Callaway Raises Adjusted EBITDA Outlook to $280 Million Despite Quarterly Sales Decline
Key Facts
Callaway raised its 2026 adjusted EBITDA outlook to a range of $272–280 million after posting $35.9 million in the third quarter, up 17.3% from the same period last year. The company reported results on November 5 for the quarter ended September 30 and said sales and adjusted earnings exceeded its expectations. The guidance increase came despite a 5.6% decline in quarterly net sales to $436.9 million from $462.6 million. Callaway also raised its annual sales outlook to $2.065–2.078 billion. CEO Chip Brewer said the results "support our increased full-year outlook and demonstrate the benefits of our return to a focused, pure-play golf company."
The annual adjusted EBITDA outlook moved from $246–260 million to $272–280 million, while the sales outlook rose from $2.045–2.070 billion to $2.065–2.078 billion. The revisions put improved profitability at the forefront of the quarterly results, while sales remained below the year-earlier level. In the nine months ended September 30, sales rose to $1,736.6 million from $1,692.6 million, an increase of 2.6%, or 2.7% on a constant-currency basis. That means cumulative-period growth coincided with a third-quarter sales contraction. The company said both quarterly sales and adjusted earnings exceeded its expectations.
Gross margin under generally accepted accounting principles improved by 1,210 basis points to 51.9%, while non-GAAP gross margin rose by 520 basis points to 45.0%, compared with the third quarter of the prior year. The company attributed the margin improvement to selected price increases, cost reductions and the streamlining of lower-margin activities. GAAP margin included about $31.8 million in tariff-recovery benefits. Those benefits were excluded from non-GAAP margin results. The accounting margin reading therefore reflects the impact of the recoveries alongside the improvement the company attributed to pricing, costs and business mix.
The sales decline was concentrated in golf equipment, which recorded $281.5 million, down 7.9% year on year. Apparel, gear and other sales totaled $155.4 million, down 1.1%. Callaway linked the pressure to a change in the timing of iron launches, the streamlining of lower-margin products and an adverse foreign-exchange impact in Asia. By contrast, growth at TravisMathew and the launches of Mini Spinner and TRTL in Asia helped offset part of the decline. These factors show that the quarterly sales decline was linked to product timing and changes in business mix, while some products and brands provided partial support for sales.
On liquidity, Callaway said it had a net cash position on September 30, with $76 million in outstanding debt, including $26 million in finance lease obligations, and $434 million in unrestricted cash and equivalents. The company repurchased about 9 million shares from the start of the year through the end of September, with $70 million remaining under its buyback authorization. These figures put returns of capital to shareholders alongside the cash position the company reported. The company also said inventory totaled $536.2 million at the end of the quarter, up $5.4 million year on year. This comes as the company expects weaker sales and adjusted earnings in the final quarter.
Callaway expects fourth-quarter sales of between $328 million and $341 million, compared with $368 million in the corresponding period of 2025. It also expects an adjusted EBITDA loss of between $45 million and $53 million, versus a $25 million loss a year earlier. The company attributed the expected decline to a change in product launch timing, streamlining lower-margin activities and investment in fitting services. It added that dividend income would be lower after using cash to repay more than $1.4 billion of debt in the first half of 2026. CALY shares closed at $15.92 on November 5, according to EL7 data. The company is scheduled to participate in the annual Stephens Investment Conference on November 17, followed by the Morgan Stanley Global Consumer & Retail Conference on December 1, 2026.