First Quarter 2025 Earnings Conference Call May 12, 2025 IMPORTANT NOTICES Forward-looking Statements. During the presentation, any comments made about future plans, events, financial results, performance, prospects, or growth opportunities, including statements relating to the Company's financial outlook (including, among others, Company, Topgolf and core business revenues, same venue sales, the Non-GAAP Projections (as defined below), and capital expenditures), our plans to pursue a separation of the Topg ...

TOPGOLF CALLAWAY BRANDS ANNOUNCES FIRST QUARTER 2025 RESULTS HIGHLIGHTS CARLSBAD, CA /May 12, 2025/ Topgolf Callaway Brands Corp. (the "Company" or "Topgolf Callaway Brands", "we", "our", "us") (NYSE: MODG) announced its financial results for the first quarter ended March 31, 2025. "We are pleased with our first quarter results as we met or beat our plan in all segments of our business," commented Chip Brewer, President and CEO. "We are particularly pleased with the performance of our Golf Equipment busines ...

HIGHLIGHTS Q1 consolidated Net Revenue of $1,092 million and strong Adjusted EBITDA both outperformed expectations. Q1 Total Segment Operating Income increased 9.7%. The Company further strengthened its available liquidity position to $805 million, increasing by 12% year-over-year. The Company reaffirmed its consolidated full year Revenue and Adjusted EBITDA guidance (subject to adjustment pending the sale of its Jack Wolfskin business).CARLSBAD, Calif., May 12, 2025 /PRNewswire/ -- Topgolf Callaway Brands ...

Core Viewpoint - Topgolf Callaway Brands (MODG) is expected to report a quarterly loss of $0.04 per share, a decline of 144.4% year-over-year, with revenues projected at $1.06 billion, down 7.4% from the previous year [1]. Earnings Estimates - The consensus EPS estimate has been revised 3% lower in the last 30 days, indicating a collective reevaluation by analysts [2]. - Changes in earnings estimates are crucial for predicting investor reactions, as empirical studies show a strong correlation between earnings estimate revisions and short-term stock performance [3]. Revenue Projections - Analysts forecast 'Net Revenues by Category- Gear, Accessories & Other' to reach $108.97 million, reflecting a year-over-year decrease of 2.6% [5]. - 'Net Revenues by Category- Apparel' is expected to be $156.51 million, indicating a decline of 1.9% year-over-year [5]. - 'Net Revenues by Category- Venues' is projected at $379.66 million, down 6.4% from the prior year [5]. - 'Net Revenues- Topgolf' is estimated to be $396.01 million, a decrease of 6.3% from the year-ago quarter [6]. - 'Net Revenues- Golf Equipment' is expected to reach $444.44 million, reflecting a year-over-year change of -1.2% [6]. - 'Net Revenues- Active Lifestyle' is projected at $265.76 million, down 2.1% from the previous year [7]. - 'Net Revenues by Category- Golf Balls' is expected to be $98.92 million, indicating a decline of 4.9% year-over-year [7]. - 'Net Revenues by Category- Golf Clubs' is projected at $345.27 million, a slight decrease of 0.2% from the prior year [8]. - 'Net Revenues- Services' is estimated at $392.88 million, reflecting a year-over-year change of -6% [8]. - 'Net Revenues- Products' is expected to reach $689.28 million, indicating a decline of 5.1% year-over-year [8]. Operating Income - The consensus estimate for 'Operating income (loss)- Golf Equipment' stands at $76.50 million, compared to $82.10 million from the previous year [9]. Stock Performance - Over the past month, shares of Topgolf Callaway have returned +9.9%, while the Zacks S&P 500 composite has changed by +11.3% [9].

Core Viewpoint - Topgolf Callaway Brands Corp. plans to release its first quarter 2025 financial results on May 12, 2025, after market close, followed by a conference call to discuss the results and business outlook [1]. Company Overview - Topgolf Callaway Brands Corp. (NYSE: MODG) is a tech-enabled Modern Golf and active lifestyle company, offering golf equipment, apparel, and entertainment through a portfolio of global brands including Topgolf, Callaway Golf, and others [3]. - The concept of "Modern Golf" encompasses both on-course and off-course golf experiences, creating a dynamic and inclusive ecosystem [3]. Investor Relations - A live webcast and presentation of the financial results will be available on the Company's Investor Relations website [1]. - A replay of the conference call will be accessible online approximately two hours after the event concludes [2]. Contact Information - Investor contact for Topgolf Callaway Brands is Katina Metzidakis, available via email [4].

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Core Viewpoint - Topgolf Callaway Brands Corp. has agreed to sell its Jack Wolfskin business to ANTA Sports for a base price of $290 million in cash, with the transaction expected to close in late Q2 or early Q3 of 2025, pending regulatory approvals [1][2]. Financial Impact - The sale is anticipated to enhance the company's balance sheet and liquidity, providing financial flexibility ahead of the planned separation of Topgolf from its core operations [2]. - The Jack Wolfskin business is estimated to generate approximately €325 million in revenue and €12 million in Adjusted EBITDA for the full year 2025, with a breakdown of €115 million in revenue and a loss of €18 million in Adjusted EBITDA for the first half, and €210 million in revenue and €30 million in Adjusted EBITDA for the second half [2]. Advisory Information - Goldman Sachs is serving as the financial advisor for the transaction, while Latham & Watkins LLP is acting as the legal advisor [3]. Company Overview - Topgolf Callaway Brands Corp. is a tech-enabled modern golf and active lifestyle company, offering a range of golf equipment, apparel, and entertainment, with a portfolio that includes brands such as Topgolf, Callaway Golf, and Jack Wolfskin [4].

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Seasonal Sales Fluctuations - The company's golf equipment sales are significantly affected by seasonal fluctuations, with first-quarter sales representing initial sell-in to retailers for the new golf season [163]. - Apparel sales are also subject to seasonal demand, particularly for cold-weather products, which may decline in unseasonably warm years [164]. - Topgolf venues historically see higher revenue in the second and third quarters, with first and fourth quarters typically experiencing lower revenue due to cooler temperatures [165]. Supply Chain and Manufacturing Risks - A significant portion of the company's products is manufactured internationally, exposing it to risks associated with global operations and foreign currency fluctuations [173][176]. - The company engages in hedging activities to mitigate the impact of foreign currency fluctuations, but these activities may not eliminate all risks [178]. - Rising costs and availability issues for raw materials and components could materially affect the company's financial condition and results of operations [180][181]. - The company is dependent on a limited number of suppliers for golf club components, which may pose risks to its supply chain [173]. - The company relies on a limited number of suppliers for golf equipment, and the loss of any supplier could disrupt production and harm the business [189]. Management and Governance - The concentration of ownership among certain stockholders could influence corporate governance and strategic decisions [170][171]. - The management team's effectiveness is critical to the company's success, and the loss of key executives could adversely impact strategic goals [169]. Legal and Regulatory Compliance - The company is subject to various licensing and regulatory requirements for its venues, and failure to maintain these licenses could adversely affect operations and financial condition [186]. - The company may face legal challenges from guests or employees, which could result in significant financial liabilities and negative publicity [196]. - Compliance with evolving data privacy laws, such as the California Consumer Privacy Act (CCPA), adds complexity and potential legal risks, requiring significant resources for compliance [235]. - The company is subject to extensive federal, state, and local regulations, with non-compliance potentially leading to fines, legal actions, and reputational damage [230]. - The company faces risks related to compliance with economic sanctions and anti-bribery laws, which could result in significant penalties and adversely affect its business [239]. Financial Performance and Risks - The company faces difficulties in accurately forecasting product demand, which could lead to insufficient or excess manufacturing, adversely affecting financial performance [184]. - A fire at the Launch Technologies golf ball manufacturing plant in Taiwan in September 2023 required the company to shift supply to other facilities, potentially impacting operations [190]. - Disruptions in delivery and shipping services could lead to manufacturing delays and increased costs, adversely affecting business operations [192]. - Instances of food-borne illness could harm the company's brand and revenues, particularly if they occur at franchisee locations [193]. - The profitability of the venues business line is affected by the availability and cost of food commodities, which may fluctuate due to various uncontrollable factors [200]. - Historical strategies to offset inflation included gradual menu price increases and improved purchasing practices, but future pricing flexibility may be limited [201]. - A long-term contract with a single broadline distributor covers a substantial majority of food and beverage supplies, posing risks if the distributor fails to deliver [202]. - The company does not engage in futures contracts for price fluctuations in food commodities, limiting protection against price changes [203]. - The company incurs additional expenses related to compliance with regulations on conflict minerals, which could affect the supply and pricing of materials used in manufacturing products [238]. - The company is subject to various environmental, health, and safety laws, which could lead to substantial civil or criminal fines and impact its financial condition [240]. - The company has significant U.S. net operating loss carryforwards (NOLs) and tax credit carryforwards, but their utilization may be limited due to ownership changes, particularly following the Topgolf merger [249]. - The company’s effective income tax rate may be adversely affected by changes in tax laws and the mix of earnings in different jurisdictions [246]. Growth and Expansion Challenges - In 2023, the company acquired assets related to Swing Suite golf simulation technology and BigShots Golf business, which may pose integration challenges [182]. - Growth initiatives require significant capital investments, with no assurance of positive returns, potentially affecting margins and cash flows [212]. - The construction and opening of new Topgolf venues may be hindered by the availability of financing, which historically has been secured through third-party developers, potentially affecting growth prospects [257]. - The company may need to raise additional funds to execute its growth strategy, including the expansion of its Topgolf business, prior to its planned separation [256]. - The company faces risks in securing timely financing on favorable terms, which could impact operations, product development investments, and repayment of existing debt [258]. Separation and Market Risks - The planned separation of the business into Callaway and Topgolf is expected to be completed in the second half of 2025, but the timeline and benefits are uncertain [263]. - The separation may lead to challenges such as management distraction, unforeseen costs, and potential negative market reactions [264]. - Post-separation, Callaway may face increased susceptibility to market fluctuations and reduced purchasing power compared to when it was combined with Topgolf [266]. - If the separation does not qualify as a tax-free reorganization, significant tax liabilities could be incurred by both the company and its shareholders [268]. - The anticipated benefits of the separation, such as improved access to capital markets and focused management strategies, may not be fully realized [273]. - The terms of agreements with Topgolf may not reflect those that would have been achieved in arm's-length negotiations with unaffiliated third parties, potentially leading to less favorable conditions [275]. Cybersecurity and Information Systems - Complex information systems are critical for operations, and failures or cybersecurity incidents could disrupt business and adversely affect financial performance [204]. - A cybersecurity incident in August 2023 affected personal information of approximately one million customers, highlighting vulnerabilities in information systems [206]. - The company is exposed to market and credit risk from transactions involving derivative financial instruments [373]. Interest Rates and Financial Obligations - Increases in interest rates could raise the cost of servicing debt, adversely affecting profitability and cash flows, and complicating future financing efforts [259]. - The company’s obligations under its credit facilities could limit its operational flexibility and ability to make dividend payments if financial covenants are not met [254]. - A hypothetical 10% increase in interest rates would result in an incremental interest expense of approximately $4.3 million for the 12-month period ending December 31, 2024 [378]. Brand and Reputation Risks - Physical safety risks at venues, including violence and civil unrest, could negatively impact sales and overall business performance [185]. - The company faces risks from product liability and recalls, which could lead to significant costs and impact reputation and sales [210]. - Increased scrutiny regarding the company's environmental, social, and governance (ESG) practices could lead to additional costs and risks, affecting its reputation and stakeholder relationships [242]. - The company faces risks associated with unauthorized sales through "gray markets," which can undermine authorized distribution channels and harm its reputation [224].

Financial Data and Key Metrics Changes - Q4 consolidated revenues reached $924 million, a 3% year-over-year increase, driven by growth in Golf Equipment and slight increases in Active Lifestyle, while Topgolf revenue remained consistent with the prior year [60] - Adjusted EBITDA for Q4 was $101 million, reflecting a 45% increase due to improved operating results across all segments [60] - Full year consolidated adjusted free cash flow was $203 million, exceeding previous guidance [69] Business Line Data and Key Metrics Changes - Golf Equipment revenue increased by 13% year-over-year to $225 million, attributed to strong sales of golf clubs and the Chrome family of golf balls [63] - Topgolf generated adjusted EBITDA of $337 million, an 11% increase compared to 2024, despite same venue sales declining by 8% [19][60] - Active Lifestyle segment revenue increased by 1% year-over-year, primarily driven by TravisMathew's apparel sales [64] Market Data and Key Metrics Changes - U.S. on-course golf participation rose by 1.5 million to 28.1 million, with rounds played growing 2% year-over-year [43] - The macro environment for premium out-of-home entertainment is facing headwinds, impacting same venue sales at Topgolf [20][41] Company Strategy and Development Direction - The company is focused on the separation of Topgolf, evaluating options for a spin-off or potential sale [16] - Initiatives to improve same venue sales include new experiences, value offerings, and operational efficiencies [41][39] - The company anticipates growing Golf Equipment revenues slightly faster than the overall golf market, with expected gross margin improvements [12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged year-over-year headwinds from foreign exchange and incentive compensation, projecting a $75 million negative impact on core business EBITDA [11] - Despite challenges, management remains optimistic about the future, expecting to mitigate headwinds through operational improvements [12][56] - The company is committed to returning to growth in same venue sales and improving profitability [41] Other Important Information - The company recorded a non-cash accounting charge of $1.45 billion related to the impairment of Topgolf goodwill and intangible assets [58] - Available liquidity increased to $797 million as of December 31, 2024, due to better cash flow generation [66] Q&A Session Summary Question: Could you elaborate on same venue sales trends when the weather has been neutral at Topgolf? - Management indicated that neutral weather markets are currently running down low to mid-single digits, with expectations for improvement in 2025 due to easier comparisons and positive consumer response to value messaging [78][79] Question: Can you talk about the key drivers behind the acceleration in corporate events comp? - Management noted that increased flexibility in product design and local market learnings contributed to the acceleration in corporate events comp, with expectations for walk-in sales to perform better than events in 2025 [89][92] Question: What drives the core business down year-over-year? - The primary driver for the decline in the core business is foreign exchange impacts, with additional challenges from competitive launches and reduced product launches planned for the second half of the year [96][97] Question: Is there anything structurally changed in the core business affecting profitability? - Management confirmed that there are no structural changes affecting profitability, with foreign exchange being the main driver of the decline [102][104] Question: Can you provide an update on expectations for pro forma leverage of the core business? - Management expressed confidence in achieving a leverage ratio of 3x or under within 12 months of the spin, emphasizing strong cash flow generation and operational flexibility [120][122]