Industry Overview - The Leisure and Recreation Services and Products industries are benefiting from optimized business processes, consistent partnerships, and digital initiatives, with rising disposable incomes in the United States driving demand for leisure and recreation supported by increased personal consumption expenditure [1] Investment Opportunities - Five leisure and recreation stocks have been identified for investment: Expedia Group Inc. (EXPE), Viking Holdings Ltd. (VIK), Johnson Outdoors Inc. (JOUT), Callaway Golf Co. (CALY), and MasterCraft Boat Holdings Inc. (MCFT), all carrying either a Zacks Rank 1 (Strong Buy) or 2 (Buy) [2] Expedia Group Inc. (EXPE) - EXPE reported a strong fourth quarter with adjusted earnings up 58% year over year, surpassing estimates, while revenues increased by 11.4%, driven by strong B2B momentum with segment revenues and gross bookings rising 24% and advertising revenues increasing by 19% [3][4] - Total gross bookings for EXPE rose 11% to $27 billion, supported by resilient lodging demand and growth in booked room nights, with adjusted EBITDA climbing 32% and margins expanding by 368 basis points [4] - The expected revenue and earnings growth rates for EXPE are 7.3% and 20.7%, respectively, for the current year, with the Zacks Consensus Estimate for earnings improving by 7.2% over the past 30 days [5] Viking Holdings Ltd. (VIK) - VIK is experiencing strong consumer demand and a solid booking environment, focusing on affluent customers to navigate the current market downturn, with increased onboard spending contributing positively [6][7] - The company is enhancing guest experiences through strategic investments and digital innovations, alongside fleet expansion and geographic diversification to drive growth [7] - VIK's expected revenue and earnings growth rates are 12.9% and 25.7%, respectively, for the current year, with the Zacks Consensus Estimate for earnings remaining flat over the past 30 days [8] Johnson Outdoors Inc. (JOUT) - JOUT is a leading global outdoor recreation company known for innovative, high-quality products across categories such as Watercraft, Marine Electronics, Diving, and Outdoor Equipment [9] - The company’s well-known brands include Old Town canoes, Ocean Kayak, and Minn Kota motors, among others [10] - JOUT's expected revenue and earnings growth rates are 9.5% and over 100%, respectively, for the current year, with the Zacks Consensus Estimate for earnings improving by 9.5% over the past 30 days [11] Callaway Golf Co. (CALY) - CALY is a premium golf equipment and apparel company with a diverse portfolio of brands, operating in segments including Topgolf and Golf Equipment [12] - The expected revenue and earnings growth rates for CALY are -42.3% and 85.7%, respectively, for the current year, with the Zacks Consensus Estimate for earnings improving by 14.7% over the past seven days [13] MasterCraft Boat Holdings Inc. (MCFT) - MCFT designs, manufactures, and markets recreational powerboats, offering a range of products including boats and aftermarket parts [14] - The expected revenue and earnings growth rates for MCFT are 8.3% and 64.1%, respectively, for the current year, with the Zacks Consensus Estimate for earnings improving by 21.8% over the past 30 days [15]

Financial Data and Key Metrics Changes - Consolidated revenues for Q1 2025 were $1,090 million, a decrease of 5% year over year, primarily due to lower Topgolf same venue sales and unfavorable foreign currency rates [42][43] - Q1 adjusted EBITDA increased by 4% to $167 million, driven by improved profitability in the golf equipment and active lifestyle segments [42] - Available liquidity increased by $85 million to $805 million as of March 31, 2025, compared to Q1 2024 [45] Business Line Data and Key Metrics Changes - Topgolf Q1 revenue decreased by 7% year over year due to lower same venue sales and the sale of the World Golf Tour business [43] - Golf equipment revenue decreased by 1% to $444 million, but operating income increased by 24% to $102 million due to improved gross margins and cost savings [44] - Active lifestyle segment revenue decreased by $17 million to $255 million, primarily due to the planned rightsizing of the Jack Wolfskin business [44] Market Data and Key Metrics Changes - U.S. rounds played were up 3.8% in March, but down slightly year to date, reflecting weather impacts [15] - Same venue sales at Topgolf were down approximately 12% for Q1, with corporate events down 13% [27] - Overall traffic in the second quarter through April was approximately flat year over year, with one to two bay traffic up low single digits [29] Company Strategy and Development Direction - The company announced the sale of Jack Wolfskin to ANTA Sports, allowing for greater business focus and financial flexibility [8] - Topgolf is implementing a strategic reset to improve value perception while maintaining a premium brand image, with initiatives like Sunday Funday and Topgolf Nights aimed at driving traffic [20][21] - The company is committed to separating Topgolf from its core business to unlock shareholder value, with various alternatives being evaluated [48][49] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about a price-sensitive consumer environment and the impact of corporate spending pressures on the events business [30][58] - The company remains optimistic about the golf equipment segment, noting strong consumer demand and market conditions [57] - Future guidance for Topgolf same venue sales has been revised to a decline of 6% to 12%, reflecting economic uncertainty [51] Other Important Information - The company expects to maintain its full-year adjusted EBITDA guidance for Topgolf despite anticipated revenue declines [51] - Tariff impacts are projected to be approximately $25 million for the year, with the company taking proactive measures to mitigate these costs [9][52] Q&A Session Summary Question: Any change in the industry backdrop for the core golf equipment business? - Management indicated no significant changes, with strong consumer demand and a positive outlook for the golf business [57] Question: How much of the softness in Topgolf is attributed to macro factors versus competition? - Management noted that corporate spending pressure is a direct macro impact, while the consumer remains price-sensitive [58] Question: What are the plans for managing venue-level cost structures going forward? - Management expressed confidence in long-term venue margins, emphasizing ongoing investments in value and efficiency improvements [66] Question: Was there any impact from the Easter shift on business performance? - Management acknowledged a shift but did not consider it material to their guidance [69] Question: What are the specifics of the cost savings achieved? - Management stated that proactive cost savings have been implemented across all areas of the business, benefiting overall performance [75] Question: How is the value proposition being adjusted for the events business? - Management is offering more local flexibility and incentives to win sales, while maintaining the premium nature of the product [100]

Financial Data and Key Metrics Changes - Consolidated revenues for Q1 2025 were $1,090 million, a decrease of 5% year over year, primarily due to lower Topgolf same venue sales and unfavorable foreign currency rates [40] - Q1 adjusted EBITDA increased by 4% to $167 million, driven by improved profitability in the golf equipment and active lifestyle segments [40] - Available liquidity increased by $85 million to $805 million as of March 31, 2025, due to increased cash compared to Q1 2024 [43] Business Line Data and Key Metrics Changes - Topgolf Q1 revenue decreased by 7% year over year, attributed to lower same venue sales and the sale of the World Golf Tour business [41] - Golf equipment revenue decreased by 1% to $444 million, but operating income increased by 24% to $102 million due to improved gross margins and cost savings [42] - Active Lifestyle segment revenue decreased by $17 million to $255 million, primarily due to the planned rightsizing of the Jack Wolfskin business [42] Market Data and Key Metrics Changes - U.S. rounds played were up 3.8% in March, but down slightly year to date, reflecting weather impacts [15] - Same venue sales at Topgolf were down approximately 12% for Q1, with corporate events down 13% [26] - The consumer base for Topgolf has an average income of approximately $100,000, indicating a relatively affluent target market [18] Company Strategy and Development Direction - The company announced the sale of Jack Wolfskin to ANTA Sports, allowing for greater business focus and financial flexibility [7] - Topgolf is implementing strategic initiatives to reset its value perception while maintaining a premium brand image [19] - The company is actively pursuing various alternatives for the separation of Topgolf, including a sale or spin-off, targeting the second half of the year for completion [45][46] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the demand side due to a slowing consumer environment, but noted that golf equipment has historically been resilient during mild recessions [10] - The company is optimistic about its ability to navigate current macroeconomic challenges, including tariffs and consumer spending pressures [50] - Management maintained full-year guidance despite the anticipated impact of the Jack Wolfskin sale and current tariffs [49] Other Important Information - The company expects to see a decline in Topgolf same venue sales guidance to down 6% to 12% for the year [22] - Adjusted EBITDA guidance for Topgolf remains at $240 million to $300 million, supported by ongoing cost savings initiatives [49] - The company is testing new value offerings and enhancing customer experience to drive traffic growth [34] Q&A Session Summary Question: Any change in the industry backdrop for the core golf equipment business? - Management noted that the golf consumer remains strong, and the outlook for the golf business is positive with no material changes [56] Question: How much do you attribute the softening at Topgolf to macro factors versus competition? - Management indicated that corporate spending pressure is a direct macro impact, while the consumer remains price sensitive [58] Question: How do you plan to manage venue-level cost structure going forward? - Management expressed confidence in long-term venue margins, emphasizing ongoing investments in value while maintaining player experience [66] Question: What is the impact of the Easter shift on business? - Management acknowledged a shift in events due to Easter but did not consider it material to their guidance [69] Question: Can you provide an update on cost savings and their impact? - Management confirmed that proactive cost savings have been beneficial, allowing them to hold guidance despite challenges [72] Question: How much of the Topgolf same venue sales reduction was due to April trends? - Management stated that the primary driver was the outlook on events, with improved traffic trends in the walk-in business [81] Question: Is there a value orientation program for the events business? - Management is offering more local flexibility in the events business to compete effectively, but noted that corporate spending is currently under pressure [99]

Core Insights - Topgolf Callaway Brands Corp. is expanding its global presence by entering into a multiyear agreement with Golf Saudi Entertainment to introduce its brands in Saudi Arabia [1][2] Group 1: Agreement Details - Golf Saudi plans to construct three Topgolf venues by 2028, with the potential to add two more in the future [2] - Callaway Golf, Odyssey, TravisMathew, and Ogio will serve as the official equipment and apparel brands for Saudi national golf teams and professionals [2] - Golf Saudi will be the exclusive distributor of Callaway Golf, Odyssey, and Ogio products in Saudi Arabia [2] Group 2: Company Perspective - Ben Sharpe, Managing Director and President, EMEA for Callaway Golf, expressed enthusiasm about entering the Middle Eastern market and highlighted the partnership with Golf Saudi [3] - The company aims to transform Saudi Arabia into a notable golfing nation through its modern golf brands [3] Group 3: Company Overview - Topgolf Callaway Brands Corp. is a tech-enabled modern golf and active lifestyle company with a diverse portfolio including Topgolf, Callaway Golf, TravisMathew, Odyssey, OGIO, and Jack Wolfskin [3]