Callaway Golf Company

Good day and welcome to the Callaway Golf Company second quarter 2026 financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mr. Patrick Burke, Senior Vice President of Investor Relations and Treasurer. Please go ahead.

Good afternoon. and welcome to Callaway Golf Company's second quarter earnings conference call. I'm Patrick Burke, Senior Vice President of Investor Relations and Treasury. Joining me on today's call are Chip Brewer, our President and Chief Executive Officer, and Brian Lynch, our Chief Financial Officer and Chief Legal Officer. Earlier today, the company issued a press release announcing its second quarter 2026 financial results. Our earnings presentation, as well as the earnings press release are both available on our investor relations website under the financial results tab. Aside from revenue, the financial numbers reported and discussed on today's call are non-GAAP measures. We identify these non-GAAP measures in the presentation and reconcile the measures to the corresponding GAAP measures in accordance with Regulation G. Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. Please review the safe harbor statements contained in the presentation and the press release for a more complete description. With that, I would like to turn the call over to Chip.

Thank you, Patrick. Good afternoon, everyone, and thank you for joining our call today. I'm pleased to report that our company delivered a strong second quarter and a very solid first half. These results show that we are building momentum as a focused, pure play golf company, and our performance reflects healthy market conditions, strong product acceptance, meaningful gross margin improvement, and disciplined execution across the business. I want to thank our teams for their continued focus and contributions. These teams are executing well in a dynamic environment, and managing the business with the right balance of confidence, agility, and discipline. I'd also like to remind everyone of the significant transformation our company has accomplished over the last year. In late May of last year, we completed the sale of Jack Wolfskin. And then in January of this year, we completed the sale of a 60% interest in Topgolf. Since the beginning of this year, we announced a new $200 million share repurchase program and then repurchased approximately $42 million worth of our stock in both Q1 and Q2. We also paid off in full our $1.2 billion of term loan debt and our $258 million of convertible notes. These moves returned us to a cash generating pure play golf company with a terrific balance sheet and a clear capital allocation strategy aimed at steadily returning capital to shareholders. We are now only six months into this renewed journey as a pure play, but we're showing clear progress strengthening the business and delivering against our stated financial and capital allocation goals. And based on the strengths of our business, and our history of performance in this space, this is a journey that we are confident in going forward. Turning to our results, Q2 revenue was $612 million, up 2% year over year, and adjusted EBITDA was $125 million, up 36% versus the prior year. Both of these results were ahead of expectations as we exceeded the midpoint of our Q2 guidance by approximately $15 million in revenue and $22 million in adjusted EBITDA. The revenue upside was driven by healthy market conditions as well as continued strength in the equipment segment, especially in golf balls. The adjusted EBITDA upside reflected the flow through from the revenue beat as well as continued progress on our gross margin initiatives. For the first half, revenue increased 6% and adjusted EBITDA increased 33%, highlighting the operating leverage and execution benefits of our more focused golf platform. We believe this performance was better than the broader market across both the Callaway and Travis Matthew brands. Gross margin expanded 460 basis points in Q2 and 360 basis points in the first half. This reflects continued progress against our margin initiatives and the benefits of portfolio actions designed to improve the long-term quality of our revenue and earnings. This gross margin improvement is a step in the right direction and a testament to the cost management and margin improvement projects that we have been focused on over the last year and that will continue to be a focus for us going forward. Turning to market conditions, healthy golf participation and sell-through data continues to be supported by a committed and enthusiastic player base. Consumer interest in the game and overall participation trends remain positive. just as they have been for several years now. In the US, rounds played through Q2 are up approximately 4% year-to-date. Similarly, we estimate that golf equipment sell-through at key accounts was up low to mid-single digits for both the quarter and year-to-date. In the UK and Europe, we estimate that our trade partner sell-through is up low to mid-single digits year-to-date but the rounds played are down simply due to unfavorable weather year over year. In Japan, the market was up low to mid-single digits in Q2 and is now up slightly for the full year, while market conditions in Korea remain down approximately 10%. Using this data as the backdrop, for the year to date, we appear to have grown our golf equipment revenue faster than the market in all major regions. And as you step back and think more deeply about this data, in the face of dynamic global macroeconomic and political conditions, low consumer confidence readings, increased gas prices, increased golf equipment pricing, and the World Cup, one can't help but be impressed by the resilience of the golf consumer. Now turning to look at our business by segment. In golf equipment, the portfolio continues to show strength across several important categories. In golf ball, the Chrome Tour family and Super Soft franchises continue to resonate with consumers, and our share of progress continues to validate the investments we've made in product performance, manufacturing capabilities, and greengrass distribution. Our Q2 golf ball revenue was up 15%. with our first half up 8%, even with intentionally reducing volume via the elimination of low-margin SKUs to support improved efficiency. Our June 2026 U.S. market share established another record high for us, up 250 basis points year over year to just over 23% overall, and with on-course share just over 24%. In clubs, the Quantum family of woods and irons has continued to receive positive market feedback. The Quantum driver with Triforce technology demonstrates the strength of our product engine, and its performance has been encouraging. In the US, both our year-to-date driver and total wood share is approximately 25%, up 110 basis points and 120 basis points, respectively. Within the woods category, high lofted fairy woods have been a particularly strong area for the industry overall and for Callaway. Building on this and leveraging our tradition of innovation, last Friday we announced the addition of a new approach to high lofted fairy woods we call mini spinners. Available in a 7, 9 and 11 wood, these clubs are easier to hit and for many consumers a more effective approach to high-lofted fairway woods. They will be shipping to retail later this month, and we anticipate a positive reaction. In the putter segment, my golf spy recently named the Odyssey AI Dual Square-to-Square No. 7 the best overall zero-torque putter of 2026, as well as the best zero-torque putter for long putts. Recognition like this is another proof point of our ability to develop and bring differentiated technology to market. Turning to the apparel and gear segment, the Callaway brand performed roughly in line with expectations, while Travis Matthew maintained its strong start to the year and performed slightly ahead of expectations. At Travis Matthew, consumer response to the women's offering remains positive, and the brand continues to gain ground in the important men's golf category, supported by clearer product pillars, more focused marketing, and exciting new products. We are in the early innings of this men's product merchandising strategy shift, but based on the consumer reaction thus far, I'm optimistic regarding its potential. Accordingly, In the first half of this year, the Travis Matthew business grew in its direct-to-consumer business and also had strong performance with key wholesale partners. One additional area that we are liberty to discuss now is the planned closure of four Travis Matthew stores that were not hitting our financial targets. These stores will close in Q4 of this year. and the financial charges for these closures was included in our Q2 financials. This will leave us with a stronger and more profitable retail fleet of 61 stores going into 2027. Similar to our previously mentioned SKU rationalization across both the Callaway and Travis Matthew brands, this is another strong example of us making disciplined, long-term decisions as we refocus on our core business. Turning to tariffs. These continue to be a dynamic area, but have been a tailwind for us relative to our expectations going into the year. We have also recently begun receiving refunds for the IEPA tariffs with more expected in the future. Ryan will add more color on actual and forecast tariffs in his sections. It is worth calling out, though, to protect inter-year comparability and to provide what we believe is a cleaner look at our performance, we made the decision to back out the AEPA refunds from our non-GAAP numbers and forecasts. Now moving to our forward guidance. Given the strength of our first half performance and the continued resilience we are seeing in the golf market, we are increasing our full-year revenue forecast by $15 million at the midpoint. This increase reflects the 15 million Q2 outperformance and a $5 million organic increase in our second half outlook, partially offset by a $5 million negative adjustment due to updated FX rates. On the bottom line, we are increasing the midpoint of our full year EBITDA guidance by $31 million. This represents Q2B, improved second half tariff estimates based on the new 301 tariff rates, the flow through from the increase in second half organic revenue, and modestly better gross margin expectations. As you look at our financial results and expectations, I think it's clear that we are anticipating a good year and that the core business is strengthening. The first half speaks for itself, with results that we believe outperform the market and show that our profitability initiatives are working. For the second half, it's worth reminding everyone that, as mentioned on our previous two calls, We are expecting our revenues and profit in the second half of the year to be impacted by strategic initiatives designed to enhance long-term profitability. This includes extending product life cycles in our iron business by pushing a significant launch out of this year into next, rationalizing lower margin portions of our business, and increasing our investment in fitting. While these actions will negatively impact the back half of this year, they represent a deliberate, disciplined approach to driving sustainable margin expansion, revenue growth, and stronger free cash flow over time. In closing, we are encouraged by the fact that the game of golf remains healthy. Our brands and products are resonating well with both consumers and retail partners, thus allowing us to grow faster than the market for the first six months of the year, and our profitability initiatives are bearing fruit. And perhaps more importantly, as we are now six months into our return to being a focused, pure play golf company, we are both enjoying and benefiting from the added focus that our new structure provides. This gives us increased confidence that we will be able to further strengthen our business going forward, and we're energized by these prospects. With that, I'll turn the call over to Brian to review our financial results in more detail.