Topgolf Callaway Brands Corp.

Good day and welcome to the Topgolf Gallery brand's fourth quarter 2024 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touchstone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Katina Matsudakis, Investor Relations. Please go ahead.

Good afternoon and welcome to Topgolf Callaway Brand's fourth quarter earnings conference call. I'm Katina Matsudakis, Vice President of Investor Relations and Corporate Communications. Joining me on today's call are Chip Brewer, our President and Chief Executive Officer, Brian Lynch, our Chief Financial Officer and Chief Legal Officer, and Artie Starrs, Chief Executive Officer of Topgolf. Earlier today, the company issued a press release announcing its fourth quarter and full year 2024 financial results. Our earnings presentation, as well as our 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 identified these non-GAAP measures in the presentation and reconciled 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 for 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'd like to turn the call over to Mr. Brewer.

Thank you, Katina. Good afternoon, everyone, and thank you for joining our call today. Starting on slide four, Q4 was a strong quarter for our company as both our golf equipment business and Travis Matthew delivered year-over-year growth on the top and bottom line. And Topgolf, delivered better-than-expected same-venue sales on improving traffic trends, as well as record Q4 venue-level margins. For the full year, golf equipment delivered another year of excellent brand performance, maintaining its leadership position in U.S. golf club market share and driving record share in golf ball. In active lifestyle, Travis Matthew delivered another strong brand and financial year, while the team at Jack Wolfskin right-sized their business so it is now positioned for profitability going forward. At Topgolf, despite top-line pressure, they delivered $337 million in EBITDA and approximately 34% venue-level EBITDA margins, which were flat versus 2023 and up 500 basis points versus 2019. Topgolf also impressively delivered over $100 million in free cash flow. Additionally, our total company free cash flow of $203 million was also above expectations, thus further strengthening our financial position, a point Brian will cover in more detail during his comments. I view all of this as evidence of our enviable brand position's as well as the dedication of our employees, whom I would like to publicly thank for their commitment to our company. As we look forward to 2025 and our guidance, on the product side of our business, we remain confident in the health of our golf equipment category, our brand position in it, and our 2025 product lineup. We expect the Travis Matthew brand to deliver year-over-year growth on both the top and bottom line and Jack Wolfskin to return to profitability. At the same time, we are facing year-over-year headwinds from foreign exchange, budgeting back to target incentive compensation levels, which were not paid in 2024, and to a lesser extent, tariffs. As you'll see on slide five, these will negatively impact our core business EBITDA by approximately $75 million year-over-year. with foreign exchange alone impacting us by approximately $60 million on the top line and $40 million on the bottom. This will unfortunately impact our financial results this year. However, we expect to be able to mitigate a good portion of these headwinds via operational improvements. And on an organic basis, thus normalizing for the foreign exchange, incentive cop, and tariff headwinds, We anticipate our EBITDA to be up approximately 6%, driven by gross margin improvements and cost savings. Looking further forward, post-separation with Topgolf, we see the opportunity for further cost savings as we anticipate scaling our corporate overhead back to a level more consistent with the size of the business without Topgolf. We anticipate being able to grow our golf equipment revenues slightly faster than the golf market overall, consistent with our long-term track record. And we anticipate gross margin improvements from both initiatives we already have in place, as well as from a potentially more stable foreign exchange environment. We remain very optimistic about the future of this business. Turning to slide six in our 2025 guidance for Topgolf, The midpoint of our guide is approximately $270 million in EBITDA, with same venue sales down mid-single digits for the full year and 10% to 13% in Q1. Venue level EBITDA margins are anticipated to be approximately flat year over year, driven by the team's strong operational execution. This contemplates headwinds of approximately $45 million due to a change in the reporting structure from a Gregorian to a retail calendar, the sale of World Golf Tour that occurred in 2024, rebudgeting for full bonus, and a small impact from foreign exchange. After considering these headwinds, we expect full-year EBITDA to be down approximately $22 million year-over-year, less than you would expect based on a normal flow-through from same-venue sales due to the cost savings and operational efficiencies that are being implemented across the business. I am pleased with the action Topgolf has taken to navigate a difficult operating environment, particularly with its delivery of strong venue-level margins and free cash flow. But I also recognize the need to drive same venue sales growth. We believe the same venue sales performance is primarily a reflection of a macro consumer and category issue. Having said this, we're committed to improving same-venue sales as quickly as possible, as it is our number one focus for this business. Along those lines, and in anticipation of the separation of these businesses later this year, we've asked Artie Stars, Topgolf's CEO, to join us on this call. Artie will give us more detail on Topgolf's performance and the niches in place to address same-venue sales. As you can see on slide seven, on a consolidated basis for 2025, we're guiding towards a midpoint of approximately $460 million in EBITDA, and we once again expect to be free cash flow positive. On the strategic front, we are productively working towards the separation of Topgolf, evaluating both a spin in the second half of this year and a potential sale. For this call, there is nothing new to report on this process other than all options are still on the table and we're making steady progress. Let's now turn to segment level performance. Artie will talk you through Topgolf and then I'll rejoin to speak to golf equipment and active lifestyle. Artie, over to you.