Topgolf Callaway Brands Corp.

Good day and welcome to the Topgolf Callaway brand's second quarter 2025 conference call. All participants will be in a listen-only mode. Should you need any 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 your telephone keypad, and 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 Metzodakis. Please go ahead.

Good afternoon and welcome to Topgolf Callaway Brand's second quarter earnings conference call. I'm Katina Metzodakis, 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 second quarter 2025 financial results. Our earnings presentation, as well as 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 more complete description. With that, I would now like to turn the call over to Chip.

Thank you, Katina. Good afternoon, everyone, and thank you for joining our call today. Starting on slide four. Q2 was another strong quarter for our company as we met or beat expectations across all three segments of our business. I was particularly pleased with the continued consumer strength in our golf equipment business, our margin improvements there, and the excellent consumer response to Topgolf's value initiatives, which has significantly improved our traffic and sales trends. On the strategic front, We closed our previously announced sale of Jack Wolfskin, thus enabling greater business focus as well as providing further financial flexibility as we move forward on our strategic process for Topgolf. As you can see on slides five through seven, given the strong year-to-date results, as well as our confidence in our ongoing initiatives, we are raising our full year guidance for the consolidated business adjusted for the sale of Jack Wolfskin in May of this year. This includes higher full-year estimates for both Topgolf and our core business. And we are doing this while absorbing the impact of the additional tariffs that were announced after this year's initial guidance was provided in February. Turning to tariffs, our best estimate of this year's impact is now approximately $40 million. up from $25 million at the time of our last call. This estimate is included in our full-year guidance net of our mitigation and cost reduction initiatives, which are, of course, ongoing. We believe we are benefiting from having been proactive on cost and margin initiatives over the last 12 months, as well as our scale in our category and the expertise of our supply chain team. Before going further, I'd like to thank all of our employees and partners for their outstanding work year to date in driving our better than expected performance in what is an uncertain and challenging operating environment. The strength and dedication of our teams is making a big difference and is highly appreciated. Now turning to our segment performance and starting with golf equipment. Both revenues and operating margins were ahead of expectations, and market conditions remain healthy, especially in the important U.S. market. For the quarter, our operating margins are approximately flat year over year. Despite incremental tariff expense and benefiting from cost reduction and margin initiatives that we've put into place over the last 12 months, as well as healthy market conditions, and some help from year-to-date improvements in foreign exchange rates. U.S. rounds played are down a little year-to-date, simply reflecting the weather, but are approximately flat on a playable hour adjusted basis. As mentioned, the U.S. golf consumer remains healthy and engaged. Looking outside the U.S., market conditions remain strong in the U.K. and northern Europe markets but are a little softer year over year in Asia and Central Europe. Our market shares are down a little this year, reflecting a more competitive launch cadence and 100% consistent with our previously communicated expectations. I continue to feel good about the golf equipment segment, our brand, and our outlook. In the second half of this year, we'll be launching several exciting new products, including our new single-piece forged line of X-Forge and X-Forge Max irons, as well as our new premium Opus SP wedges featuring Spin Pocket technology. These are exciting new products that we believe will be well-received in the marketplace. We also created some fun brand energy via our partnership with the Happy Gilmore Movie and our Odyssey hockey stick putters and Chrome Tour golf balls. Perhaps even more importantly, we remain confident in our product development pipeline and the products that will be launching in 2026 and beyond. We believe our continued commitment to product development and innovation will drive our long-term brand and technology leadership positions. As a result of all of this, we are raising our full-year revenue expectations for our golf equipment segment. In the active lifestyle segment, there is little new to report from an operational basis. Based on third-party data, market conditions for the athleisure category remain down mid to high single digits during Q2. Our revenues reflected these market conditions, partially offset by the continued growth of the women's category at Travis Matthew and positive sell-through trends in the Callaway Apparel brand in Japan. Segment operating margins are up year over year, benefiting from the cost reduction and margin initiatives, as well as the sale of Jack Wolfskin. Turning to Topgolf, our traffic trends improved considerably, with same venue sales finishing Q2 at down approximately 6%. This was better than our expectations, as our value initiatives and our summer fund passes both exceeded our forecasts. Same venue sales for the first four retail weeks of July continued the positive trend at down approximately 3%. Perhaps most importantly, our traffic results were up 6% in Q2 and 12% in that same July period. Last quarter, we explained that third-party research shows that the consumer continues to enjoy the Topgolf experience. but that we have to reposition our value perception. As shown on slide 11, this continues to be the case, as 100x data measuring 21 entertainment and dining brands ranks Topgolf number one in the important metrics of fun, atmosphere, and food and drink, but only 16th for value and 19th for price. Data like this drove the team to lean into the expanded value initiatives that we implemented during Q2. And after doing so, the definitive consumer reaction to these initiatives reinforces our belief that we are on the right path. And let me be clear. Given the strength of our concept, along with its substantial defensive moat, we view this as a big strategic move with significant upside. one that will be particularly important as Topgolf transitions to an independent company. As we change the consumer's value perception on Topgolf and continue to drive the quality of the experience, we are opening ourselves up for both more new and repeat customers, as well as sustained performance throughout inevitable economic cycles. Turning to margins. The team also continues to do an excellent job in this area, again, exceeding our internal expectations and delivering venue-level EBITDA margins that were approximately flat year over year, despite eliminating booking fees, adding significant value, and the already mentioned decline in same venue sales. These results reinforce our long-term conviction for upside in venue-level margins even while driving improved value. Artie will give you more color on this during his comments. Turning to Topgolf's balance of the year, same venue sales and revenue guidance. We are revising the same venue sales guidance from down 6% to 12% to down 6% to 9%. For Q3 specifically, we expect same venue sales to be down low to mid-single digits. During his section, Artie will provide you with more specifics on the key initiatives that have driven our stronger than expected results for Q2 and that we're excited about for the balance of the year. Now switching to the Topgolf process. We remain 100% committed and active in the process. We are still evaluating both a spin and a sale. However, the pending change in the leadership at Topgolf, which we announced last week, makes a spin impractical for the second half of this year. If a spin is the ultimate shareholder value maximizing path, it will most likely occur in 2026 after we have a new CEO in place. In conclusion, I'm pleased with our results in the direction of our business. I believe our teams are doing an excellent job managing a complex and at times uncertain environment. while also staying focused on continually improving our core businesses and effectively managing our strategic process. We remain energized and excited about our future. Before I turn it over to Artie, I'd like to thank him for his leadership at Topgolf over the last four and a half years and wish him well in his new opportunity. Now, Artie, over to you for a more in-depth view of Topgolf and then to Brian for CFO comments.