TOPGOLF CALLAWAY BRANDS ANNOUNCES THIRD QUARTER 2024 RESULTS

HIGHLIGHTS Q3 Consolidated Revenues and Adjusted EBITDA were ahead of expectations. The Callaway brand maintained its #1 position in U.S.

market share in total golf clubs and achieved record U.S. market share in golf ball.



The Company further strengthened its available liquidity position to $863 million , increasing $129 million year-over-year. The Company reaffirmed its expectation for full year positive Adjusted Free Cash Flow for the total Company and Topgolf. The Company lowered full year 2024 revenue guidance to approximately $4.

2 billion and Adjusted EBITDA to a range of $560 to $570 million . The Company maintained prior Topgolf revenue guidance of approximately $1.79 billion and increased Topgolf Adjusted EBITDA guidance to approximately $315 million .

The Company continues to believe that separating Topgolf from the core business will create shareholder value and is fully engaged in this work. CARLSBAD, Calif. , Nov.

12, 2024 /PRNewswire/ -- Topgolf Callaway Brands Corp. (the "Company" or "Topgolf Callaway Brands", "we", "our", "us") (NYSE: MODG ) announced its financial results for the third quarter ended September 30, 2024 . "We are pleased to announce results that exceeded our expectations for Q3 amid a challenging macroeconomic backdrop," commented Chip Brewer , President and Chief Executive Officer of Topgolf Callaway Brands.

"Topgolf performed consistent with our revenue expectations and continued to show strong venue profitability despite the challenging sales environment. This allows us to maintain Topgolf's prior revenue guidance and raise its EBITDA outlook for the year. In our Golf Equipment segment, Callaway continues to lead, maintaining its overall #1 share in golf clubs and with 2024 trending to be the third consecutive year that Callaway has earned this top position.

In our ball business, our strategic investments in this category and the rebranding of our premium golf ball line are delivering steady gains in both market share and manufacturing yield. Our U.S.

golf ball market share established a new record level for the quarter. Meanwhile in Active Lifestyle both TravisMathew and Jack Wolfskin made progress towards their long-term business strategies. Furthermore, on the strategic front, we continue to believe that separating Topgolf from the core business will create shareholder value and we are fully engaged in this work.

" CONSOLIDATED RESULTS The Company announced the following GAAP and non-GAAP financial results for the three and nine months ended September 30, 2024 and 2023: NON-GAAP RESULTS Non-GAAP results exclude certain non-cash and non-recurring adjustments as defined in the Additional Information and Disclosures section of this release. The Company has also provided a reconciliation of the non-GAAP information to the most directly comparable GAAP information in the schedules to this release. THIRD QUARTER 2024 CONSOLIDATED RESULTS COMMENTARY (All comparisons to prior periods are calculated on a year-over-year basis, unless otherwise noted) The Company's net revenue of $1,012.

9 million decreased 2.7% year-over-year, primarily driven by an (11.1)% decrease in Active Lifestyle, as expected, which was partially offset by revenue growth at Topgolf of 1.

2%. These results exceeded the Company's guidance range, primarily due to the timing of shipments in its products businesses. Net income decreased $33 .

3 million to a net loss of $3 .6 million on a GAAP basis. Net income decreased $31 .

5 million to $4 .3 million on a non-GAAP basis compared to the same period in the prior year. This result was due to a decrease in segment operating income as discussed below.

Adjusted EBITDA of $119 .8 million for the third quarter decreased 26.6% compared to the prior year, and was ahead of expectations due to better than expected revenue in the third quarter as well as strong venue profitability at Topgolf.

SEGMENT RESULTS SEGMENT NET REVENUES The table below provides net revenues by segment for the periods presented: SEGMENT OPERATING INCOME The table below provides operating income by segment for the periods presented: THIRD QUARTER 2024 SEGMENT COMMENTARY (All comparisons to prior periods are calculated on a year-over-year basis, unless otherwise noted) Topgolf Segment revenue increased $5.5 million or 1.2%, to $453.

2 million , driven primarily by new venues. Same venue sales declined 11%, which was roughly consistent with expectations. Segment operating income decreased $10.

6 million , or (27.2)%, to $28.3 million due to increased depreciation related to new venues and lower same venue sales.

Segment Adjusted EBITDA decreased $6.5 million , or (7.2)%, to $84.

4 million , primarily due to lower same venue sales. Golf Equipment Segment revenue increased $0.1 million to $293.

5 million , slightly ahead of expectations primarily due to the timing of shipments in the products businesses. Segment operating income decreased $8.4 million , which was in line with our expectations and primarily due to increased freight costs.

Active Lifestyle Segment revenue decreased $33.3 million or 11.1% to $266.

2 million , resulting primarily from lower European wholesale revenue at Jack Wolfskin, as expected. Segment operating income decreased $20.6 million due to the lower revenue and increased freight costs.

The following is a reconciliation of total segment operating income to income before income taxes for the periods presented: 2024 BALANCE SHEET HIGHLIGHTS Inventory decreased $70.1 million year-over-year to $666 million , driven by decreases in both the Active Lifestyle and Golf Equipment segments. Available liquidity, which is comprised of cash on hand plus availability under the Company's credit facilities, increased $129.

0 million , or approximately 18%, to $863 million compared to September 30, 2023 . BUSINESS OUTLOOK ADDITIONAL INFORMATION AND DISCLOSURES Conference Call and Webcast The Company will be holding a conference call at 2:00 p.m.

Pacific time today, November 12, 2024 , to discuss the Company's financial results, outlook and business. The call will be webcast live on our investor relations website at https://www.topgolfcallawaybrands.

com/news-and-events/presentations . A replay of the conference call will be available approximately two hours after the call ends. The replay may be accessed through the Investor Relations section of the Company's website at https://www.

topgolfcallawaybrands.com . Non-GAAP Information The GAAP results contained in this press release and the financial statement schedules attached to this press release have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

To supplement the GAAP results, the Company has provided certain non-GAAP financial information as follows: Constant Currency Basis. The Company provided certain information regarding the Company's financial results or projected financial results on a "constant currency basis" or as "constant currency" results. This information estimates the impact of changes in foreign currency exchange rates on the translation of the Company's current or projected future period financial results as compared to the applicable comparable period.

This impact is derived by taking the current or projected local currency results and translating them into U.S. dollars based upon the foreign currency exchange rates for the applicable comparable period.

It does not include any other effect of changes in foreign currency rates on the Company's results or business. Non-Recurring and Non-cash Adjustments. The Company provided information excluding the non-cash amortization of purchase accounting adjustments associated with acquired intangible assets, including acquired customer and distributor relationships and acquired developed technology related to the Company's merger with Topgolf, acquisitions of Jack Wolfskin, TravisMathew and OGIO, and distribution rights in the Korea apparel market (collectively, the "Acquisitions").

While the amortization of acquired intangible assets is excluded from the calculation of non-GAAP net income, the revenue and operating costs associated with these acquired companies is reflected in non-GAAP net income calculations, as well as the acquired assets that contribute to revenue generation. For 2024, non-recurring items include charges related to restructuring and reorganization in the Active Lifestyle segment, currency translation adjustments for the dissolution of a foreign subsidiary, the 2024 debt repricing, a 2023 cybersecurity incident, impairment and abandonment of the Shankstars media game, costs incurred related to the separation of Topgolf, and IT integration and implementation costs stemming primarily from the merger with Topgolf. For 2023, non-recurring items include legal costs, credit agency fees, and losses associated with our 2023 debt modification, combined with IT integration and implementation costs stemming primarily from the merger with Topgolf, charges related to the impairment and abandonment of the Shankstars media game, costs related to a 2023 cybersecurity incident and restructuring and reorganization charges in our Topgolf and Active Lifestyle segments.

Adjusted EBITDA. The Company provides information about its results excluding interest, taxes, depreciation and amortization expenses, stock compensation expense, non-cash lease amortization expense, and the non-recurring and non-cash items referenced above. Adjusted Free Cash Flow .

The Company defines Adjusted Free Cash Flow as cash flows from operating activities, less capital expenditures net of proceeds from lease financing and net of proceeds from government grants. In addition, the Company has included in the schedules attached to this release a reconciliation of certain non-GAAP information to the most directly comparable GAAP information. The non-GAAP information presented in this release and related schedules should not be considered in isolation or as a substitute for any measure derived in accordance with GAAP.

The non-GAAP information may also be inconsistent with the manner in which similar measures are derived or used by other companies. Management uses such non-GAAP information for financial and operational decision-making purposes and as a means to evaluate period-over-period comparisons and in forecasting the Company's business going forward. Management believes that the presentation of such non-GAAP information, when considered in conjunction with the most directly comparable GAAP information, provides additional useful comparative information for investors in their assessment of the underlying performance, and, in some cases, financial condition, of the Company's business with regard to these items.

For forward-looking Adjusted EBITDA, non-GAAP diluted earnings per share, and Topgolf Adjusted EBITDA (together, the "Projected Non-GAAP Measures") information provided in this release, reconciliation of such Projected Non-GAAP Measures to the most closely comparable GAAP financial measures are not provided because the Company is unable to provide such reconciliation without unreasonable efforts. The inability to provide a reconciliation is because the Company is currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact net income in the future but would not impact the Projected Non-GAAP measures. These items may include certain non-cash depreciation, which will fluctuate based on the Company's level of capital expenditures, non-cash amortization of intangibles related to the Company's acquisitions, income taxes, which can fluctuate based on changes in the other items noted and/or future forecasts, and other non-recurring costs and non-cash adjustments.

Historically, the Company has excluded these items from the Projected Non-GAAP Measures. The Company currently expects to continue to exclude these items in future disclosures of the Projected Non-GAAP Measures and may also exclude other items that may arise. The events that typically lead to the recognition of such adjustments are inherently unpredictable as to if or when they may occur, and therefore actual results may differ materially.

This unavailable information could have a significant impact on GAAP financial measures. Definitions Same venue sales. The Company defines same venue sales for its Topgolf business as sales for the comparable venue base, which is defined as the number of Company-operated venues with at least 24 full fiscal months of operations in the year of comparison.

Forward-Looking Statements Statements used in this press release that relate to future plans, events, financial results, performance, prospects, or growth opportunities, including statements relating to the Company's (and its segments') fourth quarter and full year 2024 guidance (including net revenues, Topgolf revenues, Adjusted EBITDA, Topgolf Adjusted EBITDA, non-GAAP diluted earnings per share, same venue sales growth, cash generation, Adjusted Free Cash Flow and diluted shares outstanding), our plans to pursue a separation of our Topgolf business, the timing and method of the separation, strength and demand of the Company's products and services, continued brand momentum, demand for golf and outdoor activities and apparel, continued investments in the business, consumer trends and behavior, future industry and market conditions, foreign currency effects and their impacts, tax rates, the completion of any strategic transaction, and statements of belief and any statement of assumptions underlying any of the foregoing, are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "estimate," "could," "would," "should," "intend," "may," "plan," "seek," "anticipate," "project" and similar expressions, among others, generally identify forward-looking statements, which speak only as of the date the statements were made and are not guarantees of future performance. These statements are based upon current information and expectations.

Accurately estimating the forward-looking statements is based upon various risks and unknowns, including uncertainty regarding global economic conditions, including relating to inflation, decreases in consumer demand and spending, and any severe or prolonged economic downturn; our ability to successfully execute planned and potential transactions, including our planned separation of Topgolf, and the potential to realize the expected benefits of such transactions in the expected timeframes or at all; our ability to satisfy the closing conditions to complete the separation on a timely basis or at all; our ability to satisfy the closing conditions to complete the separation on a timely basis, or at all; the Company's level of indebtedness; continued availability of credit facilities and liquidity and ability to comply with applicable debt covenants; effectiveness of capital allocation and cost/expense reduction efforts; continued brand momentum and product success; growth in the direct-to-consumer and e-commerce channels; ability to realize the benefits of the continued investments in the Company's business; consumer acceptance of and demand for the Company's and its subsidiaries' products and services; any changes in U.S. trade, tax or other policies, including restrictions on imports or an increase in import tariffs; future retailer purchasing activity, which can be significantly negatively affected by adverse industry conditions and overall retail inventory levels; the level of promotional activity in the marketplace; and future changes in foreign currency exchange rates and the degree of effectiveness of the Company's hedging programs.

Actual results may differ materially from those estimated or anticipated as a result of these risks and unknowns or other risks and uncertainties, including the effect of terrorist activity, armed conflict, natural disasters or pandemic diseases on the economy generally, on the level of demand for the Company's and its subsidiaries' products and services or on the Company's ability to manage its operations, supply chain and delivery logistics in such an environment; delays, difficulties or increased costs in the supply of components or commodities needed to manufacture the Company's products or in manufacturing the Company's products; and a decrease in participation levels in golf generally. For additional information concerning these and other risks and uncertainties that could affect these statements and the Company's business, see the Company's Annual Report on Form 10-K for the year ended December 31, 2023 as well as other risks and uncertainties detailed from time to time in the Company's reports on Forms 10-K, 10-Q and 8-K subsequently filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

The Company undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. About Topgolf Callaway Brands Topgolf Callaway Brands Corp. (NYSE: MODG ) is an unrivaled tech-enabled Modern Golf and active lifestyle company delivering leading golf equipment, apparel, and entertainment, with a portfolio of global brands including Topgolf, Callaway Golf, TravisMathew, Toptracer, Odyssey, OGIO, Jack Wolfskin, and World Golf Tour ("WGT").

"Modern Golf" is the dynamic and inclusive ecosystem that includes both on-course and off-course golf. For more information, please visit https://www.topgolfcallawaybrands.

com . Investor Contact Katina Metzidakis [email protected] SOURCE Topgolf Callaway Brands Corp..