PR Newswire | Aug 9, 2021 04:11PM EDT

First Half 2021

08/09 15:10 CDT

Callaway Golf Company Announces Record Financial Results For Second Quarter And First Half 2021FULL YEAR 2021 OUTLOOK REFLECTS OUTPERFORMANCE IN ALL SEGMENTS- Q2 2021 consolidated net revenue increased $617 million (+208%) to $914 million- Golf equipment and soft goods revenue increased 98% to a record $588 million- Topgolf overperformed with $325 million in revenue- Q2 2021 net income of $92 million on a GAAP basis- Q2 2021 Adjusted EBITDA increased $135 million (+464%) to $164 million- Provides full year 2021 and third quarter guidance, including full year revenue of $3,025 to $3,055 million and Adjusted EBITDA of $345 to $360 million CARLSBAD, Calif., Aug. 9, 2021

CARLSBAD, Calif., Aug. 9, 2021 /PRNewswire/ -- Callaway Golf Company (the "Company" or "Callaway") (NYSE: ELY) announced today its financial results for the second quarter ended June 30, 2021.

"I am very pleased with our performance in the second quarter of 2021 with record revenue and Adjusted EBITDA in our golf equipment and apparel businesses, as well as Topgolf results that continue to exceed our expectations," commented Chip Brewer, President and Chief Executive Officer of Callaway. "These results reflect the strong momentum and exceptional operating performance across all of our business segments and underscore the strong consumer demand for our products and services. We are encouraged to see that the interest in the sport of golf remains at all-time highs among both experienced golfers and new entrants to the sport."

"As we look ahead to the second half of 2021 and beyond, we are confident that our unique portfolio of businesses is well positioned for long-term growth," continued Mr. Brewer. "While in the short-term we will experience some lingering supply constraints and other challenges caused by the pandemic, we believe that these challenges will be manageable given current demand levels and actions we are taking to mitigate the impact. Our best estimate of these impacts is included in the guidance we are providing today, and we expect to deliver excellent financial results for the full year. All in all, we are excited about the long-term trends in our golf and outdoor apparel businesses, as well as the growth opportunities for Topgolf, all of which will continue to drive shareholder value."

GAAP AND NON-GAAP RESULTS

In addition to the Company's results prepared in accordance with GAAP, the Company provided information on a non-GAAP basis. The manner in which this non-GAAP information is derived is discussed further toward the end of this release, and the Company has provided in the tables to this release a reconciliation of the non-GAAP information to the most directly comparable GAAP information.

SUMMARY OF FINANCIAL RESULTS

The Company announced the following GAAP and non-GAAP financial results for the second quarter and first half of 2021 (in millions, except EPS):

GAAP RESULTS

Q2 Q2 ChangeFirst HalfFirst HalfChange 2021 2020 2021 2020

Net Revenue $914 $297 $617 $1,565 $739 $826

Income from Operations $107 ($177) $284 $183 ($137) $320

Other Income/(Expense), net ($31)$2 ($33) $213 ($1) $214

Income (Loss) before Income Taxes $76 ($176) $252 $396 ($138) $534

Net Income (Loss) $92 ($168) $260 $364 ($139) $503

Earnings (Loss) Per Share - diluted$0.47($1.78)$2.25 $2.28 ($1.47) $3.75

NON-GAAP RESULTS

Q2 Q2 First HalfFirst Half 2021 Change2021 2020 Change 2020

Net Revenue $914 $297 $617 $1,565 $739 $826

Income from Operations $118 $4 $114 $215 $47 $168

Other Income/(Expense), net ($27)$3 ($30) ($33) $1 ($34)

Income (Loss) before Income Taxes $91 $7 $84 $182 $48 $134

Net Income (Loss) $70 $5 $65 $147 $36 $111

Earnings (Loss) Per Share - diluted$0.36$0.06$0.30 $0.92 $0.38 $0.54

Adjusted EBITDA $164 $29 $135 $292 $89 $203

Second Quarter 2021 Financial Highlights

* Net revenue increase was driven by higher-than-expected strength across both the Golf Equipment and Apparel, Gear & Other segments, as demand remained high for golf and outdoor activities. In addition, Topgolf, which merged with the Company in March 2021, also contributed to strong, higher-than-expected revenue growth. * Non-GAAP income from operations increase was led by a $96 million increase in income from operations from the Company's Golf Equipment and Apparel, Gear & Other businesses as well as an incremental $24 million from the addition of the Topgolf business for the full second quarter. * Non-GAAP other income/(expense), net decreased $30 million primarily due to a $14 million increase in interest expense related to the addition of Topgolf as well as last year's $11 million gain from the settlement of a cross currency swap arrangement. * Fully diluted shares were 194 million shares of common stock in the second quarter of 2021, an increase of 100 million shares compared to 94 million shares in the second quarter of 2020. The increased share count is primarily related to the issuance of additional shares in connection with the Topgolf merger. * Adjusted EBITDA increase was driven by a $78 million increase in the Company's Golf Equipment and Apparel, Gear & Other businesses and the addition of $57 million from the Topgolf business.

SEGMENT RESULTS

As a result of the Topgolf merger, the Company now has three operating segments, namely Golf Equipment; Apparel, Gear and Other; and Topgolf. The Company evaluates the performance of its operating segments based on segment operating income. Management uses total segment operating income as a measure of its operational performance, excluding corporate overhead and certain non-recurring and non-cash charges and benefits. The Company believes that information about total segment operating income allows investors to better evaluate operating results and changes in results without these non-operational factors.

The following is a reconciliation of income before income taxes to total segment operating income (in millions) for the second quarter and first half of 2021 and 2020:

Q2 Q2 First HalfFirst Half Change2021 2020 Change 2021 2020

Total segment operating income$138 $17 $121 $247 $72 $175

Reconciling items* ($31)($195)$164 ($64) ($209) $145

Income from Operations $107 ($177)$284 $183 ($137) $320

Gain on Topgolf Investment - - - $253 - $253

Interest Expense ($29)($12) ($17) ($46) ($21) ($25)

Other Income ($3) $14 ($17) $7 $20 ($14)

Income before income taxes $76 ($176)$252 $396 ($138) $534

*Reconciling items exclude corporate overhead and certain non-recurring and non-cash items as described in the schedules to this release.

Second Quarter 2021 Segment Highlights

* Golf equipment * Revenue increased 91% year-over-year and 37% compared to second quarter 2019 pre-pandemic levels, driven by the continued surge in golf demand and participation, successful launch of the new EPIC line of woods and APEX line of irons and the continued success of the Chrome Soft line of golf balls, as compared to the Company's operations and golf retail being significantly impacted by restrictions and shutdowns due to the pandemic for the majority of the second quarter of 2020 * Both the golf club and golf ball products saw significant growth year-over-year, with golf club sales increasing 105% and golf ball sales increasing 51% * Segment operating income increased 236% due to the increased revenue, operating expense leverage and favorable foreign currency exchange rates

* Apparel, Gear and Other * Revenue increased 115% year-over-year, driven by a 152% increase in apparel sales as well as an 88% increase in gear, accessories and other as all brands rebounded from the year ago quarter, which was severely impacted by shutdowns due to the pandemic * Compared to second quarter 2019 pre-pandemic levels, revenue increased 21% * TravisMathew experienced significant growth in the quarter as momentum in demand for the brand continued to increase, while Jack Wolfskin and Callaway's soft goods business also increased amid continued consumer demand for golf and outdoor products * Jack Wolfskin showed resiliency, despite most European retail locations being negatively impacted by COVID-19 restrictions for a significant portion of the second quarter of 2021 * Operating income for the apparel, gear and other segment increased $28 million to $16 million in the second quarter of 2021 compared to a $12 million loss in the second quarter of 2020, driven by the increased sales and fixed cost leverage and grew $4 million versus the second quarter of 2019

* Topgolf * Contributed $325 million of revenue and $24 million of segment operating income in the second quarter of 2021 * Same venue sales increased to the low 90s as a percent of 2019 levels * Opened six new domestic locations in the first six months of 2021, including four locations opened during second quarter 2021

The table below provides the breakout of segment revenues and segment operating income for the second quarter and first half of 2021:

Q2 Q2 First HalfFirst Half Segment Net Revenue Change 2021 Change 2021 2020 2020

Golf Equipment $401 $210 $191 $778 $502 $276

Apparel, Gear & Other $187 $87 $100 $369 $238 $131

Topgolf $325 - $325 $418 - $418

Total Segment Net Revenue $914 $297 $617 $1,565 $739 $826



Q2 Q2 First HalfFirst Half Total Segment Operating Income Change 2021 Change 2021 2020 2020

Golf Equipment $98 $29 $69 $183 $88 $95 % of segment revenue 24.4%13.9% 1,050 bps23.5% 17.5% 600 bps

Apparel, Gear & Other $16 ($12) $28 $36 ($16) $52 % of segment revenue 8.4% (13.5%)2,190 bps9.8% -6.5% 1,630 bps

Topgolf $24 - $24 $28 - $28 % of segment revenue 7.4% - - 6.7% - -

Total segment operating income $138 $17 $121 $247 $72 $175 % of total net revenue 15.1%5.9% 920 bps 15.8% 9.8% 600 bps

BUSINESS OUTLOOK

The third quarter and full year 2021 projections set forth below are based on the Company's best estimates at this time. They include the estimated impact of certain factors, including (1) ongoing uncertainty due to the impact of COVID-19 on the supply chain, (2) changes in foreign currency effects, which are estimated to have a positive full year impact of $36 million on net sales, and (3) increased freight costs. In addition, due to the timing of the Topgolf acquisition on March 8, 2021, Callaway's reported full year financial results will only include 10 months of Topgolf results in 2021 and therefore will not include January and February results which were in the aggregate $142.9 million in revenue and $2.3 million in Adjusted EBITDA.

FULL YEAR 2021 THIRD QUARTER 2021

2021 2020 2019 Q3 2021 Q3 2020Q3 2019(in millions) Estimate ResultsResultsEstimate ResultsResults

Net Revenue $3,025 - $3,055$1,590 $1,701 $775 - $790$476 $426

Adjusted EBITDA $345 - $360 $163 $210 $51 - $58 $87 $57



Net Revenue:Full year 2021 net revenue estimate assumes continued positive demand fundamentals for Callaway's Golf Equipment and Apparel, Gear and Other segments, along with Topgolf segment revenue for the 10 months beginning March 8, 2021 approaching 2019 full year levels of $1,060 million. The outlook also assumes $55 million of revenue risk due to short-term supply chain constraints, almost all of which occurs in third quarter 2021.

Adjusted EBITDA:Full year 2021 Adjusted EBITDA estimate assumes the Topgolf segment will deliver over $100 million in Adjusted EBITDA for the 10 months beginning March 8, 2021. The outlook takes into account elevated freight costs in the second half of 2021, as well as non-GAAP operating expenses that are approximately $100 million higher than full year 2019 non-GAAP operating expenses primarily due to cost of living and inflationary pressures over two years, the impact of foreign currency changes and investment back into the Company's business. This estimate for non-GAAP operating expenses is $20 to $30 million higher than the Company's initial expectations at the beginning of the year and is related primarily to accelerated investments in the apparel business and variable costs associated with the strong performance of the business this year.

ADDITIONAL INFORMATION AND DISCLOSURES

Conference Call and Webcast

The Company will be holding a conference call at 2:00 p.m. Pacific time today, August 9, 2021, to discuss the Company's financial results, outlook and business. The call will be broadcast live over the Internet and can be accessed at http://ir.callawaygolf.com/. A replay of the conference call will be available approximately two hours after the call ends, and will remain available through 9:00 p.m. Pacific time on August 16, 2021. The replay may be accessed through the Internet at http://ir.callawaygolf.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 ("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." This information estimates the impact of changes in foreign currency 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 certain non-cash amortization of intangibles and other assets related to the Company's acquisitions, non-recurring transaction and transition costs related to acquisitions, severance costs related to the Company's cost-reduction initiatives, and other non-recurring costs, including costs related to the merger and integration with Topgolf, transition to the Company's new North American Distribution Center, implementation of new IT systems, the cumulative $6 million non-cash valuation allowance recorded against certain of the Company's deferred tax assets as a result of the Topgolf merger, the $253 million non-cash gain as the result of the Company's prior equity position in Topgolf, the $174 million non-cash impairment charge related to the Jack Wolfskin goodwill and trade name, as well as non-cash amortization of the debt discount related to the Company's convertible notes.

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

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 of the Company's business with regard to these items. The Company has provided reconciling information in the attached schedules.

Definitions

Same venue sales.Callaway 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.

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 Topgolf's financial outlook for the full year and third quarter of 2021 (including revenue, Adjusted EBITDA and operating expenses), continued impact of the COVID-19 pandemic on the Company's business and the Company's ability to improve and recover from such impact, impact of any measures taken to mitigate the effect of the pandemic, strength and demand of the Company's products and services, continued brand momentum, demand for golf and outdoor apparel, continued investments in the business, increases in shareholder value, post-pandemic consumer trends and behavior, future industry and market conditions, the benefits of the Topgolf merger, including the anticipated operations, financial position, liquidity, performance, prospects or growth and scale opportunities of the Company, Topgolf or the combined company, 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," "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 disruptions to business operations from additional regulatory restrictions in response to the COVID-19 pandemic (such as travel restrictions, government-mandated shut-down orders or quarantines) or voluntary "social distancing" that affects employees, customers and suppliers; costs, expenses or difficulties related to the merger with Topgolf, including the integration of the Topgolf business; failure to realize the expected benefits and synergies of the Topgolf merger in the expected timeframes or at all; production delays, closures of manufacturing facilities, retail locations, warehouses and supply and distribution chains; staffing shortages as a result of remote working requirements or otherwise; uncertainty regarding global economic conditions, particularly the uncertainty related to the duration and ongoing impact of the COVID-19 pandemic, and related decreases in customer demand/spending and ongoing increases in operating and freight costs and supply constraints; 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; cost of living and inflationary pressures; any changes in U.S. trade, tax or other policies, including restrictions on imports or an increase in import tariffs; future consumer discretionary purchasing activity, which can be significantly adversely affected by unfavorable economic or market conditions; future retailer purchasing activity, which can be significantly negatively affected by adverse industry conditions and overall retail inventory levels; 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, including expanded outbreak of COVID-19 and its variants, 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, during or as a result of the COVID-19 pandemic. 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, 2020 as well as other risks and uncertainties detailed from time to time in the Company's reports on Forms 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 Callaway Golf CompanyCallaway Golf Company (NYSE: ELY) is an unrivaled tech-enabled golf company delivering leading golf equipment, apparel and entertainment, with a portfolio of global brands including Callaway Golf, Topgolf, Odyssey, OGIO, TravisMathew and Jack Wolfskin. Through an unwavering commitment to innovation, Callaway manufactures and sells premium golf clubs, golf balls, golf and lifestyle bags, golf and lifestyle apparel and other accessories, and provides world-class golf entertainment experiences through Topgolf, its wholly-owned subsidiary. For more information please visit www.callawaygolf.com, www.topgolf.com, www.odysseygolf.com, www.OGIO.com, www.travismathew.com, and www.jack-wolfskin.com.

Investor ContactsBrian LynchLauren Scott(760) 931-1771 invrelations@callawaygolf.com

CALLAWAY GOLF COMPANY CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (In thousands)



June 30, December 31, 2021 2020

ASSETS



Current assets:

Cash and cash equivalents $415,204 $366,119

Restricted Cash 2,469 -

Accounts receivable, net 325,275 138,482

Inventories 335,346 352,544

Other current assets 175,756 55,482

Total current assets 1,254,050 912,627



Property, plant and equipment, net 1,264,886 146,495

Operating lease right-of-use assets, net 1,057,225 194,776

Intangible assets, net 3,578,545 540,997

Other assets 117,128 185,705

Total assets $7,271,834$1,980,600



LIABILITIES AND SHAREHOLDERS' EQUITY



Current liabilities:

Accounts payable and accrued expenses $426,577 $276,209

Accrued employee compensation and benefits 95,427 30,937

Asset-based credit facilities 21,438 22,130

Current operating lease liabilities 55,492 29,579

Construction advances 63,636 -

Deferred revenue 83,580 2,546

Other current liabilities 41,482 29,871

Total current liabilities 787,632 391,272



Long-term debt 1,064,429 650,564

Long-term operating leases 1,174,780 177,996

Deemed landlord financing 263,219 -

Long-term liabilities 242,311 85,124

Total Callaway Golf Company shareholders' equity3,739,463 675,644

Total liabilities and shareholders' equity $7,271,834$1,980,600

CALLAWAY GOLF COMPANY CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data)



Three Months Ended June 30,

2021 2020

Net revenues:

Products $591,410 $296,996

Services 322,231 -

Total net revenues 913,641 296,996



Costs and expenses:

Cost of products 315,008 174,941

Cost of services, excluding depreciation and amortization42,786 -

Other venue expenses 202,339 -

Selling, general and administrative expense 221,124 115,215

Research and development expense 20,271 10,020

Goodwill and tradename impairment - 174,269

Venue pre-opening costs 4,844 -

Total costs and expenses 806,372 474,445



Income (loss) from operations 107,269 (177,449)

Other income (expense), net (31,378) 1,834

Income tax benefit (15,853) (7,931)

Net income (loss) $91,744 $(167,684)



Earnings (loss) per common share:

Basic $0.50 $(1.78)

Diluted $0.47 $(1.78)

Weighted-average common shares outstanding:

Basic 185,225 94,141

Diluted 194,334 94,141



Six Months Ended June 30,

2021 2020

Net revenues:

Products $1,151,368$739,272

Services 413,894 -

Total net revenues 1,565,262 739,272



Costs and expenses:

Cost of products 625,638 421,543

Cost of services, excluding depreciation and amortization53,771 -

Other venue expenses 267,776 -

Selling, general and administrative expense 395,004 256,969

Research and development expense 33,016 23,260

Goodwill and tradename impairment - 174,269

Venue pre-opening costs 6,689 -

Total costs and expenses 1,381,894 876,041



Income (loss) from operations 183,368 (136,769)

Gain on Topgolf investment 252,531 -

Other income (expense), net (39,804) (801)

Income tax provision 31,890 1,220

Net income (loss) $364,205 $(138,790)



Earnings (loss) per common share:

Basic $2.40 $(1.47)

Diluted $2.28 $(1.47)

Weighted-average common shares outstanding:

Basic 151,541 94,225

Diluted 159,639 94,225





On March 8, 2021, the Company completed its merger with Topgolf International, Inc. ("Topgolf") and has included the results of operations for Topgolf in its consolidated condensed statement of operations from that date forward. Additionally, the Company has modified the presentation of its consolidated condensed statement of operations for the three and six months ended June 30, 2021 and 2020 to provide investors with additional information to assess the performance of the combined entity.

CALLAWAY GOLF COMPANY CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW (Unaudited) (In thousands)



Six Months Ended June 30,

2021 2020

Cash flows from operating activities:

Net income (loss) $364,205$(138,790)

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization 63,542 18,357

Lease amortization expense 26,896 16,313

Amortization of debt issuance costs 2,618 1,823

Debt discount amortization 6,527 1,483

Impairment loss - 174,269

Deferred taxes, net 28,067 8,684

Non-cash share-based compensation 15,648 4,794

Loss on disposal of long-lived assets 100 123

Gain on Topgolf investment (252,531)-

Unrealized net gains on hedging instruments and foreign currency (5,048) (14,059)

Acquisition costs (16,199) -

Changes in assets and liabilities (133,358)(93,318)

Net cash provided by (used in) operating activities 100,467 (20,321)



Cash flows from investing activities:

Cash acquired in merger 171,294 -

Capital expenditures (120,833)(25,097)

Note receivable, net of discount - (5,234)

Net cash provided by (used in) investing activities 50,461 (30,331)



Cash flows from financing activities:

Repayments of credit facilities, net (110,757)(89,029)

Proceeds from lease financing 24,799 -

Exercise of stock options 18,403 130

Acquisition of treasury stock (12,538) (21,953)

Repayments of long-term debt (12,029) (5,504)

Debt issuance cost (5,441) (9,119)

Payment on contingent earn-out obligation (3,577) -

Repayments of financing leases (200) (206)

Dividends paid (3) (1,891)

Proceeds from issuance of convertible notes - 258,750

Proceeds from issuance of long-term debt - 9,766

Premium paid for capped call confirmations - (31,775)

Net cash (used in) provided by financing activities (101,343)109,169

Effect of exchange rate changes on cash, cash equivalents and restricted cash 1,969 (767)

Net increase in cash, cash equivalents and restricted cash 51,554 57,750

Cash, cash equivalents and restricted cash at beginning of period 366,119 106,666

Cash, cash equivalents and restricted cash at end of period $417,673$164,416

CALLAWAY GOLF COMPANY Consolidated Net Sales and Operating Segment Information (Unaudited) (In thousands)



Net Revenues by Product Category^(2)

Non-GAAP Three Months Ended Constant Growth June 30, Currency vs. 2020^(1)

2021 2020 Dollars Percent Percent

Net revenues:

Golf Clubs $319,973$156,040 $163,933 105.1% 99.6%

Golf Balls 81,286 53,903 27,383 50.8% 46.9%

Apparel 91,413 36,302 55,111 151.8% 144.6%

Gear and Other 95,516 50,751 44,765 88.2% 82.5%

Venues 303,424 - 303,424 100.0% 100.0%

Topgolf Other 22,029 - 22,029 100.0% 100.0%

Total net revenue $913,641$296,996 $616,645 207.6% 201.5%





^(1) Calculated by applying 2020 exchange rates to 2021 reported sales in regions outside the U.S.

^(2) On March 8, 2021, the Company completed its merger with Topgolf. Accordingly, the Company's revenue categories for 2021 were expanded to include Topgolf's revenue categories.



Net Sales by Region

Non-GAAP Three Months Ended Constant Growth June 30, Currency vs. 2020^(1)

2021 2020 Dollars Percent Percent

Net revenues:

United States $642,757$171,714 $471,043 274.3% 274.3%

Europe 120,999 50,074 70,925 141.6% 118.7%

Japan 61,861 24,640 37,221 151.1% 155.3%

Rest of World 88,024 50,568 37,456 74.1% 58.5%

Total net revenue $913,641$296,996 $616,645 207.6% 201.5%





^(1) Calculated by applying 2020 exchange rates to 2021 reported sales in regions outside the U.S.



Operating Segment Information

Non-GAAP Three Months Ended Constant Growth June 30, Currency vs. 2020^(1)

2021 2020 Dollars Percent Percent

Net revenues:

Golf Equipment $401,259$209,943 $191,316 91.1% 86.1%

Apparel, Gear and Other 186,929 87,053 99,876 114.7% 108.4%

Topgolf 325,453 $- 325,453 100.0% 100.0%

Total net revenue $913,641$296,996 $616,645 207.6% 201.5%



Segment operating income (loss):

Golf Equipment $98,089 $29,181 $68,908 236.1%

Apparel, Gear and Other 15,668 (11,711) 27,379 233.8%

Topgolf 24,204 - 24,204 100.0%

Total segment operating income 137,961 17,470 120,491 689.7%

Corporate G&A and other^(2) (30,692) (20,650) (10,042) -48.6%

Goodwill and tradename impairment^(3) - (174,269) 174,269 100.0%

Total operating income (loss) 107,269 (177,449) 284,718 160.5%

Interest expense, net (28,876) (12,163) (16,713) -137.4%

Other income (expense), net (2,502) 13,997 (16,499) -117.9%

Total income (loss) before income taxes$75,891 $(175,615) $251,506 143.2%





^(1) Calculated by applying 2020 exchange rates to 2021 reported sales in regions outside the U.S.

^(2) Amount includes corporate general and administrative expenses not utilized by management in determining segment profitability, including non-cash amortization expense for intangible assets acquired in connection with the Jack Wolfskin, TravisMathew and OGIO acquisitions. In addition, the amount for 2021 includes (i) $2.5 million of transaction, transition and other non-recurring costs associated with the merger with Topgolf completed on March 8, 2021, (ii) $6.2 million of non-cash amortization expense for intangible assets acquired in connection with the merger with Topgolf, combined with depreciation expense from the fair value step-up of Topgolf property, plant and equipment and amortization expense related to the fair value adjustments to Topgolf leases, and (iii) $0.8 million of costs related to the implementation of new IT systems for Jack Wolfskin. The amount for the second quarter of 2020 includes (i) $3.7 million of severance charges associated with workforce reductions due to the COVID-19 pandemic, and (ii) $1.8 million of non-recurring costs associated with the Company's transition to the new North America Distribution Center and costs related to the implementation of new IT systems for Jack Wolfskin.

^(3) Represents an impairment charge related to Jack Wolfskin recognized in the second quarter of 2020.



CALLAWAY GOLF COMPANY Consolidated Net Sales and Operating Segment Information (Unaudited) (In thousands)



Net Revenues by Product Category^(2)

Non-GAAP Six Months Ended Constant Growth June 30, Currency vs. 2020^(1)

2021 2020 Dollars Percent Percent

Net revenues:

Golf Clubs $636,326 $407,264 $229,062 56.2% 52.4%

Golf Balls 141,815 94,340 47,475 50.3% 46.7%

Apparel 186,703 113,592 73,111 64.4% 58.3%

Gear and Other 182,328 124,076 58,252 46.9% 41.8%

Venues 388,594 - 388,594 100.0% 100.0%

Topgolf Other 29,496 - 29,496 100.0% 100.0%

Total net revenue $1,565,262$739,272 $825,990 111.7% 107.0%





^(1) Calculated by applying 2020 exchange rates to 2021 reported sales in regions outside the U.S.

^(2) On March 8, 2021, the Company completed its merger with Topgolf. Accordingly, the Company's revenue categories for 2021 were expanded to include Topgolf's revenue categories.



Net Sales by Region

Non-GAAP Six Months Ended Constant Growth June 30, Currency vs. 2020^(1)

2021 2020 Dollars Percent Percent

Net revenues:

United States $1,030,979$389,217 $641,762 164.9% 164.9%

Europe 229,344 146,793 82,551 56.2% 42.5%

Japan 133,747 101,987 31,760 31.1% 30.5%

Rest of World 171,192 101,275 69,917 69.0% 55.2%

Total net revenue $1,565,262$739,272 $825,990 111.7% 107.0%





^(1) Calculated by applying 2020 exchange rates to 2021 reported sales in regions outside the U.S.



Operating Segment Information

Non-GAAP Six Months Ended Constant Growth June 30, Currency vs. 2020^(1)

2021 2020 Dollars Percent Percent

Net revenues:

Golf Equipment $778,141 $501,604 $276,537 55.1% 51.3%

Apparel, Gear and Other 369,031 237,668 131,363 55.3% 49.7%

Topgolf 418,090 $- 418,090 100.0% 100.0%

Total net revenue $1,565,262$739,272 $825,990 111.7% 107.0%



Segment operating income (loss):

Golf Equipment $183,010 $87,801 $95,209 108.4%

Apparel, Gear and Other 36,158 (15,510) 51,668 333.1%

Topgolf 28,158 - 28,158 100.0%

Total segment operating income 247,326 72,291 175,035 242.1%

Corporate G&A and other^(2) (63,958) (34,791) (29,167) 83.8%

Goodwill and tradename impairment^(3) - (174,269) 174,269 100.0%

Total operating income (loss) 183,368 (136,769) 320,137 234.1%

Gain on Topgolf investment^(4) 252,531 - 252,531 100.0%

Interest expense, net (46,333) (21,278) (25,055) -117.8%

Other income, net 6,529 20,477 (13,948) -68.1%

Total income before income (loss) taxes$396,095 $(137,570) $533,665 387.9%





^(1) Calculated by applying 2020 exchange rates to 2021 reported sales in regions outside the U.S.

^(2) Amount includes corporate general and administrative expenses not utilized by management in determining segment profitability, including non-cash amortization expense for intangible assets acquired in connection with the Jack Wolfskin, TravisMathew and OGIO acquisitions. In addition, the amount for 2021 includes (i) $18.7 million of transaction, transition and other non-recurring costs associated with the merger with Topgolf completed on March 8, 2021, (ii) $8.4 million of non-cash amortization expense for intangible assets acquired in connection with the merger with Topgolf, combined with depreciation expense from the fair value step-up of Topgolf property, plant and equipment and amortization expense related to the fair value adjustments to Topgolf leases, and (iii) $1.5 million of costs related to the implementation of new IT systems for Jack Wolfskin. The amount for 2020 also includes (i) $3.4 million of non-recurring costs associated with the Company's transition to the new North America Distribution Center, as well as costs related to the implementation of new IT systems for Jack Wolfskin, and (ii) $3.7 million of severance charges associated with workforce reductions due to the COVID-19 pandemic.

^(3) Represents an impairment charge related to Jack Wolfskin recognized in the second quarter of 2020.

^(4) Amount represents a gain recorded to write-up the Company's former investment in Topgolf to its fair value in connection with the merger.

CALLAWAY GOLF COMPANY Consolidated Net Sales and Operating Segment Information (Unaudited) (In thousands)



Operating Segment Information

Three Months Ended Six Months Ended Growth Growth June 30, June 30,

2021 2019 Dollars Percent 2021 2019 Dollars Percent

Net revenues:

Golf Equipment $401,259 $292,353 $108,906 37.3% $778,141 $615,972 $162,169 26.3%

Apparel, Gear and Other 186,929 154,355 32,574 21.1% 369,031 346,933 22,098 6.4%

Topgolf 325,453 - 325,453 100.0% 418,090 - 418,090 100.0%

Total net revenue $913,641 $446,708 $466,933 104.5% $1,565,262 $962,905 $602,357 62.6%



Segment operating income:

Golf Equipment $98,089 $55,665 $42,424 76.2% $183,010 $125,658 $57,352 45.6%

Apparel, Gear and Other 15,668 11,314 4,354 38.5% 36,158 34,033 2,125 6.2%

Topgolf 24,204 - 24,204 100.0% 28,158 - 28,158 100.0%

Total segment operating income 137,961 66,979 70,982 106.0% 247,326 159,691 87,635 54.9%

Corporate G&A and other^(1) (30,692) (21,780) (8,912) -40.9% (63,958) (44,856) (19,102) -42.6%

Total operating income 107,269 45,199 62,070 137.3% 183,368 114,835 68,533 59.7%

Gain on Topgolf investment^(2) - - - -% 252,531 - 252,531 100.0%

Interest expense, net (28,876) (10,260) (18,616) -181.4% (46,333) (19,899) (26,434) -132.8%

Other income/(expense), net (2,502) 1,167 (3,669) -314.4% 6,529 (773) 7,302 944.6%

Total income before income taxes$75,891 $36,106 $39,785 110.2% $396,095 $94,163 $301,932 320.6%





^(1) Amount includes corporate general and administrative expenses not utilized by management in determining segment profitability including non-cash amortization expense for intangible assets acquired in connection with the Jack Wolfskin, TravisMathew and OGIO acquisitions. In addition, the amount for the three and six months ended June 30, 2021 includes (i) $2.5 million and $18.7 million, respectively, for transaction, transition and other non-recurring costs associated with the merger with Topgolf, (ii) $6.2 million and $8.4 million, respectively, of non-cash amortization expense for intangible assets acquired in connection with the merger with Topgolf, combined with depreciation expense from the fair value step-up of Topgolf property, plant and equipment and amortization expense related to the fair value adjustments to Topgolf leases, and (iii) $0.8 million and $1.5 million, respectively, of expenses related to the implementation of new IT systems for Jack Wolfskin. The amount for three and six months ended June 30, 2019 also includes (i) $5.3 million and $10.7 million, respectively, of amortization expense related to the fair value adjustment to Jack Wolfskin's inventory, and (ii) $1.4 million and $6.1 million, respectively, for transaction costs associated with the acquisition of Jack Wolfskin.

^(2) Amount represents a gain recorded to write up the Company's former investment in Topgolf to its fair value in connection with the merger.



CALLAWAY GOLF COMPANY Supplemental Financial Information and Non-GAAP Reconciliation (Unaudited) (In thousands)



Three Months Ended June 30,

2021 2020

Non-Cash Non-Cash Acquisition Non-Cash Non-Cash Amortization Amortization & Other Tax Non- Amortization Amortization Other Non- GAAP and of Discount Non-RecurringValuation GAAP and of Discount Non-Recurring Depreciation^(1)on ConvertibleItems^(3) Allowance^(4)GAAP Impairment on ConvertibleItems^(3) GAAP^(5) Notes^(2) Charges^(1) Notes^(2)

Net revenues $913,641 $ - $ - $ - $ - $913,641$296,996 $- $ - $ - $296,996

Total costs and expenses 806,372 7,453 - 3,274 - 795,645 474,445 175,447 - 5,889 293,109

Income (loss) from operations 107,269 (7,453) - (3,274) - 117,996 (177,449) (175,447) - (5,889) 3,887

Other income/(expense), net (31,378) (1,459) (2,598) (306) - (27,015) 1,834 - (1,499) - 3,333

Income tax provision (benefit) (15,853) (2,139) (624) (859) (32,743) 20,512 (7,931) (8,195) (345) (1,355) 1,964

Net income (loss) $91,744 $ (6,773) $ (1,974) $ (2,721) $ 32,743 $70,469 $(167,684) $(167,252) $ (1,154) $ (4,534) $5,256



Diluted earnings (loss) per share: $0.47 ($0.03) ($0.01) ($0.02) $0.17 $0.36 ($1.78) ($1.78) ($0.01) ($0.05) $0.06

Weighted-average shares outstanding:194,334 194,334 194,334 194,334 194,334 194,334 94,141 94,141 94,141 94,141 95,294





^(1) Represents non-cash amortization expense of intangible assets in connection with the acquisitions of OGIO, TravisMathew and Jack Wolfskin. 2021 also includes non-cash amortization of Topgolf intangible assets, depreciation expense from the fair value step-up of Topgolf property, plant and equipment and amortization expense related to the fair value adjustments to Topgolf leases and Topgolf debt, all recorded in connection with the Topgolf merger. 2020 also includes an impairment charge of $174.3 million related to Jack Wolfskin intangibles.

^(2) Represents the non-cash amortization of the debt discount on the Company's convertible notes issued in May 2020.

^(3) Acquisition and other non-recurring items in 2021 include transaction, transition and non-recurring costs associated with the Topgolf merger and costs related to the implementation of new IT systems for Jack Wolfskin. In 2020, non-recurring items include costs associated with the Company's transition to its new North America Distribution Center, implementation costs related to new IT systems for Jack Wolfskin, and severance charges associated with workforce reductions due to the COVID-19 pandemic.

^(4) Represents the release of a portion of the valuation allowance attributable to certain Topgolf net operating losses.

^(5) Non-GAAP diluted earnings per share for the three months ended June 30, 2020 was calculated using the diluted weighted average outstanding shares, as earnings on a non-GAAP basis resulted in net income after giving effect to pro forma adjustments.

CALLAWAY GOLF COMPANY Supplemental Financial Information and Non-GAAP Reconciliation (Unaudited) (In thousands)



Six Months Ended June 30,

2021 2020

Non-Cash Non-Cash Acquisition Non-Cash Non-Cash Amortization Amortization & Other Tax Non- Amortization Amortization Other Non- GAAP and of Discount Non-RecurringValuation GAAP and of Discount Non-Recurring Depreciation^(1)on ConvertibleItems^(3) Allowance^(4)GAAP Impairment on Convertible Notes^(2)Items^(3) GAAP^(5) Notes^(2) Charges^(1)

Net revenues $1,565,262 $ - $ - $- $- $1,565,262$739,272 $- $ - $- $739,272

Total costs and expenses 1,381,894 10,966 - 20,211 - 1,350,717 876,041 176,626 - 7,438 691,977

Income (loss) from operations 183,368 (10,966) - (20,211) - 214,545 (136,769) (176,626) - (7,438) 47,295

Other income/(expense), net 212,727 (1,752) (5,133) 252,126 - (32,514) (801) - (1,499) - 698

Income tax provision (benefit) 31,890 (3,052) (1,232) (4,948) 6,184 34,938 1,220 (8,466) (345) (1,711) 11,742

Net income (loss) $364,205 $ (9,666) $ (3,901) $236,863 $(6,184) $147,093 $(138,790) $(168,160) $ (1,154) $(5,727) $36,251



Diluted earnings (loss) per share: $2.28 ($0.06) ($0.02) $1.48 ($0.04) $0.92 ($1.47) ($1.78) ($0.01) ($0.06) $0.38

Weighted-average shares outstanding:159,639 159,639 159,639 159,639 159,639 159,639 94,225 94,225 94,225 94,225 94,485





^(1) Represents non-cash amortization expense of intangible assets in connection with the acquisitions of OGIO, TravisMathew and Jack Wolfskin. 2021 also includes non-cash amortization of Topgolf intangible assets, depreciation expense from the fair value step-up of Topgolf property, plant and equipment and expense related to the fair value adjustments to Topgolf leases and Topgolf debt, all recorded in connection with the Topgolf merger. 2020 also includes an impairment charge of $174.3 million related to Jack Wolfskin.

^(2) Represents the non-cash amortization of the debt discount on the Company's convertible notes issued in May 2020.

^(3) Acquisition and other non-recurring items in 2021 includes transaction, transition and other non-recurring costs associated with the merger with Topgolf completed on March 8, 2021, the recognition of a $252.5 million gain on the Company's pre-merger investment in Topgolf, and expenses related to the implementation of new IT systems for Jack Wolfskin. 2020 includes costs associated with the Company's transition to it's new North America Distribution Center, in addition to implementation costs related to new IT systems for Jack Wolfskin, and severance charges associated with workforce reductions due to the COVID-19 pandemic.

^(4) Amount represents the net impact of changes in the Company's valuation allowance against certain of its deferred tax assets.

^(5) Non-GAAP diluted earnings per share for the six months ended June 30, 2020 was calculated using the diluted weighted average outstanding shares, as earnings on a non-GAAP basis resulted in net income after giving effect to pro forma adjustments.

CALLAWAY GOLF COMPANY Non-GAAP Reconciliation and Supplemental Financial Information (Unaudited) (In thousands)





2021 Trailing Twelve Month Adjusted EBITDA 2020 Trailing Twelve Month Adjusted EBITDA

Quarter Ended Quarter Ended

September 30,December 31,March 31, June 30, September 30,December 31,March 31, June 30,

2020 2020 2021 2021 Total 2019 2019 2020 2020 Total

Net income (loss) $ 52,432 $(40,576) $272,461 $91,744 $376,061 $ 31,048 $(29,218) $28,894 $(167,684) $(136,960)

Interest expense, net 12,727 12,927 17,457 28,876 71,987 9,545 9,049 9,115 12,163 39,872

Income tax provision (benefit) 5,360 (7,124) 47,743 (15,853) 30,126 2,128 (2,352) 9,151 (7,931) 996

Depreciation and amortization expense 10,311 10,840 20,272 43,270 84,693 8,472 9,480 8,997 9,360 36,309

JW goodwill and trade name impairment - - - - - - - - 174,269 174,269

Non-cash stock compensation expense 3,263 2,861 4,609 11,039 21,772 2,513 3,418 1,861 2,942 10,734

Non-cash lease amortization expense (99) (76) 872 2,103 2,800 (36) (120) 264 207 315

Acquisitions & other non-recurring costs, before taxes^(1)2,858 8,607 (235,594) 3,274 (220,855) 3,009 4,090 1,516 5,856 14,471

Adjusted EBITDA $ 86,852 $(12,541) $127,820 $164,453 $366,584 $ 56,679 $(5,653) $59,798 $29,182 $140,006





^(1) In 2021, amounts include transaction, transition and other non-recurring costs associated with the merger with Topgolf completed on March 8, 2021, the recognition of a $252.5 million gain to step-up the Company's former investment in Topgolf to its fair value in connection with the merger, and expenses related to the implementation of new IT systems for Jack Wolfskin. In 2020, amounts include costs associated with the Company's transition to its new North America Distribution Center and the implementation of new IT systems for Jack Wolfskin, as well as $4.8 million of severance related to the Company's cost reduction initiatives.

CALLAWAY GOLF COMPANY Non-GAAP Reconciliation and Supplemental Financial Information (Unaudited) (In thousands)



2019 Trailing Twelve Month Adjusted EBITDA

Quarter Ended

March 31,June 30, September 30,December 31,

2019 2019 2019 2019 Total

Net income (loss) $48,647$28,931 $31,048 $(29,218) $79,408

Interest expense, net 9,639 10,260 9,545 9,049 38,493

Income tax provision (benefit) 9,556 7,208 2,128 (2,352) 16,540

Depreciation and amortization expense 7,977 9,022 8,472 9,480 34,951

Non-cash stock compensation expense 3,435 3,530 2,513 3,418 12,896

Non-cash lease amortization expense (140) (9) (36) (120) (305)

Acquisitions & other non-recurring costs, before taxes^(1)13,986 6,939 3,009 4,090 28,024

Adjusted EBITDA $93,100$65,881 $56,679 $(5,653) $210,007





^(1) Acquisitions and other non-recurring costs for the year ended December 31, 2019, include (i) $4.7 million of transaction costs associated with the acquisition of Jack Wolfskin, including banker's fees, legal fees, consulting and travel expenses; (ii) $5.5 million of costs associated with transitioning and reporting on the Jack Wolfskin business, including consulting fees, audit fees for SEC reporting requirements and valuation services associated with preparing Jack Wolfskin's opening balance sheet; (iii) the recognition of a $3.9 million foreign currency exchange loss primarily related to the re-measurement of a foreign currency contract established to mitigate the risk of foreign currency fluctuations on the purchase price of Jack Wolfskin, which was denominated in Euros; and (iv) consulting fees to address an activist investor. These amounts exclude any depreciation or amortization, which has been presented in a separate line above.

CALLAWAY GOLF COMPANY 2021 Adjusted EBITDA Guidance (Unaudited) (In millions)



Three Months EndedTwelve Months Ended September 30, 2021December 31, 2021



Net (loss) income $(32) - $(38) $196 - $209



Adjusted EBITDA^(1)$51 - $58 $345 - $360



^(1) Adjusted EBITDA excludes the following from forecasted net income:Interest expense, taxes, depreciation and amortization expense, non-cash stockcompensation expense, non-cash lease amortization expense, transaction andtransition costs associated with the merger with Topgolf completed on March 8,2021, the recognition of a $252.5 million gain to step-up the Company's formerinvestment in Topgolf to its fair value in connection with the merger, andexpenses related to the implementation of new IT systems for Jack Wolfskin.

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SOURCE Callaway Golf Company