PR Newswire | Nov 9, 2021 04:25PM EST

And Increases Full Year 2021 Guidance

11/09 15:23 CST

Callaway Golf Company Announces Record Financial Results For Third Quarter 2021 And Increases Full Year 2021 GuidanceHigh-Demand for Golf Equipment and Apparel ContinuesTopgolf Revenue Driven by Strong Walk-in Traffic and Social Events Business- Q3 2021 consolidated net revenue increased $381 million (+80%) to $856 million- Q3 2021 GAAP net loss of $(16) million and non-GAAP net income of $26 million- Q3 2021 Adjusted EBITDA increased $51 million (+57%) to $139 million- Increased full year 2021 revenue guidance to $3,110 to $3,120 million and Adjusted EBITDA guidance to $424 to $430 million as golf equipment and apparel revenue and Topgolf venue profitability continue to outperform prior expectations CARLSBAD, Calif., Nov. 9, 2021

CARLSBAD, Calif., Nov. 9, 2021 /PRNewswire/ -- Callaway Golf Company (the "Company" or "Callaway") (NYSE: ELY) announced today its financial results for the third quarter and nine months ended September 30, 2021.

"Callaway's third quarter performance highlights the significant growth and profitability embedded in our business, as all segments have recovered more quickly than we anticipated and are delivering results ahead of plan," commented Chip Brewer, President and Chief Executive Officer of Callaway. "Our golf equipment and apparel businesses are benefiting from sustained enthusiasm for the sport of golf and outdoor exploration, while Topgolf's fun, inclusive, social environment is in high demand among customers of all skill levels and ages. This powerful combination of off-course and on-course golf, entertainment, dining and outdoor living is unlike any other company in the market today and is poised for long-term growth as we continue to execute our strategy. We are committed to driving value for our shareholders and believe our brands are well-positioned to deliver sustainable, long-term growth as we look ahead to 2022 and beyond."

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 third quarter and nine months ended September 30, 2021 (in millions, except EPS):

GAAP RESULTS

Q3 Q3 2020Change YTD 2021YTD 2020Change 2021

Net Revenue $856 $476 $381 $2,422 $1,215 $1,207

Income from Operations $76 $64 $12 $259 $(73) $332

Other Income/(Expense), net $(26) $(6) $(20) $187 $(7) $194

Income (Loss) before Income Taxes $50 $58 $(8) $446 $(80) $526

Net Income (Loss) $(16) $52 $(68) $348 $(86) $434

Earnings (Loss) Per Share - diluted$ $0.54 $(0.63)$2.03 $(0.92) $2.95 (0.09)

NON-GAAP RESULTS

Q3 Q3 2020Change YTD 2021YTD 2020Change 2021

Net Revenue $856 $476 $381 $2,422 $1,215 $1,207

Income from Operations $85 $70 $15 $299 $117 $182

Other Income/(Expense), net $(22) $(3) $(19) $(54) $(3) $(51)

Income before income taxes $63 $67 $(4) $245 $114 $131

Net Income $26 $59 $(33) $173 $95 $78

Earnings Per Share - diluted$0.14 $0.61 $(0.47)$1.01 $0.99 $0.02

Adjusted EBITDA $139 $88 $51 $431 $177 $254

Third Quarter 2021 Financial Highlights

* Net revenue increase was driven by Topgolf same venue sales, which were in line with third quarter 2019 pre-pandemic levels, and higher-than-expected strength across both the Golf Equipment and Apparel, Gear and Other segments, as demand remained high for golf and outdoor activities. * Non-GAAP income from operations increased $15 million year-over-year, led by the addition of $24 million in operating income from the Topgolf business and a $9 million increase in operating income from the Apparel, Gear and Other business, but partially offset by lower golf equipment operating income as spending levels returned to normal levels versus the lower levels seen in 2020. * Non-GAAP other income/(expense), net decreased $(19) million to $(22) million, primarily due to a $16 million increase in interest expense related to the addition of Topgolf as well as lower hedge gains versus the prior year period. * Non-GAAP earnings per diluted share was $0.14 in the third quarter of 2021, compared to $0.61 per share in the third quarter of 2020. Fully diluted shares were 194 million shares of common stock in the third quarter of 2021, an increase of 97 million shares compared to 97 million shares in the third quarter of 2020. The increased share count is primarily related to the issuance of additional shares in connection with the Topgolf merger. * The Adjusted EBITDA increase of $51 million was driven by a $59 million contribution from the Topgolf business, and was partially offset by increased operating expenditures and the legacy business spending levels returned to normal levels. * Subsequent to quarter-end, on November 1, 2021, Callaway announced a $30 million minority investment in Five Iron Golf, an emerging, privately-owned, urban indoor golf and entertainment company offering simulator rentals, golf lessons, custom club fittings, social events and a curated food and beverage menu.

SEGMENT RESULTS

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

Q3 Q3 Change YTD YTD Change 2021 2020 2021 2020

Total segment operating income $104 83 $21 $352 $155 $197

Reconciling items* $(28)$(19)$(9) $(92)$(54) $(38)

Goodwill and Trademark Impairment$- $- $- $- $(174)$174

Income from Operations $76 $64 $12 $259 $(73) $332

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

Interest Expense $(29)$(13)$(16) $(75)$(34) $(41)

Other Income $3 $7 $(4) $9 $27 $(18)

Income before income taxes $50 $58 $(8) $446 $(80) $526

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

Third Quarter 2021 Segment Highlights

* Topgolf * Contributed $334 million of revenue and $24 million of segment operating income in the third quarter of 2021, driven primarily by strong domestic venue walk-in traffic, better-than-expected event bookings, and new incremental venue openings * Same venue sales surpassed expectations in the quarter, increasing to approximately 100% of the 2019 level and generating strong flow-through to Adjusted EBITDA * Opened eight new domestic locations in the first nine months of 2021, including two locations opened during the third quarter of 2021; one additional planned location expected to open in the fourth quarter of 2021

* Golf equipment * Revenue increased 8.4% year-over-year and 37.6% compared to third quarter 2019 pre-pandemic levels, driven by the continued strong demand for golf products and participation in the game and improved supply chain performance * Golf club sales increased 9.5% year-over-year and 36.5% compared to third quarter 2019 pre-pandemic levels, amid significant growth in sales volume across all major product categories resulting from continued unprecedented momentum in the golf business and the success of the new EPIC woods and APEX irons, which outweighed supply chain disruptions * Golf ball sales increased 4.1% during the quarter and 41.8% compared to third quarter 2019 pre-pandemic levels, as demand and market share increased * Golf Equipment segment operating income decreased 19.3% due to higher freight costs and a return to more normal levels of spend

* Apparel, Gear and Other * Revenue increased 11.9% year-over-year, driven by a 19.6% increase in apparel sales across TravisMathew, Jack Wolfskin and Callaway brands, despite global supply chain headwinds * Operating income for the Apparel, Gear and Other segment increased $9 million year-over-year to $35 million in the third quarter of 2021

The table below provides the breakout of segment revenues and segment operating income for the third quarter and nine months ended September 30, 2021:

Segment Net Revenue Q3 Q3 ChangeYTD YTD Change 20212020 2021 2020

Topgolf $334$- $334 $752 $- $752

Golf Equipment $290$267$23 $1,068$769 $299

Apparel, Gear and Other $233$208$25 $602 $446 $156

Total Segment Net Revenue$856$476$381 $2,422$1,215$1,207

Total Segment Operating IncomeQ3 Q3 Change YTD YTD Change 2021 2020 2021 2020

Topgolf $24 $- $24 $52 $- $52

% of segment revenue 7.2% - - 6.9% - -

Golf Equipment $46 $57 $(11) $229 $145 $84

% of segment revenue 15.9%21.3%(540) bps21.4%18.9%250 bps

Apparel, Gear and Other $35 $26 $9 $71 $10 $61

% of segment revenue 15.0%12.5%250 bps 11.8%2.2% 960 bps

Total segment operating income$104 $83 $21 $352 $155 $197

% of segment revenue 12.1%17.4%(530) bps14.5%12.8%170 bps

BUSINESS OUTLOOK

The 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 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 $33 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 approximately ten 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

(in millions) Current 2021 Previous 2021 2020 2019 Estimate Estimate ResultsResults

Net Revenue $3,110 - $3,120$3,065 - $3,095$1,590 $1,701

Adjusted EBITDA$424 - $430 $370 - $390 $163 $210

Net Revenue:Full year 2021 net revenue estimate assumes Topgolf segment revenue for the 10 months beginning March 8, 2021 slightly above 2019 full year levels of $1,059 million, as well as continued positive demand fundamentals for Callaway's Golf Equipment and Apparel, Gear and Other segments, as well as improved supply in Golf Equipment in the fourth quarter.

Adjusted EBITDA:Full year 2021 Adjusted EBITDA estimate assumes the Topgolf segment will deliver approximately $158 million in Adjusted EBITDA for the ten months beginning March 8, 2021, amid strong revenue flow-through.

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 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 November 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 $39 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 full year 2021 guidance (including revenue and Adjusted EBITDA), 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 activities and 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; global supply chain constraints and challenges; 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 Company

Callaway 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 Contacts

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

CALLAWAY GOLF COMPANY

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

(In thousands)



September 30,December 31, 2021 2020

ASSETS



Current assets:

Cash and cash equivalents $508,177 $366,119

Restricted Cash 1,754 -

Accounts receivable, net 255,223 138,482

Inventories 385,311 352,544

Other current assets 188,946 55,482

Total current assets 1,339,411 912,627



Property, plant and equipment, net 1,330,326 146,495

Operating lease right-of-use assets, net 1,066,124 194,776

Intangible assets, net 3,562,222 540,997

Other assets 99,296 185,705

Total assets $7,397,379$1,980,600



LIABILITIES AND SHAREHOLDERS' EQUITY



Current liabilities:

Accounts payable and accrued expenses $453,638 $276,209

Accrued employee compensation and benefits 115,946 30,937

Asset-based credit facilities 30,108 22,130

Current operating lease liabilities 55,507 29,579

Construction advances 54,264 -

Deferred revenue 84,359 2,546

Other current liabilities 46,333 29,871

Total current liabilities 840,155 391,272



Long-term debt 1,049,019 650,564

Long-term operating leases 1,181,443 177,996

Deemed landlord financing 312,027 -

Deferred tax liability 241,205 58,628

Long-term liabilities 51,604 26,496

Total Callaway Golf Company shareholders' equity3,721,926 675,644

Total liabilities and shareholders' equity $7,397,379$1,980,600

CALLAWAY GOLF COMPANY

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)



Three Months Ended September 30,

2021 2020

Net revenues:

Products $527,064 $475,559

Services 329,397 -

Total net revenues 856,461 475,559



Costs and expenses:

Cost of products 288,364 274,826

Cost of services, excluding depreciation and amortization40,070 -

Other venue expenses 215,841 -

Selling, general and administrative expense 217,736 127,085

Research and development expense 15,753 10,139

Venue pre-opening costs 2,687 -

Total costs and expenses 780,451 412,050



Income from operations 76,010 63,509

Other expense, net (25,772) (5,717)

Income before income taxes 50,238 57,792

Income tax provision 66,229 5,360

Net income (loss) $(15,991) $52,432



Earnings (loss) per common share:

Basic $(0.09) $0.56

Diluted $(0.09) $0.54

Weighted-average common shares outstanding:

Basic 185,963 94,171

Diluted 185,963 96,612



Nine Months Ended September 30,

2021 2020

Net revenues:

Products $1,678,432$1,214,831

Services 743,291 -

Total net revenues 2,421,723 1,214,831



Costs and expenses:

Cost of products 914,002 696,369

Cost of services, excluding depreciation and amortization93,841 -

Other venue expenses 483,617 -

Selling, general and administrative expense 612,740 384,054

Research and development expense 48,769 33,399

Goodwill and tradename impairment - 174,269

Venue pre-opening costs 9,376 -

Total costs and expenses 2,162,345 1,288,091



Income (loss) from operations 259,378 (73,260)

Gain on Topgolf investment 252,531 -

Other expense, net (65,576) (6,518)

Income (loss) before income taxes 446,333 (79,778)

Income tax provision 98,119 6,580

Net income (loss) $348,214 $(86,358)



Earnings (loss) per common share:

Basic $2.13 $(0.92)

Diluted $2.03 $(0.92)

Weighted-average common shares outstanding:

Basic 163,141 94,207

Diluted 171,194 94,207

_________________________________

On March 8, 2021, the Company completed its merger with Topgolf International,Inc. ("Topgolf") and has included the results of operations for Topgolf in itsconsolidated condensed statements of operations from that date forward.Additionally, the Company has modified the presentation of its consolidatedcondensed statements of operations for the three and nine months endedSeptember 30, 2021 and 2020 to provide investors with additional information toassess the performance of the combined entity.

CALLAWAY GOLF COMPANY

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW

(Unaudited)

(In thousands)



Nine Months Ended September 30,

2021 2020

Cash flows from operating activities:

Net income (loss) $348,214$(86,358)

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 107,919 28,668

Lease amortization expense 45,996 24,293

Amortization of debt issuance costs 4,042 3,024

Debt discount amortization 10,255 3,857

Impairment loss - 174,269

Deferred taxes, net 86,982 (117)

Non-cash share-based compensation 27,113 8,066

Loss on disposal of long-lived assets 194 297

Gain on Topgolf investment (252,531)-

Gain on conversion of note receivable - (1,252)

Unrealized net gains on hedging instruments and foreign currency (2,659) (8,899)

Acquisition costs (16,199) -

Changes in assets and liabilities (112,522)(23,297)

Net cash provided by operating activities 246,804 122,551



Cash flows from investing activities:

Cash acquired in merger 171,294 -

Capital expenditures (198,896)(30,911)

Investment in golf-related ventures - (19,999)

Proceeds from sale of investment in golf-related ventures 18,591 -

Proceeds from sale of property and equipment - 8

Net cash used in investing activities (9,011) (50,902)



Cash flows from financing activities:

Repayments of long-term debt (160,860)(8,203)

Proceeds from issuance of long-term debt 20,000 37,728

Proceeds from (repayments of) credit facilities, net 7,978 (114,345)

Proceeds from issuance of convertible notes - 258,750

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

Debt issuance cost (5,441) (9,143)

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

Repayments of financing leases (465) (530)

Proceeds from lease financing 49,508 -

Exercise of stock options 19,520 130

Dividends paid (3) (1,891)

Acquisition of treasury stock (12,938) (22,143)

Net cash (used in) provided by financing activities (86,278) 108,578

Effect of exchange rate changes on cash, cash equivalents and restricted cash (3,775) (237)

Net increase in cash, cash equivalents and restricted cash 147,740 179,990

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

Cash, cash equivalents and restricted cash at end of period $513,859$286,656

CALLAWAY GOLF COMPANY

Consolidated Net Sales and Operating Segment Information

(Unaudited)

(In thousands)



Net Revenues by Product Category^(2)

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

2021 2020 Dollars Percent Percent

Net revenues:

Venues $313,640$- $313,640 n/a n/a

Topgolf other business lines 20,143 - 20,143 n/a n/a

Golf clubs 229,346 209,356 19,990 9.5% 9.1%

Golf balls 60,269 57,921 2,348 4.1% 3.4%

Apparel 150,240 125,609 24,631 19.6% 18.5%

Gear and other 82,823 82,673 150 0.2% -0.1%

Total net revenues $856,461$475,559 $380,902 80.1% 79.2%



^(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 Revenues by Region

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

2021 2020 Dollars Percent Percent

Net revenues:

United States $552,895$214,619 $338,276 157.6% 157.6%

Europe 157,215 134,680 22,535 16.7% 14.2%

Japan 63,441 56,530 6,911 12.2% 16.5%

Rest of world 82,910 69,730 13,180 18.9% 14.5%

Total net revenues $856,461$475,559 $380,902 80.1% 79.2%



^(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 Growth Constant September 30, Currency vs. 2020^(1)

2021 2020 Dollars Percent Percent

Net revenues:

Topgolf $333,783$- $333,783 n/a n/a

Golf equipment 289,615 267,277 22,338 8.4% 7.9%

Apparel, gear and other 233,063 208,282 24,781 11.9% 11.1%

Total net revenues $856,461$475,559 $380,902 80.1% 79.2%



Segment operating income (loss):

Topgolf $23,928 $- $23,928 n/a

Golf equipment 45,815 56,784 (10,969) -19.3%

Apparel, gear and other 34,634 25,909 8,725 33.7%

Total segment operating income 104,377 82,693 21,684 26.2%

Corporate G&A and other^(2) (28,367) (19,184) (9,183) 47.9%

Total operating income 76,010 63,509 12,501 19.7%

Interest expense, net (28,730) (12,727) (16,003) 125.7%

Other income, net 2,958 7,010 (4,052) -57.8%

Total income before income taxes$50,238 $57,792 $(7,554) -13.1%



^(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) $1.4 million of transaction, transition and other non-recurring costs associated with the merger with Topgolf completed on March 8, 2021; (ii) $5.4 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) $0.5 million of costs related to the implementation of new IT systems for Jack Wolfskin. The amount for the third quarter of 2020 includes (i) $2.3 million of non-recurring costs associated with the Company's transition to the new North America Distribution Center; (ii) $1.5 million of professional and legal fees associated with the acquisition of Topgolf; (iii) $0.5 million of costs related to the implementation of new IT systems for Jack Wolfskin; and (iv) $0.7 million of cost reductions initiatives, including severance charges associated with workforce reductions due to the COVID-19 pandemic.

CALLAWAY GOLF COMPANY

Consolidated Net Sales and Operating Segment Information

(Unaudited)

(In thousands)



Net Revenues by Product Category^(2)

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

2021 2020 Dollars Percent Percent

Net revenues:

Venues $702,234 $- $702,234 n/a n/a

Topgolf other business lines 49,639 - 49,639 n/a n/a

Golf clubs 865,671 616,620 249,051 40.4% 37.7%

Golf balls 202,085 152,261 49,824 32.7% 30.2%

Apparel 336,942 239,201 97,741 40.9% 37.4%

Gear and other 265,152 206,749 58,403 28.2% 25.1%

Total net revenues $2,421,723$1,214,831$1,206,892 99.3% 96.1%



^(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 Revenues by Region

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

2021 2020 Dollars Percent Percent

Net revenues:

United States $1,583,874$603,836 $980,038 162.3% 162.3%

Europe 386,559 281,473 105,086 37.3% 29.0%

Japan 197,188 158,517 38,671 24.4% 25.5%

Rest of world 254,102 171,005 83,097 48.6% 38.6%

Total net revenues $2,421,723$1,214,831$1,206,892 99.3% 96.1%



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



Operating Segment Information

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

2021 2020 Dollars Percent Percent

Net revenues:

Topgolf $751,873 $- $751,873 n/a n/a

Golf equipment 1,067,756 768,881 298,875 38.9% 36.2%

Apparel, gear and other 602,094 445,950 156,144 35.0% 31.7%

Total net revenues $2,421,723$1,214,831$1,206,892 99.3% 96.1%



Segment operating income (loss):

Topgolf $52,086 $- $52,086 n/a

Golf equipment 228,825 144,585 84,240 58.3%

Apparel, gear and other 70,792 10,399 60,393 580.8%

Total segment operating income 351,703 154,984 196,719 126.9%

Corporate G&A and other^(2) (92,325) (53,975) (38,350) 71.1%

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

Total operating income (loss) 259,378 (73,260) 332,638 454.1%

Gain on Topgolf investment^(4) 252,531 - 252,531 n/a

Interest expense, net (75,063) (34,005) (41,058) 120.7%

Other income, net 9,487 27,487 (18,000) -65.5%

Total income (loss) before income taxes$446,333 $(79,778) $526,111 659.5%



^(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) $20.1 million of transaction, transition and other non-recurring costs associated with the merger with Topgolf completed on March 8, 2021, (ii) $13.9 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) $2.0 million of costs related to the implementation of new IT systems for Jack Wolfskin. The amount for 2020 also includes certain non-recurring costs, including (i) $5.3 million of costs associated with the Company's transition to its new North America Distribution Center; (ii) $1.5m of professional fees and legal expenses associated with the acquisition of Topgolf; (iii) $0.9 million related to the implementation of new IT systems for Jack Wolfskin, and (iv) $4.8 million related to cost-reduction initiatives, including 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 Growth Nine Months Ended Growth September 30, September 30,

2021 2019 Dollars Percent2021 2019 Dollars Percent

Net revenues:

Topgolf $333,783$- $333,783n/a $751,873 $- $751,873 n/a

Golf equipment 289,615 210,502 79,113 37.6% 1,067,756 826,474 241,282 29.2%

Apparel, gear and other 233,063 215,715 17,348 8.0% 602,094 562,648 39,446 7.0%

Total net revenues $856,461$426,217$430,244100.9% $2,421,723$1,389,122 $1,032,601 74.3%



Segment operating income (loss):

Topgolf $23,928 $- $23,928 n/a $52,086 $- $52,086 n/a

Golf equipment 45,815 23,124 22,691 98.1% 228,825 148,782 80,043 53.8%

Apparel, gear and other 34,634 34,877 (243) -0.7% 70,792 68,909 1,883 2.7%

Total segment operating income 104,377 58,001 46,376 80.0% 351,703 217,691 134,012 61.6%

Corporate G&A and other^(1) (28,367) (17,512) (10,855) 62.0% (92,325) (62,367) (29,958) 48.0%

Total operating income 76,010 40,489 35,521 87.7% 259,378 155,324 104,054 67.0%

Gain on Topgolf investment^(2) - - - n/a 252,531 - 252,531 n/a

Interest expense, net (28,730) (9,545) (19,185) 201.0% (75,063) (29,444) (45,619) 154.9%

Other income, net 2,958 2,232 726 32.5% 9,487 1,459 8,028 550.2%

Total income before income taxes$50,238 $33,176 $17,062 51.4% $446,333 $127,339 $318,994 250.5%





^(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 nine months ended September 30, 2021 includes (i) $1.4 million and $20.1 million, respectively, of transaction, transition and other non-recurring costs associated with the merger with Topgolf completed on March 8, 2021; (ii) $5.4 million and $13.9 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) $0.5 million and $2.0 million, respectively, of costs related to the implementation of new IT systems for Jack Wolfskin. The amount for the three and nine months ended September 30, 2019 also includes $3.0 million and $13.2 million, respectively, of non-recurring transaction fees and transition costs associated with the acquisition of Jack Wolfskin completed in January 2019, as well as other non-recurring advisory fees.

^(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 September 30,

2021 2020

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

Net revenues $856,461 $ - $- $- $- $856,461$475,559 $ - $- $- $475,559

Total costs and expenses 780,451 6,654 - 1,875 - 771,922 412,050 1,235 - 5,088 405,727

Income (loss) from operations 76,010 (6,654) - (1,875) - 84,539 63,509 (1,235) - (5,088) 69,832

Other income/(expense), net (25,772) (941) (2,663) (306) - (21,862) (5,717) - (2,415) - (3,302)

Income tax provision (benefit) 66,229 (1,823) (639) (523) 32,799 36,415 5,360 (284) (555) (1,170) 7,369

Net income (loss) $(15,991) $ (5,772) $(2,024) $(1,658) $(32,799) $26,262 $52,432 $ (951) $(1,860) $(3,918) $59,161



Diluted earnings (loss) per share: $(0.09) $ (0.03) $(0.01) $(0.01) $(0.18) $0.14 $0.54 $ (0.01) $(0.02) $(0.04) $0.61

Diluted weighted-average shares outstanding:185,963 185,963 185,963 185,963 185,963 193,925 96,612 96,612 96,612 96,612 96,612





^(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.

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

^(3) In 2021, non-recurring costs include transition costs associated with the Topgolf merger and costs related to the implementation of new IT systems for Jack Wolfskin. In 2020, non-recurring costs include costs associated with the Company's transition to its new North America Distribution Center, costs associated with the acquisition of Topgolf, implementation of new IT systems for Jack Wolfskin, and severance related to the Company's cost reduction initiatives.

^(4) As Topgolf's losses exceed Callaway's income in prior years, the Company has recorded a valuation allowance against certain of its deferred tax assets until the Company can demonstrate sustained cumulative earnings.

^(5) Non-GAAP diluted earnings per share for the three months ended September 30, 2021 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)



Nine Months Ended September 30,

2021 2020

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

Net revenues $ 2,421,723 $ - $ - $ - $ - $ 2,421,723 $ 1,214,831 $ - $ - $ - $ 1,214,831

Total costs and expenses 2,162,345 17,620 - 22,086 - 2,122,639 1,288,091 177,861 - 12,526 1,097,704

Income (loss) from operations 259,378 (17,620) - (22,086) - 299,084 (73,260) (177,861) - (12,526) 117,127

Other income/(expense), net 186,955 (2,693) (7,796) 251,820 - (54,376) (6,518) - (3,914) - (2,604)

Income tax provision (benefit) 98,119 (4,875) (1,871) (5,471) 38,983 71,353 6,580 (8,750) (900) (2,881) 19,111

Net income (loss) $ 348,214 $ (15,438) $ (5,925) $ 235,205 $ (38,983) $ 173,355 $ (86,358) $ (169,111) $ (3,014) $ (9,645) $ 95,412



Diluted earnings (loss) per share: $ 2.03 $ (0.09) $ (0.03) $ 1.37 $ (0.23) $ 1.01 $ (0.92) $ (1.80) $ (0.03) $ (0.10) $ 0.99

Diluted weighted-average shares outstanding: 171,194 171,194 171,194 171,194 171,194 171,194 94,207 94,207 94,207 94,207 96,055





^(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. Additionally, in 2020 there was 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 its new North America Distribution Center, costs associated with the acquisition of Topgolf, implementation costs related to new IT systems for Jack Wolfskin, and severance charges associated with workforce reductions due to the COVID-19 pandemic.

^(4) As Topgolf's losses exceed Callaway's income in prior years, the Company has recorded a valuation allowance against certain of its deferred tax assets until the Company can demonstrate sustained cumulative earnings.

^(5) Non-GAAP diluted earnings per share for the nine months ended September 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

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

2020 2021 2021 2021 Total 2019 2020 2020 2020 Total

Net income (loss) $(40,576) $272,461$91,744 $(15,991) $307,638$(29,218) $28,894$(167,684)$52,432 $(115,576)

Interest expense, net 12,927 17,457 28,876 28,730 87,990 9,049 9,115 12,163 12,727 43,054

Income tax provision (benefit) (7,124) 47,743 (15,853) 66,229 90,995 (2,352) 9,151 (7,931) 5,360 4,228

Depreciation and amortization expense 10,840 20,272 43,270 44,377 118,759 9,480 8,997 9,360 10,311 38,148

JW goodwill and trade name impairment^(1) - - - - - - - 174,269 - 174,269

Non-cash stock compensation and stock warrant expense, net2,861 4,609 11,039 10,832 29,341 3,418 1,861 2,942 3,263 11,484

Non-cash lease amortization expense (76) 872 2,103 2,792 5,691 (120) 264 207 (99) 252

Acquisitions & other non-recurring costs, before taxes^(2)8,607 (235,594)3,274 1,875 (221,838)4,090 1,516 5,856 4,402 15,864

Adjusted EBITDA $(12,541) $127,820$164,453$138,844 $418,576$(5,653) $59,798$29,182 $88,396 $171,723





^(1) In 2020, amounts include an impairment charge of $174.3 million related toJack Wolfskin.

^(2) In 2021, amounts include transaction, transition and other non-recurringcosts associated with the merger with Topgolf completed on March 8, 2021, therecognition of a $252.5 million gain to step-up the Company's former investmentin Topgolf to its fair value in connection with the merger, and expensesrelated to the implementation of new IT systems for Jack Wolfskin. In 2020,amounts include costs associated with the Company's transition to its new NorthAmerica Distribution Center, costs associated with the acquisition of Topgolf,and the implementation of new IT systems for Jack Wolfskin, as well asseverance 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) $14.1 million of transaction and transition related costsassociated with the acquisition of Jack Wolfskin, including banker's fees,legal fees, consulting fees, audit fees for SEC reporting requirements,valuation services associated with preparing Jack Wolfskin's opening balancesheet and travel expenses; (ii) the recognition of a $3.9 million foreigncurrency exchange loss primarily related to the re-measurement of a foreigncurrency contract established to mitigate the risk of foreign currencyfluctuations on the purchase price of Jack Wolfskin, which was denominated inEuros; and (iii) consulting fees to address an activist investor. These amountsexclude any depreciation or amortization, which has been presented in aseparate line above.

CALLAWAY GOLF COMPANY

2021 Adjusted EBITDA Guidance GAAP to Non-GAAP Reconciliation

(Unaudited)

(In millions)



Twelve Months Ended December 31, 2021



Net income $271 - $276



Adjusted EBITDA^(1) $424 - $430





^(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 andTopgolf. A forecast of each of these line items is not available withoutunreasonable efforts due to the variability of these items and the inability topredict them with certainty. Accordingly, we have not provided a furtherreconciliation of Adjusted EBITDA to GAAP net income.

CALLAWAY GOLF COMPANY

2021 Topgolf Adjusted EBITDA Guidance GAAP to Non-GAAP Reconciliation

(Unaudited)

(In millions)

Twelve Months Ended

December 31, 2021^(1)

Topgolf segment income from operations^(2) $ 43



Topgolf Adjusted EBITDA^(3) $ 158





^(1) Due to the timing of the Topgolf acquisition on March 8, 2021, Callaway'sreported financial results for the twelve months ended December 31, 2021 willonly include 10 months of Topgolf results in 2021.

^(2) The Company does not forecast GAAP net income at the subsidiary level, buthas provided Topgolf's forecasted segment income from operations as a relevantmeasurement of profitability. Segment income from operations does not includecorporate general and administrative expenses not utilized by management indetermining segment profitability, including non-cash amortization, interestexpense and taxes as well as other non-cash and non-recurring items.

^(3) Topgolf forecasted Adjusted EBITDA excludes the following from forecastedsegment income from operation: depreciation expense, non-cash stockcompensation expense and non-cash lease amortization expense. A forecast ofeach of these line items is not available without unreasonable efforts due tothe variability of these items and the inability to predict them withcertainty. Accordingly, we have not provided a further reconciliation ofTopgolf Adjusted EBITDA to Segment income from operations.

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SOURCE Callaway Golf Company