Q2 2024 Topgolf Callaway Brands Corp Earnings Call

August 7, 2024

Operator: Good day, and welcome to the Topgolf Callaway Brands second quarter 2024 conference call. All participants will be in a listen only mode. Should you need assistance, please signal the conference specialist by pressing the star key followed by zero. After today's remarks, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. And please note that this event is being recorded. I'd now like to turn the conference over to Katina Metzidakis, Vice President of Investor Relations and Corporate Communications. Please go ahead. Thank you.

Speaker Change: Good day and welcome to the Topgolf Callaway Brands second quarter 2024 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialist by pressing the star key followed by zero. After today's remarks, there will be an opportunity to ask questions.

Katina Metzidakis: To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. And please note that this event is being recorded. I would now like to turn the conference over to Katina Metzidakis, Vice President of Investor Relations and Corporate Communications. Please go ahead.

Katina Metzidakis: Thank you, Operator, and good afternoon, everyone. Welcome to Topgolf Callaway Brands' second quarter earnings conference call. I'm Katina Metzidakis, the company's Vice President of Investor Relations and Corporate Communications. Joining me as speakers on today's call are Chip Brewer, our President and Chief Executive Officer, and Brian Lynch, our Chief Financial Officer and Chief Legal Officer. Earlier today, the company issued a press release announcing its second quarter financial results. We have published an updated presentation.

Speaker Change: Joining me as speakers on today's call are Chip Brewer, our President and Chief Executive Officer, and Brian Lynch, our Chief Financial Officer and Chief Legal Officer.

Speaker Change: Earlier today, the company issued a press release announcing its second quarter financial results. We have published an updated presentation. Our earnings presentation, as well as the earnings press release, are both available on the company's investor relations website under the financial results tab.

Katina Metzidakis: Our earnings presentation, as well as the earnings press release..., are both available on the company's investor relations website under the financial results tab. Aside from revenue, the financial numbers reported and discussed on today's call are non-GAAP measures. We identify these non-GAAP measures in the presentation and reconcile the measures to the corresponding GAAP measures in accordance with Regulation G. Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. We encourage you to review the Safe Harbor statements contained in the presentation and the press release for a more complete description. And with that, I would now like to turn the call over to Chip Brewer.

Speaker Change: Aside from revenue, the financial numbers reported and discussed on today's call are non-GAAP measures.

Speaker Change: We identify these non- GAAP measures in the presentation and reconcile the measures to the corresponding GAAP measures in accordance with Regulation G.

Speaker Change: Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. We encourage you to review the safe harbor statements contained in the presentation and the press release for a more complete description.

Speaker Change: And with that, I would now like to turn the call over to Chip Brewer.

Chip Brewer: Thank you, Katina. Good afternoon, everyone, and thank you for joining us on our call. I want to begin by reiterating the announcement we made in our press release about our formal strategic review of the Topgolf business. We remain convinced that Topgolf is a high-quality business with significant future opportunities, is transforming the game of golf, and we believe it will deliver substantial growth and financial returns over time. At the same time, we have been disappointed in our stock performance for some time, as well as our more recent same venue sales performance.

Chip Brewer: thank you katina good afternoon everyone and thank you for joining our call

Chip Brewer: I want to begin by reiterating the announcement we made in our press release about our formal strategic review of the Topgolf business.

Speaker Change: We remain convinced that Topgolf is a high-quality business with significant future opportunity.

Chip Brewer: is transforming the game of golf, and we believe it will deliver substantial growth and financial returns over time.

Speaker Change: At the same time, we have been disappointed in our stock performance for some time.

Chip Brewer: As a result, we are in the process of conducting a full strategic review of Topgolf. This review includes the assessment of organic strategies to return Topgolf to profitable same-venue sales growth, as well as inorganic alternatives, including a potential spin-off. Our strategic review of Topgolf is being conducted with the help of outside advisors and is focused on maximizing long-term shareholder value. We're active in this work at present and expect to complete our strategic review of Topgolf expeditiously. We will report back on this when the work is complete. As you can imagine, I'm unable to provide further comments or details on any potential inorganic strategies at this time.

Chip Brewer: as well as the more recent Same Venue Sales performance.

Chip Brewer: As a result, we are in the process of conducting a full strategic review of Topgolf.

Chip Brewer: This review includes the assessment of organic strategies to return Topgolf to profitable same-venue sales growth.

Chip Brewer: well as inorganic alternatives including a potential spin of Topgolf.

Speaker Change: Our strategic review of Topgolf is being conducted with the help of outside advisors and is focused on maximizing long-term shareholder value.

Chip Brewer: We are active in this work at present and expect to complete our strategic review of Topgolf expeditiously.

Chip Brewer: We will report back on this when the work is complete.

Chip Brewer: As you can imagine, I'm unable to provide further comments or details on any potential inorganic strategies at this time.

Chip Brewer: I will try to address the organic growth initiatives during my comments and will be happy to answer questions on this portion. Moving on to a review of the second quarter. Total revenue of $1.158 billion was below our expectations primarily due to lower than expected same-menu sales at Topgolf, which I'll discuss in greater detail in a few minutes. Both the golf equipment and the active lifestyle segments performed roughly consistent with expectations, including strong market share performance at both Travis Matthew and Callaway golf equipment. Total company Q2 EBITDA of $206 million was ahead of expectations, driven by continued strong operating efficiencies and cost management across the business.

Chip Brewer: I will try to address the organic growth initiatives during my comments and will be happy to answer questions on this portion.

Speaker Change: Moving on to a review of the second quarter.

Speaker Change: Total revenue of $1.158 billion was below our expectations, primarily due to lower-than-expected same-menu sales at Topgolf, which I'll discuss in greater detail in a few minutes.

Speaker Change: Both the golf equipment and the active lifestyle segments performed roughly consistent with expectations, including strong market share performance at both Travis Matthew and Callaway golf equipment.

Speaker Change: Total company Q2 EBITDA of $206 million was ahead of expectations, driven by continued strong operating efficiencies and cost management across the business.

Chip Brewer: Given these results and current trends, we are lowering our full-year revenue expectations by approximately $225 million to a range of $4.2 to $4.26 billion, and our full-year same-venue sales estimates to be down very high single to low double digits. As a result, we are revising our EBITDA outlook to $570 to $590 million, which implies an approximately flat year-over-year EBITDA margin. By segment, we're lowering our second half Topgolf revenue outlook based on our updated same venue sales estimate.

Speaker Change: Given these results and current trends...

Speaker Change: We are lowering our full-year revenue expectations by approximately $225 million to a range of $4.2 to $4.26 billion, and our full-year same-venue sales estimates to be down very high single to low double digits.

Speaker Change: As a result, we are revising our EBITDA outlook to $570 to $590 million.

Speaker Change: which implies an approximately flat year-over-year EBITDA margin.

Speaker Change: by segment we're lowering our second half top gulf revenue outlook based on our updated same venue sales estimates

Operator: Good day, and welcome to the Topgolf Callaway Brands second quarter, 2024 conference call. All participants will be in a listen-only mode. Should you need assistance, please sign up for a specialist by pressing the star key followed by zero.

Chip Brewer: This will negatively impact our EBITDA, but the flow-through will be mitigated by continued improvement in our venue operating efficiencies, as well as cost savings initiatives. On the legacy or product side of our business, we are rising our second half revenues down by approximately 2% or $55 million. This reflects the potential for further slowing of consumer activity in the second half of this year. However, we believe we can manage expenses to offset the majority of any bottom-line impact of this modest revenue adjustment in our products business.

Speaker Change: This will negatively impact our EBITDA, but the flow-through will be mitigated by continued improvement in our venue operating efficiencies, as well as cost savings initiatives.

Operator: After today's remarks, there will be an opportunity to ask questions. To ask a question, you may press star than one on your touch term firm. To withdraw your question, please press star than two. And please note that this event is being recorded.

Speaker Change: In the legacy or product side of our business, we are rising our second half revenues down by approximately 2% or $55 million.

Katina Metzidakis: I would now like to turn the conference over to Katina Metzidakis. Vice President of Investor Relations and Corporate Communication, please go ahead. Thank you operator in good afternoon everyone. Welcome to Topgolf Callaway Brands second quarter earnings conference call. I'm Katina Metzidakis, the company's vice president of Investor Relations and Corporate Communications. Joining me as speakers on today's call are Chip Brewer, our president and chief executive officer, and Brian Lynch, our chief financial officer and chief legal officer.

Speaker Change: This reflects the potential for further slowing of consumer activity in the second half of this year. However, we believe we can manage expenses to offset the majority of any bottom-line impact of this modest revenue adjustment in our products business.

Chip Brewer: Finally, as Brian will discuss in a few minutes, our cash flow and financial position remain strong. I'll now move to segment performance, starting with Topgolf. As has been well documented, persistent inflation over the last few years has led to belt tightening across wide portions of consumer discretionary spending.

Speaker Change: Finally, as Brian will discuss in a few minutes, our cash flow and financial position remains strong.

Brian Lynch: I'll now move to segment performance starting with Topgolf.

Brian Lynch: I'd like to start with what we're seeing from a macro perspective.

Katina Metzidakis: Earlier today, the company issued a press release announcing its second quarter financial results. We have published an updated presentation. Our earnings presentation, as well as the earnings press release, are both available on the company's Investor Relations website under the financial results tab. Aside from revenue, the financial numbers reported and discussed on today's call are non-gap measures. We identify these non-gap measures in the presentation and reconcile the measures to the corresponding gap measures in accordance with regulation G. Please note that this call will include forward looking statements that involve risks and uncertainties. We encourage you to review the safe harbor statements contained in the presentation and the press release for a more complete description.

Brian Lynch: as has been well documented persistent inflation over the last few years has led to beltt tightening across wide portions of consumer discretionary spending

Chip Brewer: We see it in internal and external survey data, where price is the biggest concern of our customers, as well as those in both the leisure and restaurant industries. We hear it from our peers, see it in credit card data, and observe it firsthand in our venue business, including feedback from our large corporate clients. In support of this, during the quarter, we saw that our top performing venues were positively correlated with overall household income data.

Brian Lynch: We see it in internal and external survey data where price is the biggest concern of our customers as well as those in both the leisure and restaurant industries.

Brian Lynch: We hear it from our peers, see it in credit card data, and observe it firsthand in our venue business, including feedback from our large corporate clients.

Brian Lynch: In support of this, during the quarter, we saw that our top-performing venues were positively correlated with overall household income data.

Chip Brewer: I'll now turn to our same-venue sales results, including what we saw, what we're going to do about it, and our thoughts moving forward. Topgolf's same-venue sales declined 8% in the quarter, driven by soft overall traffic trends. The year-over-year data shows both the one and two bay and the three-plus bay down similarly in the quarter.

Speaker Change: I'll now turn to our same-venue sales results, including what we saw, what we're going to do about it, and our thoughts moving forward.

Chip Brewer: And with that, I would now like to turn the call over to Chip Brewer. Thank you Katina.

Chip Brewer: Good afternoon everyone and thank you for joining our call. I want to begin by reiterating the announcement we made in our press release about our formal strategic review of the Topgolf Business. We remain convinced that Topgolf is a high quality business with significant future opportunity is transforming the game of golf and we believe it will deliver substantial growth and financial returns over time. At the same time, we have been disappointed in our stock performance for some time, as well as the more recent same venue sales performance.

Brian Lynch: what we're seeing

Brian Lynch: Topgolf's same-venue sales declined 8% in the quarter, driven by soft overall traffic trends.

Brian Lynch: The year-over-year data shows both the 1 and 2 Bay and the 3 plus Bay down similarly in the quarter. But when you look at the two-year stack in the 2019 data, it shows the consumer portion of our business remains stronger than our events business.

Chip Brewer: But when you look at the two-year stack in the 2019 data, it shows the consumer portion of our business remains stronger than our events business. The one to two bay trends appear to be moving directionally with that of other similar entertainment experiences in restaurants. Turning to events in 3 Plus Bay, this is the slowest part of our business but perhaps the easiest to understand. For the quarter, 3 Plus Bay same-venue sales were down 9% year over year.

Brian Lynch: The 1-2 Bay trends appear to be moving directionally with that of other similar entertainment experiences in restaurants.

Chip Brewer: As a result, we are in the process of conducting a full strategic review of Topgolf. This review includes the assessment of organic strategies to return Topgolf to profitable same venue sales growth, as well as inorganic alternatives, including a potential spin of Topgolf. Our strategic review of Topgolf is being conducted with the help of outside advisors and is focused on maximizing long-term shareholder value. We are active in this work at present and expect to complete our strategic review of Topgolf expeditiously.

Brian Lynch: Turning to events in 3 Plus Bay, this is the slowest part of our business, but perhaps the easiest to understand.

Brian Lynch: For the quarter, 3 Plus Bay same-venue sales was down 9% year-over-year, 27% on a two-year stack, and 5% versus 2019.

Chip Brewer: 27% on a two-year stat and 5% versus 2019. We previously thought the events business was stabilizing, but it then deteriorated further in late May and June. We believe the event's business results reflect a normalization from a post-COVID surge, as well as softness and demand typical of slowing economic conditions and corporate belt tightening. Based on sales lead data, we now expect this slowness to continue through Q3 with the potential leveling off by the end of the year.

Brian Lynch: We previously thought the events business was stabilizing, but it then deteriorated further in late May and June.

Brian Lynch: We believe the event's business results reflect a normalization from a post-COVID surge, as well as softness in demand typical of slowing economic conditions and corporate belt tightening.

Chip Brewer: We will report back on this when the work is complete. As you can imagine, I am unable to provide further comments or details on any potential inorganic strategies at this time. I will try to address the organic growth initiatives during my comments and be happy to answer questions on this portion. Moving on to a review of the second quarter, total revenue of 1.158 billion was below our expectations primarily due to lower than expected same-venu sales at Topgolf, which I'll discuss in greater detail in a few minutes.

Brian Lynch: based on sales lead data we now expect this slowness to continue through q three with the potential level off by the end of the year

Chip Brewer: Looking at the most recent data, we saw our combined US same-venue sales deteriorate in June as there was a step change in macro demand starting in late May. This was despite the rollout, or more likely partially mitigated by the rollout, of our Free 30 promotion and advertising campaign, both of which had tested quite well in May. June's U.S. same-venue sales were down 8% when we expected them to be slightly positive.

Brian Lynch: Looking at the most recent data, we saw our combined US same venue sales deteriorate in June as there was a step change in macro demand starting in late May.

Brian Lynch: This was despite the rollout, or more likely partially mitigated by the rollout, of our Free 30 promotion and advertising campaign.

Brian Lynch: both of which had tested quite well in May.

Brian Lynch: June's U.S. same-venue sales was down 8% when we expected it to be slightly positive.

Chip Brewer: Both the golf equipment and the active lifestyle segments performed roughly consistent with expectations, including strong market share performance at both Travis Matthew and Callaway Golf Equipment. Total company Q2 Evita of 206 million was the head of expectations driven by continued strong operating efficiencies and cost management across the business. Given these results and current trends, we are lowering our full-year revenue expectations by approximately 225 million to a range of 4.2 to 4.26 billion dollars and our full-year same-venu sales estimates to be down very high single to low-double digits.

Chip Brewer: July was down approximately 11% on a retail calendar basis, with the last two weeks of the month trending better than the first few weeks. With this as the backdrop, we're now forecasting our full year same venue sales to decline by very high single digits to low double digits. This implies the trends we've been seeing in June and July continue for the balance of the year, given the fact that August through mid-December should be a period of relatively easier coming. This forecast also allows for some additional slowing of overall demand.

Brian Lynch: July was down approximately 11% on a retail calendar basis, with the last two weeks of the month trending better than the first few weeks.

Brian Lynch: With this as the backdrop, we're now forecasting our full-year same venue sales to decline very high single digits to low double digits.

Brian Lynch: This implies the trends we've been seeing in June and July continue for the balance of the year.

Brian Lynch: Given the fact that August through mid-December should be a period of relatively easier comps, this forecast also allows for some additional slowing of overall demand.

Chip Brewer: Now turning to what we're going to do about it. First of all, we're furthering our digital efforts as well as refining our select promotional offerings. As I've noted on the last several calls, we believe the biggest opportunity for us is building out Topgolf's digital business. In fact, our digital sales penetration increased again this quarter by another 50 basis points year over year to 35%.

Brian Lynch: Now turning to what we're going to do about it.

Brian Lynch: First of all, we're furthering our digital efforts as well as refining our select promotional offerings.

Chip Brewer: As a result, we are revising our Evita Outlook to 570 to 590 million dollars, which implies an approximately flat year-over-year Evita margin. By segment, we're lowering our second half Topgolf revenue outlook based on our updated same-venu sales estimates. This will negatively impact our Evita, but the flow through will be mitigated by continued improvement in our venue operating efficiencies as well as cost savings initiatives. In the legacy or product side of our business, we are rising our second half revenues down by approximately 2% or 55 million.

Brian Lynch: As I've noted on the last several calls, we believe the biggest opportunity for us is building out Topgolf's digital business.

Brian Lynch: in fact our digital sales penetration increased again this quarter by another fifty basis points year-over-year to thirty-five percent

Chip Brewer: This is important as we know that venues with higher digital sales penetration have consistently outperformed our fleet average. And this is why a significant portion of our investments are focused on strengthening our digital capabilities, both from a technology perspective, such as implementing PI, our reservation system, and our consumer data platform, as well as from a talent and organizational perspective. To this end, the digital team is going to be investing further in additional performance marketing, loyalty programs, and consumer insight expertise. Turning to promotion,

Brian Lynch: This is important as we know that venues with higher digital sales penetration have consistently outperformed our fleet averages.

Brian Lynch: And this is why a significant portion of our investments are focused on strengthening our digital capabilities both from a technology perspective, such as implementing PI, our reservation system, and our consumer data platform.

Chip Brewer: This reflects the potential for further slowing of consumer activity in the second half of this year. However, we believe we can manage expenses to offset the majority of any bottom line impact of this modest revenue adjustment in our products business.

Brian Lynch: as well as from a talent and organizational perspective.

Chip Brewer: Finally, as Brian will discuss in a few minutes, our cash flow and financial position remain strong.

Brian Lynch: To this end, the digital team is going to be investing further in additional performance marketing, loyalty program, and consumer insight expertise.

Chip Brewer: To protect long-term profitability and brand value, any promotions that we offer need to be selective and targeted. With this in mind, we have analyzed our Free 30 promotion and found it to be effective in driving traffic and interest from existing customers, smoothing out demand, and driving improved overall results, but it has been less effective in attracting new customers. Many new customers generally visit for the first time by walking in, and we believe they may be reluctant to book a two-hour reservation.

Brian Lynch: Turning to Promotions.

Brian Lynch: To protect long-term profitability and brand value, any promotions that we offer need to be selective and targeted.

Chip Brewer: I'll now move to segment performance starting with Topgolf.

Chip Brewer: I'd like to start with what we're seeing from a macro perspective. As has been well-documented, persistent inflation over the last few years has led to belt tightening across wide portions of consumer discretionary spending. We see it in an internal and external survey data where price is the biggest concern of our customers as well as those in both the leisure and restaurant industries. We hear it from our peers, see it in credit card data, and observe it firsthand in our venue business, including feedback from our large corporate clients. In support of this, during the quarter, we saw that our top performing venues were positively correlated with the overall household income data.

Speaker Change: with this in mind we have been analyzed our f thirty promotion and found it to be effective in driving traffic and interest existing customers smoothing out demand and driving and improved overall results

Brian Lynch: But it has been less effective in attracting new customers.

Brian Lynch: Many new customers generally visit for the first time by walking in.

Brian Lynch: and we believe they may be reluctant into book to our reservation

Chip Brewer: Given these insights, we will be utilizing our consumer data platform and targeting new customers with a walk-in version of our free 30 promotion that is redeemable anytime, not only 9-5 weekdays and not requiring a 2-hour reservation, while continuing to drive our existing efforts via reservation for customers who value the reservations model we have built. We are trialing this now and look forward to seeing the results. Partnerships are another way to increase awareness and drive incremental traffic.

Brian Lynch: Given these insights, we will be utilizing our consumer data platform and targeting new customers with a walk-in version of our free 30 promotion that is redeemable anytime, not only nine to five weekdays and not requiring a two-hour reservation.

Chip Brewer: I'll now turn to our same venue sales results, including what we saw, what we're going to do about it, and our thoughts moving forward. What we're seeing, Topgolf's same venue sales declined 8% in the quarter, driven by soft overall traffic trends. The year-over-year data shows both the one and two bay and the three plus bay down similarly in the quarter. But when you look at the two-year stack and the 2019 data, it shows the consumer portion of our business remains stronger than our events business. Business. The one-to-two-bay trends appeared to be moving directionally with that of other similar entertainment experiences and restaurants.

Brian Lynch: while continuing to drive our existing efforts via reservations for customers who value the reservations model we have built.

Brian Lynch: We are trialing this now and look forward to seeing the results.

Brian Lynch: Partnerships are another way to increase awareness and drive incremental traffic.

Chip Brewer: As we have gained scale, we've been able to find bigger, more national partners. Our recently announced partnership with Visa is a good example of this. With this partnership, Topgolf is being promoted to Cash App Visa cardholders via special offers intended to drive both new and repeat visits. Lastly, but importantly, we're going to be stepping up our game on delivering newness, continually improving the quality of our experience and reasons to visit. We are a premium experience, and thus, by design, we are not made to be cheap. But we are unique, and we can provide more fun and less value than other offerings.

Brian Lynch: As we have gained scale, we've been able to find bigger, more national partners. Our recently announced partnership with Visa is a good example of this.

Brian Lynch: With this partnership, Topgolf is being promoted to Cash App Visa cardholders via special offers intended to drive both new and repeat visits.

Brian Lynch: lastly but importantly we're going to be stepping up our game on delivering newness

Chip Brewer: Turning to events in 3 plus Bay, this is the slowest part of our business, but perhaps the easiest to understand. For the quarter, 3 plus Bay, same venue sales was down 9% year over year, 27% on a two-year stack, and 5% versus 2019. We previously thought the event's business was stabilizing, but it then deteriorated further in late May and June. We believe the event's business results reflect a normalization from a post-COVID surge, as well as softness and demand typical of slowing economic conditions and corporate belt tightening.

Brian Lynch: continually improving the quality of our experience and reasons to visit.

Brian Lynch: We are a premium experience, and thus, by design, we are not made to be cheap.

Brian Lynch: But, we are unique and we can provide more fun and less value than other offerings.

Chip Brewer: By refocusing on newness, we believe we can give customers more reasons to give topgolf a try or come back and visit us again. From this point forward, on a national basis, we will be delivering exciting and fun new reasons to visit at least three to four times per year. For Q3, this includes the recently launched Sure Thing Golf Club, which was designed by Callaway engineers in consultation with the Topgolf team and is geared towards new golfers. It features a unique and innovative design that makes it easier to get the ball airborne and forward.

Brian Lynch: By refocusing on newness, we believe we can give customers more reasons to give Topgolf a try or come back and visit us again.

Brian Lynch: From this point forward, on a national basis, we will be delivering exciting and fun new reasons to visit at least three to four times per year.

Brian Lynch: For Q3, this includes the recently launched Sure Thing Golf Club, which was designed by the Callaway engineers in consultation with the Topgolf team and is geared towards new golfers.

Chip Brewer: Based on sales lead data, we now expect this slowness to continue through Q3 with the potential level off by the end of the year. Looking at the most recent data, we saw our combined US same venue sales deteriorate in June as there was a step change in macro-demand starting in late May. This was despite the roll-out or more likely partially mitigated by the roll-out of our free 30 promotion and advertising campaign, both of which had tested quite well in May.

Brian Lynch: It features a unique and innovative design that makes it easier to get the ball airborne and forward.

Chip Brewer: Then, in Q4, we'll be launching our next new in-venue game. And if you're a fan of video games, we think you'll love it. In addition to these big national programs, there will also be more local initiatives to drive incremental visits and excitement, such as concerts and live DJ nights. Turning my thoughts moving forward.

Brian Lynch: Then, in Q4, we'll be launching our next new in-venue game, and if you're a fan of video games, we think you'll love it.

Brian Lynch: In addition to these big national programs, there will also be more local initiatives to drive incremental business and excitement, such as concerts and live DJ nights.

Chip Brewer: June's US same venue sales was down 8% when we expected it to be slightly positive. July was down approximately 11% on a retail calendar basis with the last two weeks of the month trending better than the first few weeks. With this as the backdrop, we're now forecasting our full-year same venue sales to decline very high single digits to low double digits. This implies the trends we've been seeing in June and July continue for the balance of the year. Given the fact that August through mid-December should be a period of relatively easier comps, this forecast also allows for some additional slowing of overall demand.

Chip Brewer: Overall, I firmly believe we're already doing a lot of the right things to drive growth and same-menu sales over time, including constantly improving our teams and initiatives. As evidence of this, I point to the fact that since launching our spring and summer initiatives, we have seen purchase intent, brand recommendation, and price perception scores improve. And perhaps most importantly, our fund scores are up, which we believe is a leading indicator for future growth and has historically been highly correlated to our consumer's likelihood to both return to and recommend topgolf.

Brian Lynch: Turning my thoughts moving forward.

Brian Lynch: Overall, I firmly believe we are already doing a lot of the right things to drive growth and same-venue sales over time, including constantly improving our teams and initiatives.

Brian Lynch: As evidence of this, I point to the fact that since launching our spring and summer initiatives,

Brian Lynch: We have seen purchase intent, brand recommendation, and price perception scores improve.

Brian Lynch: And perhaps most importantly, our fund scores are up, which we believe is a leading indicator for future growth and has historically been highly correlated to our consumers' likelihood to both return and recommend Topgolf.

Chip Brewer: At the same time, we've also identified a few areas where we can do better, and we're putting in the plans and resources to quickly address these going forward. However, it is clear that some of these initiatives will take some time to implement, and the macro environment remains choppy.

Brian Lynch: At the same time, we've also identified a few areas where we can do better, and we're putting in the plans and resources to quickly address these going forward.

Brian Lynch: Although it is clear that some of these initiatives will take some time to implement and the macro environment remains choppy, I continue to believe in Topgolf's ability to drive same-venue sales growth over time.

Chip Brewer: I continue to believe in Topgolf's ability to drive same-venue sales growth over time. Shifting gears, to our second key performance driver, margin expansion. Our team has consistently shown its ability to drive venue operating margins, both in positive and difficult market conditions. For the quarter, despite soft top-line trends, we were able to expand total segment adjusted Ibbotton margin by 260 basis points year over year. That said, given our lowered revenue outlook for the back half of the year, we now expect full-year venue EBITDA margins to be roughly flat versus last year at approximately 34%, which is still quite healthy considering our lower revenue expectation and is a full 100 basis points ahead of our 2022 March, with plenty of room to grow as the top line improves and moving a new venue opens.

Brian Lynch: Shifting gears to our second key performance driver, margin expansion.

Brian Lynch: Our team has consistently shown its ability to drive venue operating margins, both in positive and difficult market conditions.

Chip Brewer: And this is why a significant portion of our investments are focused on strengthening our digital capabilities, both from a technology perspective, such as implementing PI, our reservation system, and our consumer data platform, as well as from a talent and organizational perspective. To this end, the digital team is going to be investing further in additional performance marketing, loyalty program, and consumer insight expertise. Turning to promotions to protect long-term profitability and brand value, any promotions that we offer need to be selective and target, with this in mind we have been analyzed our free 30 promotion and found it to be effective in driving traffic and interest from existing customers, smoothing out the man and driving it improved overall results but it has been less effective in attracting new customers.

Brian Lynch: For the quarter, despite soft top line trends, we were able to expand total segment adjusted Ibbitton margin by 260 basis points year over year.

Brian Lynch: That said, given our lowered revenue outlook for the back half of the year, we now expect full-year venue EBITDA margins to be roughly flat versus last year at approximately 34 percent.

Brian Lynch: Which is still quite healthy considering our lower revenue expectations.

Brian Lynch: and is a full 100 basis points ahead of our 2022 margin with plenty of room to grow as top line improves.

Chip Brewer: We remain on track to add seven venues this year. We added Brian Texas in Q1, successfully opened Durham and Montebello in Q2, and the four remaining 2024 venues are under construction and on schedule. Venues continue to open well and are achieving our high financial target. In conclusion, on a Topgolf segment report hour. Topgolf is performing well in two of its three key performance drivers, including venue margins and new venue development, on the same venue sales front. However, results have been below our expectations, and we are committed to improving here.

Brian Lynch: Moving to new venue openings.

Brian Lynch: We remain on track to add seven venues this year.

Brian Lynch: We added Brian Texas in Q1, successfully opened Durham and Montebello in Q2, and the four remaining 2024 venues are under construction and on schedule.

Chip Brewer: Many new customers generally visit for the first time by walking in and we believe they may be reluctant to book a two hour reservation. Given these insights we will be utilizing our consumer data platform and targeting new customers with a walk in version of our free 30 promotion that is redeemable any time, not only nine to five weekdays and not requiring a two hour reservation, while continuing to drive our existing efforts via reservations for customers who value the reservations model we have built. We are traveling this now and look forward to seeing the results.

Brian Lynch: Venues continue to open well and are achieving our high financial targets.

Speaker Change: in conclusion on a top goul segment report ap

Speaker Change: Topgolf is performing well in two of its three key performance drivers, including venue margins and new venue development.

Speaker Change: on the same venue sales front. Results have been below our expectations and we are committed to improving here.

Chip Brewer: However, I believe that the vast majority of what we are seeing is an economic cycle and or a post-COVID normalization in the events portion of our business. Importantly, we are continuing to strengthen our capabilities and expertise to drive positive same-venue sales in a normalized environment. I believe that the enduring strength of Topgolf remains intact.

Speaker Change: However, I believe that the vast majority of what we are seeing is an economic cycle and or a post COVID normalization in the events portion of our business.

Chip Brewer: Partnerships are another way to increase awareness in driving and mental traffic. As we have gained scale we have been able to find bigger more national partners. Our recently announced partnership with Visa is a good example of this. With this partnership Topgolf is being promoted to cash at Visa card holders via special offers intended to drive both new and repeat visits.

Speaker Change: Importantly, we are continuing to strengthen our capabilities and expertise to drive positive same-venue sales in a normalized environment.

Speaker Change: I believe that the enduring strength of Topgolf remains intact, this being that consumers really enjoy the experience.

Chip Brewer: The reason being that consumers really enjoy the experience. In addition, the sport of golf remains on trend, as does Topgolf, and Topgolf retains a strong economic model, a model where the core profitability of our venues, as measured on a normalized revenue level, is increasing over time. This combines well with an outstanding growth outlook as we can identify and build new venues with high confidence and unmatched execution, and the business benefits from a uniquely strong defensive mode.

Speaker Change: In addition, the sport of golf remains on trend, as does Topgolf. And Topgolf retains its strong economic model, a model where the core profitability of our venues, as measured on a normalized revenue level, is increasing over time.

Chip Brewer: Lastly, but importantly, we are going to be stepping up our game on delivering newness continually improving the quality of our experience and reasons to visit. We are our premium experience and thus by design we are not made to be cheap but we are unique and we can provide more fun in this value than other offerings. By refocusing on newness we believe we can give customers more reasons to give Topgolf a try or come back and visit us again.

Speaker Change: This combines well with an outstanding growth outlook as we can identify and build new venues with high confidence and unmatched execution and the business benefits from a uniquely strong defensive moat.

Chip Brewer: Turning out golf equipment, Callaway remains strong with a growing market share position. This quarter, Callaway held its position as the number one US market share brand in driver, fairway woods, and hybrid. Our AI smoke line maintained the number one US model market share position and driver Fairwoods and Iron, and Odyssey also maintained its position as the number one putter brand. One stat that I'm particularly proud of is our June greengrass woods market share of 38%. 38% is a terrific number. It showcases the outstanding performance of our AI smoke woods in a suitable environment.

Speaker Change: Turning out a golf equipment.

Speaker Change: The Callaway brand remains strong with growing market share positions.

Chip Brewer: From this point forward on a national basis we will be delivering exciting and fun new reasons to visit at least three to four times per year. For Q3 this includes the recently launched Sure Thing Golf Club, which was designed by the Calaway engineers in consultation with the Topgolf team and is geared towards new golfers. It features a unique and innovative design that makes it easier to get the ball airborne and forward.

Speaker Change: This quarter, Callaway held its position as the number one U.S. market share brand in driver, fairway woods, and hybrids.

Speaker Change: Our AI smoke line maintained the number one U.S. model market share position in driver fairways and irons.

Speaker Change: and Odyssey also maintains its position as the number one putter brand.

Speaker Change: One stat that I'm particularly proud of is our June greengrass woods market share of 38%.

Speaker Change: 38% is a terrific number. It showcases the outstanding performance of our AI smoke woods in a fitting environment.

Chip Brewer: Then in Q4 we will be launching our next new in venue game and if you are a fan of video games we think you will love it. In addition to these big national programs there will also be more local initiatives to drive incremental business and excitement such as concerts and live DJ nights.

Chip Brewer: And the fact that we can deliver this at Greengrass also showcases our scale and strength and distribution in this important channel. Turning to golf balls, the significant and strategic investments we've made in golf balls over the last several years continue to pay dividends for the Callaway Brand. A major focus for Callaway this year was to grow in our tour ball segment with our new Chrome Tour product line, and our results show that we're doing just that. As you may recall, last quarter I announced we would be hosting Chrome Tour Ball Speed and Spin Challenge. We have now done hundreds of these, and the results have been impressive.

Speaker Change: And, the fact that we can deliver this at Greengrass also showcases our scale and strength in distribution in this important channel.

Speaker Change: Turning to golf ball, the significant and strategic investments we've made in golf ball over the last several years continue to pay dividends for the Callaway brand.

Chip Brewer: Turning my thoughts moving forward. Overall I firmly believe we are already doing a lot of the right things to drive growth and same venue sales over time including constantly improving our teams and initiatives. As evidence of this I point to the fact that since launching our spring and summer initiatives we have seen purchase intent, brand recommendation and price perception scores improve. And perhaps most importantly our fun scores are up which we believe is a leading indicator for future growth and has historically been highly correlated to our consumers likelihood to both return and recommend Topgolf, at the same time we've also identified a few areas where we can do better and we're putting in the plans and resources to quickly address these going forward although it is clear that some of these initiatives will take some time to implement and the macro environment remains choppy I continue to believe in Topgolf's ability to drive same venue sales growth over time.

Speaker Change: A major focus for Callaway this year was to grow in our tour ball segment with our new Chrome Tour product line.

Speaker Change: Our results show that we're doing just that.

Speaker Change: As you may recall, last quarter I announced we would be hosting Chrome Tour Ball Speed and Spin Challenges.

Speaker Change: We have now done hundreds of these, and the results have been impressive.

Chip Brewer: Our test data shows that we are faster in 86% of the tests and that we deliver an advantage in pitch, shot, backspin, and 66% of the tests. Our overall June US ball market share increased by 120 basis points year over year to 21.9%, and our premium ball share achieved a new record market share of 12%, up 150 basis points year over year. Our brand has also had an outstanding year on tour, with Yuka Saso winning her second U.S. Women's Open and Xander winning both his first and second major championships, the PGA Championship and then the Open Championship.

Speaker Change: Our test data shows that we are faster in 86% of the tests.

Speaker Change: and that we deliver an advantage in pitch, shot, backspin, and 66% of the test.

Speaker Change: Our overall June U.S. ball market share increased by 120 basis points year-over-year to 21.9 percent, and our premium ball share achieved a new record market share of 12 percent, up 150 basis points year-over-year.

Speaker Change: Our brand has also had an outstanding year on tour with Yuka Sasso winning her second U.S. Women's Open and Xander winning both his first and his second major championships, the PGA Championship and then the Open Championship.

Chip Brewer: Shifting Gears to our second key performance driver, Margin Expansion, our team has consistently shown its ability to drive venue operating margins both in positive and difficult market conditions. For the quarter, despite soft top line trends, we were able to expand total segment adjusted Ibitum Margin by 260 basis points year over year. That said, given our lower revenue outlook for the back half of the year, we now expect full year venue Ibitum margins to be roughly flat versus last year at approximately 34%, which is still quite healthy considering our lower revenue expectations and is a full 100 basis points ahead of our 2022 margin with plenty of room to grow as top line improves.

Chip Brewer: Looking at global markets, the core golf markets of the U.S., Japan, and Europe all remain healthy, with field inventories, consumer demand, and overall market conditions steady, if not slightly positive. In each of these markets, we believe we are slightly outperforming the overall market as measured by revenues and market share. The Korean market, on the other hand, remains soft, down double digits this year.

Speaker Change: Looking at global markets, the core golf markets of the U.S., Japan, and Europe all remain healthy, with field inventories, consumer demand, and overall market conditions steady, if not slightly positive.

Speaker Change: In each of these markets, we believe we are slightly outperforming the overall market as measured by revenues and market share.

Chip Brewer: And unfortunately, we have also underperformed in this market. As a result, we have recently made changes aimed at improving our relative performance here, and we are seeing positive signs. For the balance of the year, we're excited about our recent upcoming product launch. We just launched our new Opus Wedge, and they are already a popular choice on tour. In my opinion, this is the best wedge we've launched in my time here at Callaway.

Speaker Change: The Korean market, on the other hand, remains soft, down double digits this year, and unfortunately, we have also underperformed in this market.

Speaker Change: As a result, we have recently made changes aimed at improving our relative performance here, and we are seeing positive signs.

Chip Brewer: Moving to new venue openings, we remain on track to add seven venues this year. We added Brian Texas in Q1, successful open Durham and Montabello in Q2, and the four remaining 2024 venues are under construction and on schedule. Venues continue to open well and are achieving our high financial targets.

Speaker Change: For the balance of the year, we're excited about our recent and upcoming product launches.

Speaker Change: We just launched our new Opus Wedge, and they are already a popular choice on tour.

Speaker Change: In my opinion, this is the best wedge we've launched in my time here at Callaway. Congrats and well done to the teams that drove this.

Chip Brewer: Congratulations and well done to the teams that drove this. And looking only slightly forward, next Monday, we will be announcing the launch of our new Apex line of irons. This is our most premium line of irons, and the product is both beautiful and innovative. I'm particularly excited about the new TIE Fusion technology that will be introduced as part of this exciting new lineup, and I invite you to tune into our launch communication to learn more.

Speaker Change: and looking only slightly forward, on next Monday we will be announcing the launch of our new Apex line of irons.

Chip Brewer: In conclusion, on a top golf segment report out, top golf is performing well in two of its three key performance drivers, including venue margins and new venue development. On the same venue sales front, results have been below our expectations and we are committed to improving here. However, I believe that the vast majority of what we are seeing is an economic cycle and or a post-COVID normalization in the events portion of our business. Importantly, we are continuing to strengthen our capabilities and expertise to drive positive same venue sales in our normalized environment.

Speaker Change: This is our most premium line of irons and the product is both beautiful and innovative.

Speaker Change: I'm particularly excited about the new TIE Fusion technology that will be introduced as part of this exciting new lineup.

Speaker Change: And I invite you to tune into our launch communication to learn more.

Chip Brewer: Looking at our full year forecast for this segment, we now see revenues being approximately flat for the full year, but up slightly on a currency neutral basis. Switching gears to our active lifestyle segment. Q2 revenues were in line with expectations. Travis Matthew had a solid quarter, delivering share gains at wholesale and also opening five new retail stores. They are on track to open 10 stores for the full year, for a total of 57. The Women's Initiative also continues to develop nicely.

Speaker Change: Looking at our full year forecast for this segment, we now see revenues being approximately flat for the full year but up slightly on a currency neutral basis.

Speaker Change: Switching gears to our active lifestyle segment.

Speaker Change: Q2 revenues were in line with expectations.

Chip Brewer: I believe the enduring strength of top golf remains intact. This being that consumers really enjoy the experience. In addition, the sport of golf remains on trend as does top golf. And top golf retains a strong economic model, a model where the core profitability of our venues as measured on a normalized revenue level is increasing over time. This combines well with an outstanding growth outlook as we can identify and build new venues with high confidence and unmatched execution and the business benefits from a uniquely strong defensive mode.

Speaker Change: Travis Matthew had a solid quarter delivering share gains at wholesale and also opening five new retail stores. They are on track to open ten stores for the full year for a total of 57.

Chip Brewer: It is now approaching 10 percent of revenue. It appears to be on its way to being a significant portion of this business. In addition, the Travis Matthew team has done a great job growing their outerwear business, which in turn is helping them be a less seasonally focused brand. Moving on, to Jack Wolfskin.

Speaker Change: The Women's Initiative also continues to develop nicely. It is now approaching 10% of revenues.

Speaker Change: It appears to be on its way to being a significant portion of this business.

Speaker Change: In addition, the Travis Matthew team has done a great job growing their outerwear business.

Speaker Change: which in turn is helping them be a less seasonally focused brand

Chip Brewer: I'd like to commend the team for their hard work as we took significant steps to right-size the business since we last spoke on our Q1 earnings call. The brand has successfully shifted its strategic focus back to its core markets in Central Europe and China. We are encouraged by recent results, including achieving our sales targets for Q2. And we still expect a positive EBITDA performance in 2024. Consistent with last quarter's communication, we expect revenues in this segment to decline year over year as we form a new base from which to resume growth.

Speaker Change: Moving to Jack Wolfskin.

Speaker Change: I'd like to commend the team for their hard work as we took significant steps to right-size the business since we last spoke on our Q1 earnings call.

Chip Brewer: Turning out a golf equipment, the Calaway brand remains strong with growing market share positions. This quarter, Calaway held its position as the number one US market share brand and driver fairy woods and hybrids. Our AI smoke line maintains the number one US model market share position and driver fairy woods and iron, and Odyssey also maintains positions of the number one putter brand. One stat that I'm particularly proud of is our June green grass woods market share of 38%.

Speaker Change: The brand has successfully shifted its strategic focus back to its core markets in Central Europe and China.

Speaker Change: We are encouraged by recent results, including achieving our sales targets for Q2, and we still expect a positive EBITDA performance in 2024.

Speaker Change: Consistent with last quarter's communication, we expect revenues in this segment to decline year-over-year as we form a new base from which to resume growth.

Chip Brewer: 38% is a terrific number. It showcases the outstanding performance of our AI smoke woods in a fitting environment. And the fact that we can deliver this at green grass also showcases our scale and strengthen distribution in this important channel.

Chip Brewer: In conclusion, we are pleased with the overall performance of both our golf equipment and active lifestyle segments. At Topgolf, we are working through what we view as a short-term cycle of volatility in our same menu sales, while at the same time significantly improving our organization's ability to drive positive results in a normalized environment. We continue to demonstrate our ability to drive improved operating efficiency within our venues, to reliably deliver strong performance in newly opened venues with highly attractive financial returns, to grow our digital acumen and penetration, and to build on the overall strength of the consumer experience, an experience that continues to resonate with Topgolf players as one of the most fun entertainment options available. As we look forward, we remain confident that we have the proper strategy in place to drive long-term growth in both revenue and profitability With that, I'll turn the call over to Brian.

Speaker Change: In conclusion, we are pleased with the overall performance of both our golf equipment active lifestyle segments.

Speaker Change: At Topgolf, we are working through what we view as a short-term cycle of volatility in our same-menu sales, while at the same time significantly improving an organization's ability to drive positive results in a normalized environment.

Chip Brewer: Turning to golf ball, the significant strategic investments we've made in golf ball over the last several years continue to pay dividends for the Callaway brand. A major focus for Callaway this year was to grow in our tour ball segment with our new chrome tour product line. Our results show that we're doing just that. As you may recall, last quarter I announced we'll be hosting chrome tour ball speed and spin challenges. We have now done hundreds of these and the results have been impressive.

Speaker Change: We continue to demonstrate our ability to drive improved operating efficiency within our venues to reliably deliver strong performance in newly opened venues with highly attractive financial returns.

Speaker Change: to grow our digital acumen and penetration and to build on the overall strength of the consumer experience an Experience which continues to resonate with Topgolf players as one of the most fun entertainment options available

Chip Brewer: Our test data shows that we are faster in 86% of the tests and that we deliver an advantage in pit shot backs been in 66% of the test. Our overall June US ball market share increased by 120 basis points year over year to 21.9% and our premium ball share achieved a new record market share of 12% up 150 basis points year over year. Our brand has also had an outstanding year on tour with Yuka Sasa winning her second US women's open and Zander winning both as first and as second major championships, the PGA championship and then the open championship.

Speaker Change: As we look forward, we remain confident that we have the proper strategy in place to drive long-term growth in both revenue and profitability. With that, I'll turn the call over to Brian .

Brian Lynch: Thank you, Chip, and good afternoon, everyone. Chip covered our announcement regarding the strategic review of Topgolf, so I will jump right into our financial results. I will start with some financial highlights for the quarter. Q2 non-GAAP net income of $83 million, adjusted EBITDA of $206 million, and EPS of 42 cents were all ahead of expectations, despite a 2% year-over-year decrease in revenue. First half cash provided by operations improved $173 million compared to the first half last year.

Brian: thank you chip and good afternoon everyone

Brian: Chip covered our announcement regarding the strategic review of Topgolf, so I will jump right into our financial results.

Brian: I will start with some financial highlights for the quarter.

Brian: Q2 non-GAAP net income of $83 million, adjusted EBITDA of $206 million, and EPFs of 42 cents were all ahead of expectations, despite a 2% year-over-year decrease in revenue.

Chip Brewer: Looking at global markets, the core golf markets of the US, Japan and Europe all remain healthy with field inventories, consumer demand and overall market conditions steady if not slightly positive. In each of these markets, we believe we are slightly outperforming the overall market as measured by revenues and market share. The Korean market on the other hand remains soft, down double digits this year and unfortunately we have also also underperformed in this market. As a result, we have recently made changes aimed at improving our relative performance here and we are seeing positive signs.

Speaker Change: First half cash provided by operations improved 173 million dollars compared to first half last year.

Brian Lynch: Our inventory reduction initiatives were successful, with our consolidated inventory decreasing $193 million since Q2 last year. We made a $50 million discretionary payment against the outstanding principle of our term loan debt at the end of May. Our available liquidity remains strong and increased $136 million compared to Q2 last year. Now, turning to the specifics.

Brian: Our inventory reduction initiatives were successful with our consolidated inventory decreasing $193 million since Q2 last year.

Brian: We made a $50 million discretionary payment against the outstanding principal of our term loan debt at the end of May.

Brian: our available liquidity remains strong and increased one hundred and thirty-six million dollars compared to q two last year

Brian Lynch: Q2 consolidated revenues decreased 2% year over year to $1.158 billion, and we're 3% below the midpoint of our guidance, primarily due to softer trends in our Topgolf business. On a year-over-year basis, the decrease was attributable to an 8% decrease in golf equipment and a 3% decrease in active lifestyle, both of which were largely in line with our expectations. This decrease was partially offset by revenue growth at Topgolf, driven by new venues. However, changes in foreign currency rates negatively impacted consolidated revenue by approximately $11 million.

Speaker Change: Now turning to the specifics.

Brian: Q2 consolidated revenues decreased 2% year-over-year to $1.158 billion.

Chip Brewer: For the balance of the year, we are excited about our recent upcoming product launches. We just launched our new Opus Wedge and they are already a popular choice on tour. In my opinion, this is the best wedge we have launched in my time here at Calaway, congrats and well done to the teams that drove this. And looking only slightly forward, on next Monday, we will be announcing the launch of our new Apex line of irons.

Speaker Change: And we're 3% below the midpoint of our guidance.

Brian: primarily due to softer trends in our Topgolf business.

Speaker Change: On a year-over-year basis, the decrease was attributable to an 8% decrease in golf equipment and 3% decrease in active lifestyle, both of which were largely in line with our expectations.

Brian: This decrease was partially offset by revenue growth at Topgolf, driven by new venues.

Brian: Changes in foreign currency rates negatively impacted consolidated revenue by approximately $11 million.

Chip Brewer: This is our most premium line of irons and the product is both beautiful and innovative. I am particularly excited about the new Tyfusion technology that will be introduced as part of this exciting new line up. And I invite you to tune into our launch communication to learn more. Paul. Looking at our full-year forecast for this segment, we now see revenues being approximately flat for the full-year, but up slightly on a currency neutral basis.

Brian Lynch: Q2 adjusted EBITDA of $206 million is approximately flat compared to last year, and trailing 12-month adjusted EBITDA increased over 10% year over year. These results exceeded the high end of our Q2 2024 guidance range. Due to strong operational efficiencies at Topgolf and reduced costs and expenses across the business, Q2 non-GAAP net income was $83 million, up approximately 10% year over year. This increase in net income is primarily due to an increase in investment income and a tax benefit for the quarter. Net income also benefits from lower term loan interest expense as a result of our refinancing. Moving on to segment performance.

Brian: Q2 adjusted EBITDA of $206 million is approximately flat compared to last year and trailing 12-month adjusted EBITDA increased over 10% year-over-year.

Brian: These results exceeded the high end of our Q2 2024 guidance range driven by strong operational efficiencies at Topgolf and reduced costs and expenses across the business.

Chip Brewer: Switching gears to active lifestyle segment, Q2 revenues were in line with expectations. Travis Matthew had a solid quarter delivering share gains at wholesale and also opening five new retail stores. They are on track to open 10 stores for the full-year for a total of 57. The Women's Initiative also continues to develop nicely. It is now approaching 10% of revenues. It appears to be on its way to being a significant portion of this business. In addition, the Travis Matthew team has done a great job growing their out-of-wear business, which in turn is helping them be a less-seasonally focused brand.

Brian: Q2 non-GAAP net income was $83 million, up approximately 10% year-over-year. This increase in net income is primarily due to an increase in investment income and a tax benefit for the quarter.

Brian: Net income also benefit from lower term loan interest expense as a result of our refinancing.

Brian Lynch: At Topgolf, Q2 revenue grew 5% to $494 million, driven primarily by the new venues opened since Q2 last year. The new venues are performing well and consistent with the financial targets and returns we previously communicated. Topgolf operating income was $56 million in the second quarter, up 28% compared to the prior year, while adjusted EBITDA increased 19% year-over-year to $110 million. The adjusted EBITDA growth was driven primarily by increased revenue and continued strong operating efficiencies, including benefits from our new labor model and cost management initiatives.

Brian: Moving to segment performance.

Speaker Change: at top gooff q two revenue grew five percent to four hundred ninety-four million dollars driven primarily by the new venues op since q two last year

Speaker Change: The new venues are performing well and consistent with the financial targets and returns we previously communicated.

Speaker Change: Topgolf operating income was $56 million in the second quarter, up 28% compared to the prior year, while adjusted EBITDA increased 19% year-over-year to $110 million.

Chip Brewer: Moving to Jack Wolfskin, I'd like to commend the team for their hard work as we took significant steps to right-size the business since we last spoke on our Q1 earnings call. The brand has successfully shifted its strategic focus back to its core markets in central Europe and China. We are encouraged by recent results, including achieving our sales targets for Q2, and we still expect a positive EBITDAW performance in 2024. Consistent with last quarter's communication, we expect revenues in this segment to decline year-over-year as we form a new base in which to resume growth.

Speaker Change: The adjusted EBITDA growth was driven primarily by the increased revenue and continued strong operating efficiencies, including benefits from our new labor model and cost management initiatives.

Brian Lynch: We commend the team at Topgolf for their ability to drive profit in a volatile top line environment. Moving to Q2 results for golf equipment, overall, the underlying golf equipment business continued to see strong momentum from this year's club and ball launches, with strong market shares, as Chip discussed earlier.

Speaker Change: We commend the team at Topgolf for their ability to drive profit in a volatile top line environment.

Speaker Change: Moving to Q2 results for golf equipment.

Chip Brewer: overall the underlying gf equipment business continued to see strong momentum from this year's cluband all launches with strong market shares as chip discussed earlier

Brian Lynch: Revenue decreased 8% year-over-year to $414 million, consistent with our expectations, primarily due to lapping last year's launch of our big berth of woods and irons, which had an approximate $30 million impact compared to Q2 this year. This is just timing between quarters, and we still expect golf equipment revenue to be up for the full year on a constant currency basis. Our golf equipment segment was also negatively impacted by approximately $7 million related to foreign exchange headwinds during the quarter.

Chip Brewer: In conclusion, we are pleased with the overall performance of both our golf equipment active lifestyle segments. At Topgolf, we are working through what we view as a short-term cycle of volatility in our same-venue sales while, at the same time, significantly improving organization's ability to drive positive results in a normalized environment. We continue to demonstrate our ability to drive improved operating efficiency within our venues to reliably deliver strong performance in newly-opened venues with highly attractive financial returns to grow our digital acumen and penetration and to build on the overall strength of the consumer experience.

Speaker Change: Revenue decreased 8% year-over-year to 414 million dollars, consistent with our expectations, primarily due to lapping last year's launch of our big birth of woods and irons, which had an approximate 30 million dollar impact compared to Q2 this year.

Chip Brewer: This is just timing between quarters and we still expect golf equipment to be up for the full year on a constant currency basis.

Speaker Change: Our golf equipment segment was also negatively impacted by approximately seven million dollars related to foreign exchange headwinds during the quarter.

Brian Lynch: Golf equipment operating income of $77 million decreased 20% year over year due to lower revenue, higher air freight costs, and foreign exchange headwinds, which were partially offset by management of operations. For the Interactive Lifestyle segment, Q2 revenue decreased 3% year over year, which is in line with our expectations and was primarily from softness and Jack Wolfskin due to high field inventories, along with unfavorable changes in foreign currency rates. Operating income decreased to $15 million compared to $20 million in the prior year, primarily due to lower sales.

Chip Brewer: Staff equipment operating income of $77 million decreased 20% year-over-year due to the lower revenue, higher air freight costs, and foreign exchange headwinds, which were partially offset by management of operating expenses.

Chip Brewer: An experience which continues to resonate with Topgolf players as one of the most fun entertainment options available. As we look forward, we remain confident that we have the proper strategy in place to drive long-term growth in both revenue and profitability.

Speaker Change: In our Active Lifestyle segment, Q2 revenue decreased 3% year over year, which is in line with our expectations and was primarily from softness and Jack Willskin due to high field inventories along with unfavorable changes in foreign currency rates.

Brian Lynch: With that, I'll turn the call over to Brian. Thank you, Chip. Good afternoon, everyone. Chip covered our announcement regarding the strategic review of Topgolf, so I will jump right into our financial results. I will start with some financial highlights for the quarter. Q2-9 gap mid-income with $83 million, adjusted EBITDA of $206 million, and EPS of 42 cents were all ahead of expectations despite a 2% year-over-year decrease in revenue. First half cash provided by operations improved $173 million compared to first half last year.

Speaker Change: Operating income decreased to $15 million compared to $20 million in the prior year, primarily due to the lower sales.

Brian Lynch: Moving to balance sheet and liquidity highlights, we continue to have ample liquidity. As of June 30, 2024, our available liquidity, which is comprised of cash on hand and incremental borrowing capacity under our credit facility, increased $136 million to $784 million compared to the prior year due to better cash flow generation as the company continues to manage costs and more efficiently manage working capital, especially with regard to inventory. At quarter end, we had total net debt of $2.4 billion, which excludes convertible debt of approximately $258 million, compared to $2.2 billion at the same time last year. This increase is attributable to increased venue financing debt related to new venues.

Speaker Change: Moving to balance sheet and liquidity highlights. We continue to have ample liquidity. As of June 30th, 2024, our available liquidity, which is comprised of cash on hand and incremental borrowing capacity under our credit facilities,

Speaker Change: increased $136 million to $784 million compared to the prior year due to better cash flow generation as the company continues to manage costs and more efficiently manage working capital especially with regard to inventory.

Speaker Change: At quarter end, we had total net debt of $2.4 billion, which excludes convertible debt of approximately $258 million, compared to $2.2 billion for the same time last year.

Brian Lynch: Our inventory reduction initiatives were successful with our consolidated inventory decreasing $193 million since Q2 last- last year. We made a $50 million discretionary payment against the outstanding principle of our term loan debt at the end of May. Our available liquidity remained strong and increased $136 million compared to Q2 last year, now turning to the specifics. Q2 consolidated revenues decreased 2% year-over-year to $1.158 billion, and were 3% below the midpoint of our guidance, primarily due to softer trends in our Topgolf business.

Speaker Change: this increase is attributable to increase venue financing debt related to new venues part off set by a reduction in term loan debt due to our recent debt paydown

Brian Lynch: Partially offset by a reduction in term loan debt due to our recent debt paydown. We also think it is helpful to evaluate our net leverage position by excluding the REIT debt associated with our Topgolf venue financing, which is akin to capitalized rent with no additional principal or bullet repayment required. Excluding the REIT debt from our balance sheet, our REIT adjusted net debt is $981 million compared to $1.2 billion as of Q2 2023. Our net debt leverage, which excludes convertible debt, was 3.9 times at June 30, 2024, compared to 4.1 times in the prior year.

Speaker Change: We also think it is helpful to evaluate our net leverage position by excluding the REIT debt associated with our Topgolf venue financing.

Speaker Change: which is akin to capitalized rent with no additional principal or bullet repayment required.

Speaker Change: Excluding the REIT debt from our balance sheet, our REIT adjusted net debt is 981 million dollars compared to 1.2 billion dollars as of Q2 2023.

Brian Lynch: On a year-over-year basis, the decrease was attributable to an 8% decrease in golf equipment, and 3% decrease in active lifestyle, both of which were largely in line with our expectations. This decrease was partially all set by revenue growth at Topgolf driven by new venues. Changes in foreign currency rates negatively impacted consolidated revenue by approximately $11 million. Q2 Adjusted EBITDAV $206 million is approximately flat compared to last year, and trailing 12-month Adjusted EBITDA increased over 10% year-over-year.

Speaker Change: Arnett Debt Leverage

Speaker Change: which excludes convertible debt, was 3.9 times at June 30, 2024, compared to 4.1 times in the prior year.

Brian Lynch: This improvement was driven by increased EBITDA and improved cash flow, which more than offset the increased venue financing debt. A readjusted net debt leverage ratio, which burdens EBITDA with the REIT interest expense payment, was 1.9 times compared to 2.5 times in the prior year.

Speaker Change: This improvement was driven by increased EBITDA and improved cash flow, which more than offset the increased venue financing debt.

Speaker Change: a readadjusted net debt leverage ratio which burdenens ebitda with the re interest expense payments was one point nine times compared to two point five times in the prior year

Brian Lynch: We remain comfortable at these leverage levels. Speaking of reach, I want to provide a quick update based on what we are seeing in the market. First, our venues continue to be viewed as very attractive investments, and we are seeing strong demand and, in fact, increased interest from new re-partners for these venues. Second, the cap rates on new venues remain steady and in line with the rates we have seen over the last several quarters.

Speaker Change: We remain comfortable at these leverage levels.

Speaker Change: Speaking of REACH, I want to provide a quick update based on what we are seeing in the market.

Brian Lynch: These results exceeded the high end of our Q2 2024 guidance range, driven by strong operational efficiencies at Topgolf, and reduced cost and expenses across the business. Q2 non-gap net income was $83 million, up approximately 10% year-over-year. This increase in net income is primarily due to an increase in investment income, and a tax benefit for the quarter. Net income also benefit from lower term loan interest expense as a result of our refinancing.

Speaker Change: First, our venues continue to be viewed as very attractive investments, and we are seeing strong demand and, in fact, increased interest from new re-partners for these venues.

Speaker Change: Second, the cap rates on new venues remain steady and in line with the rates we have seen over the last several quarters.

Brian Lynch: Switching gears, our inventory balance decreased $193 million, or 23%, to $647 million at the end of Q2 2024. We continue to feel comfortable at the current level and quality of our inventory and believe we are essentially at normalized levels for our business, with small opportunities in each brand or region that we will continue to pursue. Capital expenditures for the first six months of 2024 were $149 million, and we received reimbursements of $55 million from our REIT partners, for net capital expenditures of approximately $95 million.

Speaker Change: Switching gears, our inventory balance decreased $193 million, or 23% to $647 million at the end of Q2 2024.

Speaker Change: We continue to feel comfortable with the current level and quality of our inventory, and believe we are essentially at normalized levels for our business, with small opportunities in each brand or region that we will continue to pursue.

Brian Lynch: Moving to segment performance. At Topgolf, Q2 revenue grew 5% to $494 million, driven primarily by the new venues open since Q2 last year. The new venues are performing well and consistent with the financial targets and returns we previously communicated. Topgolf operating income was $56 million in the second quarter, up 28% compared to the prior year, while adjusted EBITDAV increased 19% year-over-year to $110 million. The adjusted EBITDAV growth was driven primarily by the increased revenue and continued strong operating efficiencies, including benefits from our new labor model and cost management initiatives. We commend the team at Topgolf for their ability to drive profit in a volatile top-line environment.

Speaker Change: Capital expenditures for the first six months of 2024 were $149 million and we received reimbursements of $55 million from our REIT partners. For net capital expenditures of approximately $95 million.

Brian Lynch: Now turning to our balance of year outlook. As Chip mentioned earlier, given our revised outlook for same venue sales, coupled with our expectations for a potentially softer consumer environment across our business. We are lowering the midpoint of our full year 2024 revenue guidance range by $225 million, or approximately 5%, to a range of $4.2 billion to $4.26 billion. Approximately 170 million, or approximately 75% of this decrease, is attributable to the Topgolf business, and the other 55 million to our products.

Speaker Change: Now turning to our Balance of Year Outlook.

Speaker Change: As Chip mentioned earlier, given our revised outlook for same venue sales, coupled with our expectations for a potentially softer consumer environment across our businesses.

Chip Brewer: We are lowering the midpoint of our full-year 2024 Revenue Guidance Range by $225 million, or approximately 5%, to a range of $4.2 billion to $4.26 billion.

Brian Lynch: Moving to Q2 results for golf equipment. Overall, the underlying golf equipment business continued to see strong momentum from this year's club and ball launches, with strong market shares as Chip discussed earlier. Revenue decreased 8% year-over-year to $414 million, consistent with our expectations. Primarily due to the lapping last year's launch of our big birth of woods and irons, which had an approximate $30 million impact compared to Q2 this year. This is just timing between quarters and we still expect golf equipment to be up for the full year on a constant currency basis.

Speaker Change: Approximately $170 million or approximately 75% of this decrease is attributable to the Topgolf business and the other $55 million to our products business.

Speaker Change: As a result, we are also lowering the midpoint of our full-year adjusted EBITDA outlook by approximately $50 million to a range of $570 million to $590 million.

Speaker Change: We were able to mitigate the impact of the change in revenue on EBITDA through cost reductions and strong operational efficiencies.

Brian Lynch: By segment, at Topgolf, we are lowering our guidance to approximately $1.79 billion in revenue and approximately $310 million in adjusted EBITDA, which compares to our prior guidance of $1.96 billion and $350 million, respectively. Our outlook now assumes a softer back half of the year with updated same-venue sales guidance from down very high single digits to low double digits for the year. In golf equipment, our updated forecast now allows for a range of outcomes that includes both a continuation of current trends or some softening of the consumer in the second half of the year, despite this potential softness and unfavorable foreign currency rates.

Speaker Change: By segment, at Topgolf, we are lowering our guide to approximately $1.79 billion in revenue and approximately $310 million in adjusted EBITDA, which compares to our prior guidance of $1.96 billion and $350 million, respectively.

Brian Lynch: Our golf equipment segment was also negatively impacted by approximately $7 million related to foreign exchange headwinds during the quarter. Scott equipment operating income of $77 million decreased 20% year-over-year due to the lower revenue, higher air freight costs, and foreign exchange headwinds, which were partially offset by management of operating expenses. Interactive lifestyle segment, Q2 revenue decreased 3% year-over-year, which is inline with our expectations and was primarily from softness and jackalool skin due to high-field inventories, along with unfavorable changes in foreign currency rates. Operating income decreased to $15 million compared to $20 million in the prior year, primarily due to the lower sales.

Speaker Change: Our outlook now assumes a softer back half of the year with updated same-venue sales guidance of down very high single digits to low double digits for the year.

Speaker Change: In GOF equipment, our updated forecast now allows for a range of outcomes that includes both a continuation of current trends or some softening of the consumer in the second half of the year.

Speaker Change: Despite this potential softness and unfavorable foreign currency rates,

Brian Lynch: We expect second half growth in golf equipment and are very excited about our Q3 launches of Apex Irons and Opus Wedges. For the full year, we anticipate golf equipment to be approximately flat year over year and slightly up on a currency adjusted basis, and Active Lifestyle, Travis Matthew continues to perform in line with expectations. And, as Chip noted, we have successfully right-sized the Jack Wolfskin business to focus on his two core markets: Central Europe and China.

Speaker Change: We expect second half growth in golf equipment and are very excited about our Q3 launches of Apex Irons and Opus Wedges.

Brian Lynch: Moving to balance sheet and liquidity highlights, we continue to have ample liquidity as of June 30th, 2024, our available liquidity, which is comprised of cash on hand and incremental borrowing capacity under our credit facilities, increased $136 million to $784 million compared to the prior year due to better cash flow generation as the company continues to manage costs and more efficiently manage working capital, especially with regard to inventory. At quarter end, we had total net debt of $2.4 billion, which excludes convertible debt of our approximately $258 million compared to $2.2 billion for the same time left year.

Speaker Change: For the full year, we anticipate golf equipment to be approximately flat year-over-year and slightly up on a currency-adjusted basis.

Chip Brewer: In Active Lifestyle, Travis Matthew continues to perform in line with expectations, and as Chip noted, we have successfully right-sized the Jack Wolfskin business to focus on its two core markets in Central Europe and China.

Brian Lynch: Overall, we continue to expect full-year revenue and operating income to be down year-over-year in the segment due to lapping the $35 million corporate channel fill-in last year for Travis Matthew and lower sales at Jack Wolfson. Barring exchange rates have improved since we last gave guidance, we are now expecting a full year negative impact on revenue of approximately $35 million and an operating income of approximately $19 million. Shifting gears, while we continue to expect to be cash flow positive in 2024, we are lowering our outlook for free cash flow.

Speaker Change: Overall, we continue to expect full-year revenue and operating income to be down year-over-year in the segment due to lapping the $35 million corporate channel fill-in last year for Travis Matthew and lower sales at Jack Wolfskin.

Speaker Change: Foreign exchange rates have improved since we last gave guidance. We are now expecting a full year negative impact on revenue of approximately 35 million dollars and an operating income of approximately 19 million dollars.

Brian Lynch: This increase is attributable to increased venue financing debt related to new venues, partially all set by a reduction in term loan debt due to our recent debt paydown. We also think it is helpful to evaluate our net leverage position by excluding the REIT debt associated with our top-cuff venue financing, which is akin to capitalized rent with no additional principal or bullet repayment required. Excluding the REIT debt from our balance sheet, our REIT adjusted net debt is $981 million compared to $1.2 billion as of Q2 2023.

Speaker Change: Shifting gears, while we continue to expect to be cash flow positive in 2024, we are lowering our outlook for free cash flow. We now expect free cash flow to be approximately $130 million compared to $165 million for our prior guidance.

Brian Lynch: We now expect free cash flow to be approximately $130 million compared to $165 million for our prior guidance. Topgolf is also expected to be free cash flow positive for the year. From a net capex perspective, we estimate approximately $190 million for the full year, with $60 million coming from the non-topgolf business and $130 million coming from topgolf. Now, turning to Q3. In Q3, we expect consolidated revenue of $970 million to $990 million versus $1.041 billion in Q3. We estimate adjusted EBITDA to be in the range of $95 to $105 million, compared to $163 million in the prior year.

Speaker Change: Topgolf is also expected to be free cash flow positive for the year.

Speaker Change: From a net capex perspective, we estimate approximately $190 million for the full year, with $60 million coming from the non-topgolf business and $130 million coming from topgolf.

Brian Lynch: Our net debt leverage, which excludes convertible debt, was 3.9 times at June 30th, 2024 compared to 4.1 times in the prior year. This improvement was driven by increased EBITDA and improved cash flow, which more than all set the increased venue financing debt. Our REIT adjusted net debt leverage ratio, which burdens EBITDA with the REIT interest expense payments, was 1.9 times compared to 2.5 times in the prior year. We remain comfortable with these leverage levels.

Speaker Change: Now turning to Q3 specifically. In Q3, we expect consolidated revenue of $970 million to $990 million versus $1.041 billion in Q3 2023.

Speaker Change: We estimate adjusted EBITDA to be in the range of $95 to $105 million compared to $163 million in the prior year.

Brian Lynch: This decrease is due to revenue deleverage, increased marketing spend, and more hedge losses compared to the prior year. In Q3 of Topgolf, we expect to be down low single digits in revenue, and we expect operating income to be down more than revenue due to the revenue deleverage and the change in timing of marketing expenses year over year, partially offset by continued efficiency.

Speaker Change: This decrease is due to the revenue deleverage, increased marketing spend, and more hedge losses compared to the prior year.

Brian Lynch: Speaking of REITs, I want to provide a quick update based on what we are seeing in the market. First, our venues continue to be viewed as very attractive investments, and we are seeing strong demand and, in fact, increased interest from new repartners for these venues. Second, the cap rates on new venues remain steady, and in line with the rates we have seen over the last several quarters. Which in gears are inventory-balanced decrease $193 million, or 23% to $647 million, at the end of Q2 2024.

Speaker Change: In Q3 at Topgolf, we expect to be down low single digits in revenue, and we expect operating income to be down more than revenue due to the revenue deleverage and the change in timing of marketing expenses year over year, partially offset by continued efficiencies.

Brian Lynch: We also expect same-venue sales to be approximately the same in Q3 and Q4. However, golf equipment sales are expected to be down slightly in Q3, primarily due to unfavorable changes in foreign currency. Q4 revenue is expected to grow due to the launch timing and year-over-year growth in golf ball revenue. However, operating income is expected to be down in Q3 due to the revenue decrease and increased marketing spend related to the new product launch. Operating income is expected to be up in Q4 due to the expected revenue growth.

Speaker Change: We also expect same-venue sales to be approximately the same in Q3 and Q4.

Speaker Change: Top equipment sales are expected to be down slightly in Q3, primarily due to unfavorable changes in foreign currency.

Brian Lynch: We continue to feel comfortable with the current level and quality of our inventory, and believe we are essentially at normalized levels for our business, with small opportunities in each brand or region that we will continue to pursue. Capital expenditures for the first six months of 2024 were $149 million, and we received reimbursons of $55 million from our REIT partners. For net capital expenditures, we were approximately $95 million.

Speaker Change: Q4 revenue is expected to grow due to launch timing and year-over-year growth in golf balls.

Speaker Change: Operating income is expected to be down in Q3 due to the revenue decrease and increased marketing spend related to the new product launches.

Speaker Change: Operating income is expected to be up in Q4 due to the expected revenue growth.

Brian Lynch: Moving to the active lifestyle, we expect Q3 revenue to decline compared to last year due to lower sales estimates for Jack Wilskin and the Europe Wholesale Channel. However, we expect growth in Q4 at both Travis Matthews and Jack Wilskin. Operating income is expected to be down in Q3 due to the revenue decrease, but it is expected to be up in Q4 due to revenue leverage. As we conclude, I want to emphasize that the fundamentals of our business remain strong. Participation and interest in golf remain very strong.

Speaker Change: Moving to active lifestyle, we expect Q3 revenue to decline compared to last year due to lower sales estimates for Jack Wilskin and the Europe Wholesale Channel.

Brian Lynch: Now, turning to our balance of year outlook. As Chip mentioned earlier, given our revised outlook for same venue sales, coupled with our expectations for a potentially softer consumer environment across our businesses, we are lowering the midpoint of our full year 2024 revenue guidance range by $225 million or approximately 5%. To a range of $4.2 billion to $4.26 billion approximately $170 million or approximately 75% of this decrease is attributable to the Topgolf business and the other $55 million to our products business.

Speaker Change: We expect growth in Q4 at both Travis Matthew and Jack Wolskin.

Speaker Change: Operating income is expected to be down in Q3 due to the revenue decrease and is expected to be up in Q4 due to the revenue leverage.

Speaker Change: As we conclude, I want to emphasize that the fundamentals of our business remain strong.

Brian Lynch: Travis Matthew and Jack Wolfskin Brands are leaders in their core markets, and the fund scores are high for improvement. However, outside of our golf equipment business, we are clearly seeing some consumer softness in the current macroeconomic conditions. This is the less fun part of the economic cycle we all expected at some point. While it is having some impact on revenue, we have been able to offset much of the bottom line impact through operational efficiencies and cost management. We are free cash flow positive and have strong liquidity. We are in a great position to be able to maximize opportunities during this cycle and to take advantage of better conditions as the consumer strengthens again.

Speaker Change: Participation and interest in golf remains very strong. The Travis Matthew and Jack Wolfskin brands are leaders in their core markets.

Speaker Change: And the fund scores are High and Improving.

Speaker Change: However, outside of our golf equipment business, we are clearly seeing some consumer softness in the current macroeconomic conditions.

Speaker Change: This is the less fun part of the economic cycle we all expected at some point.

Brian Lynch: As a result, we are also lowering the midpoint of our full year adjusted EBITDA outlook by approximately $50 million to a range of $570 million to $590 million. We were able to mitigate the impact of the change in revenue in EBITDA through cost reductions in strong operational efficiencies. By segment at Topgolf, we are lowering our guides to approximately $1.79 billion in revenue and approximately $310 million in adjusted EBITDA which compares to our prior guidance of $1.96 billion and $350 million respectively.

Speaker Change: While it is having some impact on revenue, we have been able to offset much of the bottom line impact through operational efficiencies and cost management.

Speaker Change: We are free cash flow positive and have strong liquidity.

Speaker Change: We are in a great position to be able to maximize opportunities during this cycle and to take advantage of better conditions as the consumer strengthens again.

Brian Lynch: With that said, I would now like to open the call for questions. However, before actually opening the call for questions, I want to comment on the trading halt in our stock shortly before market close. Our long-term provider, whom we use to manage our investor relations website, prematurely posted our investor presentation on our website prior to market close. Although it was quickly taken down, it had already been picked up in the media. We immediately notified the NYSE, and they halted trading pending publication of our earnings announcements today. We will be discussing this matter further with our provider and apologize for this disruption. Operator, with that said, please open the call for questions.

Speaker Change: With that said, I would now like to open the call for questions.

Brian Lynch: Our outlook now assumes a softer back half of the year with updated same venue sales guidance of down very high single digits to low double digits for the year. In Gough Equipment, our updated forecast now allows for a range of outcomes that includes both a continuation of current trends or some softening of the consumer in the second half of the year. Despite this potential softness and unfavorable foreign currency rates, we expect second half growth in Gough Equipment and are very excited about our two three launches of apex irons and opus wedges.

Speaker Change: before actually opening the call for questions i want the comment on the trading hall and our stock shortly before market close

Speaker Change: Our long-term provider we use to manage our investor relations website prematurely posted our investor presentation to our website prior to market close.

Speaker Change: Although it was quickly taken down, it had already been picked up in the media. We immediately notified the NYSE and they halted trading pending publication of our earnings announcements today. We will be discussing this matter further with our provider and apologize for this disruption.

Speaker Change: Operator, with that said, please open the call for questions.

Operator: We will now begin the question and answer session. If you would like to ask a question, you may press star then 1 on your touch screen. If you are using a speakerphone, please keep your head that is pressing.

Brian Lynch: For the full year, we anticipate Gough Equipment to be approximately flat year over year and slightly up on a currency adjusted basis. In active lifestyle, Travis Matthew continues to perform in line with expectations and as Chip noted, we have successfully right sized the Jack Wolfskin business to focus on his two core markets in central Europe and China. Overall, we continue to expect full year revenue and operating income to be down year over year in the segment due to lapping the $35 million corporate channel fill in last year for Travis Matthew and lower sales at Jack Wolfskin. Foreign exchange rates have improved since we last gave guidance. We are now expecting a full year negative impact on revenue of approximately $35 million and an operating income of approximately $19 million.

Speaker Change: We will now begin the question and answer session. If you would like to ask a question, you may press star then 1 on your touch screen.

Speaker Change: If you are using a speakerphone, please keep your hands and feet pressing the keys.

Operator: To withdraw your questions, please press star then 2. And at this time, we'll pause momentarily for the first question. And our first question today will come from Alex Perry with Bank of America. Please go ahead.

Speaker Change: To withdraw your questions, please press star then 2.

Speaker Change: And at this time, we'll pause momentarily for the first question.

Speaker Change: And our first question today will come from Alex Perry with Bank of America. Please go ahead.

Unknown Speaker: Hi, thanks for taking my question here. First, I wanted to ask about Topgolf a little bit. I guess, does the current same-in-the-sales trajectory sort of make you think about pausing future unit growth beyond this year? And then, maybe a little color on sort of traffic versus ticket for Topgolf in the quarter and how you're thinking about it. Thanks.

Alex Perry: Hi, thanks for taking my question here.

Alex Perry: First, I wanted to ask about Topgolf a little bit. I guess, does the current same-in-the-sales trajectory sort of make you think about pausing future unit growth?

Speaker Change: beyond this year and then maybe a little color on on sort of traffic versus ticket for Topgolf in the quarter and how you're thinking about it. Thanks.

Chip Brewer: Sure, Alex. This is Chip.

Brian Lynch: Shifting gears, while we continue to expect to be cash flow positive in 2024, we are lowering our outlook for free cash flow. We now expect free cash flow to be approximately $130 million compared to $165 million for our prior guidance. Topped off was also expected to be free cash flow positive for the year. From a net capex perspective, we estimate approximately $190 million for the full year was $60 million coming from the top 9 top cop business and $130 million coming from top cop.

Chip Brewer: With regard to venue expansion, that's obviously something we've given a fair amount of thought to. And the short answer is that we believe the correct answer for creating shareholder value is to continue to build the venues. We expect to add an average of 10 per year, some years a little more, some years a little less, again, starting in 2025.

Speaker Change: Sure, Alex, this is Chip.

Chip Brewer: With regard to the venue expansion, so...

Chip Brewer: That's obviously something we've given a fair amount of thought to and the short answer is that we believe the correct answer for creating shareholder value is to continue to build the venues. We expect to add an average of 10 per year. Some years a little more, some years a little less.

Chip Brewer: You add a little color on that, though, as previously communicated, we have very attractive returns for these venues, 18 to 22% return on gross investment, 50 to 60% cash on cash, and less than three years of cash payback. We've confirmed and looked at the new venue performance recently, and they are delivering on the financial metrics consistent with our pro formas, even in the recent period of volatility. We believe the recent same-venue sales volatility is just that; it's volatility.

Chip Brewer: again in starting in two thousand and twenty five

Chip Brewer: You add a little color on that though, you know as previously communicated we have very attractive returns for these venues 18 to 22 percent return on gross investment 50 to 60 percent cash on cash

Brian Lynch: Now turning to Q3 specifically. In Q3, we expect consolidated revenue of $970 million to $990 million versus 1.041 billion in Q3, 2023. We have estimated adjusted EBITAS to be in the range of $95 to $105 million, compared to $163 million in the prior year. This decrease is due to the revenue de-leveraged, increased marketing spend, and more hedge losses compared to the prior year. In Q3 at Topgolf, we expect to be down low single digits in revenue, and we expect operating income to be down more than revenue, due to the revenue de-leveraged and a change in timing of marketing expenses year over year, partially all set by continued efficiencies.

Chip Brewer: and less than three year cash payback.

Chip Brewer: We've confirmed and looked at the new in the financial metrics consistent with our proformas even in the recent period of volatility.

Chip Brewer: We believe the recent same-venue sales volatility is just that, it's volatility. Over time, in a normalized market, we believe we'll be able to deliver low single-digit or better same-venue sales growth. To give you a little color on that, you know, just looking at the consumer side of it, the one-to-two bay.

Chip Brewer: Over time, in a normalized market, we believe we'll be able to deliver low single-digit or better same-venue sales growth. They give you a little color on that, you know, just looking at the consumer side of it, the 1-2 Bay.

Chip Brewer: Same venue sales over the last few years in 2022 are up 7%. In 23, it was up 4%, in 24 through the first half, it's down 7%, but it's up on a two-year stack in 2019 and versus a 2019 basis even this year. We're strengthening our team and our ability to drive same venue sales through this period of volatility, and we'll exit it in a stronger position. And in case we're wrong, we ran downside sensitivities, and the returns are still good and still far exceed our cost of capital.

Brian Lynch: We also expect the same venue sales to be approximately the same in Q3 and Q4. Gophe equipment sales are expected to be down slightly in Q3, primarily due to unfraverable changes in foreign currency. Q4 revenues expected to grow due to launch timing and year over year growth in Gophe. Operating income is expected to be down in Q3 due to the revenue decrease and increased marketing spend related to the new product launches.

Chip Brewer: Same venue sales over the last few years in 2022 was up 7%, in 2023 it was up 4%.

Speaker Change: in twenty-four through the first half it's down seven percent but it's up on a two -year stack in a two thousand and nineteen and versus of two thousand and nineteen basis even this year

Chip Brewer: We're strengthening our team and our ability to drive same venue sales through this period of volatility and we'll exit it in a stronger position.

Chip Brewer: And in case we're wrong, we ran downside sensitivities and the returns are still good and still far exceed our cost of capital.

Brian Lynch: Operating income is expected to be up in Q4 due to the expected revenue growth. Moving to active lifestyle, we expect Q3 revenue to decline compared to last year due to lower sales estimates for Jack Wolfskin and the Euro poll sale channel. We expect growth in Q4 at both Travis Matthew and Jack Wolfskin. Operating income is expected to be down in Q3 due to the revenue decrease and is expected to be up in Q4 due to the revenue leverage.

Chip Brewer: We're going to continue to assess this and respond to new information and circumstances. We've proven that we can and will slow down venue growth if needed to protect the company's cash flow goals or if we question the wisdom of the investment. Neither of those apply at present, and we remain confident. On the traffic versus spend per visit and ticket, you know, it really is mostly a traffic issue right now. So our business, like much of the other outside data we've seen, is experiencing slowness in traffic. And, you know, there's a little bit of a difference there between the event business and the consumer business as well, with the consumer business being stronger when you look at it in detail.

Chip Brewer: neither of those apply at present and we remain confident

Brian Lynch: As we conclude, I want to emphasize that the fundamentals of our business remain strong. Participation in interest in Gophe remains very strong. The Travis Matthew and Jack Wolfskin brands are leaders in their core markets and the fun scores are high in improving. However, outside of our Gophe equipment business, we are clearly seeing some consumer softness in the current macroeconomic conditions. This is the less fun part of the economic cycle we all expected at some point.

Chip Brewer: on the traffic versus spend per visit and ticket.

Chip Brewer: it really is mostly a traffic issue right now so our business like much of the other outside data we've seen

Brian Lynch: While it is having some impact on revenue, we have been able to offset much of the bottom line impact through operational efficiencies and cost management. We are free cash flow positive and have strong liquidity. We are in a great position to be able to maximize opportunities during the cycle and to take advantage of better conditions as the consumer strengthens again.

Speaker Change: is experiencing slowness in traffic and you know there's a little bit of difference there between the event business and the consumer as well with the consumer business being stronger when you look at it in detail.

Unknown Speaker: Gotcha, that's really helpful. And then I just wanted to ask about the 3Q golf equipment guide.

Speaker Change: Gotcha, that's really helpful. And then I just wanted to ask about the 3Q golf equipment guide.

Unknown Speaker: What's the sort of expected 3Q benefit from the launch timing with Apex versus Bertha that occurred in the quarter? I guess it sort of implies with the golf equipment guide down that the core is maybe down more, given that last quarter you sort of talked about a 3Q benefit. So are you seeing, you know, lower wholesale orders from your partners or what sort of the impact that takes there? Thank you.

Speaker Change: What's the sort of expected 3Q benefit from the launch timing with Apex versus Bertha that occurred in the quarter? I guess it sort of implies with the golf equip guide down that the core is maybe down more, given that last quarter you sort of talked about a 3Q benefit. So are you seeing, you know, lower wholesale orders from your partners or what's sort of the puts and takes there? Thank you.

Operator: With that said, I would now like to open the call for questions.

Chip Brewer: Before actually opening the call for questions, I want to comment on the trading hall in our stock shortly before market closed. Our long-term provider we use to manage our investor relations website prematurely posted our investor presentation to our website prior to market closed. Although it was quickly taken down, it had already been picked up in the media. We immediately notified the MISE and they halted trading pending publication of our earnings announcements today. We will be discussing this matter further with our provider and apologize for this disruption.

Chip Brewer: Yeah, I'll take it. And Brian, you jump in.

Speaker Change: Yeah, I'll take it and Brian you jump in. But basically, you know, we have Apex launch now. We have other launches coming in Q4. We're slightly more favorable from a launch timing perspective in Q4 versus Q3 for the second half of the year.

Chip Brewer: But basically, you know, we have the Apex launch. Now we have other launches coming in Q4. We're slightly more favorable from a launch timing perspective in Q4 versus Q3 for the second half of the year. We're anticipating golf equipment sales to be up in the second half of the year. You know, our market shares are good. The markets are good. We feel good about our category and our position.

Speaker Change: We're anticipating golf equipment to be up in the second half of the year. Our market shares are good. The markets are good. We feel good about the category and our position in it.

Operator: Operator with that said, please welcome the call for questions.

Alex Perry: We will now begin the question and answer session. If you would like to ask a question, you may press star then one on your touch show and send. If you are using a speaker to answer the question, you may press star then two, and at this time, we'll pause momentarily for the first question.

Brian Lynch: No, that's it. It's really just some timing noise between Q3 and Q4. As Chip mentioned, we expect to be up for the second half and even on currency neutral for the full year.

Brian: Yeah. No, that's it. It's really just some timing noise between Q3 and Q4. As Chip mentioned, we expect to be up for the second half, and even on currency neutral for the full year.

Speaker Change: Perfect. Very helpful. Best of luck going forward.

Unknown Speaker: And our next question will come from Matthew Boss with J.P. Morgan. Please go ahead. Great, thanks. So, Chip, you cited pricing as one of the largest concerns.

Unknown Speaker: Perfect. Very helpful. Best of luck going forward. And our next question will come from Matthew Boss with J.P. Morgan. Please go ahead. Great, thanks. So, Chip.

Chip Brewer: And our first question today will come from Alex Perry with Bank of America. Please go ahead. Hi, thanks for taking my question here. First, I wanted to ask about Topgolf a little bit. I guess this occurrence, same in your sales trajectories, sort of make you think about pausing future unit growth beyond this year. And then maybe a little color on sort of traffic versus ticket for Topgolf in the quarter and how you're thinking about it. Thanks.

Speaker Change: And our next question will come from Matthew Boss with J.P. Morgan. Please go ahead.

Matthew Boss: Great, thanks.

Matthew Boss: So Chip, you cited pricing as one of the largest concerns for consumers today.

Matthew Boss: Well, I guess what's your comfort with the current pricing architecture or value proposition at Topgolf venues today?

Speaker Change: and just further initiatives that you're considering to drive improvement in traffic over time.

Chip Brewer: You know, pricing is absolutely a topic of conversation for all consumers right now. You can't open the media without hearing about it.

Chip Brewer: Sure, Alex, this is Chip with regard to the venue expansion. So that's obviously something we've given a fair amount of thought to. And the short answer is that we believe the correct answer for creating shareholder value is to continue to build the venues. We expect to add an average of 10 per year. Some years a little more. Some years a little less. Again, and starting in 2025. Add a little color on that, though.

Speaker Change: you know pricing is absolutely a topic of

Speaker Change: conversation for all consumers right now. You can't open up the media without hearing about it and you know we know that there are portions of the consumer segment that are definitely feeling inflationary pressures and some some level of stress.

Chip Brewer: And, you know, we know that there are portions of the consumer segment that are definitely feeling inflationary pressures and some level of stress. And that varies across businesses, but you can clearly see it in the Topgolf business and some of the data there. We have been fairly selective and targeted in our promotional efforts at Topgolf, and I think that is wise and the right answer for the long term. If you look at the promotion that we are running, the free 30, it's both selective in timing and relatively modest in the offering that it gives.

Speaker Change: And that varies across businesses, but you can clearly see it in the Topgolf business and some of the data there.

Speaker Change: We have been fairly selective and targeted in our promotional efforts at Topgolf and I think that is wise and the right answer for the long term.

Chip Brewer: You know, as previously communicated, we have very attractive returns for these venues, 18 to 22% return on gross investment, 50 to 60% cash on cash. And less than three year cash payback, we've confirmed and looked at the new venue performance recently. And they are delivering in the financial max metrics consistent with our performers even in the recent period of volatility. We believe the recent same venue sales volatility is just that it's volatility.

Speaker Change: If you look at the promotion that we are running, the free 30.

Speaker Change: You know, it's both select in timing and it's relatively modest in the offering that it gives.

Chip Brewer: It's proven to be effective in driving increased demand in the time period of smoothing demand and driving incremental profitability. We also think we can kind of continue to refine this and do this in an intelligent way that builds and protects brand value for the long run. And we've talked about, you know, on this call, how we're expanding that offering to make it more interesting and available to new visitors that don't use the reservation model and allow us to satiate different consumers in the manner that is most satisfying for them. So, you know, we're going to continue to drive that. And we've got a lot of exciting initiatives that we're working on on the same venue sales front. The promotional side is great.

Speaker Change: It's proven to be effective in driving increased demand in the time period of smoothing demand.

Speaker Change: and driving incremental profitability. We also think we can kind of continue to refine this and do this in an intelligent way that builds and protects brand value for the long run. And we've talked about, you know, on this call, how we're expanding that offering for.

Chip Brewer: Over time in a normalized market, we believe we'll be able to deliver low single digit or better same venue sales growth. And give you a little color on that, you know, just looking at the consumer side of it, the one to bay. Same venue sales over the last few years in 2022 is up 7%. In 23, it was up 4% in 24 through the first half. It's down 7%. But it's up on a two year stack in a 2019 and versus a 2019 basis even this year.

Speaker Change: to make it more interesting and available to new visitors.

Speaker Change: that don't use the reservation model.

Chip Brewer: and allows us to satiate different consumers in the manner that is most satisfying for them. So, you know, we're going to continue to drive that.

Speaker Change: And we've got a lot of exciting initiatives that we're working on in the same venue sales front. The promotional side is just one of them.

Chip Brewer: We're strengthening our team and our ability to drive same venue sales through this period of volatility and we'll exit it in a stronger position. And in case we're wrong, we ran downside sensitivities and the returns are still good and still far exceed our cost of capital. We're going to continue to assess this and respond to new information and circumstances. We've proven that we can and will slow down venue growth if needed to protect the company's cash low goals or if we question the wisdom of the investments.

Chip Brewer: Great. And then maybe, as a follow-up, could you just elaborate on the Topgolf review that you've initiated and just what strategic alternatives there are? Sure.

Speaker Change: Great and then maybe as a follow-up could you just elaborate on the Topgolf review that you've initiated and and just what strategic alternatives could be considered or possibly on the table?

Chip Brewer: You know, there's not much I can say on that right now because it's a process that we're right in the middle of. We're considering all alternatives, but they mentioned specifically a potential spin. We're looking at how we best maximize long-term shareholder value, and we'll report back on that when that work is done. We're in the middle of that work at present.

Speaker Change: Sure, you know, there's not much I can say on that right now because it's, you know, a process that we're right in the middle of it. We're considering all alternatives.

Speaker Change: But we're mentioned specifically a potential spin You know, we're looking at you know, how do we best maximize long-term shareholder value? And we'll report back on that When that work is done, we're in the middle of that work at present

Chip Brewer: Neither of those apply a present and we remain confident on the traffic versus spend per visit and ticket. It really is mostly a traffic issue right now. So our business like much of the other outside data we've seen is experiencing a slowness in traffic. And there's a little bit of difference there between the event business and the consumer as well with the consumer business being stronger when you look at it in detail.

Alex Perry: Gotcha, that really helpful.

Unknown Speaker: And our next question will come from Eric Wold with B Riley Securities. Please go ahead.

Speaker Change: Great. Best of luck.

Speaker Change: And our next question will come from Eric Wold with B-Riley Securities. Please go ahead.

Unknown Speaker: Thank you, Jeff. A couple of questions on the non-Topgolf business. I guess, as you think about pricing being a headwind to Topgolf, and you're making a difference there, what are your thoughts on pricing within the golf equipment or lifestyle segment, either short term or long term? And how do you think about the golf equipment consumer versus the Topgolf consumer right now and their ability to spend?

Eric Wold: Thank you, Jeff. A couple questions on the non-topgolf businesses. I guess, as you think about pricing being a headwind to topgolf, and you're making adjustments there, what are your thoughts on pricing within the golf equipment or lifestyle segment, either short-term and long-term, and how do you think about

Brian Lynch: And then I just wanted to ask about the 3Q golf equipment guide. What's the sort of expected 3Q benefit from the launch timing with Apex versus Bertha that occurred in the quarter? I guess it sort of implies with the golf equipped guide down that the core is maybe down more given that last quarter you sort of talked about a 3Q benefit. So are you seeing, you know, lower wholesale orders from your partner? Or what sort of the puts it takes there? Thank you.

Speaker Change: the golf equipment consumer versus the top golf consumer right now and their ability to extend.

Chip Brewer: Sure, they're very different, Eric, and, you know, the golf equipment consumer is wealthier, more passionate, and has proven to be not especially sensitive to modest economic downturns or changes in economic conditions. And we continue to see that. The markets are remaining, you know, solid, robust across the globe with the exception of Korea, and our business is, you know, at or better than most markets out there right now, so I feel very good about that. The Topgolf consumer has an average demographic household income of about $100,000, which means that there are parts of them that, you know, might feel more pressure than the average golf equipment consumer.

Speaker Change: Sure, they're very different, Eric, and, you know, the golf equipment consumer is...

Speaker Change: wealthier more passionate and is proven to be not especially sensitive to modest economic downturns or changes in economic condition and we continue to see that

Brian Lynch: Yeah, I'll take it and Brian, you jump in. But basically, you know, we have Apex launch now, we have other launches coming in Q4. We're slightly more favorable from a launch timing perspective in Q4 versus Q3 for the second half of the year. We're anticipating golf equipment to be up in the second half of the year. You know, our market shares are good. The markets are good. We feel good about our category in our position in it. Yeah, no, it's really just some timing noise between Q3 and Q4s. Chip mentioned, we expect to be up for the second half and even on currency neutral for the full year.

Alex Perry: Perfect. Very helpful. Best of what going forward.

Eric Wold: The markets are remaining, you know, solid, robust across the globe with the exception of Korea.

Eric Wold: And our business is, you know, at or better than most markets out there right now. So, feel very good about that.

Speaker Change: The Topgolf consumer is an average demographic household income of about $100,000, which means that there are portions of them that might feel more pressure than the average golf equipment consumer.

Unknown Speaker: Got it. And so the comment before about Topgolf being more of a traffic issue than a ticket issue, safe to say that those that are visiting Topgolf, you're not seeing any degradation in their ticket or spend per person. It's more just getting that lower income demographic or maybe the more pressured consumer in the door for the first place. It's primarily a traffic issue.

Matthew Boss: And our next question will come from Matthew boss with JP Morgan. Please go ahead. Thanks. So Chip, you cited pricing as one of the largest concerns for consumers today. Well, I guess what's your comfort with the current pricing architecture or value proposition at top golf venues today? And just further initiative that you're considering to drive improvement and traffic over time. You know, pricing is absolutely a topic of conversation for all consumers right now.

Speaker Change: Got it. And so, the comment before about...

Speaker Change: Topgolf being more of a traffic issue than a ticket issue. Safe to say that those that are visiting Topgolf, you're not seeing any degradation in their ticket or spend kind of per person. It's more just getting that lower income demographic or maybe the more pressure consumer in the door for the first place.

Unknown Speaker: It's primarily a traffic issue, Alex, so there's a little bit of noise between all segments of it, but traffic is the primary issue, and you know we've got a lot of initiatives underway on that. I also shared data that shows that the consumer side of this business is actually performing significantly better and in line with what you're seeing in other similar concepts in restaurants. The event business has had some more volatility in it. There's a little bit of a post-COVID reversion going on in addition to, you know, the economic slowness that we see in the general economy right now.

Alex Perry: It's primarily a traffic issue, Alex, so you know there's a little bit of noise between in all segments of it but traffic is the primary issue and you know we've got a lot of initiatives underway on that and

Matthew Boss: You can't open up the media without hearing about it. And you know, we know that there are portions of the consumer segment that are definitely feeling inflationary pressures and some some level of stress. And that varies across businesses, but you can clearly see it in the top golf business and some of the data there. We have been fairly selective and targeted in our promotional efforts at top golf. And I think that is wise and the right answer for the long term.

Speaker Change: You know, we also share data that shows that the consumer side of this, of the business is actually performing.

Speaker Change: Significantly better and directional with what you're seeing in other similar concepts in restaurants.

Speaker Change: The event business has had some more volatility in it. There's a little bit of a post-COVID reversion going on in addition to the economic slowness that we see in the general economy right now.

Matthew Boss: If you look at the promotion that we are running the free 30, you know, it's both select in timing and it's relatively modest in the offering that it gives. It's proven to be effective in driving increased demand in the time period of smoothing the man and driving incremental profitability. We also think we can kind of continue to refine this and do this in an intelligent way that builds and protects brand value for the long run.

Corbett: Corbett. Thanks Jeff.

Unknown Speaker: And our next question will come from Megan Alexander with Mortgage Stanley. Please go ahead.

Corbett: Thank you.

Speaker Change: And our next question will come from Megan Alexander with Mortgage Stanley. Please go ahead.

Unknown Speaker: Hi, thanks very much for taking our question. I wanted to take another shot at the Topgolf strategic review question, maybe just ask it a little bit differently. So, in the release, you talked about assessing organic strategies to get Topgolf back to profitable same-venue sales growth. I understand you don't want to talk about inorganic alternatives today, but as far as that, you know, organic strategy part of the review goes, I guess I'm just trying to understand a little bit more about what exactly the mandate for the external advisors that you've hired.

Megan Alexander: Hi, thanks very much for taking our question. I wanted to take another shot at the Topgolf Strategic Review question, maybe just ask it a little bit differently. So in the release you talked about

Unknown Speaker: You did just say that it's, you know, mostly macro, mostly just volatility, and that you can get back to low single digits. So, is it just that, you know, you want them to confirm that's the case? Or, you know, are they looking at something else, as far as that organic strategy goes? And, you know, is there a timeline in terms of, or is it more so that there's kind of a timeline to get back to positive same-venue sales growth? Just trying to understand, I guess, a little bit more about, you know, the decision tree, as far as the strategic alternative goes. Yeah, sure.

Speaker Change: Assessing Organic Strategies to Get Topgolf Back to Profitable Same-Venue Sales Growth. Understand you don't want to talk about the inorganic alternatives today, but as far as that, you know, organic strategy part of the review goes, I guess I'm just trying to understand a little bit more about...

Matthew Boss: And we've talked about, you know, on this call how we're expanding that offering for to make it more interesting and available to new visitors that don't use the reservation model. And allows us to satiate different consumers in the manner that most satisfying for them. So, you know, we're going to continue to drive that. And we've got a lot of exciting initiatives that we're working on in the same venue sales front. The promotional side is just, and one of them.

Speaker Change: What exactly is the mandate for the external advisors that you've hired? You did just say you think it's

Speaker Change: You know, mostly macro, mostly just volatility and that you can get back to low single digits. So is it just that?

Speaker Change: You know, you want them to confirm that's the case, or, you know, are they looking at something else as far as that?

Speaker Change: Organic strategy goes and you know is there a is there a timeline in terms of or is it more so that there's kind of a Timeline to get back to same-venue sales positive growth

Chip Brewer: Great. And then maybe as a follow-up, could you just elaborate on the Topgolf review that you've initiated and just what strategic alternatives could be considered or possibly on the table? Sure. You know, there's not much I can say on that right now because it's, you know, a process that we're right in the middle of. We're considering all alternatives, but we're mentioned specifically a potential spin. You know, we're looking at, you know, how do we best maximize long-term shareholder value? And we'll report back on that. When that work is done, we're in the middle of that work at present.

Speaker Change: Just trying to understand, I guess, a little bit more about, you know, the decision tree as far as the strategic alternative goes.

Matthew Boss: Great. Best of luck.

Chip Brewer: Yeah, sure. So on the organic side, we do have outside advisors working with us to, you know, look at our business and how we're approaching, you know, continually improving our ability to drive same venue sales. There is, you know, and although I do believe that a lot of what we're seeing is macroeconomic volatility, I also want to be clear that we can and are going to do better. We recognize that we have to operate in the environment as it exists.

Speaker Change: Yeah, sure. So on the organic side, you know, we do have outside advisors working with us to, you know, look at our business and how we're approaching, you know, continually improving our ability to drive same venue sales.

Speaker Change: There's, you know, and although I do believe that there's a lot of what we're seeing.

Speaker Change: is macroeconomic volatility. You know, I also want to be clear that we can and are going to do better. We recognize that we have to operate in the environment as exists.

Eric Wold: And our next question will come from Eric Wold with the Riley Securities. Please go ahead. Thank you.

Chip Brewer: We are making significant efforts to continue to strengthen the team, its organization, and our capabilities to drive better and better performance on the same venue sales side. We talked about that in the script. The more newness and energy at venues, the more fun, the reasons to visit. We talked about the Sure Thing Golf Club, which just launched new games, concerts, etc. That will continue to give both new visitors and returning visitors a reason to come back.

Speaker Change: We are making significant efforts to continue to strengthen the team, its organization, our capabilities to drive better and better performance on the same venue sales side. We talked about that in the script.

Speaker Change: The more newness and energy at venues, the fun, the reasons to visit, we talked about the Sure Thing Golf Club which just launched, new games.

Speaker Change: concerts, etc. that will continue to give both new visitors and returning visitors a reason to come back.

Chip Brewer: We're upping our game on the digital and performance marketing side. We're working through our promotional efforts, as I articulated already. We're investing further in the digital and commercial teams and adding significant resources to that. We hired a new chief operating officer who came from the casino business, and she will undoubtedly be an asset to our efforts here.

Speaker Change: We're upping our game on the digital and performance marketing side.

Speaker Change: We're working through our promotional efforts as I articulated already. We're investing further in the digital and commercial teams and adding significant resources to that. We hired a new chief operating officer who came from the casino business.

Chip Brewer: I'm excited about our direction and I believe we're going to come out of this period of volatility significantly stronger, and our efforts will pay dividends in the long run. So it's not, Megan, and I'm sure you realize that, it's not that we're sitting here and just taking a macro cycle and waiting it out. Far from it.

Speaker Change: and she will undoubtedly be additive to our efforts here.

Speaker Change: And I'm excited about our direction, and I believe we're going to come out of this period of volatility significantly stronger.

Eric Wold: Eric Wold, thank you very much. Thank you.

Speaker Change: and our efforts will pay dividends in the long run.

Megan Alexander: So it's not, Megan, and I'm sure you realize that, it's not that we're sitting here and just taking a macro cycle and waiting it out. Far from it. We're using this as an opportunity to strengthen this organization.

Unknown Speaker: We're using this as an opportunity to strengthen this organization, build the resources to drive that same menu sales even better when the conditions actually do normalize. Does that answer your question? Yeah, yeah, that's helpful. Thank you.

Speaker Change: Build the resources to drive that same menu sales even better when the conditions actually do normalize.

Unknown Speaker: And maybe sticking with Topgolf, could you maybe tell us how much better the second two weeks of July look relative to the first two weeks? And, you know, maybe just in the context of that, you said, "The second half implies the trends you're seeing continue for the balance of the year." You did say comparisons get easier, but I'm assuming that's on a one-year basis. Would there be any way to kind of talk about what verse 19 looks like, given they did see a pretty big step down in 2Q?

Megan: Did that answer your question? Yeah, yeah, that's helpful. Thank you. And maybe sticking with Topgolf, could you maybe tell us how how much better the second two weeks of July look relative to the first two weeks? And, you know, maybe just in the context of that, you know, you said,

Speaker Change: The second half implies the trends you're seeing continue for the balance of the year. You did say compares get easier. I'm assuming that's on a one-year basis.

Speaker Change: Would there be any way to kind of talk about what compares verse 19 look like, given they did see a pretty big step down in 2Q? I'm just trying to understand whether, you know, you think the second half guide is kind of sufficiently de-risked at this point.

Unknown Speaker: I'm just trying to understand whether, you know, you think the second half guide is kind of sufficiently de-risked at this point. Well, what we saw is mentioned in June and July. So US business in June was down 8%, 11% in July. And, you know, our guide assumes that those trends continue. And so if you just do the math, you know, we would have to be down by a double digit number for the second half.

Speaker Change: Well, what we saw is mentioned in June and July , so the U.S. business in June down 8%, 11% in July .

Speaker Change: And, you know, our guide assumes that those trends continue.

Speaker Change: And so if you just do the math...

Speaker Change: You know, we would have to be down in a double digit number for the second half. So it's not only that the guide would say you're going to be at where the point you were, but there would continue to be weakness and the comps versus last year are easier.

Megan Alexander: And our next question, we'll come from Megan Alexander with Morgan Stanley. Please go ahead. Hi, thanks very much for taking our question.

Unknown Speaker: So it's not only that the guide would say you're gonna be at the point you were, but there would continue to be weakness, and the comps versus last year are easy. In other words, on at least a one-year basis, we are copying small negative numbers, but small negative numbers last year. Does that answer the question?

Chip Brewer: I wanted to take another shot at the Topgolf strategic review question, maybe just ask it a little bit differently. So, you know, in the release, you talked about assessing organic strategies to get Topgolf back to profitable same venue sales growth, understanding and you don't want to talk about the inorganic alternatives today. But as far as that, you know, organic strategy part of the review goes, I guess I'm just trying to understand a little bit more about what exactly is the mandate for the external advisors that you've hired.

Chip Brewer: You did just say you think it's, you know, mostly macro, mostly just volatility and that you can get back to low single digit. So is it just that, you know, you want them to confirm that's the case or, you know, are they looking at something else as far as that organic strategy goes? And, you know, is there a, is there a timeline in terms of, or is it more so that there's kind of a timeline to get back to same venue sales positive growth? Just just trying to understand, I guess, a little bit more about the decision tree as far as the strategic alternative goes.

Speaker Change: In other words, on at least a one-year basis, we are copying negative, small negative numbers, but small negative numbers last year.

Unknown Speaker: Yeah, any any, I guess, can you contextualize at all? How much better were the second two weeks of July than the first two weeks?

Megan: Does that answer the question on that one?

Speaker Change: Yeah, any, I guess, can you contextualize at all how much better the second two weeks of July were to the first two weeks? I guess just asking because...

Unknown Speaker: I guess I'm just asking because, you know, wondering. Yeah, I understand. I understand the question and the reason to ask Megan, and we're not going to get to that level of specificity. Okay, you know, there's enough noise within week to week that I think you could read too much into that one way or the other. And I think it'd be a bad practice to start getting into that level of granular detail. understood. Thought I'd try. Thank you.

Speaker Change: Yeah, I understand the question and the reason to ask, and Megan, we're not going to get to that level of specificity. There's enough noise within week-to-week that I think you could read too much into that one way or the other, and I think it would be a bad practice to...

Megan Alexander: start getting into that level of granular detail. Understood, that I'd try. Thank you. No problem.

Unknown Speaker: And once again, if you would like to ask a question, please press star, then one. Our next question will come from Gerald Altobello with Raymond James. Please go ahead.

Speaker Change: And once again, if you would like to ask a question, please press star then one. Our next question will come from Joe Altobello with Raymond James. Please go ahead.

Unknown Speaker: Not surprisingly, I wanted to go back to Topgolf here for a second. So, Chip, you've mentioned throughout the call today that your view of the business and the long-term opportunity really hasn't changed. So if you believe that the issues at Topgolf are cyclical or temporary, you know, post-COVID normalization, then what's the point of the review?

Joe Altobello: Thanks. Hey, guys. Good afternoon. So not surprisingly, I want to go back to Topgolf here for a second. So, Chip, you've mentioned throughout the call today that your view on the business

Chip Brewer: Yeah, sure. So on the organic side, you know, we do have outside advisors working with us. So, you know, look at our business and how we're approaching, you know, continually improving our ability to drive same venue sales. There's, you know, and although I do believe that there's a lot of what we're seeing is macro economic volatility, you know, I also want to be clear that we can and are going to do better.

Speaker Change: You know, and the long-term opportunity really hasn't changed. So if you believe that the issues at Topgolf are cyclical, or temporary, you know, post-COVID normalization, then what's the point of the review?

Chip Brewer: Well, I think that it's good practice to evaluate if there's an inorganic option that would be in the better interest of long-term security.

Speaker Change: Well, I think that it's good practice to evaluate if there's an inorganic option that would be in the better interest of long-term shareholder value.

Chip Brewer: We recognize that we have to operate in the environment as exists. We are making significant efforts to continue to strengthen the team, its organization, our capabilities to drive better and better performance on the same venue sales side. We talked about that in the script. The more newness and energy at venues, the fun, the reasons to visit. We talked about the sure thing golf club, which just launched new games, concerts, et cetera, that will continue to give both new visitors and returning visitors a reason to come back.

Chip Brewer: So it's really frustration with the stock. Oh, absolutely. Yeah, so right.

Chip Brewer: There are two aspects of our strategic review, Joe. There's one that's inorganic or structural, and that's alternatives to maximize long-term shareholder value, and that is strictly due to our point of view that the shares have underperformed, and they've underperformed for a period of time now. The organic side of it is, you know, relative to same venue sales, and that's recent same venue sales that were committed to obviously being best in class and driving those low single digit or better same venue sales growth over time. But don't follow up on that. Quantified, for Topgolf in the world. You know, that's something we'll be looking at.

Speaker Change: Okay, so it's really a frustration.

Speaker Change: with with the stock, not that anything

Joe Altobello: Oh, absolutely. Yeah, so right. There are two factors of our strategic review, Joe.

Speaker Change: There's one that's our inorganic or structural and that's alternatives to maximize long-term shareholder value and that is strictly due to our point of view that the shares have underperformed and they've underperformed for you know a period of time now.

Joe Altobello: The organic side of it is, you know, relative to same venue sales, and that's recent same venue sales that were committed to obviously be best in class and drive those low single digit or better same venue sales growth over time.

Chip Brewer: We're upping our game on the digital performance marketing side. We're working through our promotional efforts as I articulated already. We're investing further in the digital and commercial teams and adding significant resources to that. We hired a new chief operating officer who came from the casino business and she will undoubtedly be additive to our efforts here. I'm excited about our direction. I believe we're going to come out of this period of volatility is significantly stronger and our efforts will pay dividends in the long run.

Speaker Change: Got it. Okay. And just to follow up on that, could you quantify potentially the synergies?

Unknown Speaker: You know, that's something we'll be looking at as part of this process, but we're not going to comment on that at this time.

Joe Altobello: For Topgolf, if it were, let's say, a stand-alone business.

Speaker Change: That's something we'll be looking at as part of this process, but we're not going to comment on that at this time.

Chip Brewer: And at this time, I would like to turn the call back over to Mr. Brewer for any closing remarks.

Speaker Change: Thank you.

Speaker Change: And at this time I would like to turn the call back over to Mr. Brewer for any closing remarks.

Chip Brewer: It's not, Megan, and I'm sure you realize that. It's not that we're sitting here and just taking a macro cycle and waiting it out. All far from it, we're using this as an opportunity to strengthen this organization, build the resources to drive that same venue sales even better when the conditions that really do normal.

Chip Brewer: Well, thank you everybody for tuning in today. We appreciate your time, and we'll look forward to continuing to communicate with you in the future. The conference is now concluded. Thank you for attending today's presentation, and you may now dis-

Mr. Brewer: Well, thank you everybody for tuning in today. We appreciate your time and we'll look forward to continue to communicate with you in the future.

Operator: The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect your lines at this time. Thanks for watching! Thank you for watching!

Speaker Change: The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect your lines at this time.

Megan Alexander: I'm going to answer your question. Yeah, yeah, that's helpful. Thank you.

Megan Alexander: And maybe sticking with Topgolf, could you maybe tell us how much better the second two weeks of July look relative to the first two weeks? And maybe just in the context of that, you know, you said the second half implies the trends you're seeing continue for the balance of the year. You did say compares good easier. I'm assuming that's on a one year basis. Would there be any way to kind of talk about what compares verse 19 look like given they did see a pretty big step down in two queue. I'm just trying to understand whether, you know, you think the second half guide is kind of sufficiently dearest at this point.

Operator: [music]

Chip Brewer: Well, what we saw is mentioned in June and July. So the US business in June down 8%, 11% in July. And in our guide assumes that those trends continue. And so if you just do the math, you know, we would have to be down in a double digit number for the second. So it's not only that the guide would say you're going to be at where the point you were, but there would continue to be weakness and their comps versus last year are easier. In other words, so on at least a one year basis, we are copying negative small negative numbers, but small negative numbers last year. Does that answer the question on that one?

Megan Alexander: Yeah, any, any, I guess, can you contextualize it all how much better the second two weeks of July were the first two weeks? I guess just asking because, you know, wondering. Yeah, I understand. I understand the question and the reason to ask and Megan and we're not going to get to that level of specificity. You know, there's enough noise within week to week that I think you could read too much into that one way or the other. And I think it'd be a bad practice to start getting into that level of granular detail. Understood that I try. Thank you. No problem.

Operator: And once again, if you would like to ask a question, please press star then one.

Joseph Altobello: Our next question will come from Joe Altabella with Raymond Jane. Here you go ahead. Thanks. Hey guys, good afternoon. So not surprisingly, I want to go back to top golf here for a second. So chip, you mentioned your throughout the call today that your view on the business, you know, and the long term opportunity really hasn't changed.

Chip Brewer: So if you believe that the issues at top golf are cyclical or temporary, you know, post-COVID normalization, then what's the point of the other review? Well, I think that it's good practice to evaluate if there's an inorganic option that would be in the better interest of long term shareholder value. Okay. So it's really frustration with the stock, not that anything. Oh, absolutely. Yeah, so right. There's there are two factors of our strategic review, Joe.

Chip Brewer: There's one that's our inorganic or structural, and that's alternatives to maximize long term shareholder value. And that is strictly due to our point of view that the shares have underperformed and they've underperformed for, you know, a period of time now. The organic side of it is, you know, relative to the same venue sales, and that's recent same venue sales that were committed to obviously be best in class and drive those low single digit or better same venue sales growth over time. Got it. Okay.

Chip Brewer: And just to follow up on that, could you quantify potentially the synergies for Topgolf in the world, let's say standalone business? You know, that's something we'll be looking at as part of this process, but we're not going to comment on that at this time. Okay. Thank you.

Chip Brewer: And at this time I would like to turn the call back over to Mr. Brewer for any closing remarks. Well, thank you everybody for tuning in today. We appreciate your time and we'll look forward to continue to communicate with you in the future.

Operator: The conference is now concluded. Thank you for attending today's presentation and you may now disconnect your lines at this time. Thank you. .

Speaker Change: Randal Konik, Matthew Boss, Joseph Altobello, Michael Swartz, Brian Lynch, Katina Metzidakis, Heather McAllister, Daniel Imbro, Oliver Brewer, Eric Wold, John Kernan, Alexander Perry, Natalie McShane, Michael Swartz, Daniel Imbro, Oliver Brewer, Eric Wold, John Kernan,

Speaker Change: Thank you for watching.

Operator: Good day, and welcome to the Topgolf Callaway Brands second quarter 2024 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal the conference specialist by pressing the star key followed by zero. After today's remarks, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. And please note that this event is being recorded. I'd now like to turn the conference over to Katina Metzidakis, Vice President of Investor Relations and Corporate Communications. Please go ahead. Thank you.

Speaker Change: Good day and welcome to the Topgolf Callaway Brands second quarter 2024 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's remarks, there will be an opportunity to ask questions.

Katina Metzidakis: To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. And please note that this event is being recorded. I would now like to turn the conference over to Katina Metzidakis, Vice President of Investor Relations and Corporate Communications. Please go ahead.

Speaker Change: Joining me as speakers on today's call are Chip Brewer, our President and Chief Executive Officer, and Brian Lynch, our Chief Financial Officer and Chief Legal Officer.

Katina Metzidakis: Our earnings presentation, as well as the earnings press release, are both available on the company's investor relations website under the financial results tab. Aside from revenue, the financial numbers reported and discussed on today's call are non-GAAP measures. We identify these non-GAAP measures in the presentation and reconcile the measures to the corresponding GAAP measures in accordance with Regulation G. Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. We encourage you to review the Safe Harbor statements contained in the presentation and the press release for a more complete description. And with that, I would now like to turn the call over to Chip Brewer.

Mr. Brewer: Aside from revenue, the financial numbers reported and discussed on today's call are non-GAAP measures.

Mr. Brewer: We identify these non- GAAP measures in the presentation and reconcile the measures to the corresponding GAAP measures in accordance with Regulation G. Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations.

Mr. Brewer: We encourage you to review the Safe Harbor statements contained in the presentation and the press release for a more complete description.

Mr. Brewer: And with that, I would now like to turn the call over to Chip Brewer.

Chip Brewer: Thank you, Katina. Good afternoon, everyone, and thank you for joining our call.

Chip Brewer: I want to begin by reiterating the announcement we made in our press release about our formal strategic review of the Topgolf business.

Speaker Change: We remain convinced that Topgolf is a high-quality business with significant future opportunity.

Chip Brewer: is transforming the game of golf, and we believe it will deliver substantial growth and financial returns over time.

Mr. Brewer: At the same time, we have been disappointed in our stock performance for some time.

Chip Brewer: as well as the more recent same-venue sales performance.

Mr. Brewer: As a result, we are in the process of conducting a full strategic review of Topgolf.

Mr. Brewer: This review includes the assessment of organic strategies to return Topgolf to profitable same-venue sales growth.

Mr. Brewer: as well as inorganic alternatives including a potential spin of Topgolf.

Mr. Brewer: Our strategic review of Topgolf is being conducted with the help of outside advisors and is focused on maximizing long-term shareholder value.

Mr. Brewer: We're active in this work at present and expect to complete our strategic review of Topgolf expeditiously.

Mr. Brewer: We will report back on this when the work is complete.

Mr. Brewer: As you can imagine, I'm unable to provide further comments or details on any potential inorganic strategies at this time.

Mr. Brewer: I will try to address the organic growth initiatives during my comments and will be happy to answer questions on this portion.

Mr. Brewer: Moving on to a review of the second quarter.

Mr. Brewer: Total revenue of $1.158 billion was below our expectations, primarily due to lower-than-expected same-menu sales at Topgolf, which I'll discuss in greater detail in a few minutes.

Mr. Brewer: Both the golf equipment and the active lifestyle segments performed roughly consistent with expectations, including strong market share performance at both Travis Matthew and Callaway golf equipment.

Mr. Brewer: Total company Q2 EBITDA of $206 million was ahead of expectations, driven by continued strong operating efficiencies and cost management across the business.

Speaker Change: Given these results and current trends...

Speaker Change: As a result, we are revising our EBITDA outlook to $570 to $590 million.

Mr. Brewer: which implies an approximately flat year-over-year EBITDA margin.

Speaker Change: By segment, we're lowering our second half Topgolf revenue outlook based on our updated same venue sales estimates.

Speaker Change: This will negatively impact our EBITDA, but the flow-through will be mitigated by continued improvement in our venue operating efficiencies, as well as cost savings initiatives.

Speaker Change: In the legacy or product side of our business, we are rising our second half revenues down by approximately 2% or $55 million. This reflects the potential for further slowing of consumer activity in the second half of this year.

Speaker Change: However, we believe we can manage expenses to offset the majority of any bottom line impact of this modest revenue adjustment in our products business.

Katina Metzidakis: Thank you operator and good afternoon everyone.

Katina Metzidakis: Welcome to Topgolf Callaway Brands' second quarter earnings conference call. On Katina Metzidakis, the company's vice president of investor relations and corporate communications. Joining me as speakers on today's call are Chip Brewer, our president and chief executive officer, and Brian Lynch, our chief financial officer and chief legal officer.

Speaker Change: Finally, as Brian will discuss in a few minutes, our cash flow and financial position remains strong.

Chip Brewer: I'd like to start with what we're seeing from a macro perspective. As has been well documented, persistent inflation over the last few years has led to belt tightening across wide portions of consumer discretionary spending. We see it in internal and external survey data, where price is the biggest concern of our customers, as well as those in both the leisure and restaurant industries. We hear it from our peers, see it in credit card data, and observe it firsthand in our venue business, including feedback from our large corporate clients.

Brian: I'll now move to segment performance starting with Topgolf.

Katina Metzidakis: Earlier today, the company issued a press release announcing its second quarter financial results. We have published an updated presentation. Our earnings presentation as well as the earnings press release are both available on the company's investor relations website under the financial results tab. Aside from revenue, the financial numbers reported and discussed on today's call are non-gap measures. We identified these non-gap measures in the presentation and reconciled the measures to the corresponding gap measures in accordance with regulation G.

Brian: I'd like to start with what we're seeing from a macro perspective.

Brian: As has been well documented, persistent inflation over the last few years has led to belt tightening across wide portions of consumer discretionary spending.

Brian: We see it in internal and external survey data where price is the biggest concern of our customers as well as those in both the leisure and restaurant industries.

Mr. Brewer: We hear it from our peers, see it in credit card data, and observe it firsthand in our venue business, including feedback from our large corporate clients.

Katina Metzidakis: Please note that this call will include forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. We encourage you to review the safe harbor statements contained in the presentation and the press release for a more complete description.

Chip Brewer: In support of this, during the quarter, we saw that our top performing venues were positively correlated with overall household income data. I'll now turn to our same-venue sales results, including what we saw, what we're going to do about it, and our thoughts moving forward. What we're seeing, Topgolf's same-venue sales declined 8% in the quarter, driven by soft overall traffic trends. The year-over-year data shows both the one and two bay and the three-plus bay down similarly in the quarter.

Mr. Brewer: In support of this, during the quarter, we saw that our top-performing venues were positively correlated with overall household income data.

Speaker Change: I'll now turn to our same-venue sales results, including what we saw, what we're going to do about it, and our thoughts moving forward.

Chip Brewer: And with that, I would now like to turn the call over to Chip Brewer. Thank you Katina. Good afternoon everyone and thank you for joining our call.

Brian: What we're seeing, Topgolf's same venue sales declined 8% in the quarter, driven by soft overall traffic trends.

Chip Brewer: I want to begin by reiterating the announcement we made in our press release about our formal strategic review of the Topgolf business. We remain convinced that Topgolf is a high quality business with significant future opportunity is transforming the game of golf and we believe it will deliver substantial growth and financial returns over time. At the same time, we have been disappointed in our stock performance for some time as well as the more recent same venue sales performance.

Brian: The year-over-year data shows both the 1 and 2 bay and the 3 plus bay down similarly in the quarter. But when you look at the two-year stack in the 2019 data, it shows the consumer portion of our business remains stronger than our events business.

Brian: The 1-2 Bay trends appear to be moving directionally with that of other similar entertainment experiences in restaurants.

Brian: Turning to events in 3PLUS Bay, this is the slowest part of our business, but perhaps the easiest to understand.

Chip Brewer: As a result, we are in the process of conducting a full strategic review of Topgolf. This review includes the assessment of organic strategies to return Topgolf to profitable same venue sales growth as well as inorganic alternatives including a potential spin of Topgolf. Our strategic review of Topgolf is being conducted with the help of outside advisors and is focused on maximizing long-term shareholder value. We are active in this work at present and expect to complete our strategic review of Topgolf expeditiously.

Brian: For the quarter, 3 Plus Bay same-venue sales was down 9% year over year, 27% on a two-year stack, and 5% versus 2019.

Chip Brewer: 27% on a two-year stack and 5% versus 2019. We previously thought the events business was stabilizing, but it then deteriorated further in late May and June. We believe the events business results reflect a normalization from a post-COVID surge, as well as softness and demand typical of slowing economic conditions and corporate belt tightening. Based on sales lead data, we now expect this slowness to continue through

Brian: We previously thought the events business was stabilizing, but it then deteriorated further in late May and June .

Brian: We believe the event's business results reflect a normalization from a post-COVID surge, as well as softness in demand typical of slowing economic conditions and corporate belt tightening.

Chip Brewer: We will report back on this when the work is complete. As you can imagine, I am unable to provide further comments or details on any potential inorganic strategies at this time.

Chip Brewer: I will try to address the organic growth initiatives during my comments and be happy to answer questions on this portion.

Chip Brewer: Moving on to a review of the second quarter. Total revenue of 1.158 billion was below our expectations primarily due to lower than expected same venue sales at Topgolf, which I will discuss in greater detail in a few minutes. Both the golf equipment and the active lifestyle segments performed roughly consistent with expectations, including strong market share performance at both Travis Matthew and Calaway Golf Equipment. Total company Q2 Evita of 206 million was ahead of expectations driven by continued strong operating efficiencies and cost management across the business.

Chip Brewer: Business. Given these results and current trends, we are lowering our full-year revenue expectations by approximately 225 million to a range of 4.2 to 4.26 billion dollars, and our full-year same-venue sales estimates to be down very high single to low double digits. As a result, we are revising our IBITDA outlook to 570 to 590 million dollars, which implies an approximately flat year-over-year IBITDA margin. By segment, we're lowering our second-half Topgolf revenue outlook based on our updated same-venue sales estimates.

Chip Brewer: This will negatively impact our IBITDA, but the flow-through will be mitigated by continued improvement in our venue operating efficiencies, as well as cost savings initiatives. In the legacy or product side of our business, we are rising our second half revenues down by approximately 2% or 55 million. This reflects the potential for further slowing of consumer activity in the second half of this year. However, we believe we can manage expenses to offset the majority of any bottom-line impact of this modest revenue adjustment in our products business.

Chip Brewer: Finally, as Brian will discuss in a few minutes, our cash flow and financial position remain strong.

Chip Brewer: I'll now move to segment performance starting with Topgolf. I'd like to start with what we're seeing from a macro perspective. As has been well documented, persistent inflation over the last few years has led to belt tightening across wide portions of consumer discretionary spending. We see it in an internal and external survey data where price is the biggest concern of our customers, as well as those in both the leisure and restaurant industries.

Chip Brewer: We hear it from our peers, see it in credit card data, and observe it firsthand in our venue business, including feedback from our large corporate clients. In support of this, during the quarter, we saw that our top performing venues were positively correlated with the overall household income data.

Chip Brewer: I'll now turn to our same venue sales results, including what we saw, what we're going to do about it, and our thoughts moving forward. What we're seeing, Topgolf's same venue sales declined 8% in the quarter, driven by soft overall traffic trends. The year over year data shows both the one and two bay and the three plus bay down similarly in the quarter. But when you look at the two-year stack and the 2019 data, it shows the consumer portion of our business remains stronger than our events business.

Chip Brewer: The one to two bay trends appear to be moving directionally with that of other similar entertainment experiences and restaurants. Turning to events in three plus bay, this is the slowest part of our business, but perhaps the easiest to understand. For the quarter, three plus bay same venue sales was down 9% year over year, 27% on a two-year stack, and 5% versus 2019.

Chip Brewer: Dean. We previously thought the event's business was stabilizing, but it then deteriorated further in late May and June. We believe the event's business results reflect a normalization from a post-COVID surge, as well as softness and demand typical of slowing economic conditions and corporate belt tightening. Based on sales lead data, we now expect this slowness to continue through Q3 with the potential level off by the end of the year. Looking at the most recent data, we saw our combined U.S, same-venue sales deteriorate in June as there was a step change in macro-demand starting in late May.

Chip Brewer: This was despite the rollout, or more likely partially mitigated by the rollout, of our free 30 promotion and advertising campaign, both of which had tested quite well in May. June's U.S, same-venue sales was down 8% when we expected it to be slightly positive. July was down approximately 11% on a retail calendar basis, with the last two weeks of the month trending better than the first few weeks. With this as the backdrop, we're now forecasting our full year same-venue sales to decline very high single digits to low double digits.

Chip Brewer: This implies the trends we've been seeing in June and July continue for the balance of the year. Given the fact that August through mid-December should be a period of relatively easier comps, this forecast also allows for some additional slowing of overall demand.

Chip Brewer: This is why a significant portion of our investments are focused on strengthening our digital capabilities, both from a technology perspective, such as implementing PI, our reservation system, and our consumer data platform, as well as from a talent and organizational perspective. To this end, the digital team is going to be investing further in additional performance marketing, loyalty program, and consumer insight expertise. Turning to promotions to protect long-term profitability and brand value, any promotions that we offer need to be selective and targeted.

Chip Brewer: With this in mind, we have analyzed our free 30 promotion and found it to be effective in driving traffic and interest from existing customers, smoothing out the man, and driving it improved overall results. But it has been less effective in attracting new customers. Many new customers generally visit for the first time by walking in, and we believe they may be reluctant to book a two-hour reservation.

Chip Brewer: Foundation. Given these insights, we will be utilizing our consumer data platform and targeting new customers with a walk-in version of our free 30 promotion that is redeemable any time, not only nine to five week days and not requiring a two-hour reservation, while continuing to drive our existing efforts via reservations for customers who value the reservations model we have built. We are traveling this now and look forward to seeing the results.

Chip Brewer: Partnerships are another way to increase awareness in driving or mental traffic. As we have gained scale, we've been able to find bigger, more national partners. Our recently announced partnership with Visa is a good example of this. With this partnership, Topgolf is being promoted to cash at Visa card holders via special offers intended to drive both new and repeat visits.

Chip Brewer: Lastly, but importantly, we're going to be stepping up our game on delivering newness, continually improving the quality of our experience and reasons to visit. We are a premium experience and thus by design, we are not made to be cheap, but we are unique and we can provide more fun in this value than other offerings. By refocusing on newness, we believe we can give customers more reasons to give Topgolf a try or come back and visit us again.

Chip Brewer: From this point forward, on a national basis, we will be delivering exciting and fun new reasons to visit at least three to four times per year. For Q3, this includes the recently launched Sure Thing Golf Club, which was designed by the Calaway engineers in consultation with the Topgolf team and is geared towards new golfers. It features a unique and innovative design that makes it easier to get the ball airborne and forward.

Chip Brewer: Then, in Q4, we'll be launching our next new Invenue game. If you're a fan of video games, we think you'll love it. In addition to these big national programs, there will also be more local initiatives to drive incremental business and excitement, such as concerts and live DJ nights.

Chip Brewer: Turning to my thoughts moving forward. Overall, I firmly believe we are already doing a lot of the right things to drive growth in same menu sales over time, including constantly improving our teams and initiatives. As evidence of this, I point to the fact that since launching our spring and summer initiatives, we have seen purchase intent, brand recommendation, and price perception scores improve. And perhaps most importantly, our fun scores are up, which we believe is a leading indicator for future growth and has historically been highly correlated to our consumers' likelihood to both return and recommend top golf.

Chip Brewer: At the same time, we've also identified a few areas where we can do better, and we're putting in the plans and resources to quickly address these going forward. Although it is clear that some of these initiatives will take some time to implement, and the macro environment remains choppy, I continue to believe in top golf's ability to drive same menu sales growth over time.

Chip Brewer: Shifting Gears to our second key performance driver, Margin Expansion, our team has consistently shown its ability to drive venue operating margins, both in positive and difficult market conditions. For the quarter, despite soft top line trends, we were able to expand total segment, adjusted Ibitam margin, by 260 basis points year over year. That said, given our lowered revenue outlook for the back half of the year, we now expect full-year venue Ibitam margins to be roughly flat versus last year at approximately 34%, which is still quite healthy considering our lower revenue expectations and is a full 100 basis points ahead of our 2022 margin, with plenty of room to grow as top line improves.

Chip Brewer: Moving to new venue openings, we remain on track to add seven venues this year. We added Brian, Texas and Q1, Successful Open, Durham, and Montabello and Q2, and the four remaining 2024 venues are under construction and on schedule. Venues continue to open well and are achieving our high financial targets.

Chip Brewer: In conclusion, on a Topgolf segment report out, Topgolf is performing well in two of its three key performance drivers, including venue margins and new venue development. On the same venue sales front, results have been below our expectations and we are committed to improving here. However, I believe that the vast majority of what we are seeing is an economic cycle and or a post-COVID normalization in the events portion of our business. Importantly, we are continuing to strengthen our capabilities and expertise to drive positive same venue sales in our normalized environment.

Chip Brewer: I believe the enduring strength of Topgolf remains intact. This being that consumers really enjoy the experience. In addition, the sport of golf remains on trend as does Topgolf. And Topgolf retains a strong economic model, a model where the core profitability of our venues as measured on a normalized revenue level is increasing over time. This combines well with an outstanding growth outlook as we can identify and build new venues with high confidence and unmatched execution and the business benefits from a uniquely strong defensive mode.

Chip Brewer: Turning out a golf equipment, the Calaway brand remains strong with growing market share positions. This quarter Calaway held its position as the number one U.S, market share brand and driver fairy woods and hybrids. Our AI smoke line maintained the number one U.S, model market share position and driver fairy woods and irons. And Odyssey also maintains positions the number one putter brand. One stat that I'm particularly proud of is our June green grass woods market share of 38 percent.

Chip Brewer: 38 percent is a terrific number. It showcases the outstanding performance of our AI smoke woods in a fitting environment. And the fact that we can deliver this at green grass also showcases our scale and strengthen distribution in this important channel.

Chip Brewer: Turn into golf ball. The significant strategic investments we've made in golf ball over the last several years continue to pay dividends for the Callaway brand. A major focus for Callaway this year was to grow in our tour ball segment with our new chrome tour product line. We have now done hundreds of these and the results have been impressive. Our test data shows that we are faster and 86% of the tests and that we deliver an advantage in pit shot backs been in 66% of the tests.

Chip Brewer: Our overall June US ball market share increased by 120 basis points year over year to 21.9% and our premium ball share achieved a new record market share of 12% up 150 basis points year over year. Our brand has also had an outstanding year on tour with Yuka Saso winning her second US women's open and Zander winning both his first and his second major championships, the PGA championship and then the open championship.

Chip Brewer: For the balance of the year, we are excited about our recent upcoming product launches. We just launched our new Opus Wedge and they are already a popular choice on tour. In my opinion, this is the best wedge we have launched in my time here at Calaway. Congrats and well done to the teams that drove this and looking only slightly forward.

Chip Brewer: On next Monday, we will be announcing the launch of our new Apex line of irons. This is our most premium line of irons and the product was built beautiful and innovative. I am particularly excited about the new Thai fusion technology that will be introduced as part of this exciting new lineup and I invite you to tune into our launch communication to learn more. Looking at our full year forecast for this segment, we now see revenues being approximately flat for the full year but up slightly on a currency neutral basis.

Chip Brewer: Switching gears to our active lifestyle segment, Q2 revenues were in line with expectations. Travis Matthew had a solid quarter delivering share gains at wholesale and also opening five new retail stores. They are on track to open 10 stores for the full year for a total of 57. The Women's Initiative also continues to develop nicely. It is now approaching 10% of revenues. It appears to be on its way to being a significant portion of this business. In addition, the Travis Matthew team has done a great job growing their out-of-wear business, which in turn is helping them be a less seasonally focused brand.

Chip Brewer: Moving to Jack Wilson, I'd like to commend the team for their hard work as we took significant steps to the right size of the business since we last spoke on our Q1 earnings call. The brand has successfully shifted its strategic focus back to its core markets in Central Europe and China. We are encouraged by recent results, including achieving our sales targets for Q2, and we still expect a positive EBITDA performance in 2024. Consistent with last quarter's communication, we expect revenues in this segment to decline year-over-year as we form a new base in which to resume growth.

Chip Brewer: In conclusion, we are pleased with the overall performance of both our golf equipment active lifestyle segments. At Topgolf, we are working through what we view as a short-term cycle volatility in our same menu sales, while at the same time significantly improving our organization's ability to drive positive results in a normalized environment. We continue to demonstrate our ability to drive improved operating efficiency within our venues to reliably deliver strong performance in newly opened venues with highly attractive financial returns to grow our digital acumen and penetration and to build on the overall strength of the consumer experience. An experience which continues to resonate with Topgolf players as one of the most fun entertainment options available.

Chip Brewer: As we look forward, we remain confident that we have the proper strategy in place to drive long-term growth in both revenue and profitability.

Brian Lynch: With that, I'll turn the call over to Brian. Thank you, Chip. Good afternoon, everyone. Chip covered our announcement regarding the strategic review of Topgolf, so I will jump right into our financial results. I will start with some financial highlights for the quarter. Q2-9 gap mid-income with $83 million, adjusted EBITDA of $206 million, and EPS of 42 cents were all ahead of expectations, despite a 2% year-over-year decrease in revenue. First half cash provided by operations improved $173 million compared to first half last year.

Brian Lynch: Our inventory reduction initiatives were successful with our consolidated inventory decreasing $193 million since Q2 last year. We made a $50 million discretionary payment against the outstanding principle of our term loan debt at the end of May. Our available liquidity remains strong and increased $136 million compared to Q2 last year.

Brian Lynch: Now turning to the specifics. Q2 consolidated revenues decreased 2% year-over-year to $1.158 billion, and were 3% below the midpoint of our guidance, primarily due to softer trends in our Topgolf business. On a year-over-year basis, the decrease was attributable to an 8% decrease in golf equipment and 3% decrease in active lifestyle, both of which were largely in line with our expectations. This decrease was partially all set by revenue growth at Topgolf, driven by new venues.

Brian Lynch: Changes in foreign currency rates negatively impacted consolidated revenue by approximately $11 million. Q2 Adjusted EBITDAV $206 million is approximately flat compared to last year, and trailing 12-month Adjusted EBITDA increased over 10% year-over-year. These results exceeded the high end of our Q2 2024 guidance range, driven by strong operational efficiencies at Topgolf, and reduced cost and expenses across the business. Q2 non-gap net income was $83 million, up for approximately 10% year-over-year. This increase in net income is primarily due to an increase in investment income and a tax benefit for the quarter. Net income also benefit from lower-term loan interest expense as a result of our refinancing.

Brian Lynch: Moving to segment performance, at Topgolf Q2 revenue grew 5% to $494 million, driven primarily by the new venues open since Q2 last year. The new venues are performing well and consistent with the financial targets and returns we previously communicated. Topgolf operating income was $56 million in the second quarter, up 28% compared to the prior year, while adjusted EBITDA increased 19% year-over-year to $110 million. The adjusted EBITDA growth was driven primarily by the increased revenue and continued strong operating efficiencies, including benefits from our new labor model and cost management initiatives. We commend the team at Topgolf for their ability to drive profit in a volatile top-line environment.

Brian Lynch: Moving to Q2 results for golf equipment. Overall, the underlying golf equipment business continued to see strong momentum from this year's club and ball launches, with strong market shares as Chip discussed earlier. Revenue decreased 8% year-over-year to $414 million consistent with our expectations, primarily due to lapping last year's launch of our big-birth of woods and irons, which had an approximate $30 million impact compared to Q2 this year.

Brian Lynch: This is just timing between quarters and we still expect golf equipment to be up for the full year on a constant currency basis. Our golf equipment segment was also negatively impacted by approximately $7 million related to foreign exchange headwinds during the quarter. Golf equipment operating income with $77 million decreased 20% year-over-year due to the lower revenue, higher air freight costs, and foreign exchange headwinds, which were partially offset by management of operating expenses.

Brian Lynch: Interactive lifestyle segment, Q2 revenue decreased 3% year-over-year, which is in line with our expectations and was primarily from softness and jack-well skin due to high-peeled inventories, along with unfavorable changes in foreign currents. E-Rase. Operating income decreased to $15 million compared to $20 million in the prior year, primarily due to the lower sales.

Brian Lynch: Moving to balance sheet and liquidity highlights, we continue to have ample liquidity as of June 30, 2024, our available liquidity, which is comprised of cash on hand and incremental borrowing capacity under our credit facilities, increased $136 million to $784 million compared to the prior year due to better cash flow generation as the company continues to manage costs and more efficiently manage working capital, especially with regard to inventory. At quarter end, we have total net debt of $2.4 billion, which excludes convertible debt of our approximately $258 million compared to $2.2 billion for the same time left here.

Brian Lynch: This increase is attributable to increased venue financing debt related to new venues, partially all set by a reduction in term loan debt due to our recent debt paydown. We also think it is helpful to evaluate our net leverage position by excluding the REIT debt associated with our Topgolf venue financing, which is akin to capitalized rent with no additional principal or bullet repayment required. Excluding the REIT debt from our balance sheet, our REIT adjusted net debt is $981 million compared to $1.2 billion as of Q2 2023.

Brian Lynch: Our net debt leverage, which excludes convertible debt, was 3.9 times at June 30, 2024 compared to 4.1 times in the prior year. This improvement was driven by increased EBITDA and improved cash flow, which more than offset the increased venue financing debt. Our REIT adjusted net debt leverage ratio, which burdens EBITDA with the REIT interest expense payments, was 1.9 times compared to 2.5 times in the prior year. We remain comfortable with these leverage levels.

Brian Lynch: Speaking of REITs, I want to provide a quick update based on what we were seeing in the market. First, our venues continued to be viewed as very attractive investments and we were seeing strong demand and in fact increased interest from new repartners for these venues. Second, the cap rates on new venues remain steady and in line with the rates we have seen over the last several quarters.

Brian Lynch: Which in gears, our inventory balance decreased $193 million or 23% to $647 million at the end of Q2 2024. We continue to feel comfortable with the current level on quality of our inventory and believe we are essentially at normalized levels for our business with small opportunities in each brand or region that we will continue to pursue.

Brian Lynch: Capital expenditures for the first six months of 2024 were $149 million and we received reimbursons of $55 million from our REIT partners for net capital expenditures over approximately $95 million.

Brian Lynch: Now turning to our balance of year outlook. As Chip mentioned earlier, given our revised outlook for same venue sales coupled with our expectations for potentially softer consumer environment across our businesses, we are lowering the midpoint of our full year 2024 revenue guidance range by $225 million or approximately $5 million. $4.2 billion to $4.26 billion. Approximately $170 million or approximately 75% of this decrease is attributable to the Topgolf business and the other $55 million to our products business.

Brian Lynch: As a result, we are also lowering the midpoint of our full-year adjusted EBITDA outlook by approximately $50 million to a range of $570 million to $590 million. We're able to mitigate the impact of the change in revenue in EBITDA through cross-reductions and strong operational efficiencies. By segment at Topgolf, we are lowering our guides to approximately $1.79 billion in revenue and approximately $310 million in adjusted EBITDA, which compares to our prior guidance of $1.96 billion and $350 million respectively.

Brian Lynch: Our outlook now assumes the softer back half of the year with updated to same venue sales guidance of down very high single digits to low double digits for the year. In golf equipment, our updated forecast now allows for a range of outcomes that includes both a continuation of current trends or some softening of the consumer in the second half of the year. Despite this potential softness and unfavorable foreign currency rates, we expect second half growth in golf equipment and are very excited about our two, three launches of apex irons and opus wedges.

Brian Lynch: For the full-year, we anticipate golf equipment to be approximately flat year over year and slightly up on a currency adjusted basis. In active lifestyle, Travis Matthew continues to perform in line with expectations and as Chip noted, we have successfully right sized the Jack Wolfskin business to focus on his two core markets in central Europe and China. Overall, we continue to expect full-year revenue and operating income to be down year over year in the segment due to lapping the $35 million corporate channel fill-in last year for Travis Matthew and lower sales of Jack Wolfskin.

Brian Lynch: Foreign exchange rates have improved since we last gave guidance. We are now expecting a full-year negative impact of revenue of approximately $35 million and an operating income of approximately $19 million.

Brian Lynch: Chifting gears, while we continue to expect to be cash flow positive in 2024, we are lowering our outlook for free cash flow. We now expect free cash flow to be approximately $130 million compared to $165 million for our prior guidance. Topgolf has also expected to be free cash flow positive for the year. From a net capex perspective, we estimate approximately $190 million for the full-year was $60 million coming from the top nine topgolf business and $130 million coming from Topgolf.

Brian Lynch: Now turning to Q3 specifically. In Q3, we expect consolidated revenue of $970 million to $990 million versus $1.041 billion in Q3, 2023. We have estimated adjusted EBITAS to be in the range of $95 to $105 million compared to $163 million in the prior year. This decrease is due to the revenue of due leverage, increase marketing spend, and more hedge losses compared to the prior year. In Q3 at Topgolf, we expect to be down low single digits in revenue, and we expect operating income to be down more than revenue due to the revenue delivery and the change in timing of marketing expenses year over year, partially all set by continued efficiencies.

Brian Lynch: We also expect the same venue sales to be approximately the same in Q3 and Q4. Top equipment sales are expected to be down slightly in Q3, primarily due to unfavorable changes in foreign currency. Q4 revenues expected to grow due to launch timing and year over year growth in Gotham. Operating income is expected to be down in Q3 due to the revenue decrease and increase marketing spend related to the new product launches.

Brian Lynch: Operating income is expected to be up in Q4 due to the expected revenue growth. Moving tax of lifestyle, we expect Q3 revenue to decline compared to last year due to lower sales estimates for Jack Wolfskin and the Euro poll sale channel. We expect growth in Q4 at both Travis Matthew and Jack Wolfskin. Operating income is expected to be down in Q3 due to the revenue decrease and is expected to be up in Q4 due to the revenue leverage.

Brian Lynch: As we conclude, I want to emphasize that the fundamentals of our business remain strong. Participation in interest in Goth remains very strong. The Travis Matthew and Jack Wolfskin brands are leaders in their core markets and the fund scores are high in improving. However, outside of our Goth equipment business, we are clearly seeing some consumer softness in the current macroeconomic conditions. This is the last fund part of the economic cycle we all expected at some point.

Brian Lynch: While it is having some impact on revenue, we have been able to offset much of the bottom line impact through operational efficiencies and cost management. We are a free cash flow positive and have strong liquidity. We are in a great position to be able to maximize opportunities during this cycle and to take advantage of better conditions as the consumer strengthens again.

Operator: With that said, it would now like to open the call for questions.

Chip Brewer: Before actually opening the call for questions, I want to comment on the trading halt in our stock shortly before market close. Our long-term provider we use to manage our investor relations website prematurely posted our investor presentation to our website prior to market close. Although it was quickly taken down, it had already been picked up in the media. We immediately notified the MISE and they halted trading pending publication of our earnings announcements today. We will be discussing this matter further with our provider and apologize for this disruption.

Operator: Operator, with that said, please open the call for questions.

Alex Perry: We will now begin the question and answer session. If you would like to ask a question, you may press star then one on your touch show and send. If you are using the speaker's phone, please use the answer, pressing the key. If you have to draw your question, you may press star then two. And at this time, we will pause momentarily for the first question.

Chip Brewer: And our first question today, welcome from Alex Perry with Bank of America. Please go ahead. Hi, thanks for taking my question here. First, I wanted to ask about top golf a little bit. I guess does the current same in your sales trajectory sort of make you think about pausing future unit growth beyond this year. And then maybe a little color on sort of traffic versus ticket for top golf in the quarter and how you're thinking about it, thanks.

Chip Brewer: Sure, Alex, this is Chip. With regard to the venue expansion, so that's obviously something we've given a fair amount of thought to. And the short answer is that we believe the correct answer for creating shareholder value is to continue to build the venues. We expect to add an average of 10 per year, some years a little more, some years a little less, again, in starting in 2025. Add a little color on that, though.

Chip Brewer: As previously communicated, we have very attractive returns for these venues. 18 to 22 percent return on gross investment, 50 to 60 percent cash on cash, and less than three year cash payback. We've confirmed and looked at the new venue performance recently, and they are delivering in the financial metrics consistent with our performers, even in the recent period of volatility. We believe the recent same venue sales volatility is just that, it's volatility.

Chip Brewer: Over time in a normalized market, we believe we'll be able to deliver low single digit or better same venue sales growth. And give you a little color on that, just looking at the consumer side of it, the one to bay. Same venue sales over the last few years in 2022 is up 7 percent. In 23, it was up 4 percent. In 24, through the first half, it's down 7 percent. But it's up on a two-year stack in a 2019 and versus a 2019 basis even this year.

Chip Brewer: We're strengthening our team and our ability to drive same venue sales through this period of volatility and we'll exit it in a stronger position. And in case we're wrong, we ran downside sensitivities and the returns are still good and still far exceed our cost of capital. We're going to continue to assess this and respond to new information and circumstances. We've proven that we can and will slow down venue growth if needed to protect the companies cash flow goals or if we question the wisdom of the investments.

Chip Brewer: Neither of those apply at present and we remain confident. On the traffic versus spend per visit and ticket, it really is mostly a traffic issue right now. So our business like much of the other outside data we've seen is is experiencing a slowness in traffic and there's a little bit of difference there between the event business and the consumer as well with the consumer business being stronger when you look at it in detail.

Brian Lynch: Gotcha, that really helpful. And then I just wanted to ask about the 3Q golf equipment guide. What's the expected 3Q benefit from the launch timing with 8 packs versus birth of that occurred in the quarter? I guess it sort of implies with the golf equipment guide down that the core is maybe down more. Given that last quarter you sort of talked about a 3Q benefit. So are you seeing lower wholesale orders from your partners or what sort of the puts it takes there? Thank you.

Brian Lynch: Yeah, I'll take it and Brian, you jump in. But basically, we have Apex launch now, we have other launches coming in Q4. We're slightly more favorable from a launch timing perspective in Q4 versus Q3 for the second half of the year. We're anticipating golf equipment to be up in the second half of the year. Our market chairs are good, the markets are good. We feel good about the category in our position in it. Yeah, no, it's really just some timing noise between Q3 and Q4s. Chip mentioned we expect to be up for the second half, and even on currency neutral for the full year.

Alex Perry: Perfect, very helpful. Best of our going forward.

Matthew Boss: And our next question will come from Matthew Boss with JP Morgan. Please go ahead. Great, thanks. So, Chip, you cited pricing as one of the largest concerns for consumers today. Well, I guess what's your comfort with the current pricing architecture or value proposition at Topgolf's end use today, and just further initiatives that you're considering to drive improvement and traffic over time? You know, pricing is absolutely a topic of conversation for all consumers right now.

Matthew Boss: You can't open up the media without hearing about it, and you know, we know that there are portions of the consumer segment that are definitely feeling inflationary pressures and some level of stress. And that varies across businesses, but you can clearly see it in the Topgolf business and some of the data there. We have been fairly selective and targeted in our promotional efforts at Topgolf, and I think that is wise in the right answer for the long term.

Matthew Boss: If you look at the promotion that we are running the free 30, you know, it's both select and timing, and it's relatively modest in the offering that it gives. It's proven to be effective in driving increased demand in the time period, both smoothing the man and driving incremental profitability. We also think we can kind of continue to refine this and do this in an intelligent way that builds and protects brand value for the long run.

Matthew Boss: And we've talked about, you know, on this call how we're expanding that offering for to make it more interesting and available to new visitors that don't use the reservation model and allows us to satiate different consumers in the manner that is most satisfying for them. So, you know, we're going to continue to drive that. And we've got a lot of exciting initiatives that we're working on in the same venue sales front. The promotional side is just one of them.

Chip Brewer: Great. And then maybe as a follow-up, could you just elaborate on the top golf review that you've initiated and just what strategic alternatives could be considered or possibly on the table? Sure. You know, there's not much I can say on that right now because it's, you know, a process that we're right in the middle of it. We're considering all alternatives, but we're mentioned specifically a potential spin. You know, we're looking at, you know, how do we best maximize long-term shareholder value? And we'll report back on that when that work is done. We're in the middle of that work at press. Thank you.

Eric Wold: Great, best of luck. Our next question will come from Eric Wold with the Riley Securities.

Eric Wold: Please go ahead. Thank you. Jeff, there's a couple of questions on the non-Topgolf business.

Chip Brewer: I guess as you think about pricing being a headwind to Topgolf and you're making the difference there, what are your thoughts on pricing within the golf equipment or lifestyle segment to the short term and long term, and how do you think about the golf equipment consumer versus the topgolf consumer right now and their ability to extend? Sure, they're very different, Eric. And you know, the golf equipment consumer is wealthier, more passionate, and is proven to be not especially sensitive to modest economic downturns or changes in economic condition.

Chip Brewer: And we continue to see that. The markets are remaining solid, robust across the globe with the exception of Korea. And our business is at or better than most markets out there right now. So feel very good about that. The Topgolf consumer is an average demographic household income of about $100,000, which means that there are portions of them that might feel more pressure than the average golf equipment consumer. Got it. And so it's the kind of before about Topgolf being more of a traffic issue than a ticket issue.

Chip Brewer: The things that are visiting Topgolf, you're not seeing the degradation in their ticket, they're spending a per person. It's more getting that lower income demographics, even more pressure consumer in the golf at the first place. It's primarily a traffic issue, Alex. So, you know, there's a little bit of noise between all segments of it, but traffic is the primary issue. And, you know, we've got a lot of initiatives underway on that.

Chip Brewer: And, you know, we also share data that shows that the consumer side of the business is actually performing significantly better and directional with what you're seeing in other similar concepts and restaurants. The event business has had some more volatility in it.

Chip Brewer: There's a little bit of a post-COVID reversion going on in addition to, you know, the economic slowness that we see in the general economy right now. Thank you.

Megan Alexander: Our next question will come from Megan Alexander with Morgan Stanley. Please go ahead. Hi, thanks very much for taking our question.

Megan Alexander: I wanted to take another shot at the Topgolf Strategic Review question, maybe just ask it a little bit differently. So, you know, in the release, you talked about assessing organic strategies to get Topgolf back to the profitable same venue sales growth, understand you don't want to talk about the inorganic alternatives today, but as far as that, you know, organic strategy part of the review goes, I guess I'm just trying to understand a little bit more about what exactly is the mandate for the external advisors that you've hired.

Megan Alexander: You did just say you think it's, you know, mostly macro, mostly just volatility and that you can get back to those single digits. So, is it just that, you know, you want them to confirm that's the case? Or, you know, are they looking at something else as far as that organic strategy goes? And, you know, is there a timeline in terms of, or is it more so that there's kind of a timeline to get back to same venue sales positive growth?

Megan Alexander: Just trying to understand, I guess, a little bit more about, you know, the decision tree as far as the strategic alternative goes. Yeah, sure, so on the organic side, you know, we do have outside advisors working with us to, you know, look at our business and how we're approaching, you know, continually improving our ability to drive same venue sales. There's, you know, and although I do believe that there's a lot of what we're seeing, is macroeconomic volatility, you know, I also want to be clear that we can and are going to do better.

Megan Alexander: We recognize that we have to operate in the environment as exists. We are making significant efforts to continue to strengthen the team, its organization, our capabilities to drive better and better performance on the same venue sales side. We talked about that in the script. The more newness and energy at venues, the fun, the reasons to visit. We talked about the Sure Thing Golf Club, which has launched new games, concerts, et cetera, that will continue to give both new visitors and returning visitors a reason to come back.

Megan Alexander: We're upping our game on the digital and performance marketing side. We're working through our promotional efforts as I articulated already. We're investing further in the digital and commercial teams and adding significant resources to that. We hired a new chief operating officer who came from the casino business and she will undoubtedly be added to our efforts here. You know, and I'm excited about our direction and I believe we're going to come out of this period of volatility significantly stronger and our efforts will pay dividends in the long run.

Megan Alexander: So it's not, Megan, and I'm sure you realize that. It's not that we're sitting here and just taking a macro cycle and waiting it out. Far from it, we're using this as an opportunity to strengthen this organization, build the resources to drive that same venue sales even better when the conditions actually do normal. I'm going to answer your question. Yeah, yeah, that's helpful. Thank you.

Megan Alexander: And maybe sticking with Topgolf, could you maybe tell us how much better the second two weeks of July look relative to the first two weeks? And, you know, maybe just in the context of that, you know, you said, the second half implies the trends you're seeing continue for the balance of the year. You did say comparison is easier. I'm assuming that's on a one-year basis. Would there be any way to kind of talk about what compares verse 19 look like given they did see a pretty big step down in 2Q?

Megan Alexander: I'm just trying to understand whether, you know, you think the second half guide is kind of sufficiently de-risked at this point. Well, what we saw is mentioned in June and July. So the US business in June down 8%, 11% in July. And, you know, our guide assumes that those trends continue. And so if you just do the math, you know, we would have to be down in a double digit number for the second half.

Megan Alexander: So it's not only that the guide would say you're going to be at where the point you were, but there would continue to be weakness and their comps versus last year are easier. In other words, on at least a one-year basis we are copying negative small negative numbers, but small negative numbers last year. Does that answer the question on that one? Yeah, any I guess can you contextualize it all how much better the second two weeks of July were the first two weeks?

Megan Alexander: I guess just asking because, you know, wondering. Yeah, I understand. I understand the question and the reason to ask and Megan and we're not going to get to that level of specificity. You know, there's enough noise within week to week that I think you could read too much into that one way or the other, and I think it'd be a bad practice to start getting into that level of granular detail. Understood that I try. Thank you. No problem. And once again, if you would like to ask a question, please press star than one.

Chip Brewer: Our next question will come from Gerald Beller with Raymond Jane. Here you go ahead. Thanks. Hey guys, good afternoon. So not surprisingly, I want to go back to Topgolf here for a second. So Chip, you mentioned throughout the call today that your view on the business and the long term opportunity really hasn't changed. So if you believe that the issues at Topgolf are cyclical or temporary, you know, post-COVID normalization, then what's the point of the other review?

Chip Brewer: Well, I think that it's good practice to evaluate if there's an inorganic option that would be in the better interest of long term shareholder value. Okay. So it's really frustration with the stock, not that anything important. Oh, absolutely. Yeah, so right. There's two factors of our strategic review, Joe. There's one that's our inorganic or structural, and that's alternatives to maximize long term shareholder value. And that is strictly due to our point of view that the shares have underperformed, and they've underperformed for, you know, a period of time now.

Chip Brewer: The organic side of it is, you know, relative to the same venue sales, and that's recent same venue sales that were committed to obviously be best in class and drive those low single digit or better same venue sales growth over time. Got it, okay, and just to follow up on that, could you quantify potentially the synergies for Topgolf if the war let's say is standalone business? You know, that's something we'll be looking at as part of this process, but we're not going to comment on that at this time. Okay, thank you.

Chip Brewer: And at this time I would like to turn the call back over to Mr. Brewer for any closing remarks. Well, thank you everybody for tuning in today. We appreciate your time, and we'll look forward to continue to communicate with you in the future.

Operator: The conference is now concluded.

Operator: Thank you for attending today's presentation, and you may now disconnect your lines at this time.

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