Good day, and welcome to the Topgolf Callaway Brands Separation Announcement Conference Call. Please note this event is being recorded, and all participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star one on your telephone keypad. To withdraw your question, please press star two. We ask that you please limit yourself to one question and one follow-up during the Q&A session. I would now like to turn the conference over to Katina Metzidakis, Vice President of Investor Relations and Corporate Communications. Please go ahead. Thank you, operator, and good afternoon, everyone. Welcome to Topgolf Callaway Brands conference call, announcing our intent to separate into two independent companies. 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 intent to separate its business into two independent companies. We have also published a presentation, which, along with our press release, is available on the company's investor relations website under the News and Events tab, under Webcasts and Presentations. The purpose of this call is to address the contemplated separation of Topgolf, and therefore, we will not be discussing any intra-quarter trends nor providing any other company updates during this call. 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. With that, I'd like to turn the call over to Chip Brewer. Thank you, Katina. Good afternoon, everyone, and thank you for joining us today. As you've seen in our latest press release, we announced that Topgolf Callaway Brands intends to separate into two independent companies with the goal of maximizing shareholder value and driving the full potential of each business. While we expect that a spin-off of Topgolf into a standalone public company is the most likely separation path, the company will continue to evaluate other options for separation to maximize shareholder value. This transaction is an important milestone in our company's history. Since our founding in 1982, Callaway has always prided itself on delivering innovation that makes the game of golf more fun and accessible. Over the last decade, we have reestablished ourselves as the leading brand in golf equipment, with the number one U.S. market position in golf clubs and the number two position in golf balls, combined with a strong, complementary active lifestyle business. Since our merger with Topgolf, we have both improved and grown this business to over 100 U.S. and international venues. We have transformed the technological capabilities of the business, installing Toptracer in all venues and rolling out a system-wide digital bay inventory management system and new consumer data platform. These investments in Topgolf have created a scaled business with the capabilities necessary to achieve its growth opportunity as a standalone entity. Importantly, during this period, Topgolf has significantly expanded its market leadership position. This expansion, along with Topgolf's impressive venue-level EBITDA margin improvement, has allowed us to outperform our original EBITDA and free cash flow expectations for Topgolf. Post-transaction, Callaway will be well-positioned to continue its journey as a leading and more focused golf equipment and active lifestyle business that we believe will be well understood and valued by the market. Topgolf will remain the category-leading, high-growth, pure-play, venue-based golf entertainment business, empowered to pursue its own distinct long-term strategy and value creation opportunity. Over the last year, we have conducted an extensive strategic review of both the Callaway and Topgolf businesses. We believe that a separation will maximize shareholder value, with each business greatly benefiting from enhanced strategic focus, a strong balance sheet and optimized capital allocation policies, a simplified operating structure, and importantly, a distinct investment thesis. This transaction will create two strong, focused operating companies with industry-leading market positions. At Callaway, our vision is to be the leader in golf equipment, along with highly complementary businesses in active lifestyle and post-separation in range technology. Callaway's portfolio of leading brands would include Callaway, Odyssey, TravisMathew, OGIO, Jack Wolfskin, and Toptracer. The Callaway business, including Toptracer, generated approximately $2.5 billion of revenue in the last 12 months through Q2 2024. As an industry-defining brand, Callaway continues to solidify its legacy as a leader in golf equipment. Our ongoing innovation has enabled us to maintain our leading market share position in golf clubs. Additionally, our substantial investments in golf ball have resulted in steady share gains, reaching a record 22% of U.S. dollar market share in July of this year. As a standalone business, there are significant opportunities for growth. As golf is enjoying long-term tailwinds, we have demonstrated strong operating abilities over an extended period of time, and we will be well-positioned to continue to invest in our core strengths as well as new capabilities. Additionally, Toptracer will provide a long-term opportunity for deep engagement with avid golfers and to transform the driving range experience. Callaway's golf equipment business will be supported by a strong portfolio of popular apparel and accessory brands. Our active lifestyle brands are complementary to our golf equipment business in that they support each other and provide operating leverage across our global resources and scale. These brands all hold leading market share positions in their respective categories and are well-positioned for future growth. Callaway will continue to leverage its world-class product development and supply chain capabilities across its businesses. In terms of future capital allocation priorities, Callaway will retain the existing Topgolf Callaway financial debt, including our term loan and convertible debt, and would initially utilize free cash flow, as well as any retained stake in Topgolf, to delever before considering the return of capital to shareholders or other capital allocation priorities. In this manner, we intend to reduce our leverage to three times or lower net debt to EBITDA within 12 months of separation, and at the same time, Callaway will be well-positioned to continue to reinvest in its market-leading positions to drive future growth. Importantly, Callaway will be a business that has historically been well understood and valued by the market. At Topgolf, we will continue to build on our success to take full advantage of the significant white space opportunity in venue-based golf entertainment, where we are the clear market leader. As we've discussed in the past, Topgolf is expected to continue to benefit from shifting consumer trends, supporting the increasing popularity of off-course golf in the U.S. and globally. In 2023, an estimated record 32.9 million Americans participated in off-course golf, representing an 18% year-over-year increase and a 41% increase since 2019. Topgolf's portfolio will initially include over 100 U.S. and international venues, and they will seek to grow their footprint against a backdrop of significant white space, identified as approximately 250 venues in the U.S. and 250 internationally. The team's multiyear track record of successfully identifying and opening venues that consistently achieve our ambitious financial return rates is nothing less than extraordinary. This capability has been built up over multiple years and reflects the high level of talent within our real estate and our venue operations teams. The Topgolf business, excluding Toptracer, generated approximately $1.8 billion of revenue in the last 12 months through Q2 2024. The enduring strength of Topgolf is the unique nature of the venue experience, one that consumers continue to enjoy and both builds upon and leverages the positive momentum of golf overall. While the recent macro trends have certainly pressured same-venue sales, we view these trends as largely cyclical as we're working through a period of slowing consumer spend, along with a post-COVID reversion in corporate events. At the same time, we are taking clear action to further strengthen the ability of the business to drive positive same-venue sales as conditions normalize. We believe the longer-term trends for golf and experiential entertainment, such as Topgolf, remain positive. Furthermore, historical data shows that even prior to the improved capabilities we are now putting in place, for instance, from 2015 through 2019, the business was able to deliver positive same-venue sales performance. More recently, Topgolf delivered 7% positive same-venue sales in 2022, and the one- to two-bay consumer portion of our business, which represents approximately 80% of Topgolf's venue revenues, delivered 4% same-venue sales in 2023. Turning to our improvement initiatives and how we're gonna come out of this period even stronger. As I discussed on our second quarter call, we are making investments in our internal and front-end digital capabilities, leveraging our recently launched consumer data platform and digital bay inventory management system.... We believe these actions will allow us to enhance the user experience and deliver more tailored offerings to customers, ultimately driving revenue growth. In addition, we are placing increased emphasis on newness and the experience in the venue via new games and other surprise and delight elements, such as the launch of our new Sure Thing golf club, as we believe these will ultimately drive both new and repeat visits. Lastly, we will continue to look to partnerships to increase awareness as well as traffic. In response to our actions, the Fun Scores registered after guests play have steadily improved. Fun Scores are a leading indicator of future growth and have historically been highly correlated to our consumers' likelihood to both return to and to recommend Topgolf. Returning to same-venue sales growth will take time, but we are confident that we are putting the right plans and teams in place to execute it. Looking ahead, as same-venue sales growth resumes and the profitability of our venues steadily increases, as we have a proven track record for driving venue profitability improvement throughout the business cycle, we expect our already attractive venue returns to improve even further. With these expected improvements in venue returns, coupled with the ongoing capture of our significant white space opportunity, we believe Topgolf is well positioned to drive durable top and bottom-line growth. And I should note that while these are the pillars of our immediate action plan today, I look forward to the Topgolf team providing greater detail on the company's ambitions as we get closer to the separation. As we've discussed on our prior calls, the team at Topgolf has driven significant improvement in venue economics over time. In 2019, compared to the last 12 months, ending Q2 of this year, we have increased EBITDA per venue from $5.8 million to $6.7 million. EBITDA margin from 29% to 34%, and rent coverage, defined as the EBITDA to rent ratio from 2.6 to 2.8 times. We know our venues are capable of generating even stronger economics and returns, but their performance today already drives significant embedded cash flow, and that will create financial flexibility and reinvestment capital going forward. As we look towards the planned separation, we are committed to positioning Topgolf to deliver against its white space opportunity as a standalone business, while at the same time delivering positive free cash flow and maintaining a strong financial position. To this end, Topgolf will be well capitalized at the time of separation, with a cash balance of approximately $200 million and no financial debt. Looking ahead to 2025, to appropriately balance growth and free cash flow during this transition year, we intend to reduce Topgolf's new venue growth plans for 2025. Our current estimate would be for a mid-single-digit number of new venues. We believe this change will further improve Topgolf's already strong financial position and will likely be well received by most shareholders in what will be a newly independent entity. One of the advantages of Topgolf's current scale, embedded free cash flow, and strategic position is this optionality on when and how we build new venues, thereby allowing us to balance our mutual goals of growth and positive free cash flow. Accordingly, we expect Topgolf to be free cash flow positive in 2025, just as it was in 2023, and as it is forecast to be in 2024. And to be clear, our return metrics remain strong as to the quality of our venue pipeline. Looking further forward, it's our expectation that continued improvements in existing venue performance and continued venue unit growth can drive meaningful improvement in profitability as the business matures. As a result, we're very excited about the financial prospects of Topgolf as a standalone company. As outlined here, it will start out in a well-capitalized financial position with the clear expectation of continued positive free cash flow performance. Over time, we believe that its core fundamentals, supported by a significant white space opportunity, will create substantial value for shareholders. Beyond the attractive fundamentals of the two new businesses, Topgolf and Callaway will continue to partner to unlock further value. Post-transaction, Topgolf and Callaway will enter into ongoing value creative commercial agreements with one another. As an example, Callaway is expected to remain the exclusive golf equipment partner for Topgolf. Now I'd like to turn the call over to our Chief Financial Officer, Brian Lynch. ... Thank you, Chip. Turning to the transaction details, it is the company's intent to spin off at least 80.1% of Topgolf to obtain the desired tax-free treatment of the spin-off for U.S. federal income tax purposes. The company will also consider retaining a limited ownership position in Topgolf for a period of time. Existing shareholders of Topgolf will receive a pro rata allocation of shares in the new Topgolf company. We expect these new Topgolf shares to be listed on the New York Stock Exchange, and investors will receive detailed information on the business of the new Topgolf company. This transaction is subject to customary approvals to be secured prior to the separation. This type of transaction can generally be completed in approximately 9 to 12 months from the time of announcement. Based on what we know today, we would expect to complete our transaction in the second half of 2025. For internal purposes, we are targeting July 1st, 2025. Prior to separation, we plan to establish independent organizational structures, complete audited financials, and finalize capital structure and capital allocation policies for the two separate companies. As previously mentioned, all financial debt, including our term loan and convertible notes, will remain with Callaway. Topgolf will retain its venue financing obligations, but will have no financial debt. Topgolf will also be funded with a significant cash balance. Our current estimate of this would be approximately $200 million. Both companies are expected to be free cash flow positive from the outset and would have strong financial positions. From a leverage perspective, at the time of the spin, Topgolf, with no financial debt, would not have any financial leverage, and Callaway is expected to be at three times or lower net debt to EBITDA within 12 months. Prior to closing, we will seek to obtain a private letter ruling from the relevant tax authorities and/or an opinion from tax counsel, and would seek the U.S. Securities and Exchange Commission declaring effective the registration statement related to the spin-off. We would also seek to obtain other customary approvals, as well as final approval from our board of directors. Callaway will continue to be led by Chip Brewer. Topgolf will continue to be led by Artie Starrs as Chief Executive Officer of Topgolf. Further details about the management teams will be announced later in the transition. While the company expects that a spin-off of Topgolf is the most likely separation path, we will continue to evaluate other options for separation to maximize shareholder value. The following information is meant to provide clarity into the components of the two businesses going forward and other ongoing and one-time expenses that will be incurred as part of this transaction. As we have mentioned, the new Callaway would consist of the existing golf equipment and active lifestyle segments, plus the Toptracer business. The new Topgolf business will include the existing Topgolf segment, less the Toptracer business. In the last 12 months through Q2 2024, the existing golf equipment and active lifestyle segments generated $2.4 billion of revenue and $260 million of adjusted EBITDA. During the same period, the existing Topgolf segment generated $1.8 billion of revenue, $333 million of adjusted EBITDA, and $245 million of adjusted EBITDA, less venue financing cash interest. During the last 12 months through Q2 2024, Toptracer's results were included in the existing Topgolf segment results and consisted of revenue and EBITDA of $46 million and $1 million, respectively. As part of this transaction, we expect approximately $25 million of net dis-synergies, with slightly more than $25 million incurred at Topgolf and a net benefit at Callaway. We also expect one-time transaction expenses of approximately $50 million. I will now pass it back to Chip to close out our prepared remarks. Thank you, Brian. We firmly believe that this announcement today is in the best interest of our fellow shareholders. Both companies will enter this next period with strong financial positions and clear strategic direction. And following this separation, both businesses will benefit from more focus, a simplified operating structure, and a more distinct and compelling investment thesis for investors. Most importantly, after a thorough analysis with the full involvement of our board of directors and the counsel of multiple outside strategic advisors, including both Goldman Sachs and Centerview Partners, we believe that this separation will unlock significant shareholder value. And to be clear, we believe both companies will be financially strong from the start, and both companies are expected to generate positive free cash flow in 2025. Topgolf, in particular, will retain its venue financing obligations, but will have no financial debt, be funded with a strong cash balance of approximately $200 million, and is expected to be free cash flow positive in 2025, just as it was in 2023, and it is forecast to be in 2024. I'm sure you have many questions, and as I hope you understand, we will not have all the answers today. We will be sure to continue to provide updates as appropriate in the coming months. As we get closer to the separation, both Topgolf and Callaway will deliver more detailed presentations on their business plans and investment theses. Thank you, and operator, please open the lines for Q&A. Certainly. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. And again, we ask that you please limit yourself to one question and one follow-up. At this time, we'll pause momentarily for the first question. The first question comes from Alex Perry with Bank of America. Please go ahead. Hi, thanks for taking our questions today. I guess, just first, I wanted to talk about sort of the leverage of the two businesses. I guess, what is the pro forma leverage ratio of the standalone equipment business? And then can you just give us more color on how you plan to get to that three times levered within 12 months of the transaction being complete? Thanks. Sure. As we mentioned in the script, we would expect to get to three times or less within 12 months of the spin, and we'll essentially be using the cash from operations and as well as any retained stake. We have other options, but we don't think we'll need them. That's primarily. If you're basically looking at the term loan debt, less cash on hand, divided by EBITDA at that time. We think we'll be able to get there within the 12 months. Perfect. And then just to follow up, just given the length of time between the announcement and when you expect to complete the transaction, can you just give more color on how you plan to prioritize investment between the two businesses? And then any update in terms of when we should be provided, you know, further updates on, on the transaction? Thanks. Sure. You know, the capital allocation priorities really don't change, Alex, between now and then. You know, we are obviously preparing for that separation, and we're putting considerable emphasis on making sure that both businesses are on strong financial footing at that time, so that is certainly a priority, but we will be continuing to fund the business operations of both in all aspects of our business as we have. We have obviously modified the venue growth plans for next year, as we believe that's prudent in this time of transition and will be well received, but no change in capital allocation priorities between now and then, other than ensuring that both businesses are structured appropriately for the separation. Perfect. Really helpful. Best of luck going forward. Thank you. The next question comes with Casey Alexander from Compass Point Research & Trading. Please go ahead. Yeah. Hi, thanks for taking my questions. Would it be, Brian, would it be your expectation that the term debt would likely be downgraded as a result of this transaction and the higher financial leverage that it would sit on Callaway's balance sheet? I can't really speculate on what the rating agencies will do, but I will tell you that with what we have planned for delevering and everything, I think they would view that positively. Okay. And secondly, Chip, can you explain why Toptracer would go with Callaway as opposed to Topgolf? Sure. Two big reasons there. First of all, the customer base that you know we sell to is essentially driving ranges, and that customer base overlaps with Callaway's customer base, and therefore it'd be more effective to drive future growth and efficiency and synergies with that alignment. And then secondly, the end user of Toptracer is you know avid golfers. And the ability to engage with those avid golfers in a deep and successful manner going forward aligns best with Callaway as well. Okay. Thank you for that. And then lastly, in relation to sort of the comment that the spin is the plan, but other options could be available, should I read that to be either strategic or financial investors that may want to outright buy Topgolf? I mean, how should I read that statement? Yeah, you should read it that we have evaluated all of the options in front of us, that we're viewing the spin as attractive, and that it's likely to create significant shareholder value. It is our most likely path forward. It will not occur for 9 to 12 months, which is customary in these types of transactions. If in that time period, there is an identified and actionable path that could include a sale or another path that is more attractive for shareholders, you know, we will obviously explore that path. And so, you're reading it correctly, I think. All right, great. Well, thank you for taking my questions. I'm sure that there's others that have some more questions than I already have, so I'll let them hop in. Thank you, Casey. The next question comes with Joe Altobello with Raymond James. Please go ahead. Thanks. Good afternoon. I guess first, just to follow up on Casey's last question, are you guys actively looking for potential buyers? Is there a process that's planned? Joe, our primary and most likely path is the spin, and we believe that'll create, you know, significant shareholder value, but we are both open to considering and will explore other strategic options, and so, you know, those are dual paths with the spin being the most likely path. Okay, understood. And then just to go back to the leverage ratio, it sounds like you guys are excluding the convertible notes from that calculation to get below three times. What's the plan on refinancing those notes? Well, you are correct. That's been our practice all along, is to exclude those because the underlying shares are already in our outstanding base, so we do exclude those. We'll work through all of our financing arrangements and address those as we go forward. There's no showstoppers there. It'll just be things we have to address going forward. And then you have to remember that the convert is scheduled to expire in May 2026, so it wouldn't be long after the spin anyway. Okay. And just one last one. I may have missed this. Is shareholder approval required here? No. No. Okay. All right. Thank you. Once again, if you have a question, please press star then one. The next question comes with Eric Wold with B. Riley Securities. Please go ahead. Thank you. Good afternoon. Just one question for me. I just, with the plans to reduce, you know, the number of new Topgolf venue openings to, you know, mid-single digit number next year, you know, it seems like the rationale is to ensure that it's, you know, that the Topgolf venue remains, you know, positive free cash flow into the transaction closing, but should we infer that a mid-single digit and maybe, you know, a high single digit number of annual openings is now the right number longer term, given where Topgolf demand is? Or do you think, you know, a double-digit number in a year is achievable at some point without dipping into negative free cash flow? You know, Eric, nothing has changed on our long-term outlook for the business. So, you know, we remain confident in the white space, the venue returns, et cetera, and that Topgolf will be well capitalized at the point of separation, with the expectation of further strengthening that in that important first year, you know, with positive cash flow. So they have the optionality, and this is one of the strengths of Topgolf, given their scale now of, you know, adjusting their venue growth plans to balance growth and free cash flow as appropriate in market circumstances. And that adjustment can happen both up and down. They have a strong pipeline, so we would expect them to ramp back up, but it will be subject to the conditions that we see at that time, and something that they will be working through and report back to you in more detail, as they get closer to the separation, but the long-term growth outlook is as positive as ever. Just a quick follow-up, if I may, Chip. No change to the planned openings for this year, as in nothing slipping- No ... into next year to make that number? Okay. Got it. No. Everything this year is on plan, and the adjustment next year is just because we believe that's prudent in this period of transition. Perfect. Thank you. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Chip Brewer for any closing remarks. I just want to thank everybody for tuning in. I know this call wasn't scheduled in advance, so to the degree it was disruptive on your schedules, we appreciate you making time. We look forward to keeping you posted as we can during the process with the next planned call at our regularly scheduled earnings call, which will likely be in early November. Thank you very much. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.