Hey, good morning. Thank you for joining us. It's my pleasure to introduce Topgolf Callaway Brands. Today, we have with us Chip Brewer, President and Chief Executive Officer. Chip joined the company in 2012, and we also have Brian Lynch, Executive Vice President and Chief Financial Officer, and Chief Legal Officer, who joined in 1999. Chip and Brian, thank you so much for joining us today. Thank you, Kate. Thanks for having us. Maybe we could start with the Callaway business first. It's well known that the golf industry has seen a meaningful resurgence since the pandemic, and it's been sustained. Mm-hmm. Can you talk about the behaviors you're seeing across the industry, both on course and off course, and both in the U.S. and outside the U.S.? Sure, Kate. It has been, you know, a very strong time for golf. It's actually, you know, almost a generationally positive moment for the game, and with strong surges in both popularity of the game of golf and its cultural relevance. And we saw that surge during COVID. The seeds of that had been laid before that, and we were seeing an uptick then, but it has certainly accelerated and grown. The sport of golf has also morphed during that time to be both an on and off-course phenomenon, with the off-course now larger than the on-course and supporting its growth. You know, and fundamentally, you know, a deeper and broader appreciation for the sport, love of the game, you know, a popularity. For instance, female participation is at its largest, absolute, number in the history of the game. You know, we continue to see growth in those areas. We've seen growth, just last year on the on-course segment of about 1.5 million people, taking it to 28 million in the U.S. And, that 1.5 million of additional new participants in the game was the greatest, absolute growth since 2000, when a young Tiger Woods entered the game. You know, so most people thought, "Hey, it surged during COVID." It actually grew last year more than it did during COVID, so we're continuing to see, very positive, indications, participation, and broad-based interest in the game of golf. It is really encouraging. I'm probably dating myself, but I do remember a time where the industry maybe wasn't quite as strong, and the nine-hole course was the answer. Yeah. People don't have time to do the eighteen holes- That's right. Let's do the nine. Time and expense have always been the biggest barriers to the game, but it was also a bit of an elitist game. So, like, when I was young, the game wasn't really cool, you know? And, you know, now our, you know, cultural icons, the athletes, you know, musicians, et cetera, all play the game of golf. So when you see them... So it is therefore, you know, much broader. Our kids are gonna view the game in a different light than we did growing up. Mm-hmm. And you know, you see that transcending the sport. Plus, there is now an access point that is not just you know, viewed as a the Bataan Death March to the young people, right? Which is a game of golf, right, is like five hours on the course, plus you have to get there, and it's hard. What about going to Topgolf? You know, and as those avenues continue to grow, you know, it's transforming the game in additive. So it's almost, on the positive side, it... there's structural growth to the game now as well. As these new venues grow, they add to the population of golf, you know, which then helps both on and off. So it, it's obviously been... We've been a major part of it, but it's also, you know, significantly encouraging as you look at the broader ecosystem. So maybe we can transition from, you know, what has happened in the industry and what has it meant for your golf equipment customers. Just how different is the customer now because of the changes you've seen in the game, and what are their priorities when it comes to golf equipment? They're different from the perspective. It's just a broader, more diverse customer base, so there's, you know, a much higher percent female. You know, the growth is coming broad-based, but it's coming younger, it's coming more diverse. And so all of that is just terrific, right? You really want that. You want it to be representative of society at large, and it's clearly moving in that direction. There's still, you know, multiple types. There's the avid golfer that plays 50 rounds a year, you know, and they're extremely passionate about the game of golf, but there's a much broader, younger new participant that's entering the game as well. So, you know, there's similarities in our golf equipment business. We, at Callaway, focus on the most premium. We're clearly one of the iconic brands and a leader in the space, have been for some time. We cater mostly to avid player that plays a ton, is highly passionate. We'll talk at some point about our niches, and we're an innovative brand. We focus on product and technology, but we're also a brand that appeals to all golfer types. So if you had a consumer, a new entrant in the game, you would clearly steer them towards a Callaway product. We are easy to hit. We're inviting, you know, we're more approachable than some of the other brands for new entrants. We happen to skew very well on the female side of the business. We're the leader in that category. So some of these trends will overlap. We're driving some of them, and they also overlap well with our brand profile. That dovetails well into our next question because clearly you've been very innovative. It's a competitive advantage for Callaway. Could you maybe talk a little bit about what some of the newer innovation has been? Has the cadence of innovation and newness changed over time? The cadence of innovation and products. So product is central to how we go to market. It is. We're an innovative brand, very product-focused. We invest heavily in R&D. It's sort of in our D&A. Ely Callaway was a disruptor. He almost, he and his team or the business created the modern golf space. It was a very small cottage-type business, and he happened to be leading the business at a time where new technologies came in, and thin wall casting, and the Great Big Bertha, and metal woods, and he invested heavily on the R&D side, marketing, and, you know, the companies scaled along with that as the game grew in that era, and we've certainly continued that. We're very focused on that. You'll see us deliver product innovation. We've been fortunate to be the number one U.S. brand, nine out of the last ten years in terms of golf equipment sales. Number two in golf ball. We've invested heavily in our ball facility, our capabilities there, to build what we believe is a sustainable franchise there and the opportunity to continue to win. We first to lean into AI in terms of capabilities on the design of the product. I absolutely believe we're a leader in that space, and that we use it more effectively, more differentiatingly, than any other on the design of products. So we use it in the core competency that we think, you know, drives the bigger difference. And, you know, newness is extremely important. It's gonna be how we differentiate, and I'm continuing to be pleased with what I see coming and excited about the future of that. And then along with innovation has always been the opportunity to take some price. And so again, kind of, is there anything different in terms of what you're seeing with, with regards to that? One of the advantages or nice aspects of our golf equipment space is it's not highly price sensitive, right? So we happen to cater in that space to a highly passionate and fairly upscale or wealthy consumer. I mean, and what you've seen over time, extended period of time, there's a lot of data on this, is that it's not sensitive to price or to mild economic pullbacks. So when you look back over time, you know, the Great Recession, two thousand and nine, if you're losing your job and you can't pay your rent, you won't buy the new driver. That is true. But short of that, yeah, it's right. We might skip the vacation, but they're passionate about the game of golf. It's... And it is not. It's more sensitive to the degree of innovation in the product than it is to price. And in an environment that we're, you know, all in now, right? When at some point you'll ask about tariffs, and- Yeah. You know, that's a little bit of an unknown at the moment, but it's rippling through. Mm-hmm. Being able to, you know, take price is gonna be very relevant for any importer. Yep. You know, within the golf equipment space, we don't view the consumer as highly sensitive or elastic on that regard. So yeah, I think maybe we should ask about tariffs while we're still on the golf equipment side. You mentioned on your last quarterly call, the tariff cost had increased from $25 million - $40 million as a headwind to EBITDA. But we think, we believe this cost is before any mitigation efforts. So could you maybe talk about what strategic initiatives you are doing to pursue to mitigate these costs? Sure, and we, you, we are exactly right. On the last earnings call, we updated our estimate of tariffs from 25 to 40 for the full year, you know, because the rate of tariff went up from what was assumed to be a 10% rate to roughly 20%. We don't really bring into the U.S. much from China, so we moved out of China during or just shortly after the first Trump administration. We got the joke. He didn't want China, and so we diversified out of that. But the tariff impact, of course, would go up as it relates, and we were, you know, able to, I believe during the last one... You know, slightly increase our guidance for the full year, so we thought we did a reasonably good job of managing the environment. But there is a $40 million impact that is flowing through the P&L and in the guidance that we provided. Our mitigation efforts are really comprehensive, and they're works in progress right now. We've had a gross margin initiative that we've been pushing hard on, and we've seen a lot of success with that is ongoing. So that is, you know, just improving the efficiency of our supply chain as it currently exists, distribution costs, we're relooking at how we design product, we're relooking at all of our margin programs, we're relooking at, you know, pricing opportunities, vendor negotiations, we're looking at our overall cost structure. So in an adage of you never waste a good crisis, you know, we're recognizing that this is a, you know, significant point in time, and we're reevaluating all aspects of our cost base and cost structure and making adjustments for that. Maybe we can move on now to Topgolf. You opened one new company-owned and operated store in Q2, and you're targeting four new openings for the year. Can you talk a little bit about the long-term pipeline, the new venues, and how you're thinking about where the newest opportunities lie? Sure. We originally actually were on track to open five, but one got pushed out, which that's just part of the normal development cycle that happens from time to time, and we've made a conscious decision to slow growth and focus on same-venue sales and operating the business for cash flow in this environment, and we're very fortunate that we can toggle between the two, but there's so we'll do a few next year as well, but as same-venue sales continue to inflect, then we'll have the opportunity to increase the rate of growth if we want. Nothing has changed with our sort of long-term view of the addressable market and opportunities there. Nothing's changed with the venue economics and or even financeability of the venues. The cap rates have stayed, you know, constant. Maybe we can focus on same-venue sales, because I know that's been an area that you, like you said, you've been very, very focused on, and maybe we can take a step back first, maybe going all the way back to when we were coming out of the pandemic and you had very strong same-venue sales. How much of the, maybe some of the challenges in the venue sales have been a result of really tough compares, versus, you know, anything from an execution standpoint? That's a great question. It's hard to, you know, parse between them, but certainly. So we merged with Topgolf. We had an ownership position of 15%. I was on that board since two thousand and twelve. They were gonna go public essentially in twenty twenty. COVID hits, instead of going public, they shut down, and through that process, the outcome of that process was a stock merger, but we were the surviving entity. And as it exited, obviously, sales surged, or it may not have been obvious. It wasn't obvious in twenty twenty what that was gonna happen, but it's obvious after the fact. And it was one of the first things to open post-COVID. It was very much on theme, right? Outdoor opportunity, so safer from a COVID perspective back then. That was one of the things. In golf, great space that was red hot, and you saw all aspects of that business really, surge post-COVID, particularly some of the events. And if you remember during that time as well, it was all about there was inflation, and there was a lot of wage inflation, and everybody was worrying about keeping their employees. And so there was a ton of parties, events, et cetera, at Topgolf. Mm-hmm. So you saw, you know, a big spike, we were all geniuses, and then a reversion after that, and so there is a lot of that, essentially noise. We talked about the other side of our business, the golf business, there hasn't been any reversion, in fact, there's just been continued strength, but on the Topgolf business, there was some significant reversion. There's also been some changes that have evolved there, and so, as the economy has progressed and you know, people are clearly more value-conscious now, than they were, so some of the things that we initially put into play at Topgolf in terms of reservation systems and efficiencies and, you know, we've done an amazingly good job at building the margin profile of that business and, you know, strengthening it from that perspective. But we saw same-venue sales inflect negatively, and that has been, you know, a big overhang in our overall stock performance, major factor. And as we are, if we are, or when we are successful in inflecting that, you know, it's a major opportunity as well. What we've done recently is introduce some value propositions. And, Kate, it's as simple as it sounds, is that Topgolf is clearly a strong concept. It clearly still resonates with the consumer. It's, you know, we have Hundred X data that's on our website and investor decks, where we are the number one in fun, atmosphere, experience, but like, number 18 in value. And as the consumer's evolved and become more sensitive to that, we've had to address that value proposition, and we've done that. Earlier this year, starting over the summer, we've seen the traffic really inflect positively. It reinforces the conviction of how strong this concept is, and, you know, in June and July, double-digit growth in traffic, when, as you know, because all the people you cover, traffic is the holy grail of this, and we're doing that even though the event side of our business is still down, and, you know, we see some very positive green shoots in terms of our initiatives there, and also reinforcing in the strength of the concept. So you mentioned in the HundredX data, that value piece was maybe the weaker KPI. Yeah. I know you've introduced, like, half golf- Yeah ... half-off golf, Monday through Thursday. That's right -and Sunday Funday. So clearly trying to convey value. And, you know, this isn't like a one-time thing. This is a repositioning. This is a strategic reset for that business, where we're going to, you know, use this and deliver. We, for instance, it's Brian's question, sorry, but I'm stealing it- Mm-hmm. But on the margin, right, you saw even margin flat, same venue sales down 6% in Q2, but EBITDA margin's flat. So we can do this and still drive good economics. Right. The two big initiatives that we put in place were Sunday Funday, great program, bring the whole family to Topgolf on Sunday. A specific price point on that one, $30-$40 per bay time, and we saw traffic go up 20%-30%. I mean, immediate, massive, big move. We're busy on Friday and Saturdays, but the Monday through Thursday, we've got a lot of free capacity, like you would on a cruise ship or a hotel, right? And so filling the time there is very efficient and very cost-effective, and so we have a 50% off program that we've implemented Monday through Thursday, and again, it has had a dramatic and immediate improvements in traffic. So there are a couple of questions, maybe staying on the top line for a minute, and then I wanted to ask about the EBITDA point that you made before. There's, you know, the consumer side of it, and then there's the corporate side. You said people are having lots of parties and things to keep- Yeah Their employees. I think the corporate side of things might still be a little bit challenged. It is a little more challenged still, yes. Is there anything from an execution standpoint you're looking to do to- Yes ... for more growth? Yeah, we're definitely working on that as well. There's a lot of things that we think we can do to more positively impact that. So, you know, some of them as simple as, you know, the planners have told us they want per person pricing, so you know what we're gonna do? We're gonna give them per person pricing. Mm-hmm. They wanna do three and four bay reservations online. They don't want to have to talk to a planner. We have our sales team that does that, so we're implementing that. We hired Palantir to help us on lead generation using big data, and so they're executing across that right now. So there's lots of different things that we think we can do to positively impact that side of the business as well. But that side of the business is also. It's just a little cyclical. Everything's cyclical, but that is corporations, right? We're all cutting back more than we were in 2019 or coming out of the COVID. So that too will ebb and flow. Mm-hmm. But we are confident in our position in that space and our ability to drive it. It has improved a little bit, but it is still more impacted than the consumer side of our business, where we saw such an immediate reaction to price. I mean, corporations are essentially less price-sensitive. So if you bring me an event right now and say, "Hey, I'm gonna give you half off, you know, a corporate event," the answer is still no, right? Mm-hmm. We're austere right now. There's so much uncertainty in the world that we're managing our costs in a way that doesn't really matter what you'd present on a price perspective. Right. Right? Those budgets are down. Mm-hmm. But that, that's not gonna stay forever. So I did wanna go back. You mentioned EBITDA was flat in spite of- EBITDAR, yes. EBITDAR, in spite of some of these discounts, that you're offering. So can you maybe talk a little bit about what's offsetting that and how you've been able to- Sure. You want to take that? Just, I mean, just overall, the EBITDAR margin performance has been a real bright spot for us. Mm-hmm. When we first acquired Topgolf, it was, they were at 29%. The team, through a lot of different initiatives, was able to get it up to 34%, and then, as Chip mentioned, most recently in Q2, it was flat year -over -year, and a lot so far has been... There's a lot of initiatives that go into that, but then their optimization of their labor model has been very beneficial and paid off a lot, and there's still a lot more to go. I mean, they don't have order in bay yet, which is gonna be a significant unlock... as Chip mentioned, when the corporate events come around, which is the highest margin business, that's an unlock. And doing that when you have declining same-venue sales, well, as they continue to inflect the positive, then all those improvements flow through. It's been a real bright spot, and I think there's more to go. Okay. I think we can get to the point now where we're asking all of the companies that sit with us five questions. We've touched on some of them already, but if we could have your view just again on the consumer environment, given you have one business that's maybe not super economically sensitive and another business that's maybe a little bit more so- Oh, yeah, we have a little bit of both. What are your expectations for the environment in the second half of the year relative to the first half of the year? Better, same, or worse? And our consumer has been, you know, quite good. Mm-hmm. So we've been very pleased with the trends that we've had through the summer, and you know, I see no reason for that to change. Any view on 2026 when it comes to that? 2026 is a little fuzzier, you know, to predict at this point. With pricing, and again, we touched upon this, too, you have the innovation that allows you to take price, but on any kind of like for like SKU pricing that you have taken or have had to take as a result of tariffs or anything else, what is the general response from an elasticity standpoint? We're highly elastic on the Topgolf side, on the consumer, and very inelastic on the golf equipment side. Mm-hmm. So we have been, you know, strategic, surgical, pick your buzzword, on the golf equipment side, but we've taken some price and had no impact. With inventory, can you talk about your expectations for inventory growth into the second half? Have you had to take any inventory in earlier? Have you anticipated that at all because of the tariff environment? Sure. I don't think there's any big change over what's normal. I mean, as we get toward the end of the year, we start bringing in product, the new product for next year, and you'll see that happen again, but there hasn't been a material front-loading of the inventory. Okay. And most companies have said no to this question, but any kind of disruption that you're seeing as a result of some of the supply chain uncertainty? No disruption from a supply certainty or anything. You know, long term, it's gonna. Once it settles down, right, we're gonna make adjustments further on where the supply chain moves, but in the short term, nothing. Short term, next six months, right? I don't see anything. And then, because of the two different businesses, you can answer this for both of them if you'd like. Of the non-tariff margin drivers, how are you thinking about freight, wages, and materials into 2026? I don't really see any significant change on freight, wages, or material at this point. Freight rates have been subdued, so I don't see a reason to believe that there'll be any change on that. No material movements on most materials or the wages. So it's good, you know, balanced environment on all of those prospects, and our core consumers have been healthy. And then with the competitive landscape, again, two different competitive landscapes on the equipment side and the Topgolf side. We've seen some consolidation in traditional retail. So just in general, do you think market share consolidation will speed up, slow down, or be the same in 2026 for the two different businesses? I think that it'll continue to speed up. I think that all of this ambiguity and such is going to favor the strong, those with the, you know, stronger supply chains. We've demonstrated over time the strength of ours, ability to adapt on that. You know, we have to build models right now where, you know, tariffs in, tariffs out, but we have a strong manufacturing base in golf balls in the U.S. Those that have that in a U.S. tariff environment will have a competitive advantage, but we also are well-positioned, whichever way that goes. As the... We talked about on the equipment side, the ability, you know, how important is innovation? And innovation is getting harder and harder. I've been in this for long enough now to watch it evolve and, you know, you used to just have to have, you know, a mechanical engineer to design a new club, and now you need a mechanical engineer, an aerodynamicist, two metallurgists, a hundred engineers throughout Asia to work with the manufacturing processes, software engineers, and AI capabilities. If you do all of that, you can compete and bring something out that the others can't follow with, and you better have a pretty good patent team on top of that. It's going to continue to be more difficult and more; it's gonna reward the stronger, and at the same time, the retailers consolidate, right? Now, we have a very strong green grass distribution as well, but, you know, they want to deal with singular, stronger vendors. And so, the trend on that's very clear, and I think it'll continue. On the Topgolf business, you know, that's a really interesting business. Obviously, we need to inflect same-venue sales. We're seeing some green shoots there, but its defensive mode is amazing. It's the best I've seen of any business I've been around. It's, of course, gonna compete against movies and other uses of free time, but its, its position within the space right now of golf-oriented, driving range-type business is really unquestioned. Okay. With that, thanks for joining us today. Thank you, Kate. Appreciate it. Thank you.