CALY 10-K & 10-Q changes, risk factors and insider trading

Certain Factors Affecting Topgolf Callaway BrandsGolf Company

Our products and entertainment offerings are recreational in nature and are therefore discretionary purchases for consumers. In addition, our Topgolf venues business is dependent upon consumer and corporate discretionary spending on leisure and entertainment-based offerings. Consumers are generally more willing to make discretionary purchases of golf products and to spend on leisure and out-of-home entertainment during favorable economic conditions and when consumers are feeling confident and prosperous. As a result, demand for our products is highly sensitive to downturns in the economy and the corresponding impact on discretionary consumer spending. Any actual or perceived deterioration or weakness in general, regional or local economic conditions, unemployment levels, the job or housing markets, consumer debt levels or consumer confidence, as well as other adverse economic or market conditions due to inflation or otherwise may lead to customers having less discretionary income to spend on entertainment and recreational activities, and may result in significant fluctuations and spending patterns year to year. Discretionary spending is also affected by many other factors, including general business conditions, interest rates, the availability of consumer credit, taxes and consumer confidence in future economic conditions. A significant or prolonged decline in general economic conditions, a period of lower discretionary spending or disposable income, or uncertainties regarding future economic prospects that adversely affect consumer discretionary spending, whether in the United States or in our international markets,internationally, could result in reduced sales of our products and reduce demand and spending on our entertainment offerings,products, which in turn would have a negative impact on our results of operations, financial condition and cash flows.

We generate a substantiallarge portionmajority of our revenues from the sale of golf-related products, including golf clubs, golf balls, golf-related soft goods and golf accessories.

The demand for golf-related products in general, and golf balls in particular, as well as the demand for golf-related soft goods, is directly related to the number of golf participants and the number of rounds of golf being played by these participants. Golf participation is impacted by, among other things, the demographics (including age of golfers), dedication levels, weather and economic conditions. If golf participation decreases or the number of rounds of golf played decreases, the overall dollar volume of the market for golf-related products may not grow or may decline and sales of our products may be adversely affected. Further, we generate substantial revenue from our Topgolf business. The demand for golf and overall popularity of the sport, including through increased off-course golf participation, is tangentially related to overall guest traffic and spending at each of the Topgolf venues, and therefore, if demand for golf or the overall popularity of the sport decreases, Topgolf sales could be adversely affected.

In addition, the demand for golf products, golf entertainmentproducts and other soft goods and apparel is directly related to the popularity of magazines,publications, cabletelevision channelschannels, social media and other media dedicated to golf, television coverage of golf tournaments and attendance at golf events. We depend on the exposure of our products through advertising and the media or at golf tournaments and events. Any significant reduction in television coverage of, or attendance at, golf tournaments and events or any significant reduction in the popularity of golf magazines or golf television channels, could reduce the visibility of our brand and could adversely affect our sales.

In order for us to significantly grow our sales of golf clubs or golf balls, we must either increase our share of the market for golf clubs or golf balls, develop markets in geographic regions historically underrepresented by our products, or the overall market for golf clubs or golf balls must grow. We already have a significant share of worldwide sales of golf clubs and golf ballsballs, and the golf industry is very competitive. As such, gaining incremental market share quickly or at all is difficult. Therefore, opportunities for additional market share may be limited given the challenging and competitive nature of the golf industry, and the overall dollar volume of worldwide sales of golf clubs or golf balls may not grow or may decline.

We primarily sell our golf and apparel products to retailers and to foreign distributors. We perform ongoing credit evaluations of our customers’ financial condition and generally require no collateral from these customers. However, a severe or prolonged downturn in the general economy could adversely affect the retail market which in turn, would negatively impact the liquidity and cash flows of customers, including the ability of such customers to obtain credit to finance purchases of our products and to pay their trade obligations. A failure by our customers to pay on a timely basis a significant portion of outstanding accountaccounts receivable balances would adversely impact our results of operations, financial condition and cash flows.

Golf Equipment & Active Lifestyle. We compete against well-known large-scale global golf equipment and apparel manufacturers and retailers, many of whom have significant competitive strengths, including long operating histories, a large and broad consumer base, established customer and supplier relationships, strong brand recognition and greater financial, research and development, distribution, and other resources. There are unique aspects to the competitive dynamic in each of our product categories and markets. Pricing pressures, reduced profit margins or loss of market share or failure to grow in any of our markets, due to competition or otherwise, could materially adversely affect our business, financial condition and results of operations.

In our ActiveApparel, LifestyleGear and Other segment, we face significant competition in every region with respect to each of our product categories and offerings. In most cases, we are not the market leader with respect to our apparel, gear and accessory markets, and many of our competitors have significant competitive advantages, including longer operating histories, larger customer bases, greater brand recognition and greater financial resources. Our competitors may be willing to discount prices and accept lower profit margins to compete with us and, as a result, we may lose market share and sales, or be forced to reduce our prices to meet competition.

Our activeapparel, lifestylegear and Topgolfother venuesbusiness businesses facefaces risks associated with changedchanging consumer tastes and preferences and fashion trends.

Our expandingapparel, activegear lifestyleand other business and our Topgolf venues business areis subject to pressures from changing consumer tastes and preferences on a global level and, as a result, we are dependent on our ability to timely introduce products and services that anticipate and/or satisfy such preferences.

With respect to our active lifestyle business, changesChanges in consumer preferences, consumer purchasing behavior, consumer interest in recreational or other outdoor activities, and fashion trends could have a significant effect on our sales. Our success depends on our ability to identify and originate product trends as well as to anticipate, gauge and react to changing consumer demands and buying patterns in a timely manner. However, significant lead times for many of our products, including OGIO,Callaway TravisMathewGolf, OGIO and Jack Wolfskin-brandedTravisMathew-branded products, may make it more difficult for us to respond rapidly to new or changing product trends or consumer preferences. All of our products are subject to changing consumer preferences that cannot be predicted with certainty. Our new products may not receive consumer acceptance as consumer preferences could shift rapidly to different types of lifestyle products or away from these types of products altogether, and our future success depends in part on our ability to anticipate and respond to these changes. In addition, decisions about product designs often are made far in advance of consumer acceptance. If we or our customers fail to anticipate and respond to consumer preferences or fail to respond in a timely manner or if we or our customers are unable to effectively navigate a transforming retail marketplace, we could suffer reputational damage to our products and brands and may experience lower sales, excess inventories and lower profit margins in current and future periods, any of which could materially adversely affect our business, financial condition and results of operations.

Our golf equipment business and our activeapparel, lifestylegear and other business each have a concentrated customer base. The loss of one or more of our top customers could have a significant effect on our sales.

On a consolidated basis, no single customer accounted for more than 10% of our consolidated revenues in 2024,2025, 2023,2024 or 2022.2023. Our top five customers accounted for approximately 11%21%, 22% and 23% of our consolidated revenues in 2024,2025, 2024 and approximately2023, 12% of our consolidated revenue in 2023 and 2022.respectively.

Our top five customers specific to each operating segment represented the following as a percentage of each segment’s total net revenuessales:

•ActiveApparel, LifestyleGear and Other top five customers accounted for approximately 17%,25%, 19%24% and 17%26% of total consolidated ActiveApparel, LifestyleGear and Other sales in 2024,2025, 20232024 and 2022,2023, respectively.

The following discussion should be read in conjunction with the Consolidated Financial Statements, the related notes and the section “Important Notice to Investors Regarding Forward-Looking Statements” that appear herein. This section of this Annual Report on Form 10-K generally discusses: (i) 2025 and 2024 items and year-to-year comparisons between 2025 and 2024 and (ii) 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.2023 Discussions relateddue to 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Annual Report on Form 10-K can be found in the section entitled “Management’s Discussion and Analysisrestatement of Financialprior Conditionperiod andamounts Resultsto ofreflect Operations”reporting in Part II, Item 7 offor our Annualdiscontinued Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 29, 2024.operations.

Sell-through promotions such as price reductions and price concessions are short-term sales programs that are generally offered throughout the product’s life cycle, which is approximately two years, and are generally offered at the end of the product’s life cycle. We calculate an estimated rate related to these programs which is based on a combination of historical and forecasted data. We record a reduction to net revenuessales using this rate at the time of the sale and monitor this rate against actual results and forecasted estimates. Adjustments to the rate are made as necessary in order to reflect the amount of consideration we expect to receive from our customers. If the actual amount of variable consideration is significantly different than our accrued estimates, we may be exposed to adjustments to revenue that could be material. Assuming there had been a 10% increase in the rate used to record sales program incentives, pre-tax income for the year ended December 31, 20242025 would have decreased by approximately $2.0$1.5 million.

We apply the guidance within Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations, when accounting for our acquisitions to determine whether a transaction is the acquisition of assets, or the acquisition of a business on the date of the acquisition. Asset acquisitions are accounted for by allocating the cost of the acquisition to the individual assets and liabilities assumed on a relative fair value basis; whereas the acquisition of a business requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at the acquisition date fair values. Additionally, the acquisition of a business requires us to make significant estimates and judgementsjudgments when assigning fair value to any assets and liabilities assumed. We may use, amongst other things, certain estimates related to expected future revenues, growth rates, cash flows, discount rates and uncertain tax positions and valuation allowances to assign a value to certain acquired assets. If we receive new information within the 12 month allowable measurement period about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognized as of that date, we may adjust the purchase price allocation in the reporting period in which the amounts are determined. Any subsequent adjustments recorded after the conclusion of the allowable 12 month measurement period or final determination of the values of assets acquired or liabilities assumed are recorded to our consolidated statements of operations.

In accordance with FASB ASC 350, Intangibles—Goodwill and Other, we evaluate the recoverability of our goodwill and indefinite-lived intangible assets at least annually or more frequently whenever indicators are present that the carrying amounts of these assets may not be fully recoverable. To determine fair value, we use discounted cash flow estimates, quoted market prices, royalty rates when available and independent appraisals as appropriate. These estimates are subjective in nature and involve significant uncertainties and judgements.judgments. We use our best judgment based on current facts and circumstances related to our business when making these estimates, however, if actual results are not consistent with our estimates and assumptions used in calculating future cash flows and asset fair values, we may be exposed to impairment losses that could be material. An impairment loss is measured as the excess of the carrying amount of the asset over its estimated fair value. An impairment loss is recorded as a reduction to the carrying value of the asset and a charge to earnings in the period in which the impairment loss occurred.

We perform our goodwill impairment assessment at the reporting unit level using a combination of an income approach and a market approach. The income approach valuation method requires us to make projections of revenue, gross margin, operating expenses, and working capital over a multi-year period, and also includes weighted-average cost of capital estimates, which reflect the relative risk of an investment. The market approach valuation method determines fair value by utilizing earnings multiples of comparable public companies or interests, which reflect the market in which each relative reporting unit operates, as well as recent comparable market transactions. We did not record any impairments on goodwill during the year ended December 31, 2025.

For our indefinite-lived intangible assets, which primarily consist of our trade names, we estimate fair value based on an income approach using the relief-from-royalty method which assumes that, in lieu of ownership, a third-party would be willing to pay a royalty in order to derive a benefit from the trade name. This approach includes reviewing current licensing agreements, market benchmarking and performing branded product profitability assessments, among other factors, to assign an estimated royalty rate. Once a royalty rate is assigned, a discount rate is applied to the estimated future cash flows of the asset in order to determine the fair value of the trade names. As a result of our intangible asset impairment assessment performed as of December 31, 2024,2025, we determined that the fair value of our Topgolf tradename was impaired, and as a result, we recorded an impairment loss of $99.6$284.0 million to write down the Topgolf tradename to its new estimated fair value. See Note 4. “Discontinued Operations” in the Notes to Consolidated Financial Statements in this Form 10-K for additional information.

Our income tax provision/benefit and related income tax assets and liabilities are based on a combination of actual and expected future income, U.S. federal and foreign statutory income tax rates, and tax regulations and planning opportunities in the jurisdictions in which we operate. Significant judgementjudgment is required when interpreting the applicable tax laws and regulations in such jurisdictions, evaluating our uncertain tax positions, and assessing the likelihood of realizing tax benefits. We accrue an amount for our estimate of additional tax liability, including interest and penalties in income tax provision, for any uncertain tax positions taken or expected to be taken in an income tax return. We review and update the accrual for uncertain tax positions as more definitive information becomes available. Actual results could differ from those judgements,judgments, and changes in judgementsjudgments could materially affect our consolidated financial statements.

Certain income and expense items are accounted for differently for financial reporting and income tax purposes where tax regulations may require certain items to be included in our tax return at different times than when these items may be reflected in our financial statements. As a result, the income tax provision or benefit reflected in our consolidated statements of operations may differ from our tax returns filed with the applicable taxing authorities. These differences may be permanent or temporary, depending on their nature and the applicable tax regulations related to them, and as such, may create deferred income tax assets and liabilities, which are recognized on our consolidated balance sheet. Deferred income tax assets generally represent items that can be used as a tax deduction or credit in future tax returns for which we have already recorded a tax benefit in our consolidated statements of operations. We may record a valuation allowance to reduce our deferred income tax assets if, based on all available evidence, we believe that some portion of the tax benefit is not expectedmore likely than not to be realized.

•A constant currency measure on net revenuessales in order to demonstrate the impact of foreign currency fluctuations on these results. This information represents an estimate for comparative purposes and is calculated by taking current period local currency results and translating them into U.S. dollars based on the foreign currency exchange rates for the applicable comparable prior period.

•Net income and diluted earnings per share excluding the non-cash amortization of purchase accounting adjustments associated with acquired intangible assets, including acquired customer and distributor relationships and acquired developed technology related to our merger with Topgolf, acquisitions of Jack Wolfskin, TravisMathew and OGIO, and distribution rights in the Korea apparel marketOGIO (collectively, the “Acquisitions”). While the amortization of these assets is excluded from our calculation of non-GAAP net income, the revenue, operating costs and associated acquired assets that contribute to the revenue generation associated with these acquired companies is reflected in our calculation of non-GAAP net income.

Our products and services are considered to be non-essential items and are therefore discretionary purchases for consumers. In addition, our Topgolf venues business also depends on corporate discretionary spending relative to its leisure and entertainment-based offerings. As a result, demand for our products isand highlyservices sensitivecould tobe impacted by downturns in the economy and the corresponding impact on discretionary consumer and corporate spending. During 2024, macroeconomicMacroeconomic factors including sustained inflation and high interest rates,rates whichcontinue continued into the fourth quarter andto put downward pressure on consumer and corporate discretionary spending.spending, in addition to the recent increase in tariffs. While we generally try to mitigate the impact of such macroeconomic factors by closely monitoring changes in consumer retail spending behavior and through the implementation of various strategic initiatives, the persistence of these trends may have an adverse impact on our operating results depending on the severity and length of the changes.

A significant portion of our business is conducted outside of the United States in currencies other than the U.S. dollar. Therefore, we enter into foreign currency forward contracts to mitigate the effects that changes in foreign currency rates may have on our financial results. While these foreign currency forward contracts can mitigate the effects of changes in foreign currency rates in the short-term, they do not eliminate those effects, which can be significant, and they do not mitigate their effects over the long-term. These effects include (i) the translation of results denominated in foreign currency into U.S. dollars for reporting purposes, (ii) the mark-to-market adjustments of certain intercompany balance sheet accounts denominated in foreign currencies and (iii) the mark-to-market adjustments of our foreign currency forward contracts. In general, our overall financial results are affected positively by a weaker U.S. dollar and are affected negatively by a stronger U.S. dollar as compared to the foreign currencies in which we conduct business. Fluctuations in foreign currencies had ana unfavorablefavorable impact on international net revenuessales of $18.2$0.6 million for the year ended December 31, 2024,2025, relative to the same period in the prior year, on a constant currency basis.

Sustained inflationaryInflationary pressure partiallymay contributedcontribute to the increase in the cost of our products as well as operating costs. While we weregenerally may be able to partiallyminimize offsetthe theseimpact of inflationary pressures by increasing the price of our products and services and through costhigher managementprices or other initiatives, the length and severity of these conditions are unpredictable, and should conditions persist and/or worsen, such inflationary pressures may have a furtheran adverse effect on our operating results.expenses. Further, we may not be able to offset these increased costs through price increases. As a result, our cash flows and results of operations could be adversely affected.

Our products, services and brands are reported under threetwo operating segments: Topgolf, which includes the operations of our Topgolf business; Golf Equipment, which includes the operations of our golf clubs and golf balls business; and ActiveApparel, Lifestyle,Gear and Other, which includes the operations of our soft goods business marketed under the Callaway, TravisMathew, Jack WolfskinTravisMathew and OGIO brand names. For further detail related to our operating segments, products and seasonality, see “Part I, Item 1. Business – Overview” in this Form 10-K.

Net revenues from our Topgolf operations are primarily concentrated in the United States and Europe, with the United States being our principal market. We sell our Golf Equipment productsand Apparel, Gear and Callaway Golf and OGIO Active LifestyleOther products in the United States and internationally, with our principal international regions being Europe and Asia. ActiveApparel, LifestyleGear revenuesand fromOther product sales for our TravisMathew and Jack Wolfskin operationsbusiness are largelyprimarily concentrated in the United States and Europe, respectively.States.

During the year ended December 31, 2024,2025, net revenuessales in the United States increaseddecreased $21.1$17.8 million (0.7%1.3%) compared to the year ended December 31, 2023.2024. The increasedecrease was primarily due to incrementallower revenuessales from the openingvolumes of newgolf Company-ownedclubs and operatedtravel Topgolf venues, partially offset by a decline in same venue sales combined with a decline in sales of TravisMathew products in the corporate wholesale channel.gear.

During the year ended December 31, 2024,2025, net revenuessales in Europe decreasedincreased $29.5$21.7 million (5.5%11.9%) compared to the year ended December 31, 2023.2024. The decreaseincrease was primarily driven by a decline in sales of Jack Wolfskin products in the wholesale channel, partially offset by increases in golf club sales and Toptracergolf installations.ball sales.

During the year ended December 31, 2024,2025, net revenuessales in Asia decreased $44.3$16.0 million (8.3%4.2%) compared to the year ended December 31, 2023.2024. The decrease was primarily due to softersoft demand in the apparel market in Korea combined with unfavorable foreign currency exchange rates in both Japan and Korea. These decreases were partially offset by increases related to market expansion and direct to consumer growth in the Jack Wolfskin business in China.Japan.

During the year ended December 31, 2024,2025, net revenuessales in Rest of World increaseddecreased $7.2$5.5 million (5.5%4.1%) compared to the year ended December 31, 2023,2024. The decrease was primarily indue to lower golf equipment sales ofin Golf EquipmentCanada and Active Lifestyle products in the Australia andcombined Canada markets, partially offset bywith unfavorable foreign currency rates.impacts.

CostsGross and ExpensesProfit (in millions, except percentages)

Cost of Productssales

CostOur cost of productssales is variable in nature and fluctuates relative to sales volumes. Cost of productssales includes raw materials and component costs, direct labor and manufacturing overhead, inbound freight, dutiesduties, tariffs and shipping charges, and depreciation and amortization,amortization directly related to manufacturing and retail merchandise costs for products sold in retail shops within Topgolf venue facilities. During the year ended December 31, 2024, cost of products decreased $42.2 million (2.9%) as compared to the year ended December 31, 2023. The decreases were primarily due to lower sales in our Active Lifestyle and Golf Equipment operating segments.distribution.

In 2025, we executed a strategic realignment to focus on our core Golf Equipment and complementary soft goods businesses, which included the sale of Jack Wolfskin on May 31, 2025, for approximately $290.0 million and the sale of a 60% stake in our Topgolf and Toptracer business (“Topgolf”) based upon an equity value of approximately $1,100.0 million. The Topgolf transaction closed effective January 1, 2026, resulting in net proceeds to us of $818.8$820.1 million from the sale and related financing transactions, net of preliminary working capital adjustments and cash retained. Our remaining 40%39.3% interest in Topgolf (following the sale by Topgolf of additional dilutive units in April 2026, which decreased our non-controlling interest) is accounted for under the equity method.

As a result of these divestitures, the operating results of Jack Wolfskin and Topgolf are reportedclassified inas discontinued operations for all periods presentedpresented, while our proportionate share of earnings and losses related to our remaining equity method investment in thisTopgolf Formis 10-Q.included in continuing operations. For more information, please refer to Note 3 of this Form 10-Q or our Annual Report on Form 10-K for the year ended December 31, 2025.

•Net income and diluted earnings per share from continuing operations excluding certain non-cash and non-recurring charges,items, as further detailed below, as well as the income (loss) from our equity method investment in Topgolf. In addition, for periods presented for fiscal year 2025, net income and diluted earnings per share from continuing operations were adjusted to include interest expense associated with term loan debt that was recognized as part of discontinued operations in order to show the full effect of consolidated interest expense from our corporate debt.

Our products are discretionary purchases, and demand may be adversely affected by changes in macroeconomic conditions that impact consumer discretionary spending. These conditions include, among other factors, inflationary pressures, interest rate environments, and changes in trade policies or tariffs.tariffs, and geopolitical tensions that may create an uncertain environment for global trade and contribute to volatility in commodity, energy, and other input costs. While we seek to mitigate the effects of such factors through monitoring consumer spending behavior and implementing strategic initiatives, prolonged or severe adverse economic conditions could negatively impact our operating results.

In 2025, the U.S. government implemented reciprocal tariffs affecting many countries in which we do business, increasing costs for our products, components, and raw materials, a significant portion of which are sourced from outside the United States, including Asia and other regions, which may adversely affect product availability, pricing, and demand. The U.S. government has subsequently announced and rescinded various tariffs, contributing to continued uncertainty regarding their economic impact. On February 20, 2026, the United States Supreme Court struck down certain tariffs previously imposed under the International Emergency Economic Powers Act of 1977.1977 The(“IEEPA”). rulingAs dida notresult, addresswe potentialfiled refundsapproximately $49.5 million of tariffsrefund previously assessed under that authority, and as of March 31, 2026, we have not recognized an assetclaims related to anypreviously potentialpaid refund.IEEPA Followingtariffs, the ruling, additional tariffs were imposed under a separate authority, further contributingsubject to uncertaintyapplicable regardingeligibility, tariff levels, duration,filing, and relatedrecovery costs.requirements.

A significant portion of our operations is conducted outside the United States in currencies other than the U.S. dollar. We use foreign currency forward contracts to partially mitigate the short‑term effects of exchange rate fluctuations on our financial results; however, these instruments do not eliminate currency impacts or address long‑term exposure. Foreign currency fluctuations affect our results primarily through the translation of foreign‑currency‑denominated results into U.S. dollars and mark‑to‑market adjustments on certain intercompany balances and foreign currency forward contracts. For the three and six months ended MarchJune 31,30, 2026, foreign currency fluctuations had an unfavorable impact of $5.1 million and a favorable impact of $7.6$2.5 millionmillion, respectively, on international net revenues.

Net sales for the three months ended MarchJune 31,30, 2026 increased $57.9$11.8 million or 9.2%2.0% (8.0%2.8% on a constant currency basis) as compared to the three months ended MarchJune 31,30, 2025. Segment operating income increased $32.4$28.2 million or 23.6%26.7% driven by increases in both our Golf Equipment and Apparel, Gear and Other operating segments.

The $42.3$18.5 million (9.5%4.5%) increase in Golf Equipment net sales for the three months ended MarchJune 31,30, 2026 was primarily due to an 11.9% increase in golf club sales due to improved launch execution, strong reception of new product launches, and strong overall market demand, combined with a 1.6%14.8% increase in golf ball sales driven by the successfulcontinued launchsuccess of the new Chrome Tourfamily ball,of golf balls and overall gains in market share, and a 1.2% increase in golf club sales primarily driven by continued sales momentum in fairway woods. These increases were partially offset by SKUdecreases rationalizationin initiativessales of lower-margin golf ball products related to lowerSKU marginrationalization ball products.initiatives.

The $15.8$24.1 million increase in Golf Equipment segment operating income for the three months ended MarchJune 31,30, 2026 was primarily driven by the increase in net sales noted above, combined with improved gross margins resulting from favorable pricingpricing, andproduct mix, cost savings from gross margin initiatives,initiatives whichand morelower thantariffs. These increases were partially offset theby unfavorablean impactincrease of approximately $12.0 million from incremental tariffs. In addition,in operating expenses increasedof $8.1$4.2 million primarily due to the recognitiontiming of anadvertising $8.2spend millionand leasecost-of-living termination incentive gain in the first quarter of 2025 that did not recur.adjustments.

The $15.6$6.7 million (8.4%3.6%) increasedecrease in Apparel, Gear and Other net sales for the three months ended MarchJune 31,30, 2026,2026 was primarily due to increasesdecreases in sales of Callaway soft goods due to timing of shipments and decreases in Asia from unfavorable foreign currency impacts, partially offset by an increase in sales of TravisMathew apparel products primarily related to strong overall market demand and improvedhigher direct-to-consumer sales in the TravisMathew business.sales.

The $16.6$4.1 million (46.9%14.0%) increase in segment operating income for the three months ended MarchJune 31,30, 2026 was primarily driven by the increase in net sales and higher gross margins from favorable pricing and cost savings from gross margin initiatives, which more than offset the decrease in net sales and the unfavorable impact of approximately $3.4 million from incremental tariffs. InThese addition,increases were partially offset by an increase in operating expenses increasedof $2.8$0.8 million due to theslight recognitionincreases ofrelated ato $3.8 million lease termination incentive gaintiming in theadvertising first quarter of 2025 that did not recur.spend.

The $32.7$13.6 million (7.9%3.4%) increase in net sales for the three months ended MarchJune 31,30, 2026 was primarily due to higher sales volumes of golf clubsequipment combined with higher TravisMathew sales, partially offset by a decrease in sales of OGIO products. The $46.3 million (5.7%) increase in net sales for the six months ended June 30, 2026 was primarily due to higher golf equipment and TravisMathew sales.

The $18.9$0.2 million (29.4%0.3%) increase in net sales for the three months ended MarchJune 31,30, 2026 was primarily due to increases in golf equipment product sales. The $19.1 million (14.8%) increase in net sales for the six months ended June 30, 2026 was primarily due to increases in golf equipment product sales from strong demand combined with the favorable impact of changes in foreign currency.

The $9.5$0.4 million (22.4%0.9%) increasedecrease compared tofor the three months ended MarchJune 31,30, 2026 was primarily due to lower golf equipment sales in Canada, partially offset by increases in other rest-of-world regions. The $9.1 million (10.7%) increase for the six months ended June 30, 2026 was primarily due to higher golf equipment sales in Canada and Australia.

During the three months ended MarchJune 31,30, 2026, gross profit increased by $43.1$43.3 million (15.2%16.4%) as compared to the prior year period. Gross profit as a percent of net sales (“gross margin”) increased to 47.5%50.1% for the three months ended MarchJune 31,30, 2026 compared to 45.0%43.9% for the three months ended MarchJune 31,30, 2025. The improvement in gross margin was due to favorable pricing combinedand withproduct mix, cost savings from gross margin initiatives, which more than offsetand the unfavorable impactsreceipt of incremental$10.8 tariffs.million of tariff refunds in the current period.

The $8.7$11.1 million (5.3%3.3%) increase in SG&A expenses for the threesix months ended MarchJune 31,30, 2026 was primarily due to a $12.0 million gain recognized from a lease termination incentive in the first quarter of 2025, which did not recur in 2026, combined with animpairment increasecharges inon employeeretail costsassets primarilyat relatedTravisMathew, tolosses coston ofasset livingdisposals, and saleshigher commissionslegal increases,costs, partially offset by lower advertising spend due to the timing of planned advertising activities.activities, decreased tour expenses, and a decrease in depreciation and amortization.

The $0.7$0.4 million (4.4%2.6%) decreaseincrease in research and development expenses for the three months ended MarchJune 31,30, 2026 was primarily due to aan declineincrease in depreciationcomputer expensesoftware combinedcosts withand costprofessional savings initiatives.fees.

Interest income/expense

The $9.1 million (61.1%) decreasedecreases in interest expense, net for the three and six months ended MarchJune 31,30, 2026 waswere primarily due to lower interest expense on our term loan as a result of the partial repayment on January 2, 2026 in connection with completion of the sale of Topgolf.Topgolf and its full repayment on May 29, 2026.

Other income/expense

The $0.5$1.8 million (20.8%) increase in other income (expense), net for the three months ended MarchJune 31,30, 2026 was primarily due to a $4.3$4.5 million remeasurementfavorable gain on our investmentchange in Fiveforeign Ironcurrency Golf, $2.1 million of higher dividend income on our money market accountstransactions and $1.2hedging activity and $1.1 million of income from transition services provided to Topgolf, partially offset by a $7.5$2.3 million write-off of unamortized debt issuance feescosts in connection with the partialfull repayment of the term loan mentionedand above.a $0.7 million decrease in dividend income on our money market accounts due to lower average balances resulting from funds being used for debt repayments and stock repurchases.

The $27.7$1.0 million and $28.7 million loss during the three and six months ended MarchJune 31,30, 20262026, respectively, represents our proportionate share of Topgolf’s net losses following the completion of the sale of a majority interest in the business effective January 1, 2026.

The $5.5$21.7 million increaseand $27.2 million increases in income tax expense for the three and six months ended MarchJune 31,30, 20262026, wasrespectively, were primarily due to higher pre‑tax earnings.earnings, as well as the tax impacts from our investment in Topgolf. As a percentage of pre-tax income, our effective tax rate for the three months ended MarchJune 31,30, 2026 increased to 30.4%31.5% compared to 30.0%22.4% in the comparable period of 2025. As a percentage of pre-tax income, our effective tax rate for the six months ended June 30, 2026 increased to 30.9% compared to 27.0% in the comparable period of 2025. The increases in our effective tax rate for the three and six months ended June 30, 2026, respectively, were primarily due to impacts of valuation allowances related to our investment in Topgolf combined with our global mix of earnings.

The following table presents a reconciliation of our GAAP results for the three months ended MarchJune 31,30, 2026 and 2025 to our non-GAAP results for the same periods (in millions, except per share information):

Net income from continuing operations and diluted earnings per share for the three months ended MarchJune 31,30, 2026 were $74.9$75.8 million and $0.38$0.40 per share, respectively, as compared to net income from continuing operations and diluted earnings per share of $63.4$45.5 million and $0.33$0.24 per share, respectively, for the three months ended MarchJune 31,30, 2025. These increases were primarily driven by a $32.4$28.2 million increase in segment operating income,income combined with the recognition of $10.8 million related to the tariff refunds in additionthe tocurrent lowerquarter and a reduction in interest expense.expense resulting from the full repayment of our term loan debt. These increases were partially offset by an increase in the income tax provision and the loss recognized from our equity method investment in Topgolf.

On a non-GAAP basis, excluding the items described in the table above, our net income from continuing operations and diluted earnings per share for the three months ended MarchJune 31,30, 2026 would have been $111.8$73.8 million and $0.56$0.39 per share, respectively, as compared to net income from continuing operations and diluted earnings per share of $57.1$38.9 million and $0.30$0.20 per share, respectively, for the three months ended MarchJune 31,30, 2025. The increase in non-GAAP net income from continuing operations was primarily due to a $32.4$28.2 million increase in segment operating income andcombined with lower interest expense.expense, partially offset by an increase in the income tax provision.

IncomeLoss of $18.2$0.6 million from discontinued operations, net of tax, for the three months ended MarchJune 31,30, 2026 was related to the settlement of certain indemnification obligations and other costs directly related to our divestitures of Topgolf and Jack Wolfskin. Income of $17.6 million, net of tax from discontinued operations for the six months ended June 30, 2026, was primarily related to the recognition of an income tax benefit in connection with the sale of Topgolf effective on January 1, 2026, partially offset by transaction costs directly related to the completion of the sale.sale as well as the settlement of certain indemnification obligations. The $61.3$25.2 million and $86.5 million loss from discontinued operations, net of tax for the three and six months ended MarchJune 31,30, 20252025, respectively, was due to net operating losses of both Topgolf and Jack Wolfskin during the period.

Our cash and cash equivalents decreased $404.0$625.1 million to $499.5$278.1 million at MarchJune 31,30, 2026 as compared to December 31, 2025 and decreased $182.5$405.4 million compared to MarchJune 31,30, 2025. These decreases were primarily driven by cash used in financing activities from continuing operations, largely reflecting the partialfull repayment of our term loan induring Januarythe 2026,period, which was funded by cash proceeds from the sale of Topgolf and cash on hand. We also used cash in financing activities to repurchase shares of our common stock pursuant to our stock repurchase program. In addition, cash usedprovided inby operating activities from continuing operations increased,increased whichdue primarily reflects working capital changes associated with normal seasonal fluctuations andto the strong performance of the business. We believe that our cash on hand and existing sources of capital are adequate to fund our future operations, as necessary. For further information related to our financing arrangements, see Note 6 “Financing Arrangements” in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 and “Liquidity and Capital Resources” in Part I, Item 2 of this Form 10-Q.

Our accounts receivable balance fluctuates throughout the year as a result of the general seasonality of our business, and is also affected by the timing of new product launches. With respect to our Golf Equipment business, accounts receivable are generally the highest during the first and second quarters during the seasonal peak in the golf industry, and generally decline significantly during the third and fourth quarters as a result of an increase in cash collections combined with lower seasonal sales. With respect to our Apparel, Gear and Other business, accounts receivable balances for our TravisMathew and OGIO businesses are more evenly distributed throughout the year while accounts receivable balances for our Callaway soft good brand are subject to the same general seasonality as our Golf Equipment business. As of MarchJune 31,30, 2026, our consolidated net accounts receivable increased to $393.8$315.7 million from $123.2 million at December 31, 2025. The increase primarily reflects the seasonality of Golf Equipment net sales in the first quarter.and second quarters. Net accounts receivable as of MarchJune 31,30, 2026 increaseddecreased $33.6$15.9 million compared to MarchJune 31,30, 2025, primarily due to higherlower net sales.sales in the latter half of the second quarter of 2026 combined with improved cash collections.

Our inventory balance fluctuates throughout the year as a result of the general seasonality of our Golf Equipment business, and is also affected by the timing of new product launches. With respect to our Golf Equipment business, the buildup of inventory generally begins during the fourth quarter and continues into the first quarter and beginning of the second quarter in order to meet increased demand during the golf season. Inventory levels are also impacted by the timing of new product launches as well as the success of new products. With respect to our Apparel, Gear and Other business, inventory levels are generally less affected by seasonality due to the diversification of product offerings for these brands. As of MarchJune 31,30, 2026, our inventory decreased $28.9$107.1 million to $596.4$518.2 million, compared to December 31, 2025, which reflects our seasonality. Our inventory decreased $15.3$49.7 million as of MarchJune 31,30, 2026, compared to MarchJune 31,30, 2025, primarily due to higher net sales.sales in the current period.

As of MarchJune 31,30, 2026, we had $996.0$774.7 million in combined cash and availability under our credit facilities, which is ana increasedecrease of $223.7$386.6 million compared to MarchJune 31,30, 2025.2025 following the full repayment of our Term Loan B in May 2026 and repurchases of shares of our common stock pursuant to our stock repurchase program. Information about our credit facilities and long-term debt is presented in Note 6 “Financing Arrangements” in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, which is incorporated herein by this reference.

As of MarchJune 31,30, 2026, approximately 13%26% of our cash was held in regions outside of the United States. We continue to maintain our indefinite reinvestment assertion with respect to most jurisdictions in which we operate because of local cash requirements to operate our business. If we were to repatriate cash to the United States outside of settling intercompany balances, we may need to pay incremental foreign withholding taxes which, subject to certain limitations, generate foreign tax credits for use against our U.S. tax liability, if any. Additionally, we may need to pay certain state income taxes.

We plan to utilize our liquidity (as described above) and our cash flows from business operations to fund our material cash requirements. The table below summarizes certain significant cash obligations as of MarchJune 31,30, 2026 that will affect our future liquidity (in millions).

The duration of these indemnities, commitments and guarantees varies, and in certain cases may be indefinite. The majority of these indemnities, commitments and guarantees do not provide for any limitation on the maximum amount of future payments we could be obligated to make. Historically, costs incurred to settle claims related to indemnities have not been material to our financial position, results of operations or cash flows. In addition, we believe the likelihood is remote that payments under the commitments and guarantees described above will have a material effect on our financial condition. The fair value of indemnities, commitments and guarantees that we issued during the threesix months ended MarchJune 31,30, 2026 was not material to our financial position, results of operations or cash flows.

Total estimated capital expenditures for the year ending December 31, 2026, are expected to be approximately $35.0 million to $40.0 million.

For the threesix months ended MarchJune 31,30, 2026, there have been no material changes to our critical accounting estimates from the information reported in our Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on February 27, 2026.