Good afternoon, and welcome to the Topgolf Callaway Brands’ First Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Katina Metzidakis, Vice President, Investor Relations. Please go ahead.

Good afternoon, and welcome to Topgolf Callaway Brands First Quarter Earnings Conference Call. I'm Katina Metzidakis, Vice President of Investor Relations and Corporate Communications. Joining me on today's call are Chip Brewer, our President and Chief Executive Officer; Brian Lynch, our Chief Financial Officer and Chief Legal Officer; and Artie Starrs, Chief Executive Officer of TopGolf. Earlier today, the Company issued a press release announcing its first quarter 2025 financial results. Our earnings presentation as well as earnings press release are both available on our Investor Relations website under the Financial Results tab. Aside from revenue, the financial numbers reported and discussed on today's call are non-GAAP measures. We identify these non-GAAP measures in the presentation and reconcile the measures to the corresponding GAAP measures in accordance with Regulation G. Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. Please 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 Mr. Brewer.

Thank you, Katina. Good afternoon, everyone, and thank you for joining our call today. Starting on Slide 4. Q1 was a strong quarter for our company, as we met or beat expectations in all segments of our business. I was particularly pleased with the margin improvement in our products business as well as the consumers' response to recent initiatives at Topgolf. On the strategic front, we were pleased to announce an agreement to sell Jack Wolfskin to ANTA Sports, a transaction that will enable greater business focus as well as provide further financial flexibility as we move forward on our strategic processes for TopGolf. Before I go into the segment results, I'll provide some comments on tariffs and their impact on us, both in the near and long term. Needless to say, it's tough to predict the exact impact at this point, as we can't be sure what the final rates will be. During our last call, we forecast approximately a $5 million impact based on what we knew at that time. As of this call, and assuming current rates of approximately 10% for all countries of origin other than Mexico, Canada, and China, this year's unmitigated impact would be approximately $25 million, an increase of $20 million versus our last call. Looking forward, if these are the final rates, we believe we will be able to mitigate some portion by further optimizing operations and accelerating cost reduction and margin programs. We then believe we will have the ability to pass the balance on with only a minor impact to demand. We believe we are benefiting from having been proactive on cost and margin initiatives over the last 12 months and then accelerating them further recently as well as from the scale, brand strength and capabilities of our organization. Having said this, we'll be watching the economy and resulting demand side closely, as the risk of a further slowing of consumer activity has certainly gone up. And to be clear, my primary concern is on the demand side, and that outcome is unknowable at this point. Fortunately, as previously communicated and shown in Slide 14 of our presentation, it's worth reminding ourselves that golf equipment has not historically been sensitive to mild recessions. Continuing on the U.S. tariff front, Vietnam is our primary country of origin for both golf clubs and TravisMathew apparel. However, we also sourced goods from Taiwan and several other ASEAN countries, Peru, Bangladesh, and others. Fortunately, we source very little from Mainland China for sale into the U.S. For the North American market, we assemble our custom golf clubs in Mexico. But even at a 25% U.S. tariff, the cost impact is small since it is a value-added tax and the assembly is not a significant expense. On the ball side, I'd expect those of us that have had scaled and full manufacturing capabilities in the U.S. to be better positioned long term. And it is also worth mentioning that recent exchange rate movements appear to be tied to the recent tariff policy and a weaker dollar is decidedly positive for us, as approximately 40% of our products business is outside of the U.S. Now turning to our segment performance. Starting with Golf Equipment. Both revenues and operating margins were ahead of expectations and feedback on our product remains strong. In the driver category alone, Elyte was awarded 15 out of 15 stars on the U.S. Golf Digest Hot List, was named Today's Golfers expert choice in the U.K., and our Elyte Triple Diamond model was named Golfspy's Most Wanted Driver. Turning to Q1 results. Our operating margins are benefiting from cost reduction and margin initiatives that we put into place over the last 12 months. Segment OpEx also benefited from a lease termination incentive in our Japan subsidiary, which Brian will give you more color on during his comments. U.S. rounds played were up 3.8% in March, but down a little year-to-date, simply reflecting the weather and overall demand in key global markets that remained good through Q1. As expected, our market shares are down a little this year, reflecting a more competitive launch cadence, but I continue to feel good about the Golf Equipment segment, our brand, and our outlook. In the Active Lifestyle segment, there is little new to report from an operational basis. Based on customer feedback, market conditions remained challenging in Q1, down mid- to high-single digits, which was a continuation of last year's trends. Revenues in this segment were down in the quarter, primarily due to lower sales at Jack Wolfskin Europe, which was largely anticipated and planned for. Segment operating margins were up year-over-year, reflecting our cost reduction and margin initiatives. The biggest news in the segment is the agreement to sell the Jack Wolfskin brand later this quarter or early next. And I'd like to thank the Jack Wolfskin team for their work while a part of the Topgolf Callaway family, in particular, the efforts to right-size and reposition the business over the last year. I think the proposed transaction is a good outcome for all involved, and I wish the Jack Wolfskin team's success going forward. Turning to Soft Golf, our same venue sales were down approximately 12% for the quarter, within the guidance range we provided during our last call, but towards the higher end. Importantly, we saw positive results from two key initiatives that started in mid-March, Sunday Funday and Topgolf Nights. Sunday Funday was especially impactful, driving more than 20% improvements in same-day traffic. Stepping back to look at the big picture. From a positioning perspective, Topgolf continues to enjoy an enviable consumer position. Both golf and experiences like Topgolf remain on trend with consumers, and Topgolf appeals to a wide audience, not just golfers, but society at large with an average income of approximately $100,000 per year. Topgolf also has a significant defensive moat, high venue returns, and the demonstrated ability to drive further improvement in venue margins, and consumers continue to enjoy the experience. As shown on Slide 15, and using external data, our fun scores remain high, and consumer feedback on the experience remains definitively positive, both in absolute terms and relative to our competitive set. But over the last 18 months, as the mid-income consumers become more stretched, Topgolf has begun to be perceived as relatively expensive. And in a slowing consumer environment, this is a significant but. As a result, to better drive long-term same venue sales through economic cycles, we have made the strategic decision to reset the positioning, while at the same time continuing our efforts to drive efficiency as well as continually improving and refreshing the experience. Although we will remain a premium brand and experience, we have done extensive analysis and have a definitive plan to change our value perception, and to do so while protecting and growing long-term profitability. Sunday Funday and Topgolf Nights are two excellent examples of key initiatives towards this end, and Artie will share others with you as well. Let me be clear, we view this as a big change with significant upside, one that will be particularly important as Topgolf transitions to a separate independent company. As we change the consumers' value perception on Topgolf, we will open ourselves up for both more new and repeat customers throughout inevitable economic cycles. We can and we will do this while also driving an improved experience and long-term margin growth. With these new initiatives, we expect to see meaningful and nearly immediate progress on traffic, and we have. They will have a positive but lesser impact on same venue sales as part of the traffic growth will be offset by a higher mix of value-oriented daytime pricing. In the near term, these initiatives will temporarily pressure venue margins. Fortunately, we believe we can offset most of this impact in the short to midterm and are maintaining our full year EBITDA guidance for Topgolf. Long term, we continue to see upside in venue level margins. Artie will give you more color on all of this, including more specificity on the initiatives during his comments. Turning to Topgolf's balance of the year, same venue sales and revenue guidance, given the slow start to the year and economic uncertainty, we are revising the revenue in the same venue sales guidance to down 6% to 12%. For Q2 specifically, we expect a similar range of down 7% to down 12%. Now switching to the Topgolf process. We remain 100% committed and active in the process. We are still evaluating both the spin and the sale, and we continue to work towards a solution in the second half of this year. However, a lot has changed since we initially announced our intention to separate last September. As a result, if we spin to avoid RemainCo having too high leverage, the capital structure we are now planning for Topgolf will be different than what we previously communicated. Having said this, in the spin scenario, we remain 100% committed to positioning both RemainCo and Topgolf in strong financial positions with manageable leverage ratios and promising futures. Brian will give more color on this during his comments. Finally, turning to our full year total company guidance, thanks to our strong first quarter, confidence in our operating abilities and some help on the revenue side via foreign exchange, we are pleased to be able to hold our financial guidance other than the impact of the now planned sale of Jack Wolfskin. This guidance assumes the impact of current tariffs net of actions. The guidance does not assume further tariff escalation or an economic recession. This is clearly going to be an interesting year. But based on what we know at present, we remain well positioned to hit our full year numbers, build on our core strengths, and unlock value via our strategic processes. We remain excited and optimistic. Artie, over to you for a more in-depth view of Topgolf and then to Brian for CFO comments.

Thanks, Chip. I'd like to share our performance for each of our key focus areas, along with what to expect for Q2 2025 and balance of year, starting with same venue sales. As Chip mentioned, Topgolf's Q1 same venue sales were down 12% and in line with our guidance. Three plus bay corporate events were down 13%, and the one to two bay business was down 12%. One to two bay traffic was down 8%, and average spend per visit was down 4%. And while same venue sales were challenged in Q1, we have made substantial progress in the focus areas, more compelling and accessible value, new and relevant experiences for our players, and a streamlined corporate structure. Our number one priority is to drive traffic growth and improve value perception, which we believe is key as we navigate the current environment and for the long-term health of the brand. Overall traffic in the second quarter through April is approximately flat year-over-year with one to two bay traffic up low single digits. We can directly attribute this to specific new offers and meaningful improvement in our price-value consumer metrics. I'll cover in more detail the specific initiatives driving these results, but first, I'd like to comment on the consumer and our events business. As we enter Q2 on the macro front, we are clearly seeing a price-sensitive consumer. While traffic was positive in April, same venue sales were down approximately 10% with three plus bay down 17% and one- to two-bay down 8%. We continue to see players manage their spend, which we are addressing with targeted food and beverage offerings, which cater to group social locations. In addition, our events business is pressured as corporate spending on team outings and entertainment has reduced. It's clear that our corporate events business is going to be challenged in the near term, and we have modified our operating structure accordingly. Lead volumes are down significantly, but we are providing more flexibility on rate and time for event planners, which has led to increased conversion rates. This softer outlook for our three plus bay business is contemplated in our revised 2025 same venue sales guidance. A bright spot is an increase in youth events, where our team has done a fantastic job of marketing to youth organizations. These events provide great brand exposure to a core audience. Overall, Topgolf events remain an outstanding and differentiated offering, and we are confident in our competitive position. As I mentioned, one- to two-bay traffic through April has improved significantly. Average spend per visit is down high single digits, driven roughly equally by the removal of booking fees, which we believe is absolutely the right thing to do for the consumer, as well as the increased mix of our value offers and lower alcohol attachment rates. I'm particularly excited about the player response and brand impact of two key new initiatives, which Chip mentioned earlier. Sunday Funday promotes an appealing family-oriented message and has outperformed the balance of the portfolio by low single digits on weekly sales year-over-year and high single digits on traffic. We have rolled this offer out to 80% of our venues. Topgolf Nights is having a smaller but still positive impact on sales and traffic and is focused on appealing to the younger late-night portion of our audience, driving late-night utilization and adding energy and fun in the hours following peak Friday and Saturday evening. Our venue teams are doing an extraordinary job executing on these offerings with fun scores continuing to improve year-over-year. Leveraging the learnings from Sunday Funday and Half Price Tuesday, in April, we began testing expanded value offerings from Monday through Thursday. Currently, we are in 40 venues. And while early, we are encouraged with the results and promising sales and traffic readings to date. With this increased traffic, we've added a Funday Favs appetizer optimized for groups of four or more. In addition, with more walk-in players, we're making sure that Topgolf is providing a great experience, not only in the bays but also at our bar areas with new $5 drafts and $6 margaritas available in most markets. The early results are very encouraging in average spend per visit and overall attachment. These investments in expanded value alongside the softness in three plus bay events will impact our venue margins in the near term. As a result, we are updating our outlook for EBITDAR margin and now expect an approximate 100 to 200 basis point decline year-over-year to approximately 32%. However, we are holding our full year adjusted EBITDA guidance as we are managing our corporate expenses to help support these investments. We will see significant long-term margin opportunity for our venues and have proven our ability to grow these margins. This year, we continue to test, optimize and roll out changes to our labor model, which will drive efficiencies and position venues to grow EBITDAR over the long term. We are choosing to invest in these traffic and brand-driving initiatives while still ensuring we provide the great player experience we are well known for. Alongside these offers, we've continued to make enhancements to the experience. In addition to our 120-minute reservation, we've now rolled out 90- and 60-minute reservations to drive utilization and meet players' needs. We're able to flex the inventory of these shorter reservation times for peak demand periods. This does three things that are wins for our players and our business. Number one, meets a shorter time frame need for some groups. Number two, expands the inventory we have in a day and creates the opportunity for an extra turn of a bay. And number three, optimizes F&B spend per visit. Approximately 1/3 of our players are already selecting 90-minute reservations. Given the success of our 90-minute reservation, we've also rolled out 60-minute reservations targeting late-night occasions and are encouraged by the early player response. It meets a post-dinner need for a group meet up where the private suite-like Topgolf experience within our bays is unique and fun. To further enhance the player and playmaker experience, we've begun our rollout of the Toast point-of-sale system. We're in three markets so far and on track to have approximately half of our venues on Toast by year-end. Toast will allow our bay host to service more bays, accelerate speed of service, and over time, provide comprehensive mobile order and pay capability. Early signs from our teams indicate significant enthusiasm for ease of training and improved service times. We are very excited about the long-term impact this will have on the business. This summer, we have exciting marketing experience plans beyond the value offering expansion I've detailed. We're rolling out two new games, which will target social groups and competitive sports fans. We've also launched a Summer Fun Pass, outstanding family-oriented value that addresses our players' needs in the moment. What sets Topgolf apart is that we enjoy best-in-class brand regard and player experience metrics, holding the number one spot for fun and atmosphere. As we reset the brand positioning on value, we will appeal to both new and repeat consumers, thus setting up better same venue sales through this economic cycle. In closing, I'm very enthusiastic about the success of our new initiatives, which are already having an impact and the exciting launches we have for the summer and the fall. I believe this has the potential to be an incredibly important inflection point for Topgolf and set the brand for a successful future as an independent company. Thank you, and over to you, Brian.

Thank you, Artie, and good afternoon, everyone. Jumping into our Q1 results. Consolidated revenues of $1.09 billion decreased 5% year-over-year. This result was better than expected and was primarily due to the decrease in Topgolf same venue sales, the rightsizing of the Jack Wolfskin business and unfavorable foreign currency rates. Q1 adjusted EBITDA of $167 million increased 4%, primarily due to increased profitability in the Golf Equipment and Active Lifestyle segments. The majority of this improvement was driven by improved gross margins and OpEx reductions. The segment has also benefited from a planned $12 million incentive to terminate early our lease for our Japan headquarters. Approximately 2/3 of the incentive impacted the Golf Equipment segment and 1/3 affected the Active Lifestyle segment. Both segments will incur some incremental expense in subsequent quarters for the relocation of the Japan headquarters. Moving to segment performance. At Topgolf, Q1 revenue decreased 7% year-over-year due to the decline in same venue sales and the sale of the World Golf Tour business in December 2024, partially offset by revenue from new venues. Topgolf Q1 operating income decreased $15 million to a $12 million loss, while adjusted EBITDA decreased $16 million year-over-year to $44 million. These declines were primarily due to lower same venue sales performance, partially offset by ongoing cost reduction efforts. Moving to the Golf Equipment segment. Q1 revenue decreased 1% to $444 million year-over-year and was approximately flat on a constant currency basis despite a more competitive launch environment. Golf Equipment operating income increased 24% to $102 million. The $20 million increase was due to our improved gross margins, the impact of the lease termination incentive and other cost savings. In our Active Lifestyle segment, Q1 revenue decreased $17 million year-over-year to $255 million. This decrease is due to the planned rightsizing of the Jack Wolfskin business in Europe. Operating income increased $6 million to $31 million, primarily driven by cost savings at Jack Wolfskin and gross margin improvement for the total segment. Pushing gears to balance sheet and liquidity. Our available liquidity, which is comprised of cash on hand and incremental borrowing capacity under our credit facilities, continued to strengthen. As of March 31, 2025, our available liquidity increased $85 million to $805 million due to increased cash compared to first quarter 2024. At quarter end, net debt was $2.74 billion, including $258 million in convertible debt, up slightly from $2.68 billion last year due to increased venue financing, partially offset by a $50 million discretionary paydown of our term loan B. Excluding venue financing debt, which is essentially capitalized rent related to our Topgolf venues, but including the convertible debt, our REIT adjusted net debt was $1.22 billion, down $159 million year-over-year as a result of the increased cash and debt paydowns. Net debt leverage, including the convertible debt rose to 4.6x from 4.5x, driven by higher venue financing. However, REIT adjusted net leverage, which includes rent interest payments, improved to 2.5x from 2.7x. We are comfortable with these leverage levels. Our inventory balance decreased $49 million versus the end of Q1 2024 to $654 million at the end of Q1 2025, due to the $75 million accounting reclassification of Jack Wolfskin inventory to current assets held for sale. Before moving to guidance, I want to provide a further update on our strategic initiatives. First, the sale of our Jack Wolfskin business remains on track. We have submitted our regulatory approval applications and are taking other applications in preparation for closing. We still expect this to close in late second quarter or early third quarter. With regard to Topgolf, we continue to believe that separating Topgolf from our core business will create value for our shareholders. As a result, we are actively pursuing various alternatives to affect the separation, including a sale, a spin, or other transaction. At this point, we are still targeting the second half of the year to effectuate the separation with Q4 being more likely than Q3. However, conditions have changed a lot since we first announced our intention to separate the Topgolf business last September. We are, therefore, reassessing how much debt and cash each company would be capitalized with post-separation to ensure that both companies have sufficient liquidity and are in a strong financial position in a spin scenario. In the case of the core business, this means having a clear path to be at approximately 3x or less leverage in a reasonable amount of time. And in the case of Topgolf, this means having no more than modest funded debt leverage. All in all, our original objective remains the same: to unlock the value of both businesses, minimize execution risk and create two strong, well-capitalized companies with compelling futures. Now turning to the balance of the year outlook. As a reminder, our Q2 and full-year guidance continues to include the full financial impact of the Jack Wolfskin business. Assuming this sale closes in late Q2 or early Q3 as expected, the guidance will automatically be adjusted to exclude the Jack Wolfskin results for the balance of the year as of the closing date. While we are not updating our guidance for the Jack Wolfskin business at this time, we have provided in our earnings release today the amount of planned revenue and adjusted EBITDA attributable to the Jack Wolfskin business in our budget this year, including estimates for the first half. Given current conditions and trends, we are revising our Topgolf same venue sales guidance from down mid-single digits to down 6% to 12%. As a result, we are also lowering our full-year Topgolf revenue estimates to $1.680 billion to $1.790 billion, which is $45 million lower than previous guidance. However, we are maintaining our adjusted EBITDA guidance for Topgolf of $240 million to $300 million as our cost savings initiatives are offsetting the expected decrease in revenue. We are reiterating our consolidated full-year revenue guidance of $4.0 billion to $4.185 billion. However, in light of the decrease in Topgolf revenue estimates, we are currently tracking below the midpoint of this guidance. We are also reiterating our adjusted EBITDA guidance of $415 million to $505 million. Both the revenue and adjusted EBITDA estimates are subject to adjustment for the expected sale of the Jack Wolfskin business. We were able to maintain our consolidated guidance despite the current macroeconomic headwinds and because of our strong start to the year, improving foreign currency rates, and the actions we have taken and continue to take to reduce cost and mitigate the estimated $25 million impact of the current tariffs. This guidance does not assume further tariff escalation or a meaningful worsening of economic conditions. In addition, our guidance today is based upon recent FX rates, but our revenue, in particular, is highly sensitive to fluctuations in such rates. Regarding free cash flow, we continue to expect to be free cash flow positive at both the total company and at Topgolf in 2025. Now turning to Q2. In Q2, we are forecasting consolidated revenue of $1.075 billion to $1.115 billion versus $1.158 billion in Q2 2024. This year-over-year decrease is due to a more competitive launch environment and shift in shipment timing in the Golf Equipment business. The continued impact from the rightsizing of the Jack Wolfskin business, the negative impact from the sale of the WGT gaming business in December 2024, as well as a projected decline in same venue sales. We estimate adjusted EBITDA to be in the range of $139 million to $159 million compared to $206 million in the prior year. This decrease is due to the projected decrease in revenue and an approximate $22 million impact from increased FX hedging losses, incremental tariffs, and the sale of WGT. In summary, given the tariff volatility and softening consumer, visibility is limited, but we are providing our best estimates today. Fortunately, we were proactive in our gross margin and cost reduction initiatives, which, along with improving FX rates, are offsetting much of the impact of these macroeconomic headwinds. Importantly, we are well positioned in terms of our available liquidity for our business and the planned separation of Topgolf. In the meantime, we are managing that which is within our control, including managing discretionary spending and rationalizing any capital investments. Overall, we feel good about our start to the year and believe we are well positioned not only to navigate this short-term volatility and emerge a stronger company but also to create shareholder value as we do so. With that said, I would now like to turn the call back over to the operator for Q&A.

We will now begin the question-and-answer session. Our first question today is from Matthew Boss with JPMorgan. Please go ahead.

Great and I appreciate all the color. So maybe, Chip, on the core Golf Equipment business, any change in the industry backdrop that you've seen so far for the segment. Can you touch on sell-through rates maybe on some of the key recent launches? Or just any change to your organic outlook for this year in that segment?

Matt, the short answer is no, not really. The golf consumer remains strong, the markets remain solid, and the outlook remains positive with no material change. So, the Golf business has been on a good roll. It remains that way, and we feel good about the outlook there.

Great. And then maybe, Artie, as a follow-up. So, on the value reset at Topgolf, I guess maybe a similar question. How much do you attribute the softening that you've cited to macro relative to competition? And just maybe how best to consider the time line to scale the value initiatives or any feedback that you've seen from tests that you've initiated to date.

Sure. I believe that the most noticeable impact we’ve experienced since our last earnings call has been on the event side. We are clearly seeing some pressure on corporate spending, which reflects the current macro conditions. The brand has been established for quite some time, and we are very confident that our events business remains highly competitive, receiving positive feedback and experiences. However, the environment for corporate event spending is under pressure. Consumers are certainly more price sensitive, but I wouldn’t say the situation has changed significantly in the last 45 to 90 days. What excites me most is the immediate response we've seen; the traffic numbers are encouraging. We are committed to providing value and supporting consumers during this time. The immediate response is one of my key points of enthusiasm, as we strive to make our offerings both compelling and accessible. In this environment, we need to ensure we are delivering value to our customers when it's most needed. Last time we spoke about a shorter timeframe, and I think we are really hitting the mark now. Sunday Funday is a great example of an initiative that families can use and are looking for, and they are responding positively. In terms of rollout, we are progressing rapidly, quicker than we previously indicated. Sunday Funday is active in all venues where applicable, and Topgolf Nights is now available in about half of our locations. The early week value is becoming more accessible as students finish school, and we will monitor this closely, particularly during the college graduation period and as schools close for summer across our locations in the coming weeks. We are eager to activate this further as we observe its performance, and so far, we are pleased with the results.

The next question is from Michael Swartz with Truist Securities. Please go ahead.

Maybe just a follow-up to Matt's questions around the value repositioning at Topgolf, but maybe from a cost perspective. I mean how do you plan to manage the venue level cost structure going forward? I think you talked about venue level margins coming down a bit in the near term. But how do we think about that longer term?

We remain very confident. Over the past few years, we've managed to grow venue margins across different sales environments. I'm more optimistic than ever about the long-term EBITDAR margin outlook for Topgolf. To reiterate, we believe it can exceed 35%. Currently, we're focused on investing in value without compromising the player experience. We see this as an opportunity to attract new customers and retain existing ones, and both are responding positively to our offerings. Once the current situation improves, we'll be well-positioned. The investments and improvements made in venue-level performance are strategic for us right now. Specifically, we've reduced some corporate overhead costs and addressed other business areas outside of the venues. Within the venues, we are continually enhancing our efficiency metrics and have been rolling out updates to our labor model every couple of quarters. Adjusting to demand changes—such as more visitors on Sundays and late nights during the week—allows us to refine these models, and our teams are adapting successfully. I remain very optimistic about venue margins in the long term, while we are currently investing in value in the short term.

Okay. That's great color. And just sticking on Topgolf. Maybe give us a feel for the cadence of the quarter. And just wondering, was there any impact from the Easter shift to the later Easter into the second quarter?

Yes, there is definitely a shift that goes both ways for us, where Easter week doesn’t turn out to be much of an event week. On the other hand, kids are out of school, and the breaks vary a bit. It did result in some shifts, but I wouldn't say it had a significant impact on month-to-month comparisons or our guidance. As I mentioned, we are pleased with the increase in walk-in business in April, while events have softened, and that shapes the guidance we provided for Q2.

The next question is from Megan Clapp with Morgan Stanley. Please go ahead.

I wanted to ask about the cost savings that you've discussed. Chip and Brian, you both mentioned that proactive cost savings are allowing you to maintain your guidance despite the tariffs and the decline in Topgolf revenue. Regarding the cost savings, has your performance exceeded your expectations, or have you identified additional cost savings? If it's the latter, could you elaborate on the differences between the products and the Topgolf side regarding some of those cost savings?

Sure, Meghan. I'll take a cut at it. It's a little bit of both. So, we were aggressive at going after cost and efficiency improvements really starting this time last year and accelerating through the year. And then as we saw the conditions flashing more risk, which we clearly did going into this year as we saw FX headwinds and announced policy changes that were likely to be impactful, we've accelerated our efforts to manage those costs and improve efficiency. And it's really across all areas of the business. Artie can speak to Topgolf, but they did meaningful reductions in the corporate overhead, portions of which were last year, but then accelerated significantly this year. We have done the same here at the corporate side of Topgolf Callaway. We are driving further efficiencies in the operations side of the business. So, there's quite a bit going on on all fronts there. But the fact that we had had those wheels in motion already and then just could continue and accelerate them, I think, has benefited the business a great deal, and it allowed us to hold our current position.

Great, that’s helpful. I have a follow-up regarding your commentary on the spin and leverage for both businesses. You mentioned before that Topgolf would be funded with approximately $200 million in cash as part of the separation plan. Could you provide an update on that number and whether your view on the cash level has changed, considering the significant shifts in the macro environment?

Megan, it's Brian. You're correct. We did say originally that our plan was to have no funded debt, just the venue liabilities with Topgolf and provide them with $200 million in cash. However, a lot has changed since then, and the entire environment has shifted. We are reassessing the capital structure. While we are not ready to provide specifics, I can say that we expect to give them less cash at this point and probably a modest amount of debt, which they can easily manage. This is all aimed at ensuring that both businesses are properly set up and that RemainCo is not overly leveraged.

The next question is from Lucas Hudson with Bank of America. Please go ahead.

How much of the Topgolf same venue sales reduction was the result of April trends versus more cautious outlook in 3Q and 4Q from a softer consumer?

Yes. Thanks. This is Artie. I would say the primary thing that drove it is just the view on events. So, events in the quarter, and then as we look out this quarter, that really is what drove the bulk of it. When we look at our walk-in one- to two-bay business, we're seeing improved traffic trends, we're obviously investing in value and getting some SPV down year-over-year from that, but it's primarily three plus bay abouts.

Got it. And then just staying on Topgolf same venue sales regarding the Q2 guide. Could you just talk about what you have to do to hit the top or the bottom end of the guide?

Yes. I think it's an extension of my prior comment. I think the range of the guide contemplates the midpoint contemplates what we're currently seeing. And if three plus bay events were to come in worse than we currently expect, then that would inform that sort of the lower end or the worst end of the guide.

The next question is from J.P. Wollam with ROTH Capital Partners. Please go ahead.

Just again, kind of thinking about the value reset at Topgolf and at risk of being overly reductive, I'm just curious like, is there a way that you're thinking about how much you're effectively trying to kind of reduce price, if I was thinking about sort of a weighted average in terms of hourly price per day? Is there just kind of a high-level way that you guys think like we need to be 10% to 20% lower?

Yes. I think it differs. And hopefully, with the detail we've given you, we're trying to be very methodical about this by venue, by market, by region, and then there's also a day and week part component to it. So, the data doesn't suggest like a crude percentage. The data suggests that there are certain times of the week and certain times of the day that we have an absolute right to win and if we have a more compelling price point, we can drive traffic, and we're seeing that. So embedded the breakdown I provided in the script, sort of 1/3, 1/3, 1/3 across the booking fees, alcohol attachment, we think is something that's just price sensitivity of the consumer and then 1/3 coming from value, that's probably the best guidance I could give you across the whole revenue structure if you want to call it that. What I might say is if you look at Sunday and you look at Topgolf Nights, depending upon the venue, that could be 15% to 20% of a venue's volume in a given week. And if you think about gameplay being approximately half of our revenue stream, and then the price that we put into market could be 30% or 40% off of that. It kind of gets close to that 1/3, 1/3, 1/3 I shared as the overall breakdown.

Okay. Very helpful. And then just one more. Chip, maybe more on a kind of high-level basis here. But we've heard from kind of a few different companies, maybe pleasant surprises about less impact from tariffs and understand that that's a moving target every single day. But I guess the one thing that is pretty repetitive is price being somewhat of a lever and ideally not one that anyone wants to pull, but definitely a lever that could help offset. And so, as we think about kind of the back half of the year and into next year, how much do you guys worry that you could see a good amount of price increases across the industry and it might kind of slow some demand headed into next year?

Yes, JP. We give this a lot of consideration. We have three distinct business segments, each with its own unique relationship with consumers. In our Golf Equipment business, we believe we can increase prices because demand isn't highly elastic. When we offer a noticeably superior product, a small price increase has historically been accepted by consumers with minimal effect on demand. We're fortunate in that regard, as our consumers tend to be affluent and very passionate. In the Active Lifestyle category, things are a bit less clear-cut. Price sensitivity is somewhat higher than in Golf Equipment, but still manageable. We're positioned in a premium market, with TravisMathew as our leading brand alongside Callaway. While there's some sensitivity to pricing, it's not as pronounced as in the golf equipment segment. For Artie's business at Topgolf, the average consumer earns around $100,000 a year, and our value proposition is resonating well with them. We believe we are well-positioned on the product side. Additionally, our operations team has performed admirably. We don't have significant exposure to China, so the impact of tariffs is less pronounced for us compared to others, and we believe we can navigate these challenges effectively.

Next question is from Casey Alexander with Compass Point. Please go ahead.

I only have a couple of questions. First of all, Chip, did you get the sense that some of the strong results in the Golf Equipment division were from orders pulling through early and kind of front-running the tariff regime?

We did not see that in Golf Equipment, no, not from our customer base.

Okay. That's fine. Great. Secondly, it sounds like the value proposition is focused on the one- to two-bay products, and yet I've heard several times that there is a significant decline in the three-plus bay segment. Is there also a value orientation program aimed at the events business? Are you considering the events business as something temporary, expecting that corporations will return, and is it still viewed as a high-touch premium product?

Yes. Good question, Casey. I think what we're doing on the event side is we're offering more kind of local regional flexibility just in the direct sales channel. So, you wouldn't necessarily see it on the rate card, so to speak. But we're trying to win every sale that's out there and giving our teams the flexibility and incentives to do that. But we agree with you. We think we have a great product, and it is a premium product. It's good value too. But how you approach it in the market via advertising presentation on the website is just a little bit different than the player-facing business or the one- to two-bay business.

Yes, Casey.

If I understand what you're saying, then it's on a call-by-call basis and the sales rep has the ability to compete with, if it's Bolero or whoever you're competing with?

That's right. And I'd say it's a little bit more than a call-by-call basis where we'll have like a day of week where we'll have a specific promotion that we're trying to push through, through the events channel. But it's a bit more market by market versus "across the entire portfolio at ex price."

No, that's okay, Casey. And this is probably something you already know. But the events business isn't as sensitive to price as the consumer channel is, right? What's going on right now in many cases is just corporations are pulling back on all discretionary spending. And if somebody came in and said, "Hey, Chip, I can get a great event, but it's going to be 10% off, what do you think?" The answer is still no. And so, we're finding that the consumer is responding very clearly to the quality of the product we're putting out at Topgolf combined with good value. And the event is just less responsive to that. It will turn around with overall corporate confidence more than it will respond to value, but we are providing some.

Sounds to me like it's time to have a no tariff pricing night at Topgolf.

There are no tariffs at Topgolf, Casey.

The next question is from Noah Zatzkin with KeyBanc Capital Markets. Please go ahead.

I guess nice margin improvement on the equipment side. So, I was wondering if you could kind of talk a bit about the drivers there and how you're thinking about equipment margins this year in general.

Yes, thank you, Noah. We are pleased with the results as well. We noticed an improvement in operating expenses, particularly in gross margin, which increased a couple of hundred basis points year-over-year. This improvement comes from various initiatives we've implemented over the past several quarters, including enhancing our yields, freight, and operating efficiency, as well as optimizing our product mix. These changes are starting to show positive results. However, we do anticipate some tariff impact, which we will try to mitigate, but it will become more noticeable as the year progresses. There was no significant impact from tariffs in the first quarter.

Great. And maybe just one on kind of the industry. Any sense of maybe how retail or the consumer behaved on the Equipment side in April? And any sense of kind of the promo level that's out there right now?

No real change. The golf consumer remains solid and fully engaged and promotional activity is either consistent with how it normally is or maybe even a little bit better.

The next question is from Joe Altobello with Raymond James. Please go ahead.

Just a quick question on Topgolf. You mentioned you're taking out a lot of corporate costs here. And at the same time, you're prepping that business for potentially a sale or spin, with the spin-off potentially requiring additional infrastructure. How do you balance the need to take out costs with the need to maybe build up some of the capabilities in that business ahead of the spin? And does that impact your decision on a sale or spin at all?

I think we are open to whatever creates the most shareholder value. So, we're analyzing the possibility of a spin or sale, and we will explore that to determine the best option. We are continuing to implement cost reductions, which are funding many of our current initiatives. Additionally, there is not much incremental cost that will be needed for Topgolf to operate independently.

Okay. And just maybe a quick follow-up, just to clarify on the tariffs, the $25 million, does your guide assume that you mitigate pretty much all of that?

We don't specify how much we mitigate of that, but it is all included in our guidance. Does that make sense?

This concludes our question-and-answer session. I would like to turn the conference back over to Chip Brewer for any closing remarks.

All right. Well, I want to thank everybody for joining us today. Enjoy the rest of your spring and into the summer. I hope you get out and play some golf, maybe visit Topgolf. We look forward to updating you further on our next call, which will be at the end of the summer. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.