Good day, and welcome to the Callaway Golf Company's First Quarter Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the start key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one, on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Patrick Burke, Senior Vice President of Investor Relations and Treasury. Please go ahead.

Good afternoon, and welcome to Callaway Golf Company's first quarter earnings conference I'm Patrick Burke, Senior Vice President of Investor Relations and Treasury. Joining me on today's call are Chip Brewer, our President and Chief Executive Officer, and Brian Lynch, our Chief Financial Officer and Chief Legal Officer. Earlier today, the company issued a press release announcing its first quarter 2026 financial results. Our earnings presentation, as well as the 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 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 for 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 would now like to turn the call over to Chip.

Thanks, Patrick. Good afternoon, everyone, and thank you for joining our call today. I'm pleased to report that thanks to both strong demand for our 2026 product lines, as well as continued healthy market conditions, we have had an excellent start to our year. And despite increased macroeconomic uncertainty, we are quietly confident for our full-year results. Lastly, and perhaps most importantly, as the team and I have now had the opportunity to fully refocus on this business over the last several months, I'm excited about the strength we see across our brands, the progress our teams are delivering on key initiatives, and the clear line of sight we have on new opportunities that I believe will set up further long-term improvements. In short, we're on track to have a good year, we're making progress on our key initiatives, and we feel energized about the long-term direction of our business. As usual, I want to thank the Callaway and Travis Matthew teams for their commitment to driving our brands and our collective business forward. I'd also like to remind everyone of the significant transformation our company has accomplished over the last year. In late May of last year, we completed the sale of Jack Wolfskin. And then in January of this year, we completed the sale of a 60% interest in Topgolf. Concurrent with the close of the Topgolf sale, we also announced the repayment of $1 billion in term debt and a new $200 million share repurchase program. These moves returned us to a cash-generating, pure-play golf company with a terrific balance sheet and a plan to return capital to shareholders. We are now only a few months into our renewed journey as a pure play. However, this is a journey that we are confident in, based on the strengths of our business and our history of performance in this space. Turning to our Q1 results, revenue was $688 million, up 9% compared to the prior year, and adjusted EBITDA was $164 million, up 31% compared to last year. Both of these results were ahead of our expectations. I'm pleased with the revenue growth, some of which is timing between quarters, as our supply chain team also outperformed expectations during the quarter, but most of which reflects strong demand for our new products. This level of growth appears to be well above that of the market at both Callaway and Travis Matthew. In addition, I was very pleased with our gross margin improvement, which increased 260 basis points despite significant incremental tariff expense. This gross margin improvement is a step in the right direction and a testament to the cost management and margin improvement projects that we've been focused on over the last year and that will continue to be a focus going forward. Stepping back a minute to look at the overall market conditions, the game and the industry both continue to be in healthy positions. In the U.S., we estimate golf equipment market sell-through at key accounts was up low to mid-single digits in Q1. Rounds played were up 5%, and major OEM shipments were up approximately 2%, as reported by the National Golf Foundation. In Asia, the market was down slightly, with Japan down approximately 1%, and Korea down approximately 10%. In the U.K. and Europe, we estimate that our trade partners' sell-through was up low single digits, but rounds played were down simply due to unfavorable weather year over year. Both in the U.S. and globally, we view this as a solid start to the year, and we believe consumer interest in the game and overall participation trends remain positive, just as they have been for several years now. Using this data as the backdrop, we appear to have grown revenue faster than the market in all major regions. It's worth calling out that our UK and Europe teams have had a particularly strong last 12 months, delivering growth both faster than the market and improving profitability in that business. Clearly, Callaway continues to hold a leading position in the global golf equipment market, with a number two market share position in both clubs and balls in the U.S. and strong positions across all major international markets. Our brand also continues to lead in the consumer's rating for overall innovation and technology, a measure that historically has been a key success factor in the equipment space. And in addition to our strong position with core, male, avid golfers, Callaway also ranks as the number one brand for both new and female golfers, two of the industry's highest growth segments. In golf ball, our revenues were up 2% in Q1, but I believe this under-represents the strengths of our start to the year in this category, as our Q1 volumes were intentionally reduced by the elimination of low-margin SKUs as well as by lower sell-in volumes at retail in support of improved inventory efficiency. Most importantly, consumer reaction to our new Chrome Tour lineup has been excellent, and it feels to me that we are continuing to build momentum in this franchise. Similarly, SuperSoft continues to be a highly successful and important franchise for us. Our U.S. golf ball market share in March was up 350 basis points year over year and set a new record level of 23.9% at Greengrass. This success is a continuation of a methodical, multi-year trend of growing share. This performance has been driven by three factors. First and foremost, our significant investments in our product and manufacturing capabilities, which enable us to make a ball where you can both believe in faster and also know that you have the most consistent product available. Secondly, our sales team's steady gains in Greengrass distribution. Green Grass is now our largest channel, one where we have been systematically improving our position for over a decade. And thirdly, some differentiated approaches to how we go to market, such as our proprietary triple track alignment, as well as a regular cadence of fun, decorated offerings. A good example of our fun, decorative offerings are our Super Mom golf balls, which are especially relevant for this important up-and-coming weekend. Helpful hint, everyone. If you haven't already done so, you may want to pick up a dozen. After all, golf is supposed to be fun, and moms are super important. Now, wrapping up my comments on the golf ball category, we believe our manufacturing efficiencies in golf ball are now also world-class, setting up improved profitability for this category. Overall, I'm optimistic 2026 will be another year of continued progress for our golf ball franchise. On the club side, our new quantum family of woods and irons has also been well-received by both our trade partners and consumers. The quantum driver's Triforce face is an excellent example of our innovation capabilities, and the product performance has been validated by outside reviews, including my golf spy recognizing the Quantum Max, Triple Diamond, and Max D as the three longest drivers of 2026. Additionally, the fairwood category remains very strong globally as does our position in it. In Asia, we returned to being the number one fairwood last month on the strength of our new Quantum product line. Turning to the apparel and gear segment, All of our brands have started the year either consistent with or above expectations. Travis Matthew in particular has delivered strong growth in his direct-to-consumer business year-to-date, significantly outperforming the market overall based on third-party earnest data. Looking at their business overall, the consumer continues to react well to the new women's offering, and we have regained ground in our important men's category based on a strategic shift in our merchandising strategy, One that delivers much clearer and distinct product pillars and marketing messages, as well as exciting new products, such as our Hero Hour golf shorts. We're in the early innings of this men's product merchandising strategy shift, but based on the consumer reaction thus far, I'm optimistic regarding its potential. Now turning to our forward guidance. In addition to a strong operational start to the year, following the Supreme Court ruling in late February, we now expect our full-year 2026 gross tariff expense to be approximately $25 million lower than our previous guidance. looking forward there remains a high degree of uncertainty on the tariff rates for the second half of this year and beyond but we've incorporated the 25 million dollar reduction and expected 2026 tariffs into our guidance operationally or organically we beat the midpoint of our q1 revenue guidance by about 38 million dollars on the top line and a little more than that amount on the bottom line. A portion of our Q1 revenue beat was timing, driven by better than expected supply chain performance, and a portion of the bottom line beat was a combination of favorability and tariff expense and timing of expense spend. However, the majority of the beat on the top line was due to improved demand, and the majority of the bottom line beat was flow through from the revenue beat, along with the clear progress in the margin and efficiency initiatives that we've been working on over the last year. As we look outward to our full year forecast, we're increasing our full year revenue forecast by approximately $28 million at the midpoint. This is on the strength of the Q1 results and the fact that up to this point, we have seen no real change in consumer activity, despite bumpy macroeconomic conditions and unusually low consumer sentiment readings. This resilience in the golf consumer matches up with what we have seen historically, as golfers are on average both well-off financially and passionate about the game. As shown on slide eight, golf equipment sales have historically not been especially sensitive to mild economic changes or even mild recessions. Additionally, we have a strong product line, which of course helps too. Having said this, the conditions today are certainly more volatile than normal, and thus we will be vigilant about monitoring conditions and responding quickly if and when needed. We have been through these periods of volatility before, and we are well-versed on how to manage them. Turning to the full-year bottom-line guidance, we are passing along the tariff savings and also increasing our full-year profitability by the flow-through from the higher revenue forecast. Post-Q1, we are seeing incremental commodity and petrochemical-based cost pressures, which will be a headwind relative to Q1 performance. However, we believe our demonstrated gross margin improvements along with the reduced tariff forecast will allow us to more than offset these new pressures. The net of all this is we're revising our full year gross margin expectations from approximately flat to up year over year. When you look at our business for the first half of the year, you can see we are now expecting to be up mid-single digits in revenue And based on what I can tell thus far, I believe we will grow faster than the market through this period. As we then move to the second half of the year, as mentioned on our last call, we are expecting our revenues and profits to be negatively impacted by strategic initiatives designed to enhance long-term profitability. This includes rationalizing lower margin portions of our business, extending product life cycles by pushing a significant launch out of this year into next, and increasing our investment in fitting. While these actions will negatively impact the back half of this year, they represent a deliberate, disciplined approach to driving sustainable margin expansion, revenue growth, and stronger free cash flow over time. Our strong operating performance and margin expansion is fully expected to translate into healthy free cash flow. Based on this, and since our last call, we made a strong start on our previously announced plans to return capital to shareholders, buying back $75 million worth of shares in the open market. This leaves $125 million remaining on the repurchase plan we announced in January. Based on our continued operating performance and strong balance sheet position, I expect returning capital to shareholders to remain a part of our strategy over the months and years ahead. In closing, we are encouraged by our start to the year as the game of golf remains healthy, our brands are strong, and our new products are resonating well with both consumers and retail partners. And as we look forward, we are encouraged by the direction of our business and the prospect of demonstrating continued improvement over time. With that, I'll turn the call over to Brian to review our financial results in more detail.

Thank you, Chip, and good afternoon, everyone. Our first quarter after returning to a pure play golf company went very well. Revenues increased 9%, and adjusted EBITDA from continuing operations increased 31%. We also paid off our $258 million of convertible notes, and we began returning capital to shareholders, having repurchased $79 million of our common stock in the first four months of this year, including approximately $75 million in open market transactions. This strong start to the year, along with our now lower estimates for tariffs, is allowing us to increase our full-year financial guidance. Now let's turn to our financial results in more detail. Please note that on today's call, I will be discussing our non-GAAP financial results from continuing operations, unless otherwise noted. We have provided in our earnings release today a reconciliation of these non-GAAP results to the GAAP results, and we provided additional information about the discontinued operations. With that said, our first quarter consolidated net sales of $688 million increased 9% year-over-year. This reflected a 10% increase in golf equipment net sales, driven by our strong new product lineup and a healthy start to the golf season. Soft goods net sales increased 8%, led by strength in Travis Matthews' direct-to-consumer business. We also saw an $8 million benefit from foreign currency as the U.S. dollar weakened early in the quarter. However, based on current rates, this Q1 benefit will reverse for the balance of the year. Gross margins increased 260 basis points to 47.7%. This performance is primarily a testament to the continued work the team is doing on our gross margin initiatives, including select price increases and cost reductions. This reflects increases in both the golf equipment and soft goods segments. Soft goods segment also benefited from the recognition of approximately $6 million in deferred revenue in connection with a planned change in the consumer loyalty program at Travis Matthew. Q1 operating expenses increased $6 million to $186 million, primarily due to lapping the $12 million one-time benefit related to the early termination of our former Japan headquarters lease in Q1 last year. Excluding the Japan lease and a shift in the timing of some operating expenses from Q1 to Q2, operating expenses would have been roughly flat year over year. Adjusted EBITDA of $164 million increased 31% year-over-year. This improvement was driven primarily by higher net sales and improved gross margins. These benefits more than offset approximately $18 million of incremental tariff expense and the year-over-year headwind from lapping the $12 million one-time Japan lease benefit in Q1 2025. Moving to liquidity, we ended the quarter in a net cash position. As of March 31, 2026, we had $474 million in outstanding debt and had unrestricted cash and cash equivalents of $500 million. Our total liquidity, which is comprised of cash on hand and availability under our credit facilities, increased $224 million to $996 million at the end of the first quarter of 2026, compared to $772 million at the same time last year. Since such time, our $258 million of convertible notes matured on May 1st, and we settled the notes in cash, further simplifying our capital structure. This reduced both our cash and debt by the $258 million, with no change in our net cash position. During the quarter, we also began returning capital to shareholders. In the first four months of this year, we repurchased 5.6 million shares for a total cost of $79 million, including approximately $75 million in open market transactions under the $200 million stock repurchase plan that we announced earlier this year. Broken down by quarter, we repurchased approximately $42 million of stock in the first quarter and approximately $37 million to date in the second quarter. Looking ahead, Cowboy & Goff's capital allocation priorities remain unchanged as we focus on, first, reinvesting in our business, second, maintaining a healthy balance sheet, and third, returning capital to shareholders through the $200 million stock repurchase program authorized earlier this year. As we continue to generate free cash flow in excess of our business needs, we will work with our board to balance debt repayment and returning capital to shareholders. We still expect to end the year in a net cash to zero net leverage position. With regard to future share repurchases, no decisions on the magnitude or timing of repurchases have been made at this point. However, based on our expected continued performance, we do plan to continue to return capital to shareholders at some level while maintaining a strong balance sheet. Next, I want to give a quick update on tariffs as things have changed since our Q4 earnings call. On February 20th, the Supreme Court invalidated the tariffs previously imposed under the International Emergency Economics Powers Act, also known as NAEPA tariffs, which for the most part were approximately 20% for our overall business. However, directly following that ruling, a new executive order introduced a temporary 10% global minimum tariff under Section 122 of the Trade Act of 1974, which is set to expire no later than July 24, 2026. In addition, there have been announcements or other commentary that suggest additional tariffs may be forthcoming. In short, the tariff situation remains dynamic. Our updated guidance today reflects the impact of the current lower tariff rates and assumes that following the expiration of the Section 122 tariffs in July, the global rate will revert to rates consistent with the IEPA rates in place prior to the Supreme Court ruling. Taking all this into account, we now expect full-year 2026 gross tariff expense of approximately $50 million, down from our prior outlook of $75 million. This estimate does not include any refunds for the invalid IEPA tariffs. Based upon current information and the announced parameters of the refund program, which is being implemented in phases, we believe that we have the opportunity to obtain refunds of up to just under $50 million in the aggregate over the course of the refund program. We have already applied for a little over $10 million in refunds as part of Phase 1. We will continue to apply for additional refunds as appropriate. Beyond tariffs, we are also seeing some cost pressure from broader geopolitical volatility. Reciprocal trade policy actions have led to increases in certain commodities, and strategic metals such as tungsten, which has increased approximately eight times over the last year. On top of that, the conflict in the Middle East has led to increased petrochemical-based cost pressures, impacting the cost of our and our suppliers' energy, as well as petrochemical-based raw materials, primarily those used in golf balls as of now. While these increased costs will only have a nominal impact in the first half of this year, the impact will be greater in the second half and into next year if oil prices remain We continue to look for ways to offset these pressures, and they are reflected in our updated guidance. Now turning to our full year and second quarter 2026 outlook. Given our strong Q1 results and general health of the golf market, we are increasing our full year 2026 net sales expectations to $2.015 billion to $2.070 billion, an increase of approximately $28 million at the midpoint. As discussed on our February earnings call, our net sales in the back half of this year will be impacted by less new product launches in the second half of this year compared to 2025. The decrease in 2026 launches includes shifting an iron launch from the back half of this year to early next year, as we discussed on our last earnings call. In addition, we are rationalizing certain lower margin categories and channels, which will also reduce sales. We continue to believe these actions will strengthen our business and support higher overall gross margins over the long term. With regard to EBITDA, we are increasing our adjusted EBITDA expectations to $211 million to $233 million, an increase of $40 million at the midpoint of guidance. $25 million of the increase is related to the lower tariff expense mentioned earlier, and $15 million of the increase is related to flow-through of the $28 million net sales increase and some additional benefit from our gross margin initiatives. The other item impacting adjusted EBITDA in the second half is lower dividend income. In the back half of last year, we had excess cash generated from the business and the sale of Jack Wilskin that generated a significant amount of dividend income. In January, we used that excess cash, along with proceeds from the Topgolf sale, to pay down $1 billion of term debt, and in May, we used an additional $258 million to pay off our convertible debt. From a free cash flow perspective, paying down the term debt is a net benefit because the term loan rate was higher than the yield we were earning, but it does negatively impact EBITDA by approximately $12 million in the second half of this year compared to the same period last year. Turning to cash flow and margins, we continue to expect 2026 capital expenditures of $35 to $40 million. While we are not providing specific free cash flow guidance, we do expect the increase in our adjusted EBITDA to generally flow through to additional cash flow. For gross margin, we now expect to be up year over year versus our original guidance of approximately flat. Now turning to Q2 guidance. For Q2, we are forecasting net sales of $585 million to $610 million and adjusted EBITDA of $98 million to $108 million. With this guidance, the implied first half net sales is now up mid-single digits year over year at the midpoint, which is in line with our goal to grow at or above the overall golf market. In summary, our return to a pure play golf company is off to a good start. We are pleased with the direction of our business, and we have a strong balance sheet, a more profitable product focus and a clear path to generating shareholder value through free cash flow generation and effectively managing our capital for the benefit of shareholders. With that said, I will now turn the call back over to the operator for Q&A. We will now begin the

question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. We ask that you please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. The first question today comes from Matthew Boss with J.P. Morgan. Please go ahead.

Great, thanks, and congrats on a nice quarter.

Thanks, Matt.

So, Chip, could you elaborate on first quarter outperformance relative to plan? 9% revenue growth nearly tripled the midpoint of your outlook for the first quarter. Any way to break apart timing relative to underlying demand across the portfolio? And have you changed any of your underlying revenue growth assumptions as we look over the balance of the year, second to fourth quarter?

Sure, Matt. Yeah, so if you look at it broadly, and there's always a number of puts and takes, right? We beat the midpoint of our guidance by $38 million. We're raising the full year by $28 million. So there was roughly $28 million more demand than we had expected in the quarter, and the $10 million is basically timing between the quarters where our supply chain team outperformed and we shipped what we expected to ship in Q2 a little bit earlier. And we were really pleased with the demand for the product, particularly new product around quantum and also feedback on the golf ball. As you know, we raised some pricing in some of these product lines, and that was received well equally. So positive upside there that we saw in the quarter. And we're continuing to see the market hold in very strongly. So we feel good about our expectations for the market and for balance of the year.

Great color. And then, Brian, just relative to the first quarter gross margin expansion of more than 200 basis points, how best to think about gross margin over the balance of the year? Maybe just puts and takes between pricing relative to mix and the impact of tariffs as we progress throughout the rest of the year.

Sure, Matt. On the gross margin, as you noted, we had a good 260 basis point increase, which is a nice increase. It's really attributable to the good work on our gross margin initiatives that we've been talking about through the year. It also includes a benefit of about $6 million from the recognition of deferred revenue related to a planned change in the Consumer Loyalty Program at Travis Matthew. And then there was also some mixed change at Travis Matthew with more toward direct-to-consumer.

The next question comes from Simeon Gutman with Morgan Stanley. Please go ahead.

Hey, guys. First, Chip, can you talk about a sell-through? I assume, you know, the good trends also mean sell-through, the ability to replenish and then, you know, meet all the demand. And do you have a sense now of how big this driver and quantum line could look like?

Hey, Simen, absolutely. So, you know, very good market reaction to our new products, you know, Quantum, the Chrome Tour product and some of the changes and new product to Travis all were well received by the marketplace. And, you know, we're in good inventory positions, both in the field and in our inventory as the season opens up. And, you know, we've obviously incorporated all that into our guidance, but we're in a good spot with good reaction in a healthy market. And then,

my follow-up, it's kind of related to what slowed through the guidance. The incremental margins were awesome. You mentioned there are some timing things. But Chip, you also mentioned the business is more efficient. I think you mentioned something about sourcing, but also just the way you set it up. So is there a different way we should think about incremental margin when the business grows at a normal rate? I know this year is going to be noisy with timing, but once we get to next year, normal run rate of top line should yield a higher level of margin growth? It kind of sounds like

that's what you're saying? Yeah, we're driving efficiencies through this business. If you look at our business over, you know, the last year plus, we talked about last year, we drove 200 basis points of margin improvement pre-tariff. Now, it was washed out because of the tariff environment. But we were driving efficiencies in the business, and you could see it. Now it's becoming even more clear as in Q1, you know, on a clean basis, we're up well over 100 basis points, even with $18 million of incremental tariffs in the quarter. So the efficiencies of the business, you know, the select price increases we've taken, you know, the teams have done a great job, and, you know, we're moving our margins in the correct direction.

Next question comes from Arpine Cocharen with UBS. Please go ahead.

Hi, this is Arpine. Thanks for taking my question. As I think about the lower end of your guidance range for revenue and operand, what's the degree of variability there and pockets of surprises now that a meaningful shipment season is sort of behind you and you have a clearer picture on Triforce and what that could do for you. I'm trying to understand really just what's the degree of variability in that guidance that you provided today.

Orpina, you know, there's always still, you know, we're going into season right now. We have a fairly good signal from the marketplace and a lot of experience on this. And we obviously feel very good about where we are. We wouldn't be raising guidance. You know, having said that, there's, you know, there is uncertainty out there in the world right now. The geopolitical events are well understood. Consumer sentiment is lower than what it has historically been. As we've mentioned, we have not seen any negative reaction from our consumer, even in the face of these uncertainties, and that matches what we've seen historically, that our consumer is not sensitive to mild economic movements, even mild recessions. But there's certainly more risk and a wider range of outcomes that are in the possibility range in the second half of the year, and the comps are a little bit harder in the second half of the year. We feel good about where we are, confident in the direction of our business. We also, Arpina, are well-versed in these types of environments, and we'll be ready to react and respond if indeed something did change. But our base case is for a good year, both for the industry and for the company at this stage.

Thank you. That's very helpful. And then just really quickly on your capital allocation plans, could you maybe give your kind of latest update on how you intend to utilize your net cash position and where you see your more optimal, I guess, leverage ratio longer term to kind of really assess sort of excess cash opportunity that could be returned to shareholders?

over time? Sure. Our capital allocation is really designed around, first, invest in our business, second, ensure we have a healthy balance sheet, and third, return capital to the shareholders. And we will continue that. We'll work with the board on the mix between paying down debt and returning capital to shareholders. But that is the strategy over the long term, is to continue to pay that. We have not set long-term leverage targets. I think in the short term, we will be on the conservative side, and we'll just monitor as we go through it. The next question comes from

Joe Altabello with Raymond James. Please go ahead. Thanks. Hey, guys. Good afternoon.

First question on the tariffs. I think you said $18 million in the first quarter, and I guess the incremental guy for this year is $16 million. So maybe could you go over your assumptions one more time. What new tariffs are you assuming once the 122s expire, and are you impacted by any

changes to the 301 tariffs? So, Joe, we assume that the temporary tariffs that are currently in place will expire in July as they reach their expiration date. We're also assuming that for the second half of the year, that after that, that the tariffs revert back to the pre-Supreme core ruling rates, which for us was approximately 20% overall.

Okay. So you're not assuming any new 301 pairs?

Well, we're assuming the rates go back. So whatever section you want to call it under, we do assume for the second half of the year that they go from what's currently at about 10% to 20% roughly.

Okay. That's helpful. And maybe in terms of the puts and takes in the back half, you've talked about this a couple of times, but I don't think you can quantify the change in the launch schedule, the product and channel rationalizations, as well as the investment in fittings, maybe in terms of an overall revenue and EBITDA impact in the back half.

Yeah, I think on the sales question, Joe, in the back half, I mean, you can see it's down $70 million year over year in the second half.

At the midpoint.

at the midpoint. Over $50 million really represents the difference in new product launches from last year to this year. That includes the push of the one iron launch we had talked about last quarter, so that's inclusive of that. And then the balance would be the rationalization of the lower margin business to improve profitability. And then for the EBITDA, again, it's at the midpoint, $50 million decrease in the second half, and that's the revenue flow through from the decreased revenue. And then there's also a loss of 12, not a loss, but there was $12 million in dividend income last year that won't repeat this year as we used our cash to pay down the term loan in January. And then there's a little bit of increased cost pressures as well during the year, as we

mentioned in the scripts. The next question comes from Anna Glazgen with B. Riley. Please go ahead.

Hi, good afternoon. Thanks for taking my questions. First, really impressive gains in green grass over the past few years plus. Maybe wondering if you could share what that mix spans today and do you see further opportunity to expand that mix ahead?

Yeah, Anna, thank you. And the mix of Greengrass is our largest channel. You know, other than that, I'm not going to break down the magnitude of various channels, but that has moved to our largest channel and most strategic channel. Now, that has been a decade of great work by the team, and it is something that we're quite proud of and a good competitive position for us to be in the marketplace because it has influence on the other channels. So, nice progress there, and you can see if, you know, such as in golf ball, we regularly have higher share at the Greengrass channel than sometimes at the retail channel, and, you know, we're pleased with how that has been trending.

Thanks, Chip. Had to try. On the supply chain that came in better than expected in the first quarter, was that concentrated to any one particular product category?

It was really around the new product. So, you know, the launches around and being able to catch up with that increased demand, you know, irons and drivers in the quantum family, and then a little bit of good productivity on the ball side as well.

The next question comes from Noah Zadkin with KeyBank. Please go ahead.

Hi, thanks for taking my questions. Not to beat a dead horse, but I guess on the tariff piece, in terms of the, I guess, $25 million reduction, is the right way to think about that as that being kind of related to the 122 period, given you kind of expect to revert back to the IEPA rate. And then on the gross margin guide, now projected to be up year over year, how much of that is related to kind of maybe better flow through from improvements on the

gross margin line versus the tariff piece? Thanks. Okay. On the first question on the tariffs, There was, yes, the answer to your question is yes. It was related to the decrease that we've seen during this period. I think you called it the Section 122 period. So it relates to that, going down to 10%. That is the cost savings adjustment of the 25. And then, again, it reverts back to, we're assuming it reverts back to the 20% after that. And then something on gross margins.

No, you want to repeat the gross margin?

Oh, yeah, the gross margin guidance raise. I guess how much of that is kind of related to the margin improvement initiatives versus kind of the tariff piece?

It's mostly tariff because tariff is $25 million of the $40 million improvement in our guide forecast. but there is gross margin improvements embedded throughout this as well as being offset a little bit with some of these new cost pressures such as oil pricing and related materials that are being impacted by that.

Got it. Really helpful. And maybe just one more on Travis Matthews. I think some positive commentary there around marketing and mix improvement in the quarter. You know, I think it maybe frequently kind of got lost in the prior structure of the business. So if you could just kind of provide an update on that business, how things are trending, and how you think about the kind of long-term opportunity there.

Yeah, thanks, Noah. Good question. And Travis just had a great quarter. So they had great direct-to-consumer business that grew both at retail and at e-com faster than the market as we can measure the market based on third-party data. The women's business continues to resonate well there, continuing to grow nicely, great reaction. And then I guess the biggest new news there was the men's business inflected in Q1, and it grew faster than the market from what we can measure as well. They made some strategic changes in that business over the last year, changing some of their merchandising strategy, going to some more clear positions, positions, what they call product pillars, also working on their messaging and focusing on more hero-oriented product. Ironically, the hero short being one of those hero products, which makes it hard for me to say on earnings calls, but I guess makes sense. And, you know, it's resonated well. And, you know, they had a good quarter. What's a strong brand and a strong business reflected very favorably on the strategic changes they made, and then as a result, we feel

good about their start to the year. The next question comes from J.P. Wollum

with Roth Capital. Please go ahead. Great. I appreciate you guys taking my questions here. So first, in terms of just clarifying a comment from the press release talking about the good progress you're making with gross margin and cost-saving initiatives. Could you just give us an update sort of on the cost-saving initiatives? You know, what inning are we in there? How much more opportunity is there as you look to 2026 and potentially beyond? And just kind of where is the most opportunity there?

Well, on the corporate side, if you were talking about corporate costs, you saw we saved $5 million in Q1. that started back in the second half of last year so you won't so the second half this year the lap will be a little bit harder but we've made good progress we continue to make progress progress there's still a little bit of noise with it again we were supporting Jack Wolfskin and Topgolf through a transition period as that winds up I think there's opportunity for more cost savings but the team's done a good job so far and continuing to manage costs will be a

priority for us. And the gross margin on issues, you know, I'd say it's mid game on that one. You know, we're clearly showing good progress. They're comprehensive. And if this was a football

game, it'd be halftime. Great. And this may be kind of goes to that next or to that last point, Chip. But as we think about the kind of CapEx guide that you put in there, like, could you maybe break down you know what is baked in to that number and and i guess kind of the more important question is like is part of the conservative nature of your sort of leverage target for the year the fact that you guys are you know the opportunity for maybe a couple of big capex projects in the next year that would really kind of juice gross margin is that at all

under consideration. We don't really have any big CapEx projects planned. A lot of this is just what we use to run our business, and there's always going to be some CapEx you have to invest back in your business. But I'd say there isn't really a big project planned.

No, the conservative leverage target has been what we view as prudent for operating the business and what is a dynamic period. We're in consultation with our investors on this subject and constantly working with them to make sure that we're managing the business appropriately. And we've received good feedback, but we're going to continue to monitor that. And for the moment, we're pleased with our progress. We're able to return capital to shareholders. We're generating cash flow, and we're showing good progress in the direction of the business. We're going to try to continue that and keep that communication close with our investor base.

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

Well, thank you, everybody, for tuning in. We appreciate your time. Don't forget my recommendation on the Mother's Day presents for this weekend. Golf is supposed to be fun, and moms are super important. Thanks for tuning in. We'll look forward to updating you again in August.

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