Topgolf Callaway Brands Corp

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Topgolf Callaway Brands Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Topgolf Callaway Brands Corp. and subsidiaries (the “Company”) as of December 31, 2024, and 2023, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2025, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which it relates.

Income Tax Provision Including Valuation Allowance – Refer to Notes 2 and 12 to the Financial Statements

Critical Audit Matter Description

The Company is subject to income tax in the U.S. and foreign jurisdictions, and deferred tax assets and liabilities result from temporary differences between the financial reporting and tax bases of assets and liabilities. As described in Note 12 to the consolidated financial statements, the Company recorded an income tax benefit of $25.5 million and has gross deferred tax assets of $1,023.9 million, a valuation allowance of $57.4 million reducing the deferred tax assets to $966.5 million and, overall, net deferred tax liabilities of $27.3 million as of December 31, 2024. Management uses judgment when recording its tax provision, which includes the interpretation and application of complex tax laws across multiple jurisdictions. In addition, the valuation of the Company’s deferred tax assets requires a significant amount of judgment, including estimates of future taxable income and the ability to utilize net operating losses (“NOLs”) and tax credits to offset future taxable income.

Given the significant judgments by management when interpreting and applying complex tax laws and regulations as well as Accounting Standard Codification Topic No. 740, Income Taxes, our audit procedures to assess the tax provision and the valuation allowance recorded against the Company’s deferred tax assets required a high degree of auditor judgment and an increased extent of audit effort, including the need to involve our income tax specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures performed related to the income tax provision including valuation allowance included the following, among others:

•We tested the effectiveness of controls over the income tax provision and deferred tax assets and liabilities, including management’s controls over the estimates of future taxable income and the determination of whether it is more likely than not that deferred tax assets will be realized.

•We assessed the reasonableness of the methods, assumptions, and judgments used by management to determine the tax provision, deferred taxes, and valuation allowance.

•We tested the valuation allowances recorded by evaluating management conclusions on the realizability of the deferred tax assets.

•We tested the income tax provision by selecting a sample of permanent differences and deferred tax assets and liabilities, evaluating compliance with tax laws and regulations for those samples.

•We involved professionals in our firm having expertise in accounting for U.S. and foreign income taxes.

Topgolf Reporting Unit Goodwill and Intangibles Impairment – Refer to Notes 2 and 9 to the Financial Statements

Critical Audit Matter Description

The Company’s evaluation of goodwill and indefinite-lived intangibles for impairment involves the comparison of the fair value of each reporting unit and indefinite-lived intangible to its carrying value. The Company estimates the goodwill fair value using a combination of a discounted cash flow analysis under the income approach and a public company guideline method under the market-based approach. The income approach, utilizing the discount cash flow analysis method incorporates the use of cash flow projections and a discount rate that are developed using market participant-based assumptions. The income approach projections are based on Company’s best estimates of the long-term forecasts of the business, including the impacts of macroeconomic conditions and future venues openings, as it relates to the Topgolf reporting unit, and the rate used in the discounting of those cash flows. The market-based approach, utilizing the public company guideline method, requires management to make significant assumptions related to marketplace Revenue and EBITDA multiples from within a peer public company group. The Company estimates the indefinite-lived intangibles fair value under an income approach using the relief-from-royalty method. The royalty rate estimate is based on reviewing current licensing agreements, market benchmarking and performing branded product profitability assessments.

The carrying value of the Topgolf reporting unit and trade name exceeded the fair value as of the measurement date and, therefore, management has recognized an impairment of $1,352.4 million and $99.6 million, respectively, as of December 31, 2024. Determining the fair values of the reporting unit and indefinite-lived intangible requires management to make significant estimates and assumptions related to future revenue and earnings projections that could have significant impact on the goodwill and trade name impairment charge.

We identified the assumptions related to estimating the amount and timing of expected future revenue and earnings used in determining the fair values of the Topgolf reporting unit and trade name as a critical audit matter because of the significant judgments involved in estimating these amounts. Performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the expected amount and timing of future revenues and earnings to estimate the fair value of the Topgolf reporting unit and trade name included the following, among others:

•We tested the effectiveness of controls over their goodwill and indefinite-lived intangibles impairment evaluation, including those over the determination of fair value of the Topgolf reporting unit and trade name, such as controls related to management’s selection of forecasts of future revenues and earnings.

•We assessed the reasonableness of management’s forecasts of future revenues and earnings performing inquiries of appropriate individuals outside of the finance organization, comparing the projections to historical results and internal communications to management and board of directors.

•With the assistance of our fair value specialists, we compared applicable industry forecasted long-term revenue growth rates to management’s projected revenues used within the valuation models.

•We evaluated whether the estimated future earnings were consistent with evidence obtained in other areas of the audit.

•We evaluated management’s ability to estimate future revenues and earnings by comparing actual revenues and earnings to management’s historical forecasts.

/s/Deloitte & Touche LLP

Costa Mesa, California

February 28, 2025

We have served as the Company’s auditor since 2002.