Callaway Golf Co

Previous wording

The following discussion should be read in conjunction with the condensed consolidated financial statements and related notes that appear elsewhere in this report, and the condensed consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the SEC on February 27, 2026. Interim operating results are not indicative of operating results that may be expected for the year ending December 31, 2026, or any other future periods. See “Important Notice to Investors Regarding Forward-Looking Statements” on page 2 of this report. References to the “Company,” “Callaway Golf Company,” “we,” “our,” or “us” in this report refer to Callaway Golf Company, together with our wholly-owned subsidiaries.

Current wording

The following discussion should be read in conjunction with the condensed consolidated financial statements and related notes that appear elsewhere in this report, and the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the SEC on February 27, 2026. Interim operating results are not indicative of operating results that may be expected for the year ending December 31, 2026, or any other future periods. See “Important Notice to Investors Regarding Forward-Looking Statements” on page 2 of this report. References to the “Company,” “Callaway Golf Company,” “we,” “our,” or “us” in this report refer to Callaway Golf Company, together with our wholly-owned subsidiaries.

Previous wording

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

Current wording

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

Previous wording

In 2025, the U.S. government implemented reciprocal tariffs affecting many countries in which we do business, increasing costs for our products, components, and raw materials, a significant portion of which are sourced from outside the United States, including Asia and other regions, which may adversely affect product availability, pricing, and demand. On February 20, 2026, the United States Supreme Court struck down certain tariffs previously imposed under the International Emergency Economic Powers Act of 1977 (“IEEPA”). As a result, we filed approximately $49.5 million of refund claims related to previously paid IEEPA tariffs, subject to applicable eligibility, filing, and recovery requirements.

Current wording

In 2025, the U.S. government implemented reciprocal tariffs affecting many countries in which we do business, increasing costs for our products, components, and raw materials, a significant portion of which are sourced from outside the United States, including Asia and other regions, which may adversely affect product availability, pricing, and demand. On February 20, 2026, the United States Supreme Court struck down certain tariffs previously imposed under the International Emergency Economic Powers Act of 1977 (“IEEPA”). As a result, we identified approximately $49.5 million of potential refund claims related to previously paid IEEPA tariffs, of which approximately $42.6 million has been received as of September 30, 2026. The remaining potential refund claims have not yet been filed and remain subject to applicable eligibility, filing, and recovery requirements.

Previous wording

We account for tariff refund claims as gain contingencies and recognize refunds when they are deemed realized or realizable. During the quarter ended June 30, 2026, we recognized $10.8 million of tariff refunds related to previously paid IEEPA tariffs, with the associated benefit recorded within cost of sales in our results of operations. Despite the recognition of these refunds, significant uncertainty remains regarding future U.S. trade policy, including the potential for additional tariffs under alternative statutory authorities, the outcome of ongoing legal proceedings, and the possibility of further changes to tariff rates, scope, duration and enforcement. The ultimate amount, if any, and timing of additional tariff refunds remain subject to ongoing legal, regulatory and administrative proceedings.

Current wording

We account for tariff refund claims as gain contingencies and recognize refunds when they are deemed realized or realizable. During the three and nine months ended September 30, 2026, we recognized IEEPA tariff refund benefits of $33.5 million and $44.3 million, respectively, of which $31.8 million and $42.6 million were recognized in cost of sales, respectively, and $1.7 million was recognized in interest income (expense), net, in each period. Significant uncertainty remains regarding future U.S. trade policy and the amount and timing of any additional tariff refunds, including as a result of potential additional tariffs under alternative statutory authorities and ongoing legal, regulatory and administrative proceedings.

Previous wording

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

Current wording

A significant portion of our operations is conducted outside the United States in currencies other than the U.S. dollar. We use foreign currency forward contracts to partially mitigate the short‑term effects of exchange rate fluctuations on our financial results; however, these instruments do not eliminate currency impacts or address long‑term exposure. Foreign currency fluctuations affect our results primarily through the translation of foreign‑currency‑denominated results into U.S. dollars and mark‑to‑market adjustments on certain intercompany balances and foreign currency forward contracts. For the three andnine months ended September 30, 2026, foreign currency fluctuations had unfavorable impacts of$4.0 million and $1.5 million, respectively, on international net revenues.

Previous wording

We have reclassified certain prior-year amounts related to our discontinued operations to conform to the current year’s presentation. Unless otherwise specified, our discussion below reflects continuing operations only and prior period financial information related to discontinued operations has been reclassified and is separately presented in thecondensed consolidated financial statements and accompanying notes.

Current wording

We have reclassified certain prior-year amounts related to our discontinued operations to conform to the current year’s presentation. Unless otherwise specified, our discussion below reflects continuing operations only and prior period financial information related to discontinued operations has been reclassified and is separately presented in thecondensed consolidated financial statements and accompanying notes. Unless otherwise specified, comparisons below reflect the current year period as compared to the same period in 2025.

Previous wording

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

Current wording

Net sales for the three months ended September 30, 2026 decreased $25.7 million or 5.6% (4.7% on a constant currency basis) as compared to the three months ended September 30, 2025. Segment operating income increased $9.7 million or 26.2% driven by increases in both our Golf Equipment and Apparel, Gear and Other operating segments.

Previous wording

Net sales for the six months ended June 30, 2026 increased $69.7 million or 5.7% (5.5% on a constant currency basis) as compared to the six months ended June 30, 2025. Segment operating income increased $60.6 million or 25.0% driven by increases in both our Golf Equipment and Apparel, Gear and Other operating segments.

Current wording

Net sales for the nine months ended September 30, 2026 increased $44.0 million or 2.6% (2.7% on a constant currency basis) as compared to the nine months ended September 30, 2025. Segment operating income increased $70.3 million or 25.1% driven by increases in both our Golf Equipment and Apparel, Gear and Other operating segments.

Previous wording

The $60.8 million (7.1%) increase in Golf Equipment net sales for the six months ended June 30, 2026 was due to a 6.8% increase in golf club sales driven by strong reception of new product launches, combined with an 8.1% increase in golf ball sales driven by the successful launch of the new Chrome family of golf balls and overall gains in market share, partially offset by lower sales of lower margin golf ball products related to SKU rationalization initiatives.

Current wording

The $36.8 million (3.2%) increase in Golf Equipment net sales for the nine months ended September 30, 2026 was due to a 2.7% increase in golf club sales driven by strong reception of new product launches, combined with a 4.8% increase in golf ball sales driven by the successful launch of the new Chrome family of golf balls and overall gains in market share, partially offset by a decrease in net sales of irons due to the planned change in launch timing and a decline in sales of lower margin golf ball products primarily related to SKU rationalization initiatives.

Previous wording

The $39.9 million increase in Golf Equipment segment operating income for the six months ended June 30, 2026 was primarily driven by the increase in net sales noted above, combined with improved gross margins resulting from favorable pricing, product mix, and cost savings from gross margin initiatives, which more than offset the unfavorable impact of incremental tariffs. These increases were partially offset by an increase in operating expenses of $12.4 million primarily due to the recognition of an $8.2 million lease termination incentive gain in the first quarter of 2025 that did not recur combined with an increase in employee costs due to cost-of-living adjustments.

Current wording

The $43.8 million (21.8%) increase in Golf Equipment segment operating income for the nine months ended September 30, 2026 was primarily driven by the increase in net sales noted above, combined with an increase in gross margin resulting from ongoing initiatives including select price increases, cost reductions, and rationalizing lower margin business as well as favorable foreign currency impacts. These increases were partially offset by unfavorable impacts of imposed tariffs and higher operating expenses primarily due to an $8.2 million lease termination incentive gain recognized in the first quarter of 2025, combined with the unfavorable impact from cost-of-living increases and inflationary pressures.

Previous wording

The $6.7 million (3.6%) decrease in Apparel, Gear and Other net sales for the three months ended June 30, 2026 was primarily due to decreases in sales of Callaway soft goods due to timing of shipments and decreases in Asia from unfavorable foreign currency impacts, partially offset by an increase in sales of TravisMathew apparel products primarily related to higher direct-to-consumer sales.

Current wording

The $1.7 million (1.1%) decrease in Apparel, Gear and Other net sales for the three months ended September 30, 2026 was due to a decline in sales of gear and accessories, partially offset by an increase in sales of TravisMathew apparel products primarily related to higher direct-to-consumer sales.

Previous wording

The $8.9 million (2.4%) increase in Apparel, Gear and Other net sales for the six months ended June 30, 2026 was primarily due to increases in sales of TravisMathew apparel products related to strong overall market demand and higher direct-to-consumer sales, combined with increased sales of Callaway soft goods.

Current wording

The $7.2 million (1.4%) increase in Apparel, Gear and Other net sales for the nine months ended September 30, 2026 was primarily due to increases in sales of TravisMathew apparel products related to strong overall market demand and higher direct-to-consumer sales, partially offset by a decline in sales of gear and accessories.

Previous wording

The $20.7 million (32.0%)increase in segment operating income for the six months ended June 30, 2026 was primarily driven by the increase in net sales and higher gross margins from favorable pricing and cost savings from gross margin initiatives, which more than offset the unfavorable impact of incremental tariffs. These increases were partially offset by an increase in operating expenses of $3.6 million due to the recognition of a $3.8 million lease termination incentive gain in the first quarter of 2025 that did not recur.

Current wording

The $26.5 million (33.8%)increase in segment operating income for the nine months ended September 30, 2026 was primarily driven by the increase in net sales and higher gross margins due to cost savings and select price increases from ongoing gross margin initiatives combined with favorable product mix. These increases were partially offset by an increase in operating expenses primarily due to a $3.8 million lease termination incentive gain recognized in the first quarter of 2025 combined with cost-of-living increases and inflationary pressures.

Previous wording

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

Current wording

The$7.7 million (17.1%) decrease in net sales for the three months ended September 30, 2026 was primarily due to decreases in golf equipment product sales due to a planned decrease in product launches in the second half of 2026. The$11.4 million (6.6%) increase in net sales for the nine months ended September 30, 2026 was primarily due to increases in golf equipment product sales from strong demand combined with the favorable impact of changes in foreign currency.

Previous wording

The$1.6 million (1.7%) decrease in net sales for three months ended June 30, 2026 wasprimarily due to unfavorable foreign currency impacts. On a constant currency basis, net sales increased $5.8 million (6.3%) during the three months ended June 30, 2026 primarily due to the success of new product launches. The$4.8 million (2.4%) decrease in net sales for six months ended June 30, 2026 was also primarily due to unfavorable foreign currency impacts. On a constant currency basis, net sales increased $5.0 million (2.5%) during the six months ended June 30, 2026 due to the success of new product launches.

Current wording

The$10.4 million (11.5%) decrease in net sales for the three months ended September 30, 2026 wasprimarily due to lower sales of golf equipment productsdue to a planned decrease in product launches in the second half of 2026 combined with unfavorable foreign currency impacts. On a constant currency basis, net sales decreased $6.2 million (6.9%) during the three months ended September 30, 2026. The$15.2 million (5.3%) decrease in net sales for the nine months ended September 30, 2026 wasprimarily due to unfavorable foreign currency impacts. On a constant currency basis, net sales decreased $1.2 million (0.4%) during the nine months ended September 30, 2026.

Previous wording

During thethree months ended June 30, 2026, gross profit increased by$43.3 million (16.4%) as compared to the prior year period. Gross profit as a percent of net sales (“gross margin”) increased to 50.1% for the three months ended June 30, 2026 compared to 43.9% for the three months ended June 30, 2025. The improvement in gross margin was due to favorable pricing and product mix, cost savings from gross margin initiatives, and the receipt of $10.8 million of tariff refunds in the current period.

Current wording

During thethree months ended September 30, 2026, gross profit increased by$42.4 million (23.0%) as compared to the prior year period. Gross profit as a percent of net sales (“gross margin”) increased to 51.9% for the three months ended September 30, 2026 compared to 39.8% for the three months ended September 30, 2025. The improvement in gross margin was primarily due to the recognition of $31.8 million of tariff refunds in the current period, combined with continued progress on our gross margin initiatives including cost reductions, select price increases and rationalizing lower margin business. On a Non-GAAP basis, excluding tariff refunds and non-recurring items, gross margin increased 520 basis points to 45.0% for the three months ended September 30, 2026 compared to 39.8% in the comparative period in 2025.

Previous wording

The $11.1 million (3.3%) increase in SG&A expenses forthe six months ended June 30, 2026 was primarily due to a $12.0 million gain recognized from a lease termination incentive in the first quarter of 2025, which did not recur in 2026, combined with impairment charges on retail assets at TravisMathew, losses on asset disposals, and higher legal costs, partially offset by lower advertising spend due to the timing of planned advertising activities, decreased tour expenses, and a decrease in depreciation and amortization.

Current wording

The $13.8 million (2.7%) increase in SG&A expenses forthe nine months ended September 30, 2026 was primarily due to a $12.0 million gain recognized from a lease termination incentive in the first quarter of 2025, which did not recur in 2026, combined with cost-of-living increases and inflationary pressures. These increases were largely offset by savings from cost reduction initiatives.

Previous wording

The $0.3 million (1.0%) decrease in research and development expenses for the six months ended June 30, 2026 was primarily due to cost savings initiatives.

Current wording

The $0.2 million (1.3%) decrease in research and development expenses for the three months ended September 30, 2026 was primarily due to a decrease in employee costs from cost savings initiatives.

Previous wording

The $1.8 million increase in other income (expense), net for the three months ended June 30, 2026 was primarily due to a $4.5 million favorable change in foreign currency transactions and hedging activity and $1.1 million of income from transition services provided to Topgolf, partially offset by a $2.3 million write-off of unamortized debt issuance costs in connection with the full repayment of the term loan and a $0.7 million decrease in dividend income on our money market accounts due to lower average balances resulting from funds being used for debt repayments and stock repurchases.

Current wording

The $11.9 million increase in other income (expense), net for the three months ended September 30, 2026 was primarily due to a $15.4 million gain on our investment in Full Swing following the sale of the business, partially offset by a $4.6 million decrease in dividend income on our money market accounts due to lower average balances resulting from funds being used for debt repayments and stock repurchases.

Previous wording

The $2.3 million (115.0%) increase in other income (expense), net for the six months ended June 30, 2026 was primarily due to a $5.0 million favorable change in foreign currency transactions and hedging activity, a $4.3 million remeasurement gain on our investment in Five Iron Golf, $2.3 million of income from transition services provided to Topgolf, and $1.3 million of higher dividend income on our money market accounts due to higher average balances for the year-to-date period, partially offset by a $9.8 million write-off of unamortized debt issuance costs in connection with the repayment of the term loan mentioned above.

Current wording

The $14.2 million increase in other income (expense), net for the nine months ended September 30, 2026 was primarily due to a $15.4 million gain on our investment in Full Swing following the sale of the business and a $4.3 million remeasurement gain on our investment in Five Iron Golf, partially offset by a $9.8 million write-off of unamortized debt issuance costs in connection with the repayment of the term loan.

Previous wording

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

Current wording

The $17.9 million and $46.6 million loss during the three and nine months ended September 30, 2026, respectively, represents ourproportionate share of Topgolf’s net losses following the completion of the sale of a majority interest in the business effective January 1, 2026.

Previous wording

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

Current wording

Income tax expense decreased $3.0 million for the three months ended September 30, 2026 and increased $24.2 million for the nine months ended September 30, 2026. As a percentage of pre-tax income, our effective tax rate for the three months ended September 30, 2026 was (0.6)% compared to (192.9)% in the comparable period of 2025. As a percentage of pre-tax income, our effective tax rate for the nine months ended September 30, 2026 was 25.3% compared to 29.1% in the comparable period of 2025. Our effective tax rate for the three and nine months ended September 30, 2026, was impacted by the valuation allowances related to our investment in Topgolf as well as the gain on the sale of our Full Swing investment, which was offset by available capital loss carryforwards and therefore did not result in incremental tax expense.

Previous wording

Net income from continuing operations and diluted earnings per share for thesix months ended June 30, 2026 were $150.7 million and$0.78 per share, respectively, as compared to net income from continuing operations and diluted earnings per share of $108.9 million and $0.56 per share, respectively, for the six months ended June 30, 2025. These increases were primarily driven by a $60.6 million increase in segment operating income combined with the recognition of $10.8 million related to the tariff refunds in the current quarter and a reduction in interest expense resulting from the full repayment of our term loan debt. These increases were partially offset by the loss recognized from our equity method investment in Topgolf and an increase in the income tax provision.

Current wording

Net income from continuing operations and diluted earnings per share for thethree months ended September 30, 2026 were $48.1 million and$0.26 per share, respectively, as compared to net loss from continuing operations and diluted loss per share of $4.1 million and $0.02 per share, respectively, for the three months ended September 30, 2025. These increases were primarily driven by the recognition of $33.5 million of tariff refunds in the current quarter, the recognition of a $15.4 million gain on our investment in Full Swing following the sale of the business, a reduction in interest expense resulting from the full repayment of our term loan debt and the settlement of the Convertible Notes, a $9.7 million increase in segment operating income, and a decrease in the income tax provision (benefit). These increases were partially offset by the loss recognized from our equity method investment in Topgolf.

Previous wording

On a non-GAAP basis, excluding the items described in the table above, our net income from continuing operations and diluted earnings per share for thesix months ended June 30, 2026 would have been $185.6 million and$0.96 per share, respectively, as compared to net income from continuing operations and diluted earnings per share of $96.0 million and $0.50 per share, respectively, for the six months ended June 30, 2025. The increase in non-GAAP net income from continuing operations was primarily due to a $60.6 million increase in segment operating income combined with lower interest expense, partially offset by an increase in the income tax provision.

Current wording

On a non-GAAP basis, excluding the items described in the table above, our net income from continuing operations and diluted earnings per share for thethree months ended September 30, 2026 would have been $22.9 million and$0.12 per share, respectively, as compared to net loss from continuing operations and diluted loss per share of $11.1 million and $0.06 per share, respectively, for the three months ended September 30, 2025. The increase in non-GAAP net income from continuing operations was primarily due to lower interest expense, a $9.7 million increase in segment operating income, and a decrease in the income tax provision.

Previous wording

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

Current wording

Net income from continuing operations and diluted earnings per share for thenine months ended September 30, 2026 were $198.8 million and$1.05 per share, respectively, as compared to net income from continuing operations and diluted earnings per share of $104.8 million and $0.55 per share, respectively, for the nine months ended September 30, 2025. These increases were primarily driven by a $70.3 million increase in segment operating income, the recognition of $44.3 million related to the tariff refunds in the current period, the recognition of a $15.4 million gain on our investment in Full Swing following the sale of the business, and a reduction in interest expense resulting from the full repayment of our term loan debt and the settlement of the Convertible Notes. These increases were partially offset by the loss recognized from our equity method investment in Topgolf and an increase in the income tax provision.

Previous wording

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

Current wording

On a non-GAAP basis, excluding the items described in the table above, our net income from continuing operations and diluted earnings per share for thenine months ended September 30, 2026 would have been $208.5 million and$1.10 per share, respectively, as compared to net income from continuing operations and diluted earnings per share of $84.9 million and $0.45 per share, respectively, for the nine months ended September 30, 2025. The increase in non-GAAP net income from continuing operations was primarily due to a $70.3 million increase in segment operating income combined with lower interest expense, partially offset by an increase in the income tax provision.

Previous wording

Loss of $0.6 million from discontinued operations, net of tax, for the three months ended June 30, 2026 was related to the settlement of certain indemnification obligations and other costs directly related to our divestitures of Topgolf and Jack Wolfskin. Income of $17.6 million, net of tax from discontinued operations for the six months ended June 30, 2026, was primarily related to the recognition of an income tax benefit in connection with the sale of Topgolf effective on January 1, 2026, partially offset by transaction costs directly related to the completion of the sale as well as the settlement of certain indemnification obligations. The $25.2 million and $86.5 million loss from discontinued operations, net of tax for the three and six months ended June 30, 2025, respectively, was due to net operating losses of both Topgolf and Jack Wolfskin during the period.

Current wording

Loss of $2.4 million from discontinued operations, net of tax, for the three months ended September 30, 2026 was related to an adjustment to the income tax benefit recognized in connection with the sale of Topgolf, effective January 1, 2026. Income of $15.2 million, net of tax from discontinued operations for the nine months ended September 30, 2026, was primarily related to the recognition of an income tax benefit in connection with the sale of Topgolf, partially offset by transaction costs directly related to the completion of the sale as well as the settlement of certain indemnification obligations. The $10.6 million and $97.1 million loss from discontinued operations, net of tax for the three and nine months ended September 30, 2025, respectively, was due to net operating losses of both Topgolf and Jack Wolfskin during the period.

Previous wording

Our cash and cash equivalents decreased $625.1 million to $278.1 million at June 30, 2026 as compared to December 31, 2025 and decreased $405.4 million compared to June 30, 2025. These decreases were primarily driven by cash used in financing activities from continuing operations, largely reflecting the full repayment of our term loan during the period, which was funded by cash proceeds from the sale of Topgolf and cash on hand. We also used cash in financing activities to repurchase shares of our common stock pursuant to our stock repurchase program. In addition, cash provided by operating activities from continuing operations increased due to the strong performance of the business. For further information related to our financing arrangements, see Note 6 “Financing Arrangements” in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 and “Liquidity and Capital Resources” in Part I, Item 2 of this Form 10-Q.

Current wording

Our cash and cash equivalents decreased $469.7 million to $433.5 million at September 30, 2026 as compared to December 31, 2025 and decreased $432.1 million compared to September 30, 2025. These decreases primarily resulted from cash used in financing activities from continuing operations, largely reflecting the full repayment of our 2023 Term Loan B facility and the cash settlement of our Convertible Notes during May 2026, which were funded by cash proceeds from the sale of Topgolf and cash on hand. In addition, we used our cash and cash equivalents to repurchase shares of our common stock pursuant to our stock repurchase program. Cash provided by operating activities from continuing operations increased due to the strong performance of the business in the nine months ended September 30, 2026, and also reflects the favorable impact from the receipt of tariff refunds. For further information related to our financing arrangements, see Note 6 “Financing Arrangements” in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 and “Liquidity and Capital Resources” in Part I, Item 2 of this Form 10-Q.

Previous wording

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

Current wording

Our accounts receivable balance fluctuates throughout the year as a result of the general seasonality of our business, and is also affected by the timing of new product launches. With respect to our Golf Equipment business, accounts receivable are generally the highest during the first and second quarters during the seasonal peak in the golf industry, and generally decline significantly during the third and fourth quarters as a result of an increase in cash collections combined with lower seasonal sales. With respect to our Apparel, Gear and Other business, accounts receivable balances for our TravisMathew and OGIO businesses are more evenly distributed throughout the year while accounts receivable balances for our Callaway-branded soft goods are subject to the same general seasonality as our Golf Equipment business. As of September 30, 2026, our consolidated net accounts receivable increased to $186.0 million from $123.2 million at December 31, 2025. The increase primarily reflects the seasonality of Golf Equipment net sales in the first and second quarters. Net accounts receivable as of September 30, 2026 decreased $25.1 million compared to September 30, 2025, primarily due to lower net sales in the third quarter of 2026 compared to 2025 combined with improved cash collections.

Previous wording

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

Current wording

Our inventory balance fluctuates throughout the year as a result of the general seasonality of our Golf Equipment business, and is also affected by the timing of new product launches and success of new products. With respect to our Golf Equipment business, the buildup of inventory generally begins during the third quarter and continues into the first quarter in order to meet increased demand for the golf season. With respect to our Apparel, Gear and Other business, inventory levels are generally less affected by seasonality due to the diversification of product offerings for our brands. As of September 30, 2026, our inventory decreased $89.1 million to $536.2 million, compared to December 31, 2025, which reflects our seasonality. Our inventory increased $5.4 million as of September 30, 2026, compared to September 30, 2025, primarily due to higher Golf Equipment inventory to support demand and inventory requirements heading into next year, partially offset by lower Apparel, Gear and Other inventory due to product sell through.

Previous wording

As of June 30, 2026, we had $774.7 million in combined cash and availability under our credit facilities, which is a decrease of $386.6 million compared to June 30, 2025 following the full repayment of our Term Loan B in May 2026 and repurchases of shares of our common stock pursuant to our stock repurchase program. Information about our credit facilities and long-term debt is presented in Note 6 “Financing Arrangements” in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, which is incorporated herein by this reference.

Current wording

As of September 30, 2026, we had $815.1 million in combined cash and availability under our credit facilities, which is a decrease of $440.9 million compared to September 30, 2025 following the full repayment of our 2023 Term Loan B facility and the cash settlement of our Convertible Notes in May 2026, combined with repurchases of shares of our common stock pursuant to our stock repurchase program. Information about our credit facilities and long-term debt is presented in Note 6 “Financing Arrangements” in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, which is incorporated herein by this reference.

Previous wording

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

Current wording

As of September 30, 2026, approximately 25% of our cash was held in regions outside of the United States. We continue to maintain our indefinite reinvestment assertion with respect to most jurisdictions in which we operate because of local cash requirements to operate our business. If we were to repatriate cash to the United States outside of settling intercompany balances, we may need to pay incremental foreign withholding taxes which, subject to certain limitations, generate foreign tax credits for use against our U.S. tax liability, if any. Additionally, we may need to pay certain state income taxes.

Previous wording

During the normal course of business, we have made certain indemnities, commitments and guarantees under which we may be required to make payments in relation to certain transactions. These include (i) intellectual property indemnities to our customers and licensees in connection with the use, sale and/or license of our products or trademarks, (ii) indemnities to various lessors in connection with facility leases for certain claims arising from such facilities or leases, (iii) indemnities to vendors and service providers pertaining to the goods or services provided to us or based on the negligence or willful misconduct, and (iv) indemnities involving the accuracy of representations and warranties in certain contracts. In addition, we have made contractual commitments to each of our officers and certain other employees providing for severance payments upon the termination of employment. We have also issued guarantees in the form of a standby letter of credit in the amount of $0.4 million primarily as security for contingent liabilities under certain workers’ compensation insurance policies. We have also made certain indemnities under which we may be required to make payments in relation to divestitures of the Topgolf and Jack Wolfskin businesses. These include indemnities against (i) damages arising from certain ongoing litigation matters, (ii) certain exempted claims and (iii) certain pre-closing tax and other liabilities.

Current wording

During the normal course of business, we have made certain indemnities, commitments and guarantees under which we may be required to make payments in relation to certain transactions. These include (i) intellectual property indemnities to our customers and licensees in connection with the use, sale and/or license of our products or trademarks, (ii) indemnities to various lessors in connection with facility leases for certain claims arising from such facilities or leases, (iii) indemnities to vendors and service providers pertaining to the goods or services provided to us or based on the negligence or willful misconduct, and (iv) indemnities involving the accuracy of representations and warranties in certain contracts. In addition, we have made contractual commitments to each of our officers and certain other employees providing for severance payments upon the termination of employment. We have also made certain indemnities under which we may be required to make payments in relation to divestitures of the Topgolf and Jack Wolfskin businesses. These include indemnities against (i) damages arising from certain ongoing litigation matters, (ii) certain exempted claims and (iii) certain pre-closing tax and other liabilities.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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