Callaway Golf Co: Form 10-Q for the period ended Mar 31, 2026

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.

Divestitures of Topgolf and Jack Wolfskin

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

As a result of these divestitures, the operating results of Jack Wolfskin and Topgolf are reported in discontinued operations for all periods presented in this Form 10-Q. For more information, please refer to Note 3 of this Form 10-Q or our Annual Report on Form 10-K for the year ended December 31, 2025.

Discussion of Non-GAAP Measures

In addition to the financial results contained in this report, which have been prepared and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), we have also included supplemental information concerning our financial results on a non-GAAP basis. This non-GAAP information includes the following:

• A constant currency measure on net sales in order to demonstrate the impact of foreign currency fluctuations on these results. This information represents an estimate for comparative purposes and is calculated by taking current period local currency results and translating them into U.S. dollars based on the foreign currency exchange rates for the applicable comparable prior period.
• Net income and diluted earnings per share from continuing operations excluding the non-cash amortization associated with acquired intangible assets, including acquired customer and distributor relationships and acquired developed technology related to our acquisitions of TravisMathew and OGIO (collectively, the “Acquisitions”). While the amortization of these assets is excluded from our calculation of non-GAAP net income, the revenue, operating costs and associated acquired assets that contribute to the revenue generation associated with these acquired companies is reflected in our calculation of non-GAAP net income from continuing operations.
• Net income and diluted earnings per share from continuing operations excluding certain non-cash and non-recurring charges, as further detailed below, as well as the income (loss) from our equity method investment in Topgolf. In addition, for periods presented for fiscal year 2025, net income and diluted earnings per share from continuing operations were adjusted to include interest expense associated with term loan debt that was recognized as part of discontinued operations in order to show the full effect of consolidated interest expense from our corporate debt.

We have included information in this report to reconcile non-GAAP information for the periods presented to the most directly comparable GAAP information. Non-GAAP information in this report should not be considered in isolation or as a substitute for any measure derived in accordance with GAAP and may also be inconsistent with the manner in which similar measures are derived or used by other companies. We use such non-GAAP information for financial and operational decision-making purposes and as a means to evaluate the underlying performance of our business and/or in forecasting our business. We believe that the presentation of such non-GAAP information, when considered in conjunction with the most directly comparable GAAP information, provides additional useful information for investors in their assessment of the underlying performance of our business.

Segment and Related Information

Our products and brands are reported under two operating segments: Golf Equipment, which includes the operations of our golf clubs and golf balls business; and Apparel, Gear and Other, which includes the operations of our soft goods business marketed under the Callaway, TravisMathew and OGIO brand names.

Golf Equipment

Our Golf Equipment operating segment is comprised of Callaway Golf-branded woods, hybrids, irons, wedges, Odyssey putters, packaged sets, and Callaway Golf branded golf balls, as well as sales of pre-owned golf clubs. Our golf equipment products are designed to be technologically advanced and are for golfers of all skill levels, from beginner to professional.

Operating results for our Golf Equipment segment fluctuate due to seasonal factors, as the game of golf is primarily played on a seasonal basis in most of the regions where we conduct business. Weather conditions in most parts of the world, including our primary geographic markets, generally restrict golf from being played throughout the entire year, with many of our on-course customers closing during the cold weather months. Operating results are also impacted by the timing of our product launches. In general, we launch new products for the new golf season during the first quarter of the year. This initial sell-in period typically continues into the second quarter, while third-quarter sales are generally dependent on reorders and may also include smaller new product launches. Fourth-quarter sales are generally less than the other quarters due to the end of the golf season in many of our key regions. In addition to this seasonality, our Golf Equipment sales may also be impacted by other factors, including the timing of new product introductions. As a result of these factors, a majority of our Golf Equipment sales, and most, if not all, of the profitability from our Golf Equipment operating segment generally occurs during the first half of the year.

Apparel, Gear, and Other

Our Apparel, Gear and Other segment is comprised of high quality soft good products which we design, develop and sell under the Callaway, TravisMathew and OGIO brands. These brands deliver a range of premium performance and lifestyle products in the United States and select international markets. We are focused on maintaining strong brand momentum by category and market share growth with key trade partners by enhancing our digital marketing, e-commerce and retail store presence, which we believe will increase direct-to-consumer sales and drive increased profitability over time.

Sales of Callaway‑branded golf apparel and accessories generally follow the same seasonal patterns as golf equipment and are therefore typically higher during the first half of the year. Sales of TravisMathew and OGIO branded products, which include golf and lifestyle apparel, accessories, and performance products, are more diversified and therefore are more evenly distributed throughout the year due to broader product offerings and a greater mix of direct‑to‑consumer sales.

For further information about our segments, see Note 17 “Segment Information” in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.

Current Economic Conditions

Macroeconomic Factors

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

Tariffs

In 2025, the U.S. government implemented reciprocal tariffs affecting many countries in which we do business, increasing costs for our products, components, and raw materials, a significant portion of which are sourced from outside the United States, including Asia and other regions, which may adversely affect product availability, pricing, and demand. The U.S. government has subsequently announced and rescinded various tariffs, contributing to continued uncertainty regarding their economic impact. On February 20, 2026, the United States Supreme Court struck down certain tariffs previously imposed under the International Emergency Economic Powers Act of 1977. The ruling did not address potential refunds of tariffs previously assessed under that authority, and as of March 31, 2026, we have not recognized an asset related to any potential refund. Following the ruling, additional tariffs were imposed under a separate authority, further contributing to uncertainty regarding tariff levels, duration, and related costs.

Foreign Currency

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 months ended March 31, 2026, foreign currency fluctuations had a favorable impact of $7.6 million on international net revenues.

Results of Operations

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 the condensed consolidated financial statements and accompanying notes.

Net sales and operating segment results (in millions, except percentages)

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

($ in millions)

Golf Equipment

Net sales

The $42.3 million (9.5%) increase in Golf Equipment net sales for the three months ended March 31, 2026 was primarily due to an 11.9% increase in golf club sales due to improved launch execution, strong reception of new product launches, and strong overall market demand, combined with a 1.6% increase in golf ball sales driven by the successful launch of the new Chrome Tour ball, partially offset by SKU rationalization initiatives related to lower margin ball products.

Operating income

The $15.8 million increase in Golf Equipment segment operating income for the three months ended March 31, 2026 was primarily driven by the increase in net sales noted above, combined with improved gross margins resulting from favorable pricing and cost savings from gross margin initiatives, which more than offset the unfavorable impact of approximately $12.0 million from incremental tariffs. In addition, operating expenses increased $8.1 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.

Apparel, Gear and Other

Net sales

The $15.6 million (8.4%) increase in Apparel, Gear and Other net sales for the three months ended March 31, 2026, was primarily due to increases in sales of Callaway soft goods and TravisMathew apparel products related to strong overall market demand and improved direct-to-consumer sales in the TravisMathew business.

Operating income

The $16.6 million (46.9%) increase in segment operating income for the three months ended March 31, 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 approximately $3.4 million from incremental tariffs. In addition, operating expenses increased $2.8 million due to the recognition of a $3.8 million lease termination incentive gain in the first quarter of 2025 that did not recur.

Net sales by major geographic region for the periods presented below were as follows (in millions, except percentages):

We sell our Golf Equipment and Apparel, Gear and Other products in the United States and internationally, with our principal international regions being Europe and Asia. Apparel, Gear and Other product sales for our TravisMathew business are primarily concentrated in the United States.

United States

The $32.7 million (7.9%) increase in net sales for the three months ended March 31, 2026 was primarily due to higher sales volumes of golf clubs combined with higher TravisMathew sales.

Europe

The $18.9 million (29.4%) increase in net sales for the three months ended March 31, 2026 was primarily due to increases in golf equipment product sales.

Asia

The $3.2 million (3.0%) decrease in net sales for three months ended March 31, 2026 was primarily due to unfavorable foreign currency impacts and soft demand in the Korea apparel market.

Rest of World

The $9.5 million (22.4%) increase compared to the three months ended March 31, 2026 was primarily due to higher golf equipment sales in Canada and Australia.

Gross Profit (in millions, except percentages)

Cost of sales

Our cost of sales is variable in nature and fluctuates relative to sales volumes. Cost of sales includes raw materials and component costs, direct labor and manufacturing overhead, inbound freight, duties, tariffs and shipping charges, and depreciation and amortization directly related to manufacturing and distribution.

Gross profit and gross margin

During the three months ended March 31, 2026, gross profit increased by $43.1 million (15.2%) as compared to the prior year period. Gross profit as a percent of net sales (“gross margin”) increased to 47.5% for the three months ended March 31, 2026 compared to 45.0% for the three months ended March 31, 2025. The improvement in gross margin was due to favorable pricing combined with cost savings from gross margin initiatives, which more than offset the unfavorable impacts of incremental tariffs.

Operating Expenses (in millions, except percentages)

Selling, general and administrative expense

Selling, general and administrative (“SG&A”) expenses primarily consist of employee costs, advertising and promotional expense, legal and professional fees, tour expenses, travel expenses, building and rent expenses, depreciation and amortization charges and other miscellaneous expenses.

The $8.7 million (5.3%) increase in SG&A expenses for the three months ended March 31, 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 an increase in employee costs primarily related to cost of living and sales commissions increases, partially offset by lower advertising spend due to the timing of planned advertising activities.

Research and development expense

Research and development expenses are comprised of costs to design, develop, test or improve our products and technology, and primarily include employee costs of personnel engaged in research and development activities, research costs and depreciation expense.

The $0.7 million (4.4%) decrease in research and development expenses for the three months ended March 31, 2026 was primarily due to a decline in depreciation expense combined with cost savings initiatives.

Other Income and Expense (in millions, except percentages)

Interest expense

The $9.1 million (61.1%) decrease in interest expense, net for the three months ended March 31, 2026 was primarily due to lower interest expense on our term loan as a result of the partial repayment on January 2, 2026 in connection with completion of the sale of Topgolf.

Other income

The $0.5 million (20.8%) increase in other income for the three months ended March 31, 2026 was primarily due to a $4.3 million remeasurement gain on our investment in Five Iron Golf, $2.1 million of higher dividend income on our money market accounts and $1.2 million of income from transition services provided to Topgolf, partially offset by a $7.5 million write-off of unamortized debt issuance fees in connection with the partial repayment of the term loan mentioned above.

Income (Loss) from Equity Method Investments (in millions, except percentages)

Income (loss) from equity method investments

The $27.7 million loss during the three months ended March 31, 2026 represents our proportionate share of Topgolf’s net losses following the completion of the sale of the business effective January 1, 2026.

Income Taxes (in millions, except percentages)

Income tax expense

The $5.5 million increase in income tax expense for the three months ended March 31, 2026 was primarily due to higher pre‑tax earnings. As a percentage of pre-tax income, our effective tax rate for the three months ended March 31, 2026 increased to 30.4% compared to 30.0% in the comparable period of 2025.

Net Income, Diluted Earnings Per Share and Reconciliation of Non-GAAP Measures

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

GAAP net income from continuing operations

Net income from continuing operations and diluted earnings per share for the three months ended March 31, 2026 were $74.9 million and $0.38 per share, respectively, as compared to net income from continuing operations and diluted earnings per share of $63.4 million and $0.33 per share, respectively, for the three months ended March 31, 2025. These increases were primarily driven by a $32.4 million increase in segment operating income, in addition to lower interest expense. These increases were partially offset by the loss recognized from our equity method investment in Topgolf.

Non-GAAP net income from continuing operations

On a non-GAAP basis, excluding the items described in the table above, our net income from continuing operations and diluted earnings per share for the three months ended March 31, 2026 would have been $111.8 million and $0.56 per share, respectively, as compared to net income from continuing operations and diluted earnings per share of $57.1 million and $0.30 per share, respectively, for the three months ended March 31, 2025. The increase in non-GAAP net income from continuing operations was primarily due to a $32.4 million increase in segment operating income and lower interest expense.

Discontinued Operations (in millions, except percentages)

Income of $18.2 million from discontinued operations, net of tax, for the three months ended March 31, 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. The $61.3 million loss from discontinued operations, net of tax for the three months ended March 31, 2025 was due to net operating losses of both Topgolf and Jack Wolfskin during the period.

Financial Condition

Cash and cash equivalents

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

Accounts receivable

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 March 31, 2026, our consolidated net accounts receivable increased to $393.8 million from $123.2 million at December 31, 2025. The increase primarily reflects the seasonality of Golf Equipment net sales in the first quarter. Net accounts receivable as of March 31, 2026 increased $33.6 million compared to March 31, 2025, primarily due to higher net sales.

Inventory

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 March 31, 2026, our inventory decreased $28.9 million to $596.4 million, compared to December 31, 2025, which reflects our seasonality. Our inventory decreased $15.3 million as of March 31, 2026, compared to March 31, 2025, primarily due to higher net sales.

Liquidity and Capital Resources

Liquidity

Our principal sources of liquidity consist of our existing cash and cash equivalents, funds expected to be generated from operations and funds from our credit facilities. Based upon our current cash balances, our estimates of funds expected to be generated from operations, as well as from current and projected availability under our current credit facilities, we believe that we will be able to finance current and planned operating requirements, capital expenditures, required debt repayments and contractual obligations and commercial commitments for at least the next 12 months from the issuance date of this Form 10-Q.

Our ability to generate sufficient positive cash flows from operations is subject to many risks and uncertainties, including future economic trends and conditions, demand for our products, supply chain challenges, price inflation, foreign currency exchange rates, and other risks and uncertainties applicable to us and our business (see “Risk Factors” contained in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025).

Capital resources

As of March 31, 2026, we had $996.0 million in combined cash and availability under our credit facilities, which is an increase of $223.7 million compared to March 31, 2025. Information about our credit facilities and long-term debt is presented in Note 6 “Financing Arrangements” in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, which is incorporated herein by this reference.

As of March 31, 2026, approximately 13% 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.

Significant cash obligations

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

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.

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 three months ended March 31, 2026 was not material to our financial position, results of operations or cash flows.

In addition to the contractual obligations listed above, our liquidity could also be adversely affected by an unfavorable outcome with respect to claims and litigation that we are subject to from time to time (see Note 12 “Commitments & Contingencies” in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 and “Legal Proceedings” in Part II, Item 1 of this Form 10-Q).

We have no material off-balance sheet arrangements.

Capital expenditures

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

Critical Accounting Estimates

For the three months ended March 31, 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.

We use derivative financial instruments to mitigate our exposure to changes in foreign currency exchange rates and interest rates. Transactions involving these financial instruments are with creditworthy banks, primarily banks that are party to our credit facilities (see Note 6 “Financing Arrangements” and Note 15 “Derivatives and Hedging” in the Notes to Condensed Consolidated Financial Statements in Part 1, Item 1 of this Form 10-Q). The use of these instruments exposes us to market and credit risk which may at times be concentrated with certain counterparties, although counterparty nonperformance is not anticipated.

Foreign Currency Fluctuations

Information about our foreign currency hedging activities is set forth in Note 15 “Derivatives and Hedging” in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, of this Form 10-Q, which is incorporated herein by this reference.

As part of our risk management procedure, a sensitivity analysis model is used to measure the potential loss in future earnings of market-sensitive instruments resulting from one or more selected hypothetical changes in interest rates or foreign currency values. The sensitivity analysis model quantifies the estimated potential effect of unfavorable movements of 10% in foreign currencies to which we were exposed at March 31, 2026 through our foreign currency forward contracts.

At March 31, 2026, the estimated loss from our foreign currency forward contracts, calculated using the sensitivity analysis model described above, was $36.0 million. We believe that such a hypothetical loss from our foreign currency forward contracts would be partially offset by increases in the value of the underlying transactions being hedged.

The sensitivity analysis model is a risk analysis tool and does not purport to represent actual losses in earnings that we will incur, nor does it consider the potential effect of favorable changes in market rates. It also does not represent the maximum possible loss that may occur. Actual future gains and losses will differ from those estimated because of changes or differences in market rates and interrelationships, hedging instruments and hedge percentages, timing and other factors.

Interest Rate Fluctuations

We are exposed to interest rate risk from our credit facilities and long-term borrowing commitments. Outstanding borrowings under these credit facilities and long-term borrowing commitments accrue interest as described in Note 6 “Financing Arrangements” in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1, and in “Liquidity and Capital Resources” in Part I, Item 2 of this Form 10-Q. Our long-term borrowing commitments are subject to interest rate fluctuations, which could be material to our cash flows and results of operations. In order to mitigate this risk, we may enter into interest rate swap contracts as part of our interest rate risk management strategy. Information about our interest rate hedges is provided in Note 15 “Derivatives and Hedging” in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q. In order to determine the impact of unfavorable changes in interest rates on our cash flows and results of operations, we performed a sensitivity analysis as part of our risk management procedures. The sensitivity analysis quantified that the incremental expense incurred by a 10% increase in interest rates approximately result in an annual increase of $0.6 million in interest expense on our existing principal balance as of March 31, 2026.

Inflation

The continued increase in inflation partially contributed to the increase in the cost of our products as well as our operating costs. If the cost of our products, employee costs, or other costs continue to be subject to significant inflationary pressures, such inflationary pressures may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses. Further, we may not be able to offset these increased costs through price increases. As a result, our inability to quickly respond to inflation could harm our cash flows and results of operations in the future.

Disclosure Controls and Procedures.

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness, as of March 31, 2026, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2026.

Changes in Internal Control over Financial Reporting.

In connection with the completion of the sale of our 60% equity interest in Topgolf and our resulting equity method investment, management implemented and evaluated controls related to the accounting and disclosure of the investment. Other than this, there were no changes in our internal controls over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the three months ended March 31, 2026.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Certain Factors Affecting Callaway Golf Company

We have included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025, a description of certain risks and uncertainties that could affect our business, future performance or financial condition (the “Risk Factors”). Investors should consider the Risk Factors prior to making an investment decision with respect to our stock. There are no material changes from the disclosure provided in the Form 10-K for the year ended December 31, 2025 with respect to the Risk Factors.