Topgolf Callaway Brands Corp. (MODG) Q3 2026 Earnings Call Transcript

Operator: Good afternoon, and welcome to the Callaway Golf Company Third Quarter 26 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Patrick Burke, Senior Vice President of Investor Relations and Treasury. Please go ahead.

Patrick Burke: Good afternoon, and welcome to Callaway Golf's third quarter earnings conference call. I am Patrick Burke, Senior Vice President of Investor Relations and Treasury Joining me on today's call are Chip Brewer, our president and chief executive officer and Brian Lynch, our chief financial officer and chief legal officer. Earlier today, the company issued a press release announcing its third quarter 26 financial results, our earnings presentation as well as the earnings press release are both available on our Investor Relations website under the Financial Results tab. Aside from revenue, the financial numbers reported and discussed on today's call are non GAAP measures. We identify these non GAAP measures in the presentation and reconcile these measures to the corresponding GAAP measures in accordance with Regulation G. Please note that this call will include forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. Please review the safe harbor statements contained in the presentation and the press release for a more complete description. With that, I would now like to turn the call over to Chip.

Oliver G. Brewer: Thank you, Patrick. Good afternoon, everyone. And thank you for joining our call today. We are pleased to report another quarter of strong results. Including continued excellent year over year progress on margins, These results support us raising guidance for the full year and reaffirm that we are building momentum as a focused pure play golf company. I want to thank the Callaway and TravisMathew teams for their continued focus and contributions. Our teams are executing well in a dynamic environment. And managing the business with the right balance of confidence, agility, and discipline. I would also like to remind everyone of the significant transformation our company has accomplished over the last year. In late May of last year, we completed the sale of Jack Wolfskin. And then in January of this year, we completed the sale of a 60% interest in Topgolf. This returned us to being a pure play golf equipment company. As we made this transition, we recognized the opportunity that it created to refocus on our core business and make meaningful changes and improvements. These transactions quickly allowed us to transform our balance sheet and our capital allocation strategy. Accordingly, as we entered this year, we announced a new $200 million share repurchase program which we have been steadily executing against. With approximately $42 million in repurchases in both of the first half of this year and approximately $50 million this last quarter. We also paid down $1.4 billion in debt We now have a terrific balance sheet, 1 that derisks our business and positions us to be able to both reinvest in our business and return capital to shareholders over the long term. We have also made significant improvements to the profitability of our business through our highly successful gross margin initiatives. As well as strategic changes to our launch cadence which we believe will benefit us in the long term. Our margin profile is now back to healthy levels. And in the long run, we see further opportunity here particularly as we plan to gain market share in the years ahead. In the last several months, we also strengthened our organization with the addition of 2 outstanding leaders, Harry Arnett as senior vice president and chief brand officer and Eddie Arcmanis as senior vice president global sports marketing. Both of whom have proven track records of delivering differentiated results in their respective areas. I am thrilled to have these 2 leaders on our team And over time, I believe our shareholders will be too. Lastly, as we always remain committed to strengthening our product capabilities, and we see new opportunity here as well. To this end, today, we are announcing a $15 million investment in a 3D printing facility that will be located adjacent to our North America distribution center in Fort Worth, Texas. We have been researching this technology for approximately 7 years now. And producing both prototypes and custom models internally since late 2022. We believe this technology is going to be transformative for the club category. And this investment positions us for leadership in this area. We expect the new facility will come online mid next year. And beginning in 2028, it will support a portion of our US product needs focusing on custom titanium product. You will also further support and develop our R&D expertise in this area. For many years now, there have been no scaled vendors or competitors manufacturing titanium clubs in the US. And to the best of our knowledge, outside of China, there is no scaled capacity for the 3D printing of titanium clubs using the complex engineering designs and specifications that we require. We intend to lead the golf industry in the development of this technology and this will be the first facility to support US production of golf clubs in many years. Zooming in even a little closer, a portion of next year's product line will also feature this technology. And it will do so in an interesting and productive way that benefits performance. We look forward to announcing that product to the world in early 27. Discussing it with you on our next call. And to unlocking the full potential of this new technology platform over the next several years. Now turning to our recent results. Q3 revenue was $437 million. Down 6% year over year due to our previously announced decision to launch less product in the second half of this year, but ahead of expectations due to stronger than anticipated acceptance of the products we did launch during the quarter. Adjusted EBITDA was $36 million up 17% versus the prior year and also above expectations. For the 9 months year to date, revenue was up 3%, adjusted EBITDA increased 31%, and EPS is up 144%. We believe this revenue performance was slightly better than the broader market across both the Callaway and TravisMathew brands and the earnings growth demonstrates the operating leverage, and execution benefits of our more focused golf platform. Our gross margin expanded approximately 25 basis and 410 basis points year to date. This significant year over year improvement reflects excellent progress against our margin initiatives and the benefits of portfolio actions designed to improve the long term quality of our revenue and earnings. Turning to market conditions. After a surge in market performance last year at this time, market conditions were roughly consistent with our expectations in the quarter. US rounds played were down 5% in the quarter, likely due to weather, and are approximately flat on a year-to-date basis. To put that in context though, I would like to remind everyone that 2025 was a record year for rounds played. Moving to sell through. Q3 US ball and club retail sell through was down approximately 3% in the quarter but up approximately 6% on a 2-year stack basis. Year to date US ball and club sell through is up 1% and up nearly 8% on a 2-year stack basis. Overall, we continue to see the US markets as healthy with positive long term trends in participation supported by a committed and enthusiastic player base. In the UK, we estimate that our trade partners year to date, ball and club sell through is down low single digits, with rounds played also down simply due to unfavorable weather year over year. In Japan, the market was down 1.5% in Q3, and is flat year to date, while market conditions in Korea remain unchanged at approximately 10% down. Given the current amount of macroeconomic and geopolitical uncertainty, we are pleased with these market conditions. We, of course, are closely monitoring the same consumer and geopolitical risks as everyone else, But we also know that golf spending has historically been resilient, and we do not see anything that changes our long term positive view for golf overall. In golf equipment, the portfolio continues to show strength across several important categories. In golf ball, the Chrome Tour family and Super Soft franchises continue to resonate with consumers. And our share progress continues to validate the investments we have made in product performance, manufacturing capabilities, and on-grass distribution. Our year to date U. S. Mark share is just over 22%, up 163 basis points with Encore share just over 23%. In clubs, the Quantum family of woods and irons has continued to receive positive market feedback. Within the woods category, high lofted fairy woods have been a particularly strong area for the industry overall and for Callaway. This year, we launched an innovative new offering into this category we call mini spinners. These have been particularly well received. Both in the US and in Japan. Lastly, our putter business benefited from a strong reaction to the turtle putter which launched in Japan in early August. This product helped our Japan putter market share jump to 40% post launch. This product is already on tour, and will be launched globally later this month. Turning to the apparel and gear segment. The Callaway brand performed roughly in line with expectations while TravisMathew maintained its strong start to the year and performed slightly ahead of expectations. At TravisMathew, consumer response to the women's offering remains positive. And the brand continues to gain ground in the important men's golf category, supported by clearer product pillars, more focused marketing, and exciting new products. Now moving to our forward guidance. Given the continued strength of our performance, we are increasing our full year revenue forecast by approximately $14 million at the midpoint. This increase reflects our Q3 outperformance plus an incremental $2 million in Q4. It puts us on track to grow our top line for the full year. Even in the face of the strategic decision to exit certain less profitable product SKUs and lengthen life cycles in our iron business. On the bottom line, we are increasing the midpoint of our full year EBITDA guidance by approximately $23 million This represents the Q3 beat modestly better margin expectations for Q4, and the flow through of the incremental revenue. In closing, we are encouraged by the fact that the game of golf remains healthy as does our financial position. In the first 9 months of this year, we outperformed the golf markets overall delivered strongly on our gross margin initiatives, and are building a track record for consistently returning capital to shareholders. And perhaps more importantly, as we are now 3 quarters of a year into our return to being a focused pure play golf company we are both enjoying and benefiting from the added focus that our new structure provides. As we entered this period, we embraced the opportunity and made significant operational improvements aimed at further strengthening our business going forward. Many of these changes are now in place. Including an upgraded leadership team, strategic shifts in launch timing, SKU and retail store rationalization, and an improved margin structure. Others are now starting to take shape. Including today's announcement of a new product technology platform that we have been researching for some time that we are excited about going forward. All of this gives us increased confidence in our long term ability to continue to outperform the market to build a stronger company and to drive shareholder value for our investors. With that, I will turn the call over to Brian to review our financial results in more detail.

Brian Lynch: Thank you, Chip, and good afternoon, everyone. As Chip mentioned, we are pleased with our third quarter performance as both revenue and EBITDA exceeded our expectations. This performance reflects our continued execution against the strategy and priorities we outlined earlier this year, for improving profitability including a strategic shift in iron's launch timing rationalization of lower margin business, and investments in fitting, as well as gross margin expansion and operating cost management. We also continue to return capital to shareholders as we $50 million of our common stock during the quarter bringing the year to date total to $135 million While there is more work to be done, our transition to a pure play golf company is off to a great start. Now let's turn to our financial results in more detail. Please note that on today's call, I will be discussing our non GAAP financial results from continuing operations unless otherwise noted. We have provided in our earnings release today a reconciliation of these non GAAP results to the GAAP results, and we provided additional information about the discontinued operations. With that said, third quarter consolidated net sales decreased 6% year over year to $437 million which was better than expected. The strategic shift in iron's launch timing and rationalization of lower margin business Although beneficial in the long run, impacted net sales during the quarter as expected. We also were lapping strong market conditions in Q3 of last year. When U. S. Sell through was up approximately 10%. Changes in foreign currency exchange rates also negatively impacted net sales in the quarter by approximately $4 million The anticipated decrease in net sales, however, was partially offset by an increase in TravisMathew net sales as well as better than expected launches of the company's mini spinner, and the turtle putters in Asia. And as I will discuss further in a couple of minutes, we now expect full year net sales to grow this year. Even after the impact of the strategic initiatives previously mentioned. Q3 gross margin increased approximately 25 basis points year over year to 45.0%. Driven primarily by continued progress in our gross margin initiatives and a 110 basis point benefit from lower tariff rates. Excluding the tariff benefit, gross margin increased 10 basis points year over year. The improvement was broad based with margin expansion across all major categories, Importantly, these results reflect the continued benefit of our efforts to simplify the business, improve profitability, and focus on higher return categories and products. Q3 operating expenses increased slightly year over year to $181 million reflecting cost of living increases and other inflationary pressures were mostly offset by broad based cost discipline and ongoing expense for stuck reduction efforts, across our teams as well as a shift in the timing of approximately $2 million in marketing spend from Q3 into Q4. A portion of the cost saving initiatives were driven by lower corporate overhead expenses which declined 4% year over year in Q3 and 11% year over year through the first 9 months of the year. Adjusted EBITDA of $36 million increased 17% year over year. This improvement was driven by the improved gross margins and lower corporate overhead. Our September 30 inventory increased slightly year over year. Casey upon current estimates of the timing of new launch products, we expect inventory to be up at the end of the year. The amount depends on how much new launch product we receive at the end of 26 versus the beginning of 27. Moving to liquidity. We ended the quarter in a net cash position. As of 09/30/2026, we had $76 million of outstanding debt including $26 million of finance leases. And $434 million of unrestricted cash and cash equivalents. Total available liquidity which consists of cash on hand and availability under our credit facilities, was $815 million at the end of the third quarter of 26 compared to $1.26 billion at the same time last year. A decrease of $441 million which is primarily due to cash used for our debt pay down of $1.4 billion in the first half of 26. During the quarter, we continued to return cash to shareholders and have now repurchased approximately 9 million shares through September for a total cost of approximately $135 million. Broken down by quarter, this year we repurchased $42 million of stock in the first and second quarters, and approximately $50 million in the third quarter. As of 09/30/2026, we had $70 million of repurchase authority remaining under our current program. Looking ahead, Calaway's Gulf's capital allocation priorities remain unchanged as we focus on 1, reinvesting in our business, 2, maintaining a healthy balance sheet, and 3, returning capital to shareholders through the $200 million stock repurchase program authorized earlier this year. As we continue to generate free cash flow, in excess of our business needs, we will work with our Board to continue to return capital to shareholders. We still expect to end the year in a net cash position. Casey on our expected continued performance, and subject to market conditions and buying opportunities, we currently expect to repurchase approximately $50 million of common stock in the fourth quarter. Our capital allocation strategy is intended to provide long term predictability along with the ability to be opportunistic when appropriate. And to be clear, the purpose of the share repurchases is not only to offset dilution, from employee equity awards, but also to reduce share count meaningfully over time. We have made good progress this year. We entered 2026 with approximately 203 million fully diluted shares outstanding, and we expect to enter 2027 with less than 180 million fully diluted shares outstanding. Next, I want to give a quick update on tariffs. We continue to expect that the full year gross tariff expense for 2026 will be approximately $43 million which compares to gross tariff expense of $34 million in 2025. We also received additional refunds for tariffs paid as part of the tariff refund program. Through September 2026, we have received approximately $44 million of refunds and associated interest. As a reminder, excluded these refunds from our non GAAP results to give a clearer picture of our period over period results. We will continue to account for additional refunds as we receive them and we will continue to exclude the refunds from our non GAAP results. The cost pressures we discussed last quarter from broader geopolitical activity continue. As a reminder, these include increases in certain commodities and strategic metals such as tungsten. Which has increased significantly over 2025 costs. In addition, the continued conflict in the Middle East has led to increased petrochemical based cost pressures, including increased energy costs for us and our suppliers, increased freight costs including fuel surcharges, and increased petrochemical based raw material costs, such as those used in golf balls. These cost pressures are included in the guidance we provided today And so far, we have been able to manage them in a manner that has not had an material negative impact on our operations or financial results. We will continue to monitor developments in this area and report back as appropriate. Now turning to our full year and fourth quarter 26 outlook. Casey on our Q3 performance, year to date results and current view of the golf market, we are raising our full year revenue and adjusted EBITDA guidance. We now expect full year 2026 net sales to grow to $2.065 billion to $2.078 billion an increase of approximately $14 million at the midpoint compared to prior guidance. The change reflects the flow through of our Q3 net sales beat as well as a $2 million organic raise in Q4. With regard to EBITDA, we are raising our adjusted EBITDA expectations to $272 million to $280 million an increase of $23 million at the midpoint compared to our prior guidance. This change represents the following. $21 million of increase is related to flow through of the Q3 EBITDA exceed plus $2 million from the flow through of our improved net sales outlook and a slightly improved gross margin outlook. As a reminder, lower dividend income will be an approximate $5 million year-over-year headwind to adjusted EBITDA in Q4 and $8 million for the full year 2020. This is due to the excess cash we held in the back half of last year, generated from this business and the sale of Jack Wolfskin which we subsequently used along with proceeds from the Topgolf sale. To pay down $1.4 billion of debt in the first half of this year. While this reduces EBITDA versus last year, it is a net benefit to free cash flow given the higher cost of debt relative to the yield we were earning on cash. Turning to cash flow and margins, we continue to expect 26 capital expenditures of approximately $40 million And even with the 3D printing investment Chip discussed, we believe approximately $40 million remains a good annual CapEx run rate going forward. As investments of this scope are a regular part of our business. For gross margin, a reminder that due to the seasonality of our business, gross margins are meaningfully lower in the second half compared to the first half and lower in Q4 versus Q3 for the same reason. In addition, while we continue to expect improvements year over year, we anticipate Q4 gross margins to increase less than what we saw in the first 9 months. Due to the lower volumes related to seasonality and the change in launch cadence we mentioned earlier. And lastly, a reminder that our cost savings initiatives began in the second half of 25, which will affect year over year Q4 comparisons. As a result, while we expect corporate overhead expenses to decrease for the full year, Q4 corporate overhead expenses will likely increase compared to last year due to cost of living and other inflationary pressures. Now turning to Q4 guidance. We are forecasting Q4 net sales of $328 million to $341 million and adjusted EBITDA of minus $53 million to minus $45 million The year over year decrease in revenue was primarily driven by fewer new product launches including the strategic shift in irons launch timing rationalization of lower margin business, and tougher comps as the overall US market was up 7% in Q4 25 according to Golf Datatech. The year over year decline in EBITDA is due to the revenue flow through, a shift in the timing of $2 million of marketing spend from Q3 to Q4, the previously communicated investment in fitting, as well as $5 million less in dividend income all of which is partially offset by improving gross margins and a slight tariff benefit based upon current rates. We are very pleased with how our business has performing in the current environment. And how it is positioned for the future. Despite the current macroeconomic and geopolitical noise, the golf consumer has proven to be reasonably resilient this year and we continue to make strong progress transitioning to a pure play golf company. We are also in a net cash position and have a strong balance sheet that will provide a solid foundation for our future growth and will derisk our business going forward. While we intend to wait until the next earnings call to provide financial guidance for 2027, We believe that over time, we have the ability to grow revenue faster than the market. By gaining market share via the initiatives Chip mentioned earlier. And we also believe we have room to further increase our profitability. We also expect to consistently return capital to shareholders via stock repurchases but we also have the ability to do so opportunistically when appropriate. All of this together should create long term shareholder value. With that said, I will turn the call back over to the operator for Q and A.

Operator: We will now begin the question and answer session. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question today comes from Simeon Gutman with Morgan Stanley. Please go ahead.

Simeon Gutman: Hi, everyone. Chip, stepping back, it feels like a few things are coming together for the business. Pricing's better. Innovation seems to be working. margins are better, and you have made these changes to the product launch cadence. I respect you talked about not-- providing an outlook into 2027. But it feels like there is an opportunity for the business to grow faster and jump another level of margin. Is there any reason why that should not be in 2027? Is there some cost related to some of this innovation you are doing? Why should not 2027 be the year?

Oliver G. Brewer: Simeon, thank you, and I appreciate your, recognizing the nice progress the team's delivered. Not only on the margin initiatives and the structural change in the business, and turning capital, but, some of the changes that we are making that should allow us to build momentum as a brand and, you know, our intent is to grow market share. We have gotta go out and prove that. And, but we feel really good about, where the company is and our direction. You know, as it relates to margin, Simeon, we have made, you know, great progress faster than we candidly had expected. You know, our margins, for the quarter were up 500 basis points and 400 basis points for the year. We do see further opportunity there, but it is clearly not going to be at the same pace, or magnitude that we have. We have made great strides there. But having said that, we do feel really good about the outlook for the business. The industry is healthy. And we are making significant, changes and improvements that we think will further strengthen us. And does. Is titanium a next step in product tech and evolution, or is it a-- is it a step change and then 3D printing? What does that do to. I do not know if it is quality. 3D? Yeah. Please. We think 3D printing is transformative, Simeon. We have been investing in that, for a long time. We think we know quite a bit about it relative to, our industry. And that this positions us to be a leader and an exciting new tech that will allow us to design and manufacture titanium golf product that traditional Ti-casting just cannot do. And you know, we are also excited about you know, the opportunity to bring that investment into the US, you know, combine that with our investment in Chicopee, we think it differentiates the company. And, our desire, our ability to do these types of thing, this is what Callaway is all about. And excited to be able to get that news out. Okay. Thanks. Good luck. Well done. Thank you.

Operator: The next question is from Jonathan Keypour with Goldman Sachs. Please go ahead. John-Paul, you there?

Jonathan Keypour: Oh, yeah. Hello. Can you hear me?

Brian Lynch: We can. Now we got you.

Jonathan Keypour: Sorry about that. Thank you. Yeah. I just wanted to tap into the 3D printing news you guys announced today. It seems pretty fascinating. So I am just curious do you have a sense for how much existing demand there is for titanium clubs versus how much you expect to have to educate consumers And then anything you can tell us about, like planned mix of assortment next year that will be titanium and maybe any kind of margin implications there? I assume it is a higher price point and presumably a higher margin than traditional clubs.

Oliver G. Brewer: Sure, John-Paul. Almost all drivers and all premium drivers are made out of titanium and have been for some time. So. And that is true for Callaway and all of our competitors. They are all made through a similar process. it is a casting process. And it is a casting process that is done overseas. it is a fairly high-tech process. it is centrifugal casting at the sizes and the levels of tech fidelity that we need. 3 d printing will allow us to now there is also some in a niche form titanium done in other products. But titanium drivers are the primary ones. And that all of the manufacturers are using that same process Obviously, 3D printing allows us to do things in terms of the structure and the fidelity of the designs. That you cannot do in the existing casting process. It should allow us to make a better product. A more differentiated product, a product that is made differently and performs differently. And that we hope will lead to market share growth and a nice, step change in performance We are looking forward to leading that, and, this is our opportunity to kind of announce that. Got it. Is there any, add on benefit from, like, from an R&D standpoint? Does this facilitate, like rapid prototyping or maybe bring down costs anywhere else? It does do that. It definitely. We have had a, a titanium printer since 2022 in house. We have used it for prototyping. We have had parts that we have made for prototyping on that machine, and we have been learning all along. As we have, executed against that. We have had parts in play on tour, that we have not announced that are in fact, 3D printed parts. And so it will support further learning, further development of the technology. It will support production within the US of titanium parts that will you know, essentially have. Be made in The USA. And have a US country of origin. And, you know, we are excited about how it is gonna help us from an R&D perspective, but also from a production perspective. And next year, you know, we are gonna have product in our line that uses 3D printing. And we are not gonna give you more than that right now. But a little teaser on something that is coming as quickly as 2027. This investment itself will come online mid next year, and, will support and be in production for early 28. Parts. But our the technology will be introduced to the world in 2027. Okay. You, guys. The next question is from Greg.

Operator: Gregory Miller with Truist Securities. Please go ahead.

Analyst: Thanks. Good afternoon, Chip and Brian. there is been quite a bit in the news in the golf worlds recently. I have for you all. Maybe start with, you know, LIVGOLF had a there is an announcement about their bankruptcy today. And I am curious how that might impact Callaway and then particularly, the pros, that are sponsored by you.

Oliver G. Brewer: Sure. Yeah. We obviously have been watching, with great interest how the Liv business, played out. We have seen the same news you have. We have had a lot of different conversations both with them and with the various tours and the players that, are impacted. We think it is gonna be really good for the game to have the best players playing together. Having, those, players not play together was suboptimal. And then we have got some really good players on live, or were on Liv, I guess. Jon Rahm being the foremost of those. And so it is still undetermined where they are gonna play next year. They are-- they are going to. It will not be LIV. And, you know, where they will play is to be determined. But if they are more visible in the new. Wherever they end up, and I think it is highly likely they will be. We think that also, could be, good for us. So interesting developments and, again, getting the best players in the game all creating even more interest and energy around the game from that perspective, we are optimistic on that. Great. Thank you. And then, for my follow-up, you provide an update on any impact from the GoodGood video whether it is a Q3 earnings or your Q4 guide or just more broadly? Thank you. Yes, sure. Of course. Happy to do that. Needless to say, that whole incident was a serious 1 for us. It was a tough 2 weeks for our team and our brand. Fortunately, we did not see a material financial impact. There were really no, discernible changes in sales trends. Even during the event. We do regularly monitor our brand rating and consumer sentiment online, and that did decline during the event. But it quickly recovered to the same strong levels it was prior. In the end, we made a mistake. We took the matter seriously. We took responsibility. We apologize. And then more importantly, we addressed our internal deficiencies and updated our processes to make sure that does not reoccur. As a company and a brand, Greg, I am confident we are gonna come out of this even stronger. We have been a long term leader in women's golf. We are continuing to commit. And we are committed to continuing to be and we appreciate everyone that supported us during that time, and we will work hard to earn that trust going forward. Thank you, Chip.

Operator: Next question is from Joseph Altobello with Raymond James. Please go ahead.

Joseph Altobello: First question on gross margin, obviously, 45% this quarter. Pretty significant improvement. I am just curious what do you think a realistic goal is here. If I look back historically, pre COVID, I think your margins peaked at call it 46%-47%. You know, things have changed. Obviously, I think the company is in a better position. So is there a number in your head that you think that you wanna get to at some point?

Brian Lynch: there is not a specific number we are pushing people toward right now. We are very pleased with what we have accomplished so far this year. that is 1 of the-- been the bright spots As Chip mentioned, up 520 basis points for the quarter. And we still think there is room to go over the long term. there is been a lot of-- you know, there is a lot of things that went into that. It was not just 1 thing. it is managing freight more efficiently. For example, air versus ocean. Renegotiating with the part. The freight forwarders. The full year impact of overhead reductions in the plants and warehouse, working with suppliers on cost-- product cost reductions, the rationalization of the lower margin products, managing where products are produced to the extent we can to minimize tariffs, select price increases, and just initiatives around the company. So it is been a lot of those initiatives, and we do think over time, we can have further room to go.

Joseph Altobello: Got it. Helpful. Maybe just to follow-up on that in terms of the revenue tailwind you guys expect in 2027 from the change in the iron launch timing. Could you quantify that? And is most of that in the second quarter?

Oliver G. Brewer: We moved a launch out of this year into next year, Joseph. So, but we are also moving a launch out of next year. So we are lengthening the iron life cycle. it is not per se a tailwind to revenue next year, that specific move. It is more of a improved profitability. It should help our margin profile long term to have the longer life cycles in the iron category, but the it is not just a shift out of, this year into next year.

Joseph Altobello: Okay. So we should not model any significant or I guess, extraordinary revenue. Specific revenue growth for that move.

Oliver G. Brewer: Exactly. Okay. Right. Yes. You got that. But you should, and we. We are you know, we do believe the move is beneficial long term. And, you know, we are being very surgical about this. We are extending our product life cycles in irons. And we believe that category that makes sense. We will still have energy and excitement in the iron category next year. And we will be able to do that in a way that we have that ongoing, but also have longer product life cycles in the category, which we think makes sense for the category and will be more profitable. Okay. Thank you.

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

Noah Zatzkin: Hi, thanks for taking my questions. I guess first, it seems like you may be tracking ahead of kinda where you thought you would be from a structural margin improvement perspective So when I look at fourth quarter, I guess, the kind of unchanged bottom line guidance there, for the most part. Are there any additional headwinds to the kind of margin profile in the fourth quarter that crept up? Or how should I kind of think about that dynamic?

Brian Lynch: there is a little bit if you are talking about the EBITDA, there is a little bit of marketing timing push from Q3 to Q4. I think I called out my script about $2 million. there is also a $5 million less in dividend income. Year over year. And then the $3 million of incremental fitting investment. So if you take that plus the-- the flow through of the revenue, that gets you that account for the full takedown. that is very helpful. Yeah. And we did it. Did increase a little bit of the EBITDA for Chris, but only a couple million, but it is an increase in, in Q4.

Noah Zatzkin: that is really helpful. You know, some others have talked about input cost headwinds, particularly in the first half of 27. So just, I guess, how are you thinking about that Do you see that as a big headwind? And then what are you kind of thinking about as offsets there? As we look next year? Thanks.

Brian Lynch: So the-- with regard to the cost, we had them impact us this year as well, and we have been able to manage through them. They are definitely annoying, but we think that will continue to be able to manage through them next year as well. Not that it will not have any impact, but I think the overall impact will not be material. Very helpful.

Noah Zatzkin: Thank you.

Operator: The next question is from Arpine Kocharyan with UBS. Please go ahead.

Arpine Kocharyan: Hi, thank you for taking my question. I am sorry, it is possible you have addressed some of this as I am juggling on calls today. I was hoping you could talk a little bit about top line drivers for Q4. And puts and takes for your guidance. But more importantly, kind of your overall outlook, revenue outlook that you see beyond Q4 just based on the strength of the industry despite what it seems like there was a lot of noise this quarter, a lot of weather impacts, I guess, at least in The US. Some deceleration in rounds played, but there is again, substantial noise. I was hoping you could share your thoughts in that underlying business trends you are seeing beyond the noise. And then I have a quick follow-up.

Brian Lynch: I think Q4 is reasonably straightforward. It implies a $33 million decrease year over year. But that is the same issues we have been talking about with the change in the launch cadence. Pushing a major-- launch-- irons launch out into next year. There was also the rationalization of lower margin business we have been doing this year. And then just keep in mind that in Q4 last year was an exceptionally strong market. US sell through was up, I think, 7%. So if you bake all that in, I think that will explain the revenue decline. And then we are not really providing guidance for 2027 at this point. But we will we will look forward to doing that in February. Yeah. Great.

Arpine Kocharyan: And then your thoughts on kind of the underlying rounds played beyond kind of like maybe some of the weather impact for the quarter?

Oliver G. Brewer: Yeah. This is Chip. And, we feel good about the health of golf and the outlook. You know, again, you get a lot of different metrics. So the weather was a little less favorable this year. In Q3 versus the previous year at the same time. That impacted some rounds played. It impacted the market a little bit. You compare that to playable hours in the business, or the industry outperformed, what the decline in playable hours would have suggested. And your 2-year stacks are up 8%. You know, there is a little bit of noise, but we still feel good about the outlook. We you know, having said that, we are like everybody else. We are monitoring the geopolitical and the consumer confidence, but our consumer at this stage, remains resilient and engaged And, if you look at it historically, they have done that even in times of modest economic downturns. So unless there is a change in trend, we would expect all that to continue.

Arpine Kocharyan: that is very helpful. Thank you. And just a quick follow-up on the cost side of things, just given the current tariff outlook and also kind of raw material cost increases that you are seeing in spot today. How do you feel if that translates into kind of next year just judging based on what you are seeing spot prices but then you are analyzing some of the tariff tailwinds and other cost efficiencies and optimizations you have been running. Should those offset what you are seeing in broader inflation in spot prices for next year? Or maybe it is too early to comment on that?

Oliver G. Brewer: Yeah. it is a little early. So, tariffs, if-- if these rates are the final rates, and I say that all the time, so. right. This has obviously been a dynamic, factor for us. But if these rates are the final rates, then tariff will be a very modest headwind for us next year, but not something to fret about. And you know, the cost pressures of you know, oil and some of the metals, as Brian said, yes. Those have increased through the year. We have looked at that very thoroughly, modeled it. it is been something the year to date, we have been able to manage through, well and not have to you know, call it out per se. We are continuing to keep a very close eye on that. And although it will be a slight headwind for next year, if these rates continue where they are right now. Again, we view it as manageable. Very helpful. Thank you.

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

Oliver G. Brewer: Well, I would like to thank everybody for their time today. As I hope you gathered, we are very pleased with our progress and excited about, the direction of the company. it is that time of year. it is the holiday season. I wanna wish everybody a terrific holiday season, and we look forward to speaking to you again in early next year on our next earnings call. Thank you so much for, for calling in today.

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