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What changed in Callaway Golf Co's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Callaway Golf Co's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+537 added−492 removedSource: 10-K (2025-03-03) vs 10-K (2024-02-29)

Top changes in Callaway Golf Co's 2024 10-K

537 paragraphs added · 492 removed · 387 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

92 edited+22 added−15 removed66 unchanged
Biggest changeSocial Matters We maintain a Code of Conduct, Supplier Code of Conduct and Human Rights Policy, which establish the foundation of our Corporate Social Responsibility (“CSR”) Program that was established in 2007. In 2019, we updated our CSR audit policy and procedure, benchmarking against the United Nations Universal Declaration of Human Rights and International Labor Organization Guidelines.
Biggest changeIn 2019, we updated our CSR audit policy and procedure, benchmarking against the United Nations Universal Declaration of Human Rights and International Labor Organization Guidelines. We take actions as necessary to ensure supplier compliance, and actively work with suppliers to improve performance through training, internal and third-party audits and corrective action plan validation.
Maintaining a high quality of service in the venues depends in part on our ability to work with reliable suppliers to acquire food and beverage ingredients, venue hardware, golf equipment and/or other supplies that meet our high standards.
Maintaining a high quality of service in the venues depends in part on our ability to work with reliable suppliers to acquire food and beverage ingredients, venue hardware, golf equipment and/or other supplies that meet our standards.
The ability to attract new Toptracer customers is based primarily on the strength and quality of the brand and reputation, the products and revenue opportunities we are able to provide, as well as on the structure of the operating models and the terms of the respective agreements.
The ability to attract new Toptracer customers is based primarily on the strength and quality of the brand and reputation, the products and revenue opportunities we are able to provide to customers, as well as on the structure of the operating models and the terms of the respective agreements.
In general, during the first quarter, we begin selling our golf club and golf ball products into the golf retail channel for the new golf season. This initial sell-in generally continues into the second quarter when sales are significantly affected by the amount of reorder business of the products sold during the first quarter.
In general, we begin selling our golf club and golf ball products into the golf retail channel for the new golf season during the first quarter. This initial sell-in generally continues into the second quarter when sales are significantly affected by the amount of reorder business of products sold during the first quarter.
In exchange for a royalty fee, we also license our trademarks and service marks to third parties for use on certain Callaway apparel and golf accessories.
We also license our trademarks and service marks to third parties for use on certain Callaway apparel and golf accessories in exchange for a royalty fee.
We also have supply agreements in place with manufacturers in Taiwan and China to produce specially designed radio-frequency identification (“RFID”)-enabled golf equipment for use during game play at a Topgolf venue, and bay equipment within the venues is custom built, primarily by domestic manufacturers. 2 Sales Revenues from Company-operated venues are primarily derived from the sale of food and beverage, gameplay, events, and advertising partnerships and sponsorships.
We also have supply agreements in place with manufacturers in Taiwan and China to produce specially designed radio-frequency identification (“RFID”)-enabled golf equipment for use during game play at a Topgolf venue, and bay equipment within the venues is custom built, primarily by domestic manufacturers. 2 Sales Revenues from Company-owned and operated venues are primarily derived from the sale of gameplay, food and beverage, events, and advertising partnerships and sponsorships.
The Toptracer ball-tracking technology actively tracks ball flight paths across an entire field of vision while our custom-built sensor provides real-time shot analytics, such as ball speed, apex, curve, carry and more. Toptracer components are sourced from a number of third-party suppliers located in Germany, Taiwan, the United Kingdom and the United States, either directly or indirectly through distributors.
The Toptracer ball-tracking technology actively tracks ball flight paths across an entire field of vision while a custom-built sensor provides real-time shot analytics, such as ball speed, apex, curve, carry and more. Toptracer components are sourced from a number of third-party suppliers located in Germany, Taiwan, the United Kingdom and the United States, either directly or indirectly through distributors.
Lynch serves on the Board of Directors of the Callaway Golf Foundation. Mr. Lynch also formerly served as the Company’s Chief Ethics Officer from 2012 to 2018. Mr. Lynch first joined Topgolf Callaway Brands in December 1999 as Senior Corporate Counsel and thereafter served in various other capacities, including Associate General Counsel and Corporate Secretary. Mr.
Lynch serves on the Board of Directors of the Callaway Golf Foundation and he also formerly served as the Company’s Chief Ethics Officer from 2012 to 2018. Mr. Lynch first joined Topgolf Callaway Brands in December 1999 as Senior Corporate Counsel and thereafter served in various other capacities, including Associate General Counsel and Corporate Secretary. Mr.
We also establish relationships with professional athletes and personalities, including members of various professional golf tours as well as other athletes and media personalities, in order to promote our golf equipment products. 5 Seasonality The game of golf is played primarily on a seasonal basis in most of the regions where we conduct business.
We also establish relationships with professional athletes and personalities, including members of various professional golf tours as well as other athletes and media personalities, in order to promote our golf equipment products. Seasonality The game of golf is played primarily on a seasonal basis in most of the regions where we conduct business.
In addition, our employees have the opportunity to engage in a variety of wellness programs, ranging from fitness facilities to exercise programs and diverse educational resources. By prioritizing well-being, we not only invest in our employees' present, but we also cultivate a resilient foundation for their flourishing future.
In addition, our employees have the opportunity to engage in a variety of wellness programs, ranging from fitness facilities to exercise programs and a variety of educational resources. By prioritizing well-being, we not only invest in our employees' present, but we also cultivate a resilient foundation for their flourishing future.
He currently serves on the Board of Directors of The First Tee of San Diego/Pro Kids as well as the Executive Committee of The Legacy charity. Mr. Brewer has an M.B.A. from Harvard University and a B.S. in Economics from the College of William and Mary. 11 Brian P.
He currently serves on the Board of Directors of The First Tee of San Diego/Pro Kids as well as the Executive Committee of The Legacy charity. Mr. Brewer has an M.B.A. from Harvard University and a B.S. in Economics from the College of William and Mary. Brian P.
Third-quarter sales generally also depend on reorder business, but can also include smaller new product launches, and typically have lower sales than the second quarter since many retailers begin decreasing their inventory levels in anticipation of the end of the golf season.
Our third-quarter sales generally also depend on reorder business, but can also include smaller new product launches, and typically have lower sales than the second quarter since many retailers begin decreasing their inventory levels in anticipation of the end of the golf season.
New laws and regulations or new interpretations of existing laws and regulations may also impact the business. 9 Historically, the costs of regulation compliance have not had a material adverse effect on our business. We believe that our operations are in substantial compliance with all applicable government laws.
New laws and regulations or new interpretations of existing laws and regulations may also impact the business. Historically, the costs of regulation compliance have not had a material adverse effect on our business. We believe that our operations are in substantial compliance with all applicable government laws.
Lynch received a J.D. from the University of Pittsburgh and a B.A. in Economics from Franklin and Marshall College. Glenn Hickey is Executive Vice President, Topgolf Callaway Brands and has served in such capacity since January 2019. In addition, Mr.
Lynch received a J.D. from the University of Pittsburgh and a B.A. in Economics from Franklin and Marshall College. 11 Glenn Hickey is Executive Vice President, Topgolf Callaway Brands and has served in such capacity since January 2019. In addition, Mr.
Fine attended Lindenwood University for Business and Human Resources Management and the University of Missouri, St. Louis for Industrial Psychology. 12 Arthur F. Starrs, III is the Chief Executive Officer of Topgolf and has served in such capacity since April 2021. Mr.
Fine attended Lindenwood University for Business and Human Resources Management and the University of Missouri, St. Louis for Industrial Psychology. Arthur F. Starrs, III is the Chief Executive Officer of Topgolf and has served in such capacity since April 2021. Mr.
In addition to the sale of our golf equipment products, we also offer custom club fitting programs at our performance centers and at participating on - and off - course retail stores to help consumers find golf clubs that fit their personal specifications. We also sell certified pre-owned golf clubs directly to the consumer through our website.
In addition to the sale of our golf equipment products, we also offer custom club fitting programs at our performance centers and at participating on - and off - course retail stores to help consumers find golf clubs that fit their personal specifications. 4 We also sell certified pre-owned golf clubs directly to consumers through our website.
He served as the Company’s Senior Vice President, General Counsel and Corporate Secretary commencing in June 2012 before being appointed the additional role of Interim Chief Financial Officer in April 2017 and Chief Financial Officer in July 2017. Mr. Lynch is responsible for the Company’s finance, accounting, law, information technology, corporate audit, and compliance functions. Mr.
He served as the Company’s Senior Vice President, General Counsel and Corporate Secretary commencing in June 2012 before being appointed the additional role of Interim Chief Financial Officer in April 2017 and Chief Financial Officer in July 2017. Mr. Lynch is responsible for the Company’s finance, accounting, investor relations, law, information technology, corporate audit, and compliance functions. Mr.
We also sell directly to consumers through our websites and retail locations in Japan and Korea as well as to corporate customers who want their corporate logo imprinted on certain of our golf equipment products.
We also sell directly to consumers through our websites and retail locations in Japan and Korea as well as to corporate customers who want to imprint their corporate logo on certain of our golf equipment products.
Through the Topgolf Driving for Good Program, we contribute funds and volunteer efforts to national partners such as Make a Wish, Bunkers in Baghdad, Folds of Honor and National Urban League.
Through the Topgolf Driving for Good Program, we contribute funds and volunteer efforts to national partners such as Make a Wish, Bunkers in Baghdad, Folds of Honor, PGA Hope and the National Urban League.
Advertising & Marketing We market and advertise our soft goods brands on various platforms, including television, traditional digital and print media, web-based and social media, as well as at experimental events and Topgolf venues and media.
Advertising & Marketing We market and advertise our soft goods brands on various platforms, including television, traditional digital and print media, web-based and social media, as well as at experiential events and Topgolf venues and media.
Information with respect to our employment agreements with the Chief Executive Officer, Chief Financial Officer and other three most highly compensated executive officers will be contained in our definitive Proxy Statement in connection with the 2024 Annual Meeting of Shareholders. In addition, copies of the employment agreements for all the executive officers are included as exhibits to this report.
Information with respect to our employment agreements with the Chief Executive Officer, Chief Financial Officer and other three most highly compensated executive officers will be contained in our definitive Proxy Statement in 12 connection with the 2025 Annual Meeting of Shareholders. In addition, copies of the employment agreements for all the executive officers are included as exhibits to this report.
In the United States we distribute Toptracer using our own warehousing and logistics. For our international Toptracer operations, we partner with a third-party for warehousing and distribution, and currently have warehouses located in the United Kingdom.
In the United States we distribute Toptracer using our own warehousing and logistics. For our international Toptracer operations, we partner with a third-party for warehousing and distribution, and currently have a warehouse located in the United Kingdom.
These competitors compete for market share in the golf ball business, with Acushnet having a market share of over 50% of the golf ball business in the United States and a leading market share position in certain other regions outside of the United States.
These competitors compete for market share in the golf ball business, with Acushnet having a market share of approximately 50% of the golf ball business in the United States and a leading market share position in certain other regions outside of the United States.
Fourth-quarter golf equipment sales are generally less than the other quarters due to it being the end of the golf season in many of our key regions, but may also be affected from time to time by the early launch of product introductions related to the new golf season of the subsequent year.
Our fourth-quarter golf equipment sales are generally less than the other quarters due to it being the end of the golf season in many of our key regions, but may also be affected from time to time by the timing of product introductions related to the new golf season of the subsequent year.
We use a third-party verification company to ensure that all of our vendors meet specified United States guidelines and regulations, and for produce, we use a third-party vendor that regulates a nationwide network of produce distributors. For gameplay, we utilize our own engineers to support the development of custom digital content and certain golf equipment for use at our venues.
We use a third-party verification company to ensure all of our vendors meet any applicable and specified guidelines and regulations, and for produce, we use a third-party vendor that regulates a nationwide network of produce distributors. For gameplay, we utilize our own engineers to support the development of custom digital content and certain golf equipment for use at our venues.
Leposky served from 2005 until 2011 as co-founder, President and Chief Executive Officer of Gathering Storm Holding Company, LLC/ TMAX Gear LLC (collectively, “TMAX”), which, as exclusive licensee, designed, developed, manufactured, and distributed accessory products for TaylorMade-Adidas Golf. Prior to that, Mr.
Prior to joining Topgolf Callaway Brands, Mr. Leposky served from 2005 until 2011 as co-founder, President and Chief Executive Officer of Gathering Storm Holding Company, LLC/ TMAX Gear LLC (collectively, “TMAX”), which, as exclusive licensee, designed, developed, manufactured, and distributed accessory products for TaylorMade-Adidas Golf. Prior to that, Mr.
Products Golf clubs include woods (drivers, fairway woods and hybrids) and irons (irons, wedges and packaged sets) sold under the Callaway brand, and putters sold under the Odyssey brand. This product group also includes Callaway and non-Callaway pre-owned golf clubs. Callaway’s golf clubs are generally made of steel, titanium alloys, carbon fiber and various thermoplastic and thermoset materials.
Products Golf clubs include woods (drivers, fairway woods and hybrids), irons (irons and wedges) and packaged sets sold under the Callaway brand, and putters sold under the Odyssey brand. Golf clubs also include Callaway and non-Callaway pre-owned golf clubs. Callaway’s golf clubs are generally made of steel, titanium alloys, carbon fiber and various thermoplastic and thermoset materials.
The pre-owned golf clubs are generally acquired through our Trade In! Trade Up! program, which gives golfers the opportunity to trade in used Callaway brand golf clubs and certain competitor golf clubs at authorized retailers or through our website for credit toward the purchase of new golf equipment or pre-owned golf clubs.
The certified pre-owned golf clubs are generally acquired through our Trade In! Trade Up! program, which gives golfers the opportunity to trade in used Callaway brand golf clubs and certain competitor golf clubs at authorized retailers or through our website in exchange for credit towards the purchase of new golf equipment or pre-owned golf clubs.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS Biographical information concerning our executive officers is set forth below. Name Age Position(s) Held Oliver G. Brewer III 60 President and Chief Executive Officer, Director Brian P. Lynch 62 Executive Vice President, Chief Financial Officer Glenn Hickey 62 Executive Vice President and President, Callaway Golf Mark F.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS Biographical information concerning our executive officers is set forth below. Name Age Position(s) Held Oliver G. Brewer III 61 President and Chief Executive Officer, Director Brian P. Lynch 63 Executive Vice President, Chief Financial Officer Glenn Hickey 63 Executive Vice President and President, Callaway Golf Mark F.
Jack Wolfskin’s product offerings include a full line of functional outdoor apparel for men, women and children, including jackets, trousers, dresses, skirts and tops, in addition to footwear and outdoor equipment, including packs and bags, travel bags, tents, sleeping bags and accessories.
Jack Wolfskin’s product offerings are sold in Europe and China and include a full line of functional outdoor apparel for men, women and children, including jackets, trousers, dresses, skirts and tops, in addition to footwear and outdoor equipment, including packs and bags, travel bags, tents, sleeping bags and accessories.
The Jack Wolfskin business competes with a number of well-established and well-financed companies with recognized brand names, including Patagonia, Columbia and The North Face. We seek to differentiate ourselves through elevated design, premium materials and product innovation.
The Jack Wolfskin business competes with a number of well-established and well-financed companies with recognized brand names, including Patagonia, Columbia and The North Face. We seek to differentiate our product offerings through elevated design, premium materials and continuous product and design innovation.
The combination of products and services offered by our family of brands are sold across multiple channels to consumers both in the United States and internationally in over 120 countries.
The combination of products and services offered by our family of brands are sold across multiple channels to consumers both in the United States and internationally.
Every employee receives training on our culture and values during their onboarding process, training experience, and during their phases of leadership development. Diversity, Equity and Inclusion (DE&I) We are headquartered in Carlsbad, California and maintain regional offices, distribution centers, venues, and retail stores in numerous locations around the world.
Every employee receives training on our culture and values during their onboarding process, training experience, and during their phases of leadership development. We are headquartered in Carlsbad, California and maintain regional offices, distribution centers, venues, and retail stores in numerous locations around the world.
Leposky previously served as Executive Vice President of Global Operations from January 2019 until his appointment to Chief Supply Chain Officer in March 2023. Prior to January 2019, he served as Senior Vice President, Global Operations since April 2012. Mr.
Leposky is Executive Vice President and Chief Supply Chain Officer, Topgolf Callaway Brands. Mr. Leposky previously served as Executive Vice President of Global Operations from January 2019 until his appointment to Chief Supply Chain Officer in March 2023. Prior to January 2019, he served as Senior Vice President, Global Operations since April 2012. Mr.
In addition to the sales channels mentioned above, TravisMathew is also sold to luxury department stores and lifestyle specialty stores, and directly to consumers through the TravisMathew website and various TravisMathew retail locations in the United States, Japan, Europe, and Canada. OGIO products are sold through the OGIO website in addition to the sales channels mentioned above.
In addition to the sales channels mentioned above, TravisMathew is also sold to luxury department stores and lifestyle specialty stores, through wholesale distributors, and directly to consumers in the United States, Japan, Europe, and Canada through the TravisMathew website and various TravisMathew retail locations.
Leposky 59 Executive Vice President and Chief Supply Chain Officer Rebecca Fine 61 Executive Vice President and Chief People Officer Arthur F. Starrs 47 Chief Executive Officer, Topgolf International Oliver G. Brewer III is a Director, and the President and Chief Executive Officer of the Company and has served in such capacity since March 2012. Mr.
Leposky 60 Executive Vice President and Chief Supply Chain Officer Rebecca Fine 62 Executive Vice President and Chief People Officer Arthur F. Starrs 48 Chief Executive Officer, Topgolf International Oliver G. Brewer III is a Director, and the President and Chief Executive Officer of the Company and has served in such capacity since March 2012. Mr.
In 2019, we acquired Jack Wolfskin, and in 2021, we completed a merger with Topgolf, a leading technology-enabled golf entertainment business comprised of state-of-the-art golf and entertainment venues, proprietary Toptracer ball-tracking technology, and an innovative content creation platform.
In 2019, we acquired Jack Wolfskin, and in 2021, we completed a merger with Topgolf, a leading technology-enabled golf entertainment business with an innovative platform that includes our state-of-the-art golf and entertainment venues and proprietary Toptracer ball-tracking technology.
Historically, our venues experience higher second- and third-quarter revenues associated with the spring and summer, while the first and fourth quarters have historically had lower revenues, with the first quarter being the lowest, due to cooler temperatures and fewer corporate events.
Seasonality Topgolf sales generally fluctuate from quarter to quarter due to seasonal factors. Historically, our venues experience higher second- and third-quarter revenues associated with the spring and summer, while the first and fourth quarters have historically had lower revenues, with the first quarter being the lowest, due to cooler temperatures and fewer corporate events.
We sell Jack Wolfskin products directly and through our wholly-owned subsidiaries in Germany, China, the U.K., Switzerland, Poland and Japan to third-party distributors and retail stores, online retailers, department stores, mail order stores, as well as directly to consumers through our Company-owned retail locations and website. Jack Wolfskin retail stores are located primarily in Europe and China.
We sell Jack Wolfskin products directly and through our wholly-owned subsidiaries in Germany, China, Austria, Switzerland, Poland, the U.K., France, Italy, the Netherlands and Belgium to third-party distributors and retail stores, online retailers, department stores, mail order stores, as well as directly to consumers through our Company-owned retail locations and website.
Since the inception of the program, Topgolf has hosted more than 3,500 charitable events together with community partners, schools, and non-profit organizations, which focus on a variety of charitable endeavors, including environmental preservation, youth empowerment, aid for the homeless and disadvantaged, animal care and military care. Additional information on both of these programs is available on our website www.topgolfcallawaybrands.com.
Since the inception of the program, Topgolf has hosted more than 3,500 charitable events together with community partners, schools, and non-profit organizations, which focus on a variety of charitable endeavors, including environmental preservation, youth empowerment, aid for the homeless and disadvantaged, animal care and military care.
Our venues offer multiple forms of entertainment and are equipped with technology-enabled hitting bays, bars, dining areas, and exclusive event spaces. The technology-enabled hitting bays incorporate proprietary ball-tracking technologies which “gamify” the sport of golf and offer guests of varying skill levels a variety of games that are aimed to appeal to a broad range of players.
Our venues offer multiple forms of entertainment and are equipped with technology-enabled hitting bays, bars, dining areas, and exclusive event spaces. The technology-enabled hitting bays incorporate proprietary ball-tracking technology which “gamifies” the sport of golf and offers players of varying skill levels a broad range of appealing games.
As part of the terms of this sale, we assumed certain ongoing environmental remediation obligations. 10 We strive to adhere to all applicable Environmental Laws and take action as necessary to comply with these laws. We maintain an environmental and safety program which employs full-time environmental, health and safety professionals responsible for all of our facilities.
We strive to adhere to all applicable Environmental Laws and take action as necessary to comply with these laws. We maintain an environmental and safety program which employs full-time environmental, health and safety professionals responsible for all of our facilities.
Our employees bring a wide range of cultures, experiences, talents, capabilities, and perspectives from around the world, and we are committed to recruiting, developing and promoting a diverse and inclusive workforce while offering unique opportunities and career paths for our employees.
Our employees bring a wide range of cultures, experiences, talents, capabilities and perspectives from around the world. We are committed to recruiting, developing and promoting an inclusive workforce while offering unique opportunities and career paths for our employees throughout all levels of our organization while also maintaining our commitment to hire the most qualified individuals.
Prior to joining Topgolf Callaway Brands, Mr. Hickey was a bond trader for four years in the Los Angeles and New York offices of First Interstate Bank through its transition to Wedbush Securities. He completed a Financial Analysis for Non-Financial Managers certification from the University of Chicago, Graduate School of Business.
Prior to joining Topgolf Callaway Brands, Mr. Hickey was a bond trader for four years in the Los Angeles and New York offices of First Interstate Bank through its transition to Wedbush Securities.
We are also focused on enhancing our digital marketing, e-commerce and retail store presence to increase direct-to-consumer sales and drive increased profitability over time. Products Callaway soft good products include golf apparel, footwear, and a full range of golf accessories such as golf bags, golf gloves, headwear and practice aids.
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. 5 Products Callaway soft good products include golf apparel, footwear and a full range of golf accessories such as golf bags, golf gloves, headwear and practice aids.
Leposky served as the Chief Supply Chain Officer for Fisher Scientific International, Chief Operations Officer for TaylorMade-Adidas Golf, and in senior management roles with The Coca-Cola Company and the United Parcel Service Company. Mr. Leposky began his career serving as a United States Army and Army National Guard Infantry Officer (Rank Major). Mr.
Leposky served as the Chief Supply Chain Officer for Fisher Scientific International, Chief Operations Officer for TaylorMade-Adidas Golf, and in senior management roles with The Coca-Cola Company and the United Parcel Service Company. Mr.
The golf ball manufacturing process utilizes raw materials that are obtained from international and domestic suppliers. 4 Sales We sell our golf equipment products domestically and internationally, directly and through our wholly-owned subsidiaries, to wholesale customers, including golf course pro shops, off-course retailers, sporting goods retailers, online retailers, and third-party distributors, as well as to mass merchants for certain products.
Sales We sell our golf equipment products domestically and internationally, directly and through our wholly-owned subsidiaries, to wholesale customers, including golf course pro shops, off-course retailers, sporting goods retailers, online retailers, and third-party distributors, as well as to mass merchants for certain products.
These projects and initiatives are benchmarked against the sustainability frameworks published by the Global Reporting Initiative and the Sustainability Accounting Standards Board with respect to sustainability issues that are likely to affect the financial conditions or operating performances of companies in the consumer goods, apparel and entertainment sectors.
These projects and initiatives are benchmarked against the sustainability frameworks published by the Global Reporting Initiative and the Sustainability Accounting Standards Board with respect to sustainability issues that are likely to affect the financial conditions or operating performances of companies in the consumer goods, apparel and entertainment sectors. 9 Our entire Board oversees the Global Sustainability Program and receives a comprehensive report regarding the program’s initiatives and progress on an annual basis.
Competition Our major competitors for our golf apparel and accessories are generally other golf companies and premium golf apparel companies, as well as specialty retailers. While the TravisMathew business faces competition from the premium golf apparel companies, it also competes in department stores with other men’s apparel companies, including Bonobos, johnnie-O, Nike, Peter Millar, Ted Baker London and Vince.
While the TravisMathew business faces competition from the premium golf apparel companies, it also competes in department stores with other men’s and women’s apparel companies, including Bonobos, johnnie-O, Nike, Peter Millar, Ted Baker London and Vince, amongst others.
In addition to the training employees receive on the job, we offer various leadership programs including Emerging Leadership Programs, including Corporate Leadership Development, Sales Training, Callaway Leadership Academy, Global Operations Leadership Training, Sales Management Training, and other various ad hoc leadership courses.
We provide a work environment where opportunities for training and development are available to all employees. In addition to the training employees receive on the job, we offer various leadership programs including Emerging Leadership Programs, Corporate Leadership Development, Sales Training, the Callaway Leadership Academy, Global Operations Leadership Training, Sales Management Training and other various leadership courses.
In February 2013, we sold this facility and leased back a reduced portion of the square footage that it believes is adequate for our ongoing golf ball manufacturing operations.
In February 2013, we sold this facility and leased back a reduced portion of the square footage that we believe is adequate for our ongoing golf ball manufacturing operations. As part of the terms of this sale, we assumed certain ongoing environmental remediation obligations.
At the heart of our commitment to well-being is a dedicated focus on mental health. We recognize its paramount importance and have integrated robust resources, such as an Employee Assistance Program (“EAP”), which empowers employees and their families to manage their holistic health – mental, emotional, and physical.
We recognize its paramount importance and have integrated robust resources, such as an Employee Assistance Program (“EAP”), which empowers employees and their families to manage their holistic health – mental, emotional, and physical.
As of December 31, 2023, we had three reportable operating business segments: Topgolf, Golf Equipment and Active Lifestyle. TOPGOLF Topgolf is a leading technology-enabled golf entertainment business with an innovative platform of products and services comprised of state-of-the-art open-air golf and entertainment venues, a revolutionary proprietary Toptracer ball-tracking technology, and a digital media platform.
TOPGOLF Topgolf is a leading technology-enabled global golf entertainment business with an innovative platform of products and services comprised of state-of-the-art open-air golf and entertainment venues, a revolutionary proprietary Toptracer ball-tracking technology, and a digital media platform.
We also utilize a number of proprietary, industry standard and third-party management information systems in our business and rely on our own servers and third-party infrastructure to operate games and to maintain and provide analytical data.
We also utilize a combination of proprietary, industry standard and third-party management information systems, servers and infrastructures to operate games and to maintain and provide analytical data.
Venues The Topgolf venues business, which is the largest line of the Topgolf business, is comprised of Company-operated Topgolf venues located within the United States and Company-operated and franchised venues located outside of the United States. 1 As of December 31, Topgolf Venues by region: 2023 2022 2021 Domestic Owned and Operated 88 77 67 Domestic Acquired (1) 1 0 0 International Owned and Operated 4 4 3 International Franchised 5 5 3 Total 98 86 73 (1) Represents the Company-operated venue acquired as a part of the BigShots acquisition.
Venues Topgolf’s venues business is the largest line of the Topgolf business, and is comprised of domestic and international Company-owned and operated Topgolf venues as well as international franchised venues. 1 As of December 31, Topgolf Venues by region: 2024 2023 2022 Domestic Owned and Operated 94 88 77 Domestic Acquired (1) 2 1 0 International Owned and Operated 4 4 4 International Franchised 7 5 5 Total 107 98 86 (1) Represents the Company-owned and operated venues acquired as a part of the BigShots acquisition.
Our venues also provide flexible spaces that are used for dining, watching sports, charity fundraisers, corporate events, golf instruction, game play and live music performances, in addition to hosting events similar to arenas and other types of entertainment venues which range in size from seven to over 1,000 attendees.
Our venues also provide flexible spaces which are able to provide food and beverage and gameplay throughout the venue for a variety of social gatherings and activities including corporate events, casual dining, watching sporting events, charity fundraisers, golf instruction, and live music performances, in addition to hosting events similar to arenas and other types of entertainment venues which range in size from seven to over 1,000 attendees.
Our venues connect people in meaningful ways by introducing guests to our brand, culture and technologies, and are advertised across various marketing channels, including content distributed through paid advertising networks, email and text message subscriber lists, on Topgolf’s and other social media and influencer pages and websites, by word-of-mouth, or through other media coverage.
Advertising & Marketing Our marketing campaigns aim to increase consumer brand awareness and support our overall growth strategy. Our venues are advertised across various marketing channels, including content distributed through paid advertising networks, email and text message subscriber lists, on Topgolf and other social media and influencer pages and websites, by word-of-mouth, or through other media coverage.
Callaway branded golf apparel offerings include tops, bottoms and outerwear for men, women and children, and are made from high-quality fabrics designed for style, comfort and performance. TravisMathew is a progressive active lifestyle brand that produces its own line of men’s, women’s, and youth apparel and accessories under the TravisMathew and Cuater by TravisMathew (“Cuater”) brands.
Callaway branded golf apparel offerings include tops, bottoms and outerwear for men, women and children, and are made from high-quality fabrics designed for style, comfort and performance. TravisMathew is a premium golf and active lifestyle brand that offers men’s, women’s, and youth apparel as well as footwear, outerwear and accessories designed to deliver superior performance.
Competition Our golf equipment products generally compete on the basis of technology, quality, product performance, customer service and price.
Competition The golf equipment business is highly competitive and we compete with a number of well-established brands. Our golf equipment products generally compete on the basis of technology, quality, product performance, customer service and price.
Leposky received an M.B.A. from the Keller Graduate School of Management and a B.S. in Industrial Technology from Southern Illinois University. Rebecca Fine joined the Company as our Executive Vice President and Chief People Officer following the merger with Topgolf in March 2021, after having served as Chief People Officer for Topgolf from March 2019 to March 2021. Ms.
Rebecca Fine joined the Company as our Executive Vice President and Chief People Officer following the merger with Topgolf in March 2021, after having served as Chief People Officer for Topgolf from March 2019 to March 2021. Ms.
Our trademarks are generally valid as long as they are in use and their registrations are properly maintained and have not been found to become generic.
Our patents are generally in effect for up to 20 years from the date of the filing of the patent application and our trademarks are generally valid as long as they are in use and their registrations are properly maintained and have not been found to become generic.
HUMAN CAPITAL RESOURCES Employee Profile We view our employees as our most valuable asset and seek to attract and maintain the highest quality talent by offering competitive benefits and wellness services, opportunities to grow professionally across diverse industries, and receive performance feedback, among other initiatives.
HUMAN CAPITAL RESOURCES Employees We view our employees as our most valuable asset and seek to attract and maintain high quality talent by offering competitive benefits and wellness services, opportunities to grow professionally across diverse industries, as well as developmental training, workshops and a range of other supportive and beneficial programs and initiatives.
In 2023, we published an ESG data table on the Investor Relations section of our website, which reports our performance on certain ESG metrics for the years ended December 31, 2022 and 2021.
In 2024, we published a Sustainability Report for the years ended December 31, 2023 and 2022, as well as an ESG data table reporting our performance on certain ESG metrics for the year ended December 31, 2023, both of which are available on the Sustainability section of our website.
Technology and game development for games used in Topgolf venue gameplay and on Topgolf digital media is supported by teams located in offices and studios in Dallas, Texas, San Francisco, California and Stockholm, Sweden. These teams are comprised of a variety of engineers, computer vision and data analysis scientists and mobile app developers.
Technology and game development for the games used in the Topgolf venues and on Topgolf digital media is supported by teams which are comprised of a variety of engineers, computer vision and data analysis scientists and mobile application developers.
Toptracer delivers a data-driven and “gamified” enhancement to the traditional driving range experience by delivering instant shot replays, gameplay for all skill levels and a data record of all shots.
Other Lines of Business We license Toptracer, our proprietary ball-tracking technology to independent driving ranges and golf courses and for use in golf broadcasts. Toptracer delivers a data-driven and “gamified” enhancement to the traditional driving range experience by delivering instant shot replays, gameplay for all skill levels and a data record of all shots.
ACTIVE LIFESTYLE We design, develop and sell high quality soft good products under the Callaway, TravisMathew, OGIO and Jack Wolfskin 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.
ACTIVE LIFESTYLE Our Active Lifestyle segment is comprised of high quality soft good products which we design, develop and sell under the Callaway, TravisMathew, OGIO and Jack Wolfskin brands. These brands deliver a range of premium performance and lifestyle products in the United States and select international markets.
Product Design, Development and Manufacturing Our soft goods products are designed and developed internally and created through third-party manufacturing partners in Vietnam, China, Indonesia, Thailand, Bangladesh, the Philippines, and Peru, who source materials and create the products according to our brands’ specifications. 6 Sales We sell our soft goods products in the United States and internationally, directly and through our wholly-owned subsidiaries, to wholesale customers and directly to consumers through our retail locations and online through our websites.
Product Design, Development and Manufacturing Our soft goods products are designed and developed internally and manufactured using third-party manufacturing partners in Vietnam, China, Indonesia, Thailand, Bangladesh, the Philippines, and Peru, who source materials and create the products according to our brands’ specifications.
Our intellectual property rights are very important to us, and we seek to protect such rights through the registration of trademarks and utility and design patents, the maintenance of trade secrets and the creation of trade dress. When necessary and appropriate, we enforce our rights through litigation.
In addition, we own various other protectable rights under copyright, trade dress and other statutory and common laws. Our intellectual property rights are very important to our business, and we seek to protect such rights through the registration of trademarks and utility and design patents, the maintenance of trade secrets and the creation of trade dress.
Venue Design and Development We tailor the design of our venues to thrive in varying climates, conditions and market sizes. The location of each venue is carefully selected through a rigorous site selection process, led by an experienced real estate team.
The location of each venue is carefully selected through a rigorous site selection process, led by an experienced real estate team.
We believe that our operations are in substantial compliance with all applicable Environmental Laws. Due to the nature of our operations and the frequently changing nature of environmental compliance standards and technology, we cannot predict with certainty that future material capital or operating expenditures will not be required in order to comply with applicable Environmental Laws.
Due to the nature of our operations and the frequently changing nature of environmental compliance standards and technology, we cannot predict with certainty that future material capital or operating expenditures will not be required in order to comply with applicable Environmental Laws. 10 Social Matters We maintain a Code of Conduct, Supplier Code of Conduct and Human Rights Policy, which establish the foundation of our Corporate Social Responsibility (“CSR”) Program that was established in 2007.
Our approach supports our employees’ total wellness by addressing physical, mental and financial well-being. We provide competitive compensation packages alongside a comprehensive array of benefits designed to nurture total well-being. This includes robust health and welfare benefits, life and disability insurance coverage, and a retirement plan with employer matching contributions.
Employee Well Being We are committed to the health and well-being of our employees and design our compensation and benefits programs to demonstrate this commitment. Our approach supports our employees’ total wellness by addressing physical, mental and financial well-being. We provide competitive compensation packages alongside a comprehensive array of benefits designed to nurture total well-being.
We also have Company-operated distribution centers in Toronto, Canada; Swindon, England; Melbourne, Australia; Hamburg, Germany; and Shanghai, China, and third-party logistical operations in Tokyo, Japan and Seoul, Korea to support the distribution needs of markets they serve. 7 INTELLECTUAL PROPERTY We own approximately 5,300 U.S. and foreign trademark registrations and over 1,900 U.S. and foreign patents relating to our products, product designs, manufacturing processes and research and development concepts.
We also have Company-operated distribution centers in Toronto, Canada; Swindon, England; Melbourne, Australia; Hamburg, Germany; and Shanghai, China, and third-party logistical operations in Tokyo, Japan and Seoul, Korea to support the distribution needs of markets they serve.
We have an ongoing commitment to increase the number of women and diverse candidates throughout all levels of management while also hiring the most qualified individuals. We do not discriminate on the basis of actual or perceived race, creed, color, religion, national origin, citizenship status, age, disability, marital status, sexual orientation, gender, gender identity and similar classifications.
We do not discriminate on the basis of actual or perceived race, creed, color, religion, national origin, citizenship status, age, disability, marital status, sexual orientation, gender, gender identity or similar classifications.
He currently serves as a board member for the San Diego Junior Golf Association. Mr. Hickey received a B.S. in Business Administration from San Diego State University. Mark F. Leposky is Executive Vice President and Chief Supply Chain Officer, Topgolf Callaway Brands. Mr.
He completed a Financial Analysis for Non-Financial Managers certification from the University of Chicago, Graduate School of Business and he currently serves as a board member for the San Diego Junior Golf Association. Mr. Hickey received a B.S. in Business Administration from San Diego State University. Mark F.
We take actions as necessary to ensure supplier compliance, and actively work with suppliers to improve performance through training, internal and third-party audits and corrective action plan validation. We employ a team to conduct and oversee corporate social responsibility audits globally and have not identified any material compliance issues with our suppliers to date.
We employ a team to conduct and oversee corporate social responsibility audits globally and have not identified any material compliance issues with our suppliers to date.
Leposky is responsible for all areas of our global supply chain inclusive of product development, engineering, manufacturing, supply chain planning, program management, purchasing, and transportation and logistics, as well as leadership of the OGIO brand. Prior to joining Topgolf Callaway Brands, Mr.
Leposky is responsible for all areas of our global supply chain including product development, engineering, manufacturing, supply chain planning, program management, purchasing, and transportation and logistics, as well as leadership of the Jack Wolfskin and OGIO brands. Since May 2024, Mr. Leposky has also served on the board of directors of Flux Power Holdings, Inc.
Information regarding current litigation matters in connection with intellectual property is contained in Note 13. “Commitments & Contingencies” in the Notes to Consolidated Financial Statements in this Form 10-K. Our patents are generally in effect for up to 20 years from the date of the filing of the patent application.
When necessary and appropriate, we enforce our rights through litigation. Information regarding current litigation matters in connection with intellectual property is contained in Note 13. “Commitments & Contingencies” in the Notes to Consolidated Financial Statements in this Form 10-K.
In addition to Toptracer, we license Swing Suite, which offers simulated game play on well-known golf courses in addition to other games including football, baseball and soccer, among others, to a variety of indoor hospitality and entertainment operators, including hotels, casinos and restaurants. 3 Our Topgolf digital gaming platform is primarily comprised of digital games such as the mobile golf game World Golf Tour (“WGT”) and other digital content creation.
In addition to Toptracer, we license Swing Suite, which offers simulated game play on well-known golf courses in addition to other games including football, baseball and soccer, among others, to a variety of indoor hospitality and entertainment operators, including hotels, casinos and restaurants. 3 In December 2024, we completed the sale of Topgolf’s mobile digital golf game, World Golf Tour (“WGT”), an online multiplayer virtual golf game that utilizes proprietary GPS and 3D technology to enable players to gather online as a community and experience simulated gameplay on photorealistic recreations of more than 16 world-famous golf courses.
Through these programs, our employees are able to give back to the community through monetary and/or in-kind donations, or by providing community service. Through the Foundation, we strive to create healthy communities where our stakeholders live and work, by focusing on supporting programs that improve lives and contribute to communities on a select basis.
Through the Foundation, we strive to create healthy communities where our stakeholders live and work, by focusing on supporting programs that improve lives and contribute to communities on a select basis. 8 In 2024, the Foundation continued its commitment of cash and in-kind support for the Pro Kids Scholarship Program.
Overall, the golf club assembly process is fairly labor intensive, utilizes raw materials that are obtained from international and domestic suppliers, and requires extensive global supply chain coordination. We have a golf ball manufacturing facility in Chicopee, Massachusetts, and also utilize golf ball contract manufacturers in China and Taiwan.
In 2024, more than 50% of our golf club assembly is performed in regions outside of the United States. Overall, the golf club assembly process is fairly labor intensive, utilizes raw materials that are obtained from international and domestic suppliers, and requires extensive global supply chain coordination.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThough we believe we would be able to find one or more replacements if we were to lose our relationship with this contractor or if their services otherwise became unavailable, there can be no guarantee that we would be able to do so without incurring additional costs and delay, or that the terms of arrangements with any such replacement would not be less favorable to us. 18 There can be no guarantee that a sufficient number of suitable Topgolf venue sites will be available in desirable areas or on terms that are acceptable to us in order to achieve our growth plan, or that we will be successful in addressing the other risks inherent in our business that will allow us to open new Topgolf venues in a timely and cost-effective manner or at all.
Biggest changeThough we believe we would be able to find one or more replacements if we were to lose our relationship with this contractor or if their services otherwise became unavailable, there can be no guarantee that we would be able to do so without incurring additional costs and delay, or that the terms of arrangements with any such replacement would not be less favorable to us.
Our Topgolf business is similarly expected to experience stronger revenue at different times of the year as a result of both seasonal and non-seasonal fluctuations. Historically, our Topgolf venues experience nominally higher second and third quarter revenue associated with the spring and summer.
Our Topgolf business is similarly expected to experience stronger revenue at different times of the year as a result of both seasonal and non-seasonal fluctuations. Historically, our venues experience nominally higher second and third quarter revenue associated with the spring and summer.
Seasonality is likely to continue to be a factor in the quarterly results related to the Topgolf segment and, as a result, factors affecting peak seasons at our Topgolf venues, such as adverse weather, could have a disproportionate effect on operating results. Our Topgolf operating results also fluctuate significantly quarter to quarter and year to year due to non-seasonal factors.
Seasonality is likely to continue to be a factor in the quarterly results related to the Topgolf segment and, as a result, factors affecting peak seasons at our venues, such as adverse weather, could have a disproportionate effect on operating results. Our Topgolf operating results also fluctuate significantly quarter to quarter and year to year due to non-seasonal factors.
Forecasting demand for specific soft goods and apparel products can also be challenging due to changing consumer preferences and competitive pressures and longer supply lead times. The nature of our business makes it difficult to adjust quickly our manufacturing capacity if actual demand for our products exceeds or is less than the forecasted demand.
Forecasting demand for specific soft goods and apparel products can also be challenging due to changing consumer preferences, competitive pressures, and longer supply lead times. The nature of our business makes it difficult to adjust quickly our manufacturing capacity if actual demand for our products exceeds or is less than the forecasted demand.
Although franchisees are contractually obligated to operate their venues in accordance with specified standards, We do not oversee their daily operations. Consequently, the quality of franchised venues may be diminished by any number of factors beyond our control.
Although our franchisees are contractually obligated to operate their venues in accordance with specified standards, we do not oversee their daily operations. Consequently, the quality of franchised venues may be diminished by any number of factors beyond our control.
Our effective income tax rate in the future could be adversely affected by a number of factors, including: changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, the outcome of income tax audits in various jurisdictions around the world.
Our effective income tax rate in the future could be adversely affected by a number of factors, including: changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, and the outcome of income tax audits in various jurisdictions around the world.
While we have implemented security measures, our information systems and those of our third party vendors are nevertheless susceptible to numerous and evolving cybersecurity risks that threaten the confidentiality, integrity and availability of information systems and personal information, proprietary information belonging to our business and other confidential information (together, “Sensitive Information”) used in our business, including through electronic or physical computer break-ins, viruses and malware (e.g., ransomware), social engineering/phishing, malicious code, fraud, malfeasance by insiders, human or technological error, misconfigurations, “bugs” and other vulnerabilities in our and our vendors’ software, and other disruptions and security compromises involving the loss or unauthorized access of Confidential Information.
While we have implemented security measures, our information systems and those of our third party vendors are nevertheless susceptible to numerous and evolving cybersecurity risks that threaten the confidentiality, integrity and availability of information systems and personal information, proprietary information belonging to our business and other confidential information (together, “Sensitive Information”) used in our business, including through electronic or physical computer break-ins, viruses and malware (e.g., ransomware), social engineering/phishing, malicious code, fraud, malfeasance by insiders, human or technological error, misconfigurations, “bugs” and other vulnerabilities in our and our vendors’ software, and other disruptions and security compromises involving the loss or unauthorized access of Sensitive Information.
In addition, pursuant to a stockholders agreement entered into with certain former Topgolf stockholders in connection with the merger, Providence and certain former Topgolf stockholders affiliated with Dundon and WestRiver have the right to designate one person (for a total of three persons) to be appointed or nominated, as the case may be, for election to our board of directors for so long as such stockholder maintains beneficial ownership of 50% or more of the shares of our common stock owned by them on the closing date of the merger.
In addition, pursuant to a stockholders agreement entered into with certain former Topgolf stockholders in connection with the merger, Providence and certain former Topgolf stockholders affiliated with Dundon and WestRiver have the right to designate one person (for a total of three persons) to be appointed or nominated, as the case may be, for election to our Board for so long as such stockholder maintains beneficial ownership of 50% or more of the shares of our common stock owned by them on the closing date of the merger.
We, and in particular the Topgolf business as an operator, owner, or both of the properties on which the venues are situated, may also be subject to liability for environmental investigations and cleanups, including at properties that we currently or previously owned or operated, even if we did not cause or know of such contamination, and we may face claims alleging harm to health or property or natural resource damages arising out of contamination or exposure to hazardous substances.
We, and in particular our Topgolf business as an operator, owner, or both of the properties on which the venues are situated, may also be subject to liability for environmental investigations and cleanups, including at properties that we currently or previously owned or operated, even if we did not cause or know of such contamination, and we may face claims alleging harm to health or property or natural resource damages arising out of contamination or exposure to hazardous substances.
Accordingly, the use of social media vehicles by us and our customers, Playmakers, franchisees, licensees or other third parties, such as professional athletes, celebrities and other social influencers, could increase costs, lead to litigation or result in negative publicity that could damage our brand or reputation and have a material adverse effect on our business, financial condition and results of operations.
Accordingly, the use of social media vehicles by us and our customers, Playmakers, franchisees or other third parties, such as professional athletes, celebrities and other social influencers, could increase costs, lead to litigation or result in negative publicity that could damage our brand or reputation and have a material adverse effect on our business, financial condition and results of operations.
In particular, the Topgolf business is subject to extensive regulations, including, among others: • nutritional content labeling and disclosure requirements; • food safety regulations; 38 • employment regulations; • the PPACA; • the ADA and similar state laws; • data privacy, direct marketing and cybersecurity laws; • environmental, health and human safety laws and regulations; • laws and regulations related to franchising and licensing operations; • FCPA and other similar anti-bribery and anti-kickback laws; and • laws regarding sweepstakes and promotional contests.
In particular, the Topgolf business is subject to extensive regulations, including, among others: • nutritional content labeling and disclosure requirements; • food safety regulations; • employment regulations; • the PPACA; • the ADA and similar state laws; • data privacy, direct marketing and cybersecurity laws; • environmental, health and human safety laws and regulations; • laws and regulations related to franchising and licensing operations; • FCPA and other similar anti-bribery and anti-kickback laws; and • laws regarding sweepstakes and promotional contests.
As a result, these competitors may be able to invest greater resources or implement more aggressive strategies to attract consumers, including with respect to pricing, and, accordingly, may succeed in attracting those who would otherwise come to Topgolf’s venues, causing us to lose market share or sales, or forcing us to reduce our prices to meet the competition.
As a result, these competitors may be able to invest greater resources or implement more aggressive strategies to attract consumers, including with respect to pricing, and, accordingly, may succeed in attracting those who would otherwise come to our venues, causing us to lose market share or sales, or forcing us to reduce our prices to meet the competition.
For example, during the COVID-19 pandemic, certain of our Topgolf venues were required to be closed for a period of time under government orders, mandates, decrees and directives. These measures adversely affected our workforce, customers, consumer sentiment, economies, and financial markets. The COVID-19 pandemic, along with decreased consumer spending, led to an economic downturn in many of our markets.
For example, during the COVID-19 pandemic, certain of our venues were required to be closed for a period of time under government orders, mandates, decrees and directives. These measures adversely affected our workforce, customers, consumer sentiment, economies, and financial markets. The COVID-19 pandemic, along with decreased consumer spending, led to an economic downturn in many of our markets.
Because our supply chain is complex, we may also not be able to sufficiently verify the origins of the relevant minerals used in our products through the due diligence procedures that we implement, which may harm our reputation. 40 We could be adversely affected by any violations of economic sanctions laws and regulations, the FCPA, the U.K.
Because our supply chain is complex, we may also not be able to sufficiently verify the origins of the relevant minerals used in our products through the due diligence procedures that we implement, which may harm our reputation. We could be adversely affected by any violations of economic sanctions laws and regulations, the FCPA, the U.K.
Payments under non-cancelable leases account for a significant portion of operating expenses, and we expect to lease new properties, including for new Topgolf venues, in the future. Historically, our leases typically provide for escalating rent provisions over the initial term and any extensions. We generally cannot cancel these leases without substantial economic penalty.
Payments under non-cancelable leases account for a significant portion of operating expenses, and we expect to lease new properties, including for new venues, in the future. Historically, our leases typically provide for escalating rent provisions over the initial term and any extensions. We generally cannot cancel these leases without substantial economic penalty.
Further, if we or our franchisees enter into a new market with unionized construction companies, or the construction companies in our or our franchisees’ current markets become unionized, construction and build-out costs for new venues in such markets could materially increase. 15 In addition, immigration reform continues to attract significant attention in the public arena and the U.S. Congress.
Further, if we or our franchisees enter into a new market with unionized construction companies, or the construction companies in our or our franchisees’ current markets become unionized, construction and build-out costs for new venues in such markets could materially increase. In addition, immigration reform continues to attract significant attention in the public arena and the U.S. Congress.
However, these laws have overlapping but conflicting requirements that add additional complexity and potential legal risk, could make compliance even more challenging, require us to expend significant resources to come into compliance, restrict our ability to process certain personal information and could result in changes to business practices and policies.
However, these laws have overlapping but conflicting requirements that add complexity and potential legal risk, could make compliance even more challenging, require us to expend significant resources to come into compliance, restrict our ability to process certain personal information and could result in changes to business practices and policies.
Furthermore, the successful operation of our business depends upon our ability to attract, motivate and retain a sufficient number of qualified executives, managers and skilled employees. From time to time, there may be a shortage of skilled labor in certain of the communities in which we operate, including where our Topgolf venues are located.
Furthermore, the successful operation of our business depends upon our ability to attract, motivate and retain a sufficient number of qualified executives, managers and skilled employees. From time to time, there may be a shortage of skilled labor in certain of the communities in which we operate, including where our venues are located.
Regardless of whether any claims against us are valid or whether we are liable, claims may be expensive to defend, generate negative publicity, divert time and money away from core operations and hurt financial performance. Similarly, claims brought against Topgolf franchisees and licensees may generate negative publicity that could harm our brand and reputation.
Regardless of whether any claims against us are valid or whether we are liable, claims may be expensive to defend, generate negative publicity, divert time and money away from core operations and hurt financial performance. Similarly, claims brought against Topgolf franchisees may generate negative publicity that could harm our brand and reputation.
Shortages of skilled labor may make it increasingly difficult and expensive to attract, train and retain the services of a satisfactory number of qualified employees, which, with respect to Topgolf, could delay the planned openings of new Company-operated and franchised venues and adversely impact the operations and profitability of existing venues.
Shortages of skilled labor may make it increasingly difficult and expensive to attract, train and retain the services of a satisfactory number of qualified employees, which, with respect to Topgolf, could delay the planned openings of new Company-owned and operated and franchised venues and adversely impact the operations and profitability of existing venues.
However, the Rules of Golf as published by The R&A and the USGA are virtually the same and are intended to be so pursuant to a Joint Statement of Principles issued in 2001. In the future, existing USGA and/or R&A standards may be altered in ways that adversely affect the sales of our current or future products.
However, the Rules of Golf as published by The R&A and the USGA are virtually the same and are intended to be so pursuant to a Joint Statement of Principles issued in 2001. 20 In the future, existing standards may be altered in ways that adversely affect the sales of our current or future products.
If any of these events were to occur, our business, results of operations, and financial condition could be materially adversely affected. Regulations related to “conflict minerals” require us to incur additional expenses and could limit the supply and increase the cost of certain metals used in manufacturing our products.
If any of these events were to occur, our business, results of operations, and financial condition could be materially adversely affected. 39 Regulations related to “conflict minerals” require us to incur additional expenses and could limit the supply and increase the cost of certain metals used in manufacturing our products.
Similarly, the inability of any franchisee or licensee to maintain or obtain the licenses, permits and approvals required to develop, construct or operate one or more of their locations would also reduce franchise and licensing revenues, impair growth prospects and adversely affect our business, results of operation and financial condition.
Similarly, the inability of any franchisee to maintain or obtain the licenses, permits and approvals required to develop, construct or operate one or more of their locations would also reduce franchise and licensing revenues, impair growth prospects and adversely affect our business, results of operation and financial condition.
Furthermore, if the cost of delivery or shipping services were to increase significantly and the additional costs could not be covered by product pricing, our operating results could be materially adversely affected. 30 Instances of food-borne illness and outbreaks of disease could negatively impact our Topgolf business.
Furthermore, if the cost of delivery or shipping services were to increase significantly and the additional costs could not be covered by product pricing, our operating results could be materially adversely affected. Instances of food-borne illness and outbreaks of disease could negatively impact our Topgolf business.
We are also subject to licensing and regulation by federal, state, local and foreign authorities relating to, among other things, alcoholic beverage control, amusement, health, sanitation, stormwater and wastewater management, protection of endangered and threatened plant, wildlife and species, wetlands protection, safety and fire standards.
We are also subject to licensing and regulation by federal, state, local and foreign authorities relating to, among other things, alcoholic beverage control, amusement, health, sanitation, stormwater and wastewater management, protection of endangered and threatened plant, wildlife and animal species, wetlands protection, and safety and fire standards.
The New ABL Facility, the 2022 Japan ABL Credit Facility and the 2023 Term Loan B (collectively, the “Facilities”) include certain restrictions including, among other things, restrictions on the incurrence of additional debt, liens, dividends, stock repurchases and other restricted payments, asset sales, investments, mergers, acquisitions and affiliate transactions.
The 2023 ABL Credit Facility, the 2022 Japan ABL Credit Facility and the 2023 Term Loan B (collectively, the “Facilities”) include certain restrictions including, among other things, restrictions on the incurrence of additional debt, liens, dividends, stock repurchases and other restricted payments, asset sales, investments, mergers, acquisitions and affiliate transactions.
Our indebtedness outstanding under certain of our credit facilities, including the New ABL Facility, the 2022 Japan ABL Credit Facility and the 2023 Term Loan B, bears interest at variable rates. As a result, increases in interest rates increase the cost of servicing our indebtedness and could materially reduce our profitability and cash flows.
Our indebtedness outstanding under certain of our credit facilities, including the 2023 ABL Credit Facility, the 2022 Japan ABL Credit Facility and the 2023 Term Loan B, bears interest at variable rates. As a result, increases in interest rates increase the cost of servicing our indebtedness and could materially reduce our profitability and cash flows.
Any negative publicity concerning such claims, whether involving us or franchisees or licensees, or any judgment or other liability significantly in excess of our insurance coverage or not covered by insurance, could have a material adverse effect on our business, results of operations and financial condition.
Any negative publicity concerning such claims, whether involving us or franchisees, or any judgment or other liability significantly in excess of our insurance coverage or not covered by insurance, could have a material adverse effect on our business, results of operations and financial condition.
Any significant reduction in television coverage of, or attendance at, golf tournaments and events or any significant reduction in the popularity of golf magazines or golf television channels, could reduce the visibility of our brand and could adversely affect our sales. 14 We may have limited opportunities for future growth in sales of golf clubs and golf balls.
Any significant reduction in television coverage of, or attendance at, golf tournaments and events or any significant reduction in the popularity of golf magazines or golf television channels, could reduce the visibility of our brand and could adversely affect our sales. We may have limited opportunities for future growth in sales of golf clubs and golf balls.
Failure by us or our franchisees or licensees to comply with, or changes in these laws or requirements, could have an adverse impact on our business. We are subject to extensive federal, state, local and foreign laws and regulations, as well as other statutory and regulatory requirements.
Failure by us or our franchisees to comply with, or changes in these laws or requirements, could have an adverse impact on our business. We are subject to extensive federal, state, local and foreign laws and regulations, as well as other statutory and regulatory requirements.
Separate return limitation year NOLs and tax credits can only be used in years that both the consolidated group and the entity that created such NOLs and tax credits have taxable income or income tax liabilities, which may significantly limit our ability to utilize such NOLs and tax credits in the future. 43 Our obligations and certain financial covenants contained under our existing credit facilities expose us to risks that could materially and adversely affect our liquidity, business, operating results, financial condition and limit our flexibility in operating our business, including the ability to make any dividend or other payments on our capital stock.
Separate return limitation year NOLs and tax credits can only be used in years that both the consolidated group and the entity that created such NOLs and tax credits have taxable income or income tax liabilities, which may significantly limit our ability to utilize such NOLs and tax credits in the future. 42 Our obligations and certain financial covenants contained under our existing credit facilities expose us to risks that could materially and adversely affect our liquidity, business, operating results, financial condition and limit our flexibility in operating our business, including the ability to make any dividend or other payments on our capital stock.
If we are able to increase prices to cover increased labor costs, the higher prices could result in lower participation and therefore lower revenues, which may also reduce margins, as well as the fees received from our franchisees and licensees.
If we are able to increase prices to cover increased labor costs, the higher prices could result in lower participation and therefore lower revenues, which may also reduce margins, as well as the fees received from our franchisees.
Incidents or reports of food-borne or water-borne illness or other food safety issues, food contamination or tampering, Playmaker hygiene and cleanliness failures or improper Playmaker conduct at our Topgolf venues could lead to product liability or other claims or poor health inspection scores.
Incidents or reports of food-borne or water-borne illness or other food safety issues, food contamination or tampering, Playmaker hygiene and cleanliness failures or improper Playmaker conduct at our venues could lead to product liability or other claims or poor health inspection scores.
If we or our franchisees are unable to increase prices in response to higher food commodity and other supplies costs, or if such price increases decrease guest traffic or purchasing patterns, our operating results could be materially and adversely affected.
If we are unable to increase prices in response to higher food commodity and other supplies costs, or if such price increases decrease guest traffic or purchasing patterns, our operating results could be materially and adversely affected.
Such indicators include a sustained decline in our stock price or market capitalization, adverse changes in economic or market conditions or prospects, and changes in our operations. An asset is considered to be impaired when its carrying value exceeds its fair value.
Such indicators include a sustained decline in our stock price or market capitalization, adverse changes in economic or market conditions or prospects, and changes in our operations. 44 An asset is considered to be impaired when its carrying value exceeds its fair value.
Third, for new products to generate equivalent or greater revenues than their predecessors, they must either maintain the same or higher sales levels with the same or higher pricing, or exceed the performance of their predecessors in one or both of those areas.
For new products to generate equivalent or greater revenues than their predecessors, they must either maintain the same or higher sales levels with the same or higher pricing, or exceed the performance of their predecessors in one or both of those areas.
New Topgolf venues, once opened, may not be profitable or may close, which would adversely affect our Topgolf business as well as our financial condition and results of operations and ability to execute our growth strategy.
New venues, once opened, may not be profitable or may close, which would adversely affect our business as well as our financial condition and results of operations and ability to execute our growth strategy.
If our golf products are found to infringe third-party intellectual property rights, we may be unable to obtain a license to use such technology, and we could incur substantial costs to redesign our products, withdraw them from the market, and/or to defend legal actions. 36 With respect to the Topgolf business, intellectual property laws and procedures and restrictions provide only limited protection and any of Topgolf’s intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated.
If our golf products are found to infringe third-party intellectual property rights, we may be unable to obtain a license to use such technology, and we could incur substantial costs to redesign our products, withdraw them from the market, and/or to defend legal actions. 35 With respect to the Topgolf business, intellectual property laws, procedures and restrictions provide only limited protection and any of Topgolf’s intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated.
The development, construction and operation of our Topgolf venues depend, to a significant extent, on the selection of suitable sites, which are subject to zoning, land use, environmental, traffic and other regulations and requirements.
The development, construction and operation of our venues depend, to a significant extent, on the selection of suitable sites, which are subject to zoning, land use, environmental, traffic and other regulations and requirements.
Additionally, even if food-borne illnesses were not identified at or otherwise attributed to a Topgolf venue, our revenue could be adversely affected if instances of food-borne illnesses at other businesses were highly publicized.
Additionally, even if food-borne illnesses were not identified at or otherwise attributed to a venue, our revenue could be adversely affected if instances of food-borne illnesses at other businesses were highly publicized.
“Financing Arrangements” in the Notes to Consolidated Financial Statements in this Form 10-K for further discussion of the terms of the New ABL Facility, the 2022 Japan ABL Credit Facility and the 2023 Term Loan B.
“Financing Arrangements” in the Notes to Consolidated Financial Statements in this Form 10-K for further discussion of the terms of the 2023 ABL Credit Facility, the 2022 Japan ABL Credit Facility and the 2023 Term Loan B.
If we are unable to open new Topgolf venues, or if venue openings are significantly delayed or face other obstacles, our revenues could be adversely affected and our business negatively impacted.
If we are unable to open new venues, or if venue openings are significantly delayed or face other obstacles, our revenues could be adversely affected and our business negatively impacted.
In particular, our ability to generate customer loyalty and attract and retain additional Topgolf franchisees, licensees and commercial partners depends, to a large extent, on the strength of our brand and reputation.
In particular, our ability to generate customer loyalty and attract and retain additional Topgolf franchisees and commercial partners depends, to a large extent, on the strength of our brand and reputation.
With respect to the Topgolf business, we have both Company-operated and franchised venues located outside of the United States. In addition, we have Toptracer licensees operating Toptracer Range bays outside of the United States.
With respect to the Topgolf business, we have both Company-owned and operated and franchised venues located outside of the United States. In addition, we have Toptracer licensees operating Toptracer Range bays outside of the United States.
Any perceived or actual unauthorized or inadvertent disclosure of personal information or adverse impact to the availability, integrity or confidentiality of our information systems or Sensitive Information, whether through a compromise of us or our third party vendors’ information systems by an unauthorized party, employee theft, misuse or error, cyber-attack or otherwise, could harm our reputation, impair our ability to attract or retain customers and Playmakers, require us to notify payment brands if payment card information is accessed or compromised, compel us to comply with federal and/or state breach notification laws and foreign equivalents, subject us to costly mandatory corrective action, or subject us to regulatory investigations and enforcement actions, claims or litigation (including class actions) arising from damages suffered by consumers, fines and penalties, and/or significant incident response, system restoration and future compliance costs, all of which could adversely affect our operations, financial performance and condition.
Any perceived or actual unauthorized or inadvertent disclosure of personal information or adverse impact to the availability, integrity or confidentiality of our information systems or Sensitive Information, whether through a compromise of us or our third party vendors’ information systems by an unauthorized party, employee theft, misuse or error, cyber-attack or otherwise, could harm our reputation, impair our ability to attract or retain customers and Playmakers, require us to notify payment brands or cease accepting certain payment cards if payment card information is accessed or compromised, compel us to comply with federal and/or state breach notification laws and foreign equivalents, subject us to costly mandatory corrective action, or subject us to regulatory investigations and enforcement actions, claims or litigation (including class actions) arising from damages suffered by consumers, fines and penalties, and/or significant incident response, system restoration and future compliance costs, all of which could adversely affect our operations, financial performance and condition.
In addition, our marketing and advertising programs may not be successful in generating brand awareness in all local markets, and lack of market awareness of the Topgolf brand may pose additional risks.
In addition, our marketing and advertising programs may not be successful in generating brand awareness 18 in all local markets, and lack of market awareness of the Topgolf brand may pose additional risks.
This re-engineering process could require us to expend significant additional research and development resources, and there can be no guarantee that we will be successful. 35 Additionally, the use of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of software.
This re-engineering process could require us to expend significant additional research and development resources, and there can be no guarantee that we will be successful. 34 Additionally, the use of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of software.
Liability under environmental laws has been interpreted to be joint and several unless the harm is divisible and there is a reasonable basis for allocating the responsibility. 41 We may also be subject to similar liabilities and claims in connection with locations at which hazardous substances, contaminates or wastes we have generated have been stored, treated, otherwise managed, or disposed.
Liability under environmental laws has been interpreted to be joint and several unless the harm is divisible and there is a reasonable basis for allocating the responsibility. 40 We may also be subject to similar liabilities and claims in connection with locations at which hazardous substances, contaminates or wastes we have generated have been stored, treated, otherwise managed, or disposed.
Furthermore, as part of our longer-term growth strategy, we may open Topgolf venues in geographic markets in which we have little or no operating experience.
Furthermore, as part of our longer-term growth strategy, we may open venues in geographic markets in which we have little or no operating experience.
Scott M. Marimow is affiliated with Providence, C. Matthew Turney is affiliated with Dundon and Erik J Anderson is affiliated with WestRiver, each of whom serve on our board of directors.
Scott M. Marimow is affiliated with Providence, C. Matthew Turney is affiliated with Dundon and Erik J Anderson is affiliated with WestRiver, each of whom serve on our Board.
We regularly assess all of these matters to determine the adequacy of our tax provision. 42 In addition, new income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, or interpreted, changed, modified or applied adversely to us, any of which could adversely affect our business operations and financial performance.
We regularly assess all of these matters to determine the adequacy of our tax provision. 41 In addition, new income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, or interpreted, changed, modified or applied adversely to us, any of which could adversely affect our business operations and financial performance.
Similar incidents or reports occurring at Topgolf franchisees’ or licensees’ businesses, BigShots, or other businesses unrelated to us could likewise create negative publicity, which could negatively impact consumer behavior towards us. There can be no guarantee that our internal policies and training will be fully effective in preventing all food-borne illnesses at our venues.
Similar incidents or reports occurring at Topgolf franchisees’ businesses or other businesses unrelated to us could likewise create negative publicity, which could negatively impact consumer behavior towards us. There can be no guarantee that our internal policies and training will be fully effective in preventing all food-borne illnesses at our venues.
Fourth, the relatively short window of opportunity for launching and selling new products requires great precision in forecasting demand and assuring that supplies are ready and delivered during the critical selling periods. Finally, the rapid changeover in products creates a need to monitor and manage the closeout of older products both at retail and in our own inventory.
Furthermore, the relatively short window of opportunity for launching and selling new products requires great precision in forecasting demand and assuring that supplies are ready and delivered during the critical selling periods. Finally, the rapid changeover in products creates a need to monitor and manage the closeout of older products both at retail and in our own inventory.
Furthermore, some of our products require specially developed manufacturing techniques and processes which make it difficult to identify and utilize alternative suppliers quickly. In addition, many of our suppliers may not be well capitalized and prolonged unfavorable economic conditions could increase the risk that they will go out of business.
Furthermore, some of our products require specially developed manufacturing techniques and processes or customization which make it difficult to identify and utilize alternative suppliers quickly. In addition, many of our suppliers may not be well capitalized and prolonged unfavorable economic conditions could increase the risk that they will go out of business.
One or more instances of food-borne illness in one of our Company-operated or franchised venues, or poor health inspection scores, if highly publicized, could negatively affect revenues at all of our Topgolf venues by changing consumers’ perceptions of our venues and the food that we offer, negatively impacting demand for menu offerings and reducing guest visits at venues.
One or more instances of food-borne illness in one of our Company-owned and operated or franchised venues, or poor health inspection scores, if highly publicized, could negatively affect revenues at all of our venues by changing consumers’ perceptions of our venues and the food that we offer, negatively impacting demand for menu offerings and reducing guest visits at venues.
In addition, because we do not control the day-to-day operations of Topgolf and BigShots franchisees, licensees, there can be no guarantee that these franchisees and licensees will implement appropriate internal policies and training intended to prevent food-borne illnesses, that their employees will follow such policies and training or that such policies and training will be effective even if complied with.
In addition, because we do not control the day-to-day operations of Topgolf franchisees, there can be no guarantee that these franchisees will implement appropriate internal policies and training intended to prevent food-borne illnesses, that their employees will follow such policies and training or that such policies and training will be effective even if complied with.
Golf participation is impacted by, among other things, the demographics (including age of golfers), dedication levels, weather and economic conditions. If golf participation decreases or the number of rounds of golf played decreases, sales of our products may be adversely affected. In the future, the overall dollar volume of the market for golf-related products may not grow or may decline.
Golf participation is impacted by, among other things, the demographics (including age of golfers), dedication levels, weather and economic conditions. If golf participation decreases or the number of rounds of golf played decreases, the overall dollar volume of the market for golf-related products may not grow or may decline and sales of our products may be adversely affected.
It may not be possible to increase prices in order to pass future increased labor costs on to customers, in which case our margins would be negatively affected. With respect to our Topgolf business, reduced margins could make it more difficult to attract new franchisees and licensees and to retain existing franchisee and licensee relationships.
It may not be possible to increase prices in order to pass future increased labor costs on to customers, in which case our margins would be negatively affected. With respect to our Topgolf business, reduced margins could make it more difficult to attract new franchisees and to retain existing franchisee relationships.
Any losses, costs or liabilities may not be covered by, or may exceed the coverage limits of, any or all applicable insurance policies, and applicable insurance may not be available to us in the future on economically reasonable terms or at all. 34 We may be subject to products liability, warranty and recall claims, and our insurance coverage may not cover such claims.
Any losses, costs or liabilities may not be covered by, or may exceed the coverage limits of, any or all applicable insurance policies, and applicable insurance may not be available to us in the future on economically reasonable terms or at all. 33 We may be subject to products liability, warranty and recall claims, and our insurance coverage may not cover such claims.
If Topgolf franchisees and licensees do not operate in accordance with our expectations, or if one or more franchisees or licensees were to be the subject of unfavorable publicity, our image and reputation could suffer materially. Sales of our products by unauthorized retailers or distributors could adversely affect our authorized distribution channels and harm our reputation.
If our franchisees do not operate in accordance with our expectations, or if one or more franchisees were to be the subject of unfavorable publicity, our image and reputation could suffer materially. Sales of our products by unauthorized retailers or distributors could adversely affect our authorized distribution channels and harm our reputation.
Federal, state and foreign government bodies or agencies have adopted, and may continue to adopt, additional laws, regulations and standards that apply to us and our vendors governing data privacy, direct marketing, cybersecurity, consumer protection and other issues related to the processing of personal information.
Federal, state and foreign government bodies or agencies have adopted, and may continue to adopt, additional laws, regulations and standards that apply to us and our vendors governing data privacy, direct marketing, cybersecurity, artificial intelligence, consumer protection and other issues related to the processing of personal information.
Such deferments could have a material adverse effect on sales of our current products or result in closeout sales at reduced prices. 24 Our expanding apparel business is expected to experience stronger revenue during different times of the year than our golf-related business.
Such deferments could have a material adverse effect on sales of our current products or result in closeout sales at reduced prices. Our apparel business is expected to experience stronger revenue during different times of the year than our golf-related business.
Any significant adverse change in these and other circumstances or conditions relating to international operations could have a significant adverse effect on our operations, financial performance and condition. We have significant international sales and purchases, and unfavorable changes in foreign currency exchange rates could have a significant negative impact on our results of operations.
Any significant adverse change in these and other circumstances or conditions relating to international operations could have a significant adverse effect on our operations, financial performance and condition. We have significant international sales and purchases, and unfavorable changes in foreign currency exchange rates could have a significant negative impact on our results of operations and cash flows.
Our business could be harmed by the occurrence of natural disasters, pandemics (including the COVID-19 pandemic) or other emergencies. The occurrence of a natural disaster, such as an earthquake, tsunami, fire, flood or hurricane, the outbreak of a pandemic disease, such as a further outbreak of COVID-19 or a variant thereof, or other emergencies could significantly adversely affect our business.
Our business could be harmed by the occurrence of natural disasters, pandemics or other emergencies. 22 The occurrence of a natural disaster, such as an earthquake, tsunami, fire, flood or hurricane, the outbreak of a pandemic disease, such as a further outbreak of COVID-19 or a variant thereof, or other emergencies could significantly adversely affect our business.
Initiatives to upgrade our business processes and invest in technological improvements to our manufacturing and assembly facilities involve many risks which could result in, among other things, business interruptions and increased costs, any of which may result in our inability to realize returns on our capital investment.
Initiatives to upgrade our business processes and investments in technological improvements to our manufacturing and assembly facilities involve many risks which could result in, among other things, business interruptions and increased costs, any of which may result in our inability to realize returns on our capital investment.
The amounts outstanding under the New ABL Facility are secured by a first priority lien on certain assets, including cash (to the extent pledged by us), certain intellectual property, certain eligible real estate, inventory and accounts receivable of the Company and its subsidiaries in the United States, Germany, Canada, the Netherlands and the United Kingdom (other than certain excluded subsidiaries) and a second-priority lien on substantially all of the Company’s and its subsidiaries’ other assets.
The amounts outstanding under the 2023 ABL Credit Facility are secured by a first priority lien on certain assets, including cash (to the extent pledged by us), certain intellectual property, certain eligible real estate, inventory and accounts receivable of the Company and its subsidiaries in the United States, Germany, Canada, the Netherlands and the United Kingdom (other than certain excluded subsidiaries) and a second-priority lien on substantially all of the Company’s and its subsidiaries’ other assets (other than certain excluded assets).
Our and our franchisees’ ability to operate new venues profitably may be affected by a number of factors, many of which are beyond our control, including: • general economic conditions, which can affect venue traffic, local labor costs and prices for food products and other supplies to varying degrees in the markets in which venues are located; • changes in consumer preferences and discretionary spending; • difficulties obtaining or maintaining adequate relationships with distributors or suppliers in a given market; • inefficiency in labor costs and operations as newly hired Playmakers gain experience; • competition from other out-of-home entertainment options, including existing venues and the businesses of the Toptracer Range licensees, as well as a variety of home-based entertainment options; • temporary or permanent site characteristics of new venues; • changes in government regulation, including required licenses, permits and regulatory approvals, including liquor licenses; • the impact of infectious diseases, health epidemics and pandemics on factors impacting our business, including but not limited to changes in consumer preferences and discretionary spending, the ability and cost of suppliers to deliver required products and health and public safety regulations; and • other unanticipated increases in costs, any of which may impair profitability at a specific venue or more broadly.
Our ability to operate new venues profitably may be affected by a number of factors, many of which are beyond our control, including: • general economic conditions, which can affect venue traffic, local labor costs, costs of construction materials and prices for food products and other supplies to varying degrees in the markets in which venues are located; • changes in consumer preferences and discretionary spending; • difficulties obtaining or maintaining adequate relationships with distributors or suppliers in a given market; • inefficiency in labor costs and operations as newly hired Playmakers gain experience; • competition from other out-of-home entertainment options, including existing venues, as well as a variety of home-based entertainment options; • temporary or permanent site characteristics of new venues; • changes in government regulation, including required licenses, permits and regulatory approvals, including liquor licenses; • the impact of infectious diseases, health epidemics and pandemics on factors impacting our business, including but not limited to changes in consumer preferences and discretionary spending, the ability and cost of suppliers to deliver required products and health and public safety regulations; and • other unanticipated increases in costs, any of which may impair profitability at a specific venue or more broadly.
Our and our franchisees’ ability to open new venues on a timely and cost-effective basis, or at all, is dependent on a number of factors, many of which are beyond our control, including our and our franchisees’ ability to: • identify and successfully compete against other potential lessees or purchasers to secure quality locations; • reach acceptable agreements regarding the lease or purchase of locations; • secure acceptable financing arrangements; • comply with applicable zoning, licensing, land use and environmental regulations; • overcome litigation or other opposition efforts brought by special interest groups; • raise or have available an adequate amount of money for construction and opening costs; • respond to unforeseen construction, engineering, environmental or other problems; • avoid or mitigate the impact of inclement weather, natural disasters and other calamities; • respond to infectious diseases, health epidemics and pandemics (including the COVID-19 pandemic); • timely hire, train and retain the skilled management and other Playmakers necessary to meet staffing needs; • obtain, in a timely manner and for acceptable cost, required licenses, permits and regulatory approvals, including liquor licenses, and respond effectively to any changes in local, state or federal law and regulations that adversely affect costs or ability to open new venues; and • efficiently manage the amount of time and money used to build and open each new venue.
Our ability to open new venues on a timely and cost-effective basis, or at all, is dependent on a number of factors, many of which are beyond our control, including our ability to: • identify and successfully compete against other potential lessees or purchasers to secure quality locations; • reach acceptable agreements regarding the lease or purchase of locations; • secure acceptable financing arrangements; • comply with applicable zoning, licensing, land use and environmental regulations; • overcome litigation or other opposition efforts brought by special interest groups; • raise or have available an adequate amount of money for construction and opening costs; • respond to unforeseen construction, engineering, environmental or other problems; • avoid or mitigate the impact of inclement weather, natural disasters and other calamities; • respond to infectious diseases, health epidemics and pandemics; • timely hire, train and retain the skilled management and other Playmakers necessary to meet staffing needs; • obtain, in a timely manner and for acceptable cost, required licenses, permits and regulatory approvals, including liquor licenses, and respond effectively to any changes in local, state or federal law and regulations that adversely affect costs or ability to open new venues; • obtain building materials, including steel, and construction labor on a cost-effective basis; and • efficiently manage the amount of time and money used to build and open each new venue.
Other states have also passed and may continue to pass similar laws whose restrictions and requirements differ from those of California, which could require us to design, implement and maintain different types of state-based, privacy-related compliance controls and programs simultaneously in multiple states. Similar laws have been proposed at the federal level as well.
Other states have also passed and will likely continue to pass similar laws whose restrictions and requirements differ from those of California, which could require us to design, implement and maintain different types of state-based, privacy-related compliance controls and programs simultaneously in multiple states. Similar laws have been proposed at the federal level as well.
The 2023 Term Loan B is secured by a first-priority lien on the assets of the obligors thereunder (other than those for which the New ABL Facility has a first-priority lien and certain excluded assets), and a second-priority lien on the assets for which the New ABL Facility has a first-priority lien.
The 2023 Term Loan B is secured by a first-priority lien on the assets of the obligors thereunder (other than those for which the 2023 ABL Credit Facility has a first-priority lien and certain excluded assets), and a second-priority lien on the assets of the obligors thereunder for which the 2023 ABL Credit Facility has a first-priority lien (other than certain excluded assets).
This consolidation may also result in larger retailers gaining increased leverage, which may impact our margins.
Consolidation may also result in larger retailers gaining increased leverage, which may impact our margins.
Companies in our industry have also historically experienced relatively high turnover rates, which may also result in higher labor costs. Accordingly, if we are unable to recruit and retain sufficiently qualified individuals, our business, results of operations, financial condition and growth prospects could be materially and adversely affected.
We have also historically experienced relatively high turnover rates, which may also result in higher labor and training costs. Accordingly, if we are unable to recruit and retain sufficiently qualified individuals, our business, results of operations, financial condition and growth prospects could be materially and adversely affected.
Historically, new venues often experience an initial start-up period with considerable sales volumes, which subsequently decrease to stabilized levels after their first year of operation, followed by increases in same venue sales in line with the rest of our comparable venue base, although there can be no assurance that the same venue sales of any new venues opened in the future will increase in line with the rest of our comparable venue base or that a new venue will succeed in the long term.
Historically, new venues often experience an initial start-up period with considerable sales volumes, which subsequently decrease to stabilized levels after their first year of operation, followed by changes in same venue sales in line with the rest of our comparable venue base, although there can be no assurance that the same venue sales of any new venues opened in the future will move in line with the rest of our comparable venue base or that a new venue will succeed in the long term.
The maximum availability under the New ABL Facility fluctuates with the general seasonality of the business, and increases and decreases with the changes in our and our applicable subsidiaries’ assets that are included in the applicable borrowing base, including certain inventory and account receivable balances, pledged cash, certain intellectual property and certain eligible real estate.
The maximum availability under the 2023 ABL Credit Facility fluctuates with the general seasonality of the business, and increases and decreases with the changes in our and our applicable subsidiaries’ assets that are included in the applicable borrowing base, including certain inventory and account receivable balances, pledged cash, certain intellectual property and certain eligible real estate.
Our top five customers specific to each operating segment represented the following as a percentage of each segment’s total net revenues: • Golf Equipment top five customers accounted for approximately 25%, 26% and 24% of total consolidated Golf Equipment sales in 2023, 2022, and 2021, respectively; and • Active Lifestyle top five customers accounted for approximately 19% of total consolidated Active Lifestyle sales in 2023, and 17% in each of 2022 and 2021.
Our top five customers specific to each operating segment represented the following as a percentage of each segment’s total net revenues: • Golf Equipment top five customers accounted for approximately 26%, 25% and 26% of total consolidated Golf Equipment sales in 2024, 2023 and 2022, respectively; and • Active Lifestyle top five customers accounted for approximately 17%, 19% and 17% of total consolidated Active Lifestyle sales in 2024, 2023 and 2022, respectively.
Any damage or significant disruption in the operation of such systems, the failure of our or our IT vendors’ information systems to perform as expected, the failure to successfully integrate the IT systems of the businesses that we have recently acquired or any security breach to the information systems (including financial or credit/payment frauds) or other cybersecurity incident would disrupt our business, which may result in decreased sales, increased overhead costs, excess inventory and product shortages and otherwise adversely affect our reputation, operations, financial performance and condition. 33 Cybersecurity incidents, including cyber-attacks, unauthorized access to, or accidental disclosure of, personal information including payment card information, that we or our vendors collects or stores on our behalf may result in significant expense and negatively impact our reputation and business.
Any damage or significant disruption in the operation of such systems, the failure of our or our IT vendors’ information systems to perform as expected, the failure to successfully integrate the IT systems of the businesses that we have recently acquired or any security breach to the information systems (including financial or credit/payment frauds) or other cybersecurity incident would disrupt our business, which may result in decreased sales, increased overhead costs, excess inventory and product shortages and otherwise adversely affect our reputation, operations, financial performance and condition. 32 Cybersecurity incidents, including cyber-attacks, unauthorized access to, or accidental disclosure of, personal information including payment card information, that we or our vendors collect or store on our behalf may result in significant expense and negatively impact our reputation and business.
Our primary revolving credit facility is a senior secured asset-based revolving credit facility (as amended, the “ New ABL Facility”), comprised of a U.S. facility, a German facility, a Canadian facility and a United Kingdom/Dutch facility, in each case subject to borrowing base availability under the applicable facility.
Our primary revolving credit facility is a senior secured asset-based revolving credit facility (as amended, the “2023 ABL Credit Facility”), comprised of a U.S. facility, a German facility, a Canadian facility and a United Kingdom/Dutch facility, in each case subject to borrowing base availability under the applicable facility.
In addition to the revolving and ABL facilities described above, we are also the borrower under a senior secured term loan B facility (as amended, the “2023 Term Loan B”) that is guaranteed by our U.S. subsidiaries (other than certain excluded subsidiaries).
In addition to the revolving credit facilities described above, we are also the borrower under a senior secured term loan B facility (as amended, the “2023 Term Loan B”) that is guaranteed by our U.S. subsidiaries (other than certain excluded subsidiaries).
As of December 31, 2023, PEP TG Investments LP (“Providence”), DDFS Partnership LP and Dundon 2009 Gift Trust (together, “Dundon”), TGP Investors, LLC, TGP Investors II, LLC, WestRiver Management, LLC, Anderson Family Investments, LLC and TGP Advisors, LLC (together, “WestRiver”), each of whom acquired shares of our common stock in connection with the merger with Topgolf in 2021, own, in the aggregate, approximately 21.8% of our capital stock.
As of December 31, 2024, PEP TG Investments LP (“Providence”), DDFS Partnership LP and Dundon 2009 Gift Trust (together, “Dundon”), TGP Investors, LLC, TGP Investors II, LLC, WestRiver Management, LLC, Anderson Family Investments, LLC and TGP Advisors, LLC (together, “WestRiver”), each of whom acquired shares of our common stock in connection with the merger with Topgolf in 2021, own, in the aggregate, approximately 21.9% of our capital stock.
The rule changes are to be effective in January 2028 for professional golfers and January 2030 for recreational golfers. This revision to golf ball testing is expected to result in reduced distances for all golfers, which may increase the difficulty of the game, and thereby reduce the enjoyment of golf participants.
The rule change is to be effective in January 2028 for professional golfers and January 2030 for recreational golfers. This revision to golf ball testing is expected to result in reduced distances for all golfers, which may increase the difficulty of the game, and thereby reduce the enjoyment of golf participants.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

8 edited+4 added−1 removed3 unchanged
Biggest changeWe design and assess our program based on the National Institute of Standards and Technology Cybersecurity Framework (“NIST CSF”). This does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business.
Biggest changeThis does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business. 49 Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.
Our cybersecurity risk management program includes: • risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; 46 • a cybersecurity team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; • the use of external service providers and software, where appropriate, to monitor, assess, test or otherwise assist with aspects of our security controls; • cybersecurity awareness training of our employees; • a global incident response plan that includes procedures for responding to cybersecurity incidents; and • a third-party risk management process for service providers and suppliers.
Our cybersecurity risk management program includes: • risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; • a cybersecurity team principally responsible for managing our (1) cybersecurity risk assessment processes, (2) security controls, and (3) response to cybersecurity incidents; • the use of external service providers and software, where appropriate, to monitor, assess, test or otherwise assist with aspects of our security controls; • cybersecurity awareness training of our employees; • a global incident response plan that includes procedures for responding to cybersecurity incidents; and • a third-party risk management process for service providers and suppliers.
Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants we engage; and alerts and reports produced by security tools deployed in the IT environment.
Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants we engage; and alerts and reports produced by security tools deployed in the IT environment. 50
Cybersecurity Governance Our Board of Directors considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee oversight of cybersecurity and other information technology risks. The Audit Committee oversees management’s implementation of our cybersecurity risk management program. The Audit Committee receives reports from management on our cybersecurity risks, typically at least twice per year.
Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee oversight of cybersecurity and other information technology risks. The Audit Committee oversees management’s implementation of our cybersecurity risk management program. The Audit Committee receives reports from management on our cybersecurity risks, typically at least twice per year.
In addition, management updates the Audit Committee, as necessary, regarding any material cybersecurity incidents, as well as any incidents with lesser impact potential. The Audit Committee reports to the full Board of Directors regarding its activities, including those related to cybersecurity. The full Board of Directors also receives briefings from management on our cyber risk management program.
In addition, management updates the Audit Committee, as necessary, regarding any material cybersecurity incidents, as well as any incidents with lesser impact potential. The Audit Committee reports to the full Board regarding its activities, including those related to cybersecurity. The full Board also receives briefings from management on our cyber risk management program.
Risk Factors”, including “Cybersecurity incidents, including cyber-attacks, unauthorized access to, or accidental disclosure of, personal information including payment card information, that we or our vendors collects or stores on our behalf may result in significant expense and negatively impact our reputation and business,” for additional discussion about our cybersecurity risks.
Risk Factors”, including “Cybersecurity incidents, including cyber-attacks, unauthorized access to, or accidental disclosure of, personal information including payment card information, that we or our vendors collect or store on our behalf may result in significant expense and negatively impact our reputation and business,” for additional discussion about our cybersecurity risks.
Our management team has over 90 years of combined experience in cybersecurity, risk, and compliance, and includes members with multiple cybersecurity and compliance certifications such as Certified Information Systems Security Professional (CISSP) from ISC2, Certified Information Systems Manager (CISM) from ISACA, Certified Information Systems Auditor (CISA) from ISACA, Security+ and Network+ from the Computing Technology Industry Association (CompTIA), Certified Ethical Hacker (C|EH) from EC-Council, and other technology certifications.
Team members hold numerous globally recognized certifications, including Certified Information Systems Security Professional (CISSP) from ISC2 and Certified Information Systems Auditor (CISA) from ISACA, Security+ and Network+ from CompTIA, and Certified Ethical Hacker (C|EH) from EC-Council, among others.
Our management team, including the leaders of our Global Information Technology and Information Security and Information Technology Compliance organizations, are responsible for assessing and managing our material risks from cybersecurity threats, including the primary responsibility for our overall cybersecurity risk management program, and supervision of both our internal cybersecurity personnel and our retained external cybersecurity consultants.
Our management team, led by the newly appointed Chief Information Security Officer (CISO) and supported by leaders from our Global Information Technology, Information Security, and Information Technology Compliance organizations, oversees the assessment and management of material risks associated with cybersecurity threats.
Removed
Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.
Added
We design and assess our program based on the National Institute of Standards and Technology Cybersecurity Framework (“NIST CSF”).
Added
This includes directing our comprehensive cybersecurity risk management program, supervising internal cybersecurity personnel, and collaborating with external cybersecurity consultants to maintain a robust and adaptive security posture, as well as strengthening our cybersecurity framework and ensuring alignment with evolving regulatory requirements and industry best practices.
Added
These efforts underscore our commitment to proactively managing risks and safeguarding critical assets in an increasingly complex threat landscape. Our CISO has over 13 years of experience overseeing cybersecurity strategy, risk management, cyber defense and regulatory compliance, including for a large casino and hospitality company and a large, nationwide health system.
Added
Additionally, our CISO holds the Certified Information Security Manager (CISM) credential. Our CISO is supported by a leadership team with over 75 years of combined experience and extensive expertise in cybersecurity, risk management, and compliance.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of December 31, 2023, we had 93 Company-owned and operated venues, including 88 Topgolf venues and one acquired venue throughout the United States, and four Topgolf venues in the United Kingdom. Of the 93 Company-operated venues, over 80% are leased properties.
Biggest changeAs of December 31, 2024, we had 100 Company-owned and operated venues, including 96 Topgolf venues throughout the United States, and four Topgolf venues in the United Kingdom. Of the 100 Company-owned and operated venues, over 80% are leased properties.
We lease a majority of our primary offices utilized by our wholly-owned subsidiaries for the sale of our products in the United States and internationally located in the United Kingdom, Germany, Japan, Korea, China, Australia, Canada, and India. 47 We also lease various retail locations for the sale of our products.
We lease a majority of our primary offices utilized by our wholly-owned subsidiaries for the sale of our products in the United States and internationally located in the United Kingdom, Germany, Japan, Korea, China, Australia, Canada, and India. We also lease various retail locations for the sale of our products.
Item 2. Properties We conduct our business operations in both owned and leased properties. Our principal properties include executive offices, golf club assembly, golf ball manufacturing, warehousing and distribution, sales offices, and Topgolf venues. Our principal executive offices are located in Carlsbad, California.
Item 2. Properties We conduct our business operations in both owned and leased properties. Our principal properties include executive offices, a golf club assembly facility, a golf ball manufacturing plant, warehousing and distribution, sales offices, and Topgolf venues. Our principal executive offices are located in Carlsbad, California.
In the United States, we lease 45 retail locations for the sale of our TravisMathew-branded products. In Germany and throughout Europe as well as in China, we lease over 157 retail locations for the sale of our Jack Wolfskin-branded products.
In the United States, we lease 55 retail locations for the sale of our TravisMathew-branded products. In Germany and throughout Europe as well as in China, we lease over 150 retail locations for the sale of our Jack Wolfskin-branded products.
We also lease over 24 retail locations in Japan for the sale of Callaway-branded products, in addition to four locations for the sale of Jack Wolfskin products and four locations for the sale of TravisMathew products. In total we have 161 Jack Wolfskin retail locations, 49 TravisMathew retail locations, and 24 Callaway retail locations.
We also lease over 24 retail locations in Japan for the sale of Callaway-branded products, in addition to one location for the sale of Jack Wolfskin products and three locations for the sale of TravisMathew products. In total we have 151 Jack Wolfskin retail locations, 58 TravisMathew retail locations, and 24 Callaway retail locations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings The information set forth in Note 13. “Commitments & Contingencies”, in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K is incorporated herein by this reference. Item 4. Mine Safety Disclosures Not applicable. 48 PART II
Biggest changeItem 3. Legal Proceedings The information set forth in Note 13. “Commitments & Contingencies”, in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K is incorporated herein by this reference. Item 4. Mine Safety Disclosures Not applicable. 51 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph assumes an initial investment of $100.00 at December 31, 2018 and reinvestment of all dividends in MODG stock on the dividend payable date. 2018 2019 2020 2021 2022 2023 Topgolf Callaway Brands (NYSE: MODG) $ 100.00 $ 138.62 $ 157.06 $ 179.50 $ 129.20 $ 93.81 S&P 500 $ 100.00 $ 128.88 $ 149.83 $ 190.13 $ 153.16 $ 190.27 S&P 1500 Consumer Discretionary $ 100.00 $ 125.69 $ 165.47 $ 205.91 $ 131.20 $ 182.59 Our cumulative total shareholder return is based upon the closing prices of our common stock on December 31, 2018, 2019, 2020, 2021, 2022 and 2023 of $15.30, $21.20, $24.01, $27.44, $19.75 and $14.34, respectively. 49 Purchases of Equity Securities by the Issuer and Affiliated Purchasers 2022 Repurchase Program On May 26, 2022, we announced that our Board of Directors authorized a $100.0 million share repurchase program (the “2022 Repurchase Program”) under which we are authorized to repurchase shares of our common stock in the open market or in private transactions, subject to our assessment of market conditions and buying opportunities.
Biggest changeThe graph assumes an initial investment of $100.00 at December 31, 2019 and reinvestment of all dividends in MODG stock on the dividend payable date. 2019 2020 2021 2022 2023 2024 Topgolf Callaway Brands (NYSE: MODG) $ 100.00 $ 113.25 $ 129.43 $ 93.16 $ 67.64 $ 37.08 S&P 500 $ 100.00 $ 116.26 $ 147.52 $ 118.84 $ 147.64 $ 182.05 S&P 1500 Consumer Discretionary $ 100.00 $ 131.65 $ 163.83 $ 104.38 $ 145.27 $ 183.98 Our cumulative total shareholder return is based upon the closing prices of our common stock on December 31, 2019, 2020, 2021, 2022, 2023 and 2024 of $21.20, $24.01, $27.44, $19.75, $14.34 and $7.86, respectively. 52 Purchases of Equity Securities by the Issuer and Affiliated Purchasers 2022 Repurchase Program On May 26, 2022, we announced that our Board of Directors authorized a $100.0 million share repurchase program (the “2022 Repurchase Program”) under which we are authorized to repurchase shares of our common stock in the open market or in private transactions, subject to our assessment of market conditions and buying opportunities.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Our common stock is listed, and principally traded, on the New York Stock Exchange (“NYSE”). The symbol for our common stock is “MODG.” As of January 31, 2024, the number of holders of record of our common stock was 4,347.
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Our common stock is listed, and principally traded, on the New York Stock Exchange (“NYSE”). The symbol for our common stock is “MODG.” As of January 31, 2025, the number of holders of record of our common stock was 3,557.
The following graph presents a comparison of the cumulative total shareholder return of our common stock since December 31, 2018 to two indices: the Standard & Poor’s 500 Index (“S&P 500”) and the Standard & Poor’s 1500 Consumer Discretionary Index (“S&P 1500 Consumer Discretionary”).
“Financing Arrangements” in the Notes to Consolidated Financial Statements in this Form 10-K). The following graph presents a comparison of the cumulative total shareholder return of our common stock since December 31, 2019 to two indices: the Standard & Poor’s 500 Index (“S&P 500”) and the Standard & Poor’s 1500 Consumer Discretionary Index (“S&P 1500 Consumer Discretionary”).
Dividends are subject to liquidity, capital availability and quarterly determinations that cash dividends are in the best interests of our shareholders, and may be affected by, among other items, our views on potential future capital requirements, projected cash flows and needs, changes to our business model, and certain restrictions limiting dividends imposed by our ABL facilities (See Note 7.
The declaration, amount and payment of dividends are at the sole discretion of our Board, and are subject to liquidity, capital availability and other factors that the Board considers relevant, and may be affected by, among other items, our views on potential future capital requirements, projected cash flows and needs, changes to our business model, and certain restrictions limiting dividends imposed by our credit facilities (See Note 7.
Removed
“Financing Arrangements” in the Notes to Consolidated Financial Statements in this Form 10-K). In August 2020, as part of our effort to manage costs and capital allocation most efficiently, we announced the cessation of our quarterly dividends and we do not anticipate paying dividends in the foreseeable future.
Added
We currently do not anticipate declaring or paying any cash dividends for the foreseeable future.
Removed
During the fourth quarter of 2023, we repurchased 859,009 shares of our common stock under the 2022 Repurchase Program at a weighted average price per share of $13.93, for a total cost of $11.9 million, excluding commissions.
Added
During the fourth quarter of 2024, we did not repurchase any shares of our common stock under the 2022 Repurchase Program, and as of December 31, 2024, approximately $35.5 million remains available under the 2022 Repurchase Program. Item 6. Reserved 53
Removed
Payroll Tax Withholding We may repurchase shares by withholding a portion of employee restricted stock unit awards and performance share unit awards in order to satisfy payroll tax withholding obligations in connection with the vesting and settlement of such awards.
Removed
The repurchases of these awards in order to satisfy the payroll tax withholding obligations are not considered purchases of shares of common stock under any of our publicly announced repurchase programs. The following table summarizes our share repurchases during the fourth quarter of 2023.
Removed
Our repurchases of shares of common stock are recorded at cost and result in a reduction of shareholders’ equity.
Removed
Three Months Ended December 31, 2023 Total Number of Shares Purchased Weighted Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Dollar Value that May Yet Be Purchased Under the Program October 1, 2023 – October 31, 2023 444 $ 13.06 — $ 65,608,579 November 1, 2023 – November 30, 2023 4,245 11.47 — 65,608,579 December 1, 2023 – December 31, 2023 859,009 13.93 859,009 53,667,485 Total 863,698 $ 13.92 859,009 $ 53,667,485 Other than shares repurchased under the 2022 Repurchase Program, during the fourth quarter of 2023, we repurchased 4,689 shares of our common stock at an average cost per share of $11.62, for a total cost of $0.1 million, which were related to shares withheld to satisfy payroll tax withholding obligations as described above.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe decrease in non-GAAP net income was primarily due to an increase in other expense, net, primarily due to higher interest expense, partially offset by a decrease in the income tax provision combined with an increase in income from operations. 58 Operating Segment Results for the Years Ended December 31, 2023 and 2022 (in millions, except percentages) Year Ended December 31, Increase/(Decrease) Non-GAAP Constant Currency Growth vs. 2022 (1) 2023 2022 Dollars Percent Percent Net revenues: Venues $ 1,692.6 $ 1,477.1 $ 215.5 14.6 % 14.6% Other Topgolf business lines 68.4 71.9 (3.5) (4.9) % (4.0)% Topgolf 1,761.0 1,549.0 212.0 13.7 % 13.7% Golf clubs 1,073.5 1,097.1 (23.6) (2.2) % (0.5)% Golf balls 314.0 309.5 4.5 1.5 % 2.2% Golf Equipment 1,387.5 1,406.6 (19.1) (1.4) % 0.1% Apparel 713.2 631.7 81.5 12.9 % 13.5% Gear, accessories, & other 423.1 408.4 14.7 3.6 % 3.8% Active Lifestyle 1,136.3 1,040.1 96.2 9.2 % 9.7% Total net revenues $ 4,284.8 $ 3,995.7 $ 289.1 7.2 % 7.9% Segment operating income: Topgolf $ 108.8 $ 76.8 $ 32.0 41.7 % Golf Equipment 193.3 251.4 (58.1) (23.1) % Active Lifestyle 117.0 77.4 39.6 51.2 % Total segment operating income 419.1 405.6 13.5 3.3 % Reconciling Items (2) (181.4) (148.8) (32.6) 21.9 % Total operating income 237.7 256.8 (19.1) (7.4) % Interest expense, net (210.2) (142.8) (67.4) 47.2 % Other income, net 7.3 27.9 (20.6) (73.8) % Income before income taxes $ 34.8 $ 141.9 $ (107.1) (75.5) % (1) Calculated by applying 2022 exchange rates to 2023 reported sales in regions outside the U.S.
Biggest changeThe decrease in non-GAAP net income was primarily due to a decrease in segment operating income as discussed below combined with an increase in interest expense, partially offset by an increase in other income and a decrease in the provision for income taxes. 63 Operating Segment Results for the Years Ended December 31, 2024 and 2023 (in millions, except percentages) Year Ended December 31, Increase/(Decrease) Non-GAAP Constant Currency Growth vs. 2023 (1) 2024 2023 Dollars Percent Percent Net revenues: Venues $ 1,728.3 $ 1,692.6 $ 35.7 2.1 % 2.0% Other Topgolf business lines 81.1 68.4 12.7 18.6 % 17.7% Topgolf 1,809.4 1,761.0 48.4 2.7 % 2.6% Golf clubs 1,060.9 1,073.5 (12.6) (1.2) % —% Golf balls 321.1 314.0 7.1 2.3 % 2.7% Golf Equipment 1,382.0 1,387.5 (5.5) (0.4) % 0.6% Apparel 676.5 713.2 (36.7) (5.1) % (4.5)% Gear, accessories, & other 371.4 423.1 (51.7) (12.2) % (11.8)% Active Lifestyle 1,047.9 1,136.3 (88.4) (7.8) % (7.2)% Total net revenues $ 4,239.3 $ 4,284.8 $ (45.5) (1.1) % (0.6)% Segment operating income: Topgolf $ 114.2 $ 108.8 $ 5.4 5.0 % Golf Equipment 183.6 193.3 (9.7) (5.0) % Active Lifestyle 82.4 117.0 (34.6) (29.6) % Total segment operating income 380.2 419.1 (38.9) (9.3) % Reconciling Items (2) (1,637.4) (181.4) (1,456.0) n/m Total operating (loss) income (1,257.2) 237.7 (1,494.9) n/m Interest expense, net (231.2) (210.2) (21.0) 10.0 % Other income, net 15.2 7.3 7.9 108.2 % (Loss) Income before income taxes $ (1,473.2) $ 34.8 $ (1,508.0) n/m (1) Calculated by applying 2023 exchange rates to 2024 reported sales in regions outside the U.S.
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.
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 costs of personnel engaged in research and development activities, research costs and depreciation expense.
These are variable in nature and fluctuate based on the timing of an anticipated venue opening date, as well as the size and location of a particular Company-operated venue.
These are variable in nature and fluctuate based on the timing of an anticipated venue opening date, as well as the size and location of a particular Company-owned and operated venue.
(9) Amounts represent current and non-current portions of uncertain income tax positions as recorded on our Consolidated Balance Sheets as of December 31, 2023. Amounts exclude uncertain income tax positions that we would be able to offset against deferred taxes. For further discussion, see Note 12. “Income Taxes” in the Notes to Consolidated Financial Statements in this Form 10-K.
(9) Amounts represent current and non-current portions of uncertain income tax positions as recorded on our Consolidated Balance Sheets as of December 31, 2024. Amounts exclude uncertain income tax positions that we would be able to offset against deferred taxes. For further discussion, see Note 12. “Income Taxes” in the Notes to Consolidated Financial Statements in this Form 10-K.
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 these indemnities, commitments and guarantees that we issued during the 12 months ended December 31, 2023 was not 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 these indemnities, commitments and guarantees that we issued during the 12 months ended December 31, 2024 was not material to our financial position, results of operations or cash flows.
Any subsequent adjustments recorded after the conclusion of the allowable twelve month measurement period or final determination of the values of assets acquired or liabilities assumed are recorded to our consolidated statements of operations. Our estimates of fair value are based upon assumptions we believe to be reasonable at that time, but which are inherently uncertain and unpredictable.
Any subsequent adjustments recorded after the conclusion of the allowable 12 month measurement period or final determination of the values of assets acquired or liabilities assumed are recorded to our consolidated statements of operations. Our estimates of fair value are based upon assumptions we believe to be reasonable at that time, but which are inherently uncertain and unpredictable.
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. 62 The duration of these indemnities, commitments and guarantees varies, and in certain cases may be indefinite.
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. 67 The duration of these indemnities, commitments and guarantees varies, and in certain cases may be indefinite.
If we receive new information within the twelve month allowable measurement period about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognized as of that date, we may adjust the purchase price allocation in the reporting period in which the amounts are determined.
If we receive new information within the 12 month allowable measurement period about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognized as of that date, we may adjust the purchase price allocation in the reporting period in which the amounts are determined.
The amounts listed above approximate the minimum purchase obligations we are obligated to pay under these agreements over the next five years and thereafter as of December 31, 2023. The actual amounts paid under some of the agreements may be higher or lower than these amounts.
The amounts listed above approximate the minimum purchase obligations we are obligated to pay under these agreements over the next five years and thereafter as of December 31, 2024. The actual amounts paid under some of the agreements may be higher or lower than these amounts.
Venue Pre-Opening Costs Venue pre-opening costs consist of costs associated with activities prior to the opening of new Company-operated Topgolf venues, as well as other costs that are not considered in the evaluation of ongoing venue performance.
Venue Pre-Opening Costs Venue pre-opening costs consist of costs associated with activities prior to the opening of new Company-owned and operated Topgolf venues, as well as other costs that are not considered in the evaluation of ongoing venue performance.
Additionally, we may need to pay certain state income taxes. 61 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.
Additionally, we may need to pay certain state income taxes. 66 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.
Assuming there had been a 10% increase in the rate used to record sales program incentives, pre-tax income for the year ended December 31, 2023 would have decreased by approximately $2.2 million. 51 Excess and Obsolescence Reserves Inventories are recorded at the lower of cost or net realizable value, which includes a reserve for excess, obsolete and/or unmarketable inventory.
Assuming there had been a 10% increase in the rate used to record sales program incentives, pre-tax income for the year ended December 31, 2024 would have decreased by approximately $2.0 million. Excess and Obsolescence Reserves Inventories are recorded at the lower of cost or net realizable value, which includes a reserve for excess, obsolete and/or unmarketable inventory.
This non-GAAP information includes the following: • A constant currency measure on net revenues in order to demonstrate the impact of foreign currency fluctuations on our results.
This non-GAAP information includes the following: • A constant currency measure on net revenues in order to demonstrate the impact of foreign currency fluctuations on these results.
This section of this Annual Report on Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
This section of this Annual Report on Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
Discussions related to 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 1, 2023.
Discussions related to 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Annual Report on Form 10-K can be found in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 29, 2024.
As of December 31, 2023, approximately 40% 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.
As of December 31, 2024, approximately 30% 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.
Assuming there had been a 10% increase in the inventory reserve for the year ended December 31, 2023, pre-tax income would have decreased by approximately $2.3 million.
Assuming there had been a 10% increase in the inventory reserve for the year ended December 31, 2024, pre-tax income would have decreased by approximately $2.4 million.
(3) Related to the release of tax valuation allowances that were recorded in connection with the merger with Topgolf. (4) Diluted Earnings per share calculated using the if-converted method, which excludes interest expense related to the Convertible Notes from the calculation of net income.
(4) Related to the release of tax valuation allowances that were recorded in connection with the merger with Topgolf. (5) Diluted earnings per share is calculated using the if-converted method, which excludes interest expense related to the Convertible Notes from the calculation of net income in periods where income is reported.
Topgolf is primarily a services business with lower inventory balances than our other business segments, with the inventory balances primarily consisting of food and beverage as well as retail merchandise and Toptracer inventory. Our inventory decreased by $164.8 million to $794.4 million as of December 31, 2023 compared to $959.2 million as of December 31, 2022.
Topgolf is primarily a services business with lower inventory balances than our other business segments, with the inventory balances primarily consisting of food and beverage as well as retail merchandise and Toptracer inventory. Our inventory decreased by $37.1 million to $757.3 million as of December 31, 2024 compared to $794.4 million as of December 31, 2023.
As a result, our cash flows and results of operations could be adversely affected. 54 Segment and Related Information Our products, services and brands are reported under three operating segments: Topgolf, which includes the operations of our Topgolf business; Golf Equipment, which includes the operations of our golf clubs and golf balls business; and Active Lifestyle, which includes the operations of our soft goods business marketed under the Callaway, TravisMathew, Jack Wolfskin and OGIO brand names.
Segment and Related Information Our products, services and brands are reported under three operating segments: Topgolf, which includes the operations of our Topgolf business; Golf Equipment, which includes the operations of our golf clubs and golf balls business; and Active Lifestyle, which includes the operations of our soft goods business marketed under the Callaway, TravisMathew, Jack Wolfskin and OGIO brand names.
As of December 31, 2023, we had $742.6 million in cash and availability under our credit facilities, which is an increase of $327.3 million or 78.8% compared to December 31, 2022. Information about our credit facilities and long-term borrowings is presented in Note 7.
As of December 31, 2024, we had $796.9 million in cash and availability under our credit facilities, which is an increase of $54.3 million or 7% compared to December 31, 2023. Information about our credit facilities and long-term borrowings is presented in Note 7.
Net revenues by major geographic region for the year ended December 31, 2023 as compared to the year ended December 31, 2022 were as follows (in millions, except percentages): Year Ended December 31, Increase/(Decrease) Non-GAAP Constant Currency Growth 2023 2022 Amount Percent Percent Net revenues: United States $ 3,081.4 $ 2,798.0 $ 283.4 10.1 % 10.1% Europe 540.6 537.4 3.2 0.6 % (1.0)% Asia 531.9 545.4 (13.5) (2.5) % 2.7% Rest of World 130.9 114.9 16.0 13.9 % 19.0% Total net revenues $ 4,284.8 $ 3,995.7 $ 289.1 7.2 % 7.9% Net revenues from our Topgolf operations are primarily concentrated in the United States and Europe, with the United States being our principal market.
Net revenues by major geographic region for the year ended December 31, 2024 as compared to the year ended December 31, 2023 were as follows (in millions, except percentages): Year Ended December 31, Increase/(Decrease) Non-GAAP Constant Currency Growth 2024 2023 Amount Percent Percent Net revenues: United States $ 3,102.5 $ 3,081.4 $ 21.1 0.7 % 0.7% Europe 511.1 540.6 (29.5) (5.5) % (6.7)% Asia 487.6 531.9 (44.3) (8.3) % (3.9)% Rest of World 138.1 130.9 7.2 5.5 % 6.4% Total net revenues $ 4,239.3 $ 4,284.8 $ (45.5) (1.1) % (0.6)% Net revenues from our Topgolf operations are primarily concentrated in the United States and Europe, with the United States being our principal market.
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 in forecasting our business.
We have included information in this report to reconcile non-GAAP information for the periods presented to the most directly comparable GAAP information. 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 in forecasting our business.
In addition, our Topgolf venues business also depends on corporate discretionary spending relative to its leisure and entertainment-based offerings. As a result, the demand for our products and services is highly sensitive to macroeconomic pressures. Such pressures could result in a decline in general consumer and corporate discretionary spending and as such, demand for our products and services may decline.
In addition, our Topgolf venues business also depends on corporate discretionary spending relative to its leisure and entertainment-based offerings. As a result, demand for our products is highly sensitive to downturns in the economy and the corresponding impact on discretionary consumer and corporate spending.
While we were generally able to offset these inflationary pressures by increasing the price of our products and services, the length and severity of these conditions are unpredictable, and should conditions persist and/or worsen, such inflationary pressures may have an adverse effect on our operating expenses. Further, we may not be able to offset these increased costs through price increases.
While we were able to partially offset these inflationary pressures by increasing the price of our products and services and through cost management initiatives, the length and severity of these conditions are unpredictable, and should conditions persist and/or worsen, such inflationary pressures may have a further adverse effect on our operating results.
On a non-GAAP basis, excluding the items described in the table above, our net income and diluted earnings per share for the for the year ended December 31, 2023 would have been $93.0 million and $0.49 per share, respectively, compared to $158.2 million and $0.82 per share, respectively, for the same period in 2022 .
On a non-GAAP basis, excluding the items described in the table above, our net income and diluted earnings per share for the for the year ended December 31, 2024 would have been $42.0 million and $0.23 per share, respectively, compared to $83.9 million and $0.45 per share, respectively, for the comparable period in 2023 .
The increase in cash and cash equivalents was primarily related to net cash provided by financing activities of $375.8 million, including proceeds from lease financing, and cash provided by operating activities of $364.7 million, partially offset by cash used in investing activities of $542.9 million, primarily for capital expenditures.
The increase in cash and cash equivalents was primarily related to cash provided by operating activities of $382.0 million, partially offset by cash used in investing activities of $297.3 million, primarily for capital expenditures, and net cash used in financing activities of $23.6 million, including proceeds from lease financing.
For further detail related to our operating segments, products and seasonality, see “Part I, Item 1. Business – Overview” in this Form 10-K.
For further detail related to our operating segments, products and seasonality, see “Part I, Item 1.
United States During the year ended December 31, 2023, net revenues in the United States increased $283.4 million (10.1%) compared to the year ended December 31, 2022.
United States During the year ended December 31, 2024, net revenues in the United States increased $21.1 million (0.7%) compared to the year ended December 31, 2023.
Net income and diluted earnings per share for the year ended December 31, 2023 were $95.0 million and $0.50 per share, respectively, as compared to $157.9 million and $0.82 per share, respectively, for the year ended December 31, 2022.
Net loss and diluted loss per share for the year ended December 31, 2024 were $1,447.7 million and $(7.88) per share, respectively, as compared to net income and diluted earnings per share of $95.0 million and $0.50 per share, respectively, for the year ended December 31, 2023.
If the actual amount of variable consideration is significantly different than our accrued estimates, we may be exposed to adjustments to revenue that could be material.
Adjustments to the rate are made as necessary in order to reflect the amount of consideration we expect to receive from our customers. If the actual amount of variable consideration is significantly different than our accrued estimates, we may be exposed to adjustments to revenue that could be material.
Discussion of Non-GAAP Measures In addition to the financial results contained in this report, which have been prepared and presented in accordance with GAAP, we have also included supplemental information concerning our financial results on a non-GAAP basis.
“Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in this Form 10-K, which is incorporated herein by this reference. 56 Discussion of Non-GAAP Measures In addition to the financial results contained in this report, which have been prepared and presented in accordance with GAAP, we have also included supplemental information concerning our financial results on a non-GAAP basis.
During the year ended December 31, 2023, venue pre-opening costs decreased $4.5 million (14.8%) as compared to the year ended December 31, 2022, primarily due to the timing of venue openings combined with cost savings from operational efficiencies.
During the year ended December 31, 2024, venue pre-opening costs decreased $11.1 million (42.9%) as compared to the year ended December 31, 2023, primarily due to fewer venue openings combined with cost savings from operational efficiencies.
(5) Represents DLF obligations, including extension periods, in connection with the construction of Topgolf venues. For further details, see Note 6. “Leases” in the Notes to Consolidated Financial Statements in this Form 10-K. (6) Represents future minimum lease payments under lease agreements that have not yet commenced as of December 31, 2023 in relation to future Topgolf facilities.
(6) Represents future minimum lease payments under lease agreements that have not yet commenced as of December 31, 2024 in relation to future Topgolf facilities and TravisMathew retail stores. For further discussion, see Note 6. “Leases” in the Notes to Consolidated Financial Statements in this Form 10-K.
While we generally try to mitigate the impact of such macroeconomic factors by closely monitoring changes in consumer retail spending behavior and through the implementation of various strategic initiatives, the continued fluctuation of these trends may have an adverse impact on our operating results depending on the severity and length of the changes.
While we generally try to mitigate the impact of such macroeconomic factors by closely monitoring changes in consumer retail spending behavior and through the implementation of various strategic initiatives, the persistence of these trends may have an adverse impact on our operating results depending on the severity and length of the changes. 57 Foreign Currency A significant portion of our business is conducted outside of the United States in currencies other than the U.S. dollar.
The market approach valuation method determines fair value by utilizing earnings multiples of comparable public companies or interests, which reflect the market in which each relative reporting unit operates, as well as recent comparable market transactions.
The market approach valuation method determines fair value by utilizing earnings multiples of comparable public companies or interests, which reflect the market in which each relative reporting unit operates, as well as recent comparable market transactions. As a result of our goodwill impairment assessment performed as of December 31, 2024 , we recorded a goodwill impairment of $1,352.4 million .
Costs and Expenses (in millions, except percentages) Year Ended December 31, Increase/(Decrease) 2023 2022 Amount Percent Costs and expenses: Cost of products $ 1,443.9 $ 1,400.6 $ 43.3 3.1 % Cost of services, excluding depreciation and amortization 186.8 184.0 2.8 1.5 % Other venue expense 1,252.3 1,076.9 175.4 16.3 % Selling, general and administrative expense 1,036.6 970.6 66.0 6.8 % Research and development expense 101.6 76.4 25.2 33.0 % Venue pre-opening costs 25.9 30.4 (4.5) (14.8) % Total costs and expenses $ 4,047.1 $ 3,738.9 $ 308.2 8.2 % Cost of Products Our cost of products is variable in nature and fluctuates relative to sales volumes.
Costs and Expenses (in millions, except percentages) Year Ended December 31, Increase/(Decrease) 2024 2023 Amount Percent Costs and expenses: Cost of products $ 1,401.7 $ 1,443.9 $ (42.2) (2.9) % Cost of services, excluding depreciation and amortization 186.7 186.8 (0.1) (0.1) % Other venue expense 1,303.5 1,252.3 51.2 4.1 % Selling, general and administrative expense 1,045.7 1,036.6 9.1 0.9 % Research and development expense 92.1 101.6 (9.5) (9.4) % Goodwill and intangible assets impairment 1,452.0 — 1,452.0 n/m Venue pre-opening costs 14.8 25.9 (11.1) (42.9) % Total costs and expenses $ 5,496.5 $ 4,047.1 $ 1,449.4 35.8 % Cost of Products Cost of products is variable in nature and fluctuates relative to sales volumes.
We will continuously monitor each of our reporting units for any risk of future impairments which may occur if our current expectations of prospective results of operations, which may be influenced by market conditions and other factors, change. 52 For our indefinite-lived intangible assets, which primarily consist of our trade names, we estimate fair value based on an income approach using the relief-from-royalty method which assumes that, in lieu of ownership, a third-party would be willing to pay a royalty in order to derive a benefit from the trade name.
For our indefinite-lived intangible assets, which primarily consist of our trade names, we estimate fair value based on an income approach using the relief-from-royalty method which assumes that, in lieu of ownership, a third-party would be willing to pay a royalty in order to derive a benefit from the trade name.
Cost of products includes raw materials and component costs, direct labor and manufacturing overhead, inbound freight, duties and shipping charges, and retail merchandise costs for products sold in retail shops within Topgolf venue facilities. During the year ended December 31, 2023, cost of products increased $43.3 million (3.1%) as compared to the year ended December 31, 2022 .
Cost of products includes raw materials and component costs, direct labor and manufacturing overhead, inbound freight, duties and shipping charges, depreciation and amortization, and retail merchandise costs for products sold in retail shops within Topgolf venue facilities.
An impairment loss is measured as the excess of the carrying amount of the asset over its estimated fair value. An impairment loss is recorded as a reduction to the carrying value of the asset and a charge to earnings in the period in which the impairment loss occurred.
An impairment loss is measured as the excess of the carrying amount of the asset over its estimated fair value.
Excluding the valuation allowance release and other non-recurring items, our effective tax rate would have been 14.4% and 15.5% for the years ended December 31, 2023 and 2022, respectively. For further discussion on our income taxes, see Note 12. “Income Taxes” in the Notes to Consolidated Financial Statements in this Form 10-K.
Excluding the impact of the goodwill impairment in 2024 and the release of the valuation allowance in 2023 and other non-recurring items, our effective tax rate would have been 13.4% and 13.3% for the years ended December 31, 2024 and 2023, respectively. For further discussion on our income taxes, see Note 12.
Selling, General and Administrative Expense Selling, general and administrative (“SG&A”) expenses primarily consist of non-venue employee costs, advertising and promotional expense, legal and professional fees, tour expenses, travel expenses, building and rent expenses, depreciation charges (excluding those related to manufacturing, distribution, and venue operations), amortization, and other miscellaneous expenses.
The increase was primarily due to the addition of new Company-owned and operated Topgolf venues, in addition to higher wages and planned increases in costs related to new marketing campaigns, partially offset by operational efficiencies in the venues. 60 Selling, General and Administrative Expense Selling, general and administrative (“SG&A”) expenses primarily consist of non-venue employee costs, advertising and promotional expense, legal and professional fees, tour expenses, travel expenses, building and rent expenses, depreciation charges (excluding those related to manufacturing, distribution, and venue operations), amortization, and other miscellaneous expenses.
(3) Reconciling items include corporate general and administrative expenses not utilized by management in determining segment profitability, including non-cash amortization expense of intangible assets in connection with the acquisitions and non-recurring costs. Topgolf During the year ended December 31, 2023, Topgolf segment operating income increased $32.0 million (41.7%) as compared to the same period in 2022.
(3) Reconciling items include corporate general and administrative expenses not utilized by management in determining segment profitability, including non-cash amortization expense of intangible assets in connection with the acquisitions and non-recurring costs as discussed above.
Cost of Services, Excluding Depreciation and Amortization Our cost of services primarily consists of costs related to food and beverage sold at Topgolf venues and transaction fees related to in-app purchases within our WGT digital golf game. In addition, cost of services includes costs associated with Topgolf’s Toptracer license agreements that are primarily classified as sales-type leases.
Cost of Services, Excluding Depreciation and Amortization Cost of services primarily consists of costs related to food and beverage sold at Topgolf venues and costs associated with Topgolf’s Toptracer license agreements that are primarily classified as sales-type leases. Food and beverage costs are variable in nature, fluctuate relative to sales volume, and are impacted by product mix and commodity pricing.
Foreign Currency A significant portion of our business is conducted outside of the United States in currencies other than the U.S. dollar. Therefore, we enter into foreign currency forward contracts to mitigate the effects that changes in foreign currency rates may have on our financial results.
Therefore, we enter into foreign currency forward contracts to mitigate the effects that changes in foreign currency rates may have on our financial results.
During the year ended December 31, 2023, research and development expense increased $25.2 million (33.0%) as compared to the year ended December 31, 2022.
During the year ended December 31, 2024, research and development expense decreased $9.5 million (9.4%) as compared to the year ended December 31, 2023.
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 or future 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-K. 60 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 in this Form 10-K).
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-K.
We perform our goodwill impairment assessment at the reporting unit level using a combination of an income approach and a market approach.
An impairment loss is recorded as a reduction to the carrying value of the asset and a charge to earnings in the period in which the impairment loss occurred. 55 We perform our goodwill impairment assessment at the reporting unit level using a combination of an income approach and a market approach.
Liquidity and Capital Resources Liquidity Our principal sources of liquidity consist of our existing cash balances, funds expected to be generated from operations and funds from our credit facilities.
The decrease was primarily due to sell-through of inventory in our Active Lifestyle business, combined with inventory reduction initiatives. 65 Liquidity and Capital Resources Liquidity Our principal sources of liquidity consist of our existing cash balances, funds expected to be generated from operations and funds from our credit facilities.
(2) 2023 amounts primarily include $12.7 million in total charges related to the impairment and abandonment of the Shankstars media game in the Topgolf segment, $12.3 million of total reorganization costs in the Topgolf and Active Lifestyle segments, $13.7 million in total charges related to our 2023 debt modification, $4.2 million in IT integration and implementation costs primarily related to the Topgolf merger, and $2.4 million in costs related to a cybersecurity incident. 2022 amounts primarily include $5.7 million in non-cash asset write-downs related to the suspension of our Jack Wolfskin retail operations in Russia and the closure of a pre-merger Topgolf concept location, $5.9 million in IT integration and implementation costs primarily related to the Topgolf merger, $3.6 million in legal and credit agency fees related to a postponed debt refinancing, and $0.9 million for reorganization expenses.
(3) 2024 amounts primarily include $22.9 million of total reorganization costs in the Topgolf and Active Lifestyle segments, $8.0 million of costs incurred related to the planned separation of Topgolf, $4.7 million of costs related to our 2024 debt repricing, and $3.4 million in charges related to the impairment and abandonment of the Shankstars media game in the Topgolf segment, $2.1 million in IT integration and implementation costs primarily related to the merger with Topgolf, and $1.4 million in costs related to a cybersecurity incident. 2023 amounts primarily include $12.7 million in total charges related to the impairment and abandonment of the Shankstars media game in the Topgolf segment, $12.3 million of total reorganization costs in the Topgolf and Active Lifestyle segments, $13.7 million in total charges related to our 2023 debt modification, $4.2 million in IT integration and implementation costs primarily related to the Topgolf merger, and $2.4 million in costs related to a cybersecurity incident.
The increase was primarily due to higher revenues from the continued opening of new Company-owned and operated venues in addition to gross margin improvements and operational efficiencies at the venues. The increase in segment operating income was partially offset by higher advertising and promotional costs for national Topgolf marketing campaigns.
During the year ended December 31, 2024, Topgolf segment operating income increased $5.4 million (5.0%) as compared to the same period in 2023. The increase was primarily due to higher revenues from the continued opening of new Company-owned and operated venues in addition to gross margin improvements and operational efficiencies at the venues.
Net Income, Diluted Earnings Per Share and Reconciliation of Non-GAAP Measures The following table presents a reconciliation of our GAAP results for the years ended December 31, 2023 and 2022 to our non-GAAP results for the same periods (in millions, except per share information): Year Ended December 31, 2023 Year Ended December 31, 2022 Net Income Diluted earnings per share (4) Net Income Diluted earnings per share (4) GAAP $ 95.0 $ 0.50 $ 157.9 $ 0.82 Less: Non-Cash Acquisition Amortization and Depreciation (1) (19.4) (0.10) (21.8) (0.11) Less: Non-Recurring Items (2) (36.9) (0.18) (12.9) (0.06) Less: Tax Valuation Allowance (3) 58.3 0.29 34.4 0.17 Non-GAAP $ 93.0 $ 0.49 $ 158.2 $ 0.82 Diluted Weighted-Average Shares Outstanding 201.1 201.3 (1) Includes the amortization and depreciation of acquired intangible assets and purchase accounting adjustments.
“Income Taxes” in the Notes to Consolidated Financial Statements in this Form 10-K. 62 Net Income, Diluted Earnings Per Share and Reconciliation of Non-GAAP Measures The following table presents a reconciliation of our GAAP results for the years ended December 31, 2024 and 2023 to our non-GAAP results for the same periods (in millions, except per share information): Year Ended December 31, 2024 Year Ended December 31, 2023 Net (Loss) Income Diluted (Loss) Earnings per share (5) (6) Net Income Diluted (Loss) Earnings per share (5) (6) GAAP $ (1,447.7) $ (7.88) $ 95.0 $ 0.50 Less: Non-Cash Amortization of Acquired Intangibles (1) (9.6) (0.05) (10.6) (0.05) Less: Non-Cash Goodwill and Intangible Assets Impairment (2) (1424.6) (7.72) — — Less: Non-Recurring Items (3) (55.5) (0.30) (36.6) (0.18) Less: Tax Valuation Allowance (4) — — 58.3 0.29 Non-GAAP $ 42.0 $ 0.23 $ 83.9 $ 0.45 GAAP Diluted Weighted-Average Shares Outstanding 183.7 201.1 Non-GAAP Diluted Weighted-Average Shares Outstanding 184.6 201.1 (1) Includes the non-cash amortization of purchase accounting adjustments associated with acquired intangible assets stemming from our Acquisitions, including acquired customer and distributor relationships and acquired developed technology.
The table below summarizes certain significant cash obligations as of December 31, 2023 that will affect our future liquidity (in millions): Payments Due By Period Total 2024 2025 - 2026 2027 - 2028 Thereafter Long-term debt (1) $ 1,566.8 $ 20.8 $ 295.0 $ 29.3 $ 1,221.7 Interest payments relating to long-term debt (2) 756.7 124.4 240.0 225.3 167.0 Finance leases, including imputed interest (3) 821.8 14.9 34.5 32.7 739.7 Operating leases, including imputed interest (4) 2,456.4 155.6 319.0 304.3 1,677.5 DLF obligations (5) 4,389.8 72.9 164.9 173.2 3,978.8 Minimum lease payments for leases signed but not yet commenced (6) 364.9 4.2 19.6 19.6 321.5 Capital commitments (7) 107.0 58.0 49.0 — — Unconditional purchase obligations (8) 176.8 52.5 63.0 29.8 31.5 Uncertain tax contingencies (9) 13.6 2.9 1.3 0.6 8.8 Total $ 10,653.8 $ 506.2 $ 1,186.3 $ 814.8 $ 8,146.5 (1) Excludes unamortized debt discounts, unamortized debt issuance costs, and fair value adjustments.
The table below summarizes certain significant cash obligations as of December 31, 2024 that will affect our future liquidity (in millions): Payments Due By Period Total 2025 2026 - 2027 2028 - 2029 Thereafter Long-term debt (1) $ 1,495.5 $ 18.6 $ 291.9 $ 27.6 $ 1,157.4 Interest payments relating to long-term debt (2) 508.6 99.9 185.1 178.6 45.0 Finance leases, including imputed interest (3) 891.2 15.3 36.1 37.7 802.1 Operating leases, including imputed interest (4) 2,333.7 157.2 323.1 309.8 1,543.6 DLF obligations (5) 4,965.7 86.9 199.4 207.6 4,471.8 Minimum lease payments for leases signed but not yet commenced (6) 854.3 2.0 36.7 37.2 778.4 Capital commitments (7) 110.8 58.0 49.7 3.1 — Unconditional purchase obligations (8) 110.3 56.6 52.6 1.1 — Uncertain tax contingencies (9) 11.6 2.4 1.1 0.1 8.0 Total $ 11,281.7 $ 496.9 $ 1,175.7 $ 802.8 $ 8,806.3 (1) Excludes unamortized debt discounts, unamortized debt issuance costs, and fair value adjustments.
For further discussion, see Note 6. “Leases” in the Notes to Consolidated Financial Statements in this Form 10-K. (7) Represents capital expenditure commitments under lease agreements for Topgolf venues under construction that have been signed as of December 31, 2023.
(7) Represents capital expenditure commitments under lease agreements for Topgolf venues under construction that have been signed as of December 31, 2024.
Recent Accounting Pronouncements Information regarding recent accounting pronouncements is contained in Note 2. “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in this Form 10-K, which is incorporated herein by this reference.
“Financing Arrangements” in the Notes to Consolidated Financial Statements in this Form 10-K and is incorporated herein by this reference.
Asia During the year ended December 31, 2023, net revenues in Asia decreased $13.5 million (2.5%) compared to the year ended December 31, 2022. The decrease was primarily due to the unfavorable foreign currency exchange impacts in Japan combined with softer demand in the apparel market in various parts of Korea.
Golf Equipment During the year ended December 31, 2024, net revenues in our Golf Equipment operating segment decreased $5.5 million (0.4%), primarily due to declines in golf club and golf ball sales related to softer market conditions in Korea combined with unfavorable foreign currency impacts in Asia.
Income Taxes Our income tax benefit increased $44.2 million to $60.2 million during the year ended December 31, 2023 as compared to $16.0 million in 2022. As a percentage of pre-tax income, our effective tax rate for the year ended December 31, 2023 decreased to (173.0)% compared to (11.3)% in 2022.
As a percentage of pre-tax income, our effective tax rate for the year ended December 31, 2024 increased to 1.7% compared to (173.0)% in 2023. Our effective tax rate for the year ended December 31, 2024 was lower primarily due to the goodwill impairment charge recorded during the period, which is not deductible for tax purposes.
Results of Operations Years Ended December 31, 2023 and 2022 Net Revenues Net revenues by operating segment for the year ended December 31, 2023 as compared to the year ended December 31, 2022 were as follows (in millions, except percentages): Year Ended December 31, Increase/(Decrease) Non – GAAP Constant Currency Growth 2023 2022 Amount Percent Percent Net revenues: Topgolf $ 1,761.0 $ 1,549.0 $ 212.0 13.7 % 13.7% Golf Equipment 1,387.5 1,406.6 (19.1) (1.4) % 0.1% Active Lifestyle 1,136.3 1,040.1 96.2 9.2 % 9.7% Total net revenues $ 4,284.8 $ 3,995.7 $ 289.1 7.2 % 7.9% The $289.1 million (7.2%) increase in total net revenues was primarily related to the addition of new venues in our Topgolf operating segment and marketplace expansion in our Active Lifestyle operating segment, primarily related to our TravisMathew and Jack Wolfskin businesses.
Business – Overview” in this Form 10-K. 58 Results of Operations Years Ended December 31, 2024 and 2023 Net Revenues Net revenues for the year ended December 31, 2024 as compared to the year ended December 31, 2023 were as follows (in millions, except percentages): Year Ended December 31, Increase/(Decrease) 2024 2023 Amount Percent Net revenues: Products $ 2,447.8 $ 2,540.1 $ (92.3) (3.6) % Services 1,791.5 1,744.7 46.8 2.7 % Total net revenues $ 4,239.3 $ 4,284.8 $ (45.5) (1.1) % The $45.5 million (1.1%) decrease in total net revenues was due to a decline in product revenue primarily in our Active Lifestyle operating segment, offset by an increase in services revenue in our Topgolf operating segment.
During the year ended December 31, 2023, we used our cash and cash equivalents in addition to proceeds received from our financing and operating activities to fund our operations and invest in the expansion of the Topgolf business and other capital expenditures.
During the year ended December 31, 2024, we used our cash and cash equivalents in addition to proceeds received from lease financings to fund operations, purchase capital expenditures, repurchase stock, and complete the BigShots acquisition. Additionally, we made a $50.0 million partial repayment of the outstanding principal of our 2023 Term Loan B.
We record a reduction to net revenues using this rate at the time of the sale and monitor this rate against actual results and forecasted estimates. Adjustments to the rate are made as necessary in order to reflect the amount of consideration we expect to receive from our customers.
We calculate an estimated rate related to these programs which is based on a combination of historical and forecasted data. We record a reduction to net revenues using this rate at the time of the sale and monitor this rate against actual results and forecasted estimates.
Fluctuations in foreign currencies had an unfavorable impact on international net revenues of $25.7 million for the year ended December 31, 2023 , relative to the same period in the prior year, on a constant currency basis. Supply Chain During most of 2022, we experienced longer than normal lead times on inventory shipments due to global supply chain challenges.
Fluctuations in foreign currencies had an unfavorable impact on international net revenues of $18.2 million for the year ended December 31, 2024 , relative to the same period in the prior year, on a constant currency basis. Inflation Sustained inflationary pressure partially contributed to the increase in the cost of our products as well as operating costs.
If actual sales returns are significantly different than the recorded estimated amount, we may be exposed to material losses or gains. Assuming there had been a 10% increase over the recorded estimated sales returns reserve for the year ended December 31, 2023 , pre-tax income would have decreased by approximately $5.6 million, net of the cost recovery of inventory.
Assuming there had been a 10% increase over the recorded estimated sales returns reserve for the year ended December 31, 2024 , pre-tax income would have decreased by approximately $6.8 million, net of the cost recovery of inventory. 54 Sell-through promotions such as price reductions and price concessions are short-term sales programs that are generally offered throughout the product’s life cycle, which is approximately two years, and are generally offered at the end of the product’s life cycle.
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 excluding certain non-cash and non-recurring charges, as further detailed below. • Same venue sales, which is defined as sales for the comparable Topgolf venue base, which includes Company-operated venues with at least 24 full fiscal months of operations as of the year of comparison. 53 We have included information in this report to reconcile non-GAAP information for the periods presented to the most directly comparable GAAP information.
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. • Net income and diluted earnings per share excluding certain non-recurring charges, as further detailed below. • Same venue sales, which is defined as sales for the comparable Topgolf venue base, which includes Company-owned and operated venues with at least 24 full fiscal months of operations as of the year of comparison.
The decrease in net income was primarily due to a decrease in income from operations in addition to an increase in other expense, net, partially offset by a higher income tax benefit in the current period.
The decline in net income to a net loss was primarily due to the goodwill and intangible assets impairment charge recognized during the period, in addition to an increase in interest expense and the decrease in the income tax benefit compared to the prior year.
The increase was primarily due to the growth and continued expansion of our Topgolf and TravisMathew businesses. 55 Europe During the year ended December 31, 2023, net revenues in Europe increased $3.2 million (0.6%) compared to the year ended December 31, 2022.
During the year ended December 31, 2024, SG&A expenses increased by $9.1 million (0.9% ) as compared to the year ended December 31, 2023. The increase was primarily due to a $14.3 million increase in IT costs related to ongoing integration initiatives and $5.9 million in incremental lease expenses related to the expansion of our TravisMathew business.
The $2.8 million (1.5%) increase in cost of services for the year ended December 31, 2023 as compared to the year ended December 31, 2022 was primarily due to the opening of new Company-operated Topgolf venues. 56 Other Venue Expense Other venue expenses consist of employee costs that directly support venue operations, rent and occupancy costs, property taxes, depreciation associated with assets at the venues, supplies, credit card fees and marketing expenses.
Other Venue Expense Other venue expenses consist of employee costs that directly support venue operations, rent and occupancy costs, property taxes, depreciation associated with assets at the venues, supplies, credit card fees and marketing expenses. Other venue expenses include both fixed and variable components and therefore do not directly correlate with revenue.
Other venue expenses include both fixed and variable components and therefore do not directly correlate with revenue. During the year ended December 31, 2023, other venue expense increased $175.4 million (16.3%) as compared to the year ended December 31, 2022.
During the year ended December 31, 2024, other venue expense increased $51.2 million (4.1%) as compared to the year ended December 31, 2023.
Active Lifestyle During the year ended December 31, 2023, Active Lifestyle segment operating income increased $39.6 million (51.2%) as compared to the same period in 2022 primarily driven by an increase in revenues and gross margin improvements due to a higher mix of direct-to-consumer sales and lower freight costs.
During the year ended December 31, 2024, Active Lifestyle segment operating income decreased $34.6 million (29.6%) as compared to the same period in 2023 primarily driven by the decreases in revenue and operating expense deleverage. Financial Condition Our cash and cash equivalents increased $51.5 million to $445.0 million at December 31, 2024 from $393.5 million at December 31, 2023.
Golf Equipment During the year ended December 31, 2023, Golf Equipment segment operating income decreased $58.1 million (23.1%) as compared to the same period in 2022.
During the year ended December 31, 2024, cost of products decreased $42.2 million (2.9%) as compared to the year ended December 31, 2023 . The decreases were primarily due to lower sales in our Active Lifestyle and Golf Equipment operating segments.
These decreases were partially offset by increases related to market expansion and direct to consumer growth in the Jack Wolfskin business. Rest of World During the year ended December 31, 2023, net revenues in Rest of World increased $16.0 million (13.9%) compared to the year ended December 31, 2022.
Rest of World During the year ended December 31, 2024, net revenues in Rest of World increased $7.2 million (5.5%) compared to the year ended December 31, 2023, primarily in sales of Golf Equipment and Active Lifestyle products in the Australia and Canada markets, partially offset by unfavorable foreign currency rates.
As of December 31, 2023, our net accounts receivable increased $33.2 million to $200.5 million from $167.3 million as of December 31, 2022.
As of December 31, 2024, our net accounts receivable decreased $24.8 million to $175.7 million from $200.5 million as of December 31, 2023. The decrease is primarily due to stronger collections on increased sales in the fourth quarter of 2024 compared to the same period in 2023.
As a result of our intangible asset impairment assessment performed as of December 31, 2023 , we determined that the fair value of our intangible assets exceeded their relative carrying values, therefore, no intangible asset impairments were necessary during the current year.
As a result of our intangible asset impairment assessment performed as of December 31, 2024 , we determined that the fair value of our Topgolf tradename was impaired, and as a result, we recorded an impairment loss of $99.6 million to write down the Topgolf tradename to its new estimated fair value.
These increases were partially offset by a decrease in our Golf Equipment operating segment, which was primarily due to higher sales in 2022 related to a post-pandemic inventory fill-in at retail which did not recur in 2023 combined with the impact from unfavorable foreign currency exchange rates.
The decrease was primarily due to softer demand in the apparel market in Korea combined with unfavorable foreign currency exchange rates in both Japan and Korea . These decreases were partially offset by increases related to market expansion and direct to consumer growth in the Jack Wolfskin business in China.
Removed
Sell-through promotions such as price reductions and price concessions are short-term sales programs that are generally offered throughout the product’s life cycle, which is approximately two years, and are generally offered at the end of the product’s life cycle. We calculate an estimated rate related to these programs which is based on a combination of historical and forecasted data.
Added
Intent to Separate into Two Independent Companies In September 2024, we announced a strategic plan to pursue a separation of our business into two independent companies: Callaway, a leader in golf equipment with a highly complementary Active Lifestyle business; and Topgolf, a category leading, high-growth, pure-play venue-based golf entertainment business.
Removed
As a result of our goodwill impairment assessment performed as of December 31, 2023 , no goodwill impairments were necessary during 2023, and there was a significant cushion between the fair value of our goodwill and its related carrying value.
Added
We expect to effect the separation through a spin-off of the Topgolf business to our shareholders in a transaction that is intended to be tax-free to both us and our shareholders for U.S. federal income tax purposes.
Removed
Due to these challenges, we changed the timing and method of our inventory purchases in order to meet the heightened demand for our golf equipment and apparel products, as well as manage capacity at our suppliers.
Added
While we expect that a spin-off of Topgolf into a stand-alone public company is the most likely separation path, we will continue to evaluate other options for separation in order to maximize shareholder value.
Removed
After making these changes, inventory shipment timing and supply chain channels improved globally, leading to the receipt of inventory orders for our planned 2023 product launches earlier than anticipated, which resulted in increased inventory levels late in 2022 and early in 2023. Since December 31, 2022, our total inventory has decreased by $164.8 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−0 removed11 unchanged
Biggest changeThe sensitivity analysis model quantifies the estimated potential effect of unfavorable movements of 10% in foreign currencies to which we were exposed at December 31, 2023 through our foreign currency forward contracts. At December 31, 2023, the estimated maximum loss from our foreign currency forward contracts, calculated using the sensitivity analysis model described above, was $31.6 million.
Biggest changeThe sensitivity analysis model quantifies the estimated potential effect of unfavorable movements of 10% in foreign currencies to which we were exposed at December 31, 2024 through our foreign currency forward contracts. At December 31, 2024, the estimated maximum loss from our foreign currency forward contracts, calculated using the sensitivity analysis model described above, was $18.9 million.
A hypothetical 10% increase in our interest rates, which represents a change of approximately 50 basis points, would result in a difference in incremental interest expense of approximately $5.2 million for the 12-month period ending December 31, 2023. 63 Inflation The continued increase in inflation partially contributed to the increase in the cost of our products and services as well as our operating costs.
A hypothetical 10% increase in our interest rates, which represents a change of approximately 50 basis points, would result in a difference in incremental interest expense of approximately $4.3 million for the 12-month period ending December 31, 2024. 68 Inflation The continued increase in inflation partially contributed to the increase in the cost of our products and services as well as our operating costs.

Other CALY 10-K year-over-year comparisons