Callaway Golf Company Announces Record Net Sales And Earnings For The First Quarter Of 2018 And Significantly Increases Full Year Financial Guidance

CARLSBAD, Calif., April 26, 2018

In the first quarter of 2018, as compared to the same period in 2017, the Company's net sales increased $94 million (31%) to $403 million, and earnings per share increased $0.38 to $0.65.  These record financial results were driven by increased sales in all operating segments, all major product categories and all major regions. For the first quarter of 2018, compared to the first quarter of 2017, net sales increased as follows:

Woods	+ 19.7%	U.S.	+ 31.9%
Irons ARIVA.DE Börsen-Geflüster Kurse Topgolf Callaway Brands Corp 14,66 € -3,04%	+ 61.3%	Europe	+ 14.8%
Putters	+ 23.8%	Japan	+ 49.0%
Golf Balls	+ 13.9%	Rest of Asia	+ 35.0%
Gear & Other	+ 35.3%	Other	+   7.5%

As a result of this better than expected first quarter, the Company increased its full year 2018 sales guidance to $1,170 million - $1,185 million as compared to its prior guidance of $1,115 million - $1,135 million. The Company also increased its full year 2018 GAAP earnings per share guidance to $0.77 - $0.82 compared to prior guidance of $0.64 - $0.70.

"It has been a strong start to 2018," commented Chip Brewer, President and Chief Executive Officer of Callaway Golf Company. "Sales across our entire product line, including the Rogue line of woods and irons as well as the new Chrome Soft golf balls, are off to a strong start and we also benefitted from improved foreign exchange rates and market conditions. As a result, our EBITDA increased 95% during the first quarter.  Business around the globe remains strong with all major regions reporting significant sales growth and our new businesses are performing at or above plan.  While I am mindful that the first quarter generally represents the initial sell-in for the new golf season, I am pleased overall with how our business is performing and am cautiously optimistic for the balance of the year."   

GAAP and Non-GAAP Results

In addition to the Company's results prepared in accordance with GAAP, the Company provided information on a non-GAAP basis. The purpose of this non-GAAP presentation is to provide additional information to investors regarding the underlying performance of the Company's business without non-recurring items. This non-GAAP information presents the Company's financial results for the first quarter of 2017 excluding the non-recurring transaction and transition expenses related to the OGIO acquisition. The manner in which this non-GAAP information is derived is discussed in more detail toward the end of this release, and the Company has provided in the tables to this release a reconciliation of the non-GAAP information to the most directly comparable GAAP information. 

Summary of First Quarter 2018 Financial Results

The Company announced the following GAAP and non-GAAP financial results for the first quarter of 2018 (in millions, except EPS):

For the first quarter of 2018, the Company's net sales increased $94 million (31%) to $403 million, compared to $309 million for the same period in 2017. Net sales increased in all operating segments, in all regions and across all major product categories. The increase in net sales is attributable to the strength of the Company's 2018 product line and continued brand momentum, to an $11 million favorable impact resulting from changes in foreign currency rates, an increase in product launches during the first quarter of 2018 versus 2017, and improved market conditions. In addition, first quarter net sales of gear and accessories increased significantly as a result of the Company's acquisition of TravisMathew in the third quarter of 2017.    

For the first quarter of 2018, the Company's gross margin increased 190 basis points to 49.7% compared to 47.8% for the first quarter of 2017.  This increase reflects an overall increase in average selling prices, the addition of the TravisMathew business, which is accretive to gross margins, and the net favorable impact of changes in foreign currency rates.

Operating expenses increased $10 million to $114 million in the first quarter of 2018 compared to $104 million for the same period in 2017. This increase is primarily due to the addition in 2018 of operating expenses from the TravisMathew business as well as some variable expenses associated with higher core business net sales. 

First quarter 2018 earnings per share increased $0.38 (141%) to $0.65, which is a record first quarter for the Company, compared to $0.27 for the first quarter of 2017.  On a non-GAAP basis, 2017 first quarter earnings per share was $0.30, which excludes $0.03 per share related to the impact of the non-recurring OGIO transaction and transition expenses.  The increased earnings in 2018 reflect the increased sales in the core business, the addition of the TravisMathew business, improved gross margins and a lower tax rate due to the tax reform in 2017. 

Business Outlook for 2018

Basis for 2017 Non-GAAP Results.  In order to make the 2018 guidance more comparable to 2017, as discussed above, the Company has presented 2017 results on a non-GAAP basis by excluding from 2017 the non-recurring expenses related to the OGIO and TravisMathew acquisitions ($0.07 per share for the full year and $0.01 for the second quarter). Furthermore, the Company excluded from full year 2017 earnings per share certain non-cash, non-recurring tax adjustments ($0.04 per share).    

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