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Good day, and welcome to the Topgolf Callaway Brands' Third Quarter 2024 Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Ms. Katina Metzidakis. Please go ahead, ma'am.

Thank you, Operator, and good afternoon, everyone. Welcome to Topgolf Callaway Brands' third quarter earnings conference call. I'm Katina Metzidakis, the company's Vice President of Investor Relations and Corporate Communications. Joining me as speakers on today's call are Chip Brewer, our President and Chief Executive Officer; and Brian Lynch, our Chief Financial Officer and Chief Legal Officer. Earlier today, the company issued a press release announcing its third quarter financial results. We have also published an updated presentation. Our earnings presentation as well as the earnings press release are both available on the company's Investor Relations website under the Financial Results tab. Aside from revenue, the financial numbers reported and discussed on today's call are all non-GAAP measures. We identify these non-GAAP measures in the presentation and reconcile the measures to the corresponding GAAP measures in accordance with Regulation G. Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. We encourage you to review the safe harbor statements contained in the presentation and the press release for a more complete description. And with that, I would now like to turn the call over to Chip Brewer.

Thank you, Katina, and good afternoon, everyone. Thank you for joining our call today. I'm pleased to report Q3 results which came in ahead of our guidance in both our legacy and Topgolf businesses. Focusing first on revenue, Topgolf's same venue sales came in roughly consistent with our expectations. And in our legacy business, we benefited from product shipment timing moving into the quarter from Q4. Moving to EBITDA, the quarter's outperformance was driven by both venue operating efficiencies and cost management at Topgolf, as well as the shipment timing in our legacy business. We also had slightly favorable FX for the quarter relative to our last guide. But this subsequently shifted against us again in early Q4, and remains a headwind on a full-year year-over-year basis. In the Golf Equipment segment, we continue to lead, with 2024 trending to be the third consecutive year that Callaway has earned the number one U.S. market share position in golf clubs, as well as the ninth out of the last 10 years in this number one position. In the ball business, our investments in the category, along with this year's launch of our new Chrome Tour brand, have driven steadily improving performance and record market shares. In Active Lifestyle, TravisMathew continues to grow share of wallet through disciplined category expansion and distribution. On the other hand, in the Gold Equipment segment and at TravisMathew we saw slightly slower market conditions than expected in Q3. As a result, we are lowering our full-year revenue guidance by approximately $30 million to reflect the lower sell-through in that period, a reduction to the spread relatively evenly across the non-Topgolf portion of our business. However, we view this as short-term volatility rather than a new trend. As consumer activity has since picked back up, our brand positions remain strong, and we remain confident in the long-term outlook for our core markets and product categories. Shifting gears to segment performance, starting with Topgolf, starting with same venue sales, the business performed roughly consistent with expectations in Q3 at down 11%. 1-2 Bay was down approximately 9% and 3+ Bay was approximately down 19%. The 1-2 Bay performance was balanced fairly evenly between traffic and spend for the quarter. For the full-year, we're holding our previous guidance for same venue sales to be down very high single-digit to low double digits. Early October results were partially impacted by severe weather, but recovered nicely during the month, with the full month performing consistent with our implied Q4 same venue sales forecast, of down 10% to 15%. Additionally, November and December bookings for 3+ Bay events indicate the potential for some improvement relative to recent 3+ Bay trends. Given all this, if things break our way, we could end up towards the good end of our full-year guide. However, given the volatility we've seen and the potential for adverse weather this time of year, we're holding our previous guide. Looking forward on same venue sales, the team continues to work on key initiatives to return the business to same venue sales growth. This includes a new game that the team is very excited about, Sonic the Hedgehog, which were launched mid this month, and coincides with the new movie coming out in December. Exciting new reasons to visit and enhanced consumer experiences such as this are a key part of how we intend to drive long-term traffic growth. And thus, we are ramping up our ability to deliver these, both more frequently and more effectively. Beyond this, we're full speed ahead on leveraging our new consumer data platform to provide more targeted promotions and offers to last or new visitors. We're also launching new passes and bundles aimed at more frequent visitors. We're expanding our partnership programs, and we're further strengthening the team with experts in performance marketing and loyalty programs. We're also expanding our outbound sales efforts as well as our offerings for 3+ Bay business. On the EBITDA front, the team continues to deliver excellent results. Despite significant sales deleverage this year; we expect to end the year nearly 500 basis points higher in EBITDA margin than in 2019. This performance, along with other cost savings initiatives, is allowing us to increase our full-year EBITDA forecast for Topgolf, even with no change in the same venue sales forecast. We are proud of the team's performance in this mp area. And looking ahead, we see significant opportunity for margin expansion when same venue sales returns to growth. On the venue expansion front, we're on track to add seven new owned venues this year, six of which we built, and one acquired. The new venues continue to perform consistent with our pro forma. In the quarter, we opened in Greensborough, North Carolina, and Des Moines, Iowa. Both venues are performing well. By year's end, we will have 100 owned and operated venues. On the international front, our franchisees recently opened two new venues, one in Jakarta, and one in Wuhan, China, for a total of seven franchise international venues. Looking forward, we expect to built and open approximately five domestic venues in 2025. Shifting gears to our Golf Equipment business, the market remained strong overall, with U.S. rounds up nicely year-over-year, building on the gains in participation we have seen over the last several years. And despite a small decline in playable hours year-to-date due to slightly unfavorable weather. As previously mentioned, Datatech's U.S. sell-through for clubs was down a little more than expected in Q3 at minus 4%, but remains flat year-to-date, which is a reasonably good performance in today's macroeconomic climate. Sell-through of golf balls was flat in Q3, but is up year-to-date as has been its trend, and as you would expect given the rounds played data. Furthermore, the U.S. club market sell-through for the second-half of September and October bounced back nicely, making me think the small dip in Q3's sell-through was nothing more than normal volatility. Within these market conditions, the Calloway Club brand remained strong and continues to resonate with consumers, including, according to outside research, the sustained leadership position in technology and innovation. In the market, Calloway remains the overall number one market share club brand in the U.S. as measured by Datatech sell-through dollar market share, a position we have enjoyed for nine out of the last 10 years. During this year, we've had a particularly strong year in woods, with the Ai Smoke line propelling us to leadership positions in the driver, fairway wood and hybrid categories, as well as the number one selling model in irons. We've also had a terrific year in putters, with Odyssey dominating the tour counts, including 39 consecutive PGA Tour counts, extending from the opening event in Hawaii through the FedEx Cup Championship, and including all for Majors. And Odyssey also won every count this year on the LPGA, Champions, and DP World Tours; clean sweeps across those tours. Odyssey was in the bag of 14 winners on the PGA Tour, and 52 winners across primary global tours. Globally, our year-to-date putter category dollar market share is up 344 basis points in the U.S., 240 basis points in Europe, and 709 basis points in Japan. In Golf Ball, we continue to steadily deliver market share and brand growth, as well as operational improvements. Our Q3 U.S. market share, of 21.8%, is up 140 basis points year-over-year, and represents a new record for us. Additionally, we have now fully worked through our vendor's ball plant fire over a year ago, with that plant rebuilt and back online, as well as additional capacity developed. And we continue to drive yield and productivity improvements in our Chicopee, Mass facility, where all our premium or tour products are manufactured to industry-leading quality and consistency standards. On the brand side of golf ball, we also continue to make strides. For a Golf Datatech Summer Ball GPAU report, Callaway's ranking as preferred ball, as measured by the question, if you were playing in your club championship this weekend, which ball brand would you use, jumped from 16% to 21%. The highest level since tracking began, and the first time any brand other than Titleist exceeded 20%. We of course also had a few weak points this year, including foreign exchange, which is obviously outside of our control, volatile freight rates, which Brian will discuss later, and a slower-than-expected Korea market, where we initially lost some share, but we now see signs of both that market starting to stabilize and our relative performance improving, driven by a new team with renewed energy and resolve. Looking at product category opportunities, the Q3 launches of our Opus wedges and APEX AI irons are both going well, and we think these will shore up what has been relatively weak for us year-to-date performances in these categories. The iron category is a big category, one where we have been a historical leader, and one where the trade is telling us that we are well positioned to gain share over the next year based on the strength of our product line. While we're on product launches, building on our strong recent performance in the putter category, we'll be formally announcing later this week our entry into a new form of putting, most commonly described as

Thank you, Chip, and good afternoon, everyone. As Chip mentioned, we are pleased with our third quarter results in light of the macroeconomic backdrop. Our business units delivered solid execution, which combined with a shift in timing of shipments in our products businesses, as well as slightly favorable foreign currency, allowed us to exceed our guidance for Q3. As we look forward, our business segments are continuing to take action to manage their businesses in the current environment, holding or building their market position, and staying focused on managing costs and available liquidity. Some highlights for the quarter include Q3 revenue and adjusted EBITDA were ahead of expectations. We continued to manage through a softer top-line environment with a focus on disciplined cost management, operating efficiencies, and cash management. Cash provided by operating activities for the first nine months increased $111 million, or 49%, compared to the first nine months of 2023. Our inventory reduction initiatives continue to be successful, with our consolidated inventory decreasing $70 million since Q3 last year. Our REIT-adjusted net debt decreased approximately $220 million, or over 20% year-over-year, and our REIT-adjusted net debt leverage decreased to 1.8 times from 2.1 times. We further strengthened our available liquidity position to $863 million, representing a $129 million increase year-over-year. Now turning to the specifics, Q3 consolidated revenues of $1.013 billion decreased 3% year-over-year. This decrease was largely attributable to an 11% decrease in Active Lifestyle revenue, primarily due to an expected decrease in Jack Wolfskin revenue, which reflects the continued soft apparel wholesale market conditions in Europe. Q3 adjusted EBITDA of $120 million, declining 27% compared to the third quarter last year. I'll describe the reasons for this in my discussion of segment performance. Now moving to segment performance, at Topgolf, Q3 revenue grew 1% to $453 million, driven by the new venues open since Q3 last year. Our new venues are performing well and are achieving previously communicated financial targets and returns. This increase was partially offset by an 11% decrease in same venue sales. Topgolf operating income was $28 million, down $11 million compared to the prior year, primarily due to increased depreciation related to the new venues, combined with operating expense deleverage due to the decrease in same venue sales. Topgolf-adjusted EBITDA decreased 7% year-over-year to $84 million. EBITDA margins remain strong due to continued good execution amid the decline in same venue sales. The golf equipment segment had a strong quarter based primarily on this year's new club and ball launches, offset by lower sales of older products, as we have largely cleaned up our inventory of older product over the last year. Revenue was up slightly at $294 million. This better than expected result was primarily due to a shift in shipment timing. Golf equipment operating income of $27 million decreased $8 million, primarily due to a year-over-year increase in freight costs. In our Active Lifestyle segment, Q3 revenue decreased 11% year-over-year. This decrease is mainly due to lower sales of Jack Wolfskin due to continued softness in the European wholesale apparel market. Jack Wolfskin's business in China, however, continues to perform well, showing growth during this period. Operating income decreased to $21 million compared to $40 million in the prior year, primarily due to the lower revenue volume along with higher freight costs. Moving to balance sheet and liquidity, our available liquidity, which is comprised of cash on hand and incremental borrowing capacity under our credit facilities, continued to strengthen during the quarter. As of September 30, our available liquidity increased $129 million to $863 million compared to the prior year due to better cash flow generation as the company continues to manage working capital. At quarter-end, we had total net debt of $2.3 billion, which per our usual practice excludes convertible debt of approximately $258 million, compared to $2.1 billion for the same time last year. This increase is attributable to increased venue financing debt related to new venues, partially offset by a reduction in term loan debt, including our second-quarter discretionary $50 million term loan be it principal paydown. We think it is helpful to evaluate our net leverage position by excluding the REIT debt associated with our Topgolf venue financing, which is akin to capitalized rent with no additional principal or bullet repayment. In Q3, our REIT-adjusted net debt was $841 million, over $220 million lower versus last year. Our net debt leverage, which excludes convertible debt, was 4.1 times as of September 30, 2024, compared to 3.8 times in the prior year. This increase was primarily due to increased venue financing debt. Importantly, our REIT-adjusted net debt leverage ratio, which burden EBITDA with the REIT interest expense payments, which are akin to rent, and which we believe is the most appropriate way to look at our leverage, declined to 1.8 times from 2.1 times in the prior year. We remain comfortable with these leverage levels. With regard to new venues, we are on track to open seven new venues this year, including one we acquired as part of the BigShots transaction, but which is now being converted to a Topgolf. We expect to open approximately five new venues in 2025. Our inventory balance decreased $70 million, or 10%, to approximately $667 million at the end of Q3 2024. We feel good about the current level and quality of our inventory. Year-end inventory levels will depend on whether we receive some of the 2025 launch products at the end of December or beginning of January. Gross capital expenditures for the first nine months of 2024 were $227 million, and we received reimbursement of $88 million from our financing partners for net capital expenditures of approximately $139 million. Shifting gears, we are lowering our outlook for free cash flow commensurate with our change in our EBITDA forecast. We now expect free cash flow to be approximately $115 million compared to $130 million in our prior guidance. As mentioned earlier, the timing of the receipt and payment of that inventory could affect the forecasted cash flow. From a net CapEx perspective, we continue to expect approximately $190 million for the full-year, with $60 million coming from the non-Topgolf business and $130 million coming from Topgolf. Now turning to our full-year 2024 outlook, we are adjusting our full-year 2024 revenues guidance to approximately $4.2 billion, which is the low-end of our previous guidance. This reflects a $30 million or less than 1% reduction from the midpoint of our prior guidance due to a lower than expected consumer activity in Q3, which affects sell-through in that quarter and, in turn, reorder business in Q4. Consumer activity has since improved, and thus it is our opinion that what we saw in Q3 appears to be just short-term volatility rather than a trend. As a result of the lower revenue guide, we are also lowering our EBITDA guidance range by $15 million from the prior guidance midpoint to a range of $560 million to $570 million, with $570 million being the low-end of our prior guidance. At Topgolf, we are reiterating our annual guide of approximately $1.79 billion in revenue, and increasing our adjusted EBITDA guide by $5 million to $315 million largely due to continued strength in venue margin and cost management initiatives. Moving to Q4, we are lowering our implied guidance to reflect the shift in timing of shipments between Q3 and Q4, as well as slower than expected consumer activity in Q3. We are now forecasting Q4 consolidated revenue of approximately $885 million, and adjusted EBITDA in the range of $74 million to $84 million, compared to $897 million in revenue and $70 million EBITDA, respectively, in the prior year. The increase in adjusted EBITDA is anticipated to be due to the expected improvement in gross margins in the Golf Equipment business. In Q4 Topgolf, we expect to be down mid-single digits in revenue compared to last year due to an expected decrease in same venue sales as Chip discussed earlier. Topgolf adjusted EBITDA is expected to be down approximately $12 million year-over-year due to the anticipated decrease in same venue sales partially offset by continued operational efficiencies in the venue. In conclusion, we were pleased we were able to exceed our Q3 targets. Though the broader consumer discretionary backdrop was a little choppy in Q3, participation and interest in the game of golf remains strong, as do our leadership positions in golf equipment, golf entertainment, and active lifestyle. We're proud of our team's ability to continue to find operational efficiencies and show disciplined cost management, particularly at Topgolf where we raised our 2024 EBITDA outlook despite holding the revenue guide. We remain on strong financial footing with a solid balance sheet, including lower year-over-year REIT-adjusted net debt leverage, healthy inventory levels, and a strong liquidity position. And perhaps most importantly, we continue to expect to generate positive free cash flow this year at both the total company and Topgolf. With that said, I would now like to turn the call back over to the operator for Q&A.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question will come from Matthew Boss with J.P. Morgan. Please go ahead.

Great, thanks. So, Chip, maybe just to kickoff at Topgolf, could you help break down recent traffic versus average spend that you've seen at the concept or any notable recent trends to call out in the consumer versus event segments, and maybe as we look to 2025, how best to rank priorities or initiatives that you have in place to drive an improvement in same venue sales?

Sure. Thanks, Matt. So, recent trends at Topgolf were relatively balanced in the impact of spend per visit and traffic. So, that 9% down on the consumer business was roughly split evenly between those two factors. We've obviously seen more volatility in the events business at Topgolf than we have on the consumer side, and that continued through the quarter. Although I mentioned during that call that we have some trends that look a little more favorable on the 3+ Bay events as we look forward. And as we look forward at Topgolf, in terms of building that back to positive same venue sales, there are multiple initiatives that are underway. Obviously, the digital efforts that they're doing, the select promotion activity, the implementation of the consumer data platform, all of those are important measures and they're impactful. We're strengthening the leadership team there. The thing that I think will be the most impactful over the long-term is continuing to build on the quality of the experience and the reasons to visit. So, you see things like the new game that we launched this year, earlier in the year, the Block Party game. You saw then the Sure Thing golf club in the middle of the year. And now we just announced this cool new game in partnership with Sega, called Sonic the Hedgehog, and that is getting launched right ahead of their introduction of the movie. And so, I played the game, it's fantastic. It creates new energy, excitement, things to talk about, reasons to new visitors to visit, and also people come back again. And so, you're seeing us improve and increase our frequency of these activities. You're going to see that on a macro level, you're going to see it on a local level. And so, both with efficiency and frequency, those reasons to visit, I think, are a critical element of how we're going to drive positive same venue sales over time.

And then maybe just to follow up on Golf Equipment, could you elaborate on the recent improvement that you cites in sell-through trends in the fourth quarter relative to some of the softness, it sounded like, in the third quarter? And just how you see overall health of channel inventories for Golf Equipment?

Yes, the Golf Equipment business is very healthy, Matt, long story short. You can see it in all of the macro trends out there, right. Rounds played are up, and they're up on record levels. Participation continues to increase. But you're always going to have a little bit of volatility. And you saw one stat there being the club business in the U.S., it was down about 4% in Q3. It had been flat or up slightly. It is flat for the full-year. And that is nothing more than volatility. We see, in September, that the market already returned to some positive sell-through. It is the same in October. It has been for some period of time. But our projection had been, going into the quarter that it would have stayed where it was. It went down a small dip. It subsequently returned, and you really can see in many different ways the health of the overall market conditions and our strength of brand position in it.

Great color, thanks. Best of luck.

Thanks, Matt.

The next question will come from Michael Swartz with Truist Securities. Please go ahead.

Hey, good afternoon. Maybe just to start with on Topgolf, I think the quarter finished [technical difficulty] -- and the sales down about 11%, I think [technical difficulty] the trends you cited in July, on the last conference call. So, maybe give us a sense of how the quarter played out, I know there's probably some noise and disruption at the end of the quarter from storms, but is that -- in other words, were trends running at the down low double digits the entire quarter?

No, there was volatility through the quarter, Michael. And as we've seen, August was a little better, September was a little bit worse, but nothing to speak of from that regard, that that's -- we've seen those small periods of volatility, the consumer portion stronger than the 3+ Bay. The 3+ Bay down more than it had been in that particular quarter. Within that 3+ Bay we saw a little bit of decline in larger events as opposed to the more smaller or mid size events. But again, that itself has then moderated. So, we no longer really see that. And we've also taken some steps to address that. And the hurricane impact that you were talking about, there was a little bit of that in October. More in October than there was in September, although there was a touch in September. But candidly, there's always going to be some of that in this time of year. So, we really didn't want to belabor that. As you look forward, we've got a tough comp in December. We've called that out in the past. Last year, the last two weeks of December were record warm and sunny weather and the business benefited from that. We are not projecting record or warm sunny weather. We root for it, but assuming that weather normalizes and usually it does we'll end up with a little bit tougher comp, but as you correctly identified, the same venues trends were consistent with what we expected, and as I've already called out, we have potential for some upside on the three plus bay events, but too soon to be conclusive.

Okay, that's super helpful. Thank you, Chip. And maybe just a follow-up question. I know that timing of product launches can shift between quarters. That's not out of the ordinary, but any sense of how much that pulled into the third quarter and subsequently pulled out of the fourth quarter?

Do you want to take that one, Brian?

Sure. The majority of the change, the amount we beat the guide by, the substantial majority of that was shipment timing from Q4 to Q3.

The next question will come from Joe Altobello with Raymond James. Please go ahead.

Thanks. Hey guys, good afternoon. The first question on the guide for same venue sales for 4Q down 10 to 15, it's rather wide, particularly since we're basically halfway through the quarter here. Are you guys building in some cushion for weather, or is that just a lack of visibility into underlying trends at this point?

No, it is wide because of the potential for weather. So, as you get this late in the year, obviously the potential for weather in Q4 and the impact that would have, because December is the big month of the year, particularly with the event side of the business, and the weather would be impactful in that.

Okay, got it. And just to follow up on that, it sounds like a spin is still the most likely outcome here for Topgolf. Are you guys still targeting July 1 as a spin date? And maybe what level of interest have you guys received for that asset?

We're definitely fully engaged on the process of separation of Topgolf, and we believe that'll maximize shareholder value. We're evaluating both spin and sale. And we still would expect that if it's a spin as the outcome that it would happen as -- the earliest it would happen is mid-next year, but that would be our target date.

Okay, great. Thank you.

The next question will come from Eric Wold with B. Riley Securities. Please go ahead.

Thanks. Good afternoon. Appreciate you taking my questions. A couple questions, I guess one, you noted on Topgolf, you noted that the recent trends were fairly balanced between traffic and spend per visit. But any shifts from the last quarter call to now in terms of midweek versus weekend business? And then, on the three-plus-day business, you mentioned obviously that some improvements or some potential improvements heading into the holidays for what you're seeing for November, December. Any shifts in the type of events that are booking that surprise year that would have been different from prior trends or expectations?

Sure. We really haven't, Eric, seen any meaningful shift. Earlier in the year, we saw traffic get down a little bit more, and the mix of impact was a little more traffic-weighted than spend. It's a little more balanced now, and no change in our outlook for type of events as we look forward.

And then follow-up on Topgolf, I know now you're saying five openings for next year.

Yes, approximately five.

I'm assuming we get a little more color on Topgolf kind of planned closer to the spin. But ahead of that, have there been any changes to the pipeline at this point in terms of the size of the venue you would have previously expected versus what you now have in the pipeline, a city that may have made sense before and which may not, or is all that pretty much unchanged?

We've made adjustments to the number of venues that were opening from time-to-time as reflecting business conditions and the desire to maximize the probability and likelihood of being positive cash flow based on the business conditions, but no change in terms of types of venues, et cetera. Our pipeline remains excellent, our returns remain excellent. And so, only changes as we've talked and you've listened to us in terms of the number of venues we've -- and we're just responding to the market conditions and projections.

Perfect. Thank you.

The next question will come from Megan Clark with Morgan Stanley. Please go ahead.

Hi, good afternoon. Thanks for taking our question. I wanted to ask again about Topgolf and just maybe get a little bit of your perspective on the same venue sales performance sitting here a couple of months after things seemed to deteriorate. I know it was in line with your expectations, but if I look at your slides, it does look like the stacks on a multi-year basis did deteriorate pretty significantly here again in 3Q. And if I recall when we were sitting here in July or August when you reported 2Q, you spoke to a drop-off and it was a little bit, I guess, unclear at the time as to what drove that. So, as you've had more time to assess the trends you're seeing, are you able to better parse what is the macro in a tough consumer environment versus what maybe is a little bit more execution or process related? I guess, just said differently, like I understand the macro isn't helpful, but it does seem like down 11% comps are a bit worse than what we're seeing from some other public entertainment companies. So, just trying to understand if there's something more idiosyncratic that you can identify?

Sure, Megan. So, if you look at our business, the volatility and the significant down is all in the 3+ Bay event, in my opinion. So, if you look at the two-year stacks there, down 36%, that's big. And you also see some volatility there where it was down 9% in Q2 and down 19% in Q3. But you look back and you see up 23% on the same page. So, it's a relatively volatile category and it's going through two different things in our opinion, one being a reversion from a surge, which was late post-COVID, and the second is just an economic slowdown. And then the -- in the consumer side of it, I guess I look at the same data and I see it a little differently. I see down 8% in Q2, down 9% in Q3, down 5% in Q1. I don't see a major change there. I see a steadily weaker consumer environment where the consumer discretionary is increasingly under pressure. And clearly, Topgolf is being impacted by that. But I don't see what you're talking about regarding a significant change there. I see a gradual, if you would, change that obviously we're committed to working on.

Okay. That's helpful. And yes, I guess I was just looking at a total.

Yes. Total is being run by the -- it's just being driven so heavily by the 3+ Bay.

Okay.

But if you look at the consumer, the same venue sales are an area where we're clearly focused and we think we've got opportunity for improvement.

Okay. And maybe I guess just to follow up, if I do look at the total company, so 24 versus 19, flat in 2Q, down 4 in 3Q, is there any indication, and maybe this is what you talked about with the corporate demand for the holidays, but is there any indication that underlying demand is stabilizing? And the reason I ask is if I carry that 3Q trend forward, I could get to a scenario that comps could remain negative, at least through the first part of next year. So, is that fair? And I think you said, Chip, you're working to get comps back to positive over the long term, but does that mean perhaps comps may not return to positive in 2025?

Yes. I think it's too soon to provide guidance as it relates to 2025, Megan, so we'll skip that at this point. We'll obviously address that next quarter. And we believe we're going to be able to drive positive same venue sales over the long run, but it's also premature for me to tell you when it will make that transition at this stage. The 3+ Bay event is showing some positive indications based on our bookings, but even then, I'm not guiding specifically to that at this point. So, I'm not going to be able to answer your question directly on forecasts for next year on Topgolf same venue sales.

Okay. Fair enough. Thank you, Chip.

Thank you.

The next question will come from Casey Alexander with Compass Point Research & Trading. Please go ahead.

Yes. Hi. Good afternoon. I'm wondering, Chip, can you possibly put a finer point on some of the Topgolf promotional efforts that you engaged in starting in the second and third quarter? Is that having more of an impact on 1 and 2 Bay because that seemed more retail-oriented than corporate-oriented? And is there something else that you could do or put in place that could help drive a better and faster recovery in the corporate or 3+ Bay business?

Okay. So, let me take those each individually, Casey. Our promotions have almost entirely focused on the consumer side. It doesn't mean we're not doing some activity on the corporate side, but they are what you hear us talk about, for instance, the Free 30 promotion. That is a consumer-oriented promotion. Consumer-oriented promotions have now evolved. So, if you look at Free 30, it was originally offered online, digitally, but fairly broadly. We now, as we've implemented the consumer data platform and we're able to segment our data and consumers more accurately, we're targeting that promotion specifically at lapsed and new visitors. And so, our returns on our digital spend are going to go up significantly, and we're already seeing that. We're able to segment that data much more cleanly now and more effectively, and we're mixing it in a much more efficient manner. And that's part of the skill set that we're developing now and we'll think will certainly increase our effectiveness going forward. On the corporate side, we're obviously not sitting back and doing nothing. We're generating improved outbound sales efforts there, bringing in a lot of sales management capability and skills. We're also offering some different promotions, if you would, specifically aimed at corporate events. But it is a little less subject to being promotional-oriented, right? If you're a corporation and you've got a ban on any corporate events, it doesn't matter if I discount it or not, there's a ban. And so, we think that the promotional activity that we're able to implement now, which is fairly selective using the consumer data platform, will be more effective.

Okay, great. Thank you for that answer. Secondly, when I look at slide number 11 that is projecting $70 million of adjusted free cash flow for Topgolf in 2024, when I think about the fact that you've downscaled to five venue openings in 2025, how should I think of that impacting that 2024 outlook for adjusted free cash flow for Topgolf?

2024's outlook for Topgolf?

Yes, slide 11, the 2024 Topgolf outlook projects $70 million of adjusted free cash flow. So, I'm wondering, you slow the venues down, does that drive a better number in 2025.

Oh, in 2025. Brian, do you want to --

Yes, we're not really providing guidance on 2025 at this point, Casey. But other than the one thing I would point out, if you're starting a model 20025 is that we do anticipate a couple of potential headwinds in 2025. One, we're going to reset incentive compensation accruals back to target levels, and current FX rates would be a headwind. But we will provide more color at the next earnings call on both that and the free cash flow at Topgolf.

And you're right --

[Multiple speakers] -- Yes, go ahead.

Building less venues will generate more -- will positively impact cash flow in '25.

Okay. Brian, I'm pretty sure every analyst already has a 2025 model working right now.

Thank you.

Appreciate you taking my question.

Sure.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to our CEO, Mr. Chip Brewer for any closing remarks. Please go ahead.

All right. I want to thank everybody for their time on the call today. We appreciate it, and we look forward to updating you again in February. Have a great holiday season.