Callaway Golf Company (CALY) Q2 2026 Earnings Report, Transcript and Summary

Good day, and welcome to the Callaway Golf Company Second Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Patrick Burke, Senior Vice President of Investor Relations and Treasurer. Please go ahead.

Good afternoon, and welcome to Callaway Golf Company's Second Quarter Earnings Conference Call. I'm Patrick Burke, Senior Vice President of Investor Relations and Treasury. Joining me on today's call are Chip Brewer, our President and Chief Executive Officer; and Brian Lynch, our Chief Financial Officer and Chief Legal Officer. Earlier today, the company issued a press release announcing its second quarter 2026 financial results. Our earnings presentation as well as the earnings press release are both available on our Investor Relations website under the Financial Results tab. Aside from revenue, the financial numbers reported and discussed on today's call are non-GAAP measures. We identify these non-GAAP measures in the presentation and reconcile 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. Please review the safe harbor statements contained in the presentation and the press release for a more complete description. With that, I would like to turn the call over to Chip.

Thank you, Patrick. Good afternoon, everyone, and thank you for joining our call today. I'm pleased to report that our company delivered a strong second quarter and a very solid first half. These results show that we are building momentum as a focused pure-play golf company, and our performance reflects healthy market conditions, strong product acceptance, meaningful gross margin improvement and disciplined execution across the business. I want to thank our teams for their continued focus and contributions. These teams are executing well in a dynamic environment and managing the business with the right balance of confidence, agility and discipline. I'd also like to remind everyone of the significant transformation our company has accomplished over the last year. In late May of last year, we completed the sale of Jack Wolfskin. And then in January of this year, we completed the sale of a 60% interest in Topgolf. Since the beginning of this year, we announced a new $200 million share repurchase program and then repurchased approximately $42 million worth of our stock in both Q1 and Q2. We also paid off in full our $1.2 billion of term loan debt and our $258 million of convertible notes. These moves returned us to a cash-generating pure-play golf company with a terrific balance sheet and a clear capital allocation strategy aimed at steadily returning capital to shareholders. We are now only six months into this renewed journey as a pure play, but we're showing clear progress strengthening the business and delivering against our stated financial and capital allocation goals. And based on the strengths of our business and our history of performance in this space, this is a journey that we are confident in going forward. Turning to our results. Q2 revenue was $612 million, up 2% year-over-year, and adjusted EBITDA was $125 million, up 36% versus the prior year. Both of these results were ahead of expectations as we exceeded the midpoint of our Q2 guidance by approximately $15 million in revenue and $22 million in adjusted EBITDA. The revenue upside was driven by healthy market conditions as well as continued strength in the equipment segment, especially in golf balls. The adjusted EBITDA upside reflected the flow-through from the revenue beat as well as continued progress on our gross margin initiatives. For the first half, revenue increased 6% and adjusted EBITDA increased 33%, highlighting the operating leverage and execution benefits of our more focused golf platform. We believe this performance was better than the broader market across both the Callaway and Travis Mathew brands. Gross margin expanded 460 basis points in Q2 and 360 basis points in the first half. This reflects continued progress against our margin initiatives and the benefits of portfolio actions designed to improve the long-term quality of our revenue and earnings. This gross margin improvement is a step in the right direction and a testament to the cost management and margin improvement projects that we have been focused on over the last year and that will continue to be a focus for us going forward. Turning to market conditions. Healthy golf participation and sell-through data continues to be supported by a committed and enthusiastic player base. Consumer interest in the game and overall participation trends remain positive, just as they have been for several years now. In the U.S., rounds played through Q2 are up approximately 4% year-to-date. Similarly, we estimate that golf equipment sell-through at key accounts was up low to mid-single digits for both the quarter and year-to-date. In the U.K. and Europe, we estimate that our trade partner sell-through is up low to mid-single digits year-to-date, but that the rounds played are down simply due to unfavorable weather year-over-year. In Japan, the market was up low to mid-single digits in Q2 and is now up slightly for the full year, while market conditions in Korea remained down approximately 10%. Using this data as a backdrop, for the year-to-date, we appear to have grown our golf equipment revenue faster than the market in all major regions. And as you step back and think more deeply about this data, in the face of dynamic global macroeconomic and political conditions, low consumer confidence readings, increased gas prices, increased golf equipment pricing and the World Cup, one can't help but be impressed by the resilience of the golf consumer. Now turning to look at our business by segment. In Golf Equipment, the portfolio continues to show strength across several important categories. In golf ball, the Chrome Tour family and Super Soft franchises continue to resonate with consumers, and our share progress continues to validate the investments we've made in product performance, manufacturing capabilities and green grass distribution. Our Q2 golf ball revenue was up 15% with our first half up 8%, even with intentionally reducing volume via the elimination of low-margin SKUs to support improved efficiency. Our June 2026 U.S. market share established another record high for us, up 250 basis points year-over-year to just over 23% overall and with Oncore share just over 24%. In clubs, the Quantum family of woods and irons has continued to receive positive market feedback. The Quantum driver with Tri force technology demonstrates the strength of our product engine and its performance has been encouraging. In the U.S., both our year-to-date driver and total wood share is approximately 25% of 110 basis points and 120 basis points, respectively. Within the woods category, high-lofted fairways have been a particularly strong area for the industry overall and for Callaway. Building on this and leveraging our tradition of innovation, last Friday, we announced the addition of a new approach to high-lofted fairways we call mini spinners, available on 7, 9 and 11 wood. These clubs are easier to hit and for many consumers, a more effective approach to high-lofted fairways. They will be shipping to retail later this month, and we anticipate a positive reaction. In the putter segment, MyGolfspa recently named the Odyssey AI Dual Square to Square #7, the best overall Zero Torque putter of 2026 as well as the best Zero Torque putter for long puts. Recognition like this is another proof point of our ability to develop and bring differentiated technology to market. Turning to the Apparel and Gear segment. The Callaway brand performed roughly in line with expectations, while TravisMathew maintained its strong start to the year and performed slightly ahead of expectations. At TravisMathew, consumer response to the women's offering remains positive, and the brand continues to gain ground in the important men's golf category, supported by clearer product pillars, more focused marketing and exciting new products. We are in the early innings of this men's product merchandising strategy shift. But based on the consumer reaction thus far, I'm optimistic regarding its potential. Accordingly, in the first half of this year, the TravisMathew business grew in its direct-to-consumer business and also had strong performance with key wholesale partners. One additional area that we are at liberty to discuss now is the planned closure of 4 TravisMathew stores that were not hitting our financial targets. These stores will close in Q4 of this year, and the financial charges for these closures was included in our Q2 financials. This will leave us with a stronger and more profitable retail fleet of 61 stores going into 2027. Similar to our previously mentioned SKU rationalization across both the Callaway and TravisMathew brands, this is another strong example of us making disciplined long-term decisions as we refocus on our core business. Turning to tariffs. These continue to be a dynamic area, but have been a tailwind for us relative to our expectations going into the year. We have also recently begun receiving refunds for the IEPA tariffs with more expected in the future. Brian will add more color on actual and forecast tariffs in his section. It is worth calling out, though, to protect inter-year comparability and to provide what we believe is a cleaner look at our performance, we made the decision to back out the AEPA refunds from our non-GAAP numbers and forecasts. Now moving to our forward guidance. Given the strength of our first half performance and the continued resilience we are seeing in the golf market, we are increasing our full year revenue forecast by $15 million at the midpoint. This increase reflects the $15 million Q2 outperformance and a $5 million organic increase in our second half outlook, partially offset by a $5 million negative adjustment due to updated FX rates. On the bottom line, we are increasing the midpoint of our full year EBITDA guidance by $31 million. This represents a Q2 beat, improved second half tariff estimates based on the new 301 tariff rates, the flow-through from the increase in second half organic revenue and modestly better gross margin expectations. As you look at our financial results and expectations, I think it's clear that we are anticipating a good year and that the core business is strengthening. The first half speaks for itself with results that we believe outperform the market and show that our profitability initiatives are working. For the second half, it's worth reminding everyone that, as mentioned on our previous two calls, we are expecting our revenues and profit in the second half of the year to be impacted by strategic initiatives designed to enhance long-term profitability. This includes extending product life cycles in our iron business by pushing a significant launch out of this year into next, rationalizing lower-margin portions of our business and increasing our investment in fitting. While these actions will negatively impact the back half of this year, they represent a deliberate, disciplined approach to driving sustainable margin expansion, revenue growth and stronger free cash flow over time. In closing, we are encouraged by the fact that the game of golf remains healthy. Our brands and products are resonating well with both consumers and retail partners, thus allowing us to grow faster than the market for the first 6 months of the year and our profitability initiatives are bearing fruit. And perhaps more importantly, as we are now 6 months into our return to being a focused pure-play golf company, we are both enjoying and benefiting from the added focus that our new structure provides. This gives us increased confidence that we will be able to further strengthen our business going forward, and we're energized by these prospects. With that, I'll turn the call over to Brian to review our financial results in more detail.

Thank you, Chip, and good afternoon, everyone. We are pleased with our second quarter results and encouraged by the progress we have made on our transformation back to a pure-play golf company. In the first 6 months of this year, we have significantly improved the profitability of our business, fortified our capital structure and started returning capital to shareholders. While there is more work to be done, we are energized by the progress to date and excited by what lies ahead. Now let's turn to our financial results in more detail. Please note that on today's call, I will be discussing our non-GAAP financial results from continuing operations unless otherwise noted. We have provided in our earnings release today a reconciliation of these non-GAAP results to the GAAP results, and we provided additional information about the discontinued operations. With that said, second quarter consolidated net sales increased 2% year-over-year to $612 million. This performance reflected a 4% increase in Golf Equipment net sales, driven by strength across both clubs and balls. Golf Goods net sales decreased 4%, primarily due to the timing of shipments between Q1 and Q2 and FX headwinds in Asia, while TravisMathew grew slightly in the quarter. Q2 gross margin increased 460 basis points to 48.5%, driven primarily by continued progress on our gross margin initiatives, including select price increases, cost reductions and rationalizing select lower-margin business. with tariffs providing a slight positive impact to the year-over-year increase. Excluding the tariff benefit, Q2 gross margin increased 440 basis points year-over-year. The improvement was broad-based with gross margin expansion in both the Golf Equipment and Soft Goods segments. Q2 operating expenses increased approximately $1 million or less than 1% as cost of living increases and inflationary pressures in the Golf Equipment and Soft Goods segments were largely offset by a $4 million or 13% decrease in corporate overhead expenses, primarily due to the company's strategic transformation and related cost savings initiatives. Adjusted EBITDA of $125 million increased 36% year-over-year. This improvement was driven primarily by higher net sales, improved gross margins and corporate cost savings with tariffs providing a slight incremental benefit in the quarter. Moving to liquidity. We ended the quarter in a net cash position. As of June 30, 2026, we had $74 million of outstanding debt, including $23 million of finance leases and $278 million of cash and cash equivalents. Total available liquidity, which consists of cash on hand and availability under our credit facilities, was $775 million at the end of the second quarter of 2026 compared to $1.16 billion at the same time last year, a decrease of $387 million, which is primarily due to cash used for our debt paydown of $1.4 billion in the first half of 2026. During the quarter, our $258 million of convertible notes matured on May 1, and we settled the notes in cash. Additionally, on May 29, we paid in full the remaining $163 million outstanding under our Term Loan B facility. We also continued to return cash to shareholders and have now repurchased 5.9 million shares through June for a total cost of approximately $84 million. Broken down by quarter, we repurchased approximately $42 million of stock in the first quarter and approximately $42 million in the second quarter. As of June 30, 2026, we had approximately $120 million of repurchase authority remaining under our current program. Looking ahead, Callaway Golf's capital allocation priorities remain unchanged as we focus on: one, reinvesting in our business; two, maintaining a healthy balance sheet; and three, returning capital to shareholders through the $200 million stock repurchase program authorized earlier this year. As we continue to generate free cash flow in excess of our business needs, we will work with our Board to balance cash needed to reinvest in the business and returning capital to shareholders. We still expect to end the year in a net cash leverage position. With regard to future share repurchases, no decisions on the magnitude or timing of repurchases have been made at this point. However, based on our expected continued performance and subject to market conditions and buying opportunities from time to time, we plan to continue to steadily return capital to shareholders at some level while maintaining a strong balance sheet. And to be clear, the purpose of the share repurchases is not only to reduce dilution from equity awards, but also to reduce share count meaningfully over time. Next, I want to give a quick update on tariffs following the expiration on July 24 of the temporary 10% global minimum tariffs under Section 122 of the Trade Act of 1974 and the implementation of new Section 301 forced labor tariffs, which took effect the following day and range between 10% and 12.5%, depending on the country. The tariff situation remains dynamic, and there is some speculation additional tariffs under Section 301 or otherwise will be forthcoming. Since we don't actually know if such additional tariffs will be implemented or when or in what amount, our guidance today incorporates only the forced labor tariffs under Section 301 that began on July 25. We had previously assumed tariffs would increase to 20% once the temporary tariffs expired, so the recently announced Section 301 tariffs are upside versus our previous guidance. We now expect that the full year gross tariff expense for 2026 will be approximately $43 million, a net improvement of approximately $7 million compared to our prior guidance. The full year gross tariff expense in 2025 was $34 million. We continue to believe that we have the opportunity to obtain refunds for tariffs paid up to just under $50 million in the aggregate over the course of the refund program. We have applied for both Phase 1 and Phase 2 refunds, representing approximately $11 million and $32 million, respectively, and have received all of the Phase 1 refunds to date and almost $7 million of the Phase 2 refunds. We expect to receive the balance of the Phase 2 refunds in the second half of this year. There also should be another almost $7 million to apply for in Phase 3, which brings our refund potential to approximately $50 million, consistent with what we discussed last quarter. One final point for the sake of clarity. On a GAAP basis, we recognized $10.8 million in Q2 for the tariff refunds. We excluded those refunds from our non-GAAP results to give a clearer picture of period-over-period results. The almost $7 million of Phase 2 refunds we received were recognized in Q3. We will continue to account for additional refunds as we receive them, and we will continue to exclude the refunds from our non-GAAP results. The cost pressures we discussed last quarter from broader geopolitical activity continue. As a reminder, these include increases in certain commodities and strategic metals such as tungsten, which have increased multiples over 2025 costs. In addition, conflict in the Middle East has led to increased petrochemical-based cost pressures, including increased energy costs for us and our suppliers and increased petrochemical-based raw material costs, primarily those used in golf balls. These cost pressures are included in the guidance we provided today. Now turning to our full year and third quarter 2026 outlook. Given our strong first half results and general health of the golf market, we now expect full year 2026 net sales of $2.045 billion to $2.070 billion, an increase of approximately $15 million at the midpoint. The increase reflects the flow-through of our Q2 net sales beat as well as an additional $5 million organic raise in the second half of the year, partially offset by approximately $5 million of additional foreign exchange risk. As a reminder, our net sales in the second half of this year will be impacted by fewer new product launches compared to 2025 as well as the continued rationalization of select lower-margin business. We continue to believe these actions will strengthen our business and support higher overall margins over the long term. With regard to EBITDA, we are increasing our adjusted EBITDA expectations to $246 million to $260 million, an increase of $31 million at the midpoint of guidance. This increase represents the following: $21 million of the increase is related to the flow-through of the non-tariff Q2 EBITDA exceed, plus an additional $3 million from the flow-through of our improved net sales outlook and a slightly improved gross margin outlook, plus an additional $7 million from the revised tariff estimates I discussed earlier. As a reminder, lower dividend income will be an approximate $12 million year-over-year headwind to adjusted EBITDA in the second half. This is due to the excess cash we held in the back half of last year generated from the business and the sale of Jack Wolfskin, which we subsequently used along with proceeds from the Topgolf sale to pay down $1.4 billion of debt in the first half of this year. While this reduces EBITDA versus last year, it is a net benefit to free cash flow given the higher cost of debt relative to the yield we are earning on cash. Turning to cash flow and margins. We expect 2026 capital expenditures of approximately $40 million. While we are not providing specific free cash flow guidance, we do expect the increase in our adjusted EBITDA to generally flow through to additional cash flow. For gross margin, a reminder that due to the seasonality of our business, gross margins are meaningfully lower in the second half compared to the first half. In addition, while we continue to expect improvement year-over-year, we anticipate second half gross margins to increase less than the first half due to the lower volumes related to the change in launch cadence we mentioned earlier. And lastly, remember that our cost savings initiatives began in the second half of 2025, which will affect year-over-year second half comparisons. As a result, while we expect corporate overhead expenses to decrease for the full year, second half corporate overhead expenses will likely increase compared to last year due to cost of living and other inflationary pressures. Now turning to Q3 guidance. For Q3, we are forecasting net sales of $415 million to $435 million and adjusted EBITDA of $10 million to $20 million. The year-over-year increase in revenue primarily reflects the change in launch cadence, tougher second half comparisons following 8% U.S. sell-through growth last year and FX headwinds. The year-over-year decrease in adjusted EBITDA is primarily driven by the flow-through of our lower revenue, lower dividend income and cost of living increases, partially offset by continued gross margin improvement and more favorable tariffs. Over the past year, we have greatly simplified our business and strategy. We have sold our Jack Wolfskin business and 60% of our Topgolf business. We have returned to a pure-play golf company and significantly improved our profitability. We have also significantly improved our capital structure, having paid down $1.4 billion in debt and eliminated recourse to Callaway for the Topgolf debt, resulting in a net cash position. And our shareholder value creation strategy is straightforward. That is grow revenue over time faster than the golf market, continue to improve the profitability of our business, generate cash and return capital to shareholders. We are excited by our progress over the last 6 months and look forward to creating additional shareholder value by continuing to execute upon this strategy. With that said, I will turn the call back over to the operator for Q&A.

[Operator Instructions] And our first question today will come from Simeon Gutman with Morgan Stanley.

Nice quarter. I wanted to ask about the industry and competitive launch calendar. You're making some changes this year in the back half and into next year. And it sounds like a couple of competitors are as well. And it feels like they're healthy for the industry, so maybe less new introductions or on a more staggered schedule. Can you talk about your outlook for that? And is that in response to industry pushing up against any inflationary limitations or maybe just too much innovation at once and trying to make it easier on the consumer?

Simeon, thank you. This is Chip. We certainly have taken a look at our launch cadence over the last several years and made the decision to lengthen some of our product life cycles. And this is all in response to our desire to continue to increase the profitability of our business. So we believe that in certain instances, when we can lengthen the product life cycles, we can increase the overall profitability of that product through the life cycle. It's certainly a balancing act there, Simeon, because the market also does respond well to new innovation and new launches and the energy that comes with those. But longer life cycles as we are executing in the iron category, we think is the right thing for our business and will be positive for the market. And you are correct. There are others that are making similar decisions out there, which I do believe will be a positive for the market in the long run.

Okay. And then the follow-up, the third quarter outlook, even taking into account the adjustments you've made to your calendar, did that change at all vis-a-vis the last quarter or so? Or is the outlook almost identical or if not better than what you were thinking about before?

We raised the organic outlook about $5 million in revenue for the second half of the year.

The next question will come from Matthew Boss with JPMorgan Securities.

So Chip, on the resilience of the golf industry, can you speak to underlying revenue growth that you saw in the second quarter outside of strategic actions or any timing shifts? And then to that point on the back half and the raise, could you just walk through the drivers of the constant currency revenue guidance raise that you just cited?

Sure. So first half, Matt, we saw the market in general up low to mid-single digits. We saw rounds play up approximately 4%, and that really extended through the first half and Q2. We were really pleased with that because the market is up nicely in what could have been a challenging time. and that's consistent with what we've historically seen from the golf consumer. They're not sensitive to mild economic disturbances or even mild recessions and the long-term tailwinds that we see in golf seem to be clearly intact. As we look into the second half of our year, obviously, we're heavily impacted by the change in our launch quantity and over -- on a year-over-year basis, and that accounts for most of the change in the year-over-year revenue. There's a little bit of noise around FX. There's a little bit of organic growth uptick that we put into this forecast vis-a-vis our previous one. But it's worth reminding everybody that last year, the market was up considerably during the second half. So it had -- it was a second half-driven year. and the market was up roughly 8% in the second half of last year. So we're also dealing with tougher comps in the second half of the year. We expect the year to be a good one. We expect the second half comps for the market to be positive on a 2-year stack basis, but a little bit slower potentially than we saw in the first half.

Great. And then, Brian, maybe just a follow-up. Could you speak to the drivers of gross margin expansion in the second quarter and how best to think about puts and takes between pricing and mix in the back half of the year?

Sure, Matt. We are very pleased with our gross margin initiatives this year. I won't speak for Chip, but we've made improvements a little faster than I was expecting with 460 basis point improvement in Q2 and 360 basis points for the full year. We still expect gross margin to be up meaningfully year-over-year, but the rate of improvement will slow down in the second half versus the first. And that's really related to what Chip just talked about with fewer new product launches, which typically have higher margins and then also some due to seasonality and less volumes in the second half, so less for overhead absorption. And then really, one of the main things was that the market was better than we expected and the consumer hung in better than we expected. So that does provide some sales leverage and allowed us to be a little less promotional.

The next question will come from John Keypour with Goldman Sachs.

Very nice quarter. Just wondering... I guess the 4Q sales guide was a little bit softer than I think we were expecting. I mean I get that 3Q looked better. So there's some phasing issues. I'm just wondering if we could go over the -- what shapes that phasing exactly and why that kind of shift from what was perceived before?

Yes. We hadn't provided any quarterly forecast for the second half previously. So what you're seeing in our current guide where we start to provide it by quarter is just the impact of the launch timing on a year-over-year basis. So nothing meaningfully forecast different between the various quarters other than the timing of launches year-over-year. And obviously, we believe we're on track for a positive year.

Got it. And then lastly, just on the full year guide, the high end of the sales range wasn't raised. I'm just wondering, I guess, what conservatism is being baked into that number, that high-end number? And what would you need to see to kind of push that a bit higher?

Well, it was, in a sense, raised by $5 million. So we gave you the full second quarter beat, and then we took it up 5% organically. It was just that the FX rates offset that $5 million increase, but the underlying business on a currency-neutral basis did go up by $5 million.

The next question will come from Anna Glaessgen with B. Riley Securities.

First, I wanted to ask on golf ball, a nice 15% growth in the quarter. Was there anything like onetime in there? I'm just trying to understand drivers behind that growth?

Anna, yes, we had a terrific quarter in golf ball and a terrific first half. So first half being up 8%. A little bit of timing between quarters just in terms of when we normally ship green grass and -- but nothing onetime in any of the results, all just fundamental improvement. We've made great investments in the ball business over the last several years, green grass distribution, product manufacturing capabilities, and we're seeing the results of those.

Perfect. And then I just wanted to ask on the split or the implied margin between 3Q and 4Q in the back half. The sales decline is pretty comparable between the 2 quarters, as we've already discussed, not having the same launch cadence. But it feels like the margin degradation in the fourth quarter is a little bit heavier. Maybe could you explain maybe it speaks to like the cost of living increases embedded in the corporate expenses, maybe that falls more in the fourth quarter, but anything to understand there?

The gross margin is somewhat just -- there's less volume typically in the fourth quarter, which would affect the gross margins. But I think the way Chip explained the first half -- the second half is right.

The next question will come from Noah Zatzkin with KeyBanc Capital Markets.

I guess, first, maybe just another one on kind of the gross margin improvement in the quarter. Is there any way to kind of think about -- I think, Brian, you mentioned maybe some of the work kind of came together faster than expected. So wondering if there's any way to kind of think about what inning you're in there on maybe the structural margin improvements? And then just how to think about maybe the magnitude of the structural margin improvement opportunity?

Yes. We're very pleased with our progress to date, as we mentioned, it's been very exciting, and I'm glad it's working. It will continue to be a focus of ours going forward. But we're already getting back close to the high watermark levels for 2017 to 2019 in gross margins. And back then, they had more favorable FX rates and no tariffs. So our future rates will depend somewhat on the FX rates and tariffs. But other than that, we'll continue to work on it as we can, but we're not providing any specific long-term guidance at this point.

Okay. Very helpful. And maybe just one on TravisMathew. Obviously, you mentioned you closed, I think, a couple of stores. How are you thinking about the long-term opportunity of the business? And has anything changed there?

Yes. Noah, the -- I'm really pleased with the TravisMathew results. So that business grew during the quarter. We've had a successful launch of the women's category that continues to do well. And year-to-date, really pleased with impact of our revised men's strategy where we've changed some of our focus, our product pillars, our merchandising strategy. And we've seen nice results both direct-to-consumer and that wholesale there. So I feel great about the outlook for Travis, I have seen some really positive results year-to-date. We are planning to close 4 stores in Q4. We've announced 2 of those stores now, and that's why we're at liberty to discuss it at this point. But that shouldn't be thought of as anything different than what we've been doing very tentatively over the last year. And that's being disciplined and focused in our approach to improving the long-term structure and profitability of our business. Things such as SKU rationalization, portfolio change and this attention to the store portfolio, all fall in the same ilk, and we're optimistic that those will provide great value to the shareholder as we continue to implement them.

The next question will come from Joseph Altobello with Raymond James.

I guess, Chip, I just wanted to follow up on the answer you gave to Noah regarding the 4 Travis stores getting closed. I think I heard you say that the charges in the second quarter were included in adjusted EBITDA. Is that correct?

That's correct. We left -- those are in our financial results, both GAAP and non-GAAP.

And how much were they?

I don't know that we broke that out, but roughly $1.5 million.

Okay. So not too meaningful. And then second, you mentioned incremental commodity cost pressures in the second half, which is obviously reflected in the guide. The EBITDA guide for the second half on an operational basis, still up $3 million. How much additional commodity cost pressures is baked into that number?

I don't know whether, again, we're going to break that out specifically for you, but we have, to the best of our ability, baked in the cost pressures that we see at this point in time. Obviously, dynamic. The price of oil is a major factor in that, and the price of oil seems to be fairly volatile, although improved today. And we're comfortable that we're going to be able to manage through it. We wanted to call out that they do exist and that they -- but also want to call out that we're working through them and are comfortable with our ability to do it at the current levels.

The next question will come from Arpine Kocharyan with UBS.

I did want to go back to the full year guidance upgrade, nice uptick there in EBITDA, up something like, I think, $31 million, if I'm not mistaken, at midpoint and certainly more than sort of the Q2 beat. But more importantly, flow-through also is pretty healthy. I wanted to -- I was wondering if you could give a little bit more color on that bridge and whether -- and to maybe frame for us kind of what would be an upside scenario to that outlook? I know you're probably looking at a lot of volatility. You just talked about input costs being something that's really tough to write pinpoint here given how volatile that has been. But as we think about sort of revenue that you think you can do in the back half and sort of this healthy flow-through that you're looking at and maybe try to bridge that sort of full year upside versus the strong performance we saw in the quarter.

Sure. Brian, why don't you do the bridge, and then I'll take the latter part of this.

Okay, sure. For Eeva, you're correct, it is up $31 million at the midpoint. And that represents the $21 million of the Q2 EBITDA beat. There's $21 million of that, that we're giving. And then there was -- we talked about that $5 million organic revenue raise. So there's about $3 million that flows through to EBITDA. And then there was a $7 million improvement in our tariff estimates based on the new rates.

Upsides and potential risk in the second half, we think that we're fairly balanced on both upside and potential risk. It's certainly -- our guidance reflects the best information we have at this time. And I think it's -- you mentioned as well that this is a fairly dynamic environment right now with macroeconomic and political factors that are almost changing daily. So there's potentially a wider range of outcomes than normal in the second half. We've shown our ability to manage through this. We feel really good about the strengthening of the business that we've delivered and the resilience of our markets. So we feel really good. But we think the guidance is balanced in terms of risk and opportunity.

Great. That's super helpful. I was hoping if you could comment at all on maybe July retail trends here in terms of just sell-through as well as what you're seeing from green grass versus other channels. Anything you could give us in terms of sort of current in the quarter demand trends?

Sure. We've certainly factored into our guidance, the July results. We saw a little bit of softening in the market around World Cup. It improved subsequent to that. We have factored that all into our guidance. And I guess that's all I have on that at this stage.

And this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Chip Brewer for any closing remarks. Please go ahead.

Thank you, everybody, for tuning in. We're proud of our results and the progress we've made strengthen the business year-to-date. We look forward to updating you again at the end of Q3. Thanks for dialing in.

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