Callaway (ELY)Sid Muralidhar and Rahul Rachapudi

Company Background

● Founded by Ely Callaway● Based in Carlsbad, California ● Sells high quality golf gear and apparel in over 70

countries● Largest marketer of golf clubs● Have an “eBay” for their own clubs● Chip Brewer, CEO

○ 82% Approval Rating by Motley Fool

● Callaway beats projected EPS ($0.28) by $0.11● Viewership of 2015 Masters tourney +26%● Predicted strong market share gains and margin improvements● Minority owner in TopGolf International

○ Fast-growing; microchip technology-based gamel; aggressive expansion; Could potentially be $3-5 of ELY share alone

● On the verge of a “powerful and sustainable comeback”● New Chrome soft balls and XR clubs should drive market gain in

near future● Course activity shows that rounds played per day has increased

while participation rates have started stabilizing

-For the full year, sales rose 5% to $$887 million driven by growth in most major product categories (woods +8%; irons +12%;

golf balls +4%; and accessories and other +2%) and growth in all geographic segments (United States +5%; Japan +3%; Europe +11%; Rest of Asia +7%; and Other foreign countries +1%). Income from operations improved significantly to $31 million verses a loss of $11 million in 2013 while fully diluted earnings per share increased to $0.20 verses a loss of $0.31 in 2013. The turnaround was driven by the increases in sales, improvements in gross margins of 310 basis points and flat operating expenses that more than offset an approximately $6 million increase in other expense due to a decrease in foreign currency contract gains. There was also a $17 million decrease in pre-tax charges related to the cost reduction initiatives that were completed in 2013. (http://www.smallcapnetwork.com/Callaway-Golf-Co-ELY-Earnings-Report-A-Strong-Comeback-JOUT-MYCC/s/via/21051/article/view/p/mid/1/id/836/)

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In the News

Outsider Opinions (Stock)

● Mar 23, 2015 - Imperial Capital upgraded from In-line to Outperform

● April 20, 2015 - Jefferies initiated a Buy transaction○ Jefferies analyst publishes a 42-page research

article on why to buy Callaway

● Analysts at KeyBanc increased projection to $16 and gave ELY an “overweight” rating

Outsider Opinions (Product)

● 4 yr. Langley Varsity starter, 2x Captain, State Champ., 1st Team All-Conference, 1st Team All-Region - “I like their new 3 wood.”

● TJ Varsity player freshman year, Multiple AJGA Golf Tourney titles, Long Drive Champion at Congressional Country Club (#1 Golf course/club in the U.S.) - “The clubs have a range from very forgiving clubs for beginners, to very stiff complex clubs for professionals. Top 3 brands for drivers as it has a 460cc head and fully adjustable loft for its driver and woods.”

Icons/Endorsements

● Justin Timberlake

● Arnold Palmer

● Phil Mickelson

● Nintendo

3 Month Graph

1 Year Graph

Numbers

Competition

● Ping golf

● Taylormade Golf Company

● Acushnet Company

● ALL competitors are privately held

Community Service

● Each month since 1992, Callaway Golf employees and

their family members have volunteered with a local non-

profit organization

● The Callaway Golf Company Employee Community

Giving Program - donates to events for certain U.S.

nonprofit organizations

● Military donations

Why to Buy

● Golf industry is bouncing back● Golf players gaining popularity

○ i.e. Tiger Woods, Jordan Spieth ● Little competition with a

premium brand● Topped 1Q Forecast, Growth in

Net Income and Revenue● Phil Mickelson Approved

Recommendation