Share-Based Compensation

6 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Topgolf Replacement Awards

In connection with the merger with Topgolf (see Note 5), which was completed on March 8, 2021, the Company converted stock options previously held by former equity holders of Topgolf into 3.2 million options to purchase shares of Callaway common stock, and certain outstanding restricted stock awards of Topgolf into 0.2 million shares of Callaway common stock. During the three months ended June 30, 2022 and 2021, the Company recognized compensation expense, net of estimated forfeitures, of $0.7 million and $1.6 million, respectively, related to these awards. During the six months ended June 30, 2022 and 2021, the Company recognized compensation expense, net of estimated forfeitures, of $1.5 million and $2.0 million, respectively, related to these awards.

The Company did not grant any stock options or restricted stock awards during the three and six months ended June 30, 2022.

Restricted Stock Units

During each of the three months ended June 30, 2022 and 2021, the Company granted 0.1 million shares underlying restricted stock units at a weighted average grant-date fair value of $19.95 and $29.66 per share, respectively. During the six months ended June 30, 2022 and 2021, the Company granted 0.7 million and 1.1 million shares underlying restricted stock units at a weighted average grant-date fair value of $22.82 and $29.61, respectively.

Compensation expense, net of estimated forfeitures, for restricted stock units was $4.6 million and $3.7 million for the three months ended June 30, 2022 and 2021, respectively, and $8.6 million and $5.9 million for the six months ended June 30, 2022 and 2021, respectively.

Performance-Based Awards

During the three months ended June 30, 2022 and 2021, the Company granted a negligible amount and 0.1 million shares, respectively, underlying total shareholder return performance based restricted stock units at a weighted average grant-date fair value of $20.46 and $27.11 per share, respectively. During the six months ended June 30, 2022 and 2021, the Company granted 0.5 million and 1.4 million shares underlying various performance metrics, including adjusted pre-tax income, earnings before interest, tax, depreciation and amortization and stock compensation, and total shareholder returns, at a weighted average grant-date fair value of $23.37 and $29.42 per share.

Performance-based restricted stock units granted by the Company cliff-vest after three years, except for certain one-time grants to the Company's Chief Executive Officer and Chief Financial Officer in connection with the Topgolf merger, of which 50% will vest after three years and the remaining 50% will vest after four years. The number of shares that may ultimately be issued upon vesting is based on the achievement of the respective metrics for each award, which may range from 0% to 200%. As of June 30, 2022, all performance-based restricted stock units were within the probable range of achievement.

Compensation expense, net of estimated forfeitures, for performance-based awards was $7.9 million and $5.7 million for the three months ended June 30, 2022 and 2021, respectively, and $16.9 million and $7.7 million for the six months ended June 30, 2022 and 2021, respectively.

Share-Based Compensation Expense

The table below summarizes the amounts recognized in the financial statements related to share-based compensation for the three and six months ended June 30, 2022 and 2021, including expense for stock options, restricted stock awards, restricted stock units and performance-based restricted stock units (in millions).


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

Cost of products	$	0.5	$	0.3	$	1.0	$	0.5
Selling, general and administrative expenses	12.2		10.5		25.0		14.7
Research and development expenses	0.4		0.2		0.8		0.4
Other venue expenses	0.1		—		0.2		—
Total cost of share-based compensation included in income, before income tax	13.2		11.0		27.0		15.6
Income tax benefit	3.2		2.6		6.5		3.8
Total cost of share-based compensation, after tax	$	10.0	$	8.4	$	20.5	$	11.8