GOLF - Earnings call transcript Q1 2022

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Operator

Good day, and thank you for standing by. Welcome to the Acushnet Holdings Corp. Q1 2022 Earnings Call. [Operator Instructions]. I will now hand the conference over to your first speaker today, Sondra Lennon, you may begin.

Sondra Lennon

everyone. morning, Good joining quarter for for Holding Acushnet Thank Earnings us Conference First XXXX Call. Corp.'s you today

Joining me Financial this Chief morning are David Maher, and Pacheco, Executive our Tom our Chief Officer. Officer; President and

differ over to we and and today. from are current that making materially These Before turning statements be results in the David, would circumstances. based remind will the like on statements uncertainty expectations are expectations. subject changes I Actual forward-looking forward-looking to everyone to call may these Acushnet's call on

the as found period how in results For March of differ, Throughout revenues presentation Commission. U.S. U.S. that Securities Explanations list that constant GAAP release, Commission. adjusted factors this our a the basis with items slides release, also we EBITDA. filings Please presentation and the the accompany today's the why of actual and in that referring Exchange and and at to can make our results this and please to non-GAAP discussion, financial such the we that XX, the will press could that, in X-month to turn and currency period. accompany press of X-month use a with note to will over when XXXX, refer these comparisons, be reconciliations or to David. and With cause schedules year-to-date to our filings see today's and I'll reference comparable call ended the Exchange Securities these we metrics metrics, items including slides

David Maher

start by dividend the the the update and quarter provide $X.XX and read payout report morning, taking XXXX has or our per our expand quarterly on Thanks, about $XX early golf Board that will And company's and future. pleased on I total. first of are am for season of the start of actions our share good to some chain Directors approved the of capabilities the Sondra, the million announcing and on outlook, supply in state results everyone. we I an off Acushnet's of to of share Acushnet's

have As to priority capital heard shareholders strategy. within us is important capital Acushnet's returning allocation you an often say,

our pleased Kupcho of adjusted And where years. Players sustaining And Augusta winner best as validation many FootJoy by just will right her success Titleist EBITDA million, early Women's brands. to Acushnet constant backdrop, the X% period report have performance shoe company Pro golf. shoes begin quarter season help across relied million to for fast their enduring results. of shy leading highlights growth won of a the the a followed Acushnet's are up landscape. play Scottie playing Titleist in route an XXXX on of women's to tours XX% full FootJoy the which VX; VXX, as more golf for #X XX players compared very FootJoy a Smith, golf to over to I or And report. $XXX competitive first Championship; Pro There true in competitive EBITDA this Titleist Amateur shoes. professional one increase amateur product won shoes, delivered Cam ambassador, of validation year FootJoy sales than en a new gain few Jennifer golfers combined. the Masters are the across and portfolio. in to the wearing to all the influence, balls across Growth trusting and VX introductions the Pro XX% major or won most were clubs Scheffler many and brand championship winning our golf of for National and The margin. highlights XXXX. QX FootJoy central been sharing am by develop same starts getting Now choose with products $XXX was ability Titleist models and off other is worldwide of driven our amateur golf of FootJoy and on and Clear that to currency delivering events the to prestigious team's the and mode X% reported by sales first basis I Titleist the

launch built as quarterly our caused raw tight availability up at comped Golf record which X% looking Pro Now segment. last limited have we shortages, were by by material VX balls and year's the against results our managed production Speed and TruFeel models. levels. launched global golf Tour support up and this of Despite constraint, ball to and Tour Soft launches we upcoming new models Velocity inventory AVX, successfully new

and growing spring by have the has strong on in growth FootJoy's fulfillment same our X% QX, constrained our In franchises made track. footwear in been to QX gear. sales energy we to we been rounding significant, with out double-digit great gloves in has decision development impacted and weather pleased Fuel demand. supply and grew strong and build U.S. in ski factory was Phantom continues distribution off as XX% last all into it team noted golf And And with apparel XX% at on categories to have defer wedges FootJoy quarter from launches delays compared clubs XX% while gear the are ability year's And by coming call, up team and and did cold, also Tour continues new right from Titleist our and performance with new products. up gains finally, and golf, Titleist with to response, QX our collection. has congestion and the Vietnam expanding our momentum, And closures, Alpha in which Titleist backlog 'XX putters. product in increased that Midwest Titleist club apparel as backlogs port last quarter testament footwear, DC. to with these in and down levels. the levels, demand innovate the our around our quarter, premium pace In keep engine is FJ pre-pandemic warehousing were double demand XX% market. to lifestyle we're impacted these technical shortages very the QX Titleist growth, and design growth business leading plans Korea our the is meet as and build reduce and performance capabilities launching been of order digits been apparel shoes warm were Vokey Cameron and XXXX a fabrics great this to dynamic over and fulfillment output innovate momentum team work wet summer's line SMX continues our and and As last to the also apparel in the flex quarter

X% balance were year. an sales grew and Now our business looking in of of to off gear our last FootJoy region EMEA as trailing QX much expectations lockdown. by with beating at region. the accelerated balls the from golf from at the volumes and comps when low U.S. up was rate shifted year

see expecting take with reported, makes the the continue golf in in and tourism entire center July at course our the line our the a Japan a line to stage the healthy expectations. is golf full U.K. continent was year year XXXth and across busy in old yet and strong XXXX. participation demand prepare particular, XX% as quarter courses Open in U.K., constant busy and a Championship We return was product as XX% The in at both off for on currency

FootJoy constant consumer. our at year, product half. XX% Titleist our vibrant, new and we with in And Given performance coming target timing grew Korea clubs, second and this towards the and to The at Korea reported executing playbook Japan's gains X% market team XXXX currency excels launch expect with be our balls, apparel. weighted from connecting remains and

courses forward, secure, vital optimistic signs industry to the and game Participation overall we and is catch-up golf demand. industry. continuing state the strong. looking of industry's retailers Now financially are against continues heightened healthy, and remain and the play the about are Golf

off see at northern in play central of weather looking decline, wet increased and of impacted Florida in markets rounds as increases U.S., this we Despite the play, were open rounds Outside U.S. in First, the were the X% to pleased Hawaii. most rounds and regions. more quarter Arizona, now the looking see golf China the positions. and healthy to XXXX record this XXXX. offsetting retail a as with start Korea Overall, participation And lockdown. at resulting given from especially gains in inventory in we season, EMEA, than declines set and Japan QX Acushnet's bars high

in remain most Our balls channel low Titleist and golf regions in and most product gear. inventories categories and notably

$XXX macro the weeks at improved inventories. replenish seek a to As expected areas with of of key materials Tom which meaningful about And are persist, with to supply we higher year, where continue while balls, has will Acushnet's start business. as chain, in we inventory to will than was channel position Acushnet's we to demand and help to challenges pace to recent golf levels last million keep the availability to in be address, raw specific progress QX in June. production point full make our Starting return in will

raw these limited output golf from material Texas resulted which ball last shortages, recall, our may year's you August. have since As last production storms,

XXXX, As this of will situation particularly improves, normalized and of form the yet have come XXXX availability, will benefit heading positive it most QX. in into more impact the some in inventory that on we expect

improve earlier, times. are we expanding lead to distribution availability our fulfillment gear noted capabilities Titleist As and and

the for in half have And hedge for modified progress the potential back the early FootJoy We of delays. logistics year, expect QX we keep to to growing capacity against receipt of inventories good of pace are in second process products. demand warehousing plans adding with make taking our as a half and lastly,

the our we I'd is XXXX looking Our factory pass production to growth. capacity, are footwear your keep Similarly, to JV with capacity to will with teammates Vietnam as growing for demand chain. we adapt develop about chain. like excellence into supply they thank and our Thanks get And We're also my long-term for the to most for that, full logo pace of and keep I attention out strong Tom. prospects diversify Acushnet shoe further expanding call to to additional over expand commitment apparel. closing, In demand their are enthused operating with capabilities FJ to strive to supply and to morning. and embroidery pace our this at for

Thomas Pacheco

to continued the a have deliver help X. Thanks, XXXX yet manage forth David. thanking I strong getting all effort of chain off exceptional through start. for for demand to to they put Slide to high supply quarter challenges like very our good another and on Acushnet, would Starting by associates begin

irons. compared T-Series demand remained Our results basis partially offset was X% and in X% X% Gross or by the were sales $XXX Gear Golf level reported product up year. $X and offset by XXX almost sales ASPs expectations in of the up margins higher across The decreased $XX largely all comes points. and from last for These by higher Golf higher in Vokey line lower were $XXX were million, and Titleist down FX quarter quarter. component sales strong, million, Titleist for million and sales and Titleist were volumes in XXXX, Consolidated Overall, volumes net with increases club volumes, sales partially gross to XX.X%, clubs. million our driven and higher versus gross this increase and SMX costs new FootJoy were sales increase profit FootJoy first Balls. was which categories wedges profit gear or

margins increase partially negatively XXXX. result was Gross Net costs. all attributable higher XXXX, of including increased million, million operations Income demand, than and gear, $XXX our lower QX absorption. down margins earnings. year million of advertising from is which income Holdings selling, business our was from support In million, the the driven our distribution, offset higher golf release slide compared expense across consulting XX.X%, There prior XX%. were XXXX. expense by promotion lower to QX year. adjusted was was up compared $X continued R&D inbound well adjusted as and from of $XXX impacted QX appendix a EBITDA $XX in effective lower in costs to tax in million higher last quarter, by clubs Acushnet for a than EBITDA freight million, rate to the segments income mix million, down reconciliation to was of as shift primarily FootJoy, in was up down million, margins SG&A of higher expense profit. balls and comes from overhead presentation. was $XX jurisdictional was the levels addition, and gross The in $XX as in $XXX compared to $X to and investment IT-related $X earnings million, the which is $XX net QX a our down higher interest million

XX. to Moving Slide

strength unrestricted on of end outstanding had At $XXX and our balance million, QX, continue approximately sheet. hand. of $XXX was the facility. had the of our we million credit borrowings We about debt we of from $XXX under to benefit revolving Total million available cash

ratio QX the year. at as the the Our end million, X last by prior days. was was of million DSOs end Xx of QX leverage $XX same at Accounts improved XXXX, the about receivable QX $XXX from year. down

Our the inventory at of XX% of all $XXX was consolidated million, was end the increases segments. prior QX QX up with from year which across

to and for desired inventory, inventory same in higher time Although of inventory from $XXX decrease to in we increases in in a high year. an we million QX the as better changes first receivable for our to resulted investment spent business levels million increase were outflow was make of $XX.X our about at demand quarter we ball not quarter to of accrued in expenses levels during the $XX meet compared QX. brings in larger balances products, accounts continue expenditures. million inventory which and enable cumulative prior our capital our we of the investments Cash by and towards We the operations able million. which XXXX compared down in to cash on primarily last days demonstrated yet And the was sales the are from compared higher our last capital us working CapEx spent to capital were total $XX.X to which of changes days XXX flow golf form an at XXX $X.X the strategic in program, The outflow outflow year. from the to million that, year. in Included the those in to continued

our approximately expect full year million. to $XX be to continue We CapEx

Slide to Turning XX.

results strategy. Our have continued of execution strong financial the enabled allocation capital our

golfer remains excellence. connection in investing innovation, product priority highest Our and operational

believe to We to a at a on our that Generating long-term appeal growth flow and return. with favorable that acquisitions these strong capital will drive free focus investments to and remains that continue cash We high performance golfers. align pursue products shareholders our returning premium advance strategy dedicated also March, And cash payable cash dividend Board to our In $XX per declared priority. as David we a QX shareholders mentioned, of our June to announced dividend, which share, Directors resulted XX, on of of on paid $X.XX million. record outflow previously a X. today in June shareholders of

a $XX we On complete QX, quarter, approximately shares total At April Board million X.X of of our During and the approximately repurchased in approved for under increase authorization. we a QX. expect repurchases this share authorization, remaining had current end of million now million to XX, share we the repurchase million. $XXX to our our $XX authorization

the actively financial continue shares strong performance next new to complete over continued this year. authorization repurchase will conditions, would Assuming and we and expect to market favorable

an return remains we our element creates believe for proposition, a total to continue compelling strategy allocation which important value long-term capital Our shareholders. of Acushnet's

Slide supply XX. Despite remains management chain our thus Moving far, situation complicated. effective the of to challenges team's

costs constraints, We and costs. continue material rising material to and inbound elevated experience raw component freight

our seen has have work is overhead improving On costs to product positive through utilization logistical higher increased, customers. We ball distribution golf we also our challenges to manage manufacturing note, our which to a as more get absorption.

expenses slower year of And rate than grow expected for reaffirming previous these our factors into a guidance. anticipated. are some our we to operating year are Taking the consideration, previously at full

On to constant currency million includes billion. between foreign adjusted continue year million. basis, $X.XXX XXXX of $XX approximately the to sales of be of expect are This $XXX we in net X.X% negative And a $XXX to range continue full to currency net sales and to billion be consolidated We impacts. the up $X.XXX to expect range X.X%. full expected in year consolidated EBITDA to be million our

consolidated to half more year first a sales net and XX% adjusted the be expect full Regarding we continue XXXX, our of timing business half to be to helped about EBITDA through results sales and in than volatile QX. of deliver continued year. manage first conclusion, and XX% supply to high demand full chain for environment solid In partners a of trade challenges associates us our the with little

While meet deliver XXXX chain expect confident long-term we Q&A. continue total return in ability and financial we to supply a With now our remain to to issues, call goals our shareholders. will to our I for for turn the that, Sondra over

Sondra Lennon

up now open Tom. could Thanks, questions? for we Operator, lines the

Operator

will come Heenan your Instructions]. first question Kevin with And JPMorgan. from [Operator

Kevin Heenan

Congrats on the well. as strong XQ results

David Maher

Thank you.

Kevin Heenan

side any strong supply of I balance full you're I in the and initial the that improve. there year in for consider guess looking to you to and the at about or led seeing hold XQ outlook guess, to just expected kind that following things talked business you the the the full outlook the factors year of year? are

David Maher

say would really mind. to I Kevin, Yes. X come themes

right? And the quarter quarter We're is critical our shifts and where second year any and outlook, meaningful in up off, many in time get such First QX a or before year opening within make came full secondly, our industry the of adjustments still largely important we game is quarter. generally to the our regions. through always just practice it's an And at expectations. to

potential. weather got You've

you sell-through the from sell-in the pipeline is first months got realities your in learned -- of the what and of You've X, your that X products year.

we sit started. we way where is time typically generally be think would the year. like of I we where this today So We

to quarter a way through before lot you get the navigated to again, feel our we the long-term call, more or of but it other. journey one well. second we pretty supply As puts we generally than changes from to our that as But we to a start any takes and most, heard like direct standpoint, on meaningful relates outlook, side

Kevin Heenan

participation that -- a your elaborate if the which I industry, helpful. I healthy. you see And as guess you it. bit a Got follow-up just unpack comments That's could structurally on just about broadly and how gives we in XXXX. here in the confidence structural you as industry markets and northern the health peak that in see on trending what you season overall more enter the of

David Maher

is think year. and not we a Yes. Hawaii, it it noted it's of positive the country, to good, game. are early largely the indicator first Florida structural the with I as weather And small you've earlier, quarter, the because good has a surprising was colder rounds and that's to try positive U.S. and is rest pieces down right? rounds off been a Korea, in just wet make of is cold QX were weather days it sense ex always Yes. of starts interesting story in the than weather But weather far a you it A for in in than couple of And year And And seeing when to the participation story. a participation that. up. weather. Arizona the were around story, for rounds more world, And increased ago, it starts. U.S. Japan, had in what and days we're nice in net a EMEA, but QX But in Where down. again, early and therefore, The was golfer.

the own a normal the trending. of of of that successful about a we golf again, layer approach realities golfers or retailers, strong, for investing what play are A of be I'd our to been more and industry. way begin company, would of optimal They're specialty or certainly would And our around trade in very They're in be whether decent the to kind just as couple very structurally when industry, in golf, and levels couple broader the far, normal a it's the we frankly, structure story, below And with components their they're function the within the partners, continue investing the inventory golf a view or it business. of which just be health weather we in certainly positive. again, a consider catch-up. years. we of They've world courses Acushnet to the inventory is levels. start. to we their a is, always other that's experience off So talk we're golf thus But heading right? had which where

that frame being structural and really pretty the And certainly is our assessment those structurally time X shape of year. as outlook So strong good this void industry influenced components for view. is of our in by

Operator

next Stanley. with The Harbour will come Brian from question Morgan

Brian Harbour

you're gross -- first just on Maybe sort raw that the material And question on thought like the of some were about been kind just some costs side, the and changes stuff like what margin had helpful. provided there's of and you before would year. I in question that guess comments look of doing and other commodity comments for would items Yes. this of availability then fulfillment would you've kind that be that. your thought

changed kind I'm ocean We've that So costs, for side those think both input gross if regard of kind margin of also if seen with of wondering how recently then and anything there's freight year. the to on also changed kind has progression you costs. of trucking about any this in freight curious side. movement the I'm on

Thomas Pacheco

the down basis points. puts Yes, in closer points, to XX you. what's compared Coming had our of that gross that. about think and to last there's Thank margins year, now be and the We of would be XX there we for driving terms takes down year would number basis that anticipated a year Brian. into

some anticipated. you have input increases we we material raw As mentioned, cost seen had higher than

expectation So into compared costs our that to year were X% beginning the last came last an the with year. up or XX% year of we to

And inputs particular, and golf have up our ball that, higher materials up. in our of of some have gone some core raw than gone

freight, terms to elevated freight see we In of costs. continue

in first than of movements, where some movements market. quarter get we inventory we to airfreighted in the to and we historically. we do that would actually the And inbound continue our need more than get to freight congestion to of avoid part to portion ocean larger the our significantly a airfreighting are We We of it inventory anticipated. of sort product the

in higher to We the inbound our we had and we be we what year XXXX. airfreight that's elevated cost were second going in for to so QX to year, And full for the third certainly higher XX% cost think about XX% closer see experienced we'll continued and be now quarter. in certainly freight than and expected

that, offset of has business. golf Some though, higher our ball by been in utilization production

have the some raw us in that's higher improvement balls situation which more allowed to we a absorb has had golf to material plants in So a and at is allowed which our level, benefit. us operate overhead,

in all, and all some it points our more about we basis we together, operating all you margins we had So anticipated. put sorry, of than do being be have will will the XX to than think we year -- anticipated. for had expenses that gross some down our that But offset lower with XX%

Brian Harbour

Yes, that's helpful. very Okay.

right? some did the kind the you Second performed XQ think as you called out tailwind very Do really year year looks were well markets seeing positive more -- just question signals kind was markets, of point? some like international at and of the a you Or Obviously, phenomenon? Are that's maybe tourism? on it part lockdowns of last of in kind a that still of of rest non-U.S. it of demand those the of through this that.

David Maher

was there driven and going in in we a is the quarter. I strong tours, for EMEA, EMEA that is I say, first modest would Well, particularly where modest golf in situation a to Japan participation growth line by is Korea part first I in and see year and half do think of growth the but driven, the be and U.K., think large in it

again, through I normalized be we more half think the the going expect year. But of the year. the that's first that outlier a EMEA comp would really to throughout is

Operator

George from will with question next your Capital And Partners. Kelly come ROTH

George Kelly

the provided back with you first -- the first start kind or to EBITDA. for half, that of just to the half weighting maybe So guidance half

doing is, we've So and shows counter be in math the what sequential decline years. most it if seen decent in EBITDA question a would right, pretty that to the I'm

of or commodity kind wondering just about or effects weather -- inflationary you us a some else maybe can more is if costs impact these flag? could So other what's you give and anything there's there info of if

Thomas Pacheco

frankly, EBITDA we mostly, the even if bit loss a the a you last in bit had it's position we -- of of fourth in quarter. in year. -- were George, relative Last in the unusual second And an a distribution a a year and to was recall, half half. basically first in of EBITDA

normal, XXXX be spread you perspective. if from a So is more will, to going

see higher we so volumes do gotten our last normal back much level OpEx of half would year, at higher the hadn't and much had to sales. first you in And expect that we and this as hadn't ramped level

normal OpEx last a And and you that now we're is some XXXX, changing our at into is the of comparison, so sort of level, if new structural to that of kind year. will,

George Kelly

quarter your it first should it's below, meaningfully should should if I a I think doing right, just that more math, second I'm to shows quarter clarify, I decline. do sequential first it speaking -- be second Tom. I from be, And the was to quarter if sequential it quarter. And

So normal if that's seasonality. not the that didn't I know there was within just anything

there's a maybe something. So weather impact or

that did I sure right? make to wanted Just

Thomas Pacheco

happen be impact on because half, distribution second to of about is a and really year-to-year. shops and difficult dependent. the that shipments the on can sizable can for or It our Yes. The timing is when have really dependent late quarter, April, from why first can which it early because and be we when pinpoint talk between open in particularly QX different quarter, quarter, weather QX second half can is It guide, weather. March we first really first

George Kelly

Okay.

throughout flow the that? like inventory your end of be going -- two where And And prepared to year, you remarks, quick other enough. in And Inventory, going then you're again? just what's give I expect inventory? higher ones. to the kind what did could curious hear your you to if is Okay. Fair just year comments that the take it of the do right

Thomas Pacheco

It's go We up. inventory a for of golf of balls. all a do right? We still balance, -- to we're bit expect example, our allocation on on

don't demand. of all inventory So right now to the meet the have we

our of to quarters increase is we of largest So terms Hard need to sell-in do sell-through. say, and that. one QX, obviously, in

inventory may the in second at by if be increase our levels. sales, the expect of you to So level we more would higher our given terms year get low new it relation level we sales. a normal, They normalized end are, but a inventories think of need if will, inventories the quarter, in would are our be however, in to about of you our to to challenging and that it

George Kelly

kind expect most over -- we And on you for question -- to amount Can me, just do Understood. the x repurchase. share Okay. the year. of through last walk of then the your give next you time

So that can you again? walk just through

Thomas Pacheco

Sure.

shares first So end QX, million our the $XX in million. we had million we of on And at $XX authorization. repurchased the for approximately remaining about quarter, X.X

expect made same. has a market sheet continue We a shares price the remain decline aggressive a I'd been historically. partially assuming market. strength to us conditions be and just little say in to bit purchasing the perform rate of we more in to we from stock And had business our the and from of the continues balance faster that, have than do at partially the our

we things $XXX year. in buying increase to Board remain We year. aggressive did us Our next the expect the conditions continue enable think balance to if shares same, remain approve same, throughout that to the to that the million the of the a over be $XXX exhaust million would

Operator

Alexander with Research. next Compass will question Point come Your from Casey

Casey Alexander

said you expect half to it want of first verify EBITDA Yes. I Most XX% full And was Is answered. that what to year? full year. of to first my half that expect you you were be questions of be XX% sales of right? just

Thomas Pacheco

than more yes. XX%, A little

Casey Alexander

my That's Okay. All right. Great. question. it. only That's

David Maher

Thanks, Casey. everyone. And thanks,

spring of we to look we appreciate of some Acushnet, in lots As and forward call. on everyone. look forward reporting day, you. weather of being golf back a played, you. good by to hopefully, And interest a we our and Thank always, next great your Have

Operator

This Thank you concludes for call. today's conference participating.

may You disconnect. now

Acushnet (GOLF) 7 May 222022 Q1 Earnings call transcript