ELY - Earnings call transcript Q3 2018 | Topgolf Callaway Brands Corp.

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Operator

Good afternoon. My name is Jesse, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Q3 2018 Callaway Golf Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question-and-answer session. you. Thank of may Head your Relations, Investor Burke, begin you conference. Patrick

Patrick S. Burke

company's everyone. Jesse, call. Callaway's the Relation. and you, Welcome I'm of good Burke, conference Thank earnings afternoon, to Investor XXXX third Patrick Head quarter

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Oliver G. Brewer III

Thanks, X based call. you Patrick. on record revenue, strong and as comments market Good afternoon, another thank performance. quarter. joining been very for quiet of for announce operating of a everyone, operating put terms in I'm that a and presentation, positive for was be the will and pleased on us quarter to but EBITDA. page brief what profit, Starting of momentum today's our today on brand favorable year results Overall is track year-to-date us have My conditions

and than have core business benefit strengthen grown significant in overall we believe to as increased For business our faster the been to and operating years, scale our and over firmly will the reinvest Also realized several the more attractive opportunities long-term. continue we we've find importantly, to we improvements business perhaps leverage. we deliver have in that last our market able

pipeline product strong. new Our is

not I'll reasons be competitive to speak for However, to that today. able

our in also and exciting no significant attractive successful back are a businesses. repurchases, with a accomplishment are believe position Topgolf, strong we after incremental debt, sheet what We net acquisitions, enjoying two and investments reinvestments balance into share

motivated I'm chance next to to they company we also team for team Callaway to The our thank to me As results. sure a and lot of delivering take what we Golf custom, have the I'd take more accomplished. understand is level. the be these proud this like have my to should like do are

X. slide to Turning

take region. a by look performance operational now deeper Let's our into

up in These this the year this which our by our is core an it's growth exceptionally are continued was noting should performing and this XX.X% and quarter worth driven at as equipment product cadence conditions, loaded bear revenues brand in front-half strong were U.S., In doing quarterly mind. businesses the of double-digit for our up that high market While results the were addition level. TravisMathew XX.X% the year-to-date. as well comparisons

remain at according number our basis up year-to-date XXX woods, with equipment one irons to basis two hard XX.X% clubs, versus XX.X%, total last dollar in the year-over-year. Looking year. down we points our and Golf In goods brand balls, business, putters. is remain According golf Datatech share market to XXX share points we number Datatech,

and year-to-date. the very woods irons number strong We golf are Rogue strong category ball with showing line continue entire growth we one have revenue as model with selling across and in a to in strength our performance the

in conditions market the with year-to-date. be X% quarter, the growth for to the X.X% and growth favorable U.S. Additionally, in market continue

X. to Turning page

XX.X% hard market. conditions Our I again XX% strong and A XX.X% number this up Asia and during much is on into Japan points. Rest expected market would constant-currency in basis. In the is basis Year-to-date QX in business not our Asia XXX year. Japan revenue was with currency market us This brand driven down This based that growth during dollar had conditions constant up quarter share are the at half X% of Market along launch our exceeded growth by expectations on goods a during as strength our is but of Japan of solid revenue X% of revenues this in puts this. quarter with being a read two in the slowed year-to-date timing. Rest Asia. continued slower point too a first

manner. Field particularly across the in with line we finish are progress the and with this but revenue this category. U.S., team good the inventories Japan should expected entire in investing capabilities XXXX. and As and modest TravisMathew year market The the in been OGIO in irons performance to remain strong product line, in launch strength has seeing the in

the choppy with year-to-date. year-to-date up revenues quarter for in quarter X.X% lot UK and this is uncomfortably latest page an constant-currency by of Moving spring market quarter, team year-to-date weather-related the had in growth the been to through cold wet region followed X. September in Europe. X.X% during with and Europe warm the greater region this have through August minus of northern conditions X.X% a with In A summer. this slowing solid countries another experiencing X.X% and Market for

trending For line a share in goods the versus Europe as whole our last hard we XX.X% a year, expectations August number hard goods one down remained through with but brand and positively. with of

as financially quarter, Golf situation. through significant Golf one trading the work stopped administration a the customers, UK of course American UK been of heavily bad in the and we has them of leveraged in ours time. for has quarter have a largest and entered During challenged customer for resulting debt we charge was but our some the American with been

situation Another at the no purchased The this but with on has matter balance point. and proceed a decisions the we the not affected party consolidated a as the could and basis. on are company in view of that in now to on region, have negative the made how QX with discussions regarding negatively year material them impact we

American in investing the always failures will this nice impact made. the for on OGIO also sure positive resolution such this Golf to market in of and side, was overall but TravisMathew this being The Any business point. markets for disappointing, and at overleveraged progress be its their launch most team aren't as likely healthy is the thus XXXX in resources long run. UK with been European has We

side not the quarter. product this On report much to

new significantly half As less the the during stated product being half. our second the first product of year of previously, most with launches launched in occurred

up in marketplace Clubs year-over-year. overall We are pleased are and as as the and in with business resonated decisions. Accessory our how Profitability our segments market our have products Gear well nicely our

growth, business as significantly manufacturing profitability versus is We have increased during program. and benefits This our reinvesting in gross very to strong and deliver challenges, on which spends facility. This optimistic down is as remain capacity. due but noted we negatively our are golf ball deliver during long-term reinvestment last Chicopee quality capabilities QX continues margins will this and impacted year-to-date advertising Our last to year. ball call

Our are we'll excellent very In lot this conclusion, is to about next year. an the having call. we're strong more Both have and performing new on our well. TravisMathew acquisitions OGIO product pipeline a say and

on are shown our EBITDA. and raising revenue results These again if guidance. X earnings full once operating delivered and income year As slide record revenues, we be would

are and also optimistic a best we in is reinvesting on focused and remain shareholder that We performance for manner over believe you. run. We to sustainable the value. Brian, long-run long

Brian P. Lynch

you, Thank Chip.

XXXX. our business how with performed in pleased has are we mentioned, Chip As

we had continue Our new earnings. for months show records core beginning and our business very TravisMathew we first for net our benefits exceed strong introductions are to the of XXXX, product expectations. and/or have investments couple to OGIO made businesses The Overall years and over expectations. in our sales meet last the have nine and a exceeded setting

all increased Our net all product sales in major regions operating major months and across for categories. all segments, the first nine in

are The We that in X% goods been hard of many our we the a are industry U.S. experiencing macro markets, year. grew the key strong golf this through where tailwinds enjoying whole has as approximately September. including

Foreign first currency nine has the positively impacted months. $XX.X by our net million sales for

were keep tax Jobs year-over-year specific and our that results results affect In in also year-to-date from forecast, some Act. you rate the impacted mind by lower the should positively Cuts XXXX XXXX and Tax Our evaluating factors resulting comparisons.

XXXX our year compared cadence was XXXX, have which quarterly we can loaded been as product comparisons. to First, front in all affect launch discussing

the acquisition Second, occurred TravisMathew XXXX. in August

that our As XXXX. for nine quarter results months the included a third in was partially of result, first business only and

acquisitions, discussing million overview non-recurring fourth some results related is non-GAAP our which of as and to OGIO recorded year the non-recurring exclude full XXXX we When and as result net will provide With Act, deal-related other that Third, from our how adjustments tax that some XXXX exclude we Fourth, non-GAAP results. impacted in TravisMathew specific Tax a I the $X.X Cuts XXXX, the financial a mind Jobs our evaluate performance. during of we XXXX today, non-recurring and deal-related expenses. now expenses we quarter that the additional results. of tax incurred we the expense

by the Balls, increase Rogue in new by increase XX% Chrome and driven putter TravisMathew category Golf Gear, XXXX consolidated sales in Accessories we compared quarter quarter. Turning to $XXX $XXX XXXX the quarter driven the to our the introductions; August line are in business a Putter slide irons. our increase Odyssey third of of X% a primarily increase our Other an X% XXXX. of The Irons driven driven addition a and the new third increase Golf business success ball in in a improvement for our by business XX. of our to in Soft category, million Today the million record was third A sales significant net due XX% and net XX% in the by of of reporting

Foreign international impacted currency million quarter. the by $X net third negatively sales in

business, third the net core increased compared Excluding business for sales to the X.X% third of TravisMathew our the XXXX of quarter XXXX. quarter

earnings to partially net on was third was basis and in XX.X% $X quarter see compared slide of year. a same in also product net business to operating XXXX margin full for TravisMathew by cost third favorable primarily million of was losses third compared XXXX the of to $X.XX compared Fully the XXXX higher third $XXX quarter can by the shares versus business. of third $X compared The and the XXXX million XXX% a business increase increase income due the resulted related compared last per third million GAAP increase more of of million was the sales increased compared compared share primarily you income the the The XX% of expense to to quarter increased higher share as XX Operating expense in prices in hedging income to operating third for higher XXXX, quarter non-GAAP XX.X% by quarter diluted Operating share the million. quarter acquisition the excluding XXXX of gross quarter quarter in earnings gains $XX in diluted income the expense the driven Operating other expenses, to and $X.XX. income of As million selling driven XXXX of mix period percent non-GAAP in quarter a XXXX. nonrecurring products. XXXX XXXX. $X of compared million in income XX.X% for variable in sales On which quarter was new third average the of quarter product a per XX fully $XXX,XXX to the was basis other third per to quarter year. to related in offset expenses $XX million XXXX $X XXXX, third prior expenses XX, in third operating third in as of of XX.X% the non-GAAP to related of earnings in quarter the technologically-advanced was the to When is XX% was to XXXX. from TravisMathew to XXXX core increased in prior the in XXXX a operating of quarter partial point on of $X.XX XXXX a XXXX Other year. compared

to for sales months. primarily increase Turning now was we now nine million $XXX billion sales $XXX significant we due net months result an first of Rogue as category will slide as of XX% XXXX million improvement driven increase the XX% nine or discuss golf are nine and Other year-to-date TravisMathew in irons; a as first a months net XXXX well the to and line record XX% first of our category the driven Today reporting in in Golf The September balls, of increase XX, Accessory consolidated compared increase X% Gear, business; our in by Woods. in a XXXX, $X.XXX results. of a to new increase XX% the our in a Putters category in Soft ball by Chrome a the XX% a and Irons our increase

core Excluding our the net TravisMathew increased business, XX.X%. business sales

impacted in nine net $XX Foreign first the international by currency positively sales million months.

by to XXXX, the first prior expense of Variable same XXXX, the same XX.X% compared can basis XXXX the of of nine TravisMathew and $XXX which in The sales, XX.X% by million increased net nine cost in a gross to higher on the offset to net million on was newer XXXX, months translation selling in nine to of year. first sales average $XXX increase reinvestment the XX.X% in as the Operating point the the business the period income a nine you related business, a related exchange in increase XX, months technology million the $XX compared nine Operating mix and compared to the income first in to compared was of of in related XXXX. XX%. in XXX see expense in XX.X% operating products. exchange. driven in to margin $XX negative the was first expenses in in is related As net full for core was first of months XXXX of the compared which reflects price, of foreign TravisMathew increases of XXXX expenses XXXX, of an the addition due product favorable product all months sales partially continued quarter business. slide of percent Operating $XXX months impact the for core increase period million the impact foreign of a higher operating million to was expenses business, to to

first over in was of non-recurring of months decreased from shares diluted Fully first operating $XX resulted an $X.XX operating in lower to income million, XXXX other of months for the of per XXXX, the nine $X.XX of expense compared in months nine earnings XXXX XXXX share in The million XX a months from compared increase non-GAAP expenses hedging of the on primarily year. months of nine of earnings XXXX. Excluding XXXX. prior $X gains expense income XXXX the versus was share XXXX of to XXXX, increase losses first non-GAAP the XXX% in first per for the million million $X nine first in Other million XX%. the expense acquisition nine XXX

XXXX, Excluding XX% nine nine earnings XXXX. of acquisition diluted expenses first first per the $X.XX from share the share to per fully months of from XXXX transaction earnings increased months non-recurring compared the of non-GAAP for

Turning cover balance now and key to XX. I items. certain will slide flow sheet cash

TravisMathew The liquidity availability liquidity, the ability million core on XXXX ball at the represents plus loans the under incremental end was third you and compared demonstrating which finding generate acquisition, million As our our business in improve. in that partially core stock generated Available to asset-based cash our year was $XXX free offset to investments from We deployment are by from can operations of $XXX investment liquidity golf plant. capital additional and to credit for ago. facilities in are growth the believe as capital we quarter the in repurchases, opportunities. increased our and in our continues the and Topgolf cash our good a hand opportunities our to excess see flow business deploy of cash

quality accounts of in to was ball million of and the XXXX. million for in of XXXX to to with $XX by first receivables launch net the of $XX months believe to the sales slide decrease overall Also new upcoming collection our end were expense in Capital inventory third a compared adequately low inventory we and due end to golf Depreciation for season, remain XXXX. XX expenditures at time. the XX% DSO $XXX accounts increase the We our the compared American an driven XXXX, rates. million quality $XX compared nine We accounts this remain receivable amortization of inventory, consolidated preparation inventory days compared for at displayed timing of was balance the with and mainly earlier. were million This third comfortable quarter on levels, our at investments the levels to Our – months time the comfortable $XXX XXXX. XXXX. days quarter for and XX, XX in-transit September increased this the end $XX receivable Also XXXX and plant. increase Chip the we at of discussed to are at our as of million, first to Golf better XX% reserved of decreased million nine $XX the by XXXX due in increased

Finally, stock for we for through the approximately awards. our I'll quarter nominal acquired repurchased Year-to-date shares amount repurchased of settlement on of equity both $XX third shares X.X of XXXX a open have purchases cash. now the of settlement through comment shares the and of million includes market XXXX, guidance. awards. the company in This million equity

financials financials. As and slide of above. OGIO acquisitions the that non-recurring providing XXXX we tax non-GAAP XX, comparing and from to expenses GAAP on non-GAAP TravisMathew are deal-related you guidance $X.X mentioned can $XX our see resulting XXXX and million XXXX The are of expense non-recurring exclude million

operating XX% As seen XXXX estimates our year guidance. estimate. million be estimated expected on will an be range consistent to by prior estimates our the The previous of slide estimate be increase to growth the of XXXX $X.XXX sales XX% We than shares is our to XX, million sales to $XX of in $X. million to previous currently year to are XX% XXXX over based $XX $XXX be XXXX and guidance net sales net $XX higher $X billion, We versus to XXXX to incremental million compared the $X.XX earnings foreign $X.XXX in billion driven increases The guidance. year Putters, currently gross XX consistent estimates to to increase The per an rates and previous to that expenses XXXX to XX.X% is of in previous full in to higher with full for figures The retail sales new the market core Rogue of Odyssey on attributable GAAP to impact by outstanding. the in anticipated XXXX line compared that prior business variable full are Soft the levels. favorable share core are an estimated to GAAP costs estimate Chrome due grow to year company golf million, currency changes which increases business driven conditions. margin be the being $X.XX with will $X.XX continued full positively XX% compared projected ball, million approximately increase irons; XXXX. by

be XXXX estimates. XXXX, estimate are in not assuming XXXX to $XX rate increase the currency for amortization estimate consistent to million We favorable capital approximately our a year full and our concludes We $XX core estimate driven expense in in expenditures approximately prior XX% today. credit includes R&D $XXX EBITDA, XXXX. foreign We be a approximately which approximately generally EBITDA million. versus that XXXX million of is for to additional million, tax also $XX included with rates. our $XX and Depreciation be exchange to adjusted million, TravisMathew, tax by XX% prior our business, estimated prepared were That of adjusted remarks the

call questions. We open will the now for

Operator

comes first Zaccone with Our from JPMorgan. Steven question

open. is line Your

Steven Zaccone

much and congrats guys Thanks on quarter. Great. another very strong

Oliver G. Brewer III

Thanks, Steve.

Steven Zaccone

on is question gross Our margin.

Golf margin saw outlook? that driving to to fourth gross margin at You the drag on much you pressure the than more the performance guidance third materially are this and Is quarter full in ball better alleviate little timeline can costs arrive ball year? What's along guidance margins? should in for think next on about way gross overall improve expectations. the elaborate And the lines, segment the same of half a expect year unchanged embedded these margin to then a those a decline of and much quarter we in this to first to gross how year there to a bit margin

Brian P. Lynch

shifted QX the you'll in there's also to just Brian. decrease combination decline allowed – lower in then... some between And we the QX gross Primarily, it's in the the QX. expenses lot; see affect margins and revenues that Steve, it's and Sure. a from margins

Patrick S. Burke

Patrick. This and No is maybe.

just will that product that well. so we're less a hurt add launching to products, mix launch QX – bit margins remember little higher the Just so has is as

Oliver G. Brewer III

project of margin year the Golf are then The related the it's to we saw during margins, ball to some Chicopee we quarter. has gross Chip. we've this had and – see been on Golf and We will ball Steven,X doing line headwind quarter on investment improvement capital margin are in projects – those nicely. previous some that the progressing relative on which Okay a

Golf to as margin as be. there ramps there project the year we to expect it And through gross into on expect So we we later ball that improvement hope of it's next would the will stages and there of capital trend transitions work projects status. the is be and that positive and

Steven Zaccone

Great. much Thanks very guys.

Oliver G. Brewer III

you. Thank

Operator

Your comes Anderson Susan from next question B.Riley. with

open. line is Your

Susan Anderson

you on really I the wondering performance. Hi, another good if quarter. Nice little could good touch was international maybe evening. job a more on bit maybe

about you're felt maybe on it how you felt the but talking said when we're growth talk the year? that just thing slower just – a you was Japan a next think I across regions? you impact one-quarter seeing like be then you of (XX:XX) UK over may should And the all about kind that more little guys the bit bankruptcy

Oliver G. Brewer III

Susan. Sure

and XXXX, they've sensitive launch in So equal year significant reason market XXXX. it's When But expected drove in did XXXX. at quarter. to launch QX over of our was year you in XXXX in was at a they're relatively quarter, Japan, meaningfully saying results had it that the in which Japan which very and the Irons of the That during in had one XXXX. quarter in QX, slow in that an much don't too they're down some to very read I'm market into they smaller which excellent products growth significant what slow over the we to in QX and times, products performance it's last the different look

into that. I Japan of issues is a to specific to one it's read of that not a lot those the quarter launch relative timing lot So and think

shape, as very levels year perform think fundamentals inventory it's solid. to I and there. and to good well the important, mentioned, are anticipated very The there market are shape. in very the end continues business in Our And good

the UK slower general than a the where like and been I this the in stand Europe we year. picture, market big overall. So market or where of has rest The is world

course that to headwinds of I'm is is Some that market. more related. weather macroeconomic also of it some are of little sure that specific

If ago, on fastest back the that stage. a the growing was market international you year step market

I up, because a and Golf noting, we it's but significantly worth it point So us material point don't think year. headwind the it it'll too material within certainly into the our brought this think at next be guidance hence anniversarying grew situation year at more in And XXXX. a a tough is And this I us factor for for it's balance year. this of don't American for

but – the only noting worth brought we reason up. it Just is

Susan Anderson

you differences And Great, kind goods you more then just hard talk saw across there? that's the growth growth just very the could categories, the if one dollar the maybe helpful. versus of unit about

Oliver G. Brewer III

I goods. specific in in total don't front have across very and to information general, growth hard if that's I on was nice strong of category-by-category because believe, this that. year iron goods we wedge enough me go in saw year a partially it I know unit but hard

nice So you see some then growth And there. in...

Brian P. Lynch

Both volumes prices balls and and on board, putters for woods, basis. the irons, average selling are across year-to-date up a

Oliver G. Brewer III

And comment correct? is you're talking specifically on – Brian, your Callaway

Brian P. Lynch

yes. Yes,

Oliver G. Brewer III

Right.

Susan Anderson

helpful. Great. That's

Oliver G. Brewer III

your Susan? answer that Does question

Susan Anderson

Yeah. Yeah. quarter. That's much. No. so helpful. Thanks Good next luck

Oliver G. Brewer III

Okay. Thank you.

Operator

Your next question comes from Dave King with ROTH Capital.

line open. is Your

Dave King

Afternoon. Thanks.

get to behind assume you on it ball of cost a Once issues you, product the fair it? than cover graphene the increases associated ASP questioning on line the with that more yield bit. up should ball First, increased maybe the margin following those is

Oliver G. Brewer III

going if it yes it's volume Dave sensitive. But volume the – well. bit hit goals, a on that to specific little we our product, be

Dave King

Okay.

that's QX following what's then industry questioning of of And the got product once slower to for guess be on well, should Thanks. as on Callaway that I growth? if timing up hear. you revenue And growth Specific normalize guess. growth reflect and good about the line launch we how industry Okay again? in that terms for thinking guide, to that the I you've

Oliver G. Brewer III

we're the year. into Obviously, late very

flat that that single-digit a process, market good been forecasting itself anticipating to through go we're market our conditions, going market's and right conditions. little are quarter in The we the continued maintain of and will estimations in on we that fundamentally as forward. dependent now less we'll So so it's that strong, up see low and

Dave King

Okay.

a year, next your early then everything bit maybe next but So assume pipeline. see with on based further know industry to helped that perhaps crystal year you about thinking in it's growth fair we then to is can strong a today? terms ball – fair as with it of product assume I Is

Oliver G. Brewer III

a on that in the is if better theme it a fundamentals bit – you goes years and of solid are and it's depending for structurally industry and little very about industry It's very the that position significantly improving. it's we've now good – two down it's the up at talked levels. consumer think is such, been almost a still I now and fundamental sentiment, but near-term on events golf

yeah, our So, remains outlook positive.

Dave King

taking for Thanks hear. to questions. Great Okay. my

Oliver G. Brewer III

Thank you.

Operator

next Andress comes Your with from question Brett KeyBanc.

open. line is Your

Brett Andress

afternoon. Good Hey.

Oliver G. Brewer III

Hi, Brett.

Brian P. Lynch

Hey, Brett.

Brett Andress

The get implied comparisons do Just that your just yeah, are easier. Obviously, building on – quarter. again. question building down shipments afternoon, wholesale industry good meaningfully industry fourth the in

own also get Your Callaway-specific comparisons easier. retail

guess, are more this just launch share in to to exit more view year you inventories? you – strategic channel that I a not going quarter your this much on are with significantly cleaner So Or you're knowing taking fourth the product? is losses conservative

Oliver G. Brewer III

Well, disciplined. Brett is what we're definitely doing

to – the on we heavily focused our and that very everybody first more of that So all be long half second doing would brand year going long interest it is We is our the half over run. challenged and think that told product business was the in be our best from cadence the perspective.

or we is part I overly and of conservative a the we amount. we're period best year. over the If full of our be But year, of overly it at long-term you any do wouldn't where end indeed we quarter, of It's in And look it by that quarter, a think call or metric may the market time the not aggressive. plan. a at beating meaningful reasonable estimate will beyond any

Brett Andress

I Got on And wanted tariffs. to also ask it.

for or thinking any List new China effect XXXX? quantify an or in way when List this went are any about that we there impact components to into September, X source should that So you XXXX be or items from in and

Brian P. Lynch

Yeah. only now – headgear are XXXX. it's that and largely bags Brett, nominal the and affected it's for right

is Reg an from the have XXXX into from go effect to million and we're estimating year. a Going XX%, $X $X scheduled – that to million next currently It on XX% would us. impact

Brett Andress

squeeze some TravisMathew there? Can revenue then of give was And number more, if more the detailed more Kind one of could maybe a Okay. you in what the the just housekeeping. on I quarter?

Brian P. Lynch

the about we're year to track that. say $XX trending breaked quarter we Haven't up for towards the by I'd still are that million on hit

Brett Andress

Awesome. All you. right. Thank

Oliver G. Brewer III

Thank you.

Operator

with question next Your from comes SunTrust. Michael Swartz

Your open. line is

Michael A. Swartz

guys. evening good Hi,

Oliver G. Brewer III

Hi.

Brian P. Lynch

Hi, Michael.

Michael A. Swartz

quarters, at TravisMathew in I prior something a quarter the significantly guess if with I quarter there. of I'm just the that be Brian, Hey, we down thinking right, had of were doing that math a should specific the in the in compression? and year-over-year as good like mix Chip some think there year-over-year seems business pretty showed Is margins growth bit you gear look obviously I to the of little caused or pretty

Brian P. Lynch

You talking about margin? operating

Oliver G. Brewer III

the He's margin looking at, yeah, table. operating off

Michael A. Swartz

gear yes. on business Yes the

Brian P. Lynch

I'm showing slightly. it up

Michael A. Swartz

last doing and year Okay costs the there I'm due was wrong the had some think because acquisition. OGIO you to in I embedded TravisMathew it probably math

I So looking I was be basis but it like was backing that wrong looks down, it those out may it cost. that? On at and ex on

Brian P. Lynch

weren't profitability. Yes I line in corporate were so think the Michael they in those the costs segment

it's So already backed out. probably – it was

Travis So right? year. I up and last we more are think in that's slightly gear Versus profit, business

Oliver G. Brewer III

We're showing XXXX was XX% XXXX XX.X%. and was

Michael A. Swartz

the past over you sheet just all of pretty quarters. aggressively in delevered right. couple of That's terms And balance

cash on profile maybe Brian, like going what's usage keep we – flow So the balance forward How zero the think a maintenance would about of forward? position. you of going of cash to level And the sheet? you net being hand do debt business on cash would on this keep just

Oliver G. Brewer III

Michael that. first I'll least at take part the it of

in to opportunities, So reinvest the business. we've and been to able back attractive find areas

foremost has of successful desired first most and our that been use and So cash.

also for such outside opportunities We and look the investment as – OGIO TravisMathew.

strategy have investments strategic And in believe and the if also is the parcel buybacks, part we et to it opportunity and core be Topgolf to But how to of leverage. take growth there. and with pleased capital and they and have we delivered, back operating the deploy develop. attractive both first and continue an in and are be disciplined have structure to of we how happens certainly investments they course dividends, and when been advantage share going mix our been into the we about it and cetera are But then of business, that. of We we part capital driving foremost

Brian P. Lynch

we so then places. million just in but want around the because many much we on have always two And operations it your about we part how to of different globe $XX hand keep need cash to question varies, million $XX

facility, always see, the seasonality credit it then and probably and year. the level how we're what so our And of that's fluctuate you'll depends it during see partly so borrowing, you'll on varies

Michael A. Swartz

you. Thank Great. Okay.

Brian P. Lynch

you. Thank

Operator

Your James. next from Wewer Dan question with Raymond comes

Your open. line is

Dan R. Wewer

Yeah. Thanks.

I'm Just any think of drivers. high? is the without blow pricing wanted competitors' is of kind continue one industry price to you consumer, new to line take your of about from product to there you where to been point able a ask price too back introductory the that hearing that price to going have but get is going it's $X.XX, has great

Oliver G. Brewer III

it I that ELY to an What DSPD, product. different know how get is pricing too is is point. some Dan pleasingly superior, about certainly at the utility animal commercially much might very high be. can related in would It's product. interesting and don't when

do If over delivered they several certainly it's we've do price-sensitive that consumers great to you last it able products. build that significantly price the as years. continue not take and mousetrap over certainly a we've are last unless better But – been positive price the our so to can't and you for you several evaluate, industry and deliver, something been the a we'll actually years

Dan R. Wewer

question would completed It's thought TravisMathew almost purchase. that acquisitions. I XX have now. the deal regarding would have have since by you is another I Second months

enthusiasm is curious acquisition as Just what to going for your forward?

Oliver G. Brewer III

as the enthusiasm same is has been. Our it

here. We are a under not timetable

things on we also continue in are And We some we this We that are disciplined feel have are record. working. going acquisitions track done to right and determined are done like be process. we've must in the to fortunate

to types you clearly and it's timetable us can of part expect these disciplined but be things to on that. no is So lumpy of strategy, remain there and our

Dan R. Wewer

you noted the OGIO, into Europe. I regarding and out Japan And well rolling that question, as you're last as have TravisMathew

your Is thinking this forward? bit when need will moderate? on You we roll that support point. two revenue going of you growth of to growth and at are point those sounded OGIO upbeat at Europe you international domestic a growing for for or Japan talk and with growth? the kind objectives what more brands But what TravisMathew in some that And this type about you a investments does business XX% can

Oliver G. Brewer III

don't I has We at the TravisMathew for near XX% moderates that point point rate know It's growing a don't at future. point. some and in what faster time. see it some than

Dan R. Wewer

Yeah.

Oliver G. Brewer III

in two benefits now. of our continued strength it's we continue international brand into our will again are And results these into to growth brands roll embedded this those are The but embedded and the investments at the have initiatives see general for been those And there. business that of one able year in scale next, we ongoing. moment. are They

are are of the optimism in. be they in brand we which I initial And it so going comments to those to that to and The – to grow capital. investing is up identify are it lot bring just grow they of a and to TravisMathew has going hope a a but the It's use reason wanted revenue and things for that we pretty essentially a the estimates the of doing are future going well in is my platform quickly on potential. modest, lot one

Dan R. Wewer

you. Thank Great.

Oliver G. Brewer III

you. Thank

Operator

from comes Rommel Aegis. Dionisio question next Your with

Your line is open.

Rommel Dionisio

much. so Yeah, thanks

Scotty update Odyssey has is an of drill could that the in doing Putters of could us brand just update well, market? of ultra-premium you want it's all there? success is doing, think two you to it, that how on the Just the but your having bulk down Obviously acquisition. year. segment And been you segment guys cited I the just give Toulon since years Cameron been the strong on which the on

Oliver G. Brewer III

is but category, still very of Chip with strength growing I more had Putter in It Toulon small. great pleased small market. I'm brand is putter of brand you very year thank with product Well, a Putter that recognizing as our again. The The that. momentum gaining what a XX% but than of strength less for and percentage from this pleased total they've there's that very going is still category our so good quite line the business. It's quickly and see forward. probably it's

But overall business. of in if that positions position we the think the premium have it in dominant Cameron the a has based at and the side technology I putter dominant categories a face insert Scotty side, milled still well. premium position look you

Rommel Dionisio

Okay. That's much Thanks helpful. very

Oliver G. Brewer III

you. Thank

Operator

comes question from with next The Cohen. Kernan John

Your line is open.

Krista Zuber

Good Thanks John. taking afternoon. Krista for This for Zuber questions. is on our

you as I First highlighted head gross of you about partial some wondering margin to on light was product kind think next shed should of in if cost that as pressures could offset we a Just just the into QX. we year? some how

Oliver G. Brewer III

and fact were product buy might cost more we I more high-end we pressures think designing what products. complicated a the that are

better making And we're often So At prices we harder you product to. how it's and on following don't raise make average where what side. point cost referring I make. up product that's in see any pressures in commodity you inflation do to selling better product significant the this think

Krista Zuber

TravisMathew, And levels think on inventory fall I XXXX? lapped front inventory then Thanks. for the do kind now Great. where out you that of you've your ideally guess should

Oliver G. Brewer III

the higher – business to Overall go sales. have inventory to to increase, with our of the should levels they fall going out? Where continues as higher big we're with

year year in-transit If then we of – you service also look prior that the have adequately year. lower the to think accounts. at too compared this part inventory inventory last to we low we is the increase is additional And that had year-over-year of some

of a If And think percent numbers. as with you that line our the inventory we at look historical in it's sales I continue. those hope trends

Krista Zuber

last just for or that in you. you of my pace fiscal competitive launch is launch Thank specifics more be to into XXXX cadence? then on provide back believe there color XXXX? schedule XXXX had is reverting the And going, question the this for you the I obviously, to cadence any can going Thanks. is reasons, on Terrific. without Is product

Oliver G. Brewer III

us going about a on more we'll of that. than you're that tell ahead excited call. other Unfortunately, talking question. the line I'm one we're lot to Good be quarter next about that (XX:XX) one that And on the product you

Krista Zuber

you. Thank enough. Fair

Oliver G. Brewer III

you. Thank

Operator

from George Capital. with Imperial comes Kelly question next Your

line Your open. is

George Arthur Kelly

Hi, questions Couple guys. for me.

So, – international. in will all Japan, happening and be those that Is first both to XXXX? in TravisMathew is back Europe going

Oliver G. Brewer III

set cetera in running it subsidiaries, there that a for probably in We work specific we're and to get it's right on then distributors But now a Depending sell had and have through bit transition they to George. sizing options, worked Yes, market little We, through to a have and develop you was up. very those originally, Asia market. through that where et markets, previously various the now. you distribution small. base

stylistic and et with small then showrooms, that. distribution work differences, so systems, some that goes back Sometimes this all end cetera,

hope this year. revenue nice Probably probably over towards trend did it meaningful. the next occur So, and year. a whole will but It'll is gain meaningful we on modest that long-term thing, attractive, percentage be not

George Arthur Kelly

there, your in And your that existing business you utilize partnership, can something TSI the Japan it is business?

Oliver G. Brewer III

what There and there. so does or do That's and do JV, do capabilities can progress. or and are good have to mentioned, choose there. can't making it complicate overlap a there not and we certain scale to certain what it But we'll assets we that will capability handle as are

George Arthur Kelly

not and this questions just you're What costs incremental come a but Okay. the Golf but and the this in few related so, – couple operating that year projects operating quantify And additional incremental related questions, on business. related a to doing? – can has – then up to costs the the CapEx ball you CapEx,

Oliver G. Brewer III

incremental costs? The operating

George Arthur Kelly

some things you added issues (XX:XX)? – where thought aren't the I flagged Yeah, there that or was production

Oliver G. Brewer III

in improvement can't, that. Golf Yes, we or not that to I George, did understand can down year-over-year is quick And calculation part a basis. our see, are ball to tell we're you, choose to. But a totally a that capital the can related we just on of projects. no, all margins, I operating significant you We going that's reveal,

George Arthur Kelly

just Okay. be of trying And to sort understand and go going point. of, that's then, I to would some most it away guess, at what I'm – that's is, one-time,

Oliver G. Brewer III

Yeah.

going It's the to we're through go capabilities, George. a we to up. because our can capacity, So will our in, we metrics with that work return way our project. going and attractive fixed recover. it's And that, building point we D&A these complicated, should our little I also quality scale to and our goes we're you cost to our But increased as that increase believe It very to projects gross as only margins hopefully, positive Some very scale. base of going away, profitability facility, capital we're very add right? and gets of go about optimistic

George Arthur Kelly

CapEx ball complete, is how go-forward think And just maybe basis, CapEx? That's this project then do as major on percent about a great. maintenance great, say what last – would question for is – CapEx or Once revenue is you that's you maintenance me. of the the a

Oliver G. Brewer III

We working don't determine on to action George. as now, you can have that But item if and let us that we see we're there. for right that a for take something you

George Arthur Kelly

you. Thank you. Got

Oliver G. Brewer III

Thank you.

Operator

Point. Compass time The we with comes from have today for Casey last question Alexander

Your open. is line

Casey Alexander

Hi. Good afternoon. Real quick, could me and depreciation you again? give CapEx the numbers

Brian P. Lynch

For nine months? the

Oliver G. Brewer III

to Year date?

Casey Alexander

forecast. The

Brian P. Lynch

for to then $XX CapEx at and million We're Oh. about million million $XX $XX for D&A.

Casey Alexander

how When Thank has of talk would industry unit break terms you. come much growth, year-to-date great. down growth has growth? from about Okay, come you much growth you how average in that prices how from selling versus

Brian P. Lynch

have Good that Patrick? question. you Do

Patrick S. Burke

and at then growth got X.X%. X.X% growth of I dollar unit

Brian P. Lynch

Datatech? to according That's

Patrick S. Burke

According to the U.S. for Datatech

Brian P. Lynch

channels. U.S.

Casey Alexander

don't get quantify end all costs? is of Show, what having one at the Chip recently equipment, it the know all most you the PGA one-line know to because Merchandise out – Merchandise you single And the a paid you've that this the little bills, competitors one bit much can expensive And Okay. probably more of it. know then and much without props, applied a PGA after they people, metric do the do are which of of I Show how And the guys you that leaving item the the moved anything announced how I year. the is of conceptual, all it? How quantify you

Oliver G. Brewer III

strategic you supported now and can But the write out important the and it we are. where they view it and and annual to not our which at get going circumstances there of reach America the with and the the reliably ways. PGA The more don't – gathering Yeah. our PGA don't Interestingly, the of reach ours. you you it Channel. long-term channel. are any a We and It's controlled very Casey, is industry. the of customers partner we our would companies Grass But scale relationship without Channel – that we think sales orders have change industry, it. of and such on largest may view position lot of it. of sometimes Green Grass quantify their a importantly furthering PGA is good and Green to very depend is mind a is It professionals strength what but different the commitment individual view be different I that And as in good question. particularly same Show data by

Casey Alexander

the to as sales to with all And the appreciate cadence product PGA months highly And new that. the year. it launch we I has of the used out be But a over moved product. all that are XX you interacting sophisticated the platform calendar. now teams professional forum for have new – And

for pick just wonder incremental neighborhood worth start And that be believe you away cost that you're and to it, to opportunity products to I so at subsidizing sales to cease when the does when to your business? mom-and-pop begin a try develop that

Oliver G. Brewer III

and and shareholders. and and results the it's good but we're going it to we look against point I company, we're the would it and we'll PGA are see now, But We're Show our XXXX most Casey. brand, ongoing, committed be to evaluate right always move, of the we'll at competitors there going doing. a to to what put right use try to I now at proud that. our And your it and think of advantage

Casey Alexander

taking my right. I All Great. it. thank appreciate you for questions. Well,

Oliver G. Brewer III

Sure thing calling for Casey. Thanks in.

Operator

for questions. like Brewer. to over Mr. gentlemen turn And I'd to we now all Chip time that's the ladies and call back the have

Oliver G. Brewer III

on and everybody in. attention thank appreciate questions. call Well, good the We all for calling your you the

and again year. rest year. forward We you results a the great proud look with the of early next of I are to talking Have

Topgolf Callaway Brands (MODG) 24 Oct 182018 Q3 Earnings call transcript