Acushnet Holdings Corp.

Good day and thank you for standing by. Welcome to the Akushnet Holdings Corporation third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Sandra Lennon, VP of FP&A and Investor Relations. Please go ahead.

Good morning, and thank you for joining us today for a Krishnett Holdings Third Quarter 2021 Earnings Conference Call. Joining me this morning are David Marr, our President and Chief Executive Officer, and Tom Pacheco, our Chief Financial Officer. Before turning the call over to David, I would like to remind everyone that we will be making forward-looking statements on the call today. These forward-looking statements are based on Acushnet's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations. For a list of factors that could cause actual results to differ, please see today's press release, the slides that accompany our presentation, and our filings with the U.S. Securities and Exchange Commission. Throughout this discussion, we will be making reference to non-GAAP financial metrics, including items such as revenues at constant currency and adjusted EBITDA. Explanations of how and why we use these metrics and reconciliations of these items to a GAAP basis can be found in the schedules in today's press release, the slides that accompany this presentation, and in our filings with the U.S. Securities and Exchange Commission. Please also note that when referring to segment and regional year-on-year sales increases and decreases, we will refer to sales in constant currency. And please also note that when referring to year-to-date results or comparisons, we will refer to the nine-month period ended September 30th, 2021 and the comparable nine-month period. With that, I will turn the call over to David.

Thanks, Sandra. And good morning, everyone. As announced in today's earnings release, the Cushnet continues to build terrific momentum across our businesses as our team effectively navigates the current supply chain environment. Global golf market fundamentals are healthy and demand across our Titleist, Footjoy, and Schuss brands is strong. Cushnet's talented associates and committed trade partners are doing great work to keep pace with this demand. While operationally, we benefit from vertical integration and geographic diversity within our supply chain and a company-wide commitment to the health and well-being of our associates. Now getting right to our results, third quarter revenues of $522 million increased 8% versus last year and are up 25% compared to 2019. Titleist Golf Clubs, Gear, and Foot Joy led this growth, with clubs and Foot Joy each posting double-digit gains. Golf balls were up almost 40% versus 2019, yet down 3% versus last year as availability was tight throughout the quarter. The company's growth and strong top-line performance contributed to adjusted EBITDA of $70 million in the quarter, which, as noted in our last call, reflects incremental supply chain costs and investments throughout our business. Year-to-date, The Cushnet sales exceed $1.7 billion and we're up 45% and well ahead of 2019 levels. Each of our businesses is in great shape and strong demand is driving healthy growth while we manage tight availability in just about every product category. And year-to-date adjusted EBITDA of $333 million is up 80%. These results fortify the company's strong balance sheet and provide us with great flexibility to invest in future growth opportunities and execute against our capital allocation priorities. Now turning to slide five and a review of our business by segment. As noted, Titleist Golf Ball sales were down 3% in the quarter and up 37% year-to-date. We are pleased with the performance and momentum of the Titleist Golf Ball business. Titleist ball count across worldwide tours is a leading 73%, more than seven times the nearest competitor, and our teams are doing a good job leveraging this pyramid's success into strong demand across regions. And we are enthused about the recent launch of our new Pro-V1 golf balls with Radar Capture Technology, or RCT, which has been developed by our team to optimize the indoor user experience with TrackMan devices. While not a large volume opportunity, this product offers a good example of how the company's unwavering commitment to golf ball R&D can enhance the golfer experience and further position Titleist as the golf ball innovation and performance leader. As discussed on our prior call, golf ball production levels have been limited by raw material shortages, and we expect this dynamic will continue, resulting in tight availability for the foreseeable future. And similar to last year, we have recently converted production lines to support the launch of new Titleist Golf Ball models in the first quarter. As you would expect, the timing of this transition becomes a balancing act as we seek to both satisfy at-once demand while also building inventories to support upcoming launches. Moving to Titleist Golf Clubs, sales were up 12% for the quarter and 52% year-to-date, with our highest growth coming in the U.S. and Japan. The global launch of our new T-Series irons in August was comprehensive and successful, a testament to the good work by our product development and operations teams to advance, plan, and execute in this dynamic environment. Underscoring Titleist Golf Club strength and momentum, Titleist was the most played driver, hybrid, ironed, and wedged this past season on the PGA Tour, where more winners use Titleist equipment than any other brand. The Titleist Club business is in great shape. And while the fourth quarter will be down as we comp against last year's TSI driver launch, we think the business is well positioned for the future. Our Titleist gear segment continues to grow and gain share, with sales up 4% in the quarter and 33% year-to-date. Sell-through of our 21 line has been excellent, and while availability has been impacted by factory shutdowns in Vietnam, we are seeing this situation begin to stabilize as vaccination rates climb. Moving to foot joy, you see year-to-date sales of $462 million are up 42% on the year and 18% for the quarter. This growth is led by the success of key footwear franchises, Premier, Hyperflex, and Traditions across all regions. And the FJ apparel business is tracking ahead of expectations led by accelerated growth in the U.S. and Korea and great response to our seasonal collections. And rounding out the Acushnet portfolio, we are pleased with strong performances and growth from Titleist Apparel in Asia and our Shoes Golf business in the U.S. and Europe. Now turning to slide six and a review of our key geographies. As you see, all regions are healthy and posting strong year-on-year gains, with growth ranging from a low of 30% in EMEA to almost 50% year-to-date growth in Japan. Acushnet's business in the U.S., which represents about half the global golf market opportunity, is up 45% on the year. Year-to-date rounds of play have increased in all regions, with the three largest markets of the U.S., Japan, and Korea up between 8% and 15% through September. Now looking forward, we are optimistic about the health of the game and its underlying fundamentals. Golfer engagement levels are high and our trade partners are successfully adapting, to golf's evolving new normal. Our Titleist, FootJoy, and Shoes product development pipelines are in great shape, and we look forward to launching a comprehensive range of new products over the next several months. And while we are confident in our team's ability to proactively manage supply chain complexities, we anticipate that the current environment of raw material shortages, disrupted production schedules, longer component lead times, and increased freight costs will continue for the foreseeable future. That said, we're enthused that many of our supply partners are investing in their infrastructures, which will ultimately benefit Acushnet's supply chain capabilities. Looking to the long-term, accelerated investments in our digital infrastructure over the past year are leading to continued expansion of our global B2B and B2C capabilities. These investments will drive improved service levels, shorter lead times, and enhanced user experience for our trade partners and end-user golfers. Similarly, the transition to our centralized U.S. distribution center is well downfield and will over time provide faster and more cost-effective fulfillment for a wide range of Acoustic products. And our $125 million capital investment in support of golf ball manufacturing innovation and customization is underway. and we are optimistic about how this initiative will position the Titleist Golf Ball business for future success. In closing, we are confident that Acushnet is structured and well-positioned to capitalize on this vibrant golf market, and that our focus on the game's dedicated golfer and proven track record of product innovation and supply chain management will support the company's long-term growth objectives. Thank you for your time this morning. I will now pass the call over to Tom.