Acushnet Holdings Corp.

And good morning, everyone. As always, we appreciate your interest in the Acushta Company. As reflected in this morning's earnings release, the Acushta team continues to excel at generating momentum and developing our supply chains to meet and serve as growing demand for our Titleist, FootJoy, and Schuss product lines. I must acknowledge and thank Acushta's talented associates and our committed trade partners for their great work in this dynamic golf marketplace. While last year's record second quarter set a high bar, I am pleased to report that each of our segments posted gains this past quarter. We see this as positive reinforcement of the company's commitment to product innovation, our ability to generate demand across the entire acoustic portfolio, our strengthening supply chains, and the overall health of the golf industry and dedicated golfer. On tour, Titleist golf balls were used by each of the four men's major championship winners in 2022, with Scheffler, Thomas, Fitzpatrick, and Smith each trusting a Pro V1 or Pro V1X golf ball on their road to victory. Bokey wedges were also used by all four winners, while Titleist drivers and Scotty Cameron putters were in the bags for three of the four wins. The company aspires to develop and produce golf equipment of the highest performance and quality standards to help dedicated golfers play their very best. And these successes on golf's biggest stages validate the performance and quality promise we make to all golfers. Titleist and Footjoy Momentum Across Worldwide Tours is helping to fuel our market success and financial performance. In addition to presenting our second quarter results, this morning we will provide updates on the company's strengthening supply chain, overall health of the golf industry, and our outlook for the balance of 2022. We will also address some of the key investments we are making to prepare for tomorrow's opportunities as we position our brands for the future. And affirming the board's confidence in the company's vision and capabilities, Tom will share details of our third quarter dividend payout and expanded share repurchase plans. Now getting right to our results, which as Sandra noted, we will focus on constant currency numbers. Second quarter sales of $659 million were up 11% versus last year. Golf balls grew 3%, while clubs, gear, and foot joy all posted double-digit increases in the period. And shoes also had a strong quarter, up more than 50%. First half total Accushnet sales increased 9% to $1.26 billion, with all reportable segments posting gains led by FootJoy and Titleist Clubs, which were up 21% and 9% respectively. Adjusted EBITDA came in at $106 million for the quarter and $226 million for the first half, down versus last year and ahead of our expectations. Now looking at our business by segment, Titleist Golf Balls continue to perform very well, delivering growth for the period in spite of production limitations caused by tight raw material supply, as were noted on our prior call. The situation improved throughout the second quarter, and we are now operating our golf ball manufacturing facilities at full capacity for the first time in about a year. We are confident and expect that our plants will remain fully operational for the foreseeable future, as we benefit from both improved output from existing suppliers and the addition of new supply sources. Given these circumstances, we're very pleased with our golf ball results and market momentum. And while we were required to adjust this year's launch calendar, our team successfully introduced new TorSpeed and TorSoft models in the second quarter. Titleist golf ball retail inventories remain low and we expect to gradually return to more normal levels in the first half of 2023. As noted, Titleist Golf Balls won the Grand Slam in the men's professional game and have been used by 74% of players across the worldwide tours, including 80% usage on the LPGA Tour, which is more than 11 times the nearest competitor. Titleist Golf Clubs grew 12% in the quarter and 9% for the half, as demand remained strong and our team did good work to flex up our production levels during the peak club fitting and retail seasons. T-Series irons, Vokey wedges, and Cameron putters are all in great shape, and we look forward to launching new TSR drivers and fairways in late September. TSR Metals have been building momentum on global tours since June, and at the recent Open Championship, winner Cam Smith and runner-up Cam Young each trusted new TSR drivers during their epic final round battle at St. Andrews. Operationally, golf club component availability continues to improve, and our team has done nice work boosting output to meet ongoing healthy demand and reduce lead times. And as with golf balls, Titleist Golf Club retail inventories are also tracking below our optimal levels. Next to our gear business, you see a 12% increase in the quarter to bring this segment to flat for the first half. Within gear, we are pleased with healthy gains in gloves, headwear, and travel. However, our golf bag business in the U.S. has faced supply chain challenges, which have caused delays and tight availability. And while this situation is improving, we will be investing to expand our customization capabilities and to enhance our service level and meet growing demand for custom gear. Now moving to FootJoy, where you see a 14% increase in the quarter and 21% gain for the half. The FootJoy team continues to build momentum with their relentless focus on product performance, comfort, and design excellence, and that is evident across our footwear, glove, and apparel lines. Demand for FJ Premier, ProSL, Fuel, and Flex footwear models has been especially strong, reflecting the great work by our footwear product development group. Fochoy's leading footwear and glove businesses posted double-digit gains for the half as our shoe and glove factories excelled at meeting heightened demand. To keep pace with anticipated future growth, we are working with our long-time footwear production partner and will soon expand operations beyond our JV factory and into Vietnam to add capacity and geographic diversity to our footwear supply chain. Fochoy Apparel was up double digits in the first half. However, our U.S. business has faced the same supply chain and fulfillment challenges that have affected gear. In response, we are investing to establish a state-of-the-art apparel customization center on our Fairhaven campus. This facility will support increased volumes, provide enhanced customization and quality, and open the door for future automation and innovation as we seek to provide leading custom services and solutions to our valued trade partners. Now taking a look at regions, the company posted healthy first half gains in the U.S., EMEA, Korea, and rest of world, while sales were off 7% in Japan as foot joy growth was offset by supply chain and fulfillment constraints, which impacted our other segments in this region. Overall, global golf markets are healthy, and in most regions, our channel inventories are below 2019 levels. First half rounds of play in the U.S. have been negatively impacted by weather and are off 6% from the record pace set in 2021. And outside the United States, rounds are projected to be up 4% through June, fueled by a double-digit increase in Europe and steady gains in Japan and Korea. Overall, we are pleased with the state of the game and participation in golf's major markets is healthy and in line with our expectations for the year. Now looking forward, we are enthused by the overall health of the golf market and the resilience of the game's dedicated golfer. As noted, we are making continued progress within each of our supply chains and are optimistic about our investments to build more capacity, flexibility, and efficiencies in our custom apparel and gear operations. We're confident in our balance of year outlook and ability to serve a strong demand for Titleist Foot Joy and shoes products, and as a result, are raising our full year sales guidance in spite of expected currency headwinds of about $90 million. And we affirm our existing full-year adjusted EBITDA guidance and note that this guidance also reflects negative currency effects, increased air freight costs, and the investments we are making to bolster our global supply chains. As we head into the second half of 2022, we are pleased with our momentum and are confident that our team's track record of product innovation and operational excellence will continue to support the company's long-term growth objectives. Thanks for your attention this morning, and I will now turn the call over to Tom. Thanks, David. I would like to start by thanking all our associates for their dedication and effort in managing through continued high demand and supply chain challenges to deliver yet another very strong quarter for Acushnet. Starting on slide 10, our results for the second quarter exceeded our expectations. Consolidated net sales were $659 million, up 5%, and almost 11% on a constant currency basis compared to last year. Overall, demand remained strong, and all segments showed growth in the quarter on a constant currency basis as a result of higher sales volumes and higher average selling prices. Gross profit for the second quarter was $344 million, up 3% versus 2021. and gross margin was 52.2%, down 130 basis points. The increase in gross profit comes primarily from higher sales volumes in clubs and higher sales volumes and ASPs in foot joy footwear and in gear, partially offset by higher manufacturing costs in golf balls. Additionally, we experienced higher inbound freight costs across all segments, which negatively impacted gross profit and gross margin during the quarter. SG&A expense in Q2 was $239 million, up 14% from the prior year. The increase comes from higher selling expenses as a result of higher sales volumes, higher distribution costs primarily in foot joy and gear as we invest in expanding our distribution and custom fulfillment capabilities higher it related consulting expense and higher advertising and promotional expense r d expense was 14 million up seven percent compared to 2021 income from operations was 89 million for the quarter which was 19 percent lower than last year and our Q2 adjusted EBITDA was $106 million, down 17% compared to 2021, but ahead of our expectations. Moving to our results for the first half of 2022, consolidated net sales were $1.26 billion, up 5% compared to last year, and up 9% on a constant currency basis. Gross profit for the first half was $661 million, up 2% compared to the first six months of 2021. Gross margin was 52.2%, down 130 basis points from the prior year. SG&A expense for the first half was $435 million, up 12%, and R&D expense was $28 million, up 10% compared to 2021. First half income from operations was $194 million, which was 15% lower than 2021. Our effective tax rate for the first half of 2022 was 19.8%, down from the prior year, primarily because of a change in the mix of our jurisdictional earnings. And first half adjusted EBITDA was $226 million, down 14% year over year, but also ahead of our expectations. There is a reconciliation of net income to adjusted EBITDA for Q2 and the first half in our earnings release, as well as in the appendix of the slide presentation. Moving to slide 11, our balance sheet remains very strong. At the end of Q2, we had about $107 million of unrestricted cash on hand. Total debt outstanding was approximately $396 million. We had $319 million of available borrowings under our revolving credit facility, and our leverage ratio was 1.1 times. On this past Tuesday, August 2nd, we completed the refinancing of our credit facility which had consisted of a $350 million term loan A and a $400 million revolver into a $950 million all revolver facility. At the closing of this transaction, we used the new revolver to, among other things, pay in full the approximately $306 million outstanding balance on the term loan and to refinance the outstanding borrowings on the previous revolver. The terms of the new revolver are substantially similar to the previous revolver. More detailed information on the terms will be included in our 10-Q filing with the SEC later this afternoon. This new all-revolver structure gives us additional flexibility to manage the business and to continue to execute against our capital allocation priorities. Accounts receivable at the end of Q2 was $386 million, up $8 million from the prior year. DSOs improved by three days. Our consolidated inventory at the end of Q2 was 467 million, which was up 56% from Q2 of the prior year, with increases across all segments. Note that last year's inventory was below normal, and we are pleased that we are nearing our desired level of inventory, which will enable us to better service our trade partners and meet the continued high demand for our products. Day sales and inventory have increased to 139 days compared to 119 at the same time last year, but are still lower than pre-pandemic levels. Cash flow from operations for the second quarter was 73 million compared to 182 million in Q2 of last year, and first half cash flow from operations was a cash outflow of 91 million compared to a cash inflow of 152 million last year. The decreases in both periods were primarily the result of changes in our working capital, which resulted from larger increases in accounts receivable and inventory and a higher decrease in accrued expenses compared to the changes in these balances in the prior year. And we continue to make investments in the business in the form of capital expenditures. We spent about $9 million on CapEx and Q2, bringing the first half total to $20 million. We continue to expect our full-year CapEx to be approximately $60 million. Turning to slide 12, our continued strong financial results have enabled the execution of our capital allocation strategy. Our highest priority remains investing in product innovation, golfer connection, and operational excellence. We also continue to pursue acquisitions that align with our focus on premium performance products that appeal to dedicated golfers. We believe that these investments will advance our long-term strategy and drive growth at a favorable return. Generating strong free cash flow and returning capital to shareholders is also a high priority. Earlier today, our Board of Directors declared a cash dividend of 18 cents per share payable on September 16th to shareholders of record on September 2nd, 2022. This will total a payout of about $13 million for the quarter and bring our year-to-date dividend payout to approximately $40 million. During the second quarter, we repurchased 950,000 shares for a total of approximately $39 million, bringing our total for the year to 2.1 million shares for a total of approximately $98 million. At the end of Q2, we had approximately $150 million of share repurchases remaining under our current authorization, and on July 26, our Board approved an additional increase of $100 million to the share repurchase authorization. Assuming continued strong financial performance and favorable market conditions, we will continue to actively repurchase shares and would expect to complete our remaining authorization over the next year. Our capital allocation strategy remains an important element of a Cushnet's value proposition, which we continue to believe creates a compelling long-term total return for our shareholders. Moving to our outlook on slide 13, we are enthusiastic about the overall health of the golf industry, and demand for our products continues to be robust. Our golf ball raw material availability has improved, and we have made progress in each of our supply chains. We will, however, continue to face some challenges in the second half, including expected currency headwinds as a result of the strong U.S. dollar and higher input costs. In addition, although we have started to see some decrease in inbound freight rates, we continue to use a significant amount of air freight to protect lead times. We also plan to incur higher costs as we invest in expanding our distribution and custom fulfillment capacity for apparel and gear to support future growth and enhance our service capabilities. Taking these factors into consideration, we are raising our full-year sales guidance and reaffirming our full-year adjusted EBITDA guidance. We now expect our full year 2022 consolidated net sales to be in the range of $2.2 billion to $2.25 billion. This sales guidance reflects over $90 million of projected negative foreign currency impact, including about $40 million in the second half. On a constant currency basis, consolidated net sales are now expected to be up between 6.8% and 9.1%. And as I mentioned, we continue to expect full-year adjusted EBITDA to be in the range of $325 million to $345 million. With the launch of our new TSR metals occurring late in September, we expect Q3 consolidated net sales to be just over 50% of total second-half sales and Q3 adjusted EBITDA to be about two-thirds of total second-half adjusted EBITDA. In conclusion, our associates and trade partners helped us manage through continued high demand and supply chain challenges to deliver strong results for Q2. While we continue to expect currency headwinds, higher freight costs, and higher costs associated with investments we are making to expand our distribution and custom fulfillment capabilities, we remain confident in our ability to meet our 2022 financial goals and to deliver a long-term total return for our shareholders. With that, I will now turn the call over to Sandra for Q&A.

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

Of course. As a reminder, if you'd like to register a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two, and please ensure you're unmuted when speaking. Our first question comes from Kevin Heenan of J.P. Morgan. Kevin, the line is yours.