Acushnet Holdings Corp.

Good morning, everyone. Thank you for joining us today for a Cushnet Holding Corp's third quarter 2022 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 a Cushnet'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 make 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 references throughout this presentation to year-on-year sales increases and decreases are on a constant currency basis unless otherwise stated. As we feel this measurement best provides context as to the performance and trends of our business, and when referring to year-to-date results or comparisons, we will refer to the nine-month period ended September 30, 2022, and the comparable nine-month period. With that, I'll turn the call over to David.

Thanks, Sandra, and good morning, everyone. As we will share this morning, the company's third quarter performance reflects the great strength and momentum of our products and brands, ongoing expansion of Acushnet's supply chain capabilities, and the resilience, both in terms of participation and purchasing, of golfers in all major markets. And I must note, These results also point to the continued good work and dedication of Acushnet's talented associates. As noted on slide four, third quarter sales increased over 13% to $558 million. And year to date, sales have increased 10% to $1.82 billion. These results are consistent with the across the board health of our businesses. with each segment posting gains against record levels of 2021. In addition to these top line results, you will note gross margins are holding up well in spite of currency headwinds and persistent freight pressures. This gross margin strength and double digit sales gains contributed to a 23% increase in adjusted EBITDA for the quarter. Product performance and quality excellence define a CUSHNET and are the foundation of our sustaining success. We are pleased with the early success of our fall product launches, and looking forward, our teams are enthused while preparing for a wide range of new product introductions scheduled for the next six months. This momentum and confidence in our ability to execute support the company's track record of delivering against our capital allocation priorities, and we have returned more than $175 million to shareholders through our dividend and share repurchase programs during the first nine months of the year. This represents the company's largest return of capital since these programs were first implemented. Now turning to slide five, we will review our segment results. Golf ball sales increased 13% in the quarter with strong sell-through and improving production levels contributing to these gains. Demand for Pro V1, Pro V1X, and AVX remains especially strong, contributing to gains in all regions led by the U.S., which was up 16% in the period. Year-to-date, golf ball sales are up 4%, and our operations team has done good work striking the right balance between meeting at-once demand with the need to build inventories in preparation for 2023. Titleist golf ball retail inventories have improved over the past several months, yet are still 5% to 10% below where we would like to see them at this time of year. And new Pro V1 and Pro V1X golf balls were launched across worldwide tours last month, and early response and support of these new products has been excellent. The Titleist golf club business increased 20% in the quarter and is now up 12% year-to-date. Our golf club story in the quarter was fueled by new TSR drivers and fairways, which are off to great starts after their late September launch. Titleist drivers are currently used by 11 of the top 20 men in the world and three of the top four women professionals in the world. Terrific validation and endorsement for what has been the most played driver brand on the PGA Tour for the past four seasons. And as importantly, we are pleased with the progress throughout our golf club supply chain, which is delivering enhanced service levels and reduced lead times, especially with our custom fit made to order products, which make up such a large portion of our club business. Titleist gear also had a strong quarter with sales up 35%. This growth was led by successful new product launches and the carryover of some second quarter demand, which pushed into Q3 due to supply chain delays. For the first nine months of the year, Titleist Gear is up 10%. You may recall this business was pressured early in the year by logistics challenges, particularly in the U.S., and we are confident that the steps we are taking will result in improved availability and reduced lead times as we enter 2023. Most notable is our decision to reduce supply chain risks by front-loading our gear inventory receipts as we have done this fall. And foot joy posted a 2% gain for the quarter and is now up 15% year to date with footwear gloves and apparel all up double digits. which I continues to build a supply chain for the future to keep pace with strong demand for foot joy golf shoes outerwear apparel and gloves. Our team has successfully expanded and diversified our footwear production capacity, and we are now fully operational at our new state of the art embroidery Center here on our fair haven campus. We are confident that this extra capacity and enhanced service capabilities will support FootJoy's continued growth and the great product momentum that our design teams are generating. Now for a quick look at our business by region. As we have said throughout the year, the game is healthy across major markets, and the regional participation variants we see have been largely attributable to weather-related factors. Global rounds of play have held up very well in 2022 as the low single-digit decrease in the U.S. has been mostly offset by gains from ex-U.S. markets. We continue to be encouraged by the game's health and momentum as participation holds strong against the surge that the game experienced in recent years. And with this healthy global golf market as a backdrop, we have delivered year-to-date gains in the US, EMEA, Korea, and rest of the world. As you see, our Japan business is off 8% through the first nine months, which is mainly due to supply chain delays, which moved our TSR driver launch out of Q3 and into Q4. Rounds of play in Japan are up 8% year-to-date, and overall market conditions are generally healthy and consistent with other major regions. Now looking forward, our outlook is built around the belief that golfer participation and demand for Titleist foot joy and shoes products remain vibrant, even as we temper expectations given looming macroeconomic uncertainties. While a kushnet is not immune to downward consumer pressures, past experiences have shown that the dedicated golfer tends to be more resilient than many consumer groups. On the product front, we are enthused about early interest in our new TSR drivers and fairways and are confident that our supply chain will support high quality fitting and service experiences and our ability to meet anticipated demand levels. We are on track for the launch of new Pro V1 golf balls in the first quarter. Product development and tour validation are meeting our highest expectations and reflect the company's commitment to continuous improvement. Golf ball raw material availability is steadily improving and our ball plants are operating at full capacity as we prepare for the upcoming global launch. Turning to our foot joy business, we are optimistic about the initial response to our 2023 collections and our teams are focused on enhancing supply chain and fulfillment capabilities to support a foot joy business that is about 40% larger than it was in 2019. And in addition to the ongoing investments in our product development engines, we continue to prioritize and expand our investment in technology throughout the company as we strive to optimize operations and deliver leading service and support to our trade partners and golfers. In summary, the Acushnet team and our resilient operating model continue to provide stability as we navigate exchange rate, inflationary, and global logistic uncertainties. We are confident that the company is structured and well positioned to capitalize on the many market opportunities we see before us, 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. Thanks for your time this morning. I will now pass the call over to Tom. Thanks, David.

I would like to start by thanking our dedicated associates and trade partners for their efforts in delivering yet another strong quarter for RecushNet. Starting on slide nine, consolidated net sales for Q3 were $558 million, up 7% reported, and up over 13% on a constant currency basis compared to last year. Overall, demand continued to be strong, and all segments showed growth in the quarter on a constant currency basis. Gross profit for the third quarter was 295 million, up 10% versus 2021, and gross margin was 52.8%, up 130 basis points. The increases were driven by higher sales volumes across all reportable segments and were partially offset by continued currency headwinds and elevated inbound freight costs, mainly in golf balls and gear. SG&A expense in Q3 was $202 million, up 1% from the prior year. Our teams did a good job balancing spending while we continued to invest incrementally in our IT platforms and in distribution as we enhance our fulfillment and customization capabilities, particularly in foot joy and gear. R&D expense was $15 million, which was flat compared to 2021. Income from operations was 76 million for the quarter, which was 45% higher than last year, and our Q3 adjusted EBITDA was 87 million, up 23%. Summarizing our year-to-date results, consolidated net sales for the first nine months of 2022 were 1.82 billion, up 6% compared to last year, and up 10% on a constant currency basis. Year-to-date gross profit of $956 million has improved by 5% compared to 2021. However, gross margins of 52.4%, although solid, were down 50 basis points. SG&A expense for the first nine months was $637 million, up 9%, and R&D expense was $43 million, up 6% compared to 2021. year to date income from operations was 270 million, which is 4% lower than last year. Our effective tax rate for the first nine months of the year was 20.6% down from 23.1% in the prior year, primarily because of a change in the mix of our jurisdictional earnings. And adjusted EBITDA was 313 million for the first nine months of 2022 down 6% year over year. There is a reconciliation of net income to adjusted EBITDA for Q3 and the first nine months of 2022 in our earnings release, as well as in the appendix of the slide presentation. Moving to slide 10, our balance sheet continues to be very strong. At the end of Q3, we had about $107 million of unrestricted cash on hand. Total debt outstanding was approximately $434 million. and we had 537 million of available borrowings under our revolving credit facility, which we refinanced earlier in the quarter. Our leverage ratio at the end of Q3 was 1.1 times. Accounts receivable at the end of Q3 was 324 million, up 24 million from the prior year. DSOs improved by two days. Consolidated inventory at the end of Q3 was 537 million, Inventory balances were up across all segments compared to last year, and we are pleased to have returned to what we feel is an appropriate level of inventory to provide high-quality service to our trade partners and meet the continued demand for our products. For context, our consolidated days sales and inventory were 155 days at the end of September, which is in line with pre-pandemic levels. Cash flow from operations for the third quarter was $32 million, compared to $128 million in Q3 of last year. And cash flow from operations for the first nine months was a cash outflow of $59 million compared to a cash inflow of $280 million last year. The decreases in both periods were primarily the result of the relative changes in our working capital compared to the prior year, most notably the increase in inventory. We spent about $13 million on CapEx in Q3 bringing the year-to-date total to $34 million. We now expect our full-year CapEx to be between approximately $50 and $55 million as the timing of some receipts has shifted into 2023. We continue to make great progress against our multi-year strategic golf ball capital investment program. Turning to slide 11, our strong financial performance fuels the continued execution of our capital allocation strategy led by investments in product innovation, golfer engagement, and our operational capabilities. And we continue to prioritize generating strong free cash flow and returning capital to shareholders. Earlier today, our board of directors declared a cash dividend of 18 cents per share payable on December 16th to shareholders of record on December 2nd. This will total a payout of about $13 million for the quarter and brings our year-to-date dividend payout to approximately $52 million. During the third quarter we repurchased 869,000 shares for a total of approximately $42 million, bringing our total for the year to almost 3 million shares and $140 million. 2022 represents our most active share repurchase period to date, resulting in a reduction of our outstanding share count of almost 4% since the beginning of the year. At the end of September, we had approximately $208 million of share repurchases remaining under our current authorization. Assuming continued strong financial performance and favorable market conditions, we expect to remain on track to complete our remaining authorization by the middle of 2023. We continue to believe our capital allocation strategy of investing in the business, returning capital to our shareholders, and executing disciplined acquisitions will generate a compelling long-term total return. Moving to our outlook on slide 12, we remain enthusiastic about the overall health of the Gulf industry and demand for our products. Our retail inventories are healthy and our supply chain continues to strengthen. Inbound freight rates are trending lower from their historical highs. However, at present, we continue to utilize a higher than normal amount of air freight to protect lead times and service levels. And as you would expect, we anticipate confronting currency headwinds and the continued impacts of inflation on our input costs for the foreseeable future. Taking these factors into consideration, we have narrowed our full year guidance. We now expect our full year 2022 consolidated net sales to be in the range of $2.225 billion to $2.250 billion. and our full year adjusted EBITDA to be in the range of $325 million to $335 million. This updated guidance reflects over $116 million of projected negative foreign currency impact, and as a result, we expect our full year constant currency net sales to be up between 9% and 10.2%. In conclusion, our dedicated associates and trade partners led Accushnet in delivering another solid quarter, demonstrating the strength and momentum of the Titleist, Footjoy, and Schuss brands. We remain confident in our ability to achieve 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.

Thank you, Tom. Operator, could we please open up the line for questions?

Of course, if you would like to ask a question today, please press star followed by one on your telephone keypads. If you choose to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally. And our first question today goes to Daniel Imbrow of Stephen Dink. Daniel, please go ahead. Your line is open.

Good morning, everybody, and thanks for taking our questions. I wanted to start. David, just kind of on overall industry question, obviously, the industry remains healthy. And then you kind of mentioned your dedicated golfers is strong. I'm curious, what measures are you guys tracking internally? When you think about gauging the health of the consumer to next year? Is it home values? Is it a macro data point? Is it just a real time spending and kind of your history with cycles? Trying to understand, you know, what gives you guys the confidence with the recent price increases, but also just the volatile macro backdrop into next year as you go about planning?

Yeah, good morning, Daniel. So, you know, for us, it starts with participation, right? And we're pleased with how resilient it's been in 22. And I think if you look at our results, they do indicate the dedicated golfer is healthy. And we've said all the while, they tend to be a very resilient consumer group. That said, we are mindful of the looming risks from economic and inflationary headwinds. You know, in terms of what we look at beyond that, certainly we track real-time sell-through data. You know, what gets a lot of attention nowadays from everybody and certainly for us is the fragility we see in EMEA. And I'll caveat that with that's been an especially strong region for us. We were up, I think, 28% in 21, and we're up 20-something percent this year. So like many companies, we're concerned about the outsized inflationary pressures that are impacting this region. But really the core for us, Daniel, is going to be participation, and then we gauge the resilience of our dedicated golfer. We did see some data coming out of the NGF, and this is certainly U.S.-centric data, that says they project there are about 8% more golfers today than there were five years ago. No surprise, right? We've seen an uptick. They also would say that what they call committed golfers, that group's up about 14%. And while it's not an exact match with how we define dedicated golfers, I think it's indicative of the trends. And then maybe a broader comment as we think about the clouds and potential headwinds before us. We do expect generally that consumables tend to hold up better than durables or larger ticket items. So as we work our way through our product line, we've seen historically that golf balls tend to be one of the more resilient categories.

Great. Great. That's helpful. Maybe a second one is on the industry as a whole. Obviously, we came in this year with lean inventories. I think during your prepared remarks, David, you said we're still running about 10% below where you'd want to be right now. I guess how much of a tailwind of growth this year has the restocking so far been? And then if we were to get from that, let's say, 10% industry inventory level now back to even, how much of a tailwind of growth would that be next year? to overall revenue growth.

Yeah, let me break it out by category. My comment, Danny, was really specific to balls. Balls and clubs, in our case, we tend to be lean, and we're leaner than we historically would like to be. So we're about 5% to 10% below where we'd like to be. Channel inventories and competitive inventories may be a little higher than that. When you look at footwear, a bit of a different story. It's elevated, and that's an area where we would expect to see some promotional activity here sooner versus later, and I may say the same about gear. And then on that subject, I do think we're going to see a return to some normal end-of-cycle sell-off in golf clubs, and that's not necessarily commentary on on elevated channel inventories as much as it is. We know that there are some competitive entries coming in the first quarter, and we would expect to see some promotional activity. But to your question about how do we think about channel backfill as an influence on our business, for us, it's really been about supply chain. We've been trying to make as many golf balls as we can, and I think our team's done a wonderful job. We were up 30-something percent a year ago. We're now in the black this year, which given some of the raw materials concerns we had, we feel very good about. So in terms of what might it mean, I'm not prepared to put a number on it, Daniel, but I will say as we look forward, certainly we think about demand for our products. We think about inventory levels. We think about the overall health and vibrancy of our retail partners across channels and And what we see is a healthy environment. And again, the caveat will once again be some of the looming clouds from a macroeconomic standpoint that remains to be seen how they materialize.

Great. Thanks so much for all the color this morning and best of luck going forward.

Thanks, Daniel.

Thank you, Daniel. Operator, next question, please. Thank you. The next question goes to Mike Swartz of Truist. Mike, please go ahead. Your line is open.

Hey, guys. Good morning. Just a quick question on some of the product launches for the upcoming year. I guess two questions is any specific call-outs just around the product launch cadence over the next 12 months that might look a bit different versus two years ago? And then just given some of the macro uncertainties out there, are there any alterations to how you plan to release new product in 23 in terms of size or timing or just marketing support?

Yeah, so I would say that maybe the best like-for-like look would be 23 versus 19. 21 was still a little bit disjointed because of the fallout from 20, so we'll get back on what we would consider to be a normal cadence, and what that looks like is a Pro V1 launch in the first half. We'll update half our Cameron line in the March-April timeframe, and we would expect to launch new irons in the second half, and then And then FootJoy and Shoes, they're really on track for their spring and fall launch programs. In terms of your second question about how do we see it playing out, I would say we're still in the mode of working very hard to build inventories to support launches. And what's different today versus 2019, there was a seamless transition from prior generation to new product, and we would basically dial up and produce all the product we needed to to support a launch. It's not that easy today in the sense that we're at elevated levels. So our team's going to do all they can to prepare for and build inventory to support launches. And this is really a golf ball commentary. It's notably a Pro V1 commentary. But we'll do so without unlimited production capacity, right? So we are going to We are enthused. As I said on my earlier remarks, the team is excited about the launch, but we do have finite production capacity that will influence how we launch product in the first half.

Okay, that's helpful. And then maybe a question for Tom real quick on, I think you said freight costs. You're starting to see some easing on the inbound freight costs, but you continue to use more air freight to get stuff into the market. Maybe give us a sense of

when you expect that to normalize and and and maybe you know any way to quantify what that could mean for margins or or or or uh just lower costs yeah in terms of normalize you know i think that's a tricky question because uh i guess what what is normal going to look like in the future you know clearly clearly we think um freight rates both ocean and air will come down However, will they come all the way back down to 2019 levels remains to be seen. As you said, as I said, we have started to see rates come down from their historic levels, but they are still much higher than they were back in 2019. So hard to say what new normal will look like and when we'll get there. We do anticipate, though, that we will see some some some relief in in 2023 um haven't really quantified that yet but it you know i think it could be a reasonably um meaningful number but you know i would caution that against all the other puts and takes that come along with you know gross margins um whether that be um increased promotional activity and discounting which david mentioned um you know what's going on with fx which has obviously had a huge impact on our margins this year as well so We definitely see the freight situation improving, but hard to quantify exactly by how much at this point. Okay, great.

Thanks a lot.

Thank you, Michael. Operator, next question, please. Thank you. The next question goes to Joe Albertello of Raymond James. Joe, please go ahead. Your line is open.

Hey, thanks, guys. Good morning. Actually, Tom, that commentary was a good segue into my question. I mean, if you guide to the upper end of the sales range for this year at the lower end of the EBITDA range. I guess, where are you seeing the incremental margin pressures? You mentioned, you know, promo and FX, but I'm curious if there are other issues that are kind of weighing on profitability here in Q4.

Good morning, Joe. Yeah, certainly currency and potential promotional activities are definitely headwinds as it relates to gross margins. The other things I would point out are really around some of the investments in the business that we've been making. We continue to incrementally invest in our IT platforms. We continue to invest in our distribution as we enhance our fulfillment and customization capabilities, particularly in foot joy and gear. So we are seeing that margin pressure and some continued investment in the business. You know, I will point out, though, you know, Q4 is seasonally our lowest quarter. And, you know, if you look at the midpoint of the guidance, Q4 is going to be up over $22 million compared to last year. So we're pretty pleased with the second half and where the year is going to land.

Got it. Very helpful. And just kind of to follow up on that, the 13.5% constant currency sales growth in the quarter, Any chance that you can kind of parse that out between how much pricing drove that and what your volumes were up?

You know, it's difficult to split those. You know, I would say we continue to see FX pressure across all of our major markets, and it continues to have a significant impact on the top line. but difficult to sort of parse that into volume and price.

Hey, Joe, I'll just add on that. Balls, you know, to your, Tom answered to your FX piece, to pricing, but balls, little impact from pricing. Certainly clubs and gear were influenced by pricing. Balls, far less so. And I would say foot joy, less so as well.

Okay, and just one last one for me. The impact from pricing next year, I imagine you expect to be somewhat less than what we've seen so far in 22.

Yeah, I think our pricing journey over the last couple of years is a fair reflection of what you're going to see in 23. We generally address pricing when we introduce new products, and I think we do benefit from our two-year product life cycle, which tends to provide a more gradual pricing slope. But we have taken price increases with the majority of our products over the last 18 months. And again, I think as you look forward, that trend certainly we expect to continue. Okay. Thank you.

Thank you, Joe.

Operator, next question. Thank you. The next question goes to George Kelly of Roth Capital Partners. George, please go ahead. Your line is open.

Hey, everybody. Thanks for taking my questions. So just a couple for you. First, back to the gross margin discussion on freight. Just curious, I understand that rates have come in, but just curious if you expected the level next year, the kind of freight volume, air freight mix between air and water, would you expect it to be more like 2019 or are you still planning into early next year to be using kind of a consistent mix of air freight?

Yeah, I would say in the first part of the year we will continue to be using higher than normal levels of air freight to support our product launches. And so that won't necessarily return to 2019 levels. It may not be quite as high as we've been in, say, you know, 21, but I think it would still be elevated from normal levels. And I think over the course of the year, we would expect to trend back towards a more normal mix of air freight and ocean freight overall.

Okay. Okay. And then second question on... on the general state of the consumer. So David, you were talking in response to an earlier question just about the uncertainties out there and you're trying to be appropriately cautious. But is there anything maybe in Europe or elsewhere where you've seen anything start to change or is the business still – I mean your 3Q, what you just reported was so strong. So are you really seeing much evidence of any kind of changing dynamic?

we, we haven't seen meaningful swings, George, and, and, and keep in mind too, um, you know, we, we're, we're coming out of the season in many regions, right? So, uh, so much of the golf market is, is snow belt and, and, and really on the tail end, if not closing end of their season, we're certainly opening up in, in sunbelt markets right now. Um, but, but we haven't seen any meaningful forks in the road or speed bumps. Um, but we're also understanding that we're coming off a pretty good surge over the last several years, and we would expect things to slow, if not normalize. And again, that's sort of the basis of how we're thinking about the future. But to your question, have we seen any meaningful drops? We haven't. And again, part of that may be seasonal, but I do point to really the two main themes for us are always going to be what's happening with participation and then the fact that we think our golfer is more resilient than most consumer segments.

Okay, and then last question for me. Just thinking FX for the potential impact for next year, I'm curious if you can help us quantify what kind of drag that will be to revenue growth next year just with where rates are now. I don't know how specific you want to be, but any commentary around that would be helpful.

We're still in the planning process for 2023, so I don't think we want to get very specific. I will say that we do expect currency to be a headwind next year. I don't think we're anticipating it will be quite the headwind that it is this year, but it will still be meaningful and significant.

And this year, it was how much? Did you say 118? 116, but yes. Okay. Okay. Thank you.

Thank you, George.

Operator, next question, please. Thank you. The next question goes to Casey Alexander of Compass Point. Casey, please go ahead. Your line is open.

Yeah, kind of a one-off here because most of my other questions were answered, but any – 4Q impact from Hurricane Ian. I know there's a lot of courses shut down, a lot of territory where rounds played didn't happen, particularly in October, and I'm just wondering if that flows back to you in any way, or if there was a lot of stuff that was damaged that needs to be replaced and could provide a future demand input.

Yeah, Casey, more of the former than the latter. Certainly we look at what happened in on the west coast of Florida and up the southeast coast. There were lost rounds. There were damages. The answer is absolutely. Thankfully, and the golf world navigated through it fairly well, but we have enough of our partners who were impacted and closed and remain closed. It is an impact, and to your second theme, I don't think we'd characterize it that way, don't see it as a lift as you may get in some industries, but we do expect it to have a negative impact on the quarter as it relates to rounds and therefore purchasing. Thank you.

Thank you, Casey.

Operator, next question, please. Thank you. And the final question today goes to Randy Koenig of Jefferies. Randy, please go ahead. Your line is open.

Yeah, thanks a lot. I guess I want to just go back to this guidance on the adjusted EBITDA dollar kind of narrowing range a little bit. So just to be clear, is that narrow range a product of FX plus assumed kind of promo that could happen? Or just can you clarify exactly what that $10 million difference is, just to start?

I think at the midpoint, we narrowed the range by $5 million, just to be clear there. I would say overall, the impact, the narrowing of the range really has mostly to do with currency and with higher input costs. I would say less to do about sort of promotional activity. I think that's potentially more of a 2023 potential factor. And then also the additional investments that we've continued to make, as I mentioned earlier, in our IT platforms and our distribution capabilities. So it's really those factors.

Got it. And I guess maybe if we can think about 2023 for a second, maybe, David, you could give us some perspectives on – If you assume, again, you're potentially assuming that we could have a little bit more normalization of promo activity, could you clarify how that may change versus years ago with the rise of customization and how inventories or finished goods inventories are less on the balance sheet and so on and so forth or less in the channel? I want to get a perspective of how the whole industry has kind of changed and how if there is even – promotional activity that occurs, how that might be the same or different than stuff you've seen in years past?

Yeah, that's a good question, and I do want to make the point that our comments are as much in comparison to where the industry has been for the last couple years, and that has been close to zero promotional activity. So when we talk about promotional activity resuming or returning, It's off a base of zero. And to your question, the industry looks a fair amount different today than it did 2018, 2019. We still see it as well within the range of normal and probably less than what we saw pre-pandemic. So I do want to be clear about that. We would expect, and I made this comment earlier, that footwear broadly, and certainly golf footwear is part of this, is maybe the first place we'll look. And again, I think balls are quite resilient because, at least in our case, because of our shortfall to optimal inventory. And then again, I think you're going to see a return of some normal sell-off at end of life cycle. But also, I do think that's going to be at lesser levels than we're accustomed to. So I think it's commentary that, hey, the fundamentals of the industry are healthy and healthier than they were going back to 2019. And while we will see some promotional activity, it's going to be at a lesser level than we were accustomed to three, four years ago.

Got it. That's super helpful. I really appreciate that. Thanks for the help, guys.

Thanks. As always, folks, thanks for your time and attention this morning. We appreciate your interest in Acushnet. Hope you all have a great and safe holiday season, and we look forward to getting back with you early next year.

Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect your lines.