Acushnet Holdings Corp.

Good morning or good afternoon all, and welcome to the Acushnet Company 4Q 2022 Earnings Call. My name is Adam and I'll be your operator for today. If you'd like to ask a question during the Q&A portion of today's call, you may do so by pressing star followed by one on your telephone keypad. I will now hand the floor over to Sandra Lennon to begin. So Sandra, please go ahead when you are ready.

Good morning, everyone. Thank you for joining us today for Acushnet Holding Corp's fourth quarter and full year 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 the 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 US 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 or full year results or comparisons, we will refer to the 12 month period ended December 31st, 2022 and the comparable 12 month period. With that, I'll turn the call over to David.

Thanks, Sandra. And good morning, everyone. Thanks for joining us on today's call. As Tom and I will outline, Acushnet wrapped up a terrific year with a strong fourth quarter. helping our brands carry nice momentum into 2023. I will begin by acknowledging and thanking the talented Acushnet team for their hard work and great results. Their creative spirit of innovation and commitment to delivering the highest quality golf products and services are creating shareholder value, empowering the company's sustaining growth. Now to our results. Acushnet sales increased 11% in 2022 to $2.27 billion. All operating segments and geographic regions posted year-on-year gains, with golf clubs leading all segments up 16%. EMEA was our fastest-growing region, up 20% versus 2021. And Acushnet's business in the U.S. and Korea was also especially strong, both increasing 9% on the year. The company generated adjusted EBITDA of $338 million, a 3% increase over prior year. For the fourth quarter, revenues were up 14% to $447 million as Titleist golf clubs, gear, and golf balls all grew double digits. An adjusted EBITDA of $25 million represents a $30 million increase for the period. In summary, the strong fourth quarter finish to a very positive trending year for Acushnet. In addition, our teams have also made several operational enhancements as we invest to position the company for future success. Heading into 23, our golf ball supply chain is more expansive and diverse as our primary raw materials partner has grown its capacity and capabilities, and we have also added dynamic new suppliers. We believe these enhancements will invite new innovations while protecting our access to raw materials in uncertain times. Custom club production capacity in the U.S. and abroad have been increased to meet growing demand for Titleist golf clubs and deliver leading service levels. We have expanded footwear production into Vietnam to support growth and strengthen and diversify our supply chain. One of the keys to FJ's sustaining success is the synergistic and mutually beneficial relationship we have had with our longtime JV Footwear manufacturing partner, who shares FJ's commitment to quality and has seamlessly implemented this capacity expansion. To keep pace with rapid demand for our apparel lines, we have increased our customization capabilities in the U.S. and U.K., where club logos are most prevalent. This expansion positions both foot joy and shoes to be more agile and responsive to future growth opportunities, while helping to protect lead times and service levels. And we are optimistic about the enhancements we are making across our global distribution network to increase our ability to process inbound and outbound shipments and meet our high service standards. These investments will reduce the company's exposure to distribution bottlenecks caused by recent global supply chain disruptions. In addition to these important infrastructure investments, the company also accelerated capital returns in 22, returning more than $240 million to shareholders through our dividend and share buyback programs. And building upon this commitment, I am pleased to announce that we have increased the company's quarterly dividend by 8% to 19.5 cents per share. The company has increased our dividend each year since its inception. Now looking at our business by segment, as you see, golf ball sales were up 12% in the quarter and 6% for the full year. Titleist golf balls are the overwhelming choice across worldwide tours, and Pro V1 golf balls were the winning choice of Masters champ Scotty Scheffler, PGA champion Justin Thomas, U.S. Open winner Matt Fitzpatrick, and Open champion Cam Smith. In addition to winning all four majors in 22, Titleist was also the golf ball of choice of 95% of the players who competed in the NCAA Women's Golf Championship. These achievements, we believe, validate the Titleist Golf Ball performance, quality, and consistency advantages and are foundational to our number one ball and golf positioning. New PRO-V1 and PRO-V1X models launched in late January and deliver advanced performance achieved through innovative new core technology and advanced aerodynamic properties. We are pleased with initial consumer response to what we believe are the most advanced PRO-V1s we have ever launched. And after a two year hiatus, we have recently reopened Titleist Ball Plant 3 for tours and encourage interested golfers to join Team Titleist to experience firsthand all that goes into making Pro V1, Pro V1X and AVX and my teammates relentless commitment to product quality and process excellence. Titleist golf clubs continue to excel with fourth quarter and full year sales of 32% and 16% respectively. Titleist Golf Clubs are well positioned for 23 as we build upon our momentum with new TSR1 drivers and TSR hybrids, a full range of new Scotty Cameron Super Select putters, and new SM9 lightweight wedges. A Kushnitz gear business also added to the Titleist brand momentum with revenues up 26% in the quarter and 13% for the year. Our gear team has done good work to expand customization capacity to meet strong demand and has front-loaded inventory receipts to ensure that we are able to meet peak demand levels in the first half of the year. FootJoy sales were up slightly in the quarter and grew 12% for the year with gains coming from each of our footwear, glove, and apparel categories. The ongoing success of FJ's Premier Series footwear line reflects the brand's commitment to performance, style, and comfort. In addition, today marks the official launch of the all-new Hyperflex collection, which showcases the brand's leadership in the premium athletic footwear space. FJ Apparel also carries great momentum into 2023, coming off another year of double-digit growth as our design team excels at delivering performance and style across our men's and women's collections. While Foot Joy is fully focused on the future, this year marks a proud milestone as we celebrate the brand's 100th anniversary. Foot Joy is golf's most authentic and enduring footwear brand, the number one shoe in golf for over 75 years and counting. Foot Joy gloves are among the highest market share products in golf, and apparel and outerwear momentum add to the brand's energy and enthusiasm. Foot Joy's future has never been brighter. And rounding out Accushnet Brands, our shoes business increased by more than 25% in 2022, and our golf business has nearly doubled since our 2019 acquisition. We are enthused about the road ahead as our talented team is committed to building the shoes business for long-term, sustaining success. Now here you see that all regions posted healthy gains in 22, led by EMEA, which was up 20%. For the fourth quarter, you see double-digit growth in Japan and the U.S. Japan's outsized gains reflect the timing of our TSR driver launch, which was skewed towards Q4 in Japan and Q3 in all other regions. Key takeaways from this slide are Akushnet's ability to execute across varying marketplaces and the health of the Gulf consumer that we are seeing in all major regions. Now, looking forward, We remain encouraged by strong golfer participation and enthusiasm for the game, including a golfer base that grew for the fifth consecutive year in 2022. Global rounds of play were resilient last year, copping against record numbers in 2021. U.S. play was down slightly, and we estimate rounds outside the U.S. increased in the low single-digit range. Market fundamentals are strong. Trade partners are financially stable. and Titleist and Footjoy channel inventories are healthy across global markets. The professional game is off to a compelling start in 23, and this energy around the tours is an important catalyst as the golf season ramps up to the Masters and a full global opening in Q2. Our Titleist, Footjoy, and Schuss brands are vibrant and healthy, and we are enthused about our vast new product pipeline for 2023. We expect growth from each of our reportable segments in spite of continued currency headwinds. In addition to ongoing investments in our core businesses, we have also made recent acquisitions which are great fits and compelling long-term value creation opportunities for Acushnet. The first is our majority investment in TPI and long-term partnership with founders Dave Phillips and Dr. Greg Rose. TPI is the leading provider of golf-specific health, fitness, and swing advice available through the MyTPI website. Dave Phillips and Dr. Rose are the preeminent experts in the field of biomechanics and body movement specific to golf and other rotational sports. Their work is directed at helping athletes achieve peak performance while reducing pain and the risk of injury. They have had a profound impact on the professional game as the majority of leading tour professionals works with a TPI certified trainer. The Titleist TPI relationship goes back more than 20 years and with this new partnership we will invest in TPI to expand its reach and activate Dave and Greg's expertise across our player development and R&D engines. And last month we announced the acquisition of the Club Glove brand, the industry leading provider of golf travel gear. Club Glove is known by dedicated golfers in the U.S. to be the leader in golf travel products and is the preferred choice by the overwhelming majority of PGA Tour, LPGA Tour, and PGA Club professionals. Club Glove's patented travel gear has long been recognized among the industry's most innovative and reliable products. and given the brand's reputation for product and service excellence, we see this as an ideal fit within the Acushnet portfolio of brands. Club Glove Sounders will continue to operate the business at least through the end of the year, and we look forward to further developing this leading brand for years to come. In summary, we are optimistic about the structural health of the golf industry, the great momentum behind our Titleist, Foot Choice Shoes, TPI, and Club Glove brands, and the resilience and engagement of the game's dedicated golfer. And we are confident that recent investments in supply chain, technology, and infrastructure will benefit golfers and our trade partners and position the company for continued market leadership and sustaining success. Thanks for your attention this morning. I will now pass the call over to Tom.