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spk05: Hello everybody and welcome to the Acushnet Holdings Corp second quarter 23 earnings call. My name is Sam and I'll be coordinating your call today. If you'd like to ask a question during the presentation, you may do so by pressing star followed by one on your telephone keypad. I'll now hand you over to your host, Sondra Lennon, Vice President of Investor Relations and FP&A to begin. So Sondra, please go ahead.
spk00: Good morning, everyone, thank you for joining us today for a Christian holding corpse second quarter 2023 earnings conference call. Joining me this morning are David mar our President and chief executive officer and Sean Sullivan our chief financial officer. Before I turn 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 Christmas 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 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 results or comparisons, we will refer to the six-month period ended June 30, 2023, and the comparable six-month period. With that, I'll turn the call over to David.
spk10: Thanks, Sandra, and good morning, everyone. As always, we appreciate your interest in a Kushner Company. I will begin by thanking Tom Pacheco for his contributions over the past few years and welcoming Sean Sullivan to the Acushnet team as our new CFO. Sean has been a valued member of Acushnet's board of directors since 2016, having served as audit committee chair and on the nominating and governance committee. In addition to being an experienced CFO, he also brings a deep understanding of the company's vision and culture to his new role. Sean is a great addition to our team, and I'm confident that our analysts and investors will benefit from his contributions to Acushnet and insights into our business. Now to our results. Acushnet delivered another strong quarter, delivering sales of $689 million, a 6% year-over-year constant currency increase. Gains in Titleist golf balls and golf clubs drove this top-line growth. which contributed to adjusted EBITDA of $132 million in the quarter, a 24% increase for the period. And for the first half, sales of $1.376 billion are up almost 12%, while adjusted EBITDA of $279 million represents a 23% gain over last year. These financial results have been supplemented by many successes across the worldwide tours and throughout the pyramid of influence and are highlighted by Titleist and Footshoy Ambassadors Wyndham Clark and Brian Harmon's recent wins at the US Open and Open Championships. These achievements help to fuel positive brand momentum and validate the company's enduring commitment to product performance and quality. Supporting the company's first half results, we are enthused by the golf industry's overall health and stability with participation remaining vibrant even as golfers return to many pre-COVID activities. Some 250 million rounds of golf were played in the U.S. during the first half, a 5.5% gain versus last year and roughly 16% increase compared to 2019. Total worldwide rounds for the first half are projected to be up low single digits as domestic gains more than covered modest weather-related declines outside the U.S., The sport continues to generate strong interest and is benefiting from new golfers who have entered the game during the past few years. Now taking a look at our business by segment, Titleist Golf Balls posted 20% increases in both the second quarter and first half as the company executed our most successful Pro V1 launch to date. In addition to major wins by Clark and Harmon, the winners of the recent U.S. Women's Open Avion Championship Senior U.S. Open, Senior Open, U.S. Junior Amateur, and U.S. Girls Junior Amateur all trusted Titleist Pro V1 or Pro V1X golf balls on their roads to victory. Titleist was also the most played ball at the U.S. Adaptive Open, one of the sport's most inspiring and inclusive championships. Operationally, our team continues to optimize and expand output to meet strong global demand for Titleist golf balls. contributing to double-digit growth in all global regions for the half as golfer response to new Pro V1 and Pro V1X models has been positive across all markets. Titleist golf ball retail inventories are approaching normalized levels with the exception of Pro V1 models, which we expect to remain in tight supply into the fourth quarter. Titleist golf clubs are also excelling with sales up over 16% in both Q2 and the first half. We are seeing positive response to our entire golf club product line, which, combined with our deep commitment to custom fitting, are the primary catalysts to our growth and momentum. TSR drivers are the most played models on the PGA Tour and are leading our golf club gains. And Scottie Cameron putters are having another strong year, fueled by great response to our new Super Select models introduced earlier this year. As you know, we stagger Titleist club launches over a two-year cycle. And next up, our new T-Series irons, which we expect to begin shipping later this month. Initial response across worldwide tours and with trade partners is meeting our high expectations, and we are confident in our team's ability to execute a successful launch campaign throughout the second half. The Titleist gear business was up 3% for the quarter and 24% ahead for the first half. This outsized growth reflects the success of our product lines, notably golf bags and travel gear, and also some recalibration of shipments in 2023 as compared to last year when we faced supply constraints throughout the first half. Now to foot joy, where you see revenues were off 9% in the quarter and about flat for the half. These results reflect declines in golf footwear sales as we confront elevated marketplace inventory levels and increased promotional activity in many regions, we are confident in our ability to protect foot choice premium shares and leadership position, however, expect that it will be a few quarters until retail inventories return to healthier levels. For added context on the footwear market while foot choice footwear is down compared to first half 2022. It is almost 30% larger than 2019, giving you a sense for recent category growth and providing perspective on the current market situation. FJ Apparel continues its positive trend with revenues up double digits for the half as we benefit from recently expanded design, customization, and fulfillment capabilities across our performance apparel and outerwear categories. And finally, we continue to be enthused by the ongoing growth and development of our shoes business, which posted double-digit gains in the half led by the U.S. market, which was up almost 25%. Now for a brief overview by region, where you see the U.S. market leading the pack with second quarter sales up 14% and first half sales up 19%. Healthy participation, gains across all segments, and especially strong demand for Titleist balls, clubs, and gear are driving our U.S. growth and momentum. For the half, Japan was up 4 percent, Korea was flat, and EMEA finished off 2 percent. These markets share similar themes with weather-related headwinds and gains across our Titleist portfolio, helping to offset foot joy declines. Now looking forward, we are enthused by our brand momentum, the overall health of the golf market, and the resilience and engagement of a Kushnitz core consumer, the game's dedicated golfer. From a product development and supply chain readiness standpoint, our team has done good work preparing for the second half. To fully support our key initiatives and capitalize on Pro V1 momentum and high expectations for new Titleist irons, we will increase our AMP investment in the back half of the year commensurate with the opportunities before us. Longer term, we believe the infrastructure investments we are making in golf balls and clubs, our most capital-intensive businesses, will position the company for sustaining growth and success. Most significant is our previously disclosed five-year, $120 million capital investment across golf ball operations and R&D. And consistent with past practices, we continue to leverage the company's strong balance sheet and execute a disciplined approach to capital allocation for the long-term benefit of Acushnet and our shareholders. As Sean will outline, our recent growth has supported increased investment in our core businesses and elevated levels of shareholder returns. In summary, the company is well-positioned heading into the back half of the year, and we are confident in our ability to successfully execute Acushnet's long-range priorities. Thanks for your attention this morning. I will now pass the call over to Sean.
spk02: Thank you, David. Good morning, everyone. I'm thrilled to have joined the CouchNet company full-time on June 1st. I look forward to leveraging my experience as a board member, and I'm truly excited to work with the leadership team and the talented associates here at CouchNet as we build on the success and joy to date. Turning to the results, as David mentioned, we had a great quarter and a strong first half of 2023. Second quarter net sales increased 6.4%, driven by higher sales across our Titleist brand portfolio while adjusted EBITDA was $132 million, a 24% increase. For the first half of 2023, net sales and adjusted EBITDA increased 11.6% and 23.1% respectively. Net sales growth in the quarter was driven by continued momentum of our Titleist brand with golf balls and golf clubs growing by 19.8% and 16.3% respectively while gear increased by 2.9%. Foot joy sales were down 9.5% due to a slowdown in the footwear category, which was partially offset by an increase in foot joy apparel. Quarter over quarter sales also declined in products that are not allocated to one of our four reportable segments. Gross profit in the quarter was $369 million, up 7.2% compared to 2022, primarily due to higher sales volumes in Titleist golf balls and golf clubs, lower golf club royalty expense, and lower inbound freight across all reportable segments. FootJoy gross profit was down mainly due to lower sales volumes in footwear and unfavorable manufacturing overhead absorption. Overall gross margin of 53.5% was up 130 basis points largely due to lower inbound freight costs across all reportable segments. SG&A expense of $242 million in the quarter increased $2.8 million or 1.2% mainly due to higher advertising and promotion expense to support new product launches and costs related to the optimization of our distribution and custom fulfillment capabilities. These increases were offset by lower IT related expenses in Q2 which has shifted to the back half of 2023. R&D expense of $17 million was up mainly due to higher employee-related expenses. Our increase in intangible amortization was due to the acquisition of trademarks related to Titleist golf clubs and golf gear in the fourth quarter of 2022 and first quarter of 2023, respectively. Interest expense of $11 million in the quarter was up $9 million due to an increase in borrowings and interest rates with a little more than half the increase coming from higher debt balances. Our effective tax rate in Q2 was 21.8% up from 19.1% last year, primarily driven by a shift in our mix of jurisdictional earnings. Moving to our balance sheet and cash flow highlights. Our balance sheet and strong free cash flow positions us well to support ongoing investments in the business, manage working capital needs, and support our capital allocation program. Our net leverage ratio at the end of Q2 was 1.7 times. Inventories declined from both last quarter and year end, and we are comfortable with our inventory quality and position given the current state of demand and the supply chain. We expect inventories to decrease in Q3 before increasing in Q4 as we prepare for 2024 product launches. First half cash flow from operations was up significantly from the prior year, mainly due to changes in working capital, primarily inventory. Capital expenditures were $27 million in the first half of 2023 and are still expected to reach approximately $75 million in fiscal year 2023, given the back half loaded plan. Our capital allocation priorities remain consistent with those previously articulated. Investing in the business, including product innovation, golfer connection, and operational excellence, returning capital to shareholders in the form of dividends and share repurchases, and disciplined M&A. Through June, we returned roughly $167 million to shareholders in 2023 with approximately $140 million in share repurchases and $27 million in cash dividends. Today, our Board of Directors declared a quarterly cash dividend of 19.5 cents per share payable on September 15 to shareholders of record on September 1, 2023. As of June 30, we had $267 million remaining under the current share repurchase authorization. I expect our share repurchase activity to continue meaningfully into Q4, given our previously filed agreement with Magnus that is expected to settle in early November. Moving on to our guidance for 2023 we've increased our net sales range to 2.35 billion to 2.4 billion our revenue at constant currency remains projected to be up five to 7.2% compared to 2022. Golf ball sales momentum is expected to continue in the back half, although we still have constraints on available supply of Pro V1 and Pro V1X balls. With respect to golf clubs, we are enthused about our upcoming iron launch, and it is worth noting that the second half sales will be comping against a metals launch from last year, and metals have a larger initial inventory pipeline than irons, which are more custom fit and built to order. Titleist golf gear sales are expected to be lower in the second half, mainly due to outsized growth in 2022 in this segment, as our supply chain and fulfillment capabilities caught up. Finally, we have tempered our outlook in the foot joy golf wear segment given the elevated marketplace inventories in the footwear category. Our adjusted EBITDA guidance has increased to $355 to $375 million, up from $345 to $365 million. Our updated range reflects the benefit of lower freight and reduced headwinds in currency. The second half is expected to see promotional activity, notably in footwear, and unfavorable footwear manufacturing overhead absorption. We expect third quarter sales to be about 55 to 60% of second half sales and third quarter adjusted EBITDA to be about 80% of second half adjusted EBITDA. Finally, our forecasted effective tax rate for fiscal 23 is expected to be in line with our first half rate of approximately 20%. In closing, we are very pleased with the first half performance and remain focused on executing on our priorities for 2023 and beyond. So with that, I'll now turn the call over to Sandra for Q&A.
spk00: Thank you, Sean. Operator, could we now open up the line for questions?
spk05: Yes, thank you. If you'd like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your line is unmuted locally. The first question today comes from Matthew Boss of JPMorgan. Matthew, your line is now open. Please go ahead.
spk01: Great, thanks. It's Amanda Douglas on for Matt. So David, could you speak to the strength you're seeing across both golf ball and golf club categories? How much of this do you see as a function of strong overall industry backdrop, maybe relative to market share gains? And then just across geographies, could you elaborate on the bifurcation of performance you're seeing in the U.S. versus international regions?
spk10: Yeah, hi. Good morning, Amanda. You know, on the ball, your first question, on the ball side, certainly we always correlate the ball business and golf ball demand to rounds of play, which have been very strong. I think up near 6%, 5.5%, 6% in the U.S., And I'll qualify that a bit, and that includes some declines in the Pacific and mountain regions, really the whole West Coast, and even here in New England. So rounds of play in a very good shape. That correlates to nice golf ball demand. It's a Pro V1 launch year for us. We've had some nice success around our new Pro V1 models. So that story, while U.S.-centric in the answer, really playing out around the world as the game is healthy today, People are playing and they're using golf balls. And again, we're off to a very good start across our entire product line. Our club business, as I said in my remarks, really led by drivers, our TSR driver franchise is off to a great start. We launched that end of last year. Um, I mentioned we're having success with putters as well. And then, and then your two products for us would be wedges and irons very much in line with, with our expectations. So we're, we're, we're very pleased with, with both the ball and club categories. Um, the, the only challenge I would add right now is in golf balls where we're, we're supply constrained while we're operating our, our facilities 24 seven, we're still in tight supply with, with pro V one and pro V one X. Um, To your second question around what's happening outside the U.S., I'll touch on a couple of key markets. The rounds of play differential we see where rounds are up slightly in the U.S., down slightly in key markets of Japan, Korea, and I'll add the U.K. I think first and foremost that's probably a weather phenomenon. But in terms of our business, there's a similar pattern we're seeing around the world. Balls healthy in all markets, clubs healthy in all markets, gear stable. If there's any call-out, as we said in our prepared remarks, it would be footwear. And there's just an excess supply of footwear in the global markets. I will add that of the categories we compete in, balls, clubs, gear, footwear, Footwear is relatively small, so I think we need to keep that into context. So really, the key differential that we're seeing is just a slight variance in rounds of play, and that gives an added push to the U.S. market.
spk01: That's helpful, Collin.
spk00: Thank you. Thank you. Operator, next question, please.
spk05: And that question comes from of Stevens. Daniel, your line is now open. Please go ahead.
spk11: Hey guys, this is Joe Enderlin on for Daniel. Thanks for taking the question. Sounds like golf ball demand remains pretty robust, but it sounds like some supply issues are still around the Pro V1. We were wondering what's causing headwinds on the production or supply front, and then what steps are being taken to more effectively match demand with capacity? Thanks.
spk10: Yeah, I don't know that it's, there's no single call out from a supply chain standpoint. Our availability is very good throughout the line with the exception of Pro V1 and Pro V1X. It's still a function of strong demand. We've been producing Pro V1 and Pro V1X newer models since the fourth quarter last year, right? We're building inventory to support the first quarter first half launch. We expected that we would catch up and get in front of demand by the summertime. We're now pushing that out a few months. We think that'll be closer to the end of the third quarter, fourth quarter. But there are no constraints to call out other than very strong demands and our facilities are operating at peak capacity. We do think That normalizes as we have a chance to catch up in the fall. What happens in the fall and winter is we make more than we sell. Right now we're, in many respects, in the first quarter we're selling more than we make. So we don't know that there's a long-term fix needed. We are, as part of our long-term capital investment plan that we've talked about over the years, we are adding capacity to our Pro V1 lines. And that will come on board in the next couple of cycles. We think we're in good shape long term, and we think we get out of this current situation here by the end of the third or early fourth quarter. And I will just add, we are putting, and I made the comment in my earlier remarks, we've put a record amount of Pro V1s into the marketplace in the first half of the year. So we feel very good about our positioning. And again, I think in a few months' time, we'll get back into a state of equilibrium as it relates to demand and our output and supply.
spk11: Got it. Got it. That makes sense. Um, as a follow up, could you provide any update on how you see golf inventories in the retail channel and how is sell through at an industry level if you're seeing and maybe if you're seeing any promotions increase?
spk10: Yeah, so generally speaking, golf inventories are in pretty good shape considering, you know, all the support supply chain disruptions we've we as an industry have experienced over the past couple of years. Demand has remained strong. Rounds of play has remained strong. So as an overarching characterization of the golf industry, I'd say they're in pretty good shape. I commented on balls. They're in line. And again, we're running a little lighter than we'd like to see. There may be a few pockets of club inventories following significant launch activity in the first quarter, but nothing jumps off the board. As we've said in the past, Titleist clubs is largely a built-to-order business, which makes us a little bit less susceptible to inventory corrections. But the one area we called out was footwear, right? And golf footwear around the world is running a little heavier than we'd like. We're seeing some promotional activity there. The final point I'll make is as it relates to overall promotional activity in the golf space. Certainly it is increased from where it was two, three years ago. You may recall during 21 and 22, there was virtually no promotional activity in the marketplace. We have seen a resumption of promotional activity, nowhere near historical levels, but I do think in some cases, in the spring as an example, it was intentional as opposed to reactive, right? We had a promotion with our Pro V1 franchise I think you may see some holiday promotions that are intentional more so than corrective or reactionary. So again, we're starting to see an uptick in promotional activity, nowhere near the levels we saw pre-COVID, and I think overall in line with where the industry ought to be.
spk11: Got it. That is all for us. Thank you, guys. Thanks, Joe.
spk00: Great. Thanks, Joe. Next question, please.
spk05: That question is from Casey Alexander from Compass Point. Your line is now open. Please go ahead.
spk08: Yeah, hi, good morning. I just have a couple questions. One, on the share repurchase program, is there any way you can tell us how much of the $482,000 was bought after June 9th and would then be subject to the repurchase agreement with Magnus?
spk02: Yeah, Casey, this is Sean. I think that you'll have, when we file the 10-Q later today, you'll have at least some information listed in terms of what our activity has been since the end of the quarter.
spk08: Yeah, but I mean, the $482,000 that was in the quarter that was bought after June 9th, which is when the agreement with Magnus began,
spk02: yeah apologies no i i don't believe that we disclose that information i i do think there uh we we do record a liability in the quarter i don't believe that is uh i'll have to check the the queue uh that may be um i don't know that that's disclosed casey i apologize okay sorry to talk over you i i probably roughly a third of that number is my estimate
spk08: Okay, that's helpful. That's an approximation that's just fine. Secondly, in relation to footwear, I mean, how much of this is demand-driven versus an increase in the competitive element? I mean, we've seen a number of startups that have come into the business that, you know, and I think we've seen this before. It's almost cyclical that a bunch of startups come in with a fanfare, with some capital behind them, grab some market share for a period of time, but over time they tend to sort of fade away. Is that kind of what we're talking about here, or has it been more demand-driven correction?
spk10: No, Casey, you're right on. I think it's two parts. It may be three parts. Part one is we are seeing an influx of new competitors. Part two is there's the reality of what's happened to supply chains and forecasting may be a bit overzealous. So you've got You've got a supply bubble to an extent, which we would peg at about 20% higher than is appropriate for the footwear category. That results in price compression. There's a bit of a demand story here as well as the demand is down a little bit from a year ago. And some of that is prices have fallen a bit. So you're right. It starts with supply. It starts with a lot of new competitors. I did make the point earlier. To contextualize this, our footwear business is still about 30% bigger than it was in 2019. That's just the state of the footwear business, and you've seen this before. I do think we marched through it. This is not the first time we've seen it function this way, but the starting point is excess supply.
spk08: Thank you.
spk02: and casey this is sean just to go back and clarify it's 286 000 shares of stock since june 9th so that'll be in the that'll be in the queue when it's filed today great thank you very much thank you casey operator next question please our next question is from michael schwartz of tourist securities michael alliance now open please go ahead hey guys um good morning this is lucas on for mike i uh i was wondering if you could comment on
spk06: the data tech data for June. There was some pullback in ball share, and I was wondering if you could just give some color on that.
spk10: Thank you. Yeah. You know, we don't really get too focused on 30-day blocks of time. I would point to the year and the strong success we're having in golf balls in particular. I think your question is ball-driven. You know, as I've said, our shipments are up 20% and our inventories are lower than we'd like. So we're very happy with the state of the golf ball business. There was a unique component earlier in the year where we ran our loyalty rewarded promotion, buy three, get one. That hit mostly April and May. So overall, we're really pleased with the state of our golf ball business. We do acknowledge that there are pockets out there where Pro V1 inventory levels are less than we would like. And maybe that's contributing to what we're seeing. But overall, very strong year on the ball front. We think we're gaining share. Certainly our sales are very strong. And again, lean inventories support just a robust sell-through environment.
spk06: Okay. Thank you. That's all I had.
spk00: Thanks. Thanks, Lucas. Operator, next question, please.
spk05: Our next question is from Noah. That's from KeyBank. Noah, your line is now open. Please go ahead.
spk07: Hi, thanks for taking my question. Just a high level one for me. Obviously continue to hear and see so much about a software consumer and macro pressure elsewhere. Obviously you guys have been resilient and the game of golf has been resilient. So maybe just some color on what gives you confidence in raising the guide here. as well as any comments on how you're feeling about the health of the core golf consumer would be helpful. Thank you.
spk10: Yeah, your question really strikes to the heart of our target consumer, this dedicated golfer. They're passionate, they're resilient, they're middle income and above. We do acknowledge we're coming off some historical highs in terms of participation. and purchasing in the last couple of years. So I think we're a bit guarded on our expectations for 2023. That said, here we are in early August, and rounds are terrific, right? Up 5.5% approaching record levels. I think I saw we're within 1% of the record of 2021. So our consumer, Kushnett's target consumer, is well engaged. the categories for us that are strongest are balls and clubs. Um, and, and, you know, I think they're, they're, uh, responding well to our performance stories on the ball front and the club front. So we're real pleased with, with, uh, the golf consumer. And in particular, this dedicated golfer, which is, is really the sweet spot for, uh, the acoustic businesses. Um, Like everybody, we're watching carefully in terms of purchase levels and participation levels. But to this point, what we've seen has been positive. And I'd add to that, we've seen some share pickups around our portfolio, which add to our story.
spk05: Thank you.
spk00: Thanks, Noah. Operator, next question, please.
spk05: Our next question is from Randy Connick of Jefferies. Your line is now open. Please go ahead.
spk04: Yeah, thanks. I guess, David, a follow-up to the last question. I guess, what's surprising you most about the continued strength of the industry? Because you've obviously seen this all for decades, and you've always been measured and tempered. What's surprising you most about the industry at this point?
spk10: Well, Randy, I would say we've been, you know how we operate. I would say we've been careful and conservative with regards to participation coming off historic highs, right? There were ballpark 150 million more rounds played in 2021 than there were in 2019. And obviously, a whole lot changed in 21 as compared to 2019. We've been carefully monitoring how the sport holds up as the world either returns to the old normal or finds its new normal. And what we're very pleased with is despite a return of a lot of pre-COVID activities, golf has held a very strong place in people's prioritization of their time and money. The strength and vibrancy of the game is, I think, something we're all real pleased to see coming off such historic high levels. We were cautious and careful and felt that, hey, this meaningful step up was terrific, but we ought to be careful about do we hold on to all of it, and we're holding on to certainly a whole lot of it, which we feel good about. I think the core of it is people are fitting golf into their lives in a more meaningful way today than they did three, four, five years ago. And then the final component of that would be, you know, you're also seeing an industry that five years running has added golfers, right? We've added participants. And a decade before that, we couldn't say that. So I think near a million and a half in the U.S. alone over the last three years. So while not everybody's playing at the level they may have played at two, three years ago, That's clearly in the U.S. more than offset by incremental rounds from new participants. So, again, not the biggest surprise, but the biggest observation is how well and strong the game is holding up as compared to our, I think, rightfully conservative expectations coming off the very high watermark of 2021.
spk04: Very helpful. And then just lastly, can you give us some perspective on where customization is from your perspective on the industry right now? And maybe just when you look at your own business, the amount of customs that you're doing or fittings, I should say, what's the incremental lift that you're sort of seeing just ballpark-ish on, let's say, ASPs or gross margin or anything or gross profit dollars? Because I think that's another area that's been kind of a good leg for the industry and yourself and your company in particular. I'm just curious of kind of what are those trends you're seeing? Where do they go? And and obviously provides an incremental lift to revenue and profitability as well.
spk10: You're talking clubs, Randy, right? Golf clubs?
spk04: Yes.
spk10: Yeah, yeah. So we've been in the custom-fitting game, and it's been a very important part of our business going back 30 years in the U.S., a little bit shorter time frame in some markets around the world. I think the key themes, I'll start with the consumer. We know it's our best way to give the consumer the very best experience with our products, right? We think we have great products, and we think with an expert fitting, the consumer is going to have the very best experience and highest satisfaction level. So that's the biggest win. Then we'll get to the realities of what it means to the club business in general, right? far less inventory at retail, which maybe says far less risk of obsolescence or far less risk of net down and closing, a closeout rather. That's obviously very positive for us, and I made the comment earlier, as we think about our club business, we are just less susceptible to some of the highs and lows of inventory swings. But the most important piece is... is really the consumer experience and what we know we deliver to the consumer with a combination of great product and an expert fit. The final component of it is it really allows us to leverage and benefit from the expertise we have throughout our partnership base. We've got a lot of terrific club pros and retail partners who are very skilled and adept at fitting. And it allows us to leverage their expertise to the benefit of our business. So it's a great way to run our business. I will say, again, we've been at it a long time in the U.S. We've been at it a long time around the world. I do make the comment from time to time. The one market that's late to the party for us, if you will, is Japan. And long term, we anticipate our business growing. trending more and more custom-centric over time because today Japan's a bit of an outlier market where it's still mostly a stock, you know, ship it into retail, sell it through in a traditional fashion stock as opposed to custom-built to order. So we've talked about that before, but one of our longer-term opportunities is to accelerate the movement of custom fitting with our Japan business.
spk08: That's great.
spk05: Thanks, guys.
spk08: Thanks, Randy.
spk00: Thanks, Randy. Operator, next question, please.
spk05: Our next question is from Ivan Feintich from Tyrus Financial Partners. Ivan, your line is now open. Please go ahead.
spk03: Thank you. Thank you for taking my question and congratulations on the great results. Can you give a little bit of detail into your marketing initiatives going forward and where do you see you make the best traction? Is it people who are new to the game, and how are you marketing to them, and how are you doing with existing players?
spk10: Yes, so Ivan, I'll point to our results and say we're confident we're reaching our target audience, but the core consumer of a Kushnit is this dedicated golfer, right? So we tend to speak most regularly to them, whether through our advertising or fitting efforts. That's sort of the sweet spot of all our advertising efforts. I did make the comment earlier that we're enthused about the back half of the year, particularly on golf balls and with our new iron launch. So from a prioritization standpoint, we're going to put more A&P muscle behind those categories can answer it with the size of the opportunity. But while we're certainly pleased with the new golfers entering the marketplace, our focus is always on this core dedicated golfer who drives so much of our business and who aligns so well with our product lines. So that's how we've always approached it. It works well for us, and we intend to stay on that path. OK, thank you.
spk00: Thank you, Ivan. Operator, next question, please.
spk05: Our next question is from George Kelly of Roth Capital Partners. George, your line is now open. Please go ahead.
spk09: Hey, everyone. Thanks for taking my questions. So a couple for you. First one, your share repurchase authorization. I was trying to keep up with you on the call, but can you just go through that again? How much is remaining? And then did you give us an estimate of when you expect to exhaust the current authorization?
spk02: Uh, yeah, there's about, uh, 260 million remaining on the authorization and I did not give you, uh, an outlook more just that we would meaningfully participate through early Q4 given the Magnus agreement. But, uh, I think as we've said previously, we would expect to probably extinguish that plan later this year, early into 2024. Okay.
spk09: And then second question for you. Can you give us a breakdown in your ball business? You know, it was such strong growth in really the first half, but just sticking with the quarter. What was the breakdown between volume and pricing? Just ballpark if you have that.
spk02: Yeah, it's mostly volume, George. We did take price, as you know, on the PRO-V1 and the PRO-V1X model. But the majority is volume, again, speaks to what David was talking about, just the momentum we have in the ball business.
spk09: OK, excellent. And then last question from me. Regarding your inventory and your gross margin, James Ingram, Is your inventory. Now, I mean, there was a period when the costs of James Ingram, Your inventory work, you know, you were dealing with all the kind of supply chain issues. I'm just curious if your inventory now has kind of flushed through all that. And it's more of a real time sort of normalized number or is there still a bunch of kind of higher cost inventory in your mix.
spk02: Well, you know, if I understand your question, I think, you know, input costs, we have seen those increase. You know, as I talked about, our inventory levels were very comfortable where they're at. They've certainly come down sequentially, would expect the same cadence through the third quarter and then building again in the fourth. So, you know, I think input costs across the board, given inflationary pressures, have affected all of us. So I don't know if that answers your question or not, but You know, we're comfortable with where the inventory levels are. You know, I don't want to repeat what we said in our prepared remarks, but I'll leave it at that.
spk09: Okay. You know, let me try one more time. There was a period last year and in 2020, I mean 2021 is so long ago now, but late last year as well when it was a lot more costly to bring your inventory to the U.S. and And you were dealing with all these supply chain issues and things. All of that higher price stuff has flushed and sold through. Is that fair? Are we looking at a more normalized kind of pricing environment for your inventory balance?
spk02: Yeah. I think we're getting to a more normalized state. Correct.
spk09: Okay. Thank you. That's all I had.
spk00: Okay.
spk10: Thanks, George. Thanks, George. And everybody, thanks for your attention, as always, and your interest in the Acoustic Company. Hope you have a great rest of summer, and we look forward to speaking again after our third quarter. Have a nice day.
spk05: This concludes today's call. Thank you, everyone, for joining. You may now disconnect your lines.
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