Acushnet Holdings Corp.

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.

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.

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.