Acushnet Holdings Corp.

Good morning everyone and welcome to the AcoucheNet Holdings Court third quarter 2023 earnings conference call. My name is Carla and I will be your operator for today's call. Today's call will include a Q&A session. To register a question, please press star followed by one on your telephone keypad. If you wish to revoke your question at any point, please press star followed by two. I will now hand over to your host, Sondra Lennon, Vice President of Planning, Analysis, and Investor Relations to begin. Saundra, please go ahead.

Good morning, everyone. Thank you for joining us today for a Kushnett Holding Corp's third quarter 2023 earnings conference call. Joining me this morning are David Marr, 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 cushion its current expectations and are subject to uncertainty and changes and 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 30th, 2023, and the comparable nine-month period. With that, I'll turn the call over to David.

Thanks, Sandra, and good morning, everyone. We appreciate your interest in today's call. I will start on slide four and get right into our results. The Cushnet posted third quarter sales of $593 million, a 6% increase over last year. Adjusted EBITDA for the period was up 14% to $99 million. For September, net sales were up 10% to almost $2 billion, while adjusted EBITDA increased 21% to $378 million. I will pause here to thank my teammates for their commitment and dedication, which fuels the company's performance. Looking at our business by segment, you see the strength and momentum of Titleist Golf Balls and Golf Clubs driving the company's growth. Titleist golf balls were up 6% in the quarter and 16% year to date. New Pro V1 and Pro V1X models are leading this growth and our golf ball manufacturing team is doing good work to keep pace with strong consumer demands. As we approach the holiday retail season, our golf ball availability position is healthy and we have transitioned to building inventory to support new product launches scheduled for early 2024. And across the worldwide tours titles golf ball usage is more than seven times the nearest competitor and at the men's and women's us open and open championships all four winners play the titles golf ball. For different champions winning majors on for distinctly different golf courses showcase the quality total game performance and versatility that define the number one ball and golf. Moving to Titleist Golf Clubs, our team posted another strong quarter with sales up 18% for the period and 17% year to date. New Titleist T-Series irons launched in August and are off to a solid start with early demand meeting our high expectations. Titleist was the most played iron on the PGA Tour this past season for the 19th time in the past 20 years, and Titleist TSR drivers also continue their streak as the most played driver on tour. Rounding out our club business, we are also pleased with the momentum and sustained demand for Vokey Wedges and Scotty Cameron Putters across the worldwide tours and in the marketplace. And affirming their global strength, Titleist Golf Balls and golf clubs have posted year-to-date sales gains in all regions. Now moving to gear, you see sales were down 20% in the quarter and up 9% year-to-date. This third quarter decline was expected as we comped against last year's outsized growth when much of our gear volume was delayed into Q3 as a result of supply chain disruptions we experienced in the first half of 22. We are pleased that our gear delivery and service have returned to healthy levels and that the timing of our business is on a normalized and demand-driven cadence. Now to Footjoy, sales increased 3% in the quarter and our flat year to date due mainly to the strength of our U.S. business. Growth in the quarter was led by apparel and a modest increase in footwear as we effectively differentiate our new golf shoe products in a crowded retail environment. Affirming our comments in the last call, we expect the industry will continue to work through excess footwear inventories for the next few quarters, and we remain confident that our team will manage through this period while protecting Foot Choice premium positioning, and long-term interests. Now to slide six and a look at our business by region. Here you see the strength of the U.S. market and consumer in our quarterly and year-to-date results. The U.S. is setting the pace with rounds of play up 4% year-to-date and on track to surpass their previous high mark from 2021. We see this as positive commentary on the overall health of the sport and the additive impact of the expanding golfer base. Healthy participation and strong demand across our portfolio are driving Cushnet's 8% third quarter and 15% year-to-date growth in the U.S. Golf balls, clubs, and shoes were up double digits year-to-date, while gear and foot joy have posted high single-digit gains for the period. Outside the U.S., we estimate that rounds in EMEA, Japan, and Korea were off low single digits through September. largely attributable to unfavorable weather compared to last year. Acushnet year-to-date sales, as you see, are off 1% in the MEA, up 9% in Japan, and down 2% in Korea. Rest of world sales have increased 14%. As noted, ball and club sales are up in all regions, while footwear declines and a soft apparel market in Korea has negatively impacted both Titleist and FootJoy apparel sales. And now looking forward. The attractiveness of Acushnet's core consumer, the game's avid and dedicated player, and the company's enduring commitment to product and service excellence continue to drive the strong financial performance and positive outlook we share today. We are enthused with the momentum behind our Titleist, FootJoy, and Shoes brands and healthy market fundamentals, and are confident in the investments we are making across our businesses to position Acushnet for sustaining leadership and growth. Golf participation is vibrant with worldwide rounds of play tracking ahead of their 2021 peak and golf courses and retail partners are investing in their facilities and experiences to meet evolving consumer preferences. On the new product front, we are optimistic about early interest in our new T-Series irons and are confident our custom fitters and supply chain will support high quality golfer experiences and our ability to meet anticipated demand levels. Our golf ball team is on track to launch several new models in early 2024. Remember, in even years, we launched new AVX and performance models. We have high confidence in the health of our supply chain and ability to successfully execute these launches and also look to benefit from recently added capacity, which will support improved Pro V1 availability going forward. We're equally confident in the state of our new product pipelines for Titleist gear, Footshoy, and Schuss. and are well positioned to meet anticipated Q4 and holiday demand and launch a wide range of new products next quarter. In summary, we believe the company's commitment to making high-performance, high-quality golf products, focus on the game's dedicated golfer, proven track record of product innovation and supply chain management, and ongoing investment in our product development, golfer connection, and manufacturing will support the company's long-term growth objectives. These priorities, along with the company's disciplined approach to capital allocation, remain the foundation of Acushnet's proven investment thesis. Thanks for your time this morning. I will now pass the call over to Sean.