Acushnet Holdings Corp.

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Good morning, everyone. Thank you for joining us today for a Cushnet Holding Corps fourth quarter and full year 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 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 -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 -to-date or full-year results or comparisons, we will refer to the 12-month period ended December 31, 2023, and the comparable 12-month period. With that, I'll turn the call over to David. Thanks,

Sondra, and good morning, everyone. I am pleased to report on Acushtint's 2023 results and our outlook for 2024. As you see here on slide 4, 2023 net sales of $2.38 billion and adjusted EBITDA of $376 million represent growth of 6% and 11%, respectively. The company also generated $372 million in operating cash flow for the year. These results are made possible thanks to the talented and dedicated Acushtint team. Growth was fueled by Titleist golf balls, which increased 13%, led by strong demand for our new Pro V1 models. Golf ball sales increased in all regions with the U.S. and EMEA markets setting the pace. The continued strengthening of our golf ball supply chain and our team's ability to flex cast urethane production throughout the year were key contributors to these results. Titleist golf ball usage across worldwide professional tours indexed at 73% last year. And Titleist ball counts at the 2023 NCAA D1 Men's and Women's Championships were 88% and 90%, respectively, affirming golfers' trust in the quality, consistency, and total game performance of Titleist. Titleist golf club sales of $659 million were up 10%, fueled by healthy gains in irons, Scotty Cameron putters, and medals. The Titleist golf club story is built upon our commitment to product innovation and custom fitting. And similar to golf balls, clubs benefited from continued supply chain optimization as our team met strong demand while achieving elevated quality and service targets. Our club business has great momentum, and Titleist has been the most played driver, iron, and wedge at every PGA Tour event this year. Turning to gear, sales increased 7% with gains in all categories and steady demand for custom gear products. Growth was led by the U.S., Korea, and EMEA regions. We talked on recent calls about excess footwear inventories in the channel, and I am pleased with how Footshoi has navigated the ensuing retail correction period. Footshoi finished the year down 2% as double-digit apparel gains helped to offset a footwear decline. Footshoi's unwavering commitment to performance, comfort, and design innovation are the foundation for FJA's long-standing claim to the number one shoe in golf. Acushton's strong financial performance supported ongoing investment across our businesses and accelerated capital returns with share repurchases and dividends totaling $332 million and $52 million respectively. And furthering our commitment to return capital to shareholders, I am pleased to announce Acushton's directors have approved a 10% increase to our quarterly dividend to 21.5 cents per share and a $300 million increase to the company's share repurchase authorization, bringing this total authorization to $1 billion. These actions reflect the board's confidence in Acushton's ability to execute and generate cash flow and their positive outlook towards the company's strong position within the healthy golf industry. Now moving to slide five, you see an overview of our regional results. Our U.S. business was especially robust with all reportable segments posting growth on the year. EMEA sales were off 1%, yet golf balls and clubs were vibrant, up 9% and 7% respectively. Given macro concerns about the region where we grew 20% in 2022, we are pleased with golf's resilience across EMEA and especially the U.K. market, which continues to benefit from very strong tourist demand. As you see, sales in Japan were flat for the year with golf balls again the highlight and up double digits. Korea was down 2% with gains in titleist balls, clubs and gear more than offset by declines in foot-joy and titleist apparel. And lastly, our rest of world sales increased to healthy 12% with every segment posting gains. As we now look forward and plan for 2024, we are encouraged by strong golfer participation and enthusiasm for the game, including a U.S. golfer base that grew for the sixth consecutive year and where the fastest growing cohorts are juniors and women, according to the National Golf Foundation. Global rounds of play were vibrant in 2023, up about 2% and led by the U.S. market, which increased 4% to more than 530 million rounds. Rounds are up double digits since 2019 in almost every region with the U.S., Korea and U.K. all growing by more than 20%. And the only down markets during this period are China and Southeast Asia. For context, the number of golf courses and rounds played annually in China are comparable to the golf profile here in the state of Massachusetts. Market fundamentals are strong, trade partners are financially stable, and channel inventories are seasonally in line. The past few years have seen expansive investment by golf courses and retailers seeking to improve their facilities and experiences to meet the evolving preferences of tomorrow's golfers. As a result, it's a great time to be a golfer. Now looking forward at our segments and starting with golf balls, we successfully launched new AVX, TorSoft, and TruField models in the first quarter. Initial response has been favorable in Sunbelt markets, and we're in good shape to support our global launch over the next two months as northern markets open up. Within Titleist Golf Clubs, we look to build upon our T-Series iron momentum and add energy with new Vokey SM10 wedges and Scotty Cameron Phantom putters. We expect these new products and the expanded execution of our fitting strategies will drive our first half performance. Our gear business is well positioned for growth, both organic and from the recent inclusion of club glove, effective at the start of this year. We have successfully integrated club glove into a cushionette and are committed to enhancing supply chain, B2B, and digital platforms in 2024 to then pave the way for accelerated investment and growth expectations for golf's leading travel brand. And with club gloves, addition to the cushionette portfolio, we have scaled back some of our Titleist branded travel gear offerings. However, even with this skew reduction, still expect growth from Titleist gear in 2024. Footjoy is launching a wide range of new products in the first half, led by new Pro SLX and Quantum Golf Shoes, and several style updates to our leading Premier franchise. Golfers will notice refinements to the FJ Apparel line and additions, such as our performance-oriented Thermo and Tempo Series mid-layers, and a new golf fitness collection as we continue to build upon Footjoy's unmatched authenticity in the golf wearable space. And we're enthused about our opportunities to continue developing our shoes performance outerwear business and anticipate double-digit growth in 2024, driven by our golf product lines in the U.S. and U.K. and measured growth within Ski. In addition to the full assortment of new products we have scheduled for the first half, our positive outlook is also shaped by several new initiatives as we adapt and invest to position the company for future success. First, our new Titleist Golf Ball and Vokey Wedge selection apps will supplement our in-person fitting efforts. We are enthused about the opportunity to connect with a wider audience of golfers to help them make the best equipment choices for their games. In the coming months, we will mobilize Footjoy's proprietary new FitLab Performance Footwear System to help golfers select the best performing, best fitting, and most comfortable golf footwear. We are confident that all golfers can benefit from this innovative and value-added fitting experience and are prepared to invest behind this initiative similar to our comprehensive ball and club fitting programs. Our investment in technology will also support trade partners as we implement improved B2B capabilities and empower their use of a Cushnitz proprietary online Pro Shop to support their own D2C engagements with emphasis on club logo and tournament opportunities. In 2024, we will begin operating a new -the-art golf ball customization technology that our team has been developing for the past few years. This new automation will expand our throughput capabilities resulting in greater efficiencies and faster lead times for custom-imprinted Titleist golf balls. Earlier this year, we started fulfilling orders from our new 500,000 square foot distribution and custom embroidery center located in nearby Lakeville, Massachusetts. This facility is representative of the company's commitment to providing leading service and the highest quality distribution experience. Initially, we will fulfill wholesale demand for FJ footwear, Titleist gear, and club glove and over time expect to support D2C and additional product groups from this new facility. We also recently expanded our apparel customization capabilities in the UK, bringing much of this work in-house to improve quality, reduce lead times, and meet growing demand for embroidered FJ and shoes products in this golf-rich region. And lastly, within golf footwear, we continue to progress towards our objective of establishing a more resilient and geographically diverse supply chain. And this year, expect to produce roughly half our footwear in Vietnam as we leverage the expanded capabilities of our longtime JV footwear production partner to supplement our China factory. We are confident these investments in golfer connection, technology, and supply chain will benefit golfers and trade partners while positioning the company for sustaining success. In summary, we are optimistic about the structural health of the golf industry, the great momentum behind our Titleist foot choice shoes and club glove brands, and the resilience and engagement of the game's dedicated golfer. Thanks for your attention this morning. I will now pass the call over to Sean.

Thank you, David. Good morning, everyone. Turning to the financial results of the quarter in the full year on slide 8. In line with expectations, our fourth quarter net sales were down .6% when compared to 2022, with lower net sales across all reportable segments except for golf balls. Just the Dibidda was a loss of $1.5 million, approximately $27 million lower than Q4 of last year. The net sales decline in the quarter was primarily due to golf clubs and foot joy, which were down 17% and 14% respectively. Golf balls partially offset these declines with a 5% increase on higher sales volumes and average selling prices of our Pro V1 family of golf balls. In golf clubs, net sales were down as higher sales volumes of our newly introduced T-Series irons were more than offset by lower sales volumes of TSR drivers and fairways, which were launched in Q3 of 2022. Lower footwear sales volumes in the quarter drove the decrease in foot joy net sales. As David highlighted, for the full year 2023, net sales and adjust Dibidda increased .2% and .1% respectively, driven by increased net sales across all reportable segments except for foot joy. The net sales increase for the full year was primarily driven by higher sales volumes in golf balls, golf clubs, and titleless gear, up 13.5%, 9.5%, and 7% respectively. Foot joy was down .1% compared to 2022 on lower sales volumes, mainly in footwear, partially offset by higher apparel volumes, which increased by a double-digit percentage. Sales volumes of products that are not allocated to one of our four reportable segments also decreased versus prior year. Turning to results by region, in the fourth quarter, the U.S. and Japan were down mainly due to lower net sales comparing to the prior year launch of TSR drivers and fairways previously mentioned, as well as lower footwear sales volumes in the U.S. Full year growth was led by the U.S. and rest of the world with gains across all reportable segments in those regions. Gross profit in the quarter was $210 million, down .2% compared to 2022, primarily due to decreased sales volumes in golf clubs and foot joy. Gross margin of .8% was up 80 basis points, largely due to favorable manufacturing costs in golf balls and lower inbound freight costs. Gross profit for the full year was $1.3 billion, up 6.2%, primarily resulting from increased volumes and average selling prices in golf balls, golf clubs, and Titleist gear, as well as lower inbound freight across all reportable segments and lower royalty expense in golf clubs. Lower sales volumes in foot joy and products not allocated to one of our four reportable segments partially offset the increase. Gross margin of .6% was up 70 basis points, mainly due to lower inbound freight costs. SG&A expense of $213 million in the quarter increased $17 million, or 8.8%, across all operating expense categories, mainly due to higher employee related expenses partially offset by lower IT expenses. R&D expense of $18 million was also up mainly due to higher employee related expenses. SG&A expense of $888 million for the full year increased $55 million, or 6.6%, from 2022, primarily due to higher advertising and promotional expenses across all reportable segments to support new product launches and higher employee related expenses in selling and admin partially offset by lower retail commission expense in Korea and lower IT related expenses. We also incurred about $12 million of one-time charges in 2023, of which $10 million related to the optimization of our distribution and custom fulfillment operations. R&D expense of $65 million was up to support new product introductions. 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 was up $6 million in the quarter and $28 million for the full year due to an increase in borrowings and interest rates with a little more than half the increase coming from higher debt. Our effective tax rate in Q4 was .9% and our full year effective tax rate was 17.8%, down from .9% last year. Decreases in both periods were primarily driven by a shift in our mix of jurisdictional earnings. Moving to our balance sheet and cash flow highlights on slide nine. Our balance sheet and cash flow positions continue to be very strong, allowing us to continue to execute our capital allocation strategy with our ongoing investments in the business and return of capital to shareholders being our highest priorities. Our net leverage ratio at the end of 2023 was 1.9 times. As expected, inventories increased sequentially from Q3 in support of 2024 product launches but declined from year end 2022. We're comfortable with our inventory quality and net position given the current state of demand and the supply chain as we move into 2024. Capital expenditures for 2023 were in line with expectations of $75 million and are projected to reach approximately $85 million in 2024. As David noted, in 2023, we returned roughly $384 million to shareholders with $332 million in share repurchases and $52 million in cash dividends. The quarterly dividend announced today of $0.215 per share will be payable on March 22nd to shareholders of record on March 8th, 2024. This increase in our quarterly dividend is the seventh increase since the dividend was implemented in 2017, which highlights our continuing confidence in the business outlook and cash flow generation. During the fourth quarter, we repurchased approximately 2.3 million shares of our common stock for $127 million, bringing our full year repurchases to approximately 6.5 million shares for a total of $332 million. As mentioned on February 15th, our board of directors increased the share repurchase authorization by an additional $300 million, bringing the total authorization to $1 billion since the share repurchase program was established in 2018. As a result, as of February 23rd, 2024, the remaining share repurchase authorization was $359 million and the number of shares outstanding was $63.5 million. Turning to our full year 2024 outlook on slide 10, full year revenue is projected to be between $2.45 billion and $2.5 billion, up .3% at the midpoint on a constant currency basis compared to 2023, with growth across all reportable segments, as well as growth both domestically and internationally. Our full year adjusted EBITDA is expected to be between $385 and $405 million. At the midpoint, our adjusted EBITDA growth would be 5%, with an EBITDA margin of approximately 16%. As we continue to invest in the business to drive sustainable long-term growth, many initiatives underway that will continue into 2024, including expanding our distribution and customization capabilities, increasing our fitting network for both balls and clubs, and technology investments to support B2B, D2C, and enterprise systems. As a result, full year SG&A growth will be a bit higher than our sales growth projections. And as we have mentioned, we have been diversifying our supply chain and footwear as we shift incremental production into Vietnam. As a result of these initiatives, we expect to incur transformation and restructuring charges in 2024. We will provide more information on these charges on our first quarter call. Due to the investments in operating expenses and support of the strategic initiatives highlighted, the quarterly cadence of our financial results in 2024 will differ from historical patterns. With respect to the first half of 2024, we expect net sales to be up low single digits compared to the first half 2023, with growth coming from titles golf balls, golf clubs, and golf gear, and first half EBITDA to be about flat to first half of 2023 due to increased operating expenses and to a lesser degree, the unfavorable impact of changes in foreign currency exchange rates. We are also forecasting a modest impact in freight costs in the first half due to the situation in the Red Sea. From a quarterly standpoint for the first half of 2024, as is typically the case, we expect net sales to be more weighted to the second quarter, while EBITDA will be even further weighted to Q2, as the first quarter will be burdened by continuing to increase its operating costs. And begin the year with a positive outlook for 2024, given the state of the industry, our consumer, and our leading product portfolio, all while remaining focused on executing our strategic priorities. With that, I will now turn the call over to Sandra for Q&A.

Thanks, John. Daisy, could we now open up the lines for questions?

Of course. Thank you. If you would like to register a question, please press star followed by one on your telephone keypad and ensure you are unmuted locally. If you would like to withdraw your question, please press star followed by two. So that's star followed by one on your telephone keypad to register a question. Our first question today comes from Megan Alexander from Morgan Stanley. Megan, please go ahead, your line is open.

Hi, good morning. Thanks so much. I wanted to start on the sales outlook. I think I heard you're expecting growth in all segments. Maybe can you give some color on what you're assuming for core equipment growth within that 3% to 5% guide? And then related to that, you've talked about some changes you've made specifically on your ball products.

And then the guide

in terms of price versus units as well.

Yeah, hi, Megan. I'm going to start with your second question about the ball product line. So just to walk it back, odd years we launched Pro V1s and even years we generally launched the remainder of the product line, as is the case this year. And for the most part, they're not equal weighted. A Pro V1 launch will typically be larger than what we would

see an even year. We did say we're... We have in our golf ball business.

So you'll see new models in Trufeel, and these have already been introduced and launched in the market, and Velocity and new AVX and Torsoft. So we've got an exciting lineup of new golf balls. Made the comment that they're off largely Sunbelt launch in the first part of the quarter, but by March, April, we'll have our global launch underway. And then in terms of guidance for the year, I would say Sean was fairly prescriptive in terms of first half and quarters. But as it relates to segments, I'll reiterate, we do anticipate growth across segments. The one difference would be within gear, where you'll see the additive component of club glove, which was not part of our results last year. But again, we're confident at this stage to leading and guiding towards low single across the board for each of the segments. Again, Outlier being the gear business.

Okay, great. That's helpful. And then maybe just taking a step back, bigger picture. The business historically grew at call it a 1 to 2% annual CAGR prior to COVID. You're now guiding sales 3 to 5% this year, and we may arguably be in the first kind of normal year post-COVID, supplies seemingly in a good spot. So I guess how do you think about whether the industry and business has structurally changed? And does this give you confidence that maybe this 3 to 5% is the new normal run rate for your business?

Yeah, certainly you look at where golf is today versus where it was before COVID. The baseline would be number of golfers, right? We've seen that number increase six years in a row. So that's certainly a positive and not going to yet prognosticate on what is going to happen in 2024. But we feel really good about the energy and momentum around participation. In round numbers, that looks like 950 or so million rounds in 2023 as compared to call it 800 million rounds in 2019. So that 150 million round number additional was true in 21 and 22 and 23. So there's been a real step up in our industry. And you're right. I would say supply chains have normalized probably in the back half of 2023. And certainly our guide reflects our enthusiasm and confidence around dedicated golfer, right? We operate in a bit of a subset of the total golf marketplace, but they're responsible for a whole lot of purchasing activity. Our confidence in the structural health of the marketplace. Our retailers are in really good shape. Golf courses are investing in their products to be more relevant and appealing to tomorrow's golfer. And then certainly our own internal momentum with our products and brands. So in terms of how we're thinking long term, we certainly are assessing the impacts of what has been a step up in our industry. And I think by virtue of our of our guide for 2024, we feel a bit more positive about the outlook today than we may have five plus years ago.

And Megan, maybe I just add to that again to punctuate in the club business, for example, I talked about the investments we're making in the fitting network. So I think as we expand the fitting network, we think the club business has probably outsize gross relative potentially to the market as we invest in that area for dedicated golfers. David talked about obviously club glove and integrating that into our distribution network. And certainly as we look at twenty four, the hope is that the footwear market will normalize as we get into the back half of the year. So I think all of those are the puts against our outlook, at least for twenty, twenty four.

Great. Thank you so much.

Thanks, Megan.

Operator. Next question.

Of course, our next question today is from Randy Connick from Jeffries. Randy, please go ahead. Your line is open.

Great. Thanks, David. I've asked this question before, but when you have your conversations across the many golf course operators you speak to, maybe give us some perspective on what those conversations are like in terms of how they feel about. Their business, the outlook, et cetera, how they.

We're

certainly we we connect with hundreds, if not thousands of golf professionals. You know, they're let's face it, they're looking at they're looking at the impacts of rounds up in the US, 20 some odd percent, and they've seen an increase in their play midweek. Weekends were always fairly robust. They've seen new participants there. The number of lessons has increased. The number of juniors, the number of women has increased. So from where they sit, they're busy and and they're they're optimistic about the state of the game and the energy and momentum behind the game. You know, one reality they'll always face is weather, and that's an unavoidable influence on the golf business. But even even through some tough weather starts last year, you know, to see the US market finish up 20 some odd million rounds up 4% off the prior year and even ahead of 21 was was really impressive. So there's a general level of enthusiasm towards just an increase in participation. We've said this. It puts a lot of pressure on the supply side of game and that many, many private clubs are full and there are long wait lists. And that's a reality the game is contending with on the flip side. Some 75% of play in golf is at public facilities. They're doing real well. Again, their challenge and their frustration maybe is moments where demand exceeds supplies. So so they would all say, hey, those are nice problems to have. But those are some of the realities they're dealing with. But generally speaking, again, and I point to the to the BGA show, there's a there's a general level of optimism about the state of the game, as you would expect coming off a year like we had in 2023.

You're proud for my I guess my last question would be, I think it's also asked about this in the past is, you know, the concept of fittings and customization and how the industry is moving more and more towards that kind of model. Maybe give us some perspective of where we are, where we've come from and and how that kind of changed in terms of, you know, change, you know, let's say ASP's conversion, working capital improvements potentially in the business, the way you're running your business. But then the whole industry is being run. It just seems like a bigger opportunity for, you know, you and others. And there's only a few others given to oligopoly or a consolidated industry that it's just a better run industry now with a lot more stability and pricing and margin. So maybe kind of comment on what you think there on those thoughts.

Yeah, so high level, Randy, I'm going to agree with all your points, but I'll dig in on a couple of observations on how they play out across the industry. So we've been we've been dedicated to custom fitting for 30 some odd years, and we continue to build out and refine our fitting efforts. And as Sean said, we continue to invest more and more in fitting. It just becomes a clear place for us to invest money because it results in all the benefits you describe. But most importantly, we know it's the best way for golfers to to experience and ultimately select golf clubs. You know, years ago, fitting was isolated to outdoors. Now fitting is happening almost everywhere with the advent of launch technologies and indoor simulators. There's a whole lot of education happening on the fitting side. So fitting continues to grow. It's most evolved and advanced in the U.S. and Europe. I've said this in the past. It's got a long way to go in Japan and Korea, but but we're moving we're moving forward. And one of the benefits that I think fitting lends itself to is is just the reality that comes at end of product life cycles. You have less product, less stock product in the market. Therefore, you're discounting less stock product. And as an example, right now you've seen you're seeing a lot of new driver launches from our competitors in the first quarter. And typically when that happens, you'd see a good amount of sell off of prior generation. And while that's happening, it's not happening to the degree we've seen in prior years. And again, I think that's a positive ancillary benefit of because so much of the business nowadays is happening through custom fitting. So it's been a great transformation. You've also got new channels emerging, right? You've got indoor fitters, teachers emerging because fitting has become so prevalent across the industry. But again, as it as it relates to working capital, as it relates to margins, as it relates to the overall golfer experience, all positives. And I think it's a it's a trend. I made the point we're 30 years down the road here and we keep building it out. And I would imagine that trend will continue. And it's it's compelling us to keep investing in custom fitting, which, again, if nothing else, gives you confidence, gives you a sense for our confidence about the opportunity moving forward.

Very helpful. Thank you.

Thanks, Randy. Operator, next question, please.

Thank you. Our next question is from Mike Schwartz from Travis Securities. Mike, please go ahead. Your line is open.

Hey, good morning, everyone. Maybe maybe just as it pertains to guidance and more specifically gross margin, you know, as we typically think about a non-pro V1 year in even years, gross margin is typically down year over year. But if I'm doing my math correctly based on on your guidance, I think it would imply gross margin of flat to maybe up slightly. So maybe I guess is that correct? And then maybe walk us through some of the puts and takes around gross margin as you think about it in the year ahead.

Sure, Michael, happy to. I think that we're not guiding specifically to margin. I don't think your assumptions, though, are far off. I think the biggest biggest item probably I would call out is is freight. We've seen freight normalized. So, you know, that will be less of a tailwind, I guess, that it was in twenty three versus twenty two. So we think that normalizes. We think that we get some more normalization in the supply chain. I think I've talked about raw materials and we have pretty good visibility in terms of what our costs are byproduct. So it's really it's really a freight conversation. And, you know, again, I don't think your assumption is is too far off.

OK, great. That's helpful. And maybe if we just look at the range of guidance and I know the range, the range really isn't too wide, but maybe help us understand, you know, what are the assumptions at the top end of that guidance? What are the assumptions at the bottom end of that guidance?

Yeah, you know, I think I think Michael certainly will. It's an appropriate guide for our business, certainly this time of year, right? We're late February and so much of the golf season is in front of us with with the majority of rounds and fittings happening, really, in Q2 and Q3. There there's a wide variety of puts and takes, I would say. Hey, unlike past years, there's more supply chain certainty this year than we've experienced in the last couple of years. You know, Sean mentioned the footwear category we expect to stabilize here in in in the mid part of the year. So there's more marketplace clarity and certainty in the wild card as always, as it always is this time of year, Q2, Q3, weather participation, et cetera. We like the way we're trending. But I think I think you get a better you get a better insight and answer from us, maybe maybe on the on a subsequent call.

OK, great. Thanks.

Thanks, Mike. Operator, next question, please.

Thank you. Our next question is from Joe Altavello from Raymond James. Joe, please go ahead. Your line is open.

Thanks, hey guys. Good morning. I think it's first question, a little bit of a housekeeping question here, but what's the contribution from from Club Love that you're assuming in your guidance?

Yeah, Joe, I think we have said it's less than 20 million in sales. It's EBITDA, EBITDA accretive, but again, not material.

OK, perfect. And then in terms of the new golfers that you've seen enter the sport of the last, you know, call it six years, how do they differ from typical golfers in respect to how often they trade up in terms of their clubs? Where they buy their clubs? Are they more inclined for fittings, etc.?

Yeah, I think I think it's it's a question we we have been asked often and we're certainly trying to understand ourselves. I'll attach it to Randy's earlier question as it relates to fittings. There's just a there's an inertia and energy around fittings that's hard to avoid. So where yesterday's beginner golfer may not have been as inclined to get fit, that's not the case today. Hey, you look at you look at rounds, you look at participation, there's there's an avid golfer base out there. And you know, our story, we're focused on the dedicateds. We said then and we say it now, they they make up 15 or so percent of the golfers. They play 40 percent of the round and responsible for about 70 percent of the spend. We still think that's the case. But I would say as it relates to these new golfers, we sort of break them out into into two parts, the true new to the game golfers and and the latent golfers, those who played at previous points. Took some time off and now jump back into the game. So clearly they come in with a bit more experience and a bit more understanding, maybe a step closer to becoming a dedicated player. But, you know, when you look at overall and you look at channel activity, you look at overall sell through, you see clearly this golfer has a preference for performance equipment. And you see that in in strong ASP's and balls and drivers and in every category, quite frankly, and further to that. And they go hand in hand. They they they they subscribe to the benefits of fitting. So we like what we see. It's a moving target, but we certainly like what we see in this in these in these changing times.

Very helpful, David. Maybe your lastly, your thoughts on the January rounds play date. I know it's a small month and I know there was some weather in there, but just curious what you thought what you're thinking there.

Yeah. Yeah. So just for context, January is about five percent of the U.S. total. It's probably, I don't know, two, three percent of the global total down, obviously. And I'll answer that question, Joe, on a three month. So you look at you look at November and this is U.S. up, I think, eight percent, December up twenty four percent and in January down sixteen or seventeen percent. And when I look at January, really, I look at three markets. I look at I look at California, Arizona and Florida, California, Arizona. We're up. They had some favorable weather comps, even though they had a lot of rain and Florida was down. So I think it's more than anything weather story and where you've had decent weather, you're going to be fine. And where you have where you have cold and rain, you're going to take the hit. So I'm going to I'm going to give Mother Mother Nature a lot of credit for what we saw in January.

OK, great. Thank you.

Thanks, Joe. Operator, next question, please.

Thank you. Our next question is from George Kelly from Ross MKM. George, please go ahead. Your line is open.

Hey, everybody. Thanks for taking my questions and congrats on another strong quarter. Thanks first for you on the increased authorization, the 300 million buyback that you announced this morning. I'm curious, should we anticipate a similar kind of cadence to your fiscal year? Twenty four buybacks to what you did in twenty three or do you expect to slow it down like any kind of color there would be helpful?

Sure, George. So, you know, as I've talked about in the past, I think we're going to be guided by overall net leverage. Right. So I've talked about less than two and a quarter times for the business. You can appreciate the seasonality and in the guide that I really was trying to be prescriptive about what to expect in the first half of the year. So you can imagine there'll be some variability in leverage first half versus second half. So I would use the leverage as one indicator of how the pace of share repurchases may or may not proceed in twenty twenty four. So, again, it's you know, the capital allocation strategy here, I think our past practice has been well articulated. You know, we've got significant investments we're making in the business for for real long term benefit, you know, obviously very pleased with the dividend increase and, you know, we'll continue to be opportunistic with the share repurchase at the end of the day, making sure we've got a strong balance sheet and the appropriate leverage profile. So that's how we think about it for twenty four.

Understood. Thanks. And then second question. In your prepared remarks, you talked about CapEx plans and efforts in customization in the fall and apparel businesses. And so I'm just curious how big are those businesses and what is the growth path look like? I'm just curious if you could give a little more context around the investments you're making and the opportunity you see in customization in the fall and apparel stuff outside of the equipment business.

Yeah, George, I'll start and then Sean will jump in. But in terms of those businesses, right, I did make the point that foot joy as an example, while a tough year for footwear foot joy apparel was up double digits. So we like we like the growth we're getting out of out of the foot joy apparel business. I would add shoes to that. So much of what we do in the shoes line, particularly in the U.S. in the UK is customized. So we're seeing we're seeing nice growth in that business. A lot of it, as you would expect, is is on course where custom logos are very important. So clearly we're compelled to invest to increase our capacity. And I also made the point where it part of it's a function of moving from three PL where we used to outsource to bring it in house. We think it brings just better control, better quality execution and more more cost effective. So we like we like the space. Part two of that question is, is it relates to golf balls? And that's a that's an automation capability we've been working on for a few years as part of our long term one hundred and twenty million dollar capital campaign. We're really excited about it. It's it's a quality play. It's a throughput efficiency play. It's inevitably going to be a cost effectiveness play. And just to contextualize our ball business, roughly one in four dozens are decorated in some way, either with a corporate logo or a club logo or a golfer personalization. So so a big meaningful part of our ball business.

And, George, just to clarify, I guess what I was highlighting in the script was, you know, we're going to see about eighty five million dollars of CapEx, obviously very much focused on the ball and club segments and franchises to continue to support the growth. I talked about some of the technology investments, but specifically distribution and customization was about taking ownership and control of the quality lead times and delivery of our product. I think David talked about the specific segments and products that are within this Massachusetts distribution and customization facility, primarily foot, joy and gear. So that those were those were really the comments in my script that I was highlighting.

George, the final point I'll make is, you know, we're we're we're a lot bigger than we were three, four or five years ago. So our our historical distribution methods have been pressured. So this is as much a commentary on building a distribution network for the future, recognizing it that that our our past infrastructure was taxed to the point where we had to make some meaningful changes.

OK, that was helpful. Thank you.

Thank you. Thanks, George. Operator. Next question.

Thank you. Our next question is from Noah Duggan from KeyBank Capital Markets. Noah, please go ahead. Your line is open. Hi,

thanks for taking my questions. Maybe first, if you could give just an update on the competitive environment and channel health and footwear and maybe the unlock as you see it from foot, joy foot lab. And then second, any color on the differences in the markets outside of the U.S., both from an industry and strength of sport perspective that's kind of baked into the guide would be helpful as well. Thanks.

Yeah, you know, so specific to footwear, I'll walk it back a bit. And, you know, we saw that we saw that inventory globally spike really in Q2 last year, and then we saw it retreat in Q3 and Q4. We like where it's trending. We think we're in the back half of a correction, maybe 60, 70 percent downfield on the correction. But but we're in a good place. And if you see a situation like that and it corrects itself in less than a year, we feel pretty good about it. So as we've got it, we think we think we work our way through it through Q2 and then return to sort of a more normal, healthy cadence within within footwear and should return to more normalized growth. And and you said it, part of it is a response to the after effect of covid where there was a time when the marketplace had an insatiable appetite for footwear and then and then demand normalized. The other part of it is you saw a lot of new competitive entries into the marketplace. I am pleased. I am pleased with in particular how footjoy share and premium positioning has held up during this time. And I think that's commentary on a lot of the great products they brought to market, particularly on the on the premier franchise. And I think we continue to build upon that with SLX and traditions and some of our some of our our newer footwear models. So, you know, I again, I think I think we're in the back the back half of that correction. And and after after two, two quarters of of of inventory reduction. And when I say that, I'm speaking to global inventory at retail. And the final point I'll make on that is we're pleased with our inventory in house. It's down quite a bit from a year ago. So we think we're healthy and nimble and agile. So we like where that positions us in terms of your second question, how we feel about markets around the world. I'll start with U.S. market was clearly the strongest in twenty twenty three. And and we we don't see that changing in twenty twenty four. There's just a there's a vibrancy in the U.S. market that I think everybody's in tune with, you know, as as we look around the board, I'm not sure any one market jumps out. Right. We're projecting growth in the in Korea and rest of world. So there's not a market that stands out. I do like to call out Korea just because it's such a vibrant golf marketplace. You know, I've said before the the average course in Korea does about seventy thousand rounds a year, which is which is extraordinary. Just a strong demand, vibrant golf marketplace. And then the only other comment I'd add is the .E.A. You know, we've all been been cautious and careful about a .E.A. Certainly in twenty twenty three, whether it's inflation or energy costs or the war, I thought it held up pretty well last year. And and and the outlier, if if you will, would be the U.K. where golf remains vibrant and in particular golf tourism is really at a terrific level. So that's that's a high level of our of our perspective as to key regions around the world.

Thank

you.

Thanks, Noah.

OK, thanks, everybody. As always, we certainly appreciate your time this morning and your interest in a cushion. Hope you all have a great spring and we look forward to talking to you again on our next call.

Thank you, everyone, for joining today's call. You may now disconnect your lines and have a lovely day.