Acushnet Holdings Corp.

Q3 was 19.3 percent as compared to 16.5 percent in last year's third quarter, primarily driven by changes in our jurisdictional mix of earnings. Looking to the full year, we expect our annual effective tax rate to be in line with our -to-date rate of 21.6 percent. Moving to our balance sheet and cash flow highlights, as we head into 2025, our balance sheet and cash flow positions are strong, and we continue to prioritize ongoing investments in the business and returning capital to shareholders. Our net leverage ratio at the end of Q3, using average trailing net debt, was 1.8 times, sequentially down from 1.9 times in the second quarter. Our inventory position has significantly improved, having declined 19 percent and 6 percent when comparing to year-end 2023 and last year's third quarter, respectively. We are comfortable with our inventory position given the current state of demand and expect inventories to increase at year-end, primarily to support the 2025 Pro V1 and Pro V1X launch, as well as the 2025 club launches. -to-date cash flow from operations decreased from the first nine months of 2023, primarily due to decreases in net income and deferred income tax expense, as well as changes in working capital. Capital expenditures were $43 million through the first nine months of 2024, and we still expect full-year CAPEX spend to be approximately $80 million. Through September, we returned roughly $184 million to shareholders, with $143 million in share repurchases and $41 million in cash dividends. Today, our board of directors declared a quarterly cash dividend of 21.5 cents per share payable on December 20th to shareholders of record on December 6, 2024. During the quarter, we repurchased 1.1 million shares for an aggregate of $70 million. Included in this amount were shares repurchased from Magnus for $37.5 million in relation with our previously disclosed March 2024 share purchase agreement. As of September 30, 2024, we had $232.2 million remaining under the current share repurchase authorization, including $62.5 million related to the June 2024 share purchase agreement. Turning to our full-year 2024 outlook, we are narrowing our adjusted EBITDA range to $395 million to $405 million. With respect to our 2024 net sales outlook, we are reaffirming a range of $2.45 billion to $2.5 billion on a reported basis. As we discussed on our second quarter call, we still expect to be towards the lower end of the reported sales range, in part due to FX impacts, and closer to the midpoint of our .2% to .3% constant currency sales range. When looking at the fourth quarter, our outlook incorporates -over-year sales growth in all segments except golf balls, which is expected in the last quarter of our two-year product lifecycle. We also expect -over-year fourth quarter adjusted EBITDA improvement, which includes incremental investments across SG&A and R&D as we look to build upon this year's momentum heading into 2025. Also in the fourth quarter, we anticipate incurring a restructuring charge related to the full transition of our footwear supply chain to Vietnam in early 2025, as David just highlighted. Lastly, beginning with our 2024 10K filing, we expect to combine Titleist golf balls and golf clubs into one operating segment that will be reported as Titleist golf equipment. In recent years, golf balls and golf clubs have increasingly converged from a strategic and economic standpoint, and we believe this new reporting structure best reflects the way in which we are now viewing and managing the golf equipment business. Golf gear and foot-joy golf wear will remain as reportable segments. In closing, really pleased with our -to-date performance, and the team remains focused on finishing the year strong and continuing to execute on our strategic priorities for 2025 and beyond. With that, I will now turn the call over to Sandra for Q&A.

Thank you, Sean. Operator, could we please open the line for questions? Thank you. We will now start today's Q&A session. If you would like to ask a question, please press star followed by one on your telephone keypad, and if you wish to withdraw your question, then it is star followed by two. Our first question today comes from Matthew Boss from JPMorgan. Your line is now open. Please go ahead.

Great, thanks. So, David, maybe if you could elaborate on participation and engagement trends that you're seeing in the current landscape and just any notable call-outs across geographies as we think about the U.S. market relative to international.

Yeah, hey, Matt. So, you know, as noted, we're really pleased. The industry is really pleased with rounds of play in the U.S. up just about 2% year to date. After a slow start in January and February, primarily in the southeast, and as you look at sort of the map of the country, you see all regions up versus the, with the exception of the southeast again, a slow start in the early part of the year. So to sit here today and look at 24 rounds on pace with the record of 21, I think is really a positive indicator and trend of what's happening in golf, both with dedicated golfers and the benefit of some of the new golfers that have joined the game in the last couple of years. As we move around the globe, Matt, we project rounds through September down about 2%. Korea up slightly, the others down modestly. A little bit of weather, a little bit of maybe macroeconomic, and we've said consistently, U.S. market, U.S. consumer, stronger than we're seeing around the world. But by and large, we think rounds are holding up very well. There's always going to be a variability due to weather. As I think about where we are today versus sort of a 2019 baseline, you know, the major markets, U.S., Korea, up 20-plus percent. Japan would be in my top three markets, up 10%, and worldwide rounds up about 15%. So structurally, Matt, the game's in a good place, and we're always going to have weather ups and downs, but net-net, we're really confident with where we are through the first three quarters.

Great. And then maybe just a follow-up for Sean. As we think about gross margin, just any puts and takes in terms of the fourth quarter on gross margin, and how best to think about the promotional landscape and inventory in the channel today?

Yes, I'll take the first one. I think gross margin, you saw the positive trend in Q3. I think I spoke on the last call about the back half gross margin approximating where we ended the first half. That statement still holds true. Obviously, given the performance of the club business in Q3, that really helped drive. But again, it's both volume and price and efficiency. So very, very pleased with that in terms of the promotional environment and inventory. I'll turn it over to David. All

the way in, Matt. So from an equipment standpoint, balls and clubs, I would say steady state, normal. You're going to see some promotional activity at the holidays, which we always do. So again, I would characterize that as normal. I've said this before, clubs, we tend to be a little bit isolated or resilient just because so much of what we do is custom fit. So net-net, I would put equipment, balls and clubs in a steady state, normalized position. If there's some watch out, it's the continued discussion we've had all year about footwear. While better than it has been, I would expect to see some promotional activity over the holidays. Apparel, again, we don't see too many swings within apparel simply because so much of what we do is custom embroidered. But I would overall characterize the landscape as within the range of normal. Balls, clubs, healthiest, and maybe a watch out in footwear.

Great color. Best of luck.

Thanks, Matt.

As a reminder, if you would like to ask a question on today's call, please press star, followed by one on your telephone keypad. And if you wish to withdraw your question, then it is star, followed by two.

Okay. Thanks, everybody. Short Q&A today. Everybody gets a little time back on their calendar. As always, we appreciate your interest and look forward to getting together again in three months' time. Thanks again.

That concludes today's A Kushnet Company call. You may now disconnect your line.