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Hello, everyone, and welcome to the Acushnet Holdings Corp 4Q 2023 earnings call, and thank you for standing by. My name is Daisy, and I'll be coordinating this call today. [Operator Instructions] I would now like to hand the call over to your host. I would now like to hand the call over to your host.

Good morning, everyone. Thank you for joining us today for Acushnet Holdings Corp's Fourth Quarter and Full Year 2023 Earnings Conference Call. Joining me this morning are David Maher, 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 Acushnet'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 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 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 Acushnet'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 Acushnet 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 the 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 on the channel, and I am pleased with how FootJoy has navigated the ensuing retail correction period. FootJoy finished the year down 2% as double-digit apparel gains helped to offset a footwear decline. FootJoy's unwavering commitment to performance, comfort, and design innovation are the foundation for FJ's longstanding claim to the number one shoe in golf. Acushnet'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 Acushnet's directors have approved a 10% increase to our quarterly dividend to $0.215 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 Acushnet'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 5, 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 UK 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 FootJoy and Titleist apparel. And lastly, our rest of world sales increased a 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 UK 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, Tour Soft, and TruFeel models in the first quarter. Initial response has been favorable in sunbelt markets and we are 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 Acushnet 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 Glove's addition to the Acushnet portfolio, we have scaled back some of our Titleist branded travel gear offerings. However, even with this SKU 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 UK 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 Acushnet's 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 state-of-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 capability of our longtime JV footwear production partner to supplement our manufacturing. 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 FootJoy 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 for the quarter and the full year on Slide 8. In line with expectations, our fourth quarter net sales were down 8.6% when compared to 2022, with lower net sales across all reportable segments except for golf balls. Adjusted EBITDA 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 FootJoy, 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 FootJoy net sales. As David highlighted, for the full year 2023 net sales and adjusted EBITDA increased 6.2% and 11.1%, respectively, driven by increased net sales across all reportable segments except for FootJoy. The net sales increase for the full year was primarily driven by higher sales volumes in Golf Balls, Golf Clubs, and Titleist Gear, up 13.5%, 9.5%, and 7% respectively. FootJoy was down 2.1% 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 World, with gains across all reportable segments in those regions. Gross profit in the quarter was $210 million, down 6.2% compared to 2022, primarily due to decreased sales volumes in Golf Clubs and FootJoy. Gross margin of 50.8% 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 FootJoy and products not allocated to one of our four reportable segments partially offset the increase. Gross margin of 52.6% 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 26.9% and our full year effective tax rate was 17.8%, down from 20.9% 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 9. 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 are 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 at $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 22 to shareholders of record on March 8, 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 15, 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 23, 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 4.3% 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 million 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 are 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 and operating expenses in 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 first half 2023, with growth coming from Titleist 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 [indiscernible] 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 Sondra for Q&A.

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

Of course, thank you. [Operator Instructions] 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. 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 product [indiscernible] in a 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 launch Pro V1s, and even years we generally launch 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 in an even year. We did say [indiscernible] 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 TruSoft. So we've got an exciting lineup of new golf balls. I 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 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, the 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 supply is 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 the 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 golfers, 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 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'll 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 outsized growth 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 '24, 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 2024.

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, etc. How are they [indiscernible]

Certainly, we connect with hundreds if not thousands of golf professionals. Let's face it, they're looking at the impacts of rounds up in the U.S., 20-some-odd percent, and they've seen an increase in their play midweek, weekends were always fairly robust. They've seen new participants. 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 they're optimistic about the state of the game and the energy and momentum behind the game. One reality they'll always face is weather. And that's an unavoidable influence on the golf business. But even through some tough weather starts last year to see the U.S. market finish up 20 million some odd rounds, up 4% off the prior year, and even ahead of '21 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 the game, and that many, many private clubs are full and there are long waitlists, and that's a reality the game is contending with. On the flip side, some 75% of a play in golf is at public facilities. They're doing real well. Again, their challenge and their frustration maybe is moments where demand exceeds supply. 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 BGA show, 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.

Super helpful. I guess my last question would be, I think I've also asked about this in the past, is 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 how that's kind of changed in terms of changed, let's say ASPs conversion, working capital improvements potentially in the business, and the way you're running your business, but then the whole industry is being run. It just seems like a bigger opportunity for you and others, and there's only a few others given its 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 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 described. But most importantly, we know it's the best way for golfers to experience and ultimately select golf clubs. 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 we're moving forward. And one of the benefits that I think fitting lends itself to is just a reality that comes at the 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'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 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 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 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. Thanks, guys.

Thanks, Randy. Operator, next question, please.

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

Hey. Good morning, everyone. Maybe just as it pertains to guidance and more specifically gross margin, as we typically think about a non-Pro V1 one year in even years, gross margin, I know, is typically down year-over-year, but if I'm doing my math correctly, based 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 item probably I would call out is freight. We've seen freight normalize, so that will be less of a tailwind I guess that it was in 23' versus 22'. 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 by product. So, it's really a freight conversation and again, I don't think your assumption is too far off.

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

Yeah. 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 the majority of rounds and fittings happening, really in Q2 and Q3. There is 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. Sean mentioned the footwear category, we expect to stabilize here in the mid part of the year. So there's more marketplace clarity and certainty in the wild card, as it always is this time of year, Q2, Q3, weather participation, etc. We like the way we're trending, but I think you get a better insight and answer from us, maybe on a subsequent call.

Okay. Great. Thanks.

Thanks, Mike. Operator, next question, please.

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

Thanks. Hey, guys. Good morning. I guess the first question, a little bit of a housekeeping question here, but what's the contribution from Club Glove 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 accretive, but again, not material.

Okay, perfect. And then in terms of the new golfers that you've seen enter the sport over the last, 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 it's a question 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 an inertia and energy around fittings that's hard to avoid. So where Yesteryear's beginner golfer may not have been as inclined to get fit, that's not the case today. Hey, you look at rounds, you look at participation, there's an avid golfer base out there. And our story, we're focused on the dedicated. We said then, and we say it now, they make up 15 or so percent of the golfers. They play 40% of the round and responsible for about 70% of the spend. And 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 two parts. The true new to the game golfers 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 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 strong ASPs and balls and drivers in every category, quite frankly. And further to that, and they go hand in hand. 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 these -- in these changing times.

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

Yeah. So just for context, January is about 5% of the U.S. total. It's probably, I don't know, 2%, 3% of the global total. Down, obviously, and I'll answer that question, Joe, on a three-month. So you look at November and this is U.S. up, I think 8%, December up 24%, and January down 16% or 17%. And when I look at January, really I look at three markets. I look at California, Arizona, and Florida. California, Arizona were up. They had some favorable weather comps, even though they had a lot of rain. And Florida was down. So net-net, 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 cold and rain, you're going to take the hit. So I'm going to give Mother Nature a lot of credit for what we saw in January.

Okay. Great. Thank you.

Thanks, Joe. Operator, next question, please.

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

Hey, everybody. Thanks for taking my questions, and congrats on another strong quarter. First for you on the increased authorization, the $300 million buyback that you announced this morning. Curious, should we anticipate a similar kind of cadence to your fiscal year '24 buybacks to what you did in '23, or do you expect to slow it down like any kind of color there would be helpful?

Sure, George. So 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 in a quarter times for the business. You can appreciate the seasonality 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 2024. So again, the capital allocation strategy here. I think our past practice has been well articulated. We've got significant investments we're making in the business for real long-term benefit. Obviously, very pleased with the dividend increase, and 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 '24.

Okay. Understood. Thanks. And then second question. In your prepared remarks, you talked about CapEx plans and efforts in customization in the ball and apparel businesses. And so I'm just curious, how big are those businesses? And what does 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 ball 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 FootJoy, as an example, while a tough year for footwear, FootJoy apparel was up double digits. So we like the growth we're getting out of the FootJoy apparel business. I would add shoes to that. So much of what we do in the shoes line, particularly in the U.S. and the UK, is customized. So we're seeing nice growth in that business. A lot of it, as you would expect, 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 part of it's a function of moving from 3PL, where we used to outsource to bring it in-house. We think it brings just better control, better quality, execution, and more cost-effective. So we like the space. Part two of that question is, as it relates to golf balls, and that's an automation capability. We've been working on for a few years as part of our long-term $120 million capital campaign. We're really excited about it. 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 a big meaningful part of our ball business.

And, George, just to clarify, I guess what I was highlighting in the script was we're going to see about $85 million 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 FootJoy and Gear. So those were really the comments in my script that I was highlighting.

George, the final point I'll make is we're a lot bigger than we were three, four, five years ago. So 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 our past infrastructure was taxed to the point where we had to make some meaningful changes.

Okay. That was helpful. Thank you.

Thank you.

Thanks, George. Operator, next question.

Thank you. Our next question is from Noah

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 FootJoy, FootLab. 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. So specific to footwear. I'll walk it back a bit. And 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% downfield on the correction but we're going 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 guided, we think we work our way through it, through Q2, and then return to sort of a more normal, healthy cadence within footwear and should return to more normalized growth. 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 demand normalized. The other part of it is you saw a lot of new competitive entries into the marketplace. 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've brought to market, particularly on the premier franchise. And I think we continue to build upon that with SLX and traditions and some of our newer footwear models. Again, I think we're in the back half of that correction and after two-quarters 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 2023, and we don't see that changing in 2024. There's a vibrancy in the U.S. market that I think everybody's in tune with. As we look around the board, I'm not sure any one market jumps out, right ? We're projecting growth in EMEA, 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. I've said before, the average course in Korea does about 70,000 rounds a year, which is extraordinary, just a strong demand, vibrant golf marketplace. And then the only other comment I'd add is EMEA. We've all been cautious and careful about EMEA, certainly in 2023, whether it's inflation or energy costs or the war, I thought it held up pretty well last year. And the outlier, if you will, would be the UK, where golf remains vibrant. And in particular, golf tourism is really at terrific levels. So that's a high level of our perspective as to key regions around the world.

Thank you.

Thanks, Noah.

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