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Good morning, everyone, and welcome today's Acushnet Company 2Q '24 Earning Call. My name is Drew and I'll be your operator today. [Operator Instructions]. I will now turn the call over to Sondra Lennon, Vice President, Planning, Analysis and Investor Relations to begin. Please go ahead.

Good morning everyone. Thank you for joining us today for Acushnet Holding Corp's second quarter 2024 earnings conference call. Joining me this morning are David Maher, our President and Chief Executive Officer, and Sean Sullivan, our Chief Financial Officer. Before I turn the call over to David, I would like to remind everyone that we will be making forward-looking statements on the call today. These forward-looking statements are based on the 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 US Securities and Exchange Commission. Throughout this discussion, we will make reference to non-GAAP financial metrics, including items such as net sales on a constant currency basis and adjusted EBITDA. Explanations of how and why we use these metrics and reconciliations of these items to the most directly comparable GAAP metrics can be found in the schedule of today's press release, the slides that accompany this presentation, and in our filing with the U.S. Securities and Exchange Commission. Please also note that references throughout this presentation to year-on-year net sales increases and decreases are on a constant currency basis unless otherwise stated, as we feel this measurement best provides context as to the performance and trends of our business. And when referring to year-to-date results or comparisons, we are referring to the six-month period ended June 30, 2024, and the comparable six-month period in 2024. With that, I'll turn the call over to David.

Thanks, Andrea and good morning, everyone. As always, we appreciate your interest in the Acushnet Company. We continue to be enthused about the overall state of the Golf industry, and I'm especially appreciative of my teammates for their great work and commitment to excellence, which fueled the company's first-half success. Getting right to our comments here on slide four, you see our second quarter and first-half results. For the quarter, Acushnet delivered net sales of $684 million, a 1% year-over-year increase, primarily related to gains in Titleist Golf Balls. This has contributed to adjusted EBITDA of $131 million in the quarter, down $1.1 million from last year's second quarter. And for the half, net sales of $1.39 billion were up 2%, while adjusted EBITDA of $285 million also increased 2% compared to last year's first-half. There are several contributors to these results, which reflect differences across segments and regions that we've experienced through the first half. First is the global momentum behind Titleist Golf Balls and Golf Clubs, which grew 7% and 5%, respectively, in the half. Our Titleist Golf Balls business performed especially well in the half against a challenging comp with last year's Pro V1 launch, and in the year, where we've seen a wide range of competitive Golf ball introductions. Double-digit Titleist Golf Balls gains in the U.S. and growth in Korea are setting the first-half pace and we entered the back half of the year with nice momentum. To meet healthy demand in all regions, we continue to operate our three Golf Ball production facilities at full capacity. Additionally, we are seeing the initial benefits from our recent capital investment program in the form of expanded urethane capacity and improved throughput efficiency and capabilities across our ball plants and custom imprint facilities. It has also been a terrific first-half for Titleist Golf Balls across the Pyramid of Influence with Pro V1 and Pro 1X notching 26 PGA Tour wins year-to-date, as compared to four for the nearest competitor. Titleist Golf Club growth in the half was fueled by steady demand for our new Vokey SM10 wedges, Scotty Cameron and Phantom putters, and T-Series Irons. Japan led the way with sales up double digits, followed by growth in EMEA in the U.S. as well. While clubs in the first half were up 5% over last year, a more relevant comp is against two years ago, given our extended product life cycles. Compared to the first half of 2022, Titleist Club sales increased 22% with growth coming from wedges, putters, and irons. And our club team has been especially busy over the past few months preparing for the upcoming launch of new Titleist GT Metals. We are pleased with early player response as the new GT has been the most played driver at recent events on both the PGA and DP World Tours. As you would expect, we see this as powerful validation as we build interest and demand prior to our global market launch later this month. In addition to this momentum in golf balls and clubs, another contributor to our first half performance was our strong across-the-board success in the U.S. market, which grew 7% in the half. This was led by double-digit growth from golf balls and FJ Apparel along with gains from KJUS, Titleist gear, clubs and FJ footwear. Our U.S. business continues to benefit from healthy participation with rounds up 2% in the first half with this growth achieved despite poor weather comps across much of the East Coast. These tailwinds from balls, clubs in our U.S. region helped to offset a slow start in Europe, where rounds were off high single digits as the region has endured an unusually cold and wet spring and summer. This slow start impacted each of our businesses and especially FootJoy footwear and apparel. Our teams are closely monitoring channel inventories and promotional activity as this region reacts to the inevitable effects of poor weather and reduced early season traffic. First half rounds of play in Korea and Japan are projected to be up 2% and down 1%, respectively, as both markets made up ground in Q2 after slow weather-related starts in Q1. And while we are pleased with our golf ball and club momentum across Asia, the region continues to work through excess footwear and apparel inventories, which has negatively impacted our results in these regions. As we said on our last call, we expect the Korea's premium apparel market will remain soft for the near-term as the market corrects following a period of accelerated growth, which brought in many new competitors and a significant amount of inventory in recent years. And while we are comfortable that footwear inventories have normalized in the U.S. market, we are still seeing elevated channel inventory levels in Europe and Asia. Looking forward, we are enthused by our brand momentum, the overall health of the golf market and the resilience and engagement of Acushnet's core consumer, the game's dedicated golfer. From a product development and supply chain readiness standpoint, our team has done good work, and we expect healthy growth from Titleist clubs and gear, FJ and KJUS in the second half. Golf balls are projected to be down slightly for the half but up compared with their 2022 comp as we balance our production schedule to satisfy at-once demand with the need to build inventory to support new products scheduled for launch in early 2025. Key product launches in the coming months include new Titleist GT Metals and new seasonal collections for FJ and KJUS and Titleist Apparel in Korea, Japan and China. FJ also launches Quantum, a new athletic inspired golf shoe for men and women that strives for maximum comfort and performance. We look for Quantum to complement the great momentum of our FJ Classics franchise, which is fueled by our popular and timeless Premiere and Traditions lines. And consistent with past practices, we continue to leverage the company's strong balance sheet and execute a disciplined approach to capital allocation for the long-term benefit of Acushnet, our brands and our shareholders. In summary, the company is well-positioned heading into the back half of the year, and we are confident in our ability to successfully execute against Acushnet's long-range goals. Thanks for your attention this morning. I will now pass the call over to Sean.

Thank you, David. Good morning, everyone. As David mentioned, we had a solid second quarter and strong first half to start 2024. Second quarter net sales increased slightly and adjusted EBITDA was $131 million, down $1.1 million from last year's second quarter. For the first half of 2024, net sales and adjusted EBITDA both increased 2%, in line with our expectations. Net sales growth in the second quarter was driven by continued strength in our Titleist Golf Ball segment, up 5% compared to last year. As expected, Titleist Golf Clubs net sales were down 4% in the quarter given the timing of product launches in the first half. Geographically, net sales in Q2 were up in all regions, except for Rest of World, where lower net sales in the FootJoy Golf Wear segment drove the year-over-year decline. Gross profit in the second quarter of $372 million was up 1% or $3 million compared to 2023, primarily due to higher sales volumes and lower manufacturing costs in Titleist Golf Balls, higher average selling prices in Titleist golf gear and a favorable product mix within FootJoy. Titleist Golf Clubs gross profit was down in the quarter due to sales volumes and the repositioning of TSR Metals at the end of their two-year product life cycle. Second quarter gross margin of 54.4% was up 90 basis points versus prior year. SG&A expense of $246 million in the quarter increased $4 million or 2% from 2023, mainly due to increases in IT-related expenses and higher distribution expenses in the U.S. Interest expense of $14 million in the quarter was up $3 million due to an increase in borrowings. Our effective tax rate in Q2 was 23.2%, up from 21.8% last year, primarily driven by a shift in our jurisdictional mix of earnings. Moving to our balance sheet and cash flow highlights. Our balance sheet and cash flow positions continue to be very strong, allowing us to execute our capital allocation strategy with ongoing investments in the business and return of capital to shareholders being our highest priorities. Our net leverage ratio at the end of Q2 using average trailing net debt was 1.9x. Our inventory position has significantly improved, having declined 22% from the fourth quarter of 2023 and 10% from the first quarter of 2024 with decreases across all of our product segments. When comparing to last year's second quarter, inventories were down 14% We are comfortable with our inventory position given the current state of demand and expect inventories to increase in the back half of 2024 in support of second half product introductions in the 2025 Pro V1 launch. First half cash flow from operations decreased from the first half of 2023, primarily due to a decrease in net income and deferred income tax expense, offset by a change in working capital. Capital expenditures were $22 million in the first half of 2024. And based on project timing, we now expect full year 2024 CapEx spend to be approximately $80 million rather than $85 million. Through June, we returned roughly $101 million to shareholders with $73 million in share repurchases and $28 million in cash dividends. Today, our Board of Directors declared a quarterly cash dividend of $0.215 per share payable on September 20 to shareholders of record on September 6, 2024. In relation to the March 14, 2024 agreement with Magnus, on July 10, we purchased approximately 588,000 shares of our common stock for an aggregate of $37.5 million. On June 14, we entered into a new agreement with Magnus to purchase an equal amount of our common stock as we purchase on the open market from July 1, 2024, to December 31, 2024, up to an aggregate of $62.5 million. As of June 30, 2024, after giving effect to the July 10 settlement, we had approximately $265 million remaining under the current share repurchase authorization. Turning to our full year 2024 outlook; we are reaffirming our full year 2024 net sales outlook of $2.45 billion to $2.5 billion on a reported basis and our adjusted EBITDA range of $385 million to $405 million. With respect to our revenue outlook, while we are maintaining our full year constant currency revenue range, up approximately 3.2% to 5.3% as compared to 2023, we are trending towards the lower end of our range on a reported basis, primarily due to continued currency headwinds as well as market conditions impacting the FootJoy and Titleist golf gear segments. It is worth noting that during the first half of 2024, we experienced currency headwinds impacting net sales of approximately $16 million. Providing some additional context around timing, similar to last year's second half, we expect third quarter net sales to be greater than 50% of our second half net sales behind the strength in Titleist golf clubs and the launch of our new GT Metals. We also expect third quarter adjusted EBITDA to be greater than 75% of second half adjusted EBITDA. Overall, we are very pleased with our first half performance and remain focused on executing our strategic priorities for 2024 and beyond. With that, I will now turn the call over to Sondra for Q&A.

Thank you, Sean. Operator, could we now open up the lines for questions?

[Operator Instructions] Our first question today comes from Matthew Boss from JPMorgan. Your line is now open. Please go ahead.

Great. Thanks. So David, maybe just to kick off, any change in your view as it relates to the health of the golf industry, how it typically holds up during more volatile macro backdrop? And maybe more near-term, could you speak to channel feedback or just initial excitement on your drivers and metal launches ahead in the back half of the year that supports the embedded revenue growth acceleration in the back half?

Yes, Matt. Maybe I'll break that out regionally to start. We're -- our business, as we outlined, healthiest in the U.S., I think, aided by rounds increase, rounds up a couple of percent despite some soft weather in the East. So we like what we see there, called out the inherent strength of balls and clubs and gear, just an overall healthy profile in the U.S. As we move into EMEA, really two stories, UK, a little bit healthier than the continent. I think the UK is aided nicely by golf tourism. I would say we lost about half a turn or so due to a slow start that happens in poor weather conditions. Rounds, I said, were down high single digits. Again, they had a very cold and wet spring so no real surprises there. And then Japan, Korea, we're actually pleased with rounds of play. I think Japan up -- down slightly, Korea, up slightly. So round and participation remain healthy, balls and clubs, particularly resilient. When we think about Asia, there is an apparel correction happening, and we talk about that really with focus on Korea, which is a sizable premium apparel market. That's been correcting for a year or so, and we expect that to continue for the near-term. And then gears just been soft. So we're cautious in Asia. So really, you look at the three main theaters and you see a resilience, you see a resilient consumer, some tailwinds with participation in some regions, some headwinds elsewhere with other regions. So structurally, we like where the game is. Obviously, it's been a major step-up over the last several years and to sit here today and talk about rounds growth in the U.S. and rounds growth in Korea is a real positive. And then consistent with what we've said over the last couple of cycles, clearly, the U.S. consumer is the strongest consumer that we see across the globe. And Matt, as to your question about forward outlook; certainly our -- we're looking for growth in all segments. I think we said with the exception of golf ball. That's just part of our two-year calendar, down low single digits. Really fueled by product launches and excitement around I called out drivers and apparel collections and footwear. But you're right, you called out the GT. That's -- there's a lot of excitement around that. We've had some nice early success across tours and in the Pyramid that gives us confidence that we're off to a nice start. Now we do start shipping that product in earnest here in the coming weeks. We just put out our fitting supplies in the marketplace. So that will start here really right around August 1. So continuing with the momentum of balls and clubs, that's sort of the benchmark of how we think about the back half of the year. And yes, clubs -- we're enthused about around the early response and enthusiasm around the new GT series.

Great. And then maybe just one for Sean. Could you speak to expectations for gross margin in the back half of the year? Maybe what you've embedded for promotional activity in the marketplace across segments?

Sure, Matt. So just to take the last point, I think you saw in my comments or heard in my comments anyway, we did have some promotional activity in our Club business that was probably a little earlier than we had anticipated. So we absorbed that in Q2, and we'll get the benefit in the back half. But I don't really see the gross margin outlook in the back half that much dissimilar to what we've experienced in the first half. Again, very pleased with the mix that we're seeing, product mix, the manufacturing efficiencies, etcetera. So nothing really material to call out as we think about the back half gross margin profile.

Great. Color. Best of luck.

Thanks, Matt.

Thanks, Matt. Operator, next question, please?

Our next question comes from Joseph Altobello from Raymond James. Your line is now open. Please go ahead.

Good morning. This is Martin on for Joe. I was just wondering if you can give any color if there's any pushback on ball pricing. Have you seen anyone to sort of trade down?

Martin, we look at our ball business over the last couple of years, I think we were up 20-some-odd-percent in full year 2023 and up 7% for the first half. So we like what we see. I would say conversely, to a trade down, we see continued interest in our premium urethane offerings, Pro V1, Pro V1x, AVX. So haven't necessarily seen trade down. And in fact, we tend to, over the years, and certainly this year, almost see it go the other way. There's a stronger appetite and demand for our premium urethane products and that's been consistent over the last few years.

Great. Appreciate it. And is there any sense that golfers are delaying club purchases?

Well, I would speak to our club purchases. And so stepping out of the macro and into our business, we had a really nice half. We launched wedges successfully, putters, irons. We're seeing some nice steady growth in our business. Clubs were up, I think, in every market, but Korea in the first half, and we're enthused about what lies ahead for the drivers. So we haven't seen an indication of that. And our view is as long as we can continue to deliver great product and a great fitting experience our business will be healthy, and that's what we're seeing nowadays.

Great. Thank you. Appreciate it.

Thanks.

Thanks, Martin. Operator, next question, please.

Our next question comes from Randy Konik from Jefferies. Your line is now open. Please go ahead

Yes. Thanks a lot. Good morning, everyone. Maybe David, give us maybe some perspective as you think about the GT family of products and how it compared to the TS family of product and product series before that in other years. Maybe give us some perspective on what you've changed from a marketing standpoint, pricing changes? And just early reads on enthusiasm, reception from the different channels that you're going to be selling through with that family of products. Thank you.

Well, first off, it's really GT is generational technology for us. It's a meaningful change in its construction. It's our prior drivers, the TS Series. And before that, we're all titanium. This is titanium and composite, which allows us to do a few things differently in terms of construction and ball and flight performance. Early testing with the Pyramid professionals and Amateurs has been terrific. And to -- I said it in my earlier remarks, to win a driver counts with a new model on both the PGA Tour and DP World Tour is really powerful. And I think that speaks to early player response to not only the drivers, but also the fairways as well. So we're very enthused. This one has been in the works for a long, long time. And as enthused as we are about the products, we're equally enthused about the fitting plans we have. We've got a big vast network of fitters. They're ready. We've got fitting tools in the marketplace. So there's a good interest and energy level around the driver. Pricing is we -- the prior TSR was $599 -- this is priced in the market at $649.So you'll see a price increase on the GT. And again, just everything we've done to this point has been real positive. The other piece that we look is our supply chain readiness. As I said, it's a new construction that always brings an element of risk. Our team has been on this for quite some time. So we feel really good about our readiness to capture early season demand. So early days in that, again, we started -- I think the global launch date is August 23. We start fittings in earnest on August 1. So early days, but up to this point, we're very enthused about the product and its performance deliverables. It performs very well on miss-hits for some players. They pick up club head speed, which is a positive. So yes, all the early indicators are positive. And again, now it's time to go to go execute.

Helpful. I guess last question. Just on FootJoy, where do you think we are in this cycle from the industry backdrop perspective? How many quarters do you think we need until we get to a kind of more equilibrium in terms of inventory around the world, pricing and promotional levels. Just give us some flavor on where you see things unfolding over the next two to four to six quarters?

Yes. Thanks. And I'll give it a regional flare too, Randy. So in FootJoy, I think we're where we need to be in the U.S. market. We talked about that a quarter ago from a total footwear inventory standpoint. And so we're comfortable with where footwear stands in the U.S. We thought the ex-U.S. markets lagged a quarter or two and that was probably exacerbated due to some weather in Europe. So we're probably a few quarters away from getting the global footwear market where we like it to be. But with that said, footwear has always been a low barrier to entry. It's always seen as a tempting entry point for a lot of brands and with that comes a lot of inventory. So it's just a reality we deal with. There are some bright spots in our FootJoy business. Certainly, I mentioned apparel up double digits in the U.S. And we've had some great success with our Premiere and Traditions, which I think green grass were up some 40% year-to-date. So there are some bright spots within the footwear and apparel space. Again, I would say the U.S. market in somewhat steady state, normal state. And I'd like to thank markets around the world will be steady state come early 2025. But we're working through it. There are some positives. There's a positive margin story happening within FootJoy. There's a positive momentum story certainly within our product lines, and we're just -- we're dealing with some inventory issues. Probably the biggest -- and I mentioned it earlier as well is Korea and just that super-premium market is so unique, and you see it as a negative drag within the other segment, and you also see it as a negative drag within FootJoy apparel.

Super helpful. Thanks, guys.

Thanks, Randy.

Thanks, Randy. Operator, next question please?

Our next question comes from George Kelly from ROTH Capital Partners. Your line is now open. Please proceed.

Hi, everybody. Thanks. So a couple of questions for you. First, if I heard you right in your prepared remarks, you expect -- I think you said in the third quarter should be more than 50% of your back half total. And if I go back to the last couple of years, it had been well over 50%, closer to 60% in the prior two years. So I'm just curious if you're using kind of an overly -- or just a broader over 50% certainly even at the last two years or is it more of a kind of an even split this year just due to product launches and the Pro V1 launch early next year?

Yes, George, I -- it's definitely more than 50%. It's not intended to guide you to an equal split. So maybe to your point, it's a broader comment than we have made historically. Again, I think on being a bit more cautious in the context of currency headwinds and FX given the volatile market environment we're in. So again, with the GT launch that David just spoke about and some of the other product cadences, certainly, it's -- more than 50% will be in Q3. And obviously, in the ball business, in Q4, as you know, we start to prepare for the 2025 Pro V1 launch. So I wouldn't read much into it. I think we're just being a little more cautious and a little more broad with the revenue guide on a quarterly basis.

Okay, understood. And then second question for you. What is your expectations with respect to the Olympics? And have you historically -- I know there's not a lot of history to draw on there, but have you seen an uplift before? And how are you factoring that into guidance?

Well, to answer the question about have we seen an uplift before, right? 2016 was Rio, that was new. That was golf's first entry into the Olympics in 100 years. 2020 or 2021 in Tokyo was COVID-related, 2024 was terrific. So it was in many respects after a couple of starts. This was golf's big arrival into the Olympics. We put it in the calendar of golf events that are happening around the world throughout the year. I'm not sure we give it a lot of weight in terms of our forward guidance. But we certainly like what it means for the game over the longest term, right, when you expose new regions and new fans and new consumers to the game, that's a positive. But I would think that's a positive over the very long term, not so in the near-term. So to your question, George, don't read anything into it in terms of how we're thinking about the near-term. But that said, it was certainly a terrific -- it was a terrific competition. And I think most golf fans would agree it's arrived after a couple of years in sort of incubation over the last couple of cycles.

Okay. And then just one last quick one. Where did your share count end the quarter?

Share count, I'll give you a different number, George. At the end of July, we had 61.8 million shares roughly of common stock.

Okay. That's great. Thank you.

Thanks, George. Thanks, everyone. As always, we appreciate your interest in the company, and hope you have a great rest of summer and look forward to following up in a few months' time.