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Acushnet Holdings Corp (GOLF) Q1 2024 Earnings Call Transcript Highlights: Strong Start with ...

GuruFocus Research
·5-min read

  • Worldwide Net Sales: $708 million, a 4% constant currency increase over last year.

  • Adjusted EBITDA: $154 million, up 5% for the quarter.

  • Golf Ball Sales: Increased 9% in the quarter.

  • Titleist Golf Clubs Sales: Up 14%.

  • Titleist Gear Sales: Increased 2% in the quarter.

  • FootJoy Business: Declined 6% in the quarter.

  • Net Sales by Region: U.S. up 13%; EMEA down 5%; Japan down 10%; Korea down 12%.

  • Gross Profit: $378 million, up 3% or $12 million compared to 2023.

  • SG&A Expenses: $237 million, increased $14 million or 6% from 2023.

  • Interest Expense: $13 million, up $3 million due to an increase in interest rates and borrowings.

  • Effective Tax Rate: 21.7%, up from 18.1% last year.

  • Inventory Levels: Declined 13% from Q4 2023 and down 16% from Q1 2023.

  • Cash Used in Operations: Increased from Q1 2023 due to changes in working capital.

  • Capital Expenditures: $7 million in Q1 2024, expected to reach $85 million in FY 2024.

  • Shareholder Returns: $50 million returned through share repurchases and dividends.

  • Full Year 2024 Revenue Outlook: Expected to be between $2.45 billion and $2.5 billion.

  • Full Year 2024 Adjusted EBITDA Outlook: Expected to be between $385 million and $405 million.

Release Date: May 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Acushnet Holdings Corp reported a strong start to 2024 with a first quarter net sales increase of 4% over the previous year.

  • Adjusted EBITDA was $153.7 million, a 4.7% increase from the first quarter of 2023, driven by continued momentum in golf clubs, golf balls, and golf gear.

  • The company successfully launched new golf ball models and golf clubs, including the AVX Tour Soft and TruFuel models, and the bulky design SM.10 wedges and Scotty Cameron Phantom putters.

  • Acushnet Holdings Corp's North American distribution center startup exceeded expectations, contributing to operational efficiency.

  • The company maintains a strong balance sheet with healthy inventory positions, allowing for ongoing investments and shareholder return programs.

Negative Points

  • FootJoy net sales declined by 6% in the quarter, with growth in the US offset by declines in international markets.

  • The EMEA region experienced a 5% decrease in sales, attributed to an especially wet spring and slow start to the golf season.

  • In Japan, sales were down 10% as gains in golf clubs were more than offset by declines in other product categories.

  • Korea also saw a 12% decrease in sales, mainly from Titleist apparel declines and poor weather, which delayed the start of their golf season.

  • SG&A expenses increased by $14 million or 6% from 2023, due in part to increases in advertising, promotional expense, and information technology related expenses.

Q & A Highlights

Q: Can you elaborate on overall participation and engagement from your dedicated golfer, any change in U.S. momentum post the Masters, and on a global basis? Any call-outs on the international front with the divergence in top-line performance? A: David Maher, President and CEO, noted strong U.S. rounds of play data, with a 20% increase in March and 6-7% for the quarter. He highlighted the impact of weather on regional performance, with poor weather in the Southeast affecting play. Internationally, wet weather in Korea and the U.K. delayed the start of the season. Maher emphasized the resilience and demand of the dedicated golfer, pointing to strong demand for newly launched golf balls and clubs.

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Q: With inventory exiting the first quarter down mid-teens, could you speak to your overall comfort with inventory on hand to support demand? And on the footwear category, what is the latest timeline for this category returning to clean across the marketplace and the potential return to top-line growth? A: Sean Sullivan, CFO, expressed confidence in the inventory position across all product segments. David Maher added that channel inventories are healthy and appropriate for the season. He noted that the U.S. footwear market has corrected and normalized, with international markets expected to follow in a quarter or two.

Q: You left guidance unchanged for the year despite a solid 1Q beat. Is this related to 1Q being more of a sell-in quarter, and was there any pull forward into 1Q from the global launch of some clubs? A: Sean Sullivan explained that the unchanged guidance reflects prudence early in the year, with all vital signs remaining positive except for weather-related issues. David Maher added that it's typical not to adjust guidance after Q1 due to the need to see how markets open up in Q2.

Q: How did the gross margin play out relative to your expectations, especially considering the promotional environment? A: Sean Sullivan stated that the gross margin trajectory was in line with expectations, supported by the performance of golf balls and clubs. David Maher noted that the promotional activity was as expected for the season, with typical increases in promotional activity occurring later in Q2 and early Q3.

Q: Can you provide insights on the drivers of long-term participation in golf, particularly regarding junior and female participation, and the status of Country Club waiting lists? A: David Maher discussed the industry's focus on accommodating new players, with an increase in lessons to make the game more accessible. He highlighted investments in facilities to meet future consumer needs and noted that most clubs are at capacity with waitlists, although not as long as during the peak of COVID demand.

Q: Regarding the North American distribution center startup exceeding expectations, can you elaborate on the potential P&L benefits, both near-term and long-term? A: Sean Sullivan described the distribution center as not only about efficiency but also about quality product delivery and customization. He emphasized the strategic benefits of the center in terms of customization and control, which are expected to contribute to long-term efficiency and service improvement.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.