Acushnet (US:GOLF)2024-05-07 10:02Q1 2024 Financial Performance Overview Management Commentary Management reported solid Q1 with 4% constant currency net sales growth, driven by Titleist golf balls and clubs, strong U.S. market performance, and successful new product launches - Constant currency net sales grew 4% in Q1, led by strong performance in the U.S. market which saw a 13% increase4 - Growth was supported by the successful launch of new products across the Titleist and FootJoy brands, including Vokey SM10 wedges, Scotty Cameron Phantom putters, and new golf ball and shoe models45 - Management views the golf industry as structurally healthy, with resilient participation despite poor weather affecting some regions early in the year6 Key Financial Highlights Acushnet's Q1 2024 saw 3.1% net sales growth to $707.6 million, a 5.9% decline in net income to $87.8 million, and a 4.7% increase in Adjusted EBITDA to $153.7 million Q1 2024 Key Financial Metrics | Metric | Q1 2024 | Q1 2023 | % Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $707.6M | $686.3M | +3.1% | +4.0% | | Net Income | $87.8M | $93.3M | -5.9% | N/A | | Adjusted EBITDA | $153.7M | $146.8M | +4.7% | N/A | Detailed Financial Analysis Sales growth was driven by Titleist golf clubs and balls, particularly in the U.S., offsetting international declines, with mixed profitability as net income decreased but Adjusted EBITDA improved Performance by Business Segment Titleist branded products led growth, with golf clubs and balls sales increasing by 12.8% and 8.3% respectively, driven by new products, while FootJoy golf wear sales declined by 6.3% Q1 2024 Net Sales Growth by Segment | Segment | % Change (Reported) | % Change (Constant Currency) | Key Drivers | | :--- | :--- | :--- | :--- | | Titleist golf balls | +8.3% | +9.4% | Higher volumes of Pro V1/V1x and new models | | Titleist golf clubs | +12.8% | +14.0% | Higher volumes of new SM10 wedges and T-Series irons | | Titleist golf gear | +1.8% | +2.4% | Higher sales in travel gear, gloves, and bags | | FootJoy golf wear | -6.3% | -5.7% | Lower sales volumes across all product categories | Performance by Geographic Region The United States was the standout performer, with net sales increasing by 13.1% driven by strong Titleist product growth, while sales in regions outside the U.S. decreased by 8.5% - Net sales in the United States grew 13.1%, driven by strong performance in Titleist golf clubs (+20.6%), Titleist golf balls (+15.5%), and Titleist golf gear (+13.9%)9 - Net sales in regions outside the United States decreased by 8.5% (6.5% constant currency), primarily due to lower sales in Korea, EMEA, and Japan10 Profitability Analysis Net income decreased 5.9% to $87.8 million due to higher interest and tax expenses, while Adjusted EBITDA rose 4.7% to $153.7 million, with its margin expanding to 21.7% - The 5.9% decrease in net income to $87.8 million was mainly caused by an increase in net interest expense and income tax expense12 - Adjusted EBITDA increased by 4.7% to $153.7 million, with the Adjusted EBITDA margin improving to 21.7% from 21.4% in the prior year period12 Shareholder Returns and Capital Allocation Dividends The Board declared a quarterly cash dividend of $0.215 per share, payable in June 2024 - A quarterly cash dividend of $0.215 per share was declared13 - The dividend is payable on June 21, 2024, to shareholders of record on June 7, 202413 Share Repurchases Acushnet repurchased $35.3 million of common stock in Q1 and entered a new agreement with its majority shareholder for further stock purchases up to $37.5 million - In Q1, the Company repurchased 547,233 shares on the open market for an aggregate of $35.3 million, at an average price of $64.51 per share14 - A new agreement was made with Magnus Holdings Co., Ltd. for the company to purchase an equal amount of stock as open market purchases from April 1, 2024, through June 28, 2024, up to an aggregate of $37.5 million14 Full-Year 2024 Outlook Financial Guidance Acushnet reaffirmed full-year 2024 guidance, expecting consolidated net sales of $2,450M - $2,500M and Adjusted EBITDA of $385M - $405M Full-Year 2024 Guidance | Metric | Guidance Range | | :--- | :--- | | Consolidated Net Sales | $2,450M - $2,500M | | Adjusted EBITDA | $385M - $405M | - On a constant currency basis, full-year consolidated net sales are expected to increase by 3.2% to 5.3%15 Financial Statements (Unaudited) Condensed Consolidated Statements of Operations Q1 2024 saw net sales increase to $707.6 million and gross profit to $377.9 million, but higher expenses led to decreased net income of $87.8 million and diluted EPS of $1.35 Q1 Statement of Operations Highlights (in thousands) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net sales | $707,554 | $686,290 | | Gross profit | $377,939 | $365,672 | | Income from operations | $121,381 | $124,904 | | Net income attributable to Acushnet | $87,762 | $93,275 | | Diluted EPS | $1.35 | $1.36 | Condensed Consolidated Balance Sheets As of March 31, 2024, total assets increased to $2.36 billion due to higher accounts receivable, total liabilities rose to $1.43 billion from long-term debt, and total shareholders' equity modestly increased to $919.4 million Balance Sheet Highlights (in thousands) | Line Item | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total current assets | $1,174,448 | $996,692 | | Total assets | $2,356,959 | $2,196,677 | | Total current liabilities | $436,077 | $451,135 | | Long-term debt | $833,335 | $671,819 | | Total liabilities | $1,427,916 | $1,283,805 | | Total shareholders' equity | $919,439 | $903,087 | Condensed Consolidated Statements of Cash Flows In Q1 2024, the company used $109.5 million in cash from operating activities, with financing activities providing $101.6 million from credit facilities, resulting in an overall cash decrease of $16.7 million Q1 Cash Flow Summary (in thousands) | Cash Flow Category | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Cash flows used in operating activities | $(109,516) | $(86,418) | | Cash flows used in investing activities | $(7,275) | $(34,834) | | Cash flows provided by financing activities | $101,571 | $119,310 | | Net decrease in cash | $(16,713) | $(1,620) | Supplemental and Non-GAAP Information Supplemental Net Sales Information This section details Q1 net sales by segment and region, highlighting strong Titleist golf clubs and balls performance, especially in the U.S., contrasting with declines in FootJoy golf wear and most international markets Q1 2024 Net Sales by Segment (in millions) | Segment | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Titleist golf balls | $208.0 | $192.0 | +8.3% | | Titleist golf clubs | $203.9 | $180.8 | +12.8% | | Titleist golf gear | $68.2 | $67.0 | +1.8% | | FootJoy golf wear | $192.4 | $205.3 | -6.3% | Q1 2024 Net Sales by Region (in millions) | Region | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | United States | $418.2 | $369.9 | +13.1% | | EMEA | $101.7 | $104.8 | -3.0% | | Japan | $37.2 | $46.4 | -19.8% | | Korea | $75.3 | $89.0 | -15.4% | | Rest of World | $75.2 | $76.2 | -1.3% | Reconciliation of GAAP to Non-GAAP Measures The company reconciles Net Income to Adjusted EBITDA, showing Q1 2024 Net Income of $87.8 million was adjusted for various expenses to arrive at an Adjusted EBITDA of $153.7 million - The company uses non-GAAP measures like constant currency net sales and Adjusted EBITDA to evaluate business performance, excluding items it does not consider indicative of ongoing operations3538 Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net income attributable to Acushnet | $87,762 | $93,275 | | Interest expense, net | $13,076 | $9,896 | | Income tax expense | $23,407 | $20,725 | | Depreciation and amortization | $13,781 | $12,631 | | Share-based compensation | $7,424 | $7,283 | | Restructuring & Transformation costs | $10,792 | $2,956 | | Other adjustments | $(2,551) | $16 | | Adjusted EBITDA | $153,691 | $146,782 |