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Acushnet (GOLF) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Acushnet reported Q1 2022 sales of $606 million, an 8% increase at constant currency and a 4% gain on a reported basis compared to Q1 2021 [12][31] - Adjusted EBITDA for Q1 was $120 million, reflecting a decline of $15 million compared to the previous year [36] - Gross profit was $317 million, up $6 million or 2% year-over-year, with gross margins at 52.3%, down 120 basis points [33][34] - Net income attributable to Acushnet Holdings was $81 million, down $4 million from the prior year [36] Business Line Data and Key Metrics Changes - Golf balls sales increased by 6%, despite production constraints due to raw material shortages [13] - Titleist golf clubs saw a 3% increase in sales, with Q1 sales up over 75% compared to pre-pandemic levels [14] - Titleist gear experienced a 17% decline, impacted by supply shortages and fulfillment backlogs [15] - FootJoy grew by 24%, with double-digit gains across footwear, apparel, and gloves [16] Market Data and Key Metrics Changes - U.S. sales were up 4%, with golf balls exceeding expectations while gear and FootJoy sales lagged [18] - EMEA region showed accelerated growth off low comps from last year, with strong demand expected due to upcoming events [19] - Japan's sales were down 11% at constant currency, while Korea grew by 17% constant currency and 8% reported [20] Company Strategy and Development Direction - The company is focused on expanding distribution capabilities to reduce order backlogs and meet strong demand levels [15][28] - Acushnet aims to invest in product innovation and operational excellence, with a capital expenditure expectation of approximately $60 million for the year [41][42] - The company is also pursuing acquisitions that align with its focus on premium performance products [42] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the golf industry's health, citing strong participation and financial security among golf courses and retailers [21][62] - The company reaffirmed its full-year guidance, expecting consolidated net sales between $2.175 billion and $2.225 billion [48] - Supply chain challenges are expected to persist, but improvements in raw material availability are anticipated [26][46] Other Important Information - The Board of Directors approved a quarterly dividend of $0.18 per share, totaling about $13 million [9] - Cash flow from operations for Q1 was an outflow of $164 million, compared to an outflow of $30 million in the prior year [40] - The company repurchased 1.2 million shares for approximately $59 million during the quarter [44] Q&A Session Summary Question: Factors influencing full year outlook - Management indicated that the quarter met expectations and prefers to assess the full year outlook after Q2, considering weather and sell-through realities [55][56] Question: Structural health of the industry - Management noted that participation trends are largely weather-dependent, with positive indicators in regions with favorable weather [58][60][63] Question: Gross margin expectations - Management revised gross margin expectations to be down closer to 40 basis points due to higher raw material and freight costs [67][72] Question: International market performance - EMEA is expected to perform strongly in the first half, while Japan and Korea are anticipated to normalize throughout the year [74] Question: Inventory levels and expectations - Management expects inventory levels to increase to meet demand, aiming for a more normalized level by year-end [81] Question: Share repurchase strategy - The company plans to continue aggressive share repurchases, with a $150 million increase in authorization expected to be exhausted over the next year [83]