Q2 2022 Acushnet Holdings Corp Earnings Call
Welcome to today's Kushner Holdings Corp, second quarter 2022 earnings Conference call. My name is Jordan and I'll be coordinating your call today, if you'd like to register a question you may do so by pressing star followed by one on your telephone keypad.
I'm now going to hand over to Sondra Lennon Vice President of S. P&A in Investor Relations to begin Sandra. Please go ahead.
Good morning, everyone. Thank you for joining us today for our crush that holding Corp's second quarter 2022 earnings conference call Joy.
Joining me. This morning are David Maher, our President and Chief Executive Officer, and Tom Pacheco, 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 <unk> 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.
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 those 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 results or comparisons.
We will refer to the six month period ended June 30th 2022, and the comparable six month period with that ill turn the call over to David.
Thank you Sandra and good morning, everyone as always we appreciate your interest in the acoustic company.
As reflected in this morning's earnings release the coach the team continues to excel at generating momentum in developing our supply chain to meet and serve as growing demand for our title list for Joy and <unk> product lines.
I must acknowledge and thank of course, its talented associates and our committed trade partners for their great work in this dynamic Gulf marketplace.
While last year's record second quarter set a high bar I am pleased to report that each of our segments posted gains this past quarter.
We see this is positive reinforcement of the companys commitment to product innovation our.
Our ability to generate demand across the entire <unk> portfolio are strengthening supply chains and the overall health of the golf industry and dedicated golfer.
On tour Titleist golf balls were used by each of the four men's major championship winners in 2022 with Schaeffler, Thomas Fitzpatrick and Smith, each trusting our probie, one we're probably one ex golf ball on their road to victory.
<unk> wedges were also used by all four winners while title as drivers and Scotty Cameron putters or in the bags for three of the four wins.
The company aspires to develop and produce golf equipment at the highest performance and quality standards to help dedicated golfers play their very best and these successes on golf's biggest stages validate the performance and quality promise, we make to all golfers.
Title list Unfortunately momentum across worldwide tours is helping to fuel our market success and financial performance.
In addition to presenting our second quarter results. This morning, we will provide updates on the company strengthening supply chain overall health of the golf industry and our outlook for the balance of 2022.
We will also address some of the key investments, we are making to prepare for tomorrow's opportunities as we position our brands for the future.
In affirming the board's confidence in the company's vision and capabilities, Tom will share details of our third quarter dividend payout and expanded share repurchase plans.
Now getting right to our results, which is solder noted we will focus on constant currency numbers.
Second quarter sales of $659 million were up 11% versus last year Gulf.
Golf balls grew 3%, while clubs gear and foot Joy, all posted double digit increases in the period and.
<unk> also had a strong quarter up more than 50%.
First half total acoustic sales increased 9% to $1 $6 billion with all reportable segments posting gains led by foot joy entitled clubs, which were up 21% and 9% respectively.
Adjusted EBITDA came in at $106 million for the quarter and $226 million for the first half down versus last year and ahead of our expectations.
Now looking at our business by segment title. This golf balls continue to perform very well delivering growth for the period in spite of production limitations caused by tight raw material supply as we noted on our prior call.
The situation improved throughout the second quarter, and we are now operating our golf ball manufacturing facilities at full capacity for the first time in about a year.
We are confident and expect that our plants will remain fully operational for the foreseeable future as we benefit from both improved output from existing suppliers and the addition of new supply sources.
Given the circumstances, we're very pleased with our golf ball results and market momentum.
And while we were required to adjust this year's launch calendar our team successfully introduced new towards speed and tour soft models in the second quarter.
Title of golf ball retail inventories remain low and we expect to gradually return to more normal levels in the first half of 2023.
As noted title this golf balls won the Grand Slam in the men's professional game and had been used by 74% of players across the worldwide tours.
Including 80% usage on the LPGA tour, which is more than 11 times the nearest competitor.
Titleist golf clubs grew 12% in the quarter and 9% for the half as demand remains strong and our team did good work to flex up our production levels during the peak club fitting and retail seasons.
T series Irons, <unk> wedges, and Cameron Putters are all in great shape, and we look forward to launching new TSA, our drivers and fairways in late September .
CSR metals had been building momentum on global tours since June and at the recent open Championship Winter Camp Smith and runner up Cam young each trusted new tsi drivers during their epic final round battle at St Andrews.
Operationally golf club component availability continues to improve and our team has done a nice work boosting output to meet ongoing healthy demand and reduce lead times.
And as with golf balls, Titleist Golf club retail inventories are also tracking below our optimal levels.
Next to our gear business Youll see a 12% increase in the quarter to bring this segment to flat for the first half.
Within gear, we are pleased with healthy gains in gloves, headwear and travel however, our golf bag business in the U S has faced supply chain channel.
Sticking to expand our customization.
Our service levels and meet growing demand.
And for custom gear.
Now moving to foot Joy, where youll see a 14% increase in the quarter and 21% gain for the half.
Fluctuate.
Team continues to build momentum with their relentless focus on product performance comfort and design excellence and that is evident across our footwear glove and apparel lines.
Demand for F. J premiere pro SL fuel and flex footwear models has been especially strong.
Collecting the great work by our footwear product development group.
Put choice, leading footwear and glove businesses posted double digit gains for the half as our shoe and glove factories excelled at meeting heightened demand.
To keep pace with anticipated future growth, we are working with our longtime footwear production partner.
And will soon expand operations beyond our JV factory and into Vietnam to add capacity and geographic diversity to our footwear supply chain.
Fortunately apparel was up double digits in the first half however, our U S business has faced the same supply chain and fulfillment challenges that have affected gear.
In response, we are investing to establish a state of the art apparel customization center on our Fair Haven campus.
This facility will support increased volumes.
Provide enhanced customization and quality and opened the door for future automation and innovation as we seek to provide leading test and services and solutions to our valued trade partners.
Now taking a look at regions the company posted healthy first half gains in the U S EMEA Korea and rest of world.
Sales were off 7% in Japan as foot yoy growth was offset by supply chain and fulfillment constraints, which impacted our other.
First half round.
That's a play in the U S have been negatively impacted by weather and are off 6% from the record pace set in 2021.
And outside the United States rounds are projected to be up 4% through June fueled by a double digit increase in Europe , and steady gains in Japan and Korea overall.
Overall, we are pleased with the state of the game and participation in golf's major markets is healthy and in line with our expectations for the year.
Now looking forward, we are enthused by the overall health of the golf market and the resilience of the game's dedicated golfer.
As noted we are making continued progress within each of our supply chains and are optimistic about our investments to build more capacity flexibility and efficiencies in our custom apparel and gear operations.
We are confident in our balance of year outlook and ability to serve as strong demand for title is virtually and shoes products.
And as a result are raising our full year sales guidance in spite of expected currency headwinds of about $90 million.
And we affirm our existing full year adjusted EBITDA guidance and note that this guidance also reflects negative currency effects increased airfreight costs and the investments we are making to bolster our global supply chains.
As we head into the second half of 2022, we are pleased with our momentum and are confident that our team's track record of product innovation and operational excellence will continue to support the company's long term growth objectives.
Thanks for your attention this morning, and I will now turn the call over to Tom.
Thanks, David I would like to start by thanking all of our associates for their dedication and effort in managing through continued high demand and supply chain challenges to deliver yet another very strong quarter for our Cushing it.
Starting on slide 10, our results for the second quarter exceeded our expectations.
Consolidated net sales were $659 million up 5% and almost 11% on a constant currency basis compared to last year.
Overall demand remains strong and all segments showed growth in the quarter on a constant currency basis as a result of higher sales volumes and higher average selling prices.
Gross profit for the second quarter was $344 million up 3% versus 2021, and gross margin was 52, 2% down 130 basis points.
The increase in gross profit comes primarily from higher sales volumes in clubs and higher sales volumes and Asps and foot joy footwear and in gear, partially offset by higher manufacturing costs in golf balls.
Additionally, we experienced higher inbound freight costs across all segments, which negatively impacted gross profit and gross margin during the quarter.
SG&A expense in Q2 was $239 million up 14% from the prior year.
The increase comes from higher selling expenses as a result of higher sales volumes higher distribution costs, primarily in foot joy in gear as we invest in expanding our distribution and custom fulfillment capabilities.
Higher it related consulting expense and higher advertising and promotional expense.
R&D expense was $14 million up 7% compared to 2021.
Income from operations was 89 million for the quarter, which was 19% lower than last year and our Q2, adjusted EBITDA was $106 million down 17% compared to 2021, but ahead of our expectations.
Moving to our results for the first half of 2022 consolidated net sales were $1 $2 6 billion up 5% compared to last year and up 9% on a constant currency basis.
Gross profit for the first half was $661 million up 2% compared to the first six months of 2021.
Gross margin was 52, 2% down 130 basis points from the prior year.
SG&A expense for the first half was $435 million up 12% and R&D expense was $28 million up 10% compared to 2021.
First half income from operations was $194 million, which was 15% lower than 2021.
Our effective tax rate for the first half of 2022 was 19, 8% down.
Down from the prior year, primarily because of a change in the mix of our jurisdictional earnings.
And first half adjusted EBITDA was $226 million down 14% year over year, but also ahead of our expectations.
There is a reconciliation of net income to adjusted EBITDA for Q2 in the first half and our earnings release as well as in the appendix of the slide presentation.
Moving to slide 11, our balance sheet remains very strong at.
At the end of Q2, we had about $107 million of unrestricted cash on hand.
Total debt outstanding was approximately $396 million.
We had $319 million of available borrowings under our revolving credit facility and our leverage ratio was one one times.
On this past Tuesday August 2nd we completed the refinancing of our credit facility, which had consisted of a $350 million term loan a.
And a $400 million revolver into a $950 million all revolver facility.
At the closing of this transaction, we used the new revolver to among other things painful the approximately $306 million outstanding balance on the term loan and to refinance the outstanding borrowings on the previous revolver.
The terms of the new revolver are substantially similar to the previous revolver.
More detailed information on the terms will be included in our 10-Q filing with the SEC later this afternoon.
This new all revolver structure gives us additional flexibility to manage the business and to continue to execute against our capital allocation priorities.
Accounts receivable at the end of Q2 was $386 million up $8 million from the prior year.
Dsos improved by three days.
Our consolidated inventory at the end of Q2 was $467 million, which was up 56% from Q2 of the prior year with increases across all segments.
Note that last year's inventory was below normal and we are pleased that we are nearing our desired level of inventory, which will enable us to better service our trade partners and meet the continued high demand for our products.
Days sales in inventory have increased to 139 days compared to 119 at the same time last year, but are still lower than pre pandemic levels.
Cash flow from operations for the second quarter was $73 million compared to $182 million in Q2 of last year and first half cash flow from operations was a cash outflow of $91 million compared to a cash inflow of $152 million last year.
The decreases in both periods were primarily the result of changes in our working capital, which resulted from larger increases in accounts receivable and inventory and a higher decrease in accrued expenses compared to the changes in these balances in the prior year.
And we continue to make investments in the business in the form of capital expenditures.
We spent about $9 million on Capex in Q2, bringing the first half total to $20 million.
We continue to expect our full year capex to be approximately $60 million.
Turning to slide 12, our continued strong financial results have enabled the execution of our capital allocation strategy.
Our highest priority remains investing in product innovation golfer connection and operational excellence.
We also continue to pursue acquisitions that align with our focus on premium performance products that appeal to dedicated golfers.
We believe that these investments will advance our long term strategy and drive growth at a favorable return.
Generating strong free cash flow and returning capital to shareholders is also a high priority.
Earlier today, our board of directors declared a cash dividend of <unk> 18 per share payable on September 16th to shareholders of record on September <unk> 2022.
This will total a payout of about $13 million for the quarter and bringing our year to date dividend payout to approximately $40 million.
During the second quarter, we repurchased 950000 shares for a total of approximately $39 million, bringing our total for the year to $2 1 million shares for a total of approximately $98 million.
At the end of Q2, we had approximately $150 million of share repurchases remaining under our current authorization and on July 26th Our board approved an additional increase of $100 million to the share repurchase authorization.
Assuming continued strong financial performance and favorable market conditions, we will continue to actively repurchase shares and would expect to complete our remaining authorization over the next year.
Our capital allocation strategy remains an important element of our Cushing its value proposition, which we continue to believe creates a compelling long term total return for our shareholders.
Moving to our outlook on slide 13, we are enthusiastic about the overall health of the golf industry and demand for our products continues to be robust.
Our golf ball raw material availability has improved and we have made progress in each of our supply chains.
We will however continue to face some challenges in the second half, including expected currency headwinds as a result of the strong U S dollar and higher input costs.
In addition, although we have started to see some decrease in inbound freight rates. We continue to use a significant amount of air freight to protect lead times.
We also plan to incur higher costs as we invest in expanding our distribution and custom fulfillment capacity for apparel and gear to support future growth and enhance our service capabilities.
Taking these factors into consideration we are raising our full year sales guidance and reaffirming our full year adjusted EBITDA guidance.
We now expect our full year 2022 consolidated net sales to be in the range of $2 2 billion to $2 two 5 billion.
This sales guidance reflects over $90 million of projected negative foreign currency impact, including about $40 million in the second half.
On a constant currency basis consolidated net sales are now expected to be up between six 8% and nine 1%.
And as I mentioned, we continue to expect full year adjusted EBITDA to be in the range of 325 million to $345 million.
With the launch of our new Tsi metals occurring late in September we expect Q3 consolidated net sales to be just over 50% of total second half sales in Q3, adjusted EBITDA to be about two thirds of total second half adjusted EBITDA.
In conclusion, our associates and trade partners helped us manage through continued high demand and supply chain challenges to deliver strong results for Q2.
While we continue to expect the currency headwinds higher freight costs and higher costs associated with investments, we are making to expand our distribution and customer fulfillment capabilities. We remain confident in our ability to meet our 2022 financial goals and to deliver a long term total return for our shareholders.
With that I will now turn the call over to Sondra for Q&A.
Thanks, Tom operator could we now open up the lines for questions.
Of course as a reminder, if you'd like to register a question. Please press star followed by one on your telephone keypad. If you change your mind. Please press star followed by two and please ensure you're on mute when speaking.
Our first question comes from Kevin <unk> of J P Morgan, Kevin Malone as yours.
Hi, Good morning, guys and thanks for taking my question.
Good morning, Kevin Good morning.
I guess, given the more challenging macro backdrop today.
What do you see as the key factors driving the strength in your top line today.
Maybe higher level.
How do you see the health of the golf industry and participation structurally today.
The pre pandemic. Thanks.
Yes, Kevin.
So I'll start with we've always we've always pointed to our dedicated golfer.
Being a very resilient and committed consumer of the game and of equipment and I think I think we're seeing that today a couple of other factors I'd add in.
You look at all the data coming out over the last couple of years and you'll see.
New participants and we're now we're now getting a sense for what they look like and in year, two and year three and four there were $3 million beginners last year I think in 2020, I think $3 2 million beginners in 2021.
So the mix of participation has has changed.
Which is obviously favorable in a positive as you bring more participants in the game into the into the industry.
I commented on the strength of the dedicated player.
As we think about what's happening with our business, it's really a two part story first and foremost.
We've said all along that 2022 is going to be.
Largely dependent on what we get out of our supply chain and more than ever the supply chain is start to finish it's what are we.
What kind of inputs do we get from our from our our raw material suppliers and our component suppliers.
What can we produce what can we get through our distribution centers globally, what can we customize et cetera et cetera. So every area of our supply chain has been under pressure and when we look at results like we just posted to me thats indicative of the supply chain at all levels is performing performing well.
Maybe taking that logic further.
As we look out at it speaks to golf's place in this in this developing emerging new normal right and not that anybody is going to say we've landed on a new normal but it's clear people are prioritizing the gain more today than they did say pre pandemic. If you look at <unk>.
<unk> data we.
We said all the while for 2022, we'd be real pleased is 'twenty two rounds came in somewhere between 2020 in 2021. They are in fact are doing a little bit better than that even in the face of poor weather. So I think structurally the industry's in a very good place add to that our retailers are doing great job.
<unk> facilities are investing they're healthy and they're investing in their futures to be more relevant to tomorrow's consumers.
So we're just we're just seeing a golf industry that that.
Has been healthy and remains healthy today.
Great.
If I could just ask a quick follow up on the jewelry business.
Results in the quarter I guess can you maybe talk about how you see kind of a market share on the footwear side evolving for that business and then maybe higher level, what's driving the strength between footwear and apparel more broadly Vince.
Very much.
Yes, I will say this that fluctuate team has been excelling in the last couple of years and you see it in our numbers and Thats commentary on footwear.
Commentary on gloves in apparel in it.
Absolutely starts with product and I think our team is really hitting the mark from a performance standpoint from a design standpoint from a comfort standpoint. So it starts with the very good work coming out of our product development teams add to that.
We've got we've got.
We've got full control over our supply chain right, we own a joint venture venture shoe factory.
It's a factory that makes one brand of footwear foot joy.
I mentioned earlier, we're expanding we're expanding into into Vietnam, which gives us more capacity and better.
Better bit of geographic diversity.
We own about factory that makes what youre entitled clubs, that's a rarity in this industry.
And I would say the team continues to the team continues to cultivate and develop our messaging.
To be complementary to the product story and the operational story on the quality story so.
With product. It obviously involves a lot of very talented people, but if you track the fluctuating business over the last couple of years.
It's really on a nice run now too to what's playing out this year I said earlier.
Footwear off to a great start clubs terrific.
<unk>.
<unk>.
<unk> of supply.
Apparel is doing fine, but we are having some challenges in the U S that I talked about with embroidery and thats part of a broader.
Supply chain pressure that we're seeing in our business when it when it comes to importing product into the United States getting it through our distribution centers getting it to our embroidery facilities and then getting it out to our trade partners, who has been a real bottleneck there I talked about it in gear I talked about it in apparel. So we're working on that but.
More than anything Kevin at this this is a this is a product story first and foremost.
And I point to our teams for really doing exceptional work.
Great. Thanks, so much does mhm.
Uh-huh.
Thanks, Kevin.
Next question please.
Our next question comes from Daniel <unk> of Stephens, Inc. Daniel Please go ahead.
Yes, Hey, good morning, guys and thanks for taking the questions.
David I think are below 2019 levels across.
Industry.
That should be supportive of pricing, but is there any risk.
And then just on that pricing.
It's coming up.
Do you view.
To your customer today and the ability to take.
Given the broader macro backdrop.
First first off.
Retail inventories.
My commentary in my earlier remarks, we're about our inventories not not the total but when we when we look at the total we see similar trends.
It's an industry. That's that's grown nicely over the last several years and <unk> got supply chains working hard to keep up so I think orange, our inventories tend to be a little bit lower so I think we saw that this year, even if the appetite.
From the trade is it's going to be difficult for Oems to meet all of that demand. So net net there's a bit of a governor in place and as a result, we're seeing a marketplace that's from a supply demand standpoint.
And a pretty good state of balance.
It's something we certainly watch right.
And what you don't want to do is get into.
The status of the industry.
And the health of the industry from a from a retail standpoint.
The pricing we talked about this a lot we try to be very thoughtful and take a long.
We address it when we introduce new.
Products and we do our very best to deliver deliver added value when we take price increases and I think our team's done a real good job of that.
Add to that our two year product life cycles, and that tends to provide consumers with a more gradual pricing slope, which we think is beneficial.
Now given rising input and freight costs, we have taken price increases.
Over the past 18 months.
Understanding and accepting of those of those price changes I think.
Again in large part they are attached to improve products are attached to added value.
And then finally as it relates to our new TSA driver launch.
Pricing is up there are eight or nine 9%.
Again, our team is going to go out and work hard and show golfers y y.
Bringing them something.
Thats better and is worth more.
And the final point I'll make Daniel is we are seeing consumers understanding of price increases.
Throughout the golf landscape right Theyre seeing it elsewhere and they understand what's happening with input costs, what's happening with with transportation cost as well so.
We.
We haven't seen any pushback, but again I'll add we.
Try to be very thoughtful about how we manage pricing and take a take a very long term approach.
That was great I appreciate all that color and then Tom maybe a little bit on the guidance.
Thinking they are released in your comments, you said, you're assuming higher grade.
In recent months, we've seen ocean attracted higher growth or how should we think about that.
<unk> backdrop that you've embedded into guidance.
Yeah.
Yes, we are starting to see some decreases in inbound freight rates in certain markets, but certainly not everywhere.
And despite this the freight rates, obviously remains significantly elevated compared to previous levels and we are utilizing even more air freight than we had anticipated.
Doing that to protect our lead times to get product, where it needs to be so.
I think what's mostly driving our increased freight is is the use of airfreight and.
We expect to see that continue.
Through the end of the year, we did have higher freight costs in Q2.
And in the first half than we anticipated and we our forecast for the balance of the year has also gone up.
We're hoping that that's great.
Oh go ahead.
Okay can you just clarify where any launch timing change anything from <unk> being pushed to next year or no real change on timing in the guidance as well.
The.
All season, not a lot not a lot of ships.
Yes.
Due to supply chain.
<unk>, we mentioned late September with stock product.
Start shipping custom probably early October .
We've got some we've got some colored golf balls in Japan, which is a big deal in Japan. They are popular there we pushed these back from from the first half of the year into the second half we've got a full plate of fluctuate products, new flex XP new Stratus.
Women's footwear lines, a lot happening on the <unk> side.
We're targeting October one we're going to hedge that a bit because of just supply chain and getting it in and true to our to our trade partners. I guess is half will happen in Q3 half will happen in Q4, and then our tip.
Typical seasonal fall apparel collections, both titles for Chilean entitle us to apparel and Asia will will happen on escape.
Actual so Daniel really where we're back on what I would what I would say is a normalized.
Schedule.
After a couple of years of being required to move things around.
Great really appreciate all the color this morning, and best of luck going forward.
Thanks, Zander of Compass point.
Yes, good morning first Tom.
Third will be off a little bit about the way that you.
Presented the remaining balance of the share repurchase program.
Is it 150, plus 100, which makes 250 remaining in total or is it 100.
50 remaining in total right now.
It is now $250 million at the end of the quarter was $1 50, and then subsequent to the end of the quarter our board.
Approved an increase to that by 100, so the total amount of the next year.
Correct.
Okay, Great secondly.
Down, 6%, but weather.
And that so rounds played.
Whether I'm curious if the.
Weather had been relatively normal which would have suggested it rounds played.
Okay on the golf ball side.
Yes, Casey Youre right and you said Youre looking at the same <unk>.
Let's say they say.
Playable hours were off 9%, but rounds were down 6% that says utilization was favorable.
I will say we were.
We were fairly challenged to meet existing participation in rounds. So so.
A further spike in play or increase in play would have further stressed our supply chain noted, we havent run our plants at full capacity. We're finally up to doing that if we had been running them at full capacity for the last.
Last year.
The answer would be different but the point being it's been a challenge for us in the first half to meet existing demand and you see that reflected in our in a relatively lean inventory position in golf balls.
Okay, Alright thats helpful. Thank you.
Thanks, guys. Thanks, Casey Thank you Casey.
Hey, good morning, guys.
Maybe just to follow up on that is.
Where do you think there's the most.
Unmet demands.
Or maybe comment on that by some of the other product lines perhaps.
Yes, so as we as we move around millennials think about inventories.
Balls and clubs are both below pre pandemic levels.
Footwear and gear are slightly better but still.
Leanne.
We're probably tightest in apparel in the U S and golf bags in the U S and that ties to the supply chain challenged I noted I noted earlier.
But but globally.
Our first priority is to is to get golf ball inventories production back.
Back to I won't say normal, but I will say an optimal level and that optimal level is ahead of where it was in 202019.
Okay, great. Thanks.
One other.
Okay.
Back or have been under pressure.
Yes.
I'm curious what you see across across different product categories across your different customer types.
Certainly we would expect the dedicated golfer doesn't cut back as much and Thats, a higher income customer anyway, but.
What are some of the things that you've observed if you think about customer types and different products.
Yes no.
Youre right dedicated golfers are passionate.
They have the means to continue to play and they do continue to play.
During during down times.
They they may extend their purchasing cycles on bigger ticket items, but.
We certainly see from a product perspective consumables hold up well.
This demographic has.
The solid income profile and that works in our favor as well and as we've said before.
Back in the <unk> nine recession, we did see our business pull back, but if you look at our business, excluding Cobra, which was really not focused on the dedicated golfer and which we subsequently sold.
The rest of our business was down about 8%.
<unk>.
The companies within the consumer discretionary.
We fared better.
Sure.
And then that group.
Okay. Thank you.
Thank you Brian Operator next question please.
Our next question comes from George Kelly of Roth Capital Partners. George Please go ahead.
Hi, everybody thanks for taking my questions.
So first one I was trying to keep up with.
Could it be quite catch it all what was the you gave some detail about the within your guidance.
But between third quarter and fourth quarter for revenue and EBITDA can you walk through that again.
Sure.
So in terms of sales with the timing of the CSR metals occurring later in September we're expecting consolidated net sales for Q3 to be just over 50% of the total second half sales.
And then in terms of Q3 adjusted EBITDA, we're expecting that to be about two thirds of total second half adjusted EBITDA.
Okay great.
And then second question for you.
<unk>.
On the share repurchase.
Should we going forward I mean is it safe to assume that share repurchases.
We'll be sort of a heavy component of your discretionary free cash flow usage.
The reason I'm asking is if we go pre COVID-19.
Started repurchasing stock I think it was in 2019.
But I'm just trying to get a feel for if it's really much more of a priority now.
And with the new scale that you have you have so much free cash flow is it something we should just kind of.
Bank ongoing going forward beyond one year.
Yes.
You're always cautious about giving guidance, if you will out a year or more but you can you can certainly see that youre right. We started purchasing shares in 2019, we bought about 29 million shares that year $29 million worth of shares that year, we did take a pause in 2020.
In 2021, we bought about $65 million worth of shares and so far in the first half of 'twenty. Two we've we bought $98 million. So that number has increased over time.
It.
It certainly corresponds with the increase in scale of our business and the increase in free cash flow.
It will our expectation is that it.
Assuming conditions.
Conditions stay the same our expectation is that it will continue to be a prominent important part of our capital allocation strategy, but.
But we do have flexibility.
Flexibility, particularly with our <unk>.
With our new all revolver, we have flexibility to do other things in our capital allocation.
Our strategy as well, so but but.
Think it's pretty safe to say all things being equal that share repurchases will continue to be a very important part of our strategy George I'll, just add a bit of color going back going back to the IPO. In 2016. This this was our story alright, we started on that path.
Was predicated on us getting our getting our debt situation down below <unk>, which we have so we started on that journey, we took a bit of a hiatus in during during 2020.
But as Tom said right, it's an important piece along with dividend along with.
Investing in the business, which we're doing a whole lot of and finally M&A. So I view this as a as a reflection of the story we painted in 2016.
Six years later, it's maybe just a bigger story and thats as much commentary on our strong balance sheet.
Okay, Great and then last question for me.
Other one.
<unk> for the consumer.
A few questions before but maybe ask it a slightly different way.
So much noise in the market these days.
Fear about.
It is coming in and peoples.
Balance sheets.
Inflation et cetera, and concern over the sort of spending patterns and trends and so just real simple question have you seen any evidence of people kind of trading down or may be having.
Being more timid as far as consumer spending.
Hey, George the short answer is no we're certainly sensitive to it and aware of it for all the reasons you just mentioned, but but I'll go back to number one our results number two what were seeing and hearing from our trade partners.
We get that Hey, there was it was a big there was a big stimulus input last year that went away and that affected.
Retail so we're certainly sensitize too.
The macro forces you just talked about.
We're pretty confident that we're marching through it.
Are we in.
Entirely immune to it probably not I don't know that anybody is but we like where we are today and again as indicated by our first half results and our confidence in the second half.
We're saying that hey, what we see is is pretty favorable from our end.
That's great. Thank you so much.
Thank you George Operator next question please.
Our next question comes from.
From Joe <unk> of Raymond James Joe. Please go ahead.
Thank you this environment <unk> got lots of Belo quick.
Quick question about demand when it comes to ensure data it looks like it's held up very well.
Have you seen a shift in consumer purchasing patterns are they deferring club purchases are trading down in bulk purchases.
We haven't seen a lot of that.
Clubs Trust, we've been we've been chasing it.
For a while our lead times have been longer than we'd like I'm pleased to say in the last month comeback availability improve and our team is doing a better job getting product.
Through our system in the peak of golf season and it's.
Youre going to Youre going to see a few months.
Our regional slowdown in the next couple of months that that's part of golf's annual cycle, but.
Today again, we like.
We like our situation your question not dissimilar from Georges Harry.
There are it and we're very attentive to whats, we watch it very very carefully but.
As we sit here today.
Things are things are moving along very much in line with our expectations and again back to art.
It's just indicative of.
Two things really a stable state.
We are out of our supply chain.
Thank you and as a follow up can you talk a little bit about recent market is that due to lack of availability.
Production levels.
Yes, I'll say, our golf ball business.
With with the key exception.
These are lower than we'd like which is a function.
Carrier availability. So I think we were up I think we were up 30% last year.
The year in golf balls and to be flat through the first half for us.
In another.
Non <unk>, one year and given our supply constraints. We're very pleased with these results again with the caveat being we accept that the channel inventories retail inventory that.
I will add and it's always it's always a bit of an odd year, even year discussion, but in the U S and around the <unk>.
The globe.
We're comping this year.
Dear against last year's sell off of prior generation inventory, which which always comes with a bump.
And we are loyalty rewarded program was in full flight last year and we didn't offer it in 2022, so it's a very different dynamic.
And the final point would be add to that we had to delay our towards speed and tour soft launches, which led to excess inventory outages for much of the first half.
So a lot of moving parts in the ball business, but I'd take a step back and say very pleased.
As with our performance at the top of the pyramid and our our performance in the marketplace.
Okay.
And as we said, we're finally at a better position, where we can start we can start producing full capacity, which we think is very important so.
Again, a lot of puts and takes on the ball business.
Final I'll add is where.
We've had to slow down our corporate business, just because of availability, we look forward to picking that back up here in the near term.
So again, where we are today, we're very pleased with with the state of the title of golf ball business.
Sounds good thank you.
Thank you.
Thanks, everybody, we as always we appreciate your time and interest in <unk>.
Hope you all have a great rest of summer and look forward to catching back up on our next call.
Connect your lines.
Okay.
Yeah.
Yeah.
Alright.
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