Q4 2022 Acushnet Holdings Corp Earnings Call
Speaker 1: If you'd like to ask a question during the Q&A portion of today's cool human user repressing star followed by one on your telephone keypad. I will now hand the floor over to Sandra Lennon to begin, Sandra, please go ahead when you are ready.
[music].
Speaker 2: Good morning, everyone. Thank you for joining us today for a Christian holding Corps 4th quarter and full year 2022 earnings conference call. Joining me this morning are David Marr, our President and Chief Executive Officer, and Tom Patrico, our Chief Financial Officer.
Good morning, Good afternoon, welcome to the accretion that company for 2022 earnings call. My name is Adam and I'll be Roberts for today, if you'd like to ask a question during the Q&A portion of today's call. Jimmy Choo said by pressing star followed by one on your telephone keypad I will now hand, the floor over to Sondra Lennon to begin just Andre. Please go ahead when you're ready.
Speaker 2: Before turning 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 a Cushnet's current expectations and are subject to uncertainty and changes in circumstances.
Speaker 2: actual results may differ materially from these expectations.
Good morning, everyone. Thank you for joining us today for a Christian holding corp's fourth quarter and full year 2022 earnings Conference call. Joining me. This morning are David Maher, our President and Chief Executive Officer, and Tom Pacheco, Our Chief Financial Officer.
Speaker 2: For a list of factors that could cause the 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.
Speaker 2: Throughout 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 reconcilations of these items to a gap basis.
Before turning 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 the actual results to differ please see today's press release, the slides that accompany our presentation and our filings.
Speaker 2: 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.
Speaker 2: 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.
The U S Securities and Exchange Commission.
Throughout this discussion we will make reference to non-GAAP financial metrics, including items, such as revenues at constant currency and adjusted EBITDA.
Speaker 2: And when referring to year-to-date or full-year results or comparisons, we will refer to the 12-month period ended December 31st, 2022 in the Comparable 12-month period.
Explanations of how and why we use these metrics and reconciliations of these 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.
Speaker 2: With that, I'll turn the call over to David.
Speaker 3: Thanks, Andrepp, and good morning, everyone. Thanks for joining us on today's call.
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.
Speaker 3: As Tom and I will outline, a cushion it wrapped up a terrific year with a strong fourth quarter, helping our brands carry nice momentum into 2023.
We feel this measurement best provides context as to the performance and trends of our business and when referring to year to date or full year results or comparisons we will refer to the 12 month period ended December 31st 2022, and the comparable 12 month period.
Speaker 3: I will begin by acknowledging and thanking the talented Kuzma team for their hard work and great results.
Speaker 3: They are creative spirit of innovation and commitment to delivering the highest quality golf products and services.
Speaker 3: are creating shareholder value and powering the company's sustaining growth.
With that I'll turn the call over to David.
Thanks, Sondra and good morning, everyone. Thanks for joining us on today's call.
Speaker 3: Now to our results.
Speaker 3: Acoustic sales increased 11 percent in 2022 to $2.27 billion.
As Tom and I will outline a crushed it wrapped up a terrific year with a strong fourth quarter, helping our brands carry a nice momentum into 2023.
Speaker 3: All operating segments and geographic regions posted year on your gains with golf clubs, leading all segments up 16 percent.
I will begin by acknowledging and thanking the talented a cushion of team for their hard work and great results.
Speaker 3: MIA was our fastest growing region of 20% versus 2021, and a cushioned business in the US and Korea was also especially strong, both increasing 9% on the year.
Their creative spirit of innovation and commitment to delivering the highest quality golf products and services are creating shareholder value empowering the company's sustaining growth.
Speaker 3: The company generated a adjusted EBITDA of $338 million, a 3% increase over prior year.
Now to our results.
<unk> sales increased 11% in 2000 $22 billion to $2.27 billion, all operating segments and geographic regions posted year on year gains with golf clubs, leading all segments up 16%.
Speaker 3: For the fourth quarter revenues were up 14% to $447 million as title-iss golf clubs, gear, and golf balls all grew double digits.
Speaker 3: And adjusted EBITDA of $25 million represents a $30 million increase for the period.
EMEA was our fastest growing region up 20% versus 2021, and a cushion its business in the U S and Korea was also especially strong both increasing 9% on the year.
Speaker 3: In summary, a strong fourth quarter finish to a very positive trending year for a Kushnet.
Speaker 3: In addition, our teams have also made several operational enhancements as we invest to position the company for future success.
The company generated adjusted EBITDA of $338 million, a 3% increase over prior year.
Speaker 3: Heading into 23, our golf ball supply chain is more expansive and diverse as our primary raw materials partner has grown its capacity and capabilities and we have also added dynamic new suppliers.
For the fourth quarter revenues were up 14% to $447 million as title. This golf clubs gear in golf balls, all grew double digits.
And adjusted EBITDA of $25 million represents a $30 million increase for the period in.
Speaker 3: We believe these enhancements will invite new innovations while protecting our access to raw materials in uncertain times.
In summary, our strong fourth quarter finish to a very positive trending year for cushioning.
Speaker 3: Custom Club production capacity in the U.S. and abroad have been increased to meet growing demand for Titleist Golf Clubs and deliver leading service levels.
In addition, our teams have also made several operational enhancements as we invest to position the company for future success.
Speaker 3: We have expanded footwear production into Vietnam to support growth and strengthen and diversify our supply chain.
Heading into 'twenty, three our golf ball supply chain is more expansive and diverse as our primary raw materials partner has grown its capacity and capabilities and we have also added dynamic new suppliers. We believe these enhancements will invite new innovations, while protecting our access to raw materials and <unk>.
Speaker 3: One of the keys to FJ's sustaining success is the synergistic and mutually beneficial relationship we have had with our long-time JV footwear manufacturing partner, who shares FJ's commitment to quality and has seamlessly implemented this capacity expansion.
Uncertain times.
Custom club production capacity in the U S and abroad have been increased to meet growing demand for title this golf clubs and deliver leading service levels.
Speaker 3: To keep pace with rapid demand for our apparel lines, we have increased our customization capabilities in the US and UK, where club logos are most prevalent.
We have expanded footwear production in Vietnam to support growth and strengthen and diversify our supply chain.
Speaker 3: This expansion positions both FootJoy and SHOOS to be more agile and responsive to future growth opportunities while helping to protect lead times and service levels.
One of the keys to FTA sustaining success is the synergistic and mutually beneficial relationship. We have had with our longtime JV footwear manufacturing partner, who shares <unk> commitment to quality and has seamlessly implemented this capacity expansion.
Speaker 3: And we are optimistic about the enhancements we are making across our global distribution network to increase our ability to process inbound and outbound shipments and meet our high service standards.
Speaker 3: These investments will reduce the company's exposure to distribution bottlenecks caused by recent global supply chain disruptions.
To keep pace with rapid demand for our apparel lines, we have increased our customization capabilities in the U S and UK where club logos are most prevalent.
Speaker 3: In addition to these important infrastructure investments, the company also accelerated capital returns in 22, returning more than $240 million to shareholders through our dividend and share buyback programs.
This expansion positions, both foot joy and choose to be more agile and responsive to future growth opportunities, while helping to protect lead times and service levels.
Speaker 3: And building upon this commitment, I am pleased to announce that we have increased the company's quarterly dividend by 8% to 19.5% per share. The company has increased our dividend each year since its inception.
And we are optimistic about the enhancements, we are making across our global distribution network to increase our ability to process inbound and outbound shipments and meet our high service standards. These investments will reduce the company's exposure to distribution bottlenecks caused by recent global supply chain disruptions.
Speaker 3: Now looking at our business by segment, as you see golf ball sales were up 12% in the quarter and 6% for the full year.
In addition to these important infrastructure investments the company also accelerated capital returns in 'twenty, two returning more than $240 million to shareholders through our dividend and share buyback programs.
Speaker 3: Titleist golf balls are the overwhelming choice across worldwide tours and ProV1 golf balls were the winning choice of Masters champ Scottie Sheffler, PGA champion Justin Thomas, US Open Winter Matt Fitzpatrick, and open champion Cam Smith.
And building upon this commitment I am pleased to announce that we have increased the company's quarterly dividend by 8% to $19.05 per share. The company has increased our dividend each year since its inception.
Speaker 3: In addition to winning all four majors in 22, Titleist was also the golf ball of choice of 95% of the players who competed in the NCAA Women's Golf Championship. These achievements, we believe, validate the Titleist Golf Ball performance, quality and consistency advantages.
Now looking at our business by segment.
You see golf ball sales were up 12% in the quarter and 6% for the full year.
Speaker 3: and our foundational to our number one ball and golf positioning. New ProV1 and ProV1X models launched in late January and deliver advanced performance achieved through innovative new core technology and advanced aerodynamic properties.
Title. This golf balls are the overwhelming choice across worldwide tours, and probably one golf balls were the winning choice of Masters Champs Scotty Sheffler PGA champion Justin Thomas U S. Open winter met Fitzpatrick and open champion Cam Smith.
Speaker 3: We are pleased with initial consumer response to what we believe are the most advanced Pro-V ones we have ever launched.
In addition to winning all four majors in 'twenty. Two title. This was also the golf ball of choice of 95% of the players who competed in the NCAA Women's Golf Championship.
Speaker 3: And after a two-year hiatus, we have recently reopened Titleist Ball Plan 3 for tours and encourage interested golfers to join Team Titleist to experience firsthand all that goes into making ProV1, ProV1X and ADX.
These achievements, we believe validate the title this golf ball performance quality and consistency advantages and are foundational to our number one ball in golf positioning.
Speaker 3: and my teammates relentless commitment to product quality and process excellence.
New <unk>, one and probably one X models launched in late January and deliver advanced performance achieved through innovative new core technology and advanced aerodynamic properties. We are pleased with initial consumer response to what we believe are the most advanced <unk> ones, we have ever launched.
Speaker 3: Titleist off-clubs continue to excel with fourth quarter and full year sales up 32% and 16% respectively.
Speaker 3: Titleist golf clubs are well positioned for 23 as we build upon our momentum with new TSR1 drivers and TSR hybrids.
And after a two year hiatus, we have recently reopened title. This ball plant three for tours and encourage interested golfers to join team title list to experience firsthand all that goes into making <unk>, one probably one X and AVX and my teammates relentless commitment to product quality and process excellence.
Speaker 3: a full range of new Scotty Cameron Super Select putters, and new SM-9 lightweight wedges.
Speaker 3: A Christian's Gear business also added to the title of the brand momentum with revenues up 26% in the quarter and 13% for the year.
Speaker 3: Our gear team has done good work to expand customization capacity to meet strong demand, and as front-loaded inventory receipts to ensure that we are able to meet peak demand levels in the first half of the year.
Title at golf clubs continue to excel with fourth quarter, and full year sales up 32% and 16% respectively.
Title is golf clubs are well positioned for 'twenty three as we build upon our momentum with new <unk> drivers and Tia SAR hybrids, a full range of new Scotty Cameron Super select putters, and new SM nine lightweight wedges.
Speaker 3: Foot joy sales were up slightly in the quarter and grew 12% for the year with gains coming from each of our footwear, gloves and apparel categories.
Speaker 3: The ongoing success of FJ's premier series, Footwear Line reflects the brand's commitment to performance, style, and comfort.
Christian its gear business also added to the title of brand momentum with revenues up 26% in the quarter and 13% for the year.
Speaker 3: In addition, today marks the official launch of the all-new HyperFlex Collection, which showcases the brand's leadership in the premium athletic footwear space.
Our gear team has done good work to expand customization capacity to meet strong demand and is frontloaded inventory receipts to ensure that we are able to meet peak demand levels in the first half of the year.
Speaker 3: FJ apparel also carries great momentum into 2023 coming off another year of double-digit growth as our design team excels at delivering performance and style across our men's and women's collections.
Fortunately sales were up slightly in the quarter and grew 12% for the year with gains coming from each of our footwear glove and apparel categories.
Speaker 3: While Foot Joy is fully focused on the future, this year marks a proud milestone as we celebrate the brand's 100th anniversary.
The ongoing success of <unk> Premier series footwear line reflects the brand's commitment to performance style and comfort.
Speaker 3: Fruchoy is golf's most authentic and enduring footwear brand. The number one shoe engulfed for over 75 years and counting.
In addition, today marks the official launch of the all new Hyperflex collection, which showcases the brand's leadership in the premium athletic footwear space.
Speaker 3: which I grudges are among the highest market share products in golf.
FJ apparel also carries great momentum into 2023 coming off another year of double digit growth as our design team excels at delivering performance and style across our men's and women's collections.
Speaker 3: At a parallel and outerwear momentum add to the brand's energy and enthusiasm.
Speaker 3: But choice future has never been brighter.
Speaker 3: And rounding out the cushioned brands, our shoes business increased by more than 25% in 2022. And our golf business has nearly doubled since our 2019 acquisition.
While for Choi is fully focused on the future. This year marks a proud milestone as we celebrate the brands 100 <unk> anniversary.
For Choi is golf's, most authentic and enduring footwear brand the number one shoe in golf for over 75 years and counting.
Speaker 3: We are enthused about the road ahead as our talented team is committed to building the shoes business for long term sustaining success.
Speaker 3: Now here you see that all regions posted healthy gains in 22 led by EMEA which was up 20%.
Which I gloves are among the highest market share products in golf.
At apparel and outerwear momentum add to the brand's energy and enthusiasm for choice future has never been brighter.
Speaker 3: For the fourth quarter, you see double-digit growth in Japan and the U.S.
Speaker 3: Japan's outsized gains reflect the timing of our TSR driver launch, which was skewed towards Q4 in Japan and Q3 in all other regions.
And rounding out our cushion at brands, our shoe business increased by more than 25% in 2022.
Speaker 3: Key takeaways from this slide are a cushioned ability to execute across varying marketplaces.
And our golf business has nearly doubled since our 2019 acquisition.
We are enthused about the road ahead as our talented team is committed to building the shoe business for long term sustaining success.
Speaker 3: and the health of the Gulf consumer that we are seeing in all major regions.
Speaker 3: Now looking forward, we were made encouraged by strong golfer participation and enthusiasm for the game, including a golfer base that grew for the fifth consecutive year in 2022.
Now here you see that all regions posted healthy gains in 'twenty, two led by EMEA, which was up 20% for.
For the fourth quarter, you see double digit growth in Japan, and the U S. Japan's outsized gains reflect the timing of our CSR driver launch, which was skewed towards Q4 in Japan in Q3 and all other regions.
Speaker 3: Goal around to play. We're resilient last year, copying against record numbers in 2021.
Speaker 3: The U.S. play was down slightly and we estimate rounds outside the U.S. increased in the low single-digit range.
Key takeaways from this slide are a cushion its ability to execute across varying marketplaces and the health of the golf consumer that we're seeing in all major regions.
Speaker 3: Market fundamentals are strong, trade partners are financially stable, and Titleist and Foot
Now looking forward, we remain encouraged by strong golfer participation and enthusiasm for the game, including a golfer base grew for the fifth consecutive year in 2022.
Speaker 3: The professional game is off to a compelling start in 23 and this energy around the tours is an important catalyst as the golf season ramps up to the masters at a full global opening in Q2.
Global rounds of play we're resilient last year comping against record numbers in 2021.
Speaker 3: Our title is Fochoy and Shoes Brands, our vibrant and healthy, and we are enthused about our vast new product pipeline for 2023.
U S play was down slightly and we estimate rounds outside the U S increased in the low single digit range.
Speaker 3: We expect growth from each of our reportable segments in spite of continued currency headwinds.
Market fundamentals are strong trade partners are financially stable entitled list and foot Joy channel inventories are healthy across global markets.
Speaker 3: In addition to ongoing investments in our core businesses, we have also made recent acquisitions, which are great fits and compelling long-term value creation opportunities for a cushioned.
The professional game is off to a compelling start in 'twenty three and this energy around the tours is an important catalyst as the golf season ramps up to the masters at a full global opening in Q2.
Speaker 3: The first is our majority investment in TPI and long-term partnership with Founders Dave Phillips and Dr. Greg Rose.
Our title list <unk> and <unk> brands are vibrant and healthy and we are enthused about our vast new product pipeline for 2023.
Speaker 3: TPI is the leading provider of golf specific health, fitness, and swing advice available through the My TPI website. Dave Phillips and Dr. Rose are the preeminent experts in the field of biomechanics and body movement specific to golf and other rotational sports.
We expect growth from each of our reportable segments in spite of continued currency headwinds.
In addition to ongoing investments in our core businesses. We've also made recent acquisitions, which are great fits and compelling long term value creation opportunities for our cushioning.
Speaker 3: Their work is directed at helping athletes achieve peak performance while reducing pain and the risk of injury.
Speaker 3: They have had a profound impact on the professional game as the majority of leading tour professionals works with the TPI certified trainer.
The first is our majority investment in TPI and long term partnership with founders, Dave Phillips and Dr. Greg Rose.
Speaker 3: The Titleist TPI relationship goes back more than 20 years, and with this new partnership we will invest in TPI to expand its reach and activate Dave and Greg's expertise across our player development and R&D engines.
<unk> is the leading provider of golf specific health fitness and swing advice available through the <unk> website.
Dave Phillips and Dr. Roes are the preeminent experts in the field of biomechanics and body movements specific to golf and other rotational sports.
Speaker 3: And last month we announced the acquisition of the Club Glove brand, the industry leading provider of golf travel gear.
Their work is directed at helping athletes achieve peak performance, while reducing pain and the risk of injury.
Speaker 3: Club Grub is known by dedicated golfers in the U.S. to be the leader in golf travel products and is the preferred choice by the overwhelming majority of PGA Tour, LPGA Tour and PGA Club professionals.
They have had a profound impact on the professional game is the majority of leading tour professionals works with the TPI certified trainer.
The title is TPI relationship goes back more than 20 years and with this new partnership we will invest in TPI to expand its reach and activate Dave and greg's expertise across our player development and R&D engines.
Speaker 3: Club Glove's patented travel gear has long been recognized among the industry's most innovative and reliable products.
Speaker 3: And given the brand's reputation for product and service excellence, we see this as an ideal fit within the Acrystant Portfolio of Brands.
And last month, we announced the acquisition of the club club brand the industry, leading provider of golf travel gear.
Speaker 3: CROBGLUB founders will continue to operate the business at least through the end of the year, and we look forward to further developing this leading brand for years to come.
Club Grub is known by dedicated golfers in the U S to be the leader in golf travel products and is the preferred choice by the overwhelming majority of PGA Tour LPGA tour and PGA club professionals.
Speaker 3: In summary, we are optimistic about the structural health of the Gulf industry, the great momentum behind our title-est, Furtuei Shoes, TPI and Club Glove brands, and the resilience and engagement of the game's dedicated golfer.
Club gloves patented travel gear has long been recognized among the industry's most innovative and reliable products and given the brand's reputation for product and service excellence, we see this as an ideal fit within the <unk> portfolio of brands.
Speaker 3: And we are confident that recent investments in supply chain, technology, and infrastructure will benefit golfers and our trade partners, and position the company for continued market leadership and sustaining success.
Cloud gloves founders will continue to operate the business at least through the end of the year and we look forward to further developing this leading brand for years to come.
Speaker 3: Thanks for your attention this morning. I will now pass the call over to Tom.
Speaker 3: Thanks David and good morning everyone. I also would like to begin by recognizing our talented associates for the tremendous effort they put forth to deliver a great year for Acushnet in 2022.
In summary, we are optimistic about the structural health of the golf industry, the great momentum behind our titlist fluctuates shoes, TPI and club club brands and the resilience and engagement of the game's dedicated golfer.
Speaker 3: Starting with our Q4 results on slide 10, consolidated net sales were $447 million, up 6% reported, and up 14% level FX versus 2021.
And we are confident that recent investments in supply chain technology, and infrastructure will benefit golfers and our trade partners and position the company for continued market leadership and sustaining success.
Speaker 3: Overall, our momentum continued with all reportable segments showing growth in the quarter on a constant currency basis.
Thanks for your attention. This morning, I will now pass the call over to Tom.
Speaker 3: Gross profit for the fourth quarter was 224 million, up 19 million or 9% versus the prior year, and gross margins were 50%, up 140 basis points.
Thanks, David and good morning, everyone.
I also would like to begin by recognizing our talented associates for the tremendous effort they put forth to deliver a great year for our cushion in 2022.
Speaker 3: The increase in gross profit and gross margin was driven by golf clubs and golf balls as a result of higher sales volumes, primarily TSR metals and clubs and across all models and balls, and by lower inbound freight costs.
Starting with our Q4 results on slide 10, consolidated net sales were $447 million up 6% reported and up 14% level FX versus 2021.
Speaker 3: SG&A expense in Q4 was $196 million, down $13 million or 6%. An R&D expense was $14 million, down $2 million or 10% compared to the prior year.
Overall, our momentum continued with all reportable segments showing growth in the quarter on a constant currency basis.
Gross profit for the fourth quarter was $224 million up $19 million or 9% versus the prior year and gross margins were 50% up 140 basis points.
Speaker 3: SGNA for the quarter was down across all reportable segments and across all expense categories except for distribution where we continue to make investments to increase our throughput while maintaining high service levels.
The increase in gross profit and gross margin was driven by golf clubs and golf balls as a result of higher sales volumes, primarily tsi metals in clubs and across all models and balls and by lower inbound freight costs.
Speaker 3: Income from operations for the quarter was 12 million, up 34 million, or over 150% from 2021.
SG&A expense in Q4 was $196 million down $13 million or 6% and R&D expense was $14 million down $2 million or 10% compared to the prior year.
Speaker 3: Interest expense was 5 million, up over 4 million on higher interest rates and higher outstanding borrowings.
Speaker 3: An income tax expense was $2 million, up $1 million from the prior year, primarily as a result of a shift in our mix of jurisdictional earnings.
SG&A for the quarter was down across all reportable segments and across all expense categories, except for distribution, where we continue to make investments to increase our throughput while maintaining high service levels.
Speaker 3: Net loss income attributable to a cushion at holdings was up 26 million compared to 2021.
Speaker 3: and adjusted EBITDA was $25 million, up $30 million from the prior year.
Income from operations for the quarter was $12 million up $34 million or over 150.
Speaker 3: Moving to our full year results, consolidated net sales for the year were $2.27 billion, up 122 million or 6% on a reported basis compared to a record 2021.
Speaker 3: Consolidated net sales were up 11% on a constant currency basis.
Speaker 3: Gross profit was 1.18 billion, up 61 million, or 5 percent, and gross margins were 51.9 percent, down 20 basis points from the prior year, despite higher sales volume and higher ASPs and many product categories.
Speaker 3: primarily as a result of higher end bound freight, the negative impact of currency, and higher input costs. SGNA expense for 2022 was $833 million, up $38 million, or 5% compared to 2021.
Speaker 3: The increase came from higher selling expenses due to an increase in sales volumes, higher distribution costs as we enhance our fulfillment and customization capabilities, and higher G&A costs mainly from investments we are making in technology.
Speaker 3: all of which were partially offset by reductions in A&P and employee related expenses. R&D was 56 million up 1 million compared to the prior year.
Speaker 3: Income from operations was 282 million, up 22 million or 8% from 2021. Interest expense was 6 million higher, with about 2-thirds of the increase coming from higher interest rates and 1-third coming from higher debt balances.
Speaker 3: And our effective tax rate was 20.9% compared to 25.7% in 2021 as a result of a shift in the mix of our jurisdictional earnings. Net income attributable to a cushion at holdings was $199 million, up 20 million.
Speaker 3: And adjusted EBITDA was $338 million, up 10 million, or 3% compared to 2021. There was a reconciliation of net income to adjusted EBITDA for Q4 in the full year in our earnings release as well as in the appendix of the slide presentation. Moving to slide 11.
Speaker 3: We continue to benefit from the strength of our balance sheet. At the end of 2022, we had about 57 million of unrestricted cash on hand. Total debt outstanding was approximately 568 million.
Speaker 3: and we had approximately 417 million of available borrowings under our revolving credit facility. Our leverage ratio was 1.4 times at the end of 2022. Consolidated accounts receivable was 217 million, up 42 million from the prior year, and our day sales outstanding were 52 days, the same as the end of 2021.
Speaker 3: Inventory at the end of 2022 was $675 million, up $261 million from the prior year, and our day sales in inventory were 176 days. The end of 2022 was $675 million from the prior year, and our day sales in inventory were 176 days.
Speaker 3: We are comfortable with our overall inventory levels as we enter 2023. And I will point out that the comparison to last year can be misleading as our year end 2021 inventory levels were unusually low for our growing sales base. The composition and level of our inventories varies by segment. Coughball inventories remain lower than we would like.
Speaker 3: as we continue to catch up from last year's raw material shortage. Golf Club inventories are well positioned for upcoming product launches and to meet expected demand with DSIs in line with pre-pandemic levels. Gear and FootJoy inventories are strategically elevated in advance of upcoming product launches to mitigate fulfillment risks in the early part of the year. There is some level of excess footwear and apparel inventory.
Speaker 3: However, we are confident in our plans to sell this inventory during the first half of 2023.
Speaker 3: And given the changes in our business, we expect inventory will come down in the first half at a faster rate than prior years, returning to more normal seasonal levels by mid-year.
Speaker 3: Cash flow from operations for the fourth quarter of 2022 was an outflow of $9 million and for the full year was an outflow of $68 million.
Speaker 3: This compares to inflows of $34 million and $314 million for the same periods in 2021.
Speaker 3: The decrease in cash flows from operations for both periods comes primarily from increases in working capital, mainly inventory.
Speaker 3: And we continue to make meaningful CAPEX investments in our business.
Speaker 3: We spent 28 million on CAPEX during Q4 and 61 million for the full year, which was up 24 million from 2021.
Speaker 3: For 2023, we expect our capital expenditures to increase to about 75 million as some CAPEX has shifted out into 2023 and some is being pulled forward to accelerate the realization of the benefits of those investments.
Speaker 3: Flight 12 provides highlights of our recent acquisitions and capital allocation activities.
Speaker 3: In November , we acquired an 80% interest in TPI for 18 million.
Speaker 3: TPI is a leading supplier of online educational programs, certifications, and live seminars primarily for dedicated golfers.
Speaker 3: The impact of TPI sales in EBITDA were diminimous on our financial results for 2022. And for 2023, we expect TPI to add less than 10 million in sales and to initially be EBITDA neutral.
Speaker 3: TPI's results will roll up into our golf club segment in our external reporting.
Speaker 3: In February of 2023, we acquired the Club Glove brand, including all relevant trade names, domains, and products from West Coast Trends Inc. for $25 million.
Speaker 3: Cobb Glove is a highly respected performance leader in premium golf travel products.
Speaker 3: West Coast Trends will continue to operate in Service Club Club as a licensee of a cushion unit through the end of the year while we set up our internal operations.
Speaker 3: While under this structure, we would expect the Club Club brand to add a very limited amount of royalty revenue and EBITDA to our results.
Speaker 3: Once we are running the business internally, we would expect initial annual ClubGlove branded product sales to be under $20 million and for EBITDA to be accretive.
Speaker 3: The financial results of the Club Glove brand will roll into our Titleist gear segment in our external reporting.
Speaker 3: Additionally, in December 22, we acquired trademarks related to our putter business for cash consideration of $65 million.
Speaker 3: Prior to this transaction, we had been accessing these trademarks through a licensing arrangement.
Speaker 3: In terms of capital allocation, our strong financial results support the continued execution of our capital allocation strategy.
Speaker 3: Our highest priority remains investing in the business in the form of OpEx and CapEx with a focus on product innovation, golfer connection, and operational excellence.
Speaker 3: We will continue to evaluate potential acquisitions and other investments that align with our focus on premium performance products that appeal to dedicated golfers.
Speaker 3: We believe that these investments advance our long-term strategy and drive growth at a favorable return.
Speaker 3: Our focus on generating strong free cash flow and returning capital to shareholders continues to be a high priority.
Speaker 3: In December , we paid our previously announced Q4 dividend, which increased our total dividends paid for the year to $52 million, up 6% compared to 2021.
And as David mentioned, our Board of Directors today declared a quarterly cash dividend of 19.5 cents per share, payable on March 24th to share holders of record on March 10th.
This represents more than 8% increase in our dividend and an expected Q1 cash outflow of approximately $13 million.
During the fourth quarter, we repurchased about 1.1 million shares of our common stock for approximately 51 million, bringing our full year repurchases to just over 4 million shares for a total of 191 million.
These repurchases reduced our share count by about 5% over the course of the year. At the end of 2022, we had about 157 million remaining under our share repurchase authorization.
Between January 1 and January 13, 2023, we purchased an additional 168,000 shares of our common stock on the open market for $7.4 million, triggering the closing of our most recent share repurchase agreement with Magnus.
As a result, on January 23rd, we purchased about 2.2 million shares of our common stock from Magnus for 100 million to complete the agreement.
This further reduced our share count by an additional 3% for a total decrease of 8% from the beginning of 2021.
On February 9, 2023, our Board of Directors authorized us to repurchase up to an additional $250 million of our Outstanding Common Stock, bringing the total authorization up to $700 million since our share repurchase program was established in 2018.
Our capital allocation strategy is a foundational element of a Cushnet's value proposition, which we continue to believe creates a compelling long-term total return for our shareholders.
Moving to slide 13, our outlook for 2023 reflects continued strong demand for golf and decoust new products and a healthy pipeline of new product introductions.
As you would expect, our outlook is tempered somewhat by caution given the overall economic environment.
While we expect that currency will continue to be a headwind, mostly in the first half of the year and more so in Q1 than in Q2, we expect all segments to show growth on a constant currency basis for the full year.
And while we expect to benefit from lower inbound freight rates and reduced air freight utilization,
We expect some headwinds from higher input costs and from the return of promotional activity, albeit at lower than pre-pandemic levels. Taking these factors into consideration, we expect our full year 2023 consolidated net sales to be in the range of 2.325 to 2.375 billion, up 3.5 percent on a reported basis at the midpoint.
This includes a negative impact from foreign currency of about 60 million. On a constant currency basis, consolidated net sales are expected to be up between 5 and 7.2%. And we expect full-year adjusted EBITDA to be in the range of 345 million to 365 million up 5%.
compared to 2022 at the midpoint. Within this, we expect full year gross margins to be up slightly and we expect full year opex to grow slightly faster than reported sales as we continue to make investments to support the significant growth we have seen in the business over the past few years.
This outlook includes the full year impact of the acquisitions I previously discussed.
We expect the timing of our business in 2023 to be similar to 2022. With first half 2023 consolidated net sales, expected to represent just above 55% of full-year sales and first half adjusted EBITDA to be in the range of 65% to 70% of full-year adjusted EBITDA.
In conclusion, our associates and trade partners enabled us to deliver strong results for a cushioning in 2022.
While we are cautious given current economic uncertainty, we are pleased by the structural health of the industry, the momentum of our brands, and the investments we are making in the business.
We are confident we will achieve our financial goals for 2023 and beyond and deliver a solid long-term total return for our shareholders. With that, I will now turn the call over to Sandra for Q&A.
Thank you Tom. Operator, could we open up the line for questions please?
Of course, as a reminder, if you'd like to ask a question today, please press staff followed by one on your telephone keypad now. For a parent ask a question, please ensure your headset is fully plugged in and unmuted locally. That's star one to ask a question.
And our first question today comes from Brian Harbert from Morgan Stanley . Brian , please go ahead. Your line is open.
Hi this is Matt. I'm from Brian . Thanks for taking the question, maybe. First, it looks like some of the golf equipment entry data is soften a little bit in recent months. What do you think was the driver of that in any color, on why it looks like it did' that much for an impact on your results?
Of course as a reminder, if you'd like to ask a question today. Please press star followed by one on your telephone keypad now from preparing to ask a question. Please ensure your headsets fully plugged in and on music likely Thats Star one to ask question.
Good morning, Matt. Matt, can I just ask you to clarify that the golf equipment entry data helped me understand that question. Yes, at least through Golf Data Tech, it looks like the industry sales data softened a bit in recent months. What were the
And our first question today comes from Brian <unk> from Morgan Stanley . Brian . Please go ahead. Your line is open.
Hi, This is Matt on for Brian Thanks for taking the question.
I'm not sure if that's what you're seeing. Okay, okay, got it. You know, the way we look at certainly the past December , Q1, January , February ,
Maybe first it looks like some of the golf equipment industry data soften a little bit in recent months. What do you think was the driver of that and any color on why it looks like it didn't have much of an impact on your results.
I'll go back to holiday sales where in our minds healthy, what we certainly have seen is some swings. Some regional swings based on weather patterns. You look at rounds of play. They were down, double digits in California. They were down, double digits in Arizona, high double digits in California due to weather.
Good morning, Matt.
Ask you to clarify that the golf equipment entry data.
Help me understand.
Yes, so at least for golf data take it looks like the.
Industry sales data soften a bit.
In recent months.
Not sure if that's what you're seeing okay. Okay got it.
They were up in Florida. So there's some regional swings that we've seen, but we haven't seen any meaningful blips one way or the other over the last several months. Great, thanks. And then maybe you want SG&A. It looks like it's been...
The way the way we look at certainly the past December Q1 January February .
I'll go back to holiday sales were were in our minds healthy what we certainly have seen is some is some swings.
favorable and maybe similar or strange. Can this continue into 23 and is that a key driver of the guide? So our SGNA, particularly in Q4, was down. That's as much a story about our accelerated investments in Q4 of 21 as much as it is the result in Q4 of 2022.
Some regional swings based on weather patterns, you look at rounds play.
They were down double digits in California, they were down double digits in Arizona high double digits in California due to weather.
We're up in Florida. So there is some some regional swings that we've seen.
But we haven't seen any meaningful meaningful blips, one way or the other over the last over the last several months.
For going forward for 2023, we expect OpEx will grow slightly faster than sales, which it did not do that in 2022. And we expect some growth in each quarter of next year. So that trend will not continue. Q4 is a bit of an anomaly. Q4 is a bit of an anomaly.
Great. Thanks, and then maybe you wanted to SG&A it looks like it's been.
<unk> and maybe similar strain can this continue into 'twenty three.
A key driver of the guide.
Yeah.
So our SG&A, particularly in Q4 was was down that's as much a story about our.
Great, thank you.
The next question comes from Daniel Embry from Steven Zink. Daniel, please go ahead. Your line is open. Hey, good morning, everybody. Thanks for having our questions. David, I want to start on the demand side. Obviously, you mentioned participation, numbers of rising, and kind of looking through whether you guys feel pretty good about the industry.
Accelerated investments in Q4 of 'twenty one.
As much as it is the result in Q4 of 2022.
For going forward for 2023, we expect Opex will grow.
Likely faster than sales.
Which it did not do that in 2022.
But obviously we're coming off some strong gears. So if you can take a step back, what gives you guys confidence that this will continue? And then when I think about the 6.5% Confidence Currency Guide, what are you anticipating for core golf equipment growth? What's coming from foot joys, shoes? I think Tom mentioned maybe 10 million from TPI. Maybe walk through the building blocks there of the guy.
And we expect some growth in each quarter of next year. So that trend will not continue in Q4 is a bit of an anomaly.
Great. Thank you.
Yeah.
The next question comes from Daniel <unk> from Stephens, Inc. Please go ahead. Your line is open.
Hey, good morning, everybody, thanks for taking our questions.
David I want to start on the demand side. Obviously, you mentioned the participation numbers are rising and kind of looking for whether you guys feel pretty good about the industry, but obviously, we're coming off a strong year.
I just got back what gives you guys confidence that will continue.
And as we're seeing in rounds of play data, when weather cooperates, golfers are getting out and playing. So we've got a step one would be we've got a healthy golf marketplace. Chino inventories are in a good place. They're not where they were.
And then when I think about six 5% constant currency guide what are you anticipating for core golf equipment grew what's coming from foot jewelry shoes I think.
John mentioned, maybe $10 million from CPI, maybe you walked through the building blocks there of the guide in the context of your overall industry outlook.
Hey, good morning, Daniel.
18 months ago, which was very tight, but they're in a healthy place as compared to historic levels. We then point to two other contributing factors. One is broader consumer spending, which experts will tell you is projected in the...
At a high level.
The golf equipment apparel markets are healthy.
Courses off course retailers are healthy.
And as we're seeing in rounds played data when when weather cooperates golfers golfers or getting out and playing so we've got a step one would be we've got a healthy golf marketplace.
Channel inventories are in a good place.
They're not where they were 18 months ago, which was.
Tight, but they are not there in a healthy place as compared to historic historic levels.
And then getting into our businesses, right? If I look at it through its parts and pieces, we've got enthusiasm and excitement around a new ProV1 launch that brings great energy to the ball business and brand. We're enthused about our driver success with TSR starting in the fourth quarter and heading into its first spring season.
We then we then we then point to two other contributing factors one is broader consumer spending.
Which which.
Experts will tell you is projected in the in the in the flat to low single digit range.
And then you layer on whether projections, which which long ago. We realize you don't project, whether so we tend to think of weather as being flat surrounds being flat with the understanding youre going to be you're going to be wrong in one direction or another.
And we look at our gear and our food joy business, and we look internally at our products and our pipeline, and we have cause for optimism. To maybe the root of your question, right, the caution if there is any and there always is.
And then getting into our businesses right.
Look at it through its parts and pieces, we've got enthusiasm and excitement around <unk>.
The caution is always around the consumer. And where goes the consumer in 2023? But where we stand today, the factors I just walked through are effectively the...
<unk> launch.
That brings great energy to the ball business and brand we're enthused about our driver success with Tsi, starting in the fourth quarter and heading into its first spring season.
the baseline and foundation for our guide. As to segment, I'll pass that over to Tom for his thoughts. Well, Daniel, what we've said as it relates to segment is we do anticipate growth on a constant currency basis across all of our segments. So it is across the board.
And we look at our gear and our <unk> business and we look internally at our products in our pipeline and we have cause for optimism.
Maybe the root of your question right. The caution if there is any and there always is the caution is always around the consumer.
And where it goes the consumer in 2023, but where we stand today. The factors I just walked through are effectively the.
The baseline and foundation for our guide.
and the utilization of air freight, but there are also some headwinds, particularly from input cost and currency, and potentially the return of some promotional activity. So all in all, we anticipate that our gross margins will be up slightly across all of our-
As to segment.
Pass that over to Tom for his thoughts.
Well, Daniel what we've said.
As it relates to segment as we do.
Anticipate growth on a constant currency basis across all of our segments.
So it is it is across the board.
From.
segments and that our OPEX is going to grow a little bit faster than sales. Thank you guys for the color. I'll maybe follow up on that last point. I'm thinking about the promotional cadence. Which part of the business do you expect to see that show up most in? Is it equipment? Is it apparel? And then maybe related, you guys launched your TSR. It went really well last fall, but obviously your peers now have launched.
From an earnings perspective, there are there are lots of puts and takes.
That we all know about.
We're seeing a reduction both in freight rates and the utilization of <unk>.
Airfreight, but there are there are also some headwinds, particularly from input costs and currency.
And potentially the return of some promotional activity so all in all.
competitive product. That's a pretty full channel. Based on what you're here, kind of the industry, is inventory heavy with any 1 OEM? Is there a risk of any OEM getting from or showing the club side this year? You could just expound on that would be great.
We anticipate that our gross margins will be up slightly.
Cross all of our.
Segments and that our Opex is going to grow a little bit a little bit faster than sales.
Yeah, I'll touch on that Daniel. So to your first question, you know, but ball balls for us, we're feeling like we're finally caught up from an inventory standpoint. So we think that category, it's not oversupplied, therefore unlikely it would get overly promotional.
Okay. That's good. Thank you guys for the color maybe a follow up on that last point thinking about promotional cadence.
As part of the business do you expect to see that show up most in.
Equipment and apparel and then maybe related you guys launched your DSR. However, the rollout, but obviously your peers now have launched competitive product and it's a pretty cool channel.
Our club business in some respects, beats to its own drum, we're so custom fitting oriented that we're confident that we're not going to get caught up in excess inventories. I think we may have said this on the last call, that the categories that might be the most susceptible to promotional activity would be.
Based on what Youre hearing kind of the industry inventory heavy with any one OEM.
Of any OEM getting promotional on the club side this year.
On that would be great.
Yes, I'll touch on that Daniel So to your first question.
Balls for us we're feeling like we're finally caught up from an inventory standpoint.
footwear and apparel and really that traces back to they were they were Industry-wide the most disrupted last year in the in the second quarter in the first and second quarters because of the supply chain disruption So you had a lot of spring Products that simply came in late and didn't get out the door. So those categories we've been watching carefully and again, I think if you're looking for where is the highest likelihood of promoting
So we think that category, it's not oversupplied, therefore unlikely would get overly promotional.
Our club business in some respects speaks to its own drum or so custom fitting oriented that where we're confident that we.
We're not going to get caught up in excess inventories.
We may have said this on the last call that the categories that might be the most susceptible to promotional activity would be footwear and apparel and really that traces back to they were they were industry wide. The most disrupted last year in the second quarter and the first and second quarters because of the supply chain disruptions. So you had a lot of spring.
Products.
Simply came in late and didn't get out the door. So those categories, we've been watching carefully.
competition we
We like where we are. Again, I mentioned we've got a Pro V1 launch here, a lot of great energy and enthusiasm there. The driver realities you mentioned, that's an annual occurrence, right? We go when we go, when our competitors go, when they go. So I think what you'll see right now is, again, we're early days, but you should see full channels, right, as everybody gears up and as our pregrtts and
And again I think if youre looking for where is the.
Higher likelihood of promotional activity, that's where you'd see it.
Apparel and footwear now again in the context of where that sits historically I would say below historical.
Below historical normal levels, but certainly above what we've seen in the last in the last couple of years.
As to your second question about competition we.
We like where we are again I mentioned, we've got a we've got a protein one launch here a lot of great energy and enthusiasm there.
The driver realities, you mentioned, that's an annual occurrence right.
We go when we go when our competitors go when they go so I think I think what Youll see right. Now is again, we're early days, but you should see full channels right as everybody gears up and as our green grass and retail partners gear up for the season ahead.
We don't see any outliers that give us cause for concern at this point.
of us cause for concern at this point.
Great. I really appreciate all the color and best of luck. Thanks Daniel. Thanks Daniel. Thanks Daniel. Operator next question please. The next question is from Mike Swartz from Trivist Securities. Mike Hulinas open please go ahead.
That question May have a better answer two three months from now after we've seen the beginning of the season play out but from what we can see now we are seeing channels beginning to fill up in anticipation of the season and as we look at that again, it's not it's not a perfect.
Hey, good morning everyone. Just maybe first question, at a 30,000 foot level around a lot of the.
investments you've made, David, I think you called them out at the beginning of the call around capacity and capabilities. I guess where do we stand and we use the baseball metaphor? Where do we stand? Which inning are we in in really this investment phase? Because it sounds like there is going to be some increased investment in 2023 as well.
Balanced between supply and demand, but we don't see any we don't see any outliers that give us that give us cause for concern at this point.
Great really appreciate all the color and best of luck.
Thanks, Dan Thanks, Danielle Thanks, Danielle Operator next question please.
The next question is from Mike Swartz from <unk> Securities. Mike. Your line is open. Please go ahead.
Yeah, I hate me, Michael. You know, I would say on one hand, it never stops, right? You're continually investing in your capabilities and infrastructure sometimes for growth, sometimes for efficiency, sometimes for quality. You're continually investing in your capabilities and infrastructure sometimes for quality.
Hey, good morning, everyone.
Maybe first question.
Maybe 30000 foot level around a lot of the <unk>.
Investments you've made David I think you called them out at the beginning of the call around capacity and capabilities.
But we are comfortable that we're some 40 plus percent bigger than we were a handful of years ago. And we are comfortable that from a capacity expansion standpoint, we are where we need to be. As I've mentioned, most of our businesses were in a pretty good place.
Do we stand if we use the kind of the base of the baseball metaphor, where do we stand which inning are we in.
And really this investment phase because it sounds like there is going to be some increased investment in 2023 as well.
Yeah, Hey, Michael.
I would say on one hand it at <unk>.
<unk> stops right you are continually investing in your capabilities and infrastructure, sometimes for growth sometimes for efficiency sometimes for quality.
from a supply and availability standpoint, the two outliers might be balls and gloves. And the ball story really less predicated on our capacity and more a function of our suppliers' inability to get us the raw materials we needed. And we're...
But we are comfortable that were some were some 40 plus percent bigger than we were a handful of years ago, and we are comfortable that from a capacity expansion standpoint.
We are where we need to be as I've mentioned most of our businesses. We are in a pretty good place from a supply and availability standpoint, the two outliers might be balls and.
Well, the one call out all make is, you know, we're continuing to invest in technology to enrich the consumer experience to enrich our trade partner experience and to just just create better.
And gloves and the ball story really less predicated on our capacity and more of a function of our.
Our suppliers' inability due to get us the raw materials, we needed and where we're long past that point so.
<unk>.
architecture throughout our organization to be more effective and efficient. So as we think about the investments, that's area one. Area two, and we've touched on this a little bit, we continue to invest in distribution around the world. We made some moves last year with apparel to expand our distribution capabilities.
Hopefully that gives you a sense for where we're at.
Yeah, and I guess, where.
Where are the future investments really oriented as we talk about 2003.
Well.
The one call out I'll make is we're continuing to invest in technology to.
Enrich the consumer experience to enrich our trade partner experience into.
Just just create better architecture throughout our organization to be more <unk>.
<unk> and efficient.
So as we as we think about the investments.
Thats area, one area two and we've touched on this a little bit we continue to invest in distribution around the world.
Okay, great. Maybe just a follow-up on the on balls on the pro B1 relaunch this year I think you're taking the 10% price increase which I think is one of the largest price increases you've taken in that business You've got a lot of competition and obviously competitors have been doing very well the ball side the past couple years I guess what gives you the comfort or confidence in taking that?
Right, we made some moves last year with with apparel to expand our distribution capabilities, we have some opportunities.
In all markets outside the U S too.
To rethink and re imagine how we how we distribute products in and through our warehouses around the world. So that's that.
That's an area that we're paying attention to as well.
Okay, Great maybe just a follow up on the.
Balls when appropriate one relaunch this yet youre, taking 10% price increase which I think is one of the largest price increases you've taken in that business.
based on the performance and quality attributes of our product. And that's what we're seeing now.
<unk> got a lot of competition and obviously competitors have been doing very well on the ball side in the past couple of years I guess, what gives you the comfort or confidence.
We're also seeing the introduction of some or the return of some programs, our loyalty program is back, which golfers are great fans of. And important to note as well that our pricing journey is a long road in the sense that are two-year price life cycles.
Taking that level of pricing.
Yes.
Fair to say.
Pricing was driven by.
Input costs that we've seen across all areas of our business.
We've always been comfortable at a premium to the competition based on.
We don't take a lot of moves and this one reflects, it's been a couple of years, number one and number two, we've incurred and absorbed a good amount of input cost over the years. So there's a bit of a catch up baked into where we are. But again, we've always been comfortable at a premium versus the competition. As warranted, we think by the product, by our leading shares, by our...
The performance and quality attributes of our product and that's what we're seeing now.
We're also seeing the introduction of some or the return of some programs our loyalty program is back.
Which which golfers are great fans of and important to note.
leading usage throughout the pyramid. And anytime you take a price increase, it ups the ante in the sense that you've got to work extra hard to show consumers that your product is worth it. That's what our team is committed to as they seek to show how our products outperform the competitive set. So we're comfortable where we are. We don't take price increases lightly. We never have.
As well our pricing journey is a long road in the sense that our two year price like life cycles.
We don't take a lot of moves in this one reflects.
It's been a couple of years number one and number two we've incurred and absorbed a good amount of input cost over the year. So there's a bit of a catch up.
Baked in to where we are.
Again, we've always been comfortable at a premium versus the competition.
As warranted, we think by the product by our leading shares by our leading usage throughout the pyramid.
And anytime you take a price increase.
At ups the ante in the sense that you got to work extra hard to show consumers that your product is worth it and Thats, what our team is as committed to as they as they seek to show how our products outperform.
in the last couple of years.
Thank you, David.
thanks Te Grill.
Thanks Michael operator next question please. The next question is from Joe Altabello from Raymond James. Joe Yulana's item please go ahead. Thanks, hey guys good morning. I guess just to kind of follow up on that point, you know it's been a while since we've had a, a garden variety recession if you will, but historically what have you seen in terms of overall spending?
Competitive sets. So we're comfortable where we are we don't we don't take price increases lightly we never have.
But we think we've got the parts and pieces in place too.
To be effective and we think golfers understand where we're coming from one given our long.
Historical journey as it relates to pricing and two given the realities of some of the price increases we've dealt with in the past couple of years and in some respects absorbed in the last couple of years.
in the category and on your brands. Is there any trade down given the premium positioning of your brands? In a recession do golfers play fewer rounds or do they use cheaper balls or do they stay in the same regimen?
Thanks, David.
Mhm.
Thanks, Michael Operator next question please.
The next question is from Joe <unk> from Raymond James Joe. Your line is open. Please go ahead.
Yeah, I may be talking about both cadet at that high level Joe, you know what we've seen golfers tend to keep playing. They may prolong their life cycles, right? So that's the first takeaway from what we've seen in the past.
Thanks, Hey, guys. Good morning, I guess just to kind of follow up on that on that point, it's been a while since we've had a.
Garden variety recession, if you will but historically what have you seen in terms of overall spending in the category.
Historically, and I think we've noted this before, the company has fared well. We're not recession proof. We've fared well in downturns going back to the subprime and going back to the dot com. I may pass that one off to Tom for some.
On your brands is there any trade down given the premium positioning of your brands and I guess.
In a recession golfers.
With you around.
Paper bowls or do they stay the same regiment.
Yes, maybe Tom and I, both get at that high level Joe.
What we've seen golfers tend to keep playing they may prolong their life cycles right.
some specifics on those events. So Tom, I'll kick that one over to you. Sure, Joe, and I think we've talked about this before. Back in the 2008, 2009 timeframe, when you look at our business, excluding Cobra, which did not focus on the dedicated golfer and which we later sold.
So that's the first takeaway from what we've seen in the past historically and I think we've noted this before.
The company has fared has fared well we're not recession proof.
Our core business, if you will, was down about 8%. And if you look at a basket of leisure and recreation product companies within the consumer discretionary segment, they were down more than 15%. So as David said, our business fared far better than some of our peers. Our business is down far better than some of our peers. Our business is down far better than some of our peers.
We fared well in downturns going back to the.
The subprime and going back to the Dot com.
I may pass that one off to Tom for some for.
Some specifics.
On those events, so Tom I'll kick that one over to you sure Joe and I think we've talked about this before back in.
All right. Appreciate that. And Joe, just to final, the final observation, Joe, is you made a comment about trade-down. Yep.
The 2008 2009 timeframe when you look at our business, excluding Cobra, which did not focus on the dedicated golfer, which we later sold.
we haven't seen a lot of that right again if you if it if it tends to be more just extended life cycles but we haven't seen a lot of trade down i think that speaks to more than anything that the makeup and demographic and a bit of our of our dedicated player
Our core business. If you will was down about 8% and if you look at.
Our basket of leisure and recreation product companies within the consumer discretionary segment, they were down more than 15%. So so as David said, our business fared far better.
Thanks for that, David. And I guess just to follow up on that, when we were down in Orlando at the PGA show a few weeks ago, your overall outlook on the industry was about flattish in 2023. So maybe, can you help us square that outlook with the 5 to 7 percent constant currency sales growth?
Then then than some of our peers.
I appreciate it and Joe just I guess a final the final the final observation. Joe is you made a comment about trade down.
Yes.
We haven't seen a lot of that alright again.
It tends to be more just extended life cycles, but we haven't seen a lot of trade down I think that speaks to more than anything the makeup and demographic and ability of our of our dedicated player.
you provided today. How much of that growth is coming from your games?
and replenishment on the ball side in particular. Yeah, I would say it's born out of...
brand momentum and product enthusiasm across our pipelines.
Thanks for that David and I guess just to follow up on that.
We're down in Orlando at the <unk>.
Step one, step two, there's a bit of replenishment that will play out.
So a few weeks ago your overall outlook on the industry.
Was about flattish right in 2023, and so maybe could you help us square that outlook with the 5% constant currency sales growth you provided today, how much of that growth is coming from share gains and replenishment on the ball side in particular.
in Q1 and then I think we're there from an inventory standpoint. We're where we want to be, right? We were a little leaner on the ball side in particular. So I think by the end of end of April is probably a better way to think about it when we've loaded up the channels. I think the replenishment is complete.
Yes, I would say, it's it's borne of <unk>.
Brand momentum and product enthusiasm across our pipelines.
There's a little bit of pricing in there as well. So yeah, your take on macro market, what we said in January is...
Step step one step two.
There is there is.
A bit of replenishment that will play out in Q1, and then I think we're there from an inventory standpoint, we're where we want to be right. We were a little leaner.
is for us the right way to think about it. We're thinking about this here is generally flat from a marketplace perspective. But again, there's some parts and pieces of our, within our business that give us confidence.
Sure.
On the ball side in particular, so I think by the end of end of April is probably a better way to think about it when we've when we've loaded up the channels.
that we can outpace that growth. Thanks.
Thanks, Joe. Operator, next question, please. The next question comes from George Kelly from Rock Capital. George, please go ahead, your line is open.
The replenishment is complete.
There's a little bit of pricing in there as well so yes, you're take on on macro market. What we said in January as is for US the right way to think about it we're thinking about this year is generally flat from a marketplace perspective.
Okay, everybody, thanks for taking my questions. So most have been asked and answered, but just a couple for you, I guess. The trademark, I think it was a $65 million transaction in the fourth quarter, could you give a little more detail on that? Is that providing material?
But again there is some there is some parts and pieces of our.
In our business that give us confidence confidence.
That we can outpace that growth.
benefit to EBITDA in 23 and beyond. Yeah, hey George, this is something that we've been looking at for a long time. As we feel it's very important for the company to...
Got it thanks guys.
Thanks, Joe.
Operator next question please.
The next question comes from George Kelly from Roth Capital. Please go ahead. Your line is open.
Hey, everybody thanks for taking my questions.
certain trademarks and certainly we do own the vast majority of our trademarks. Our putter business is in great shape and we see this as an important step to protecting this business for the very, very long term.
Most have been asked and answered, but just a couple for you I guess.
The trademark.
It was a $65 million transaction in the fourth quarter could you give a little more detail on that is that providing a material.
Yeah, and as it relates to EBITDA, you know, this is really a trading, if you will, from a royalty model to an own model. So we will end up putting an intangible asset on the balance sheet and amortizing that over a 20-year period. And so...
Benefit to EBITDA in 'twenty, three and beyond.
Yes, Hey, George This is this is something that we've been looking at for a long time as we feel it's very important for the company too.
One certain trademarks and certainly we do own the vast majority of our trademarks.
Our.
that swapping of those costs, if you will, amortization gets added back for EBITDA purposes, so it'll have an impact on operating income, but it'll be a tailwind for EBITDA. Okay, that's helpful. And the next question, just curious if you could be more specific, if you could quantify the impact of the acquisitions you've made on your guidance.
<unk> business is in great shape, and we see this as an important step to protecting this.
This business for the very very long term.
Yes, and as it relates to.
EBITDA this is really a.
Trading if you will from a.
From a.
The royalty model to an owned model. So we will end up putting an.
An intangible asset on the balance sheet and amortizing that.
Over over a 20 year period, and so that that swapping of those costs, if you will amortization amortization.
Amortization gets added back for EBITDA purposes, so it'll it'll be it'll have an impact on operating income, but it will be it will be.
A tailwind for for EBITDA.
Okay. Okay. That's helpful and then the next question.
Just curious if you could be more specific if you could quantify.
From a club glove perspective, that was more of an acquisition of intangibles, whether it be trademarks and things of that nature. So we are in the process of setting up that business internally so that we can run it internally. So for the balance of 2022.
The impact of the acquisitions, you've made on your guidance for fiscal year 'twenty three specific to revenue.
Sure so.
What we've said is.
TPI is.
Is an acquisition an acquisition in the traditional sense.
And we anticipate that.
West Coast Trends will continue to operate the business and support the brand on a license basis. And so we'll, for 2023, recognize royalty income on that, and that'll be a very small amount. So both of those transactions and the impact are included in our guidance.
It will add on the top line less than $10 million, so reasonably small acquisition there.
From a.
From a club gloves perspective.
That was more of a.
And acquisition of intangibles, whether it would be.
Trademarks and.
Okay, that's really helpful. And then last question from me, with this REopt share repurchase authorization, I believe you said $250 million, is the plan to continue aggressively doing that? I mean, is that something you could work through over the next three or four quarters?
And things of that nature. So we are in the process.
Of setting up that business internally, so that we can run it internally so for the balance of 2022 West coast trends will continue to operate the business and support the brand.
On a license basis, and so so will 2023 recognize royalty income on that and that will be a very small amount. So both of those.
Yeah, so as you know, we've been pretty aggressive buying back shares. We expect to continue to buy back shares. You know, we will obviously monitor, you know, the economic situation and market conditions and adjust accordingly. But we would.
Transactions and the impact are included in our guidance.
Okay. That's really helpful. And then last question for me.
we would absent any changes in those factors, we would anticipate utilizing that 250 maybe by the middle part of next year.
absent any changes in those factors, you know, we would anticipate utilizing that 250, you know, maybe by the middle part of next year. Okay, excellent. Thank you.
With this re upped.
Share repurchase authorization I believe you said $250 million.
Is the plan to continue aggressively doing that I mean is that something.
You could work through over the next three or four quarters.
Thank you, George. Thanks, everyone. As always, we appreciate your interest in the company. Hope you have a great day, and we look forward to catching up with you on our next call. This concludes today's call. Thank you very much for your attendance.
Yeah.
Yes, so as you know we've been pretty aggressive buying back shares we.
We expect to continue to buy back shares.
We will obviously monitor the economic situation and market conditions and adjust accordingly.
But we would we would absent any changes in those factors, we would anticipate utilizing that 250.
Maybe by the middle Middle part of next year.
Okay excellent. Thank you.
Thank you George.
Thanks, everyone as always we appreciate your interest in the company Hope you have a great day, and we look forward to catching up with you on our next call.
This concludes today's call. Thank you very much for your attendance you may now disconnect your lines.
Yeah.
Yeah.
Yeah.
Okay.