Q1 2024 Acushnet Holdings Corp Earnings Call
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Chach: Good morning everyone and welcome to the Acushnet Holdings conference. My name is Chach, and I'll be your moderator today. All lines will be muted during the presentation portion of the call with the opportunity for questions and answers at the end. I'd now like to pass the call over to your host, Sondra Lennon, Vice President of FP&A and Investor Relations. Please go ahead.
Speaker Change: Good morning, everyone and welcome to push that holding conference. My name is chat should not be our moderator today all lines will be muted during the presentation portion of the call with the opportunity for questions and answers at the end and I'd like to pass the conference over to your highest Sondra Lennon Vice President <unk> S. P. A N a and Investor Relations. Please go ahead.
Speaker Change: Ed.
Sondra Lennon: Good morning, everyone. Thank you for joining us today for Acushnet Holdings Corp.'s first quarter 2024 earnings conference call. Joining me this morning are David Maher, our President and Chief Executive Officer, and Sean Sullivan, our Chief Financial Officer. Before turning the call over to David, I would like to remind everyone that we will make forward-looking statements on the call today. These forward-looking statements are based on Acushnet's current expectations and are subject to uncertainty and changes in circumstances. The actual results may differ materially from these expectations.
Sondra Lennon: Good morning, everyone. Thank you for joining us today for a course that holding Corp, first quarter 2024 earnings conference call join.
Sondra Lennon: Joining me. This morning are David Maher, our President and Chief Executive Officer, and Sean Sullivan, Our Chief Financial Officer.
Sondra Lennon: 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. Throughout this discussion, we will make reference to non-GAAP financial metrics, including items such as net sales on a constant currency basis and adjusted EBITDA. Explanations of how and why we use these metrics and reconciliations of these items to the most directly comparable GAAP metric 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.
Sondra Lennon: Before turning the call over to David I would like to remind everyone that we will make forward looking statements on the call today.
Sondra Lennon: These forward looking statements are based on a cushion on its 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.
Sondra Lennon: And our filings with the U S Securities and Exchange Commission.
Sondra Lennon: Throughout this discussion we will make reference to non-GAAP financial metrics, including items, such as net sales on a constant currency basis, and adjusted EBITDA explanations of how and why we use these metrics and reconciliations of these items to the most directly comparable GAAP metric can be found on the <unk>.
Sondra Lennon: <unk> is in today's press release, the slides that accompany this presentation and in our filings with the U S Securities and Exchange Commission.
Sondra Lennon: 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 are referring to the three-month period ended March 31st, 2024, and the comparable three-month period in 2023. With that, I'll turn the call over to David.
Sondra Lennon: 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.
Sondra Lennon: We are referring to the three month period ended March 31, 2024 in the comparable three month period in 2023.
Sondra Lennon: With that I'll turn the call over to David.
David E. Maher: Thanks, Sondra, and good morning, everyone. As always, we appreciate your interest in Acushnet Holdings. I am pleased to report on a strong start to the year for Acushnet, led by our momentum in golf balls and clubs, supported by continued supply chain enhancements and a better than expected startup at our new North American Distribution Center. As is customary in Q1, we launched a wide range of new products across our portfolio, helping to deliver worldwide net sales of $708 million, a 4% constant currency increase over last year. This contributed to adjusted EBITDA of $154 million, a 5% gain for the quarter.
David E. Maher: Thank sondra and good morning, everyone as always we appreciate your interest in a cushion at holdings.
David E. Maher: I am pleased to report on a strong start to the year for Cushing. It led by our momentum in golf balls and clubs supported by continued supply chain enhancements and better than expected startup at our new North American distribution Center.
David E. Maher: As is customary in Q1, we launched a wide range of new products across our portfolio helping.
David E. Maher: Helping to deliver worldwide net sales of $708 million.
David E. Maher: 4% constant currency increase over last year.
David E. Maher: This contributed to adjusted EBITDA of $154 million, a 5% gain for the quarter.
David E. Maher: Global interest in golf and rounds of play continue to be healthy. U.S. rounds were up 21 percent in March and 7 percent for the quarter, positive trends, particularly given poor weather across the southeast. Conversely, rounds were off 9 and 12 percent in Korea and the UK, where elevated rainfall caused delayed starts to their seasons.
David E. Maher: Global interest in golf and rounds of play continue to be healthy U.
David E. Maher: U S rentals were up 21% in March and 7% for the quarter.
David E. Maher: <unk> trends, particularly given poor weather across the south East <unk>.
David E. Maher: Conversely rounds were off nine of 12% in Korea, and the U K, where elevated rainfall caused delayed starts to their seasons. These.
David E. Maher: These weather-related put and takes are common for Q1 and in line with the widely held belief that the golf season, more often than not, starts with the Masters in early April. Getting to our segment results, golf ball sales increased 9% in the quarter, which is noteworthy given the steep comp against last year's sizable Pro V1 launch and 21% growth. This gain was led by double-digit growth in the U.S. We successfully launched new ADX, TORSOFT, and TRUFIEL models in the quarter and also benefited from greater than expected demand and fulfillment in our Pro V1 Loyalty Rewarded program in March. This golf ball success was supported by an especially fast start on the PGA Tour, where Titleist golf balls were used by the winners of 16 of the first 18 events of the 2024 season.
David E. Maher: These weather related puts and takes are common for Q1 and in line with a widely held belief that the golf season more often than not starts with the masters in early April.
David E. Maher: Getting to our segment results you see golf ball sales increased 9% in the quarter, which is noteworthy given the steep comp against last year's sizable probie, one launch and 21% growth.
David E. Maher: This gain was led by double digit growth in the U S.
David E. Maher: We successfully launched new AVX tour soft and true for your models in the quarter and also benefited from greater than expected demand and fulfillment and our probie one loyalty rewarded program in March.
David E. Maher: This golf ball success was supported by an especially fast start on the PGA tour, where title. This golf balls were used by the winners of 16 of the first 18 events of the 2024 season.
David E. Maher: Titleist Golf Clubs also posted a strong quarter, with sales up 14 percent, led by solid gains in the U.S., Japan, and EMEA. Our new T-Series irons have been well-received, and we successfully launched new Vokey Design SM-10 wedges and Scotty Cameron Phantom putters during the period. Our wedge launch was especially well executed as our operations group completed our global launch in Q1 and a few weeks ahead of schedule.
David E. Maher: Titleist golf clubs also posted a strong quarter with sales up 14% led by solid gains in the U S, Japan and EMEA.
David E. Maher: Our new T series Irons have been well received and we successfully launched new Vogie design S. M 10, wedges and Scotty Cameron Phantom putters in the period.
David E. Maher: Our wedge launch was especially well executed as our operations group completed our global launch in Q1 and a few weeks ahead of schedule.
David E. Maher: Titleist gear sales were up 2% in the quarter on double-digit growth in the U.S., and our footshoy business was off 6% in the quarter, in line with expectations as growth in the U.S. was more than offset by declines in international markets. We are pleased with the early response to new footwear and apparel lines and anticipate growing momentum for Footshoy as the footwear market stabilizes in the back half of the year. Later this month, FJ will launch the new Mobile Fit Lab performance fitting system to help golfers select the best performing, best fitting, and most comfortable golf footwear.
David E. Maher: Titleist gear sales were up 2% in the quarter on double digit growth in the U S and our foot Joy business was off 6% in the quarter inline with expectations as growth in the U S was more than offset by declines in international markets.
David E. Maher: We are pleased with the early response to new footwear, and apparel lines and anticipate growing momentum for <unk> as the footwear market stabilizes in the back half of the year.
David E. Maher: Later this month F. J will launch the new mobile fit lab performance fitting system to help golfers select the best performing best fitting and most comfortable golf footwear.
David E. Maher: This tech-enabled golf footwear fitting experience will be in pilot mode in the U.S. this summer, and longer term, we anticipate increasing our investment in FJ FitLab to support a global build-out of this value-added fitting service and golfer connection opportunity. Also, in the quarter, net sales of products not allocated to a reportable segment were down.
David E. Maher: This tech enabled golf footwear fitting experience will be in pilot mode in the U S. This summer.
David E. Maher: Longer term, we anticipate increasing our investment in F. J fit lab to support our global build out of this value added fitting service and golfer connection opportunity.
David E. Maher: Also in the quarter net sales of products not allocated to our reportable segment were down with continued momentum and growth from shoes, not enough to offset a decline in our Korean titlist apparel business.
David E. Maher: With continued momentum and growth from shoes, not enough to offset a decline in our Korean Titlist apparel business. Now looking at the quarter by region, you see the U.S. market was up 13% with gains coming from all segments and coinciding with a positive Rounds of Play story. EMEA was off 5%, reflecting an especially wet spring and slow start to their golf season. Japan was off 10%, as sales of games and golf clubs were more than offset by declines in other product categories. And Korea was off 12%, mainly due to Titleist apparel declines and poor weather, which delayed the start of their golf season as rounds were off 9%.
David E. Maher: Now looking at the quarter by region, you'll see the U S market was up 13% with gains coming from all segments and coinciding with a positive rounds of play story.
David E. Maher: EMEA was up 5%, reflecting an especially wet spring and slow start to their golf season, Japan.
David E. Maher: Japan was off 10% as gains in golf clubs were more than offset by declines in other product categories.
David E. Maher: Korea was off 12% mainly from title this apparel declines and poor weather, which delayed the start to their golf season as rounds were off 9%.
David E. Maher: In summary, we are pleased with our start to the year as the strength of golf balls and golf clubs and benefits from continued progress at our North American D.C. offset delayed starts in EMEA and Asia, where we anticipate improving results as their seasons open up. As Sean will address, the company is well positioned as we enter Q2 with healthy inventory positions and a strong balance sheet to support our continued organic investment and shareholder return programs.
David E. Maher: In summary, we are pleased with our start to the year as the strength of golf balls and golf clubs and benefits from continued progress at our North American D. C offset delayed starts in EMEA and Asia, where we anticipate improving results as their season's open up.
David E. Maher: As Sean will address the company is well positioned as we enter Q2 with healthy inventory positions and a strong balance sheet to support our continued organic investment and shareholder return programs.
David E. Maher: The golf industry is on firm footing, and while Acushnet is not immune to macroeconomic or weather-related pressures, our business has, over time, proven to be resilient. Due to the avidity and favorable demographic profile of our core consumer, the dedicated golfer, our global teams have done nice work positioning Titleist, Footshoy, and Shoes products in golf shops. And we are confident in our ability to deliver compelling product, fitting, and service experiences to golfers throughout the upcoming season. Thanks for your attention this morning. I will now pass the call over to Sean.
David E. Maher: The golf industry is on firm footing and while at Cushing. It is not immune to macroeconomic or weather related pressures our business has over time proven to be resilient.
David E. Maher: Due to the avidity and favorable demographic profile of our core consumer the sports dedicated golfer.
Sean S. Sullivan: Our global teams have done a nice work positioning titlist virtually and choose products in golf shops, and we are confident in our ability to deliver compelling product fitting in service experiences to golfers throughout the upcoming season.
David E. Maher: Thanks for your attention. This morning, I will now pass the call over to Sean.
Sean S. Sullivan: Thank you, David. Good morning, everyone. As David highlighted, we had a strong start to 2024 with a first quarter net sales increase of 4 percent over the prior year. Adjusted EBITDA was $153.7 million, a 4.7% increase from the first quarter of 2023. Net sales growth in the quarter was driven by continued momentum of our Titleist brand, with golf clubs, golf balls, and golf gear growing by 14%, 9%, and 2%, respectively. Footjoy net sales declined 6% in the quarter.
Sean S. Sullivan: Thank you David good morning, everyone.
Sean S. Sullivan: As David highlighted we had a strong start to 2024 with a first quarter net sales increase of 4% over prior year.
Sean S. Sullivan: Adjusted EBITDA was $153 7 million or four 7% increase from the first quarter of 2023.
Sean S. Sullivan: Net sales growth in the quarter was driven by continued momentum of our titles brand with golf clubs golf balls, and golf gear growing by 14%, 9% and 2% respectively foot joined net sales declined 6% in the quarter.
Sean S. Sullivan: Geographically, net sales were up in Q1 in the U.S., but declined in Korea, Japan, and EMEA primarily due to lower net sales within our Foot Joy golf wear segment and lower net sales of products that are not allocated to one of our four reportable segments. Gross profit in the first quarter of $378 million was up 3%, or $12 million, compared to the same period last year, primarily due to increased net sales, partially offset by lower net sales, and unfavorable manufacturing overhead absorption in foot-joy golf wear.
Sean S. Sullivan: Geographically net sales were up in Q1 in the U S, but declined in Korea, Japan, and EMEA, primarily due to lower net sales within our foot Joy golf wear segment and lower net sales of products that are not allocated to one of our four reportable segments.
Sean S. Sullivan: Gross profit in the first quarter of $378 million was up 3% or $12 million compared to 2023, primarily due to increased net sales, partially offset by lower net sales and unfavorable manufacturing overhead absorption and foot Joy golf wear.
Sean S. Sullivan: SG&A expense of $237 million in the quarter increased $14 million, or 6% from 2023, due in part to increases in advertising and promotional expenses, information technology-related expenses, and employee-related selling expenses, which were partially offset by lower retail commission expenses in Korea. SG&A expense in the first quarter also included $7 million of restructuring costs related to the closing of certain production lines in China as a portion of our footwear production transitions to Vietnam.
Sean S. Sullivan: SG&A expense of $237 million in the quarter increased $14 million or 6% from 2023 due in part to increases in advertising and promotional expense information technology related expenses and employee related selling expenses, which were partially offset by lower retail.
Sean S. Sullivan: Emission expense in Korea.
Sean S. Sullivan: SG&A expense in the first quarter also included $7 million of restructuring costs related to the closing of certain production lines in China as a portion of our footwear production transitions to Vietnam.
Sean S. Sullivan: Interest expense of $13 million in the quarter was up $3 million due to an increase in interest rates and borrowing. Our effective tax rate in Q1 was 21.7%, up from 18.1% last year, primarily driven by a shift in our jurisdictional mix of earnings.
Sean S. Sullivan: Interest expense of $13 million in the quarter was up $3 million due to an increase in interest rates and borrowings our effective tax rate in Q1 was 21, 7% up from 18, 1% last year, primarily driven by a shift in our jurisdictional mix of earnings.
Sean S. Sullivan: Moving to our balance sheet and cash flow highlights. Our balance sheet and cash flow positions continue to be very strong, allowing us to execute our capital allocation strategy, with ongoing investments in the business and return of capital to shareholders being our highest priority. Our net leverage ratio using average trailing net debt at the end of Q1 was 1.9 times.
Sean S. Sullivan: Moving to our balance sheet and cash flow highlights our balance sheet and cash flow positions continue to be very strong, allowing us to execute our capital allocation strategy with ongoing investments in the business and return of capital to shareholders being our highest priorities.
Sean S. Sullivan: Our net leverage ratio using average trailing net debt at the end of Q1 was one nine times.
Sean S. Sullivan: Inventories overall declined 13% from the fourth quarter of 2023, with decreases across all of our product segments. When compared to last year's first quarter, inventories are down 16%, and at this point in the year, we are comfortable with our current inventory position. Cash use and operations increased from the first quarter of 2023, primarily due to changes in working capital. Capital expenditures were $7 million in the first quarter of 2024 and are still expected to reach approximately $85 million in fiscal year 24.
Sean S. Sullivan: Inventories overall declined 13% from the fourth quarter of 2023 with decreases across all of our product segments.
Sean S. Sullivan: When comparing to last year's first quarter inventories are down 16% and at this point in the year, we are comfortable with our current inventory position.
Sean S. Sullivan: Cash used in operations increased from the first quarter of 2023, primarily due to changes in working capital cash.
Sean S. Sullivan: Capital expenditures were $7 million in the first quarter of 2024 and are still expected to reach approximately $85 million in fiscal year 'twenty four.
Sean S. Sullivan: Through March, we returned roughly $50 million to shareholders, with $35 million in share repurchases and $15 million in cash dividends. In April, our Board of Directors declared a quarterly cash dividend of 21.5 cents per share payable on June 21, 2024, to shareholders of record on June 7, 2024. On March 14th, 2024, we entered into a new agreement with Magnus to purchase an equal amount of stock as we purchase on the open market from April 1st to June 28th, 2024, up to an aggregate of $37.5 million.
Sean S. Sullivan: Through March we returned roughly $50 million to shareholders with $35 million in share repurchases and $15 million in cash dividends.
Sean S. Sullivan: During April our board of directors declared a quarterly cash dividend of 21, and a half cents per share payable on June 20, <unk> to shareholders.
Sean S. Sullivan: As of record on June seven 2024.
Sean S. Sullivan: On March 14th 2024, we entered into a new agreement with Magnus to purchase an equal amount of stock as we purchase on the open market from April one to June 28, 2020 for up to an aggregate of 37 $5 million.
Sean S. Sullivan: As of March 31, 2024, we had $340 million remaining under the current share repurchase authorization. Turning to our full year 2024 outlook, we are maintaining our view for revenue to be between $2.45 billion and $2.5 billion, up 4.3 percent at the midpoint on a constant currency basis compared to 2023. We're also reaffirming our adjusted EBITDA outlook and still expect full year 2024 to be between $385 million and $405 million. As David mentioned, we had a solid start to the year behind our newly launched golf ball models and strong demand and fulfillment of our loyalty reward program during the quarter.
Sean S. Sullivan: As of March 31, 2024, we had $340 million remaining under the current share repurchase authorization.
Sean S. Sullivan: Turning to our full year 2024 outlook, we are maintaining our view for revenue to be between $2 45 billion and $2 5 billion up four 3% at the midpoint on a constant currency basis compared to 2023.
Sean S. Sullivan: We're also reaffirming our adjusted EBITDA outlook, and still expect full year 2024 to be between $385 million and $405 million.
Sean S. Sullivan: As David mentioned, we had a solid start to the year behind our newly launched golf ball models and strong demand and fulfillment of our loyalty rewarded program during the quarter.
Sean S. Sullivan: In clubs, our operations team was successful in the launch of our Vokey SM-10 wedges. Following these accomplishments, we still expect net sales in the first half to be up low single digits compared to the first half of 2023 and adjusted EBITDA to be flat with last year's first half. In closing, we are very pleased with our performance in the first quarter of the year and remain focused on executing our strategic initiatives for the remainder of the year. With that, I will now turn the call over to Sondra for Q&A.
Sean S. Sullivan: In clubs our operations team was successful in the launch of our <unk> <unk> wedges.
Sean S. Sullivan: Following these accomplishments we still expect net sales in the first half to be up low single digits compared to the first half of 2023 and adjusted EBITDA to be flat with last year's first half.
Sean S. Sullivan: In closing we are very pleased with our performance in the first quarter of the year and remain focused on executing on our strategic initiatives for the remainder of the year with that I will now turn the call over to Sondra for Q&A.
Sondra Lennon: Thank you, Sean. Operator, could we now open up the lines for questions?
Sondra Lennon: Thank you John operator could we now open up the lines for questions.
Operator: Thank you, Sondra. If you'd like to ask a question, please press star four by one on your telephone keypad. Now, if you change your mind, please press star four by two.
Sondra Lennon: Thank you Sanjay if you'd like to ask a question. Please press star followed by one on USA.
Sondra Lennon: Thank you Pat now.
Sondra Lennon: If you change your mind Facebook Nike when preparing to ask a question. Please a Chilean Tobias is unmated lately.
Operator: When preparing to ask a question, please ensure your device is unmuted locally. We have our first question from Matthew Boss from J.P. Morgan. Please go ahead.
Sondra Lennon: We have our first question from Matthew Boss from Jpmorgan. Please go ahead.
David E. Maher: Great thanks and congratulations on a really nice quarter. So, David, you cited the golf industry as structurally healthy today. Could you elaborate on overall participation and engagement that you're seeing from your dedicated golfer? Any change in US momentum post-Masters? And on a global basis, any call-outs on the international front, just with the divergence in top line performance?
Matthew Robert Boss: Great Thanks, and congrats on a really nice quarter.
Matthew Robert Boss: Yeah.
Matthew Robert Boss: So David you cited the golf industry is structurally healthy today could you elaborate on overall participation and engagement that you're seeing premier dedicated golfer any change in U S momentum.
Matthew Robert Boss: Masters and on a global basis any callouts on the international front, just with the divergence in topline performance.
David E. Maher: Yeah, hey Matt. Good morning. So first off, I think it's worth a minute to look at the US market. Very strong rounds of play data, up 20-some-odd percent in March and up 6 or 7 percent for the quarter. That I think needs to be taken with a grain of salt, because you had some tough weather in the southeast that affected play and affected the markets. But we're very pleased with the overall interest, demand, and participation levels.
David E. Maher: Yeah, Hey, Matt good morning.
David E. Maher: So first off I think it's worth submitted to look at the U S market.
David E. Maher: Very strong rounds of play data up 20, some odd percent percent margin up six or 7% for the quarter.
Speaker Change: That I think needs to be taken with a grain of salt because you had some some tough weather in the southeast that affected play and affected the market. So we're very pleased with the overall.
Speaker Change: Interest and demand and participation levels rounds of play in the North in Q1 are different and rounds of play in the South in Q1, I think that really just points to the weather differences, we saw but overall structurally very very pleased and again in markets, where you had tough weather you saw rounds decline you saw slower retail and Conversely, where.
David E. Maher: Rounds of play in the north in Q1 are different than rounds of play in the south in Q1. I think that really just points to the weather differences we saw. But overall, I'm very pleased.
David E. Maher: And again, in markets where you had tough weather, you saw rounds decline. You saw slower retail. And conversely, where you had favorable weather, you saw some nice upticks. Moving around the globe a bit.
David E. Maher: You had favorable whether you saw some some nice.
David E. Maher: Saw some nice upticks.
David E. Maher: Moving around moving around the globe a bit.
David E. Maher: I called out, we had some particularly wet starts to the season, very common in Q1. You're going to have some slow starts and some quicker starts. Wet weather, I think I called out Korea and the UK, slowed their starts to the season. But generally speaking, where you saw decent weather, you saw rounds play favorably. So to our golfer and the dedicated player, you know, not a lot has changed in the last months and quarters. Demand is strong. They're avid. They're resilient.
David E. Maher: I called out we just we had some particularly wet start to the season very common in Q1.
David E. Maher: Youre going to have some slow starts in some and some quicker starts.
David E. Maher: Whether I think I called out Korea, and the U K has slowed there starts to the season.
David E. Maher: But generally speaking where you saw decent whether you saw rounds play favorable so.
David E. Maher: Two two hour golfer in the dedicated player.
David E. Maher: Not a lot has changed in the last months and quarters.
David E. Maher: Demand is strong there avid there.
David E. Maher: <unk>.
David E. Maher: Again, the biggest callout at this stage is really focused on weather. But in terms of early demand, I'll point to some of our new product launches, whether it's golf balls. I noted on the call that we're pleased and it was a unique quarter in that we drove gains from all models, newly launched performance models, and also Pro V1, which compared against last year's launch. So we liked the way that played out in the quarter. Some strong club launches led by Vokey Wedges and Phantom Putters. That's a mallet putter.
David E. Maher: Again, the biggest call out at this stage is really focused on weather, but in terms of early demand all point to some of our new product launches, whether it's golf balls.
David E. Maher: I noted on the call that we're pleased and it was a unique quarter in that we drove gains from all models.
David E. Maher: Newly launched performance models, and also probably one which comped against last years launch. So we like we like the way that <unk>.
David E. Maher: Played out in the quarter.
David E. Maher: Some strong club launches led by bulky wedges and.
David E. Maher: Phantom Putters, that's a mallet putter, Mel let's are particularly strong. These days so our timing was fortuitous with AML at launch.
David E. Maher: Mallets are particularly strong these days, so our timing was fortuitous with a mallet launch in 2024. But the early days, Matt, in Q1, and we're always careful about deducing too much from what we see in Q1 because a lot of it is weather. A lot of what you see is simply shipments in. But in terms of consumer behavior, we like what we see. And in line with expectations, I won't call out any highs or lows other than in key markets where weather was down, you saw some softness, and again, in key markets where you had decent weather, you saw rounds of play upticks.
David E. Maher: In 2024, but.
David E. Maher: Early days, Matt in Q1, and we're always careful about about deducing too much from what we see in Q1, because a lot of it is weather a lot of what you see is is simply shipments in.
David E. Maher: But in terms of consumer behavior, we like what we see and in line with expectations I won't I won't call out any highs or lows other than in key markets, where weather was down you saw some softness and again in key markets, where you had decent weather you saw rounds of play upticks I do note that a lot of the increase.
David E. Maher: You know, I do note that a lot of the increase we saw in participation in the U.S. came from the north, and in Q1, that just plays differently than gains in the Carolinas, Florida, Alabama, et cetera. So, we covered a lot of ground there, but hopefully, it gives you a quick snapshot of how we think about demand, participation, and the early state of the consumer.
David E. Maher: Again, which is why I say it needs to be taken with a grain of salt a lot of the increase we saw in participation in the U S came from the north and in Q1 that just plays differently than gains in the Carolinas, Florida, Alabama.
David E. Maher: Et cetera. So.
David E. Maher: Covered a lot of ground there, but hopefully give you a quick snapshot on how we think about how do we think about demand participation in early state of the consumer.
Sean S. Sullivan: It's a great color. And then maybe just with inventory exiting the first quarter down mid-team, could you just speak to your overall comfort with inventory on hand to support demand? And on the footwear category, just the latest timeline as we think about this category returning to prominence across the marketplace and the potential return to top-line growth.
David E. Maher: It's great color and then maybe just with inventory exiting the first quarter down mid teen.
David E. Maher: Could you just speak to your overall comfort with inventory on hand to support demand and on the footwear category. Just the latest timeline as we think about this category returning to clean across the marketplace and the potential return to topline growth.
David E. Maher: Yeah.
Sean S. Sullivan: Yeah, Matt, maybe I'll start and David can jump in. So, you know, we feel very good about the inventory position. Obviously, we wanted to call out where we are sequentially, where we are year over year. You know, we've called out footwear for the last couple of quarters. We feel very good about the inventory position. So, across the board, in all of our product segments, whether it's current gen or prior gen, we feel very good about the working capital investment there, as we see here in Q1. Yeah, Matt, I'll just follow on that a bit.
Speaker Change: Yeah, Matt, maybe maybe I'll start and David can can jump in.
Speaker Change: So we feel very good about the inventory position. Obviously, you wanted to call out where we are sequentially, where we are year over year.
Speaker Change: You called out footwear for the last couple of quarters, we feel.
Speaker Change: Good about the inventory position. So you know across the board and in all of our product segments, whether its current gen or prior Gen. We feel very good about our working capital investment there as we sit here in Q1.
David E. Maher: Yeah, Matt, I'll just follow on that a bit. Just to echo Sean's comments, the channels are full, as they should be this time of year, so we don't see any outlying areas of inventory concern. And I'll reiterate, we really like our inventory position, both in terms of quantity and quality. If there's one area we'd like to have more of, it's golf balls, and that's something we continue to work on. Maybe just a bit more color on footwear, the footwear market in the U.S., channel inventories all in, total markets down about 12% from last year this time, and really right where we think it ought to be, not far off from, believe it or not, 2019, so the footwear category has grown nicely, but footwear inventories today are only up 2%, 3%, 4% from where they were in 2019.
Speaker Change: Yes, Matt I'll, just I'll, just I'll just follow on that a bit.
Speaker Change: Just to Echo Shawn's comments that the channels are full as they should be this time of year. So we don't see any outlying areas of inventory concern and I'll reinforce we really like our inventory position both in terms of quantity and quality. If there's one area, we'd like to have more of its golf ball.
Speaker Change: Yes.
Speaker Change: That's something we continue to work on maybe just a bit more color on footwear.
Speaker Change: Footwear market in the U S channel inventories all in total markets down about 12% last from last year. This time and really right, where we think it ought to be not far off from believe it or not 2019. So the footwear category has grown nicely, but footwear inventories today are only up to three 4% from where they were.
Speaker Change: In 2019, so after a year or 15 months of correction in footwear, we like where the U S footwear market is.
David E. Maher: After a year or 15 months of correction in footwear, we like where the U.S. footwear market is. A little different story around the world. I think that's trailing a quarter or two, which is not surprising, so we look at the rest of the world's inventories, and we'd call out Japan and EMEA principally. We see that correction probably take another quarter or two.
Speaker Change: Little different story around the world I think thats trailing a quarter or two which is not surprising. So we see we see rest of world inventories and we'd call out Japan.
Speaker Change: In EMEA, principally we see that correction, probably take another quarter or two.
Speaker Change: Congrats best of luck.
Speaker Change: Thanks, Matt.
Operator: Thanks, Matt. Operator, next question, please.
Speaker Change: Thanks, Matt Operator next question please.
Operator: The next question is from Megan Alexander from Morgan Stanley. Please go ahead.
Speaker Change: The next question is from Megan Alexander from Morgan Stanley. Please go ahead.
Megan Christine Alexander: Hi, thanks, good morning. I wanted to ask a little bit, Sean. You gave some commentary on the guidance, you left it unchanged for the year, and you kept your first half expectations unchanged, despite, you know, a solid 1Q beat, at least versus what the street was expecting. And it seems like, you know, momentum over the quarter after a slower start. I know it's historically been your practice to wait until 2Q to make any changes, given 1Q is more of a settling quarter.
Megan Christine Alexander: Hi, Thanks, Good morning wanted to ask a little bit Sean you gave some commentary on the guidance you left it unchanged for the year you kept your tap expectations unchanged. Despite.
Speaker Change: And solid <unk> treatment.
Megan Christine Alexander: Treatment is expecting and it seems like.
Megan Christine Alexander: Over the quarter after a slower start.
Sean S. Sullivan: It's historically been impacted to wait until <unk> to make any changes and then one more of a tailwind quarter. So is that how we should think about.
Megan Christine Alexander: So is that how we should think about, you know, the guidance being unchanged today? Maybe related to that, you did mention that you completed the global launch of some clubs a few weeks ahead of schedule. So was there any pull forward into 1Q? And how are you seeing kind of sell through in that golf club segment trend versus your expectations?
Speaker Change: Guidance being unchanged today, maybe related to that you did mention that you completed the global lines.
Speaker Change: The clubs that you had it.
Speaker Change: Was there any pull forward into <unk> and how are you seeing kind of sell through in that segment trends versus your expectation.
Speaker Change: Yeah.
Sean S. Sullivan: Yeah, Megan, so, you know, guidance for the first half, I think, as David said, it's really a first half, second half, so, you know, the expectation is to hold for the first half. We do think that all the vital signs are positive, with the exception of weather, which David has talked about.
Megan Christine Alexander: Yes, Megan so.
Megan Christine Alexander: Now to the guidance in the first half I think as David said, it's really a first half second half so.
Speaker Change: The expectation is to hold for the first half and we do think that all the vital signs are positive.
Speaker Change: Exception of weather with David has talked about so we just think it's prudent at this stage of the year to hold in terms of what our expectations are for the first half and the full year.
Sean S. Sullivan: So we just think it's prudent at this stage of the year to hold in terms of what our expectations are for the first half and the full year. You know, that being said, certainly, as you look across the board, we're pleased with the balls and the loyalty reward program. Obviously, clubs had a very strong SM10 Vokey launch in Q1, and, you know, we still feel good about Q2. But obviously, it still implies a low single-digit growth for the quarter.
Speaker Change: That being said certainly as you look across the board, we're pleased with the balls and and the loyalty rewarded program, obviously clubs had a very strong.
Speaker Change: To 10 Vogie launch.
Speaker Change: In Q1.
Speaker Change: And we still feel good about Q2, obviously it still implies a low single digit growth for the quarter will continue to invest as we've said across the board to support our advertising promotion.
Sean S. Sullivan: You know, we'll continue to invest, as we've said, across the board to support our advertising, promotion, network, some of the IT-related expenses. So, you know, we continue to invest appropriately in SG&A. You know, and the last thing I'll say is, you know, and David called it out in his comments, we really are pleased with our distribution center and, you know, probably more efficient in the month of March than we had anticipated.
Speaker Change: Hitting network some of the it related expenses so we.
Speaker Change: We continue to invest appropriately in SG&A.
Speaker Change: And the last thing I'll say is and David called it out in his comments, we really are pleased with our distribution center and probably we're more efficient in the month of March than we had anticipated so certainly that exceeded our expectations a bit.
Sean S. Sullivan: So, certainly, that exceeded our expectations a bit. But all in all, I think we still see the first half and the full year, as we've articulated. And certainly, when we're back together in July or early August, whenever the call is, we can certainly revisit. But all things positive, you know, again, I'll leave it at that. Yeah, Megan, I'll...
Speaker Change: But all in all I think we still see the first half and the full year as we've articulated and certainly when we're back together and in July early August whenever the call is we can certainly revisit but all things positive.
Speaker Change: Again.
Speaker Change: I'll leave it at that.
David E. Maher: Yeah, Megan, I'll maybe give you some historical color. In all my time with the company, I don't know that we've ever adjusted guidance after Q1. And it really speaks to a reality of the golf business that everybody's crystal ball gets a lot clearer in the second quarter as markets open up. I made the comment about the golf season, in many respects, truly begins with the Masters in April. That's true.
David E. Maher: Yes, Megan I'll, just just maybe some historical color and in all my time with the company I don't know that we've ever adjusted guidance. After Q1, and it really speaks to a reality of the golf business that everybody's Crystal ball gets a lot clearer in the second quarter as markets open up I made the comment about the golf season in many respects truly.
Speaker Change: Begins with the Masters in April does that is true. So you need to see how mid belt and snowbelt markets open up how markets around the world open up and again, it's always been our feeling that that you can't really have a clear clear sense of the industry in year until you get through Q2, and then maybe just another thought on distribution.
David E. Maher: So you need to see how the Mid-Belt and Snow-Belt markets open up, how markets around the world open up. And, again, it's always been our feeling that you can't really have a clear, clear sense of the industry and the year until you get through Q2. And then maybe just another thought on distribution center progress, really related to staffing and training. And that's gone along quite a bit better than we anticipated some six, eight weeks ago. So we're very pleased with the progress being made at our new D.C.
Megan Christine Alexander: Great! That's really helpful.
Speaker Change: Center progress really related to <unk>.
Speaker Change: Staffing and training and that's gone along quite a bit better than we anticipated. Some some six to eight weeks ago. So we're very pleased with the progress being made or at our new DC.
Megan Christine Alexander: And then maybe just a follow-up to that point. You know, the gross margin up again. Can you just talk a little bit about how that played out relative to your expectations, and particularly how the promotional environment looks out there? You know, I think you talked about perhaps margins and EBITDA gross being a bit more pressured in 1Q, just given the promotional environment. So just trying to understand how that played out relative to your expectations as we think about the second quarter.
Speaker Change: Great. That's really helpful. And then maybe just a follow up to that point.
Speaker Change: Margin up again.
Speaker Change: Can you just talk a little bit about how that played out relative to your expectation and particularly how the promotional environment out there.
Speaker Change: I think you talked about perhaps margins and EBITDA growth being a bit more pressured than <unk> just given the promotional environment. So just trying to understand how that played out relative to your expectations as we think about the second quarter.
Sean S. Sullivan: Sure, Megan, I'll take the margin question. I think it was in line with expectations, and certainly given the margin profile of both balls and clubs and the performance of those two product segments, you know, I guess we weren't surprised by the gross margin trajectory in the quarter. Yeah, and as to the market, Megan, the promotional environment, again, the markets are full; they should be this time of year in anticipation of the peak Q2 and Q3 playing seasons.
Speaker Change: Sure Megan maybe I'll take the margin question I think it was in line with expectations and certainly given the.
Megan Christine Alexander: Margin profile of both balls and clubs and the performance of those two product segments.
Speaker Change:
Speaker Change: We weren't surprised by the gross margin.
Speaker Change: Trajectory in the quarter.
Speaker Change: Yeah, and as to the market Megan.
Speaker Change: The promotional environment again the.
Speaker Change: The markets are full retailers are full as they should be this time of year in anticipation of the the peak Q2 and Q3 playing seasons.
Sean S. Sullivan: There are two areas that we would point to, drivers simply because there were a whole lot of competitive launches, and with that, you get some degree of sell-off and discounting of prior generations. The same thing happened with golf balls. I don't know that I would characterize any of those as out of the ordinary, though, so I don't see promotional activity as being noteworthy as either high or low or too far off from the norms.
Speaker Change: There are two areas that we that we would point to drivers simply because there were a whole lot of competitive launches and with that you get some degree of sell off in discounting of prior generation same thing happened in golf balls.
Speaker Change: I don't know that I would characterize any of those as out of the ordinary though so I don't I don't see promotional activity is being noteworthy as either high or low or too too far off from the norms.
Sean S. Sullivan: And just another reality, when you see promotional activity pick up, it tends to be late Q2, early Q3, after the season, so not a lot of new color to add other than what we're seeing is about what we expected for this time of year.
Speaker Change: And just another reality when you see promotional activity pick up it tends to be late Q2 early Q3 after the season so.
Speaker Change: Not a lot of new color to add other than what we're seeing is about what we expected for this time of year.
Megan Christine Alexander: Great. Thank you so much. Best of luck.
Speaker Change: Great. Thank you so much that dog.
Operator: Thank you. Thanks, Megan. Operator, next question, please.
Speaker Change: Thank you. Thanks, Meghan operator next question please.
Operator: The next question is from Randy Konik from Jeffreys. Please go ahead.
Speaker Change: The next question is from Randy <unk> from Jefferies. Please go ahead.
Randal J. Konik: Yeah, thanks a lot. And good morning. I guess, David, first for you, you've always been very balanced about your view of the industry and not to get too euphoric yet. The industry continues to power ahead. Is this surprising you, or how much is it surprising you? And then maybe you could give us some perspective on drivers of long-term participation; anything you can share with us from a data point perspective with your partners in the Greengrass area as it relates to junior programming levels, female participation, and lesson levels, and then just country club waiting lists would be very helpful to get your perspective on.
Randy: Yes, Thanks, a lot and good morning, I guess, David first for you you've always been very balanced about your.
Randy: View on the industry and never to get to you for it yet.
Randy: The industry continues to power ahead.
Randy: Surprising you or how much is it surprising you.
Randy: Maybe you could give us some perspective on the drivers of long term.
Randy: The patient anything you can share with us from a data point perspective with your partners in the Green grass area as it relates to junior.
Randy: Junior programming level female.
Randy: Our participation in <unk>.
Randy: Lesson level, and then just country club country club a waiting list would be very helpful to get your perspective on.
Randy: Okay.
David E. Maher: Okay, Randy. Well, I appreciate your questions from an industry standpoint. You know, we're at a point in time where we've seen six years where the number of golfers has increased, right? So obviously, a real positive, and the industry is working hard to make good use of that interest in demand. Our focus is obviously on what happens on course, and certainly there's a whole other world happening off course that we don't participate in, but I would say is additive to the on-course experience. If you look at NGF profile data, they'll point to women and juniors being some of the fastest growing segments.
Speaker Change: Okay Randy.
Randy: Well I appreciate your questions from an industry standpoint.
Randy: Where we are.
Speaker Change: We're at a point in time, where we've seen six years, where the number of golfers has increased right. So obviously, a real positive and the industry is working hard to make good use of that interest and demand.
Speaker Change: Our focus is obviously on what happens on course, and certainly there is a whole another world happening off course that we don't participate in but I would say is additive to the on course experience.
Randy: If you look at you look at NGF profile data they'll point to women in juniors being some of the fastest growing segments. So what's the game doing about it.
David E. Maher: So what's the game doing about it? There was a line from, I think it was Seth Watt, the PGA, who said, let's make sure we don't just let this great parade go by without doing something about it. And the game and the industry are working hard to be responsive and welcoming and accommodating to new players. And I think a couple themes that stand out there would be a number of lessons.
Randy: There was a line from I think it was Seth wall at the PGA, who said, let's make sure. We don't just let this great parade go by without doing something about it and the game and the industry are working hard to be.
Randy: Be responsive and welcoming and accommodating to new players and I think a couple of themes that stand out there would be number of lessons and the games hard and one of the reasons people leave us because it's difficult. So one way you can make the game less difficult and more sticky if you will is to.
David E. Maher: And the game's hard, and one of the reasons people leave is because it's difficult. So one way you can make the game less difficult and more sticky, if you will, is to execute and provide more lessons. So globally, we're seeing that. Teachers are as busy as they've been in a long time, both in the US and around the world.
Randy: Is to is to is to execute and provide more lessons. So globally. We're seeing that teachers are as busy as they've been in a long time, both in the U S and around the world.
David E. Maher: And in terms of how we think about drivers of long-term participation, I would call out the reality that what we've seen in the last handful of years, and it's sort of an unintended benefit of the game, as the game has done quite well as golf participants, golf clubs, and golf retailers have done well in recent years. There's been an incredible amount of capital investment in facilities to position golf courses, golf clubs, and family centers for the needs of tomorrow's consumer. And we hadn't seen that for a few decades prior.
Randy: And in terms of of how we think about drivers of long term participation.
Randy: I would call out the reality that what we've seen in the last handful of years and it's sort of an unintended benefit of the game as the game has done quite well as golf participants golf clubs golf retailers have done well in recent years, there's been an incredible amount of capital investment in facilities to position golf courses.
Randy: Golf clubs family centers for the needs of Tomorrow's consumer and we hadn't seen that for a few decades. Prior so I like the level of invest of investment.
David E. Maher: So I like the level of investment that the game is making to position itself to meet the needs of tomorrow's consumers. And then, Randy, your final thought on waitlists and such is a good one in the sense that I'm quick to point out that about three-quarters of the rounds played are public, not private, okay? So a little bit immune to the waitlist reality, but nonetheless, we continually hear from golfers, it's just tough to get tee times, and particularly on weekends and peak season in key markets, but the general narrative is most clubs are at capacity and have waitlists, maybe not as long as they were two, three years ago during the peak of COVID demands, but I would say the industry is as healthy as it's been in quite some time, and again, that feeds itself because that allows facilities to reinvest in their value proposition for tomorrow.
Randy: The game the game is making.
Randy: To position itself to meet the needs of Tomorrow's consumers.
Randy: And then Randy your final thought on Waitlists and such is.
Randy: Is a good one in the sense that that I'm quick to point out that about three quarters of the rounds played our public not private okay. So a little bit immune to the waitlist reality, but nonetheless, we continually hear from golfers, it's just tough to get tea times, and particularly on weekends and peak season in key markets.
Randy:
Randy: The general narrative is most clubs are at capacity.
Randy: And have waitlist, maybe not as long as they were two or three years ago during the peak.
Randy: Of Covid demand, but I would say the industry is as healthy as it's been in quite some time and again that feeds itself because that allows facilities to reinvest in and.
Randy: And their value proposition for tomorrow. So.
David E. Maher: So, yeah, here we are with a nice start to the year in some markets. I do call out a slower start in other markets. Demand is high, and a reality is it's still tough to get tee times in key markets, and it's tough to get to join clubs in key markets. Now, does that last forever? Probably not, but that's the current state today.
Randy: Yes here, we are with with with a.
Randy: A nice start to the year in some markets I do call out a slower start in other markets.
Randy: Demand is high and in a reality is it's still tough to get two times in key markets and it's tough to get to join clubs in key markets now does that lasts forever probably not.
Randy: But that's the current state today.
Sean S. Sullivan: Super helpful. And then I guess maybe last question just for Sean, you know, when you look at the 10 year historical model for this company, you have EBITDA margins that were usually around 12 to 13 percent. You know, we're now around, I don't know, 15, 16 percent, somewhere in that ballpark. You have lower competition, there's a consolidated industry, there's customization, fittings, et cetera. You know, have you got, have you kind of put some thoughts to how you should be thinking about long-term margin potential in this business? You know, just kind of put some thoughts together that we should be thinking about over the long term. Thanks. Uh, yeah.
Speaker Change: That's super helpful. And then I guess, maybe last question just for Sean.
Sean S. Sullivan: When you look at the 10 year historical model for this company.
Speaker Change: You have <unk>.
Sean S. Sullivan: EBITDA margin that we're used to be around 12% 13%.
Sean S. Sullivan: We're now around I don't know 15, 16% somewhere in that ballpark.
Sean S. Sullivan: You have lower comp as a consolidated industry, there's customization fitting et cetera.
Sean S. Sullivan: Got it got it got it.
Sean S. Sullivan: Thought too high.
Sean S. Sullivan: Thinking about la.
Sean S. Sullivan: Long term margin potential in the business.
Sean S. Sullivan: It just kind of puts and takes that we should thinking about over the long term.
Sean S. Sullivan: Yeah, thanks, Randy. Yeah, so we talk about it quite often. I guess before I get specifically into the margin, I think that what we're most excited about is the building blocks for growth here in terms of the portfolio of assets that we have and products to service the dedicated golfer, and certainly, as that dedicated golfer universe continues to expand to the extent that all of these investments that are occurring in the participation rates continue, we feel we've got real building blocks for long-term growth that we're excited about.
Speaker Change: Yes, Thanks, Randy Yes. So we are we've talked about it quite often.
Speaker Change: I guess before I get specifically into the margin I think that.
Randy: What we're most excited about is the building blocks for growth here in terms of the portfolio of assets that we have in products to service the dedicated golfer.
Speaker Change: Certainly as that dedicated golfer.
Speaker Change: Universe continues to expand to the extent that all of these investments that are occurring in the participation rates continue we feel we've got real building blocks for long term growth that we're excited about number one and that's it that's excluding any potential M&A.
Sean S. Sullivan: Number one, that's excluding any potential M&A. We've done a few things over the last five or six years that still have opportunities for growth. So, first and foremost, we're excited about what the growth outlook can be for the top line for the company over a five to 10-year period. Number two, we're making a lot of investments, as we've talked about, across the company to meet the needs of the dedicated golfer in terms of customization and fit.
Speaker Change: We've done a few things over the last five or six years that still have opportunities for growth. So first and foremost we're excited about what what the growth outlook can be on the top line for the company over a five to 10 year period number two we're making a lot of investments as we've talked about across the company.
Speaker Change: To meet the needs of the dedicated golfer.
Speaker Change: In terms of customization in terms of fitting so we believe we're well positioned there and certainly we like the margin profile of custom.
Sean S. Sullivan: So we believe we're well-positioned there, and certainly we like the margin profile of customization and personalized fitting of our products. In addition, through technology, through direct-to-consumer channels, obviously managing all channels and all key on- and off-course partners, we think there's opportunity. Certainly, we talk about operating leverage in the business and the ability to continue to, through the use of technology and efficiency, deliver incremental EBITDA and long-term margin growth. So those are kind of the assumptions and the outlook that I see.
Speaker Change: Customization and personalized fitting of our products.
Speaker Change: In addition through technology through direct to consumer channels, obviously, managing all channels and all key on and off course partners.
Speaker Change: We think theres opportunity certainly we talk about operating leverage in the business and the ability to continue to through the use of technology and efficiency.
Speaker Change: Deliver.
Speaker Change: Mental EBITDA and long term margin growth. So those are kind of the puts and the outlook that I see I'm, certainly not going to dimensionalize, what I see.
Sean S. Sullivan: I'm certainly not going to dimensionalize what I see, the roadmap in five to 10 years, certainly a long time from now, but we believe that, as I said, we've got the revenue trajectory and we're making the appropriate investments across the globe and portfolio that will drive long-term growth and, hopefully, margin.
Speaker Change: The roadmap in five to 10 years, certainly a long time from now, but we believe that as I've said, we've got the revenue trajectory and we're making the appropriate investments across the globe and portfolio that will drive long term growth and hopefully margin expansion.
Speaker Change: Great. Thank you guys.
Operator: Thanks, Randy. Thank you, Randy. Operator, next question, please.
Speaker Change: Thanks, Randy Thank you Randy Operator next question please.
Operator: The next question is from Joe Altobello from Ribbon James. Please go ahead.
Speaker Change: The next question is from Jay <unk> from Raymond James. Please go ahead.
Joseph Nicholas Altobello: Hey guys, good morning. I guess, you know, first question: I wanted to get your thoughts on the growth in the quarter of Pro B1, Pro B1X against the launch period, which I think is sort of unusual. Maybe what did sell-through look like in the quarter, and did you guys experience any meaningful share gain in the quarter?
Jay: Thanks, Hey, guys good morning.
Jay: First question I wanted to get your thoughts on the growth in the quarter.
Speaker Change: <unk>, one probably won't act against the longer period, which I think is sort of unusual maybe.
Jay: Maybe what that sell through look like in the quarter and did you guys experience any meaningful share gains in the quarter.
David E. Maher: Yeah, Joe, I'll take that one. So it is. We had a significant launch last year. And it's unusual when you compare favorably against a launch in the following year, given our two-year product life cycles. I think the key differential we saw was really nice demand for our loyalty rewarded program, which is our buy three, get one free offer to start the season. And our operations team did a nice job fulfilling that demand in March. So we like the demand, the message that sends around demand for our product. So that was theme number one.
Speaker Change: Yes, Joe I'll take that one.
Joe: So it is we had a we had a significant launch last year and it's unusual when you when you comp favorably.
Joe: Against a launch in the following year, given our two year product life cycles.
Joe: I think the key differential we saw we saw really nice demand for our loyalty rewarded program, which is our.
Joe: Buy three get one free to start the season and our ops team did a nice job fulfilling that demand in March so we like we.
David E. Maher: You know, in terms of market share, again, we're coming off a big comp last year, we launched a whole new range of new products this year, and we feel very strong about our market position. It's always a little different in the first quarter of an even year as we compare it against last year when we sold off some prior generation inventory. And conversely, our competitors sell off some of their prior generation inventory this year.
Joe: We like the demand.
Joe: The message that centers around demand for for our product. So that was that was theme one.
Joe: In terms of market share again, we're coming off a big comp last year, we launched a whole new range of new products. This year, we feel very strong about our market position.
Joe: It's always a little different in our in the first quarter of an even year as we comp against last year. When we sold off some prior generation inventory and Conversely, our competitors sell off some of their prior generation inventory this year. So.
David E. Maher: So, net-net, we like the way our ball business is moving along. And I would add, we continue to see great demand in the corporate space for corporate-logoed products. So that's just another dimension of the golf ball business that's driving our success. You know, demand. I hate to keep drilling on the regional piece and the weather piece, but said simply, where people are playing, we like demand. Where they're not playing due to weather or slow starts, obviously, demand is slower.
Joe: Net net we like we like the way our ball business is moving along.
Speaker Change: And I would add we continue to see nice demand.
Speaker Change: In the corporate space for corporate logo products. So that's just another dimension of the golf ball business.
Speaker Change: That's driving that's driving our success.
Speaker Change: Two demand.
Speaker Change: I hate to keep drilling on the regional piece and the weather piece, but said simply where people are playing we like we like demand where theyre not playing due to weather or slow starts obviously demand is slower but again that's life in the golf business in Q1.
David E. Maher: But again, that's life in the golf business in Q1. But overall, we're really pleased with our first quarter performance and the overall state and readiness of our golf ball business and our ball-fitting teams around the globe to do what they're going to do here in the next couple of months.
Speaker Change: But overall, we're real pleased with.
Speaker Change: Our first quarter performance and the overall state and readiness of.
Speaker Change: Our golf ball business and our ball fitting teams around the globe to do what they're going to do here in the next couple of months.
Joseph Nicholas Altobello: Very helpful. And maybe a couple of follow-ups for Sean.
Speaker Change: Very helpful and maybe a couple of follow up for Sean.
Speaker Change: The yen has weakened a little bit from here is there any impact on your business.
Sean S. Sullivan: I guess first, you know, the yen has weakened a little bit here. Is there any impact on your business, or is it too insignificant to really call out? And maybe secondly, how are we thinking about free cash flow conversion in terms of your e-bidial business for this year?
Sean S. Sullivan: Or is it too insignificant to really call out and maybe secondly, how are you thinking about free cash flow conversion in terms of your EBITDA outlook for this year.
Sean S. Sullivan: Sorry, I'm not sure I got the second one. But, you know, at the end, we're certainly watching it. Obviously, it's historic levels. We definitely had an impact in the first quarter, you know, which was probably five plus million dollars in terms of impact year over year. So we're keeping an eye on it. Overall, we continue to like the overall international businesses for 2024 in the aggregate. Certainly, we're keeping our eye on Japan. And sorry, Joe, what is your second question?
Speaker Change: Sorry, I'm not sure I got the second one, but we're certainly watching it obviously, it's a historic levels.
Speaker Change: We definitely had a impact in the first quarter.
Speaker Change: Which was probably five plus million dollars in terms of impact year over year. So we're keeping an eye on it overall, we continue to like the overall.
Speaker Change: <unk> international businesses for 2024 and the aggregate.
Speaker Change: Certainly, we're keeping our eye on Japan.
Speaker Change: And sorry, Joe Your second question, yes.
Joseph Nicholas Altobello: Yeah, precastal conversion relative to the epithelium.
Speaker Change: Free cash flow, our free cash flow.
Speaker Change: Conversion relative to EBITDA this year.
Sean S. Sullivan: Yeah, I don't know that we guide to that, but again, I would expect us to convert at not a dissimilar rate as we have historically.
Speaker Change: Yeah, I don't I don't know that we guide to that but again, we are we should I would expect us to convert that not a dissimilar rate that we have historically.
Speaker Change: Okay. Thank.
Speaker Change: Thank you guys.
Operator: Thanks, Joe. Operator, next question, please.
Speaker Change: Thanks, Joe Thanks, Operator next question please.
Operator: The next question is from Casey Alexander from Compass Point. Please go ahead.
Speaker Change: The next question is from Casey Alexander from Compass point. Please go ahead.
Casey Jay Alexander: Yeah, good morning; he just, uh, stole my...
Casey Jay Alexander: Yes. Good morning, he just stole my Japan question, but I'll move on to my next one.
David E. Maher: I just stole my Japan question, but I'll move on to my next one. There seemed to be sort of a hat tip towards travel-related products in the press release. Is this a nod towards Club Glove, which you basically took control of this year? Has there been some sort of an uptick in demand for that new company that you brought on board? Did you kind of walk into a nice little uptick in demand at Club Glove?
Casey Jay Alexander: There seem to be sort of a hat tip towards travel related.
Casey Jay Alexander: <unk> in the press release.
Casey Jay Alexander: Is this a nod towards club glove, which you basically took control of this year has there been sort of an uptick in demand for that new company that you brought on.
Casey Jay Alexander:
Casey Jay Alexander: As you kind of walk into.
Casey Jay Alexander: Have a nice little uptick in demand at club gloves.
Casey Jay Alexander: Yeah, Casey, I wouldn't make that assumption. I think it's more commentary on the overall state of our gear business. We looked last year, we were up some 50% in the quarter, and felt we had a nice comp this year, even while we added Club Glove and also pulled back on some Titleist branded travel products that were maybe a bit redundant to Club Glove. But I wouldn't point to that simply because while we're pleased with the early start to Club Glove, it's a rather small piece of the gear story. And again, while we're bullish and enthused about Club Glove both today and in the longer term, again, I wouldn't read too much into that piece of the story.
Casey Jay Alexander: Yes, Casey I.
Casey Jay Alexander: I wouldn't I wouldn't make that assumption I think it's more commentary on on the total of our gear business. We were looking last year, we were up some 50% in the quarter and felt we had a nice comp this year, even while we added club gloves.
Casey Jay Alexander: And also pulled back on some titlist branded travel products that were maybe a bit redundant to club love, but I wouldn't point to that simply because while we're pleased with the early start to club club, it's a rather small piece of the gear story.
Casey Jay Alexander: And again, while we're while we're bullish and enthused about club love, both today and longer term.
Casey Jay Alexander: Again, I wouldn't I wouldn't read too much into that into that piece of the story.
Sean S. Sullivan: And secondly, my second question is, you know, historically, the repurchase from Magnus has been in $100 million increments. And this most recent one, you know, pulled down to 37 and a half million. Why the change in the cadence of when you repurchase? Is it to try to keep the stock closer to, you know, what the repurchase price is? Or I'm just curious why they changed that cadence after several that were at 100 million?
Speaker Change: Alright, Thank you for that and secondly, my second question is.
Speaker Change: Historically the repurchase from Magnus has been in $100 million increments in this most recent one.
Speaker Change: Pulled down to $37 5 million why the change in the cadence of when you repurchase is it to try to keep the stock closer to.
Speaker Change: What the repurchase price is or I'm, just curious why why change that cadence after several that were at a $100 million.
Sean S. Sullivan: Yeah, Casey, it's Sean. Good question. You know, at the end of the day, as I've said a few times, we're really guided by the leverage, right, in terms of maintaining leverage below two and a quarter times. So, you know, often, given the cadence of the year with the sell-in in the first quarter, the investment in working capital, we kind of look at the share repurchase and the Magnus agreements in the context of overall leverage.
Speaker Change: Casey It's Sean that's a good question you know.
Sean S. Sullivan: At the end of the day as I've said, a few times, we're really guided by the leverage right and in terms of maintaining.
Sean S. Sullivan: Leverage below two and a quarter times, so often given the cadence of the year with the sell in in the first quarter of the investment in working capital.
Sean S. Sullivan: We've kind of we look at the share repurchase and the Magnus agreements in the context of overall leverage so I don't know that I would read a whole lot into past practice or current practice, but I really point you to we're trying to manage the business and maintain a very strong balance sheet with that leverage target.
Sean S. Sullivan: So I don't know that I would read a whole lot into past practice or current practice, but I really want to point you to how we're trying to manage the business and maintain a very strong balance sheet with that leverage target.
Speaker Change: Alright, thank you.
Operator: Thank you. Thanks, Casey. Operator, next question, please.
Speaker Change: Thank you thanks Casey.
Speaker Change: Operator next question please.
Operator: The next question is from Mike Swartz from Truist Securities. Please go ahead.
Speaker Change: The next question is from Mike Swartz from <unk> Securities. Please go ahead.
Michael Arlington Swartz: Hey, good morning, everyone. I just wanted to start with the ball business. And maybe following up on Joe's question, but taking a little higher level view of, you know, in a typical, even-numbered year, you know, lapping a Pro B1 launch, it's been very rare that the ball business has grown. And I think even back in February, you had said you expected the ball business to grow year over year. I think you've had a loyalty program before, and I understand you got some new product launches this year, but I guess, has something structurally changed, you know, relative to maybe the pre-pandemic level where you can now grow for even a number of years in that business, or is this more of a factor of inventory levels are just still too low and you're still rebuilding some of that this year?
Michael Arlington Swartz: Hey, good morning, everyone I just wanted to I wanted to start with the ball business and.
Michael Arlington Swartz: Maybe following up on Joes question, but taking a little higher level view.
Michael Arlington Swartz: In a typical even numbered year lapping of probe one launch if it's been very rare that the ball business has grown and I think even back in February.
Michael Arlington Swartz: You had said you expected the ball business to grow year over year, I think <unk> had a loyalty program before understanding you got into some new product launches. This year, but I guess has something structurally changed relative to maybe the pre pandemic level, where you can now.
Michael Arlington Swartz: Grow in even number of years in that business or is this more of a factor of inventory levels or just still too low and youre still rebuilding some of that this year.
David E. Maher: Yeah, Mike, I would say it's a good question. What's different today versus a handful of years ago? You know, I've said this before, annually. There are about 150 or so million more rounds of golf being played today than were played in 2019, right? So you do the math on that, what it means to a golf ball company. I would also say that we've been producing golf balls at near full capacity for quite some time to keep pace with demand and put enough product in the market to represent the brand the way we want it to be represented.
Michael Arlington Swartz: Yeah, Mike I would say, it's a good question, what's different today versus handful of years ago.
Michael Arlington Swartz: I've said this before.
Michael Arlington Swartz: Really there are about 150 or so million more rounds of golf being played today than were played in 2019 right. So you do the math on that and what it means to our golf ball company.
Michael Arlington Swartz: I would also say that that our we've been we've been producing golf balls.
Michael Arlington Swartz: At near full capacity for quite some time.
Michael Arlington Swartz: To keep pace with demand and to.
Michael Arlington Swartz: Put enough product in the market to to represent the brand the way we want to be represented so without without pointing to one singular event I would say overall.
David E. Maher: So without pointing to one singular event, I would say overall demand is up. We think our shares are up. We think our manufacturing capabilities and output, certainly this year versus last year, are in better shape, inventory, and global channel inventories are healthy and where they ought to be. So not one singular answer, but rather health across the board.
Michael Arlington Swartz: Overall demand is up.
Michael Arlington Swartz: We think our shares are up.
Michael Arlington Swartz: We think our manufacturing.
Michael Arlington Swartz: Capabilities and output certainly this year versus last year are in better shape.
Michael Arlington Swartz: And I would point to global.
Michael Arlington Swartz: Inventory global channel inventories as being as being healthy and where they ought to be so not one singular answer but rather.
Michael Arlington Swartz: Rather health across the board I mentioned, a moment or two ago, we're seeing a nice a nice return to the corporate business and have for the last couple of years. So.
David E. Maher: I mentioned a moment or two ago that we're seeing a nice return to the corporate business and have for the last couple of years. So, a lot of positives there, and particular to the quarter, we were a bit constrained last year from a supply standpoint, and lead times were longer than we would have liked. But that is no longer the case.
Michael Arlington Swartz: A lot of positives there in particular to the quarter.
Michael Arlington Swartz: We were a bit constrained last year from a from a supply standpoint.
Michael Arlington Swartz: And lead times were longer than we would have liked that is no longer. The case. So I think youre seeing the business perform sort of without without limitations right now, whereas the last couple of years, we've had limitations due to raw materials. We've had we've had limitations due to strong demand et cetera et cetera. So.
David E. Maher: So I think you're seeing the business perform sort of without limitations right now, whereas in the last couple of years, we've had limitations due to raw materials, we've had limitations due to strong demand, et cetera, et cetera. So we like where we are. I will say, longer term, we'd like to normalize our production schedules so we're not operating at peak capacity for as long as we are. And we do expect that at some point, that will happen.
Michael Arlington Swartz: We like where we are I will say longer term.
Michael Arlington Swartz: We'd like to normalize our production schedules. So we're not operating at peak capacity for as long as we are.
Michael Arlington Swartz: And we do expect that at some point that will happen, but for the time being we like we like the way the business is running.
David E. Maher: But for the time being, we like the way the business is running. And again, I think I've given you three or four ideas as to why we saw what we saw in Q1 of 24, where again, a Pro V1 launch was received favorably. So obviously, we feel real good about the ball business, and, you know, our most pressing, not threat, but our most pressing area of interest right now is weather. Because when the weather's decent, people are out playing golf and purchasing Titleist golf balls. Hopefully, that gives you some color.
Michael Arlington Swartz: Again, I think I've, given you three or four.
Michael Arlington Swartz: [noise] ideas as to why we saw what we saw in Q1 of 24, where again, probably one launch.
Michael Arlington Swartz: <unk> was comped favorably. So obviously, we feel real good about the ball business in.
Michael Arlington Swartz: Our most pressing not threat, but our most pressing.
Michael Arlington Swartz: Areas of interest right now is really weather because when weather is decent people are out playing golf.
Michael Arlington Swartz: And purchasing title X golf ball so.
Speaker Change: Hopefully that gives you some color.
Michael Arlington Swartz: Yeah, no, that was great. Thanks, David.
Speaker Change: Yes, no that was great. Thanks, David and then just second question just to put a finer point on the first quarter because I think when you. When you gave kind of the guidance and the cadence of the year back in February I think it implied EBITDA dollars down year over year. Obviously you came in ahead of that so is that simply the product of better better.
Sean S. Sullivan: And then just a second question, just to put a finer point on the first quarter, because I think when you gave kind of the guidance and the cadence of the year back in February, I think it implied EBITDA dollars down year over year. Obviously, you came in ahead of that. So is that simply the product of better performance at your distribution center and maybe a little bit of the VOKI launch slipping into the first quarter versus, I guess, your assumption that some of that would have been in the second quarter when we talked in February?
Speaker Change: <unk> that your distribution center, and maybe a little bit of the Vogie launch slipping into the first quarter versus I guess your assumption that some of that would have been in the second quarter. When we talked in February.
Sean S. Sullivan: Yeah, that's fair. That's a fair portrayal of the first half in terms of where we sit here today versus the end of February.
David E. Maher: Yeah, that's fair that's a fair portrayal of the first half in terms of where we sit here today versus the end of February.
Operator: Okay, great. Thanks, Sean. Thanks, guys.
Speaker Change: Okay, great. Thanks, Jon Thanks, guys.
Speaker Change: Thanks, Mike.
Operator: Operator, next question, please.
Speaker Change: Operator next question please.
Noah Seth Zatzkin: The next question is from Noah Zatzkin from KeyBank Capital Markets. Please go ahead.
Speaker Change: The next question is from now is that skin from Keybanc capital markets. Please go ahead.
David E. Maher: Hi, thanks for taking my questions. I'm just wondering if there are any early reads on your sense of sell-through across categories exiting the quarter in terms of trajectory from March into and through April. Has demand in April remained strong? Any color there would be great, particularly as it relates to the foot joint. Thanks.
Skin: Hi, Thanks for taking my question.
Keybanc: Just wondering if there's any early read on your sense of sell through across categories exiting the quarter in terms of trajectory from March into and through April as demand in the April remained strong any color there would be great, particularly as it relates to fluctuate.
David E. Maher: Yeah, I would say that the common theme in Q1 was, you know, where weather was decent, demand was good; where weather was less than decent, demand was affected. So, the southeast, in particular, was slower than we would have liked. Again, not surprising given the round's profile.
Speaker Change: Yes, I would say the common theme in Q1 was where weather was decent demand was good where weather was was was less than decent demand was affected so south east in particular was slower than we would've liked again not surprising given the rounds profile.
David E. Maher: I would say, and we hear this every year, as the weather turned and as March turned to April, we did begin to hear some more positives from our retail partners as their seasons opened up. So, I think the narrative is more about a delayed start to the season versus strong demand and weak demand. Within our product lines, we've been especially pleased with our wedge launch and early demand there. That team did a great job, as I've said, and early demand has been strong.
Speaker Change: I would say and we hear this every year.
Speaker Change: As weather turned and as March turned to April we did begin to hear some some more positives from our retail partners as their seasons opened up.
Speaker Change: So I think the I think the narrative is more about.
Speaker Change: Delayed start to season versus strong demand weak demand.
Speaker Change: Within our product lines, we have been especially pleased with with our wedge launch and early demand. There. That's team did a great job as Ive said in early demand has been has been strong.
David E. Maher: You know, so much of our products are custom fit, and a lot of that activity is going to start here in April, May, June, July. So, we'll have a much better read on our custom fitting activity, whether it's golf clubs or golf balls.
Speaker Change: So much of our products are custom fit and a lot of that activity is going to start here in April May June July.
Speaker Change: So we'll have much just a much better read on our custom fitting activity, whether it's golf clubs golf balls I called out some new footwear fitting opportunities that.
David E. Maher: I called out some new footwear fitting opportunities that we're going to embark on here later this month. And now to your final comment about Footjoy, again, we really like the product story. We like what's happening in our footwear business and our apparel business and our glove business. I think we've pointed to back-half growth in that business after what was obviously a slow start, although we did call out growth in the U.S., which we were pleased with, more than offset by some declines outside the U.S. So, Footjoy is working its way through a correction period, and again, we're optimistic about growth in the back three quarters of the year, really built around a product portfolio that we feel really good about.
Speaker Change: That we're going to embark on here later this month and now what are your to your final comment about foot Joy.
Speaker Change: Again, we really like we like the product story, we like what's happening in our footwear business.
Speaker Change: In our apparel business in our glove business.
Speaker Change: Think we've pointed to <unk>.
Speaker Change: Back half growth in that business. After what was obviously a slow start although we did call out.
Speaker Change: In the U S, which we were pleased with more than offset by some declines outside the U S. So.
Speaker Change: He is working its way through through a correction period.
Speaker Change: And again, we're we're optimistic for growth in.
Speaker Change: In the back three quarters of the year really built around.
Speaker Change: Our product portfolio.
Speaker Change: That we feel really good about.
Sean S. Sullivan: Great. Maybe just one other question, just on your comments about the North America Distribution Center, SPARTUP exceeding expectations. Just wondering if you could provide a bit of color there in terms of how we should be thinking about the potential P&L benefits, both near term and long term. Thanks.
Speaker Change: Great and maybe just.
Speaker Change: One other question just on your comments around the North American distribution center startup exceeding expectations.
Speaker Change: Just wondering if you could provide.
Speaker Change: A bit of color there in terms of how we should be thinking about the potential P&L benefits, both near term and long term. Thanks.
Sean S. Sullivan: Yeah, no, it's, again, as David said, it's really about hiring, it's about training, and it's about getting the throughput and the efficiency up to where we want it to be. So, you know, the primary products there are FootJoy and Titleist Gear. You know, when we think longer term, you know, I think it's much about efficiency. It is ownership, control, and customization. So, a big part of the strategic benefit of this distribution center is that it's also a customization center of excellence. So, it's as much about quality products and serving our customers well as it is about doing it efficiently.
Speaker Change: Ah yes.
Speaker Change: Again, as David said, it it's really about the.
Speaker Change: Our hiring it's about training and it's about getting the throughput and the efficiency up to where we want it to be so.
Speaker Change: Primary products, there are foot joy entitled skier.
Speaker Change: When we think longer term.
Speaker Change: I think it is it's much about efficiency. It is his ownership and control and customization. So a big part of the strategic benefit of this distribution center. It's also a customization center of excellence so.
Speaker Change: It's much of it is as much about quality product and serving our customers well as it is about doing it efficiently. So we're still in the early stages of ramp up we feel very good about where we're at.
David E. Maher: So, we're still in the early stages of ramping up. We feel very good about where we are at, and certainly hope that there's more opportunity to further leverage that facility across the portfolio. So, that's a little bit of the color of what transpired in Q1. Again, we went live on January 1 from that location. So, we're pleased where we are after four months of operation. I'll just add some historical context on that
Speaker Change: Certainly our hope that there's more opportunity to further leverage that facility.
Speaker Change: Across the portfolio.
Speaker Change: So that's a little bit of the color of what transpired in Q1 again, we went live on January one.
Speaker Change: From that location. So we're pleased where we are after four months of operation.
David E. Maher: I'll just add some historical context on that, Noah. We felt some pressure points with customization and distribution for Footshoy and gear throughout the COVID years, and that led to the decision that Sean outlined to take greater control of golf bag embroidery, apparel embroidery, and distribution of those products. So really, the origins were some pressure points from a few years back. The team did a nice job mobilizing. We like the control we have because, again, I'll echo Sean's comments. We just think it allows us to deliver a better service to our trade partners and to golfers.
Speaker Change: Just to add some historical context on that Noah, we felt some pressure points with customization and distribution for <unk> and gear throughout the Covid years and that led to the decision that Shaun outlined to take greater control of.
Speaker Change: Golf bag embroidery apparel embroidery and distribution of those products. So.
Speaker Change: Really the origins, where some pressure points or a few years back and the team has done a nice job mobilizing and we like we like the control we have because we again I'll Echo Shawn's comments, we just think it allows us to deliver better service to our trade partners into golfers.
Speaker Change: Great. Thank you.
Operator: Thanks, Noah. Operator, next question, please.
Speaker Change: Thanks, Operator next question please.
Operator: We have a question from J.P. Wallin from Ross MKM. Please go ahead.
Speaker Change: We have a question from JP <unk> from Ross and K and please go ahead.
J.P. Wallin: Good morning, and thanks for taking my question. Maybe first, in terms of kind of the investments in IT and infrastructure and understanding kind of the usual protocol about forward guidance, but putting together kind of Q1 EBITDA and just the investments that have been made so far, I'm curious if there's anything to read through in terms of maybe more than expected investment costs going forward, particularly in the back half of the year. And then you alluded to kind of maybe some investments for that FJ fitting lab. Are those new, or have those always been contemplated? And will that be impacting the kind of SG&A in the back half of the year?
JP: Good morning, and thanks for taking my question.
JP: Maybe first in terms of kind of the inverse.
JP: Investments in infrastructure and understanding kind of usual protocol about forward guidance, but putting together kind of Q1, EBITDA and just the investments that have been made so far I'm curious if there's anything to read through in terms of maybe even more than expected.
JP: Good.
JP: Investment costs going forward, particularly in the back half of the year and then you alluded to kind of maybe some investments for that S. J fitting room or are those new or has that always been contemplated and will that be impacting kind of.
JP: SG&A in the back half of the year.
JP: Okay.
Sean S. Sullivan: Yeah, JP, I'll start. Yeah, so I think that at the end of the year, we did talk about growth and OPEX in 24, right, outpacing sales, if I recall correctly. So, you know, this is expected. I think we're still in the early stages of this, and you'll see this flow through throughout the year. But, again, important to recognize that some of these things are enterprise investments. Some of these are specific to product segments around fitting networks, and fit apps and technology.
Speaker Change: Yes, J P I'll start.
J P: Yeah. So I think that at the end of the year, we did talk about growth in Opex in 'twenty four right outpacing sales if I recall correctly so.
J P: This is expected I think we're still.
J P: In the early stages of this and you'll see this flow through throughout the year, but again important to recognize that.
J P: Some of this or some of these things are enterprise investments. Some of these are specific to product segments.
J P: Around fitting networks about fitting apps and technology. So we.
Sean S. Sullivan: So, you know, we do intend to continue to invest, and you'll see that flow through in SG&A in 2024, and it's embedded in our full-year guidance. So we think these are all certainly appropriate and necessary to better serve customers and create the operating leverage that we expect to deliver here in the coming years. And, JP, just a quick follow-on to your question about Foot Choice FitLab. Yeah, that has been contemplated and planned for in our long-term plans. I think more of it will follow in 2025 than late 24, but we're enthused about getting that program running.
J P: We do intend to continue to invest.
J P: And youll see that flow through in SG&A in 2024, and it's embedded in our full year guidance. So we.
J P: We think these are all certainly appropriate necessary to better serve and create the operator operating leverage that we expect to deliver here in outer years and J P. Just a quick follow on to your question about.
J P: What choice fit lab, yes that has been contemplated and planned for and our out year plans I think more of it to follow in 2025, then late 'twenty four but we are enthused about.
J P: Getting that program running.
J P: Okay.
David E. Maher: Okay, understood. Thanks for the color.
Speaker Change: Okay understood. Thanks for the color and then maybe just.
Speaker Change: On the Joy.
J.P. Wallin: And then maybe just on foot joy, in thinking about kind of international markets, you know, I think you maybe touched on being optimistic about the product portfolio. But could you maybe just give a little bit more color in your prepared remarks? You said that you were kind of optimistic about things stabilizing in the back half of the year. So what gives you confidence there? And then maybe anything you've seen with kind of broader customer behavior, specifically on the international side?
Speaker Change: Thinking about kind of international markets.
Speaker Change: I think you may be touched on being optimistic about the product portfolio.
Speaker Change: But could you maybe just give a little bit more color in your prepared remarks, you said that you were kind of optimistic about.
Speaker Change: Things stabilizing in the back half of the year. So what gives you confidence there and then just maybe anything you're seeing with kind of broader customer behavior, specifically on the international side.
David E. Maher: Yeah, so to part one of your question, what gives us comfort is the changing footwear inventory landscape. As I noted, it's all but corrected and normalized in the US.
Speaker Change: Yeah. So so two part one of your question what what gives US comfort is the correcting footwear inventory landscape.
Speaker Change: As I noted, it's all but corrected a normalized in the U S. We think that process takes another quarter or two outside the U S.
David E. Maher: We think that process takes another quarter or two outside the US. And when that happens, we just feel confident that our products will be better positioned to succeed. I will call out, you know, as you think about markets around the world, and we've spoken of this before, Korea has a very unique, super-premium golf apparel market, and we pursue that with both the Futchoy brand and a Korea-specific Titleist apparel brand.
Speaker Change: When we think when that happens, we just feel confident that our <unk>.
Speaker Change: Products will be better positioned to succeed.
Speaker Change: I will call out as you think about markets around the world and we.
Speaker Change: We spoke of this before.
Speaker Change: Area has a very unique super premium golf apparel market and we are.
Speaker Change: We pursue that with both the foot Joy brand in a Korea specific title list apparel brand.
David E. Maher: That region has seen some outsized growth in the last couple of years, and more recently, we're seeing a bit of a correction. Strong demand followed by a whole lot of new entrants has resulted in excess inventory and promotional activities.
Speaker Change: That that region has seen some outsized growth in the last couple of years and more recently, we're seeing a bit of a correction.
Speaker Change: <unk> demand followed by a whole lot of new entrance resulted in excess inventory.
Speaker Change: And promotional activities. So we feel as though we're in the midst of a correction within the Korea apparel.
David E. Maher: So we feel as though we're in the midst of a correction within the Korean apparel, golf apparel market space. We've planned for it. And while we like our positioning over the long term, and we like our ability to withstand the effects of this correction in 2024, we have factored in market softness. That's the only real unique call-out that I think is worth noting.
Speaker Change: Golf apparel market space.
Speaker Change:
Speaker Change: We've planned for it and while we like our positioning over the long term and we like our ability to withstand the effects of this correction.
Speaker Change: In 2024, we have factored in market softness.
Speaker Change: It's the only real unique callout that I think is worth noting the others I think I hit on particularly EMEA, which was just a slow start, but but one area, we're seeing and it does affect it shows up in our other segment.
David E. Maher: The others I think I hit on, particularly EMEA, which is just a slow start. But one area we're seeing that it does affect is in our other segments. On the title side, it shows up in Foot Joy.
Speaker Change: On the title of the slide it shows up in foot Joy on the food choice side is just a.
David E. Maher: On the Foot Joy side, there is just a softness after a period of outsized growth in Korea, and we think that market's going to correct throughout the year. And we'll probably correct for the full year, and we anticipate, again, that we like our positioning over the long term. And we think we're in good shape to withstand the effects of the correction. But that's the only market that I think warrants a unique call-out at this stage.
Speaker Change: Ah softness after a period of outsized growth in Korea.
Speaker Change: And we think that market is going to correct throughout the year and will probably correct for the full year and we anticipate again, we like our positioning over the long term and we think we're in a good shape to withstand the effects of the public correction, but that's the only market, but I think we're in a unique call out at this stage.
J.P. Wallin: Great. I appreciate the color. Best of luck moving forward.
Speaker Change: Great I appreciate the color best of luck moving forward.
David E. Maher: J.P., thanks. And thanks to all for your questions and interest. Hopefully, you take advantage of some nice weather here in the next few months and go play some golf. And we look forward to speaking with you on our next call. Thanks again.
Speaker Change: J P. Thanks, and thanks to all for your questions and interest hopefully you take advantage of some nice weather here in a few months and go play some golf and we look forward to speaking with you on our next call. Thanks again.
Operator: This concludes today's call. Thank you for joining us. You may now disconnect your lines.
Speaker Change: This concludes today's call. Thank you for joining you may now disconnect your lines.
David E. Maher: ...on our next call. Thanks again.
Speaker Change: On our next call. Thanks again.
Operator: This concludes today's call. Thank you for joining us. You may now...
Speaker Change: This concludes today's call. Thank you for joining you may now.