Q4 2024 Acushnet Holdings Corp Earnings Call

Hello, everyone and thank you for joining us for todays cushion at company Bulky 24 earnings call. My name is drew and I'll be the operator today.

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During today's call. After the prepared remarks, we will have a Q&A session. If you would like to ask a question. Please press star followed by one on your telephone keypad and if you wish to withdraw your question than it is star followed by T.

Sondra Lennon: It's now my pleasure to hand over to Sondra, Lennon Vice President of <unk> and Investor Relations. Please go ahead.

Drew: Hello everyone and thank you for joining us for today's Acushnet Company 4Q24 earnings call. My name is Drew and I'll be the operator today.

Sondra Lennon: Good morning, everyone. Thank you for joining us today for our Christmas holding Corp, fourth quarter and full year 2024 earnings conference call.

Drew: During today's call, after the prepared remarks, we will have a Q&A session. If you would like to ask a question, please press star followed by one on your telephone keypad. And if you wish to withdraw your question, then it is star followed by two.

Sondra Lennon: Joining me. This morning are David Maher, our President and Chief Executive Officer, and Sean Sullivan, Our Chief Financial Officer.

Speaker Change: Before turning the call over to David I would like to remind everyone that we will make forward looking statements on the call today.

Speaker Change: It's now my pleasure to hand over to Sondra Lennon, Vice President of FP&A and Investor Relations. Please go ahead.

Speaker Change: 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 presence.

Speaker Change: Good morning, everyone. Thank you for joining us today for a Kushnet Holding Corp's fourth quarter and full year 2024 earnings conference call. Joining me this morning are David Maher, our President and Chief Executive Officer, and Sean Sullivan, our Chief Financial Officer.

Speaker Change: Jason and our filings with the U S Securities and Exchange Commission.

Speaker Change: Before turning the call over to David, I would like to remind everyone that we will make forward-looking statements on the call today.

Speaker Change: 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.

Speaker Change: These forward-looking statements are based on a cushion its current expectations and are subject to uncertainty and changes in circumstances Actual results may differ materially from these expectations

Speaker Change: Explanations of how and why we use these metrics and reconciliations of these items to the most directly comparable GAAP metrics can be found in the schedules in today's press release, the slides that accompany this presentation and in our filings with the U S Securities and Exchange Commission.

Speaker Change: 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.

Speaker Change: 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.

Speaker Change: Please also note that references throughout this presentation to year on year net 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 or.

Explanations of how and why we use these metrics.

Speaker Change: and reconciliations of these items to the most directly comparable gap metrics can be found in the schedules in today's press release, the slides that accompany this presentation, and in our filings with the U.S. Securities and Exchange Commission.

Speaker Change: Full year results or comparisons we are referring to the 12 month period ended December 31st 2024, and the comparable 12 month period in 2023.

Speaker Change: Please also note that references throughout this presentation to year-on-year net 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.

David Maher: With that I'll turn the call over to David.

David Maher: Thanks, Andre and good morning, everyone as always we appreciate your interest in a cushioning and look forward to sharing our 2024 results and future outlook today.

Starting on slide four the company delivered fourth quarter sales of $445 million up 8% for the period.

Speaker Change: And when referring to year-to-date or full-year results or comparisons, we are referring to the 12-month period ended December 31, 2024, and the comparable 12-month period in 2023. With that, I'll turn the call over to David.

David Maher: Adjusted EBITDA of $12 $4 million.

David Maher: Strong golf equipment sales led by title is G T metals and double digit gains in gear drove this growth.

David Maher: Thanks, Sondra, and good morning, everyone. As always, we appreciate your interest in the Cushnet and look forward to sharing our 2024 results and future outlook today.

David Maher: And our team did good work balancing healthy at once demand while also preparing for several first quarter product launches.

David Maher: Now to full year results the cushion that achieved sales of $2.46 billion in 2024% to 4% constant currency gain in adjusted EBITDA of $404 million, a seven 5% increase for the year.

David Maher: Starting on slide 4, the company delivered fourth quarter sales of $445 million, up 8% for the period, and adjusted EBIT of $12.4 million.

David Maher: Strong golf equipment sales, led by Titleist GT Metals, and double digit gains in gear drove this growth.

David Maher: These results were made possible thanks to the talented and dedicated associates, who make up a cushion it.

David Maher: And our team did good work balancing healthy at-once demand while also preparing for several first quarter product launches.

David Maher: Including our longest serving teammate who works in golf ball operations and next week celebrates his 55th anniversary with the company.

David Maher: Underscore a key themes of 2024, our team generated terrific momentum in Tulsa golf equipment, which increased net sales 7% for the year.

David Maher: Titleist golf ball sales in 2024 grew 4%, which is noteworthy given this followed the 2023, probably one launch year when ball sales increased double digits. We generally expect second year sales to be down slightly due to the timing associated with our two year product cycles.

David Maher: These results were made possible thanks to the talented and dedicated associates who make up Acushnet, including our longest serving teammate who works in golf ball operations and next week celebrates his 55th anniversary with the company.

David Maher: To underscore key themes of 2024, our team generated terrific momentum in Titleist Golf Equipment, which increased net sales 7% for the year.

David Maher: Our strong golf ball performance in 2024 was fuelled by balanced growth across our probie, one performance models and strong adoption throughout the pyramid of influence.

David Maher: Titleist golf ball sales in 2024 grew 4%, which is noteworthy given this followed the 2023 Pro V1 launch year.

Titles Golf clubs also posted strong results in 2024 with overall sales up double digits in growth in all regions led by the U S and Japan.

David Maher: when ball sales increased double digits. We generally expect second year's sales to be down slightly due to the timing associated with our two-year product cycles.

David Maher: Our S. M 10 wedge launch in Q1 and G. T metals launch in Q3 were well received in these franchises are in great shape as we start the 2025 season and also plan for the new putter and iron launches.

David Maher: Our strong golf-golf performance in 2024 was fueled by balanced growth across our Pro B1 and performance models and strong adoption throughout the pyramid of influence.

David Maher: Our gear segment posted 5% growth for the year led by gains in our travel category again growth was led by the U S market, which was up double digits. After.

David Maher: Titleist Golf Clubs also posted strong results in 2024, with overall sales up double digits and growth in all regions led by the U.S. and Japan.

David Maher: <unk> sales were off 2% for the year with gains in the U S more than offset by declines in international markets.

David Maher: Our SM-10 Wedge launch in Q1 and GT Metals launch in Q3 were well received and these franchises are in great shape as we start the 2025 season and also plan for the new putter and iron launches.

David Maher: For Choi has done good work navigating what has been a correcting footwear and apparel market.

David Maher: Secondly, managing inventories and leaning into high performance offerings across footwear apparel and gloves and doing so put joy delivered improved bottom line performance in 2024, despite the topline decline.

David Maher: Our gear segment posted 5% growth for the year, led by gains in our travel category. Again, growth was led by the U.S. market, which was up double digits.

And in our other category, which is comprised of title is apparel and shoes.

David Maher: FJ sales were off 2% for the year, with gains in the U.S. more than offset by declines in international markets.

David Maher: The key 2024 themes are continued growth of shoes golf in the U S and U K and softness in the Asia specific title list apparel market.

David Maher: Footshoy has done good work navigating what has been a correcting footwear and apparel market.

David Maher: effectively managing inventories and leaning into high-performance offerings across footwear, apparel, and gloves. In doing so, Footjoy delivered improved bottom-line performance in 2024, despite a top-line decline.

David Maher: A cushion at strong financial performance in 2024 supported ongoing investment across our business and the company's commitment to returning capital to shareholders for the year of dividend and share repurchases totaled $227 million, bringing our total return over the past three years to more than 850.

Speaker Change: And in our other category, which is comprised of Titleist Apparel and Shoes, the key 2024 themes are continued growth of shoes golf in the U.S. and U.K. and softness in the Asia-specific Titleist Apparel market.

David Maher: $8 million.

David Maher: And furthering this commitment to shareholders I am pleased to announce that a cushion its directors have approved a 9% increase to our quarterly dividend payout in 2025 to 23 and a half cents per share.

Speaker Change: A Cushnet's strong financial performance in 2024 supported ongoing investment across our business.

David Maher: This marks the eighth consecutive annual dividend increase since the program was initiated in 2017.

and the company's commitment to returning capital to shareholders.

Speaker Change: For the year, dividend and share repurchases totaled $227 million, bringing our total return over the past three years to more than $850 million.

David Maher: As Sean will discuss we have also increased our share repurchase authorization.

David Maher: These actions reflect our board's confidence in a cushion its ability to execute and generate cash flow and their positive outlook towards the company's leading position within the golf industry.

Speaker Change: And furthering this commitment to shareholders, I am pleased to announce that Acoustics Directors have approved a 9% increase to our quarterly dividend payout in 2025, to $0.235 per share.

David Maher: As you will continue to see we are focused on investing to position the company for future growth, while also returning capital to shareholders as appropriate.

Speaker Change: This marks the eighth consecutive annual dividend increase since the program was initiated in 2017.

David Maher: Now looking ahead to 2025, starting with a few industry data points that inform our planning and outlook.

Speaker Change: As Sean will discuss, we have also increased our share repurchase authorization.

David Maher: In the U S market brands increased 2% in 2024 to a record $543 million.

David Maher: Noteworthy is that these rounds were played across some 16000 golf courses the supply that is down about 1500 courses since 2000.

Speaker Change: As you will continue to see, we are focused on investing to position the company for future growth, while also returning capital to shareholders as appropriate.

David Maher: Driving this participation growth is a golfer base that increased 6% in 2024 to $28 1 million golfers.

Speaker Change: Now, looking ahead to 2025, starting with a few industry data points that inform our planning and outlook.

David Maher: This 1.5 million net gain represents the largest single year increase since 2000.

Speaker Change: In the U.S. market, Brown's increased 2% in 2024 to a record $543 million.

David Maher: And the number of beginners top 3 million for the fifth consecutive year in a row.

Speaker Change: Noteworthy is that these rounds were played across some 16,000 golf courses, a supply that has dowed about 1,500 courses since 2000.

David Maher: Given these metrics it is not surprising that 70% of public facilities right their financial health is good or excellent versus 23% in 2016.

Speaker Change: Driving this participation growth is a golfer base that increased 6 percent in 2024 to 28.1 million golfers.

David Maher: And 80% of private golf courses report, good or excellent financial health versus 46% in 2016.

Speaker Change: This $1.5 million net gain represents the largest single year increase since 2000, and the number of beginners topped $3 million for the fifth consecutive year in a row.

David Maher: Annual U S rounds are up over 20% since 2019.

David Maher: As his participation in the U K, Canada, Korea and Australia.

Speaker Change: Given these metrics, it is not surprising that 70% of public facilities rate their financial health as good or excellent versus 23% in 2016.

David Maher: Japan play has grown 10% during the same period health.

David Maher: Healthy golfer participation and in particular the strength of the dedicated golfer are the foundation for our perspective on the state of the global game and particularly in the U S.

Speaker Change: and 80% of private golf courses report good or excellent financial health versus 46% in 2016.

David Maher: Looking outside the U S. We are planning for growth. However continue to take a measured approach for well golf participation has been resilient the macro economic backdrop in key regions continues to be more challenging.

Speaker Change: Annual U.S. rounds are up over 20% since 2019, as is participation in the U.K., Canada, Korea, and Australia. Japan play has grown 10% during this same period.

David Maher: And while FX headwinds and tariff uncertainty are inevitable pieces of the planning process, we remain confident in our ability to execute against our priorities and what we can control.

Speaker Change: Healthy golfer participation, and in particular, the strength of the dedicated golfer, are the foundation for our perspective on the state of the global game, and particularly in the U.S.

David Maher: Starting with our growth plans for golf equipment. We are excited about new probie, one and probably one ex golf ball models and expect increases across all regions. The first probably one was launched 25 years ago and the past quarter century has been defined by innovation and our team's commitment to continuous.

Speaker Change: Looking outside the U.S., we are planning for growth, however, continue to take a measured approach. For while golf participation has been resilient, the macroeconomic backdrop in key regions continues to be more challenging.

Speaker Change: And while FX headwinds and tariff uncertainty are inevitable pieces of the planning process, we remain confident in our ability to execute against our priorities and what we can control.

David Maher: Improvement.

David Maher: While early in the season probie when usage on worldwide tours is up to 77% more than nine times the nearest competitor.

Speaker Change: Starting with our growth plans for golf equipment, we are excited about new Pro V1 and Pro V1X golf ball models and expect increases across all regions.

David Maher: We are enthused about our opportunity and our team has developed some great campaigns to tell our story in 2025.

David Maher: For title this golf clubs, we carry healthy momentum into the year and expect to benefit from recent investments to our product development engine and expanded and fitting networks across the globe.

Speaker Change: The first Pro V1 was launched 25 years ago, and the past quarter century has been defined by innovation and our team's commitment to continuous improvement.

David Maher: While our first quarter launch calendar is smaller than last year's as is the case in odd numbered years, we look forward to launching new title is G. T hybrids G T. One metals.

Speaker Change: While early in the season, Pro V1 usage on worldwide tours is up to 77%, more than nine times the nearest competitor.

Speaker Change: We are enthused about our opportunity and our team has developed some great campaigns to tell our story in 2025.

David Maher: And a new lineup of Cameron studio style putters to start the season following a new irons later this year.

Speaker Change: For Titleist Golf Clubs, we carry healthy momentum into the year and expect to benefit from recent investments to our product development engine and expand in fitting networks across the globe.

David Maher: We also expect growth from our gear segment led by New title list products and the continued development of our club glove traveled franchise in 2025.

David Maher: We are confident in our outlook for foot Joy, which anticipates, a strong product pipeline and higher concentration of premium performance footwear products like Premier Hyperflex and quantum golf shoes, leading to improved profitability.

Speaker Change: While our first quarter launch calendar is smaller than last year's, as is the case in odd-numbered years, we look forward to launching new Titleist GT hybrids, GT1 metals, and a new lineup of Cameron Studio-style putters to start the season, following the new irons later this year.

David Maher: We expect F J sales to be roughly flat for the year with organic growth offset by reduced closeout sales and strategic product line rationalization.

David Maher: After a recent period of correction in global golf footwear, we see a healthier environment in 2025.

Speaker Change: We are confident in our outlook for Footjoy, which anticipates a strong product pipeline and higher concentration of premium performance footwear products like Premier, Hyperflex, and Quantum golf shoes, leading to improved profitability.

David Maher: In support of these priorities and longer term growth opportunities, we plan to make several strategic investments in 2025 to build out our global fitting network for golf equipment and footwear.

Speaker Change: We expect FJ sales to be roughly flat for the year, with organic growth offset by reduced closeout sales and strategic product-line rationalization.

David Maher: Expand the reach of our B to B and D to C capabilities to new regions and invest in the future of the title This performance Institute or TPI, where we see expansion opportunities in the coming years.

Speaker Change: After recent period of correction in global golf footwear, we see a healthier environment in 2025.

David Maher: And we are pleased with recent capital investments and golf equipment, R&D and operations and are confident these projects will fuel enhanced innovation product development and golfer connection capabilities core attributes to the long term success of titlist equipment.

Speaker Change: In support of these priorities and longer-term growth opportunities, we plan to make several strategic investments in 2025 to build out our global fitting network for golf equipment and footwear.

Speaker Change: expand the reach of our B2B and D2C capabilities to new regions, and invest in the future of the Titleist Performance Institute, or TPI, where we see expansion opportunities in the coming years.

David Maher: As noted on our last call. We recently completed the transition of our footwear manufacturing from China to Vietnam and expect this will lead to greater product development capabilities and a more durable supply chain.

Speaker Change: And we are pleased with recent capital investments in golf equipment R&D and operations and are confident these projects will fuel enhanced innovation, product development, and golfer connection capabilities, core attributes to the long-term success of Titleist equipment.

David Maher: As Sean will address we are also in the process of implementing a new global ERP system.

Speaker Change: Collectively we expect these investments to support our future growth plans and generate increased operating leverage over the long term.

Speaker Change: And in summary, we are optimistic about the structural health of the golf industry and are focused on expanding our momentum in the title of the golf equipment segment, strengthening our gear and F. J wearables businesses and investing in key initiatives that will pay dividends over the next several years.

Speaker Change: As noted on our last call, we recently completed the transition of our footwear manufacturing from China to Vietnam and expect this will lead to greater product development capabilities and a more durable supply chain.

Speaker Change: As Sean will address, we are also in the process of implementing a new global ERP system.

Speaker Change: Confidence in the acoustic team and their ability to provide dedicated golfers with leading products and services as we seek to build long term value for our shareholders.

Speaker Change: Collectively, we expect these investments to support our future growth plans and generate increased operating leverage over the long term.

Speaker Change: And in summary, we are optimistic about the structural health of the golf industry.

Speaker Change: For your attention. This morning, I will now pass the call over to Sean.

Speaker Change: and are focused on expanding our momentum in the Titleist Golf Equipment segment.

Sean Sullivan: Thank you David Good morning, everyone to begin I would like to discuss a few items that have impacted the 2020 for financials.

Speaker Change: strengthening our gear and FJ wearables businesses and investing in key initiatives that will pay dividends over the next several years.

Sean Sullivan: First as we discussed last quarter I want to highlight the combination of our previous Titleist golf balls and golf club segments.

Speaker Change: I have confidence in the Acushnet team and their ability to provide dedicated golfers with leading products and services as we seek to build long-term value for our shareholders. Thanks for your attention this morning, I will now pass the call over to Sean.

Sean Sullivan: Two title of golf equipment segment.

Sean Sullivan: This new reporting structure best reflects the way in which we are now managing and allocating resources to the golf equipment business.

Sean Sullivan: As you can see in today's earnings release, we will still provide net sales detail for golf balls and clubs within the financials.

Sean Sullivan: Thank you, David. Good morning, everyone. To begin, I'd like to discuss a few items that have impacted the 2024 financials.

Sean Sullivan: Next the company made a change in accounting principle related to the presentation of distribution and shipping and handling costs moving these costs from SG&A expense into cost of goods sold distribution expense as a cost essential to the fulfillment and delivery of our products to our customers and as such is more meaningfully presented as a <unk>.

Sean Sullivan: First, as we discussed last quarter, I want to highlight the combination of our previous Titleist Golf Balls and Golf Club segments into Titleist Golf Equipment segment.

Sean Sullivan: This new reporting structure best reflects the way in which we are now managing and allocating resources to the golf equipment business.

Sean Sullivan: As you can see in today's earnings release, we will still provide net sales detail for golf balls and clubs within the financials.

Sean Sullivan: Cost of sales rather than SG&A.

Sean Sullivan: This presentation change also makes our financial statements more comparable to some of our closest industry peers the impact.

Sean Sullivan: This change for 2024 and 2023 has been included in today's earnings release.

Sean Sullivan: Lastly, I want to point out that we recorded a one time benefit to our income statement associated with a change in the company's paid time off policy or PTO totaling approximately $18 million in the fourth quarter.

Sean Sullivan: Distribution expense is a cost essential to the fulfillment and delivery of our products to our customers and as such is more meaningfully presented as a cost of sales rather than SG&A.

Sean Sullivan: The amount of the benefit that is included in gross profit SG&A and R&D is $7 million 9 million and $2 million respectively.

Sean Sullivan: This presentation change also makes our financial statements more comparable to some of our closest industry peers.

Sean Sullivan: The impact of this change for 2024 and 2023 has been included in today's earnings release.

Sean Sullivan: The total amount has been excluded from adjusted EBITDA as noted in our reconciliation.

Sean Sullivan: Now turning to our 2024 financial results fourth quarter net sales were in line with our expectations and up seven 9% when compared to the fourth quarter of 2023 with higher net sales across all reportable segments.

Sean Sullivan: Lastly, I want to point out that we recorded a one-time benefit to our income statement associated with a change in the company's paid time off policy, or PTO, totaling approximately $18 million in the fourth quarter.

Sean Sullivan: The amount of the benefit that is included in gross profit, SG&A, and R&D is $7 million, $9 million, and $2 million, respectively.

Sean Sullivan: Adjusted EBITDA was $12 $4 million, approximately 14 million better than last year's fourth quarter.

Sean Sullivan: The total amount has been excluded from Adjusted EBITDA as noted in our reconciliation.

Sean Sullivan: Looking at our segments title. This golf equipment was up seven 4% in the quarter largely due to higher sales volumes. Our recently launched G T drivers and fairways, along with higher average selling prices.

Sean Sullivan: Now turning to our 2024 financial results. Fourth quarter net sales were in line with our expectations and up 7.9 percent when compared to the fourth quarter of 2023 with higher net sales across all reportable segments.

Sean Sullivan: These increases were partially offset by lower volumes of our second model year irons.

Sean Sullivan: Put joy net sales grew one 9% during the fourth quarter driven by higher volumes in footwear.

Sean Sullivan: The Justice of the Dail was $12.4 million, approximately $14 million better than last year's fourth quarter.

Sean Sullivan: Golf gear net sales increased 17, 3% driven by higher sales volumes and travel product categories and golf clubs.

Sean Sullivan: Looking at our segments, Titleist golf equipment was up 7.4% in the quarter, largely due to higher sales volumes of our recently launched GT drivers and fairways, along with higher average selling prices.

Sean Sullivan: Looking at the full year results in 2024, net sales and adjusted EBITDA increased three 9% and seven 5%, respectively with net sales increases in our title this golf equipment and golf gear segments.

Sean Sullivan: These increases were partially offset by lower volumes of our second model year irons.

Sean Sullivan: Footshoy net sales grew 1.9% during the fourth quarter, driven by higher volumes in footwear.

Sean Sullivan: Turning to results by region on slide seven in the fourth quarter, we saw net sales growth across all regions, except Japan.

Sean Sullivan: The full year the U S led the growth of seven 2% in EMEA and rest of World in Korea were slightly up during the year.

Sean Sullivan: Looking at the full year results in 2024, net sales and adjusted EBITDA increased 3.9% and 7.5% respectively, with net sales increases in our Titleist golf equipment and golf gear segments.

Sean Sullivan: Japan was down three 5% as higher net sales entitled US golf equipment was more than offset by decreases in other categories.

Sean Sullivan: Overall fourth quarter gross profit was $108 million was up $27 million or 15, 2% compared to last year's fourth quarter with increases across all reportable segments.

Sean Sullivan: Turning to results by region on slide 7, in the fourth quarter, we saw net sales growth across all regions except Japan.

Sean Sullivan: In the full year, the U.S. led the growth, up 7.2 percent, and EMEA, rest of world, and Korea were slightly up during the year.

Sean Sullivan: Reported gross margin of 46, 7% was up 300 basis points.

Sean Sullivan: The impact from the one time PTO benefit was 150 basis points on gross margin for the quarter.

Sean Sullivan: Japan was down 3.5% as higher net sales and Titleist golf equipment was more than offset by decreases in other categories.

Sean Sullivan: Gross profit for the full year was $1 $2 billion up 6% or $68 million, primarily resulting from increased volumes entitled Us golf equipment and golf gear.

Sean Sullivan: Overall, fourth quarter gross profit of $208 million was up $27 million, or 15.2%, compared to last year's fourth quarter, with increases across all reportable segments.

Sean Sullivan: Gross margin grew to 48, 3% up 130 basis points from last year, primarily driven by a favorable product mix shift.

Sean Sullivan: reported gross margin of 46.7 percent was up 300 basis points

Sean Sullivan: The impact from the one time PTO benefit was 20 basis points on gross margin for 2024.

Sean Sullivan: The impact from the one-time PTO benefit was 150 basis points on gross margin for the quarter.

Sean Sullivan: SG&A expense of $193 million in the quarter increased $9 million or 5% compared to the fourth quarter of 2023 and includes a $9 million benefit related to the onetime PTO adjustment.

Sean Sullivan: Gross profit for the full year was $1.2 billion, up 6% or $68 million, primarily resulting from increased volumes in Titleist golf equipment and golf gear.

Sean Sullivan: Gross margin grew to 48.3 percent, up 130 basis points from last year, primarily driven by a favorable product mix shift.

Sean Sullivan: SG&A expense of $802 million for the full year increased 46 million or six 1% from 2023 and includes the $9 million PTO benefit.

Sean Sullivan: The impact from the one-time PTO benefit was 20 basis points on gross margin for 2024.

Sean Sullivan: The increase was primarily due to $18 million of restructuring costs related to our footwear manufacturing moved to Vietnam, which is included in operating income, but added back for adjusted EBITDA purposes.

Sean Sullivan: SGA expense of $193 million in the quarter increased $9 million, or 5%, compared to the fourth quarter of 2023 and includes a $9 million benefit related to the one-time PTO adjustment.

Sean Sullivan: Decrease was also impacted by higher employee expenses, including the support of our golf equipment fitting initiatives higher information technology related expenses and higher A&P expense related to new product launches.

Sean Sullivan: SG&A expense of $802 million for the full year increased 46 million, or 6.1% from 2023, and includes the $9 million PTO benefit.

Sean Sullivan: Interest expense was up $11 million for the full year due to an increase in borrowings and a higher weighted average interest rate in 2024.

Sean Sullivan: The increase was primarily due to $18 million of restructuring costs related to our footwear manufacturing move to Vietnam, which is included in operating income, but added back for adjusted EBITDA purposes.

Sean Sullivan: Our full year effective tax rate was 19, 2% up from 17, 8% last year.

Sean Sullivan: The increase was also impacted by higher employee expenses, including the support of our golf equipment fitting initiatives, higher information technology related expenses, and higher A&P expense related to new product launches.

Sean Sullivan: The increase in ETR was primarily driven by changes in our jurisdictional mix of earnings as well as changes in our valuation allowance.

Sean Sullivan: Moving to our balance sheet and cash flow highlights.

Sean Sullivan: Interest expense was up $11 million for the full year due to an increase in borrowings and a higher weighted average interest rate in 2024.

Sean Sullivan: 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 Sullivan: Our full year effective tax rate was 19.2%, up from 17.8% last year.

Sean Sullivan: Our net leverage ratio at the end of 2024 was one eight times, our inventory levels remain healthy and were down $40 million or about 6% from year end 2023.

Sean Sullivan: The increase in ETR was primarily driven by changes in our jurisdictional mix of earnings as well as changes in our valuation allowance.

Moving to our balance sheet and cash flow highlights.

Sean Sullivan: Capital expenditures for 2024 were $75 million slightly lower than our $80 million expectation for the year.

Sean Sullivan: 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 Sullivan: As David noted in 2024, we returned roughly $227 million to shareholders with $173 million in share repurchases and $54 million in cash dividends today.

Sean Sullivan: Our net leverage ratio at the end of 2024 was 1.8 times. Our inventory levels remain healthy and we're down $40 million or about 6% from year-end 2023.

Sean Sullivan: Today, we announced an increased quarterly dividend of 23, and a half cents per share, which will be payable on March 20, <unk> to shareholders of record on March seven 2025.

Sean Sullivan: Capital expenditures for 2024 were $75 million, slightly lower than our $80 million expectation for the year.

Sean Sullivan: During the fourth quarter, we repurchased approximately 440000 shares of our common stock for $30 million, bringing our full year repurchases to approximately $2 7 million shares for a total of $173 million.

Sean Sullivan: As David noted, in 2024, we returned roughly $227 million to shareholders, with $173 million in share repurchases and $54 million in cash dividends.

Sean Sullivan: On February 13th 2025, our board of directors increased the share repurchase authorization by an additional $250 million, bringing the total authorization to 1.25 billion since the share repurchase program was established in 2018.

Sean Sullivan: Today, we announce an increased quarterly dividend of 23.5 cents per share, which will be payable on March 21st to shareholders of record on March 7th, 2025.

Sean Sullivan: During the fourth quarter, we repurchased approximately 440,000 shares of our common stock for $30 million, bringing our full-year repurchases to approximately 2.7 million shares for a total of $173 million.

Sean Sullivan: As of February 21, 2025, the remaining share repurchase authorization was approximately $434 million and the number of shares outstanding was $59 9 million.

Sean Sullivan: On February 13, 2025, our Board of Directors increased the share repurchase authorization by an additional $250 million, bringing the total authorization to $1.25 billion since the share repurchase program was established in 2018.

Sean Sullivan: Turning to our full year 2025 outlook full year net sales is projected to be between 2.485 billion and 2.535 billion on a reported basis, including an estimated $35 million negative impact from foreign currency year over year.

Sean Sullivan: As of February 21, 2025, the remaining share repurchase authorization was approximately $434 million, and the number of shares outstanding was 59.9 million.

Sean Sullivan: On a constant currency basis, our current expectation is that consolidated net sales will be up between two 6% and four 6% compared to 2024 with growth across all reportable segments as well as growth both domestically and internationally.

Sean Sullivan: Turning to our full-year 2025 outlook, full-year net sales is projected to be between $2.485 billion and $2.535 billion on a reported basis, including an estimated $35 million negative impact from foreign currency year-over-year.

Sean Sullivan: Our full year adjusted EBITDA is expected to be between 405 and $420 million and includes the estimated negative impact from foreign currency.

Sean Sullivan: On a constant currency basis, our current expectation is that consolidated net sales will be up between 2.6% and 4.6% compared to 2024, with growth across all reportable segments, as well as growth both domestically and internationally.

Sean Sullivan: At the midpoint, our adjusted EBITDA margin would be approximately 16, 4%.

Sean Sullivan: This outlook does not reflect the impact of any recently announced tariffs by the U S or potential retaliatory actions taken by other countries.

Sean Sullivan: Tariff and trade environment remains uncertain at this time and continues to evolve.

Sean Sullivan: Our full-year adjusted EBITDA is expected to be between $405 and $420 million and includes the estimated negative impacts from foreign currency.

Sean Sullivan: As we have previously mentioned, we source about 6% of our cost of goods sold from China and have limited exposure to Canada and Mexico.

Sean Sullivan: At the midpoint, our adjusted EBITDA margin would be approximately 16.4%.

Sean Sullivan: The China, 10% incremental tariff would equate to an approximately $7 million headwind where.

Sean Sullivan: We are actively exploring actions to mitigate this impact, including leveraging our supply chain and potential pricing actions.

Sean Sullivan: This outlook does not reflect the impact of any recently announced tariffs by the U.S. or potential retaliatory actions taken by other countries as the tariff and trade environment remains uncertain at this time and continues to evolve.

Sean Sullivan: As we remain committed to driving sustainable long term growth, we are investing in the business through many strategic initiatives extending into 2025 and beyond.

Sean Sullivan: As we have previously mentioned, we source about 6% of our cost of goods sold from China and have limited exposure to Canada and Mexico.

Sean Sullivan: As David mentioned this includes investments in our global fitting network across both our Titleist golf equipment and foot joy segments, and expanding our global digital commerce presence.

Sean Sullivan: The China 10% incremental tariff would equate to an approximately $7 million headwind.

Sean Sullivan: We are actively exploring actions to mitigate this impact, including leveraging our supply chain and potential pricing actions.

Sean Sullivan: We are also in the process of a multi year implementation of a new global cloud based ERP system to provide scalability simplified standardized processes and enhanced supply chain and finance capabilities.

Sean Sullivan: As we remain committed to driving sustainable long-term growth, we are investing in the business through many strategic initiatives extending into 2025 and beyond.

Sean Sullivan: We anticipate this new global ERP platform will enable further operating efficiencies and support our digital transformation.

Sean Sullivan: As David mentioned, this includes investments in our global fitting network across both our Titleist golf equipment, foot joy segments, and expanding our global digital commerce presence.

Sean Sullivan: As a result of these key strategic initiatives, we expect full year 2025, SG&A growth to be higher than our sales growth projections.

Sean Sullivan: We are also in the process of a multi-year implementation of a new global cloud-based ERP system to provide scalability, simplified standardized processes.

Sean Sullivan: These initiatives are critical to delivering long term sustainable growth and operating leverage in the years to come.

Sean Sullivan: We expect capital expenditures for 2025 to be approximately $85 million. In addition, we expect to invest $15 million to $20 million in capitalized implementation costs associated with our worldwide ERP platform.

and Enhanced Supply Chain and Finance Capabilities.

Sean Sullivan: We anticipate this new global ERP platform will enable further operating efficiencies and support our digital transformation.

Sean Sullivan: Looking at the first half of 2025, we expect reported net sales to be up low single digits compared to the first half of 2024 with growth primarily coming from Titleist golf equipment, driven by the new Probie, one launch and continued momentum of our G. T metals product line, including the launch of the GT one.

Sean Sullivan: These initiatives are critical to delivering long-term sustainable growth and operating leverage in the years to come.

Sean Sullivan: We expect capital expenditures for 2025 to be approximately $85 million. In addition, we expect to invest $15 to $20 million in capitalized implementation costs associated with our worldwide ERP platform.

Sean Sullivan: Rivers' and fairways and GT hybrids.

Sean Sullivan: We expect adjusted EBITDA to be slightly lower than the first half of 2024 due to increased operating expenses and the estimated negative impacts from foreign currency.

Sean Sullivan: Looking at the first half of 2025, we expect reported net sales to be up low single digits compared to the first half of 2024.

Sean Sullivan: From a quarterly standpoint, we expect net sales and adjusted EBITDA to be more weighted to the second quarter.

Sean Sullivan: with growth primarily coming from Titleist Golf Equipment driven by the new Pro V1 launch and continued momentum of our GT Metals product line including the launch of the GT1 Drivers and Fairways and GT Hybrids.

Sean Sullivan: This is different than last years cadence due to the outsized impact of Oki wedge is launched in the first quarter of last year.

Sean Sullivan: On a reported basis, we expect first quarter net sales to be below prior year as we are forecasting a $10 million to $15 million foreign currency headwind.

Sean Sullivan: We expect adjusted EBITDA to be slightly lower than the first half of 2024 due to increased operating expenses and the estimated negative impacts from foreign currency.

Sean Sullivan: We would also expect this currency headwind to have a negative impact on adjusted EBITDA in the first quarter.

Sean Sullivan: From a quarterly standpoint, we expect net sales and adjusted EBITDA to be more weighted to the second quarter. This is different than last year's cadence due to the outsized impact of VOKI wedges launched in the first quarter of last year.

Sean Sullivan: In closing we are pleased with our performance in 2024 and remained focus on executing on our priorities in 2025 and beyond.

Sondra Lennon: With that I'll now turn the call over to Sondra for Q&A.

Speaker Change: Thank you son, operator could we now open up the lines for questions.

Sean Sullivan: On a reported basis, we expect first quarter net sales to be below prior year as we are forecasting a $10 to $15 million foreign currency headwind.

Sondra Lennon: Absolutely.

Speaker Change: He would like to ask a question on todays call. Please press star followed by one on your kind of thing keypad. If you wish to withdraw. Your question then is followed by Kay.

Sean Sullivan: We would also expect this currency headwind to have a negative impact on adjusted EBITDA in the first quarter.

Sean Sullivan: In closing, we are pleased with our performance in 2024 and remain focused on executing on our priorities in 2025 and beyond.

Speaker Change: Our first question today comes from Jason alter that life from Raymond James Your line is now open. Please go ahead.

Sondra Lennon: With that, I'll now turn the call over to Sondra for Q&A.

Jason Alter: Thanks, Hey, guys. Good morning, I guess first question on the quarter.

Sondra Lennon: Thank you, Sean. Operator, could we now open up the lines for questions?

Jason Alter: Gross margin up 300 basis points I think the PTO benefit was with half of that so I apologize I missed is what drove the other half of the improvement year over year.

Speaker Change: Absolutely. If you would like to ask a question on today's call, please press star followed by one on your telephone keypad. If you wish to withdraw your question then it is star followed by two.

Speaker Change: Yeah, Joe just continued performance in the golf equipment segment, we had growth across all of the product segments on the top line I think we've got a more normalized supply chain are moderating freight distribution environment.

Speaker Change: Our first question today comes from Joseph Altabello from Raymond James, if your line is now open please go ahead.

Joseph Altabello: Thanks. Hey, guys, good morning. I guess 1st question on the quarter, the gross margin of 300 basis points. I think the, the PTO benefit was was half of that. So, and I apologize. I missed it. What drove the other half of the improvement year over year.

Jason Alter: Which allowed us to deliver our incremental gross margin for Q4.

Speaker Change: Okay.

Speaker Change: Shifting over to the investments you guys called out. This morning is there a way to quantify how much of that is hitting in 'twenty five and should we think of it as sort of onetime in nature or are they going to continue going forward.

Speaker Change: Yeah, Joe, just continued performance in the golf equipment segment. We had growth across all of the product segments on the top line. I think we've got a more normalized supply chain, moderating freight distribution environment, which allowed us to deliver incremental gross margin for Q4.

Speaker Change: Yeah, I don't know that we quantify how much hits and twenty-five Joe, but we did call out a handful that are.

Speaker Change: We'll be we'll be outsized in 'twenty, five and normalize in the out years.

Speaker Change: Okay, and shifting over to the investments you guys called out this morning, is there a way to quantify how much of that is hitting in 25? And should we think of those as sort of one time in nature, or are they going to continue going forward?

Yeah, I think Joe again, I'd just point you to the guide you gave you on on revenue and adjusted EBITDA. We do think that you know 2025 brings a you know a consistent or expanding gross margin.

Thank you.

Speaker Change: Yeah, I don't know that we quantify how much hits in 25, Joe, but we did call out a handful that will be outsized in 25 and normalized in the out years.

Speaker Change: For the company in total we talked a bit about the SG&A and in delivering an EBIT EBITDA excuse me EBITDA margin generally in line with where we're at today. So.

Speaker Change: Obviously, the global ERP is a multi year building out the fitting network globally is something that we.

Speaker Change: Yeah, I think, Joe, again, I just point you to the guide we gave you on revenue and adjusted EBITDA. We do think that, you know, 2025 brings, you know, a consistent or expanding gross margin for the company in total.

Speaker Change: We will continue to do but obviously as you see given the performance of the golf equipment segment has and yields a tremendous benefit so.

Speaker Change: We talked a bit about the SG&A and delivering an EBITDA margin.

Speaker Change: I'll leave it at that Yeah, and I'd just I'd just add we've talked for a while Joe about the build out of our digital capabilities. The build out of our fitting network at some point they'll be built out right. This.

generally in line with where we're at today, so...

Speaker Change: You know, obviously the global ERP is a multi-year, building out the fitting network globally is something that we will continue to do, but obviously, as you see, given the performance of the golf equipment segment, has and yields, you know, tremendous benefits.

Speaker Change: This is us taking taking.

Speaker Change: Taking our efforts to new markets and again at some point they will be built out we think where we.

Speaker Change: We're spending investing in 'twenty five but in 'twenty six 'twenty seven we should be closer to the build out phase than we are now.

Joseph Altabello: I'll leave it at that. Yeah, and I just said, we've talked for a while, Joe, about the build-out of our digital capabilities, the build-out of our fitting network.

Speaker Change: Okay very helpful. Thank you.

Speaker Change: Thanks, Phil Operator next question please.

Speaker Change: At some point, they'll be built out, right? This is us.

Speaker Change: Of course, our next question comes from Meghan <unk> from Morgan Stanley. Your line is now let them pay proceeds.

Speaker Change: taking our efforts to new markets and again at some point they will be built out. We think we're, you know, we're spending, investing in 25 but in 26 and 27 we should be.

Speaker Change: Hey, good morning. Thanks, so much I wanted to start with the topline guide Sean you gave a lot of helpful commentary on the first half, but as it relates to the full year mid point in constant currency up 3.5%.

Closer to the build-out phase than we are now.

Okay, very helpful. Thank you.

Speaker Change: Should we expect your commentary around the first half to be consistent with the full year in terms of most of the growth is coming from golf equipment and within that between balls and clubs understand youre not going to disclose.

Thank you, Joe. Operator, next question, please.

Speaker Change: Of course. Our next question comes from Megan Clapp from Morgan Stanley. Your line is now open, please proceed.

Speaker Change: <unk> disclosed the difference between the two going forward, but can you just help us understand how you're thinking about <unk> versus clubs in the context of the overall consequent my guide for the year.

Megan Clapp: Hey, good morning. Thanks so much. I wanted to start with the top line guide, Sean. You gave a lot of helpful commentary on the first half, but as it relates to the full year,

midpoint and constant currency up three and a half percent.

Speaker Change: Sure and just to clarify we will be continuing to give you a sales information for clubs and balls separately, so you're not losing that it's really.

Should we expect...

Megan Clapp: And your commentary around the first half to be consistent with the full year in terms of...

Megan Clapp: Most of the growth is coming from golf equipment, and within that, between balls and clubs, understand you're not going to disclose the difference between the two going forward, but can you just help us understand how you're thinking about balls versus clubs in the context of the overall golf equipment guide for the year?

Speaker Change: The aggregated segment P&L through Oh I that.

Speaker Change: That will be aggregated so as we talk about the guide our balls are again its a pro V. One launch year. So I would expect a large part of the growth in balls to be first half versus second half.

Megan Clapp: Sure, and just to clarify, we will be continuing to give you sales information for clubs and balls separately, so you're not losing that. It's really

Speaker Change: At the same time, the club business as David and I talked about we've got some upcoming.

Speaker Change: Launches with the Cameron putters as well as the GT one in the G T hybrid so.

Megan Clapp: the aggregated segment P&L through OI that will be aggregated. So, as we talk about the guide, BALLS, again, it's a Pro V1 launch year, so I would expect a large part of the growth in BALLS to be first half versus second half.

Speaker Change: And then irons later in the year. So you know I would expect the you know the growth in the club business to be more weighted to the second quarter, but overall, we feel very good about the growth in the golf equipment segment for the full year.

Megan Clapp: At the same time, the club business, as David and I talked about, we've got some upcoming launches with the Cameron Putters, as well as the GT1 and the GT Hybrids, and then Irons later in the year.

Speaker Change: You didn't ask this question, but again for joy.

Speaker Change: It is very much focused on profitability as we've gone.

Speaker Change: And taken some price as some product line rationalization and really are more focused on driving higher profitability with a more.

Megan Clapp: I would expect the growth in the club business to be more weighted to the second quarter.

Speaker Change: More premium.

Speaker Change: Appropriate our offering in that segment. So I don't know if that's helpful color or context to the overall guide, but those are some of the thoughts that.

Megan Clapp: But, you know, overall, we feel very good about the growth in the golf equipment segment for the full year.

Megan Clapp: You didn't ask this question, but again, Foot Joy is very much focused on profitability as we've gone.

Speaker Change: Our our impact and again the foreign currency headwind is obviously a real one.

Speaker Change: Great.

Matthew Boss: Our next question comes from Matthew Boss from Jpmorgan. Your line is now open. Please go ahead.

more focused on driving higher profitability with a

Megan Clapp: more premium appropriate offering in that segment. So I don't know if that's helpful color or context to the overall guide, but those are some of the thoughts that are impacting. Again, the foreign currency headwind is obviously a real one.

Matthew Boss: Great. Thanks so.

Speaker Change: So maybe David if you could elaborate on current health of the golf industry, maybe in the U S versus international and just how you see that translating to rounds played in in 'twenty, five and sustainability of the trends that youre seeing today.

Thank you.

David Maher: Yeah, Matt So I'll start with with rounds of play right really strong year in in the U S.

Speaker Change: Our next question comes from Matthew Boss from JP Morgan. Your line is now open, please go ahead.

Matthew Boss: Great, thanks. So maybe, David, if you could elaborate on current health of the golf industry, maybe in the U.S. versus international, and just how you see that translating to rounds played in in 25 and sustainability of the trends that you're seeing today.

David Maher: Given all the inputs, whether it's new golfers capacity et cetera.

David Maher: Our general approach and this wouldn't defer given particularly we're coming off record a record year would be to think about rounds as being flat and then and then mother nature does what she does and that pushes you up or down.

Yeah, Matt, so I'll start with with rounds of play.

David Maher: But the the golfer supply the participation rates are healthy.

Right, really strong year in the U.S.

Given all the inputs, whether it's new golfers, capacity, etc.

David Maher: So we've been doing this for a long long time in my time here. We generally think of rounds is flat and then that that informs our planning process.

Matthew Boss: Our general approach, and this wouldn't differ given particularly we're coming off a record year, would be to think about rounds as being flat, and then Mother Nature does what she does, and that pushes you up or down.

David Maher: Again, when we when we get good weather, we will see upward ticks when we when we get poor weather, we will see it go downwards.

David Maher: But I will I will point to just the inputs that the that.

David Maher: That inform our thinking that I made a couple of these comments in my prepared remarks around the golfer supply in the Gulf of base.

David Maher: So generally a healthy healthy golfer base that that.

David Maher: Is the starting point to our thinking.

David Maher: And in terms of in terms of rest of world are the trends are similar the.

David Maher: The dedicated golfer behavior is similar.

David Maher: But macro economic conditions have not been as robust they were they were softer in 'twenty three and 'twenty four.

David Maher: And we expect similar.

Matthew Boss: Is the starting point to our thinking.

David Maher: Conditions in twenty-five that said.

Matthew Boss:

Matthew Boss: In terms of in terms of rest of world. The trends are similar the the dedicated golfer behavior is similar.

David Maher: We are we are planning for growth outside the U S. In our business so part of that.

David Maher: New products part of that share it et cetera, So a high level, we like we like what we see from a golfer perspective, we like what we see from our participation perspective, there's always an element of caution baked into our planning, whether it's U S tariffs and inflation or ex U S, particularly in Japan and Korea.

Matthew Boss: But macro economic conditions have not been as robust they were they were softer in 'twenty three and 'twenty four.

Matthew Boss: And we expect similar conditions.

Matthew Boss: Conditions in 'twenty five.

Matthew Boss: That said we.

Matthew Boss: We are we are planning for growth outside the U S. In our business. So part of that is new.

David Maher: And the final final area I'd look at is what does the market look like certainly the green grass channel globally is very healthy our retail partners off course.

Matthew Boss: New products part of that share it et cetera, So a high level, we like we like what we see from a golfer perspective, we like what we see from our participation perspective, there's always an element of caution baked into our planning, whether it's U S tariffs and inflation or ex U S, particularly in Japan and Korea.

David Maher: Our healthy as well in inventories.

Our in our in very much a normal place for this time of year and we were asked we've been asked over the last couple of weeks about January sell through and my my key takeaways from January sell through which which was generally positive.

Matthew Boss: And the final the final area I would look at is what does the market look like certainly the green grass channel globally is very healthy.

David Maher: What was that pricing held up pretty well and what you sometimes see in January as you see you see some real price pressure as retailers and Oems, sometimes clear the decks to prepare for new product launches.

Matthew Boss: Our retail partners off course.

Matthew Boss: Our healthy as well in inventories.

Matthew Boss: Our in our in very much a normal place for this time of year and we were asked we've been asked over the last couple of weeks about January sell through and my my key takeaways from January sell through which which was generally positive.

Matthew Boss: We didn't we didn't see that in January so so Matt.

David Maher: Through a lot of extra there, but but summary view.

David Maher: Golf, we're still in pretty good shape you know.

Matthew Boss: What was that pricing held up pretty well and what you sometimes see in January as you see you see some real price pressure as retailers and Oems, sometimes clear the decks to prepare for new product launches.

David Maher: The macroeconomic pressures as well as I do we feel better about the U S than we do in Japan, and Korea, that's not different from the last couple of years.

David Maher: And again, our retailers are in a generally healthy spot so.

Matthew Boss: We didn't we didn't see that in January so so Matt.

David Maher: I think the I think the summation of all that is our guide and we're projecting a.

Matthew Boss: Ill throw a lot of extra there, but summary view.

David Maher: Growth in segments and growth in all regions, albeit a little faster paced in the U S.

Golf, we're still in pretty good shape.

Matthew Boss: The macroeconomic pressures as well as I do we feel better about the U S than we do in Japan, and Korea, that's not different from the last couple of years.

David Maher: Yeah.

Sean Sullivan: Maybe and then Sean just on gross margin could.

Sean Sullivan: Could you walk through puts and takes to consider this year and just health of channel inventory in the U S versus overseas today.

And again, our retailers are in a generally healthy spot. So I think the I think the summation of all that is our guide and we are projecting growth in segments and growth in all regions, albeit a little faster paced in the U S.

Sean Sullivan: Yeah.

Sean Sullivan: Yeah, just the just to add on and I'll take the second one first are you know I think the health of the channel inventory is very good you know, we obviously have worked through the foot joy apparel and footwear that we've been talking about probably for several quarters internationally, but we feel very very good about the health.

Matthew Boss: Yeah.

Speaker Change: Great and then Sean just on gross margin could you walk through puts and takes to consider this year and just health of channel inventory in the U S versus overseas today.

Sean Sullivan: The channel inventory.

Sean Sullivan: For 'twenty five as it relates to gross margin you know I'll talk a bit on the top line you know certainly we didn't raise our pricing on probuphine in the U S. But we did take pricing action I think in three or four of the international markets.

Matthew Boss: Yeah.

Matthew Boss: Yeah, just just to add on and I'll take the second one first you know I think the health of the channel inventory is very good.

Matthew Boss: Obviously have worked through the foot joy apparel and footwear that we've been talking about probably for several quarters internationally, but we feel very very good about the health of the channel inventory for.

Sean Sullivan: You're from you know you're aware of the pricing we took in the club business.

Sean Sullivan: Et cetera will do similarly in certain product categories within foot Joy. So I think there's an element of of higher asps coming into 2025.

Matthew Boss: Twenty-five as it relates to gross margin you know I'll talk a bit on the top line you know certainly we didn't raise our pricing on probuphine in the U S. But we did take pricing action and I think in three or four of the international markets.

Sean Sullivan: As it relates to cost of goods sold in distribution as I said the supply chain feels normalized I think the free environment right in fraying out is a little more normalized with no longer the threat of strikes et cetera.

Matthew Boss: You're from you know you're aware of the pricing we took in the club business.

Matthew Boss: Et cetera will do similarly in certain product categories within foot Joy. So I think there's an element of of higher asps coming into 2025.

Sean Sullivan: We are continuing to see the benefits and efficiencies of our owned and controlled distribution center here domestically in Massachusetts, which.

Matthew Boss: As it relates to cost of goods sold in distribution as I said the supply chain feels normalized I think the free environment freight in fraying out is a little more normalized with no longer the threat of strikes et cetera.

Sean Sullivan: Would I expect would continue to drive incremental efficiencies and leverage in the business. So overall, we feel about the gross margin environment as I said, a meeting and expanding relative to 'twenty four are in the 2025 period.

Matthew Boss: We are continuing to see the benefits and efficiencies of our owned and controlled distribution center here domestically in Massachusetts.

Matt: Thanks, Matt next question.

Matthew Boss: I would expect would continue to drive.

Matthew Boss: Incremental efficiencies and leverage in the business. So overall, we feel about the gross margin environment as I said meeting and expanding relative to 'twenty four are in the 2025 period.

Speaker Change: Our next question comes from Mike Swartz from curious Securities. Your line is now open. Please go ahead.

Mike Swartz: Hey, good morning, guys, maybe just a follow up to Matts last question I.

Speaker Change: I think with the global outlook it sounds like you'd be thinking kind of flattish status quo. It sounds like you're taking some pricing how do you think about just in that organic organic growth outlook. Just the the view between maybe unit volume and pricing is most of that pricing or are you waiting for some unit volume growth as well.

Matt: Thanks, Matt.

Matthew Boss: Question.

Speaker Change: Our next question comes from Mike Swartz from curious Securities. Your line is now open. Please go ahead.

Mike Swartz: Hey, good morning, guys, maybe just a follow up to Matts last question.

Speaker Change: Yeah, I would say, it's a combination of the two.

Speaker Change: I often refer to our product product launch.

Mike Swartz: I think with the global outlook it sounds like you'd be thinking kind of flattish status quo. It sounds like you are taking some pricing.

Speaker Change: Launch lifecycle calendars itself.

Speaker Change: It's approaching one year, they if I if I look back I think we were up double digits in 'twenty three we.

Speaker Change: How do you think about just in that organic organic growth outlook, just the view between maybe unit volume and pricing is most of that pricing or are you bidding for some unit volume growth as well.

Speaker Change: We have a nice ball year last year, which is not always the case in a in a year following a launch here.

Speaker Change: But we would certainly see a combination of unit growth and pricing, particularly on the equipment side, Mike maybe a little bit of a different story in the rest of our business which would be.

Speaker Change: Yeah, I would say, it's a combination of the two.

Speaker Change: I often refer to our product product.

Speaker Change: Launch lifecycle calendar is it's a it's a probably one year. They if I if I look back I think we were up double digits in 'twenty three we.

Speaker Change: Probably more level level, a level volumes, but but a bit more price on the on the gear and wearable side.

Speaker Change: We had a nice ball year last year, which is not always the case in a year following a launch here.

Speaker Change: But we would certainly see a combination of unit growth and pricing, particularly on the equipment side, Mike maybe a little bit of a different story in the rest of our business which would be.

Speaker Change: Okay.

Speaker Change: Helpful. And then just with the with the tariff commentary you just made.

Speaker Change: Maybe a little more.

Speaker Change: Context, there I think you had said your guidance doesn't include any potential tariffs or read patent retaliatory actions, but then I think you also said that it's about 10 million <unk> seven.

Speaker Change: Probably more level level, a level volumes, but but a bit more price on the on the gear and wearable side.

Speaker Change: $7 million hit on the incremental 10% to China coming out of China.

Speaker Change: Does the guidance actually include that $7 million or not include that $7 million.

Speaker Change: Okay.

Speaker Change: Helpful and then just.

Speaker Change: The tariff commentary just may.

Speaker Change: Can be a little more.

Speaker Change: Yeah, Mike. It does not include I, just think the environment is fairly dynamic right now so we thought to be reasonable and prudent was to highlight what we saw as the potential risk and isolate it for everyone as opposed to baking. It in so as we go forward here, we can update.

Speaker Change: Context, there I think you had said your guidance doesn't include any potential tariffs or.

Speaker Change: Inventory actions, but then I think you also said that about 10 million <unk> seven.

Speaker Change: $7 million hit on the incremental 10% to China coming out of China.

Speaker Change: Does the guidance actually include that $7 million or not include that $7 million.

Speaker Change: You each quarter, but but again I think that the important points for the for the Investor base is that we have minimal exposure to Canada, and Mexico, given our operations, we've done a wonderful job with our supply chain and having you know for one example, moving to Vietnam with the footwear production, which was complete.

Speaker Change: Yeah, Mike. It does not include I, just think the environment is fairly dynamic right now so we thought to be reasonable and prudent was to highlight what we saw as the potential risk and isolate it for everyone as opposed to baking. It in so as we go forward here, we can update.

Speaker Change: Good and is fully operational here in 25, so I think to have 6% exposure of cost of goods sold to China.

Speaker Change: You each quarter, but again I think that the important points for the for the for the Investor base is that we have minimal exposure to Canada, and Mexico, given our operations, we've done a wonderful job with our supply chain and having you know for one example, moving to Vietnam with the footwear production, which was complete.

Speaker Change: I think it's a good place for us to be you can imagine we're working with the teams to evaluate the supply chain other geographic sourcing options.

Speaker Change: Well as any potential pricing actions to mitigate that so that's our that's our best outlook today and felt the best to exclude it from the guide and you know we we've quantified it for you and we're hard at work are looking for ways to mitigate.

Speaker Change: Good and is fully operational here in 25, so I think to have 6% exposure of cost of goods sold to China. I think is a good place for us to be.

Speaker Change: You can imagine we're working with the teams to evaluate.

Speaker Change: Okay helpful. Thank you.

The supply chain other geographic sourcing options as well as any potential pricing actions to mitigate that so.

Speaker Change: Great. Thank you operator next question please.

Speaker Change: Thank you. Our next question comes from J P. Wallin from Roth Capital Partners. Your line is now <unk>. Please go ahead.

Speaker Change: That's our that's our best outlook today and felt the best to exclude it from the guide and we quantified it for you and we're hard at work looking for ways to mitigate.

Speaker Change: Good morning, everyone. Thanks for taking my questions.

Speaker Change: Let me just start.

Speaker Change: Kind of assessing the.

Speaker Change: Okay helpful. Thank you.

Speaker Change: Paul.

Speaker Change: Year.

Speaker Change: Great. Thank you operator next question please.

Speaker Change: Wanted to maybe clicking on them.

Speaker Change: I know you said that I think it was.

Speaker Change: Thank you. Our next question comes from J P. <unk> from Roth Capital Partners. Your line is now open. Please go ahead.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: What else can we do about kind of how that held up in the year and where that growth came from.

Speaker Change: Good morning, everyone. Thanks for taking my questions.

Speaker Change: And it's really just as I think about kind of.

Speaker Change: If we could maybe just start.

Speaker Change: How well do in the launch here going forward.

Speaker Change: We are assessing the.

Speaker Change: Paul.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Just wanted to maybe clicking on.

Speaker Change: Yeah.

Channel new opportunity arose in 2024.

Speaker Change: And I know you said that I think it was.

Speaker Change: Okay.

Speaker Change: You just broke up a bit.

Speaker Change: Yeah.

Speaker Change: What else can we do.

Speaker Change: So I don't know that we got your entire question.

Speaker Change: No.

Speaker Change: How has that held up in the year and where that growth came from my end.

I'm sorry can you hear me all right.

Speaker Change: It's really just as I think about kind of how.

Speaker Change: Yeah, that's a little bit better.

Speaker Change: Well it can do.

Speaker Change: Great.

Speaker Change: You're going for.

Speaker Change: Perfect really just assessing the <unk> strength in 2024 and kind of what that can tell us about.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: New channels, new opportunity arose in 2024.

Speaker Change: Just how strong of a launch here we can have in 2025.

Speaker Change: Can you just broke up a bit.

Speaker Change: Yeah, Okay J P. Thanks, as I said this just to walk it back a bit were in year.

Speaker Change: I don't know that we got your entire question.

Speaker Change: I'm sorry can you hear me all right.

Speaker Change: 25 of of Probie, one, which we're incredibly excited about and I said it earlier.

Speaker Change: Yeah, that's a little bit better.

Speaker Change: Okay.

Speaker Change: Perfect really just assessing the <unk> strength in 2024 and kind of what that can tell us about you know just how strong of a launch here we can have in 2025.

Speaker Change: It's it's a it's a journey of of innovation and continuous improvement.

Speaker Change: We take that initiative in charge very seriously so on the product side, we're very excited about <unk>.

Speaker Change: Yeah, Okay J P. Thanks.

Speaker Change: As I said this just to walk it back a bit were in year.

Speaker Change: Counts around the worldwide tours are up to 77%, which is higher than we would typically see and we point to the performance and quality of the pro V. One is a key driver to that.

Speaker Change: 25 of <unk>, one, which we're incredibly excited about and I said it earlier.

Speaker Change: It's a it's a journey of of innovation and continuous improvement.

In terms of the last couple of years and what it means for 2025.

Speaker Change: We take that initiative in charge very seriously so on the product side, we're very excited about <unk>.

Speaker Change: It starts with product. It. It is followed by we talk a lot about expanding or fitting networks. That's not just clubs that's balls too we've got a whole lot of ball fitting happening around the world that we think pays off.

Speaker Change: Our accounts around the worldwide tours are up to 77%, which is higher than we would typically see and we point to the performance and quality of the <unk>. One is a key driver to that.

Speaker Change:

Speaker Change: It's it's the positioning of AVX within the line. It's our performance models. So it's not just probie, one and again it was a terrific year for us to grow on the on the heels of of a 13% increase in 2023 and golf balls.

Speaker Change: In terms of the last couple of years and what it means for 2025.

Speaker Change: It starts with product. It. It is followed by we talk a lot about expanding our fitting networks. That's not just clubs that's balls too we've got a whole lot of ball fitting happening around the world that we think it pays off.

So in 'twenty for when you think about.

Speaker Change: The pipeline realities that happened in the launch here that don't that don't repeat in a in a non launch here. So I'll get to 20 or 25, and and really it's it's a product story. It's a fitting story. It's a that the team is committed to really telling our story well part of.

Speaker Change: Got.

Speaker Change: It's it's the positioning of AVX within the line. It's our performance models. So it's not just <unk> and again it was a terrific year for us to grow on the on the heels of of a 13% increase in 2023 and golf balls to do so in 24, when you think about the.

Speaker Change: Our investment in 'twenty, one 'twenty five as in A&P to tell the great story that we think we have tell.

Speaker Change: The pipeline realities that happened in the launch here that don't that don't repeat in a in a non launch here. So I'll get to 2025 and really it's it's a product story. It's a fitting story. It's a the team is committed to really telling our story well I'm part of <unk>.

Speaker Change: As as we look to expand our reach in the golf ball marketplace. So.

Speaker Change: We are anticipating and planning for growth as Sean said, a lot of that'll be first half, but we are anticipating and planning for growth.

Speaker Change: In in 2025, it it won't be to let the double digit level, we're not planning for the double digit level. We saw in 2023, our last launch, but we're certainly planning for nice growth in the golf ball franchise. It's it's you know it if there's one takeaway from today.

Speaker Change: Our investment in 2012 25 is in A&P to tell the great story that we think we have to tell.

Speaker Change: As as we look to expand our reach in the golf ball marketplace. So.

Speaker Change: We are anticipating and planning for growth as Sean said, a lot of that'll be first half, but we are anticipating and planning for growth.

Speaker Change: It's the health and vibrancy of our equipment segment balls and clubs and our willingness to continue to invest behind those franchises to continue to grow them.

Speaker Change: In in 2025, it it won't be to the double digit level, we're not planning for the double digit level, we saw in 2023 or less launch, but we're certainly planning for nice growth in the golf ball franchise. It's it's you know it.

Speaker Change: Great. Thank you and one follow up just on put Joy I know you mentioned kind of a SKU rationalization and maybe some price, but can you just share what else gives you confidence that that maybe we've kind of trough in that business.

Speaker Change: There is one takeaway from today.

Speaker Change: It's the health and vibrancy of our equipment segment balls and clubs and our willingness to continue to invest behind those franchises to continue to grow them.

Speaker Change: Yeah, I think it starts you you hit it it's what what were the actions, we're taking and Theres. Some obscure SKU reduction theres some line rationalization, but more than anything it's it's the new product pipeline we have.

Speaker Change: Great. Thank you and one follow up just on put Joy I know you mentioned kind of a SKU rationalization and maybe some price, but can you just share what else gives you confidence that that maybe we've kind of trough in that business.

Speaker Change: On the footwear side, we've had some outsized growth of apparel, we that business is in really good shape. So the things. We're controlling we think are very positive. This also underscores the reality that the last couple of years in footwear have been very tough I think global footwear or at least footwear sell through in the U S was was down upwards.

Speaker Change: Yes, I think it starts you hit it it's what what were the actions, we're taking and Theres. Some secure SKU reduction theres some line rationalization, but more than anything it's it's the new product pipeline we have on.

Speaker Change: A 10% last year and I think that we're at a point, where the footwear marketplace has corrected a I think it's going to normalize a bit in 2025, which should provide a better backdrop for us to.

Speaker Change: On the footwear side, we've had some outsized growth on apparel, we that business is in really good shape. So the things. We're controlling we think are very positive. This also underscores the reality that the last couple of years in footwear have been very tough I think global footwear or at least footwear sell through in the U S was was down upwards.

Speaker Change: Execute our strategy and again the strategy really leads with our.

Speaker Change: Premium performance product I mentioned Premier we're launching Hyperflex next week, we launched quantum a few weeks ago. Our high performance products that we think have meaningful points of difference both in terms of performance benefit in style.

Speaker Change: 10% last year, and I think that we're at a point, where the footwear marketplace has corrected a I think it's going to normalize a bit in 2025, which should provide a better backdrop for us to.

Speaker Change: So like like the actions, we're taking and and I think the marketplace.

Speaker Change: Execute our strategy and again the strategy really leads with our premium performance product I mentioned Premier we're launching Hyperflex next week, we launched quantum a few weeks ago. Our high performance products that we think have meaningful points of difference both in terms of performance benefit in style.

Is going to be healthier and we see that in inventory data, we called that out in the U S. We saw improved last year, we thought it would take longer ex U S to improve and it has but we're approaching 2025 for the first time in a couple of years as though the footwear market will be normalized.

Speaker Change: So like like the actions, we're taking and I think the marketplace.

Speaker Change: Great. Thank you and best of luck going forward.

Speaker Change: Thanks, J P. J P. Operator next question.

Speaker Change: He is going to be healthier and we see that in inventory data, we called that out in the U S. We saw improved last year, we thought it would take longer ex U S to improve and it has but we're approaching 2025 for the first time in a couple of years as though the footwear market will be normalized.

Speaker Change: Our next question today is from now is that skin from Keybanc capital markets. Your line is now eight then please proceed.

Speaker Change: Hi, Thanks for taking my questions.

Speaker Change: I guess first just.

Speaker Change: Wondering if you could kind of.

Speaker Change: Provide any thoughts around the competitive environment looking out to 2025, I know some others have kind of pointed to maybe a more robust launch calendar in terms of industry product launches than in recent prior years. So just wondering if you. If you had any thoughts there I know you you also.

Speaker Change: Great. Thank you and best of luck going forward.

Speaker Change: Thanks, J P. J P. Operator next question.

Speaker Change: Our next question today is from now is that skin from Keybanc capital markets. Your line is now open. Please proceed.

Speaker Change: Hi, Thanks for taking my questions.

Speaker Change: I guess first just wondering if you could kind of.

Speaker Change: Kind of pointed to maybe promo kind of in check in January.

Provide any thoughts around the competitive environment looking out to 2025.

Speaker Change: But just any thoughts on promo looking out as.

Speaker Change: As well yeah, yeah, our real time data promos and check in January that's that's the best way to think about it.

Speaker Change: Some others have kind of pointed to maybe a more robust launch calendar.

Speaker Change: In terms of industry product launches than in recent prior years. So just wondering if you had any thoughts there I know you you also kind of pointed to maybe promo kind.

Speaker Change: You know our we're on a little bit of a different calendar than most of the market. We launch we launched our driver in Q3, a lot of our competitors launched products in the first part of the year.

Speaker Change: In check in January.

Speaker Change: We see the market as very competitive as it always is so so I'm not sure I see it meaningfully different from years past.

Speaker Change: But just any thoughts on promo looking out.

Speaker Change: Well, yeah, yeah, our real time data promos and check in January that's that's the best way to think about it.

Speaker Change: It it does sort of prompt me to remind everybody of our dedicated golfer focus and that were a bit more narrow in our approach and reach and sometimes that are that allows us to be less susceptible to the broader market.

Speaker Change: You know our we're on a little bit of a different calendar than most of the market. We launch we launched our driver in Q3, a lot of our competitors launch products in the first part of the year.

Speaker Change: We see the market as very competitive as it always is so so I'm not sure I see it meaningfully different from years past.

Speaker Change: The broader market competitive forces in terms of you know going after a broader base of the marketplace, but it's it's competitive it's competitive and drivers and it's competitive and balls.

Speaker Change: It it does sort of prompt me to remind everybody of our dedicated golfer focus and that were a bit more narrow in our approach and reach and sometimes that are that allows us to be less susceptible to the broader market.

Speaker Change: I'm not sure, it's any more or less competitive than it's been in years prior.

Speaker Change: What we will watch given all of this is what happens to pricing in the months ahead and really in Q2 Q3.

Speaker Change: The broader market competitive forces in terms of going after a broader base of the marketplace, but it's it's competitive it's competitive and drivers as competitive and balls.

Speaker Change: In all the product that arrived in the market right. The winters, We'll we'll march forward in an old price and in others, we'll maybe have to take some pricing action. So.

Speaker Change: I'm not sure, it's any more or less competitive than it's been in years prior.

Speaker Change: Again, I don't I don't see this as an extreme outlier year I see this as a typically competitive environment.

Speaker Change: What we will watch given all of this is what happens to pricing in the months ahead and really in Q2 Q3.

Speaker Change: That's how that's how we're approaching things and again.

Speaker Change: Data point in one month, but but promotional activity seems to be.

Speaker Change: When all the product that arrived in the market right. The winners will will March forward and hold price and others will maybe have to take some pricing actions. So.

Speaker Change: In Czech and normalize then at minimum no worse than what we saw a year ago.

Speaker Change: Great. That's really helpful. And then maybe just just one on on Korea.

Speaker Change: Again, I don't I don't see this as an extreme outlier year I see this as a typically competitive environment.

Speaker Change: I think the results were pretty strong during <unk>, but you kind of flagged that as as kind of a market that youre watching just maybe any update there.

Speaker Change: And that's how that's how we're approaching things and again, a data point of one month, but promotional activity seems to be in check and normalized and at minimum no worse than what we saw a year ago.

In terms of kind of the state of play on the ground and how youre thinking about that piece of the business. Thanks, Yeah. So Korea is a terrific market right rounds up 20, some odd 22% since 2019, I think they were down two or 3% last year.

Speaker Change: Great. That's really helpful. And then maybe just just one on on Korea.

Speaker Change: Yes.

Speaker Change: I think the results were pretty strong during <unk>, but you kind of flagged that as kind of a market that youre watching just maybe any update there.

Speaker Change: They had some tough weather early but it but it's a resilient vibrant golf market yet.

Speaker Change: They of course, they are consumers under some duress it has been for a little bit and they've got some they've got some political unrest that we're watching as.

Speaker Change: In terms of kind of the state of play on the ground and how youre thinking about that piece of the business. Thanks, Yeah. So Korea is a terrific market right rounds up 20, some odd 22% since 2019, I think they were down two or 3% last year.

As we think about Korea, I would I would characterize it this way where we're bullish on equipment as excuse me as we have been a lot of our Korea commentary has been built around the wearable space and that that market went through a a ride in the early.

Speaker Change: They had some tough weather early but it but it's a resilient vibrant golf market yet.

Speaker Change: Of course their consumers under some duress it has been for a little bit and they've got some they've got some political unrest that we're watching as.

Speaker Change: <unk> 2021 'twenty two some exponential growth in premium Super premium apparel, and we've seen a correction in that space. So as you know we have a we have a sizable apparel presence in Korea, our title list apparel franchise.

Speaker Change: As we think about Korea, I would I would characterize it this way where we're bullish on equipment.

Speaker Change: Excuse me as we have been a lot of our Korea commentary has been built around the wearable space and that that market went through a.

Speaker Change: And that entire segment of premium apparel has been soft the last couple of years. So.

Speaker Change: As we think about as we think about Korea feel stronger about about equipment than we do apparel.

Speaker Change: Right in the early.

Speaker Change: 'twenty 2021 'twenty two some exponential growth in premium Super premium apparel, and we've seen a correction in that space. So as you know we have a we have a sizable apparel presence in Korea are titlist apparel franchise.

Speaker Change: And it is an outsized apparel market just for it for the size of it that's.

Speaker Change: That said, we think we think another year of correction should put it back to a path of normalcy, but in terms of the dedicated golfer in that market.

Speaker Change: And that entire segment of premium apparel has been soft the last couple of years. So as we think about as we think about Korea.

Speaker Change: A lot of alive, and well and work we're confident.

Speaker Change: In their continued resilience, but there are some macro forces and really the outsized impact of of of Wearables in that market and that's really been the the root of our of our caution in the last couple of years and into 2025.

Speaker Change: I feel stronger about about equipment than we do apparel.

Speaker Change: And it is an outsized apparel market just for it for the size of it.

Speaker Change: That said, we think we think another year of correction should put it back to a path of normalcy, but in terms of the dedicated golfer in that market.

Speaker Change: Great. Thank you.

Speaker Change: Thanks Noah.

Speaker Change: A lot of alive, and well and were confident.

Speaker Change: Thanks, Noah and everybody. We appreciate your time and interest and attention on the call and hope you have a great spring and we look forward to catching up.

Speaker Change: And in their continued resilience, but there are some macro forces and really the outsized impact of of of Wearables in that market and that's really been the the root of our of our caution in the last couple of years and into 2025.

Speaker Change: On our next on our next call.

That concludes today's call you may now disconnect your lines.

Speaker Change: [music].

Speaker Change: Great. Thank you.

Noah: Thanks Noah.

Speaker Change: And everybody. We appreciate your time and interest and attention on the call Hope you have a great spring and we look forward to catching up.

Noah: On our next on our next call.

Speaker Change:

Noah: That concludes today's call you may now disconnect your line.

Noah: Yeah.

Noah: Okay.

Noah: Yeah.

Noah: Yeah.