Acushnet Holdings Corp. (NYSE:GOLF) is the global leader in the design, development, manufacture and distribution of performance-driven golf products. The company is the steward of two of the most revered brands in golf - Titleist, one of golf's leading performance equipment brands, and FootJoy, one of golf's leading performance wearable brands.

Business Overview

Acushnet's target market is dedicated golfers, who are the cornerstone of the worldwide golf industry. These dedicated golfers are avid and skill-biased, prioritizing performance and committing the time, effort and money to improve their game. The company's differentiated focus on performance and quality excellence, enduring connections with dedicated golfers, and favorable mix of consumable and durable products have been the key drivers of its solid financial performance.

Financials

In the fiscal year 2023, Acushnet reported annual net income of $198,429,000 and annual revenue of $2,381,995,000. The company generated annual operating cash flow of $371,827,000 and annual free cash flow of $271,228,000. These strong financial results demonstrate Acushnet's ability to consistently deliver value to its shareholders.

For the first quarter of 2024, Acushnet reported net sales of $707,554,000, a 3.1% increase compared to the same period in 2023. This growth was driven primarily by higher sales volumes in Titleist golf clubs and Titleist golf balls, partially offset by lower sales volumes in FootJoy golf wear. Geographically, net sales increased 13.1% in the United States, but declined in other regions, including EMEA (-3.0%), Japan (-19.8%), and Korea (-15.4%), mainly due to lower sales in the FootJoy golf wear segment and lower sales of products not allocated to the company's four reportable segments.

Gross profit for the first quarter of 2024 increased by $12.2 million to $377,939,000, with gross margin expanding to 53.4% from 53.3% in the prior year period. The increase in gross profit was primarily driven by higher sales volumes in Titleist golf clubs and Titleist golf balls, partially offset by a decrease in FootJoy golf wear.

Selling, general and administrative (SG&A) expenses increased by $14.1 million to $236,592,000 in the first quarter of 2024. This increase was due in part to higher advertising and promotional expenses, administrative expenses, and selling expenses, as well as $7.0 million in restructuring costs associated with the company's footwear manufacturing joint venture.

Research and development (R&D) expenses increased by $2.0 million to $16,453,000 in the first quarter of 2024, primarily due to increases in employee-related expenses and to support new product introductions.

Interest expense, net increased by $3.2 million to $13,076,000 in the first quarter of 2024, primarily due to an increase in interest rates and borrowings.

Income tax expense increased by $2.7 million to $23,407,000 in the first quarter of 2024, with the effective tax rate rising to 21.7% from 18.1% in the prior year period, primarily driven by changes in the company's jurisdictional mix of earnings.

Segment Performance

Acushnet's reportable segments include Titleist golf balls, Titleist golf clubs, Titleist golf gear, and FootJoy golf wear. In the first quarter of 2024, the Titleist golf balls segment reported a 9.3% increase in operating income, driven by higher sales volumes and gross profit. The Titleist golf clubs segment reported a 22.5% increase in operating income, also due to higher sales volumes and gross profit. The Titleist golf gear segment saw a 17.2% decrease in operating income, primarily due to higher operating expenses. The FootJoy golf wear segment reported a 14.3% decrease in operating income, driven by lower sales volumes and gross profit.

Outlook

Looking ahead, Acushnet is maintaining its full-year 2024 revenue guidance of $2.45 billion to $2.5 billion, representing a 4.3% increase at the midpoint on a constant currency basis compared to 2023. The company is also reaffirming its full-year 2024 adjusted EBITDA outlook of $385 million to $405 million.

Liquidity

Acushnet's balance sheet and cash flow positions remain strong, allowing the company to execute its capital allocation strategy with ongoing investments in the business and return of capital to shareholders. As of March 31, 2024, Acushnet had a net leverage ratio of 1.9x using average trailing net debt. The company returned approximately $50 million to shareholders in the first quarter of 2024, with $35 million in share repurchases and $15 million in cash dividends.

Conclusion

The golf industry is on firm footing, with Acushnet well-positioned to capitalize on the growing interest and participation in the sport. The company's focus on innovation, quality, and serving the dedicated golfer has been the foundation of its success. With a strong brand portfolio, diversified product mix, and healthy financial position, Acushnet is poised to continue its leadership in the golf equipment market.