Company Overview

Acushnet Holdings Corp. (GOLF) is a global leader in the design, development, manufacture, and distribution of high-performance golf products. With its iconic Titleist and FootJoy brands, the company has established a reputation for delivering cutting-edge technology, superior quality, and unparalleled customer satisfaction in the golf equipment and apparel markets.

Founded in 1910 and headquartered in Fairhaven, Massachusetts, Acushnet’s history is deeply rooted in the game of golf. The company’s journey began with the establishment of Titleist in 1932, which quickly became a premier golf ball brand favored by many of the game’s top players. Over the decades, Titleist expanded its product offerings to include golf clubs, wedges, putters, and other golf gear, solidifying its position as a comprehensive golf equipment provider known for its commitment to innovation, quality, and performance.

Acushnet’s portfolio further expanded with the acquisition of FootJoy in 1985. Founded in 1857, FootJoy had already established itself as a leading manufacturer of golf shoes. In the 1970s, FootJoy diversified its product range to include other golf apparel and accessories, becoming one of the most recognizable brands in the golf industry. This strategic acquisition significantly strengthened Acushnet’s position as a golf industry leader, allowing the company to offer a full range of golf equipment and apparel under its umbrella.

Throughout its history, Acushnet has faced various challenges, including changing consumer preferences, increased competition, and macroeconomic factors impacting the golf industry. However, the company’s unwavering focus on innovation, quality, and meeting the needs of dedicated golfers has enabled it to navigate industry fluctuations successfully and continue growing its business.

Financials

Acushnet’s financial performance has been consistently strong, with the company reporting net sales of $2.38 billion and net income of $198.43 million in the fiscal year ended December 31, 2023. The company’s robust balance sheet, with a net debt to EBITDA ratio of 1.8x as of September 30, 2024, provides the necessary financial flexibility to pursue strategic initiatives and navigate market challenges.

One of Acushnet’s key strengths is its diversified product mix, which includes both consumable (golf balls and golf gloves) and more durable (golf clubs, golf shoes, golf gear, and golf apparel) offerings. This balanced portfolio helps the company navigate the cyclical nature of the golf industry and provides a stable revenue stream.

During the first nine months of 2024, Acushnet reported net sales of $2.01 billion, a 3.1% increase compared to the same period in 2023. This growth was primarily driven by strong performance in the Titleist Golf Clubs and Titleist Golf Gear segments, which saw increases of 9.3% and 3.2%, respectively, on a constant currency basis.

The company’s Titleist Golf Balls segment, which accounts for a significant portion of its revenue, reported a 4.7% increase in net sales on a constant currency basis during the first nine months of 2024. This growth was supported by the continued popularity of the Pro V1 and Pro V1x golf ball models, which are widely used by professional and avid golfers. For the first nine months of 2024, the Titleist golf balls segment generated $646.00 million in net sales, a 3.80% increase compared to the same period in 2023. This segment’s operating income increased 2.10% to $134.30 million, driven by higher sales volumes and lower manufacturing costs.

The Titleist golf clubs segment reported an 8.30% increase in net sales to $595.30 million for the first nine months of 2024. Operating income in this segment grew 5.20% to $124.70 million, primarily due to higher sales volumes of the company’s new SM10 wedges and GT drivers and fairways, partially offset by lower sales of hybrids.

The Titleist golf gear segment saw a 2.20% increase in net sales to $188.70 million, with operating income up 6.00% to $28.30 million. The growth was driven by higher sales volumes in travel product categories and improved margins from lower cost of customization.

FootJoy, Acushnet’s golf wear division, experienced a 3.50% decrease in net sales to $482.80 million during the first nine months of 2024, primarily due to softer market conditions in the apparel and footwear categories. However, operating income increased 5.80% to $34.80 million. The sales decline was due to lower volumes across all product categories, partially offset by higher average selling prices, especially in the apparel line. The company remains focused on diversifying its FootJoy supply chain and enhancing its product innovation to drive future growth in this segment.

In the most recent quarter (Q3 2024), Acushnet reported revenue of $620.50 million, a 4.6% increase year-over-year, driven by higher sales volumes in Titleist Golf Clubs. Net income for the quarter was $56.22 million, a slight decrease due to higher operating expenses. Operating cash flow for Q3 2024 was $144.11 million, with free cash flow of $123.70 million.

Geographically, the United States accounted for 60.3% of net sales in Q3 2024, up 6.2% year-over-year. This was driven by increases in Titleist Golf Clubs and Gear. Net sales in regions outside the US increased 2.2%, with gains in Japan, Korea and Rest of World, partially offset by a decline in EMEA.

Liquidity

Acushnet’s commitment to research and development (R&D) is a key driver of its success. The company invests significantly in innovation to stay ahead of evolving consumer preferences and technological advancements in the golf industry. This dedication to R&D has enabled Acushnet to consistently introduce new and improved products that cater to the needs of dedicated golfers, its primary target market.

In addition to its organic growth initiatives, Acushnet has also demonstrated its ability to execute strategic acquisitions to complement its product portfolio. In January 2023, the company acquired certain trademarks from West Coast Trends, Inc., a leading provider of premium golf travel products, to enhance its Titleist Golf Gear segment.

As of September 30, 2024, Acushnet had a strong liquidity position with $99.06 million in cash and cash equivalents. The company’s debt-to-equity ratio stood at 0.845, indicating a balanced capital structure. Acushnet also maintains a $950 million multi-currency revolving credit facility, of which $586.70 million was available as of September 30, 2024, providing additional financial flexibility.

The company’s current ratio of 2.10 and quick ratio of 1.14 as of September 30, 2024, demonstrate its ability to meet short-term obligations and maintain a healthy working capital position.

Looking ahead, Acushnet is well-positioned to continue its growth trajectory. For the full year 2024, the company has narrowed its adjusted EBITDA guidance range to $395 million to $405 million. Acushnet is also reaffirming its net sales guidance range of $2.45 billion to $2.5 billion on a reported basis, expecting to be towards the lower end of this range due in part to foreign exchange impacts.

In the fourth quarter of 2024, Acushnet expects year-over-year sales growth in all segments except Golf Balls, which is anticipated to decline in the last quarter of the 2-year product life cycle. The company also expects year-over-year improvement in fourth quarter adjusted EBITDA, which includes incremental investments in SG&A and R&D as they look to build on this year’s momentum heading into 2025.

Challenges and Outlook

However, the company is not without its challenges. Acushnet operates in a highly competitive golf equipment and apparel market, where it faces rivalry from both established players and newcomers. Additionally, the company is exposed to macroeconomic risks, such as changes in consumer spending patterns and foreign currency fluctuations, which could impact its financial performance.

The global golf industry is experiencing mixed trends, with golf participation, as measured by rounds played, increasing 2% year-to-date in the United States but declining 2% in regions outside the US. Despite these regional variations, the global golf equipment and apparel market is projected to grow at a compound annual growth rate (CAGR) of 4-6% over the next 5 years, driven by increased golf participation and new product innovation.

Acushnet is taking proactive steps to optimize its operations and strengthen its competitive position. The company anticipates incurring a restructuring charge in the fourth quarter of 2024 related to the full transition of their footwear supply chain to Vietnam in early 2025. This move is expected to improve operational efficiency and potentially reduce costs in the long term.

Overall, Acushnet Holdings Corp. (GOLF) is a well-established and respected player in the dynamic golf equipment industry. Its strong brand portfolio, diversified product mix, commitment to innovation, and prudent financial management have enabled the company to deliver consistent financial performance and position it for continued success in the years ahead. With its focus on meeting the needs of dedicated golfers and its ability to adapt to changing market conditions, Acushnet is well-equipped to capitalize on the projected growth in the global golf equipment and apparel market.

Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.