Acushnet Holdings Corp (NYSE: NYSE:GOLF), the parent company of Titleist and FootJoy, reported a 4% increase in worldwide net sales to $708 million in Q1 2024, compared to the same period last year. The company experienced growth in its golf ball and club segments, benefiting from an improved supply chain and a new distribution center. Despite a decline in rounds played in Korea and the UK due to poor weather, the US market saw a 13% increase in net sales.
However, Acushnet's FootJoy business saw a 6% decrease in the quarter. The company's Titleist golf balls were chosen by winners in 16 of the first 18 PGA Tour events of the season. Acushnet maintained its full-year revenue forecast of $2.45 billion to $2.5 billion and adjusted EBITDA projections of $385 million to $405 million. The company's financial position remains robust, supporting ongoing business investments and shareholder returns.
Key Takeaways
- Acushnet reported a 4% increase in worldwide net sales, reaching $708 million in Q1 2024.
- Growth was observed in golf balls and clubs, with Titleist balls being used by winners in the majority of early PGA Tour events.
- Rounds of play increased in the US by 7% for the quarter, with a notable 21% rise in March.
- Sales in the US grew by 13%, while EMEA, Japan, and Korea saw declines of 5%, 10%, and 12%, respectively.
- The FootJoy segment experienced a 6% decrease in sales during the quarter.
- The company reaffirmed its full-year 2024 revenue and adjusted EBITDA guidance.
- Acushnet's balance sheet and cash flow positions are strong, enabling continued investment and shareholder capital return.
Company Outlook
- Full-year 2024 revenue expected to be between $2.45 billion and $2.5 billion.
- Adjusted EBITDA forecasted to be between $385 million and $405 million.
- Investments in fitting networks, fitting apps, and technology to drive efficiency and create operating leverage.
- Plans for FootJoy's FitLab to launch in 2025.
Bearish Highlights
- Declines in net sales in EMEA, Japan, and Korea due to unfavorable weather conditions.
- FootJoy business saw a 6% decrease in sales for the quarter.
- Concerns over golf ball inventory levels.
Bullish Highlights
- Strong performance in the golf ball and club segments.
- Successful launches of new products, including T-Series irons and Scotty Cameron putters.
- The new North America distribution center exceeded expectations, promising long-term benefits.
Misses
- FootJoy's decline in sales, despite the overall positive performance of the company.
- Adverse weather conditions impacting rounds of play in Korea and the UK.
Q&A Highlights
- Confidence in the current inventory position, except for some concerns in the golf ball category.
- The promotional environment remains standard, with no unusual activities.
- Efforts to attract new players like women and juniors through lessons and facility investments.
- Optimistic about the health of the golf industry and its capacity for reinvestment.
Throughout the article, the company referred to is Acushnet Holdings Corp, and the ticker mentioned is NYSE: GOLF. The information provided reflects the company's performance and market conditions as of Q1 2024. The company's executives remain positive about the future, citing strong demand, strategic investments, and a solid financial position to navigate market challenges.
InvestingPro Insights
Acushnet Holdings Corp (NYSE: GOLF) has demonstrated commendable financial discipline and shareholder value through its strategic decisions. The company's management has been actively engaging in share buybacks, signaling confidence in the firm's intrinsic value and future prospects. Additionally, the consistent increase in dividend payouts for seven years is a testament to Acushnet's stable cash flow and commitment to returning value to shareholders.
InvestingPro Tips for GOLF highlight the company's ability to maintain dividend payments for eight consecutive years and the fact that liquid assets surpass short-term obligations, indicating a solid liquidity position. These aspects are particularly relevant as they underscore the company's financial health and its potential to withstand market fluctuations while continuing to invest in growth initiatives.
From the real-time metrics provided by InvestingPro, Acushnet's Market Cap stands at $4.15 billion, with a Price/Earnings (P/E) Ratio of 22.2, which is slightly adjusted to 20.9 for the last twelve months as of Q4 2023. While the company is trading at a high P/E ratio relative to near-term earnings growth, with a PEG Ratio of 3.02, this may reflect market expectations for future earnings potential. The Price/Book ratio of 4.8, coupled with a Revenue Growth of 4.92% over the last twelve months, indicates that the company is valued above book value, potentially due to strong brand equity and market position.
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Full transcript - Acushnet Holdings Corp (GOLF) Q1 2024:
Operator: Good morning, everyone. And welcome to the Acushnet Holdings Conference. My name is Chatch, and I'll be coordinating this call today [Operator Instructions]. I would now like to pass the conference over to your host, Sondra Lennon, Vice President of FP&A and Investor Relations. Please go ahead.
Sondra Lennon: Good morning, everyone. Thank you for joining us today for Acushnet Holdings Corp's first quarter 2024 earnings conference call. Joining me this morning are David Maher, our President and Chief Executive Officer; and Sean Sullivan, our Chief Financial Officer. Before turning the call over to David, I would like to remind everyone that we will be making forward-looking statements on the call today. These forward-looking statements are based on Acushnet's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations. For a list of factors that could cause actual results to differ, please see today's press release, the slides that accompany our presentation and our filings with the US Securities and Exchange Commission. Throughout this discussion, we will make reference to non-GAAP financial metrics, including items such as net sales on a constant currency basis and adjusted EBITDA. Explanations of how and why we use these metrics and reconciliations of these items to the most directly comparable GAAP metric can be found in the schedules in today's press release, the slides that accompany this presentation and in our filings with the US Securities and Exchange Commission. Please also note that references throughout this presentation to year-on-year sales increases and decreases are on a constant currency basis unless otherwise stated as we feel this measurement best provides context as to the performance and trends of our business. And when referring to year-to-date results or comparisons, we are referring to the three month period ended March 31, 2024 and the comparable three month period in 2023. With that, I'll turn the call over to David.
David Maher: Thanks, Sondra. And good morning, everyone. As always, we appreciate your interest in Acushnet Holdings. I am pleased to report on a strong start to the year for Acushnet led by our momentum in golf balls and Clubs, supported by continued supply chain enhancements and better than expected start-up at our new North American distribution center. As is customary, in Q1, we launched a wide range of new products across our portfolio, helping to deliver worldwide net sales of $708 million, a 4% constant currency increase over last year. This contributed to adjusted EBITDA of $154 million, a 5% gain for the quarter. Global interest in golf and rounds of play continue to be healthy. US rounds were up 21% in March and 7% for the quarter, positive trends particularly given poor weather across the southeast. Conversely, rounds were off 9% and 12% in Korea and the UK where elevated rainfall caused delayed starts to their seasons. These weather related puts and takes are common for Q1 and inline with the widely held belief that the golf season more often than not starts with the Masters in early April. Getting to our segment results, you see golf ball sales increased 9% in the quarter, which is noteworthy given the steep comp against last year's sizable Pro V1 launch and 21% growth. This gain was led by double digit growth in the US. We successfully launched new AVX, Tour Soft and TruFeel models in the quarter and also benefited from greater than expected demand fulfillment in our Pro V1 loyalty rewarded program in March. This golf ball success was supported by an especially fast start on the PGA Tour, where Titleist golf balls were used by the winners of 16 of the first 18 events of the 2024 season. Titleist golf clubs also posted a strong quarter with sales up 14% led by solid gains in the US, Japan and EMEA. Our new T-Series irons have been well received and we successfully launched new Vokey Design SM10 wedges and Scotty Cameron Phantom putters in the period. Our wedge launch was especially well executed as our operations group completed our global launch in Q1 and a few weeks ahead of schedule. Titleist gear sales were up 2% in the quarter on double digit growth in the US, and our FootJoy business was off 6% in the quarter inline with expectations as growth in the US was more than offset by declines in international markets. We are pleased with the early response to new footwear and apparel lines and anticipate growing momentum for FootJoy as the footwear market stabilizes in the back half of the year. Later this month, FJ will launch the new mobile FitLab performance fitting system to help golfers select the best performing, best fitting and most comfortable golf footwear. This tech enabled golf footwear fitting experience will be in pilot mode in the US this summer. And longer term, we anticipate increasing our investment in FJ FitLab to support the global build out of this value added fitting service and golfer connection opportunity. Also in the quarter, net sales of products not allocated to a reportable segment were down with continued momentum and growth from shoes not enough to offset a decline in our Korean Titleist Apparel business. Now looking at the quarter by region. You see the US market was up 13% with gains coming from all segments and coinciding with a positive rounds of play story. EMEA was off 5%, reflecting an especially wet spring and slow start to their golf season. Japan was off 10% as gains in golf clubs were more than offset by declines in other product categories. And Korea was off 12%, mainly from Titleist apparel declines and poor weather, which delayed the start to their golf season as rounds were off 9%. In summary, we are pleased with our start to the year as the strength of golf balls and golf clubs and benefits from continued progress at our North American DC offset delayed starts in EMEA and Asia where we anticipate improving results as their seasons open up. As Sean will address, the company is well positioned as we enter Q2 with healthy inventory positions and a strong balance sheet to support our continued organic investment and shareholder return programs. The golf industry is on firm footing. And while Acushnet is not immune to macroeconomic or weather related pressures, our business has over time proven to be resilient due to the avidity and favorable demographic profile of our core consumer, the sports dedicated golfer. Our global teams have done nice work positioning Titleist, FootJoy and shoes products in golf shops and we are confident in our ability to deliver compelling product, fitting and service experiences to golfers throughout the upcoming season. Thanks for your attention this morning. I will now pass the call over to Sean.
Sean Sullivan: Thank you, David. Good morning, everyone. As David highlighted, we had a strong start to 2024 with the first quarter net sales increase of 4% over prior year. Adjusted EBITDA was $153.7 million, a 4.7% increase from the first quarter of 2023. Net sales growth in the quarter was driven by continued momentum of our Titleist brand with golf clubs, golf balls and golf gear growing by 14%, 9% and 2%, respectively. FootJoy net sales declined 6% in the quarter. Geographically, net sales were up in Q1 in the US but declined in Korea, Japan and EMEA, primarily due to lower net sales within our FootJoy golf wear segment and lower net sales of products that are not allocated to one of our four reportable segments. Gross profit in the first quarter of $378 million was up 3% or $12 million compared to 2023, primarily due to increased net sales, partially offset by lower net sales and unfavorable manufacturing overhead absorption in FootJoy golf wear. SG&A expense of $237 million in the quarter increased $14 million or 6% from 2023 due in part to increases in advertising and promotional expense, information technology related expenses and employee related selling expenses, which were partially offset by lower retail commission expense in Korea. SG&A expense in the first quarter also included $7 million of restructuring costs related to the closing of certain production lines in China as a portion of our footwear production transitions to Vietnam. Interest expense of $13 million in the quarter was up $3 million due to an increase in interest rates and borrowings. Our effective tax rate in Q1 was 21.7%, up from 18.1% last year, primarily driven by a shift in our jurisdictional mix of earnings. Moving to our balance sheet and cash flow highlights. Our balance sheet and cash flow positions continue to be very strong, allowing us to execute our capital allocation strategy with ongoing investments in the business and return of capital to shareholders being our highest priorities. Our net leverage ratio using average trailing net debt at the end of Q1 was 1.9 times. Inventories overall declined 13% from the fourth quarter of 2023 with decreases across all of our product segments. When comparing to last year's first quarter, inventories are down 16%. And at this point in the year, we are comfortable with our current inventory position. Cash used in operations increased from the first quarter of 2023, primarily due to changes in working capital. Capital expenditures were $7 million in the first quarter of 2024 and are still expected to reach approximately $85 million in fiscal year '24. Through March, we returned roughly $50 million to shareholders with $35 million in share repurchases and $15 million in cash dividends. During April, our Board of Directors declared a quarterly cash dividend of $0.215 per share payable on June 21st to shareholders of record on June 7th, 2024. On March 14, 2024, we entered into a new agreement with Magnus to purchase an equal amount of stock as we purchase on the open market from April 1st to June 28, 2024 up to an aggregate of $37.5 million. As of March 31, 2024, we had $340 million remaining under the current share repurchase authorization. Turning to our full year 2024 outlook. We are maintaining our view for revenue to be between $2.45 billion and $2.5 billion, up 4.3% at the midpoint on a constant currency basis compared to 2023. We are also reaffirming our adjusted EBITDA outlook and still expect full year 2024 to be between $385 million and $405 million. As David mentioned, we had a solid start to the year behind our newly launched golf ball models and strong demand and fulfillment of our loyalty rewarded program during the quarter. In clubs, our operations team was successful in the launch of our Vokey SM10 wedges. Following these accomplishments, we still expect net sales in the first half to be up low single digits compared to the first half of 2023 and adjusted EBITDA to be flat with last year's first half. In closing, we are very pleased with our performance in the first quarter of the year and remain focused on executing on our strategic initiatives for the remainder of the year. With that, I will now turn the call over to Sondra for Q&A.
Sondra Lennon: Thank you, Sean. Operator, could we now open up the lines for questions?
Operator: [Operator Instructions] We have our first question from Matthew Boss from JPMorgan.
Matthew Boss: So David, you cited the golf industry as structurally healthy today. Could you elaborate on overall participation and engagement that you're seeing from your dedicated golfer? Any change in US momentum post Masters? And on a global basis, any call outs on the international front just with the divergence in top line performance?
David Maher: So first off, I think it's worth a minute to look at the US market, very strong rounds of play data up 20% some odd in March and up 6% or 7% for the quarter. That I think needs to be taken with a grain of salt, because you had some tough weather in the Southeast that affected play and affected the market. So we're very pleased with the overall interest in demand and participation levels. Rounds of play in the North in Q1 are different than rounds of play in the South in Q1. I think that really just points to the weather differences we saw. But overall, structurally very pleased. And again, in markets where you had tough weather, you saw rounds decline, you saw slower retail. And conversely where you had favorable weather, you saw some nice upticks. Moving around the globe a bit, I called out, we just -- we had some particularly wet starts to the season, very common in Q1. You're going to have some slow starts and some quicker starts. Wet weather, I think I called out Korea and the UK slowed their starts to the season. But generally speaking, where you saw decent weather, you saw rounds play favorable. So to our golfer and the dedicated player, not a lot has changed in the last months and quarters. Demand is strong, they are avid, they're resilient. Again, the biggest call out at this stage is really focused on weather. But in terms of early demand, I'll point to some of our new product launches, whether it's golf balls. I noted on the call that we're pleased and it was a unique quarter in that we drove gains from all models, newly launched performance models and also Pro V1, which comped against last year's launch. So we like the way that played out in the quarter. Some strong club launches led by Vokey wedges and Phantom putters, that's a mallet putter. Mallets are particularly strong these days, so our timing was fortuitous with a mallet launch in 2024. But early days, Matt, in Q1 and we're always careful about deducing too much from what we see in Q1, because a lot of it is weather, a lot of what you see is simply shipments in. But in terms of consumer behavior, we like what we see in line with expectations. I won't call out any highs or lows other than in key markets where weather was down you saw some softness. And again, in key markets where you had decent weather, you saw rounds of play upticks. I do note that a lot of the increase again, which is why I say, it needs to be taken with a grain of salt, a lot of the increase we saw in participation in the US came from the North. And in Q1, that just plays differently than gains in the Carolinas, Florida, Alabama, et cetera. So covered a lot of ground there. But hopefully, give you a quick snapshot on how we think about demand, participation and early state of the consumer.
Matthew Boss: And then maybe just with inventory exiting the first quarter down mid-teen. Could you just speak to your overall comfort with inventory on hand to support demand? And on the footwear category just the latest timeline as we think about this category returning to clean across the marketplace and the potential return to top line growth?
Sean Sullivan: Matt, maybe I'll start and David can jump in. So we feel very good about the inventory position. Obviously, we wanted to call out where we are sequentially, where we are year-over-year. We've called out footwear for the last couple of quarters. We feel very good about the inventory position. So across the board, in all of our product segments, whether it's current gen or prior gen, we feel very good about the working capital investment there, as we sit here in first quarter.
David Maher: Matt, I'll just follow on that a bit. Just to echo Sean's comments, the channels are full, as they should be this time of year. So we don't see any outlying areas of inventory concern and I'll reinforce we really like our inventory position, both in terms of quantity and quality. If there's one area we'd like to have more, it's golf balls and that's something we continue to work on. Maybe just a bit more color on footwear. The footwear market in the US, channel inventories all in, total market is down about 12% from last year this time and really right where we think it ought to be, not far off from, believe it or not, 2019. So the footwear category has grown nicely but footwear inventories today are only up 2%, 3%, 4% from where they were in 2019. So after a year or 15 months of correction in footwear, we like where the US footwear market is. A little different story around the world. I think that's trailing a quarter or two, which is not surprising. So we see rest of world inventories and we'd call out Japan and EMEA principally. We see that correction probably take another quarter or two.
Operator: The next question is from Megan Alexander from Morgan Stanley.
Megan Alexander: I wanted to ask a little bit, Sean, you gave some commentary on the guidance. You left it unchanged for the year. You kept your first half expectations unchanged despite a solid 1Q beat at least versus what the street was expecting, and it seems like momentum over the quarter after a slower start. I know it's historically been your practice to wait until 2Q to make any changes given 1Q is more of a sell in quarter. Is that how we should think about the guidance being unchanged today? Maybe related to that, you did mentioned that you completed the global launch of [indiscernible] a few weeks ahead of schedule. Was there any pull forward into 1Q? And how are you seeing kind of sell through in that golf club segment trend versus your expectations?
Sean Sullivan: So to the guidance in the first half, I think as David said, it's really a first half, second half. So the expectation is to hold for the first half. We do think that all the vital signs are positive with the exception of weather what David has talked about. So we just think it's prudent at this stage of the year to hold in terms of what our expectations are for the first half and the full year. That being said, certainly as you look across the board, we're pleased with the balls and the loyalty rewarded program. Obviously, clubs had a very strong SM10 Vokey launch in Q1, and we still feel good about Q2. Obviously, it still implies a low single digit growth for the quarter. We'll continue to invest, as we've said, across the board to support our advertising, promotion, fitting network, some of the IT related expenses. So we continue to invest appropriately in SG&A. And the last thing I'll say is, and David called it out in his comments, we really are pleased with our distribution center and probably were more efficient in the month of March than we had anticipated. So certainly that exceeded our expectations a bit. But all-in-all, I think we still see the first half and the full year as we've articulated. And certainly, when we're back together in July or early August, whenever the call is, we can certainly revisit. But all things positive, again, I'll leave it at that.
David Maher: Megan, I'll just -- just maybe some historical color in all my time with the company, I don't know that we've ever adjusted guidance after Q1. And it really speaks to a reality of the golf business that everybody's crystal ball gets a lot clearer in the second quarter as markets open up. I made the comment about the golf season in many respects truly begins with the Masters in April. That's true. So you need to see how mid-belt and snow-belt markets open up, how markets around the world open up. And again, it's always been our feeling that you can't really have a clear, clear sense of the industry and year until you get through Q2. And then maybe just another thought on distribution center progress really related to staffing and training and that's gone along quite a bit better than we anticipated some six, eight weeks ago. So we are very pleased with the progress being made at our new DC.
Megan Alexander: And then maybe just a follow-up to that point. The gross margin up again. Can you just talk a little bit about how that played out relative to your expectations and particularly how the promotional environment looks out there? I think you talked about perhaps margins and EBITDA growth being a bit more pressured in 1Q just given the promotional environment. So just trying to understand how that played out relative to your expectations as we think about the second quarter?
Sean Sullivan: I think it was inline with expectations. And certainly given the margin profile of both balls and clubs and the performance of those two product segments, I guess, we weren't surprised by the gross margin trajectory in the quarter.
David Maher: As to the market, Megan, the promotional environment, again, the markets are full, retailers are full as they should be this time of year in anticipation of the peak Q2 and Q3 playing seasons. There are two areas that we would point to drivers, simply because there were a whole lot of competitive launches and with that you get some degree of sell off and discounting of prior generation. Same thing happened in golf balls. I don't know that I would characterize any of those as out of the ordinary, though. So I don't see promotional activity as being noteworthy as either high or low or too, too far off from the norms. And just another reality, when you see promotional activity pick up, it tends to be late Q2, early Q3 after the season. So not a lot of new color to add other than what we're seeing is about what we expected for this time of year.
Operator: The next question is from Randy Konik from Jefferies.
Randy Konik: I guess, David, first for you, you've always been very balanced about your view on the industry and never to get too euphoric, yet the industry continues to power ahead. Is this surprising you or how much is this surprising you? And then maybe you could give us some perspective on drivers of long term participation? Anything you can share with us from a data point perspective with your partners in the green grass area as it relates to junior programming levels, female participation and lesson levels? And then just Country Club waiting list would be very helpful to get your perspective on.
David Maher: From an industry standpoint, we're at a point in time where we've seen six years where the number of golfers has increased, right? So obviously, a real positive and the industry is working hard to make good use of that interest in demand. Our focus is obviously on what happens on course. And certainly, there's a whole another world happening off course that we don't participate in, but I would say is additive to the on course experience. You look at NGF profile data, they'll point to women and juniors being some of the fastest growing segments. So what's the game doing about it? There was a line from, I think it was Seth Watt, the PGA, who said, let's make sure we don't just let this great parade go by without doing something about it. And the game and the industry are working hard to be responsive and welcoming and accommodating to new players. And I think a couple themes that stand out there would be number of lessons. And the game is hard and one of the reasons people leave is because it's difficult. So one way you can make the game less difficult and more sticky, if you will, is to execute and provide more lessons. So globally, we're seeing that. Teachers are as busy as they've been in a long time, both in the US and around the world. And in terms of how we think about drivers of long term participation, I would call out the reality that what we've seen in the last handful of years and it's sort of an unintended benefit of the game, as the game has done quite well as golf participants, golf clubs, golf retailers have done well in recent years, there's been an incredible amount of capital investment in facilities to position golf courses, golf clubs, family centers for the needs of tomorrow's consumer, and we hadn't seen that for a few decades prior. So I like the level of investment that the game is making to position itself to meet the needs of tomorrow's consumers. And then Randy, your final thought on wait lists and such is a good one in the sense that I'm quick to point out that about three quarters of the rounds played are public, not private. So a little bit immune to the the wait list reality. But nonetheless, we continually hear from golfers, it's just tough to get tea times and and particularly on weekends and peak season in key markets. But the general narrative is most clubs are at capacity and have wait lists maybe not as long as they were two, three years ago during the peak of COVID demands. But I would say the industry is as healthy as it's been in quite some time. And again, that feeds itself because that allows facilities to reinvest in their value proposition for tomorrow. So yes, here we are with a nice start to the year, in some markets. I do call out a slower start in other markets. Demand is high and reality is it's still tough to get tea times in key markets and it's tough to get to join clubs in key markets. Now does that last forever? Probably not but that's the current state today.
Randy Konik: And I guess maybe last question just for Sean. When you look at the 10 year historical model for this company, you have EBITDA margins that were usually around 12% to 13%. We are now around, I don't know, 15%, 16%, somewhere in that ballpark. You have lower comps. There's some consolidated industry, there's customization, fittings, et cetera. Have you kind of put some thoughts to how we should be thinking about long term margin potential in this business, just kind of puts and takes that we should be thinking about over the long term?
David Maher: So we talk about it quite often. I guess before I get specifically into the margin, I think that what we're most excited about is the building blocks for growth here in terms of the portfolio of assets that we have and products to service the dedicated golfer. And certainly, as that dedicated golfer universe continues to expand to the extent all of these investments that are occurring and the participation rates continue, we feel we've got real building blocks for long term growth that we're excited about, number one. And that's excluding any potential M&A. We've done a few things over the last five or six years that still have opportunities for growth. So first and foremost, we're excited about what the growth outlook can be on the top line for the company over a five to 10 year period. Number two, we're making a lot of investments as we've talked about across the company to meet the needs of the dedicated golfer. That's in terms of customization, in terms of fitting. So we believe we're well positioned there and certainly we like the margin profile of customization and personalized fitting of our products. In addition, through technology, through direct-to-consumer channels, obviously, managing all channels and all key on and off course partners, we think there's opportunity. Certainly, we talk about operating leverage in the business and the ability to continue to -- through the use of technology and efficiency, deliver incremental EBITDA and long term margin growth. So those are the puts and the outlook that I see. I'm certainly not going to dimensionalize what I see the roadmap in five to 10 years. Certainly a long time from now. But we believe that, as I said, we've got the revenue trajectory and we're making the appropriate investments across the globe and portfolio that will drive long term growth and hopefully margin expansion.
Operator: The next question is from Joe Altobello from Raymond James.
Joe Altobello: I guess, first question, I wanted to get your thoughts on the growth in the quarter of Pro V1, Pro V1x against the launch period, which I think is sort of unusual. Maybe what did sell through look like in the quarter? And did you guys experience any meaningful share gains in the quarter?
David Maher: So it is -- we had a significant launch last year and it’s unusual when you comp favorably again a lunch in the following year given our two year product life cycles. I think the key differential we saw, we saw really nice demand for our loyalty rewarded program, which is our buy three get one free to start the season. And our ops team did a nice job fulfilling that demand in March. So we like the demand -- the message that sends around demand for our product. So that was theme one. In terms of market share, again, we're coming off a big comp last year. We launched a whole new range of new products this year. We feel very strong about our market position. It's always a little different in the first quarter of an even year as we comp against last year when we sold off some prior generation inventory and conversely our competitors sell off some of their prior generation inventory this year. So net-net, we like the way our ball business is moving along. And I would add, we continue to see nice demand in the corporate space for corporate logo products. So that's just another dimension of the golf ball business that's driving our success. To demand, I hate to keep drilling on the regional piece and the weather piece. But said simply, where people are playing, we like demand. Where they're not playing due to weather or slow starts, obviously demand is slower. But again, that's life in the golf business in Q1. But overall, we are real pleased with our first quarter performance and the overall state and readiness of our golf ball business and our ball fitting teams around the globe to do what they're going to do here in the next couple of months.
Joe Altobello: And maybe a couple of follow-ups for Sean. I guess, first, the yen has weakened a little bit here. Is there any impact on your business or is it too insignificant to really call out? And maybe secondly, how are we thinking about free cash flow conversion in terms of your EBITDA outlook for this year?
Sean Sullivan: I'm not sure I got the second one. But, the yen, we're certainly watching it. Obviously, it's at historic levels. We definitely had a impact in the first quarter, which was probably $5 million plus in terms of impact year-over-year. So we are keeping eye on it. Overall, we continue to like the overall international businesses for 2024 in the aggregate. Certainly, we're keeping our eye on Japan. Joe, your second question?
Joe Altobello: Yes, free cash flow conversion relative to EBITDA this year.
Sean Sullivan: I don't know that we guide to that. But again, we should -- I would expect us to convert at not a dissimilar rate than we have historically.
Operator: The next question is from Casey Alexander from Compass Point.
Casey Alexander: He just stole my Japan question, but I'll move on to my next one. There seem to be sort of a hat tip towards travel related products in the press release. Is this a nod towards Club Glove, which you basically took control of this year? Has there been an uptick in demand for that new company that you brought on? Did you kind of walk into a nice little uptick in demand at Club Glove?
David Maher: Casey, I wouldn't make that assumption. I think it's more commentary on the total of our gear business we were looking last year, we were up some 50% in the quarter and felt we had a nice comp this year even while we added Club Glove and also pulled back on some Titleist branded travel products that were maybe a bit redundant to Club Glove. But I wouldn't point to that, simply because while we're pleased with the early start to Club Glove, it's a rather small piece of the gear story. And again, while we're bullish and enthused about Club Glove both today and longer term, again, I wouldn't read too much into that piece of the story.
Casey Alexander: Secondly, my second question is, historically, the repurchase from Magnus has been in $100 million increments. And this most recent one pulled down to $37.5 million. Why the change in the cadence of when you repurchase? Is it to try to keep the stock closer to what the repurchase price is? I'm just curious why change that cadence after several that were at $100 million?
Sean Sullivan: At the end of the day, as I've said a few times, we're really guided by the leverage in terms of maintaining leverage below 2.25 times. So often given the cadence of the year with the sell on in the first quarter, the investment in working capital, we look at the share repurchase and the Magnus agreements in the context of overall leverage. So I don't know that, I would read a whole lot into past practice or current practice, but I really point you to, we're trying to manage business and maintain a very strong balance sheet with that leverage target.
Operator: The next question is from Mike Swartz from Truist Securities.
Mike Swartz: I just wanted to start with the ball business and maybe following up on Joe's question, but taking a little higher level view of. In a typical even numbered year lapping a Pro V1 launch, it's been very rare that the ball business has grown. And I think even back in February, you had said, you expected the ball to grow year-over-year. I think you have had a loyalty program before, understanding you've gotten some new product launches this year. But I guess, has something structurally changed relative to maybe the pre-pandemic level where you can now grow in even number of years in that business or is this more of a factor of inventory levels are just still too low and you are still rebuilding some of that this year?
David Maher: Mike, I would say, what's different today versus handful of years ago. I've said this before, but annually, there are about a 150 or so million more rounds of golf being played today than were played in 2019, right? So you do the math on that, what it means to a golf ball company. I would also say that we've been producing golf balls at near full capacity for quite some time to keep pace with demand and to put enough product in the market to represent the brand the way we want it to be represented. So without pointing to one singular event, I would say, overall demand is up. We think our shares are up. We think our manufacturing capabilities and output certainly this year versus last year are in better shape. And I would point to global channel inventories as being as being healthy and where they ought to be. So not one singular answer but rather health across the board. I mentioned a moment or two ago, we're seeing a nice return of the corporate business and have for the last couple of years. So a lot of positives there and particular to the quarter. We were a bit constrained last year from a supply standpoint and lead times were longer than we would have liked, that is no longer the case. So I think you are seeing the business perform sort of without limitations right now, whereas the last couple of years we've had limitations due to raw materials, we've had limitations due to strong demand, et cetera, et cetera. So we like where we are. I will say longer term, we'd like to normalize our production schedules. So we're not operating at peak capacity for as long as we are. And we do expect that at some point that will happen. But for the time being, we like the way the business is running. And again, I think I've given you three or four ideas as to why we saw what we saw in Q1 of '24 where again a Pro V1 launch was comped favorably. So obviously, we feel real good about the ball business. And our most pressing, not threat, but our most pressing area of interest right now is really weather, because when weather is decent people are out playing golf and purchasing Titleist golf balls. So hopefully that gives you some color.
Mike Swartz: And then just second question, just to put a finer point on the first quarter, because I think when you gave kind of the guidance and the cadence of the year back in February, I think it implied EBITDA dollars down year-over-year. Obviously, you came in ahead of that. So is that simply the product of better performance at your distribution center and maybe a little bit of the Vokey launch slipping into the first quarter versus I guess your assumption that some of that would have been in the second quarter when we talked in February?
Sean Sullivan: Yes, that's fair. That's a fair portrayal of the first half in terms of where we sit here today versus the end of February.
Operator: The next question is from Noah Zatzkin from KeyBanc Capital Markets.
Noah Zatzkin: Just wondering if there's any early reads on your census sell through across categories exiting the quarter in terms of trajectory from March into and through April. Has demand in April remained strong? Any color there would be great, particularly as it relates to FootJoy?
David Maher: I would say the common theme in Q1 was, where weather was decent, demand was good. Where weather was less than decent, demand was affected. So the southeast in particular was slower than we would have liked, again, not surprising given the rounds profile. I would say and we hear this every year, as weather turned and as March turned to April, we did begin to hear some more positives from our retail partners as their seasons opened up. So I think the narrative is more about delayed start to season versus strong demand, weak demand. Within our product lines, we've been especially pleased with our wedge launch and early demand there, that team did a great job, as I've said, and early demand has been strong. So much of our products are custom fit. And a lot of that activity is going to start here in April, May, June, July. So we'll have just a much better read on our custom fitting activity, whether it's golf clubs, golf balls. I called out some new footwear fitting opportunities that we're going to embark on here later this month. And now to your final comment about FootJoy, again, we really like the product story. We like what's happening in our footwear business and our apparel business, and our glove business. I think we've pointed to back half growth in that business after what was obviously a slow start, although, we did call out growth in the US, which we were pleased with, more than offset by some declines outside the US. So FootJoy is working its way through a correction period. And again, we're optimistic for growth in the back three quarters of the year, really built around a product portfolio that we feel really good about.
Noah Zatzkin: And maybe just one other question. Just on your comments around the North America distribution center start-up exceeding expectations. Just wondering if you could provide a bit of color there in terms of how we should be thinking about the potential P&L benefits both near term and long term?
Sean Sullivan: So again, as David said, it's really about hiring, it's about training and it's about getting the throughput and the efficiency up to where we want it to be. So the primary products there are FootJoy and Titleist gear. When we think longer term, I think it's much about efficiency as is ownership and control and customization. So a big part of the strategic benefit of this distribution center, it's also a customization center of excellence. So it's much -- this is much about quality product and serving our customers well as it is about doing it efficiently. So we're still in the early stages of ramp up. We feel very good about where we're at. Certainly, hope that there's more opportunity to further leverage that facility across the portfolio. So that's a little bit of the color of what transpired in Q1. Again, we went live on January 1 from that location. So we're pleased where we are after four months of operation.
David Maher: I'll just add some historical context on that, Noah. We felt some pressure points with customization and distribution for FootJoy and gear throughout the COVID years, and that led to the decision that Sean outlined to take greater control of golf bag embroidery, apparel embroidery and distribution of those products. So really the origins were some pressure points of a few years back and the team's done a nice job mobilizing. And we like the control we have, because we -- again, I'll echo Sean's comments. We just think it allows us to deliver better service to our trade partners and to golfers.
Operator: We have a question from JP Wollam from Roth MKM.
JP Wollam: Maybe first in terms of kind of the investments in IT and infrastructure and understanding kind of usual protocol about forward guidance. But putting together kind of Q1 EBITDA and just the investments that have been made so far. I'm curious, if there's anything to read through in terms of maybe more than expected investment costs going forward, particularly in the back half of the year? And then you alluded to kind of maybe some investments for that FJ FitLab. Are those new or how that's always been contemplated and will that be impacting kind of SG&A in the back half of the year?
Sean Sullivan: JP, I'll start. So I think that, at the end of the year, we did talked about growth in OpEx in '24, right, outpacing sales, if I recall correctly. So this is expected. I think we're still in the early stages of this and you'll see this flow through throughout the year. But again, important to recognize that some of these things are enterprise investments, some of these are specific to product segments around fitting networks, about fitting apps and technology. So we do intend to continue to invest and you'll see that flow through in SG&A in 2024 and it's embedded in our full year guidance. So we think these are all certainly appropriate, necessary to better serve and create the operating leverage that we expect to deliver here in outer years.
David Maher: And then JP, just a quick follow-on to your question about for FootJoy’s FitLab, that has been contemplated and planned for in our out year plans. I think more of it to follow in 2025 than late '24, but we're enthused about getting that program running.
JP Wollam: And then maybe just on FootJoy, and thinking about kind of international markets. I think you maybe touched on being optimistic about the product portfolio. But could you maybe just give a little bit more color. In your prepared remarks, you said that you’re kind of optimistic about things stabilizing in the back half of the year. So what gives you confidence there? And then just maybe anything you are seeing with broader customer behavior specifically on the international side?
David Maher: So to part one of your question, what gives us comfort is the correcting footwear inventory landscape. As I noted, it's all but corrected and normalized in the US. We think that process takes another quarter or two outside the US. And when we think -- when that happens, we just feel confident that our products will be better positioned to succeed. I will call out, as you think about markets around the world, and we've spoken this before. Korea has a very unique super premium golf apparel market and we pursue that with both the FootJoy brand and a Korea specific Titleist apparel brand. That region has seen some outsized growth in the last couple of years. And more recently, we're seeing a bit of a correction. Strong demand followed by a whole lot of new entrants resulted in excess inventory and promotional activities. So we feel as though we're in the midst of a correction within the Korea golf apparel market space. We've planned for it. And while we like our positioning over the long term and we like our ability to withstand the effects of this correction in 2024, we have factored in market softness. That's the only real unique call out that I think is worth noting. The others, I think I hit on particularly EMEA, which is just a slow start. But one area we're seeing it does affect, it shows up in our other segment. On the Titleist side, it shows up in FootJoy. On the FootJoy side is just a softness after a period of outsized growth in Korea. And we think that market is going to correct throughout the year and will probably correct for the full year and we anticipate again -- we like our positioning over the long term and we think we're in a good shape to withstand the effects of the public correction. But that's the only market that I think warrants a unique call out at this stage.
JP Wollam: Great. I appreciate the color. Best of luck moving forward.
Sean Sullivan: JP, thanks. And thanks to all for your questions and interest. Hopefully, you take advantage of some nice weather here in the few months and go play some golf. And we look forward to speaking with you on our next call. Thanks again.
Operator: This concludes today's call. Thank you for joining. You may now disconnect your lines.
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