Acushnet [GOLF] Conference call transcript for 2022 q3
2022-11-06 02:20:04
Fiscal: 2022 q3
Operator:Sondra Lennon: Good morning everyone. Thank you for joining us today for Acushnet Holdings Corp. Third Quarter 2022 Earnings Conference Call. Joining me this morning are David Maher, our President and Chief Executive Officer; and Tom Pacheco, our Chief Financial Officer. Before I turn 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 U.S. Securities and Exchange Commission. Throughout this discussion, we will make reference to non-GAAP financial metrics, including items such as revenues at constant currency and adjusted EBITDA. Explanations of how and why we use these metrics and reconciliations of those items to a GAAP basis 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. 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 will refer to the nine-month period ended September 30, 2022, and the comparable nine-month period. With that, I'll turn the call over to David.
David Maher: Thanks, Sondra, and good morning, everyone. As we will share this morning the company's third quarter performance reflects the great strength and momentum of our products and brands, ongoing expansion of Acushnet's supply chain capabilities and the resilience both in terms of participation and purchasing of golfers in all major markets. And I must note, these results also point to the continued good work and dedication of a Acushnet's talented associates. As noted on slide 4, third quarter sales increased over 13% to $558 million and year-to-date sales have increased 10% to $1.82 billion. These results are consistent with the across the board health of our businesses, with each segment posting gains against record levels of 2021. In addition to these top line results, you will note gross margins are holding up well in spite of currency headwinds and persistent freight pressures. This gross margin strength and double digit sales gains contributed to a 23% increase in adjusted EBITDA for the quarter. Product performance and quality excellence define Acushnet and are the foundation of our sustaining success. We are pleased with the early success of our fall product launches and looking forward. Our teams are enthused while preparing for a wide range of new product introductions scheduled for the next six months. This momentum and confidence in our ability to execute support the company's track record of delivering against our capital allocation priorities and we have returned more than $175 million to shareholders through our dividend and share repurchase programs during the first nine months of the year. This represents the company's largest return of capital since these programs were first implemented. Now turning to slide 5, we will review our segment results. Golf ball sales increased 13% in the quarter with strong sell through and improving production levels contributing to these gains. Demand for Pro V2 Pro V1x and ABX remains especially strong, contributing to gains in all regions led by the U.S. which was up 16% in the period. Year-to-date golf ball sales are up 4% and our operations team has done good work striking the right balance between meeting at once demand with the need to build inventories in preparation for 2023. Titleist Golf Balls retail inventories have improved over the past several months, yet are still 5% to 10% below where we would like to see them at this time of year. And new Pro v1 and pro V1x golf balls were launched across worldwide tours last month and early response in support of these new products has been excellent. The Titleist Golf Balls club business increased 20% in the quarter and is now up 12% year-to-date. Our golf club story in the quarter was fueled by new TSR drivers and fairways, which are off to great starts after their late September launch. Titleist drivers are currently used by 11 of the top 20 men in the world and three of the top four women professionals in the world; terrific validation and endorsement for what has been the most played driver brand on the PGA Tour for the past four seasons. And as importantly, we are pleased with the progress throughout our golf clubs supply chain which is delivering enhanced service levels and reduce lead times especially with our custom fit, made to order products which make up such a large portion of our club business. Titleist gear also had a strong quarter with sales up 35%. This growth was led by successful new product launches and the carryover of some second quarter demand which pushed into Q3 due to supply chain delays. For the first nine months of the year Titleist gear is up 10%. You may recall this business was pressured early in the year by logistics challenges particularly in the U.S. and we are confident that the steps we are taking will result in improved availability and reduce lead times as we enter 2023. Most notable is our decision to reduce supply chain risks by front loading our gear inventory receipts as we have done this fall. And FootJoy posted a 2% gain for the quarter and is now up 15% year-to-date with footwear, gloves and apparel all up double digits. FootJoy continues to build a supply chain for the future to keep pace with strong demand for FootJoy golf shoes, outerwear, apparel and gloves. Our team has successfully expanded and diversified our footwear production capacity and we are now fully operational at our new state of the art embroidery center here on our Fair Haven campus. We are confident that this extra capacity and enhanced service capabilities will support for choice continued growth and the great product momentum that our design teams are generating. Now for a quick look at our business by region. As we have said throughout the year, the game is healthy across major markets and the regional participation variants we see have been largely attributable to weather related factors. Global rounds of play have held up very well in 2022 as the low single digit decrease in the U.S. has been mostly offset by gains from ex-U.S. markets. We continue to be encouraged by the game's health and momentum, as participation holds strong against the surge that the game experienced in recent years. And with this healthy global golf market as a backdrop, we have delivered year-to-date gains in the U.S. EMEA, Korea and rest of world. As you see our Japan business is off 8% through the first nine months which is mainly due to supply chain delays which moved our TSR driver launch out of Q3 and into Q4. Rounds of play in Japan are up 8% year-to-date and overall market conditions are generally healthy and consistent with other major regions. Now looking forward. Our outlook is built around the belief that golfer participation and demand for Titleist FootJoy and products remain vibrant, even as we temper expectations given looming macro economic uncertainties. While Acushnet is not immune to downward consumer pressures, past experiences have shown that the dedicated golfer tends to be more resilient than many consumer groups. On the product front, we are enthused about early interest in our new TSR drivers and fairways and fairways and are confident that our supply chain will support high quality fitting and service experiences and our ability to meet anticipated demand levels. We are on track for the launch of new Pro V1 golf balls in the first quarter. Product development and tour validation are meeting our highest expectations and reflect the company's commitment to continuous improvement. Golf Ball raw material availability is steadily improving and our ball plants are operating at full capacity as we prepare for the upcoming global launch. Turning to our FootJoy business. We are optimistic about the initial response to our 2023 collections and our teams are focused on enhancing supply chain and fulfillment capabilities to support FootJoy business that is about 40% larger than it was in 2019. And in addition to the ongoing investments in our product development engines, we can continue to prioritize and expand our investment in technology throughout the company as we strive to optimize operations and deliver leading service and support to our trade partners and golfers. In summary, the Acushnet team and our resilient operating model continue to provide stability as we navigate exchange rate inflationary and global logistic uncertainties. We are confident that the company is structured and well-positioned to capitalize on the many market opportunities we see before us and that our focus on the game's dedicated golfer and proven track record of product innovation, and supply chain management will support the company's long term growth objectives. Thanks for your time this morning. I will now pass the call over to Tom.
Thomas Pacheco: Thanks, David. I would like to start by thanking our dedicated associates and trade partners for their efforts in delivering yet another strong quarter for Acushnet. Starting on slide 9, consolidated net sales for Q3 were 558 million up 7% reported and up over 13% on a constant currency basis compared to last year. Overall, demand continues to be strong, and all segment showed growth in the quarter on a constant currency basis. Gross profit for the third quarter was $295 million up 10% versus 2021 and gross margin was 52.8% up 130 basis points. The increases were driven by higher sales volumes across all reportable segments and were partially offset by continued currency headwinds and elevated inbound freight costs mainly in golf balls and gear. SG&A expense in Q3 was 202 million up 1% from the prior year. Our teams did a good job balancing spending, while we continue to invest incrementally in our IT platforms and in distribution as we enhance our fulfillment and customization capabilities, particularly in FootJoy in gear. R&D expense was $15 million which was flat compared to 2021. Income from operations was $76 million for the quarter, which was 45% higher than last year. And our Q3 adjusted EBITDA was 87 million up 23%. Summarizing our year-to-date results, consolidated net sales for the first nine months of 2022 were 1.82 billion up 6% compared to last year, and up 10% on a constant currency basis. Year-to-date gross profit of 956 million has improved by 5% compared to 2021. However, gross margins of 52.4% although solid are down 50 basis points. SG&A expense for the first nine months was 637 million up 9% and R&D expense was 43 million, up 6% compared to 2021. Year-to-date income from operations was $270 million, which is 4% lower than last year. Our effective tax rates for the first nine months of the year was 20.6%, down from 23.1% in the prior year, primarily because of a change in the mix of our jurisdictional earnings and adjusted EBITDA was 313 million for the first nine months of 2022 down 6% year-over-year. There was a reconciliation of net income to adjusted EBITDA for Q3 and the first nine months of 2022 in our earnings release, as well as in the appendix of the slide presentation. Moving to slide 10, our balance sheet continues to be very strong. At the end of Q3 we had about $107 million of unrestricted cash on hand. Total debt outstanding was approximately 434 million, and we had 537 million of available borrowings under our revolving credit facility which we refinanced earlier in the quarter. Our leverage ratio at the end of Q3 was 1.1 times. Accounts receivable at the end of Q3 was 324 million, up 24 million from the prior year. DSOs improved by two days. Consolidated inventory at the end of Q3 was $537 million. Inventory balances were up across all segments compared to last year and we are pleased to have returned to what we feel is an appropriate level of inventory to provide high quality service to our trade partners and meet the continued demand for our products. For context our consolidated day sales and inventory were 155 days at the end of September, which is in line with pre-pandemic levels. Cash flow from operations for the third quarter was $32 million, compared to $128 million in Q3 of last year and cash flow from operations for the first nine months was a cash outflow of $59 million compared to a cash inflow of 280 million last year. The decreases in both periods were primarily the result of the relative changes in our working capital compared to the prior year, most notably the increase in inventory. We spent about 13 million on CapEx in Q3 bringing the year-to-date total to 34 million. We now expect our full year CapEx to be between approximately 50 million and 55 million, as the timing of some receipts has shifted into 2023. We continue to make great progress against our multi-year strategic golf ball capital investment program. Turning to slide 11. Our strong financial performance fuels the continued execution of our capital allocation strategy led by investments in product innovation, golfer engagement and our operational capabilities. And we continue to prioritize generating strong free cash flow and returning capital to shareholders. Earlier today, our board of directors declared a cash dividend of $0.18 per share payable on December 16, to shareholders of record on December 2. This will total a payout of about $13 million for the quarter and brings our year-to-date dividend payout to approximately $52 million. During the third quarter, we repurchased 869,000 shares for a total of approximately $42 million bringing our total for the year to almost 3 million shares and $140 million 2022 represents our most active share repurchase period to-date resulting in a reduction of our outstanding share count of almost 4% since the beginning of the year. At the end of September, we had approximately $208 million of share repurchases remaining under our current authorization. Assuming continued strong financial performance and favorable market conditions, we expect to remain on track to complete our remaining authorization by the middle of 2023. We continue to believe our capital allocation strategy of investing in the business, returning capital to our shareholders and executing disciplined acquisitions will generate a compelling long term total return. Moving to our outlook on slide 12. We remain enthusiastic about the overall health of the golf industry and demand for our products. Our retail inventories are healthy, and our supply chain continues to strengthen. Inbound freight rates are trending lower from their historical highs. However, at present, we continue to utilize a higher than normal amount of air freight to protect lead times and service levels. And as you would expect, we anticipate confronting currency headwinds and the continued impacts of inflation on our input costs for the foreseeable future. Taking these factors into consideration, we have narrowed our full year guidance. We now expect our full year 2022 consolidated net sales to be in the range of $2.25 billion to $2.250 billion and our full year adjusted EBITDA to be in the range of 325 million to 335 million. This updated guidance reflects over $116 million of projected negative foreign currency impact and as a result we expect our full year constant currency net sales to be up between 9% and 10.2%. In conclusion, our dedicated associates and trade partners led Acushnet in delivering another solid quarter, demonstrating the strength and momentum of the Titleist FootJoy and shoes brands. We remain confident in our ability to achieve our 2022 financial goals and to deliver a long term total return for our shareholders. With that, I will now turn the call over to Sondra for Q&A.
Sondra Lennon: Thank you, Tom. Operator, could we please open up the line for questions?
Operator: Of course. And our first question today go to Daniel Imbro of Stephens Inc. Daniel, please go ahead. Your line is open.
Daniel Imbro: Good morning, everybody. And thanks for taking the questions. I want to to start David just kind of on overall industry question. Obviously the industry remains healthy and then you kind of mentioned your dedicated golfer is strong. I'm curious, what measures are you guys tracking internally when you think about gauging the health of the consumer into next year? Is it at home values? Is that a macro data point? Is it just a real time spending and kind of your history with cycles, trying to understand what gives you as a confidence, but the reason price increases, but also just the volatile macro backdrop into next year as you go about planning?
David Maher: Yes, good morning, Daniels. So for us it starts with participation and we're pleased with how resilient it's been in 22. And I think if you look at our results, they do indicate the dedicated golfer is healthy. And we've said all the while they tend to be a very resilient consumer group. That said we are mindful of the looming risks from economic and inflationary headwinds. in terms of what we look at, beyond that, certainly we track real time sell through data. What gets a lot of attention nowadays from everybody and certainly for us is the fragility we see in EMEA and I'll caveat that with, that's been an especially strong region for us. We were up I think, 28% in '21 and we're up 20 something percent this year. So like many companies we are concerned about the outsized inflationary pressures that are impacting this region. But really, the core for us, Daniel is going to be participation and then we gauge the resilience of our dedicated golfer. We did see some data coming out of the and this is this is certainly U.S. centric, that says they project there were about 8% more golfers today than there were five years ago. No surprise, right. We've seen an uptick, that they also would say that what they call committed golfers that groups up about 14%. And while it's not an exact match with how we define dedicated golfers I think it's indicative of the trends. And then maybe a broader comment as we think about the clouds and potential, the potential headwinds before us. We do expect generally that consumables tend to hold up better than durables or larger ticket items. So as we work our way through our product line, we've seen historically that golf balls tend to be one of the more resilient categories.
Daniel Imbro: Great thatâs helpful. On the industry as a whole. Obviously, we came in this year with clean inventories. I think during your prepared remarks, David, you said we're still running about 10% below where you where you want to be. Right now. I guess how much of a tailwind to growth this year has the restocking so far been? And then if we were to get from the say 10% of industry inventory level now back to even how much of a tailwind to grow through that the next year to overall revenue growth?
Thomas Pacheco: Yes. Let me break it out by category. My comment Dan was was really specific to balls and clubs. In our case, we tend to be lean, and we're leaner than we historically would like to be. So we're about 5% to 10% below where we'd like to be channel inventories and competitive inventories may be a little higher than that. When you look at footwear, a bit of a different story, it's elevated and that's an area where we would expect to see some promotional activity here sooner verse later. And I may say the same about gear and then and that subject, I do think we're going to see a return to some normal end of cycle sell off in golf clubs. And that's not necessarily commentary on elevated channel inventories as much as it is we know that there's some competitive entries coming in the first quarter and we would expect to see some promotional activity but to your question about how do we think about channel backfill as an influence on our business for us it's really been about supply chain. We've been trying to make as many golf balls as we can. And I think our team has done a wonderful job. We were up 30 something percent a year ago. We're now in the black this year, which given some of the raw materials concerns we had we feel very good about. So in terms of what might it mean, I'm not prepared to put a number on it Daniel, but I will say as we look forward, certainly we think about demand for our products. We think about inventory levels. We think about the overall health and vibrancy of our retail partners across channels. And what we see is a healthy environment and again that the caveat will once again be some of the some of the looming clouds from a macroeconomic standpoint that remains to be seen how they materialize.
Daniel Imbro: Great. Thanks so much for all the color this morning and best of luck going forward.
David Maher: Thanks, Daniel.
Thomas Pacheco: Thank you, Daniel. Operator next question, please.
Operator: Thank you. The next question goes to Mike Swartz of Truist, Mike please go ahead. Your line is open.
Mike Swartz : Hey, guys. Good morning. Just a quick question on some of the product launches for the upcoming year. I guess two questions. Any specific call outs just around the product launch cadence over the next 12 months that might look a bit different versus two years ago? And then just given some of the macro uncertainties out there? Are there any alterations to how you plan to release new product in â23 in terms of size, or timing or just marketing support?
David Maher: Yes so I would say that maybe the best, the best like for like, look would be '23 verse '19. '21 was still a little bit disjointed, because of the fallout from '20. So we'll get back on what we would consider to be a normal cadence and what that looks like is a Pro V1 launch in the first half. We will update half our Cameron line in the March, April timeframe. And we would expect to launch -- new in the second half and then FootJoy and shoes they're really on track for their spring and fall launch programs. In terms of your second question about how do we see it playing out, I would say we're still in the mode of working very hard to build inventories to support launches. And what's different today versus 2019, 2019 there was a seamless transition from prior generation to new product and we would basically dial up and produce all the product we needed to support a launch. It's not that easy today, in the sense that we're at elevated levels. So our team is going to do all they can to prepare for and build inventory to support launches. And this is really a golf ball commentary. It's notably a Pro V1 commentary, but will do so without unlimited production capacity. Right. So we are going to, we are enthused, as I said in my earlier remarks, the team is excited about the launch. But we do have finite production capacity that will influence how we launch product in the first half.
Mike Swartz : Okay, that's helpful. And then maybe a question for Tom, real quick on, you said freight costs, you're starting to see some easing on the inbound freight costs, but you continue to use more air freight to get stuff into the market. Maybe give us a sense of when you expect that to normalize, and maybe any way to quantify what that could mean for margins or just lower costs.
Thomas Pacheco: Yes, in terms of normalize I think that's a tricky question. Because I guess what is normal going to look like in the future clearly, we think, freight rates, both ocean and air will come down. However, will they come all the way back down to 2019 levels remains to be seen. As you said, as I said, we have started to see rates come down from their historic levels, but they are still much higher than they were back in 2019. So hard to say what new normal will look like and when we'll get there. We do anticipate, though that we will see some relief in 2023. Haven't really quantified that yet. But I think it could be a reasonably meaningful number. But I would caution that against all the other puts and takes that come along with gross margins whether that be increased promotional activity and discounting which David mentioned what's going on with FX, which is obviously had a huge impact on our margins this year, as well. So we definitely see the freight situation improving but hard to quantify exactly by how much at this point.
Mike Swartz : Okay, great. Thanks a lot
David Maher: Thank you, Michael. Operator, next question, please.
Operator: Thank you. The next question goes to Joe Altobello of Raymond James. Joe, please go ahead. Your line is open.
Joe Altobello: Hey, thanks, guys. Good morning. Actually, Tom, that commentary was a good segue into my question. I mean, we got to the upper end of the sales range for this year at the lower end of the EBITDA range, I guess, where are you seeing the incremental margin pressures? You mentioned promo and FX, but I'm curious if there are other issues that are kind of weighing on profitability here in Q4.
Thomas Pacheco: Morning, Joe, yes, certainly, currency and potential promotional activities are definitely headwinds as it relates to gross margins. The other things I would point out are really around some of the investments in the business that we've been making. We continue to incrementally invest in our IT platforms. We continue to invest in our distribution, as we enhance our fulfillment and customization capabilities, particularly in FootJoy and gear. So we are seeing that margin pressure, and some continued investment in the business. I will point out though Q4 is seasonally our lowest quarter and if you look at the midpoint of the guidance, Q4 is going to be up over $22 million compared to last year. So we're pretty pleased with the second half and where the year is going to land.
Joe Altobello: Got it very helpful, and just kind of to follow up on that the 13.5% constant currency sales growth in the quarter, any chance that you can kind of parse that out between how much pricing drove that and what your volumes were up?
Thomas Pacheco: It's difficult to split those. I would say we continue to see FX pressure across all of our major markets and continues to have a significant impact on the top line but difficult to sort of parse that into volume and price.
David Maher: Hey, Joe, I'll just add on that balls to your, Tom answer to your ethics piece to to pricing, balls, little impact from pricing, certainly clubs and gear were influenced by pricing. Balls far less so. And I would say FootJoy less so as well.
Joe Altobello: Okay. And just one last one. For me the the impact from pricing next year, I imagine you expect to be somewhat less than what we've seen so far in '22.
David Maher: Yes. I think our pricing journey over the last couple of years is a fair reflection of what you're going to see in '23. We generally address pricing when we introduce new products. And I think we do benefit from our two year product lifecycle, which tends to provide a more gradual pricing slope, but we have taken price increases with the majority of our products over the last 18 months and again, I think as you look forward the trend certainly we expect to continue.
Joe Altobello: Okay, thank you.
David Maher: Thank you, Joe. Operator, next question.
Operator: Thank you. The next question goes to George Kelly of ROTH Capital Partners. George, please go ahead. Your line is open.
George Kelly: Hey, everybody, thanks for taking my questions. So just a couple of for you. First, back to the gross margin discussion on freight. Just curious, I understand that rates have come in but just curious if you expected the level of next year the kind of freight volume or freight mix between air and water would you expect it to be more like 2019? Are you still planning into early next year to be using kind of a consistent mix of air freight?
David Maher: Yes. I would say in the first part of the year, we will continue to be using higher than normal levels of air freight to support our product launches. And so that won't necessarily return to 2019 levels, may not be quite as high as we've been in say, â21. But I think it would still be elevated from normal levels. And I think over the course of the year, we would expect the trend to back towards a more normal mix of air freight and ocean freight overall.
George Kelly: Okay. And then second question on the general state of the consumer. So, David, you were talking to in response to an earlier question just about the uncertainties out there and you're trying to be appropriately cautious. But is there anything maybe in Europe or elsewhere where you've seen anything start to change, is the business still, I mean, your 3Q, what you just reported was so strong. So are you really seeing much evidence of any kind of changing dynamic?
Thomas Pacheco: We haven't seen meaningful swings, George. And keep in mind too we're coming out of the season in many regions. So much of the golf market is snowbelt and really on the tail end, if not closing end of their season. We're certainly opening up in Sunbelt markets right now. But we haven't seen any meaningful forks in the road or speed bumps. But we're also understanding that we're coming off a pretty good surge over the last several years and we would expect things to slow if not normalize. And again, that's sort of the basis of how we're thinking about the future. But to your question, have we seen any meaningful drops? We haven't. And again, part of that may be seasonal. But I do point to really, the two main themes for us are always going to be what's happening with participation. And then the fact that we think our golfer is more resilient than most consumer segments.
George Kelly: Okay, and then last question for me, just thinking FX for the potential impacts for next year. Curious if you can help us quantify what kind of drag that will be to revenue growth next year, just with where rates are now? Any kind of, I don't know how specific you want to be. But any any commentary around that would be helpful?
David Maher: We're still in the planning process for 2023. So I don't think we want to get very specific. I will say that we do expect currency to be a headwind next year. I think it won't be. I don't think we're anticipating that will be quite the headwind that it is this year, but it will still be meaningful and significant.
George Kelly: And this year was how much did you say 118?
David Maher: 116? But yes.
George Kelly: Okay. Thank you.
David Maher: Thank you, George. Operator, next question, please.
Operator: Thank you. The next question goes to Casey Alexander of Compass Point. Casey, please go ahead. Your line is open.
Casey Alexander: Yes. Kind of a one off here because most of my other questions were answered but any 4Q impact from Hurricane Ian know there's a lot of courses shut down, a lot of territory where rounds played didn't happen, particularly in October. And I'm just wondering if that flows back to you in any way? Or if there was a lot of stuff that was damaged that needs to be replaced and could provide a future demand input?
David Maher: Yes, Casey, more of the former than the latter. Certainly we look at what happened on the west coast of Florida and up the southeast coast. And there were last rounds, there were damages. So yes, the answer is absolutely. Thankfully and the golf world navigated through it fairly well. But we have enough of our partners, who were impacted and closed and remain closed. So it is an impact into your second theme. I don't think we we characterize it that way. I don't see it as a lift as you may get in some in some industries. But we do expect it to have a negative impact on the quarter as it relates to rounds, and therefore purchasing.
Casey Alexander: Right, thank you.
David Maher: Thank you, Casey. Operator, next question, please.
Operator: Thank you. And the final question today goes to Randy Konik of Jefferies. Randy, please go ahead. Your line is open.
Randy Konik: Yes. Thanks. I guess we want to just go back to this guidance on the adjusted EBITDA dollar kind of, you're kind of narrowing the range a little bit. So just to be clear, is that now narrow range a product of FX plus assumed kind of promo that could happen or just to clarify exactly what that $10 million difference is just the start?
Thomas Pacheco: I think at the midpoint we narrowed the range by 5 million. Just to be clear there. I would say overall, the impact, the narrowing of the range really has mostly to do with currency. And with higher input costs. I would say less to do about sort of promotional activity. I think that's potentially more of a 2023 potential factor. And then also the additional investments that we've continued to make as I mentioned earlier in our IT platforms and our distribution capabilities. So it's really those factors.
Randy Konik: Got it. And I guess maybe if we can think about 2023 for a second, maybe David, you could give us some perspective on if you assume, again, you're potentially assuming that we could have a little bit more normalization of promo activity. Because you clarify how that may change versus years ago with the rise of customization. And how inventories, finished goods inventories are less on the balance sheet, and so on and so forth, or less than the channel like I want to get a perspective of how the whole industry has kind of changed and how if there is even promotional activity that occurs, how that might be the same or different than stuff you've seen in years past?
David Maher: Yes, Randy, that's a good question. And I do want to make the point that our comments are as much in comparison to where the industry has been for the last couple of years. And that has been close to zero promotional activity. So when we talk about promotional activity resuming or returning, it's off a base of zero. And to your question, the industry looks a fair amount different today than it did 2018, 2019. We still see it as well within the range of normal and probably less than what we saw, pre-pandemic. So I do want to be clear about that. We would expect and I made this comment earlier that footwear broadly and certainly golf footwear as part of this is maybe the first place we'll look. And again, I think balls are quite resilient, because at least in our case, because of our shortfall to optimal inventory. And then again, I think you're going to see a return of some normal sell off at end of life cycle. But also I do think that's going to be at lesser levels than we're accustomed to. So I think it's commentary that, hey, the fundamentals of the industry, are healthy and healthier than they were going back to 2019 and while we will see some promotional activity, it's going to be at a lesser level than we were accustomed to three, four years ago.
Randy Konik: Got it. That's super helpful. I really appreciate that. Thanks for the help, guys.
David Maher: Thanks.
David Maher: As always, folks, thanks for your time and attention this morning. We appreciate your interest in Acushnet. I hope you all have a great and safe holiday season. And we look forward to getting back with you early next year.
Operator: Thank you. This now concludes today's call. thank you for joining. You may now disconnect your lines.
