Acushnet Q3 Financial Report – Key Takeaways

Big sales quarter for Acushnet – $483 million, up nearly 16% vs. Q3 2019 Big Net Income (Profit) quarter, too – $63.2 million, up 112% vs. Q3 2019 Year-to-date numbers still down vs, 2019 however, thanks to COVID-19

The Acushnet Q3 Financial Report is out. If you’re an optimist by nature, feel free to do a little dance, make a little love, and get down tonight.

For the more pessimistic types out there, feel free to channel your inner Eyeore, and commence with the “yeah-buts…”

It’s an interesting report and once you get past the investor-focused spin, there’s a little something for both sides. Let’s take a look.

Acushnet Q3 Financial Report – a BIG 3rd Quarter

If you’ve been paying any attention at all, you know the golf industry has been positively giddy lately. By all accounts, the game is enjoying a post-lockdown boom. The Acushnet Q3 Financial Report gives us some tangible proof of that.

Acushnet is posting $483 million in sales for the quarter. That’s an impressive 15.7 percent jump over Q3 of 2019. In dollars, that’s a nearly $66 million increase.

More impressively (and badly needed, considering the Q2 results), is a Q3 net profit of $63.2 million. That’s a 112% increase over Q3 2019, where Acushnet posted a $29.8 million net profit. If you’re scoring at home, that’s a $33.4 million dollar increase.

“The momentum we saw in June and July for the game of golf and Acushnet products continued throughout the third quarter,” says Acushnet CEO David Maher in a press release. “Our team focused on exceeding the needs of our trade partners and golfers around the world, all while operating under new safety and social distancing protocols.”

Q3 Sales Specifics

So, what drove the big increase? The Acushnet Q3 Financial Report says sales in three of the company’s four product categories were up worldwide compared to Q3 of 2019. Specifically:

Ball sales were up nearly 41% ($170M vs. $121M) Titleist Gear (hats, gloves, bags, etc) sales were up 28% ($44M vs. $34M) FootJoy sales were up 13% ($116M vs. $103M)

Titleist golf club sales, however, dropped nearly 5% in Q3 ($121M vs. $127M last year). That’s likely due to lower average selling prices for TS metal woods. The TS woods have been discounted in anticipation of the TSi release in Q4. Irons sales were also down in Q3.

Regionally, the Acushnet Q3 financial report shows a nearly 26% increase in U.S. sales. Specifically, balls sales increased by over $39 million, Titleist gear sales jumped by $7.5 million, and FootJoy sales grew by $7.1 million. Titleist golf clubs bucked the global trend in the U.S., growing by nearly $2 million. Acushnet says the growth was fueled by a significant increase in rounds played and the related demand for golf products.

For the rest of the planet, the Acushnet Q3 financial report shows the following:

Europe sales up 17 percent vs. Q3 2019 ($65m vs $56M) Korean sales up 10 percent vs. Q3 2019 ($61.5M vs. $55.7M) Japan sales DOWN 23 percent vs. Q3 2019 ($42.3M vs $55.2M) Rest of World sales up 21.5 percent vs. Q3 2019 ($42.4M vs. $35M)

That’s the good news. But don’t think it’s all sunshine and rainbows. There’s more to the story.

Acushnet Q3 Financial Report – The Year-To-Date Tango

As with any financial report, the headlines are rosy as hell. But despite a boffo third quarter, Acushnet is still well behind last year’s performance. That should come as no surprise. Take nearly two months out of any nine-month sales cycle and the numbers are going to suffer.

Worldwide, Acushnet’s Year-To-Date sales are at $1.19 billion. That sounds great, but it’s down more than nine percent and $121.4 million vs. the first three quarters of 2019.

“Throughout the end of September of 2020, our business was significantly impacted by the COVID-19 pandemic,” says Maher. “The negative impact was primarily experienced in the first and second quarters when our manufacturing and distribution centers were shut down and most on-course retail pro shots and off-course retail partner locations were closed due to government-ordered shutdowns in the U.S and Europe.”

The Year-To-Date specifics are sobering but, considering the times, should be taken with a grain or two of salt.

U.S. YTD sales are down nearly 11 percent and nearly $75M Europe YTD sales are down 6.7 percent and $12.5M Japan YTD sales are down over 24 percent and nearly $33M Korea YTD sales are UP 7.6 percent and $12.6M Rest of World YTD sales are down over 11 percent and $14M

And globally by product category:

Ball YTD sales are down by nearly 11 percent and over $47M Club YTD sales are down by nearly 12 percent and $38.7M Titleist YTD gear sales are down 5.1 percent and $6.4M FootJoy YTD sales are down 12 percent and nearly $43M

Other Odds and Ends

The fun of financial reports is poking around in the details to see what’s there. The Acushnet Q3 Financial Report has a few nuggets worth sharing.

First off, the Q3 Income Statement shoes a $47.5 million decrease in Selling, General, and Administrative expenses Year-To-Date. That’s reflective of many things, including possible reductions in travel expenses (no one’s field sales team is traveling much right now). Additionally, any variable expenses related to sales volume – such as commissions – would also be down, since YTD sales are also down.

Additionally, Acushnet has spent nearly $20 million Year-To-Date on COVID-19 related expenses. According to the report, these include “salaries and benefits for associates who could not work due to government-mandated shutdowns, fringe benefits paid for furloughed associates, spoiled raw materials, incremental costs to support remote work and the additional costs of health and safety equipment.”

Acushnet’s Q3 EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) was also impressive, at $99.3 million. That’s a nearly 78 percent increase over Q3 of 2019. Year-To-Date EBITDA, however, is down 5.4 percent compared to last year.

Acushnet Q3 Financial Report – Final Thoughts

It’s time for our regular disclaimer that we here at MyGolfSpy are not financial experts, nor are we financial consultants. We’re just folks who follow the golf industry and like to read.

That said, while the Acushnet Q3 financial report is both good news/bad news, the former is really positive while the latter is perfectly understandable. There are no two ways to look at it, the golf industry overall did incredibly well in Q3. Golf Datatech reported record-setting industry sales months in both July and August for both the U.K and the U.S. And anyone who’s tried to score a prime tee time can attest, rounds played are way up.

And our conversations with golf retailers confirm booming sales, particularly among new golfers. Since that’s not a market Titleist generally serves with its golf clubs, it’s understandable that club sales would be comparatively lackluster. However, all those new golfers need shoes, gloves, hats, clothing, and especially golf balls. And the newer the golfer, the more balls he or she is going to need.

In the big picture, Acushnet is in the same boat as almost any other manufacturer that isn’t making Personal Protection Equipment. In terms of Year-To-Date sales, Acushnet is in a $121.4 million dollar hole compared to 2019. It’s going to be a Herculean task to match last year’s numbers, but again, that should not be a surprise. The bigger surprise is that despite everything, Acushnet will very likely come close to last year’s numbers.

Unlike Callaway, whose Q3 financial report comes out Monday afternoon, Acushnet doesn’t have the same level of product diversification. The KJUS acquisition was a first step toward that, and KJUS sales have helped offset some of the declines in other areas.

A Final COVID-19 Warning

A quote lost in the final paragraphs of the Acushnet Q3 financial report is a bit sobering:

“The impact of the COVID-19 pandemic continues to evolve and remains highly uncertain, including the potential for a significant increase in the spread of the virus, additional government-related shutdowns, and a significant decrease in the current levels of rounds of play and the related demand for golf-related products.”

So yeah, Q3 was great, but the fact is no one knows what’s coming. This week’s news that golf courses in the U.K. are being shut down is a sign of that continued uncertainty.

Acushnet’s stock bottomed out at $21.15 per share in late March but has since rebounded. At the opening bell today, it stood at $36.67 per share. The share price peaked at $39.35 in early August.

So go ahead, do a little dance, make a little love and get down tonight to celebrate Q3. But as the report suggests, be wary because there may be a Bad Moon on the Rise.

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