Q1 2024 Acushnet Holdings Corp Earnings Call

Participants

Sondra Lennon; Vice President, Financial Planning Analysis & Investor Relations; Acushnet Holdings Corp

David Maher; President, Chief Executive Officer, Director; Acushnet Holdings Corp

Sean Sullivan; Chief Financial Officer, Executive Vice President; Acushnet Holdings Corp

Matthew Boss; Analyst; JPMorgan

Megan Alexander; Analyst; Morgan Stanley

Randy Konik; Analyst; Jefferies

Joe Altobello; Analyst; Raymond James

Casey Alexander; Analyst; Compass Point Research & Trading, LLC

Mike Swartz; Analyst; Truist Securities

Noah Atkinson; Analyst; KeyBanc Capital Markets

JP Wallen; Analyst; Roth MKM

Presentation

Operator

Good morning, everyone, and welcome to the Acushnet Holdings conference. My name is Chad, and I'll be your moderator today. (Operator Instructions)
And now I'd 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 make 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 startup 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 up 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 in line with a 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 TruFuel models in the quarter and also benefited from greater than expected demand and fulfillment in our Pro V1 loyalty rewards 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 U.S., Japan and EMEA. Our new T-Series irons have been well received and we successfully launched new bulky design SM. 10 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 U.S. and our FootJoy business was off 6% in the quarter, in line 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 fit lab 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 U.S. this summer and longer term, we anticipate increasing our investment in FJ. fit lab 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 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 U.S. 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. 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 macro-economic 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 a 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 titles 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.
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 21, to shareholders of record on June 7, 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 first 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 rewards program during the quarter. In clubs. Our operations team was successful in the launch of our bulky 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 questions?

Question and Answer Session

Operator

(Operator Instructions) Matthew Boss, JPMorgan.

Matthew Boss

Great, thanks and congrats on a really nice quarter. So David, you cited the golf industry is structurally healthy today. Could you elaborate on overall participation and engagement that you're seeing from your dedicated golfer, any change in U.S. momentum post the Masters and on a global basis? And any call-outs on the international front just with the divergence in top line performance?

David Maher

Yes. Hey, Matt. Good morning. So first off, I think it's worth a minute to look at the US market, some very strong rounds of play data, 20%-some-odd, some percent 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 markets.
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, very pleased.
And again, in markets where you had tough weather, you saw rounds decline. You had you saw slower retail. And conversely, where you had favorable weather, you saw some nice some you saw some nice upticks moving around moving around the globe a bit I called out.
We just we had some particularly wet start to the season very common in Q1, you're going to have some slow starts and some and some quicker starts wet weather. I think I called out Korea and the U.K. slowed their start to the season.
But generally speaking, where you saw decent weather, you saw rounds play favorable. So on to our golfer and the dedicated player, not a lot's changed in the last months and quarters, the demand is strong there, Avid, their resilience, 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 we like the way that played out in the quarter have some strong club launches led by bulky wedges and in Phantom putters. That's a Mallet putter, malice or 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 producing 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 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 in. 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 U.S. came from the north and in Q1 that just plays differently than gains in the Carolinas, Florida, Alabama, et cetera. So I covered a lot of ground there, but hopefully, give you a quick snapshot on how we think about how we think about demand participation, an early state of the consumer.

Matthew Boss

Great. It's great color. And then maybe just with inventory exiting the first quarter down mid-teens. Could you just speak to your overall comfort with inventory on hand to support demand and on the footwear category, just the latest time line as we think about this category returning to clean across the marketplace and the potential return to top-line growth.

Sean Sullivan

Yes, Matt, maybe I'll start and David, can I can jump in so we feel very good about the inventory position. Obviously 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 see here in Q1.

David Maher

Yes. Matt, I'll just I'll just I'll just follow on that a bit, but just to echo Sean's comments that 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 golf balls, and that's something we continue to work on.
Maybe just a bit more color on footwear, the footwear market in the U.S. channel inventories all in total markets down about 12% last from last year this time and really right where we think it ought to be and I'm 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, 15 months of correction in footwear, we like where the U.S. 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 we see Rest of World inventories we'd call out Japan. And in EMEA, principally, we see that correction probably taken another quarter or two.

Matthew Boss

Congrats. Best of luck.

David Maher

Thanks, Matt.

Sondra Lennon

Thanks Matt. Operator, next question, please.

Operator

Megan Alexander, Morgan Stanley.

Megan Alexander

Good morning. I wanted to ask a little bit, Sean, you gave some commentary on the guidance. You left it unchanged for the year. You've kept your H1 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. So is that how we should think about the guidance being unchanged today, maybe related to that, you did mention that you concluded the global launch at some clubs a few weeks ahead of schedule. So was there any pull forward into 1Q? And how are you seeing kind of sell through and now golf clubs segment trends versus your expectations?

Sean Sullivan

And again, 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. And with the exception of whether what David has talked about.
So we just think it's prudent at this stage of the year on 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 rewards program.
Obviously, clubs had a very strong s and Ted 10 of O'KEY launch in Q1, and we still feel good about Q2. Obviously, it still implies a low single digit growth for the quarter, and 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.
The last thing I'll say is, you know, and David called it out in his comments. We really are pleased with our distribution center and we probably were more efficient in the month of March than we had anticipated. And 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. And again, I'll leave it at that.

David Maher

Yes, Megan, I'll 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, but that's true. So you need to see how amid belt and Snowbelt markets open up markets around the world open up. And again, it's always been our feeling that that you can't really have a clear, clear sense of the industry in the 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 60 weeks ago. So we're very pleased with the progress being made are at our new DC.

Megan Alexander

Great that's really helpful. And then maybe just a follow-up to that point and 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?
And I think you had 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 it patients as we think about the second quarter.

Sean Sullivan

Sure.
Megan, maybe I'll take the margin question.
I think it was in line 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 on trajectory in the quarter.

David Maher

So yes, as to the market, Megan, on 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 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 I don't see promotional activity as being noteworthy as either high or low or too far off from the norms. And just another reality of it. When you see promotional activity pickup, 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.

Megan Alexander

Great. Thank you.

David Maher

Thank you.

Sondra Lennon

Thanks, Megan. Operator, next question, please.

Operator

Randy Konik, Jefferies.

Randy Konik

Yes, thanks a lot and good morning. 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 it surprising you or how much is it surprising you?
And then maybe you could give us some perspective on the drivers of longer terms on participation. Anything you can share with us from a data point perspective with your partners in the green grass area as it relates to at junior programming level female, our participation and for our western levels. And then just Country Club Country Club, a waiting list was very helpful to get your Factive on.

David Maher

Okay. Randy from well, I appreciate your questions 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, of course, that we don't participate in, but I would say is additive to the on-course experience. You look at you look at NGF profile data.
They'll point to women in juniors being some of the fastest growing segments. So what's the game doing about it that there was a line from I think it was said why the PGA who said, let's make sure we don't just let this great parade go by without doing something about it in the game and the industry are working hard to be responsive and welcoming and accommodating to new players.
And I think a couple of 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 us. It is too, 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 invest of investment and that's the game 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.
Okay. So a little bit immune to the waitlist reality. But nonetheless, we continually hear from golfers. It's just tough to get TI types 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 demand. 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 a reality is it's still tough to get times in key markets, and it's tough to get to join clubs in key markets. Now those that last forever, probably not, but that's the current state today.

Randy Konik

That's super helpful. And then I guess maybe last question just for Sean, on when you look at the 10-year historical model for this company, you have EBITDA margins that were usually around 12% to 13%. We're now around, I don't know, 15%, 16% somewhere in that ballpark. You have lower comps.
There's a consolidated industry, there's customization, fittings, et cetera. Have you got it, got it. But some thought 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. Thanks.

Sean Sullivan

Yes. Thanks, Randy. Yes. So we talk about it quite often on the 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 in products to service the dedicated golfer and certainly has that dedicated golfer universe continues to expand to the extent that all of these investments that are occurring in the participation rates continue, we feel we've got some real building blocks for long-term growth that we're excited about number one, that's excluding any potential M&A.
You know, 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 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 condense continue to through the use of technology and efficiency and deliver incremental EBITDA and long-term margin growth.
So those are kind of the puts and the outlook that I see. I'm certainly not going to dimension Alize what I see the road map in 5 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.

Randy Konik

Great. Thank you, guys.

David Maher

Thanks, Randy.

Sondra Lennon

Thank you, Randy. Operator, next question, please.

Operator

Joe Altobello, Raymond James.

Joe Altobello

Thanks, guys. Good morning. I guess first question, I wanted to get your thoughts on unit growth in the quarter of Pro V1 Pro V1S against the launch period, which I think is sort of unusual and maybe what did sell through looks like in the quarter? And did you guys experience any meaningful share in the quarter?

David Maher

Yes, Joe, I'll take that one. So it is we had it. We had a significant launch last year and it's unusual when you when you comp favorably against a launch 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 reward program, which was 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 we like the demand, the message that sends around demand for our product. So that was 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 and it's always a little different in it 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 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 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 we like demand where they're not playing due to weather or slow starts. Obviously, demand is lower, but again, that's life in the golf business in Q1.
But overall, we're real pleased with our first quarter performance and the overall state 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

Very helpful. And just maybe a couple of follow-up for Sean. I guess first, you have the yen has weakened a little bit here. Is there any impact on your business? Or is this new and significant to really call out? And maybe secondly, how are you thinking about free cash flow conversion in terms of EBITDA for this year?

Sean Sullivan

Sorry, I'm not sure I got the second one, but the and we're certainly watching it obviously 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're keeping an eye on overall. We continue to like the overall on international businesses for 2024 in the aggregate, certainly, we're keeping our eye on Japan.
And sorry, your second question?

Joe Altobello

Yes, free cash from the cash conversion relative to (inaudible) .

Sean Sullivan

Yes, I don't know that we guide to that. But again, we should I would expect us to convert that not a dissimilar rate that we have historically.

Joe Altobello

Okay, thank you.

Sondra Lennon

Thanks, Joe. Operator, next question, please.

Operator

Casey Alexander, Compass Point.

Casey Alexander

He just stole my Japan question, but I'll move on to my next one on there seem to be sort of a hat tip towards travel related products in the press release on is this a nod towards club glove, which you basically took control of this year? Has there been sort of an uptick in demand for that new company that you brought on, you know, did you kind of walk into, you know, a nice little uptick in demand at Club?

David Maher

Yes, Casey, I wouldn't 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 gloves and also pulled back on some Titleist branded travel products that were maybe a bit redundant to club love.
But I wouldn't point to that simply because while we're pleased with the early start to club plus, it's a rather small piece of the gear story. And again, while we're while we're bullish and enthused about club love both today and longer term, again, I wouldn't I wouldn't read too much into that into that piece of the story.

Casey Alexander

Thank you for that. And secondly, my second question is, you know, historically the repurchase from Magnus has been in $100 million increments in this most recent one, you know, pull down to $37.5 million. Why the change in the cadence of when you repurchased was it tried to keep the stock closer to you know what the repurchase prices or I'm just curious why change that cadence after several that were at $100 million?

Sean Sullivan

Yes, Casey, it's Sean. That's a good question at the end of the day, as I've said a few times, we're really guided by the leverage right in terms of maintaining leverage below two and a quarter times on.
So you know, often given the cadence of the year with the sell in the first quarter, the investment in working capital and we've kind of 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 would really point you to we're trying to manage the business and maintain a very strong balance sheet with that leverage target.

Casey Alexander

Right. Thank you.

Sean Sullivan

Thank you.

Sondra Lennon

Thanks, Casey. Operator, next question, please.

Operator

Mike Swartz, Truist Securities.

Mike Swartz

Hey, good morning, everyone. I just wanted to wanted to start with the ball business and maybe following up on Joe's question. We're taking a little higher-level view of any typical even numbered year, lapping a Pro V1 launch of 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 business to grow year over year and that you've had a loyalty program before understanding you had 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-numbered years in that business? Or is this more of a factor of inventory levels are just still too low and you're still rebuilding some of that this year?

David Maher

Yes, Mike, I would say it's a good question. What's different today versus a handful of years ago, I've said this before, but annually, there are about 150 million-or-so more rounds of golf being played today than were played in 2019.
Right so you do the math on that and what it means to a golf ball company.
I would also say that that our we've been we've been producing golf balls. It 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 wanted 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 outputs certainly this year versus last year are in better shape. And I would point to global inventory global channel inventories as being as being healthy and where they ought to be.
So not one singular answer but rather but rather health across the board, I mentioned a moment or two ago, we're seeing a nice a nice return to the corporate business and have for the last couple of years.
So a lot of positives there in particular to the quarter, and we were a bit constrained last year from a from a supply standpoint and lead times were longer than we would have liked. That is no longer the case. So I think you're 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 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 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 good about the ball business in our most pressing, not threat, but our most pressing area of interest right now is really weather because when weather is decent, people are playing golf and purchasing Titleist golf balls. So hopefully that gives you some color.

Mike Swartz

Yes, no, that was great. Thank David. And then just second question, just to put a finer point on the first quarter, because I think when you would 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 you have better performance at your distribution center and maybe a little bit of the focus 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.

Mike Swartz

Okay, great. Sean. Thanks.

David Maher

Thanks, Mike.

Sondra Lennon

Operator, next question, please.

Operator

[Noah Atkinson], KeyBanc Capital Markets.

Noah Atkinson

I'm just wondering if there's any early read on your sense of 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 federal? Thanks.

David Maher

Yes, I would say the common theme in Q1 was where weather was decent. Demand was good weather was less than decent demand was affected. So the Southeast in particular were 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 I think the narrative is more about a delayed start to season versus strong demand, weak demand. And within our product lines, we've been especially pleased with our wedge launch and early demand there that's team did a great job, as I've said, and early demand has been has been strong.
And 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 not 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 term, but we're going to embark on here later this month.
And now what are your final comment about FootJoy again, we really like we 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 some back half growth in that business after what was obviously a slow start.
Although we did call out growth in the U. S, 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. Are really built around a product portfolio that we feel really good about.

Noah Atkinson

Great. And maybe just on one other question, just on your comments around the North American distribution center startup exceeding expectations. Tom, just wondering if you could provide some 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? Thanks.

Sean Sullivan

Yes, no, it 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, you know, the primary products there are FootJoy and Titleist gear on when we think longer term would be. I think it's much about efficiency.
It is his 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 it is as 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, I 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 just had 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 John 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 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.

Noah Atkinson

Great. Thank you.

Sondra Lennon

Thanks, Noah. Operator, next question, please.

Operator

[JP Wallen], Roth MKM.

JP Wallen

Good morning and thanks for taking my question. Maybe first, in terms of kind of the investments in IT and infrastructure and understanding kind of usual protocol about forward guidance, putting together kind of at 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. fitting line? Are those new or has that always been contemplated? And will that be impacting kind of and SG&A in the back half of the year?

Sean Sullivan

Yes, JP, I'll start. Yes. So I think that at the end of the year, we did talk about growth in OpEx in '24, right outpacing sales if I recall correctly. So on this as 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 this or some of these things are enterprise investments.
Some of these are specific to product segments around fitting networks about fitting apps and technology. So and we do intend to continue to invest, and you'll see that flow through in SG&A in 2024. That'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 JP, just a quick follow on to your question about food choice fit lab? Yes, that has been contemplated and planned for in our out-year plans. I think more of that to follow in 2025 than late '24, but we're enthused about and getting that program running.

JP Wallen

Okay, understood. Thanks for the color. And then maybe just on FootJoy in thinking about kind of international markets. I think you may be 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 Are things stabilizing in the back half of the year. So what gives you confidence there? And then just maybe anything you're seeing with kind of broader customer behavior specifically on the international side?

David Maher

Yes. 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 U. S, 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 you think about markets around the world. And we've spoke of 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. And that region has seen some outsized growth in the last couple of years. And more recently, we're seeing a bit of a correction from strong demand, followed by a whole lot of new entrants resulted in excess inventory and promotional activity. So we feel as though we're in the midst of a correction within the Korea apparel 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 callout 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 and it does affect it shows up in our other segment.
On the title 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 up to withstand the effects of that of the correction. That's the only market that I think warrants a unique callout at this stage.

JP Wallen

Great. I appreciate the color and best of luck moving forward.

David Maher

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 and thank you for joining, and you may now disconnect your lines.