Good morning, everyone, and welcome to today's Acushnet Company 3Q '24 Earnings Call. My name is Drew, and I'll be the moderator for today's call. [Operator Instructions] It's now my pleasure to hand over to Sondra Lennon, Vice President, FP&A and Investor Relations, to begin. Please go ahead.

Good morning, everyone. Thank you for joining us today for Acushnet Holding Corp.'s Third 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 U.S. 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 metrics 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 net 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 9-month period ended September 30, 2024, and the comparable 9-month period in 2023. With that, I'll turn the call over to David.

Thanks, Sondra, and good morning, everyone. As always, we appreciate your interest in the Acushnet Company. I will start on Slide 4 and get right to our results. During the third quarter, Acushnet delivered net sales of $621 million, a 5% year-over-year increase. This growth contributed to adjusted EBITDA of $107 million in the quarter, up 9% from the third quarter of 2023. Through September, year-to-date net sales were up 3%, surpassing $2 billion with growth coming from Titleist Clubs, Titleist Golf Balls and Gear. Adjusted EBITDA of $392 million was up 4% compared to the first 9 months of last year. And I will pause here to thank my teammates for their dedication, which fuels this company performance. Looking at our business by segment. Titleist Golf Ball net sales were down 1% in the quarter and are up 5% year-to-date. This growth has been led by sustaining Pro V1 momentum, especially in the U.S. market, which is benefiting from increased rounds of play. As we said on our last call, we expect Golf Balls sales to be down modestly in the second half as we and our trade partners lower inventories in preparation for the launch of new Pro V1 models in January. This upcoming launch, which will mark the 25th anniversary of Pro V1, is well underway as we recently debuted new Pro V1 models across worldwide tours. Player feedback has been very positive, and we have fully transitioned production lines to new models to support the upcoming launch. Titleist Golf Clubs posted a healthy 19% increase in the third quarter as the team did great work bringing new GT drivers and Fairway Metals to market. Since its debut, GT has been the #1 driver on the PGA, DP World and Korn Ferry tours and early consumer response…

Thank you, David. Good morning, everyone. As David mentioned, we had a great third quarter and solid year-to-date performance. In the third quarter, net sales increased 5% over the same period in 2023, primarily driven by higher net sales in Titleist Golf Clubs. Adjusted EBITDA of $107 million was up $8.6 million. For the first 9 months of 2024, net sales and adjusted EBITDA increased 3.1% and 3.8%, respectively. The 19% increase in Titleist Golf Club net sales in the quarter was driven by the successful launch of our GT drivers and Fairway Metals. Titleist Golf Gear was also up in the quarter, almost 9% compared to last year. Titleist Golf Balls were down 1% in the quarter, primarily due to lower sales volumes of our performance models. FootJoy was down 2% in the quarter, primarily on lower sales volumes in footwear and apparel. Gross profit in the third quarter of $337 million was up 9% or $29 million compared to 2023, primarily due to higher sales volumes in Titleist Golf Clubs and Golf Gear and higher average selling prices across all FootJoy categories. Third quarter gross margin of 54.4% was up 240 basis points versus prior year, largely due to higher sales volumes and a favorable product mix in Titleist Golf Clubs. SG&A expense of $233 million in the quarter increased $23 million or 11% from 2023, mainly due to higher employee-related expenses related to administration and to support our golf club and ball fitting initiatives and increases in advertising and promotional expenses, mainly supporting the launch of the GT drivers and metals in the quarter. Interest expense of $13 million in the quarter was up $4 million due to an increase in borrowings. Our effective tax rate in Q3 was 19.3% as compared to 16.5% in last year's…

Thank you, Sean. Operator, could we please open the line for questions?

[Operator Instructions] First question today comes from Matthew Boss from JPMorgan.

So David, maybe if you could elaborate on participation and engagement trends that you're seeing in the current landscape? And just any notable callouts across geographies as we think about the U.S. market relative to international?

Yes. Matt, so as noted, we're really pleased -- the industry is really pleased with rounds of play in the U.S., up just about 2% year-to-date. After a slow start in January and February, primarily in the Southeast. And as you look at sort of the map of the country, you see all regions up versus the -- with the exception of the Southeast, again, a slow start in the early part of the year. So to sit here today and look at '24 rounds on pace with the record of '21, I think, is really a positive indicator and trend of what's happening in golf, both with dedicated golfers and the benefit of some of the new golfers that have joined the game in the last couple of years. As we move around the globe, Matt, we project rounds through September, down about 2%, Korea up slightly, the others down modestly. A little bit of weather, a little bit of maybe macroeconomic, and we've said consistently U.S. market, U.S. consumer stronger than we're seeing around the world. But by and large, we think rounds are holding up very well. There's always going to be a variability due to weather. And as I think about where we are today versus sort of a 2019 baseline, the major markets, U.S., Korea, up 20-plus percent. Japan would be in my top 3 markets, up 10% and worldwide rounds up about 15%. So structurally, Matt, game is in a good place. And we're always going to have weather ups and downs. But net-net, we're really confident with where we are through the first 3 quarters.

Great. And then maybe just a follow-up for Sean. As we think about gross margin, just any puts and takes in terms of the fourth quarter on gross margin? And how best to think about the promotional landscape and inventory in the channel today?

Yes. So I'll take the first one. I think gross margin, you saw the positive trend in Q3. I think I spoke on the last call about the back half gross margin approximating where we ended the first half. That statement still holds true. Obviously, given the performance of the club business in Q3, that really helped drive. But again, it's both volume and price and efficiency. So very pleased with that. In terms of the promotional environment and inventory, I'll turn it over to David.

Yes, I'll weigh in, Matt. So from an equipment standpoint, balls and clubs, I would say steady state, normal. You're going to see some promotional activity at the holidays, which we always do. So again, I would characterize that as normal. I've said this before, clubs, we tend to be a little bit isolated or resilient just because so much of what we do is custom-fit. So net-net, I would put equipment balls and clubs in a steady state normalized position. If there is some watch out, it's the continued discussion we've had all year about footwear. While better than it has been, I would expect to see some promotional activity over the holidays. Apparel, again, we don't see too many swings within apparel simply because so much of what we do is custom embroidered. But I would overall characterize the landscape as within the range of normal, balls, clubs, healthiest and maybe a watch out in footwear.

[Operator Instructions]

Okay. Thanks, everybody. Short Q&A today. Everybody gets a little time back on their calendar. As always, we appreciate your interest and look forward to getting together again in 3 months' time. Thanks again.

That concludes today's Acushnet Company call. You may now disconnect your line.