Acushnet Holdings Corp. (GOLF) Q4 2018 Earnings Report, Transcript and Summary

Good morning. My name is Christina and I will be your conference operator today. At this time, I would like to welcome everyone to the Acushnet Holdings Corporation’s Fourth Quarter and Full Year 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Tony Takazawa, Vice President of Investor Relations, you may begin your conference.

Thank you. Good morning, and welcome to Acushnet Holdings' call to discuss the financial results for Q4 and full year 2018. This morning, we are joined by Acushnet President and CEO, David Maher. David will provide commentary on the conditions in the golf industry and discuss the performance of our business in the context of our long-term mission and strategy. Next, Acushnet CFO, Tom Pacheco, will spend some time discussing the overall financial results for the year and highlights from 4Q. 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 our filings with the U.S. Securities and Exchange Commission. Throughout this discussion, we will be making 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 these 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. With that, it is my pleasure to introduce Acushnet CEO, David Maher. David?

Thanks, Tony. Good morning, everyone. We appreciate your time today. I'd like to begin by sharing some of Acushnet's highlights from 2018. Starting with golf balls, Titleist had a strong year, as 73% of all worldwide tour players relied on Pro V1 or Pro V1x as their golf ball equipment choice, including the winners of all four men's major championships and all five women's major championships in 2018. We believe this is powerful commentary on the performance, quality and consistency inherent in every Titleist golf ball produced by our world-class manufacturing team. In 2018, we also introduced our new AVX, a premium multilayer cast-urethane golf ball developed for golfers who benefit from lower spin in flight and prefer a softer feel. We're very pleased with this past summer's global launch and the effective and clear positioning of AVX in the marketplace. The Titleist golf club business also had a terrific year, driven by the resoundingly successful launch of TS Metals, a strong year in irons, and robust Vokey SM7 wedge and Cameron Select putter launches. We're excited about the momentum our golf club business is generating. Our gear and FootJoy businesses were resilient, in spite of some challenges inherent in their respective product categories, and we believe both segments are positioned well for 2019. Since our January acquisition of Links & Kings, we've made meaningful investment to improve and expand our supply chain to prepare this great brand for growth. And in the fourth quarter, we began the process of integrating and working closely with our new partners at PG Professional Gulf. And while Mother Nature was especially unkind to the golf business in 2018, the industry held up well despite a weather-induced loss of rounds in many global markets. Against this backdrop, Acushnet was able to capitalize, posting a 5% sales increase for the year, fueled by new product innovation and some great work by our associates. Acushnet's associates are known for their experience, expertise and passion for their work. I must acknowledge and thank my teammates for their commitment and effort, which are the foundation of Acushnet's consistent performance and future growth. We are also appreciative of our valued trade partners, who so effectively communicate Acushnet's performance, quality and consistency benefits to golfers. And affirming our commitment to our support of shareholders, I am pleased to make the following two announcements: the first is that Acushnet's Board of Directors has voted to increase our fourth quarter dividend payout by 8% to $0.14 per share, bringing the aggregate value to approximately $10.5 million. And secondly, we are announcing an increase to our share buyback program authorization to $50 million as another means to reward and return value to our shareholders. Both of these actions are signs of the board's confidence in Acushnet's ability to execute over the long term and commitment to providing Acushnet shareholders with an attractive long-term total return investment opportunity. Please now turn to Page 5 and our top line results for the year and quarter. For the full year 2018, Acushnet sales of $1.63 billion grew by 5% or 3% in constant currency. Adjusted EBITDA for the year increased by 3% to $230.8 million. Titleist clubs increased 11% and were the top gainer in 2018. This growth was driven by successful wedge and putter launches in the first half, year-long iron momentum led by our AP3 model and our successful TS Driver and Fairway launch in the second half. Titleist golf balls also had a strong year, posting growth in a non-Pro V1 launch year and despite reduced rounds of play. As you recall, even-numbered years tend to present challenging comps for the ball business, given our product launch cadence. Looking at the fourth quarter, Acushnet posted sales of $343 million, down 2% versus last year. This quarterly decline was anticipated and due primarily to the seasonal drawdown of Pro V1 field inventories in advance of the 2019 Pro V1 launch and the timing associated with our golf club product launches in the second half. Specifically, the TS Metals launch had a greater impact on our third quarter, whereas last year's Titleist irons launch was more concentrated in the fourth quarter of 2017. Adjusted EBITDA for the fourth quarter of $36.1 million decreased 12% versus last year. Now turning to Page 6. We'll take a closer look at Acushnet's four business segments, with results presented in constant currency. Starting with golf balls. Titleist ball sales increased 1% for the year and were off 2% in the fourth quarter for the reasons I just mentioned. Titleist golf ball sales in 2018 were driven by new products, notably our AVX franchise, which debuted in May, and new Tour Soft and Velocity, which launched in January. Across the worldwide professional tours, Titleist had another great year, with a 73% ball count, representing more than seven times the usage of the nearest competitor. And Pro V1 golf balls notched 180 wins across worldwide tours in the 2018 season, more than six times the nearest competitor. This past January, we launched the new Titleist Pro V1 and Pro V1x golf balls at the PGA Merchandise Show. These new golf balls made their debut on worldwide professional tours in the fall and have been engineered with thinner covers, thicker casing layers and larger, faster cores. These enhanced designs result in more ball speed and lower spin for greater long-game distance, while maintaining the preferred short game spin, feel and control characteristics of both Pro V1 and Pro V1x. And we have, for the first time, introduced yellow models in both Pro V1 and Pro V1x, which we expect will be well received by golfers who have a preference for colored golf balls. Acushnet's continued golf ball success is rooted in our unwavering commitment to R&D, manufacturing excellence and golfer engagement. Led by the first quarter launch of the new Pro V1 and Pro V1x models and our ongoing efforts to develop the nascent AVX franchise, we're excited and optimistic about 2019. And finally, in golf balls, our PG Professional Golf acquisition is progressing as expected. For 2019, we expect full year revenues to be in the range of $20 million to $25 million. Now moving to golf clubs. Titleist clubs had a terrific year, delivering sales of $445 million, an 11% increase versus last year. Sales for the quarter were off 5% for reasons I mentioned earlier. Each of our golf club categories performed well in 2018, with growth led by TS Metals and Vokey wedges. Titleist clubs also grew in every major golf market, with the U.S. and EMEA posting the largest increases. Our commitment to invest and innovate in clubs is yielding positive momentum across all categories, drivers, fairways, hybrids, irons, wedges and putters. And while it was not a feat we intentionally set out to achieve, our team is rightfully proud of the recent sweeps of the ball count and all six club categories at the Sony Open in January and then again two weeks later at Torrey Pines. Such an equipment sweep had never before been accomplished on the PGA Tour. We see this widespread support by the game's best players as being indicative of the momentum and energy around Titleist golf clubs, and most notably, our TS Driver franchise, which has seen the greatest usage gains since making its tour debut at last year's U.S. Open. More tour players are playing with Titleist drivers than ever before, and this success and growth are spanning across each of the leading global tours. We are experiencing similar momentum with top amateurs and in the marketplace, which fuels our enthusiasm around the Titleist golf club business as we soon enter the heart of the 2019 equipment season. Next, moving to Slide7 and Titleist gear. Gear posted an almost 15% increase in the quarter, bringing the full year to roughly flat with last year. Gear achieved positive growth in the U.S. and EMEA in 2018, which was offset by declines in Japan and Korea. We have leveraged our global design and supply chain to create more market-specific bags and travel gear, both of which are off to a good start and should help to differentiate Titleist gear products in the key markets. And we continue to expand our custom capabilities and offerings to capitalize on increasing demand for customized and personalized products. Overall, we believe our gear business is in good shape, and we look forward to a solid year ahead. Now moving to our final segment, FootJoy, which delivered full year sales of $440 million, a 1% decline versus 2017. Fourth quarter sales, comping against the 15% gain last year, were down 2%. There are three central themes which emerged within the FootJoy business this past year: First, FootJoy was not as competitive in the sub-$100 price range, a category which grew in 2018. As you may recall, we decided to exit some lower-margin, lower price points last year. And while we see this as a long-term positive for the FootJoy brand, this negatively impacted our 2018 results. Going forward, we believe we are introducing the right products to be more competitive in that sub-$100 space. Second is the continued success and growth of FootJoy men's apparel, women's athleisure apparel and performance outerwear. FootJoy is relatively new to the golf apparel space, and the growth of our business closely parallels our expanding design, customization and supply chain capabilities. And finally, FootJoy gloves, which have earned one of Acushnet's leading share positions, continue to innovate and set the standard in all markets for performance, quality and consistency. FootJoy and Titleist gloves are made at Acushnet's wholly-owned glove factory, which we view to be a distinct competitive advantage for both brands. Looking to 2019, our footwear team has adapted well to ever-changing consumer preferences and has fortified our new product pipeline to capitalize on shifting market trends. Led by Pro SL and the recently introduced, athletically styled Fury and Flex models, FootJoy is positioned for an exciting first half. FootJoy's new women's footwear line is scheduled to ship in the spring and should add to this momentum. FootJoy outerwear is the number one outerwear in U.S. green grass shops and continues to solidify its position as the best in performance outerwear. We're excited to introduce a new innovation story in the first quarter with HydroKnit, a fully waterproof shell with a specifically engineered three-layer bonded knit fabrication that makes it one of FootJoy's lightest outerwear garments. In 2018, our team successfully launched the FJ 1857 collection of handcrafted leather footwear and luxury apparel. 1857 sell-through met our high expectations and we anticipate its continued progress at many of the top golf shops around the U.S. While the 1857 collection is not intended to be a sizable business for FootJoy, it represents an important and classic product offering for the game's dedicated and discerning golfer. We report Links & Kings under our FootJoy segment and our first year integration under the Acushnet umbrella has gone well, as we improved its supply chain while managing to keep up with double-digit growth for the brand. We are confident that Links & Kings is well positioned for future growth, first in North America and the U.K., and in time, to key markets across Asia and Continental Europe. Now looking at our business regionally on Slide 8. U.S. sales increased 5% for the year and were off 5% in the fourth quarter. Our U.S. team achieved good results, driven by strong sales in golf clubs, golf balls and apparel. Looking outside the U.S., EMEA posted a 1% gain for the year and was roughly flat in the fourth quarter. Outside of challenges with U.K. retailer American golf, our business across EMEA has been relatively stable. Japan was down 3% for the full year and 9% in the quarter. Rounds in Japan were off 5%, which contributed to market softness, particularly through the first three quarters of the year. We did see a rebound in the fourth quarter when both weather and rounds improved. And lastly, our team in South Korea had another strong year, with sales up 7% as they finished the year with a great fourth quarter. And now turning to Page 9 and our outlook for 2019. We feel the global business of golf and the dedicated golfer base are structurally healthy. As we look to 2019, we expect new product innovation will once again be the engine of revenue growth and share gains with the game's dedicated golfer. These golfers represent 70% of the industry's purchasing power, remain an especially attractive demographic and are the focal point of Acushnet's product development and go-to-market strategies. Each of our business segments is active with new product development and a full calendar of new product introductions, which bring enthusiasm to golfers, our trade partners and our associates. We're investing in our associates and in technology to advance the performance and appeal of our products while pursuing efficiencies throughout our organization to achieve operating leverage over the long term. The Acushnet team has a proven track record of executing, and we are confident in our ability to continue delivering favorable returns for our shareholders. In closing, we appreciate your continued support. And I will now hand it over to Tom to provide an overview of our financial performance.

Thanks, David, and good morning to everyone on the call. I would like to echo David's comments and thank all of our associates and trade partners for helping us deliver solid results for the year. I'm going to start off by discussing our results for the full year. As you know, we manage the business with our annual goals, two-year product life cycles and long-term strategy in mind. This has proven to be a successful approach, as our business results can be impacted in the short term by factors such as the timing of product launches and the weather. Looking at 2018 overall, we are pleased with our ability to execute our plan and to deliver the solid results we have achieved. Consolidated net sales were $1,634,000,000, up 5% over last year and up 3% on constant currency. Growth was primarily a result of innovation in our Titleist clubs business, where the newly introduced TS Drivers and Fairway Metals and the Vokey SM7 wedges helped to drive revenue. Gross profit was $842 million, up $40 million versus last year. The success of the Titleist TS Metals, Vokey wedges and higher average selling prices in golf balls were major factors in gross profit improvement. Full year gross margins were 51.6%, up 20 basis points versus last year. SG&A expense was $612 million, up 6% over 2017. As has been discussed, throughout the year, the increase in SG&A in 2018 was primarily due to planned higher selling expenses across all segments, an increase in advertising and promotion and higher IT-related costs and share-based compensation expenses. I would also note that SG&A expense included an unfavorable impact of $5 million from changes in foreign currency exchange rates. Research and development expense of $51 million was up $4 million compared to last year and about 3% of net sales. Operating income was up slightly over 2017 at $172 million. Interest expense increased by $3 million to $18 million for 2018, reflecting higher average interest rates compared to 2017. Our effective tax rate was 31.4% compared to 32% last year. We currently expect our 2019 effective tax rate to be around 30%. 2018 net income attributable to Acushnet Holdings was $100 million, up 1% over last year. And for the year, we are pleased that adjusted EBITDA was $231 million, up $7 million or 3% year-over-year. To assist you in your review of the calculation of adjusted EBITDA, we have provided a reconciliation in our earnings release as well as in the slide presentation. Now I will review our Q4 results. Consolidated net sales in the quarter were $343 million, down 2% year-over-year and down 1% on constant currency. As David mentioned, this decline was anticipated and due primarily to the drawdown of Pro V1 field inventories in advance of the 2019 Pro V1 launch and the timing associated with our golf club product launches in the second half of the year. Q4 gross profit was $175 million, down $4 million on lower sales volumes of both golf balls and golf clubs. Gross margin was basically flat at 50.9%. Looking at operating expenses. SG&A of $140 million was up $3 million or 2% versus last year. The increase in SG&A was due to higher selling expenses across all segments and included continued partner readiness expenses to support the very successful TS Metals launch. In Q4, R&D expense of $13 million increased $1 million over last year, largely attributable to higher employee-related costs. Operating income in the quarter was $20 million. This was lower than the same quarter last year due to the combination of lower revenues and higher selling expenses that I mentioned. Q4 interest expense of $4 million increased by $600,000 year-over-year due to higher average interest rates on borrowings. Our Q4 effective tax rate was 22.2%. This rate was substantially lower than the full year ETR as a result of the release of a portion of our valuation allowances on state-deferred tax assets, partially offset by the impact of the new guidance related to tax reform that was issued during the quarter. For the quarter, net income attributable to Acushnet Holdings was $11 million, and Q4 adjusted EBITDA was $36 million, down 12% from the prior year period. Now looking to the balance sheet. We had about $31 million of cash on hand at December 31, 2018. Total debt outstanding at year-end was approximately $386 million. On a rolling four quarter basis, our total debt-to-adjusted EBITDA ratio is now 1.97 times. We are very pleased to have reached our target leverage ratio as we expected. 2018 CapEx was about $33 million. While a good portion of this spend is maintenance-related, as we previously stated, we have also been making investments in innovation, technology and infrastructure to drive continued market leadership, operational efficiency and future growth. For 2019, we expect CapEx to be about $36 million. As I mentioned, we are pleased that we have reached our target leverage ratio at the end of the year as expected. We now have the flexibility to expand our capital allocation options with regard to both return on capital and return of capital. Investment in innovation, golfer connection and operational efficiency is key to the long-term success in the golf business. As such, we plan to continue to make investments in R&D, targeted sales and marketing programs and CapEx which deliver a favorable business on investment. Examples of these investments include: The innovations we delivered with last year's introduction of the Titleist AVX golf ball; the marketing programs which have delivered some of our most successful product launches ever in the new AP iron series and the new TS Metals; and the capital expenditures we have made to improve our manufacturing abilities, better leverage information technology and make necessary improvements to our physical infrastructure to make it more efficient and productive. We also plan to continue to look for targeted M&A opportunities which would help support our long-term strategies and to drive growth at a favorable return. Our cash dividend has been an important element of our capital allocation strategy. As a reminder, we declared our first dividend in our first full quarter as a public company two years ago. We raised that dividend a year later, and we are pleased that we have raised our quarterly dividend again by almost 8% to $0.14 a share. And finally, as we have reached our target leverage ratio, share buybacks will become an increasingly important element of our capital allocation strategy. As we announced earlier this morning, we have increased our share repurchase authorization to up to $50 million. This will not only enable us to offset future dilution, but will also allow us to increase the amount of capital we can return to shareholders. This repurchase authorization is a strong indicator of the confidence our Board of Directors has in the strength of our strategy, our proven ability to execute and the exciting opportunities that we believe lie ahead. Moving forward, we anticipate that our majority shareholder will maintain its current ownership percentage over time. We are focused on being good stewards of shareholder capital, and as always, we will carefully evaluate the various opportunities we have to both invest in the business and to return capital to shareholders. As to the outlook, for full year 2019, we expect reported consolidated net sales will be in the range of $1,655,000,000 to $1,685,000,000. This is approximately 2.2% at the midpoint. On a constant currency basis, we expect revenues to increase in a range of up 2.8% to up 4.7% versus last year. And we are forecasting our adjusted EBITDA for 2019 to be $235 million to $245 million. At the midpoint of this range, this represents growth of about 4% versus 2018. To help you with your understanding of how we expect the business to flow during the year, I would like to remind you that in the first half of 2018, we had the benefit of four major product launches: Performance golf balls, Vokey SM7 wedges and Cameron Select putters in Q1 and the U.S. launch of the AVX golf ball in Q2. We also had the benefit of the continued momentum of the Titleist AP irons over the first half of 2018. In the first half of 2019, we expect to benefit from only two major product launches: The Pro V1 and Pro V1x in Q1 and the Cameron Phantom X putters in Q2. We also expect to continue to benefit from the success of the new TS Metals. As a result, first half 2019 consolidated net sales are expected to be approximately flat compared to the first half of 2018 on a reported basis. In summary, 2018 was a solid year, driven by our focus on innovation, our ability to deliver the best-performing and highest-quality products and our continued execution of our long-term strategy. Our focus on the dedicated golfer, broad and deep product portfolio, global distribution, strong partner network and attractive financial framework, are all important factors in our current and ongoing success. We are well-positioned and are looking forward to an exciting 2019. With that, I will now turn the call over to Tony for Q&A.

Thanks, Tom. Christina, can we now open up the lines for questions, please?

[Operator Instructions] Our first question comes from Randy Konik from Jefferies. Your line is open.

Thanks very much. I guess, Dave, I want to ask about just the general – your general thoughts about the environment. You kind of alluded to, in your text, in the press release, the business of golf being structurally healthier in recent years. Just kind of just want to get your kind of pulse on the industry for the next – as you see it today and over the next couple of years, just high level.

Sure. Good morning, Randy. A couple of quick ways to get at that, and I'll start by commenting really at a high level on 2018. It was a challenging weather year globally. It really, as challenging as we've seen in quite some time, which led to rounds being off somewhere between 3% and 5% around the world. And in spite of this, the market held up well, which is, I think, commentary on the overall health and resilience of the dedicated golfer. And now certainly, consumables were hit a bit harder than clubs, but overall for the year, for the industry, it turned out a whole lot better than you would expect, given the weather, round realities. So with that as a backdrop, I'll peek forward to 2019 and I'll share several inputs that shape our thinking about 2019. First, again, the dedicated golfer is in good shape, alive and well, playing, spending, despite some weather and weather drags. Second, of course, would really be our internal product plans, which we're excited about and confident in. I would say third would be the retail channels, and we've talked a lot about this over the years. The retail channels are healthy. They're as healthy as they've been in quite some time. And for the most part, inventory levels heading into the new year are in good shape. And I would say lastly, the final piece would be the broader economic climate and consumer spending. And we did see that consumer spending was a bit less robust in the second half of 2018 than it was in the first half. And really, these second half conditions are the conditions with which we built our 2019 plans around. So net-net, Randy, we'll reiterate our position, and this has been consistent over the last couple of years, also consistent with this overall healthy retail climate, which I did note in my opening remarks, which is that we do project the industry growth, and that is our target market dedicated golfer industry growth to be in the flat to low single-digit range. So those are the key inputs we think about as we assess golf going forward into 2019.

Helpful. And then if we jump off that last comment around, let's say, the second half versus the first half from a industry spend kind of perspective by the consumer, how do you kind of think about that and compare that to or contrast it with some of the product acceptance you're seeing with some of the new product areas, like the AVX, the TS product line, even the colorway change on the Pro V1, the yellow coming up, et cetera? So how do you think about that as indication for your business being able to almost like sort of outperform and gain share in the upcoming year?

Yes, so certainly, from a product standpoint, we're very excited about – and I'll go sequentially. Our May introduction of AVX, our fall introduction of TS Metals and now we're in the midst of a first quarter launch of new Pro V1 and Pro V1x. So from a product standpoint, I think our team has done a great job controlling all their variables and really bringing terrific product to market and activating it with both the trade and consumers in a really effective manner. The other piece, Randy, that you can't overlook is what we saw in the fourth quarter. Rounds – and this is more U.S. commentary – rounds were off double digits in the fourth quarter. Weather was, you look at the mapping and you look at what happened from a precipitation standpoint, up dramatically. You look at it from a temperature standpoint, down dramatically. So the industry came through a pretty rugged quarter from a weather standpoint, that hit rounds some, which were off some 10%. It really is as tough a quarter as we've seen in quite some time. Again, all commentary on the inputs that have us thinking about the business as we head into 2019. So at the highest level, we feel good that we've weathered a tough weather year, pun intended. But again, the things we can control, the product stories we're bringing to market, we're very, very optimistic about.

Great. And last question, just would like to – you just talked about the, I guess, the return on capital and return of capital and just different uses, given that the leverage ratios have been kind of net where you want them to be. On the M&A strategy or potential M&A strategy, just curious on just what – how you think about your – what's your philosophy around M&A? Links & Kings, just kind of what – just curious on if there were to be any M&A, amongst the other ton of things you can choose to do, just curious on how you think about the M&A area in terms of what you would look at, what you wouldn't look at? Just curious.

Well, I think fair to say we're very open-minded in terms of M&A. Our preferred inputs are does it, does the product or brand resonate with the dedicated golfer? That's our sweet spot. That's where we have the most expertise. And then secondly, would it be synergistic with our global distribution platform? We have strengths on our own. We have our own fingerprint in terms of how we go to market and where we have strengths. Good example, maybe the best example, would be the Links & Kings, which again, dedicated golfer acceptance, matches nicely with our existing distribution – channel distribution strengths. So those are really the two primary drivers to how we assess and think about M&A. But that said, Randy, we are open-minded, and we're always looking at opportunities that would work well within our company. Shared with you last go around that the PG Professional Golf doesn't necessarily fit the two criteria I established, but it fit from a vertical supply chain standpoint. So that one a bit outside the lines of our typically stated M&A approach, but we think real effective and important and long term, could be very successful for Acushnet.

Very helpful. Thanks, guys.

Thanks, Randy. Next question, please.

Our next question comes from the line of Steven Zaccone from JPMorgan. Your line is open.

Great. Thanks very much. Good morning. So encouraging top line guidance for 2019. And thanks for the commentary on the first half versus the second half cadence. But I was hoping you could talk a little bit more detail about expectations by segment. Seems like Pro V1 selling into a healthier channel than the last launch, and you also have the new yellow ball launch. So presumably, golf ball sales growth will outpace the consolidated outlook. But just could you talk a little bit more about the expectations by segment?

Sure, Steven. This is Tom. Good morning. So as you said, we – it's a Pro V1 launch year, so an odd-numbered year, we're always looking for a solid performance from the golf ball business. And as you think about the clubs business coming off a very successful 2018, you've got some challenging comps there. So certainly looking at strong performance from golf balls and a little more challenging performance from clubs. We are looking for a bit of a rebound for FootJoy as it compares to some of the challenges it had last year. So I think from a segment perspective, that's what we're looking at.

I'll reiterate, Steve, just to again make a point that Tom made earlier. A big theme here in 2019 is our launch cadence. And again, as Tom said, if you look at what we launched in the first half of 2018, we had performance models, we had wedges, we had putters, we had an AVX golf ball, all in the first half. That compares with the first half of 2019, really we have a Pro V1 launch, which is meaningful, but not meaningful enough to offset some of those high-impact pipelines that took place in the first half of the year. So if there's a theme, and it really rings true in odd years for Acushnet, is that our launch cadence differs in odd years from even years, which again, we've talked about in the past.

Yes, understood. And then just on the increase in the share purchase program, could you comment around your strategy around actually repurchasing stock? Would you expect to be a consistent repurchaser? Or maybe do it on more of an opportunistic basis?

So this is Tom again. We're not going to get into a great amount of detail in terms of our execution plans. We do expect to purchase relatively consistently throughout the year. We will obviously be cognizant of the share price and be opportunistic where we can. So we will be strategic, but we do expect to be a consistent purchaser across rest of the year.

Great. That’s it all for me and hoping for better with this year. Take care.

Thank you, Steve. Next question, please.

Our next question comes from Dan Wewer from Raymond James. Your line is open.

Thanks. So with the midpoint of revenue guidance in that mid-2% range for 2019, given we're going to be flat in the first half of the year, that implies the growth is going to be back-loaded. And those are two seasonally smaller periods, so we're talking about what, 4%, 5% revenue growth at a minimum, I guess, in the second half of the year. Why would we be confident about the second half rebounding at that rate? Is it due to some changes in product launches? Or is it an assumption that weather gets a lot better?

No, not at all. Not at all, Dan. It's not at all to do with weather. It's just a function of our launch cadence. Again, odd years, this is how they flow. Even years tend to be very first half-driven, as I said. But this is solely a function of our launch cadence. And it won't be – each of the segments won't perform the same. As we mentioned, the ball business takes a –- take a bit of a ride in the first quarter, whereas some of the other segments more back half-loaded. But really, solely a function of how we think about launch timing.

Okay. And then second question. There's been more speculation about the domestic economy, I guess, given the global economy is slowing, it's been a over a decade since we've had a recession, but how do you think that the golf industry, how would it change in the next inevitable recession compared to what happened back in 2008 and 2009?

Yes, and we share – you're right, it's inevitable. When? Nobody knows. But in terms of how we've experienced recessions going back over the last couple of decades, I'll point to '08, '09 and if you back out the Cobra piece of our business, which was before we sold it, our business held up quite well. We certainly took a hit, but we didn't take as big a hit as the broader economy. And again, I think it's commentary on just the passion and commitment and dedication to the game of our dedicated golfer. Do they keep playing? Yes, they do. Do they keep spending? yes, they do, albeit at a lesser rate. So if we use '08, '09 as the benchmark, again, our business took a half step backwards while the broader economy may have taken a full step backwards. So there's some inherent resilience that comes with our dedicated golfer base around the world.

And just the last question I have is, curious as to how you're thinking about the ultra premium end of the market? Seeing PXG taking pricing lower. There's been some speculation that maybe Titleist is going to push its Concept irons a little bit harder. But curious as to how you're thinking about the very high-end price point in the golf sector?

Yes, we're excited by it. we've got a terrific product in our Concept irons, which we launched late last year. We're very excited about it. We do understand it's a very – it's a labor-intensive business, in that I mean you have to really make a meaningful commitment to the fitting process and the fitting experience. So it's really a two-part business: It's one, it's the product; and two, it's the golfer experience. But we're excited about it. We haven't seen any pricing pressure on that business. If you make great product and can prove to golfers that it's worth it, pricing tends to take care of itself. But we see some upside. We understand it's got finite size and it's going to be a modest opportunity in the context of the broader Acushnet portfolio, but we think it's an important space. We're glad we're there, and really, the effort and the enthusiasm starts with what happens in the R&D labs, which we're real confident in.

Okay, great. Thank you.

Thanks, Dan. Next question, please.

Our last question is from Dave King from ROTH Capital Partners. Your line is open.

Thanks, good morning, guys. Maybe following up on the segment guidance line of questioning a bit. Do you have any early reads on the success of this year's Pro V1 launch versus prior launches in terms of bookings, I don't know, particularly with the new yellow ball? And then how is that TS business trending now in Q1 after some strong launches from some of your competitors?

Yes, good morning, Dave. So as to Q1, really, too soon to say, in the sense that there's not – there's not much meaningful data out there yet in terms of what's happening in the first quarter. We've had a cold and wet spring out West, which is more a long-term positive, given they need the rain and the water. We would expect rounds will be up slightly in January, but that's not out yet as well. But in terms of Pro V1, it is too early to say. Certainly, you get a lift from new, we think we'll get some interest and some new trial. On the yellow, we're excited, but again, really at this stage, tough to give you any meaningful feedback at this point. And as to TS, we're very excited about TS. But you're right, there's a whole lot of new competitive product entering the market, which was anticipated. And in the end, it's going to come down to how our product fares versus theirs on the fitting tee and on the launch monitor. And so far, we're very, very confident that our product will stand up as well as any product in the marketplace in terms of speed, overall performance, forgiveness, et cetera, et cetera. But in terms of how we're faring versus the pack and the meaningful competitive activity that's out there, we like our position at this point.

Okay, great to hear it. And then on the EBITDA guidance, I want to unpack that a bit. How should we be thinking about gross margin versus expenses, particularly with ball mix maybe providing some lift to gross margin, I think? But I seem to recall you talking about maybe accelerating some marketing or maybe changing some of your marketing plans, how should we be thinking about those factors?

So this is Tom. Dave, good morning. So as you know, we don't provide particular guidance around gross margins or operating margins. There are a lot of puts and takes, particularly in our gross margins, including the two-year product life cycle, timing of launches, et cetera. We are – if you look to our guidance, we are showing leverage and growth at the EBITDA level relative to – with a roughly 4% growth rate there versus a 2.2% growth rate on the top line. So we are forecasting leverage through the P&L, so.

Okay. Fair enough. Thanks and good luck with 2019.

Well, thank you, everyone. We appreciate your time and attention to our business and on today's call. As I've said earlier, we're excited about the upcoming golf season. Our associates have done great work planning for the year. And we're busy preparing golf shops, educating our trade partners for the upcoming season. And most importantly, we have a great range of exciting new products for golfers to experience in the coming months, which we believe will help them play their best golf and fully enjoy the game. With that, said, again, we thank you for your time and attention this morning, and we look forward to reporting back to you in the spring.

This concludes today's conference call. You may now disconnect.