Acushnet Holdings Corp. (GOLF) Q1 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the Acushnet Holdings Corp First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] Thank you. I'd now like to hand the conference over to your speaker for today Sondra Lennon, Vice President, FP&A and Investor Relations, please go ahead.

Good morning everyone. Thank you for joining us today for our Acushnet Holdings First Quarter 2020 Earnings Conference Call. Joining me this morning are David Maher, our President and Chief Executive Officer; and Tom Pacheco, our Chief Financial Officer. Before I turn the call over to David, I would like to remind everyone that we will be making forward-looking statements on the call today. These forward looking statements are based on Acushnet's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations. In particular at this time, the COVID-19 pandemic is having a significant impact on the company's business and results of operations. There is significant uncertainty about the duration and scope of this pandemic and its ultimate impact. Due to the dynamic nature of these circumstances our plans could change, and our actual results could differ materially from those contemplated by our forward-looking statements. The company undertakes no obligation to update or revise publicly any forward-looking statements whether because of new information, future events or other factors except as required. Reported results should not be considered as an indication of future performance. 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 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 US Securities and Exchange Commission. Please also note, that when referring to segment and regional year-on-year sales increases and decreases, we're referring to sales in constant currency. And please also note that when referring to year-to-date results or comparisons, we are referring to the three month period ended March 31st, 2020, and the comparable three month period. With that, I'll turn the call over to David.

Thanks, Sondra. Good morning, everyone. On behalf of the Acushnet team we hope that you and your families are staying safe and positive, while you make your way through these trying times. As we report our first quarter earnings, I would like to first recognize the impact that the COVID-19 pandemic has had on our associates, their families, our trade partners and communities. Since entering the golf ball business in 1932, Acushnet has withstood hurricanes, wars, recessions and other significant challenges, thanks to the resolve and spirit of our dedicated associates. The great hurricanes of 1938 and 1954 are especially profound events in our company history as twice our associates saved the ball business from ruin and in the process protected founder Phil Young's dream of designing and manufacturing the number one ball in golf. As a result of recent experiences, I have become even more appreciative of the entire Acushnet's families resilience and agility. As this global health crisis developed, our teams quickly adapted to create safe work environments and respond to sudden business disruptions in order to best protect the company's financial position and preserve the Company's market leadership positions. Tom's and my objectives for this call are to provide clarity and understanding about how COVID-19 has impacted the golf industry and Acushnet over the past months, outline the steps we are taking to navigate Acushnet's safe passage through this global health crisis and begin to frame how we see the game of golf and Acushnet emerging in a post-pandemic world. And looking back at the first quarter, in the month of April, our business has gone through two distinct phases before arriving at early May when over the past week, we have started to see the initial signs of recovery. When we spoke on our last call, the effects of the virus were largely isolated to Asian markets, with our expectation that Korea would be most significantly impact [indiscernible]. And while Korea did take a hit, it was not to the extent initially forecasted as the country pretty quickly mobilized to contain the virus and limit its economic impacts. The golf market in Korea has been resilient over the past several months, with rounds of play projected to be up 10% through April and our team delivering strong first quarter results as golf retail climbs back to normal levels. The Japan Golf market was fairly stable in the first quarter. While golf courses and most golf retailers remain operational, recently extended stay at home orders suggest that the second quarter will be more challenging. The other piece of this initial phase was disruption to our supply chain and as anticipated, this has been minimal. Our joint venture shoe factory in China was closed for five weeks, while the country was under quarantine and after resuming operations in February, it has been fully operational since mid-March. Additional supply chain challenges mostly specific to soft goods have been manageable. Phase II of the pandemic's impact started in mid-March when the virus began to more directly impact our operations in the golf industry as a whole, across North America and Europe. Golf retail activity declined sharply as most on course golf shops and golf retail stores were required to temporarily close their doors. Furthermore, golfers were understandably focused on health and safety and not on purchasing golf equipment during this very challenging period. As a result, traditional golf retail activity in these two regions reduced significantly. Since mid-March, operations at most of our US and European production facilities and distribution centers have been suspended. Our Massachusetts ball plants are now on their 8th week of shutdown, their longest since World War II. Club assembly custom ball operations and our embroidery centers have also been suspended during this time. We have been able to maintain much of our B2C fulfillment mainly with FootJoy and gear, as these businesses are fulfilled from 3PL partners located in states that have remained operational. Globally, Titleist ball plant 4 in Thailand has remained open, which has helped to mitigate the loss of production from our US ball plants and our glove factory in Thailand has also remained open. From a sourcing standpoint, our apparel and gear supply chains are functioning at normal levels. In responding to these challenges, our actions have been shaped by an organization wide commitment to associate health and safety, the need to aggressively manage operating expenses during the peak of the crisis, the importance of ensuring that our short-term decisions are compatible with the cushion its long-term principles and vision and doing what we can to support the COVID-19 relief effort. Tom will outline several of the steps we have taken to navigate Acushnet's safe passage. As you will note, they have been extensive achieving a 10% reduction in planned expenses in Q1, all of which came after February and a planned 25% reduction in Q2. While reductions in A&P accounted for the majority of these savings, we have also implemented a comprehensive temporary furlough program throughout the organization. This as you would expect has been a very difficult process and I am glad to report that in the past weeks, we have been able to call back some of our associates in areas where work has resumed. Safely returning our associates back to work is our leadership teams’ highest priority and we are hopeful that this process will gradually accelerate over the next several weeks. In addition, our global team from the earliest days of the pandemic has been focused on carefully managing worldwide inventory positions to ensure that our supply is in sync with the most up-to-date forecast expectations. We believe their good work over the past several weeks will increase our options as we adapt and modify future plans to best meet the evolving needs of dedicated golfers and our trade partners. Having outlined what we see is the first two phases of impacts on the golf industry and Acushnet's business. We are now in phase 3, which is the widespread reopening of golf courses and the gradual reopening of retail stores and the return of golf commerce. We are prepared for our ball manufacturing club assembly and embroidery operations to resume in the coming weeks in compliance with all health and safety requirements. As you know, our production facilities are located in Massachusetts and California, which remain under stay at home orders and whose reopening schedules may lag other states. The great majority of golf courses in the US are now open for play with 49 of 50 states either reopened or having announced plans to reopen in the coming days. We see this as endorsement and affirmation of the game as a healthy and beneficial recreational activity. While April weather was not ideal, many open regions have reported that rounds of play increased during the month. And last week, we saw a wave of golf retailers reopen as more and more states are in the process of safely ramping up their economies. And earlier this week regulations here in Massachusetts have been eased to allow for trade shipments to resume with limited staffing levels and strict social distancing guidelines. While limited, this represents meaningful progress from April levels. And we are hopeful that by the end of this month we will be able to resume some if not all US Golf ball manufacturing and custom ball processing and expand our club making capabilities. Our teams have done good work to re-engineer the workflow, to adhere, to social distancing regulations and create a safe and productive work environment for our associates. Again, we are cautiously optimistic and prepared to operate safely yet acknowledge that there remains uncertainty around timing. As I mentioned earlier, one of our priorities when we entered this crisis was to use our capabilities to help in the relief effort. Through these challenging times, the Acushnet team has committed to making a difference in the communities in which we work and live and across the close knit golf industry. I am pleased to share with you that our associates rose to the challenge in donating 100,000 face masks to local hospitals and manufacturing face shields and other PPE components for front-line health-care workers. And just over the last few weeks, with the help and generosity of some of our Titleist and FootJoy brand ambassadors, we auctioned off 12 once in a lifetime golf experiences and what played out to be a rewarding experience for all involved. Lastly, in recent weeks, we donated a portion of our online sales and to date, the company has contributed more than $800,000 to relief efforts in the communities in which we live and work and the golf industry workers who have become unemployed as a result of this crisis. I would like to publicly thank my fellow associates and our valued ambassadors for their commitment and sense of purpose as they set out to make a positive difference. As we now look ahead to the summer months, we expect the golf's appeal will continue to be robust given its outdoor field to play an embedded ease of social distancing. Along these same lines, we believe the game is well positioned for the post-pandemic world and this bodes well for our business in the long-term. In the short term, while we are encouraged by the recent beginnings of recovery within the golf industry, we expect that our second quarter will be significantly impacted with April being the most challenging, followed by incremental improvements in May and June as golf retail ramps back up and we resume company operations. The pace at which consumer spending resumes remains to be seen, as does the degree to which retail activity will be impacted over the course of 2020. We are bracing for increased promotional activity in the coming months as stores reopen and the market recovers. And lastly, while we look forward to the return of our manufacturing operations, it also remains to be seen to what extent our output levels will be affected by new safety regulations which will be in place for as long as COVID-19 remains a threat. We expect the answers to these questions will become clear in the coming weeks and months at which time we plan to provide further guidance and clarity around our full year outlook. I will conclude my prepared remarks by reaffirming Acushnet's commitment to the safety and well-being of our associates and trade partners and our focus on leading the company through these challenging times, as we build upon our proven track record for providing shareholders with a compelling long term total return investment opportunity. With that, I will now pass the call over to Tom.

Thanks, David and good morning to everyone on the call. I too would like to recognize the impact that COVID-19 has had on our associates, their families, our trade partners and communities and the resilience and agility our team has shown throughout this trying time. Starting on Slide 7, consolidated net sales were $409 million, down 6% versus Q1 of last year and down 5% on a constant currency basis. As David mentioned, all our segments were performing well through mid-March and were tracking at or ahead of our expectations, but this performance was offset by sharp declines over the last two weeks of the quarter. Adjusted EBITDA was $53 million for the quarter, down $11 million or 18% compared to Q1 2019. Moving to our segment results on Slide 8, Titleist golf balls were down 17%. While a decline is expected in a non-Pro V 1 year, we were pleased with the launches of AVX, Tour Soft and Velocity, which were well received. Titleist golf clubs were up 3% on the successful launches of Vokey SM8 wedges and Cameron Special Select putters, as well as solid sell-through of TS Metals and T-Series irons. Titleist Golf Gear was down 2%, despite a strong showing from golf bags, which were up 10% year-over-year. And finally, after a good start to the year on the strength of the launches of ProISL, Tour X and Flex XP golf shoes and spring deliveries of apparel and gloves, FootJoy Golf Wear was down 7%. Shifting to our geographic market results on Slide 9, the US was down 8% year-on-year, with decreases across all segments despite increases in rounds played in January and February. EMEA was up 8% year-on-year, primarily from the impact of shoes, which was not included in our results in Q1 of 2019. Japan was down 9% as Pro V 1 was in its second model all year and the retail environment continued to be challenging with elevated inventory levels. And finally, Korea was up 9% as the region recovered quickly from the COVID-19 disruption. Slide 10 is our Q1 income statement and there are a few items I would like to highlight. Gross profit was $201 million, down $21 million or 10% versus last year and gross margin was 49.2%, down 200 basis points. The decreases in gross profit and gross margin were driven primarily by the overall decrease in sales and production volumes. SG&A expense in Q1 was $153 million, down $3 million or 2% compared to Q1, 2019 and was significantly lower than our expectations, as a result of our cost reduction actions during the quarter. During the first quarter, management approved a restructuring program to refine our business model and improve operational efficiencies. As a result, the company recorded a restructuring charge of $12 million for benefits provided to associates included in both voluntary and involuntary workforce reduction programs. Operating income in Q1 which includes the $12 million negative impact of the restructuring charge was $21 million, down $31 million from 2019. Interest expense was $4 million compared to $5 million last year, reflecting lower average interest rates on outstanding borrowings. Our income tax expense was down almost $5 million on lower income before taxes, but our effective tax rate was 46% compared to 25.4% last year. The increase in the effective tax rate was driven primarily by a shift in our jurisdictional profit mix away from the US, as well as by negative discrete items in Q1 2020. And finally, net income attributable to Acushnet Holdings was $9 million, compared to $35 million in Q1 of ' 19. On Slide 11, we have provided a reconciliation of net income to adjusted EBITDA for Q1. There are two items to highlight here. The first is the add-back of the Q1 restructuring charge and the second is the add-back for COVID-19 related expenses of $7.5 million, which is included in the line item other extraordinary unusual or non-recurring items net. These items are both consistent with the definition of adjusted EBITDA in our credit agreement. For clarity, the COVID-19 add back include salaries and benefits paid for associates who could not work due to government-mandated shutdowns, benefits paid for furloughed associates, spoiled raw material costs, incremental cost to support remote work and the cost of additional health and safety equipment. Moving to Slide 12 at March 31, 2020, we had about $54 million of unrestricted cash on hand. Our total debt outstanding was approximately $521 million and our leverage ratio was 1.8 times. On April 1st to bolster our cash position and to maximize our flexibility, we drew down $200 million on our revolving credit facility. Including the drawdown, we had unrestricted cash and available borrowings under our revolving credit facility of approximately $275 million. At this time, we believe that our cash on hand and available borrowings will be sufficient to meet our liquidity requirements for at least the next 12 months. Consolidated accounts receivable at the end of Q1 2020 was $309 million, compared to $215 million at the end of Q4 2019 and $334 million at the end of Q1 2019. The increase in the first quarter of 2020 is seasonally normal, but was lower than we anticipated as a result of the drop of often sales at the end of the quarter. Our days sales outstanding were consistent with the same period last year and we have been working closely with our partners to extend payment terms where needed. Consolidated inventories were $365 million at the end of Q1 2020, compared to $398 million at the end of Q4, 2019 and $346 million at the end of Q1 2019. As with the change in accounts receivable, the decrease in inventory at the end of the first quarter of 2020 is seasonally normal, but was also lower than we expected. Our team is doing good work closely managing our supply chain and production schedules to ensure our worldwide inventory levels remain appropriate. Overall, we are comfortable with the quality of our accounts receivable and the amount and composition of our inventory at this time. Cash flow from operations for the first quarter of 2020 was an outflow of $73 million, compared to an outflow of $90 million for the first quarter of 2019, an improvement of $17 million. The improvement was primarily driven by a smaller increase in working capital balances in the respective periods. CapEx was $6 million in Q1 2020 which was essentially flat compared to the first quarter of 2019. We are closely monitoring our CapEx for the second quarter and for the balance of the year and currently expect 2020 full year CapEx to be lower than 2019. As David discussed, we have taken several precautionary steps to significantly reduce our expenses and manage our cash. These steps include reducing planned inventory receipts and capital expenditures, reducing all discretionary spending including advertising and promotional costs, selling costs and business travel, reducing our payroll costs through the restructuring actions we took in Q1, temporary associate furloughs and a reduction in senior management compensation, suspending cash retainers for our Board of Directors and adjusting our capital allocation actions which I will describe shortly. As a result of these steps, we achieved a 10% reduction in planned operating expenses in Q1 and we expect to achieve a 25% reduction in Q2, while at the same time minimizing the use of our cash and available credit. Turning to capital allocation on Slide 14, although our long-term priorities have not changed, we have adjusted our capital allocation plans for the short term. As I just mentioned, we currently expect 2020 full year CapEx to be lower than 2019. In March, we suspended our share repurchase program. At that time we had purchased approximately 244,000 shares in the open market during Q1 for a total of approximately $7 million. On March 27, 2020, the company paid its previously announced Q1 dividend totaling approximately $12 million. The company is committed to paying a dividend over the long term and today, our Board of Directors declared a Q2 cash dividend of $0.155 per share payable on June 19th to shareholders of record on June 5; this would represent a return of approximately $12 million to shareholders. Decisions about future dividend payments will be based on the economic and market conditions at that time. Finally, turning to guidance. As David mentioned, while we are encouraged by the recent beginnings of recovery within the golf industry, we expect that our Q2 will be significantly impacted with April being the most challenging, followed by incremental improvements in May and June. Going forward, there is a great deal of uncertainty regarding the pace at which consumer spending will resume, the degree to which retail activity will be impacted and our ability to return our manufacturing operations to their normal levels. Based on this uncertainty we have elected not to provide guidance at this time. We will continue to closely monitor this rapidly changing situation and will provide you with our updated view on our second quarter earnings call. In conclusion, although the golf industry will clearly be disrupted throughout 2020 and will continue to be a challenging environment for us to operate in, we are confident we have taken the appropriate steps to protect the company's liquidity and financial position to enable us to maintain our market leadership positions into the future. With that I will now turn the call over to Sondra for Q&A.

Thanks Tom. Operator, could we now please open up the lines for questions?

Certainly. [Operator Instructions] Kimberly Greenberger with Morgan Stanley, your line is open.

Okay, great. Thank you so much. And I wanted to just ask a little bit about the first quarter, you talked about the big change in revenue trajectory mid-March in North America, in Europe. Is there - are there any numbers you could put around that, what was revenue growth sort of up until mid-March? And then what did you see from revenue growth in the back half of March or revenue decline as it were. And then any update in terms of what you're seeing here in April, any geographical differences that are emerging. And if you can look at the current contour of your business, do you think that that your business is one that gets back to normal sooner because it's tied more to the golf industry which appears at least in North America to be largely open at this time or what are the mitigating factors that could limit that recovery back to normal. Thank you so much.

Good morning, Kimberly, I'll take the first part of that question as it relates to Q1 and I think David will add some color about April and - and what we're seeing in some of the geographies. As it- as it relates to the revenue trajectory in Q1, while we won't get into specific numbers through the first 10 weeks or so, all of our businesses were tracking either at or ahead of plan. The rounds played data was really good, things were off on quite a good trajectory in the last two weeks in particular is when we really started to feel the impact in - in North America and in Europe. And you can see, where we ended up where all of our businesses did end up lower than our expectations coming into the quarter.

Good morning. Kimberly, I'll address your second question and the first piece being some of the geographic differences we're seeing. If we - if we - if we had a global ladder, it might look like Korea at the top. As I mentioned, they were disrupted in late February, early March, made a quick recovery and rounds of play. They are up near 10%, that market functioning close to as we would have expected several months ago. So, they've climbed back to near-normal levels as quickly as any market as we've seen. Next is Japan which I said earlier, has been operating at a fairly stable pace through Q1. We have seen in recent weeks a bit of consumer pullback as that country enacted some extensions to their stay at home orders. Then you - then you reach the US which we described significantly disrupted in April, as virtually all golf shops were closed, certainly all, of course, retail was shut down. Where we see things from here is - there is a lot of interest in the game of golf right now and that's obviously a terrific indicator for the long-term. But the factors remain again April, you had a period where on course shops, off course shops largely shutdown. We do think those forces will come closer to one another that being interest in golf staying at a pretty high level and golf shops over time gradually resuming more normalized operations. As we look at our business by segment, certainly you see - you see balls probably on the front lines of recovery, most closely tethered to participation and rounds of play and all other categories following suit at their own different, different paces. So, we are seeing two different forces, again the first force being very high interest in golf right now and that's nothing but a long-term positive. But golf shops and golf commerce are playing catch up right now.

Thank you so much.

Thank you, Kimberly. Next question, please.

Daniel Imbro with Stephens. Your line is open.

Hey, this is Andrew [ph] on for Daniel. I was kind of wondering how you're thinking about your inventory position for the year and the price environment remaining rational and what your thoughts are for the price environment going forward. Thanks.

Sure, Andrew. I'll start with - with our inventory position internally and David can perhaps talk about sort of field inventory and the pricing environment. So, at the end of Q1, our inventories were about 368 million, this is down from the end of the year at - which was at $398 million and compares to $346 million at the end of Q1 2019, a decrease in Q1 from - from the end of the previous year is seasonally normal for us, but the decrease was perhaps a little less than we expected. We attribute this to the drop-off in sales that occurred at the end of the quarter, which left a little more inventory on the balance sheet than we normally would have expected. Our team is doing a good job sort of managing supply chain and our forward looking production schedules to ensure that our inventory levels are appropriate internally. And overall we're really comfortable at this point with the amount and composition of our inventory.

Yes, Andrew, just maybe a little color on what we're seeing in the marketplace. Certainly, inventories are going to vary by segment and channel, but in both cases on course, of course around the world, they're going to be seasonally high in mid-March, as all channels prepare for the April through - call it August period where golf retail tends to be at its peak. Looking at off course inventories would be seasonally high in mid-March. And then - and then they confronted store closures for the last four to six weeks. So that gives you sense for that channel and what it might look like many on course shops in mid belt and snow belt regions we saw defer or cancel their opening orders which would typically ship around April 1, give or take a couple of weeks for weather. So, as a result the on course channel is going to be leaner and lighter than the off-course channel. Golf balls typically would be in the best shape, given increased rounds of play and their consumable nature. And our sense from available information is that our golf ball inventory - Titleist golf ball inventory at the moment are down versus a year ago. To clubs, we had - we had recently launched wedges and putters, so the pipeline is full. Our Iron business tends to be primarily fitting dependent in all channels and thus inventory generally don't get too far out a position. There is likely a good amount of driver inventory in the market, seasonally as it ought to be for this time of year. We're again a little bit fortunate that our TS driver is in the final year of a two-year life cycle. So our inventories would tend to be relatively low in year two. And the final piece I'd add is that, footwear is running heavy which is - which is normal for this time of year and this was one of the first categories we saw to become promotional. To FootJoy - FootJoy we see it to be in pretty good shape. In fact, we look at on course inventory, they are down 20% versus a year ago, again back to the idea that many - many April 1 orders were deferred or pushed out later in the year.

Thanks. And could you touch on how you're expecting the price environment to change going forward, are you expecting anyone to get promotional from here? Thanks.

You know, as I said earlier, we are preparing for it. It's too soon to say at this point, I did note we've seen some activity in footwear. We've seen golf ball manufacturers, ourselves included, extend their spring ball promotions and that was largely a function of because they - we missed - we missed a month of retail traffic to showcase and promote - promote those promotions, so those have been extended. At this stage with golf retail really just coming back online and up and running, it's too soon to say, but we do - we do expect to see some promotional activity throughout - throughout the year.

All right. That's really helpful. Thanks guys.

Thank you, Andrew. Next question, please.

Tim Conder with Wells Fargo Securities. Your line is open.

Hi, it's actually Joe Lackey dialing in for Tim. Hope everyone is safe first of all. So I wanted to build on - on the first question. So talking about like the retail cadence, right, as you move from mid-March through the weeks of April. Can you talk about maybe what you're seeing as far as a cadence there is - is the pace of declines easing right is - are the declines less than what you were seeing in late March? And then, maybe if you could comment similarly, what percentage of your retail outlets were closed as of mid-March and what are currently open as of now?

Yes, so fair to - fair to look at the March to mid-March to April period as being the most challenging and I'll correlate that with the fact that the vast majority of retail outlets were closed certainly in the US, in Europe. Again as we said earlier, Korea, Japan on a different - different cadence, but certainly that period we've seen - we've seen a lot of closures both on course golf shops and of course golf retailers. And as we said over the last couple of weeks, we've seen that loosen up, so week-by-week over last two, three weeks, we're seeing more golf courses open, we're seeing more golf shops open and we're seeing more golf retailers open. So as we've said, we're in the beginning of the recovery thought process, it changes - it changes literally by the day. The number of courses, number of states that have - that have allowed for golf to reopen now stands at 49, it was a far smaller number days ago even weeks ago. So we're just seeing a whole lot of change in ramp-up as more - as more and more states and more and more regions are thinking about ways to safely reactivate their economies. But in terms of golf commerce, again golf courses we see it roughly 90% operational golf retail shops are lagging. And they're following state regulations. So in many states, all golf shops, all golf retail outlets are open and in some states they have not yet opened. So again it's a gradual development process that - that is really playing out real time over the last couple of weeks and over the next couple of weeks. And I expect by the end of May, we should see most golf shops back up and running.

Okay, that's helpful. And then just one follow-up on the balls business because there's obviously a lot of moving parts there, right? So I was hoping you could try and quantify the 17% decline and maybe kind of parse it out into different buckets, right? Obviously, you've got the difficult comparison, right, you've got a decline in consumer demand and rounds played and then you've got the manufacturing disruption, right? So, if maybe you could kind of divide up that Q1 decline and kind of parse what part of it would fall in each of those buckets that would be helpful. Thanks.

Yes, so Q1 in an even year for golf balls, a non-Pro V1 launch here tends to trail a bit, a prior year odd year Pro V1 launch. So that's - that's step one. Step 2 is our launches of as Tom said AVX and Tour Soft and Velocity in the first couple of months, first 10 weeks we're running at or ahead of our expectations. The biggest impact was the drop-off at the end of - at the end of the - of the quarter, far less of an impact the supply chain. So, in fact virtually no impact from the supply chain. With the exception of some custom ball shipments that we couldn't get out at the end of the month. But the primary impact on what you saw in golf balls was the slowdown at the end of the quarter. And a lot of that, again, as I mentioned earlier in some of the channel inventory comments, we saw lot of golf shops who would typically take in their spring order on April 1, call us on March 15 and either push that back or cancel it.

Okay, thanks.

Thank you, Joe. Next question, please.

Certainly. [Operator Instructions] Steven Zaccone with JP Morgan. Your line is open.

[Technical Difficulty] question. To follow-up on the prior question about inventory positioning, specifically in the off course channel, based on your conversations with retail partners, how long do you think it would take for the off course channel to get in the cleaner position, could the channel be relatively clean by the start of the third quarter?

Yes, so as we - as we look at inventories, I think fair to say, they did a good job with curbside pickup. They did a good job with their e-Commerce businesses and they obviously scaled back purchases. So where they were - where they were in mid-March, I would say is likely to be slightly better now than again it was 4 to 6 weeks ago. So they're looking at inventory positions today versus a year ago that are probably flat to down slightly and that begs then the question what do we think is going to happen in the next - in the next - in the next three months. Again, back to my earlier framing, I think fair to say consumables come back first and fastest and others - other categories and segments follow the pace really at which to be determined. And again, and I know you'd love to hear some more clarity on what we think is going to happen in the next few months, but we are living at a time where this is - this is a week or two weeks in the making in terms of what we've seen retail do in terms of getting back online. But we are - we are hopeful that the one, the one indicator and the one - the one North Star and all this is the game and the high interest in the game, which leads us to believe participation should be robust, consumables should be robust and others will follow the pace at which we're just going to have to - have to buy some time to better understand.

Thanks, David. Just a follow-up on that. So if you think about how the COVID-19 pandemic is impacting the business, is it causing you to rethink your launch schedule for the balance of the year, like would you consider delaying the fall launch of your new driver to next year just given your commentary about the driver category maybe having some excess product out there?

Yes, fair question. As you'd expect, we have planned fall launches in virtually all categories. Our goal at the moment is to be ready to go or ready to differ depending on market dynamics, inventories, overall health, consumer spending, fitting readiness et cetera, et cetera, tour validation plays a role in that calculus as well. Our intentions are to get a good read on the consumer and the market readiness over the course of the next four to six weeks and then make our decisions and circumstances will certainly vary by product category and thus so will our actions. At the moment, fair to say some of our plan - some of our launches will go off as planned, others may be pushed into next year and some might be pushed into - into a later - a later window in the second half.

Great. Best of luck in the second quarter.

Thank you.

Thank you.

There are no further questions at this time. I would now like to turn the call back over to the presenters.

Jack, thank you and thanks everybody for your time today. We do believe the game of golf and Acushnet are well positioned for the long-term, while we face and own the near-term challenges that we are confronting. I wish you all good health and safety until we speak again.

This concludes today's conference call. We thank you for your participation. You may now disconnect.