Third Quarter 2016 Results December 8, 2016 Acushnet Holdings Corp - - PowerPoint PPT Presentation

Acushnet Holdings Corp Third Quarter 2016 Results

December 8, 2016

Acushnet Holdings Corp Third Quarter 2016 Results

Tony Takazawa Vice President, IR

Disclaimers

FORWARD-LOOKING STATEMENTS This presentation includes forward-looking statements that reflect our current views with respect to, among other things, our

• perations and financial performance. These forward-looking statements are included throughout this presentation and relate to

matters such as our industry, business strategy, goals and expectations concerning our market position, future operations, margins, profitability, capital expenditures, liquidity and capital resources and other financial and operating information. We use words like “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “future,” “will,” “seek,” “foreseeable” and similar terms and phrases to identify forward-looking statements in this

• presentation. The forward-looking statements contained in this presentation are based on management’s current expectations and

are subject to uncertainty and changes in circumstances. We cannot assure you that future developments affecting us will be those that we have anticipated. Actual results may differ materially from these expectations due to changes in global, regional or local economic, business, competitive, market, regulatory and other factors, many of which are beyond our control. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this presentation or in the section entitled “Risk Factors” in our Prospectus dated October 27, 2016 and filed with the SEC pursuant to Rule 424(b). Any forward-looking statement in this presentation speaks only as of the date of this presentation. Acushnet undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws. NON-GAAP FINANCIAL MEASURES This presentation includes certain financial measures not presented in accordance with generally accepted accounting principles (“GAAP”) such as Adjusted EBITDA and net sales in constant currency. These non-GAAP financial measures are not measures of financial performance in accordance with GAAP and may exclude items that are significant in understanding and assessing the Company’s financial results. Therefore, these measures should not be considered in isolation or as an alternative to net income or net sales or other measures under GAAP. You should be aware that the Company’s presentation of these measures may not be comparable to similarly-titled measures used by other companies. For a reconciliation of these measures to the most comparable GAAP measures, we refer you to the earnings release that we have made available on our website (www.acushnetholdingscorp.com) in connection with this presentation. For further information, please see our Prospectus dated October 27, 2016 and filed with the SEC pursuant to Rule 424(b) and our periodic reports filed with the SEC pursuant to the Securities Exchange Act of 1934 which are available at the SEC’s website (www.sec.gov). Copies of this presentation and the accompanying webcast are publicly available on our website (www.acushnetholdingscorp.com). This presentation should be read with the accompanying webcast and related earnings release.

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Acushnet Holdings Corp Third Quarter 2016 Results

Wally Uihlein President and CEO

Acushnet Today

 Authentic and enduring performance golf equipment company  Longest running success story in golf commercial space  Steward of some of the most recognized brands in golf:



• the #1 ball in golf and Golf’s

Symbol of Excellence 

• the #1 shoe and #1 glove in golf

 Focused on the industry’s dedicated golfer and the preferred trade partners who serve them  Leading Pyramid of Influence usage and validation  Possesses a differentiated and proven

• perating model:

 Commitment to Perpetual Innovation  World Class Operations Platform  Unrivaled Route to Market  Robust Golfer Experience and Connection

 Attractive long-term, total return company

Golf’s Leading Performance Equipment Brand One of Golf’s Leading Performance Wearable Brands 5

Acushnet Today

 $1.5Bn in 2015 revenue  $215MM in 2015 Adjusted EBITDA (1)  2015 revenue by brand ― Titleist – 72% of revenue ― FootJoy – 28% of revenue  Balanced portfolio of consumables and durables  Revenue diversification across geographies  Leading positions in all major product categories of professional golf  5,000+ associates worldwide (2)  31,000 direct accounts worldwide serviced by 370 company sales representatives (2)  Direct sales capture in 46 countries (2)  $51MM annual spend on research and product development and patent administration (2)(3)  Near 1,200 active golf ball patents, and over 300 in golf clubs, wedges and putters (2)

1. See appendix for Adjusted EBITDA reconciliation 2. As of 12/31/2015 3. Includes $46MM of R&D and $5MM of patent administration

2015 Revenue Mix – $1,503MM

By Product Group By Operating Segment

2% 9% 28% 26% 36% 9% 30% 61%

By Region

13% 12% 10% 11% 54% ROW Korea EMEA United States Japan Golf Gear Golf Wear Golf Equipment Gear FJ Golf Wear Balls Clubs

Key Statistics

Other

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Acushnet Business Model

Strategy and Competency Model Benefits and Outcomes

Dedicated Golfer Focus

 15% of golfers, 40% of rounds, 70% of spend (U.S.)  Commit time, money and energy  Avid, skill-based and performance-biased  Disposed to pay premium for performance

• 1. Demanding expectations drives company focus
• 2. Leads to broad and deep portfolio
• 3. Supports sustainability of brands
• 4. Contributes to revenue stability

Pyramid of Influence Validation

 Industry’s most dedicated golfer  Golf is imitation based  How Many versus Who 1. Drives innovation, performance and quality focus 2. Anchors compelling marketing strategy 3. Leads to broad and deep portfolio

Commitment to Perpetual Innovation

 Performance rooted in Innovation  Largest portfolio of active patents  150 Scientists, Engineers and Chemists 1. Supports disciplined product introduction cadence 2. Helps deliver high margins in performance categories 3. 90% of current products incorporate current technology

World Class Operations Platform

 History of supply chain excellence  Comprehensive supply chain footprint

• 1. Supports performance and quality focus
• 2. Maximizes cost controls / working capital efficiency
• 3. Drives country and category customization
• 4. Contributes to wide competitive category moat

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Acushnet Business Model, cont’d.

Strategy and Competency Model Benefits and Outcomes

Unrivaled Route to Market

 31,000 direct accounts  Direct sales capture in 46 countries  370 direct sales representatives 1. Bridge to dedicated golfer 2. Maximizes retail presence, visibility and availability 3. Contributes to full-service, value proposition 4. Diversified revenue base

Robust Golfer Experience / Connection

 Golf ball education and fitting  Custom club fitting and trial  Direct to consumer initiatives 1. Direct connection with dedicated golfer 2. Maximize experience, build brand loyalty 3. Customization drives higher margins

Differentiated and Proven Operating Model

• 1. High brand loyalty
• 2. Premium positioning and higher margins
• 3. Solid revenue and earnings track record
• 4. Strong free cash flow

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Acushnet Has Consistently Outperformed Through Economic and Industry Cycles

$1,336 $1,451 $1,477 $1,538 $1,503 $1,235 $138 $165 $190 $203 $215 $191

2011 2012 2013 2014 2015 YTD 2016

Revenue ($MM)

• Adj. EBITDA ($MM) (4)

 Golf’s oversupply build out 1986-2008  Correction commences 2008. Search for supply-side equilibrium including OEM rightsizing, golf course closings, retail consolidation, potential ownership changes, selective exiting, retail reorganization  Stabilization of industry, improved set of fundamentals  Acushnet performance 2011-2015

 Net Sales: 6% CAGR @cc  Adjusted EBITDA: 12% CAGR  Consistent above market performance  Growth in all segments and in all regions

 Acushnet performance YTD 2016

 Net Sales: 4.7% @cc  Adjusted EBITDA 3.4% Japan earthquake leads to a 5.7% drop in Japan’s GDP Edwin Watts announces bankruptcy and closing

• f ~1/2 of its stores

adidas announces the intention to sell TaylorMade following severe losses Nike announces exit from golf equipment Golfsmith files bankruptcy 10.3% % Margin 11.4% 12.9% 13.2% 14.3%

Industry-Leading Performance with Sustained, Resilient and Stable Growth(1) Key Highlights

• 1. 2011 comparison to 2010 excludes 2010 revenue from Cobra brand; industry data not available beyond 2014
• 2. Constant currency
• 3. Industry revenue information from Golf Datatech/Yano Research 2015 World Golf Report. Industry revenue information is based on U.S. and Japan retail sales data only, while the Acushnet revenue information is based on our consolidated net

sales from all regions where we sell our products; the industry revenue information is based on retail sales data for golf balls, clubs, bags, shoes and apparel only, while the Acushnet revenue information is based on our consolidated net sales from all products lines that we sell

• 4. See appendix for Adjusted EBITDA reconciliation

2011-2015 Revenue CAGR: 6% (2) 2011-2015 EBITDA CAGR: 12% 2011 2012 2013 2014 2015 YTD 2016

+3.5% +4.7% (0.7%) +10.6% +5.3% +9.6% +2.9% +9.5% +5.0% (2.2%)

C

Industry Revenue Growth (2)(3) Acushnet Revenue Growth (2)

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15.5%

Acushnet Holdings Corp Third Quarter 2016 Results

Bill Burke Chief Financial Officer

Highlights

($ millions) 3Q 2016 Growth Y/Y b Growth Y/Y @ CC YTD 2016 Growth Y/Y b Growth Y/Y @ CC

Net Sales $332.4 3.9% 2.2% $1,235.3 4.4% 4.7% Adjusted EBITDA $27.0 9.0% $191.4 3.4%

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Business Cycle

Industry “Sell-In” and “Sell-Through” Dynamics

1Q 2Q 3Q 4Q

 Begin selling products into golf retail channels for the upcoming season  New product launches (balls, wedges, putters and shoes)  Sales dependent on success of fall prebooks, channel inventory levels post-holiday and weather – all can affect 1Q/2Q sales calendarization  Initial retail sell-in continues and high level

• f sell-through activity

 Early season sell- through of higher dollar value, “considered” purchases  Weather critical to driving early season momentum and rounds

• f play generation

 Reorder and replenishment period that is rounds of play dependent – primarily consumables  Fitting and demo activities at green grass level continue  Order levels lower than 2Q and gradually decrease in anticipation

• f end to the golf season

 Golf season winds down in major markets and product closeout activity at golf retail  New product launches – primarily golf clubs – sustain sales momentum  Holiday sales programs drive year-end retail sell- through

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Segment Results

($ millions) 3Q 2016 Growth Y/Y b Growth Y/Y @ CC YTD 2016 Growth Y/Y b Growth Y/Y @ CC

Titleist Golf Balls

$119.1 (5.5)% (6.5)% $415.3 (3.6)% (3.1)%

Titleist Golf Clubs

$74.3 10.4% 7.7% $314.6 9.3% 9.0%

Titleist Golf Gear

$30.5 5.2% 3.1% $114.8 9.2% 9.7%

FootJoy Golf Wear

$97.8 7.5% 6.2% $361.8 6.4% 6.8%

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Geographic Results

($ millions) 3Q 2016 Growth Y/Y b Growth Y/Y @ CC YTD 2016 Growth Y/Y b Growth Y/Y @ CC

United States

$172.4 (0.7)% (0.7)% $653.8 1.3% 1.3%

Japan

$47.7 25.5% 5.4% $155.2 16.2% 5.1%

Korea

$40.9 14.4% 10.8% $123.4 14.7% 19.2%

EMEA

$39.6 (2.4)% 6.2% $177.2 5.8% 10.1%

ROW

$31.8 (0.7)% (0.8)% $125.7 (2.2)% 2.3%

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Income Statement and Liquidity/Capital Highlights

3Q16 Income Statement Highlights

 Gross profit up 3% year over year  Gross margin 48.7% of net sales  SGA expense down 3.6% year over year  R&D expense 3.8% of net sales  Net loss attributable to Acushnet Holdings improved by $7.8 million  Adjusted EBITDA up 9.0% year over year  Adjusted EBITDA margin 8.1% compared to 7.7% in 3Q15

3Q16 Liquidity / Capital Highlights

 $86 million, cash on hand  $255 million, available revolving credit facility  $66 million, available local credit facilities

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Appendix

Historical Adjusted EBITDA Reconciliation

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Adjusted EBITDA(in thousands):

Jan 1 – Jul 29 Jul 30 – Dec 31 Year ended December 31, 2011 2011 2012 2013 2014 2015

Net income (loss) attributable to Acushnet Holdings Corp. .......................................................

$49,402 $(80,556) $13,873 $19,636 $21,557 $(966)

Income tax expense (benefit) ................................

46,159 (41,678) 7,555 17,150 16,700 27,994

Interest expense, net ...............................................

1,537 29,503 69,185 68,149 63,529 60,294

Depreciation and amortization ...............................

17,058 15,197 38,837 39,423 43,159 41,702

EAR Plan(a) ........................................................... —

— 41,056 28,258 50,713 45,814

Shared-based compensation(b) .............................. —

— — 3,461 1,977 5,789

One-time executive bonus(c) ................................ —

— — — — —

Restructuring charges(d) ................................

— — — 955 — 1,643

Predecessor compensation expenses(e) ….

11,287 1,881 2,477 — — —

Thailand golf ball plant start-up costs(f)…

1,055 662 1,617 2,927 788 —

Transaction fees(g) ................................................. —

15,754 845 551 1,490 2,141

Step-up in inventory……………………...

— 67,501 — — — —

Beam indemnification expense (income)(h).......................................................... —

— (2,872) 6,345 1,386 (3,007)

(Gains) losses on the fair value of our common stock warrants(i) ................................

— 1,641 (12,224) (976) (1,887) 28,364

Other non-cash (gains) losses, net .......................... —

— (23) (149) (628) (169)

Nonrecurring expense (income)(j) ......................... —

— — — — —

Net income attributable to noncontrolling interests(k) ...........................................................

2,151 (189) 4,271 4,677 3,809 5,122

Adjusted EBITDA ....................................................

$128,649 $9,716 $164,597 $190,407 $202,593 $214,721

Adjusted EBITDA margin ................................

11.4% 12.9% 13.2% 14.3%

Historical Adjusted EBITDA Reconciliation (Cont’d)

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Adjusted EBITDA(in thousands):

Three months ended September 30 Nine months ended September 30 2016 2015 2016 2015

Net income (loss) attributable to Acushnet Holdings

• Corp. ......................................................................

$(6,167) $(13,987) $45,902 $19,469 Income tax expense (benefit) ................................. 440 (4,273) 39,878 32,646 Interest expense, net .............................................. 15,672 17,563 44,076 48,093 Depreciation and amortization ............................... 10,003 10,297 30,553 31,566 EAR Plan(a)........................................................... (940) 10,423 (940) 33,088 Shared-based compensation(b) .............................. 6,159 3,875 7,123 5,789 One-time executive bonus(c) ................................. — — 7,500 — Restructuring charges(d) ........................................ 174 — 816 — Transaction fees(g) ................................................ 2,947 127 11,912 665 Beam indemnification expense (income)(h) .......... (2,156) 272 (2,641) (4,446) (Gains) losses on the fair value of our common stock warrants(i) ................................................. — (243) 6,112 14,535 Other non-cash (gains) losses, net ......................... (236) 34 (531) (87) Nonrecurring expense (income)(j) ......................... — — (1,467) — Net income attributable to noncontrolling interests(k) .......................................................... 1,124 689 3,077 3,847 Adjusted EBITDA .................................................... $27,020 $24,778 $191,370 $185,165 Adjusted EBITDA margin ........................................ 8.1% 7.7% 15.5% 15.7%

Historical Adjusted EBITDA Reconciliation (Cont’d)

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(a) Reflects expenses related to the anticipated full vesting of Equity Appreciation Rights (“EARs”) granted under our EAR Plan and the remeasurement of the liability at each reporting period based on the then-current projection of our common stock equivalent value (as defined in the EAR Plan). See “— Critical Accounting Policies and Estimates—Share-Based Compensation” in our Prospectus dated October 27, 2016 and filed with the SEC pursuant to Rule 424(b). We may incur additional material expenses in 2016 in connection with the outstanding EARs. All outstanding EARs under the EAR Plan vested as of December 31, 2015. The EAR Plan expires on December 31, 2016 and amounts earned under the EAR Plan must be paid within two and a half months after the expiration date. (b) For the years ended December 31, 2013, 2014 and 2015, reflects compensation expense associated with the exercise of substitute stock options by an executive which were granted in connection with the Acquisition. All such stock options have been exercised. For the three months ended September 30, 2016 and nine months ended September 30, 2016, reflects compensation expenses with respect to equity-based grants under the Acushnet Holdings Corp. 2015 Omnibus Incentive Plan which were made in the second quarter

• f 2016.

(c) In the first quarter of 2016, our President and Chief Executive Officer was awarded a cash bonus in the amount of $7.5 million as consideration for past performance. (d) Reflects restructuring charges incurred in connection with the reorganization of certain of our operations in 2013, 2015 and 2016. (e) Primarily reflects accelerated share-based compensation expense relating to Beam stock options that vested in connection with the Acquisition in 2011 and incentive compensation charges in 2012 related to the Acquisition. (f) Reflects expenses incurred in connection with the construction and production ramp-up of our golf ball manufacturing plant in Thailand. (g) Reflects financial, legal and other transaction-related advisory fees in 2011 relating to the Acquisition and legal fees incurred in 2012, 2013, 2014 and 2015 relating to a dispute arising from the indemnification

• bligations owed to us by Beam in connection with the Acquisition as well as certain fees and expenses we

incurred in 2015 and 2016 in connection with our initial public offering. (h) Reflects the non-cash charges related to the indemnification obligations owed to us by Beam that are included when calculating net income (loss) attributable to the Company. (i) Fila Korea Co., Ltd. exercised all of our outstanding common stock warrants in July 2016 and we used the proceeds from such exercise to redeem all of our outstanding 7.5% bonds due 2021. (j) Reflects legal judgment in favor of us associated with the Beam value-added tax dispute recorded in other (income) expense. (k) Reflects the net income attributable to the interest that we do not own in our FootJoy golf shoe joint venture.