Inside the Acushnet IPO: Q&A with COO David Maher

October 29, 2016
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One of the best-known names in golf went public Friday. That doesn’t mean that Tiger played his local muni. It means that Acushnet Holdings, the company behind such leading brands as Titleist and FootJoy, debuted on the New York Stock Exchange with an initial public offering, trading under the appropriate ticker symbol GOLF.

Shares opened at $17, lower than the $21-$24 that Acushnet had hoped for, and by day’s end, the stock was up only modestly to $17.80.

Several hours before the closing bell, caught up with David Maher, Acushnet’s chief operating officer, to discuss the details of the IPO, how going public will affect the company, and what the move says about the state of the game. Are there any conclusions we can draw from your decision to go public — either about the health of Acushnet, or about the state of the golf industry at large?

MAHER: I’m going to give you a two-part answer. The first part is why we are where we are today. The second part is what role the industry plays in the timing. First off, in 2011, we were acquired by the Fila group and a consortium of investors from South Korea. We knew at that time that they were in it for five years. We knew they were going to exit in a 48- to 60-month window. With the IPO, those investors, who owned 12 percent of the company, have purchased a controlling interest. They own 53 percent of the company today. That’s the why.

And the second part?

In terms of timing, starting in the 1980s, the mindset in the golf industry was that with baby boomer demographics and, some years later, with Tiger prompting a spike in TV ratings — the mindset was that there was going to be a wild swing and increased demand, and that we were going to grow the golfer base from 50 million golfers worldwide to 100 million. Therefore, the thinking was that we needed more courses. From 1985 to 2000, 3,000 new courses were built in the United States alone. We also saw retail space expand exponentially as big box players got into the space. And you saw some deep-pocket sports companies enter the equation with Adidas’ acquisition of Solomon, which owned TaylorMade at the time, and with Nike’s arrival. What we saw over that period was that golf demand remained stable and supply ran away from the pack. With the (financial crisis) of 2008 and 2009, the industry realized it was on shaky ground, and what we’ve seen over the past several years is what we believe is a necessary correction to bring supply and demand back into equilibrium. For the strong players left standing, and we believe we are one of them, the industry conditions are a lot more favorable than they have been in a long, long time.

That partly answers my next question, but I’ll ask it anyway: Why should anyone buy your stock?

We think there are a lot of reasons, starting with our focus on the dedicated golfer — people who devote time and resources and emotion to the game and are dedicated to getting better. There are 8 million golfers in the world who account for 70 percent of the spend on golf. Our target market are those dedicated golfers who have proven to be resilient. Another reason is that we’ve got a differentiated business model. We’re a global business. Half of our business is outside the U.S. We see white space in every category all around the world.

Are there any specific equipment categories that you think have the greatest growth potential?

I would call out a business strategy, not a category. If there’s a broad theme, it’s how can we push more of our business toward customization. We have custom balls and custom clubs facilities in all markets, and an organizational mission to grow our custom business because that’s what we see across the market: an increased interest in customization. We know that golfers who are custom fit are going to have a better time, they’re going to play better, they’re going to be more loyal. The next time they think about replacing that equipment, we’re going to be tops in their consideration. That applies to every category.

One category in which you’re especially strong is golf balls. Given your dominance in that market, is there really any motivation to change what you do there?

We’ve got a lot of folks who wake up every day thinking about how we can improve. The game changes. Drivers change, spin characteristics change, irons change. There’s a reason balata made sense in the persimmon days. You needed a high-spin ball because that was a low-spin driver. The most prominent dedicated golfers are those who play on the worldwide tour, and they’re consistently looking for ways to get better, whether its feel or control or trajectory or wind stability. We also want to continue to build on our ball-fitting. We did more than 250,000 ball fittings last year to make sure golfers are playing the right ball for their game, so there are a lot of reasons why we think about what we think about.

(MORE: A Cut Above the Rest – Titleist Pro V1 Golf Ball)

You’re known as a traditionalist’s brand. Given the concerted effort many companies are making to go after millennials, do you feel any pressure to get younger and hipper?

Millennials get a lot of attention in the press for a lot of good reasons, but if you think about the role and impact of the under-30 crowd, they have never played a significant role in the commercial part of golf, in large part because it takes time and money to play the game. When you’re in your 20s you rarely have time and money. You’re building a career. You’re building a family. What’s important is that millennials are getting exposed to the game. The most common gateway is through parents. But when you look around the game, a lot has changed. The Tour has refaced itself. It has evolved from what was Tiger-centric to a host of young and talented players. Facilities around the world are working hard to be more family-centric, to reinvent themselves to be more relevant to the needs of today’s market. Millennials today, we think that many of them will become golfers. But when we think about what drives our business today, it really is the baby boomer and Gen-X crowd.

You mentioned Tiger. He used to be a Titleist guy. Nike’s out of the picture. Any interest in trying to get Woods to play your clubs again?

We’ve got a terrific group of folks around the world playing our equipment. We’re very happy with where we are. Just because a competitor shifts gears doesn’t mean we’re going to change the way we approach the Tour landscape. We’re real satisfied where we are right now.

How do you measure the value of your endorsement deals? When one of your players, like Adam Scott, goes on a torrid run, do you see an uptick in sales?

From the very beginning, our belief has been that to be seen as the best, you have to be played by the most. So that’s what we’ve gone after: being the most-played, rather than going after the “who.” Yes, we do have some marquee full-product line players, and we’re very proud of them. Adam Scott, of course. Brad Faxon was here today on Wall Street. When one of our players succeeds, we welcome that, of course. But we’re less about the individual than we are about being played by the most.

A number of financial analysts have weighed in on your IPO, and some have been skeptical. In one report, an analyst said that he wasn’t a fan of “equity cash-outs, as the driving motivation of this activity is to put money in the hands of existing shareholders, not raise funds for the business.” How do you respond to that sort of skeptical take?

I don’t see that as skeptical. What’s happening is we have shareholders who are exiting, so they are taking their ownership stake and selling it at a public offering. Different from a company raising money to expand their footprint. What [the analyst] is saying is accurate, and his position is his position, but he’s speaking about the financial mechanics, not about what’s happening on the golf front. In terms of what it means to us as a public company, it provides us with improved cash flow. It will give us more resources to invest in the future of our business.

Meantime, anyone looking to invest in Acushnet can find you under the stock ticker, GOLF. How’d you manage to land that ticker?

Another company had it years ago but it was available and it was our first choice. Can you imagine us with any other ticker?