Acushnet Holdings Corp. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Industry Outlook: Golf industry fundamentals healthy, with 1.5 million new golfers in 2024 (seventh consecutive year-on-year increase) and worldwide rounds of play up 2% in first half despite U.S. weather volatility.
• Financials: Second quarter net sales $720M, up 5%; first half net sales $1.42B, up 3%. Adjusted EBITDA Q2 $143M, up $12M; first half $282M, down 1%. SG&A expense increased $14M in Q2 due to investments in fitting network, IT systems, and restructuring costs related to voluntary bridge to retirement program ($6.4M in Q2, ~$7M in back half). Balance sheet strong with net leverage ratio 2x at end of Q2, inventory up 11% compared to Q2 2024. CapEx revised to ~$70M for full year 2025 from $85M. Returned $154M to shareholders through share repurchases ($125M) and dividends ($29M).

Segment Performance

• Golf Equipment: Second quarter net sales up mid-single digits, first half up mid-single digits. Driven by new Pro V1 golf ball models and GT Metals/hybrid franchise. Titleist golf equipment sales up in all regions for the first half, with equipment revenues up 10% compared to first half of 2023. The Titleist golf ball business is well positioned for the back half, and new T-Series irons launched recently have positive early response.
• Gear: Sales increased 7% in Q2 and 6% in first half. Core Titleist categories (bag, glove, headwear) grew mid-single digits, while travel brands led by Club Glove grew >20%. FootJoy off 2% in Q2 and 4% in first half, shifting to premium performance footwear and reducing discounted closeout volumes.
• Products not allocated to reportable segment: Steady growth in first half, led by double-digit gains in shoes, outerwear, and apparel.
• Regional Results: U.S. business strong despite slight rounds of play decline due to weather. EMEA up 6% in first half, led by Titleist Golf Equipment and gear. Japan and Korea up 4% and 3% in first half, with equipment growth but softer apparel, footwear, and gear markets expected to stabilize in back half.

Guidance

• Second Half 2025: Expect net sales up low single digits, considering full year FX headwind of ~$5M. Mitigating tariff impact with supply chain optimization, vendor sharing, and selective pricing actions. Estimated tariff impact in second half ~$30M.
• Full Year 2025: CapEx revised to ~$70M from $85M. Board declared quarterly cash dividend of $0.235 per share payable on September 19, 2025.

Risks

• Tariffs: Potential impact on consumer spending and product pricing; rapidly changing tariff rates affecting sourcing and supply chain.
• Macro Uncertainties: Impact of broader economic environment on consumer demand for premium golf products.

Question and Answer

• **Q: Around inflation and pricing.

A: David discussed price increases in gear, footwear, and apparel across the industry; ball business somewhat immune to tariffs due to U.S. manufacturing; clubs vary by sourcing and tariff exposure.

• **Q: Sell-in and sell-through in Asian region.

A: David mentioned stabilization in Japan and Korea, with equipment steady but apparel correcting; expected to stabilize in back half of the year.

• **Q: Gross margin and operating expense for back half.

A: Sean discussed gross margin impact from tariffs and restructuring costs (VBR) in the back half; operating expenses tied to long-term growth investments, with confidence in conversion from sales to adjusted EBITDA