Acushnet Holdings Corp. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• The golf industry is vibrant with increased global rounds of play. After a weather-induced slow start, rounds of play accelerated in Q3, with worldwide rounds in 2025 expected to match or exceed 2024's record.
• Acushnet's trade partners are healthy and investing in facility enhancements. The company is focused on exceeding golfer expectations, product quality (Pro V1 has a 1 in 16 million return rate), and refining its operating model.
• Third quarter net sales were $658 million, a 5% constant currency increase, with adjusted EBITDA of $119 million, up 10%. YTD net sales were $2.08 billion, up 4%, and adjusted EBITDA was $401 million, up 2%.
• Regional performance: US up 6%, EMEA Q3 +14% YTD +8%, Korea Q3 +3%, Japan Q3 -13% YTD -7%, Rest of World Q3 +5% YTD +3%.
• Gross profit in Q3 was $319 million, up $15 million, but impacted by tariffs. SG&A expense increased due to A&P investments and restructuring costs. Interest expense rose due to higher borrowings. Effective tax rate was higher in Q3 due to jurisdictional mix changes and tax law impacts.

Segment Performance

• Titleist Golf Equipment: Q3 net sales grew 5% and YTD 5%. Key drivers include the year-to-date growth of the Pro V1 franchise across all regions and the successful launch of new Titleist T-Series irons and limited edition Vokey SM10 wedges in Q3.
• Golf Gear: Q3 net sales increased 13% and YTD 8%. Travel brands within golf gear have seen a 20% YTD increase, particularly from Links & Kings and Club Glove brands. The team has been effective in bringing compelling products to market and leveraging expanding custom capabilities.
• FootJoy: Q3 net sales rose 3%. It benefits from the success of Premiere and HyperFlex footwear models, fewer footwear closeouts, steady glove growth, and resilient apparel performance.
• Products not allocated to a reportable segment: Q3 net sales saw double-digit growth, led by shoes in the golf business.

Guidance

• Full year 2025 revenue expected in the range of $2.52 billion to $2.54 billion (reported), with constant currency growth midpoint at 3% (2.6%-3.4%).
• Adjusted EBITDA expected in the range of $405 million to $415 million.
• Full year tariff costs are estimated at $30 million, with plans to mitigate a portion in 2026.

Risks

• Tariff impacts on gross margin, with $15 million recognized YTD and an expected $5 million charge in Q4.
• Jurisdictional mix of earnings affecting the effective tax rate, with a higher rate in Q3 due to tax law changes.
• Macro-economic forces affecting consumer spending in Japan and Korea, impacting footwear and apparel segments there.

Question and Answer

Q: Joe Altobello at Raymond James asked about parsing U.S. sales growth between volume and price and relative to the category.

A: Sean Sullivan responded that U.S. sales growth is driven by strong ball business volume gains, club growth despite higher ASP comps, and FootJoy and gear growth with selective pricing. David Maher added on product cadence and category comps.

Q: Amanda Douglas at JPMorgan asked about golf participation and reception of Pro V1 and T-Series irons.

A: David Maher said industry fundamentals are strong with good rounds of play, Pro V1 had a strong 25th anniversary year with growth in all regions, and T-Series irons launched to positive consumer response due to product changes and fitting network work.

Q: Pedro Gil Garcia Alejo at Morgan Stanley asked about retail sell-through trends and channel inventory levels.

A: David Maher stated good sell-through for Titleist golf balls, especially Pro V1, with favorable inventory levels indicating strong sell-through.

Q: Noah Zatzkin at KeyBanc Capital asked about channel inventory and retail partner ordering habits.

A: David Maher said channel inventories are seasonally in line, with low levels in snow belt and high in Sunbelt, and no unusual concerns. Discussed Europe's strong growth beyond weather, and Japan/Korea's softer markets with equipment repositioning.

Q: Douglas Lane at Water Tower Research asked about Europe's growth and working capital use.

A: David Maher attributed Europe's strong growth to healthy rounds of play and execution, and Sean Sullivan noted working capital use related to inventory and IT investments but comfortable with free cash flow outlook.