Q2 2025 Acushnet Holdings Corp Earnings Call

Welcome to the cousin Holdings. Court 2, q25 earnings call my name is Lawrence and I'll be your operator today.

There'll be an opportunity for questions at the end of the presentation.

if you would like to ask a question and please press star followed by 1 on your telephone keypad,

I will now hand you over to Sandra. Lennon vice president fpna and investor relations to begin. Please go ahead.

Good morning everyone. Thank you for joining us today for a cushion at holding corpse second quarter 2025 earnings conference call.

Joining me this morning, are David Maher, our president and chief executive officer, and Sean Sullivan, our Chief Financial Officer.

Before turning 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 a cushioned, current expectations, and are subject to uncertainty and changes in circumstances. Actual results. May differ materially from these expectations for a list of factors that could cause actual results to differ. Please see today's press release the slides that accompany our presentation in our filings with the US Securities and Exchange Commission.

Throughout this discussion, we will make reference to non-gaap financial measures including items such as net sales on a constant currency basis and adjusted ibida.

Explanations of how and why we use these measures and reconciliations of these items to the most directly comparable, gaap measures can be found in the schedules and 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 references throughout this presentation to year on year. Net sales increases and decreases. Our on a constant currency basis, unless otherwise stated as we feel this measurement, best provides context as to the performance and trends of our business. And when referring to year-to-date results or comparisons, we are referring to the 6-month period end of June 30th 2025 and the comparable 6-month period and 2024 with that, I'll turn the call.

Over to David.

Thanks Sandra, and good morning, everyone. We appreciate your interest in a cushioned Holdings.

The sport and

for the National Golf foundation's Reed on the US market 1.5 million new golfers entered the sport in 2024 barking. The seventh consecutive year-on-year, increase,

These gains contributed to resilient participation results with Worldwide rounds of play in the first half projected to be up 2%. Despite some of the weather related volatility, we have experienced in the US,

Cushion. It continues to benefit from our focus on the games, dedicated golfer, whose healthy demographic and deep commitment. To the sport, helped to offset some of the macro uncertainties consumers are facing

With that, I am pleased to report on a solid quarter and first half for a cushion net. Led by our momentum in title is golf equipment and steady growth in the US and EMA regions.

Moving to slide 4. You see our second quarter and first half results.

For the quarter, a kushna delivered worldwide, net sales of 720 million, a 5% increase over last year, driven by the strength of our golf equipment and gear segments which contributed to a 9% year-over-year increase in adjusted ebita.

For the half net sales of 1.42 billion dollars or up 3%, while adjusted ebita of 282 million was down 1%, in line with our expectations, as we make several Investments, across our business with a long-term focus on golf equipment, Innovation, and our technology and golfer connection platforms.

Getting to our segment results. Golf equipment, sales were up mid single digits in the quarter and first half led by the success of new Pro V1 Golf Ball models and strength within our GT Metals and hybrid franchise.

Titleist golf equipment sales were up in all regions for the half led by the US and EMA.

and a similar product launch cycle equipment, revenues are up 10%

Well, positioned for the back half of the year as our team keeps Pace with healthy demand and activates our golf ball fitting initiatives in all markets.

On the club side, we're excited about our new T-Series irons which were launched last month.

This Innovative new product lineup. Delivers enhanced performance and feel. And while early initial response is meeting our high expectations

within our golf.

We are confident in the strength and diversity of our supply chain.

With golf balls benefiting from our 2 production facilities in the US and third in Thailand.

Our ability to assemble golf clubs in most major regions also provides flexibility as we navigate of evolving tariff policies.

Moving to gear. This business is healthy with sales, increasing 7% in the second quarter and 6% for the first half.

4 title is bag glove and headwear categories, grew mid single digits while our travel Brands led by Club, glove grew more than 20%.

Our FootJoy business was off 2% in the quarter and 4% in the half.

These results were in line with our expectations as we shift towards a higher concentration of Premium Performance Footwear led by Premier hyperflex and Quantum golf shoes.

At the same time, we have reduced discounted, closeout volumes and elevated. Our entry-level price points across the brand.

We are pleased with fj's Market, positioning product lineup, and sell through Trends. And as you will see in our financials, these are positively impacting fj's, operating results.

Lastly products not allocated to a reportable segments. Also posted steady growth in the half led by double-digit gains from our shoes outerwear and apparel business which continues to build nice momentum

Now looking at our regional results, you see ongoing strength from our us business, despite rounds of play being down slightly due to unfavorable weather.

It was up 6% in the first half reflecting gains and title, as golf equipment, primarily golf balls, as well as golf gear.

the region is benefiting from outside growth in the UK where rounds of play are up 20% through June,

Revenues in Japan and Korea are all 4 and 3% in the half respectively.

As noted on our last call, we are pleased with our equipment growth in these countries, but the markets for apparel Footwear and gear have been relatively soft.

We expect our business in these regions to stabilize in the back half of the year.

In summary golf industry fundamentals are in good shape and we are pleased with our new product pipelines and the overall health of our business. As we look to the Future. As always, we appreciate the good work of our Associates and support of Partners.

And while a cushion.

Immune to macro uncertainties, we are confident in our ability to effectively manage. All that is in our control, as we seek to deliver the highest quality products, and services to Dedicated golfers and in turn grow invest in our future and return Capital to shareholders.

Thanks for your interest this morning. I will now pass the call over to Sean

Thank you, David, good morning, everyone. We had a solid second quarter and strong first half to start 2025.

Second quarter, net sales were up 5% and adjusted IBA was 143 million up 12 million from last year's. Second quarter.

For the first half of 2025, net sales, increased 3% and adjusted. I decreased 1% in line with our expectations.

Net sales growth. In the second quarter was driven by continued strength in our title as golf equipment, segment up 6% in the quarter behind the continued momentum of our latest Pro V1 golf balls launch in GT metal success.

Gross profit in the second quarter of 354 million was up. 21 million compared to 2024 driven by increases in the title, is golf equipment, golf gear and FootJoy. Golf wear segments.

The increase in title is golf equipment, was primarily driven by higher sales volumes and higher average selling prices, partially offset by mix.

Increase sales volumes and lower distribution costs where the primary drivers in golf gear.

In fjo, golf wear, the increase was driven by lower manufacturing costs and a favorable product mix including less closeout sales.

Second quarter gross, margin of 49.2% was up 40 basis points versus prior year while first half gross margin of 48.6% was consistent with last year.

Sgna expense of 222 million in the quarter increased 14. Million from 2024, as we continue to invest in our fitting Network it systems, and A&P to support new product, launches and future growth,

During the second quarter, the company initiated a voluntary bridge to retirement program to reduce operating costs and Bridge long tenured eligible employees to retirement.

As a result SGA expense includes restructuring costs of 6.4 million related to this program.

For the second half of the year we are expecting approximately 7 million dollars of additional charges related to this program.

Interest expense of $15 million in the quarter was up $1 million due to an increase in borrowings, partially offset by a decrease in interest rates.

Our effective tax rate in Q2 was 19.9% down from 23.2% last year, primarily driven by a shift in our jurisdictional mix of earnings.

Moving to our balance sheet and cash flow highlights.

The strength in our balance sheet and cash flow supports, the continued execution of our Capital, allocation strategy, our Focus remains on investing in the business to support long-term growth and returning Capital to shareholders.

Our net leverage ratio at the end of Q2, using average trailing, net debt was 2 times.

Inventories were up 11% compared to last year's second quarter, reflecting the advancement of inventory ahead of tariff deadlines and the impact of our iron launch.

Overall, we are comfortable with our inventory quality and position.

First half cash flow from operations. Decrease, from the first half of 2024, primarily due to an increase in cash, used to fund working capital.

Capital capital expenditures were 25 million in the first half of 2025 and we now expect full year. 2025 capex, spend to be approximately 70 million rather than the 85 million previously stated

Through June, we returned roughly 154 million to shareholders with 125 million in share repurchases, in 29 million in cash dividends.

Today, our board of directors, declared a quarterly cash dividend of 23 and a half cents per share. Payable on September 19th. To shareholders of record, on September 5th, 2025.

On July 10th, we were purchased approximately 953,000 shares of our common stock from Magnus for an aggregate of 62.5 million in satisfaction of our previously. Disclosed obligations under our share repurchase agreement,

While the game of golf is healthy and dedicated golfers demand for our products as strong. We continue to operate with caution, given tariffs, and their potential impact on consumer spending.

For these reasons, similar to our q1 call. We're not going to formally update our full year guidance at this time, but instead provide some color around the second half of the year as we see it today.

During the second half of 2025, we expect net sales to be up low single digits, taking into account, a full year FX headwind of approximately 5 million dollars as compared to last year.

The second half quarterly, Cadence is expected to align with our historical seasonality.

We anticipate net sales growth across all segments, driven by the continued strength of golf equipment while FJ continues to execute on their premium performance strategy.

The situation remains very fluid. And we continue to closely monitor developments in the dynamic, tariff landscape and broader macroeconomic environment.

Based on the recently announced tariff rates and agreements. We expect to have an estimated impact or approximately 30 million dollars in the second half of the year, in addition to the 5 million impact in the first half of 2025.

Our mitigation efforts include optimizing our supply chain footprint vendor sharing programs, selective pricing actions and cost reduction initiatives, such as the vbr program.

As a result, we estimate the mitigating greater than 50% of the Tariff impact in the second half.

Overall we are very pleased with the first half performance and remain focused on executing our long-term strategic priorities.

With that, I will now turn the call over to senator for Q&A.

Thank you, Sean. Operator, could we please open the line for questions?

Yes, of course, we will now begin the Q&A session. If you would like to ask a question, then please press starplay by 1 on your telephone keypad.

To withdraw your question. Please, press star mode by 2.

Please also ensure that your phone is unmuted locally.

As a reminder that is the staff loaded by 1 to ask a question.

We'll pause for a moment to allow questions to be registered.

Our first question today comes from Simeon. Gutman from Morgan Stanley. Please go ahead.

Hey, good morning, everyone and good quarter. My first question, it's around inflation in pricing. So there is a certain amount of inflation driven by Innovation every year in this category. Now, we have tariff on top of that, do you have a sense of where that number on a percentage basis can go for the industry? Not just the cushion at uh for the second half given some of the Tariff impacts and how will that compared to some of the annual rate of inflation that's happened in the past, thanks?

Uh morning Simeon. I I'll I'll touch that more on a general sense that ah that ah that a hard number. Um and and tell you what, we've seen up to this point. Um,

We, we've certainly seen price increases in gear, Footwear and apparel across the industry. And we've taken

Select Moves In in those categories.

uh, would be part 1, uh, part 2, uh, our our ball business is, is, um, not entirely immune but, but somewhat immune to, uh, some of the Tariff risks as we manufacture so much of our product in the US

um,

so we haven't seen as much in in balls clubs, is is really been all over the map, depending on

the sourcing and and where manufacturers assemble products. So

Uh it it's certainly it's certainly part of the story. It has been to this date. We saw some price increases introduced into the into the industry in late Q2.

some of which really flowed in Q3 after um, pre books had shipped but

To your question. How does it compare to historical? Um I would say it's it's almost too soon to say in part because we're dealing with

Rapidly changing rates, um, even today, right? The narrative changes.

Um, but but you have seen some, you have seen some pricing action taken, and again that point you more so, to gear Footwear and apparel than equipment at this stage. But, but we're doing what everybody's doing, and that is

Um assessing what it means for balance of year and future product, introductions what it means for next year and how much dexterity do we have within our sourcing and supply chain to to to mitigate, um, before we take price?

So again, hopefully some general overview of what we're seeing in the industry. Um is is is helpful as you think about inflation and how golf responds to tariffs and how it compares to some of the broader National numbers.

and and if I can 1 follow up, same topic, which it's, it's somewhat nebulous, but given the customer profile who you sell to

And the premium product line.

How much do you worry about your customers ability to take price? Not just in the Gulf category, not just from a cushion net, but as they face higher prices in general in a second half and Beyond

Yeah, we think about it a lot. Um, and and every time we think about price, we think about our ability to show improved performance. Um, you know, if you look at our results, um,

Certainly we've we've we we called it out earlier uh balls, right? It was it was driven by premium performance Pro V1 for Choy their performance driven by premium Premiere hyperflex clubs we don't really run a multi-tier pricing strategy. So um, we're we're careful we're we're we're in many respects uh, premium positioned across the board and and we balance we balance the need to pass a long tariff cost with the need to constantly.

Show value, and prove to our consumers. Who, who? Yeah, I guess they are.

Uh certainly higher end and More performance-oriented in nature. Um but we're careful about it and and we realize that there's got to be a performance story attached to any, any pricing action.

Thanks. Thanks Simeon. Operator next question, please.

Uh, next question comes from Joseph Bellow for Raymond James, please go ahead.

Hi, good morning. This is Martin on, for Joe. I was just trying to get an idea of how did the man play out as expected in any kind of commentary? You might have when it comes to selling self through?

I'm sorry. Martin could you you cut out just a little bit in the uh, beginning of that question, would you mind repeating

Yeah, 1. If we can get any commentary regarding kind of sell it and sell through.

Yeah. Um, well, I think sell end. I, I'd point to our results. We're pleased with our results in the quarter in half. Um, I would link that to inventory levels in the market which I would say are norm normalized. And, and the bridge between selling and inventory is sell through.

So we're we're we're pleased. Uh you know it was it was um I guess our last call would have been early May and there was a lot of angst around the state of the consumer certainly for the for the second quarter and and and balance of the year. Um, and we've been, we've been pleased, both in terms of participation rounds of Play Down slightly in the US but but up overall worldwide.

We're pleased with what we're seeing. And again, certainly when you reference that against, uh, against some of the early narrative and concerns around tariffs and inflation and what it might mean to the consumer, um,

I think we're, I think we're uh, in in a pretty good spot industrywide. And again, if we had, if we had meaningful sell through concerns, you'd see it in in inventory levels, um, On The Rise, which again, I would, I would characterize inventory, uh, as seasonally normal, um, you're always going to have some Pockets around the world and we do, but, uh, but by and large, I would characterize it as seasoned. Seasonally normal, which again,

links back to, um, sell through in in pretty good shape, particularly, given the backdrop of, of all the Tariff uncertainty,

Great. And you mentioned, there's some stabilization in the Asian region looking to sort of expect a return to growth.

yeah, I I think um,

I'll I'll I'll speak of of Japan and its really Japan and Korea and I'll speak to them in 2. 2 parts. Part 1 is is equipment balls and clubs which have been for us steady and stable and and we like the trends there. Um, part 2 is is is Footwear and gear and apparel. And and we've seen particularly in apparel.

Uh, almost a bit of a bubble in the last couple of years. It's that, as that has been correcting, it went on such a rise during the COVID years.

And it's been correcting. Um, but we like the way we're approaching it. Uh, nothing has necessarily surprised us, and we planned for it. Uh, we saw a whole lot of new entrants in apparel.

Uh, particularly in in Korea and and Japan jump into the market in the last handful of years.

And, and we expect to see some of those new entrance exit the market. So, I think it's part of a correction, it's part of a rationalization, uh, most noteworthy in in apparel and I would say Korea. First Korea is the largest apparel Market, uh, across Asia. Um,

But I did call out. Also, I think we we see things stabilizing in the back half of the year, so I I, I feel like we're okay. Um, and again, I think it's important. As you think about Japan and Korea, Korea, at least on our side to break apart, what's happening with equipment, with what's happening with Footwear and apparel, because, um, really the the drag has been on the ladder

Thank you. Congrats on the quarter and good luck.

Thanks. Thank you, operator. Next question.

The next question comes from Matthew boss from JP Morgan. Please go ahead.

Great, thanks.

So David could you elaborate on customer response to new launches maybe across both clubs and and balls in the marketplace today and speak to your level of visibility? If as we look out to the low single digits back, half Revenue, growth forecasts segments,

Yeah, Matt. Hey we're we're obviously pleased with our launches. Uh

Pro V1 launched in in q1. Uh, we like our, we like our sell through Trends. We like our share Trends, um, across all markets. I think we made the point that our equipment business was up and all all regions in in the half.

In in the back half of 2024, we're very pleased with what's happening on the driver front. So

Um, self through Trends, uh, pyramid usage meeting our high expectations. I think is the best way to characterize it. Um, and again, we're we're in a good place as we as we enter the back half of the year.

Your your comment about your question about second half and how do we think about second half? You know, it starts with

Um, it starts with our new product pipeline. It starts with our order book, uh, inventory levels, and just initial response and demand. And I point to, um, we've got a new iron in the market, our T Series, which is off and running, uh, we launched it in July.

And and again, early responses is again meeting our high expectations. Um, as as you'd expect we get pretty good sell through data week to week, uh, which just gives us a read on Trends and which way the winds blowing and how our inventories is holding up. So all that informs what Sean said was our outlook for, for the back half of the year, um, which we characterized as low single, I think with, with growth coming from all segments. And and I, I just final point, I'd add

Um, much of my commentary was balls clubs, but but FootJoy as well continues to to generate momentum. Um, and I I noted, uh, Top Line down slightly but but really pleased with

Uh, the profitability and sort of operational results within FootJoy. Um,

and our confidence. There really driven behind some exciting new product, uh, line extensions. So a lot of parts and pieces. Go into it. Uh, Matt. But, uh, I think, I think that that's sort of the, um, fuels how we think about the half and our, our confidence in, uh,

in our Outlook.

That's great. And then maybe Sean could you speak to gross margin. Considerations for the back half of the year and and maybe just how best to think about the timing of operating expense, dollar dollar dollar, growth relative to your low, single digits sales forecast for the back half.

Uh, sure, yeah, I mean just, uh, Matt to go back to the script. Obviously, I'm trying to guide you to the Top Line relative to some historical Cadence in terms of Q3 versus Q4. Uh, so that was helpful. Um, you know, obviously we're pleased with the gross, uh, margin profile, uh, through the first half. Uh, as I look in the back half, uh, obviously giving you some some, uh, impact as a result of the, uh, tariffs. So, uh, that certainly will spread across, uh, Q3 Q4. Um, but again, you know, we're going to have, we're going to have that.

That burden. But you know, again, we we see growth across all segments, uh, in the back half, uh, in terms of operating expense, I I don't think, uh, you know, there there's anything more to say, in terms of the, the profile. We feel very good about um, the the conversion, uh, from sales to adjusted IBA. Uh, the overall margin profile. Obviously, we're investing for long-term growth, we'll continue to do that. Um, you do have the impact of the vbr that we talked about in Q2 that will roll through, uh, in the back half as well. So I give you that number as well. So, uh, all in all I guess, uh, absent tariffs were were pleased with where we're at for the year, uh, and the outlook for the year David's talked at length about the demand, the dedicated golfer. Um, and you know, it's really about execution at this point for us and, you know, certainly the, the Tariff and the supply chain, and vendor sharing. And and, and all those things, uh, you know,

Will happen over the course of the year. Uh, so we position ourselves uh for 2026.

Helpful color, best of luck.

Thanks. Thanks everyone. Yeah, we we appreciate your interest uh in the company as always and and and now more than ever your understanding, is we attempt to thoughtfully manage and navigate these tariffs on certainties and uh and always stay connected to uh, to our core consumer. So we appreciate your interest and and understanding

And uh hope you have a great rest of the day. Thanks very much.

Cool. Thank you for joining everyone. You may now.

Talk to lines.