Acushnet Holdings Corp. Q4 2025 earnings call

Hello and welcome to the Acushnet Company fourth quarter 2025 earnings call. My name is Josh, and I will be the moderator for today's call. All lines will be muted during the presentation portions of the call, with an opportunity for questions and answers at the end. At this time, I'd like to introduce your host, Mr. Cameron Vollmer, Director of Investor Relations. Cameron, you may proceed.

Good morning, everyone. Thank you for joining us today for Acushnet Holdings Corp.'s fourth quarter and full year 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 make forward-looking statements on the call today. These forward-looking statements are based on Acushnet's 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, and our filings with the U.S. 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 EBITDA.

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 in today's press release, the slides that accompany this presentation, and in our filings with the U.S. Securities and Exchange Commission. Please also note that references throughout this presentation to year-on-year net sales increases and decreases are on a constant currency basis, unless otherwise stated. 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 12-month period ended December 31st, 2025, and the comparable 12-month period in 2024. With that, I'll turn the call over to David.

Good morning, everyone. Cameron has been with our team for a while, and it's my pleasure to welcome him to his first quarterly earnings call. We appreciate your interest in Acushnet and look forward to sharing our 2025 results and future outlook today. As a starting point, we are pleased with our fourth quarter performance as our teams executed our year-end plans and did good work preparing for the 2026 season and several product launches. As Sean will outline, revenues were up 7% for the period, and we generated nice momentum in our operating segments. Turning to slide four. For the full year, Acushnet achieved net sales of $2.56 billion and adjusted EBITDA of $410 million in 2025, growth of 4% and 1.5%, respectively.

These results were made possible thanks to the talented and dedicated associates who make up Acushnet and our committed trade partners who are on the front lines wherever golf is played. There are several highlights within these operating results, led by the Titleist Golf Equipment segment, which grew 6% on the year as investments in product development, precision manufacturing, and fitting paid dividends across our golf ball and golf club businesses. As you will note from our revenue growth, the company is benefiting from recent capacity expansion projects, which will continue with a focus on cast urethane golf ball production and custom golf club assembly. In 2025, new Pro V1 posted gains across all regions, contributing to a 4% increase in golf ball net sales on the year with EMEA, Japan, and the U.S., our fastest growing markets.

We are pleased with increasing demand for our AIM, or Alignment Integrated Marking golf balls. Operationally, we continue to benefit from the expansion of our automated custom imprinting capabilities, which is driving efficiencies and reducing lead times. Within equipment, 2025 was a strong year for Titleist Golf Clubs, which grew more than 7%, led by the successful launch of new T-Series irons and steady growth in metals and Scotty Cameron putters. Our Vokey Wedge franchise also posted strong results in year two of the SM10 product cycle. Ongoing investments in product development and our global club fitting network frame how we characterize the Titleist Golf Club opportunity. Acushnet's gear business increased 6% on the year, with especially strong increases by Titleist Gear in EMEA and the U.S. and growing momentum for Club Glove travel products.

Now moving to FootJoy, we are pleased with the direction this business is pointed. Sales were down 1%, mainly due to reduced discounted sales versus last year. On the strength of products like Premiere and HyperFlex, we are seeing a favorable mix shift towards our premium high-performance footwear franchises, and the FJ Mobile Fit Lab program is delivering a value-added fitting experience, which helps golfers select the best footwear, performance, and comfort option for their games. Growth in gloves and apparel added to FootJoy's momentum and improved profitability for the year. Rounding out our portfolio, we continue to generate strong growth with our KJUS brand, up 9% on the year, led by double-digit gains in the U.S. Titleist Apparel also delivered a promising year, led by growth in China and our business in Korea.

As to Acushnet's regional performances, full year 2025 results affirm our previous commentary about the Titleist equipment segment, posting gains in all major regions, led by the U.S. and EMEA, and softer conditions in Japan and Korea, where our equipment gains have been offset by declines in the correcting apparel and footwear categories. Acushnet's strong financial performance in 2025 supported ongoing investment across our business and the company's commitment to returning capital to shareholders. For the year, dividend and share repurchases totaled $268 million, bringing our total return over the past four years to more than $1.1 billion. Furthering Acushnet's commitment to our shareholders, I am pleased to announce that our board of directors has approved an 8.5% increase to our quarterly dividend payout in 2026 to $0.255 per share.

This marks the ninth consecutive annual dividend increase since the program was initiated in 2017. These actions reflect the board's confidence in Acushnet's ability to execute and their positive outlook towards the company's leading positions within the structurally healthy golf industry. As you will note, the company remains focused on investing to position the company for future growth, while also returning capital to shareholders as appropriate. Now, looking ahead, we start by pointing to the game's global momentum, with worldwide rounds projected to have increased about 2% in 2025, with growth in EMEA, the U.S., and Japan, and a flat year in Korea. In the U.S., our largest market, the number of golfers again increased, contributing to this rounds of play momentum.

The global golf industry, as defined by golf courses, teaching centers, and golf retailers, continues to be healthy, with strong financials supporting ongoing investments as the industry adapts to meet ever-evolving golfer preferences. Within Acushnet, we are enthused by our new product pipelines and sustaining momentum our brands carry into 2026. As is customary in even-numbered years, we successfully launched a comprehensive lineup of new Titleist Golf Balls in this first quarter, including Pro V1x Left Dash and new AVX Tour Soft and Velocity models. It's also a busy year for Titleist Golf Clubs, with new Vokey SM11 wedges and a new lineup of Scotty Cameron Mallet putters launching in Q1. Both products debuted on worldwide tours earlier this year, and initial responses have met our very high expectations. Plans are well underway for our new driver launch in late June, earlier than our customary Q3 timing.

Titleist drivers are number one on the PGA Tour. We are enthused by the great work from our product development and operations teams to provide added flexibility around launch timing. We will share more details about this product on our May call. One of our key narratives in recent years has been our focused investments in golf equipment R&D, operational efficiencies, and capacity expansion, and point to these investments as drivers to our recent growth and confidence in our ability to deliver enhanced innovation, product development, and best-in-class golfer experiences, core attributes to the long-term success of Titleist Golf Equipment. Acushnet's gear business is well positioned, coming off a strong 2025. We are planning for growth led by gains in the U.S. and EMEA. Within gear, we pursue exceptional performance and quality to differentiate our products with discerning core golfers.

The FJ brand continues to move forward in 2026 as we leverage high-performance Premiere and Pro/SL franchises to strengthen our position as the number one shoe in golf. We continually evolve our outerwear and apparel offerings with a focus on our premium segments as we position FJ for the future and manage near-term tariff headwinds. To our investments in 2026, in support of Acushnet's priorities and our longer-term growth opportunities, we will prioritize strategic capacity expansion and the build-out of our global fitting networks for golf equipment and footwear, expand our B2B and D2C capabilities to new regions, and invest in the future of the Titleist Performance Institute, where demand for TPI's golf-specific health, fitness, and swing expertise is outpacing our available capacity. Collectively, we expect these investments will support our future growth plans and enable operating leverage over the long term.

In summary, we are optimistic about the structural health of the golf industry and are focused on expanding our momentum in the Titleist Golf Equipment segment, strengthening our gear and FJ wearables business, and investing in key initiatives that we believe will pay dividends over the next several years. I have confidence in the Acushnet team and their ability to provide dedicated golfers with leading products and services as we seek to build long-term value for shareholders. Thanks for your attention this morning. I will now pass the call over to Sean.

Thank you, David. Good morning, everyone. Turning to our 2025 financial results, fourth quarter net sales were up 7% when compared to the fourth quarter of 2024, primarily driven by higher net sales in Titleist Golf Equipment. Adjusted EBITDA was $9.8 million, lower than last year's fourth quarter of $12.4 million. Looking at our segments, Titleist Golf Equipment was up 10% in the quarter, largely due to higher sales volumes of our T-Series irons and SM10 wedges, partially offset by lower GT driver sales, which comped against last year's launch. FootJoy net sales grew 4.5% during the fourth quarter, driven by favorable mix shift and higher average selling prices in footwear. Golf gear net sales decreased 5% in the fourth quarter.

Overall, 2025 fourth quarter gross profit of $211 million was up $3 million compared to last year's fourth quarter. As a reminder, during last year's fourth quarter, we recognized a one-time benefit related to a PTO policy change that impacted gross profit by approximately $7 million. Gross profit for the full year was $1.2 billion, up 3% or $34 million, primarily resulting from higher sales volumes, higher average selling prices, and favorable mix. Gross margin fell to 47.7%, down 60 basis points from last year, primarily related to incremental tariff costs of approximately $30 million. SG&A expense of $206 million in the quarter increased $13 million compared to the fourth quarter of 2024.

Last year's SG&A expense included a one-time PTO policy change benefit of approximately $9 million. SG&A expense of $833 million for the full year increased $32 million or 4% from 2024. Excluding the $9 million one-time PTO policy change benefit, the $23 million increase was primarily related to higher employee expenses, including the support of our fitting initiatives, higher A&P expenses related to product launches, and higher information technology-related expenses. Interest expense was up approximately $6 million for the full year due to a year-over-year increase in borrowings. Additionally, we recognized a $17 million charge from debt extinguishment related to our fourth quarter refinancing, which I will discuss in a moment. Our full year effective tax rate was 21.9%, up from 19.2% last year.

The increase in ETR was primarily driven by changes in our jurisdictional mix of earnings and a reduced income tax benefit related to the U.S. deduction of foreign-derived intangible income. Moving to our balance sheet and cash flow highlights, we continue to maintain a strong balance sheet and cash flow profile, enabling us to invest back in the business while also returning capital to shareholders. In the fourth quarter of 2025, given attractive market conditions, we proactively strengthened our balance sheet by extending our revolving credit agreement out to 2030, and refinancing our senior notes into a 2033 maturity at a more favorable interest rate. Our net leverage ratio at the end of 2025 was 2.2x.

Our inventory levels increased $33 million or about 6% from year-end 2024, primarily due to higher tariff costs, as well as increased inventory to support the accelerated metals launch in Q2. Capital expenditures in 2025 were $74 million, in line with 2024. Free cash flow, which we define as cash flow from operations less CapEx, totaled $120 million in 2025. This was down from $170 million in 2024 due to the increased inventory levels, additional spend related to the ongoing implementation of our new ERP system, and our 2025 voluntary retirement program.

During 2025, we returned $268 million to shareholders, consisting of $56 million in cash dividends and $212 million in share repurchases, or approximately 3.1 million shares. As of February 21st, 2026, the remaining amount on our share repurchase authorization was approximately $241 million. Turning to our full year 2026 outlook, full year net sales are projected to be between $2.625 billion and $2.675 billion on a reported basis.

On a constant currency basis, our current expectation is that consolidated net sales will be up between 2.5% and 4.5% compared to 2025, with growth across all reportable segments, as well as growth both domestically and internationally, with strength in EMEA and rest of world markets. Turning to tariffs, as we discussed previously, we expect approximately $70 million of tariff costs in 2026, reflecting the tariff environment in place prior to the Supreme Court's February 20th ruling. While the decision impacts certain tariff programs, the timing, implementation, and durability of any changes remain uncertain. As a result, our 2026 financial guidance reflects the continued assumption of approximately $70 million of tariffs. As we gain greater clarity on the path forward, we will update you with any material changes to our outlook.

We expect our full year 2026 adjusted EBITDA to be between $415 million and $435 million. At the midpoint, our adjusted EBITDA margin would be approximately 16% flat with 2025. As we remain focused on driving sustainable long-term growth, we continue to invest in the business through a number of strategic initiatives, including expanding our global fitting network across our Titleist Golf Equipment and FootJoy segments, strengthening our global B2B and B2C capabilities, and enhancing consumer engagement through the Titleist Performance Institute.

In 2026, we will continue the implementation of our new global cloud-based ERP system, which we expect to enhance our customer service, supply chain, and finance capabilities and support operating efficiencies across the business. As a result, we anticipate approximately $6 million of incremental operating expense in 2026 related to the implementation. Given these investments, we expect full year 2026 SG&A growth, excluding the incremental ERP expense, to be generally in line with our sales growth projections, as we believe these initiatives position the company for sustained growth and operating leverage. Looking ahead, our capital allocation strategy remains unchanged. We continue to prioritize investing back in the business and returning capital to shareholders through our dividend and an opportunistic share repurchase program.

From a financial policy standpoint, we remain focused on maintaining net leverage at or below 2.25x on average, while allowing for flexibility to account for seasonality and other business needs that may arise. We expect capital expenditures in 2026 to be approximately $95 million. This step up primarily reflects investments in golf ball manufacturing capacity and increased club production throughout the world as we scale our facilities to support the continued demand for our products. We view $95 million in 2026 as a high watermark, with capital spending expected to step down in the subsequent years. In addition, we expect to invest approximately $25 million in capitalized costs associated with our ERP implementation in 2026.

Turning to free cash flow, we expect 2026 to improve meaningfully versus 2025 and normalize back towards recent run rates. This improvement reflects the absence of several one-time cash outflows incurred in 2025, which I highlighted earlier. Moving to calendarization, we expect reported first half 2026 net sales to be up mid to high single digits compared to the first half of 2025, with growth primarily coming from Titleist Golf Equipment, driven by the launch of new SM11 Vokey wedges and the acceleration of our new metals launch to June. We expect first half 2026 adjusted EBITDA to also increase mid to high single digits year-over-year, as increased sales resulting from new product launches more than offset the impact of higher tariff costs.

From a quarterly perspective, we expect first half growth in both net sales and adjusted EBITDA to be heavily weighted towards the second quarter, again, driven by the Vokey wedge launch and the acceleration of our metals launch into June. We expect first quarter net sales to increase low single digits, primarily related to the strength in our Titleist Golf Equipment segment. In closing, as David mentioned, the golf industry is structurally sound, our product portfolio is well positioned, our performance in 2025 reflects strong results by our entire team. We remain focused on execution in 2026, despite continued economic uncertainty with tariffs, while also making the necessary investments intended to continue to deliver long-term growth for all stakeholders. With that, I will now turn the call over to Cameron for Q&A.

Thanks, Sean. Operator, could we now open up the line for questions?