Acushnet Q1 2025 Earnings Call Transcript

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Operator

Good morning, all, and thank you for joining us for today's Acushnet Company First Quarter twenty twenty five Earnings Call. My name is Drew, and I'll be the operator today. During today's call, after the prepared remarks, there will be a Q and A session. It's now my pleasure to hand over to Saundra Lennon, Vice President, FP and A and Investor Relations to begin. Please go ahead when you're ready.

Sondra Lennon
Sondra Lennon
VP - FP&A and IR at Acushnet

Good morning, everyone. Thank you for joining us today for Acushnet Holding Corp. First Quarter twenty twenty five Earnings Conference Call. Joining me this morning are David Marr, 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.

Sondra Lennon
Sondra Lennon
VP - FP&A and IR at Acushnet

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.

Sondra Lennon
Sondra Lennon
VP - FP&A and IR at Acushnet

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 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 three month period ended 03/31/2025 and the comparable three month period in 2024.

Sondra Lennon
Sondra Lennon
VP - FP&A and IR at Acushnet

With that, I'll turn the call over to David.

David Maher
David Maher
President & CEO at Acushnet

Thanks, Sandra, and good morning, everyone. As always, we appreciate your interest in Acushnet Holdings. I am pleased to report on a solid start to the year for Acushnet led by momentum in our Titleist golf equipment and golf gear segments. For the quarter, Acushnet delivered worldwide net sales of $703,000,000, a 1% increase over last year. Adjusted EBITDA was $139,000,000, which reflects a decrease of $15,000,000 related to our decision to step up investment in our equipment segment in 2025.

David Maher
David Maher
President & CEO at Acushnet

Getting to our segment results, you see golf equipment net sales increased almost 4% in the quarter with gains in every region. This growth was led by the successful launch of new Pro V1 and Pro V1x golf ball models and continued momentum across our Titleist GT metals franchise, which was expanded in q one with the launch of new hybrids and GT one metals. The Titleist golf ball business grew 4% with gains led by the EMEA region, which was up double digits as favorable weather contributed to an early start to their golf season. And for context, golf ball revenues were up 11% on a reported basis versus two years ago, our most recent Pro V one launch quarter. Our Titleist golf club business grew 4% versus last year and 15% on a reported basis when compared to the similar product launch cycle in q one twenty twenty three.

David Maher
David Maher
President & CEO at Acushnet

In most cases, we would expect q one club sales to be down in an odd year given the challenging comp against even year bulky wedge launches. This was obviously not the case in 2025 as GT Metals and Scotty Cameron putters contributed to our growth over last year. Acoustic gear sales were up almost 4% in the quarter with growth in all major markets led by EMEA and Japan. Titleist gear posted steady gains while the combined Club Glove and Links and Kings business was up double digits. Gear margin and OI trends were also favorable as our team is doing good work generating operating leverage across the segment.

David Maher
David Maher
President & CEO at Acushnet

FootJoy sales were down 5% in the quarter, which is attributable to lower closeout footwear sales and some targeted product line rationalization across the brand. We are pleased with the initial responses to new HyperFlex, Premier, and Quantum footwear models. And FootJoy gloves, the global category leader, had a nice start in the quarter. As noted on our last call, we characterized 2025 as a year of stability and improving profitability for FootJoy with a higher percentage of premium sales as we exit what has been a two year period of correction in the global footwear space. Finally, net sales of products not allocated to a reportable segment were down slightly in the quarter.

David Maher
David Maher
President & CEO at Acushnet

Shoes again posted nice gains, which were offset by a decline in Titleist apparel as Korea's super premium apparel segment continues to correct after a period of outsized growth. Now looking at the quarter by region, you see The US market was up 1%, EMEA grew 4% with gains from all segments, and Japan and Korea were off 24% respectively. Common themes in the quarter with our Asia business are growth in Titleist equipment and gear and declines in FootJoy and Titleist apparel. The season started slowly in Japan and Korea due to poor weather, but we have seen improved conditions in March and April. With a solid first quarter in the books, we are now focused on executing a full slate of ball, club, and footwear fitting events across all markets.

David Maher
David Maher
President & CEO at Acushnet

Despite poor weather and a slow start in The US where rounds were off 2%, we project that total worldwide rounds of play were up slightly for the quarter led by a nice start in EMEA and The UK, up 15%. I will now comment on how the changing tariff landscape is impacting Acushnet and some of the steps we are taking across the organization to mitigate these new costs. As we have noted in recent years, the company's supply chain is durable and regionally diverse, which provides our teams a good amount of operational flexibility to adapt to an uncertain and evolving tariff dynamic. Our vertical integration in golf balls, golf clubs, footwear, and golf gloves, first and foremost, supports our efforts to achieve the highest quality standards in the products we produce. It also provides a good amount of control and agility as it relates to demand planning and global supply chain management.

David Maher
David Maher
President & CEO at Acushnet

Roughly two thirds of our worldwide golf ball output is produced in The United States, and our two Massachusetts based ball plants supply the majority of our US golf ball demand. Our Thailand plant supplies Pro V one models to all other regions, now including Canada. Our golf ball business has a small exposure to tariffs from China sourced raw materials, which we expect to mitigate by end of year. Additionally, we ship US produced performance model golf balls into Canada and Mexico, which are presently incurring a 25% tariff. We have not yet reacted to this temporary rate.

David Maher
David Maher
President & CEO at Acushnet

However, if this becomes permanent, we will likely take pricing measures. Club components are sourced from China, Taiwan, Vietnam, and The US, and we operate our own assembly centers in most major regions. All of our US club demand is assembled in our Carlsbad, California facility. Our primary golf club tariff exposure today is from China sourced clubheads shipped into The US. Over time, we will reroute these heads to our international facilities and supply our US production center with components sourced from The US, Taiwan, and Vietnam.

David Maher
David Maher
President & CEO at Acushnet

As you know, we recently relocated our footwear manufacturing center from China to Vietnam. While we are confident this move has a long term benefit, FootJoy, like most footwear companies, is exposed to tariff uncertainty in Vietnam, which was originally posted at 46% but is now at 10% during the current pause period. And finally, the company owns and operates a standalone glove facility in Thailand, which produces both FootJoy and Titleist gloves, the number one and number two selling glove brands in the market. We are confident that Acushnet's supply chain footprint provides us with flexibility to adapt, most notably within golf equipment, our largest segment. As Sean will outline, we expect to mitigate a good portion of the current tariff impact by end of year and expect to realize further relief in 2026 from some of our actions that will take longer to materialize.

David Maher
David Maher
President & CEO at Acushnet

With regards to pricing, we have not yet passed along increased tariff costs to consumers, but do anticipate taking some regional pricing action on select products as we gain clarity on the extent and timing of our mitigation efforts. In summary, we are pleased with our strong start to the year and the continued strength and resiliency of Acushnet's core consumer, the game's dedicated golfer. As you would expect, our teams are focused on providing exceptional product, fitting, and service experiences to golfers and our trade partners and making the right long term based decisions while we navigate this period of tariff uncertainty. Thanks for your attention this morning. I will now pass the call over to Sean.

Sean Sullivan
Sean Sullivan
Executive VP & CFO at Acushnet

Thank you, David. Good morning, everyone. As highlighted, we started 2025 with an increase in net sales of 1.2% over last year's first quarter. Adjusted EBITDA was $138,900,000 a decrease of 9.6% from the first quarter of twenty twenty four, but in line with our expectations as we continue to invest in key strategic initiatives. Net sales growth in the quarter was driven by continued momentum of our Titleist brand with golf equipment and golf gear both growing by 4%.

Sean Sullivan
Sean Sullivan
Executive VP & CFO at Acushnet

FootJoy net sales declined 5% in the quarter primarily due to lower footwear and apparel volumes. Geographically, Q1 net sales were up year over year in The US, EMEA and rest of world driven by golf equipment and golf gear. First quarter net sales declined in Korea and Japan primarily due to our FootJoy golfwear segment largely in footwear and lower net sales of Titleist apparel products that are not allocated to one of our three reportable segments. Gross profit in the March '30 '7 million dollars was down $5,000,000 compared to the first quarter of twenty twenty four, primarily due to higher manufacturing costs in the Titleist golf equipment segment as well as lower net sales in FootJoy golfwear. These were partially offset by higher average selling prices and lower distribution costs in golf gear and higher net sales in Titleist golf equipment.

Sean Sullivan
Sean Sullivan
Executive VP & CFO at Acushnet

SG and A expense of $200,000,000 in the quarter decreased almost $1,000,000 from 2024. Increases in advertising and promotional expense to support new product launches and selling expense primarily related to fitting network investments were more than offset by lower retail commission expense in Korea as well as a $7,000,000 decrease in restructuring expense related to a charge recognized in the first quarter of twenty twenty four associated with our footwear production transition to Vietnam. R and D expense of $18,900,000 was up $2,400,000 compared to last year's first quarter, primarily to support next generation product introductions. Net interest expense of $13,800,000 in the quarter was up almost $1,000,000 due to an increase in borrowings, partially offset by a decrease in interest rates. Moving to the other income expense line, I want to highlight a gain resulting from the transition of our footwear manufacturing from our China joint venture to Vietnam.

Sean Sullivan
Sean Sullivan
Executive VP & CFO at Acushnet

Because of the shift in footwear manufacturing out of China, we are no longer the primary beneficiary of the joint venture and therefore have deconsolidated the JV accounts from our financial statements. As a result of this deconsolidation, we recognized a noncash pretax gain of $20,900,000 during the first quarter, which has been excluded from the adjusted EBITDA calculation as noted in the reconciliation attached to our earnings release. Our effective tax rate in Q1 was 17.9%, down from 21.7% last year, primarily driven by a shift in our jurisdictional mix of earnings. Moving to our balance sheet and cash flow highlights. Our balance sheet and cash flow positions continue to be very strong, allowing us to execute our capital allocation strategy while also navigating the current macroeconomic uncertainty.

Sean Sullivan
Sean Sullivan
Executive VP & CFO at Acushnet

Our net leverage ratio using average trailing net debt at the end of Q1 was two times. Overall, inventories declined 7% from the fourth quarter of twenty twenty four and were roughly flat when compared to last year's first quarter. Overall, we are comfortable with our inventory quality and position. Capital expenditures were $11,000,000 in the first quarter of twenty twenty five. And while we plan for approximately $85,000,000 of spend in 2025, we will continue to assess considering the current environment.

Sean Sullivan
Sean Sullivan
Executive VP & CFO at Acushnet

Through March, we returned roughly $51,000,000 to shareholders with $36,600,000 in share repurchases and $14,800,000 in cash dividends. During April, our Board of Directors declared a quarterly cash dividend of $0.02 $35 per share payable on June 20 to shareholders of record on June 6. As of March 31, we had $415,500,000 remaining under the current share repurchase authorization. On 04/10/2025, we repurchased approximately 936,000 shares of our common stock from Magnus for an aggregate of $62,500,000 related to our June 2024 share repurchase agreement. With respect to our previously disclosed December 2024 Magna share repurchase agreement, through the April, we've repurchased approximately 90% of the $62,500,000 target and expect to settle the related Magna share repurchase obligation during the third quarter of twenty twenty five.

Sean Sullivan
Sean Sullivan
Executive VP & CFO at Acushnet

Given the current market conditions, we will continue to assess our previously stated capital allocation approach for the balance of the year while monitoring leverage, liquidity needs and the appropriate levels of investment. Moving to guidance for 2025, the macro environment remains highly uncertain due to changing trade policy. For that reason, we are not providing any updates to our consolidated full year outlook until there's more clarity. On a positive note, as David said, our core consumer remains strong and resilient. In terms of overall tariff exposure, based on our estimates, we expect our gross impact in 2025 to be approximately $75,000,000 on the assumption that the current rate regime extends through year end.

Sean Sullivan
Sean Sullivan
Executive VP & CFO at Acushnet

The largest impact or about 70% relates to the China import tariff rate of a 45%. If we had not worked to diversify our supply chain over the past few years, our tariff exposure would be much higher. We are taking actions to implement mitigation plans, including adjusting our global supply chain footprint, initiating cost and productivity programs both internally and externally with our suppliers, and considering selective price increases. Through these actions, we believe we can offset greater than 50% of the $75,000,000 gross tariff impact during 2025. Now turning to the first half, similar to our twenty twenty four fourth quarter call, we currently expect first half sales to be up low single digits versus the first half of twenty twenty four.

Sean Sullivan
Sean Sullivan
Executive VP & CFO at Acushnet

We expect most of the additional tariff impact to fall in the second half based on our current inventory levels. For Q2, we expect an approximately $4,000,000 tariff impact. Including this impact, we expect first half adjusted EBITDA to be down low single digits as compared to last year's first half. In closing, we are very pleased with our performance in the first quarter of the year and remain focused on controlling what we can while servicing the needs of dedicated golfers. Our business and balance sheet are well positioned for the current market environment and we'll continue to monitor the tariff situation and provide updates when appropriate.

Sean Sullivan
Sean Sullivan
Executive VP & CFO at Acushnet

With that, I'll now turn the call over to Sandra for Q and A.

Sondra Lennon
Sondra Lennon
VP - FP&A and IR at Acushnet

Thank you, Sean. Operator, could we now open up the lines for questions?

Operator

Of course, thank you. Our first question today comes from Megan Platt from Morgan Stanley. Your line is now open. Please go ahead.

Megan Christine Alexander
Megan Christine Alexander
Analyst at Morgan Stanley

Hey, good morning, Dave, Sean. Thanks for the question. Wanted to start maybe with the guidance. It seems like you're more pausing the guide to wait until there's more clarity, and it doesn't seem like anything has really changed around your second quarter expectation. So is the decision to pause, is it driven by anything you're seeing today as it relates to consumer demand or customer ordering patterns?

Megan Christine Alexander
Megan Christine Alexander
Analyst at Morgan Stanley

Or is it more so just the acknowledgment that there's less visibility today than there was three months ago, and there's a lot that can occur over the next couple of months.

David Maher
David Maher
President & CEO at Acushnet

Yeah. Hi, Megan. I'll start with that one. You know, typically, this time of year, we we do not update guidance. Right?

David Maher
David Maher
President & CEO at Acushnet

We say often q one is about pipeline and and shipping product into the market. Q two, you get a read on on consumer behavior, you get a read on early response to your products. But but as Sean said, we were we were prescriptive as it relates to the first half up low single. That that is certainly informed by what we've seen up to this point in the year. Browns play as noted, resilience.

David Maher
David Maher
President & CEO at Acushnet

And and if I look at a slight decline in The US and an uptick outside The US for a net positive, that's that's that's a nice position to be in. Looking in The US, Florida up slightly in the quarter, California, Arizona up 85% in the quarter. So go going back to we feel we feel really positive about our our consumer and the structural health of the industry. Certainly, we're we're careful and cautious with regards to what's happening from a from a tariff perspective. But but our guide, I'm not sure it's as pause as much as this is how we generally play it this time of year, and we just we just exit q two, which hit with a much more informed position.

David Maher
David Maher
President & CEO at Acushnet

What you could infer is we've reiterated our first half based on what we've seen today,

David Maher
David Maher
President & CEO at Acushnet

and that

David Maher
David Maher
President & CEO at Acushnet

is rounds of play stable, consumer purchasing stable through April.

Megan Christine Alexander
Megan Christine Alexander
Analyst at Morgan Stanley

Okay. That's clear and helpful. Thank you. And then as it relates to the tariffs, maybe a follow-up for Sean. When you think about the mitigating actions more than 50% of the 75,000,000 this year, it seems like pricing is maybe the last resort.

Megan Christine Alexander
Megan Christine Alexander
Analyst at Morgan Stanley

But could you spend a little bit of time just bucketing the actions? Maybe, you know, what's what's first, in your minds in terms of what you're going to do and and, you know, at what point, do you think you'll make a decision on pricing?

Sean Sullivan
Sean Sullivan
Executive VP & CFO at Acushnet

Yeah. I can start. David certainly can, chime in afterwards. I I think that, certainly, you're right. I think the price, is probably the last lever we would pull.

Sean Sullivan
Sean Sullivan
Executive VP & CFO at Acushnet

You know, in the, intervening period, we're very focused on how do we redirect certain activities to to markets and sourcing into The United States at the lower tariff rate, number one. Number two, we're having conversations with many of our suppliers and vendors and identifying opportunities to either cost share or reimagine the price points at which we're procuring the product. We do have a diversified supply chain. You know, the the biggest impacts in terms of our business is really the club business and FootJoy. As David talked about, I think, you know, the club side, we have a a plan and a path for later this year to source clubs in The United States out of non China territories.

Sean Sullivan
Sean Sullivan
Executive VP & CFO at Acushnet

So that's good. And on the FootJoy side, certainly pleased that our our footwear is in is in Vietnam, but there's certainly apparel categories that we're looking at alternative opportunities. So, you know, first and foremost, look at the supply chain, see where we can source into country from alternative areas. And over the longer term, I think we have a plan to, you know, move out of China in certain aspects of our business.

Megan Christine Alexander
Megan Christine Alexander
Analyst at Morgan Stanley

Okay. Great. Super helpful. Thanks. I'll pass it on.

Sondra Lennon
Sondra Lennon
VP - FP&A and IR at Acushnet

Thanks, Megan. Operator, next question.

Operator

Our next question today comes from Joe Altobello from Raymond James. Your line is now open. Please proceed.

Joseph Altobello
Joseph Altobello
MD & Senior Analyst at Raymond James Financial

Thanks. Hey, guys. Good morning. I the clarity on tariffs, obviously. Guess one question.

Joseph Altobello
Joseph Altobello
MD & Senior Analyst at Raymond James Financial

I'm not sure anybody expects China to stay at 145%. So what does that $75,000,000 look like if China was at, say, 50%,

Joseph Altobello
Joseph Altobello
MD & Senior Analyst at Raymond James Financial

for example?

Sean Sullivan
Sean Sullivan
Executive VP & CFO at Acushnet

Yeah, Joe. I mean, again, I I highlighted in our remarks. I mean, of our 75,000,000, 70 percent or more of that, is related to, China specifically. So, you know, that's what? 50 some odd million dollars is China.

Sean Sullivan
Sean Sullivan
Executive VP & CFO at Acushnet

So, presumably, if it's at 50, we're looking at a third of that number. So that's a, you know, a a big, a big opportunity to to mitigate it if we go from one forty five to 50. So hopefully, I've given you those pieces to assess that.

Joseph Altobello
Joseph Altobello
MD & Senior Analyst at Raymond James Financial

No. I appreciate that. I missed that. I apologize. And maybe kind of moving on to Asia.

Joseph Altobello
Joseph Altobello
MD & Senior Analyst at Raymond James Financial

There's still a little

Joseph Altobello
Joseph Altobello
MD & Senior Analyst at Raymond James Financial

bit of

Joseph Altobello
Joseph Altobello
MD & Senior Analyst at Raymond James Financial

weakness, particularly in apparel in Korea and Japan. Think you mentioned that you saw a little bit of improvement later in the quarter and into Q2. Could you sort of elaborate on that a little bit?

David Maher
David Maher
President & CEO at Acushnet

Yes, Joe. Slow starts January, February weather turns. March, April have been pretty good. So so we're back on track, but but certainly a slow weather related start there. A quick comment on on Asia and, you know, we we like the trends of our equipment business and and our gear business.

David Maher
David Maher
President & CEO at Acushnet

As we've said recently, there's been some pressure on apparel in Asia. And just for context, and I and I have called out before this premium super premium market in Korea, And and it is outsized. It it represents about 40% of the global, golf apparel market opportunity. So it's a very sizable market. It went on a big run over the last four or five years, and it and it is correcting.

David Maher
David Maher
President & CEO at Acushnet

We saw it last year, and we see it this year. So a, we're prepared for it. B, it it's not surprising to us. But I would if I break up Asia and in this case, really Japan and Korea, which are the second and third largest markets, I'll park China aside just because it's not that big. But if you look at Asia and Japan and Korea, rounds are resilient after a slow start.

David Maher
David Maher
President & CEO at Acushnet

We like the trends of balls and clubs, and a watch out continues to be apparel and footwear, which again we've planned for.

Joseph Altobello
Joseph Altobello
MD & Senior Analyst at Raymond James Financial

Got it. Okay. Thank you.

Sondra Lennon
Sondra Lennon
VP - FP&A and IR at Acushnet

Thanks, Joe. Operator, next question please.

Operator

Our next question today comes from Michael Shortz from Truist. Your line is now open. Please go ahead.

Analyst

Hey, good morning. This is Julian on for Mike. Just one question, I guess relative to your guidance in February, how would a change in exchange rates that we've seen impact that outlook?

Sean Sullivan
Sean Sullivan
Executive VP & CFO at Acushnet

Yes. So as we had entered the year, Julian, we had expected, as you know, $35,000,000 headwind. We experienced about a $12,000,000 impact in q one, right in line with our 10 to 15 that we had highlighted. I think that if today's rate were to persist to the end of the year, it's probably worth something north of $20,000,000 tailwind for Q2 through Q4.

Analyst

Great. Thank you very much.

Sondra Lennon
Sondra Lennon
VP - FP&A and IR at Acushnet

Thank you. Operator, next question please.

Operator

Our next question today comes from Noah Zapskin from KeyBanc Capital Markets. Your line is now open. Please go ahead.

Noah Zatzkin
Noah Zatzkin
Vice President & Equity Research Analyst at KeyBanc Capital Markets

Hi, thanks for taking my questions. I guess first maybe just a quick follow-up on the $20,000,000 tailwind comment. Is that a kind of tailwind to overall numbers? Or is that a tailwind versus, kind of, the run rate $35,000,000 impact, that you had laid out previously?

Sean Sullivan
Sean Sullivan
Executive VP & CFO at Acushnet

Yeah. Yeah. It's it's 20,000,000 versus prior year is what I've highlighted. Right? So we've got the the $12,000,000 impact in q one that the year over year headwind and the $20,000,000 would be a tailwind relative to prior year, I guess, net $8,000,000 for the year is how I'm playing it out for you.

Noah Zatzkin
Noah Zatzkin
Vice President & Equity Research Analyst at KeyBanc Capital Markets

Okay.

Noah Zatzkin
Noah Zatzkin
Vice President & Equity Research Analyst at KeyBanc Capital Markets

That's very helpful. Just as you think about kind of mitigation efforts beyond this year, is there a scenario where you'd be able to presumably like diversify fully away from China? Or are there some critical components like that will have to remain in China? And just in general, if you think you can mitigate 50% this year, do you have any kind of guidepost in mind looking ahead? Thanks.

David Maher
David Maher
President & CEO at Acushnet

Yes. So a couple of examples. Right now, we source club heads from China, Taiwan and Vietnam. We have assembly centers around the world. What we said is that we would move sourcing to The US away from China into Vietnam and Taiwan.

David Maher
David Maher
President & CEO at Acushnet

So that's an existing move that we can make fairly quickly. Yet we still anticipate China supplying our assembly centers in markets outside The United States. Similar, we've got a we've got a diverse supply chain across our apparel franchises, but but a good amount comes from China and the Far East and and South America. It's it's more a function of moving away from China for products shipped and sold in The United States and rerouting some of that capacity to markets outside The United States. So I think in many cases, we've got a lot of dexterity and flexibility to move pieces around the board.

David Maher
David Maher
President & CEO at Acushnet

Where it where it gets a little interesting is we've got a small exposure in our golf ball business. We source raw materials from China, some raw materials from China to our ball plants in The United States and and and Thailand. We'll keep sourcing into Thailand Thailand. We'll look to move out of China in terms of our sourcing coming into The US. That takes a little while.

David Maher
David Maher
President & CEO at Acushnet

You need to qualify new vendors that probably won't realize or materialize until sometime next year. So it it's not a full exit from China. It's a it's a move pieces around the board and and, minimize the product we bring in from China into The US. But I still expect we'll have some some products flowing from China into markets outside The United States where there's no tariff exposure.

Sean Sullivan
Sean Sullivan
Executive VP & CFO at Acushnet

But but to your Very helpful. Question Go ahead. For sure. Again, it's a fluid situation seemingly is changing by the day. We don't wanna move too quickly and affect, demand or the consumer.

Sean Sullivan
Sean Sullivan
Executive VP & CFO at Acushnet

But the expectation is once we, if the current environment is the steady state, we would be in a position to mitigate a % of this impact, in '26. That would be the expectation.

David Maher
David Maher
President & CEO at Acushnet

Yeah. And I'll I'll I'll underscore Sean's comment. You know, our our objective is to take a very measured long term view in what is a period of of of significant uncertainty. We think it's it's best for our business, it's best for our trade partners, and most importantly, it's it's best for our consumers. So if there's one takeaway, it it is that we're we've got a lot of flexibility within our supply chain, and we're being measured and and whenever, wherever we can, taking a long term view and and keeping our options open with the understanding that that it's highly unlikely whatever the situation is today will be the situation it is two, three months from now.

Noah Zatzkin
Noah Zatzkin
Vice President & Equity Research Analyst at KeyBanc Capital Markets

Very helpful. Thank you.

Sondra Lennon
Sondra Lennon
VP - FP&A and IR at Acushnet

Great. Thank you, operator. Next question.

Operator

Our next question comes from Carlos Gallagher from Jefferies. Your line is now open. Please proceed.

Carlos Gallagher
Carlos Gallagher
Senior Associate - Equity Research at Jefferies

Good morning. Thanks for the question. Could you guys just unpack what you're seeing in terms of quarter to date demand trends? And are you seeing any signs of or do you anticipate any reduced demand in international markets related to the move away from American brands?

David Maher
David Maher
President & CEO at Acushnet

Yeah. Carlos, good good question. Obviously, we're watching it very, very carefully both in The United States and in markets outside The United States. I will say early days in the golf world, as so many markets just opened up in the last couple of weeks. So we don't have a a a deep or long bank of of of consumer data to work with.

David Maher
David Maher
President & CEO at Acushnet

But I will what I will say is here we are in early May, and we like the state of participation rounds. And I would characterize our business, in in just about every market as normal for this time of year. So said differently, we haven't seen any meaningful swings or noteworthy swings in one direction or another, either in The United States or or in markets outside The US. But to your question, it's something we're watching very carefully. And and and more notably, we're we're watching the state of the consumer very, very carefully.

David Maher
David Maher
President & CEO at Acushnet

And and when we do that, we also do it with the understanding and some degree of comfort that that our consumer, the dedicated golfer as we call it, over cycles has proven to be quite resilient. But as we sit today, what we're seeing is about what we expected out of The U. S. Markets and in markets around the world.

Carlos Gallagher
Carlos Gallagher
Senior Associate - Equity Research at Jefferies

Super helpful. Thanks. And then just could you give us an update on the dynamics in footwear space just related to some of the new entrants we saw last year in channel inventories?

David Maher
David Maher
President & CEO at Acushnet

Yeah. Hey. We're really happy with with our footwear business. We've got a handful of new launches that have been that have been well received, HyperFlex, Premier, Quantum. We we did comment on on the top line decline.

David Maher
David Maher
President & CEO at Acushnet

We're we're selling fewer closeouts, which is a net positive. And we've done some product line rationalization, which we think over time will be a positive for FootJoy as well. I did comment, we look at 2025 as a year of top line stability, a greater percentage of premium performance, full price product, if you will, and and a path to improve profitability. But but after what's been eighteen, twenty four months of correction in the footwear in the footwear space as it worked through what we would characterize as an oversupply, Generally, we look we look around the world and we see footwear inventories at a at a at a at a proper level for this time of year. Said differently, stores, retailers are full as they should be at the beginning of the season.

David Maher
David Maher
President & CEO at Acushnet

But we think we think the year in footwear should be characterized as being more normal normalized than we've seen in the last couple of years. And we like the early response and trends within within our foot or foot choice business as well.

Carlos Gallagher
Carlos Gallagher
Senior Associate - Equity Research at Jefferies

Great. Thank you. I'll pass it on.

David Maher
David Maher
President & CEO at Acushnet

Thanks, everybody. We appreciate your your interest, and, hopefully, mother nature cooperates this spring. And, we all get out and play some golf, And, we look forward to speaking to you, after q two.

Operator

That does conclude today's call. You may now disconnect your line.

Executives
    • Sondra Lennon
      Sondra Lennon
      VP - FP&A and IR
    • David Maher
      David Maher
      President & CEO
    • Sean Sullivan
      Sean Sullivan
      Executive VP & CFO
Analysts

Key Takeaways

  • Acushnet delivered a solid Q1 with worldwide net sales of $703 million (up 1% year-on-year) and adjusted EBITDA of $139 million, driven by momentum in Titleist golf equipment (up 4%) and gear (up 4%) despite increased investment in equipment.
  • FootJoy sales declined 5% due to lower closeout footwear volumes and product line rationalization, though new HyperFlex, Premier, and Quantum models and strong glove performance point to a stabilized premium mix and improving profitability.
  • The company anticipates a $75 million tariff impact in 2025 (70% from China), but its diversified, vertically integrated supply chain and planned sourcing shifts aim to mitigate over 50% of this cost by year-end, with selective price increases as a last resort.
  • Acushnet’s financial position remains strong with net leverage at , inventories flat versus last year, planned 2025 CapEx of ~$85 million, and $51 million returned to shareholders in Q1 via buybacks and dividends.
  • Full-year guidance is paused amid trade policy uncertainty, but first-half net sales are still expected to rise low-single digits with adjusted EBITDA down low-single digits, while consumer demand and rounds of play remain resilient.
AI Generated. May Contain Errors.
Earnings Conference Call
Acushnet Q1 2025
00:00 / 00:00

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