Good morning all and thank you for joining us for today's Acushnet Company First Quarter 2025 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&A session. [Operator Instructions] It's now my pleasure to hand over to Sondra Lennon, Vice President FP&A and Investor Relations to begin. Please go ahead when you're ready.

Good morning, everyone. Thank you for joining us today for Acushnet Holding Corps first 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 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 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 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 US 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 March 31, 2025 and the comparable three month period in 2024. With that, I'll turn the call over to David.

Thanks, Sondra 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 and our Titleist Golf Equipment and Golf Gear Segments. For the quarter, Acushnet delivered worldwide net sales of $703 million, a 1% increase over last year. Adjusted IBITDA was $139 million which reflects a decrease of $15 million related to our decision to step up investment in our equipment segment in 2025. 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 Q1 with the launch of new hybrids and GT1 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-V1 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 Q1 2023. In most cases, we would expect Q1 club sales to be down in an odd year given the challenging comp against even year Vokey wedges launches. This was obviously not the case in 2025 as GT Metals and Scotty Cameron putters contributed to our growth over last year. Acushnet Gear sales were up almost 4% in the quarter with growth in all major markets led by EMEA and Japan. Titleist Gear posted…

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 was $138.9 million a decrease of 9.6% in the first quarter of 2024, 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%. 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 the rest of the world driven by golf equipment and golf gear. First quarter net sales declined in Korea and Japan primarily due to our FootJoy golf wear 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 first quarter of $337 million was down $5 million compared to the first quarter of 2024 primarily due to higher manufacturing costs in the Titleist golf equipment segment as well as lower net sales and FootJoy golf wear. These were partially offset by higher average selling prices and lower distribution costs in golf gear and higher net sales in Titleist golf equipment. SG&A expense of $200 million in the quarter decreased almost $1 million 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 million decrease in restructuring expense related to a charge recognized in the first quarter of 2024 associated with our footwear production transition to Vietnam. R&D expense of…

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

We will start today's Q&A session. [Operator Instructions] Our first question today comes from Megan Platt from Morgan Stanley. Your line is now open. Please go ahead.

Hey, good morning, Dave, John. Thanks for the question. I 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 expectations. 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? Or is it more so just the acknowledgment that there's less visibility today than there was 3 months ago, and there's a lot that can occur over the next couple of months?

Yeah. Hi, Megan, I'll start with that one. Typically, this time of year, we do not update guidance, right? We say often Q1 is about pipeline and shipping product into the market. Q2, you get a read on consumer behavior, you get a read on early response to your products. But as Sean said, we were prescriptive as it relates to the first half, up low single. That is certainly informed by what we've seen up to this point in the year. Rounds play has noted resilience. And if I look at a slight decline in the US and an uptick outside the US for a net positive, that's a nice position to be in. Looking in the US, Florida up slightly in the quarter, California, Arizona up 8% and 5% in the quarter. So going back to, we feel really positive about our consumer and the structural health of the industry. Certainly, we're careful and cautious with regards to what's happening from a tariff perspective. But our guide, I'm not sure it's a pause as much as this is how we generally play at this time of year. And we just exit Q2 with a much more informed position. What you could infer is, we've reiterated our first-half based on what we've seen today and that is rounds of play stable; consumer purchasing stable through April.

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 million this year, it seems like pricing is maybe the last resort. But could you spend a little bit of time just bucketing the actions, maybe what's first in your minds in terms of what you’re going to do and at what point do you think you'll make a decision on pricing?

Yeah. I can start. David, certainly can chime in afterwards. I think that, certainly, you're right. I think the price is probably the last lever we would pull, in the intervening period. We're very focused on how we redirect certain activities 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. The biggest impact, in terms of our business, is really the Club business and FootJoy. And, as David talked about, I think the Club side we have a plan and a path for later this year to source clubs in the United States out of non‑China territories. So that's good. And, on the FootJoy side, certainly pleased that our footwear is in Vietnam, but there are apparel categories that we're looking at alternative opportunities. So, 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 move out of China in certain aspects of our business.

Okay, great, super helpful. Thanks. I'll pass it on.

Thanks, Megan. Operator, our next question.

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

Thanks. Hey, guys. Good morning. Appreciate the clarity on tariffs, obviously. I guess one question. I'm not sure anybody expects China to stay at 145%. So, what does that $75 million look like, if China was at, say, 50%, for example?

Yeah. Joe, as I highlighted in our remarks I mean of our $75 million, 70% or more of that is related to China specifically. So that's about $50‑some odd million dollars for China. Presumably, if it's at 50%, we're looking at a third of that number. So that's a big opportunity to mitigate it, if we go from 145% to 50%. So, hopefully, I've given you those pieces to assess that.

No, I appreciate that. I missed that; I apologize. And, maybe, kind of moving on to Asia still a little bit of weakness particularly in apparel in Korea and Japan, I 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?

Yeah, Joe, slow starts January, February weather turns March, April have been pretty good, so we're back on track, but certainly a slow weather related start there. A quick comment on Asia and you know we like the trends of our equipment business and our gear business. As we've said recently, there's been some pressure on apparel in Asia and just for context and I have called out before. This premium super premium market in Korea and it is outsized. It represents about 40% of the global golf apparel market opportunities, so it's a very sizable market. It went on a big run over the last four or five years and it is correcting. We saw it last year and we see it this year. So, a, we're prepared for it. B, 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 2nd and 3rd 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. We like the trends of balls and clubs and a watch out continues to be apparel and footwear which again we've planned for.

Got it. Okay. Thank you. Thank you.

Thanks, Joe. Operator, next question please.

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

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

Yeah, so as we had entered the year Julian, we had expected as you know $35 million headwind. We experienced about a $12 million dollars impact in Q1 right in line with our $10 million to $15 million that we had highlighted. I think that if today's rate were to persist through the end of the year, it's probably worth something north of $20 million dollar tailwind for Q2 through Q4.

Great. Thank you very much.

Thanks you. Operator, next question please.

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

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

Yeah. It's 20 million versus prior year is what I've highlighted, right. So we've got the $12 million dollar impact in Q1 that's a year over year headwind and the $20 million dollar would be a tailwind relative to prior year, I guess therefore net $8 million for the year is how I'm laying it out for you.

Okay. That's very helpful. And 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 like, if you think you can mitigate 50% this year, do you have any kind of guidepost in mind looking ahead? Thanks.

Thanks. Yeah, 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. 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 diverse supply chain across our apparel franchises, but a good amount comes from China and the Far East and South America. 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, 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 Thailand. We'll keep sourcing into Thailand. Thailand will look to move out of China in terms of our sourcing coming into the US. That takes a little while. You need to qualify new vendors that probably won't realize or materialize until sometime next year. So it's not a full exit from China. It's a it's a move pieces around the board and minimize the product we bring in from China into the US, but I still expect we'll have some products flowing from China into markets outside the United States where there's no tariff exposure.

Very helpful.

But to your -- question for sure again it's a fluid situation seemingly is changing by the day. We don't want to move too quickly in effect demand or the consumer but the expectation is once we – if the current environment is the steady state we would be in a position to mitigate 100% of this impact in 2026. That would be the expectation.

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

Very helpful. Thank you.

Great. Thank you, operator. Next question?

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

Good morning. Thanks for the question. Could you guys 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?

Yeah. Carlos, 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 deep or long bank of consumer data to work with, but I 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 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 in markets outside the US. But to your question, it's something we're watching very carefully. And more notably, we're watching the state of the consumer very, very carefully. And when we do that, we also do it with the understanding and some degree of comfort 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 US markets and in markets around the world.

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

Yes. We're really happy with our footwear business. We've got a handful of new launches that have been well received, HyperFlex, Premier, Quantum. We did comment on the top line decline. 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 a path to improve profitability. But after what's been 18, 24 months of correction in the footwear space as it worked through what we would characterize as an oversupply, generally, we look around the world and we see footwear inventories 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. But we think the year in footwear should be characterized as being more normalized than we've seen in the last couple of years. And we like the early response and trends within our FootJoy business as well.

Great. Thank you. I’ll pass it on.

Thanks, everybody. We appreciate 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 Q2.

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