Acushnet Holdings Corp. Q4 FY2025 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. At this time, I'd like to introduce your host, Mr. Cameron Vollmuth, Director of Investor Relations. Cameron, you may proceed.

Good morning, everyone. Thank you for joining us today for Acushnet Holding 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. As we feel this measurement best provides context as to the performance and trends of our business, when referring to year-to-date results or comparisons, we are referring to the 12-month period ended December 31, 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 is 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 4. 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 has 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. And 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 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 has 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 FitLab 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 shoes 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. And 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, TourSoft, 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 #1 on the PGA Tour, and 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 we 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, and 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 #1 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. As 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 21, 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 20 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 D2C 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, and 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.

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

Operator Instructions. The first question comes from the line of Simeon Gutman with Morgan Stanley.

This is Lauren Ng on for Simeon. First, we just wanted to get more color on the 2026 product calendar. I know you guys alluded to this earlier in the call. But can you comment on your innovation pipeline for the new driver and new wedge launches?

So as we often do, we'll point you in an even numbered year '26, two years back to 2024, that's the best like-for-like view of our timing and product pipeline. And that holds true really in golf balls and wedges and putters for this year, also across our gear and wearables business. What's different, and we did call it out, is that we've elected to accelerate the launch of our new driver into late June. Typically, that happens in early August. So more to follow in terms of timing and product details, etc., but we wanted to give you that visibility to let you know that the model will be a bit different in '26 solely because of the driver launch timing change. We haven't brought that story to our trade partners. They're aware of it, but we haven't brought the product story to our trade partners. So until we do that, we're going to keep that under wraps.

That's helpful. And just a quick follow-up. If you could just give us any more color on your expectations for the U.S. market specifically in '26 and maybe how we should think about volume versus price for these categories.

I’ll begin, and then Sean can elaborate on volume and price. The U.S. market has consistently been our strongest, largely due to a robust consumer base. Participation in rounds of play in the U.S. has increased by 25% over the past 5 to 6 years, driven by a continuous rise in the number of golfers for about 7 or 8 years. This trend indicates a very healthy golfer base and participation rate. Additionally, during the late 2016 to 2018 period, the industry underwent a correction, leading to a reduction in retailers and manufacturers, which helped the industry become more streamlined by the end of the 2010s. Following this, we've experienced a pandemic-driven surge in the last 5 to 6 years, resulting in significant growth and structural health in the U.S. market. Moreover, we’re benefiting from strong consumer participation among golfers over the past few years. As for the current market, in February, inventory levels are where they should be, with full and vibrant supplies in open markets while being lean in closed markets. This situation will evolve over the next 4 to 6 weeks. Overall, we're optimistic about the U.S. market, especially regarding the engagement of golfers in the country.

And Lauren, maybe what I'd add just on a segment basis, really, the focus for you should be in the golf equipment, again, reiterating and reinforcing the 2-year product introduction cycle. So '26 is obviously not a Pro V1 launch year. Historically, we have seen flat to down volumes in the ball business. But if you look at where we're at versus 2 years ago, we feel very good about where the golf ball business is performing and delivering. And then on the club side, again, you see the strong growth we experienced in '25. But if we look at volumes versus 2024, we expect good growth from the club business with the metals launch in '26 versus '24.

The next question comes from the line of Randy Konik with Jefferies.

David, it seems you have a much more positive outlook on the FootJoy business. The efforts around product architecture and the FitLab appear to be yielding results. Could you elaborate on the current status of the FootJoy business? It looks like consumers are leaning towards premium products. Additionally, could you provide an update on Japan and Korea? I believe you mentioned that Japan is expected to see growth this year, which is a shift, while Korea might remain flat or show improvement from a previous decline. However, you mentioned that apparel and footwear are still struggling somewhat in those regions. Could you clarify what the future looks like for those markets and categories?

Thanks, Randy. Starting with FootJoy, we noted previously that the footwear industry experienced an 18 to 24-month correction period following the pandemic surge. Demand initially soared, and the industry responded, but as demand normalized, we were left with excess supply, leading to an inventory correction that we believe we overcame about a year ago. FootJoy has a rich heritage, over 100 years, and has been the top golf shoe for over 75 years. We continue to focus on the high-performance legacy of the brand as we look towards future innovations. We mentioned earlier our shift towards prioritizing profitability over sales growth during this correction period, and the team has executed well in this regard. Although sales decreased slightly, this was largely due to a drop in closeout sales. We are emphasizing our premium performance products and streamlining our product line by reducing lower price options while raising the quality threshold. Overall, we are content with our current position. While I haven’t delved into apparel, the situation mirrors that of FootJoy, and the team is performing well. I’m optimistic about the trends in the FootJoy business, noting a slower sales growth but improved profitability. However, tariffs are a significant concern for this segment, as it is more affected by them compared to others, yet we are managing to mitigate some of those impacts. Regarding FitLab, our expertise in ball and club fitting dates back to the '90s, and we are now seeing the benefits of footwear fitting globally. FitLab is an additional service that enhances our products and ensures golfers receive an excellent experience in terms of performance and fit. As for Japan and Korea, we have experienced good growth in equipment, particularly in balls and clubs, while gear and wearables, including FootJoy, have had softer sales. We're optimistic about the equipment market in both countries, although we have tempered expectations for wearables and footwear. In Japan, round play is slightly up, showing a 10% increase compared to 2019, while Korea has seen a 20-25% increase from the same period. Overall, the equipment landscape in Asia mirrors that of the U.S., though wearables have been weaker, leading to cautious expectations in those categories.

Super helpful. Just last question. A lot of the commentary has come through around, I guess, pricing. So is your view that we still are in a very firm pricing environment across all categories, it looks like, in particular, balls and clubs, it feels pretty good. The consumer is very much willing to pay higher prices for more innovation, etc.?

Yes. We're careful, right? We've said this before. We're careful with pricing, but we're dealing with the realities of input costs, distribution costs, labor, and all that, but not to mention tariffs. So as we think about pricing, we took action more notably with FootJoy and gear in the second half of '25. You'll see some pricing action in equipment in the first half of '26. Yes, our job is any time you take price, you've got to work a little bit harder to show value, whether it's improved product or a better fitting experience. We don't take it lightly, but so far, so good in terms of how we've both mitigated higher cost and, within that, had to pass along some of those costs. So we don't take it lightly but again, so far, so good. And again, first half of '26, you'll see some equipment price increases across our lines really attached to new club products. And then on golf balls, it's going to be more a U.S.-Canada story around Pro V1, where the rest of the world, we took some pricing measures last year. So we're trying to be thoughtful and strategic. We look at it case by case. We look at it market by market. But so far, so good. But again, as I said, every time we take price, it compels us to work a little bit harder on the product side and the experience side to make sure we're showing value.

The next question comes from the line of Joe Altobello with Raymond James.

First question on the quarter. I was not expecting 19% club growth. And based on your guidance, I'm not sure you were either. So maybe talk about what drove that upside? Was there a timing issue? And why didn't we see that flow through on the EBITDA line?

Yes, Randy, I'll take it, Sean. I'm sorry, Joe. So yes, no, I think we saw in the quarter top line, we saw better-than-expected performance across all segments, particularly in clubs, as you called out, just really great execution by the team, continued strong demand. I think David talked about the T-Series iron. So just really pleased with how that played out. So as it relates to the conversion rate, again, we had the impact of tariffs in Q4, as you know, was $15 million, the largest quarter of the year against the total of $30 million. So not particularly a surprise to us in terms of how the bottom line delivered relative to our expectations.

Okay. That's helpful. Maybe on the subject of tariffs, I think you mentioned this morning, $70 million total, so that's, call it, $40 million incremental. How much of that is IEPA?

The incremental $40 million is related to the IEPA tariff. As I mentioned in my prepared remarks, similar to our approach last year, we plan to let things settle and will provide updates as needed instead of getting caught up in ongoing discussions about this topic. That's the current situation.

Have you filed for a refund yet?

No, we have not. But we're obviously monitoring the market, obviously talking daily with advisers and assessing our approach and the ability to get a refund for sure. So still early days.

The next question comes from the line of Matthew Boss with JPMorgan.

It's Amanda Douglas on for Matt. So David, with the healthy golf industry backdrop, as you cited, could you speak to your top priorities into 2026 to capture additional market share within the equipment category? And specifically, any initial feedback you've received from channel partners on your new launches as we look ahead to the core selling season?

Yes. Amanda, so just in terms of how we think about growth and share, I'll really bring it back to really what our core principles are, and that is, number one, get the product right, get it as good as we can get it. We validate it through the pyramid. And then we really invest behind our fitting experience. So we're trying to bring to golfers great product and a world-class fitting experience that helps them decide that what we're bringing to market is better than what's in their bag, and that's it. So no magic tricks up our sleeve beyond get the product right, get the golfer experience right. Within that, we work real closely with our trade partners to educate them, to partner with them to make sure our golfer connections are effective and working. So that's as much the long-standing proven playbook. Amanda, help me. Part two of your question was about what? Repeat that, please.

Just any feedback you've received from channel partners on your new product launches.

So I'll just level set. It's February in the golf industry. Most of the industry is still under cover of snow as we are here. But early days, we like. We've launched a whole series of golf balls as planned, as expected. We're pleased. Almost too early to say on wedges and putters. Those are just arriving in the market here now. So I don't have a lot of great color to talk about how new products have been received. But what I can say about the market is when the weather is okay, people are playing golf. And when it's not, they're not. So we had a little bit of some ice storms across the Southeast in January, as you'd expect, that slows things down. But it's January. But by and large, when weather is okay, people are playing golf, and the game is alive and healthy. In terms of really getting a sense for the market and what's happening. We've always said first quarter is really about shipment in. Second quarter gives you a read on what's happening in the market, how the consumer is behaving and how they're responding to your products. So we tend to reserve our commentary or assessment until a little bit later in the year. But yes, no, for this time of the year, we like where we are with the exception of, again, we're under 3 feet of snow here in New England.

Yes. Just to reiterate what I said in my prepared remarks, as we look at 2026, we're expecting gross margins to be relatively flat to 2025. So I think in the context of higher input costs and particularly in our Golf Equipment segment, as well as the incremental tariff landscape that we've talked about and some of the pricing actions we've taken, we feel very good about the ability to deliver and hold margins flat year-over-year. As it relates to gross margin first half, second half, again, I would guide you to what we talked about in terms of the growth. So seemingly, given what I've talked about in terms of first half sales and EBITDA contribution, I'll leave it to you to model how that gross margin may impact. You're probably going to see slightly higher in the first half and maybe less so in the back. But overall, on a full-year basis, like I said, consistent with 2025.

The next question comes from the line of Noah Zatzkin with KeyBanc Capital Markets.

I guess just to kind of follow up on pricing and not only specific to you guys, but across the industry. What are you kind of seeing from competitors in terms of pricing? If you've seen it kind of broadly up, like have you, I guess, heard chatter or have a sense for how kind of retail partners are responding to that? And then kind of like within that framework, how do you think that positions you relative to some others? Meaning, are others kind of been more aggressive on pricing, similar? Just trying to understand kind of the pricing landscape.

Yes. I have a few observations. Similar to what I mentioned about Acushnet, I believe you can apply this analogy to the entire industry based on what we've observed. The initial pricing changes were mainly in gear and wearables due to the life cycles of those segments, and we anticipate this will continue into the second half of 2025. During that period, there wasn't much pricing activity in equipment, balls, and clubs. We are beginning to see that now, indicating that our trends align with industry patterns. Regarding our positioning, we are a premium product, and we strive to maintain that status, knowing our competitors are also working hard to do the same. Generally, we are witnessing price increases being reflected in retail, although it's still early in the year, just February. This trend is not surprising, as we anticipated it as early as the fourth quarter. However, it will take a few more months to understand how consumers perceive different companies in terms of pricing. We are confident in our position and our ability to implement price increases, mainly because of our belief in our products and the golf experiences we offer. We will have more insights as the market reacts, but that is typical for this time of year.

No, that's really helpful. And you touched on this, I think, a little bit kind of as it relates to top line trends across different regions. But anything to call out in terms of maybe health of the sport across international markets? It's obviously early in the year, but any changes in how you're thinking about different markets?

It was a good year for golf in 2025, with positive results in the U.S., Canada, the U.K., and Mainland Europe. Many of these regions are now in their off-season, so my perspective may change in a few months, but the initial trends are certainly favorable. We continue to observe the strongest consumer activity in the U.S., which isn’t surprising. Equipment, balls, and clubs show the most resilience. However, we are cautious about the apparel markets in Korea and Japan. Overall, it’s encouraging to see an increase in rounds played across most regions, especially in Western markets.

The next question comes from the line of Doug Lane with Water Tower Research.

Staying on the topic of golf, the resilience is impressive, with another good year in the U.S. and other regions. However, if I recall correctly, the U.S. started out slowly last year but managed to recover significantly in the latter half. What accounted for the difference between the first half and the second half of last year in U.S. rounds of golf?

Doug, weather. Yes, really, that's simple. You had some tough weather. You had some tough weather in the Southeast that slowed things down, and that's just a fact of life in the golf business, Mother Nature has her say. But that was the issue. We had a slow start due to weather, and then we saw weather normalize and it was nice to see the comeback in the U.S. market.

And have you talked about who's playing the more rounds of golf? Is it more retirees? Is it more people in the South? Is it more amateur, teenagers? Really what's driving the increased rounds of golf, the persistent increased rounds of golf over the last several years?

Yes. We refer to the National Golf Foundation, which effectively gathers data to help us understand the changing golfer demographic. This shift is coming from various directions, but I can confidently say that avid golfers are thriving. Notably, the fastest-growing segments in recent years have been women and juniors, who are making significant contributions to the growth we've witnessed. For reference, in 2019, approximately 800 million rounds of golf were played globally, and that figure is expected to approach 1 billion this year, representing about a 23% increase. In practical terms, that translates to an additional 180 to 190 million rounds being played today. I also want to highlight the essential role of the PGA and PGA Club professionals in nurturing and expanding the game. I hope that answers your question.

No, that's very helpful. And just one more, if I might. We read about and hear about the bifurcated consumer these days where the higher end continues to spend and the lower end seems to be a little squeezed. And you've got a pretty wide variety of products. You have low ticket, high ticket, consumables, durables. So how are you seeing consumer behavior here in your ecosystem?

I think we've discussed our product performance extensively, but I want to highlight our dedicated golfer. They are enthusiastic and passionate about the game. If we can demonstrate that our products are superior, they are likely to buy them, believing it will enhance their play. We find the dedicated golfer demographic appealing; they are generally middle class and above. Over time, we've observed that they are somewhat resilient during economic downturns—not completely immune, but they remain committed despite economic cycles. Golf attracts a strong consumer base. We have a wide range of products at various price points, but we primarily focus on premium performance, which is where most of our development and product offerings are centered. The dedicated golfer is central to our strategy and serves as a guiding focus for the company. They form a significant and robust consumer group.

The next question comes from the line of JP Wollam with ROTH Capital Partners.

If we could just start first on G&A. I think last time in November, we were maybe expecting to see some leverage there, just given you have the voluntary retirement program and kind of a good year or 18 months of prior investment. So just curious to see what kind of changed there. It sounds like G&A growth is expected kind of in line with revenue. So are there incremental? What kind of changed?

Yes, JP. When I compare 2025 to 2024, if you adjust for the PTO in 2024 and the ERP along with some of the one-time factors I've mentioned, it appears we have successfully managed to keep OpEx growth lower than sales growth. I'm optimistic about this outlook for 2025. Regarding OpEx in 2026, while we anticipate some additional expenses, we still expect growth to align with sales. We are making headway and realizing ongoing benefits, which won't be just a one-time occurrence. Instead, you can expect to see this improvement unfold gradually in the coming years as we achieve better operating leverage.

Understood. I have a follow-up regarding tariffs. Given that the situation is quite dynamic, if we consider the four strategies we discussed for offsetting costs—pricing adjustments, vendor cost sharing, leveraging some general and administrative expenses, and possibly tightening advertising and promotional spending—I'm curious about your perspective on the 2026 guidance. Specifically, if tariffs were to be eliminated in the next three to four months, would there be an opportunity to increase investments in advertising and promotions, potentially leading to revenue growth? How are you approaching this?

I feel very positive about our guidance and the performance of the business, especially in managing the challenges presented by the changing tariff situation. We are committed to continuing our investments in advertising and promotions, and you will see this reflected in our filings. We have increased our advertising and promotional spending for 2025, though only by a modest amount in the low single digits, which has been the trend for the past couple of years. We have strong confidence in our Golf Equipment brands, particularly FootJoy, and we will keep investing in these areas. As David mentioned, it is still early in the year, being February, but we are not seeing this as a reason to reduce our advertising and promotional spending for long-term growth. Overall, we are operating as usual despite the tariff challenges, and we remain optimistic about our guidance in relation to these factors.

Thanks, everybody. As always, we appreciate your time and interest this morning and look forward to getting back with you in a few months to provide updates on the quarter.

Ladies and gentlemen, thank you for attending today's conference call. This now concludes the conference. Please enjoy the rest of your day.