Conference Transcript - NWTG 2026-06-11

Operator

welcome back everyone next we have newton golf company inc it trades on the nasdaq under the symbol nwtg and it's committed to innovation inspired by sir isaac newton applies the principles of physics to the design and performance of premium golf equipment creating precision engineered golf newton motion shafts and gravity putters that deliver unmatched stability control and performance happy to welcome coo jeff claiborne nice to see you jeff for very much looking forward to hearing your presentation today thanks anna appreciate uh everyone taking the time to learn a little bit about newton golf today perfect go for it and call me back when you're ready for questions all right so i'm going to go through our slide deck everyone um i'm going

Jeff Clayborne, COO

to skip through um some of the slides and the slide deck is available at newtongolf.com in the investor relations section you can spend more time there some of the presentation will get into some the technical elements of golf if you got additional questions you feel free to email us we're happy to set up separate conversations with anyone that wants to hear more about the story with that i'll jump into a few things uh newton golf here's our key stats page won't spend much time here we went public in 2023 we launched our first motion shaft in 2023 at the back end of the year which is why the revenue is a little bit lighter uh we launched the fairway wood in 2024 you saw great revenue growth up to 3.4 million and then we ended up at 8.1 million last year on the heels of launching the fast motion driver shaft we have approximately 4.6 million shares outstanding for trading right around a dollar puts us right around a five million dollar market cap and have a half million dollars of convertible debt that's priced above market the conversion rate is fixed at a dollar sixty um and subsequent to 331 we've added an additional 1.5 million of convertible notes all with the fixed conversion price of a dollar sixty so who is newton i'm not going to spend much time here uh as anna said we are technology forward thinking as we created our shafts um i think what differentiates us differentiates us the most is our dot system which i will spend more time later in the presentation we manufacture in the u.s we have new product lines coming out later this year and we're expanding internationally we operate in a relatively big market won't spend much time here the global garth market is 9 billion which provides opportunities for newton gulf to expand beyond shaft once we prove ourselves and establish a sound market share within the shaft business the shaft market itself is 600 million golf is growing uh you guys can read about this if you're active golfers you know what's going on in the golf space um for us this is where the where we start to differentiate ourselves and you'll start seeing common themes as i go through again it's a 600 million dollar market um but it's a relatively frustrating market and we are riding the tide of the changes in the oem manufacturer where they started at changing the tips and now they have adapters at the bottom of all the driver shafts they're now in the fairways many of the hybrids have what does that mean back in the day when and it's sad i actually just replaced my shaft but i had bought a speedster uh with my callaway back in 2005 and for me to change that out i would have to go to someone else they would have to tear it apart put a new shaft in now with a simple screwdriver you can unscrew uh the driver head from the shaft and you can put in a replacement shaft in that allows golfers to upgrade their shafts and improve their game on the fly that is the biggest change which has really provided the opportunity for someone like newton to come into this space what makes us different um there is zero standardization in the gulf um if you between fuji cura graphite design mitsubishi they all have different naming conventions and the way they go through the fitting process is cumbersome and fragmented flex labels what is stiff with one isn't stiff for another and all the shafts perform quite a bit differently and one of the biggest frustration points is is if you find you get go get a driver shaft and you love the you find out your vent is blue and you go to a fitter and you have your driver for their fairway and hybrids no other company actually customizes the fairway and hybrid hybrid shafts all they do is take the standard driver shaft and they cut it down and make it shorter that obviously creates quite a bit of an opportunity for someone like newton which i'll get into in a minute because if you're cutting it down in your fairways you need a heavier shaft because the drug the head of a fairway is heavier than a driver also you're hitting on the ground which creates different torque so if you were a ventus blue and you had a mid flex point uh mid impact point that does not mean that's what you're going to need for a fairway um so keep that kind of the back of your mind and now i'll walk you through where we're kind of changing things so if you were in the old system the first thing you're going to do is look at your swing speed and understand the flex that you need and there's like i said six or seven different types of flexes and they vary based on the company you're working with so once you identify your your flex then you're going to find out your kick point most of the competition have three kick points the three kick points are up in the close to the grip that is usually reserved for people swing the golf ball really fast then you get your mid kick point your average enthusiast moderately athletic and at the bottom it still might be someone that used to be athletic but maybe you're getting older and your swing speed is um slowing down so you need a lower kick point um so you can drive the ball higher or further um with newton all you have to do is understand your swing speed once you we understand your swing speed we will put you in a dot we have what is one through seven dots one being uh not to describe an older person that doesn't swing really hard the shaft's going to be a lot more flexible and we have an elongated profile and at the bottom it'll lead more to a more a lower kick point even though we use long more of the shaft i'll get into that later right so now you've got your dot number uh and once you have your dot you can build your bag so what does that mean where i went back to our competition i was eventus blue now i want to i want to upgrade all my shafts in my bag for my fairways and my hybrids you've got to go back to the fitting system which can be complex the shaft started 170 dollars and go up the $300. So these are relatively decent sized ticket items, especially when people could be buying five, six, seven upgrade shafts. For us, once you know you are either a fast motion or a motion, and I know I'm, let's say, a four dot, you're going to be a four dot in the motion series, or you will be a four dot in the fast motion series. So once you know you're a four dot, it's i've got my four dot driver then i'd be a four dot fairway i'd be four dot through all my hybrids and it would just be a differentiation between the fast and the motion product line i will quickly go through the product line motion was our first shaft it's a little bit heavier than the fast motion we use three types of fiber um making our shafts the fast motion is on average 10 grams lighter um it obviously if it's lighter generally you can swing the golf the ball faster which would then give you higher swing speeds it is our number one selling we use what's called high mod fiber which is just as stiff as our standard fibers but it's much lighter it performs better um now with the higher swing speeds part of the misnomer is it's not just that you swing faster um you also use your wrist a lot of golfers use their wrist to put movement on the ball if you have a lighter shaft it puts less pressure on your wrist and allow you to control your ball and your flight a lot easier um we have we also sell putters putters will part will be part of the phase two of the company it's interesting we started as a putter business in 2018 the shafts are what took off putter is a completely feel business and they the putters started around 400 up to 550 they don't sell really well d2c as we expand into wholesale retail and get floor space and our customers can try the putters we will then bring the putters to the forefront and focus a little bit more of our business right now the 99 of our business is focused on our shaft part of the business okay um just a couple key stats here um we were the number two shaft on a tour of champions last year we've had 60 plus tour professionals across pga lpga corn ferry tour of champions put our drivers into play uh we have some champions and then on the right i mentioned we're the number one chef and club champion after only being in distance for a few years but we're also testing the limits of what carbon fiber can do so we have multiple players that are using a long drive and then just earlier this year uh one of the long drive guys set the world record holder for the fastest ball speed using a newton shaft won't spend much time here other than this is our historical performance you can see sales are going up our gross profit is going up obvious percentage that gross margins down a little bit the gross margins are down primarily last year was doing to scalability over time we couldn't maximize the facility bring the margins down however we believe we can get to 70 plus percent margins in the future as we optimize our capacity and our manufacturing process where i want to spend a little more time was q1 for those following the company uh we had slowed down our capacity to upgrade our processes procedures during q1 our revenue came in at 991 000 that was down year over year which we're aware that's not a tremendous growth story for a company like ours to have revenue going backwards however the demand didn't slow it was the fact that we we did not ship as many products as we were fine-tuning the manufacturing process to quality control and making slight improvements to our shafts themselves we finished the quarter the 1.2 million backlog uh it's typically under 100 000 uh that mix of that was 900 000 between ddc 300 000 for wholesale if you if we had shipped all that product we would have had another record quarter um for q1 quarter over quarter um so the demand remained strong. It was a slowdown of our manufacturing facility, and those changes were critical to allow us to secure OEM partnerships. That's the primary highlights there. I'm sure I'll get more questions in the Q&A. I want to leave as much time for the Q&A, and I apologize. I talk really fast. Our business mix mentioned it. We're currently 91% DTC, 9% wholesale, which is dominated by club champion uh our penetration for internationals a rounding error it's zero the one thing i would point out there is we signed our partnership with korea uh they put in a thousand unit order in q1 which already blew their minimum guarantee um so we're seeing tremendous progress progress in korea the japan market will start heating up we launched our website last year. We also signed a few golfers in Japan that have local star power to increase our visibility in the Japan market. Japan and Korea, they bounce back and forth, guys. They're usually number two or three as far as the largest golf markets behind the United States. Okay, so how do we plan on growing? Obviously, we have our DOT system, and that DOT system works by expanding our shaft platform so we have two primary um product lines we have our fast motion which is lighter you have the motion that's a little bit heavier we're eventually going to launch an x which sits in between the two um and then within each of the fast the motion and the future x it is to have the driver then the fairways you know three five seven hybrids three four five six seven um that in itself changes the game we launched in 2023 with the ability for a customer to buy one shaft we market it um our customer acquisition costs can run around a hundred dollars but someone only has ability to buy one shaft now if you're a motion lover you can buy the fairway now you got an opportunity to buy two shafts actually three or four because there's multiple fairways that you can purchase this year we are launching the fast motion fairway and we also have the motion and fast motion hybrids coming that changes the game for the company because it increases the lifetime value of our customer someone can come in and do their initial replacement and then they can upgrade those shafts later down the road and as i mentioned you spend the money you go get your fitter you know who you are you know your swing once you know your dot and you know your faster motion you can go and upgrade your shafts without going back to a fitter you can just go right to newton.com and buy your four dot hybrid um to upgrade your bag oem partnerships is the second big one for us and and to us in some ways maybe this is um the holy grail um partly because to get in business with the oems you have to have consistent quality of your product has to perform and they it we have the 60 pros using it so that's a certain amount of validation to manage the scale and the volume of an oem i i think it stamps another validation point for the company but it's more than just a validation point uh there are roughly 10.5 million shafts sold you'll see that in another another slide through these oems initially every year um but when you get into the oem uh some of the oems have thousands of fitters that just fit calorie just fit titles some of the big fitting operations club champion will fit on their own so they carry new they carry new and we were the number one shaft however other big fitting operations will only fit if you're in the catalog of the oem because they'll do the custom fitting but then they'll send the order for the various clubs to the oem they'll put the shaft together and they'll send it back to the fitter and then you get your club so if you're not in the catalog you're missing some opportunities but that catalog is the free marketing for us once we're in a callaway catalog the title is catalog we increase our visibility people may see us there people may go to the fitter they don't like the price of the fitter but then they go to the ddc website and purchase online the other component of the oem is now you get into the tour band uh we've done incredibly well on the tour of champions and that's partly because there's not a lot of endorsement money um these golfers are obviously still very competitive bernie ells i think still swings at 115 miles an hour um so these are tremendous golfers but because the money's smaller we have the ability um to sign them to small nil deals we call it tee up money so we we divvy up about 6200 every tournament and the top five golfers are using a newton shaft we divide up that money and we pay them for putting the newton shaft in play that tee up money isn't possible at the pga level it's way too expensive um to to get rory mcroy to use our shaft would just be i mean we don't have a budget for it however once you're in a tour van these are competitive golfers they're all trying to improve their game you have certain golfers that will tinker with their clubs all season you have other golfers that will work on the off season and they're not going to change they're going to stick with it all season however once you're in a tour van the caddies working with you you don't like the way you're the ball's coming off the club you can go we're in tour van he can go back to the tour van and now pick the newton and put it in play putting less focus on our sales team and they're just organically doing it and it'll allow us the opportunity to start getting to a younger demographic across the pga or corn ferry specific tours we're obviously mentioned wholesale retail once we get into catalogs it makes it easier for wholesale retail growth and i touched on international expansion so we have four primary growth areas product and oem will lead the charge and be game changers for the company as i went to the oem i'll give you some stats here i mentioned the 10.5 million those are the sales of clubs that are sold annually across the drivers hybrids fairways you see the little matrix of the market share callaway tyler made titulus are the big guys with ping right there um and then the other big opportunity is what we call the aftermarket so yes there's only 10.5 million clubs sold every year but the average golfer let's say they keep their clubs for five years i kept my calls for 15 years because i'm not a very good golfer i don't need to be changing but the time that people are keeping their clubs is expanding because the pga has changed the rules on the driver heads you know back when i bought my club you everyone's still competing they're making changes you hit the ball longer but the pros are getting bigger stronger and they're out driving the courses so the pga doesn't you don't see advertisement oh you hit the ball further with our new cowlick because they they've already stretched the limits they'll help with you're hitting off the heel it still goes straight but you're not going to get more distance out of your drivers and your clubs that technology now is going to be in the shaft because i think it's 2028 uh the pj is also changing the rules of the golf ball um so the golf balls don't go as far so in order to hit the ball further the shaft technology is going to be in a forefront so we have a unique opportunity right now to capitalize on that opportunity but when i mentioned on the aftermarket if the average person doesn't replace their clubs um over five years that's 50 million potential upgradable shafts i put in a in this little slide 40 million and this is just a hypothetical and we use really conservative numbers assuming we achieved a half percent of the initial oem sales that could lead to 6.8 million in revenue we achieve two and a half percent of all the upgradable shaft sales and keep in mind we're the number one shaft sold at club champion so to get to two and a half percent we feel like that's defensible um that would add 13 million in revenue however what does that really mean to the company because if you remember earlier we're 90 d to c so for us the oem kind of gets the flywheel going you know we're visible we're in all the catalogs we're on the tour you go to a cat you're a callaway guy you go to a callaway fitter you get fit you don't like the price or you can't afford to upgrade all your shafts well with our dot system now you know who we are you got your fitting you picked up your driver but now you can go expand the shafts through the bag and we believe that's going to drive sales to ddc as well as oem due to the price points right our average price point um factored in is 130 a shaft for our oem and wholesale uh ddc the average price point is $230 so we sell less shafts make more money but it also that will substantially decrease our customer acquisition costs increase the lifetime value of the company which is all the things our investors want to see and I certainly want to see as a CFO as well and the excuse me the combined mix we have a path to over 50 million in revenue and that'd be 300,000 shafts if anyone has listened to our presentations before you know I've mentioned that we have capacity in our St. Joe facility up to 200,000 shafts. We are already looking at adding second lines on key equipment in the near future for two purposes. One, something breaks down, you can shift, you have your equipment there. Two, we want to be able to expand beyond 200,000 shafts and allow for the opportunity to meet the demands that are going to be coming from the OEMs. We're at 21 minutes, so I'm going to quickly go through this um so i leave time for q a we have an elongated profile what that means our competition have kick points i mentioned grip middle low we use an elongated kick point which stretches over two-thirds of the shaft if you think about a long bow and you know you pull it all up and all that energy stored in the bow and since we have a elongated kick point we can store more energy and so when the shaft releases hit the ball you hit the ball further and with our technology hit the ball straighter where if you have a smaller kick point you don't store store up as much energy um that's kind of the differentiation for us uh there's a comparison to lab golf and their exit you can see that online the key takeaways record sales last year were high gross margin number one shaft at club champion have 60 plus tour professionals putting our shaft in play we have a proprietary dot system which allows for expansion and revenue growth we're launching new shaft lines later this year we have begun penetration with oems we are in multiple discussions and currently shipping to one of the oems we have international expansion and we do believe we will still have a record year as our demand hasn't slowed down it has simply been us optimizing our facility in st joe's uh with that i will turn it back over to anna for a q a awesome great job jeff really interesting stuff here uh starting with the question how do the improvements in the manufacturing facility better position you for potential oem partners and when you think the facility will be ready for the potential oem partners when might that be um i'll take the last one first the oem facility our facility is ready for oems now we virtually got through most of that in q1 and the later part at the very beginning of q2 the biggest impact was consistency and quality control part of it was you know we started 2023 uh i brought in somebody a someone with 30 years of experience of growing manufacturing facilities the gentleman has over 19 years of vice president or above experience he is now leading the charge which that is across multiple avenues for a company like us and getting on someone's radar one it's the hr part managing that safety in the warehouse osha requirements you know you've got to meet all that and create a professional work environment with someone that understands how to lead that As we went from doing 1,000 shafts a year, last year we did roughly 48,000 shafts. So as we're growing, we need to become more professional. On top of that, then it was changing out some of the people. And once you establish standard operating procedures of everything and consistency, you find that some of the people that were there may not be the right people for the future. So all of our shafts are handmade. they are cut they are stacked then we roll them we then run them through the media which is the cellophane that goes around him you bake them you take them out of the oven you sand them you paint them in the old process with the quality control for d2c was fine they everyone if you because you're buying one shaft at a time the difference is if you're shipping to an oem you may be sending them 300 shafts those 300 shafts have two tuscans they have to roll the same they have to weigh the same so our guys have the hand part of the process of rolling it on and getting it in the oven was slightly different they may sand so it was within spec but it sanded a little bit different we needed to tighten all of that from a quality control standpoint that was critical for us because again as i mentioned the oem is a really important part of our business and their standards are much higher than if i just get one shot because oh i got it i hit it straighter i hit it farther i'm happy the oem standards for managing and putting us through the gauntlet is a little bit different and we're ready for that now perfect thank you for that and have you had any order cancellations from the 1.2 million backlog we have um but not not material um overall we had and it's not out of the 1.2 million the 1.2 million is net we've had very few cancellations of that backlog we stated in march because we are now shipping product um we've cut our backlog in half uh since over the last 30 days so that's in process which is great but we did have about three hundred thousand dollars of retail value wholesale value cancellations from inception and if you're following us online that is probably the biggest sore point we have is through the shutdown that q1 is our slowest part of the year we have the oem circling we could have put this off and waited till next year and done it throughout the year um we chose to take it on the chin and get ready for the oems because too many of them are circling and we didn't want to lose the opportunity however with that is the frustration from our customers it's real if you go on reddit you go on facebook people talk positive about the shaft but there's comments out there oh are they a scam are they a real customer because we had customers waiting two months three months for their shaft that's now all getting worked out the new shafts are actually better than the shafts we had before so the customer the reviews of the customers are getting are glowing however we're still managing um the backlog so i i think to me it's less about the cancellation as it is reputational damage um that we don't want people to think we're not real um it just this the crossover and making the changes in the warehouse took a little longer than we anticipated thank you for that uh with that said what percentage of customers purchase additional newton products after their first purchase um we saw for a you know 47 uptick um that is just starting and the reason is it's a metric we're going to continue to start uh what we do see is an expansion amongst friends and groups someone goes out in their foursome we're seeing the rest of their their buddies come in and buy a shaft you know we hear the testimonies why'd you buy the shaft um yeah because the guy that hit the ball the shortest is now leading us on on sunday and i can't have that so i'm gonna give you a new chat to try um as we expand because right now if you are if you love fast motion fast motion represents 67 of our sales well we don't offer any other fast motion shafts right there is no fairway yet there's no hybrid those are coming later this year after that point you're we're going to start seeing an uptick where right now with motion you can buy the motion shaft you can buy the motion fairways um so it's limited and we just launched um the fast motion last year that's kind of become the crown jewel wonderful well i want to give you about a minute to close we've got so many questions for you but we are out of time so we'll send them to you you can answer on your own but what do you have to say for a takeaway for our viewers today um we are in a very unique position in a sport that's growing uh not just for the casual golfer you get outside the fresh air the technology and the at-home golf that you can do with the simulators top golf canada you've got we're seeing upticks in golf around the world from places that never golfed before you know you can only golf in canada and parts of canada for a few months a year now you can golf all year round in simulators um that has a big impact with the changes and the tips and and and how easy it is to upgrade a shaft i think we are as an eight million dollar revenue five million dollar market cap we have tremendous total returns to investors to look forward to in the future as we grow this company and execute on our dot system perfect well great presentation today jeff we appreciate your time and really enjoyed learning more about newton Golf Company.

Operator

And we'd love to see you again real soon.

Jeff Clayborne, COO

Thank you, Anna. Thanks for Merging Growth. Bye-bye.

Operator

All right, everyone. We'll be right back with our next presenter.