Acushnet Holdings Corp. Aktie

Hello, everyone. Thank you for joining us, and welcome to the Acushnet Company 2Q '26 Earnings Call. [Operator Instructions]

I will now hand the conference over to Cameron Vollmuth, Director of Investor Relations. Please go ahead.

Good morning, everyone. Thank you for joining us today for Acushnet Holding Corp.'s Second Quarter 2026 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. And when referring to year-to-date results or comparisons, we are referring to the 6-month period ended June 30, 2026, and the comparable 6-month period in 2025.

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

Thanks, Cameron, and good morning, everyone.

We are pleased to report on Acushnet's strong second quarter and first half results, highlight the investments we are making to strengthen the company for the future and outline the puts and takes within our second half outlook.

For the second quarter, Acushnet delivered worldwide net sales of $820 million, a 14% increase over last year, driven by strength and momentum within Titleist Golf Equipment and steady gains from FootJoy and Golf Gear. This growth contributed to a 46% increase in adjusted EBITDA, which, while healthy on its own merits, also reflects the net benefit from tariff refunds.

For the first half, Acushnet net sales of $1.57 billion are up 10% over last year with growth in all reportable segments and regions. Adjusted EBITDA of $353 million represents a 25% increase in the period.

Fueling these results, the Acushnet team remains focused on the game's avid dedicated golfer and enthused about healthy industry fundamentals and growing participation. First half rounds of play are projected to be up low single digits with growth in the U.S., Japan and Korea, offset by modest declines in Europe, which comped against an outsized weather-related increase in 2025.

And as Sean will note, we are making strategic investments in Acushnet's future with focus on golf ball manufacturing and golf club assembly capacity, enhanced customization and automation capabilities and our global technology platforms.

Getting to our segment results, you see continued momentum in our Titleist Golf Equipment business, which grew 14% in the first half. Golf Club set the pace, up 43% in the quarter and 24% for the half, led by the successful launch of our new GTS line of metals. Noteworthy is the good work by our team to accelerate product development and production time lines to move this launch from Q3 into the seasonal peak of Q2.

And while GTS is the headline within golf clubs, successful new Vokey SM11 wedges and Titleist irons also contributed to our growth in the first half. Titleist golf balls also posted a strong half with revenues up 6%, led by Pro V1 growth on top of the challenging comp against last year's launch volumes.

On the PGA Tour, Titleist golf balls have 22 wins to date, 18 more than the nearest competitor as this pyramid of influence validation and success helped to fuel our golf ball momentum in the marketplace.

And within the Titleist Golf Equipment segment, we continue to fuel our success and momentum with our strong commitment to fittings and value-added consumer connections across regions. The Acushnet's Golf Gear segment is also in good shape, growing 6% in the half, led by double-digit gains in Titleist gloves, bags and our Club Glove travel brand.

And FootJoy delivered 3% growth in the quarter, led by strong footwear sales and is up 1% for the half. FJ's underlying fundamentals continue to strengthen with increased focus on premium performance franchises, Premier, HyperFlex and Pro SL, generating a favorable product mix shift within footwear and similar trends with FJ apparel, which are helping to offset softness in Japan and Korea.

And finally, net sales of products not allocated to a reportable segment were up also with continued momentum and growth from shoes in the U.S. and GB&I.

Now looking at our business by region on Slide 5. You see that all regions increased on a constant currency basis in the second quarter and first half. Acushnet's U.S. sales were up 15% in the quarter, driven by growth in Titleist Golf Equipment and the benefits from healthy rounds of play and strong engagement from our core dedicated golfer base.

EMEA was up 12%, reflecting growth in Titleist Golf Equipment and golf gear. Japan was up 31%, driven by Titleist Golf Equipment, notably golf clubs and continued strength in golf balls.

Korea was up 7% in the quarter, also driven by Golf Equipment and the accelerated GTS metals launch and double-digit footwear gains. And Rest of World was up 15% versus last year's second quarter, led by outsized growth in Australia, New Zealand, Southeast Asia and China.

And now looking forward to the second half, Acushnet is well positioned for the peak summer playing season, and we point to the overall health of the golf industry and our core consumer as baselines for our outlook.

It is worth noting that second half comps will be impacted by the timing shift associated with our GTS launch into Q2 and the upcoming transition within golf balls as we prepare and build inventories to support our 2027 Pro V1 launch. This club timing makes for a meaningful change to our typical club cadence, while the Pro V1 transition is anticipated to unfold similar to prior every other year launches.

In summary, golf industry fundamentals are in good shape. Participation is durable and positive trending, and we are pleased with our momentum and new product pipelines as we look to the future. As always, we appreciate the commitment and good work of our associates and supportive partners as we work together to provide golfers with leading product and service experiences.

Thanks for your interest this morning. I will now pass the call over to Sean.

Thank you, David. Good morning, everyone.

We had a solid second quarter and first half to start 2026, driven by continued momentum in Titleist Golf Equipment, including the successful launch of our GTS drivers and fairways.

Second quarter net sales were up 14% and adjusted EBITDA was $209 million, up $66 million from last year's second quarter. These results include IEEPA tariff refunds, which represented an approximately $38 million benefit to adjusted EBITDA, net of the impact on incentive compensation.

For the first half of 2026, net sales increased 9.5% and adjusted EBITDA increased 25%. Excluding the net refund benefit, adjusted EBITDA increased 12% in the first half, ahead of our expectations of high single-digit growth in both net sales and EBITDA during the first half as second quarter GTS metal shipments were greater than anticipated.

Gross profit in the second quarter of $446 million was up $92 million compared to 2025. The increase reflected the portion of the net IEEPA tariff refund recognized in gross profit as well as higher sales volumes and average selling prices in Titleist Golf Equipment, partially offset by approximately $11 million of incremental tariff expense in the quarter versus prior year.

Second quarter gross margin of 54.4% was up 520 basis points, while first half gross margin was 50.9%, up 230 basis points versus prior year. Excluding the net tariff refund benefit, first half gross margin was 48.1%, down 50 basis points year-over-year. It's worth noting that the first half tariff expense was approximately $29 million more than the first half of 2025.

SG&A expense of $246 million in the quarter increased $24 million from 2025 as we continue to invest in our fitting network, IT systems and A&P to support new product launches and future growth as well as recognizing higher incentive compensation expense related to tariff refunds.

Interest expense of $12 million in the quarter was down $3 million due to a decrease in interest rates as well as interest income on tariff refunds, partially offset by an increase in borrowings. Our effective tax rate in Q2 was 23.6%, up from 19.9% last year, primarily driven by changes in our jurisdictional mix of earnings and a reduced income tax benefit related to the U.S. deduction on foreign-derived intangible income.

Moving to our balance sheet and cash flow highlights. The strength in our balance sheet and cash flow supports the continued execution of our capital allocation strategy. Our focus remains on investing in the business to support long-term growth and returning capital to shareholders.

Our net leverage ratio at the end of Q2 using average trailing net debt was slightly below 2x, lower than the first quarter level of 2.3x and our stated leverage target of 2.25x. Inventories were flat when compared to last year's second quarter, and we remain comfortable with our inventory quality and position. First half cash flow from operations increased $76 million from the first half of 2025, driven in part by tariff refunds received in Q2.

Capital expenditures were $37 million in the first half of 2026, up $12 million from last year as we continue to invest strategically in additional golf ball manufacturing capacity and increased club assembly to support the sustained strength of demand for our products around the world. We still expect full year free cash flow to meaningfully improve year-over-year, converting at roughly 40% to 50% of adjusted EBITDA.

Through June, we returned roughly $57 million to shareholders with $31 million in cash dividends and $26 million in share repurchases. Today, our Board of Directors declared a quarterly cash dividend of $0.255 per share payable on September 18 to shareholders of record on September 4, 2026.

Moving to guidance. We are raising our full year outlook to reflect our solid first half results and the onetime benefit from the net IEEPA tariff refunds. We now expect full year sales to be in the range of $2.65 billion to $2.675 billion, up 4.1% at the midpoint. On a constant currency basis, we are expecting net sales to be up between 3.4% and 4.3%.

This outlook reflects continued strength in our Titleist Golf Equipment segment, partially offset by softness in wearables, specifically in Asia. We now expect full year adjusted EBITDA to be $450 million to $470 million. This outlook includes a full-year net IEEPA tariff refund benefit of approximately $30 million.

We continue to work on the implementation of our new cloud-based ERP system and still expect full year SG&A growth, excluding incremental ERP expenses to be generally in line with our sales growth projections for the year. As it relates to tariffs, we now expect approximately $54 million of tariff expense in 2026, which is $16 million lower than our original estimate of $70 million.

As we discussed last quarter, we expect this benefit to be largely offset by higher product costs and freight costs, primarily driven by energy-related supplier cost increases, including synthetic rubber pricing in golf ball manufacturing and tungsten costs in golf clubs.

Looking at the second half, our outlook reflects continued strength throughout our business. That being said, the timing impacts of the accelerated GTS metals launch, which shifted a meaningful amount of Titleist Golf Equipment sales and earnings into the first half, creates a more challenging comparison in the back half of the year. As a result, we expect second half net sales to be down low single digits and adjusted EBITDA to decline when compared to second half of 2025 with the impact more pronounced in the fourth quarter.

Overall, we're pleased with our first half execution, the performance of the accelerated GTS metals launch and the position of the business heading into the back half of the year. We remain focused on supporting the dedicated golfer, investing for long-term growth and maintaining a disciplined capital allocation approach.

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

Thanks, Sean. Ben, could we now open up the lines for questions?

[Operator Instructions] Your first question comes from the line of Simeon Gutman with Morgan Stanley.

My first question is, if you look at golf clubs, which grew $82 million in Q2 on constant currency, I don't know if you said this or not or you're willing to quantify, but how much is attributable to the timing of pulled-up launches? And then how do you think about the rest of the business in that regard?

Yes, Simeon, it's Sean. We didn't quantify it. Again, we're just highlighting as we did on the last call, the impact. Obviously, very pleased with north of 40% growth in the quarter, certainly a little better than we expected in terms of timing. And as we look into the back half, hopefully, with the guide we've provided, you can understand that at least for clubs, we'll see continued performance in Q3, but the more pronounced comp on clubs will be in Q4, given the accelerated timing if you're comping against the '24 GT launch.

Okay. And actually, my follow-up is related to that. And again, I missed some of the prepared remarks, so hopefully, this is not redundant.

But if we look -- Q2 was much better on sales in the second half, it looks like it's just a Street modeling issue because you didn't help us figure out what that launch would look like exactly. So can you talk about your plan and the sequencing of the year, second half versus first half? And if any of the pluses or minuses, it sounds like it's all pluses and there's just some timing mismatch in how the Street model, but that's what I'm looking to clarify.

Yes. Just to clarify, again, last quarter, given the early performance of the launch, we had guided everybody to the high single digits in terms of revenue growth. So obviously, it delivered better than that on the top line for the company. So again, the timing was slightly better than expected.

As we look at the back half of the year, again, we feel very good about the full year outlook in terms of 4.1% at the midpoint, almost 4% constant currency and how that converts. So very pleased.

Again, we gave you as much as we thought we could at the time on the first quarter call relative to first half. So to your point, it's just a timing shift where I think the Street consensus had more of a club number in Q3 than what ultimately delivered in Q2 for us. Hopefully, that's helpful.

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

This is Mitch Ingles on for Joe Altobello. My first question is on the $38 million of net IEFA tariff refunds in 2Q. You're guiding $30 million for the year. So can you help bridge us between those 2 figures?

Sure. Happy to, Mitch. It's just a function of our updated outlook. If we take the $460 million at the midpoint in terms of EBITDA, our incentive plans are tied to adjusted EBITDA. So based on the new outlook for the year, expensing the incremental incentive comp over the 9-month period. So the $38 million reflects what was booked in Q2. The remaining $8 million that nets us to $30 million will flow through in the second half.

The good news is all of the tariff refunds were submitted. They've all been received. So I don't expect any incremental refunds in the back half of the year to be material at all. And again, that's a credit to the team in terms of our ability to submit quickly and receive those refunds on a timely basis. But more than you asked, but we will ratably book that incentive comp expense over the back half of the year, which causes the net down to $30 million.

Got it. That's helpful. And then my follow-up is on the DTS launch. How would you characterize the channel inventory today? Do you still say you like where they are right now?

Yes, I'll take that, Mitch. So it's a good opportunity for us to sort of lean into our custom fitting efforts. So much of what we do in golf clubs nowadays is through custom fitting. And so the idea of channel inventories, they tend to run pretty steady state.

The larger question that we think about often is our ability to meet at once's custom demand, which is in good shape. I will say lead times are a little bit longer than our typical lead times, but I think that's just a function of demand. So where we are inventory-wise in the channels, we feel very good about it. And again, part 2 of that is our team is doing a nice job meeting at-once demand from our global fitters.

Next question, please.

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

I guess on the quality over quantity theme on FootJoy, continued improvement on ASPs. Just can you give us some perspective on kind of where we are with margins in that business, just kind of where they've kind of peaked out, where they troughed out, where we are today, kind of any opportunity to continue this quality theme of improving out-the-door selling price and just managing the inventories better and better to provide a more profitable segment going forward as you've done in the last few quarters. Just curious on where we are there.

Yes, Randy, maybe Sean and I will come at this 2 ways. First off, my comments is much about favorable mix shift towards premium performance, both in footwear and apparel. Fewer closeouts and just an overall more premium favorable mix within the segment, which is delivering healthy margin trends with the caveat of tariffs. And if you look at our business and what was hit the hardest, it would clearly be FootJoy.

So that's the overall theme when we talk about the structure is improving, and it is. We're -- we've got a bit of a headwind that we've dealt with vis-a-vis tariffs, but the team is doing a nice job moving through that. Again, if there's a common theme within FootJoy, it's -- we're seeing a continued trend and shift towards the more premium end of the line.

Yes. And just, Randy, to add to that, and you'll see it when we file the Q. On a reported basis, FootJoy's operating margin improved year-over-year by, I think, 100 basis points in the first half. If you normalize for the refunds and the net tariff refund, I think it actually improved by 170 basis points. So certainly pleased with the operating income margin profile of FootJoy and its improvement.

That's great. And then we all know that the United States is super strong. I think I saw in the release that Korea was slightly positive. I think that area of the world had been down previously. So can you just give us a refresher on international markets, just what you see out there and what you see ahead?

Yes. So I would say, Korea, Japan, first off, starting with rounds of play, total rounds are up in those markets, which is obviously a positive. The theme we're seeing in '26 mirrors largely what we've seen in the last year or 2.

In our case, balls and clubs, the equipment segment has done quite well, where we've seen challenges are wearables, apparel, footwear and also gear. So it's a little bit of a tale of 2 markets in the sense that equipment, strong, healthy, vibrant, growing, and we've seen some challenges across the wearables line. That's played out last year that continues to play out this year.

And just by way of calling out Korea, Korea has historically had an outsized apparel market. It's one of the largest apparel markets in the world. So when it rote up, it was a great thing, and it's been correcting for the last year or so.

Moving around the board, Europe and for us, you may recall a year ago, rounds of play were up dramatically in the first half and for the year. They had a very mild spring, got off to a fast start. So Europe had a very strong year last year. Rounds are down across the U.K. and the Mainland. But again, net-net, up over its normalized run rate.

That said, we're pleased with our business in the region. You saw the numbers and healthy growth across segments but certainly affected by the accelerated driver launch. So yes, we're pleased with business around the world, rounds of play being a key proxy for just the health and state of the game, and we continue to confront and navigate softness in wearables across Japan and Korea.

Operator, next question, please.

Your next question comes from the line of Gregory Miller with Truist Securities.

First question, I'd like to ask you about material costs and how they've trended relative to your prior expectations.

They've moderated a bit, Greg. I think we -- in terms of synthetic rubber, again, still slightly volatile in light of the oil markets. I think the cost of tungsten has moderated slightly. relative to where we were maybe 90 days ago. We continue to see slightly elevated distribution freight in, freight out, et cetera. So continuing to monitor, continuing to manage supply as best we can in light of the macro environment. So it's marginally better than maybe where it was 90 days ago, but still a lot of uncertainty.

Okay. My second question, I wanted to ask for an update in terms of your CapEx spend as it relates to the plant utilization, given that your ball plants are running at very high capacity levels at this point. I'm just curious if you could provide us the latest in terms of your progress on that front.

Yes. Yes. And you're right. We are running at near full capacity in our plants. We've been in the midst over really started 4, 5 years ago of adding capacity, notably in cast urethane and converting lines into more cast urethane capacity.

So we feel very good about the work we've done in the last 4 or 5 years that have allowed us to deliver the results we're delivering today. But we see in the next year or 2, continued expansion mainly within cast urethane in both our Massachusetts and Thailand ball plants. So I don't see our capacity as a constraint today, and we're optimistic on the good work that's happening.

I will just add, it takes a while, right? So when you make the decision to add capacity, it can take 12 to 18 months to get new lines up and running just from a machinery standpoint. So we're far downfield on Wave 1, and we're in flight on Wave 2 in terms of managing and adjusting our capacity with a shift and tilt more towards cast urethane, which, in our case, is the broader Pro V1 lines.

Operator, next question, please.

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

So David, could you speak to larger picture health of the golf industry versus company-specific execution? Meaning on the 20% growth in total Golf Equipment, if there's a way to elaborate on underlying demand and reception to the GTS metals launches and performance on the ball side relative to initial plan, I think that, that would be helpful just to pull out any launch timing benefit.

And then secondly, any changes at all to your underlying plan in the back half across segments, again, outside of any launch timing shifts?

Yes. Matt. Here we go. So I'll start with a high-level view of the game. We talked about rounds of play up low single digits, up 4% in the U.S., far and away the largest market.

A couple of call-outs that I found interesting vis-a-vis rounds of play would be the National Golf Foundation carves up the country into 8 regions and every region is up year-to-date, which is unusual because typically, you've got an outlier weather pattern that's going to affect one region over another. So I think that speaks to the structural health of the game.

The other piece I'd add is they track public and private access, public play, which is about 75% or so of total rounds in the U.S. is up at a greater rate than private play. Again, I think a sign of broad-based health of the game. And then we always track and we pay close attention to just the cost of public play. And you can imagine it's a wide range. It's up about 4% year-to-date. NGF has it at about $47 per round. So, while up, still there's still affordable golf out there. So high level, and that's a U.S.-centric comment. Game is healthy.

Now to our business, Matt, obviously, very pleased on many fronts. And I would say the highlights would be in the equipment segment, right? Any time we can grow our ball business on a year following a Pro V1 launch, that's a positive. That's happened this year. Ball sales up 6%. We feel great about that.

Really, I called it out in my remarks, the ability and good work of our team to move a launch from Q3 into Q2. On one hand, it sounds simple. It's anything but because it affects product development time lines, supply chains, assembly, et cetera, et cetera. So our team did a really nice job. So very pleased on the ball side of the house, very pleased on the club launch side of the house and the early response.

And then separate from that, if I look at our wearables business around the world, FootJoy, Titleist apparel in Asia shoes around the world and gear business, steady with some pockets of softness that I called out. So Matt, that's a very high-level view of our business, and I would lean into we're particularly pleased with the strength and early success of balls and clubs equipment in the first half of the year.

Now in terms of what maybe has changed for back half of the year, I think Sean called it out, and we're trying to be very prescriptive to help you do the modeling around what really is the outlier, and that's going to be clubs, right? I think balls, FootJoy, gear, et cetera, should be fairly similar to last year's in terms of their modeling and their growth. The outlier for us in the second half is really a club story, and that's a function of we moved a lot of volume from Q3, Q4 last year into Q2 of this year. So really high level, I gave you a lot of information there.

I realize -- any follow-ons to that? Did I get at your question, Matt?

Yes, you did. The only follow-on is just outside of any timing launches, if we're looking at that Golf Equipment segment in the back half of the year. Just wanted to make sure there wasn't anything outside of launch timing that's changed in your plan.

No, Matt, this is Sean. It's largely as we described. It's a shift from Q3 into Q2 for the club business. Everything else is as expected.

There are no further questions at this time. I will now turn the call back to David Maher for closing remarks.

Thanks, everybody. As always, we appreciate your interest in Acushnet and look forward to following up in following the third quarter. Have a great rest of summer.

This concludes today's call. Thank you for attending. You may now disconnect.

[Operator Instructions]

I will now hand the conference over to Cameron Vollmuth, Director of Investor Relations. Cameron, please go ahead.

Good morning, everyone. Thank you for joining us today for Acushnet Holding Corp.'s First Quarter 2026 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. And when referring to year-to-date results or comparisons, we are referring to the 3-month period ended March 31, 2026, and the comparable 3-month period in 2025. With that, I'll turn the call over to David.

Thanks, Cameron, and good morning, everyone. As always, we appreciate your interest in Acushnet Holdings. I am pleased to report on a positive start to the year for Acushnet, highlighted by a wide range of new product launches and early season growth in our Titleist Golf Equipment and Golf Gear segments.

Acushnet delivered worldwide net sales of $753 million, a 5% constant currency increase over last year. Adjusted EBITDA was $145 million in the first quarter, an increase of $6 million year-over-year. These results reflect solid execution and synergies across our product development and supply chain teams and Acushnet's continued investment to drive future growth and operational excellence. Now getting to segment results. You see Titleist Golf Equipment sales increased 7% in the quarter as our Titleist Golf Balls and Golf Clubs business continued to generate positive momentum. Titleist Balls and Clubs are helping players excel at the highest levels of the game, which affirms Titleist's 72% ball count across worldwide tours, more than 7x the nearest competitor and #1 driver positioning on the PGA and DP World tours.

In the quarter, golf ball volumes increased in all regions as our team successfully launched new Pro V1x Left Dash, AVX, Tour Soft and Velocity models. We typically expect modest volume declines in the first quarter of even years when comping against a prior year's Pro V1 launch. And this year's volume growth is commentary on our team's ability to innovate and the overall strength of the Titleist golf ball lineup heading into Q2.

Titleist Golf Clubs also delivered a strong first quarter, led by the successful launch of new Vokey SM11 wedges and healthy demand for GT drivers and fairway metals in their second year. The Titleist Equipment segment continues to benefit from our ongoing work at the Titleist Performance Institute. TPI, led by Dr. Greg Rose and Dave Phillips, is a powerful force within Acushnet, which informs our understanding of golfer biomechanics, is at the center of our commitment to help golfers play their best and shapes our R&D visions across golf balls, clubs and footwear.

As we have talked about on recent calls, we continue to invest in and develop our capabilities across our TPI platform. Now to Golf Gear. Q1 sales were up 8%, driven by higher sales volumes in golf bags and double-digit gains in the U.S. and EMEA And our FootJoy segment is off to a good start as we operate an increasingly productive business with greater focus on premium franchises and fewer offerings at lower price points. FJ sales were down 1% in the quarter as our teams successfully launched new Pro/SL and Premier golf shoes and our spring apparel collections have been well received. FootJoy profitability, while still burdened with incremental tariffs, is on track with our internal plans.

Also, in the quarter, net sales of products not allocated to a reportable segment were up slightly with continued momentum and growth from KJUS' U.S. golf business and modest gains from Titleist Apparel in Asia.

Now looking at the quarter by region, you see the U.S. market was up 5% on the strength of the Titleist Golf Equipment and Golf Gear segments. Rounds of play in the U.S. were up 5% through March with gains in key Sunbelt states, Arizona, California, Florida and Texas. EMEA was up 8%, reflecting gains from all reportable segments led by double-digit growth from Titleist Equipment and Gear as we continue to generate nice momentum across the region. Japan also delivered a solid start to the year, up 6%, led by gains in Golf Equipment. And Korea was in line with our expectations, yet off 7% as the timing of their first quarter golf club launch calendar differs from other regions, which we expect to normalize in the coming months. And the Rest of World region was up 9% with increased sales across all segments.

Now looking forward, and as we shared on the Q4 call, we will be launching new Titleist GTS drivers and fairway metals in the second quarter, which we see as a favorable transition from our customary Q3 launch window. New GTS metals debuted across professional tours in late March, and we are very pleased with the initial response and enthusiasm. Golfer fittings begin next week, and we are preparing for the global market launch on June 11. As you would expect, the shift from Q3 to Q2 will impact the cadence of our business in 2026, and Sean will share greater details during his remarks.

In summary, we are pleased with our start to the year in what is best characterized as a product sell-in quarter. Industry fundamentals and the overall state of the game are healthy, and we point to global rounds growth in the quarter as an indicator of golf's durability and popularity. The Acushnet team is focused on providing exceptional product, fitting and service experiences to avid golfers and our trade partners as we seek to generate long-term value for our shareholders. Thanks for your attention this morning. I will now pass the call over to Sean.

Thank you, David. Good morning, everyone. As highlighted, we started 2026 with an increase in net sales of 5% over last year's first quarter. Adjusted EBITDA was $144.6 million, an increase of 4% from the first quarter of 2025. Net sales growth in the quarter was driven by continued momentum of our Titleist brand with Golf Equipment growing 7% and Golf Gear growing 8%, while FootJoy net sales declined 1% in the quarter.

Gross profit in the first quarter of $355 million was up $18 million compared to the first quarter of 2025, mainly due to higher net sales, which were partially offset by higher tariff costs of $17 million year-over-year. Gross margin was 47.2% in the quarter, down 70 basis points from last year, primarily due to the tariff cost headwind of 220 basis points just mentioned. SG&A expense of $214 million in the quarter increased $13 million from the first quarter of 2025. This increase was due to higher selling expenses incurred in connection with the higher sales volumes, costs related to the expansion of our product fitting networks, higher IT-related expenses and additional A&P expenses to support new product launches.

Net interest expense of $13.1 million in the quarter was down modestly from last year. Our effective tax rate in Q1 was 22.9%, up from 17.9% 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. Our balance sheet and cash flow positions continue to be strong, allowing us to execute our disciplined capital allocation strategy while also navigating the current macroeconomic uncertainty. Our net leverage ratio using average trailing net debt at the end of Q1 was 2.3x. As discussed on our fourth quarter call, we remain focused on maintaining net leverage at or below 2.25x on average, while we maintain flexibility to account for seasonality and other business needs as evidenced by our leverage position at the end of this quarter. With respect to inventories in the first quarter, FootJoy and Golf Gear inventories were down year-over-year. However, total inventories were up 7% as we built golf equipment inventory to support our accelerated GTS metals launch in the second quarter.

Overall, we remain comfortable with our inventory quality and position. Capital expenditures were $19 million in the first quarter of 2026, up $8 million from last year, and we continue to expect full year spend to be approximately $95 million. Free cash flow in the first quarter was down $31 million compared to last year, in part related to the increased inventory levels associated with the upcoming GTS metals launch. We still expect free cash flow to meaningfully improve versus 2025 with the benefit mainly occurring in the second half of the year.

Through March, we returned roughly $26 million to shareholders with $16 million in cash dividends and $10 million in share repurchases. Today, our Board of Directors declared a quarterly cash dividend of $0.255 per share payable on June 22 to shareholders of record on June 5. As of March 31, we had $231 million remaining under the current share repurchase authorization.

Now let's turn to Slide 10 and review our financial outlook for 2026. We are pleased with our strong results in the first quarter, and we note that as the golf season is just about to begin in many markets around the world, there remains uncertainty in the macroeconomic and geopolitical environment. As is our practice at this time of the year, we are maintaining our full year outlook and continue to expect full year 2026 net sales to be in the range of $2,625 million and $2,675 million and adjusted EBITDA to be in the range of $415 million to $435 million. This outlook excludes any potential IEEPA tariff refunds. On calendarization, reflecting the first quarter results, we now expect reported first half net sales and adjusted EBITDA to be closer to the high end of our previous range of up mid- to high single digits.

As it relates to tariffs, we previously cited a $70 million full year impact or $40 million year-over-year incremental headwind in 2026. Since then, there have been several developments, including the recent Supreme Court ruling on IEEPA tariffs, the implementation of Section 122 tariffs and changes to the application of Section 232 tariffs. Overall, we believe these changes to the tariff rate environment could be favorable in 2026. That said, uncertainty around the structure and duration of tariffs remains high, making it difficult to quantify the total impact at this time. In addition, we expect that the potential benefits from these tariff rate changes will be largely offset by higher product costs due to rising commodity prices and related raw material input and freight costs associated with the current geopolitical environment.

We're monitoring these dynamics closely and taking actions where possible to mitigate impacts on the business. In closing, we are pleased with where the business is positioned amid this volatile global environment and remain focused on servicing the needs of the dedicated golfer as many global golf markets open in the second quarter. With that, I'll now turn the call over to Cameron for Q&A.

Thanks, Sean. Jen, could we now open up the lines for questions?

[Operator Instructions] Your first question comes from the line of Simeon Gutman with Morgan Stanley.

My first question, it's on the shape of the year. So the first quarter, there was some margin headwind, which I would have said was expected, and it looks like you got through it relatively well. While there is uncertainty about tariffs, whether you probably are going to pay less and you could get refunds. And I do think the balance of the year, there is an adjusted EBITDA margin expansion modestly. But it feels like -- and then as you push the guidance for the first half at the high end, it feels like there's more upward pressure here than there is downward pressure. Is that fair? And then how -- I guess, it would be more pronounced in the back half as you lap some of this tariff stuff?

Yes, Simeon, I think it's a reasonable view of our comments today. Again, very pleased with Q1. Obviously, we're guiding you to the higher end of the range for Q2. I did call out, obviously, we had $17 million of tariff headwind in Q1. We're going to still have the Section 122s in Q2, which will be a headwind versus prior year.

So yes, all in all, we're pleased. Again, it's early in the year. But again, I do want to be balanced and disciplined, right? We've got raw material input costs that are affected by the price of oil. We have other materials in our club business. We have freight in, freight out. So I don't want to understate that there are headwinds. But as I said in my comments, we hope that the tariff opportunity, whether it's lower relative to where we had expected to be versus $17 million. We'll see some offset from the input costs, and this doesn't factor anything related to any potential refunds. So I think you've got the outlook for the year. But again, we're pleased with the consumer, and we're pleased with the demand in spite of all of those things.

And then can I follow up on product, the driver. You've done this every year. You've seen it every year you release or every other year when you have a driver release, you have competitive release. This year, the competitive set, I think, was a little more forceful across most brands. Can you talk about that in the context of expectations around GTS, whether it's timing or sell-in, sell-through? You talked about early success on tour. Curious how that can translate in a more competitive release year.

Yes. Thanks, Simeon. So new timing for us this year, GTS, right? We typically launch Q3. We're moving to Q2. We're very excited about that. Not as easy as it may sound. You got to adjust your entire supply chain to pull it all forward a few months. So we're a couple of months ahead of schedule from our historical Q3 timing. But really starting with the product, we're just very enthused about the product, great early success across the worldwide tours, great adoption from players, which is a good indicator.

As I noted in my remarks, we start fitting next week globally, and we're in market in mid-June. So I think the key takeaway separate from product, is we're going to hit the market really in a peak window, which is May, June, July, where historically, we've hit the market in the third quarter, which is clearly a less than peak window. So we like the timing. We really like the product. Yes, you're right, it's a competitive market, nothing new there. But I would say we're very, very excited about this launch. And again, the comments about what's happened on tour, that's as much about early adoption and validation, which is very important to us and our consumer, and that's really right on track. So what we've done in the last couple of months is do a lot of training of our fitters to get them ready to go out and give golfers great experiences. We've got fitting tools in the market around the world. So we're ready. And again, a key differentiator is going to be the benefit of timing in which we're launching in a peak window versus prior years.

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

So David, could you speak to participation and engagement? Maybe just elaborate on what you're seeing from your dedicated golfer today. Any impact at all from the volatile macro backdrop that you cited across regions so far to date? Or any pushback on any recent pricing or price increases across categories that you would call out?

Yes, Matt, we of course, we watch that very carefully, and I'll maybe give you 2 answers of what we see, one of what we see and two, just sort of our annual seasonal caveat that, hey, it's early in the season. But in terms of what we see, we're just very pleased with the game's durability and resilience right? If I look at the big 3 or 4 markets around the world, U.S. rounds up 5%, I said earlier, growth in California, Arizona, Texas, Florida, that's a great way to start the year.

Here in New England, we're slow out of the gates, but frankly, we're always slow out of the gates given just weather realities. As you move around the board: Korea, nice start. Again, small basis. First quarter is not a real meaningful piece of the full year. I think it's about 15% of total rounds. Rounds are up 10% in Korea, flat to down slightly in Japan. And the U.K. was down pretty good in the first quarter. But again, it's their winter quarter and they're coming off a real outlier year last year with weather.

But net-net, to sit here today and have global rounds be up low single digits, again, commentary on the health of the game and the durability of our consumer. So participation is metric one we watch. And then, of course, like everybody else, we're paying close attention to consumer spending and how they're -- just their overall behavior in light of this macro uncertainty and certainly some of the challenges vis-a-vis oil pricing pressures.

But the best way to frame it would be we're generally in line with where we think we ought to be for this time of year. I've said before that the golf industry, the crystal ball gets a lot clearer in Q2 as the season unfolds in the Northeast and Midwest and around the world. But here we are early May. We like the trends. We like the state of our consumer. Of course, there's some caution. But in terms of how we're tracking versus expectations, I would say we're right where we'd like to be. And again, here we are in year 5, 6, 7 of growth vis-a-vis the game and number of golfers and participation. And I think everybody in the industry would feel pretty positive about that.

Great. And then maybe a follow-up for Sean. So with this year's bottom line outlook calling for EBITDA dollar growth roughly in line with sales, maybe could you just speak to drivers for EBITDA margin expansion multiyear or beyond this year? Or just help us to think about bottom line growth relative to your low to mid-single-digit top line algorithm?

Yes. As we've talked about in the past, Matt, we're making significant investments across the globe to meet the demands of our dedicated golfer and first and foremost, around golf equipment, that's capacity, that's club assembly, et cetera. That's the fitting network, along with, obviously, a lot of technology unlocks as well, whether it be the ERP system or other digital direct-to-consumer activities. So we're in that continued phase of investing for the long term. We think that, again, we're still in the middle of that. There's no question there will be operating leverage here over the long term as it relates to the investments and the realization of those for the company. So I'm not going to get into a multiyear outlook, but given where our EBITDA growth and EBITDA margins are, we feel they're very healthy. We're making the requisite operating and capital investments, I think that will generate very positive long-term growth and margin.

Your next question comes from the line of Joe Altobello.

I want to ask about the GTS launch and how we should think about this because it seems like you're implying that it's sort of a pull forward, right, that sales that normally would have happened in the third quarter get pulled into June to some degree. But is it accretive to the full year in the sense that you now have 7 months of sales versus 5 months in a normal year?

Joe, maybe Sean and I will give you a 2-part answer. But yes, we are very enthused about the timing, right, to get a driver launch into Q2 is meaningful for us. And I would say, yes, we do see -- you're going to get more months out of the driver in 2026 than you typically would in prior years. So we think that's a real positive. In terms of modeling, maybe Sean has some additional thoughts on that.

Yes, Joe. So I think that you're very familiar with our 2-year product cadence. So I guess I would bring you back to probably Q3 of 2024 might be a good starting point in terms of growth in the overall club business vis-a-vis the GT launch. Obviously, we're pulling it forward. We expect it to be accretive to the full year. But if you're looking at just first half or Q2, I think that Q3 of '24 is instructive. Obviously, we've got momentum in terms of volume, price, and we're not necessarily comping off of prior irons launch. A lot to unpack there, but I figure it was worthwhile putting that out there for you as you think about the golf club and golf equipment growth rates in light of the new accelerated launch.

I appreciate it. Maybe just kind of moving on to balls. And I know you touched on this earlier in your prepared remarks. But if you look at growth in the first quarter in a non-Pro V1 year, we sort of saw this as well in 2024, strong first quarter growth in an even year -- and it sounds like that's obviously a testament to the rest of the portfolio. But what are the other takeaways from that in terms of -- is it that your ball business is much more diversified and broad beyond just Pro V1 at this point?

Yes, Joe, I'll point to a couple of factors. One, there may have been a bit of catch-up in '24. But for '26, it's a couple of themes. I think generally speaking, our team did a terrific job with the launch with our performance models. Adding to it, we've talked over the years about our meaningful capital investment across golf ball operations. One of those investments was expanded customization capabilities.

So what you'll see in our line is a whole lot more what we call AIM alignment integrated marking. So you just got a lot more features and technology and benefits embedded into the products. That's all been additive. And then we did launch a new Pro V1x Left Dash, which was new to the story, too.

So add it up, I think it's part innovation, part momentum and certainly rounds of play growth is contributory as well. So yes, really like the tone and tenor and state of the Titleist golf ball business right now. Over the long haul, we do expect even years to be down slightly versus odd years in which we launched Pro V1. We've bucked that trend in the last couple of years. And again, commentary on our team's ability to innovate and bring great products to market.

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

I guess, first, just wondering what you're seeing in terms of year-over-year price increases from competitors and where you think you stack up there as well as any thoughts on the current state of channel inventories?

Yes. I guess, as it relates, Noah, to competitors, the industry, I think, a fair characterization, we saw pricing upticks last year largely in wearables across footwear and apparel. And this year, we're seeing more in clubs and balls.

So I think it's been a fairly consistent pricing scheme in 2026 from key competitors. We're comfortable at a premium. And whether it's balls or clubs, we are comfortable at a premium to the pack, and that's where we are. We're either at parity or premium to the pack, number one. Number two, within our club business, too, not only is it the price of the product, but we invest a whole lot in fitting, which is reflected in the pricing as well.

So very comfortable with where we are in the state of premium performance products around the world. Your second question, Noah, around competitive channel inventories rather. Its channels should be full and they are. So that's sort of a shorthand answer for. I think we're in a normalized state. The watchouts would be, is there any carryover inventory from the prior year that's clogging up the system.

We don't necessarily see that. So I think, generally speaking, inventories are healthy. And again, that's codeword for full and as they should be at this time of year on the eve of the golf season really taking full flight. It's a different answer 3 months from now when you see who the winners and losers were and who sold -- which products sold through and which maybe didn't quite sell through to expectations. But certainly, here we are in early May, I would characterize channel inventories globally as healthy and in line with where they ought to be.

Great. And maybe just one on Japan. A couple of quarters in a row of growth there. Obviously, this is a smaller quarter, but wondering if you could kind of give a quick update on that market and your opportunity there as you see it.

Yes. We've talked a bit about Japan over the last couple of years. We are pleased with the team and some of our recent investments, starting really with balls and clubs and the equipment segment, which I think has the most momentum and is driving some of that growth. We've done some repositioning within our wearables business. We actually pulled back our Titleist apparel business in that market. So some of the offsets.

But I would say Japan, really, at this stage, 2 parts. One would be growth and momentum in equipment, balls and clubs and a cautious conservative view around wearables, but I think we're being smart and taking a long-term approach there. So yes, we're pleased with the momentum. We've got a team there that's really making some good sound, smart decisions and executing well. Our counts on the men's and women's tours are improving. Our counts across the amateur game are improving, which is part of our affirmation and validation story. So yes, like where we are with the direction we're heading in Japan. And the final point I'd make is, I've talked about this a lot over the years. It's a market where our percentage of fit clubs is probably the lowest in the world. We're chipping away at that, and that's certainly benefiting balls, that's certainly benefiting golf clubs.

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

I noticed you reiterated your CapEx expectation for $95 million this year, which is elevated. And I'm just wondering what are some of the things you're investing in this year that you may not be investing in future years? And should we look for CapEx to return to maybe something in the mid-70 range like it's been in the last couple of years after this year?

Yes, Doug, thanks for the question. Yes, I do expect it to be more in line with what you articulated over the midterm. As we've talked about here, it's very much focused on the Golf Equipment segment our investments. So we continue to add golf ball capacity, both domestically and abroad. We continue to add club assembly capacity around the world as well, as you can see from the growth of the club business.

So those are our primary investments to really meet the continued demand of our products. And I think very strategic and probably more than half of the money we're spending. There's certainly investments in facilities. There's investments in technology, et cetera, that we believe are necessary and will deliver not only incremental sales, but operating efficiencies. So again, high watermark this year at $95 million, and we expect it will moderate over the next few years to a more reasonable run rate as you articulated.

Okay. That's helpful. And just one follow-up on working capital. It was a pretty substantial use last year. I know it's difficult to forecast, but that sort of elevated $87 million of use last year, I assume, is also not going to be repeated and that should come down as well.

Yes. And we talked about free cash flow meaningfully improving over 2025, mostly in the back half of the year. Obviously, significant investment in working capital in Q1 due to the inventory position for golf equipment. Timing of sales was probably more end of quarter weighted versus prior year. So AR was up a bit as well. But we feel very good about the full year free cash flow generation given the seasonality of the business. So yes, it definitely will meaningfully improve this year versus '25.

Thanks, everybody. As always, we appreciate your interest in Acushnet and look forward to reporting back after Q2 in sometime this summer. Thanks again. Have a great spring.

This concludes today's call. Thank you for attending. You may now disconnect.

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. [Operator Instructions] 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 and 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.

2

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 2 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. And 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 4 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 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. And 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 PPI'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 onetime 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 onetime 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 onetime 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 onetime 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.

With that, I will now turn the call over to Cameron for Q&A.

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

[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, 2 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, et cetera, 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.

Yes. I'll start and maybe Sean can get into volume, price. But U.S. market, we've said for a while, has been our healthiest and it really starts with a strong consumer base, right? Rounds of play in the U.S. over the last 5, 6 years are up 25% and really driven by, I think we said it 7 or 8 years in a row of golfer increases. So from a golfer base and a participation standpoint, very, very healthy. I might add also, and I've talked about this before, in the late 2016, '17, '18 period, the industry corrected. We saw a contraction of retailers, manufacturers. So the industry got lean and fit, at the end of the 20-teens, and then we've seen this pandemic-led surge the last 5, 6 years. So came in fit and then went on a bit of a growth birth.

So we like the fundamentals, industry participants, whether it's golf courses or teaching centers or golf specialty retailers are financially sound. So structurally, the U.S. market is probably our healthiest around the world. But part 2 to that, it's also benefiting from a very, very strong golfer base consumer participation momentum that we've seen over the last handful of years. So -- and the final point I would add is just in terms of how we think about the market today. It's February. The market is from an inventory standpoint, where it should be. Inventories are full and vibrant in open markets and lean and almost dormant in closed markets. That will change here in the next 4, 6 weeks. But no, we're enthused about the U.S. market and really led by what's happening at the golfer base in the U.S.

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.

I think, David, for you, you had a meaningfully more constructive tone around the FootJoy business. It seems like all the efforts around product architecture, the FitLab are really paying off. So kind of maybe walk us through a little deeper on where we are with the FootJoy business. It seems like people are moving towards the premium products. And then after that, can you give an update on Japan and Korea? I think you said Japan will be up this year. I think that's a change. Korea flat to an improvement from down. But that -- you talked about apparel and footwear still languishing a little bit in those markets. Maybe give us an update on where we go from here with those markets in those categories.

Yes. Great. Thanks, Randy. So starting with FootJoy, we noted a year or so ago that coming out of what was an 18, 24-month correction period in the footwear industry following the pandemic surge, right? We had a whole lot of demand and just the way that supply chain works, we chased that demand as an industry. Demand normalized yet supply kept running. So we had an inventory correction issue that we dealt with as an industry, we feel we got through it about a year or so ago. So what it meant for FootJoy and FootJoy has got a wonderful long history, over 100 years, been the #1 shoe in golf for over 75 years. So we continually lean into the high-performance heritage of that brand as we think about innovation in the future.

And we said a while ago, we're going to be more focused on the bottom line than the top line, again, coming out of this correction period. The team has done a really nice job of that. I made the comment earlier that while sales were down slightly, it really is -- it was a commentary or a function of lower closeout reduced volume sales. So I've called out a handful of our products, whether it's Premiere, whether it's Traditions, whether it's HyperFlex or Pro/SL. We're really leaning into our premium performance products, and we're rationalizing the product line down at some lower price points and raising the floor, if you will, on some of the lower price points.

So structurally, we like where we are. I haven't really commented about what's happening with apparel, but it's a similar story. And the team is doing a really good job. So I'm pleased with the direction and trend lines of the FootJoy business, again, moderating top line, slower top line, but a more accelerated bottom line. The caveat to that is, of course, tariffs. So that business, more than others, heavily burdened by tariffs. We're doing a good job mitigating, offsetting the best as best we can. And then the final piece is FitLab, right? We're -- we've benefited as a company with ball fitting and club fitting going back into the '90s. Footwear fitting has arrived in full force with footwear, both in the U.S. and around the world.

So FitLab is just another -- is another -- I talk a lot about products and services. That's another service, that helps optimize our products and make sure golfers have the very best experience, whether it's from a performance standpoint or a fit standpoint. So that's, again, high level on FootJoy. Your comments, Randy, on Japan and Korea, maybe just some level setting. Both those markets, we had some nice growth in equipment in certainly balls and clubs in 2025. Gear, wearables, FootJoy softer businesses. We run a Korea, Asia specific apparel business, Titleist apparel over there. So we've been pleased with the equipment business in Japan and Korea, but wearables have been soft for us and the industry.

I'll make a couple of comments about Japan as we look ahead. We do expect growth, again, similar led by equipment, maybe tempered expectations in gear and wearables. And similar to Japan, we -- really a similar story in Korea, where we're a little bit more bullish about equipment and are taking a tempered measured, conservative outlook vis-a-vis wearables and footwear. So -- but in terms of rounds of play and what's happening in those markets, if I look at Japan, up slightly, rounds up slightly, that's a positive last year, up about 10% versus 2019. Korea is a little bit of a different story, similar, about last year, up about 20%, 25% versus 2019. So healthy markets, equipment landscape similar in Asia as it is in the U.S., the key differentiator is really wearables. Footwear and apparel has been softer for the last couple of years, which leads to our tempered expectations in those segments.

Super helpful. Just last question. A lot of the commentary has come through around, I guess, pricing. So is your view that the -- 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, et cetera?

Yes. We're careful, right? We've said this before. We're careful with pricing, but we're dealing with the realities of input cost and distribution costs and 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 got to work a little bit harder to show value and 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 in -- 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 rest of 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?

That is all IEPA. The incremental $40 million is the IEPA tariff. So as I said in my prepared remarks, we're going to -- similar to the approach we took last year, we're going to let things settle in, and we'll update you as appropriate rather than trying to follow the towing and throwing on this topic. So 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 2 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.

That's helpful. And Sean, just as a follow-up, maybe if you could speak to your overall expectations for gross margins in 2026, maybe relative to the 60 basis point decline in 2025? And any differences you see between front half and back half gross margin drivers?

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. So I guess, Noah, a couple of observations. One would be -- and I said this about Acushnet. I do think you could make this analogy to the total industry, and this is just from what we've seen. Again, the early pricing moves were gear and wearables just due to the life cycles of those segments. And we saw industry-wide that play out in the second half of 2025. You didn't see as much pricing action in equipment, balls and clubs in '25. So I think you're starting to see that now. So again, I think our profile and flow is similar to what you'll see in the industry. In terms of what we -- how we think about our positioning in all this, we're a premium positioned product, and we work hard to earn that position. And I know our competitors will as well. But by and large, yes, we are seeing price increases flow through retail. It's early, right? As I've said, it's early, it's February. But we are seeing some price increases flow through retail. I don't think anybody is surprised by that. We all saw that coming in as much as the fourth quarter.

But in terms of how it stacks up and how the consumer responds, it really is -- it's going to take a few more months to get a read on how the consumer processes company A versus company B versus company C. But we do believe and feel pretty good about our position and our ability to take price. And I say that principally because of the belief we have in our products and the belief we have in the experience we can bring to golfers. So a little bit of more to follow in terms of how the market reacts, but that's common for this time of year. So I think that's the best we can frame it for you.

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?

Yes. I would just -- a good year for golf in 2025, right? U.S. was up, Canada, U.K., Mainland Europe, up, up, up, all good. So that's the first thing I'll point to. Many of those regions are now in their off-season. So again, I'll have a different answer 2, 3, 4 months from now, but they certainly come in with favorable positive trends. I will say we continue to be -- we see the consumer strongest in the U.S. That's not a surprise. We see durability -- the most durability across equipment, balls and clubs. And we've called out the watchouts of Korea and Japan, notably as it relates to really apparel in those spaces. But that's the regional view. But any time I can sit here in February and say rounds were up in most regions around the world, certainly in Western markets. That's terrific. And just to round out, Japan and Korea about flat last year. So didn't have bad years. They just didn't post the big growth in '25 that we saw elsewhere.

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

Staying on around the golf. The resilience is impressive, another good year in the U.S. and elsewhere. But last year, if I remember right, the U.S. started out slowly and then it made it up -- more than made it up in the back half. So why was the difference between the first half and the second half last year in U.S. round 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 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. So we point to -- we really point to the NGF, National Golf Foundation. They do a nice job, collecting data to help us understand the evolving golfer base. It's really coming from all angles, but I would say the avid is certainly playing and alive and well. But the 2 call-outs that, again, there call-outs that I'll pass along would be the fastest-growing segments over the last several years have been women and juniors. So they're certainly providing outsized contribution to the growth we've seen over the last handful of years.

And just for context and just using some big round numbers, in 2019, there were about 800 million rounds of golf played worldwide. And that number is going to be just shy of $1 billion this year. So it's about a 23% increase. But in real-world terms, it's 180 million, 190 million more rounds of golf being played today. And as I say that, I'm always compelled to point to the PGAs and the PGA Club professional and the outsized role and contribution and importance of their work in taking care of the game and really growing the game. But that's -- hopefully, 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 talked a lot about it in terms of how our products are performing, but I will package your question to sort of point to our dedicated golfer, right? They're avid, they're passionate. They'll play if you can prove to them. If you can prove to them that you've got a better product, they're inclined to purchase it, and it's going to help them play better. So we like the construct and demographic that is this dedicated golfer we talk about. We characterize them as middle class plus. So they're a nice demographic.

And we've said over time, they're recession-resistant. They're not recession-proof, but over cycles, we've seen they're committed and avid. So golf has a great consumer. You're right, we have a broad and vast portfolio of products in terms of varying price points. But by and large, we focus on premium performance, and that's where the bulk of our story is. That's where the bulk of our R&D efforts reside. That's where the bulk of our product line is constructed. So -- but I think the heart of your ask is this dedicated golfer, which the company sort of used as the sun to our solar system. And they're a strong cohort for sure.

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. So when I look at 2025 versus '24, I think if you normalize for the PTO in '24, you normalize for the ERP and some of the onetime things that I talked about, I think we have effectively delivered OpEx growth at less than the rate of sales. So I feel good about that in terms of '25. And I think as you -- as I talked about for OpEx in '26, again, we have some incremental expense as well, but overall, expect growth to be in line with sales. So again, we're making progress and delivering incremental benefits. And again, it's not a onetime unlock that's going to happen here. I think you're going to start to see that gradually over the coming years in terms of delivering operating leverage.

Okay. Understood. And just one follow-up on tariffs. So understanding that it's obviously an extremely fluid situation. But if I think about kind of the -- what we maybe discussed as sort of the 4 levers to offsetting, pricing, vendor cost sharing, some G&A leverage. And then I think we talked about maybe being able to tighten some advertising and promotional expenses. And so really, the question is, as you think about the '26 guide, is there any tightening in terms of the advertising and promotional that if tariffs went away in the next 3 to 4 months, like you actually have an opportunity to invest more there and could see some top line upside? Is that -- how are you thinking about that?

Yes. I guess how I'm thinking about it is I feel really good about the guide, feel really good about the performance of the business, the ability to overcome the incrementality of the tariff landscape, albeit obviously seemingly changing. But now, we are continuing to invest in A&P. You'll see it in the filings. We increased A&P in '25, not significantly, but low single digits, and you've seen that the last couple of years. So we have incredible confidence in our Golf Equipment franchises in FootJoy. So we're going to continue to invest behind those. Certainly, given the -- as David said, it's early. It's February. But overall, we're not using this as an opportunity to pull back on A&P to support our long-term growth. So I think it's business as usual despite the tariff landscape. And again, we'll have to see how the year goes by, but we feel good about the guide in the context of all those.

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.

Hello, everyone, and welcome to today's Acushnet Company Third Quarter '25 Earnings Call. My name is Seb, and I'll be the operator for your call today. [Operator Instructions]

I will now hand the floor to Sondra Lennon, Vice President, FP&A and Investor Relations. Please go ahead.

Good morning, everyone. Thank you for joining us today for Acushnet Holding Corp.'s Third 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 I turn 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. And when referring to year-to-date results or comparisons, we are referring to the 9-month period ended September 30, 2025, and the comparable 9-month period in 2024.

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

Good morning, everyone, and thanks to Sondra, who last month started her 28th year with our company. As always, we appreciate your interest in Acushnet Holdings. As the golf world exits peak season in many regions and begins prime time across the Sunbelt, the sport and business of golf continue to be vibrant with an increased number of golfers playing an increased number of rounds globally. After a weather-induced slow start to the year in the U.S., rounds of play accelerated in the third quarter, which is the largest participation period of the year, and we now expect worldwide rounds in 2025 to match or exceed what was a record 2024.

Acushnet's trade partners are, by and large, healthy and investing to enhance their facilities and ultimately, their value propositions to best meet the evolving preferences of tomorrow's golfers. The global golf market is structurally sound with momentum in the U.S. and EMEA offsetting softness, mainly from footwear and apparel across Japan and Korea. And within Acushnet, our team is relentlessly focused on exceeding dedicated golfer expectations, developing great products, earning the trust and endorsement of the pyramid of influence and our partners and executing a wide range of fitting and golfer connection initiatives.

Tying this together is the company's unwavering commitment to product quality, best exemplified by every Pro V1 golf ball, which passes more than 100 quality checks throughout the production process. As a result of this commitment, our return rate is 1 golf ball out of every 16 million Pro V1s produced. This operating model, Acushnet's blueprint for success is continually refined and improved upon by our team as we strive to provide great products and services to golfers, execute our capital allocation strategy and create shareholder value for our investors.

With this as background, I now point to Slide 4 and our third quarter and year-to-date results. First, for the quarter, Acushnet delivered worldwide net sales of $658 million, a 5% constant currency increase over last year, with gains across all segments. Adjusted EBITDA of $119 million grew by 10%. Year-to-date, sales of $2.08 billion were up 4% and adjusted EBITDA of $401 million was up 2% compared to last year.

Getting to our segment results, you see the continued global momentum within Titleist Golf Equipment, which has grown 5% in both the quarter and year-to-date. Key drivers have been the year-to-date growth of our Pro V1 franchise in all regions and the very successful launch of new Titleist T-Series irons and limited edition Vokey SM10 wedges in Q3. We have spoken in recent years about the investments we have made to strengthen our golf equipment product development and enhance manufacturing capabilities. Our growth and momentum today are byproducts of these investments.

Acushnet's Golf Gear segment also had a strong quarter, posting a 13% gain and is up 8% year-to-date as our team brings a steady flow of compelling products to market and leverages our expanding custom capabilities and strengthening supply chain. Within gear, the company's travel brands have increased 20% year-to-date with especially strong growth from our Links & Kings and Club Glove brands.

And our FootJoy business continues to build momentum and delivered another positive quarter with revenues up 3%. FootJoy is benefiting from the success of our Premiere and HyperFlex footwear models, fewer footwear closeouts and steady glove growth. FJ's apparel business adds to the brand story, showing resilience with quarterly and year-to-date gains. As we have discussed throughout the year, these trends are positively affecting FJ's market momentum and financial performance in 2025.

And finally, net sales of products not allocated to a reportable segment were up nicely in the quarter with continued momentum and double-digit growth from shoes led by outsized gains across their golf business.

Now looking at our business by region on Slide 5, you see the U.S. market continues to be strong, up 6% with growth across all segments, led by Titleist Golf Equipment. EMEA posted a 14% gain in the quarter and is now up 8% year-to-date. Rounds of play are up high single digits as the region benefits from favorable weather comps versus last year. Korea was up 3% in the quarter with strength in Titleist Golf Equipment led by golf balls, while Japan was off 13% in the quarter and 7% year-to-date. And as you see, our revenues in Rest of World were up 5% in the quarter and 3% year-to-date.

In summary, we are pleased with Acushnet's performance in the quarter and the overall health of our consumer. The company's product lines are in great shape. Inventory positions, both owned and at retail are in line for this time of the year, and we are confident in our team's ability to execute against our strategies.

Thanks for your attention this morning. I will now pass the call over to Sean.

Thank you, David. Good morning, everyone. As highlighted, we had a great third quarter and solid year-to-date performance. Third quarter net sales were up 5%, while adjusted EBITDA was $119 million, up $11 million from last year's third quarter. For the first 9 months of 2025, net sales increased 4% and adjusted EBITDA increased 2% as compared to the same period last year.

Moving to our income statement highlights on Slide 8. Gross profit in the third quarter of $319 million was up $15 million compared to 2024, driven by increases across all 3 reportable segments, primarily related to higher average selling prices, higher sales volumes and a favorable mix shift in FootJoy. We also had approximately $10 million in incremental tariff costs in the quarter and year-to-date have recognized $15 million.

Third quarter gross margin of 48.5% was down 50 basis points versus prior year, primarily related to the headwind from higher tariff costs. Year-to-date gross margin of 48.6% was consistent with last year. SG&A expense of $205 million in the quarter, increased $5 million from the third quarter of 2024 as we continue to invest in A&P to support new product launches and future growth initiatives, including our fitting network and IT systems. SG&A also included $2 million of restructuring costs related to the voluntary retirement program the company initiated earlier this year. As a reminder, we expect a further charge in Q4 related to this program of approximately $5 million.

Interest expense of $14.5 million in the quarter was up $1 million due to an increase in borrowings. Year-to-date, our effective tax rate is 23.6%, 200 basis points more than last year's rate through 9 months. Our effective tax rate in Q3 was 37.3%, up from 19.3% last year, primarily driven by a shift in our jurisdictional mix of earnings and a reduced income tax benefit related to the U.S. deduction of foreign-derived intangible income resulting from the enactment of the One Big Beautiful Bill Act.

Moving to our balance sheet and cash flow highlights on Slide 9. Our strong balance sheet and consistent cash flow generation continue to support the disciplined execution of our capital allocation strategy. We remain focused on investing in the business to drive long-term growth while also returning capital to shareholders through dividends and share repurchases. Our net leverage ratio at the end of Q3 using average trailing net debt was 2x. Inventories were up 3% when compared to last year's third quarter, reflecting some advancement of inventory ahead of tariff deadlines and the impact of our iron launch. Overall, we remain comfortable with our current inventory position and quality.

Year-to-date cash flow from operations decreased from 2024, primarily due to increased investments in strategic initiatives, including our IT systems and increased working capital requirements. Capital expenditures were $51 million in the first 9 months of 2025, and we now expect full year CapEx spend to be approximately $75 million. Through September, we returned approximately $230 million to shareholders with $188 million in share repurchases and $42 million in cash dividends. Today, our Board of Directors declared a quarterly cash dividend of $0.235 per share payable on December 19 to shareholders of record on December 5, 2025.

Looking ahead to the remainder of the year, I would like to provide an update on our full year revenue and adjusted EBITDA outlook shown on Slide 10. We expect full year 2025 revenue to be in the range of $2.52 billion and $2.54 billion on a reported basis. As discussed on our second quarter call, we are still forecasting low single-digit growth in the second half, driven by contributions across all reportable segments. We now anticipate the full year FX impact to be negligible compared to last year, resulting in aligned reported and constant currency growth ranges. Both are projected to be between 2.6% and 3.4% for the full year, representing a midpoint growth of 3%. This midpoint implies fourth quarter revenue of approximately $448 million, representing high single-digit growth over Q4 2023, a period consistent with the cadence of our product launch cycle.

Moving to adjusted EBITDA. We are projecting full year 2025 to be in the range of $405 million to $415 million. Incremental full year gross tariff costs are expected to be $30 million, about $5 million lower than our previous estimate, driven by timing shifts in tariff-related variables. This reflects a $15 million gross tariff headwind in the fourth quarter. Through the strategic mitigation efforts we've discussed, we still anticipate offsetting a meaningful portion of the full year gross tariff headwind. Overall, we are very pleased with our year-to-date performance and full year outlook. The team remains focused on finishing the year strong and continuing to execute on our long-term strategic priorities. With that, I'll now turn the call over to Sondra for Q&A.

Thanks, Sean. Operator, could we please open the lines for questions?

[Operator Instructions] Our first question comes from Joe Altobello at Raymond James.

I guess my first question is on U.S. sales. If I look at it year-to-date, you're up almost 5%. I was wondering if you could kind of parse that out between volume and price and maybe what that looks like relative to the category.

Yes, Joe, this is Sean. I'll take it. And obviously, David can supplement as necessary. When we look at U.S. sales, again, very pleased. I think it's also important to keep in mind the product cadence, right, of each of our categories in each of the segments. So the ball business has done incredibly well in the U.S. We've had a good year in clubs as well in terms of both volume and price. We didn't take price in balls in 2025. So you can see that a lot of the ball growth is coming from volume gains in that category. On the club side, we're comping against last year's metals launch, which is generally higher ASP, so a more difficult comp. But given the momentum we have with the irons launch and the other special edition categories of Vokey wedges, as David highlighted, we've seen good gains there as well.

So as I look at clubs versus 2 years ago, we're seeing volume gains independent of price, which I think is the right comp for that category. On the FootJoy side in the U.S., obviously, we are focused on profitability, winnowing the portfolio and really going more premium, particularly in the footwear category. And gear in the U.S. has seen really great performance across all categories, gloves, bags and headwear. Obviously, the golf -- even FootJoy has done great with gloves. Obviously, rounds of play with that consumable product is a good comp, too. So all in all, sorry I didn't answer your question directly, I think we're pleased with both price and volume. I think the product cadence matters a lot. We did take some selective pricing in both FootJoy and gear midpoint of the year. So that's having some effect on those segments. So...

Yes. Joe, I just -- I'd echo what Sean said, really 2 parts, equipment, really not a pricing story this year. And again, you really need to look at our 2-year cadence. But we're very pleased with the growth and momentum within equipment. And then as Sean said, the wearables gear market, a little more tariff impact there, and we took some selective price moves across footwear and gear, not across the line, but in key models earlier in the year. So I think the best way to think about it is to look at equipment one way and the rest of the portfolio a little bit differently.

Got it. Very helpful. And maybe just to kind of pivot to tariffs. I think you mentioned earlier, $30 million for this year, but you expect to mitigate a good portion of that. How does that look for '26 in terms of what you're thinking about maybe an incremental impact for next year?

Yes, Joe. So again, to highlight certainly, this year at $30 million was slightly lower than what we had anticipated on our last call. So I just want to make sure everybody has that and what the impact is in Q4. As we fast forward to 2026, our number today, if nothing changes, is probably just north of $70 million, 7-0. We've done good work in terms of our strategic initiatives around vendor sharing, around certain changes within the supply chain. Again, I'm not going to give you a percentage today given where we sit in the year. But the expectation as we go on our '26 planning cycle, we're going to mitigate, again, a meaningful portion of that $70-plus million in '26.

I'm sorry, Sean, is the $70 million total? Or is that incremental?

That is the full impact for 2026. It's obviously $40-some-odd million incremental to 2025.

Our next question comes from Matthew Boss at JPMorgan.

It's Amanda Douglas on for Matt. So David, just to start, could you speak to the health of the overall golf participation that you're seeing across regions and elaborate on reception you've seen in the marketplace to your T-Series irons and the Pro V1 franchise.

Yes. Amanda, so maybe high level, right, we like where industry fundamentals are. They're in very good shape. Rounds of play, obviously, very strong. I made the point earlier, our consumer is engaged and healthy. But to your question, if I dig into rounds of play around the world, up slightly in the U.S., terrific after a strong third quarter. U.K., EMEA, up high single digits, great. Even Japan and Korea, where we've called out some softness in wearables and in footwear. We've got Japan through 9 months flat versus a year ago, up double digits versus 4, 5 years ago. And we've got Korea down 1% through the first 9 months, but up 20-some-odd percent versus 4, 5 years ago. So structurally, we like where the industry sits.

Participation is the engine and driver to a lot of what we do, which is why we pay very close attention to it. So that's really part 1. But I will lean into just, hey, fundamentals, rounds of play, consumer all in good shape, certainly for this time of year. To your questions about Pro V1, this was our 25th anniversary of the Pro V1 golf ball. We leaned into that a bit early in the season. And as we've said, very pleased with our golf ball performance this year, both in terms of sell-in and sell-through and growth in all regions. And behind that is the great work by our production team, right? We produce some 70% of our golf balls in Massachusetts, the rest in our plant in Thailand.

And our team has done a great job keeping pace with strong demand. So really pleased with where Pro V1 is through this time of year and as we start gearing up for next year. Similar to that, across the pyramid of influence, our accounts, our wins are really strong, and that just -- that for us, provides validation and endorsement of our performance and quality story. So particularly strong year for Pro V1.

And then your question about T-Series iron launches, again, we're really pleased. We had high expectations. We made some meaningful changes to the product, which I think the golf audience, our target consumer has responded very well to. And I will make the point that any time we talk about golf clubs, particularly irons, which are so custom fitting centric, for us, it's great work by the product development team on the products. And part 2 of that is great work by our fitting teams around the world to tell the story to golfers and make sure golfers are getting fit with the right products. And the final point I'd make is we're seeing a whole lot of blended sets, which we like, which shows the strength and capabilities of our fitting network and also our supply chain. But to your questions, Pro V1, T-Series, really strong out of the gates on both fronts, and we like our position.

That's helpful. And Sean, just as a follow-up, as we look ahead to 2026 in a flat or modest growth rounds played backdrop for the industry, how best to think about gross margin drivers or multiyear SG&A investments just as we're shaping the initial P&L?

Yes. When we look at gross margin, again, we're in the midst of obviously mitigating the tariff impacts that I just highlighted. So I think that we continue to see a growth story that outpaces the market even in a flat rounds of play environment. We believe that where our club business is positioned, particularly helps us drive better than market growth. As I look at the puts and takes on gross margin, again, I think tariff will be the headwind. We'll mitigate a meaningful portion of that as we move forward. So I'm hopeful that we don't have a material impact to our gross margin portfolio. And as we've talked about on past calls, we've made a lot of investments in '24 and '25 in OpEx. We've obviously invested in our fitting networks, as David talked about, both on balls and clubs. And the expectation is we're going to see operating leverage. And hopefully, we'll see the opportunity to continue to drive better than revenue growth, EBITDA growth for the company. But still early days as we go through our '26 planning cycle, but we feel very good about where we are positioned going into '26.

Our next question is from Simeon Gutman at Morgan Stanley.

This is Pedro on for Simeon. Congratulations on a strong quarter. As my first question, could you give us a bit of color on the sell-through trends at retail and the channel inventory levels, both for the Pro V1 ball and for the club launches?

Yes. I'll link -- and this is as much a global commentary. I'll link our couple of comments made. One, we like our growth in our golf ball growth year-to-date. We like our in-market inventory positions and what obviously connects those is sell-through. So it's been a good sell-through year for Titleist golf balls and especially Pro V1. Again, growth in all regions is no small feat, but our team managed to achieve that. And I would say, aided by some interesting new follow-ons, whether it's Pro V1x Left Dash, some new enhanced alignment products. So we're really pleased with the product itself, but the franchise continues to get, I think, more compelling and value-added to our target audience. So yes, we don't -- as you may know, Pedro, we don't really zero in on market share by region for a lot of different reasons. But again, I would say, if you look at our top line growth and you look at inventory levels around the world, which are in great shape, that implies where we're in really good shape and implies a very favorable positive sell-through story for the year.

Okay. Great. That's helpful. And as a follow-up, the full year guidance implies a bit of a deceleration in sales growth relative to where you've been running the past couple of quarters on a year-on-year basis. Is there something that you're seeing specifically kind of going into the holidays? Or is it just the tougher comparisons versus last year?

Yes. I don't -- Pedro, I don't think it's a tougher comparison. I think the implied midpoint of the guide is about, what, $448 million of revenue. It's certainly better than last year. But if you look back to Q4 of 2023, where I think we did about $413 million, that's a high almost double-digit growth rate over '23. So given the product cadence, given the 2-year product life cycle, I think we're very pleased with the Q4. And again, I'll reiterate what I said in my comments that we had a second half where we expected low single-digit revenue growth and growth across all segments. And I think this guide at the midpoint delivers that. So we feel very good about the Q4, and I don't think there's anything unusual about demand, about product or otherwise that would indicate otherwise.

Yes. I'll just affirm Sean's point as it relates to the 2-year product cadence really in equipment, right? The best way to see like-for-like comparison Q4 '25 in equipment, balls and clubs is to look back 2 years because that's when the product line was comparable. Again, gear footwear, less of a 2-year story. But yes, just to reiterate Sean's point, we feel really good about our business. We feel really good about the half, how we're organizing our stories and our product lines for next year. So we don't really think about it or see the fourth quarter as being a period of deceleration. We see it as a period of continued momentum generation, but it is noteworthy to call out within equipment of how we look at things over a 2-year product life cycle.

Our next question is from Noah Zatzkin at KeyBanc Capital.

I guess, first, if you could just kind of comment on how you're feeling about inventory in the channel, both in terms of your inventory and from an industry perspective? And then just any comments on potential changes or not in retail partner ordering habits?

Yes. So I would just first say, Noah, that inventories in the golf industry at this time of year should be relatively low as you move as -- the snow belt, if you will, in northern markets and mid-belt markets sort of move out of season. And they should be relatively low. They are. So we like what we see there. And in the Sunbelt, they should be high, and they're filling up the stores for the start of their season. So that's the expectation as we look at channel inventories around the world, and that's what we're seeing. So no unusual call-outs. Sure, there are pockets here and there, but nothing that bubbles up to caution or concern.

We really look at our channel inventories on a months of inventory basis and all very much in line with where they should be. And then the next step will be our retail partners who are open for the holidays in the North and Midbelt will fill up their shops here in the fourth quarter. But it's as much commentary on the ebb and flow of inventories in golf throughout the year. So again, channel inventories at a seasonally low level and very much in line with what we expect. And to our own inventories, yes, really good shape. Sean mentioned it. We like what we have. We like the quality of it. We did some pull forward along the way to stay in front of ever-evolving tariffs, but we like where things sit from an overall channel inventory perspective.

Great. Very helpful. And maybe just looking outside of the U.S., obviously, maybe some puts and takes when you're looking across regions. EMEA has been strong this year. Japan has been a bit softer as has Korea been. So just any thoughts on both your business and the sport outside of the U.S. looking ahead?

Yes. I think I've leaned into enough the U.S. business, right? Real strong rounds of play, consumer. I think our numbers bear that out. Especially strong in EMEA this year and U.K. I think that speaks to pretty good fundamentals. But clearly, they're getting a bump because of some very favorable weather against some less than favorable weather a year ago, and that attributes or contributes to some of the high growth rates we're seeing in rounds the play. And obviously, that's good for balls and gloves and consumables. So those 2 markets, particularly strong. Maybe a minute on Japan. So I made the comment earlier, Japan rounds are flat. They're certainly up versus 4 or 5 years ago. So structurally, Japan is in decent shape.

I would say to our business, we feel pretty good about equipment, right? We like our equipment positioning. Ball growth this year, year-to-date is obviously strong. So again, part 1 of the story is equipment in Japan is healthy and trending in the right direction. A couple of behind-the-scenes stories in Japan would be -- we're going through a pretty meaningful repositioning with our FootJoy business. We're exiting some price points, introducing some more premium products in the market. So we had expectations to be down in 2025, and we're meeting those expectations.

And then I would add to it, our gear business in Japan has been down. I think that's a little bit timing and a little bit overall market softness. But again, Japan, equipment in pretty good shape and repositioning happening within FootJoy and gear. And then I'll move to Korea, really a similar story. Their equipment business -- our equipment business in good shape, balls and clubs in good shape. I've talked over the years about the ascension and growth of the premium apparel business in that market. It rode up high, and it's been through a bit of a correction this year.

And we're seeing that have a negative effect on our business. But overall, structurally, in decent shape from an equipment standpoint, footwear and apparel softer. And I would just add the consumer not as healthy in Japan and Korea as we're seeing certainly in the U.S. But again, you add it up, we're still -- we're pleased with how the game is holding up. Again, rounds of play roughly flat in both markets. We're comfortable with. And again, as we look at the comp versus a handful of years ago, there's been a bump in the golf marketplace in those markets. But I think they're just dealing with some different macroeconomic forces that are shaping consumer spending, and we're certainly seeing that in our business.

Our next question is from Doug Lane at Water Tower Research.

I just wanted to press a little bit on Europe because you've just seen a noticeable acceleration in growth in Europe, including double-digit local currency growth in 2 of the last 4 quarters after really most of 2024 and 2023 being flattish, maybe down a little bit. So is there something more going on there than weather? Are we seeing a change in the competitive dynamic in Europe?

Yes. I think it's -- I don't want to give all the credit to weather, but certainly rounds of play and the golf industry has been very healthy. U.K. up low double digits in rounds of play. That just drives the golf economy. So I think the golf economy is outpacing other sectors. Yes, we like our positioning and our share positions across all our categories. So we're certainly growing in all categories. It's just -- it's a whole lot healthier environment this year than we've seen in the last couple of years. And again, just a healthy rounds of play environment, nice execution by our team.

We got our product lines right in those markets. And the final piece would be just our continued build-out and activation of fitting across balls and clubs and now footwear. We're doing more fitting in EMEA than we ever have, and that's certainly having a favorable impact on -- again, on balls, on clubs and across footwear, which is the latest entrant into our fitting realm with FitLab. So yes, really happy with the team, happy with the market. Weather deserves some of the credit, but not all the credit.

Okay. That's good color. And just one last thing on working capital, the use of working capital is more than twice what it was last year. Is there something going on there specifically that is using up more cash than last year?

I mean, again, we talked about the inventory. We talked about some of the investments we're making in IT and some of the systems. So I think that, Doug, is having some impact of it. But overall, I feel good about the free cash flow outlook conversion as well. So I don't -- I feel very comfortable about our working capital position.

Well, thanks, everybody. As always, we appreciate your time on these calls, and I look forward to connecting in a few months as we wrap up the fourth quarter in 2025 and start talking more in earnest about 2026. Thanks again.

This concludes today's conference call. Thank you all very much for joining, and you may now disconnect.