Executive Summary / Key Takeaways

• Acushnet Holdings (GOLF) maintains a strong position as a leader in performance-driven golf products, focusing on the resilient dedicated golfer market through its premium Titleist and FootJoy brands.
• First quarter 2025 results demonstrated underlying constant currency growth (+1.2%) driven by Titleist golf equipment and Golf gear, offsetting softness in FootJoy golf wear, reflecting the company's diversified segment strength.
• Strategic investments in global fitting networks, digital capabilities, R&D, and a new ERP system are expected to drive long-term growth and operating leverage, despite increasing near-term SG&A expenses.
• The company is actively addressing significant new tariff impositions, particularly from China, Thailand, and Vietnam, quantifying the potential 2025 gross impact at $75 million and targeting over 50% mitigation this year, with full mitigation expected in 2026 through supply chain adjustments and cost programs.
• Acushnet continues to return capital to shareholders through dividends (recently increased) and share repurchases, underpinned by a strong balance sheet and confidence in future cash flow generation, even while navigating current market uncertainties and investing for the future.

A Focus on the Dedicated Golfer

Acushnet Holdings Corp. stands as a prominent force in the global golf industry, recognized as the steward of two of the game's most revered brands: Titleist and FootJoy. The company's strategic foundation is built upon a singular focus: the dedicated golfer. This target market, characterized by avid, skill-biased individuals who prioritize performance and invest significantly in their game, forms the bedrock of Acushnet's business model. Leveraging a "pyramid of influence" strategy, Acushnet ensures its products are favored by the world's elite players, creating aspirational appeal that resonates with a broader base of golfers. This approach, coupled with a relentless commitment to innovation and manufacturing excellence, yields products widely acknowledged for their superior performance and consistent quality – attributes highly valued by the dedicated golfer.

The company's history underscores this dedication. For instance, 2025 marks the 25th anniversary of the iconic Titleist Pro V1 golf ball, a testament to enduring innovation and market leadership. Acushnet operates on well-established, roughly two-year product launch cycles for its core golf ball and golf club franchises, which consistently drive sales momentum and reinforce its performance credentials. Recent successful launches, such as the Vokey SM10 wedges and T-Series Irons in 2024, followed by the new Titleist GT drivers, fairways, hybrids, GT1 metals, and Scotty Cameron Studio Style putters in late 2024 and early 2025, exemplify this cycle and its impact on the Titleist Golf Equipment segment's performance.

Technological Edge and the Pursuit of Performance

Acushnet's competitive moat is significantly reinforced by its technological differentiation, particularly within its Titleist Golf Equipment segment. The company invests heavily in research and development (R&D), with expenses increasing by $2.4 million in Q1 2025, primarily for employee-related costs supporting next-generation product introductions. This investment fuels the development of proprietary technologies that offer tangible performance benefits to golfers.

In golf balls, Titleist's core technology focuses on optimizing aerodynamics, cover formulation, and core construction to deliver specific flight characteristics, spin control, and feel. While specific quantitative metrics comparing Acushnet's ball technology directly to competitors are limited, the impact is evident in market adoption and tour usage. Titleist golf balls, particularly the Pro V1 and Pro V1x, consistently dominate professional tours, with management highlighting 77% usage on worldwide tours and 26 PGA Tour wins in the first half of 2024 compared to just 4 for the nearest competitor. This widespread adoption by the most discerning players serves as powerful validation of their performance superiority.

In golf clubs, recent innovations like the Titleist GT Metals incorporate new constructions, such as the combination of titanium and composite materials, allowing for different weight distribution and performance characteristics compared to prior all-titanium models. Early player response to the GT Metals has been positive, with the new GT driver quickly becoming the most played driver at recent PGA and DP World Tour events. The company emphasizes the importance of its expanded global fitting networks, which leverage technology and expertise to ensure golfers are matched with the optimal equipment for their game, further enhancing the performance benefit derived from their products.

For FootJoy, technological focus centers on golf footwear and gloves designed for performance and comfort. FootJoy shoes are noted for their dominance on the PGA Tour, suggesting a performance edge valued by professionals. While specific quantifiable benefits like moisture-wicking efficiency or grip performance are not detailed with comparative figures, the brand's leadership position, including FootJoy gloves being the global category leader and the #1 and #2 selling glove brands alongside Titleist, points to a perceived technological and quality advantage in the market. New product introductions like the HyperFlex, Premier, and Quantum footwear models aim to deliver maximum comfort and performance, complementing established lines like the FJ Classics franchise.

The "so what" for investors is clear: Acushnet's sustained investment in R&D and its ability to translate technological advancements into performance-leading products are critical drivers of its premium brand positioning, pricing power, and competitive moat. This focus allows the company to command higher average selling prices and maintain healthier margins in its core segments compared to competitors who may prioritize broader market appeal or cost leadership.

Navigating a Competitive Landscape

The golf market is intensely competitive, with rivals vying for market share across equipment, apparel, and accessories. Acushnet faces direct competition from major players like Topgolf Callaway Brands (MODG), Nike (NKE), and PUMA (PUM) through its Cobra-PUMA Golf division, among others.

Acushnet strategically positions itself at the premium end of the market, targeting the dedicated golfer who prioritizes performance over price. This contrasts with competitors like MODG, which has diversified into experiential golf (Topgolf) alongside its equipment business, or PUMA, which often competes on value and athleisure crossover. Nike, while a global powerhouse in athletic wear, has a broader lifestyle focus compared to FootJoy's dedicated golf performance emphasis.

Financially, Acushnet's focus on premium products often translates into superior profitability metrics compared to some rivals. While direct, comprehensive TTM comparisons across all competitors are not fully available, Acushnet's latest TTM Gross Profit Margin of 46.76% and Operating Profit Margin of 12.13% reflect a healthy ability to capture value from its sales. Its Net Profit Margin of 9.21% and EBITDA Margin of 15.26% also indicate solid profitability. The company's focus on high-margin consumables like golf balls and premium durable goods contributes to this profile.

Acushnet's competitive advantages lie in its strong brand equity, validated by tour usage and loyalty among dedicated golfers, and its proprietary technology that delivers perceived performance benefits. This allows Acushnet to maintain pricing power, as seen with the price increase on the new GT drivers. Its vertical integration in key areas like golf balls and gloves provides control over quality and supply chain agility.

However, Acushnet is not without vulnerabilities. Its reliance on the dedicated golfer segment, while resilient, may limit overall growth potential compared to competitors tapping into broader markets or experiential golf. Supply chain dependencies, particularly for components sourced globally, expose it to risks like tariffs. Furthermore, while strong in its core areas, the pace of innovation or breadth of product offerings in certain categories might be challenged by larger, more diversified competitors with vast R&D budgets or faster production cycles. The competitive environment is described as "very competitive," particularly in high-volume categories like drivers and balls, requiring continuous innovation and effective go-to-market execution.

Operational Strength and Supply Chain Agility

Acushnet's operational backbone includes owned manufacturing facilities for golf balls (two in the US, one in Thailand) and golf gloves (Thailand), as well as assembly centers in major regions. This vertical integration is crucial for maintaining quality control and provides a degree of agility in managing supply chain dynamics.

A notable operational shift involved the FootJoy footwear business. Historically, a significant portion of FootJoy footwear was produced through a joint venture in China. During 2024, Acushnet transitioned this production to a third-party supplier in Vietnam, affiliated with its long-standing joint venture partner. This led to the deconsolidation of the joint venture (Lionscore) effective January 31, 2025, resulting in a non-cash gain of $20.9 million in Q1 2025. This strategic move was undertaken to enhance product development capabilities and build a more durable supply chain, positioning FootJoy for improved profitability in 2025 after a period of market correction.

The company is also investing in a new global cloud-based enterprise resource planning (ERP) platform, a multi-year initiative aimed at integrating operations, enhancing supply chain and finance capabilities, and driving future operating efficiencies. This investment totaled $8.0 million in capitalized implementation costs in Q1 2025, with $15 million to $20 million expected for the full year.

These operational initiatives and supply chain adjustments are particularly relevant in the context of the evolving tariff landscape.

Financial Performance and Capital Deployment

Acushnet reported net sales of $703.4 million for the three months ended March 31, 2025, a slight decrease of 0.6% on a reported basis compared to the prior year. However, on a constant currency basis, net sales increased by a solid 1.2%, demonstrating underlying business growth. This growth was primarily fueled by the Titleist Golf Equipment segment (+3.8% constant currency), driven by new product launches in golf balls and clubs, and the Golf Gear segment (+3.9% constant currency). The FootJoy Golf Wear segment experienced a decline (-4.9% constant currency), attributed to lower sales volumes in footwear and apparel, partially offset by higher average selling prices in golf gloves.

Gross profit for Q1 2025 was $337.2 million, down 1.5% from the prior year, resulting in a gross margin of 47.9%, a decrease of 50 basis points from 48.4%. This margin contraction was primarily due to higher manufacturing costs in Titleist Golf Equipment and lower sales volumes in FootJoy, partially offset by favorable trends in Golf Gear (higher ASPs, lower distribution costs).

Operating expenses saw mixed trends. Selling, general, and administrative (SGA) expenses decreased slightly by $0.7 million, as increases in advertising/promotion and selling expenses (supporting new launches and fitting networks) were more than offset by a $6.9 million decrease in restructuring costs related to the FootJoy supply chain transition. Research and development expenses increased by $2.4 million, reflecting investment in future products.

Income from operations decreased by 5.6% to $114.5 million. However, net income attributable to Acushnet Holdings Corp. increased by 13.2% to $99.4 million, significantly boosted by a $20.9 million non-cash gain from the deconsolidation of the FootJoy footwear joint venture, which was recorded in other income, net. The effective income tax rate decreased to 17.9% from 21.7%, primarily due to changes in the jurisdictional mix of earnings.

Acushnet maintains a strong balance sheet and focuses on disciplined capital allocation. As of March 31, 2025, the company had $39.4 million in unrestricted cash and equivalents and significant liquidity available under its credit facilities ($369.5 million revolver, $38.6 million local facilities). The net leverage ratio stood at 2.0x at the end of Q1 2025.

The company is committed to returning capital to shareholders. It recently increased its quarterly cash dividend to $0.235 per share, marking the eighth consecutive annual increase. Share repurchase activity continued, with $36.6 million in repurchases during Q1 2025. As of March 31, 2025, $415.5 million remained under the current authorization, including a $99.1 million liability for shares to be purchased under agreements with Magnus Holdings. Capital expenditures are projected at $85 million for the full year 2025, supporting manufacturing, distribution, and strategic initiatives.

Outlook and Navigating Uncertainty

Acushnet's outlook for 2025 is shaped by a combination of internal momentum and external uncertainties. While the company did not provide an updated consolidated full-year outlook in its Q1 2025 report due to the dynamic nature of trade policy, it offered specific expectations for the first half of the year.

Management expects first half 2025 net sales to be up low single-digits on a constant currency basis compared to the first half of 2024, driven primarily by the Titleist Golf Equipment segment (new Pro V1 launch, GT Metals momentum). First half 2025 adjusted EBITDA is expected to be down low single digits, reflecting increased operating expenses from strategic investments and the estimated impact of tariffs.

The most significant external factor is the recently announced U.S. tariffs. Acushnet estimates the gross tariff impact in 2025 to be approximately $75 million, assuming the current rate regime persists. The largest portion of this impact (around 70%) is attributed to the 145% tariff rate on imports from China, a key source for golf club components and apparel. Other significant tariffs affect imports from Thailand (golf gloves, golf balls) and Vietnam (footwear, gear, apparel).

Acushnet is actively implementing mitigation plans, leveraging its diversified supply chain and vertical integration. These actions include adjusting global supply chain flows (e.g., rerouting club component sourcing away from China for US production), initiating cost and productivity programs, and considering selective price increases. Management believes these efforts can offset greater than 50% of the $75 million gross tariff impact during 2025, with the expectation of achieving 100% mitigation in 2026 as longer-term supply chain adjustments materialize. The Q2 2025 tariff impact is estimated at approximately $4 million, with the majority of the remaining impact expected in the second half of the year.

Despite these headwinds, management remains confident in the resilience of the dedicated golfer and the structural health of the golf industry, particularly in the U.S. While planning for growth outside the U.S., they are taking a measured approach due to challenging macroeconomic conditions in key international regions, notably the ongoing correction in Asia's premium apparel market and lingering elevated footwear/apparel inventories in Europe and Asia.

Overall, the outlook reflects a company investing for future growth and operational efficiency while proactively addressing significant external challenges like tariffs, aiming to mitigate their financial impact over the next 18-24 months.

Risks and Considerations

Investing in Acushnet involves considering several key risks. The most immediate and quantifiable risk is the impact of changing U.S. and foreign trade policies, specifically the recently imposed tariffs. While the company has outlined mitigation strategies, the dynamic nature of these policies and potential retaliatory tariffs introduce significant uncertainty regarding future costs and profitability.

Macroeconomic conditions, including inflation, interest rates, and consumer spending habits, can influence participation levels and spending on golf products, particularly impacting demand for durable goods and premium items. Regional economic weakness, as observed in parts of Asia and Europe, poses a risk to international sales growth.

Competition remains intense across all product categories, potentially leading to pricing pressures or requiring increased investment in R&D and marketing to maintain market share. The correction in certain market segments, such as premium apparel in Korea and footwear globally, highlights the potential for inventory imbalances and promotional activity to impact financial results.

Supply chain disruptions, whether due to geopolitical events, natural disasters, or trade disputes, could affect the availability and cost of raw materials, components, and finished goods, impacting manufacturing efficiency and product delivery. While Acushnet's diversified supply chain offers some resilience, it is not immune to these risks.

Finally, the successful execution of strategic initiatives, such as the ERP implementation and expansion of fitting networks, is crucial for realizing expected long-term benefits. Delays or cost overruns in these projects could impact financial performance.

Conclusion

Acushnet Holdings Corp. presents a compelling investment case centered on its leadership position in the premium golf market and its unwavering focus on the dedicated golfer. The company's core strengths lie in its iconic brands, Titleist and FootJoy, its commitment to performance-driven innovation validated by tour usage, and its increasingly agile and vertically integrated supply chain.

Recent performance in Q1 2025, while facing reported sales headwinds, showed underlying constant currency growth driven by the strength of its Titleist Golf Equipment and Golf Gear segments. Strategic investments in R&D, global fitting networks, digital capabilities, and a new ERP system are positioning the company for long-term sustainable growth and enhanced operating leverage.

The most significant near-term challenge is the impact of new tariffs, which the company is actively addressing through supply chain adjustments, cost programs, and potential pricing actions, targeting substantial mitigation in 2025 and full mitigation in 2026. While macroeconomic conditions and regional market softness, particularly in international footwear and apparel, remain watch points, the resilience of the dedicated golfer and the company's disciplined approach to capital allocation, including consistent dividend increases and share repurchases, provide a degree of stability.

For investors, Acushnet offers exposure to a structurally healthy industry and a company with a proven strategy of serving the high-value segment of the market. The ability to successfully navigate the current tariff environment and execute on its strategic investment pipeline will be key determinants of its financial performance and shareholder value creation in the coming years.