Newton Golf Company, Inc. Common Stock 2026 Q2 Earnings Call

Sir, please go ahead. Good afternoon, everyone, and thank you for joining us.

During the second quarter, our results reflected a temporary reduction in production throughput as we implemented manufacturing transition activities in conjunction with the introduction of updated versions of our Fast Motion driver shaft and Motion driver and fairway shafts. These activities included updates to certain shaft manufacturing recipes and related production processes, including recalibration of machining operations, modifications to finishing workflows, changes to paint mixtures, and maintenance activities designed to improve product quality, production consistency, and manufacturing scalability. These transition activities, together with temporary carbon fiber supply constraints, delayed shipment timing on certain customer orders. At the same time, management maintained disciplined control of discretionary spending and intentionally moderated marketing activity to better align customer demand with available production capacity, reduce our backlog, and avoid generating demand beyond our ability to fulfill customer orders on a timely basis.

We were disciplined in managing demand and spending during this period. We also evaluated our direct-to-consumer strategy and engaged a new marketing agency to improve the efficiency and effectiveness of customer acquisition, refine our brand messaging, diversify customer acquisition channels, and broaden awareness of our proprietary shaft technology among golfers. We made meaningful operational progress through the manufacturing transition. By refining manufacturing techniques, equipment utilization, bend profiles, product specifications, production tolerances, and process controls, we improved output consistency and reduced production loss rates. We believe these improvements provide a stronger foundation for higher production volumes, tighter product consistency, and more scalable manufacturing performance over time. We also continued to strengthen the operating infrastructure at our St. Joseph, Missouri, manufacturing and warehouse facility, giving us greater control over product quality, production, and fulfillment.

Together, these improvements are intended to support higher throughput, faster fulfillment, and a more reliable customer experience as demand generation increases. Even with those near-term constraints, we continue to make progress in several strategic areas, including professional adoption, our fitter network, international distribution, and new product development. Professional adoption continued to grow, with more than 77 professional golfers putting Newton Motion and Fast Motion shafts in play across the PGA Tour, PGA Tour Champions, LPGA, and Korn Ferry Tours as of the end of the second quarter. That compares with more than 60 at the end of the first quarter. We also expanded our professional club fitter networks to approximately 273 accounts at quarter end, compared with approximately 235 accounts at the end of the first quarter. This growth was supported by 38 new club fitter and golf course accounts following the appointment of an East Coast sales manager.

We strengthened our manufacturing organization as well, hiring a new head of manufacturing in April, with more than 20 years of production and operational leadership experience to help drive improvements in throughput, consistency, and fulfillment capacity. On the product development front, we introduced updated versions of the Fast Motion driver shaft and Motion driver and fairway shafts, which we refer to as our 2.0 shafts, and which are differentiated by green product logos. The updated shafts are designed to support more consistent performance characteristics, tighter ball flight dispersion, improved continuity between driver and fairway shaft specifications, and a broader fitting profile across player types. We also believe the refinements provide greater manufacturing consistency and tighter production tolerances. Initial professional adoption has been strong, including a significant conversion from prior generation shafts to the 2.0 products.

More recently, multiple players on the PGA Tour Champions have added the updated Motion fairway shafts and are putting into play in competition. We also continued advancing new Fast Motion fairway wood and hybrid shafts, which we expect to launch commercially in the fourth quarter 2026 or first quarter of 2027. Because golfers typically carry a driver, multiple fairway woods, and multiple hybrid clubs, we believe this platform strategy creates the opportunity for multiple Newton shaft placements within a single golf bag, rather than a single driver placement. As the platform expands, we believe this creates an opportunity to increase the number of Newton shafts used by each golfer and the value of each fitting relationship. We were also pleased to announce that earlier this year, our Fast Motion driver shaft set the Guinness World Record title for the fastest golf drive.

Australian professional long drive golfer Thomas Fliniks achieved a ball speed of 235.1 miles an hour, surpassing the prior record set in 2013. After quarter end, we secured additional carbon fiber supply from Toray, Japan. While availability from Toray U.S. also improved. As raw material availability improved, we began increasing production of our updated 2.0 shaft products and selectively resumed marketing initiatives in late July under a revised commercial strategy. Initial results from the resumed marketing activity has been encouraging. Marketing activity remains below historical levels as we transition to our new agency and gradually ramp up paid media in line with available production capacity and our ability to fulfill demand.

By the beginning of August, production shipment times had improved to within seven business days, and we had substantially fulfilled the delayed orders represented by the approximately $1.2 million of customer deposits and open wholesale orders reported at the end of the first quarter. Taken together, we believe these improvements represent meaningful progress. We are operating from a stronger manufacturing base with better process control, improved production yield, and a more disciplined approach to matching demand generation with production capacity. As throughput and fulfillment continue to improve, we believe we are better positioned to convert customer demand into revenue while delivering a more consistent customer experience. With that, I'll turn the call over to Jeff to review our financial results.

Thank you, Aki, and good afternoon, everyone. The second quarter of 2026, net sales were $1.3 million, compared to $2.1 million in the prior year quarter. The decline was primarily driven by reduced manufacturing capacity during our manufacturing transition, along with temporary carbon fiber supply constraints that delayed shipment timing on certain customer orders. We also intentionally moderated marketing activity to align demand with available production capacity and avoid adding to the order backlog while fulfillment capacity was constrained. Our gross profit was $911,000, or 69.2% of net sales. That compares to $1.4 million, or 67.6% of net sales in the prior year quarter. Gross profit declined due to lower sales volume, while gross margin improved primarily because of a more favorable product and sales channel mix, including a higher proportion of direct-to-consumer sales, partially offset by manufacturing inefficiencies associated with the transition activities.

Our total operating expenses were approximately $2.5 million for the second quarter, compared to $2.9 million in the prior year quarter. Selling, general and administrative expenses decreased approximately $700,000 to $2.1 million, primarily due to lower sales and marketing costs, partially offset by higher manufacturing costs classified as operating expenses due to the reduced production throughput and resulting idle capacity. Plus, we had an increase in stock-based compensation expense. Research and development expenses increased to $348,000 from $143,000, primarily due to the overtime and travel costs associated with the manufacturing transition, manufacturing labor reclassified to research and development to reflect work performed on the new products, and manufacturing process improvements. Our net loss for the second quarter was $2.3 million, or negative $0.49 per share, compared to a net loss of $1.5 million, or $0.34 per share in the prior year quarter.

The increase was primarily attributed to a higher operating loss resulting from the lower net sales and increased costs associated with idle manufacturing capacity and manufacturing process improvements. Together, with an approximate $600,000 non-cash loss from the change in fair value of our warrant liabilities, partially offset by the lower sales and marketing expenses. For the first half of 2026, net sales were $2.3 million, down 30% from the $3.3 million in the prior year period. Gross profit was $1.5 million or 66.7% of net sales, compared to $2.3 million or 68.7% of net sales in the prior year period.