All right. Good morning, everyone. Thank you so much for being with us here today. It is my pleasure to introduce you to Sebastian Tadla, CFO of FST.
Thank you. Good morning, everyone. We are FST Corp. We trade on NASDAQ under the symbol KBSX. Again, my name's Sebastian Tadla. I am the Chief Financial Officer of FST. Quickly before we begin, just need to show you our disclaimers about what you're going to hear in this presentation. So take a quick few seconds to read that through. We can begin. Let's just jump into it. Who are we? FST, at its core, is a golf shaft manufacturer. We started manufacturing golf shafts in the late 1980s. However, our history goes back quite a bit further than that. About 80 years ago, our CEO's grandfather opened what today is a heavy industrial company located in Taiwan. They specialize in CNC machining. The thing that we were spun out of is piping. They would make, they still do make, all sorts of pipes.
Anything down from a few centimeters in diameter all the way up to 3 m. In the 1980s, with all that knowledge of pipe making, they were trying to decide what else they could do, how else they could branch out and gain additional revenue, and they initially thought, "What is a golf shaft if not a little pipe?" So from the late 1980s to the mid-2000s, we spent that time improving our manufacturing capacity and capabilities because we quickly found out that there's a lot of technology that goes into golf shafts, significantly more than standard piping. So in 2006, we finally believed that our factory was ready to deliver a premium product to the market. So we partnered with Kim Braly, who is a renowned shaft designer, and in 2007, we launched the KBS brand of golf shafts.
As many of you know, there's a lot of hard work that goes into building a brand. However, you do need to get lucky at the same time. Luck plays a major factor. Lucky for KBS, our lucky break happened in 2008 when a golfer who was in the twilight of his career decided to switch to KBS shafts. He was a player on the PGA Tour, and that year he won three events after not winning for five years.
What that did is it validated the technology and the design of the product to all the other golfers on the PGA Tour, and we quickly started seeing more professional golfers switching in, which caused all the major OEMs to take notice and notice that we have developed a product that is good enough for a professional golfer, and therefore, it is good enough for them to use in their golf clubs. That was 2008. As the time went on, in 2023, we were ranked one of the top 100 businesses in golf. In 2024, over 100 professional players were playing KBS shafts. At the beginning of 2025, we won in a city called Chiayi. Our Asian headquarters are located in Taipei, also about an hour away from Chiayi. We have an office in Tokyo.
Moving over to the U.S., our North American headquarters are in Boulder, Colorado, and we do have a sales office here in Carlsbad, California. As of this year, just a few months ago, we also opened a small satellite office in the U.K. to better serve the European market. Our products break down into three distinct product lines. The first one, excuse me, is what we call our premium products. These offer full customization. They are our proprietary designs. How you can tell that it is a premium product is if it has a KBS label. Anything with a KBS label, any golf shaft, that is considered premium. The target users are professional and serious players. We do recommend that most people get custom fitted into these clubs because which shaft you play will dictate how the club feels and performs.
Premium line of products represent roughly 53% of our revenue and 26% of the units we sell. Next, we will move to our standard units, or our standard line of products. These products offer less customization, and we get the designs from our OEM partners. What this means is TaylorMade has a golf club that they are releasing. They want a proprietary design. They will give us that design, work with us, we will build it for them, and then sell it. These are not branded as KBS. They represent about 45% of our shaft revenue and 68% of the units we manufacture. Finally, on the right, we have what we would call economy shafts. These are the shafts that we started manufacturing in the late 1980s. They offer little to no customization. They are unbranded, mainly being sold in big box retailers such as Walmart.
They represent about 3% of our overall shaft revenue, 6% of the units we manufacture. The one interesting thing that we get to do is any of the standard shafts that do not pass for cosmetic QC reasons, meaning that there is something wrong with the chroming, but nothing wrong with the shaft itself, we get to offload those in the economy sector. Our R&D is led by Kim Braly still. Today, he leads a team of 19 R&D employees that are located around the U.S. and Asia. They work with professional and amateur golfers alike to develop the next great shaft. Our steel shaft manufacturing is done in our in-house production facility, which is located in Chiayi, Taiwan. We do have our own proprietary steel blend. This steel blend took us about seven years of R&D working with China Steel, who is Taiwan's largest steel manufacturer, to develop.
I do want to say our competition has their own steel blend, so this is not unique to us. However, our blend only works in our process. We could not use their blends in our process because the shafts would turn out too brittle. We try to optimize the production process and monitor every step of the way as the shaft moves from the steel coil to the final product. It takes about three weeks to manufacture one steel shaft. Because all of this is done in-house at our production facility, we can catch any sort of issues that happen along the way and correct them and hopefully, get a lower reject rate. All of this really leads to a shorter delivery period for our customers because the shafts are 100% done in-house.
Final thing I want to say, we do have reduced costs compared to our competition, in our manufacturing and labor cost. Our competition makes their shafts in Japan and here in Mississippi while we manufacture in Taiwan. Our sales and marketing team is currently about 30 employees that's located all around the world, and we sell to two distinct customer segments. The first segment is our OEMs customers. These represent roughly 70% of our overall revenue, and these are all the brands that everyone knows, TaylorMade, Cobra, Titleist, Takomo. The other 30% of our customers are what we call aftermarket and retail. So these are fitting studios, mom-and-pop shops, Club Champion, PGA Superstore, and others located worldwide. We have three fitting studios currently. Our first one was opened in 2019 here in Carlsbad, California.
We followed that up with our second studio in Tokyo, Japan, in 2021, and our flagship was opened in Taipei in 2024. These studios have three main benefits to them. The first is bringing custom fitting to the people. We believe that every player should play a golf club that is really good for them today. Meaning that as your game progresses, chances are you need to play a different club that's meant for you. So we want to get that fitting to the customer's hands to see them play as well as they can today. Second major benefit for us is that we get to take all the data from those custom fittings. We get to see swing speeds, and then we get to use that in our R&D process.
The third major benefit is we get to bring in our OEM partners, bring in their sales, bring in their customer service teams, and we can teach them about what is new with KBS at these Experience Studios. Some of the other things we offer outside of just buying new clubs is a retro build service. We know custom fitting is tough for people, whether from a time or a financial commitment. So we have retrofitting, where you can log in to our website, answer a few questions. It'll spit out a number of shafts that we believe would be good for you today, and then you can send your clubs in, and we will rebuild them with a new product for a fraction of the cost. Some of the other services KBS offers. We have this on-site PGA Tour truck.
This truck goes to all North American PGA Tour events, and it is there to support the professional player. We do have that online fitting tool, which I talked about. We have the KBS Open. Last year was the inaugural KBS Open, and then this upcoming January is going to be the second one. It is a golf tournament. It is a pro-am tournament located in Taiwan. It has Taiwan's largest purse. It is open to anyone through two regional qualifiers. We are really excited for what this tournament allows us to do to reach the greater golf community, and hopefully, this will spread and continue to grow. As I mentioned earlier, it is really important for us to have professionals playing KBS shafts because this is the single greatest marketing tool we have.
When a professional player, whether on the PGA, LPGA, Korn Ferry, or DP World Tour, is seen winning a tournament playing a KBS shaft, that signals to the general consumers that KBS has a product that is worthy of a professional player, and that that product is good enough for amateurs and professionals alike. Some of the competitive advantages that we have. There is a minimal risk of future competition in steel shaft manufacturing. We estimate that it would cost around $40 million to open a steel shaft plant where you can make about 100,000 units a month. Today, we can manufacture about 1.2 million units per month, so that wouldn't allow you to compete on the world stage. We do have lower shipping costs.
The vast majority of golf clubs are assembled in Southeast Asia, so shipping from Taiwan to Southeast Asia is significantly cheaper than over here from the U.S. We have lower labor costs because we manufacture in Taiwan. This allows us to better compete on price. We have our R&D, which is led by Kim Braly, who is an industry veteran. Then we have engagement with all golfers through our KBS Golf Experience Studios. Today, three major players make up 96% of all steel shafts in the market. As golf continues to grow, which it has been for the past few years, and it looks like it will continue growing for the next few years, steel shafts will remain the number one material of choice. Today, about 60% of all golf clubs are steel.
The reason that steel is dominant is because it offers consistent performance, which leads to high-level players, whether amateur or professionals, to choose steel over graphite. As the game of golf continues to grow, steel will remain the number one material in golf clubs. This is talking about the U.S. Where is this demand coming from? What we are seeing is in 2025, we set an all-time record with 48 million rounds of golf played. This year, we are on pace to break 50 million rounds of golf played. What this is doing is it is bringing new players into the fold, and now about 30% of all new consumers opt for custom fit clubs. As we are seeing the game of golf grow, we are also seeing more and more people take or be serious about the investment that they are making in their golf clubs.
Now, what are we talking about when we talk about the entire global golf market? Today, the entire golf club market is about $4.2 billion. It is slated to grow to about $4.8 billion by the end of the decade. What we are seeing is as this demand continues to grow, the most important thing is that every single one of these clubs needs a golf shaft. That is why we feel pretty good about what the future holds. The largest place where golf is growing, the key growth area, is Southeast Asia. The reason for that is as they have a growing middle class, more and more of those players are electing to play golf over other sports. Let us take a look at our full year financial overview. These are the last three full years. We had going public expenses, so that is why you will see our net losses there.
If we look at the first half of this year compared to last year, we were able to raise revenue by 23% in the first half. We were able to raise gross profits by 33%. A lot of that has to do with reaching economies of scale and lowering our per shaft cost in manufacturing. We are able to pull back our operating expenses, and because of that, our EBITDA went from a negative $1.5 million to a positive $2.4 million, and then we took our net income from a negative $5.8 million to a positive $830,000. Some of our growth strategies. It is important to note that a few years ago, we did increase our manufacturing capacity up to 1.2 million. This has allowed us to be aggressive with our partners and to try to obtain more market share.
The other thing that we are looking at is I talked about how graphite shafts represent 40% of all golf clubs, but we do know that graphite is a very big part of that. We know that we need to scale our graphite business in order to take this business from a $50 million to a potentially $100 million business. Finally, it is expanding the KBS footprint. Looking at expansion into Europe, which we started this year. Right now, we are only in the U.K., but hoping to get into continental Europe, and then also into other parts of Asia. Our management team, collectively, we have over 120 years of experience in golf shaft manufacturing, sales, marketing, and finance and accounting. Some of the investment highlights, the things I want you to take away from here.
We do have that protected status in steel shaft manufacturing because of that high barrier to entry. We have a vertically integrated cost advantage model, which allows us to have higher margins. We are looking at global expansion. As the game of golf grows globally, we want to make sure that we are there to service those new customers. We have proven R&D validation on professional tours and through working with the KBS Golf Experience. Thank you so much for coming out. Again, my name is Sebastian Tadla. If you guys have any questions or would care to reach out, please reach out to us at ir@skylineccg.com or investorrelations@fstshafts.com. Now, free to take any questions. Phil?
You recently launched the V-X product line. Can you just talk more about that?
Sure. We're asked can I talk a little bit more about the V-X product line. The V-X product line is a new line of golf shafts, which we released, the V-X and the V-X Lite. It's going to be in steel and in graphite alike. What it does is it created a beefier feel at a lighter weight. What it allows us to do is get players into this shaft that have strong swing speeds, but they would prefer a lighter shaft. This is going to be pretty good for places such as the LPGA Tour, where a lot of ladies don't like swinging very heavy shafts, but they still have really good swing speeds. We're excited, and this is just another tool into our overall fitting matrix and allows us to reach more customers. Yes.
Of the other, there's top three top competitors in the steel. How big is the market in total right now? Also what do you think their margins are?
Just need to repeat the question real fast. Out of the three main competitors in steel, how big is the overall market? Then what do we believe their margins are? In terms of the three of us, I currently believe that the market is somewhere between $120 million- $150 million. Could be a little bigger than that, hard to say. The one thing that we do know is, how we can extrapolate the market is we do know that the U.S. is roughly 40% of the global market. We do know what we sell in the U.S., and then we can kind of get our market share out of that. We do know that we have somewhere between 30%- 40% of the overall market.
In terms of margins for our competition, that's really tough to say because a lot of that is based on their manufacturing capacity, where they're at, and then current cost. Our main competitor is located here in Mississippi. I believe that their manufacturing costs are pretty high because the cost of carrying that factory are probably pretty high. I know that they do have economies of scale there, so they can manufacture a lot of products. But if I had to guess, I know our overall margin is around high 40s to low 50s on a given month, and I do believe that they're going to be around the same place. Our other competitor, who's in Japan, I do believe that they might have slightly lower margins than us. Yes, Tom.
You talked about increase in production capacity, 1.2 million a month. Where are we now on that percent wise? Then once you get to full capacity, 1.1 million shafts, whatever, what does that mean for revenue generation?
Sure
And gross margin?
Absolutely. The question was, we mentioned that we increased our manufacturing capacity to 1.2 million. Where are we on that, in terms of percentage? Then, when we get to where do we see our gross margin percentage going? Great question. Since we expanded to 1.2 million, today we are manufacturing around 700,000 units- 750,000 units per month. Granted, this changes because it's seasonal. Because the game of golf is seasonal, I don't want to say that that happens every month. From a percentage perspective, we're looking at around, what would that be? 65%, give or take, which is where we're at. We're currently at around just a hair under 50% margin, with that. We do know in 2022, before our factory expansion, when we were manufacturing above 80% of our manufacturing capacity, our margins were in the 60%-65% range.
We do believe that if we can gain that now, 80% threshold, that we would be able to open up those margins and take that next step. 80% of 1.2 million is roughly 850,000 units that we would have to get to. It is there for us, right? But it is tough, right? Each additional unit is the next unit is harder to get than the previous one. A lot of it has to line up to, as I mentioned, golf seasonality. A lot of the programs that we do have are on two-year product cycles. For example, last year when TaylorMade launched their Qi iron, it is their largest volume iron in their entire arsenal. We had that program, so our sales were really high. But this year we are on year two of the Qi program, so the sales are dwindling with that naturally, right?
Because next year or in 20, excuse me, in 2028, they will release a new iron. A lot of these things have to line up for us to be able to get to that 80% threshold. And a big part of that is getting new additional business, things that we have not had, and then we will be able to take that step quickly. Barry.
Can we talk about the graphite-
Yes
strategy? You mooted perhaps an acquisition.
Yes.
You're in the market for products today. You're outsourcing production. Your legacy competency is steel.
Yes
not graphite. As CFO, what parameters would you look at in any potential acquisition?
Sure. The question is, if we can talk about our graphite strategy overall. I think the first and most important thing is what we look at is a dual track strategy. I think I've mentioned this before, but in case I haven't, what we're doing with our graphite business is similar to what we did with steel 20 years ago, or 17 years ago. We're trying to develop really good product, then get that product into the hands of professional golfers, and then once it's adopted there, then we do believe that it's going to help grow, in the overall general market. It's going to help open up doors for OEM programs, and that will snowball. But the other track is to look at a potential acquisition.
Look at a graphite brand that's out there that manufactures their own product, which I think is the most important aspect. There's plenty of graphite brands that we can look at and acquire, but they don't have manufacturing capacity or capabilities at all. So we're looking at those two things. An acquisition would help take our revenue from, let's say, $50 million- $80 million almost overnight as we would acquire that company. What we do believe with a good acquisition is we would be able to manufacture our products, hoping to open up more profit margin than what we currently have by using a third-party manufacturer. Now when it comes to looking, what parameters I would like to look at, I think an important thing is to make sure that it's a brand that has a global name.
Because there's plenty of golf brands out there that are stuck in their region. We want to be really big in the U.S. This is the biggest market. If we get any brand out there that can manufacture their own clubs, then we would look at that potential acquisition. We want to look at how their factory is as well to make sure that what we're getting into isn't going to be an endless bucket of costs when it comes to keeping that plant alive. I think that's all. Thank you all so much for coming out. Again, my name's Sebastian Tadla with FST.