On Reports First Quarter 2023 Results
ZURICH, Switzerland, May 16, 2023 - On Holding AG (NYSE: ONON) (“On,” “On Holding AG,” the “Company,” “we,” “our,” “ours,” or “us”), has announced its financial results for the first quarter ended March 31, 2023.
- On starts the year with another record net sales quarter ahead of expectations. Q1 2023 net sales of CHF 420.2 million and a growth rate of 78.3% year-over-year are a further validation of the strong brand momentum across all regions, channels and product groups. The significantly improved operational environment and product availability versus the prior year period contributed to the strong growth and allowed On to capture the full momentum of the brand.
- On delivers a first quarter gross profit margin of 58.3%, up from 51.8% in the prior year period, reflecting the normalized supply chain environment and the resulting discontinuation of exceptional air freight usage, which had weighed on profitability during the first quarter of 2022.
- The higher gross profit margin alongside scale gains on SG&A expenses supported On's ongoing profitability expansion towards its stated mid-term targets. This resulted in significant increases in net income and adjusted EBITDA for the quarter, reaching CHF 44.4 million and CHF 61.0 million respectively.
- On's strong order book for the second half of the year, driven by existing and exciting upcoming product launches are increasing the confidence of On in its growth aspirations for 2023. On is therefore raising its outlook for the full fiscal year 2023 to reach at least CHF 1.74 billion.
- On continues to capture significant market and mind share in the performance arena. This included exceptional performances by On athletes, including Hellen Obiri's win at the Boston Marathon and Iga Świątek winning her first Tennis tournament as an On athlete at the Stuttgart Open. Such successes at the highest level of performance continue to increase awareness and credibility of the On brand, leading to visible market share increases with runners across the globe.
Martin Hoffmann, Co-CEO and CFO of On, said: “Our record Net Sales in Q1 are a further proof of the strong brand momentum across all regions, channels and product groups. This was supported by a largely normalized supply chain environment versus the first quarter of 2022, which also allowed for the discontinuation of exceptional air freight and corresponding significant gross profit margin improvement. We always emphasize the importance of our multi-channel strategy, and we are very happy to see the contributions of our new retail stores. Supported by an exceptionally strong start for our new London store, our own retail net sales more than quadrupled year-over-year. Along with our expansion into Tennis, including the first on-court performances by Iga Świątek and Ben Shelton, On is reaching more fans than ever before.”
Caspar Coppetti, Co-Founder and Executive Co-Chairman of On, said: “We entered into 2023 with high ambitions and we are very pleased to see the continuation of our growth journey and increased profitability in the first quarter of the year. With Hellen Obiri's win at the Boston Marathon, we were once again able to prove that our highest level performance products are some of the fastest products available in the market for long distances. At the same time, we are thrilled to see how such achievements at the highest level are increasing the awareness and reach of our products with everyday runners. We recently kicked off the road to Paris 2024, but still have a lot more to come in 2023 to be excited about."
First Quarter 2023 Financial and Operating Metrics
Key highlights for the three-month period ended March 31, 2023 compared to the three-month period ended March 31, 2022 include:
- net sales increased 78.3% to CHF 420.2 million;
- net sales through the direct-to-consumer (“DTC”) sales channel increased 64.3% to CHF 137.0 million;
- net sales through the wholesale sales channel increased 86.0% to CHF 283.2 million;
net sales in Europe, Middle East and Africa (“EMEA”), Americas and Asia-Pacific increased 51.6% to CHF 118.9 million, 91.9% to CHF 270.2 million and 89.4% to CHF 31.1 million, respectively; - net sales from shoes, apparel and accessories increased 80.0% to CHF 400.5 million, 48.9% to CHF 16.9 million and 52.3% to CHF 2.8 million, respectively;gross profit increased100.6% to CHF 244.9 million from CHF 122.1 million; ;
- gross profit margin increased to 58.3% from 51.8%;
- net income increased 209.2% to CHF 44.4 million from CHF 14.3 million;
- net income margin increased to 10.6% from 6.1%;
- basic earnings per share (“EPS”) Class A (CHF) increased to 0.14 from 0.05;
- diluted EPS Class A (CHF) increased to 0.14 from 0.04;
- adjusted EBITDA increased 288.2% to CHF 61.0 million from CHF 15.7 million;
- adjusted EBITDA margin increased to 14.5% from 6.7%;
- adjusted net income increased to CHF 48.8 million from CHF 17.0 million;
- adjusted basic EPS Class A (CHF) increased to 0.15 from 0.05; and
- adjusted diluted EPS Class A (CHF) increased 0.15 to 0.05.
Key highlights as of March 31, 2023 compared to December 31, 2022 included:
- cash and cash equivalents decreased by 2.6% to CHF 361.3 million from CHF 371.0 million; and
- net working capital was CHF 573.0 million as of March 31, 2023, which reflects an increase of 24.8% compared to December 31, 2022.
Adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted basic EPS, adjusted diluted EPS and net working capital are non-IFRS measures used by us to evaluate our performance. Furthermore, we believe adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted basic EPS, adjusted diluted EPS and net working capital measures enhance investor understanding of our financial and operating performance from period to period because they enhance the comparability of results between each period, help identify trends in operating results and provide additional insight and transparency on how management evaluates the business. Adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted basic EPS, adjusted diluted EPS and net working capital should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with IFRS. For a detailed description and a reconciliation to the nearest IFRS measure, see the section below titled “Non-IFRS Measures”.
Outlook
On entered 2023 with high ambitions of continuing its growth journey, capturing market share and further increasing profitability. Supported by a normalized operational environment and ongoing brand momentum, On has started the year with a record net sales quarter ahead of expectations.
The overachievement in the first quarter combined with On's strong order book for the second half of the year, driven by existing and exciting upcoming product launches, allow On to maintain the confidence in its growth aspirations for the remainder of 2023. As such, On is raising its net sales outlook for the full fiscal year ending December 31, 2023 to at least CHF 1.74 billion.
On is further maintaining its outlook for gross profit margin in 2023 to reach 58.5%, implying an absolute gross profit of over CHF 1 billion. On's focus on profitable growth and economies of scale, further allow to retain an adjusted EBITDA margin outlook for the full year 2023 of 15.0% even at the higher net sales outlook.
As previously communicated, the supply chain normalization over recent months has led to some acceleration in product inflow and On is in the process of optimizing its product on hand for the updated lead time indications. On continues to expect the inventory levels at the end of the year 2023 to be broadly in line with December 2022 levels, while maintaining a significantly higher net sales base.
Other than with respect to IFRS net-sales and gross profit margin, On only provides guidance on a non-IFRS basis. The Company does not provide a reconciliation of forward-looking adjusted EBITDA to IFRS net income due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. As a result, we are not able to forecast with reasonable certainty all deductions needed in order to provide a reconciliation to net income. The above outlook is based on current market conditions and reflects the Company’s current and preliminary estimates of market and operating conditions and customer demand, which are all subject to change. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of risks and uncertainties, including those stated below and in our filings with the U.S. Securities and Exchange Commission (the "SEC").
High-res images available for download here.
Conference Call Information
A conference call to discuss first quarter results is scheduled for May 16, 2023 at 8 a.m. US Eastern time (2 p.m. Central European Time). Those interested in participating in the call are invited to dial the following numbers:
United States: +1 561 771 14 27
United Kingdom: +44 161 250 82 06
Switzerland: +41 91 261 14 47
No access code necessary.
Additionally, a live webcast of the conference call will be available on the Company's investor relations website and under the following link. Following the conclusion of the call, a replay of the conference call will be available on the Company's website.
About On
On was born in the Swiss Alps with one goal: to revolutionize the sensation of running by empowering all to run on clouds. Thirteen years after market launch, On delivers industry-disrupting innovation in premium footwear, apparel, and accessories for high-performance running, outdoor, and all-day activities. Fueled by customer recommendation, On’s award-winning CloudTec® innovation, purposeful design, and groundbreaking strides in sportswear’s circular economy have attracted a fast-growing global fan base — inspiring humans to explore, discover and dream on.
On is present in more than 60 countries globally and engages with a digital community on www.on.com.