On Reports Results for the Second Quarter and Six-Month Period Ended June 30, 2022
Zurich, Switzerland, August 16, 2022 - On Holding AG (NYSE: ONON) (“On,” “On Holding AG,” the “Company,” “we,” “our,” “ours,” or “us”), has announced its financial results for the second quarter and six-month period ended June 30, 2022.
- On had a very strong first half of 2022, with second quarter 2022 results again exceeding expectations to surpass CHF 500 million net sales for the half year. Q2 2022 net sales increased by 66.6%, driven by a strong wholesale growth of 70.1% and DTC growth of 60,8%, as well as continued exceptional momentum and demand in On’s North America region, growing at 102.5%.
- On records Q2 2022 net sales of CHF 291.7 million, net income of CHF 49.1 million and adjusted EBITDA of CHF 31.4 million despite the continued challenging supply chain environment as well as geopolitical and macroeconomic uncertainties.
- On delivers a second quarter 2022 gross profit margin of 55.1%, down from 60.7% in the prior year period and up from 51.8% in the first quarter 2022, reflecting continued, yet reduced transitory headwinds from higher airfreight share and corresponding expenses.
- On is closely observing macroeconomic developments and potential consumer demand impacts of the current environment. However, on the back of the very successful first half of the year and continued strong demand for On's products, On is raising its previous guidance and now expects net sales of at least CHF 1.1 billion and adjusted EBITDA of CHF 145 million, with guidance for the full year 2022. Guidance for the full year adjusted EBITDA margin remains unchanged at 13.2%.
- On continues to focus on delivering innovation that will drive performance for the world's best athletes. The second quarter not only saw On's first Diamond League victory, but also first Commonwealth Games and World Championship medals. In addition, On is taking big strides on its sustainability mission, having delivered the first fully recyclable subscription-based running shoe to early subscribers of On’s Cyclon program.
Martin Hoffmann, Co-CEO and CFO of On, said: “We are very pleased and proud to report that we have reached our highest quarterly net sales in history by a good margin in the second quarter of 2022 and with that, are observing a continued strong demand for On products across all regions. Our team has done an outstanding job to efficiently manage product flows in what we expect to be the near final stages of supply shortages stemming from last year's factory closures. Thanks to them, we have been able to welcome many new fans to the On community and equip them with our newest product launches. In June, for the first time in our history, single- month net sales exceeded 100 million Swiss Francs, bringing our total net sales for the first half of 2022 to over 500 million Swiss Francs. Based on the performance we have seen the in the first half, we are once again increasing our outlook for net sales and adjusted EBITDA for the full year 2022. As we continue our mission to ignite the human spirit through movement, we are thinking long-term. Our goal is to build a durable company at the intersection of performance, design and impact.”
Caspar Coppetti, Co-Founder and Executive Co-Chairman of On, said: “On continues to make great strides and reach new milestones at the intersection of performance, design and impact. We are thrilled to see our commitment to developing high-performance products to unleash our athletes' full potential paying off. In the past few weeks On athletes have shown incredible performances, leading to not only our first Diamond League victory, but also our first Commonwealth Games and World Championship medals. This quarter also saw us reach significant milestones on our mission to drive sustainable and circular innovations. Just a few weeks ago, our very first community of Cyclon subscribers in the US received their first subscription-based and fully recyclable shoe, the Cloudneo. This very special launch provided a further step towards our sustainability mission, and we are looking forward to sharing many more innovations in the future."
Second Quarter 2022 Financial and Operating Metrics
Key highlights for the three-month period ended June 30, 2022, compared to the three-month period ended June 30, 2021 include:
- net sales increased 66.6% to CHF 291.7 million;
- net sales through the direct-to-consumer ("DTC") sales channel increased 60.8% to CHF
- 105.6 million;
- net sales through the wholesale sales channel increased 70.1% to CHF 186.0 million;
- net sales in North America, Europe and Asia-Pacific increased 102.5% to CHF 181.7 million, 17.5% to CHF 83.3 million and 52.2% to CHF 17.9 million, respectively;
- net sales from shoes, apparel and accessories increased 68.2% to CHF 280.6 million, 31.3% to 9.2 million and 51.9% to 1.8 million;
- gross profit increased 51.2% to CHF 160.8 million;
- gross margin decreased to 55.1% from 60.7%;
- net income increased to CHF 49.1 million from CHF 14.2 million;
- net income margin increased to 16.9% from 8.1%;
- basic EPS Class A (CHF) increased by CHF 0.11 to CHF 0.16;
- diluted EPS Class A (CHF) increased by CHF 0.10 to CHF 0.15;
- adjusted EBITDA increased 14.7% to CHF 31.4 million from CHF 27.4 million;
- adjusted EBITDA margin decreased from 15.7% to 10.8%;
- adjusted net income increased to CHF 44.8 million from CHF 14.0 million;
- adjusted basic EPS Class A (CHF) increased by CHF 0.09 to CHF 0.14; and
- adjusted diluted EPS Class A (CHF) increased by CHF 0.09 to CHF 0.14.
Key highlights for six-month period ended June 30, 2022, compared to the six-month period ended June 30, 2021 include:
- net sales increased 67.2% to CHF 527.3 million;
- net sales through the DTC sales channel increased 63.9% to CHF 189.1 million;
- net sales through the wholesale sales channel increased 69.1% to CHF 338.3 million;
- net sales in North America, Europe and Asia-Pacific increased 95.3% to CHF 320.1 million, 23.7% to CHF 158.2 million and 80.4% to CHF 34.4 million, respectively;
- net sales from shoes, apparel and accessories increased 68.5% to CHF 503.1 million, 38.5% to CHF 20.6 million and 76.8% to CHF 3.7 million;
- gross profit increased 51.1% to CHF 282.9 million;
- gross margin decreased to 53.6% from 59.3%;
- net income increased to CHF 63.5 million from CHF 3.8 million;
- net income margin increased to 12.0% from 1.2%
- basic EPS Class A (CHF) increased by CHF 0.19 to CHF 0.20;
- diluted EPS Class A (CHF) increased by CHF 0.19 to CHF 0.20;
- adjusted EBITDA decreased 0.4% to CHF 47.1 million from CHF 47.3 million;
- adjusted EBITDA margin decreased from 10.8% to 8.9%;
- adjusted net income increased to CHF 61.8 million from CHF 26.4 million;
- adjusted basic EPS Class A (CHF) increased 106.0% to CHF 0.20; and
- adjusted diluted EPS Class A (CHF) increased 107.5% to CHF 0.19.
Key highlights as of June 30, 2022, include:
- cash decreased 14.6% to CHF 557.7 million compared to December 31, 2021; and
- net working capital was CHF 330.8 million as of June 30, 2022, which reflects an increase of 76.4% compared to December 31, 2021.
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 enhance investors understanding of our financial and operating performance from period to period because they exclude certain material items related to share-based compensation and other costs which are not reflective of our ongoing operations and performance. 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
Following a very successful first half of the year with net sales exceeding CHF 500 million, we continue to be confident in our ability to execute our growth strategy in the second half of 2022 despite ongoing macroeconomic uncertainties and challenges.
We currently anticipate limited impacts from these macroeconomic uncertainties on the demand for our products. Nevertheless, we see it as our duty to remain prudent and alert in such an environment and have taken certain measures to grow our cost base somewhat more conservatively than initially planned.
The first half of 2022 had been further impacted by the transitory supply shortages as a result of factory closures in 2021. Thanks to the dedication and commitment of our factory partners, our inventory situation has in the meantime improved significantly. As such, the use of air freight is anticipated to be reduced in the second half of the year. We will selectively continue to use air freight to ensure availability of our more recently launched products, which did not have an initial inventory position. From this, we expect a limited headwind to our gross profit margin of 150-200 basis points in the third quarter of 2022.
Taking into consideration the current macroeconomic challenges as well as the very successful first half year of 2022, we are increasing our outlook for net sales and adjusted EBITDA. For the fiscal year ending December 31, 2022, we now expect net sales to reach CHF 1.1 billion, representing a year-over-year growth of 52% compared to 2021. The higher anticipated net sales will allow additional, growth focused investments into the brand while increasing our adjusted EBITDA target for the full year to CHF 145 million, confirming our goal of an adjusted EBITDA margin of 13.2% even at the significantly elevated top line outlook. Other than with respect to IFRS net- sales, we only provide 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.
High-res images available for download here.
Conference Call Information
A conference call to discuss third quarter results is scheduled for August 16, 2022 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: +1 760 294 16 74
United Kingdom: +44 203 059 58 69
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 this 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. Twelve 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-running.com.