On Reports Results for the Second Quarter and Six-Month Period Ended June 30, 2023
ZURICH, Switzerland, August 15, 2023 - 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, 2023.
- On delivers its sixth consecutive record top-line quarter, reaching net sales of CHF 444.3 million in Q2 2023. This corresponds to a year-over-year growth rate of 52.3% and over 60% on a constant currency basis. Driven by the high end-consumer demand, net sales in the direct-to-consumer (“DTC”) channel outgrew the wholesale channel, increasing by 54.7% year-over-year.
- Supported by the resulting increased DTC share of 36.8% and a high share of full-price sales, On achieves a strong second quarter gross profit margin of 59.5%. The increase versus the 55.1% gross profit margin in the prior year period further reflects the discontinuation of extraordinary air freight usage, which had weighed on profitability during the first half of 2022.
- On continues on its path to combine strong growth with increasing profitability, achieving a positive net income in the quarter of CHF 3.3 million despite significant unrealized FX losses. Adjusted EBITDA reached CHF 62.7 million, nearly doubling from CHF 31.4 million in the prior year period.
- As a result of the achievements in the first half of the year, ongoing momentum in the start of the third quarter and continued positive feedback from its retail partners, On is raising its outlook for net sales to reach at least CHF 1.76 billion in the fiscal year 2023, implying a full year growth rate of 44% and second half year growth rate of close to 30%.
- The increased outlook for the full year includes consideration of the persistent CHF strength that On faces in relation to its other meaningful currencies. On a constant currency basis, the increased outlook implies a growth rate of 44% for the second half of the year.
- On continues to deliver innovative, differentiated products that enable world-class performances on the road, tracks, trails, and courts. In recent months, Iga Świątek won the women's singles French Open title and On athletes achieved 24 podium finishes in their respective national athletics championships, further enhancing On's credibility in the performance space.
Martin Hoffmann, Co-CEO and CFO of On, said: "The very strong first six months of the year and now six consecutive record quarters is a testament to the incredible work and dedication our team continues to showcase every day. The strength of the On brand and continued exceptional growth is visible across channels, regions and products. We are thrilled that we are visibly progressing further on our strategy and ambition to win credibility and market share in the performance space. In particular, we are extremely pleased with the feedback on our Cloudboom Echo 3, which was more broadly launched in Q2 and is our fastest long-distance running shoe yet. On the Tennis side, we saw Iga Świątek take the victory at the French Open at Roland Garros in early June – we are so proud to have kicked off On’s presence on the grand slam courts with such an incredible and emotional debut.”
David Allemann, Co-Founder and Executive Co-Chairman of On, said: “We are coming closer to our two-year anniversary since our IPO. Our life as a public company has been an incredible continuation of our journey, marked by significant progress and huge achievements. Our product innovation engine has delivered six all-new performance shoes within the 24-month period, as we continue to take market share in the specialty run channel. We have opened the door for future regional growth and category expansion, while also improving our operational backbone. After a great first half of 2023, we are excited and energized for the second half of the year, starting with the upcoming World Athletics Championships in Budapest, where numerous On athletes will be participating.”
Second Quarter 2023 Financial and Operating Metrics
Key highlights for the three-month period ended June 30, 2023, compared to the three-month period ended June 30, 2022 include:
- net sales increased 52.3% to CHF 444.3 million;
- net sales through the direct-to-consumer ("DTC") sales channel increased 54.7% to CHF 163.5 million;
- net sales through the wholesale sales channel increased 51.0% to CHF 280.8 million;
- net sales in Europe, Middle East and Africa (“EMEA”), Americas and Asia-Pacific increased 28.9% to CHF 113.6 million, 59.8% to CHF 296.6 million and 90.2% to CHF 34.1 million, respectively;
- net sales from shoes, apparel and accessories increased 52.6% to CHF 428.2 million, 45.9% to 13.4 million and 45.4% to 2.7 million, respectively;
- gross profit increased 64.4% to CHF 264.5 million from CHF 160.8 million;
- gross profit margin increased to 59.5% from 55.1%;
- net income decreased 93.3% to CHF 3.3 million from CHF 49.1 million;
- net income margin decreased to 0.7% from 16.9%;
- basic earnings per share (“EPS”) Class A (CHF) decreased to 0.01 from 0.16;
- diluted EPS Class A (CHF) decreased to 0.01 from 0.15;
- adjusted EBITDA increased 99.6% to CHF 62.7 million from CHF 31.4 million;
- adjusted EBITDA margin increased to 14.1% from 10.8%;
- adjusted net income decreased to CHF 11.7 million from CHF 44.8 million;
- adjusted basic EPS Class A (CHF) decreased to 0.04 from 0.14; and
- adjusted diluted EPS Class A (CHF) decreased to 0.04 from 0.14.
Key highlights for the six-month period ended June 30, 2023, compared to the six-month period ended June 30, 2022 include:
- net sales increased 63.9% to CHF 864.5 million;
- net sales through the DTC sales channel increased 58.9% to CHF 300.5 million;
- net sales through the wholesale sales channel increased 66.7% to CHF 564.0 million;
- net sales in the EMEA, Americas and Asia-Pacific increased 39.4% to CHF 232.2 million, 73.6% to CHF 566.8 million and 90.5% to CHF 65.5 million, respectively;
- net sales from shoes, apparel and accessories increased 64.7% to CHF 828.7 million, 47.6% to CHF 30.3 million and 48.9% to CHF 5.4 million, respectively;
- gross profit increased 80.1% to CHF 509.4 million from CHF 282.9 million;
- gross profit margin increased to 58.9% from 53.6%;
- net income decreased 24.9% to CHF 47.7 million from CHF 63.5 million;
- net income margin decreased to 5.5% from 12.0%
- basic EPS Class A (CHF) decreased to 0.15 from 0.20;
- diluted EPS Class A (CHF) decreased to 0.15 from 0.20;
- adjusted EBITDA increased 162.5% to CHF 123.7 million from CHF 47.1 million;
- adjusted EBITDA margin increased to 14.3% from 8.9%;
- adjusted net income decreased to CHF 60.5 million from CHF 61.8 million;
- adjusted basic EPS Class A (CHF) decreased to 0.19 from 0.20; and
- adjusted diluted EPS Class A (CHF) remained unchanged at 0.19.
Key highlights as of June 30, 2023 compared to December 31, 2022, include:
- cash and cash equivalents decreased by 9% to CHF 337.1 million from CHF 371.0 million; and
- net working capital was CHF 598.6 million as of June 30, 2023 which reflects an increase of 30.4% 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 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
Following two consecutive record quarters in 2023, On remains confident in the strength of the brand and in the ability to continue carrying out its growth strategy. The strong second quarter results serve as a proof point for the strength of the On brand and the strong demand that persists across all channels, regions and products.
Supported by an exciting product pipeline, encouraging feedback from wholesale partners, and a strong start into Q3, On is again raising its outlook for the full fiscal year ending December 31, 2023, and now expects to reach net sales of CHF 1.76 billion. This implies a year-over-year growth rate of 44.0% and a second half year growth rate of close to 30%. Based on the current foreign exchange rates and in comparison to the previous outlook in May, this incorporates an additional negative FX impact of approximately 3% on On's US Dollar net sales for the second half of the year, equivalent to approximately 20 million Swiss Francs. The guidance for the second half of the year further implies a constant currency growth rate of 44%.
On is maintaining its previous outlook on gross profit margin and adjusted EBITDA margin of 58.5% and 15.0% respectively. As it relates to gross profit margin, On sees the potential to exceed the 58.5% mark in the case of an ongoing US Dollar weakness versus the Swiss Franc and absent any significant offsets from other currencies. This is further supported by the strong gross profit margin of 58.9% in the first half of the year, and the expectation for a continued high share of full-price sales in the remainder of the year.
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 and here.
Conference Call Information
A conference call to discuss second quarter results is scheduled for August 15, 2023 at 8 a.m. U.S. Eastern time (2 p.m. Central European Time). Those interested in participating in the call are invited to dial the following numbers:
United States: +1 646 307 19 63
United Kingdom: +44 203 481 42 47
Switzerland: +41 43 210 51 63
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 fanbase — 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.