On Reports Results for the Third Quarter and Nine-Month Period Ended September 30, 2022
ZURICH, Switzerland, November 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 third quarter and nine-month period ended September 30, 2022.
- On presents strong results for the first nine months of 2022, reaching CHF 855.4 million in net sales YTD. Q3 2022 net sales increased by 50.4%, driven by strong wholesale growth of 55.6% and DTC growth of 40.7%, as well as exceptional growth of 85.2% in the Asia-Pacific region and continued strong demand in On's North America region, growing at 57.1%.
- Q3 2022 was the strongest quarter in history, as On records Q3 2022 net sales of CHF 328.0 million. Despite an uncertain macroeconomic environment, foreign exchange headwinds, and temporary supply chain constraints, net income and adjusted EBITDA reached CHF 20.6 million and CHF 56.3 million respectively.
- On delivers a third quarter 2022 gross profit margin of 57.1%, down from 60.2% in the prior year period and up from 55.1% in the second quarter 2022, reflecting unfavorable foreign exchange rates and continued, yet reduced, transitory headwinds from a higher airfreight share.
- On is monitoring the macroeconomic developments and potential changes in consumer demand with caution. However, based on the outstanding performance of the first three quarters of 2022 and strong order books for Q4, On is raising its previous guidance by CHF 25 million and now expects net sales of CHF 1.125 billion and an increased adjusted EBITDA of CHF 148 million for the full year 2022. Guidance for the full year adjusted EBITDA margin remains unchanged at 13.2%.
- On is continuing to create innovative products to unleash the full potential of the world's best athletes. In the third quarter, On Athlete Gustav Iden won the men's Ironman World Championships in Hawaii with a new overall course record, as well as running a course record marathon. In addition, On is continuing its great efforts in the sustainability field and is pioneering the footwear industry by presenting the first-ever shoe made out of carbon emissions.
Martin Hoffmann, Co-CEO and CFO of On, said: “With 50.4% top-line growth and 56.3m CHF adjusted EBITDA, Q3 has been another record quarter for On. We are extremely proud to have exceeded 1 billion Swiss Francs in net sales when considering the past 12 months leading up to September 30th. Our recently launched running and trail running shoes are extremely hot and win market share globally. The win of On Athlete Gustav Iden in the men's Ironman World Championships in Hawaii, the launch of our first online re-sell platform Onward and our we-chat mini program in China, and the latest owned retail store opening in Los Angeles are just some of the highlights in the last three months. The strong nine-month results and the strong order books for Q4 and beyond give us a lot of confidence going into the last months of the year and into 2023, putting us in a position to again increase our net sales outlook for the full year 2022. All of this would not be possible without our culture and the team that is standing behind it."
David Allemann, Co-Founder and Executive Co-Chairman of On, said: “The momentum of the On brand shows no signs of slowing. This quarter has seen On reach more new fans than ever before with a combination of innovative performance footwear and apparel, powerful marketing campaigns and immersive shopping experiences. Our unrelenting focus on performance innovation continues to be a winning formula, inspiring us to create the world’s first ever shoe made from carbon emissions and helping our fans and elite athletes to achieve their dreams."
Third Quarter 2022 Financial and Operating Metrics
Key highlights for the three-month period ended September 30, 2022, compared to the three-month period ended September 30, 2021, include:
• net sales increased 50.4% to CHF 328.0 million;
• net sales through the direct-to-consumer ("DTC") sales channel increased 40.7% to CHF 106.6 million;
• net sales through the wholesale sales channel increased 55.6% to CHF 221.4 million;
• net sales in North America, Europe, Asia-Pacific, and Rest of World increased 57.1% to CHF 176.3 million, 31.8% to CHF 116.5 million, 85.2% to CHF 24.2 million, and 150.0% to 11.0, respectively;
• net sales from shoes, apparel, and accessories increased 51.6% to CHF 310.9 million, 32.4% to CHF 15.2 million, and 25.2% to CHF 1.9 million, respectively;
• gross profit increased42.7% to CHF 187.4 million;
• gross profit margin decreased to57.1% from 60.2%;
• net income increased to CHF 20.6 million from CHF 13.0 million;
• net income margin increased to 6.3% from 6.0%;
• basic EPS Class A (CHF) increased by CHF 0.02 to CHF 0.07;
• diluted EPS Class A (CHF) increased by CHF 0.02 to CHF 0.06;
• adjusted EBITDA increased 48.5% to CHF 56.3 million from CHF 37.9 million;
• adjusted EBITDA margin decreased from 17.4% to 17.2%;
• adjusted net income increased to CHF 22.3 million from CHF 18.5 million;
• adjusted basic EPS Class A (CHF) increased by CHF 0.01 to CHF 0.07; and
• adjusted diluted EPS Class A (CHF) increased by CHF 0.01 to CHF 0.07.
Key highlights for the nine-month period ended September 30, 2022, compared to the nine-month period ended September 30, 2021, include:
- net sales increased60.3% to CHF 855.4 million;
- net sales through the DTC sales channel increased 54.7% to CHF 295.6 million;
- net sales through the wholesale sales channel increased 63.5% to CHF 559.7 million;
- net sales in North America, Europe, Asia-Pacific, and Rest of World increased 79.8% to CHF 496.4 million, 27.0% to CHF 274.7 million, 82.3% to CHF 58.6 million, and 186.6% to CHF 25.7, respectively;
- net sales from shoes, apparel, and accessories increased 61.7% to CHF 814.0 million, 35.8% to CHF 35.8 million, and 55.1% to CHF 5.5 million
- gross profit increased47.7% to CHF 470.3 million;
- gross profit margin decreased to 55.0% from 59.7%;
- net income increased to CHF 84.1 million from CHF 16.8 million;
- net income margin increased to 9.8% from 3.1%;
- basic EPS Class A (CHF) increased by CHF 0.21 to CHF 0.27;
- diluted EPS Class A (CHF) increased by CHF 0.20 to CHF 0.26;
- adjusted EBITDA increased21.4% to CHF 103.5 million from CHF 85.2 million;
- adjusted EBITDA margin decreased from 16.0% to 12.1%;
- adjusted net income increased 87.2% to CHF 84.1 million from CHF 44.9 million;
- adjusted basic EPS Class A (CHF) increased 66.0% to CHF 0.27 from CHF 0.16; and
- adjusted diluted EPS Class A (CHF) increased 67.2% to CHF 0.26 from CHF 0.16.
Key highlights as of September 30, 2022 include:
- cash and cash equivalents decreased 25% to CHF 493.0 million compared to December 31, 2021; and
- net working capital was CHF 382.6 million as of September 30, 2022, which reflects an increase of 104.0% 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
On has had a very successful first nine months of 2022, achieving three consecutive net sales records in the respective quarters. The continued success of the On brand has been driven by continuously increasing brand awareness around the globe, and numerous successful and innovative product launches. Based on all indications available, including the order book for the remainder of the year and into 2023, On expects to continue to drive significant growth despite the current macroeconomic environment.
Following transitory supply shortages as a result of factory closures in 2021, particularly impacting the first half of the year 2022, On goes into the fourth quarter with a strong inventory position and expects the use of air freight to be at a fully normalized level in the final months of the year. While On expects continued margin pressure from the combination of a strong USD and weak EUR compared to its reporting currency CHF, the current demand puts On in a strong position to further increase absolute and relative profitability.
For the year ending December 31, 2022, On is again increasing its net sales outlook by CHF 25 million, to CHF 1.125 billion, representing a year-over-year growth of approximately 55% compared to 2021. Despite the pressures on margin described above, On is raising its adjusted EBITDA target for the full year to CHF 148 million and with that reiterating the target adjusted EBITDA margin of 13.2%.
Other than with respect to IFRS net-sales, 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 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 November 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 is necessary.
Additionally, a live webcast of the conference call will be available on the Company's investor relations website and under the following link: https://events.q4inc.com/attendee/916539984. 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.