- 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.
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.
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 increased 100.6% 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
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.
Non-IFRS Measures
Adjusted EBITDA, adjusted EBITDA margin, adjusted net income,
adjusted basic EPS, adjusted diluted EPS and net working capital
are financial measures that are not defined under IFRS. We use
these non-IFRS measures when evaluating our performance, including
when making financial and operating decisions, and as a key
component in the determination of variable incentive compensation
for employees. We believe that, in addition to conventional
measures prepared in accordance with IFRS, these non-IFRS 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. In
particular, we believe adjusted EBITDA, adjusted EBITDA margin,
adjusted net income and net working capital are measures commonly
used by investors to evaluate companies in the sportswear
industry.
However, 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 and may not be comparable to similarly titled non-IFRS
measures used by other companies. The tables below reconcile each
non-IFRS measure to its most directly comparable IFRS measure.
As noted above, we do 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. The amount of these
deductions may be material and, therefore, could result in
projected net income being materially less than projected adjusted
EBITDA. These statements represent forward-looking information and
may represent a financial outlook, and actual results may vary.
Please see the risks and assumptions referred to in the
Forward-Looking Statements section of this news release.
Forward-Looking Statements
This press release includes estimates, projections, statements
relating to the Company's business plans, objectives, and expected
operating results that are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995,
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. In many cases, you can identify
forward-looking statements by terms such as "may," "will,"
"should," "expects," "plans," "anticipates," "outlook," "believes,"
"intends," "estimates," "predicts," "potential" or the negative of
these terms or other comparable terminology. These forward-looking
statements also include the Company's guidance and outlook
statements. These statements are based on management's current
expectations but they involve a number of risks and uncertainties.
Actual results and the timing of events could differ materially
from those anticipated in the forward-looking statements as a
result of risks and uncertainties, which include, without
limitation: the strength of our brand and our ability to maintain
our reputation and brand image; our ability and the ability of our
independent manufacturers and other suppliers to follow responsible
business practices; our ability to implement our growth strategy;
the concentration of our business in a single, discretionary
product category, namely footwear, apparel and accessories; our
ability to continue to innovate and meet consumer expectations;
changes in consumer tastes and preferences including in products
and sustainability, and our ability to connect with our consumer
base; our generation of net losses in the past and potentially in
the future; our limited operating experience in new markets; our
ability to open new stores at locations that will attract customers
to our premium products; our ability to compete and conduct our
business in the future; health epidemics, pandemics and similar
outbreaks, including the COVID-19 pandemic; general economic,
political, demographic and business conditions worldwide, including
geopolitical uncertainty and instability, such as the
Russia-Ukraine conflict; the success of operating initiatives,
including advertising and promotional efforts and new product and
concept development by us and our competitors; our ability to
strengthen our DTC channel; our ability to execute on our
sustainability strategy and achieve our sustainability-related
goals and targets, including sustainable product offerings; our
third-party suppliers, manufacturers and other partners, including
their financial stability and our ability to find suitable partners
to implement our growth strategy; supply chain disruptions,
inflation and increased costs in supplies, goods and
transportation; the availability of qualified personnel and the
ability to retain such personnel, including our extended founder
team; our ability to accurately forecast demand for our products
and manage product manufacturing decisions; our ability to
distribute products through our wholesale channel; changes in
commodity, material, labor, distribution and other operating costs;
our international operations; our ability to protect our
intellectual property and defend against allegations of violations
of third-party intellectual property by us; security breaches and
other disruptions to our IT systems; increased hacking activity
against the critical infrastructure of any nation or organization
that retaliates against Russia for its invasion of Ukraine; our
reliance on complex IT systems; financial accounting and tax
matters; any material weaknesses identified in our internal control
over financial reporting and remediation efforts; the potential
impact of, and our compliance with, new and existing laws and
regulations; other factors that may affect our financial condition,
liquidity and results of operations; and other risks and
uncertainties set out in filings made from time to time with the
SEC and available at www.sec.gov, including, without limitation,
our most recent reports on Form 20-F and Form 6-K. You are urged to
consider these factors carefully in evaluating the forward-looking
statements contained herein and are cautioned not to place undue
reliance on such forward-looking statements, which are qualified in
their entirety by these cautionary statements. The forward-looking
statements made herein speak only as of the date of this press
release and the Company undertakes no obligation to publicly update
such forward-looking statements to reflect subsequent events or
circumstances, except as may be required by law.
Source: On Category: Earnings
Consolidated Financial Information Consolidated
Interim Statements of Income (unaudited)
Three-month period ended March
31,
(CHF in millions)
2023
2022
Net sales
420.2
235.7
Cost of sales
(175.3
)
(113.6
)
Gross profit
244.9
122.1
Selling, general and administrative
expenses
(202.6
)
(118.7
)
Operating result
42.3
3.4
Financial income
2.1
0.3
Financial expenses
(1.7
)
(1.5
)
Foreign exchange result
8.8
17.2
Income before taxes
51.5
19.4
Income taxes
(7.1
)
(5.0
)
Net income
44.4
14.3
Earnings per share
Basic EPS Class A (CHF)
0.14
0.05
Basic EPS Class B (CHF)
0.01
0.00
Diluted EPS Class A (CHF)
0.14
0.04
Diluted EPS Class B (CHF)
0.01
0.00
Consolidated Interim Balance Sheets (unaudited)
(CHF in millions)
3/31/2023
12/31/2022
Cash and cash equivalents
361.3
371.0
Trade receivables
238.5
174.6
Inventories
465.2
395.6
Other current financial assets
34.8
33.2
Other current operating assets
92.5
77.0
Current assets
1,192.2
1,051.5
Property, plant and equipment
81.1
77.2
Right-of-use assets
161.8
151.6
Intangible assets
69.1
70.3
Deferred tax assets
40.1
31.7
Non-current assets
352.0
330.9
Assets
1,544.3
1,382.4
Trade payables
130.7
111.0
Other current financial liabilities
35.4
31.2
Other current operating liabilities
146.6
81.7
Current provisions
7.4
5.0
Income tax liabilities
27.9
13.9
Current liabilities
348.0
242.7
Employee benefit obligations
3.0
6.3
Non-current provisions
8.0
7.2
Other non-current financial
liabilities
149.0
138.8
Deferred tax liabilities
17.6
17.9
Non-current liabilities
177.6
170.2
Share capital
33.5
33.5
Treasury shares
(26.1
)
(26.1
)
Capital reserves
1,109.6
1,105.1
Other reserves
0.4
0.0
Accumulated losses
(98.5
)
(142.9
)
Equity
1,018.7
969.5
Equity and liabilities
1,544.3
1,382.4
Consolidated Interim Statements of Cash Flow
(unaudited)
Three-month period ended March
31,
(CHF in millions)
2023
2022
Net income
44.4
14.3
Share-based compensation
2.3
1.2
Employee benefit expenses
(3.3
)
0.4
Depreciation and amortization
13.8
9.3
Interest income and expenses
(0.9
)
2.3
Net exchange differences
(8.9
)
(16.7
)
Income taxes
7.1
5.0
Change in provisions
3.2
0.3
Change in working capital
(107.2
)
(57.5
)
Trade receivables
(61.6
)
(28.9
)
Inventories
(64.9
)
(25.3
)
Trade payables
19.3
(3.3
)
Change in other current assets /
liabilities
48.9
(19.1
)
Interest received
2.0
—
Income taxes paid
(2.1
)
(2.8
)
Cash outflow from operating
activities
(0.6
)
(63.2
)
Purchase of tangible assets
(8.6
)
(14.1
)
Purchase of intangible assets
(1.2
)
(2.2
)
Cash outflow from investing
activities
(9.7
)
(16.3
)
Payments of lease liabilities
(4.9
)
(4.4
)
Sale of treasury shares related to
share-based compensation
2.2
16.8
Interest paid
(1.0
)
(1.3
)
Cash inflow / (outflow) from financing
activities
(3.8
)
11.2
Change in net cash and cash
equivalents
(14.1
)
(68.3
)
Net cash and cash equivalents at January
1
371.0
653.1
Net impact of foreign exchange rate
differences
4.4
15.7
Net cash and cash equivalents at March
31
361.3
600.4
Reconciliation of non-IFRS measures
Adjusted EBITDA and adjusted EBITDA margin
The table below reconciles net income to adjusted EBITDA for the
periods presented. Adjusted EBITDA margin is equal to adjusted
EBITDA for the period presented as a percentage of net sales for
the same period.
Three-month period ended March
31,
(CHF in millions)
2023
2022
% Change
Net income
44.4
14.3
209.2
%
Exclude the impact of:
Income taxes
7.1
5.0
41.1
%
Financial income
(2.1
)
(0.3
)
574.7
%
Financial expenses
1.7
1.5
14.0
%
Foreign exchange result
(8.8
)
(17.2
)
(48.8
)%
Depreciation and amortization
13.8
9.3
48.1
%
Share-based compensation(1)
4.9
3.0
62.6
%
Adjusted EBITDA
61.0
15.7
288.2
%
Adjusted EBITDA Margin
14.5
%
6.7
%
117.5
%
(1) Represents non-cash share-based
compensation expense.
Adjusted Net Income, Adjusted Basic EPS (CHF) and Adjusted
Diluted EPS
We use adjusted net income, adjusted basic EPS and adjusted
diluted EPS as measures of operating performance in conjunction
with related IFRS measures.
Adjusted basic EPS is used in conjunction with other non-IFRS
measures and excludes certain items (as listed below) in order to
increase comparability of the metric from period to period, which
we believe makes it useful for management, our audit committee and
investors to assess our financial performance over time.
Diluted EPS is calculated by dividing net income by the weighted
average number of ordinary shares outstanding during the period on
a fully diluted basis. For the purpose of operational performance
measurement, we calculate adjusted net income, adjusted basic EPS
and adjusted diluted EPS in a manner that fully excludes the impact
of any costs related to share-based compensation and includes the
tax effect on the tax deductible portion of the non-IFRS
adjustments.
The table below provides a reconciliation between net income to
adjusted net income, adjusted basic EPS and adjusted diluted EPS
for the periods presented:
Three-month period ended March
31,
(CHF in millions, except per share
data)
2023
2023
2022
2022
Class A
Class B
Class A
Class B
Net income
39.5
4.8
12.8
1.6
Exclude the impact of:
Share-based compensation(1)
4.4
0.5
2.7
0.3
Tax effect of adjustments(2)
(0.5
)
(0.1
)
(0.3
)
—
Adjusted net income
43.5
5.3
15.1
1.9
Weighted number of outstanding
shares
283,522,941
345,437,500
280,849,324
345,437,500
Weighted number of shares with dilutive
effects
3,290,072
10,412,977
3,502,362
7,492,339
Weighted number of outstanding shares
(diluted and undiluted)(3)
286,813,013
355,850,477
284,351,686
352,929,839
Adjusted Basic EPS (CHF)
0.15
0.02
0.05
0.01
Adjusted Diluted EPS (CHF)
0.15
0.02
0.05
0.01
(1) Represents non-cash share-based
compensation expense.
(2) The tax effect has been calculated by
applying the local tax rate on the tax deductible portion of the
respective adjustments.
(3) Weighted number of outstanding shares
(diluted and undiluted) are presented herein in order to calculate
Adjusted EPS as Adjusted net income for such periods.
Net Working Capital
Net working capital is a financial measure that is not defined
under IFRS. We use, and believe that certain investors and
analysts, use this information to assess liquidity and management
use of net working capital resources. We define net working capital
as trade receivables, plus inventories, minus trade payables. This
measure should not be considered in isolation or as a substitute
for any standardized measure under IFRS. Other companies in our
industry may calculate this measure differently than we do,
limiting its usefulness as a comparative measure.
As of March 31,
As of December 31,
(CHF in millions)
2023
2022
% Change
Accounts receivables
238.5
174.6
36.6
%
Inventories
465.2
395.6
17.6
%
Trade payables
(130.7
)
(111.0
)
17.8
%
Net working capital
573.0
459.2
24.8
%
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version on businesswire.com: https://www.businesswire.com/news/home/20230516005301/en/
For investor and media inquiries Investor Contact:
On Holding AG Jerrit Peter investorrelations@on.com or ICR, Inc.
Brendon Frey brendon.frey@icrinc.com
Media Contact: On Holding AG Vesna Stimac
press@on.com
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