- On had a very strong start into the year, exceeding
expectations. Net sales increased by 67.9% in Q1 2022, with the
direct-to-consumer and wholesale business growing nearly equally
and contributing to another record top-line quarter. Continued very
strong consumer demand, successful new product launches, and
extraordinary teamwork to mitigate the supply chain headwinds,
allowed On to win market share at an accelerated pace in the first
quarter 2022.
- On records Q1 2022 net sales of CHF 235.7 million, net income
of CHF 14.3 million and adjusted EBITDA of CHF 15.7 million despite
the continued challenging supply chain environment.
- On delivers a first quarter gross profit margin of 51.8%, down
from 57.6% in the prior year period, reflecting transitory
headwinds from higher airfreight share and the corresponding
expenses.
- The success of On's new product launches, the feedback from
retail channels as well as the strength of the supply chain give On
additional confidence in its growth aspirations in 2022. On is
therefore raising its guidance for the full fiscal year 2022 and
now expects net sales of at least CHF 1.04 billion.
- On continues to innovate at the highest level and explore ways
to move away from petroleum-based resources. The first quarter saw
On's biggest product launch in history with the all-new Cloud 5,
made with an industry-leading 44% of recycled content. On further
announces a new cushioning technology to be introduced in Spring
2023, called Cloudtec Phase™, which was generated using advanced
Finite Element Analysis (FEA) simulation.
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, 2022.
Martin Hoffmann, Co-CEO and CFO of On, said: “We are extremely
proud and grateful to report that we continue to see strong demand
for the On brand globally and we had an outstanding start to 2022.
Our team has once again done phenomenal work to navigate through an
uncertain supply chain environment and to mitigate the impacts from
last year's factory closures. While the transitory supply shortage
had still limited our ability to fulfil all of the demand, we were
able to ship more products to our customers than expected while
also maintaining profitability. In March, for the first time in our
history, we were able to ship more than 1 million pairs of shoes in
a single month. Building on the strong first quarter and 12 years
after our foundation, we anticipate to surpass the groundbreaking
hurdle of CHF 1 billion in sales for the full year 2022. We are
thrilled to continue to see the On community growing and are
excited to announce the further expansion of our presence to most
countries in Latin America in the second half of 2022 - this namely
includes the introduction of Argentina, Bolivia, Chile, Colombia,
Peru and Uruguay as distributor markets.”
Caspar Coppetti, Co-Founder and Executive Co-Chairman of On,
said: “With the accelerated pace of market share gains in the first
quarter of 2022, we made further progress towards our goal to be
the number one brand on runners' feet. We have supported this
positive trend with the launch of a number of key new Performance
Running styles that are seeing significant traction with consumers,
both online and with our retail partners. In addition, with our
Lighting program, we have a dedicated team that is focused on one
mission: developing the fastest products possible and working
together with our most talented athletes to reach their full
potential. This quarter also saw our biggest product launch in
history - with the Cloud 5, the latest and most environmentally
friendly iteration of our flagship product in the Performance All
Day category, we continue to drive the industry in sustainable
innovations."
First Quarter 2022 Financial and Operating Metrics
Key highlights for the three-month period ended March 31, 2022
compared to the three-month period ended March 31, 2021
include:
- net sales increased 67.9% to CHF 235.7 million;
- net sales through the direct-to-consumer ("DTC") sales channel
increased 68.0% to CHF 83.4 million;
- net sales through the wholesale sales channel increased 67.8%
to CHF 152.3 million;
- net sales in Europe, North America and Asia-Pacific increased
31.3% to CHF 74.9 million, 86.5% to CHF 138.4 million and 125.9% to
CHF 16.4 million, respectively;
- net sales from shoes, apparel and accessories increased 69.0%
to CHF 222.5 million, 44.9% to 11.4 million and 111.8% to 1.8
million
- gross profit increased 51.0% to CHF 122.1 million;
- gross profit margin decreased to 51.8% from 57.6%;
- net income (loss) increased to CHF 14.3 million from CHF (10.5)
million;
- net income (loss) margin increased to 6.1% from (7.4)%;
- adjusted EBITDA decreased (21.1)% to CHF 15.7 million from CHF
19.9 million;
- adjusted EBITDA margin decreased to 6.7% from 14.2%;
- adjusted net income increased to CHF 17.0 million from CHF 13.7
million;
- adjusted basic EPS Class A (CHF) increased 8.5% to CHF 0.05;
and
- adjusted diluted EPS Class A (CHF) increased 9.5% to CHF
0.05.
Adjusted EBITDA, adjusted EBITDA margin, adjusted net income,
adjusted basic EPS and adjusted diluted EPS 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 and adjusted diluted EPS 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 and adjusted diluted EPS margin 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
We are incredibly excited for what is ahead of us for the
remainder of 2022. This includes groundbreaking innovations on
sustainability, many athletes that will compete in On gear on the
big stages throughout the upcoming summer months and even more
exciting footwear and apparel products, especially in our core
running range.
While many of our teams around the world have been returning to
our respective offices, our colleagues in China and particularly in
Shanghai are currently going through one of the toughest phases
since the beginning of the COVID-19 pandemic. Given the relatively
small overall net sales share of China, we do not expect a
significant impact from selected local lock-downs in China on our
top or bottom-line.
However, in response to the transitory impacts from production
shortages in the second half of 2021 in Vietnam, we expect to
continue to use air freight in the second quarter of 2022 to
further balance inventory levels against the strong demand. As
such, we continue to expect a headwind to our cumulative gross
profit margin for the first half of 2022 in the range of 700-800
basis points.
The strong first quarter 2022 results put us in a good position
to surpass our growth aspirations for 2022 and drive higher growth
than previously anticipated. For the fiscal year ending December
31, 2022, we now expect net sales to exceed CHF 1.04 billion,
representing a year-over-year growth of at least 44% compared to
2021. The higher anticipated net sales will allow additional,
growth focused investments into the brand and the team while
increasing our adjusted EBITDA target for the full year to CHF 137
million and the corresponding adjusted EBITDA margin to 13.2%.
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.
Conference Call Information
A conference call to discuss third quarter results is scheduled
for May 17, 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 link:
https://event.on24.com/wcc/r/3766807/E103942F1045344B91E35333B2D447D9.
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. Fuelled
by customer-recommendation, On’s award-winning CloudTec®
innovation, purposeful design and ground-breaking 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-running.com.
Non-IFRS Measures
Adjusted EBITDA, adjusted EBITDA margin, adjusted net income,
adjusted 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.
Additionally, we believe these non-IFRS measures enhance an
investor’s understanding of our financial and operating performance
from period to period, because certain measures, such as adjusted
EBITDA and adjusted EBITDA margin, exclude certain material items
relating to share-based compensation and other costs which are not
reflective of our ongoing operations and performance. 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 EPS, adjusted diluted EPS or 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. For more information on these non-IFRS
measures, please see the section captioned "Reconciliation of
Non-IFRS Measures" included in the accompanying financial tables,
which includes more detail on the IFRS measure that is most
directly comparable to each non-IFRS measure, and the related
reconciliations between these measures.
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: our ability to maintain the value and reputation of our
brand; the current COVID-19 coronavirus pandemic and related
government, private sector, and individual consumer responsive
actions; global supply chain challenges in the form of inflationary
cost pressures on labor and freight caused by COVID-19; the ongoing
conflict between Russia and Ukraine; our highly competitive market
and increasing competition; our ability to compete and conduct our
business in the future; our ability to anticipate consumer
preferences and to continue to innovate and to successfully develop
and introduce new, innovative and updated products; the
acceptability of our products to customers and our ability to
connect with our consumer base; our ability to accurately forecast
consumer demand for our products and manage product manufacturing
decisions; changes in consumer tastes and shopping preferences and
shifts in distribution channels; our international operations; our
ability to expand internationally in light of our limited operating
experience and limited brand recognition in new international
markets; our ability to implement our growth strategy and manage
our growth and the increased complexity of our business
effectively; our ability to strengthen our direct-to-consumer
channel; our ability to successfully open new store locations in a
timely manner; seasonality; our third-party suppliers, manufactures
and other partners, including their financial stability and our
ability to find suitable partners to implement our growth strategy;
our reliance on and limited control over third-party suppliers to
provide materials for and to produce our products; the operations
of many of our suppliers are subject to international and other
risks; suppliers or manufacturers not complying with our Vendor
Code of Ethics or applicable laws; our ability to deliver our
products to the market and to meet consumer expectations if we have
problems with our distribution system; our ability to distribute
products through our wholesale channel; the availability of
qualified personnel and the ability to retain such people;
increasing labor costs and other factors associated with the
production of our products in South Asia and South East Asia;
changes in commodity, material, distribution and other operating
costs; rising inflation rates due to material shortages,
transportation bottlenecks and rising shipping costs; our ability
to safeguard against security breaches with respect to our
information technology systems; our compliance with privacy and
data protection laws; our reliance on complex IT systems and any
material disruption of our information systems, including security
breaches; our ability to have technology-based systems function
effectively and grow our e-commerce business globally; climate
change, and related legislative and regulatory responses; increased
scrutiny regarding our environmental, social, and governance; or
sustainability responsibilities; an economic recession, depression,
or downturn or economic uncertainty in our key markets; global
economic, demographic, political and business conditions; health
epidemics, pandemics and similar outbreaks, including the COVID-19
pandemic; our ability to source and sell our merchandise profitably
or at all if new trade restrictions are imposed or existing trade
restrictions become more burdensome; changes in governmental
regulations or tax laws, including unanticipated tax liabilities;
our ability to comply with trade and other regulations;
fluctuations in foreign currency exchange rates; imitation by our
competitors; our ability to protect our intellectual property and
defend against allegations of violations of third-party
intellectual property by us; conflicting trademarks and the
prevention of sale of certain products; our exposure to various
types of litigation; our generation of net losses in the past and
potentially in the future; other factors that may affect our
financial condition, liquidity and results of operations; our
expectations regarding the time during which we will be an emerging
growth company under the JOBS Act and a foreign private issuer; and
other risks and uncertainties set out in filings made from time to
time with the United States Securities and Exchange Commission 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 / (Loss) (unaudited)
Three-month period ended March
31,
(CHF in thousands)
2022
2021
Net sales
235,681
140,393
Cost of sales
(113,607
)
(59,561
)
Gross profit
122,074
80,832
Selling, general and administrative
expenses
(118,703
)
(91,733
)
Operating result
3,371
(10,901
)
Financial income
310
6
Financial expenses
(1,499
)
(518
)
Foreign exchange result
17,190
2,679
Income / (loss) before taxes
19,372
(8,734
)
Income taxes
(5,028
)
(1,718
)
Net income / (loss)
14,344
(10,452
)
Earnings per share
Basic EPS Class A (CHF)
0.05
(0.04
)
Diluted EPS Class A (CHF)
0.04
(0.04
)
Consolidated Interim Balance Sheets
(unaudited)
(CHF in thousands)
3/31/2022
12/31/2021
Cash and cash equivalents (excluding bank
overdrafts)
626,254
653,081
Trade receivables
130,556
99,264
Inventories
162,451
134,178
Other current financial assets
36,934
30,054
Other current operating assets
58,743
48,024
Current assets
1,014,938
964,601
Property, plant and equipment
46,823
34,399
Right-of-use assets
180,172
177,889
Intangible assets
57,662
57,464
Deferred tax assets
3,859
2,171
Non-current assets
288,516
271,923
Assets
1,303,454
1,236,524
Trade payables
42,713
45,939
Other current financial liabilities
55,723
20,096
Other current operating liabilities
116,315
121,673
Current provisions
14,954
14,903
Income tax liabilities
7,942
2,400
Current liabilities
237,647
205,011
Employee benefit obligations
6,250
5,853
Non-current provisions
5,024
4,442
Other non-current financial
liabilities
169,111
167,228
Deferred tax liabilities
7,067
5,611
Other non-current liabilities
38
—
Non-current liabilities
187,490
183,134
Share capital
33,454
33,454
Treasury shares
(25,836
)
(25,035
)
Capital reserves
1,060,187
1,043,987
Other reserves
(3,227
)
(3,422
)
Accumulated losses
(186,261
)
(200,605
)
Equity
878,317
848,379
Equity and liabilities
1,303,454
1,236,524
Consolidated Interim Statements of Cash
Flow (unaudited)
Three-month period ended March
31,
(CHF in thousands)
2022
2021
Net income / (loss)
14,344
(10,452
)
Share-based compensation
1,219
25,482
Employee benefit expenses
395
364
Depreciation and amortization
9,308
5,325
Interest income and expenses
2,330
416
Net exchange differences
(16,735
)
34
Income taxes
5,028
1,718
Change in provisions
317
2,861
Change in working capital
Trade receivables
(28,893
)
(21,785
)
Inventories
(25,253
)
(22,813
)
Trade payables
(3,322
)
(10,011
)
Change in other current operating assets /
liabilities
(19,135
)
11,997
Income taxes paid
(2,782
)
(610
)
Cash inflow / (outflow) from operating
activities
(63,179
)
(17,474
)
Purchase of tangible assets
(14,102
)
(2,667
)
Purchase of intangible assets
(2,226
)
(2,652
)
Payment of contingent considerations
—
(200
)
Cash inflow / (outflow) from investing
activities
(16,328
)
(5,519
)
Payments of lease liabilities
(4,387
)
(1,551
)
Proceeds from issue of shares
—
71
Proceeds on sale of treasury shares
related to share-based compensation
16,821
—
Interests paid
(1,260
)
(414
)
Cash inflow / (outflow) from financing
activities
11,174
(1,894
)
Change in net cash and cash
equivalents
(68,333
)
(24,887
)
Net cash and cash equivalents at January
1
653,081
90,595
Net impact of foreign exchange rate
differences
15,663
1,360
Net cash and cash equivalents at March
31*
600,411
67,068
* Net cash and cash equivalents are net of
bank overdrafts (CHF 25,843 thousand at March 31, 2022 and CHF 0 at
December 31, 2021).
Reconciliation of non-IFRS measures
Adjusted EBITDA and adjusted EBITDA margin
The table below reconciles net income / (loss) 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 thousands)
2022
2021
% Change
Net income / (loss)
14,344
(10,452
)
237.2
%
Exclude the impact of:
Income taxes
5,028
1,718
192.7
%
Financial income
(310
)
(6
)
4846.1
%
Financial expenses
1,499
518
189.3
%
Foreign exchange result(1)
(17,190
)
(2,679
)
541.6
%
Depreciation and amortization
9,308
5,325
74.8
%
Share-based compensation(2)
3,031
25,482
(88.1
)%
Adjusted EBITDA
15,710
19,906
(21.1
)%
Adjusted EBITDA Margin
6.7
%
14.2
%
(53.0
)%
(1)
Represents the foreign exchange impact
within the net financial result. We do not consider these expenses
reflective of the operating performance of the business.
(2)
Represents non-cash share-based
compensation expense. We do not consider these expenses reflective
of the operating performance of the business.
Adjusted Net Income, Adjusted EPS and Adjusted Diluted
EPS
We use adjusted net income, adjusted EPS and adjusted diluted
EPS as measures of operating performance in conjunction with
related IFRS measures.
Adjusted EPS is used in conjunction with other non-IFRS measures
and excludes certain items (as listed below) from the calculation
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 earnings per share (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 EPS and adjusted diluted EPS in a
manner that fully excludes the impact of any costs related to
share-based compensation and other costs which are not reflective
of our ongoing operations and performance and includes the tax
effect on the tax deductible portion of the non-IFRS
adjustments.
The table below provides a reconciliation between net income /
(loss) to adjusted net income, adjusted EPS and adjusted diluted
EPS for the periods presented:
Three-month period ended March
31,
(CHF in thousands, except per share
data)
2022
2022
2021
Class A
Class B
Class A
Net income / (loss)
12,773
1,571
(10,452
)
Exclude the impact of:
Share-based compensation(1)
2,699
332
25,482
Tax effect of adjustments(2)
(346
)
(42
)
(1,329
)
Adjusted Net income / (loss)
15,126
1,861
13,701
Weighted number of outstanding
shares(4)
280,849,324
345,437,500
276,057,806
Weighted number of shares with dilutive
effects(4)
3,502,362
7,492,339
5,977,256
Weighted number of outstanding shares
(diluted and undiluted)(3)(4)
284,351,686
352,929,839
282,035,062
Adjusted EPS (CHF)
0.05
0.005
0.05
Adjusted Diluted EPS (CHF)
0.05
0.005
0.05
(1)
Represents non-cash share-based
compensation expense. We do not consider these expenses reflective
of the operating performance of the business.
(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.
(4)
Original share numbers have been
multiplied by 1,250 to give effect to the Share Capital
Reorganization that took place in 2021.
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 thousands)
2022
2021
% Change
Accounts receivables
130,556
99,264
31.5
%
Inventories
162,451
134,178
21.1
%
Trade payables
(42,713
)
(45,939
)
(7.0
)%
Net working capital
250,294
187,503
33.5
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220517005212/en/
Investor Contact: On Holding AG Florian Maag
investorrelations@on-running.com or ICR, Inc. Brendon Frey
brendon.frey@icrinc.com Media Contact: On Holding AG Vesna
Stimac press@on-running.com
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