On Q3 Revenues Surge 68 Percent In Third Quarter

On Holding AG, in its first report since going public, reported sales grew 68 percent in the third quarter as sales continued to accelerate in all channels, regions and product categories. Adjusted EBITDA ran up 67.9 percent and the gross margin reached 60.2 percent, up from 54.5 percent a year ago.

Martin Hoffmann, co-CEO and CFO said: “The third quarter of 2021 has been the strongest in the history of the company in terms of net sales, gross profit and adjusted EBITDA. We are thankful for the relentless work of our team during the pandemic to achieve this. Consumer demand for the On brand is accelerating across the globe, evident by the fact that our wholesale and direct-to-consumer sales channels, geographic regions, and product groups have all contributed significantly to our strong growth of 68 percent for the quarter and 77 percent for the first nine months. We expect the demand for the On brand to increase. Recent supply chain challenges will lead to a transitory supply shortage in the fourth quarter and the first half of 2022. But since early November, all our production factories are open, and our outlook on net sales and adjusted EBITDA exceeds our original assumptions. We believe we are well-positioned to leverage this market momentum and to capitalize on the powerful consumer trends that are enlarging the global sportswear industry, increasing our brand awareness, and expanding the size and breadth of our community.”

Caspar Coppetti, co-Founder and Executive Co-Chairman, said: “To see what started over ten years ago with our first prototype running shoe, to where we are today, generating quarterly net sales of CHF 218.0 million – makes us extremely proud. We are excited to see the great progress the company has made over the third quarter of 2021 across all our strategic initiatives. We continued to strengthen our partnership with some of the most recognized premium global retailers while significantly scaling our community through our DTC channel, including a new On store in China. In addition to our strong results, we hit exciting milestones this quarter, which included becoming the official outfitter for the Swiss Olympics and Paralympics teams, introducing the Cloudboom Echo to support our athletes achieve incredible results, and wowing consumers with the new Cloudstratus. Further, we see our initial public offering in September as a stepping stone to continue to deliver on our growth strategy and our mission to serve more and more people around the world and have them move with us.”

Third Quarter 2021 Financial and Operating Metrics
Key highlights for the third quarter ended September 30, 2021, compared to the third quarter ended September 30, 2020, include:

• net sales increased 67.6 percent to CHF 218.0 million;
• net sales through the DTC sales channel increased 93.0 percent to CHF 75.7 million;
• net sales through the wholesale sales channel increased 56.7 percent to CHF 142.3 million;
• net sales in Europe, North America and the Asia-Pacific increased 50.3 percent to CHF 88.3 million, 82.6 percent to CHF 112.2 million, and 71.4 percent to CHF 13.1 million, respectively;
• net sales from shoes, apparel and accessories increased 65.2 percent to CHF 205.0 million, 133.0 percent to 11.5 million and 41.5 percent to 1.5 million
• gross profit increased 85.4 percent to CHF 131.3 million;
• gross margin increased to 60.2 percent from 54.5 percent;
• net income increased to CHF 13.0 million from CHF 8.1 million;
• adjusted EBITDA increased 67.9 percent to CHF 37.9 million; and
• adjusted EBITDA margin remained at 17.4 percent.

Key highlights for the nine-month period ended September 30, 2021, compared to the nine-month period ended September 30, 2020 include:

• net sales increased 77.2 percent to CHF 533.5 million;
• net sales through the DTC sales channel increased 69.8 percent to CHF 191.1 million;
• net sales through the wholesale sales channel increased 81.7 percent to CHF 342.4 million;
• net sales in Europe, North America and the Asia-Pacific increased 53.9 percent to CHF 216.3 million, 95.2 percent to CHF 276.1 million, and 112.2 percent to CHF 32.1 million, respectively;
• net sales from shoes, apparel and accessories increased 76.2 percent to CHF 503.6 million, 109.4 percent to CHF 26.4 million and 35.8 percent to CHF 3.6 million
• gross profit increased 90.9 percent to CHF 318.5 million;
• gross margin increased from 55.4 percent to 59.7 percent;
• net income increased to CHF 16.8 million from a net loss of CHF 25.0 million; and
• adjusted EBITDA increased 121.0 percent to CHF 85.2 million; and
• adjusted EBITDA margin increased from 12.8 percent to 16.0 percent.

Balance Sheet
Key highlights as of September 30, 2021 include:

• cash increased 641.6 percent to CHF 672.2 million compared to December 31, 2020; and
• networking capital was CHF 200.3 million as of September 30, 2021 which reflects an increase of 89.6 percent compared to September 30, 2020 and 77.3 percent compared to December 31, 2020.

Outlook
Due to recent events in Vietnam, On said it expected that the following supply chain challenges will have a short-term and transitory impact on its financial performance for the upcoming quarters:

• continued ramp-up after COVID-19 induced closures of factories located in the south of Vietnam is expected to cause supply constraints and higher airfreight expenses; and
• additional delays throughout the supply chain may delay a portion of net sales; and
• higher freight and shipping charges and warehouse labor expenses will impact overall operating expenses.

The financial outlook assumes these challenges will impact the fourth quarter of 2021 and the first half of 2022.

For the year ending December 31, 2021, On said it expected net sales to be CHF 710 million, which represents year-over-year growth of approximately 67 percent compared to 2020. Further, for the year ending December 31, 2021, On said it expected adjusted EBITDA to be CHF 92 million, representing an adjusted EBITDA margin of 13.0 percent and year-over-year growth of 85 percent.

For the year ending December 31, 2022, On anticipates net sales to be at least CHF 960 million and its net sales development returning to growth as of HY2 2022. Further, for the year ending December 31, 2022, On said it expects adjusted EBITDA to be CHF 125 million, representing an adjusted EBITDA margin of 13.0 percent and consistent with its outlook for 2021.

Photo courtesy On