On Holding (ONON) Q3 2024 Earnings Call Transcript | The Motley Fool

Image source: The Motley Fool. Date Tuesday, November 12, 2024 at 8 a.m. ET Call participants Co-Founder and Executive Co-Chairman - Caspar Coppetti Co-CEO and CFO - Martin Hoffmann Need a quote from a Motley Fool analyst? Email [email protected] Takeaways Net sales -- CHF635.8 million, up 32.3% reported and 33.2% constant currency, setting a quarterly record for the company. APAC region sales -- CHF74.6 million, representing growth of 79.3% reported and 85.7% constant currency, with APAC comprising 11.7% of total business. Gross profit margin -- 60.6% for the quarter, up 70 basis points year over year, marking the highest figure since going public. Adjusted EBITDA margin -- 18.9%, rising from 16.9% in the prior year period, reflecting adjusted margin expansion above prior guidance. D2C channel share -- 38.8% of total net sales, a more than 450 basis point increase over the prior year for the quarter; D2C sales reached CHF246.7 million. Wholesale channel growth -- CHF389.1 million, up 23.2% reported and 24% constant currency, with most growth from existing and new product franchises. Footwear sales -- CHF603.7 million in the quarter, rising 32.1% with core franchises such as Cloud Monster and Cloudrunner leading volumes. Apparel sales -- CHF26.8 million, up 33.3%, with expectations for reacceleration in Q4 based on preorders and operational focus. Americas sales -- CHF395.5 million, up 34.1% reported and 34.5% constant currency, driven primarily by US brand strength and retail expansion. EMEA sales -- CHF165.8 million, growing 15.1% reported and 15.2% constant currency, with France as the fastest-growing market for the region in Q3. Inventory -- Lowest level in the past twelve months at quarter-end, with net working capital at CHF540.1 million. Operating cash flow -- Over CHF105 million generated in the quarter, with a year-to-date positive cash flow of over CHF250 million; cash balance near CHF750 million at quarter-end. Store openings -- 20 new retail stores expected for 2024, on target with the company’s annual 20-25 store opening ambition, reflecting significant retail channel expansion globally. Brand awareness -- In the US, awareness of the On brand has doubled since last year, now reaching close to 20%. In the city of Paris, the home of the Olympics, Coppetti said, "our brand awareness almost tripled year over year. All of this confirms our efforts are paying off, but also that we have a lot more room to grow." FX impact -- Unfavorable FX movement resulted in an unrealized loss of CHF37.2 million, primarily due to Swiss franc/US dollar fluctuations. Guidance update -- Full-year constant currency net sales growth target raised to at least 32% from at least 30%, with reported net sales expectation of at least CHF2.29 billion. Gross profit margin outlook -- Upgraded to approximately 60.5% for 2024, 50 basis points above previous outlook, with expectations for the strongest margin in company history. Adjusted EBITDA margin outlook -- Now anticipated at the upper end or above prior 16%-16.5% guidance for the full year. Product innovation -- LightSpray technology and franchise launches such as Cloudsurfer Next and...

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