Revenue Channels and Growth - Direct-to-Consumer (DTC) channel accounted for 35.7% of revenue in 2023, up from 29.5% in 2022[349] - Wholesale channel accounted for 64.3% of revenue in 2023, down from 70.5% in 2022[349] - E-commerce grew from 14.5% of revenue in 2022 to 16.4% in 2023[355] - Revenue in Q4 accounted for 30%, 34%, and 33% of total revenue in fiscal years 2023, 2022, and 2021, respectively, driven by higher DTC channel sales and fall/winter collections[361] - Revenue for 2023 increased by $819.6 million, or 23.1%, compared to 2022, driven by strong growth in the Technical Apparel segment and a rebound in Greater China[396] - DTC channel revenue increased by $512.7 million, or 49.0%, to $1,558.8 million in 2023, driven by increased consumer demand and a net opening of 38 owned retail stores[397] - Revenue is primarily derived from the DTC channel, which includes owned retail and e-commerce, and the wholesale channel[496] Geographic Revenue and Expansion - Greater China revenue increased to $841.4 million in 2023, up 60.6% from $523.8 million in 2022[369] - Greater China revenue grew by $317.6 million, or 60.6%, in 2023, driven by increased consumer demand following COVID-19 lockdowns in 2022[398] - Amer Sports plans to expand into North America, Europe, and Greater China[357] Financial Performance - Total revenue for fiscal year 2023 was $4,368.4 million, a 23.1% increase from $3,548.8 million in 2022[369] - Net loss for fiscal year 2023 was $208.8 million, with a net loss margin of 4.8%, improving from a 7.1% net loss margin in 2022[369] - Adjusted EBITDA for fiscal year 2023 was $610.7 million, with an Adjusted EBITDA margin of 14.0%, up from 12.8% in 2022[369] - Gross profit for 2023 increased by $512.5 million, or 29.1%, to $2,276.2 million, with a gross margin of 52.1% compared to 49.7% in 2022[400] - Selling, general and administrative expenses increased by $459.8 million, or 30.2%, to $1,982.5 million in 2023, driven by higher selling and marketing costs and administrative expenses[401] - Operating profit for 2023 increased by $251.9 million, or 497.7%, to $302.5 million, primarily due to lower impairment losses and increased revenue[404] - Finance cost increased by $176.9 million, or 74.8%, to $413.4 million in 2023, driven by higher interest expenses[406] - Income tax expense increased by $55.9 million, or 115.7%, to $104.2 million in 2023, with an effective tax rate of (100)%[407] - Adjusted EBITDA for 2023 was $610.7 million, up from $453.0 million in 2022, with an Adjusted EBITDA Margin of 14.0% compared to 12.8% in 2022[434] - Net loss for 2023 was $208.8 million, an improvement from $252.7 million in 2022, with Adjusted Net Income at $(135.4) million compared to $(29.9) million in 2022[438] Segment Performance - Technical Apparel segment revenue grew to $1,592.8 million in 2023, a 45.4% increase from $1,095.5 million in 2022[369] - Technical Apparel segment revenue increased by $497.3 million, or 45.4%, to $1,592.8 million in 2023[412] - Outdoor Performance segment revenue increased by $251.3 million, or 17.7%, to $1,667.8 million in 2023[412] - Technical Apparel segment revenue grew to $1,592.8 million in 2023, a 45.4% increase from $1,095.5 million in 2022, driven by DTC channel growth of 56.7%[421] - Arc'teryx brand revenue increased to $1,443.5 million in 2023 from $952.6 million in 2022, contributing significantly to the Technical Apparel segment growth[417] - Comparable sales growth for the Technical Apparel segment reached 54.7% in 2023, up from 33.4% in 2022, with a net increase of 15 owned retail stores[418] - Outdoor Performance segment revenue increased by 17.7% to $1,667.8 million in 2023, driven by growth in footwear and performance in Greater China[426] - Ball & Racquet Sports segment revenue grew by 6.9% to $1,107.8 million in 2023, primarily due to growth in inflatable ball sales[429] - Segment Adjusted Operating Profit for Technical Apparel increased by 83.5% to $314.4 million in 2023, driven by gross margin improvement and favorable channel mix[422] Inventory and Supply Chain Management - Inventory management is critical to maintaining premium brand positioning and avoiding missed sales opportunities[360] - The company focuses on diversifying its supplier network and expanding its distribution footprint[358] - Inventory is valued at the lower of cost or net realizable value using the weighted average cost method[502] Foreign Currency and Risk Management - 68.5% of revenue in fiscal year 2023 was generated in non-USD currencies, including 18.7% in euros, 8.4% in Canadian dollars, and 18.2% in RMB[362] - The company manages foreign currency exposure through hedging arrangements, including forward contracts, options, and swaps, primarily for euros, Canadian dollars, and RMB[363] - The company generated 68.5% of its revenue in currencies other than U.S. dollars in 2023, with 77.8% of operating expenses incurred in foreign currencies[482] - A 10% increase in the U.S. dollar against all other foreign currencies would have decreased the company's operating profit by $17.1 million in 2023[482] - 33.1% of the company's assets and 76.2% of its liabilities were subject to foreign currency exposure as of December 31, 2023[483] - The company's foreign currency risk is managed through financing business units in their functional currency and using hedging arrangements, including foreign exchange forward contracts and options[484] - The company is exposed to commodity price risk from materials such as rubber, nylon, polyester, steel, and aluminum, and manages these risks by negotiating prices in advance[485] - A 1% increase in interest rates would have increased net loss by $51.7 million and $52.5 million for the years ended December 31, 2023 and 2022 respectively[488] Cash Flow and Capital Expenditures - Cash and cash equivalents increased by $81.4 million to $483.4 million as of December 31, 2023, compared to $402.0 million in 2022, driven by improved net cash flows from operating activities[443] - Capital expenditures for 2023 were $136.3 million, with a budget of approximately $300 million for 2024, primarily for upgrading the global SAP system and expanding warehousing facilities[444] - Net cash flows from operating activities improved significantly to $199.0 million in 2023, compared to a cash outflow of $91.7 million in 2022, a year-over-year increase of $290.7 million[446][447] - Cash outflows from investing activities increased by $36.2 million to $154.8 million in 2023, mainly due to investments in property, plant, and equipment, including retail store expansion[448] Debt and Financing - The company issued $800 million in 6.750% senior secured notes, maturing on February 16, 2031, with interest payable semi-annually[451] - The company secured new senior secured credit facilities, including a $500 million USD term loan, a €700 million EUR term loan, and a $710 million revolving credit facility[458] - The company has a maximum first lien net leverage ratio requirement of not greater than 5.00:1.00 and an interest coverage ratio of not less than 2.00:1.00, increasing to 2.25:1.00 by December 31, 2025, and further to 2.50:1.00 by December 31, 2026[468] - The company's Senior Credit Facilities included a EUR 315 million revolving facility and a EUR 1.7 billion term loan facility, both of which were repaid and terminated by February 16, 2024[470] - As of December 31, 2023, the company had EUR 4.2 million of borrowings available under the Revolving Facility and no borrowings available under the Term Loan Facility[470] - The company's contractual obligations and commitments as of December 31, 2023, totaled $7,330.4 million, including $2,244.4 million in loans from financial institutions and $4,077.0 million in loans from related parties[477] - The company has $710 million of borrowings available under the New Revolving Credit Facility and no borrowings available under the New Term Loan Facilities as of February 16, 2024[487] Impairment and Restructuring - The company experienced a $77.5 million impairment charge on Suunto's net assets in 2021 and a $5.5 million loss on the disposal of Suunto in 2022[366] - Impairment losses on goodwill and intangible assets were $4.7 million in 2022, with no such losses recorded in 2023[441] - No impairment losses on goodwill and intangible assets with indefinite useful lives were recorded in 2023[507] - Restructuring expenses decreased to $0.5 million in 2023 from $1.5 million in 2022[441] Corporate Governance and Compensation - The company identified a material weakness in internal control over financial reporting and is implementing measures to remediate it, including new IT systems and hiring a Chief Accounting Officer[490] - The company granted share-based compensation to employees under equity compensation plans, with expenses recognized starting in Q4 2023 as the IPO became probable[511] - Aggregate compensation for board members and executive officers in 2023 was $7,495,787, including benefits and indirect compensation[535] - 1,031,226 options were granted to board members and executives in 2023, with a weighted average exercise price of EUR 29.31[535] - Non-employee directors receive an annual cash retainer of $100,000, with additional retainers for committee roles (e.g., $25,000 for audit committee chair)[537] - The lead director receives an additional annual cash retainer of $40,000[537] - Audit committee members receive an annual cash retainer of $10,000 each[537] - Compensation committee chair receives an annual cash retainer of $20,000[537] - Nominating and corporate governance committee chair receives an annual cash retainer of $15,000[537] - Compensation includes fixed and variable components, with cash bonuses based on agreed business targets[534] - Executive officers and senior management receive benefits aligned with market practices in their respective countries[534] - The interim Chief Financial Officer's compensation is included in the aggregate compensation figure for 2023[535] - Each independent non-employee director received an equity grant of RSUs with a grant date fair market value of $175,000 upon IPO completion[538] - The number of ordinary shares underlying the RSU grant is determined by dividing $175,000 by the IPO price[538] - Initial RSU grants will vest on the one-year anniversary of the IPO completion, contingent on continuous service[538] Product and Brand Performance - Salomon's revenue in 2022 was over 60% from footwear[344] - Arc'teryx's Alpha SV jacket is a best-selling "hardshell" jacket in North America[343] - Wilson is the official partner of professional sports leagues including the NBA, WNBA, NFL, US Open, and Roland Garros[345] - The company's innovation centers, including the Wilson Innovation Center and Arc'teryx design centers, focus on consumer-driven product development and sustainability[493] Customer and Partner Relationships - The company offers DTC customers a 14–30 day return policy and provides wholesale partners with volume rebates and performance bonuses[499][500] - The largest single customer accounted for 4% of total accounts receivable, and the 20 largest wholesale partners accounted for 31% of total accounts receivable as of December 31, 2023[489] - The average payment time for outstanding sales was 49 days as of December 31, 2023[489] Retail Expansion - Net store count increased by approximately 85% from January 1, 2019, to over 360 owned retail stores as of December 31, 2023[354]
Amer Sports(AS) - 2023 Q4 - Annual Report