Xiaomi (SEHK:01810) Q4 2025 Earnings call March 24, 2026 07:30 AM ET Company ParticipantsAlain Lam - VP and CFOWilliam Lu - Partner and PresidentXu Ran - General Manager of Group Investor Relations and Capital Markets DepartmentConference Call ParticipantsKyna Wong - Senior Equity Research AnalystTimothy Zhao - Equity Research AnalystZoe Xu - Greater China Tech Hardware AnalystNone - AnalystNone - AnalystNone - AnalystOperatorNow, we will have Mr. Xu Ran, General Manager of Group Investor Relations and Capi ...

Xiaomi (SEHK:01810) Q4 2025 Earnings call March 24, 2026 07:30 AM ET Speaker2Now, we will have Mr. Xu Ran, General Manager of Group Investor Relations and Capital Markets Department to start. Welcome, everyone. Welcome to the investor conference call and audio webcast for the company's 2025 annual results. Before we start the call, we would like to remind you that this call may include forward-looking statements, which are underlined by a number of risks and uncertainties and may not be realized in the futu ...

Core Insights - On Holding AG reported record results for 2025, achieving over CHF 3 billion in annual net sales for the first time, driven by premium positioning and disciplined full-price selling [2][5] - The company expects at least 23% net sales growth at constant currency for 2026, with a gross margin target of at least 63% and an adjusted EBITDA margin of 18.5% to 19% [4][17] Financial Performance - For Q4, net sales reached CHF 743.8 million, a 22.6% increase year-over-year on a reported basis and 30.6% at constant currency, exceeding previous guidance [1] - Full-year 2025 results included a gross profit margin of 62.8% and an adjusted EBITDA margin of 18.8%, with operating cash flow of CHF 359.5 million and over CHF 1 billion in cash at year-end [1][5] Regional Growth - APAC led growth in Q4 with net sales of CHF 126.5 million, increasing 70.8% reported and 85.1% at constant currency, supported by strong performance during key shopping events [10] - The Americas reported Q4 net sales of CHF 434.3 million, up 12.8% reported and 21.3% at constant currency, with nearly 50% of sales driven by direct-to-consumer (DTC) channels [7] Product and Innovation - The company is focusing on product innovation, including the upcoming launch of the Cloudsurfer 3 in H2 2026, which features new foam technology [11] - On's apparel business grew 76% in 2025 at constant currency, with apparel and accessories now contributing 15% of total retail net sales [14] Manufacturing and Sustainability - On opened a LightSpray manufacturing facility in Busan, South Korea, increasing production capacity by 30 times compared to 2025, while significantly reducing CO₂ emissions [12] - The new manufacturing approach streamlines production, reducing assembly steps from 200 to 1 [12] Strategic Outlook - The company anticipates that DTC sales will outpace wholesale growth in 2026, with apparel expected to significantly exceed overall growth [18] - On is planning a future investor day in the first quarter of next year to align with the incoming CFO [19]

Financial Data and Key Metrics Changes - The company achieved record net sales of CHF 794.4 million, growing 24.9% year over year on a reported basis and 34.5% at constant currency [17][30] - Gross profit margin reached 65.7%, an increase of 510 basis points year over year, while adjusted EBITDA margin was 22.6%, up 370 basis points year over year [25][26] - Adjusted EBITDA grew nearly 50% year over year, amounting to CHF 179.9 million [17][25] Business Line Data and Key Metrics Changes - Performance footwear net sales reached CHF 731.3 million, increasing by 21.1% year over year on a reported basis and 30.4% at constant currency [22] - Apparel category net sales reached CHF 50.1 million, an increase of 86.9% year over year on a reported basis and 100.2% at constant currency, with over 1 million apparel units sold in a single quarter for the first time [23][30] - Direct-to-consumer (D2C) channel net sales reached CHF 314.7 million, an increase of 27.6% year over year on a reported basis and 37.5% at constant currency [17] Market Data and Key Metrics Changes - Asia Pacific region delivered net sales of CHF 144.9 million, up 94.2% year over year on a reported basis and 109.2% at constant currency, now approaching 20% of total sales [21] - Americas net sales reached CHF 436.2 million, growing 10.3% year over year on a reported basis and 21% at constant currency [19] - Europe, Middle East, and Africa (EMEA) net sales reached CHF 213.3 million, up 28.6% year over year on a reported basis and 33% at constant currency [20] Company Strategy and Development Direction - The company aims to be the most premium global sportswear brand, focusing on brand awareness and premium positioning [12][52] - The strategy includes expanding the apparel business as a standalone growth pillar, with a focus on D2C channels and retail presence [15][42] - The company plans to double net sales by 2026, implying a 26% net sales constant currency CAGR over three years [32][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the brand's momentum and the ability to maintain premium pricing despite external challenges [30][66] - The company anticipates strong growth across all regions, with a focus on maintaining a full-price sales strategy during the holiday season [77][78] - The outlook for 2026 includes a constant currency growth expectation of at least 23%, supported by a robust product pipeline and strategic investments [31][56] Other Important Information - The company opened new flagship stores in key markets, including Tokyo and Zurich, which contributed to record sales [13][18] - The company is leveraging collaborations with cultural icons to enhance brand appeal among younger consumers [10][87] - The cash balance at the end of Q3 stood at CHF 961.8 million, reflecting strong operational cash flow management [28] Q&A Session Summary Question: Can you discuss the traction in apparel and its regional performance? - Management highlighted strong traction in apparel, accounting for about 8% of total business, with significant growth in running, training, and tennis categories [38][39] Question: How do you balance top-line growth with margin protection? - Management emphasized the importance of discipline in inventory management and maintaining a premium business model to protect margins while driving growth [45][46] Question: Can you elaborate on the 2026 guidance and growth expectations? - Management confirmed that the 2026 guidance is based on constant currency and reflects strong growth across all regions, with a focus on brand awareness and premium positioning [51][56] Question: What is the outlook for gross margin in Q4? - Management indicated that there is potential for margin upside in Q4, supported by operational improvements and favorable market conditions [60][61] Question: How is the company connecting with younger consumers? - Management noted successful collaborations with cultural figures and the launch of a kids line, which has resonated well with younger demographics [87]