On AG(ONON) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - On Holding AG achieved a significant milestone by crossing the CHF 3 billion revenue mark for the first time in 2025, with a reported growth rate of 30% year-over-year and 35.6% at constant currency [16][23] - The company reported a record gross profit margin of 62.8% and an adjusted EBITDA margin of 18.8%, exceeding their 2026 aspirations [16][30] - Cash flow generation improved, resulting in a cash position of over CHF 1 billion, marking the strongest cash position in the company's history [16][32] Business Line Data and Key Metrics Changes - The apparel business saw a remarkable 76% net sales growth at constant currency, indicating a successful expansion into multi-category offerings [13][21] - Accessories experienced a growth of 135.1%, contributing to a structural improvement in the premium mix and overall business profitability [21] - Performance running maintained strong momentum, supported by the Cloudsurfer franchise and the successful launch of the Cloudsurfer Max [28] Market Data and Key Metrics Changes - The Americas delivered net sales of CHF 434.3 million, growing 12.8% reported and 21.3% at constant currency, with nearly 50% of net sales driven by D2C channels [25] - Europe, Middle East, and Africa (EMEA) saw net sales reach CHF 183 million, increasing 24.2% year-over-year and 27.5% at constant currency [26] - Asia-Pacific delivered exceptional results with net sales of CHF 126.5 million, increasing 70.8% reported and 85.1% at constant currency, solidifying its role as a key growth driver [27] Company Strategy and Development Direction - The company aims to be the most premium global sportswear brand, focusing on performance innovation, premium inspiration, and a complete expression of the brand [8][12] - A significant investment in R&D has led to a 1,000% increase in the R&D team, focusing on performance and feel for the movement class [8][9] - The company is expanding its retail footprint, with plans to scale to close to 20 countries, and opened 80 new stores in the past year [12][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the brand's momentum, with expectations for strong growth rates across all regions in 2026, particularly in the D2C channel [44][45] - The company anticipates a reported net sales target of at least CHF 3.44 billion for 2026, reflecting a significant elevation of ambition [38] - Management highlighted the importance of maintaining premium positioning and operational excellence as key to future growth [17][18] Other Important Information - The company is leveraging AI technology to enhance customer service and improve operational efficiency [12][13] - The LightSpray manufacturing technology is expected to democratize high-performance footwear, with a significant increase in production capacity [63][64] Q&A Session Summary Question: Expectations for growth across regions in 2026 - Management indicated strong product pipeline and innovation, expecting robust growth across all regions, particularly in North America and D2C channels [42][43] Question: Insights on wholesale distribution expansion - Management confirmed opportunities for expanding wholesale distribution while focusing on elevating customer experience and increasing apparel sales [49][50] Question: Brand awareness and gross margin expectations - Management noted brand awareness has reached 30%, with significant potential for growth, and expects strong gross margins throughout the year [70][73] Question: EBITDA margin and distribution line items guidance - Management emphasized ongoing operational efficiencies and reinvestment into the brand to drive profitability while maintaining growth [76][78] Question: Addressable market size and market share - Management discussed the societal shift towards investing in oneself, indicating a large growth opportunity beyond traditional sportswear markets [81][84]