On Holding AG Q3 FY2024 earnings call

• Brand awareness efforts: Significant investments in boosting global brand awareness, including presence at Olympics, partnerships with Zendaya and FKA Twigs, leading to doubled brand awareness in the U.S. and nearly tripled in Paris. - Retail expansions: Opened several new stores in Q3, including in Americas (New York, Austin, Chicago), EMEA (Milan), and APAC (Australia, China). - Product launches: Launched new Back to Run campaign with Cloudsurfer Next, saw 3x increase in Cloudsurfer franchise; apparel preorders for Spring Summer '25 show strong momentum. - APAC focus: APAC region growing rapidly, led by China and Japan, with strong e-com performance during Double 11, and plans to open more stores in South Korea and emerging markets.

In Q3 2024, On Holdings AG achieved record net sales of CHF 635.8 million, growing 32.3% on a reported basis and 33.2% on a constant currency basis. By product segment: Shoes net sales grew by 32.1% to CHF 63.7 million, with running verticals like Cloudmonster and Cloudrunner driving volumes. Apparel net sales grew by 33.4% to CHF 26.8 million, though growth was slightly constrained in Q3 due to supply issues but expected to accelerate in Q4. The D2C channel was a key driver, with net sales in Q3 growing by 49.8% (50.7% constant currency) to CHF 246.7 million, making up 38.8% of total net sales. The APAC region saw net sales of CHF 74.6 million in Q3, a growth rate of 79.3% (85.7% constant currency), accounting for 11.7% of total business.

• Full-year net sales: Revised constant currency growth to at least 32%, expecting net sales of at least CHF 2.29 billion. - Gross profit margin: Expecting around 60.5%, a 50 basis points increase from previous outlook. - Adjusted EBITDA margin: Expected to be at the upper end of previous guidance (16%-16.5%) or slightly above, driven by strong top-line and profitability expansion.

• Supply chain constraints: Past issues with inventory and warehouse management impacting execution, though efforts are underway to improve with automation projects. - FX fluctuations: Significant impact on results, particularly in the Americas region due to Swiss franc vs. U.S. dollar movements. - Operational challenges: Constraints in apparel product flow in Q3, though expected to improve in Q4.

Q: Congratulations on the results. I wanted to ask about the increases brand awareness that you're seeing. Can you share where the increases are coming from?

A: Marc Maurer mentioned focus on younger community via partnerships like Zendaya and FKA Twigs, Olympics presence boosting awareness globally, including 30 percentage point increase in Switzerland and doubled U.S. awareness.

Q: Wanted to hear more, if you could just kind of dive into some of the drivers of the 50% B2C growth in the quarter, maybe from a product perspective?

A: Marc Maurer stated brand awareness from Olympics, product launches like Cloudboom Strike and Cloudsurfer Next, and investment in D2C environment as drivers of B2C growth.

Q: Congrats on another great quarter here. I just wanted to focus on the inventory and supply chain constraints. Just on the constraints, when should those be mostly behind you?

A: Martin Hoffmann said team has taken measures to improve product flow, with automation projects in Atlanta expected to go live in spring '25, aiming for reliable supply chain and inventory levels.