On Holding AG 2026 Q2 Earnings Call

Liv, please go ahead. Good afternoon and good morning to our investor community.

Thank you for joining On's second quarter earnings conference call and webcast. With me today on the call are David Allemann, founder and Co-CEO, and Frank Sluis, CFO. Before we begin, I will briefly remind everyone that today's call will contain forward-looking statements within the meaning of the Federal Securities laws. These forward-looking statements reflect our current expectations and beliefs only and are subject to certain risks and uncertainties that could cause actual results to differ materially. Please refer to our annual report on Form 20-F for the 2025 fiscal year, filed with the SEC on 3 March 2026 for a detailed discussion of such risks and uncertainties. We will further reference certain non-IFRS financial measures such as adjusted EBITDA and adjusted EBITDA margin.

These measures are not intended to be considered in isolation or as a substitute for the financial information presented in accordance with IFRS accounting standards. Please refer to today's release for a reconciliation to the most comparable IFRS measures. We will begin with David, followed by Frank, leading through today's prepared remarks, after which we are looking forward to opening the call for a Q&A session. With that, I'm very happy to turn the call over to David.

Good afternoon and good morning to our global investor community. Thank you so much for joining us today. When we started On 16 years ago, we were told that the sportswear industry operated on a rigid set of rules, standard molds, standard distribution, and standard ways of doing business. We politely chose to carve our own path. When told it was physically impossible to put holes into the rubber sole of a running shoe, I took those industry-stranded molds and broke them. This is how CloudTec was born. That single act of defiance forged our permanent innovation culture. At On, we are reinventing the mold again and again because it is the only way to build a premium global sports brand that will prevail for decades. Stepping into the roles of Co-CEOs just over 12 weeks ago is a strategic commitment to our founder-led DNA.

As On continues to scale into a multi-decade global company, we approach our growth with the precise focus of innovators and operators, but with the long-term patience of founders. We are not sprinting for short-term volume. We are deliberately engineering for the multi-decade value of a premium brand. Alongside our President and COO, Scott Maguire, and our CFO, Frank Sluis, this leadership structure unifies our strategic intent with disciplined operational and financial execution. Relentless product innovation, a unique design culture, and brand equity remain at the very center of every decision we make. This commitment delivered another exceptional quarter of premium growth. For Q2 2026, net sales reached CHF 850 million, a powerful 22% growth at constant currency. At the same time, we delivered industry-leading profitability, over 65% gross profit margin, and close to 20% adjusted EBITDA margin.

The strongest proof of the connection we are building is the extraordinary strength of our direct-to-consumer channel. The most premium expression of our brand, which delivered exceptional momentum in Q2, growing 34% at constant currency. This was driven by deep, top-of-head consumer demand across all regions, with On's brand awareness increasing to 30% as a whole new generation of fans discovered the brand. We are proving that a brand can achieve global scale without eroding premium positioning or margin ambitions. We do not create exclusivity through artificial scarcity or hype. We scale by bringing superior technology, engineering, unique design, and cultural relevance to millions of consumers, capturing market share while fiercely protecting our margins. On ultimately creates a highly defensible, scalable financial profile of a premium growth compounder. Our actions in wholesale this quarter are perhaps the clearest example of our premium strategy at work.

Momentum in our own channels was remarkably strong, with growth ahead of our expectations in all regions. On the other hand, in wholesale, the sell-out of some of our everyday running franchises tracked below our ambitions in a highly promotional multi-brand marketplace, particularly in the Americas. Clearly, this is something we are not pleased with. But our response is where the premium standard proves itself. We have been intentional and disciplined on managing selling to the channel within this environment. Most importantly, we choose not to build in-channel inventory that could compromise our full price integrity. This commitment, discipline, and focus on driving high-value accretive growth will continue into the second half of the year and be evident in our premium financial profile. We expect our full year net sales to grow in the low 20s at constant currency, with a higher gross margin outlook and reiterated adjusted EBITDA margin.

On this basis, we are on track to close 2026 as the fastest-growing global brand with the highest gross margin in our industry. This is a continuation of the premium strategy that makes us who we are. Let me give you a personal example of where we saw that strategy at work. Early in our journey as a public company, we made the tough choice to prune over-distributed channels in EMEA and protect our full price integrity. Many questioned us then. Today, that discipline is delivering exceptional 21% constant currency growth and record Q2 group margins. EMEA proves that premium growth isn't bought through volume. It's forged through restraint. In the wholesale channel, this discipline does more than protect our margins. It clears the runway for an acceleration of our innovation cycle. We are not just releasing new models, we are deploying a step change in performance engineering.

Franchises like the Cloudmonster 3 Hyper, the Cloudsurfer 3, and the Cloudboom Strike 2 are the direct beneficiaries of this strategy. By ensuring a clean premium marketplace today, we allow these breakthrough technologies to land with maximum impact, driving full price demand. Now, let's step into our innovation lab. Our premium position is anchored by our innovation engine, and that engine starts with running. Patenting performance engineering is our permanent antidote to promotion. This past June, we hosted our inaugural On Running Summit in Paris, bringing together our top 100 global run specialty partners. We gave them an exclusive look at our next-generation marathon racing shoe, the Cloudboom Strike 2, featuring our new CloudTec Steel geometry paired with Helion HF superfoam. An independent landmark study confirms that the Cloudboom Strike 2 delivers a 1.6% improvement in running economy over the industry's leading super shoes.

We are offering the Strike 2 in both a precision laced offer and our revolutionary robotic LightSpray offer. LightSpray is no longer an elite prototype. It's a fast-scaling commercial engine. With our automated facilities in Busan and Zurich fully cranking, LightSpray is driving extraordinary momentum across our running lineup, demonstrated by immediate sellouts for the Cloudmonster 3 Hyper LightSpray that launched in March this year. Crucially, elite breakthroughs must benefit the broader running community. In Paris, we also previewed our spring summer 2027 collection, featuring Surreal foam technology in the Cloudsurfer 3 and the Cloudsurfer Max 2. While the legacy footwear industry accepts a compromise between impact absorption and rebound, we engineered advanced CloudTec structures directly into a superfoam, combining unique chemistry with the physical advantage of dynamic cavities. This represents a first for On, and we expect it to define the industry.

On's innovation advantage is tearing up global record books. Zaynab Dosso captured world indoor gold in the 60-meter sprint. To solidify this technical authority, we officially launched the On Athletics Club Sprint Squad in Los Angeles. Led by Coach John Bolton, this elite team is built to dominate short-distance track and spark the imagination of a young global audience leading up to the 2028 L.A. Olympics. Let us expand the view across all our sports verticals. Tennis is bringing On to the most premium spectator sport. At Roland-Garros, Flavio Cobolli captivated millions with an unforgettable underdog run to the final. A 19-year-old Brazilian, João Fonseca, sent shockwaves through the sport by defeating Novak Djokovic in the third round. This isn't just visibility, it's revenue. Tennis is our fastest-growing apparel vertical, with sales nearly tripling this quarter.

In training and hybrid fitness racing, a hyper-growth category we intend to scale, our training powerhouse, Alex Rončević, completely redefined what is humanly possible. Wearing an advanced prototype of our CloudX Tempo Pro, he became the first human in history to shatter the 52-minute barrier, stopping the clock at a blistering 51 minutes and 59 seconds and setting two world records in a single race. Our training vertical showed a 40% growth rate as a result. This intersection of performance engineering and cultural relevance is winning what we call the movement class. A generation that treats health, vitality, and longevity as the ultimate status symbol. They are expanding our addressable market drastically. Today, consumers under the age of 34 represent over one-third of our total customer base and keep growing fast. This massive generational step-up fueled a stellar 190% year-over-year growth for our Cloudpillow franchise within the premium sneaker channel.

We are clearly winning in sports lifestyle. A defining moment for this movement was seeing Cloudpillow models take three of the top five selling positions at Foot Locker Europe last quarter, unseating current incumbents that had held top spots for years. This is not just a statistical win. It is a profound validation of our design language and our ability to capture the zeitgeist. We backed this momentum with elevated storytelling. In April this year, Zendaya's co-created collection was a phenomenal commercial success that sold out well ahead of expectations with 60% of buyers being women under 34. Our Shape of Dreams campaign film, directed by Spike Jonze, won three Cannes Lions, reinforcing our strategy to earn consumer attention through entertainment rather than just buying ad space.