ON Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 12, 2025

Key Takeaways

  • Positive Sentiment: Record Q2 results with net sales up 38% on a constant-currency basis to CHF 749.2 million, a 61.5% gross profit margin and an 18.2% adjusted EBITDA margin.
  • Positive Sentiment: Direct-to-consumer sales surged 54.3% year-over-year on a constant-currency basis to CHF 308.3 million, lifting D2C mix to 41.1% of total sales.
  • Positive Sentiment: Broad-based regional momentum with EMEA up 46.1%, The Americas up 23.6%, and APAC delivering triple-digit growth of 110.9% on a constant-currency basis.
  • Positive Sentiment: Apparel continued rapid expansion, rising 75.5% on a constant-currency basis as repeat and first-time buyers increasingly add apparel to their baskets.
  • Positive Sentiment: Full-year 2025 guidance raised to at least 31% net sales growth on a constant-currency basis, a 60.5–61% gross margin and a 17–17.5% adjusted EBITDA margin.
AI Generated. May Contain Errors.
Earnings Conference Call
ON Q2 2025
00:00 / 00:00

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Operator

Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to On Holding AG Q2 twenty twenty five Results. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Thank you. I would now like to turn the call over to Liv Redlinger, Head of Investor Relations. Please go ahead.

Liv Radlinger
Head - IR at On Holdings AG

Good afternoon, and good morning to our investor community. Thank you for joining ON's twenty twenty five second quarter earnings conference call and webcast. With me today on the call are ON's Executive Co Chairman and Co Founder, David Alleman and CEO and CFO, Martin Hoffman. 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.

Liv Radlinger
Head - IR at On Holdings AG

Please refer to our annual report on Form 20 f for the 2024 fiscal year filed with the SEC on the 03/04/2025 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 Maarten, leading through today's prepared remarks, after which we are looking forward to opening the call for a Q and A session.

Liv Radlinger
Head - IR at On Holdings AG

With that, I'm very happy to turn the call over to David.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

A very warm welcome to our second quarter twenty twenty five results call. We hope you are having an enjoyable summer. This past quarter, our story of growth continued with incredible momentum. Our results show that what we are building is robust and truly transformative. We grew net sales by 38% on a constant currency basis to a record of CHF 7 and 49,200,000.0, beating our expectations.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

But this wasn't just about growth. It was about our premium positioning, which drove further expansion in our gross profit margin to 61.5% and our adjusted EBITDA margin to 18.2%. What I'm most proud of is that this momentum was broad based. We saw strength across every region, channel and product category. This broad based resilience is the very definition of the athlete spirit in our business, setting the stage for long term growth.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

The strong numbers we just reported are a direct reflection of something deeper. Today, I want to talk about one of the core values at On! The athlete spirit. This spirit is all about resilience and balance. It's about waking up ready to train regardless of whether you won or lost yesterday.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

It's about playing the long game, not chasing a fast win. We're building resilience everywhere in our product portfolio and our channel mix, in the strength of our global footprint and fan base and in our founder led leadership. It's building our future for years to come. For me, everything starts with the product. What truly excites me is that we're not just creating footwear, we're building iconic franchises.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

Today, have nine distinct footwear franchises, each contributing more than 5% to our top line. That kind of balance isn't an accident. It's the result of a years long focused strategy to build resilience into our portfolio. We are building iconic franchises like the CloudSurfer and CloudMonster, and they're also seeing fresh momentum with the newly launched Cloud6. These are product brands in their own right.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

But our vision goes far beyond footwear. Our apparel business is expanding very fast and with it our relevance as a full sportswear brand. We recently previewed our SpringSummer twenty six collection during Paris Fashion Week and launched new apparel with Zendaya, which will further elevate awareness. What connects footwear and apparel is on strive in technological innovation and our roots in Swiss engineering and design. This allows us to show up, toe to head, connected with a broader audience and build a truly resilient portfolio.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

But our product resilience is about more than just footwear and apparel. It's our commitment to win in multiple sports. We started in running, but we successfully expanded to trail, outdoor tennis and training, moving us closer to our vision of being the most premium holistic sportswear brand. For example, fans saw Igor Svyatek win an incredible Wimbledon final a few weeks ago and Ben Shelton captured his first Masters one thousand title at the twenty twenty five Canadian Open climbing to world number six. And now fans can wear the styles of these athletes both on and off the tennis court.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

Or they can shine in the training capsule collection we just launched with FTA Twix. While On! Is fundamentally a sports brand, the cultural shift towards sport as the new uniform and fashion means we're also a lifestyle brand, unlocking a much larger addressable market. Our hugely successful collaboration with LUVY on the Cloud Tilt, which sold out almost entirely within days, retailing at USD $5.90 perfectly illustrates this intersection. The seed for the most premium global multi sports brand is planted.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

The result of all this is what we call consumer resilience. What we are seeing is that we are no longer just for early adopters. We are now resonating with a much wider audience from established drummers to the very young. Our brand strength is over indexing with Gen Z consumers. In The U.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

S, we have previously shared that awareness has more than doubled in a single year, making on one of the top wanted athletic shoe brands among teats. They love the SoftWinds campaign with Elmo for the CloudSurfer. We're also seeing this broad appeal powered by diverse sports and franchises like the Cloud, which has grown from a running shoe into an everyday essential. For us, it feels like we've reached a tipping point. We are converting broad communities for buying ON's premium sports products

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

Our channel strategy is another dimension of resilience and balance. Wholesale remains a vital channel and we're incredibly successful with over 11,000 stores globally from the biggest players to local running specialty. At the same time, our direct to consumer business, both online and in physical retail, is a key highlight with a particularly strong performance. We now operate 54 on stores worldwide and these aren't just places to transact. They are spatial experiences where product, brand, community and storytelling come together.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

With robust productivity growth in existing on retail doors, we are confident to scale on retail to create further balance between on wholesale and D2C channels. Next up are high profile openings in Palo Alto, Stockholm and Seoul. This global footprint has been a priority for us since the very beginning. As founders of a young Swiss brand from a small home market, what do you do? We went to Europe in our first year, to The U.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

S. In our second and to Asia, to Japan in our third. That global mindset has led to a significant business in the world's most important sports market, The U. S, where we continue to see strong growth. At the same time, we are seeing rapid demand acceleration in Europe with France, Italy and Spain showing lots of untapped potential for RAN.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

And the continued triple digit growth in Asia as a whole is nothing short of amazing, including new expansions for our brand into Singapore and Thailand. All of this is leading to a beautifully balanced global portfolio. We are bringing this global mindset to manufacturing and supply, and it's this focus that recently earned us a major recognition. Fast Company named ON one of the world's 50 most innovative companies of 2025, thanks to our light spray technology. This ultralight operator is sprayed not built in a one step process automated by a robotic arm in just three minutes.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

A few weeks ago, we launched our first light spray factory in Zurich with four robotic arms. It's a path to the future of manufacturing, faster, less labor intensive in various locations with a much simpler supply chain that's closer to consumer demand. It's all about the long game and a company that is innovating on product manufacturing beyond the product itself. Our financial profile mirrors our vision to be the most premium global sportswear brand and enables us to build for the long term. Powerful top line growth and our premium positioning mean we can consistently invest in important multiyear projects, striking a balance between near term success and long term growth drivers.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

Our ambition of constant innovation means we dedicate significant time and financial investment into projects like LightSpray, knowing they will only fully unfold over several years and require consistent focus and patience. As I noted earlier, it's these long term commitments that support and strengthen our resilience. It's a virtuous circle. Our leadership philosophy builds a company that is here to stay for a very long time. As a founder led business, Casper, Olivier and myself, with Martin as CEO, operate together with our senior leadership team like athletes in a team sport.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

We sometimes lose together and we often win together. We have the bandwidth to play both defense and offense at the same time. And we give each other very direct feedback once in the locker room after the game. Our deep bench of talent is the ultimate source of our resilience. We hire for an exceptional balance, the right mindset aligned with the five spirits of ON combined with a unique skill set.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

Our diverse team comprises over 100 different nationalities, operates from 15 global locations and attracts 200,000 job applications a year, all in pursuit of finding exceptional talent. This deep bench of talent and our global structure bring in critical perspectives from around the world to ensure we build a global brand with local sensibility. Our mission, Dream On, speaks to the growth mindset at On. We dream daring dreams that create resilience, balance and opportunity now and in the future because we firmly believe the best days are ahead of all. We could not be more excited that Time Magazine sees it the same way and in June named ON one of the 100 most influential companies globally.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

You just heard me share my excitement for the long game vision of ON, but the vision is only as strong as its execution. It's my great pleasure to now hand the baton over to my partner and our CEO, Martin, to walk you through the details of a quarter that proves our vision is becoming a reality. So Martin, please.

Martin Hoffmann
CEO & CFO at On Holdings AG

Thank you, David, and hello from my side as well. The athlete spirit is the core of our culture, and I'm incredibly proud of the passion and unwavering focus our team and partners have shown over the last six months. We are 1.5 into our three year strategic plan, and we are running far ahead of our expectations. For the next one point five years, we have more confidence than ever in the impact of our growth pillars on our products, customer experiences and ultimately, our financial results. And at the same time, this strategic clarity allows us to dream on, to dream even bigger and even further, to lay the foundation to bring our mission and vision to life at an even bigger scale, to invest time and resources to work on new initiatives, products and exciting projects that will expand our addressable market in the future as well as our abilities to elevate the premium experience of our customers.

Martin Hoffmann
CEO & CFO at On Holdings AG

The incredible work of our team is evident everywhere. But what truly stands out to me is our brand momentum across communities, the power of our distribution and the rapid growth of our apparel business. Running remains the foundation of our brand, and it's where our credibility is rooted. In recent months, our proprietary brand tracker has shown a significant increase in our connection with runners and our performance credibility. We also grew overall brand awareness faster than any other brand in our category.

Martin Hoffmann
CEO & CFO at On Holdings AG

This momentum will carry forward with the launch of the CloudBoom Max next week. It's our first super shoe built for the everyday runner, and many on team members, including myself, will be wearing it in our fall marathons. This brand heat is spreading. We are seeing great traction in tennis apparel and the new Cloud Ultra Pro and Cloud Ultra three by strengthening our connection with dedicated trail runners. What's truly unique is how we are reinforcing our position at the intersection of sport and lifestyle.

Martin Hoffmann
CEO & CFO at On Holdings AG

Our brand tracker shows we are the only brand growing our connection with both Ormonds and Lifestyle simultaneously, a rare position to be in that speaks to the strength and versatility of the on brand. This is also evident in our outsized growth with the eighteen to thirty four year old segment. The momentum in our products comes to life through our multichannel distribution strategy. Over the last few months, I've had the opportunity to spend time with many of our global key account partners. In every conversation, I felt the incredible motivation and commitment to grow the brand together, including an offering elevated even more premium customer experiences.

Martin Hoffmann
CEO & CFO at On Holdings AG

Nowhere is our commitment to premium experiences more evident than in our retail network. And its exceptional growth, driven by both improvements in productivity as well as base expansion, demonstrates the strength and resonance of this position. Three weeks ago, I had the pleasure of joining the opening of our first retail store in Singapore, a large and beautifully designed store at the Chewel Changi Airport Mall. The store delivered close to the highest daily sales across our global retail fleet during its opening weekend. The largest transformation since our Investor Day has happened in our apparel business.

Martin Hoffmann
CEO & CFO at On Holdings AG

The passion within our team to build on as a toe to head sportswear brand is leaving visible marks across the whole organization. In the first half of this year, we sold more apparel items than one of our most successful footwear franchises, the Cloud Hill. Our retail momentum and the growing number of dedicated shop in shop executions are supporting our significant growth in apparel across all our regions, and we remain focused on taking our offer to the next level. Overall, we are building a foundation that is stronger than ever. We achieved close to CHF 1,500,000,000.0 in net sales in the 2025, which is a 39% increase year over year on a constant currency basis.

Martin Hoffmann
CEO & CFO at On Holdings AG

In fact, both Q1 and 2025 had higher absolute net sales than the entirety of our first year as a public company, a reminder of just how far we have come in a incredibly short period of time. As David and I have both said, our team and our culture are the ultimate source of our success and resilience. We are thrilled to have our new Chief Human Resource Officer, Katharina Burke, join us to continue building that culture. With that, let's have a closer look at Q2. It was another record quarter on both net sales and adjusted EBITDA.

Martin Hoffmann
CEO & CFO at On Holdings AG

Net sales reached CHF 7 and 49,200,000.0, up 32% year over year on a reported basis and 38.2% on a constant currency basis. Our D2C channel delivered another exceptional quarter, demonstrating incredible momentum. Net sales reached CHF 308,300,000.0, up an outstanding 54.3% year over year at constant currency and 47.2 on a reported basis. This very strong growth elevated our D2C mix to a new second quarter high of 41.1% of sales. Crucially, this reflects strength in both e commerce and retail, which are continuing to work together to boost our global brand awareness and customer engagement.

Martin Hoffmann
CEO & CFO at On Holdings AG

The strength in e commerce was particularly evident with accelerated growth in both EMEA and The Americas, while our APAC region continued to deliver results that significantly exceeded expectations. In retail, our flagship stores remain key in driving this success. Our Paris Champs Elysees store continues its strong growth a year after opening. And our LA Aberceeny store saw the highest year over year growth in The Americas, powered by strong community engagement. As L.

Martin Hoffmann
CEO & CFO at On Holdings AG

A. Prepares to host the twenty twenty eight Olympics, we are strategically increasing our brand exposure to capture the city's rising buzz and excitement. Meanwhile, our wholesale channel also saw strong growth in Q2, reflecting the strong demand across all regions while we maintain our focus on a slow and controlled store rollout. Net sales were up 28.8% year over year at constant exchange rates and up 23.1% on a reported basis, reaching CHF441 million. We continue to build and scale relationships with premium distributor partners in select markets.

Martin Hoffmann
CEO & CFO at On Holdings AG

The store we opened in Singapore with one of these partners marks a significant milestone, and we are excited to explore new markets in Southeast Asia and in The Middle East through this channel in the coming quarters. Now let me take you through development by region, demonstrating our global momentum. Starting with EMEA, which delivered a very strong quarter with net sales growing by an outstanding 46.1% year over year on a constant currency basis and by 42.9% on a reported basis to CHF197.8 million. This is the strongest growth rate we have seen in the region in the past two years, confirming the strategic decisions we took to elevate our brand perception. We're seeing this accelerated growth across both newer markets like France and Italy and established ones, with The U.

Martin Hoffmann
CEO & CFO at On Holdings AG

K. Being a particular highlight delivering extremely strong growth rates on an increasingly large sales base. Moving on to The Americas. Net sales grew strongly by 23.6% on a constant currency basis and by 16.8% on a reported basis to CHF 4 and 32,300,000.0. As a result of the ongoing strong demand for the brand and our significantly improved operational capabilities, our T2C channel materially outperformed in Q2.

Martin Hoffmann
CEO & CFO at On Holdings AG

Sell in into our wholesale partners were at a slower base given timing of product launches, but sell out rates with our key account partners reflected the same strong demand we saw in our D2C channel. And last, but absolutely no means least, the APAC region, which continues to materially outpace our expectations, delivering the third successes this quarter of triple digit growth and now accounting for a mid teens percentage of our net sales. On a constant currency basis, net sales were up 110.9% year over year in Q2, translating to 101.3 reported growth and absolute net sales of €119,200,000 In all markets, the demand for our products is outpacing supply. In Greater China, net sales more than doubled, driven by more than 50% same store growth in our own retail stores, even higher growth rates in our ecom channels and the addition of powerful new retail stores. Our flagship store in Chengdu outperforms our expectations on all key retail metrics and will serve as a blueprint for our future retail expansion in this market.

Martin Hoffmann
CEO & CFO at On Holdings AG

Turning to our product categories. Our growth is strong and broad based. Net sales from shoes grew 36% at constant exchange rates. On a reported basis, net sales were up 29.9% year over year, reaching million. This growth is a direct result of our ability to build a portfolio of strong franchise.

Martin Hoffmann
CEO & CFO at On Holdings AG

In Q2, we saw strong demand across both our Performance and Lifestyle portfolios. In Performance, Running, Handmith and Outdoor grew strongly with the strongest growth in the CloudSurfer and CloudMonster. Our key lifestyle franchises, particularly the Cloud, CloudTilt and CloudZone, are resonating deeply with consumers, additionally amplified by our campaigns with Sandaya. Our Apparel business delivered an outstanding quarter with net sales growing an impressive 75.5% at constant exchange rates and 67.5% on a reported basis to CHF 36,700,000.0. We're particularly encouraged by the deepening consumer engagement in this category.

Martin Hoffmann
CEO & CFO at On Holdings AG

We are seeing a healthy year over year increase in repeat transactions. And importantly, also first and second time buyers are increasingly adding apparel to their basket. This is a key indicator of our success in building a full sportswear brand and driving apparel adoption earlier in the customer journey. Moving down the P and L. Our gross profit margin increased by 160 basis points year over year to 61.5%, validating again the strength of the premium position of the brand.

Martin Hoffmann
CEO & CFO at On Holdings AG

The year over year increase was primarily driven by the high D2C share, lower freight expenses as well as a net foreign exchange tailwind from the further depreciation of the U. S. Dollar during the quarter. We implemented selective price increases in The U. S.

Martin Hoffmann
CEO & CFO at On Holdings AG

In early July, but these did not have any effect on our Q2 profitability. SG and A expenses, excluding share based compensation, were very well controlled, accounting for 47.7% of net sales in Q2, down from 48.6% in the same period last year. We continue to invest heavily in key growth areas, including our stores, light spray and strengthening our IT and tech capabilities. At the same time, we saw ongoing benefits from operational efficiencies, particularly in distribution costs, which we now expect to continue throughout the rest of the year. As a result of our very strong top line, gross profit margin expansion and controlled investment into growth, We are thrilled to report an adjusted EBITDA of CHF136.1 million, translating to an 18.2% adjusted EBITDA margin, up two twenty basis points year over year.

Martin Hoffmann
CEO & CFO at On Holdings AG

But our very strong operational performance drove substantial adjusted EBITDA growth, the continuous weakness of The U. S. Dollar versus Swiss franc in the second quarter, closing near multi decade lows at €0.79 led to a meaningful unrealized foreign exchange impact in our net financial results, which resulted in a net loss of CHF 40,900,000.0. As highlighted in the past, this effect is mainly driven by the valuation of our U. S.

Martin Hoffmann
CEO & CFO at On Holdings AG

Dollar based assets, especially cash and cash equivalents at quarter end exchange rates and does not impact or reflect the financial health of our business. Moving on to our balance sheet. Capital expenditures were CHF17.4 million in the quarter. This equates to 2.3% of net sales, down from 3% in Q2 last year. During the last one point five years, we made significant investments into the strength of our operational backbone and into inventory management.

Martin Hoffmann
CEO & CFO at On Holdings AG

As a result, we continue to see ongoing improvements of our net working capital position, our cash conversion cycle and the health of our inventory, without limiting our ability to fulfill the strong demand from our customers. Our overall inventory balance stood at 360,400,000.0 at the end of the quarter. We ended the quarter with a cash balance of CHF846.6 million, down from CHF871.8 million in the prior quarter. Over 70% of this position was held in U. S.

Martin Hoffmann
CEO & CFO at On Holdings AG

Dollar, which was impacted by the before mentioned valuation at quarter end exchange rates, leading to this the reduction despite the positive operational cash flow. As we enter into the 2025, we do so with exceptional brand momentum, deep confidence in our strategy and conviction in our ability to perform at the highest level. The results we achieved in the first half are not only ahead of plan. They are a clear reflection of the strength of our brand, the quality of our execution and the scale of the opportunity ahead. The products we have launched over the past couple of weeks and the pipeline ahead is strong.

Martin Hoffmann
CEO & CFO at On Holdings AG

From performance running to trail, training, tennis, lifestyle and apparel, we are bringing bold innovation and a lot of brand energy in every vertical and category. These launches will be supported by integrated campaigns and high impact retail moments designed to amplify our presence and drive strong growth across all markets. Over the next couple of weeks, we look forward to exciting LightSpray activations at the World Athletic Championships in Tokyo, building further on our collaborations with SENDAYA and FK Twix and taking our training and tennis visibility to the next level. We will continue to drive momentum with the running community and elevate our position at races around the world powered by our recent launches. Considering our strong performance in Q2, continued powerful momentum in the first weeks of Q3, a strong order book for the fallwinter season and the continued efficiency tailwinds driven by our focus and commitment to operational excellence, we are increasing our 2025 guidance across all line items with high expectations for net sales growth, gross profit margin and adjusted EBITDA margin.

Martin Hoffmann
CEO & CFO at On Holdings AG

We expect net sales at constant currency rates to be up at least 31% year over year, ahead of our previous guidance of up at least 28%. Importantly, this reflects our strong performance in Q2 as well as our increased second half expectations. Given increased confidence in the outlook and the ongoing powerful momentum in Q3. Within this guidance, we still embed prudence to reflect the uncertain macroeconomic outlook in the second half of the year. Given the ongoing devaluation of the U.

Martin Hoffmann
CEO & CFO at On Holdings AG

S. Dollar against the Swiss franc, the second half of the year is expected to face ongoing foreign exchange headwinds. Current spot rates our constant currency growth guidance implies reported net sales reach at least CHF 2,910,000,000.00, higher than our previous guidance of CHF 2,860,000,000.00. Alongside the increased net sales outlook, we now expect the gross profit margin of 60.5% to 61%, ahead of our previous guidance of 60% to 60.5%. The strong momentum in the first half of twenty twenty five, the expected continued strength of our D2C channel, combined with a focus on full price sales, continued operational efficiencies driven by our focus on excellence, favorable freight cost evolutions and positive foreign exchange rates are expected to substantiate a gross profit margin 60% plus for the second half of the year, in line with our longer term gross profit margin target.

Martin Hoffmann
CEO & CFO at On Holdings AG

This increased outlook already includes the impact of a 20% incremental tariff on imports to The U. S. From Vietnam and the 10% assumed in our previous guide. As we had outlined in May, we are focused on what we can control and continue to build our company towards our vision to be the most premium global sportswear brand. This means delivering on our brand promise to our fans while ensuring we continuously invest into what differentiates us in the long term: highest quality standards, cutting edge innovation, premium customer experiences and service, sustainability and social impact.

Martin Hoffmann
CEO & CFO at On Holdings AG

Our increased outlook on net sales and gross profit margin enables us to accelerate strategic investments in future growth, particularly in marketing, innovation projects and technology. At the same time, we continue to drive efficiencies across our operating expenses. Reflecting these dynamics, we now expect an adjusted EBITDA margin of 17% to 17.5%, ahead of our previous guidance of 16.5% to 17.5%. To close, I want to share a personal highlight of this summer and the moment we won't forget anytime soon, watching Ikas Wiantic's historic Wimbledon win. Her performance, a masterclass in focus, consistency and resilience was a true reflection of the athlete spirit.

Martin Hoffmann
CEO & CFO at On Holdings AG

With this victory, she now holds Queensland titles on all three surfaces, a testament to her versatility and crit. In many ways, her journey embodies the very spirit that also is the driving force for us: rentless focus and courage to push boundaries without compromising our identity, allowing us to compete and win at the highest level. With that, David and I would like to open up the session to your questions.

Operator

Your first question comes from the line of Jay Sole with UBS. Your line is open.

Jay Sole
Jay Sole
Managing Director at UBS Group

Great. Thank you so much. Obviously, really outstanding results today. Just curious what gives you the confidence to raise your constant currency sales growth guidance for the year given the potential impact of tariffs in The U. S?

Jay Sole
Jay Sole
Managing Director at UBS Group

And also at the same time, what gives you the confidence to raise your adjusted EBITDA margin guidance given the impact of tariffs? You so much.

Martin Hoffmann
CEO & CFO at On Holdings AG

Chad. This is Thomas Martin. Thanks for the question. I mean, you have seen it in our first half year numbers. The brand has incredible momentum all around the world. Very strong growth in all the regions, in all product categories, in all channels. If we look into Q3, we had a very strong start as well. Actually, it's very similar to what we said on the call last time.

Martin Hoffmann
CEO & CFO at On Holdings AG

Again, in July, we had the strongest month in the history of the brand from an absolute numbers perspective. So that momentum continues. We have a very strong order book. And at the same time, we are aware of the macroeconomic environment that is there. We want to factor that in.

Martin Hoffmann
CEO & CFO at On Holdings AG

We know that we had a very strong second half of the year last year, which we need to factor in. So it's a bit of a tougher comparison compared to the first half of the year. But still, we are very confident in our ability, in our product pipeline and in the momentum that we are having. And then I think it's always important to take a step back and then also look at where we want to be from a growth pattern perspective. We want to grow in a durable way.

Martin Hoffmann
CEO & CFO at On Holdings AG

We want to focus on high quality growth. And so that growth corridor that we are now going into is basically exactly where we want to be in order to drive healthy growth for the future. We had 33% growth last year, 39% growth in the first half of this year. And so this reflects the strong momentum. I think if we look at EBITDA and tariffs, also here, maybe a bit of longer answer.

Martin Hoffmann
CEO & CFO at On Holdings AG

First, I think it's very important to now have clarity about the new tariffs and to have that executive order out there. Of course, we're not happy about the additional tariffs, but I think it's super important that this is nothing new for our industry. So ever since On Xist, we have been paying around 20% import duty on the majority of our products imported into The U. S. From our Southeast Asian manufacturing places.

Martin Hoffmann
CEO & CFO at On Holdings AG

And so now this number is changing. It's changing to 40% for imports from Vietnam and to 39% from imports from Indonesia. But as a premium brand and as a fast growing brand, we have multiple opportunities to compensate for these impacts of our cost salts. And with that, you've seen we are confident in increasing our gross profit margin outlook for the year. And we're also confident that we can maintain our gross profit margin in line with the long term aspiration that we communicated at our Investor Day, which is 60% plus.

Martin Hoffmann
CEO & CFO at On Holdings AG

And it's really in moments like this where it's just super important to be clear what the brand stands for. And we want to be the most premium global sportswear brand, which means to deliver on our promise to our fans, to invest into what differentiates us. And that's what we continue to do. And there will be no compromise, no compromise on innovation, on quality, on customer experience. But over the last years, we have done so many investments and upscaling of our abilities to drive more gross profit margin, which means innovation products that come at higher price points.

Martin Hoffmann
CEO & CFO at On Holdings AG

It's increasing our DTC mix. It's economies of scale on our product cost. It's supply chain optimizations. We have done price increases as of July 1 in The U. S.

Martin Hoffmann
CEO & CFO at On Holdings AG

And obviously, we are well positioned. And we have not even yet spoken to our retail partners or our factory partners about mitigation efforts, which is still something we can do, but we have needed it yet. So this gives us the confidence to raise basically all our financial numbers.

Jay Sole
Jay Sole
Managing Director at UBS Group

Got it. Super helpful, Martin. Thank you so much.

Operator

Your next question comes from the line of John Kernan with TD Cowen. Your line is open.

John Kernan
Managing Director at TD Cowen

Good morning. Congrats on just tremendous results. Martin, maybe you could talk about the second half constant currency revenue growth, tremendous 39% growth in the first half. Obviously, with the guidance, you are conservatively planning for a bit of a deceleration. Can you talk to trends you're planning in wholesale and DTC?

John Kernan
Managing Director at TD Cowen

And maybe give a little bit more color regionally in terms of how we should think about the phasing of that revenue growth in the second half?

Martin Hoffmann
CEO & CFO at On Holdings AG

Very happy to do so. So as I just said, the momentum is very strong. It continues to be very strong go into the quarter. At the same time, we want to grow in a durable way and in a premium way in the long term. And this has always been number one strategy for us.

Martin Hoffmann
CEO & CFO at On Holdings AG

And this is the growth rate where we want to grow at. And the first half of the year was super strong. And this actually puts us into a position to be even more meaningful about the additional levers that we are pulling to grow, to be more meaningful with adding additional doors, to be more focused on full price sales, to really put a focus on high quality growth. And I think this is an amazing position to be in. And this is guiding our decision making and how much additional brand momentum we're driving and how we invest.

Martin Hoffmann
CEO & CFO at On Holdings AG

And at the same time, as I said on the call, we can now already focus on what comes after 'twenty six and what are we building for the long term and how can we invest into new things to drive the growth because we have so much confidence into the building blocks that we have at the moment. And at the same time, there are amazing products coming. There are many more new amazing retail stores in great locations coming. So there's a momentum that substantiates the outlook.

John Kernan
Managing Director at TD Cowen

Got it. Then maybe a longer term question. You're running well above the targets you put out at the twenty twenty three Investor Day. You talked long term about an adjusted EBITDA margin north of 20%. What are the levers for additional margin expansion, given you're already running pretty far above the targets you put out for 2026?

Martin Hoffmann
CEO & CFO at On Holdings AG

Think we continue to prove almost with every quarter that we we are on the right track and even ahead of the track to to substantiate the targets that we have given. And I think we are very transparent where that additional profitability comes from in future. So we believe there is continued opportunity to increase our gross profit margin with a higher D2C mix. Our own retail stores are continue to gain share, and we will continue to expand in that channel. And we see a strong spillover then also into our D2C channel.

Martin Hoffmann
CEO & CFO at On Holdings AG

Our apparel business will be growing, and with that, we'll drive higher margin in the future as well, not only because it's a very strong D2C business, but also because we will be benefiting from economies of scale in there. You see that we are driving also economies of scale in our distribution costs. And at the same time, we want to take it step by step. And so we keep on investing in what is building the brand for the future. We keep on investing in marketing.

Martin Hoffmann
CEO & CFO at On Holdings AG

We keep on investing in exciting projects that build a future like light spray or many technology projects. And so we are we will we want to grow in a meaningful way towards the 20% number. But I think we have a very clear picture on where that additional profitability will come from in the future.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

And if I John, if this is David, if I can expand from here, just kind of zooming out even more. Our vision is to build the most premium global sports brand. And I think if you've been following on for a long time and you've seen us going from footwear to apparel, from sports also into fashion. So you see how kind of we're developing the potential to be to have a very high margin profile as a business somewhere between a sports brand and a fashion brand. Probably the most extreme vision of that is what we're currently doing with L'oeuvre at very, very high price points.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

That's not where we're going in general, but it points to a future where ON is playing at the intersection of performance, innovation and fashion. And so that increases, of course, the margin profile potential as well.

Operator

Your next question comes from the line of Aubrey Cianiglio with BNP Paribas Asset Management. Your line is open.

Aubrey Tianello
Equity Research Analyst at BNP Paribas

Hey, thanks for taking the questions. I wanted to ask on new products and any more color you can give on the impact of launches like the Cloud six, the Surfer two this year? And then as we look ahead to next year, how we should be thinking about lapping some of these launches and how you can keep the momentum going into 2026 with new products?

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

Thank you very much for the question. Yes, happy to talk about product and product in the future. First of all, let me say, we're incredibly excited about how we're building franchises. And as you heard me say before, we now have nine franchises that deliver more than 5% of top line. And that wasn't always the case.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

When we had our IPO, it was 7%. Now the runner came into as the eight now kind of a lifestyle shoe, the Cloud Tilt kind of became the nine. So we're constantly expanding franchises. And of course, that creates broad based momentum where we reach very, very different communities. And what I'm currently most excited about is how we reenergized the CloudSurfer franchise.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

So you've seen the launch of the new CloudSurfer two with Elmo, but now we also launched the CloudSurferMax. And we are continuing that momentum in the running space. The CloudBoomMax will launch in the future the the first first super shoe for the everyday runner. So there's an incredible momentum in our core, core space of running. But then on the other side, we're really kind of growing incredibly in apparel.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

And so we do exactly what we want going from toe to head. And so the apparel momentum is driving the brand to a much more broader audience as well. And then I think on a third dimension, we're really also able to build product energy through the new sports that we're doing. So if you've seen what's happening in tennis and how our tennis stars are performing on court, that, of course, builds a lot of momentum for tennis product, but then also beyond tennis, just a lot of awareness for the brand.

Martin Hoffmann
CEO & CFO at On Holdings AG

Then maybe just adding for '26. There's no reason to believe that our level of newness slows down. We are planning to have exciting new launches of the next generation of the CloudMonster and the CloudRunner, two very key franchises for us, so then compounding against the launch of the cloud and the server this year.

Operator

Your next question comes from the line of Anna Andreeva with Piper Sandler. Your line is open.

Anna Andreeva
Anna Andreeva
MD & Senior Research Analyst at Piper Sandler Companies

Great. Thank you so much. Good morning and terrific results. Congrats. We wanted to ask about the working capital improvement margin on inventories really tight at down 10%.

Anna Andreeva
Anna Andreeva
MD & Senior Research Analyst at Piper Sandler Companies

How do you feel about the positioning there, especially in The U. S? Did that constrain sales growth at all during the quarter? And then secondly, you mentioned a selective growth with wholesale partners a few times. Should we expect similar mid single digit growth in wholesale doors globally to continue into next year as well?

Anna Andreeva
Anna Andreeva
MD & Senior Research Analyst at Piper Sandler Companies

And what are you hearing from your partners as it relates to spring orders, especially here in The U. S?

Martin Hoffmann
CEO & CFO at On Holdings AG

Yeah. So starting with working capital. We have done a lot of work and really strengthened our teams and our internal processes to fulfill the customer demand with a lower level of of inventory in our warehouses because we significantly improved our capabilities of demand and supply planning. Merchandising is an is a function that basically didn't exist for a long time now. We have this has a very strong capability with with In On.

Martin Hoffmann
CEO & CFO at On Holdings AG

So we feel very confident to run our company at a lower working capital level going forward, and this is an aspiration that we outlined in the past as well. And so at the moment, we feel very good about the inventory position, and we have seen it in the second quarter that we were able to fulfill the consumer demand all around the world to the level that we also wanted to fulfill it. As you know, we like to be in a position where demand is a bit above supply. If we look into our wholesale partners and and and our key account partners, what they are experiencing, especially in the in The US, the the momentum for the brand continues to be very strong. And I think it's important to basically dive a little bit deeper into the second quarter.

Martin Hoffmann
CEO & CFO at On Holdings AG

The region was growing with 23.6% on a constant currency basis. If we look at our D2C business, this was actually growing at close to 40% in that region. And this shows the momentum that we are having, and this is also a momentum that many of our key account partners are experiencing. And this puts us exactly in the position that we described that we need less incremental door openings in order to to have enough growth to be in the growth corridor where we want to be. So the mid single digit number is still the one that we are aiming to.

Martin Hoffmann
CEO & CFO at On Holdings AG

And again, the good thing is we're in full control here, and we can really focus on premium same store growth, but at the same time, on a very selective expansion of more doors.

Anna Andreeva
Anna Andreeva
MD & Senior Research Analyst at Piper Sandler Companies

Terrific. Thanks so much. Best of luck.

Operator

Your next question comes from the line of Cristina Fernandez with Telsey Advisory Group. Your line is open.

Cristina Fernández
MD & Senior Equity Research Analyst at Telsey Advisory Group

Hi, good morning and congratulations on great results. I wanted to see if you can expand on the gross margin outlook for the year. Maybe unpack how much is FX helping the pricing benefits in if you look at tariff mitigation, do you think more price increases are needed, or would the one you took in July your your cover for the foreseeable future?

Martin Hoffmann
CEO & CFO at On Holdings AG

Yeah. Thank you. I think I shared this a few times in the past. Our view on the gross profit margin is that we always need to expect that some impacts are on our cost of goods sold. And I think over the past five years, we have gone through different impacts from basically too much inventory or not enough inventory to elevated freight costs and now to tariffs.

Martin Hoffmann
CEO & CFO at On Holdings AG

And our focus is to put ourselves in the position to have enough power and enough strength in the brand and in the measures that we are taking to compensate for those effects. And this is also how we are looking now at the additional tariffs. And as I said, we have done a lot of work to put ourselves in a strong position for exactly moments like the one that we are experiencing now. Of course, the price increase that we initiated for July 1 is supporting the gross margin outlook. We feel very confident that we don't need additional price increase to reach the margin targets that we now communicated because we have the ongoing benefits from economies of scale on the production cost side.

Martin Hoffmann
CEO & CFO at On Holdings AG

We have the impact of the foreign exchange rate. But again, this this can always change, and then other things become more favorable, and and and maybe we see we see other disruptions in the future. And this is why the message that I gave earlier is so important that we feel very confident that we we can maintain the gross profit margin on the level where we said we expect it to be in the long term of 60% plus. And that factors in basically that there's always something that that disrupts that that position.

Cristina Fernández
MD & Senior Equity Research Analyst at Telsey Advisory Group

Thank you for that. And and then as a follow-up, on on the apparel, you've seen good acceleration the last two quarters. Can you if you look at what's driving that, any feedback you're getting from customers with your stores, is it safe, is it having it in DTC, the marketing? And I guess what's next for Parallel to build on that momentum?

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

Yes. Thank you for the question. I mean, we are seeing an incredible energy in apparel, and that's driven by wider scale adoption of apparel in addition to footwear. So what we are currently seeing is that also first and second time buyers of the brand are very aware of apparel and they are adding kind of apparel to their basket. So it's really kind of going from first adopters to a broader audience.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

And that's, of course, fueled by our direct to consumer channel. So think retail. Retail, of course, is the classic channel where you build the entirety of an apparel brand, you get full look and feel and the full range, and as an extension of that, our ecom channel. And so as we're expanding retail, as we're expanding the reach out of our ecom channel, Of course, that drives a lot of energy for apparel as well. And we also selectively work with premium wholesale partners in really showcasing apparel.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

We, for example, did pop up shop in shop in Selfridges. And so this is driving the overall momentum. And then, of course, we are doubling down on some of the most exciting collections like the one that we have done with FTA Twix in our training category, the whole lifestyle apparel in collaboration with Zendaya. And so the awareness of these huge influencers helps apparel as well on the marketing side. And probably last, we invest a lot of innovation into the technicity of apparel.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

So for example, now for winter, Guard Tech, protecting you against the elements will be an important fabric innovation that continues to roll out. So we really thrive on all levels.

Operator

Your next question comes from the line of Michael Binetti with Evercore. Your line is open.

Michael Binetti
Senior MD at Evercore ISI

Hey, thanks guys. Thanks for taking our question and congrats on a nice quarter. Can you just help us think about the cadence of revenues in third quarter and fourth quarter and then speak to how some of the drivers that you talked to us today about second half on revenues wrap around into the 2026 as we think about the different regions and channels, particularly given the different growth rates across the regions that you guys reported in the second quarter? And then I guess I'll just latch on to the last question about apparel and how we'll see that strategy evolve. You mentioned Zendaya and Selfridges.

Michael Binetti
Senior MD at Evercore ISI

I mean, should we think about that category? How should we think about that category evolving in with performance customers? Or is there is the bigger opportunity for this brand to attack some of the big, market dollars in the athleisure categories?

Martin Hoffmann
CEO & CFO at On Holdings AG

Okay. I'll take the phasing, and then David will take the apparel question. I mean, you know we are guiding on the full year. And but I think what is implied in our guidance for the second half of the year is very much also indicated for where we see the regions and the growth in the regions. As we have said, we have a tougher comparison because at the beginning of the second half of last year, we really significantly improved our operational capabilities.

Martin Hoffmann
CEO & CFO at On Holdings AG

We had a very strong holiday season last year. But that picture is very similar for Q3 and Q4. We continue to expect very strong growth in Asia Pacific. Also there, we want to grow in a premium way, so we will very much control the growth there as well. The U.

Martin Hoffmann
CEO & CFO at On Holdings AG

S. Is in a very strong position, but this is probably where we apply the strongest lever of caution. That's also in our outlook given the macro environment. And then, yes, Europe, basically, a similar picture. So expected quite consistent growth rates in the two quarters.

Martin Hoffmann
CEO & CFO at On Holdings AG

This is substantiated by the order book that we have. And as said, if the environment remains favorable, as we have seen it in the last two, three months, then there's an opportunity to also outgrow our expectations. But at the moment, we want to approach the second half in a very reasonable way.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

Sam, probably to the second part of your question. Currently, see on apparel on the best running athletes. You see them on the highest mountains. You see it on the tennis court becoming very, very visible in a spectator sport. You see it in the leading gyms.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

So apparel really comes from core performance, but of course sports is the new fashion. And so what we're building from core performance goes out to far more than core sports. And you're alluding to that, of course, we venture out, for example, with the capsule that we have done with FK Twix, highly technical but a unique aesthetic, and we're building a sports fashion brand as well. And so that, of course, kind of gives Apparel a much wider audience. Don't expect us to swim in a sea of sameness.

David Allemann
Co-Founder & Executive Co-Chairman at On Holdings AG

We're going to do it highly elevated as a premium brand and very distinctively.

Michael Binetti
Senior MD at Evercore ISI

Thanks a lot guys. Congrats again.

Operator

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Analysts
    • Liv Radlinger
      Head - IR at On Holdings AG
    • David Allemann
      Co-Founder & Executive Co-Chairman at On Holdings AG
    • Martin Hoffmann
      CEO & CFO at On Holdings AG
    • Jay Sole
      Managing Director at UBS Group
    • John Kernan
      Managing Director at TD Cowen
    • Aubrey Tianello
      Equity Research Analyst at BNP Paribas
    • Anna Andreeva
      MD & Senior Research Analyst at Piper Sandler Companies
    • Cristina Fernández
      MD & Senior Equity Research Analyst at Telsey Advisory Group
    • Michael Binetti
      Senior MD at Evercore ISI
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