Q1 2023 On Holding AG Earnings Call
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Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the On Holding AG Q1 2023 results call.
Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. If you would like to ask a question, you may press star followed by 1 on your touch-tone telephone. Please press the star key followed by 0 for operator assistance.
I would now like to turn the conference over to Jared Peter. Please go ahead.
Good afternoon, good morning, and thank you for joining on the 2023 first quarter earnings conference call and webcast.
With me today on the call are Executive Co-Chairman and Co-Founder, Casper Capetti.
CSO and COCO, March and Healthman and COCO, Mark Nower.
Before we begin, I would like to remind everyone that today's call weeks and forward-looking statements within the meaning of the Federal Security's law.
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 20F filed with the SEC on March 21st 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 in larger.
These measures are not intended to be considered in isolation or as a substitute for the financial information presented in accordance with IFRS.
Please refer to today's release for reconciliation to the most comparable IFRS measures.
We will begin with Kasper followed by Martin 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 over the call to Kasper.
Thank you and a warm welcome from my side. It's a great pleasure to be here with you to discuss our first quarter performance and recent milestones.
On entrance 2023 with high ambitions of continuing our growth journey, capturing market share and further increasing profitability.
We are pleased to share that the on-growth story continues. We were able to exceed our expectations and post record net sales of 420.2 million Swiss francs in the three-month period.
This reflects a growth rate of 78% versus Q1-22, which have been somewhat constrained by the supply shortages that had affected our industry a year ago.
As we have shared before, delivering best-in-class profit margins is a focus for ON, and I am happy to report that we have been able to substantially expand our margins in the first 6 months.
Gross margin for the first quarter was 58.3% and adjusted EBITDA was 14.5%.
We are tracking well towards our mid-term ambition of delivering best-in-class gross profit margins of 60% and EBITDA margins in the high teens. And Martin will expand on this in his comments in a minute.
But first, let's have a look at some business highlights from this court.
ON is an innovation company at heart, and we are happy to report that ON's recent running launches have met with very strong consumer demand and have helped ON capture additional market share in the running category.
I'd like to highlight the extremely successful introduction of the CloudSurfer 6, which is the first on-product to feature computer optimized technology, which we call CloudTech Face.
and will roll out to further models in coming seasons.
And on is also capturing mindshare in the running space.
An emotional highlight was Ann's first win in the Boston Marathon.
with ON Athletics Club member Helen O'Berry distancing a very strong women's field and once again proving that ON's highest performance running shoes are some of the fastest marathon products. The CloudFoam Echo 3 for example will be more broadly available to consumers starting in July this year.
We are very satisfied to see that on slighting and rain strategy, winning races and converting everyday runs to on is delivering strong results.
To illustrate, with the Cloud Surfer, the Cloud Monster, the Cloud Runner and the Cloud Goal,
Four running products that were only launched within the last 12 months are now making up 45% upon sales at the leading US running store franchise Fleet Feet.
On the tennis side, we are thrilled to see world number one Iga Šviatek and Ben Shelton competing on the court in their new on-gear. Iga stunned Azal, coming back from an injury to win her first tournament as a non-athlete by defending her title at the Stuttgart Open in late April . Both the Rsimpro Tennis performance products ironically serve many goals, but too much for three goals?
As well as the Roger lifestyle tennis franchise are in high demand and have been growing even significantly faster than on overall.
The on-board is strong and keeps getting stronger.
In recent months, we have started to shift some of our marketing spend to awareness, image and top funnel investments.
And it is paying off. In March, the cloud surfer and our tagline DREAMON were part of a global brand campaign that featured mega-posts in key cities and airports supported by digital ads.
In preparation for the spring marathon season, an additional emphasis was put on apparel with the Feel Nothing campaign, dedicated to the design and functionality of ARNS apparel.
Austin Merathon was supported by concerted PR outreach, resulting in strong media presence before and after the race and an amplified by Helena Miris stellar performance.
As you know, ON is regarded as the thought leader for sustainability among sports brands, and we have further put significant steps into action.
On strategy is to pioneer sustainable technologies and scale them rapidly. And so we have taken learnings from Saigon on surchose description and have scaled into mass market products.
The new CloudSurfer, for example, is the first commercial running shoe to feature a similar material upper made from recycled polyester, which makes the product ready to be recycled. In addition, we use dope dyeing, which saves 90% water compared to conventional dyeing. We are now rolling these technologies out to further models in the coming seasons.
around the world and we still have a lot more to come in 2020 to be excited about.
Our deepest gratitude goes out to our stellar team here at ON who have planned and executed this quarter to perfection. With this, it is my great pleasure to hand over to Martin for the Hubon Financial Review, Market Deep Dives and Elevated Outlook for the full year.
Thank you, Casper, and hello everyone.
You mentioned the winner fell on a peary in Boston.
We are so proud to be one of only four friends to win one of the Marathon majors during the last four years.
Back in 2014, we had our first sales booth in the corner of the Marathon Expo in Boston.
And ever since we had dreamed of winning this race one day.
Therefore, this victory was a very special moment for so many people at all. And now, we can dream even bigger.
Our starting Q1 was outstanding and exceeded our own expectations.
Netails for the first quarter reached 420.2 million with ranks.
up by 78.3% year over year.
Our cross-profit margin increased from 51.8%.
to 58.3%. And our adjusted EBDA margin from 6.7 to 40.5%.
In our full year results call in March, we share the strategic pillars that we are executing on to maintain our strong self and profitability growth in 2023.
Our record net sales in Q1 are a further validation of the strong print momentum across all regions, channels, and product groups.
Our strong supply position and our ability to distribute the high volume allowed us to capture the full momentum.
This is a very different situation to the supply constraints that we had faced 12 months ago.
recall, these constraints in Q122 had a large impact on wholesale than on T2C.
As a result of the very high demands from our retail partners, combined with the light at quarter last year.
Till and Keep in mind 26%
reaching 283.2 million rest francs. The majority of this growth is coming from existing doors, both fueled by existing and new products.
With the start of our new spring summacies in Beckin-Chanery, we continued our selective door expansion globally.
In our direct markets, on products are now available in almost 9,800 doors.
This includes the now 58 doors that we have at Dixporting Goods, a partnership that we are incredibly happy with and that plays an important part in expanding our reach to new customers.
In particular, we are very pleased to note that Dix, no boats, the highest apparel share among all key accounts, the significant milestone in our efforts to establish on as a head to dough print.
The strong demand for the print is directly reflected in our strong D2C growth across all regions.
ETC net sales increased by 64.3% versus last year. A more normalized rate versus wholesale, contributing 137 million Swiss francs to our top line.
All regions grew by more than 50 percent. In Europe and in APEC, D2C grows had been stronger than wholesale growth.
In our T2C data, we can also observe that we are increasingly reaching a younger consumer with our newer running models.
This strategically important trend is very visible, for example, with the Cloud Monster and Cloud Runner that are among the top of our youngest leaning models in our running range. Along with many of our younger leaning performance all their products.
such as the Cloud Nova. This is further validating the successful expansion of our product offerings to younger audience.
We always emphasize the importance of our multi-channel strategy to meet the customer wherever they are.
While still a small part, our own retail stores enable us to showcase on in the most premium way. And we are very happy with how they are elevating brand demands.
This is evidence post in the increased DTC traffic, following store openings and at the same time, a spillover to halt their doors in proximity to our own stores.
In Q1, we modern quadrupled our return that cells compared to the same period last year. We mentioned the strong start of our flagship store in London. We're very happy that this momentum has sustained.
This is providing us with the evidence that there is a demand for selected larger flexor applications.
We are therefore extremely excited for the upcoming months, which we will see the opening of new retail stores in Williamsburg and Miami.
Both of these stores will have more than double the selling space compared to our current New York store.
Moving on to our ritual performance, where we continue to see strength in all geographies.
As many of you will have seen in our press release two weeks ago, we are updating our disclosure to no longer report the rest of world's region as of this quarter.
Our Middle East and Africa business will join Europe to form Imiya.
While Latin America will be added to North America to form America.
Our press release from May 2nd provides a detailed walk over from the old to the new regional splits for all quarters of the 2022 fiscal year.
Not impacted by this change is the Asia-Pacific region. So let me start here. NetSales and Asia-Pacific accelerated to 31.1 million with strings in Q1, growing by 89.4% compared the same period last year.
All three key markets, Australia, China and Japan, have seen a very strong growth rate between 75% and 100%.
We have seen a strong increase of local customers, as well as international travelers, in our Tokyo flagship store, as well as our China stores.
The APEC region continues to be a very strong showcase of our success of our parallel business with over 10% a parallel share across the whole region.
Moving on to Europe Middle East and Africa, when that sells continue to cross strongly by 51.6% to 118.9 million square-strengths in Q1.
Suddenly UK more than doubled, now making it the second largest country in the region.
We already mentioned the multi-channel momentum in the London area, but we see a similar spike in demand in many other key cities. With some distance, Germany remains our largest market in the region as it continued to grow at 56%.
With the launch of the new cloud server, on made big waves with strong presence in most key European cities, such as Barcelona, Paris, London, Berlin, and our home in Zurich.
Let's see how the Americas increased by 91.9% for the first quarter, reaching 270.2 million This is 16.5 million more than the previous quarterly record sales in Q4 2022.
This exception arose was driven by the strong demand in both channels.
of course supported by the control door expansion as outlined earlier. Turning to our performance by product category. Let's add some shoe, crew 80% to 400.5 million Swiss ranks.
The second half of the quarter, so exciting new launches, which of course included a cloud server that Casper elaborated on.
In the first three months, we already sold more of the new cloud server than during the last two years of the old cloud server model combined.
We all the launch the Roger Broke Lay and our kids connection.
Stupa are emerging presence on tennis courts, demand for the Roger Bro is exceeding our own expectations.
This is also true for kids shoes. We launched the Cloud Play and the Cloud Sky at a very selective number of key retail partners, as well as our own D2C channels and continue to see very strong sellout numbers.
A parallel reach net sales of 16.9 million in the quarter with a 48.9% year-on-year growth.
Our new collections introduced for the spring summer season under the Feel Nothing campaign have resonated very well with our fans in both channels. The corrosion uptake in the parallel continues to be skewed more towards our D2C channel and newer markets as evidenced by the epic example.
This includes the proof and ability of RID to see and our own store retail to fully showcase our heads with dough looks.
It includes the proven ability of our DTC and our own store retail to fully showcase our heads with our looks and increase cross-selling between categories.
Moving on to cross-profit, which reached 244.9 million with strengths in the quarter. More than doubling year over year.
We achieved the cross margin of 58.3%, up 650 basis points compared to Q122.
The significant uplift here over year is largely a result of the normalized supply chain environment and the resulting discontinuation of the exceptional air-produced.
which had been most elevated in the first quarter last year. Our strong margining Q1 also validates our full year cross profit margin target of around 58.5%.
Considering that Q1 normally has a much lower D2C share compared to the rest of the year. S-GNA expense, excluding SHPS compensation, were 197.7 million Swiss strengths.
and 47% of net sales in Q1.
reduced from 49.1% in the same period last year. A couple of callouts in the individual SG&A items.
Working through the temporarily above optimal inventory volumes comes with slightly elevated distribution expenses for additional storage space. Alongside the cost for the ramp up of our warehouse automation projects around the globe. With $44.6 million marketing expenses.
We enlisted more in brand building in our position as a premium performance brand rooted in running.
And in the consumer awareness, born as a head-to-toe print, then in any previous quarter.
Our big brand presence at key airports, like Los Angeles, at the latest festival in China, or the Tokyo Marathon, at just a few examples of more upper funnel investments to drive brand awareness globally.
cost management and the strong net sales created economies of scale in both selling and channel administration expenses.
We continue to invest into our team by leveraging outsourcing opportunities.
We also continue investing in our digital capabilities to connect more directly with our customers while using our tech landscape to drive efficiencies in key processes.
As a result of these dynamics, our adjusted EBTA reached 61 million strength in the quarter.
288.2% up from 15.7 million in the prior period.
We achieved an adjusted EBDA margin of 14.5 percent, considerably up from 6.7 percent in Q1-22.
Now moving to our balance sheet, capital expenditures were 9.7 million in Q123, but 2.3% of net sales. The significant reduction compared to the 16.3 million, we had in Q122. When we were building out our new offices in Zurich, in Portland.
As expected and communicated in our full year results call, our inventory position at the end of Q1 increased slightly as a result of the normalization of lead times.
Our inventory position stands at 465.2 million, up by 17.6% compared to December 22.
The increase is driven by the early inflow of first 12-inch season products.
Overall, our inventory remains very fresh and sets us up to drive a continued high share of full-price sales in 2023.
Our cash balance at the end of Q1 was 361.3 million.
only slightly below the 371 million Swiss francs at the end of Q422.
We are progressing well on the expansion of our existing credit line and continue to anticipate closing the new facility during the course of Q2 or Q3. With that, let's look ahead.
We had a very strong first quarter.
We continue seeing a strong end customer demand during the first weeks of the second quarter. Also, as expected, growth rates have moderated as we approach a more comparable year over year situation.
Our new products are resonating very strongly with existing and new fans. And we maintain a strong order book for the second half of the year, driven by existing and exciting upcoming new products. As a result of all of this positive momentum, we again raise our guidance for the full year.
half of the year in the light of the many risks in the current macro-opinomic environment.
On cross-marchen, as I briefly alluded to, we are retaining our cross-profit margin guidance of 58.5% for the full year 23, which would for the first time bring our cross-profit in absolute terms to over 1 billion Swiss francs for the year. On the Chocodeebidier margin,
We maintain our target of 15% for the full year, even at the higher net sales expectation. Implying a year-over-year absolute adjusted EBDA increase of close to 60%.
With this strong outlook and business momentum, we expect to generate a positive cash flow in 2023.
Last week we introduced our exciting spring summer 24 collection to our team and key partners at our global meetings in Ho Chi Minh City in Portland and in Zurich.
We are highly energized and motivated by the initial waves of positive feedback.
for our apparel and for their products, from our retail partners, and by the continued excitement around the on-brand. Our teams are working with full speed
We are so grateful for the strong and collaborative partnerships to continue to form.
and take this optimism and energy to our daily efforts to build an even more diverse and impactful business going forward.
But even more important was the opportunity during the global meetings to connect with so many people from our team from across the world and to speak about dreams and obstacles.
And about our culture, because this is the fundamental of everything. It is such a privilege for Casper Margindai to present our strong results on behalf of our whole team. And we could not be happier about where we stand today.
With that, we'd like to open up the session to your questions.
Operator, we are ready to begin the Q&A session.
Ladies and gentlemen, at this time we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two.
If you are using speaker equipment today, please lift the answer before making your selections. Anyone who has a question may press down, followed by one at this time.
One moment for the third place.
First question is from the line of Abby Svaniex with Pi Percentler. Your question please.
Happy, you are now live.
Miss Abby Swayniacs from 5% Luz, you are not alive.
Great, thanks for choosing my question. Convact in the quarter. Just given the strength in Q1, I mean, I know you've slowed the beat through the top line, but are you seeing any changes in consumer behavior that give you any more caution? Are there any quarterly headlines that we should be thinking about in terms of tempered compares?
or I think some peer to call out some foster wholesale trends into QQ, just any color that would be helpful. Thank you.
Thank you, Abby, for this question. And welcome, Ariel one, also from my side.
So what we saw on the whole South Side in Q1, and the picture continues in Q2 as well, is there's still a lot of, in general, there's still quite a bit of inventory in some of the channels, so it's very important for monitoring South through and to the moment for...
The brand was continued to be strong. That's what you're seeing in the result. That's what we're continuing to observe.
It's a bit volatile in general. So the wholesale environment, when we look at sellout, some weeks are very strong and then some weeks are a bit weaker and this is also why, basically we wanna look at Q2, Q3 and Q4 with an element of caution. We know we're all aware of the macro environment.
and it's really some uncertainty there. But when we look at on, we're very confident. And I just wanna probably share with you also kind of looking at ticks, for example, where we're now, I think, in 58 doors than already.
those doors have the highest average sales rule of all doors that we have it on all wholesale doors. So also the new doors that we're adding and the brand has been received super, super strong.
average cells through a wall door that we have it on all whole cell doors. So it's also the news doors that we're adding and the brand has been received super, super strong.
Got an M1 follow-up if I can just on the apparel because this is the strongest year of year growth in four quarters. So can you talk about any changes to the equipment or the strategy and like specifically more color on where you see price points going to that business? Thank you.
Yeah, thank you. So we feel very confident where we bring into collection. And we would have loved to welcome you at our global meeting. So you could already see what's happening in 2024.
In the end, we feel there's a lot of opportunity to take something that's born in performance running and to move it into the movement all day, all the active space. This is live reparttering with some of the doors that we're partnering as well. And the product continue to evolve, the demand that comes from the cell in that we have with the care count.
was very strong. Again, looking at Dix, for example, they are our strongest parallel door in terms of the parallel share. And especially I want to highlight that our own retail store see very, very strong and the parallel numbers. And that's also one of the reasons why we're looking forward to continue to evolve our own retail network.
From a price point perspective, we should confident where we are. And there's definitely room to probably have a few more pieces in a little bit kind of a little bit lower price point, which is close to where our current lowest price point is. But then we also feel we have a spot where there is demand and we're meeting the right consumer at the right place if the apparel piece is never having.
Thank you. The next question is from the line of Aubrey, TNLOS, PNB, Paripath. Your question, please. All right. Thanks so much for taking the questions. Wanted to ask on the updated revenue guidance.
and just if you could maybe elaborate a bit more on what's driving the higher guide, whether there's anything specific to call out.
either from a region or product perspective. And then second, you mentioned strong pre-orders for fall winter, particulars and key styles. They've got optimism for the back after the year. Is there any change to your expectation on two-h revenue growth kind of the low to mid-30s range?
I'll pray happy to take that one. So we really have seen a very strong demand, but also very good capabilities and fulfilling that demand in the last days of the quarter, which has resulted in the overachievement compared to the number that we...
months remain strong with the changes that we see and from a week to week basis. Our pre-orders for the fall winder season are very strong and they...
The growth rate there indicates that we are in a position to over achieve the number, but at the same time, we want to stay in a position that we take the right decisions, even in a weaker environment. We don't need to chase cells, but continue to sink long-term. And therefore, we embedded that element of cautionness.
from our, how we look at the first half here versus the second half here. This day is pretty much in line with what we shared in our last call. So now is the updated, two one number. We more look at the mid 50s growth rate in the first half and then the low to mid 30s in the back half of the year. Right. Thank you.
The next question is from the line of Chase, so with UBS. Great, thank you so much. Just wondering if you can elaborate a little bit on the growth in the Asia Pacific region, particularly in China, what you're seeing there. And really maybe what you're outlook is not just for this year, but even if you look at a little bit beyond how you see that market developing.
Thank you. Thank you for the question, Jay. Hey, I think China, we're all aware of how the market came back. And I think January , February , it was still a bit slower. And then it really started to pick up. And we see we're very happy with the traffic that we're seeing in the store. So we currently have 15 stores in China. And two of them.
reaches consumers way beyond running in an active space, in the movement space. And we remain very, very, very confident for the mid and long term. We said this before, right? I mean, we're in China because we want to make it in one of the top two markets. And that's what we're aiming for.
And this is what you see reflected in the growth rates. Obviously a lot of investment and going in there, we have a team of over 100 people making sure we have a very tailored marketing approach as well with a lot of local content. And that we can bring to the market, but the brand is received well. And that's in the end, but we see the numbers.
in the growth rates, obviously a lot of investment. And going in there, we have a team of over 100 people making sure we have a very tailored marketing approach as well with a lot of local content. And that we can bring to the market, but the brand is received well. And that's in the end, body seeing the numbers. Terrific, thank you so much.
The next question is from the line of Christina Fernandez, was the tell say advisor, please go ahead. Good morning. I wanted to ask about the inventory. Can you give us a color around how you expected to throw over the next couple of quarters?
It's one to the peak on an absolute basis and then it's the current sequentially that you deliver that inventory in a more corridorly helpful. I'm just happy to take this one. Recalling what we shared on the last call, the
fresh and basically will allow us to fulfill the demand in the coming months at full price.
Now the increase of the inventory, as we shared with last time, is the result of shorter lead times, and we've trended times, and together with more and more reliable factory outputs that we have seen. And so back in December , we started to adjust our production orders going forward, because you have a certain commitment towards your factories.
those adjustments will only come into place at scale now in the second quarter. But we already see the first results of that if we would look one level down on inventory. At the end of December we had 145 million inventory in transit. Now at the end of March we only had 124 million.
of inventory in transit, so 20 million less. So that means that there's already less inventory in the pipeline. And so as we have shared in the last call, our goal is still to reach around 30% of working capital in terms of net sales by the end of the year. So looking at them.
and inventory in the range of somewhere 425 to 450 million. So this is where we want to be. So at a lower level than where we are at the moment, somewhere in between end of March and end of December . Thank you. And now, I have a question. What will you look at at the demand you're seeing globally?
Are there any callouts by Regents FAR? Are the parts that are resonating, for example, in the American service scene, in the APEC, where they're different in performance by lifestyle, or any callouts there as far as what's working with non-regime versus the other?
So if we got the correct data question is on them, regional differences from a product size and how the products are received. So.
I mean, really aside, and we mentioned it in the notes as well, I think we saw strong growth across all regions, right? So in the Americas and Asia Pacific, we just spoke about China where January and February was still a very difficult environment. Despite that, we still almost had 90% of growth in Asia Pacific. And
When you look at markets like Germany with 56% growth or the UK with above 100% growth, then I think the essence is always the same. It's run products that are performing very well. The Monster, the Gold Surfer, we spoke about it making up 45% of our performance run.
So new products that have been received really, really well. And we're closely monitoring that the products are being adopted by runners and being born on runner's feet along the key running route. So when we look at share and there, we sometimes reach above 15%.
And then you have products that's slightly different, especially on the performance all day side. So if you look at the US, the cloud no longer is really strong. And it's performing very, very well. If you look at China, you, for example, as a product like the CloudX, that is the strongest franchise. And we feel this is very, very healthy, because it allows us to basically balance the...
I want to make here which is...
We invested a lot in really rooting and communicating the brand from a performance perspective and also reaching a younger audience. And it's paying out in all the countries. And just an example there also in the UK, you know, we're very happy to have over 100% growth. And so, yeah, we're very happy.
very much coming from an audience that is among the youngest that we have globally. Thank you. The next question is from the line of Jim Duffy. This is Steve for your question, please. Thank you, Caspar, Mark and Martin. I wanted to start by asking about regional differences in channel mix and momentum.
I think if we just look at the growth rates, it's a bit of a function of the comparison.
So Q2 will be the first quarter where also COVID doesn't play a role anymore in our prior year numbers, maybe with the exception of China. But we have an issue with all these loyalists who have dedicated their own propertyUEH to ex Això ?? and the homeless, but they're so stuck and so vulnerable, that we have to come together and start looking for ways to reestablish them.
We continue to see and it's fully our strategy to have a stronger growth rate in our D2C channel, both e-comm and online, compared to our wholesale channel. That's the strategy that we follow in all the geographies.
We see a similar momentum in all the geographies now on a more comparable base. We invest significantly in our digital capabilities to connect more directly with our customer, to increase our service level with our customers in our direct channels and the experience overall. And as Mark said, our own retail stores.
play an important part. We gave the example of London, but we see a similar pattern also in LA or in Tokyo where our retail stores are additive to our online channel, but also additive to our whole search channel.
I'd also like to ask about the planned timing of marketing spend across the balance of the year and any specific marketing plans around the upcoming tennis majors like Wimbledon and the French Open. I'd also like to ask about the planned timing of marketing spend across the year and any specific marketing plans around the upcoming tennis majors like Wimbledon and the French
Yeah, what do you see happening in marketing and I think what the experience is really a shift and from lower funnel to upper funnel. So we will continue to build the brand and to reach a wider audience. This is what you saw with the launch of the car surfer. And this is one of the key reasons why we also decided to move into tennis.
We're very happy with the impact that EGA and Ben already have in Italy allows us to bring the own logo and the brand on the chest of some of the best players to a very, very large audience. And so what we will do is basically have a major launch event around the US open. With the two players it's going to be...
around August , so late, August just before the game is starting. And it's our very clear goal to continue to make tennis and a very inclusive sport that we can also connect between different audiences, so not just to have it as a spectator sport, but basically how can we connect the pro tennis players with the audience that is playing it all day and every day. And so what the experience we've...
the pests are going to be very important for us. It's a clear goal to be competing for metals on one of the biggest stages. And then this is also the last test, so to say before Paris, which is going to be a very important moment for us. So how can we bring more sustainable innovation?
and lead from a performance side to a huge audience through athletes and this is what Paris will be about.
Thank you. And the next question will be from Alex Travenor's long Stanley, your question please.
Great, good morning. Thanks for taking my question and congrats on another great quarter. Martin, I have two that are probably best for you. Just first, I wanted to clarify something in the guidance. Looks like you only flowed through part of the first quarter EBITDAB B to the full year. From the commentary, it just sounds like that's conservatism, but I want to make sure I'm not missing anything there that's limiting the...
the flow through. And then second, just on Gross Margin, I think free was like a 800-bit impact last year. And I'm seeing Gross Margin's up 650. So I'm just wondering, does that mean you didn't fully recapture the air freed or there's something else pressuring margin? I just wanna make sure I'm understanding all the moving pieces there. Thanks. APPE. difficile. The
So let me start on the on the Martian side. So really we continue to see a very high share of full price sales. So there's no discounting embedded in there. Compared to last year, we still have a negative ethics impact in there, especially from the Vika Euro.
And then that elevated inventory level that we have has also created some additional freight costs especially for delayed unloading of container which are also reflected in the cross-profit that we had for the first quarter. But we are out of that topic so going forward.
We foresee that we continue driving a high cross orbit margin in line with our long-term goal of 60%. Again, there's still pressure from the weaker euro on the margin side of 60 to 100 basis points. But...
the rest of the business is really set up to deliver on that higher margin. Our price increases have been very well received by the consumers. We haven't seen any demand impacts. On EBITDA.
Again, our philosophy is to invest into the business and into the future growth while driving profitability. This is why for us, the full year number is the one that we are managing, the 15%.
EVDA and so we are investing into people, we are investing into marketing, into print building, into innovation in order to become a bigger brand in the future. At the same time, we also have a lot of initiatives to drive economies of scale.
The next question is from the line of Tom Nikit with wet bush securities. Your question, please.
Hi, I'm going up to the gentleman. That's just a question. I just want to ask, I know we are growing very, very rapidly and you're ensuring you have that vision. So you'll continue growing over the next period. Do you have today's sufficient manufacturing capacity to point their support?
You know, in growth that you're expected to see over the next couple of years, or will you have to find more manufacturing capacity that you could give to the growth?
Yeah, thanks for, thanks for the question. I think A.W.A.W.A.T.S. It's very clear that on the manufacturing side in general, there is water over capacity right now than under capacity. So it's...
It's not so difficult to have enough capacity. Nevertheless, we've been planning for that for many years, right? So we've been working with the same partners over time and they know our growth aspirations. And I think the key here is not just to get capacity, but it's basically to allow.
to partner with the best innovators, right? And so what we're very much focusing on is how can we bring the most performance foam to the market? How can we have the best and lightest membrane? How can we have the most sustainable products in the market? And in the end, we're investing a lot of time on partnering with the best chemical companies that are out there.
Great, just one quick follow up. We look at in May, I think we talked about really great growth in the United Kingdom and the small growth in Germany. That would kind of suggest that maybe there will be some growth elsewhere in the region.
Are there, you know, sort of pockets of the media where, you know, maybe the, you know, the brand is not, like, not as much momentum.
elsewhere and would you be there at that opportunity? Yeah, so when we're looking at it, I think, with the formation of the reach and in the others, many different elements in there. And so let's start with the Middle East, where we basically, there's a very, very strong demand, but we have a lot of opportunity in setting.
represented as a brand to some other markets. We've spoken about Germany and the UK and then their Switzerland and Austria, where we very much focus on working with the right partners and bringing a performance-run range to life. As part of that, you can also expect some changes on the partners we're working with, especially then for next year.
very much trying to focus on the channels that allow us to reach the right consumer, which means we're gonna go out of comfort doors and brown-through doors. And obviously there's some change happening there, but the impact is gonna happen over time, and especially the nose in spring summer 24, we're quite confident that we can compensate.
a lot of that with new channels and with our own retail channel and the own DTC channel that we continue to expand.
The next question is from the line of Jonathan Comble, with your question. Yeah, how you get after noon? Casper, if you're still there or a mark, I'm curious. I wanted to ask really what you make of the strength of the newest performance models you're launching and just any...
Perspective how that might be influencing your forward product strategy. And then if you could comment it all on the road to Paris 2024, any high level thoughts on what we should expect.
Thank you, John , and thanks for asking a question about product. That's for me. Carehouse first and foremost. Yeah, as you mentioned, there's been a lot of anticipation for the Cloud Server for launch. Cloud Tech phase is a very intuitively understandable technology.
and we've been blown away really and surprised by how well it's been taking. Most retailers and other intellectuals have been telling through this very, very quickly. I think Martin shared some numbers earlier. And that's good news because we're about to roll cloud tech phase out to more products into higher pushing products.
to the trail side and also to one of our lifestyle models. Overall, you follow the the architecture gains that we've had in the running space and that's really driven by some of the latest innovations that we've introduced over the last 12 months.
Most notably the Cloud Monster, a very prominent product that continues to be extremely strong. Where we're going to go into almost like a family of Cloud Monsters for Spring 24. But then, you know, maybe a little bit less exciting, like the Cloud Runner, you know, that now is usually one of the top two sellers in one specialty that also allows us to...
capture a market share from those bread and butter models from other brands, and giving the retailers an opportunity to expand their average price points because
Many of you may be aware that there's an arms race going on currently among the top performance brands of who makes the fastest shoes and we start this lightning initiative within on only about 18 months ago. So to have someone like Helm will be rebate pretty much all the favorites on the women's side for the Paris 24 marathon.
gives us a lot of confidence going into the next season. At the same time, we're looking at how can we bring some of these performance technologies and so on two more consumers, maybe not the ones that are running at two hour marathon, but maybe the ones that are running at more than four hour marathon, probably pretty much everybody on this call.
could benefit from these technologies. Those are the things that we're working on, John . Something I could benefit from looking forward to that. And then just maybe a follow up, Martin, thinking about the financial guidance, the revenue guidance for the year. It looks like the guidance implies first quarter should be about.
24, 25% of the full year revenue. You know, historically it looked like first quarter's been closer to 20% they're below. So anything that would change the shape of your revenue cadence throughout the year or is that more a reflection of the conservatism that?
that you're baking into the model. Thank you.
Remember back in 2021, we also changed our logic of launching the product from basically a launch in the second half of the year to launch in the one January of February . So I think it's hard to use his historicals. And as I said in the beginning, if we look into the second half of the year,
where we apply a certain level of cautiousness. But again, from our product pipeline and some of the things that that customer mentioned, there's a lot of confidence that we should see all the strong re-orders based on the pre-orders that we have on books. But we don't want to be in a position where we have to take.
short-term decisions in order to chase growth.
decisions in order to chase growth. Very helpful. Thank you. Thank you.
The next question is from the line of Sam Bosa with Williams Trading. Your question, please. Good morning. Thank you. Or good afternoon. Thank you for taking my question. Once the question has been answered, I have two. One is just about inventory and really how to think about...
You know, what you want your optimum turn to be, you know, sure, once we clear through this year, because, you know, and then I have a follow-up. I have a separate question as well.
Let's talk this with inventory. So as I mentioned for us, the good way to sing the power is on the working capital. Jesus has a lot of the payables and the inventory are ultimately related. So 30%
working capital as a goal in percent of net sales over the last 12 months. If it's for us a good indication on very one-a-pea, we had lower levels in the past and of course we were continuing working on optimizing our inventory.
be through direct shipments to some of our key account partners, of course, working with our factory partners, but also optimizing our internal processes. So we are clearly on this, but for the moment, we'd be focusing on.
on basically bringing our lead times back to where we see the reality now with transit times. And then for us, important is to keep the inventory fresh, to keep inventory in a position that we have more demand than supply. So that's an important...
part of planning the business in the new conservatory space. Thank you. And then secondly, you talked about not too much promotions. I was wondering one in Switzerland. I'm one of your larger wholesale accounts. I do believe.
has just broke price and it's 20% off of all your shoes, at least 20% off there, some old ones that are marked down lower. That's something that just popped up in the last week, the caution or sport. I assume that's a good customer of yours. Why am I a grCo? price short now.
Thank you. Thank you, Sam, that question. I think what's important to know first and foremost that all the markets have different policies on how we control pricing, right? So the US knows map. It's very controlled in Europe that doesn't exist. So every partner is free to decide on how they want to price in the end product.
We're working very closely with all the partners and it's important that they're showing the product in a premium way and that they're reaching the right consumers and you can rest assured that we're making sure that we're not selling in too many products and that we're working with our partners on showing the premium-ness of the brand in the right way.
It wouldn't be a great price unless it was a need to break price. I would say, could you buy this of what was permitted in a marketplace? So could you repeat that? It wouldn't be promoting your product and what they thought they needed to promote your product.
Some great price, most of them are the needs of great price, I would say, for the purpose of what is permitted in a market price. So could you repeat that? It wouldn't be promoting your product and what they thought they needed to promote your product.
to drive more sales. So we haven't really seen that here in the US yet, but I'm wondering is that because there's too much inventory in that particular retailer? And again, I understand there are different rules and you can't tell them what to do, but at the same time it was sort of odd to see it. Yeah, I think we could jump in here.
This particular retailer is 20% off site-wide on all their running products.
Let me just highlight two additional points. One is what we're having in Europe . There is a topic of Euro versus Swiss ranks as well. So as you know, we have different prices between markets. So this always plays an important role in terms of where different people can shop and can get access to the product.
And then I just want to highlight again, since it's by four, and as you know, the most penetrated marketing, and what we already said that we're trying to make sure we're working with the right partners to reach like consumers as part of that role. So I'm not working with stores anymore, and more on the brown shoe and comfort side.
And then Kasper already mentioned the fact that this one is a side light and not just an out-promotion.
Have a good day. Ladies and gentlemen, the conference is now concluded. And you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye. Thank you for the bye. You