On Holding AG — FY2021 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2021, prepared under IFRS in Swiss francs (CHF). The filing also provides unaudited fourth-quarter comparisons. On completed its NYSE IPO in September 2021.
Financial performance
| Metric | FY2021 | FY2020 |
|---|---|---|
| Net sales | CHF 724.6 million | CHF 425.3 million |
| Gross profit / margin | CHF 430.3 million / 59.4% | CHF 231.1 million / 54.3% |
| Operating result | Loss of CHF 141.1 million | Loss of CHF 17.1 million |
| Net result | Loss of CHF 170.2 million | Loss of CHF 27.5 million |
| Adjusted EBITDA / margin | CHF 96.4 million / 13.3% | CHF 49.8 million / 11.7% |
| Operating cash flow | Inflow of CHF 16.9 million | Outflow of CHF 14.7 million |
| Cash and cash equivalents at year-end | CHF 653.1 million | CHF 90.6 million |
| Net working capital | CHF 187.5 million | CHF 113.0 million |
FY2021 adjusted EBITDA and adjusted EBITDA margin are non-IFRS measures; the filing excludes items including share-based compensation, foreign exchange results and IPO-related costs. The statutory net loss included CHF 198.5 million of share-based compensation expense, much of it associated with IPO-triggered vesting, and CHF 7.6 million of equity transaction costs.
Q4 2021: Net sales rose 53.7% to CHF 191.1 million, gross margin increased to 58.5% from 51.7%, and adjusted EBITDA was CHF 11.2 million, roughly flat year over year. Net loss widened to CHF 187.0 million from CHF 2.6 million, largely reflecting CHF 176.2 million of share-based compensation in the quarter and higher foreign-exchange expense.
Revenue mix and changes versus prior year
- Sales grew 70.4% year over year. Wholesale sales increased 69.5% to CHF 448.8 million; direct-to-consumer (DTC) sales increased 71.9% to CHF 275.8 million. DTC represented 38.1% of annual sales versus 37.7% in 2020.
- North America was the largest region, with sales up 96.8% to CHF 409.5 million and 56.5% of total sales. Europe grew 38.8% to CHF 260.4 million; Asia-Pacific grew 85.8% to CHF 42.7 million.
- Shoes generated CHF 683.3 million, or 94.3% of sales. Apparel grew 130.8% to CHF 36.3 million, but remained 5.0% of sales.
- Gross margin improved by 5.1 percentage points, reflecting lower sourcing and customs costs, including the EU–Vietnam trade agreement, and the absence of duplicate sourcing-transition expenses from 2020. Increased airfreight partly offset the improvement.
- SG&A rose 130.2% to CHF 571.4 million, faster than sales growth. Excluding share-based compensation, SG&A was CHF 372.9 million and 51.5% of sales, versus 45.5% in 2020.
Cash, debt and liquidity
- Financing cash inflow was CHF 595.9 million, primarily reflecting net IPO proceeds of CHF 618.2 million. Investing cash outflow was CHF 36.4 million, including CHF 36.2 million of capital expenditures.
- Year-end current assets were CHF 964.6 million and current liabilities CHF 205.0 million. The balance sheet reported CHF 848.4 million of equity.
- No amounts were drawn on the committed overdraft facilities at year-end. Facilities had stated limits of CHF 100 million, CHF 25 million and USD 35.5 million, subject to borrowing-base calculations and covenants.
- Reported financial liabilities included CHF 180.9 million of lease liabilities, of which CHF 13.6 million was current. Total contractual obligations were CHF 276.4 million, including lease liabilities and lease commitments.
Outlook, commentary and key risks
- Management said the company achieved its FY2021 net-sales outlook despite supply constraints and the delayed spring-summer product launch. It expected factory, freight, port and labor disruptions to continue into 2022 and 2023; increased airfreight was expected to remain above normal through the first half of 2022.
- Management expected continued investment in marketing, product development, inventory, distribution, offices and selective retail expansion. It also cautioned that 2022 supply disruptions and logistics-cost inflation could materially affect sales, net income and adjusted EBITDA. The filing does not provide a clear numeric FY2022 sales or earnings forecast.
- In the third quarter of 2021, COVID-related closures in Vietnam caused approximately 12 weeks of lost production. All footwear was produced in Vietnam in 2021; the company began production with new Indonesian factory partners in early 2022.
- Other material risks include reliance on third-party suppliers and retail partners, product and geographic concentration, consumer demand for premium discretionary goods, competition, foreign-exchange movements, and the execution of DTC and international growth plans.
- Management concluded disclosure controls were ineffective at December 31, 2021 because of a material weakness in segregation of accounting duties and review of journal entries and reconciliations. Remediation steps included a new ERP system, additional internal-control resources and external advisers; the weakness was not yet considered remediated.
- Founders retained substantial voting influence through the dual-class structure. The company stated it did not expect to pay dividends in the foreseeable future.
Important facts for investors to verify
- Reconcile the CHF 170.2 million IFRS net loss with adjusted EBITDA of CHF 96.4 million, focusing on share-based compensation and other excluded adjustments.
- Review the timing and vesting conditions of equity awards, including the significant IPO-related expense and expected elevated share-based compensation in Q4 2022.
- Track factory diversification, inventory availability, airfreight use, freight and labor costs, and whether supply disruptions affect margins and growth.
- Assess whether cash generation and the CHF 653.1 million cash balance can support expansion and contractual lease commitments without additional financing.
- Follow remediation and testing of the disclosed material weakness in internal control over financial reporting.
- Monitor sales concentration in footwear and North America, and the ability to sustain growth in apparel, other regions and DTC without weakening wholesale relationships.