On Running IPO ‘ignited a lot of positive energy into the company’: Co-CEOs

On Running Co-CEO and CFO Martin Hoffmann and Co-CEO Mark Maurer speak with Yahoo Finance’s Brian Sozzi and Julie Hyman about the outlook for footwear and apparel brand's growth amid COVID lockdowns in Europe and their IPO experience.

Video Transcript

- 2021, already shaping up to be one of the most active IPO years.

- Talking about companies like Warby Parker, Allbirds.

- We went for a run with the team, we ran for the New York Stock Exchange, got to ring the opening bell. What else can you dream of?

- We're going to have this IPO kind of bring Visio into the next chapter. So we're really excited about where we're going from here.

- This is going to be a super, super dynamic year for us, and you're going to see the changes in terms of market share and growth and all that.

- We wanted to create an amazing foundation, so we did some things the hard way.

- And we wanted to create a brand that really disrupted fast food and made it healthy.

- And so we were able to grow in spite of the challenges and the headwinds from the pandemic. Frankly, we feel like we're emerging stronger.

- In the end, it's about bringing a perfect product and the perfect running feeling to the market and this is what we're focused on.

BRIAN SOZZI: On Holdings has been off to the races since a sizzling debut on the New York Stock Exchange back in mid-September. The company recently reported that third quarter sales surged 68% from a year ago and profit margins nearly expanded 600 basis points. Let's check in on what On has on tap for next year with Co-CEO and CFO Martin Hoffmann and Co-CEO, Mark Maurer.

Guys, good to see you again. Thanks for taking some time. Mark, I'll start with you here. How's the holiday season going?

MARK MAURER: It's amazing. We actually just came back from skiing, but we couldn't be happier than spending this afternoon with you.

BRIAN SOZZI: And Martin, over to you. The holiday season has started pretty well. It looks like the malls have been crowded. What are you seeing from an inflation standpoint?

MARTIN HOFFMANN: So we just came out of a very strong third quarter. It actually has been the strongest one in the history of the company. Not only in top line, but also gross profit and EBITDA margin. So we really see that there is a strong demand for the On brand across all channels, across all product categories, across all the different regions.

And this also continued now into the holiday season. We just passed the Black Friday weekend and have seen very strong results there. At the same time, of course, Europe, many countries are going back into lockdown, so this is obviously something that we are feeling as well.

So Asia, is on the hind side, is doing very well. So it's a bit of a mixed picture in the fourth quarter so far, but overall, very, very happy where we are and very, very strong feelings about the future. We just started our selling season for the second half of 2022 and get a lot of really positive feedback from our key retail partners all around the world, on our existing products and our new products. So we are really positive about the future.

JULIE HYMAN: Yeah, you guys have seen incredible growth over the past couple of years. Mark, you guys, when you reported your earnings last month, you talked a little bit about supply chain and trying to diversify the supply chain a little bit more. Now that we're a month on from those comments, I'm just curious how that's going, especially given what Martin was just talking about, in terms of this latest wave of the virus.

MARK MAURER: Yeah, I think for us, it's been very important since a long time to be extremely agile and nimble on how we're approaching things. And what you're seeing right now is you're seeing a lot of disruptions on the demand side, but then also on the supply side, lots of disruptions in the freight market. And so what we've been up to is really kind of balancing that out.

We continue to diversify. We're entering new countries and we're actually, in January and February, above the capacity that we originally planned back in June. So we are very, very happy on where we stand from a supply perspective.

JULIE HYMAN: And you guys have also been diversifying in terms of product, right? When you reported your last quarter, your apparel sales are way up as a percentage of your overall sales. And I'm curious what the goal is for that side of the business. In other words, Martin, I'll ask this one to you. What does the appropriate mix look like for you between apparel and footwear?

MARTIN HOFFMANN: We are looking less at the mix. So apparel is obviously at a very earlier stage than our footwear business. We started with a pair back in 2016, but it's growing much stronger than the footwear, so it will be a very important pillar of growth for the future.

And we are very excited about many new products that are coming next year, especially in the area of buttons and insulated jackets and outer layers. But at the same time, our footwear business is still extremely strong across running, outdoor, performance, all day. So for us, it's about growing all the different businesses, but less about how much share apparel will be in the future.

BRIAN SOZZI: Yeah, and Mark, I know the team puts a lot of pride in its innovation and the product pipeline as well. What's your biggest innovation that we need to be on the lookout for next year?

MARK MAURER: I mean, there are lots to come, but definitely I want to highlight Clean Cloud, which we announced, where we basically take carbon emissions and where we're intending to make a mid-sole and out-sole out of that. Please look out and watch out for Cyclone, which is our fully recyclable and circular product that comes in a subscription model. Very, very important. But then we're also looking at amazing innovation in the running space.

So we're relaunching the Cloud we're. Bringing Cloud Monster, a Cloud Runner, and all of these products come with way higher share of sustainable materials than in the past. So we're very, very happy with that progress and we're very happy that we can continue to ignite the human spirit through movement and bring an amazing feeling to runner's feet.

JULIE HYMAN: Guys, I want to ask you both, now that you have been a public company for several months, how that's been, if there is anything that's particularly surprised you about the difference between being public and being privately held? If there's any big learning that you have taken away? I mean, I want to get both of your takes on that Martin let's get you first on this.

MARTIN HOFFMANN: Well, first of all, I think the IPO itself was a very emotional moment for all of us and I think we were very fortunate that we hit the moment where actually our teams all around the world could at least meet in the office and celebrate that moment a bit before we all have to separate again. So there was a lot of positive energy that came out of it. And at the same time, we are at a new starting line of delivering on our mission to ignite the human spirit through movement.

So it maybe took like two weeks of digesting that whole situation, and then we all fully went back into the business and the opportunities that we have there, and also the volatility that we see on the supply side. But all we really see that it ignited a lot of positive energy into the company and into our partners as well, which has been at the running event in Austin, one of the biggest trade shows for run specialty. And also there was a lot of positive feedback and pride from our retail partners about that milestone.

JULIE HYMAN: Yeah, it's always good to meet those people in person. What about you, Mark?

MARK MAURER: Yeah, I think, look, we exist, as Martin said, to ignite the human spirit through movement and we have a big dream to bring millions and millions and millions more into that. And the IPO really helps us to have the funds and the opportunities available to do so, and I think already, since the IPO, we've been able to announce few things. Like Clean Cloud, that I just spoke about, we've been able to celebrate successes at the podium in the Berlin Marathon.

And we can take that and we can bring it back to the athletes, we can create even better product, even faster product. We we're expanding our distribution with some of the biggest retailers. We are doing pilots with JD and FootLocker and this is all very, very positive. So in the end, as Martin said, it's a new starting line and it's a huge motivation to everyone and to make this way, way bigger than what it is today.

BRIAN SOZZI: And guys, I was slated to be in your neck of the Woods soon for the World Economic Forum in Davos, but now that has since been cancelled because of the pandemic.

MARK MAURER: We're very sorry for that?

BRIAN SOZZI: What are you seeing?

MARK MAURER: [INAUDIBLE]

BRIAN SOZZI: Yeah, I know. You could have shown me how to ski, for sure. But what are you seeing on the ground there in Switzerland? Is your team back in the office or are you seeing less mobility? What are you seeing?

MARTIN HOFFMANN: No, so now it's mandatory home office again. So everyone is in the home office, but also in the outdoors, which was already a positive momentum in the last lockdowns. But anyway, we are approaching now the holiday season, so I think it's also a moment where the team deserves to switch off for a moment and to recover. They have done an amazing job over the last 12 months. And then hopefully, everyone comes back fully energized to dream on in 2022.

MARK MAURER: And let me just very quickly add, I think we've seen that in the past, in the last two years, that lockdowns and that being bound to a home place also triggers the need to go out and run. So I think you over the last two years, we've seen that this also gives a very, very positive momentum in the end to our products and to the movement that we're trying to create. So we are ready to tackle what's to come and we want to help people to get out and move.

BRIAN SOZZI: All right, well stay safe on the slopes, stay safe out there in general. Look forward to talking with you both next year. On Holdings Co-CEO and CFO Martin Hoffmann and Co-CEO, Mark Maurer. We'll talk to you soon.