On Holding AG (ONON) Earnings Call Transcript & Summary

Hello, everyone. Thank you for joining us, and welcome to the On Holding AG Second Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Liv Radlinger, Head of Investor Relations. Liv, please go ahead.

Good afternoon, and good morning to our investor community. Thank you for joining on second quarter earnings conference call and webcast. With me today on the call are David Allemann, Founder and Co-CEO and Frank Sluis, CFO. Before we begin, I will briefly remind everyone that today's call will contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements reflect our current expectations and beliefs only and are subject to certain risks and uncertainties that could cause actual results to differ materially. Please refer to our annual report on Form 20-F for the 2025 fiscal year filed with the SEC on third March 2026 for a detailed discussion of such risks and uncertainties. We will further reference certain non-IFRS financial measures such as adjusted EBITDA and adjusted EBITDA margin. These measures are not intended to be considered in isolation or as a substitute for the financial information presented in accordance with IFRS accounting standards. Please refer to today's release for a reconciliation to the most comparable IFRS measures. We will begin with David, followed by Frank, leading through today's prepared remarks, after which we are looking forward to opening the call for a Q&A session. With that, I'm very happy to turn the call over to David.

Good afternoon, and good morning to our global investor community. Thank you so much for joining us today. When we started On 16 years ago, we were told that the sportswear industry operated on a rigid set of rules, standard malls, standard distribution and standard ways of doing business. We politely chose to carve our own path. When told it was physically impossible to put holes into the rubber sole of a running shoe, I took those indices stranded molds and broke them. This is how Cloudtilt was born. That single act of defines forged our permanent innovation culture. At On, we are reinventing the mold again and again because it is the only way to build a premium global sports brand that will prevail for decades. Stepping into the roles of Co-CEOs just over 12 weeks ago, is a strategic commitment to our founder led DNA. As On continues to scale into a multi-decade global company, we approach our growth with the precise focus of innovators and operators but with the long-term patients or founders. We are not sprinting for short-term volume. We are deliberately engineering for the multi-decade value of a premium brand. Alongside our President and COO, Scott McGuire and our CFO, Frank Sluis, this leadership structure unifies our strategic intent with disciplined operational and financial execution, relentless product innovation, a unique design culture and brand equity remain at the very center of every decision we make. This commitment delivered another exceptional quarter of premium growth. For Q2 '26, net sales reached CHF 850 million a powerful 22% growth at constant currency. At the same time, we delivered industry-leading profitability over 65% gross profit margin and close to 20% adjusted EBITDA margin. The strongest proof of the connection we are building is the extraordinary strength of our direct-to-consumer channel. The most premium expression of our brand which delivered exceptional momentum in Q2, growing 34% at constant currency. This was driven by deep toe-to-head consumer demand across all regions with On's brand awareness increasing to 30% as a whole new generation of fans discovered the brand. We are proving that a brand can achieve global scale without eroding premium positioning or margin ambitions. We do not create exclusivity through artificial scarcity or hype. We scale by bringing superior technology, engineering, unique design and cultural relevance to millions of consumers, capturing market share while seriously protecting our margins. On ultimately creates a highly defensible, scalable financial profile of a premium growth compounder. Our actions in wholesale this quarter are perhaps the clearest example of our premium strategy at work. Momentum in our own channels was remarkably strong with growth ahead of our expectations in all regions. On the other hand, in wholesale, the sellout of some of our everyday running franchises tracked below our ambitions in a highly promotional multi-brand marketplace, particularly in the Americas. Clearly, this is something we are not pleased with, but our response is where the premium standard proves itself. We have been intentional and disciplined on managing sell-in to the channel within this environment. Most importantly, we choose not to build in channel inventory that could compromise our full price integrity. This commitment, discipline and focus on driving high-value accretive growth will continue into the second half of the year and be evident in our premium financial profile. We expect our full year net sales to grow in the low 20s at constant currency with a higher gross margin outlook and reiterated adjusted EBITDA margin. On this basis, we are on track to close 2026 as the fastest-growing global brand with the highest gross margin in our industry. This is a continuation of the premium strategy that makes us who we are. Let me give you a personal example of where we saw that strategy at work. Early in our journey as a public company, we made the tough choice to prune over distributed channels in EMEA and protect our full price integrity. Many question us then. Today, that discipline is delivering exceptional 21% constant currency growth and record Q2 group margins. EMEA proves that premium growth isn't bought through volume, it's forged through restraint. In the wholesale channel, this discipline does more than protect our margins. It clears the runway for an acceleration of our innovation cycle. We are not just releasing new models. We are deploying a step change in performance engineering. Franchises like the Cloud Monster 3 hyper, the Cloudsurfer and the Cloudboom Strike 2 are the direct beneficiaries of the strategy by ensuring a clean premium marketplace today, we allow these breakthrough technologies to land with maximum impact, driving full price demand. So now let's step into our innovation lab. Our premium position is anchored by our innovation engine, and that engine starts with running. Patented performance engineering is our permanent antidote to promotion. This past June, we hosted our inaugural On Run Fun Meet in Paris, bringing together our top 100 global run specialty partners. We gave them an exclusive look at our next-generation marathon racing shoe the Cloudboom Strike 2, featuring our new Cloudtilt [indiscernible] geometry paired with Helion HF super foam. An independent landmark study confirms that the Cloudboom Strike to delivers a 1.6% improvement in running economy over the industry's leading super shoes. We are offering the strike to in both a precision laced upper and our revolutionary robotic LightSpray upper. LightSpray is no longer an elite prototype. It's a fast scaling commercial engine. With our automated facilities in Busan and Zurich fully cranking, light spread is driving extraordinary momentum across our running lineup demonstrated by immediate sellout for the Cloudmonster 3 Hyperlite spray that launched in March this year. Crucially, Elite breakthroughs must benefit the broader running community. In Paris, we also previewed our spring/summer '27 collection, featuring the real phone technology in the cloud server and the cloud server Max tool. While the legacy footwear industry accepts a compromise between impact absorption and rebound, we engineered advanced cloud tech structures directly into a super form. Combining unique chemistry with the physical advantage of dynamic cavities. This represents the first for On and we accepted to define the industry. On's innovation advantage is tiering up global record books. [indiscernible] also captured world indoor gold in the 60-meter sprint. To solidify this technical authority, we officially launched on Atlantic Club Spring squat in Los Angeles. Led by Coach John Bolton, this Elite team is built to dominate short-distance track and spark the imagination of a young global audience, leading up to the 2028 L.A. Olympics. Let us expand the view across all our sports verticals. Tennis bring on to the most premium spectator sport. At Roland Garros, Flavio copoly captivated millions with an unforgettable on the dark ground to the final, a 19-year-old Brazilian Jawonseka sent shockwave through the sport by defeating Novaco in the third round. This isn't just visibility, it's revenue. Tennis is our fastest-growing apparel vertical with sales nearly tripling this quarter. In training and hybrid fitness racing, a hypergrowth category, we intend to scale our training powerhouse, Alex Roncevic, completely redefined what is humanly possible. bearing an advanced prototype of our Cloud X Tempur Pro, he became the first human in history to shatter the 52-minute barrier, stopping the clock at a blistering 51 minutes and 59 seconds, and setting 2 world records in a single race. Our training vertical showed a 40% growth rate as a result. This intersection of performance engineering, cultural relevance is winning what we call the movement class. A generation that treats health, vitality and longevity as the ultimate status symbol. They are expanding our addressable market drastically. Today, consumers under the age of 34 represent over 1/3 of our total customer base and keep growing fast. This massive generational step-up fueled a stellar 10% year-over-year growth for our cloud field franchise within the premium sneaker channel. We are clearly winning in sports lifestyle. A defining moment for this movement was seen cloud tilt models take 3 of the top 5 selling positions at Foot Locker Europe last quarter, [indiscernible] current incumbents that had held top spots for years. This is not just a statistical win. It is a profound validation of our design language and our ability to capture the site gist. We backed this momentum with elevated storytelling. In April this year, Zendeya cocreated collection was a phenomenal commercial success that sold out well ahead of expectations with 60% of buyers being women under 34. Our shape of Dreams campaign film directed by Spike Jones won 3 con lines, reinforcing our strategy to earn consumer attention through entertainment rather than just buying ad space. Furthermore, our Paris Fashion Week installations alongside Love and post archaean prove that On's design language commands a premium position, entirely untouched by legacy sportswear. This brand heat validates our strategy of selective expansion, unlocking highly calculated sequential growth across entirely new product categories, channels and geographies. Apparel is hitting its stride. Our proprietary [indiscernible] fabric is helping us engage further with female customers worldwide, a key priority for us. At the same time, the expansion of our walled running collection, so apparel achieved a record 28% share of our running campaign net sales in Q2. proving our ability to complete the runners uniform from toe to head. Our own retail ecosystem is spearheading this complete uniform. Take the Paris retail flywheel. Our elite visibility during Roland Garros translated immediately into exceptional apparel and footwear performance. Our [indiscernible] flagship was our strongest performing store globally this quarter, driving exceptional growth in traffic, conversion and average item values. In Stockholm, our new flagship in the historic Golden Triangle has been opened just 2 months and is already performing at twice our expected level. None of this execution is possible without our global team. We approach our talent architecture with extreme intention, pairing founder vision with world-class operational leadership. To steer our next chapter of scale, we promoted Rebecca [ Kaye ]to Chief Global Markets Officer following her stellar growth execution across APAC, our most premium region. We are equally excited to welcome Alice Delahan as our Chief Customer Officer, injecting profound consumer brand and digital ecosystem expertise directly into our D2C strategy. They join an elite leadership bench ready for our next horizon of growth and you have the opportunity to meet them face-to-face very soon. On September 21 and 22, we will host our 2026 Investor Day right here at our own labs in Zurich. It has been 3 years since we last shared our long-term road map. We cannot wait to show you up close and personal, how we intend to keep pushing the boundaries of what sportswear can be and deliver sustained premium growth for the years and decades ahead. With that, it is my great pleasure to hand the call over to Frank Sluis for his first earnings call as CFO. Frank brings over 2 decades of global consumer finance leadership, managing multibillion operations in Europe, the Americas and Asia. As an avid marathon and triathlete, he fundamentally understands what it means to build for long-term endurance. Over the past few months, he has brought remarkable discipline, operational rigor and an unwavering conviction in our premium path. He will now walk you through our Q2 performance and how we are calibrating our financial outlook for the balance of the year. Frank, over to you.

Thank you, David, and a very warm welcome from my side as well. It's a real pleasure to be speaking with you all for the first time. I spent my first month at on listening and learning, spending time with our teams across the regions with our partners and naturally diving into the strategy and the numbers. I want to mention 3 things that have impressed me the most. Firstly, the obsession with disruptive innovation which runs throughout the company and is supported by excellent R&D capabilities and supplier partnerships. Secondly, the huge ambition and growth mindset of our 4,000 team members and the still untapped potential in so many areas including retail and apparel to just mention a few. Thirdly, the founder-led culture and commitment to building the most premium sports brand for many decades to come. This requires discipline every day in the choices we make to drive long-term and sustainable value creation with a unique earnings model. This is the threat I would like to ask you to hold on to throughout my remarks when going through the financials. Let's now dive further into the details of a strong quarter 2. Net sales this quarter reached a new high of CHF 850 million, growing 21.6% at constant currency and 13.5% on a reported basis. As ever, the composition tells you more than the total. Growth was strongly led by direct-to-consumer, our most elevated channel, our highest margin channel and the clearest read we have on our brand momentum. The strength went through both e-commerce and retail. Net sales in DTC reached CHF 388 million, up 34.3% at constant currency and by 26.0% on a reported basis, lifting DTC to a second quarter record of 45.7% of sales. This is the channel where we fully define our brand experience. So to see this powering our business is one of the results we are most pleased with this quarter. E-commerce growth exceeded our expectations in every single region. Last quarter, we spoke about deliberately widening the conversation to new communities. We continue to pursue this strategy and the signals of our commitments to this approach are encouraging. Those newer visitors are already moving deeper into the journey evidenced in increased engagement. And we did it while driving a further increase in full price share year-on-year. To me, that is the whole strategy in one data example. We are broadening and elevating the brand at the same time. Our own stores also performed very well with continued strong growth, both in new doors and con sales. David mentioned our [indiscernible] flagship, I would add our 2 Tokyo stores. which both continue to perform exceptionally with no signs of cannibalization. Clearly, telling us that with the right format in the right location, we have real room to expand even in cities where we are already present and at very attractive economics. Our retail KPIs continue to strengthen from an already high base, proving the incredible value of our deepening consumer connections. Let me turn to wholesale because it is where the choices David spoke about showed up in the numbers. Growth was more moderate, 12.7% at constant currency and 4.8% reported with DTC outperforming wholesale in every region. As David explained, that is deliberate. We sell out software in some of our everyday running franchises in a highly promotional environment. We chose to hold back, sell-in rather than ship volume that would build inventory in the channel, and put a full price integrity at risk. It costs us some wholesale growth, but it protects our partners' inventory health, our premium positioning and ensures the best position for launching what we believe are outstanding innovations in 2027. Switching to our regions. In the Americas, net sales grew 13.0% at constant currency and by 4.5% on a reported basis, reflecting the wholesale dynamic I just described. Within DTC, momentum accelerated in both North America and Latin America. We also continue to attract younger consumers with the share of e-commerce customers under 24, up by more than 1/3 versus quarter 1. I find it really exciting because it means we are attracting the next generation of on consumers without discounting our way to them. Our stores in the region performed well, too, particularly Miami and our New York Flatiron flagship with higher average basket sizes reflecting the resonance of our premium offer, including a strong performance of our Leave and Zendeya launches. EMEA was a real standout. Net sales up a very strong 20.5% at constant currency and by 15.4% on a reported basis and all the more striking against a very demanding prior year comparison. DTC growth was in excess of 20% at constant currency across every single subregion, including DAC. The performance in Southern Europe was again exceptional, with France, Spain and Italy all tracking comfortably ahead of our expectations and building real momentum on an ever larger base. Our retail presence in these markets also goes from strength to strength with standout performances of our stores in Madrid and Milan. In APAC, net sales grew 54.7% at a constant currency and by 43.1% on a reported basis, broad-based across the region, making this another quarter of 20% global share. Japan and Korea continued to perform exceptionally well, as did Greater China. This market exceeded our expectations in every channel with a great contribution from our stores and particular strength on Tmall despite our choosing not to participate in promotional activity. This quarter, we opened our first store in Macau, which is already matching the strong momentum of our remarkable Hong Kong locations. With the widest assortment in the region, the store achieved above-average conversion, reinforcing our conviction in the potential of larger format stores across the region. Across our categories, growth is increasingly driven by multiple engines. Net sales from SUs went up 18% at constant currency and by 10.9% on a reported basis. In performance running, the Cloud Monster 3 hyper delivered strong sell-through and continues to be widely praised by retailers and consumers alike. We continue to scale LightStream, which already contributed quite meaningfully to our performance running vertical this quarter despite being still early in the scale-up journey. As a run and myself, attending our inaugural global run Summit in Paris and spending time with our retail partners and innovation teams has left me even more excited about what is to come next year. This enthusiasm is clearly shared by our partners with Spring/Summer '27 orders for Cloudsurfer 3 from these retailers doubling after the event. If we turn to lifestyle, David mentioned the performance of Cloudtilt which saw strength across all versions, including the remix, which is resonating exceptionally well with the young mill consumer. The strength of this vertical is particularly impressive in the context of a highly competitive environment where many brands resorted to promotions. Our authenticity in this space and the newness of our products really resonates with the consumer. Training was also a highlight with Cloud Pulse and Cloud X both growing strongly and a great example of how we structurally build new franchises and credibility in new sports. Our tennis momentum continued to build on and off court through the Roger franchise fueled also by our athletes performances at Wimbledon and Roland Gara. Apparel grew 56.2% at constant currency and by 47.7% on a reported basis. continuing to establish itself as a meaningful growth driver in its own right and increasingly an entry point into the brand. Performance running remain the anchor supported by our established collections, the expansion of Volt and a highly successful limited drop with Air1. The tennis court collection delivered excellent growth and sell-through, taking a meaningfully larger share of our [indiscernible] business. and the co-created Zendeya Collection significantly exceeded expectations. In the U.S., every style beats are forecast by triple digits. To summarize, across regions, channels and categories, we are building an increasingly global and diversified business, one that remains firmly rooted in performance innovation thrives at the intersection of sports and culture and continues to be built for the long term with a discipline that comes from founder that leadership. Turning to the P&L. This is where all that discipline converts into profitability. Constant currency sales growth of 21.6%, coupled with adjusted EBITDA margin expansion to 19.8%, drove absolute constant currency adjusted EBITDA growth of over 30% year-over-year. Bottom line margin expansion was primarily fueled by an outstanding gross margin of 65.4%, reflecting our strategy at its best -- strong DTC momentum, disciplined execution and continued operating efficiencies. Together with a favorable freight mix and some positive foreign exchange effects, those efficiencies let us fully absorb external pressures including higher U.S. import tariffs and still expand our gross margin. To be clear, these numbers do not include any tariff refunds, which we anticipate are likely to come throughout half 2. Our gross margin is a clear demonstration of the strength of our premium operating model. While freight mix and foreign exchange will naturally vary over time, the core drivers are in the base, disciplined full price execution higher DTC mix and sustainable operational efficiencies. These capabilities allow us to invest deeply into our premium product and consumer experiences, further differentiating our brands. Within SG&A, distribution expenses decreased to 10.0% of net sales, continuing to benefit from operational efficiencies, including in last-mile fulfillment. As we have said before, those efficiencies create the capacity to invest where we see the strongest long-term returns for our future. This quarter in brand building and digital opportunities, including those to engage with new communities driving marketing to 14.0% of net sales. Selling expenses increased as expected, reflecting the strong DTC contribution, while we also continue to invest behind future growth in G&A. Discipline earns the margin and the margin funds the future. Our strategy and value creation flywheel in action. Turning to our balance sheet where our earnings translated into another quarter of strong cash generation. Net working capital improved by CHF 14.9 million versus quarter as strong receivable and payables management more than offset our inventory intake for the full winter season and our actions to recalibrate solid. Total net working capital remained strong at below 20% of sales. Capital expenditure was CHF 28.2 million, focused primarily on our selective retail expansion and the infrastructure to support our continued growth. Altogether, we increased our cash balance by CHF 185.2 million, ending with just over CHF 1.2 billion in net cash and a very strong financial position. One, that lets us fund innovation, stores and brand building ourselves. Before I turn to our outlook, I want to thank the whole On team for their performance this quarter. I spent time with many of you these first months and the welcome has been wonderful. You have been open, generous and quick to help. Those qualities are a part of the unique culture of On, a key elements of what makes this company so special. This is just one more reason I'm even more excited today when I joined about growing the company together. Let me close on the balance of the year. In Q3, so far, we have continued to execute on our strategic priorities and premium vision with conviction. In July, we again demonstrated our commitment to impact and sustainability. With the launch of the Cloud X5 with Clean Cloud, the first EVA missile made using captured carbon emissions. This technology has already skilled past 1 million pairs 4 years ahead of our own target. Our Pinnacle LightSpray Cloudboom Strike I made for our most dedicated running community was, as David mentioned, independently validated as one of the very best ratios globally. And we will begin scaling the cloud service, our first 2 with our new SURREAL superfoam in October with RunSpecialty Partners. The response to this innovation at our Paris run Summit was incredible. We've also opened a number of key premium retail stores in the last few weeks, including in the United Arab Emirates, Copenhagen and Sao Paulo. When it comes to our outlook for the year, I want to share a bit of context on the philosophy behind how we are guiding. I mentioned it, but it is rare and an absolute privilege to work in an environment where every single team member as incredibly ambitious goals and dreams. But at the same time, it's very clear on the discipline required to build a differentiated premium brand for the long term. Strong growth and premium execution can absolutely go hand in hand as we proved this quarter and doing it the right way is a nonnegotiable. So what you see in our outlook is our premium growth strategy in action. This is a model built on discipline. On only pursuing the growth that protects and elevates our positioning. With the deliberate action already taken On selling in quarter 2 and early quarter 3 and the message that we will not shy away from taking further action to ensure we are setting up for success and a strong pipeline in 2027, we are committing to a 2026 constant currency net sales growth rate in the low 20s. This reflects our premium growth strategy, clear visibility on the wholesale action taken for the third quarter, including in our everyday running franchises and the focus on continuing to manage sell-in deliberately where we deem it beneficial for our long-term success. With these actions relating to wholesale, it is important to understand that we expect continued, very strong momentum in DTC and resulting significant DTC mix expansion for the rest of the year. I want to be equally clear about profitability because this is where the quality of a growth shows. The commitment to premium execution alongside the high DTC mix means we now expect a full year gross margin of at least 65% and as we pursue high-quality growth and keep investing in our future, we maintain our adjusted EBITDA margin outlook of 19.5% to 20%. Note this margin outlook does not include any benefits from tariff refunds. We expect to recognize some refunds in our quarter 3 results, and we'll update you when we have fuller visibility on the amount. You heard it today, we're on a journey to build the most premium sportswear brand of the coming decades. The discipline inherent in this is what makes this such a compelling earnings model. Strong growth, industry-leading margins and a compounding financial profile. As a CFO, I could not be more excited and convinced of where we are going. I look forward to meeting many of you at our Investor Day in September to share in more detail how we bring this ambition to reality.

We will now begin the question-and-answer session. For the Q&A, David and Frank are joined by Caspar Coppetti, Founder and Co-CEO. [Operator Instructions] Your first question comes from the line of Jay Sole with UBS.

Great. David, my questions for you. You mentioned in your prepared remarks about the global trend toward fitness and wellness. But at the same time, a lot of brands in the athletic wear space have seen slowing results over the past year. What gives you confidence that the industry growth rate that you envisioned can remain strong? And what gives you comments that we're not seeing a real slowdown in that, but were broadly on a global basis that maybe could cause more weakness going forward?

Okay. Thanks a lot for your question. This is David. Hey, what we are seeing, and you see that really broad-based growth for on in our direct-to-consumer channel that saw the stellar growth and we're an innovation brand. So really kind of our core comes from innovation. And we're seeing that we have across channels, geographies, but then also new verticals like, for example, tennis, training. Now our new innovation that comes in running, like, for example, the recently launched Cloud Monster that we have an incredible momentum. And we believe that what we call the movement class is a societal shift that brings a lot more consumers to sports because it's not just about utility, but it's about identity. And identity is built through innovations through cultural relevance and ultimately also through a price point because it's a differentiation factor. And so it's the perfect territory for a premium innovation brand. And that's where we're doubling down. We feel that's an opening TAM, and that is supporting on growth, and you've seen that at play in the second quarter as well.

Got it. Maybe, Frank, if I can ask one -- if I can ask you one question. Just on the gross margin guidance increase. Can you just walk through the drivers? Is it mostly mix? Is there any markdown increases baked in to your gross margin guidance for the year?

Thanks, Jay. As we said in quarter 1 already is that for this year, I think the margin trajectory will be quite clean and no basically significant one-offs in our year-to-date and also not in our outlook. So in quarter 1, you saw basically sort of a mid-64 margin. Now a low 65 or a mid 65, 65.4%. And in that, basically, growth versus last year, of course, is a combination of #1 and higher DTC share or #1, I would say, is a continued strengthening of our full price strategy, #2 is the increased share of the DTC mix and #3, operational efficiencies. And I think as they are in the year-to-date margin, I think they'll also be visible in a similar sort of rate in the year to go, and hence, also, we lifted the outlook a bit from the -- basically added 64.5% to 65% plus. As we now see that basically the DTC mix, in particular, is trending favorable. And we believe that also to remain the case for the remainder of the year.

Your next question comes from the line of Jonathan Komp with Baird.

Could you just maybe share a little bit more perspective when you look at the divergence across channels right now, are you seeing a similar divergence in your everyday running platforms across channels? Or do you think there are some unique factors in the Americas wholesale segment currently? And do you have any insight on how long of a drag, some of the intentional actions to limit sell-in into those channels and wholesale might continue here?

Jon, thanks a lot for your question. I think what we are seeing is a very, very loyal customer in our own channels. And actually, we also have a lot of new cohorts coming to our channel. Now 1/3 of our consumers are under 34. So it's also a next generation that is coming to us. And of course, they're coming to us as a premium brand and they're not looking for price, but they're looking for innovation. They're looking for cultural relevance. So that's the primary driver in that channel. While in a wholesale channel, of course, you're more exposed to a very promotional environment. And so it's more of a choice that you have. So that's why we feel we have a very strong consumer. We have higher awareness now, 30%. We have a young new cohort coming to us, and that's what drives the D2C growth that you have seen at more than 34%.

Jon, I can weigh in a bit on wholesale. So we want to be quite clear. So this is mostly an Americas wholesale topic where it's been a bit more volatile and the months are different. We had a very strong start to the year with our innovation hitting. Now in the second quarter, we were mostly comping some of our everyday run franchises which we've still grown, but not maybe at the rate that we're expecting going forward. Now when we look into the start of Q3, we're already off to a very good start with innovation that we have. Most importantly, Cloud X 5 and CloudoneMax that are landing extremely well. We also had a very strong back-to-school. So even in the region where wholesale is a bit depressed for us right now, which we believe is transitory. We're seeing a lot of good signs. To your question how long this will last. We're starting to roll out cloud server to our own specialty stores first in October, giving them a 3-month exclusive period to also really gain the credibility for our new technology. And then Surfer3 will roll out broadly in January, followed by Surfer MAX 2 in April, and we're also relaunching flow, which in the past has been quite a strong franchise. So there's a lot of innovation happening in Q4, Q1 and Q2. And then this is the big -- the fastest accelerated rollout of product that we ever have. So all everyday running franchises will update to the new foams and the new technologies, and the Swiss engineering precision fit within 14 months from now.

That's very helpful. And maybe more broadly, just given the strength of the pipeline on the performance side, the strength and acceleration in the lifestyle side and then some of the additional drivers that you have over the next few years, how would you frame up thinking about the types of growth rate you're projecting for 2026 to continue for a while here?

I think, Jon, we talked to it in the opening remarks. We are planting -- we have planted a lot of seeds. And you see these seeds now fully sprouting. Think about our training vertical, 40% growth year-over-year. Think about apparel, growing over 56%, think about tennis, think about geographies. I mean, if you think about APAC, but also then I'm super excited about EMEA, where we are actually opening new stores in a Nordic cluster with Stockholm and with Copenhagen, but also in Germany, Lat Am. So there are so many opportunities for premium growth I wouldn't worry about basically being out of fuel at all.

And then of course, to come in the Investor Day where we can really talk about the long term.

Your next question comes from the line of Aubrey Tianello with BNP Paribas.

I wanted to ask about the revenue guidance. And should we assume that the change in revenue guidance is entirely coming from the lower wholesale outlook I think last quarter, you mentioned that the DTC growth we saw in Q1 in the high 20s was the right way to think about the full year for DTC. Is that still the case? Obviously, we saw a really strong DTC number. Did anything change in terms of the DTC outlook for the year?

Thanks, Aubrey. Yes. So coming back to DTC. So indeed, coming back on the first one is that, indeed, the actions we are taking in wholesale in quarter 2 and also in -- of course, there are indeed the key factor for the new basically top line guidance. It is also fair to say that we were, I think, that the DTC growth in quarter 2 has been very strong. I think what you saw in many industries was that I think with the change in the digital landscape that basically, we also saw a slight slowdown probably at the end of last year. I think we are very positive on the actions we have taken and the good growth in e-commerce in quarter 2. And as David said, we are basically exceeding our expectations in all the regions. Secondly, of course, you know that we'll open up quite a bit of stores at the back end of the year. So all in all, I think that basically, we look with a lot of confidence in half 2 to basically our DTC growth. And we -- yes, basically, it should be over the full half sort of continue to be strong. And that's why, indeed, the revised top line guidance is very much linked to the wholesale actions.

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