Tom Werner On Holding AG ( NYSE: ONON ) has reported another stellar quarter, reporting record sales and net income. On a constant currency basis, sales increased 29.2% (or 20.

2% in reported currency) and margins expanded thanks to a greater contribution from the Direct to Consumer (DTC) segment. Gross profit margin expanded from 58.3% to 59.

7%, Adjusted EBITDA margin expanded from 14.5% to 15.2%, while net margin expanded from 10.

6% to 18.0%. The gross margin is encouraging, because this is well on its way towards the 2024 and medium term target of 60%.

On’s Adjusted EBITDA target for 2024 is 16.0%-16.5%, so there is still some work to do.

On will likely hit this target if DTC continues its momentum and the currency improves. The substantial improvement in net margin was the result of a massive “foreign exchange result”, which was a CHF 76.8m benefit to the financials.

ONON Company Filings I mentioned in my previous coverage of ONON that foreign exchange was an “unfortunate yet unpredictable” headwind. In the first quarter, the CHF weakened, after having strengthened in the prior quarter, which gave the results of the company a large boost. This line item is shown on the income statement after the operating results but included in IFRS net income.

It is important to understand the mechanics of this line item. This is not the translation of income and/or expenses across currencies. This is the movement of balance sheet items held in USD that were revalued through th.