Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the On Holding AG Q4 and full year 2021 results. Throughout today's call, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Florian Maag, Head of Investor Relations, please go ahead.

Good afternoon, good morning. And thank you for joining on 2021 full-year conference call and webcast. With me today on the call, our Executive Co-Chairman and Co-Founder, David Allemann, CFO and Co-CEO Martin Hoffmann and Co-CEO Marc Bouwer. For the first part, David in marketing-related through the prepared statements. Afterwards, we are looking forward to opening the call for Q&A session. Before we begin, I would like to remind everyone that their remarks during today's call may contain forward-looking statements regarding future events, and financial performance within the meaning of the Federal Securities Laws. These forward-looking statements reflect our current expectations and beliefs only, and as such, they've been subjected to certain risks and uncertainties that could cause actual results to differ materially. Please refer to our 20-F filed with the Securities and Exchange Commission earlier this morning for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please further note that this call will also contain certain non-IFRS financial measures such as adjusted EBITDA and adjusted EBITDA margin. While the company believes these non-IFRS financial measures will provide useful information for investors, the presentation of this information is 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 a reconciliation of non-IFRS financial measures to the most comparable measures prepared in accordance with IFRS. With that, I will turn the call over first to David followed by Martin for the prepared remarks.

A warm welcome to all of you joining us today around the world from Switzerland. We are excited to share with you On's first full-year results as a public company after our successful IPO just six months ago. We thank you very much for following our journey and for tuning in today. You will hear about recent progress and important priorities before we dive more deeply into financials, conclude with an outlook on 2022, and then open up to your questions. Global consumer demand continues to drive On's hyper-growth. We are very pleased to announce that 2021 has been the strongest year in On's 12-year history and beats our expectations at the beginning of last year on all accounts. We experienced strong global consumer demand across all the regions, channels, and product categories. The exceptional momentum lifted net sales to CHF725 million, representing a 70% year-over-year growth. At the same time, we see a significant jump in On's gross profit margin to the top end of our industry and continued increase in adjusted EBITDA. We are grateful to have successfully navigated down certainties of a global pandemic and supply chain restrictions in the last two years. I feel it shows the strength of the On's brands, of our operating model, and most importantly, of our global team. On the supply side, on strong consumer demand is met with better-than-expected product availability. Some of the brightest members of our team vote into supply planning. Their agility and strong relationships with our suppliers made it possible to mitigate the temporary start of production in Vietnam in a short amount of time. Of course, COVID is not over award in Europe is not just a human tragedy, but could have ramifications in global trade. And inflation is a challenge to consider. We remain…

Thank you. David. 2021 has been extremely exciting and decisive year for On. We're very proud of what we have achieved. Not only from a financial perspective, but across so many different dimension. A year is like a marathon race. The circumstances of the fourth-quarter made the last [Indiscernible] even more challenging. But thanks to our whole team, we were able to exceed our expectations for Q4 and to successfully finish the year with many new record numbers. And equally important, we are coming out of Q4 with more confidence and evidence for continued strong growth in 2022. Our financial results in the fourth quarter are further validation of the strong global demand for the On brand and our commitment to manage the company with a long-term growth and profitability-driven mindset. Net sales for the quarter were 191.1 million Swiss francs, exceeding our previous guidance. This marks a strong 54% increase compared to the fourth quarter last year. Yet, as expected, the growth is slightly slower than in previous quarters due to the following three transitory impacts. First, the factory closures in Vietnam between September and November have led to supply shortages, especially in Europe, where we had less inventory buffer going into the fourth quarter. Second, until 2020, we launched our new Spring Summer footwear collection in November, and consequently, at higher wholesale volumes in Q4. As of 2022, the Spring Summer season starts in January, which is expected to result in a permanent volume shift in our wholesale channel from Q4 to Q1. And third, while North America had lifted most COVID-19 -related shopping restriction, we have experienced repeated lockdowns in Europe, especially Germany, Austria, and Switzerland, as well as in some of the markets like Australia and various cities in China. Despite these headwinds, we achieved net…

Ladies and gentlemen, at this time, we will begin the question and answer session. [Operator Instructions]. One moment for the first question, please. First question is from the line of Jay Sole from UBS. Please go ahead.

Great. Thank you so much. Nice quarter. The question is about the expansion of the product offering in 2022. You mentioned that REI, you introduced some outdoor footwear there were to a great success. Can you just tell us a little bit more, maybe elaborate on how the expanded product offering is going to allow to coming to address different parts of the market with different types of shoes to continue to expand the brand and expand the audience for the brand? Thank you.

Jay thanks a lot for the question. This is David. We're incredibly excited about how we're expanding the product range. And probably first of all, it's important to know that we also retain customers very much based on lasting franchises and [Indiscernible]. So, of course, seeing the Cloud now in its 5th iteration launch and with a huge community is important for us, especially because now the Cloud has 44% of recycled contents. But then, we also see a record number of all-new shoe models this year. And as I mentioned, one very important direction is that we want to reach all type of products. And the Cloudmonster is our highly cushioned product, is super important and we've just been at the running event in Austin and just seeing the intensity of interest by the specialty running community [Indiscernible] Fleet Feet and so on has been tremendous. But then, we're also going to launch the Cloudrunner and the Cloudgo at very interesting price point. So it's really important how we extend in running. But then, on the other side, we also feel that we're very much resonating with the consumer that is interested in running, but also in run culture, so their performance is almost taking a bigger share and that's probably will be shown in this [Indiscernible] capsule where [Indiscernible] just introduced into All Stars to really come to their range with our performance gear, just showing that performance and functional value is very much crossing over into mainstream in fashion as well.

We can't here you at the moment. Could you please unmute your telephone?

Could you hear me out?

I can still hear you.

Okay. Very good. To sum up, we're very much expanding when it comes to running to all types of runners. But we'll continue to cross over into what we call all-day shoes and with also our performance apparel pieces.

Got it. If I can ask one more --

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Hello. If I can ask one more question, hopefully that you can hear me. You mentioned door increases last year and wholesale doors, obviously, great success there. And then you mentioned a new pilot with DICK's Sporting Goods that sounds exciting, expansion with Foot Locker, JD Sports. Can you just give us a sense of how much door increases you expect in 2022 and a little bit maybe more color on some of the partnerships with some of the retailers that you mentioned DICK's Sporting Goods, Foot Locker, JD. Thank you so much.

Thanks for the question, Jay. I didn't -- I hope I got the -- this is Marc speaking. I hope I understood the full question regarding Foot Locker and JD and DICK'S. What we are very much trying to do with Foot Locker and JD is reach and expanding to an even younger consumer base and this is driving the partnership. So with JD, we'll be heavily focused on the UK that is driving a large part of this expansion and on the U.S. And then with Foot Locker, and -- the expansion in 2022 is mainly U.S.-based, very strongly defining the key locations. And together with them being -- where we believe we have the strongest consumer fit, but then also working on a very distinct product peering. And so when you experience On across different channels, study always find the right products for their respective consumer. With DICK'S, the story is a little bit different so our goal and our dreams to be number 1 on runners feet and DICK'S plays a very important role in there so we will start the pilots with On branded spaces within some key fix and doors as of this summer. And we'll also start and two selected pilots with public land, which is DICK'S outdoor format, to reach the outdoor consumer.

Got it. Okay. Thank you so much.

The next question is from the line of Jim Duffy from Stifel. Please, go ahead.

Hello. Thank you. Hello, everyone. Martin, I think this is coming your direction, but I want ask a few questions on the supply chain backdrop and influence on product flow. Can you speak to the level of in-transit inventory positions? Then I'm curious is the incremental use of airfreight expected to be fully through the P&L in the first half of the year.

Yeah. Thanks, Jim. I think most most important is we have now confidence and clarity on the factory and the volumes that they are producing and so we can plan basically all the use of airfreight much more clearly than in the past. As mentioned, we expect 700 basis points to 800 basis points headwind from use of airfreight in the first half of the year compared to the gross profit margin that we had in the first half of 2021. We will carefully balance basically growth and use of airfreight, but what we see is that we will be able to fulfill an higher share of the demand that we're are having in the first half of the year, which is also reflected in the increased guidance.

And then, I'm curious the level of in-transit in your current inventory positions and then how you're thinking about the progression of inventory across fiscal 2022. And then perhaps related to that, I'm curious, is there a way to characterize the wholesale channel inventory levels where they sit right now versus the desired levels?

In transit, in the end we're balancing if the volume comes out of the factory at the moment was what goes on ocean freight and what goes on airfreight. We see some concession especially at the West Coast port of LA. We don't see similar concessions at the other port so the product is slowing there. But already before the lockdowns, we have adjusted basically how much cautioning we take into account when we plan our production volume for longer shipping time so we have increased it in our internal calculations by two weeks already, even before the impacts. And then, maybe Marc can elaborate a bit how we look at the inventory positions at wholesale.

On the wholesale side, from the beginning, On has decided to partner with premium retailers and premium wholesale partners and many of them have an extremely strong standing in the industry. And so what has happened, many of the brands have essentially prioritize to [Indiscernible] and the same partner so we see many of ours -- our partners if relatively healthy levels. And when it comes to our inventory, we feel the availability that we can provide them is very strong and that is also reflected in some of the sell-through data that we're seeing from them where On continues to experience very strong growth.

Thank you.

Next question is from the line of Cristina Fernández from Telsey Advisory Group. Please go ahead. Cristina Fernández: Good morning, and good afternoon. And congratulations on the better-than-expected quarter. I wanted to ask about the marketing plans. You decided to invest more in 2021, which makes sense given the demand for the product. As you look at 2022, do you expect to be above the -- your long-term target of 12% to 12.5%, how are you thinking about that?

I think important is our long-term target for adjusted EBITDA margin is to be in the high-teens. And we -- this is clearly what we're working towards, and you also see that we increased our EBITDA target despite the fact that we are facing the headwinds from the higher airfreight. So we purposely increased investments in Q4 in marketing because we have seen strong sales growth, but we also at the lower share of airfreight compared to what we were planning and so we made use of the opportunities that were there. We will continue to use similar opportunities as they arise to invest, especially in the upper funnel of marketing and to target regions where on has a strong -- weaker brand presence than average. We will invest into two product groups like apparel. But on our main goal is to increase profitability over time into the high-teens. Cristina Fernández: Thank you. And then, my second question is, as it relates to the flow of the year on sales now versus the last call, I think on the last call you had talked about 40%, 45% growth in the back half, which implied about 20 to 25 first half. Should we assume that the better product flow you're seeing would just lift the first half of the year in the second half base in that range should or how are you thinking about the split of it through the year? Thanks.

Yes. So this is how we are thinking about this. We have visibility for the first half of the year, and believe we can fulfill more demand at the same time, the return to a hybrid growth numbers that you just mentioned in the second half of the year. We feel that there is much more confidence behind the numbers because we are now seeing strong pre -orders from our retail partners, new partners, existing partners, new products, existing products. So we have a much higher level of confidence in that number, and we also have the confidence that the product supply should be there based on the current availability of the factory production capacity.

Ms. Fernandez, are you finished with your questions? Cristina Fernández: Yes. Thank you.

Next question is from the line of Jon Komp from Baird. Please go ahead.

Hi. Thank you. I want to follow up on some of the product innovation plans that you have, and could you share a little bit more on your plans for 2022 on the apparel side. If you have any insights on the launches there, and any new categories that you plan to enter and your expectations?

Thanks a lot for your, for your question, Jonathan. And I mean, and apparel has being growing twice as fast as shoes and we continue to launch new products and products that we're launching are always at this intersection between performance and design and then also sustainability and that makes just our apparel pieces incredibly versatile. So we're seeing that adoption of our apparel pieces is becoming more wide. And as I mentioned, for example, in some of our own stores in China, it's already 25% of sales. So we still feel that it's really apparel resonates with our consumer. So you're going to see more launches. In fact, I've just seen in the last two weeks important apparel launches for us. They also make sure that we double down on the move of our apparel pieces for movement, of course, which is part of our brand [Indiscernible]. So you're for example going to see a women's bra line in the future as well. So it's really just giving more that to our range, but pretty much in the areas that we already play, which is of course in the core running, but it's then extending also to the outdoors and extending to movement. So everything that empowers you to go out, experience nature, and move. What's very encouraging is that we see, for example, customers who come to us for apparel show a high lifetime value. And so our ambition is very clear that On is becoming a global premium sports brand beyond a pure running shoe brand and that's where we also [Indiscernible] product.

Yeah. Great. That's very helpful. And then maybe a broader question about the plan for 2022 revenue. Is there any more color you can share in terms of some of the channel expectations? I know wholesale, you have some shift in the timing of the spring selling of this year, but there's also some different comparisons that you'll be cycling throughout the year. So any anymore directional color, not year wholesale versus direct-to-consumer, any shaping expectations around those?

Actually, I'm happy to take that. I think most important to us is that we really see strong growth rates across all the different channels. And if you're looking at D2C, we really see that also the share of new customers, I repeat customers, stays very strong. So we're really building that business based on the elevated consumer base that we were building during the pandemic. Then at the same time, Marc already shared some of the expansion plans that we're having in wholesale, and this some of those expansions we clearly address at a different consumer crew where we also expect that they are continue shopping on -- in our D2C channel. At the same time, we are expanding our own retail network, so we will open up new doors as we have announced in Tokyo and London, but also in the U.S. and Switzerland, doubling our account in China, which will further grow to D2C channel. For us, it's important that both channels are mutual beneficial and we want to grow both channels and not physical of a clear D2C share.

Yeah, great. Thank you very much.

Next question is from the line of Kimberly Greenberger from Morgan Stanley. Please go ahead.

Great. Thank you so much. I was very intrigued by your comments on the quality and rate of sell-in for spring-summer 2022 and fall-winter 2022. I don't know if there's any additional color that you could share on perhaps the year-over-year rate of growth, either in spring-summer or fall-winter? And then, I wanted to ask about the 700 basis points to 800 basis points in gross margin headwind here in the first half of 2022. I would imagine that some piece of this you expect will be transitory, such as maybe the elevated use of airfreight, but is there a portion of it as well that could be sticky, maybe higher distribution center expenses, or at least a portion of them might be a little more permanent? And any color you could share would be helpful. Thanks.

Thank you, Kimberly. And so let's start with the pre -order and what we're seeing for the second half. We're not sharing the number of the growth, but it's higher than we expected, and so which is very, very fortunate and it's across all geographies and across all product groups, which is super important to us. So we are seeing exactly the quality in the order we want. And so for example, as we already mentioned, we want to be number one on Runner seat. So how we are growing in running is a very important measure for us. So we're overseeing that happening. At the same time, we're also always looking at what's same-store growth and what's new store growth, and we're also seeing that in stores were we already have quite a significant presence. We're still growing very, very strongly. And then beyond footwear, it's important for us that we continue to build on as a global sports company, and with that we're very strongly looking at the apparel share and in the accessories share, and so we see it's still on a very small basis, our accessories business, but we're expecting very, very strong growth in 2022. And on apparel, a lot of the order is driven by now being able to be in many of the right channels, so we spoke about the shop-in-shops and with Nordstrom, which gives us an elevated presence, and we experience where we do have shop-in-shop executions, we also have a higher apparel share, and that is reflected in the pre -order. So we're really positive across the board, and Martin will quickly talk about the margin impact.

Kimberly, so on the -- on our distribution costs, we're still seeing a very volatile environment. So around our last call mentioned that we see airfreight price around -- jumping up from $20 to $40 per shoe. At the moment, we go more towards $16 again, so it's very volatile, therefore, it's hard to project. We continuously -- we always happen a certain amount of airfreight share with very low airfreight volumes in most parts of 2021 to a very good product availability that we have. So probably we will happen a little bit in higher share also post half Q1. The -- probably the most longstanding impact with the On higher labor costs in our warehouses where we don't expect that the effect is reversing. And this is why we have increased the prices in the U.S. as mentioned on both 40% of our volume to offset those prices and to be able to maintain our gross profit margin and to clearly work towards the direction of the long-term target of 60% on gross profit.

Great color. Thank you so much and it sounds like you expect the price increases that you're taking to be able to fully offset some of the cost inflation leading you on track for that high teens, long-term adjusted EBITDA margin. Am I hearing you correctly on that?

Yes. At the same time, we do not expect price increases in Europe in 2022, but we're clearly looking at the market and the competitive landscape there, and we have the pricing power as a premium print to selectively increase the prices also for 2023.

Great. Thanks so much, and good luck here for the year.

Next question is from the line of Michael Binetti from Credit Suisse. Please go ahead.

Hey, guys. Good morning. Thanks for taking our question here. Congrats on an [Indiscernible] quarter. I guess as we even on the gross margin a little bit and look back at some of the modeling from the S1 around the IPO, obviously, PCB and higher gross margin growing faster is a positive influence. But geography should've been a negative influence with the lower-margin of the U.S. business growing fastest. I think in total, channel and geography would be a slight negative to gross margin year-over-year in fourth quarter. So my got there is that underlying profitability, and its challenges turning out to be higher than what you anticipated as you scale or maybe you tell me it's just selling at much higher levels of full-price selling, which you would have to cycle. So I just want to be aware of that, but maybe should we -- I guess, some help on how you look at how the gross margin has actualized versus what you thought at the IPO, is 59, 60 a new floor to build off of at this point?

That's a good question. Thanks for that. We're still besides the airfreight spendings. We were still in a very favorable environment across profit versus strong full price sales and very high D2C share, also in the fourth quarter, especially compared to the second quarter and third quarter. At the same time, we had used less airfreight in Q4 than we were anticipating. So going forward, we continue to have an higher cross-profit margin in our D2C business. So we will see strong impact from debt, helping to offset what you were mentioning partially lower cross profit margins in the U.S. business. At the same time, China is a very strong business for us all from across profit perspective. So we feel long-term the 60% is clearly the target that we are working towards. At the same time, we need to factor in the use of airfreight to a certain level. Very strong is also that our product prices are fixed for 2022, so this is always committed for the full season. And so we do not expect to see any impacts from higher FOB prices there, this will then only be visible as of 2023. So I think we are still in a very similar environment in our last calls and the range that we were sharing there.

And then, I guess if we -- we're back here at CHF990 million in revenue for the year. We're back to the way you saw the business before the Vietnam issues started so that's great to see. I think you were thinking originally that on that level of revenues, EBITDA margin to be about 14.1, you're guiding us to 13.1. Obviously, some of that's explainable by the gross margin you talked to in the first half. Is the best way those since we're back to those revenues as we think about 2023. I think you were originally looking at something like CHF1.3 billion in revenues and margins moving towards the 15-15 or half range on EBITDA. Is that -- as we lift our eyes a little bit past 2022, is that still the right direction to think about the model?

I think we don't want to talk about 2023. The 990 still includes our headwinds from supply shortages. So I think this is the key differentiated all the to the number that you mentioned earlier. We maintained our long-term outlook to be able to achieve high-teens on our adjusted EBITDA margin. And as you said, if we do not expect long-term use of such an high airfreight [Indiscernible] which was projected for the first half of the year, which should result in higher profitability than -- and over time, we have proven our ability to grow profitable, to be conscious on investment versus holding back-end and crowing in a profitable way. So this is clearly the focus that we will continue to have in the future.

Thanks a lot, guys and congratulations.

Next question is from the line of Sam Poser from Williams Trading, please go ahead.

Thank you for taking my questions. I've got a few here. Number 1. In the gross margin, the 7800 points decrease in the gross margin on the first half, I assume that that would be certainly more weighted to Q1 than Q2. Is that a fair assessment?

That's a fair assessment of the properly more 60, 40 across the two quarters.

And then, for the full year, can you just give us some idea of what you're thinking the gross margin is going to be? And number two, overall, I mean given some of the product shortages and so on, I assume that the demand for your product is outpacing supply and given that, and given that you're probably not able to satisfy some of the core running businesses and core running consumers and the more heritage business you've developed, why go after that younger, more fashion customer when you could use that production for better to serve being that more running, a more performance customer?

Thank you. Thank you for the question. So on the gross profit outlook 2022, so we're not giving gross profit guidance for 2022, but I'm super happy to talk about the channels and how we're balancing supply and demand. So I think On is a premium brand and we have historically experienced [Indiscernible] demands than supply and basically having a certain amount of product scarcity helps us remaining premium and also helps our margin situation. So we'll continue to execute on that strategy. When we're looking at prioritization, for us, it's important to reach the right consumers through the right channels. So we definitely did prioritize for the running product the channels that reach a running consumer. So did we prioritize for more an all-day consumer the channels that reach an all-day consumer. And where we keep product supply as high as possible in all products is our own D2C environment, and I think this is what you're seeing playing out. We have some flexibility on balancing different products. So when you look at our most important products, we dual or triple source almost all of them, so we can balance between factories. But we don't have a 100% flexibility to just move overall capacity around. But I mean, I think going forward, this is probably a little bit on how we can think about which consumers have access to which product groups.

Thanks. And then, just one last thing here. Apparel has a ton of performance features in it. And then, do you foresee apparel go again to like let's say, athletic specialty going forward, or is that more of the same performance [Indiscernible]?

We're basically, again, we're trying to be a global sports brand and we will bring apparel into the stores where we feel apparel has a good showing and reaches the right consumer. If you look at the pilot, for example, with DICK'S, apparel will be part of that. Apparel will also be in, for example, our Nordstrom doors. But then, run specialty is a channel that is a little bit less apparel heavy and therefore, will also have less apparel exposure. Our own D2C channel and our own retail stores are extremely important and for all the apparel expansions so we'll continue to drive that. And then, I think, you can also expect us to be in some channels that are originally or originating more in the apparel space and meant that have way less footwear exposure. And we'll also expand I think our apparel and assortment into some of these premium doors.

Thanks very much. Good luck.

There are no further questions at this time. Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.