At this time, I would like to welcome everyone to ON Holdings AG Third Quarter 2024 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press the appropriate key. Thank you. I would now like to turn the conference over to Jerrit Peter, Head of Investor Relations. Jerrit, you may begin.

Good afternoon and good morning to our investor community. Thank you for joining ON's 2024 Third Quarter Earnings Conference Call and Webcast. With me today on the call are ON's Executive Co-Chairman and Co-Founder, Caspar Coppetti; CFO and Co-CEO, Martin Hoffmann; and Co-CEO, Marc Maurer. 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 Form 20-F filed with the SEC on March 12 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. Please refer to today's release for a reconciliation to the most comparable IFRS measures. We will begin with Caspar, followed by Martin leading through today's prepared remarks. After which, we are looking forward to opening the call for a Q&A session. With that, I am very happy to turn over the call to Caspar. A warm welcome from my side, and thank you for joining us today.

I am very excited to speak about this record quarter for ON. We have reached CHF636 million in net sales in Q3, growing by 33% on a constant currency basis. Very importantly, we also continue to deliver on our ambition to combine significant growth with ongoing profitability expansion. These strong results are supported by the incredible work that our team has done over the past months. Their efforts and dedication have first and foremost allowed us to make significant progress on the strategic building blocks that we outlined a little more than a year ago, as part of our Dream ON vision. Ultimately, to position ON as the most premium global sportswear brand, with a long runway of profitable and durable growth in the years to come. One of these core building blocks is centered around boosting global brand awareness amongst our core community. Of course, this included our presence at the Olympics and the inspiring stories our athletes have shared with the world through their achievements or heartbreaking journeys. Stories that have been amplified through traditional and social media surrounding this great event, reaching fans both locally and globally. With these upper funnel investments, we are also reaching new communities. Our authentic long-term partnerships, like the ones with Zendaya or FKA Twigs, are reaching younger demographics, bringing in a new group of fans who are connecting to ON through movement in a broader sense. We see this reflected in our quarterly proprietary brand survey. In the US, awareness of the ON brand has doubled since last year, now reaching close to 20%. In the city of Paris, the home of the Olympics, our brand awareness almost tripled year over year. All of this confirms our efforts are paying off, but also that we have a lot more room to…

Thank you, Caspar, and welcome from my side as well. I wish I would have been able to accelerate my speed in the second half of the race in the same way we are able to accelerate our net sales growth in the third quarter of the year. Over the past weeks, our team has done an amazing job improving our operational execution, which allowed us to capture the very strong brand momentum that we have built through so many incredible highlights during the summer. As a result, we have achieved all-time quarterly records across top line and profitability. As you know, our culture and our team are at the core. We invest into a culture of innovation and excellence with the goal to provide our customers with the best products rooted in performance, design, and sustainability, and with the best premium experience. We view innovation and excellence as the two foundational pillars that fundamentally guide the way we work. Innovation is at the heart of what we do. We fuse our dreams, which allows us to explore different paths and find new solutions. Groundbreaking technologies like LightSpray are a great example of what the culture of innovation can achieve. Excellence is about how we bring our vision to life today and in the future. It is the consistent attention we put into every detail and the way we approach our work to ensure we reach the goals we set out to achieve. The third quarter offers a great case study of how we strive for excellence in all aspects of our execution. It is no secret that we were not entirely happy with our level of operational excellence during Q2, but in a very short time frame, the dedicated work of our team has allowed us to do a…

Thank you. We will now begin the question and answer session. We would like to ask that you limit yourself to one question. Your first question comes from Christina Fernandez with Kessler Advisory Group. Please go ahead.

Hi. Good morning, and congratulations on the results. I wanted to ask about the increases in brand awareness that you are seeing. Caspar, you gave some details on the US. Can you share where the increases are coming from? If you have any details you can share by demographic, such as in the younger cohort, gender, anything else there would be helpful. Thank you.

Hi, Christina. Thank you for this question. It has been a big focus for us to increase the brand awareness and to see that now come to life and flow through into Q3 results, that has been very, very positive. So one thing that happened was that Zendaya, FKA Twigs, and some of the investment into the younger community clearly helped. So we very significantly increased brand awareness in the younger community. But it is not limited to that. We were also able to increase brand awareness across the globe. So if you look, for example, at very penetrated countries like Switzerland, we increased brand awareness by 30 percentage points in an already relatively strongly penetrated country. And when we look at the US, it was from coast to coast, so to say. So what we were able to do, you know, we were focused, but we saw some overflow from that into other regions and into other cities as well. And then lastly, besides Zendaya and FKA Twigs and tapping into the younger community, performance was a very, very important focus for us, so we really used the Olympics to continue to penetrate ON as an innovation brand but also the performance community. So when you look at our run counts, we were also able to increase share across all running routes across the globe. And so we are very, very confident in how this is uplifting ON as a brand overall.

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

Hey. Thanks so much for taking the questions, and congrats on the results. I wanted to hear more if you could, you know, just kind of dive into some of the drivers of the 50% D2C growth in the quarter, maybe from a product perspective. And then what is giving you the confidence that constant currency revenue growth should accelerate in Q4? What are your early reads so far as we approach the holiday season?

Yeah. Let me quickly take the D2C question, and Martin will elaborate on the second one. So I think when you look at our recent quarters, then I think we, in most of the quarters, were able to execute on our growth plan and our strategy, which is basically to increase the D2C share over time. I think the last quarter was almost a bit of an outlier in the negative direction due to the operational constraints that we saw. And now we are really back to seeing the brand kind of tapping into this strength and being able to convert it. So I think this is a reconfirmation of our long-term strategy and not just a positive outlier as a quarter. And now when we look into this quarter specifically, I elaborated on it a little bit before. So brand awareness was a very big driver, so the Olympics and Zendaya really, really helped. And it helped in all regions. So if we compare D2C growth in Europe versus the US, for example, they are at a very, very similar growth level. And then APAC has a positive outlier due to strength in Japan and China. Then I think we saw very successful product launches. That has been the second driver of that. So they were really, really resonating, and it was not limited to one. It was the full kind of portfolio of launches that we brought to life, and obviously, LightSpray and sharing the innovation story and also converting that into our performance product like the Cloudboom Strike that really, really resonated with our consumers. Then lastly, we have invested a lot into the D2C environment over the last couple of months. So this is really allowing us to not only capture new traffic in a very efficient way but also to further continue to penetrate our existing consumer base in an even more meaningful way.

Yeah. And then those are also the drivers that give us the confidence into the holiday season. So we do not think they are exhausted yet, and we leave Q3 with a lot of momentum, and we also continue to see that momentum in the first weeks of the quarter. So take Asia Pacific, for example, which just had our record month there in October. So the momentum clearly continues. For China, October is a super important month leading into the Double Eleven season. And that positivity is reflected in the increased guidance that we have given. It will allow us to focus on our full-price premium business during the holiday season, which is important for us. And at the same time, it will allow us to focus on preparing our important Spring/Summer 2025 launches, which includes the new Cloud 6, our key franchise, which will update in early next year. The holiday season clearly is go time for retail. So for the first time in...Martin Hoffmann: ...our history, we are entering the holiday season with a robust retail footprint, and we are well-prepared to capitalize on the increased foot traffic and consumer interest. Our new store openings and enhanced e-commerce capabilities are set to play a crucial role in driving sales during this period. We are confident that our strategic initiatives and the strong brand momentum will enable us to deliver a successful holiday season and set the stage for continued growth into 2025.

Thank you. Your next question comes from the line of Michael Binetti with Credit Suisse. Please go ahead.

Hi, guys. Thanks for taking my question, and congrats on the strong quarter. I wanted to ask about the gross margin outlook. You mentioned some favorable factors contributing to the margin expansion. Can you elaborate on what specific elements are driving this, and how sustainable do you see these factors being as we move into next year?

Thank you, Michael. The gross margin expansion we have seen is primarily driven by a few key factors. First, our D2C channel has been performing exceptionally well, and as you know, this channel typically carries a higher margin compared to wholesale. The increased share of D2C in our overall sales mix has been a significant contributor to the margin improvement. Second, we have maintained a disciplined approach to pricing, focusing on full-price sales and minimizing promotional activity, which has supported our margin resilience. Additionally, our operational efficiencies, particularly in distribution and logistics, have helped us manage costs effectively. Looking ahead, we believe these factors are sustainable. Our strategy to grow the D2C channel remains a priority, and we are confident in our ability to continue driving efficiencies across our operations. While we remain vigilant about potential headwinds, such as currency fluctuations and cost pressures, we are optimistic about maintaining a strong gross margin profile as we move into 2025.

Thank you. Your next question comes from the line of Alex Straton with Morgan Stanley. Please go ahead.

Hi, everyone. Great quarter. I wanted to touch on the APAC region, which showed impressive growth. Can you provide more color on the specific strategies you are employing in this region, and how you plan to sustain this momentum?

Hi, Alex. Thank you for the question. The APAC region has indeed been a standout performer for us, and we are very pleased with the progress we are making there. Our strategy in APAC is multifaceted. Firstly, we are expanding our retail footprint significantly, particularly in key markets like China and Japan. This includes opening new stores and enhancing our presence in premium locations, which helps us reach a broader audience and strengthen our brand positioning. Secondly, we are leveraging digital channels to engage with a younger, mobile-first consumer base. Our success during events like the Double Eleven shopping festival highlights the effectiveness of our e-commerce strategy in the region. We are also focusing on building strong local partnerships and collaborations, such as our association with Roger Federer, which has helped elevate our brand visibility and appeal. Looking ahead, we plan to continue investing in these areas, while also exploring opportunities in emerging markets within the region, such as Indonesia and the Philippines. We believe that by maintaining a strong focus on local consumer preferences and leveraging our global brand strengths, we can sustain the momentum we have built in APAC.

Thank you. We have time for one more question. Your final question comes from the line of Tom Nikic with Wedbush Securities. Please go ahead.

Hi, thanks for squeezing me in. I wanted to ask about your product innovation pipeline. You mentioned some exciting launches like the Cloud 6. Can you give us a sense of what other innovations we can expect in the coming quarters?

Hi, Tom. We are always excited to talk about our product innovation pipeline. As you mentioned, the Cloud 6 is a key launch for us, and we are looking forward to its introduction in early 2025. Beyond that, we have a robust lineup of innovations across both footwear and apparel. In footwear, we are continuing to push the boundaries with new technologies and materials that enhance performance and sustainability. You can expect to see further advancements in our LightSpray technology, as well as new iterations of our popular Cloud series. In apparel, we are focused on expanding our offerings with products that combine functionality, style, and sustainability. We are also exploring new categories and collaborations that align with our brand ethos and resonate with our consumers. Overall, our commitment to innovation remains strong, and we are excited to bring these new products to market and continue delighting our customers.

Thank you. This concludes today's conference call. Thank you for joining us, and we look forward to speaking with you again soon. Have a great day.