On Holding AG

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome and thank you for joining the On Holding AG Q4 2022 Results Call. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may do so by pressing star and 1. Press the star key followed by 0 for operator access. It's my pleasure, and I would now like to turn the conference over to Jared Peter. Please go ahead.

Good afternoon, good morning, and thank you for joining ONCE 2022 Fourth Floor and Full Year Earnings Conference Call and Webcast. With me today on the call are Executive Co-Chairman and Co-Founder David Aleman, CFO and Co-CEO Martin Hoffman, and Co-CEO Mark Maurer. Before we begin, I would like to remind everyone that today's call will contain forward-looking statements regarding future events and performance within the meaning of 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 20F filed with the SEC earlier this morning for a detailed discussion of such risks and uncertainties. we will further reference certain non-IFRS financial measures, such as adjusted EBDA and adjusted EBDA 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 reconciliation to the most comparable IFRS measures. We will begin with David, 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'm very happy to turn over the call to David.

Thank you very much and welcome everyone to our fourth quarter results update call. The last three months of our first full financial year as a public company saw an exceptionally strong finish to an exceptional year. It is fair to say that at the time of the IPO, we didn't expect that we would already have beaten the one billion Swiss franc net sales mark so comprehensively in 2022. So it fills me with a huge sense of pride to stand here 18 months later on behalf of the ON team to speak to our very successful fourth quarter that brought us to more than 1.2 billion Swiss francs in net sales for 2022, delivering a year over year growth of 69% versus 2021. Since the IPO, we've often spoken about our philosophy that has guided us since we started. Driving growth while at the same time staying focused on efficiency and driving profitability. So it makes us even more proud of the team's achievement of finishing our first full year as a public company in a profitable way with a net income of 57.7 million Swiss francs. We are so grateful to everyone that has shaped on with us over the past 13 years and set the foundation for this amazing achievement. Finishing the year with such an outstanding Q4 is the perfect testament to the great work our team continues to do and an indicator of the continued momentum and the great opportunity that lies ahead of us. With net sales of 367 million Swiss francs and a growth rate of 92%, the quarter came in significantly ahead of even our own high expectations. The demand for the brand across all regions, categories and channels remains extremely strong and we are so excited that we were able to go into 2023 in such a great position. By switching our URL to on.com, we've also made it even easier for consumers to find our iconic brand online. And we truly believe we are setting ourselves up for our best year yet. I say this both in terms of that strong momentum that we have seen in the first months of the year, as well as where we and the industry are if you look at the normalization of operations. The last three years of the pandemic roller coaster have been a huge challenge and have put our teams and operations to the test. The factory closures in Q3 of 2021 meant a very tight inventory position at the end of 2021 and early 2022, as well as elevated air freight usage, particularly in the first half of 2022. Along with industry, we have seen tight production capacities at factory partners, disruptions of global trade lines, increased T-freight lead times, as well as macro challenges. We were additionally challenged by our 3PL-induced warehouse disruption in the third quarter of 2022. Martin will provide some additional perspectives on how these elements come to play in our financial review, as well as Outlook for 2023. But it is safe to say we are very confident and excited to be heading into a year of increasingly normalized operations, where we can focus even more on driving our brand and continuing to build a community of athletes, fans, and innovators. And an exceptional team that is excited to be part of the next phase of ON. But before we move to the detailed financial review of the fourth quarter, I want to take a few minutes to focus on three areas that are fueling the ongoing momentum we see around the brand as we move into 2023. Namely, the way we are winning in running, our ambitious move into tennis and our growing popularity amongst younger consumers. So let's start with running. It's clear to see that 2022 was a huge year for us. With the introduction of the CloudRunner, CloudGo, and CloudMonster, we added three major silhouettes that have been strongly supporting our ongoing market share increase on runners' feet. We can see this very clearly in our proprietary runner count data, where in particular the CloudMonster and CloudRunner are positively over-indexing with regards to their visibility on the running routes versus their contribution to sales. This, of course, further establishes our credibility as a brand rooted in performance, a key strategic priority for us. We are excited to play our part in fueling run culture and amplifying it with storytelling and content around the amazing sport of running. For example, with initiatives such as our new global event series On Track Nights, which we announced in January. To begin in May with the Track Fest in Los Angeles, these events held at different track meets around the globe will have their own unique local flavor, but all champion a fresh community-focused festival-feel approach to track racing. We also make running more inclusive thanks to our Ride to Run social impact partnerships program. Ride to Run brings together grassroots communities and organizations to make an impact in the realms of safety, access, awareness, and inclusion in running and movement. We continue to expand the program and now partner with 17 organizations globally, helping us to achieve our ambition of reaching 100,000 community members. Another way we fuel run culture and a key component of ON's mission to ignite the human spirit through movement is the ON Athletics Club. an incredibly inspiring group of young track and field talents with tremendous potential and big dreams. Just last month, we announced the launch of the Oceania division of the OAC and together with their counterparts in the US and Europe, we look forward to supporting the next chapter of track and field champions as they set their sights on the Paris 2024 Olympics. While many online athletes are working towards their first Olympic Games, We are extremely excited to have added a reigning Olympic champion to our roster. Triathlon gold medalist at the Tokyo Olympics, Christian Blumenfeld, has joined us with the ambition to defend his title in Paris next year. Alongside Christian and Ironman world champion Gustav Eden, who joined on in fall 2022, we also announced the signing of two more triathletes in January. Reigning female Ironman world champion Chelsea Sodaro and fellow superstar triathlete Paula Findlay have also joined the ON team. What all our OAC team members and ON athletes across running, trail and triathlon have in common is the belief and knowledge that our products put them in a position to win at the highest levels of performance. They know that ON is at the forefront of innovation and has the success of our athletes as its number one priority. Just look at some of the amazing achievements of our athletes recently. This past weekend, we saw Helen O'Berry cruise to victory in the New York Half Marathon with a new course record. And at last month's Melrose Games, one of the most important indoor track events of the season, on had 13 athletes competing. significant jump versus the four we had last year and those athletes delivered career best performances including seven national records and wins for alicia monson in the women's 3000 meter race and jared nuguze in the man's mile this run of form continued when on athlete helen bekele won the osaka marathon in february We look forward to seeing our pinnacle products on the feet of many, many more runners in the near future. That's why we'll be making these products available to the broader markets, for example, commercially launching the new generation CloudBoom Echo 3, which has been on the feet of our most successful athletes in elite competitions in recent months. And our next phase of innovation for the everyday runner is about to shake the market up too. Two days from now, we will officially launch the all-new CloudSurfer, which features our new cushioning technology called CloudTechFace. This evolution of ONN's existing technology was generated using a computer-optimized technology called Finite Element Analysis, which simulates the effects of structures and materials on the human body to minimize stresses and to provide a whole new running sensation. The innovation within the CloudSurfer is here to make waves, and we've seen waves of positive feedback even ahead of the official launch. Early media reviews have been hugely positive, with testers describing being blown away by the new CloudTech phase cushioning, calling it their favorite road running shoe of the year, and heralding the CloudSurfer as an impressive that change for all. And our innovations are not just reserved for footwear. Back in February, we kicked off our spring-summer 23 season with a focus on our full head-to-toe offering by introducing our latest apparel collection. The supporting campaign was centered around the message to feel nothing so you can feel everything, shining a spotlight on our innovative lightweight and high-tech materials. But coming to my second point, it's not just the world of running where we've been making waves. Yesterday, we made our ambitions clear for tennis when we announced the signings of two of the sport's most exciting talents to our roster of top ranked tennis professionals. The women's world number one ranked player, Poland's Iga Swiatek, and America's newest man sensation, Ben Shelton, for whom ON is the 20-year-old's first ever multi-year sponsor. Going forward, both players will be wearing the company's newly developed on-court collection for professional competition and custom editions of the Roger Pro. The competition tennis shoe has been Swiss engineered and designed individually for and in close collaboration with both players, Roger Federer, and the Lightning Innovation Team at ON Labs to meet the demands of their individual style of play. And with an eye on the future, ON has also signed the 16-year-old Brazilian player João Fonseca, who recently made his ATP main road debut at the 2023 Rio Open after some hugely impressive achievements on the junior circuit. With a potent mix of inspirational athletes and innovative heads-to-toe products, we truly believe that tennis can play a key role in fueling the next stage of Ons' growth. Coming to my third point, as we further build the brand in the performance run space and expand across categories, we see that our new product innovations lead us to new customer groups. ON's highly visible technology in innovation in shoes and apparel is increasingly embraced by younger consumers, from tastemaking teenagers in the UK to many young ON fans in gyms and on the streets across the US. This is one reason why we have used our most popular shoe, the Cloud, as our starting base and have reimagined its Cloud set to activate with lower weights and smaller feet. The result? The Cloud plate. ON's first kid shoe and the Cloud Sky, our first shoe for teens and preteens. Our commitment to put performance at the forefront of every new product also starts with the smallest ones. That's why we work together with two leading universities in the field of children's biometrics to tune the Cloud and make sure these shoes help kids' feet grow in the very best conditions. As a small added benefit, Martin, Mark and I were now finally able to fulfill our own kids' wishes that we've been hearing about for many years by getting them into a pair of us. And believe me, we have been hearing these wishes a lot. It's our mission to promote movement among kids and teenagers from a young age to build the love for sports and the relationship with them for a lifetime. With that as an introduction, I'm very pleased to hand over to Martin for the Q4 financial review and our outlook for 2023.