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. 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 the 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 will provide marketing-related through the prepared statements. Afterwards, we are looking forward to opening the call for a 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 have 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 the uncertainties of a global pandemic and supply chain restrictions in the last two years. I feel it shows the strength of On's brands, our operating model, and most importantly, our global team. On the supply side, strong consumer demand is met with better-than-expected product availability. Some of the brightest members of our team worked on supply planning. Their agility and strong relationships with our suppliers made it possible to mitigate the temporary halt of production in Vietnam in a short amount of time. Of course, COVID is not over, and in Europe, it is not just a human tragedy, but it could have ramifications in global trade. Inflation is a challenge to consider. We remain on the lookout, vigilant to take on risks as they arise. Risk awareness has served us well in the starting years of an incredible journey. Still, we continue to be very optimistic, always experiencing a running boom every day. Markets like the US, the UK, and China are taking off like never before, and we see strong growth across all the regions. The On brand truly is on fire. In the US, we recorded over 92% growth in our specialty channel and also over 85% in our own eco-stores. In the UK, our sales grew over 75% in 2021, or in China, we jumped from ranked 120 to 35 in the key most sports ranking and saw a fivefold increase in brand followers. The momentum of the On brand starts to be fueled by athletes. As you know, On has been founded by athletes for athletes. We are all inspired by On athletes to turn their dreams into reality. They truly are on a winning streak across the globe. The On Athletics Club, or OAC, is On's elite athlete team based and trained in Boulder, Colorado. We are honored to announce that the two-time 5,000-meter world champion, Hellen Obiri, is joining the On Athletics Club. Hellen is one of the most impressive and versatile female athletes. She will move with her family to the U.S. to join the On Athletics Club in Boulder to train with our coach Dathan Ritzenhein and the OAC team. Many of the OAC athletes have competed in last year's Olympics and continue to stun audiences, like Australian Olympian Olli Hoare, who won the fastest mile at the Millrose Games in New York City with a striking time of three minutes and 50 seconds. We could not be happier about the success of our athletes and the On Athletics Club. This is why we have decided to establish OAC in Europe and Oceania as well this year. Over in Europe, our athletes from the Swiss Alps have just come home from the most successful Winter Olympics for Switzerland ever, and the Norwegian Olympic team has won the most medals of all nations in this year's Winter Olympics. On has been developing shoes and apparel for both teams in the last years and is their official sponsor. Seeing all athletes across the globe fuels the momentum of On as a unique performance brand. We further amplify through broad storytelling in feature-length films and short social stories. We are making fast progress towards our long-term brand mission to ignite the human spirit through movement. On is carried by a rapidly increasing movement of millions who run, explore, travel near and far, lift their spirits, and stream on. This means that On is reaching a far broader community. On's brand and products resonate with a bigger market in three ways. First, we are launching exciting products for all types of runners. As an innovation brand, we are building on our technology for world champions and making it vitally relevant for all runners. Just two examples of the record launch of all six new shoe models. The new Cloud Monster model will launch this spring and is celebrated by our retailers who serve a big group of everyday runners. These are runners who demand maximum cushioning. For outdoor retailers, we launched all new functional shoes. They are the perfect companion for gravel roads and tracks, versatile and mainstream. At the same time, we see our color range growing nearly twice as fast as our shoes. On's innovation drive is rewarded by our industry. Footwear News has named On the 2021 Brand of the Year back in November, and ISPO, the biggest European sportswear fair, has given the 2022 ISPO awards to our new functional jacket in apparel and the all-new Cloud Monster in footwear. My second point is that our culture is crossing over into popular culture. A young community in Tokyo, Shanghai, New York has embraced On as a brand that inspires them at the intersection of performance and design. On performance shoes and the apparel piece is popping up in the streets well beyond the running route. We believe that On taps into a secular shift where performance is taking over fashion and replaces classical archetypes with performance aesthetics. Driven by the shift, one of the fastest-growing global fashion brands and the rising star in the LVMH universe has asked us to collaborate with them on performance footwear. Two years in the making, the unique capsule of our shoes and apparel has launched just last week, available in select flagship stores and on our website. Days after the launch, the collection is almost sold out. This all means that On is firmly rooted in running culture and at the same time is embraced by a much wider market and demographic. An important third point is that we believe all communities have a fundamental right to movement. This inspired the launch of our rights around the social impact program in early 2021. Through partnerships with community organizers and non-profits around the world, we promote access and inclusion in running. Sometimes it is as basic as having a safe route to run. Together with our partners, we are empowering communities at risk of being left out of the global running community, such as people with disabilities and people of color, or those who are experiencing houselessness. We are committed to igniting the human spirit through movement in all parts of society. Now, let me speak to our Omni-channel strategy that is so vital to our success. We are not only creating products that our customers love, but also reach them where they shop. On's Omni-channel strategy is firing on all cylinders. It delivers scale, insights, and resilience for On in the following ways. Our own e-commerce channel on our website has reached a high share of 36% of our business in 2021. This means that we increased direct connections to our community, serving customers in 48 countries through D2C and learning from them. For example, customers who buy apparel as a first piece show a higher lifetime value as they already appreciate On as a sports brand, not just a pure shoe brand. Predicting the relevant offerings to the right customers at the right time in their journey has allowed us to retain big new customer cohorts. In fact, in the last two years, we have retained our newest customers with similar stickiness as customers who came to us when On was still a smaller brand. This shows that running habits formed during the pandemic persist. The benefits of this very data-driven approach obviously extend to demand planning and operational effectiveness, and, of course, also give us higher margins. At the same time, we continue to build strong relationships with our wholesale partners. We believe that retail partners with strong brands and unique offerings will continue to add value to their customers in physical locations, as well as on digital channels. They inform and inspire beyond the transaction. We are fortunate that strong wholesale partners have partnered with us for years and continue to introduce and position our brand to their unique audience. To mention a few activation highlights with our key wholesale partners, for example, we exclusively pre-launched the Cloudultra as the top trail running shoe to their community of 20 million outdoor enthusiasts, a huge win for building On's credibility in the outdoor space. Our fast success at Nordstrom paves the way for roughly 20 additional shop-in-shops in important Nordstrom locations this year. And focusing on the best Foot Locker stores introduces On to an even younger audience. At the same time, we have opened shop-in-shops in some of the most premium locations on this planet. Our initiatives allow us to grow fast on a global scale in more than 8,700 stores and hundreds of city centers. At more than 1,000 locations, On is present with a branded shop-in-shop experience. In 2021, we observed consumers flooding back to city centers and stores after lockdowns, eager for interaction and experiences. As a result, we have seen wholesale revenues bouncing back strongly, keeping our Omni-channel mix with D2C very resilient. This has strengthened our belief that attractive physical shopping experiences continue to be an important part of consumer culture and the very fabric of our cities. The importance of physical experiences is now the backdrop for our expansion of our very own retail network in global hub cities. Our flagship stores act as the most complete experience community center and media channel for our brand. Our New York City flagship is experiencing waiting lines at the door, and many community runs start from this space. New York and our eight On flagships in China are able to attract the highest share of first-time customers to On across all our channels. Conversion in-store is higher than any other sales channel, with a significant share of apparel in some stores - up to 25% of sales. All of our stores have reached profitability within nine short months of opening. We will continue to expand to the most important cities on this planet. We will open in Tokyo, followed by a launch in Zurich in summer. It is important for you to know that we are not seeing a cannibalization of our wholesale and D2C channels. Both channels showed sustained strong growth at the same time and are highly complementary. Let me come to the ultimate success factor of On, our team. We are fortunate that On has been able to attract exceptional talent. Only 1% of all applicants are accepted. In 2021, On has grown to 1,100 members who dream on and build a future. 600 people have joined team On in the last two years and have mostly worked remotely. The On team comes from over 65 nationalities and very different backgrounds and mindsets. We see adversity as a catalyst for innovation and creativity. Each month we are seeing important moments as the team moves back together into new social offices and spaces. Our European technology hub in Berlin was just opened in a big former post office and brings together 200 tech and customer service people. Our new North American home in Portland will see 300 people move in together in April and 700 people will build into the new On labs in Zurich in the summer. The team will continue to have the opportunity for hybrid work but also come together in social spaces again; nobody is coming back to the office just for a desk. We continue to build a unique On culture and join many runs along the way together. When you speak of running and our team, I have to mention the most important member of our community, our planet. Nature is the most important environment for sports and exploration but also the most endangered one. So in the next earnings call, we will talk about our important green tech initiatives, Cyclon and CleanCloud, so stay tuned. With that, I am handing over to Martin, our CFO and co-CEO, to take you on a financial deep dive.

Thank you, David. 2021 has been an extremely exciting and decisive year for On. We're very proud of what we have achieved, not only from a financial perspective, but across many different dimensions. A year is like a marathon race. The circumstances of the fourth quarter made the last period even more challenging. But thanks to our whole team, we were able to exceed our expectations for Q4 and successfully finish the year with many new record numbers. 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 managing 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 three transitory impacts. First, the factory closures in Vietnam between September and November 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, resulting in 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. Third, while North America had lifted most COVID-19 related shopping restrictions, we experienced repeated lockdowns in Europe, especially Germany, Austria, and Switzerland, as well as in some markets like Australia and various cities in China. Despite these headwinds, we achieved net sales of CHF724.6 million for the full year of 2021, a 70.4% increase compared to 2020 and a 65% CAGR over the past three years. We have experienced an acceleration in our sales growth compared to 2020; including 2021, we have grown more than 65% in nine out of the 11 years since our foundation. Since the inception of On in 2010, our sales have grown with a CAGR of 84%. While the supply constraints impacted both our DTC and wholesale channel, the season change and continued lockdowns are more visible in wholesale only. Consequently, in Q4, we have seen a very strong growth of 76.7% in DTC to CHF 84.7 million, compared to a 39.3% growth in wholesale to CHF 106.4 million. On a full-year basis, our gross rates were 71.9% for DTC and 69.5% for wholesale, validating the strength of our multichannel distribution. DTC continues to outgrow wholesale despite the reopening of many retail stores. Our DTC share on a full-year basis grew from 37.7% to 38.1%. The engagement of existing customers and the increasing trend awareness as well as the sustained shift in consumer behavior since the pandemic continue to significantly drive our DTC channel. During 2021, the number of sessions recorded on our e-commerce platform, including China, increased from CHF 66 million to CHF 102 million. We had a very successful holiday season. This stronger focus on our brand story, with the message for every runner, allowed us to push product sales on paid channels and created more reach from a storytelling perspective on organic channels. China accounted for 3% of our total e-commerce sales during the full-year 2021 versus 1% in 2020. Our Double 11 campaign, focused on blockbuster products, resulted in a 429% growth in terms of sold items in 2021 versus 2020. We expanded our own retail footprint in China by opening two new stores in Q4, one in Shenzhen and one in Chengdu. As we begin to build our presence in core cities outside Shanghai and Beijing. Overall, our store count in China increased to eight. The store in Chengdu's Taikoo Li mall is our largest retail store to date in China. David already mentioned some key highlights for our strong partnerships with retail partners in the wholesale channel. Overall, our growth in wholesale was driven by an increase of 900 doors from over 7,800 to over 8,700, as well as achieving significantly higher net sales per door. Shifting our focus to net sales by geography, North America and Asia are growing strongly and especially the United States and Canada experienced a new level of consumer demand following the IPO. North America grew 100.1%, and Asia-Pacific by 35% in the fourth quarter of 2021. In Europe, sales have been more impacted by supply shortages and the renewed lockdowns in November and December. Net sales for the fourth quarter ended up slightly below Q4 2020. To be clear, we see all impacts as transitory and expect continued growth rates in Europe from Q1 onwards. For the full-year 2021, all regions posted significant growth with Europe growing 38.8% despite the prolonged lockdowns in Q1 and Q4. North America 96.8%, Asia-Pacific 85.8%, and the rest of the world 78.8%. Of course, this sustained growth is fueled by our constant innovation and the exciting products we launched across all product categories in 2021. We are very proud to see further acceleration of consumer demand for our expanding apparel line, resulting in 216% growth in Q4 2021. Ultimately, for the full year, shoes grew at 68.1%, apparel almost at twice the rate at 130.8%, and accessories at 57.2%. The share of sales from apparel increased from 3.7% to 5%. Gross profit in the fourth quarter was CHF111.8 million compared to CHF64.3 million in Q4 2020. Our gross profit margin increased year-over-year from 51.7% in Q4 2020 to 58.5% in Q4 2021. As expected, while we had to achieve around a 60% gross profit margin in Q3 and Q2, Q4 was negatively impacted by additional airfreight to compensate for the supply shortages from factory closures, partially offset by the higher D2C share. Overall, we used less airfreight than anticipated mainly due to the longer factory closures and very volatile airfreight rates. On a full-year basis, our gross profit margin improved by more than 500 basis points from 54.3% to 59.4%. This increase mainly reflects lower customs costs related to the free trade agreement between Vietnam and Europe, as well as lower sourcing costs, but also our ability to drive cost efficiencies across the supply chain. Moving on to SG&A and leaving out share-based compensation for the moment. SG&A expenses as a percentage of net sales were 59.2% for Q4 2021, compared to 45.9% for the same period last year. This increase largely relates to the increased marketing and general administration spending. We did not manage our expenses in Q4 in isolation but with a clear focus on our long-term growth and full-year profitability. The IPO ignited a lot of energy and awareness of the trend, especially in North America and Asia. We took the decision to fuel this momentum and to leverage the post-COVID marketing opportunities in the physical and virtual growth. Our strong net sales growth and lower-than-expected expenses in airfreight, combined with COVID-related cost savings, allow us to invest in brand-building campaigns while still realizing a significant increase in our adjusted EBITDA margin on a full-year basis. This investment enables us to create a significant brand presence at Q4 trade and sports events, particularly at global marathons and trade events like the Running Event in Austin, where On received very positive feedback from the long specialty retail community. The increase in general and administration expenses was mostly driven by initiatives to enhance our financial capabilities as a public company and expenses for our new offices, as well as higher travel expenses to allow our team members to connect globally in the aftermath of the pandemic. SG&A expenses before share-based compensation for the full-year 2021 were 51.5% of net sales compared to 45.5% for 2020. For G&A, this increase is mainly driven by the higher expenses just mentioned for Q4. In addition to the Q4 impact, full-year 2021 marketing expenses saw the launch of our official expression of our brand mission to ignite the human spirit through movement, alongside assets and promotions created under the Dream On tech line. Sustained brand awareness and sales growth allowed us to further invest in upper-funnel acquisition activities and to lay a foundation for future growth. Moving on to share-based compensation. As disclosed in the IPO and announced in our previous call, we granted CHF 7.5 million in stock-based awards in Q4. The majority of the current benefits are assigned to leaders and key employees at On beyond the executive team. On top of that, all of our employees received a founder's grant at the IPO, turning the entire team into shareholders in appreciation of their hard work over the last 12 years. The majority of the stock-based awards vested at the IPO, leading to recorded share-based compensation expenses of CHF176.2 million for Q4 and CHF198.5 million for the full year. Adjusted EBITDA, excluding share-based compensation and one-off transactions related to the IPO, was CHF11.2 million for the three months ended December 31, 2021, very similar to the CHF11.2 million in the prior year period. As expected, our adjusted EBITDA margin decreased from 9% in Q4 2020 to 5.9% in Q4 2021. Important for us and in line with our commitment to continue increasing our profitability, adjusted EBITDA for the full-year 2021 increased by 93.8% from CHF49.8 million to CHF96.4 million. As a percentage of net sales, adjusted EBITDA increased from 11.7% to 13.3%, the highest adjusted EBITDA margin in the history of the company. We ended the year well financed with CHF650 million cash on hand, which allows us to pursue our ambitious growth plans. Proceeds from the IPO and subsequent equity transactions were CHF690 million. Throughout 2021, we continued to invest in our IT infrastructure, especially in our new ERP, CRM, and data analytics landscape in retail stores and office infrastructure. Our capital expenditures in 2021 were CHF36.2 million, equivalent to 5% of net sales. In 2021, we achieved a positive operating cash flow of CHF16.9 million compared to minus CHF14.7 million in 2020. Naturally, our strong growth results in a significant increase in net working capital driven by rising receivables from higher sales volumes with wholesale partners and investments in inventory to fuel our future growth. Excluding the increase in working capital of CHF74.4 million, we achieved a positive operating cash flow of CHF91.4 million, which further validates the strength of our profitable business model. Now, let's look ahead into 2022. As mentioned in our last call, our guidance philosophy is to provide prudent, yet aspirational guidance for the full year, not on a quarterly basis. David already shared how we will continue building the brand and drive significant growth across all channels, regions, and product categories. We plan to significantly expand our offering in running, outdoor, and lifestyle, which we call performance all-day, with highly innovative and even more sustainable shoes, apparel items, and accessories. We have completed our selling season for spring, summer, and fall, winter 2022, and we are seeing very strong pre-orders from existing and new wholesale partners for both half-year one and half-year two. These include a very controlled expansion of our partnership with Foot Locker and JD Sports following a successful pilot during Q3 2021. It will also include the first pilot with Dick's Sporting Goods as of summer, featuring a targeted assortment of our running products. At the same time, we have built a significantly elevated customer base in D2C and continue to retain existing customers while bringing in new ones. We expect to reach more fans around the globe and allow them to move in On products. In addition, we will bring a new level of brand experience to more flagship stores around the globe. For the first time, we will open flagship stores in Europe and Asia outside of China and will continue increasing our presence in North America and approximately double our store count in China. As mentioned earlier, all of this gives us additional confidence in our outlook for 2022. This confidence is further elevated by the positive development of the sourcing situation in Vietnam and throughout the supply chain. Since December, our production capacity is at 100% back to the levels we had committed to before lockdown. We are extremely grateful for the support received from our factory partners throughout the last month. For example, most partners continued working during the Tet holiday in early February to recover from some of the capacity loss. Overall, we are fast-tracking our capacity ramp-up plan this year, leveraging our close relationships with the factories. This includes an expansion into Indonesia, where we just started production in a new facility aimed at producing 10% of our footwear outside of Vietnam by the end of 2022. Managing the supply chain remains a core priority as we experience volatile shipping costs, port congestion on the U.S. West Coast, and labor shortages due to Omicron infections in some of our warehouses. As explained in our last update, the transitory supply shortages will define our pace of growth in the first two quarters. Supplies are not expected to be a significant limiting factor in the second half. By then, our pace of growth will be defined much more by our strategy to build a global premium performance brand. Thanks to strong partnerships with our factories and supply chain partners, as well as the passionate work of our supply chain teams in Vietnam and Zurich, we expect, compared to our Q3 update, to be in a stronger supply position to fuel the demand in the first half of the year. For example, just three weeks ago, we launched the new Cloud 5 globally within the planned timeframe. It actually marks our biggest product launch ever. Also, the new Cloudmonster, our next cushioned running shoe, will be available to our customers as of March 31st. Based on this elevated supply position, we expect to drive more net sales growth in Q1. At the same time, the current situation in Vietnam and our strong pre-orders provide further confidence in having the right product to return to hypergrowth in the second half. Consequently, and also considering the global economy and geopolitics, we increased our outlook for the full year 2022 and expect to achieve at least CHF990 million in net sales. Our internal ambition is still higher than that, and we will continue to balance net sales growth versus profitability to mitigate disruptions across the international supply chain. We continue using airfreight to balance inventory levels against strong demand. While we were able to achieve our strong Q4 with a lower-than-expected share of airfreight, we still expect a headwind to our gross margin of approximately 700 to 800 basis points in the first half of 2022, compared to the first half of 2021. This is comparable to the relative impact we announced in our previous outlook. Outside the transitory impact from higher airfreight expenses, we expect to maintain our high gross profit margin as a premium brand. To offset the impact of some high expenses along the supply chain, we have increased our retail prices in North America by $10 on roughly 40% of our sales value. The higher net sales will allow additional gross-focused investments into the brand and the team while increasing our adjusted EBITDA target for the full year to CHF130 million and raising our goal of an adjusted EBITDA margin to 30.1%. If we can achieve higher net sales, we expect to drive additional profitability. We will continue to closely monitor the situation in Russia and Ukraine. Our business exposure in both markets is very limited. We have one distributor in Russia accounting for less than CHF500,000 in net sales in 2021. We have decided to stop any new product supply into Russia as we clearly denounce all acts of violence and intimidation. We do not have any business in Ukraine nor any On entities in Ukraine or Russia, but as an international company with a diverse team, our connection to Russia, Ukraine, and neighboring countries is extensive, including many Russian and Ukrainian team members. These individuals, our team, colleagues, and friends, collectively come together as one community. Looking back, 2021 was an extremely exciting year for On with huge milestones like the IPO, the launch of our new European systems, and our official expression of our brand mission to ignite the human spirit through movement. Exciting new products like the Cloudultra, the Cloudstratus, and apparel items that combine performance with design. With our significant steps in sustainability, many new athletes, our presence at the Tokyo Olympics, our first podium at the Berlin Marathon, and our growing presence in China, along with many new members of our team, all of us together are fully committed to shaping our future and making 2022 even more exciting. We are extremely grateful to have such an amazing and high-performing sports team that allows us to dream on and to further build a global premium sports brand that lives at the intersection of performance, design, and impact. With that, David, Marc, Florian, and I would like to open up the session to your questions. Thank you for your support and trust throughout 2021.

Ladies and gentlemen, at this time, we will begin the question-and-answer session. One moment for the first question, please.

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

Jay, thanks a lot for the question. We're incredibly excited about how we're expanding the product range. It's important to know that we also retain customers based on lasting franchises and new product releases. Of course, seeing the Cloud now in its fifth iteration launch and with a huge community is significant for us, especially because now the Cloud has 44% of recycled content. We also see a record number of all-new shoe models this year. One essential direction is that we want to reach all types of runners. The Cloudmonster, which is our highly cushioned product, is super important, and we've just been at the running event in Austin. The level of interest from the specialty running community has been tremendous. We're also going to launch the Cloudrunner and the Cloudgo at very interesting price points. It's crucial how we extend into running. Additionally, we feel we're resonating well with consumers interested in running but also in run culture, where performance is taking a bigger share. This will probably be shown in our new capsule collection that we're just introducing.

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

I can still hear you.

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

Sorry, we are experiencing a technical difficulty at the moment.

Operator, we don't experience a difficulty.

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, as well as expansion with Foot Locker and JD Sports. Can you just give us a sense of how many door increases you expect in 2022 and a little bit more color on some of the partnerships with some of the retailers you mentioned, Dick's Sporting Goods, Foot Locker, JD? Thank you so much.

Thanks for the question, Jay. I hope I understood the full question regarding Foot Locker and JD. What we are very much trying to do with Foot Locker and JD is expand to an even younger consumer base, which is driving the partnership. With JD, we will be heavily focused on the UK where a big part of this expansion is being driven, as well as in the U.S. For Foot Locker, the expansion in 2022 is mainly U.S.-based and is aimed at defining key locations where we believe we have the strongest consumer fit. Additionally, we are working on a very distinct product pairing. When you experience On across different channels, you will always find the right products for their respective consumer. With Dick's, the story is a little different, and our goal is to be number one on runners' feet. Dick's plays a crucial role, and we will start the pilots with On-branded spaces within some key Dick's doors as of this summer. We also plan two selected pilots with the Public Lands format, targeting the outdoor consumer.

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 to ask a few questions on the supply chain backdrop and its influence on product flow. Can you speak to the level of in-transit inventory positions? Then I'm curious about the incremental use of airfreight and whether it is expected to fully impact the P&L in the first half of the year.

Yeah. Thanks, Jim. I think the most important point is we now have confidence and clarity on the factory and the volumes they are producing. Therefore, we can plan the use of airfreight much more clearly than in the past. We expect a headwind of 700 to 800 basis points from airfreight in the first half of the year compared to the gross profit margin we had in the first half of 2021. We will carefully balance growth and the use of airfreight, but we can fulfill a higher share of the demand in the first half of the year, which is also reflected in the increased guidance.

And then, I'm curious about the level of in-transit inventory positions and how you're thinking about the progression of inventory across fiscal 2022. Is there a way to characterize the wholesale channel inventory levels compared to desired levels?

In transit, we're balancing what comes out of the factory with what goes on ocean freight and what goes on airfreight. We see some congestion, especially at the West Coast port of LA. We don't see similar congestion at other ports, so the product is slowing there. Before the lockdowns, we adjusted how much cautioning we take into account for planning production volumes due to longer shipping times. We increased it in our internal calculations by two weeks already before the impacts. Maybe Marc can elaborate on how we look at inventory positions at wholesale.

On the wholesale side, from the beginning, On has decided to partner with premium retailers and premium wholesale partners, many of whom have an extremely strong standing in the industry. What has happened is many of the brands have prioritized certain partners, so many of ours remain relatively healthy. Regarding our inventory, we believe the availability we can provide is very strong, which is also reflected in the sell-through data that we're seeing; 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.

Good morning, and good afternoon. 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 your long-term target of 12% to 12.5%? How are you thinking about that?

I think it's important to note our long-term target for adjusted EBITDA margin is to be in the high-teens. This is clearly what we're working towards, and we also see that we increased our EBITDA target despite the headwinds from the higher airfreight. We deliberately increased investments in Q4 in marketing because we observed strong sales growth, but we also had a lower share of airfreight compared to what we originally planned. We will continue to take advantage of similar opportunities as they arise to invest, particularly in upper-funnel marketing targeting regions where On has a weaker brand presence than average. We will invest in product groups like apparel, but ultimately our main goal is to increase profitability over time into the high-teens.

Thank you. My second question is regarding the flow of sales for the year now versus the last call. Previously, you mentioned a 40% to 45% growth in the second half, implying about 20% to 25% in the first half. Should we assume the better product flow you’re seeing will lift the first half while the second half stays in that range? How are you thinking about the split for the year?

Yes. 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, returning to hybrid growth numbers towards the second half of the year. There is much more confidence behind the numbers, as we are seeing strong pre-orders from our retail partners for both new and existing products. We have a much higher level of confidence in that number, coupled with the assurance that product supply should be available based on the current factory production capacity.

Ms. Fernández, are you finished with your questions?

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. Could you share a bit more on your plans for 2022 on the apparel side? If you have any insights on the launches and any new categories that you plan to enter?

Thanks a lot for your question, Jonathan. Apparel has been growing twice as fast as shoes and we continue to launch new products. The products we're launching always sit at the intersection of performance and design, while also focusing on sustainability, making our apparel pieces incredibly versatile. We're seeing that the adoption of our apparel pieces is becoming wider. In some of our own stores in China, apparel already makes up 25% of sales. We anticipate more launches; I've just seen important apparel launches for us in the last two weeks. We will ensure that we double down on the movement aspects of our apparel pieces, which is part of our brand strategy. Expect to see a women's bra line in the future, adding depth to our range, primarily in core running but extending also to outdoor and versatile movement products. What’s very encouraging is that customers who come to us for apparel show a high lifetime value. Our ambition is very clear: On is becoming a global premium sports brand beyond just a running shoe brand.

That's very helpful. And then maybe I have a broader question about the plan for 2022 revenue. Is there any more color you can share on some of the channel expectations? I know wholesale has had some shifts in the timing of the Spring selling season this year. Any directional color on wholesale vs. direct-to-consumer and expectations?

Actually, I'm happy to take that. Most importantly, we see strong growth rates across all channels. In D2C, we observe that the share of new and repeat customers stays robust. We are building our business based on the elevated consumer base that we cultivated during the pandemic. Meanwhile, Marc already shared some of our expansion plans in wholesale; these expansions clearly target a different consumer group while also ensuring they continue shopping in our D2C channel. We are also growing our own retail network, opening new doors in Tokyo, London, the U.S., and Switzerland while doubling our account in China, which will further grow our D2C channel. It’s important to note that both channels are mutually beneficial and we aim for growth in both.

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. Is there any additional color you could share on perhaps the year-over-year rate of growth for the seasons? Also, regarding the 700 to 800 basis points in gross margin headwind here in the first half of 2022, do you anticipate some pieces of this to be transitory, such as elevated use of airfreight? Or could some of it be sticky, potentially higher distribution center expenses?

Thank you, Kimberly. Let's start with the pre-orders we’re seeing for the second half. We're not sharing specific growth numbers, but we are seeing it higher than we expected, which is fortunate and it's consistent across all geographies and product groups. For us, this is critical. In addition, we focus on same-store growth as well as new store growth. We’re experiencing strong growth in stores where we already have a significant presence. Beyond footwear, it’s important for us to continue building as a global sports company, so we're closely monitoring growth in apparel and accessories. Our accessory business is still small, but we expect very strong growth in 2022. In apparel, many orders are driven by being in the right channels, such as shop-in-shops with Nordstrom, which we find enhances our exposure. Stronger apparel representation is also observed in pre-orders, so we're positive across the board. Martin will quickly discuss the margin impact.

Kimberly, regarding our distribution costs, we're still seeing a very volatile environment. As previously mentioned, we observed airfreight prices fluctuating from $20 to $40 per shoe. Currently, we're trending toward $16 again, so it’s very unstable, making projections challenging. We maintain a certain amount of airfreight share with very low airfreight volumes in most of 2021 due to good product availability. We will likely experience a higher share also post the first half of Q1. The most persistent impact will likely come from higher labor costs in our warehouses, where we don’t expect the effects to reverse. This is why we have increased prices in the U.S. on about 40% of our sales volume to offset those costs while maintaining our gross profit margin and working towards our long-term gross profit target of 60%.

Great color. Thank you so much. It sounds like you expect the price increases to offset some of the cost inflation, keeping you on track for that high teens long-term adjusted EBITDA margin. Am I hearing you correctly?

Yes. At the same time, we do not expect price increases in Europe for 2022. We will monitor the market and the competitive landscape closely there, and we have the pricing power as a premium brand to selectively increase prices for 2023.

Hey, guys. Good morning. Thanks for taking our question here. Congrats on an outstanding quarter. I guess as we look back at some of the modeling from the S1 around the IPO, obviously, PCB and higher gross margins are positive. However, the geography should have been a negative influence with the lower-margin U.S. business growing fastest. My question is, how do you see underlying profitability, and is it turning out to be higher than what you anticipated as you scale? Should we think of 59-60% as a new floor?

That's a good question. We're maintaining a favorable environment across profit due to strong full-price sales and a high D2C share in the fourth quarter, especially compared to Q2 and Q3. We used less airfreight in Q4 than we had planned. We will continue to have a higher profit margin in our D2C business. Strong sales in D2C will help offset what you mentioned regarding potentially lower gross profit margins in the U.S. market. Additionally, China remains a high-performing business for us from a gross profit perspective, so we still believe long-term that reaching 60% is the goal we are working towards while also considering our airfreight use. Our product prices remains fixed for 2022, starting base level that captures commitments made for the full season. As such, any impacts from higher FOB prices will only become visible in 2023.

Regarding reaching CHF990 million again, this is fantastic; we’re returning to pre-Vietnam issue projections, which is great to see. Initially, you expected 14.1% EBITDA margin at this revenue level. Now with a target of 13.1%, can we still realistically expect margins moving towards 15-16% for 2023?

We want to refrain from discussing 2023 at the moment. The CHF990 million still incorporates headwinds from supply shortages, so it’s an important differentiation to make with the numbers you mentioned earlier. We maintain our long-term outlook to achieve a high-teens adjusted EBITDA margin. If we do not anticipate high levels of airfreight like in the first half of this year, we should see further profitability improvements moving forward.

Thank you for taking my questions. I have a few here. Number 1, you mentioned the 7-800 basis point headwind in gross margin for the first half, with an assumption that this will be weighted towards Q1 more so than Q2. Is that a fair assessment?

That's a fair assessment; probably more like a 60-40 split across the two quarters.

And then, can you provide more insight into your gross margin expectations for the full year? Given some product shortages, demand for your products likely outpaces supply. Why pursue that younger, more fashion-oriented customer when you could use that production to better serve the core running business?

On the gross profit outlook for 2022, we're not providing specific guidance, but I'm happy to discuss how we're balancing supply and demand. On is a premium brand. Historically, we’ve experienced more demand than supply, and a certain amount of product scarcity helps us maintain premium status, aiding our margin situation. We will continue to execute on that strategy. When we prioritize products, it’s important to reach the right consumers through the right channels. We prioritize running products to reach the running consumer. For the all-day consumer, we focus on appropriate channels. In our D2C environment, we maintain the highest flexibility regarding product supply. Our products are dual or triple-sourced, allowing for some balancing, but there’s limited flexibility to completely rearrange capacities.

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.