Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to On Holdings AG Third Quarter 2024 Results Conference Call. I would now like to turn the conference over to Jerrit Peter, Head of Investor Relations. Jerrit, you may begin.

Good afternoon, good morning to our investor community. Thank you for joining the 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 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're looking forward to opening the call for a Q&A session. With that, I'm very happy to turn over the call to Caspar.

A warm welcome from my side, and thank you for joining us today. I'm very excited to speak about this record quarter for On. We have reached CHF 636 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 primarily allowed us to make significant progress on the strategic building blocks that we outlined a little over 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 communities. 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're 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 who are connecting to On through movement in a broader sense. We see this reflected in our quarterly proprietary brand survey. In the U.S., the 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 ad brand awareness almost tripled year-over-year. All of this confirms our efforts are paying off, but also demonstrates that we have a lot more room to grow. At the same time, our running community remains by far our largest, marking another big pillar in our strategic growth plan. We are thrilled to see how our presence at the Olympics and innovations like LightSpray continue to increase our visibility and engagement with runners. Recently recognized as one of Time's 200 best inventors of 2024, the groundbreaking LightSpray technology continues to turn heads. During an event in New York, thousands of people stopped by our pop-up in SoHo to see the spring process in action. Only a few lucky members were able to secure a pair of the Hellen Oberi-approved Cloudboom Strike LightSpray, available for the first time in an ultra-limited production drop. After her performances in Boston and the marathon in Paris earlier this year, Hellen topped off her one-of-a-kind season with a second-place finish in the New York City Marathon. We are delighted to see how our core running franchises continue to develop and grow. In particular, our strategic focus on building the Cloudmonster, Cloudsurfer, and Cloudrunner families through clear product segmentation is paying off with the all-new Cloudsurfer Next and the Cloudrunner 2 proving to have immediate blockbuster potential. As you remember from On's Investor Day, our growth plan includes three substantial building blocks: Apparel, On retail, and Asia. In recent quarters, you have heard a lot about our strategic vision for apparel and retail. Today, I would like to spend some more time on the third area with the incredible growth and momentum we are experiencing in our fastest-growing region, APAC, led by both Japan and China. Both for Q3 and year-to-date, we have massively increased our APAC business and are ahead of our plan, growing over 85% on a constant currency basis in the first nine months. The consistency of execution and exceptional momentum in the region are making it an increasingly meaningful part of our business. In fact, for the third quarter in a row, APAC has contributed over 10% to our global net sales number. And still, with a very small base of close to CHF 75 million in Q3, the opportunities for growth are palpable. In China, this strong expansion is driven by our own retail stores and e-commerce. The vast majority of our new store openings this year have been in China. We continue to accelerate the rollout given the broad-based success of our store formats, allowing us to dream bigger, so much so that we have decided to bring our proven and larger global flagship format to at least two premium locations in China next year. In China, we are further reaching a notably young mobile-first consumer, visible in the meaningful e-commerce share from the livestream channel. During the recent Double 11 shopping festival, we have continued to see incredibly strong online results, including our all-time China single-day sales record during the first peak of the event. We achieved this despite remaining committed to a full-price strategy in this highly promotional environment, a testament to On's exceptional brand strength. However, no engagement on our various e-commerce channels can compare to the level of engagement with the On brand that comes from our partner Roger Federer. During his visit to the Shanghai Tennis Masters in early October, we invited a group of kids from the Wild Elephant tennis club to meet their idol in Shanghai. The club is based in a rural mountain region and allows children from ethnic minority groups with limited resources to chase their tennis dreams. Roger played and even got challenged by the kids on the court, truly creating a moment they will never forget. The event captured unprecedented attention for the On brand in some of the largest domestic media and spread globally from there. Our key markets, Japan and China, will continue to lead our growth journey in the region. We are rapidly increasing our scale in South Korea. Next year will be the first complete year that our own distribution will be fully operational in the country, and we are incredibly excited about the opportunities that this brings. Finally, we are also planting seeds for the future in emerging growth markets like Indonesia and the Philippines. Looking ahead, we are excited to continue to co-create and pioneer On culture in the region. As the sunset of this Olympic year, we are setting our sights on Tokyo, home of the World Athletics Championships in 2025. You can expect this to be a big global priority for us next year. Including the opening of our second Tokyo store. You can also expect the On experience to be ready once again when the fastest runners hit the track in our fastest-growing market. We hope you can feel it as well. We are incredibly excited about the momentum in the region and the huge opportunity that it presents. On's journey of significantly scaling our presence and brand awareness has just begun. Overall, one year after announcing our strategic three-year plan through 2026, we are happy to report that we are well on track on all core strategic building blocks, which will be the key drivers for On's sustained growth in the coming years. With that, I'm happy to hand over to Martin, who will share more about the incredible energy that we have experienced in New York and, of course, provide a detailed review of the quarter. Congratulations on your New York Marathon finish, Martin.

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're 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 the top line and profitability. As you know, our culture and our team are at the core. We invest in 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. It fuels our dreams and allows us to explore different paths and find new solutions. From groundbreaking technologies like LightSpray, 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's 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's no secret that we were not entirely satisfied with our level of operational excellence during Q2. However, in a very short timeframe, the dedicated work of our team has allowed us to do a much better job at fulfilling the incredible demand for our products and to deliver our largest quarter in history in Q3. We are convinced that we have the right team and culture in place to succeed in the areas that will define our long-term success, including disruptive manufacturing processes, new product innovations, premium brand executions, and supply chain and warehouse efficiency. It will all require the right mix between innovation and excellence, and we are excited for the growth journey ahead of us. On this journey, we are focused on our mission to ignite the human spirit through movement. Our efforts are centered around the goal to live, educate, and enable movement. The New York Marathon always offers a particularly powerful reminder of the transformative impact of movement. It also highlights the fact that access to sports and physical activity is not a given. To that end, we have our Right to Run social impact partnership program. I had the chance to meet with several partners in New York to understand how we can amplify the transformative work they are doing to break down barriers to movement. One of our partners, Equity Design, works closely with schools in the Bronx to encourage physical activity for both kids and adults. Their work focuses on reducing health disparities and closing the gap between health and wealth in underserved communities. Elsewhere, our senior leadership team recently spent the day getting to know another one of our Right to Run partners, whose mission is to enable access to sport and movement in long-term refugee camps. The efforts and dedication of our partners were a huge inspiration for myself and our entire team. While it's a huge privilege for us to partner with them, it comes with an obligation to think about how we can further elevate the impact that Right to Run can have in the future and how we can promote the importance of movement and the access to it. With that, let's move on to the detailed financial review of the third quarter. Q3 has been, by quite a distance, the strongest quarter in our history. We reached record net sales of CHF 635.8 million in Q3, growing by 32.3% on a reported basis and 33.2% on a constant currency basis. In the early years of our journey, we aspired to reach the magic number of 1 million pairs of shoes sold on an annual basis. We finally reached that aspiration in 2016. In Q3, we had the first single week in our history with more than 1 million pairs sold. This illustrates the strong demand for the brand and, even more so, the operational ability to continue our strong growth into the future. Q3 is another strong validation of the power of our premium position. Our multichannel distribution and our commitment to strong growth both in terms of net sales and adjusted EBITDA. We achieved a gross profit margin of 60.6% and an adjusted EBITDA margin of 18.9%, the highest since going public. 38.8% of the record net sales came from our D2C channel, clearly exceeding our expectations. D2C net sales in Q3 grew by 49.8% and even 50.7% on a constant currency basis, reaching CHF 246.7 million in the quarter. Our continued investments into our D2C channel, both online and offline, together with our operational improvements allowed us to capture a higher share of the strong consumer demand and deliver our biggest e-commerce quarter in history. Besides the success we already pointed out in China, EMEA, this also includes continued success of our marketplace in Zalando, which is bringing a younger community to the On brand. Additional growth within D2C is driven by our own retail formats. We made significant progress in our retail footprint with the opening of several important new stores in Q3. In the Americas, we celebrated the opening of our third New York City location and the first ones in Austin and Chicago. New York City Flat Iron and Chicago marked our two largest stores in the region so far. In EMEA, we opened in Milan. Following the two stores in Paris, France, we continue our expansion of our own retail as an important channel for growth in Western and Southern Europe. In APAC, we opened our first store in Australia in Melbourne and five new locations in China, with three of these locations having significantly larger square footage than our historical fleet on average. With three new stores expected in Q4, we will have opened 20 new stores in the full year 2024. This number is in line with our ambition to open 20 to 25 new stores annually outlined at our Investor Day. We are extremely proud of our team establishing own retail as a new channel that is elevating our brand experience across the world, delivering strong top-line growth and profitability by driving a high share of apparel sales. By the end of 2024, we expect nearly 1,000 team members working in our retail stores compared to just 380 at the end of 2023. Our increase in brand awareness is not only reflected in our D2C channel growth but also in the continued momentum at our wholesale partners. In Q3, our wholesale channel grew by 23.2% or 24% on a constant currency basis, reaching CHF 389.1 million. In line with our strategy, we have expanded our wholesale footprint in a very controlled way. The vast majority of growth is driven by the strength of our existing and new product franchises and our ability to convert more shelf space opportunities with our expanded offerings in running and in our new categories. In sum, we are very pleased to see our multichannel strategy in full effect. In line with our strategic ambition, our D2C channel has significantly outpaced our wholesale channel this year. The result is an over 300 basis point D2C share increase versus last year, when looking at the year-to-date period or even a 450 basis points increase for the third quarter specifically. With that, let me move on to the developments by region. Net sales in the Americas grew by 34.1% in Q3 or 34.5% on a constant currency basis, reaching CHF 395.5 million. While this great performance is certainly a reflection of the operational improvements, it is first and foremost a reflection of the strength of the brand in the region. As Caspar shared, our brand-building moments over the summer converted into higher brand awareness and resulting transactions in the key U.S. market, in particular. At the same time, we're also very encouraged to see additional upside coming from markets like Canada and Brazil. Net sales in the EMEA region reached CHF 165.8 million in Q3, growing by 15.1% year-over-year or 15.2% on a constant currency basis. In line with the rapid rise in brand awareness, On climbed to be our fastest-growing market in the region in Q3. This, of course, coincides with the Paris Olympics and the successful start of our flagship store. So we are encouraged by the ongoing momentum in the fall. APAC reached net sales of CHF 74.6 million in the third quarter, corresponding to a growth rate of 79.3% or 85.7% on a constant currency basis. With that, the APAC region made up 11.7% of our total business in Q3, driven by the continued momentum in China, Japan, and also in South Korea. Turning to performance by product. In Q3, net sales from shoes grew by 32.1%, reaching CHF 63.7 million. Our running vertical continues to be the key driver of volumes. With franchises like the Cloudmonster and Cloudrunner continuing to lead the way. As fall begins, many of us have an opportunity for fresh starts and developing new behaviors, habits, and activities. This is for us to launch our new 'Back to Run' campaign and, with that, to further double down on our running core. The campaign showcased the all-new Cloudsurfer Next, which supported a threefold increase of our Cloudsurfer franchise versus the prior year period. Apparel grew by 33.4% in the quarter, reaching CHF 26.8 million. While we provided our initial focus on improving the product flow on the footwear side, constraints on the apparel side tracked well into Q3, resulting in a growth rate slightly behind our ambition. We are confident that we will see a re-acceleration here in the fourth quarter. Based on the preorders for Spring/Summer '25, we expect strong momentum in this focus area to continue into the new year. Earlier this year, our team spent a full day in the Swiss mountains. The result was a beautiful campaign for our fall/winter season. With millions of impressions across our various channels, we're excited to continue building long-term brand awareness and momentum for our apparel category. Moving down the P&L, largely driven by the exceptional B2C performance and resulting in a high B2C share of 38.8% in the quarter. We reached a very strong gross profit margin of 60.6%, an increase of 70 basis points year-over-year. SG&A expenses, excluding share-based compensation, were CHF 292.8 million, equivalent to 46% of net sales, and reduced from 46.4% in the prior year period. The main benefit resulted from more efficient distribution expenses in this year's period, reflecting our continued focus on achieving operational efficiency gains. This included a temporary strategic shift of volumes to our L.A. warehouse during the quarter, which we were able to secure at a favorable rate. The resulting adjusted EBITDA margin for Q3 is 18.9%, significantly up from 16.9% in the prior year. This very strong profitability reflects the flow-through of the top line exceeding our expectations, together with a slightly more conservative cost plan in place, considering the operational challenges we faced in Q2. While we continue to take measures to reduce the sensitivity of our results to FX fluctuations, the significant drop in Swiss francs per U.S. dollar between the end of Q2 and the low point at the end of Q3 led to considerable unrealized FX losses during the period of CHF 37.2 million. We are pleased to have delivered a strong net income of CHF 30.5 million, despite this impact, demonstrating the resilience of our business, which brings me to our balance sheet. Capital expenditures were CHF 19.1 million in Q3, equivalent to 3% of net sales. Our net working capital balance at the end of Q3 stands at CHF 540.1 million. This includes our lowest inventory portion in the last 12 months, a further testament to the continual operational optimizations we have been focused on. This has contributed to continued strong cash flow with a positive cash flow of over CHF 125 million in Q3 alone and a year-to-date positive cash flow of over CHF 250 million. We have significantly increased our cash balance to close to CHF 750 million at the end of the third quarter. As I mentioned in our Q2 call, we do expect a higher inventory position at year-end as we increase our on-hand levels on key styles during the first quarter. This will include the inbounds for our Spring/Summer '25 launches, including the all-new Cloud 6 that we are very excited about. Now let me move on to our outlook for the full year of 2024. We are extremely pleased with where we are today. We see our mission to ignite the human spirit through movement coming to life around the globe. We are successfully executing every dimension of our strategic plan. We grew our brand awareness and broaden our reach to new communities. We already had a strong start this quarter, and we are heading into the holiday season with a lot of confidence and excitement and expect to see limited operational constraints to deliver against the continued exceptional brand momentum we are seeing globally. For Q4, we expect a higher constant currency growth rate than Q3, even exceeding our expectations in the third quarter. For the full year 2024, we are increasing our constant currency net sales growth ambition from at least 30% to at least 32%. On a reported basis, at current spot rates, our increased outlook reflects the expectation to reach at least CHF 2.29 billion in net sales for the full year '24. This incorporates the sizable FX headwind that we expect in Q4 across all regions, with the Americas region likely to see the biggest impact given the meaningful U.S. dollar move versus the Swiss franc in recent months. As a result of the D2C strength in Q3, we achieved a 60.1% gross profit margin for the first nine months year-to-date. Driven by the historical strength of D2C, our disciplined full-price strategy, and the strong momentum in our balanced inventory position, we expect an even stronger gross profit and are confident in our ability to significantly exceed our previous gross profit margin outlook for 2024. We now expect to reach a full-year gross profit margin of around 60.5%, an increase of 50 basis points versus our previous outlook. As communicated in the past, we execute in line with our philosophy of building long-term global growth, which extends to both top-line and profitability expansion. We always seek opportunities to drive additional meaningful long-term-oriented investments for our brand and businesses when we overachieve our net sales and gross profit expectations during the financial year. Given the proximity to year-end, we expect a higher flow-through of the strong gross profit to our adjusted EBITDA. We expect our adjusted EBITDA margin for the full year to reach the upper end of our previous guidance of 16% to 16.5%, potentially even slightly above. While we are incredibly thrilled with our Q3 results and this increased outlook for 2024, we are even more proud to see the progress we have made against our long-term vision announced just over a year ago. We're excited to continue building for the long term and look forward to finishing the year 2024 on a high note. We look forward to being back with this audience in 2025. Thank you once again for your continued support and trust.

Thank you. We will now begin the question-and-answer session. Your first question comes from Cristina Fernandez with Telsey Advisory Group.

Congratulations on the results. I wanted to ask about the increase in brand awareness that you're seeing. Caspar, you gave some detail from the U.S. Can you share where the increases are coming from? Do you have any details you can share by demographic? Is it in the younger cohort or gender? Anything else you could share would be helpful.

Yes. Cristina, thank you for this question. Increasing brand awareness has been a significant focus for us, and seeing it flow through into Q3 results has been very positive. One thing that happened was that Zendaya, FKA Twigs, and some of the investment into the younger community clearly helped. We significantly increased brand awareness in the younger community, but it's not limited to that. We were also able to increase brand awareness across the globe. For example, in already highly penetrated countries like Switzerland, we increased brand awareness by 30 percentage points. In the U.S., we saw improvements from coast to coast. By focusing our marketing spending, we saw positive spills into other regions and cities. Performance-driven marketing, especially focused on the Olympics, helped us penetrate as an innovation brand and also within the performance community. Therefore, we are very confident in how this is uplifting the On brand overall.

Your next question comes from Aubrey Tianello with BNP Paribas.

I wanted to hear more about the drivers of the 50% B2C growth in the quarter, perhaps from a product perspective. Additionally, what gives you confidence that constant currency revenue growth should accelerate in Q4? What are your early reads as we approach the holiday season?

Let me quickly address the D2C question, and then Martin will elaborate on the second one. Looking at our recent quarters, we have generally been able to execute on our growth plan and our strategy, which is essentially to increase the D2C share over time. The last quarter was almost an outlier in the negative direction due to operational constraints. Now we're back to seeing the brand tapping into strength and converting that demand. Brand awareness was a significant driver, with the Olympics and Zendaya playing crucial roles across all regions. Comparing D2C growth in Europe versus the U.S., the levels are very similar, while APAC serves as a positive outlier due to success in Japan and China. We also experienced successful product launches contributing to our positive outlook, including notable responses to our innovation story, particularly with the Cloudboom Strike. Overall, our investments and improvements in D2C will support our Q4 outlook.

Apologies for interrupting, but our confidence extends to the holiday season. Momentum continues to build; for example, we just had record months in Asia Pacific this October. This momentum reflects positivity in China, with October being crucial leading into the Double 11 shopping festival. Our guidance reflects this positivity, enabling us to focus on our full-price premium business during the holiday season while preparing for our important Spring/Summer '25 launches, including the new Cloud 6. For the first time, we ended the season with 50 owned retail stores, ready to deliver a premium experience across all of them. This positive momentum also allows for investments into product innovation, sustainability, and technology—key pillars for future growth.

Your next question comes from Alex Stratton with Morgan Stanley.

Congrats on another outstanding quarter here. I wanted to focus on the inventory and supply chain constraints. When should those be mostly behind you? How will your channel prioritization change in 2025? Regarding inventory, is that where you want it from a level perspective? Any insights into your plans for next year would be helpful.

I’m happy to take that question. Looking back, we encountered multiple impacts limiting our ability to meet full demand, including inventory and warehouse constraints. We're proud of how our team has implemented measures to improve product flow, shifting volumes and inventory to our West Coast warehouse, using airfreight effectively, and actively managing our order book in collaboration with our wholesale partners. This has significantly improved delivery quality and our Net Promoter Score in both D2C and B2B. While these measures have had short-term effectiveness, we aim to develop a reliable supply chain and warehouse infrastructure supporting growth aspirations outlined at Investor Day. We seek to have two highly automated and reliable warehouses on the U.S. East and West Coasts. The team is focused on automation projects in Atlanta with an expected go-live in spring '25, ramping up volumes to create effective supply chain management.

Regarding our channel strategy for 2025, we will continue the journey outlined at Investor Day. We aim to grow our D2C share and expect to open 20 to 25 additional owned retail doors, allowing us to meet consumers more premiumly across the globe. This expansion will occur in all major geographies. Conversely, growth in wholesale will likely decrease slightly as we aim to strengthen existing partnerships rather than simply expanding our outlet count. Our efforts in apparel are very promising, with significant preorder confirmation for 2025, seeing our success in apparel reach its peak this October.

Your next question comes from Jay Sole with UBS.

Great. We talked a lot about innovation in the prepared remarks, with several new styles mentioned as well, including the upcoming Cloud 6. At the Investor Day a year ago, you mentioned at least seven franchises driving 5% of total sales. Can you talk about how much product assortment has helped create more diversification within the product lines? Any stats on how wide your SKU set is now compared to a decade ago?

Thanks for the excellent question. I'm happy to report that we’ve achieved the goal we laid out of not just being a one-trick pony. Now we consider ourselves more of a seven or eight trick pony, joking aside. These SKUs are significantly distributed across various sports and verticals. We are no longer just a running brand; we also maintain major business in training, tennis, and lifestyle. Our goal is to be the most premium sports brand. The Cloud 6 will deliver a superior product compared to Cloud 5. We're offering this at a $10 higher price point, aiming to capture more of the willingness to pay premium prices. Additionally, we won't rest on our laurels; we're excited about the upcoming launch of Cloud Zone on March 20, where Zendaya will introduce a lower silhouette geared towards a futuristic take on performance-inspired footwear.

Your next question comes from the line of Jim Duffy with Stifel.

This is Peter McGoldrick on for Jim. Just diving into the marketing strategy; you recently had a huge brand moment with the Paris Olympics and expanded your association with cultural icons. How should we think about the level and mix of brand marketing versus performance marketing going forward?

Thank you for the question. We wouldn't categorize it strictly as brand marketing versus performance marketing, as it's all one topic for us. The question truly is how we authenticate the products we create with consumers through the personalities we're partnering with. The collaboration of personalities like Zendaya and Roger Federer is indicative of this approach. You can expect us to continue in a similar way next year while sticking to our brand priorities of performance running, enhanced training, and our focus on becoming an outdoor brand. Additionally, we're emphasizing our head-to-toe brand identity, combining efforts with athletes and influencers. This reflects our ongoing execution strategy, and the Q3 results showcase that our approach resonates well with consumers.

Your next question comes from the line of Jonathan Komp with Baird.

Caspar, I want to follow up on the impressive publicity for LightSpray. How are you viewing innovation like LightSpray? Is it mostly an opportunity for raising consumer awareness, or do you see commercialization potential as well? Martin, if I may follow up regarding Q4 implied adjusted EBITDA. You've grown adjusted EBITDA margins throughout the year. Could you elaborate on the assumptions you're making for Q4?

Thanks, Jon. LightSpray isn't just a marketing story; it has the potential to truly disrupt footwear manufacturing. Recall that it involves a revolutionary material, a unique production technology bonding the upper and bottom in one automated step, and it significantly enhances sustainability. We can produce it nearshore, maintaining competitive costs in various global locations. Since the Olympics, we've focused on scaling LightSpray. Don't expect substantial market penetration in the next year or two, but we're exploring applications beyond performance footwear into casual wear and figuring out how to integrate several production units into a fully automated line.

To address your second question, during last year's Investor Day, we communicated midterm aspirations for gross profit and adjusted EBITDA margins, aiming for 60%+ gross profit margins and 18%+ adjusted EBITDA margins. We're extremely proud that our Q3 results validate those aspirations. We commit fully to a philosophy of durable growth, focusing on both top-line and profitability over time while driving additional investments. This approach will carry into our Q4 outlook. In terms of marketing, we have significant brand campaigns lined up, while anticipating increased D2C activity in Q4, corresponding with the holiday retail period. Collectively, we see our adjusted EBITDA at the high end of the previously communicated range of 16% to 16.5%, potentially even slightly above. We will refrain from prioritizing short-term moves, instead focusing on meaningful long-term investments.

Your next question comes from the line of Anna Andreeva with Piper Sandler.

Great. Let us add our congratulations for the quarter as well. I wanted to follow up on wholesale. Was the slight moderation there entirely a function of not having enough inventory, or were there other supply limitations? Did you quantify the value of volumes lost in the quarter? Additionally, regarding the Atlanta DC automation project, do you have any initial thoughts on the timeline and magnitude for FX benefits from that automation?

Let me clarify the situation with wholesale; one impact was indeed the store closures in Europe this year compared to Q3 last year, which had a negative effect. It's crucial to note that we're observing robust brand demand overall, which is represented well in our D2C growth rate. We've been monitoring sellout closely and are optimistic that our brand awareness initiatives will translate positively across wholesale channels. The sell-in number reported aligns with our expectations; we're committed to working with reliable partners and pursuing a careful door closure approach.

In terms of Atlanta, the team is on track to implement the automated solution in the first half of the next year, working diligently on that front. Once we have confidence in the solution's reliability, we can ramp up volumes and shift products back from the West Coast warehouse to the East Coast while also managing underlying business growth. We will provide a clearer outlook regarding distribution expenses in the Q4 call as we gain more insights. In the long run, the automated solution will incur a higher fixed cost base but will depend more on the volume driven through the warehouse. We expect to share better indications in terms of timing during our next call.

Your next question comes from Michael Binetti with Evercore ISI.

On the multi-year margin outlook, as we look at your framework for 2028, the plan was to drive about 100 basis points of EBITDA per year from the 15% baseline in 2023, increasing to 18%. After this year, you will only have 150 basis points, meaning about 75 basis points per year. Should we interpret this as a pull-forward of that expansion or can you still achieve 100 basis points annually with a potentially higher endpoint? Any insights on where you’re running ahead of plan approaching 15.5% this year? Moreover, regarding B2C, do you still anticipate that Q4 will be the strongest growth quarter?

To address your second question first, we expect overall net sales growth in the fourth quarter to surpass the third quarter's growth, though we did not specify a channel mix; the holiday season's optimistic outlook suggests strong sellout numbers. Regarding EBITDA, we’re very fortunate to be in a position to invest significantly in the meaningful initiatives that foster long-term brand growth, focusing on innovation and sustainability. While our strategy remains to increase EBITDA gradually over the next two years, the strength of our business model shows our robust performance.

Your next question comes from Janine Stichter with BTIG.

Congratulations! Just a follow-up on margins. Gross margins are tracking ahead of where we thought they would be, with stronger momentum in the DTC business. It sounds like there might be some airfreight tailwinds going into next year. Help us think about how to model medium-term gross margins. Are there any offsets to the tailwinds from channel mix or less reliance on airfreight? You mentioned some price increases; anything else we should consider as we forecast gross margin?

I'm pleased to address this. We believe we are in a largely undisrupted environment concerning global supply chains at the moment. Q3 indicates the brand's robust potential, and we see the 60% gross profit margin outlook as still valid. However, Q3 also demonstrates the brand's capacity when disruptions are minimal. The recent price adjustments, including the $10 increase for the Cloud, along with additional price modifications for next year, further position us securely against current discussions around tariffs. We maintain manufacturing economies of scale that could enhance sustainability, while the strong growth in the DTC channel is crucial for delivering on our high gross profit margins.

Your next question comes from Rick Patel with Raymond James.

I want to delve deeper into apparel. You noted growth constraints; could you specify anything besides the distribution center that impacted growth? In a broader context, is your assortment satisfactory regarding fit and style, enabling you to accelerate growth? If so, what does that mean for your channel strategy going forward?

We clearly indicated that supply constraints impacted Q3, but we see those easing. We're optimistic about our orders and interest for Spring '25. We conducted a comprehensive resizing exercise throughout our apparel lines, which ensures consistency in fit across our diverse customer bases in Europe, the U.S., and Asia. We're already observing positive results with decreased return rates, making repurchasing easier. As for channel strategy, our success at our retail locations indicates high apparel shares, ranging from 25% to 30%. This reaffirms that our owned retail is critical for establishing a premium apparel brand.

We have time for one more question, and that question comes from Dylan Carden with William Blair.

I'm curious about the running category. You've made efforts to streamline SKUs in that channel to be more compatible with competitors. How did that strategy perform with growth this quarter? Did the boost help uniformity in that area?

Thank you for your question. Running is incredibly important to us; runner counts are a vital metric for the company. We're closely measuring growth, and the product range is better distributed, enabling us to cater to different running styles effectively. We're pleased with the performance of the Monster franchise. The Cloudmonster shifted to the Monster 2, alongside the Hyper Monster, capturing the elevated consumer segment effectively. As Caspar mentioned, the launch of the Cloudsurfer Next has been tremendously successful, especially reaching younger audiences. Likewise, the Cloudrunner has resonated well and is among our strongest styles in running specialty. Overall, running continues to be a rapidly growing category for us.

Ladies and gentlemen, with that, that does conclude today's conference call. Thank you for your participation, and you may now disconnect.