Q4 2023 On Holding AG Earnings Call

Okay.

Unknown Executive: Good afternoon, good morning, and thank you for joining ON's 2023 fourth quarter and full year earnings conference call and webcast. With me today on the call are Executive Co-Chairman and Co-Founder David Allemann, CFO and Co-CEO Martin Hoffmann, and Co-CEO Marc. Before we begin, I would briefly remind everyone that today's call will contain forward-looking statements within the meaning of the federal securities law. 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 be different materially. Please refer to our 20F filed with the SEC earlier this morning for a detailed discussion of such risks and other issues. We will further reference certain non-IFRS financial measures, such as adjusted EBITDA and adjusted EBITDA margins. However, these measures are not intended to be considered in isolation or as a substitute for the financial information presented in accordance with IFR.

Good afternoon.

And thank you for joining on 2020, three fourth quarter and full year earnings conference call and webcast.

Today on the call our executive co Chairman and co founder, David Alibaba, CFO and co CEO, Martin Hoffman and co CEO Marc Mauer.

He was getting a briefly remind everyone that today's call will contain forward looking statements within the painting 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 might differ materially.

Please refer to our 20-F filed with the SEC earlier. This morning for a detailed discussion of such risks and uncertainties.

We will further reference certain non <unk> 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 high for us.

Unknown Executive: Please refer to today's release for reconciliation to the most comparable IFRS. 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.

Please refer to today's release for reconciliation to the most comparable measures.

We will begin with David followed by Martin bleeding 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.

David Allemann: Thank you, Jerrit, and welcome everyone to our fourth quarter and full year 2023 results call. I'm talking to you from On Life in Zurich, while my partners Marc and Martin are tuning in live from the New York Stock Exchange. I'm excited to tell you that 2023 has been another exceptional year for our brand and also a very significant revenue growth of 47% to 1.79 billion Swiss francs in 2020. This translates into even 55% growth on a constant currency basis and exceeds the expectations that we had for the year. It means that ON is capturing market share faster than competitors.

Thank you you are eating into outcome, everyone to our fourth quarter and full year 2023 results call.

I'm talking to you from all last year Zurich by My partners Martin Martin are tuning in live from the New York Stock Exchange.

I'm excited to tell you that 2023 has been another exceptional year for our brands.

Also very significant revenue growth of 47% to 1.79 billion Swiss francs in 2023.

This turns into even 55% growth on a constant currency basis and exceed the expectations that we had for the year.

It means that on is capturing market share faster than competitors.

David Allemann: I would also like to point out the gross profit margin of 59.6% on our journey to becoming the most premium global sports brand. Today, I would like us to speak about why ON is a performance sports brand that appeals to a far wider audience. As you know, the journey of honor is deeply rooted in our commitment to innovation, catering first to athletes and runners. In 2023, we witnessed our running products soar to new heights, further solidifying their dominant position in our portfolio. Let me share an example of this success with the Cloud Monster. Launched just two years ago, this running shoe has quickly ascended to be our highest absolute grossing franchise in 2023. But we don't pause here.

I would also like to point out the gross profit margin of 59, 6% on our journey to becoming the most premium global sports brands.

Today, I would like us to speak about why <unk> is a performance sports brand that appeals to a far by their audience.

As you know the journey of Amish deeply rooted in our commitment to innovation tasting firsts to athletes and dramas.

In 2023, B Beatenest hour running product sold to new Heights purchased solidifying their dominant position in our portfolio.

Let me share an example of the success with the cause monster.

Launch just two years ago, disrupting schuh has quickly ascended to be our highest absolute gross franchise in 2023.

But we don't close here.

David Allemann: Just two weeks ago, we unveiled CloudMonster 2. And in early April, we will launch the innovation-packed CloudMonster hybrid. This move not only amplifies the momentum in running but also introduces a range of options for our channel partners. Marc Turing is in our playbook. I would like to highlight that the success of the CloudMonster franchise is part of a broader narrative where seven of our franchises now contribute over 5% each to our growing top line. Besides the Cloud Monster, this also includes franchises like the Cloud Swift and the Cloud Runner in running.

Just two weeks ago, we unveiled the cloud monster tool and in early April we launched innovation packed cloud monster hyper.

These moves not only amplifies the momentum in running but also introduces a range of options for our channel partners.

Mark hearing AIDS in our playbook.

I would like to highlight that the success of the Clat Monster franchise is part of a broader narrative. There are seven of our franchisees now contribute over 5% each to our growing top line.

Besides the Monster is also includes franchises like the clouds lift and the clouds Rhonda in running the cloud noble as a running sneaker enter rupture franchise in Tennessee.

David Allemann: Cloud Nova as a running sneaker and the Roger franchise in tennis. We are expanding the strength and diversity of our innovation-driven portfolio like never before. The strength of our running innovation is showcased by Helno Beery scoring major marathon wins for On in our most advanced shoe technology. Making history in 2023, Helen became the first woman in 34 years to clinch victory at both the Boston and New York City Marathons in the same year.

We are expanding the strength and diversity of our innovation driven portfolio like never before.

The strength of our running innovation is showcased by Hell, No biery, scoring major marathon beans for on our most advanced <unk> technology.

Making history 2023 patent became the first woman in 34 years to claim victory at both the Boston and New York City marathons in the same year.

David Allemann: And let's not forget her stunning performance at the New York City Half Marathon, where she didn't just win, she shattered the course record. This isn't just a win for Helen, it's a testament to the On-Brand's growing influence. This is also clearly visible in the fast-growing share of onshrews on major running routes across the world. I'm especially proud of this stellar growth as it is the result of the passion and relentless execution drive of our team. We're beyond thankful for their enormous contributions and the infectious optimism they bring. They truly inspire me.

And let's not forget for a stunning performance at the New York City half Marathon.

She didn't just V shafted of course record.

This isn't just a bean for Helen it's a testament to the own brands growing influence.

This is also clearly visible in the fast growing share of onshore on major running routes across the world.

I'm, especially proud of this stellar growth.

It is the result of the passion and relentless execution drive of our team.

The P ons thankful for their enormous contributions and the infectious optimism they bring.

They truly inspire me.

David Allemann: I talked about the success of ON in running. Now, let's zoom out to see the bigger picture. As we reflect on the first post-pandemic year, let's look at the remarkable journey of one in the evolving sports and fashion landscape. We all know that the pandemic has been a catalyst for change, redefining lifestyles and fashion orders. We have been liberated to work more from home, introduce sports and movement into everyday life, and wear sportswear as the new uniform. Going way back, this revolution reminds me of Coco Chanel freeing women from corsets and introducing comfort and pants to the female wardrobe. Yes, I do need pants.

I talked about the success of <unk> in Ronnie.

Now, let's zoom out to see the bigger picture.

As we reflect on the first post pandemic here, let's look at the remarkable journey album, and Devolving sports and fashion landscape.

We all know that the pandemic has been a catalyst for change redefining lifestyles and fashion orcs.

We have been deliberate to work more from home introduce sports and movement to everyday and their sportswear Este new uniforms.

Going way back its revolutionary minds me of Coco Chanel, freeing women from core sets and introducing comfort and pads to the female wardrobe, yes patents.

David Allemann: As many of you will know, this happened in the early 20th century. Since then, technical fibers and new manufacturing methods in footwear and apparel have allowed sports brands to retire the military uniform and the classic dress as prime archetypes and inspiration for fashion. Out with the coat, formal jackets, leather shoes, and dresses.

As many of you will know this happened in the early 20th century.

Since then take 5% new manufacturing methods in footwear and apparel has allowed sports brands to retire day military uniforms, and the classic dress S Prime archetypes and inspiration for fashion.

Outweighs the coat formal checketts leather shoes into dress English sneakers, tights track pants, booties and technical jackets.

David Allemann: In with sneakers, tights, track pants, hoodies, and technical check. It's the next revolution. The last pivotal years have made it clear that sports are the new uniform, the new normal that will continue to transcend culture and fashion. Sports are not just an activity; they're a statement, a lifestyle, a new luxury for a generation, valuing movement and exploration over possession and status.

It's the next evolution the loss pivotal years made it clear that sports eastern new uniforms, the new normal that Vale continued transcend culture and fashion.

Sports is not just an activity, it's a statement of lifestyle and new luxury for a generation valuing movement into exploration over possession and status.

David Allemann: It follows this logic why fashion brand Loewe has partnered up with us to introduce technical sports footwear and apparel to their collection. The joint edition of the CloudTilt Sneaker has been a spectacular success, flying off the shelf. Our partnership with Loewe, rooted in creativity and innovation, continues to thrive across apparel and footwear and to elevate it as the most premium sports brand. It is also no coincidence that global fashion brands pivot to sign global sports stars as ambassadors to play in the live sporting arenas of the Super Bowl and the Olympics. When we invited Roger Federer to become a co-entrepreneur at ON a few years ago, it was done to build on the growing cultural relevance of sports and its most exceptional talent. I'm very happy that young tennis greats Igor Sviatek and Ben Shelton have since decided to join us. They are admired not only for their game but also for their personality.

It follows dislodge shake my passion brand glow Eva has partnered up with our stated use technical sports footwear and apparel to their collection.

Detroit edition of the cloud Tilled Sneaker has been a spectacular success flying off the shelves.

Our partnership with loyalty rooted in creativity and innovation continues to thrive across apparel and footwear and to elevate on S. The most premium sports brands.

It is also no coincidence that global fashion brands pivot to sign Global Sports stars as ambassadors to play in the live sports arenas After Super Bowl and Olympics.

When we invited rupture Roger Federer to become acquainted printer at all a few years ago. It was stone to build on the growing cultural relevance of sports and it's most exceptional talents.

I'm very happy that young tennis grade. So you guys should be uptake and Ben Shelton has since decided to join <unk>.

They are not only admired for their game, but also for that personality.

David Allemann: Their wins in the spectator sport tennis, fully outfitted in Ons Apparel, also elevate Ons Apparel to a new level of broad recognition. As ON is expanding its reach, the partnership with many of the world's best athletes will always root us in performance and sport. Because one thing is clear, ON is not a luxury fashion brand but a premium sports brand. Yet it happens that ON has been emerging as a new brand in sports right at the moment when sports is not the domain of weekend activities anymore. Instead, sport and movement are literally getting woven into the fabric of everyday life.

Their beans in the spectator sport tennis fully outfitted in all gear also elevate answer apparel to a new level of broad recognition.

As all is expanding its reach to partnership with many of the world's best athletes will always root us in performance and sports.

Because one thing is clear on these novel luxury fashion brand by the premium sports spread.

Yet it happens that all has been emerging as a new brand in sports right at the moment, where sports is not the domain of weakened activities anymore.

Instead sportage movement is literally getting bozeman into the fabric of everyday life.

David Allemann: This ties into OWN's mission to ignite the human spirit through movement, to not just dream the future someday but on most days. These are the days where our focus on performance, sustainability, and design perfectly aligns with the contemporary consumer's expectations. It's no surprise that On is gaining strong brand momentum with teenagers, according to a recent brand study. To connect to new consumers even more intimately, you will see us expanding OMS' global presence by opening an additional 100 OMS stores worldwide in the coming years. Believe me, this move isn't just about featuring our cutting-edge footwear. It's also a commitment to showcase on apparel and dress our community from head to toe. In 2023, our apparel line made significant progress. In our flagship stores in New York, Paris, and Shanghai, roughly one in six items sold is already fit the body, not the feet.

These tied into one submission to ignite the human spirit through movement, So not just dream to future Sunday, but on most days.

These are the days there our focus on performance sustainability and design perfectly aligns with the contemporary consumers expectations.

It's no surprise that all this gaining strong brand momentum with genes. According to a recent Brian study.

To connect to new consumers, even more intimately you will see us expanding our global presence by opening an additional wall Honda brand stores worldwide in the coming years.

Believe me this movie isn't just about featuring our cutting edge footwear. It's also a commitment to showcase on apparel and threats our community from head to toe.

In 2023, our apparel line made significant progress in our flagship stores in New York, Paris, and Shanghai, roughly one in six items sold if already fitting the body not defeat.

David Allemann: Now, let's look ahead to 2024. This will be an exciting year for the ON community and the Olympics in Paris. We are poised to demonstrate Ohm's Atlantic DNA.

Now, let's look ahead to 'twenty 'twenty four.

This will be an exciting year for the <unk> community and tolling picks in Paris.

We are poised to demonstrate almost plastic DNA.

David Allemann: Expect groundbreaking product innovation to show up at the Olympics. Up to a dozen athletes of the On Athletics Club will compete together with stars like Helen O'Biery and tennis world number one Ilga Schwier. Or, as the New York Times wrote in a recent feature headline about the all-athletics club, "The most impressive world championship team is in the country." From my opening, there are two key points to hold on to. Firstly, ON remains committed to being a performance sports brand at its core, dedicated to innovation and serving the needs of apps. Secondly, in today's world, sports gear is becoming the new uniform in footwear and apparel.

Expect groundbreaking on product innovation to show up at the Olympics.

Up to a Dawson athletes after only atlantic's cloud Bill compete together a stars like calendar Berry and tennis rolled number one you've got three attacks.

Or is the New York Times wrote in a recent feature headline about Y'all Atlantic Club.

The most impressive for a championship team isn't a country.

It's a brand.

From my opening there are two key points to old onto.

Firstly on remains committed to being a performance sports brand at its core dedicated to innovation and surfing the needs of athletes.

Secondly in today's World Sports gear is becoming the new uniforms in footwear and apparel.

Martin Hoffmann: As a leading premium sports brand, On is ideally placed to be a driving force in this significant cultural transformation. Let's continue to dream big, to push boundaries, and to innovate in this transformation of sports culture as the premium sports brand On. And with this, I'm passing the baton from Zurich to New York and to our co-CEO and CFO, Martin Hoffmann. Martin, please.

As the leading premium sports brand on is ideally placed to be a driving force in the significant cultural transformation.

Let's continue to dream big to push boundaries and to innovate in this transformation to sports culture.

Premium sports brand all.

And with this I'm passing the Baton from series to New York and to our co CEO and CFO Martin Hoffman.

Marty please.

Martin Hoffmann: Thank you very much, David, and hello to everyone on the call. We're very excited to be hosting today's call from the New York Stock Exchange. Being here brings back great memories of our listing event in September 2020. It fills us with an immense sense of pride to see what our team has achieved in the first two years since going public. We observe very strong growth, an incredible increase in brand awareness, and significant gains in market share nearly everywhere around the globe. Seeing with our own eyes, the fast-growing share of runners in on-product along the Bund in Shanghai a few weeks ago or when running through Central Park these past days, but also the increasing diversity and more younger fans wearing our products. And it's also extremely rewarding.

Thank you very much David and Hello to everyone on the call. We're very excited to be hosting today's call from the New York stock exchange being here bring spec rate memories from our listing event in September 2021.

It fills us with and the men sense of pride to see what our team has achieved in the first two years since going public.

We observed very strong growth incredible increase in trend awareness and significant gains in market share nearly everywhere around the globe.

Being with our own ice to fast growing share fondness and on product along the abundant Shanghai a few weeks ago when running through Central Park This cost base.

But also the increasing diversity and more younger fans varying our product is extremely rewarding.

Martin Hoffmann: On our journey towards building the most premium global sportswear brand, 2023 was another exceptional year. David highlighted some of the big achievements we were able to celebrate. All of this is reflected in our very strong financial risk. We significantly exceeded our expectations voiced at the beginning of the year and reached 1.79 billion Swiss francs in net sales, a 46.6% increase compared to 2020.

On our journey towards building the most premium global sportswear brand.

<unk> 23 was another exceptional year.

David highlighted some of the big achievements, we were able to set up right.

All of this is reflected in our very strong financial results.

We significantly exceeded our expectations voiced at the beginning of the year and reached 107 9 billion Swiss francs and net sales.

46, 6% increase compared to 2022.

Martin Hoffmann: It's worth reminding you that this includes considerable translation impacts from the strengths of the Swiss franc throughout 2020. On a constant currency basis, we are thrilled to say that ON grew by over 55%. As the most premium sportswear brand, our focus is on combining strong top and bottom line growth. In 2023, we will achieve this outstanding net sales growth while bringing efficiency and profitability to new heights. We significantly increased our cross-profit margin from 56 to 59.6% and our adjusted EBDA margin from 13.5% to 15.5%. At the same time, we have grown our D2C share from 36.4% to 37.5%, significantly optimized our inventory position, and achieved a positive cash flow of 163 million Swiss francs. The highest in the history of the brand.

It's worth reminding that this includes considerable translation impact from the strengths of the suites Frank throughout 2023.

On a constant currency basis, we are thrilled to say that on crew by over 55%.

As the most premium sportswear brand our focus is on combining strong top and bottom line growth in.

In 2023, we achieved this outstanding that sets growth, while bringing efficiency and profitability to new heights.

We significantly increased our gross profit margin from 56 to 59, 6% and our adjusted EBITDA margin from 13, 5% to 15, 5%.

At the same time, we have grown our D to T share from 36, 4% to 37.5% significantly optimized our inventory position and achieved positive cash flow of 163 million Swiss francs.

Highest in the history of the brand.

Martin Hoffmann: Thanks to our partnership with the best and most meaningful retail partners, net sales from the Wholesale Channel exceeded $1 billion. We also generated more than one billion sales in the Americas, and more than 1 billion cross-profits. Over 230 million visitors came to our website, a growth of 63% year-over-year. These successes belong to our Including retail, we have grown from 1,700 to over 2,400, now representing 94 nationalities in over 20 offices around the world. Our culture is at the center of our.

Thanks to our partnership with the best and most meaningful retail partners net sales from the wholesale channel exceeded 1 billion Swiss francs.

Also generated more than 1 billion sales in the Americas region and more than 1 billion gross profit.

Over 230 million visitors came to our website a growth of 63% year over year.

These successes belong to our team.

Including retail we have grown from 1700 to over 2400 people.

Now representing 94 nationalities in over 20 offices around devote.

Our culture is at the center of our success and our focus remains on building a high performing team centered around our mission.

Martin Hoffmann: And our focus remains on building a high-performance team centered around our mission. We are deeply grateful for all your great work and your passion. The strength of the brand and the momentum we have seen continued into the fourth quarter. Throughout the quarter, we observed very strong consumer demand across all channels. We had a very successful holiday while maintaining a high share of full price. Record high traffic to our website and stores around the world are a true testament. Strengths of the On Brand and Increased Global Awareness. As a result, we achieved the highest B2C share in the history of ONG. We are reporting our highest cross-profit margin since the IPO and an adjusted EPDA margin ahead of our own expectations. We definitely finished the year with great results.

We are deeply grateful for all your great work and to you our passion.

The strength of the brand and the momentum we have seen continued into the fourth quarter.

Throughout the quarter, we observed very strong consumer demand across all channels.

We had a very successful holiday season, while maintaining a high share of full price sales.

Record high traffic 12 website and stores around the world are a true testament to the strength of the on trend and increased global awareness.

As a result, we achieved the highest density share into history of one supporting our highest gross profit margins since the IPO and an adjusted EBITDA margin ahead of our own expectations.

We definitely finished the year with great momentum.

Martin Hoffmann: As most of you are aware, the constraints in our Atlanta warehouse back in Q3 2020 and the resulting shift of volumes to Q4 22 made for a very tough comparison quarter for our America's business. With this in mind, we are thrilled to have achieved 31% net sales growth on a constant currency basis. On a reported basis, reflecting the considerable ethics translation.

As most of you are aware the constraints in our Atlanta warehouse back in Q3, 2022, and the resulting shift in volumes to Q4 'twenty to make for a very tough comparison quarter for our Americas business in particular.

With this in mind, we are thrilled to have achieved 31% <unk> growth on a constant currency basis in the fourth quarter.

On a reported basis, reflecting the considerable FX translation impacts we reached global consolidated net sales of $447 1 million Swiss francs, and a 21.9% growth year over year.

Martin Hoffmann: We reached global consolidated net sales of $447.1 million and a 21.9% growth year over year. Compared to the exceptionally strong holiday season in 22, our D2C channel grew by 38.2% to 206.6 million square miles. Currency neutral, the growth was 49%.

Compared to the exceptionally strong holiday season in 'twenty, two our DTC channel grew by 38, 2% to $206 6 million Swiss francs.

Currency neutral growth was 14, 9% sales.

Martin Hoffmann: Sales from DTC accounted for 46.2% of net sales, versus 40.7% in Q4 2020. The significantly higher D2C share serves as a further validation of our D2C focused multichannel strategy and the exceptional momentum of our own. For the full year 2023, the resulting growth in our D2C channel was over 60% on a constant currency basis. We're excited to see the contribution of our own retail stores to this great event. During 23, we opened 15 new retail outlets, 10 of which are located in China.

Sales from D to C. Our calendars for 46, 2% of net sales in Q4 23.

It is 47% in Q4 22.

The significantly higher D to C share stuff as a further validation of our D to C focused multichannel strategy and the exceptional momentum of our own channels.

For the full year 2023, the resulting growth in our D to C channel was over 60% on a constant currency basis.

We are excited to see the contribution of our own retail stores to this great achievement.

Twenty-three, we opened 15, new retail stores 10 of which are located in China.

Martin Hoffmann: In Q4 alone, we opened six new stores in London, Miami, Paris, Beijing, Chengdu, and Guangzhou. And we also expanded our New York Lafayette. We're eagerly looking forward to the openings in the upcoming weeks and months. Personally, I'm very excited for our first store in my home country, Germany. A new 300-square-meter store in the center of Berlin is planned to open later this year.

In Q4 alone we opened six new stores in London, Miami, Paris, Beijing, Chengdu and Guangzhou.

We also expanded our New York Lafayette store.

We're eagerly looking forward to the opening in the upcoming beaks and months.

Personally I'm very excited for our first store in my home country, Germany.

Our new 300 square meter store in Descender Berlin is planned to open later this months.

Martin Hoffmann: But equally, for our recently opened store in Portland, the home of our brand. As anticipated, reflecting some of the comparison period then, but also accruing more modestly in the, Achieving 10.7% reported, or 19% consistent.

But equally for our recently opened store in Portland, the home of our plant in North America.

As anticipated, reflecting some of the comparison periods dynamics also grew more modestly in the quarter, achieving 10.7% reported or 19% constant currency growth.

Martin Hoffmann: Our wholesale partners observed strong sellout numbers at full price, both in the brick-and-mortar locations as well as online. Most of this volume had been shipped towards the end of Q3 in anticipation of a strong Q4. This is reflected in our combined wholesale growth for the second half of the year of 26.8%, equivalent to 36% on a constant current. In EMEA, as previously discussed, we're executing our strategy to fully emphasize the most premium and highest quality, reflected in the closure of around 200 doors in Central Europe that we deem non-strategic. These stores officially stopped receiving products as of Q1 2024 but had already reduced their orders in Q4'23 to some extent.

Our wholesale partners obsessed strong sell out numbers at foot price both in the freaking mortar locations as well as their online presence.

Most of this volume being shipped towards the end of Q3 in anticipation of the strong Q4.

This is reflected in our combined wholesale growth for the second half of the year of 26, 8% equivalent to 36% on a constant currency basis.

In EMEA as previously discussed we're executing our strategy to fully emphasized the most premium and highest quality cross.

Afflicting into closure of around 200 doors and central Europe that we deem non strategic.

These stores have officially stopped receiving product as of Q1 'twenty four.

But had already reduced their orders in Q4 'twenty three to some extent.

Martin Hoffmann: We will continue to manage our different channels very quickly. While we will be adding a lower number of incremental wholesale doors in the future than we have over the past years, we see significant potential for deeper penetration and strategic accounts, same-stock growth, and ongoing market check. We are very pleased to see how this opportunity materializes with the launch of some of our spring-summer 24 stars. The Cloud Tilt, initially launched in a limited collaboration with Loewe, is now more broadly available and has seen an incredible launch.

We will continue to manage our different channels very consciously.

While we will be adding a lower number of incremental wholesale doors into future didn't behalf over the past years, we see significant potential for deeper penetration of strategic accounts same store growth and ongoing market share gains.

We are very pleased to see how this opportunity materializes with the launch of some of our spring summer 'twenty four stocks.

Cloud tilt initially launched in a limited collaboration with new Eva is now more broadly available and has seen an incredible launch.

Martin Hoffmann: This completely new all-day silhouette is clearly complementary to our existing portfolio. And based on the feedback and demand from our partners, we are confident that our team has created another blockbuster. Let me move to our regional.

This completely new all day silhouette is clearly complementary to our existing portfolio and based on the feedback and demand from our partners. We are confident that our team has created another blockbuster in the making.

Let me move Toller regional performance.

Martin Hoffmann: As I just mentioned, our focus in EMEA on the more selective whole cell distribution is pain, but we saw increasing high-quality demand in our D2C channel, more than making up for the door closures on the whole set. In aggregate, net sales in EMEA grew by 22.9% to 112.5 million Swiss francs for the fourth quarter. On a constant currency basis, growth in EMEA was 26% versus the prior year. The Americas grew by 18.5% in Q4 to reach 300.6 million.

As I just mentioned our focus in EMEA are on the more selective wholesale distribution is paying off.

We saw an increasing high quality demand in our D to C channel more.

More than making up for the door closure on the wholesale side.

In aggregate net sales in EMEA grew by 22, 9% to $112 5 million Swiss francs for the fourth quarter.

On a constant currency basis growth in EMEA was 26% versus the prior year period.

The Americas grew by 18, 5% in Q4 to 326 million Swiss francs.

Martin Hoffmann: This marks the strongest quarter for the region in the history of ON and reflects the strong demand for our product. As an EMEA, we have seen a disproportionate growth of the D2 of the D2 of the D2 of the D2 of the D2 of the D2 of the D2 of the D2 of the D2 of the D2 of the D2 of the D2 of the D2 of the D2 of the D2 of the D2 of the D2 of the D2 of the D2 of the D2 of the D2 of the Our constant currency growth rate is at 29% for the quarter. We continue to be very encouraged by the underlying dynamics and the strength of the brand in the region. APEC reached net sales of 34 million Swiss francs, corresponding to a growth rate of 57.7%. APEC was again the most impacted by its translations.

This marks the strongest quarter for the region in the history of wrong and reflects the strong demand for our products.

As in EMEA, we have seen a disproportionate growth of the DTC channel.

While the reported growth includes nearly 11 percentage points of FX translation impacts as well as the constraints by the comparison period dynamics, our constant currency growth is at 29% for the quarter.

We continue to be very encouraged by the underlying dynamics and the strength of the Brent in the region.

APAC reached net sales of 34 million Swiss francs in Q4 corresponding to a growth rate of 57.7%.

APAC was again, the most impacted by FX translation on a constant currency basis gross into reach and has been over 75%.

Martin Hoffmann: On a constant currency basis, growth in the region has been over 75%. We're extremely excited about the very strong momentum in China and Japan, and in particular, our ability to gain share and awareness with the dedicated running. In the Shanghai Marathon held at the end of November, on ranked as the fifth of all brand in terms of presence on runners, serving as a demonstration of the brand's performance credibility in China. Turning to the performance background.

We are extremely excited about the very strong momentum in China, and Japan and in particular, our ability to gain share and awareness with the dedicated running community.

And the Shanghai Marathon held at the end of November on ranked as the fifth of all Brent in terms of presence on Runoffs sheet, serving as a demonstration of the Prince performance credibility in China.

Turning to the performance by product.

Martin Hoffmann: Apparel had been the focus of marketing campaigns in the fourth quarter. We are very pleased to see this has led to a fourth quarter growth rate of 60.1% to reach 18.4 million. In our D2C channel, the apparel crew increased by 110%... In APEC, the apparel share exceeded 10% in the fourth quarter.

<unk> had been into focus for our marketing campaigns into fourth quarter.

We are very pleased to see this has led to a fourth quarter growth rate of 61% to reach $18 4 million Swiss francs.

In our DTC channels apparel grew 100 at 10% in APAC, the apparel share exceeded 10% in the fourth quarter.

Martin Hoffmann: The strong demand provides a tailwind to 2024, where exciting new products, updated sizings, and more focus across all channels are expected to thrive first. We're thrilled to be launching our 10th apparel line later this year. We know that our most loyal fans have been waiting for this ever since Iga and Ben first set foot on the court in our gear last year.

The strong demand provides a tailwind to 2024 were exciting new products updated size things as more focus across all channels are expected to drive further success.

We're thrilled to be launching our tenants apparel later this week.

We know that our most loyal fans have been waiting for everything.

Ever since <unk> been fresh set foot on the court in our gear last year.

Martin Hoffmann: Net sales from shoes grew by 20.4% in Q4, reaching $425.7 million. David mentioned the unparalleled success of the cloud. It's no surprise that Loudmonster was also one of the significant growth contributors during the holidays. More broadly, we're thrilled to see our strategic priorities playing out, with a large part of growth being driven by our performance running. In performance all day, the Cloud Nova has established itself as a holiday season favorite, continuing to resonate very strongly with the younger D2C customers. Throughout the holiday season, we maintained a high share of food prices.

Net sales from shoes grew by 24% in Q4, reaching $425 7 million Swiss francs.

David mentioned, the unparalleled success of the clot monster.

It's no surprise that last month was also one of the significant growth contributors during the holiday season.

More broadly we're thrilled to see our strategic priorities playing out as intended with a large part of growth being driven by outperformance funding ranges.

And performance all day the clock Noah has established itself as the holiday seasons favorite continuing to resonate very strongly with the younger D to C customer in particular.

Throughout the holiday season, we maintained our high share of full price sales.

Martin Hoffmann: Owens' cross-profit margin in Q4 reached a very strong 60.4%, exceeding our midterm ambition of 60% plus and an increase of 190 basis points hereover. The increase versus the prior year was further driven by the higher D2C share, overall favorable freight rates, and limited use of air. SG&A expenses, excluding share-paid compensation in Q4, were 48.9% of total.

Once cross profit margin in Q4 reached a very strong 64%.

Over our midterm ambition of 60% plus.

And an increase of 190 basis points year over year.

The increase versus the prior year was further driven by the higher D to C share overall favorable freight rates and limited to use of airfreight.

SG&A expenses, excluding share based compensation in Q4 were 48, 9% of net sales up from 45, 1% in the same period last year.

Martin Hoffmann: [inaudible] The increase was primarily driven by planned, continued investment in brand building, which we had slightly scaled back in half year 222 to absorb some of the higher frames. In addition, DNA saw an increase as a percentage of net cells, largely due to the somewhat different cells facing in 2023. The resulting adjusted EBDA margin of 16.1% for the fourth quarter is well ahead of our latest expectations. For the full year 23, this brings our adjusted EBDA margin to 15.5%, an increase of 200 basis points year over year and significantly above our 15% target. This achievement further exemplifies our commitment to not only drive significant growth but also consistently increase our profitability and take steps towards our stated 18% plus midterm target. Ultimately, it shows the power of our premium brand. As a result of the temporary downward movement of the U.S. dollar-Swiss franc FX rate in late December, resulting in a 0.84 year-end Swiss franc per US dollar closing rate.

The increase was primarily driven by planned continued investment into brand building.

Which we had slightly scaled back in half year 222 to absorb some of the higher freight costs.

In addition, G&A saw an increase as a percentage of net sales largely due to the somewhat different sales facing in 2023 versus 2022.

The resulting adjusted EBITDA margin of 16, 1% for the fourth quarter is well ahead of our latest expectations.

For the full year 'twenty three this brings our adjusted EBITDA margin to 15, 5% an increase of 200 basis points year over year.

And significantly above our 15% target.

This achievement further exemplifies our commitment to not only drive significant growth, but also have consistently increased our profitability and take steps towards our stated 18% plus midterm target.

Ultimately it shows the power of our premium print positioning.

As a result of the temporary downward movement of the U S dollar Swiss franc FX rate in late December.

<unk> in the serum <unk> eight four year and Swiss franc per U S dollar closing rate.

Martin Hoffmann: The revaluation of our U.S. dollar balance sheet items led to the recording of unrealized FX losses in Q2, weighing on our reported net income and turning it into a loss for the three months. However, based on current spot rates, we expect a partial reversal of these Q4 losses and a corresponding gain in the course of 2020. For the full year, we are very pleased to have reached a record net income of $79.6 million, up from $57.7 million in the prior year, even with the significant unrealized FX charges to our reporter. A strong focus in 2023 was on improving and strengthening our balance. Most importantly, inventory and click.

The revaluation of our U S dollar balance sheet items led to the recording of unrealized FX losses in Q4.

Weighing on our reported net income and turning it to a loss for the three months period.

However, based on current spot rates, we expect a partial reversal of the Q4 losses and a corresponding gain in the course of 2024.

For the full year, we are very pleased to have reached a record net income of $79 6 million Swiss francs up from $57 7 million in the prior year, even with the significant unrealized FX charges to our reported profits.

A strong focus in 2023, both on improving and strengthening our balance sheet, most importantly inventory and liquidity.

Martin Hoffmann: To recall, due to the expedited recovery of the global supply chain, we started the year with an elevated inventory. Our focus throughout the year had been to maintain the inventory level while growing our. Our teams have done a tremendous job to finish 2023 with roughly the same number of items in our inventory as we had at the end of 2020. In the same time frame, our business has grown by 55%. This puts us in a great position heading into 2024 while still providing further opportunities to optimize and to drive additional operating cash flow over the coming quarters. We significantly reduced the level of capital expenditures from 22 to 25, both on an absolute basis as well as in percentage terms.

To recall.

Due to the expedited recovery of the global supply chain, we started into the year with an elevated inventory position.

Our focus throughout the year has been to maintain the inventory level, while crawling ourselves.

Our teams have done a tremendous job to finish 2023 with roughly the same number of items in our inventory we had at the end of 2022.

At the same time frame our business has grown by 55%.

This puts us in a great position heading into <unk> or.

While still providing further opportunities to optimize and to drive additional operating cash flow over the coming quarters and tiers.

We significantly reduced the level of capital expenditures from 'twenty two to 'twenty three.

On an absolute basis as well as a percentage of net assets.

Martin Hoffmann: While we had major investments in our office infrastructure in 2022, we invested 2.6% of sales in 2023, mainly in our retail expansion technology and some smaller. On an ongoing basis, we continue to expect CAPEX in the range of 3.5 to 4.5 percent. This includes high expenses in connection with our planned acceleration of retail storage. As a result of our strong profitability and the improved networking capital, we achieved an operating cash flow of 232 million Swiss francs and a net cash flow of 163 million Swiss francs. This is by far the strongest cash flow in the history of the world. At the end of the year, our cash balance stood at $495 million.

While we have major investments into our office infrastructure in 2022, we invested two 6% of sales in 2023, mainly in our retail expansion technology and some smaller offices.

On an ongoing basis, we continue to expect Capex in the range of three five to four 5% offsets.

This includes high expenses in connection with our planned acceleration of Frito store Rollouts.

As a result of our strong profitability and improved networking capital position, we achieved an operating cash flow of 232 million Swiss francs, and the net cash flow of $163 million in 2023.

This is by far the strongest cash flow in the history of the company.

At the end of the year, our cash balance stood at 495 million Swiss francs significantly up from $371 million at the end of 'twenty two.

Martin Hoffmann: Significantly up from 371 million at the end. Together with our 700 million credit line, we are very well financed to invest in our future growth and to triple. With that, let me turn to our outlook. In 2024, our fans can expect an incredible pipeline of new, exciting, and highly innovative products combined with big brand moments and some surprises that are not yet ready to be shared. And all of this delivered by an even stronger, more effective, more efficient, and more consumer-focused expertise. Our mission is very

Together with our 700 million credit line, we are very well financed to invest into our future growth.

And to trim big.

With that let me turn to our outlook for the year.

In 2024 hour fence can expect an incredible pipeline of new exciting and highly innovative products combined with big Brent moments and some surprises that are not yet ready to be shared.

And all of this delivered by an even stronger more effective more efficient at more consumer focused execution engine.

Our mission is very clear.

Martin Hoffmann: We want to be the most premium global sponsor. Over the past few years, we have learned a lot. Insights that give us confidence about the return on our planned investment. First up:

We want to be the most premium global sportswear Brent.

Over the past two years, we have learned a lot insights that give us confidence about the return on our planned investments.

For example.

Martin Hoffmann: How we convert brand awareness into sales and ultimately into our D2C business. Learnings about the right formats and layout for our own retail stores and a much deeper understanding of the unit economics and investment level, or How We Scale Apparel and Optimize Product Life Cycle. Overall, we have a lot more insights, conviction, and execution capability than we ever had before, and we are very clear on our priorities for 2020. Number one is capitalizing on the immense global momentum of our brand. While we will continue to grow at unprecedented rates at this scale, we know that the on-brand continues to have huge upside in terms of brand awareness and driving and growing cultural relevance within our core communities and people. David elaborated on the incredible opportunity our brand has to fully capture the merging of sports culture and fashion. 2024 will be a year to scale existing and new audiences globally with large brand moments. But at our core remains the running.

Probably convert prend awareness into cells and ultimately into our DTC business.

Learnings about the right formats and lay out our owned retail stores and a much deeper understanding of the unit economics and investment levels.

How we scale apparel and optimize product life cycles.

We have a lot more insights conviction and execution capability than we ever had before.

And we are very clear on our priorities for 2024.

Number one is capitalizing on the immense global momentum of our brand.

We will continue to grow at unprecedented rates at this scale, we know that the on trend continues to have huge upside in terms of brand awareness.

And to drive and CRO cultural relevance within our core communities and beyond.

David elaborated on the incredible opportunity our brand test to fully capture the merging of sports culture and fashion.

2024 will be a year to scale existing and new audiences globally with large Brent moments.

At our core remains the running community.

Martin Hoffmann: We believe that a road to the Paris Olympics offers a great opportunity to connect and build credibility as an innovation-driven, premium performance brand around the world. [inaudible] As mentioned, we certainly have a few surprises up our sleeve. Priority number two is apparel.

We believe that the road to the Paris Olympics offer a great opportunity to connect and build credibility as an innovation triptan premium performance brand around the globe.

As mentioned, we certainly have a few surprises up our sleeves.

Priority number two is apparel.

Martin Hoffmann: During the last one and a half years, we made huge steps in creating an exciting apparel product pipeline and, at the same time, a dedicated, powerful apparel organization. Recent demand from our partners for our updated styles has been higher than our already ambitious expectations. So much so that we had to increase production to fill the growing demand. We are extremely excited to kick off our apparel in tennis and training, which will allow us to speak to new audiences and launch our first category. At the same time, we will offer our running community exciting innovations at the intersection of performance, design, and sustainability. Priority number three and closely linked to our publication is our own research.

During the last one and a half years, we made huge steps and create an exciting a pallet product pipeline and at the same time, a dedicated powerful apparel organization, but they are not.

Recent demand from our partners for our updated styles has been higher than our already ambitious expectations.

So much so that we had to increase production to fill the growing demand.

We're extremely excited to kick off our apparel and tennis and training, which will allow us to speak to new audiences and apparel trusts categories.

At the same time, we will offer our running community exciting innovations at the intersection of performance design and sustainability.

Priority number three and closely linked to our apparel vision is owned retail.

Martin Hoffmann: In 23, we have validated and fine-tuned our story. From New York to London to Tokyo, our fans are lining up in front of our stores. Showing the draw of our brand and our premium in-store. 2024 will be the year to expand globally with more stores in key cities in Europe, North America, and China, but also the first stores in Latin America, Australia, and possibly in the Middle East. Our most premium channel not only supports our hog quality growth but manifests our premium positioning and overall price, bringing on board a large number of new frontline ambassadors.

In 'twenty three we have validated and fine tuned our store concept from the Europe to London to Tokyo offense are lining up in front of our stores.

During the trough of our friends and our premium in store experience.

2024 will be the year to expand globally with more stores in key cities in Europe, North America and in China, But also first stores in Latin America, Australia, and possibly in the Middle East.

Our most premium channel not only supports our how quality crows, but manifests our premium positioning and overall price stability.

Bringing on board, a large number of new frontline ambassadors to bring our stores to life in an authentic way that represents our culture and our values is one of the elements are most looking forward for this year.

Martin Hoffmann: To bring our stores to life in an authentic way that represents our culture and our values is one of the elements I'm most looking forward to this year. Priority number four is to elevate the power of our multichannel. The ever-growing awareness and strong demand for the brand will mean that our D2C will continue to capture a disproportional share of our growth. This is further validated by the strong start to the year of our e-comm and own retail stores, outpacing our wholesale competitors. Our significantly optimized inventory position will allow us to control the supply into the right channels and the right partners even more consciously. In 2023, we increased our footprint in key global retail partners like JD, Dix, and Offline.

Priority number four is to elevate the power of our multichannel strategy.

The ever growing awareness and strong demand for the Brent will mean that our D to C. We continue to capture a disproportionate share of our growth this year.

This is further validated by the strong start into the year of our E com and owned retail stores outpacing our wholesale growth.

Our significantly optimized inventory position will allow us to control to supply into the right channels and the right partners even more consciously.

In 2023, we increased our footprint in key global retail partners like JD, Dick's or footlocker.

Martin Hoffmann: We are very pleased with how this has driven high quality and strong holds across last year. At the same time, considering the great collaborations and very positive feedback and pre-orders, we see significant opportunities for the on-brand to increase shelf space and same-store quality within many of our wholesale partners. In core markets like the US and Germany, we have the right part. Can we expect to see less incremental door expansion in 2015?

We are very pleased with how this has driven high quality and strong wholesale growth last year.

At the same time, considering the correct collaborations and very positive feedback on three of our tests, we see significant opportunities for the <unk> brand to increased shelf space and same store growth within many of our wholesale partners.

In core markets like the U S and Germany, we have the right partners and we expect to see less incremental door expansion in 'twenty four.

Martin Hoffmann: At the same time, we have significant opportunities to increase our wholesale presence in some of our less established markets, which will drive additional revenue. Behind all of these priorities is the common thread to take the next step towards our vision, while always being thoughtful about focusing on world-class execution and long-term success. Before we come to the numbers, let me quickly remind everyone of our guidance. In providing guidance, it's always our goal to ensure that we share a common understanding of how we see our business and how we measure our success and progress. As you know, we always focus on the long term and the achievement of our full years, and will therefore continue to refrain from providing quarterly guidance. However, when I provide guidance for Q1 24 and, this can be considered an exception to this rule, given we are already heading towards the end.

At the same time, we have significant opportunities to increase our wholesale presence in some of our less established markets, which will drive additional tour expansion.

Yeah.

Behind all of these priorities is the common threat to take the next step towards our vision, while always being thoughtful about focusing on world class execution and the long term success of one.

Before we come to numbers, let me quickly remind everyone of our guidance philosophy.

And providing guidance, it's always our goal to ensure that we share a common understanding of how we see our business and how we measure our success and progress.

As you know, we always focus on the long term and the achievement of our full year aspiration and will therefore continue to refrain from providing quarterly guidance.

When I provide guidance for Q1, 'twenty four and a bit this can be considered an exception to this rule.

Given we are already heading towards the end of the quarter.

Martin Hoffmann: Considering the large impacts from FX translations we have seen in 2023 and expect to remain over the course of 2024, we will begin to refer to a constant currency growth rate in our stated net sales expectations. This will ensure we stay focused on the things that we can control and have full accountability over elements of our business that we deem to be the primary measures of success by removing some of the noise of translation. Now,

Considering the large impact from FX translation, we have seen in 'twenty, three and expect to remain over the course of 'twenty four.

We'll begin to refer to our constant currency growth rate in our stated net set expectations.

This will ensure we stay focused on the things that we can control and have full accountability of elements of our business that we deemed to be the primary measure of success by removing some of the noise of translational spanx.

No.

Martin Hoffmann: At Investor Day back in October, we shared our aspiration to grow at 26% CAGR throughout fiscal year 2020. Our aspiration for 2024 is even higher than that, and we expect to achieve a constant currency growth rate of at least 30%. Considering the Swiss franc strength, this translates to reported Swiss franc net sales of at least 2.25 billion at current spot prices.

At the Investor Day back in October we shared our aspiration to grow at a 26% CAGR throughout fiscal year 2026.

Our aspiration for 2024 is even higher than that and we expect to achieve constant currency growth rate of at least 30%.

Considering the Swiss franc strengths. This translates to reported Smiths Frank net sales of at least 2.25 billion at current spot rates.

Martin Hoffmann: Within this, the FX translation will be more pronounced in the first half of. For Q1, we are seeing strong demand, but we are also compounding against the strong wholesale performance in Q1 2021, driven by the initial expansion into some of the larger. As a result, for Q1 specifically, we expect a significantly increased B2C share and to achieve constant currency net sales growth of 26%, translating into reported Swiss francs net sales of 495 In 2023, we have already demonstrated that our brand is set up to achieve premium status. We currently anticipate a cross-profit margin of around 60% in line with our mid-term target. This serves as a basis to continue on our path towards the adjusted EBDA margin target of 18% plus by 2020. For 2024, we will continue to invest to drive long-term durable growth. While we expect to further increase or adjust the DBDA margin to 16 to 16.5%. Beyond this, we will maintain our focus in 2024 on further optimizing our inventory and networking capital position, and with that, we expect continued strong positive growth. To conclude,

Within this the FX translation will be more pronounced in the first half of the year.

For Q1, we're seeing strong demand, but we also compounding against the strong wholesale performance in Q1 dollars 23.

Driven by the initial expansion into some of the larger key accounts.

As a result for Q1, specifically, we expect a significantly increased DTC chair and to achieve constant currency net sales growth of 26% translating into reported Swiss francs net sales of $495 million.

In 2023, we have already demonstrated that our brand is set up to achieve premium margins.

We currently anticipate the cross profit margin of around 60% in line with our midterm target.

This serves as a basis to continue on our path towards the adjusted EBITDA margin target of 18% plus by 2026.

For 2024, we will continue to invest to drive long term durable growth, while we expect to further increase our adjusted EBITDA margin to 16 to 16, 5%.

Beyond this we will maintain our focus in 2024 on further optimizing our inventory and networking capital position and fits that expect a continued strong positive cash flow.

To conclude.

Martin Hoffmann: We ended the year with a lot of tailwind and opportunities in all parts of the world. The demand for on-trend remains very strong. Exciting product launches and big brand moments are in the making. We have more capabilities to execute on our strategic plan than ever before, from retail to apparel, from e-com to operations. And we have a great team in place, ready to dream on.

We ended the year with a lot of tailwind and opportunities in all parts of the business.

The demand for the on trend remains very strong.

Exciting product launches and big Brent moments are in the making.

We have more capabilities to execute on our strategic plan than ever before from retail to apparel from E com to operations.

And we have a great team in place ready to dream on.

Martin Hoffmann: We look forward to another great year. A big thank you to all of you for being a part of our journey. We really appreciate it. And with that, David, Marc, and I would like to open up the session to your questions. Operator, we are ready to begin the Q&A. As a reminder, if you would like to ask a question, please press star followed by the number one on your telephone keypad. We also ask that you limit yourself to one question. Your first question comes from the line of Aubrey Tianello from BNP Paribas. Please go ahead.

We look forward to another great year.

Big Thank you to all of you for being a part of our chutney be really appreciate it.

And with that David Mark and I would like to open up the session to your questions. Operator, we are ready to begin the Q&A session.

As a reminder, if you would like to ask a question. Please press star followed by the number one on your telephone keypad. We also ask that you limit yourself to one question. Your first question comes from the line of operate P&L, though from BNP Paribas. Please go ahead.

Aubrey Leland Tianello: Hey, thanks for taking the question. Wanted to start out with the revenue guide and the guidance for 1Q revenue growth in the context of the full year. Appreciate some of the color you already gave, Martin, on why we should expect an acceleration later. And I know you don't typically guide by channel by quarter.

Hey, Thanks for taking the question.

Wanted to start out with the revenue guide and the guidance for <unk> revenue growth and the context for the full year.

I appreciate the color you already gave Martin on why we should expect that acceleration later.

And I know you don't typically guide by.

By channel by quarter.

Martin Hoffmann: But given the realignment and wholesale that's going on in EMEA and the year over year comparisons that you referred to, it would be great to get a little more color on what the expectation is for Wholesale in OneQ and should we maybe anticipate something similar to the fourth quarter? This is a bit in a bigger context. For us, we're very closely focused on sell-out, and we're seeing that demand is much, much higher than supply to the channel, which is great, which is where we want to be as a premium brand. And when you look at Q3 and Q4 last year, you basically saw that Q3 in terms of currency had roughly 55% growth, and Q4 roughly 20% growth. So on average, this gives a roughly 35% selling growth into wholesale, and I think this is a meaningful number to look at. Now, when we look at EMEA, we're seeing the door closure impact.

But given the realignment in wholesale that's going on in EMEA.

Year over year compares that you referred to would be great to get a little more color on what the expectation is.

For wholesale and <unk> and should we maybe anticipate something similar to the fourth quarter.

Yeah.

Yes.

In the bigger context in the bigger context is for us.

Very closely focused on sell out and we're seeing that demand is much much higher than 10 supplying to the channel, which is great, which is where we want to be as a premium brand.

And when you look at Q3 and Q4 last year. Then you basically started Q3 on a constant currency had roughly 55% growth in Q4, roughly 20% growth.

So on average this gives a roughly 35% selling growth into wholesale and I think this is.

A meaningful number to look at now when we look at EMEA. So we're seeing the door closure impact and in Q1 is a specifically high so we roughly have a 9% overall impact on EMEA number in Q1 and 13% roughly for wholesale. So this is really.

Martin Hoffmann: And in Q1, this is specifically high, so we roughly have a 9% overall impact on the EMEA number in Q1, and 13% roughly for wholesale. So this is really the door closures being pronounced in this quarter, and then it will level out more around 5% of the wholesale number. Great, thanks.

The door closures being pronounced in this quarter and then it will level out more around 5% of that number.

Great. Thanks, and if I could just ask a quick follow up I think the midterm target for <unk>.

Martin Hoffmann: And if I could just ask a quick follow-up question, I think the midterm target for own store openings is about 20 to 25 per year. Is that what we should expect to see in 2024? Or does it sort of ramp toward that rate later?

One store openings is about $20 25 per year.

What we should expect to see in 2024 does it sort of ramp towards that rate later.

Martin Hoffmann: Yeah, so including China, we're looking at roughly 17 to 19 retail locations that we're opening in 2024. But, as we state every single time, it's very important that we have some flexibility. This is not just about the absolute number; it's about getting the right location and the right size to reach the right consumers. But if you consider roughly 20 stores in 2024, then this is not a bad number. Thank you. Your next question comes from the line of Alex Stratton from Morgan Stanley. Please go ahead. Hi, this is Chad Burnell on behalf of Alex Straton.

So, including China, and we're looking at roughly 17 to 19.

Retail locations that were opening in 2024, but as we are stating every single time that it's very important that we have some flexibility. This is not just about the absolute number it's about getting the right location at the right size to reach the right consumer, but if you consider roughly 20 stores in 2024 languages.

It's not a bad number.

Got it thank you.

Your next question comes from the line of Alex Stratton from Morgan Stanley. Please go ahead.

Hi, This is Chad Bert now on for Alex straight in first.

Chad Burnell: First, for me on the full-year guide, can you just talk a little bit more about some of the assumptions you've made on the DTC and wholesale side as it relates to building to your full-year number for 2024? Yeah, I'm very happy to take this. So we laid out our plan at investor day, and we said we believed in the multi-channel strategy. So this is Ecom, retail, and our wholesale partners. And we want to grow in a meaningful way across all the different channels. At the same time, we always said that we expected an increase in our D2C share, and we proved that again last year, and especially in the fourth quarter. And also, our communication now, what we are seeing in the first quarter, shows the strength that we have in our direct channel, be it retail, be it e-commerce. We'll continue building our capabilities there. We will significantly invest in our technological capabilities.

First for me on the full year guide can.

Can you just talk a little bit more about some of the assumptions you've made on the DTC and wholesale side as it relates to building to your full year number 2024.

Yeah.

Yeah.

Very happy to take this.

So we laid out our plan in the Investor Day, and we said we believe in the multichannel strategy. So this is E com retail and our wholesale partners and we want to grow in a meaningful way and all the different channels.

The same time.

We always said that we expect an increase of our D to C share and we have proven that again last year and.

Especially in the in the fourth quarter and also our communication of what we are seeing in the first quarter shows the strength that we have been in our direct channel be it retail be at equal will continue building our capabilities. There we went significantly invest in our tech capabilities. We just spoke about the retail.

Martin Hoffmann: We just spoke about retail expansion, and we see that high-quality demand coming into the channel. So we have strong confidence that we will continue seeing an increase in our D2C share. And to the point that Marc just mentioned, that channel will not be affected by the comparisons that we have in wholesale, where we have the impact of the expansion into new doors, but we maintain a high sellout number and basically high demand in the channel. So it will be in focus, and it will drive sales beyond the guidance that we give for the whole business. And yeah, it remains our closest and most premium touchpoint. Great, thanks.

Expansion, and we see that high quality demand coming into into the channel. So we have a strong confidence that we will continue seeing an increase in our D to C share and to the point that that Mark just mentioned the channel would be.

Basically not impacted by by the comparisons that we have been in in wholesale where we have the impact from the expansion into new doors, but.

But we maintain a high sell out number and basically a high demand in the in the channel. So it will be and focus and it will drive.

Beyond the guidance that we gave for for the whole business.

And.

Yeah.

It remains our closest and most premium touch point with the customer.

Martin Hoffmann: And then just a quick follow-up for me. So on order book strength in the first half of 2024, your commentary last quarter was a bit more upbeat than peers, and it seemed like you were seeing some strong demand signals when you reported 3Q. So just wondering if you're seeing any softening there or potentially adopting a more cautious outlook that's a bit more in line with what we've seen from some of your peers. I think we have seen really strong demand in the holiday season. We already knew quite a lot at the time when we communicated it last time.

Great. Thanks, and then just a quick follow up for me.

So on order book strengthen the first half of 2020 core your commentary last quarter was a bit more upbeat than peers and it seemed like you were seeing some strong demand signals. When you reported three Q. So I'm just wondering if youre seeing any softening there or potentially adopting a more cautious outlook.

That's a bit more in line with what we've seen from from some of your peers.

Okay.

No I think we.

We have seen really strong demand in the in the holiday season.

We knew already quite a lot at the time when we when we communicated at last time. It was a very promotional environment, we state a full price.

Martin Hoffmann: It was a very promotional environment. We stayed full price with a high share. This is also reflected in our strong margin, and so we are very happy. And what we really see, and we mentioned that in the call, our retail partners and our D2C channels have seen very strong growth, and it's also not a surprise that there is probably some competition that we see in the online channel when it comes to some of our key accounts that are driving significant holiday business as well. So that's something to factor in.

It was our highest share does this also reflected in our strong margins.

And so we are we're very happy on what we really see is and we mentioned it in the call.

Our retail partners in our DTC channels have seen a very strong growth and it's also not a surprise that there is probably some some competition that we see in the online channel when it comes to some of our key accounts that are driving a significant holiday business as well.

So that's something to factor in but and again for us it's about reaching the right customer with the right product.

Jonathan Robert Komp: But in the end, for us, it's about reaching the right customer with the right product. So if we look at the overall demand that we saw in the holiday season, this was clearly very, very strong and above the outlook that we have given where we see growth for the business. Ladies and gentlemen, as a gentle reminder, please limit yourself to one question. Your next question comes from the line of Jonathan Komp from Baird. Please go ahead. Yeah, hi, thank you. Good morning or good afternoon.

So if we look at the overall demand that we have seen in the in the holiday season. This was clearly very very strong and above the.

The outlook that we have given where we see the growth for the business in the future.

Ladies and gentlemen at the terms of a reminder, please limit yourself to one question. Your next question comes from the line of Jonathan Komp from Baird. Please go ahead.

Yeah.

Yeah, Hi, Thank you good morning or.

Good afternoon, I wanted to follow up on that for your guidance if I could ask maybe a broader question just the fact that the constant currency growth of 30% is above the long term CAGR you outlined could you maybe just touch on the factors that give you confidence of projecting above your long term targets, especially since there is some.

Martin Hoffmann: I want to follow up on the full year guidance. If I could ask maybe a broader question, just the fact that the constant currency growth of 30% is above the long-term CAGR you outlined. Could you maybe just touch on the factors that give you confidence of projecting above your long-term targets, especially since there is some acceleration in constant currency growth after the first quarter? And could you just touch on, you know, the Olympics, what you're hoping to accomplish and what sort of a moment that could represent for the brand? Thank you. Thank you, Jonathan.

Acceleration in the constant currency growth after the first quarter and could you just touch on the Olympics here, what what you're hoping to accomplish and what what sort of the the moment could represent for the brand. Thank you.

Thank you Jonathan that's a long one question.

Martin Hoffmann: That's a long question, but we're super excited to talk about the Olympics, too. I think we're – what gives us confidence? One is we're extremely closely watching sell-out in our key channels, so wholesale partners, but also retail and our own e-com. What we're seeing in terms of demand going in makes us very, very positive. And again, I think we already spoke about it, so we're really where we want to be in terms of being able to limit product supply to exactly the right channels, keeping the brand premium and catering to that demand. Then the second element that makes us very positive is how it's reflected in the product.

We're super excited to talk about the Olympic steel.

Where we are.

So what gives us confidence one is extreme.

Extremely closely watching sell out in our key channels, so wholesale partner, but also.

Retail and our own E comm on Bob we're seeing in terms of demand going in.

It makes us very very positive and again I mean, I think we already spoke about it. So we're really where we want to be in terms of being able to limit the product supply to exactly the right channels, keeping the brand premium in catering to that to that demand.

And then the second element that makes us very positive is that how how it's reflected in the product. So.

Martin Hoffmann: So apparel is growing when we look at the future and pre-orders that we have on the book. So, for example, pre-orders for Fall-Winter 24 in apparel are more than doubling. And the sell-out that we see, how sizing is being – the new sizing is being adopted by the market, all makes us feel very positive about how the category is growing. And then we also see that our bread and butter, which is really the core running market, we continue to gain share in running specialty but also in the PSG channel like Dix. And I think one element there is maybe you followed the launch of the Cloud Monster 2, and the Cloud Monster 2 is very clearly segmented more into the channels that cater to the runner, and it's doing extremely well, and it's not really cannibalizing the CloudMonster One a lot.

Apparel is growing when we look at future and preorders that we have on the books for example, preorders in the profile of <unk> 24 in a parallel more than doubling.

The sellout WC, how sizing and they speak the new siding is being adopted by the market. All makes us feel very positive about how the category is growing and then we also see that our bread and butter, which is really the core running market. We continued to gain share in run specialty but also in the in.

The PFT channel like Dick's and and I think one element there is.

And maybe a follow up the launch of the cloud Monster too and the club Monster too.

Very clearly segmented more into the channels that cater to the runner and.

It's.

Doing extremely well and it's not really cannibalizing the club monster one a lot so sell both products together have grown and then also.

Martin Hoffmann: So both products together have grown. And then also, we will launch CloudMonster Hyper. And that one is then even the most elevated products. And so like that, you can basically see how the product segmentation is working out. And we can reach more consumers with with more segmented products. And then, Probably lastly, the pre-orders that we have on footwear into the year 24, which are partially forecasts that we do together with accounts, but partially hard pre-order is above guidance. And this gives us confidence that for 24 but also beyond, we are ahead of the LRP growth projections on a constant currency basis. And then, very quickly, on the Olympics. So, I'm super excited. I'm going from New York to Paris in a few months.

We will launch cloud once they're hyper and everyone extended even most elevated product and so like that you can basically see how the product segmentation is working out and we can reach more consumers with more segmented products and then.

Probably lastly, the.

The preorders that we have on footwear and into the into the year 'twenty, four which which are partially forecast that we do together with accounts, but partially hard preorder is above guidance and and this gives us confidence that 424, but also beyond and we already are ahead of the LLP growth protections on and on.

On a constant currency basis, and then very quickly on the Olympics.

So super excited and going from New York to Paris, and a few months I think we will we will really showcase corrupt innovation, so bringing on as an innovative premium brand to the market. So we'll be there with with their own heart with the specific location of our you'll be able to witness some.

Martin Hoffmann: I think we will really showcase product innovation. So, we will bring on as an innovative premium brand to the market. So, we'll be there with On Hub, with a specific location where you'll be able to witness some of the latest product innovation. Part of it, you could already see at the Barcelona Marathon, where Tadej Abraham won a new course record and Swiss record in the CloudBoom Strike. And you'll see an even more elevated product from what he was wearing in Barcelona.

Our latest product innovation part of it you could already see in the Barcelona Marathon, where today's Alburnum won a new course record Swiss records in the cloud boom strike and you'll hear even more elevated product from what he was wearing in Barcelona, and you'll also be able to see our latest apparel and collection and how it connects.

Martin Hoffmann: And you'll also be able to see our latest apparel collection and how it connects with not only Swiss athletes but all the athletes and the non-athletes that will be there. And then, finally, we are 99% sure that we'll have our Champs-Élysées store open by then. So, you will be able to see On in one of the most prominent streets in the world, and we can bring the brand in front of even more consumers around Paris. A long answer, but it was a long question.

Two the Swiss at least but all of the athletes and the one at least that will be there and then finally and we are 99% sure that we'll have our shortly say store opened by then and so you will be able to see on in in one of the most prominent streets in the world and we.

Can bring the brand in front of even more consumers around Paris Olympics long answer everybody was a long question. So thanks for bearing with me.

Jay Daniel Sole: So thanks for bearing with me. Very good. Thank you. Your next question comes from the line of Jay Sole from UBS. Please go ahead.

Very good thank you.

Your next question comes from the line of Jay sole from UBS. Please go ahead.

Martin Hoffmann: Great, thank you. I have one question, but it has two parts. First, on the gross margin guide for approximately 60% this year, can you just talk about some of the drivers to get from, you know, the 59.6 level of 23 to the 60% for 24? And then just to follow up on the Olympics question, how do you see marketing as a percent of sales developing this year in fiscal 24, given it is, you know, an Olympic year and probably a lot of marketing spend around that event? Thank you.

Great. Thank you I have one question, but two parts first on.

On the gross margin guide for approximately 60%. This year can you just talk about some of the drivers to get from 59 612 of 23 to the 60% for 24 and then just a follow up on the Olympics question, how do you see marketing as a percent of sales developing this year in fiscal 'twenty four given that as you know an Olympic year, and probably a lot of marketing spend around that event.

Yeah.

Martin Hoffmann: I'm happy to take the margin question. So we always said that we were running our business at a 60% margin. We are premium brands. We have premium pricing, and we have the power. We maintain that high share of full price sales. And 2023 was the first year where we were able to show almost the full potential of the cross margin. There were still some headwinds, especially in the beginning of the year.

So we're happy to take the margin question. So.

We always said that we are running our business.

At the 60% margin.

We.

Our premium brands, we have premium pricing and we have the power.

We maintain that high share of food price Delta.

And.

2023 was the first year, where we were able to show almost the full potential of the gross margin.

There were still some headwinds, especially in the beginning of the year you will remember from basically the.

Martin Hoffmann: You remember basically the additional costs that we had from the inventory. But for 2024, the key driver will be a higher D2C share. So this is the key underlying factor. We are not planning significant price increases in 2024. We will be increasing prices on some of the updated models. So you have seen this on the CloudMonster. But the CloudMonster 2 is at a $10 higher price point than the CloudMonster 1.

The additional costs that we have from from the inventory but.

For 2000 and for the key driver would be a higher D to C share so to say that the key underlying factor.

We are not planning significant price increases in 'twenty four we have we will be.

Increasing prices on some of the updated model. So you have seen this on the on the cloud monster, but the cloud amongst the two is that a $10 higher price point and the cloud months that one.

Martin Hoffmann: But besides that, there will not be a meaningful pricing round this year. That's something that we are looking at. And on marketing spend, I think just considering the Olympics for us would probably be the wrong thing to do. I think what we're trying to do is increase brand awareness and consideration in a meaningful way over time in the key markets. And I think Martin has elaborated on it in the prepared remarks, we feel there are a lot of opportunities to continue to increase brand awareness, especially in already sizable markets like the US. So we will use the Olympics to basically tell the Olympic story through our eyes and the eyes of the athletes, which is very much around kind of competing together versus competing against each other.

But besides that there will not be a meaningful pricing round. This year, that's something that we are looking into into 2025.

And on marketing spend I think just considering the Olympics for us would probably be the wrong thing to do I think what we're trying to do is increase brand awareness and consideration in a meaningful way over time in the key markets and.

Martin has elaborated on it in the in the prepared remarks, we feel there's a lot of opportunity to continue to increase brand awareness, especially in already sizable markets like the U S. So we will use the Olympics to basically tell the Olympics stories through our eyes Ntis.

Fleets, which.

Which is very much around kind of competing together versus competing against each other and as already said, we feel it's a it's a great window to bring product innovation to the market and so it's more of a story that we can use to tell us but in terms of absolute spending this will continue to be around 12%.

Martin Hoffmann: And as we've already said, we feel it's a great window to bring product innovation to the market. And so it's more of a story that we can use to tell. But in terms of absolute spending, this will continue to be around 12%. And really, with a focus on increasing brand awareness across the globe, where we feel we have an opportunity is to bring almost a little bit less messages in a more concentrated way to the market. So how do we focus our marketing spend on the biggest cities, on where the money has the biggest impact? And how do we do that with stories that we almost tell over and over again?

And really with a focus on increasing brand awareness across the globe.

Phil the half opportunity is to bring almost a little bit less messages in a more concentrated way to the market. So how do we focus our marketing spend on the big cities and where the money has the biggest impact on how do we that with stories that we almost tell over and over again and so it really lance if the consumer versus hour.

Martin Hoffmann: And so it really lands with the consumer versus our spreading ourselves a bit too thin. And that's an area that we're looking at. Got it. Thank you so much. Your next question comes from the line Abby Zvejnieks from Piper Sandler. Please go ahead.

It's spreading ourselves debate to statement that scenario that we're looking.

Got it thank you so much.

Your next question comes from the line of Abby <unk> from Piper Sandler. Please go ahead.

Ashley Anne Owens: Great. Thanks for taking my question. Can you just talk about, you know, as you launch new products and categories like Train with the Cloud Pulse and some more in the lifestyle category with Cloud Tilt, is there any way that you're segmenting the product differently or any wholesale accounts where you think you can significantly expand into those new categories? And then, just, you know, kind of as a follow-up, you mentioned wholesale accounts. You feel well penetrated in terms of actual doors in North America and Germany.

Great. Thanks for taking my question can you just talk about you know as you launch new products and category like train them with the cloud pulse.

Lifestyler cloud is there any way that you're segmenting, the product differently or any wholesale accounts.

Or do you think you can significantly expand into those new categories.

And then just kind of as a follow up you mentioned wholesale accounts you feel well.

Well penetrated in terms of actual doors in North America, and Germany that theres more opportunity outside of that can you just give us a little more color on on what you mean are examples of that.

Martin Hoffmann: But there's more opportunity outside of that. Can you just give us a little more color on what you mean or examples of that? I'd be very happy to comment on how we're expanding our product line in apparel and in training, and Marc can probably then shed some light on the different wholesale accounts. I mean, one thing is very clear, the apparel category is clearly working, Martin mentioned it. Our growth in D2C last year was 110%, so that works really well. And so also, if you're looking at the apparel growth in fall-winter 24 pre-orders versus fall-winter 23, we see a 126% growth, and that's across the different collections in apparel. And it also includes different price points, so clearly, apparel is working. Now, of course, the Cloud Pulse is our footwear piece in the training vertical, but it's also very important to note that, of course, in training, a lot more apparel pieces are sold than footwear, so we have really high hopes of penetration into training.

Okay.

I'd be very happy to comment on how we are.

Expanding our product in it.

Carol and in training and Mark can probably shed some light on that.

<unk> wholesale accounts I mean, one thing is very clear the apparel category is clearly working and Martin mentioned Nate.

Our growth in <unk>.

Good to see last year has been 110% so that works really well and so also if youre looking at now.

Apparel growth in fall winter training for preorders versus Fob into 'twenty, three we see a 126% growth and thats across the different end collections in apparel.

And it also includes different price points. So clearly apparel is working now of course, the cloud pulse is our footwear piece in the training vertical but its also very important to note that.

Of course in training a lot more apparel pieces are sold span footwear, so it'd be really high hopes to penetrate training and we already see that because if you go to a premium chin.

Martin Hoffmann: And we already see that because if you go to a premium gym in the US and across the world, you see how consumers adopt running shoes and running apparel to a large extent, and we truly build on that. So that's how apparel and, especially, the training vertical are working. Very quickly on Wholesale, so last year you saw roughly 8%, so last year 2023, an 8% net increase, so this includes the new doors but also the ones that we closed in the Wholesale Channel, and you can calculate with a similar number for 2024, so roughly 8% net overall. Thank you. Your next question comes from the line of Jim Duffy from Stiefel. Please go ahead.

In the U S and across the World you see how consumers and.

Adopt to a large extent also and all running shoes and on running parallel and be truly build on that so.

That's how apparel and especially also the training vertical is working.

And very quickly on wholesale so last year, you saw roughly 8% last year by 23, 8% net increase. So this includes the new doors, but also that one step it will be closed in the wholesale channel and you can calculate with a similar number for 2024, so roughly 8% net over.

Okay.

Thank you.

Okay.

Your next question comes from the line of Jim Duffy from Stifel. Please go ahead.

James Vincent Duffy: Thank you. I wanted to ask about the inventory. Very good progress to tighten inventories exiting the year. Can you speak to the inventory composition by region and how you're projecting inventory into early 2024? Maybe the Q1 and mid-year expectations? Thanks, Jim.

Thank you I wanted to ask about the inventory very good progress to tightened inventories exiting the year can you speak to the inventory composition by region and how you are projecting inventory.

Into early 2020 for maybe the Q1 and midyear expectations.

Thanks, Jim.

Martin Hoffmann: So this was a big focus for us in 2023 to really manage that inventory down. Great work by the team. We are now in a position where we have a good inventory level, but there is still room to optimize. So if you look at the number at the moment, that's about six months of reach. We always said that we should be rather at four months of reach, so there's further optimization going on. But very important is that it's still the right inventory.

So this was a big focus for us.

<unk> 23 to <unk>.

We manage that inventory down.

And great work by the by the team.

We are now in a position where.

We have.

A good inventory level, but there is still room to optimize.

So if you if you if you look at the number at the moment that's about six months of reach we always said that.

We see that we should be rather had four months of reach so there's further optimization going on but very important is it's still the right inventory. So it has been the right inventory last year. It is still the right inventory, but there is no risk sitting in our inventory.

Martin Hoffmann: So it was the right inventory last year. It is still the right inventory, so there's no risk sitting in our inventory. And we will continue our path on increasing ourselves stronger than our inventory position. The picture is the same in all the different regions.

And we will continue our pass on increasing our sales stronger than our inventory position.

The picture is the same in all the different regions.

Olivia Townsend: So the inventory situation is healthy in the different regions. We are in a position to fulfill the demand, but we are also now in a stronger position to hold back if we think that this is in the favor of our long-term durable growth. And so, really, an important step into the right direction. I said it a year ago that for us, a working capital of around 30% of net sales is something we have been in the past and where we want to be. And this is where we are now. And now we can optimize. Thank you. Your next question comes from Liv Townsend from J.P. Morgan. Please go ahead.

So inventory situation is healthy in the different regions.

We are in a position to.

To fulfill the demand.

But we are also now in a stronger position to hold back if we if we think that is in the favor of our long term durable growth.

So really an important step into the into the right direction.

I've said it a year ago that for us a working capital of around 30% of net sales is something where we have been in the past and where we want to be and this is where we are now and now we can optimize from that.

Thank you.

Your next question comes from live Townsend from J P. Morgan. Please go ahead.

Martin Hoffmann: Thanks for taking my question. It's just about the stores, as you've continued to open more. Is it possible to talk now about like for like trends in stores or maybe sales densities or just anything that would help us understand a bit more about the store performance and profitability? Yeah, thank you.

Thanks for taking my question just on the stores as Ive continued to open more.

Is it possible to talk now about like for like trends in stores or maybe sales densities or just anything that would help us understand a bit more about the store performance and profitability.

Martin Hoffmann: I assume you're talking about our own retail store. So yeah, I think the way to think about this is basically like kind of different stores are catered to different consumers. So one is how do we reach, in high-traffic locations, a very broad consumer base, so you can think about Regent Street, Champs-Élysées would definitely be one, and some of the Lafayette stores in New York, for example. So how are we bringing large enough footprints to very, very high traffic? And then I think we're also trying to cater to a more local consumer base. So if you take the Williamsburg store in New York or the Saint-Germain store in Paris, they are a little bit smaller by size, but they cater very much to the wrong community.

Yes, Thank you I assume youre talking about our own owned retail stores. So yes.

But.

So so the way to think about this is basically.

Almost like kind of the different stores that cater to different consumer so one is how.

How do we reach in high traffic locations.

Very broad consumer base. So you can think about regent street shortly they will definitely be one and some of the Lafayette store in New York. For example, so how are we bringing large enough footprint to two very very high traffic and then I think we're also trying to cater more local consumer.

So if you take the Williamsburg and stored in the headquarter staff for Matador.

Parents that are a little bit smaller bite size, but that cater very much often to a wrong community. So we do a lot of community runs a lot of store activations and so on and for US it's very important that all.

Martin Hoffmann: So we do a lot of community runs, a lot of store activations, and so on. And for us, it's very important that our stores are able to bring the different vertical product franchises and communities to life, and that we're able to cater to those. And now, when you look at high-traffic locations like Regent Street, we are extremely happy with how they are performing, and they're driving significant revenue. So I can invite you all to go to London. I think we've shared some insights in the past, but those locations work really, really well.

Our stores are able to bring different vertical product franchises and communities to life and that we're able to cater to dose and now when you look at that high traffic locations like Regent Street.

We are extremely happy how they are performing and that driving significant significant revenue. So can invite you all to go to London I think we've shared some some insights and in the past, but dose locations work really really well and what we learned is that we need more space to sell product I think.

Martin Hoffmann: And what we've learned is that we need more space to sell products. I think we're trying to find out what's the right split between bringing amazing experiences to the consumer and just being commercial, and I think this is where we're learning a lot.

We're trying to find out what's the right what's the.

Split between being bringing amazing experiences and to the consumer and anticipating commercial and I think this is why we are learning a lot and we've made improvements in for example, the New York store in the London store and it's really showing this especially showing India parachute. So the approach that continues to increase as we're giving.

Martin Hoffmann: We've made improvements in, for example, the New York store and the London store, and it's really showing, especially in the apparel share. So the apparel share continues to increase as we're giving more space for apparel and as we're giving more space for visual merchandising. And then I think the second thing that we're learning is that many of our stores are too small. So we started relatively small, almost like we were guiding, trying to kind of overachieve a little bit on the initial ideas that we had.

More space for apparel and that we're giving more space for visual merchandising and then I think the second thing that we're learning is that many of our stores are too small so.

We started and relatively small.

Almost like where we're guiding and trying to kind of overachieve a little bit.

The initial ideas that we had and so I think we learned a lot through that and it allows us now to upscale the store footprint and bring bigger stores to the market and that's the biggest focus in China. So it's not.

Martin Hoffmann: And so I think we learned a lot through that, and it allows us now to expand the store footprint and bring bigger stores to the market, and that's the biggest focus in China. So it's not only about adding new stores; it's also very much about taking existing locations and bringing more square footage and square meters to the consumer. And I think this is, so when you look at the future, don't only look at the number of stores, but also look at the square meters that we can bring to the consumer and, in the end, the profitability that we can drive out of it. Thank you.

Not only about adding new stores. It also very much about.

Taking existing locations and bringing more square footage in square meters to that to the consumer and I think this is so when you look at the future don't only look at the amount of stores also look at square meters that we can bring to the consumer and in the end the profitability that we can drive out of it.

Thank you and if I could just ask a very quick second question just on the guidance on EBIT on adjusted EBITDA and.

Martin Hoffmann: And if I could just ask a very quick second question, just on the guidance for EBIT, on adjusted EBITDA, what kind of FX impact are you expecting to see at the adjusted EBITDA level, given the mismatch in FX on OPEX? Would we be right to assume that there's slightly larger FX pressure on the guidance for adjusted EBITDA versus sales? Thanks. But the impact of EPICS on our EPA margin is very small. You can take this out or leave it in.

What kind of.

FX impact are you expecting to see at the adjusted EBIT dollar level.

The mismatch.

FX on Opex.

Would we be right to assume that there's a slightly larger FX pressure on the guidance the adjusted EBITDA loss of sales.

Yes.

Well the impact of FX on our EBITDA margin.

Very small.

So you can you can take this out to a much more balanced when it comes to our full P&L on the currencies.

Martin Hoffmann: We are much more balanced when it comes to our full P&L on the currencies. The strongest impact sits on the top line. That's why we call it out.

The strongest impacted on the topline that's why that's why we called it out but the two.

Martin Hoffmann: But the 16 to 16.5%, that's our goal for the year, both basically reported and constant. Of course, the absolute number is impacted by: Your next question comes from the line of Ashley Owens from Key Bank Capital Markets. Please go ahead.

16% to 65% that's our goal for the year, both basically reported and in constant of course, the absolute number is impacted by the currency.

Thank you.

Your next question comes from the line of Ashley Owens from Keybanc capital markets. Please go ahead.

Martin Hoffmann: Hi, great. Thank you. So, you know, could you elaborate on any notable areas of strength within the product assortment quarter today? Any new product launches you believe are currently or will be pivotal in driving share gains this year? And then just how have you seen repeat purchase rates trend as you kind of continue to expand both that product assortment and DTC share would be helpful? Let me probably comment on exciting new products and also product strength. I mean, we already talked about CloudTilt and how the launch has shaped up in an incredible way.

Hi, great. Thank you.

Yes, just could you elaborate on any notable areas of strength within the product assortment quarter today.

New product launches do you believe are currently and will be pivotal in driving share gains. This year and then Jay houses being repeat purchase rates trend as you kind of continue to expand that product.

Sure would be helpful.

Let me probably comment on exciting new products and also product strength I mean, we already talked about the cloud tilt and how the launch has shaped up in an incredible way. So we feel that can be a new blockbuster franchise in N performance all day.

Martin Hoffmann: So we feel that it can be a new blockbuster franchise in performance all day. And we also talked about the CloudMonster franchise and how it's now expanding with the CloudMonster Hyper. But we're really strongly focusing this year on performance and running. So the CloudRunner 2 is still launching this spring, and then we already mentioned the CloudBoom Strike.

Also talked about the cloud monster franchise, and how it's now expanding with the platform to hyper, but we're really strongly focusing this year on performance and drawing so the cloud run the tool is still launching this spring.

Then we already mentioned to cloud boom strike Mark mentioned eight that's going to launch in July and other technology leap and our Super short range.

Martin Hoffmann: Marc mentioned it. That's going to launch in July. Another technology leap in our super shoe range. Striking fast, as the name says. And our Pinnacle Marathon racing shoe has already proved itself in the Barcelona marathon last weekend. And then we continue into August with the CloudFlyer 5 and the CloudSurfer Next. The CloudSurfer Next is truly exciting because it's for a young audience.

Striking fast as the name says.

In our Pinnacle Marathon racing Shaw is now pushed into <unk>.

Barcelona Marathon last weekend.

And then we continue into August with the cloud Flyer Fyfe and the clouds are for next the cloud Sir for next is truly exciting because it's for a young audience attractive entry point at 150 U S dollars and our cloud circle franchise and featuring our new cloud Tech face so really focused.

Martin Hoffmann: Attractive entry point at US$150 in our CloudSurfer franchise and featuring our new CloudTech face, so really focusing on performance and running. As you remember from the intro, it's seven franchises that now contribute more than 5% to our range. And then just on repeat purchase. So what we see in Ecom is very similar to our wholesale development. So it is growing based on more sales with existing customers, and it is growing because of a strong gain of new customers. And what we are very encouraged about is that with our expansion of the product assortment and especially bringing more silhouettes that speak to younger customers, that's something that we very clearly see in our new customer acquisition. So just looking at what the share of customers that is below 34 years old is.

King.

<unk> and drawing and then as you as you remember also from the neutral it's seven franchises that to now contribute more than 5% at <unk>.

And then just on the on the repeat purchase so what we see in E. Commerce is very similar to our wholesale.

Development, so honest growing based on more sales with existing customers and honest growing because of a strong gain of.

New customers and what we are very encouraged about is that with our expansion of the product assortment and especially bringing more silhouettes that speak to a younger customer that is something that we very clearly see in our new customer acquisition. So just looking at what is the share of customers that is below.

34 years old in.

Martin Hoffmann: In 2021, that share was around 24%. Now, in 23, the share was already at 29%. So 29% of the customers that we acquired newly in our D2C channel last year were 34 years and younger.

In 2021 debt share was around 24% now in 'twenty three the share was already at 29% 29% of the customers that we acquired newly in our DTC channel last year were 34 years and younger so definitely in the right direction.

Martin Hoffmann: So definitely in the right direction, and that's also reflected in the success and in the respective key accounts like Footlocker. We have time for one more question, and that question comes from the line of John Kernan from TD Cowan. Please go ahead.

That's been also reflected in the success in their respective key accounts like foot locker JD.

We have time for one more question and that question comes from the line of John Kernan from TD Cowen. Please go ahead.

Martin Hoffmann: Thanks for taking my question. Hey, Martin, just got asked a few different ways, but how should we think about the magnitude of the FX result? It obviously created a big EPS headwind in fiscal 23. I'm just curious.

Thanks for taking my question.

Hey, Martin just as Scott asked a few different ways, but how should we think about the magnitude of the FX resulted obviously created a big <unk>.

<unk> headwind in fiscal 'twenty three I am just curious I think you said that there's going to be some reversal in fiscal 'twenty four but just as we model both adjusted EBITDA and EPS I think it would be helpful. If we had a little bit more color on the magnitude of the line item here.

Martin Hoffmann: I think you said there's gonna be some reversal in fiscal 24, but just as we model both adjusted EBITDA and EPS, I think it'd be helpful if we had a little bit more color on the magnitude of the line. Thanks for the advance; I can elaborate a little bit more on this. So, it's very important to understand how we translate our foreign exchange balances into Swiss francs. So on the P&L, that's based on an average rate, so it's a moving average rate, whereas the balance sheet is always translated based on the quarter and FX. So if we look into 2023, the Swiss franc will have gained in value against almost every currency in the world. So for us, the US dollar, the euro, the British pound, currencies from China and Japan, those are the ones that are important to our business.

So thanks for everyone's I can.

Elaborate a little bit more on this so it's very important to understand how we translate our foreign exchange balances into Swiss francs. So on the P&L that is based on an average.

Right. So it's moving average rate, whereas the balance sheet is always translated based on the quarter end FX rates.

So if we look into 2023, the Swiss franc has gained in value against almost every currency in the world.

But for Us U S dollar Euro British pound.

Currently from China, and Japan, those are the ones that are important to our business.

Martin Hoffmann: So if you take the dollar-Swiss franc ratio, for example, then the dollar dropped from 96 cents to 91 cents in the course of 2023 and is sitting at around 88 cents today. So this has already driven a headwind in the P&L last year, and this is what we called out will continue to drive an impact in 2024. Now, if you look at the rates, then it really dropped again towards the end of December, down to $0.84.

Should take the dollar Swiss franc ratio for example than the debt.

That the dollar dropped from 96.

291 in.

In the course of 2023 and is sitting at around 88 today.

Today. So this will this has already driven an headwind in the in the in the P&L last year and this is what we called out will continue to drive and impact in 2024.

Now if you look at the rates then it really dropped again towards the end of December down to 84.

And that was the rates that we had to use to convert our balance sheet and this has driven.

Martin Hoffmann: And that was the rate that we had to use to convert our balance sheet. And this has driven a meaningful ethical impact. It's unrealized, but it has driven that.

A meaningful FX impact, it's unrealized but has driven that it's also visible in our cash balance so the visible in our inventory balance I called out that our inventory items stayed flat, but if you look at the reported numbers actually came down 10%, which is the FX impact now today.

Martin Hoffmann: It's also visible in our cash balance. It's also visible in our inventory balance. I called out that our inventory items stayed flat.

Martin Hoffmann: But if you look at the reported number, it actually came down 10%, which is the ethics impact. Now, today, as I just mentioned, we are at 88 cents. So there has already been a recovery from the 84 at the end of the year. But that's why we expect, if the rate stays, that we will have some of the unrealized gains coming back and resulting in FX profits. But it's only on that line versus revenue and cross profits, which are impacted by the continued downward trend that we see on this on the US dollar and other currencies over time. So it is not super simple, but I tried to shed some more light.

As mentioned we are at 88.

So there has already been a recovery from the 84 of the end of the year, but that's why we expect if the rate space that we have some of the unrealized gains coming back and resulting in an FX profit.

But it's only on that line versus the revenue and the gross profit those are impacted from the continued downward trend that we see on the on this on the on the U S dollar and other currencies overtime.

<unk> not super simple, but I'll try to shed some more light on that.

Martin Hoffmann: That's helpful. And then maybe just one follow-up on SG&A, just based on the high end of guidance for the adjusted EBITDA margin guidance, it seems like you are expecting some SG&A leverage, even with the shift to DTC. So maybe we could talk about the levers within SG&A, the cost of the store expansion, and how should we think about the ability for more SG&A leverage going forward? Yeah, so we continue to execute on our path to higher profitability levels. Our midterm aspiration is 18% plus. So we are investing in automation in the warehouses. So we expect in 24, basically, not an improvement yet, but we will lay the foundation to then see significant improvements in 2024. At the same time, we have economies of scale in many other parts of the business.

That's helpful. And then maybe just one follow up on the SG&A.

Based on the high end of guidance of the adjusted EBITDA margin guidance. It seems like you are expecting some SG&A leverage even even with the shift to DTC. So maybe talked about the levers within the SG&A the cost of the store expansion.

And how should we think about the ability for more SG&A leverage going forward.

Yes, so we continue to execute on our path to a higher profitability levels.

Our midterm aspiration is 18% plus.

So we invest in automation in the warehouses. So we expect in 2004.

Basically northern northern improvement, yet, but we will lay the foundation to then see significant improvements in 2024.

At the same time, we have economies of scale in many other parts of the business. So when it comes to administration when it comes to the profitability of certain markets like China for example, more of our stores.

Martin Hoffmann: So when it comes to administration, when it comes to the profitability of certain markets, like China, for example, more of our stores have become more profitable, and that's helping the overall number. At the same time, we continue to invest. We continue to invest in retail store rollouts, we continue to invest in building apparel in China, in other emerging markets, and in our tech capabilities and sustainability. And that's why we feel that this 16 to 16.5% is exactly the right balance of investing and growth, but at the same time, further increasing profitability. So we will manage that in the way we have done in the past. We are committed to that number, but we will reinvest any additional gains that we have in order to fuel growth for the future.

Some more profitable.

And that's helping the overall number at the same time, we continue to invest we continue to invest in retail store rollout, we continue to invest in building apparel in China, and other upcoming markets and our tech capabilities and sustainability and that's why we feel that the 16% to 16, 5% is exactly the right balance.

Of investing in growth, but at the same time further increasing profitability.

So we will we will manage that.

And the way we have done in the past we are committed towards that number, but we will reinvest.

Any additional games that we have in order to fuel growth for the future.

Martin Hoffmann: Very helpful. Thank you. Ladies and gentlemen, that does conclude today's Q&A session. And with that, that does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Very helpful. Thank you.

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

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