Baltimore, MD (July 23, 2015) - Under Armour, Inc. (NYSE: UA) today announced financial results for the second quarter ended June 30, 2015. Net revenues increased 29% in the second quarter of 2015 to $784 million compared with net revenues of $610 million in the prior year's period. On a currency neutral basis, net revenues increased 31% compared with the prior year's period. Net income decreased 17% in the second quarter of 2015 to $15 million compared with $18 million in the prior year's period and diluted earnings per share for the second quarter of 2015 were $0.07 compared with $0.08 per share in the prior year's period, inclusive of the impacts of the Endomondo and MyFitnessPal acquisitions.
Second quarter apparel net revenues increased 23% to $515 million compared with $420 million in the same period of the prior year, driven primarily by enhanced product offerings in baselayer and training. Second quarter footwear net revenues increased 40% to $154 million from $110 million in the prior year's period, primarily reflecting continued product expansion across the running category and ongoing excitement around Stephen Curry signature product. Second quarter accessories net revenues increased 39% to $83 million from $60 million in the prior year's period, driven primarily by new introductions across the bags category. Direct-to-Consumer net revenues, which represented 32% of total net revenues for the second quarter, grew 33% year-over-year. International net revenues, which represented 11% of total net revenues for the second quarter, grew 93% year-over-year.
Kevin Plank, Chairman and CEO of Under Armour, Inc., stated, "More than ever before, this year has highlighted that the right investments are key to not only driving near-term results, but building the foundation for the unlimited potential of the Under Armour Brand. In the second quarter of 2015, we witnessed historic performances and accolades from our incredible portfolio of athletes including the NBA's MVP and World Champion Stephen Curry, PGA Tour pro Jordan Spieth who won this year's Masters & U.S. Open and the American Ballet Theatre's first-ever African American female principal dancer Misty Copeland. Leveraging these unprecedented successes for our Brand remain critical as we continue to align our strategy to attack key growth categories and drive deeper connections with the athlete. Some of these powerful connections are already evident across our distribution, where we are investing in expanded relationships with our key sporting goods and mall partners, as well as supporting our own direct-to-consumer capabilities including new Brand House openings across both the U.S. and our International markets. It also means continuing to build one of our key foundations for future growth with Connected Fitness. With our Connected Fitness community now totaling more than 140 million unique registered users and adding on average more than 100,000 new athletes each day, we are pleased with our progress and believe we are still in the early stages of uncovering the potential of what the world's largest digital health and fitness community can do to build consumer engagement and drive healthier lifestyles."
Gross margin for the second quarter of 2015 was 48.4% compared with 49.2% in the prior year's period, primarily reflecting the impacts of foreign exchange rates and planned air freight expenses. Selling, general and administrative expenses as a percentage of net revenues were 44.3% in the second quarter of 2015 compared with 43.5% in the prior year's period, primarily reflecting investments to support Connected Fitness and the opening of global Brand House stores in the quarter. Second quarter operating income decreased 8% to $32 million compared with $35 million in the prior year's period.
Balance Sheet Highlights
Cash and cash equivalents decreased 43% to $171 million at June 30, 2015 compared with $300 million at June 30, 2014. Inventory at June 30, 2015 increased 26% to $837 million compared with $662 million at June 30, 2014. Total debt increased to $716 million at June 30, 2015 compared with $197 million at June 30, 2014, primarily reflecting borrowing to fund the two Connected Fitness acquisitions.
Updated 2015 Outlook
The Company had previously anticipated 2015 net revenues of approximately $3.78 billion, representing growth of 23% over 2014, and 2015 operating income in the range of $400 million to $408 million, representing growth of 13% to 15% over 2014. Based on current visibility, the Company expects 2015 net revenues of approximately $3.84 billion, representing growth of 25% over 2014 and 2015 operating income in the range of $405 million to $408 million, representing growth of 14% to 15% over 2014. The 2015 guidance continues to reflect the net dilutive impact from the Connected Fitness acquisitions, as well as the impact of the strong dollar negatively impacting our operating margin within our international businesses.
Brad Dickerson, COO/CFO of Under Armour, Inc., stated, "The ongoing strength of our Brand and execution of our business plan give us confidence in raising our full year top line outlook. In addition, the confluence of our sports marketing success stories has provided a unique opportunity to drive investment toward areas that we see are key to long-term sustainable growth and we plan to take advantage of this dynamic in the back half of 2015. At the same time, we are increasing our focus on developing sustainable business process improvements and better connecting the components of our value chain to more fully capitalize on our Brand's momentum each season going forward. We look forward to discussing these initiatives and our longer-term business plan in greater detail at our Investor Day on September 16th."
Conference Call and Webcast
The Company will provide additional commentary regarding its second quarter results as well as its updated 2015 outlook during its earnings conference call today, July 23rd, at 8:30 a.m. ET. The call will be webcast live at http://investor.underarmour.com/events.cfm and will be archived and available for replay approximately three hours after the live event. Additional supporting materials related to the call will also be available at http://investor.underarmour.com. The Company's financial results are also available online at http://investor.underarmour.com/results.cfm.
Non-GAAP Financial Information
The Company reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP"). However, this press release refers to certain "currency neutral" financial information, which is a non-GAAP financial measure. The Company provides a reconciliation of this non-GAAP measure to the most directly comparable financial measure calculated in accordance with GAAP. See the end of this press release for this reconciliation.
Currency neutral financial information is calculated to exclude foreign exchange impact. Management believes this information is useful to investors to facilitate a comparison of the Company's results of operations period-over-period. This non-GAAP financial measure should not be considered in isolation and should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP. In addition, the Company's non-GAAP financial information may not be comparable to similarly titled measures reported by other companies.
About Under Armour, Inc.
Under Armour (NYSE: UA), the originator of performance footwear, apparel and equipment, revolutionized how athletes across the world dress. Designed to make all athletes better, the brand's innovative products are sold worldwide to athletes at all levels. The Under Armour Connected Fitness™ platform powers the world's largest digital health and fitness community through a suite of applications: UA Record, MapMyFitness, Endomondo and MyFitnessPal. The Under Armour global headquarters is in Baltimore, Maryland. For further information, please visit the Company's website at www.uabiz.com.
Forward Looking Statements
Some of the statements contained in this press release constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts, such as statements regarding our future financial condition or results of operations, our prospects and strategies for future growth, the implementation of our marketing and branding strategies, and the future benefits and opportunities from acquisitions. In many cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "outlook," "potential" or the negative of these terms or other comparable terminology. The forward-looking statements contained in this press release reflect our current views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to: changes in general economic or market conditions that could affect consumer spending and the financial health of our retail customers; our ability to effectively manage our growth and a more complex global business; our ability to successfully manage or realize expected results from acquisitions and other significant investments; our ability to effectively develop and launch new, innovative and updated products; our ability to accurately forecast consumer demand for our products and manage our inventory in response to changing demands; increased competition causing us to lose market share or reduce the prices of our products or to increase significantly our marketing efforts; fluctuations in the costs of our products; loss of key suppliers or manufacturers or failure of our suppliers or manufacturers to produce or deliver our products in a timely or cost-effective manner, including due to port disruptions; our ability to further expand our business globally and to drive brand awareness and consumer acceptance of our products in other countries; our ability to accurately anticipate and respond to seasonal or quarterly fluctuations in our operating results; risks related to foreign currency exchange rate fluctuations; our ability to effectively market and maintain a positive brand image; our ability to comply with trade and other regulations; the availability, integration and effective operation of information systems and other technology, as well as any potential interruption in such systems or technology; risks related to data security or privacy breaches; our potential exposure to litigation and other proceedings; and our ability to attract and retain the services of our senior management and key employees. The forward-looking statements contained in this press release reflect our views and assumptions only as of the date of this press release. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.