October 25, 2016

Under Armour Reports Third Quarter Net Revenues Growth Of 22%; Reiterates Full Year Net Revenues Outlook Of $4.925 Billion

- Third Quarter Net Revenues Increased 22% to $1.47 Billion
- Reiterates 2016 Net Revenues Outlook of Approximately $4.925 Billion (+24%)
- Reiterates 2016 Operating Income Outlook of $440 Million to $445 Million (+8%-+9%)

BALTIMORE, Oct. 25, 2016 /PRNewswire/ -- Under Armour, Inc. (NYSE: UA, UA.C) today announced financial results for the third quarter ended September 30, 2016.  Net revenues increased 22% in the third quarter of 2016 to $1.47 billion compared with net revenues of $1.20 billion in the prior year's period.  On a currency neutral basis, net revenues increased 23% compared with the prior year's period. Operating income increased 16% in the third quarter of 2016 to $199 million compared with $171 million in the prior year's period.  Net income increased 28% in the third quarter of 2016 to $128 million compared with $100 million in the prior year's period and diluted earnings per share for the third quarter of 2016 were $0.29 compared with $0.23 in the prior year's period.

Under Armour, Inc. Logo. (PRNewsFoto/Under Armour, Inc.)

During the third quarter, wholesale net revenues grew 19% year-over-year to $1.01 billion compared to $850 million in the prior year's period, while Direct-to-Consumer net revenues grew 29% year-over-year to $408 million compared to $316 million in the prior year's period. North America net revenues for the third quarter grew 16% year-over-year.  International net revenues, which represented 15% of total net revenues for the third quarter, grew 74% year-over-year, or 80% on a currency neutral basis.  

Within product categories, apparel net revenues increased 18% to $1.02 billion compared with $866 million in the same period of the prior year, led by growth in men's training, women's training, golf and team sports.  Footwear net revenues increased 42% to $279 million from $196 million in the prior year's period, driven by strong growth in running and basketball.  Accessories net revenues increased 18% to $122 million from $104 million in the prior year's period, driven primarily by growth in bags and headwear.

Kevin Plank, Chairman and CEO of Under Armour, Inc., stated, "Under Armour is a growth company and our ambitions for the Brand have never been higher. This marks our 26th consecutive quarter of 20+% revenue growth demonstrating the strength of the Under Armour Brand. From the Olympic Games in Rio to the launch of Under Armour Sportswear at New York Fashion Week, the Under Armour Brand continues to extend its reach to new consumers while remaining authentic and rooted in sport.  In the third quarter, our key strategies and investments to diversify our portfolio on a global scale were evident across categories, channels, and geographies. In running, we experienced strong global demand for our Slingride and Bandit 2 footwear styles, showcasing the continued expansion of our premium $100+ footwear offerings.  Within direct-to-consumer we launched three new e-commerce sites, bringing our total to 30 global sites, as we focus on expanding brand experience and premium offerings for consumers wherever they shop. And finally, we hosted our second tour through Asia with Stephen Curry, where the Brand continues to resonate and drive incredible momentum in new markets."

Gross margin for the third quarter of 2016 was 47.5% compared with 48.8% in the prior year's period, primarily reflecting negative impacts from the timing of liquidation, increased promotions, and foreign exchange rates, partially offset by continued product cost margin improvements. Selling, general and administrative expenses grew 20% to $499 million compared with $416 million in the prior year's period primarily driven by investments in Direct-to-Consumer and overall headcount to support the Company's strategic initiatives.

Balance Sheet Highlights
Cash and cash equivalents was $180 million at September 30, 2016 compared with $159 million at September 30, 2015. Inventory at September 30, 2016 increased 12% to $971 million compared with $867 million at September 30, 2015. Total debt increased 19% to $1.07 billion at September 30, 2016 compared with $902 million at September 30, 2015.

Updated Outlook
Based on current visibility, the Company continues to expect 2016 net revenues of approximately $4.925 billion, representing growth of 24% over 2015, and 2016 operating income of $440 million to $445 million, representing growth of 8% to 9% over 2015.  Below the operating line, the Company expects interest expense of approximately $30 million, an effective full year tax rate of approximately 35.5%, and fully diluted weighted average shares outstanding of approximately 446 million.

The Company will provide an update on its longer-term guidance on the third quarter earnings conference call.

Mr. Plank concluded, "Over the past twenty years we have established ourselves as a premium global brand with a track record of strong financial results. Looking back over the past nine months, it has never been more evident that we are at a pivotal moment in time, where the investments we are making today will fuel our growth and drive our industry leadership position for years to come. As a growth company with an expanding global footprint and businesses like footwear and women's each approaching a billion dollars this year, we have never been more focused on the long-term success of our Brand."

Conference Call and Webcast
The Company will provide additional commentary regarding its third quarter as well as its updated 2016 and longer-term outlook during its earnings conference call today, October 25, 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, UA.C), 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 development and introduction of new products, 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; the financial health of our 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 or capital expenditures; 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 ability to raise additional capital required to grow our business on terms acceptable to us; 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.

(Tables Follow)

 

Under Armour, Inc.

For the Quarter Ended and Nine Months Ended September 30, 2016 and 2015

(Unaudited; in thousands, except per share amounts)


CONSOLIDATED STATEMENTS OF INCOME








Quarter Ended September 30,


Nine Months Ended September 30,



2016


% of Net
Revenues


2015


% of Net
Revenues


2016


% of Net
Revenues


2015


% of Net
Revenues

Net revenues


$

1,471,573



100.0

%


$

1,204,109



100.0

%


$

3,520,058



100.0

%


$

2,792,627



100.0

%

Cost of goods sold


772,949



52.5

%


616,949



51.2

%


1,863,151



52.9

%


1,448,750



51.9

%

  Gross profit


698,624



47.5

%


587,160



48.8

%


1,656,907



47.1

%


1,343,877



48.1

%

Selling, general and
administrative expenses


499,314



34.0

%


415,763



34.6

%


1,403,336



39.9

%


1,112,912



39.8

%

  Income from operations


199,310



13.5

%


171,397



14.2

%


253,571



7.2

%


230,965



8.3

%

Interest expense, net


(8,189)



(0.5)

%


(4,100)



(0.3)

%


(18,476)



(0.6)

%


(10,572)



(0.4)

%

Other expense, net


(772)



(0.1)

%


(3,239)



(0.3)

%


(1,025)



%


(5,038)



(0.2)

%

  Income before income taxes


190,349



12.9

%


164,058



13.6

%


234,070



6.6

%


215,355



7.7

%

Provision for income taxes


62,124



4.2

%


63,581



5.3

%


80,322



2.2

%


88,384



3.2

%

  Net income


$

128,225



8.7

%


$

100,477



8.3

%


$

153,748



4.4

%


$

126,971



4.5

%

        Adjustment payment to
Class C capital stockholders










59,000








  Net income available to all 
  stockholders


128,225





100,477





94,748





126,971





















Basic net income per share of
Class A and B common stock


$

0.29





$

0.23





$

0.22





$

0.29




Basic net income per share of
Class C common stock


$

0.29





$

0.23





$

0.49





$

0.29




Diluted net income per share of
Class A and B common stock


$

0.29





$

0.23





$

0.21





$

0.29




Diluted net income per share of
Class C common stock


$

0.29





$

0.23





$

0.48





$

0.29





















Weighted average common
shares outstanding Class A
and B common stock

















Basic


218,074





215,743





217,535





215,347




Diluted


222,115





221,053





221,709





220,708





















Weighted average common shares outstanding Class C common stock

















Basic


219,756





215,743





218,147





215,347




Diluted


223,738





221,053





222,301





220,708




 

 

 

Under Armour, Inc.

For the Quarter Ended and Nine Months Ended September 30, 2016 and 2015

(Unaudited; in thousands)


NET REVENUES BY PRODUCT CATEGORY




Quarter Ended September 30,


Nine Months Ended September 30,



2016


2015


% Change


2016


2015


% Change

Apparel


$

1,021,185



$

865,514



18.0

%


$

2,300,596



$

1,936,221



18.8

%

Footwear


278,891



196,279



42.1

%


785,843



510,864



53.8

%

Accessories


121,832



103,564



17.6

%


302,266



249,755



21.0

%

Total net sales


1,421,908



1,165,357



22.0

%


3,388,705



2,696,840



25.7

%

Licensing revenues


29,484



24,313



21.3

%


69,923



59,355



17.8

%

Connected Fitness


20,181



14,439



39.8

%


62,180



36,432



70.7

%

Intersegment eliminations






%


(750)





(100.0)

%

Total net revenues


$

1,471,573



$

1,204,109



22.2

%


$

3,520,058



$

2,792,627



26.0

%


NET REVENUES BY SEGMENT



Quarter Ended September 30,


Nine Months Ended September 30,



2016


2015


% Change


2016


2015


% Change

North America


$

1,225,188



$

1,059,440



15.6

%


$

2,932,915



$

2,440,728



20.2

%

International


226,204



130,230



73.7

%


525,714



315,467



66.6

%

Connected Fitness


20,181



14,439



39.8

%


62,179



36,432



70.7

%

Intersegment eliminations






%


(750)





(100.0)

%

Total net revenues


$

1,471,573



$

1,204,109



22.2

%


$

3,520,058



$

2,792,627



26.0

%


OPERATING INCOME (LOSS) BY SEGMENT



Quarter Ended September 30,


Nine Months Ended September 30,



2016


2015


% Change


2016


2015


% Change

North America


$

182,840



$

181,822



0.6

%


$

251,084



$

272,543



(7.9)

%

International


24,984



6,180



304.3

%


34,996



6,126



471.3

%

Connected Fitness


(8,514)



(16,605)



48.7

%


(32,509)



(47,704)



31.9

%

Income from operations


$

199,310



$

171,397



16.3

%


$

253,571



$

230,965



9.8

%

 

 

 

Under Armour, Inc.

As of September 30, 2016, December 31, 2015 and September 30, 2015

(Unaudited; in thousands)


CONDENSED CONSOLIDATED BALANCE SHEETS




As of
9/30/16


As of
12/31/15


As of
9/30/15

Assets







Cash and cash equivalents


$

179,954



$

129,852



$

159,398


Accounts receivable, net


713,731



433,638



551,188


Inventories


970,621



783,031



867,082


Prepaid expenses and other current assets


162,255



152,242



134,751


Deferred income taxes






60,692


Total current assets


2,026,561



1,498,763



1,773,111


Property and equipment, net


751,286



538,531



478,418


Goodwill


576,903



585,181



591,872


Intangible assets, net


68,248



75,686



79,692


Deferred income taxes


155,592



92,157



42,866


Other long term assets


106,747



75,652



66,404


Total assets


$

3,685,337



$

2,865,970



$

3,032,363


Liabilities and Stockholders' Equity







Revolving credit facility, current


$

250,000



$



$

300,000


Accounts payable


254,222



200,460



274,285


Accrued expenses


238,284



192,935



188,266


Current maturities of long term debt


27,000



42,000



42,124


Other current liabilities


81,898



43,415



43,929


Total current liabilities


851,404



478,810



848,604


Long term debt, net of current maturities


796,768



624,070



559,411


Other long term liabilities


114,011



94,868



89,094


Total liabilities


1,762,183



1,197,748



1,497,109


Total stockholders' equity


1,923,154



1,668,222



1,535,254


Total liabilities and stockholders' equity


$

3,685,337



$

2,865,970



$

3,032,363


 

 

 

Under Armour, Inc.

For the Nine Months Ended September 30, 2016 and 2015

(Unaudited; in thousands)


CONSOLIDATED STATEMENTS OF CASH FLOWS



Nine Months Ended September 30,


2016


2015

Cash flows from operating activities




Net income

$

153,748



$

126,971


Adjustments to reconcile net income to net cash used in operating activities




Depreciation and amortization

105,382



72,211


Unrealized foreign currency exchange rate (gains) losses

(4,846)



24,677


Loss on disposal of property and equipment

504



434


Stock-based compensation

43,445



44,800


Deferred income taxes

(61,561)



(15,266)


Changes in reserves and allowances

70,565



19,577


Changes in operating assets and liabilities, net of effects of acquisitions:




Accounts receivable

(342,342)



(288,687)


Inventories

(186,472)



(357,874)


Prepaid expenses and other assets

(9,232)



(52,629)


Other noncurrent assets

(10,470)




Accounts payable

68,093



58,155


Accrued expenses and other liabilities

43,945



44,863


Income taxes payable and receivable

35,079



9,320


Net cash used in operating activities

(94,162)



(313,448)


Cash flows from investing activities




Purchases of property and equipment

(251,378)



(226,733)


Purchases of property and equipment from related parties

(70,288)




Purchase of businesses, net of cash acquired



(539,460)


Purchases of available-for-sale securities

(24,230)



(80,272)


Sales of available-for-sale securities

30,712



68,314


Purchases of other assets

(858)



(2,670)


Net cash used in investing activities

(316,042)



(780,821)


Cash flows from financing activities




Proceeds from long term debt and revolving credit facility

1,302,537



650,000


Payments on long term debt and revolving credit facility

(889,000)



(29,527)


Excess tax benefits from stock-based compensation arrangements

44,444



40,768


Proceeds from exercise of stock options and other stock issuances

13,022



7,527


Payments of debt financing costs

(5,250)



(947)


Cash dividends paid

(2,927)




Contingent consideration payments for acquisitions

(2,424)




Net cash provided by financing activities

460,402



667,821


Effect of exchange rate changes on cash and cash equivalents

(96)



(7,329)


Net increase (decrease) in cash and cash equivalents

50,102



(433,777)


Cash and cash equivalents




Beginning of period

129,852



593,175


End of period

$

179,954



$

159,398


 

 

 


Under Armour, Inc.

For the Quarter Ended September 30, 2016 and 2015

(Unaudited)


The table below present the reconciliation of non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP.  See "Non-GAAP Financial Information" above for further information regarding the Company's use of non-GAAP financial measures.


CURRENCY NEUTRAL NET REVENUE GROWTH RECONCILIATION





Quarter Ended
September 30,

Total Net Revenue



2016

Net revenue growth - GAAP



22.2%

Foreign exchange impact



0.7%

Currency neutral net revenue growth - Non-GAAP                                         



22.9%





North America




Net revenue growth - GAAP



15.6%

Foreign exchange impact



0.1%

Currency neutral net revenue growth - Non-GAAP



15.7%





International




Net revenue growth - GAAP



73.7%

Foreign exchange impact



6.1%

Currency neutral net revenue growth - Non-GAAP



79.8%





Connected Fitness




Net revenue growth - GAAP



39.8%

Foreign exchange impact



—%

Currency neutral net revenue growth - Non-GAAP



39.8%



BRAND HOUSE AND FACTORY HOUSE DOOR COUNT




As of September 30,


2016


2015

Factory House

145


137

Brand House

17


10

   North America total doors

162


147





Factory House

32


7

Brand House

31


19

   International total doors

63


26





Factory House

177


144

Brand House

48


29

   Total doors

225


173

 

 

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