Under Armour About UA

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11.04.19

Under Armour Reports Third Quarter Results; Updates 2019 Full Year Outlook

BALTIMORE, Nov. 4, 2019 /PRNewswire/ -- Under Armour, Inc. (NYSE: UA, UAA) today announced financial results for the third quarter ended September 30, 2019. The company reports its financial performance in accordance with accounting principles generally accepted in the United States of America ("GAAP"). This press release refers to "currency neutral" and "adjusted" amounts, which are non-GAAP financial measures described below under the "Non-GAAP Financial Information" paragraph. References to adjusted financial measures exclude the impact of the company's 2018 restructuring plan and the related tax effects. Reconciliations of non-GAAP amounts to the most directly comparable financial measure calculated in accordance with GAAP are presented in supplemental financial information furnished with this release. All per share amounts are reported on a diluted basis.

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

"Building our long-term brand strength remains at the center of everything we do," said Under Armour Chairman and CEO Kevin Plank. "Our ongoing transformation across the business continues to make us smarter, faster and more operationally excellent. As we make the turn into 2020, we are confident in our ability to deliver our fourth quarter targets while proactively supporting higher levels of strategic marketing investments that will further fuel the Under Armour brand."

Third Quarter 2019 Review


  • Revenue was down 1 percent to $1.4 billion (flat on a currency neutral basis).
    • Wholesale revenue decreased 2 percent to $892 million and direct-to-consumer revenue decreased 1 percent to $463 million, representing 32 percent of total revenue.
    • North America revenue decreased 4 percent to $1.0 billion and the international business increased 5 percent to $368 million (up 8 percent currency neutral), representing 26 percent of total revenue. Within the international business, revenue was up 9 percent in EMEA (up 13 percent currency neutral), up 4 percent in Asia-Pacific (up 6 percent currency neutral) and down 4 percent in Latin America (down 1 percent currency neutral).
    • Apparel revenue increased 1 percent to $986 million; footwear revenue decreased 12 percent to $251 million; and accessories revenue increased 2 percent to $118 million in the third quarter. On a year-to-date basis, apparel and footwear revenue are relatively flat and accessories is down approximately 3 percent compared to 2018.
  • Gross margin increased 220 basis points to 48.3 percent compared to the prior year driven by channel mix, supply chain initiatives and restructuring charges in the prior period.
  • Selling, general & administrative expenses increased 4 percent to $551 million, or 38.5 percent of revenue.
  • Operating income was $139 million.
  • Net income was $102 million or $0.23 diluted earnings per share.
  • Cash and cash equivalents increased 147 percent to $417 million.
  • Inventory decreased 23 percent to $907 million.
  • Total debt was down 26 percent to $592 million.

Updated Fiscal 2019 Outlook

  • Revenue is now expected to be up about 2 percent versus the previously expected range of 3 to 4 percent, due to:
    • Lower than planned excess inventory to service the off-price channel;
    • Ongoing traffic and conversion challenges in direct-to-consumer; and,
    • Negative impacts from changes in foreign currency.
  • Gross margin is now expected to increase approximately 130 to 150 basis points versus the previously expected range of 110 to 130 basis points compared to 2018. Excluding restructuring charges from the comparable prior period, we now expect an increase of approximately 90 to 110 basis points (versus previous expectation of 70 to 90 basis points) compared to 2018 adjusted gross margin due to ongoing supply chain initiatives and additional channel mix benefits.
  • Operating income is now expected to reach the high end of the previously given range of approximately of $230 million to $235 million.
  • Interest and other expense, net is expected to be approximately $30 million.
  • Effective tax rate is expected to be approximately 22 percent.
  • Earnings per share is now expected to reach the high end of the previously given range of approximately of $0.33 to $0.34.
  • Capital expenditures are now expected to be approximately $180 million versus the previously expected $210 million.

Conference Call and Webcast

Under Armour will hold its third quarter 2019 conference call and webcast today at approximately 8:30 a.m. Eastern Time. The call will be webcast live at https://about.underarmour.com/investor-relations/financials and will be archived and available for replay approximately three hours after the live event.

Non-GAAP Financial Information

This press release refers to "currency neutral" and "adjusted" amounts. Currency neutral financial information is calculated to exclude the impact of changes in foreign currency. Management believes this information is useful to investors to facilitate a comparison of the company's results of operations period-over-period. 2018 adjusted gross margin is referred to but not presented and excludes the impact of restructuring and other related charges.  A reconciliation of 2018 adjusted gross margin is available in the company's 2018 year-end earnings release.  Management believes this information is useful to investors because it provides enhanced visibility into the company's actual underlying results excluding the impact of its 2018 restructuring plans. These non-GAAP financial measures 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. Additionally, 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, Inc., headquartered in Baltimore, Maryland, is a leading inventor, marketer and distributor of branded athletic performance apparel, footwear and accessories. Powered by one of the world's largest digitally connected fitness and wellness communities, Under Armour's innovative products and experiences are designed to help advance human performance, making all athletes better. For further information, please visit https://about.underarmour.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, the impact of our investment in our licensee on our results of operations, and the future benefits and opportunities from significant investments. In many cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "assumes," "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 overall consumer spending or our industry; changes to the financial health of our customers; our ability to successfully execute our long-term strategies; our ability to realize expected benefits from our restructuring plans; our ability to effectively drive operational efficiency in our business; our ability to manage the increasingly complex operations of our global business; our ability to comply with existing trade and other regulations, and the potential impact of new trade, tariff and tax regulations on our profitability; 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; any disruptions, delays or deficiencies in the design, implementation or application of our new global operating and financial reporting information technology system; 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; our ability to successfully manage or realize expected results from acquisitions and other significant investments or capital expenditures; the impact of the performance of our equity method investment on our results of operations; risks related to foreign currency exchange rate fluctuations; our ability to effectively market and maintain a positive brand image; the availability, integration and effective operation of information systems and other technology, as well as any potential interruption of 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 key talent 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.

 

Under Armour, Inc.

For the Three and Nine Months Ended September 30, 2019 and 2018

(Unaudited; in thousands, except per share amounts)


CONSOLIDATED STATEMENTS OF OPERATIONS




Three Months Ended September 30,


Nine Months Ended September 30,



2019


% of Net
Revenues


2018


% of Net
Revenues


2019


% of Net
Revenues


2018


% of Net
Revenues

Net revenues


$

1,429,456


100.0

%


$

1,442,976


100.0

%


$

3,825,907


100.0

%


$

3,803,205


100.0

%

Cost of goods sold


739,558


51.7

%


777,769


53.9

%


2,036,901


53.2

%


2,087,961


54.9

%

Gross profit


689,898


48.3

%


665,207


46.1

%


1,789,006


46.8

%


1,715,244


45.1

%

Selling, general and administrative
expenses


550,978


38.5

%


527,640


36.6

%


1,626,309


42.5

%


1,594,893


41.9

%

Restructuring and impairment charges



%


18,601


1.3

%



%


134,920


3.5

%

Income (loss) from operations


138,920


9.7

%


118,966


8.2

%


162,697


4.3

%


(14,569)


(0.4)

%

Interest expense, net


(5,655)


(0.4)

%


(9,151)


(0.6)

%


(15,881)


(0.4)

%


(26,266)


(0.7)

%

Other expense, net


(429)


%


(4,294)


(0.3)

%


(2,224)


(0.1)

%


(9,475)


(0.2)

%

Income (loss) before income taxes


132,836


9.3

%


105,521


7.3

%


144,592


3.8

%


(50,310)


(1.3)

%

Income tax expense


29,344


2.1

%


30,874


2.1

%


31,735


0.8

%


691


%

Income (loss) from equity method
investment


(1,177)


(0.1)

%


619


%


(5,414)


(0.1)

%


481


%

Net income (loss)


$

102,315


7.2

%


$

75,266


5.2

%


$

107,443


2.8

%


$

(50,520)


(1.3)

%


















Basic net income (loss) per share of
Class A, B and C common stock


$

0.23




$

0.17




$

0.24




$

(0.11)



Diluted net income (loss) per share of
Class A, B and C common stock


$

0.23




$

0.17




$

0.24




$

(0.11)



Weighted average common shares outstanding Class A, B and C common stock

Basic


451,385




447,070




450,739




444,931



Diluted


454,695




451,035




454,047




444,931



 

 

Under Armour, Inc.

For the Three and Nine Months Ended September 30, 2019 and 2018

(Unaudited; in thousands)


NET REVENUES BY PRODUCT CATEGORY



Three Months Ended September 30,


Nine Months Ended September 30,



2019


2018


% Change


2019


2018


% Change

Apparel


$

985,623


$

978,457


0.7

%


$

2,499,989


$

2,495,723


0.2

%

Footwear


250,596


284,856


(12.0)

%


827,223


828,001


(0.1)

%

Accessories


118,164


116,186


1.7

%


306,406


314,250


(2.5)

%

Total net sales


1,354,383


1,379,499


(1.8)

%


3,633,618


3,637,974


(0.1)

%

Licensing revenues


29,602


31,363


(5.6)

%


76,567


78,876


(2.9)

%

Connected Fitness


39,346


32,160


22.3

%


101,385


90,098


12.5

%

Corporate Other


6,125


(46)


13,415.2

%


$

14,337


$

(3,743)


483.0

%

Total net revenues


$

1,429,456


$

1,442,976


(0.9)

%


$

3,825,907


$

3,803,205


0.6

%

 

NET REVENUES BY SEGMENT



Three Months Ended September 30,


Nine Months Ended September 30,



2019


2018


% Change


2019


2018


% Change

North America


$

1,015,920


$

1,059,535


(4.1)

%


$

2,675,389


$

2,770,463


(3.4)

%

EMEA


160,981


147,640


9.0

%


440,405


414,170


6.3

%

Asia-Pacific


154,898


149,388


3.7

%


453,296


390,647


16.0

%

Latin America


52,186


54,299


(3.9)

%


141,095


141,570


(0.3)

%

Connected Fitness


39,346


32,160


22.3

%


101,385


90,098


12.5

%

Corporate Other


6,125


(46)


13,415.2

%


14,337


$

(3,743)


483.0

%

Total net revenues


$

1,429,456


$

1,442,976


(0.9)

%


$

3,825,907


$

3,803,205


0.6

%

 

INCOME (LOSS) FROM OPERATIONS



Three Months Ended September 30,


Nine Months Ended September 30,



2019

% of Net
Revenues
(1)


2018

% of Net
Revenues
(1)


2019

% of Net
Revenues
(1)


2018


% of Net
Revenues
(1)

North America


$

237,229

23.4

%


$

253,706

23.9

%


$

536,700

20.1

%


$

534,421


19.3

%

EMEA


21,989

13.7

%


16,726

11.3

%


44,700

10.1

%


17,935


4.3

%

Asia-Pacific


34,666

22.4

%


36,579

24.5

%


74,116

16.4

%


82,092


21.0

%

Latin America


233

0.4

%


(3,772)

(6.9)

%


(4,017)

(2.8)

%


(10,339)


(7.3)

%

Connected Fitness


7,023

17.8

%


2,132

6.6

%


8,103

8.0

%


7,254


8.1

%

Corporate Other


(162,220)

NM



(186,405)

NM



(496,905)

NM



(645,932)


NM


Income (loss)
from operations


$

138,920

9.7

%


$

118,966

8.2

%


$

162,697

4.3

%


$

(14,569)


(0.4)

%


(1) The operating income (loss) percentage is calculated based on total segment net revenues. Additionally, the operating income (loss) percentage for Corporate Other is not presented as it is not a meaningful metric (NM).

 

 

Under Armour, Inc.

As of September 30, 2019, December 31, 2018 and September 30, 2018

(Unaudited; in thousands)


CONDENSED CONSOLIDATED BALANCE SHEETS




September 30,
2019


December 31,
2018


September 30,
2018

Assets







Current assets







Cash and cash equivalents


$

416,603


$

557,403


$

168,682

Accounts receivable, net


843,495


652,546


867,074

Inventories


906,544


1,019,496


1,173,115

Prepaid expenses and other current assets


292,447


364,183


378,159

Total current assets


2,459,089


2,593,628


2,587,030

Property and equipment, net


778,894


826,868


821,078

Operating lease right-of-use assets


595,832



Goodwill


541,798


546,494


551,208

Intangible assets, net


37,811


41,793


43,792

Deferred income taxes


90,860


112,420


86,436

Other long term assets


129,481


123,819


137,625

Total assets


$

4,633,765


$

4,245,022


$

4,227,169

Liabilities and Stockholders' Equity







Revolving credit facility, current


$


$


$

75,000

Accounts payable


483,627


560,884


499,467

Accrued expenses


309,305


340,415


303,399

Customer refund liabilities


209,785


301,421


303,457

Operating lease liabilities


119,446



Current maturities of long term debt



25,000


25,000

Other current liabilities


77,498


88,257


93,416

Total current liabilities


1,199,661


1,315,977


1,299,739

Long term debt, net of current maturities


591,995


703,834


703,455

Operating lease liabilities, non-current


588,490



Other long term liabilities


99,953


208,340


218,054

Total liabilities


2,480,099


2,228,151


2,221,248

Total stockholders' equity


2,153,666


2,016,871


2,005,921

Total liabilities and stockholders' equity


$

4,633,765


$

4,245,022


$

4,227,169

 

 

Under Armour, Inc.

For the Nine Months Ended September 30, 2019 and 2018

(Unaudited; in thousands)


CONSOLIDATED STATEMENTS OF CASH FLOWS



Nine Months Ended September 30,


2019


2018

Cash flows from operating activities




Net income (loss)

$

107,443


$

(50,520)

Adjustments to reconcile net income (loss) to net cash provided by operating activities




Depreciation and amortization

140,443


135,029

Unrealized foreign currency exchange rate gain

12,885


9,350

Loss on disposal of property and equipment

2,884


3,378

Impairment charges


9,930

Amortization of bond premium

190


190

Stock-based compensation

38,048


32,445

Excess tax benefit (loss) from stock-based compensation arrangements


(3)

Deferred income taxes

23,827


(9,965)

Changes in reserves and allowances

(22,778)


(239,073)

Changes in operating assets and liabilities:




Accounts receivable

(187,585)


(23,846)

Inventories

123,364


(30,390)

Prepaid expenses and other assets

73,753


(97,519)

Other non-current assets

5,939


(1,596)

Accounts payable

(67,336)


(37,353)

Accrued expenses and other liabilities

(52,466)


113,297

Customer refund liabilities

(88,710)


304,685

Income taxes payable and receivable

(7,433)


778

Net cash provided by operating activities

102,468


118,817

Cash flows from investing activities




Purchases of property and equipment

(105,767)


(121,439)

Sale of property and equipment


11,285

Purchase of equity method investment


(39,208)

Purchases of other assets

(1,273)


(4,861)

Net cash used in investing activities

(107,040)


(154,223)

Cash flows from financing activities




Proceeds from long term debt and revolving credit facility

25,000


465,000

Payments on long term debt and revolving credit facility

(162,817)


(580,000)

Employee taxes paid for shares withheld for income taxes

(4,088)


(2,743)

Proceeds from exercise of stock options and other stock issuances

5,797


10,739

Payments of debt financing costs

(2,661)


(11)

Other financing fees

77


306

Net cash used in financing activities

(138,692)


(106,709)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

4,809


520

Net increase in cash, cash equivalents and restricted cash

(138,455)


(141,595)

Cash, cash equivalents and restricted cash




Beginning of period

566,060


318,135

End of period

$

427,605


$

176,540

 

 

Under Armour, Inc.

For the Three and Nine Months Ended September 30, 2019

(Unaudited)


The table below presents the reconciliation of net revenue growth (decline) calculated in accordance with
GAAP to currency neutral net revenue which is a non-GAAP measure. See "Non-GAAP Financial
Information" above for further information regarding the Company's use of non-GAAP financial measures.


CURRENCY NEUTRAL NET REVENUE GROWTH (DECLINE) RECONCILIATION




Three Months Ended
September 30, 2019

Nine Months Ended
September 30, 2019

Total Net Revenue




Net revenue growth (decline) - GAAP


(0.9)

%

0.6

%

Foreign exchange impact


0.8

%

1.3

%

Currency neutral net revenue growth (decline) - Non-GAAP


(0.1)

%

1.9

%





North America




Net revenue decline - GAAP


(4.1)

%

(3.4)

%

Foreign exchange impact


%

0.2

%

Currency neutral net revenue decline - Non-GAAP


(4.1)

%

(3.2)

%





EMEA




Net revenue growth - GAAP


9.0

%

6.3

%

Foreign exchange impact


4.1

%

4.6

%

Currency neutral net revenue growth - Non-GAAP


13.1

%

10.9

%





Asia-Pacific




Net revenue growth - GAAP


3.7

%

16.0

%

Foreign exchange impact


2.7

%

4.7

%

Currency neutral net revenue growth - Non-GAAP


6.4

%

20.7

%





Latin America




Net revenue decline - GAAP


(3.9)

%

(0.3)

%

Foreign exchange impact


2.6

%

3.3

%

Currency neutral net revenue growth (decline) - Non-GAAP


(1.3)

%

3.0

%





Total International




Net revenue growth - GAAP


4.8

%

9.3

%

Foreign exchange impact


3.2

%

4.5

%

Currency neutral net revenue growth - Non-GAAP


8.0

%

13.8

%

 

 

Under Armour, Inc.

As of September 30, 2019 and 2018


BRAND HOUSE AND FACTORY HOUSE DOOR COUNT




September 30,



2019


2018

Factory House


167


162

Brand House


18


15

   North America total doors


185


177






Factory House


96


68

Brand House


89


65

   International total doors


185


133






Factory House


263


230

Brand House


107


80

   Total doors


370


310

 

 

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SOURCE Under Armour, Inc.

Under Armour Contacts: Lance Allega, SVP, Investor Relations & Corporate Development, (410) 246-6810, Diane Pelkey, SVP, Global Communications, (410) 246-5927

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