Under Armour Reports First Quarter 2021 Results; Raises Full Year Outlook
"
First Quarter 2021 Review
- Revenue was up 35 percent to
$1.3 billion (up 32 percent currency neutral) compared to the prior year. - Wholesale revenue increased 35 percent to
$800 million and direct-to-consumer revenue increased 54 percent to$437 million , driven by 69 percent growth in eCommerce. North America revenue increased 32 percent to$806 million and international revenue increased 58 percent to$452 million (up 50 percent currency neutral). Within the international business, revenue increased 41 percent in EMEA (up 33 percent currency neutral), increased 120 percent inAsia-Pacific (up 107 percent currency neutral), and decreased 9 percent inLatin America (down 7 percent currency neutral).- Apparel revenue increased 35 percent to
$810 million . Footwear revenue increased 47 percent to$309 million . Accessories revenue increased 73 percent to$117 million . - Gross margin increased 370 basis points to 50.0 percent compared to the prior year, driven primarily by benefits from pricing, supply chain initiatives, and channel mix.
- Selling, general & administrative expenses decreased 7 percent to
$515 million primarily due to lower legal and marketing costs than the prior year. - Restructuring and impairment charges were
$7 million . - Operating income was
$107 million . Adjusted operating income was$114 million . - Net income was
$78 million . Adjusted net income was$75 million . - Diluted earnings per share was
$0.17 . Adjusted diluted earnings per share was$0.16 . - Inventory was down 9 percent to
$852 million . - Cash and Cash Equivalents was
$1.3 billion at the end of the quarter, and no borrowings were outstanding under the company's$1.1 billion revolving credit facility.
Updated 2021 Outlook
Key points related to
- Revenue is now expected to be up at a high-teen percentage rate compared to the previous expectation of a high-single-digit percentage rate increase, reflecting a high-teen percentage growth rate in
North America and low thirties percentage growth rate in the international business. - Gross margin is now expected to be up approximately 50 basis points compared to the previous expectation of 'up slightly,' versus the prior year adjusted gross margin of 48.6 percent with benefits from pricing and supply chain efficiency, being largely offset by the sale of MyFitnessPal, which carried a high gross margin rate.
- Operating income is now expected to reach approximately
$105 million to$115 million compared to the previous range of$5 million to$25 million . Excluding the impact of restructuring efforts, adjusted operating income is expected to reach$230 million to$240 million compared to the previous expectation of$130 million to$150 million . - Diluted loss per share is now expected to be about
$0.02 to$0.04 compared to the previous expectation of a diluted loss per share of$0.18 to$0.20 and adjusted diluted earnings per share is expected to be in the range of$0.28 to$0.30 compared to the previous expectation of adjusted diluted earnings per share in the range of$0.12 to$0.14 .
2020 Restructuring Plan
In
COVID-19 Update
Conference Call and Webcast
Non-GAAP Financial Information
This press release refers to "currency neutral" and "adjusted" results as well as "adjusted" forward-looking estimates of the company's fiscal 2021 outlook. Currency-neutral financial information is calculated to exclude the impact of changes in foreign currency exchange rates. Management believes this information is helpful to investors to compare the company's results of operations period-over-period. Adjusted financial measures exclude the impact of the company's 2020 restructuring plan and related impairment charges, impairments associated with certain long-lived assets and goodwill, and related tax effects. Management believes this information is useful to investors because it enhances visibility into its actual underlying results, excluding these impacts. Adjusted interest expense, adjusted other expense, adjusted net income (loss) and adjusted diluted income (loss) per share exclude the non-cash amortization of debt discount on the company's convertible senior notes. Management believes the non-cash portion of the interest expense, which represents the accretion of the bifurcated equity component of the convertible senior notes' conversion option, is not core to the company's operations given the intent and ability to settle in shares of the company's Class C common stock. These supplemental non-GAAP financial measures should not be considered in isolation and should be contemplated in addition to, and not as an alternative for, the company's reported results prepared per GAAP. Additionally, the company's non-GAAP financial information may not be comparable to similarly titled measures reported by other companies.
About
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 impact of the COVID-19 pandemic on our business and results of operations, our plans to reduce our operating expenses, anticipated charges and restructuring costs, projected savings related to our restructuring plans and the timing thereof, the development and introduction of new products, the implementation of our marketing and branding strategies, 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," "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: the impact of the COVID-19 pandemic on our industry and our business, financial condition and results of operations; changes in general economic or market conditions that could affect overall consumer spending or our industry; 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 raw materials and commodities we use in our products and our supply chain; changes to the financial health of our customers; our ability to successfully execute our long-term strategies; our ability to effectively drive operational efficiency in our business and successfully execute any restructuring plans and realize their expected benefits; our ability to effectively develop and launch new, innovative and updated products; our ability to accurately forecast consumer shopping preferences and consumer demand for our products and manage our inventory in response to changing demands; loss of key customers, suppliers or manufacturers or failure of our suppliers or manufacturers to produce or deliver our products in a timely or cost-effective manner; 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 manage the increasingly complex operations of our global business; our ability to successfully manage or realize expected results from significant transactions and investments; 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; any disruptions, delays or deficiencies in the design, implementation or application of our global operating and financial reporting information technology system; our ability to attract key talent and retain the services of our senior management and key employees; our ability to access capital and financing required to manage our business on terms acceptable to us; 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 comply with existing trade and other regulations, and the potential impact of new trade, tariff and tax regulations on our profitability; risks related to data security or privacy breaches; and our potential exposure to litigation and other proceedings. 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.
|
||||||||||||||
For the Three Months Ended |
||||||||||||||
(Unaudited; in thousands, except per share amounts) |
||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS |
||||||||||||||
Three Months Ended |
||||||||||||||
2021 |
% of Net |
2020 |
% of Net |
|||||||||||
Net revenues |
$ |
1,257,195 |
100.0 |
% |
$ |
930,240 |
100.0 |
% |
||||||
Cost of goods sold |
628,554 |
50.0 |
% |
499,256 |
53.7 |
% |
||||||||
Gross profit |
628,641 |
50.0 |
% |
430,984 |
46.3 |
% |
||||||||
Selling, general and administrative expenses |
514,638 |
40.9 |
% |
552,701 |
59.4 |
% |
||||||||
Restructuring and impairment charges |
7,113 |
0.6 |
% |
436,463 |
46.9 |
% |
||||||||
Income (loss) from operations |
106,890 |
8.5 |
% |
(558,180) |
(60.0) |
% |
||||||||
Interest expense, net |
(14,137) |
(1.1) |
% |
(5,960) |
(0.6) |
% |
||||||||
Other income (expense), net |
(7,180) |
(0.6) |
% |
1,534 |
0.2 |
% |
||||||||
Income (loss) before income taxes |
85,573 |
6.8 |
% |
(562,606) |
(60.5) |
% |
||||||||
Income tax expense |
9,881 |
0.8 |
% |
21,547 |
2.3 |
% |
||||||||
Income (loss) from equity method investments |
2,060 |
0.2 |
% |
(5,528) |
(0.6) |
% |
||||||||
Net income (loss) |
$ |
77,752 |
6.2 |
% |
$ |
(589,681) |
(63.4) |
% |
||||||
Basic net income (loss) per share of Class A, B and C common stock |
$ |
0.17 |
$ |
(1.30) |
||||||||||
Diluted net income (loss) per share of Class A, B and C common stock |
$ |
0.17 |
$ |
(1.30) |
||||||||||
Weighted average common shares outstanding Class A, B and C common stock |
||||||||||||||
Basic |
456,014 |
452,871 |
||||||||||||
Diluted |
459,226 |
452,871 |
|
|||||||||||
For the Three Months Ended |
|||||||||||
(Unaudited; in thousands) |
|||||||||||
NET REVENUES BY PRODUCT CATEGORY |
|||||||||||
Three Months Ended |
|||||||||||
in '000s |
2021 |
2020 |
% Change |
||||||||
Apparel |
$ |
810,041 |
$ |
598,287 |
35.4 |
% |
|||||
Footwear |
309,047 |
209,688 |
47.4 |
% |
|||||||
Accessories |
117,396 |
67,748 |
73.3 |
% |
|||||||
Total net sales |
1,236,484 |
875,723 |
41.2 |
% |
|||||||
Licensing revenues |
21,657 |
19,935 |
8.6 |
% |
|||||||
Corporate Other (1) |
(946) |
34,582 |
(102.7) |
% |
|||||||
Total net revenues |
$ |
1,257,195 |
$ |
930,240 |
35.1 |
% |
NET REVENUES BY SEGMENT |
|||||||||||
Three Months Ended |
|||||||||||
in '000s |
2021 |
2020 |
% Change |
||||||||
|
$ |
805,727 |
$ |
608,980 |
32.3 |
% |
|||||
EMEA |
193,883 |
137,904 |
40.6 |
% |
|||||||
|
210,220 |
95,686 |
119.7 |
% |
|||||||
|
48,311 |
53,088 |
(9.0) |
% |
|||||||
Corporate Other (1) |
(946) |
34,582 |
(102.7) |
% |
|||||||
Total net revenues |
$ |
1,257,195 |
$ |
930,240 |
35.1 |
% |
INCOME (LOSS) FROM OPERATIONS |
||||||||||||
Three Months Ended |
||||||||||||
in '000s |
2021 |
% of Net |
2020 |
% of Net |
||||||||
|
$ |
210,562 |
26.1 |
% |
$ |
(3,773) |
(0.6) |
% |
||||
EMEA |
26,686 |
13.8 |
% |
3,704 |
2.7 |
% |
||||||
|
46,513 |
22.1 |
% |
(36,841) |
(38.5) |
% |
||||||
|
1,457 |
3.0 |
% |
(48,184) |
(90.8) |
% |
||||||
Corporate Other |
(178,328) |
NM |
(473,086) |
NM |
||||||||
Income (loss) from operations |
$ |
106,890 |
8.5 |
% |
$ |
(558,180) |
(60.0) |
% |
(1) Prior to Fiscal 2021, the Company's |
(2) 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 a meaningful metric (NM). |
|
||||||||||||
As of |
||||||||||||
(Unaudited; in thousands) |
||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||||||||
in '000s |
|
|
|
|||||||||
Assets |
||||||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
$ |
1,348,737 |
$ |
1,517,361 |
$ |
959,318 |
||||||
Accounts receivable, net |
696,287 |
527,340 |
668,409 |
|||||||||
Inventories |
851,829 |
895,974 |
940,236 |
|||||||||
Prepaid expenses and other current assets, net |
260,865 |
282,300 |
300,044 |
|||||||||
Total current assets |
3,157,718 |
3,222,975 |
2,868,007 |
|||||||||
Property and equipment, net |
632,307 |
658,678 |
726,568 |
|||||||||
Operating lease right-of-use assets |
511,130 |
536,660 |
583,418 |
|||||||||
|
497,970 |
502,214 |
485,672 |
|||||||||
Intangible assets, net |
12,548 |
13,295 |
40,490 |
|||||||||
Deferred income taxes |
23,796 |
23,930 |
39,576 |
|||||||||
Other long term assets |
78,827 |
72,876 |
93,844 |
|||||||||
Total assets |
$ |
4,914,296 |
$ |
5,030,628 |
$ |
4,837,575 |
||||||
Liabilities and Stockholders' Equity |
||||||||||||
Revolving credit facility, current |
$ |
— |
$ |
— |
$ |
600,000 |
||||||
Accounts payable |
490,860 |
575,954 |
417,397 |
|||||||||
Accrued expenses |
311,905 |
378,859 |
267,115 |
|||||||||
Customer refund liabilities |
191,979 |
203,399 |
208,172 |
|||||||||
Operating lease liabilities |
160,918 |
162,561 |
129,758 |
|||||||||
Other current liabilities |
78,655 |
92,503 |
69,060 |
|||||||||
Total current liabilities |
1,234,317 |
1,413,276 |
1,691,502 |
|||||||||
Long term debt, net of current maturities |
1,009,951 |
1,003,556 |
593,281 |
|||||||||
Operating lease liabilities, non-current |
801,292 |
839,414 |
913,754 |
|||||||||
Other long term liabilities |
98,537 |
98,389 |
88,858 |
|||||||||
Total liabilities |
3,144,097 |
3,354,635 |
3,287,395 |
|||||||||
Total stockholders' equity |
1,770,199 |
1,675,993 |
1,550,180 |
|||||||||
Total liabilities and stockholders' equity |
$ |
4,914,296 |
$ |
5,030,628 |
$ |
4,837,575 |
|
|||||||
For the Three Months Ended |
|||||||
(Unaudited; in thousands) |
|||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||
Three Months Ended |
|||||||
in '000s |
2021 |
2020 |
|||||
Cash flows from operating activities |
|||||||
Net income (loss) |
$ |
77,752 |
$ |
(589,681) |
|||
Adjustments to reconcile net income (loss) to net cash used in operating activities |
|||||||
Depreciation and amortization |
35,512 |
48,565 |
|||||
Unrealized foreign currency exchange rate gain (loss) |
14,702 |
12,976 |
|||||
Loss on disposal of property and equipment |
575 |
129 |
|||||
Impairment charges |
5,601 |
437,517 |
|||||
Amortization of bond premium |
5,273 |
63 |
|||||
Stock-based compensation |
10,372 |
10,465 |
|||||
Deferred income taxes |
(9) |
23,253 |
|||||
Changes in reserves and allowances |
(9,262) |
10,130 |
|||||
Changes in operating assets and liabilities: |
|||||||
Accounts receivable |
(170,493) |
27,596 |
|||||
Inventories |
49,246 |
(59,701) |
|||||
Prepaid expenses and other assets |
22,295 |
27,153 |
|||||
Other non-current assets |
19,467 |
(336,357) |
|||||
Accounts payable |
(80,092) |
(192,651) |
|||||
Accrued expenses and other liabilities |
(121,841) |
226,315 |
|||||
Customer refund liabilities |
(10,949) |
(8,334) |
|||||
Income taxes payable and receivable |
1,263 |
(4,150) |
|||||
Net cash provided by (used in) operating activities |
(150,588) |
(366,712) |
|||||
Cash flows from investing activities |
|||||||
Purchases of property and equipment |
(8,465) |
(31,498) |
|||||
Sale of property and equipment |
561 |
— |
|||||
Purchase of businesses |
— |
(37,343) |
|||||
Net cash used in investing activities |
(7,904) |
(68,841) |
|||||
Cash flows from financing activities |
|||||||
Proceeds from long term debt and revolving credit facility |
— |
700,000 |
|||||
Payments on long term debt and revolving credit facility |
— |
(100,000) |
|||||
Employee taxes paid for shares withheld for income taxes |
(4,301) |
(2,732) |
|||||
Proceeds from exercise of stock options and other stock issuances |
858 |
1,649 |
|||||
Other financing fees |
— |
35 |
|||||
Net cash provided by (used in) financing activities |
(3,443) |
598,952 |
|||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
(6,900) |
8,761 |
|||||
Net increase in (decrease in) cash, cash equivalents and restricted cash |
(168,835) |
172,160 |
|||||
Cash, cash equivalents and restricted cash |
|||||||
Beginning of period |
1,528,515 |
796,008 |
|||||
End of period |
$ |
1,359,680 |
$ |
968,168 |
|
|||
For the Three Months Ended |
|||
(Unaudited) |
|||
The table below presents the reconciliation of net revenue growth (decline) calculated according to GAAP to currency-neutral net revenue 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 |
|||
Total Net Revenue |
|||
Net revenue growth - GAAP |
35.1 |
% |
|
Foreign exchange impact |
(2.6) |
% |
|
Currency neutral net revenue growth - Non-GAAP |
32.5 |
% |
|
|
|||
Net revenue growth - GAAP |
32.3 |
% |
|
Foreign exchange impact |
(0.5) |
% |
|
Currency neutral net revenue growth - Non-GAAP |
31.8 |
% |
|
EMEA |
|||
Net revenue growth - GAAP |
40.6 |
% |
|
Foreign exchange impact |
(7.4) |
% |
|
Currency neutral net revenue growth - Non-GAAP |
33.2 |
% |
|
|
|||
Net revenue growth - GAAP |
119.7 |
% |
|
Foreign exchange impact |
(13.0) |
% |
|
Currency neutral net revenue growth - Non-GAAP |
106.7 |
% |
|
|
|||
Net revenue decline - GAAP |
(9.0) |
% |
|
Foreign exchange impact |
1.7 |
% |
|
Currency neutral net revenue decline - Non-GAAP |
(7.3) |
% |
|
|
|||
Net revenue growth - GAAP |
57.8 |
% |
|
Foreign exchange impact |
(7.6) |
% |
|
Currency neutral net revenue growth - Non-GAAP |
50.2 |
% |
|
||||
For the Three Months Ended |
||||
(Unaudited, in thousands, except per share) |
||||
The tables below present the reconciliation of the Company's condensed consolidated statement of operations presented in accordance with GAAP to certain adjusted non-GAAP financial measures discussed in this press release. See "Non-GAAP Financial Information" above for further information regarding the Company's use of non-GAAP financial measures. |
||||
ADJUSTED OPERATING INCOME RECONCILIATION |
||||
in '000s |
Three months ended |
|||
GAAP Income from operations |
$ |
106,890 |
||
Add: Impact of restructuring and impairment charges |
7,113 |
|||
Adjusted income from operations |
$ |
114,003 |
||
ADJUSTED NET INCOME RECONCILIATION |
||||
in '000s |
Three months ended |
|||
GAAP Net income |
$ |
77,752 |
||
Add: Impact of restructuring and impairment charges |
7,113 |
|||
Add: Impact of amortization of debt discount |
5,210 |
|||
Add: Impact of provision for income taxes |
(15,492) |
|||
Adjusted net income |
$ |
74,583 |
||
ADJUSTED DILUTED EARNINGS PER SHARE RECONCILIATION |
||||
Three months ended |
||||
GAAP Diluted net income per share |
$ |
0.17 |
||
Add: Impact of restructuring and impairment charges |
0.02 |
|||
Add: Impact of amortization of debt discount |
0.01 |
|||
Add: Impact of provision for income taxes |
(0.04) |
|||
Adjusted diluted income per share |
$ |
0.16 |
|
||||||||||||||
Outlook for the Three Months Ended |
||||||||||||||
(Unaudited; in millions, except per share amounts) |
||||||||||||||
The table below presents the reconciliation of the Company's fiscal 2021 outlook for income from operations calculated in accordance with GAAP to adjusted operating income, which is a non-GAAP financial measure. See "Non-GAAP Financial Information" above for further information regarding the Company's use of non-GAAP financial measures. |
||||||||||||||
ADJUSTED OPERATING INCOME RECONCILIATION |
||||||||||||||
(in millions) |
Three Months Ended |
Year Ended |
||||||||||||
Low end of estimate |
High end of |
Low end of estimate |
High end of |
|||||||||||
GAAP Income (loss) from operations |
$ |
5 |
$ |
5 |
$ |
105 |
$ |
115 |
||||||
Add: Estimated impact of restructuring and impairment charges (1) |
35 |
40 |
125 |
125 |
||||||||||
Adjusted income (loss) from operations |
$ |
40 |
$ |
45 |
$ |
230 |
$ |
240 |
ADJUSTED OPERATING MARGIN RECONCILIATION |
|||||
Year Ended |
|||||
Low end of estimate |
High end of estimate |
||||
GAAP Operating margin |
2.0 |
% |
2.2 |
% |
|
Add: Estimated impact of restructuring and impairment charges (1) |
2.4 |
% |
2.3 |
% |
|
Adjusted operating margin |
4.4 |
% |
4.5 |
% |
ADJUSTED DILUTED EARNINGS PER SHARE RECONCILIATION |
|||||||
Year Ended |
|||||||
Low end of |
High end of |
||||||
GAAP Diluted net income (loss) per share |
$ |
(0.04) |
$ |
(0.02) |
|||
Add: Impact of restructuring and related impairment charges (1) |
0.27 |
0.27 |
|||||
Add: Impact of amortization of debt discount |
0.05 |
0.05 |
|||||
Adjusted diluted income per share |
$ |
0.28 |
$ |
0.30 |
(1) Under the Company's 2020 restructuring plan's approved range of |
In connection with the Company's first-quarter conference call and webcast, the Company will discuss its projected adjusted diluted earnings per share for the three months ended |
The Company's net income for the three months ended |
|
||||
As of |
||||
BRAND HOUSE AND FACTORY HOUSE DOOR COUNT |
||||
|
||||
2021 |
2020 |
|||
Factory House |
176 |
169 |
||
Brand House |
16 |
19 |
||
North America total doors |
192 |
188 |
||
Factory House |
136 |
113 |
||
Brand House |
98 |
122 |
||
International total doors |
234 |
235 |
||
Factory House |
312 |
282 |
||
Brand House |
114 |
141 |
||
Total doors |
426 |
423 |
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SOURCE
Lance Allega, SVP, Investor Relations & Corporate Development, (410) 246-6810; Blake Simpson, SVP, Global Communications, Community Impact & Events, (443) 630-9959