BALTIMORE, Oct. 30, 2020 /PRNewswire/ -- Under Armour, Inc. (NYSE: UA, UAA) today announced financial results for the third quarter ended September 30, 2020. 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 2020 restructuring plan and related impairment charges, impairments associated with certain long-lived assets and goodwill and related tax effects, and with respect to certain measures, the non-cash amortization of debt discount on the company's convertible debt, deal-costs related to the pending sale of MyFitnessPal and related tax effects. The reconciliation of non-GAAP amounts to the most directly comparable financial measure calculated according to GAAP is 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.)

"Our third-quarter results reflect considerably better than expected performance due to higher demand and our strong execution, especially in North America," said Under Armour President and CEO Patrik Frisk. "We believe that the critical mass of our transformational challenges is behind us, and we remain sharply focused on operational improvements and financial discipline to accelerate strategies to create sustainable, long-term growth for the Under Armour brand and our shareholders."

Third Quarter 2020 Review

  • Revenue was flat at $1.4 billion compared to the prior year.
    • Wholesale revenue decreased 7 percent to $830 million and direct-to-consumer revenue increased 17 percent to $540 million, driven by continued strong growth in eCommerce.
    • North America revenue decreased 5 percent to $963 million and international revenue increased 18 percent to $433 million (up 17 percent currency neutral). Within the international business, revenue increased 31 percent in EMEA (up 26 percent currency neutral), increased 15 percent in Asia-Pacific (up 16 percent currency neutral), and decreased 15 percent in Latin America (down 7 percent currency neutral).
    • Apparel revenue decreased 6 percent to $927 million. Footwear revenue increased 19 percent to $299 million. Accessories revenue increased 23 percent to $145 million.
  • Gross margin decreased 40 basis points to 47.9 percent compared to the prior year, driven primarily by negative impacts from COVID-19 related discounting and product mix partially offset by supply chain efficiencies and channel mix.
  • Selling, general & administrative expense was relatively unchanged from the prior year at $554 million.
  • Restructuring and impairment charges were $74 million consisting of $70 million of restructuring and related impairment charges and $4 million from long-lived asset impairments. Through the third quarter, the company has recognized $550 million of restructuring and impairment charges consisting of $410 million in restructuring and related impairment charges ($326 million in non-cash and $84 million in cash) and $140 million from impairments of long-lived assets and goodwill.
  • Operating income was $59 million. Excluding the impact of restructuring and impairment charges, adjusted operating income was $133 million.
  • Net income was $39 million. Adjusted net income was $118 million.
  • Diluted earnings per share was $0.09. Adjusted diluted earnings per share was $0.26.
  • Inventory was up 17 percent to $1.1 billion.
  • Cash and Liquidity
    • The company ended the third quarter with Cash and Cash Equivalents of $866 million.
    • No borrowings were outstanding under the company's $1.1 billion revolving credit facility at the end of the third quarter.

Fiscal 2020 Outlook

Due to ongoing uncertainty related to COVID-19 and its potential effect on global markets, the company expects material impacts on its business results for the remainder of 2020 and into 2021. Key points related to Under Armour's full-year 2020 outlook include:

  • Revenue is expected to be down at a high-teen percentage rate compared to 2019 results, reflecting a low twenties percentage rate decline in North America and a high-single-digit percentage rate decline within the international business. For the fourth quarter, the company now expects revenue to be down at a low-teen percentage rate, versus the previous down 20 to 25 percent expectation, impacted by the following factors:
    •  Expected year-end timing impacts from COVID-19, related to customer order flow and changes in supply chain timing resulting in more planned spring product deliveries in early 2021 versus late 2020.
    • An anticipated substantial decline in licensing revenue due to lower contractual royalty minimums and contract settlements realized in the prior year.
    • Lower planned excess inventory sales to the off-price channel.
  • Gross margin is expected to be up 20 to 40 basis points versus 2019 due to channel mix benefits and supply chain efficiencies, offset mainly by discounting related to COVID-19. For the fourth quarter, the company anticipates meaningful gross margin pressure primarily related to expectations around a more promotional environment relative to the prior year.
  • Operating loss is expected to reach approximately $800 million to $860 million. Excluding the impact of restructuring and impairment charges, adjusted operating loss is expected to reach approximately $140 million to $150 million.
  • Adjusted interest and other expense net is planned at approximately $55 million.
  • Adjusted diluted loss per share is expected to be in the range of $0.47 to $0.49.
  • Inventory is expected to be up approximately 10 percent at the end of 2020.
  • Capital expenditures are planned at approximately $80 million compared to $144 million in 2019.

COVID-19 Update

Under Armour continues to monitor COVID-19 globally, complying with guidance from government entities and public health authorities. The company remains focused on protecting our teammates and consumers' health and safety while working with our suppliers and customers to minimize potential disruptions. The vast majority of locations where Under Armour is sold are now open. In the company's owned and operated retail stores, traffic trends remain challenged; however, conversion trends remain strong. Additionally, the company experienced significant eCommerce growth around the world during the quarter. The fourth quarter and full-year outlook provided today assume the vast majority of retail locations where Under Armour is sold will continue to remain open and operate under similar health and safety requirements for the remainder of the year.

MyFitnessPal Platform Sale Announcement

In a separate press release today, the company announced that it has entered into a definitive agreement to sell the MyFitnessPal platform to Francisco Partners, a private equity firm. The transaction value is $345 million, inclusive of the achievement of potential earn-out payments and subject to working capital and other customary adjustments. The transaction, which is expected to close in the fourth quarter of 2020, is subject to customary closing conditions and regulatory approvals. The fourth quarter and full-year outlook provided today do not include the impact of the potential sale of MyFitnessPal.

MyFitnessPal is currently reported within Under Armour's Connected Fitness segment, which also contains the MapMyFitness and Endomondo platforms. In conjunction with this announcement, the company indicated that it would discontinue its Endomondo platform at the end of 2020. The MapMyFitness platform, which includes MapMyRun and MapMyRide, remains a crucial element of Under Armour's digital strategy, as does its connected footwear business.

Conference Call and Webcast

Under Armour will hold its third quarter 2020 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 about 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 exchange rates. Management believes this information is useful 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 net loss and adjusted diluted loss per share also exclude the non-cash amortization of debt discount on the company's convertible senior notes, deal-costs related to the pending sale of MyFitnessPal and related tax effects. 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. Similarly, deal costs are not core to the company's operation given dispositions are infrequent and non-recurring in nature. 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 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, 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, the impact of the COVID-19 pandemic on our business, our plans to reduce our 2020 operating expenses, anticipated charges and restructuring costs, projected savings related to our restructuring plans and our planned sale of our MyFitnessPal platform and the timing thereof. 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: 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; changes to the financial health of our customers; 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; our ability to access capital and financing required to manage our business on terms acceptable to us; our ability to successfully execute our long-term strategies; our ability to successfully execute any potential restructuring plans and realize their expected benefits; 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; 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; 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 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, 2020, and 2019

(Unaudited; in thousands, except per share amounts)


CONSOLIDATED STATEMENTS OF OPERATIONS




Three Months Ended September 30,


Nine Months Ended September 30,



2020


% of Net
Revenues


2019


% of Net
Revenues


2020


% of Net
Revenues


2019


% of Net
Revenues

Net revenues


$

1,433,021



100.0

%


$

1,429,456



100.0

%


$

3,070,901



100.0

%


$

3,825,907



100.0

%

Cost of goods sold


746,701



52.1

%


739,558



51.7

%


1,604,428



52.2

%


2,036,901



53.2

%

Gross profit


686,320



47.9

%


689,898



48.3

%


1,466,473



47.8

%


1,789,006



46.8

%

Selling, general and administrative expenses


553,549



38.6

%


550,978



38.5

%


1,586,156



51.7

%


1,626,309



42.5

%

Restructuring and impairment charges


74,201



5.2

%




%


549,601



17.9

%




%

Income (loss) from operations


58,570



4.1

%


138,920



9.7

%


(669,284)



(21.8)

%


162,697



4.3

%

Interest expense, net


(14,955)



(1.0)

%


(5,655)



(0.4)

%


(32,251)



(1.1)

%


(15,881)



(0.4)

%

Other expense, net


(7,184)



(0.5)

%


(429)



%


(10,493)



(0.3)

%


(2,224)



(0.1)

%

Income (loss) before income taxes


36,431



2.5

%


132,836



9.3

%


(712,028)



(23.2)

%


144,592



3.8

%

Income tax expense (benefit)


(3,714)



(0.3)

%


29,344



2.1

%


14,696



0.5

%


31,735



0.8

%

Loss from equity method investments


(1,199)



(0.1)

%


(1,177)



(0.1)

%


(6,906)



(0.2)

%


(5,414)



(0.1)

%

Net income (loss)


$

38,946



2.7

%


$

102,315



7.2

%


$

(733,630)



(23.9)

%


$

107,443



2.8

%


















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


$

0.09





$

0.23





$

(1.62)





$

0.24




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


$

0.09





$

0.23





$

(1.62)





$

0.24




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

Basic


454,541





451,385





453,847





450,739




Diluted


456,674





454,695





453,847





454,047




 

 

Under Armour, Inc.

For the Three and Nine Months Ended September 30, 2020, and 2019

(Unaudited; in thousands)


NET REVENUES BY PRODUCT CATEGORY




Three Months Ended September 30,


Nine Months Ended September 30,



2020


2019


% Change


2020


2019


% Change

Apparel


$

927,041



$

985,623



(5.9)

%


$

1,951,186



$

2,499,989



(22.0)

%

Footwear


298,687



250,596



19.2

%


693,464



827,223



(16.2)

%

Accessories


145,060



118,164



22.8

%


268,912



306,406



(12.2)

%

Total net sales


1,370,788



1,354,383



1.2

%


2,913,562



3,633,618



(19.8)

%

Licensing revenues


25,121



29,602



(15.1)

%


51,244



76,567



(33.1)

%

Connected Fitness


36,894



39,346



(6.2)

%


102,600



101,385



1.2

%

Corporate Other (1)


218



6,125



(96.4)

%


$

3,495



$

14,337



(75.6)

%

Total net revenues


$

1,433,021



$

1,429,456



0.2

%


$

3,070,901



$

3,825,907



(19.7)

%




NET REVENUES BY SEGMENT




Three Months Ended September 30,


Nine Months Ended September 30,



2020


2019


% Change


2020


2019


% Change

North America


$

962,565



$

1,015,920



(5.3)

%


$

2,021,247



$

2,675,389



(24.5)

%

EMEA


210,111



160,981



30.5

%


437,140



440,405



(0.7)

%

Asia-Pacific


178,895



154,898



15.5

%


397,846



453,296



(12.2)

%

Latin America


44,338



52,186



(15.0)

%


108,573



141,095



(23.0)

%

Connected Fitness


36,894



39,346



(6.2)

%


102,600



101,385



1.2

%

Corporate Other (1)


218



6,125



(96.4)

%


3,495



$

14,337



(75.6)

%

Total net revenues


$

1,433,021



$

1,429,456



0.2

%


$

3,070,901



$

3,825,907



(19.7)

%





INCOME (LOSS) FROM OPERATIONS




Three Months Ended September 30,


Nine Months Ended September 30,



2020

% of Net Revenues (2)


2019

% of Net Revenues (2)


2020

% of Net Revenues (2)


2019


% of Net Revenues (2)

North America


$

224,593


23.3

%


$

237,229


23.4

%


$

251,579


12.4

%


$

536,700



20.1

%

EMEA


40,834


19.4

%


21,989


13.7

%


43,840


10.0

%


44,700



10.1

%

Asia-Pacific


19,248


10.8

%


34,666


22.4

%


(30,040)


(7.6)

%


74,116



16.4

%

Latin America


1,802


4.1

%


233


0.4

%


(50,756)


(46.7)

%


(4,017)



(2.8)

%

Connected Fitness


6,629


18.0

%


7,023


17.8

%


14,020


13.7

%


8,103



8.0

%

Corporate Other


(234,536)


NM



(162,220)


NM



(897,927)


NM



(496,905)



NM


Income (loss) from operations


$

58,570


4.1

%


$

138,920


9.7

%


$

(669,284)


(21.8)

%


$

162,697



4.3

%


(1) Corporate Other consists of foreign currency hedge gains and losses related to revenues generated by entities within our geographic operating segments but managed through our central foreign exchange risk management program.


(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 it is not a meaningful metric (NM).

 

 

Under Armour, Inc.

As of September 30, 2020, December 31, 2019, and September 30, 2019

(Unaudited; in thousands)


CONDENSED CONSOLIDATED BALANCE SHEETS




September 30, 2020


December 31, 2019


September 30, 2019

Assets







Current assets







Cash and cash equivalents


$

865,609



$

788,072



$

416,603


Accounts receivable, net


806,916



708,714



843,495


Inventories


1,056,845



892,258



906,544


Prepaid expenses and other current assets


243,971



313,165



292,447


Total current assets


2,973,341



2,702,209



2,459,089


Property and equipment, net


680,871



792,148



778,894


Operating lease right-of-use assets


560,146



591,931



595,832


Goodwill


493,631



550,178



541,798


Intangible assets, net


37,274



36,345



37,811


Deferred income taxes


45,995



82,379



90,860


Other long-term assets


72,293



88,341



129,481


Total assets


$

4,863,551



$

4,843,531



$

4,633,765


Liabilities and Stockholders' Equity







Accounts payable


$

643,315



$

618,194



483,627


Accrued expenses


309,096



374,694



309,305


Customer refund liabilities


197,496



219,424



209,785


Operating lease liabilities


156,885



125,900



119,446


Other current liabilities


141,607



83,797



77,498


Total current liabilities


1,448,399



1,422,009



1,199,661


Long term debt, net of current maturities


997,347



592,687



591,995


Operating lease liabilities, non-current


872,791



580,635



588,490


Other long-term liabilities


74,668



98,113



99,953


Total liabilities


3,393,205



2,693,444



2,480,099


Total stockholders' equity


1,470,346



2,150,087



2,153,666


Total liabilities and stockholders' equity


$

4,863,551



$

4,843,531



$

4,633,765


 

 

Under Armour, Inc.

For the Nine Months Ended September 30, 2020, and 2019

(Unaudited; in thousands)


CONSOLIDATED STATEMENTS OF CASH FLOWS



Nine Months Ended September 30,


2020


2019

Cash flows from operating activities




Net income (loss)

$

(733,630)



$

107,443


Adjustments to reconcile net income (loss) to net cash used in operating activities




Depreciation and amortization

124,169



140,443


Unrealized foreign currency exchange rate gain (loss)

(3,676)



12,885


Loss on disposal of property and equipment

3,547



2,884


Impairment charges

452,945




Amortization of bond premium

6,910



190


Stock-based compensation

32,770



38,048


Deferred income taxes

19,172



23,827


Changes in reserves and allowances

22,910



(22,778)


Changes in operating assets and liabilities:




Accounts receivable

(105,874)



(187,585)


Inventories

(159,930)



123,364


Prepaid expenses and other assets

64,404



73,753


Other non-current assets

(288,111)



5,939


Accounts payable

17,972



(67,336)


Accrued expenses and other liabilities

301,720



(52,466)


Customer refund liabilities

(23,164)



(88,710)


Income taxes payable and receivable

18,159



(7,433)


Net cash provided by (used in) operating activities

(249,707)



102,468


Cash flows from investing activities




Purchases of property and equipment

(71,639)



(105,767)


Purchases of other assets



(1,273)


Purchase of businesses

(38,848)




Net cash used in investing activities

(110,487)



(107,040)


Cash flows from financing activities




Proceeds from long term debt and revolving credit facility

1,288,753



25,000


Payments on long term debt and revolving credit facility

(800,000)



(162,817)


Purchase of capped call

(47,850)




Employee taxes paid for shares withheld for income taxes

(3,285)



(4,088)


Proceeds from exercise of stock options and other stock issuances

3,855



5,797


Payments of debt financing costs

(5,150)



(2,661)


Other financing fees



77


Net cash provided by (used in) financing activities

436,323



(138,692)


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

2,398



4,809


Net increase in (decrease in) cash, cash equivalents and restricted cash

78,527



(138,455)


Cash, cash equivalents and restricted cash




Beginning of period

796,008



566,060


End of period

$

874,535



$

427,605


 

 

Under Armour, Inc.

For the Three Months Ended September 30, 2020

(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
September 30, 2020

Total Net Revenue



Net revenue growth - GAAP


0.2

%

Foreign exchange impact


%

Currency neutral net revenue growth - Non-GAAP


0.2

%




North America



Net revenue decline - GAAP


(5.3)

%

Foreign exchange impact


0.2

%

Currency neutral net revenue decline - Non-GAAP


(5.1)

%




EMEA



Net revenue growth - GAAP


30.5

%

Foreign exchange impact


(4.3)

%

Currency neutral net revenue growth - Non-GAAP


26.2

%




Asia-Pacific



Net revenue growth - GAAP


15.5

%

Foreign exchange impact


0.1

%

Currency neutral net revenue growth - Non-GAAP


15.6

%




Latin America



Net revenue decline - GAAP


(15.0)

%

Foreign exchange impact


8.2

%

Currency neutral net revenue decline - Non-GAAP


(6.8)

%




Total International



Net revenue growth - GAAP


17.7

%

Foreign exchange impact


(0.6)

%

Currency neutral net revenue growth - Non-GAAP


17.1

%

 

 

Under Armour, Inc.

For the Three Months Ended September 30, 2020

(Unaudited)


The tables below present the reconciliation of the Company's 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




Three months ended September 30, 2020

Income from operations


$

58,570


Add: Impact of restructuring and related impairment


70,232


Add: Impact of impairment


3,969


Adjusted income from operations


$

132,771





ADJUSTED NET INCOME RECONCILIATION




Three months ended September 30, 2020

Net income


$

38,946


Add: Impact of restructuring and related impairment


68,208


Add: Impact of impairment


3,855


Add: Impact of amortization of debt discount


4,894


Add: Impact of deal-related costs


2,149


Adjusted net income


$

118,052





ADJUSTED DILUTED EARNINGS PER SHARE RECONCILIATION




Three months ended September 30, 2020

Diluted net income per share


$

0.09


Add: Impact of restructuring and related impairment


0.15


Add: Impact of impairment


0.01


Add: Impact of amortization of debt discount


0.01


Add: Impact of deal-related costs



Adjusted diluted income per share


$

0.26


 

 

Under Armour, Inc.

As of September 30, 2020, and 2019


BRAND HOUSE AND FACTORY HOUSE DOOR COUNT




September 30,



2020


2019

Factory House


172


167

Brand House


18


18

 North America total doors                                         


190


185






Factory House


122


96

Brand House


116


89

 International total doors


238


185






Factory House


294


263

Brand House


134


107

 Total doors


428


370

 

 

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SOURCE Under Armour, Inc.

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