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Oct. 30, 2020, 6:55 a.m. EDT

Under Armour Reports Third Quarter 2020 Results; Provides Outlook For 2020

BALTIMORE, Oct. 30, 2020 /PRNewswire/ -- Under Armour, Inc. /zigman2/quotes/208967132/composite UA -3.83% /zigman2/quotes/204420722/composite UAA -3.34% 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.

"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.

  • 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. A djusted 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

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:

  • 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.

  • C apital 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.

CONSOLIDATED STATEMENTS OF OPERATIONS



Three Months Ended September 30,
Nine Months Ended September 30,


2020
% of NetRevenues
2019
% of NetRevenues
2020
% of NetRevenues
2019
% of NetRevenues
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.

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.

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.

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.

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.

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.

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

 

 

Cision
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SOURCE Under Armour, Inc.

COMTEX_373675171/2454/2020-10-30T06:55:14

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