Under Armour Reports First Quarter 2021 Results; Raises Full Year Outlook

May 4, 2021 6:55 AM EDT

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BALTIMORE, May 4, 2021 /PRNewswire/ -- Under Armour, Inc. (NYSE: UA, UAA) today announced unaudited financial results for the first quarter ended March 31, 2021. 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, 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 is off to an excellent start for the year. Our first-quarter results demonstrate that our improved operating model and investments we're making to amplify our connection with consumers are enabling us to deliver against strong demand for our brand," said Under Armour President and CEO Patrik Frisk. "Additionally, with a solid balance sheet and well-managed inventory, we're confident in our ability to drive well through 2021 as we get back on offense and make measured progress to returning to sustainable, profitable growth over the long-term."

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 in Asia-Pacific (up 107 percent currency neutral), and decreased 9 percent in Latin 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 Under Armour's full-year 2021 outlook include:

  • 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 April 2020, Under Armour announced a restructuring plan designed to rebalance its cost base to improve profitability and cash flow. Of the estimated $550 million to $600 million restructuring plan range, the company has recognized $480 million of pre-tax charges, including $7 million in the first quarter of 2021. Of the $480 million recognized, there has been $126 million in cash-related charges and $354 million in non-cash-related charges. The company expects to realize approximately $35 million to $40 million in charges related to this plan in the second quarter.

COVID-19 Update

Under Armour remains focused on protecting teammate and consumer health and safety while working with its suppliers, partners, and customers to navigate potential disruptions. Given continued uncertainty related to COVID-19, there could be potential material impacts on its full-year business results in 2021.

Conference Call and Webcast

Under Armour will hold its first-quarter 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" 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 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. Designed to empower human performance, Under Armour's innovative products and experiences are engineered to make athletes better. For further information, please visit http://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 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.

 

Under Armour, Inc.

For the Three Months Ended March 31, 2021 and 2020

(Unaudited; in thousands, except per share amounts)

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,

2021

% of NetRevenues

2020

% of NetRevenues

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

 

Under Armour, Inc.

For the Three Months Ended March 31, 2021 and 2020

(Unaudited; in thousands)

NET REVENUES BY PRODUCT CATEGORY

Three Months Ended March 31,

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 March 31,

in '000s

2021

2020

% Change

North America

$

805,727

$

608,980

32.3

%

EMEA

193,883

137,904

40.6

%

Asia-Pacific

210,220

95,686

119.7

%

Latin America

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 March 31,

in '000s

2021

% of Net Revenues (2)

2020

% of Net Revenues (2)

North America

$

210,562

26.1

%

$

(3,773)

(0.6)

%

EMEA

26,686

13.8

%

3,704

2.7

%

Asia-Pacific

46,513

22.1

%

(36,841)

(38.5)

%

Latin America

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 Connected Fitness segment was discretely disclosed; however, effective January 1, 2021 Corporate Other now includes the remaining Connected Fitness business consisting of MapMyRun for Fiscal 2021 and the entire Connected Fitness, including MyFitnessPal for Fiscal 2020. All prior period balances were recast to conform to the current period presentation. Such reclassifications did not affect total consolidated net revenues, consolidated income from operations, or consolidated net income. Corporate Other primarily includes foreign currency hedge gains and losses related to revenues generated by entities within the Company's operating segments but managed through the Company's 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 a meaningful metric (NM).

 

Under Armour, Inc.

As of March 31, 2021, December 31, 2020 and March 31, 2020

(Unaudited; in thousands)

CONDENSED CONSOLIDATED BALANCE SHEETS

in '000s

March 31, 2021

December 31, 2020

March 31, 2020

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

Goodwill

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

 

Under Armour, Inc.

For the Three Months Ended March 31, 2021 and 2020

(Unaudited; in thousands)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

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

 

Under Armour, Inc.

For the Three Months Ended March 31, 2021

(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 March 31, 2021

Total Net Revenue

Net revenue growth - GAAP

35.1

%

Foreign exchange impact

(2.6)

%

Currency neutral net revenue growth - Non-GAAP

32.5

%

North America

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

%

Asia-Pacific

Net revenue growth - GAAP

119.7

%

Foreign exchange impact

(13.0)

%

Currency neutral net revenue growth - Non-GAAP

106.7

%

Latin America

Net revenue decline - GAAP

(9.0)

%

Foreign exchange impact

1.7

%

Currency neutral net revenue decline - Non-GAAP

(7.3)

%

Total International

Net revenue growth - GAAP

57.8

%

Foreign exchange impact

(7.6)

%

Currency neutral net revenue growth - Non-GAAP

50.2

%

 

Under Armour, Inc.

For the Three Months Ended March 31, 2021

(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 March 31, 2021

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 March 31, 2021

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 March 31, 2021

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

 

Under Armour, Inc.

Outlook for the Three Months Ended June 30, 2021 and Year Ended December 31, 2021

(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 June 30, 2021

Year Ended December 31, 2021

Low end of estimate

High end of estimate

Low end of estimate

High end of estimate

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 December 31, 2021

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 December 31, 2021

Low end of estimate

High end of estimate

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 $550 million to $600 million in restructuring and impairment charges, the impact of total charges to be realized in fiscal 2021 assumes the high-end of an estimated $77 million to $127 million range.

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 June 30, 2021 and the full year ended December 31, 2021. As a result of restructuring expenses incurred in fiscal year 2021, in connection with the 2020 restructuring plan, the United States and certain other foreign jurisdictions are considered loss jurisdictions for fiscal year 2021. These jurisdictions are accounted for discretely and excluded from the annual effective tax rate computation for purposes of computing the interim tax provision and a separate annual effective rate is calculated for each of these jurisdictions and applied against their respective year-to-date ordinary income or loss each quarter. As a result, the income tax expense for the three months ended June 30, 2021, is subject to significant variability based on the actual quarterly pre-tax results, and a meaningful estimated range of GAAP-based income tax expense cannot be provided. Given this variability, there is substantial uncertainty associated with accurately projecting the Company's GAAP-based income tax expense and GAAP-based diluted earnings per share for the three months ended June 30, 2021. Alternatively, Adjusted income tax expense includes all global jurisdictions in the annual effective tax rate mitigating significant quarterly variability. Therefore, a reconciliation to the Company's adjusted diluted earnings per share for the three months ended June 30, 2021 has not been provided, as the Company believes the reconciliation is not meaningful.

The Company's net income for the three months ended June 30, 2021, is expected to be impacted by approximately $35 to $40 million of restructuring and impairment charges, and approximately $5 million of non-cash amortization of debt discount on its convertible debt, both of which are excluded for purposes of calculating adjusted net income.

 

Under Armour, Inc.

As of March 31, 2021 and 2020

BRAND HOUSE AND FACTORY HOUSE DOOR COUNT

March 31,

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

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/under-armour-reports-first-quarter-2021-results-raises-full-year-outlook-301282671.html

SOURCE Under Armour, Inc.



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