Under Armour(UA) - 2023 Q3 - Quarterly Report

Revenue Performance - Total net revenues increased by 3.4% for the three months ended December 31, 2022, compared to the same period in 2021[125]. - Wholesale revenue increased by 6.8%, while direct-to-consumer revenue decreased by 0.7%[125]. - Net sales increased by $46.8 million, or 3.1%, to$ 1,535.0 million for the three months ended December 31, 2022, compared to $1,488.2 million for the same period in 2021[136]. - Total net revenues increased by$ 52.6 million to $1,581.8 million during the three months ended December 31, 2022, a growth of 3.4% year-over-year[155]. - Total net revenues for the nine months ended December 31, 2022, increased by$ 78.5 million, or 1.8%, to $4,504.7 million compared to the same period in 2021[135]. Regional Performance - The company experienced a 2.4% decrease in net revenue in North America, while EMEA saw an increase of 32.5%[125]. - North America net revenues decreased by$ 25.7 million, or 2.4%, to $1,037.6 million, primarily due to a decline in the wholesale channel[155]. - EMEA region net revenues increased by$ 65.0 million, or 32.5%, to $265.3 million, driven by higher wholesale channel performance[155]. - Asia-Pacific region net revenues decreased by$ 19.2 million, or 8.8%, to $198.0 million, impacted by COVID-19 related restrictions[157]. - Latin America region net revenues increased by$ 19.8 million, or 44.9%, to $63.8 million, attributed to a shift to a distributor operating model[157]. Product Performance - Apparel revenue decreased by 2.1%, footwear revenue increased by 25.3%, and accessories revenue decreased by 1.7%[125]. - Footwear sales increased by 25.3% to$ 354.4 million for the three months ended December 31, 2022, while apparel sales decreased by 2.1% to $1,075.7 million[134]. Financial Metrics - Gross margin decreased by 650 basis points to 44.2%[125]. - Gross profit decreased by$ 77.5 million to $698.4 million for the three months ended December 31, 2022, with gross margin dropping to 44.2% from 50.7%[140]. - Total operating income increased by$ 8.5 million to $94.7 million during the three months ended December 31, 2022, a 9.9% increase year-over-year[158]. - Total operating income decreased by$ 130.8 million, or 34.5%, to $248.6 million for the nine months ended December 31, 2022[164]. Expenses and Income - Selling, general and administrative expenses decreased by 10.6%[125]. - Selling, general and administrative expenses decreased by$ 71.9 million, or 10.6%, to $603.7 million for the three months ended December 31, 2022[144]. - Net income for the three months ended December 31, 2022, was$ 121.6 million, compared to $109.7 million in the same period in 2021, representing an increase of 10.5%[131]. - Interest expense, net decreased by$ 6.0 million to $1.6 million during the three months ended December 31, 2022, a reduction of 78.7% compared to the same period in 2021[147]. - Other income (expense), net increased by$ 23.3 million to income of $47.3 million during the three months ended December 31, 2022, representing a 96.8% increase year-over-year[151]. - Income tax expense increased by$ 25.6 million to $18.8 million during the three months ended December 31, 2022, with an effective tax rate of 13.4% compared to a benefit of (6.6)% in the same period in 2021[152]. Cash Flow and Capital Expenditures - Cash provided by operating activities decreased by$ 741.0 million to $74.4 million for the nine months ended December 31, 2022[171]. - Cash flows used in investing activities increased by$ 52.2 million compared to the nine months ended December 31, 2021, primarily due to an increase in capital expenditures of $86.3 million, totaling$ 147.6 million or approximately 3% of net revenues[173]. - Capital expenditures included $48.8 million for the construction of a new global headquarters, aligning with the company's long-term sustainability strategy[173]. - Cash flows used in financing activities decreased by$ 292.2 million compared to the nine months ended December 31, 2021, with $125.0 million paid for share repurchases[174]. Share Repurchase and Debt - The company repurchased a total of$ 425 million or 34.9 million shares of Class C Common Stock under its share repurchase program[169]. - The amended credit agreement provides for revolving credit commitments of $1.1 billion, with no amounts outstanding as of December 31, 2022[176]. - The company issued$ 500.0 million in 1.50% convertible senior notes due 2024, with approximately $80.9 million remaining outstanding after exchanges[178]. - The company issued$ 600.0 million in 3.250% senior unsecured notes due June 15, 2026, with proceeds used to pay down amounts under the revolving credit facility[180]. Market Conditions and Challenges - The ongoing impacts of COVID-19 in China caused labor disruptions and temporary closures, affecting financial results[126]. - The company anticipates continued challenges from inflationary pressures and fluctuations in foreign currency exchange rates[127]. - The company expects continued pressure on gross margins due to higher discounting, elevated product input costs, and foreign exchange impacts[141]. - The company has not experienced significant changes to its market risk since December 31, 2021[182].