Under Armour(US:UA)2022-11-07 16:00Financial Performance - Total net revenues for the three months ended September 30, 2022, increased by 1.8% compared to the same period in 2021, reaching $1,573,885 thousand[126]. - Net income for the three months ended September 30, 2022, was $86,925 thousand, down from $113,444 thousand in the same period of 2021[133]. - Total net revenues increased by $28.4 million to $1,573.9 million during the three months ended September 30, 2022, a 1.8% increase, driven by growth in EMEA and Asia-Pacific regions[159]. - Total net revenues for the six months ended September 30, 2022, increased by $25.9 million, or 0.9%, to $2,922.9 million compared to $2,897.1 million for the same period in 2021[165]. Revenue Breakdown - Wholesale revenue increased by 4.1%, while direct-to-consumer revenue decreased by 4.4% during the same period[126]. - Net revenue in North America decreased by 2.3%, while EMEA, Asia-Pacific, and Latin America saw increases of 8.9%, 6.5%, and 3.2%, respectively[126]. - North America net revenues decreased by $24.0 million, or 2.3%, to $1,011.8 million, primarily due to declines in wholesale and direct-to-consumer channels[160]. - EMEA net revenues increased by $21.5 million, or 8.9%, to $262.7 million, driven by an increase in the wholesale channel[160]. - Asia-Pacific net revenues increased by $13.8 million, or 6.5%, to $225.7 million, supported by growth in both wholesale and direct-to-consumer channels[160]. - North America net revenues decreased by $20.2 million, or 1.0%, to $1,921.2 million, primarily due to a decline in direct-to-consumer sales[167]. - EMEA region net revenues increased by $19.4 million, or 4.3%, to $467.9 million, driven by an increase in the wholesale channel[167]. - Asia-Pacific region net revenues decreased by $1.9 million, or 0.5%, to $402.4 million, impacted by COVID-19 related restrictions[167]. Cost and Expenses - Gross margin decreased by 560 basis points to 45.4%[126]. - Cost of goods sold increased to $860,051 thousand from $757,428 thousand year-over-year[133]. - Selling, general and administrative expenses decreased by 0.8% to $594,424 thousand[126]. - Selling, general and administrative expenses decreased by $5.0 million, or 0.8%, to $594.4 million for the three months ended September 30, 2022, as a percentage of net revenues decreased to 37.8% from 38.8%[147]. - Cost of goods sold as a percentage of net revenues increased to 54.6% for the three months ended September 30, 2022, compared to 49.0% in the prior year[134]. - Selling, general and administrative expenses increased by $45.8 million, or 4.0%, during the six months ended September 30, 2022, as a percentage of net revenues increased to 40.7% from 39.5%[147]. Profitability - Gross profit decreased by $74.3 million to $713.8 million during the three months ended September 30, 2022, with a gross margin of 45.4%, down from 51.0% in the prior year[142]. - Net income for the three months ended September 30, 2022, was 5.5% of net revenues, down from 7.3% in the same period of 2021[134]. - Total operating income decreased by $52.7 million to $119.4 million during the three months ended September 30, 2022, a 30.6% decrease, primarily due to lower revenues and higher costs[162]. - Total operating income decreased by $139.4 million, or 47.5%, to $153.9 million, primarily due to lower revenues and increased costs[168]. - Operating income in North America decreased by $83.2 million to $209.2 million, a 28.4% decline, attributed to lower revenues and increased costs[163]. - Operating income in North America decreased by $119.0 million, or 22.9%, to $399.1 million, driven by lower gross profit and increased expenses[170]. Cash Flow and Liquidity - Cash flows used in operating activities were $(2.5) million, a decrease of $362.9 million compared to $360.5 million in the prior year[177]. - As of September 30, 2022, the company had approximately $853.7 million in cash and cash equivalents, sufficient to meet liquidity needs for at least the next twelve months[173]. - Cash flows used in financing activities decreased by $365.2 million compared to the six months ended September 30, 2021[182]. Debt and Financing - The company issued $500.0 million aggregate principal amount of 1.50% convertible senior notes due 2024, with net proceeds of $488.8 million[187]. - The company issued $600.0 million aggregate principal amount of 3.250% senior unsecured notes due June 15, 2026, with proceeds used to pay down amounts under the revolving credit facility[190]. - The amended credit agreement provides for revolving credit commitments of $1.1 billion, with no amounts outstanding as of September 30, 2022[183]. - The company is required to maintain a consolidated EBITDA to consolidated interest expense ratio of not less than 3.50 to 1.0 as of September 30, 2022[183]. - The company recognized losses on debt extinguishment of $34.7 million and $23.8 million during the second and third quarters of Fiscal 2021, respectively[187]. - As of September 30, 2022, the company was in compliance with all applicable covenants under the amended credit agreement[183]. - The company has the option to redeem the convertible senior notes at a price equal to 100% of the aggregate principal amount plus accrued interest, under certain conditions[189]. Future Outlook - The company faced increased freight expenses and ongoing COVID-19 related impacts, particularly in China, affecting overall performance[124]. - The company anticipates continued challenges from the COVID-19 pandemic and inflationary pressures impacting future financial results[127][128]. - The fiscal year was changed from December 31 to March 31, with the current fiscal year running from April 1, 2022, to March 31, 2023[132]. Restructuring and Impairment - Restructuring and impairment charges were $0 for the three and six months ended September 30, 2022, compared to $16.7 million and $19.3 million for the same periods in 2021, representing a 100% decrease[148]. Interest and Other Expenses - Interest expense, net decreased by $5.7 million to $3.6 million during the three months ended September 30, 2022, a 61.6% reduction, and decreased by $13.0 million to $9.6 million during the six months ended September 30, 2022, a 57.6% reduction[150]. - Other expense, net decreased by $23.7 million to $5.8 million during the three months ended September 30, 2022, an 80.4% decrease, and decreased by $48.0 million to $20.0 million during the six months ended September 30, 2022, a 70.6% decrease[154]. - Income tax expense increased by $3.3 million to $22.3 million during the three months ended September 30, 2022, a 17.3% increase, while it decreased by $1.1 million to $27.9 million during the six months ended September 30, 2022, a 3.8% decrease[155].