Kevin A. Plank
President and Chief Executive Officer at Under Armour
Thank you, Lance, and everyone joining us on this morning's call. Our fiscal 3rd-quarter results exceeded expectations, driven by strong gross margin performance with revenue also surpassing our forecast. With these results, I'm pleased we were able to raise our full-year outlook again, demonstrating that our strategies to reposition the Under brand are gaining traction. Much of the credit goes to our actions of reducing promotions and discounts in our e-commerce business, which has contributed nicely to improved gross margin this year. A key metric for our consumers value our brand and a core validation of the pricing power, we intend to increase and leverage over-time as we work to improve the quality of our revenue from mostly good level product to more better and best level, under armor that consumers will choose to buy. As discussed at our investor meeting in December, the idea of balance in our logo structure is fundamental to our ambition for the brand we are building and how we expect to run the business efficiently going-forward. This will take time, but our strategy is sound and beginning to take root as each day we get stronger than the one before. Also at our investor meeting, we provided a comprehensive overview of our product, brand and commercial strategies, along with other key initiatives designed to enhance Under ability to achieve better long-term financial results focusing on product, story, service and team. We are fully committed to these strategies, including launching an improved product lineup in fall/winter '25, establishing distinctive underdog Muse in our storytelling and implementing intentional, disciplined marketplace management across our regions. Perhaps most importantly, we wanted you to meet our management team and experience our energy and dedication to this exceptional brand, clarifying where we are, where we're headed and how our leadership talent will drive our objectives. First, as a brand rooted in sports that creates solutions for athletes, our human connection and dedication to achieving challenging goals are in our DNA. Grounded in athletic performance, our sports house identity offers a significant advantage in our mission to reposition Under Armour. It is unique to only a handful of athletic brands, which can outfit athletes on any field, court or pitch across virtually any athletic endeavor worldwide. However, sitting in a broader sports industry with multiple competitors, both bigger and smaller, we are fortunate to be bigger than the new trending brands, yet more agile than the bigs, an aspect we plan to use to our advantage. This position provides us with an exceptional broad-based platform to speak directly to and create amazing products for our athletes. First, our product machine is working as the first-place I focused on when reassuming the CEO role last April due to the 18-month lead times we have in our industry to build products for the market, it was imperative to get our product trajectory in the right direction as it takes the longest. Beginning with supporting leadership for Yassin as Chief Product Officer and the entire product organization from innovation through design, we've made significant progress in enhancing our athletic performance and new sportswear offerings, blending those elements of innovation, fabric and trim, thought leadership with aggressive young and fearless design. Highlighting the 3rd-quarter was the launch of the first signature shoe for curry brand athlete Fox, the Fox One. Designed to complement his speed and optimize his performance on the court, quickly showcased them, becoming only the third player in NBA history to score at least 109 points in two consecutive games for the Fox One debut. The shoe features some of the best innovations the Curry brand is known for, including our patented Flow Soul technology and is available exclusively through our DTC channels and Sporting Goods, a key retail partner we plan to win with through this next chapter. More on the footwear front, the spring/summer 25 season, which kicks off with four sets later this month, introduces Echo Footwear, the latest version of our SlipSpeed platform. The Echo showcases new technology and an evolved design language from the original versions. After seeding it ahead of the upcoming NBA All-Star weekend, which will include a unique collaboration to be unveiled in limited pairs for launch, the initial buzz has started and we're eager to release the SlipSpeed Echo more broadly in the coming months. Additionally, on the apparel side, new better and best products are coming this season, including elevated offerings from our unstoppable Meridian collections, putting to test the underlying pricing power we intend to increasingly establish in the coming seasons. It is encouraging that these more premium-level products have continued to perform well over the past several quarters. So we're building confidence that these offerings will help us achieve a better balance in our good, better, best product segmentation. Another solid proof point in our move toward a more meaningful sportswear presence and business is the success we saw with one of our premium fleece offerings, the $120 UA icon heavyweight hoodie, which has seen terrific sell-through, particularly traction with young athletes who we are actively reintroducing ourselves to. Our innovation capabilities consistently rank among the best-in the industry. Recent examples include Women's Health Magazine naming the UA Infinity 2.0 High as the best high-impact sports bra in December. And men's Health Magazine selecting the UA project rock BSR4 shoes as the most versatile cross-training shoes for men. Not to mention the new suspension backpack we demonstrated at our investor meeting, which will hit stores this fall, built with our patent-pending auxetic strap and braking system, I got to tell you, it makes you feel like you're carrying half the weight, a great metaphor for the problems we hope to solve with every Underrummer product we build for our athletes to make you better. From an operational perspective, we continue to refine our focus through a streamlined creation, process, assortment and merchandising strategy to achieve a more intentional product presentation for athletes and especially our retail partners. Leading this effort are initiatives to reduce SKUs across all assortments by 25%. In addition to the components that make-up our products like cutting footwear foams by about 50% to anchor around consistent underfoot cushioning across our charged hover and flow midsoles. And narrowing our materials library to those with volumes or multiple end uses that bring the best articulation of our fabric superiority and highest margins, all efforts to allow our designers to enhance efficiency and effectiveness in doing their work, effectively doing more with less. As we've previously discussed, we are transitioning from an apparel footwear and accessory-led operating model to a consumer-focused category managed model that emphasizes singular accountability leadership in team sports, train, golf, basketball, run, sportswear, outdoor and other key sports that serve as authenticators in specific regions. This change will enable us to better understand and meet athletes' needs by enhancing strategic alignment across our product, marketing and commercial teams, driven by more direct financial accountability and clear definitions of each category's role in our overall go-to-market strategy. The brand operationally has relied on the process of the UA machine that have been built and running for us the past several years. But without enough clear individual accountability, I don't believe we've optimized our performance. So our new category-led operating model addresses this head-on. Beginning with our people, this will mostly be a shift in what many of the roles our teammates are already responsible for as we are primarily reassigning existing talent into the category model with their refined responsibility and as a result, bringing absolute clarity to what is expected of them and their respective teams each and every day as well as a clear definition of success. This, I believe is the most fundamental key to unlocking the winning culture we expect and are establishing at Under Armour. As we transition to our new operating model this month, led by recently named brand President, Eric Lidky, we have a seasoned team ready to hit the ground running as we improve and perfect our processes over the coming seasons. Key to the benefit of what it will deliver for us is in Eric's new role leading for the brand, which now integrates product and story within the same go-to-market leadership and accountability. At Under Armour, our currency is product and our voice is the compelling story that we tell about those amazing products. With our team now in-place and running the 18 month product go-to-market, I am now turning our emphasis to layering excellent story into this machine, meaning exactly how we will market this brand. During our recent investor meeting, Eric outlined our goal of improving all aspects of marketing and brand strategy to foster a stronger connection with young team sport athletes. Put simply, we will stop asking them to buy our product through performance marketing, which has led to the promotions that have plagued our recent history. Instead, we will focus on showing them why they should love our individual products and our brand. And as we get that right, they will then love to buy our great products. This is in-flight. So our mission is to capture the hearts and minds of young team sport athletes. We are dedicated to refining our messaging to bring this narrative to life in ways only Under Armour can as we remain fundamentally connected to the underdog mindset. The intense athlete who carries a chip on their shoulder, underrated athlete eager to prove their worth and demonstrate their extraordinary potential to the world. So as we strive to forge deeper, more meaningful connections with consumers, our UA Next Global Grassroots program focused on enhancing the next-generation of athletes has become an essential platform for us. In November, building on our fall soccer or football brand activation in EMEA, we held a Paris experience which featured Real Madrid defender Tony Rudiger and Sasha Bowie, a promising defender from Bayern Munich. The event included offensive master class highlighting our commitment to nurturing young football talent. As a crucial global authenticator, our athlete roster continues to grow, including the recent added Brazilian player Douglas Costa, who plays for Sydney Football Club and Torres, a promising young Spanish talent from Barcelona FC. In January, we wrapped up the UA Next All America games in Orlando that were broadcast on ESPN. These are more than 130 of the nation's top high-school football and volleyball players. To garner social media mindshare, we had an impactful time with these alpha athletes introducing and getting reactions to products as well as significantly improving our digital presence with better engagement and views compared to the previous year. The way we communicate with our athletes begins with those at the tip of the sphere who will inform us as we continue to improve how we show-up where young athletes are already watching. Here are a few examples of just how we're doing that. In American football, tunnel walks are our catwalks. And with that, we had three great runway moments during the quarter, starting with the Naval Academy, showcasing our beautifully designed Jolly Rogers uniforms and the accompanying story video we made-for the series as they beat Army in the 125th Army Navy game. Followed by a victory in the Armed Forces Bowl against Oklahoma, achieving 10 wins for just the sixth time in-school history. We also renewed our partnership with the Naval Academy's official outfitter of their 36 intercollegiate varsity teams in a multiyear agreement, extending our relationship since 2014. Another long-time UA school, Notre Dame had a remarkable journey to the college football playoff championship game, proudly wearing the fantastic 37 jerseys featuring our now iconic Center neck logo or as we're calling this, the balanced UA logo position. Amid all the excitement of the CFPs we engaged with, athletes and fans through a range of electrifying social activations that generated considerable buzz, including teaming up with comedian and actor Shane Gillis in a spot called Shane's Prayer for a Notre Dame victory in the National Championship game, which went viral on the Saturday morning before the game on Monday. This ability and I should say agility for our team to quickly act within seven days finding the right collaboration for a unique brand expression, a prayer for the underdogs and executing this creative and clever lane for UA to play from. Getting to this moment required a lot of ingredients that needed to go right, like signing Notre Dame and even their making it to this game and is the type of energy and hype we expect to bring to the content we make with our $500 million marketing budget and what you should expect from UA moving forward. This example of thoughtful, culturally relevant collaboration will be our bar for marketing excellence. Also at the professional level, some of our NFL athletes like Justin Jefferson, Zape Flowers, Kyle Hamilton had terrific Pro Bowl level seasons and we expect to build-on our NFL roster going-forward.. This past quarter, we also emphasized our commitment to the growing women's basketball scene by partnering with the new unrivaled League is their official and exclusive uniform and performance outfitter. Coupled with the strong starts to the women's college basketball season for many of our teams, including the University of South Carolina and Notre Dame, currently ranked second and third in the AP Top 25 respectively, there's plenty to be excited about for the upcoming season. This brings us to our discussion at the Investor Meeting about a pivotal new chapter in our marketing strategy. Later this year, we plan to redeploy and centralize a significant amount of our existing marketing budget to fuel our most ambitious brand activation. This dynamic multi-year initiative represents a significant step forward in our marketing approach, specifically designed to resonate with athletes in their environments. Through this program, we'll establish a robust and engaging content platform that highlights our commitment to specialized media, showcases the incredible talents of athletes and teams, collaborates with influential creators and explores new verticals. This is not just an investment, it's our promise to connect authentically and elevate our brand like never before. And while underdog has been our muse to inspire our marketing message, it is not literal, but instead the spirit and grit DNA that makes UA unique amongst the other, as we call called them podium brands. Next, turning to service. Our strategy for reconstituting the Under Armour brand and strengthening our position has primarily focused on North-America, our largest and most influential market. While this effort impacts the region's top-line, we're confident that a more disciplined approach to marketplace management, including optimizing our promotional levels, refining our segmentation and enhancing our premium brand presentation will help restore brand strength in the long-run. As such, we're now nine months into restoring health to our North American e-commerce business with another quarter of fewer promotional days and shallower discount depths that reinforce our brand's value. Although this has impacted our top-line as athletes embrace our evolving value proposition and as you've heard me say pricing power, we're encouraged by the early signs of progress. Notably, we saw another quarter of average unit retail and average order value growth and continued improvement in our full-priced sales mix. In North American owned retail, we've only just started refining and optimizing the promotional strategies of our factory houses, focusing on higher contribution margins from our stores, a strategy that will take even greater shape in fiscal year '26. Here, we're focused on changing this business's complexion and profitability, balancing our discounting inventory clearance strategies and adopting a tiered approach to define each store's role within a specific market. We've also reduced SKU assortments to clarify our offerings and increase depth in key products. In our full-price brand houses, we've also reduced SKUs and are making changes to create a more seamless shopping experience and a more premium connection with our athletes. In December, we moved into our impressive new sustainable headquarters and opened our flagship campus store here in Baltimore, and we're gaining valuable insights that will apply across our network of 200 stores here in North-America and the nearly 2,000 stores that Under Armour has around the world. Additionally, loyalty is and will continue to be an even more significant driver of our DTC business. We're excited to see ongoing growth in this area. During the quarter, we gained 4 million new members, raising the North American total to 17 million, who consistently demonstrate higher repurchase rates and revenue per consumer than non-members. We believe this sector has immense untapped potential, so we will keep investing in enhancing our loyalty program in every market around the world. Ultimately, shifting the reason that athletes join our program from being primarily about price to a UA loyalty community that offers exclusivity and membership privileges amongst other things. In North American wholesale, we continue to navigate the effects of several years of elevated promotions and inconsistent execution have had on our order books. Nevertheless, our strategies to reduce promotional activity in our e-commerce business are encouragingly reducing allowances and markdowns. While it's clear that's getting shelf-space back takes time, we're optimistic that as our product and marketing efforts gain momentum in the coming seasons, this channel will experience a really positive shift. As we move into EMEA, our best-performing region this year, we remain committed to maintaining the strength that we've built through disciplined decisions in-product marketing and distribution. The environment in the region is somewhat tenuous and we're focusing on working with the right partners to preserve our premium positioning. While keeping stability front and center, including protecting our market-share and positioning in the UK, we'll also carefully sequence our investments to encourage growth in places like Spain and lay the groundwork for future growth in France and Germany through channel and sports marketing investments, particularly in football. In our APAC business, we are addressing demand-related challenges arising from a competitive market, high inventory levels, inconsistent execution and macroeconomic factors resulting in increased discounting and returns and lower revenue. However, these challenges are similar to those that we faced in EMEA and are currently managing in North-America. So we will draw from these playbooks accordingly. The good news is that athletes think very highly of Under Armour throughout the region. We expect to maintain this premium perception. Last month during our trip to Tokyo, Seoul and Shanghai, Dave, Eric and myself worked with our teams to analyze business dynamics and challenges. As a result, we're working to stabilize our trajectory there, strengthen our brand and restore our pricing power. In addition, we recently appointed a new Head of APAC Marketing and are focusing on-brand investments, reducing promotional activities and enhancing our local for local approach. All of this product, story and service leads us to the realization that a well-coordinated team is essential at every level of the organization. With our transition to a centralized campus and the energy of our new sports house buildings, harnessing the strength, collaboration and cultural benefits of 1,500 plus teammates working closely together is an energy that has been missing for several years. I truly believe this move will be crucial in revitalizing our culture, enabling us to achieve better execution as we implement our strategies. Overall, it's wonderful to be in this new house. In closing, we feel optimistic about our progress on our ambitious journey to elevate the Unerma brand. This transformation is not just about immediate gains, it's about creating lasting value for our shareholders and all stakeholders involved. We're dedicated to strengthening our brand with the understanding that this journey is not a sprint but a marathon that requires resilience and thoughtful strategy. We practice patience and careful planning with every step, ensuring every action is focused and intentional. Our unwavering commitment to our strategic playbook remains strong as we stay agile and opportunistic. And as someone who has led brand-building before, I am excited about the similarities in the journey and equally is curious with that which requires new thinking. We are walking the floors, talking to our teams and our partners, assessing the environment, drawing up immediate action plans with the definitions of success, providing the required resources of time, people and money and then moving on to the next, one opportunity at a time, turning each obstacle into a stepping stone toward greater success. Putting this simply and just like our logo, we are targeting strength, stability and balance in every aspect of our great brand. More to come. And with that, I'll turn it over to Dave for further details on the results and our outlook.
