Q4 2021 Under Armour Inc Earnings Call

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[music].

Speaker 2: ["Pomp and Circumstance"] ["Pomp and Circumstance"]

Speaker 1: Good day and thank you for standing by. Welcome to the Under Armour fourth quarter earnings webcast and conference call.

Good day, and thank you for standing by welcome to the under armour fourth quarter earnings webcast and conference call.

Speaker 1: At this time, all participants are in listen-only mode. After the presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star, then one on your telephone keypad. Please be advised, today's conference will begin at 10 a.m.

At this time, all participants are in listen only mode.

After the presentation, there will be a question and answer session.

I'll ask a question. During this session you will need to press Star then one on your telephone keypad.

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Speaker 1: I'd now like to hand the conference over to Lance Alega, Senior Vice President, Investor Relations and Corporate Development.

I would now like to hand, the conference over to Lance Omega Senior Vice President Investor Relations <unk> corporate development.

Good morning, Thank you everyone for joining us for under armour, <unk> fourth quarter and full year fiscal 2021 earnings conference call information provided on today's call include forward looking statements that reflect the underwriters' view of its current business as of February 11 2022.

Speaker 3: Good morning. Thank you everyone for joining us for Under Armour's fourth quarter and full year fiscal 2021 earnings conference call. Information provided on today's call will include four living people.

Speaker 3: Statements made are subject to risks and uncertainties that are detailed in documents regularly filed with the

Statements made are subject to risks and uncertainties that are detailed in documents regularly filed with the SEC and the safe Harbor statement included in this morning's press release, both of which can be found on our website at about under armour Dot com.

Speaker 3: State Harbor statement included in this morning's press release, both of which can be found on our website at about.underummer.com. It's important to note that the ongoing uncertainty related to COVID-19 and...

It is important to note that the ongoing uncertainty related to COVID-19, and its potential effects on the global retail environment to continue to impact our business results moving forward.

Speaker 3: We may reference non-GAAP financial information on today's call, including adjusted and currency mutual terms, which are defined under SEC rules in this morning's press release.

We may reference non-GAAP financial information on today's call, including adjusted and currency neutral terms, which are defined under SEC rules. In this morning's press release, you May also hear us refer to amounts under U S. GAAP.

Reconciliations of GAAP to non-GAAP measures can also be found in our press release, which identify and quantify all excluded items and provides argue about why we believe this information is helpful to investors.

Speaker 3: Also, we've done our press release, which identify and quantify all excluded items and provides our view about why we...

Speaker 3: Joining us on today's call will be Under Armour President and CEO Patrick Frist.

Joining us on today's call will be under armour, President and CEO Patrik Frisk and.

CFO deeper pattern.

Thank you Lance and good morning, everyone and welcome to our fourth quarter and year end 2021 conference call.

Speaker 4: Thank you, Lance, and good morning, everyone. And welcome to our fourth quarter and year-end 2021 conference call. At the beginning of last year, we were confronted with significant uncertainty about our business due to impacts from the COVID-19 pandemic. With dynamic changes in purchase behavior and marketplace demand, we faced several obstacles as we worked through what we believed to be a recovery year following a difficult 2020.

At the beginning of last year, we were confronted with significant uncertainty about our business due to impacts from the COVID-19 pandemic with dynamic changes in purchase behavior and marketplace demand. We faced several obstacles as we work through what we believe to be a recovery year following a difficult 2020.

Speaker 4: At that point, it would have been easy to stay conservative and adopt the wait and see strategy. Yet the tremendous progress we made following our multi-year transformation, including healthier demand for the Under Armour brand, and the passion that this team shows up with every day meant going on offense was the only path for 2021.

At that point, it would've been easy to stay conservative and adopt a wait and see strategy yet the tremendous progress. We've made following our multiyear transformation, including healthier demand for the under armour brand and the passion that this team shows up with everyday meant going on offense was the only path for 2021.

Speaker 4: And because we stayed on offense, Under Armour delivered a record year of financial results, a year that exemplifies the power of our long-term strategic plan and our ability to stay hyper-focused on execution while leveraging our core strengths to position us more strongly for our next chapter of growth.

Because we stayed on offense Undrawn <unk> delivered a record year of financial results a year that exemplifies the power of our long term strategic plan and our ability to stay hyper focused on execution, while leveraging our core strengths that position us more strongly for our next chapter of growth.

Speaker 4: Throughout 2021, we worked methodically to expand our brand's awareness and engagement, ensuring we showed up more consistently, louder, and with a sharper point of view about the distinct role we play in an athlete's journey to competitiveness.

Throughout 2021, we worked methodically to expand our brand awareness and engagement, ensuring we showed up more consistently louder and with a sharper point of view about the distinct role we play in and athletes journey to compete we underscored our commitment to performance by delivering some of the most innovative products that we've ever produced before it's deeper and more.

Speaker 4: We underscored our commitment to performance by delivering some of the most innovative products that we have ever produced. We forged deeper and more productive relationships with our key wholesale partners.

Productive relationships with our key wholesale partners.

Speaker 4: We saw significant progress in our largest long-term growth drivers are international, direct consumer, women's, and footwear businesses, and we're stronger financially.

Saw significant progress in our largest long term growth drivers our international direct to consumer women's and footwear businesses were stronger financially than we've ever been.

Speaker 4: In this respect, looking at some of our highlights, while our year-over-year comparisons benefited from the significant COVID-19 impacts we experienced in 2020, we are equally pleased with our performance over the past two years. For the full year 2021.

In this respect looking at some of our highlights while our year over year comparisons benefited from the significant COVID-19 impacts we experienced in 2020, we are equally pleased with our performance over the past two years for the full year 2021.

Revenue was up 27% to reach $5 7 billion, which is a record versus 2019 revenue was up 8%. So solid progress from before the pandemic and the result, driven by several strategies that have lifted the quality and composition of our sales compared to a few years ago breaking that down wholesale revenue increased 36.

Speaker 4: Revenue was up 27% to reach $5.7 billion, which is a record.

Speaker 4: Versus 2019, revenue is up 8%, so solid progress from before the pandemic and the result driven by several strategies that have lifted the quality and composition of our sales compared to a few years ago. Breaking that down, wholesale revenue increased 36% to $3.2 billion in 2021. On a two-year basis, wholesale is up 3%.

6% to $3 2 billion in 2021 on a two year basis wholesale is up 3% as detailed on previous calls. This performance has been tempered by the strategic decisions, we've made to improve brand health by reducing our sales to the off price channel and exiting approximately $2 5000, undifferentiated retail doors in north <unk>.

Speaker 4: As detailed in previous calls, this performance has been tempered by the strategic decisions we've made to improve brand health by reducing our sales through the off-price channel and exiting approximately 2,500 undifferentiated retail doors in North America, an effort which is now concluded.

Erica and effort, which is now concluded.

Speaker 4: Our direct consumer business was up 26% to $2.3 billion in 2021.

Our direct consumer business was up 26% to $2 3 billion in 2021 versus 2019 direct consumers up 29% with strong momentum in our owned and operated stores and our E. Commerce business. Following a 40% increase in 2020, our E Commerce business was up 4% in 2021 equating to 45 <unk>.

Speaker 4: Versus 2019, direct consumers up 29% with strong momentum in our owned and operated stores and our e-commerce business.

Speaker 4: Following a 40% increase in 2020, our e-commerce business was up 4% in 2021, equating to 45% growth on a two-year stack. This result gives us confidence that this business is well-positioned following a prolonged period of elevated promotional activity.

Rent growth on a two year stack.

This result gives us confidence that this business is well positioned following a prolonged period of elevated promotional activities two.

Speaker 4: 2021 Gross Margin was up 210 basis points to a record 50.3%. Versus 2019, Gross Margin is up 340 basis points, so excellent progress over two years, driven by benefits from pricing and a more favorable channel mix being offset by supply chain headwinds related to COVID-19 and the absence of MyFitnessPal, which we sold at the end of 2020.

<unk> 2021, gross margin was up 210 basis points to a record 53% versus.

Versus 2019 gross margin is up 340 basis points. So excellent progress over two years, driven by benefits from pricing and a more favorable channel mix being offset by supply chain headwinds related to COVID-19, and the absence of my fitness Pal, which we sold at the end of 2020.

Speaker 4: Rounding out the P&L, our full year operating income reached $486 million, net income was $360 million, and our diluted earnings per share was $0.77, all three of which are record

Rounding out the P&L all full year operating income reached $486 million net income was $360 million and our diluted earnings per share was <unk> 77, all three of which are records. We also realized strong balance sheet and cash flow performance is with inventory down 9% to an absolute dollar value that is only slightly higher than <unk>.

Speaker 4: We also realized strong balance sheet and cash flow performances with inventory down 9% to an absolute dollar value that is only slightly higher than in 2015 when we were a $4 billion business.

2015, when we were a $4 billion business.

And finally, one more record having ended the year with $1 7 billion in cash.

Speaker 4: And finally, one more record, having ended the year with $1.7 billion in cash.

Speaker 4: All in, what an incredible period for Under Armour. Having operated for nearly two years amid a global pandemic, I am proud of the progress we've made, the resilience we've shown, and the potential we have to do even better in the future. By staying focused on our key strategies, we are competing and executing at progressively higher levels, helping us unlock value and returns for our shareholders.

All in what an incredible period for enrollment.

Having operated for nearly two years submitted global pandemic I am proud of the progress we've made the resilience we've shown at the potential we have to do even better in the future by staying focused.

<unk> on our key strategies, we are competing and executing at progressively higher levels, helping us unlock value and returns for our shareholders.

Speaker 4: Driving us forward, at the heart of why we exist, is our purpose. We empower those who strive for more. For Under Armour, everything is about the journey. From an awful workout when you want to quit but don't, to pushing through that last rep and adding one more, to earning that PR because you put in the work. Under Armour makes you better.

Driving us forward at the heart of why we exist is our purpose, we empower those who strive for more for under armour everything is about the journey from an awful workout when you want to quit but don't to pushing through that last rep, and adding one more to earning that PR because you've put into work under armour makes you better.

Speaker 4: We do this by delivering innovative products, experiences, and styles influenced by athlete insight and real-world data, innovations wrapped in art. Engineered to empower the journey to sport through training, competition, and recovery, 2021 was an exceptional year for Under Armour products.

Do this by delivering innovative products experiences and styles influenced by athlete insight and real world data innovations wrapped in our engineered to empower the journey to sport through training competition and recovery 2021 was an exceptional year for under armour product or too many to list, but a few standouts on the apparel.

Speaker 4: There are too many to list, but a few standouts on the apparel side include Rush, Isochill, Rival Fleece, Crossback, Infinity, Unstoppable, and Meridian, all names that delivered the 33% increase in revenue we achieved. On the footwear side, franchises like Hover Sonic, Machina, and Infinite, UA Flow Velocity Wind, Charge Pursuit, Assert Aurora, Curry, and Project Rock contributed nicely to 35% growth, validating one of our largest long-term growth opportunities.

Site include Rush, ISO chill rival Fleece cross back Infinity, unstoppable and Meridian all names that delivered a 33% increase in revenue we achieved on the footwear side franchises like hovers, Sonic Mark and I and infinite.

Flow velocity wind charge pursuit, Aurora Curry and project rock contributed nicely to 35% growth validating one of our largest long term growth opportunities two.

Speaker 4: 2021 was also an exceptional year in Under Armour's progress to connect our brand even more deeply with consumers. From the optionality we created in our P&L, we were able to make incremental marketing investments which we expect to fuel even stronger brand momentum in the years ahead.

<unk> 2021 was also an exceptional year in Undrawn <unk> progress to connect our brand even more deeply with consumers from the Optionality. We created in our P&L, we were able to make incremental marketing investments, which we expect to fuel even stronger brand momentum in the years ahead at.

Speaker 4: At the center of these efforts, product, experience, and inspiration sits the only way through. More than a mantra, it's become an ethos, synonymous with the hard work necessary to power the journey. And it's always a journey. From an initial product drawing, to a shopping bag, to the closet, we obsess athletes and those who strive for more.

At the center of these efforts product experience and inspiration fits the only way is through more than a mantra, it's become an ethos synonymous with the hard work necessary to power the journey and it's always a journey from an initial product drawing two shopping bags to the closet, we obsess athletes and those who strive for more however.

Speaker 4: However, being purpose-led means that it's about more than just shirts and shoes. And sport is so much more than just a game. It teaches us to push past our limits, to be collaborators, to be leaders.

Being purpose led means that it's about more than just shirts and shoes and sport is so much more than just the game. It teaches us to push past our limits to be collaborators to be leaders it increases confidence reduces stress and improves mental health.

Speaker 4: It increases confidence, reduces stress, and improves mental health.

Speaker 4: Yet many young athletes face barriers that prevent them from starting their journey.

Yes, many young athletes face barriers that prevent them from starting their journey to support with a lack of fields and courts gaps and coaching shrinking leaks and a shortage of geared to play train and compete with we recognize that not everyone has access to support.

Speaker 4: With a lack of fields and courts, gaps in coaching, shrinking leagues, and a shortage of gear to play, train, and compete with, we recognize that not everyone has access to sport.

Speaker 4: Addressing this opportunity a few weeks ago, we announced a long-term commitment of our resources, focus, and energy to break down these barriers. As we lay the foundation for our Access to Sport initiative, we are excited to share more in the years ahead as we build opportunities for millions of youth to engage in sport by 2030, ensuring that the next generations of focused performers are inspired even more holistically than those before them.

Addressing this opportunity a few weeks ago, we announced a long term commitment of our resources focus and energy to break down. These barriers as we lay the foundation for access to support initiative. We are excited to share more in the years ahead as we build opportunities for millions of used to engage and support by 2030, ensuring that the next generations.

Focused performers are inspired even more holistically and those before them.

Speaker 4: Now back to our business, and the last two years have proven to be one of the most dynamic, yet opportunistic times in Under Armour's history.

Now back to our business in the last two years have proven to be one of the most dynamic yet opportunistic times and under Armours history.

Speaker 4: Managing the marketplace prudently through a constant focus on operational excellence to ensure we're keeping the brand healthy and moving forward, we are delighted with our results. That said, let's look at how our regions performed in 2021, starting with North America, where revenue was up 29% to $3.8 billion, or up 4% since 2019. In our largest market, we continue to focus on three fundamentals.

Managing the marketplace prudently through a constant focus on operational excellence to ensure we are keeping the brand healthy and moving forward. We are delighted with our results that said, let's look at how our regions performed in 2021, starting with North America, where revenue was up 29% to $3 8 billion were up 4% since 2019 and our <unk>.

Just market, we continue to focus on three fundamentals.

Speaker 4: First, it's becoming a better retailer by creating more compelling in-store experiences and delivering best-in-class service across our fleet. Additionally, this means continuing to build on the momentum we've seen in our e-commerce experience.

<unk> is becoming a better retailer by creating more compelling in store experiences and delivering best in class service across our fleet. Additionally, this means continuing to build on the momentum we've seen in our e-commerce business, realizing we'd likely see traffic declines compared to the abnormality that was 2020, we stayed focused on quality by investing in high.

Speaker 4: realizing we'd likely see traffic declines compared to the abnormality that was 2020, we stayed focused on quality by investing in high-return vehicles like targeted PLAs and improved product wayfinding to improve our online shopping experience.

Our return vehicles like targeted Pls and improved product way finding to improve our online shopping experience and it's working in 2021, while we did experience a year over year traffic decline it was more than offset by meaningful increase in conversion and therefore solid revenue growth.

Speaker 4: and it's working. In 2021, while we did experience a year-over-year traffic decline, it was more than offset by meaningful increase in conversion and, therefore, solid revenue growth.

Speaker 4: Second, with the critical mass of undifferentiated wholesale door exits behind us, we are encouraged by the productivity KPIs we're seeing across this channel in North America.

With a critical mass of undifferentiated wholesale door exits behind US we are encouraged by the productivity Kpis were seeing across this channel in North America, a more premium position driven by outstanding inventory management and promotional discipline is translating nicely to additional shelf space opportunities with our largest strategic partners.

Speaker 4: A more premium position, driven by outstanding inventory management and promotional discipline, is translating nicely to additional shelf space opportunities with our largest strategic partners, higher AURs, and significantly better turns. And that last point, turns, which is really about execution, is a core element of what gives me confidence that we're in an excellent position to adapt to however the environment may develop over the short term.

Higher AUR and significantly better terms and that last point turns which is really about execution.

Core element, but what gives me confidence that we're in an excellent position to adapt to however, the environment may develop over the short term.

Speaker 4: Third, we are continuing to drive performance by investing more smartly in marketing, which shows up in improved brand affinity scores around awareness, consideration, and conversion. Gaining better productivity from how and where we spend has always been the goal. By delivering higher quality traffic through strategic paid media and targeted email activations, our ability to connect more meaningfully across key moments and multiple platforms has never been greater.

Third we are continuing to drive performance by investing more smartly in marketing, which shows up and improve brand affinity scores around awareness consideration and conversion.

Gaining better productivity from how and where we spend has always been the goal by delivering higher quality traffic through strategic paid media and targeted E mail activations, our ability to connect more meaningfully across key moments and multiple platforms has never been greater.

Speaker 4: Turning to our international business, revenue in EMEA was up 41%, driven by nearly 50% growth in our wholesale business and continued momentum in direct consumer. We are encouraged by the quality of business results delivered in 2021. Our efforts to position Under Armour as premium performance, healthier wholesale relationships, and improved retail capabilities continue to validate the power of our playbook. Our two-year performance is strong as well, with revenue in EMEA up 36% versus 2019.

Turning to our international business revenue in EMEA was up 41% driven by nearly 50% growth in our wholesale business and continued momentum in direct to consumer we are encouraged by the quantity of business results delivered in 2021, our efforts to position under armour as premium performance healthier wholesale relationships and improved <unk>.

<unk> capabilities continued to validate the power of our playbook. Our two year performance is strong as well with revenue in EMEA up 36% versus 2019.

Speaker 4: Next up is Asia-Pacific, where revenue was up 32% in 2021, driven by nearly 50% growth in our wholesale business and a strong increase in direct consumer sales.

Next up is Asia Pacific, where revenue was up 32% in 2021, driven by nearly 50% growth in our wholesale business and a strong increase in direct to consumer sales clearly the story here is about a more challenging environment that has developed in China as of late as evidenced by a 6% decline in our fourth quarter APAC revenue the <unk>.

Speaker 4: Clearly, the story here is about a more challenging environment that has developed in China as of late, as evidenced by a 6% decline in our fourth quarter APAC revenue.

Speaker 4: The recent market trends in China are impacting our business. However, our focus in China remains the same, staying premium, continuing to invest in digital innovation, including working to deliver a much-improved end-to-end consumer engagement platform, and ensuring that store expansions are done at an appropriate pace amid dynamic market conditions.

Market trends in China are impacting our business. However, our focus in China remains the same staying premium continuing to invest in digital innovation, including working to deliver a much improved end to end consumer engagement platform and ensuring that store expansions are done at an appropriate pace amid dynamic market conditions.

Speaker 4: Versus 2019, revenue in Asia-Pacific was up 31%, so strong growth on a two-year basis.

Versus 2019 revenue in Asia Pacific was up 31%, so strong growth on a two year basis, and finally revenue in our Latin America region. In 2021 was up 18% driven by strength in our full price wholesale and distributor businesses.

Speaker 4: And finally, revenue in our Latin America region in 2021 was up 18% driven by strength in our full-price wholesale and distributor business.

Speaker 4: As a reminder, we have transitioned certain countries in this region to a strategic distributor model, a decision we believe will begin to optimize this region's ability to grow and contribute more profitably in the years to come. Versus 2019, revenue in Latin America is about flat on a two-year basis.

As a reminder, we have transitioned certain countries in this region to a strategic distributor model a decision. We believe will begin to optimize this region's ability to grow and contribute more profitably in the years to come versus 2019 revenue in Latin America is about flat on a two year basis.

So in closing we remain both confident and cautious in this operating environment and while current macro factors are having a material impact on our business. We have no intentions of sitting idle innovation consumer connectivity and inspiring doses drive for more or not tactics at under armour, they're our way of life.

Speaker 4: So in closing, we remain both confident and cautious in this operating environment, and while current macro factors are having material impact on our business, we have no intentions of sitting idle. Innovation, consumer connectivity, and inspiring those who strive for more are not tactics at Under Armour, they are our way of life.

Speaker 4: Moving forward, we believe that the things we can control will continue to serve us as strengths, just as they did in fiscal 2021. Regardless of the short-term environment, we are running a stronger, better company, one that is increasingly more capable of delivering sustainable, profitable growth and value creation for our shareholders over the long term.

Moving forward, we believe that the things we cannot control will continue to serve us our strengths just that they did in fiscal 2021, regardless of the short term environment, we're running a stronger better company. One that is increasingly more capable of delivering sustainable profitable growth and value creation for our shareholders over the long term.

Speaker 4: I am pleased with where Under Armour is sitting, incredibly proud of this team, and in my nearly five years here, I have never been more excited about our future, and with that, I'll hand it over to Dave. Thanks, Patrick. Since the beginning of COVID-19 pandemic, our intent has been to deliver appropriate financial performance while protecting the Under Armour brand and positioning ourselves for sustainable, profitable growth over the long term.

I am pleased with where under armour sitting incredibly proud of this team and in my nearly five years here I have never been more excited about our future and with that I'll hand, it over to Dave.

Thanks, Patrick.

Since the beginning of COVID-19 pandemic, our intent has been to deliver appropriate financial performance, while protecting the under armour brand and positioning ourselves for sustainable profitable growth over the long term.

Speaker 5: Leveraging the strength of a data-driven, consumer-centric strategy and a constant focus on operational excellence.

Leveraging the strength of a data driven consumer centric strategy and our constant focus on operational excellence. We believed we could emerge from this unprecedented time as a stronger more profitable company.

Speaker 5: We believed we could emerge from this unprecedented time as a stronger, more profitable company.

Speaker 5: Despite the high level of uncertainty, we committed to staying agile to minimize downside risk, while executing against our playbook to help us capitalize on upside opportunities as they arose. In 2021, we did just this.

Despite the high level of uncertainty, we committed to staying agile to minimize downside risk while executing against our playbook to help us capitalize on upside opportunities as they arose.

In 2021, we did just this.

Speaker 5: That isn't to say that uncertainty is over. We remain vigilant about the dynamic environment we are operating in, including ongoing supply chain headwinds, rising wages and inflationary input cost pressures that continue to permeate the market.

That isn't to say that uncertainty is over we remain vigilant about the dynamic environment, we are operating in including ongoing supply chain headwinds rising wages and inflationary input cost pressures that continue to permeate the marketplace yet.

Speaker 5: Yet we remain confident in our ability to deliver against our plan by staying focused on our business strategies and remaining nimble as we implement them. Our fourth quarter results reinforce

Yet we remain confident in our ability to deliver against our plan by staying focused on our business strategies and remaining nimble as we implement them.

Our fourth quarter results reinforce that confidence.

Speaker 5: Compared to the prior year, revenue was up 9% to $1.5 billion.

Compared to the prior year revenue was up 9% to $1 5 billion.

Speaker 5: As a reminder, we expected several headwinds in the quarter, including lower sales of sports masks, lower sales to the off-price channel, the absence of MyFitnessPal, and proactive supply constraints, among others.

As a reminder, we expected several headwinds in the quarter, including lower sales of sports masks lower sales to the off price channel.

The absence of my fitness Pal and proactive supply constraints among others.

Speaker 5: Versus our previous expectation, our revenue overdrive was primarily due to higher demand across our full-price wholesale and direct-to-consumer businesses, particularly in North America, coupled with better-than-expected supply chain execution during this challenging environment.

Versus our previous expectation our revenue overdrive was primarily due to higher demand across our full price wholesale and direct to consumer businesses, particularly in North America, coupled with better than expected supply chain execution. During this challenging environment.

Speaker 5: From a channel perspective, fourth quarter wholesale revenue was up 16%, driven by strong performance in our full-price business, partially offset by lower year-over-year sales to the off-price channel.

From a channel perspective fourth quarter wholesale revenue was up 16% driven by strong performance in our full price business, partially offset by lower year over year sales to the off price channel.

Speaker 5: Our direct-to-consumer business increased 10 percent, led by 14 percent growth in our own and operated retail stores, and 4 percent growth in our e-commerce.

Our direct to consumer business increased 10% led by 14% growth in our owned and operated retail stores and 4% growth in our ecommerce business.

Speaker 5: In addition, our e-commerce business is up more than 30% on a two-year basis.

In addition, our e-commerce business is up more than 30% on a two year basis.

Speaker 5: And licensing revenue was down 33%, driven primarily by the recognition timing of minimum royalty payments.

And licensing revenue was down 33% driven primarily by the recognition timing of minimum royalty payments.

By product type.

Speaker 5: By product type, apparel revenue was up 18% with strength in our training and outdoor business.

Apparel revenue was up 18% with strength in our training and outdoor businesses.

Speaker 5: Footwear was up 17%, driven primarily by our running and training categories.

Where was up 17% driven primarily by our running and training categories.

Speaker 5: and our accessories business was down 27% due to planned lower sales of our sports masks compared to last year's fourth quarter.

Our accessories business was down 27% due to planned lower sales of our sports masks compared to last year's fourth quarter.

From a regional and segment perspective.

Fourth quarter revenue in North America was up 15% to $1 1 billion driven by premium growth in our full price wholesale and direct to consumer businesses. So excellent barometer as to improving brand strength in consumer demand in our largest region.

Speaker 5: Fourth quarter revenue in North America was up 15% to $1.1 billion, driven by premium growth in our full-price wholesale and direct consumer business.

Speaker 5: So excellent barometers to improving brand strength and consumer demand in our largest region.

Speaker 5: Compared to 2019, North American revenue was up 8% in the fourth quarter, driven by higher quality revenue than two years ago.

Compared to 2019, North American revenue was up 8% in the fourth quarter, driven by higher quality revenue and two years ago.

In our international business.

Speaker 5: EMEA revenue was up 24 percent, driven primarily by strength in our wholesale business.

EMEA revenue was up 24% driven primarily by strength in our wholesale business.

Speaker 5: Compared to the fourth quarter of 2019, revenue in EMEA was up 11%.

Compared to the fourth quarter of 2019 revenue in EMEA was up 11%.

Next up is APAC, where the business was down 6% in the quarter driven by softer demand in our wholesale business, which more than offset DTC growth.

Speaker 5: Next up is APAC, where the business was down 6% in the quarter, driven by softer demand in our wholesale business, which more than offset DTC growth.

Speaker 5: Compared to 2019, total APAC revenue was up 19%.

Compared to 2019 total APAC revenue was up 19%.

Speaker 5: And finally, in line with expectations, Latin America revenue was down 22% due to the change in our business model as we moved certain countries to distributors, an effort which is now completed.

And finally in line with expectations Latin America revenue was down 22% due to the change in our business model as we move certain countries to distributors and effort, which is now completed.

Versus the fourth quarter of 2019, Latin America was down 20%.

Speaker 5: Versus the fourth quarter of 2019, Latin America was down 20%.

Speaker 5: Related to gross margin, our fourth quarter improved 130 basis points to 50.7%.

Related to gross margin, our fourth quarter improved 130 basis points to 57%.

Speaker 5: This expansion was driven by 350 basis points of pricing improvements due primarily to lower promotional activity within our DTC business.

This expansion was driven by 350 basis points of pricing improvements due primarily to lower promotional activity within our DTC business.

Speaker 5: favorable pricing related to sales to the off-price channel, and lower promotions and markdowns across our wholesale business.

Favorable pricing related to sales to the off price channel.

And lower promotions and markdowns across our wholesale business.

And 90 basis points of benefit related to lower restructuring charges.

Speaker 5: and 90 basis points of benefit related to lower restructuring charges.

These improvements were partially offset by 190 basis points of Covid related supply chain impacts driven by higher freight cost, which meaningfully offset product cost benefits during the quarter.

Speaker 5: These improvements were partially offset by 190 basis points of COVID-related supply chain impacts driven by higher freight costs, which meaningfully offset product cost benefits during the quarter.

80 basis points related to the absence of my fitness Pal.

Speaker 5: 80 basis points related to the absence of my fitness pal.

Speaker 5: and 50 basis points of unfavorable product mix related primarily to lower sports mass sales, which carry a higher gross margin.

And 50 basis points of unfavorable product mix related primarily to lower sports mass sales, which carry a higher gross margin.

Speaker 5: Versus our previous expectation, our fourth quarter gross margin over-delivery was primarily due to favorable pricing developments from lower-than-planned promotional activity within our DTC business.

Versus our previous expectation our fourth quarter gross margin over delivery was primarily due to favorable pricing developments from lower than planned promotional activity within our DTC business.

Speaker 5: more favorable pricing related to sales to the off-price channel, and lower-than-planned promotions and markdowns within our wholesale business.

More favorable pricing related sales to the off price channel and lower than planned promotions and markdowns within our wholesale business.

SG&A expenses were up 15% to 676 million.

Speaker 5: SG&A expenses were up 15% to $676 million, primarily due to increased

Primarily due to increased marketing investments.

Speaker 5: Incentive compensation and non-salaried workforce wages. Related to our 2020 restructuring plan.

Incentive compensation and non salaried workforce wages.

Related to our 2020 restructuring plan.

We recorded $14 million of charges in the fourth quarter.

Speaker 5: In this morning's press release, we noted that we have reduced the high end of our planned expectations by $25 million, so we now expect to recognize total planned charges ranging from $525 million to $550 million.

In this morning's press release, we noted that we have reduced the high end of our planned expectations by $25 million. So we now expect to recognize total planned charges ranging from $525 million to $550 million.

Speaker 5: Thus far, we've realized $514 million of pre-tax restructuring and related charges.

Thus far we've realized $514 million of pre tax restructuring and related charges.

Speaker 5: We expect to recognize any remaining charges related to this plan by the end of the first quarter of our fiscal year 2023.

We expect to recognize any remaining charges related to this plan by the end of the first quarter of our fiscal year 2023.

Speaker 5: Moving on, our fourth quarter operating income was $86 million.

Moving on our fourth quarter operating income was $86 million.

Speaker 5: excluding restructuring and impairment charges, adjusted operating income was $100 million.

Excluding restructuring and impairment charges.

Adjusted operating income was $100 million.

After tax we realized a net income of $110 million or 23 of diluted earnings per share during the quarter.

Speaker 5: After tax, we realize a net income of $110 million, or $0.23 of diluted earnings per share during the quarter.

Excluding restructuring charges.

Speaker 5: income related to our first year of the MyFitnessPal divestiture earn out.

Income related to our first year of the my fitness Pal divestiture earn out.

Speaker 5: and the non-cash amortization of debt discount on our senior convertible notes, our adjusted net income was $67 million, or 14 cents of adjusted diluted earnings per share.

And the noncash amortization of debt discount on our senior convertible notes.

Our adjusted net income was $67 million or <unk> 14 of adjusted diluted earnings per share.

Speaker 5: From a balance sheet perspective, inventory was down 9% to 811 million, driven by continued improvements in our operating model and inbound shipping delays due to COVID-related supply chain pressure.

From a balance sheet perspective inventory was down 9% to $811 million driven by continued improvements in our operating model and inbound shipping delays due to COVID-19 related supply chain pressures.

Speaker 5: Our cash and cash equivalents were $1.7 billion at the end of the quarter, and we had no borrowings under our $1.1 billion revolving credit facility.

Our cash and cash equivalents were $1 7 billion at the end of the quarter and we had no borrowings under our $1 1 billion revolving credit facility.

Speaker 5: Finally, following last year's convertible bond exchanges, we are proud to share that our cash position left debt of $663 million nearly doubled to $1 billion by the end of the fourth quarter.

Finally, following last year's convertible bond exchanges, we are proud to share that our cash position less debt of $663 million nearly doubled to $1 billion by the end of the fourth quarter.

Looking forward one last reminder, about our fiscal reporting year change.

Speaker 5: Looking forward, one last reminder about our fiscal reporting year change.

Speaker 5: Mechanically, the current period we're in right now, January 1st through March 31st of 2022, will serve as a transition period until we begin our new fiscal year 2023 on April 1st.

Mechanically the current period, we're in right now January one through March 31, 2022 will serve as a transition period until we begin our new fiscal year 2023 on April one.

Speaker 5: To revisit what we detailed last year, we believe this change, namely putting our two largest quarters in the middle of our new fiscal year, will provide us with greater visibility when providing our initial annual outlook.

To revisit what we detailed last year, we believe this change, namely putting our two largest quarters in the middle of our new fiscal year will provide us with greater visibility when providing our initial annual outlook.

Speaker 5: In this respect, by the time of our next call, which is expected in early May, we'll have booked orders in hand for the majority of our fall-winter wholesale business.

In this respect by the time of our next call, which is expected in early May we will have booked orders in hand for the majority of our fall winter wholesale business.

Accordingly, we are not providing a financial outlook for fiscal 2023 on today's call.

Speaker 5: Accordingly, we are not providing a financial outlook for fiscal 2023 on today's call.

That said, let's turn to our outlook for the current transition quarter.

Speaker 5: That said, let's turn to our outlook for the current transition quarter.

From a revenue perspective, we now expect our transition period to be up at a mid single digit rate compared to the previous expectation of a low single digit rate increase.

Speaker 5: we now expect our transition period to be up at a mid-single-digit rate compared to the previous expectation of a low single-digit rating.

Speaker 5: This includes approximately 10 points of revenue headwinds related to reductions in our Spring-Summer 2022 Wholesale Order Book from supply constraints associated with ongoing COVID-19 pandemic impact.

This includes approximately 10 points of revenue headwinds related to reductions in our spring Summer 2022 wholesale order book from supply constraints associated with the ongoing COVID-19 pandemic impacts.

Speaker 5: Moving forward, we expect many of these headwinds to continue well into fiscal 2023 until longer-than-usual transit times, backlogs, and congestion find balance.

Moving forward, we expect many of these headwinds to continue well into fiscal 2023 and.

Until longer than usual transit times backlogs and congestion fine balance.

Speaker 5: Associated freight and logistics costs normalize, and inbound shipping delays subside.

Associated freight and logistics costs normalize and.

And in bound shipping delays subside.

Speaker 5: At this time, we do expect these uncertainties to cause material impact and variability in our future results.

At this time, we do expect these uncertainties to cause material impacts and variability in our future results.

Speaker 5: And accordingly, we will remain cautious and agile as we operate our business into fiscal 2023.

And accordingly, we will remain cautious and agile as we operate our business into fiscal 2023.

That said the proactive strategies, we're employing.

Speaker 5: That said, the proactive strategies we're employing.

Speaker 5: greater operational agility, and overall demand for the Under Armour brand give us confidence in our ability to navigate this dynamic and challenging business environment effectively.

Greater operational agility and overall demand for the under armour brand gives us confidence in our ability to navigate this dynamic and challenging business environment effectively.

Speaker 5: And we believe these COVID-related supply chain pressures are just a temporary speed bump on our road to continued profitable growth over the long term.

And we believe these COVID-19 related supply chain pressures are just a temporary speed bump on a road to continued profitable growth over the long term.

Speaker 5: Turning to gross margin, we expect our transition quarter rate to be down approximately 200 basis points against our Q1 2021 adjusted gross margin, which includes approximately 240 basis points of negative impact from higher freight expenses related to ongoing COVID-19 supply chain challenges, in addition to an unfavorable sales mix, partially offset

Turning to gross margin, we expect our transition quarter rate to be down approximately 200 basis points against our Q1 2021, adjusted gross margin, which includes approximately 240 basis points of negative impact from higher freight expenses related to ongoing COVID-19 supply chain challenge.

In addition to an unfavorable sales mix, partially offset by pricing benefits.

Speaker 5: With that, we expect operating income to reach approximately $30 to $35 million and diluted earnings per share to be approximately $0.02 to $0.03.

With that we expect operating income to reach approximately $30 million to $35 million and diluted earnings per share to be approximately two to three.

In closing we're proud of the record results, we achieved in 2021 and the consistent progress we've made over the past couple of years.

Speaker 5: In closing, we're proud of the record results we achieved in 2021 and the consistent progress we've made over the past couple of years.

Speaker 5: This gives us great confidence in our brand and business and our team's ability to navigate this dynamic environment.

This gives us great confidence in our brand and business and our team's ability to navigate this dynamic environment.

Speaker 5: As we work through our transition quarter and head into fiscal 2023, we're monitoring and tracking the dynamic supply chain and inflationary pressures, and we'll be mindful of the uncertainty and volatility that comes along with it.

As we work through our transition quarter and head into fiscal 2023, we're monitoring and tracking the dynamic supply chain and inflationary pressures and we will be mindful of the uncertainty and volatility that comes along with it.

These conditions demand that we maintain a high degree of agility and I am confident we will.

Speaker 5: These conditions demand that we maintain a high degree of agility, and I am confident we will.

Speaker 5: With that, we'll turn it back to the operator for your questions. Operator?

With that I will turn it back to the operator for your questions operator.

Speaker 1: If you'd like to ask a question at this time, please press the star, then the number one key on your touchtone telephone. Our first question comes from Matthew Boss with J.P. Morgan.

If you'd like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone.

Our first question comes from Matthew Boss with Jpmorgan.

Thanks, and congrats on a nice quarter.

Thank you thank you Matt.

So Patrick can you talk to overall health of the athletic channel today and on your mid single digit top line sub quarter outlook I guess, how best to think about the underlying demand for your brand in North America and international relative to that mid singles as we consider the 10 point supply chain constraints that you have.

Speaker 6: So Patrick, can you talk to overall health of the Athletic Channel today, and on your mid-single-digit, top-line, sub-quarter outlook, I guess how best to think about the underlying demand for your brand in North America and international relative to that mid-singles as we consider the 10-point supply chain constraint that you cited on your report?

You cited on your reported numbers.

Speaker 4: Yeah. Thank you, Matt. First of all, I believe that currently the inventory levels in the channel are probably the healthiest they've been in the last decade, let's say. And I think that sets us up for a good trajectory going forward. So a lot of what we're seeing right now, and Dave called it out in his script, right? I mean, we have about a 10-point headwind in this quarter alone.

Thank you Matt first of all I believe that currently the inventory levels in the channel.

Probably the healthiest had been in.

In the last decade, let's say.

And I think that sets us up for a good trajectory going forward. So a lot of what we're seeing right now and Dave called it out in his script right.

About a 10 point headwind in this quarter alone.

Speaker 4: simply based on on uh... uh... logistics i would say in transport and inbound outbound and all that stuff so for us we feel the brand is continue its trajectory we feel that our playbook is working

Simply based on on.

Logistics I would say in transport inbound outbound and all of that stuff. So for US we feel the brand is continuing its trajectory.

Feel that our playbook is working.

Speaker 4: We see in our in our metrics in terms of both awareness consideration

See in our in our metrics in terms of.

Awareness consideration.

Speaker 4: and engagement from the consumer that we continue to get stronger. So the extra marketing that we talked to all of you about in our last earnings call has really started to make the impact that we want to. So feeling very good about Athletic, feeling very good about the Under Armour brand and the trajectory we're on right now. And we're looking forward to just navigating through this, what we believe, short term.

And engagement from the consumer that we continue to get stronger.

So the the extra marketing that we've talked to all of you about in our last earnings call has really.

<unk> started to make the impact that we want to so feeling very good about athletic feeling very good about the under armour brand and the trajectory. We're on right now and we're looking forward to just navigating through this what we believe short term speed bump.

Speaker 6: Great. And then Dave, while I know you're not providing explicit full year guidance at this time, given the multiple moving parts in the sub-quarter, how best to think about this year's 9.3% operating margin as a base, meaning is the expectation for continued gross margin expansion and SG&A leverage from this base multi-year as we think moving forward?

Great and then Dave while I know youre, not providing explicit full year guidance at this time.

The multiple moving parts in the quarter.

Best to think about this year's nine 3% operating margin as a base, meaning is the expectation for continued gross margin expansion and SG&A leverage from this base multiyear as we think moving forward.

Speaker 5: Yeah, it's a great question. You know, again, we're not at a point where we're going to give any real details on on fiscal 23. But, you know, we're excited about what we were able to deliver for 2021. And it's a lot of things coming together there from all the work that we've done, whether it be on the GTM and the operating model, the help with our major accounts,

Yes, it's a great question.

Again, we're not at a point, where we're going to give any real details on fiscal 'twenty three but we're excited about what we were able to deliver for 2021.

And it's a lot of things coming together there from all the work that we've done.

Whether it be on the GTS and the operating model.

The health with our major accounts and then getting to a point now where we can really.

Speaker 5: And then, you know, getting to a point now where we can really prioritize better and manage our cost structure and be much more nimble after the restructuring efforts that we've been driving through. So, it does set us up well going forward.

Prioritize better and manage our cost structure and be much more nimble after the restructuring efforts that we've been driving through so it does set us up well going forward.

Speaker 5: I will say that our continued goal is to invest in the brand for the longer term.

I will say that our continued goal is to invest in the brand for the longer term, but at the same time, we have to be able to continue to leverage our cost structure and that is definitely one of our constant goal. So.

Speaker 5: But at the same time, we have to be able to continue to leverage our cost structure, and that is definitely one of our constant goals.

Speaker 5: You know, as we move forward, we do see opportunities in gross margin. We also see opportunities in leveraging SG&A.

As we move forward, we do see opportunities in gross margin, we also see opportunities and leveraging SG&A.

Speaker 5: But we are going to have some near term.

But we are going to have some near term pressures in the first half of fiscal 'twenty three because of the supply chain.

Speaker 5: pressures in the first half of fiscal twenty three because of the supply chain uh... issues whether it be on on top

Issues, whether it be on topline.

Speaker 5: or whether it be on the freight costs as well. Again, we see that as temporary and we see that as dissipating a lot in the back half of fiscal 23.

Or whether it be on the freight costs as well again, we see that as temporary.

And we see that is dissipating a lot in the back half of fiscal 'twenty three.

Speaker 5: But that is something that we are going to be navigating very, very nimbly. Great. Best of luck. Thank you. Thank you.

But that is something that we are going to be navigating very very nimbly.

Great Best of luck.

Thank you.

Our next.

Comes from Erinn Murphy with Piper Sandler.

Speaker 7: Great. Thank you. Good morning. I guess the question is around North America and the strength that you've been seeing in this market.

Great. Thank you good morning, I guess.

So my question is around North America, and the strength that you've been seeing in the market how sustainable do you see that growth I think it was up 8% on a two year stack basis, and then particularly as we lap the stimulus comparisons from last year here in March and April and then secondly, again related to this marketplace I think Dave you talked about seeing it.

Speaker 7: How sustainable do you see this growth? I think it was up 8% on a two-year stack basis. And then particularly as the stimulus comparisons from last year here in March and April . And then secondly, again, related to this marketplace, I think Dave, you talked about seeing additional shelf space here in North America. Can you just expound upon a little bit of what you're seeing, what type of accounts are taking incremental space from you guys?

Additional shelf space here in North America can you just expound upon a little bit of what you're seeing what type of accounts are.

They are taking incremental space from you guys. Thank you.

Thank you Erin Patrick here I'll kick it off and then I'll pass it over to Dave when I have given some color.

Speaker 4: Thank you, Aaron. Patrick here. I'll kick it off and then I'll bounce it over to Dave when I've given some color. First of all, you know, the health of our growth right now is dramatically different than where we were in 18-19, right? In terms of the composition of the revenue, you know, significantly less off-price sales.

First of all the health of our growth right now is dramatically.

Different than where we were in 2019 right in terms of the composition of the revenue significantly less off price sales.

Speaker 4: reduce discounting, markdowns and promotion in all of our channels.

Reduced discounting markdowns in promotion in all of our channels. The type of inventory management that we have and subsequently much better turn in both our own as well as our wholesale partners and then the fact that we have.

Speaker 4: the type of inventory management that we have, and subsequently, you know, much better turn in both our own as well as our wholesale partners. And then the fact that we've, you know, exited about two and a half thousand doors that we felt were undifferentiated, and the fact that we're still growing despite of that, just shows.

About $2 5000 doors.

We felt we're on differentiated and the fact that we're still growing despite of that just shows the.

Speaker 4: the type of trajectory that we're expecting going forward. So for me, at this point in time, we're continuing to earn back shelf space. And we're able to now, through the work that we've done in our P&L, we're able to invest in the right way behind the brand, which also comes on back of a much better understanding of our return on marketing investment models that we're running. And I don't know, Dave, do you want to add something to that?

Type of trajectory that we're expecting going forward. So for me at this point in time, we continuing to earn back shelf space and we're able to now through the work that we've done in our P&L, we're able to invest in the right way behind the brand, which also comes on back of a much better understanding of our return on.

<unk> marketing investment models that were running I don't know, Dave do you want to add something to that.

Speaker 5: Yeah, I mean, I think that, you know, it's it's important to note that, you know, the momentum in North America is definitely real. And if you think about the overdrive that we delivered in Q4.

Yes, I mean I think that.

It's important to note that.

The momentum in North America is definitely real and if you think about the overdrive that we delivered in Q4.

Speaker 5: uh... over seventy five percent of that was driven by the north america business so it is is definitely not a demand challenges we think about this transition quarter or even going into the beginning of fiscal twenty three

Over 75% of that was driven by the North America business. So it is definitely not a demand challenge as we think about this transition quarter or even going into the beginning of fiscal 'twenty three.

Speaker 5: It is a supply challenge with the COVID impacts and so.

It is a supply challenge with the Covid impacts and so that's a position that.

Speaker 5: That's a position that we're excited to be in and really challenge our supply team.

We're excited to be in and really challenge our supply chain supply chain team to be able to continue to deliver for us and just one more thing we're not.

Speaker 5: supply chain team to be able to continue to deliver for us.

Speaker 4: taking our foot off the gas as it relates to marketing here in the transition quarter either. We're going to continue to spend on the brand for future seasons.

Taking our foot off the gas as it relates to marketing here in the transition quarter, either we're going to continue to spend on the brand for future seasons.

Got it and then just on the shelf space gains just curious on what types of accounts or kind of where youre seeing that.

Speaker 7: And then just on the shop space games, just curious on what types of accounts are kind of where you're seeing that most.

Speaker 5: Well, right now, we're not at a point where we're going to be giving kind of an account level or distribution level input there, but appreciate the question. Thank you.

Well right now we're not at a point, where we're going to be giving kind of account level or distribution level input.

Input there, but I appreciate the question. Thank you. Thank you. Thank.

Thank you.

Our next question comes from Simeon Siegel with BMO capital markets.

Speaker 1: Our next question comes from Simeon Siegel with BMO Capital Markets.

Great. Thanks, Hey, guys. Good morning, Congrats on the ongoing results.

Speaker 8: Great, thanks. Hey guys, good morning. Congrats on the ongoing results, the ongoing gross margin.

Gross margins just great.

Speaker 8: It's really great to see. You mentioned the pricing, how was AUR? And then maybe just because you mentioned the sports masks, are we apples to apples now? So anything to keep in mind there. And then just thoughts on how you're prioritizing inventory between DTC and wholesale given the constraints. Thanks.

Really great to see you mentioned the pricing how was AUR and then maybe just because you mentioned the sports masks are we apples to apples now so anything to keep in mind, there and then just thoughts on how youre prioritizing inventory between DTC and wholesale.

The constraints thanks.

Speaker 5: Yeah, a couple of things there. You know, gross margin, definitely we're excited about the growth there as well. It is unfortunate, the amount of freight costs that we're dealing with.

Yes, a couple of things there.

Margin definitely we're excited about the growth there as well it is unfortunate that the amount of freight costs that we're dealing with.

Speaker 5: The sport mask headwind, you know, has been real in the back half of 21, and we expect that that's going to be, you know, continuing a little bit here through the transition period and a little bit into early 23, but definitely starting to become a lower impact as we go forward and definitely normalize more by the back half of fiscal 23. And that does create a tiny bit of a gross margin headwind just from that aspect.

The sport mask headwind has been real in the back half of 'twenty one.

And we expect that that's going to be continuing a little bit here through the transition period, and a little bit into early 'twenty three but.

But definitely starting to become a lower impact as we go forward and definitely normalized more by the back half of fiscal 'twenty, three and that does create a tiny bit of a gross margin headwind just from that aspect.

Speaker 5: But again, the biggest challenge we have on the gross margin side right now is the freight cost, you know, if you think about in the

But again the biggest challenge we have on the gross margin side right. Now is the freight costs. If you think about in the.

In the stub period here, we actually would be going forward further year over year in the stub quarter in gross margin. If it wasn't for these freight costs. So I think that's definitely important to keep in mind.

Speaker 5: in the stub period here, we actually would be going forward further year over year in the stub quarter in gross margin if it wasn't for these freight costs. So I think that's definitely important to keep in mind.

Speaker 8: Great. Thanks. And then because you mentioned it a few times, I mean, the cash generation has been great. So you're growing cash and like your peers, you're also growing your share accounts. Any thoughts on the cash?

Great. Thanks, and then because you mentioned it a few times I mean, the cash generation has been great. So you're growing cash. Unlike your peers Youre also growing your share count's any any thoughts on the cash.

Yes, I mean I think at this point, we continue to evaluate our options. We're very pleased with what we've been able to drive from a liquidity management and working capital management and overall profitability here. So.

Speaker 5: Yeah, I mean, I think at this point, we continue to evaluate our options, you know, we're very pleased with what we've been able to drive from a liquidity management, working capital management and overall profitability here.

Speaker 5: We're staying focused on kind of navigating the current environment and, you know, therefore operating with agility, and so having that additional cash is helpful there.

We're staying focused on kind of navigating the current environment, and therefore operating with agility and so having that additional cash is helpful. There.

Speaker 5: uh... we will be reinvesting some of that back into the business you know whether it be through uh... the dtc expansion whether it be through some of our systems

We will be reinvesting some of that back into the business whether it be through the.

The DTC expansion, whether it be through some of our systems, a little bit with the headquarter consolidation work that we're going to be doing.

Speaker 5: a little bit with the headquarter consolidation work that we're going to be doing.

Speaker 5: We're also evaluating would we do a possible further debt buydown, so that's a consideration as well. And then even a share buyback is a possible consideration also. But nothing finalized there, but we're definitely looking at opportunities. But pleased with the position that we currently have.

We're also evaluating would we do a possible further debt buy down so that's a consideration as well.

And then even a share buyback as a possible consideration also but nothing finalized there, but we're definitely looking at opportunities but.

Pleased with the position that we currently have.

Speaker 8: Great, thanks guys. Nice job and best of luck for the rest of the year. Thanks.

Great. Thanks, guys nice job and best of luck for the rest of the year.

Thanks.

Our next question comes from Paul <unk> with Citi.

Speaker 8: Hey, thanks guys. I just want to understand the 10-point headwind that you're seeing in the stub quarter a little bit better. Is that the lead product that's still coming to you just late, or is that product that wholesale partners canceled because of the expected timing of when it will be received and that caused you to cancel orders? So just maybe to alleviate a product backup, I just want to understand that dynamic a little bit better. And to what extent are you trying to get your wholesale partners to order early for fall just to maybe avoid some of these supply chain issues for the upcoming year? Thanks.

Hey, Thanks, guys just one.

I understand the 10 point headwind that youre seeing in the stub quarter, a little bit better is that the lead product that's still coming to you just laid or is that product that wholesale partners cancelled because of do you expect the timing of when it will be received and that caused you to cancel orders. So just maybe to alleviate a profit back up I just wanted to understand that.

<unk> was a bit better.

What extent are you trying to get your wholesale partners to order early for fall just to maybe avoid some of these supply chain issues for the upcoming year.

Yes, I mean, a couple of things relative to the 10 point headwind on the transition quarter. This is not really.

Speaker 5: Yeah, I mean, a couple of things, you know, relative to the 10 point headwind on the transition quarter, this is not really expected timing delays. This is actually us proactively understanding the capacity issues with our vendors and then working with them and also working with our customers to actually cancel.

<unk> timing delays this is actually us proactively understanding the capacity issues with our vendors and then working with them and also working with our customers to actually cancel purchase orders for production and also cancel sales orders with our customers ahead of time and we worked with our customers on that so that we all had the <unk>.

Speaker 5: purchase orders for production, and also cancel sales orders with our customers ahead of time. And we worked with our customers on that, so that we all had the visibility and transparency

Visibility and transparency trends.

Speaker 5: transparency together to be able to drive through those decisions and we we did prioritize those decisions to make sure that we were protecting You know premium DTC and also our our top wholesale accounts

Transparency together to be able to drive through those decisions and we did prioritize those decisions to make sure that we were protecting.

Premium DTC and also our top wholesale accounts, but we wanted to go about it that way because of those pressures were real if we didn't approach. It that way then we would be having a lot of product coming in late it would not be making to the floors and our wholesalers will probably be frustrated with the late visibility to that and we would probably end up with some excess.

Speaker 5: but we wanted to go about that way because those pressures were real uh... if we didn't approach that way that we would be having a lot of product coming in late

Speaker 5: It would not be making it to the floors, and our wholesalers would probably be frustrated with the late visibility to that, and we would probably end up with some excess inventory. So, to proactively avoid all of that, we actually got ahead of this a while back.

Inventory so to proactively avoid all of that we actually got ahead of this a while back and cancel those orders and Thats really whats driving this headwind.

Speaker 5: and canceled those orders and that's really what's driving this headwind.

Speaker 5: And again, we do think it's temporary, and we expect it to continue into Q1, Q2 of 2023.

And again, we do think it's temporary and.

And we expect it to continue into Q1 Q2 of 2003.

Speaker 4: And to take the second half of that question, Paul, as it relates to deliveries in future seasons and order books, et cetera, we continue to work with our accounts and internally, of course, in our own channels to make sure that we're balancing the remainder of

And to take the second half of that question, Paul as it relates to deliveries and future seasons in order books et cetera, we continue to work with our with our accounts.

Internally of course in our own channels to make sure that we're <unk>.

Balancing.

The remainder of.

Speaker 4: uh... the first half as well as into the second half of of uh... twenty-two here where we see to dave's earlier point in the script you know still still some challenges right but uh... we're ahead of it and and we're we're really working through that right now but it is about a balance because we need to not just look at north america we need to look at it globally and we need to look at it across channels

The first half as well as into the second half of 'twenty, two here, where we see to Dave's earlier point in the script still still some challenges right, but we're ahead of it and were really working through that right now, but it is about a balance because we need to not just look at North America, we need to look at it.

And we need to look at it across channels.

Speaker 4: We're now battle-tested, if you like, in terms of having done this for many seasons now and the relationship with our internal teams, of course, and our external partners in Holcet are excellent right now. I'm sure we're going to get through it well. Thanks. Good luck.

And.

We're now battle tested if you like in terms of having done this for many seasons now and the relationship with our.

Internal teams of course, and our external partners and wholesale are excellent right now so I'm sure we're going to get through it well.

Alright, Thanks, good luck.

Thank you.

Our next question comes from John Kernan with Cowen.

Speaker 3: Hey, good morning everybody and congrats on a strong year. Thanks, John .

Hey, good morning, everybody and congrats on a strong year.

Thanks, Joe.

Dave as you look out into beyond spring summer.

Speaker 3: Dave, as you look out into, you know, beyond spring, summer.

What's the duration.

Speaker 3: duration of the spray costs and supply chain costs into the back half of your next fiscal year.

Sprague cost and supply chain costs into the back half of your next fiscal year.

Obviously, we all see the impacts.

Speaker 3: The first half, I'm just curious, is this something that's going to have duration into the back half on freight costs and air freight and shipping?

In the first half I'm. Just curious is this something thats going to have duration into the back half on freight cost and air freight and shipping.

Speaker 3: Curious as your thoughts of how we should think about gross margin beyond just.

I'm curious as your thoughts as to how we should think about gross margin beyond just Q1.

Speaker 5: Yeah, I mean, again, we're not going to give a ton of detail yet on fiscal 23. But what I would say is we are anticipating that we will continue to use and need heavier air freight in this transition quarter and also in the first two quarters of fiscal 23.

Yes, I mean again, we're not going to give a ton of detail on our fiscal 'twenty three but what I would say is we are anticipating that we will continue to use and need heavier airfreight in this transition quarter and also in the first two quarters of fiscal 'twenty three.

Speaker 5: uh... we do not anticipate to have to use a lot of air freight in the back half of fiscal twenty three so we believe that air freight cost could actually become a tailwind for us in the back half of fiscal twenty three whereas it would continue to probably be a headwind for us in the front half of fiscal twenty three

We do not anticipate to have to use a lot of air freight in the back half of fiscal 'twenty. Three so we believe that airfreight costs could actually become a tailwind for us in the back half of fiscal 'twenty three whereas it would continue to probably be a headwind for us in the front half of fiscal 'twenty, three and then relative to ocean freight rates that's all.

Speaker 5: And then relative to ocean freight rates, that's also been a developing cost increase as well. That one's probably going to take a little bit longer to subside. So we're continuing to monitor that and work through it. But that's kind of what we're seeing at this point.

Also been a developing cost increased as well.

That one is probably going to take a little bit longer to subside.

So we're continuing to monitor that and work through it.

But that's kind of what we're seeing at this point.

Speaker 3: got it that's helpful and just just one follow-up uh asia pack

Got it that's helpful.

Just one follow up Asia Pac.

Speaker 3: has been a bright spot for you, particularly versus some of the results your peers are reporting. Maybe a little bit more challenging in the fourth quarter, but if you look at it.

That's been a bright spot for you, particularly versus some of the results of your peers are reporting.

A little bit more challenging in the fourth quarter, but if you look at it.

Speaker 3: represents almost half of your total sales growth off the 2019 base.

Represents almost half of your total sales growth off the 2019 base.

Speaker 3: to the end of 2021. So just curious, what are you seeing in Asia? How are you navigating China? And any structural changes to how you engage with Chinese consumers on the ground there? Thank you.

To the end of 2021. So just curious what are you seeing in Asia, how you're navigating China.

And any structural changes to how you engage with Chinese consumers on the ground there. Thank you.

Yes.

Speaker 4: Yeah, hi. Hi, John . Yeah, for sure. APAC is is still.

Hi, John Yes for sure.

APAC is still.

Probably I would say most affected at this point in terms of.

Speaker 4: probably I would say most affected at this point in terms of

Speaker 4: traffic patterns due to COVID, especially in China, and that's certainly something that's affecting.

Traffic patterns due to COVID-19 , especially in China, and Thats, certainly something thats affecting.

Speaker 4: You know the marketplace there, but also I would say Some of the supply chain things we're dealing with are not isolated to just what I think that's also Having an impact in in China, but as it relates to Under Armour, you know, we have it We have an advantage in China to some degree, right? It's a smaller part of our business overall Than some of our competition and we continue to really be focused on on our strategy. They are staying premium

The marketplace, there, but also I would say.

Some of the supply chain things, we're dealing with are not isolated to just the west I think that's also having an impact in China, but as it relates to under armour. We haven't we have an advantage in China to some degree right. It's a smaller part of our business overall some of our competition and we continue to really be focused on.

<unk> on our strategy, they're staying premium continuing to invest into digital innovation.

Speaker 4: continuing to invest in the digital innovation and this entire end-to-end consumer engagement platform. And we're also continuing to build out stores, but we're very, very

This entire end to end consumer engagement platform and we're also continuing to build out stores, but we're very very.

Speaker 4: cautious about how we do that, of course, in this current environment, and so we're

Im cautious about how we do that of course in this current environment.

So we're feeling good about what we're doing over there and again, we mentioned it in the script, we think it is shorter and shorter term in nature.

Speaker 4: good about what we're doing over there, and again, we mentioned it in the script, we think it is shorter term in nature.

Speaker 4: And I'm very, very pleased with the progress we continue to make despite of these headwinds. That's great. Best of luck, guys. Thanks. Thank you.

And.

Very very pleased with the progress we continue to make despite these headwinds.

That's great best of luck guys. Thanks.

Thank you.

Our next question comes from Sam Poser with Williams trading.

Speaker 9: Uh, good morning. Thank you for taking my questions. Um, morning, Sam.

Sure.

Good morning, Thank you for taking my questions Good morning, Sam.

Speaker 9: Morning. One, just some housekeeping. I wonder if you could break out the marketing expense and the other expense for the quarter. And then I was also wondering how much of your inventory is in transit right now? And I just noticed that when I went by it, what's the status on 58th and 5th Avenue? Because last time I was in the city, I saw the store was wrapped with Under Armour.

Morning.

One I guess.

Housekeeping I Wonder if you could break out the marketing expense in the other expense.

For the quarter.

And then I.

Was also wondering how much of your inventory in transit right now.

And I just noticed that when I went by what's the status on 58 fifth Avenue because last time was in the city I saw that.

The store was wrapped with under armour.

Speaker 5: Yeah, I guess a couple of things there, you know, from an SGA perspective in Q4 our global marketing spend was in the neighborhood of $200 million, maybe a little bit more. So definitely one of the highest percentage marketing to revenue quarters that we've had and we did that on purpose to really invest in the brand as we go into next year. And then also we're going to continue to invest pretty heavy here in the transition quarter as well to really keep the gas on as we step into fiscal 23.

Yes, I guess, a couple of things there from a <unk>.

<unk> perspective in Q4.

Our global marketing spend was in the neighborhood of $200 million, maybe a little bit more so definitely one of the highest percentage marketing the revenue quarters that we've had and we did that on purpose to really invest in the brand as we go into next year.

And then also we're going to continue to invest pretty heavy year in the transition quarter as well.

Well it really keep the gas on as we step into fiscal 'twenty three.

Relative to inventory in transit I don't have that exact number handy.

Speaker 5: Relative to inventory and transit, I don't have that exact number handy, but I think that our inventory management continues to be a huge focus for us. I think we're very proactive in how we handle that.

But I think that our inventory management continues to be a huge focus for us I think we're very proactive in how we handled.

Speaker 5: uh... the supply constraint situation uh... so you know we'll have come up and down the inventory but we're going to continue to manage it tightly uh... continue to protect the working capital

The supply constraint situation.

So we will have some ups and downs in inventory, but we're going to continue to manage it tightly and.

And continue to protect the working capital.

Speaker 5: uh... and you know cash conversion cycle that we've driven to this year which is something that we're really really proud of

Cash conversion cycle that we've driven to this year, which is something that we're really really proud of.

Speaker 5: And then last, on Fifth Avenue, we're continuing to market the space. It's not exactly a great market right now, but that's okay. We're continuing to work through it, and we've planned for that.

And then last on fifth Avenue, we're continuing to market the space, it's not actually a great market right now.

But that's okay, we're continuing to work through it and we've we've planned for that.

Speaker 9: Thank you. Maybe this is just one quick follow up. It sounds to me like you're sort of getting ahead of a lot of things in the transition quarter. I know you're not guiding, but would that mean that as a percent, at least in the

Okay. Thank you if I can just just one quick follow up it sounds to me like you're sort of getting ahead of a lot of things in the transition quarter with that I know, you're not guiding but would that mean that.

As a percent at least in the.

Speaker 9: The third quarter of fiscal 23 that we would begin to potentially see some leverage in the marketing.

The third quarter of fiscal 'twenty three.

That.

That we would begin to potentially see some leverage in the marketing.

Well I would say that again.

Speaker 5: Well, I would say that, again, you know, we're at a point now where we feel like.

We're at a point now where we feel like.

We are going to manage SG&A relative to what revenue and gross margin are doing we have that ability now so we're going to stay agile.

Speaker 5: we are going to manage SG&A relative to what revenue and gross margin are doing.

Speaker 5: You know, we have that ability now, so we're going to stay agile, you know, yet balanced while making appropriate brand investments to continue to fuel the growth. But as I mentioned earlier, cost structure leverage is a constant goal, and that comes with marketing as well. I think it's an area that we're always going to try and protect more than other areas, but we need to continue to leverage our cost structure and continue to grow profitability and bottom line as well.

Yet balanced while making appropriate brand investments to continue to fuel the growth, but as I mentioned earlier.

Cost structure leverage is a constant goal and that comes with marketing as well I think it is an area that we're always going to try and protect more than other areas, but we need to continue to leverage our cost structure and continue to grow profitability and bottom line as well.

Thank you very much continued success.

Thanks Sam.

Our next question comes from Keith Fitzsimmons with Wells Fargo.

Speaker 1: Our next question comes from Kate Fitzsimmons with Wells Fargo.

Speaker 1: Yes, hi. Good morning. Thanks for taking my question. I guess, you know, not to beat a dead horse, but just when looking out on the stub corridor, Dave, you had alluded to 240 basis points of freight pressures. You know, should we think about that being the height of the freight pressures, maybe relative to what you're expecting in the first half of F-23?

Yes, hi, good morning, Thanks for taking my question.

Not to beat a dead horse, but just when looking out on the stab corner. There. Dave you guys you had alluded to 240 basis points of freight pressures.

Should we think about that being the height of the freight pressures maybe relative to what youre expecting in the first half of F. 'twenty three.

Speaker 1: And Patrick, you alluded to several times in your prepared comments just about greater consideration and awareness that the brand has made. I'm curious if you can just speak more directly to strides you've made in some of the growth categories, especially women's and footwear, you know, coming off of calendar 21. Thanks so much.

And Patrick you alluded to several times in your prepared comments, just about greater consideration and awareness that the brand has made.

So if you can just speak more directly to strides you've made in some of the growth categories.

Women's and footwear coming off.

Calendar 'twenty one thanks, so much.

Yes, I would say that as we think about Q1 and Q2 of fiscal 'twenty three those freight impacts are going to be pretty sizeable.

Speaker 5: Yeah, I would say that as we think about Q1 and Q2 of fiscal 23, those freight impacts are going to be pretty sizable. I don't know that we're ready to give detail on whether it's going to be, you know, a little bit larger or a little bit smaller than what we saw in or what we're expecting in the transition quarter, but it will be significant and it is something that's going to impact our gross margin in the first half of the year.

Don't know that were ready to give detail on whether it's going to be a little bit larger a little bit smaller than what we saw in.

Or what were expecting in the transition quarter, but it will be significant and it is something that's going to impact our gross margin in the first half of the year.

Speaker 5: Yeah, and then, Kate, as it relates to our metrics, our KPIs.

Yeah and then.

As it relates to our metrics or Kpis.

Speaker 5: We've talked a lot today about and I did in my prepared remarks as well around how we're going to continue to spend and how we're spending is really more in top of funnel. That was something we weren't able to necessarily afford to do.

We've talked a lot today about than I did in my prepared remarks, as well around how we're going to continue to spend and how we are spending is really more in top of funnel that was something we weren't able to necessarily afford to do in years past as much as we're doing now and that's what we're going to continue to do and the idea there is real.

Speaker 5: in years past as much as we're doing now, and that's what we're going to continue to do. And the idea there is really to increase both awareness and attraction, and then ultimately further down in the funnel consideration for the brand. And what we're seeing right now is, and this is across the world, by the way, it's not just North America. We're seeing...

Two inch.

Increased both awareness and attraction and then ultimately further down in the funnel consideration for the brand and what we're seeing right now is and this is across the world by the way it's not just North America, we are seeing.

Speaker 5: strong momentum in all of those metrics, compared to where we were, you know, just a few years ago. So we're very excited about that. And that's also why Dave and I feel so confident in continuing to spend here in the sub-quarter. You know, the leverage that we're getting out of our ROMI metrics, while we're continuing to get better at connecting and engaging consumers in their decision journey,

Strong momentum in all of those metrics compared to where we were just a few years ago. So we're very excited about that and that's also why Dave and I feel so confident in continuing to spend here in the stub quarter.

The leverage that we're getting out of our ROMI metrics.

We're continuing to get better at connecting and engaging consumers in their decision journey.

Speaker 5: gives us confidence that this is the right decisions to do at this point in time. So very excited about where we are and what that means for the brand going forward. And just to add a little color on that too, our current campaign, The Only Way Is Through, just kicked off here a few weeks ago with the theme of what we call the gift of the game, which is already showing really good results for us as well. Great, thanks.

Gives us confidence that this is the right decision to do at this point in time, so very excited about where we are and what that means for the brand going forward and just add a little color on that to our current campaign. The only way is through.

Just kicked off here a few weeks ago with the with the team of what we call the gift for the game, which is already showing really good results for us as well.

Great. Thanks best of luck.

Thank you very much.

Our next question comes from Jonathan Komp with Baird.

Yes.

Yes, hi, Thank you just a follow up on the 10 point headwind that you mentioned since it sounds like it's very intentional in terms of your actions that are driving that.

Speaker 10: Yeah, I think you just to follow up on the 10 point headwind that you mentioned since it sounds like it's very intentional in terms of your actions that are driving that.

Speaker 10: Do you care to comment just on how the magnitude of the drag looks over the next few quarters? And then just on pricing, could you comment on your plans for the year and if the stub quarter here fully reflects your plan pricing or if there are additional actions to roll through yet?

Do you care to comment just on how that.

Due to the drag looks over the next few quarters and then just on pricing could you comment on your plans for the year.

The stub quarter here fully reflects your planned pricing.

There's additional actions to roll through yet.

Jonathan This is Dave we're not going to be giving exact numbers here yet for fiscal 'twenty, three but I would say that from the proactive work we've done the supply chain constraints and therefore impacts to our top line for fiscal 'twenty three.

Speaker 11: Jonathan, this is Dave, you know, we're not going to be giving exact numbers here yet for fiscal 23, but I would say that, you know, from the proactive work we've done

Speaker 11: the uh... supply chain constraints and therefore impact to our top line for fiscal twenty three uh... Q1 Q2

Q1 Q2.

Speaker 11: they're they're not going to be that significantly different than what we're seeing here in transition quarter at least that's our current visibility uh... again we'll get a lot more color on that in the early may call uh... kind of what we're seeing at this point and then uh... definitely not seeing that type of an impact for Q3 Q4 fiscal twenty three

They're not going to be that significantly different than what we're seeing here in transition quarter at least that's our current visibility again, we'll give a lot more color on that in the early may call.

But thats kind of what we're seeing at this point and then.

Definitely not seeing that type of an impact for Q3 and Q4 fiscal 'twenty three.

Speaker 5: And Jonathan Patrick here, as it relates to pricing, we have

And Jonathan Patrick here as it relates to pricing.

We have most of our benefit right now in terms of our gross to net.

Speaker 5: most of our benefit right now in terms of our gross to net in the stub quarter and coming out of 21, but we will be raising some prices here in 22, and it's really about a continuation of our pricing strategy as the brand gets stronger, as the market continues to evolve and the conditions evolve, we're definitely looking at opportunistically raising prices where we can.

The stub quarter and coming out of 'twenty one.

But we will be raising some prices here in 'twenty, two and it's really about a continuation of our pricing strategy as the brand gets stronger as the market continues to evolve and the conditions evolve. We are definitely looking at opportunistically raising prices, where we can but it's going to be more surgical in nature.

Speaker 5: but it's going to be more surgical in nature versus kind of an across the board approach.

Versus kind of an across the board approach.

Okay. That's helpful. And then just one broader question on the margin outlook given everything <unk> seen today about the performance last year and then the current headwinds anything thats changed in terms of the timeline to get back to low double digit operating margin anything thats changed in your view.

Speaker 10: Okay, that's helpful. And then just one broader question on the margin outlook. Given everything you've seen today about the performance last year and then the current headwinds, anything that's changed in terms of the timeline to get back to low double-digit operating margin? Anything that's changed in your view?

Speaker 11: You know, look, I think over time, our goals and our strategy are still solid and we've made a lot of progress in 2021.

I think over time, our goals and our strategy are still solid and we've made a lot of progress in 2021.

Speaker 11: And as we navigate through kind of these short-term impacts here with supply chain through the first half of 23, we believe we're going to be well on the road towards that trajectory. So again, we'll give more details in the early May call, but we've got the momentum. We've got the control over our cost structure.

And as we navigate through these short term impacts here with supply chain through the first half of 'twenty three.

We believe we're going to be well on the road towards towards that trajectory. So again, we will give more details in the early may call.

But we've got the momentum we've got the control over our cost structure, we've got great relationships with our accounts and so as soon as we can get past. These logistical challenges we're ready to run.

Speaker 11: We've got great relationships with our accounts. And so as soon as we can get past these logistical challenges, we're ready to run.

Great. Thanks again.

Thanks.

Our next question comes from Kimberly Greenberger with Morgan Stanley .

Speaker 12: Our next question comes from Kimberly Greenberger with Morgan Stanley .

Okay, great. Thank you so much.

Speaker 1: Okay, great. Thank you so much. Nice recap on a great year Patrick. I wanted to ask about the sort of unmet demand that you've got here, both in the transition quarter and in the first half of the upcoming fiscal year.

Nice recap on a great year Patrick.

I wanted to ask about the sort of unmet demand that you've got here both in the transition quarter and in the first half of the upcoming fiscal year.

Speaker 1: In your mind, does that represent sort of organic demand for the brand that you think you might be able to capture in maybe calendar year 2023 and beyond? Is that is that how you would characterize it? Or do you think this is more, you know, if you can't meet the demand today, it's possible that it goes away?

In your mind does that represent.

Sort of organic demand for the brand that you think you might be able to capture.

In calendar year 2023, and beyond is that is that how you would characterize it or do you think this is more if you can't meet the demand today.

Possible that it goes away.

Speaker 5: No, I, you know, this, what we're, you know, according to how we see things and, and, and Kimberly, what, what they said before is, is very true, you know, this is real demand that's out there. So for the brand and it's, it's quality.

Yes.

This.

According to how we see things and Kimberly what Dave said before is very true. This is real demand that's out there so for the brand and its.

Quality demand.

Speaker 4: We don't believe that because we are not able to meet that demand right now because of these proactive decisions that we're going to be

We don't believe that.

Because we are not able to meet.

That demand right now because of these proactive decisions that we're going to be.

Speaker 5: somehow disadvantaged going forward. We believe that the inventory levels now in general, as I said earlier here today, are healthier than it had ever been in this sector, in our sector, perhaps the best it had been for a decade. So we believe that as we continue to now also spend on the brand, as we have now pruned our distribution to be in the right places, as we continue to win shelf space back and be more.

Somehow disadvantage going forward, we believe that the inventory levels now in general as I said earlier here today are healthier than they've ever been.

In the in this sector in our sector, perhaps the best benefit a decade. So we believe that as we continue to now also spend on the brand as we have now pruned our distribution to be in the right places as we continue to win shelf space back and be more.

Speaker 5: specific and focused around what we're doing, we're going to continue to grow this brand going forward. Again, we believe this is very short-term. We believe it's a speed bump. The communication and engagement we're driving with the consumer is still there. So once things start to unlock, we believe we're going to be able to unlock the sales again.

Specific and focused around what we're doing we're going to continue to.

ROE this brand going forward.

Again, we believe this is very short term, we believe it's a speed bump.

The communication engagement, we're driving with the consumer is still there.

Once things start to unlock we believe we're going to be able to unlock the sales again.

Fantastic and.

Speaker 1: Fantastic. And, you know, looking at that inventory that you mentioned, Patrick, inventory coming out of 2021 is down 99% compared to 2019, but revenue is up 6%. You've got a nice 15-point differential there.

Looking at that inventory that you mentioned Patrick inventory coming out of 2021, it's down nine 9% compared to 2019 revenues up 6% you've got a nice 15 point differential there.

Speaker 1: You know, the channel inventory is clearly very, very lean. How are you feeling about your own inventory level? I'm wondering if maybe you wish you had a little more. It sounds like you'd have, you know, even an even more robust revenue outlook if you had a bit more. And how should we think about the way

The channel inventory clearly very very lean how are you feeling about your own inventory level I'm wondering if maybe you wish you had a little more it sounds like you would have.

Even and even more robust revenue outlook, if you had a bit more.

And how should we think about the way that you would be planning inventory over the next one to two years. If this level is is maybe just a little bit too lean.

Speaker 1: that you would be planning inventory over the next one to two years if this level is maybe just a little bit too late.

Speaker 5: Yes, good questions. Dave, if you kick it off with some of the numbers, I'll take some of the inventory at the end. Yeah, I mean, I think, again, you know, we're very comfortable with the mix of inventory, with demand kind of versus excess, and our ability to utilize the off-price channel and our own factory houses to work, you know, while keeping that third-party off-price really low. And the inventory that we're running now, yes, it's very well-managed. We're excited about where we're able to end the year.

Good questions, David if you kick it off with some of the numbers I'll take some of the inventory at the end, yes, I mean, I think again.

We're very comfortable with the mix of inventory with demand kind of versus excess in our ability to utilize the off price channel.

And our own factory houses to work, while keeping that third party off price really low.

And the inventory that we're running now yes, it's very well managed we're excited about where we were able to end the year, but we're not at a point, where we feel like we're leaving sales off the table, we've had to cancel a lot of purchase orders, which we've mentioned because of the supply chain constraints.

Speaker 11: But we're not at a point where we feel like we're leaving sales off the table. We've had to cancel a lot of purchase orders, which we've mentioned because of the supply chain constraints.

Speaker 11: But outside of that, we feel like the operating model is working. And therefore, as we get past kind of these speed bumps with the supply chain challenges, we believe that we're going to be able to continue to grow that top line and continue to manage inventory tightly. And we're excited about being able to do that and what that means for continued free cash flow going forward.

But outside of that we feel like the operating model is working.

And therefore, as we get past kind of the speed bumps with the supply chain challenges.

We believe that we're going to be able to continue to grow that top line and continue to manage inventory tightly.

And we're excited about being able to do that and what that means for continued free cash flow going forward.

Speaker 1: Great. So it's more about getting back to that smooth flow of inventory rather than carrying it a higher level of inventory. Am I hearing you right on that?

Great. So it's more about getting back to that smooth flow of inventory rather than carrying a higher level of inventory am I hearing you right on that.

Speaker 5: Yeah, I think I think for us, it's all about balance, right? And and we're certainly going to make sure that we're not missing opportunities in terms of driving revenue where there's opportunity. But it's also about making sure that we continue to

I think.

For us, it's all about balance right and.

We're certainly going to make sure that we're not missing opportunities in terms of driving revenue, where there is opportunity, but it's also about making sure that we continue to become more efficient.

Speaker 4: become more efficient in where and how we place inventory. And one of the great things about the work we've done through our transformation is an ability to actually do just that, in terms of working closely with both our wholesale partners, our internal teams, as well as our vendors.

There and how we place inventory and one of the great things about the work we've done through our transformation is an ability to actually do just that and in terms of working closely with both our wholesale partners and our internal teams as well as our vendors.

Speaker 4: to really demand plan better. You know, we've built out a demand planning function that works incredibly well with our supply planning function. And we're getting better and better at predicting where demand is going to happen. And that is, you know, a skill. It takes time to build out. You need the systems and you need the people and you need the expertise. And Under Armour is at that stage now. Sounds great. Thank you so much.

Two really demand plan better we built out a demand planning function that works incredibly well with our supply planning function.

And we're getting better and better at predicting where demand is going to happen and that is.

Scale. It takes time to build out do you need the systems that you need the people and you need the expertise.

And under Armours at that stage now.

Sounds great. Thank you so much thank you.

<unk>.

Our last question will come from Michael Binetti with credit Suisse.

Speaker 13: Oh, hey, guys. Thanks for taking our question at the end of your nice quarter. I just wanted to clarify one of the questions earlier, and maybe, Dave, we could think alongside you. Last quarter, I think you spoke to spring-summer order books.

Hey, guys. Thanks for taking our question at the end of your nice quarter.

I just wanted to clarify one of the questions that you earlier and maybe Dave.

We could think alongside you last quarter I think you spoke to spring Summer order book.

Speaker 13: reductions on the third quarter call. Is that 10 points that you pointed to today higher or lower than you expected at that point?

Reductions in the third quarter call is that 10 points that you pointed to today higher or lower than you than you expected at that at that point.

Speaker 13: And then on the SG&A, if we just look at what's implied for the sub-quarter here, it's a bit higher than, you know, the percent of revenues that we see usually in the March quarter pre-COVID. I know you've done a lot of work to take out fixed costs.

And then on the on the SG&A if we just.

Look at what's implied for the stub quarter here.

It's a bit higher than.

Net of revenues that we see usually in the March quarter Preto.

A lot of work to take out fixed costs.

Speaker 13: And again, I know we're not going to get into anything specific for 23, but maybe can you just help us think in the medium term how the SG&A leverage profile works. I know you've said a few times you're going to keep the foot on the gas in the marketing in the first quarter, but maybe just some, you know, higher level SG&A thoughts as we roll into fiscal 23.

And again I know, we're not going to get into anything specific for 'twenty three but maybe can you just help us think in the medium term.

How the how the SG&A leverage profile works I know you've said a few times, you're going to keep the foot on the gas and the marketing in the first quarter, but maybe just some.

A higher level of SG&A thoughts as we roll into fiscal 'twenty three.

Speaker 11: Sure. So, Michael, first, on the spring-summer 22, three months back, we were signaling that we were going to have that headwind pressure, and the amount of that pressure actually is pretty close to what we anticipated three months back. So, you know, we called the ball pretty well relative to that as far as the proactive management, you know, with our vendors and our accounts.

Sure So Michael first on the spring summer 'twenty two.

Three months back we were signaling that we were going to have that headwind pressure.

And the amount of that pressure actually is pretty close to what we anticipated three months back so.

We called the ball pretty well relative to that as far as the proactive management with our vendors and our in our accounts.

Speaker 11: Relative to SG&A, Q4 was a pretty big quarter for us in 2021, just with the magnitude of that marketing expense being in that $200 million range, plus increased incentive compensation that comes along with the performance in 2021. But we also, and we talked about this before, did some minimum wage increases relative to our retail stores in North America and also our distribution centers.

Relative to SG&A.

Q4 was a pretty big quarter for us in 'twenty one.

Just with the magnitude of that marketing expense being in that $200 million range.

Plus increased incentive compensation that comes along with the performance of this in 2021.

But we also and we've talked about this before.

Did some minimum wage increases relative to our retail stores in North America and also our distribution centers.

Speaker 11: So all those investments came through Q4 21 and they were partially offset by the continued cost deficiencies across the enterprise from all the restructuring work and the operating model evolution. When you think about the sub-quarter here that we're currently in,

So all of those investments came through Q4, 'twenty, one and they were partially offset by the continued cost efficiencies across the enterprise from all the restructuring work and the operating model evolution.

When you think about the stub quarter here that we're currently in.

It's still a pretty heavy SG&A quarter and that's on purpose, it's really driven by increased marketing investments that we are strategically, making and that we want to stay on the gas and fuel the brand to really roll into fiscal 'twenty, three and the right place from a brand perspective, and then also does have the continued increase in the non salary.

Speaker 11: It's still a pretty heavy SG&A quarter, and that's on purpose. It's really driven by increased marketing investments that we are strategically making, and that we want to stay on the gas and fuel the brand to really roll into fiscal 23 in the right place from a brand perspective. And then it also does have the continued increase in the non-salaried wages that I just mentioned.

Wages that I just mentioned so.

Speaker 11: So, as we think about fiscal 23, again, I'll just keep reiterating that we want to continue to find ways to leverage our new kind of rebased cost structure while protecting the community.

As we think about fiscal 'twenty three again I'll, just keep reiterating that.

Want to continue to find ways to leverage our new kind of rebased cost structure, while protecting the key investments and the balance around that will be ready to talk about in the early may call.

Speaker 11: And the balance around that we'll be ready to talk about in the early May call. Okay.

Okay. Thank you.

Thanks, Michael.

Speaker 12: That concludes today's question and answer session. Thank you for participating. You may now disconnect.

That concludes today's question and answer session. Thank.

Thank you for participating you may now.

Now disconnect.

Oh.

Okay.

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Speaker 12: Good day and thank you for standing by. Welcome to the Under Armour fourth quarter earnings webcast and conference call.

Good day, and thank you for standing by and welcome to the under armour fourth quarter earnings webcast and conference call.

Speaker 12: At this time, all participants are in listen-only mode. After the presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star, then one on your telephone keypad. Please be advised, today's conference...

At this time, all participants are in listen only mode.

After the presentation, there will be a question and answer session to ask a question. During the session you will need to press Star then one on your telephone keypad.

Please be advised today's conference maybe recorded.

Speaker 12: If you require operator assistance during the call, please press star then zero.

If you require operator assistance during the call. Please press Star then zero.

Speaker 12: I'd now like to hand the conference over to Lance Alega, Senior Vice President, Investor Relations and Corporate Development.

I'd now like to hand, the conference over to Lance <unk> Senior Vice President Investor Relations <unk> corporate development.

Speaker 3: Good morning. Thank you, everyone, for joining us for Under Armour's fourth quarter and full year fiscal 2021 earnings conference call information provided today's call for looking.

Good morning, Thank you to everyone for joining us for under our fourth quarter and full year fiscal 2021 earnings Conference call information provided on today's call include forward looking statements that reflect under Armours view of its current business as of February 11 2022.

Speaker 3: Statements made are subject to risks and uncertainties that are detailed in documents regularly filed

Payments made are subject to risks and uncertainties that are detailed in documents regularly filed with the SEC.

Speaker 3: safe harbor statement included in this morning's press release, both of which can be found on our website at about dot under armor dot com. It's important to note that the ongoing uncertainty related to COVID-19

Harbor statement included in this morning's press release, both of which can be found on our website at about <unk> under armour Dot com.

It is important to note that the ongoing uncertainty related to COVID-19, and its potential effects on the global retail environment to continue to impact our business results moving forward.

Speaker 3: We may reference non-GAAP financial information on today's call, including adjusted and currency mutual terms, which are defined under SEC rules in this morning's press release.

We may reference non-GAAP financial information on today's call, including adjusted and currency neutral terms, which are defined under SEC rules. In this morning's press release, you May also hear us refer to amounts under U S. GAAP reconciliations of GAAP to non-GAAP measures can also be found in our press release, which identify and quantify all excluded items and provides argue about why we bill.

Speaker 3: Also meets under a press release which identify and quantify all excluded items and provides our view about why we

This information is helpful to investors.

Speaker 3: Joining us on today's call will be Under Armour President and CEO Patrick Frisk.

Joining us on today's call will be under armour, President and CEO , Patrik, Frisk and CFO , Dave Bergman pattern.

Speaker 5: Thank you, Lance, and good morning, everyone, and welcome to our fourth quarter and year-end 2021 conference call. At the beginning of last year, we were confronted with significant uncertainty about our business due to impacts from the COVID-19 pandemic. With dynamic changes in purchase behavior and marketplace demand, we faced several obstacles as we worked through what we believe to be a recovery year following a difficult 2020.

Thank you Lance and good morning, everyone and welcome to our fourth quarter and year end 2021 conference call.

At the beginning of last year, we were confronted with significant uncertainty about our business due to impacts from the COVID-19 pandemic with dynamic changes in purchase behavior and marketplace demand. We faced several obstacles as we work through what we believe to be a recovery year following a difficult 2020.

At that point, it would've been easy to stay conservative and adopt a wait and see strategy yet the tremendous progress we made following a multiyear transformation, including healthier demand for the under armour brand and the passion that this team shows up with everyday meant going on offense was the only path for 2021.

Speaker 4: At that point, it would have been easy to stay conservative and adopt the wait-and-see strategy. Yet the tremendous progress we made following our multi-year transformation, including healthier demand for the Under Armour brand, and the passion that this team shows up with every day meant going on offense was the only path for 2021.

Speaker 5: And because we stayed on offense, Under Armour delivered a record year of financial results, a year that exemplifies the power of our long-term strategic plan and our ability to stay hyper-focused on execution while leveraging our core strengths to position us more strongly for our next chapter of growth.

Because we stayed on offense Undrawn <unk> delivered a record year of financial results a year that exemplifies the power of our long term strategic plan and our ability to stay hyper focused on execution, while leveraging our core strengths that position us more strongly for our next chapter of growth.

Speaker 5: Throughout 2021, we worked methodically to expand our brand's awareness and engagement, ensuring we showed up more consistently, louder, and with a sharper point of view about the distinct role we play in an athlete's journey to competitiveness.

Throughout 2021, we worked methodically to expand our brand awareness and engagement, ensuring we showed up more consistently louder and with a sharper point of view about the distinct role we play in and athletes journey to compete we underscored our commitment to performance by delivering some of the most innovative products that we've ever produced before it's deeper and more.

Speaker 4: We underscored our commitment to performance by delivering some of the most innovative products that we've ever produced. We forged deeper and more productive relationships with our key wholesale partners.

Productive relationships with our key wholesale partners.

Speaker 4: We saw significant progress in our largest long-term growth drivers are international, direct consumer, women's and footwear businesses, and we're stronger financially.

Saw significant progress in our largest long term growth drivers, our international direct to consumer women's and footwear businesses, and we're stronger financially than we've ever been.

Speaker 4: In this respect, looking at some of our highlights, while our year-over-year comparisons benefited from the significant COVID-19 impacts we experienced in 2020, we are equally pleased with our performance over the past two years. For the full year 2021.

In this respect looking at some of our highlights while our year over year comparisons benefited from the significant COVID-19 impact we experienced in 2020, we are equally pleased with our performance over the past two years for the full year 2021.

Revenue was up 27% to reach $5 7 billion, which is a record versus 2019 revenue was up 8%. So solid progress from before the pandemic and the result, driven by several strategies that have lifted the quality and composition of our sales compared to a few years ago breaking that down wholesale revenue increased 36.

Speaker 4: Revenue was up 27% to reach $5.7 billion, which is a record.

Speaker 4: Versus 2019, revenues up 8%, so solid progress from before the pandemic and the result driven by several strategies that have lifted the quality and composition of our sales compared to a few years ago. Breaking that down, wholesale revenue increased 36% to $3.2 billion in 2021. On a two-year basis, wholesale is up 3%.

Percentage $3 2 billion in 2021 on a two year basis wholesale is up 3% as detailed on previous calls. This performance has been tempered by the strategic decisions, we've made to improve brand health by reducing our sales to the off price channel and exiting approximately $2 five.

Speaker 4: As detailed in previous calls, this performance has been tempered by the strategic decisions we've made to improve brand health by reducing our sales through the off-price channel and exiting approximately 2,500 undifferentiated retail doors in North America, an effort which is now concluded.

Undifferentiated retail doors in North America, and effort, which is now concluded.

Speaker 4: Our direct consumer business was up 26% to $2.3 billion in 2021.

Our direct consumer business was up 26% to $2 3 billion in 2021 versus 2019 direct consumers up 29% with strong momentum in our owned and operated stores and our E. Commerce business. Following a 40% increase in 2020, our E Commerce business was up 4% in 2021 equating to 45.

Speaker 4: Versus 2019, direct consumers up 29% with strong momentum in our owned and operated stores and our e-commerce business.

Speaker 4: Following a 40% increase in 2020, our e-commerce business was up 4% in 2021, equating to 45% growth on a two-year stack. This result gives us confidence that this business is well-positioned following a prolonged period of elevated promotional activity.

Rent growth on a two year stack.

This result gives us confidence that this business is well positioned following a prolonged period of elevated promotional activities two.

Speaker 5: 2021 Gross Margin was up 210 basis points to a record 50.3%. Versus 2019, Gross Margin is up 340 basis points, so excellent progress over two years, driven by benefits from pricing and a more favorable channel mix being offset by supply chain headwinds related to COVID-19 and the absence of MyFitnessPal, which we sold at the end of 2020.

<unk> 2021 gross margin was up 210 basis points to a record 53% versus 2019 gross margin is up 340 basis points. So excellent progress over two years, driven by benefits from pricing and a more favorable channel mix being offset by supply chain headwinds related to COVID-19 and.

The absence of my fitness Pal, which we sold at the end of 2020.

Speaker 5: Rounding out the P&L, our full year operating income reached $486 million, net income was $360 million, and our diluted earnings per share was $0.77, all three of which are record

Rounding out the P&L of full year operating income reached $486 million net income was $360 million and our diluted earnings per share was <unk> 77, all three of which are records.

Speaker 4: We also realized strong balance sheet and cash flow performances with inventory down 9% to an absolute dollar value that is only slightly higher than in 2015 when we were a $4 billion business.

We also realized strong balance sheet and cash flow performance is with inventory down 9% to an absolute dollar value that is only slightly higher than in 2015, when we were at $4 billion business.

Speaker 5: And finally, one more record, having ended the year with $1.7 billion in cash.

And finally, one more record having ended the year with $1 7 billion in cash.

Speaker 4: All in, what an incredible period for Under Armour. Having operated for nearly two years amid a global pandemic, I am proud of the progress we've made, the resilience we've shown, and the potential we have to do even better in the future. By staying focused on our key strategies, we are competing and executing at progressively higher levels, helping us unlock value and returns for our shareholders.

All in what an incredible period for Undrawn, having operated for nearly two years amid a global pandemic I am proud of the progress. We've made the resilience we have shown and the potential we have to do even better in the future by staying focused on our key strategies, we are competing and executing at progressively higher levels, helping us unlock.

Value and returns for our shareholders.

Driving us forward at the heart of why we exist is our purpose, we empower those disk drive for more for under armour everything is about the journey from an awful workout when you want to quit but don't to pushing through that last rep, and adding one more to earning that PR because you've put in the work under armour makes you better.

Speaker 4: We do this by delivering innovative products, experiences, and styles influenced by athlete insight and real-world data. Innovations wrapped in art. Engineered to empower the journey to sport through training, competition, and recovery. 2021 was an exceptional year for Under Armour products.

We do this by delivering innovative products experiences and styles influenced by athlete insight and real world data innovations wrapped in our engineered to empower the journey to sport through training competition and recovery.

'twenty one was an exceptional year for under armour products are too many to list, but a few standouts on the apparel side include rush ISO chill rival Fleece Cross back Infinity unstoppable and Meridian all names that delivered a 33% increase in revenue we achieved on the footwear side franchises like cover Sonic.

Speaker 4: There are too many to list, but a few standouts on the apparel side include Rush, Isochill, Rival Fleece, Crossback, Infinity, Unstoppable, and Meridian, all names that delivered a 33% increase in revenue we achieved. On the footwear side, franchises like Hover Sonic, Machina, and Infinity.

Mark and I and infinite UA flow velocity wind charge pursuit, Aurora Curry and project rock contributed nicely to 35% growth validating one of our largest long term growth opportunities two.

Speaker 4: UA Flow Velocity Wind, Charge Pursuit, Assert Aurora, Currie, and Project ROC contributed nicely to 35% growth, validating one of our largest long-term growth opportunities.

Speaker 4: 2021 was also an exceptional year in Under Armour's progress to connect our brand even more deeply with consumers. From the optionality we created in RP&L, we were able to make incremental marketing investments, which we expect to fuel even stronger brand momentum in the years ahead.

2021 was also an exceptional year and Undrawn must progress to connect our brand even more deeply with consumers from the Optionality. We created in our P&L, we were able to make incremental marketing investments, which we expect to fuel even stronger brand momentum in the years ahead at.

Speaker 4: At the center of these efforts, product, experience, and inspiration sits the only way is through. More than a mantra, it's become an ethos, synonymous with the hard work necessary to power the journey. And it's always a journey, from an initial product drawing to a shopping bag to the closet, we obsess athletes and those who strive for more.

At the center of these efforts product experience and inspiration sits the only way is through more than a mantra, it's become an ethos synonymous with the hard work necessary to power the journey and it's always a journey from an initial product drawing two shopping bags to the closet, we obsess athletes and those who strive for more however.

Speaker 4: However, being purpose-led means that it's about more than just shirts and shoes. And sport is so much more than just a game. It teaches us to push past our limits, to be collaborators, to be leaders.

Being purpose led means that it's about more than just shirts and shoes and sport is so much more than just a game. It teaches us to push past our limits to be collaborators to be leaders it increases confidence reduces stress and improves mental health.

Speaker 4: It increases confidence, reduces stress, and improves mental health.

Speaker 5: Yet many young athletes face barriers that prevent them from starting their journey.

Yet many young athletes face barriers that prevent them from starting their journey to support with a lack of fields and courts gaps and coaching shrinking leagues and the shortage of geared to play train and compete with we recognize that not everyone has access to support.

Speaker 4: with a lack of fields and courts, gaps in coaching, shrinking leagues, and a shortage of gear to play, train, and compete with, we recognize that not everyone has access to sport.

Speaker 4: Addressing this opportunity a few weeks ago, we announced a long-term commitment of our resources, focus, and energy to break down these barriers. As we lay the foundation for our Access to Sport initiative, we are excited to share more in the years ahead as we build opportunities for millions of youth to engage in sport by 2030, ensuring that the next generations of focused performers are inspired even more holistically than those before them.

Addressing this opportunity a few weeks ago, we announced a long term commitment of our resources focus and energy to break down. These barriers as we lay the foundation for our access to support initiative. We are excited to share more in the years ahead as we build opportunities for millions of used to engage and support by 2030, ensuring that the next generations.

Focus performers are inspired even more holistically and those before them.

Speaker 4: Now back to our business, and the last two years have proven to be one of the most dynamic, yet opportunistic times in Under Armour's history.

Now back to our business in the last two years have proven to be one of the most dynamic yet opportunistic times and under Armours history.

Speaker 4: Managing the marketplace prudently through our constant focus on operational excellence to ensure we're keeping the brand healthy and moving forward, we are delighted with our results. That said, let's look at how our regions performed in 2021, starting with North America, where revenue was up 29% to $3.8 billion, we're up 4% since 2019. In our largest market, we continue to focus on three fundamentals.

Managing the marketplace prudently through a constant focus on operational excellence to ensure we are keeping the brand healthy and moving forward. We are delighted with our results that said, let's look at how our regions performed in 2021, starting with North America, where revenue was up 29% to $3 8 billion were up 4% since 2019 and our long.

Or just market, we continue to focus on three fundamentals.

Speaker 5: First, it's becoming a better retailer by creating more compelling in-store experiences and delivering best-in-class service across our fleet. Additionally, this means continuing to build on the momentum we've seen in our e-commerce experience.

<unk> is becoming a better retailer by creating more compelling in store experiences and delivering best in class service across our fleet. Additionally, this means continuing to build on the momentum we've seen in our e-commerce business, realizing we'd likely see traffic declines compared to the abnormality that was 2020, we stayed focused on quality by investing in high.

Speaker 5: realizing we'd likely see traffic declines compared to the abnormality that was 2020, we stayed focused on quality by investing in high-return vehicles like targeted PLAs and improved product wayfinding to improve our online shopping experience.

Our return vehicles like targeted Pls and improved product way finding to improve our online shopping experience and it's working in 2021, while we did experience a year over year traffic decline it was more than offset by meaningful increase in conversion and therefore solid revenue growth.

Speaker 5: And it's working. In 2021, while we did experience a year-over-year traffic decline, it was more than offset by meaningful increase in conversion and, therefore, solid revenue growth.

Speaker 5: Second, with the critical mass of undifferentiated wholesale door exits behind us, we are encouraged by the productivity KPIs we're seeing across this channel in North America.

With a critical mass of undifferentiated wholesale door exits behind US we are encouraged by the productivity Kpis were seeing across this channel in North America, a more premium position driven by outstanding inventory management and promotional discipline is translating nicely to additional shelf space opportunities with our largest strategic partners.

Speaker 5: A more premium position driven by outstanding inventory management and promotional discipline is translating nicely to additional shelf space opportunities with our largest strategic partners, higher AURs, and significantly better turns. And that last point, turns, which is really about execution, is a core element of what gives me confidence that we're in an excellent position to adapt to however the environment may develop over the short term.

<unk> higher aur's as significantly better turns and that last point turns which is really about execution.

Core element, but what gives me confidence that we are in excellent position to adapt to however, the environment may develop over the short term.

Speaker 5: Third, we are continuing to drive performance by investing more smartly in marketing, which shows up in improved brand affinity scores around awareness, consideration, and conversion. Gaining better productivity from how and where we spend has always been the goal. By delivering higher quality traffic through strategic paid media and targeted email activations, our ability to connect more meaningfully across key moments and multiple platforms has never been greater.

Third we are continuing to drive performance by investing more smartly in marketing, which shows up in improved brand affinity scores around awareness consideration and conversion gaining better productivity from how and where we spend has always been the goal by delivering higher quality traffic through strategic paid media and targeted E mail.

Activations are ability to connect more meaningfully across key moments and multiple platforms has never been greater.

Speaker 5: Turning to our international business, revenue in EMEA was up 41%, driven by nearly 50% growth in our wholesale business and continued momentum in direct consumer. We are encouraged by the quality of business results delivered in 2021. Our efforts to position Under Armour as premium performance, healthier wholesale relationships, and improved retail capabilities continue to validate the power of our playbook. Our two-year performance is strong as well, with revenue in EMEA up 36% versus 2019.

Turning to our international business revenue in EMEA was up 41% driven by nearly 50% growth in our wholesale business and continued momentum in direct to consumer we are encouraged by the quality of business results delivered in 2021, our efforts to position under armour as premium performance healthier wholesale relationships and improved REIT.

Rail capabilities continued to validate the power of our playbook. Our two year performance is strong as well with revenue in EMEA up 36% versus 2019.

Speaker 5: Next up is Asia-Pacific, where revenue was up 32% in 2021, driven by nearly 50% growth in our wholesale business and a strong increase in direct consumer sales.

Next stop is Asia Pacific, where revenue was up 32% in 2021, driven by nearly 50% growth in our wholesale business and a strong increase in direct to consumer sales.

Speaker 5: Clearly, the story here is about a more challenging environment that has developed in China as of late, as evidenced by a 6% decline in our fourth quarter APAC revenue.

The story here is about a more challenging environment that has developed in China as of late as evidenced by a 6% decline in our fourth quarter APAC revenue. The recent market trends in China are impacting our business. However, our focus in China remains the same staying premium continuing to invest in digital innovation, including working to deliver.

Speaker 5: The recent market trends in China are impacting our business. However, our focus in China remains the same – staying premium, continuing to invest in digital innovation, including working to deliver a much-improved end-to-end consumer engagement platform, and ensuring that store expansions are done at an appropriate pace amid dynamic market conditions.

We're a much improved end to end consumer engagement platform and ensuring that store expansions are done at an appropriate pace and the dynamic market conditions versus 2019 revenue in Asia Pacific was up 31%. So strong growth on a two year basis, and finally revenue in our Latin America region in 2020.

Speaker 5: Versus 2019, revenue in Asia-Pacific was up 31%, so strong growth on a two-year basis.

Speaker 5: And finally, revenue in our Latin America region in 2021 was up 18 percent, driven by strength in our full-price wholesale and distributor business.

One was up 18% driven by strength in our full price wholesale and distributor businesses.

Speaker 5: As a reminder, we have transitioned certain countries in this region to a strategic distributor model – a decision we believe will begin to optimize this region's ability to grow and contribute more profitably in the years to come. Versus 2019, revenue in Latin America is about flat on a two-year basis.

As a reminder, we have transitioned certain countries in this region to a strategic distributor model a decision. We believe will begin to optimize this region's ability to grow and contribute more profitably in the years to come versus 2019 revenue in Latin America is about flat on a two year basis.

Speaker 5: So in closing, we remain both confident and cautious in this operating environment, and while current macro factors are having material impacts on our business, we have no intentions of sitting idle. Innovation, consumer connectivity, and inspiring those who strive for more are not tactics at Under Armour. They are our way of life.

So in closing we remain both confident and cautious in this operating environment.

While current macro factors are having a material impact on our business. We have no intentions of sitting idle innovation consumer connectivity and inspiring doses drive for more or not tactics at under armour. They are our way of life.

Speaker 5: Moving forward, we believe that the things we can control will continue to serve us as strengths, just as they did in fiscal 2021. Regardless of the short-term environment, we are running a stronger, better company, one that is increasingly more capable of delivering sustainable, profitable growth and value creation for our shareholders over the long term.

Moving forward, we believe that the things we can control will continue to serve as our strengths just that they did in fiscal 2021, regardless of the short term environment, we're running a stronger better company. One that is increasingly more capable of delivering sustainable profitable growth and value creation for our shareholders over the long term.

Speaker 5: I am pleased with where Under Armour is sitting, incredibly proud of this team, and in my nearly five years here, I have never been more excited about our future. And with that, I'll hand it over to Dave. Thanks, Patrick. Since the beginning of COVID-19 pandemic, our intent has been to deliver appropriate financial performance while protecting the Under Armour brand and positioning ourselves for sustainable, profitable growth over the long term.

I am pleased with where under armour sitting incredibly proud of this team and in my nearly five years here I have never been more excited about our future and with that I'll hand, it over to Dave.

Thanks, Patrick.

Since the beginning of COVID-19 pandemic, our intent has been to deliver appropriate financial performance, while protecting the under armour brand and positioning ourselves for sustainable profitable growth over the long term.

Speaker 11: Leveraging the strength of a data-driven, consumer-centric strategy and a constant focus on operational excellence.

Leveraging the strength of a data driven consumer centric strategy and our constant focus on operational excellence. We believed we could emerge from this unprecedented time as a stronger more profitable company.

Speaker 11: We believed we could emerge from this unprecedented time as a stronger, more profitable company.

Speaker 11: Despite the high level of uncertainty, we committed to staying agile to minimize downside risk, while executing against our playbook to help us capitalize on upside opportunities as they arose. In 2021, we did just this.

Despite the high level of uncertainty, we committed to staying agile to minimize downside risk while executing against our playbook to help us capitalize on upside opportunities as they arose.

In 2021, we did just this.

Speaker 11: That isn't to say that uncertainty is over. We remain vigilant about the dynamic environment we are operating in, including ongoing supply chain headwinds, rising wages, and inflationary input cost pressures that continue to permeate the market.

That isn't to say that uncertainty is over we remain vigilant about the dynamic environment, we are operating in including ongoing supply chain headwinds rising wages and inflationary input cost pressures that continue to permeate the marketplace yet.

Speaker 11: Yet we remain confident in our ability to deliver against our plan by staying focused on our business strategies and remaining nimble as we implement them. Our fourth quarter results reinforce that.

Yet we remain confident in our ability to deliver against our plan by staying focused on our business strategies and remaining nimble as we implement them.

Our fourth quarter results reinforce that confidence.

Speaker 11: Compared to the prior year, revenue was up 9% to $1.5 billion.

Compared to the prior year revenue was up 9% to $1 5 billion.

Speaker 11: As a reminder, we expected several headwinds in the quarter, including lower sales of sports masks, lower sales to the off-price channel, the absence of MyFitnessPal, and proactive supply constraints, among others.

As a reminder, we expected several headwinds in the quarter, including lower sales of sports masks lower sales to the off price channel. The absence of my fitness Pal and proactive supply constraints among others.

Speaker 11: Versus our previous expectation, our revenue overdrive was primarily due to higher demand across our full-price wholesale and direct-to-consumer businesses, particularly in North America, coupled with better-than-expected supply chain execution during this challenging environment.

Versus our previous expectation our revenue overdrive was primarily due to higher demand across our full price wholesale and direct to consumer businesses, particularly in North America, coupled with better than expected supply chain execution. During this challenging environment.

Speaker 11: From a channel perspective, fourth quarter wholesale revenue was up 16%, driven by strong performance in our full-price business, partially offset by lower year-over-year sales to the off-price channel.

From a channel perspective fourth quarter wholesale revenue was up 16% driven by strong performance in our full price business, partially offset by lower year over year sales to the off price channel.

Our direct to consumer business increased 10% led by 14% growth in our owned and operated retail stores.

Speaker 11: Our direct-to-consumer business increased 10 percent, led by 14 percent growth in our own and operator retail stores and 4 percent growth in our e-commerce.

4% growth in our ecommerce business.

Speaker 11: In addition, our e-commerce business is up more than 30% on a two-year basis.

In addition, our e-commerce business is up more than 30% on a two year basis.

Speaker 11: And licensing revenue was down 33%, driven primarily by the recognition timing of minimum royalty payments.

And licensing revenue was down 33% driven primarily by the recognition timing of minimum royalty payments.

Speaker 11: By product type, apparel revenue was up 18% with strength in our training and outdoor business.

By product type.

<unk> revenue was up 18% with strength in our training and outdoor businesses.

Footwear was up 17% driven primarily by our running and training categories and.

Speaker 11: Footwear was up 17%, driven primarily by our running and training categories.

Speaker 11: And our accessories business was down 27% due to planned lower sales of our sports masks compared to last year's fourth quarter. From a regional.

In our accessories business was down 27% due to planned lower sales of our sports masks compared to last year's fourth quarter.

From a regional and segment perspective.

Speaker 11: Fourth quarter revenue in North America was up 15% to $1.1 billion, driven by premium growth in our full-price wholesale and direct consumer business.

Fourth quarter revenue in North America was up 15% to $1 1 billion driven by premium growth in our full price wholesale and direct to consumer businesses. So excellent barometers to improving brand strength and consumer demand in our largest region.

Speaker 11: So excellent barometers to improving brand strength and consumer demand in our largest region.

Speaker 11: Compared to 2019, North American revenue was up 8% in the fourth quarter, driven by higher quality revenue than two years ago.

Impaired to 2019, North American revenue was up 8% in the fourth quarter, driven by higher quality revenue and two years ago.

In our international business.

Speaker 11: EMEA revenue was up 24%, driven primarily by strength in our wholesale business.

EMEA revenue was up 24% driven primarily by strength in our wholesale business.

Speaker 11: Compared to the fourth quarter of 2019, revenue in EMEA was up 11.

Compared to the fourth quarter of 2019 revenue in EMEA was up 11%.

Speaker 11: Next up is APAC, where the business was down 6% in the quarter, driven by softer demand in our wholesale business, which more than offset DTC growth.

Next up is APAC, where the business was down 6% in the quarter driven by softer demand in our wholesale business, which more than offset DTC growth.

Speaker 11: Compared to 2019, total APAC revenue was up 19%.

Compared to 2019 total APAC revenue was up 19%.

Speaker 11: And finally, in line with expectations, Latin America revenue was down 22% due to the change in our business model as we move certain countries to distributors, an effort which is now completed.

And finally in line with expectations Latin America revenue was down 22% due to the change in our business model as we move certain countries to distributors and effort, which is now completed.

Versus the fourth quarter of 2019, Latin America was down 20%.

Speaker 11: Versus the fourth quarter of 2019, Latin America was down 20%.

Speaker 11: Related to gross margin, our fourth quarter improved 130 basis points to 50.7%.

Related to gross margin, our fourth quarter improved 130 basis points to 57%.

Speaker 11: This expansion was driven by 350 basis points of pricing improvements due primarily to lower promotional activity within our DTC business.

This expansion was driven by 350 basis points of pricing improvements due primarily to lower promotional activity within our DTC business <unk>.

Speaker 11: favorable pricing related to sales to the off-price channel, and lower promotions and markdowns across our wholesale business.

Favorable pricing related to sales to the off price channel.

And lower promotions and markdowns across our wholesale business.

And 90 basis points of benefit related to lower restructuring charges.

Speaker 11: and 90 basis points of benefit related to lower restructuring charges.

Speaker 11: These improvements were partially offset by 190 basis points of COVID-related supply chain impacts driven by higher freight costs, which meaningfully offset product cost benefits during the quarter.

These improvements were partially offset by 190 basis points of Covid related supply chain impacts driven by higher freight cost, which meaningfully offset product cost benefits during the quarter.

Speaker 11: 80 basis points related to the absence of my fitness pal.

80 basis points related to the absence of my fitness Pal.

Speaker 11: and 50 basis points of unfavorable product mix related primarily to lower sports mass sales, which carry a higher gross margin.

And 50 basis points of unfavorable product mix related primarily to lower sports mass sales, which carry a higher gross margin.

Speaker 11: Versus our previous expectation, our fourth quarter gross margin over-delivery was primarily due to favorable pricing developments from lower-than-planned promotional activity within our DTC business.

Versus our previous expectation our fourth quarter gross margin over delivery was primarily due to favorable pricing developments from lower than planned promotional activity within our DTC business more.

Speaker 14: more favorable pricing related to sales to the off-price channel, and lower than planned promotions and markdowns within our wholesale business.

A more favorable pricing related sales to the off price channel and lower than planned promotions and markdowns within our wholesale business.

SG&A expenses were up 15% to $676 million Pri.

Speaker 11: SG&A expenses were up 15% to $676 million, primarily due to increased

Primarily due to increased marketing investments.

Speaker 11: incentive compensation, and non-salaried workforce wages. Related to our 2020 restructuring plan.

Incentive compensation and non salaried workforce wages.

Related to our 2020 restructuring plan.

We recorded $14 million of charges in the fourth quarter.

Speaker 15: In this morning's press release, we noted that we have reduced the high end of our planned expectations by $25 million, so we now expect to recognize total planned charges ranging from $525 million to $550 million.

In this morning's press release, we noted that we have reduced the high end of our planned expectations by $25 million. So we now expect to recognize total planned charges ranging from $525 million to $550 million.

Speaker 11: Thus far, we've realized $514 million of pre-tax restructuring and related charges.

Thus far we've realized $514 million of pre tax restructuring and related charges.

Speaker 11: We expect to recognize any remaining charges related to this plan by the end of the first quarter of our fiscal year 2023.

We expect to recognize any remaining charges related to this plan by the end of the first quarter of our fiscal year 2023.

Speaker 11: Moving on, our fourth quarter operating income was $86 million.

Moving on our fourth quarter operating income was $86 million.

Speaker 11: excluding restructuring and impairment charges, adjusted operating income was $100 million.

Excluding restructuring and impairment charges.

Adjusted operating income was $100 million.

Speaker 11: After tax, we realized a net income of $110 million, or $0.23 of diluted earnings per share during the quarter.

After tax we realized a net income of $110 million or 23 of diluted earnings per share during the quarter.

Excluding restructuring charges.

Speaker 11: income related to our first year of the MyFitnessPal divestiture earn out.

Income related to our first year of the my fitness Pal divestiture earn out.

Speaker 11: and the non-cash amortization of debt discount on our senior convertible notes, our adjusted net income was $67 million, or $0.14 of adjusted diluted earnings per share.

And the noncash amortization of debt discount on our senior convertible notes.

Our adjusted net income was $67 million or <unk> 14 of adjusted diluted earnings per share.

From a balance sheet perspective inventory was down 9% to $811 million driven by continued improvements in our operating model and inbound shipping delays due to COVID-19 related supply chain pressures.

Speaker 11: From a balance sheet perspective, inventory was down 9% to 811 million, driven by continued improvements in our operating model and inbound shipping delays due to COVID-related supply chain pressure.

Speaker 11: Our cash and cash equivalents were $1.7 billion at the end of the quarter, and we had no borrowings under our $1.1 billion revolving credit facility.

Our cash and cash equivalents were $1 7 billion at the end of the quarter and we had no borrowings under our $1 1 billion revolving credit facility.

Speaker 11: Finally, following last year's convertible bond exchanges, we are proud to share that our cash position left debt of $663 million nearly doubled to $1 billion by the end of the fourth quarter.

Finally, following last year's convertible bond exchanges, we are proud to share that our cash position less debt of $663 million nearly doubled to $1 billion by the end of the fourth quarter.

Speaker 16: Looking forward, one last reminder about our fiscal reporting year change.

Looking forward one last reminder, about our fiscal reporting year change.

Mechanically the current period, we're in right now January one through March 31, 2022 will serve as a transition period until we begin our new fiscal year 2023 on April one.

Speaker 11: Mechanically, the current period we're in right now, January 1st through March 31st of 2022, will serve as a transition period until we begin our new fiscal year 2023 on April 1st.

Speaker 11: To revisit what we detailed last year, we believe this change, namely putting our two largest quarters in the middle of our new fiscal year, will provide us with greater visibility when providing our initial annual outlook.

To revisit what we detailed last year, we believe this change, namely putting our two largest quarters in the middle of our new fiscal year will provide us with greater visibility when providing our initial annual outlook.

Speaker 11: In this respect, by the time of our next call, which is expected in early May, we'll have booked orders in hand for the majority of our fall-winter wholesale business.

In this respect by the time of our next call, which is expected in early May we will have booked orders in hand for the majority of our fall winter wholesale business.

Speaker 11: Accordingly, we are not providing a financial outlook for fiscal 2023 on today's call.

Accordingly, we are not providing a financial outlook for fiscal 2023 on today's call.

That said, let's turn to our outlook for the current transition quarter.

Speaker 11: That said, let's turn to our outlook for the current transition quarter.

From a revenue perspective, we now expect our transition period to be up at a mid single digit rate compared to the previous expectation of a low single digit rate increase.

Speaker 11: we now expect our transition period to be up at a mid-single-digit rate compared to the previous expectation of a low single-digit rating.

Speaker 11: This includes approximately 10 points of revenue headwinds related to reductions in our spring summer 2022 wholesale order book from supply constraints associated with ongoing COVID-19 pandemic impact.

This includes approximately 10 points of revenue headwinds related to reductions in our spring Summer 2022 wholesale order book from supply constraints associated with the ongoing COVID-19 pandemic impacts.

Moving forward, we expect many of these headwinds to continue well into fiscal 2023 and.

Speaker 11: Moving forward, we expect many of these headwinds to continue well into fiscal 2023 until longer-than-usual transit times, backlogs, and congestion find balance.

Until longer than usual transit times backlogs and congestion find balance.

Speaker 11: Associated freight and logistics costs normalize, and inbound shipping delays subside.

Associated freight and logistics costs normalize and inbound shipping delays subside.

Speaker 11: At this time, we do expect these uncertainties to cause material impacts and variability in our future results.

At this time, we do expect these uncertainties to cause material impacts and variability in our future results and accordingly, we will remain cautious and agile as we operate our business into fiscal 2023.

Speaker 11: And accordingly, we will remain cautious and agile as we operate our business into fiscal 2023.

Speaker 11: That said, the proactive strategies we're employing.

That said the proactive strategies, we're employing.

Speaker 11: greater operational agility, and overall demand for the Under Armour brand give us confidence in our ability to navigate this dynamic and challenging business environment effectively.

Greater operational agility and overall demand for the under armour brand gives us confidence in our ability to navigate this dynamic and challenging business environment effectively.

Speaker 11: And we believe these COVID-related supply chain pressures are just a temporary speed bump on our road to continued profitable growth over the long term.

And we believe these COVID-19 related supply chain pressures are just a temporary speed bump on a road to continued profitable growth over the long term.

Speaker 11: Turning to gross margin, we expect our transition quarter rate to be down approximately 200 basis points against our Q1 2021 adjusted gross margin, which includes approximately 240 basis points of negative impact from higher freight expenses related to ongoing COVID-19 supply chain challenges, in addition to an unfavorable sales mix, partially offset

Turning to gross margin, we expect our transition quarter rate to be down approximately 200 basis points against our Q1 2021, adjusted gross margin, which includes approximately 240 basis points of negative impact from higher freight expenses related to ongoing COVID-19 supply chain challenge.

In addition to an unfavorable sales mix, partially offset by pricing benefits.

With that we expect operating income to reach approximately $30 million to $35 million and diluted earnings per share to be approximately two to three.

Speaker 11: With that, we expect operating income to reach approximately $30 to $35 million and diluted earnings per share to be approximately $0.02 to $0.03.

Speaker 11: In closing, we're proud of the record results we achieved in 2021 and the consistent progress we've made over the past couple of years.

In closing we're proud of the record results, we achieved in 2021 and the consistent progress we've made over the past couple of years.

Speaker 11: This gives us great confidence in our brand and business and our team's ability to navigate this dynamic environment.

This gives us great confidence in our brand and business and our team's ability to navigate this dynamic environment.

Speaker 11: As we work through our transition quarter and head into fiscal 2023, we're monitoring and tracking the dynamic supply chain and inflationary pressures and we'll be mindful of the uncertainty and volatility that comes along with it.

As we work through our transition quarter and head into fiscal 2023.

We're monitoring and tracking the dynamic supply chain and inflationary pressures and we will be mindful of the uncertainty and volatility that comes along with it.

Speaker 11: These conditions demand that we maintain a high degree of agility, and I am confident we will.

These conditions demand that we maintain a high degree of agility and I am confident we will.

Speaker 11: With that, we'll turn it back to the operator for your questions. Operator?

With that I will turn it back to the operator for your questions operator.

If you'd like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone.

Speaker 12: If you'd like to ask a question at this time, please press the star, then the number one key on your touchtone telephone. Our first question comes from Matthew Boss with J.P. Morgan.

Our first question comes from Matthew Boss with Jpmorgan.

Thanks, and congrats on a nice quarter.

Speaker 17: Thank you. Thank you, Matt. So, Patrick, can you talk to overall health of the Athletic Channel today and on your mid-single-digit top-line sub-quarter outlook, I guess, how best to think about the underlying demand for your brand in North America and international relative to that mid-singles as we consider the 10-point supply chain constraint that you cited on your report?

Thank you thank you Matt.

So Patrick can you talk to overall health of the athletic channel today and on your mid single digit topline stub quarter outlook I guess, how best to think about the underlying demand for your brand in North America and international relative to that mid singles as we consider that 10 point supply chain constraints that you said.

You cited on your reported numbers.

Speaker 5: Yeah. Thank you, Matt. First of all, I believe that currently the inventory levels in the channel are probably the healthiest they've been in the last decade, let's say. And I think that sets us up for a good trajectory going forward. So a lot of what we're seeing right now, and Dave called it out in his script, right? I mean, we have about a 10-point headwind in this quarter alone.

Thank you Matt first of all I believe that currently the inventory levels in the channel.

Probably the healthiest had been in.

In the last decade, let's say.

And I think that sets us up for a good trajectory going forward. So a lot of what we're seeing right now and Dave called it out in his script right. I mean, we have about a 10 point headwind in this quarter alone.

Speaker 5: simply based on logistics, I would say, and transport and inbound, outbound and all that stuff. So, for us, we feel the brand is continuing its trajectory. We feel that our playbook is working.

Simply based on on.

Logistics I would say in transport on inbound outbound and all of that stuff. So for US we feel the brand is continuing its trajectory we feel that our playbook is working.

Speaker 5: We see in our in our metrics in terms of both awareness consideration

We see in our in our metrics in terms of both awareness consideration.

Speaker 5: and engagement from the consumer that we continue to get stronger uh... so that so the uh... the extra marketing that we talked to all of you about uh... in our last earnings call has really uh... started to to make the impact that we want to so feeling very good about athletic feeling very good about the Andromeda brand and the trajectory we're on right now and we're looking forward to just navigating through this what we believe short

And engagement from the consumer that we continue to get stronger.

So the the extra marketing that we've talked to all of you about in our last earnings call has really.

Started to make the impact that we want to so feeling very good about athletic feeling very good about the under armour brand and the trajectory. We're on right now and we're looking forward to just navigating through this what we believe short term speed bump.

Great and then Dave while I know youre, not providing explicit full year guidance at this time, given the multiple moving parts in the stub quarter.

Speaker 6: Great. And then Dave, while I know you're not providing explicit full year guidance at this time, given the multiple moving parts in the sub-quarter, how best to think about this year's 9.3% operating margin as a base, meaning is the expectation for continued gross margin expansion and SG&A leverage from this base multi-year as we think moving forward?

How best to think about this year's nine 3% operating margin as a base, meaning is the expectation for continued gross margin expansion and SG&A leverage from this space multiyear as we think moving forward.

Yes, it's a great question.

Speaker 11: Yeah, it's a great question. You know, again, we're not at a point where we're going to give any real details on on fiscal 23. But, you know, we're excited about what we were able to deliver for 2021. And it's a lot of things coming together there from all the work that we've done, whether it be on the GTM and the operating model, the health with our major accounts,

We're not at a point, where we're going to give any real details on fiscal 'twenty three but we're excited about what we were able to deliver for 2021.

It's a lot of things coming together there from all the work that we've done whether it be on the GTS and the operating model.

Health with our major accounts and then getting to a point now where we can really.

Speaker 11: And then getting to a point now where we can really prioritize better and manage our cost structure and be much more nimble after the restructuring efforts that we've been driving through. So it does set us up well going forward.

Prioritize better and manage our cost structure and be much more nimble after the restructuring efforts that we've been driving through so it does set us up well going forward.

Speaker 11: I will say that our continued goal is to invest in the brand for the longer term.

I will say that our continued goal is to invest in the brand for the longer term, but at the same time, we have to be able to continue to leverage our cost structure and that is definitely one of our constant goal. So.

Speaker 18: But at the same time, we have to be able to continue to leverage our cost structure and that is definitely one of our constant goals.

Speaker 11: You know, as we move forward, we do see opportunities in gross margin. We also see opportunities in leveraging SG&A.

As we move forward, we do see opportunities in gross margin, we also see opportunities and leveraging SG&A.

Speaker 11: But we are going to have some near term.

But we are going to have some near term pressures in the first half of fiscal 'twenty three because of the supply chain.

Speaker 11: pressures in the first half of fiscal twenty three because of the supply chain uh... issues whether it be on on top

Issues, whether it be on topline or whether it be on the freight costs as well again, we see that as temporary and.

Speaker 19: or whether it be on the freight costs as well. Again, we see that as temporary.

Speaker 20: uh... we see that it dissipating a lot in the back up a fiscal twenty three

And we see that is dissipating a lot in the back half of fiscal 'twenty three.

Speaker 11: But that is something that we are going to be navigating very, very nimbly. Great. Best of luck. Thank you.

But that is something that we're going to be navigating very very nimbly.

Great Best of luck.

Thank you. Thank you.

Our next question comes from Erinn Murphy with Piper Sandler.

Speaker 7: Great. Thank you. Good morning. I guess the question is around North America and the strength that you've been seeing in this market.

Great. Thank you good morning.

My question is around North America, and the strength that you've been seeing in the market how sustainable do you see this growth I think it was up 8% on a two year stack basis, and then particularly as we lap the stimulus comparisons from last year here in March and April and then secondly, again related to this marketplace I think Dave you talked about seeing.

Speaker 21: How sustainable do you see this growth? I think it was up 8% on a two-year stack basis. And then particularly as we lap the stimulus comparisons from last year here in March and April .

Speaker 7: And then secondly, again, related to this marketplace, I think Dave, you talked about seeing additional shelf space here in North America. Can you just expound upon a little bit of what you're seeing, what type of accounts are kind of are taking incremental space from you guys?

No shelf space here in North America can you just expound upon a little bit of what you're seeing what type of accounts are alright.

Alright, taking incremental space from you guys. Thank you.

Speaker 5: Thank you, Aaron. Patrick here. I'll kick it off and then I'll bounce it over to Dave when I've given some color. First of all, you know, the health of our growth right now is dramatically different than where we were in 18-19, right? In terms of the composition of the revenue, you know, significantly less off-price sales.

Thank you Erin Patrick here I'll kick it off and then I'll pass it over to Dave, but I have given some color.

First of all the health of our growth right now is dramatically.

Different than where we were in 2019 right in terms of the composition of the revenue significantly less off price sales.

Speaker 5: reduced discounting, markdowns and promotion in all of our channels.

Reduced discounting markdowns in promotion in all of our channels. The type of inventory management that we have and subsequently much better turn in both our own as well as our wholesale partners and then the fact that we have.

Speaker 22: the type of inventory management that we have, and subsequently, you know, much better turn in both our own as well as our wholesale partners. And then the fact that we've, you know, exited about two and a half thousand doors that we felt were undifferentiated, and the fact that we're still growing despite of that, just shows.

About $2 5000 doors.

We felt were on differentiated and wood.

The fact that we're still growing despite of that just shows the type of trajectory.

Speaker 23: the type of trajectory that we're expecting going forward. So for me, at this point in time, we're continuing to earn back shelf space. And we're able to now, through the work that we've done in our P&L, we're able to invest in the right way behind the brand, which also comes on back of a much better understanding of our return on marketing investment models that we're running. And I don't know, Dave, do you want to add something to that?

<unk> that we're expecting going forward. So for me at this point in time, we continuing to earn back shelf space and we're able to now through the work that we've done in our P&L, we're able to invest in the right way behind the brand, which also comes on back of a much better understanding of our return on.

Marketing investment models that were running I don't know, Dave do you want to add something to that.

Speaker 11: Yeah, I mean, I think that, you know, it's it's important to note that, you know, the momentum in North America is definitely real. And if you think about the overdrive that we delivered in Q4.

Yes, I mean, I think that is.

It's important to note that.

The momentum in North America is definitely real and if you think about the overdrive that we delivered in Q4.

Speaker 11: over 75% of that was driven by the North America business. So it is definitely not a demand challenge as we think about this transition quarter or even going into the beginning of fiscal 23. It is a supply challenge with the COVID impacts. And so that's a position that we're excited to be in and really challenge our supply team.

Over 75% of that was driven by the North America business. So it is definitely not a demand challenge as we think about this transition quarter or even going into the beginning of fiscal 'twenty three.

It is a supply challenge with the Covid impacts and so that's the position that we.

We're excited to be in and really challenge our supply chain supply chain team to be able to continue to deliver for us and just one more thing we're not.

Speaker 24: team to be able to continue to deliver for us. And just one more thing, we're not

Speaker 5: taking our foot off the gas as it relates to marketing here in the transition quarter either. We're going to continue to spend on the brand for future seasons.

Taking our foot off the gas as it relates to marketing here in the transition quarter, either we're going to continue to spend on the brand for future seasons.

Got it and then just on the shelf space gains just curious on what types of accounts that are kind of where youre seeing that.

Speaker 25: And then just on the shelf space game, just curious on what types of accounts are kind of where you're seeing that most.

Speaker 11: Well, right now, we're not at a point where we're going to be giving kind of an account level or distribution level input there, but appreciate the question. Thank you.

Well right now we're not at a point, where we're going to be giving kind of account level or distribution level input.

Input there, but I appreciate the question. Thank you alright. Thank you. Thank.

Thank you.

Our next question comes from Simeon Siegel with BMO capital markets.

Speaker 26: Our next question comes from Simeon Siegel with BMO Capital Markets.

Great. Thanks, Hey, guys. Good morning, Congrats on the ongoing results.

Speaker 8: Great. Thanks. Hey, guys. Good morning. Congrats on the ongoing results, the ongoing gross margin.

Gross margins just great.

Speaker 8: really great to see. You mentioned the pricing. How was AUR? And then maybe just because you mentioned the sports masks, are we apples to apples now? So anything to keep in mind there. And then just thoughts on how you're prioritizing inventory between DTC and wholesale given the constraints. Thanks.

Really great to see you mentioned the pricing how was AUR and then maybe just because you mentioned the sports masks are we apples to apples now so anything to keep in mind, there and then just thoughts on how youre prioritizing inventory between DTC and wholesale give it that the constraints.

Speaker 11: Yeah, a couple things there, you know, gross margin, definitely. We're excited about the growth there as well. It is unfortunate the amount of freight costs that we're dealing with.

Yes, a couple of things there.

Gross margin definitely we're excited about the growth there as well it is unfortunate the amount of freight costs that we're dealing with.

Speaker 11: The sport mask headwind, you know, has been real in the back half of 21, and we expect that that's going to be, you know, continuing a little bit here through the transition period and a little bit into early 23, but definitely starting to become a lower impact as we go forward and definitely normalize more by the back half of fiscal 23. And that does create a tiny bit of a gross margin headwind just from that aspect.

The sport mask headwind has been real in the back half of 'twenty one.

And we expect that that's going to be continuing a little bit here through the transition period and a little bit into early 'twenty three.

But definitely starting to become a lower impact as we go forward and definitely normalized more by the back half of fiscal 'twenty, three and that does create a tiny bit of a gross margin headwind just from that aspect.

Speaker 11: But again, the biggest challenge we have on the gross margin side right now is the freight cost, you know, if you think about in the

But again the biggest challenge we have on the gross margin side right. Now is the freight costs. If you think about in the.

Speaker 27: in the stub period here, we actually would be going forward further year over year in the stub quarter in gross margin if it wasn't for these freight costs. So I think that's definitely important to keep in mind.

In the stub period here, we actually would be going forward further year over year in the stub quarter in gross margin. If it wasn't for these freight costs. So I think that's definitely important to keep in mind.

Great. Thanks, and then because you mentioned it a few times I mean, the cash generation has been great. So you're growing cash. Unlike your peers are also growing share counts any any thoughts on the cash.

Speaker 8: Great, thanks. And then, because you mentioned it a few times, I mean, the cash generation has been great. So you're growing cash, unlike your peers, you're also growing your share counts. Any thoughts on the cash?

Yes, I mean I think at this point, we continue to evaluate our options. We're very pleased with what we've been able to drive from a liquidity management and working capital management and overall profitability here. So.

Speaker 28: Yeah, I mean, I think at this point, we continue to evaluate our options, you know, we're very pleased with what we've been able to drive from a liquidity management, working capital management and overall profitability here.

Speaker 29: We're staying focused on kind of navigating the current environment and, you know, therefore operating with agility. And so having that additional cash is helpful there.

We're staying focused on kind of navigating the current environment, and therefore operating with agility and so having that additional cash is helpful. There.

Speaker 30: We will be reinvesting some of that back into the business, whether it be through the DTC expansion, whether it be through some of our systems.

We will be reinvesting some of that back into the business whether it be through the.

The DTC expansion, whether it be through some of our systems, a little bit with the headquarter consolidation work that we're going to be doing.

Speaker 11: a little bit with the headquarter consolidation work that we're going to be doing.

Speaker 31: We're also evaluating would we do a possible further debt buydown, so that's a consideration as well. And then even a share buyback is a possible consideration also. But nothing finalized there, but we're definitely looking at opportunities. But pleased with the position that we currently have.

We're also evaluating would we do a possible further debt buy down so that's a consideration as well.

And then even a share buyback as a possible consideration also but nothing finalized there, but we're definitely looking at opportunities but.

Pleased with the position that we currently have.

Speaker 8: Great, thanks guys. Nice job and best of luck for the rest of the year. Thanks.

Great. Thanks, guys nice job and best of luck for the rest of the year.

Thanks.

Our next question comes from Paul <unk> with Citi.

Speaker 32: Hey, thanks guys. I just want to understand the 10-point headwind that you're seeing in the stub quarter a little bit better. Is that the lead product that's still coming to you just late, or is that product that wholesale partners canceled because of the expected timing of when it will be received and that caused you to cancel orders? So just maybe to alleviate a product backup, I just want to understand that dynamic a little bit better. And to what extent are you trying to get your wholesale partners to order early for fall just to maybe avoid some of these supply chain issues for the upcoming year? Thanks.

Hey, Thanks, guys.

I understand the 10 point headwind that youre seeing in the stub quarter, a little bit better is that the lead product that's still coming to you just laid or is that product that wholesale partners cancelled because of do you expect the timing of when it will be received and that caused you to cancel orders. So just maybe to alleviate a private backup I just wanted to understand that.

Quit a bit better and to what extent are you trying to get your wholesale partners to order early for fall just to maybe avoid some of these supply chain issues for the upcoming year.

Speaker 33: Yeah, I mean, a couple things, you know, relative to the 10 point headwind on the transition quarter, this is not really expected timing delays. This is actually us proactively understanding the capacity issues with our vendors and then working with them and also working with our customers to actually cancel.

Yes, I mean, a couple of things relative to the 10 point headwind on the transition quarter. This is not really expected timing delays. This is actually us proactively understanding the capacity issues with our vendors and then working with them and also working with our customers to actually can.

<unk> purchase orders for production and also cancel sales orders with our customers ahead of time, and we worked with our customers on that so that we all had the visibility and transparency trends.

Speaker 11: purchase orders for production, and also cancel sales orders with our customers ahead of time. And we worked with our customers on that, so that we all had the visibility and transparency

Speaker 34: transparency together to be able to drive through those decisions and we we did prioritize those decisions to make sure that we were protecting You know premium DTC and also our our top wholesale accounts

Transparency together to be able to drive through those decisions and we did prioritize those decisions to make sure that we were protecting.

Premium DTC and also our top wholesale accounts, but we wanted to go about it that way because those pressures were real if we didn't approach. It that way then we would be having a lot of product coming in late it would not be making to the floors and our wholesalers will probably be frustrated with the late visibility to that and we would probably end up with some excess.

Speaker 35: But we wanted to go about it that way because those pressures were real. If we didn't approach it that way, then we would be having a lot of product coming in late.

Speaker 11: It would not be making it to the floors, and our wholesalers would probably be frustrated with the late visibility to that, and we would probably end up with some excess inventory. So to proactively avoid all of that, we actually got ahead of this a while back.

Inventory so to proactively avoid all of that we actually got ahead of this a while back and cancel those orders and Thats really whats driving this headwind.

Speaker 36: and cancel those orders and that's really what's driving the headwind

Speaker 37: And again, we do think it's temporary, and we expect it to continue into Q1, Q2 of 23.

And again, we do think it's temporary.

And we expect it to continue into Q1 Q2 of 'twenty three.

Speaker 5: And to take the second half of that question, Paul, as it relates to deliveries in future seasons and order books, et cetera, we continue to work with our accounts and internally, of course, in our own channels to make sure that we're balancing the remainder of

And to take the second half of that question, Paul as it relates to deliveries and future seasons in order books et cetera, we continue to work with our with our accounts.

Internally of course in our own channels to make sure that we're.

Balancing.

The remainder of.

Speaker 5: the first half as well as into the second half of 22 here, where we see to Dave's earlier point in the script, you know, still some challenges, right? But we're ahead of it and we're really working through that right now. But it is about a balance because we need to not just look at North America, we need to look at it globally and we need to look at it across channels.

The first half as well as into the second half of 'twenty, two here, where we see to Dave's earlier point in the script still still some challenges right, but we're ahead of it and were really working through that right now, but it is about a balance because we need to not just look at North America, we need to look at it.

And we need to look at it across channels.

Speaker 5: And we're now battle-tested, if you like, in terms of having done this for many seasons now, and the relationship with our internal teams, of course, and our external partners in Holstead are excellent right now. So I'm sure we're going to get through it well. Thanks. Good luck.

And.

We're now battle tested if you like in terms of having done this for many seasons now and the relationship with our.

Internal teams of course, and our external partners and wholesale are excellent right now so I'm sure we're going to get through it well.

Alright, Thanks, good luck.

Thank you.

Our next question comes from John Kernan with Cowen.

Speaker 3: Hey, good morning everybody and congrats on a strong year. Thanks John .

Hey, good morning, everybody and congrats on a strong year. Thanks, John Thanks, John .

Speaker 38: Dave, as you look out into, you know, beyond spring, summer,

Dave as you look out into beyond spring summer.

Speaker 39: duration of the spray costs and supply chain costs into the back half of your next fiscal year.

The duration of the Sprague cost and supply chain costs into the back half of your next fiscal year.

Obviously, we all see the impacts in the first half I'm. Just curious is this something thats going to have duration into the back half on freight cost and air freight and shipping.

Speaker 3: The first half, I'm just curious, is this something that's going to have duration into the back half on freight costs and air freight and shipping?

Speaker 3: Curious as your thoughts of how we should think about gross margin beyond just.

Is your thoughts how we should think about gross margins beyond just Q1.

Speaker 11: Yeah, I mean, again, we're not going to give a ton of detail yet on fiscal 23, but what I would say is we are anticipating that we will continue to use and need heavier air freight in this transition quarter and also in the first two quarters of fiscal 23.

Yes, I mean again, we're not going to give a ton of detail on fiscal 'twenty three but what I would say is we are anticipating that we will continue to use and need heavier airfreight in this transition quarter and also in the first two quarters of fiscal 'twenty three.

Speaker 11: We do not anticipate to have to use a lot of air freight in the back half of fiscal 23. So we believe that air freight costs could actually become a tailwind for us in the back half of fiscal 23, whereas it would continue to probably be a headwind for us in the front half of fiscal 23.

We do not anticipate to have to use a lot of air freight in the back half of fiscal 'twenty. Three so we believe that air freight costs could actually become a tailwind for us in the back half of fiscal 'twenty three whereas it would continue to probably be a headwind for us in the front half of fiscal 'twenty, three and then relative to ocean freight rates. That's also.

Speaker 40: And then relative to ocean freight rates, that's also been a developing cost increase as well. That one's probably going to take a little bit longer to subside. So we're continuing to monitor that and work through it. But that's kind of what we're seeing at this point.

Been a developing cost increased as well.

That one is probably going to take a little bit longer to subside.

So we're continuing to monitor that and work through it.

But that's kind of what we're seeing at this point.

Speaker 3: Got it. That's helpful. And just one follow-up, AsiaPAC.

Got it that's helpful and just one follow up.

<unk> Pak.

Speaker 3: has been a bright spot for you, particularly versus some of the results your peers are reporting. Maybe a little bit more challenging in the fourth quarter, but if you look at it,

<unk> has been a bright spot for you, particularly versus some of the results of your peers are reporting.

Maybe a little bit more challenging in the fourth quarter, but if you look at it.

Speaker 3: It represents almost half of your total sales growth off the 2019 base.

It represents almost half of your total sales growth off the 2019 base.

Speaker 3: to the end of 2021. So just curious, what are you seeing in Asia? How are you navigating China? And any structural changes to how you engage with Chinese consumers on the ground there? Thank you.

For the end of 2021. So just curious what are you seeing in Asia, how you're navigating China and any structural changes to how you engage with Chinese consumers on the ground there. Thank you.

Yes, Hi, John Yeah for sure.

Speaker 5: Yeah, hi, hi, John . Yeah, for sure. APAC is is still.

APAC is still.

Speaker 5: probably I would say most affected at this point in terms of

Probably I would say most affected at this point in terms of traffic.

Speaker 5: traffic patterns due to COVID, especially in China, and that's certainly something that's affecting.

Traffic patterns due to COVID-19 , especially in China, and Thats, certainly something thats affecting.

Speaker 5: You know the marketplace there, but also I would say Some of the supply chain things we're dealing with are not isolated to just what?

The marketplace, there, but also I would say.

Some of the supply chain things, we're dealing with are not isolated to just the weather.

Speaker 5: that's also having an impact in China. But as it relates to Under Armour, you know, we have an advantage in China to some degree, right? It's a smaller part of our business overall than some of our competition. And we continue to really be focused on our strategy there, staying premium.

That's also having an impact in China, but as it relates to under armour. We haven't we have an advantage in China to some degree right. It's a smaller part of our business overall some of our competition and we continue to really be focused on on our strategy, they're staying premium continuing to invest in the digital innovation.

Speaker 41: to invest in the digital innovation and you know this entire end-to-end consumer engagement platform and we're also continuing to build up stores but we're very very

This entire end to end consumer engagement platform and we're also continuing to build out stores, but we're very very.

Speaker 42: cautious about how we do that, of course, in this current environment, and so we're

Im cautious about how we do that of course in this current environment.

So we're feeling good about what we're doing over there.

Speaker 43: good about what we're doing over there, and again, we mentioned it in the script, we think it is shorter term in nature.

We mentioned it in the script, we think it is shorter and shorter term in nature.

Speaker 5: And I'm very, very pleased with the progress we continue to make despite of these headwinds. That's great. Best of luck, guys. Thanks. Thank you.

And.

Very very pleased with the progress we continue to make despite these headwinds.

That's great best of luck guys. Thanks.

Thank you.

Our next question comes from Sam Poser with Williams trading.

Speaker 9: Uh, good morning. Thank you for taking my questions. Um, morning, Sam.

Good morning, Thank you for taking my questions Good morning, Sam.

Speaker 44: Morning. One, just some housekeeping. I wonder if you could break out the marketing expense and the other expense for the quarter. And then I was also wondering how much of your inventory is in transit right now? And I just noticed that when I went by it, what's the status on 58th and 5th Avenue? Because last time I was in the city, I saw that the store was wrapped with Under Armour.

Morning.

One I guess.

Housekeeping I Wonder if you could break out the marketing expense in the other expense.

For the quarter.

And then I.

I was also wondering how much of your inventory is in transit right now.

And I just noticed that when I went by what's the status on 58 fifth Avenue because last time you guys saw.

The store was wrapped with under armour.

Yes, I guess, a couple of things there from a <unk>.

Speaker 11: Yeah, I guess a couple of things there, you know, from an SGA perspective in Q4 our global marketing spend was in the neighborhood of $200 million, maybe a little bit more. So definitely one of the highest percentage marketing to revenue quarters that we've had and we did that on purpose to really invest in the brand as we go into next year. And then also we're going to continue to invest pretty heavy here in the transition quarter as well and really keep the gas on as we step into fiscal 23.

SG&A perspective in Q4.

Our global marketing spend was in the neighborhood of $200 million, maybe a little bit more so definitely one of the highest percentage marketing to revenue quarters that we've had and we did that on purpose to really invest in the brand as we go into next year.

And then also we're going to continue to invest pretty heavy year in the transition quarter.

Well it really keep the gas on as we step into fiscal 'twenty three.

Relative to inventory in transit I don't have that exact number handy.

Speaker 45: Relative to inventory and transit, I don't have that exact number handy, but I think that our inventory management continues to be a huge focus for us.

But I think that our inventory management continues to be a huge focus for us I think we're very proactive in how we handled.

Speaker 46: I think we're very proactive in how we handled the supply constraint situation. So, you know, we'll have some ups and downs in inventory, but we're going to continue to manage it tightly and continue to protect the working capital.

The supply constraint situation.

So we will have some ups and downs in inventory, but we're going to continue to manage it tightly and.

And continue to protect the working capital.

Speaker 47: uh... and you know cash conversion cycle that we've driven to this year which is something that were really really proud of

And cash conversion cycle that we've driven to this year, which is something that we're really really proud of.

Speaker 11: And then last, on Fifth Avenue, we're continuing to market the space. It's not exactly a great market right now, but that's okay. We're continuing to work through it, and we've planned for that.

And then last on fifth Avenue.

Continuing to market the space it is not actually a great market right now.

But that's okay, we're continuing to work through it and we've we've planned for that.

Speaker 48: Thank you very much. Just one quick follow up. It sounds to me like you're, you're sort of getting ahead of a lot of things in the transition quarter with that. I know you're not guiding, but would that mean that, you know, as a percent, at least in the.

Thank you everybody knows just one quick follow up it sounds to me like you're you're sort of getting ahead of a lot of things in the transition quarter with that I know, you're not guiding but would that mean that.

Sure.

As a percent at least in the.

Speaker 49: The third quarter of fiscal 23 that we would begin to potentially see some leverage in the marketing.

The third quarter of fiscal 'twenty three.

That.

That we would begin to potentially see some leverage in the marketing.

Speaker 50: Well, I would say that, again, you know, we're at a point now where we feel like.

Well I would say that again.

We're at a point now where we feel like.

Sure.

Speaker 11: We are going to manage SG&A relative to what revenue and gross margin are doing.

We are going to manage SG&A relative to what revenue and gross margin are doing we have that ability now so we're going to stay agile.

Speaker 11: You know, we have that ability now, so we're going to stay agile, you know, yet balanced while making appropriate brand investments to continue to fuel the growth. But as I mentioned earlier, cost structure leverage is a constant goal, and that comes with marketing as well. I think it's an area that we're always going to try and protect more than other areas, but we need to continue to leverage our cost structure and continue to grow profitability and bottom line as well. Thank you.

Balanced, while making appropriate brand investments to continue to fuel the growth, but as I mentioned earlier.

Cost structure leverage is a constant goal and that comes with marketing as well I think it's an area that we're always going to try and protect more than other areas but.

But we need to continue to leverage our cost structure and continue to grow profitability and bottom line as well.

Thank you very much continued success.

Thanks Sam.

Speaker 12: Our next question comes from Kate Fitzsimmons with Wells Fargo.

Our next question comes from Keith Fitzsimmons with Wells Fargo.

Speaker 12: Yes, hi, good morning. Thanks for taking my question. I guess, you know, not to beat a dead horse, but just when looking out on the Stub Corridor, Dave, you had alluded to 240 basis points of freight pressures, you know, should we think about that being the height of the freight pressures, maybe relative to what you're expecting in the first half of F-23?

Yes, hi, good morning, Thanks for taking my question.

I guess not to beat a dead horse, but just when looking out on the stab corridor. David you guys. You had alluded to 240 basis points of freight pressures should we think about that being the height of the freight pressures may be relative to what youre expecting in the first half of F. 'twenty three and.

Speaker 51: And Patrick, you alluded to several times in your prepared comments just about greater consideration and awareness that the brand has made. I'm curious if you can just speak more directly to strides you've made in some of the growth categories, especially women's and footwear, you know, coming off of calendar 21. Thanks so much.

And Patrick you alluded to several times in your prepared comments, just about greater consideration and awareness that the brand has made I'm curious if you can just speak more directly to strides you've made in some of the growth categories, especially women's and footwear coming off.

Calendar 'twenty one thanks, so much.

Yes, I would say that as we think about Q1 and Q2 of fiscal 'twenty three those freight impacts are going to be pretty sizeable.

Speaker 11: Yeah, I would say that as we think about Q1 and Q2 of fiscal 23, those freight impacts are going to be pretty sizable. I don't know that we're ready to give detail on whether it's going to be, you know, a little bit larger or a little bit smaller than what we saw in or what we're expecting in the transition quarter, but it will be significant and it is something that's going to impact our gross margin in the first half of the year.

Don't know that were ready to give detail on whether it's going to be a little bit larger a little bit smaller than what we saw in.

Or what were expecting in the transition quarter, but it will be significant and it is something that's going to impact our gross margin in the first half of the year.

Speaker 5: Yeah, and then, Kate, as it relates to our metrics, our KPIs,

Yeah and then.

As it relates to our metrics or Kpis.

Speaker 52: We've talked a lot today about and I did in my prepared remarks as well around how we're going to continue to spend and how we're spending is really more in top of funnel. That was something we weren't able to necessarily afford to do.

We've talked a lot today about than I did in my prepared remarks, as well around how we're going to continue to spend and how we're spending is really more in top of funnel that was something we weren't able to necessarily afford to do in years past as much as we're doing now and that's what we're going to continue to do and the idea there.

Speaker 53: in years past as much as we're doing now, and that's what we're going to continue to do. And the idea there is really to increase both awareness and attraction, and then ultimately further down in the funnel, consideration for the brand. And what we're seeing right now is, and this is across the world, by the way, it's not just North America. We're seeing...

Really to increase both awareness and attraction and then ultimately further down into the funnel consideration for the brand and what we're seeing right now is and this is across the world by the way. This is not just North America, we are seeing.

Speaker 54: strong momentum in all of those metrics, compared to where we were, you know, just a few years ago. So we're very excited about that, and that's also why Dave and I feel so confident in continuing to spend here in the sub-quarter. You know, the leverage that we're getting out of our roaming metrics, while we're continuing to get better at connecting and engaging consumers in their decision journey.

Strong momentum in all of those metrics compared to where we were just a few years ago. So we're very excited about that and that's also why Dave and I feel so confident in continuing to spend here in the stub quarter.

The leverage that we're getting out of our ROMI metrics.

While we're continuing to get better at connecting and engaging consumers in their decision journey gives us confidence that this is the right decision to do at this point in time, so very excited about where we are and what that means for the brand going forward and just add a little color on that to our current campaign. The only way is through.

Speaker 55: gives us uh... confidence that that this is the right decisions to do at this point in time so very excited about where we are and and what that means for the brand going forward and just a little color on that to you know our current campaign the only way through uh... uh... just kicked off here and you know a few weeks ago with the with the with the theme of uh... and what we call the gift of the game which uh... is already showing uh... really good results for us as well great thank

Just kicked off here a few weeks ago with the with the theme of what we call. The gift for the game, which is already showing really good results for us as well.

Great. Thanks best of luck.

Thank you very much.

Our next question comes from Jonathan Komp with Baird.

Yes.

Speaker 10: Yeah, I think you just to follow up on the 10 point headwind that you mentioned since it sounds like it's very intentional in terms of your actions that are driving that.

Yes, hi, Thank you just a follow up on the 10 point headwind that you mentioned since it sounds like it's very intentional in terms of your actions that are driving that.

Speaker 10: Do you care to comment just on how the magnitude of the drag looks over the next few quarters? And then just on pricing, could you comment on your plans for the year and if the subquarter here fully reflects your plan pricing or if there's additional actions to roll through

Do you care to comment just on how all of that.

Magnitude of the drag looks over the next few quarters and then just on pricing could you comment on your plans for the year.

The stub quarter here fully reflects your planned pricing or if there's additional actions to roll through yet.

Speaker 11: Jonathan, this is Dave, you know, we're not going to be giving exact numbers here yet for fiscal 23, but I would say that, you know, from the proactive work we've done

Jonathan This is Dave we're not going to be giving exact numbers here yet for for fiscal 'twenty, three but I would say that from the proactive work we've done the supply chain constraints and therefore impacts to our top line for fiscal 'twenty three.

Speaker 11: the supply chain constraints and therefore impact to our top line for fiscal 23 Q1, Q2.

Q1 Q2.

Speaker 11: they're they're not going to be that significantly different than what we're seeing here in transition quarter at least that's our current visibility uh... again we'll get a lot more color on that in the early may call uh... kind of what we're seeing at this point and then uh... definitely not seeing that type of an impact for Q3 Q4 fiscal twenty three

They're not going to be that significantly different than what we're seeing here in transition quarter at least that's our current visibility again, we'll give a lot more color on that in the early may call.

But thats kind of what we're seeing at this point and then.

Definitely not seeing that type of an impact for Q3 and Q4 of fiscal 'twenty three.

Speaker 5: And Jonathan Patrick here, as it relates to pricing, we have

And Jonathan Patrick here as it relates to pricing.

We have most of our benefit right now in terms of our gross to net.

Speaker 56: most of our benefit right now in terms of our gross to net in the stub quarter and coming out of 21. But we will be raising some prices here in 22. And it's really about a continuation of our pricing strategy. As the brand gets stronger, as the market continues to evolve and the conditions evolve, we're definitely looking at opportunistically raising prices where we can.

The stub quarter and coming out of 'twenty one.

But we will be raising some prices here in 'twenty, two and it's really about.

Continuation of our pricing strategy as the brand gets stronger as the market continues to evolve into conditions evolve we're definitely looking at opportunistically raising prices, where we can but it's going to be more surgical in nature versus kind of an across the board approach.

Speaker 5: but it's going to be more surgical in nature versus kind of an across-the-board approach.

Okay. That's helpful. And then just one broader question on the margin outlook given everything <unk> seen today about the performance last year and then the current headwinds anything thats changed in terms of the timeline to get back to low double digit operating margin anything thats changed in your view.

Speaker 57: Okay, that's helpful. And then just one broader question on the margin outlook. Given everything you've seen today about the performance last year and then the current headwinds, anything that's changed in terms of the timeline to get back to low double-digit operating margin, anything that's changed in your view?

Speaker 11: You know, look, I think over time, our goals and our strategy are still solid and we've made a lot of progress in 2021.

Look I think over time, our goals and our strategy are still solid and we've made a lot of progress in 2021.

Speaker 58: And as we navigate through kind of these short-term impacts here with supply chains through the first half of 23, we believe we're going to be well on the road towards that trajectory. So again, we'll give more details in the early May call, but we've got the momentum. We've got the control over our cost structure.

And as we navigate through these short term impacts here with supply chain through the first half of 'twenty three.

We believe we're going to be well on the road towards towards that trajectory. So again, we will give more details in the early may call.

But we've got the momentum we've got the control over our cost structure, we've got great relationships with our accounts and so as soon as we can get past. These logistical challenges we're ready to run.

Speaker 59: We've got great relationships with our accounts. And so as soon as we can get past these logistical challenges, we're ready to run.

Great. Thanks again.

Thanks.

Our next question comes from Kimberly Greenberger with Morgan Stanley .

Speaker 60: Our next question comes from Kimberly Greenberger with Morgan Stanley .

Okay, great. Thank you so much.

Speaker 1: OK, great. Thank you so much. Nice recap on a great year, Patrick. I wanted to ask about the sort of unmet demand that you've got here, both in the transition quarter and in the first half of the upcoming fiscal year.

Nice recap on a great year Patrick.

I wanted to ask about just sort of unmet demand that you've got here both on the transition quarter and in the first half of the upcoming fiscal year.

Speaker 61: In your mind, does that represent sort of organic demand for the brand that you think you might be able to capture in maybe calendar year 2023 and beyond? Is that is that how you would characterize it? Or do you think this is more, you know, if you can't meet the demand today, it's possible that it goes away?

In your mind does that represent.

Sort of organic demand for the brand that you think you might be able to capture.

In may be calendar year, 2023, and beyond is that is that how you would characterize it where do you think this is more if you can't meet the demand today.

Possible that it goes away.

Speaker 62: No, I, you know, this, what we're, you know, according to, uh, how we see things and, and, and Kimberly, what, what Dave said before is, is very true, you know, this is real demand that's out there. So for the brand and it's, it's quality.

No.

This.

According to how we see things and Kimberly what Dave said before is very true. This is real demand thats out there so for the brand and its.

Quality demand.

Speaker 63: We don't believe that because we are not able to meet that demand right now because of these proactive decisions that we're going to be

And we don't believe that.

Because we are not able to meet.

Meet that demand right now because of these proactive decisions that we're going to be.

Speaker 64: somehow disadvantaged going forward. We believe that the inventory levels now in general, as I said earlier here today, are healthier than it had ever been in this sector, in our sector, perhaps the best they've been for a decade. So we believe that as we continue to now also spend on the brand, as we have now pruned our distribution to be in the right places, as we continue to win shelf space back and be more.

Somehow disadvantage going forward, we believe that the inventory levels now in general as I said earlier here today.

Healthier than they've ever been.

In the in this sector in our sector, perhaps the best benefit a decade. So we believe that as we continue to now also spend on the brand as we have now pruned our distribution to be in the right place as we continue to win shelf space back and be more.

Speaker 65: specific and focused around what we're doing. We're going to continue to grow this brand going forward. Again, we believe this is very short term. We believe it's a speed bump. The communication and engagement we're driving with the consumer is still there. So once things start to unlock, we believe we're going to be able to unlock the sales again.

Specific and focused around what we're doing we're going to continue to.

Grow this brand going forward.

Again, we believe this is very short term, we believe it's a speed bump.

The communication and engagement, we're driving with the consumer.

It is still there so once things start to unlock we believe we're going to be able to unlock the sales again.

Fantastic and.

Speaker 1: Fantastic. And, you know, looking at that inventory that you mentioned, Patrick, inventory coming out of 2021 is down 99% compared to 2019, but revenue is up 6%. You've got a nice 15 point differential there.

Looking at that inventory that you mentioned Patrick inventory coming out of 2021, it's down 99% compared to 2019 revenues up 6% you've got a nice.

15 point differential there.

Speaker 1: You know, the channel inventory is clearly very, very lean. How are you feeling about your own inventory level? I'm wondering if maybe you wish you had a little more. It sounds like you'd have, you know, even an even more robust revenue outlook if you had a bit more. And how should we think about the way.

The channel inventory clearly very very lean how are you feeling about your own inventory level I'm wondering if maybe you wish you had a little more it sounds like you would have.

Even and even more robust revenue outlook, if you had a bit more.

And how should we think about the way that you would be planning inventory over the next one to two years.

Speaker 66: that you would be planning inventory over the next one to two years if this level is maybe just a little bit too late.

Level is is maybe just a little bit too lean yes.

Speaker 67: Yeah, that's a good question. Dave, if you kick it off with some of the numbers, I'll take some of the inventory at the end. Yeah, I mean, I think, again, you know, we're very comfortable with the mix of inventory, with demand kind of versus excess, and our ability to utilize the off-price channel.

Yes, good questions, David if you kick it off with some of the numbers I'll take some of the inventory at the end, yes, I mean, I think again.

We're very comfortable with the mix of inventory with demand kind of versus excess in our ability to utilize the off price channel.

Speaker 11: and our own factory houses to work, you know, while keeping that third party off price really low. And the inventory that we're running now, yes, it's very well managed. We're excited about where we'll be able to end the year.

And our own factory houses to work, while keeping that third party off price really low.

And the inventory that we're running now yes, it's very well managed we're excited about where we were able to end the year, but we're not at a point, where we feel like we're leaving sales off the table, we've had to cancel a lot of purchase orders, which we've mentioned because of the supply chain constraints.

Speaker 11: but we're not at a point where we feel like we're we're leaving sales off the table we've had to cancel a lot of purchase orders which we've mentioned because of the supply chain constraint

Speaker 11: But outside of that, we feel like the operating model is working. And therefore, as we get past kind of these speed bumps with the supply chain challenges, we believe that we're going to be able to continue to grow that top line and continue to manage inventory tightly. And we're excited about being able to do that and what that means for continued free cash flow going forward.

But outside of that we feel like the operating model is working and therefore as we get past kind of the speed bumps with the supply chain challenges.

We believe that we're going to be able to continue to grow that topline and continue to manage inventory tightly.

And we're excited about being able to do that and what that means for continued free cash flow going forward.

Speaker 68: Great. So it's more about getting back to that smooth flow of inventory rather than carrying a higher level of inventory. Am I hearing you right on that?

Great. So it's more about getting back to that smooth flow of inventory rather than carrying a higher level of inventory am I hearing you right on that yes, I think I think.

Speaker 69: Yeah, I think I think for us, it's all about balance, right? And and we're certainly going to make sure that we're not missing opportunities in terms of driving revenue, where there's opportunity. But it's also about making sure that we continue to

For us, it's all about balance right and.

We're certainly going to make sure that we're not missing opportunities in terms of driving revenue, where there is opportunity, but it's also about making sure that we continue to become more efficient.

Speaker 70: become more efficient in where and how we place inventory. And one of the great things about the work we've done through our transformation is an ability to actually do just that, right, in terms of working closely with both our wholesale partners and our internal teams, as well as our vendors.

Where and how we place inventory and one of the great things about the work we've done through our transformation is an ability to actually do just that and in terms of working closely with both our wholesale partners and our internal teams as well as our vendors to really demand plan better.

Speaker 71: to really demand plan better. You know, we have built out a demand planning function that works incredibly well with our supply planning function. And we're getting better and better at predicting where demand is going to happen. And that is, you know, a skill. It takes time to build out. You need the systems and you need the people and you need the expertise. And Under Armour is at that stage now. Sounds great. Thank you so much.

We've built out a demand planning function that works incredibly well with our supply planning function.

And we're getting better and better at predicting where demand is going to happen and that is.

Scale. It takes time to build out do you need the systems and you need the people and you need the expertise.

And under Armours at that stage now.

Sounds great. Thank you so much thank you.

<unk>.

Our last question will come from Michael Binetti with credit Suisse.

Speaker 13: Oh, hey, guys, thanks for taking our question at the end of your nice quarter. I just wanted to clarify one of the questions earlier, and maybe, Dave, we could think alongside you. Last quarter, I think you spoke to spring-summer order books.

Hey, guys. Thanks for taking our question at the end of your nice quarter.

I just wanted to clarify one of the questions earlier and maybe David you could think alongside you last quarter I think you spoke to spring Summer order book.

Speaker 72: reductions on the third quarter call. Is that 10 points that you pointed to today higher or lower than you expected at that point?

Reductions in the third quarter call is that 10 points that you pointed to today higher or lower than you than you expected.

At point.

Speaker 73: And then on the SG&A, if we just look at what's implied for the subquarter here, it's a bit higher than, you know, the percent of revenues that we see usually in the March quarter pre-COVID. I know you've done a lot of work to take out fixed costs.

And then on the on the SG&A.

Look at what's implied for the stub quarter here.

A bit higher than 11.

As a percent of revenues that we see usually in the March quarter, Preto <unk> done a lot of work to take out fixed costs.

Speaker 74: And again, I know we're not going to get into anything specific for 23, but maybe can you just help us think in the medium term how the SG&A leverage profile works. I know you've said a few times you're going to keep a foot on the gas in the marketing in the first quarter, but maybe just some, you know, higher level SG&A thoughts as we roll into fiscal 23.

I know, we're not going to get into anything specific for 'twenty three but maybe can you just help us think in the medium term.

How the how the SG&A leverage profile works I know you've said a few times, you're going to keep their foot on the gas and the marketing in the first quarter, but maybe just some high level SG&A thoughts.

We roll into fiscal 'twenty three.

Speaker 75: Sure. So, Michael, first, on the spring-summer 22, three months back, we were signaling that we were going to have that headwind pressure, and the amount of that pressure actually is pretty close to what we anticipated three months back. So, you know, we called the ball pretty well relative to that as far as the proactive management, you know, with our vendors and our accounts.

Sure So Michael first on the spring summer 'twenty two.

Three months back we were signaling that we were going to have that headwind pressure.

And the amount of that pressure actually is pretty close to what we anticipated three months back so.

We called the ball pretty well relative to that as far as the proactive management with our vendors and our in our accounts.

Speaker 11: You know, relative to SG&A, you know, Q4 was a pretty big quarter for us in 21, just with the magnitude of that marketing expense being in that $200 million range, plus increased incentive compensation that comes along with the performance of this in 2021. But we also, and we talked about this before, did some minimum wage increases relative to our retail stores in North America and also our distribution centers.

Relative to SG&A.

Q4 was a pretty big quarter for us in 'twenty one.

Just with the magnitude of that marketing expense being in that $200 million range.

Plus increased incentive compensation that comes along with the performance of this in 2021.

But we also and we've talked about this before.

Did some minimum wage increases relative to our retail stores in North America and also our distribution centers.

Speaker 11: So all those investments came through Q4 21 and they were partially offset by, you know, the continued cost efficiencies across the enterprise from all the restructuring work and the operating model evolution. When you think about the stub quarter here that we're currently in,

So all of those investments came through Q4, 'twenty, one and they were partially offset by the continued cost efficiencies across the enterprise from all the restructuring work and the operating model evolution.

When you think about the stub quarter here that we're currently in.

Speaker 11: It's still a pretty heavy SG&A quarter, and that's on purpose. You know, it's really driven by increased marketing investments that we are strategically making, and that we want to stay on the gas and fuel the brand to really roll into fiscal 23 in the right place from a brand perspective. And then it also does have the continued increase in the non-salaried wages that I just mentioned.

It's still a pretty heavy SG&A quarter and that's on purpose, it's really driven by increased marketing investments that we are strategically, making and that we want to stay on the gas and fuel the brand to really roll into fiscal 'twenty three.

In the right place from a brand perspective, and then also does have the continued increase in the non salary wages that I just mentioned so.

Speaker 11: So, as we think about Fiscal 23, again, I'll just keep reiterating that we want to continue to find ways to leverage our new kind of rebased cost structure while protecting the community.

As we think about fiscal 'twenty three again I'll, just keep reiterating that.

Want to continue to find ways to leverage our new kind of rebased cost structure.

While protecting the key investments and the balance around that will be ready to talk about in the early may call.

Speaker 76: And the balance around that, we'll be ready to talk about in the early May call. Okay.

Okay. Thanks, guys.

Thanks, Michael.

Speaker 77: That concludes today's question and answer session. Thank you for participating. You may now disconnect.

That concludes today's question and answer session. Thank.

Thank you for participating you may now.

Now disconnect.