Q1 2023 Under Armour Inc Earnings Call

August 3, 2022

[music].

Thank you for standing by and welcome to the under Armour, Inc. Q1, 2023 earnings webcast and conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Like to ask a question during this time simply press star followed by the number one on your telephone keypad. If your question has been answered or you'd like to withdraw your question again press. The star one we ask that you limit yourself to one question and one follow up to allow everyone an opportunity.

I would now like to turn the conference over to Lance.

SVP of IR and corporate development Mr. <unk>. Please go ahead.

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

Note that the ongoing uncertainty related to COVID-19, and its potential effects on global retail environment could continue to impact our business results moving forward, 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 GAAP to amounts under U S. GAAP reconciliations.

GAAP to non-GAAP measures can also be found in our press release, which identify and quantify all excluded items and provide our view about why we believe this information is helpful to investors joining us on today's call will be under armour executive Chairman and branch you'd Kevin Mike interim President and CEO , Colin Browne and CFO , Dave Bergman Kevin.

Thanks, Lance and good morning, everyone.

It's my great privilege to be with you on the call today, joining calling and Dave who will walk through our results and provide some context as ever thinking about the year.

I'm going to kick us off though here at the top and cover some of the broader aspects of where we are with the brand right now and the opportunities and potential that we see for under armour. Following my comments I'll be hopping off the call, let Colin and Dave get to their scripts and handle Q&A.

So.

Throughout the pandemic and general uncertainty that the last several years have brought us we become quite adept at working through incredibly dynamic environments and during this time, we strengthened our strategic operational and financial foundations, but along the way we've never wavered in putting the under armour brand and our relationship with athletes first the parts of our business and strategy that made us successful.

We'll of course focus on reclaiming, but we're not trying to recreate the success. We've had in the past, we're a better business today with a stronger balance sheet wiser leadership and have been tested we have no delusions of critical getting back to any previous chapter in our path. We are both looking and moving forward.

So it changes a constant backdrop, the ability to pivot and evolve is critical to ensuring future success and we have exercised and strengthen this adapt to change muscle that any internal brand requires.

In this respect let me begin with an update on our search for you as next CEO .

The board and I are focused on our search for a permanent CEO a proven leader capable of amplifying our existing strategy and are now large and mature public company, a professional who can technically do the job while simplifying the definition of success in that job. The fundamentals are essential but so is our inspiration our next chapter will be met with simpler.

The city of understanding that our role is to inspire our athletes teammates customers and all stakeholders to love UA.

We believe this will drive more robust topline growth and increased profitability over the long term take.

Take care of the brand optimize the assets we already have as there are so many from partnerships to athlete relationships to being opportunistic where it makes sense drive love for the UA brand and the rest will follow that's the message for our next CEO .

And to be clear <unk> is not standing still nor without leadership in fact in its first 60 days Colin Browne, our interim President and CEO has done an outstanding job stepping in to manage our business and the team of 17000 strong here at under armour.

The board is running a formal process led by Karen Katz, an active search for a terrific Q are proven leaders and high potentials across various industries deploy.

The pool, we have to choose from is thorough and robust, including calling and we will make a terrific choice for the next CEO of under armour before year's end.

I would now like to lay out where we are.

For prior section is a word that was used to describe compression when I first began researching the idea of you way back in 1996, and its meaning still sits with me today.

It describes how compression when worn on the body can create a greater sense of knowing where the body is in space well.

Well today at UA, our proprietary option is arm and we're fully aware of where you stand and the opportunities that come with it understanding the.

The incredible resources, we now have that to even try to replicate UA would require a fortunate of dollars decades of time and our relationship with consumers to create a brand feeling that you are not just buying apparel footwear and accessory, but real science and innovation that as our mission statement reads will make you better.

We are a brand that has 1400 global UA stores across partners in owned stores around the world 10000 points of retail distribution, United States and authenticity that is undeniable from this brand being born in a football field at the University of Maryland, We bleed authentic.

The team and the relationships we have in the U S alone include more than 450 outfitting contracts with colleges.

The 2000 contracts with high schools, and nearly 1000 club and travel teams. The overwhelming majority of which paid have you lay on their uniforms.

Our aided brand awareness metrics, where we compete are a stunning 92% in the United States confirmed by more than 600000 consumers that our insights team has spoken to in the last several years breaking that out into the biggest global markets means.

<unk> solid consumer awareness from Germany, and the U K to China, and Japan, and while the metrics may vary there's a consistency and who UA is in what we do for athletes.

It means building space suits that can travel into the atmosphere for Virgin Galactic soccer boots for trend Alexander Arnold of Liverpool, and the English premiership as well as building the best football uniforms on the planet for the likes of Notre Dame Auburn, and Wisconsin, as well as cleats and gloves for the greatest football player. The planet has ever seen and Tom Brady.

<unk>, who actually turns 45 today, so happy birthday Tom.

It means proving that we're a basketball brand and expect to challenge in this space for the benefit of 29, UA outfitted teams wearing our uniforms in basketball shoes to the NCAA men's and women's tournaments. This past March including the women's National Champion South Carolina, Gamecocks as well as having the NBA, scoring champion and perennial all star <unk> wearing.

Deep into the playoffs, and Oh, yeah, having Stephen Curry the reigning greatest basketball player in the world wearing UA footwear in partnership with building the Curry brand.

To be clear under armour basketball footwear can play.

It's about major League baseball for Bryce Harper is 2021, MVP season to want Soto and Julio Rodriguez facing off with dueling, UA gloves, and cleats and a spectacular homerun derby, leading into the MLB All star game, a few weeks ago and all the while doing it with strong brand advocates like Lindsey Vaughn and Dwayne the rock Johnson through our project rock <unk>.

<unk>, who know what the UA brand is cooking.

And is the fuel for these and all UA assets, we have a big budget to work with including more than 600 million marketing dollars and we do not feel as if we optimize this and will continue to reposition and reallocate those dollars to drive brand growth.

This may seem very U S centric, yet our brand presence and athletes stable cover more than 100 countries, where <unk> does business today, but at this point underscores how heavily focused we are on ensuring that we win here in North America and have every confidence that we have the tools to do so.

Our covered today is full and there is so much to choose from and to build on to that is why we continue to use the word amplified to describe our go forward strategy.

Not a departure from where we've been but simply amplifying our existing strategy building growth for UAE, where we started in 1996 was hard building growth for UA in 2022 is a whole different ballgame with a suite of assets partners relationships and history with our consumers to pull from.

I am proud of what we've accomplished growing from a single item into our head to toe global authentic on field sports brand that's unique we.

We are in this fight and we will fight for every fixture brand location or moment of mind share with young athletes to assure them that we are thinking on their behalf.

These problem solving and providing solutions they never knew they needed and once they have tried them cannot imagine living without.

It's that same problem solving that led to under Armours founding answering the question with a solution of why we would accept sweat soaked cotton T shirts beneath our uniforms when are better and frankly simpler solutions should exist.

We will be the pre eminent innovation company at the intersection of performance and style.

We have the resources of established products and relationships with athletes that will tap into and given the most innovative solutions in the world with the great that we have yet to unleash on our behalf.

Under armour is on its front foot and playing offense. We've spent the last several years building, our strong foundation and defense, but sometimes the best defense is to score another touchdown, we will do both.

Our product teams are hard at work with industry experts that I wouldn't trade with any brand building the best products security and the best ideas, we find throughout our network, providing the world with one brand destination anyway that they know is aggregating the best ideas in apparel footwear and accessory innovation into one place under one roof.

In our house.

But this will of course, I mean, our own inline innovation first and foremost in our product pipeline is full.

And to that end this fall, we'll be launching a new footwear platform, we discovered through a very simple athlete insight.

One we believe can change the athletic footwear landscape.

We'll introduce a new technology franchise in a training shoe that we feel can become a signature item for our current $1 $5 billion footwear business. We then plan to take this technology to additional footwear categories, where we compete.

Opening the aperture first and foremost it means being the most credible and authentic uniform and workout provider of gear, but also includes wearing occasions for our consumers and our athletes or beyond the fields courts, and gyms and ensuring that they can choose from their closet across performance and sportswear and even from <unk>.

Time to time collaborations with brands that makes sense, having our core team sport athlete choose from a lot with ease and having it happen to all be UA.

This best describes what we mean when we say the amplification of our strategy meeting our consumers, where they are and giving them the ability to love UA in multiple wearing occasions.

This is more than a vision. This is actionable something we can go after and with a 92% of Americans, who know the under armour brand expect from us.

All of this leads to a relentless belief that the UA brand has more than earned the right to exist and that we're appropriately positioned as a challenger once again.

So both those larger and smaller than UA as we will focus on punching much higher above our weight.

So to close out.

Under armour is moving forward.

We're well tested and disciplined and have the inspirational fire and freedom to dream bigger and Thats exactly what we will do.

The board and I have complete trust in the depth of our management team, our solid business foundation, and our ability to push ourselves towards the future of more pronounced profitable growth.

We are in the fight and believe we have all the tools that we need to win and with that I'm going to jump off the call and turn it over to Colin Davies. Thank you all very much.

Thank you Kevin.

Incredibly excited by the opportunity to lead this amazing brand and honored by the trust that you and our board of directors have placed in me. This is my first earnings call. So I'd like to take a moment to introduce myself I've spent my entire career in this industry I've lived on three continents worked in multiple brands and have experienced in nearly all facets.

The apparel footwear and retail space.

Over the past 10 years and focused on operations and supply chain, including the past six years under armour White alkylate key efforts to significantly improve our strategic and operational capabilities and strengthen our powerful foundation and playbook I believe my experience stands me in good stead to lead this brand through the interim period.

As we set ourselves up for the next phase of growth.

Even though my role as interim as Kevin has said we are not standing still over the last couple of months I've spent significant time meeting with customers and partners and teammates and I can report that our brand remains strong and that our multiyear efforts to strengthen our core business is working yet cutting to the chase.

<unk> more that we can be doing to maximize the launch opportunities in consideration for the under armour brand over the near and long term.

Fifth we have seen some unusual shifts in the retail space over the past two years in 2020, the world shut down for long periods, creating significant revenue headwinds. In contrast, 2021, so incredibly high pent up demand, which drove substantial revenue and historical margin gains across our sector.

In 2022, following repercussions from last Fall's Lockdown, we believe an overabundance of product is about to hit the market.

Specifically and supply chain starts to recover from last year's disruptions.

During the same period under armour brand a constraint model designed to clean the market in prime the Brian for future growth, while well intended and we believe successful in helping to restore brand health. This strategy. Further was further exasperated by Covid impacted product supply chain and order constraints along with order.

<unk>.

All conspiring to impact our revenue performance.

As we pivot to a next phase we are adjusting this model to unleash the brand's full potential.

Given that this change coincides with elevated inventories coming into the back half of 2022, we will be vigilant about managing this intersection intelligently and appropriately David will give more on this later, but as our inventories build through the remainder of fiscal 'twenty three it's important to keep in mind, the lean base, we're comparing against.

As we lap future quarters.

So if you consider inventory versus revenue growth on a three year basis at the end of fiscal 'twenty. Three we expect our inventory will be up about 10% over that period. This compares to expected revenue growth in excess of 20% over the same three year period. So we're encouraged by the progress we're making.

These industry wide inventory challenges and more significant inflationary pressures.

Cautious consumer outlook for the balance of the year occur.

Accordingly, we assumed the market will be very promotional and we will need to participate in many of these promotions, which is the primary factor for our margin cool down.

However, we are taking the time to assess where we're at and where we need to be and how we want to reposition ourselves for more significant topline growth in years to come to be clear our foundation is strong our <unk>.

<unk> space has been reset in our P&L is primed and ready and capable of greater productivity as we work to invigorate the top line.

This is about taking our existing core business strategy and amplifying it scaling our ability more effectively across our direct to consumer international women's and footwear businesses. This was about strengthening our innovation engine to deliver products and experiences that inspire and serve athletes better. It's also about ensuring <unk>.

Ms access to products across our evolving omni channel environment, and it's also about prioritizing resources to the areas that have the highest growth trajectory Max.

Maximizing returns on the investments, we're already making and distorting these investments to high priority areas like our digital capabilities and related DTC enablers, including investments in our order management and retail point of sale systems and additional E com and consumer journey at the Huntsman.

Indeed, there is a lot going on and Theres a lot waiting into here while early days. Our teams are empowered with fresh thinking and the freedom to push the bonds beyond the boundaries of what is possible.

Next and simultaneous to amplifying our core we're also working to identify new ways to find new ways to accelerate broader consideration for the under armour brand. We are confident that we are respected as an authentic performance, Brian capable of empowering and athletes journey as they train compete and recover.

Building on this foundation and based on countless conversations with athletes and our customers that ask is clear. There is also demand for under armour across the less sweaty non elevated heart rate parts of that date.

Simply they loved wearing a brand and want more access to more style more options and more usage occasions.

We're actioning how under armour can best meet these needs carefully and responsibly to build upon the trust and credibility. We've earned over the years as a performance brand. This will not require significant transformation by incremental evolution to better serve our athletes.

As you can appreciate I'm 60 days in so it's early days, yet, but I look forward to sharing more details later now back to the present, where I'm excited to touch upon some of the highlights of our first quarter.

And apparel one of our best sellers was our men's ISO chill product a fabric engineered to disburse body heat, making it feel cool to the touch.

Riding solid momentum in our running business. Another highlight was in our women's business with strengthen our Meridian line now cross back into Infinity Bronx.

Footwear underway fourth ring Stephan Curry Rockford current nine throughout the season, then switched to the Carrefour flow trop. During the finals are refreshed not so once he wore during his second NBA title back in 2017.

Fans of the flow trial should be on the lookout for additional release is taking place at the back end of the summer.

Team sports business.

Baseball and football cleats have been performing extremely well and we're looking forward to that back to the back to school in the fall sports seasons.

I'm running a hover mechanism three schuh has been well received with initial solid sell through driven by sales in the Asia Pacific region, and our North American market, we continued to see strength in our UA charged franchises across search road advantage.

We are also excited about our flow velocity elite launch one of the fastest high performing running shoes ever created by under armour. This carbon fiber based marathon specific shoe balances flexibility and cushioning, the maximum speed and efficiency and it works as worn by Jordan trough, we set a world record for the world.

Fastest time to complete three mountains in three days besting the previous mark by over 40 minutes.

And finally, we are incredibly excited about the new training footwear platform, Kevin referenced earlier, and we look forward to delivering game changing products that connects us even more deeply with our athletes.

So I bring my remarks to a close I will introduce a phrase that kind of defines our transitional strategy to amplify the cool and accelerate more as we continue to formulate and execute the strategy I underscore my confidence in the exceptional capabilities of our global team.

Even amidst the noise. This year, we are well positioned to pivots and harness the strength of our foundation to drive more significant top line growth for under armour more consistently in the years ahead.

Hard to pivot.

And to amplify and it's time to accelerate our athletes customers and shareholders deserve it.

Thank you and I'll now hand, the call over to Dave.

Thanks, Colin with that let's review the results for our first quarter of fiscal 2023, which ended June 30.

As a reminder, we changed our fiscal year. So the comparable prior year period is the second calendar quarter of 2021.

Our first quarter revenue was $1 3 billion, which was flat against last year's result, and in line with our outlook.

Excluding the negative impact of foreign currency due to the strength of the U S. Dollar revenue was up 2%.

As discussed on prior earnings calls. This result included an approximate 10 point headwind related to proactive order cancellations due to supply constraints associated with COVID-19 pandemic impacts.

Drilling down by region, our North American business was flat in the quarter were up 1% on a currency neutral basis with increased revenue in our wholesale business being offset by a decline in direct to consumer sales.

In wholesale increased revenue in our full price business was tempered by decreased sales to the off price channel.

In our DTC business positive momentum in our full price stores and ecommerce businesses was offset by a decline in outlet stores.

Revenue in the EMEA region was down 1% in the first quarter, though up 6% on a currency neutral basis.

Clicking down further within EMEA growth in our wholesale business was offset by a decline in DTC sales, which were somewhat constrained by operational issues that impacted shipping and sell through performance, particularly in the U K.

Within our Asia Pacific region, Lockdowns in China contributed to an 8% revenue decline.

On a currency neutral basis revenue was down 4%, primarily due to lower DTC sales.

Looking forward, while there are some green shoots and signs of better days ahead.

Zero tolerance, China, Covid policy keeps us cautious.

On a positive note we have seen an excellent post COVID-19 recovery in the rest of the region with strength in South APAC, South Korea and Japan.

Finally, Latin America revenue was up 6% to $49 million.

Solid performance in distributor led markets.

On a global basis by channel wholesale revenue was up 3% to $792 million.

Increases in our distributor and full price channels were partially offset by lower sales to the off price channel.

Direct to consumer revenue declined 7% to $521 million.

With declines across our own stores, driven primarily by Lockdowns in China, lower E Commerce sales and lower sales in our North American outlet business.

Licensing revenue increased 21% in the quarter to $28 million driven by timing and recognition of minimum guaranteed royalty payments in the APAC region and a solid performance from our Japanese business.

By product type.

Apparel revenue was down 1% with strength and team sports, particularly global football and baseball offset by softness in golf and run categories.

Footwear was up 1% as the supply chain continues to catch up to delays following last year's shutdowns, where we experienced a more significant impact on footwear production.

Despite these challenges and delays we saw good performance during the quarter and our football and basketball categories offset by declines in the running category.

And finally, our accessories business was down 13% due mainly to planned lower sales of our sports match compared to last year.

Our first quarter gross margin fell 280 basis points year over year to 46, 7%.

This was driven primarily by 160 basis points of Covid related supply chain impacts driven by elevated freight costs, particularly ocean freight.

50 basis points from higher promotions and discounting versus last year.

40 basis points of various unfavorable channel regional and product mix impacts.

30 basis points of negative impacts from changes in foreign currency.

SG&A expenses were up 9% to $596 million in the first quarter.

This increase was primarily due to planned marketing investments carried forward from a transition quarter as well as higher workforce wages due to last year's TMA compensation increases.

Legal expenses related to ongoing litigation matters, along with higher consulting and technology related spending.

Our marketing spend in the first quarter was 11% of revenue.

Next operating income was $34 million in the quarter, excluding approximately $10 million of legal expenses related to ongoing litigation matters. Adjusted operating income was $44 million coming in above our outlook of $25 to $35 million, primarily driven by lower than planned SG&A.

<unk>.

After tax we realized a net income of $8 million or <unk> <unk> of diluted earnings per share in the quarter.

Our adjusted net income was $15 million, yielding <unk> of adjusted diluted earnings per share coming in at the high end of our previous outlook for the first quarter.

Now moving to the balance sheet.

At the end of the first quarter inventory was up 8% to $954 million Bill.

Building on Collyns earlier comment we were running leaner inventory levels over the past year due to our constraint model and proactive cancellations of orders because of Covid related supply challenges.

Our supply chain deliveries recover from recent disruptions, we expect elevated inventory growth rates over the next few quarters.

Given the unique environment in 2020 and 2021, we believe looking at inventory on a three year stack is a more accurate barometer of our current situation.

In this respect on a comparable basis versus 2019, our first quarter inventory is down 1%, while our revenue has increased 13% during the same three year period.

And of course, the composition of our inventory, namely higher margin products fewer skus and styles, along with considerably less off price sales demonstrate success in our efforts towards better brand health.

Rounding out the quarter, our cash and cash equivalents were $1 billion and we had no borrowings under our $1 $1 billion revolving credit facility.

And finally recall that our first ever share repurchase program was authorized in February .

Of this two year $500 million program, we've repurchased $325 million in shares including $25 million in the first quarter.

Next let's turn to our fiscal 'twenty three outlook.

Given our fiscal year change remember that the comparable periods. We are using are the corresponding quarters from the trailing 12 month period from April one 2021 through March 31, 2022, Accordingly, we will refer to this as our baseline period.

To set some context, we continued to see high freight cost impact first quarter profitability.

Though we are now seeing signs that supply chain disruptions could find some balance from this point as we move through the rest of the year.

The impact of our preemptive wholesale order cancer.

Due to Covid related disruptions diminishes in the second quarter and thus we plan on being in a better position relative to product availability during the back half of our fiscal year.

As such we anticipate sequentially, increasing revenue growth as we move through the remaining quarters of our fiscal year.

But with that said, we also expect higher levels of uncertainty to remain due to inflationary pressures.

Taking this to the full year there is no change to our expectation that revenue should be up 5% to 7%.

Excluding approximately 200 basis points of anticipated foreign currency headwinds.

Revenue should be up 7% to 9% on a currency neutral basis in fiscal 'twenty three.

This expectation includes approximately three percentage points of headwinds related to our strategic decision to work with our vendors and customers to cancel or is affected by last fall's capacity issues and supply chain delays along with the impacts of the COVID-19 resurgence in China.

Given expectations for higher discounting and promotional activities versus our previous plan. The most significant change to our overall outlook is within gross margin.

Where are we now anticipate a 375 to 425 basis point decline in fiscal 'twenty three.

This compares with our prior year baseline rate of 49, 6%.

With a productive global outlet presence, coupled with maintaining off price sales within our targeted 3% to 4% of revenue range. We believe we're positioned well to navigate however, the environment may or may not develop.

Our expectations regarding inflationary pressures on freight and product cost remain the same as noted on our previous call.

Other full year gross margin headwinds relative to our initial plan include additional impacts from changes in foreign currency.

And channel mix.

With this lower gross margin, we plan to leverage SG&A and keep our expenses close to flat versus the prior year baseline year.

Within that spend we are committed to driving efficiency in corporate overhead while ensuring our investment dollars are optimized.

And the Collyns earlier example, we are working to distort some spending to accelerate specific areas of priority like our digital capabilities and related DTC enablers.

Dropping through the impact of lower gross margin with some offset from anticipated SG&A savings. Our operating income outlook is now $300 million to $325 million.

Excluding legal expenses related to ongoing litigation matters. Adjusted operating income is expected to reach $310 million to $335 million.

This takes us to diluted earnings per share for fiscal 'twenty, three which we now expect to be 61 to 67.

This includes a 28% benefit related to a tax valuation allowance release expected to be realized during the fiscal year.

Of this 28 benefit 16 of this amount is related to prior restructuring.

Additionally, there is a <unk> <unk> negative impact from legal expenses related to ongoing litigation matters.

Excluding these net positive impacts of 14.

Adjusted diluted earnings per share is expected to be between 47 and 53.

And finally, we expect capital expenditures of approximately $225 million this year, which is within our operating principle of 3% to 5% of net revenues.

Next I'd like to give some color on our current quarter.

We expect our second quarter revenue to be flat to up slightly on a reported basis.

We're up at a low to mid single digit rate on a currency neutral basis.

This includes about five percentage points of headwinds from proactive reductions and cancellations to our order book due to COVID-19 related supply constraints as previously discussed.

Given a tough year over year comparison, we expect gross margin to be down approximately 550 to 600 basis points in the second quarter due to negative impacts from elevated promotional activities.

Increased freight expenses shift.

Shifting channel mix.

And growing pressures from changes in foreign currency.

For SG&A, demonstrating my earlier comments to mitigate and offset gross margin pressures, we expect to hold SG&A flat to slightly down in the second quarter.

Taking this to the bottom line, we expect a second quarter operating income of $105 million to $115 million.

Which should translate to 15 to 17 of diluted earnings per share.

So in closing we remain confident in our strategy and we believe we have the right offensive and defensive playbooks to see us through this developing environment.

Our strategic operational and financial foundations have strengthened over the past couple of years and our team has weathered more than a few storms gaining experience and agility as we dealt with ever changing market dynamics we.

We are confident this will work in our favor as we pivot towards driving more pronounced growth and ultimately improve profitability and shareholder returns in the long term.

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

Certainly at this time, if you'd like to ask a question. Please press star one on your telephone keypad. If your question has been answered or you wish to withdraw your question. Please press star one again.

Please limit yourself to one question and one follow up question to allow everyone an opportunity.

Matthew boss with Jpmorgan Your line is open.

Great. Thanks, So collyn, what's your overall assessment of demand today for the under armour brand, maybe relative to the access market.

Where do you see opportunity to drive even greater brand.

And then as we think about the composition for this year what factors are driving the confidence to hold the revenue outlook and how best to think about drivers of the revenue growth in the back half of the year.

Well. Thank you for that question Matthew I mean.

We still believe there is a lot of demand out there for under armour brand as I said in my script.

Thanks, a lot of time talking to contact consumers and customers.

And undoubtedly there is still a lot of demand out there $6 billion worth of demand out there. So we're still confident when we look at the metrics with regards to consideration and other things and we're pretty upbeat with regards to the opportunities to kind of kind of continuing to drive into that we've got a lot of exciting innovative products coming to market in the back end of the year, which were in <unk>.

<unk> kind of upbeat and excited about Kevin talked a little bit about that and I kind of referenced that in my script as well. So no I think that gives us some optimism for the future as well so.

What was the third question, perhaps I missed the third one.

Drivers of the revenue growth in the back half of the year relative to the front half that youre going to jump in here. So this is Dave Matthew when you think about the back half of the year a couple of things I would consider as one.

We believe we're going to be in a much better supply chain position relative to product availability. So that'll be a big factor. In addition, we will not be comping or dealing with the challenges of the inbound that we've talked about that have taken away 10 points in Q1, and we estimate five points in Q2, So we'll be.

Beyond that as we go into the back half as well.

And then when you think about May.

Maybe some over indexed areas you could also look at APAC understanding some of the challenges that they've been under in the first half of the year with Covid.

And with their growth getting back to normal as Covid subsides, and also with retail door openings et cetera.

<unk> should be a big driver in the back half as well. So those are just a few different things, but there's a fair amount that's out there I don't know if you want to add anything yes, I would just say EMEA as well I mean, we're seeing a lot of upside in our EMEA business as well. So again, we're creating demand and we're pretty optimistic about how our how we kind of see the balance of the year playing out.

Great and then just a follow up gave on gross margin could you just elaborate on the elevated promotional activity now is embedded in your outlook. What exactly are you seeing today, what have you embedded in the second quarter in terms of actions and just how do you feel about your overall inventory position.

Sure sure.

When you think about Q2 just for this current quarter that we're in.

The biggest factor in Q2 is definitely the expectation of having to be a lot more promotional and discounting as we see that developing in the market.

We don't feel that we're going to be an outlier in any way, but we believe that that's where the market is going to be.

And we need to play in that and make sure that we're staying staying in the game there.

Probably the second biggest factor for Q2.

Is the increased freight costs, which we've been dealing with and we've talked about before.

And then there is also a.

A little bit of impact with channel mix Theres more distributor sales and a little less DTC mix planned in Q2.

Then also the developing FX pressures.

When you think about full year.

If you kind of work your way down the the largest impact that we are estimating now for this year is the higher discounting and promotions that's probably.

Little more than a point on.

On a full year impact versus last year.

The second one would probably be the inflationary pressures, which are impacting the freight costs, we talked about and also product cost and that's about a point of an impact versus prior year and then the mix from a channel perspective, mainly the higher distributor sales, which some of that is EMEA. Some that's latam.

That's a little less than a point and then after that probably the next one would be FX pressures, which is probably right now estimated about a half a point year over year. So hopefully that gives you a little more color and let me just jumping on the inventory situation and the question you asked there I mean, we're feeling actually pretty comfortable with our inventory level, we talked a little bit about the metrics having.

Compare over that three year stack and if you look at our tons in other of our.

Key metrics, we kind of getting back in the right level to service the market and actually is the right level based upon how we wanted to start to grow the brand.

As you heard us talk about in the script, there's a lot of optimism and a lot of kind of accelerate thinking about how do we kind of accelerate beyond kind of what we currently do and the idea of ensuring that we actually have the right inventory to kind of service that side of the market is something which we definitely want to make sure. We're in a babel and an ability to kind of lean into to that so yeah, we're comfortable with our inventory levels.

That's helpful Best of luck.

Thank you. Thank you.

Okay.

Jay sole with UBS Your line is open.

Great. Thank you so much Tom I wanted to ask you about.

Given the change in leadership and now that you are.

Joe.

How do you think about the mandate from the board to drive growth top line growth for the company versus sort of maintain the discipline that the company has showed over the last few years compared to maybe where it was 2013 2014 2015.

Control pricing control.

Brand management control of the brand equity and make sure that like the brand continues to move forward and elevated way how do you balance the needs of both.

As you look to drive the company forward. Thank you.

Thank you for that question by the way I think it's a great question, but isn't this all about creating that right balance because there isn't that what Greg companies do.

Over the past.

Five years, we've worked aggressively to put in place an operating model that's really started.

Put us in a great position to contribute to this next chapter, but as we move into the sniff next chapter where suddenly not kind of walk away from the operational disciplines in the processes that we put in place, but what has allowed us to do is give this incredible platform. This incredible kind of launching pad for which we can start to think about how do we kind of pivot to that mix.

Growth and so it's not a question of giving up one to get the other but it's really clear when we go and talk to consumers consumers do want more from under armour and just to be wearing in the sweaty part of that day.

Thinking through how do we meet that demand, but do so in a way that's really true to under armour with performance and styling comp be kind of anything other than under armour true it needs to be.

It needs to be with the right under armour logo on it and so I don't think these things are mutually exclusive but we have to do them, both and I think we're incredibly well positioned to really lean into that and it's one of the things I'm. Most excited about suddenly in this interim role to kind of figure out how we do that we're so well positioned to execute against that plan.

Got it and if I could just follow up with one more.

You mentioned that the company has an authorization to buy back stock company is about $1 billion in cash and stock prices pretty low relative to its history.

Or are you thinking about buying back stock.

Over the rest of the year, given the company's still generate pretty good cash flow, even this year and probably better next year.

Yes, Jay this is Dave obviously, we continue to look at what the different options are that are out there. We're happy with where we are from a liquidity perspective, and overall balance sheet perspective.

Do have some open remainder on the share repurchase program. So we will continue to pursue that prudently.

And then we will continue to look at other options as well but.

At this point.

We continue to.

Believe that having the liquidity that we have is very helpful allows us to be nimble allows us to continue to look at new opportunities, whether they be organic or not.

But at this point.

We're in a good spot.

Got it thank you so much.

Thanks Jay.

Yes.

Simeon Siegel with BMO capital markets. Your line is open.

Thanks, Hey, good morning, everyone.

Within the full year, just any help on how to think about apparel footwear and accessory revenue is baked into that guide and then I. Appreciate the full year gross margin color any way to just quantify the components of your expected QQ pressure as well. Thank you.

Sure sure relative to full year revenue.

When you think about from a product perspective.

We anticipate footwear growth is definitely going to be higher than our apparel growth and partly that is because if you think about the supply chain challenges back half of last year, a lot of that impacted footwear production more so than apparel production. So you're you're comping that in the back half of this year, so footwear growth, which is healthy to begin with.

It gets a little bit of a comp benefit there as we go into the back half of the year. So full year growth definitely leaning heavier on footwear versus apparel accessories will still be a little bit down potentially due to comping the sport mass business.

We should get past that as we get through the end of this year.

And then when you when you think a little bit around we gave North America versus international and North America, where we're seeing a mid single digit growth. This year international kind of the low low teen level.

And then relative to gross margin for Q2.

The lion's share of the impact is anticipated elevated promotional activities as we manage through the environment. So that is probably close to three point impact over prior year quarter.

Increased freight expenses.

Probably a little bit more than a point so between those two.

<unk> got two thirds or more of the impact the next largest would be the channel mix, which is mainly around higher percentage of distributor sales and a little less DTC sales.

In the mix for Q2.

And then the FX pressure is probably around a half a point or so.

Hopefully that helps great. Thanks, Yeah. That's great. Thanks, and then just quick follow up what was the change in inventory units versus the 8% growth in dollars and how are you thinking about that AUC delta going forward.

Yes, I mean inventory when you think about sales.

Sales for Q2.

Price versus units they were both fairly fairly flattish there wasn't really a big disparity there. So it wasn't really a big story for us.

Okay, great. Thanks, a lot guys best of luck for the rest of the year.

Thanks.

Michael Binetti with credit Suisse. Your line is open.

Hey, guys I just wanted to clarify one thing if I look at the direct to consumer business decelerated by about 10 points. When we look versus 2019 and wholesale accelerated it looks like by about 11 points.

Just to kind of.

Set the baseline for how the revenues were composed in the quarter is that it sounded like in your prepared comments that the inventories will start to build in some of the production headwinds get out of the way as we get past <unk>.

<unk>.

Maybe I'll just ask you how do you feel confident that you are rebuilding inventories here with DTE decelerating a little bit in this quarter that it will be able to I guess improve a little bit as you go through the year to match up.

Demand for the inventory youre coming in.

Then maybe if you can click into the North America outlet is a little bit it sounded like Youre happy with full price Youre happy with E. Commerce in North America. The outlets is that is that traffic how is that channel responding as you moved through the first quarter and even into the second quarter.

You guys have shown in consumer some of the promotions.

Yes, Michael This is Dave I guess, a couple of things when you mentioned on the DTC growth versus 19, I think the big thing to remember there is the over indexed impact of the China Lockdowns that we had in the quarter and knowing that China is a pretty big DTC quarter for us as well.

So that's one thing I think to consider and I think you'll see that normalize a little bit more as we go forward here.

Here into Q2, Q3, Q4, and then when you think about the.

North America outlook, there's a lot of things there that are that are moving forward very well for us.

And we have fairly balanced assumptions, there as far as growth within wholesale and also growth within DTC.

I would say that E. Commerce is definitely something that we're leaning into more with all the investments that we're making there and we're excited about those and some of those come online this year, which we anticipate would start helping Q3 and Q4 as well Colin I'm not sure. If you want to add anything else there not a huge amount I don't think you covered most of it Dave I mean, we are the <unk>.

Imposition of our growth is certainly healthier than it was a few years ago, and we've really kind of happy with the way in which our wholesale relationships are continuing to evolve but at the same time. We also recognize that we need to accelerate how we think about DTC in the language, we're leaning into that and as we talked about earlier, we're kind of starting to over invest in that area to try and ensure that we are able.

To compete in the appropriate level there so overall.

We're feeling okay. I'll also just add that we also believe we've kind of got the appropriate off price sales mix. So, although we're kind of dealing with some margin challenges here I think we've got the balance about right and feeling confident to have that kind of coming together for the balance of the year.

Okay.

If I could follow with one unparallel gets down down 1% doesn't seem all that bad in the environment. We're in for you guys I'm curious.

Did you see volumes pick up with the promos that you mentioned so feel okay about the effectiveness as you show the consumer promos to keep inventory moving.

Yes, yes, we do yes, I mean, obviously, we are still kind of anniversarying. Some of the supply chain challenges. We've had so but overall we are certainly still seeing demand for apparel thats still working pretty well for us and we are feeling again reasonably buoyant was the expression I've been using recently reasonably buoyant about how the how that still starting.

To flow through.

Okay. Thanks, a lot guys.

Thank you. Thank you.

Yeah.

Tom <unk> with Wedbush Securities. Your line is open.

Hey, good morning, everybody. Thanks for taking my question.

Follow up on the earlier question I mean.

During the pandemic.

He did a great job kind of.

Helping drive.

<unk>.

Kind of.

Reestablishing the.

Premium more premium position of the <unk>.

Yeah.

Obviously down in the past.

Now you can be more promotional on the next call.

Couple of quarters.

How do you kind of avoid.

<unk>.

Having the consumer claims.

Luckily discounts promos.

Yes.

While we kind of get past this period of disruption and elevated inventories at Clarion.

Or do we ensure that.

The customer goes back.

Looking for the brand full price incentives.

Yes.

Looking for discounts promos beyond this.

Okay.

Yes, Tom that's a great question and a great point and as we sit here and look at this year and how it's developing.

It is going to be an interesting market, we know theres a lot of inventory coming in with all the brands. We know that demand is going to be a little challenged relative to inflation and the amount of wallet available.

So we've got to be able to play into that.

And so although we're not excited about being more promotional and we're going to do at a very strategic way a lot of it is going to be focused on our outlet business, where consumers are kind of always expecting those deals.

Thank you youre going to see us going deeper than our competitors and the other thing I would also say is we've made a lot of good strides to your point over the last year or so, especially last year and as we look at the number of promotional days and the depth of our promotions that we had now have planned for this year to navigate the environment we're still.

<unk> actually in a better place than we were.

I would say than we were in 2019, which is probably the last normal year I would say so we are being <unk>.

But we're also being careful we want to make sure we're protecting the brand and also we're going to start investing more as we go forward to into full priced brand house stores, whether that be further in APAC, we're starting to do more in EMEA that we're really excited about and.

And we've got some lined up here is stepping into for the U S. As well. So I think there's also a little bit of high or low that we're going to keep an eye on as well and keep driving forward and set ourselves up well for next year.

Just jumping in there I think one of the other things that.

We kind of core lines, we will continue to heavy up marketing, we are going to be at kind of 10% to 11% range is kind of what we bought we pulled out four and our expectation is to continue to lean into that to make sure and that'll be a lot of that will be middle to top it.

Marketing to really make sure that we're building the brand long term of the brands still resonate with consumers.

At the right at the right level and at the same time, we've talked a lot about how we're looking to kind of continue to distort some of our growth in footwear and that's going to be important that lapping some of the premium channels as well. So we need to play that high low game today's point of view, but at the same time make sure. We're we're plowing the right amount of money in marketing to make sure that we still resonating with the consumer.

At the right level within the market.

Understood. Thanks for the color best of luck.

Thanks, Tom.

Okay.

Jonathan Komp with Baird. Your line is open.

Yes.

Yes, Hi, maybe just a follow up a bit.

Maybe a broader context.

How you are viewing the margin performance relative to the health of the brand the guidance for the year.

It's back more similar to 2017 or 2018 levels on gross margin, yes, the direct to consumer portion is higher the distributions cleaner. So just how should we read that in the overall context of the health of the brand and your confidence.

Where that brand stands today relative to the the discounting and gross margin Youre planning.

Yes, Jonathan I guess this is Dave a couple of things I would I would consider there is as I. Just mentioned, yes, we are intending to be more promotional this year to manage through the environment.

But again I think we're going to do that in a brand right way and we're going to be very strategic about how we do that we're very comfortable with what we can do through our outlet stores and we also are still planning the third party off price channel kind of in that 3% to 4% of our overall revenue mix, which we think is a reasonable level.

So I think we're going to do pretty well as far as protecting the brand as we navigate through this year.

And then when you look at some of the other pieces of gross margin the inflationary pressures that we're seeing on freight.

We do expect to start to subside as we go further into the year and into next year. So when you're thinking long term or when youre thinking comparing the 2019 that headwind should definitely start to dissipate.

And then also as we're making all these investments in omni and in the consumer touch points and digital you will we should expect to see our DTC growth accelerate even more as we move into next year and beyond which will also help gross margin.

And then lastly, I would say that we're at a pretty high point here with the U S dollar and what that does to our gross margin right now.

I'm not going to sit here and try and forecast what FX is going to do but most would probably say that we're at a higher point right now and what would that mean for potentially a little favorability on that side going into next year as well. So I think it's just thinking about all those different puts and takes and what.

It would be a pressure point this year versus what will start to dissipate or maybe become a tailwind as we think about next year and beyond.

Yes, that's really helpful and maybe just one follow up on the DTC and the acceleration can you just maybe be a little more specific on how much of that acceleration youre planning to capture in the guidance this year and.

In the context of lower overall SG&A spend for the balance of the year, how do you make sure you've got enough reinvestment to to be able to support that acceleration.

Okay.

Yeah as far as.

Breaking down this year again.

<unk>.

We do obviously anticipate hope.

Growth in DTC, but again remember that Q1 and Q2.

Especially Q1 was very challenged relative to the China impacts and that's going to drag on us for the year as far as the full year impact and we still expect some of that challenge this quarter as well.

Then getting into a much better spot on DTC growth as we go into the back half of the year.

So it's a little bit back half weighted but there is clear reasons for that in addition to <unk>.

Product availability as well.

And then Im sorry, Jonathan what was your second question on SG&A, Yes, I think yes go ahead Jonathan.

Sorry to interrupt yeah, just in the context of the lower implied SG&A spend for the balance of the year. How do you how do you make sure you're keeping enough to reinvest in the right places.

Context for the acceleration.

Yes, it's a great great.

Sure.

And it's something that we've spent the last probably three years really.

Digging in whether it's through the restructuring through the operating model work to really understand.

All of the levers within our SG&A cost structure, and which ones that we can.

Change or drive differently, while still protecting the brand while still protecting a lot of that top of funnel marketing spend.

And really reallocating some of those dollars to go heavier into the digital investments that Colin was talking about so we've got a really good process in place and the other thing that I'll mention is the enterprise mindset of our leadership across the company.

And I'm speaking to all the leaders within our company not just those at the top of the table here, but.

Everybody has been working together and really making sure that we're spending smart we're prioritizing the right way and we're making good decisions for the long term and.

Hats off to all the employees here for helping us do that and continuing that forward, yes, I would echo those comments from Dave, but I would say it should give some assurance.

The operating model, we've stood up from the disciplines, we put in place we've now really starting to see the benefit of some of those as we really look to trying to drive the leverage of the operating model we've stood up the processes the systems.

Thinking through as I expressed earlier in the call how do we use that foundation through which to pivot to growth, but at the same time, ensuring we're actually holding our SG&A at a at an appropriate level and pivoting and kind of talking our investments as appropriate to where we can drive the greatest the greatest value for the brand and it's very clear the DTC and E. Commerce is whether it should be.

Thanks again.

Thank you.

Brian Nagel with Oppenheimer. Your line is open.

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

So first off I guess, maybe just more of a qualitative look at <unk>.

<unk> comments.

So you should think about either from under armour perspective, or maybe what youre seeing in the.

The category broadly the inventory now.

To flow better.

Is it more of just which should be coming.

It's a product that's been backed up and now potentially could be out of season off trend, which would lead to potentially more promotional activity.

Thats, a great question, Brian and I think.

Although as we talked we actually took some proactive cancellations earlier in the year to make sure that that was not an issue to make sure that the timing that we were in a clean position with regards to the inventory that was coming in the right inventory was coming in at the right time and Thats why we are now moving into we are seeing the right inventory arriving at the right place at the right time in order to service.

So we feel our inventory is going to be pretty clean and going to be at the right place at the right time to meet consumers and provide those with performance solutions. They never knew they needed and comments and looking at that as we fabric across the brand.

Okay. That's very helpful. And then this is Mike I just wanted my follow up question.

You talked about in the prepared comments.

This may be growing emphasis if you will.

Lifestyle, or which you referred to as parts of the day, where people don't want to sweat as much.

How should we think about that.

The timing of that that the timing of when would we begin to see that product in any type of emphasis around that product.

Well I mean, we are working through that Brian I mean, it's going to take a while to obviously build into our go to market model, but at the same time one of the disciplines. We've put in place over the past couple of years is kind of what I call up if you will small real trying to model from the point of view there are certain things that are just going to take time to do because that's the cadence that we need to have in place to run.

The business and produce the kind of and if it's if kind of solutions, we can come up with but at the same time, there's clearly tactical opportunities for us to kind of double down and deliver things within season. So we're running those two things at the same time it will take a while for it to kind of impact the entire business, while the relevant relevant parts of the business, but certainly we're looking for.

I'll make some tactical shifts as and when we potentially can so we're leaning into that now.

Alright, well I appreciate it thank you.

Thank you thank you Bob.

Yes.

We have time for one final question, Paul <unk> with Citigroup. Your line is open.

Hey, Thanks, guys I'm curious if you could talk a little bit more about the SG&A.

And the way that you were able to flex.

For the rest of the year in response to the current environment and then related to that I think you mentioned you have a $600 million marketing dollar budget that was not optimized I'm curious, where you feel like youre not getting a good return on the marketing dollars that you're spending how big is that.

Bucket of dollars that you feel like is not producing an adequate return and how quickly can you pivot away from what youre spending on today versus I think you mentioned a little bit more focused towards DTC. Just curious how fast you can move there. Thanks.

Yes, Paul I'll start overall, and SCA, and then I'll hand, it over to Collin <unk> to dive in on the marketing a little bit but.

In general as we're seeing things develop we motivated pretty quickly to dig in and see how we could re prioritize and move forward in a way to protect the brand keep making the right investments while kind of taking the SG&A down. So there is definitely some things that we've done there relative to.

Some of the.

Salting spend that we believe that we can do more in house or that we believe that we can defer a little bit out too to later periods, although still protecting kind of the digital and consumer journey touch points work.

So some of it is really just doing some pretty deep detailed diving and prioritization of areas like that.

But then also there are some areas where.

We can slow down a little bit relative to hiring.

Tiring and some of the expansion areas.

There is also some areas where capex, we can slow down a little bit of it is non.

Non revenue generating capex when it goes live you've got depreciation so there's ways that we can slow that down and prioritize that more.

But it's really just going through and working with all of our teams and prioritize in each of the areas in understanding what we want to protect and what we can given a little bit more on and again using an enterprise mindset, which has really been strong strongly developed over the last few years.

And with regards to the question on marketing I mean, Kevin Kevin in his prepared remarks kind of explained just the.

Incredible assets, we have across the brand and the opportunity for us to really optimize those as really one of them might be kind of make sure we needed to do with making sure we're leveraging those and engaging that appropriately and making sure that we are making sure. We're driving the right ROMI with regards to how we are investing in marketing so a real kind of deep dive to make sure.

We're activating those assets that we've got in place and really making sure that we can continue to kind of optimize that so.

Vis vis the.

Deep dive that we're doing at the moment as part of obviously this this transitional plan to make sure we're really doubling down on driving upon that because we've got we've got some of the greatest assets in the world and how do we make sure that we've just optimizing those for the benefit of the brand.

When should we expect that work to be done and when will the consumer see something different from you guys in terms of how you're spending your marketing dollars.

I think that will come through over a period of time, we're obviously in a transitional period at the moment with fitness CEO kind of leadership leaning in here, but the teams are working on it it's actually a work in progress at the moment I think we will start to see some iterations around that fairly soon because marketing is one of these things we can pivot a little bit.

Im certainly incredibly proud of the back to school campaign that the teams recently put out which I think kind of started to lean in a little bit differently to how we think about that but clearly there is opportunities for us to do more than I know.

The marketing teams are kind of actively mean into that and I think youll see that evolve certainly over the next over the next few months.

Okay. Thanks, guys. Good luck.

Thank you thanks Paul.

Alright. Thanks, everyone. Appreciate you joining us on today's call. Thank you bye.

Bye bye.

This concludes the under Armour, Inc. Q1, 2023 earnings webcast and conference call. We thank you for your participation you may now disconnect.

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Ask a question during this time simply press star followed by the number one on your telephone keypad.

If your question has been answered or you would like to withdraw your question again press. The star one we ask that you limit yourself to one question and one follow up to allow everyone an opportunity. Thank.

I would now like to turn the conference over to Lance <unk>.

IR and corporate development Mr. <unk>. Please go ahead.

Thank you and good morning, everyone and thanks for joining us on the under armour first quarter fiscal 2023 earnings call. The information provided on today's call will include forward looking statements that reflect <unk> view of its current business as of August three 2022 statements made are subject to risks and uncertainties that are detailed in documents regularly filed with the SEC and the <unk>.

Safe Harbor statement included in this morning's press release, both of which can be found on our website at about not under armour Dot com.

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

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 GAAP 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 provide our view about why we believe this information is helpful to investors joining us on today's call will be under armour executive Chairman and brand Chief Kevin Mike Interim President and CEO , Colin Browne and CFO , Dave Bergman Kevin.

Thanks, Lance and good morning, everyone.

It's my great privilege to be with you on the call today, joining calling and Dave who will walk through our results and provide some context as ever thinking about the year.

Im going to kick us off though here at the top and cover some of the broader aspects of where we are with the brand right now and the opportunities for potential that we see for under armour. Following my comments I'll be hopping off the call, let Colin and Dave get to their scripts and handle Q&A.

So.

So it will change is a constant backdrop, the ability to pivot and evolve is critical to ensuring future success and we have exercised and strengthen this adapt to change muscle that any internal brand requires.

In this respect let me begin with an update on our search for UAS next CEO .

City of understanding that our role is to inspire our athletes teammates customers and all stakeholders to love UA.

We believe this will drive more robust topline growth and increased profitability over the long term take.

And to be clear <unk> is not standing still nor without leadership in fact in its first 60 days Colin Browne, our interim President and CEO has done an outstanding job stepping into manage our business and the team of 17000 strong here at under armour.

<unk> is running a formal process led by Karen Katz, an active search for a terrific Q are proven leaders and high potentials across various industries.

Paul we have to choose from is thorough and robust, including Collyn and we will make a terrific choice for the next CEO of under armour before year's end.

I would now like to lay out where we are.

For prior section is a word that was used to describe compression when I first began researching the idea of UA back in 1996, and its meaning still sits with me today.

In essence, it describes how compression when worn on the body can create a greater sense of knowing where the body is in space.

Well today at UA, our propriety section is on and we are fully aware of where <unk> stands and the opportunities that come with it understanding the.

The team and the relationships we have in the U S alone include more than 450 outfitting contracts with colleges.

2000 contracts with high schools, and nearly 1000 club and travel teams the overwhelming majority of which paid have UA on their uniforms.

<unk> solid consumer awareness from Germany, and the U K to China, and Japan, and while the metrics may vary there's a consistency and who UA is in what we do for athletes.

It means building space suits that can travel into the atmosphere for Virgin Galactic soccer boots for Alexander Arnold of Liverpool, and the English premiership as well as building the best football uniforms on the planet for the likes of Notre Dame Auburn, and Wisconsin, as well as cleats and gloves for the greatest football player. The planet has ever seen and Tom Brady.

<unk>, who actually turns 45 today, so happy birthday Tom.

It means proving that we're a basketball brand and expect to challenge in this space for the benefit of 29, UA outfitted teams wearing our uniforms in basketball shoes to the NCAA men's and women's tournament. This past March including the women's National Champion South Carolina, Gamecocks as well as having the NBA, scoring champion and perennial all star <unk> wearing.

Deep into the playoffs, and Oh, yeah, having Stephen Curry the reigning greatest basketball player in the world wearing UA footwear in partnership with building the <unk> brand.

To be clear under armour basketball footwear can play.

<unk>, who know what the UA brand is cooking.

Our covered today is full and there is so much to choose from and to build on to that is why we continue to use the word amplified to describe our go forward strategy.

Now to departure from where we've been but simply amplifying our existing strategy building growth for UAE, where we started in 1996 was hard building growth for UA in 2022 is a whole different ballgame with a suite of assets partners relationships and history with our consumers to pull from.

I am proud of what we've accomplished growing from a single item into our head to toe global authentic on field sports brand Thats unique.

We are in this fight and we will fight for every fixture brand location or moment of mind share with young athletes to assure them that we are thinking on their behalf.

<unk> problem solving and providing solutions they never knew they needed and once they have tried them cannot imagine living without.

It's that same problem solving that led to <unk> founding answering the question with a solution of why we would accept sweat soaked cotton T shirts beneath our uniforms when are better and frankly simpler solutions should exist.

We will be the pre eminent innovation company at the intersection of performance and style.

Under armour is on its front foot and playing offense. We've spent the last several years building, our strong foundation and defense, but sometimes the best defense is to score another touchdown.

We will do both.

Our product teams are hard at work with industry experts that I wouldn't trade with any brand building the best products security and the best ideas, we find throughout our network, providing the world with one brand destination and UA that they know is aggregating the best ideas in apparel footwear and accessory innovation into one place under one roof.

In our house.

But this will of course in our own inline innovation first and foremost in our product pipeline is full.

And to that end. This fall, we will be launching a new footwear platform, we discovered through a very simple athlete insight.

One we believe can change the athletic footwear landscape, we will introduce a new technology franchise in a training shoe that we feel can become a signature item for our current $1 $5 billion footwear business.

We then plan to take this technology to additional footwear categories, where we compete.

From time to time collaborations with brands that makes sense.

Having our core team sport athlete choose from a lot with ease and having it happen to all be UA.

This best describes what we mean when we say the amplification of our strategy meeting our consumers, where they are and giving them the ability to love UA in multiple wearing occasions.

This is more than a vision. This is actionable something we can go after and with a 92% of Americans, who know the under armour brand expect from us.

All of this leads to a relentless belief that the UA brand has more than earned the right to exist and that we're appropriately positioned as a challenger once again.

So both those larger and smaller than UA as we will focus on punching much higher above our weight.

So to close out under armour is moving forward, we are well tested and disciplined and have the inspiration of fire and freedom to dream bigger and Thats exactly what we will do.

The board and I have complete trust in the depth of our management team, our solid business foundation, and our ability to push ourselves towards a future of more pronounced profitable growth.

We are in the fight and believe we have all the tools that we need to win and with that I'm going to jump off the call and turn it over to Colin Davies. Thank you all very much.

Thank you Kevin.

The apparel footwear and retail space.

Over the past 10 years, I've focused on operations and supply chain, including the past six years under armour, where alkylate key efforts to significantly improve our strategic and operational capabilities and strengthen our powerful foundation on playbook.

I believe my experience stands me in good stead to lead this brand through the interim period as we set ourselves up for the next phase of growth.

<unk> more that we can be doing to maximize the launch opportunities in consideration for the under armour brand over the near and long term to be fair. We've seen some unusual shifts in the retail space over the past two years in 2020, the world shut down for long periods, creating significant revenue headwinds in contrast <unk>.

'twenty, one so incredibly high pent up demand, which drove substantial revenue and historical margin gains across our sector in.

In 2022, following repercussions from last Fall's Lockdown, we believe an overabundance of product is about to hit the market.

Specifically and supply chain starts to recover from last year's disruptions.

All conspiring to impact our revenue performance.

As we pivot to a next phase we are adjusting this model to unleash the brand's full potential.

Given that this change coincides with elevated inventories coming into the back half of 2022, we will be vigilant about managing infection intelligently and appropriately.

<unk> will give more on this later, but as our inventories build through the remainder of fiscal 'twenty three it's important to keep in mind building base, we're comparing against as we lap future quarters.

Even so if you consider inventory versus revenue growth on a three year basis at the end of fiscal 'twenty. Three we expect our inventory will be up about 10% over that period. This compares to expected revenue growth in excess of 20% over the same three year period. So we're encouraged by the progress we're making.

These industry wide inventory challenges and more significant inflationary pressures.

Cautious consumer outlook for the balance of the year.

Accordingly, we assumed the market will be very promotional and we will need to participate in many of these promotions, which is the primary factor for our margin quarter.

As we work to invigorate the top line.

Ms access to products across our evolving omni channel environment, and it's also about prioritizing resources to the areas that have the highest growth trajectory.

Quite simply they love wearing our brands and want more access to more style more options and more usage occasions.

We're actioning how under armour can best meet these needs carefully and responsibly to build upon the trust and credibility we've earned over the years as a performance brand.

This will not require significant transformation by incremental evolution to better serve our athletes.

And apparel one of our best sellers was our mens ISO chill product a fabric engineered to disburse body heat, making it feel cool to the touch driving solid momentum in our running business. Another highlight within our women's business with strength in our Meridian line now cross back into Infinity Brown.

Turning to footwear underway fourth ring Stephan Curry Rockford current nine throughout the season, then switched to the Carrefour flow trout during the finals a refresh not so what's he wore during his second NBA title back in 2017.

So the flow through should be on the lookout for additional release is taking place at the back end of the summer and our team sports business base.

Baseball and football cleats have been performing extremely well and we're looking forward to that back to the back to school in the fall sports seasons.

And running hover mechanism three schuh has been well received with initial solid sell through driven by sales in the Asia Pacific region, and our North American market, we continued to see strength in our UA charged franchises across search road advantage.

We are also excited about our flow velocity elite launch one of the fastest high performing running shoes ever created by under armour. This carbon fiber based marathon specific shoe balances flexibility and cushioning, the maximum speed and efficiency and it works as wound by Jordan trough, we set a world record for the worlds.

Boston, Tom to complete three marathons and three days besting the previous mark by over 40 minutes.

So I bring my remarks to a close I will introduce a phrase that kind of defines our transitional strategy to amplify the call and accelerate more as we continue to formulate and execute the strategy I underscore my confidence in the exceptional capabilities of our global team.

Even amidst the noise. This year, we are well positioned to pivot and harness the strength of our foundation to drive more significant top line growth for under armour more consistently in the years ahead.

Time to pivot.

To amplify and it's time to accelerate our athletes customers and shareholders deserve it.

Thank you and I'll now hand, the call over to Dave.

Thanks, Colin with that let's review the results for our first quarter of fiscal 2023, which ended June 30.

As a reminder, we changed our fiscal year. So the comparable prior year period is the second calendar quarter of 2021.

Our first quarter revenue was $1 3 billion, which was flat against last year's result, and in line with our outlook.

Excluding the negative impact of foreign currency due to the strength of the U S. Dollar revenue was up 2%.

Drilling down by region.

Our North American business was flat in the quarter were up 1% on a currency neutral basis with increased revenue in our wholesale business being offset by a decline in direct to consumer sales.

In wholesale increased revenue in our full price business was tempered by decreased sales to the off price channel.

In our DTC business positive momentum in our full price stores and ecommerce businesses was offset by a decline in outlet stores.

Revenue in the EMEA region was down 1% in the first quarter, though up 6% on a currency neutral basis.

Within our Asia Pacific region, Lockdowns in China contributed to an 8% revenue decline on.

On a currency neutral basis revenue was down 4%, primarily due to lower DTC sales.

Looking forward, while there are some green shoots and signs of better days ahead, the zero tolerance, China Covid policy keeps us cautious.

On a positive note we have seen an excellent post COVID-19 recovery in the rest of the region with strength in South APAC, South Korea and Japan.

Finally, Latin America revenue was up 6% to $49 million on a solid performance in distributor led markets.

On a global basis by channel wholesale revenue was up 3% to 792 million.

Increases in our distributor and full price channels were partially offset by lower sales to the off price channel.

Direct to consumer revenue declined 7% to $521 million.

With declines across our own stores, driven primarily by Lockdowns in China, lower E Commerce sales and lower sales in our North American outlet business.

By product type.

Apparel revenue was down 1% with strength and team sports, particularly global football and baseball offset by softness in golf and run categories.

Footwear was up 1% as the supply chain continues to catch up to delays following last year's shutdowns, where we experienced a more significant impact on footwear production.

Despite these challenges and delays we saw good performance during the quarter and our football and basketball categories offset by declines in the running category.

And finally, our accessories business was down 13% due mainly to planned lower sales of our sports matter compared to last year.

Our first quarter gross margin fell 280 basis points year over year to 46, 7%.

This was driven primarily by 160 basis points of Covid related supply chain impacts driven by elevated freight costs, particularly ocean freight.

50 basis points from higher promotions and discounting versus last year.

40 basis points of various unfavorable channel regional and product mix impacts.

30 basis points of negative impact from changes in foreign currency.

SG&A expenses were up 9% to $596 million in the first quarter.

This increase was primarily due to planned marketing investments carried forward from a transition quarter as well as higher workforce wages due to last year's teammate compensation increases.

Legal expenses related to ongoing litigation matters, along with higher consulting and technology related spending.

Our marketing spend in the first quarter was 11% of revenue.

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After tax we realized a net income of 8 million or <unk> <unk> of diluted earnings per share in the quarter.

Our adjusted net income was $15 million, yielding <unk> of adjusted diluted earnings per share coming in at the high end of our previous outlook for the first quarter.

Now moving to the balance sheet.

At the end of the first quarter inventory was up 8% to $954 million Bill.

Our supply chain deliveries recover from recent disruptions, we expect elevated inventory growth rates over the next few quarters.

Given the unique environment in 2020 and 2021, we believe looking at inventory on a three year stack is a more accurate barometer of our current situation.

In this respect on a comparable basis versus 2019, our first quarter inventory is down 1%, while our revenue has increased 13% during the same three year period.

Rounding out the quarter, our cash and cash equivalents were $1 billion and we had no borrowings under our $1 1 billion revolving credit facility.