Good day, ladies and gentlemen, and welcome to the Under Armour, Inc. Third Quarter Earnings Webcast and Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today's conference call is being recorded. I would now like to turn the conference over to Mr. Tom Shaw, Director of Investor Relations. Please go ahead, sir.

Great. Thanks and good morning to everyone joining us in today's third quarter conference call. During the course of this call, we'll be making projections or other forward-looking statements regarding future events or the future financial performance of the Company. We wish to caution that such statements are subject to risks and uncertainties that could cause actual events or results to differ materially. These risks and uncertainties are described in our press release and in the Risk Factors section of our filings with the SEC. The Company assumes no obligation to update forward-looking statements to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, as required by Regulation G, we need to make sure you are aware that during the call we will reference certain non-GAAP financial information, specifically currency neutral net revenue growth. We provide a reconciliation of this non-GAAP financial information in our earnings release, a copy of which is available on our Web-site at uabiz.com. Joining us on today's call will be Kevin Plank, Chairman and CEO; followed by Brad Dickerson, our Chief Operating Officer and CFO, who will discuss the Company's financial performance for the third quarter, provide an update to our 2015 outlook and introduce our preliminary 2016 outlook. After the prepared remarks, Kevin and Brad will be available for a Q&A session that will end at approximately 9.30 AM. Finally, a replay of this teleconference will be available at our Web-site at approximately 11.00 AM Eastern Time today. And with that, I'll turn it over to Kevin Plank.

Thank you, Tom, and good morning everyone. In three weeks, Under Armour will be celebrating our 10 year anniversary as a public company. Back in 2005, we were a $281 million company. Compression apparel made up two-thirds of our business. The phrase 'connected fitness' had not yet been coined. The day when we would feature a ballerina in a commercial seemed unlikely. And Jordan Spieth had only just begun his journey to greatness by taking golf lessons at Brook Hollow Golf Club in Dallas at the tender age of 12 from Pro Cameron McCormick. What I knew back then and still believe today is that anything is possible because of the ever-evolving power of sports. In just the last few months I've seen first-hand the value to advertisers who understand that sports is the only thing left that viewers insist on watching live, like the emotion of 80,000 fans stilling Twickenham Stadium including Prince William, Duke of Cambridge, and His Royal Highness Prince Harry of Wales on a fall Saturday in London to watch England take on Wales in the Rugby World Cup, while 4,000 miles away another 80,000 were watching Notre Dame Football in South Bend. More than 10,000 fans lining up in Manila to get a glimpse of the NBA's most valuable player, Stephen Curry. The power of sports and its ability to transcend generations, technologies and trends is what makes other industries envious of the business that we are in. The power of sports is the engine that has fuelled our growth from day one and the reason for our confidence in the future. It is the foundation behind our doing business in just four countries in 2005 to now more than 60 today; growing our retail footprint from a single UA Web-site and four domestic factory…

Thanks Kevin. Now I'd like to spend some time reviewing our third quarter results followed by our updated outlook for 2015 and preliminary thoughts on 2016. Our net revenues for the third quarter of 2015 increased 28% to $1.2 billion. On a currency neutral basis, net revenues increased 31% for the period. Within our product categories, we grew apparel net revenues 23% to $866 million compared to $705 million in the prior year's quarter. From a product perspective, our new Armour baselayer and expanded innovation platforms like Storm and ColdGear Infrared were key stories during the third quarter. On four categories we saw significant growth in golf and outdoor. Third quarter footwear net revenues increased 61% to $196 million from $122 million in the prior year. Our strength in footwear remains broad-based, including our largest categories of running and basketball, and extending to some of our newer categories such as hiking and global football. Key products included our latest addition to the SpeedForm platform with the SpeedForm Fortis running shoe, as well as additional Curry 1 basketball styles ahead of the Curry 2 launch this weekend Our accessories net revenues during the third quarter increased 22% to $104 million from $85 million last year, primarily driven by strong consumer demand for our line of bags. Our global direct-to-consumer net revenues increased 28% for the quarter, representing approximately 26% of net revenues. We continue to be encouraged by the success we are seeing with our 2015 brand house openings. From a global standpoint, we ended the third quarter with 173 owned stores including 144 factory house stores and 29 brand house stores. In e-commerce, we launched six new country Web-sites during the quarter bringing our total to 24 global sites. We continue to utilize more targeted, effective communication to our consumers…

[Operator Instructions] Our first question comes from Robby Ohmes of Bank of America Merrill Lynch. Your line is now open.

Kevin, actually two questions. The first, can you talk a little bit more on the international side specifically about China and was China a big contributor this quarter and is expected to be big this year or is it maybe some help on the timing of when China could really ramp up as a market for you? And the second question, I know on your Investor Day and then today again you've mentioned the sportswear opportunity, could you just give us a little more color on how Under Armour thinks about that huge opportunity in terms of partners and product categories or any insight you could give us?

First of all, internationally, we're really excited, we've crossed the 11% of the total mix for the Company, which is a big deal for us. It's been a long time coming. And becoming global is something you can't just say it, you actually have to act on it. So I think it was really 2006 we launched our first office in Europe, 2010 we opened our first brand house with a 1,000 square foot store in Shanghai, and it has been a lot of learnings and a lot of adjustment. It's not as easy as just opening stores but it's into the products, it's into the localized fits and localized merchandising, it's into the execution, the distribution, the manufacturing. So there are a lot of pieces and China is a great lesson for that. I haven't given these numbers publicly but I think it's instructive of just sort of what our growth has been in China. So in 2012 for instance, I said we launched our first store at 1000 square feet and it was incredibly successful. We were doing over $1 million off that 1000 square feet out of one store in Shanghai. We didn't have the right leadership when we went in there and we sort of toiled around for the next couple of years. By the end of 2012 we were doing $3 million in sales in China. We took somebody who was one of our – I introduced to you a guy named Kevin Eskridge, he is now running global merchandising for us, but I pulled him out of our outdoor group and sent him and his family to Shanghai and the results that we had were the business went from $3 million in 2012 to $7 million in 2013 to roughly $30 million in 2014.…

Sounds great. Thanks Kevin.

Our next question comes from Camilo Lyon of Canaccord Genuity. Your line is now open.

Great job on the quarter, guys. Brad, I was hoping you could give a little bit more detail on the inventory composition. I think you mentioned a couple of things. So a little bit more footwear inventory as well as a little bit more build to improve the service level. Could you maybe quantify the mix between those two and how we should think about the growth rate of footwear relative to the increase of the inventory in footwear?

So I think you are hitting a couple of things, so yes, definitely with footwear growing at the rate it's growing and obviously ASPs in footwear much higher than apparel, that's part of the driver behind inventory growth, but probably the bigger driver of what we're doing right now year-over-year specifically in Q3 and as we look into Q4 is more gauged around just the flow of inventory. So if you recall, looking back a year ago or so, or maybe a little bit more than a year ago, we talked about some of the challenges that we had in flowing product on time for things like back-to-school and holiday, and we really got focused this year as we came into 2015 on making sure to some degree at all cost almost that we're going to flow product on time and we’ve called out freight cost, specifically air freight, as an impact to gross margins this year to do that. So that's probably the bigger driver of what you're seeing in inventory growth rate, is we were really focused on hitting key floor set date. So when you look at things like getting into the holidays of this year, making sure that product is flowing in and ready to go, is increasing our Q3 inventory levels. When you look at starting to set the floors right at the beginning of next year, in spring 2016, what you're going to see is earlier flow of product in the back half of this year specifically as you get close to the end of this year. So as I talked about at Investor Day, when you kind of look at year-over-year growth rates in inventory, that's the bigger driver of this is the flow of product. Obviously we grew a little bit higher than revenue here in Q3 and I think what you'll see is even a little bit more so in Q4 as we really focus on getting product on the floor on time for our spring floor sets. That should start to normalize a little bit as we work through 2016 because we start to get into a comparison of that focus we had in 2015 to flow product better too. So as you start working through Q1 and Q2 of 2016, you should start to normalize that and get back more in line with revenue growth.

Perfect, very helpful, thanks. And then, Kevin, there seems to be an endless amount of growth opportunities that you are pursuing. How do you think about the needs around your organizational structure? Specifically, do you think you have invested enough on the talent side on your bench to make future transitions more seamless?

I'm really proud and we used that theme at Investor Day about the map and the terrain, and I think we've demonstrated a really great expertise in being able to adjust with a different terrain. There's going to be many trends, we saw a lot of them in the last 10 years, we are anticipating probably something similar in the next decade or more importantly anticipating what we haven't even thought about yet. But I think investments are important, a great way to talk about our team. Our core pillars we talk about are, product, story, service and team, and team obviously being the most important thing. There's a couple of places that I think are illustrative of where we have and frankly where we now need to be more aggressive. Our women's business is a great example of that. Women's footwear is something that as recent as a year ago we had just a handful of people or less than that, really people who used [indiscernible] women's footwear as a part-time job, and where if you compare that to others in our industry, there is not dozens, there's hundreds of people working on [these themes][ph]. And so the investments that we're making from a few different sides are really important. I speak about being opportunistic with our investment in general and there's a few places that we think that we need to invest. Now first of all our core business, investing in areas like marketing, supply-chain and technology, and again along with this, Camilo, it all comes down to team and people. But we do see that we are at this unique moment in time and it's the right time for us because of the year we have, some of our assets and athletes, it's things like what should…

That's great, thanks for the color. If I could sneak one more in, Brad, could you just remind us what your exposure to weather is in the fourth quarter and how we should be thinking about it relative to your guidance?

Pretty consistent with the last couple of years, weather has become less and less of an impact to us as our product has diversified around the fleece products and specifically as we start to set floors a little bit earlier for next year also on the holidays. So last couple of years it has been, we've called out like a 1% to 2% growth rate potential in weather. I think every year probably becomes less impactful to us because of the diversification of our product and also in our regions too, on the international basis. So yes, I mean there's a little bit of an impact there but it's not tremendously significant, and obviously as we look at our guidance for the fourth quarter, we are not anticipating any dramatic change in weather year-over-year either way in our guidance.

Camilo, let me jump on the end of that as well with Brad. Look it's the second warmest September I think on record that came out recently and I think there's a lot of conversation around it but we're incredibly proud about the ability to still post a 28% growth rate in the quarter, and one thing we focused on really just going back four or five years where we realized how weather-dependent we were as a company with a pretty classic 60/40 split front-half versus – 40/60 split with front half versus back half of the year, I think we have done a good job into letting things like [indiscernible] quarter not being silver lined on heavyweight fleece but focusing more on sort of stylish lightweight fleeces and we have really worked closely with our partners to create offerings that aren't just relying on big puffer jackets that are sitting in retail stores and if it doesn't snow aren't going to sell. So definitely it's a work in process but weatherproofing our business has been a real focus for our Company and I think we're pretty proud of how we're positioned versus maybe other people in our world.

Perfect. All the best, guys.

Our next question comes from Michael Binetti of UBS. Your line is now open.

Congrats on a great quarter. I have a couple of near-term questions. I know you guys are geared up to celebrate 10 years as a phenomenal public company, so I apologize for focusing on the near-term here a little bit, but can we just talk about the comments on the footwear liquidation in the fourth quarter? I'm assuming that that happens at the factory houses and maybe you could just help us think, I know you pointed out as a gross margin drag but as you work through some lower ASPs, will we hear about a little bit of a slower comp sales drag in the outlook as well as that happened?

On the footwear liquidation, it's really kind of a victim of our success to some degree as we've had some tremendous growth rates in footwear in the last few quarters in the 40s, 50s and now 60s, 61% this quarter. So this is just the normal process of managing inventory and as you work through selling in and selling through, which both have been very positive for us on the footwear side, you're ultimately always going to be left with some excess inventory in footwear. We've become over the course of the last few years and this year too very focused on getting into the next season very clean on the footwear side. So looking at the excess footwear we had again which is really just being generated from the tremendous growth and success we've had in footwear in general. We really got focused on getting through some of the footwear liquidation in Q4 and making sure that we were very clean getting into next year. So obviously as you talk about footwear gross margins, just the regular gross margins of footwear being well below our apparel gross margins, that's also the case on the liquidation side where your footwear liquidation margins are going to be much less than your apparel liquidation side. As far as the avenues and vehicles to liquidate, factory house obviously is one of them and we have talked about third party in the past also of moving some of our excess inventory through a third-party also. Although small in revenue and volume, obviously does impact gross margin.

Got it. And then, Brad, I know it's one of the tougher metrics to kind of look at, but the currency impact on gross margin is fairly large for your international mix as I look at companies across this space have much bigger international components to their overall business. Can you help us, that fourth quarter 100 basis points that you talked to, can you help us dimentionalize that, what is causing that much pressure, and maybe is there anything you guys can look at down the road to help offset that a little bit more that you may not be doing at this point?

So it's a good question, so when you look at the fourth quarter specifically, we anticipate 100 basis point decline. FX will be a big part of that year-over-year decline. If you remember, we came into this year talking about FX impacting our margins by about 50 basis points. Now we are up to about 80 basis points full year impact. So obviously the FX has worsened during the course of the year. So that's a big driver of it. Again, the fourth quarter margins, air freight, as we really get focused on slowing inventory, that's a little bit of a driver too and that kind of increased during the course of the year as we've got kind of laser-focused on better deliveries and better flow of product. Those would be the big, big drivers. We talked about footwear liquidation also being a driver in Q4. We came into this year on the FX side probably less prepared than we are coming out of the year relative to how we hedge currencies going forward. So we have done a better job during the course of this year offsetting some of the increased pressures on FX. We have built some better competencies in-house from a talent perspective and some better strategies around hedging that will continue to increase going forward. So I would expect that in the future we're more prepared to offset some of those impacts that you're seeing right now, and obviously as you get into 2016 we're going to start to compare to 2015 FX rates, so you would imagine that there would be a much more favorable comparison unless something drastically changes in the FX front.

Okay. If I could just sneak in one last one, on the fourth quarter you guys have done a great job exceeding your plan on revenues for a long time, comparison of a couple of big growth drivers like international get tougher in the fourth quarter, specifically as you look through your plan and your inventors look like you're ready to chase if you need to, do you see an opportunity in the fourth quarter, where do you think we'll hear from you in the fourth quarter that there could be any upside to opportunity [indiscernible]?

Very consistent direct-to-consumer, it's the area we can obviously impact the quickest, we control the whole value chain there, so our ability to react and turn product is the most quickest in DTC. So that's where I would expect upside the most. That doesn't mean you couldn't see it in the wholesale also, but we can obviously react much quicker on the DTC side.

Thanks a lot, guys.

Our next question comes from Matthew Boss of J.P. Morgan. Your line is now open.

Congrats on a great quarter. So with the footwear acceleration you're seeing, still early I think, but can you talk about any examples that you have seen so far of more [indiscernible] hook-up for the brand, meaning as it becomes a larger piece of the pie, do you think footwear can drive incremental apparel and just ways that you can even take advantage of this more?

I think classically as people typically get dressed, it's foot to head, it's not head to toe, and it's one thing where I think we've probably been dragging a little bit. The women's example that I gave earlier, that's something which was glaring and really obvious, but look, we've got growth coming from a lot of places, and so until you really turn attention and can focus on it, you're probably a bit vulnerable. So we've made I think six or seven hires just in the last 45 days on our women's footwear team, really looking to become robust and build that out, and there's places where we have definitely taken an ROI approach to it where we have the biggest impact. But at the same time, we don't want to apologize for footwear. It's a relatively small number and we also put a 60% number up this quarter committing to a 40% CAGR through 2018, we think there is great growth there and we're going to be the beneficiaries of that. But one thing I want to emphasize to people is that it is 10 years in making shoes for us, but it absolutely takes time. The first category we got into was American football cleats and that was 2006 and it was a big breakthrough and we had high teens, low 20s market share, and since that time we are now pushing close to a 40% market share in football cleats with our sight set on being number one. And I say that only because of the category we've been in the longest, and if we're 10 years in football cleats and five years in running shoes, imagine what we're going to look like in running shoes in another five years there. But I guess the thing to…

Great. And then just a quick follow up to switch gears, on Connected Fitness and the math house, can you just touch on the integration, any learnings and really the opportunities to change the game as you think about the next year and beyond?

Since Investor day is when I had that time actually with Ram and he took us through that idea of math house which I guess we knew it all along but it was a great way to articulate it. But if I could just take a second on our Connected Fitness, today more than 150 million athletes continue to add over 100,000 a day throughout 2015 downloading one of our four apps. I mean the scale is extraordinary. At Investor Day we had mentioned there were 6 billion foods logged at the time. Today just a few weeks later, over 6.5 billion foods logged. Workouts, 1.3 billion is the number we gave you at Investor Day. Today it's more than 1.5 billion workouts. More than 200 million workouts have occurred just in the last few weeks. So the information we are gaining every day we think is incredible and is going to continue to enable us to provide the consumer with really relevant information inside to, we like to use the word, to enrich lives. We think the bigger opportunity though is much bigger, is much broader than the $200 million target that we talked about and ultimately it's going to help us sell more shirts and shoes. The math house idea though, the ability to use data and analytics to drive business, is something which is I don't even think we have quantified yet. I use the example and I think it's a really good one, that Amazon, how they credit 40% of the revenues, what they call the recommendation engine, and that's basically just based off toothpaste. I know if I sold you a tube of toothpaste five weeks ago, a toothpaste has a six week lifecycle, and I can ask if you want me to send you…

Great, best of luck.

Operator, time for one more question.

Our last question will come from the line of Omar Saad of Evercore ISI. Your line is now open.

I'll keep this quick. The first question, one follow-up on the gross margin comments, Brad, I understand the headwinds, the FX, the mix shift, et cetera, but you mentioned product margin as one of the benefits to the gross margin line, 80 or 90 bps, something like that, could you be a little bit more specific and expand upon what you mean by product margin driving one of the takes against the puts?

That's really probably more kind of on our core apparel business, so just overall our kind of core product margins, whether it would be through pricing and/or costing just in general across the globe, North America or international. Again, most of our core apparel product margins are improving. So that's helping offset some of the other pressures we talked about.

Is that more generating scale in the business on the cost side, are you taking price strategically or is it a mix to more premium products, maybe just expand a little bit more?

It's a little bit across the board. So obviously some of the innovations that we have come out with over the last few years from a price point perspective helped our margins, getting more focused on kind of our higher volume products on the costing side of things, obviously scale is a big, big part of that. So it's kind of all of the above, Omar, to some degree, but again, you would expect from a perspective of improving product margins that our apparel business would be the place we see the most of that because it's obviously our longer business and existing business, so that's where we're seeing it right now.

Okay, that's helpful. And then one last one on DTC, if you kind of look at the store growth, it's been accelerating, you talked about at Investor Day accelerating the store growth longer term being an important channel, I think it's over a quarter of the business now. The revenue slowed a little bit the last couple of quarters, which implies a slowdown in the same-store sales number for lack of a better term. Can you help us understand, are there subtle things going on there we should be aware of, any timing issues, is it more on the e-commerce side where maybe it's slowing a little bit or is it the outlet channel, as we have seen other companies with outlet exposure see a little bit of a slowdown there, just maybe a little more detail around what's going on in DTC and how we expect that to unfold in the coming quarters?

I think what you've seen from DTC is a little bit of, if you go back to the first quarter, it grew at 21% and it grew 33% in the second quarter and now 28% in the third quarter. So it's been up and down a little bit. A lot of that right now is going to be timing of new market entries on the e-commerce side globally, retail on the global side too, entry into certain markets and expansion of certain markets, Kevin talked a lot about China and the growth in China, the timing of some of that, obviously brand house in the states too. So if you look across the board, e-commerce side of it has been the strongest of the growth drivers across all the quarters really. If you look back over the last four quarters, e-commerce has kind of led the way from a growth rate perspective. The retail, although been strong, has been below the e-com growth. When you look at just in general on the retail side, you have to remember that still the majority of our revenues on retail are being generated by North America factory house channel. So although we talk about brand houses both domestically and globally, what's going on in retail, the large majority of our retail revenue still sits in that kind of North America factory house, and we've talked about over the course of the last six, seven, eight quarters that planning the slowdown of that growth rate as we opened less doors going forward and focused on square footage growth, that we plan that growth rate of North America factory house to decline as we got into 2015 in the future. So that to some degree what you're seeing is the impact of that North America factory house growth rate which we plan to kind of come down, still healthy but plan down. That's kind of what you're seeing I think from the perspective of some of the growth rates in DTC.

All right, that's really helpful. Thanks, great job guys.

Thanks everyone for joining us on the call today. We look forward to reporting to you our fourth quarter 2015 results which [indiscernible] have been scheduled for Thursday, January 28 at 8.30 AM Eastern Time. Thanks again and goodbye.