Welcome to the Under Armour, Inc. Fourth Quarter Earnings Webcast and Conference Call. [Operator Instructions]. I would like to introduce your host for today's conference, Mr. Tom Shaw, Director of Investor Relations. Sir, please begin.

Thanks. Good morning to everyone joining us for today's fourth 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 you 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 website at UAbiz.com. Joining us on today's call will be, Kevin Plank, Chairman and CEO; Chip Molloy, our new CFO; and Brad Dickerson, who just handed over the CFO reigns to Chip and is assisting with the transition before he leaves UA next month. Following Kevin's remarks, Chip will briefly introduce himself and Brad will take us through the Company's financial performance for the fourth quarter and full year 2015, followed by an update to our 2016 outlook. After the prepared remarks, Kevin and Brad will be available for a Q&A session that will end at approximately 9:30AM. Finally, a replay of this teleconference will be available at our website at approximately 11AM Eastern time today. With that, I will turn it over to Kevin Plank.

Thank you, Tom. Good morning, everyone. I want to wish you all a belated Happy New Year and wish those in China an early, Guonian Hao. While this earnings call is to report on our 2015 fourth quarter and the past year as a whole, I want to focus for a moment on the year ahead. This year, 2016, is Under Armour's 20th year in business. It is an incredible milestone for any Company and for us, it means a few things. It means that the next generation entering the workforce doesn't know a world where Under Armour didn't exist. This generation doesn't recognize us as the underdogs but as the always was. It means that we're not a passing fad or a flavor of the month. The interlocking UA logo has become a globally recognized symbol for being aggressive, young and fearless. It means we're a brand that resonates with athletes, all athletes. We will continue to thrive because we remain as humble and hungry as we were 20 years ago with plenty of room left to grow. With that, our scoreboard remains strong. We're entering this milestone positioned for success, capping off the past year with yet another solid finish. Total net revenues for the fourth quarter were up 31%, marking our 23rd consecutive quarter of 20% plus net revenue growth. Since this call is about our most recent fourth quarter, let me throw out a few more numbers to you that are fourth quarter related, 36, 34, 26, 35 and 31. Those are the percentages we have grown in each of the previous five fourth quarters. Each year around this time, weather inevitably plays part of the conversation. Each year, we answer those who doubt us, with extremely strong growth numbers in the fourth quarter. Was it…

Thanks, Kevin. I appreciate the kind words. Although, I've only been on the job for about 10 days now, it is already abundantly clear that this Company has a tremendous runway of growth ahead. I am also extremely privileged to follow a leader like Brad and inherit the great team that he has been instrumental in building over his time with the Company. In the near term, I'll be focused on living and learning the business and look forward to meeting many of you beginning late spring. Now, I will turn it over to Brad to run through the numbers.

Thanks, Kevin and Chip. I would now like to spend some time reviewing our fourth quarter and full-year 2015 financial results followed by our updated outlook for 2016. Our net revenues for the fourth quarter of 2015 increased 31% to $1.17 billion. On a currency neutral basis, fourth quarter net revenues increased 33%. For the full year, net revenues increased 28% to $3.96 billion which compared to our most recent full-year guidance of $3.91 billion. On a currency neutral basis, full-year net revenues increased 31%. Focusing on the fourth quarter, we grew apparel net revenues 22% to $865 million compared to $708 million in the prior-year's quarter. With our efforts to build a more diversified business, we posted impressive growth across channels and categories despite well-documented weather challenges. Our focus on building brand equity around the globe through elevated product and experiences was evident in the strong growth of international and direct-to-consumer in the quarter. We also saw success around our continued expansion in key product categories like training, running, golf, team sports and basketball. Fourth quarter footwear net revenues increased 95% to $167 million from $86 million in the prior year. Broad-based footwear strength has been the consistent theme in 2015, though the exceptional performance of our Curry Two signature basketball line was clearly the fourth quarter standout. Our accessories net revenues during the fourth quarter increased 23% to $97 million from $79 million last year, primarily driven by continued strong demand for our line of bags. Our global direct-to-consumer net revenues increased 25% for the quarter, representing approximately 36% of net revenues. In global retail, we entered the fourth quarter with 191 owned stores, including 161 factory house doors and 30 brand house stores. With our retail business still heavily weighted to North America factory house doors, we…

[Operator Instructions].Our first question is from Matt McClintock from Barclays. Your line is open, sir.

My question is, Kevin, there seems to be a lot of debate in the marketplace on several of your strategies. You kind of hit upon some of this in your prepared remarks but, in particular, the competitive positioning of both your footwear and your women's business and then also the potential maturity of the domestic business, I was wondering if you can give us your updated thoughts on those topics? Have there been any strategic changes that we should be thinking about? Thanks.

Matt, this is Brad. I'm going to start that question and let Kevin follow up. But I think one of the things that is important, there's a lot of noise this time of year with the weather and so forth in the fourth quarter. I think it was important especially in Kevin's prepared remarks around the track work that we have had with 23 straight quarters above 20% growth. Then even in the fourth quarter in the last six years, a CAGR in the fourth quarter of about 32% growth. Then planning our business in 2016 at 25%. There was a lot of growth in a multitude of places. I think there's -- we have talked about this in the past too. I think there is a little bit of a danger in looking at some of the data sets that are out there, specifically a data set like SportScan. It can be challenging looking at our business relative to something like SportScan, where that data is only -- is capturing actually less than 40% of our business specifically in the fourth quarter. It is missing key data inputs like our direct-to-consumer business, our international business. It's actually extrapolating some of our key accounts that are pretty large, like the Dick's and the FootLocker. It obviously also includes accounts that we do not service. So utilizing that data as a proxy for our success especially in the fourth quarter, it can be a little bit challenged. As we've seen obviously because we posted another strong quarter, our apparel growing over 20%. So I just wanted to start that answer with, just let's be careful on some of what those data sets set there and understand how they relate to our business in particular.

I think it is important just to put some context. So let me just take a couple of minutes and address your question. So, let me begin with footwear, then I will do North America and then I will close with women's. So, I think the best place for us to start is about growth. It goes without saying, is that any of these questions come down to, what does our growth look like? In the fourth quarter with 31% growth and frankly, marketing our 23nd conservative quarter of 20% plus top-line revenue growth. Our growth story is strong. We remain a growth Company and none of that has wavered. But I also want to give you some context, beginning with footwear about just how our business has changed since really just 2012 and evolving into a true footwear brand. Remember 10 years ago, we celebrated or we went public. We hadn't even launched our first shoe until we launched football cleats in June of 2006. So, we've come a long way from there. So beginning with footwear, just going back to 2012 was 13% of our business. Since then, we have added, I don't know, over just a couple billion dollars of revenue. Today, footwear is nearly 17% of our business, representing a 42% CAGR over the last just few years. The diversity, again back in 2012, our mix of product was 33% of our footwear in 2012 was cleats. Cleats today are down to 22%, with plans of being the number one shoe in the market in football. I will get back to that in just a second. In my prepared remarks, I mentioned us doubling our running styles over $100. I just want to make for context -- I also talked about increasing over 1,000%. Across all…

Our next question is from Jim Duffy of Stifel. Your line is open.

Chip, I look forward to working with you. A couple questions on the footwear business. First, as the business and key platforms gain scale, are you making progress on footwear margins? What does the arc of that curve look like? Then Kevin, can you maybe speak to the traction you're seeing with footwear in international markets?

Perfect. Yes, Jim, on the footwear margins, yes, we're definitely seeing improvements in the footwear margins in general. Now, obviously even with those improvements, footwear margins are well below our apparel margins. We've talked about that consistently over the years. So we do anticipate still a lot of room on the footwear side, a lot of that will come from our ability to sell, again, more at premium pricing points specifically in categories like running and basketball which are historically, more our higher margin products. So as they become a bigger part of our portfolio that will help our margins from a mix perspective. We've put a lot of investment and energy into the sourcing side of our business and the development side of our business in footwear also. So we're seeing some benefit there on the costing side. I think, as Kevin talked about too, the ability to utilize the strength of our brand in these categories too from a pricing perspective. So we do see footwear margins, they have improved from the last few years to today. We see them improving in the next few years also. But again, I just want to caution that they will continue to be a lower than our overall apparel margins. That being said though, as we also talked about in the past, that you've got to keep in mind from an operating margin perspective, with the higher price points in footwear and higher ASPs in footwear compared to apparel, you do have the ability to lever SG&A a little bit better. So we do see in the long run, even though gross margins will improve in footwear, but will be below apparel that our operating margins in the longer run should look pretty similar to our apparel business.

Following up on that, we do see the ability to continue to drive ASPs and improve margin by a true premium product is the way that we will build it out. The one thing we have learned is, Malcolm Gladwell says, 10 years or 10,000 hours to perfect something. So I'm not sure that we've perfected footwear but we really feel strong about our position in the game right now. That begins of course I think with the athletes that make it real and that are winning in our footwear out on field, out on pitch, out on court. Whether it is Cam Newton -- what hopefully he'll do in football in the Super Bowl next week, Jordan Speith in golf or Stephan Curry in basketball, as you talk about international, we have no greater global ambassadors than the ones that we have there today. As recent as this past week, we also launched, Duane, The Rock, Johnson, that will be sporting Under Armour as his official brand of choice. So what we've built in footwear is impressive but again, we think we still have room to grow. But some of the franchises that we built from Highlight to Speedform to Gemini to Gemini Record, to the new Curry product, the Slingshot, the Bandit. I think we've done a great job of building, as I said, franchise businesses across the sports where we want to win. That typically begins in running and it begins in basketball. So we love our positioning there, as I mentioned, eight products above $100. Again, hitting some of those sweet spots for the right distribution that meets again the consumer where they want to be met. So I think we feel very bullish about what we're doing on the international front. Again, some of that evolution too, Jim, has been things like, we'd launch a product in the United States and then it was six months or a year later that we'd launch it on the global basis. So the ability to truly, with Charlie and the team that we have on the international side, of building and launching those things the way we did it, we have done -- I think, we've demonstrated our ability to do, has really evolved our Company. A great example again is last year, when I mentioned going on the Curry tour. The purpose of that tour was launching the Curry Two in China, almost six weeks ahead of when we launched it here in North America. So, I think that truly becoming a global business means not being a North American Company that sells things in other markets, but truly being a global business that has a global presence and a global position, that sells things at the same time equally. So we're evolving toward that, but we really like our progress and incredibly excited about where we're headed with it.

Our next question is from Omar Saad of Evercore ISI. Your line is open.

You kept mentioning premiumization, I think specifically to the footwear. Can you just dig a little bit deeper there and then talk about, does this translate over to apparel at some point and we start to see ASPs going up there? Brad, maybe you could comment on premiumization, maybe how it might flow through gross margin over time, especially if you look at gross margin excluding the mix shift drag and the FX drag? What are the really underlying gross margins going to do over time? Thanks.

So let me start it and then I'll let Brad finish up. So, first of all, on the apparel side is that, again, a majority of our business 70% plus of our business is still in apparel. So it is our focus. It's our largest team here. Frankly, it is where we have built our brand as innovators. So some of the things that I mentioned on the call, Reactors, Swacket, Cool Switch, some of the product that we have in the apparel offerings, all of that continued to support our existing ColdGear business. We effectively built the $25 price point for heat gear and the $50 price point for cold gear. Since then, we have been evolving those. So, as we look, we're a premium brand. One of the other things that I mentioned that, I can maybe go into a little more depth on is just our ability now to have merchandising. You asked about ASPs and price points, again, we didn't have a merchandising team in 2014. It was a category that we started building out for ourselves in 2015. So 2015 for us was about building the team. In 2016, it is about segmenting and playing it out in the market. What that means is, again, having the right product at the right place at the right time. Truly, having a team that isn't just selling the same styles to everyone on an equal basis, but being specific and differentiating between what we do in the mall versus what we do in the sporting goods, let alone what we do at Dick's Sporting Goods versus what we do in one of our other accounts. So we want to be incredibly thoughtful about that in the way we drive. As we look forward into 2017, we really see the ability to drive efficiency, of really looking at pricing, of really looking at the ability for us to maximize and optimize things like margin, but also again, making sure that it is with the right product and that it sells through. Because some of the things that we dealt with this year is bringing product in and having our floors set in time for January. No one can predict things like what happened in this fourth quarter, but I think one of the things we're most proud of is that in spite of what happens with weather, we still have a post of 31% top-line growth. So we would love that to see -- continue to translate and drive margin. It's one of our key barometers that we use here in the Company. I think frankly, as Brad will tell you right now, we're doing a good job and more importantly is the plan going forward, where we continue to drive and demonstrate that premium position in the marketplace.

Yes, Omar, on the second part of your question on margins in general. Yes, you are correct. In 2015, that was probably really evident relative to my prepared remarks. When you look at 2015 gross margins going backwards, 90 basis points. The large majority of that, 70 basis points coming from foreign currency impact. A lot of other things going on in the rest of that 20 basis points, but the fact of the matter is, we had some pretty strong headwinds in 2015 relative to air freight, we were looking at servicing our customers during the year and the port disruption earlier in the year. Mix, we talked about a lot during the year, footwear, international working against us from a gross margin perspective pretty significantly. We were able to offset a lot of that just through our general increase in improvement in product margin specifically on the apparel side. So as you look forward in 2016 and beyond, you should see continued improvement in places like our footwear product margins, like in our apparel product margins, international even to some degree as we go forward should get better as the businesses in countries we do directly, whether it is through our DTC or through wholesale become a larger part of our share versus some of the distributors we do today. So, I think in all aspects of our business, you will see that improve over time. Mix will definitely work against us because these businesses are still footwear international, still lower margin businesses. But to your point, our ability to improve those margins is great. Our ability to improve margins in apparel is not only possible but it is happening right now as we speak.

Our next question is from Kate McShane of Citi Research. Your line is open.

A quick question, not to harp on weather, but I just wondered if you could give a little bit more detail about how you were able to mitigate some of the risk from the warmer weather? How you are going to be liquidating some of the inventory going into the first half? If there are any plans going forward about how to better, again, mitigate inventory risk from adverse one-time type events?

Yes. Kate, this question has come up a lot over the last few years in the fourth quarter specifically on weather. We have had some warm fourth quarters, some colder fourth quarters and so forth. Our answer is pretty consistent. Over the last few years, there's obviously going to be a little bit of an impact in weather, there's no doubt about that. It impacts our business too. We've said in the last few years, there's probably a couple percentage points of growth impact relative to weather specifically, one way or the other whether it is warm or cold. In fact, there is no doubt in the fourth quarter this year we had a little bit of that impact. We talked about the fact of managing our way through that and liquidating some excess inventory and taking care of that also in the front half of next year, specifically in the first quarter. But overall, from a top-line perspective, it is really only a couple percentage points of growth one way or the other probably. That again, when you look at specifically this fourth quarter, that was more of a North America dynamic. Places where you would see it probably impact us the most would be our North America wholesale apparel business and our factory house business. But again, with the diversity of our product lines in apparel, with footwear's strong growth, international's strong growth, there is just much more going on in our business that offset some of those weather impacts which again are probably a couple percentage points of growth one way or the other. So going forward, I think continuously being careful how we plan Q3 and to specifically Q4 in years. Not being overly optimistic on weather but being prudent and putting ourselves in the position to be opportunistic if weather behaves for us, I think is really important. To the same extent, if weather doesn't behave, it will impact us a little bit. We can manage our way through that specifically with the strong factory house channel we have.

Thank you. At this time, I would like to turn the call back to Kevin Plank for any closing comments.

Yes. Thank you all for your questions today and for the opportunity to tell our story. Again, we're incredibly proud of the Company that has been built and most importantly the people that have built it. So first of all, I want to welcome Chip, someone who went to high school less than five miles from here. So I want to welcome him home and college less than 30 miles from here. So, it is great to have Chip back in Maryland. He spent a long time on the other coast. Getting him back to the East is going to be great and what we have going forward. I also want to take a minute and I want to thank Brad for 11 great years together, an incredible run that we've built as a Company and most importantly as a team. So you'll be missed here. Again, we wish you the very best in your next endeavor. So I want to thank the market for all the support of myself, Brad, our team and the future support we're counting on for Chip. We'll still be here running forward. So thank you all very much. We wish you all a great day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.