Good day, ladies and gentlemen, and welcome to the Under Armour, Incorporated, First 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. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Lance Allega. Sir, you may begin.

Thank you, operator. Good morning, everyone; thank you for joining us on today's call to discuss Under Armour's first quarter 2017 results. I'd like to remind everyone that participants will make forward-looking statements. These statements are based on current expectations and are subject to certain uncertainties that could cause actual results to differ materially. These uncertainties are detailed in this morning's press release and documents filed regularly with the SEC. 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 an anticipated event. Additionally, we may reference certain non-GAAP financial information. We provide a reconciliation of non-GAAP financial information in our earnings release and the electronic version of the portions of the script today from today's call which will be available at uabiz.com. Joining us on today's call will be Under Armour's chairman and CEO, Kevin Plank; and Dave Bergman, our CFO. Following our prepared remarks we'll open the call to questions. And with that I'd like to turn it over to Kevin.

Thanks, Lance. Good morning, everyone, and thank you for joining us today. 2017 is a year we're empowering Under Armour to become a single, more agile, stronger and smarter company. Our first quarter marks a good start to this journey. In January we detailed some of the challenges we're facing in North America as well as what we feel are our competitive advantages to manage through this rapidly changing environment. We talked about the imbalance caused by extreme growth, due to more than doubling our size over the past three years. We spoke to the unique strength of our brand, unparalleled ability to connect with global athletes and our tremendous portfolio of growth drivers. That said, our strategy is about more than this quarter or the next, and while parts of the broader environment remain uneven, we feel very good about the evolution of our brand strength, relationships with consumers around the world and our ability to gain share in key markets and categories. Whether analyzing the next 3, 5 or 10 years by product type, gender, category, channel or geography, we are underpenetrated comparatively by any measure, market share, mind share and potential. So now, as the third-largest athletic brand in the world with more than $15 billion ahead of us to second place and another $15 billion ahead of that to first place, the fact remains that we have significant and scalable opportunities before us. To build on commentary from our last call, the road to the first $5 billion was much different than we expect the road to the next $5 billion to be. Yet we can't talk about results or opportunity without considering the need for balance. With a shifting terrain we are hyper-focused on balancing external marketplace growth with internal operational excellence, working both in…

Thanks, Kevin. We are pleased with our first quarter result which came in a little better than we expected due to some cadence and timing shifts, and we remain on track with our full-year outlook. So let's take a look at how we did. Total revenue in the first quarter was up 7% to $1.1 billion. By product type, apparel revenue increased 7% to $715 million driven by strength in golf, team sports and training. By continuing to focus on improved assortments, newness and innovation, including premium apparel platforms like Threadborne and Athlete Recovery Sleepwear, we feel well-positioned to deliver a solid year. In line with our expectations, revenue for our footwear business was up 2% to $270 million. Recall that we're lapping 64% growth in last year's first quarter which had significant strength in basketball sales. Some footwear standouts in the quarter included golf, women's training and running. Additionally, we had less liquidation in the quarter as we're working to ensure appropriate-to-channel inventory and driving our premium position in the category. Hitting $1 billion in revenue in 2016 was a great accomplishment, and we expect another year of growth that outpaces the overall company. Revenue for accessories increased 12% to $89 million in the quarter with solid results from men's training, youth and global football. Looking at revenue by channel, our wholesale business was up 4% to $773 million, reflecting an uneven North American environment and the tough comp given the bankruptcies of several key partners in 2016. Direct-to-consumer revenue grew 13% to $302 million, representing 27% of global revenue in the quarter. This growth was balanced across all three concepts, factory and brand houses and e-commerce. Our licensing business grew 25% to $24 million in the first quarter driven by strength in our socks business and our licensed…

Thank you. And our first question comes from the line of Bob Drbul of Guggenheim. Your line is now open.

Hi. Good morning.

Morning.

I guess the two questions that I have for you this morning, the first one is on the footwear with the 2% number this quarter, what have you learned (23:27) the optimism that you have going forward for a rebound in footwear? And the second question is you gave some detail on the expectation for the revenues to reaccelerate throughout the remainder of the year, especially the back half. Can you just discuss a little bit more the confidence that you have in that forecast as well?

Hey, Bob. So number one, let me just begin with, as it regards to footwear is that we don't like it and we don't accept it. We believe in footwear and we believe what we've built in the infrastructure that's now in place. And our footwear for the year is actually going to outpace the overall growth of the company for 2017, so we realize the base that we've put in place going back to 2016, crossing $1 billion and that's given us scale and it's given us the ability to invest. So the infrastructure that we have from the global innovations (24:18) over the last 11 years we've been building locally where we (24:22) it all comes together at the Under Armour Lighthouse, as well as the new footwear building that we're putting up in Portland where our team can have a house that they can actually call a home. So we understand that as we look at what's happening in the marketplace, number one, we're a performance brand, and we continue to see momentum in some of our on-field and on-court categories, things like cleated and things like running as well as what we're seeing in basketball. There's other momentum that we have in the marketplace, but we see and we understand the shift to lifestyle. The one thing we think is important though is that all the lifestyle that we'll introduce, whether it's apparel, whether it's footwear, are things that will build on the credibility we have because of our authentic athletic base. But we've also seen some things in our lifestyle families like the 24/7, our Encounter product, and a new product we just unveiled called Threadborne Shift a couple weeks ago. It's also important to note that the international demand for our footwear is very,…

And, Bob, this is Dave. I'll jump in on the second part of your question relative to back half and Q4. Q4 and back half confidence comes really from product distribution and also pricing strategy. From a product perspective we have new offerings such as our Unstoppable lifestyle product. We have new running technology. We also have a lot of confidence in Reactor products, just as a few examples. And also we learned a lot from last fall/winter, and so we broadened our fall/winter assortment with more layers such as lightweight fleece to be better prepared for any type of winter. We've revisited our auto-replenishment program. We also have more price and distribution levers that we're pulling, as Kevin mentioned, along with a better strategy to refresh our product on the floor more quickly. So and you add it all up, we also have a smaller comp in Q4. And we're just definitely excited about what we can deliver in the back half and Q4 altogether.

Thank you very much.

Thanks, Bob.

Thank you. And our next question comes from the line of Kate McShane of Citi Research. Your line is now open.

Thanks. Good morning. Thanks for taking my question.

Hey.

My first question is just on the North America market. I think there has been evidence of a high level of promotions in this market. How are you feeling about North America over the next few quarters from a promotional standpoint? And do you think we can return to inflation and price increases after a prolonged period of promotion?

So, Kate, this is Dave. I'll start off with that one. North America being down 1%, simply put, we don't like it, and we don't really accept it. It was in line with our expectations, though. We expected the choppy promotional environment would carry over from Q4. We did anticipate that our new distribution wasn't going to be enough to offset the prior-year bankruptcies. But we are proactively managing our inventory and brand health in the marketplace. And that also included less liquidation this quarter. So in general we did expect the lower growth in Q1 for North America. But it's not something that we're going to accept.

Kate, let me start underscoring that from David. But more importantly, like the promotional environment that exists out there, it's pervasive, it's something that's very real, and it's something that we need to be prepared for. And I think I feel really good about it. In the back half of 2016 it's something that we knew we could have done a better job with, and it's the lessons learned that we are applying going forward. So that being said, it's just understanding the way that we've approached 2017. Because when we look at growth overall for our company, it's been a heck of a three years of going and doubling the business over that period of time and has us looking forward about what's next. And so we really are focused this year on operational excellence and what we can do to being a better run company. And again we're going to do that while still adding more than $0.5 billion in revenue. So we're definitely not going to stand still, and we certainly don't like going backwards. And so focusing on going forward is where we are. We have a lot of executional opportunities in the near term and also while building I think the bigger, better engine for the future. And as we do that I think there is a couple ways that we're looking to make that happen. I mentioned in my script three real focuses we have at the company. First is structure, I think of having just the alignment of evolving from a small company to a mid-company to getting to a bigger-size business. Category management we believe is going to be a big difference of keeping us close to the consumer as well as giving P&L responsibility in a matrix approach that allows and…

Thank you. Kevin, if I could just follow up with one quick question that I think rolls into what you were saying, could you comment all about how you're thinking about segmentation, especially now that you're in Kohl's? And how you're feeling about the differentiation of product between what you're selling there in the mid tier versus your premium end customers?

Yes. So as I mentioned a minute ago, we told you a while back that we had about 11,000 points of distribution, we were targeting roughly 13,000. So we've now hit that. As far as distribution goes, number one, it was important to me that when we announced expanded distribution that it was the same day that we announced being on Fifth Avenue and committing to building the greatest retail store in the world that will open in the middle of 2019. So our commitment to being premium brand has never wavered or changed, but to compete at the levels where we want to run, we feel that we need to be the best and we feel like we need coverage and coverage is about some of the volumes that we can drive. And again, where we talk about being in 13,000 points of distribution, it's important to remind people that some of our key competition has more than 23,000 points of contribution in North America alone. So apples to apples, we feel very good about where we are. Now, that does lead to the question of segmentation strategy, which we told you, the beginning of 2016 was the first time that we really stood up merchandising for ourselves as a brand, and with that comes having clear segmentation between our product lines. So I think that we're good today, but we understand what our customers want. And they want differentiation. And they expect it and they demand it. And frankly, that we have a brand that has the capability of doing it, and things like some of the investments we're making between systems and between some of the structural things in Category Management – we feel pretty good about our ability to do that. As far as additional distribution…

Thank you.

Thank you. And our next question comes from the line of Matt McClintock of Barclays. Your line is now open.

Hi. Yeah. Good morning, everyone. Kevin, the comment was made just a second ago that you're proactively managing the brand health, and I thought it would be helpful if maybe high level we could just get your assessment of where the brand health stands today overall? And then as a follow-up, I was just wondering if you could elaborate a little bit more on the innovation? You talked a lot about lifestyle and there has been a lot of discussion about that. But what changes to the innovation pipeline are you making? And maybe can you provide some visibility into innovation on the horizon in 2017 and maybe beyond? Thank you.

Yeah, thanks, Matt. So first of all, financially we did exactly what we said we're going to do this quarter, so I think anything as it relates to brand health from that standpoint is that we had a pretty good idea of where we were. As far as our brand goes, and this is somebody with 21 years having been in this industry, I truthfully wouldn't change positions with anyone else in the world, with any other brand. I believe that our brand is positioned, I believe that our brand is strong, I believe that our brand demonstrates that we can take punches and I believe that our brand also demonstrates that it can throw them, too. So you look at the bevy of assets that we've built and the things that we have as a company today. We've got international business that's growing more than 50%, which remains one of our largest opportunities as a company. As far as the base of partnerships we have here in the U.S., we've got more than 40 all-school collegiate deals where we outfit them head to toe. We're introducing ourselves to the State of California this year with the introduction of signings of Cal Berkeley and UCLA. We've added a new outfitting deal with Major League Baseball that goes through 2030 and declaring to build the greatest retail store in the world on Fifth Avenue that opens in 2019. This brand is looking forward, and we expect to bring our consumers with us. And if you are starting a brand today or looking at who we had and the support that we had, I think a lot of these things have been misstated in terms of where and how people are aligned with our company – Tom Brady; Dwayne The Rock Johnson;…

Great color, Kevin. Thank you.

Thank you.

Thank you. And our next question comes from the line of Michael Binetti of UBS. Your line is now open.

Hey. Good morning. Congrats on a nice quarter. I know it's a tough macro out there, guys. Just a quick modeling question and then maybe just a higher level question for Kevin. Can you talk to us a little bit more about the puts and takes on the gross margin as we head into the second quarter? It looks like the first half guide implies 2Q will be down about 180 basis points, obviously worse than the first quarter, but as compares get easier I would think the currency pointed out would start to diminish. Inventories look like they're in better shape. It seems like you took some pain in the first quarter there to clean it up. I know you said something about airfreight being a bit more of a headwind in 2Q, but maybe just give us a little bit more on the second quarter and what some of the headwinds are, get to a more significant 2Q compare versus 1Q?

Hey, Michael. This is Dave. I'll take that one. When you think about Q2 gross margin, some of the inventory management promotional environment challenges we had in Q1 we're still expecting to persist into Q2. We also did mention that we're going to have a little bit higher airfreight. Some of that has to do with managing around our SAP go live. We do expect some continued headwinds from the FX impacts, but also our international business is actually growing a little bit faster than we even planned even though we were excited about it to begin with. And as you know, that creates a little bit of a margin headwind also. So when you add all of those up, it does make Q2's margin a little bit tougher, but then as you trend back into the back half of the year, we do expect and are planning on a little bit more of improved product costing benefits in the back half which we're excited to see. You will have less year-over-year impacts of promotions and discounts when you're comping that. And also we're expecting a beneficial mix of product, or actually with channel, when you think about DTC being up more and then also the fact that we've talked about liquidation being a smaller mix of our business. So we've got some bigger favorability in the back half which should be able to for the most part offset the continued pressure on FX headwinds along with the footwear and international pressures that we always have with their high growth rates, so we feel pretty good about the back half.

Okay. I mean, Kevin, just at a higher level, you mentioned sportswear, the very first category up front there today. So maybe just tell us a little bit about – you're in the second round there – maybe how you see the evolution of that sportswear business going over the next few years as far as maybe how you see distribution growing and when you think it could be a more meaningful contributor on the total company revenue line? And then same question for Connected Fitness.

Okay. So let me begin with sportswear. So there's four categories or ways that we think about our overall brand positioning with the different categories we have. The first would be on-field – and think about them left to right. On-field would be pleated. Sport performance would be things you could wear with a pair of jeans, like basketball. All the way out to the right would be sportswear, which is what we launched this past fall with UAS, and sitting right in the middle, which is the meat of the business, which is more than a third for our two largest competitors of their business, is what we call sports lifestyle. So today, we obviously want to get to the sport lifestyle category, but we thought we'd have a better opportunity of doing that by putting this flag all the way out there which was UAS. And so having time for that to curate and position ourselves at the high end of fashion, giving us the ability to attack the massive market of sports lifestyle from the top versus trying to simply evolve it from the field. We believe that's important, so having that positioning is something that we're very bullish on. Sport lifestyle still remains again our largest opportunity, and frankly, by a mile. And we look at the different categories of where we can grow and so everything we've been doing to authenticate ourselves has put us in a position for sport lifestyle. It's not a new category for us, but I think I keep coming back to saying what's going to make us different and unique is that some brands rely on their logo being cool or a good line. What makes Under Armour unique is that every product does something. And so that DNA is something that we'll carry through into every product we do, and again, where the emphasis is not just going to be on the fiber technology. Like, we get it. We're not just blind and saying we're just looking at product through a performance lens, but we think there's a much bigger opportunity. We think authenticity and equity are really what drive us there, and again, it's not something which needs to be a new category for the business. It needs to be something that can really evolve into our overall total business. So look, we've got the cool people. We have access to all the same color agencies that the rest of them do. We feel like we're driving there in a big way. So we understand the emphasis of getting the lifestyle, but it doesn't mean abandoning what we have in performance. So wrapping our arms around the fact that we are a deep performance company and getting ourselves to the next step. Connected Fitness, Michael, your question there?

Yeah, just on how you see the evolution from here. Yeah.

So I think it's a good opportunity for me just to sort of explain where we were when we made the acquisitions, the original vision that we had of becoming digital as a company, and what we think that pay off is for us. So the Connected Fitness investment for us was always about having a better understanding of our consumer. And we viewed that through the lens though is that it would help us sell more shirts and shoes. To be clear, like that was the goal. And we believe that original vision is still very much intact. The resources, community and team that Connected Fitness has given us has really – it's opened the aperture of the way that we believe consumers are going to expect an athletic brand to deliver for them in the future, like helping them make better decisions about how to improve their lives. Like it's not just going to be a cool logo or a nice shoe. It'll be all those things of course. And it'll be stylistically portrayed. But it also has to be in the context of how are you helping me live a healthier life. So today just for perspective and a reminder, our Connected Fitness community, we have the number one app in the fitness store with just alone our MFP. Across the three or the four different apps that we have, we have over 200 million strong with more than 80,000 downloads occurring every single day, downloading one of our four apps and giving us the insight that we believe gets us much closer. Now I mentioned we're just beginning to plug in some aspects of the SVOC program, the single view of the consumer, through some of our SAP go-lives. And we think the data that we'll…

Thanks a lot, guys.

Thank you.

Thank you. And our next question comes from the line of Randy Konik of Jefferies. Your line is now open.

Yeah. Thanks a lot. I guess a question for Kevin. I just wanted to kind of get some perspective on how you think your marketing strategies will continue to evolve, or need to change or not change. We went from the football kids on the bus to now more athletes and you have Rock as well. So how do you think about – you have this huge community of fitness people with the MyFitnessPal, et cetera. How do you want to market digitally to them, showing them specific product or not? And how do you think about the evolving message of the brand? Or to communicate some of the lifestyle offerings you plan to – you'll further bring to the market? How do you kind of try to want to change the marketing tactics with the consumer?

Yeah. The kids on the bus is a good walk down memory lane. It is a great spot, and it was a different time, when people were just looking at the 30-second or the 60-second commercial that we ran during live broadcast. Today it's changed very much. And I think that we've got some great amplifiers for us within the athletes that we have, the teams that we have, the partnerships that we signed recently. And it's really all-inclusive is that the understanding of what social means for us – and I don't think we've been a great social company to date. I don't think we've done a great job with our social media. And I think the understanding is that there's a couple ways for us to leverage our social media. One is that we have an incredible athlete community that's creating authentic content for us every single day. And simply as curators of our athlete community is something that I think that we can do to tell bigger bolder brand stories that keep us out there in the marketplace. I think from a social media standpoint, you'll also see us get much better at what we do with telling product stories. The market is incredibly crowded now. The things that made Under Armour unique three or four or five years ago, everyone has their version of athletic something. Every company has gotten to their version of jumping on athleisure or jumping in and making their version of a tight. And so moving beyond just yarn differentiation of what makes our fiber or fabric better is no place for us to live. And so I keep coming back and driving home this theme of, when you think about companies that last, and it's a difficult time for many retailers…

And can I just follow up with one more item? I'm just intrigued by the amount of – these systems and implementation and it sounds pretty exciting. Can you just give us maybe some perspective on any type of measuring sticks or yardsticks you're trying to kind of work towards like we think the systems can help us reduce our inventory levels by some amount or the liquidation levels can continue to move lower, our design-to-market cycles can be reduced by some level of X. And I'm just curious what your thoughts are there. And then, you said these systems are going to also help with things like the implementation of Curry 4. Are you going to kind of – is the system – these systems going to allow you to use a different type of (55:41) strategy, and so forth? Just curious there. Thanks.

Randy, this is Dave. I'll take that. I mean, we're not going to give you specific numbers or percentages. But as Kevin mentioned, we're definitely investing in the one global instance of SAP across our business. So it really does enable us to simplify and automate our process and enable a more transparent supply chain. The largest part of that implementation goes live in early Q3, but there will be stages after that, as well. It will definitely be creating capabilities to efficiently operate a value chain at scale. When you think about some of those future benefits you were mentioning, we'll definitely see some of that relative to revenue growth and speed to market. Definitely around inventory optimization. Also service-level improvements because there's a big supply chain component to that. And all that comes through on effective margin management, as well. So there's definitely a lot of exciting aspects that we'll see. I think you're going to see more of the meaningful improvements of that coming out in 2019 and beyond, but it's definitely a big play for us.

Thank you.

Thank you, Randy.

Thank you. And now we'll take our last question from the line of Andrew Burns of D. A. Davidson. Your line is now open. Andrew S. Burns - D. A. Davidson & Co.: Good morning. Thanks for all the details on the sportswear and lifestyle game plan, including the Unstoppable collection. As a follow-up, I'm trying to better understand how quickly you can pivot the assortment to where you want it to be with your key wholesale partners, as well as in DTC. From a consumer's point of view as they shop your key wholesale partners and DTC in the upcoming holiday season, how visible will this assortment shift be and how do you expect to communicate the lifestyle and sportswear initiatives to consumers? Thanks.

Thank you. So I believe in 80/20 rules and I still believe that the basis that we have is a foundation the people need. People need T-shirts and people need golf polos and people need quarter zips. But beyond that, there is a lifestyle component that we think that we can accelerate onto our brand. The ability for us to effect that in Q1 and Q2; we looked at where we were in the first half of the year and frankly, the lessons learned coming out of the end of 2016 we said we think we can be better. And where we were able to effect once we had that information was really going after Q3 and Q4. And it doesn't mean there needs to be a seismic shift, but it means some of the key items where – the Unstoppable collection was something that we drove hard, really from December last year to be able to deliver this year. So it's great practice for us of learning just how fast we can be as a company from a supply chain standpoint and understanding why we're not that fast everywhere. And so fast fashion and the way that they operate being close to consumer is something that we want to get a lot smarter about and something that we're continuing to drive. We feel good about the collections that we have now. We feel good about the line that we have out on the floor. We're just saying we can be better, and better means a real sense of focus. And I guess if – when I started to feel and sort of look at the year and where we are, the one place that I've thrown myself into in the last several months and really looking at this year…

Thanks very much.

Thanks, Andrew.

Thanks.

Thank you. Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.