Under Armour, Inc. net revenues increased 46.3% in the third quarter of
2007 to $186.9 million from $127.7 million a year ago. Net income increased 25.4% to $20 million, or 40 cents a share,
from $16 million, or 32 cents.
Results
easily exceeded Wall Street's concensus expectations of earnings of 34
cents a share, on revenues of $171 million. The Baltimore firm also
raised its sales and earnings outlook for both 2007 and 2008.
As previously reported, in the
third quarter of 2006, the company received a $2.3 million benefit to
net income, or five cents per diluted share, as a result of the impact
of state tax credits.
Driven by strong growth across Men's,
Women's, and Youth, apparel net revenues rose 44.8% in the third
quarter. The Compression and Training categories continued to be the
main drivers of revenue growth across the apparel business, while an
expanded product assortment in Golf and the launch of the Mountain
product category also made healthy contributions to top line growth.
“Our
third quarter results reflect strength in both our core apparel
business and continued growth in new product categories,” stated Kevin
Plank, chairman and CEO. “We're especially excited about the success of
our women's marketing campaign entitled BoomBoom-TAP(TM), which
illustrated our dedication to the Team Girl consumer. The results
included 49% top line growth in our Women's business this quarter. This
is further proof that the female team athlete continues to demand
innovative, performance-oriented product, and we intend to fulfill that
demand as we expand our product offering for this consumer.
“Our
ability to tell great stories about key growth drivers is also
benefiting from our improved retail presentation. With new Under Armour
concept shops being installed in many of our key accounts and the
upgrades we've recently made to our online consumer site, we're
enhancing our brand presentation for a wide range of consumers. We are
also opening our first store offering a fully-integrated Under Armour
Brand experience later this week in Annapolis, Maryland.”
Gross
margin for the third quarter remained steady at 50.6% compared to 50.6%
the prior year. Selling, general and administrative expenses decreased
to 32.5% of net revenues compared to 33.4%. The company had previously
indicated that third quarter marketing spend would be above the range
of 10% to 12% of net revenues. However, based on the growth in net
revenues as well as the timing of investments in the brand, marketing
expense was 11.5% of net revenues for the third quarter of 2007. The
company still expects to invest in its marketing budget at the high-end
of the range of 10% to 12% of net revenues for the full year.
Balance Sheet Highlights
Reflecting
the company's planned investment in core inventory to position itself
for anticipated consumer demand, inventory totaled $151.8 million at
September 30, 2007, compared to $75 million at the end of the same
period of the prior year. Cash and cash equivalents were $14.5 million
at September 30, compared to $44.3 million at the end of the same
period of the prior year reflecting a planned investment in working
capital and other infrastructure investments. The company had
borrowings outstanding of $10 million under its $100 million revolving
credit facility.
Outlook for 2007
For
2007, the company had previously estimated annual net revenues in the
range of $580 million to $590 million and annual income from operations
in the range of $79.0 million to $81.0 million. However, based on the
company's performance year-to-date, the company is increasing its
outlook for 2007.
The company now expects annual net revenues
for 2007 in the range of $590 million to $600 million, an increase of
37% to 39% over 2006, and annual income from operations in the range of
$81.5 million to $83.0 million, an increase of 42% to 45% over 2006. It
now anticipates fully diluted weighted average shares outstanding of
approximately 50 million for 2007.
Preliminary Outlook for 2008
The
company has previously stated its long-term growth targets of 20% to
25% for the top and bottom lines, but it now believes net revenues and
income from operations will exceed these targets. In support of certain
key growth initiatives, the company expects to increase its investment
in marketing from the historical 10% to 12% of net revenues to 12% to
13% of net revenues for the full year in 2008.
Plank concluded,
“As we look out to 2008 and beyond, we remain excited about the
opportunities to expand the reach of the Under Armour Brand into new
product categories and regional markets. And, with increased revenues,
we have leverage to make a greater investment in marketing to support
our launch into new large, scalable businesses. Our focus on
performance and innovation has allowed us to build credibility with
athletes of all sports. We are focused on achieving the next
significant milestone in our story as a growth company as we execute
our launch of Under Armour performance training footwear in 2008.”
Under Armour, Inc.Quarter and Nine Months Ended September 30, 2007 and 2006(Unaudited; in thousands, except per share amounts)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Quarter QuarterEnded % of Net Ended % of Net9/30/07 Revenues 9/30/06 Revenues
Net revenues $186,863 100.0% $127,745 100.0%Cost of goods sold 92,346 49.4% 63,070 49.4%Gross profit 94,517 50.6% 64,675 50.6%
Operating expensesSelling, general andadministrative expenses 60,708 32.5% 42,692 33.4%
Income from operations 33,809 18.1% 21,983 17.2%
Other income, net 674 0.4% 177 0.1%
Income before income taxes 34,483 18.5% 22,160 17.3%Provision for income taxes 14,453 7.8% 6,190 4.8%
Net income $20,030 10.7% $15,970 12.5%
Net income available per commonshareBasic $0.42 $0.34Diluted $0.40 $0.32
Weighted average common sharesoutstandingBasic 48,183 47,164Diluted 50,085 49,599
