Good day, ladies and gentlemen, and welcome to the Under Armour Incorporated Second 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. I would now like to introduce your host for this conference call to Ms. Carrie Gillard. You may begin.

Thanks and good morning to everyone joining us on today's second quarter conference call. During the course of this call we'll be making projections or other forward-looking statements regarding future events for 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. We provide a reconciliation of non-GAAP financial information in our earnings release and in the electronic version of portions of the script from today's call, both of which are available on our website at uabiz.com. Joining us on today's call will be Kevin Plank, Chairman and CEO; followed by Chip Molloy, our CFO, who'll discuss the company's financial performance for the second quarter and provide an update to our 2016 outlook. After the prepared remarks, Kevin and Chip, along with our Senior Vice President of Corporate Finance, Dave Bergman, will be available for a Q&A session that will end at approximately 9:30 a.m. Finally, a replay of this teleconference will be available at our website at approximately 11:00 a.m. Eastern Time today. And with that, I'll turn it over to Kevin Plank. Kevin A. Plank - Chairman & Chief Executive Officer: Thank you, Carrie, and first of all, congratulations on your new role. Most of you already know Carrie who's been…

Thanks, Kevin. I would now like to spend some time on reviewing our second quarter 2016 financial results, followed by our updated outlook for the remainder of the year. Our revenues for the second quarter of 2016 increased 28% to $1 billion. As we continue to navigate through the changing dynamics of the retail landscape, the consistent growth across our diverse product lines and channels delivered another quarter of strong results. During the second quarter, our wholesale revenues grew 27% to $635 million. Our direct-to-consumer revenues grew 28% to $321 million, representing approximately 32% of total revenues for the quarter. During the quarter, licensing revenues grew 16% to $21 million, and Connected Fitness revenues grew 73% to $23 million. On the product category front, apparel revenues grew 19% to $613 million compared to $515 million in the prior year's quarter, led by many of the same factors as the first quarter, as we continue to see new innovation platforms like Micro Fit gain momentum in key categories like running as well as continued growth in men's training, women's training and golf. Second quarter footwear revenues increased 58% to $243 million from $154 million in the prior year's quarter. Our basketball category, led by the Curry signature basketball line posted another quarter of strong growth. Beyond basketball, we continue to make strong gains in our running and cleated products within our golf and team sports categories, as we remain focused on providing premium, pinnacle products for our customers in more styles and price points than ever before. Our accessories revenues during the second quarter increased 21% to $101 million from $83 million in the prior-year's quarter, primarily driven by our new lines of bags and headwear. On a regional basis, North American revenues in the second quarter increased 22% to $827…

Our first question comes from Omar Saad with Evercore ISI.

Thanks. Good morning, guys. Kevin A. Plank - Chairman & Chief Executive Officer: Hi, Omar.

Quick technical question. On the Kohl's announcement, I know you said 2017. Any of this – is that – do any of the shipments come this year or does it really all start – the shipments start next year? I just wanted to make sure we're understanding the timing of when that rolls out. Kevin A. Plank - Chairman & Chief Executive Officer: Some of that'll be a little bit of mix, but we're looking to be set by the time they start their first quarter. So, you'll see nothing out of the ordinary or extraordinary, but this is a 2017 initiative for the brand.

Okay. Cool. Thanks. And then on the Sportswear piece, I thought it was an interesting hire as well for that. Can you let talk a little bit about the styling, the aesthetic? You kind of mentioned, Kevin, there's a big amount of daylight between what the Sportswear is going to be and the kind of current offering. Help us think through how that product is going to look and feel and be different than the rest of the offering? What are the key kind of value-added components to it? Kevin A. Plank - Chairman & Chief Executive Officer: Sure. Well first off, it began with the consumer. I think people are asking and trying to figure out how to wear the brand beyond the pitch, the field, the court. We've just seen that over and over and over again. And when we look at the market opportunity, our two competitors claim that their sportswear businesses are somewhere between 20% to 30%, so the aggregate number there is roughly $50 billion, so we assume there's about a $15 billion market opportunity that today Under Armour is playing just a few percentage points for overall growth. So, we think there's a massive opportunity, there's massive appetite for those in our space to really be effective in sportswear. We also recognize that I think there's a shift that's happening in the consumer workplace right now, and I don't know how many people in the call have people in their offices that are wearing suits and ties. And so there's this massive shift to casual and comfortable, and I think what we've done to establish our brand is that our shirts aren't just – they don't just look great, but they actually do something. And so whether that's wicking, moisture management, stretch, washability, all…

Do you think the logo will be a big part of it, Kevin, or is it really more about the materials, the technical performance with a street look? Kevin A. Plank - Chairman & Chief Executive Officer: I think the story is going to be the biggest part of it, meaning that everything does something. So we're not just going to start making stylish clothes, they have to be stylish clothes that do something. You'll see some of the features, whether it's a button-down that actually has a sleeve that has a spandex in it or elastic in it, so you can pull your sleeves up without having to fold them, a bit more ready-wear, wash-ability, but everything will have the Under Armour DNA in it. That's most important. Whether it is stain resistance, or waterproof or some of the other things you'd expect from us. A little more stylish. You'll see the branding, and I think, what I'd challenge the team to do is, lean on the brand when you need to. And the first reaction is that, we don't need the branding anywhere, but I think the consumer – again, this will be a journey, and as we get there, you'll see the brand. But the UAS will have its own unique distinctive brand, and from time-to-time, particularly in things like the footwear, you'll see some more starting use of the logo. But the logo will be on every piece just whether it's on the inside of the collar or the outside of the collar is bit of a question.

Great. Thanks. That's really helpful. Kevin A. Plank - Chairman & Chief Executive Officer: Thanks, Omar.

Our next question comes from Matt McClintock with Barclays.

Hi. Yes. Good morning, everyone. Kevin, just a follow-up on Kohl's; I was wondering if you can maybe discuss your product segmentation strategy as you think about entering new channels such as Kohl's? And thinking about addressing the women's category more broadly, what other distribution points or channels or other ways can you reach women that you're currently not in today? Thank you. Kevin A. Plank - Chairman & Chief Executive Officer: So, women is a great – it's a great segue for that. But I want to be clear, as we talk about Kohl's, first and foremost, we have an amazing distribution group of partners that have enabled us to get to this point. And I think we've been incredibly prudent with the way that we've rolled out our distribution. It has been thoughtful, it has been patient, it has been 20 years in the making. And I want everyone to know that, first of all, Kohl's is – there's nothing reactionary about Kohl's. This is a proactive move for us that has been in the work for the last several years. And you're right, the thing that allows us to be in this position is that we have built a merchandising expertise in the building that frankly, really just a couple of years ago we didn't exactly have, not specifically. The goal and the role of merchandising when we brought Kevin Eskridge, who heads up our merchandising now back from China and gave him that task for us more than a year ago, it has us really in this position that we think we're ready for it in 2017. And so we're very thoughtful about our existing distribution, because the differentiation in the lines is critical. Number one, as we become more expert at differentiating within channels, so…

Thank you very much.

Our next question comes from Camilo Lyon with Canaccord Genuity.

Good morning, guys. How are you? Kevin A. Plank - Chairman & Chief Executive Officer: Good, thanks, Camilo.

So, following up on the Kohl's topic, Kevin, I wanted to get your sense to, does this expansion into Kohl's allow you to expand your product offering in pre-existing department store relationships? Previously you've been pretty measured in how you've assorted those stores like at Macy's and Belk and some of the other, Lord & Taylor sort of relationships. So I'm curious to know all the segmentation work that you've done for Kohl's, does this offer an opportunity to equally expand your presence in your pre-existing relationships? Kevin A. Plank - Chairman & Chief Executive Officer: Well, I think one thing we have done in the last year is we've added over 200 women shops within our existing department store distribution. So I don't know if it's new doors as much as it is new opportunity. When we give door counts 11,000 in North America, I think a lot of times the saturation level is a bit misunderstood with how we fare against, say, our competition. So we do believe, when we talk about North America, we're bullish on North America. We continue to see opportunity and expansion within existing doors and that's a story that we see, of course, in apparel. But frankly, when we look at things like footwear, we're barely scratching the surface there. So we see really great, great opportunity for us. And as we think about distribution for us, across all of our channels, all of our partners, all of our – everywhere we do business, our job is to be important as an iconic brand. And when I say that, that really speaks I think, talking about the things we're opening in the future, and again this won't be for a couple of years, but taking over the space, the old FAO Schwarz space…

Great. And then just to understand a little bit about the pace, can you just talk about – are you going to be in all doors in Q1, or is there going to be more of a measured rollout? And I'm assuming that it's apparel then footwear, so is there any sort of margin implication as we should think about that new department store channel coming online? Kevin A. Plank - Chairman & Chief Executive Officer: We'll be in about 600 doors or so to kick things off, and then beyond that...

Yeah. Kevin A. Plank - Chairman & Chief Executive Officer: You're not going to see any margin implications.

You shouldn't see any margin because the mix is generally going to be in line with the mix of the company.

Understand. All the best, guys. Thanks. Kevin A. Plank - Chairman & Chief Executive Officer: Thanks very much.

Thank you.

Our next question comes from Matthew Boss with JPMorgan.

Thanks, guys. Kevin, can you talk about athletic inventory in the channel today? It sounds like inventory for you guys will be in line with sales by the end of this quarter. Nike expects to be clean by August. I guess are you comfortable with the promotional backdrop you see out there today? And then larger picture, what would you say to those calling for a top in the athletic cycle out there? Kevin A. Plank - Chairman & Chief Executive Officer: Yeah, I'm not going to say I'm comfortable with the promotion out there in the market today, but I don't know if that's different than what we've seen in the last several years either. I mean when you look at holiday these days, it's an incredibly – it is promotional environment out there. And so what we all have found is the barbell effect continues to really accentuate itself with either going to one or two extremes; either, A, the consumer chasing price, and you'll see that with obviously some of the digital pure plays out there, or you'll see it with – or people finding that at retail or they're chasing premium, they're chasing brand. And so we of course expect to be on the right side of that barbell, and I think we've continued to define that for the consumer as to where they find us. I don't think it's a top out, I think there's a shift happening. I think the way the people are dressing is changing, and it's altering. And so I don't know if it'll be as extreme as just women's buying black tights and whether people can make a career out of that, and obviously there have been a lot of people jumping in the boat on women's, specifically in the…

Great. And then just a follow up; on gross margins, your guidance for this year implies material expansion in the fourth quarter. Could you just walk through some of the drivers of the inflection in the fourth quarter? And then as we move to next year, is it fair to think about a return to expansion of gross margin? Any help on the near term and multiyear puts and takes on gross margin would help.

Hey, Matthew. This is Chip. So I'd think about it more in the medium to long-term is we are going have a headwind called mix in front of us. As we continue to outgrow our business in footwear and we continue to grow internationally at an accelerated pace, that is a headwind. On the flip side, it's our job to improve the cost side of the house and bring product to the table so that we can offset that headwind. So I think in the longer term, that's our job, and we're probably looking at a push. In the near term, as it relates to this year, we are looking at some meaningful impact in Q4. We have less of a mix challenge as the year progresses, and we will see notable improvements in the actual product margins in Q4 and anniversarying a negative number last year.

Great. Best of luck, guys.

Our next question comes from Lindsay Drucker Mann with Goldman Sachs. Lindsay Drucker Mann - Goldman Sachs & Co.: Thanks. Good morning, guys. I wanted to ask about the North American wholesale business. And maybe you could give us an update on how you're thinking now that we've moved a little bit further in the year, how the Sports Authority dynamic is going to affect your sales for the year. If there was any change to your thinking on actual dollar impact, reverse cannibalization and the timing of that? And my second question is on looking at North American operating profit for the quarter, which was relatively flat despite pretty good sales growth, and how we should be thinking about incremental margins for that division across the year?

It's Chip. On the TSA side, so the TSA, we did ship product in the first quarter and the second quarter to TSA. It is in fact predominantly in the back half of the year. It is about 300 basis points to 400 basis points of our growth in the back half of the year without shipping to TSA. We have made up some of that, but not all of it. And then as it relates to North America, when you're looking at the segment, there have been some costs that have moved from Connected Fitness. There were head count costs on the marketing side of the house for Connected Fitness that are more for the overall North America segment or all-in segment, and those costs have shifted – approximately $5 million have shifted from Connected Fitness to North America. So that's why that segment looks that way. Lindsay Drucker Mann - Goldman Sachs & Co.: That's an annualized number for Connected Fitness?

Two, Dave?

That was Q2. The $5 million relates to the Q2 impact this year versus last year.

Right. Lindsay Drucker Mann - Goldman Sachs & Co.: Okay. And how should we be thinking about the margin drivers for North America for the second half of the year?

Well, for the second half of the year, the margin drivers I would go just at the corporate level, since North America is predominantly our business. So in the back half of the year, you're going to look at the third quarter, we're probably going to be slightly down again. And then in the fourth quarter, we'll see some material impact. Mix is a challenge throughout the year, with – once again, with footwear growing at 2x apparel, you have higher margins there. That's going to be a challenge. But then, on the product side, we're going to see improvements on the product side, which should help the margins product cost side, especially in Q4. Lindsay Drucker Mann - Goldman Sachs & Co.: Great. Thanks, guys.

Our next question comes from Robby Ohmes with Bank of America.

Good morning, guys. Kevin A. Plank - Chairman & Chief Executive Officer: Good morning, Robbie.

Good morning.

Kevin, I was hoping you could talk a little more about China. It sounds like things couldn't be going better for the brand. Can you guys talk about the outlook for store growth and maybe accelerating it? Kevin A. Plank - Chairman & Chief Executive Officer: Yes, of course. So China, as we think about the opportunities we have, we've got about – opening over 150 owned partner stores in 2016 as we look at it. The majority of those are actually going to be in China. So we feel like we found a really – it's an interesting model. And as you look at the way they do it in China, you're either, A, going with a partner or you're effectively – you're running space like a landlord in a larger department store. So China, for us, is something – just recounting some of the history, we spent a long time trying to figure it out. We started manufacturing there in 2000 and we started selling there in 2010, where we did $1 million, $1.2 million or $1.3 million out of one store. By 2012, that was $3 million, and then we really amplified it by, I think, bringing in great senior leadership and really defining a point of view for ourselves in the market. And from $3 million in 2012 to $7 million in 2013, to $30 million in 2014, to $80 million in 2015 to this year, we're looking at north of $150 million business. And so, really, we're seeing that inflection point for the brand in China. We have great leadership on the ground over there. We have seasoned leadership on the ground. Our office, our headquarters in Shanghai. And we think there's a really good momentum. We're going to be following up on some of…

That sounds great. Thanks very much. Kevin A. Plank - Chairman & Chief Executive Officer: Thanks, Robby.

The next question comes from Kate McShane with Citi Research.

Hi. Thanks for taking my question. I had a question about the New York City store, just in terms of when it opens, and also just since it is a fairly expensive real estate and there'll be remodeling, how long will you be paying rent and investing in the building before the store opens? Kevin A. Plank - Chairman & Chief Executive Officer: So thanks, Kate. We expect to be in somewhere around 2019, end of 2018, beginning to the middle. So it's a little unclear, but we've been open with the landlord. But probably by the middle of 2019 at the latest, in doing that they've got – someone else is going to go and use the space as temporary space for a period of time and then we'll be taking over. So again, I think that, that space for me, it solves lots of things for the brand. Number one, I think it's a flag in the ground for, first and foremost, our product teams. Putting out there for our teams of telling them the way, and telling every designer and putting the world on notice and every designer and every builder and every product manager that once we build the greatest product for the corner of Main and Main of beyond the United States, but really the world. And so, being there at the mouth of Central Park, on the opening of Fifth Avenue, we think it's a great platform for the brand. We're really going to be able to define ourselves of the company that we expect to be. So there's going to be a lot of imagineering that's going to happen as we look at this, experiential. It's going to be at the pinnacle of what we're going to try to create here, and really, how we drive retail. And we think, as we continue to add retail stores, we finished the year with some 400, again, opening over 150 this year, we think that as we, it is, whether we like it or not, we are retailers at some level, and we never want that to be competitive with our existing wholesale distribution base, but we think the more excellent we become as retailers, the better wholesale will be as well, and that'll end up being a net effect for all of us. And again, driving the idea of iconic, what I said is I made some bold statements in my written remarks about how big I think this idea of the store can be, but effectively, the goal that we have to build the greater – the single greatest retail store in the world. And we know that's a big statement with a big company. But I think that, that's opportunity that we have and I expect to put together an incredible team of people that'll help us think through what that means, and I think it'll really position the brand, again, in the iconic place where we believe that we belong.

Okay, that's helpful. Thank you. And then my one quick follow up question is just with regards to your long-range guidance. How does Kohl's fit into that? Was that already kind of figured into your long-range guidance, the revenue growth that you gave in September? Or can we be expecting an updated figure over time?

This is Chip. So long-range guidance was given last year in 2015 and as we said, 25% top line, 23% bottom line growth. As part of that, there's always going to be things that are going to go in that long-range guidance, points of distribution expansion overseas, et cetera, so I would suggest that Kohl's would be part of that long-range guidance.

Thank you.

Operator, we have time for one more question.

Our next question comes from Michael Binetti with UBS.

Hey, guys. Good morning. Congrats on a very tough quarter. One quick modeling question, could you – Chip, would you mind helping us think about how FX will impact the gross margins in each of the next two quarters, just so we can kind of compare it where we were in the first half?

Yes, sure. Hold on just a second on the FX side. So FX in the last – back half of the year is going to be slightly negative for the back half of the year, a little bit more in Q3 and Q4.

Okay. And then, Kevin, obviously, it is a very tough quarter for U.S. athletic retail with the Sports Authority bankruptcy. It sounds like you guys have figured a plan to kind of plug that hole in distribution. But if we look at the guidance for revenue to decelerate to 20% here in the third quarter, you called out we're lapping some fulfillment strategy we put in last year and then the Sports Authority thing, again, sounds like you have a plan. But then you're going to be launching big retailers like Kohl's that'll get into 2017. As we just kind of think about the cadence or how our models now start to transition in 2017, should we look at that slowdown to 20% heading off to a growth rate closer to the 25% long-term growth rate that you guys have outlined, as we get into the first half of next year? Or any other color you can help us try to think about the shape of – because I know next time we hear from you, on the third quarter call, you guys traditionally like to give us the 2017 numbers, so just trying to think about our model for a little bit longer term here? Kevin A. Plank - Chairman & Chief Executive Officer: Yes, no. I think we're going to have a much better picture in 90 days, to be clear, to give you guys, and we want to be as close as possible to that. But I think the first thing that – when you just look at the strength of the brand is that, we're not – the hardest thing is accepting a question that says, tell us about decelerating revenues. And we're still projecting; we're 25 quarters north of 20% in a row. Over six…

If I could sneak one in, since you're talking a little bit longer term, I know, a couple of years ago, you laid out a big mapping exercise that you did in North America that showed where the opportunities were regionally. It seems like a lot of the moves you've made on the West Coast lately between UCLA and Berkeley, and obviously, Golden State, can go a long way shoring up maybe productivity on the West Coast versus the East Coast. I think sportswear is a much important category on the West Coast. Have you guys – is there – I mean, can you help us think about how big of an opportunity that is, if I'm still right that that's an opportunity from the mapping analysis we saw a few years ago. Seems like kind of the marketing assets are moving in the right direction for a pretty meaningful opportunity there for you? Kevin A. Plank - Chairman & Chief Executive Officer: Yes, of course. So, we think there's a big opportunity. One of the challenges that we had being primarily a sporting goods wholesale account, there wasn't a large sporting goods presence in the West Coast. The exception is Sports Authority, which had 63 doors that went away. And so, one of the things, frankly that, even we see in Kohl's is that they've got over 100 doors in the State of California. So we look at California as an opportunity for us. Again, it is the world's sixth largest economy, and something that we don't feel that we had been aggressive enough on. And so that's why you saw us make two very bold bets in terms of a new partnership with Cal and a new partnership with UCLA. And so those are about as certain as things get when you talk about investing in – really in the community. And so, Northern and Southern California in one fell swoop, backed up, of course, with what Stephen Curry is doing there. And then, one of our key Connected Fitness officers, where Mike Lee, the Head of Connected Fitness is based out of in San Francisco as well. And we've got a new 50,000 square-foot office being built there right now also. So we're in the State of California. We do think it's an opportunity for us, but we think it's also – that is a top market globally and something we think is also a bit of a leaping board for us as we look to Asia and other markets abroad, too. So, we like the opportunity, but again, many of these deals that we made recently were really the deal about geography as much as anything else, and we feel like we accomplished that point. So, now we have to prove it out and there's work to be done. So you'll watch our team run hard.

Thanks, guys. Great quarter. Kevin A. Plank - Chairman & Chief Executive Officer: Thanks very much. Appreciate it.

Thank you.

Ladies and gentlemen, that concludes today's Q&A portion. I'd like to turn the call back over to Carrie Gillard for closing remarks.

Thanks for joining us on our call today. We look forward to reporting to you our third quarter 2016 results, which tentatively have been scheduled for Tuesday, October 25, at 8:30 a.m. Eastern Time. Thanks again, and good-bye.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.