Under Armour, Inc. (UA) Q1 2027 Earnings Report, Transcript and Summary

Good day, and welcome to the Under Armour First Quarter 2027 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would like now to turn the conference over to Lance Allega, Senior Vice President, Finance and Capital Markets. Please go ahead.

Good morning, and welcome to Under Armour's Fiscal 2027 First Quarter Earnings Call. Today's call is being recorded, and a replay will be available on our Investor Relations website shortly after the call concludes. Joining us this morning are Kevin Plank, President and CEO; and Reza Taleghani, Chief Financial Officer. Before we begin, please note that certain statements made on today's call are forward-looking statements within the meaning of federal securities laws. These statements reflect management's current expectations as of August 7, 2026, and are subject to risks and uncertainties that could cause actual results to differ materially. For a discussion of these results and risks and uncertainties, please refer to this morning's press release and our filings with the SEC, including our most recent Forms 10-K and 10-Q and other public disclosures. During today's call, we may reference certain non-GAAP financial measures. We believe these measures provide additional insight into the underlying trends of our business and when considered alongside our GAAP results. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in today's press release and available on our Investor Relations website at about.underarmour.com. With that, thank you for joining us this morning and for your continued interest in Under Armour. I'll now turn the call over to Kevin.

Good morning, everyone, and thank you for joining us. Let me start with the headline. We're lowering our revenue outlook for the year while maintaining our adjusted operating income expectation. That's not the outcome we wanted on the top line, but it does reflect a business that is more disciplined and flexible than it was just a year ago. Consumer demand remains softer than we expected, particularly in North America and Asia Pacific. Our response isn't to chase that market lower. It's to continue simplifying the business, sharpening our product focus, improving marketplace execution and investing behind the innovation, athlete credibility and storytelling that will strengthen Under Armour over the long term. 90 days ago, I said we were entering the next phase of our transformation. The challenge now is convert internal progress into stronger consumer demand. That's the work in front of us, and it's what will position Under Armour for healthier growth over time. Last quarter, Sharon Lokedi won the Boston Marathon in our Velociti Elite 3 racing shoe, her second consecutive Boston victory in Under Armour. This quarter, Ferran Torres scored the World Cup winning goal for Spain in our Shadow Elite 4 boot. These are the moments this brand was built for, products performing on the biggest stages under the greatest pressure with the world's best athletes. They show what happens when we build from the athlete back, credible performance moments that should, can and will create stronger demand for both the literal product worn on pitch or course, but especially the commercial expressions we convert into brand demand and wearing beyond sport. They also reinforce why the progress behind the scenes matters. Over the past 2 years, we simplified the organization by removing excess weight to create greater focus and agility. Great example is our significant SKU reduction, all while strengthening the connection between product, marketing and sales, so our teams are moving with greater speed and accountability. We've also become more rigorous in how we allocate capital and manage expenses. For instance, in the first quarter, we consolidated parts of our innovation footprint, including rightsizing our Portland office, while strengthening Baltimore and New York as hubs where decisions can move faster, product decisions sharpen and teams manage with greater intentionality. These actions are about improving the quality of the business over time, and that will be proven by execution, not by what we say today. A few years ago, we're too often managing for quantity, more products, more complexity and volume that did not always strengthen the brand. Today, we're managing for quality, fewer products with greater purpose, tighter execution and a clear reason to buy. This mandate to the organization is incredibly straightforward. We will sell so much more of so many less products at a much higher full retail price. And this mission is well underway. That focus must apply to every channel. In our DTC business, promotion has too often been the reason for consumers to shop. We're testing more full-price product in this environment. What we know is that when the product is differentiated and the value proposition is clear, the sell-through follows. In wholesale, we're taking the same approach where stronger relationships remain central to our turnaround. Since returning to the chair, I've made this a priority, and we're beginning to see it pay off in better alignment and stronger execution. A good example is our back-to-school takeover of the fashion show set at DICK'S House of Sport Doors, which puts us front and center as you walk into these elevated presentations with a full expression of UA across men's and women's with our heat gear, icon fleece, tees and Stealth-form hats. The goal is to build more of these executions across the marketplace where differentiated product and strong storytelling can drive healthier full price demand. That brings us to the central question. How do we turn a healthier business into stronger consumer demand? We know the brand has been too reliant on promotion. The marketplace still carries too much complexity. The issues are clear. The work is underway, and our focus is on 4 priorities. First, rationalize the product line so investment goes beyond the highest potential franchises and innovation platforms with a clear role in the portfolio. You can see that in the SKU reductions underway and the priority behind platforms like HeatGear, Velociti and StealthForm. Second, rebuild the market engine around fewer, bigger stories that connect our best products, athletes and cultural moments in a more consistent way. Sharon winning Boston and Ferran scoring on the world stage are the proof points we need to turn into a repeatable system. Third, improve commercialization so consumers can see it, understand it and buy into it across our own channels and wholesale partners, making it easier for the consumer to say yes to the UA brand. That means tighter launch planning and stronger retail and digital execution to our biggest campaigns convert. And fourth, manage inventory in the marketplace. The business operates with greater consistency and less dependency on discounting. That means being willing to walk away from lower quality volume, tighten inventory buys and reduce the amount of product that ultimately has to be cleared for promotion. We should see progress in those areas before revenue fully reaccelerates. That's the nature of this reset, improve the quality of what we make, how we sell it and how consistently the marketplace reflects the value of the brand. Against that backdrop, let me talk about both sides of what we're seeing, where the environment has become more challenging and where the playbook is beginning to show up. As the first quarter progressed, particularly from late May forward, traffic softened, especially in North America and Asia Pacific, while the marketplace became increasingly promotional. Given what we're seeing today, we've taken a more cautious view of revenue for the balance of the year. Still, this does not change our strategy. It reinforces it. Consumers are going to choose Under Armour at a premium, we must earn that through more compelling reasons to buy, the right product choices and a tighter connection between what we make and why athletes should care. One of the biggest lessons for us has been that athletes don't need more choices. They need better ones. Building on the 25% reduction we've already achieved in our fall/winter '26 assortment compared to just 2 years ago, we've begun targeting a further 25% SKU reduction over the next 18 months. That is not about doing less, it's about giving our teams room to build products that matter and concentrating investment behind the franchises and innovation platforms with the strongest potential to create separation. That focus is helping us concentrate talent and investment in the areas where Under Armour can create meaningful advantages for athletes, training, team sports, running and the innovation platforms that define our performance heritage. We're seeing early signs this approach is working. ER base layer has remained strong across regions and channels, and velocity continues to validate our technical innovation with runners. We're also seeing encouraging reads across newer apparel concepts, which indicate where the consumer is responding. These are signals we can learn from and scale deliberately. Best example of what this looks like when we get it right is the Bouncy Tee. What can happen when product and culture come together at retail. Launched in May, Bouncy has exceeded expectations while selling at its full $65 retail price. Alongside innovations like base layers, SlipSpeed, StealthForm Hats and the No Weigh Backpack, it shows that we know how to create products with a clear reason to command value. The combination of new upcoming innovation and frankly, the amazing products that we already have but have not done a good enough job storytelling for yet gives us a robust platform to leverage. Now we just need to align in firing with a coordinated brand right marketing approach. Beyond these proof points, the bigger job is to build a more effective marketing engine, not just put more products in the pipeline. And for us, that starts with the products that matter most, the top 10 volume drivers I've talked about before. Tech Tee is a great example. It's one of our largest volume programs, but candidly, it's discounted too often. So the answer is not to walk away from that business. The answer is to improve the product and reset how it shows up in the marketplace. We are refreshing Tech Tee, so it plays a better role at scale. And at the same time, we've created a more premium expression with the Helix Tee. As Helix comes to market later this year, it will launch at $35 with a more complete UA performance story, stretch, recyclable and an outrageously quick dry time and with the marketing and retail support required to earn that premium. That is the playbook, improve the essentials that give us scale and build elevated products with a clear reason to trade up. Product strength also must show up in how we market the brand. As we take this story to our consumer, our industry is certainly taking notice. An example is 2 womenswear daily covers just this week featuring UA brand ambassadors, Wednesday with Francois Arnaud of Heated Rivalry theme wearing UA HeatGear. And just this morning, another cover showcasing Fern T's World Cup celebrity while wearing our new Bouncy Tee. The opportunity now is to make those stories travel farther and connect more consistently with consumers. Our goal is not to be part of every conversation. It's to show up where performance matters most and where our product gives us permission to lead. That requires tighter integration between innovation and storytelling, so consumers understand what the product does and why it matters. Our marketing reset is not only about how much we spend, but how effectively we spend it and what the return ultimately is. The point is to make each dollar work harder behind a brand idea consumers can understand, remember and purchase against. On our last call, we expected marketing investment to move higher as part of rebuilding consumer pull. Since then, we've gone deeper into the plan and identified opportunities to rebalance spend, reduce waste and improve returns. Given this amplified focus, we're taking marketing lower as a percentage of revenue this year. To be clear, this is not a retreat from the brand. It's a reset in how we invest, fewer, bigger activations, tighter ties to product and retail, clear measurement and a higher bar for funding. We believe we have the ability for significantly higher efficacy in every marketing dollar we spend and the return it brings to the brand. Underneath all of this, the company is operating better. The structure is simpler, decision-making is faster and tighter prioritization is helping us respond to changing market conditions while maintaining our full year profitability outlook. So in closing, Under Armour is at its best when we build products, athletes trust in the moments that matter most. This year marks our 30th anniversary, and I know what this brand can be when performance credibility turns into consumer demand. I'm proud of our history, but I'm not satisfied with where we are today. We will not solve that by chasing unhealthy volume or buying short-term revenue. We'll solve it by editing the line, cleaning up the marketplace, sharpening our storytelling and turning our strongest assets into consistent demand. That's the work in front of us, make the brand sharper, the business cleaner and the execution more consistent. And with that, let me turn the call over to Reza to walk you through our financial results and outlook in more detail. Reza?

Thanks, Kevin, and good morning to everyone. From a financial perspective, the first quarter showed the benefit of the operating control we've been building into the model. Revenue came under pressure as the period progressed, but adjusted operating income exceeded our outlook. Starting with our first quarter fiscal '27 results, revenue declined 3% to $1.1 billion. By region, North America revenue decreased 9% with declines in wholesale due to softer spring/summer orders and traffic headwinds that put pressure on our e-commerce and retail store business. EMEA revenue increased 12% and 10% constant currency in the quarter, driven by strength in our distributor business, partially offset by slight declines in our DTC and full-price wholesale businesses. Revenue in APAC decreased 7% or 10% constant currency, reflecting greater-than-anticipated softness in China and Southeast Asia. In China, results were also affected by stock-outs in key styles and sizes as well as demand cannibalization from certain licensees that discounted aggressively in a promotional market. We are addressing those issues through better inventory availability and closer alignment with licensing partners. And in Latin America, revenue increased 8%, driven by favorable foreign exchange as constant currency revenue was up 1% in the quarter. In short, North America and parts of Asia Pacific drove the pressure versus expectations, while EMEA and Latin America were more resilient in the quarter. Looking at performance by channel. Wholesale revenue decreased 2% due to declines in full-price wholesale revenue and in sales to third-party off-price channel versus the prior year. This was partially offset by growth in our distributor business. Direct-to-consumer revenue decreased 6% in the quarter with a 3% decline in our owned and operated stores and a 12% decline in e-com. As mentioned, as the first quarter progressed, we saw increasing traffic challenges, particularly in our North America and China markets. And licensing revenue increased 2% with growth in our international business, partially offset by lower revenue in North America. By product category, apparel revenue was down 2% with declines across most sport categories. This was partially offset by growth in sportswear. Footwear revenue was down 8% due to the combination of general demand softness and actions we've taken to optimize and edit our product assortment with the largest declines in team sports, sportswear and train. Increases in outdoor and golf partially offset this, while our run business was flat in the quarter. In accessories, revenue decreased 4% with softness in train, outdoor and golf, while sportswear was an area of growth. Gross margin increased 590 basis points year-over-year to 54.1% in the first quarter. This year-over-year increase was due to 640 basis points of benefit from IEEPA tariff refunds related to cost expense in the P&L in fiscal '26 and 50 basis points of other supply chain benefits, including lower inventory reserves and product costing tailwinds. These benefits were partially offset by 50 basis points of unfavorable foreign currency impacts, 30 basis points from unfavorable regional channel and product mix and 20 basis points of pricing headwinds due to increased discounting in response to a softer, more promotional retail environment. SG&A expenses increased 2% to $543 million as we continue to fund priority investments while managing our costs tightly. Excluding $2 million in transformation expenses related to our fiscal 2025 restructuring plan, adjusted SG&A expenses were 4% higher than the prior year. This came in slightly better than our outlook for a high single-digit increase. In Q1, part of the favorability reflected timing of marketing spend. We also began reducing discretionary operating expenses as we balance revenue headwinds with the necessary investments to strengthen the brand. In the first quarter, we recorded $4 million in restructuring charges and along with $2 million in transformation-related SG&A, we recognized a total of $6 million under our restructuring plan. To date, we've incurred $266 million in total restructuring and transformation costs, of which $116 million is cash and $150 million is noncash. We continue to expect the total anticipated restructuring plan cost to reach approximately $305 million and for these actions to be substantially complete by December 31 of this year. Below SG&A, first quarter operating income was $47 million. Excluding transformation expenses and restructuring charges, adjusted operating income was $52 million, exceeding our outlook of $30 million to $40 million despite a challenging revenue environment, reflecting the greater agility and cost rigor we continue to build into the operating model. On the bottom line, first quarter diluted earnings per share was breakeven. Excluding transformation and restructuring charges, our adjusted diluted earnings per share for the quarter was $0.05, also ahead of the outlook range we provided in May. Importantly, these results demonstrate that we're managing the parts of the business we can control. Even in a softer environment, we delivered adjusted operating income above our outlook through tighter cost management and improved operating execution. Turning to the balance sheet. We ended the quarter with $1.1 billion in inventory, down 3% year-over-year and generally in line with the revenue decline. We also closed the quarter with $396 million in cash and $200 million outstanding under our revolving credit facility. During the quarter, we used restricted investments to settle the remaining principal and interest payments on the senior notes due 2026, further improving our debt profile. We also completed an amendment to our revolving credit facility earlier this week. This was a proactive step to modernize legacy definitions in the agreement and better align the covenant package with current market practice, our global cash management structure and our seasonal operating profile while keeping the facility size unchanged. Importantly, the amendment is leverage neutral and not related to near-term funding need. We appreciate the strong partnership from our lenders throughout the process. With that context, let me turn to our updated fiscal '27 outlook, which reflects a softer consumer environment and more promotional marketplace, particularly in North America and parts of Asia Pacific. It also reflects the greater flexibility we now have in the operating model, which allows us to take a more cautious view of revenue while continuing to manage profitability. Based on those factors, we now expect this year's revenue to decline at a mid-single-digit rate, but we are maintaining our adjusted operating income outlook of $140 million to $160 million. In North America, we now expect revenue to decline at a mid-single-digit rate. This reflects softer traffic in a more promotional environment than we anticipated entering the year. We are prioritizing healthier revenue, managing inventory tightly and avoiding short-term volume that would pressure margins or weaken brand positioning. In EMEA, we now expect revenue to decline at a low single-digit rate in fiscal '27. The region remains highly competitive and promotional with emerging consumer headwinds in certain markets. Even so, we continue to see resilience in the region, supported by strong marketplace execution and our focus on protecting the brand while keeping product elevated and aligned with our strategy. In Asia Pacific, we now expect revenue to decline at a low single-digit rate. This reflects softer consumer response in China and parts of Southeast Asia, along with a more fragmented marketplace across channels and partners. In China, we are focused on better e-commerce execution, improved inventory availability in key styles and sizes and closer alignment with licensing partners. We are adjusting our outlook accordingly while continuing to build the foundation for long-term growth in the region. Across regions, our outlook reflects a more conservative revenue assumption. We are managing expenses and inventory tightly while continuing to fund the priorities to support long-term growth and brand health. On gross margin, we continue to expect expansion of approximately 220 to 270 basis points versus last year. This includes roughly 150 basis points of benefit from IEEPA tariff refunds related to expenses realized in fiscal '26. Excluding that benefit, we still expect gross margin to improve, supported by pricing actions, lower discounting and favorable channel mix, partially offset by supply chain pressure related to the Middle East conflict, which we continue to monitor. Additionally, given the recent tariff announcements and the rates effective as of July 24, we still believe our 10% tariff assumption from the period from July through the end of our fiscal year remains appropriate at this time. We will continue to monitor tariff policy closely and update our assumptions as the situation evolves. Given softer consumer response and its impact on our top line, we've also updated our outlook for adjusted SG&A, which we now expect to decline at a low single-digit rate versus last year. This reflects active cost actions, sharper prioritization and the more focused marketing approach Kevin described. We've already taken actions across nonmarketing expenses, and we'll continue to prioritize spending that supports long-term brand health and profitability. Putting these pieces together and excluding anticipated transformation expenses and restructuring charges, our expectations for full year adjusted operating income and adjusted diluted EPS remain unchanged from our initial outlook given on May 12. We are maintaining this outlook despite lower revenue expectations, reflecting the greater operational control we've built into the business. As indicated previously, this includes approximately $70 million of benefit from the refund of IEEPA tariffs expense through the P&L in fiscal '26, partially offset by approximately $35 million of expected negative impacts related to the ongoing Middle East conflict, which we continue to monitor. For the second quarter, we expect a more challenging consumer environment to persist, particularly in North America and parts of Asia Pacific. As such, we expect revenue to decline at a high single-digit rate, reflecting anticipated high single-digit declines in North America and Asia Pacific and low double-digit decline in EMEA. Gross margin is expected to be in line with last year's same period result, driven by favorable product cost and pricing actions, partially offset by unfavorable foreign exchange impacts and channel mix. Adjusted SG&A is expected to decline at a low single-digit rate, driven by lower marketing spend and continued management of other discretionary SG&A. And we expect second quarter adjusted operating income of $10 million to $20 million and an adjusted diluted loss per share of $0.01 to $0.03. To close, we are taking a more conservative view of revenue, but the cost actions and operating control in the model allow us to maintain our adjusted operating income outlook. We will manage inventory tightly, protect revenue quality and continue funding the priorities that matter most to long-term brand health and profitability. With that, we'll open the call for questions.

[Operator Instructions] Our first question comes from Jay Sole of UBS.

Kevin, congratulations on the Bouncy Tee. Great product, great response. Can you just talk a little bit about the intentionality behind that product because there's a plan that was in place to make that product come to life and get the response you're getting. Can you tell us about that? And then can you connect it to what you can take from those learnings from that product going forward and a little bit about your product pipeline going forward, how you can bring more innovation to the market to continue to get the kind of results you've seen with the Bouncy Tee.

Yes. Thanks, Jay. I think the product was meant to be -- the painful thing about our industry is an 18- to 24-month go-to-market process. And as we sit here just a little beyond a couple of years back in the chair, we wanted something that would really articulate the brand and more importantly, the metaphor that we wanted to create of what we expected from all of our products. Promotion has become just too consistent, I think, out in the marketplace. And so we wanted something that could really demonstrate the full price nature of Under Armour, where we put the articulation of great innovation with our NEOLAST fiber that replaces a new version of stretch that replaces liker a sustainable version for it. It brings the style and design is something that we obsessed that was relevant to the consumer. We've got a terrific business in our Heat and ColdGear business, which are our legacy franchises, but also compressions available to about 7% of the buying public. And so we thought what's something that we can put in everybody's draw that explains Under Armour. And frankly, this would be the way that we'd look for every product to come to market, where we're combining culture with innovation. We're telling an Under Armour branded story. We're assessing the details from the forward swept shoulders to the way the logo shows up to something that can really be different. Everyone is telling us we don't want a logo on the shirt. We think that's something we can challenge because we actually have a brand. We think that's what makes us unique. I think what you can count on from us is us doing this in a more consistent way, bringing things like Bouncy Tea of having the formula of, yes, the right product that speaks to the innovation of the brand, which is unique and cutting to Under Armour. Number two is the way that we bring it to market with a very simple what it is, what it does, how it makes you better, and then the retail execution. And I'll add in the cultural pieces we've done with Gunna and Parker McCollum here in the U.S. over in APAC, where we signed the K-pop band, BOYNEXTDOOR to launch it. So we've just seen good results so far, and it's really consistent and something we think that we can build on. So hopefully, this becomes the metaphor of the plan when any time you see a product come to market, this is going to be our new bar.

Got it. Makes sense. And maybe if I can ask you one more. Very interesting that changing the sales guidance, but maintaining the gross margin guidance and inventory seems under control despite the macro pressures that are out there. Just talk about the culture change of the company to be able to have that kind of discipline on gross margin, on inventory and on expenses to be able to continue to drive the business and create products like Bouncy Tee, but not sort of fall into that trap of trying to chase business or kind of do what the other guys are doing that you know is unhealthy.

Yes, 30 years in business this year and 21 of them public. So we've seen this movie before. And I think we've at least been able to build a little bit of wisdom when it comes to looking at the way we want to approach the business. And so I think we're being incredibly thoughtful with the way we're thinking about the business in general. And frankly, in the last 90 days, Reza, myself, our marketing team really got together and we looked at the spend that we had in marketing. And I just want to make sure people understand the decision to do this has nothing to do with leveraging our future. This is about investing in the brand, investing in the future. We just believe we can increase the efficacy of the products or the stories that we're putting out there. And this isn't something we're just waiting for our product pipeline to come from either. It's that the products that we already have in the pipeline, but I believe that we can be much more efficient with the spend that we have, and that works across the business. And so we are finding leverage in the business. We are finding opportunities. And this is not easy slugging. It's not like we just pick up this money. We have to work for it. And so I think you've got a committed team that knows that we're not just picking up dollar bills, but we're looking for nickels and dimes and pennies as well and just understanding what it means to run a great profitable business. So unfortunately, we saw some softening in consumer demand. We wanted to hold the line with how we're thinking about for the consumer. We did not want to push that, make sure that we have a cleaner consumer environment out there in the marketplace. But the ability for us to do that while maintaining a stronger, more -- putting more rigor into the systems and decisions that we're making. I think you'll see that it starts in marketing. It goes across the organization. And really proud of this team and the way that we've been executing against that.

Our next question comes from Sam Poser of Williams Trading.

Can you define what sportswear is because you called that out as strong, and I've got a bunch of other questions.

Sam, I would say it's a product that were intended to be worn with all the performance attributes of UA, but things in a non-playing, nonfield, noncourt, non-pitch environment.

Does that include the Bouncy Tee? And I mean how big a part of your business is that?

Yes. I mean the beauty of things, and I wish I'd include this in my response to Jay, the Bouncy Tee was a product that was clearly made, as we say, for Friday night out, you can wear it under a sport coat for Saturday morning in the gym, all the performance attributes you're looking for from Under Armour or just laying around on a Sunday on a couch. And so yes, it's something that actually walks the line, which is what we're focusing on right now beyond sportswear. It's that balance between brand marketing and product marketing. And frankly, as we get this right, you should not be able to tell the difference. And that's what I think we achieved with Bouncy Tee. And again, I think it sort of the -- sets the edge of what we expect to do with everything going forward. So when it's -- even if it's Under Armour Sportswear, we call ourselves the what to do brand. We're the brand when you say, that's a great looking top. It doesn't need a big blazing Under Armour logo for that to be the case. And someone says, "Wow, that looks great, what is it?" You say it's Under Armour. The next question from them should be, "Oh, it's Under Armour, well, what's it do?" So we want to make sure that we maintain that integrity of credibility of always being future first and making sure that innovation defines what we do, but ensuring that we bring great style to it and something that a kid can wear on a field, on a gym in a pitch, but they can also wear it out on a Friday night or to school on a Monday.

And then you talked about the SKU count reduction, the additional 25%. So where does that leave you focused on? Or what's being -- like where -- what is -- like how are you targeting the cuts? Are there certain categories that you're stepping away from or product franchises? And then secondly, is your -- is your goal this year basically to cut your inventory down and what your inventory is going to look like for the balance of the year and just have less out there of better product. So sales are down, that's the improvement in the margins. Like I don't know what promotions were or markdowns were as a percent of sales last year. But like what kind of decrease -- like what kind of full price selling are you anticipating versus the prior year that's built into your guidance?

So I'll start. I'll let Reza pick up on the inventory, and I'll come back. But -- so first of all, the reducing SKUs we're just removing weight from the system. Without being too colloquial, it is like a jenga house is making sure we have all the pieces that give us a sound foundation, but it also gives us the ability to remove excess weight. And that's what we feel like we're doing. It's a slow process. When I came back, we had an extraordinary number of SKUs. And before even stepping into the chair, the mandate was to cut 25% of SKUs. So we're pleased that we've accomplished that. And as we've gotten into the work, we see that we can go deeper. And that's how we're approaching the business right now. And again, this sort of credo that we've been continuing to say, which is selling so much more of so many less things at a much higher full retail price, that's really speaking to what we're looking for. So there is going to be some near-term trade-off, and that's part of what's reflected in our outlook. But the objective is better productivity per style, cleaner inventory, stronger sell-through and healthier margins over time. So -- and also just reducing the weight from our team. We have an excellent team, but I think we've overburdened them and we've become a bit of a cap request from accounts sometimes and things where we're just trying to find another few pieces of revenue that can build into it. So we want to remove that pressure. We want to make sure that intentionality speaks to everything we do when it comes to the brand, every product we introduced, every story that we tell and ensuring there's a red thread that not only goes to the product itself, but it carries across the globe in each of the 3 regions. And so we think that's where we can build a lot of the leverage that we can find in the business from a marketing storytelling standpoint. And we think it will just get simpler as we increase our global commonality of styles and products that it really feels like one brand instead of 3 small companies running on 3 different continents.

And with regards to inventory, let me just start with the quarter. Q1 inventory was down 3% to $1.1 billion. That's in line with the revenue decline year-over-year. We're managing inventory really, really consistently and trying to make sure that we're in concert with whatever the external demand environment is. You'll recall on the last call, we talked about inventory, and we felt that we entered the year with a very clean inventory position. Most of the composition of the inventory we have is current season with active demand on it. So the aging is in really good shape. If you're looking at it as an industry matter, what I would just highlight is that you do have some peers out there that have been clearing some inventory, and so that's leading to the promotional environment that you see in certain markets. For us, we feel really good about where we stand. We have some new product introductions coming in as well in the back half of the year. And so you should generally expect our inventory to trend with revenue. Obviously, there's some seasonality in there as you try to build up for holiday and other selling periods. So just bearing that in mind overall, you should expect as a full year matter for us to be in line with how the revenues are trending.

Then one last question...

Go ahead.

Well, I mean, the thing is that you're cutting your SKU count by 25% over the next 18 months, which means that you're going to have to work your way out of some of this current inventory that you have. And then you're bringing in new stuff, which I would assume at the beginning is less than what you're cutting. So theoretically, you don't want to play in the promotional environment, except for to clear that 25% of your inventory that you don't want to go forward with. So wouldn't that inherently bring the inventory levels down on a year-over-year basis fairly significantly just because you don't want to take too big a bet on the new product going forward as you liquidate the old stuff, that's the that's that see the change prior to in the productivity of the product before you put too much out there, which theoretically would lead for inventories on a year-over-year basis to be down more than sales as -- because of the liquidation and you're going to liquidate more than you're going to bring in initially. So wouldn't that inherently drive the inventories down more than in line with the sales trend?

Yes. Sam, so let me take the first part, and I'll let Reza hop on. But I think you're helping us get to what -- I think one of the broader themes that we really wanted to convey today is that, yes, I'm really proud of the innovation pipeline that's been building up over the last couple of years. But I want to be clear is that while we have several new products we're excited to bring to market over the next 6 and 12 months, especially in things we have high confidence in, we're already making a lot of really good product. I just don't think we've done a good enough job selling it. And so as we cut SKUs, we're talking about cutting the less productive SKUs and going deeper and longer in the products that actually work for us, making sure that we're in stock, making sure that we're in inventory and probably most importantly, ensuring that we actually tell a story about the products that we're building. I think that's where we've fallen down. Our dry pant at $80 is a phenomenal product, but I don't know if I've ever seen anybody explain actually what the technical benefits of it are or why someone aware or how great it looks from a style standpoint.

Yes. I understand the question in terms of how you're looking at it, but you have to realize when we set the target, we were saying over 18 months. The natural sales cycle that we have on these SKUs will allow us to work through that inventory. And if you're looking at it overall, we are saying that we're looking at bringing in more full-price product, but we expect volumes to be backing that. So if you're looking at it in terms of an absolute number, we're expecting that those new full-price products that are going to be coming in, along with the natural cadence of the other purchasing that we have will offset the nonproductive or less productive SKUs that we have. So there is a tail in terms of the SKUs that we have, where there's just a lot of stuff that we're looking at cutting off that long tail and working through that in a natural course. So it's not that you have to get rid of it all at once. You can do that in the natural sales cycle. But as the new purchases come in that offset that, those will individually kind of build at a bigger level and then you're selling to Kevin's point, so much more, so much less.

The next question comes from Bob Drbul of BTIG.

Just a couple of questions, if I could. I guess the first one, when you think about the outlook today versus what you gave us 90 days, specifically on the revenue side, so from like slightly down to down mid-single, can you just give us some buckets around the changes during that period just in the dollars or the percentages or something along those lines would be helpful. I guess the second question, just higher level, Kevin, when you think about marketing overall, like what is the brand focused on today in marketing specifically?

Thanks, Bob. Let me take a cut at this. So number one, I want to be clear that we're not happy about having to modify our top line, but we do think it's a responsible move as we just look at the brand health and what we're doing is that we're not just building a company, we are building a brand. And as we negotiate through the turnaround, we're facing a pretty tough consumer demand backdrop. And in spite of that, we're making good progress in the business and especially the brand. I'm proud of the team and how our ability to be able to demonstrate our management agility right now by maintaining the full year profitability outlook, though, because this is not a sign of leveraging our future. And I've said that a few times because I want to make sure that message is heard. We can responsibly maintain our OI while being more surgical with how we deploy the SG&A dollars, specifically within marketing. But what we saw was as we came out of the beginning of the year, we saw that traffic deteriorated more than expected in the U.S. and APAC, specifically around mid- to late May, and the traffic trends just precipitously got weaker across retail and e-com. So the outlook reflects that current demand conditions and I think more importantly, the disciplined marketplace management we're going to take toward it. We also saw some competitive discounting happening and more than some, particularly over in Europe and the U.K., especially. And while not perfect, we did hold the line on broader promotions ourselves. And so making sure that we can do this, we will be changing the tires as we're driving. And so I want people to understand as we think about that. It's a theme you'll consistently hear from us. What we're doing about it is we're bringing a balanced approach, intentionality, reducing promotions while increasing full price product exposure with UA innovation and compelling story. That means, I think on our web, we've been promotional too often, ensuring that we're highlighting those full-price products, creating a new environment for the consumer to be able to see us with trading them out of being a promotion-only buyer for our existing consumers, while we hunt for new consumers at the same time. So we're not going to chase the market down. We've got great confidence in the product pipeline that we're building, and we're doing a better job articulating why so many of our current products deserve to trade at full price. So the bottom line, the outlook revenue change, but the strategy is not. We're balancing near-term revenue opportunities with actions that will strengthen the long-term brand health and focus on that. And yes, we get it. As we say all of this, there are brands who are clearly winning in this environment. So some of this sits on us, but we believe the work we're doing right now positions us for long-term premium, which our definition of is selling at full price. That's our launch and our major target. From a marketing standpoint, I got to tell you is I think that we can improve the size of the red thread that's built at Under Armour, meaning consistency across the regions, the way that we show up in the marketplace, the way that we show up amongst -- across categories, whether it's running training or sportswear, team sports, whatever is important. But I am really proud of our team. The marketing stable, and I will call them that, that we've assembled is pretty impressive from Sharon's win back in April for the second time of being a repeat champion in Boston, demonstrates our team can build Formula 1 race cars for underfoot. But now we've got to commercialize that velocity platform to actual price points. Again, on the marketing, and I'm going to combine marketing and sports marketing here, too, but we showed up with 5 starters at MLB All-Star weekend in Philadelphia, wearing UA cleats and gloves with Bryce Harper hosting in Philly. The entertainment side, the Gunna Parker McCollum and Bouncy Tee, the BOYNEXTDOOR coming from K-Pop. we're demonstrating the entertainment side of our business. From a collab front, we had in the last several months, including Paris Fashion Week, we had Marine Serre, Feng Chen Wang as well as we had our collab with 424 when all the global footballers from around the world showed up for World Cup. We had our 9 athletes were wearing UA Leather. So we're demonstrating we've got some range there. Marina Mabrey and the WMB All-Star game, our Dodge Hellcat collab that saw product blow out. And we've got all this on our Investor Relations side as well because I do think we're showing up in a very important way. We just want to make sure it's more coordinated. The rivalry, Francois Carnaud, wearing HeatGear for when it's hot. The last 2 goals in the World Cup were scored by UA boots. Pedro Porro for Spain and the semifinal over France and then Ferran Torres scoring the only goal in the final. We followed that up with Fern starring in our restless campaign that launched in Europe immediately following World Cup with what footballers do in the off-season. That was shopped months before, anticipating the hype for Ferra, and I think our team deserves an enormous amount of credit there. And then, of course, all that, just as we get ready heading into fall with our college teams, including Notre Dame, taking the American Football Field, a brand-new collegiate partnership with Georgia Tech that kicks off in just a few weeks and then back on field with the NFL at official gleet and glove supplier. So we'll continue to be visible and we'll win with this consumer and continue to bring them to Under Armour. But I'm proud of the way our marketing is working. It's not -- our marketing isn't broken. We just need to get it more alignment with the product that we're bringing to market and making sure that these moments of winning on pitch, on court, on the field, et cetera, they're converting into commercial sales force. So the brand is playing offense. We're excited about the marketing is about to kick off in another 3, 4 weeks here. But yes, if you get a chance, please take a look at the Investor Relations site.

The next question comes from Brooke Roach of Goldman Sachs.

I was hoping to get a little bit more color on your updated outlook in North America. How much of the pullback in revenues in the second quarter is strategic and proactive? And how much of this is a reflection of the macro and traffic trend that you're seeing quarter-to-date? Have you seen any cancellations in wholesale orders? And then maybe stepping back, is that back half improvement that you're forecasting a function of a change in the proactive and strategic pullbacks? Is it a function of stronger confidence in new product launches? Or are you assuming a change in macro trend in the back half?

Why don't I take that one, Kevin. So in terms of where North America is right now and if you look at the numbers that we're forecasting for Q2, the trends that we're seeing from the macro level consumer are working their way into Q2 specifically. So that sort of trend is continuing right now. So that's where we set the expectation for the next quarter. As we look at the back half of the year, we do have some product launches that we've alluded to that are coming. The -- from a wholesale standpoint, those -- the early sell-in for that is productive in terms of what we're seeing. So we are expecting improvement versus the first half run rate in North America because of these product launches, some key retail partner initiatives that we have, which Kevin talked about as well with DICK'S and others on the script and continued marketplace discipline. I do want to re-highlight that as we look at the revenue environment, we're being very disciplined around not chasing the market down in an overly promotional environment. So we are maintaining our gross margin outlook for that reason. We want to make sure that we're continuing to elevate the brand as the year goes on. And so as we look at the back half, we have to balance that. And we do expect that the new product launches that we have will bear fruit in terms of helping us premiumize as well. But that's how we look at it in terms of Q2 versus the back half of the year.

Great. And then just one follow-up on the SG&A spend. That control is really nice to see. Can you quantify some of those buckets of savings versus your prior outlook? How much is from marketing? And how much needs to be reintroduced into the cost structure as we look into next year, such as incentive comp or other drivers?

Yes, we are managing SG&A very, very tightly. But -- and this is a very big but, we are making the investments we need to do to continue to premiumize the brand. So when you're seeing the savings coming through, it's just showing a lot greater operational discipline. Let's start with the fact that we've had a restructuring plan, which is bearing fruit. So you have run rate savings that work their way into this year because of that. We've taken additional actions in Q1 as well. We talked about Portland rationalization on the call just now. So as I think about the different buckets of SG&A, if I'm working my way down to operating income, the first thing that I'll start with is, obviously, there's a revenue decline that we're talking about, but we are maintaining our view on gross margin. And then when you get over to SG&A, we're looking at the different -- there's a variable component of it that will obviously naturally flex that will come down. And then in terms of the fixed SG&A components of it, there's compensation expense, which we're managing very, very tightly right now coming into the year as well as -- and that will bear fruit into next year as well. And then the marketing component of it, it will still be within the range that we indicated on the previous call of 10% to 11%. But as you're looking at it, because you're looking at the revenue environment coming down as well as you apply that against that, that will naturally flex down as well, even if you're on the lower end of that range. But as Kevin said, and I do want to just reemphasize this point, even the marketing spend, as we've gone through it, if we're looking at what is actually reaching ultimate consumers and eyeballs, we are being very disciplined around making sure that we don't end up cutting that portion of it. There are other line items in marketing that we're looking at in terms of some of the commissions that we're paying in terms of other things that we could just simply be a lot smarter around, and that's where we're focused.

The next question comes from Simeon Siegel of Guggenheim Partners.

This is John Elias on for Simeon. I'm actually wearing the HBO right now, so please don't cut that SKU out. My question is on your outlook, which holds the operating income steady even with revenue being revised down. Can you just help us understand what's driving that?

Yes. I mean we just talked about the SG&A component of it, which obviously, as you're looking at the outlook, again, just to go through the different line items of it. Gross margin is remaining the same as what we said previously. So that line item in terms of the percentage, we're maintaining the guidance on that. As I look at SG&A, we are basically saying that we're going to do better than what we said on the last call in terms of SG&A as a percentage of sales. So that helps offset some of it. The other thing is, bear in mind, we overdelivered on Q1. And so if you bake that into the fact that you're looking at the rest of the year, we delivered 52% versus a range when we were saying it was 30% to 40%. And so that overdeliverance obviously helps us in terms of building some cushion for the remainder of the year as well.

Our next question comes from Laurent Vasilescu of BNP Paribas.

Kevin, I wanted to follow up. I thought it was very helpful color that you provided on traffic softening since May. I think you called out to Bob and the audience that you really called out Europe. But I wanted to follow up on North America and China commentary. Curious to know what you're seeing in those 2 markets. Obviously, North America is easier to tell what's happening here. But are the traffic trends getting worse over the last 2 months? And if that's the case, how would you unpack it for both North America and China?

Yes. Thank you, Laurent. Yes, the promotional environment in North America, first of all, traffic, the backdrop, as I talked about earlier, we have seen it. I don't know if we're ready to call stabilize. It's -- we're working through the environment right now. And so I think we have a pretty good understanding of what that's going to look like going forward, but we're just leaving ourselves the optionality to make sure that we can be reactive. The marketplace has become increasingly promotional, especially where our peers are clearing inventory, et cetera. We still think there's a bit of consumer uncertainty, especially at some of the lower ends where we sort of find the middle income places, that's where the traffic challenges have really been picking up. In DTC, we participated somewhat more than planned early in Q1 to address the soft traffic, but we pulled back because buying short-term traffic through deeper discounts, it wasn't going to help us build sustainable demand. So we want to be really thoughtful, but that's why we're putting the emphasis on marketing. And when I say that, it's not a wishful hope. It's really a belief that we can be thoughtful by not just performance marketing, but making sure it's something that will ring true for us. In APAC, for us, it remains early in the recovery. And again, I talk about global continuity or commonality amongst the products and the SKUs we're selling so we can start leveraging some of the overall storytelling that we're putting together with them. But we've seen some softness in coming out of particularly China and Southeast Asia have been the 2 places between the U.S., APAC or China and Southeast Asia is where we've seen a lot of the sort of hesitation from consumers. So the e-commerce with less promotions, better visuals and content, we're focused on retail elevation, inventory management is something that you want to be smart about right now. but we're really shifting from chasing revenue to real disciplined marketplace execution and stronger long-term brand health. So we've had great leadership in China between Simon and our Head of China as well is Carol Chen. She's an industry pro and just gets it. So I think we've got the right eyes on the business right now. We think we can -- we think we're doing a pretty good job managing through any of the headwinds or the backdrop that we're seeing. But there's work to be done. We think we can impact that a bit with our doing better storytelling.

Very helpful, Kevin. And then, Reza, I just wanted to follow up on the revised annual guide with regards to revenues and gross margins. I recognize you're not ready to guide for 3Q. But for the audience, any way you can kind of shape the second half of the year in terms of revenues and gross margins? Should we assume that they're kind of somewhat equal? Or are there dynamics at play with the order books that would make it more 3Q or 4Q weighted? Any color there would be very helpful for the audience.

Thanks, Laurent. If you do the math, obviously, we're not giving guidance for Q3 and Q4 at this stage. But if you just do the math based on what you're seeing in the first half of the year versus the second half, there is a slight difference between the 2. So they're not completely equally weighted, but it's not like you have a massive hockey stick or anything like that, that's happening on the back half on the revenue line. In terms of gross margins, I'm just going to repeat it again that we are trying to basically maintain discipline. On the last call, we talked about price increases that are going in. That should have some offset and improvement on the back half of the year in terms of gross margins as we look at that. And then the SG&A, we're just managing it super, super tight. And so some of it is marketing, as we talked about, but it's every line item. I mean we really are -- you have to bear in mind when we're looking at a $305 million restructuring plan, that does have run rate benefits that work their way into it. So that's what's allowing us to maintain our view on operating income.

The next question comes from Brian Nagel of Oppenheimer.

First, it's definitely a follow-up. But as you just look at the sales -- the weaker demand trajectory that you're telegraphing here, are you seeing that across products? I mean the point I'm trying to -- you've been introducing new products. I mean is the demand for those newer products also weaker in this environment? Or is it the weakness more relegated to the kind of legacy type products?

Yes. Let me start, Brian. Thank you. we're just beginning to roll out some of the product innovations. I think if we want to talk about progress, a year, let alone 6 months ago, we were talking about a hat and a backpack, the ability for us to add apparel to that narrative. And what you'll hear in the coming quarters too is where we start talking about footwear that can be premium. The way we want to think about it, though, is it's not just we need more reasons for the consumer to want to shop Under Armour. We need more reasons for them to want to walk in our store, walk to our section of a retail store. And so that's going to come from new innovation. But again, this isn't just us waiting for the pipeline. I believe that we do have great product right now. I believe that in more cases than not, we've been transacting with product and product quality that is significantly in a product-to-value ratio, significantly favoring the product that we're building. So I believe we can command higher prices. We just have to explain that to the consumer. And so that's why you continue to hear this emphasis on storytelling and what we're doing to articulate that. We're going to do a better job, again, using Bouncy Tee as sort of setting the edge for us as a metaphor of the way that we see bringing a product to market with that kind of intentionality. And that will drive traffic. It's driving traffic to our site. It's bringing people to like things like the Bouncy continue to be our #1 most repeatable products. So someone comes and buys one, they come back a week later and buy 3 more. So we want to make sure that we're creating that kind of environment. The world doesn't need another capable apparel and footwear manufacturer. The world needs a hope and a dream to feel something from the products, and that's where the Under Armour brand comes in. So we're going to deliver more of that.

That's helpful. And then a follow-up to that. So I just want to make sure I understand this correctly. So with regard to marketing spend through the, I guess, the balance of the current year, are you pulling back on marketing spend? Is it a reallocation? How should we think about just that, I guess, that spend dynamic?

So what we are looking at is we have said that we're going to be within a range of 10% to 11% for the year. So that range still holds, but you should expect to be at the lower end of that range by the time we get to the end of the year. So -- and then we're also looking at the revenue guidance coming down. So basically, if you apply those 2 metrics together, it does mean that it's a reduction in absolute dollars of marketing that are going to be working their way into SG&A. So yes. But the component parts of that, if you look at marketing, it includes things like sports marketing assets, it includes production costs, includes commissions that you're paying to agencies and then you have performance marketing, et cetera. We're very, very focused on that reduction coming from those activities that just get us to be much more efficient. And there is a lot of room with a $0.5 billion budget to be able to do that. And so we're looking at it and saying, what are those initiatives that are going to drive full price sales? What are those brand-enhancing initiatives, and we're going to continue to invest behind those. And there's a lot of campaigns that are coming in the back half of the year. So we feel very confident that we're not impacting the marketing spend that's really driving revenues, but we're just being much more efficient in terms of how we go to market.

Brian, I was just going to add, if you just think about it colloquially, if we ask you how much you thought we spent in marketing, I'm not sure the number you would come up with would be $0.5 billion. So we want to reconcile that feeling with the reality of how we show up at retail in the marketplace, et cetera. So our teams have done great jobs. We're just a 30-year-old business. We're making sure that we're looking at everything. And so that's why we feel that we have the opportunity. We're going to go in deeper and make sure that it's not just a click down, but it's going 2 and 3 clicks down, zero-based budgeting, all that, the usual things. But we can get sharper on our -- what we're taking with production and a few other things we can leverage that across the regions. And so we don't feel like this is a step back in marketing. We think like it's just sharpening our pencil.

Our next question comes from Peter McGoldrick of Stifel.

I wanted to ask on the capital structure. You're now clean of the $600 million notes. Can you share your plans for cash generation of the business to fund operations and planned reliance on the updated revolver? And then also, have you banked the IEEPA refund already?

Why don't I take that, Kevin. So the IEEPA refunds have come in. So if you're looking at what we reported in Q1, the majority of those have come in, and you'll see there's a little bit more that's going to work its way into Q2, but most of the IEEPA refunds have already been received. You'll see it on the cash on the balance sheet when you look at the Q. As we're thinking about the capital structure overall, we feel really, really good about our liquidity position. We talked about the recent amendment that we did with the banks as well. That's just basically taking advantage of better market terms. So I think overall, in terms of balance sheet liquidity, we feel that we're in a very strong position to run the business. We continue to be very focused on net working capital as well. We've already talked about inventory, et cetera. On the last call, we talked about just general CapEx. So if you're thinking about kind of free cash flow generation of the business, we feel very good about the continued progress we're doing there. We're forecasting that we're going to be free cash flow positive this year. Obviously, the IEEPA tariff refunds helped that. And then it comes to the question of really capital allocation going forward. I would tell you that our primary focus is investing behind the business. We've talked a lot about marketing. That's probably the #1 area we want to make sure that we're investing behind. Innovation has always been a focus, so nothing has really changed there, but just the efficacy of marketing is probably the biggest one. There's no M&A on the horizon. That's just not in the DNA of where we need to be, et cetera. So if that was kind of the follow-up question, I'll just proactively take that off the table as well.

I appreciate that. I'll go in a different direction on the follow-up. I wanted to ask about the environment in EMEA and Europe. As we think about that being promotional, but improving as the year progresses, can you share how you're servicing the marketplace at wholesale and then your promotional stance in your own DTC?

Yes. There's a lot happening in Europe, and it's been a real stalwart for us is that we've actually taken a lot of lessons of success that we've taken from Europe and applied across the globe is how we're thinking about it right now. Our strategy has been clear. And so I think that's led to some of the positive growth that we've had there. But what we're seeing is we're definitely seeing a challenged consumer, particularly in the U.K. right now. It's a very price-sensitive consumer that we're finding and how we show up in the product that we're building for them. We feel like we can just be a bit sharper. So we don't want to chase that bottom, which is somewhat reflected in the revenue outlook caution that we have. But Europe is a very complicated place. We've got terrific partners there between the Sports Direct, the JDs, the El Corte Inglés and glasses. Our wholesale partnerships are critical for us there. But it's been a tough sled the last 6 months as competitors are very aggressive, which has increased the promotional environment. So we're playing the long game. We're not chasing, speaks into why we're being cautious with the revenue, but we're protecting and growing the brand as a priority. So it's things where we think we can be better. The market is just a bit tough. So that's what's giving and again, pushing towards some of the caution.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Kevin Plank for any closing remarks.

Thank you, operator. So just to be clear, this is a turnaround, and there's never a straight line, but I just want to make sure that there's no mistake. We are making progress. It starts with product, and we know how to do this. But frankly, as you've heard us emphasize about marketing, a T-shirt or a shoe without a story, it's just a T-shirt or a shoe. So we're focusing on our storytelling. The success that we've seen with things like Bouncy, that gives us great positive that the consumer is ready to return to Under Armour to make sure that they will pay full price for us and we give them that proposition and tell them the story, give them the innovation and give them great style that has the versatility that I think only an Under Armour can bring. So I'm proud of the way that our teams are showing up in moments that matter, winning marathons and World Cups, but we need to translate that into more commercial success, especially as it relates to footwear. The removing SKUs is something we're really proud of. The additional SKUs, we believe will add weight. It's not an easy thing to do. It gives our sales team some pause for sure. But we just think we can be more clear. We can be more intentional with the products that we're selling, and that's what we plan on doing. And that SKU reduction, it leads us to putting this architecture of good, better, best of being clear about it. And that doesn't always mean just taking SKUs out, too. We're just thinking about the business. We're building a brand, not just a company. And so the architecture of how we show up through good, better and best products, it's not always eliminating. In some instances, we'll have 9 or 10 or 12 products for one particular category. In other instance, we see opportunity in making better and best for things that are really close to us. So I think you'll see us fill this architecture out that isn't just about cutting, but we will be adding in things that can be meaningful for the business. But from the day I walked into by the end of '28, we're forecasting roughly a 40% overall plus overall drop in SKUs, which is something we're really proud of. If I had to end it just for our team listening as well, execution is our opportunity. It's our #1 priority, creating a leaner company and ensuring accountability. We're getting our footing. We're ready to play offense. And we understand today isn't ideal. We're exactly where we want to be, but we really like the direction where we're going. So with that, thank you, operator, and everyone, have a good day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.