Under Armour, Inc.

determine how to best prioritize investments to the areas of highest return and deprioritize areas that may not be as productive for the brand. In this respect, we are assessing the productivity of SKUs, styles, categories, sports marketing assets, and distribution channels to determine the most optimal path forward. Back to the quarter, we have a lot of newness to be excited about this fall, holiday season, and into next year. Starting with the most innovative shoe thus far in the Curry portfolio, the Curry 11 Future Curry dropped on October 13th. The first iteration of the Curry 11 speaks to Steffen's desire to inspire the next generation of players. It features UA warp upper technology and dual-density UA flow cushioning for premium comfort and control to support his demanding dynamic style of play. As we continue to grow the Curry brand, we are excited to bring more talent under the Curry umbrella, including our recent signing of rising star Darren Fox. Marking the first time an active NBA athlete brand has added an active NBA player to the portfolio, we're working on a Curry brand signature Darren shoe that will embody what he brings to the game. Turning to our UA Slip Speed platform, we launched Slip Speed Youth footwear a few weeks ago. Scaled down so all ages can enjoy the versatility of this industry-leading innovation, Slip Speed Youth is only available in our direct channels and Dick's Sporting Goods. Next up for the platform will be a Curry-Bruceley collab due out later this month, and then our Slip Speed running shoe in February, just in time for the start of the 2024 running season. Some more drops? more energy, and of course, more versatility to come. Rounding out our product highlights, in our sports style and women's businesses, we launched several better and best offerings for her, including premium products from head to toe that will keep her warm and comfortable, from the locker room and field to out on the town after the big game. Here, it's all about premium executions of fit, fabric, and finish infused with the swagger and style our athletes desire. Starting on top, Our unstoppable fleece collection has all-day comfort and four-way stretch material with just enough warmth to keep her ready for anything. On the bottom, our meridian cold-weather leggings take our super soft and stretchy performance knit fabric to the next level by adding extra thickness for warmth. Her outfit is complete with our retro sportswear-inspired Forge 96 shoes, the ultimate expression of comfort and style. Wrapping up our product update, although we know it will take time for our focus on elevated design to deliver expanded better and best level collections, we are not standing still. While re-merchandising existing products, we are selectively infusing limited run releases and capsules with an expectation that greater critical mass will arrive towards the end of next year. This brings me to our third strategic priority, which is to drive U.S. sales. During the second quarter, our North American business was down 2%, which was in line with our expectations. However, when we look towards the balance of the year, we expect a further contraction in North America, mainly due to ongoing pressures in our wholesale business, which have gotten tougher since our last call. Several forces are at play here, including inflation and consumer confidence, normalizing inventory levels amid still broad promotions, and overall softness in our future wholesale order book. As a result, we lowered our fiscal 24 revenue outlook to reflect these challenges. Amid these conditions, we are, however, making progress on our premium wholesale distribution strategy in North America. Leveraging the strength of key footwear franchises, including Curry, our mall penetration is expected to be up more than 40% by the end of fiscal 24. This is an early win, and I'm confident that as we drive brand heat and deliver better products, we will continue to gain premium shelf space. Shifting to our direct-to-consumer business, our U.S. loyalty program, UA Rewards, which went live in late July, has exceeded our initial expectations. In October, we made the program available in our retail stores, adding to our momentum. Having surpassed 1 million members in our first few months, we see more robust engagement amongst our members. So far, UA Rewards members are almost twice as likely to make a repeat purchase and return to the brand within 90 days, so early points on the board in building greater brand love and loyalty. As a cornerstone of our consumer engagement strategy, we are confident that UA Rewards will inspire better sales conversion as we continue to scale the program. In concert with our loyalty program, we are distorting resources to our digital platforms, including our website and our mobile app. Most of our consumers start their shopping journey on social media, our website, and our app. So it's critical that we improve this experience. Within this context, our teams are working hard to accelerate our e-commerce business by enhancing our search and browse capabilities, upgrading our size and fit guides, adding athlete chop-the-look sections, and increasing mobile speed, all enhancements that we know will deliver a more premium experience. I understand what a world-class digital offering looks like, and this team is strengthening the foundation for our long-term success. Turning to our international business, we continue to maintain momentum in EMEA and APAC. EMEA was our highest growth region during the quarter, reflecting solid growth in our DTC and wholesale channels. In July, we opened our fourth London brand house on Oxford Street, marking an exciting milestone as we expand our presence in the UK and drive greater brand affinity across this important market. Our APEC business also grew in the second quarter, driven by solid performances in our wholesale and DTC channels. Over a broad array of different countries and cultures, our focus is on customizing our product and marketing strategies with the local athlete in mind. and leveraging the success of our loyalty program. With 7.5 million members in our APAC loyalty program, we're now piloting franchise partner implementation, and our members are spending almost 30% more than non-members. Encouragingly, there are many learnings that we can leverage from APAC to make our U.S. loyalty program even better. In summary, at the halfway mark of fiscal 24, we are progressing against our PTH3 priorities. Acknowledging that this is a multi-year journey with much work ahead of us, most immediately we are focused on operational efficiencies and controlling costs to ensure we remain responsible stewards of the business. With our continued strategic evolution and a renewed mindset, I'm confident that we are building a stronger Under Armour. With brand T, more premium product offerings to inspire athletes worldwide, and ultimately a more robust, profitable growth story in the long term. With that, I will hand it over to Dave.

Thanks, Stephanie. Diving right in, our second quarter revenue was flat versus the prior year at $1.6 billion, which was in line with our outlook. Excluding the impact of foreign currency, revenue was down 1%. On a regional basis, North American revenue declined by 2%, coming in at $991 million. which was in line with our expectations. Wholesale was down at about the same rate due to challenges in our full price business, partially offset by growth related to inventory management strategies, which included normalization of our off-price channel mix from low levels last year. Our North American DTC business was down slightly during the quarter. EMEA revenue was up 9% to $287 million, or up 4% on a currency-neutral basis. This was driven by solid growth in our DTC business related to new store openings and a strong underlying comp business. Our EMEA wholesale business was also up during the quarter. APAC revenue was up 3% to $232 million, or up 7% on a currency-neutral basis. Despite the dynamic environment, we saw growth in our wholesale and DTC channels. China was a leading contributor to second quarter growth. And finally, our Latin American business was down 8% to $54 million in the quarter, or down 19% on a currency neutral basis due to the timing of distributor orders. From a channel perspective, wholesale revenue was down 1% to $940 million, with decreases in our distributor business partially offset by higher sales to the off-price channel. Our full-price business was flat compared to the prior year. Direct consumer revenue increased by 3% to $596 million due to a 4% increase in our owned and operated store revenue and a 2% increase in our e-commerce business. And licensing revenue decreased 14% in the quarter to $29 million, driven by declines in our North American and Japanese licensee partners. By product type, apparel revenue was up 3%, driven primarily by growth in our train and golf businesses. Following several quarters of solid growth, footwear was down 7%, driven primarily by softness in our team sports and run categories. Within team sports, we did see strong growth in basketball. As a reminder, during the second quarter of fiscal 23, a significant amount of footwear products that were previously delayed due to COVID-related factory constraints made their way into the wholesale channel. For the second half of fiscal 24, we expect footwear to be relatively flat, as we comp against last year's 26% growth in the second half. And finally, our accessories business was up 3%. Moving down the P&L, gross margin was up 260 basis points to 48% during the second quarter, driven by approximately 410 basis points of supply chain benefits, mainly due to lower freight costs. These tailwinds were better than our previous expectation and were responsible for most of the overdrive on gross margin. These benefits were partially offset by 120 basis points of unfavorable pricing due to deeper discounts in our sales to the off-price channel and our proactive strategy to reduce inventory through our factory houses, and about 20 basis points of unfavorable channel mix related to a higher percentage of off-price sales. In the second quarter, SG&A expenses were up 2% to $606 million, driven by higher marketing costs. Next, operating income was $146 million, which was above our outlook of $115 to $135 million. After tax, we realized net income of $110 million, or 24 cents of diluted earnings per share, coming in above our outlook of 18 to 21 cents for the second quarter. Now, moving on to the balance sheet. At the end of the second quarter, our inventory was up 6% to $1.1 billion. This was in line with our outlook, and as a reminder, we anticipate consecutive declines in Q3 and Q4 to end the year down at a mid to high teen percentage rate, or about $1 billion. As our levels normalize, we feel very good about the quality and composition of the inventory we have on hand. Rounding out the quarter, our cash and cash equivalents were $656 million, and we had no borrowings under our $1.1 billion revolving credit facility. And finally, we repurchased $50 million of Class C common stock during the second quarter, thus retiring 7.6 million previously outstanding shares. Under our two-year $500 million program, we have repurchased $475 million of or about 42.5 million shares of Class C stock. Next, let's turn to our fiscal 24 outlook. As Stephanie mentioned, several pressures impacting our North American business have persisted longer and are tougher since our last call. The macroeconomic environment remains uncertain, with continued inflation, mixed consumer confidence, and the effects of wholesale channel destocking. having led to softness in our future order books. And while we're not seeing significant cancellations, we don't anticipate as many at-once or automatic replenishment orders as initially planned, so we've revised our full-year outlook expectations. Accordingly, we now expect revenue to be down 2% to 4% versus our prior outlook of flat to up slightly. Looking down into our full-year revenue outlook, we're now expecting North America revenue to be down 5% to 7% versus the previous expectation of down 3% to 4%. And there is no change to the expectation that our international business should be up at a low double digit rate. Next, given lower freight and product costs, we now expect gross margin to be up 100 to 125 basis points versus our previous expectation of up 25 to 75 basis points. Moving to SG&A, we now expect our expenses to be flat to down slightly versus our prior outlook of flat to up slightly. We remain committed to ensuring our investment dollars are optimized to the areas with the highest returns while proactively identifying areas to manage expenses appropriately. That said, our operating income outlook of $310 to $330 million and diluted earnings per share of 47 to 51 cents remain unchanged. Turning to color on the second half of fiscal 24, we anticipate revenue to decline at a mid single digit rate in the third quarter due to softer wholesale orders in North America, partially offset by continued growth in our DTC business. This implies that our fourth quarter revenue will be down about three to 5% versus the prior year. Next, we expect gross margin to be flat to up slightly in the third quarter. And as a reminder, this is the smallest quarterly gross margin improvement this year due to anticipated actions to manage our inventory down further. As we finish the year, we expect an expansion of around 200 basis points in the fourth quarter due to supply chain benefits from product costs and an easy comparison related to elevated promotions in last year's fourth quarter. Bringing this to the bottom line, we expect third quarter operating income to reach approximately 65 to 75 million and nine cents to 11 cents of diluted earnings per share. This implies a fourth quarter operating income of about 75 to 85 million and 12 cents to 14 cents of diluted earnings per share. To wrap it up, Thanks to the outstanding efforts of our team, we are progressing on our PTH3 priorities and at the same time taking a balanced approach to mitigate near-term pressures. We are relentlessly focused on driving brand heat and delivering elevated design and products while driving operational efficiencies and controlling costs. We are confident this will foster sustainable, profitable growth over the long term. With that, I'll return it to the operator so we can take your questions. Thank you.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star then 2. At this time, we'll pause momentarily to assemble our roster. Our first question will come from Jay Sol with UBS. You may now go ahead.