Under Armour, Inc. :UA-US: Earnings Analysis: Q1, 2017 By the Numbers : May 11, 2017

Under Armour, Inc. reports financial results for the quarter ended March 31, 2017.


  • Summary numbers: Revenues of USD 1,117.33 million, Net Earnings of USD -2.27 million.
  • Gross margins narrowed from 45.96% to 45.31% compared to the same period last year, operating (EBITDA) margins now 4.42% from 6.47%.
  • Change in operating cash flow of 80.06% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-03-31 2016-12-31 2016-09-30 2016-06-30 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 1117.33 1308.13 1471.57 1000.78 1047.7
Revenue Growth (%YOY) 6.65 11.74 22.21 27.72 30.16
Earnings (mil) -2.27 104.91 128.23 -52.66 19.18
Earnings Growth (%YOY) -111.85 -0.66 27.62 -456.6 63.54
Net Margin (%) -0.2 8.02 8.71 -5.26 1.83
EPS -0.01 0.23 0.29 -0.12 0.04
Return on Equity (%) -0.45 21.23 27.77 -11.99 4.5
Return on Assets (%) -0.25 11.45 14.42 -6.34 2.52

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, UA-US‘s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if UA-US‘s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by -14.59% and earnings by -102.17% compared to the previous period.

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 45.96% to 45.31%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 6.47% to 4.42% in this time frame. For comparison, gross margins were 44.84% and EBITDA margins were 15.76% in the previous period.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

UA-US‘s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 104.09 days, compared to last year’s level of 94.80 days.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

UA-US‘s year-on-year change in operating cash flow of 80.06% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.


The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 3.42% to 0.75% and (2) one-time items that contributed to a decrease in pretax margins from 3.15% to 0.20%

EBIT Margin History
PreTax Margin History

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Company Profile

Under Armour, Inc. engages in the developing, marketing and distributing of branded performance apparel, footwear and accessories for men, women and youth. It operates through the following geographical segments: North America, Latin America, Europe, the Middle East, and Africa. The company was founded by Kevin A. Plank in 1996 and is headquartered in Baltimore, MD.

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