1.
Team Members
Brandon Carlson
Qiongxi (Michelle) Luo
Aditi Mishra
Panchaya Pimprapoat
Xiaochen (Ariel) Song
Under Armour, Inc.

2.
Company Overview
Industry:
Sports Apparel and Equipment
Founded:
1996, Baltimore, Maryland
CEO:
Kevin Plank
IPO:
2005 (UA)
Market Cap:
$18.4 Billion (as of Dec 3, 2015)

3.
Major Milestones
Under Armour was
founded as
an athletic
apparel company
New headquarter
and warehouse
in Baltimore
Entered athletic
footwear market
IPO with
revenue $281M
Launched
women's line
$1B
revenue

4.
Consecutive Years of Revenue Growth
$10B
$20B
$30B
$40B
(Founded)
Source: UA Investor Day

5.
Celebrity Endorsement

6.
Company Overview
Source: 2014 10K

7.
Revenue Exposure by Country
Source: FactSet as of October 22, 2015
Trailing Twelve Month Revenue: $3.7B
%
%
%
%

8.
Global Expansion
226 stores
11 Countries
1.1 M SQ FT
1000+ stores
40+ Countries
3M+ SQ FT
YE 2014
62%
North America
38%
International
YE 2018
20%
North America
80%
International

9.
Major Changes
Acquisitions
Change in
management
- MapMyFitness [Dec 2013]
- Endomondo [Jan 2015]
- MyFitnessPal [Feb 2015]
- CFO/COO, Brad
Dickerson to step down in
Feb 2016
Automated
Manufacturing
- “Project Glory”
- Physical space in Baltimore
- Reduce human touches
by up to 30%
- Improved supply chain

10.
Connected Fitness Platform

11.
INDUSTRY
&
COMPETITIVE ANALYSIS

12.
Global Sports and Apparel Industry
Source: Statista
$132B $135B
$141B $146B
$152B
$158B
$165B
$171B
Projected Industry in Billions

13.
Athletic and Sporting Goods in the US
5 Year Expected Growth
Revenue expected to increase at an annualized rate of 0.6% to $9.3B
Key information:
● Highly competitive and fragmented with many brands competing
● Many mergers and acquisitions over recent years
● Increasing demand for versatile wear with wider functionality
● More health-conscious and older demographics
● Women = strong consumer demographic
● More collaboration between sports and fashion industry
Major Market Segment 2015
Total volume: $9.1B
Source: IBISWorld, Statista

14.
Competitive Landscape
Source: Yahoo Finance, FactSet
Years as Public Company
0 5 10 15 20 25 30 35 40 45
Nike
Adidas
Lululemon
V.F. Corporation
Under Armour
Columbia Sportswear
$111.3B
$27.2B
$3.2B
$18.4B
$6.9B
$40.0
$35.0
$30.0
$25.0
$20.0
$15.0
$10.0
$5.0
$0.0
LTMRevenueinBillions
$19.6B

15.
Performance Comparison (IPO Index)
Under Armour
Performance of a $100 Investment at IPO

16.
SWOT Analysis
•Focus on innovation
•Strong financial performance
•Growing product portfolio
•Top-profile endorsement
•Highly visible marketing
campaigns
•Revenue source is heavily
depended on North America
•Outsourced manufacturing
- little control
•International expansion
•Athletic footwear market
•Connected fitness
•Project Glory
•Women’s Apparel growth
•Casual activewear
•E-commerce
•Low barriers of entry
•Rising labor wages
•Limited patent ownership
•FX volatility

17.
MANAGEMENT PERSPECTIVE
&
WALL STREET COMMENTS

18.
Recent Performance
Net Revenue by Product
Products Q3 FY15 Q3 FY14 % increase
Apparel $866M $705M +23%
Footwear $196M $122M +61%
Accessories $104M $85M +22%
License revenues $24M $22M +9%
Connected Fitness $14M $4M +221%
Total $1.2B $938M +28%
Net Revenue by Region
Regions Q3 FY15 Q3 FY14 % increase
North America $1.1B $848M +25%
International $130M $86M +52%
Connected Fitness $14M $4M 221%
Total $1.2B $938M +25%
Source: 10-Q
● First Billion dollar quarter

19.
Analyst Feedback Before & After Earnings Call
Average = $109.59
Median = $110.00
Average = $105.83
Median = $105.00

20.
Analyst Feedback Before & After Earnings Call

21.
Analyst Universe

22.
Analyst Review of Q3 Earnings Call
● Future growth of Connected Fitness (SAP
platform) - targeted consumer experience
● International retail and footwear expansion
● New e-commerce site
● Apparel growth for Womens & Casual
activewear (ex. polo shirts, chinos)
● Robust revenue
● CFO search is a positive catalyst
● China retail strategy a new growth driver
○ Direct retail expansion in China:
aims for 1,000-1,500 stores
○ 70% of stores to be run by
distributors by 2018
● China footwear aggressive growth
UA warrants a higher valuation
relative to peers
Balanced by accelerated
investments in key drivers:

23.
Key Reasons for Stock Behavior
Higher mix
of footwear
revenues
Higher air
freight costs
Unanticipated
FX Pressure
Gross Margin
Impact
M&A of
connected
fitness
New
opportunities
Management
transition
Investments

24.
● Partnership allows creating a single user database
with insights on consumer purchase habits
● Advent to targeted marketing
New Findings & Future Guidance for Investors
Expand to Casual
Activewear
Connect Fitness &
SAP Partnership
Adding Talent in
Women’s Footwear
● Hiring
● Women’s footwear focus
● Long-term investment in apparel for
outside the gym (eg. polo shirts, chinos)
● Innovations in apparel functionality

25.
Metrics 2015 2016 % increase
Rev $3,923 $4,937 25.8%
EBIT (Operating
Income)
403.8 484.0 19.9%
Operating Margin
(OI/Rev)
9.7% 10.6% 9.0%
EPS $1.10 $1.30 28.4%
Analyst Conclusions via Ratio and Metrics Analysis

26.
SHOULD WE BUY UNDER ARMOUR STOCK?

27.
Common-Size Income Statement
● Net profit margins ( ) : Operating margins ( ) + Non-operating margins ( )

28.
Ratio Analysis-Profitability
● ROE = Net Income / Equity
● Decrease of ROE: Increase on Equity > Increase on Net Income
● 3 Main attributes to Equity increase
○ Exercise of stock options
○ Issuance of common stocks
○ Converted convertible stocks

29.
Ratio Analysis-Assets Turnover
● Loosen credit sales policy -> Credit risk ● Increasing inventory turnover on Q3-2015
due to credit sales

30.
Ratio Analysis-Solvency Ratio
● Steady decline from 2010 to 2013
● Strong recovery from 2013 to 2014
● Strong Liquidity

31.
Ratio Analysis-PE Band
78.3
● The standard deviation band:
○ Measures the historical variation/volatility from
the average PE
○ 95% fall within the range
● Recent performance suggested PE ratio:
○ Unpredictable of the future pattern
61.0

32.
Source: All data and estimates from Bloomberg, LP
Relative Valuation: Method of Comparables
As of November 30, 2015
($ in millions, except per share data)

33.
Source: All data and estimates from Bloomberg, LP
Relative Valuation: Method of Comparables
As of November 30, 2015
($ in millions, except per share data)

34.
Source: All data from Bloomberg, LP
Absolute Valuation: Discounted Cash Flow Method
As of November 30, 2015

35.
Source: All estimates from most recently published analyst reports
Leading Investment Bank Estimates (DCF Inputs)
As of November 30, 2015

36.
Source: All estimates from most recently published analyst reports
Leading Investment Bank Estimates (DCF Inputs)
As of November 30, 2015

37.
Discounted Cash Flow Output
Market Price as of November 30th, 2015:
Therefore: Fairly Valued!
THEORETICAL VALUE PER SHARE
$85.54
$86.22
Our Criteria: If absolute value + / - 10% of its current market price, Under Armour over / under valued

38.
SHOULD A BANK LEND TO UNDER ARMOUR?

39.
Credit Analysis
Notes: [1] Total Debt to Assets ratio calculated as total liabilities divided by total assets, net of goodwill.
Financial Strength Debt & Commitments Capacity to Repay

40.
Concluding Remarks
EQUITY INVESTMENT
● On comparable basis: overvalued
● Absolute value vs Market Price; fairly valued
● High risk/return potential; growth stock
Debt Covenants
- Additional issuance of debt is not permitted without our approval
- The Company must maintain an Interest Coverage Ratio of at least 3.5x
- The Company must not exceed a Leverage Ratio of greater than 2.5x
DEBT INVESTMENT
● Strong balance sheet
● More than enough operating strength
to sustain additional debt
Is Under Armour’s growth sustainable?