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Good morning, and welcome to the Under Armour Q2 2025 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Lance Allega, SVP, Investor Relations, Treasury and Corporate Development. Please go ahead.

Good morning, and welcome to Under Armour's second quarter fiscal 2025 earnings conference call. Today's event is being recorded for replay. Joining us on today's call are Under Armour President and CEO, Kevin Plank; and CFO, Dave Bergman. Our remarks today will include certain forward-looking statements that reflect Under Armour management's current view of our business as of November 7, 2024. These statements may include projections for our business in the present and future quarters and fiscal years. Forward-looking statements are not guarantees of future business performance, and our actual benefits may differ materially from those expressed or implied in the views provided. Statements made are subject to risks and other uncertainties detailed in this morning's press release and documents filed regularly with the SEC, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. Today's discussion may also include non-GAAP references. Under Armour believes these measures give investors a helpful perspective on underlying business trends. When applicable, these measures are reconciled to the most comparable U.S. GAAP measures. Reconciliations, along with other pertinent information, can be found in this morning's press release and at about.underarmour.com. With that, I'll turn the call over to Kevin.

Thank you, Lance, and to everyone for joining us on this morning's call. At the halfway point of fiscal ‘25, we're pleased with another quarter of profitability ahead of our outlook. Thanks to gross margin improvement from actions we've taken to produce promotions and discounting in our DTC businesses and ongoing initiatives that improve product costing. Although we are early in our reset, I believe this demonstrates that our strategies to strengthen this brand are beginning to gain traction. Our team is working incredibly hard and diligently to build a better business and I'm so proud of this collective effort. Though we still have much work to do, we are on offense and are committed to reconstituting the Under Armour brand, deliberately and methodically. With a roughly $50 million second quarter adjusted operating income beat, compared to the outlook we provided in August, we are splitting the difference and allocating about half of those dollars to our revised adjusted operating income outlook for fiscal ‘25. The other half will be invested in marketing and brand building efforts to deepen our connection with consumers. Q2 also marked another quarter of planning our flag as a sports house, meaning one of only a handful of athletic brands globally who can credibly outfit athletes head to toe on field, court, or pitch in virtually any sport or athletic endeavor. We will defend and build on this position to exploit our global opportunity. To be clear, Under Armour is more than just a single category or activity of athletic excellence. And this breadth is what provides us with the sports house status to build from. And what differentiates the UA Sports House from the other brands on the podium with us is our position as the brand for the little guy or little girl, who has not had the size or resources to truly compete. Therefore, we're not innovating so that our athletes and teams can run up a score, but simply to give them that fighting chance to compete. This try-hard persona and grit that defines UA has four key attributes: Athlete, Sports, Innovation, and Passion. This is our constant muse and describes our affinity for the underdog. The athlete who puts in the work from pillar to podium, looking for every edge possible from their training, studying, and especially from their gear. The ones who have no choice but to apply the rule of 10,000 hours to achieve excellence in their sport. And who also are seeking a competitive edge from the best athletic performance apparel, footwear, and accessories on the planet. These are our Under Armour athletes. Because of this, we must use every resource and waking hour to help them improve. This mindset drives our product storytelling and commercial strategies ultimately expressed by the perfectly balanced UA logo, where the top is the same as the bottom, the left is the same as the right, and an ambition or at the least the metaphor for the gear that we make. Performance apparel and footwear meant to prevent you from getting too hot or too cold, targeting equilibrium in every wearing occasion. The symbol of our athletes' underdog spirit was something to prove. Being clear about who we are and where we're going, front and center in all interactions, including those with retailers, athletes, and teammates. A direction that is being received well as we've taken this narrative to our partners and we will build on from here. As a podium brand with a foundation of performance products forged at the highest levels of athletic competition, we worked tirelessly to deliver head-to-toe outfitting, with style, fit, form, and function across the high school, club, and professional levels. UA must give athletes an edge to perform, feel, and look their breath. We will honor our nearly 30-year history with that hard-earned place on the podium by elevating our products, amplifying our stories, delivering best-in-class service, and empowering our team to drive consistent execution. As we have said previously, this chapter is not a repeat of the first time building the brand, there will certainly be parts that rhyme. We plan to utilize every tactic, relationship, strategy, or ethos that served this brand in the past to our benefit. One of those is certainly product, story, service, and team, four powerful dimensions that when working in concert can drive this brand to greater heights. This is what we have brought to life, what we are evangelizing internally and externally and what we are executing against. The elevation of our product offering continues to gain momentum. This includes a critical mass of new products designed and developed by our expert product team with an immediate focus on our men's apparel business and footwear, as well as a significant evolution in style and innovation offerings as we work toward fall-winter ‘25. Based on previews in the initial sell-in cycle, we've received strong feedback, showcasing products with brand-new innovations, refreshed design direction and a holistic approach to outfitting our core revenue categories, training, running, basketball, sportswear and golf. In the meantime, we've refocused and relaunched basics like base layer compression, where we have market leadership, which gives us the ability to change our trajectory. This includes recent success in premium distribution with heat gear, franchises like Unstoppable, particularly Fleece, as well as our Vanish Training collection and an increasing, but targeted selection of UA Sportswear. In addition to what we call Trojan horse products, recently articulated accessories with the StealthForm Uncrushable Hat, where we showcase what Under Armour’s take on a category as seemingly ordinary as a ball cap that traditionally has been only the logo on the front that differentiates it from other brands and apply the performance lens of stretch, recovery and moisture management, which also allow us to charge a premium of $45 to a category that typically sells for less than $25. This is the type of consistent innovation and premiumization you should now expect from UA with the purpose of making your consumer wonder. They put this much performance thinking into a hat, I wonder what their shirts and shoes are like. In footwear, we're making some of the greatest strides with our enhanced product team having an impact. There's much work to do as we're experiencing challenging results in the near-term, particularly in our good level products. While it will be a couple of seasons until it hits the market, we've taken a different tact here with good level, refining and eliminating redundant SKUs, assigning our best footwear designers to work on some of our lower ASP products, but that have big volumes like the UA Assert, whose volume is in the millions of payers with updated designs that focus on the price to value perception and winning consumers to the brand with just simply better looking and performing product at great value. Just because the shoe costs less than $100 does not mean that it does not deserve to be beautiful. And I'm excited about our strategies for improved assortment across our better and best segmentation over the next few seasons as more elevated products like our Infinite running collection have been tracking well for us. While our footwear business continues to reset, our objective is to merge with a more substantial, better and best level offering and a streamlined improved good level offering. All-in all, more precise, well-defined segmentation within our franchises to deliver for all tiers of distribution that will serve us in the ambition of preimmunizing the UA brand. It's really about selling so much more of so much less. Critical to our evolution is our team sports positioning, the sharp point and epicenter of our connection with young athletes. With school back-in session, we saw a solid performance from cleated products in baseball and American football. As well as in basketball with Curry brand footwear. Building on that a few weeks ago, the Curry-12 launched globally following limited releases of select colorways, including the red, white and blue version Stefan wore during his iconic performance in the Paris Olympics, which helped secure gold for Team USA. The response to the Curry-12 has been solid, so we're off to a good start ahead of our next launch, which will see the first-ever Signature shoe for Rising NBA star, De'Aaron Fox under the Curry brand. Next up is story and continuing with Stefan as an excellent example. In September, we conducted our first tour in China with him since 2019. The response to Stefan and market was frankly overwhelming and demonstrated the power of the Under Armour brand when we holistically integrate compelling athlete moments with elevated products and storytelling. Despite our four-city tour turning into a three-city tour, because the second stop in SHEIN had to be canceled due to a Taylor Swift-like reaction with for just one example, from, SHEIN 7,000 people waiting outside of his hotel to greet him. We unfortunately had to cancel that visit, but successfully pulled off our most impactful tour ever. With historically high brand exposure, including over 4 billion media impressions, nearly 34 million live stream views and incredible social buzz and engagement. Overall basketball sales impacted in China that week, along with a threefold increase in Curry sales. One thing that is certain is that the opportunity we have with Stefan to build-on his celebrity for the benefit of Curry brand, UA Basketball and Under Armour as a whole we plan to be much more aggressive with Stefan's global presence as we scale our business in the upcoming years. Taking this learning and replicating it more frequently at multiple touch points is the goal. Holistic and synergistic moments to reach young team sport athletes more effectively as a sports house with an ability to outfit the world's most incredible athletes at the highest-level of competition, including Major League Baseball's World Series and Los Angeles' Freddie Freeman driving in 12 runs and four homers to become the MVP as the Dodgers won their eighth title. American Football NFL standouts, Justin Jefferson,

Thanks, Kevin. Digging right into our second-quarter fiscal '25 results, we outperformed the profitability outlook we provided in August. However, in-line with our expectations, revenue was down 11% to $1.4 billion with a 13% decline in North-America due to softer full-price wholesale demand and lower sales for the off-price channel. Our North American DTC business was also down during the quarter, driven by a continued decline in our e-commerce business, resulting from proactive strategies to reduce promotional activity, and we also experienced lower retail store-sales. EMEA revenue was down 1% on a reported and currency-neutral basis, driven by a decline in our wholesale business, partially offset by strength in DTC. Revenue in APAC was down 11%, were down 10% on a currency-neutral basis due to declines in our wholesale and DTC businesses, amid a soft macro-environment that continues to impact consumer traffic. In Latin-America, revenue was down 13%, were down 4% on a currency-neutral basis. Growth in DTC partially offset the decline in our wholesale and distributor businesses. From a channel perspective, our wholesale revenue was down 12% in the second quarter, driven by softer demand in our full-price and distributor businesses and lower sales to the off-price channel. Direct-consumer revenue declined 8% with a 21% decrease in e-commerce as we expected, given strategies to drive a more premium online presence through reduced promotions and discounts. Sales from our owned and operated retail stores were flat in the quarter. Licensing was down 13%, primarily due to a decline in our North American business. By-product type, apparel revenue was down 12% with declines across most categories in the quarter, while we had good performance in outdoor. Footwear was down 11% with declines in most categories. However, relative strength in golf and team sports, particularly cleated products, partially offset the decline. And our accessories business was up 2% in the quarter. Our second quarter gross margin increased by 200 basis points to 49.8%. This increase compared to the prior year was driven by 120 basis points of supply chain benefits due mainly to lower product costs, 50 basis points from a favorable channel mix, driven principally by a reduction in off-price sales and 40 basis points of pricing benefits due to lower discounting and promotions, mainly in our direct-to-consumer business as we work to drive a more premium position for our brand. And lastly, also had lower markdowns in the wholesale channel. These benefits were partially offset by 10 basis points of headwinds from unfavorable foreign currency impacts and regional mix. The significant gross margin outperformance in the quarter, relative to the outlook we provided in August was due to three main factors. First, we saw increased supply-chain benefits from additional product cost-savings compared to our plan, along with lower-than-expected freight costs. Second, wholesale markdowns and allowances were less than initially anticipated. And third, our channel mix was more favorable due to lower-than-planned sales to the off-price channel. Next, SG&A expenses were down 15% to $520 million in the second quarter. As mentioned on our last call, our second quarter benefited from a shift in the timing of marketing expenses, in this case, about $15 million, which is in our third quarter outlook. Excluding roughly $13 million in benefits from a litigation-related insurance recovery and approximately $3 million in net transformation expenses related to our fiscal ‘25 restructuring plan, second quarter adjusted SG&A expenses were down 13% to $530 million. This decrease was primarily driven by lower marketing expenses as some of our brand investments are concentrated in the second-half of the year. As anticipated, we also recognized a $27 million SG&A benefit due to an insurance recovery for legal fees incurred in previous years. Lastly, ongoing cost management actions, including headcount reductions also influenced the decrease. Moving down the P&L, we recognized $3 million in restructuring charges, which together with the $3 million in transformation expenses booked in SG&A resulted in $6 million in restructuring charges and related expenses for the quarter. Through the first-half of the year, we have recognized $40 million in charges and expenses under our fiscal 2025 restructuring plan, of which roughly $36 million were cash-related and $4 million were non-cash expenses. In September, we announced an expansion of our restructuring plan with additional initiatives to optimize our logistics and transportation network and overall business performance. This expansion included approximately $70 million in new opportunities, primarily related to the exit of one of our distribution facilities in Rialto, California. This change will allow us to utilize capacity better and gain efficiencies in our remaining facilities as we invest in automation over the next several years. These efforts are expected to be completed by the end of fiscal 2026. Incorporating this decision, we now expect between $140 million and $160 million in total restructuring charges and expenses, of which roughly, two-thirds will be realized in fiscal '25 and the remainder in fiscal '26. Given the time required to wind-down and close the Rialto distribution facility, this expansion to the plan is not expected to result in additional restructuring-related savings in fiscal '25. Above and beyond the approximate $40 million annual savings previously disclosed. And finally, moving to profitability. Our second-quarter operating income was $173 million. Excluding the litigation-related insurance recovery, transformation expenses and restructuring charges, our adjusted operating income was $166 million. Taking this to the bottom-line, we realized diluted earnings per share of $0.39, while adjusted diluted earnings per share was $0.30 in the quarter. The profitability overdrive versus our second-quarter outlook was mainly due to our gross margin outperformance with additional benefits from better SG&A expense control and shifting some marketing spending into the back-half of the year. From a balance sheet perspective, our inventory was down 3% compared to last year, which aligned with our plan. We continue to expect our fiscal year-end inventory to be roughly flat compared to our fiscal '24 ending balance. Our cash position was $531 million, which is after the payment of our legal settlement during the second quarter. And we had no borrowings under our $1.1 billion revolving credit facility. Next, let's turn to our fiscal '25 outlook. Our expectation that full-year revenue will decline at a low double-digit rate has not changed. We also reiterate our outlook for a 14% to 16% revenue decline in North-America, flat revenue in EMEA and a high single digit decrease in APAC. Given our outperformance in the second-quarter, we have increased our outlook for gross margin and now expect an improvement of 125 basis points to 150 basis points for the full-year, which is better than our prior outlook improvement range of 75 basis points to 100 basis-points. This anticipated increase in our gross margin is driven by reduced promotional and discounting activities in our DTC business, which continue to benefit our average selling price. Along with the actions to improve product costs. This implies that second-half gross margin is expected to expand at a lower rate than in the first-half, which is driven by tougher comparisons with the prior year, as well as the impact of some inventory cleanup actions later in the year as we prepare the market for product introductions in the fall/winter ‘25 season. Concerning SG&A, excluding the litigation settlement expense and related insurance recoveries and the midpoint of estimated transformation expenses related to our restructuring plan adjusted SG&A is expected to decline at a low to mid-single-digit rate, which is unchanged relative to our prior outlook despite larger than anticipated declines over the first two quarters of the year. This also incorporates our recent decision to reinvest some of our first-half gross margin upside into brand-building investments ahead of upcoming pivotal seasons and the timing shift of marketing into the second-half. As a result, roughly half of our second-quarter adjusted operating income outperformance will be invested in incremental marketing later this year. While the remaining half is reflected in the increase in our adjusted operating income outlook, which we have raised by $25 million versus our prior call. Therefore, we anticipate that adjusted operating income will reach $165 million to $185 million for the year. Incorporating all this into the bottom-line, we expect adjusted diluted earnings per share to be $0.24 to $0.27. Up about $0.05 at the midpoint from our prior outlook. Next, I'd like to provide context for our third quarter of Fiscal '25, where we expect revenue to be down approximately 10%, which assumes continued pressure in North-America and ongoing proactive strategies to reduce promotional activities in our DTC businesses. This points to Q4 revenue being more pressured than Q3, which is primarily related to some timing differences in Q3, Q4 flow this year versus last year within our North-America and APAC wholesale businesses, along with it, a more difficult prior year Q4 comp in our North-America Factory House business. And some developing FX headwinds driven by the recent strengthening of the U.S. dollar. Third quarter gross margin is expected to be up 150 basis points to 175 basis points due to supply-chain benefits resulting from lower product costs, favorable FX and pricing benefits related to reduced discounting and promotions in our direct-to-consumer business. As mentioned earlier, a significant shift in the timing of marketing investments will cause our adjusted SG&A expenses to increase in the second-half, compared to last year, particularly in the third quarter when expenses should be up at a mid-single-digit percentage rate. This brings us to an expected third quarter adjusted operating income of $20 million to $30 million and $0.02 to $0.04 of adjusted diluted earnings per share. In closing out today's prepared remarks, our work to reconstitute the Under Armour brand continues to gain traction after another quarter of outperformance. Our teams are executing our strategies, focusing on the dimensions of our business that will make a difference in our brand strength and premium positioning. Though, we still have much work to do, we're encouraged by our early progress in this journey and we're confident that with our strength and leadership team, improved execution, clear alignment and prioritization and renewed energy as an organization, we will continue to build momentum toward long-term sustainable and profitable growth. With that, we'll open it up for questions. Operator?

We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Simeon Siegel with BMO Capital Markets. You may now go ahead.

Thanks. Hey, everyone. Good morning. Congrats on the ongoing progress. Really great to see.

Thank you.

Kevin, I know it's only been a few months. Anything further you'd share on what Eric is bringing -- been bringing to the team so far? And then, Kevin or Dave, just congrats on the gross margin improvement. That's been great and obviously a nice validation of your strategy. How are you thinking about future gross margin opportunity? And then maybe putting that in context of that back-half guide you gave the 3Q after the healthier profits, it does look like the total outlook. I think the total profit looks to be very light in the back-half of the year. So any further context you could give on that, if it's anything beyond timing? Thank you.

Yes, I'll take the first and let Dave pile on gross margin. But yeah, it's pleasant to see. And I think one of the indicators when we had so many things going a couple of different directions, a good way to judge how we're doing with the business and the progress in the reset. But Eric has been terrific. Number one, he's an experienced global executive. It's been a great addition to the team and really fit-in. He's someone that coming from the industry, he not only speaks our language, he speaks our dialect. So the learning curve has been very small and also you deal with a good confident executive. It's great to see. And so I think that's been really seamless. And coming in the mandate for Eric was really in three parts. His title was brand strategy. And first of all, within that was the strategy and for us to coordinate the strategic business plan for the organization and just lock us up between brand, financial, commercial objectives, because while we've had these things in place, I think our refined lens on them has been important. The second thing I ask Eric to help with is really the operating model, which is, again, I'll use the word refining our category management structure and enhancing our go to market where we can just be more coordinated, and whether that's just here in the U.S. across channels, be it wholesale or retailer or what we're doing in our factory house or online as well as what we're doing in other regions and coordinating. So we feel like one large brand versus a lot of small pieces. And so there'll be more to come on that. And then in marketing, it's one thing about this business where really the primary focus was Eric to help us in the marketing component. We've got a $0.5 billion-plus budget for marketing, but it sure doesn't feel that way. And so that's priority number-one. I mentioned in my prepared remarks, our ambition or plan is to build a -- and to bring on a major campaign that we'll have in 2025. And that's just looking and saying. It's not that we don't have enough money. We just don't like how we've been spending it. And so us really getting surgical in the way that we're looking at that is important. And all this to contextualize this underdog persona as we head towards with sort of circling fall or winter '25. And this isn't a wait-and-see and this isn't -- there's going to be some line that we cross in fall-winter '25. There's several proofs of life that you'll see along the way from product and from brand and story, but it gives us a really good, really good target and we're pleased of where we are right now. So taking the room in our marketing to build a comprehensive campaign.

Relative to gross margin longer-term, there's nothing structurally prohibiting us from driving more towards 50% over-time. When you think about some of those longer-term tailwinds for next year and beyond, continued lower promotions as we continue this reset play, a higher mix of DTC percentage, including higher ASPs and better segmentation, et cetera, there will be a continued headwind, we believe with footprint growth outpacing apparel growth longer-term, but we're okay with that. And relative to the front-half, back-half, relative to gross margin, and there's really a couple of different things. There's gross margin, there's SG&A. But gross margin, Q2 is generally our highest gross margin quarter to start just as our brand. And then when you think about the back-half, we normally have more seasonal promotions in Q3. So that's something that's obviously coming into play here. And then also there are some supply-chain headwinds in the back-half with a little bit more ocean freight pressure and some tougher prior year comps. So all of that is kind of built into our back-half gross margin profit. And you can understand then why front-half versus back-half gross margin is a little bit different. But maybe taking that a step further and how it translates down to operating income, there's even a bigger differential within SG&A spending. Here adjusted SG&A, we're thinking that we're going to be up year-over-year, compared to a 10% decline in the first-half. And you kind of ask why is that? But the second-half obviously does not include a $27 million insurance recovery that we saw in Q2. And then the marketing is a really big piece. We're actually planning roughly $40 million more of marketing investments in the back-half of this year versus the front-half as we kind of ramp-up around key commercial moments and also, as Kevin mentioned, reinvesting some of the profitability upside. So when you kind of add that gross margin timing difference add the SG&A differences, it kind of points to the front-half of our year for this fiscal year anyway, we're earning about 90% of our operating income for the full-year. So it is a little bit interesting and there's a lot of pieces there, but I just wanted to try and help make sure everybody grasps that.

Great. Thanks a lot guys. Best of luck to holiday.

Thank you.

Thank you.

Our next question will come from Jay Sole with UBS. You may now go ahead.

Great. Thank you so much. A lot of exciting things to talk about. But Kevin, I want to ask you about a comment you made that you're getting strong feedback on new products. Can you just elaborate that on that a little bit? And tell us a little bit more about these new products, tell us more about the feedback you're getting. And if you give us a sense of like how retailers are really responding in terms of their orders, that would be super interesting? Thank you.

Yeah, thank you, Jay. We've got -- look, we've got work to do. And so I think right now, we're running a bit of a better business. But what's difficult in our industry with an 18-month go-to-market typically is we still have time before we'll start seeing a lot of these things hit the market, be it the product especially in the marketing, of course. And as I mentioned, there's be plenty of proofs of life. We've got -- I think our pipeline right now with what you've seen, our product team, John Varvatos, Yuron, our entire group plus this incredible group of experts that we've had here in-place at UA. And I think our product pipeline is really as healthy as I've seen it. We've got a lot of things that are exciting. We've got some drops that are coming for Q1 of calendar '25. But then as I said, it's really going to be an anchor around fall/winter '25. And so we're going to give you a lot more color at our Investor Day coming up December 12, as well. So we want to make sure that people make a point to come see and visit us there. It will be somewhat qualitative in what we're doing of going through the topics of talking about the business. But we've got an update to our SlipSpeed product that's coming in in first-quarter, which should be really exciting. And then again, I think that we're doing a good job in some of the places we're winning. It's the basics. It's UA compression and base layer that's working for us right now, unstoppable as a franchise that you've heard us talk about consistently. The Vanish men's I mentioned in the prepared remarks, as well [Indiscernible] doing pretty well for us too. So what we found is I feel like we've got this organization where the pipes are laid, not only to the product but making sure that we're getting the shelf-space and the relationships that we have with retailers as well, making sure that we're sequencing also is doing a good job with the way that we can tell the stories of those products on e-com, but making sure we're spending -- making $1 spend like three as we say here at UA and really getting the bank for the buck when it comes to making it a compelling story. And that's why we've just going through product and making sure that product and story have this function. I mentioned product marketing and commercial working together, but something as simplistic as I've said before on the calls is, what it is, what it does and how it makes you better. Going to retail at times, we've become a bit of a brand that's being sold-on price and there's just so much more to the incredible products that we make. And so without story there, you're just selling shirts and shoes and the world doesn't need another capable parallel footwear brand, the world needs hope and that's what we think Under Armour can be. And so that's really, I'm not sure sort of where this inflects for the business, but one thing I can tell you is that we don't know exactly when it is, but it's not-too-distant of when this brand inflects and that will be the real metric that we're looking to build forward on.

Yes, I understand. That sounds great. Thank you so much.

Our next question will come from Bob Drbul with Guggenheim. You may now go ahead.

Hi, good morning. Just on North-America, Kevin, when you look at where North-America is and the reset, how is it working? And do you expect North-America to grow in FY '26?

Yes. Thank you, Bob. We're not looking at '26 just yet, but let me tell you a few things that we're thinking and we do know about North America. We've got work to do in this market, but we also have a brand that has great affinity and I don't believe the consumer is mad at us. We just have to give them a reason to want to engage with us again. Probably one of the things I'm most proud of in the first seven months of being back-in the CEO chair is identifying and defining for our own team, as well as beginning to for our consumers of who we are and who we stand for, which is this underdog thematic that you'll begin to see come through. And that's not meant to be a little translation, but more the directionally of what and who we are because it's just frankly authentic and we think we're the only ones who could hold that position. But we think it's going to mean something here in the U.S. especially. And then we'll see that it gives you ability to set the tone for both EMEA and APAC as well. This revenue step-down that we've done, it's allowed us to test some things. We've reset our e-commerce business. And as a part of that, you saw the significant benefit it's had to gross margin this underscores for us that there was a test, the world wants Under Armour. We're a brand that's earned the right to exist and that we're a premium brand. And so as long as we sort of clear out some of the noise that we've had around some of the lower ASP products and get ourselves to a more full-price front foot tenor, I think you'll see the strength from us. But that's not going to happen from wishful thinking either or just a fancy ad campaign, it means better products. And so what the team has done from taking us from competing on price to competing on science and design, but this is going to take some time. As I mentioned, there's probably several proofs of life that you'll be able to see. Some of them may be a lottery ticket, but you never know, it's why I like to say that success and mediocrity are typically next door neighbors. So how far away are you, but we have some product really like that's coming in. As I mentioned that in the first-quarter is really powerful. This last expression that we have coming is going to be really exciting. And then sportswear for UA is also a huge opportunity where you'll continue to see our bent there really begin to grow. But the shift to more premium, one thing I want to be clear on is, I don't think that we don't have to stop selling good level in order to premiumize this brand. We just need to focus more on some of our better and best level product. And so I think a lot of the things with from the product and the story side and then of course, the relationships at the accounts, what we're doing with our own e-com and our own store base as well matters. But some of these bigger structural things, as I mentioned, what Eric is doing and adding to an incredibly talented executive team, I feel that we've assembled. Category management is going to make a difference. The SKU rationalization, eliminating 25% of our SKUs over the next 12 months to 18 months just gives us just clear focus and makes it easier for the consumer, all that with a healthy tension on cost management, of course. And so we want to elevate the brand experience. We want to do that in our factory houses where I think there's some pretty significant margin opportunity for us there. Our brand houses, of course and then just these relationships with wholesalers. And I said in my prepared remarks, this idea of ensuring that our strategic partners know the strategic partners that extends beyond just our customers. It goes to our factories, it goes through our vendors, it goes really across-the-board for this brand. And so I think that North America is that as we stabilizing this ship, we think that there's great upside for Under Armour, but we're incredibly optimistic and we like where we are, we like our team. We like the position we have. We think we got a pretty good shot.

Great. And if I could just jump-in with one more. I think Dave mentioned additional marketing dollars in the second-half. Like what will those dollars be spent on?

Thanks, Bob. Let me let me take that. The -- we're thrilled with the overdrive of $50 million. It's big money, but we're going to split that and give 25 million of it to the bottom-line. And then we're also going to be putting that across the different regions with EMEA, APAC and the Americas. I mean, this is going to be a lot of top of funnel brand-building in Europe, where I think regions are pretty much in different places as well. Europe is probably our strongest region right now. We've already got a campaign that's in-place and in-flight and so we're going to be bolstering that. We're going to be a little more defensive than APAC, which is an area that we think that we're really going to dig in. And I'm going to spend more time on China and our business there as well in -- beginning in the first-quarter as we turn into the new year. And then here in the U.S., we're going to put a portion of that towards some of our top of funnel and again with the fiscal year going through March, as we roll into fiscal year '26, this underdog positioning that we have, but there's a lot of great things that happen in the first quarter of 2025, specifically the 2025 NBA All-Star game, which is going to be held in San Francisco, which will should be like a homecoming for Stefan, who will be hosting that effectively Super Bowl, March Madness. And so there's a lot of places where, again, we can just start getting this perspective of the brand, which is maybe a bit of a new under Armour, but something which feels incredibly natural in just who and what we are.

Thank you.

Thank you.

Thanks, Bob.

Our next question will come from Paul Lejuez with Citi. You may now go ahead.

Hey, thanks guys. Two questions. First, as you guys further embrace the underdog personas, I think what you called it, Kevin, what does it mean for how you're going to use professional athletes as brand ambassadors going forward? Should we expect any change there? And then second, just curious if you can just give an update on where you think inventory levels and promotional levels are in each of your major markets right now and as you look out the holiday?

Yes. Thanks, Paul. I think that this persona is something which this isn't lost on, you know that pros don't apply to it. And of course, the changing landscape, what NIL means and what's happening with sports marketing, sports marketing assets. The unique aspect of UA when we talk about being a sports house, it means that we sort of run the spectrum from American football to football in Europe to basketball. And there's probably no better example of what I describe as that underdog athlete is those that weren't given all of God's gifts, but somehow have to work a little harder and train a little more and apply that rule of 10,000 and probably Stefan Curry is the one who has changed the game of basketball by doing exactly that. He didn't come out and he wasn't the tallest, the biggest or the fastest, but he just he took a focus on something that allowed him to compete there. So we think we can do this both high and low with elite levels like Stefan, all the way down to the more personal stories that you'll see at the NIL collegiate level as well. And so I'm not sure if you ask me to line-up, you know all those that feel like they're going through a hard time right now had to overcome something pretty difficult and try to get to where they are. That's a pretty consistent feeling is that just about everybody feels that way. And so we think we're going to tap into that and we think it's incredibly true and authentic to who and what this brand is as well. So we think there's a bit of an unlock for us there.

And this is Dave. Relative to the inventory question, I think what we're seeing is the industry inventory levels are definitely a little better-positioned today, though I think there's still some retailer conservatism out there that's kind of leaning towards a little softer demand and it's also still a very intense competitive environment. So we're still seeing a little bit of retailer conservatism remaining and therefore kind of reluctance to kind of go after big increases in orders, et cetera. But as far as where we see ourselves, so we think the overall size of our inventory is good right now in the market and what we have in our DH. We expect that level to fall a little bit more as we close-out the year. And on the composition of our inventory, the majority is current-season with active demand. So the aging of our inventory is in good shape and there are significant differences by region and product-type, but they're not really much to call-out as far as where we stand-on far as aging or anything like that. So we continue to manage well. We think we're in a good spot. We're going to start working further on inventory turns in the future years, but we're pretty comfortable with where we are right now.

All right. Thank you. Good luck. Thanks, guys.

Thanks, Paul.

Thanks, Paul.

Our next question will come from Brian Nagel with Oppenheimer. You may now go ahead.

Hey, guys. Good morning. Thanks for taking my question. So a couple of questions. First-off, you this is, I guess within the investment community, tariffs are now another hot topic. So any thoughts there from Under Armour from a sourcing perspective or how -- to what extent you -- how you would be able to manage any increase in tariffs? And then second, I guess bigger-picture, Kevin, you talked about in your comments just the pushback to wholesale and reengaging with your wholesale partners. Kind of I know it's early, but where are we in those conversations? And how are there some of those initial conversations going? I guess the question I'm asking is you're talking to these wholesale partners, what is it they're really looking for and what timetable from Under Armour?

Hey, Brian, this is Dave. I'll jump-in on the tariffs. You know, as we're sitting here today, obviously, we've got the election results and we're going to keep an eye on how that kind of unfolds. It will be interesting to see how things develop with whether we still have a split Congress or not. I think that's really going to impact some things if it goes one-way or if it stays split. And we're going to continue to monitor it. Obviously, there could be some higher tariffs. There could be some U.S. duty implications that could impact our cost-of-goods-sold and gross margin and a little bit with income tax expense. But it's something that we were prepared to manage pretty well before. We'll continue to manage it as best we can going-forward. So right now, we're not anticipating any real sizable impacts, but it's something we're going to keep monitoring. Kevin, if you want to jump on the wholesale partners?

Yes. Thanks, Brian. I think that I've had it's interesting when you talk to our accounts is, they're generally so happy and looking for partners that can break through. I mean, you got to remember, a lot of the people we do business with, they've had the majority of their open-to-buy like greater than 40%, 50%, 60% has typically been dominated by one brand. So when they say they're rooting for you, they really mean it, but I imagine they say that to lots of partners. So what we have to do is we have to find product that cuts through. And I've got to say in my first seven months, I've had the benefit of being everywhere from across Europe, from Manchester to Amsterdam to London across Latin America, across Asia, as well as taking in some football games, as well as going to see our key partners and customers that we have here. So there has been no mold has been growing underneath of our feet. We are certainly moving and making sure that we're sitting down and talking to customers. We're also with our new headquarters. We've also been inviting a lot of people here to show them to be able to -- we play a great home game and let people feel what's happening with this brand, because it's hard to say is that, as I said, the brand will inflect sooner than the business will inflect. And you can start to feel that. I think that between and the product teams and now with Eric coming on-board to be able to unlock that that product and story aspect as well as what Curry has been doing here in North-America with our partners. We just want to let them know that Under Armour is open for business. Again, that we are ready to listen to their feedback and input. But let's be clear, we have a point-of-view. We bring a point-of-view as a brand that's incredibly unique. Everything performs, everything does something, every product is meant to help you get better. And so whether that's the performance products we put on-field or whether it's us entering a category like there's a differentiator that makes it UA. And we think that, that with the technical components of the product along with the benefits that we're able to story tell of making sure because I don't think our story has been told, either a, who this brand is or B, what the products do, we're going to do a much better job of that. And so these retailers are rooting for us and we feel an obligation to do a good job for them. We've got a longstanding history and -- but we don't have as much shelf-space as we once had. And so it's our job to earn that season-by-season and we feel really good about what the future looks like. Unfortunately, it's not going to happen all at-once, but we are certainly in this fight.

I appreciate all the color. Thank you.

Thank you.

Thanks, Brian.

Our final question will come from John Kernan with Cowen. You may now go-ahead. Pardon me, John, your line may be muted. Pardon me, John, your mic may be muted.

I think we lost the polo call.

There were two on there, operator, maybe try the second one. There were two in the queue under John, not sure what happened.

Thank you, one moment. [Operator Instructions]

As we lost into, yes, we'll go-ahead and conclude our call on that then. And John, if you're listening and can't get-in, we'll give you a follow-up call on that. Appreciate it, buddy. So thank you everyone joining us today on our second quarter fiscal 2025 call. Much appreciated.

Terrific. Thanks, everyone.

Thank you.