Daily Letter | 1

1 December 2014______

Under Armour
BUY

UA : NYSE : US$72.49

Target: US$80.00
COMPANY STATISTICS:
Market Cap (000s):
52-week Range:
Avg. Daily Vol.:

US$15,801.5
39.76 - 73.42
2,005.6

EARNINGS SUMMARY:
FYE Dec
P/Sales:
P/E:
Revenue:

Total
EPS:

Total

2013A
6.8x
95.7x
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4

2014E
5.2x
77.0x

2015E
4.2x
60.5x

$471.6 $641.6A
$804.9
$454.5 $609.7A
$759.9
$723.1 $937.9A $1,153.6
$682.8
$853.4 $1,038.0
$2,332.1 $3,042.6 $3,756.3
$0.04
$0.06A
$0.08
$0.08
$0.08A
$0.12
$0.34
$0.41A
$0.50
$0.30
$0.39
$0.49
$0.76
$0.94
$1.20

SHARE PRICE PERFORMANCE:

Camilo Lyon - Canaccord Genuity Inc. (US)

clyon@canaccordgenuity.com

212.849.3978

Pallav Saini - Canaccord Genuity Inc. (US)

psaini@canaccordgenuity.com

212.389.8054

Consumer & Retail -- Footwear and Apparel

$10B IN 5Y: WHAT UA COULD LOOK

LIKE BY 2019: REITERATE BUY
Investment recommendation
We often are asked how we gain comfort around UAs valuation. While
we dont disagree that the stock looks expensive by most current
measures, we are of the opinion that UAs long growth trajectory is
robust with opportunities that will result in it reaching $10B in sales in
the next five years (26% CAGR), well on its way to becoming the second
largest global athletic brand ultimately eclipsing Adidas. Under our long
term growth assumptions, we estimate UA has approximately $4/share
in 2019 earnings power. In this context, we believe UAs current
valuation is not only reasonable, but under-stated relative to its true
growth potential. Said another way, UA has never looked inexpensive
(except during the 2008-2009 recession during which it briefly dipped
below 20x P/E), yet it has delivered average revenue growth of 28% a
trend we expect to continue. In this report, we dissect the elements that
will take UA from $3B in sales today to $10B in sales by 2019. In our
view, UA is a core growth holding, and thus reiterate our BUY.

Investment highlights

International, footwear, and DTC will be the key incremental growth

drivers over the next 5 years combining to contribute $3B of the
incremental $7B in sales we are projecting.

We estimate womens and kids will combine to add nearly $2B in

incremental NA wholesale sales over the next five years.

The investments UA is making today are essential to its longevity.

As such, we expect EBIT margins will only show a modest 50100bps of expansion over the next five years.

Source: Interactive Data Corporation

COMPANY DESCRIPTION:
Under Armour is a leading manufacturer of athletic
apparel, footwear, and accessories. The company sells
through wholesale channels of distribution, factory outlet
stores, and through its e-commerce platform.
Geographically, North America represents 94% of UA's
sales with the remaining 6% from international countries.
All amounts in US$ unless otherwise noted.

Valuation
Our $80 target is a blended average of 60x our 2015E EPS, 30x EBITDA,
and DCF.

Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX | CF. : LSE)
The recommendations and opinions expressed in this research report accurately reflect the Investment Analysts personal, independent
and objective views about any and all the Designated Investments and Relevant Issuers discussed herein. For important information,

please see the Important Disclosures section in the appendix of this document.

Daily Letter | 2
1 December 2014

THE ROADMAP TO $10B IN SALES

We believe UA has the brand strength to reach $10B in sales over the next five years.
While getting there is easier said than done, we believe UA is making the appropriate
investments now so that the multiple long-term global opportunities available to it can be
realized. These investments have and will continue to span supply chain, IT, key
management hires, and marketing assets. In this report, we focus on the growth drivers
that can ultimately combine to create the second largest global athletic brand by 2019.
Figure 1 below details the incremental sales contribution by category we believe will
combine to yield $10B in sales.
Figure 1: The UA roadmap to $10B in sales

UA's Path to $10B

$0.6

$10.1

Acc/Licensing

2019E Sales

$1.2
$10

$0.6

$9

$1.4

$8
$1.0

$7
$0.7

$6
$1.5

$5
$4

$3.1

$3
$2
Men's

Kid's

Women's

International

Footwear (w/s
only)

DTC (inc.
footwear)

2014E Sales

Source: Company reports, Canaccord Genuity Research

E-COMMERCE AND INTERNATIONAL OUTLETS: THE NEXT

LEGS OF DIRECT-TO-CONSUMER (DTC) GROWTH
Over the last five years, UA has rapidly grown its outlet distribution network in the US to
~122 stores, a strategy that we believe has allowed it to (1) address white space that its
sporting goods partners did not reach, (2) create a clearance mechanism that serves to
keep its full price position at retail intact, and (3) expand the brands reach and increase
overall awareness. E-commerce (~8% of sales today) has also become a larger contributor
to growth. As UA reaches full capacity of its domestic outlets, we expect ecommerce will
continue to grow at an outsized pace yet still remain a relatively constant component of
overall sales at 8%, yet adding ~$560M in incremental sales during that period.
In addition, we also believe UA will begin to open factory outlet stores in key international
markets over the next 12-18 months. Like in the US, factory outlets will be critical to

Daily Letter | 3
1 December 2014

ensuring product can be digested by the marketplace should excesses arise at any point in
time. We believe UA will begin to open a few outlets each in Europe, Latin America, and
Asia over the next 12-18 months. Once comfortable with the operating model, we expect
UA to accelerate that store opening initiative.
For comparison, NKE has approximately 460 international factory stores, suggesting
ample runway for UA to develop its outlet store network. Currently, we estimate UA is
generating $5.5M in sales per outlet store; however when it opened its first outlets in 2009,
sales/ outlet were $3.5M. Assuming UA has 60 outlets opened by 2019 and with each store
generating $5M in sales, it would add $300M to overall DTC. It is worth noting that we are
not contemplating full price stores in our long-term DTC projection, which ostensibly
would provide upside to our estimates. The net result would be a DTC business that
represents approximately $2.4B in sales. Figure 2 details our growth assumptions for DTC.
Figure 2: DTC wont slow anytime soon
UA DTC
US factory/retail stores
e-commerce
Int'l outlets
Total

2014E
$687.6
232.2
0.0
$919.8

2019E
$1,300.0
800.0
300.0
$2,400.0

CAGR
14%
28%
21%

Note: US factory/retail sales assumes 7% comps and 30% CAGR in footw ear
International outlets assumes 60 stores at $5M/store in 2019
Source: Company reports, Canaccord Genuity Research

FOOTWEAR TRACTION IS INTEGRAL TO REACHING $10B

We estimate UAs share in the footwear market is no more than 1%-2% currently. Getting
footwear right has always been important because footwear can serve as the gateway to
new sports and thus new markets such as soccer in Europe and Latin America. To that
end, we are encouraged by the continual product introductions UA has brought to market
over the last few years particularly in the running category. With each new platform
(Charge RC, Speedform, Spine, etc.) UA is making further inroads in a highly competitive
category in which NKE is the dominant leader. Basketball, estimated to be just $20-$30M
in sales for UA, remains a significant opportunity but also has the biggest competitive
hurdles to overcome considering NKE owns 95% of the market.
Over the next five years, we estimate overall footwear will grow at 30% CAGR reaching
$1.5B from ~$400M today. Getting there will take a combination of both share gains and
product/category extensions. We believe brands like Puma, Adidas, tertiary brands such as
New Balance, and technical brands such as Brooks/Asics/Mizuno will likely donate share
to UA.
The easiest path for UA to grow is in the wholesale channel in which it is still significantly
under-represented we estimate wholesale footwear sales are ~$250M today. As it
improves the quality/styling quotient and expands the breadth of SKUs, we believe retailers
like Foot Locker and Finish Line will play a larger role in UAs domestic footwear growth.
As such, we do not believe our 30% CAGR estimate is unrealistic. Lastly, UAs growing DTC
presence is also helping to boost its footwear profile thus creating a virtuous demand circle

Daily Letter | 4
1 December 2014

that should help expand its wholesale penetration more consumers demand the footwear
brand.
Figure 3: Footwear on its way to being $1.5B segment
UA Footw ear
Footw ear sales in DTC
Footw ear sales at w /s
Total footw ear sales

2014E
$150.0
$254.9
$404.9

2019E
$556.0
$950.0
$1,506.0

CAGR
30%
30%
30%

Source: Company reports, Canaccord Genuity Research

LAYING THE FOUNDATION FOR RAPID INTERNATIONAL

EXPANSION
This year has marked UAs re-launched international effort led by Charlie Maurath,
President of International, who came from Adidas in 2012. The newly adopted strategies
now in place are propelling growth to +90% this year. They include retaking control of its
distribution in key European countries (e.g. UK, Europe, and Germany) and converting
from an agent model to a UA salesforce model. UA has also invested in opening retail
stores in China that serve as brand messengers. Lastly, UA has also hired much needed
region specific talent to manage the growth of the brand in these markets. We believe the
success UA is seeing in Europe today supports our thesis that the brand is reaching a
tipping point of awareness.
We believe the strategies in place today should drive continued global expansion of 38%
CAGR. At its analyst day in 2013, UA projected international would grow at a CAGR of
~50% to ~$480M. Given the tremendous growth experienced this year of approximately
87%, we believe UA will blow past that 2016 target.

Global sporting goods market is ripe with opportunity

Getting to a $1.25B in revenue from ~$250M this year implies a CAGR of 38%. We believe
this is an attainable goal, particularly when considering the size of the global opportunity
and where that share can come from.
First, the international sporting goods market is estimated to be $130B in which the top 10
markets account for 60% or $78B of that share. UAs international focus is on the top three
markets in Asia (China, Korea, Japan), Europe (UK, France, Germany), and Latin America
(Brazil, Mexico, and Argentina). Assuming UA was to achieve our projected $1.25B goal in
2019, it would still only represent 1.6% of the total international sporting goods market. In
fact, we believe our estimates could prove conservative if the brands momentum continues
to grow at the current 50%-60% pace.

Daily Letter | 5
1 December 2014

Figure 4: Scratching the International surface

Int'l sporting goods ($B)
Top 10 markets
UA 2014 int'l sales est.
UA 2019 projected sales
CAGR 2014-2019
UA int'l market share in 2019

$130.0
$78.0
$0.25
$1.25
38.0%
1.6%

Source: Company reports, Canaccord Genuity Research

Helping drive the consistent growth in international, will be share donation from key
European brands Adidas and Puma. Together, we estimate the two companies generated
2013 wholesale sales of $9.5B in the key target markets for UA. Assuming UA takes 1%
share per year would account for roughly half of the incremental dollar growth we
estimate international will represent in 2019. Given the issues both Adidas and Puma have
been facing, we believe the opportunity is ripe for UA to press the share gain opportunity.

WOMENS AND KIDS TO DRIVE THE US BUSINESS

Womens (~30% of apparel) and kids (~12% of apparel), will continue to be the fastest
growth categories in the US, largely due to the well-established share position mens
already enjoys. In womens, UA has made great strides in improving its offering, both in
quality and fashion content. In addition, it has made a splash with its recent choices for
athlete endorsements (Misty Copeland and Gisele Bundchen). The result has been a
significant growth in its womens business characterized by increasing sq. ft. allocation at
its wholesale partner doors (e.g. DKS). That said, we believe the womens category has
further room to grow as the line evolves, particularly as the apparel trend continues to
embrace athletic as the category that can transcend the different parts of a womans day
and consequently, her attire needs. We therefore believe wholesale womens, which we
estimate is $410M today, will experience above average growth of ~34% annually reaching
$1.8B by 2019, adding nearly $1.4B in incremental sales to UA. At this level of sales,
womens would represent 40% of sales in 2019.
Much like womens apparel, kids apparel should experience above average growth over
the next five years as well. UAs renewed focus on kids during the past two years has
proven very successful. Its UA Next campaign that caters to the younger athlete (sub-12
years old) coupled with increasing the SKU representation has accelerated growth in the
category. That UA is priming the next generation of athletes and consumers underscores
the importance of this demographic to the long term outlook for UA.

WHILE MENS HOLDS STEADY

Mens has been the cornerstone for the company since its inception nearly 18 years ago.
Naturally it is the largest category, and as such we expect it to show the most modest
growth rate relative to other segments. For the purposes of this analysis we are isolating
mens as a distinct category to the U.S. market. Impressively men's has grown at a CAGR
of 23% over the last six years and today we estimate it represents ~58% of apparel sales.

Daily Letter | 6
1 December 2014

Over the next five yards we believe growth will slow to a rate of ~20%, yet in that time will
contribute approximately $1.2B in incremental sales to the company. By 2019 we estimate
mens domestic wholesale apparel sales will represent 44%. Key to this growth will be 1)
category expansion outside its core athletic category into more traditional apparel
categories where it can offer an improved alternative (e.g. UA chinos), and 2) accelerated
door/footage growth outside of the traditional sporting goods space (e.g. department
stores).
Figure 5: Womens and kids growth rates to outpace mens
UA NA w /s apparel (est.)
Men's
Mix % of apparel
Women's
Mix % of apparel
Kids
Mix % of apparel

2014E
$795
58%
$411
30%
$164
12%

2019E
$2,000
44%
$1,800
40%
$725
16%

CAGR
20%
34%
35%

Source: Company reports, Canaccord Genuity Research

INVESTMENTS ARE NECESSARY TO DRIVE GROWTH

Much continues to be made of UA's EBIT margins of 11.5%-12% being paltry (we argue the
case for under-earning), yet we believe the company is balancing its growth and
investments appropriately. Looking back at NKE's history of investment during its earlier
days of rapid growth in the 1990s, its SG&A as a percent of sales expanded by 1000bps
from ~20% to ~30%. Arguably, these expenses were critical in helping it fuel its long term
growth potential through marketing, advertising, or infrastructure. As such, we are not
worried about UAs optically slow pace of margin expansion during this period of
accelerated growth, particularly in light of the vast growth opportunities it has. We believe
there will be petty of time for the company to harvest its sales gains in later years, but for
now it is more important to lay the proper foundation to support the next five years
growth.

Daily Letter | 7
1 December 2014

DCF SUGGESTS SIGNIFICANT UPSIDE AS UAS EARNINGS

POWER WILL APPROACH ~$4/SHARE
Taking our 2019 projections and using a DCF framework, we arrive at an equity value of
$136/share. This translates into nearly $4/share in earnings power in 2019 (vs. our 2014E
EPS $0.94). Our assumptions include UA getting to $10B with EBIT margins modestly
increasing to 12.5% over that time frame. We use a terminal growth rate of 6.5% and a
WACC of 8.4%. Again using NKE as the analog, it has grown at a remarkable top line
CAGR of ~9% for the last 20 years. Given our belief in UAs long run growth opportunity,
we believe our 6.5% growth is conservative.
Figure 6: UAs 5-year DCF supports current valuation
2013E
2,332.1
27.1%
265.1
11.4%
37.8%
164.9
50.5
2.2%
(87.8)
3.8%
(50.0)
$77.6

Net Sales
grow th rate
EBIT
EBIT margin
tax rate
After tax EBIT
+D&A
% of sales
-Capex
% of sales
-NWC change
Free Cash Flow
PV FCF
WACC
Grow th

71.6

2014E
3,047.2
30.7%
354.5
11.6%
40.8%
210.0
70.1
3.0%
(150.0)
4.9%
(50.0)
$80.1
73.9

8.4%
6.5%

PV of FCF
PV of Terminal Value

1,539.3
27,975.3

Enterprise Value
Net Debt
Equity Value
Shares Outstanding
Equity Value per share

29,514.6
(103.8)
29,618.4
217.29
$136.31

Source: Company reports, Canaccord Genuity Research

2015E
3,793.5
24.5%
448.7
11.8%
39.0%
273.7
113.8
3.0%
(151.7)
4.0%
(50.0)
$185.8
171.3

2016E
4,817.7
27.0%
578.1
12.0%
38.0%
358.4
144.5
3.0%
(192.7)
4.0%
(50.0)
$260.3
221.4
12,242.4

2017E
6,166.7
28.0%
752.3
12.2%
37.0%
474.0
185.0
3.0%
(246.7)
4.0%
(50.0)
$362.3
284.2
15,718.0

2018E
7,893.3
28.0%
986.7
12.5%
37.0%
621.6
236.8
3.0%
(315.7)
4.0%
(50.0)
$492.7
356.5
19,712.7

2019E
9,945.6
26.0%
1,243.2
12.5%
35.0%
808.1
298.4
3.0%
(298.4)
3.0%
(50.0)
$758.1
505.9
27,975.3

Daily Letter | 8
1 December 2014

Using an exit EV/EBITDA multiple valuation framework, we arrive at an equity value of

$101. We base our valuation on an average exit EBITDA multiple of 20x (see Figure 7
below).
Figure 7: UAs valuation using an exit multiple on EBITDA methodology
Equity Value Per Share
at 2019 EBITDA Multiple of:
15.0x
20.0x
25.0x
$83.06
$108.43
$133.81
$81.20
$105.99
$130.78
$79.38
$103.61
$127.83
$77.62
$101.29
$124.96
$75.69
$98.82
$121.96
$74.02
$96.62
$119.23
$72.38
$94.48
$116.58

Discount
Rate
6.9%
7.4%
7.9%
8.4%
8.9%
9.4%
9.9%
Average:

$101.32

Source: Company reports, Canaccord Genuity Research

Taking an average of both valuation measures yields an equity price of $118/share. In

either scenario, we see significant upside in UA to todays stock price. Our BUY rating is
predicated on UA optimizing on its global growth opportunities across all categories across
all channels of distribution. We view UA as a core growth holding.

Daily Letter | 9
1 December 2014

Figure 8: UA projected income statement

December Fiscal
Incom e Statem ent
Revenue
Apparel
Footw ear
Accessories
Total Net Sales
Licensing revenues
Total Net Revenue

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14E

1Q15E

2Q15E

3Q15E

4Q15E

2010

2011

2012

2013

2014E

2015E

345.5
80.8
36.1
462.4
9.2
471.6

310.2
81.7
51.0
442.9
11.6
454.5

560.9
81.0
64.4
706.3
16.9
723.1

545.5
55.4
64.6
665.5
17.3
682.8

459.2
114.0
51.6
624.8
16.8
641.6

420.0
109.5
59.9
589.5
20.2
609.7

704.6
121.6
84.9
911.1
26.8
937.9

681.9
72.0
73.7
827.5
25.9
853.4

569.5
148.3
67.0
784.7
20.1
804.9

520.8
136.9
77.9
735.7
24.2
759.9

859.6
164.2
97.7
1,121.4
32.2
1,153.6

825.1
97.2
84.7
1,007.0
31.1
1,038.0

853.5
127.2
43.9
1,024.6
39.4
1,063.9

1,122.0
181.7
132.4
1,436.1
36.6
1,472.7

1,385.4
239.0
165.8
1,790.1
44.8
1,834.9

1,762.2
298.8
216.1
2,277.1
55.0
2,332.1

2,265.7
417.2
270.1
2,953.0
89.6
3,042.6

2,774.9
546.5
327.3
3,648.8
107.5
3,756.3

COGS
Gross Profit
SG&A
Operating Incom e

255.1
216.6
203.1
13.5

234.9
219.6
187.3
32.3

373.0
350.1
229.3
120.8

332.4
350.4
251.9
98.5

340.9
300.7
273.8
26.9

309.7
300.0
265.3
34.7

472.6
465.3
319.2
146.1

420.7
432.7
289.7
143.0

425.8
379.1
347.8
31.3

384.5
375.4
328.9
46.4

579.1
574.5
397.4
177.1

505.5
532.5
356.3
176.2

533.4
530.5
418.2
112.4

759.8
712.8
550.1
162.8

955.6
879.3
670.6
208.7

1,195.4
1,136.7
871.6
265.1

1,544.0
1,498.6
1,148.0
350.7

1,894.9
1,861.4
1,430.4
431.1

Other Income, net

Pretax Income
Taxes
Net Income
EPS, diluted
First Call Consensus

(0.5)
13.0
5.2
$7.8
$0.04
$0.02

(1.5)
30.8
13.2
$17.6
$0.08
$0.07

(0.8)
120.0
47.2
$72.8
$0.34
$0.33

(1.3)
97.2
33.0
$64.2
$0.30
$0.26

(1.7)
25.1
11.6
$13.5
$0.06
$0.04

(1.0)
33.7
16.0
$17.7
$0.08
$0.07

(4.9)
141.2
52.1
$89.1
$0.41
$0.40

(2.0)
141.0
56.4
$84.6
$0.39
$0.39

(2.0)
29.3
11.4
$17.9
$0.08
$0.09

(2.0)
44.4
17.3
$27.1
$0.12
$0.12

(2.0)
175.1
66.5
$108.6
$0.50
$0.50

(2.0)
174.2
66.2
$108.0
$0.49
$0.49

(3.4)
108.9
40.4
$68.5
$0.33
$0.31

(5.9)
156.9
59.9
$96.9
$0.46
$0.46

(5.3)
203.4
74.7
$128.8
$0.61
$0.60

(4.1)
261.0
98.7
$162.3
$0.76
$0.72

(9.6)
341.1
136.1
204.9
$0.94
$0.95

(8.0)
423.1
161.5
261.6
$1.20
$1.20

214.0

214.2

214.4

214.6

216.9

217.3

218.0

218.5

218.5

218.5

218.5

218.5

205.1

210.1

212.6

214.3

217.7

218.5

45.9%
0.34%
43.1%
(3.83%)
2.9%
(0.1%)
39.9%
1.7%

48.3%
2.45%
41.2%
1.48%
7.1%
(0.3%)
43.0%
3.9%

48.4%
(0.33%)
31.7%
1.22%
16.7%
(0.1%)
39.4%
10.1%

51.3%
1.06%
36.9%
(2.76%)
14.4%
(0.2%)
34.0%
9.4%

46.9%
0.95%
42.7%
0.38%
4.2%
(0.3%)
46.1%
2.1%

49.2%
0.88%
43.5%
(2.30%)
5.7%
(0.2%)
47.5%
2.9%

49.6%
1.19%
34.0%
(2.32%)
15.6%
(0.5%)
36.9%
9.5%

50.7%
(0.61%)
33.9%
2.95%
16.8%
(0.2%)
40.0%
9.9%

47.1%
0.23%
43.2%
(0.53%)
3.9%
(0.2%)
39.0%
2.2%

49.4%
0.20%
43.3%
0.22%
6.1%
(0.3%)
39.0%
3.6%

49.8%
0.19%
34.4%
(0.42%)
15.4%
(0.2%)
38.0%
9.4%

51.3%
0.60%
34.3%
(0.38%)
17.0%
(0.2%)
38.0%
10.4%

49.9%
1.97%
39.3%
(1.37%)
10.6%
(0.3%)
37.1%
6.4%

48.4%
(1.46%)
37.4%
1.95%
11.1%
(0.4%)
38.2%
6.6%

47.9%
(0.48%)
36.5%
0.80%
11.4%
(0.3%)
36.7%
7.0%

48.7%
0.82%
37.4%
(0.83%)
11.4%
(0.2%)
37.8%
7.0%

49.3%
0.51%
37.7%
(0.36%)
11.5%
(0.3%)
39.9%
6.7%

49.6%
0.30%
38.1%
(0.35%)
11.5%
(0.2%)
38.2%
7.0%

22.0%
26.9%
21.8%
22.8%
18.8%
22.7%
23.6%
23.8%
34.7%
(44.7%)
(46.7%)
(47.3%)

22.7%
21.1%
30.1%
23.2%
16.7%
23.0%
29.6%
30.4%
18.7%
175.7%
163.4%
161.0%

26.1%
28.3%
18.4%
25.6%
29.4%
25.7%
24.9%
24.7%
21.1%
32.8%
27.0%
26.2%

34.9%
23.8%
51.7%
35.3%
23.1%
35.0%
37.8%
38.7%
45.9%
20.7%
28.0%
27.5%

32.9%
41.2%
42.9%
35.1%
81.8%
36.0%
38.9%
36.9%
34.9%
99.1%
73.3%
70.9%

35.4%
34.2%
17.5%
33.1%
73.1%
34.1%
36.6%
34.5%
41.6%
7.4%
0.7%
(0.7%)

25.6%
50.1%
32.0%
29.0%
59.1%
29.7%
32.9%
31.6%
39.2%
20.9%
22.4%
20.4%

25.0%
30.0%
14.0%
24.3%
50.0%
25.0%
23.5%
22.1%
15.0%
45.2%
31.9%
29.5%

24.0%
30.0%
30.0%
25.6%
20.0%
25.4%
26.1%
26.4%
27.0%
16.6%
32.1%
31.2%

24.0%
25.0%
30.0%
24.8%
20.0%
24.6%
25.1%
25.5%
24.0%
33.9%
53.3%
52.4%

22.0%
35.0%
15.0%
23.1%
20.0%
23.0%
23.5%
23.7%
24.5%
21.2%
21.8%
21.5%

21.0%
35.0%
15.0%
21.7%
20.0%
21.6%
23.1%
23.3%
23.0%
23.2%
27.7%
27.7%

30.9%
(6.6%)
25.1%
24.5%
18.1%
24.2%
29.4%
30.3%
28.7%
31.8%
46.3%
44.5%

31.5%
42.9%
201.7%
40.2%
(7.1%)
38.4%
34.4%
37.7%
31.5%
44.9%
41.5%
38.2%

23.5%
31.5%
25.3%
24.7%
22.5%
24.6%
23.4%
23.4%
21.9%
28.2%
32.9%
31.3%

27.2%
25.1%
30.3%
27.2%
22.8%
27.1%
29.3%
29.6%
30.0%
27.0%
26.1%
25.1%

28.6%
39.6%
25.0%
29.7%
63.0%
30.5%
31.8%
30.3%
31.7%
32.3%
26.3%
24.3%

22.5%
31.0%
21.2%
23.6%
20.0%
23.5%
24.2%
24.5%
24.6%
22.9%
27.6%
27.2%

Shares outstanding, diluted

Margin Analysis
Gross Margin Total
y/y change (bps)
SG&A
leverage/(deleverage)
EBIT Margin
Other income
Taxes
Net Income
Grow th Analysis
Revenue
Apparel
Footw ear
Accessories
Total Net Sales
Licensing revenues
Total Net Revenue
Gross Profit Dollars
Gross Profit Dollars ex-licensing revs
SG&A
EBIT
Net Income
EPS

Source: Company reports, Canaccord Genuity Research

Daily Letter | 10
1 December 2014

Investment risks
1.) We believe the primary risk to our thesis is a deceleration in sales. UA's
premium multiple is predicated on the continuation of robust sales growth and
thus any perceived or actual slowdown in top-line trends would likely result in
multiple compression.
2.) Another risk includes continued supply chain issues that lead to gross margin
contraction and/or order cancellations. While UA is acting to improve its order fill
rate with its customers, we do not expect a meaningful change to its supply
constraints until H2/12. Should demand for its product continue to outstrip
supply, margins could suffer as the company is forced to compensate its
customers for late deliveries.
3.) Lastly, we consider footwear to be a risk as questions regarding UA's ability to
succeed in this category remain unanswered. A lack of improvement in future
footwear launches, particularly running, could result in brand deterioration and
stall growth in the category.

Daily Letter | 11
1 December 2014

APPENDIX: IMPORTANT DISCLOSURES

Analyst Certification:

Compendium Report:

Site Visit:

Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby
certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring
analysts personal, independent and objective views about any and all of the designated investments or
relevant issuers discussed herein that are within such authoring analysts coverage universe and (ii) no part
of the authoring analysts compensation was, is, or will be, directly or indirectly, related to the specific
recommendations or views expressed by the authoring analyst in the research.
Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may
not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to the NASD Rule 2711
and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading
securities held by a research analyst account.
If this report covers six or more subject companies, it is a compendium report and Canaccord Genuity and its
affiliated companies hereby direct the reader to the specific disclosures related to the subject companies
discussed in this report, which may be obtained at the following website (provided as a hyperlink if this
report is being read electronically) http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx; or by
sending a request to Canaccord Genuity Corp. Research, Attn: Disclosures, P.O. Box 10337 Pacific Centre,
2200-609 Granville Street, Vancouver, BC, Canada V7Y 1H2; or by sending a request by email to
disclosures@canaccordgenuity.com. The reader may also obtain a copy of Canaccord Genuitys policies and
procedures regarding the dissemination of research by following the steps outlined above.
An analyst has visited the issuer's material operations in Baltimore, Maryland. No payment or
reimbursement was received from the issuer for the related travel costs.

Price Chart:*

Distribution of Ratings:

Coverage Universe

Global Stock Ratings

(as of 1 October 2014)

IB Clients
Rating

627

60.2%

36.7%

53

5.1%

54.7%

Hold

317

30.5%

13.9%

Sell

43

4.1%

2.3%

Buy
Speculative Buy

1041
100.0%
*Total includes stocks that are Under Review

Daily Letter | 12
1 December 2014

Canaccord Genuity
Ratings System:

BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.
HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.
SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months.
NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer.
Risk-adjusted return refers to the expected return in relation to the amount of risk associated with the
designated investment or the relevant issuer.

Risk Qualifier:

SPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental
criteria. Investments in the stock may result in material loss.

Canaccord Genuity Research Disclosures as of 1 December 2014

Company
Under Armour

Disclosure
5, 7

The relevant issuer currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated
companies. During this period, Canaccord Genuity or its affiliated companies provided the following services
to the relevant issuer:
A. investment banking services.
B. non-investment banking securities-related services.
C. non-securities related services.
In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for
Corporate Finance/Investment Banking services from the relevant issuer.

In the past 12 months, Canaccord Genuity or any of its affiliated companies have been lead manager, co-lead
manager or co-manager of a public offering of securities of the relevant issuer or any publicly disclosed offer
of securities of the relevant issuer or in any related derivatives.

Canaccord Genuity acts as corporate broker for the relevant issuer and/or Canaccord Genuity or any of its
affiliated companies may have an agreement with the relevant issuer relating to the provision of Corporate
Finance/Investment Banking services.
Canaccord Genuity or one or more of its affiliated companies is a market maker or liquidity provider in the
securities of the relevant issuer or in any related derivatives.
In the past 12 months, Canaccord Genuity, its partners, affiliated companies, officers or directors, or any
authoring analyst involved in the preparation of this research has provided services to the relevant issuer for
remuneration, other than normal course investment advisory or trade execution services.
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive
compensation for Corporate Finance/Investment Banking services from the relevant issuer in the next six
months.
The authoring analyst, a member of the authoring analysts household, or any individual directly involved in
the preparation of this research, has a long position in the shares or derivatives, or has any other financial
interest in the relevant issuer, the value of which increases as the value of the underlying equity increases.
The authoring analyst, a member of the authoring analysts household, or any individual directly involved in
the preparation of this research, has a short position in the shares or derivatives, or has any other financial
interest in the relevant issuer, the value of which increases as the value of the underlying equity decreases.
Those persons identified as the author(s) of this research, or any individual involved in the preparation of this
research, have purchased/received shares in the relevant issuer prior to a public offering of those shares, and
such persons name and details are disclosed above.
A partner, director, officer, employee or agent of Canaccord Genuity or its affiliated companies, or a member
of his/her household, is an officer, or director, or serves as an advisor or board member of the relevant issuer
and/or one of its subsidiaries, and such persons name is disclosed above.
As of the month end immediately preceding the date of publication of this research, or the prior month end if
publication is within 10 days following a month end, Canaccord Genuity or its affiliated companies, in the
aggregate, beneficially owned 1% or more of any class of the total issued share capital or other common
equity securities of the relevant issuer or held any other financial interests in the relevant issuer which are
significant in relation to the research (as disclosed above).
As of the month end immediately preceding the date of publication of this research, or the prior month end if
publication is within 10 days following a month end, the relevant issuer owned 1% or more of any class of the
total issued share capital in Canaccord Genuity or any of its affiliated companies.
Other specific disclosures as described above.

5
6
7
8
9
10
11
12

13
14

Daily Letter | 13
1 December 2014

Canaccord Genuity is the business name used by certain wholly owned subsidiaries of Canaccord Genuity
Group Inc., including Canaccord Genuity Inc., Canaccord Genuity Limited, Canaccord Genuity Corp., and
Canaccord Genuity (Australia) Limited, an affiliated company that is 50%-owned by Canaccord Genuity Group
Inc.
The authoring analysts who are responsible for the preparation of this research are employed by Canaccord
Genuity Corp. a Canadian broker-dealer with principal offices located in Vancouver, Calgary, Toronto,
Montreal, or Canaccord Genuity Inc., a US broker-dealer with principal offices located in New York, Boston,
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in London (UK) and Dublin (Ireland), or Canaccord Genuity (Australia) Limited, an Australian broker-dealer
with principal offices located in Sydney and Melbourne.
The authoring analysts who are responsible for the preparation of this research have received (or will
receive) compensation based upon (among other factors) the Corporate Finance/Investment Banking
revenues and general profits of Canaccord Genuity. However, such authoring analysts have not received, and
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The information contained in this research has been compiled by Canaccord Genuity from sources believed to
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contrary to the opinions expressed in this research. Canaccord Genuitys affiliates, principal trading desk,
and investing businesses may make investment decisions that are inconsistent with the recommendations or
views expressed in this research.
This research is provided for information purposes only and does not constitute an offer or solicitation to buy
or sell any designated investments discussed herein in any jurisdiction where such offer or solicitation would
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to act as a securities broker or dealer in any jurisdiction by any person or company that is not legally
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direct or consequential loss arising from or relating to any use of the information contained in this research.

For Canadian Residents:

This research has been approved by Canaccord Genuity Corp., which accepts sole responsibility for this
research and its dissemination in Canada. Canadian clients wishing to effect transactions in any designated
investment discussed should do so through a qualified salesperson of Canaccord Genuity Corp. in their
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For United States

Residents:

Canaccord Genuity Inc., a US registered broker-dealer, accepts responsibility for this research and its
dissemination in the United States. This research is intended for distribution in the United States only to
certain US institutional investors. US clients wishing to effect transactions in any designated investment
discussed should do so through a qualified salesperson of Canaccord Genuity Inc. Analysts employed outside
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These analysts may not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to
the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public
appearances and trading securities held by a research analyst account.

Daily Letter | 14
1 December 2014

For United Kingdom and

European Residents:

This research is distributed in the United Kingdom and elsewhere Europe, as third party research by
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For Jersey, Guernsey

and Isle of Man
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This research is sent to you by Canaccord Genuity Wealth (International) Limited (CGWI) for information
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For Australian
Residents:

This research is distributed in Australia by Canaccord Genuity (Australia) Limited ABN 19 075 071 466
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For Singapore
Residents:

This research is distributed pursuant to 32C of the Financial Advisers under an arrangement between each of
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Additional information is available on request.
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Conduct Authority.
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