Nike, Inc.

Good afternoon, everyone. Welcome to Nike Inc's fiscal 2021 second quarter conference call. For those who want to reference today's press release, you'll find it at investors.nike.com. Leading today's call is Andy Muir, VP Investor Relations. Before I turn the call over to Ms. Muir, let me remind you that participants on this call will make forward-looking statements based on current expectations, and those statements are subject to certain risks and uncertainties that could cause the actual results to differ materially. These risks and uncertainties Uncertainties are detailed in the reports filed with the SEC, including the annual report filed on Form 10-K. Some forward-looking statements may concern expectations of future revenue growth or gross margin. In addition, participants may discuss non-GAAP financial measures, including references to constant dollar revenue. References to constant dollar revenue are intended to provide context as to the performance of the business, eliminating foreign exchange fluctuations. Participants may also make references to other non-public financial and statistical information and non-GAAP financial measures. To the extent non-public financial and statistical information is discussed, presentations of comparable GAAP measures and quantitative reconciliations will be made available at Nike's website, investors.nike.com. Now I would like to turn the call over to Endy Muir, VP, Investor Relations.

Thank you, Operator. Hello, everyone, and thank you for joining us today to discuss Nike, Inc.' 's fiscal 2021 second quarter results. As the operator indicated, participants on today's call may discuss non-GAAP financial measures. You will find the appropriate reconciliations in our press release, which was issued about an hour ago, or at our website, investors.nike.com. Joining us on today's call will be Nike Inc. President and CEO, John Donahoe, and our Chief Financial Officer, Matt Friend. Following their prepared remarks, we will take your questions. We would like to allow as many of you to ask questions as possible in our allotted time. So we would appreciate you limiting your initial questions to one. In the event you have additional questions that are not covered by others, Please feel free to re-queue, and we will do our best to come back to you. Thanks for your cooperation on this. I'll now turn the call over to Nike Inc. President and CEO, John Donahoe.

Thank you, Andy. And hello and happy holidays to everyone on today's call. Before I get into our Q2 performance, I want to acknowledge the global environment right now. We continue to deal with the COVID-19 pandemic with surges across the U.S. and in many countries around the world. In fact, consistent with social distancing norms, Matt, Andy, and I are doing this call from our homes. So if this audio sounds a little different, that's life in the Zoom world. And we're feeling optimistic with positive news on vaccines. But in the meantime, we hope everyone stays safe out there. Looking at Q2, our strong business results reflect our relentless focus on our objectives. I'm going to talk this quarter about the same themes I talked about last quarter. And most probably next quarter, I'll talk to you about them again. The reason for this consistency is that our strategy is sound. Our strategy is working. and we're excited by what we're seeing as we continue to execute it. In Q2, we returned a growth of 9% on a reported basis. This revenue improvement reflects currency-neutral growth across all of our geographies, Nike Digital up 80% globally, and women's growth outpacing our overall growth. But beyond any one-quarters results, The clear momentum we have right now is evidence of our product innovation and brand strength that allows us to connect with consumers worldwide. I've said it before. These are times when strong brands get stronger. The structural tailwinds we're seeing, including permanent shifts toward digital, athletic wear, and health and wellness, continue to offer us incredible opportunities. And, of course, as organized sport returns around the world, that energy creates yet another tailwind for Nike. For example, we were excited to see so many runners participating in the Shanghai Marathon two weeks ago. Speaking of Greater China, the growth we saw there in Q2 is evidence of the progress we've made toward our end-to-end digital transformation, which allows us to better manage volatility and deliver strong growth. As a result, in Q2, Greater China grew 19% on a currency neutral basis and 24% on a reported basis. Our success in Greater China was also driven by a triumphant Singles Day, in which Nike yet again was the number one sport brand, with the highest store demand and highest traffic on Tmall. This growth underscores how we engage with consumers on Singles Day. bringing more than 4 million new members to Nike. Overall, Singles Day drove more than a half a billion dollars in digital demand. More broadly, this holiday season also was highlighted by the record-setting digital sales we saw during Black Friday week, which has shown the power of our digital transformation all over the globe. Digital is now woven into everything we do as a company. It's how we operate and prioritize, from how we engage with members, to how we operate our supply chain, to how we serve consumers in the marketplace. Today, I'd like to focus on two key areas of increasing competitive advantage for us. Our leadership and innovation and our incredible brand momentum. Let's start with product and innovation. Innovation has always been our lifeblood at Nike. It's what continues to create separation between us and our competition. Our return to growth this quarter was fueled by our relentless innovation pipeline. In the last 90 days, we've introduced exciting products at an impressive pace, and this will continue going forward. Through innovation, we are serving consumers in ways no other brand can. We're using digital to connect product to consumers like never before. We're bringing more athletes into sport through inclusivity. And we're scaling sustainable materials further in our product portfolio. This quarter's launches in basketball, including the LeBron 18 and the Kyrie 7, have sold incredibly well. I'm particularly excited that both were launched digital first. The LeBron 18 was introduced in September through an integrated live stream with Tencent in Greater China, driving deeper connection to local hoops culture. And we launched the Kyrie 7 by announcing four colorways available only as mystery purchases through the sneakers app. In women's, our M maternity collection. is connecting with consumers in the marketplace with 100% sell-through of tights in the first two days. Due to high consumer demand for our new maternity wear, we're bringing more units into the marketplace and rolling out more content and inspiration for women pre- and postpartum on our activity apps. This is a great example of how we start with product and then scale further through engagement to deepen our connection with consumers. We also grow sport through inclusivity. For example, we continue to extend our size offerings as we give more consumers access to sport. For example, in women's, we now have more than 100 styles of extended sized apparel across Nike and Jordan, and we will continue to further increase our offering. And this quarter, we launched extended sizing in our kids' business in North America with a plan to increase to 25% of our kids' assortment next summer. Finally, sustainability will always be core to our innovation efforts. 85% of our recently launched ACG apparel collection contains more than 90% recycled materials. And we'll also continue to scale sustainability through our sportwear icons. In fact, just this past quarter, we launched our new sustainable crater foam in both Air Force One and Waffle Racer. The demand for these products and more shows that consumer hunger for sustainability continues to accelerate. We're proud of this innovation pipeline, and we have no plans to slow down. In coming quarters, new innovations will include exciting new women's products in Jordan brand, a new running style designed to help reduce injury, and our first performance shoe in our sustainable footwear platform. Innovation differentiates Nike. We don't settle for the lead, and our ability to innovate remains unrivaled. It's so fundamental to us that we increased our investment in innovation during the uncertainty of the pandemic to create even further separation. This is how Nike stays in the lead. Moving to our brand strength, our deep connection with consumers through authentic brand moments at global scale also continues to expand our leadership position. As I said earlier, the strong are getting stronger. and our scale is unmatched. In Q2, Nike generated over 7 billion brand impressions across social platforms globally, directly connecting with consumers on the platforms where they spend their time. For example, our Never Too Far Down film became the number one ad that consumers chose to watch on YouTube during 2020. And these touch points led to over 400 million social engagements. It's clear we're not just reaching our consumers. We're creating dialogue and opportunities for action that continue to exceed our own internal benchmarks. This deep and meaningful connection has a direct result on Nike membership. Since the pandemic began, we've added more than 70 million new members globally. and we're deeply focused on the member funnel outcomes, including new member buying, reactivation, and retention. And it's working. Importantly, buying member growth is outpacing new and active member growth. And growth in member demand is outpacing total digital growth. As we drive our membership efforts, we continue to innovate how we serve members. This quarter, Nike hosted our first ever globally coordinated member days, which demonstrate how we continue to create value for Nike members. This unique retail moment offers first access to product, rewards for activity, and exclusives across stores and digital. This event reached over 60 million members across 25 countries, driving higher engagement in conversion metrics for the quarter. And in Q2, we once again used the Sneakers app to push digital retail to the next level. Sneakers remains one of Nike's greatest competitive advantages, delivering truly innovative features for consumers. For example, this quarter we launched Sneakers Live with our first-ever product drop via live streaming, resulting in 100% sell-through of the Air Jordan 4 PSG in under two minutes This live streaming capability is now fully launched in both North America and EMEA with plans to expand in Japan. Live interaction creates stronger member engagement with Nike, giving them better access to our best products and experiences. We see so much value here that we opened a brand new live streaming studio in Greater China just in time for Singles Day. Simply put, The Nike brand is strong. We have a scale that's unparalleled, and the brand is creating meaningful connections everywhere the swoosh exists. Just look at our results this quarter. Our brand's power this year has been second to none. Before I wrap up, I want to give a little more context for a number I mentioned earlier, our 80% Nike digital growth this quarter. we've now had three straight quarters of roughly 80% digital growth. As we've said, this growth won't always be so uniform, but we are growing the pie and taking share from competition. This is the sharp point of our strategy. The consumer shift to digital is permanent, and our digital penetration will only increase in years to come. Across the quarter, our innovation pipeline and brand strength positioned us to continue to navigate a dynamic environment with agility. We have a proven playbook led by digital. The foundation of this playbook is our commitment to product and consumer connection. The fundamental truth of Nike is that our innovation and brand strength continue to set the pace. Now, Matt will give you more detail on our playbook. Before he does, I'd like to finish by saluting our teams around the globe. Since the start of the pandemic, we've said that we would stay on the offense and the credit for that continued effort and execution goes to our team. Around the world, in every facet of our business and our organization, They continue to demonstrate commitment, resilience, and creativity. I could not be prouder of everyone on the Nike team, and I genuinely thank them. And now, I'll turn things over to Matt.