Nike, Inc.

Good afternoon, everyone. Welcome to Nike Inc.' 's fiscal 2021 third 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 actual results to differ materially. These risks and uncertainties are detailed in the reports filed with 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'd like to turn the call over to Andy Muir, VP, Investor Relations.

Thank you, Operator. Hello, everyone, and thank you for joining us today to discuss Nike Inc.' 's Fiscal 2021 Third Quarter results. As the operator indicated, participants on today's call may discuss non-GAAP financial measures. You will find the appropriate reconciliation 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 to everyone on today's call. First and foremost, like all companies around the world, we're pleased by the recent positive news of the vaccine rollout. We remain optimistic. though we're prepared to operate through continued volatility until the virus is fully contained. Our teams have proven their agility to operate through uncertainty while also staying focused on the long term. And we once again demonstrated that agility in Q3. It's why I wouldn't trade our position with anyone. The power of Nike is our consistency and the strength of our global portfolio. Throughout the pandemic, we have stayed focused on our unique advantages and we've been resolute in fueling innovation and our brand is as strong as ever. I'm proud of our results this quarter. Q3 saw us continue to deliver consumers new products, new campaigns, the energy from our roster of athletes and more. Our strategy puts the member at the center and keeps us in the lead. and we will continue to drive even further competitive separation. And still, we push our own expectations of ourselves. Last week, we released our 2020 impact report and announced our new 2025 purpose targets. Our new five-year purpose targets offer a roadmap to 2025, outlining clear goals, action plans, and accountability. And for the first time, that accountability now includes linking executive compensation to our purpose goals. Our 2025 targets will keep us focused on accelerating our efforts against a wide range of priorities, from sustainability to representation to investing in the future of sport in communities around the world. I encourage everyone to take a look at the report at purpose.nike.com. Ultimately, this isn't just the right thing to do. It makes great business sense. Setting purpose targets for ourselves creates long-term value, raises the bar for our industry, and redefines our own potential for positive impact in the world. Our commitment to constant improvement is why I continue to be so amazed by this team. I have never been more confident in our leadership and teams around the world as we stay on the offense accelerating our long-term strategy. And as I said, this continues to be a dynamic external environment, but I am proud how adaptable Nike is. No matter what happens, COVID spikes, forest store closures, port congestion on the West Coast, and more, this team responds with solutions. We adjust and we win. Our brand continues to deeply connect all over the world. We remain consumers' number one favorite brand in all 12 of our key cities in both men's and women's businesses. We're also seeing particularly strong connections in Greater China, where our strong portfolio brands, including Jordan and Converse, is helping to extend our leadership position. All over the world, the relationships we have with consumers cannot easily be replicated. Our brand differentiates us, driven by the unique competitive advantages that we enjoy. First, Nike's connections with consumers are driven by sport and cultural authenticity. Our roster of athletes is the greatest in the world. Naomi Osaka continues to emerge as a truly global sport icon, having won four Grand Slam titles at only 23 years old. Killian Mbappe became the youngest footballer ever to score 25 Champions League goals, leading Paris Saint-Germain into the quarterfinals. The NBA All-Star Game was proof yet again of our dominance in basketball, with LeBron's team taking on KD's, Giannis winning MVP, and a young core of Jordan-brand superstars led by Zion and Luka. And the energy of March Madness... tips off today with Jordan and Nike schools making up 10 of the top 16 women's teams and 15 of the top 16 men's teams. No brand connects with consumers with the power and culture of sport like Nike and we pride ourselves on our leadership role to drive hope and inspiration all over the world. Our brand is powered by our global scale. This is a particularly critical advantage as we continue to fuel our digital transformation. We've had tremendous success in digital, quickly pivoting to serve consumers as they shift to digital channels. But even as this consumer shift is felt across industries, Nike's digital transformation remains a unique advantage. Scale matters. The strength of our brand allows us to stay personal at scale with consumers in all of our geographies. And more than ever, the portfolio effect of being a truly global brand is powerful. Third, we stay at the front of the pack thanks to our compelling consumer experiences. Last quarter, we announced the launch of Sneakers Live, our first product drop via live streaming. In Q3, we doubled the number of countries with live streaming, adding Japan, Germany, and Italy. We're seeing phenomenal engagement for this live interaction, with average viewing duration doubling to over 15 minutes. I wish it were 15 years. Well above the interesting norms. We're also creating content to connect members to the sport and sneaker community content that drives the highest engagement on sneakers so whether it's few through the sneakers app our activity apps platforms like tick tock and more we continue to find compelling ways to deliver an authentic nike experience in digital and fourth the jordan brand had a very strong quarter growing double digits in q3 This growth was broad-based, led by our biggest growth opportunities, digital, international, apparel, and women's. In fact, Jordan's women's business was up nearly triple digits, a strong statement of how the brand continues to serve a broader set of consumers. Q3 also saw the launch of the Air Jordan 11 Jubilee, one of the largest and most successful footwear launches ever with more than $175 million in revenue. We're incredibly confident about the continued growth opportunity for the Jordan brand moving forward. As always, our brand is propelled by our unmatched innovation investment and pipeline. Innovation's at our core. reflecting not just our foundational values, but the values we share with consumers. We don't just innovate for the elite athlete. We use innovation and design to solve problems for all consumers, no matter their sport or style of play. And we consistently bring fresh, new product to market, supported by compelling storytelling that helps drive consumer demand. At the core of our innovation engine is our edge in performance. And we continue to use this edge to evolve some of the most popular products for everyday runners. This quarter, we focused on a key problem for runners with new footwear that continues our mission to unlock injury prevention. The Zoom 10 Invincible Run offers a brand new look for Nike running with increased foam in the midsole. This creates a soft ride that makes running feel easy with incredible energy return and is designed to help reduce running-related injuries. We also just launched the React Escape, a shoe specifically designed for the female runner. The React Escape's silhouette, materials, and design details are all aimed at new runners, and it's seen great sell-through as it encourages more women to pick up the sport. We're also driving our sustainability agenda through strong product innovation. We've set ambitious goals around the use of sustainable materials throughout our line and will continue to invest in new materials and methods of make to maintain our leadership position here. Last month, we launched Cosmic Unity, our first performance shoe under our Move to Zero initiative. This initiative, which moves us toward zero waste and zero carbon, embraces circular design as a guiding principle. Cosmic Unity, which has also already been worn on court by some of the NBA's best, including Anthony Davis, is Nike's first performance shoe made out of at least 25% recycled content by weight and offers just a hint of our future with sustainable product. We're also resolute in our pursuit of making sport a daily habit for all athletes. A great example of this work is the Nike Go Fly Ease. It's easy on, easy off design, solves for an ambitious North Star, the creation of a truly hands-free shoe. This is a shoe for everyone, from elite athletes to parents with their hands full. We're initially launching Nike GoFlyEase first for our most engaged members with broader consumer availability coming later this year. and we continue to push our industry in creating product through better consumer insights. This quarter, we acquired Datalog, a data integration platform that will help us process, analyze, and act on the data we enjoy thanks to our scale advantage. This lets us harness the full power of our data, turning it into more actionable insights and enabling greater speed. As part of our recent organizational realignment, we also put our data teams alongside the creative teams to unlock this opportunity. Nike has always married the art and science of product creation, and the move toward deeper and more dynamic insights, along with our talent and investments in data science and machine learning, creates a capacity that no other brand has. Let's quickly talk about the Tokyo Olympics and Paralympics. Despite the unique circumstances surrounding the Games, we look forward to leveraging that world stage to showcase our innovation and purpose commitments. Our pipeline and cadence has continued its pace, including some new innovations and the scaling of a few of our recent innovation platforms. This summer in Tokyo, we look forward to sharing the next generation of FlyEase and its mission of inclusive innovation, as well as delivering some new and exciting women-specific innovations. The last thing I'd like to discuss is digital. We're taking even greater advantage of our vast digital opportunity as we create the future of retail. We know that our consumers want a consistent, seamless and premium experience. And so alongside our strategic partners, we continue to consolidate the marketplace to give our consumers that premium experience. Our owned digital business is thriving with growth of 54% on a currency neutral basis during the quarter. This growth was led by North America, which had its first ever quarter with a billion dollars in digital revenue. As you know, we set a bold vision for digital across owned and operated and partnered, being 50% of our business in the long term. We have made significant progress to date. increasing the digital mix of our business by more than 10 points in Q3 versus the prior year. Nike's ability to sustainably grow digital for the long term is rooted in our member connections and compelling experiences that only Nike can offer. And our members are more engaged than ever, with an over 60% increase in monthly engaged users for the quarter, led by our Sneakers app, where we're seeing four times the engagement in monthly active users versus last year. This heightened engagement is translating into buying. We're seeing continued member growth outpace total digital growth as buying members increased 80% versus the prior year. And these connections extend beyond digital. In our own stores, member demand penetration rates are seeing meaningful increases enabled by robust store training programs, member specific promotions, and enhanced account linking capabilities. This is critical as we strategically focus on better serving and driving repeat engagement with active high value members across all of our channels. In the end, Nike is staying on offense, and we're focused on extending our leadership position. We have a proven playbook, led by digital, and everything we've seen makes us more confident in our future. Our focus is on the long term, and we're not slowing down. And with that, I'll turn the call over to Matt.