Nike, Inc.

Good afternoon, everyone. Welcome to Nike Inc's Fiscal 2022 Second Quarter Conference Call. For those who want to reference today's press release, you'll find it at http://investors.nike.com. Leading today's call is Paul Trussell, VP of Investor Relations and Strategic Finance. Before I turn the call over to Mr. Trussell, let me remind you that all 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 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 http://investors.nike.com. Now I'd like to turn the call over to Paul Trestle.

Thank you, operator. Hello, everyone, and thank you for joining us today to discuss Nike Inc.' 's fiscal 2022 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. Thank you for your cooperation on this. I will now turn the call over to Nike Inc. President and CEO, John Donahoe. Thanks, Paul.

And hello and happy holidays to everyone on today's call. Before I get into our quarterly performance, I want to take a moment to acknowledge the recent passing of Virgil Abloh, Since 2016, Virgil has been a beloved member of the Nike, Jordan, and Converse family. He was a brilliant creative force who shared a passion for challenging the status quo and pushing forward a new vision while inspiring multiple generations along the way. But what stood out to me personally about Virgil was his humility and his humanity. We offer our condolences to the many who shared a connection with Virgil he will be missed greatly. As we look at Q2, the creativity and resilience of our entire Nike Inc. team helped deliver another strong quarter. The results we delivered offered continued proof that our strategy is working, even as we execute through global macroeconomic constraints. You know, whenever there's turbulence, I always go back to the fundamentals. And for Nike, that means putting the consumer at the center and leveraging our long-term competitive advantages, which include a culture deeply rooted in innovation, a brand that deeply connects with consumers fueled by compelling storytelling, and an unmatched sports marketing portfolio. And we believe a fourth emerging competitive advantage for us is digital, as we are one of the few brands that can directly connect with and serve consumers at scale. We also continue to benefit from structural tailwinds that have accelerated during the pandemic. Tailwinds that include a larger movement of health and fitness that is taking place around the world, consumers' desire to wear athletic footwear and apparel in all moments of their lives, and expanding definition of sport. And last, the fundamental shift in consumer behavior toward digital plays to our increasing digital advantage. As I said before, Challenges create opportunities for the strong brands to get stronger, and that's what's happening here. And we are now in a much stronger competitive position today than we were 18 months ago, and that trend continues. We're seeing this strength come to life this holiday season. Our brand's deep connection with the consumer is driving strong holiday sales, most notably with North American Digital, leading the industry over Black Friday week with close to 40% growth. And our single-state performance showcased our brand strength in Greater China, as we added 13 million new members, and Nike was again the number one sport brand on Tmall. More broadly, this holiday season has shown the power of our digital transformation across the globe. Digital is the engine driving our consumer direct acceleration strategy. And Q2 was also another incredible quarter for sport, led by our deep roster of athletes and teams. Let me just touch on a few of the highlights from the quarter. Following the exciting end of the WNBA and MLB seasons, the energy around sport continues with the NBA, NFL, European soccer, and upcoming college football bowl seasons. where 16 of the top 20 teams and three out of the four playoff participants are Nike teams. When these leagues are as exciting as they are today, our business benefits. And Nike athletes continue to lead the way across the sports landscape, highlighted by Barcelona captain Alexia Puteus, who won the Ballon d'Or as the best female footballer in 2021. We are also thrilled to see Marcus Rashford receive his MBE from Prince William last month, an honor very well deserved for his work to support vulnerable children during the pandemic. And congratulations to Cristiano Ronaldo for reaching yet another remarkable milestone by becoming the first player in recorded history to score 800 career goals in official matches. And I also have to give a special shout-out to Shalane Flanagan, who was wearing the Nike Air Zoom AlphaFly Next% when she completed the six World Marathon majors in six weeks, running each of them in under two hours and 47 minutes. This achievement offers all of us a reminder of the joy and unrelenting spirit of sports. As we deliver against our consumer direct acceleration strategy, we continue to drive separation as the most innovative sports brand by delivering a constant pipeline of new products that set the standard. And what's more, we're aligning against our key growth drivers of women's Jordan apparel, as well as our commitments to sustainability. In women's, we launched a brand new shoe designed specifically for dancers. The Nike Air Sesh was designed by Tinker Hatfield in collaboration with professional dancers and choreographers, and it prioritizes both style and performance with a mid-cut leather upper and cushion foam under the foot. We launched the Air Sesh for Nike members first with a wider release to take place soon. And this new product comes as we welcome some of the world's best athletes to our global roster, including dance choreographer Paris Goebel and fitness athlete Tunde Oyunian. As we continue to accelerate our strategy and fuel the expanded definition of sport, we're able to more deeply connect with women and create an even sharper focus. And this quarter also saw the debut collection from the Serena Williams Design Crew, our apprenticeship program that advances diversity in design. The crew connects innovation, design, and purpose in a uniquely powerful way, fueled by our commitment to the full spectrum of sport for women across performance and lifestyle. Serena joined us on campus a few months back to help open the Serena Williams building at our world headquarters. Along with our LeBron James Innovation Center, these two buildings represent the most remarkable investment in sport innovation in the world. We were also thrilled to see the Jordan brand launch the AJ36. The AJ36 is Nike Inc.' 's first shoe using leno weave, a process that creates material that is uniquely strong, lightweight, and adaptable to all foot shapes. making the AJ36 one of the lightest Air Jordans ever. Consumers can expect to see us iterate on this innovation in future seasons. And in apparel, we're driving energy in the market through design that resonates with consumers. The latest NBA City Edition and MLB City Connect uniforms are great examples as we grow the culture of sport by listening to local team communities and using thoughtful design to celebrate the game. We also launched FitADV, the next generation of performance apparel that combines weather-ready tech and innovative design to help athletes take on extreme conditions. This represents the pinnacle of Nike apparel innovation and is currently in Nike's performance apparel collections. And next year, it will be available in Nike lifestyle products across all platforms. And finally, in sustainability, we launched AlphaFly Next Nature, our most sustainable performance shoe and our first sustainable performance running shoe. This continues the progress made by our Cosmic Unity sustainable basketball shoe by reaching more than 50% total recycled content by weight. Learnings from the AlphaFly Next nature will be scaled across our running line, creating higher performing products with more sustainable materials. We know the future of sport depends on a healthy planet, and we remain committed to doing our part to protect that future. As we connect consumers with the strongest innovation, athlete roster, and brand storytelling in the world, we're also elevating their experience through one Nike marketplace. We're creating the marketplace of the future where we serve consumers with seamless, consistent, and premium experiences. Through Nike membership, we increasingly know and serve our consumer across a connected marketplace. I'd like to highlight three examples from the quarter of how Nike is driving a more elevated and premium member experience across the marketplace. First, we recently launched new wellness content and workouts featuring Megan Thee Stallion in our Nike Training Club app. Megan's content drove record high engagement, drawing two times increase in daily active users in NTC. And her curated looks saw more than double the demand compared to any other product content viewed during that same time period. Second, Ahead of Singles Day in Greater China, we activated a new member experience on Tmall and improved the onboarding journey. As a result, the Nike flagship store on Tmall was the number one brand for new member recruitment across sport, driving a 20-point increase in member demand penetration this year. And third, just last month, We announced a partnership with one of our strategic retail partners, Dick's Sporting Goods, who shares our vision for the future of retail, specifically shopping and experiences that are amplified by digital and personal to each consumer's journey. This new partnership allows shoppers to link their Nike member account and their DSG account together to unlock exclusive offers, products, and experiences. You know, recently I had an opportunity to visit one of DSG's newest concepts, the House of Sport door in Rochester, New York. I must say I was blown away at the store's unique service model, interactive sport experience, and enhanced showcasing of product, which creates a true destination for consumers and will alter future expectations at retail. Our partnership with DSG is a new model of how brands and retailers work together delivering product experience and connection service to delight consumers at scale. We're fulfilling our vision that through connected member experiences and inventory, powered by connected data and technology, we can provide consumers with greater access to the very best of Nike with more speed, convenience, and connection to our brand and to sport than ever before. And as we look forward, there is even more opportunity to connect consumers with Nike across digital platforms that integrate sport, innovation, culture, and commerce. For example, we recently opened a new space in our New York digital studio to produce the weekly sneakers live streams that are driving industry-leading engagement metrics. Weekly content includes launch previews in our sneakers live heating up show In a new Jordan franchise presented through the lens of female Jordan's fans called jaywalking. Our stories go deep and engage a two way interaction with the community. And as a result, our consumer engagement is three times the industry average for live streams. And speaking of sneakers in Jordan, the first set of invitations for the AJ 11 cool gray was sent. to the largest female-focused group yet and sold out in the first hour. The group was selected utilizing our new dedication score, designed to reward member groups with high product affinity. We continue to see exclusive access serve as a defining marketing mechanism to connect with consumers. And in Q2, we also launched the 3D Immersive World of Nike Land on Roblox. Nike is meeting young athletes wherever they are, encouraging them to let their imaginations run wild and rewarding real-world movement through new virtual experiences. And just last week, we welcomed Artifact to the Nike Inc. family. The Nike, Jordan, and Converse brands have always thrived at the intersection of sport, creativity, innovation, and culture. The artifact acquisition allows us to extend this reach to serve and delight consumers and creators in both the physical and virtual worlds. We'll invest in a very talented artifact team, creator community, and cutting-edge innovation to deliver next-generation experiences that involve the artifact and Nike Inc. brands. Today, We're stronger than we were before the pandemic, and I couldn't be more excited by the opportunity ahead of us. Our results this quarter are evidence that our strategy is working. And as we close out 2021, I want to take a moment to personally thank our 75,000 global Nike Inc. teammates for everything they've done this year. For all we've navigated, this team has worked together. with creativity and resilience to serve our consumers and serve our communities. This team is the greatest collection of talent in the world, and I want to sincerely thank them. And with that, I'll turn it over to Matt.