Good afternoon, everyone. Welcome to NIKE Inc.'s Fiscal 2019 Second Quarter Conference Call. For those who want to reference today's press release, you will find it at https://investors.nike.com. Leading today's call is Nitesh Sharan, Vice President, Investor Relations and Treasurer. Before I turn the call over to Mr. Sharan, 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 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 nonpublic financial and statistical information and non-GAAP financial measures. To the extent nonpublic financial and statistical information is discussed, presentations of comparable GAAP measures and quantitative reconciliations will be made available at NIKE's website, https://investors.nike.com. Now I'd like to turn the call over to Nitesh Sharan, Vice President, Investor Relations and Treasurer.

Thank you, operator. Hello, everyone, and thank you for joining us today to discuss NIKE Inc.'s fiscal 2019 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. Chairman, President and CEO, Mark Parker; and our Chief Financial Officer, Andy Campion. Following their prepared remarks, we will take your questions. [Operator Instructions] Thanks for your cooperation on this. I'll now turn the call over to NIKE Inc. Chairman, President and CEO, Mark Parker.

Thanks, Nitesh. Hello and happy holidays, everyone. We've seen some amazing highlights in sports this past year. Eliud Kipchoge smashed the Marathon World Record. Simone Byles dominated the world championships. Kylian Mbappé became a global star at the World Cup and LeBron James continued to inspire on and off the court. It was a year of incredible achievements for NIKE as well and Q2 was another strong proof point on our journey. We continue to show progress against our key long-term objectives of driving innovation, direct connections and speed and agility around the world. Our teams are doing a fantastic job of delivering sustainable, profitable growth through the Consumer Direct Offense, while aggressively pursuing our highest potential long-term opportunities. We set high goals and each success makes us hungry for more. The marketplace in which we compete is highly dynamic. Consumer expectations are accelerating and the macro-economy is increasingly volatile. A key part of our strategy to win in this environment is to double down on digital. Our digital transformation is taking hold through a series of positive disruptions across the business. For example, we're leading the industry through a retail revolution. We're creating sports first, smart adaptive footwear. And we're investing in a global supply chain that delivers personnel at scale. It's all incredibly energizing and we find that the more disruptive we are, the more we grow. Our digital disruption is fueled by breaking old models, building new commerce partnerships, emerging new talent with our years of industry experience. Our teams are driving change and it's yielding excellent results. For the quarter, NIKE Inc. revenues grew 10%. On a currency-neutral basis, NIKE Inc. revenue increased 14%. Gross margin was up 80 basis points to prior year and earnings per share was up 13% to prior year. Specific highlights…

Thank you, Mark, and happy holidays, everyone. Our Q2 financial performance was exceptionally strong across nearly all dimensions. 14% currency neutral revenue growth, 80 basis points of gross margin expansion, 13% EPS growth versus prior year. Our strong growth was also broad-based across all four of our geographies, as well as across footwear, apparel, men's, women's and most categories. This broad-based momentum is not happening by accident, but rather is being fueled by our focus on what matters most to consumers globally. The common theme across our portfolio is the Consumer Direct Offense. More specifically, we are bringing the triple-double of 2X Innovation, 2X Direct and 2X Speed to life in our 12 key cities and 10 key countries around the world. Take innovation, for example. We've said we expect new innovation platforms to drive over 50% of our incremental growth over the next 5 years. In fact, year-to-date, new innovation platforms, including VaporMax, Air Max 270, React and ZoomX have driven over 80% of our incremental growth. Another significant contributor to our growth from a product perspective are our Power Franchises. By leveraging an approach that Mark calls editing to amplify, we're bringing new dimension and driving the growth of iconic franchises like the Air Force 1 and the Air Jordan 1. We do that, for example, through fresh new designs and collaborations for both men and women, as well as color and material updates through our Express Lane. Our broad-based growth is also being fueled by new experiences that more directly connect NIKE to our consumers globally. We expect NIKE Direct and partnered NIKE experiences physical and digital will contribute over 50% of our incremental growth and outpace undifferentiated retail over the next 5 years, leading the way once again in Q2 with NIKE Digital. Our NIKE Digital…

[Operator Instructions] Your first question is from Lauren Cassel with Morgan Stanley. Your line is open.

Thanks so much and really nice quarter. I just want to ask about gross margin. So 70 basis points for the full year and in the third quarter. I think previously, you were expecting second half gross margin to be a little bit better than the first half. Is there anything that's changed or maybe just being a little more conservative given the macro backdrop? That's my first question. And then, maybe just talk to us a little bit about how much of the 9% growth in North America has been driven by ASP versus units? And perhaps given the robust innovation pipeline that you guys have, if there's an opportunity for that region to potentially grow a little bit faster than 3% to 4% over the long-term? Thank you.

All right. Thanks for the question, Lauren. As for gross margin, I'll touch on that question first. We are expecting our gross margin to be better in the second half of the year. And as you note in our reported results, it was slightly better than we expected in Q2. We're seeing structural benefits to our margin from our over-indexing growth in Direct, which has had very strong momentum and momentum that's exceeded our expectations, specifically in digital, as well as a greater mix of premium innovative product and stronger full price sell-through. We're also benefiting from a clean marketplace, particularly for NIKE. So as noted in my remarks, we do have an improved outlook for '19 with our expansion been roughly in line with the year-to-date margin expansion of 70 basis points. And as we noted when we entered the year, we expect that the second half margin to be stronger than the first half. And in the first quarter, our margin expansion was lesser than in the second quarter. I would note that in any given quarter, there can be anomalies that impact margin. And finally, I'd note that, Q2 is a quarter in which our margin is historically lower. Q3 and Q4, we have higher margin. And so the expansion we expect in the third and fourth quarters is actually strong expansion on an already relatively higher quarterly margin. And then you asked about ASP and units. What I would note is that ASPs were up across our portfolio in both footwear and apparel. Again, new innovation, strong full price sell-through, our shift to Direct, clean marketplace are impacting ASPs. We see continued ASP expansion in our order book going forward. And so very balanced. Again, single-digit rates of increase in footwear and in apparel, with apparel ASP is even expanding a little bit stronger than footwear, but both strong. And then, like I said, balanced with strong unit expansion in both footwear and apparel.

Great. Thanks very much…

Thank you, Lauren. Operator, we'll take the next question, please.

Your next question is from Kate McShane with Citigroup. Your line is open.

Hi. Thanks for taking my question. My question today was on Jordan. I know you don't talk or guide the magnitude of growth that you expect for a particular line or brand. But I wondered if you could talk generally the direction of what you expect for Jordan for the rest of fiscal year '19? And what are the key drivers that's going to be accelerating that growth?

Yes. As we said, the growth for Q2 was exceptional and we had a great start for Q3, with the largest product launch that we've ever had in our history. So that's a good signal right there. I think that the great story in Jordan is that we're managing the business more holistically between performance, product and retro. It's a clean market, a healthy market, particularly in North America. So we're in a good pull market situation now. We got great brand heat, I think, and that's really driven by strong product and storytelling. I mentioned the Concord of late. The PSG collaboration was a great source of energy that was kind of unexpected. But incredible sell-through in energy, not just in Europe, but around the world. So I think the potential in Jordan is the return to growth in North America and on the energy and the enthusiasm for the brand and the product around the world, and including and maybe I'll especially call out China there. And then, we have more potential as we diversify the portfolio of product, particularly around the Woman's offense in both footwear and in apparel. So again we're actually quite bullish on the future opportunities and continued growth for Jordan in the second half and beyond as we move into fiscal '20.

And just to emphasize the point that Mark made, Kate, Jordan's growth was strong in the quarter and it was based on growth across all geographies. We had strong growth in North America as well as Mark said, very strong double-digit growth internationally.

Okay, great. Thank you. And if I could just – all right, thank you.

Your next question comes from…

Operator, we'll take the next question, please.

Certainly. Your next question is from Bob Drbul with Guggenheim Securities. Your line is open.

Hi, good evening. I guess, just if we could stay on North America for a minute. I think you highlighted, I think, athletic specialty a little bit. Is the growth in the other channels having an outsized impact on this - the high single digit in this very strong outlook, can you talk maybe to some of the change to yourselves, and how you're doing in that area, please?

Yeah, I think the growth is - I mean, we feel really great about the growth in Digital as we've stressed continuously in our prepared remarks, but we also mentioned the increase on the wholesale side beyond expectations there. And I think that's driven by the elevation of the experience, the doors with, particularly with Foot Locker and Dick's for example. We're seeing - where we have invested in elevating and differentiating the retail experience for the consumer that we're seeing tremendous response. Obviously, the backbone of that demand and that response is great product. So we feel really good about that in terms of where we began this first half and then obviously with what's coming. But our - the strategic relationships with our bigger partners, who are really investing in the consumer experience is what we're seeing paying off. And we're bullish on that as we move forward. But, again, the big driver here is the combination of wholesale, including - in addition to our direct Digital.

Got it. And I'm just curious if, in the Jordan business, there's some momentum there, has - did the Michael Jordan and Malik Monk little exchange, did that help the business at all coming out of the quarter? Or has it had no impact?

Well, any news is good news in a way. There is - a little bit of energy is always good. So we will take it.

We'll take the next question, please.

Your next question is from Paul Trussell with Deutsche Bank. Your line is open.

Congrats on the great results. Could you just give a little bit more detail on your confident outlook outside of North America? Certainly, we see it in the results, but certainly, there have also been other companies that are maybe flat incremental discounting or concerns around a slowdown in sneaker sales, both in Europe and in China. So if you can just speak in more detail to your success there? And then second, if you can just go back and maybe talk a bit more about the opportunity for more moderately price point products. I think you mentioned early in your comments. Just elaborate on where you see that opportunity from a geography or channel or stall opportunity? Thanks.

Yeah. Sure. I'll touch on the first part of your question related to the momentum in China and Europe in contrast of what you referred to is what some others maybe saying in those markets. We're seeing extraordinary momentum in both markets. I'd say the headline in China is our growth continues to accelerate. We are the number one brand with consumers in China. We are brand of China, deeply connected with teams, federations, athletes. And, again, even the government to some extent, the Ministry of Sports in terms of our joint venture to fuel sport participation. We're seeing incredibly strong demand for our product, the innovation that we're launching, our Basketball product, our Jordan product. And then, as we've noted, our Digital business, both our NIKE Digital ecosystem and through our partnership with Tmall is fueling extremely strong growth. We have not seen any impact from our business from some of the U.S., China dynamics that we're all reading about. We're mindful of those. But in the context of being mindful of those, we continue to see very strong signs of momentum in China. As per Europe, very similar. Europe, we have great momentum. In both geographies, ASPs are strong, comp store sales are strong, closeout mix is low, inventory is healthy. In EMEA, in particular, we're taking significant share. That's also amplifying our growth.

Yes, the core footwear, let me touch on that briefly. We see basically our approach to complete offense. One of the things we look at is where are the opportunities on the offense to actually grow the business even further than what we see today. And core footwear, more excessively priced product in that core footwear zone, particularly in North America, but really around the world is a big opportunity for us. We're doing well with the business, but, we think, there's more upside opportunity. We want to leverage some of the platforms that we've introduced more completely with more accessible versions of those products for those products within those platforms, as well as actually creating unique innovation that is targeted towards that core, more accessible price point. And actually, amp [ph] up our storytelling around that product. We think that there's tremendous opportunity for us as well there.

Operator, we'll take the question, please.

Your next question is from Jamie Merriman with Bernstein. Your line is open.

Thanks. The first question is, Andy, you talked about that 30% Digital target that you laid out at Investor Day last year as maybe more of the mile marker. So I guess, can you talk about whether you think you will achieve that faster than what you had laid out? And then, what you think that ultimate opportunity is? And you used a reference 50% or 80% in other categories, I mean, how you get there? And then the second piece is, Mark, you mentioned that you're introducing RFID into footwear and non-licensed apparel. But how will that work with your wholesale partners who may or may not all have RFID capabilities? And what do you think that will enable NIKE to do?

All right. Jamie, I'll touch on your question regarding our long-term vision for digital. Frankly, we're not taking a year-over-year incremental rate of growth approach to Digital. Looking out longer-term, we do see the potential to have Digital be the majority of our business. And as I noted, when we look to other industries, which you referenced, other industries, consumer products industries, not just Digital or content industries, but other industries ranging from toys to electronics, books, et cetera, we see that in each of those industries, there was positive disruption that catalyzed that shift. And as the leader in our industry, we're going to continue to invest in this digital transformation of NIKE, and even more importantly, a consumer-centric digital transformation of the industry. Some examples of that are the services that we're providing within our NIKE App, the sneaker's app, which really has been a source of explosive growth. Our membership program, which, we believe, is a uniquely compelling proposition within this industry in terms of the friction that it removes for consumers and the personalization that it gives our consumers. And then as Mark touched upon on the call, we think, driving digital penetration in our industry also has quite a bit to do with leveraging the power of digital in the physical retail environment. And again, as we always have as NIKE, we tend to catalyze that change by putting innovative new experiences into the market, that then catalyze the change not only within our owned store base because that's something within our control but that's an example for the strategic wholesale partners that we've referenced. In terms of the experience, we would like to see them continue to evolve. So we're very ambitious, but we see the goals is very achievable when you look at benchmarks in other industries. So again it's less about when we would get to the 30%. And it's more about our extreme confidence that, that we're going to go well beyond that number over the long term.

And quickly on RFIDs, connected inventory is a way that will enable us to meet demand - consumer demand much more effectively, more efficiently. We're going to be scaling RFID and product as I mentioned throughout 2019. We'll be working closely with our retail partners, obviously and obviously all of NIKE Direct so that when consumers is really looking for product, we're in a position to provide it if it's not in the store that they're looking for. So we think that this, as Andy pointed out with the example in Korea, that, we think, that the opportunity here to affect the consumer - satisfying consumer demand is going to be actually pretty significant throughout the year. And that's just going to grow across 2019. So we're very bullish on that.

Operator, I think, we'll take one last question, please.

Your last question comes from the line of Jim Duffy with Stifel. Your line is open.

Thank you. Happy holidays, everyone. Great to see the innovation. It's great to see the innovation being rewarded, but building momentum. I want to talk a little bit about the Women's business in the context of the size of the opportunity, that's very encouraging. What's been the big unlock with the recent success? I'm sure there's more to it than just the other [ph] amplified? Are you speaking the female consumers in a different way? Or is there some sort of structural or cultural tailwind that's strengthened recently?

Well, as we mentioned, women's is outpacing men's growth for the quarter, and we see that continuing as we move forward through the fiscal year and beyond. I think there's a number of factors. I think women are embracing sneaker culture. We're seeing that with some of the iconic franchises that we've had like the Air Force 1 that are actually designed specifically for women with deeper insights, that, I think, resonate. And that's one example, but that's true across the product offering. Using the insights that we gain in that connection that we have with the female consumer, we're creating better product and we're seeing that reflected in the demand. The capsule collections that we've introduced in apparel Nike Metallic Sheen was one, Terra Perma was another capsule collection. Great response to those. I think it's relevant product in the end. Compelling relevant product is the foundation of that demand. And then, I think, the brand is actually speaking to women more directly and personally. And as I said in my remarks, that's going to be amped up throughout this 2019 as we head towards World Cup. You're going to see Just Do It with a big emphasis on women's. And then sports is affecting lifestyle and fashion in a way that we're seeing dramatic impacts around the world. There's a real appetite for more active lifestyle and that's expecting fashion and what - the product that we're creating is more sensitive to that and we're seeing the response from that work.

And you mentioned women's 25% of the business globally, can you speak about how that shakes out across the regions?

Sure. It's relatively evenly distributed across the regions. And from a categorical perspective, it's largely comprised sportswear, running and training, which is, in part, why it's relatively well distributed across the regions. In terms of the rate of growth, it's outpacing in all geos, outpacing the men's business. Now in terms of where opportunity is, as Mark touched on, we've got tremendous momentum, and that momentum is opening the aperture in terms of our vision in terms of where incremental growth is longer term. The women's footwear and apparel market is 1.5 times the size of the men's footwear and apparel market globally; and as you noted, it's less than quarter of our revenue. So we see extraordinary potential to drive continued strong growth and even step change growth as we really do two things, open the aperture in terms of the definition of sport, again, that's with a sharp focus on women and movement and activity. And then second, editing and more aggressively shifting resources within NIKE towards the women's opportunity. So in short, we've got great momentum in the women's business, but we're chasing something much bigger.

Thank you, Jim. Okay, that's all the time we have for today. Thank you all for joining us. Happy holidays. We'll speak with you next quarter.

This concludes today's conference call. You may now disconnect.