Good afternoon, everyone. Welcome to NIKE, Inc.'s Fiscal 2020 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 Matt Friend, CFO, NIKE Operating Segments and Vice President, Investor Relations. Before I turn the call over to Mr. Friend, 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 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 would like to turn the call over to Matt Friend, CFO, Operating Segments and Vice President, Investor Relations.

Thank you, operator. Hello, everyone, and thank you for joining us today to discuss NIKE, Inc.'s fiscal 2020 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. 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 two. 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. Chairman, President and CEO, Mark Parker.

Thanks, Matt, and hello everybody. As most of you know, this is my final quarterly earnings call as NIKE's CEO. And while I'm tempted to go right to the results to let another strong quarter speak for itself, there are a few things I want to say right upfront. I'm excited to take on a new role as Executive Chairman, remaining a part of the management team and leading the Board. This has been a very thoughtful transition that has been planned for many months. I strongly believe the best time to make change is from a position of strength. And our brand and our business are as strong as they’ve ever been. We're focused, we're competitive, and we’re creating a future of our own design. Most of all, the time is right because of the team we have at NIKE, and of course, John Donahoe himself. I can't say enough about the incredible people I get to work with every single day. With their expertise, their commitment and their enthusiasm for the business, the entire NIKE team has been fueling our current momentum. And because of the depth and the quality of the leadership team we have at NIKE, the transition with John will be seamless. As for John, his proven experience in leading global strategy, digital commerce and enterprise technology will be invaluable as we continue our digital transformation. And his passion for sport, his commitment to developing teams and talent, and his growth mindset will make him a great NIKE CEO. John will help elevate NIKE to the next level and accelerate our strategic transformation. I look forward to working with him even more closely. With that let's take a look at our Q2 results where we continue to show the greater focus is the key to…

Hello and happy holidays to everyone on the call. First, I want to thank and recognize Mark. We've all been fortunate to be guided by Mark’s extraordinary vision and leadership as NIKE’s Chief Executive Officer over the past 14 years. I told Mark this personally, he's the most creative, inquisitive and frankly also the most demanding leader for whom I've ever worked, and at the same time, he's the most patient, thoughtful and balanced. We will all continue to benefit from Mark's leadership as NIKE’s Executive Chairman. We're also extremely fortunate to have John Donahoe joining us as Chief Executive Officer. Few companies are guided by an inspirational founder, as well as a 14-year former CEO and 40-year veteran of the Company and now John Donahoe. John is clearly a proven CEO who brings extraordinary people leadership and talent development experience, as well as deep expertise and strategy, consumer digital technology and enterprise technology. This abundance of strong leadership is yet another competitive advantage that we enjoy at NIKE. And this planful transition is happening as NIKE’s momentum is accelerating, driven by the increasingly deeper execution of our consumer direct offense by our talented teams around the world. As we're still in the early innings of our digital transformation, now, as Mark said, is the perfect time for John to be joining and leading our team. Simply put, I'm extremely excited about the future for NIKE. Before we talk more about the future, let's focus on the present for just a few moments. In Q2, we delivered revenue growth of 13% on a currency-neutral basis. Our strong top line growth was amplified by gross margin expansion and significant SG&A leverage. The result was EPS growing 35%. There are three key strategic and financial themes that stand out as we reflect…

[Operator instructions] Our first question comes from Bob Drbul with Guggenheim. Your line is open.

Hey. Good afternoon. And Mark, good luck on the next chapter. And thanks for all of the help over the last numerous years. It’s been a lot of fun.

Thanks, Bob. I appreciate that. Yes.

I guess, the first question I have is, if we could just talk about in quarter, but can you talk a little bit about the North American apparel market and sort of the performance and/or the outlook, and sort of some of the assumptions, there's been a lot of press recently around the MLB partnership that you are launching right now?

Yes. I’ll take that one, Bob. Overall -- I'll start just overall with our apparel business. We've got incredible momentum in the apparel business overall. Globally, apparel grew 10% in the quarter. And frankly, we think we have much greater opportunities ahead that we haven't even yet capitalized on and we've spoken quite a bit about that. Our international geographies growth has been phenomenal, Sportswear and Jordan are leading the growth, lifestyle apparel for both men and women. In North America in particular, the rate of growth in the quarter was impacted by prior year comparison. So, in the prior year, this may sound like not that significant of an impact, but it actually was. The shift of LeBron James to the Lakers and the initial impact from the sale of his jerseys was significant. But for that, the growth rate in North America would have been more in the mid-single-digit range. For context, what I would tell you is that in the prior year North America apparel actually grew 10% in part, aided by that comparison. So, we continue to feel one, both great about the state of our apparel business and brand in North America, but at the same time nowhere near satisfied in terms of the opportunities ahead that we have to really drive more epic growth in apparel.

Got it. Okay. And then, if I could just ask a follow-up for Mark, sort of a closing question for you. With all the attention on the Vaporfly NEXT%, I was just wondering, can you just share with us how much you shaved off your personal record or personal best with the pair of shoes that you've been using?

Okay. Well, I can just tell you that the time it takes me to walk across the NIKE campus here, at headquarters, has dropped by at least 4%. So, feeling good about it, feeling really good.

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

I wanted to touch on gross margins, a number of puts and takes going on. Maybe just touch first on what transpired in the second quarter, especially relative to your expectations? And maybe give a little bit more detail around the updated kind of third quarter and second half guidance. Thank you.

Sure. I'll start with that one, Paul. In the quarter, as you know, our gross margin expansion landed about as closest we’ve ever been to the guidance that we have provided. So, at the same time, there are some really important highlights to call within our margin. Our gross pricing margin as we call it, so that's our average selling prices net of product costs were very strong. We had strong average selling price increases, thanks to the strong product pipeline that we have and the innovation that we’ve bringing to market. Of course, some of the other impacts in the quarter included tariffs. Tariffs in the quarter were roughly 40 to 50 basis-point impact, obviously pretty significant, if you were to add that back alone. So, that's the second impact I'd call out. We also continue to make investments in our supply chain. A little bit of detail there. We are expanding our distribution center capacity in the Memphis and Mississippi areas to increase both, capacity and speed, especially with our growing digital business and omnichannel strategy with online to offline services. We are expanding some apparel distribution capability in EMEA, which again is reflective of just a great opportunity we see ahead in apparel and the momentum that we have in that market. Tokyo and Mexico City are also areas we’re investing in our supply chain. We’ve invested more broadly across our entire supply chain, putting RFID in our product. We now have RFID in about 100% of our footwear, about three quarters of our apparel. And for a little context, the benefits of that are still to come. So, the RFIDs in the product, the ability to scan and the distribution centers is significant with at least eight of our distribution centers having that ability. We're still in the early stages of growing out the ability to leverage that in stores, but it’s happening, but more in the dozens of stores. FX was an impact. Although that's one of the things -- I'll end there by saying, there are a lot of puts and takes within margin in any given quarter. And I would tell you not to focus on a quarterly margin expansion results, especially in these times as indicative of the trend. The real trend is strong gross pricing margin, the shift to our Nike Direct, the ability to capture more-full price sell-through et cetera. But, if I was to give you one of the more distinctive variances between Q3 and Q2, FX was in maybe the 15 basis-point headwind zone in Q2, and we see the impact of FX being more in line with what we saw in Q1, which is, say roughly 50 basis points. So, that alone more than more equates for the difference between what we delivered in Q2 and guidance.

That's helpful color. Thank you. Maybe turning now to SG&A. Just maybe talk a little bit more about the timing shift and just also how should we be thinking bigger picture as we move towards all of these key sporting events, especially the excitement around Tokyo 2020 as it relates to demand creation expenses, and how maybe some of that will be offset by where you are finding some efficiencies in the operations. Thank you.

Yes. I guess, what I’ll start by saying is, if you reflect on Q2, we both had stronger revenue than we expected going into the quarter. And obviously what you can infer is we felt less of a need to spend demand creation in the quarter to drive it. We’ve got an incredibly strong pull market and just had and have great momentum. And so, in the spirit of realizing we’ve got unrivaled resources in this industry, it's even more important than what we see an opportunity to really leverage those resources in a focused way. We make decisions and shift real-time. So, we looked at the situation and said we didn’t mean that demand creation in Q2, we want to save that powder so to speak for the big events and the big launches that we have in the second half of the year and going into fiscal year 2021. So, that’s really the biggest driver of that shift in SG&A. To your question about Tokyo, Mark's probably the best person to give color on how excited we are about the product. But, you can infer from us wanting to shift. Part of demand creation is getting our voice out there and communicating the benefits of our product and how excited we are, and we in fact are. That’s why we have deferred that demand creation.

Yes. I’ll just quickly add that the excitement around Tokyo is tremendous here at NIKE in terms of what's coming in the innovation pipeline. I mentioned, performance product that we have coming for Tokyo both in footwear and apparel. And then, we're leveraging that across sportswear and I think for men and women. So it's really a complete offense plan around Tokyo. And we think we have, to Andy's point, a lot to leverage with that demand creation spend. This is a big moment for us. This is every four years and we really rally around this event in a major way. So, the impact on the revenue you're going to see in the year but you're also going to see it carry on and influence our potential going forward.

Your next question comes from Alex Walvis with Goldman Sachs. Your line is now open.

Good afternoon. Thanks so much for taking the question here. So, first question is on North America footwear and strong acceleration in that category and the region during the quarter. Can you give us a little bit more detail on what's driving that from a styles and channels perspective, and perhaps any feedback from your partners on the new styles that are selling into that channel?

Yes. I speak to complete offense quite a bit and the second half of the fiscal year we're really trying to dial up our offense, particularly in the core product, footwear product innovation, states and some of the new styles we have coming there, I think will give us a real boost in the second half. The reaction from retailers has been very positive, in terms of some of the new styles we got including the React product that we have coming. It’s a new version React called Infinity React Run, which is actually higher performance shoes that we think will give us more access to that core runner. We have new core running styles coming in underneath that as well, both in men's and women's styles. We also have Air Max coming down into the core price range selectively leveraging the Air Max platform. We have others. If you look at some of the other styles we've got on the sportswear side, we've got Dunk, Blazer, the MJ product is -- the MJ Air Force -- or I'm sorry, the Air Jordan 1. Our Air Force 1 continues to be actually very strong for us. We’re continuing to iterate new styles on both of those franchises. And with the addition of the Blazer and the Dunk in the mix, we think that that'll continue to create some good momentum for us on the footwear side. So, it's really a more complete offense for the second half on footwear with a big emphasis on core for us, particularly on our own channel in the digital direct space. So, we think that's going to be a good boost for us.

Second question, if I may is on Converse, really strong momentum in that brand now for another quarter. Can you talk about what's driving this growth rate there? And then, it seems to be that that is focused on international regions. Is there anything you can share on the outlook for North America and whether that can meet the growth rates seen elsewhere?

Yes, much of the growth at Converse is being led by international, specifically Asia Pacific, really led by China, and then we're also seeing strong performance in EMEA, and much of that also is driven by digital. So, we're seeing incredible momentum for Converse really starting to build in those markets. We have some gaps to close in North America. I think. We are continuing to differentiate our product line beyond the Chuck. And I think that all creates more opportunities for us in basketball or looking at running and some other dimensions of the Converse footwear portfolio, apparel as well. We are seeing by the way strong growth in North America for Converse in the digital space. So, we think that's a sign of some optimism for us for Converse in North America going forward. And I think, the expansion of our digital platform for Converse is going to be a driver globally, certainly led currently by China, but we'll start to see that happen more and more in North America and for Europe.

And I'd just add one thing. Mark spoke about adding diversification relative to the Chuck business. We've got some real momentum within the Chuck franchise, in particular driven by a style called the Chuck 70, which is growing really strong double to triple digits in all geographies. In fact, it's already a pretty significant percent of total Chuck business in markets like China and elsewhere and it's ramping up quickly in the U.S. So, we see great energy in terms of, as Mark would say, providing more choice and differentiation within a style that has the kind of expansive opportunity that the Chuck has. And that is a more premium version of the Chuck, which also kind of raises tentpole and adds the opportunity to expand on that franchise.

Your next question comes from Omar Saad with Evercore ISI. Your line is open.

Yes. Thanks for taking my question. Congrats on the great run, Mark.

Thank you.

So, while I have you in a reflective mood, I'd love to hear your thoughts on two things. Number one, the decision to terminate the Amazon trial, maybe you could get into a little bit into the why, and what might get the NIKE brand to come back? And the second question I have, as the NIKE, Inc. CEO and having seen the various evolutions of the portfolio, do you think NIKE is going to be a multi-brand or a monogram company 10 years from now. And the reason I asked is, on the one hand you're talking about kind of shutting some of the legacy assets and you've divested Hurley, but on the other hand you are talking about -- describing this amazing kind of asset [Technical Difficulty] capabilities from back end to front end, and it feels like maybe there is an opportunity to plug some great brands in your platform and leverage what you we felt. So, I would love your kind of musings on those two topics. Thanks.

Yes. Well, we have a clear framework for partners in the digital space, and what's guiding us is really to be in the path of the consumer in a way that's really right for the brand. We continue to see, just on a macro basis great momentum with our partners, including partners like Instagram and Google and Tmall and WeChat. So, brand right is really what's important here. And that's building those relationships with the consumer through better presentation I think elevated, authentic, consumer experiences on whatever digital platform. And this means ensuring that we have an environment where the consumer can be certain that they're buying authentic NIKE product from authorized retailers. So, that's been our focus as to really be -- to elevate the brand, strengthen the connection with consumer much like we do with the differentiated wholesale strategy. So, that's kind of led us to our decision in terms of moving forward. We have -- your second question on multiple brands or one brand, mono brand, I would say pretty convincingly or confidently that we will be a multi-brand company in the future. We have multiple brands now, Nike, Jordan, Converse. We see tremendous upside potential with those brands. We're in the early stages of strengthening our portfolio and expanding our portfolio within the Jordan brand. Obviously, Sportswear is very strong, performance basketball, there is more upside, other performance categories, there is upside, apparel, women's, international growth. So, there is tremendous growth opportunity within that Jordan brand for NIKE. And then, Converse, likewise. So, I think, as we just talked about, as we diversify that portfolio, strengthen our position in North America, tremendous upside I think for the Converse brand. And taking some of that pressure off of NIKE to be everything everybody, I think that's important. And then, we can leverage our capabilities, our digital capabilities for example, across the portfolio. And then, I think as we transform our operating model, we’ll enable more and more opportunity for that broader NIKE portfolio.

Congratulations on job. Well done.

Thank you, Omar. Thank you very much.

Operator, one last call before we wrap up.

Our last question comes from Matthew Boss with JP Morgan. Your line is open.

Great. Thanks. Nice quarter. And Mark contras on the transition.

Thank you.

I guess, so with this -- with five straight quarters of double-digit constant currency revenue growth, I guess maybe at a higher level, Mark, what do you see that’s been driving the upside versus your high-single-digit growth algorithm? And what’s your confidence in the multiyear product and innovation pipeline to sustain the stronger momentum.

Well, I can honestly say, I’ve never been more confident than I’m right now. What's driving those results, those consistently strong results are not only the innovative product that really is where the consumer votes ultimately. So, the product has to be strong, the complete offense of products, footwear and apparel up and down the price points across the categories, men's and women's. I think we’ve been driving a more complete offense, and much of that has been driven by the innovation that represents so much more of the percentage of our revenue growth than it had even just a few years ago. So, that's absolutely critical. And then, of course, I’d say we get teased for saying digital transformation, as much as we do. But, it's clearly driving some incredible results for us. And I sit here today firmly believing and more confident than ever that that will continue to drive great opportunity and upside for us. And I’m excited to have John come in and be a part of accelerating that transformation for us going forward. It's going to be to me a win-win situation between the incredible team we have on the field today. John with his expertise, my guidance, continue to focus on things that I think are really important for the Company, particularly in the innovation, design product, marketing space. I think, those continue to be core fundamental driving principles for Nike's and that's exciting for me going forward. And then, lastly I will say is, what's really driving all of this, all the above is the team that we have here. We have incredible talent at Nike, not only individual talent across the Company, the functions, the geos, the categories, but the collective team and how that teams come together. It’s really -- the chemistry of the team is one of those things that does get talked about its business very often. But we have great chemistry and incredibly competitive driven team and that ultimately is what's going to drive the success of any company. And that's certainly the case here at Nike.

That’s great. Congrats again on the quarter. Thank you, Mark.

Thank you.

Thanks, Matt. And thanks to everyone for joining us today. We look forward to speaking with you next quarter. Happy holidays to everyone.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.