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Item 2. Management’s Discussion and Analysis

2022-10-06 compared with 2022-04-05 · 203 added, 338 removed, 296 unchanged (65% of the section changed)

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We are the largest seller of athletic footwear and apparel in the world.

We sell our products through NIKE-owned retail stores and through digital platforms (which we refer to collectively as our “NIKE Direct” operations), to retail accounts and to a mix of independent distributors, licensees and sales representatives in virtually all countries around the world.

We sell our products through NIKE Direct operations, which is comprised of both NIKE-owned retail stores and sales through our digital platforms (also referred to as "NIKE Brand Digital"), to retail accounts and to a mix of independent distributors, licensees and sales representatives in virtually all countries around the world.

Our goal is to deliver value to our shareholders by building a profitable global portfolio of branded footwear, apparel, equipment and accessories businesses.

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Through the Consumer Direct Acceleration, we are focusing on creating the marketplace of the future through more premium, consistent and seamless consumer experiences, leading with digital and our owned stores, as well as select wholesale partners that share our marketplace vision.

Over the last several years, as we have executed against the Consumer Direct Acceleration, we have grown our NIKE Direct business to be approximately 43% of total NIKE Brand revenues for the first nine months of fiscal 2022, and we have reduced the number of wholesale accounts globally.

Additionally, we have aligned our product creation and category organizations around a new consumer construct focused on Men’s, Women's, Kids' and the Jordan Brand and continue to invest in data and analytics, demand sensing, insight gathering, inventory management and other areas to create an end-to-end technology foundation, which we expect will further accelerate our digital transformation.

During fiscal 2021, we substantially com pleted a series of leadership and operating model changes to streamline and speed up the strategic execution of the Consumer Direct Acceleration.

For the three and nine months ended February 28, 2022 , we recognized an immaterial amount of related employee termination costs and, to a lesser extent, stock-based compensation expense.

During the three months ended February 28, 2021, we recognized employee termination costs of $23 million and $6 million within Operating overhead expense and Cost of sales, respectively, and made cash payments of $99 million.

For the nine months ended February 28, 2021, we recognized employee termination costs of $168 million and $36 million within Operating overhead expense and Cost of sales, respectively, and made cash payments of $170 million.

Additionally, the related stock-based compensation expense recorded within Operating overhead expense and Cost of sales was immaterial for the three months ended February 28, 2021, and was $40 million and $4 million, respectively, for the nine months ended February 28, 2021 .

For all periods presented these costs were classified within Corporate.

For more information, see Note 14 — Restructuring within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

COVID-19 UPDATE

The COVID-19 pandemic and its impacts on the global supply chain continue to create volatility in our business results and operations globally, causing us to transform the way we operate in order to better serve our consumers.

Revenues grew 5% for the third quarter of fiscal 2022, as we continued to manage the ongoing impacts of supply chain challenges across each of our geographies and Converse.

Our NIKE Direct business continued its momentum, growing 15% and 17% on a reported and currency-neutral basis, respectively, for the third quarter of fiscal 2022, led by North America, APLA and EMEA, partially offset by declines in Greater China due to a COVID-19 resurgence and ongoing marketplace dynamics.

As of April 4, 2022, nearly all of our owned stores were open across North America, EMEA and APLA.

In Greater China however, due to a COVID-19 resurgence, we continue to experience a higher level of temporary store closures, with some operating on reduced hours, as well as lower physical traffic versus pre-pandemic periods.

During the first quarter of fiscal 2022, the majority of NIKE Brand and Converse contract manufacturers in Vietnam and Indonesia were subject to government mandated shutdowns due to COVID-19.

These closures significantly impacted our previously planned inventory production.

As a result of these closures, we lost approximately three months of production, impacting available product supply for this fiscal year.

All impacted factories began re-opening in the second quarter of fiscal 2022 and globally, nearly all of our supplier base is currently operational without restrictions.

While factory production is currently in line with pre-closure production levels and our future demand plans, there could be further impacts, including additional closures or employee absences, as a result of the emergence and spread of COVID-19 variants, as well as other factors outside of our control that could continue to cause further disruption to our planned inventory production.

For fiscal 2021, 51% of NIKE Brand footwear and 30% of NIKE Brand apparel was manufactured in Vietnam, and 24% of NIKE Brand footwear and less than 12% of NIKE Brand apparel was manufactured in Indonesia.

In addition, our product availability continued to be impacted by extended inventory transit times in the third quarter and first nine months of fiscal 2022, due primarily to port congestion, transportation delays as well as labor and container shortages.

product availability was impacted most significantly in our wholesale channel.

We also experienced elevated transportation, logistics and fulfillment costs as a result of this dynamic environment, which partially offset gross margin expansion in the third quarter and first nine months of fiscal 2022.

We expect elevated transit times will continue to impact product availability, leading to inventory supply significantly lagging consumer demand for at least the remainder of the fiscal year.

In addition, we expect transportation, logistics and fulfillment costs will continue to remain elevated as we navigate these supply chain constraints.

We also expect product costs to remain elevated due to higher input costs.

To mitigate the impact across our business, our teams are continuing to leverage our operational playbook and taking actions where we can, including shifting production capacity to other countries, strategic use of air freight, pricing actions and employing a seasonless approach to products.

Despite these short-term dynamics, our Consumer Direct Acceleration strategy continues to drive our business towards our long-term fiscal 2025 financial goals shared in our Annual Report on Form 10-K for the fiscal year ended May 31, 2021.

During the quarter, we continued to invest in our digital transformation and brand campaigns as the world returns to sport.

For the remainder of fiscal 2022, we will maintain our multi-year investment plans in order to transform our business for the future.

We continue to monitor the ongoing and dynamic impacts of COVID-19, as well as guidance from international and domestic authorities, including federal, state and local public health authorities and may take additional actions based on their recommendations.

There have been and may continue to be developments outside of our control, including new COVID-19 variants, that require us to make adjustments to our operating plan, such as store operating hours and the timeline to return to normal production volumes in factories impacted by COVID-19.

Such developments and other potential impacts of COVID-19, such as new or prolonged factory closures, higher inventory levels or inventory shortages in various markets, other adverse impacts on the global supply chain, revised payment terms with certain of our wholesale customers, higher sales-related reserves, factory cancellation costs and a volatile effective tax rate driven by changes in the mix of earnings across our jurisdictions, among other factors, could have material adverse impacts on our revenue growth as well as our overall profitability in future periods.

As a result of these circumstances, COVID-19 related disruptions are making it more challenging to compare our performance, including our revenue growth and overall profitability, across quarters and fiscal years, and we expect that the operating environment could remain volatile as COVID-19 variants may continue to cause disruptions to our operations.

THIRD QUARTER OVERVIEW

For the third quarter of fiscal 2022, NIKE, Inc.

Revenues increased 5% to $10.9 billion compared to the third quarter of fiscal 2021 and increased 8% on a currency-neutral basis.

Net income was $1,396 million and diluted earnings per common share was $0.87 for the third quarter of fiscal 2022, compared to Net income of $1,449 million and diluted earnings per common share of $0.90 for the third quarter of fiscal 2021.

Income before income taxes increased 2% compared to the third quarter of fiscal 2021, due to higher Revenues and gross margin expansion, partially offset by higher Selling and administrative expense.

Over the last several years, as we have executed against the Consumer Direct Acceleration, we have grown our NIKE Direct business to be approximately 42% of total NIKE Brand revenues for the first quarter of fiscal 2023, and we have reduced the number of wholesale accounts globally.

Additionally, we have aligned our product creation and category organizations around a new consumer construct focused on Men’s, Women’s and Kids’ and continue to invest in data and analytics, demand sensing, insight gathering, inventory management and other areas to create an end-to-end technology foundation, which we expect will further accelerate our digital transformation.

We believe this unified approach will accelerate growth and unlock more efficiency for our business, while driving speed and responsiveness as we serve consumers globally.

CURRENT ECONOMIC CONDITIONS AND MARKET DYNAMICS

Ongoing supply chain challenges, macroeconomic conditions and the COVID-19 pandemic continue to create volatility in our business results and operations globally.

Despite these challenges, our first quarter Revenues increased 4% and 10% on a reported and currency-neutral basis, respectively, led by North America, EMEA and APLA, partially offset by declines in Greater China due to COVID-19 disruptions.

However, gross margin decreased by 220 basis points in the first quarter of fiscal 2023 with elevated freight and logistics costs and higher promotional activity, among other items, contributing to this decrease.

During fiscal 2022, we experienced elevated inventory transit times due to port congestion, transportation delays, and labor and container shortages which caused seasonally late product to arrive in the first quarter of fiscal 2023.

As a result, we planned our fiscal 2023 product purchases based on elevated inventory transit times continuing.

However, during the first quarter of fiscal 2023, inventory transit times improved ahead of plan, particularly in North America, resulting in challenges managing the timing of seasonal inventory flow.

This disruption in the flow of product caused inventories in North America to grow to $4.7 billion, an increase of 15% compared to the fourth quarter of fiscal 2022.

At the same time, there is increased promotional activity across the retail industry.

We increased promotional activity in the first quarter of fiscal 2023, primarily in North America, and expect to increase promotional activity in the second quarter of fiscal 2023, to sell excess inventory and create capacity in the marketplace for new seasonally relevant product.

Most of our geographies are currently operating with little to no COVID-19 related restrictions, but revenues in Greater China for the first quarter of fiscal 2023 were impacted by lower retail traffic as a result of COVID-19 related disruptions.

Fluctuations in currency exchange rates also create volatility in our reported results as we translate the balance sheets, operational results and cash flows of our subsidiaries into U.S.

Dollars for consolidated reporting.

During the first quarter of fiscal 2023, foreign currency headwinds increased significantly as the U.S.

Dollar strengthened in relation to most foreign currencies, reducing reported Revenues by $823 million.

We expect unfavorable changes in foreign currency exchange rates, net of hedges, will have a material negative impact on reported Revenues and Income before income taxes for the second quarter of fiscal 2023.

Additionally, we expect the continued combination of elevated freight and logistics costs and increased promotional activity will have a negative impact on gross margin for the second quarter of fiscal 2023.

We also continue to closely monitor macroeconomic conditions, including consumer behavior and the potential impacts inflation could have on consumer demand for our product.

While we believe our Consumer Direct Acceleration Strategy continues to drive our business toward our long-term financial goals, worsening macroeconomic conditions could affect our business, including, among other things, higher inventory levels in various markets, higher inventory obsolescence reserves, higher promotional activity, reduced demand for our products, reduced orders from our wholesale customers for our products and order cancellations.

There could also be new COVID-19 related restrictions or disruptions across our geographies.

Any of these factors, among others, could have material adverse impacts on our revenue growth as well as overall profitability in future periods.

FIRST QUARTER OVERVIEW

For the first quarter of fiscal 2023, NIKE, Inc.

Revenues increased 4% to $12.7 billion compared to the first quarter of fiscal 2022 and increased 10% on a currency-neutral basis.

Net income was $1,468 million and diluted earnings per common share was $0.93 for the first quarter of fiscal 2023, compared to Net income of $1,874 million and diluted earnings per common share of $1.16 for the first quarter of fiscal 2022.

Income before income taxes decreased 13% compared to the first quarter of fiscal 2022, due to higher Selling and administrative expense and gross margin contraction, partially offset by higher Revenues.

NIKE Brand revenues, which represent over 90% of NIKE, Inc.

Revenues, increased 6% compared to the third quarter of fiscal 2021.

On a currency-neutral basis, NIKE Brand revenues increased 8%, driven by higher revenues in EMEA, North America and APLA, partially offset by declines in Greater China.

Additionally, NIKE Brand currency-neutral revenues were higher across apparel and footwear, as well as Men's, the Jordan Brand, Kids' and Women's.

Revenues for Converse decreased 1% and increased 2% compared to the third quarter of fiscal 2021, on a reported and currency-neutral basis, respectively, led by strong performance in North America and Western Europe, partially offset by declines in Asia.

Our effective tax rate was 16.4% for the third quarter of fiscal 2022, compared to 11.4% for the third quarter of fiscal 2021, due to a shift in our earnings mix, the effects of stock-based compensation and recently finalized U.S.

tax regulations.

Consumer protection and data privacy laws have been coming into effect across the world, including recently introduced laws that became effective during the second quarter of fiscal 2022 in China, that provide for the comprehensive regulation of data and personal data processing activities across all industries and operations such as collecting, utilizing, processing, sharing and transferring data and personal information in and out of China.

Uncertainty regarding the interpretation and application of these laws in practice may impact us and could impair our ability to execute on our operating plan and have adverse effects on our business and results of operations.

Further, any non-compliance could subject us to, among other things, fines, legal proceedings, regulatory orders or damage to our reputation.

During fiscal 2021, the transaction with Grupo SBF S.A.

to purchase substantially all of our NIKE Brand operations in Brazil closed.

We remain committed to selling our Argentina, Chile and Uruguay legal entities and granting distribution rights to third-party distributors.

As such, the assets and liabilities of these entities have remained classified as held-for-sale on the Unaudited Condensed Consolidated Balance Sheets.

Revenues, increased 4% compared to the first quarter of fiscal 2022.

On a currency-neutral basis, NIKE Brand revenues increased 10%, driven by higher revenues in North America, EMEA and APLA, partially offset by declines in Greater China.

Additionally, NIKE Brand currency-neutral revenues were higher across footwear and apparel, as well as Men's, the Jordan Brand, Kids' and Women's.

Revenues for Converse increased 2% and 8% compared to the first quarter of fiscal 2022, on a reported and currency-neutral basis, respectively, led by strong performance in North America and Western Europe, partially offset by declines in Asia.

Our effective tax rate was 19.7% for the first quarter of fiscal 2023, compared to 11.0% for the first quarter of fiscal 2022, primarily due to decreased benefits from stock-based compensation.

On August 16, 2022, the U.S.

government enacted the Inflation Reduction Act of 2022 that includes, among other provisions, changes to the U.S.

corporate income tax system, including a fifteen percent minimum tax based on "adjusted financial statement income," which is effective for NIKE beginning June 1, 2023, and a one percent excise tax on net repurchases of stock after December 31, 2022.

We are continuing to evaluate the Inflation Reduction Act and its requirements, as well as the application to our business.

During the first quarter of fiscal 2023, we completed the sale of our entity in Chile to a third party distributor and the impacts of completing this transaction were not material to the Unaudited Condensed Consolidated Financial Statements.

Subsequent to the end of the first quarter we completed the sale of our entities in Argentina and Uruguay to a third party distributor.

For more information see Note 13 — Acquisitions and Divestitures within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

As we shift from a wholesale and direct to consumer operating model within these countries, we expect consolidated NIKE, Inc.

and APLA revenue growth will be reduced due to different commercial terms.

However, over time we expect the future operating model to have a favorable impact on our overall profitability as we reduce selling and administrative expenses, as well as lessen exposure to foreign exchange rate volatility.

USE OF NON-GAAP FINANCIAL MEASURES

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RESULTS OF OPERATIONS

THREE MONTHS ENDED FEBRUARY 28, NINE MONTHS ENDED FEBRUARY 28,

(Dollars in millions, except per share data) 2022 2021 % CHANGE 2022 2021 % CHANGE

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions, except per share data) 2022 2021 % CHANGE

Revenues $ 12,687 $ 12,248 4 %

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CONSOLIDATED OPERATING RESULTS

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THREE MONTHS ENDED AUGUST 31,

(Dollars in millions)

2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES (1)

NIKE Brand Revenues by:

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Corporate (3)

(19) 14 — — (56) 53 — —

TOTAL NIKE, INC.

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(3) Corporate revenues primarily consist of foreign currency hedge gains and losses related to revenues generated by entities within the NIKE Brand geographic operating segments and Converse, but managed through our central foreign exchange risk management program.

THIRD QUARTER OF FISCAL 2022 COMPARED TO THIRD QUARTER OF FISCAL 2021

FIRST QUARTER OF FISCAL 2023 COMPARED TO FIRST QUARTER OF FISCAL 2022

On a currency-neutral basis, NIKE, Inc.

Revenues increased 8% for the third quarter of fiscal 2022, driven by growth in EMEA, North America and APLA, partially offset by lower revenues in Greater China.

Higher revenues in EMEA, North America and APLA contributed approximately 4, 3 and 3 percentage points to NIKE, Inc.

Revenues increased 10% for the first quarter of fiscal 2023, driven by growth in North America, EMEA and APLA, partially offset by lower revenues in Greater China.

Higher revenues in North America, EMEA and APLA contributed approximately 5, 5 and 2 percentage points to NIKE, Inc.

Revenues, respectively, while lower revenues in Greater China reduced NIKE, Inc.

Revenues by approximately 2 percentage points.

On a currency-neutral basis, NIKE Brand footwear revenues increased 5% in the third quarter of fiscal 2022, driven by growth in NIKE Direct, partially offset by a decline in our wholesale business.

Unit sales of footwear decreased 3%, while higher average selling price (ASP) per pair contributed approximately 8 percentage points of footwear revenue growth, primarily due to higher NIKE Direct ASP, the favorable impact of growth in our NIKE Direct business, higher full-price ASP, net of discounts, on a wholesale equivalent basis, and a higher mix of full-price sales.

Currency-neutral NIKE Brand apparel revenues, for the third quarter of fiscal 2022, increased 12%, driven primarily by growth in Men's.

Unit sales of apparel increased 5%, and higher ASP per unit contributed approximately 7 percentage points of apparel revenue growth, primarily due to higher full-price and NIKE Direct ASPs.

On a reported basis, NIKE Direct revenues represented approximately 44% of our total NIKE Brand revenues for the third quarter of fiscal 2022 compared to 40% for the third quarter of fiscal 2021.

Digital commerce sales were $2.7 billion for the third quarter of fiscal 2022 compared to $2.2 billion for the third quarter of fiscal 2021.

On a currency-neutral basis, NIKE Direct revenues increased 17%, driven by digital commerce sales growth of 22%, comparable store sales growth of 12%, in part due to improved physical retail traffic, and the addition of new stores.

Comparable store sales, which exclude digital commerce sales, comprises revenues from NIKE-owned in-line and factory stores for which all three of the following requirements have been met:

On a currency-neutral basis, NIKE Brand footwear revenues increased 12% in the first quarter of fiscal 2023, driven by higher revenues in Men's and the Jordan Brand.

Unit sales of footwear increased 3%, while higher average selling price (ASP) per pair contributed approximately 9 percentage points of footwear revenue growth, primarily due to higher full-price ASP, net of discounts, on a wholesale equivalent basis, the favorable impact of growth in our NIKE Direct business and higher NIKE Direct ASP.

Currency-neutral NIKE Brand apparel revenues, for the first quarter of fiscal 2023, increased 7%, driven primarily by growth in Men's.

Unit sales of apparel increased 5%, and higher ASP per unit contributed approximately 2 percentage points of apparel revenue growth, primarily due to higher full-price ASP, net of discounts, partially offset by lower NIKE Direct ASP.

On a reported basis, NIKE Direct revenues represented approximately 42% of our total NIKE Brand revenues for the first quarter of fiscal 2023 compared to 40% for the first quarter of fiscal 2022.

NIKE Brand Digital sales were $2.9 billion for the first quarter of fiscal 2023 compared to $2.5 billion for the first quarter of fiscal 2022.

On a currency-neutral basis, NIKE Direct revenues increased 14%, driven by NIKE Brand Digital sales growth of 23%, comparable store sales growth of 4%, in part due to improved physical retail traffic, and the addition of new stores.

Comparable store sales, which exclude NIKE Brand Digital sales, comprises revenues from NIKE-owned in-line and factory stores for which all three of the following requirements have been met:

(1) the store has been open at least one year, (2) square footage has not changed by more than 15% within the past year and (3) the store has not been permanently repositioned within the past year.

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Management considers this metric when making financial and operating decisions.

The method of calculating comparable

store sales varies across the retail industry.

The method of calculating comparable store sales varies across the retail industry.

As a result, our calculation of this metric may not be comparable to similarly titled measures used by other companies.

FIRST NINE MONTHS OF FISCAL 2022 COMPARED TO FIRST NINE MONTHS OF FISCAL 2021

On a currency-neutral basis, NIKE, Inc.

Revenues increased 7% for the first nine months of fiscal 2022, driven by higher revenues in North America, EMEA, APLA and Converse, partially offset by lower revenues in Greater China.

Higher revenues in North America, EMEA, APLA and Converse contributed approximately 4, 2, 2 and 1 percentage points to NIKE, Inc.

Revenues, respectively, while lower revenues in Greater China reduced NIKE, Inc.

Revenues by approximately 2 percentage points.

On a currency-neutral basis, NIKE Brand footwear revenues increased 5%, driven by growth in NIKE Direct, partially offset by a decline in our wholesale business.

Unit sales of footwear decreased 2%, while higher ASP per pair contributed approximately 7 percentage points of footwear revenue growth, primarily due to higher NIKE Direct ASP, a higher mix of full-price sales and the favorable impact of growth in our NIKE Direct business.

Currency-neutral NIKE Brand apparel revenues increased 9%, driven primarily by growth in Men's.

Unit sales of apparel increased 2%, and higher ASP per unit contributed approximately 7 percentage points of apparel revenue growth.

Higher ASP per unit was primarily due to higher full-price and NIKE Direct ASPs, as well as a higher mix of full-price sales.

On a reported basis, NIKE Direct revenues represented approximately 43% of our total NIKE Brand revenues for the first nine months of fiscal 2022 compared to 39% for the first nine months of fiscal 2021.

Digital commerce sales were $7.9 billion for the first nine months of fiscal 2022 compared to $6.6 billion for the first nine months of fiscal 2021.

On a currency-neutral basis, NIKE Direct revenues increased 16%, driven by digital commerce sales growth of 19%, comparable store sales growth of 12%, in part due to improved physical retail traffic, and the addition of new stores.

THREE MONTHS ENDED FEBRUARY 28, NINE MONTHS ENDED FEBRUARY 28,

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions)

2022 2021 % CHANGE 2022 2021 % CHANGE

2022 2021 % CHANGE

Gross profit $ 5,615 $ 5,696 -1 %

Gross margin 46.6 % 45.6 % 100 bps 46.3 % 44.4 % 190 bps

For the third quarter of fiscal 2022, our consolidated gross margin was 100 basis points higher than the prior year period and primarily reflected the following factors:

• Higher margin in our NIKE Direct business, primarily driven by lower promotional activity in the current period reflecting limited available for sale inventory due to supply chain constraints compared to higher promotional activity in the prior year as we managed the impacts from COVID-19, (increasing gross margin approximately 140 basis points);

• Favorable changes in net foreign currency exchange rates, including hedges, (increasing gross margin approximately 80 basis points);

• Higher mix of full-price sales, on a wholesale equivalent basis, (increasing gross margin approximately 70 basis points);

• Lower NIKE Brand full-price product margins, on a wholesale equivalent basis, (decreasing gross margin approximately 170 basis points) reflecting:

• Higher product costs (decreasing gross margin approximately 120 basis points) largely due to increased freight and logistics costs as well as product mix;

• Lower full-price ASP, net of discounts, (decreasing gross margin approximately 50 basis points) driven by product mix, partially offset by strategic pricing increases;

• Higher other costs, in part due to higher warehousing and freight costs, among other factors (decreasing gross margin approximately 30 basis points).

For the first nine months of fiscal 2022, our consolidated gross margin was 190 basis points higher than the prior year period and primarily reflected the following factors:

• Higher margin in our NIKE Direct business, primarily driven by lower promotional activity in the current period reflecting limited available for sale inventory due to supply chain constraints compared to higher promotional activity in the prior year as we managed the impacts from COVID-19 (increasing gross margin approximately 160 basis points);

• Higher mix of full-price sales, on a wholesale equivalent basis, (increasing gross margin approximately 70 basis points);

• Favorable changes in net foreign currency exchange rates, including hedges, (increasing gross margin approximately 50 basis points);

• Higher NIKE Brand product costs, on a wholesale equivalent basis, primarily due to increased freight and logistics costs (decreasing gross margin approximately 90 basis points).

Gross margin 44.3 % 46.5 % (220) bps

For the first quarter of fiscal 2023, our consolidated gross margin was 220 basis points lower than the prior year and primarily reflected the following factors:

• Higher NIKE Brand product costs, on a wholesale equivalent basis, primarily due to elevated freight and logistics costs and product mix (decreasing gross margin approximately 190 basis points);

• Higher other costs, in part due to higher inventory obsolescence in North America and EMEA, among other factors (decreasing gross margin approximately 100 basis points);

• Lower margin in our NIKE Direct business, primarily driven by higher promotional activity in North America (decreasing gross margin approximately 90 basis points);

• Unfavorable changes in net foreign currency exchange rates, including hedges, (decreasing gross margin approximately 70 basis points);

• Higher full-price ASP, net of discounts, on a wholesale equivalent basis (increasing gross margin approximately 200 basis points), reflecting strategic pricing increases and product mix.

TOTAL SELLING AND ADMINISTRATIVE EXPENSE

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THREE MONTHS ENDED AUGUST 31,

(Dollars in millions)

2022 2021 % CHANGE 2022 2021 % CHANGE

2022 2021 % CHANGE

Demand creation expense (1)

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Total selling and administrative expense $ 3,920 $ 3,572 10 %

% of revenues 31.6 % 29.4 % 220 bps 31.2 % 28.8 % 240 bps

% of revenues 30.9 % 29.2 % 170 bps

(1) Demand creation expense consists of advertising and promotion costs, including costs of endorsement contracts, complimentary products, television, digital and print advertising and media costs, brand events and retail brand presentation.

THIRD QUARTER OF FISCAL 2022 COMPARED TO THIRD QUARTER OF FISCAL 2021

Demand creation expense increased 20% for the third quarter of fiscal 2022 primarily due to higher advertising and marketing spend reflecting normalization of spend against brand campaigns and continued investments in digital marketing to support heightened digital demand.

FIRST QUARTER OF FISCAL 2023 COMPARED TO FIRST QUARTER OF FISCAL 2022

Demand creation expense increased 3% for the first quarter of fiscal 2023 primarily due to normalization of spend against sports marketing and brand campaign investments.

Changes in foreign currency exchange rates decreased Demand creation expense by approximately 5 percentage points.

Operating overhead expense increased 11% primarily due to higher strategic technology investments and an increase in wage-related expenses.

Changes in foreign currency exchange rates decreased Operating overhead expense by approximately 1 percentage point.

FIRST NINE MONTHS OF FISCAL 2022 COMPARED TO FIRST NINE MONTHS OF FISCAL 2021

Demand creation expense increased 32% for the first nine months of fiscal 2022 primarily due to higher advertising and marketing spend against brand campaigns as we experienced marketplace closures in the prior year due to COVID-19, as well as continued investments in digital marketing to support heightened digital demand.

Changes in foreign currency exchange rates had an insignificant impact on Demand creation expense.

Operating overhead expense increased 11% primarily due to higher strategic technology investments and an increase in wage-related expenses.

Changes in foreign currency exchange rates had an insignificant impact on Operating overhead expense.

Operating overhead expense increased 12% primarily due to higher wage-related expenses, an increase in strategic technology investments and increased NIKE Direct costs.

Changes in foreign currency exchange rates decreased Operating overhead expense by approximately 4 percentage points.

OTHER (INCOME) EXPENSE, NET

THREE MONTHS ENDED FEBRUARY 28, NINE MONTHS ENDED FEBRUARY 28,

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions)

2022 2021 2022 2021

Other (income) expense, net $ (146) $ (39)

Other (income) expense, net comprises foreign currency conversion gains and losses from the remeasurement of monetary assets and liabilities denominated in non-functional currencies and the impact of certain foreign currency derivative instruments, as well as unusual or non-operating transactions that are outside the normal course of business.

For the third quarter of fiscal 2022, Other (income) expense, net increased from $22 million of other income to $94 million in the current year, primarily due to a favorable change in foreign currency conversion gains and losses, including hedges.

For the first nine months of fiscal 2022, Other (income) expense, net changed from $18 million of other expense to $235 million of other income in the current year, primarily due to a favorable change in foreign currency conversion gains and losses, including hedges, as well as a net incremental charge in the prior year, related to our planned, strategic distributor partnership transition within APLA.

For more information related to our distributor partnership transition within APLA, see Note 13 — Acquisitions and Divestitures within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

We estimate the combination of the translation of foreign currency-denominated profits from our international businesses and the year-over-year change in foreign currency-related gains and losses included in Other (income) expense, net had favorable impacts of approximately $3 million and $170 million on our Income before income taxes for the third quarter and first nine months of fiscal 2022, respectively.

THREE MONTHS ENDED FEBRUARY 28, NINE MONTHS ENDED FEBRUARY 28,

2022 2021 % CHANGE 2022 2021 % CHANGE

Effective tax rate 16.4 % 11.4 % 500 bps 12.7 % 12.3 % 40 bps

Our effective tax rate was 16.4% for the third quarter of fiscal 2022, compared to 11.4% for the third quarter of fiscal 2021, primarily due to the impact of recently finalized U.S.

tax regulations and a less favorable impact from stock-based compensation, partially offset by a shift in our earnings mix.

Our effective tax rate was 12.7% for the first nine months of fiscal 2022, compared to 12.3% for the first nine months of fiscal 2021, primarily due to the impact of recently finalized U.S.

tax regulations, partially offset by changes in discrete items compared to the first nine months of fiscal 2021, including the recognition of a reserve in the first quarter of fiscal 2021 related to Altera Corp.

Commissioner.

For the first quarter of fiscal 2023, Other (income) expense, net increased from $39 million of other income to $146 million in the current year, primarily due to a favorable change in foreign currency conversion gains and losses, including hedges, as well as settlements of legal matters, partially offset by net favorable activity in the prior year related to our strategic distributor partnership transition within APLA.

We estimate the combination of the translation of foreign currency-denominated profits from our international businesses and the year-over-year change in foreign currency-related gains and losses included in Other (income) expense, net had unfavorable impacts of approximately $234 million on our Income before income taxes for the first quarter of fiscal 2023.

THREE MONTHS ENDED AUGUST 31,

2022 2021 % CHANGE

Effective tax rate 19.7 % 11.0 % 870 bps

Our effective tax rate was 19.7% for the first quarter of fiscal 2023, compared to 11.0% for the first quarter of fiscal 2022, primarily due to decreased benefits from stock-based compensation.

Refer to Note 5 — Income Taxes within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for additional information.

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The breakdown of Revenues is as follows:

THREE MONTHS ENDED FEBRUARY 28, NINE MONTHS ENDED FEBRUARY 28,

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions)

2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES (1)

North America $ 5,510 $ 4,879 13 % 13 %

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Corporate (3)

(19) 14 — — (56) 53 — —

TOTAL NIKE, INC.

7 unchanged sentences

The breakdown of earnings before interest and taxes is as follows:

THREE MONTHS ENDED FEBRUARY 28, NINE MONTHS ENDED FEBRUARY 28,

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions)

2022 2021 % CHANGE 2022 2021 % CHANGE

2022 2021 % CHANGE

North America $ 1,377 $ 1,434 -4 %

19 unchanged sentences

NORTH AMERICA

THREE MONTHS ENDED FEBRUARY 28, NINE MONTHS ENDED FEBRUARY 28,

(Dollars in millions) 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions) 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

Footwear $ 3,805 $ 3,264 17 % 17 %

6 unchanged sentences

EARNINGS BEFORE INTEREST AND TAXES $ 1,377 $ 1,434 -4 %

THIRD QUARTER OF FISCAL 2022 COMPARED TO THIRD QUARTER OF FISCAL 2021

On a currency-neutral basis, North America revenues for the third quarter of fiscal 2022 increased 9%, due primarily to higher revenues in Men's.

NIKE Direct revenues increased 27%, driven by strong digital sales growth of 33%, comparable store sales growth of 16%, in part due to improved physical retail traffic, and the addition of new stores.

Footwear revenues increased 6% on a currency-neutral basis, driven by growth in NIKE Direct, partially offset by declines in our wholesale business.

Unit sales of footwear decreased 10%, reflecting a lack of available inventory supply due to the impact of factory closures during the first quarter of fiscal 2022 as well as elevated inventory transit times, while higher ASP per pair contributed approximately 16 percentage points of footwear revenue growth.

Higher ASP per pair was primarily due to higher NIKE Direct ASP, the favorable impact of growth in our NIKE Direct business, higher full-price ASP and a higher mix of full-price sales.

On a currency-neutral basis, apparel revenues increased 11%, driven primarily by growth in Men's, partially offset by a decline in Women's.

Unit sales of apparel decreased 6%, while higher ASP per unit contributed approximately 17 percentage points of apparel revenue growth.

The increase in ASP per unit was primarily driven by higher full-price and NIKE Direct ASPs and the favorable impact of growth in our NIKE Direct business.

Reported EBIT was flat as higher revenues were offset by higher selling and administrative expense and gross margin contraction.

Gross margin decreased approximately 50 basis points largely driven by higher product costs primarily due to increased freight and logistics costs.

This activity was partially offset by higher margins in our NIKE Direct business and the favorable impact of growth in our NIKE Direct business as well as higher full-price ASP, net of discounts, and a higher mix of full-price sales.

Selling and administrative expense increased due to higher operating overhead and demand creation expense.

Operating overhead expense increased primarily as a result of higher wage-related costs, lower bad debt recoveries and higher strategic technology investments.

The increase in demand creation expense reflected higher advertising and marketing expense as well as continued investments in digital marketing to support heightened digital demand.

FIRST NINE MONTHS OF FISCAL 2022 COMPARED TO FIRST NINE MONTHS OF FISCAL 2021

On a currency-neutral basis, North America revenues for the first nine months of fiscal 2022 increased 12%, due primarily to higher revenues in Women's.

FIRST QUARTER OF FISCAL 2023 COMPARED TO FIRST QUARTER OF FISCAL 2022

On a currency-neutral basis, North America revenues for the first quarter of fiscal 2023 increased 13%, due primarily to higher revenues in Men's and the Jordan Brand.

NIKE Direct revenues increased 13%, driven by strong digital sales growth of 19%, comparable store sales growth of 4%, in part due to improved physical retail traffic, and the addition of new stores.

Footwear revenues increased 10% on a currency-neutral basis, largely driven by higher revenues in Women's and Kids', partially offset by a decline in Men's.

Unit sales of footwear increased 1%, while higher ASP per pair contributed approximately 9 percentage points of footwear revenue growth.

Higher ASP per pair was primarily due to higher NIKE Direct ASP, the favorable impact of growth in our NIKE Direct business and a higher mix of full-price sales, partially offset by lower full-price ASP.

On a currency-neutral basis, apparel revenues increased 15%, driven primarily by higher revenues in Men's.

Unit sales of apparel increased 1%, while higher ASP per unit contributed approximately 14 percentage points of apparel revenue growth.

The increase in ASP per unit was primarily driven by higher full-price and NIKE Direct ASPs, the favorable impact of growth in our NIKE Direct business as well as a higher mix of full-price sales.

Reported EBIT increased 10% as higher revenues and gross margin expansion more than offset higher selling and administrative expense.

Gross margin increased approximately 100 basis points primarily due to higher margins and the favorable impact of growth in our NIKE Direct business, a higher mix of full-price sales and higher full-price ASP, net of discounts.

This activity was partially offset by higher product costs primarily due to increased freight and logistics costs.

Selling and administrative expense increased due to higher demand creation and operating overhead expense.

Demand creation expense increased primarily as a result of higher advertising and marketing expense, as well as higher digital marketing investments.

The increase in operating overhead expense reflected higher wage-related costs as well as an increase in NIKE Direct strategic technology investments.

Footwear revenues increased 17% on a currency-neutral basis, driven by higher revenues in Men's and the Jordan Brand.

Unit sales of footwear increased 10%, while higher ASP per pair contributed approximately 7 percentage points of footwear revenue growth, primarily due to higher full-price ASP.

On a currency-neutral basis, apparel revenues increased 5%, driven by higher revenues in Men's.

Unit sales of apparel increased 5%, while ASP per unit remained flat, as higher full-price ASP was offset by lower NIKE Direct ASP, primarily due to higher promotional activity.

Reported EBIT decreased 4% primarily due to gross margin contraction, offset by higher revenues and lower selling and administrative expense as a percent of revenues.

Gross margin decreased approximately 460 basis points largely driven by higher product costs, primarily due to increased freight and logistics costs as well as product mix, lower margin in our NIKE Direct business driven by higher promotional activity, an increase in other costs reflecting higher inventory obsolescence and a lower mix of full-price sales.

This activity was partially offset by higher full-price ASP, net of discounts, due to product mix and strategic pricing increases.

Selling and administrative expense increased due to higher operating overhead expense, slightly offset by lower demand creation expense.

Operating overhead expense increased primarily as a result of an increase in wage-related expenses, lower bad debt recoveries and increased NIKE Direct costs.

The decrease in demand creation expense reflected lower advertising and marketing expense for brand events and our retail operations, partially offset by higher sports marketing expense.

EUROPE, MIDDLE EAST & AFRICA

THREE MONTHS ENDED FEBRUARY 28, NINE MONTHS ENDED FEBRUARY 28,

(Dollars in millions) 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions) 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

Footwear $ 2,012 $ 1,983 1 % 18 %

6 unchanged sentences

EARNINGS BEFORE INTEREST AND TAXES $ 975 $ 875 11 %

THIRD QUARTER OF FISCAL 2022 COMPARED TO THIRD QUARTER OF FISCAL 2021

On a currency-neutral basis, EMEA revenues for the third quarter of fiscal 2022 increased 13%, primarily driven by growth in Men's.

NIKE Direct revenues increased 22% primarily due to comparable store sales growth of 46%, in part due to improved physical retail traffic, digital sales growth of 11% and the addition of new stores.

Currency-neutral footwear revenues increased 4%, driven by growth in NIKE Direct, partially offset by declines in our wholesale business.

Unit sales of footwear decreased 6%, while higher ASP per pair contributed approximately 10 percentage points of footwear revenue growth.

FIRST QUARTER OF FISCAL 2023 COMPARED TO FIRST QUARTER OF FISCAL 2022

On a currency-neutral basis, EMEA revenues for the first quarter of fiscal 2023 increased 17%, primarily driven by growth in Men's and the Jordan Brand.

NIKE Direct revenues increased 20%, driven by strong digital sales growth of 46% and comparable store sales growth of 3%, partially offset by store closures.

Currency-neutral footwear revenues increased 18%, driven by higher revenues in Men's and the Jordan Brand.

Unit sales of footwear remained flat, while higher ASP per pair contributed approximately 18 percentage points of footwear revenue growth.

Higher ASP per pair was primarily due to higher full-price and NIKE Direct ASPs as well as a higher mix of full-price sales.

Currency-neutral apparel revenues increased 15% due primarily to higher revenues in Men's.

Unit sales of apparel increased 19%, while higher ASP per unit contributed approximately 9 percentage points of apparel revenue growth, primarily due to higher full-price and NIKE Direct ASPs as well as a higher mix of full-price sales.

Reported EBIT increased 34% as higher revenues and gross margin expansion more than offset higher selling and administrative expense.

Gross margin increased approximately 590 basis points primarily due to favorable changes in standard foreign currency exchange rates, higher NIKE Direct margins and a higher mix of full-price sales.

Selling and administrative expense increased due to higher operating overhead and demand creation expense.

Higher operating overhead expense was driven by higher strategic technology investments.

Higher demand creation expense was primarily due to higher advertising and marketing expense.

FIRST NINE MONTHS OF FISCAL 2022 COMPARED TO FIRST NINE MONTHS OF FISCAL 2021

On a currency-neutral basis, EMEA revenues for the first nine months of fiscal 2022 increased 9%, due primarily to higher revenues in Men’s.

NIKE Direct revenues increased 12% primarily due to comparable store sales growth of 22%, in part due to improved physical retail traffic, digital sales growth of 4% and the addition of new stores.

Currency-neutral footwear revenues increased 4%, driven by growth in NIKE Direct and our wholesale business.

Unit sales of footwear decreased 4%, while higher ASP per pair contributed approximately 8 percentage points of footwear revenue growth.

Higher ASP per pair was primarily due to higher NIKE Direct and full-price ASPs as well as a higher mix of full-price sales.

Currency-neutral apparel revenues increased 16% due primarily to higher revenues in Men's.

Unit sales of apparel increased 8%, while higher ASP per unit contributed approximately 8 percentage points of apparel revenue growth, primarily due to higher NIKE Direct and full-price ASPs as well as a higher mix of full-price sales.

Reported EBIT increased 27% as higher revenues and gross margin expansion more than offset higher selling and administrative expense.

Gross margin increased approximately 500 basis points primarily due to higher NIKE Direct margins, favorable changes in standard foreign currency exchange rates and a higher mix of full-price sales, partially offset by higher product costs largely due to increased freight and logistics costs.

Unit sales of apparel increased 7%, while higher ASP per unit contributed approximately 8 percentage points of apparel revenue growth, primarily due to higher full-price ASP, partially offset by a lower mix of NIKE Direct sales and lower NIKE Direct ASP.

Reported EBIT increased 11% as gross margin expansion and higher revenues more than offset higher selling and administrative expense.

Gross margin increased approximately 380 basis points primarily due to higher full-price ASP, net of discounts, reflecting strategic pricing increases, as well as higher margin and the favorable impact of growth in our NIKE Direct business, a higher mix of full-price sales, higher off-price margin and favorable changes in standard foreign currency exchange rates.

This activity was partially offset by higher product costs and higher other costs, particularly higher inventory obsolescence.

Selling and administrative expense increased due to higher demand creation and operating overhead expense.

Higher demand creation expense was driven by higher advertising and marketing expense.

Higher operating overhead expense was primarily due to higher wage-related expenses and higher strategic technology investments.

Higher demand creation expense was primarily due to increases in advertising and marketing expense as well as sports marketing expense.

Higher operating overhead expense was driven by lower bad debt recoveries and an increase in strategic technology investments, offset by lower wage-related expense.

GREATER CHINA

THREE MONTHS ENDED FEBRUARY 28, NINE MONTHS ENDED FEBRUARY 28,

(Dollars in millions) 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions) 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

Footwear $ 1,233 $ 1,449 -15 % -11 %

6 unchanged sentences

EARNINGS BEFORE INTEREST AND TAXES $ 541 $ 701 -23 %

THIRD QUARTER OF FISCAL 2022 COMPARED TO THIRD QUARTER OF FISCAL 2021

On a currency-neutral basis, Greater China revenues for the third quarter of fiscal 2022 decreased 8%, reflecting impacts from supply chain constraints, government restrictions due to COVID-19 as well as ongoing marketplace dynamics.

The decrease in revenues was primarily due to lower revenues in Men’s.

NIKE Direct revenues decreased 11% due to digital sales declines of 19%, comparable store sales declines of 10%, in part due to reduced physical retail traffic as a result of government restrictions due to COVID-19 as well as ongoing marketplace dynamics, partially offset by the addition of new stores.

FIRST QUARTER OF FISCAL 2023 COMPARED TO FIRST QUARTER OF FISCAL 2022

On a currency-neutral basis, Greater China revenues for the first quarter of fiscal 2023 decreased 13%, reflecting impacts from COVID-19 related disruptions.

The decrease in revenues was primarily due to lower revenues in Men’s and Women's, partially offset by growth in the Jordan Brand.

NIKE Direct revenues decreased 2% due to digital sales declines of 5%, comparable store sales declines of 3%, in part due to reduced physical retail traffic as a result of COVID-19 related disruptions, partially offset by the addition of new stores.

Currency-neutral footwear revenues decreased 11%, driven primarily by lower revenues in Men's and Women's, partially offset by growth in the Jordan Brand.

Unit sales of footwear increased 2%, while lower ASP per pair reduced footwear revenues by approximately 8 percentage points, driven by lower NIKE Direct and full-price ASPs.

Currency-neutral apparel revenues decreased 13%, due primarily to lower revenues in Men's.

Unit sales of apparel decreased 3%, while lower ASP per unit reduced apparel revenues by approximately 10 percentage points, primarily due to lower NIKE Direct and full-price ASPs.

Reported EBIT decreased 19% due to lower revenues, higher selling and administrative expense and gross margin contraction.

Gross margin decreased approximately 140 basis points reflecting lower full-price ASP, net of discounts, and lower NIKE Direct margins, partially offset by favorable changes in standard foreign currency exchange rates and lower product costs due to favorable product mix.

Selling and administrative expense increased due to higher demand creation and operating overhead expense.

Growth in demand creation expense was primarily due to higher advertising and marketing expense.

Operating overhead expense increased largely due to higher strategic technology investments and higher wage-related costs.

FIRST NINE MONTHS OF FISCAL 2022 COMPARED TO FIRST NINE MONTHS OF FISCAL 2021

On a currency-neutral basis, Greater China revenues for the first nine months of fiscal 2022 decreased 11%, reflecting impacts from supply chain constraints, government restrictions due to COVID-19 as well as ongoing marketplace dynamics.

The decrease in revenues was primarily due to lower revenues in Men’s and Women's.

NIKE Direct revenues decreased 13% due to digital sales declines of 19%, comparable store sales declines of 11%, in part due to reduced physical retail traffic as a result of government restrictions due to COVID-19 as well as ongoing marketplace dynamics, partially offset by the addition of new stores.

Currency-neutral footwear revenues decreased 9%, driven primarily by lower revenues in Men's and Women's.

Unit sales of footwear decreased 5%, while lower ASP per pair reduced footwear revenues by approximately 4 percentage points, driven by lower NIKE Direct and full-price ASPs.

Unit sales of footwear decreased 10%, while lower ASP per pair reduced footwear revenues by approximately 1 percentage point, driven by lower full-price and off-price ASPs, partially offset by higher NIKE Direct ASP.

Currency-neutral apparel revenues decreased 18%, due primarily to lower revenues in Men's and Women's.

Unit sales of apparel decreased 8%, while lower ASP per unit reduced apparel revenues by approximately 7 percentage points, primarily due to lower NIKE Direct and full-price ASPs, reflecting higher discounts.

Reported EBIT decreased 20% due to lower revenues, higher selling and administrative expense and gross margin contraction.

Gross margin decreased approximately 190 basis points reflecting lower full-price ASP, net of discounts, lower NIKE Direct margins and higher other costs, primarily due to higher warehousing and freight.

This activity was partially offset by favorable changes in standard foreign currency exchange rates and lower product costs due to favorable product mix.

Selling and administrative expense increased due to higher demand creation and operating overhead expense.

Growth in demand creation expense was primarily due to higher advertising and marketing expense.

Operating overhead expense increased largely due to higher wage-related costs and higher strategic technology investments.

Unit sales of apparel decreased 7%, while lower ASP per unit reduced apparel revenues by approximately 11 percentage points, primarily due to lower off-price, full-price and NIKE Direct ASPs.

Reported EBIT decreased 23% due to lower revenues, gross margin contraction and higher selling and administrative expense as a percent of revenues.

Gross margin decreased approximately 20 basis points reflecting lower NIKE Direct margin and full-price ASP, net of discounts.

This activity was partially offset by lower other costs, primarily due to lower warehousing and freight charges and lower inventory obsolescence, as well as favorable changes in standard foreign currency exchange rates.

Selling and administrative expense decreased due to lower demand creation, offset by higher operating overhead expense.

The decrease in demand creation expense was primarily due to lower retail brand presentation expense as well as lower investments in digital marketing, partially offset by higher advertising and marketing expense.

Operating overhead expense increased largely due to higher wage-related costs and higher NIKE Direct strategic technology investments.

ASIA PACIFIC & LATIN AMERICA

THREE MONTHS ENDED FEBRUARY 28, NINE MONTHS ENDED FEBRUARY 28,

(Dollars in millions) 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions) 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

Footwear $ 1,064 $ 1,022 4 % 15 %

6 unchanged sentences

EARNINGS BEFORE INTEREST AND TAXES $ 500 $ 481 4 %

As discussed previously, our NIKE Brand business in Brazil transitioned to a distributor operating model during fiscal 2021 and our NIKE Brand businesses in Argentina, Chile and Uruguay have remained classified as held-for-sale.

The impacts of closing the Brazil transaction as well as classifying the Argentina, Chile, and Uruguay entities as held-for-sale in fiscal 2020 are included within Corporate and are not reflected in the APLA operating segment results.

As discussed previously, our NIKE Brand business in Brazil transitioned to a distributor operating model during fiscal 2021.

During the first quarter of fiscal 2023, we completed the sale of our entity in Chile to a third-party distributor and the impacts from closing this transaction are included within Corporate and are not reflected in the APLA operating segment results.

Subsequent to the end of the first quarter of fiscal 2023, we completed the sale of our Argentina and Uruguay entities to a third party distributor.

This completes the transition of our NIKE Brand businesses in these markets to a distributor operating model.

Our Central and South America (CASA) marketplace now reflects a full distributor operating model.

For more information see Note 13 — Acquisitions and Divestitures within the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

THIRD QUARTER OF FISCAL 2022 COMPARED TO THIRD QUARTER OF FISCAL 2021

On a currency-neutral basis, APLA revenues increased 19% for the third quarter of fiscal 2022.

The increase was due to higher revenues across nearly all territories, led by Korea, Mexico and SOCO (which comprises Argentina, Chile and Uruguay), which increased 23%, 51% and 43%, respectively.

Revenues increased primarily due to higher revenues in Women's and Men’s.

FIRST QUARTER OF FISCAL 2023 COMPARED TO FIRST QUARTER OF FISCAL 2022

On a currency-neutral basis, APLA revenues increased 16% for the first quarter of fiscal 2023.

The increase was due to higher revenues across nearly all territories, led by Southeast Asia & India and Korea, which increased 64% and 23%, respectively.

Revenues increased primarily due to higher revenues in Men's, Women's and the Jordan Brand.

NIKE Direct revenues increased 30%, primarily due to digital sales growth of 29%, comparable store sales growth of 24%, in part due to improved physical retail traffic, and the addition of new stores.

Currency-neutral footwear revenues increased 20%, due primarily to higher revenues in Women's.

Currency-neutral footwear revenues increased 15%, due primarily to higher revenues in Women's and the Jordan Brand.

Unit sales of footwear increased 1%, while higher ASP per pair contributed approximately 14 percentage points of footwear revenue growth.

Higher ASP per pair was driven by higher NIKE Direct ASP and the favorable impact of growth in our NIKE Direct business, as well as higher full-price and off-price ASPs.

Higher ASPs, in part, reflect inflationary conditions in our SOCO territory.

Currency-neutral apparel revenues increased 16%, due primarily to higher revenues in Men's.

Unit sales of apparel increased 15%, while higher ASP per unit contributed approximately 1 percentage point of apparel revenue growth, driven by higher off-price ASP and a higher mix of full-price sales, partially offset by lower full-price ASP.

Higher ASPs, in part, reflect inflationary conditions in our SOCO territory.

Reported EBIT increased 17% for the third quarter of fiscal 2022, as higher revenues and gross margin expansion more than offset higher selling and administrative expense.

Gross margin increased approximately 230 basis points primarily due to favorable changes in standard foreign currency exchange rates, higher margins and the favorable impact of growth in our NIKE Direct business, as well as lower product costs and a higher mix of full-price sales.

This activity was partially offset by lower full-price ASP, net of discounts.

Higher ASP per pair was driven by the favorable impact of growth in our NIKE Direct business as well as higher full-price ASP.

Higher ASPs, in part, reflect inflationary conditions in Argentina.

Currency-neutral apparel revenues increased 19%, due primarily to higher revenues in Men's and Women's.

Unit sales of apparel increased 18%, while higher ASP per unit contributed approximately 1 percentage point of apparel revenue growth, driven by higher off-price ASP.

Higher ASPs, in part, reflect inflationary conditions in Argentina.

Reported EBIT increased 4% for the first quarter of fiscal 2023, as higher revenues and gross margin expansion more than offset higher selling and administrative expense.

Gross margin increased approximately 90 basis points due to higher full-price ASP, net of discounts, the favorable impact of growth and higher margin in our NIKE Direct business, higher off-price margin, and favorable changes in standard foreign currency exchange rates.

This activity was partially offset by higher other costs, primarily higher warehousing and freight, as well as higher product costs.

Selling and administrative expense increased due to higher operating overhead and demand creation expense.

Higher operating overhead expense was primarily due to an increase in NIKE Direct strategic technology investments, as well as higher wage-related expenses.

The increase in demand creation expense was primarily due to higher digital marketing investments to support heightened digital demand.

FIRST NINE MONTHS OF FISCAL 2022 COMPARED TO FIRST NINE MONTHS OF FISCAL 2021

On a currency-neutral basis, APLA revenues increased 13% for the first nine months of fiscal 2022.

The increase was due to higher revenues across nearly all territories, driven by SOCO, Mexico and Korea, which increased 61%, 31% and 13%, respectively.

Revenues increased primarily due to higher revenues in Men’s and Women's.

NIKE Direct revenues increased 25%, primarily due to digital sales growth of 48% and comparable store sales growth of 10%, partially offset by store closures.

Currency-neutral footwear revenues increased 13%, due primarily to higher revenues in Women's.

Unit sales of footwear decreased 1%, while higher ASP per pair contributed approximately 14 percentage points of footwear revenue growth.

Higher ASP per pair was driven by higher NIKE Direct ASP, higher full-price ASP, reflecting lower discounts, higher off-price ASP and a higher mix of full-price sales.

Higher ASPs, in part, reflect inflationary conditions in our SOCO territory.

Currency-neutral apparel revenues increased 10%, due primarily to higher revenues in Men's.

Unit sales of apparel remained flat, while higher ASP per unit contributed approximately 10 percentage points of apparel revenue growth, driven by higher NIKE Direct, full-price and off-price ASPs, as well as a higher mix of full-price sales.

Higher ASPs, in part, reflect inflationary conditions in our SOCO territory.

Reported EBIT increased 21% for the first nine months of fiscal 2022, as higher revenues and gross margin expansion more than offset higher selling and administrative expense.

Gross margin increased approximately 420 basis points primarily due to higher margins and the favorable impact of growth in our NIKE Direct business, lower product costs, lower other costs, a higher mix of full-price sales and higher full-price ASP due to lower discounts.

The decrease in other costs was primarily due to the favorable rate impact of fixed supply chain costs on a higher volume of wholesale shipments, as well as lower inventory obsolescence.

Selling and administrative expense increased due to higher demand creation and operating overhead expense.

Higher demand creation expense was primarily due to higher digital marketing investments to support heightened digital demand.

The increase in operating overhead expense was primarily due to an increase in NIKE Direct strategic technology investments, lower bad debt recoveries and higher wage-related expenses.

Higher operating overhead expense was primarily due to an increase in professional services costs, as well as higher wage-related expenses.

The increase in demand creation expense was primarily due to normalization of sports marketing spend.

GLOBAL BRAND DIVISIONS

THREE MONTHS ENDED FEBRUARY 28, NINE MONTHS ENDED FEBRUARY 28,

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions)

2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

Revenues $ 14 $ 7 100 % 96 %

2 unchanged sentences

Global Brand Divisions revenues include NIKE Brand licensing and other miscellaneous revenues that are not part of a geographic operating segment.

THIRD QUARTER OF FISCAL 2022 COMPARED TO THIRD QUARTER OF FISCAL 2021

Global Brand Divisions' loss before interest and taxes increased 14% for the third quarter of fiscal 2022 driven by higher operating overhead and higher demand creation expense.

Higher operating overhead expense was primarily due to an increase in strategic technology investments.

Higher demand creation expense was primarily due to higher advertising and marketing expense as well as higher digital marketing investments to support heightened digital demand.

FIRST NINE MONTHS OF FISCAL 2022 COMPARED TO FIRST NINE MONTHS OF FISCAL 2021

Global Brand Divisions' loss before interest and taxes increased 19% for the first nine months of fiscal 2022 driven by higher operating overhead and higher demand creation expense.

Higher operating overhead expense was primarily due to an increase in strategic technology investments as well as continued investment in digital capabilities.

Higher demand creation expense was primarily due to higher advertising and marketing expense.

THREE MONTHS ENDED FEBRUARY 28, NINE MONTHS ENDED FEBRUARY 28,

FIRST QUARTER OF FISCAL 2023 COMPARED TO FIRST QUARTER OF FISCAL 2022

Global Brand Divisions' loss before interest and taxes increased 20% for the first quarter of fiscal 2023 driven primarily by higher operating overhead expense while demand creation expense remained flat.

Higher operating overhead expense was primarily due to an increase in wage-related costs and strategic technology investments.

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions)

2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES 2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

2022 2021 % CHANGE % CHANGE EXCLUDING CURRENCY CHANGES

Footwear $ 577 $ 567 2 % 7 %

10 unchanged sentences

We do not own the Converse trademarks in Japan and accordingly do not earn revenues in Japan.

THIRD QUARTER OF FISCAL 2022 COMPARED TO THIRD QUARTER OF FISCAL 2021

On a currency-neutral basis, Converse revenues increased 2% for the third quarter of fiscal 2022 as revenue growth in North America and Western Europe was partially offset by declines in Asia.

Wholesale revenues decreased 14%, primarily due to ongoing marketplace dynamics in China and global supply chain constraints, while direct to consumer revenues increased 32%.

Combined unit sales within the wholesale and direct to consumer channels decreased 10%, while ASP increased 11%, driven by higher full price ASP, due to lower discounts and growth in direct to consumer.

Reported EBIT increased 12%, driven by gross margin expansion, partially offset by higher selling and administrative expense.

Gross margin increased approximately 410 basis points as decreased promotions and higher margins in direct to consumer,

favorable changes in standard foreign currency exchange rates, and higher ASP net of discounts were partially offset by higher product costs due to increased freight and logistics costs.

Selling and administrative expense increased due to higher operating overhead expense as a result of an increase in professional services costs.

Demand creation expense was relatively flat compared to the prior year.

FIRST NINE MONTHS OF FISCAL 2022 COMPARED TO FIRST NINE MONTHS OF FISCAL 2021

On a currency-neutral basis, Converse revenues increased 8% for the first nine months of fiscal 2022 as revenue growth in North America, Western Europe and licensee markets more than offset declines in Asia.

Wholesale revenues decreased 3%, primarily due to ongoing marketplace dynamics in China and global supply chain constraints, while direct to consumer revenues increased 25%.

Combined unit sales within the wholesale and direct to consumer channels decreased 5%, while ASP increased 11%, driven by higher full price ASP, due to lower discounts and growth in direct to consumer.

Reported EBIT increased 24%, driven by higher revenues and gross margin expansion, partially offset by higher selling and administrative expense.

Gross margin increased approximately 330 basis points as higher margins in direct to consumer, favorable changes in standard foreign currency exchange rates, growth in licensee revenues, and higher ASP were slightly offset by higher product costs due to increased freight, duty and logistics costs.

Selling and administrative expense increased due to higher operating overhead and demand creation expense.

Operating overhead expense increased primarily due to an increase in professional services costs, while demand creation expense increased primarily due to higher advertising and marketing expense.

THREE MONTHS ENDED FEBRUARY 28, NINE MONTHS ENDED FEBRUARY 28,

FIRST QUARTER OF FISCAL 2023 COMPARED TO FIRST QUARTER OF FISCAL 2022

On a currency-neutral basis, Converse revenues increased 8% for the first quarter of fiscal 2023 as revenue growth in North America and Western Europe was partially offset by declines in Asia.

Direct to consumer revenues increased 17%, driven by strong digital demand in North America.

Combined unit sales within the wholesale and direct to consumer channels decreased 5%, while ASP increased 12%, driven by growth in direct to consumer.

Reported EBIT increased 2%, driven by gross margin expansion and higher revenues, partially offset by higher selling and administrative expense.

Gross margin increased approximately 220 basis points as higher ASP, net of discounts, and higher margin in direct to consumer were partially offset by higher product and other costs, primarily due to increased freight costs.

Selling and administrative expense increased due to higher operating overhead expense, partially offset by a decrease in demand creation expense.

Operating overhead expense increased as a result of higher professional services costs, lower bad debt recoveries and an increase in wage-related expenses.

THREE MONTHS ENDED AUGUST 31,

(Dollars in millions)

2022 2021 % CHANGE 2022 2021 % CHANGE

2022 2021 % CHANGE

Revenues $ (4) $ (21) —

9 unchanged sentences

and certain other foreign currency derivative instruments.

THIRD QUARTER OF FISCAL 2022 COMPARED TO THIRD QUARTER OF FISCAL 2021

Corporate's loss before interest and taxes decreased $70 million for the third quarter of fiscal 2022, primarily due to the following:

• a favorable change in net foreign currency gains and losses of $87 million related to the remeasurement of monetary assets and liabilities denominated in non-functional currencies and the impact of certain foreign currency derivative instruments, reported as a component of consolidated Other (income) expense, net;

FIRST QUARTER OF FISCAL 2023 COMPARED TO FIRST QUARTER OF FISCAL 2022

Corporate's loss before interest and taxes increased $29 million for the first quarter of fiscal 2023, primarily due to the following:

• an unfavorable change of $140 million related to the difference between actual foreign currency exchange rates and standard foreign currency exchange rates assigned to the NIKE Brand geographic operating segments and Converse, net of hedge gains and losses;

these results are reported as a component of consolidated gross margin;

• a favorable change of $41 million, primarily due to higher restructuring-related costs related to our organizational realignment in the prior year.

FIRST NINE MONTHS OF FISCAL 2022 COMPARED TO FIRST NINE MONTHS OF FISCAL 2021

Corporate's loss before interest and taxes decreased $237 million for the first nine months of fiscal 2022, primarily due to the following:

• a favorable change of $206 million largely due to higher restructuring-related costs associated with our organizational realignment as well as a net incremental charge related to our planned, strategic distributor partnership transition within APLA, both of which occurred in the prior year, partially offset by higher-wage related expenses in the first nine months of fiscal 2022;

• a favorable change in net foreign currency gains and losses of $67 million related to the remeasurement of monetary assets and liabilities denominated in non-functional currencies and the impact of certain foreign currency derivative instruments, reported as a component of consolidated Other (income) expense, net;

• an unfavorable change of $94 million related to the difference between actual foreign currency exchange rates and standard foreign currency exchange rates assigned to the NIKE Brand geographic operating segments and Converse, net of hedge gains and losses;

these results are reported as a component of consolidated gross margin.

• a favorable change of $44 million related to settlements of legal matters, partially offset by net favorable activity in the prior year related to our strategic distributor partnership transition within APLA.

FOREIGN CURRENCY EXPOSURES AND HEDGING PRACTICES

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Our foreign exchange risk management program is intended to lessen both the positive and negative effects of currency fluctuations on our consolidated results of operations, financial position and cash flows.

We manage global foreign exchange risk

centrally on a portfolio basis to address those risks material to NIKE, Inc.

We manage global foreign exchange risk centrally on a portfolio basis to address those risks material to NIKE, Inc.

Our hedging policy is designed to partially or entirely offset the impact of exchange rate changes on the underlying net exposures being hedged.

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We do not hold or issue derivative instruments for trading or speculative purposes.

As of and for the three and nine months ended February 28, 2022, there have been no material changes to the Company's hedging program or strategy from what was disclosed within the Annual Report on Form 10-K.

As of and for the three months ended August 31, 2022, there have been no material changes to the Company's hedging program or strategy from what was disclosed within the Annual Report on Form 10-K.

Refer to Note 4 — Fair Value Measurements and Note 8 — Risk Management and Derivatives in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for additional description of outstanding derivatives at each reported period end.

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Dollars for consolidated reporting results in a cumulative translation adjustment to Accumulated other comprehensive income (loss) within Shareholders' equity.

The impact of foreign exchange rate fluctuations on the translation of our consolidated Revenues was a detriment of approximately $280 million and a benefit $165 million for the three and nine months ended February 28, 2022, respectively, and a benefit of approximately $357 million and $430 million for the three and nine months ended February 28, 2021, respectively.

The impact of foreign exchange rate fluctuations on the translation of our Income before income taxes was a detriment of approximately $84 million and a benefit of $45 million for the three and nine months ended February 28, 2022, respectively, and a benefit of approximately $109 million and $143 million for the three and nine months ended February 28, 2021, respectively.

The impact of foreign exchange rate fluctuations on the translation of our consolidated Revenues was a detriment of approximately $823 million for the three months ended August 31, 2022, and a benefit of approximately $382 million for the three months ended August 31, 2021.

The impact of foreign exchange rate fluctuations on the translation of our Income before income taxes was a detriment of approximately $253 million for the three months ended August 31, 2022, and a benefit of approximately $117 million for the three months ended August 31, 2021.

Management generally identifies hyper-inflationary markets as those markets whose cumulative inflation rate over a three-year period exceeds 100%.

Management has concluded our Argentina subsidiary within our APLA operating segment is operating in a hyper-inflationary market.

As a result, beginning in the second quarter of fiscal 2019, the functional currency of our Argentina subsidiary changed from the local currency to the U.S.

As of and for the three and nine months ended February 28, 2022,

this change did not have a material impact on our results of operations or financial condition, and we do not anticipate it will have a material impact in future periods based on current rates.

Management has concluded our Argentina subsidiary within our APLA operating segment and our Turkey subsidiary within our EMEA operating segment are operating in hyper-inflationary markets.

As a result, beginning in the second quarter of fiscal 2019 and the first quarter of fiscal 2023, the functional currency of our Argentina subsidiary and our Turkey subsidiary, respectively, changed from the local currency to the U.S.

As of and for the three months ended August 31, 2022, these changes did not have a material impact on our results of operations or financial condition, and we do not anticipate they will have a material impact in future periods based on current rates.

MANAGING TRANSLATIONAL EXPOSURES

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Dollar denominated available-for-sale investments are accounted for as cash flow hedges.

We estimate the combination of translation of foreign currency-denominated profits from our international businesses and the year-over-year change in foreign currency related gains and losses included in Other (income) expense, net had a favorable impact of approximately $3 million and $170 million on our Income before income taxes for the three and nine months ended February 28, 2022, respectively.

We estimate the combination of translation of foreign currency-denominated profits from our international businesses and the year-over-year change in foreign currency related gains and losses included in Other (income) expense, net had an unfavorable impact of approximately $234 million on our Income before income taxes for the three months ended August 31, 2022.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOW ACTIVITY

Cash provided (used) by operations was an inflow of $4,037 million for the first nine months of fiscal 2022, compared to $4,645 million for the first nine months of fiscal 2021.

Net income, adjusted for non-cash items, generated $5,387 million of operating cash inflow for the first nine months of fiscal 2022, compared to $4,840 million for the first nine months of fiscal 2021.

The net change in working capital and other assets and liabilities resulted in a decrease to Cash provided (used) by operations of $1,350 million for the first nine months of fiscal 2022 compared to $195 million for the first nine months of fiscal 2021.

For the first nine months of fiscal 2022, the net change in working capital compared to the prior year was primarily driven by unfavorable impacts to Cash provided (used) by operations from Inventories of $1,546 million, partially offset by favorable impacts from Accounts receivable of $1,303 million.

These changes are, in part, due to supply chain constraints, which caused higher levels of in-transit inventory and therefore a lower supply of available inventory to meet consumer demand.

Cash provided (used) by investing activities was an outflow of $1,711 million for the first nine months of fiscal 2022, compared to $3,987 million for the first nine months of fiscal 2021, primarily driven by the net change in short-term investments.

For the first nine months of fiscal 2022, the net change in short-term investments (including sales, maturities and purchases) resulted in a cash outflow of $1,156 million compared to a cash outflow of $3,650 million for the first nine months of fiscal 2021.

Cash provided (used) by financing activities was an outflow of $3,456 million for the first nine months of fiscal 2022 compared to $612 million for the first nine months of fiscal 2021.

The increased outflow in the first nine months of fiscal 2022 was driven by our resumption of the share repurchase program in the fourth quarter of fiscal 2021, resulting in $2,923 million of share repurchases for the first nine months of fiscal 2022 compared to no share repurchases in the first nine months of fiscal 2021.

During the first nine months of fiscal 2022, we repurchased 18.9 million shares of NIKE's Class B Common Stock for $2.9 billion (an average price of $155.28 per share) under the four-year, $15 billion share repurchase program approved by the Board of Directors in June 2018.

As of February 28, 2022, we had repurchased 68.9 million shares at a cost of approximately $7.6 billion (an average price of $110.31 per share) under this program.

Cash provided (used) by operations was an inflow of $357 million for the first three months of fiscal 2023, compared to $1,111 million for the first three months of fiscal 2022.

Net income, adjusted for non-cash items, generated $1,771 million of operating cash inflow for the first three months of fiscal 2023, compared to $2,076 million for the first three months of fiscal 2022.

The net change in working capital and other assets and liabilities resulted in a decrease to Cash provided (used) by operations of $1,414 million for the first three months of fiscal 2023 compared to $965 million for the first three months of fiscal 2022.

The net change in working capital was unfavorably impacted by an increase in Inventories of $1,464 million as a result of higher inventory levels due to extended lead times and shifts in product flow as a result of ongoing supply chain volatility.

The change in working capital was also impacted by a $707 million favorable change in Accounts payable due to higher product purchases and the net favorable change in cash collateral with derivative counterparties as a result of hedging transactions.

During the first three months of fiscal 2023, we received cash collateral of $476 million as compared to $39 million during the first three months of fiscal 2022.

Refer to the Credit Risk section of Note 8 — Risk Management and Derivatives in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements for additional details.

Cash provided (used) by investing activities was an outflow of $214 million for the first three months of fiscal 2023, compared to an inflow of $501 million for the first three months of fiscal 2022, primarily driven by the net change in short-term investments.

For the first three months of fiscal 2023, the net change in short-term investments (including sales, maturities and purchases) resulted in a cash outflow of $89 million compared to a cash inflow of $583 million for the first three months of fiscal 2022.

Cash provided (used) by financing activities was an outflow of $1,404 million for the first three months of fiscal 2023 compared to $743 million for the first three months of fiscal 2022.

The increased outflow in the first three months of fiscal 2023 was driven by lower proceeds from stock option exercises, which resulted in a cash inflow of $82 million in the first three months of fiscal 2023 compared to $473 million in the first three months of fiscal 2022, as well as higher share repurchases of $983 million for the first three months of fiscal 2023 compared to $752 million in the first three months of fiscal 2022.

During the first three months of fiscal 2023, we repurchased a total of 9.0 million shares of NIKE's Class B Common Stock for $991.1 million (an average price of $110.58 per share).

In August 2022, we terminated the previous four-year, $15 billion share repurchase program approved by the Board of Directors in June 2018.

Under this program, we repurchased 6.5 million shares for a total approximate cost of $710.0 million (an average price of $109.85 per share) during the first quarter of fiscal 2023 and 83.8 million shares for a total approximate cost of $9.4 billion (an average price of $111.82 per share) during the term of the program.

Upon termination of the four-year, $15 billion program, we began purchasing shares under the new four-year, $18 billion share repurchase plan authorized by the Board of Directors in June 2022.

As of August 31, 2022, we had repurchased 2.5 million shares at a cost of approximately $281.1 million (an average price of $112.48 per share) under this new program.

We continue to expect funding of share repurchases will come from operating cash flows and excess cash.

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The Shelf expires on July 21, 2025.

As of February 28, 2022, our committed credit facilities were unchanged from the information previously reported on Form 10-K for the fiscal year ended May 31, 2021.

As of August 31, 2022, our committed credit facilities were unchanged from the information previously reported on Form 10-K for the fiscal year ended May 31, 2022.

We currently have long-term debt ratings of AA- and A1 from Standard and Poor's Corporation and Moody's Investor Services, respectively.

Any changes to these ratings could result in interest rate and facility fee changes.

As of February 28, 2022, we were in full compliance with the covenants under our facilities and believe it is unlikely we will fail to meet any of the covenants in the foreseeable future.

As of February 28, 2022 and May 31, 2021, no amounts were outstanding under our committed credit facilities.

On March 11, 2022, subsequent to the end of the third quarter of fiscal 2022, we entered into a 364-day committed credit facility agreement with a syndicate of banks which provides for up to $1 billion of borrowings, with the option to increase borrowings up to $1.5 billion in total with lender approval.

The facility matures on March 10, 2023, with an option to extend the maturity date an additional 364 days.

This facility replaces the prior $1 billion 364-day credit facility agreement entered into on March 15, 2021, which would have matured on March 14, 2022.

Refer to Note 5 — Short-Term Borrowings and Credit Lines for more information.

On March 11, 2022, we also entered into a five-year committed credit facility agreement with a syndicate of banks which provides for up to $2 billion of borrowings, with the option to increase borrowings up to $3 billion in total with lender approval.

The facility matures on March 11, 2027, with options to extend the maturity date up to an additional two years.

This facility replaces the prior $2 billion five-year credit facility agreement entered into on August 16, 2019, which would have matured on August 16, 2024.

Refer to Note 5 — Short-Term Borrowings and Credit Lines for more information.

As of August 31, 2022, we were in full compliance with the covenants under our facilities and believe it is unlikely we will fail to meet any of the covenants in the foreseeable future.

As of August 31, 2022 and May 31, 2022, no amounts were outstanding under our committed credit facilities.

Liquidity was also provided by our $3 billion commercial paper program.

As of and for the three months ended February 28, 2022, we did not have any borrowings outstanding under our $3 billion program.

As of and for the three months ended August 31, 2022, we did not have any borrowings outstanding under our $3 billion program.

We may issue commercial paper or other debt securities depending on general corporate needs.

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however, future volatility in the capital markets may increase costs associated with issuing commercial paper or other debt instruments or affect our ability to access those markets.

As of February 28, 2022, we had cash, cash equivalents and short-term investments totaling $13.5 billion, primarily consisting of commercial paper, corporate notes, deposits held at major banks, money market funds, U.S.

As of August 31, 2022, we had cash, cash equivalents and short-term investments totaling $11.9 billion, primarily consisting of commercial paper, corporate notes, deposits held at major banks, money market funds, U.S.

Treasury obligations and other investment grade fixed-income securities.

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All of our investments are investment grade to minimize our credit risk.

While individual securities have varying durations, as of February 28, 2022, the weighted average days to maturity of our cash equivalents and short-term investments portfolio was 59 days.

While individual securities have varying durations, as of August 31, 2022, the weighted average days to maturity of our cash equivalents and short-term investments portfolio was 136 days.

We believe that existing cash, cash equivalents, short-term investments and cash generated by operations, together with access to external sources of funds as described above, will be sufficient to meet our domestic and foreign capital needs in the foreseeable future.

We utilize a variety of tax planning and financing strategies to manage our worldwide cash and deploy funds to locations where they are needed.

We indefinitely reinvest a significant portion of our foreign earnings, and our current plans do not demonstrate a need to repatriate these earnings.

Should we require additional capital in the United States, we may determine to repatriate indefinitely reinvested foreign funds or raise capital in the United States through debt.

Given our existing structure, if we were to repatriate indefinitely reinvested foreign earnings, we would be required to accrue and pay withholding taxes in certain foreign jurisdictions.

There have been no significant changes to the material cash requirements reported in our Annual Report on Form 10-K for the fiscal year ended May 31, 2022.

OFF-BALANCE SHEET ARRANGEMENTS

As of February 28, 2022, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on our current or future financial condition, results of operations, liquidity, capital expenditures or capital resources.

CONTRACTUAL OBLIGATIONS

There have been no significant changes to the contractual obligations reported in our Annual Report on Form 10-K for the fiscal year ended May 31, 2021.

As of August 31, 2022, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on our current or future financial condition, results of operations, liquidity, capital expenditures or capital resources.

NEW ACCOUNTING PRONOUNCEMENTS

There have been no material changes in recently issued or adopted accounting standards from those disclosed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2022.

CRITICAL ACCOUNTING POLICIES

CRITICAL ACCOUNTING ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based upon our Unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.

We believe that the estimates, assumptions and judgments involved in the accounting policies described in the “Management's Discussion and Analysis of Financial Condition and Results of Operations” section of our most recent Annual Report on Form 10-K have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies.

Actual results could differ from the estimates we use in applying our critical accounting policies.

We believe the assumptions and judgments involved in the accounting estimates described in the “Management's Discussion and Analysis of Financial Condition and Results of Operations” section of our most recent Annual Report on Form 10-K have the greatest potential impact on our financial statements, so we consider these to be our critical accounting estimates.

Actual results could differ from these estimates.

We are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis