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Microsoft (MSFT) Satya Nadella on Q3 2016 Results - Earnings Call Transcript

Q3 2016 Earnings Call

April 21, 2016 5:30 pm ET

Executives

Chris Suh - General Manager-Investor Relations

Satya Nadella - CEO & Non-Independent Director

Amy E. Hood - Chief Financial Officer & Executive Vice President

Analysts

Brent Thill - UBS Securities LLC

Philip Alan Winslow - Credit Suisse Securities (NYSE:USA) LLC (Broker)

Mark L. Moerdler - Sanford C. Bernstein & Co. LLC

Heather Bellini - Goldman Sachs & Co.

Keith Eric Weiss - Morgan Stanley & Co. LLC

Karl E. Keirstead - Deutsche Bank Securities, Inc.

Walter H. Pritchard - Citigroup Global Markets, Inc. (Broker)

Ross MacMillan - RBC Capital Markets LLC

Kash Rangan - Bank of America Merrill Lynch

Mark R. Murphy - JPMorgan Securities LLC

Stewart Kirk Materne III - Evercore ISI

Operator

Welcome to Microsoft's Third Quarter Fiscal Year 2016 Earnings Call. As a reminder, this conference is being recorded. I would like to turn the call over to Chris Suh, General Manager of Investor Relations. Chris, please proceed.

Chris Suh - General Manager-Investor Relations

Thank you. Good afternoon, and thank you for joining us today. On the call with me today are Satya Nadella, Chief Executive Officer; Amy Hood, Chief Financial Officer; Frank Brod, Chief Accounting Officer; and John Seethoff, Deputy General Counsel and Corporate Secretary. On our website, microsoft.com/investor, you could find are earnings press release and financial summary slide deck, which is intended to supplement our prepared remarks during today's call and provide the reconciliation of differences between GAAP and non-GAAP financial measures.

Unless otherwise specified, we will refer to non-GAAP metrics on the call. The non-GAAP measures exclude the net impact from revenue deferrals and the impact of integration and restructuring charges. The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP. They are included as additional clarifying items to aid investors in further understanding the company's third-quarter performance in addition to the impact that these items and events had on the financial results.

All growth comparisons we make on the call relate to the corresponding period of last year unless otherwise noted. We also provide growth rates in constant currency when available as a framework for assessing how our underlying businesses performed, excluding the effect of foreign currency rate fluctuations. At the segment level, we provide constant currency growth for both revenue and gross margin. However, due to recent change to our external reporting segments, we aren't able to provide segment level constant currency operating expense growth, and consequently cannot derive constant currency segment operating income either. We do provide constant currency operating expense and operating income growth at the company-wide level.

Please note that in the third quarter of fiscal 2016, we adopted a new standard issued by the FASB that made certain changes to accounting for stock-based compensation. One of the more significant changes require that excess tax benefits and deficiencies be recorded as part of income tax expense rather than as part of additional paid-in capital. Adoption of the new guidance requires us to reflect adjustments as of July 1, 2015, and hence impacts our previously reported quarterly results for fiscal 2016. You can find additional information in the financial summary slide deck and in our 10-Q filing.

We will post our prepared remarks to our website immediately following the call until the complete transcript is available. Today's call is being webcast live and recorded. If you ask a question, it will be included in our live transmission, in the transcript and in any future use of the recording. You can replay the call and view the transcript on the Microsoft Investor Relations website until April 21, 2017.