YUM BRANDS INC Q4 FY2024 earnings call

• Digital sales grew approximately 15% in 2024, with over 50% of system sales through digital channels. - Accelerated technology transformation by integrating digital and technology teams into a unified global team, introducing Byte by Yum! which 25,000 Yum! restaurants use at least one product. - KFC: Twin growth engine, units grew 7% driving system sales growth of 3% full year, with international markets showing recoveries. - Taco Bell: Strong momentum in 2024, Decades platform generated product innovation, brand excitement, $7 Luxe Box as value leadership. - Pizza Hut: Focus on striking balance between everyday value and disruptive campaigns, enhancing digital experience. - Habit Burger & Grill Division: Operational efficiencies with labor productivity initiatives, reducing restaurant labor expense as a percentage of sales by 150 basis points. - Test concepts: KFC opened Saucy by KFC in December, Taco Bell testing Live Más Cafe with strong consumer response.

1. KFC: Accounts for 49% of divisional operating profit. Full year system sales grew 3% with 7% unit growth, despite 2% same-store sales decline. Fourth quarter same-store sales flat, with international same-store sales improving to +1% and momentum building. Africa comps rose 9%, Latin America same-store sales up 6% in Q4. 2. Taco Bell: Accounts for 37% of divisional operating profit. Full year system sales up 6% fueled by exceptional same-store sales growth. Fourth quarter same-store sales rose 5% year-over-year, outpacing U.S. industry by five percentage points. Taco Bell International same-store sales grew 3% in Q4. 3. Pizza Hut: Represents 13% of divisional operating profit. Full year system sales declined 1% including 2% net new unit growth. Fourth quarter same-store sales growth improved 300 basis points sequentially. 4. Habit Burger & Grill Division: Full year system sales grew 1% driven by unit growth. Fourth quarter same-store sales trends improved, restaurant-level margins reached 10% in 2024, 150 basis points higher year-over-year.

• 2025 core operating profit growth target of at least 8%. - Unit growth in 2025 expected to reach at least 4% or 5% when excluding one-time Turkey-related closures. - G&A expected to increase by a low single-digit percentage, excluding headwind from reset of below target incentive compensation. - Same-store sales performance anticipated to improve in many markets, supported by stronger value perception scores and recovery in markets affected by Middle East conflict. - Confident in hitting 8% core operating profit number driven by twin growth engines (KFC International recovery and Taco Bell US momentum).

• Turkey terminated franchise agreements and reacquired master franchise rights, resulting in removal of 284 KFC and 254 Pizza Hut stores in Turkey from unit count in Q1. - Some markets affected by broader global consumer sentiment, particularly those impacted by the Middle East conflict.

Q: Ask about international and franchisee health impact on growth trajectory in 2025.

A: David Gibbs mentioned KFC international markets with some impacted by Middle East conflict but showing recovery, and Chris Turner noted confidence in franchise base health.

Q: Curious how modeling the makeup of the gap in 2025 core operating profit growth.

A: David Gibbs said Turkey closures not big headwind, twin growth engines (KFC International recovery and Taco Bell US momentum) to drive growth.

Q: Outlook on G&A longer term.

A: Chris Turner said G&A expected to get leverage over long term as top line grows, with resource optimization program and Byte by Yum! progress.

Q: Thoughts on Scott making his stamp on KFC US business.

A: David Gibbs said Scott has global KFC experience, will work on modernizing consumer experience, digital, and menu innovation like expanding Saucy by KFC test.

Q: Arguments for and against Byte tech model for franchisees vs outsourced.

A: David Gibbs said controlling tech destiny is better, Chris Turner added Byte enables faster deployment of capabilities like AI-driven marketing personalization.

Q: On acceleration and roll out of Byte and visible impact.

A: David Gibbs said bringing under Byte umbrella helps accelerate deployment, with examples like KFC International digital ordering growth.

Q: On attracting and retaining technologists for Byte by Yum!.

A: David Gibbs said Yum! has strong culture and growth, able to attract talent, with Joe Park leading technology work and team being pumped.