Yum! Brands, Inc. Q2 FY2025 earnings call

• Leadership transition: David Gibbs' final earnings call as CEO, with Chris Turner to take over on October 1, and David serving as adviser until end of 2026. • Segment performance: KFC International had 3% same-store sales growth, Taco Bell U.S. same-store sales grew 4% outpacing the category, Pizza Hut U.S. had transaction softness but launched new value offers, Habit Burger and Grilled improved value offerings. • Digital sales: Digital mix reached 57%, up 7 points year-over-year; KFC's digital sales grew 22% with mix over 60%. • Innovation: Byte rollout, AI-driven personalized advertising, Live Mas Cafe expansion at Taco Bell, new mobile app for Pizza Hut. • Sustainability: Achieved 89% of Yum! approved suppliers certified for food safety, 94% cage-free eggs sourced, reduced emissions by 25% since 2019.

KFC contributes 52% of Yum!'s divisional operating profit, with KFC International accounting for 85% of international operating profit. KFC International grew same-store sales 3%. Taco Bell accounts for 37% of divisional operating profit, with same-store sales growing 4% in the U.S. and 5% in Europe. Pizza Hut accounts for 11% of divisional operating profit; in the U.S., transaction softness occurred but new offers were launched, while internationally it grew same-store sales 2%. Habit Burger and Grilled had year-over-year system sales decline of 1%, but improved value offerings lifted sales starting in June.

• System sales growth expected to be 4% with 4%-5% unit growth excluding Turkey market exit. • G&A ex special and ex FX expected to be at high end of mid-single-digit increase due to one-off expenses. • Core operating profit expected to grow 8% excluding 53rd week, with Q4 in double digits. • Interest expense expected to land between $500 million and $520 million. • FX expected to have a $20 million tailwind to GAAP operating profit for remainder of year.

• Consumer environment challenges with softer demand. • Inflationary pressures on key building products sourced from Mexico and Canada. • Geopolitical uncertainties impacting operations in some regions. • Potential impact of tariffs on the business given 90% of development outside U.S.

Q: Thoughts on degree of confidence in 8% core operating profit growth for the year and back half drivers?

A: Chris Turner mentioned strong company store profit growth, lapping bad debt from last year, and refranchising gains will help offset some expenses but still expect 8% growth with Q4 in double digits Q: Talk about tech capabilities and their impact on comps, profitability, unit growth?

A: Chris Turner discussed Byte strategy's impact on top and bottom line, AI-enabled marketing with high return on targeted communications, operational tech improving store flow and reducing turnover Q: Commentary on difficult U.S. consumer environment and how brands are positioned to win?

A: David Gibbs noted Taco Bell is taking share from fast casual and other competitors, with strong innovation and value offerings like $5.79 menu, and upcoming new products in Q3 and Q4 Q: Units with full Byte platform and rollout cadence?

A: Christopher Lee Turner said ~25,000 restaurants have some Byte components, with focus on expanding to full ecosystem and new markets, with demand for Byte high from franchisees Q: Clarification on Byte Connect pricing and Taco Bell share from fast casual vs other QSRs?

A: Christopher Lee Turner explained Byte Connect is priced at discount due to scale and internal development, and Taco Bell is taking share from both fast casual and general QSR industry Q: Value perception at KFC and value menu at Pizza Hut?

A: David Gibbs stated value is important in softer consumer environment, with KFC working on improving value perception and Pizza Hut establishing compelling value propositions like Wing Wednesday and $2 personal pan pizzas