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Yum! Brands Reports Third-Quarter Results; Record 760 Net-New Units and Same-Store Sales Growth of 5%, Driving System Sales Growth of 8%; Sustained Digital System Sales of Over $5 Billion

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LOUISVILLE, Ky., October 28, 2021--(BUSINESS WIRE)--Yum! Brands, Inc. (NYSE: YUM) today reported results for the third-quarter ended September 30, 2021. Worldwide system sales excluding foreign currency translation grew 8%, with 5% same-store sales and 4% unit growth. Third-quarter GAAP EPS was $1.75, an increase of 90% over the prior year quarter. Third-quarter EPS excluding Special Items was $1.22, an increase of 21% over the prior year quarter.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20211028005365/en/

DAVID GIBBS COMMENTS

David Gibbs, CEO, said "Our third quarter results, led by record-breaking unit development and sustained momentum in digital sales, are a testament to the strength of our Brands and the unmatched commitment and capability of our best-in-class franchise partners. I am proud that each of our global divisions contributed to delivering 760 net-new units in the quarter. Our 5% same store sales growth for the third quarter, or 3% same-store sales growth on a 2-year basis, demonstrates the resilience of our diversified global business model despite the headwind of the Delta variant in certain key markets.

During the quarter, we advanced our digital capabilities with the acquisition of Dragontail and its AI-based integrated kitchen order management and delivery technologies that strengthens store operations, enhances the customer experience and makes it easier for team members to run a restaurant. As we continue to navigate the short-term uncertainties of the COVID recovery, we are incredibly confident in the ability of our iconic brands and our world-class talent to drive growth and maximize stakeholder value by delivering on our long-term growth algorithm."

THIRD-QUARTER HIGHLIGHTS

  • Worldwide system sales excluding foreign currency translation grew 8%, with KFC at 11%, Taco Bell at 8% and Pizza Hut at 4%.

  • We reported 4% unit growth year-over-year and record third-quarter net-new unit growth of 760.

  • Foreign currency translation favorably impacted divisional operating profit by $12 million.

% Change

System Sales
Ex F/X

Same-Store Sales

Units

GAAP Operating
Profit

Core
Operating Profit1

KFC Division

+11

+6

+7

+14

+10

Pizza Hut Division

+4

+4

+1

+13

+11

Taco Bell Division

+8

+5

+3

(1)

(1)

Worldwide

+8

+5

+4

+12

+3

Third-Quarter

Year-to-Date

2021

2020

% Change

2021

2020

% Change

GAAP EPS

$1.75

$0.92

+90

$4.10

$1.86

+120

Special Items EPS1

$0.53

$(0.09)

NM

$0.66

$(0.61)

NM

EPS Excluding Special Items

$1.22

$1.01

+21

$3.44

$2.47

+39

1 See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further detail of Core Operating Profit and Special Items.

All comparisons are versus the same period a year ago.

System sales growth figures exclude foreign currency translation ("F/X") and core operating profit growth figures exclude F/X and Special Items. Special Items are not allocated to any segment and therefore only impact worldwide GAAP results. See reconciliation of Non-GAAP Measurements to GAAP Results within this release for further details.

Digital system sales includes all transactions where consumers at system restaurants utilize ordering interaction that is primarily facilitated by automated technology.

KFC DIVISION

Third-Quarter

Year-to-Date

%/ppts Change

%/ppts Change

2021

2020

Reported

Ex F/X

2021

2020

Reported

Ex F/X

Restaurants

26,222

24,602

+7

N/A

26,222

24,602

+7

N/A

System Sales ($MM)

7,878

6,909

+14

+11

22,789

18,484

+23

+18

Same-Store Sales Growth (%)

+6

(4)

NM

NM

+14

(11)

NM

NM

Franchise and Property Revenues ($MM)

391

340

+15

+12

1,124

906

+24

+19

Operating Profit ($MM)

314

278

+14

+10

932

655

+42

+35

Operating Margin (%)

45.4

47.2

(1.8)

(1.7)

46.6

41.9

4.7

4.9

Third-Quarter (% Change)

Year-to-Date (% Change)

International

U.S.

International

U.S.

System Sales Growth Ex F/X

+12

+3

+20

+9

Same-Store Sales Growth

+6

+4

+15

+9

  • KFC Division opened 636 gross new restaurants in 61 countries.

  • Operating margin decreased 1.8 percentage points driven by lapping bad debt recoveries offset by system sales growth.

  • Foreign currency translation favorably impacted operating profit by $10 million.

  • For the division, same-store sales grew 1% on a 2-year basis, which includes the impact of about 1% of our stores being temporarily closed as of the end of the third-quarter 2021.

    • For KFC International, same-store sales declined 1% on a 2-year basis, which includes the impact of about 1% of our stores being temporarily closed as of the end of the third-quarter 2021.

    • For KFC U.S., same-store sales grew 13% on a 2-year basis.

KFC Markets1

Percent of KFC
System Sales
2

System Sales Growth Ex F/X

Third-Quarter
(% Change)

Year-to-Date
(% Change)

China

27%

+1

+12

United States

18%

+3

+9

Asia

12%

+6

+5

Russia, Central & Eastern Europe

7%

+30

+36

Australia

7%

+1

+11

United Kingdom

6%

+26

+56

Western Europe

5%

+19

+24

Latin America

5%

+41

+33

Africa

4%

+17

+40

Middle East / Turkey / North Africa

4%

+33

+43

Canada

2%

+4

+9

Thailand

2%

(13)

(11)

India

1%

+92

+72

1Refer to investors.yum.com/financial-information/financial-reports/ for a list of the countries within each of the markets.

2Reflects Full Year 2020.

PIZZA HUT DIVISION

Third-Quarter

Year-to-Date

%/ppts Change

%/ppts Change

2021

2020

Reported

Ex F/X

2021

2020

Reported

Ex F/X

Restaurants

18,007

17,842

+1

N/A

18,007

17,842

+1

N/A

System Sales ($MM)

3,170

2,994

+6

+4

9,409

8,548

+10

+7

Same-Store Sales Growth (%)

+4

(3)

NM

NM

+9

(8)

NM

NM

Franchise and Property Revenues ($MM)

147

134

+9

+7

435

393

+10

+8

Operating Profit ($MM)

101

89

+13

+11

306

252

+21

+18

Operating Margin (%)

40.6

36.7

3.9

3.8

40.9

35.4

5.5

5.2

Third-Quarter (% Change)

Year-to-Date (% Change)

International

U.S.

International

U.S.

System Sales Growth Ex F/X

+9

(2)

+11

+2

Same-Store Sales Growth

+6

+2

+10

+7

  • Pizza Hut Division opened 297 gross new restaurants in 39 countries.

  • Operating margin increased 3.9 percentage points driven by same-store sales growth.

  • Foreign currency translation favorably impacted operating profit by $2 million.

  • For the division, same-store sales grew 1% on a 2-year basis, which includes the impact of about 1% of our stores being temporarily closed as of the end of the third-quarter 2021.

    • For Pizza Hut International, same-store sales declined 4% on a 2-year basis, which includes the impact of about 1% of our stores being temporarily closed as of the end of the third-quarter 2021.

    • For Pizza Hut U.S., same-store sales grew 8% on a 2-year basis.

Pizza Hut Markets1

Percent of Pizza
Hut System Sales2

System Sales Growth Ex F/X

Third-Quarter
(% Change)

Year-to-Date
(% Change)

United States

45%

(2)

+2

China

15%

+1

+20

Asia

15%

+1

+1

Latin America / Spain / Portugal

10%

+23

+15

Europe (excluding Spain & Portugal)

8%

+11

+2

Middle East / Turkey / North Africa

3%

+9

+11

Canada

3%

+10

+13

India

1%

+78

+60

Africa

<1%

+3

+39

1Refer to investors.yum.com/financial-information/financial-reports/ for a list of the countries within each of the markets.

2Reflects Full Year 2020.

TACO BELL DIVISION

Third-Quarter

Year-to-Date

%/ppts Change

%/ppts Change

2021

2020

Reported

Ex F/X

2021

2020

Reported

Ex F/X

Restaurants

7,619

7,400

+3

N/A

7,619

7,400

+3

N/A

System Sales ($MM)

3,143

2,914

+8

+8

9,212

8,074

+14

+14

Same-Store Sales Growth (%)

+5

+3

NM

NM

+12

(2)

NM

NM

Franchise and Property Revenues ($MM)

177

165

+8

+7

518

460

+13

+13

Operating Profit ($MM)

184

186

(1)

(1)

560

484

+16

+16

Operating Margin (%)

34.6

37.2

(2.6)

(2.6)

36.1

34.5

1.6

1.6

  • Taco Bell Division opened 74 gross new restaurants in 15 countries.

  • Operating margin decreased 2.6 percentage points due to restaurant level margins returning to historical levels and increased general and administrative expenses offset by same-store sales growth.

  • For the division, same-store sales grew 8% on a 2-year basis.

HABIT BURGER GRILL DIVISION

  • The Habit Burger Grill Division opened 8 gross new restaurants in the U.S.

  • During the quarter, The Habit Burger Grill Division same-store sales grew 11%.

    • For the year-to-date, The Habit Burger Grill Division same-store sales grew 18%.

  • For the division, same-store sales for the quarter grew 7% on a 2-year basis, which includes the impact of about 1% of stores that were temporarily closed as of the end of the third-quarter 2021.

OTHER ITEMS

  • Same-store sales growth on a 2-year basis is calculated using the geometric method as follows: (1 + Q3 2020 reported same-store sales growth) * (1 + Q3 2021 reported same-store sales growth) - 1.

  • We recorded $52 million of pre-tax investment income related to the change in fair value of our approximate 5% investment in Devyani International Limited, an entity that operates KFC and Pizza Hut franchised units in India that executed an initial public offering during the quarter. This change in fair value resulted in a $0.16 benefit to third-quarter EPS.

  • During the third quarter of 2021 a subsidiary of Taco Bell Corp. issued $2.25 billion of Securitization Notes. Proceeds were used to repay $1.3 billion of existing higher coupon Taco Bell Securitization Notes and for general corporate purposes including capital return to shareholders.

  • Disclosures pertaining to outstanding debt in our Restricted Group capital structure will be provided at the time of the filing of the third-quarter Form 10-Q.

CONFERENCE CALL

Yum! Brands, Inc. will host a conference call to review the company's financial performance and strategies at 8:15 a.m. Eastern Time October 28, 2021. The number is 877/871-3172 for U.S. callers, 412/902-6603 for international callers, conference ID 1801564.

The call will be available for playback beginning at 10:00 a.m. Eastern Time October 28, 2021 through November 4, 2021. To access the playback, dial 877/344-7529 in the U.S., 855/669-9658 in Canada, and 412/317-0088 internationally, conference ID 10159830.

The webcast and the playback can be accessed by visiting Yum! Brands' website, investors.yum.com/events-and-presentations and selecting "Q3 2021 Yum! Brands, Inc. Earnings Call."

ADDITIONAL INFORMATION ONLINE

Quarter end dates for each division, restaurant count details, definitions of terms and Restricted Group financial information are available at investors.yum.com. Reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures are included within this release.

FORWARD-LOOKING STATEMENTS

This announcement may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the fact that they do not relate strictly to historical or current facts and by the use of forward-looking words such as "expect," "expectation," "believe," "anticipate," "may," "could," "intend," "belief," "plan," "estimate," "target," "predict," "likely," "seek," "project," "model," "ongoing," "will," "should," "forecast," "outlook" or similar terminology. These statements are based on and reflect our current expectations, estimates, assumptions and/or projections, our perception of historical trends and current conditions, as well as other factors that we believe are appropriate and reasonable under the circumstances. Forward-looking statements are neither predictions nor guarantees of future events, circumstances or performance and are inherently subject to known and unknown risks, uncertainties and assumptions that could cause our actual results to differ materially from those indicated by those statements. There can be no assurance that our expectations, estimates, assumptions and/or projections, including with respect to the future earnings and performance or capital structure of Yum! Brands, will prove to be correct or that any of our expectations, estimates or projections will be achieved.

Numerous factors could cause our actual results and events to differ materially from those expressed or implied by forward-looking statements, including, without limitation: the severity and duration of the COVID-19 pandemic, food safety and food borne-illness issues; health concerns arising from outbreaks of a significant health epidemic; the success of our franchisees and licensees; our significant exposure to the Chinese market; changes in economic and political conditions in countries and territories outside of the U.S. where we operate; our ability to protect the integrity and security of personal information of our customers and employees; our ability to successfully implement technology initiatives; our increasing dependence on multiple digital commerce platforms; the impact of social media; our ability to secure and maintain distribution and adequate supply to our restaurants; the loss of key personnel, or labor shortages or difficulty finding and retaining qualified employees; the success of our development strategy in emerging markets; changes in commodity, labor and other operating costs; harm or dilution to our brands caused by franchisee and third party activity; pending or future litigation and legal claims or proceedings; changes in or noncompliance with government regulations, including labor standards and anti-bribery or anti-corruption laws; tax matters, including changes in tax laws or disagreements with taxing authorities; consumer preferences and perceptions of our brands; failure to protect our service marks or other intellectual property; changes in consumer discretionary spending and general economic conditions; competition within the retail food industry; not realizing the anticipated benefits from past or potential future acquisitions, investments or other strategic transactions, and risks relating to our significant amount of indebtedness. In addition, other risks and uncertainties not presently known to us or that we currently believe to be immaterial could affect the accuracy of any such forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

The forward-looking statements included in this announcement are only made as of the date of this announcement and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances. You should consult our filings with the Securities and Exchange Commission (including the information set forth under the captions "Risk Factors" and "Forward-Looking Statements" in our most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q) for additional detail about factors that could affect our financial and other results.

Yum! Brands, Inc., based in Louisville, Kentucky, has over 52,000 restaurants in more than 150 countries and territories primarily operating the company’s brands – KFC, Pizza Hut and Taco Bell – global leaders of the chicken, pizza and Mexican-style food categories. The Company’s family of brands also includes The Habit Burger Grill, a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more. Yum! Brands was included on the 2021 Bloomberg Gender-Equality Index and in 2020, Yum! Brands was named to the Dow Jones Sustainability Index North America and was ranked among the top 100 Best Corporate Citizens by 3BL Media.

YUM! Brands, Inc.

Condensed Consolidated Summary of Results

(amounts in millions, except per share amounts)

(unaudited)

Quarter ended

% Change

Year to date

% Change

9/30/21

9/30/20

B/(W)

9/30/21

9/30/20

B/(W)

Revenues

Company sales

$

513

$

486

5

$

1,509

$

1,244

21

Franchise and property revenues

716

639

12

2,080

1,760

18

Franchise contributions for advertising and other services

377

323

17

1,105

905

22

Total revenues

1,606

1,448

11

4,694

3,909

20

Costs and Expenses, Net

Company restaurant expenses

421

399

(5)

1,230

1,046

(18)

General and administrative expenses

253

257

1

689

724

5

Franchise and property expenses

31

13

(145)

81

107

25

Franchise advertising and other services expense

375

313

(19)

1,090

887

(23)

Refranchising (gain) loss

1

(9

)

(108)

(21

)

(30

)

(30)

Other (income) expense

(2

)

4

NM

(12

)

154

NM

Total costs and expenses, net

1,079

977

(10)

3,057

2,888

(6)

Operating Profit

527

471

12

1,637

1,021

60

Investment (income) expense, net

(51

)

(10

)

386

(52

)

(67

)

(22)

Other pension (income) expense

1

4

74

6

9

34

Interest expense, net

126

161

23

416

411

(1)

Income before income taxes

451

316

43

1,267

668

90

Income tax (benefit) provision

(77

)

33

330

22

96

77

Net Income

$

528

$

283

87

$

1,245

$

572

118

Basic EPS

EPS

$

1.78

$

0.94

91

$

4.17

$

1.89

120

Average shares outstanding

296

303

2

298

302

1

Diluted EPS

EPS

$

1.75

$

0.92

90

$

4.10

$

1.86

120

Average shares outstanding

302

307

2

304

307

1

Dividends declared per common share

$

0.50

$

0.47

$

1.50

$

1.41

See accompanying notes.

Percentages may not recompute due to rounding.

YUM! Brands, Inc.

KFC DIVISION Operating Results

(amounts in millions)

(unaudited)

Quarter ended

% Change

Year to date

% Change

9/30/21

9/30/20

B/(W)

9/30/21

9/30/20

B/(W)

Company sales

$

143

$

130

10

$

423

$

346

22

Franchise and property revenues

391

340

15

1,124

906

24

Franchise contributions for advertising and other services

158

116

36

452

309

46

Total revenues

692

586

...

1,999

1,561

28

Company restaurant expenses

117

109

(7)

346

307

(12)

General and administrative expenses

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