Yum! Brands, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Yum! Brands Q3 2019 earnings release call. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you would like to withdraw your question, press the pound key. If you require further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Keith Signer, Vice President, Investor Relations, M&A, and Treasurer. Thank you. You may begin.

Thanks, Operator. Good morning, everyone, and thank you for joining us. On our call today are Greg Creed, our CEO, David Gibbs, our President and Chief Operating Officer, Chris Turner, our Chief Financial Officer, and Dave Russell, our Senior Vice President and Corporate Controller. Following remarks from Greg, David, and Chris, we'll open the call to questions. Before we get started, I'd like to remind you that this conference call includes forward-looking statements. These forward-looking statements are subject to future events and uncertainties that could cause our actual results to differ materially from those statements. All forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our filings with the SEC. In addition, please refer to our earnings releases and relevant sections of our filings with the SEC to find disclosures and reconciliation of non-GAAP financial measures that may be used on today's call. Please note the following regarding our basis of presentation for today's call. First, all system sales results exclude the impact of foreign currency. Second, Pizza Hut division and worldwide system sales and net new unit growth include the benefit of the increase in units in the fourth quarter of 2018. Related to our strategic alliance with Telepizza, same-store sales growth reflects the inclusion of Telepizza in the prior year base. Third, core operating profit growth figures exclude the impact of foreign currency and special items. Fourth, the lease accounting standard was prospectively adopted on January 1, 2019. As a reminder, this is a GAAP-required change resulting in the recognition of operating lease assets and liabilities on the balance sheet. We do not expect a change in our income statement or cash flows as a result of this accounting change. And last, please note that 2019 results will include a 53rd week. We're broadcasting this call via our website. This call is also being recorded and will be available for playback. Please be advised that if you ask a question, it will be included in both the live conference and in any future use of the recording. We'd like to make you aware of the following changes in upcoming Yum! Investor events. Disclosures pertaining to outstanding debt in our restricted group capital structure will be provided at the time of the Form 10Q filing. Fourth quarter 2019 earnings will be released on February 6th, 2019 with the conference call on the same day. Now, I'd like to turn the call over to Mr. Gregory.

Thank you, Keith, and good morning, everyone. Following a very strong first half and in line with our expectations, Third quarter results were healthy and consistent with our long-term growth model. Yum delivered third quarter system sales growth of 8%, including 3% same-store sales growth and 7% net new unit growth. While we're pleased with our results, we know there is always work to be done. I'd like to begin today's call with a few opening remarks before I hand it over to Chris, who will go over our third quarter results and unrivaled culture and talent. Then David will discuss our four growth drivers, relevant, easy, and distinct brands, or as we say, RED for short, bold restaurant development, unmatched franchise operating capability, and then some additional news on culture and talent. Now, to start at the top, I'm confident that the board and I have identified the best and most capable person to lead the next phase of growth for Yum. We're delighted that David will officially take over as CEO in January. David has been a fantastic partner to me throughout our transformation these past few years. We've always shared an unwavering belief in people, their development, and our culture, and we'll continue to invest in making Yum! the best place to work. I'm also immensely proud of the progress we've made by making both the Taco Bell and the KFC brands red, and accelerating the pace of global unit development. But there is always unfinished business. And for us, that unfinished business includes consistently enhancing the customer experience by ensuring that we have the best people, technology, and assets. And this unfinished business is probably most pronounced at Pizza Hut US. I'm proud of Artie Stiles and his team as they continue to make significant progress on many aspects of the turnaround of this business, such as enhancing product quality, improving the speed of service, introducing a loyalty program, and upgrading our technology over the past few years. And as we announced last quarter, They're leaning in to accelerate the transition of our asset base to one with modern delivery carryout assets while also moving aggressively to evolve our franchisee base so that we can deliver a world-class experience every time. We know that some of our franchisee's economics are pressured, particularly in higher wage markets. At the same time, others are over leveraged and some simply aren't the right operating partner for us to grow this brand. We know this transition won't be easy, but we are committed to doing the right thing for this iconic brand over the long term. To be clear, we have many existing Pizza Hut US franchisees that have the capital, commitment, and capability to bring the brand to life the right way, and we will continue to support and partner with them on the brand turnaround. Of course, this transition will undoubtedly lead to some disruption and choppiness in the short term, And I'm confident that Artie and his team are set to tackle this head on. Now, you want to leave a business better than you found it, but also with the knowledge that it'll be better after you're gone. And that's exactly how I feel today. We have accelerated growth while simultaneously executing a major transformation. And now nothing will give me more pleasure than to watch our brands and each of our employee and franchise partners go from strength to strength. When I got the opportunity to serve as the CEO of Yum starting in 2015, the goal was to lead our culture to fuel results and continue to build brands that people trust and champion while driving aggressive unit expansion. This has always been and remains a foundational pillar for me. We then built on this foundation with the separation of Yum China in October 2016, which was the starting point of our three-year transformation. we became maniacal about being more focused, more franchised and more efficient to generate more growth and create a world with more yum. We're confident we're well on the way to accomplishing our 2016 transformation goals. We completed our re-franchising program and are 98% franchised. We have demonstrated financial discipline by meeting our goal of G&A being 1.7% of system sales and by reducing run rate capex. We're on track to return $6.5 to $7 billion to shareholders through dividends and share repurchases between 2017 and 2019, and we've generated over 80% total shareholder return since we announced the transformation. Additionally, we closed creative and transformative deals to drive profitable system sales growth for Yum and our franchisees for years to come. We've achieved healthy same-store sales, and our pace of net unit growth has nearly doubled since we announced our transformation in 2016. Our work is not finished, but I'm extremely proud, and I believe the Young family is equally proud of what we have accomplished, and we're even more excited about our future growth potential. And with that, it gives me great pleasure to introduce our new Chief Financial Officer, Chris Turner. Thank you, Greg, and good morning, everyone.