Yum! Brands, Inc.

Good morning and welcome to the fourth quarter 2021 Yum! Brands, Inc. Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please limit yourself to one question. Please note, this event is being recorded. I would now like to turn the conference over to Jody Dyer, Vice President, Investor Relations. Please go ahead.

Thanks, Operator. Good morning, everyone, and thank you for joining us. On our call today are David Gibbs, our CEO, Chris Turner, our CFO, and Dave Russell, our Senior Vice President and Corporate Controller. Following remarks from David and Chris, we'll open the call to questions. Before we get started, I would like to remind you that this conference call includes forward-looking statements that are subject to future events and uncertainties that could cause our actual results to differ materially from these statements. All forward-looking statements are made only as of the date of this announcement and 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 definitions of non-GAAP financial measures and other metrics that may be used on today's call, as well as reconciliations of non-GAAP financial measures. Please note that during today's call, all system sales and operating profit results exclude the impact of foreign currency. We will no longer be providing an update on temporary store closures as we ended Q4 with less than 1% of our stores temporarily closed. As a reminder, temporary store closures only include stores that were fully closed as of the end of the quarter but have or are expected to reopen. For more information on our reporting calendar for each market, please visit the financial report section of our website. We are broadcasting this conference 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 our live conference and in any future use of the recording. We would like to make you aware of upcoming Yum! Investor events in the following. Disclosures pertaining to outstanding debt in our restricted group's capital structure will be provided at the time of the Form 10-K filing. First quarter earnings will be released on May 4, 2022, with a conference call on the same day. Now, I'd like to turn the call over to Mr. David Gibbs.

Thank you, Jody, and good morning, everyone. As we reflect on 2021, I couldn't be prouder of the collective accomplishments of our world-class franchise partners and collaboration of our global teams, guided by our recipe for growth and good. While the last two years have been the most challenging operating environment we've ever navigated, we exit 2021 stronger than ever with over 53,000 global restaurants. Compared to 2019, we've nearly doubled our digital business. System sales have grown over $5.5 billion, and operating profit has grown over $200 million. Additionally, since 2019, we've added another iconic brand and closed on three technology acquisitions. all while launching our global unlocking opportunity initiative with a $100 million commitment over five years investing in equity and inclusion, education, and entrepreneurship, the cornerstones of our recipe for good. In 2021, we opened 3,057 net new units, driven by 4,180 gross unit openings with meaningful contributions from each of our brands. marking the strongest growth year in our history and setting an industry record for unit development. To put that into context, as the world's largest restaurant company, we opened a new restaurant on average every two hours. This speaks to the health of our business, iconic brand, capable, committed, and well-capitalized franchise partners, and strong unit economics. This is yet another significant development milestone on our ongoing growth journey, providing customers with access to our brands through a variety of restaurant formats and on- and off-premise ordering channels. Now more than ever, we've leaned into the structural advantages of our diversified global portfolio by leveraging our unmatched global scale, sophisticated supply chains, marketing and consumer insights expertise, and our growing digital and technology capabilities to fuel growth and deliver strong results. Even as dining room sales recovered throughout the year, we continued to grow our digital sales that reached a record $22 billion in fiscal 2021, an increase of approximately 25% over 2020, suggesting a more permanent shift to digital channels. We ended the year with over 45,000 restaurants offering delivery, representing more than a 25% increase year over year. We galvanized our digital and technology strategy and accelerated the development of our ecosystem with both internal investments and the closing of the Quantum, Tick Tock, and Dragon Tail acquisitions. Our teams remain focused on elevating the customer experience, expanding our off-premise capabilities, and empowering our team members with tools to make it easier to run our restaurants, all ultimately fueling improved unit economics. Expectations of our customers, team members, and franchisees have forever changed due to the experiences over the past two years, and we continue to challenge ourselves to exceed their rising bar. I'm confident we're poised to lead the industry as we embark on the next chapter of our growth journey. Today, I'll discuss our 2021 results, showcasing a few examples across our brands for two of the four pillars in our recipe for growth. Our relevant, easy, and distinctive brands, or RED for short, and our unrivaled culture and talent. Then I'll share progress on our recipe for good. Chris will share our fourth quarter results and provide an update on the other two pillars of our recipe for growth, bold restaurant development and unmatched operating capability, as well as an update on our strong balance sheet position and capital allocation strategy. To begin, full year 2021 system sales grew 13% with same store sales growth of 10% or 3% on a two-year basis and 6% unit growth. Each of our brands recorded positive same-store sales growth for the year and contributed to broad-based development strength. Full-year core operating profit increased 18%, driven by same-store sales growth and the impact of unit development throughout the year. As we ended the year, COVID outbreaks and resulting government restrictions limiting mobility continued to impact sales in a few key markets, primarily in Asia, presenting a headwind to fourth quarter results. However, our sales momentum remained strong with continued global recovery as evidenced by our two-year global same-store sales, excluding Asia, up 10% on a two-year basis, accelerating sequentially from last quarter. Next, I'll talk about our four red brands. I'll begin with KFC, which accounts for 52% of our divisional operating profits. kfc full year 2021 system sales grew 16 driven by 11 same store sales growth and eight percent unit growth q4 system sales increased ten percent with five percent same store sales growth or three percent on a two-year basis We continue to see ongoing recovery in emerging markets as evidenced by the fact that more than half of our 13 global KFC regions delivered system sales growth in excess of 25% for the full year. KFC International Q4 same-store sales grew 6% or 2% on a two-year basis. Sales remained strong throughout the quarter despite regional impacts from COVID variants, with momentum holding in many recovered markets more than offsetting heavily impacted markets, including parts of Asia and Western Europe. Common themes fueling top-line growth in the quarter include off-premise and digital capabilities, newsworthy products, and a strong value offering. KFC U.S. Q4 same-store sales grew 4%, or 12% on a two-year basis. Strong top-line momentum was fueled by strength in group locations, growth in the digital channel, and the success of our chicken sandwich. The chicken sandwich continues to perform well for the business and now makes up roughly 9% of our sales mix as of Q4, a strong improvement from a 1% mix last year. Our sandwiches are served straight from the fryer and hot to our guests. We expect the Chicken Sandwich platform to continue to be a significant driver of our positive sales momentum for the business going forward. Next, Taco Bell, which accounts for 32% of our divisional operating profit. Before delving into results, I'd like to congratulate the entire Taco Bell system for ranking number one in the Franchise 500 for the second year in a row, beating our peers as well as impressive concepts in other industries. Entrepreneur Magazine, which produces this list, recognized Taco Bell for its franchisee collaboration and innovation. This recognition is further evidence of our intentionality to be the world's franchisor of choice. Now I'll discuss our results for the year. Taco Bell full-year 2021 system sales grew 13%, driven by 11% same-store sales growth and 5% unit growth. Fourth quarter system sales grew 11%, with same-store sales growth of 8% or 9% on a two-year basis, reflecting an acceleration from Q3. Taco Bell kicked off the quarter by introducing the new Cantina Crispy Melt Taco, and later in the quarter brought back the Grilled Cheese Burrito, featuring a grilled and bubbly blend of real cheddar, mozzarella, and pepper jack cheeses. Additionally, the team kept value front and center with the launch of a new, crave-more-value menu featuring the $2 burritos. In addition, we launched a new lineup of toasted breakfast burritos as a way to welcome customers back to our breakfast day park. Taco Bell fans continue to adopt digital ordering channels as we set digital sales records in both the U.S. and international this year. We will continue to bring distinctive products to life through our digital channels with early access to new products, digital-only campaigns, and loyalty rewards. Moving on to Pizza Hut, which accounts for 16% of our divisional operating profits. Full-year 2021 system sales grew 6%, driven by 7% same-store sales growth and 4% unit growth. Q4 system sales grew 4%, with same-store sales growth of 3% or 2% on a two-year basis. Overall, we saw an inflection in the growth trajectory of the PSAT brand this year, a testament to the hard work of our team members and franchise operators, and a reflection of the overall health of the system. PSAT International Q4 same-store sales grew 4%, while same-store sales declined 3% on a two-year basis. Key markets that contributed strong performance in the quarter included Africa, Canada, India, and the U.K. The brand remains focused on emphasizing easy through embracing continued growth in all-premise channels through utilization of both first- and third-party delivery networks. Pizza at U.S. Q4 same-store sales grew 1% or 10% on a two-year basis. The team continues to bring iconic pizza that customers love to market in relevant and distinctive ways. In the fourth quarter, Pizza Hut received strong recognition for an influencer-based marketing campaign that resulted in Pizza Hut being named a 2021 culture driver by TikTok. Additionally, we brought back a fan favorite, the Triple Treat Box, offering customers a convenient and value-oriented family meal option, which drove sales in the quarter. Lastly, the Haberberger Grill achieved full-year 2021 system sales growth of 24%, driven by 16% same-store sales growth and 11% unit growth. Q4 system sales increased 20%, with 11% same-store sales growth, or 5% on a two-year basis. To showcase their chef-inspired innovation, the Habit Burger Grill reintroduced the chicken caprese sandwich on garlic ciabatta bread with garlic aioli during the quarter. As dining rooms have reopened over the course of the year, Habit team members welcome customers back into the restaurants while continuing to serve customers through their digital and off-premise channels. Now I'll discuss our unrivaled culture and talent growth driver. The hallmark of YUM is our people-first culture, which drives retention and recruitment of amazing talent. We remain committed to growing our talent from within and recruiting top external talent, as you've seen from some of our recent internal promotions and leadership transitions. This past quarter, we were excited to welcome former Nike executive Sean Tresbon to serve as Taco Bell Chief Brand Officer, while former Nintendo executive Nick Chavez joined KFC US as Chief Marketing Officer. The past two years have allowed us to build a strong foundation centered on our culture, talent, and unwavering relationships with our franchisees. The collaboration with our franchisees has never been more powerful as we're aligned more than ever on the future growth trajectory of the business. Finally, I want to give an update on our recipe for good and the work we're doing around our three priority pillars, planet, food, and people. When it comes to our planet pillar, 2021 was a milestone year. We announced science-based targets to reduce greenhouse gas emissions nearly 50% by 2030 and pledged to achieve net zero emissions by 2050. We are expanding our foundational requirements for green building standards for new unit builds and advancing our corporate office and company-owned restaurant footprint to renewable energy. In terms of our food, we remain focused on food safety, listening and responding to customers' evolving preferences, and improving the nutritional value of our menu items. We continue to introduce relevant and distinctive plant-based offerings, from KFC's national launch of Beyond Fried Chicken in the U.S. to Pizza Hut offering Beyond Italian Sausage Crumbles in Canada. Finally, on the people front, we're committed to investing in Yum's social purpose focused on unlocking opportunities for our people and communities while championing equity, inclusion, and belonging across all aspects of our business. Just last week, we announced the Yum Franchise Accelerator, a groundbreaking partnership with the University of Louisville and Howard University to train and advance underrepresented minorities and women interested in building a career in the restaurant industry. Not only is this a priority for Yum!, but unlocking opportunity remains a focus for our brands as well with the recent launch of the Taco Bell Business School. As a result of our elevated commitments and transparent disclosures, we've received notable recognition this quarter, including being named the Dow Jones Sustainability Index North America for the fifth consecutive year and being named on Newsweek's ranking of America's Most Responsible Companies. I'm incredibly proud of our recipe for good and know that this work is more important than ever when it comes to building resilient and relevant brands for the future. As I take a moment to reflect on the past two years, I'm extremely proud and grateful for the significant accomplishments and collaboration across our teams to both serve our customers and community while fueling growth for our franchisees and shareholders. We're entering 2022, which marks YOM's 25th anniversary, with confidence in our recipe for growth and good strategies, and I'm energized for what lies ahead. I'm certain we'll continue to build the world's most loved, trusted, and fastest-growing restaurant brands while delivering lasting value for our stakeholders. With that, Chris, over to you.