Yum! Brands, Inc.

We'll now hand over to your host, Matt Morris, Head of Investor Relations, to begin. Matt, please go ahead.

Thanks, Apparator. 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, please note that this 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 call 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 release and the relevant sections of our filings with the SEC to find disclosures, definitions, and reconciliations of non-GAAP financial measures and other metrics used on today's call. Please note that during today's call, all system sales growth and operating profit growth results exclude the impact of foreign currency. On our last earnings call, we announced that we signed an agreement to acquire 218 KFC franchise restaurants in the UK and Ireland. The transaction closed on April 29th. As a reminder, several of Yum! Brand's business units report on a period calendar basis, including all US and Canada brands, KFC UK, and KFC Australia. For business units that report on a period basis, first quarter same-store sales growth excludes the benefit from the additional day of sales owing to Leap Day. When forecasting 2024, please keep in mind this year will include an extra week in the fourth quarter for those entities. For more information on our reporting calendar for each market, please visit the financial reports section of the IR website. We are broadcasting this conference call via our website. This call is also being recorded and will be available for playback. We would like to make you aware of upcoming YUM investor events and the following. Our second quarter earnings will be released on August 6th with a conference call on the same day. Finally, please mark your calendars for an in-person Taco Bell Consumer Day on December 10th at the Taco Bell headquarters in Irvine, California. Stay tuned for more details and invitations to follow. Now, I'd like to turn the call over to David Gibbs.

Thank you, Matt, and good morning, everyone. I'm pleased to report that Yum! grew core operating profits 6% this quarter despite a challenging operating environment demonstrating the resilience of our business. As we communicated last earnings, OneQ should represent our most challenging sales quarter this year as we worked through tough year-ago laps, returned to a more normal inflationary environment, and navigated discrete consumer demand pressures. While the impacts from the Middle East conflict have been scattered and difficult to measure, we've begun to see improvement in the most impacted markets. Taco Bell U.S. outperformed the industry on same-store sales and delivered industry-leading margins while 1Q unit openings at KFC International set us up for a strong unit growth story in 2024. We continue to make significant progress scaling our proprietary digital and AI-powered platforms and are excited by plans to accelerate deployment. Digital sales continued an upward trajectory, approaching $8 billion, and we're up 11% year over year. Through continued kiosk deployment, greater adoption of click and collect, and stable third-party aggregator sales, digital mix improved five points and, for the first time ever, represented over 50% of system sales in Q1. We now have $30 billion in annualized digital sales, which by itself would represent one of the largest restaurant companies in the world. Overall, despite a more challenged operating environment, we have reached impressive new milestones and remain on track to deliver on our long-term growth algorithm target of at least 8% core operating profit growth for the full year. Now I'll discuss our relevant, easy, and distinctive brands, or RED for short, followed by our unrivaled culture and talent and good growth strategy. Chris will then provide an update on our first quarter results, followed by our bold restaurant development, unmatched operating capabilities, and balance sheet position. Starting with the KFC division, which accounts for 51% of our divisional operating profit. KFC grew system sales 4% this quarter, owing to an 8% unit growth and a 2% decline in same store sales. The same store sales pressure was partially attributable to impacts from the conflict in the Middle East, which have begun to ease, and we expect a two-year trend for KFC International overall to accelerate in the second quarter. We saw strong top-line growth in other parts of the world, including Latin America, Africa, and Greater Asia. System sales in Latin America grew 22% on the heels of a strong marketing calendar and continued success of the KFC original nuggets. In Africa, system sales grew 11% thanks to 5% same-store sales growth driven by product innovation and 6% net new unit growth. In Greater Asia, where system sales grew 8%, we recently partnered with a new franchisee in Korea who is driving transaction growth with a calendar focused on core, value, and expanding consumer access, which resulted in a 26% growth in same-store sales. At KFC U.S., Same-store sales were pressured from unfavorable weather events and chicken value promotions from QSR competitors. Moving on to the Taco Bell division, which represents 35% of our divisional operating profit and 75% of our U.S. divisional operating profit. System sales at Taco Bell U.S. grew 4%, led by 2% same-store sales growth and a strong outcome on top of last year's 9% same-store sales growth. Sales improved throughout the quarter after difficult weather events in January. Taco Bell focused on key levers within its magic formula to drive growth, including building brand buzz, providing value to our consumers, and expanding into new category entry points. We know that when we execute on this magic formula, Taco Bell puts itself at the center of the cultural conversation. There was no better example of this than the LiveMoss Live event Taco Bell held in Las Vegas to share its upcoming innovation calendar, an industry-first event. Of course, it was not surprising that Fast Company named Taco Bell the most innovative company in dining and number eight overall. Early in the quarter, the team launched a new cravings value menu and ended the quarter with a successful launch of the chicken cantina menu. The cravings value menu features industry-leading value with 10 items priced under $3, providing consumers with craveable everyday value offerings. Nearly one-third of transactions contain an item off the cravings value menu, and when purchased, 80% have at least one other item added, translating to a nearly 10% check uplift compared to non-cravings value menu checks. The impressive performance of such product launches is compounded by Taco Bell's ability to deliver industry-leading margins on top of a great consumer experience. At Taco Bell International, system sales grew 6% this quarter. The team is focused on building brand and category awareness globally. This included markets such as Canada and Latin America, where the team elevated the core menu and launched the chicken cantina menu to expand their consumer base. Next, at the Pizza Hut division, which comprises 15% of our divisional operating profits. During the first quarter, system sales declined 4% with 5% unit growth and a 7% decline in same-store sales. The year-over-year growth rate in same-store sales was suppressed from difficult year-ago laps and the ongoing impact from the conflict in the Middle East. The team continued to focus on the individual meal occasion this quarter with the India market launching the MELTS platform. At Pizza Hut US, same-store sales declined 6% as we lapped the launch of Melt and Big New Yorker Pizza. However, the two-year trend was positive and improved from last quarter. Lastly, at the Habit Burger Grill, for the first quarter, system sales declined 2% with 6% unit growth. Margin trends improved throughout the quarter with a combination of initiatives leading to a 60 basis point improvement in store-level margins year over year. Now I'll turn to our good growth strategy, starting with our people pillar. Effective June 1st, Alex Barsk will join KFC Global as the new chief financial officer. Alex is joining from Pizza Hut, where she most recently served as global CFO. Alex joined Pizza Hut in 2015 and has held several leadership roles across strategy, finance, development, and supply chain. Alex's transition is another great example of YUM leveraging its talent across brands to help share unique learnings and experiences. To round out our people pillar, I'd like to congratulate and thank YUM's Senior Vice President of Finance, Corporate Controller, and my friend, Dave Russell, who recently celebrated his 25th anniversary at YUM, with today marking his 100th quarterly earnings announcement. Dave has been with the company since 1999, always serving as a trusted leader who brings his deep knowledge and analytical perspective to our finance and accounting function. Thank you, Dave, for your dedication to our growth over the last 25 years, and I look forward to your continued partnership in the future. Before I hand it over to Chris, I would like to share a few thoughts on the future of our digital and technology strategy, given we achieved an important milestone this quarter with more than half of our sales coming from digital. You'll recall that the first phase of our journey to become the leading global digital restaurant company began in earnest in 2019. That first phase focused on building or acquiring a comprehensive suite of owned platforms spanning easy experiences, easy operations, and easy insights, and accelerating deployment of those platforms across our brands and markets. While we still have further to go in deploying these platforms, we have achieved critical mass in several areas. Taco Bell US, one of our twin growth engines, has achieved the most extensive deployment of key platforms, including the Poseidon POS system, the Yum e-commerce platform, and the AIM inventory management platform. Our other primary growth engine, KFC International, has been accelerating the rollout of those same platforms and is our leader in deploying in-store kiosk technology. Pizza Hut, of course, has been our leader in deploying Dragontail to thousands of restaurants around the globe. Behind the scenes, our global data hub houses data generated from these platforms. The deployment of our capabilities in this first phase of our journey has driven the dramatic increase in our digital sales from approximately 20% in 2019 to over 50% now. The impact of this growth has been significant. To share just a couple of examples of impact, our consumers enjoy more convenient and frictionless experiences, leading to higher frequency and check sizes. Our franchisees enjoy significant productivity benefits as their team members no longer spend time taking orders and payments for half of all transactions, leading to stronger unit economics. We believe we are still only scratching the surface of the full value creation potential of our capabilities. While the first phase of work in deploying our platforms will continue, given the critical mass we have achieved, we have initiated a second parallel phase in our technology journey. This second phase will focus on maximizing the value creation potential of our platforms through the acceleration of AI capabilities in combination with fully leveraging the immense data assets we now own. With our platform-driven approach, we can now more easily integrate AI capabilities across our digital ecosystem. We currently have more than 40 AI initiatives in progress across the company, spanning marketing, operations, insights, engineering, and our internal back office function. While many of these initiatives will remain confidential for now, one example that we have shared publicly is voice AI to enhance our consumer experience. We've been testing this capability at the drive-thru in five Taco Bell stores in California. We are expanding that test to 30 stores in Q2 based on positive consumer feedback. Another example is our piloting of AI-powered technology in our Super App restaurant general manager support tool, making it even easier and faster for managers to access critical operational information to make better decisions. Of course, our Dragontail platform was the first AI-enabled next-gen restaurant operational system to enhance the consumer and team member experience in a multi-channel fulfillment environment. As an example of how we are elevating the use of our data assets, in Q1, we launched the REDD360 US Consumer Data Insights System. As of Q1, both Pizza Hut US and Taco Bell US have integrated into this system and KFC US will integrate in the second quarter. This system allows us to leverage insights into consumer behavior across our brands in the US. After full deployment, REDD360 will be the first scaled cross-brand US restaurant consumer data engine in the quick service industry and will pave the way for unique insights and personalization opportunities on digital and social channels. For those who may have missed it, Joe Park, our Chief Digital and Technology Officer, was recently interviewed in the Wall Street Journal, bringing to life many of these plans as we become more focused on pursuing AI and data-driven innovation. As we do all of this, we are also continually innovating how our technology teams work internally to better leverage our scale so that we can continue to bend the curve on the net investment impact of these digital and technology initiatives. To sum it up, we are excited about having ramped up this second phase in our journey and are doubling down and pursuing the ultimate goal of our digital and technology strategy, which is to better serve our franchisees, providing them with more, better, faster, cheaper, and safer technology, while simultaneously delighting consumers and maximizing YUM shareholders' returns. We will continue to provide updates on both phases of our journey on future calls, organized around our easy capability framework. In closing, as I look back over the quarter, I'm proud of our teams and their ability to navigate any environment as our brands stand for unmatched value and convenience, providing a range of products and price points to meet any consumer's needs. A resilient business model coupled with our strategy to leverage our technology platforms on a global scale gives me confidence we will continue to improve both franchisee and YUM economics. Looking ahead, our initiatives to become an even more nimble and data-driven organization are underway, and I'm excited for the shareholder value we will create. With that, Chris, over to you.