Yum! Brands, Inc.

Hello, everyone. Thank you for joining us today for the Young Brands 2025 third quarter earnings call. My name is Sammy and I'll be coordinating your call today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two on your telephone keypad to remove yourself from the question queue. And we ask that you limit yourself to one question per person. And if you have any follow-ups, please do re-enter the question queue. I would now like to hand over to your host, Matt Morris, Head of Investor Relations, to begin. Please go ahead, Matt.

Good morning, everyone, and thank you for joining us today. On our call are Chris Turner, our CEO, Ranjith Roy, our CFO, and Dave Russell, our Senior Vice President and Corporate Controller. Following remarks from Chris and Roy, welcome the call to questions. 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 discussed in our SEC filings. Please refer to today's release and filings with the SEC to find disclosures, definitions, and reconciliations of non-GAAP financial measures. Please note that during today's call, system sales and operating profit growth will exclude the impact of foreign currency. 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 that our fourth quarter earnings will be released on February 4th with the conference call on the same day. Finally, I want to express my appreciation to those investors who have willingly shared their perspectives on our strategy and communication. Your thoughts are important to us. I will make myself available to listen to your views, as well as share those with our management teams. Now, I'll turn the call over to our CEO, Chris Turner.

Thank you, Matt, and good morning, everyone. With this being our first call since David's retirement, I want to recognize his exceptional leadership over the past five years as CEO and his many strategic contributions throughout his remarkable 36-year career at YUM. David will continue to serve as a trusted advisor through next year. On behalf of our team members, employees, and franchise partners, I want to sincerely thank David for the lasting impact and strong foundation he's built as we carry Yum into the future. As I take on the role of CEO, I've spent the last few months meeting many of Yum's stakeholders, including many of our leaders, board members, and largest franchise partners to better understand where Yum is leading the industry and where Yum has even greater potential. I've spent time in our restaurants, serving our consumers, and listening to team members and general managers. Finally, I've met with many of our top shareholders to hear how Yum can unlock even more value. Speaking with our incredible team has reinforced how important a strong culture and performance mindset are to driving robust results. Yum invests meaningfully in our talent and gives employees opportunities to work across functions and brands. providing Yum with the most experienced and tested leaders in the industry. Combining the best leaders with the world's most loved, trusted, and connected restaurant brands is a winning formula. It's no surprise that few companies are executing at our level with Taco Bell delivering industry-leading 7% same-store sales growth and KFC on track to add nearly 3,000 new restaurants on a gross basis around the world, which would set a new record for annual gross development for the brand. It is also clear there is a consistent theme that success in our industry depends on anticipating and adapting to changing consumer needs. That's a tremendous opportunity for a company like Yum that already benefits from scale, talent, and the ability to innovate. With this in mind, I see three areas where I'll focus additional energy to raise the bar on our growth. First, we're a consumer first business, and we must stay as relevant to the next generation of consumers as we are to our core. Second, franchisees are the lifeblood of our system, and we can do more to leverage our global scale to strengthen their store level economics. Third, Yum has pursued a differentiated technology strategy that gives us unmatched operational agility and control. I want to extend those advantages across more restaurants to benefit consumers, franchise partners, and team members alike. To this end, I recently announced a series of leadership changes. These included expanding the role of Taco Bell CEO, Sean Tresmont, to include that of YUM chief consumer officer with responsibilities that will include oversight of Collider, YUM's in-house consumer insights agency. Jim Dausch, global chief digital and technology officer of Pizza Hut, was promoted to YUM brand's chief digital and technology officer and president of Byte by YUM. Ranjith Roy, who goes by Roy, YUM's chief strategy officer and treasurer, was promoted to chief financial officer. Roy had previously spent more than 15 years with Goldman Sachs leading investment banking relationships for restaurants, food, and tech businesses. We also intend to add a Chief Scale Officer to Yum's leadership team, who will focus on leveraging Yum's scale to maximize franchise returns and drive stronger restaurant profitability. We also announced this morning that we have commenced a process to explore strategic options for the Pizza Hut brand, Our objective is to maximize value for Yum and position Pizza Hut and its franchise partners for greater success. Pizza Hut holds key structural advantages, strong brand equity, experienced franchise partners, and meaningful scale, which give it a unique opportunity to reclaim the leading position in the highly fragmented pizza market. We believe a different approach, including but not limited to a sale of the business, would allow Pizza Hut to realize its full potential. More broadly, I'm encouraging the brand teams to play more offense through bold actions, particularly when we see opportunities to accelerate development. In that spirit, we announced our plans to complete the acquisition of 128 Taco Bell restaurants located across the southeast U.S. in the fourth quarter. Buyout opportunities of this scale are unusual to come by in the Taco Bell system. This acquisition provides our team with an opportunity to improve and accelerate Taco Bell profitability, expand strategic leadership within the Taco Bell system, and unlock significant unit development in the region. Of course, this acquisition provides immediate and significant EBITDA growth at an attractive multiple in the context of the Taco Bell system. I want to reiterate that there is no change in strategy regarding our asset-light model. Now, let me turn to our third quarter results. Yum delivered another strong quarter, with system sales up 5% and core operating profit up 7%. Between KFC and Taco Bell, we've delivered 5% unit growth, 7% system sales growth, and 11% segment operating income growth. At KFC, which represents 53% of our divisional operating profit, We delivered 14% core operating profit growth, driven by 6% unit growth and 3% same-store sales growth. Several KFC international markets are delivering exceptional results, including the UK market, with same-store sales up 9% on 6% transaction growth, and South Africa delivering 7% same-store sales growth on record youth engagement. Several markets, like South Korea and Brazil, posted double-digit transaction growth within the quarter. Turning to the U.S., which represents 12% of our KFC global system sales, we have taken bold steps over the last 18 months to re-engineer our strategy, bolster our talent, and pilot new approaches. The new president of KFC U.S., Catherine Tan Gillespie, has been driving KFC's comeback plan, with new marketing tactics and products focused on increasing consumer relevance. which have led to a 2% growth in same-store sales this quarter. There is still a long journey ahead, but we're pleased with Q3's momentum. As a separate plank in the strategy, we're excited about the continued progress to refine and thoughtfully expand the Saucy pilot in the Southeast region. Let me briefly touch on KFC's unit development, which remained broad-based and energized by strong franchise engagements. I recently made a trip to Italy to visit our new franchisee, where I saw firsthand how critical having the right 3C partner is in driving powerful change. Since joining our system in 2023, our franchisee, COB, has doubled the number of stores and improved AUVs to $2 million. I was pleased to be there when the team unveiled its Italian flagship restaurant featuring two floors in Rome with prime real estate between the Spanish Steps and the Trevi Fountain. Similarly, our new franchise partner in South Korea is delivering unbelievable results. That team reported their third consecutive quarter of double digit sales and traffic growth and is set to have five times the net new unit growth they had in 2024. Our strongest partners are expanding into new and adjacent markets. As is the case in Brazil, one of KFC's largest under-penetrated growth markets. Our highly capable 850-unit Latin American partner, Juan Carlos Serrano, is building commissaries and piloting more efficient asset formats, laying the foundation for sustainable, scaled growth ahead. Finally, I recently returned from China, where our largest partner, Yum China, runs the most efficient and advanced restaurant operation in the world. leading to significant market share wins over the competition. Overall, KFC's development pipeline remains robust. White space remains abundant, and our well-capitalized, capable, and committed franchise partners remain growth hungry. At Taco Bell, which represents 36% of our divisional operating profit, same store sales grew seven percent reflecting continued progress on the journey laid out at the taco bell consumer day to drive three million dollar u.s average unit volumes by 2030. innovation distinctive value offerings and digital engagement drove this remarkable performance in the u.s taco bell introduced innovation-led buzz like the tony hawk and bad birdie collaborations compelling value like the three dollar grilled steak burrito and expanded its beverage platform with the launch of Refrescas and Baja Blast Midnight. Digital Mix hit another record and digital sales grew 28% year-over-year. Next year, the U.S. team will add more weeks of crispy chicken, fries, and beverages to expand everyday occasions, balanced with a refreshed Cravings Value menu and elevated guest experience. Turning to Taco Bell International, same-store sales growth accelerated again with momentum building as the team executes against its magic formula and strategic priorities laid out at the Taco Bell Consumer Day in March. This quarter, the team expanded to two new markets, Greece and Ireland. During my trip to Europe, I stopped to visit our largest international Taco Bell franchise partner, Ignacio Mora Figuera, and his amazing Taco Bell Spain team. I saw firsthand how the team keeps building relevance and scale. Shifting now to our goal of building the world's most trusted brands, stepping into the role of CEO has been both humbling and energizing. I couldn't be more excited to start this next chapter of Yum's growth with a renewed focus on what makes us extraordinary, led by our people and our culture. Our commitment to trust and connection extends beyond our restaurants. It's reflected in how we show up in our communities. In September, we celebrated Community Impact Month. Employees at all three of our U.S. campuses volunteered to help more than 15,000 people in communities across the United States. Our teams fought childhood hunger, packing more than 6,000 weekend meals for kids who need them most, donated blood with the American Red Cross, prepared food with local food banks, and packed hygiene and laundry kits for those in need. Hundreds of volunteers touched thousands of lives. That's the power of Yum, serving up good everywhere there's a KFC, Pizza Hut, Taco Bell, and a Habit Burger and Grill. One month in as CEO, and I'm inspired by the commitment to excellence across our system, from our franchise partners to our restaurant teams and leaders. Together, we are building on Yum's solid foundation to continue delivering strong, sustainable growth. And going forward, we will be laser focused on accelerating growth around the world, backed by our two biggest brands, KFC and Taco Bell. With the dedication of our people, power of our brands, and a clear strategic vision, I am confident that we are entering an exciting new chapter of growth and long-term value creation for Yum and our stakeholders around the world. With that, Roy, over to you.