Yum China Holdings, Inc.

Thank you for standing by and welcome to the YamChina Third Quarter 2023 Earnings Conference Call. I would now like to hand the conference over to Michelle Shen. Please go ahead.

Thank you, Zach. Hello, everyone. Thank you for joining YamChina's Third Quarter 2023 Earnings Conference Call. On today's call are our CEO, Ms. Joey Watts, and our CFO, Mr. Andy Yang. I'd like to remind everyone that our earnings call and investment materials contain forward-looking statements, which are subject to future events and uncertainties. Actual results may differ materially from these forward-looking statements. All forward-looking statements should be considered in conjunction with the cautionary statement in our earnings release and the risk factors included in our findings with SEC. This call also includes certain non-GAAP financial measures you should carefully consider the comparable GAAP measures. Reconciliation of non-GAAP and GAAP measures is included in our earnings release. You can find a webcast of this call and a PowerPoint presentation on our IR website. Now, I would like to turn the call over to Joey Wang, CEO of Young China.

Hello, everyone, and thank you for joining us today. We held our investor day in September in Xi'an, China. It was wonderful meeting investors face-to-face. At the event, we unveiled our RGM 2.0 strategy with a strong focus on growth. We have set ambitious growth targets for the coming three years. These include reaching 20,000 stores by 2026, achieving double-digit EPS header, and returning $3 billion to shareholders in dividends and share repurchases. With our long-term growth commitment in mind, let's zoom into the third quarter. Our results reflect continued strength. Third quarter net new stores, revenue, and adjusted operating profit all reached record levels. We accelerated new store openings with 500 net new stores in the quarter. while maintaining healthy store paper periods. Our portfolio now exceeds 14,000 stores. System sales grew 15% year-over-year in constant currency. Adjusted operating profit excluding temporary release grew 21% year-over-year in constant currency. In the first nine months, adjusted operating profit exceeds $1 billion. Our team's relentless efforts produced these remarkable results. To drive sales in the peak summer trading season, we bolstered crew resources for excellent service, ensured supply pipeline readiness, and executed traffic driving campaigns. Simcoe Sales Growth in the third quarter was led by strong transaction growth. During the summer holidays, same-store sales at our tourist and transportation locations surged more than 50% year-over-year. It's important to remember, though, that consumers have continued to be cautious in their spending. Our formula to capture sales growth has always been simple. The food, the fun, and exceptional value. Now let me go through what we have done. First, Food innovations on a big scale. Our $100 million club showcase at Investor Day illustrates our success in building huge categories to boost sales. Recent innovations at KFC include our juicy whole chicken and beef burger. To put things into perspective, in the third quarter, these two categories combined exceed 6% of KFC sales mix. This is higher than our original recipe chicken, which we have been proudly serving in China over the past 36 years. It shows our ability to innovate, but also build very big categories. We are continuing to expand these categories with new flavors like Sichuan-style spicy whole chicken, Chuan Xiang Yan Ba Mian Zi Quan Jin, offering it from Friday to Sunday only. This spicy whole chicken is perfect for a home consumption. We also collaborate with Ultraman to promote our premium Ultra Cheese 210 Beef Burger, Pu Bu Zhi Shi Er Dian Lin, Zhi Zhi Hou Niu Bao, Consumers love them. At Pizza Hut, we sold over 100 million pizzas in the first nine months of the year. One out of every five pizzas we sold was a durian pizza. That's over 20 million durian pizzas, nearly 70% more year over year. Our in-house supply chain works with suppliers to secure durian supplies and expand capacity to satisfy the growing demand. We are offering our customers amazing value for money on top of the innovative food. KFC Crazy Thursdays is no longer just a marketing campaign. It has become a cultural phenomenon. Crazy Thursday sales consistently outperformed other weekdays in the third quarter by around 40%. To keep customers engaged, We rotate over and regularly launch new flavor variations such as spicy nuggets, bao huo, jiao ma, ti kua. We chose products that utilize existing ingredients and involve simple cooking process to provide exceptional value while ensuring operational efficiency. At Pizza Hut, we are expanding our selections for pizzas priced below 50 RMB. which is a very significant portion of the overall pizza market. Around 20% of our pizzas, we offer a price below 50 RMB, and that's not enough. We could do more. By enriching our lower-priced pizza offerings, we are tapping into this substantial opportunity that's currently underserved by Pizza Hut. Other than pizzas, We are adding new snacks that customers love. Our new cheese tart, Sisi Danta, became our best-selling snack in September and an amazing traffic driver. Not easy for a snack item to be a traffic driver compared to pizza. Next, keeping users engaged and having fun along the way. Our loyalty programs topped 460 million members in Q3. up 15% year-over-year. Notably, sales from members continue to be high at 65%. We collaborate with pop culture icons that resonate with young generations. JFC's campaign was Hongkai, Starrail, Xinchong, Tiegao. A popular e-game generated huge social buzz and attracted many new customers. Almost 40% of traffic generated from the campaign came from new or inactive members, and a significant portion are young adults, and that's fantastic news for the brand. We are proud to be an exclusive Western food catering supplier for the Asian Games in Hangzhou. Over 250 of our crew members from across China were chosen to serve at the sporting events. KFC and Pizza Hut set up nearly 30 pop-up stores and serve over 1 million athletes and fans. And it shows that our food is good enough and healthy enough for the professional athletes, too. We also ran nationwide campaigns, offering exclusive gifts at our restaurants and through our super app in celebration. In closing, I want to thank all of our teams for their hard work in delivering a strong quarter. Next week, we will host our RGM Convention for our Restaurant General Managers. This marks the first in-person convention for 13,000 attendees in 2019. Very excited about it. It's an excellent occasion to honor our RGM's dedication, celebrate our achievements, and reaffirm our goals for the coming year and beyond. Looking forward, the growth potential in China remains vast, even with moderate economic growth. Our GM 2.0 provide us the strategic framework to grow sustainably. Evolving consumer preferences in the post-pandemic environment require us to stay agile and vigilant. Our robust supply chain and innovative digital ecosystem head enable us to quickly adapt to changing market conditions. I'm confident we can continue to create long-term value for our shareholders. With that, I will turn the call over to Andy.