Yum! Brands, Inc. (NYSE: YUM) today reported results for the second quarter ended June 30, 2022. Worldwide system sales excluding foreign currency translation grew 3%, with 4% unit growth and 1% same-store sales growth. Second quarter GAAP EPS was $0.77, a decrease of 40% year-over-year. Second quarter EPS excluding Special Items was $1.05, a decrease of 9% year-over-year.

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DAVID GIBBS COMMENTS

David Gibbs, CEO, said “Our second quarter system sales grew 5% excluding Russia, driven by sustained development momentum. Despite a complex operating environment and lapping the strongest same-store sales growth in our history, our global business continues to perform well, led by industry-leading results at Taco Bell U.S. including 8% same-store sales growth and in-line margins year-over-year. We are pleased with the continued growth of our digital business with digital sales of nearly $6 billion, fueled by the adoption of our global platforms and capabilities. Our second quarter results demonstrate the resilience and power of our unmatched global scale, unrivaled talent and world-class franchise partners that are the driving force behind the success of our iconic brands.”

RUSSIA UPDATE

• In June, we completed the transfer of ownership of our Pizza Hut Russia business to a local operator who has initiated the process of re-branding locations to a non-Yum! concept. We are also in advanced stages of transferring ownership of our KFC Russia restaurants, operating system and master franchise rights, including the network of franchised restaurants, to a local operator who will be responsible for re-branding locations to a non-Yum! concept. Upon the completion of this process we will have fully exited from Russia.
• As of the beginning of the second quarter, we have elected to remove Russia from our unit count and system sales, which negatively impacted those key performance metrics as presented in our SECOND-QUARTER HIGHLIGHTS section and the remainder of this release.
• Removing Russia from our prior year base, key performance metrics would have been as follows:

SECOND-QUARTER HIGHLIGHTS

• Worldwide system sales grew 3%, excluding foreign currency translation, with KFC at 1%, Taco Bell at 10% and Pizza Hut flat.
• We added 781 gross units during the second quarter resulting in 463 net-new units¹ offset by the removal of 1,165 Russia units for a total decline in unit count of 702 units during the quarter.
• Russia units do not impact our same-store sales results for the quarter.
• Worldwide same-store sales ex-China grew 6% during the quarter.
• Foreign currency translation unfavorably impacted divisional operating profit by $23 million.

KFC DIVISION

• We removed 1,112 units in Russia from our global KFC unit count, or 4% of units.
• KFC Division opened 405 gross new restaurants in 54 countries during the quarter.
• KFC Division ex-China same-store sales grew 7%.
• As a result of our decision to exit the Russia business, KFC Division year-over-year operating profit growth excluding foreign currency was negatively impacted by 4 percentage points.
• Foreign currency translation unfavorably impacted operating profit by $19 million.

TACO BELL DIVISION

• Taco Bell Division opened 82 gross new restaurants in 13 countries.
• Taco Bell U.S. system sales grew 9% and Taco Bell International system sales grew 31%.
• Taco Bell U.S. same-store sales grew 8% and Taco Bell International same-store sales grew 9%.
• Company-owned restaurant margins were approximately 26%, in-line year-over-year.

PIZZA HUT DIVISION

• We removed 53 units in Russia from our global Pizza Hut unit count.
• Pizza Hut Division opened 287 gross new restaurants in 43 countries during the quarter.
• Pizza Hut International ex-China same-store sales grew 6%.
• Foreign currency translation unfavorably impacted operating profit by $3 million.

HABIT BURGER GRILL DIVISION

• The Habit Burger Grill Division grew system sales 10% for the quarter.
• The Habit Burger Grill Division opened 7 gross new restaurants in the U.S.
• The Habit Burger Grill Division same-store sales decreased 4% for the quarter.

OTHER ITEMS

• On April 1 we issued $1.0 billion of 5.375% YUM Senior Unsecured Notes due in 2032. Proceeds were used to repay $600 million of 7.75% YUM Senior Unsecured Notes due in 2025, including the prepayment premium, and for general corporate purposes.
• Disclosures pertaining to outstanding debt in our Restricted Group capital structure will be provided at the time of the filing of the second-quarter Form 10-Q.

CONFERENCE CALL

Yum! Brands, Inc. will host a conference call to review the company's financial performance and strategies at 8:15 a.m. Eastern Time August 3, 2022. The number is 844/200-6205 for U.S. callers, 833/950-0062 for Canada callers, and 929/526-1599 for international callers, conference ID 417843.

The call will be available for playback beginning at 10:00 a.m. Eastern Time August 3, 2022 through August 10, 2022. To access the playback, dial 866/813-9403 in the U.S., 226/828-7578 in Canada, 0204/525-0658 for U.K. (local), and +44/204-525-0658 internationally, conference ID 545704.

The webcast and the playback can be accessed by visiting Yum! Brands' website, investors.yum.com/events-and-presentations and selecting “Q2 2022 Yum! Brands, Inc. Earnings Call.”

ADDITIONAL INFORMATION ONLINE

Quarter end dates for each division, restaurant count details, definitions of terms and Restricted Group financial information are available at investors.yum.com. Reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures are included within this release.

FORWARD-LOOKING STATEMENTS

This announcement may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the fact that they do not relate strictly to historical or current facts and by the use of forward-looking words such as “expect,” “expectation,” “believe,” “anticipate,” “may,” “could,” “intend,” “belief,” “plan,” “estimate,” “target,” “predict,” “likely,” “seek,” “project,” “model,” “ongoing,” “will,” “should,” “forecast,” “outlook” or similar terminology. These statements are based on and reflect our current expectations, estimates, assumptions and/or projections, our perception of historical trends and current conditions, as well as other factors that we believe are appropriate and reasonable under the circumstances. Forward-looking statements are neither predictions nor guarantees of future events, circumstances or performance and are inherently subject to known and unknown risks, uncertainties and assumptions that could cause our actual results to differ materially from those indicated by those statements. There can be no assurance that our expectations, estimates, assumptions and/or projections, including with respect to the future earnings and performance or capital structure of Yum! Brands, will prove to be correct or that any of our expectations, estimates or projections will be achieved.

Numerous factors could cause our actual results and events to differ materially from those expressed or implied by forward-looking statements, including, without limitation: the severity and duration of the COVID-19 pandemic, food safety and food borne-illness issues; health concerns arising from outbreaks of a significant health epidemic; the success of our franchisees and licensees; our significant exposure to the Chinese market; changes in economic and political conditions in countries and territories outside of the U.S. where we operate; the macroeconomic and regional instability caused by the Russia conflict in Ukraine; our ability to protect the integrity and security of personal information of our customers and employees; our ability to successfully implement technology initiatives; our increasing dependence on multiple digital commerce platforms; the impact of social media; our ability to secure and maintain distribution and adequate supply to our restaurants; the loss of key personnel, or labor shortages or difficulty finding and retaining qualified employees; the success of our development strategy in emerging markets; changes in commodity, labor and other operating costs; harm or dilution to our brands caused by franchisee and third party activity; pending or future litigation and legal claims or proceedings; changes in or noncompliance with government regulations, including labor standards and anti-bribery or anti-corruption laws; tax matters, including changes in tax laws or disagreements with taxing authorities; consumer preferences and perceptions of our brands; failure to protect our service marks or other intellectual property; changes in consumer discretionary spending and general economic conditions; competition within the retail food industry; not realizing the anticipated benefits from past or potential future acquisitions, investments or other strategic transactions, and risks relating to our significant amount of indebtedness. In addition, other risks and uncertainties not presently known to us or that we currently believe to be immaterial could affect the accuracy of any such forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

The forward-looking statements included in this announcement are only made as of the date of this announcement and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances. You should consult our filings with the Securities and Exchange Commission (including the information set forth under the captions “Risk Factors” and “Forward-Looking Statements” in our most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q) for additional detail about factors that could affect our financial and other results.

Yum! Brands, Inc., based in Louisville, Kentucky, and its subsidiaries franchise or operate a system of over 53,000 restaurants in 155 countries and territories under the company’s concepts – KFC, Taco Bell, Pizza Hut and the Habit Burger Grill. The Company's KFC, Taco Bell and Pizza Hut brands are global leaders of the chicken, Mexican-style food, and pizza categories, respectively. The Habit Burger Grill is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more. Yum! Brands was named to the 2021 Dow Jones Sustainability Index North America and was ranked on Newsweek’s list of 2021 America’s Most Responsible Companies. In 2022, Yum! Brands was named to 3BL Media’s 100 Best Corporate Citizens.

Reconciliation of Non-GAAP Measurements to GAAP Results

(amounts in millions, except per share amounts)

(unaudited)

In addition to the results provided in accordance with Generally Accepted Accounting Principles in the United States of America ("GAAP"), the Company provides the following non-GAAP measurements.

• Diluted Earnings Per Share ("EPS") excluding Special Items (as defined below);
• Effective Tax Rate excluding Special Items;
• Core Operating Profit. Core Operating Profit excludes Special Items and foreign currency translation (“F/X”) and we use Core Operating Profit for the purposes of evaluating performance internally;
• Company restaurant profit and Company restaurant margin as a percentage of sales (as defined below).

These non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of these non-GAAP measurements provide additional information to investors to facilitate the comparison of past and present operations.

Special Items are not included in any of our Division segment results as the Company does not believe they are indicative of our ongoing operations due to their size and/or nature. Our chief operating decision maker does not consider the impact of Special Items when assessing segment performance. The Special Items are described in (a) - (h) in the accompanying notes.

Company restaurant profit is defined as Company sales less Company restaurant expenses, both of which appear on the face of our Condensed Consolidated Statements of Income. Company restaurant expenses include those expenses incurred directly by our Company-owned restaurants in generating Company sales, including cost of food and paper, cost of restaurant-level labor, rent, depreciation and amortization of restaurant-level assets and advertising expenses incurred by and on behalf of that Company restaurant. Company restaurant margin as a percentage of sales ("Company restaurant margin %") is defined as Company restaurant profit divided by Company sales. We use Company restaurant profit for the purposes of internally evaluating the performance of our Company-owned restaurants and we believe Company restaurant profit provides useful information to investors as to the profitability of our Company-owned restaurants. In calculating Company restaurant profit, the Company excludes revenues and expenses directly associated with our franchise operations as well as non-restaurant-level costs included in General and administrative expenses, some of which may support Company-owned restaurant operations. The Company also excludes restaurant-level asset impairment and closures expenses, which have historically not been significant, from the determination of Company restaurant profit as such expenses are not believed to be indicative of ongoing operations. Company restaurant profit and Company restaurant margin % as presented may not be comparable to other similarly titled measures of other companies in the industry.

Certain non-GAAP measurements are presented excluding the impact of F/X. These amounts are derived by translating current year results at prior year average exchange rates. We believe the elimination of the F/X impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.