What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2024-11-07 · 145 added, 227 removed, 309 unchanged (55% of the section changed)

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dollars except per share and unit count amounts, or as otherwise specifically identified.

Percentages may not recompute due to rounding.

In the first quarter of 2025, the Company prospectively changed its basis of presentation to round financial figures in the Financial Statements and as presented in the tabular presentations in this MD&A to the nearest whole number in millions in all instances.

As a result, some totals and percentages may not recompute based on rounded figures as presented within this MD&A.

Previously, amounts were presented to ensure that all numbers herein recomputed, resulting in the presentation of certain figures inconsistent with their underlying rounding.

and its Subsidiaries (collectively referred to herein as the “Company,” “YUM,” “we,” “us” or “our”) franchise or operate a system of over 60,000 restaurants in more than 155 countries and territories, primarily under the concepts of KFC, Taco Bell, Pizza Hut and The Habit Burger & Grill (collectively, the “Concepts”).

The Company’s KFC, Taco Bell and Pizza Hut brands are global leaders of the chicken, Mexican-style and pizza categories, respectively.

The Company’s KFC, Taco Bell and Pizza Hut brands are global leaders of the chicken, Mexican-inspired and pizza categories, respectively.

The Habit Burger & Grill, is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more.

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• The Habit Burger & Grill Division which includes our worldwide operations of the Habit Burger & Grill concept

Through our Good Growth Strategy we intend to unlock the growth potential of our Concepts and YUM, drive increased collaboration across our Concepts and geographies and consistently deliver better customer experiences, improved unit economics and higher rates of growth.

Key enablers include accelerated use of technology and better leverage of our systemwide scale.

Our global citizenship and sustainability strategy is reflected in our Good agenda, which includes our priorities for social responsibility, risk management and sustainable stewardship of our people, food and planet.

Our Growth agenda is based on four key drivers:

• Unrivaled Culture and Talent:

Leverage our culture and people capability to fuel brand performance and franchise success

• Unmatched Operating Capability:

Recruit and equip the best restaurant operators in the world to deliver great customer experiences

• Relevant, Easy and Distinctive Brands:

Innovate and elevate iconic restaurant brands people trust and champion

• Bold Restaurant Development:

Drive market and franchise unit expansion with strong economics and value

Through our Recipe for Good Growth we intend to deliver iconic restaurant brands and consistently drive better customer experiences, improved unit economics and higher rates of growth.

Key enablers include accelerated use of digital and technology, increased collaboration and better leverage of our systemwide scale.

This is done through a framework of three pillars:

being Loved, Trusted and Connected.

We grow by delighting customers with craveable food and a distinctive experience.

We innovate and elevate our iconic restaurant brands that people trust and champion, resulting in relevant, easy and distinctive brands.

We operate responsibly with consistency and efficiency in our restaurants, across our system and in our communities.

This includes a commitment to our priorities for social responsibility, risk management and sustainable stewardship of our people, food and planet.

We use our teamwork, technology and global scale to serve every customer, everywhere, anytime.

Our unmatched operating capability allows us to recruit and equip the best restaurant operators in the world to deliver great customer experiences.

And our commitment to bold restaurant development drives market and franchise unit expansion with strong economics.

Our unrivaled culture and talent and leading with smart, heart and courage are key to our success, fueling brand performance and franchise success.

We intend for this MD&A to provide the reader with information that will assist in understanding our results of operations, including performance metrics that management uses to assess the Company's performance.

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Net new unit growth reflects gross unit openings offset by permanent store closures, by us and our franchisees.

To determine whether a restaurant meets the definition of a unit we consider whether the restaurant has operations that are ongoing and independent from another YUM unit, serves the primary product of one of our Concepts, operates under a separate franchise agreement (if operated by a franchisee) and

has substantial and sustainable sales.

We believe gross unit openings and net new unit growth are useful to investors because we depend on new units for a significant portion of our growth.

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Core Operating Profit excludes Special Items and FX and we use Core Operating Profit for the purposes of evaluating performance internally;

• Net Income excluding Special Items;

• Company restaurant profit and Company restaurant margin as a percentage of sales (as defined below).

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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.

Further, while we generally include depreciation and amortization of restaurant-level assets within Divisional Company restaurant expenses used to derive Divisional Company restaurant profit, we record amortization of reacquired franchise rights arising from acquisition accounting within Corporate and Unallocated Company restaurant expenses as such amortization is not believed to be indicative of ongoing Divisional results as well as to enhance comparability of acquired stores' margins with those of existing restaurants.

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.

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YUM +5 +3 +3 +5 +8

Year to date Financial Highlights:

System Sales, ex FX Same-Store Sales Units GAAP Operating Profit Core Operating Profit

KFC Division +2 (3) +7 +1 +3

Taco Bell Division +5 +3 +2 +8 +8

Pizza Hut Division (2) (5) +2 (5) (3)

YUM +2 (2) +5 +2 +6

Additionally:

• Foreign currency translation unfavorably impacted Divisional Operating Profit by $3 million and $26 million for the quarter and year to date ended September 30, 2024, respectively.

Third Quarter

2024 2023 % Change 2024 2023 % Change

• Foreign currency translation unfavorably impacted Divisional Operating Profit by $11 million for the quarter ended March 31, 2025.

First Quarter

2025 2024 % Change

GAAP EPS $0.90 $1.10 (18)

Less Special Items EPS

$(0.02) $0.02 NM $(0.14) $0.06 NM

$(0.40) $(0.05) NM

EPS Excluding Special Items $1.30 $1.15 +13

• On a year-over-year basis, our diluted EPS, excluding Special Items, reflects a $0.14 and $0.32 negative impact for the quarter and year to date ended September 30, 2024, respectively, from a higher current year tax rate and unfavorability in after-tax investment gains and losses.

Foreign currency translation negatively impacted our diluted EPS, excluding Special Items, by approximately $0.01 and $0.07 for the quarter and year to date ended September 30, 2024, respectively.

• Gross unit openings for the quarter were 1,029 units resulting in 547 net new units.

Gross unit openings for the year to date were 2,731 units resulting in 1,456 net new units.

Quarter ended Year to date

2024 2023 % B/(W) 2024 2023 % B/(W)

• Foreign currency translation negatively impacted our diluted EPS, excluding Special Items, by approximately $0.03 for the quarter ended March 31, 2025.

Our diluted EPS, excluding Special Items, was unfavorably impacted by $0.08 for the quarter ended March 31, 2024 from after-tax investment losses.

• Gross unit openings for the quarter were 751 units.

◦ Net units declined by 460 for the quarter, primarily driven by unit closures in Turkey.

On January 8, 2025, we terminated our franchise agreements with franchisee IS Gida A.S.

(IS Gida), the owner and operator of KFC and Pizza Hut restaurants in Turkey and a subsidiary of IS Holding A.S., after failure by IS Gida to meet our standards.

As a result, 283 KFC restaurants and 254 Pizza Hut restaurants in Turkey were closed during the quarter.

Quarter ended

2025 2024 % B/(W)

Company sales $ 607 $ 474 28

Franchise and property revenues 804 796 1 2,350 2,351 Even

Franchise contributions for advertising and other services 401 402 Even 1,170 1,194 (2)

Franchise and property revenues 785 757 4

Franchise contributions for advertising and other services 395 367 8

Total revenues 1,787 1,598 12

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Franchise and property expenses 34 31 (9)

Franchise advertising and other services expense 401 400 Even 1,169 1,183 1

Refranchising (gain) loss (12) (19) NM (31) (40) NM

Other (income) expense (4) (1) NM (10) 14 NM

Franchise advertising and other services expense 396 367 (8)

Refranchising (gain) loss (5) (5) 2

Other (income) expense (8) (1) NM

Total costs and expenses, net 1,239 1,078 (15)

Operating Profit 548 520 5

Investment (income) expense, net (1) (16) NM 21 (21) NM

Other pension (income) expense (2) (2) NM (5) (5) NM

Investment (income) expense, net (1) 22 NM

Other pension (income) expense — (2) (83)

Interest expense, net 120 117 (2)

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Effective tax rate 41.0 % 18.0 % (23.0) ppts.

22.5 % 16.3 % (6.2) ppts.

(a) See Note 3 for the number of shares used in this calculation.

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Total 60,886 59,129 3

Quarter ended Year to date

2024 2023 2024 2023

Quarter ended

Same-store Sales Growth (Decline) % 3 (3)

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Our system sales breakdown by Company and franchise sales was as follows:

Quarter ended Year to date

2024 2023 2024 2023

Quarter ended

Company sales (a)

$ 621 $ 510 $ 1,667 $ 1,495

Franchise sales 14,896 14,572

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Negative (Positive) Foreign Currency Impact (b)

32 N/A 588 N/A

System sales, excluding FX $ 15,743 $ 15,046

Company sales (a)

$ 220 $ 117 $ 488 $ 342

Franchise sales 8,124 8,023

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Negative (Positive) Foreign Currency Impact (b)

21 N/A 480 N/A

System sales, excluding FX $ 8,524 $ 8,128

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Company sales (a)

$ 267 $ 256 $ 775 $ 738

Franchise sales 3,717 3,357

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Negative (Positive) Foreign Currency Impact (b)

(1) N/A (1) N/A

System sales, excluding FX $ 3,986 $ 3,597

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Company sales (a)

$ 1 $ 2 $ 5 $ 11

Franchise sales 3,025 3,165

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Negative (Positive) Foreign Currency Impact (b)

12 N/A 109 N/A

System sales, excluding FX $ 3,078 $ 3,167

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Company sales (a)

$ 133 $ 135 $ 399 $ 404

Franchise sales 30 27

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Non-GAAP Items, along with the reconciliation to the most comparable GAAP financial measure, as presented below.

Quarter ended Year to date

2024 2023 2024 2023

Quarter ended

Core Operating Profit Growth %

Diluted EPS Growth (Decline) %, excluding Special Items (5) 32 (1) 22

Diluted EPS Growth %, excluding Special Items

Effective Tax Rate excluding Special Items 19.8 % 19.4 %

Quarter ended Year to date

2024 2023 2024 2023

Company restaurant profit $ 87 $ 74

Company restaurant margin % 14.3 % 15.6 %

Reconciliation of GAAP Operating Profit to Core Operating Profit Quarter ended Year to date

2024 2023 2024 2023

Reconciliation of GAAP Operating Profit to Core Operating Profit Quarter ended

GAAP Operating Profit $ 548 $ 520

Detail of Special Items:

(Gain) loss associated with market-wide refranchisings (a)

(1) (2) 3 (7)

Operating (profit) loss impact from decision to exit Russia (b)

Charges associated with Resource Optimization (c)

Loss associated with market-wide refranchisings (a)

Charges associated with Resource Optimization (b)

Charges associated with Brand HQ Consolidation (c)

Other Special Items Expense 2 —

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Condensed Consolidated Statements of Income Line Item

General and administrative expenses $ 11 $ 4 $ 57 $ 19

Franchise and property expenses — (1) — 1

Refranchising (gain) loss (1) (2) 3 (7)

Other (income) expense 1 — 1 6

Decrease in Franchise and property revenues

Increase in General and administrative expenses

Increase in Refranchising loss

Increase in Other income

Special Items Expense - Operating Profit

$ 11 $ 1 $ 61 $ 19

GAAP Operating Profit $ 331 $ 313

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GAAP Operating Profit (Loss)

$ 1 $ (2) $ (2) $ (4)

Negative (Positive) Foreign Currency Impact

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Special Items Expense - Operating Profit

Special Items Tax Benefit (d)

(2) (4) (19) (36)

Special Items Tax Expense (Benefit) (d)

Net Income excluding Special Items $ 366 $ 328

Quarter ended

Reconciliation of Diluted EPS to Diluted EPS excluding Special Items

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(a) Due to their size and volatility, we have reflected as Special Items those refranchising gains and losses that were recorded in connection with market-wide refranchisings.

During the quarters ended September 30, 2024 and 2023, we recorded net refranchising gains of $1 million and $2 million, respectively, that have been reflected as Special Items.

During the years to date ended September 30, 2024 and 2023, we recorded net refranchising losses of $3 million and net refranchising gains of $7 million, respectively, that have been reflected as Special Items.

Additionally, we recorded net refranchising gains of $11 million and $17 million during quarters ended September 30, 2024 and 2023, respectively, that have not been reflected as Special Items.

During the years to date ended September 30, 2024 and 2023, we recorded net refranchising gains of $34 million and $33 million, respectively, that have not been reflected as Special Items.

During the quarter ended March 31, 2024, we recorded net refranchising losses of $3 million that have been reflected as Special Items.

Additionally, we recorded net refranchising gains of $5 million and $8 million during quarters ended March 31, 2025 and 2024, respectively, that have not been reflected as Special Items.

These net refranchising gains relate to refranchising of restaurants unrelated to market-wide refranchisings that we believe are indicative of our expected ongoing refranchising activity.

(b) In April 2023, we completed our exit from the Russia market by selling the KFC business in Russia to Smart Service Ltd.

Our GAAP operating results presented herein for the quarter and year to date ended June 30, 2023, reflect revenues from and expenses to support the Russian operations for KFC prior to the date of sale, within their historical financial statement line items and operating segments.

However, given our decision to exit Russia and our pledge to direct any future net profits attributable to Russia subsequent to the date of invasion to humanitarian efforts, we reclassed such net operating profits or losses from the KFC Division segment results to Unallocated Other income (expense).

Additionally, we incurred certain expenses related to the dispositions of the businesses and other one-time costs related to our exit from Russia which we recorded within Corporate and unallocated G&A and Unallocated Franchise and property expenses.

The resulting net Operating Profit of $2 million and net Operating Loss of $10 million for the quarter and year to date ended September 30, 2023, respectively, have been reflected as a Special Items.

(c) We recorded charges of $11 million and $57 million during the quarter and year to date ended September 30, 2024, respectively, and $3 million and $13 million during the quarter and year to date ended September 30, 2023, respectively, to General and administrative expenses and charges of $1 million during both the quarter and year to date ended September 30, 2024 to Other (income) expense related to a resource optimization program.

This program has allowed us to reallocate significant resources to accelerate our digital, technology and innovation capabilities to deliver a modern, world-class team member and customer experience and improve unit economics.

We recently expanded the program to identify further opportunities to optimize the Company’s spending and identify additional, critical areas in which to potentially reallocate resources, both with a goal to enable the acceleration of the Company’s growth rate.

(b) We recorded charges of $17 million and $21 million during the quarters ended March 31, 2025 and 2024, respectively, to General and administrative expenses related to a resource optimization program.

Over the past several years, this program has allowed us to reallocate significant resources to accelerate our digital, technology and innovation capabilities to deliver a modern, world-class team member and customer experience and improve unit economics.

We expanded the program in 2024 to identify further opportunities to optimize the Company’s spending and identify additional, critical areas in which to potentially reallocate resources, both with a goal to enable the acceleration of the Company’s growth rate.

Costs incurred to date related to the program primarily include severance associated with positions that have been eliminated or relocated and consultant fees.

Due to their scope and size, these charges have been reflected as Special Items.

(c) During the quarter ended March 31, 2025, we recorded charges of approximately $7 million to General and administrative expenses associated with our decision to designate two brand headquarters in the U.S., located in Plano, Texas and Irvine, California, to foster greater collaboration among brands and employees.

This involved relocating the KFC U.S.

corporate office to a KFC Global headquarters and requiring the majority of our U.S.-based remote employees to relocate to an appropriate headquarter office.

Costs incurred to date primarily include severance for the employees who have chosen not to relocate and consultant fees.

Due to their scope and size, these charges have been reflected as Special Items.

(d) The below table includes the detail of Special Items Tax Benefit:

Quarter ended Year to date

9/30/2024 9/30/2023 9/30/2024 9/30/2023

Tax Benefit on Special Items Operating Profit

Quarter ended

3/31/2025 3/31/2024

Tax Benefit - Income tax impacts from decision to exit Russia

Tax (Benefit) on Special Items Expense

Tax Expense - Foreign tax audit

Tax (Benefit) - Other Income tax impacts recorded as Special

Special Items Tax Benefit

$ (2) $ (4) $ (19) $ (36)

Tax Benefit on Special Items Operating Profit was determined by assessing the tax impact of each individual component within Special Items based upon the nature of the item and jurisdictional tax law.

Other Income Tax impacts recorded as Special in the years to date ended September 30, 2024 and 2023 include benefits related to the reversal of reserves due to the favorable resolution of tax audits in foreign jurisdictions.

Such reserves were established in prior years related to income tax liabilities and deferred tax assets originally recorded as Special Items as part of intercompany restructurings of intellectual property.

Other Income Tax impacts recorded as Special in the year to date ended September 30, 2023 also include the release of valuation allowances associated with a jurisdiction in which a marketwide refranchising event occurred.

Special Items Tax Expense (Benefit)

Tax Benefit on Special Items Expense was determined by assessing the tax impact of each individual component within Special Items based upon the nature of the item and jurisdictional tax law.

Tax Expense - Foreign tax audit in the quarter ended March 31, 2025 reflects a reserve associated with a change in management's judgement around a Mexican subsidiary's ability to utilize losses to offset recapture gains triggered by a historical tax deconsolidation in Mexico (see Note 7).

This tax expense was reflected as a Special Item due to its size and the years to which the reserve relates.

Other Income tax impacts recorded as Special in the quarter ended March 31, 2024 include benefits related to the reversal of a reserve due to the favorable resolution of a tax audit in a foreign jurisdiction.

Such reserve was established in prior years related to income tax liabilities originally recorded as a Special Item as part of an intercompany restructuring of intellectual property.

Reconciliation of GAAP Operating Profit to Company Restaurant Profit

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Company restaurant margin % 12.2 % 22.5 % 1.9 % 5.5 % N/A 15.6 %

Year to date 9/30/2024

KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division

Corporate and Unallocated Consolidated

GAAP Operating Profit (Loss) $ 986 $ 709 $ 278 $ (2) $ (225) $ 1,746

Franchise and property revenues 1,219 678 446 7 — 2,350

Franchise contributions for advertising and other services 427 477 264 2 — 1,170

General and administrative expenses 253 137 153 38 249 830

Franchise and property expenses 46 22 19 3 — 90

Franchise advertising and other services expense 424 473 270 2 — 1,169

Refranchising (gain) loss — — — — (31) (31)

Other (income) expense (3) (1) (10) 1 3 (10)

Company restaurant profit (loss)

$ 60 $ 185 $ — $ 33 $ (4) $ 274

Company sales $ 488 $ 775 $ 5 $ 399 $ — $ 1,667

Company restaurant margin % 12.2 % 23.9 % (1.9) % 8.2 % N/A 16.4 %

Year to date 9/30/2023

KFC Division Taco Bell Division Pizza Hut Division Habit Burger & Grill Division

Corporate and Unallocated Consolidated

GAAP Operating Profit (Loss) $ 975 $ 658 $ 292 $ (4) $ (212) $ 1,709

Franchise and property revenues 1,254 637 454 6 — 2,351

Franchise contributions for advertising and other services 473 447 273 1 — 1,194

General and administrative expenses 265 141 155 41 238 840

Franchise and property expenses 57 21 14 2 1 95

Franchise advertising and other services expense 470 439 273 1 — 1,183

Refranchising (gain) loss — — — — (40) (40)

Other (income) expense 7 2 (7) (1) 13 14

Company restaurant profit $ 47 $ 177 $ — $ 32 $ — $ 256

Company sales $ 342 $ 738 $ 11 $ 404 $ — $ 1,495

Company restaurant margin % 13.6 % 23.9 % 1.2 % 8.0 % N/A 17.1 %

Items Impacting Reported Results and Reasonably Likely to Impact Future Results

The following items impacted reported results in 2024 and/or 2023 and/or are reasonably likely to impact future results.

See also the Detail of Special Items in this MD&A for other items similarly impacting results.

Middle East Conflict

During the fourth quarter of 2023, certain of our markets, principally in our KFC and Pizza Hut Divisions, began being impacted by a military conflict in the Middle East region.

Our sales continue to be impacted significantly in markets across the Middle East, Malaysia and Indonesia.

The impact in these markets represented a low single-digit headwind to YUM's overall same-store sales growth in both the quarter and year to date ended September 30, 2024.

Additionally, we believe we have experienced conflict-related impacts in a broader set of markets, though such amounts are difficult to precisely quantify.

In a few isolated cases, the scale and duration of these sales’ impacts are affecting the financial health of our less scaled or less well-capitalized franchisees, particularly those whose restaurants have been most heavily impacted.

We have experienced an increase in restaurant closures in those markets most heavily impacted by the Middle East conflict during the first three quarters of 2024.

We have approximately 275 restaurants in these markets that are currently temporarily closed as of September 30, 2024.

Subsequent to the end of the third quarter, we defaulted a franchisee who operates a market in the Middle East under the terms of their franchise agreement.

The number of units impacted by this default comprise less than 1% of our global store count.

We are working closely with our franchisees in markets who have been most heavily impacted by the Middle East conflict to improve their profitability and position their businesses for healthy growth in the future.

Additionally, we are working with the franchisee who we defaulted subsequent to the quarter end in an attempt to help them cure their default and/or transition their franchise agreement to another party.

There is risk that we experience further permanent closures in these markets in the fourth quarter of 2024, which would have a negative impact on our unit growth rate and result in the write-off of cash incentives we have previously provided in connection with these units.

Given the lower volume nature of the units most at risk for potential closure, we do not currently anticipate that any ongoing financial impact would be material.

The Middle East conflict is ongoing, and its dynamic nature makes it difficult to forecast any impacts on the Company’s balance of year 2024 revenues, operating profit, including the impacts of any bad debt expense, and unit count with any certainty.

Impact of Foreign Currency Translation on Operating Profit

Changes in foreign currency exchange rates negatively impacted the translation of our foreign currency denominated Divisional Operating Profit by $3 million and $26 million for the quarter and year to date ended September 30, 2024, respectively.

This included a negative impact to our KFC Division Operating Profit of $1 million and $21 million for the quarter and year to date ended September 30, 2024, respectively.

We currently expect changes in foreign currency to negatively impact Divisional Operating Profit by approximately $20 to $30 million on a full-year basis.

The following item impacted reported results in 2024.

See also the Detail of Special Items in this MD&A for other items impacting results in 2025 or 2024.

Investment in Devyani

During the quarter ended March 31, 2024, we sold our approximate 5% minority investment in Devyani International Limited ("Devyani"), a franchise entity that operates KFC and Pizza Hut restaurants in India, for pre-tax proceeds of $104 million.

Changes in the fair value of our ownership interest in Devyani prior to the date of sale resulted in pre-tax investment losses of $20 million in the year to date ended September 30, 2024 and pre-tax gains of $16 million and $21 million in the quarter and year to date ended September 30, 2023, respectively.

Changes in the fair value of our ownership interest in Devyani prior to the date of sale resulted in pre-tax investment losses of $20 million in the quarter ended March 31, 2024.

The KFC Division has 31,998 units, 89% of which are located outside the U.S.

Additionally, 99% of the KFC Division units were operated by franchisees as of September 30, 2024.

Quarter ended Year to date

% B/(W) % B/(W)

2024 2023 Reported Ex FX 2024 2023 Reported Ex FX

System Sales $ 8,669 $ 8,620 1 1 $ 25,023 $ 24,975 Even 2

Same-Store Sales Growth (Decline) % (4) 6 N/A N/A (3) 9 N/A N/A

Additionally, 99% of the KFC Division units were operated by franchisees as of March 31, 2025.

Quarter ended

2025 2024 Reported Ex FX

System Sales $ 8,340 $ 8,128 3 5

Same-Store Sales Growth (Decline) % 2 (2) N/A N/A

Company sales $ 216 $ 105 106 109

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Company restaurant margin % 9.3 % 12.2 % (2.9) ppts.

12.2 % 13.6 % (1.4) ppts.

G&A expenses $ 86 $ 86 (1) Even $ 253 $ 265 4 5

G&A expenses $ 80 $ 83 3 2

Franchise and property expenses 16 17 8 7

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Company sales and Company restaurant margin %

The quarterly and year to date increases in Company sales, excluding the impact of foreign currency translation, were driven by the KFC U.K.

and Ireland restaurant acquisition (see Note 2) in the second quarter of 2024, partially offset by Company same-store sales declines of 4%.

The quarterly and year to date decreases in Company restaurant margin percentage were driven by higher restaurant operating and labor costs and Company same-store sales declines.

The quarterly increase in Company sales, excluding the impacts of foreign currency translation, was driven by the KFC U.K.

and Ireland restaurant acquisition (see Note 2) in the second quarter of 2024 and Company same-store sales growth of 2%.

The quarterly decrease in Company restaurant margin percentage was driven by the margin percentages of the units included in the KFC U.K.

and Ireland restaurant acquisition, partially offset by Company same-store sales growth.

Franchise and property revenues

The quarterly decrease in Franchise and property revenues, excluding the impact of foreign currency translation, was driven by a franchise same-store sales decline of 3% and a 2% negative impact from the KFC U.K.

and Ireland restaurant acquisition, partially offset by unit growth.

The year to date decrease in Franchise and property revenues, excluding the impact of foreign currency translation, was driven by a franchise same-store sales decline of 3% and a 1% negative impact from the sale of our KFC Russia business, partially offset by unit growth.

G&A, excluding the impact of foreign currency translation, was flat during the quarter as higher professional fees and higher salaries and benefits were offset by lower expenses related to our annual incentive compensation programs.

The year to date decrease in G&A, excluding the impact of foreign currency translation, was driven by lower expenses related to our annual incentive compensation programs, refranchising, the impact of the sale of our KFC Russia business and lower travel related costs, partially offset by higher professional fees and higher salaries and benefits.

The quarterly increase in Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by unit growth and franchise same-store sales growth of 2%, partially offset by a 1% negative impact from the KFC U.K.

and Ireland restaurant acquisition.

The quarterly decrease in G&A, excluding the impacts of foreign currency translation, was driven by lower headcount, partially offset by expenses related to the operation of acquired KFC U.K.

and Ireland restaurants.

Operating Profit

The quarterly decrease in Operating Profit, excluding the impact of foreign currency translation, was driven by a same-store sales decline and higher bad debt expense, partially offset by unit growth.

The year to date increase in Operating Profit, excluding the impact of foreign currency translation, was driven by unit growth and lower G&A, partially offset by a same-store sales decline.

The quarterly increase in Operating Profit, excluding the impacts of foreign currency translation, was driven by unit growth and same-store sales growth.

Taco Bell Division

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The Company owned 7% of the Taco Bell units in the U.S.

as of September 30, 2024.

Quarter ended Year to date

% B/(W) % B/(W)

2024 2023 Reported Ex FX 2024 2023 Reported Ex FX

as of March 31, 2025.

Quarter ended

2025 2024 Reported Ex FX

System Sales $ 3,980 $ 3,597 11 11

Same-Store Sales Growth % 4 8 N/A N/A 3 7 N/A N/A

Same-Store Sales Growth % 9 1 N/A N/A

Company sales $ 263 $ 240 10 10

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Company restaurant profit $ 59 $ 54 9 9

Company restaurant margin % 23.4 % 23.8 % (0.4) (0.4) 23.9 % 23.9 % Even Even

Company restaurant margin % 22.4 % 22.5 % (0.1) (0.1)

G&A expenses $ 49 $ 49 1 1

8 unchanged sentences

Company sales and Company restaurant margin %

The quarterly and year to date increases in Company sales were driven by Company same-store sales growth of 2% and unit growth.

The quarterly decrease in Company restaurant margin percentage was driven by higher labor and other restaurant operating costs partially offset by same-store sales growth.

Company restaurant margin percentage was flat for the year to date as Company same-store sales growth was offset by higher labor and other restaurant operating costs.

The quarterly increase in Company sales was driven by Company same-store sales growth of 7% and unit growth.

The quarterly restaurant margin percentage decrease was driven by lower margins associated with new builds outside the U.S., commodity inflation and higher labor and other restaurant operating costs partially offset by same-store sales growth.

Franchise and property revenues

The quarterly and year to date increases in Franchise and property revenues were driven by franchise same-store sales growth of 4% and 3% for the quarter and year to date, respectively, and unit growth.

The quarterly decrease in G&A was driven by lower expenses related to our annual incentive compensation programs and lower share-based compensation, partially offset by higher digital and technology expenses.

The year to date decrease in G&A was driven by lower share-based compensation and lower expenses related to our annual incentive compensation programs, partially offset by higher digital and technology expenses, and higher headcount and salaries.

The quarterly increase in Franchise and property revenues was driven by franchise same-store sales growth of 9% and unit growth.

The quarterly decrease in G&A was driven by decreased legal costs and lower headcount and salaries partially offset by higher digital and technology expenses.

Operating Profit

The quarterly and year to date increases in Operating Profit were driven by same-store sales growth, unit growth and lower G&A partially offset by higher restaurant operating costs.

The quarterly increase in Operating Profit was driven by same-store sales growth and unit growth partially offset by higher restaurant operating costs.

Pizza Hut Division

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airports) and includes units operating under both the Pizza Hut and Telepizza brands.

Additionally, over 99% of the Pizza Hut Division units were operated by franchisees as of September 30, 2024.

Quarter ended Year to date

% B/(W) % B/(W)

2024 2023 Reported Ex FX 2024 2023 Reported Ex FX

Additionally, over 99% of the Pizza Hut Division units were operated by franchisees as of March 31, 2025.

Quarter ended

2025 2024 Reported Ex FX

System Sales $ 3,028 $ 3,167 (4) (3)

Same-Store Sales Growth (Decline) % (4) 1 N/A N/A (5) 4 N/A N/A

Same-Store Sales Growth (Decline) % (2) (7) N/A N/A

Company sales $ 3 $ 2 94 94

Franchise and property revenues 150 150 Even 1 446 454 (2) (1)

Franchise and property revenues 143 148 (4) (2)

Franchise contributions for advertising and other services 85 88 (4) (4)

Total revenues $ 231 $ 238 (3) (2)

Company restaurant profit $ — $ — NM NM $ — $ — NM NM

Company restaurant profit $ — $ — NM NM

Company restaurant margin % (6.1) % 1.9 % (8.0) ppts.

(1.9) % 1.2 % (3.1) ppts.

G&A expenses $ 55 $ 52 (5) (5)

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Franchise and property revenues

The quarterly increase in Franchise and property revenues, excluding the impact of foreign currency translation, was driven by unit growth offset by a franchise same-store sales decline of 4%.

The year to date decrease in Franchise and property revenues, excluding the impact of foreign currency translation, was driven by a franchise same-store sales decline of 5% partially offset by unit growth.

The quarterly and year to date decreases in G&A, excluding the impact of foreign currency translation, were driven by lower expenses related to our annual incentive compensation programs.

The quarterly decrease in Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by a franchise same-store sales decline of (2%).

The quarterly increase in G&A, excluding the impacts of foreign currency translation, was driven by professional and legal expenses associated with four franchise entities that are transitioning to new ownership.

Operating Profit

The quarterly decrease in Operating Profit, excluding the impact of foreign currency translation, was driven by higher current year bad debt expense and a same-store sales decline, partially offset by unit growth.

The year to date decrease in Operating Profit, excluding the impact of foreign currency translation, was driven by a same-store sales decline and higher current year bad debt expense, partially offset by unit growth.

The quarterly decrease in Operating Profit, excluding the impacts of foreign currency translation, was driven by higher current year bad debt expense (including bad debt expense associated with four franchise entities that are transitioning to new ownership), timing of digital and technology related spending within Franchise advertising and other services expense, a same-store sales decline and higher G&A.

Habit Burger & Grill Division

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The Company owned 80% of the Habit Burger & Grill units in the U.S.

as of September 30, 2024.

Quarter ended Year to date

% B/(W) % B/(W)

2024 2023 Reported Ex FX 2024 2023 Reported Ex FX

System Sales $ 161 $ 163 (1) (1) $ 483 $ 489 (1) (1)

Same-Store Sales Growth % (5) (5) N/A N/A (6) (2) N/A N/A

as of March 31, 2025.

Quarter ended

2025 2024 Reported Ex FX

System Sales $ 155 $ 154 Even Even

Same-Store Sales Growth (Decline) %

(3) (8) N/A N/A

Total revenues $ 128 $ 130 (1) (1)

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Corporate & Unallocated

Quarter ended Year to date

(Expense) / Income 2024 2023 % B/(W) 2024 2023 % B/(W)

Quarter ended

(Expense) / Income 2025 2024 % B/(W)

Corporate and unallocated G&A $ (105) $ (89) (17)

Unallocated Company restaurant expenses (See Note 9)

( 3 ) — NM ( 4 ) — NM

Unallocated Franchise and property expenses — 1 NM — ( 1 ) NM

Unallocated Refranchising gain (loss) 12 19 NM 31 40 NM

Unallocated Other income (expense) 2 ( 4 ) NM ( 3 ) ( 13 ) NM

Investment income (expense), net (See Note 9) 1 16 NM ( 21 ) 21 NM

Unallocated Refranchising gain (loss) 5 5 2

Unallocated Other income (expense) 6 (5) NM

Investment income (expense), net (see Note 9)

Other pension income (expense) (see Note 10)

2 2 NM 5 5 NM

Interest expense, net (120) (117) (2)

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Effective tax rate (See Note 7) 41.0 % 18.0 % (23.0) ppts.

22.5 % 16.3 % (6.2) ppts.

Corporate and unallocated G&A

The quarterly increase in Corporate and Unallocated G&A expense was driven by higher costs associated with our resource optimization program, lapping net insurance recoveries associated with the prior year ransomware attack and higher meeting costs, partially offset by lower current year expenses related to our annual incentive compensation programs and lower share based compensation expense.

The year to date increase in Corporate and Unallocated G&A expense was driven by higher costs associated with our resource optimization program, partially offset by lower current year expenses related to our annual incentive compensation programs, lower share based compensation expense and lapping net costs associated with the prior year ransomware attack.

Interest expense, net

The quarterly decrease in Interest expense, net was primarily driven by lower borrowings.

The year to date decrease in Interest expense, net was primarily driven by lower borrowings and higher interest income.

The quarterly increase in Corporate and Unallocated G&A expense was driven by higher costs associated with our resource optimization program, costs associated with our brand headquarters consolidation, higher professional fees and higher compensation.

Consolidated Cash Flows

Net cash provided by operating activities was $404 million in 2025 versus $363 million in 2024.

The increase was primarily driven by an increase in Operating Profit before Special Items, a decrease in interest payments and timing of accounts receivable collections, partially offset by higher income tax payments and an increase in payments related to our resource optimization program.

Net cash used in investing activities was $292 million in 2024 versus $4 million in 2023.

The change was primarily driven by outflows in the current year related to the KFC U.K.

and Ireland restaurant acquisition, lapping proceeds from the prior year sale of KFC Russia and higher current year purchases of short-term investments, partially offset by current year proceeds arising from the sale of our approximate 5% minority investment in Devyani.

The increase was primarily driven by a decrease in incentive compensation payments, an increase in Operating Profit before Special Items and timing of accounts receivable collections, partially offset by timing of spending on advertising and an increase in payments related to our resource optimization program.

Net cash provided by investing activities was $2 million in 2025 versus $45 million in 2024.

The change was primarily driven by higher current year capital spending.

The prior year proceeds arising from the sale of our approximate 5% minority investment in Devyani were largely offset by proceeds arising from the current year maturity of short-term investments.

Net cash used in financing activities was $443 million in 2025 versus $247 million in 2024.

The change was primarily driven by higher current year share repurchases offset by lower current year net debt repayments.

The change was primarily driven by higher current year share repurchases.

Liquidity and Capital Resources

We have historically generated substantial cash flows from our extensive franchise operations, which require a limited YUM investment, and from the operations of our Company-owned stores.

Our annual operating cash flows have been in excess of $1.3 billion in each of the past five years and we expect that to continue to be the case in 2024.

Our annual operating cash flows have been in excess of $1.4 billion in each of the past four years and we expect that to continue to be the case in 2025.

It is our intent to use these operating cash flows to continue to invest in growing our business and pay a competitive dividend, with any remaining excess then returned to shareholders through share repurchases.

To the extent operating cash flows plus other sources of cash do not cover our anticipated cash needs, we maintain a $1.5 billion Revolving Facility under our Credit Agreement which had $210 million outstanding as of September 30, 2024.

We believe that our ongoing cash from operations, cash on hand, which was approximately $460 million at September 30, 2024, and availability under our Revolving Facility will be sufficient to fund our cash requirements over the next twelve months.

Subject to market conditions, we expect to maintain our consolidated net leverage ratio at its current level of approximately 4.0x Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") over the medium term by issuing incremental debt as our business grows.

As a result, we plan to deliver materially higher capital returns going forward as compared to the past two years when we were using significant amounts of cash to reduce our debt outstanding.

We believe that our ongoing cash from operations, cash on hand, which was approximately $600 million at March 31, 2025, and availability under our Revolving Facility will be sufficient to fund our cash requirements over the next twelve months.

Borrowings under our Revolving Facility had original maturities of three months or less.

There have been no material changes to the disclosures made in Item 7 of the Company's 2024 Form 10-K regarding our material cash requirements.

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Debt Instruments

As of September 30, 2024, approximately 96%, including the impact of interest rate swaps, of our $11 billion of total debt outstanding, excluding the Revolving Facility balance, finance leases and debt issuance costs and discounts, is fixed with an effective overall interest rate of approximately 4.5%.

As of March 31, 2025, approximately 82% of our $11.0 billion of total debt outstanding, excluding the Revolving Facility balance, finance leases and debt issuance costs and discounts, is fixed with an effective overall interest rate of approximately 4.7%.

Subsequent to the end of the first quarter, we entered into interest rate swaps (see Note 12) to fix the interest rate on $1.5 billion of borrowings, primarily under our Term Loan B Facility, from April 2025 to March 2028 which increased the fixed percentage of this total debt outstanding to 96%.

We ended the quarter with a consolidated net leverage ratio of 3.9x EBITDA.

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We have credit ratings of BB+ (Standard & Poor's)/Ba2 (Moody's).

The following table summarizes the future maturities of our outstanding long-term debt, excluding finance leases and debt issuance costs and discounts, as of September 30, 2024.

The following table summarizes the future maturities of our outstanding long-term debt, excluding finance leases and debt issuance costs and discounts, as of March 31, 2025.

2025 2026 2027 2028 2029 2030 2031 2032 2037 2043 Total

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Total $ 18 $ 965 $ 1,668 $ 2,019 $ 1,401 $ 800 $ 1,787 $ 2,100 $ 325 $ 275 $ 11,357

See Note 11 for details on the Securitization Notes, the Credit Agreement, Revolving Facility, Subsidiary Senior Unsecured Notes and YUM Senior Unsecured Notes, including a refinancing of the Credit Agreement that took place in April 2024.

See Note 11 for details on the Securitization Notes, the Credit Agreement, Revolving Facility, Subsidiary Senior Unsecured Notes and YUM Senior Unsecured Notes.

New Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements through enhanced disclosures about significant segment expenses.

The standard is effective for the Company's Annual Report on Form 10-K for fiscal 2024, and subsequent interim periods, with early adoption permitted.

The amendments should be applied retrospectively to all prior periods presented in the financial statements.

We do not anticipate the impact of the standard will result in significant new disclosures for the Company.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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We are currently evaluating the impact of the standard on our disclosures.

In March 2024, the SEC issued a final rule under SEC Release Nos.

33-11275 and 34-99678, The Enhancement and Standardization of Climate-Related Disclosures for Investors.

The rule requires disclosure of material climate-related information outside of the audited financial statements and disclosure in the footnotes addressing specified financial statement effects of severe weather events and other natural conditions above certain financial thresholds, certain carbon offsets and renewable energy credits or certificates.

The standard is effective for the Company's Annual Report on Form 10-K for fiscal 2025.

In April 2024, the SEC released an order staying this final rule pending judicial review of all the petitions challenging the rule.

We are in the process of analyzing the impact of the rule on our disclosures should the stay be lifted.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40), which requires new financial statement disclosures disaggregating prescribed expense categories within relevant income statement expense captions.

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We are currently evaluating the impact of the standard on our disclosures.

Quantitative and Qualitative Disclosures About Market Risk

There were no material changes during the quarter ended March 31, 2025, to the disclosures made in Item 7A of the Company’s 2024 Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis