What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-08-05 compared with 2026-05-06 · 199 added, 84 removed, 371 unchanged (43% of the section changed)

14 unchanged sentences

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

In 2025, we began a review of strategic options for the Pizza Hut brand.

The objective of the review was to create value for YUM, Pizza Hut and its franchise partners by determining the optimal approach to best capitalize on Pizza Hut's structural advantages — strong brand equity, experienced franchise partners and meaningful scale — in the highly fragmented pizza market.

In June 2026, we entered into two definitive agreements to sell the Pizza Hut brand thereby completing this review (see Note 3 for discussion regarding the agreements).

Through our Recipe for Good Growth, our mission is to grow iconic restaurant brands globally that are loved, trusted and connected:

57 unchanged sentences

We believe the elimination of the FX impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.

Certain General and administrative expenses allocations between KFC Division and Corporate and Unallocated for the prior periods have been restated to be comparable with the allocations for the quarter and year to date ended June 30, 2026.

Results of Operations

4 unchanged sentences

Taco Bell Division +9 +7 +3 +19 +19

Pizza Hut Division Even Even +1 (14) (16)

Pizza Hut Division (2) (1) +1 (12) (14)

+5 +3 +5 +5 +5

Year to date Financial Highlights:

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

KFC Division +6 +2 +7 +14 +9

Taco Bell Division +10 +8 +3 +18 +18

Pizza Hut Division (1) (1) +1 (13) (15)

Worldwide +6 +3 +5 +11 +6

Additionally:

• Foreign currency translation positively impacted Divisional Operating Profit by $25 million for the quarter ended March 31, 2026.

• Foreign currency translation favorably impacted Divisional Operating Profit by $16 million and $41 million for the quarter and year to date ended June 30, 2026, respectively.

• Gross unit openings for the quarter were 1,053 units resulting in 481 net new units.

First Quarter

2026 2025 % Change

◦ Gross unit openings for the year to date were 2,083 units resulting in 881 net new units.

Second Quarter Year to date

2026 2025 % Change 2026 2025 % Change

GAAP EPS $3.08 $1.33 +131 $4.62 $2.23 +107

Less Special Items EPS

$0.05 $(0.40) NM

$1.46 $(0.11) NM $1.50 $(0.51) NM

EPS Excluding Special Items $1.62 $1.44 +12 $3.12 $2.74 +14

Quarter ended

2026 2025 % B/(W)

Quarter ended Year to date

2026 2025 % B/(W) 2026 2025 % B/(W)

Company sales $ 837 $ 669 25 $ 1,622 $ 1,277 27

7 unchanged sentences

Refranchising (gain) loss (1) (11) (88) (2) (16) (85)

Other (income) expense (45) (8) NM

Other (income) expense 6 (7) NM (39) (15) NM

Total costs and expenses, net 1,514 1,311 (16) 2,930 2,550 (15)

Operating Profit 655 622 5 1,299 1,170 11

Investment (income) expense, net — (1) (94)

Investment (income) expense, net (6) — NM (6) (1) NM

Other pension (income) expense — (1) (93) — (1) (74)

1 unchanged sentence

Income before income taxes 533 499 7 1,049 929 13

Income tax provision

Income tax (benefit) provision (320) 125 356 (236) 301 178

Net Income $ 853 $ 374 128 $ 1,285 $ 628 105

2 unchanged sentences

Effective tax rate (60.1) % 25.1 % 85.1 ppts.

(22.5) % 32.4 % 55.0 ppts.

(a) See Note 4 for the number of shares used in this calculation.

4 unchanged sentences

Total 64,166 61,272 5

Quarter ended

Same-store Sales Growth (Decline) % 3 3

Quarter ended Year to date

2026 2025 2026 2025

Same-store Sales Growth % 3 2 3 2

System Sales Growth %, reported

1 unchanged sentence

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

Quarter ended

Quarter ended Year to date

2026 2025 2026 2025

Company sales (a)

$ 837 $ 669 $ 1,622 $ 1,277

Franchise sales 16,691 15,608 32,910 30,504

1 unchanged sentence

Negative (Positive) Foreign Currency Impact (b)

(375) N/A (960) N/A

System sales, excluding FX $ 17,154 $ 16,277 $ 33,571 $ 31,781

Company sales (a)

$ 275 $ 245 $ 530 $ 461

Franchise sales 9,291 8,476 18,364 16,600

1 unchanged sentence

Negative (Positive) Foreign Currency Impact (b)

(313) N/A (788) N/A

System sales, excluding FX $ 9,254 $ 8,721 $ 18,106 $ 17,061

1 unchanged sentence

Company sales (a)

$ 396 $ 287 $ 768 $ 550

Franchise sales 4,281 3,988 8,303 7,705

1 unchanged sentence

Negative (Positive) Foreign Currency Impact (b)

(5) N/A (21) N/A

System sales, excluding FX $ 4,672 $ 4,275 $ 9,050 $ 8,255

1 unchanged sentence

Company sales (a)

$ 31 $ 7 $ 63 $ 10

Franchise sales 3,077 3,109 6,160 6,134

1 unchanged sentence

Negative (Positive) Foreign Currency Impact (b)

(57) N/A (151) N/A

System sales, excluding FX $ 3,052 $ 3,116 $ 6,072 $ 6,144

1 unchanged sentence

Company sales (a)

$ 135 $ 130 $ 260 $ 255

Franchise sales 42 36 83 66

7 unchanged sentences

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

Quarter ended

Quarter ended Year to date

2026 2025 2026 2025

Core Operating Profit Growth %

3 unchanged sentences

Company restaurant margin % 16.3 % 16.3 % 15.0 % 15.3 %

Reconciliation of GAAP Operating Profit to Core Operating Profit Quarter ended

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

2026 2025 2026 2025

GAAP Operating Profit $ 655 $ 622 $ 1,299 $ 1,170

4 unchanged sentences

Income from Litigation Settlement (c)

Other Special Items (Income) Expense

Special Items (Benefit) Expense - Operating Profit

German acquisition and Turkey termination-related costs (d)

Special Items Expense - Operating Profit 44 28 38 55

Positive Foreign Currency Impact on Division Operating Profit

(16) N/A (41) N/A

Core Operating Profit $ 683 $ 650 $ 1,296 $ 1,225

2 unchanged sentences

Decrease in Franchise and property revenues

$ — $ — $ — $ 1

Increase in General and administrative expenses

Increase in Other (income) expense

Special Items (Benefit) Expense - Operating Profit

Special Items Expense - Operating Profit $ 44 $ 28 $ 38 $ 55

GAAP Operating Profit $ 410 $ 363 $ 793 $ 694

Negative (Positive) Foreign Currency Impact

(14) N/A (37) N/A

Core Operating Profit $ 395 $ 363 $ 756 $ 694

2 unchanged sentences

Negative (Positive) Foreign Currency Impact

— N/A (1) N/A

Core Operating Profit $ 310 $ 262 $ 590 $ 502

2 unchanged sentences

Negative (Positive) Foreign Currency Impact

(2) N/A (4) N/A

Core Operating Profit $ 69 $ 80 $ 131 $ 155

1 unchanged sentence

GAAP Operating Profit (Loss)

$ (4) $ 3 $ (11) $ 2

Negative (Positive) Foreign Currency Impact

2 unchanged sentences

GAAP Net Income $ 853 $ 374 $ 1,285 $ 628

Special Items (Benefit) Expense - Operating Profit

Special Items Tax (Benefit) Expense (d)

Special Items Expense - Operating Profit 44 28 38 55

Special Items Tax (Benefit) Expense (e)

(449) 3 (456) 88

Net Income excluding Special Items $ 449 $ 405 $ 867 $ 771

Quarter ended

Quarter ended Year to date

2026 2025 2026 2025

Reconciliation of Diluted EPS to Diluted EPS excluding Special Items

7 unchanged sentences

(a) In 2025, we began a review of strategic options for the Pizza Hut brand.

During the quarter ended March 31, 2026, we incurred charges of $37 million to Corporate and unallocated General and administrative expenses, which primarily included third-party advising costs associated with this strategic options review.

During the quarter and year to date ended June 30, 2026, we recorded charges of $44 million and $81 million, respectively, to Corporate and unallocated General and administrative expenses, which primarily included third-party advising costs associated with this strategic options review.

Given the significance of the costs expected to be incurred through the course of this strategic options review, we have reflected such amounts as Special Items.

4 unchanged sentences

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

As a result of these decisions, we recorded charges of approximately $1 million and $7 million during the quarters ended March 31, 2026 and 2025, respectively, to Corporate and unallocated General and administrative expenses.

As a result of these decisions, we recorded charges of approximately $10 million during the quarter ended June 30, 2025, and approximately $1 million and $17 million for the years to date ended June 30, 2026 and 2025, respectively to Corporate and unallocated General and administrative expenses.

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

2 unchanged sentences

Due to the nature and size of the settlement, including the years to which the litigation related, it has been reflected as a Special Item within Other income.

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

Quarter ended

(d) 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.

(IS Holding), 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 first quarter of 2025.

We also re-acquired the master franchise rights in Germany for KFC and Pizza Hut from the owner of IS Holding in December 2024.

We recorded charges of $5 million and $7 million during the quarter and year to date ended June 30, 2025, respectively, to Corporate and unallocated General and administrative expenses consisting primarily of severance costs associated with re-acquiring the master franchise rights in Germany.

Consistent with prior charges related to the matter, these charges have been reflected as Special Items.

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

Quarter ended Year to date

6/30/2026 6/30/2025 6/30/2026 6/30/2025

Tax Expense (Benefit) on Special Items (Benefit) Expense - Operating Profit

Tax Expense - Foreign tax reserve

Tax (Benefit) on Special Items Expense - Operating Profit $ (11) $ (7) $ (9) $ (14)

Tax (Benefit) - Income tax impacts from planned sale of Pizza Hut (359) — (359) —

Tax (Benefit) - Intra-entity transfers and valuations of intellectual property (79) — (101) —

Tax Expense - Other Income tax impacts recorded as Special

Tax Expense - Foreign tax reserve — 10 — 102

Special Items Tax (Benefit) Expense

Tax Expense (Benefit) on Special Items (Benefit) Expense - 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.

Tax (Benefit) - Intra-entity transfers and valuations of intellectual property in the quarter ended March 31, 2026, reflects the tax benefit resulting from an internal reorganization to consolidate our Pizza Hut legal entities and assets into two isolated ownership structures by aligning the legal ownership, simplifying the organizational footprint and consolidating the Pizza Hut domestic and international business.

$ (449) $ 3 $ (456) $ 88

Tax (Benefit) on Special Items Expense - 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.

Tax (Benefit) - Income tax impacts from the planned sale of Pizza Hut in the quarter and year to date ended June 30, 2026, reflects a $359 million net deferred tax benefit recorded upon the recognition of certain tax basis in entities expected to be sold.

Such recognition was triggered upon entering into definitive agreements during the quarter ended June 30, 2026 to sell Pizza Hut.

The Pizza Hut sales are expected to close at significant book gains in the quarter ended September 30, 2026 resulting in the utilization of these deferred tax benefits.

Tax (Benefit) - Intra-entity transfers and valuations of intellectual property in the quarter and year to date ended June 30, 2026, reflects tax benefits of $91 million and $113 million, respectively, resulting from an internal reorganization to consolidate our Pizza Hut legal entities and assets into two isolated ownership structures by aligning the legal ownership, simplifying the organizational footprint and consolidating the Pizza Hut domestic and international businesses.

As part of this reorganization, certain Pizza Hut intellectual property ("IP") rights from subsidiaries in the U.S.

1 unchanged sentence

This reorganization began in the fourth quarter of 2025 in connection with our Pizza Hut strategic options review.

Tax Expense - Other Income tax impacts recorded as Special in the quarter ended March 31, 2026, includes a $13 million adjustment to tax expense associated with our decision to exit Russia.

Additionally, Tax (Benefit) - Intra-entity transfers and valuations of intellectual property in the quarter and year to date ended June 30, 2026, includes $12 million of tax expense representing an adjustment to the valuation allowance on tax credits previously granted by local Swiss tax authorities in connection with transferred IP rights in Switzerland.

Previously recorded impacts associated with this IP transfer were recorded as Special Items.

Tax Expense - Other Income tax impacts recorded as Special in the year to date ended June 30, 2026, includes a $13 million adjustment to tax expense associated with our decision to exit Russia.

Consistent with previously recorded impacts associated with our decision to exit Russia, this adjustment was recorded as a Special Item.

Tax Expense - Foreign tax reserve in the quarter ended March 31, 2025, is associated with a reserve, and the related ongoing foreign exchange and inflationary adjustments, associated with a change in management's judgment around a Mexican subsidiary's ability to utilize losses to offset recapture gains triggered by a historical tax deconsolidation in Mexico.

Tax Expense - Foreign tax reserve in the quarter and year to date ended June 30, 2025, is associated with a reserve, and the related ongoing foreign exchange and inflationary adjustments, associated with a change in management's judgment around a Mexican subsidiary's ability to utilize losses to offset recapture gains triggered by a historical tax deconsolidation in Mexico.

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

30 unchanged sentences

Company restaurant margin % 12.1 % 24.3 % (6.6) % 10.7 % N/A 16.3 %

Year to date 6/30/2026

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

Corporate and Unallocated Consolidated

GAAP Operating Profit (Loss) $ 793 $ 591 $ 135 $ (11) $ (209) $ 1,299

Franchise and property revenues 938 522 285 6 — 1,751

Franchise contributions for advertising and other services 334 360 159 2 — 856

General and administrative expenses 174 106 116 25 225 646

Franchise and property expenses 37 15 31 2 — 85

Franchise advertising and other services expense 329 361 171 2 — 863

Refranchising (gain) loss — — — — (2) (2)

Other (income) expense (2) — (6) 8 (39) (39)

Company restaurant profit (loss)

$ 59 $ 191 $ 1 $ 18 $ (25) $ 244

Company sales $ 530 $ 768 $ 63 $ 260 $ — $ 1,622

Company restaurant margin % 11.2 % 24.8 % 2.0 % 6.9 % N/A 15.0 %

Year to date 6/30/2025

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

Corporate and Unallocated Consolidated

GAAP Operating Profit (Loss) $ 694 $ 502 $ 155 $ 2 $ (183) $ 1,170

Franchise and property revenues 844 482 290 5 (1) 1,620

Franchise contributions for advertising and other services 316 336 169 1 — 823

General and administrative expenses 169 98 109 26 202 604

Franchise and property expenses 36 13 21 2 — 73

Franchise advertising and other services expense 311 333 179 1 — 824

Refranchising (gain) loss — — — — (16) (16)

Other (income) expense — — (5) — (10) (15)

Company restaurant profit (loss)

$ 50 $ 129 $ (1) $ 25 $ (7) $ 196

Company sales $ 461 $ 550 $ 10 $ 255 $ — $ 1,277

Company restaurant margin % 10.8 % 23.4 % (6.4) % 9.6 % N/A 15.3 %

Items Impacting Reported Results and Reasonably Likely to Impact Future Results

1 unchanged sentence

See also the Detail of Special Items in this MD&A for other items impacting results in 2026 or 2025.

Public Health Issue

On July 17, 2026, after communication with state and federal health officials, Taco Bell U.S.

announced that it had preemptively and voluntarily removed certain lettuce provided by its vendor, Taylor Farms, which Taylor Farms subsequently recalled.

We removed the lettuce from our nationwide supply chain quickly and transparently, and before the recall, because the safety and well-being of our consumers is always our top priority.

Taco Bell U.S.

saw a meaningful near-term impact on sales as a result of the issue.

Sales are improving from their low-point and we believe that they will continue to improve through the quarter ended September 30, 2026, due to the underlying strength of the brand and recovery plan being implemented by the Taco Bell team.

While it is difficult to forecast with certainty the impacts of this issue, we believe Taco Bell Company restaurant margin percentage in the U.S.

will range between 19% to 21% in the quarter ended September 30, 2026.

Pizza Hut Strategic Options Review

In 2025, we began a review of strategic options for the Pizza Hut brand.

The objective of the review is to create value for YUM, Pizza Hut and its franchise partners by determining the optimal approach to best capitalize on Pizza Hut's structural advantages — strong brand equity, experienced franchise partners and meaningful scale — in the highly fragmented pizza market.

We currently intend to complete this strategic options review in 2026, and there can be no assurance this review will result in any specific outcome or transaction.

In January 2026, we launched the Hut Forward program that represents a bridge to a longer-term acceleration of the Pizza Hut brand.

1 unchanged sentence

The YUM contribution for incremental marketing in the quarter ended March 31, 2026, is being recognized as advertising expense throughout 2026.

Additionally, we incurred certain other costs during the quarter ended March 31, 2026 associated with this strategic review (see Detail of Special Items section of this MD&A) and expect to incur further costs of a currently indeterminate amount as this strategic options review progresses.

On June 16, 2026, we entered into definitive agreements to sell Pizza Hut in two separate transactions completing our strategic options review.

Pizza Hut excluding Mainland China (“Pizza Hut Ex-China”) will be acquired by LongRange Capital, a private equity firm, and Pizza Hut in Mainland China will be acquired by Yum China Holdings, Inc., which will remain YUM’s master franchisee for KFC and Taco Bell in Mainland China.

We anticipate both transactions will close in August 2026, subject to customary closing conditions, including receipt of required regulatory approvals.

Across the two transactions, we expect to receive approximately $2.3 billion of net proceeds after taxes, closing adjustments and transaction-contingent fees.

Additionally, YUM has the opportunity to receive an earn-out from LongRange Capital of $75 million by 2030.

We will continue to provide Byte by Yum!, our proprietary technology, to Pizza Hut Ex-China subsequent to the sale.

Additionally, following the closing of the transaction, we will provide certain enterprise technology and finance services to Pizza Hut Ex-China under a transition services agreement.

We incurred certain other costs during the quarter and year to date ended June 30, 2026 associated with this strategic review (see Detail of Special Items section of this MD&A) and we expect to incur further expenses of approximately $40 million during the remainder of 2026.

The KFC Division has 34,747 units, 90% of which are located outside the U.S.

Additionally, 98% of the KFC Division units were operated by franchisees as of March 31, 2026.

Quarter ended

2026 2025 Reported Ex FX

Additionally, 99% of the KFC Division units were operated by franchisees as of June 30, 2026.

Quarter ended Year to date

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

2026 2025 Reported Ex FX 2026 2025 Reported Ex FX

System Sales $ 9,566 $ 8,721 10 6 $ 18,894 $ 17,061 11 6

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

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

Company sales $ 275 $ 245 12 8 $ 530 $ 461 15 9

4 unchanged sentences

Company restaurant margin % 12.0 % 12.1 % (0.1) ppts.

11.2 % 10.8 % 0.4 ppts.

G&A expenses $ 88 $ 89 1 3 $ 174 $ 169 (3) —

8 unchanged sentences

Company sales and Company restaurant margin %

The quarterly increase in Company sales, excluding the impacts of foreign currency translation, was driven by Company same-store sales growth of 5%, acquisitions of restaurants from franchisees and unit growth.

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

The quarterly increase in Company sales, excluding the impacts of foreign currency translation, was driven by Company same-store sales growth of 5%, unit growth and acquisitions of restaurants from franchisees.

The year to date increase in Company sales, excluding the impacts of foreign currency translation, was driven by Company same-store sales growth of 5%, acquisitions of restaurants from franchisees and unit growth.

The quarterly decrease in Company restaurant margin percentage was driven by lower margins associated with new builds inside the U.S., partially offset by Company same-store sales growth.

The year to date increase in Company restaurant margin percentage was driven by Company same-store sales growth, partially offset by higher restaurant operating costs and lower margins associated with new builds inside the U.S.

Franchise and property revenues

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%.

The quarterly increase in G&A, excluding the impacts of foreign currency translation, was driven by higher headcount.

The quarterly and year to date increases in Franchise and property revenues, excluding the impacts of foreign currency translation, were driven by unit growth and franchise same-store sales growth of 2%.

The quarterly decrease in G&A, excluding the impacts of foreign currency translation, was driven by lower professional fees.

G&A, excluding the impacts of foreign currency translation, was flat year to date.

Operating Profit

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

The quarterly and year to date increases in Operating Profit, excluding the impacts of foreign currency translation, were driven by same-store sales growth and unit growth.

Taco Bell Division

1 unchanged sentence

The Company owned 8% of the Taco Bell Division units in the U.S.

as of March 31, 2026.

Quarter ended

2026 2025 Reported Ex FX

as of June 30, 2026.

Quarter ended Year to date

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

2026 2025 Reported Ex FX 2026 2025 Reported Ex FX

System Sales $ 4,677 $ 4,275 9 9 $ 9,071 $ 8,255 10 10

Same-Store Sales Growth % 8 9 N/A N/A

Same-Store Sales Growth % 7 4 N/A N/A 8 6 N/A N/A

Company sales $ 396 $ 287 38 38 $ 768 $ 550 40 40

4 unchanged sentences

Company restaurant margin % 25.9 % 24.3 % 1.6 ppts.

24.8 % 23.4 % 1.4 ppts.

G&A expenses $ 53 $ 49 (8) (8) $ 106 $ 98 (8) (8)

Franchise and property expenses 6 6 Even 1

Franchise and property expenses 9 7 (24) (23) 15 13 (13) (12)

Franchise advertising and other services expense 187 176 (7) (7) 361 333 (8) (8)

6 unchanged sentences

Company sales and Company restaurant margin %

The quarterly increase in Company sales was driven by acquisitions of restaurants from franchisees, company same-store sales growth of 6%, and unit growth.

The quarterly increase in Company restaurant margin percentage was driven by same store sales growth and the margin percentages of restaurants acquired from franchisees, partially offset by higher labor and other restaurant operating costs and commodity inflation (primarily beef).

The quarterly and year to date increases in Company sales were driven by acquisitions of restaurants from franchisees and company same-store sales growth of 6%.

The quarterly and year to date restaurant margin percentage increase was driven by same store sales growth and the margin percentages of restaurants acquired from franchisees, partially offset by other restaurant operating costs, higher labor costs, and commodity inflation (primarily beef).

Franchise and property revenues

The quarterly increase in Franchise and property revenues was driven by franchise same-store sales growth of 8% and unit growth partially offset by acquisitions.

The quarterly increase in G&A was driven by higher professional and legal fees and higher headcount.

The quarterly and year to date increases in Franchise and property revenues were driven by franchise same-store sales growth of 7% and 8% for the quarter and year to date, respectively, and unit growth partially offset by the impact of our acquisition of restaurants from franchisees.

The quarterly and year to date increases in G&A were driven by higher headcounts including headcount associated with operating restaurants acquired from franchisees, higher digital and technology expenses, and higher legal and professional fees.

Operating Profit

The quarterly increase in Operating Profit was driven by same-store sales growth, the impact of restaurants acquired from franchisees and unit growth, partially offset by higher restaurant operating costs and higher G&A.

The quarterly and year to date increases in Operating Profit were driven by same store sales growth, the impact of restaurants acquired from franchisees and unit growth, partially offset by higher restaurant operating costs and higher G&A.

Pizza Hut Division

2 unchanged sentences

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 March 31, 2026.

Quarter ended

2026 2025 Reported Ex FX

Additionally, over 99% of the Pizza Hut Division units were operated by franchisees as of June 30, 2026.

Quarter ended Year to date

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

2026 2025 Reported Ex FX 2026 2025 Reported Ex FX

System Sales $ 3,108 $ 3,116 Even (2) $ 6,223 $ 6,144 1 (1)

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

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

Company sales $ 31 $ 7 348 346 $ 63 $ 10 505 492

5 unchanged sentences

Company restaurant margin % 2.2 % (6.6) % 8.8 ppts.

2.0 % (6.4) % 8.4 ppts.

G&A expenses $ 56 $ 54 (5) (5) $ 116 $ 109 (6) (5)

8 unchanged sentences

Franchise and property revenues

The quarterly decrease in Franchise and property revenues, excluding the impact of foreign currency translation, was primarily driven by the impact of our acquisitions of restaurants from franchisees.

Franchise same-store sales were flat in the quarter.

The quarterly increase in G&A, excluding the impact of foreign currency translation, was driven by the impact of G&A associated with operating restaurants acquired from franchisees.

The quarterly and year to date decreases in Franchise and property revenues, excluding the impact of foreign currency translation, were primarily driven by franchise same-store sales declines of 1% and the impact of our acquisition of restaurants from franchisees.

The quarterly and year to date increases in G&A, excluding the impact of foreign currency translation, were driven by the impact of G&A associated with operating restaurants acquired from franchisees and higher expense associated with annual

incentive compensation plans, partially offset by lower professional and legal expenses and lapping expenses associated with the bi-annual Global Franchise Convention held in the prior year.

Operating Profit

The quarterly decrease in Operating Profit, excluding the impact of foreign currency translation, was driven by higher advertising costs associated with the Pizza Hut U.S.

Hut Forward program and the impact of operating restaurants acquired from franchisees.

The quarterly and year to date decreases in Operating Profit, excluding the impact of foreign currency translation, were driven by higher advertising costs associated with the Pizza Hut U.S.

Hut Forward program, the impact of operating restaurants acquired from franchisees and same-store sales declines.

Habit Burger & Grill Division

The Habit Burger & Grill Division has 388 units, all of which are in the U.S.

The Company owned 79% of the Habit Burger & Grill Division units as of March 31, 2026.

Quarter ended

2026 2025 Reported

The Company owned 78% of the Habit Burger & Grill Division units as of June 30, 2026.

Quarter ended Year to date

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

2026 2025 Reported 2026 2025 Reported

System Sales $ 177 $ 166 7 $ 343 $ 321 7

Same-Store Sales Growth (Decline) %

3 (4) N/A 4 (3) N/A

Total revenues $ 139 $ 134 4 $ 269 $ 262 3

Operating Profit (Loss) $ (7) $ (1) (934)

Operating Profit (Loss) $ (4) $ 3 NM $ (11) $ 2 NM

Unit Count 6/30/2026 6/30/2025 % Increase (Decrease)

3 unchanged sentences

Corporate & Unallocated

Quarter ended

(Expense) / Income 2026 2025 % B/(W)

Quarter ended Year to date

(Expense) / Income 2026 2025 % B/(W) 2026 2025 % B/(W)

Corporate and unallocated G&A $ ( 114 ) $ ( 97 ) (18) $ ( 225 ) $ ( 202 ) (11)

2 unchanged sentences

Unallocated Franchise and property revenues

— — NM — ( 1 ) NM

Unallocated Refranchising gain (loss) 1 11 (88) 2 16 (85)

Unallocated Other income (expense) (See Note 5)

Unallocated Other income (expense) (See Note 6) ( 6 ) 4 NM 39 10 NM

Investment income (expense), net

6 — NM 6 1 NM

Other pension income (expense)

— 1 (93) — 1 (74)

Interest expense, net ( 128 ) ( 123 ) (4) ( 257 ) ( 243 ) (6)

Income tax provision (See Note 7) (84) (176) 52

Income tax benefit (provision) (See Note 8) 320 (125) 356 236 (301) 178

Effective tax rate (See Note 8) ( 60.1 ) % 25.1 % 85.1 ppts.

( 22.5 ) % 32.4 % 55.0 ppts.

Corporate and unallocated G&A

The quarterly increase in Corporate and Unallocated G&A expense was driven by costs associated with the Pizza Hut Strategic Options Review, partially offset by lapping costs associated with our Resource Optimization Program and Brand Headquarters Consolidation.

The quarterly and year to date increases in Corporate and Unallocated G&A expense were driven by costs associated with the Pizza Hut Strategic Options Review, partially offset by lapping costs associated with our Resource Optimization Program and Brand Headquarters Consolidation.

Unallocated Company restaurant expenses

Unallocated Company restaurant expenses include amortization of reacquired franchise rights.

The quarterly increase was driven by the acquisitions of restaurants from franchisees in 2025.

The quarterly and year to date increases were driven by the acquisition of restaurants from franchisees in 2025.

Interest expense, net

The quarterly increase in Interest expense, net was driven by higher outstanding borrowings.

The quarterly and year to date increases in Interest expense, net were driven by higher outstanding borrowings.

Consolidated Cash Flows

Net cash provided by operating activities was $923 million in 2026 versus $850 million in 2025.

The increase was primarily driven by an increase in Operating Profit, partially offset by higher incentive compensation payments, the timing of spending on advertising and higher income tax payments.

Net cash used in investing activities was $80 million in 2026 versus net cash provided by investing activities of $2 million in 2025.

The change was primarily driven by lapping maturities of short-term investments in the prior year.

The increase was primarily driven by an increase in Operating Profit, partially offset by higher incentive compensation payments and higher income tax payments.

Net cash used in investing activities was $169 million in 2026 versus $130 million in 2025.

The change was primarily driven by lapping maturities of short-term investments in the prior year and higher current year capital spending, partially offset by lower current year spending on restaurant acquisitions.

Net cash used in financing activities was $757 million in 2026 versus $741 million in 2025.

The change was primarily driven by lower current year share repurchases and higher current year net borrowings.

The change was primarily driven by higher current year share repurchases, partially offset by higher current year net borrowings.

Consolidated Financial Condition

Our Condensed Consolidated Balance Sheet was impacted by the held for sale classification of assets and liabilities associated with the Pizza Hut divestitures (See Note 3).

Liquidity and Capital Resources

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

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 $350 million outstanding as of March 31, 2026.

Borrowings under our Revolving Facility in 2026 had original maturities of three months or less.

We believe that our ongoing cash from operations, cash on hand, which was approximately $700 million at March 31, 2026, and availability under our Revolving Facility will be sufficient to fund our cash requirements over the next twelve months.

We believe that our ongoing cash from operations, cash on hand, which was $674 million at June 30, 2026, and availability under our Revolving Facility will be sufficient to fund our cash requirements over the next twelve months.

There have been no material changes to the disclosures made in Item 7 of the Company's 2025 Form 10-K regarding our material cash requirements.

Due to the ongoing significance of our debt obligations, we are providing the update below.

Pizza Hut Divestitures

On June 16, 2026 we entered into definitive agreements to sell Pizza Hut in two separate transactions.

We anticipate both transactions will close in August 2026, subject to customary closing conditions, including receipt of required regulatory approvals.

Across the two transactions, we expect to receive approximately $2.3 billion of net proceeds after taxes, closing adjustments and transaction-contingent fees.

With the anticipated net proceeds from the Pizza Hut transactions, we expect to pay down the current drawings on the Revolving Facility and the majority of the remainder will be set aside for share repurchases with timing subject to market conditions.

Accordingly, in June 2026, our Board of Directors authorized incremental share repurchases of up to $4 billion through June 30, 2028 (see Note 5).

Debt Obligations and Interest Payments

As of March 31, 2026, approximately 96%, including the impact of interest rate swaps, of our $11.5 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 June 30, 2026, approximately 96%, including the impact of interest rate swaps, of our $11.5 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%.

We target a capital structure which we believe provides an attractive balance between optimized interest rates, duration and flexibility with diversified sources of liquidity and maturities spread over multiple years and as mentioned above, we expect to maintain our net leverage ratio at approximately 4.0x EBITDA over the medium term by issuing incremental debt as our business grows.

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 March 31, 2026.

The following table summarizes the future maturities of our outstanding long-term debt, excluding finance leases and debt issuance costs and discounts, as of June 30, 2026.

2026 2027 2028 2029 2030 2031 2032 2037 2043 Total

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A Term Loan A Facility that is part of the Credit Agreement and the Revolving Facility will mature on the earliest of (i) April 26, 2029, (ii) the date that is 91 days prior to the March 15, 2028 maturity of the existing Term Loan B Facility if more than $250 million of such Term Loan B Facility remains outstanding as of such date or (iii) the date that is 91 days prior to the June 1, 2027 maturity of the existing Subsidiary Senior Unsecured Notes if more than $250 million of such Subsidiary Senior Unsecured Notes remain outstanding as of such date.

Given the $750 million in Subsidiary Senior Unsecured Notes oustanding as of March 31, 2026, the maturity date of the Term Loan A Facility and the Revolving Facility will occur less than 12 months from the balance sheet date of these Condensed Consolidated Financial Statements if the Company has not paid nor refinanced at least $500 million of the Subsidiary Senior Unsecured Notes 91 days prior to June 1, 2027.

As such, the outstanding borrowings of the Term Loan A Facility and the Revolving Facility as of March 31, 2026 have been classified as Short-term borrowings in the Condensed Consolidated Balance Sheets as of March 31, 2026.

Given the $750 million in Subsidiary Senior Unsecured Notes outstanding as of June 30, 2026, the maturity date of the Term Loan A Facility and the Revolving Facility will occur less than 12 months from the balance sheet date of these Condensed Consolidated Financial Statements if the Company has not paid nor refinanced at least $500 million of the Subsidiary Senior Unsecured Notes 91 days prior to June 1, 2027.

As such, the outstanding borrowings of the Term Loan A Facility and the Revolving Facility as of June 30, 2026 have been classified as Short-term borrowings in the Condensed Consolidated Balance Sheets as of June 30, 2026.

We expect to refinance the $750 million of the existing Subsidiary Senior Unsecured Notes before 91 days prior to June 1, 2027, and as such, the table above reflects the April 26, 2029 anticipated repayment date for the Term Loan A Facility and the Revolving Facility.

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Quantitative and Qualitative Disclosures About Market Risk

There were no material changes during the quarter ended March 31, 2026, to the disclosures made in Item 7A of the Company’s 2025 Form 10-K.

There were no material changes during the quarter ended June 30, 2026, to the disclosures made in Item 7A of the Company’s 2025 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