Core Insights - Yum Brands reported disappointing revenue, with adjusted earnings per share of $1.44, missing Wall Street estimates of $1.46, and revenue of $1.93 billion, below projections of $1.94 billion [1] - The company faced challenges in the US market, particularly with KFC and Pizza Hut, which saw significant sales declines [1][7] Financial Performance - Net income for Yum Brands was $374 million, or $1.33 per share, in the second quarter, up from $367 million the previous year [2] - Overall same-store sales increased by 2% during the quarter [2] Segment Performance - KFC's global same-store sales rose by 2%, but US same-store sales fell by 5% [5][6] - Pizza Hut's global same-store sales decreased by 1%, with US same-store sales plunging by 5% [7][8] - Taco Bell reported a 4% growth in same-store sales in the US and internationally, benefiting from the successful re-launch of Crispy Chicken Nuggets [9][11] Strategic Initiatives - The company is attempting to boost sales through value options and new menu items, although these efforts have not resonated well with customers [5][7] - Yum Brands is rushing to implement new promotions to address the insufficient value message perceived by American customers [7] Operational Growth - Yum Brands increased its restaurant count by 3%, adding 871 new locations, primarily international KFC restaurants [10]

Core Insights - YUM! Brands, Inc. reported second-quarter 2025 results with earnings missing the Zacks Consensus Estimate but revenues exceeding expectations [1][9] - Following the results, shares of YUM declined by 1.6% in pre-market trading [1] Financial Performance - Adjusted earnings per share (EPS) for Q2 2025 were $1.44, missing the consensus estimate of $1.45, but representing a 7% increase from the prior-year quarter [2] - Quarterly revenues reached $1,933 million, surpassing the consensus mark of $1,930 million, and increased by 10% year over year [2] Divisional Performance - Worldwide system sales, excluding foreign currency translation, increased by 4% year over year, with Taco Bell rising by 6% and KFC by 5%, while Pizza Hut saw a decline of 1% [3] - KFC revenues totaled $849 million, up 19% year over year, with comparable sales increasing by 2% [4] - Pizza Hut revenues were flat at $239 million, with comparable sales decreasing by 1% [5] - Taco Bell revenues reached $711 million, up 7% year over year, with comparable sales increasing by 4% [6] - Habit Burger Grill revenues amounted to $134 million, down 5% year over year, with comparable sales declining by 4% [7] Operating Margins - KFC's operating margin contracted by 360 basis points to 43% [5] - Pizza Hut's operating margin decreased by 580 basis points to 33.5% [6] - Taco Bell's operating margin contracted by 70 basis points to 36.8% [6] Cash and Debt Position - As of June 30, 2025, cash and cash equivalents totaled $677 million, an increase from $616 million at the end of 2024 [8] - Long-term debt decreased to $10,418 million from $11,306 million at the end of 2024 [8] Long-Term Growth Targets - The company aims for approximately 5% annual unit growth and expects system sales to rise around 7% each year, excluding foreign exchange impacts [10] - YUM is committed to achieving at least 8% annual growth in core operating profit on a constant currency basis [10] Market Position - YUM currently holds a Zacks Rank 2 (Buy) [11] - Other top-ranked stocks in the Zacks Retail – Restaurants industry include Cracker Barrel, BJ's Restaurants, and Yum China [11]

Core Insights - Yum! Brands Inc reported second-quarter earnings of $1.44 per share, slightly below the Zacks Consensus Estimate of $1.45, and revenue of $1.93 billion, just under the expected $1.94 billion [1] - The company's underperformance was attributed to weak domestic results from KFC and Pizza Hut, which are facing significant competition [1] Stock Performance - Following the earnings report, Yum! Brands' stock declined by 3.1%, trading at $142.42, although it still maintains a 6.26% year-to-date gain [2] - Support at the $140 level has helped stabilize the stock since February [2] Analyst Sentiment - Analysts show caution towards Yum! Brands, with nine maintaining a "strong buy" rating and 18 a "hold" rating [3] - Options traders have exhibited increased bullish sentiment, with a call/put volume ratio of 1.85, higher than 96% of readings from the past year [3] Options Activity - Options volume is currently five times the typical intraday average, with the most active contract being the monthly 8/15 140-strike call [4]

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Core Insights - Yum Brands has established itself as a significant source of leadership talent for the restaurant industry, providing CEOs to rival companies for decades [1][4] - The company's strong focus on leadership development and a culture that prioritizes people has contributed to its reputation as a training ground for future industry leaders [2][4] Company Background - Yum Brands, which owns Pizza Hut, KFC, and Taco Bell, was previously part of PepsiCo, known for its talent development, before becoming Tricon Global Restaurants in 1997 and later rebranding as Yum in 2002 [3] Leadership Development - Yum's commitment to cultivating a strong company culture and talent has enabled its leaders to make a significant impact globally [4] - Notable past CEOs from Yum, such as David Novak and Greg Creed, have fostered an environment where other executives could develop their skills and advance their careers [4] Case Study: Brian Niccol - Brian Niccol, the current CEO of Starbucks, began his career at Procter & Gamble before joining Yum in 2005, where he held key marketing roles at Pizza Hut and Taco Bell [5] - After Creed transitioned to CEO of Yum, Niccol succeeded him as CEO of Taco Bell before moving on to lead Chipotle and eventually Starbucks [6]

Financial Data and Key Metrics Changes - System sales grew by 4%, driven by strong unit growth at KFC International and market share gains at Taco Bell U.S. [6][30] - Digital sales increased by 18%, with a digital mix reaching a record 57%, up two points from the previous quarter [30][8] - Total restaurant level margins were 16.3%, down approximately 150 basis points year over year due to unfavorable commodity impacts [31][32] - Core operating profit increased by 2% to $646 million, with ex-special EPS at $1.44, up 7% year over year [32][33] Business Line Data and Key Metrics Changes - KFC contributed 52% of Yum! Brands' divisional operating profit, with same-store sales growth of 3% in key international markets [10][11] - Taco Bell accounted for 37% of divisional operating profit, achieving 4% same-store sales growth, outpacing the limited service category in the U.S. by four percentage points [13][14] - Pizza Hut represented 11% of divisional operating profit, with same-store sales growth of 2% internationally, driven by recovery in the Middle East and strong performance in South Asia [15][17] Market Data and Key Metrics Changes - KFC International's same-store sales growth was driven by strong performance in South Africa, Spain, Canada, Japan, and the UK [10] - Taco Bell's same-store sales grew 5% in Europe, with double-digit increases in Canada and India [15] - Habit Burger and Grill experienced a year-over-year system sales decline of 1%, reflecting continued softness in consumer demand [17] Company Strategy and Development Direction - The company aims to be the most loved and trusted brand globally, focusing on digital sales and AI-driven personalized marketing [8][23] - KFC U.S. is implementing the Kentucky Fried Comeback campaign to improve performance in underperforming regions [11] - Taco Bell is expanding its beverage offerings with the Live Mas Cafe, targeting a $5 billion beverage market in the U.S. [19][76] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a tough consumer environment but noted Taco Bell's strong performance across all income bands [80][81] - The company expects to achieve 8% core operating profit growth for the year, with a focus on optimizing company store profits and managing G&A expenses [56][60] - Management remains optimistic about the future, citing strong digital capabilities and ongoing development momentum [45][48] Other Important Information - The company has made significant strides in sustainability, achieving 89% of suppliers certified for food safety initiatives and sourcing 94% cage-free eggs [24][25] - The transition of CEO from David Gibbs to Chris Turner is set to occur on October 1, with Gibbs remaining as an advisor until 2026 [6][28] Q&A Session Summary Question: Guidance for the year and confidence in achieving 8% operating profit growth - Management remains on track to deliver 8% core operating profit growth, with solid performance expected in the second half [54][56] Question: Technology capabilities and their impact on metrics - The BITE strategy is positively impacting both top and bottom lines, with AI-enabled marketing showing strong returns [61][63] Question: Capital intensity and future unit development - The company will continue to be asset-light, focusing on high-performing restaurants and ensuring strong returns on investments [70][73] Question: Beverage strategy and differentiation - Taco Bell is well-positioned in the beverage market, with plans to expand the Live Mas Cafe and leverage proprietary beverages [76][77] Question: Consumer environment and brand positioning - Taco Bell is gaining market share even in a pressured consumer environment, with consistent sales growth across income bands [81][82]

Financial Data and Key Metrics Changes - System sales grew by 4%, driven by strong unit growth at KFC International and market share gains at Taco Bell U.S. [5][30] - Digital sales increased by 18%, with a digital mix reaching a record 57%, up two points from the previous quarter [30][6] - Core operating profit increased by 2% to $646 million, with adjusted EPS at $1.44, up 7% year over year [32][33] Business Line Data and Key Metrics Changes - KFC contributed 52% of Yum! Brands' divisional operating profit, with KFC International growing same-store sales by 3% [8][12] - Taco Bell accounted for 37% of divisional operating profit, achieving 4% same-store sales growth, outpacing the limited service category in the U.S. by four percentage points [12][13] - Pizza Hut represented 11% of divisional operating profit, with same-store sales growth of 2% internationally, driven by recovery in the Middle East and strong performance in South Asia [15][14] Market Data and Key Metrics Changes - KFC International saw strong performance in key markets including South Africa, Spain, Canada, Japan, and the UK [8][10] - Taco Bell's same-store sales grew 5% in Europe, with double-digit increases in Canada and India [14] - Habit Burger and Grill experienced a year-over-year system sales decline of 1%, reflecting continued softness in consumer demand [15] Company Strategy and Development Direction - The company aims to be the most loved and trusted brand globally, focusing on digital sales and AI-driven personalized advertising [6][7] - KFC U.S. introduced the "Kentucky Fried Comeback" campaign to improve performance in underperforming regions [10] - Taco Bell is expanding its beverage offerings with the Live Mas Cafe, targeting the $25 billion beverage category in the U.S. [18][76] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a tough consumer environment but noted Taco Bell's ability to gain market share across all income bands [80][81] - The company expects to achieve 8% core operating profit growth for the year, with a strong focus on optimizing company store profits and refranchising gains [53][56] - Management expressed confidence in the long-term growth potential, emphasizing the strength of their digital capabilities and operational scale [45][48] Other Important Information - The company opened 871 gross new units in the quarter, translating to 386 net new units [33][34] - The company is committed to sustainability, achieving 89% of suppliers certified in food safety initiatives and sourcing 94% cage-free eggs [23][24] - Yum! Brands plans to maintain a strong and flexible balance sheet while returning excess capital to shareholders [44][45] Q&A Session Questions and Answers Question: Guidance for the year and confidence in achieving 8% operating profit growth - Management remains on track to deliver 8% core operating profit growth, with solid performance expected in the second half [53][54] Question: Technology capabilities and their impact on metrics - The Byte strategy is positively impacting both top and bottom line, with strong correlations between digital sales mix and sales growth [61][62] Question: Future capital intensity and CapEx benchmarks - The company will continue to be asset-light, maintaining a low percentage of restaurant ownership while ensuring high returns on tech investments [71][72] Question: Beverage strategy and differentiation - Taco Bell is well-positioned in the beverage market, leveraging successful proprietary drinks and expanding the Live Mas Cafe concept [76][77] Question: Consumer environment and brand positioning - Despite a challenging consumer environment, Taco Bell has consistently shown positive sales growth across all income bands, indicating strong brand resilience [80][81]

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Yum shares have added about 9.6% since the beginning of the year versus the S&P 500's gain of 7.6%. What's Next for Yum? While Yum has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one relia ...

Core Insights - Yum Brands reported quarterly earnings and revenue that fell short of analysts' expectations, primarily due to declines in same-store sales for Pizza Hut and KFC in the U.S. [1] Financial Performance - The company reported a second-quarter net income of $374 million, or $1.33 per share, an increase from $367 million, or $1.28 per share, a year earlier [1] - Adjusted earnings per share were $1.44, slightly below the expected $1.46 [3] - Net sales increased by 10% to $1.93 billion, but this was below the expected $1.94 billion [2][3]

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) This section summarizes Yum! Brands' strong second-quarter 2025 performance, strategic announcements, and CEO commentary [Second-Quarter Performance Overview](index=1&type=section&id=Second-Quarter%20Performance%20Overview) Yum! Brands reported strong Q2 2025 results with GAAP EPS of $1.33 and EPS excluding Special Items of $1.44, a 7% increase year-over-year, while digital system sales exceeded $9 billion, achieving a record 57% digital sales mix, and worldwide system sales grew 4% excluding foreign currency translation, led by Taco Bell at 6% and KFC at 5% Second-Quarter 2025 Key Financial Highlights | Metric | Q2 2025 | Q2 2024 | % Change | | :-------------------------- | :------ | :------ | :------- | | GAAP EPS | $1.33 | $1.28 | +4 | | EPS Excluding Special Items | $1.44 | $1.35 | +7 | | Worldwide System Sales (Ex F/X) | +4% | N/A | N/A | | Worldwide Same-Store Sales | +2% | N/A | N/A | | Worldwide Units | +3% | N/A | N/A | | GAAP Operating Profit | +2% | N/A | N/A | - Digital system sales exceeded **$9 billion**, with a record digital mix of approximately **57%**[7](index=7&type=chunk)[8](index=8&type=chunk) - Unit count increased **3%** including **871** gross new units in the quarter[8](index=8&type=chunk) [CEO Commentary](index=1&type=section&id=DAVID%20GIBBS%20COMMENTS) CEO David Gibbs highlighted the strength of Q2 results, attributing them to bold food innovation, digital transformation, and iconic brands, noting Taco Bell U.S. outperforming with 4% same-store sales growth and KFC International opening 565 new units, while expressing confidence in Yum!'s future and announcing Chris Turner as his successor, effective October 1, 2025 - Taco Bell U.S. meaningfully outpaced the category with **4%** same-store sales growth[3](index=3&type=chunk) - KFC International opened **565** gross new units[3](index=3&type=chunk) - Chris Turner, current CFO and Chief Franchise Officer, will succeed David Gibbs as Chief Executive Officer, effective **October 1, 2025**[3](index=3&type=chunk)[8](index=8&type=chunk) [Recent Strategic Announcements](index=1&type=section&id=RECENT%20STRATEGIC%20ANNOUNCEMENTS) Key strategic announcements include the upcoming CEO transition to Chris Turner, who has been pivotal in digital and technology transformation, and Taco Bell's plan to expand its innovative Live Más Café concept to 30 locations by the end of 2025, targeting $5 billion in beverage sales by 2030 - Chris Turner, CFO since 2019 and Chief Franchise Officer since 2024, was unanimously elected to succeed David Gibbs as CEO, effective **October 1, 2025**, having been instrumental in transforming the digital and technology organization, launching Byte by Yum!, and centralizing the global supply chain[8](index=8&type=chunk) - Taco Bell announced plans to scale its Live Más Café concept to **30** locations by the end of **2025**, as part of a long-term strategy to reach **$5 billion** in beverage sales by **2030**[8](index=8&type=chunk) [Divisional Performance](index=3&type=section&id=Divisional%20Performance) This section details the second-quarter 2025 performance of Yum! Brands' key divisions: KFC, Taco Bell, Pizza Hut, and Habit Burger & Grill [KFC Division](index=3&type=section&id=KFC%20DIVISION) The KFC Division reported a 5% increase in restaurants and 5% system sales growth (excluding F/X) for Q2 2025, with same-store sales growing 2%, while operating profit increased 9% (8% excluding F/X), with international markets showing strong growth and the U.S. market experiencing a decline KFC Division Second-Quarter 2025 Performance | Metric | 2025 | 2024 | % Change (Reported) | % Change (Ex F/X) | | :-------------------------- | :----- | :----- | :------------------ | :---------------- | | Restaurants | 32,369 | 30,689 | +5 | N/A | | System Sales ($MM) | 8,721 | 8,226 | +6 | +5 | | Same-Store Sales Growth (%) | +2 | (3) | NM | NM | | Operating Profit ($MM) | 365 | 334 | +9 | +8 | | Operating Margin (%) | 43.0 | 46.6 | (3.6) ppts | (3.3) ppts | KFC Division System Sales Growth Ex F/X by Region (Q2 2025) | Region | System Sales Growth Ex F/X (% Change) | | :-------------------------------- | :------------------------------------ | | International | +7 | | U.S. | (8) | | Asia | +10 | | Latin America | +10 | | Middle East / Turkey / North Africa | +10 | | Africa | +11 | - KFC Division opened **566** gross new restaurants across **58** countries[9](index=9&type=chunk) [Taco Bell Division](index=4&type=section&id=TACO%20BELL%20DIVISION) The Taco Bell Division demonstrated strong performance in Q2 2025, with a 2% increase in restaurants, 6% system sales growth (excluding F/X), and 4% same-store sales growth, while operating profit rose 5% (excluding F/X), with both U.S. and International markets contributing positively to system sales and same-store sales Taco Bell Division Second-Quarter 2025 Performance | Metric | 2025 | 2024 | % Change (Reported) | % Change (Ex F/X) | | :-------------------------- | :----- | :----- | :------------------ | :---------------- | | Restaurants | 8,756 | 8,565 | +2 | N/A | | System Sales ($MM) | 4,275 | 4,017 | +6 | +6 | | Same-Store Sales Growth (%) | +4 | +5 | NM | NM | | Operating Profit ($MM) | 262 | 250 | +5 | +5 | | Operating Margin (%) | 36.8 | 37.5 | (0.7) ppts | (0.7) ppts | - Taco Bell U.S. system sales grew **6%** and Taco Bell International system sales excluding foreign currency translation, grew **11%**[14](index=14&type=chunk) - Taco Bell U.S. and Taco Bell International same-store sales both grew **4%**[14](index=14&type=chunk) [Pizza Hut Division](index=4&type=section&id=PIZZA%20HUT%20DIVISION) The Pizza Hut Division faced challenges in Q2 2025, reporting a 1% decline in system sales (excluding F/X) and same-store sales, with operating profit decreasing significantly by 15% (excluding F/X), impacted by technology spending timing, franchise transitions, and global convention expenses Pizza Hut Division Second-Quarter 2025 Performance | Metric | 2025 | 2024 | % Change (Reported) | % Change (Ex F/X) | | :-------------------------- | :----- | :----- | :------------------ | :---------------- | | Restaurants | 19,768 | 19,864 | Even | N/A | | System Sales ($MM) | 3,116 | 3,140 | (1) | (1) | | Same-Store Sales Growth (%) | (1) | (3) | NM | NM | | Operating Profit ($MM) | 80 | 94 | (15) | (15) | | Operating Margin (%) | 33.5 | 39.3 | (5.8) ppts | (5.7) ppts | - Operating profit growth was negatively impacted by **3 percentage points** due to timing of technology spending, **2 percentage points** due to expense associated with three franchise entities transitioning to new ownership, and **2 percentage points** due to expenses associated with the bi-annual Global Franchise Convention[15](index=15&type=chunk) Pizza Hut Division System Sales Growth Ex F/X by Region (Q2 2025) | Region | System Sales Growth Ex F/X (% Change) | | :-------------------- | :------------------------------------ | | United States | (6) | | China | +1 | | Asia | +7 | | Middle East / Africa | +9 | [Habit Burger & Grill Division](index=5&type=section&id=HABIT%20BURGER%20%26%20GRILL%20DIVISION) The Habit Burger & Grill Division opened one new restaurant in Q2 2025, but experienced a 1% decline in system sales and a 4% decline in same-store sales - Habit Burger & Grill Division opened **1** gross new restaurant[18](index=18&type=chunk) - Habit Burger & Grill Division system sales declined **1%** with same-store sales declining **4%**[18](index=18&type=chunk) [Financial Statements](index=8&type=section&id=Financial%20Statements) This section presents Yum! Brands' condensed consolidated income statements, balance sheets, and cash flow statements for the reported periods [Condensed Consolidated Summary of Results (Income Statement)](index=8&type=section&id=Condensed%20Consolidated%20Summary%20of%20Results) For Q2 2025, Yum! Brands reported a 10% increase in total revenues to $1,933 million, driven by strong company sales and franchise revenues, with operating profit growing 2% to $622 million and net income increasing 2% to $374 million, while year-to-date, total revenues rose 11%, but net income saw an 8% decrease Condensed Consolidated Summary of Results (Q2 2025 vs Q2 2024) | Metric | Q2 2025 ($MM) | Q2 2024 ($MM) | % Change | | :---------------------------------- | :------------ | :------------ | :------- | | Total revenues | 1,933 | 1,763 | 10 | | Company sales | 669 | 572 | 17 | | Franchise and property revenues | 835 | 789 | 6 | | Operating Profit | 622 | 607 | 2 | | Net Income | 374 | 367 | 2 | | Diluted EPS | $1.33 | $1.28 | 4 | Condensed Consolidated Summary of Results (YTD 2025 vs YTD 2024) | Metric | YTD 2025 ($MM) | YTD 2024 ($MM) | % Change | | :---------------------------------- | :------------- | :------------- | :------- | | Total revenues | 3,720 | 3,361 | 11 | | Company sales | 1,277 | 1,046 | 22 | | Franchise and property revenues | 1,620 | 1,546 | 5 | | Operating Profit | 1,170 | 1,127 | 4 | | Net Income | 628 | 681 | (8) | | Diluted EPS | $2.23 | $2.38 | (6) | [Condensed Consolidated Balance Sheets](index=12&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, Yum! Brands' total assets increased to $6,917 million from $6,727 million at year-end 2024, primarily driven by increases in property, plant and equipment, goodwill, and intangible assets, while total liabilities rose to $14,597 million, largely due to a significant increase in short-term borrowings Condensed Consolidated Balance Sheets (As of June 30, 2025 vs December 31, 2024) | Metric | 6/30/25 ($MM) | 12/31/24 ($MM) | | :------------------------------------------ | :------------ | :------------ | | Total Assets | 6,917 | 6,727 | | Cash and cash equivalents | 677 | 616 | | Total Current Assets | 1,826 | 1,871 | | Property, plant and equipment, net | 1,383 | 1,304 | | Goodwill | 792 | 736 | | Intangible assets, net | 454 | 416 | | Total Liabilities | 14,597 | 14,375 | | Short-term borrowings | 971 | 27 | | Long-term debt | 10,418 | 11,306 | | Total Shareholders' Deficit | (7,680) | (7,648) | [Condensed Consolidated Statements of Cash Flows](index=13&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the year-to-date period ended June 30, 2025, net cash provided by operating activities increased to $850 million from $705 million in the prior year, net cash used in investing activities decreased, while net cash used in financing activities significantly increased to $741 million, primarily due to higher share repurchases and dividends paid Condensed Consolidated Statements of Cash Flows (YTD 2025 vs YTD 2024) | Metric | YTD 2025 ($MM) | YTD 2024 ($MM) | | :------------------------------------------ | :------------- | :------------- | | Net Cash Provided by Operating Activities | 850 | 705 | | Net Cash Used in Investing Activities | (130) | (253) | | Net Cash Used in Financing Activities | (741) | (547) | | Repurchase shares of Common Stock | (338) | (50) | | Dividends paid on Common Stock | (395) | (377) | | Net Increase (Decrease) in Cash | 11 | (101) | [Non-GAAP Reconciliations & Segment Details](index=14&type=section&id=Non-GAAP%20Reconciliations%20%26%20Segment%20Details) This section provides reconciliations of non-GAAP financial measures to their GAAP equivalents and detailed segment-level financial results [Non-GAAP Measurements and Reconciliations](index=14&type=section&id=Reconciliation%20of%20Non-GAAP%20Measurements%20to%20GAAP%20Results) Yum! Brands provides non-GAAP measurements such as Core Operating Profit, EPS excluding Special Items, and Company restaurant profit to offer investors additional insights into the company's ongoing operational performance, as Special Items are not considered indicative of core business activities - Non-GAAP measurements are provided to facilitate the comparison of past and present operations and are not intended to replace GAAP results[45](index=45&type=chunk) - Special Items are not allocated to any segment and are excluded from segment performance assessment as they are not indicative of ongoing operations[46](index=46&type=chunk) - Company restaurant profit is used internally to evaluate the performance and profitability of company-owned restaurants[47](index=47&type=chunk) [Core Operating Profit Reconciliation](index=14&type=section&id=Core%20Operating%20Profit%20Reconciliation) Consolidated Core Operating Profit for Q2 2025 was $646 million, an increase from $633 million in Q2 2024, after adjusting for Special Items and the impact of foreign currency translation Core Operating Profit Reconciliation (Q2 & YTD 2025 vs 2024) | Metric | Q2 2025 ($MM) | Q2 2024 ($MM) | YTD 2025 ($MM) | YTD 2024 ($MM) | | :------------------------------------------------------- | :------------ | :------------ | :------------- | :------------- | | GAAP Operating Profit | 622 | 607 | 1,170 | 1,127 | | Special Items Expense - Operating Profit | 28 | 26 | 55 | 50 | | Negative (Positive) Foreign Currency Impact on Division Operating Profit | (4) | N/A | 7 | N/A | | Core Operating Profit | 646 | 633 | 1,232 | 1,177 | [Net Income and EPS Excluding Special Items Reconciliation](index=15&type=section&id=Net%20Income%20and%20EPS%20excluding%20Special%20Items%20Reconciliation) Diluted EPS excluding Special Items for Q2 2025 increased 7% year-over-year to $1.44, and for the year-to-date period, it increased 10% to $2.74, reflecting adjustments for various non-recurring items Diluted EPS Excluding Special Items Reconciliation (Q2 & YTD 2025 vs 2024) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :---------------------------------- | :------ | :------ | :------- | :------- | | Diluted EPS | $1.33 | $1.28 | $2.23 | $2.38 | | Less Special Items Diluted EPS | (0.11) | (0.07) | (0.51) | (0.12) | | Diluted EPS excluding Special Items | $1.44 | $1.35 | $2.74 | $2.50 | Net Income Excluding Special Items Reconciliation (Q2 & YTD 2025 vs 2024) | Metric | Q2 2025 ($MM) | Q2 2024 ($MM) | YTD 2025 ($MM) | YTD 2024 ($MM) | | :---------------------------------- | :------------ | :------------ | :------------- | :------------- | | GAAP Net Income | 374 | 367 | 628 | 681 | | Special Items Expense - Operating Profit | 28 | 26 | 55 | 50 | | Special Items Tax Expense (Benefit) | 3 | (7) | 88 | (17) | | Net Income excluding Special Items | 405 | 386 | 771 | 714 | [Company Restaurant Profit Reconciliation](index=16&type=section&id=Reconciliation%20of%20GAAP%20Operating%20Profit%20to%20Company%20Restaurant%20Profit) Consolidated Company restaurant profit for Q2 2025 was $109 million on sales of $669 million, yielding a 16.3% margin, representing an increase in profit from Q2 2024, though the margin slightly decreased from 17.8%, with divisional margins varying and Pizza Hut showing a negative margin Consolidated Company Restaurant Profit and Margin (Q2 & YTD 2025 vs 2024) | Metric | Q2 2025 ($MM) | Q2 2024 ($MM) | YTD 2025 ($MM) | YTD 2024 ($MM) | | :---------------------------------- | :------------ | :------------ | :------------- | :------------- | | Company restaurant profit | 109 | 102 | 196 | 176 | | Company sales | 669 | 572 | 1,277 | 1,046 | | Company restaurant margin % | 16.3% | 17.8% | 15.3% | 16.8% | Divisional Company Restaurant Margin % (Q2 2025 vs 2024) | Division | Q2 2025 Margin % | Q2 2024 Margin % | | :-------------------- | :--------------- | :--------------- | | KFC Division | 12.1% | 11.9% | | Taco Bell Division | 24.3% | 25.6% | | Pizza Hut Division | (6.6)% | (2.2)% | | Habit Burger & Grill Division | 10.7% | 10.7% | [Segment Results (Detailed)](index=18&type=section&id=Segment%20Results) These tables provide a detailed breakdown of revenues and expenses for each of Yum! Brands' divisions (KFC, Taco Bell, Pizza Hut, Habit Burger & Grill) and Corporate and Unallocated, reconciling them to the consolidated summary of results, with the Corporate and Unallocated column including all Special Items Q2 2025 Total Revenues by Segment ($MM) | Segment | Total Revenues ($MM) | | :-------------------- | :------------- | | KFC Division | 849 | | Taco Bell Division | 711 | | Pizza Hut Division | 239 | | Habit Burger & Grill Division | 134 | | Consolidated | 1,933 | Q2 2025 Operating Profit (Loss) by Segment ($MM) | Segment | Operating Profit (Loss) ($MM) | | :-------------------- | :---------------------- | | KFC Division | 365 | | Taco Bell Division | 262 | | Pizza Hut Division | 80 | | Habit Burger & Grill Division | 3 | | Corporate and Unallocated | (88) | | Consolidated | 622 | - The Corporate and Unallocated column includes all amounts deemed Special Items, which are not allocated to segments for performance reporting purposes[57](index=57&type=chunk)[60](index=60&type=chunk) [Notes to Financial Statements (Special Items)](index=20&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Summary%20of%20Results%2C%20Condensed%20Consolidated%20Balance%20Sheets%20and%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The notes provide detailed explanations for financial figures and the nature of Special Items, which include refranchising gains/losses, charges from a resource optimization program, brand headquarters consolidation, and costs related to the termination of franchise agreements in Turkey and re-acquisition of master franchise rights in Germany - Special Items include refranchising gains and losses due to their size and volatility[65](index=65&type=chunk) - Charges of **$14 million** (Q2 2025) and **$32 million** (YTD 2025) were recorded for a resource optimization program aimed at accelerating digital, technology, and innovation capabilities, and optimizing spending[65](index=65&type=chunk) - Charges of approximately **$10 million** (Q2 2025) and **$17 million** (YTD 2025) were incurred for Brand HQ Consolidation, involving relocating KFC U.S. corporate office and requiring U.S.-based remote employees to relocate[65](index=65&type=chunk) - Charges of **$5 million** (Q2 2025) and **$7 million** (YTD 2025) were related to the termination of franchise agreements in Turkey (**283** KFC and **254** Pizza Hut restaurants closed) and the re-acquisition of master franchise rights in Germany[65](index=65&type=chunk) - Tax Expense - Foreign tax audit of **$10 million** (Q2 2025) and **$102 million** (YTD 2025) reflects a reserve associated with a change in management's judgment regarding a Mexican subsidiary's ability to utilize losses[64](index=64&type=chunk)[66](index=66&type=chunk) [Other Information](index=5&type=section&id=Other%20Information) This section outlines Yum! Brands' long-term growth algorithm, conference call details, and important forward-looking statements and company profile information [Long-Term Growth Algorithm](index=5&type=section&id=LONG-TERM%20GROWTH%20ALGORITHM) Yum! Brands has set long-term financial performance targets, first announced in 2022, aiming for sustained growth across key metrics including unit expansion, system sales, and core operating profit - The Company targets the following long-term financial performance metrics, on average[18](index=18&type=chunk) - **5%** Unit Growth - **7%** System Sales Growth, excluding F/X and 53rd week - At least **8%** Core Operating Profit Growth, excluding F/X and 53rd week [Conference Call & Additional Information](index=7&type=section&id=CONFERENCE%20CALL) Details for the Q2 2025 earnings conference call and webcast are provided, along with information on where to access additional financial reports, restaurant count details, and definitions of terms online - Yum! Brands will host a conference call to review Q2 2025 financial performance and strategies on **August 5, 2025**, at **8:15 a.m. Eastern Time**[20](index=20&type=chunk) - The webcast and playback will be accessible via investors.yum.com/events-and-presentations[21](index=21&type=chunk) - Additional information, including quarter-end dates, restaurant count details, definitions of terms, and Restricted Group financial information, is available at investors.yum.com[21](index=21&type=chunk) [Forward-Looking Statements & Company Profile](index=7&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section includes a standard disclaimer regarding forward-looking statements, highlighting inherent risks and uncertainties that could cause actual results to differ, and provides a brief overview of Yum! Brands, its global operations across over 61,000 restaurants in 155+ countries, and its recognition for sustainability and leadership - Forward-looking statements are subject to known and unknown risks, uncertainties, and assumptions that could cause actual results to differ materially[22](index=22&type=chunk)[23](index=23&type=chunk) - Yum! Brands, Inc. franchises or operates a system of over **61,000** restaurants in more than **155** countries and territories under KFC, Taco Bell, Pizza Hut, and Habit Burger & Grill concepts[25](index=25&type=chunk) - Named to the Dow Jones Sustainability Index North America and 3BL's list of 100 Best Corporate Citizens in **2024** - Recognized among TIME magazine's list of Best Companies for Future Leaders in **2025** - KFC, Taco Bell, and Pizza Hut led Entrepreneur's Top Global Franchises **2024** list, with Taco Bell securing the **No. 1** spot in North America for the **fifth consecutive year** in Entrepreneur's **2025** Franchise 500