UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _________________ Commission file number 001-37762 Yum China Holdings, Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware 8 ...

Financial Data and Key Metrics Changes - Total revenue for Q1 2022 grew 4% to $2.7 billion, driven by new store openings and consolidation of Hangzhou KFC, despite same-store sales decline and temporary closures [27][28] - Same-store sales were 92% of the prior year's level, with KFC at 91% and Pizza Hut at 95% [28] - Restaurant margin decreased to 13.8%, down 490 basis points year-over-year, primarily due to higher commodity prices and wage inflation [29] - Net income was $100 million, with diluted EPS of $0.23, impacted by a $30 million mark-to-market loss on equity investments [33] Business Line Data and Key Metrics Changes - KFC same-store traffic was at 86%, while average ticket grew by 6% due to increased delivery mix [28] - Pizza Hut's same-store traffic was at 97%, but average ticket decreased by 2% due to a higher mix of delivery [28] - New retail sales more than doubled compared to the prior year period, indicating strong demand for packaged products [12] Market Data and Key Metrics Changes - Eastern China, accounting for 30% to 40% of store and sales mix, was severely impacted by COVID, with many cities under lockdown [34][35] - Non-manufacturing PMI dropped from 48 in March to 42 in April, indicating weak consumer spending [36] Company Strategy and Development Direction - The company remains focused on its RGM strategy to fortify market leadership and capture growth opportunities across brands [23] - Plans to expand Taco Bell's store network to at least 100 stores by the end of the year and 225 by 2025, indicating confidence in long-term potential [43] - The company is adjusting marketing strategies and optimizing costs to navigate the challenging environment [40] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term prospects in China despite current challenges, emphasizing the importance of agility and cost control [23][39] - The company expects to operate at a loss in Q2 2022 unless external conditions improve significantly [39] - Management highlighted the importance of community purchasing and digital capabilities in adapting to the current environment [64] Other Important Information - The company opened 329 net new stores, ending the quarter with over 12,000 units [27] - The Board of Directors expanded the share repurchase authorization by $1 billion, totaling $2.4 billion [44] Q&A Session Summary Question: Impact of COVID on industry supply and small chains - Management noted that the resilient business model of Yum China has allowed it to capture significant sales even during lockdowns, differentiating it from competitors [47][48] Question: Trends in Eastern and Southern China - Management indicated that Eastern China is performing better in terms of same-store growth despite the COVID situation, with lower-tier cities showing resilience [58][70] Question: Membership sales trends - Management clarified that a healthy mix of new customers and membership sales is essential, and a slight decline in membership sales percentage is not a concern [76] Question: Store expansion strategy - Management confirmed that the disciplined approach to store expansion remains unchanged, with a focus on maintaining strong economics and payback periods [80][81] Question: Community purchasing model - Management expressed that community purchasing has proven effective during lockdowns and will be considered for future operations, showcasing the company's agility [105]

Financial Performance - Total revenue for Q1 2022 was $2.67 billion, an increase of 4% compared to $2.56 billion in the same period last year[7]. - Operating profit for Q1 2022 was $191 million, a decrease of 44% from $342 million in the same period last year[7]. - Net profit for Q1 2022 was $100 million, down 57% from $230 million year-over-year[7]. - Adjusted net profit for Q1 2022 was $102 million, a decrease of 56% compared to $233 million in the same period last year[7]. - The adjusted operating profit for Q1 2022 was $193 million, a decrease of 44% from $345 million in Q1 2021[8]. - The company reported a decline in net cash generated from operating activities to $171 million from $331 million in the previous year[28]. - The company’s net profit attributable to Yum China Holdings, Inc. was $100 million for the quarter ending March 31, 2022, compared to $230 million in the same quarter of 2021, a decline of about 56.5%[33]. - The adjusted EBITDA for the company was $365 million for the quarter ending March 31, 2022, down from $476 million in the same quarter of 2021, indicating a decrease of approximately 23.3%[33]. - The company’s basic earnings per share (EPS) was $0.23 for the quarter ending March 31, 2022, compared to $0.55 in the same quarter of 2021, a decline of about 58.2%[32]. Sales and Store Performance - System sales decreased by 4% year-over-year, with KFC and Pizza Hut declining by 4% and 1% respectively[7]. - Same-store sales fell by 8% year-over-year, with KFC and Pizza Hut down by 9% and 5% respectively[7]. - The company opened 329 new stores in Q1 2022, bringing the total number of stores to 12,117[7]. - The company opened 522 new stores in Q1 2022, resulting in a net increase of 329 stores, bringing the total to 12,117 stores as of March 31, 2022[13]. - The company plans to continue expanding its restaurant network and enhancing its product offerings in the upcoming quarters[40]. - As of March 31, 2022, the total number of self-operated restaurants increased to 7,668, up from 7,437 at the end of 2021, representing a growth of approximately 3.1%[36]. - KFC generated $1,991 million in revenue, while Pizza Hut contributed $542 million for the quarter ending March 31, 2022[39]. Operational Challenges - The company faced significant operational challenges due to the Omicron variant, with over 3,000 stores temporarily closed or offering only takeout in April 2022[4]. - The company experienced a significant increase in operational costs, particularly in food and packaging, due to inflationary pressures[40]. - The restaurant profit margin was 13.8%, down from 18.7% in the same period last year, primarily due to declining same-store sales[7]. - The restaurant profit margin for KFC was 15.2%, down from 19.9% in the previous year, reflecting a 4.7 percentage point decline[25]. - The restaurant profit margin was 10.7%, down from 15.3% year-over-year, reflecting a decrease of 4.6 percentage points[26]. Tax and Financial Metrics - The effective tax rate for Q1 2022 was 33.1%[7]. - The actual tax rate for the quarter was 33.1%, up from 29.6% in the same quarter of 2021, indicating an increase of 3.5 percentage points[32]. - The effective tax rate increased to 33.1%, compared to 29.6% in the previous year, reflecting a 3.5 percentage point increase[24]. Shareholder Returns - The company repurchased approximately 5 million shares for a total of $232 million at an average price of $46.57 per share in Q1 2022[10]. - The company has approximately $1.4 billion remaining in its stock repurchase authorization as of March 31, 2022[10]. Digital and Membership Performance - Digital orders accounted for approximately 88% of restaurant revenue in Q1 2022, up from 86% in the same period last year[11]. - As of the end of Q1 2022, KFC and Pizza Hut had a combined membership of over 370 million, with membership sales accounting for about 62% of system sales[11]. - Takeout revenue represented approximately 36% of restaurant income in Q1 2022, an increase of about 5 percentage points year-over-year[11]. Company Recognition and Rankings - The company was ranked 363rd on the 2021 Fortune 500 list and was included in the Bloomberg Gender-Equality Index for the fourth consecutive year in 2022[23].

Business Overview - Yum China reported a system sales of $9.9 billion for the year 2021, establishing itself as the largest restaurant company in China with over 11,700 restaurants as of December 31, 2021[9]. - KFC, as the leading fast-food brand in China, had over 8,100 restaurants across more than 1,600 cities by the end of 2021, significantly outpacing its closest competitor[9]. - Pizza Hut is the largest casual dining brand in China, with over 2,500 restaurants in more than 600 cities as of the end of 2021, approximately six times the number of its closest competitor[10]. - Approximately 85% of Yum China's restaurants are owned and operated by the company, with the remainder being franchised[9]. - The company has exclusive operating rights for KFC, Pizza Hut, and Taco Bell in mainland China, excluding Hong Kong, Macau, and Taiwan[9]. Expansion and Growth Strategy - The company plans to focus on expanding its business in existing and new cities, capitalizing on the significant growth potential within China[9]. - Yum China aims to enhance its digital and delivery capabilities, as well as invest in technology and quality assets to improve restaurant performance[6]. - The company aims to expand its restaurant network to 20,000 locations, currently tracking over 1,100 potential sites without KFC or Pizza Hut[14]. - The company is exploring various new restaurant models to support further expansion, particularly in lower-tier cities[16]. - The company plans to continue investing in digitalization and supply chain improvements as key growth drivers[13]. Digital and Technological Initiatives - As of December 31, 2021, KFC and Pizza Hut had over 330 million and approximately 110 million members respectively, with digital ordering accounting for 86% of restaurant revenue[19]. - The company is focusing on enhancing its digital infrastructure and delivery capabilities to drive sales growth and improve operational efficiency[19]. - The company has invested in digital technology to modernize operations, opening digital R&D centers in Shanghai, Nanjing, and Xi'an in 2021 to enhance internal digital capabilities[32]. - The company has integrated mobile ordering and payment features into its super apps, with approximately 1,600 KFC restaurants in China implementing facial recognition payment by December 31[33]. - The company has developed and launched a digital wallet in collaboration with UnionPay to provide convenient payment options within a single application[112]. Supply Chain and Logistics - The company emphasizes the importance of logistics and supply chain management in its operational strategy to ensure efficiency and quality[6]. - The company collaborates with over 800 independent suppliers, primarily located in China, and employs more than 1,400 staff in its integrated supply chain management system[28]. - In 2021, the company established three new logistics centers to strengthen its supply chain network, utilizing 32 logistics centers for distribution to self-operated restaurants and franchisees[29]. - The company has implemented a centralized procurement model, allowing it to maintain quality control and achieve better pricing and terms through bulk purchasing[29]. - The company is subject to various regulatory risks, including potential tax liabilities related to acquisitions and compliance with food safety laws[84]. Financial Performance and Market Position - The total sales revenue of China's food service market in 2021 was approximately $738 billion, with the company holding the largest market share based on system sales[40]. - The company recorded a loss of $38 million and a gain of $104 million from equity securities investments in 2021 and 2020, respectively[133]. - The company recognized a gain of $618 million from the remeasurement of previously held 47% equity in a joint venture after acquiring control in the fourth quarter of 2021[134]. - The company has not experienced any significant violations of the master franchise agreement, and it actively monitors compliance with its terms[93]. - The company has paid a cash dividend of $0.12 per share quarterly since Q4 2018[200]. Employee Development and Corporate Culture - The company has a "Bench Planning" career development program that allows most operational leadership talents to grow internally, with graduates potentially becoming restaurant managers within two years[48]. - The company funded continuing education programs, with 3,800 employees receiving subsidies for higher education degrees by the end of 2021[51]. - The company has established the China Nutrition Society - Yum China Health Fund in collaboration with the China Nutrition Society (CNS) to improve nutrition for children in impoverished areas[63]. - The company has been recognized as an outstanding employer in China for four consecutive years, ranking among the top 20 employers in the restaurant sector[55]. - The company encourages and rewards employees for getting vaccinated against COVID-19 to ensure health and safety[54]. Environmental and Social Responsibility - The company aims to achieve net-zero emissions across its entire value chain by 2050, in line with the Science Based Targets initiative[57]. - The company has set a goal to reduce food waste by 10% per restaurant by 2030 compared to 2020 levels, promoting food bank initiatives and expanding biodiesel conversion projects[60]. - The company aims to achieve a 30% reduction in non-biodegradable plastic packaging by 2025 compared to 2019 levels[59]. - The company has faced challenges in sourcing alternative packaging materials to meet environmental standards, which may increase operational costs[147]. - The company is committed to reducing the weight of non-degradable plastic packaging by 30% by 2025, in response to increasing public concern over environmental sustainability[147]. Risks and Challenges - The company faces significant risks related to food safety and foodborne illnesses, which could adversely affect its reputation and business operations[84]. - The company is exposed to labor shortages and rising labor costs, which may affect operational efficiency[80]. - The company’s financial performance may be adversely affected by fluctuations in raw material prices[80]. - The company faces significant risks related to currency exchange fluctuations, as most of its revenue and costs are denominated in RMB[145]. - The company anticipates continued operational impacts from COVID-19, including potential government actions such as lockdowns and travel restrictions[90]. Regulatory and Compliance Issues - The company must comply with various tax obligations, including value-added tax, customs duties, and local taxes, which could further complicate its financial situation[120]. - The company is subject to various regulations regarding foreign investment and mergers, which may complicate future acquisitions[172]. - The company faces potential penalties and legal repercussions due to non-compliance with foreign exchange regulations in China, which may restrict its ability to make payments and receive dividends[166]. - The company is subject to increased public scrutiny regarding data security and privacy, which may raise compliance costs and risks[109]. - The company must ensure compliance with the National Foreign Exchange Administration's guidelines to avoid financial penalties related to foreign currency transactions[170].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-37762 Yum China Holdings, Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware 81-2421743 (State or Other Jurisdiction of (I.R. ...

Good day, everyone. Thank you for standing by. Welcome to YUM China four quarter and fiscal year 2021 earnings conference call. At this time, all participants are in a listen only mode. After the speaker presentation, there'll be a question and answer session. To ask a question during the session, you need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any assistance during the call, please press star zero. I would now like to hand the confer ...

Financial Performance - Total revenue for the quarter ended June 30, 2021, was $2,451 million, a 29% increase from $1,902 million in the same quarter of 2020[4] - Net profit for the quarter was $193 million, compared to $136 million in the same quarter of 2020, representing a 42% increase[4] - The company restaurant revenue reached $2,233 million for the quarter, up 32% from $1,692 million in the same quarter of 2020[4] - The operating profit for the quarter was $233 million, compared to $128 million in the same quarter of 2020, marking an 82% increase[4] - Total comprehensive income for the quarter was $251 million, compared to $143 million in the same quarter of 2020, indicating a 75% increase[5] - The company reported a diluted earnings per share of $0.42 for the quarter, up from $0.34 in the same quarter of 2020, a 24% increase[4] - Net profit for the six months ended June 30, 2021, was $436 million, compared to $202 million for the same period in 2020, representing a 116% increase[6] - Cash generated from operating activities was $773 million, up from $452 million in the previous year, indicating a 71% increase[6] - Total revenue for the six months ending June 30, 2021, was $5,087 million, with KFC at $3,566 million and Pizza Hut at $1,079 million[22] - The company reported a net profit before tax of $257 million for the quarter ended June 30, 2021, compared to $181 million for the same quarter in 2020, representing a growth of approximately 42%[68] Revenue Sources - The company's revenue primarily consists of restaurant income, franchise fees, and transactions with franchisees and joint ventures[14] - Restaurant income is recognized when customers obtain food and make payment, with net amounts shown after deducting relevant sales tax[14] - Franchise fees include upfront fees and ongoing fees, with initial franchise fees recognized as income over the term of the franchise agreement, typically 10 years for KFC and Pizza Hut[16] - Revenue from transactions with franchisees includes sales of food and packaging, as well as advertising and other services provided to franchisees[17] - Total income from other segments was $106 million for the quarter ending June 30, 2021[20] Assets and Liabilities - Total assets as of June 30, 2021, amounted to $11,304 million, compared to $10,875 million at the end of 2020, reflecting a growth of 3.9%[7] - Total liabilities increased to $4,476 million from $4,404 million, marking a 1.6% increase[7] - Shareholders' equity rose to $6,575 million as of June 30, 2021, compared to $6,206 million at the end of 2020, representing a 5.9% increase[7] - The company reported a decrease in inventory from $398 million to $380 million, a decline of 4.5%[7] - The company’s long-term operating lease liabilities increased slightly from $1,915 million to $1,941 million, a rise of 1.4%[7] Market Expansion and Strategy - The company plans to continue expanding its market presence and investing in new product development to drive future growth[4] - The company believes there are significant expansion opportunities within China, focusing on both existing and new cities[76] - The company is exploring market expansion opportunities and new product development to enhance its competitive edge in the fast-food industry[71] - Yum China plans to open 500 new stores in 2024, expanding its market presence significantly[142] Shareholder Returns - The company declared a cash dividend of $0.12 per share for the quarter ended June 30, 2021, totaling $51 million[30] - The board has authorized a share repurchase program totaling $1.4 billion, with $692 million remaining available for future repurchases as of June 30, 2021[34] - The company has suspended share repurchases since the second quarter of 2020, with no shares repurchased in the six months ended June 30, 2021[34] Tax and Regulatory Issues - The company continues to face scrutiny from tax authorities regarding transfer pricing audits from 2006 to 2015, which may impact financial performance[63] - The company is undergoing a tax audit related to transfer pricing, which may have significant adverse effects on its financial condition and operating results[117] - The company anticipates potential significant developments in tax assessments within the next 12 months[63] Operational Performance - KFC and Pizza Hut generated total revenue of $2,505 million for the quarter ending June 30, 2021, with KFC contributing $1,734 million and Pizza Hut $538 million[20] - KFC's system sales growth for the quarter was 25%, with same-store sales growth of 14%[94] - Pizza Hut's total revenue for the quarter was $538 million, a 26% increase from $424 million in 2020[100] - The company reported a restaurant profit margin of 15.8% for Q2 2021, up from 13.7% in Q2 2020[84] Challenges and Risks - The company faces various risks that could significantly affect its future performance, including food safety issues and supply chain disruptions[130] - The company is exposed to commodity price risks affecting food costs, which are managed through pricing agreements with suppliers[134] - The company has limited ability to pass on increased costs due to competitive pressures in its operating environment[134] Investments and Acquisitions - The company completed the acquisition of a 5% stake in Shengnong for approximately $261 million, which is the largest poultry supplier in China[36] - The company is assessing the potential benefits of acquisitions and strategic investments, which may not be realized in a timely manner[130] - The company has a joint venture with Lavazza Group to explore and develop the Lavazza coffee shop brand concept in China[76] E-commerce and Technology - The company has begun its e-commerce business in 2017, allowing customers to purchase various products directly through its platform[8] - The company is investing $100 million in new technology for digital ordering and delivery systems[142] - The company is focusing on enhancing its e-commerce business, which presents its own set of challenges and risks[130]