Cash Flow and Capital Management - Net cash provided by operating activities decreased to $1,419 million in 2024 from $1,473 million in 2023, primarily due to working capital changes[440]. - Net cash used in investing activities significantly decreased to $178 million in 2024 from $743 million in 2023, mainly due to changes in short-term investments and long-term deposits[440]. - Net cash used in financing activities increased to $1,636 million in 2024 from $716 million in 2023, driven by increased share repurchases and repayment of short-term borrowings[441]. - The company repurchased 31.3 million shares for $1,242 million in 2024, compared to 12.4 million shares for $617 million in 2023[446]. - Total cash dividends paid increased to $248 million in 2024 from $216 million in 2023, with a quarterly dividend of $0.16 per share in 2024[447]. - The company plans to increase capital returns to shareholders from $3 billion to $4.5 billion between 2024 and 2026, representing a 50% increase[448]. - Fiscal year 2025 capital expenditures are expected to be in the range of approximately $700 million to $800 million[443]. - As of December 31, 2024, the company had unused credit facilities of approximately $1,041 million[451]. - Material cash requirements as of December 31, 2024, totaled $3,172 million, with significant obligations related to operating leases and finance leases[452]. - The company has entered into share repurchase agreements for approximately $360 million for the first half of 2025[448]. Intangible Assets and Impairment - The company evaluated indefinite-lived intangible assets, with a book value of $123 million and $127 million as of December 31, 2024 and 2023, respectively, related to the Little Sheep and Huang Ji Huang trademarks, concluding no impairment charges were necessary for 2024 and 2023[466][467]. - Goodwill amounted to $1,880 million as of December 31, 2024, associated with KFC, Pizza Hut, Huang Ji Huang, and Lavazza reporting units, with no impairment charges recorded for 2024 and 2023[472]. - The company performed qualitative impairment assessments for its trademarks and concluded that it was more likely than not that the assets were not impaired, resulting in no impairment charges recorded[467]. - The company continues to evaluate its long-lived assets for impairment semi-annually, based on forecasted undiscounted cash flows and market participant assumptions[463][464]. - The discount rate used in fair value calculations for goodwill and intangible assets reflects the required rate-of-return expected by a third-party buyer, which is influenced by the risks and uncertainties of forecasted cash flows[470][471]. - The company’s estimates of future cash flows for impairment assessments are highly subjective and can be significantly impacted by changes in business or economic conditions[471]. Tax and Regulatory Matters - The company had $19 million and $20 million of unrecognized tax benefits as of December 31, 2024 and 2023, respectively, related to uncertainties in the deductibility of certain business expenses[478]. - The total temporary difference for which the company has not provided foreign withholding taxes is approximately $3 billion as of December 31, 2024, with a foreign withholding tax rate of 5% or 10% depending on the repatriation method[480]. - The company has been under a national audit on transfer pricing by the STA in China since 2016, which may lead to significant developments in the next 12 months[479]. Share-Based Compensation - The fair value of share-based compensation is estimated using models that require subjective assumptions, which can materially affect the fair value estimate and, consequently, the company's operating profit and net income[474][477].

Group 1 - The article provides an update on Yum China Holdings (NYSE: YUMC) following a previous buy recommendation due to a robust growth outlook [1] - The author emphasizes a fundamentals-based approach to value investing, focusing on companies with long-term durability and strong balance sheets [1] - There is a common misconception that low multiple stocks are necessarily cheap, but the author argues that price matters less when the growth potential is significant [1] Group 2 - The article does not contain any disclosures related to stock positions or business relationships with the companies mentioned [2] - It is noted that past performance does not guarantee future results, and no specific investment advice is provided [3]

Core Insights - Yum China Holdings, Inc. (YUMC) reported fourth-quarter 2024 results with earnings exceeding expectations but revenues falling short, showing year-over-year growth in both metrics [1][3]. Financial Performance - Adjusted earnings per share (EPS) for Q4 were 30 cents, beating the Zacks Consensus Estimate of 29 cents by 3.5%, and reflecting a 20% increase year-over-year [3]. - Total revenues reached $2,595 million, missing the consensus estimate of $2,638 million, but still showing a 4% year-over-year increase [3]. - Total costs and expenses were $2.44 billion, slightly below the expected $2.51 billion, while the restaurant margin improved to 12.3%, up 160 basis points year-over-year [5]. - Adjusted net income was $115 million, compared to $103 million in the prior-year quarter, aligning closely with the estimate of $114.1 million [6]. Operational Highlights - Total system sales, excluding foreign currency translation, increased by 4% year-over-year, driven by a net new unit contribution of 5% [4]. - Same-store sales reached 99% of the previous year's level, with same-store transactions growing by 4% year-over-year [4]. - Yum China opened 534 net new stores in Q4, bringing the total restaurant count to 16,395 [9]. Shareholder Returns - The company announced a 50% increase in its cash dividend to 24 cents per share, scheduled for payment on March 27, 2025 [8]. - Yum China aims to return $4.5 billion to shareholders between 2024 and 2026, having delivered a record $1.5 billion in returns in 2024 [7]. Future Outlook - Yum China expects to open between 1,600 and 1,800 net new stores in 2025, with capital expenditures projected to be between $700 million and $800 million [11]. - The company anticipates a steady increase in the proportion of net new franchised stores, targeting 40-50% for KFC and 20-30% for Pizza Hut in the coming years [10].

Fourth Quarter and Fiscal Year 2024 Results 6 February 2025 NYSE: YUMC and HKEX: 9987 Cautionary Statement This presentation contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the fact that they do not rel ...

Financial Data and Key Metrics Changes - In Q4 2024, system sales grew 4% year over year, with same-store sales index improving to 99% of prior year levels [7][27] - Core operating profit increased by 35%, with diluted EPS growing by 22% [8][33] - For the full year, system sales grew 5%, and net income reached $911 million, up 13% year over year [35][36] Business Line Data and Key Metrics Changes - KFC system sales increased by 6% in 2024, with a same-store sales index reaching 99% of prior year levels [14][27] - Pizza Hut achieved a 5% growth in same-store transactions and opened a record 412 net new stores [19][20] - The retail segment saw over 30% sales growth and became profitable in 2024 [24] Market Data and Key Metrics Changes - KFC expanded its delivery sales by 16%, continuing a decade-long double-digit growth trend [10] - Pizza Hut's ticket average was 10% lower year over year, aligning with its strategy to become more mass-market [29] - The company opened a record 1,751 net new stores in 2024, ending the year with 16,395 stores [8][35] Company Strategy and Development Direction - The company aims to reach 20,000 stores by 2026, with plans to open 1,600 to 1,800 net new stores in 2025 [40] - Focus on operational efficiency and innovation, with initiatives like Project Fresh Eye and Red Eye enhancing business capabilities [46][48] - The company is committed to maintaining healthy restaurant margins for KFC and improving Pizza Hut's margins in the mid to long run [41][100] Management's Comments on Operating Environment and Future Outlook - Management noted a dynamic external environment but expressed confidence in maintaining positive same-store transaction growth [42][43] - The company anticipates wage inflation in 2025 but aims to offset this through operational efficiency [40][102] - Management highlighted the importance of innovation and operational efficiency in driving long-term sustainable growth [53][54] Other Important Information - The company plans to return $4.5 billion to shareholders from 2024 through 2026, with a 50% increase in quarterly dividends [36][38] - The company generated $714 million in free cash flow in 2024 and ended the year with $2.8 billion in net cash [37] Q&A Session Summary Question: Insights on the competitive landscape and market share opportunities - Management observed rationalization in marketing promotions and modest price increases, indicating a healthier competitive landscape [60][61] - There are still significant opportunities for market share expansion, particularly in lower-tier cities [67] Question: Implications of new store expansion strategy - The company is aggressively pursuing new store openings in both top-tier and lower-tier cities, with a focus on achieving a two-year payback period [75][76] - Franchise stores are being accelerated to capture incremental opportunities in strategic locations [80] Question: Timing for same-store sales and margin improvements - Management indicated that the same-store sales growth strategy is working, with a focus on maintaining stable ticket averages while driving traffic [92] Question: Future margin improvement trends - The company expects core OP margin to remain stable or slightly improve year over year, with ongoing efforts to optimize costs [99][132] Question: Store economics of the Pizza Hut Wow model - The Pizza Hut Wow model is still maturing, with early signs of significant outperformance in dine-in sales, but margins are still being optimized [115][116] Question: Labor cost dynamics and delivery sales - While delivery sales are increasing, the company is implementing efficiency measures to manage labor costs effectively [130][131] Question: Pricing strategy and its impact on same-store sales - Management plans to continue driving down the ticket average for Pizza Hut while maintaining margin neutrality through innovation [140][141]

Core Insights - Yum China Holdings reported $2.6 billion in revenue for Q4 2024, a year-over-year increase of 4.1% and an EPS of $0.30 compared to $0.25 a year ago, with a slight revenue miss against the Zacks Consensus Estimate of $2.64 billion [1] - The company delivered an EPS surprise of +3.45%, exceeding the consensus EPS estimate of $0.29 [1] Financial Performance Metrics - Total number of restaurants reached 16,395, surpassing the average estimate of 16,354 [4] - Company sales revenue was $2.43 billion, below the average estimate of $2.47 billion, reflecting a year-over-year change of +3.9% [4] - Revenues from transactions with franchisees amounted to $101 million, slightly below the average estimate of $103.57 million, with a year-over-year increase of +12.2% [4] - Franchise fees and income were reported at $22 million, compared to the average estimate of $23.47 million, showing a year-over-year change of +10% [4] Segment Performance - Pizza Hut generated revenues of $510 million, below the average estimate of $519.81 million, with a year-over-year change of +2.8% [4] - KFC reported revenues of $1.95 billion, compared to the average estimate of $1.98 billion, reflecting a year-over-year increase of +4.4% [4] - Other revenues from Pizza Hut were $7 million, exceeding the average estimate of $5.99 million, but showing a year-over-year decline of -12.5% [4] Stock Performance - Yum China's shares returned +4.5% over the past month, outperforming the Zacks S&P 500 composite's +2.1% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Earnings Performance - Yum China Holdings reported quarterly earnings of $0.30 per share, exceeding the Zacks Consensus Estimate of $0.29 per share, and up from $0.25 per share a year ago, representing an earnings surprise of 3.45% [1] - Over the last four quarters, the company has surpassed consensus EPS estimates four times [2] - The company posted revenues of $2.6 billion for the quarter ended December 2024, missing the Zacks Consensus Estimate by 1.64%, compared to year-ago revenues of $2.49 billion [2] Stock Performance and Outlook - Yum China shares have declined approximately 5.5% since the beginning of the year, while the S&P 500 has gained 3.1% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] Estimate Revisions and Industry Context - The estimate revisions trend for Yum China is currently mixed, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] - The current consensus EPS estimate for the upcoming quarter is $0.79 on revenues of $3.11 billion, and $2.55 on revenues of $12.13 billion for the current fiscal year [7] - The Retail - Restaurants industry, to which Yum China belongs, is currently in the top 21% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

Financial Performance - Fourth quarter operating profit grew 36% YoY to $151 million, with an operating profit margin of 5.8%, an increase of 140 basis points YoY[5][7] - Total revenues for the fourth quarter increased 4% YoY to $2.6 billion, a record high for the quarter[5][6] - For the full year, operating profit rose 5% YoY to $1.2 billion, with a core operating profit increase of 12% YoY[5][6] - Net income for Yum China Holdings, Inc. was $115 million for the quarter, up 18% from $97 million in the same quarter last year[31] - Net income for the year ended December 31, 2024, was $980 million, up from $901 million in 2023, representing an increase of 9%[41] - Total revenues for the year ended December 31, 2024, were $11,303 million, a 2.9% increase from $10,978 million in 2023[56] - Operating profit for 2024 was $1,162 million, a slight decrease from $1,106 million in 2023, reflecting a decline of 5.1%[64] Sales and Revenue Growth - Same-store sales reached 99% of the prior year's level, marking the eighth consecutive quarter of same-store transaction growth[5][6] - Digital sales reached $9.6 billion, accounting for approximately 90% of total company sales[5][6] - Company sales for Q4 2024 reached $2,434 million, an increase from $2,343 million in Q4 2023, representing a growth of 3.9%[61] - Company sales for the year ended 12/31/2024 reached $10,651 million, an increase from $10,391 million in 2023, representing a growth of 2.5%[63] Store Expansion and Operations - The company opened 534 net new stores in the fourth quarter, bringing the total store count to 16,395 as of December 31, 2024[5][6] - The company plans to open approximately 1,600 to 1,800 net new stores and allocate capital expenditures of $700 million to $800 million for the 2025 fiscal year[21] - Yum China operates over 16,000 restaurants across more than 2,200 cities in China, making it the largest restaurant company in the country[27] Franchise and Membership - Total membership for KFC and Pizza Hut exceeded 525 million, up 11% YoY, with member sales accounting for approximately 65% of system sales[5][6] - Franchise fees and income for the quarter increased by 8% to $22 million compared to $20 million in the same quarter last year[31] - Revenues from transactions with franchisees rose by 14% to $101 million for the quarter, up from $90 million in the previous year[31] - Franchise fees and income increased by 10% to $2 million in the quarter compared to $1 million in the same quarter last year[37] - Franchise fees and income for 2024 totaled $94 million, up from $89 million in 2023, marking a growth of 5.6%[64] Profitability and Margins - The operating profit margin was 2.6%, reflecting an increase of 160 basis points YoY[21] - The restaurant margin for KFC in 2024 was 16.9%, while Pizza Hut reported a margin of 12.0%, leading to an overall restaurant margin of 15.7%[63] - The company achieved a restaurant margin of 12.0%, with an expansion of 60 basis points YoY due to operational efficiency and favorable commodity prices[21] Shareholder Returns - The company plans to return a total of $4.5 billion to shareholders between 2024 and 2026, including a 50% increase in cash dividends[10][12] - Yum China aims to return $3 billion to shareholders from 2025 through 2026, in addition to the $1.5 billion returned in 2024[21] - The company repurchased $1,249 million worth of common stock during the year, compared to $613 million in the previous year[41] Tax and Expenses - The effective tax rate for the quarter was 27.6%, an increase of 3.4 percentage points from 24.2% in the previous year[31] - Total costs and expenses for the quarter were $2,444 million, a 3% increase from $2,383 million in the prior year[31] - General and administrative expenses for 2024 were $568 million, a decrease from $638 million in 2023, reflecting a reduction of 10.9%[64] - The total costs and expenses for 2024 were $10,141 million, up from $9,872 million in 2023, representing an increase of 2.7%[64] Operational Highlights - KFC's system sales grew 5% YoY, with delivery sales contributing approximately 42% of KFC's company sales[16] - Pizza Hut's operating profit increased 156% YoY in the fourth quarter, reaching $14 million[15] - Pizza Hut's system sales grew 3% YoY, with same-store sales reaching 98% of the prior year's level, an improvement from 94% in Q3[21] - Delivery sales for Pizza Hut increased by 6% YoY, contributing approximately 42% of the company's total sales[21] - The company reported a restaurant profit of $301 million for Q4 2024, compared to $253 million in Q4 2023, which is an increase of 19%[62]

Core Insights - Yum China reported a strong fourth quarter with a 36% increase in operating profit and a 140 basis point expansion in operating profit margin [1][6] - The company achieved record results for 2024, with total revenues reaching $11 billion and a net addition of 1,751 stores [1][8] - The CEO highlighted the effectiveness of operational efficiency and innovation strategies, contributing to sustained growth in sales and profitability [6][8] Fourth Quarter Highlights - Total revenues for the fourth quarter increased by 4% year-over-year to $2.6 billion, marking a record high for the quarter [8] - Same-store sales improved to 99% of the prior year's level, with same-store transactions growing by 4% [8][9] - Operating profit for the fourth quarter was $151 million, a 36% increase year-over-year, with an operating profit margin of 5.8% [8][9] Full Year Highlights - For the full year, operating profit rose by 5% to $1.2 billion, with core operating profit increasing by 12% [1][8] - Diluted earnings per share (EPS) increased by 18% to $2.33, a record high for the year [8][9] - The company returned $1.5 billion to shareholders in 2024 through dividends and share repurchases, representing approximately 8% of outstanding shares [11][12] KFC Performance - KFC system sales grew by 5% year-over-year, with same-store sales reaching 99% of the prior year's level [16][23] - The brand opened a record 1,352 net new stores in 2024, with a total store count of 11,648 [16][23] - Operating profit for KFC increased by 15% year-over-year, with an operating profit margin of 9.9% [16][23] Pizza Hut Performance - Pizza Hut system sales grew by 3% year-over-year, with same-store sales reaching 98% of the prior year's level [23][32] - The brand opened a record 412 net new stores in 2024, bringing the total store count to 3,724 [23][32] - Operating profit for Pizza Hut grew by 156% year-over-year, with an operating profit margin of 2.6% [23][32] Future Outlook - The company plans to return a total of $3 billion to shareholders from 2025 through 2026, in addition to the $1.5 billion returned in 2024 [12][23] - Yum China aims to achieve a store count of 20,000 by 2026, with a focus on expanding through both company-owned and franchise stores [6][12] - The company anticipates an increase in the franchise mix of net new stores over the next few years [23][32]

Core Viewpoint - Yum China Holdings (YUMC) is expected to report quarterly earnings of $0.30 per share, reflecting a year-over-year increase of 20%, with anticipated revenues of $2.67 billion, a 7% increase compared to the previous year [1]. Earnings Estimates - The consensus EPS estimate has been revised 3.5% lower over the last 30 days, indicating a reevaluation by analysts [2]. - Revisions to earnings estimates are crucial for predicting investor actions, as empirical research shows a strong correlation between these trends and short-term stock performance [3]. Revenue Projections - Analysts estimate 'Revenues- Other revenues' to reach $39.76 million, a year-over-year change of -0.6% [5]. - 'Revenues- Company sales' are projected at $2.49 billion, indicating a +6.1% change from the prior-year quarter [5]. - 'Revenues- Revenues from transactions with franchisees' are expected to be $104.22 million, reflecting a +15.8% change from the year-ago quarter [5]. - 'Revenues- Franchise fees and income' are forecasted to reach $24.57 million, a +22.9% year-over-year change [6]. - 'Revenues- Pizza Hut' are expected to be $525.27 million, indicating a +5.9% change from the prior-year quarter [6]. Same-store Sales Estimates - The consensus estimate for 'Same-store sales, excluding F/X - KFC' is -0.3%, down from 3% in the same quarter last year [7]. - 'Same-store sales, excluding F/X - Pizza Hut' are projected at -1.8%, compared to 6% in the previous year [7]. - The overall estimate for 'Same-store sales, excluding F/X - Total' is -0.6%, down from 4% year-over-year [7]. Restaurant Count Projections - Analysts forecast 'No of Restaurants - Pizza Hut' to reach 3,724, up from 3,312 in the previous year [8]. - 'No of Restaurants - Others' is estimated at 990, down from 1,036 year-over-year [8]. - 'No of Restaurants - KFC' is projected to be 11,645, compared to 10,296 in the same quarter last year [8]. Market Performance - Over the past month, Yum China shares have recorded returns of +0.1%, while the Zacks S&P 500 composite has changed by +1% [8]. - Based on its Zacks Rank 3 (Hold), Yum China is expected to perform in line with the overall market in the upcoming period [9].