Yum!(YUM) - 2024 Q4 - Annual Results

Yum! Brands Fourth-Quarter and Full-Year 2024 Results Overall Performance Summary Yum! Brands reported a 6% increase in full-year 2024 EPS excluding special items, reaching $5.48, with 8% core operating profit growth driven by Taco Bell's 5% same-store sales growth and KFC International's 8% unit growth Q4 & Full-Year 2024 Earnings Per Share (EPS) | Metric | Q4 2024 | Q4 2023 | % Change | Full-Year 2024 | Full-Year 2023 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | GAAP EPS | $1.49 | $1.62 | (8)% | $5.22 | $5.59 | (7)% | | EPS Excluding Special Items | $1.61 | $1.26 | +28% | $5.48 | $5.17 | +6% | - Full-year core operating profit grew 8% excluding the impact of the 53rd week, meeting the company's long-term growth algorithm[2][9] - Digital sales increased by approximately 15% in 2024, with the digital sales mix surpassing 50% of total sales[3] - The company opened 4,535 new stores across more than 100 countries during 2024[3] Management Commentary CEO David Gibbs highlighted the company's resilient business model, citing Taco Bell U.S.'s 5% same-store sales growth and KFC International's second consecutive year of over 2,000 net new units as key strengths - CEO David Gibbs emphasized the strength of the company's twin growth engines: Taco Bell U.S. same-store sales growth and KFC International unit development[3] - CFO Chris Turner announced "Byte by Yum!", a proprietary SaaS digital ecosystem, and noted that digital sales mix surpassed 50% in 2024[3] Strategic Initiatives and Announcements The company officially announced "Byte by Yum!", a proprietary AI-driven SaaS platform designed to integrate and streamline restaurant technologies, with 25,000 restaurants already using at least one of its products - Launched Byte by Yum!, a comprehensive, proprietary AI-driven SaaS platform integrating mobile ordering, POS, kitchen/delivery optimization, and management tools. 25,000 restaurants are currently using at least one product from the suite[7] - Promoted Scott Mezvinsky to KFC Division CEO, effective March 1, 2025[7] - Opened first test locations of new concepts: Saucy by KFC (chicken tenders with 11 sauces), Taco Bell Live Más Cafe (beverage concept), and a new Pizza Hut design with self-service kiosks and a drive-thru[7] Divisional Performance Analysis KFC Division For the full year 2024, the KFC Division saw system sales grow 3% (ex-F/X) and unit count increase by 7%, opening 2,892 gross new restaurants, despite a 2% same-store sales decline KFC Division Performance vs. Prior Year | Metric | Q4 2024 | Full-Year 2024 | | :--- | :--- | :--- | | System Sales Growth (Ex-F/X) | +6% | +3% | | Same-Store Sales Growth | Even | (2)% | | Unit Growth | +7% | +7% | | Core Operating Profit Growth | +15% | +6% | - Opened 1,100 gross new restaurants in Q4 and 2,892 for the full year across 97 countries[12][13] Full-Year 2024 System Sales Growth (Ex-F/X) by Market | Market | % of System Sales | FY 2024 Growth | | :--- | :--- | :--- | | China | 27% | +6% | | United States | 14% | (5)% | | Europe (ex-UK) | 12% | +8% | | Latin America | 8% | +15% | | Africa | 5% | +11% | Taco Bell Division The Taco Bell Division was a standout performer in 2024, delivering 8% system sales growth (ex-F/X) and 4% same-store sales growth for the full year, with core operating profit growing by 11% Taco Bell Division Performance vs. Prior Year | Metric | Q4 2024 | Full-Year 2024 | | :--- | :--- | :--- | | System Sales Growth (Ex-F/X) | +14% | +8% | | Same-Store Sales Growth | +5% | +4% | | Unit Growth | +2% | +2% | | Core Operating Profit Growth | +19% | +11% | - For the full year, Taco Bell U.S. same-store sales grew 4%, while International same-store sales were flat[18] - The 53rd week in 2024 provided a significant benefit in Q4, adding 6 percentage points to system sales growth and 7 percentage points to core operating profit growth[18] - Full-year company-owned restaurant margins increased by 70 basis points to 24.4%[18] Pizza Hut Division The Pizza Hut Division faced challenges in 2024, with a full-year system sales decline of 1% (ex-F/X) and a same-store sales decline of 4%, resulting in a 3% fall in core operating profit Pizza Hut Division Performance vs. Prior Year | Metric | Q4 2024 | Full-Year 2024 | | :--- | :--- | :--- | | System Sales Growth (Ex-F/X) | +3% | (1)% | | Same-Store Sales Growth | (1)% | (4)% | | Unit Growth | +2% | +2% | | Core Operating Profit Growth | (3)% | (3)% | - For the full year, U.S. same-store sales declined 3% and International same-store sales declined 5%[18] Full-Year 2024 System Sales Growth (Ex-F/X) by Market | Market | % of System Sales | FY 2024 Growth | | :--- | :--- | :--- | | United States | 42% | Even | | China | 18% | +3% | | Asia | 13% | (3)% | | Europe | 11% | (6)% | | Canada | 3% | +6% | The Habit Burger Grill Division The Habit Burger Grill Division reported a 2% system sales growth for the full year 2024, though same-store sales declined by 4%, with 16 new restaurants opened during the year Habit Burger Grill Performance - Full-Year 2024 | Metric | % Change | | :--- | :--- | | System Sales Growth | +2% | | Same-Store Sales Growth | (4)% | - The division opened 6 gross new restaurants in Q4 and 16 for the full year[23] Other Items and Long-Term Outlook The company announced a 6% increase in its quarterly dividend to $0.71 per share and reaffirmed its long-term growth algorithm targeting 5% unit growth, 7% system sales growth, and at least 8% core operating profit growth annually - The Board of Directors approved a 6% dividend increase to $0.71 per share, payable March 7, 2025[23] - Terminated franchise agreements with IS Gida A.S. in Turkey, affecting 284 KFC and 254 Pizza Hut restaurants, and is seeking a new partner[23] Long-Term Growth Algorithm | Metric | Target | | :--- | :--- | | Unit Growth | 5% | | System Sales Growth (ex-F/X, 53rd week) | 7% | | Core Operating Profit Growth (ex-F/X, 53rd week) | At least 8% | Consolidated Financial Statements Consolidated Summary of Results (Income Statement) For the full year ended December 31, 2024, Yum! Brands' total revenues increased by 7% to $7.55 billion, while GAAP net income decreased by 7% to $1.49 billion due to a higher income tax provision Full-Year 2024 Consolidated Income Statement Highlights (in millions, except EPS) | Metric | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $7,549 | $7,076 | +7% | | Operating Profit | $2,403 | $2,318 | +4% | | Net Income | $1,486 | $1,597 | (7)% | | Diluted EPS | $5.22 | $5.59 | (7)% | Consolidated Balance Sheets As of December 31, 2024, Yum! Brands reported total assets of $6.73 billion, an increase from $6.23 billion at year-end 2023, while total liabilities also increased to $14.38 billion Year-End Balance Sheet Highlights (in millions) | Metric | 12/31/2024 | 12/31/2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $616 | $512 | | Total Assets | $6,727 | $6,231 | | Long-term debt | $11,306 | $11,142 | | Total Liabilities | $14,375 | $14,089 | | Total Shareholders' Deficit | $(7,648) | $(7,858) | Consolidated Statements of Cash Flows For the full year 2024, net cash provided by operating activities was $1.69 billion, up from $1.60 billion in 2023, with $422 million used in investing activities and $1.16 billion in financing activities Full-Year 2024 Cash Flow Summary (in millions) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $1,689 | $1,603 | | Net Cash Used in Investing Activities | $(422) | $(107) | | Net Cash Used in Financing Activities | $(1,163) | $(1,429) | | Net Increase in Cash | $83 | $77 | - Key uses of cash in financing activities included $752 million for dividends and $441 million for share repurchases[51] Reconciliation of Non-GAAP Financial Measures Explanation of Non-GAAP Measures and Special Items This section provides reconciliations for non-GAAP measures like Core Operating Profit and EPS excluding Special Items, which are used internally to evaluate performance by excluding distorting factors such as foreign currency fluctuations and specific charges - The company provides non-GAAP measures like Core Operating Profit and EPS excluding Special Items to facilitate comparison of past and present operations by removing distorting factors[54] - Core Operating Profit is a key internal performance metric that excludes Special Items and the impact of foreign currency (F/X) translation[59] - Key Special Items in Q4 2024 included $61 million in German acquisition and Turkey termination-related costs and $21 million in charges for a resource optimization program[59][75] Reconciliation of Operating Profit and EPS For the full year 2024, GAAP Operating Profit was $2.40 billion, which, after adjusting for $141 million in Special Items expenses and a $28 million negative foreign currency impact, resulted in a Core Operating Profit of $2.57 billion Full-Year 2024 Reconciliation of GAAP to Core Operating Profit (in millions) | Metric | Amount | | :--- | :--- | | GAAP Operating Profit | $2,403 | | Special Items Expense | $141 | | Negative Foreign Currency Impact | $28 | | Core Operating Profit | $2,572 | Full-Year 2024 Reconciliation of GAAP to Non-GAAP Diluted EPS | Metric | Amount | | :--- | :--- | | Diluted EPS (GAAP) | $5.22 | | Less: Special Items Diluted EPS | $(0.26) | | Diluted EPS excluding Special Items | $5.48 |