Yum!(YUM) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights This section summarizes Yum! Brands' strong second-quarter 2025 performance, strategic announcements, and CEO commentary Second-Quarter Performance Overview 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][8] - Unit count increased 3% including 871 gross new units in the quarter[8] CEO Commentary 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] - KFC International opened 565 gross new units[3] - Chris Turner, current CFO and Chief Franchise Officer, will succeed David Gibbs as Chief Executive Officer, effective October 1, 2025[3][8] Recent Strategic Announcements 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] - 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 $5 billion in beverage sales by 2030[8] Divisional Performance This section details the second-quarter 2025 performance of Yum! Brands' key divisions: KFC, Taco Bell, Pizza Hut, and Habit Burger & Grill KFC Division The KFC Division reported a 5% increase in restaurants and 5% system sales growth (excluding F/X) for Q2 2025, with same-store sales growing 2%, while operating profit increased 9% (8% excluding F/X), with international markets showing strong growth and the U.S. market experiencing a decline KFC Division Second-Quarter 2025 Performance | Metric | 2025 | 2024 | % Change (Reported) | % Change (Ex F/X) | | :-------------------------- | :----- | :----- | :------------------ | :---------------- | | Restaurants | 32,369 | 30,689 | +5 | N/A | | System Sales ($MM) | 8,721 | 8,226 | +6 | +5 | | Same-Store Sales Growth (%) | +2 | (3) | NM | NM | | Operating Profit ($MM) | 365 | 334 | +9 | +8 | | Operating Margin (%) | 43.0 | 46.6 | (3.6) ppts | (3.3) ppts | KFC Division System Sales Growth Ex F/X by Region (Q2 2025) | Region | System Sales Growth Ex F/X (% Change) | | :-------------------------------- | :------------------------------------ | | International | +7 | | U.S. | (8) | | Asia | +10 | | Latin America | +10 | | Middle East / Turkey / North Africa | +10 | | Africa | +11 | - KFC Division opened 566 gross new restaurants across 58 countries[9] Taco Bell Division The Taco Bell Division demonstrated strong performance in Q2 2025, with a 2% increase in restaurants, 6% system sales growth (excluding F/X), and 4% same-store sales growth, while operating profit rose 5% (excluding F/X), with both U.S. and International markets contributing positively to system sales and same-store sales Taco Bell Division Second-Quarter 2025 Performance | Metric | 2025 | 2024 | % Change (Reported) | % Change (Ex F/X) | | :-------------------------- | :----- | :----- | :------------------ | :---------------- | | Restaurants | 8,756 | 8,565 | +2 | N/A | | System Sales ($MM) | 4,275 | 4,017 | +6 | +6 | | Same-Store Sales Growth (%) | +4 | +5 | NM | NM | | Operating Profit ($MM) | 262 | 250 | +5 | +5 | | Operating Margin (%) | 36.8 | 37.5 | (0.7) ppts | (0.7) ppts | - Taco Bell U.S. system sales grew 6% and Taco Bell International system sales excluding foreign currency translation, grew 11%[14] - Taco Bell U.S. and Taco Bell International same-store sales both grew 4%[14] Pizza Hut Division The Pizza Hut Division faced challenges in Q2 2025, reporting a 1% decline in system sales (excluding F/X) and same-store sales, with operating profit decreasing significantly by 15% (excluding F/X), impacted by technology spending timing, franchise transitions, and global convention expenses Pizza Hut Division Second-Quarter 2025 Performance | Metric | 2025 | 2024 | % Change (Reported) | % Change (Ex F/X) | | :-------------------------- | :----- | :----- | :------------------ | :---------------- | | Restaurants | 19,768 | 19,864 | Even | N/A | | System Sales ($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] 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 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] - Habit Burger & Grill Division system sales declined 1% with same-store sales declining 4%[18] Financial Statements 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) 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 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 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 This section provides reconciliations of non-GAAP financial measures to their GAAP equivalents and detailed segment-level financial results Non-GAAP Measurements and Reconciliations 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] - Special Items are not allocated to any segment and are excluded from segment performance assessment as they are not indicative of ongoing operations[46] - Company restaurant profit is used internally to evaluate the performance and profitability of company-owned restaurants[47] Core Operating Profit Reconciliation 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 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 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 ($MM) | | :---------------------------------- | :------------ | :------------ | :------------- | :------------- | | Company restaurant profit | 109 | 102 | 196 | 176 | | Company sales | 669 | 572 | 1,277 | 1,046 | | Company restaurant margin % | 16.3% | 17.8% | 15.3% | 16.8% | Divisional Company Restaurant Margin % (Q2 2025 vs 2024) | Division | Q2 2025 Margin % | Q2 2024 Margin % | | :-------------------- | :--------------- | :--------------- | | KFC Division | 12.1% | 11.9% | | Taco Bell Division | 24.3% | 25.6% | | Pizza Hut Division | (6.6)% | (2.2)% | | Habit Burger & Grill Division | 10.7% | 10.7% | Segment Results (Detailed) These tables provide a detailed breakdown of revenues and expenses for each of Yum! Brands' divisions (KFC, Taco Bell, Pizza Hut, Habit Burger & Grill) and Corporate and Unallocated, reconciling them to the consolidated summary of results, with the Corporate and Unallocated column including all Special Items Q2 2025 Total Revenues by Segment ($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][60] Notes to Financial Statements (Special Items) 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] - 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] - 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] - 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] - 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][66] Other Information 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 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] - 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 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] - The webcast and playback will be accessible via investors.yum.com/events-and-presentations[21] - Additional information, including quarter-end dates, restaurant count details, definitions of terms, and Restricted Group financial information, is available at investors.yum.com[21] Forward-Looking Statements & Company Profile 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][23] - 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] - 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