Yum! Brands, Inc. (NYSE: YUM) today reported results for the fourth-quarter and year ended December 31, 2021. Fourth-quarter GAAP EPS was $1.11, an increase of 3%. Full-year GAAP EPS was $5.21, an increase of 77%. Fourth-quarter EPS excluding Special Items was $1.02, a decrease of (12)%. Full-year EPS excluding Special Items was $4.46, an increase of 23%.

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DAVID GIBBS & CHRIS TURNER COMMENTS

David Gibbs, CEO, said “We opened an astounding 4,180 gross units in 2021, marking the strongest growth year in Yum!'s history and setting a restaurant industry record for unit development. We also reached new heights in digital sales that topped $22 billion. I’m confident and energized heading into 2022, which marks Yum!’s 25th anniversary, as we continue to build the world’s most loved and trusted brands while delivering lasting value for our stakeholders.”

Chris Turner, CFO, said “Our fiscal 2021 system sales growth of 13%, with 10% same store sales and 6% unit growth, illustrates the health of our global system – iconic Brands, capable, committed, and well-capitalized franchise partners and strong unit economics. During the quarter, system sales grew 9% including 5% same store sales growth, or 4% on a 2-year basis. We remain focused on fueling growth, with confidence in our Recipe for Growth and Good strategies, and delivering on our long-term growth algorithm in fiscal 2022 and beyond.”

SUMMARY FINANCIAL TABLE

FOURTH-QUARTER HIGHLIGHTS

• Worldwide system sales grew 9% excluding foreign currency translation, with KFC at 10%, Taco Bell at 11%, and Pizza Hut at 4%.
• We added 1,678 gross units during the fourth quarter.
• We repurchased 5.6 million shares totaling $720 million at an average price per share of $128.
• Foreign currency translation unfavorably impacted divisional operating profit by $1 million.

FULL-YEAR HIGHLIGHTS

• Worldwide system sales grew 13% excluding foreign currency translation, with KFC at 16%, Taco Bell at 13%, and Pizza Hut at 6%.
• We added a record 4,180 gross units during the year contributing to 6% unit growth.
• We repurchased 13 million shares totaling $1.6 billion at an average price per share of $122.
• Foreign currency translation favorably impacted divisional operating profit by $54 million.

KFC DIVISION

• KFC Division opened 904 gross new restaurants during the quarter.
  • For the year, KFC Division opened 2,471 gross new restaurants in 105 countries.
• Operating margin was flat for the quarter as higher general and administrative expenses and higher company restaurant expenses were offset by system sales growth.
  • For the year, operating margin increased 3.5 percentage points driven by system sales growth and bad debt recoveries, partially offset by higher general and administrative expenses.
• Foreign currency translation unfavorably impacted operating profit by $1 million for the quarter and favorably impacted operating profit by $45 million for the year.
• For the division, same-store sales on a 2-year basis grew 3% for the quarter and 2% for the year.
  • For KFC International, same-store sales on a 2-year basis grew 2% for the quarter and declined 1% for the year.
  • For KFC U.S., same-store sales on a 2-year basis grew 12% for the quarter and 13% for the year.

TACO BELL DIVISION

• Taco Bell Division opened 195 gross new restaurants during the quarter.
  • For the year, Taco Bell Division opened 433 gross new restaurants in 27 countries.
• Company restaurant margin percentages were 22.6% for the quarter and 23.9% for the year.
• Operating margin decreased 4.9 percentage points for the quarter and less than 1 percentage point for the year driven by higher company restaurant expenses and higher general and administrative expenses, partially offset by system sales growth.
• For the division, same-store sales on a 2-year basis grew 9% for the quarter and 10% for the year.
• Spain became the first Taco Bell International market to surpass 100 units.

PIZZA HUT DIVISION

• Pizza Hut Division opened 571 gross new restaurants during the quarter.
  • For the year, Pizza Hut Division opened 1,250 gross new restaurants in 66 countries.
• Operating margin increased less than 1 percentage point for the quarter primarily driven by system sales growth, partially offset by higher Franchise advertising and other services expense primarily related to digital and technology expenses.
  • For the year, operating margin increased 4 percentage points driven by system sales growth and lower general and administrative expenses, partially offset by higher Franchise advertising and other services expense primarily related to digital and technology expenses.
• Foreign currency translation had less than $1 million unfavorable impact on operating profit for the quarter and favorably impacted operating profit $8 million for the year.
• For the division, same-store sales on a 2-year basis grew 2% for the quarter and 1% for the year.
  • For Pizza Hut International, same-store sales on a 2-year basis declined 3% for the quarter and declined 5% for the year.
  • For Pizza Hut U.S., same-store sales on a 2-year basis grew 10% for the quarter and 9% for the year.

THE HABIT BURGER GRILL DIVISION

• The Habit Burger Grill Division grew system sales 20% for the quarter and 24% for the year.
• The Habit Burger Grill Division same-store sales increased 11% for the quarter and 16% for the year.
  • For the division, same-store sales on a 2-year basis grew 5% for the quarter and 3% for the year.
• The Habit Burger Grill Division opened 8 gross new restaurants during the quarter.
  • For the year, The Habit Burger Grill Division opened 26 gross new restaurants.

OTHER ITEMS

• Same-store sales growth on a 2-year basis is calculated using the geometric method as follows: (1 + Q4 2020 reported same-store sales growth) * (1 + Q4 2021 reported same-store sales growth) - 1 and (1 + FY 2020 reported same-store sales growth) * (1 + FY 2021 reported same-store sales growth) - 1.
• Disclosures pertaining to outstanding debt in our Restricted Group capital structure will be provided at the time of the filing of the 2021 Form 10-K.

CONFERENCE CALL

Yum! Brands, Inc. will host a conference call to review the company's financial performance and strategies at 8:15 a.m. Eastern Time Wednesday, February 9, 2022. The number is 877/871-3172 in the U.S., 1-877-504-2267 in Canada and 1-412-902-6603 for international callers, conference ID 2088582.

The call will be available for playback beginning at 10:00 a.m. Eastern Time February 9, 2022 through February 16, 2022. To access the playback, dial 877/344-7529 in the U.S., 855/669-9658 in Canada, and 412/317-0088 internationally, conference ID 2558485.

The webcast and the playback can be accessed via the website by visiting Yum! Brands' website, investors.yum.com/events-and-presentations and selecting “Q4 2021 Earnings Conference Call.”

ADDITIONAL INFORMATION ONLINE

Quarter end dates for each division, restaurant count details, definitions of terms and Restricted Group financial information are available at investors.yum.com. Reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures are included within this release.

FORWARD-LOOKING STATEMENTS

This announcement may contain “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 relate strictly to historical or current facts and by the use of forward-looking words such as “expect,” “expectation,” “believe,” “anticipate,” “may,” “could,” “intend,” “belief,” “plan,” “estimate,” “target,” “predict,” “likely,” “seek,” “project,” “model,” “ongoing,” “will,” “should,” “forecast,” “outlook” or similar terminology. These statements are based on and reflect our current expectations, estimates, assumptions and/or projections, our perception of historical trends and current conditions, as well as other factors that we believe are appropriate and reasonable under the circumstances. Forward-looking statements are neither predictions nor guarantees of future events, circumstances or performance and are inherently subject to known and unknown risks, uncertainties and assumptions that could cause our actual results to differ materially from those indicated by those statements. There can be no assurance that our expectations, estimates, assumptions and/or projections, including with respect to the future earnings and performance or capital structure of Yum! Brands, will prove to be correct or that any of our expectations, estimates or projections will be achieved.

Numerous factors could cause our actual results and events to differ materially from those expressed or implied by forward-looking statements, including, without limitation: the severity and duration of the COVID-19 pandemic; food safety and food borne-illness issues; the occurrence of a significant health epidemic or other catastrophic event; the success of our franchisees and licensees; our significant exposure to the Chinese market; changes in economic and political conditions in, and other risks associated with, countries and territories outside of the U.S. where we operate; changes in currency exchange rates; our ability to protect the integrity and security of personal information of our customers and employees, and other cybersecurity risks; our ability to successfully implement technology initiatives; our increasing dependence on multiple digital commerce platforms; the impact of social media; our ability to secure and maintain distribution and adequate supply to our restaurants; the loss of key personnel, or labor shortages or difficulty finding qualified employees; the success of our development strategy, including in emerging markets; changes in commodity, labor and other operating costs; the impact of climate change and other environmental and sustainability matters; pending or future litigation and legal claims or proceedings; changes in or noncompliance with government regulations, including data privacy laws, labor standards, and anti-bribery or anti-corruption laws; tax matters, including changes in tax laws or disagreements with taxing authorities; consumer preferences and perceptions of our brands and corporate reputation; failure to protect our service marks or other intellectual property; changes in consumer discretionary spending and general economic conditions; competition within the retail food industry; not realizing the anticipated benefits from past or potential future acquisitions, investments or other strategic transactions; and risks relating to our significant amount of indebtedness. In addition, other risks and uncertainties not presently known to us or that we currently believe to be immaterial could affect the accuracy of any such forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

The forward-looking statements included in this announcement are only made as of the date of this announcement and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances. You should consult our filings with the Securities and Exchange Commission (including the information set forth under the captions “Risk Factors” and “Forward-Looking Statements” in our most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q) for additional detail about factors that could affect our financial and other results.

Yum! Brands, Inc., based in Louisville, Kentucky, has over 53,000 restaurants in more than 155 countries and territories, operating the Company’s brands – KFC, Pizza Hut and Taco Bell – global leaders of the chicken, pizza and Mexican-style food categories. The Company’s family of brands also includes The Habit Burger Grill, a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more. In 2021, Yum! Brands was named to the Dow Jones Sustainability Index North America and was ranked on Newsweek’s list of America’s Most Responsible Companies.

Reconciliation of Non-GAAP Measurements to GAAP Results

(amounts in millions, except per share amounts)

(unaudited)

In addition to the results provided in accordance with Generally Accepted Accounting Principles in the United States of America ("GAAP"), the Company provides the following non-GAAP measurements.

• Diluted Earnings Per Share ("EPS") excluding Special Items (as defined below);
• Effective Tax Rate excluding Special Items;
• Core Operating Profit. Core Operating Profit excludes Special Items and FX and we use Core Operating Profit for the purposes of evaluating performance internally.
• Company restaurant profit and Company restaurant margin as a percentage of sales (as defined below).

These non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of these non-GAAP measurements provide additional information to investors to facilitate the comparison of past and present operations.

Special Items are not included in any of our Division segment results as the Company does not believe they are indicative of our ongoing operations due to their size and/or nature. Our chief operating decision maker does not consider the impact of Special Items when assessing segment performance. The Special Items are described in (a) - (i) in the accompanying notes.

Company restaurant profit is defined as Company sales less Company restaurant expenses, both of which appear on the face of our Consolidated Statements of Income. Company restaurant expenses include those expenses incurred directly by our Company-owned restaurants in generating Company sales, including cost of food and paper, cost of restaurant-level labor, rent, depreciation and amortization of restaurant-level assets and advertising expenses incurred by and on behalf of that Company restaurant. Company restaurant margin as a percentage of sales ("Company restaurant margin %") is defined as Company restaurant profit divided by Company sales. We use Company restaurant profit for the purposes of internally evaluating the performance of our Company-owned restaurants and we believe Company restaurant profit provides useful information to investors as to the profitability of our Company-owned restaurants. In calculating Company restaurant profit, the Company excludes revenues and expenses directly associated with our franchise operations as well as non-restaurant-level costs included in General and administrative expenses, some of which may support Company-owned restaurant operations. The Company also excludes restaurant-level asset impairment and closures expenses, which have historically not been significant, from the determination of Company restaurant profit as such expenses are not believed to be indicative of ongoing operations. Company restaurant profit and Company restaurant margin % as presented may not be comparable to other similarly titled measures of other companies in the industry.

Certain non-GAAP measurements are presented excluding the impact of FX. These amounts are derived by translating current year results at prior year average exchange rates. We believe the elimination of the FX impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.