Yum China Holdings, Inc. · NYSE:YUMC
Yum China — Q3 2020 Earnings Presentation
26 slides from Yum China's earnings presentation, Oct 29, 2020
Slide 1: Third Quarter 2020 Results Presentation
Third Quarter 2020 Results Presentation October 2020
Slide 2: Cautionary Statement on Forward-Looking Statements & Non-GAAP Measures
Cautionary Statement on Forward-Looking Statements & Non-GAAP Measures 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 covere
Slide 3: Business Highlights; Appendix – Financial Results
Business Highlights Appendix – Financial Results 3
Slide 4: Q3: Resilience in the Challenging Time
Q3: Resilience in the Challenging Time Resilient Performance Profitable Growth Leading Digital Capabilities • Total revenue grew 1%1 • Gross new stores: 312 (660 YTD) • Q3 Sales were • System sales grew 1%2 • Total stores: 10,150 Digital payment: 97% • Same-store sales: 94% of prior year2 • New st
Slide 5: Re-establishing Momentum
Re-establishing Momentum 1% Total revenue -11% 556 growth1 (%) Operating 320 Adjusted -24% Q1 Q2 Q3 Profit 128 (US$mn) 97 1% Q1 Q2 Q3 System -4% sales growth2 (%) 83% -20% Q1 Q2 Q3 Operating 5% Adjusted Profit growth2 (%) -33% -66% Same-store -6% Q1 Q2 Q3 sales -11% growth2 (%) -15% Q3 included gain
Slide 6: Operating Profit Growth
Operating Profit Growth Operating Profit (US$ mn) 2019 2020 Key Factors for Q3 Year-Over-Year Growth Q3 556 300 300 320 • Re-measurement of previously held interest in Suzhou KFC • Labor productivity improvement Reported Adjusted • Cost structure realignment YoY +86% +7% • One-time relief provided b
Slide 7: Powerful Digital Ecosystem
Powerful Digital Ecosystem Mobile Privilege Mobile Tableside Order Program Super Apps Pre-order Improves Online engagement with Membership Queuing Program customers K-Music Improves Delivery efficiency K-Run YUMC Pay Smile V-gold & to Pay E-Gifting Book Kingdom Merchandise Payment Operations Marketi
Slide 8: Super Apps and Membership Programs Drive Frequency and Spend
Super Apps and Membership Programs Drive Frequency and Spend 770+ mm 145+ mm Downloads and Downloads and updates from iOS updates from iOS and Andriod 1 and Andriod1 260+ mm 80+ mm KFC Members1 Pizza Hut Members1 105 mm 14 mm MAU2 in Q3 2020 MAU2 in Q3 2020 ~61% ~53% KFC Sales3 Pizza Hut Sales3 ~2x
Slide 9: Delivery and Takeaway are Key Growth Drivers
Delivery and Takeaway are Key Growth Drivers Delivery + Takeaway = Off-premise % of Company sales % of Company sales % of Company sales 27% 30%+ 19% 15% 12% 25%+ 55%+ in Q3 2020 2017 2018 2019 20 Q3 2019 20 Q3 32% 24% 25% 20% ~7% ~5% ~40% in Q3 2020 2017 2018 2019 20 Q3 2019 20 Q3 Note: % of Company
Slide 10: New Store Growth with Attractive Paybacks
New Store Growth with Attractive Paybacks 2018 2019 2020 Lower Tier Penetration New Unit Payback1 646 660 Tier 1-2 Tier 3-6 YTD new stores 562 Gross 312 new 231 39% stores 195 KFC 53% PH 47% Tier 1-2 Tier 3-6 61% Q3 YTD KFC ~2-3 yrs ~2 yrs 10,150 Total stores Tier 1-2 Tier 3-6 Pizza Hut ~4-5 yrs ~3-
Slide 11: Expand with Multiple Brands and Store Formats
Expand with Multiple Brands and Store Formats Shopping Mall Community Tourist Location Small Format 11
Slide 12: Remodeling Keeps Brands Refreshing
Remodeling Keeps Brands Refreshing 2018 2019 2020 Always Something New 699 642 556 301 209 222 Remodeled Q3 YTD stores 2020 YTD remodel Others ,1 Pizza Hut, 245 KFC, 396 KFC Pizza Hut 12
Slide 13: KFC: Resilient Business Model and Solid Execution
KFC: Resilient Business Model and Solid Execution Q3 2020 Highlights System sales -1%1 Restaurant 227 margin Gross new Operating profit of Same-store sales -6%1 stores Transactions -10% 19.4% US$286 million2 Average ticket +4% -0.7 ppt y/y 179 remodels Menu innovation ~83% Digital orders +17ppts y/y
Slide 14: Tasty Food, Great Fun and Compelling Value Proposition
Tasty Food, Great Fun and Compelling Value Proposition Innovative Products Value for Money Diversified Occasions Exciting Cross-over Durian Crayfis burger h (Jul) Extended Crazy Thursday Spicy Crayfish for Late Night Delivery Durian Chicken Burger / Double Burger Cross-over with Karl Lagerfeld to We
Slide 15: Digital Campaigns Drive Member Spending
Digital Campaigns Drive Member Spending Various Privilege Programs Serve Different Needs Successful LTO in Q3 17mn privilege ¥8.8 for 2 membership weeks sold in Q3 (39mn 40% discount cumulative) for any one item Drive repeat purchases Free items with spending Cross sell >RMB 39 / 59 dayparts and cat
Slide 16: Pizza Hut: Operating Profit Grew 59%
Pizza Hut: Operating Profit Grew 59%1 Q3 2020 Highlights System sales -6%1 37 Gross Restaurant margin Operating profit of new stores Same-store sales -7%1 16.7% US$61 million2 Transactions -5% +5.3 ppt y/y + 59% y/y1 Average ticket -1% 122 remodels ~65% Digital orders Menu innovation with LTO +34 pp
Slide 17: Pizza Hut Continued to Enhance its Food and Value
Pizza Hut Continued to Enhance its Food and Value Pizza LTO Dessert Innovation Abundant Value Regional Launch Chinese-style braised (Dongpo) Buffet – 5 Days Only Wuhan-style Hot Dry Noodles Salted Egg Yolk Volcano Cake Beef and Pizza RMB 158 for members; Reserve Online with Crayfish 17
Slide 18: Enhanced Digital Experience Drives Traffic
Enhanced Digital Experience Drives Traffic Various Privilege Programs Targeting Different Occasions 2mn privileges sold in Q3 (6mn+ cumulative) Enjoy discounts on main dish, coffee- to-go, steak, one- person meal set, free delivery, etc. Selection of duration - monthly/quarterly/ annual 1 Super Priv
Slide 19: Capital Allocation Strategy
Capital Allocation Strategy Cash Capital Expenditure Cash Dividends Share Repurchases US$4.2 bn cash and Store expansion and US$426mn (since spin- US$708mn (since spin- short term investment remodeling, end-to-end off) off) digitalization and supply chain Include net proceeds of To resume c
Slide 20: 2020 Outlook and Strategic Priorities
2020 Outlook and Strategic Priorities 2020 • Over 900 gross new stores, including new builds of Huang Ji Huang since acquisition FINANCIAL • $500-550 million Capex TARGETS • Top priority is to safeguard the health and safety of our employees and customers • Drive innovation across the business and a
Slide 21: Business Highlights; Appendix – Financial Results
Business Highlights Appendix – Financial Results 21
Slide 22: Q3 Results Improved Sequentially
Q3 Results Improved Sequentially Sales Growth1 Profit Margin Net Income & EPS System sales growth (%) Restaurant Margin (%) Net Income (NI) (US$ mn) 8% 9% 18.6% 634 623 633 4% 4% 17.6%17.7% 16.9% 17.0% 1% 439 14.7% 203 223 -8% Q3 YTD Q3 YTD Q3 YTD Same-store sales growth (%) Operating Profit (OP) (U
Slide 23: KFC Continued to Demonstrate Resilience
KFC Continued to Demonstrate Resilience Sales Growth1 (%) Restaurant Margin (%) Operating Profit2 (US$ mn) System sales growth 11% 20.1% 788 10% 759 6% 6% 19.2% 19.4% 18.8 19.0% % 598 -1% 16.2% -7% Q3 YTD Same-store sales growth 295 286 4% 264 3% 2% 1% -6% Q3 YTD Q3 YTD -9% Q3 YTD 1 Stated in consta
Slide 24: Pizza Hut: Significant Year-over-Year Improvement in Restaurant Margin
Pizza Hut: Significant Year-over-Year Improvement in Restaurant Margin Sales Growth1 (%) Restaurant Margin (%) Operating Profit2 (US$ mn) System sales growth 16.7% 117 3% 3% 106 -2% -1% 13.8% -6% 12.4% 11.4% 11.8% -19% 10.6% Q3 YTD 61 Same-store sales growth 53 48 38 1% 1% -5% -5% -7% -16% Q3 YTD Q3
Slide 25: Growing Popularity of Membership and Digital
Growing Popularity of Membership and Digital Members (mn) Member Sales1 Digital Order2 MAU3 260+ 215+ 61% 54% 83% 160+ 44% 63% 110+ 32% 105 mm in Q3 2020 17 YE 18 YE 19 YE 20 Q3 17 FY 18 FY 19 FY 20 Q3 19 FY 20 Q3 53% 80+ 46% 70+ 44% 65% 50+ 35+ 14 mm 18% 31% in Q3 2020 17 YE 18 YE 19 YE 20 Q3 17 FY
Slide 26: Reconciliation of Reported Results to Non-GAAP Measures
Reconciliation of Reported Results to Non-GAAP Measures Quarter Ended Year to Date Ended 9/30/2020 9/30/2019 9/30/2020 9/30/2019 Non-GAAP Reconciliations Reconciliation of Operating Profit to Adjusted Operating Profit Operating Profit $ 556 $ 300 $ 781 $ 807 Details of Special Items Special Items, O