Yum China Holdings, Inc. · NYSE:YUMC
Yum China — Q3 2024 Earnings Presentation
34 slides from Yum China's earnings presentation, Nov 4, 2024
Slide 1: Third Quarter 2024 Results
Third Quarter 2024 Results 4 November 2024 NYSE: YUMC and HKEX: 9987
Slide 2: Cautionary Statement
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 Sec
Slide 3: Strong Results 3Q24 Amid Challenging Market Conditions
Strong Results 3Q24 Amid Challenging Market Conditions Robust Sales Growth Margin Expansion System sales Same-store 7 consecutive OP Restaurant growth1 sales growth1 quarters of Margin Margin same-store +100 bps Steady Q3 YoY: +4% transaction -3% Q3 YoY YoY on a -4% in Q2 2024 growth comparable basi
Slide 4: Upsizing Capital Returns to Shareholders for 2024 - 2026
Upsizing Capital Returns to Shareholders for 2024 - 2026 Capital Returns to Shareholders1 $4.3bn $mn Total Capital Returned FY Target 2 (From 2017 to Nov 1st 2024) ~1,500 Net Cash3 (By end of Sep 2024) $3.1bn 833 668 473 1,055 Target to increase capital returns 442 1,242 166 278 by 50% in 2024-262 1
Slide 5: Opening New Stores to Capture Long-Term Opportunities
Opening New Stores to Capture Long-Term Opportunities 15,861 Total Stores 4 years Net new stores 438 in Q3 >10,000 1,217 Q3 YTD 8 years >5,000 Net new unit contribution to sales 25 years 7% in Q31 1 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 24'Q3 2000 2001 2002 2003 2004 2005
Slide 6: Penetrating into More Cities – Good New Store Returns
Penetrating into More Cities – Good New Store Returns Penetrating More Cities Healthy New Store Payback2 #1 Western QSR in China1 Net New Total 24 Q3 YTD ~2 years Stores Stores ~2 ~2 ~2 ~2 987 11,283 ~2,200 % in Tier 3-6 58% 56% Net New Stores Total Cities Q3 YTD Stores % of franchise 27% 12% 2017 2
Slide 7: Achieved Double-Digit Delivery Sales Growth over the Past Decade
Achieved Double-Digit Delivery Sales Growth over the Past Decade +19% +11% YoY in Q3 YoY in Q3 Delivery Sales Growth YoY +18% +14% ~34% ~32% Q3 Q3 YTD ~53% ~55% ~52% ~70% • KFC and Pizza Hut both gained market share on delivery platforms ~31% ~29% ~9% ~10% • Took actions to reduce rider costs – ~29%
Slide 8: Digital Sales Exceeded $7 Billion in First Nine Months; Total Members Surpassed 510 Million
Digital Sales Exceeded $7 Billion in First Nine Months; Total Members Surpassed 510 Million Digital Sales Growth Member Growth Digital orders1 Members (mn)3 Member sales %4 65% 65% 89% 89% 90% 63% 62% 86% 60% 80% 510+ 52% 470+ 410+ 55% >$7bn 300+ 360+ Digital Sales2 240+ Q3 YTD 2019 2020 2021 2022 2
Slide 9: KFC Continuing to Thrive
KFC Continuing to Thrive Q3 2024 +6% (2)% 352 System sales Same-store Net new stores growth1 sales growth1 18.3% 15.7% ` Restaurant margin OP margin (30) bps YoY +10 bps YoY +30 bps YoY on a +60 bps YoY on a comparable basis2 comparable basis2 +6% YoY +9% YoY Operating profit Core operating profit3
Slide 10: Offering Innovative Products and Great Value
Offering Innovative Products and Great Value Breathing Fresh Energy into Providing Great Value-for-money and Emotional Value our Flagship Products Original recipe chicken with curry Spicy beef wrap Crazy Thursday – chicken nugget with cumin, Genshin Impact campaign includes gravy and mashed potatoes
Slide 11: Side-by-side KCOFFEE Cafes Reached 500 Locations
Side-by-side KCOFFEE Cafes Reached 500 Locations Note: Side-by-side KCOFFEE Cafes are considered part of existing KFC stores and are not counted separately in Yum China's total store count. Photos: KFC store in Chengdu City Center (成都领地中心) 11
Slide 12: KCOFFEE Cafe Features a Distinct Menu and Stunning Value for Money
KCOFFEE Cafe Features a Distinct Menu and Stunning Value for Money Unique Product Stunning Value for Money Driving Repeat Purchase Original recipe chicken latte Sparkling Americano at RMB 9.9 Coffee and hot dog combo at Privilege subscription: RMB 8.8 for 30 RMB 9.9 days, coffee from RMB 5 12
Slide 13: Pizza Hut Becoming More Resilient and Profitable
Pizza Hut Becoming More Resilient and Profitable Q3 2024 +2% (6)% 102 System sales Same-store Net new stores growth1 sales growth1 12.8% 8.6% Restaurant margin OP margin +10 bps YoY +80 bps YoY +60 bps YoY on a +140 bps YoY on a comparable basis2 comparable basis2 +13% YoY +20% YoY Operating profit
Slide 14: Introducing Innovative Products and Outstanding Value
Introducing Innovative Products and Outstanding Value Durian Pizza and Burger for the Durian Lovers Driving Traffic with Exceptional Value Durian pizza with new flavors Pizza dough beef burger All-you-can-eat for a limited time Buy one get one free for a limited time with durian and pineapple 14
Slide 15: Pizza Hut WOW Model Reached 150 Stores in November
Pizza Hut WOW Model Reached 150 Stores in November Guangzhou Aeon Mall (广州金沙洲永旺) Shanghai Qibao Powerlong City (上海七宝宝龙) Covering 10 provinces, from Tier 1 cities to lower-tier towns 15
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Slide 17: Pursuing Greater Operational Efficiency to Make our Business Even More Resilient
Pursuing Greater Operational Efficiency to Make our Business Even More Resilient Assess our operations from: RGM’s point of view Customer’s point of view Reduce business Simplify menu & Uplift operational complexity operations efficiency Best in class Best in cost Spend better Buy better Pass on sav
Slide 18: 2024 Targets Remain Unchanged
2024 Targets Remain Unchanged Net new stores 1,500- Capex $mn 1,697 1,700 To step up investment in digital, supply chain and other 1,306 1,282 infrastructure 1,159 Huang Ji 700- Huang 850 716 689 679 710 657 501 ex HJH 470 421 415 435 419 2017 2018 2019 2020 2021 2022 2023 2024 E 2017 2018 2019 2020
Slide 19: 2024-2026 Growth Targets
2024-2026 Growth Targets 20,000 Stores by 2026 3-Year Growth Targets (CAGR) on 2023 Base1 High Single to High Single to Double Digits Double Digits Double Digits System Sales Operating Profit EPS $4.5bn Targeted capital returns to shareholders 2 1 Excludes the impact of foreign exchange. 2 Based on
Slide 20: Appendix
YumChina Appendix
Slide 21: Third Quarter Grew YoY and vs 2019
Third Quarter Grew YoY and vs 2019 Third Quarter 2019 2023 2024 2024 vs 2023 2024 vs 2019 No. of Stores 8,917 14,102 15,861 +12% +78% Revenue ($ mn) 2,319 2,914 3,071 +5% +32% Members (mn) 230+ 460+ 510+ +11% +122% Member Sales % 53% 65% 64% (1) ppt ~ +11ppt Operating Profit ($ mm) 300 323 371 +15%
Slide 22: Sales and Profit Grew YoY in Third Quarter
Sales and Profit Grew YoY in Third Quarter Revenue/Sales YoY Total Revenue ($bn) 2.91 3.07 Key factors for Revenue year-over-year change Revenue growth (reported) +5% + Net new unit contribution − Same-store sales decline Revenue growth (ex F/X) +4% System sales growth1 +4% 23'Q3 24'Q3 Operating Pro
Slide 23: Third Quarter Key Performance Highlights – KFC & Pizza Hut
Third Quarter Key Performance Highlights – KFC & Pizza Hut Digital 24’Q3 YoY Sales Growth Channel Mix Members order System Same-store Same-store Average Total off- Member Sales sales transactions ticket Delivery Million Sales % premise sales % YoY YoY YoY YoY +6% (2)% +1% (3)% 40% 68% 475+ 65% 90% 2
Slide 24: Reconciliation of Reported Results to Non-GAAP Measures
Reconciliation of Reported Results to Non-GAAP Measures (in $mn) Quarter Ended Year to Date Ended 9/30/2024 9/30/2023 9/30/2024 9/30/2023 Non-GAAP Reconciliations Reconciliation of Operating Profit to Adjusted Operating Profit Operating Profit $ 371 $ 323 $ 1,011 $ 996 Special Items, Operating Profi
Slide 25: Reconciliation of Operating Profit to Core Operating Profit
Reconciliation of Operating Profit to Core Operating Profit* (in $mn) Yum China Quarter ended % Change Year to Date Ended % Change 9/30/2024 9/30/2023 B/(W) 9/30/2024 9/30/2023 B/(W) Operating profit $ 371 $ 323 15 $ 1,011 $ 996 1 Special Items, Operating Profit — 4 — 9 Adjusted Operating Profit $ 3
Slide 26: Reconciliation of Operating Profit to Core Operating Profit (KFC)
Reconciliation of Operating Profit to Core Operating Profit * (in $mn) KFC Quarter Ended Year to Date Ended 9/30/2024 9/30/2023 9/30/2024 9/30/2023 GAAP Operating Profit $ 364 $ 342 $ 1,000 $ 1,035 Special Items, Operating Profit — — — — Adjusted Operating Profit $ 364 $ 342 $ 1,000 $ 1,035 Items Af
Slide 27: Reconciliation of Operating Profit to Core Operating Profit (Pizza Hut)
Reconciliation of Operating Profit to Core Operating Profit * (in $mn) Pizza H ut Quarter Ended Year to Date Ended 9/30/2024 9/30/2023 9/30/2024 9/30/2023 GAAP Operating Profit $ 52 $ 47 $ 139 $ 137 Special Items, Operating Profit — — — — Adjusted Operating Profit $ 52 $ 47 $ 139 $ 137 Items Affecti
Slide 28: Reconciliation of Operating Profit to Restaurant Profit
Reconciliation of Operating Profit to Restaurant Profit (in $mn) Yum China Quarter Ended Year to Date Ended 9/30/2024 9/30/2023 9/30/2024 9/30/2023 GAAP Operating Profit $ 371 $ 323 $ 1,011 $ 996 Less: Franchise fees and income 25 23 72 69 Revenues from transactions with franchisees 116 100 319 282
Slide 29: Reconciliation of Operating Profit to Restaurant Profit (KFC)
Reconciliation of Operating Profit to Restaurant Profit (in $mn) KFC Quarter Ended Year to Date Ended 9/30/2024 9/30/2023 9/30/2024 9/30/2023 GAAP Operating Profit $ 364 $ 342 $ 1,000 $ 1,035 Less: Franchise fees and income 19 16 53 48 Revenues from transactions with franchisees 15 12 41 33 Other re
Slide 30: Reconciliation of Operating Profit to Restaurant Profit (Pizza Hut)
Reconciliation of Operating Profit to Restaurant Profit (in $mn) Pizza H ut Quarter Ended Year to Date Ended 9/30/2024 9/30/2023 9/30/2024 9/30/2023 GAAP Operating Profit $ 52 $ 47 $ 139 $ 137 Less: Franchise fees and income 2 2 6 6 Revenues from transactions with franchisees 2 1 4 3 Other revenues
Slide 31: Items Affecting Comparability – 2023 by Quarter
Items Affecting Comparability – 2023 by Quarter (in $mn) Yum China 23Q1 23Q2 23Q3 23Q4 Items Affecting Comparability Temporary relief from landlords (8) (2) — (1) Temporary relief from government agencies (2) (1) (1) (3) VAT deductions (19) (9) (14) (2) Amortization of reacquired franchise rights 2
Slide 32: ESG Key Initiatives
ESG Key Initiatives Climate Action Circular Economy Nutrition & Food Safety People 151 stores & 3 logistics Coffee ground recycling Published Yum China Encourage active centers completed extended to ~8,700 KFC Nutrition and Health engagement through RGM renewable energy purchases stores nationwide,
Slide 33: ESG Ratings and Awards
ESG Ratings and Awards ESG Rating People & Community 4th Year Industry No. 1 6th Year Joined in August 2023 Industry highest score MSCI ESG ‘AA’ rating Industry best for the 3rd year To support UN SDG1 Industry No.1 Industry Leader 5th Year 2nd Year One of the only three China Best ESG Employers ‘Lo
Slide 34: About Yum China
About Yum China Largest restaurant Fortune 500 6 restaurant company in China1 company brands 15,000+ ~2,200 ~400,000 restaurants cities in China employees Vision: To be the world’s most innovative pioneer in the restaurant industry World-class, Strong digital capabilities & Strategic Moat: digitaliz