Yum China Holdings, Inc. · NYSE:YUMC
Yum China — Q2 2020 Earnings Presentation
33 slides from Yum China's earnings presentation, Jul 30, 2020
Slide 1: Second Quarter 2020 Results Presentation
Second Quarter 2020 Results Presentation 30 July 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: Overview, Q2 2020 Business Highlights, Q2 2020 Financial Results
Overview Q2 2020 Business Highlights Q2 2020 Financial Results 33
Slide 4: Yum China by the Numbers – a Powerful Business
Yum China by the Numbers – a Powerful Business #1 Western QSR & NYSE listed with CDR brands in China $18bn market cap 9,900+ stores in 1,400+ cities in China #361 Fortune 500 2020 25 logistics centers 265mn+ digital members of KFC and Pizza Hut Note: Store, logistics center and member counts as of J
Slide 5: Our Long-Term Strategy
Our Long-Term Strategy SUSTAINABLE PLATFORM FOR GROWTH YUM CHINA RESTAURANT BRAND PORTFOLIO Western dining Chinese dining Coffee ENABLED BY KEY PILLARS ACROSS BRANDS DIGITAL DATA DELIVERY ECOSYSTEM AND CROSS FUNCTIONAL CAPABILITIES Supply Public HR Development Operation Marketing IT Finance Legal Ch
Slide 6: The World's Most Innovative Pioneer In The Restaurant Industry
exeQlliin & an 3c The World's Most Innovative Pioneer In The Restaurant Industry QD vwwvcin | @ @ O ea © & amow
Slide 7: Digital Strategy: Connecting with Our Consumers
Digital Strategy: Connecting with Our Consumers Mobile Pre-order KFC Member Program Mobile Pizza Hut Tableside order Member Program Online Queuing E-gifting Delivery K-Music YUMC Pay K-Run Book Kingdom V-gold & Merchandise Privilege Program 77
Slide 8: Digital Strategy: Driving Efficiency Across the Business
Digital Strategy: Driving Efficiency Across the Business Omni Data & Intelligent Optimizing Customer Channel AI Driven Supply Labor Yum China Services Marketing Chain Productivity 88
Slide 9: Yum China Investment Highlights
Yum China Investment Highlights Solid track record Strong balance sheet & Track record of Responsible corporate since spin-off cash flow generation shareholder returns Dividends & Share DJSI: Top 5 in 2.3 $1.66bn new stores Cash and repurchases ($mn) REX4 industry opened per day 3 2 short-term inves
Slide 10: Q2 2020 Business Highlights
Overview Q2 2020 Business Highlights Q2 2020 Financial Results 10 10
Slide 11: Solid Q2 Performance in Challenging Environment
Solid Q2 Performance in Challenging Environment • Gross new stores: 169 • Revenue: $1.90 billion • Total stores: 9,954 • Operating Profit: $128 million • New store cash payback periods: ~2-3 years SALES & ~3-5 years STORES PROFIT • 99% stores open COVID IMPACT DIGITAL & • Sales were DELIVERY • Syste
Slide 12: KFC: Resilient Business Model and Solid Execution
KFC: Resilient Business Model and Solid Execution Q2 2020 Highlights System sales -6%1 Restaurant margin 142 Operating profit Same-store sales -10%1 Gross new Transactions -20% 14.6% of $159 million2 stores Average ticket +12% -1.5 ppt y/y Menu innovation ~86% Digital orders +23ppts y/y Value promot
Slide 13: Offered Great Value to Drive Traffic
Offered Great Value to Drive Traffic Crazy Thursday Original Recipe Bucket Combo at Half Price Value Breakfast Offer at ¥9.9/19.9: For 5 weeks: Free breakfast items Classic original recipe chicken Chicken nuggets / bubble milk tea Members Only for new members; bucket at half price / spicy wing tips
Slide 14: Launched Innovative Products
Launched Innovative Products Premium Burger Plant-Based Nuggets Tofu Pudding K-Coffee Messy cod fish & chicken Traditional street Cross-over with 3-day pilot in select stores burger with 3-layer cheese food for breakfast Liushen floral water 14 14
Slide 15: Campaigns to Capture Weekend and Holiday Sales
Campaigns to Capture Weekend and Holiday Sales Labor Day Children’s Day Dragon Boat Festival Weekend Campaign ¥149 combo with chocolate Traditional festive food: Members only, for selected items: May 1st bucket with big savings cake and Pokemon toy Sticky Rice Dumpling Second piece for free 15 15
Slide 16: Digital Marketing to Capture Online Traffic and Increase Loyalty
Digital Marketing to Capture Online Traffic and Increase Loyalty Capturing Online Traffic Driving Member Loyalty 618 Flexible promotions in privilege Tmall and campaign: KFC app Discount on Live Webcast breakfast, in KFC app delivery and 1 and Taobao out of 3 other offers (coffee, afternoon tea & de
Slide 17: Pizza Hut: Significant Improvement vs Q1
Pizza Hut: Significant Improvement vs Q1 Q2 2020 Highlights System sales -12%1 8 Gross Restaurant margin new stores Operating profit Same-store sales -12%1 11.2% of $15 million2 Transactions -5% -0.1 ppt y/y Average ticket -7% 116 remodels New menu ~61% Digital orders Attractive value campaigns +31
Slide 18: Launched New Menu in June
Launched New Menu in June Pizza Hut 30th Anniversary ● Platinum Menu Launch Supreme Durian Thin Stuffed Crust Crust Pizza Angus Steak Spicy Pizza Thick Cut Durian Stuffed Australian Crayfish Crust Pizza Queen Burrata Crayfish and Sirloin Pan Fried Pasta Thin Crust Pizza Steak Platter Rice 18 18
Slide 19: Attractive Offer Targeting Different Needs
Attractive Offer Targeting Different Needs All-you-can-eat Monday – Pizza Tuesday – Durian Wednesday - Steak 5 Days Only 19 19
Slide 20: Expanded Occasions, Categories and Dayparts
Expanded Occasions, Categories and Dayparts One-Person Meal/Takeaway Ready-to-Cook Steak Plant-based Burger Afternoon Tea 30-day privilege at ¥18 Australian Sirloin Steak for Beyond Burger and Australian Tea set for two Meal set from ¥19 Delivery or Takeaway Sirloin burger combo at ¥59 20 20
Slide 21: Enhanced Digital Experience Drove Online Traffic
Enhanced Digital Experience Drove Online Traffic Alipay Mini-Program 618 Campaign Live Webcast 35% off Delivery and takeaway Partnership with JD Baked crayfish with cheese 21 21
Slide 22: Q2 2020 Financial Results
Overview Q2 2020 Business Highlights Q2 2020 Financial Results 22 22
Slide 23: Gross New Stores Opened in First Half, Mainly KFC
348 Gross New Stores Opened in First Half, Mainly KFC 415 367 348 327 307 272 Gross 164 178 169 new 128 136 142 68 60 stores 27 26 19 8 Q2 YTD Q2 YTD Q2 YTD 9,954 6,749 8,751 Total 8,198 6,179 stores 5,696 2,252 2,258 2,209 18 Q2 19 Q2 20 Q2 18 Q2 19 Q2 20 Q2 18 Q2 19 Q2 20 Q2 Note: Included Huang J
Slide 24: Q2 Results Showing Sequential Improvement
Q2 Results Showing Sequential Improvement Sales Growth1 Profit Margin Net Income & EPS System sales growth (%) Restaurant Margin (%) Net Income (NI) ($ mn) 431 16.6% 16.7% 400 10% 10% 3% 5% 15.1%14.7% 13.7% 178 194 12.2% 143 132 -4% -13% Q2 YTD Q2 YTD Q2 YTD Same-store sales growth (%) Operating Pro
Slide 25: Productivity Improvement and Additional One-Time Relief Partially Offset Sales Deleverage
Productivity Improvement and Additional One-Time Relief Partially Offset Sales Deleverage Operating Profit ($ mn) 2019 2020 Key Factors for Q2 Year-Over-Year Movement Q2 204 204 128 132 • Sales deleverage impact from same-store sales decline • Higher promotion costs Reported Adjusted • Wage and comm
Slide 26: KFC Continued to Demonstrate Resilience
KFC Continued to Demonstrate Resilience Sales Growth1 (%) Restaurant Margin (%) Operating Profit2 ($ mn) System sales growth 18.9% 12% 12% 495 493 7% 18.1% 5% 16.8% 16.1% -6% -10% 312 Q2 YTD 14.6% 14.1% Same-store sales growth 199 205 159 5% 5% 3% 0% -10% -11% Q2 YTD Q2 YTD Q2 YTD 1 Stated in consta
Slide 27: Pizza Hut Improved Sales and Margin vs Q1
Pizza Hut Improved Sales and Margin vs Q1 Sales Growth1 (%) Restaurant Margin (%) Operating Profit ($ mn)2 System sales growth 12.9% 79 4% 3% 11.1%11.3% 11.2% 10.8% -1% -1% 53 -12% -25% Q2 YTD 6.4% 29 Same-store sales growth 19 15 1% 1% -4% -5% -12% -22% -13 Q2 YTD Q2 YTD Q2 YTD 1 Stated in constant
Slide 28: Membership and Digital Order Grew in Popularity
Membership and Digital Order Grew in Popularity Members (mn) Member Sales Digital Order 65% 86% 240+ 215+ 54% 45% 62% 160+ 110+ 33% 17 YE 18 YE 19 YE 20 Q2 17 Q2 18 Q2 19 Q2 20 Q2 19 Q2 20 Q2 53% 75+ 46% 47% 61% 70+ 50+ 35+ 29% 6% 17 YE 18 YE 19 YE 20 Q2 17 Q2 18 Q2 19 Q2 20 Q2 19 Q2 20 Q2 28 28
Slide 29: Delivery and Takeaway Increased Year-over-Year
Delivery and Takeaway Increased Year-over-Year Delivery Sales Takeaway Sales Delivery Coverage 2019 Q2 2020 Q2 32% 27% 93% 97% ~39% 83% 19% ~32% 76% ~28% 15% 12% 2017 2018 2019 20 Q1 20 Q2 2019 20 Q1 20 Q2 Store coverage City coverage 48% 93% 94% 97% 99% 35% 24% 25% ~11% ~11% 20% ~5% 2017 2018 2019
Slide 30: Continued Penetrating into Lower Tiers with Healthy Return
Continued Penetrating into Lower Tiers with Healthy Return Lower Tier Penetration Drive New Unit Return1 Remodel Store Mix in Tier 3-6 KFC Pizza Hut Others All Stores YTD Gross New Openings YUMC: 238 310 61% Tier 1-2 Tier 3-6 56% 116 53% 1 41% KFC ~2-3 yrs ~2 yrs 78 Pizza Hut ~4-5 yrs ~3-4 yrs 194 1
Slide 31: Continued to Take Cautious Actions Despite Strong Balance Sheet
Continued to Take Cautious Actions Despite Strong Balance Sheet 2020 2019 Cash and Dividends Share Repurchases short-term $1.71 bn $1.58 bn investments Since spin-off: $426 mn Since spin-off: $708 mn As of June 30 20 Q2: - 20 Q2: - Quarterly Cash Dividend per Share Total Program ($ mn) Net cash from
Slide 32: 2020 Outlook and Strategic Priorities
2020 Outlook and Strategic Priorities 2020 • 800-850 gross new units, excluding Huang Ji Huang FINANCIAL • $500-550 million Capex TARGETS • Targets subject to revision based on how the COVID-19 situation evolves • Top priority is to safeguard the health and safety of our employees and customers • Dr
Slide 33: Appendix: Reconciliation of Reported Results to Non-GAAP Measures
Appendix: Reconciliation of Reported Results to Non-GAAP Measures Quarter Ended Year Ended 6/30/2020 6/30/2019 6/30/2020 6/30/2019 Detail of Special Items Derecognition of indemnification assets related to Daojia(b) $ (3 ) $ — $ (3 ) $ — Share-based compensation expense for Partner PSU awards(c) (1