Q1 2024 Yum! Brands Inc Earnings Call

Nadia: Hello everyone and welcome to the Yum! Brands Inc. 2024 first quarter earnings call. My name is Nadia, and I'll be coordinating the call today. If you would like to ask a question at the end of the presentation, please press star followed by one on your telephone keypad. I will now hand over to your host, Matt Morris, Head of Investor Relations, to begin. Matt, please go ahead.

Hello, everyone and welcome to the Yum Brands, Inc. 2024 first quarter earnings call. My name is Nadia and I'll be coordinating the call today.

Speaker Change: If you would like to ask a question at the end of the presentation. Please press star followed by one no telephone keypad.

I will now hand over to haste Matamoros head of Investor Relations to begin ma'am. Please go ahead.

Matt Morris: Thanks, Operator. Good morning, everyone, and thank you for joining us.

Haste Matamoros: Thanks, operator, good morning, everyone and thank you for joining us on our call today are David Gibbs, our CEO, Chris Turner, our CFO and Dave Russell, Our senior Vice President and corporate controller following remarks from David and Chris will open the call to questions before we get started please note that this call includes forward looking statements that are subject to future events and uncertainties that.

Matt Morris: On our call today are David Gibbs, our CEO; Chris Turner, our CFO; and Dave Russell, our Senior Vice President and Corporate Controller. Following remarks from David and Chris, we'll open the call to questions. Before we get started, please note that this call includes forward-looking statements that are subject to future events and uncertainties that could cause our actual results to differ materially from these statements. All forward-looking statements are made only as of the date of this call and should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our filings with the SEC.

Matt Morris: In addition, please refer to our earnings release and the relevant sections of our filings with the SEC to find disclosures, definitions, and reconciliations of non-GAAP financial measures and other metrics used on today's call. Please note that during today's call, all system sales growth and operating profit growth results exclude the impact of foreign currency. On our last earnings call, we announced that we had signed an agreement to acquire 218 KFC franchise restaurants in the UK and Ireland.

Could cause our actual results to differ materially from these statements. All forward looking statements are made only as of the date of this call and should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our filings with the SEC. In addition, please refer to our earnings release and the relevant sections of our filings with the SEC to find disclosures definitions and.

Matt Morris: The transaction closed on April 29th. As a reminder, several of Yum! Brands' business units report on a period calendar basis, including all U.S. and Canada brands, KFC UK, and KFC Australia. For business units that report on a period basis, first quarter same-store sales growth excludes the benefit from the additional day of sales owing to leap day.

Haste Matamoros: Reconciliations of non-GAAP financial measures and other metrics used on today's call. Please note that during today's call all system sales growth and operating profit growth results exclude the impact of foreign currency.

Haste Matamoros: Last earnings call, we announced that we signed an agreement to acquire 218 KFC franchise restaurants in UK and Ireland that transaction closed on April 29.

Haste Matamoros: As a reminder, several of Yum brands business units report on a period calendar basis, including all U S and Canada brands, KFC U K and KFC, Australia for business units that report on a period basis first quarter same store sales growth excludes the benefit from the additional day of sales owing to leap day when forecasting 2024. Please keep in mind this year will <unk>.

David W. Gibbs: When forecasting 2024, please keep in mind this year will include an extra week in the fourth quarter for those entities. For more information on our reporting calendar for each market, please visit the Financial Reports section of the IR website. We are broadcasting this conference call via our website. This call is also being recorded and will be available for playback. We would like to make you aware of upcoming Yum! Investor events and the following.

Haste Matamoros: <unk>, an extra week in the fourth quarter for those entities for more information on our reporting calendar for each market. Please visit the financial reports section of the IR website.

Haste Matamoros: Brian casting this conference call via our website. This call is also being recorded and will be available for playback.

Haste Matamoros: We would like to make you aware of upcoming Yum investor events and the following our second quarter earnings will be released on August six with the conference call on the same day.

David W. Gibbs: Our second quarter earnings will be released on August 6th, with a conference call on the same day. Finally, please mark your calendars for an in-person Taco Bell Consumer Day on December 10th at the Taco Bell headquarters in Irvine, California. Stay tuned for more details and invitations to follow. Now, I'd like to turn the call over to David Gibbs.

Haste Matamoros: Finally, please mark your calendars for an in person to talk about consumer day on December 10, but they're talking about headquarters in Irvine, California stay tuned for more details and invitations to follow now I'd like to turn the call over to David Gibbs.

David W. Gibbs: Thank you, Matt, and good morning, everyone. I'm pleased to report that Yum! grew core operating profit 6% this quarter, despite a challenging operating environment, demonstrating the resilience of our business. As we communicated in our last earnings report, 1Q should represent our most challenging sales quarter this year as we worked through tough year-ago laps, returned to a more normal inflationary environment, and navigated discrete consumer demand pressure. While the impacts of the Middle East conflict have been scattered and difficult to measure, we've begun to see improvement in the most impacted markets.

David W. Gibbs: Thank you, Matt and good morning, everyone.

David W. Gibbs: I'm pleased to report that Yum grew core operating profit, 6% this quarter, despite a challenging operating environment demonstrating the resilience of our business as we communicated last earnings <unk> should represent our most challenging sales quarter. This year as we work through tough year ago Labs returned to a more normal inflationary.

David W. Gibbs: And navigated discrete consumer demand pressures.

David W. Gibbs: While the impacts from the middle East conflict had been scattered and difficult to measure we've begun to see improvement in the most impacted markets.

David W. Gibbs: Taco Bell U.S. outperformed the industry on same-store sales and delivered industry-leading margins, while 1Q unit openings at KFC International set us up for a strong unit growth story in 2024. We continue to make significant progress scaling our proprietary digital and AI-powered platforms and are excited by plans to accelerate deployment. Digital sales continued an upward trajectory, approaching $8 billion, and were up 11% year over year. Through continued kiosk deployment, greater adoption of click and collect, and stable third-party aggregator sales, digital mix improved 5 points and, for the first time ever, represented over 50% of system sales in Q1.

David W. Gibbs: Taco Bell U S outperformed the industry on same store sales and delivered industry, leading margins, while <unk> unit openings at KFC International set us up for a strong unit growth story in 2024.

David W. Gibbs: We continued to make significant progress scaling our proprietary digital and AI powered platforms and are excited by plans to accelerate deployment digi.

David W. Gibbs: Digital sales continued an upward trajectory approaching $8 billion and were up 11% year over year through continued kiosk deployment greater adoption of click and collect and stable third party aggregator sales digital mix improved five points and for the first time ever.

Represented over 50% of system sales in Q1.

David W. Gibbs: We now have $30 billion in annualized digital sales, which by itself would represent one of the largest restaurant companies in the world. Overall, despite a more challenged operating environment, we have reached impressive new milestones and remain on track to deliver on our long-term growth algorithm target of at least 8% core operating profit growth for the full year. Now, I'll discuss our Relevant, Easy, and Distinctive Brands, or REDD for short, followed by our Unrivaled Culture and Talent and Good Growth Strategies.

David W. Gibbs: We now have $30 billion in annualized digital sales, which by itself would represent one of the largest restaurant companies in the world.

David W. Gibbs: Overall, despite a more challenging operating environment, we have reached impressive new milestones and remain on track to deliver on our long term growth algorithm target of at least 8% core operating profit growth for the full year.

David W. Gibbs: Now I'll discuss our relevant easy and distinctive brands or red for short followed by our unrivaled culture and talent and good growth strategy.

David W. Gibbs: Chris will then provide an update on our first quarter results, followed by our bold restaurant development, unmatched operating capabilities, and balance sheet position. Starting with the KFC division, which accounts for 51% of our divisional operating profit. KFC grew system sales 4% this quarter, owing to an 8% unit growth and a 2% decline in same-store sales. The same-store sales pressure was partially attributable to impacts from the conflict in the Middle East, which have begun to ease, and we expect a two-year trend for KFC International overall to accelerate in the second quarter. We saw strong top-line growth in other parts of the world, including Latin America, Africa, and Greater Asia.

David W. Gibbs: Chris will then provide an update on our first quarter results followed by our bold restaurant development unmatched operating capabilities and balance sheet position.

David W. Gibbs: System sales in Latin America grew 22% on the heels of a strong marketing calendar and the continued success of the KFC Original Nugget. In Africa, system sales grew 11% thanks to 5% same-store sales growth driven by product innovation and 6% net new unit growth. In Greater Asia, where system sales grew 8%, we recently partnered with a new franchisee in Korea who is driving transaction growth with a calendar focused on core, value, and expanding consumer access, which resulted in a 26% growth in same-store sales. In the U.S., same-store sales were pressured from unfavorable weather events and chicken-value promotions from QSR competitors.

David W. Gibbs: Starting with the KFC division, which accounts for 51% of our divisional operating profit.

David W. Gibbs: KFC grew system sales, 4% this quarter, owing to an 8% unit growth and a 2% decline in same store sales.

David W. Gibbs: The same store sales pressure was partially attributable to impacts from the conflict in the middle East, which have begun to ease and we expect the two year trend for KFC international overall to accelerate in the second quarter.

David W. Gibbs: We saw strong topline growth in other parts of the World, including Latin America Africa, and Greater Asia system sales in Latin America grew 22% on the heels of a strong marketing calendar and continued success of the KFC original Nuggets.

David W. Gibbs: In Africa system sales grew 11% to 5% same store sales growth driven by product innovation and 6% net new unit growth.

David W. Gibbs: In greater Asia, where system sales grew 8%. We recently partnered with a new franchisee in Korea, who is driving transaction growth with a calendar focused on core value and expanding consumer access which resulted in a 26% growth in same store sales.

David W. Gibbs: At KFC U S same store sales were pressured from unfavorable weather events and chicken value promotions from our competitors.

David W. Gibbs: Moving on to the Taco Bell division, which represents 35% of our divisional operating profit and 75% of our U.S. divisional operating profit. System sales at Taco Bell U.S. grew 4%, led by 2% same-store sales growth and a strong outcome on top of last year's 9% same-store sales growth. Sales improved throughout the quarter after difficult weather events in January.

David W. Gibbs: Moving on to the Taco Bell Division, which represents 35% of our divisional operating profit and 75% of our U S divisional operating profit.

David W. Gibbs: System sales at Taco Bell U S grew 4% led by 2% same store sales growth and a strong outcome on top of last year's 9% same store sales growth sales improved throughout the quarter after difficult weather events in January.

David W. Gibbs: Taco Bell focused on key levers within its magic formula to drive growth, including building brand buzz, providing value to its consumers, and expanding into new category entry. We know that when we execute on this magic formula, Taco Bell puts itself at the center of the cultural conversation. There was no better example of this than the Live Mas Live event Taco Bell held in Las Vegas to share its upcoming innovation calendar, an industry first event.

David W. Gibbs: Talk about focused on key levers within its magic formula to drive growth, including building brand buzz providing value to our consumers and expanding into new category entry points.

We know that when we execute on this magic Formula Taco Bell puts itself at the center of the cultural conversation.

David W. Gibbs: There was no better example of this than the live Mas live event Taco Bell held in Las Vegas to share its upcoming innovation calendar and industry first event.

David W. Gibbs: Of course, it was not surprising that the fast company named Taco Bell the most innovative company in dining and number eight overall. Early in the quarter, the team launched a new Cravings Value menu and ended the quarter with a successful launch of the Chicken Cantina menu. The Cravings Value menu features industry-leading value with 10 items priced under $3, providing consumers with craveable everyday value offers.

David W. Gibbs: Of course, it was not surprising that fast company named Taco Bell the most innovative company in dining and number eight overall.

David W. Gibbs: Early in the quarter the team launched a new cravings value menu and ended the quarter with the successful launch of the chicken cantina menu. The cravings value menu features industry, leading value with 10 items priced under $3, providing consumers with craveable everyday value offering.

David W. Gibbs: Nearly one-third of transactions contain an item off the cravings value menu and, when purchased, 80% have at least one other item added, translating to a nearly 10% check uplift compared to non-cravings value menu checks. The impressive performance of such product launches is compounded by Taco Bell's ability to deliver industry-leading margins on top of a great consumer experience. At Taco Bell International, system sales grew 6% this quarter. The team is focused on building brand and category awareness globally.

David W. Gibbs: Only one third of transactions contained in item off the cravings value menu and when purchased 80% have at least one other item added translating to a nearly 10% check uplift compared to non cravings value menu checks.

The impressive performance of such product launches is compounded by Taco Bell's ability to deliver industry, leading margins on top of a great consumer experience.

David W. Gibbs: Taco Bell International system sales grew 6% this quarter. The team is focused on building brand and category awareness globally. This included markets, such as Canada, and Latin America, where the team elevated the core menu and launched the chicken cantina menu to expand their consumer base.

David W. Gibbs: This included markets such as Canada and Latin America, where the team elevated the core menu and launched the Chicken Cantina menu to expand their consumer base. Next, the Pizza Hut division, which comprises 15% of our divisional operating profit. During the first quarter, system sales declined 4% with 5% unit growth and a 7% decline in same-store sales. The year-over-year growth rate in same-store sales was suppressed from difficult year-ago periods and the ongoing impact of the conflict in the Middle East.

David W. Gibbs: Next at the Pizza Hut Division, which comprises 15% of our divisional operating profit.

David W. Gibbs: During the first quarter system sales declined 4% with 5% unit growth and a 7% decline in same store sales the year over year growth rate in same store sales with suppressed from difficult year ago labs, and the ongoing impact from the conflict in the middle East. The team continued to focus on the individual meal occasion this quarter with the India.

David W. Gibbs: The team continued to focus on the individual meal occasion this quarter, with the India market launching the Meltz platform. At Pizza Hut U.S., same-store sales declined 6% as we lapped the launch of the Melt and Big New Yorker Pizza. However, the two-year trend was positive and improved from last quarter. Lastly, at the Habit Burger Grill, for the first quarter, system sales declined 2% with 6% unit growth.

David W. Gibbs: <unk> launching the <unk> platform.

David W. Gibbs: At Pizza Hut U S same store sales declined 6% as we lap the launch of melt and Big New York a pizza. However, the two year trend was positive and improved from last quarter.

David W. Gibbs: Lastly, at the habit Burger grill for the first quarter system sales declined 2% with 6% unit growth.

David W. Gibbs: Margin trends improved throughout the quarter with a combination of initiatives leading to a 60 basis point improvement in store level margins year over year. Now I'll turn to our sustainable growth strategy, starting with our people pillar. Effective June 1st, Alex Barsk will join KFC Global as the new Chief Financial Officer. Alex is joining from Pizza Hut, where she most recently served as global CFO. Alex joined Peatside in 2015 and has held several leadership roles across strategy, finance, development, and supply chain. His transition is another great example of Yum!

David W. Gibbs: Margin trends improved throughout the quarter with a combination of initiatives leading to a 60 basis point improvement in store level margins year over year.

David W. Gibbs: Now I'll turn to our good growth strategy, starting with our people pillar.

David W. Gibbs: Effective June 1st Alex Bar will joined KFC global as our new Chief Financial Officer.

David W. Gibbs: Alex is joining from Pizza hut, where she most recently served as global CFO.

David W. Gibbs: Alex joined Pizza out in 2015 and has held several leadership roles across strategy finance development and supply chain.

Speaker Change: Alex This transition is another great example of Yum leveraging its talent across brands to help share unique learnings and experiences.

David W. Gibbs: leveraging its talent across brands to help share unique learnings and experiences. To round out our Peeper Pillar, I'd like to congratulate and thank Yum's Senior Vice President of Finance, Corporate Controller, and my friend, Dave Russell, who recently celebrated his 25th anniversary at Yum, with today marking his 100th quarterly earnings announcement. Dave has been with the company since 1999, always serving as a trusted leader who brings his deep knowledge and analytical perspective to our finance and accounting function.

Speaker Change: To round out our people pillar I would like to congratulate and thank <unk> senior Vice President of Finance corporate controller, and my friend, Dave Russell, who recently celebrated its 25th anniversary Ed with today, marking his 100th quarterly earnings announcement date.

Speaker Change: Dave has been with the company since 1999 always serving as a trusted leader who brings his deep knowledge and analytical perspective to our finance and accounting functions.

David W. Gibbs: Thank you Dave for your dedication to our growth over the last 25 years, and I look forward to your continued partnership in the future. Before I hand it over to Chris, I would like to share a few thoughts on the future of our digital and technology strategy given that we achieved an important milestone this quarter with more than half of our sales coming from digital. You'll recall that the first phase of our journey to become the leading global digital restaurant company began in earnest in 2019.

Speaker Change: Dave for your dedication to our growth over the last 25 years and I look forward to your continued partnership in the future.

Speaker Change: Before I hand, it over to Chris I would like to share a few thoughts on the future of our digital and technology strategy. Given we achieved an important milestone this quarter with more than half of our sales coming from digital youll.

David W. Gibbs: That first phase focused on building or acquiring a comprehensive suite of owned platforms, spanning easy experiences, easy operations, and easy insights, and accelerating the deployment of those platforms across our brands and markets. While we still have further to go in deploying these platforms, we have achieved critical mass in several areas. Taco Bell U.S., one of our twin growth engines, has achieved the most extensive deployment of key platforms, including the Poseidon POS system, the Yum!

Speaker Change: Youll recall that the first phase of our journey to become the leading global digital restaurant company began in earnest in 2019.

David W. Gibbs: e-commerce platform, and the AIM inventory management platform. Our other primary growth engine, KFC International, has been accelerating a rollout of those same platforms and is our leader in deploying in-store kiosk technology. Pizza Hut, of course, has been our leader in deploying Dragontail to thousands of restaurants around the globe.

Christopher Lee Turner: That first phase focused on building or acquiring a comprehensive suite of owned platforms spanning easy experiences easy operations and easy insights and accelerating deployment of those platforms across our brands and markets.

Speaker Change: While we still have further to go in deploying these platforms, we have achieved critical mass in several areas.

Speaker Change: Taco Bell U S. One of our twin growth engines has achieved the most extensive deployment of key platforms, including the Poseidon Pos system. The <unk> E Commerce platform and the aim inventory management platform.

Speaker Change: Our other primary growth engine KFC international that's been accelerating the rollout of those same platforms and as our leader in deploying in store kiosk technology.

Speaker Change: Pizza Hut of course has been our leader in deploying Dragon tale to thousands of restaurants around the globe.

David W. Gibbs: Behind the scenes, our global data hub houses data generated from these platforms. The deployment of our capabilities in this first phase of our journey has driven a dramatic increase in our digital sales from approximately 20% in 2019 to over 50% now. The impact of this growth has been significant.

Speaker Change: Behind the scenes our global data hub houses data generated from these platforms.

Speaker Change: The deployment of our capabilities in this first phase of our journey has driven the dramatic increase in our digital sales from approximately 20% in 2019 to over 50% now.

Speaker Change: The impact of this growth has been significant to share just a couple of examples of impact our consumers enjoy more convenient and frictionless experiences leading to higher frequency and check sizes are franchisees enjoy significant productivity benefits as their team members no longer spend time, taking orders and payments for <unk>.

David W. Gibbs: To share just a couple of examples of impact, our consumers enjoy more convenient and frictionless experiences, leading to higher frequency and check size. Additionally, our franchisees enjoy significant productivity benefits as their team members no longer spend time taking orders and payments for half of all transactions, leading to stronger unit economics. We believe we are still only scratching the surface of the full value creation potential of our capability. While the first phase of work in deploying our platforms will continue, given the critical mass we have achieved, we have initiated a second, parallel phase in our technology journey.

Speaker Change: Half of all transactions, leading to stronger unit economics.

Speaker Change: We believe we are still only scratching the surface of the full value creation potential of our capabilities.

Speaker Change: While the first phase of work in deploying our platforms will continue given the critical mass. We have achieved we have initiated a second parallel phase in our technology journey. This second phase will focus on maximizing the value creation potential of our platforms through the acceleration of AI capabilities in combination with fully let.

David W. Gibbs: This second phase will focus on maximizing the value creation potential of our platforms through the acceleration of AI capabilities in combination with fully leveraging the immense data assets we now own. With our platform-driven approach, we can now more easily integrate AI capabilities across our digital ecosystem. We currently have more than 40 AI initiatives in progress across the company, spanning marketing, operations, insights, engineering, and our internal back-office function. While many of these initiatives will remain confidential for now, one example that we have shared publicly is Voice AI to enhance our consumer experience. We've been testing this capability at the drive-thru at five Taco Bell stores in California.

Speaker Change: Bridging the immense data assets, we now own.

Speaker Change: With our platform driven approach, we can now more easily integrate AI capabilities across our digital ecosystem.

Speaker Change: We currently have more than 40 AI initiatives in progress across the company spanning marketing operations insights engineering and our internal back office function.

Speaker Change: While many of these initiatives will remain confidential for now. One example that we have shared publicly is voice AI to enhance our consumer experience. We've been testing this capability at the drive thru and five Taco Bell stores in California.

David W. Gibbs: We are expanding that test to 30 stores in Q2 based on positive consumer feedback. Another example is our piloting of AI-powered technology in our super app, Restaurant General Manager Support Tool, making it even easier and faster for managers to access critical operational information to make better decisions. And, of course, our Dragontail platform was the first AI-enabled next-gen restaurant operational system to enhance the consumer and team member experience in a multi-channel fulfillment environment.

Speaker Change: We are expanding that test to 30 stores in Q2 based on positive consumer feedback.

Speaker Change: Another example is our piloting of AI powered technology, and our Super App restaurant General manager support tool, making it even easier and faster for managers to access critical operational information to make better decisions.

Speaker Change: Of course, our drag Intel platform was the first AI enabled nextgen restaurant operational system to enhance the consumer and team member experience and a multichannel fulfillment environment. As an example of how we are elevating the use of our data assets in Q1, we launched the Red 360 U S.

David W. Gibbs: As an example of how we are elevating the use of our data assets, in Q1, we launched the REDD 360 U.S. Consumer Data Insights System. As of Q1, both Pizza at U.S. and Taco Bell U.S. have integrated into the system, and KFC U.S. will integrate in the second quarter.

Speaker Change: Tumor data insights system.

Speaker Change: As of Q1, both Pizza Hut U S and talk about U S have integrated into the system and KFC U S will integrate in the second quarter.

David W. Gibbs: This system allows us to leverage insights into consumer behavior across our brands in the U.S. After full deployment, REDD 360 will be the first scaled, cross-brand U.S. restaurant consumer data engine in the quick service industry and will pave the way for unique insights and personalization opportunities on digital and social channels. For those who may have missed it, Joe Park, our Chief Digital and Technology Officer, was recently interviewed in the Wall Street Journal, bringing to life many of these plans as we become more focused on pursuing AI and data-driven innovation.

Speaker Change: This system allows us to leverage insights into consumer behavior across our brands in the U S.

Speaker Change: After full deployment Red 360 will be the first scaled cross brand U S restaurant consumer data engine in the quick service industry and will pave the way for unique insights and personalization opportunities on digital and social channels.

For those who may have missed it Joe Park.

Speaker Change: Chief Digital and Technology Officer, who was recently interviewed in the Wall Street Journal, bringing to life. Many of these plans as we become more focused on pursuing AI and data driven innovation.

David W. Gibbs: As we do all of this, we are also continually innovating how our technology teams work internally to better leverage our scale so that we can continue to bend the curve on the net investment impact of these digital and technology initiatives. To sum it up, we are excited about having ramped up this second phase in our journey and are doubling down in pursuing the ultimate goal of our digital and technology strategy, which is to better serve our franchisees, providing them with more, better, faster, cheaper, and safer technology while simultaneously delighting consumers and maximizing Yum!

Speaker Change: As we do all of this we are also continually innovating how our technology teams work internally to better leverage our scale. So that we can continue to bend the curve on the net investment impact of these digital and technology initiatives.

Speaker Change: To sum it up we are excited about having ramped up this second phase in our journey and are doubling down in pursuing the ultimate goal of our digital and technology strategy, which is to better serve our franchisees, providing them with more better faster cheaper and safer technology while simultaneously.

Speaker Change: Tenuously delighting consumers and maximizing shareholder returns.

David W. Gibbs: shareholders' returns. We will continue to provide updates on both phases of our journey on future calls organized around our easy capability framework. In closing, as I look back over the quarter, I'm proud of our teams and their ability to navigate any environment as our brands stand for unmatched value and convenience, providing a range of products and price points to meet any consumer's needs. A resilient business model, coupled with our strategy to leverage our technology platforms on a global scale, gives me confidence we will continue to improve both the franchisee and the Yum! economics. Looking ahead, our initiatives to become an even more nimble and data-driven organization are underway, and I'm excited for the shareholder value we will create. With that, Chris, over to you.

Speaker Change: We will continue to provide updates on both phases of our journey on future calls organized around our easy capability framework.

Speaker Change: In closing as I look back over the quarter I'm proud of our teams and their ability to navigate any environment as our brand stand for unmatched value and convenience, providing a range of products and price points to meet any consumers' needs.

Speaker Change: Our resilient business model, coupled with our strategy to leverage our technology platforms on a global scale gives me confidence we will continue to improve both franchisee and Yum economics looking ahead, our initiatives to become an even more nimble and data driven organization are underway and I am excited for the shareholder value we will creep.

Speaker Change: Right.

With that Chris over to you.

Christopher Lee Turner: Thank you, David. And good morning, everyone. Today, I'll discuss our financial results, our bold restaurant development and unmatched operating capability growth drivers, followed by an update on our balance sheet and capital strategy. Starting with our results, first quarter system sales grew by 2%, driven by 6% unit growth. As we communicated on our last call, we expected the first quarter to be our most challenged from a same-store sales perspective due to the prior year lag, a return to a more normal inflationary environment, and discreet consumer demand pressures, including markets impacted by the Middle East conflict.

Christopher Lee Turner: Thank you David and good morning, everyone today, I'll discuss our financial results, our bold restaurant development and unmatched operating capability growth drivers followed by an update on our balance sheet and capital strategy.

Christopher Lee Turner: Starting with our results first quarter system sales grew by 2% driven by 6% unit growth.

Christopher Lee Turner: As we communicated on our last call we expected the first quarter to be our most challenged from a same store sales perspective due to prior year laps are returned to a more normal inflationary environment and discrete consumer demand pressures, including markets impacted by the middle East conflict.

Christopher Lee Turner: We believe the markets most impacted by the conflict collectively created a low single-digit headwind on Yum's overall Q1 same-store sales. Despite these challenges, I am pleased to report that Yum! delivered 6% core operating profit growth, exceeding our internal plan and demonstrating the resilience of our profit model. First quarter, ex-special, general, and administrative expenses were $265 million, down 4% year over year, a continuation of the G&A momentum we had in the fourth quarter.

Christopher Lee Turner: We believe the markets most impacted by the conflict collectively created a low single digit headwind on young overall Q1 same store sales.

Christopher Lee Turner: Despite these challenges I am pleased to report Yum delivered 6% core operating profit growth exceeding our internal plan and demonstrating the resilience of our profit model.

Christopher Lee Turner: First quarter ex special general and administrative expenses were $265 million down 4% year over year, a continuation of the G&A momentum we had in the fourth quarter.

Christopher Lee Turner: Reported GNA was $286 million and included $21 million in special expenses related to ongoing resource optimization, which we expect to generate additional savings in the second half. Reported operating profit included a two-point impact in the quarter from foreign currency translation. First quarter ex-special EPS was $1.15, which includes negative after-tax impacts of $0.08 from investment losses and $0.03 from foreign currency translation.

Christopher Lee Turner: Reported G&A was $286 million and includes $21 million and special expense related to ongoing resource optimization, which we expect to generate additional savings in the second half.

Christopher Lee Turner: Reported operating profit included a two point impact in the quarter from foreign currency translation.

Christopher Lee Turner: First quarter ex special EPS was $1 15, which includes negative after tax impacts of <unk> <unk> from investment losses, and <unk> <unk> from foreign currency translation.

Christopher Lee Turner: As a reminder, we shared on our last call the intent to purchase 218 KFC UK and Ireland stores. We're excited to report we officially closed this acquisition at the end of April. These stores have average unit volumes above $2 million and healthy store-level cash margins. We expect the addition of these units to provide approximately $40 million of incremental EBITDA in the 12 months after acquisition, while the benefit to our operating profit will be largely offset over the next several years due to depreciation and amortization, including amortization of reacquired franchise rights. Now, let me share greater detail on our first quarter unit growth in the context of our bold restaurant development growth driver. Yum!

Christopher Lee Turner: As a reminder, we shared on our last call the intent to purchase 218, KFC UK and Ireland stores. We're excited to report we officially closed this acquisition at the end of April.

Christopher Lee Turner: These stores have average unit volumes above $2 million and healthy store level cash margins. We expect the addition of these units to provide approximately $40 million of incremental EBITDA in the 12 months after acquisition, while the benefit to our operating profit will be largely offset over the next several years.

Christopher Lee Turner: Due to depreciation and amortization, including amortization of reacquired franchise rights.

Christopher Lee Turner: Now, let me share greater detail on our first quarter unit growth in the context of our bold restaurant development growth driver.

Christopher Lee Turner: opened over 800 units in the first quarter. We reached the incredible milestone of opening KFC's 30,000th restaurant globally, as the number one brand on Entrepreneur Magazine's Top Global Franchise Rankings. KFC continues to demonstrate strong desirability among global franchisees, with a new store opening every three hours. We continue to see an incremental store opportunity of 50,000 KFCs over the long term. Across the global system, the outlook for development in 2024 is strong.

Christopher Lee Turner: <unk> opened over 800 units in the first quarter.

Christopher Lee Turner: We reached the incredible milestone of opening Kfc's 30000th restaurant globally.

Christopher Lee Turner: As the number one brand on entrepreneur magazine's top global franchise rankings.

Christopher Lee Turner: KFC continues to demonstrate strong desirability among global franchisees with a new store opening every three hours.

Christopher Lee Turner: We continue to see an incremental store opportunity of 50000 kfc's over the long term.

Christopher Lee Turner: Across the global system the outlook for development in 2024 is strong.

We expect to continue to open units and a broad range of markets, which last year included over 100 markets and to cross the 60000 unit milestone.

Christopher Lee Turner: We expect to continue to open units in a broad range of markets, which last year included over 100 markets, and to cross the 60,000-unit milestone, further solidifying Yum's position as the world's leading multi-brand restaurant franchisor. There are several reasons we remain confident in these trends.

Christopher Lee Turner: Further solidifying <unk> position as the world's leading multi brand restaurant franchise or.

Christopher Lee Turner: There are several reasons, we remain confident in these trends.

Christopher Lee Turner: First, we entered 2024 with broad-based development momentum. In Q1, we grew units across 81 brand-country combinations. Second, we have large, committed franchisees who have entered into more unit development commitments for 2024 than in each of the prior two years. Approximately 80% of 2024 expected new builds for KFC outside of China are part of these development commitments. Third, the development white space remains massive. We have just 6% of the global QSR market. China is a prolific developer and serves only one-third of the Chinese population.

Christopher Lee Turner: First we entered 2024 with broad based development momentum.

Christopher Lee Turner: In Q1, we grew units across 81 brand country combinations.

Christopher Lee Turner: We have large committed franchisees, who have entered into more unit development commitments for 2024, then in each of the prior two years.

Christopher Lee Turner: Approximately 80% of 2020 for expected new builds for KFC outside of China are part of development commitments.

Christopher Lee Turner: Third the development White space remains massive we have just 6% of the global <unk> market.

Christopher Lee Turner: China is a prolific developer and serves only one third of the China population.

Christopher Lee Turner: In India, which is the fastest growing global economy, KFC and Pizza Hut have been the fastest and third fastest growing QSR chains, respectively, since 2019. Finally, our brand's unit economics remain attractive across key markets, where scale and first mover advantages put our franchisees in a position of strength. Scale leads to unique advantages, including access to alternative financing solutions, Dedicated Development Teams, and In-Depth Market Knowledge. Scale also offers Operating Advantage. For instance, our largest partner, Yum!

Christopher Lee Turner: In India, which is the fastest growing global economy, KFC and pizza hut have been the fastest and third fastest growing <unk> change respectively. Since 2019.

Finally, our brand's unit economics remain attractive across key markets, where scale and first mover advantages put our franchisees and a position of strength.

Scale leads to unique advantages, including access to alternative financing solutions dedicated development teams and in depth market knowledge scale also offers operating advantages for instance, our largest partner Yum, China has AI enabled digital tools to allow its restaurant general manager.

Christopher Lee Turner: China, has AI-enabled digital tools to allow its restaurant general managers to oversee multiple restaurants, creating unmatched savings that can be passed to consumers. The Serrano Group, based in Latin America, and RamCar, based in the Philippines, run their own poultry processing facilities, in addition to distribution capabilities, giving them cost and reliability advantages.

Christopher Lee Turner: Yours to oversee multiple restaurants.

Christopher Lee Turner: Creating unmatched savings that can be passed to consumers.

Christopher Lee Turner: The Serrano group based in Latin America, and Ram car based in the Philippines run their own poultry processing facilities. In addition to distribution capabilities, giving them cost and reliability advantages.

Christopher Lee Turner: At a brand level, KFC has food innovation kitchens in Canada, the U.S., Latin America, and the Caribbean, the United Kingdom, Thailand, Australia, South Africa, India, and Singapore. Perhaps underappreciated, our global innovation capabilities are real sources of differentiation. Moving now to the digital and technology front, recall that our vision is to empower our franchisees with leading-edge technology solutions and advantaged economics. As David put it, we want to deliver more, better, faster, cheaper, and safer technology to our franchise partners. We are advantaged by owning important foundational platforms such as our Poseidon POS system. Yum, e-commerce, Dragon Tail.

Christopher Lee Turner: At a brand level KFC has food innovation kitchens in Canada, The U S Latin America and the Caribbean.

Christopher Lee Turner: United Kingdom, Thailand, Australia, South Africa, India and Singapore.

Christopher Lee Turner: Perhaps underappreciated, our global innovation capabilities are real sources of differentiation.

Christopher Lee Turner: Moving now to the digital and technology front recall that our vision is to empower our franchisees with leading edge technology solutions with advantaged economics.

Christopher Lee Turner: As David put it we want to deliver more better faster cheaper and safer technology to our franchise partners.

Christopher Lee Turner: We are advantaged by owning important foundational platforms, such as our Poseidon Pos system Yum.

Christopher Lee Turner: <unk> E Commerce Dragon tail.

Christopher Lee Turner: The Super App and our Global Data Hub, and the impact of these platforms will grow exponentially as we deploy more of them to more stores. Data is becoming a crucial differentiator, enabling us and our franchisees to generate better insights and make better decisions. On this front, quick service restaurants will benefit disproportionately because of the high frequency nature of our consumer visits, which results in more data. Within QuickService, a few characteristics will separate us from our competitors, including our multi-brand portfolio, our scale and global footprint, our ownership of key platforms, and the increasing integration between our platforms.

Christopher Lee Turner: Super App and our global data hub and the impact of these platforms will grow exponentially as we deploy more of them to more stores.

Christopher Lee Turner: Data is becoming a crucial differentiator, enabling us and our franchisees to generate better insights and make better decisions.

Christopher Lee Turner: On this front quick service restaurants will benefit disproportionately because of the high frequency nature of our consumer visits which results in more data.

Christopher Lee Turner: Within quick service, a few characteristics will separate us from our competitors, including our multi brand portfolio, our scale and global footprint, our ownership of key platforms and the increasing integration between our platforms.

Christopher Lee Turner: We will leverage our data for insights and to drive more effective marketing and loyalty engagement, and we will deploy advanced AI tools across all aspects of our business. As we leverage our scale more and more in these areas, we can be faster, cheaper, and safer through consistency and standardization across our environment. Let me now discuss the digital and technology accomplishments for Q1 across our Easy Experiences, Easy Operations, and Easy Insights pillars.

Christopher Lee Turner: We will leverage our data for insights and to drive more effective marketing and loyalty engagement and we will deploy advanced AI tools to all aspects of our business.

Christopher Lee Turner: As we leverage our scale more and more in these areas, we can be faster cheaper and safer through consistency and standardization across our environment.

Christopher Lee Turner: Let me now discuss the digital and technology accomplishments for Q1 across our easy experiences easy operations and easy insights pillars.

Christopher Lee Turner: Beginning with our Easy Experiences pillar, we continued to onboard Pizza Hut US to the Yum! e-commerce platform with a full cutover planned by Q3, followed by three Pizza Hut International Markets by year end. For Taco Bell U.S., where the Yum! Commerce platform is fully operational,

Christopher Lee Turner: Beginning with our easy experience. This pillar, we continued to onboard pizza hut U S to the young E Commerce platform with a full cutover planned by Q3.

Christopher Lee Turner: Following by three Pizza hut international markets by year end.

Christopher Lee Turner: For Taco Bell U S, where the young commerce platform is fully operational we have accelerated viral promotions and have seen Taco Bell's digital ordering capacity increased tenfold relative to the legacy system.

Christopher Lee Turner: We have accelerated viral promotions and have seen Taco Bell's digital ordering capacity increase tenfold relative to the legacy system. Additionally, within Easy Operations, the expansion of our world-class technology products and platforms continues. We expanded Poseidon to 1,800 Taco Bell U.S. restaurants, bringing our total to over 7,000 restaurants. We also onboarded over 500 Pizza Hut restaurants onto the Dragon Tail AI platform, bringing our system total to over 7,000 restaurants. In the near future, we plan to roll out Dragontail's Kitchen Display System and Poseidon in our KFC U.S. restaurants.

Christopher Lee Turner: Within easy operations, the expansion of our World class technology products and platforms continued.

Christopher Lee Turner: We expanded Poseidon to 1800, Taco Bell U S restaurants, bringing our total to over 7000 restaurants, we on boarded over 500 pizza hut restaurants onto the Dragon Teo AI platform, bringing our system total to over 7000 restaurants.

Christopher Lee Turner: In the near future, we plan to nationally rollout Dragon Tales kitchen display system, and Poseidon to our KFC U S restaurants.

Christopher Lee Turner: Finally, our custom-built Super App, which provides smart, automated routine management tools for our restaurant managers, is now used in nearly 9,500 Pizza Hut and KFC restaurants, with significant expansion plans underway for KFC. For the third pillar of our Easy Strategy, Easy Insights, KFC and Pizza Hut have continued to scale a new experience management program, allowing the brands to draw insights from an expanded source of consumer reviews across digital channels, including third-party aggregators and social media, in addition to guest survey responses. KFC is now live in 10,000 restaurants and has seen a five-fold increase in per-store data points. Pizza Hut expanded this service to 7,000 restaurants across more than 50 countries.

Christopher Lee Turner: Finally, our custom built Super App, which provides smart automated routine management tools for our restaurant managers is now used in nearly 9500 pizza hut and KFC restaurants with significant expansion plans underway for KFC for the third pillar of our easy strategy easy insights KFC and pizza.

Christopher Lee Turner: Have continued to scale, a new experienced management program, allowing our brands to draw insights from an expanded source of consumer reviews across digital channels, including third party Aggregators and social media. In addition to guest survey responses KFC.

Christopher Lee Turner: KFC is now live in 10000 restaurants and has seen a fivefold increase in per store data points Pizza hut expanded this service to 7000 restaurants across more than 50 countries.

Christopher Lee Turner: Talking about all of the tremendous advancements underway excites me about the future. This work will be vital as we embark on further innovation behind voice AI, restaurant automation, and better leveraging our loyalty program. Next, I'll provide an update on our balance sheet and liquidity position. Net capital expenditures for the quarter were $38 million, reflecting $49 million in gross capex and $11 million in re-franchising revenues. Our net leverage ratio ended the quarter at 4.1X. In the quarter, we sold our minority investment in Debiani for $104 million, representing a $73 million increase in value since acquisition.

Speaker Change: Talking about all of the tremendous advancements underway excites me about the future.

Speaker Change: This work will be vital as we embark on further innovation behind voice AI restaurant automation and better leveraging our loyalty programs.

Christopher Lee Turner: Our cash balance ended at $652 million, reflecting proceeds from the Debiani investment sale and modest accumulation in cash to finance the KFC UK acquisition. With the KFC UK deal behind us, our cash balance will return to a normalized rate of around $400 million, excluding the un-repatriated Debiani proceeds. Thereafter, with no significant debt maturities in 2024 or 2025, we plan to use our excess free cash flow primarily to fund share repurchases, absent accretive investments we choose to make.

Speaker Change: Next I'll provide an update on our balance sheet and liquidity position net capital expenditures for the quarter were $38 million, reflecting $49 million in gross capex and $11 million in Refranchising proceeds.

Speaker Change: Our net leverage ratio ended the quarter at $4 One X.

Speaker Change: In the quarter, we sold our minority investment in Debbie Ani for $104 million.

Speaker Change: Representing a $73 million increase in value since acquisition.

Speaker Change: Our cash balance ended at $652 million, reflecting proceeds from the Debbie any investment sale.

Speaker Change: And modest accumulation and cash to finance the KFC UK acquisition.

With the KFC UK deal behind Us our cash balance will return to a normalized rate of around $400 million excluding.

Speaker Change: Excluding the <unk> repatriated Debbie any proceeds.

Speaker Change: Thereafter, with no significant debt maturities in 2024 or 2025, we plan to use our excess free cash flow primarily to fund share repurchases absent accretive investments we choose to make.

Christopher Lee Turner: I will reiterate that our capital priorities are guided by maximizing shareholder value. This includes investing in the business, maintaining a resilient balance sheet, offering a competitive dividend, and returning excess cash to our shareholders. Subsequent to the quarter end, we renewed our Pro Rata Credit Facility, including our Revolving Credit Facility and Term Loan A. We were pleased to renew the $2 billion facility with the same pricing and terms that we achieved in 2021, while also increasing the revolver from $1.25 billion to $1.5 billion.

I'll reiterate that our capital priorities are guided by maximizing shareholder value.

Speaker Change: This includes investing in the business, maintaining a resilient balance sheet.

Speaker Change: Offering a competitive dividend and returning excess cash to our shareholders subsequent to the quarter end, we renewed our pro rata credit facility, including our revolving credit facility and term loan a.

We were pleased to renew the $2 billion facility with the same pricing and terms that we achieved in 2021, while also increasing the revolver from $1 25 billion to $1 5 billion.

Christopher Lee Turner: Now, let me discuss our latest outlook on full year 2024. We are confident that 2024 will showcase a strong unit development story at or above 5% unit growth, led by KFC International as franchisees capitalize on our brand's attractive payback. In the U.S., Taco Bell continues to balance core everyday value to cater to a more discerning consumer across income groups with premium innovation to attract new consumers. We expect full-year Taco Bell company-operated margins to be in the range of 23 to 24 percent. Excluding the 53rd week, we now expect X special GNA to be flat to down slightly for the year, including incremental GNA associated with the KFC UK acquisition.

Now, let me discuss our latest outlook on full year 2024.

Speaker Change: We are confident that 2024 will showcase a strong unit development story at or above 5% unit growth.

Speaker Change: Led by KFC International as franchisees capitalize on our brands attractive paybacks.

Speaker Change: In the U S. Taco Bell continues to balance core everyday value to cater to a more discerning consumer across income groups with premium innovation to attract new consumers.

Speaker Change: We expect full year Taco Bell company operated margins to be in the range of 23% to 24%.

Speaker Change: Excluding the 50 <unk> week, we now expect ex special G&A to be flat to down slightly for the year, including incremental G&A associated with the KFC UK acquisition.

Christopher Lee Turner: Finally, we are confident we will deliver at least 8% core operating profit growth, excluding the benefit of the 53rd. To close, I am incredibly proud of the progress we have made over the last few years in the areas to which we have dedicated our focus and internal resources. Our team continues to manage through industry challenges to position us for a strong year and deliver our long-term operating profit plan, reinforcing the resilience of our business, the strength of our talent, and commitment to our shareholders.

Speaker Change: Finally, we are confident we will deliver at least 8% core operating profit growth excluding the benefit of the 50 <unk> week.

Speaker Change: To close I am incredibly proud of the progress we have made over the last few years in the areas to which we dedicated our focus and internal resources.

Speaker Change: Our team continues to manage through industry challenges to position us for a strong year and deliver our long term operating profit plan reinforcing the resilience of our business strength of our talent and commitment to our shareholders.

Christopher Lee Turner: Going forward, we are moving to solidify ourselves as the multi-brand franchisor of choice through a more efficient, adaptable, data-driven organization. We are only in the early innings of unlocking the value of our unmatched data, which will help power our aspirations and deliver sustained, above-market shareholder returns. With that, operator, we are ready to take any questions.

Speaker Change: Going forward, we are moving to solidify ourselves as the multi brand franchise or of choice through a more efficient adaptable data driven organization. We are only in the early innings of unlocking the value of our unmatched data, which will help power our aspirations and deliver sustained above market shareholder returns.

Speaker Change: With that operator, we are ready to take any questions.

Operator: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to remove your question, please press star followed by two. Additionally, when we plan to ask you a question, please ensure your phone is unmuted locally. We ask you please limit yourself to one question. Our first question goes to Jon at Tower of Citigroup. Jon, please go ahead. Your line is open.

Speaker Change: Thank you if you would like to ask a question. Please press star followed by one on your telephone Keith.

Speaker Change: Pat if you would like to tell me. If your question. Please press star followed by <unk>.

Speaker Change: While the tank ask your question picking shales, ladies and meet you lately.

Speaker Change: Archie please limit yourself to one question.

John: Our first question guys, Hey, Jon tower of such a great. John. Please go ahead. Your line is open.

Jon Michael Tower: Great, thanks for taking the question. It's encouraging to see the G&A curve bending. I was hoping you could maybe drill into some of the puts and takes there. Obviously, there were some offsets this quarter, some charges, but curious if you could give us a little bit of context around what's flowing through that line to help move it lower and maybe where you, you know, anticipate this moving over the long term for the business.

John: Great. Thanks for taking the question.

John: Encouraging to see the G&A curve bending I was hoping you could maybe drill into some of the puts and takes there. Obviously there were some offsets this quarter surcharges, but curious if you could give us a little bit of context around what's flowing through that line to help move it lower and maybe where you anticipate this moving over the long term for the business I think historically.

Jon Michael Tower: I think historically, you've talked about the idea of potentially reaching or, at one point in time, having that set at about 1.7% system-wide sales. You know, is that still a target that you think is reasonable? Or do you feel like you can even move that further as we continue to grow this digital business over time?

John: Eric Lee you've talked about the idea of potentially reaching or at one point in time, having that sit at about one 7% system wide sales is that still a.

John: <unk> target that you think is reasonable or do you feel like you could even move that further as we continue to grow this digital business over time.

Christopher Lee Turner: Yeah, thanks, John. That's a good question. First, let me just reiterate a couple of details on the G&A guidance. So we expect that X's special G&A on a 52-week basis will be flat to slightly down. As we mentioned on the last call, that assumes a target level of incentive compensation. So that's one factor that could change as we go through the year. But on the factors and levers that help us to achieve that plan, first, there are some one-time factors at play. Examples of that include lapping the cyber event last year, a couple of small remnants of the Russia overlap, and some laps of incentive-based compensation last year.

Eric Lee: Yeah. Thanks, John Good question first let me just reiterate a couple of details on the G&A guidance. So we expect that ex special G&A on a 52 week basis will be flat to slightly down.

Eric Lee: As we mentioned on the last call that assumes a target level of incentive compensation. So that's one factor that could move as we go through the year, but on the factors and levers that help us to achieve that plan first there are some one time factors at play and examples of that include lapping the cyber event last year couple of small.

Eric Lee: Remnants of the Russia overlap.

Eric Lee: And some laps of incentive based compensation last year now on the other side, we do have some expenses related to the acquisition of the stores in the U K, we expect that will add just under $10 million to our G&A in year.

Christopher Lee Turner: Now, on the other side, we do have some expenses related to the acquisition of the stores in the UK. We expect that'll add just under $10 million to our G&A in the year. But those are the – that set of factors.

Eric Lee: But those are the that set of factors. If we go to the longer term levers that we're pulling we continue to drive our resource optimization program, which has allowed us to find efficiencies and legacy parts of the business.

Christopher Lee Turner: If we go to the longer-term levers that we're pulling, we continue to drive our resource optimization program, which has allowed us to find efficiencies in legacy parts of the business, part of which we've used to fund investments in the D&T strategy. You saw some special charges this quarter, which included the impact of some of those moves that we made, but that helps to drive productivity in the business going forward. And finally, as you say, we continue to bend the curve on the impact of our D&T investments on the P&L.

Eric Lee: Part of which we've used to fund investments and the DMT strategy you saw some special charges this quarter, which included.

Eric Lee: The impact of some of those moves that we make but that helps to drive productivity in the business going forward and finally as you say, we continue to bend the curve on the impact of our DNT investments on the P&L.

Christopher Lee Turner: This happens as we deploy more and more of our technology through increased franchisee adoption. And, of course, we're continuing to better leverage our scale in how we operate internally in digital and technology, which is allowing us to do more together across the business. All of that is in service of delivering more, better, faster, cheaper, and safer technology to our businesses, as David said earlier. But bending that curve is part of the long-term plan.

Eric Lee: This happens as we deploy more and more of our technology through increased franchisee adoption.

Eric Lee: And of course, we're continuing to better leverage our scale and how we operate internally in digital and technology, which is allowing us.

Eric Lee: Do more together across the business.

Eric Lee: All of that is in service delivering more better faster cheaper and safer technology to our business as David said earlier, but bending that curve as a part of our long term plan.

Brian John Bittner: Great, thank you. The next question goes to Brian Bittner of Oppenheimer & Co. Brian, please go ahead, your line is open.

Eric Lee: Great. Thank you. The next question goes to Brian Bittner of Oppenheimer <unk> co.

Brian John Bittner: Please go ahead your line is open.

Eric Lee:

Christopher Lee Turner: Thank you. Good morning. You reiterated your 2024 target to grow core operating profit in line with your long-term algorithm of at least 8%. And that's impressive given the first quarter where comps were negative and poor operating profit growth was below the full year outlook, and I'm assuming this was always built in the plan because of the tough comparisons, and I realize you have a lot of GNA flexibility to hit your operating profit targets, but the question is what's the global same store sales base case that you're thinking is required for the rest of the year to comfortably reach your operating profit goal?

Brian John Bittner: Thank you and good morning.

Brian John Bittner: You reiterated your 2024 target to grow core operating profit in line with your long term algorithm of at least 8%.

Brian John Bittner: And that's impressive given the first quarter, where comps were negative and core operating profit growth was below the full year outlook and I'm assuming.

Brian John Bittner: This was always built into the plan because of the tough comparisons in <unk>.

Brian John Bittner: And I realize you have a lot of G&A flexibility to hit your operating profit targets.

Brian John Bittner: Targets, but.

Brian John Bittner: It seems what's good global same store sales base case that you're thinking is required for the rest of the year comfortably reach your operating profit goals.

Christopher Lee Turner: Appreciate the question, Brian, and I agree that hitting 8% in this choppy environment is a proud achievement, and I think it speaks to the resilience of our business model and the talent of our leaders. As you know, we don't provide quarter-to-quarter same-store sales guidance, particularly in an environment like this. We're preparing for various scenarios to get to the 8% number. Obviously, one of the strong levers we have to pull to get to the 8% number is on the development front, and we feel really good about the pipeline that we have in place in development with our partners around the world, and that's something much more so than same-store sales that we can count on to get to the 8%. But as far as forecasting same-store sales growth in this environment, obviously, it's very difficult given the impact that we're seeing.

Speaker Change: I appreciate the question Brian.

Speaker Change: I agree.

Speaker Change: Hitting 8% in this choppy environment, we're proud of our ability to expect that kind of a result, and I think it speaks to the resilience of our business model.

Speaker Change: The talent of our leaders.

Speaker Change: As you know we don't provide.

Speaker Change: For the quarter same store sales guidance, particularly in an environment. Like this we are preparing for various scenarios to get to the 8% number.

Speaker Change: Obviously, one of the levers one of the strong leverage we have to pull to get to the number is on the development front and we feel really good about the pipeline that we have in place and development from our partners around the world and Thats something much more so than same store sales because we can count on to get to the 8%.

Speaker Change: <unk>.

Speaker Change: As far as forecasting same store sales growth.

Speaker Change: This environment, obviously, it's very difficult given the impacts that we're seeing.

David Sterling Palmer: Thank you. The next question goes to David Palmer of Evercore ISI. David, please go ahead; your line is open.

Speaker Change: Thank you. The next question guys, Hey, David Palmer of Evercore ISI. David. Please go ahead. Your line is open.

David W. Gibbs: Thanks. I was just hoping to get some more color on international. KFC International, Pizza Hut International, you know, what were some of the highlights and lowlights on same store sales trends in terms of your brand geography combinations? And more importantly, I'm curious about your reality for 2024 given the exit rates of brand geography combinations. Have any of these, you know, changed for the better or worse? How are you feeling about things versus perhaps just a few months ago? Thanks.

David Sterling Palmer: Oh. Thanks, I was I was just hoping to get some more color on international.

David Sterling Palmer: KFC International Pizza Hut International.

David Sterling Palmer: Some of the highlights and low lights on same store sales trends in terms of your brand geography combinations, but more importantly, I'm curious about your reality for 2024, given the exit rates of brand geography combinations.

David Sterling Palmer: Has any of these change to better or worse, how are you feeling about it.

David Sterling Palmer: Things versus perhaps just a few months ago.

David W. Gibbs: Thanks, David. Yeah, look, we feel great about our twin engines of growth, right? 80% of our profit comes from Taco Bell US and KFC International. In the international business, to answer your question, 85% of our profit comes from KFC International. And if you look at the areas of the world that are less impacted by the Middle East, like Africa, for example, our system sales, you'll see in our release, were up 22%. Latin America, less impacted, really no impact, you know, up 11%.

Speaker Change: Thanks, David.

David: Yes look we feel great about our twin engines of growth right, 80% of our profit come from Taco Bell U S and KFC International and the international business to your question, 85% of our profit comes from KFC International and if you look at the areas of the world that are less impacted by the middle East like Africa for.

David: For example, our system sales Youll see in our release was up 22% Latin America less impact there's really no impact.

David W. Gibbs: I'm sorry, Latin America up 22%, Africa up 11%. Yeah, I recently actually made a trip to Africa this quarter with our team, and was just blown away by the progress we're making on the ground there, where we're the leader in the industry, and we're widening our margin, in terms of that leadership, whether it's South Africa, which we visited, or Kenya, where we've got, you know, franchisees used to be a part of our the company system, who's building our brand the right way they're launching breakfast, you know, the employer of choice in the country, leveraging, you know, menu innovation to take and actually inspiring some of our innovation around the world.

David: Up 11% Im sorry, Latin America up 22% Africa up 11%.

Speaker Change: Yes, I recently actually made a trip to Africa this quarter with our team and it was just blown.

Speaker Change: No way by the progress, we're making on the ground there where we're the leader in the industry and we're widening our margin.

Speaker Change: In terms of that leadership, whether it's South Africa, which we visited or Kenya, where we've got a franchisee.

Speaker Change: Part of the company's system, who is building our brand the right way, they're launching breakfast.

David W. Gibbs: So if you look, if you look at places like that, where business is really healthy and doing well, yeah, the other parts of the world are obviously, you know, much more challenged. But we still see, you know, impressive results for KFC International, growing system sales, you know, 6% in this environment. And, you know, if you adjust for the Middle East, that's, you know, eight, eight, 9% kinds of system sales growth.

Speaker Change: The employer of choice in the country.

Speaker Change: Averaging.

Speaker Change: Menu innovation to take.

Speaker Change: Actually inspiring some of our innovation around the world.

Speaker Change: So if you look if you look at places like that.

Speaker Change: The business is really healthy and doing well.

Speaker Change: The other the impacted parts of the world.

Speaker Change: Obviously.

Speaker Change: Much more challenged but we still see impressive result for KFC international growing system sales, 6% in this environment.

Speaker Change: If you adjust for middle East.

Speaker Change: 89% kinds of system sales growth.

Speaker Change: And very importantly, we highlighted this in the earnings release KFC International.

Speaker Change: Net new unit growth up 10%.

Speaker Change: Shows the strength of the quality of the development pipeline that we have which obviously bodes well for the future of the brand.

David W. Gibbs: And very importantly, we highlighted this in the earnings release, you know, KFC International with new net unit growth up 10% shows the strength of the quality of the development pipeline that we have, which obviously bodes well for the future of the brand. But as far as the international consumer goes, there's probably more of an emphasis on value than there has been in past quarters; we're seeing the same thing in the US. That's one that we know, with KFC, we're well equipped to navigate.

Speaker Change: But as far as the international consumer goes is probably more of an emphasis on value than there has been in past quarters. We're seeing the same thing in the U S. That's one that we know with KFC, we're well equipped to navigate.

John William Ivankoe: Thank you. The next question goes to John Ivankoe of J.P. Morgan. John, please go ahead; your line is open.

Speaker Change: Thank you. The next question guys, Hey, John <unk> of Jpmorgan. Please go ahead. Your line is open.

John: Yes, hi, thank you.

John: I was hoping to get maybe just a little bit more color on bending the curve on digital and technology spend, especially how it might influence 25, and 26 type of total G&A growth I mean, I think this has been one of the more kind of debated topics.

Christopher Lee Turner: bending the curve on, you know, digital and technology spend, especially how it might influence 25 and 26, you know, type of, you know, total GNA growth. I mean, I think this has been one of the more controversial topics of this on the street: are we just talking about a lower rate of growth? Or might we actually see, you know, declines in dollars in 25 and 26 as you leverage the platform?

John: On the street is or are we just talking about a lower rate of growth or might we actually see.

John: Declines in dollars and 25% and 26 as you leverage the platform and a follow up to this and I think its very related.

Christopher Lee Turner: And the follow-up to this, and I think it's very related, you know, acquiring technology, building technology is one thing, but, of course, maintaining technology with best-of-class technology talent, especially kind of at the leadership end, you know, might be something different. So I just wanted to get, you know, your thoughts in terms of, you know, acquiring some of this tech talent and, you know, Yum's ability to both attract and retain this talent, going forward, as they may have other projects to work on in the future. Thank you.

John: Acquiring technology building technology is one thing but of course, maintaining technology with best of class technology talent, especially kind of that.

John: Leadership and might be something different so I just wanted to get your thoughts in terms of.

John: Acquiring some of this tech talent and Yum 's ability to both attract and retain this talent going forward as they may have other projects to work on in the future. Thank you.

Christopher Lee Turner: Thanks, Jon. Look, if you go back over the last few years, we saw the importance of digital and technology for Yum's future, and we invested ahead on behalf of the system to build those capabilities and put them in place across easy experiences, easy operations, and easy insights. We thought that was the right thing to do for the business, and it did create some pressure on the G&A line as we did it.

Speaker Change: Hey, Thanks, John look if you.

Speaker Change: Go back over the last few years.

Speaker Change: We saw the importance of digital and technology to Yum 's future and we invested ahead on behalf of the system to build those capabilities and put them in place across easy experiences easy operations and easy insights. We thought that was the right thing to do for the business and it did create some pressure on the G&A.

Christopher Lee Turner: As we deploy our platforms to more and more markets and we get increased adoption, of course, that happens when our franchisees see the business cases coming to life and the improvements in their economics and the way the technology impacts their consumers and their team members. And, as we shared on the call, we continue to drive those deployments. In fact, we're now starting to bundle some of those deployments. At Taco Bell, for instance, we are driving both AIM inventory management in addition to the TRAX back-of-house system.

Speaker Change: <unk> as we did it.

Speaker Change: As we deploy our platforms to more and more markets and we get increased adoption and of course that happens when our franchisees see the business cases coming to life in the improvements in their economics, and the way the technology impacts their consumers and their team members.

Speaker Change: As we shared on the call continuing to drive those deployments.

Speaker Change: We're now starting to bundle some of those deployments.

Speaker Change: At Taco Bell for instance, we are driving.

Speaker Change: Both.

Speaker Change: The.

Speaker Change: Aim inventory management. In addition to the tracks back of House system at KFC U S will be deploying the dragon tail.

Christopher Lee Turner: At KFC U.S., we'll be deploying the Dragontail kitchen display system along with the Poseidon POS system, so we're bundling those together. And as we create more and more examples and proof points of the impact, as we talk to franchisees in additional markets, it becomes easier to prove the business case that our technology is delivering. So that's what supports the long-term deployment path as we move forward. Obviously, we have to continue to make investments in things like AI, better leveraging our data, as David mentioned, and as you said, continuing to enhance the existing platforms that we have, but as we bend the curve, that reduces the net P&L impact over time. And so, in the long run, we expect to get increasing leverage on our G&A, and G&A as a percent of system sales should come down over the long term.

Speaker Change: <unk> display system.

Speaker Change: Along with the beside the POS system, so were bundling those together and as we create more and more examples and proof points of the impact.

Speaker Change: As we talked to franchisees in additional markets it becomes easier to prove the business case that our technology is delivering so that's what supports the long term deployment path.

Speaker Change: As we as we move forward, obviously, we have to continue to make investments in things like AI and better leveraging our data as David mentioned and as you said and continuing to enhance the existing platforms that we have.

Speaker Change: But as we as we bend the curve that reduces the net P&L impact overtime and so.

Speaker Change: In the long run we expect the.

Speaker Change: As to get increasing leverage on our G&A and the G&A as a percent of system sales should come down over the long run.

Brian James Harbour: Thank you. The next question goes to Brian Harbour of Morgan Stanley. Brian, please go ahead; your line is open.

Morgan Stanley: Thank you. The next question is she buying <unk> of Morgan Stanley. Brian. Please go ahead. Your line is open.

Christopher Lee Turner: Yeah, thank you. Good morning.

Brian John Bittner: Yes. Thank you good morning, maybe.

Christopher Lee Turner: Maybe just following up on that. You spent a lot of time discussing all these tech initiatives. I think it's, you know, it's probably a little bit harder for us to sort of observe that in terms of comp impact, and margin impact. Obviously, we don't kind of see franchisee profitability. But are there any examples you can give of, You know, for example, e-commerce was deployed in certain restaurants and you saw, you know, a certain uplift in sales or, you know, franchisee profits? What happens to those when you deploy, you know, that tech bundle that you just mentioned? I think, you know, that would just sort of bring it to life more for us.

Brian John Bittner: Maybe just following up on that.

Brian John Bittner: You spent a lot of time discussing all of these tech initiatives I think it's.

Brian John Bittner: It's probably a little bit harder for us to sort of.

Brian John Bittner: In terms of comp impact margin impact, obviously, we don't kind of see franchisee profitability, but.

Brian John Bittner: Are there any examples you can give us.

Brian John Bittner: For example, e-commerce was deployed in certain restaurants and you saw.

Brian John Bittner: Certain uplift in sales or franchisee profits what happens to those when you deploy that tech bundle that you just mentioned I think that would just sort of bring it to life more for us.

Christopher Lee Turner: Yeah, great question. Look, you know, in all of these deployments, this is us partnering with our franchisees. And, of course, they co-invest to bring these platforms to their businesses, and they only do that when they see a strong business case.

Speaker Change: Yeah, Great question look.

Speaker Change: And all of these deployments this is us partnering with our franchisees and of course, they co invest to bring these platforms to their businesses and they.

Speaker Change: Only do that when they see a strong business case, so if you take Taco Bell.

Speaker Change: <unk>, which is the one market, where we've deployed the most of our platforms in combination.

Speaker Change: I think the tremendous sales results there as they've gone from essentially no digital sales in 2018.

Christopher Lee Turner: So if you take Taco Bell in the US, which is the one market where we deploy the most of our platforms in combination, you know, I think the tremendous sales results there as they've gone from essentially no digital sales in 2018, to well into the 30% mix now demonstrate the power of the combination of those platforms in every market around the globe. As we shift sales from non-digital to digital channels, we see increases in check size, and we see increases in frequency.

Speaker Change: Well into the 30% mix now demonstrates the power of the combination of those platforms in every market around the globe as we shift sales from non digital to digital channels, we see increases in check size, we see increases in frequency.

Speaker Change: You said you don't see all of our Franchisees' P&L holds.

Speaker Change: But on the productivity side for our franchisees I think our development momentum.

Christopher Lee Turner: Now, as you said, you don't see all of our franchisees' P&Ls. But on the productivity side, for our franchisees, I think our development momentum is the best proof point that digital is adding to unit economics. That's, that's the driver of us continuing to set records for unit development around the globe, and the digital and technology impacts on their P&L are an important part of that. So, you know, all of that is enhancing the business model. But, as we said, we think we're just getting started on the value creation potential from these platforms and capabilities. Yeah, maybe, and just to get in.

Brian John Bittner: Is the best proof point, the digital is adding to unit economics.

Brian John Bittner: The driver of US continuing to set records on unit development around the globe and the digital and technology impacts on their P&L. This is an important part of that.

Brian John Bittner: So all of that.

Brian John Bittner: Is enhancing the business model, but as we said we think for just getting started on the value creation potential from these platforms and capabilities.

Christopher Lee Turner: Yeah, I mean, and just to get in, if you're looking for specifics, as you can imagine, when we move people to digital ordering, we see an uplift in check in almost every case, whether it's kiosk or online. When we move people to things like Dragontail, we know we get a four, for Pizza Hut, we know we get a four minute savings on delivery time of pizzas. And we know we can get drivers to deliver more orders per hour by using it.

Brian John Bittner: Just to get in if Youre looking for specifics as you can imagine when we move people to digital ordering we see an uplift in check in almost every case, whether its kiosk or online when we move people to things like Dragon tail. We know we get a forum for Pizza Hut, we know we get a four minute savings on delivery time of pizzas, and we know we can get drawn.

Brian John Bittner: <unk> to deliver more orders per hour by using it so.

Brian John Bittner: Point of your question the measures in the financial results from the rollout of these things there are use cases all over the place.

Brian John Bittner: For how this improves unit economics for our franchisees, which ultimately is the heart of our business the better their unit economics are the more they build the more they can afford to offer the right prices and value to customers and so on.

Dennis Geiger: Thank you. The next question goes to Dennis Geiger of UBS. Dennis, please go ahead; your line is open.

Christopher Lee Turner: So to the point of your question, the measures and the financial results from the rollout of these things, there are use cases all over the place for how this improves unit economics for franchisees, which ultimately, you know, is the heart of our business. The better their unit economics are, the more they build, the more they can afford to offer the right prices and value to customers. Thank you. The next question goes to Dennis Geiger of UBS. Dennis, please go ahead; your line is now open. Great, thank you. Specific to the US, wondering if you could speak a bit more about how

Brian John Bittner: Thank you. The next question guys, Hey, Dennis Geiger of UBS Denis. Please go ahead. Your line is open.

Dennis Geiger: Great. Thank you specific to the U S. Wondering if you could speak a bit more to how you think about the trajectory of the brands with some of those tougher comparisons on the weather headwinds behind you, even if it's at sort of a higher level and sort of maybe how do you think about how the brands are positioned in the U S.

Dennis Geiger: Seemingly difficult environment, whether there's sort of any notable strategy shifts that you guys contemplate in an environment like this be it on on value or otherwise. Thank you.

Christopher Lee Turner: Yeah, yeah, thanks, Dennis. I think we referred to this somewhere, but I'll just do it for completeness. So in Q1, obviously, we had a lot of impact from the weather during the quarter, but our business generally improved sequentially during the quarter. Taco Bell, as you know, is 75% of our US operating profit. Taco Bell improved throughout the quarter and into Q2, and we are seeing an acceleration of same store sales growth trends. So we're feeling good about how Taco Bell's positioned. Remember, they just launched the Cantina chicken menu at the end of Q1. So we're excited to share the results of that.

Speaker Change: Yes, yes, thanks Dennis.

Speaker Change: I think we referred to this somewhere but I'll just for completeness.

Speaker Change: In in Q1, obviously, we had a lot of impact on the weather during the quarter our businesses generally improve sequentially during the quarter Taco Bell as you know is 75% of our U S operating profit.

Speaker Change: Taco Bell improved throughout the quarter and into Q2, we are seeing an acceleration of same store sales growth trends. So we're feeling good about how taco Bell's position remember they just launched the cantina chicken menu at the end of Q1. So we're excited to share the results of that but.

Speaker Change: Suffice to say, it's been well received.

Speaker Change: By consumers.

Speaker Change: And we think Taco Bell is incredibly well positioned for what I would describe as a more normal consumer environment today custom.

Christopher Lee Turner: But suffice to say it's been well received by consumers. And we think Taco Bell is incredibly well positioned for what I would describe as a more normal, you know, consumer environment today. Customers care more about value in the US. Taco Bell, we know from the industry data, we know from the industry data that, you know, value is more important, and that others are struggling with value, and that Taco Bell is a value leader. You're seeing some low-income consumers fall off the industry.

Speaker Change: Custom customers care more about value in the U S. Taco Bell, we know from the industry data.

Speaker Change: We know from the industry data that value is more important and that others are struggling with value and the Taco Bell as the value leader Youre seeing some low income consumers falloff in the industry, we're not seeing that Taco Bell, so really favorable setup for Taco Bell, which you probably can say about that in the environment that they operate in and given the strength of the brand.

Christopher Lee Turner: We're not seeing that at Taco Bell. So a really favorable setup for Taco Bell, which you probably can say about any environment that they operate in, given the strength of the brand. And for Pizza Hut, obviously, the laps in the quarter were unusually large. We always intend to lap anything with positive sales. We didn't do that at Pizza Hut US, but we are positive on a two-year basis.

Speaker Change: For Pizza Hut, obviously, the labs in the quarter were.

Speaker Change: Unusually large.

Speaker Change: We always intend to lap anything with positive sales, we didn't do that at Pizza Hut U S. Although we are positive on a two year basis, and we actually did see an acceleration of pizza huts two year trends in Q1 versus Q4.

Speaker Change: Im excited about the calendar the pizza hut has for the balance of the year as well in the U S for KFC, it's a different story.

Speaker Change: AFC brand in the U S has been struggling.

Christopher Lee Turner: And we actually did see an acceleration of Pizza Hut's two-year trends in Q1 versus Q4. I'm excited about the calendar that Pizza Hut has for the balance of the year as well in the US. For KFC, it's a different story. You know, the KFC brand and the US have been struggling. And I think we're excited about some of the work that's going on behind the scenes to really boldly reset the brand in the US.

Speaker Change: We're excited.

Speaker Change: Cited about some of the work that's going on behind the scenes to really boldly reset the brand in the U S.

Speaker Change: Have a great playbook for KFC, which is our global business, our international business on fire as I talked about before on the underlying business.

Speaker Change: We know how to bring that brand to life to connect with consumers around the world and we have to do a better job of that in the U S.

Speaker Change: As a small part of our operating profit obviously, it doesn't really move the needle in the growth equation, but it is something that's a high priority for us as we move forward.

Christopher Lee Turner: Thank you. The next question goes to Sarah Senator of Bank of America. Sarah, please go ahead. Your line is open. Hi Sarah, your line's open.

Christopher Lee Turner: We have a great playbook for KFC, which is our global business, our international business on fire, as I talked about before, the underlying business. We know how to bring that brand to life to connect with consumers around the world. And we have to do a better job of that in the US. Thank you.

Sara Senator: Thank you. The next question Gucci Sara Senator of Bank of America. Please go ahead. Your line is open.

Speaker Change: Hi, Savi your line is open.

Sarah Senator of Bank of America: Oh, sorry. First, a quick follow-up and then a question asked about the impact from the Middle East. You said it was dissipating.

Savi: Oh, sorry, first a quick follow up and then a question.

Sara Senator: Asking about the impact from the Middle East are sent you said it was dissipating I was just curious if youre doing anything specific.

Christopher Lee Turner: I was just curious if you're doing anything specific to do that, like brand marketing, that type of thing, or if it's just a matter of time. But the question is about unit growth over time and sort of how that translates into system-wide sales, maybe this year and beyond. As some of these AUVs are coming in lower, as you think about your long-term algorithm, how should we think about that, either this year, kind of hitting the long-term algorithm from a top-line perspective, or over time?

Speaker Change: Do that like brand marketing that type of thing or if it's just matters.

Speaker Change: A matter of time.

Speaker Change: Question is about unit growth over time and sort of how that translates into the system right now.

Speaker Change: This year and beyond.

Speaker Change: Does that mean, a these are coming in.

Speaker Change: Sure Yeah as you think about your long term algorithm.

Speaker Change: How should we think about that either this year, you're kind of hitting that the long term algorithm from a topline perspective or.

Speaker Change: You know over time.

Christopher Lee Turner: Sure, thank you, Sarah. The first part of your question: I don't think we're doing anything special. We've obviously had a lot of experience in the past, given the global footprint we have of dealing with different issues around the world. And we have a sense for how these things recover, but everyone's different, and time is usually the answer to most of those problems.

Speaker Change: Sure. Thank you Sara first part of your question.

Speaker Change: No I don't think we're doing anything special we've obviously had a lot of.

Speaker Change: For instance, in the past being with the global footprint, we have of dealing with different issues around the world.

Speaker Change: We have a sense for how these things recover but everyone's different.

Speaker Change: Time is usually.

Speaker Change: The answer to most of those problems as far as unit growth goes.

Christopher Lee Turner: As far as unit growth goes, it is true that a lot of times when we're building, particularly with our footprint and our emphasis on development, we're building in emerging markets which tend to have lower average unit volumes. That's how we built a powerhouse business in China back in the day, and it's how we're building out markets like India, which tend to have lower volumes. But we're also excited about a lot of the development agreements and new franchise partners that we're getting into, in Western Europe, for example, and some other markets around the world, which are much higher volume markets.

Speaker Change: Yes. It is true that a lot of times when we're building, we're building, particularly with our footprint.

Speaker Change: Our emphasis on development, we are building in emerging markets, which tend to have lower average unit volumes. That's how we built the powerhouse business in China back in the day and that's how we're building out markets like India, which tend to have lower volumes, but we're also excited about a lot of the development agreements and new franchise partners that we're getting in and Western Europe for example.

Speaker Change: And some other markets around the world, which are much higher volume markets and I think it will always be a mix and it will probably always tend to be lower volume than our typical average volume and that's fine. Because these are markets that tend to start out with lower volumes and grow faster than a traditional market that we've seen that all around the world over the last few deca.

Christopher Lee Turner: And I think it'll always be a mix, and it will probably always tend to be lower volume than our typical average volume, and that's fine, because these are markets that tend to start out with lower volumes and grow faster than a traditional market. And we've seen that all around the world over the last few decades as Yum has built out its footprint.

Speaker Change: <unk> has built out its footprint.

David E. Tarantino: I'm afraid that we have time for one more question. Thank you. The next question goes to David Tarantino of Bird. David, please go ahead; your line is open.

Speaker Change: Further we have time for one more question.

Speaker Change: Thank you. The next question guys, Hey, David Tarantino of Baird. David. Please go ahead. Your line is open.

David W. Gibbs: Hi, good morning. My question is about your results in the context of sales performance. I think you mentioned that the operating profit in Q1 was slightly better than your expectations. I was curious to know how the sales are progressing relative to the expectations you might have had when you gave the guidance originally. And then in particular, you know, I guess, you know, Q1, about what you expected, better than what you expected?

David E. Tarantino: Hi, Good morning, My question's on on your results and in the context of the sales performance I think you mentioned that the operating profit in Q1 was slightly better than your expectations.

David E. Tarantino: I was curious to know.

David E. Tarantino: How the sales are progressing relative to the expectations you might have had when you gave the guidance originally.

David E. Tarantino: And then in particular I.

David E. Tarantino: I guess.

David E. Tarantino: With Q1.

David E. Tarantino: About what you expected better than what you expected and then some.

David W. Gibbs: And then, secondly, you know, David, if you could give us some sense of whether you have line of sight to global comps performance turning positive either in the second quarter or in the second half of the year. Thanks. David Gibbs

Speaker Change: Secondly, Dave.

David Sterling Palmer: David If you could give us some sense of whether you have line of sight.

David Sterling Palmer: Global comps performance, turning positive either either in the second quarter or in the second half of the year.

Dave Russell: Okay.

David W. Gibbs: Thanks, David. Obviously, we didn't anticipate the weather impacts in the U.S., for example, in Q1, but it generally was in line with what we expected, perhaps just a tad weaker. But to the point of your question, as we go into Q2, as I mentioned earlier, the Taco Bell business is picking up steam. We are generally on track with our projections for the year, which is why we feel comfortable with our operating profit commitment and the long-term algorithm. But it is going to be a challenging year, and we have a great team out there tackling the challenges.

Dave Russell: Alright, Thanks, David obviously, we didn't anticipate the weather impacts in the U S. For example in Q1. So generally was in line with what we expected, perhaps just a tad weaker.

Speaker Change: But to the point of your question.

Dave Russell: As we go into Q2 as I mentioned earlier, the Taco Bell business is picking up strength.

Dave Russell: We are generally on track with our projections for the year, which is why we feel comfortable with our operating profit commitment to the long and.

Dave Russell: The long term algorithm.

Dave Russell: <unk>.

Dave Russell: But it is going to be a challenging year.

Dave Russell: And we have a great team out there tackling the challenges in any one of these challenging years, its always an opportunity to grab market share as well, we're doing that through development with the pace of development that youre seeing.

David W. Gibbs: And in any one of these challenging years, there's always an opportunity to grab market share as well. We're doing that through development at the pace of development that you're seeing. And I'll just close with a few comments about the business.

Speaker Change: I'll just close with a few comments about the business. We talk about this a lot, but I think this was a quarter that really demonstrated how resilient this businesses and how we can navigate just about anything thrown our way. The fact that we're sitting here in this first quarter in this choppy environment, and we're able to put up 6% core operating profit growth and re.

David W. Gibbs: We talk about this a lot, but I think this was a quarter that really demonstrated how resilient this business is and how we can navigate just about anything thrown our way. The fact that we're sitting here in this first quarter in this choppy environment and we're able to put up 6% core operating profit growth and reconfirm that 8% plus target, I think is a testament to the levers that we have to pull and the talent we have around the world.

Speaker Change: Confirm that 8% plus target I think is a testament to the levers that we have to pull in the talent we have around the world. Our twin growth engines, which are 80% plus of our operating profit talk about U S and KFC international their underlying strength of their business is obvious when you look at the 10% unit growth at KFC or you look.

David W. Gibbs: Our twin growth engines, which are 80% plus of our operating profit, Taco Bell U.S. and KFC International, the underlying strength of their business is obvious when you look at the 10% unit growth at KFC or you look at Taco Bell's performance with low-income consumers in a value environment and the acceleration we're seeing in 2Q. Our development machine, we actually just put up the second highest quarter for growth development in YUM's history, obviously on track to meet or exceed that 5% development target.

Speaker Change: At Taco bells performance with low income consumers in a value environment and the acceleration we're seeing in <unk>. Our development machine, we actually just put up the second highest quarter for gross development and gums history, obviously on track to meet or exceed meet or exceed that 5% development targets and then very.

David W. Gibbs: And then, very exciting, the digital inflection point. Passing 50% digital is something I don't think people thought was possible just a few years ago, this quickly. It's a real testament to the quality of the teams that we put together.

Speaker Change: Adding the digital inflection point hit passing 50% digital is something I don't think people thought was possible just a few years ago. This quickly it's a real testament to the quality of the teams that we've put together.

David W. Gibbs: And as you can see from our prepared remarks, we are not at all resting on that as a key accomplishment as we lean in on things like AI and the use of our data to separate ourselves from the rest of the industry. I'll leave you with one final fact, which I heard just the other day, which really goes to the core of who we are and the strength of our business. Since January of 2021, Twenty-five percent of all the Yum!

Speaker Change: And as you can see from our prepared remarks, we are not at all resting on that.

Speaker Change: A key accomplishment as we lean in on things like AI and the use of our data to separate ourselves from the rest of the industry I'll leave you with one final fact, which I heard just the other day, which.

Speaker Change: It really goes to the core of what we are and the strength of our business since.

Speaker Change: Since January of 2021, 25% of all the units in the world have been built.

David W. Gibbs: Units in the world have been built. That's how new our asset base is. That's how fast we're developing. Think about the impact that that has on the consumer in terms of how fresh and modern our brands are. Since January 21, 25% of our store base has been built, and we don't see that slowing down at any time soon. And in a choppy environment this year, you know, we're very confident that we can get through it, strengthen our business, and come out of it, you know, delivering that 8% core operating profit. Thank you for your time. Thank you.

Speaker Change: That's how new are asset basis, that's how fast we're developing to think about the impact that that has on the consumer in terms of how fresh and modern our brands are since January 21, 25% of our store base. That's been built we don't see that slowing down at anytime soon and in a choppy environment. This year.

Speaker Change: We are very confident that we can get through it strengthened our business and come out of it.

Speaker Change: Delivering that 8% core operating profit growth.

Speaker Change: Thank you for your time today.

Operator: Thank you. This now concludes today's call. Thank you all for joining us. You may now disconnect your lines. Thank you for joining; you may now disconnect your lines.

Speaker Change: Thank you. This now concludes today's call. Thank you for joining you may now disconnect your lines.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Today's call. Thank you for joining you may now disconnect your lines.