Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction and Overview

The following Management's Discussion and Analysis (“MD&A”), should be read in conjunction with the unaudited Condensed Consolidated Financial Statements (“Financial Statements”), the Forward-Looking Statements and our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, (“2024 Form 10-K”). All Note references herein refer to the Notes to the Financial Statements. Tabular amounts are displayed in millions of U.S. dollars except per share and unit count amounts, or as otherwise specifically identified.

In the first quarter of 2025, the Company prospectively changed its basis of presentation to round financial figures in the Financial Statements and as presented in the tabular presentations in this MD&A to the nearest whole number in millions in all instances. As a result, some totals and percentages may not recompute based on rounded figures as presented within this MD&A. Previously, amounts were presented to ensure that all numbers herein recomputed, resulting in the presentation of certain figures inconsistent with their underlying rounding.

Yum! Brands, Inc. and its Subsidiaries (collectively referred to herein as the “Company,” “YUM,” “we,” “us” or “our”) franchise or operate a system of over 60,000 restaurants in more than 155 countries and territories, primarily under the concepts of KFC, Taco Bell, Pizza Hut and The Habit Burger & Grill (collectively, the “Concepts”). The Company’s KFC, Taco Bell and Pizza Hut brands are global leaders of the chicken, Mexican-inspired and pizza categories, respectively. The Habit Burger & Grill, is a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more. Of the over 60,000 restaurants, 98% are operated by franchisees.

YUM currently consists of four operating segments:

The KFC Division which includes our worldwide operations of the KFC concept
The Taco Bell Division which includes our worldwide operations of the Taco Bell concept
The Pizza Hut Division which includes our worldwide operations of the Pizza Hut concept
The Habit Burger & Grill Division which includes our worldwide operations of the Habit Burger & Grill concept

Through our Recipe for Good Growth we intend to deliver iconic restaurant brands and consistently drive better customer experiences, improved unit economics and higher rates of growth. Key enablers include accelerated use of digital and technology, increased collaboration and better leverage of our systemwide scale. This is done through a framework of three pillars: being Loved, Trusted and Connected.

Loved: We grow by delighting customers with craveable food and a distinctive experience. We innovate and elevate our iconic restaurant brands that people trust and champion, resulting in relevant, easy and distinctive brands.

Trusted: We operate responsibly with consistency and efficiency in our restaurants, across our system and in our communities. This includes a commitment to our priorities for social responsibility, risk management and sustainable stewardship of our people, food and planet.

Connected: We use our teamwork, technology and global scale to serve every customer, everywhere, anytime. Our unmatched operating capability allows us to recruit and equip the best restaurant operators in the world to deliver great customer experiences. And our commitment to bold restaurant development drives market and franchise unit expansion with strong economics.

Our unrivaled culture and talent and leading with smart, heart and courage are key to our success, fueling brand performance and franchise success.

We intend for this MD&A to provide the reader with information that will assist in understanding our results of operations, including performance metrics that management uses to assess the Company's performance. Throughout this MD&A, we commonly discuss the following performance metrics:

Same-store sales growth is the estimated percentage change in system sales of all restaurants that have been open and in the YUM system for one year or more, including those temporarily closed. From time-to-time restaurants may be temporarily closed due to remodeling or image enhancement, rebuilding, natural disasters, health epidemic or pandemic, landlord disputes, boycotts, social or civil unrest or other issues. The system sales of restaurants we deem temporarily closed remain in our base for purposes of determining same-store sales growth and the restaurants remain in our unit count (see below).

Same-store sales growth excludes, for subsidiaries operating on a monthly calendar, the extra day resulting from a leap year and excludes, for subsidiaries operating on a weekly periodic calendar, the last week of the year in fiscal years with 53rd weeks. We believe same-store sales growth is useful to investors because our results are heavily dependent on the results of our Concepts' existing store base. Additionally, same-store sales growth is reflective of the strength of our Brands, the effectiveness of our operational and advertising initiatives and local economic and consumer trends.

Gross unit openings reflects new openings by us and our franchisees. Net new unit growth reflects gross unit openings offset by permanent store closures, by us and our franchisees. To determine whether a restaurant meets the definition of a unit we consider whether the restaurant has operations that are ongoing and independent from another YUM unit, serves the primary product of one of our Concepts, operates under a separate franchise agreement (if operated by a franchisee) and has substantial and sustainable sales. We believe gross unit openings and net new unit growth are useful to investors because we depend on new units for a significant portion of our growth. Additionally, gross unit openings and net new unit growth are generally reflective of the economic returns to us and our franchisees from opening and operating our Concept restaurants.
System sales and System sales excluding the impacts of foreign currency translation (“FX”) reflect the results of all restaurants regardless of ownership, including Company-owned and franchise restaurants. Sales at franchise restaurants typically generate ongoing franchise and license fees for the Company at a rate of 3% to 6% of sales. Increasingly, customers are paying a fee to a third party to deliver or facilitate the ordering of our Concepts' products. We also include in System sales any portion of the amount customers pay these third parties for which the third party is obligated to pay us a license fee as a percentage of such amount. Franchise restaurant sales and fees paid by customers to third parties to deliver or facilitate the ordering of our Concepts' products are not included in Company sales on the Condensed Consolidated Statements of Income; however, any resulting franchise and license fees we receive are included in the Company's revenues. We believe System sales growth is useful to investors as a significant indicator of the overall strength of our business as it incorporates our primary revenue drivers, Company and franchise same-store sales as well as net new unit growth.

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

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

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

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

Company restaurant profit is defined as Company sales less Company restaurant expenses, both of which appear on the face of our Condensed Consolidated Statements of Income. Company restaurant expenses include those expenses incurred directly by our Company-owned restaurants in generating Company sales, including cost of food and paper, cost of restaurant-level labor, rent, depreciation and amortization of restaurant-level assets and advertising expenses incurred by and on behalf of that Company restaurant. Company restaurant margin as a percentage of sales (“Company restaurant margin %”) is defined as Company restaurant profit divided by Company sales. We use Company restaurant profit for the purposes of internally evaluating the performance of our Company-owned restaurants and we believe Company restaurant profit provides useful information to investors as to the profitability of our Company-owned restaurants. In calculating Company restaurant profit, the Company excludes revenues and expenses directly associated with our franchise operations as well as non-restaurant-level costs included in General and administrative expenses, some of which may support Company-owned restaurant operations. The

Company also excludes restaurant-level asset impairment and closures expenses, which have historically not been significant, from the determination of Company restaurant profit as such expenses are not believed to be indicative of ongoing operations. Further, while we generally include depreciation and amortization of restaurant-level assets within Divisional Company restaurant expenses used to derive Divisional Company restaurant profit, we record amortization of reacquired franchise rights arising from acquisition accounting within Corporate and Unallocated Company restaurant expenses as such amortization is not believed to be indicative of ongoing Divisional results as well as to enhance comparability of acquired stores' margins with those of existing restaurants within Divisional results. Company restaurant profit and Company restaurant margin % as presented may not be comparable to other similarly titled measures of other companies in the industry.

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

Results of Operations

Summary

All comparisons within this summary are versus the same period a year ago.

Quarterly Financial Highlights:


	% Change
	System Sales, ex FX	Same-Store Sales	Units	GAAP Operating Profit	Core Operating Profit
KFC Division	+5	+2	+6	+6	+9
Taco Bell Division	+11	+9	+2	+16	+16
Pizza Hut Division	(3)	(2)	(1)	(20)	(18)

YUM	+5	+3	+3	+5	+8

Additionally:

Foreign currency translation unfavorably impacted Divisional Operating Profit by $11 million for the quarter ended March 31, 2025.


	First Quarter
	2025	2024	% Change
GAAP EPS	$0.90	$1.10	(18)
Less Special Items EPS	$(0.40)	$(0.05)	NM
EPS Excluding Special Items	$1.30	$1.15	+13

Foreign currency translation negatively impacted our diluted EPS, excluding Special Items, by approximately $0.03 for the quarter ended March 31, 2025. Our diluted EPS, excluding Special Items, was unfavorably impacted by $0.08 for the quarter ended March 31, 2024 from after-tax investment losses.
Gross unit openings for the quarter were 751 units.

◦Net units declined by 460 for the quarter, primarily driven by unit closures in Turkey. On January 8, 2025, we terminated our franchise agreements with franchisee IS Gida A.S. (IS Gida), the owner and operator of KFC and Pizza Hut restaurants in Turkey and a subsidiary of IS Holding A.S., after failure by IS Gida to meet our standards. As a result, 283 KFC restaurants and 254 Pizza Hut restaurants in Turkey were closed during the quarter.

Worldwide

GAAP Results


	Quarter ended
	2025			2024			% B/(W)
Company sales	$	607		$	474		28
Franchise and property revenues	785			757			4
Franchise contributions for advertising and other services	395			367			8
Total revenues	1,787			1,598			12

Company restaurant expenses	520			400			(30)
G&A expenses	302			286			(5)
Franchise and property expenses	34			31			(9)
Franchise advertising and other services expense	396			367			(8)
Refranchising (gain) loss	(5)			(5)			2
Other (income) expense	(8)			(1)			NM
Total costs and expenses, net	1,239			1,078			(15)
Operating Profit	548			520			5

Investment (income) expense, net	(1)			22			NM
Other pension (income) expense	—			(2)			(83)
Interest expense, net	120			117			(2)
Income before income taxes	429			383			12
Income tax provision (benefit)	176			69			(155)
Net Income	$	253		$	314		(19)

Diluted EPS(a)	$	0.90		$	1.10		(18)
Effective tax rate	41.0		%	18.0		%	(23.0)	ppts.

(a)See Note 3 for the number of shares used in this calculation.

Performance Metrics


Unit Count	3/31/2025	3/31/2024	% Increase (Decrease)
Franchise	59,581	58,106	3
Company-owned	1,305	1,023	28
Total	60,886	59,129	3


	Quarter ended
	2025	2024
Same-store Sales Growth (Decline) %	3	(3)
System Sales Growth %, reported	3	—
System Sales Growth %, excluding FX	5	2

Our system sales breakdown by Company and franchise sales was as follows:


	Quarter ended
	2025		2024

Consolidated
Company sales(a)	$	607	$	474
Franchise sales	14,896		14,572
System sales	15,503		15,046
Negative (Positive) Foreign Currency Impact(b)	239		N/A
System sales, excluding FX	$	15,743	$	15,046

KFC Division
Company sales(a)	$	216	$	105
Franchise sales	8,124		8,023
System sales	8,340		8,128
Negative (Positive) Foreign Currency Impact(b)	184		N/A
System sales, excluding FX	$	8,524	$	8,128

Taco Bell Division
Company sales(a)	$	263	$	240
Franchise sales	3,717		3,357
System sales	3,980		3,597
Negative (Positive) Foreign Currency Impact(b)	6		N/A
System sales, excluding FX	$	3,986	$	3,597

Pizza Hut Division
Company sales(a)	$	3	$	2
Franchise sales	3,025		3,165
System sales	3,028		3,167
Negative (Positive) Foreign Currency Impact(b)	50		N/A
System sales, excluding FX	$	3,078	$	3,167

Habit Burger & Grill Division
Company sales(a)	$	125	$	127
Franchise sales	30		27
System sales	155		154
Negative (Positive) Foreign Currency Impact(b)	—		N/A
System sales, excluding FX	$	155	$	154

(a)Company sales represents sales from our Company-operated stores as presented on our Condensed Consolidated Statements of Income.

(b) The foreign currency impact on System sales is presented in relation only to the immediately preceding year presented. When determining applicable System sales growth percentages, the System sales excluding FX for the current year should be compared to the prior year System sales.


Non-GAAP Items

Non-GAAP Items, along with the reconciliation to the most comparable GAAP financial measure, as presented below.

	Quarter ended
	2025		2024
Core Operating Profit Growth %	8		6
Diluted EPS Growth %, excluding Special Items	13		9
Effective Tax Rate excluding Special Items	19.8	%	19.4	%





Company restaurant profit	$	87		$	74
Company restaurant margin %	14.3		%	15.6		%


Reconciliation of GAAP Operating Profit to Core Operating Profit	Quarter ended
	2025		2024
Consolidated
GAAP Operating Profit	$	548	$	520
Detail of Special Items:
Loss associated with market-wide refranchisings(a)	—		3
Charges associated with Resource Optimization(b)	17		21
Charges associated with Brand HQ Consolidation(c)	7		—
Other Special Items Expense	2		—
Special Items Expense - Operating Profit	27		24
Negative Foreign Currency Impact on Division Operating Profit	11		N/A
Core Operating Profit	$	586	$	544

Special Items as shown above were recorded to the financial statement line items identified below.

Condensed Consolidated Statements of Income Line Item
Decrease in Franchise and property revenues	$	1	$	—
Increase in General and administrative expenses	28		21
Increase in Refranchising loss	—		3
Increase in Other income	(2)		—
Special Items Expense - Operating Profit	$	27	$	24

KFC Division
GAAP Operating Profit	$	331	$	313
Negative (Positive) Foreign Currency Impact	9		N/A
Core Operating Profit	$	340	$	313

Taco Bell Division
GAAP Operating Profit	$	241	$	208
Negative (Positive) Foreign Currency Impact	—		N/A
Core Operating Profit	$	241	$	208

Pizza Hut Division
GAAP Operating Profit	$	74	$	93
Negative (Positive) Foreign Currency Impact	1		N/A
Core Operating Profit	$	76	$	93

Habit Burger & Grill Division
GAAP Operating Profit (Loss)	$	(1)	$	(5)
Negative (Positive) Foreign Currency Impact	—		N/A
Core Operating Profit (Loss)	$	(1)	$	(5)

Reconciliation of GAAP Net Income to Net Income excluding Special Items
GAAP Net Income	$	253	$	314
Special Items Expense - Operating Profit	27		24

Special Items Tax Expense (Benefit)(d)	86		(10)
Net Income excluding Special Items	$	366	$	328


	Quarter ended
	2025			2024
Reconciliation of Diluted EPS to Diluted EPS excluding Special Items
Diluted EPS	$	0.90		$	1.10
Less Special Items Diluted EPS	(0.40)			(0.05)
Diluted EPS excluding Special Items	$	1.30		$	1.15

Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate excluding Special Items
GAAP Effective Tax Rate	41.0		%	18.0		%
Impact on Tax Rate as a result of Special Items	21.2		%	(1.4)		%
Effective Tax Rate excluding Special Items	19.8		%	19.4		%

(a) Due to their size and volatility, we have reflected as Special Items those refranchising gains and losses that were recorded in connection with market-wide refranchisings. During the quarter ended March 31, 2024, we recorded net refranchising losses of $3 million that have been reflected as Special Items.

Additionally, we recorded net refranchising gains of $5 million and $8 million during quarters ended March 31, 2025 and 2024, respectively, that have not been reflected as Special Items. These net refranchising gains relate to refranchising of restaurants unrelated to market-wide refranchisings that we believe are indicative of our expected ongoing refranchising activity.

(b)We recorded charges of $17 million and $21 million during the quarters ended March 31, 2025 and 2024, respectively, to General and administrative expenses related to a resource optimization program. Over the past several years, this program has allowed us to reallocate significant resources to accelerate our digital, technology and innovation capabilities to deliver a modern, world-class team member and customer experience and improve unit economics. We expanded the program in 2024 to identify further opportunities to optimize the Company’s spending and identify additional, critical areas in which to potentially reallocate resources, both with a goal to enable the acceleration of the Company’s growth rate. Costs incurred to date related to the program primarily include severance associated with positions that have been eliminated or relocated and consultant fees. Due to their scope and size, these charges have been reflected as Special Items.

(c)During the quarter ended March 31, 2025, we recorded charges of approximately $7 million to General and administrative expenses associated with our decision to designate two brand headquarters in the U.S., located in Plano, Texas and Irvine, California, to foster greater collaboration among brands and employees. This involved relocating the KFC U.S. corporate office to a KFC Global headquarters and requiring the majority of our U.S.-based remote employees to relocate to an appropriate headquarter office. Costs incurred to date primarily include severance for the employees who have chosen not to relocate and consultant fees. Due to their scope and size, these charges have been reflected as Special Items.

(d)The below table includes the detail of Special Items Tax Benefit:


	Quarter ended
	3/31/2025		3/31/2024
Tax (Benefit) on Special Items Expense	$	(7)	$	(6)
Tax Expense - Foreign tax audit	92		—
Tax (Benefit) - Other Income tax impacts recorded as Special	—		(4)
Special Items Tax Expense (Benefit)	$	86	$	(10)

Tax Benefit on Special Items Expense was determined by assessing the tax impact of each individual component within Special Items based upon the nature of the item and jurisdictional tax law.

Tax Expense - Foreign tax audit in the quarter ended March 31, 2025 reflects a reserve associated with a change in management's judgement around a Mexican subsidiary's ability to utilize losses to offset recapture gains triggered by a historical tax deconsolidation in Mexico (see Note 7). This tax expense was reflected as a Special Item due to its size and the years to which the reserve relates.

Other Income tax impacts recorded as Special in the quarter ended March 31, 2024 include benefits related to the reversal of a reserve due to the favorable resolution of a tax audit in a foreign jurisdiction. Such reserve was established in prior years related to income tax liabilities originally recorded as a Special Item as part of an intercompany restructuring of intellectual property.


Reconciliation of GAAP Operating Profit to Company Restaurant Profit
	Quarter ended 3/31/2025
	KFC Division			Taco Bell Division			Pizza Hut Division			Habit Burger & Grill Division			Corporate and Unallocated		Consolidated
GAAP Operating Profit (Loss)	$	331		$	241		$	74		$	(1)		$	(98)	$	548
Less:
Franchise and property revenues	407			234			143			2			(1)		785
Franchise contributions for advertising and other services	149			160			85			1			—		395
Add:
General and administrative expenses	80			49			55			13			105		302
Franchise and property expenses	16			6			11			1			—		34
Franchise advertising and other services expense	149			157			89			1			—		396
Refranchising (gain) loss	—			—			—			—			(5)		(5)
Other (income) expense	—			—			(2)			—			(6)		(8)
Company restaurant profit (loss)	$	20		$	59		$	—		$	11		$	(3)	$	87
Company sales	$	216		$	263		$	3		$	125		$	—	$	607
Company restaurant margin %	9.3		%	22.4		%	(6.1)		%	8.6		%	N/A		14.3		%


	Quarter ended 3/31/2024
	KFC Division			Taco Bell Division			Pizza Hut Division			Habit Burger & Grill Division			Corporate and Unallocated		Consolidated
GAAP Operating Profit (Loss)	$	313		$	208		$	93		$	(5)		$	(89)	$	520
Less:
Franchise and property revenues	397			210			148			2			—		757
Franchise contributions for advertising and other services	130			148			88			1			—		367
Add:
General and administrative expenses	83			49			52			13			89		286
Franchise and property expenses	17			8			5			1			—		31
Franchise advertising and other services expense	129			147			90			1			—		367
Refranchising (gain) loss	—			—			—			—			(5)		(5)
Other (income) expense	(2)			—			(4)			—			5		(1)
Company restaurant profit	$	13		$	54		$	—		$	7		$	—	$	74
Company sales	$	105		$	240		$	2		$	127		$	—	$	474
Company restaurant margin %	12.2		%	22.5		%	1.9		%	5.5		%	N/A		15.6		%

Items Impacting Reported Results and Reasonably Likely to Impact Future Results

The following item impacted reported results in 2024. See also the Detail of Special Items in this MD&A for other items impacting results in 2025 or 2024.

Investment in Devyani

During the quarter ended March 31, 2024, we sold our approximate 5% minority investment in Devyani International Limited ("Devyani"), a franchise entity that operates KFC and Pizza Hut restaurants in India, for pre-tax proceeds of $104 million. Changes in the fair value of our ownership interest in Devyani prior to the date of sale resulted in pre-tax investment losses of $20 million in the quarter ended March 31, 2024.

KFC Division

The KFC Division has 31,998 units, 89% of which are located outside the U.S. Additionally, 99% of the KFC Division units were operated by franchisees as of March 31, 2025.


	Quarter ended
							% B/(W)
	2025			2024			Reported		Ex FX
System Sales	$	8,340		$	8,128		3		5
Same-Store Sales Growth (Decline) %	2			(2)			N/A		N/A

Company sales	$	216		$	105		106		109
Franchise and property revenues	407			397			2		5
Franchise contributions for advertising and other services	149			130			15		17
Total revenues	$	773		$	632		22		25

Company restaurant profit	$	20		$	13		58		61
Company restaurant margin %	9.3		%	12.2		%	(2.9)	ppts.	(2.8)	ppts.

G&A expenses	$	80		$	83		3		2
Franchise and property expenses	16			17			8		7
Franchise advertising and other services expense	149			129			(16)		(17)
Operating Profit	$	331		$	313		6		9


			% Increase (Decrease)
Unit Count	3/31/2025	3/31/2024
Franchise	31,524	30,029	5
Company-owned	474	222	114
Total	31,998	30,251	6

Company sales and Company restaurant margin %

The quarterly increase in Company sales, excluding the impacts of foreign currency translation, was driven by the KFC U.K. and Ireland restaurant acquisition (see Note 2) in the second quarter of 2024 and Company same-store sales growth of 2%.

The quarterly decrease in Company restaurant margin percentage was driven by the margin percentages of the units included in the KFC U.K. and Ireland restaurant acquisition, partially offset by Company same-store sales growth.

Franchise and property revenues

The quarterly increase in Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by unit growth and franchise same-store sales growth of 2%, partially offset by a 1% negative impact from the KFC U.K. and Ireland restaurant acquisition.

G&A

The quarterly decrease in G&A, excluding the impacts of foreign currency translation, was driven by lower headcount, partially offset by expenses related to the operation of acquired KFC U.K. and Ireland restaurants.

Operating Profit

The quarterly increase in Operating Profit, excluding the impacts of foreign currency translation, was driven by unit growth and same-store sales growth.

Taco Bell Division

The Taco Bell Division has 8,723 units, 87% of which are in the U.S. The Company owned 7% of the Taco Bell units in the U.S. as of March 31, 2025.


	Quarter ended
							% B/(W)
	2025			2024			Reported	Ex FX

System Sales	$	3,980		$	3,597		11	11
Same-Store Sales Growth %	9			1			N/A	N/A

Company sales	$	263		$	240		10	10
Franchise and property revenues	234			210			11	11
Franchise contributions for advertising and other services	160			148			8	8
Total revenues	$	657		$	598		10	10

Company restaurant profit	$	59		$	54		9	9
Company restaurant margin %	22.4		%	22.5		%	(0.1)	(0.1)

G&A expenses	$	49		$	49		1	1
Franchise and property expenses	6			8			22	22
Franchise advertising and other services expense	157			147			(7)	(7)
Operating Profit	$	241		$	208		16	16


			% Increase (Decrease)
Unit Count	3/31/2025	3/31/2024
Franchise	8,218	8,071	2
Company-owned	505	484	4
Total	8,723	8,555	2

Company sales and Company restaurant margin %

The quarterly increase in Company sales was driven by Company same-store sales growth of 7% and unit growth.

The quarterly restaurant margin percentage decrease was driven by lower margins associated with new builds outside the U.S., commodity inflation and higher labor and other restaurant operating costs partially offset by same-store sales growth.

Franchise and property revenues

The quarterly increase in Franchise and property revenues was driven by franchise same-store sales growth of 9% and unit growth.

G&A

The quarterly decrease in G&A was driven by decreased legal costs and lower headcount and salaries partially offset by higher digital and technology expenses.

Operating Profit

The quarterly increase in Operating Profit was driven by same-store sales growth and unit growth partially offset by higher restaurant operating costs.

Pizza Hut Division

The Pizza Hut Division has 19,786 units, 67% of which are located outside the U.S. The Pizza Hut Division uses multiple distribution channels including delivery, dine-in and express (e.g. airports) and includes units operating under both the Pizza Hut and Telepizza brands. Additionally, over 99% of the Pizza Hut Division units were operated by franchisees as of March 31, 2025.


	Quarter ended
							% B/(W)
	2025			2024			Reported		Ex FX

System Sales	$	3,028		$	3,167		(4)		(3)
Same-Store Sales Growth (Decline) %	(2)			(7)			N/A		N/A

Company sales	$	3		$	2		94		94
Franchise and property revenues	143			148			(4)		(2)
Franchise contributions for advertising and other services	85			88			(4)		(4)
Total revenues	$	231		$	238		(3)		(2)

Company restaurant profit	$	—		$	—		NM		NM
Company restaurant margin %	(6.1)		%	1.9		%	(8.0)	ppts.	(8.0)	ppts.

G&A expenses	$	55		$	52		(5)		(5)
Franchise and property expenses	11			5			(119)		(129)
Franchise advertising and other services expense	89			90			1		1
Operating Profit	$	74		$	93		(20)		(18)


			% Increase (Decrease)
Unit Count	3/31/2025	3/31/2024
Franchise	19,763	19,935	(1)
Company-owned	23	7	229
Total	19,786	19,942	(1)

Franchise and property revenues

The quarterly decrease in Franchise and property revenues, excluding the impacts of foreign currency translation, was driven by a franchise same-store sales decline of (2%).

G&A

The quarterly increase in G&A, excluding the impacts of foreign currency translation, was driven by professional and legal expenses associated with four franchise entities that are transitioning to new ownership.

Operating Profit

The quarterly decrease in Operating Profit, excluding the impacts of foreign currency translation, was driven by higher current year bad debt expense (including bad debt expense associated with four franchise entities that are transitioning to new ownership), timing of digital and technology related spending within Franchise advertising and other services expense, a same-store sales decline and higher G&A.

Habit Burger & Grill Division

The Habit Burger & Grill Division has 379 units, the vast majority of which are in the U.S. The Company owned 80% of the Habit Burger & Grill units in the U.S. as of March 31, 2025.


	Quarter ended
					% B/(W)
	2025		2024		Reported	Ex FX
System Sales	$	155	$	154	Even	Even
Same-Store Sales Growth (Decline) %	(3)		(8)		N/A	N/A
Total revenues	$	128	$	130	(1)	(1)
Operating Profit (Loss)	$	(1)	$	(5)	86	$	86


Unit Count	3/31/2025	3/31/2024	% Increase (Decrease)
Franchise	76	71	7
Company-owned	303	310	(2)
Total	379	381	(1)

Corporate & Unallocated


	Quarter ended
(Expense) / Income	2025			2024			% B/(W)
Corporate and unallocated G&A	$	(105)		$	(89)		(17)
Unallocated Company restaurant expenses (See Note 9)	(3)			—			NM

Unallocated Refranchising gain (loss)	5			5			2
Unallocated Other income (expense)	6			(5)			NM
Investment income (expense), net (see Note 9)	1			(22)			NM
Other pension income (expense) (see Note 10)	—			2			(83)
Interest expense, net	(120)			(117)			(2)
Income tax benefit (provision) (See Note 7)	(176)			(69)			(155)
Effective tax rate (See Note 7)	41.0		%	18.0		%	(23.0)	ppts.

Corporate and unallocated G&A

The quarterly increase in Corporate and Unallocated G&A expense was driven by higher costs associated with our resource optimization program, costs associated with our brand headquarters consolidation, higher professional fees and higher compensation.

Consolidated Cash Flows

Net cash provided by operating activities was $404 million in 2025 versus $363 million in 2024. The increase was primarily driven by a decrease in incentive compensation payments, an increase in Operating Profit before Special Items and timing of accounts receivable collections, partially offset by timing of spending on advertising and an increase in payments related to our resource optimization program.

Net cash provided by investing activities was $2 million in 2025 versus $45 million in 2024. The change was primarily driven by higher current year capital spending. The prior year proceeds arising from the sale of our approximate 5% minority investment in Devyani were largely offset by proceeds arising from the current year maturity of short-term investments.

Net cash used in financing activities was $443 million in 2025 versus $247 million in 2024. The change was primarily driven by higher current year share repurchases.

Liquidity and Capital Resources

We have historically generated substantial cash flows from our extensive franchise operations, which require a limited YUM investment, and from the operations of our Company-owned stores. Our annual operating cash flows have been in excess of $1.4 billion in each of the past four years and we expect that to continue to be the case in 2025. It is our intent to use these operating cash flows to continue to invest in growing our business and pay a competitive dividend, with any remaining excess then returned to shareholders through share repurchases. Subject to market conditions, we expect to maintain our consolidated net leverage ratio at its current level of approximately 4.0x Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") over the medium term by issuing incremental debt as our business grows. As a result, we plan to deliver materially higher capital returns going forward as compared to the past two years when we were using significant amounts of cash to reduce our debt outstanding.

To the extent operating cash flows plus other sources of cash do not cover our anticipated cash needs, we maintain a $1.5 billion Revolving Facility under our Credit Agreement which had $374 million outstanding as of March 31, 2025. We believe that our ongoing cash from operations, cash on hand, which was approximately $600 million at March 31, 2025, and availability under our Revolving Facility will be sufficient to fund our cash requirements over the next twelve months. Borrowings under our Revolving Facility had original maturities of three months or less.

There have been no material changes to the disclosures made in Item 7 of the Company's 2024 Form 10-K regarding our material cash requirements. Due to the ongoing significance of our debt obligations, we are providing the update below.

Debt Instruments

As of March 31, 2025, approximately 82% of our $11.0 billion of total debt outstanding, excluding the Revolving Facility balance, finance leases and debt issuance costs and discounts, is fixed with an effective overall interest rate of approximately 4.7%. Subsequent to the end of the first quarter, we entered into interest rate swaps (see Note 12) to fix the interest rate on $1.5 billion of borrowings, primarily under our Term Loan B Facility, from April 2025 to March 2028 which increased the fixed percentage of this total debt outstanding to 96%.

We ended the quarter with a consolidated net leverage ratio of 3.9x EBITDA. We continually reassess our optimal leverage ratio to maximize shareholder returns. We target a capital structure which we believe provides an attractive balance between optimized interest rates, duration and flexibility with diversified sources of liquidity and maturities spread over multiple years. We have credit ratings of BB+ (Standard & Poor's)/Ba2 (Moody's).

The following table summarizes the future maturities of our outstanding long-term debt, excluding finance leases and debt issuance costs and discounts, as of March 31, 2025.


	2025		2026		2027		2028		2029		2030		2031		2032		2037		2043		Total
Securitization Notes			$	938	$	884	$	595	$	590			$	737							$	3,743
Credit Agreement	$	18	28		34		1,424		438												1,940
Revolving Facility									374												374
Subsidiary Senior Unsecured Notes					750																750
YUM Senior Unsecured Notes											$	800	1,050		$	2,100	$	325	$	275	4,550

Total	$	18	$	965	$	1,668	$	2,019	$	1,401	$	800	$	1,787	$	2,100	$	325	$	275	$	11,357

See Note 11 for details on the Securitization Notes, the Credit Agreement, Revolving Facility, Subsidiary Senior Unsecured Notes and YUM Senior Unsecured Notes.

New Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which updates income tax disclosure requirements related to the income tax rate reconciliation and requires disclosure of income taxes paid by jurisdiction. The standard is effective for the Company's Annual Report on Form 10-K for fiscal 2025 with early adoption permitted. The amendments should be applied prospectively; however, retrospective application is permitted. We are currently evaluating the impact of the standard on our disclosures.

In March 2024, the SEC issued a final rule under SEC Release Nos. 33-11275 and 34-99678, The Enhancement and Standardization of Climate-Related Disclosures for Investors. The rule requires disclosure of material climate-related information outside of the audited financial statements and disclosure in the footnotes addressing specified financial statement effects of severe weather events and other natural conditions above certain financial thresholds, certain carbon offsets and renewable energy credits or certificates. The standard is effective for the Company's Annual Report on Form 10-K for fiscal 2025. In April 2024, the SEC released an order staying this final rule pending judicial review of all the petitions challenging the rule. We are in the process of analyzing the impact of the rule on our disclosures should the stay be lifted.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40), which requires new financial statement disclosures disaggregating prescribed expense categories within relevant income statement expense captions. The standard is effective for the Company's Annual Report on Form 10-K for fiscal 2027, and subsequent interim periods, with early adoption permitted. The amendments should be applied prospectively; however, retrospective application is permitted. We are currently evaluating the impact of the standard on our disclosures.

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