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, 2025, (“2025 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.

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 63,000 restaurants in 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 63,000 restaurants, 97% 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, our mission is to grow iconic restaurant brands globally that are loved, trusted and connected:

Loved: We grow by delighting customers with craveable food and a distinctive experience.

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 resources.

Connected: We use our teamwork, technology and global scale to serve every customer, everywhere, anytime.

In 2026 and beyond, we intend to drive the next chapter of growth for YUM by Raising the B.A.R. through three clear priorities that reflect bold aspirations and a commitment to industry-leading performance:

• B**attle for the future consumer by staying relentlessly focused on their needs and wants.

• A**ccelerate restaurant unit economics for our franchisees and maximize performance of every restaurant, serving as a catalyst for new unit development and keeping our franchise system healthy.

• R**each the full potential of Byte by Yum! by effectively operating, innovating and expanding our connected platform built by restaurant operators for restaurant operators to unlock its full potential for our franchise partners and our business.

Key to our success fueling brand performance and franchise success is our unrivaled culture and talent and leading with smart, heart and courage.

We intend to drive long-term growth and shareholder returns primarily through consistent same-store sales growth and new unit development across all of our Concepts. We intend to support this growth and development through a capital and operating structure that:

• Invests capital in a manner consistent with an asset light, franchisor model;

• Allocates G&A in an efficient manner that provides leverage to operating profit growth while at the same time opportunistically investing in strategic growth initiatives;

• Targets a consolidated net leverage ratio that balances shareholder returns, cost of capital and flexibility against various risk factors; and

• Maximizes shareholder return through a combination of paying a competitive dividend and returning excess cash flow through share repurchases.

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). 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. 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			+6			+2			+7			+16			+9
Taco Bell Division			+10			+8			+3			+16			+16
Pizza Hut Division			Even			Even			+1			(14)			(16)
Worldwide			+6			+3			+5			+17			+6

Additionally:

• Foreign currency translation positively impacted Divisional Operating Profit by $25 million for the quarter ended March 31, 2026.

• Gross unit openings for the quarter were 1,030 units resulting in 400 net new units.

			First Quarter
			2026			2025			% Change
GAAP EPS			$1.55			$0.90			+72
Less Special Items EPS			$0.05			$(0.40)			NM
EPS Excluding Special Items			$1.50			$1.30			+15

Worldwide

GAAP Results

			Quarter ended
			2026						2025						% B/(W)
Company sales			$	785					$	607					29
Franchise and property revenues			856						785						9
Franchise contributions for advertising and other services			418						395						6
Total revenues			2,059						1,787						15
Company restaurant expenses			677						520						(30)
G&A expenses			322						302						(7)
Franchise and property expenses			43						34						(28)
Franchise advertising and other services expense			419						396						(6)
Refranchising (gain) loss			(1)						(5)						(79)
Other (income) expense			(45)						(8)						NM
Total costs and expenses, net			1,415						1,239						(14)
Operating Profit			644						548						17
Investment (income) expense, net			—						(1)						(94)
Other pension (income) expense			—						—						(7)
Interest expense, net			128						120						(7)
Income before income taxes			516						429						20
Income tax provision			84						176						52
Net Income			$	432					$	253					71
Diluted EPS(a)			$	1.55					$	0.90					72
Effective tax rate			16.2		%				41.0		%				24.8			ppts.

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

Performance Metrics

Unit Count			3/31/2026						3/31/2025						% Increase (Decrease)
Franchise			62,053						59,581						4
Company-owned			1,632						1,305						25
Total			63,685						60,886						5

						Quarter ended
						2026						2025
Same-store Sales Growth (Decline) %						3						3
System Sales Growth %, reported						10						3
System Sales Growth %, excluding FX						6						5

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

						Quarter ended
						2026						2025
Consolidated
Company sales(a)						$	785					$	607
Franchise sales						16,218						14,896
System sales						17,003						15,503
Negative (Positive) Foreign Currency Impact(b)						(586)						N/A
System sales, excluding FX						$	16,417					$	15,503
KFC Division
Company sales(a)						$	255					$	216
Franchise sales						9,073						8,124
System sales						9,328						8,340
Negative (Positive) Foreign Currency Impact(b)						(476)						N/A
System sales, excluding FX						$	8,852					$	8,340
Taco Bell Division
Company sales(a)						$	372					$	263
Franchise sales						4,022						3,717
System sales						4,394						3,980
Negative (Positive) Foreign Currency Impact(b)						(16)						N/A
System sales, excluding FX						$	4,378					$	3,980
Pizza Hut Division
Company sales(a)						$	32					$	3
Franchise sales						3,083						3,025
System sales						3,114						3,028
Negative (Positive) Foreign Currency Impact(b)						(94)						N/A
System sales, excluding FX						$	3,020					$	3,028
Habit Burger & Grill Division
Company sales(a)						$	126					$	125
Franchise sales						40						30
System sales						166						155
Negative (Positive) Foreign Currency Impact(b)						—						N/A
System sales, excluding FX						$	166					$	155

(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
						2026						2025
Core Operating Profit Growth %						6						8
Diluted EPS Growth %, excluding Special Items						15						13
Effective Tax Rate excluding Special Items						18.0		%				19.8		%

Company restaurant profit						$	107					$	87
Company restaurant margin %						13.7		%				14.3		%

Reconciliation of GAAP Operating Profit to Core Operating Profit						Quarter ended
						2026						2025
Consolidated
GAAP Operating Profit						$	644					$	548
Detail of Special Items:
Charges associated with Pizza Hut Strategic Options Review(a)						37						—
Charges associated with Brand HQ Consolidation(b)						1						7
Charges associated with Resource Optimization						—						17
Income from Litigation Settlement(c)						(44)						—
Other Special Items (Income) Expense						—						2
Special Items (Benefit) Expense - Operating Profit						(6)						27
Positive Foreign Currency Impact on Division Operating Profit						(25)						N/A
Core Operating Profit						$	612					$	575
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						38						28
Increase in Other (income) expense						(44)						(2)
Special Items (Benefit) Expense - Operating Profit						$	(6)					$	27
KFC Division
GAAP Operating Profit						$	383					$	331
Negative (Positive) Foreign Currency Impact						(23)						N/A
Core Operating Profit						$	361					$	331
Taco Bell Division
GAAP Operating Profit						$	281					$	241
Negative (Positive) Foreign Currency Impact						(1)						N/A
Core Operating Profit						$	280					$	241
Pizza Hut Division
GAAP Operating Profit						$	64					$	74
Negative (Positive) Foreign Currency Impact						(2)						N/A
Core Operating Profit						$	62					$	74
Habit Burger & Grill Division
GAAP Operating Profit (Loss)						$	(7)					$	(1)
Negative (Positive) Foreign Currency Impact						—						N/A
Core Operating Profit (Loss)						$	(7)					$	(1)
Reconciliation of GAAP Net Income to Net Income excluding Special Items
GAAP Net Income						$	432					$	253
Special Items (Benefit) Expense - Operating Profit						(6)						27
Special Items Tax (Benefit) Expense(d)						(8)						86
Net Income excluding Special Items						$	418					$	366

						Quarter ended
						2026						2025
Reconciliation of Diluted EPS to Diluted EPS excluding Special Items
Diluted EPS						$	1.55					$	0.90
Less Special Items Diluted EPS						0.05						(0.40)
Diluted EPS excluding Special Items						$	1.50					$	1.30
Reconciliation of GAAP Effective Tax Rate to Effective Tax Rate excluding Special Items
GAAP Effective Tax Rate						16.2		%				41.0		%
Impact on Tax Rate as a result of Special Items						(1.8)		%				21.2		%
Effective Tax Rate excluding Special Items						18.0		%				19.8		%

(a) In 2025, we began a review of strategic options for the Pizza Hut brand. During the quarter ended March 31, 2026, we incurred charges of $37 million to Corporate and unallocated General and administrative expenses, which primarily included third-party advising costs associated with this strategic options review. Given the significance of the costs expected to be incurred through the course of this strategic options review, we have reflected such amounts as Special Items.

(b)In 2025, we decided 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 the KFC Global headquarters and requiring the majority of our U.S.-based remote employees to relocate to an appropriate headquarter office. We also decided to relocate our YUM Corporate headquarters to a new space in Louisville, Kentucky and accordingly, donated our existing space. Costs incurred to date primarily include severance for the employees who chose not to relocate and consultant fees. As a result of these decisions, we recorded charges of approximately $1 million and $7 million during the quarters ended March 31, 2026 and 2025, respectively, to Corporate and unallocated General and administrative expenses. Due to their scope and size, these charges have been reflected as Special Items.

(c)During the quarter ended March 31, 2026, we received approximately $44 million, net of legal expenses, related to a credit card interchange fee litigation settlement in which we were a plaintiff. This settlement was recorded to Unallocated Other (income) expense. Due to the nature and size of the settlement, including the years to which the litigation related, it has been reflected as a Special Item within Other income.

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

						Quarter ended
						3/31/2026						3/31/2025
			Tax Expense (Benefit) on Special Items (Benefit) Expense - Operating Profit			$	2					$	(7)
			Tax Expense - Foreign tax reserve			—						92
			Tax (Benefit) - Intra-entity transfers and valuations of intellectual property			(22)						—
			Tax Expense - Other Income tax impacts recorded as Special			13						—
			Special Items Tax (Benefit) Expense			$	(8)					$	86

Tax Expense (Benefit) on Special Items (Benefit) Expense - Operating Profit 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 (Benefit) - Intra-entity transfers and valuations of intellectual property in the quarter ended March 31, 2026, reflects the tax benefit resulting from an internal reorganization to consolidate our Pizza Hut legal entities and assets into two isolated ownership structures by aligning the legal ownership, simplifying the organizational footprint and consolidating the Pizza Hut domestic and international business. As part of this reorganization, certain Pizza Hut intellectual property ("IP") rights from subsidiaries in the U.S. were transferred to international subsidiaries resulting in a step-up in amortizable tax basis of those IP rights. This reorganization began in the fourth quarter of 2025 in connection with our Pizza Hut strategic options review.

Tax Expense - Other Income tax impacts recorded as Special in the quarter ended March 31, 2026, includes a $13 million adjustment to tax expense associated with our decision to exit Russia. Consistent with previously recorded impacts associated with our decision to exit Russia, this adjustment was recorded as a Special Item.

Tax Expense - Foreign tax reserve in the quarter ended March 31, 2025, is associated with a reserve, and the related ongoing foreign exchange and inflationary adjustments, associated with a change in management's judgment around a Mexican subsidiary's ability to utilize losses to offset recapture gains triggered by a historical tax deconsolidation in Mexico. This expense was reflected as a Special Item due to its size and the time elapsed since the years to which the reserve relates.

Reconciliation of GAAP Operating Profit to Company Restaurant Profit
						Quarter ended 3/31/2026
						KFC Division						Taco Bell Division						Pizza Hut Division						Habit Burger & Grill Division						Corporate and Unallocated						Consolidated
GAAP Operating Profit (Loss)						$	383					$	281					$	64					$	(7)					$	(77)					$	644
Less:
Franchise and property revenues						461						251						142						3						—						856
Franchise contributions for advertising and other services						163						175						80						1						—						418
Add:
General and administrative expenses						87						53						59						13						111						322
Franchise and property expenses						19						6						17						1						—						43
Franchise advertising and other services expense						161						173						84						1						—						419
Refranchising (gain) loss						—						—						—						—						(1)						(1)
Other (income) expense						—						1						(3)						1						(45)						(45)
Company restaurant profit (loss)						$	26					$	88					$	1					$	5					$	(12)					$	107
Company sales						$	255					$	372					$	32					$	126					$	—					$	785
Company restaurant margin %						10.3		%				23.6		%				1.8		%				3.7		%				N/A						13.7		%

						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		%

Items Impacting Reported Results and Reasonably Likely to Impact Future Results

The following items impacted reported results in 2026 and/or 2025 and/or are reasonably likely to impact future results. See also the Detail of Special Items in this MD&A for other items impacting results in 2026 or 2025.

Pizza Hut Strategic Options Review

In 2025, we began a review of strategic options for the Pizza Hut brand. The objective of the review is to create value for YUM, Pizza Hut and its franchise partners by determining the optimal approach to best capitalize on Pizza Hut's structural advantages — strong brand equity, experienced franchise partners and meaningful scale — in the highly fragmented pizza market. We currently intend to complete this strategic options review in 2026, and there can be no assurance this review will result in any specific outcome or transaction.

In January 2026, we launched the Hut Forward program that represents a bridge to a longer-term acceleration of the Pizza Hut brand. This program includes alignment on a vibrant marketing plan, modernization of certain technology and franchise agreements and a YUM contribution to marketing support, along with the approval of some targeted closures of underperforming units. The YUM contribution for incremental marketing in the quarter ended March 31, 2026, is being recognized as advertising expense throughout 2026.

Additionally, we incurred certain other costs during the quarter ended March 31, 2026 associated with this strategic review (see Detail of Special Items section of this MD&A) and expect to incur further costs of a currently indeterminate amount as this strategic options review progresses.

KFC Division

The KFC Division has 34,332 units, 90% of which are located outside the U.S. Additionally, 98% of the KFC Division units were operated by franchisees as of March 31, 2026.

						Quarter ended
																		% B/(W)
						2026						2025						Reported									Ex FX
System Sales						$	9,328					$	8,340					12									6
Same-Store Sales Growth (Decline) %						2						2						N/A									N/A
Company sales						$	255					$	216					18									10
Franchise and property revenues						461						407						13									7
Franchise contributions for advertising and other services						163						149						9									1
Total revenues						$	879					$	773					14									7
Company restaurant profit						$	26					$	20					30									18
Company restaurant margin %						10.3		%				9.3		%				1.0			ppts.						0.8			ppts.
G&A expenses						$	87					$	80					(8)									(4)
Franchise and property expenses						19						16						(19)									(12)
Franchise advertising and other services expense						161						149						(8)									—
Operating Profit						$	383					$	331					16									9

																		% Increase (Decrease)
Unit Count						3/31/2026						3/31/2025
Franchise						33,815						31,524						7
Company-owned						517						474						9
Total						34,332						31,998						7

Company sales and Company restaurant margin %

The quarterly increase in Company sales, excluding the impacts of foreign currency translation, was driven by Company same-store sales growth of 5%, acquisitions of restaurants from franchisees and unit growth.

The quarterly increase in Company restaurant margin percentage was driven by Company same-store sales growth, partially offset by higher labor and other restaurant operating costs.

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%.

G&A

The quarterly increase in G&A, excluding the impacts of foreign currency translation, was driven by higher headcount.

Operating Profit

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

Taco Bell Division

The Taco Bell Division has 9,021 units, 86% of which are in the U.S. The Company owned 9% of the Taco Bell Division units in the U.S. as of March 31, 2026.

						Quarter ended
																		% B/(W)
						2026						2025						Reported									Ex FX
System Sales						$	4,394					$	3,980					10									10
Same-Store Sales Growth %						8						9						N/A									N/A
Company sales						$	372					$	263					41									41
Franchise and property revenues						251						234						7									7
Franchise contributions for advertising and other services						175						160						9									9
Total revenues						$	797					$	657					21									21
Company restaurant profit						$	88					$	59					49									49
Company restaurant margin %						23.6		%				22.4		%				1.2			ppts.						1.3			ppts.
G&A expenses						$	53					$	49					(8)									(8)
Franchise and property expenses						6						6						Even									1
Franchise advertising and other services expense						173						157						(10)									(10)
Operating Profit						$	281					$	241					16									16

																		% Increase (Decrease)
Unit Count						3/31/2026						3/31/2025
Franchise						8,346						8,218						2
Company-owned						675						505						34
Total						9,021						8,723						3

Company sales and Company restaurant margin %

The quarterly increase in Company sales was driven by acquisitions of restaurants from franchisees, company same-store sales growth of 6%, and unit growth.

The quarterly increase in Company restaurant margin percentage was driven by same store sales growth and the margin percentages of restaurants acquired from franchisees, partially offset by higher labor and other restaurant operating costs and commodity inflation (primarily beef).

Franchise and property revenues

The quarterly increase in Franchise and property revenues was driven by franchise same-store sales growth of 8% and unit growth partially offset by acquisitions.

G&A

The quarterly increase in G&A was driven by higher professional and legal fees and higher headcount.

Operating Profit

The quarterly increase in Operating Profit was driven by same-store sales growth, the impact of restaurants acquired from franchisees and unit growth, partially offset by higher restaurant operating costs and higher G&A.

Pizza Hut Division

The Pizza Hut Division has 19,944 units, 69% 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, 2026.

						Quarter ended
																		% B/(W)
						2026						2025						Reported									Ex FX
System Sales						$	3,114					$	3,028					3									Even
Same-Store Sales Growth (Decline) %						Even						(2)						N/A									N/A
Company sales						$	32					$	3					825									789
Franchise and property revenues						142						143						(1)									(3)
Franchise contributions for advertising and other services						80						85						(6)									(6)
Total revenues						$	253					$	231					10									7
Company restaurant profit (loss)						$	1					$	—					370									350
Company restaurant margin %						1.8		%				(6.1)		%				7.9			ppts.						7.8			ppts.
G&A expenses						$	59					$	55					(8)									(6)
Franchise and property expenses						17						11						(59)									(56)
Franchise advertising and other services expense						84						89						6									6
Operating Profit						$	64					$	74					(14)									(16)

																		% Increase (Decrease)
Unit Count						3/31/2026						3/31/2025
Franchise						19,809						19,763						—
Company-owned						135						23						487
Total						19,944						19,786						1

Franchise and property revenues

The quarterly decrease in Franchise and property revenues, excluding the impact of foreign currency translation, was primarily driven by the impact of our acquisitions of restaurants from franchisees. Franchise same-store sales were flat in the quarter.

G&A

The quarterly increase in G&A, excluding the impact of foreign currency translation, was driven by the impact of G&A associated with operating restaurants acquired from franchisees.

Operating Profit

The quarterly decrease in Operating Profit, excluding the impact of foreign currency translation, was driven by higher advertising costs associated with the Pizza Hut U.S. Hut Forward program and the impact of operating restaurants acquired from franchisees.

Habit Burger & Grill Division

The Habit Burger & Grill Division has 388 units, all of which are in the U.S. The Company owned 79% of the Habit Burger & Grill Division units as of March 31, 2026.

						Quarter ended
																		% B/(W)
						2026						2025						Reported
System Sales						$	166					$	155					7
Same-Store Sales Growth (Decline) %						5						(3)						N/A
Total revenues						$	130					$	128					1
Operating Profit (Loss)						$	(7)					$	(1)					(934)

Unit Count						3/31/2026						3/31/2025						% Increase (Decrease)
Franchise						83						76						9
Company-owned						305						303						1
Total						388						379						2

Corporate & Unallocated

						Quarter ended
(Expense) / Income						2026						2025						% B/(W)
Corporate and unallocated G&A						$	(111)					$	(105)					(5)
Unallocated Company restaurant expenses						(12)						(3)						(330)
Unallocated Franchise and property revenues						—						(1)						NM
Unallocated Refranchising gain (loss)						1						5						(79)
Unallocated Other income (expense) (See Note 5)						45						6						NM
Investment income (expense), net						—						1						(94)
Other pension income (expense)						—						—						(7)
Interest expense, net						(128)						(120)						(7)
Income tax provision (See Note 7)						(84)						(176)						52
Effective tax rate (See Note 7)						16.2		%				41.0		%				24.8			ppts.

Corporate and unallocated G&A

The quarterly increase in Corporate and Unallocated G&A expense was driven by costs associated with the Pizza Hut Strategic Options Review, partially offset by lapping costs associated with our Resource Optimization Program and Brand Headquarters Consolidation.

Unallocated Company restaurant expenses

Unallocated Company restaurant expenses include amortization of reacquired franchise rights. The quarterly increase was driven by the acquisitions of restaurants from franchisees in 2025.

Interest expense, net

The quarterly increase in Interest expense, net was driven by higher outstanding borrowings.

Consolidated Cash Flows

Net cash provided by operating activities was $416 million in 2026 versus $404 million in 2025. The increase was primarily driven by an increase in Operating Profit, partially offset by higher incentive compensation payments, the timing of spending on advertising and higher income tax payments.

Net cash used in investing activities was $80 million in 2026 versus net cash provided by investing activities of $2 million in 2025. The change was primarily driven by lapping maturities of short-term investments in the prior year.

Net cash used in financing activities was $375 million in 2026 versus $443 million in 2025. The change was primarily driven by lower current year share repurchases and higher current year net borrowings.

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 were in excess of $2.0 billion in 2025 and we expect continued strong operating cash flows in 2026. 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 approximately 4.0x Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") over the medium term by issuing incremental debt as our business grows.

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 $350 million outstanding as of March 31, 2026. Borrowings under our Revolving Facility in 2026 had original maturities of three months or less. We believe that our ongoing cash from operations, cash on hand, which was approximately $700 million at March 31, 2026, and availability under our Revolving Facility will be sufficient to fund our cash requirements over the next twelve months.

There have been no material changes to the disclosures made in Item 7 of the Company's 2025 Form 10-K regarding our material cash requirements. Due to the ongoing significance of our debt obligations, we are providing the update below.

Debt Obligations and Interest Payments

As of March 31, 2026, approximately 96%, including the impact of interest rate swaps, of our $11.5 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 4.5%. 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 and as mentioned above, we expect to maintain our net leverage ratio at approximately 4.0x EBITDA over the medium term by issuing incremental debt as our business grows. 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, 2026.

						2026						2027						2028						2029						2030						2031						2032						2037						2043						Total
Securitization Notes												$	884					$	595					$	590					$	1,000					$	737					$	500																	$	4,306
Credit Agreement						$	21					34						1,424						438																																				1,916
Revolving Facility																								350																																				350
Subsidiary Senior Unsecured Notes												750																																																750
YUM Senior Unsecured Notes																														800						1,050						2,100						$	325					$	275					4,550
Total						$	21					$	1,668					$	2,019					$	1,377					$	1,800					$	1,787					$	2,600					$	325					$	275					$	11,872

A Term Loan A Facility that is part of the Credit Agreement and the Revolving Facility will mature on the earliest of (i) April 26, 2029, (ii) the date that is 91 days prior to the March 15, 2028 maturity of the existing Term Loan B Facility if more than $250 million of such Term Loan B Facility remains outstanding as of such date or (iii) the date that is 91 days prior to the June 1, 2027 maturity of the existing Subsidiary Senior Unsecured Notes if more than $250 million of such Subsidiary Senior Unsecured Notes remain outstanding as of such date. Given the $750 million in Subsidiary Senior Unsecured Notes oustanding as of March 31, 2026, the maturity date of the Term Loan A Facility and the Revolving Facility will occur less than 12 months from the balance sheet date of these Condensed Consolidated Financial Statements if the Company has not paid nor refinanced at least $500 million of the Subsidiary Senior Unsecured Notes 91 days prior to June 1, 2027. As such, the outstanding borrowings of the Term Loan A Facility and the Revolving Facility as of March 31, 2026 have been classified as Short-term borrowings in the Condensed Consolidated Balance Sheets as of March 31, 2026. We expect to refinance the $750 million of the existing Subsidiary Senior Unsecured Notes before 91 days prior to June 1, 2027, and as such, the table above reflects the April 26, 2029 anticipated repayment date for the Term Loan A Facility and the Revolving Facility.

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 November 2024, the Financial Accounting Standards Board ("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.

In September 2025, the FASB issued ASU 2025-06, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which amends certain aspects of the accounting for software costs, including removing software development project stages and requiring companies to capitalize costs when both 1) management authorizes or commits to funding a software project and 2) it is probable that the project will be completed and the software will be used to perform the function intended. The standard is effective for the Company in our first quarter of fiscal 2028, with early adoption permitted and can be applied on a prospective, retrospective or modified prospective basis. We are currently evaluating the impact of the standard on our condensed consolidated financial statements.