YUM - Earnings call transcript Q1 2020

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Operator

Good day and welcome to the Yum! Brands 2020 First Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note, today’s event is being recorded.

to Investor conference Relations, like Siegner, to now President, Vice M&A would turn over the Keith I and Treasurer. ahead. go Please

Keith Siegner

Thanks, our Vice Chief President thank and Officer; and our David morning, Corporate our joining Financial our Good Senior Russell, Gibbs, Turner, On are call Controller. you Chris CEO; and Dave us. today operator. for everyone,

Following call to remarks from David and Chris, we questions. will operating expense the

that started, this would remind conference includes get like I we you Before Statements. call Forward-Looking to

that subject could differ are future to results statements. and uncertainties our statements to cause Forward-looking materially events actual these from

our to thinking COVID-XX We our But completely are going do our evolving. on the best obviously the to of and provide situation is unprecedented current impact this business. about pandemic

earnings regarding that and and conjunction made factors the only considered the pandemic cautionary SEC. statements So as statements this be All with filings should and will our of of and date the severity in any forward-looking the remarks uncertainty be in duration the variable should with in as are announcement considered our forward-looking release a the impacted result. be the light of of in included risk

In addition, relevant the of reconciliations and to earnings please our with be and measures filings of today’s to find disclosures financial that call. releases SEC non-GAAP our may sections on refer used

Please basis regarding of our note following the presentation.

First, all system sales currency. impact of results exclude the foreign

exclude of currency foreign figures impact and the profit growth items. Second, core operating special

please each more the For reporting market, Reports visit section our for calendar our information Financial of website. on

advised you a call both be in be use for is being our will any will also conference this if included the available broadcasting call ask and conference be Please live recorded recording. are our via of it in This website. We future question, playback. and that

to like following. events We upcoming the aware investor make of and Yum! would you

in the debt capital provided the be at XX-Q outstanding structure to Form time group our of restricted will pertaining filing. disclosures First,

same call the quarter earnings July XX, with XXXX, the on second on Second, released day. conference will be

call the over turn to like would Gibbs. to I Now, David

David Gibbs

Keith. good everyone. morning, And you, Thank

challenges are franchisees I you Before experiencing that say we we and around like moment begin, and a to team thank world. the take unprecedented all members heartfelt the would to our acknowledge to a

been is these affected unbelievable healthcare lines while speed. critical play are brave action working have with and front entire take by many to COVID-XX. our thoughts positive together with band system our everyone confront part, It challenges most of amazing the them And to workers our us see and the role, and to are on the

information the goal capability. of a business. use to our and quarter to about Our is today and the of our an unrivaled illustrate operating the talent review examples overall few state I current will of be start unmatched and and you timely with and business first give transparent state culture the power of

be are their brands adjusting easy more of in our how results healthy highlight and framework are RED business also we our will will supporting to share environment. and this distinctive position. I and relevant, details the state. model adapting How current Then franchisees liquidity our and QX Chris

the quarter in by of QX brand. For our driven early by our underlying encouraged we the were momentum results, strength

our core reason as the operating impacted XXth, profit was X%. X-K However, signaled in by the COVID-XX, we was on which primary quarter declined heavily March

dine-in dependent our outbreak sale. new and the of severity market our system of same-store partially reliance unit sales on is declined net by Yum! offset each was well upon as sales X% The as each in timing, growth. the Overall X% sales decline on markets X% as impact duration

early that seen Importantly, in of by impacted first recovery we in were others. have signs COVID-XX stabilization markets and

completely our closed, stores by X-K approximately were filing, at global of As the government one our example, largely time driven of XXXX shutdown.

with reopening stores given closed reopened, have XX,XXX. trends increased then, from sales approximately talk to a Since recent this stores reopens figure about few trial. Chris and minutes. changing in mandate various and been XXXX about more will consistently As the slowly

pandemic, the top of restaurant onset support customers of Since safety our priority. the and and this has franchisees employees, team been our members,

move protocols and stringent emphasizing strengthen quickly and already sanitation. reinforce cleaning to we hygiene, our First,

leverage Next, practices contactless best out we by markets. off-premise carry our of our which and pioneered accelerated China, the operations services. in we of many delivery Simultaneously, to suspend move execution room Yum! dining

and continue usage team restaurant for facial of to increased Our single frontline temperature brands measures also use possible. coverings, gloves, where including expand checks, protective measures physical members, distancing disposable protective

refining We the and latest will guide. Public and based feedback our consumer continue on Health practices Government

around the world. At restaurants our Company X,XXX and

who role our team in scheduled home continue Recognizing are at to managers general due We members to these to paying stores. COVID-XX. X,XXX restaurant are stay to required vital hours the play

$X,XXX to time normally pay provided restaurants in to We if sales bonuses their not one our addition quarter second RGM to would committing qualify. bonuses even their have performance

bonuses Also of restaurants. the X,XXX one-time working in June, our to majority pay we owned Company will team in members

increase time. restaurant during members to supportive Our this franchisees steps are team also taking critical

for Employee Medical Fund provide support company for well for employees restaurants with Global owned a created Relief caring are were diagnosed we someone Finally, to who COVID-XX. franchise diagnosed restaurant as as financial and with

of I other we to to are some bridge to our help like the of crisis. would the this taking steps side franchisees also share

businesses business our a blood. many As and of are system, comprised independent life entrepreneurs, franchisees small XX% and franchise we our are and

do we everything this constraints crisis, the will we facing power all in them franchisees are within our into team. reassured their and Going to we our help

access Scott of Chris health and limited but COVID-XX our help Including, available source. provided team We in Turner not navigate chaired global continuity support. franchise business partners all and Yum! have franchise system to up General support set economic Counsel, our a Catlett. sources To by with to the

certain to will To need are partners, more periods those standing who to deferring including obligations, good help and payments, certain about. asset and which we graces more in providing franchise our Chris are talk assistance access near-term capital, for

response core to to Now in quickly moving brand adjust our and crisis. intently brands. the to RED on to needs listened Each has customer pivoted

digital affordable a is safe with were in system technology global our partnered by addressing have low shared business. to franchise provide with capability. environment already we food in contactless In delivery and contact carryout, payments. All mission thru, ways curbside accelerating many COVID-XX our our We entire trends drive convenient mobile enabled a and on

Let’s same-store of unit with as results. division reported declined QX was partially declined growth. sales new X%, This an division by X% net sales a KFC system start offset X%

details COVID-XX impact their on were the call. Given already Yum! China by provided earnings

the Let’s business take to through China. excluding global minute walk a KFC

particularly, Outside having year. very same-store a of to of the in we X% East January quarter had with sales UK In X% and momentum want to start beginning were same-store sales in the China highlight the strong February. Middle the growth we the in growth and great

COVID-XX full more down divisions world X% quarter As for in China. prevalent restrictions, the became KFC excluding around March. the The ended

COVID-XX services markets, XX% are our of delivery and As doubling down are expanding contactless now in part of and available we globally. on pivots, KFC digital

strength QX, by of Australia. KFC with and than click year a with digital Thailand end particular in through driven current increased and In its trend sales sustain, through quarter more collect channels. delivery mix Digital and globally could the

meals by KFC with is can U.S. options and customize. offering customers advantages example competitive off-premise strides style on staying of KFC RED, friendly current along perfect the the major a in are of has that multiple variations family made family U.S. environment. our digital meal affordable how capabilities,

on a with for feed Truly $XX enough some incredible $XX offer now to family fill the up multiple a value XX an in which We have to food add fill up. as cases. includes meals tenders

KFC.com ago. have month seen up buckets last digital And digits original with a increasing a sales low-single which just importantly XX% in today. of people is change XX% late accessing to digital We year. how ones from recipe about of through are going approximately sales are This

Moving net unit division. System of on to declined Pizza same-store X% decline with the sales and XX% growth. sales flat new the

safety Pizza had down team QX. seen on food X% were Globally, mass safety, sales services, China, the Hut a in community. Hut same-store brand and giving in contactless to messaging, division back Excluding shift members focusing Pizza

with over able pickup partnership we to out curbside support contactless our delivery, In to materials in appropriate carry and quickly available and protocols now develop franchisees, rollout countries. of XX training the were

margin on our more meat pizza quarter and value products. offering Dipper. products targeted During and promotional as of higher and premium core the we U.S., specialty into pivoted while Pizza lovers time limited constructs Big Hut the value towards such QSR first leaned

than We returns off-premise to are early ever. the Hoffman, innovation serving and marketing led increased is by see and changes are for President succeed to starting where who Kevin more about from the now brand’s Hut reasons a the the ability benefits and contactless important world as are Hut optimism Interim Pizza Pizza in

sales the Hut Recent declined express our of Express And overall gains International, offset China. our represented of our X% At the sales vast off-premise in room. excluding X% dining has XXXX. impact of helped in majority units. Pizza same-store system closing

thus through to be continued typically markets Our without far. heavy and restrictions well to carryout delivery crisis significant fared have that have focused able trade the

impacted However, related COVID-XX America operating across Middle and by closures Latin significantly the and many restrictions. countries Europe, have East been

While, the in declines some and increase net such by UK, dining been have an as a in the headwind. offset demand, has carryout impact delivery been of the

generated sales of XX%. And increased a into same-store sales off-premise channel XX% to growth off-premise XX% Hut Pizza context, all this for positive off-premise quarter International been Historically, QX. sales. have our in of To sales this put

the Hong declines In than we growth quarter. positive overall markets, to sales in dining and certain Kong deliver Japan, off-premise particular, during offset sales more which Asia Taiwan saw same-store

unit with X% same-store sales growth Turning X% to Taco new system Bell, growth. X% sales QX net grew and

last offering $X year growth impressive excluding The with the power quarter, sales was Tacos. of the X%. two with weeks trending a in started at a the Importantly, toward same-store point price the Stacked an Double U.S. value

is successful across delivery makes options X%. Taco $XX orders Chicken by of very Fries, quickly Like adapt fronts to all advertising Grubhub. This Taco all Bell program offering COVID-XX. off-premise was sales our free over Bell Buffalo to followed with through a on and brands, total about highlighting responded

of In drive-through XX% the sales. represented about U.S. sales delivery and pre-COVID

of sales approximately nearly Now XX%. representing this XXX% is with Taco digital Bell’s

the low below have simultaneously drive-through achieving minute remarkable all while changed. times, maintained time four has We in quickly considering our also dissatisfaction. customer how This is landscape an

action. to option and business Habit quarter, this Bell whole during Grill, and Habit were the as model. our pause very Burger operators to knew first have the and hours Also, have restaurants optimize in offering team breakfast of completed Russ the Bendel Finally, the adjust operations our we of seen along Taco we the acquisition that appropriate already all strong best we

with such drive-through rolling drive-through quickly just pop-up adapted self as Habit order modes by new order for fact, carry XX park-in out many units, to different the and the outdoor (Ph). team In environment [TI] order, out

marketing Additionally, shifted value family digital Habit to delivery. bundles carryout and accessible through on focus

this sales, excited more about trend operational forward digital Habit XX% for have ordering, of of what is be fueled couldn’t versus long-term adjustments believe about prove future XX% which and will that be marketing the growth now win. from brand to the Combined, We our up holds levels. our and in acquisition pre-COVID-XX

I toward future to I new Yum’s position it contemplate as over thoughts and on Chris, few a pass normal. move Before to want offer the a we

we have As I four distinct see advantages. it,

First, our talent. unrivaled culture and

Our Yum! brand urgently a we on solutions way at and at have employees builders our the never are partnering seen pace before, franchisees. of that consumers, acting needs address and a in changing operators and

Second, this our from recover for a become iconic over many relevant half will more brands, each century. which have and a endured result. even challenges challenge distinct as and of easy And we

valuing highly beyond. Our in which of these and times brands stand convenience out for and sought all consistently normalcy, uncertain are

model. business our Third,

position and country us diversification recovery strength withstand to Fourth Our plus our across and enables in will finally, brands sustained us adverse. off-premise the well growth. for combinations segment XXX

a COVID-XX we communities, is convenient can part support working how to are. limit COVID-XX offer of affordable connected By a globally and doing spread all safe together our and of the while our in reminder we stark environment. food frontlines just

hand will it I Chris over our Turner. that, With to CFO,

Chris Turner

good you, results. first first I our capital XXXX our will strategy guidance morning David highlights Thank to results. and everyone. our discuss Today begin April and quarter quarter

QX, in reported X%. of decline new we decline unit mentioned, net system and growth a X%, of sales same-store David As of sales X%

the profit added net on $X.XX, an our the Restaurants declined quarter. value to included of special development and during Core Grubhub. basis investments front, excluding a [XXX] the increase EPS XXX and of for was On a we owing items XX restaurants or new operating new opened aggregate Habit $X.XX restaurants change in headwind gross which XXX X%, (Ph) fair

results much significant our COVID-XX having our is on we signaled impact QX As on weighed in recent a X-K, QX. more heavily and

sales starting more restrictions before U.S., especially system, of COVID Government Europe, overall to across better related same-store in and became As the Western trend the month the and through prevalent in our deteriorated April. March

trends, recent growth. illustrate approximation I To these our will latest recent share rough same-store sales of

determining that our sales has same-store base temporary As a reminder, for been closures always remain methodology in growth. our

In decline the seeing first negative approximately the sales following flat. week to rapid same-store sales The XX%. of decline We March, saw in our was growth drop week Yum’s April. approximately second then negative global of with beyond the same-store March XX% the global of to This across falling continued half being includes impact stores on of same-store our XX% sales average, approximately closed. and in a

same-store between to the global of bolstered XX%, dine-in business, sales Hut negative in in in U.S. Pizza timeframe XX% express most negatively impacted significant parts and closures but negative in globe declines down and carryout and delivery. that were by strength by the

Bell with Taco time was period. declines little average negative this XX% a worse, almost to over on

Finally, of XX% full more KFC XX% driven than in approximately during large were KFC by closures sales same-store period declines that of restaurants. part

restaurants are mind, still in weeks, global stores recent Since across we that have operating. and period in Keep trends sales closed. significantly improve have brands and approximately XX,XXX opened we seen all time that in

So will mostly Asia the that current we on U.S. pace and we continuation to the reopening sales look same-store the and improvement QX know trends depends of as growth, of in

Given and for environment capital the we spend. an have our expenses results to changed assess refine non-essential active and in for in our plans programs business, our

least and for the eliminate to team at quickly our moved members, we September. As an in-person meetings travel most of and clearly and example, safety until

We freeze. not transformation we any corporate drastic our headcount made completed in as also our To appropriately business. be implemented a sized clear, strategic right reductions hiring recently have

stainable that advantages teams However, for and best scale to resources our to franchisees. competitive longer working for growth increase the to we leverage drive identifying opportunities have our reallocate efficiency, opportunities term on should

We delivery, contact talk in low out, include the drive areas contactless will through, other these could curbside environment. and more have about But relevant areas capabilities to carry an future. digital off-premise in

franchisees We are continuity manner impacted markets business to possible. in safest help in with working navigate the

need periods working We grace provide near-term more and to are are with where for capital good who franchisees certain necessary. assistance, standing payments to also access in including

constraints obligations two for These U.S. the XX-days and payments international grace breathing provide periods capital in a and and those have and development pay year deferred additional cash additional provide franchisees up also markets. in to royalty flow their to we with room XXXX remodels to select of new

record long-term, factors high There Yum! many that for Next, our confidence the will customer stakeholders including XXXX momentum. and remain pivoting business. have outlook track and our strong us strong the are XXXX Each the of give early brands in needs. all steadfast strong culture long-term. of growth returns rapidly to generating company meet evolving over the for and been We that has remain a a

timing global a make unprecedented the COVID-XX uncertainty shape of the we recoveries this said, we nature to That and into are the guidance settle result. and back difficult outgrowth various around when withdrawing as will it of and say,

took fund would we caution, and and over that an and we cash increase acquisition entered to Now which our our We of sheet steps for Knowing our in out revolver. balance on of billion of and strong restricted sheet XXXX abundance with position. the our March cash with position. and a balance balance cash liquidity equivalents the $XXX liquidity million, nothing of cash $X drawn excludes with Habit bolster

order liquidity our outlook, we in share macro suspended uncertainties our in further program. First, repurchase to given enhance the

We have shares billion authorization, authorized in not of the $X runs and our XXXX. repurchased which through share under any repurchase XXXX middle was

drew facility. we revolving credit of $X down our Second, $XXX million billion

the the in fund with Habit While to proceeds acquisition along majority used was cash. cash a hand of portion draw Burger on this Grill, the of kept the of were

Brands as issuance. given issued high the at of reflective Holding Company year of nature preserve well a Third, million of the to of market preference conditions ensure bonds, as flexibility five we coupon X.XX% the the level $XXX time, a a Yum! our Incorporated is

I issue moments. future in a increasing to which a bond preserve the to allowing the was will at our issue rather call subject years us group after contains restricted than call prepayment Also, order feature, few a level to subsidiaries, bond In company explain bond our two flexibility flexibility, a to modest premium. the holding from decision

debt Bonds subsidiaries, to it covenants. our Please current the issuance that company sheet. balance QX this in are reflected as maintenance subject but not received April a the outside preserve on Xst, costs which our issued we most cash at from they flexibility higher in so are the financial and note holding of carry is

it This market This high nearly because a is issuance. notable, has without signals the debt the a lenders. yield especially Brands minds gone of and reopened of investors issuance an Yum! that month strength credit in

We in capital environment. the are difficult a very by that were raise able to we encouraged fact such

the pro we actions billion quarter at Xst. over these in increase $X.X result cash was over cash The an or excluding our cash on billion, balance for forma $X.X net end of debt April equivalents to cash restricted received and issuance

like our would a optimal context structure covenants. target capital I times structure five our basis. on to We on continual provide some Next, our leverage evaluate debt additional including and capital

thoughtful very the leverage. times our in within construct how also we five are We debt structure context of

refinancing structure including costs, debt and designed leverage and loans, Each and flexibility own base investor capital markets, the has high financial bonds, Our market. overtime. securitization asset We yield is various unique source from balance characteristics. its to risk duration, backed market

group participating primarily different including in of of financial a groups base to We each these entities three subject Taco markets of Company Bell entities, debt access Brands entity. covenants, the distinct Incorporated to each like in markets broader as Holding We and Yum! participating provides from investors. issue our our multiple restricted Securitization

Approximately pro no at under issued unsecured issuance. hold-co April level our billion in issued covenants. XXXX include $X is gross indentures, maintenance holding or our this as life our issued investment for debt of of company forma grade consists bonds Outstanding current which debt

typical including billion coverage are in and and our to maximum provide out group from debt minimum on ratios Approximately issued is are with group covenants, quarter. of $X of our group. incurrence maintenance yield issued we our gross website various bonds restricted high and Please note, leverage ratios. that financials restricted Loans our indenture subject covenants restricted each

are Taco asset gross Bell entity. our security in leverage from issued debt incurrence entity ratios maintenance out and investment Securitization of and our billion grade backed minimum various Approximately Securitization notes is with our Lastly, ratios. $X coverage covenants, of including Taco typical Bell issuances maximum issued

approximately six XXXX. pro approximately end Excluding with debt through our of for April’s balance of maturity rate of XX% issuance, our minimum and duration rate average revolver approximately and is fixed an outstanding years X.X% and average on the forma

all Taco entities. We ended to continue of COVID we monitor Securitization in group of our Bell major light and going And the will in significant to restricted cushion both QX with covenants the situation. covenants forward

Now, the take your happy to team and I are questions.

Operator

Thank you.

will begin ISI. question Evercore question the comes from session. Today’s now We Please and David at [Operator answer ahead. go Palmer Instructions] first

David Palmer

seen are Thanks. be and that, in in each are where about half that to is somehow have your recent those that. things the unusual and there the things bottomed you remarks into Could March pace about I of morning, recovery good And hear prepared believe of And things unsustainable, April in causing talked love early you weeks weird or global you in speak we brands. of anything the weekly where those to numbers about to are would lately? if that second

revenue or these franchisees? out arrears I are a Are major separately anything there any what health, causing franchisee in big things your And issues biggest topic we is Could to know talk you seeing the should of. days. to be then your from aware are be franchise that Thanks. on there there that that you

David Gibbs

David. Thanks,

opening I we it least at those, opened have any about closed units few And think called that at like more. then every of back bottomed that number we we the comments if XXXX day. And the XX,XXX. point more out at looks bottoming, a as far As one were not are of

that into trough standpoint we we from So past it the unit count that a business are the and think reopening. of backed on

there is is success offering next that stores having fact, of stores. just KFC to In to that they by stores are week. through XXX reopened out, announcement primarily about reopening from delivery the reopened going have an just came UK And up their

we we the operate markets sales we the beyond is owing this how not comment number trends as in moved far through detail As to to going really comments That have environment. have really that improved a out made. April. trends, to great significantly, figured of That as are Certain factors. in have

going to in example, Japan be of to give Pizza Just it Hut you XX% up looks like is business the another over well the month April.

is reopening there stimulus momentum KFC, figured the in that how options business value well. Certainly Australia In on as helping a is UK, out stores. well. U.S., low in our is contact consumers business and the and this market helping is that obviously I to as with So impact KFC is build environment. doing mentioned

last when they but get as little forecast, more and But heard from Yum! have that it bit to forward exact the that I details look been very has difficult makes where through think results. they we to you what trends, isn’t on recovery learned night China to gone certainly uneven have QX bottoms sharing sales, it are a the

I the bit you franchise question Chris a issues. more some will let of those health asked about that talk in little

Chris Turner

this provide a work Yes. their franchisee that leadership I of would chance organizations. has and crisis. amazing say franchisee health Good who these And crisis. I lead the folks had this How I foremost, our with Yum! see to David. will great bit time at and through question first leaders several women great of a on been the is context just to men along that. it little been with have during franchisees on

other stronger with think been operate, safety customers are going members emerge continuing stores crisis. an and so we throughout and the are their the from have even this They bond our of focused team the on open franchisees. I protecting with where enhancing to to And

franchisees our And some with have new to of On franchisee or policies strengths related health. and cases, in in the franchisees financial enter arrangements contractual arrangements system. provisions we specific typically our we topic their financial evaluate as health, franchisee

broad It or them franchisees XXX brush. country combinations. plus with our course franchisee X,XXX Of arrangements base, brand hard paint really a across the with our is with to

in U.S. feel the U.S. in about feeling are of feeling to of stores. And them the franchisees crisis. Just are that one small our country three same for operate that to across the many this businesses stress give a the you XX% through

the Of globe, have go franchisees. course, around larger we we many

In strong financial our companies larger crisis. XXX while other same many and feeling these the that And restaurants and large other feeling operated the XX% more resilient, franchisees pressures fact, about are industries result franchisees of as or are are of by of international with units. generally are a them

So with their have sales are we impact franchisees, over accelerated that X,XXX those few working financial our And with did the to struggling crisis number distress before their small address hit. cases, a to we a in role the were partners of health the crisis system. has and and in

shape. But while real. The the weather into storm. franchisees to overall, of the our the vast to vast we situation are solid challenges are they fortunate came majority expect majority in be this are we facing that And able

capital the many to their royalty franchisees periods but are many form In support, in grace of In a have support. also including partners, situations, other the government and lenders, we only of from landlords, need some others. distributors, countries, Yum!, range offered which and and going assistance including programs their deferrals, not from suppliers,

an franchisees are leaders situation. appreciate providing. partners in. putting the again, hard support is franchisee the to really work our all on that It we all deck we And are appreciate the of that And all our hands

system. are we that is mention to who like in will I our from thing money inbound requests some would to outside Partners Capital work fielding put Last

that, network. of multi the store gives a about to that layered think our you health approach us bolstering really when So

plans working parts who focus primary suffering with in needed the our franchisees, certain the the could are partners It step backup globe. But those with on in if distress. with in have most existing of do we starts particular who

health you feel gives franchisee for current So hopefully that the a landscape.

Keith Siegner

Thanks. Operator, question. next

Operator

sir. Yes

with Sara comes Senatore ahead. Bernstein. Next Please go question from

Sara Senatore

Just a a clarification and question. then

franchisee the I and I was missed if wondering support, On apologize I this.

the just franchisee that lines. service think could some expense. was operating talk versus expected higher bit of other very that item had control the we was about And a one line I on tight the you If than

on which support have extent more little to you a that bit it the color the and reflected just So provided. that

it then of a of more just in are Is but customer peak satisfaction out you you the recognize Thank see what tangible? marketing scores maybe color you. benefits you puts there it? wanted environment, How and are or looks little measuring that on Could And to after you approach. takes, that starting about the more a lot is just talk new said to I this like? the something that. get

Chris Turner

Great.

this I question around turn the second over will So David to of and debt for question. your Chris, start with bad is will the I it your expense then part

So on expense. the bad debt

You release QX, And Pizza number Hut of was this of both that driver a that in the continues just accounts. noted KFC. a in morning small for and be it to a story

some it. I will So context you try to give around

to bad book accounts. for bad $XX we our has debt debt in QX, allowances approach which up on So million of specific doubtful versus is been $XX.X expense, had Historically about million year-over-year QX expense, year. last

In XX-days franchisee gets over include any general, in balances of for the arrears. we that XXX%

current This quarter, is, the expected as implementation of of one of sure new the things the I’m GAAP on happened you are that aware losses. credit standards

was And implementation on COVID of we thought $X.X disruption in the QX. causing. crisis. that that given increase the standard, of million to And it So some it is we And appropriate allowance additional the course the represented reflected about year-over-year. that $XX of million book

accounts. That about U.S. KFC increase in year America, last million specific that primarily situations. a mostly Europe Latin was was in handful versus driven of So leaves Pizza and a and by Hut that franchisees accounts, QX $XX few

we take a took you total our a of that just if a you a basis, reserved, If the give franchisees an is issue have franchisees on specific X% the you reserves. represents balance I for of know this doubtful different QX. from in global total lens, our for take accounts on If around that the small being top-XX XX% about globe, that this around sense to I accounts X,XXX franchisees if allowance I number of which

eight to Pizza of a XX% way again U.S., it driven Hut Hut drive Hut half U.S. driven different that balance. XX% accounts U.S. of A slice the that Pizza by balance, of to handful are accounts. is And current by is There Pizza about

those the handful discussed have situations of in past. We

are that of quarter. is a just So obviously, we where first snapshot in the

situation were with mentioned, pandemic markets we to really the Keith unprecedented particularly up them a other working strain hard As been it we the closed on is where and have when side. this in stores opening to help and are bridge our call, is franchisees causing

David Gibbs

question in he and business, your having And Hut, Hochman team, that the impact Sara with his people has as far that as Kevin excited very Pizza brought that new from probably is we are we about business it new from as on some have Yours, credentials on Our the was a you Hut really our have to brand’s player. before done but COVID-XX, repositioned to tagline, our impact delivery him. reinforces seen the that on

of all been delivery the has our capabilities. work on side of terms operation There in sorts

have seen contactless addition in delivery. contactless carryout us rollout to You

were of business. China As those both a reminder, things Hut by invented our Pizza

Wat of in time. rolled her around they team idea of Joey world. fact the and the is environment. as great challenges also And the to all is this very this being industry have And needs business at a great our reacting meet the innovative consumers And on across rolled now it across have to

Bowls we on sales on of the focus brand digital on recently to our this U.S. of on the Hut Actually two Friday we the focusing business than - and previous which component. sales carryout So the in did held typical Super either doing record. last a led contactless, and set more the repositioning delivery record Pizza

businesses. are rapid month So roadmap. that the brand is, going have is things been say changes, our right period that us some is to truly And this for you accelerating getting our And on it a like now that and we sense we digital carryout had to through have plan of worth business. to to what three in is years would this changes delivery basically be I it Pizza going Hut gives the three

are being like trust it long Another Pizza Hut those its of team with just brand turning are brand, Pizza of major to fabric the the is the have and I consumers the which trusted the benefit consumers the in and community, of to operating brand. this, kinds restaurant that Kevin And given times a part is leveraging, think brands. history

Keith Siegner

Next question, operator.

Operator

question go Our comes ahead. Please UBS. Dennis Geiger, next from

Dennis Geiger

well. doing and hope all are Thanks you

to Just more us growth that algorithm. and the unit kind takes, talk bit is how or development thought years over broadly and it back access the impacts And et you next you COVID Understanding little wondering, Thank and you. maybe cetera. to puts franchisee think current could couple demand situation. open takes you unit impact bit ability if based on any difficult the of a know be exiting units any of Could about to determine situation the settle you about would longer to the capital, puts help great. could term into potential a when

David Gibbs

XXXX. we net was was XXXX are from up which growth X,XXX the units Obviously, that XXXX, in new that up and with over excited unit we about delivered obviously from

We sequential and in continue expected have development had improvement unit that into XXXX. to

Obviously, may changes with This new they think still environment than bigger that we today. the part count there, are be may bit to be off-premise a assets our be equation, different. a little long-term ability the off-premise more of slightly But of for lot it our a will designed being grow unit variables. the

think And an available. that of their China standpoint, not the think as in been last variables, night for could have this There on a be I this, terms Dennis from talked might Yum! estate about there about previously call. opportunity opportunity real could an you locations be

this that environment well have an Brands doing their opportunity to are expand in footprint. should

will get them our Of course, we is look through. the And to for that challenges to franchisees. short-term, capital in our that availability something the

But we guidance. have obviously withdrawn our

think I’m be is going And think to no that going give any in form a not the way, growth this you reason part about about So we business shape - or a business unit to is brands there numbers that is long-term. future. to our But that. what not of exact big development

Keith Siegner

Thank you.

question. Next

Operator

Tarantino Our next question Please ahead. with Baird. from comes go David

David Tarantino

into of look defer are might the you allowing was guess the wondering the you to you to Hope if heading to doing here I morning. the as my debt run Chris, level is I bad risks year And year. that what the need weaker guess payments. that performing about the second good could short And here. frame assist some you franchisees unfolds of like think that as I thinking help everyone of well. then question expense Hi, cash is up franchisees. consume dynamic. half the about might in of how about

Chris Turner

Good bond really, right that I liquidity We We that purchases. cash April plenty through offering David. Obviously of up Yes. that made short with the work the on position. then for as year plenty feel moves the really our last cushion think we hitting And at Thanks, list. beginning around crisis the our starting right us of gives and I making all through quarter. franchisees of pause now companies a that the in next are liquidity to the questions. think top managing share of mentioned is move we like position we earlier strong given

So periods, it is you subset franchisees. these of think grace a about only

who be the will capital. We access franchisees available making need to those to

is burn the few so And over one overall you The months. is the about number think to next happening if cash what our factor rate. sales

the current take plenty second, see see have in we collect that will And will door. then that, have back coming we But we we feel royalties couple there periods But we we back of up. of fewer on with shore will then end position. the the of cash where, as got our of grace franchisees cushion as months advantage

it, who health, In periods franchisee need to the know, grace franchisees in good that of are you they as we one standing. being terms advantage of the for for able mentioned of take qualifications those is

the our franchisees with globe, the have around manage so teams to eligibility brand into And that closely worked program.

cases. components to one the what this. performance franchisees But those is partners they even our other is I the from are come is drive as doing how just that us they as is all are assistance through that of other we the of are of been There their businesses, what backside gives earlier, we mentioned the stool. it our confidence doing so go about they managing in drive of And franchisees collection with this of So to plus leadership starting great getting and certain many that stronger. leg their the own carefully have the out something sales, on

Keith Siegner

you. Thank

Next question operator.

Operator

John from comes question Glass ahead. Morgan Please Stanley. with go next Our

John Glass

is specifically if permanent some I do that very this uptick inside is. Thanks already the And you you process? that closures appreciate closures so talk point. unit in think of the situation Could anticipated there an about does in that think that the the U.S., Hut unclear on accelerate system? Pizza in was at though, Do you what the visibility of openings much. expect number I

about not? the if franchisee I’m Or And either even Are table? in on considered then from injections relief those on there other options capital options the draw finally, royalties? contribution talk or or assistance company certain franchisees, you thinking do top-ups there, about you the fund direct are into line add

David Gibbs

Thanks it about. are we closing because we that That them number why is John. no you when I have net world, are we a That of the talked every on naturally of growth the I restaurants earlier. XX,XXX openings. mentioned was you units question unclear your variables of certain year. and open number guess development, first unit on Certainly right just around is have what

would that are permanent extent this coming opportunity be of But be number not are to So to an now. of we to them, they may this. a the if of advantage that out anticipating get we of some closures with units, closed take wanted situations out there massive

as as the the delivery business brand and base, on together And Hochman to to Pizza modern heights. And involves and Kevin working that. asset player become as the franchisees in the are closely they mentioned, that category. I goes. And are far Hut In working take new together the the really U.S.,

and constraints play opportunities into that that. there be may there So But will again, other are there. capital

providing far franchisees. the that relief As as we are the for

to coming of like is other haven’t been we other working a closely really there period, through the us or and grace discussions we at period, has about as As that described end grace are like and it the us Chris the think advertising and this. the are items anything back with franchisees getting money

any we options launch to a no will do address of couple other far of there we something that have But specific beyond situations, without programs wholesale other where described. As have do, to that. for we there what different might is as things the than be may

Keith Siegner

question next please. operator, you. Thank

Operator

Our next question from comes ahead. go with Charles Andrew Please Cowen.

Andrew Charles

Within capital clarification at XX% question. to the was the to sales Great, March. my how those available in really breakfast terms attributable that decline both on thanks. the assist is much lack Bell’s Taco store counts. just of is and question of outside of you One Can then here. comment contextualize the in sales And

perhaps are Just there. the in debt? willingness know Just even business? range take is curious the of thoughts on this on your what pipe to table. the Is what this that what Could and options means Thanks. you for of a more play in kind

David Gibbs

Thanks, Andrew.

and And great I just growth far Taco the who Bell along Bell COVID-XX. as As team of Taco the then as out until give want Mark a same-store at specifically, a to in X% do sales targeting to XXXX. are put King shout impact script, we mentioned year the in up we

to reacted I team this. really Taco how has the of Bell been have proud

As a late which businesses have you they our were because they impact and had relies breakfast nights. mentioned don’t in most many ways, business their business on other because has the

through aren’t late drive much. the They can business you roads a impact is breakfast obviously And going of going and some for bars are theaters night not to imagine, things that. the people As aren’t out as the on and work. impacted through when people like businesses in breakfast

that to designed is and out Taco think core But is are their through So business that. team from get well this. businesses model. time. And, I Taco the drive the Bell had impact delivery they creative embracing Bell positioned their through this And and then for perfectly carry

lines like cases, of anything outside meant is to system, in in to of address. we As capital, far as outside buyers businesses options buyers the over imply one along do that. we designed many pipe to as restructure wasn’t interested have them. and anything more system are the options the the in distress, have the That franchisees was those or that to in that If addition financial take

in that to are with people team think capital will I skew come few And outside So which given that address out to as lot the recognize participate this become take is people the into the want well that, off-premise towards stronger. that Chris there situations Yum! account and we a of problematic. positioned of

Keith Siegner

Thank you. please. next question operator,

Operator

from comes Please question with go next Ivankoe John ahead. Our JPMorgan.

John Ivankoe

you. thank Hi,

just at crisis. corporation, of looking kind as there of that you I to the the about need if type any curious was kind look initial kind of is Just this at the of brands thinking overall maybe some of mean I work side accelerate guess again, If data. things and on of an insights I like other you consumer this. are coming or the kind is even opportunity dig there out of digital deeper

the think a or you from years corporation that have structured structural work in kind the of couple perspective? you happy as is done a You of with are past about the that Yum! way

weren’t lot how And of related closer together? secondly efforts is some more opportunity cross an I opportunity brand Yum! to consumer maybe many more an the is apply there and you that reasons, insights data all doing be digital logical functionality to perhaps this before? offered from had comprehensive do a some you siloed. work of of brands and But know have the kind across brands themselves to your maybe that

David Gibbs

question, Great John. Yes.

technology in the and the of would middle stuff that earlier, a now trends in business accelerating months is in years that As delivery everybody like do order the few to I about. and right taken really we take have pay talking that the are I of hold things and mentioned lot all digital are and

have of lot a things, been working in on. those already So we

beefed calls at our brand talked the and that much different adding things our cross brand themselves collaboration. all to become talent lot have leveraging about we the fact on these a for adding Clay projects of And lend technology the have Those all to team that sorts oriented We business. more and up we that technology Johnson.

position, of executive team came on We and world. other brand the the of the are that but of now. notes the in leverage of things our sit learnings Yum! a crisis right are going is to and meeting on that very day around compare on learnings great that the is around world with things right and from and all the Yum! teams other unique China, the all out every now leveraging myself going starting One this Asia

happening. great opportunity closer to exactly for a work is together that us and what This is is

is don’t I going to be change. a that think structural So

think it is the I this for in talked we think about as will need collaboration more well, change. on the when have happening, mindset serve the I new that of a even and That is come side. I lot out other world. a

Keith Siegner

operator. Thanks

We have time for one more please. question

Operator

Tower question with from Okay. ahead. Fargo. Wells Please Jon will Today’s come go final

Jon Tower

Great, Awesome. thanks.

for couple a Just me.

believe guess this First, longer funded second, with you in there in that crisis the but the think How it growth. franchise has Thank that I the U.S.? implemented self business access crisis you carry system you. thread. and how close that then of the operating continuing this versus guess across new brands? about are anything you store debt working of perspective, loans I will lastly, about franchisees been funded? answered much this, kind the term. from of PPP have throughout is post kind the And that the forward Has thinking to growth then terms part And historically thinking And I an you been of just of of

David Gibbs

PPP. on the don’t Chris then I turn take will two, Why it last I over to and

development, debt. as them get significant China, about, franchisees, debt, X,XXX that of thing new we same far Chris the As like Yum! have some store some of no talked have them

development. is how to I know store that So financed we don’t there one brush new broad answer

debt is it of and their are some think on flow I others of cash business? through doing taking

will of new it returns in that requirements. franchisees the meet being And return are those a advantage and all do indicates or we indicates unit opportunity all build almost of rates right their now. increase by that the done the potentially that size take Clearly have potentially better that access getting franchisees to at development think the capital capital the can we still, insecure

question? the the I’m as, third sorry, far As of part

Jon Tower

What things will sustain?

David Gibbs

and I of right that What industry things as order and future Obviously, there the terms pay, a these great mentioned, will off-premise. accelerating are question is sustain? looks restaurant like. is trends now, delivery of what digital it Yes, in the

as look bigger I in their in people to think business has a food. the automation play contact role for less

strengths the think this creating to is also opportunities in play I then that new But that Yum!.

We convenience, may QSR trust. as but has convenience and value foundation customer these have go of in and value definitions have been different strength we The and really forward. this always

So cost, can in pickup of one order time. ways sorts delivery accuracy convenience, advantages really curbside the Curbside pickup. it is for customers the is great contactless process, way I’m some of excited all control over a and way, of take in about terms of a things in has

strongly. at like our carryout well, surprisingly seeing curbside business Pizza is launched businesses have increasing contactless Hut are delivery through increasing pretty pickup, we And also the our we

that is know through an and other stay here bought process. are talk the did change consumers was that I and that. is it I And a easy So to a curbside day I think more about TV pickup to starting it

you a obviously big value of with family are seeing on in people more eating at terms think change I home. meals,

I that to to is in pivoting of have going stay size our value offering think some in at brands great more been larger party constructs.

at probably it a trust think have consumers. talked we the in have. that this with about And, is, they surveys use I seen to we have three a about consumers history what of when time. the lot that I of level haven’t thing have There that they you with brands brands want like have enough is

There really that trust. be has to

in We always have like going about safety. been beyond things above food and

is think And operating they history continue. that trust long to live communities people a in. going brands had I the And think have I our We that of brands. trust in in

then bit I close out. will will just a let franchisee And Chris I about accessing talk little PPP.

Chris Turner

Yes.

in the average affected closures, on to around any mix franchisees think XXXX of our small earlier When franchisees like our flow drops. with experienced overall down full franchisees that The that. about some XX%, March. a even those in experienced cash dramatic but That talk were we the bigger was we we sales markets mentioned are So, about if larger I hit drop markets being support. health in about of of businesses. And the Again, question and that franchise thinking globally. Government businesses globe, we

the we providing and suppliers mentioned business. franchisees requiring involved nature the grace like multifaceted solve of as the And, other Government the programs. pandemic, being support things Yum! their these given is this that driving the periods, includes it

extent the can one Those are we to appreciate next. the different and what the the are specific obviously and government they understand each from The extent available. programs. And our franchisees to locality of help the those country each is country To programs program try we to we Government or nature of is doing. program that

those market. the individual that helping challenged, employees globe. globe Ultimately, decision to consumers access a of employed, any the fact many and been franchise’s it franchisees have and been certainly, provide around our extent has there to But We franchisees of them aim around programs. keeping is where market appreciate been on is programs of it the to has that to safe, keeping the those focused service the available that support and in the the

David Gibbs

thanks, everybody. Thanks, Chris. And Great.

reiterate. to Just want

a As you we finished of And we XXXX of XXXX. widespread uniquely are all know, a start XXXX, But The are end business, the before in to shape is good impact really the before to that on strong our good note. we get on orders. And off marching a in come and positioned this incredibly was it out basis, broad through stronger. COVID-XX.

nimble learnings consumer we about all to and identify to, trends how evolve react we have be we leveraging that need XXX from brand/country the combinations. we those talk so do the And the is business, that

attuned are needs. terms of talent, and time this What changing we we consumer changing constantly consumer in unrivaled consumers’ needs to particularly in Our been culture offer to serving evolving. the well us the and always of way is

with value learnings us brand/country with Our gives trust of XXX iconic I as this convenience. combination The around model brands, and the leverage mentioned, to world. this combinations and from the ability diversified business

point is then And the finally off-premise. fourth

for We are made contactless.

today. in competitive their always stores and drive but Taco were stat bigger Just advantages through. simple These KFC one the have XX% advantages U.S. of Bell

So life our have lines that have I the will finish day and through by our front and our just been thanking business to employees franchisees. as on we gone bring people amazing that the the this, every restaurants

through these today. get with And manner, their Our of are job consumers employees challenging incredible ever in to normalcy for during contactless us serving franchisees building an safe have stronger doing to everyone, lives bring food had we together times. than a some time this our your to bonds Thanks, together. working are

Operator

Thank you. conference This call. today’s concludes

have You may a and day. lines now wonderful disconnect your

Yum! Brands (YUM) 29 Apr 202020 Q1 Earnings call transcript