Yum China — Third Quarter 2026 Earnings Summary

Financial Performance:

• Total revenues increased 8% year-over-year to $3.5 billion for the third quarter, or 2% excluding foreign exchange (F/X).
• Operating profit grew 13% YoY to $451 million, with core operating profit growing 6% YoY.
• Operating profit margin expanded 50 basis points YoY to 13.0%, marking the 10th consecutive quarter of expansion.
• Restaurant margin increased 50 basis points YoY to 17.8%.
• Diluted EPS increased 20% YoY to $0.91, or 12% excluding F/X and 8% further excluding mark-to-market equity investments.
• Net income for the quarter was $311 million, up 10% YoY.
• Year-to-date (YTD) total revenues were $9.9 billion, up 10% YoY.
• YTD operating profit was $1.25 billion, up 13% YoY.
• YTD diluted EPS was $2.48, up 18% YoY.
• Delivery sales grew 7% YoY, contributing approximately 54% of total company sales.
• Active members of KFC or Pizza Hut exceeded 278 million, a 6% YoY increase.
• Cash and cash equivalents were $535 million as of September 30, 2026.
• Total assets were $12.4 billion as of September 30, 2026.
• Net cash provided by operating activities for the first nine months was $1.5 billion.

Guidance and Future Outlook:

• Raised 2026 full-year target to over 2,400 net new store openings, aiming for a total store count of over 20,500.
• Targets 40-50% franchise mix of net new stores for both KFC and Pizza Hut in 2026.
• Projects capital expenditures of approximately $600 million to $700 million for 2026.
• Targets $1.5 billion in capital returns to shareholders for 2026.
• Plans to return approximately 100% of annual free cash flow after subsidiary dividend payments to non-controlling interests starting in 2027.
• Anticipates average annual returns of approximately $900 million to over $1 billion in 2027 and 2028, exceeding $1 billion in 2028.
• Management remains committed to the growth algorithm outlined at the Investor Day on a three-year basis.

Business Segments and Product Lines:

• KFC:
  • Total revenues increased 8% YoY to $2.6 billion for the quarter.
  • Operating profit grew 10% YoY to $425 million, a record third-quarter level.
  • OP margin increased 30 basis points YoY to 16.3%.
  • Restaurant margin increased 10 basis points YoY to 18.6%.
  • Opened 518 net new stores (269 by franchisees), reaching a total of 14,307 stores.
  • Delivery sales grew 7% YoY, contributing 54% of KFC company sales.
  • KCOFFEE cafes crossed 4,000 locations; KPRO exceeded 700 locations.
• Pizza Hut:
  • Total revenues increased 5% YoY to $665 million for the quarter.
  • Operating profit grew 29% YoY to $73 million.
  • OP margin expanded 210 basis points YoY to 11.0%, supported by license fee savings.
  • Restaurant margin increased 190 basis points YoY to 15.3%.
  • Opened 191 net new stores (91 by franchisees), reaching a total of 4,740 stores.
  • Delivery sales grew 8% YoY, contributing 53% of Pizza Hut company sales.
  • Pizza Hut's Burger Bar surpassed 300 locations.
• Other Brands:
  • Completed the acquisition of the Pizza Hut brand in Mainland China on August 7, 2026.
  • Expanded car-side pickup to over 9,000 KFC locations.

Market and Competitive Landscape:

• Same-store transactions grew 3% YoY for the total system, marking the 15th consecutive quarter of growth.
• Same-store sales reached 97% of the prior year's level, facing pressure from tough comparisons against last year's delivery platform subsidies and adverse weather in August.
• Captured incremental demand across a broader range of consumption occasions, including smaller orders and solo dining.
• Dine-in and takeaway performance improved sequentially.
• Ticket average for KFC was 5% lower YoY, driven by value-for-money offerings and smaller orders.
• Pizza Hut's ticket average moved closer to the target range, driven by value-for-money offerings and solo diners.

Risks and Challenges:

• Same-store sales faced pressure from tough comparisons against last year's delivery platform subsidies.
• Adverse weather in August impacted performance.
• Value-for-money offerings, sales deleveraging, and increased rider costs from a higher delivery mix offset some margin expansion.
• Forward-looking statements are subject to risks including changes in political, economic, trade relations, and regulatory conditions in China and the U.S., as well as food safety and quality control.

Management Commentary and Tone:

• CEO Joey Wat highlighted the resilience of the business model and disciplined execution despite a dynamic operating environment.
• Management expressed confidence in sustainable growth, citing the 10th consecutive quarter of growth in system sales, operating profit, and OP margin.
• Wat noted that diluted EPS has grown by double digits year-to-date and in each of the past three years, excluding mark-to-market equity investments and foreign exchange.
• Management emphasized the success of tailored store formats, menus, and side-by-side modules in driving incremental sales and profit.

Other Key Points:

• Returned $362 million to shareholders in the third quarter via $263 million in share repurchases and $99 million in cash dividends.
• Returned $1.08 billion to shareholders in the first nine months of 2026.
• The Board increased the share repurchase authorization by $1 billion in November 2026, leaving approximately $1.3 billion available for future repurchases.
• The Board declared a cash dividend of $0.29 per share, payable on December 22, 2026, to shareholders of record as of December 1, 2026.
• Total store count reached 19,989 as of September 30, 2026, with 19% of stores operated by franchisees.
• 44% of net new stores opened in the third quarter were by franchisees.
• Adjusted EBITDA for the quarter was $578 million.
• YTD Adjusted EBITDA was $1.63 billion.