Yum China Reports Second Quarter 2026 Results

Yum China Reports Second Quarter 2026 Results

PR Newswire

SHANGHAI, July 30, 2026

Revenue Increased by 13%; Operating Profit Up 14%; Diluted EPS Grew 21%Same-Store Sales Growth Improved Sequentially to 1%; OP Margin Expanded Year Over Year for the 9th Consecutive QuarterAcquisition of the Pizza Hut Brand in Mainland China Expected to Close in August 2026On Track to Return $1.5 Billion to Shareholders in 2026, ~10% of Current Market CapitalizationSHANGHAI, July 30, 2026 /PRNewswire/ -- Yum China Holdings, Inc. (the "Company" or "Yum China") (NYSE: YUMC and HKEX: 9987) today reported unaudited results for the second quarter ended June 30, 2026.

Second Quarter HighlightsTotal system sales grew 6% year over year ("YoY"), excluding foreign currency translation ("F/X").Same-store sales grew 1% YoY. Same-store transactions grew 5% YoY, the 14th consecutive quarter of growth.Total revenues increased 13% YoY to $3.1 billion, or a 6% increase excluding F/X.Opened 560 net new stores, a second-quarter record high and 67% higher than the openings in the same quarter last year, with 41% opened by franchisees. As of June 30, 2026, total store count reached 19,297, with 18% of stores operated by franchisees.Operating profit grew 14% YoY to $348 million, a second-quarter record high. Core operating profit grew 7% YoY.OP margin was 11.1%, an increase of 20 basis points YoY, the ninth consecutive quarter of OP margin expansion.Restaurant margin was 16.1%, flat YoY, primarily due to increased rider cost from a higher delivery mix, offset by streamlined operations.Diluted EPS increased 21% YoY to $0.70, or up 14% excluding F/X, and up 10% further excluding the impact(1) of the mark-to-market equity investments.Returned $402 million to shareholders through $301 million in share repurchases and $101 million in cash dividends.Delivery sales grew 26% YoY. Delivery contributed approximately 54% of total Company sales, up from 45% in the same quarter last year.Active Members of KFC or Pizza Hut, defined as those who transacted in the past 12 months, exceeded 270 million, representing a 6% YoY increase.CEO Comments Joey Wat, CEO of Yum China, commented, "We delivered strong results in the second quarter. For the ninth consecutive quarter, we simultaneously grew system sales, operating profit and OP margin. While the operating environment remains dynamic, our topline growth continued to outperform the industry in Q2. Same-store sales growth improved sequentially to 1%, led by the 14th consecutive quarter of same-store transaction growth, while store openings continued to accelerate year over year across both company-owned and franchise stores. KFC delivered strong results, with 7% system sales growth and restaurant margin expansion. Pizza Hut's same-store sales returned to positive growth and net new openings nearly doubled from last year."Wat continued, "Our menu innovations and breakthrough side-by-side modules are helping us broaden into new occasions and new customer segments. As we rapidly roll out KCOFFEE cafe, KPRO and car-side pickup services to more KFC locations, Pizza Hut has also built a Pizza Hut Burger Bar to drive incremental sales and profit. At the same time, our KFC Small Town and Pizza Hut WOW models are helping us deepen penetration in lower-tier cities. With our multiple growth drivers, we are confident in our ability to lead the catering industry and deliver on our full-year growth targets, even as we face tougher comparisons in the second half of the year following last year's delivery platform subsidies."Wat concluded, "We are about to reach a major breakthrough by becoming the owner of the Pizza Hut brand in Mainland China, after operating the brand in the market for 36 years. In the near term, we expect the savings in license fees to support margin expansion, with Pizza Hut's restaurant margin approaching KFC's. More potential new stores are expected to meet our payback requirements of two to three years. Over the longer term, brand ownership will give us greater strategic flexibility to capture new opportunities and innovate more nimbly across our menu, store formats, new business modules and operations. We expect this to accelerate Pizza Hut's growth trajectory and generate sustainable long-term value for our shareholders."(1) Refers to a 4 cents favorable F/X impact, and a lower mark-to-market loss of 2 cents in the second quarter of 2026, compared with a loss of 4 cents in the second quarter of 2025.Key Financial ResultsSecond QuarterFirst Half (Year to Date Ended 6/30)%/ppts Change%/ppts Change20262025ReportedEx F/X20262025ReportedEx F/XSystem Sales Growth (2) (%)64NMNM53NMNMSame-Store Sales Growth (2) (%)11NMNM1EvenNMNMOperating Profit ($mn)348304+14+7795703+13+7Adjusted Operating Profit (3) ($mn)348304+14+7795703+13+7Core Operating Profit (3) (4) ($mn)328304NM+7751703NM+7OP Margin (5) (%)11.110.9+0.2+0.212.412.2+0.2+0.2Core OP Margin (3) (6) (%)11.110.9NM+0.212.412.2 NM+0.2Net Income ($mn)244215+14+6553507+9+3Adjusted Net Income (3) ($mn)244215+14+6553507+9+3Diluted Earnings Per Common Share ($)0.700.58+21+141.571.35+16+10Adjusted Diluted Earnings Per Common Share (3) ($)0.700.58+21+141.571.35+16+10(2) System sales and same-store sales percentages exclude the impact of F/X. Effective January 1, 2018, temporary store closures are normalized in the same-store sales calculation by excluding the period during which stores are temporarily closed.(3) See "Reconciliation of Reported GAAP Results to Non-GAAP Measures" included in the accompanying tables of this release for further details.(4) Core operating profit is defined as operating profit adjusted for special items, further excluding items affecting comparability and the impact of F/X. The Company uses core operating profit for the purposes of evaluating the performance of its core operations. Current period amounts are derived by translating results at the average exchange rates of the prior year period.(5) OP margin refers to operating profit as a percentage of total revenues.(6) Core OP margin refers to core operating profit as a percentage of total revenues excluding F/X.Note: All comparisons are versus the same period a year ago.Percentages may not recompute due to rounding.NM refers to not meaningful.Capital Returns to ShareholdersThe Company is on track to return $1.5 billion each year from 2024 to 2026, which is annually around 10% of our market capitalization as of July 29, 2026.In the first half of 2026, the Company returned $718 million in capital to shareholders through $515 million in share repurchases and $203 million in cash dividends.The Board declared a cash dividend of $0.29 per share on Yum China's common stock, payable on September 17, 2026, to shareholders of record as of the close of business on August 27, 2026.Starting in 2027, the Company plans to return approximately 100% of annual free cash flow after subsidiaries' dividend payments to non-controlling interests. This is anticipated to translate into an average annual return of approximately $900 million to over $1 billion in 2027 and 2028, and to exceed $1 billion in 2028.KFCSecond QuarterFirst Half (Year to Date Ended 6/30)%/ppts Change%/ppts Change20262025Reported Ex F/X 20262025Reported Ex F/X Restaurants13,78912,238+13NM 13,78912,238+13NM System Sales Growth (%)75NM NM 64NM NM Same-Store Sales Growth (%)11NM NM 1Even NM NM Total Revenues ($mn)2,3382,096+12+54,7914,342+10+4Operating Profit ($mn)332292+14+7749678+10+5Core Operating Profit ($mn)313292NM +7709678NM +5OP Margin (%)14.214.0+0.2+0.215.615.6——Restaurant Margin (%)17.116.9+0.2+0.218.118.4(0.3)(0.3)System sales for KFC grew 7% YoY, improving sequentially from 5% in the first quarter. Same-store sales increased 1% YoY, the fifth consecutive quarter of growth. Same-store transactions grew 4% YoY. Ticket average was 3% lower YoY, mainly due to incremental smaller orders from new customer segments and occasions, including KCOFFEE and KPRO.Delivery sales grew 26% YoY, contributing approximately 54% of KFC's Company sales, up from 45% in the same quarter last year.KFC opened 335 net new stores during the quarter, including 152 opened by franchisees, representing 45% of net new store openings. Total store count reached 13,789 as of June 30, 2026, with 17% of stores operated by franchisees.Operating profit increased 14% YoY to $332 million. Core operating profit increased 7% YoY.OP margin was 14.2%, an increase of 20 basis points YoY.Restaurant margin was 17.1%, an increase of 20 basis points YoY, primarily due to streamlined operations and favorable commodity prices, partially offset by the impact of increased rider cost resulting from higher delivery mix and value-for-money offerings.Pizza HutSecond QuarterFirst Half (Year to Date Ended 6/30)%/ppts Change%/ppts Change20262025Reported Ex F/X 20262025ReportedEx F/X Restaurants4,5493,864+18NM 4,5493,864+18NM System Sales Growth (%)63NM NM 53NM NM Same-Store Sales Growth (%)12NM NM Even 1NM NM Total Revenues ($mn)613554+11+41,2481,149+9+3Operating Profit ($mn)5146+11+5122106+15+9Core Operating Profit ($mn)4846NM +5115106NM +9OP Margin (%)8.38.3—+0.19.89.2+0.6+0.6Restaurant Margin (%)12.913.3(0.4)(0.4)14.013.9+0.1+0.1System sales for Pizza Hut grew 6% YoY, improving sequentially from 4% in the first quarter. Same-store sales growth returned to positive at 1%. Same-store transactions grew 13% YoY, marking the 14th consecutive quarter of growth, and more than offset the 11% decline in ticket average. In line with our mass-market strategy, ticket average moved closer to our target range, primarily driven by value-for-money offerings and incremental smaller orders such as those from solo diners.Delivery sales grew 26% YoY, contributing approximately 52% of Pizza Hut's Company sales, up from 43% in the same quarter last year.Pizza Hut opened 174 net new stores during the quarter, nearly double the net openings in the same quarter last year, including 70 opened by franchisees, representing 40% of net new store openings. Total store count reached 4,549 as of June 30, 2026, with 11% of stores operated by franchisees.Operating profit grew 11% YoY to $51 million. Core operating profit increased 5% YoY.OP margin was 8.3%, flat YoY. OP margin expanded by 60 bps YoY in the first half of the year.Restaurant margin was 12.9%, a decrease of 40 basis points YoY, primarily due to the impact of increased costs associated with higher delivery sales mix, value-for-money offerings and investment in Pizza Hut Burger Bar, partially offset by streamlined operations, automation and favorable commodity prices. Restaurant margin increased by 10 basis points YoY in the first half of the year.2026 OutlookThe Company targets:Total stores of over 20,000, or more than 1,900 net new stores.40-50% franchise mix of net new stores for both KFC and Pizza Hut.Capital expenditures of approximately $600 million to $700 million.$1.5 billion capital return to shareholders.Other UpdateThe Company is on track to close the acquisition of the Pizza Hut brand in Mainland China in August and plans to secure an approximately $1.2 billion equivalent offshore bridge loan to finance the transaction.Note on Non-GAAP MeasuresReported GAAP results include items that are excluded from non-GAAP measures. See "Reconciliation of Reported GAAP Results to Non-GAAP Measures" and "Segment Results" within this release for non-GAAP reconciliation details.Conference CallYum China's management will hold an earnings conference call at 7:00 a.m. U.S. Eastern Time on Thursday, July 30, 2026 (7:00 p.m. Beijing/Hong Kong Time on Thursday, July 30, 2026).A live webcast of the call may be accessed at https://edge.media-server.com/mmc/p/zubr6dix.To join by phone, please register in advance through the link provided below. Upon registering, you will be provided with participant dial-in numbers and a unique access PIN.Pre-registration Link: https://register-conf.media-server.com/register/BI611346d62d61456ca32d90b61aca7523A replay of the webcast will be available two hours after the event and will remain accessible until July 29, 2027. Earnings release and accompanying slides will be available at the Company's Investor Relations website http://ir.yumchina.com.For important news and information regarding Yum China, including our filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange, visit Yum China's Investor Relations website at http://ir.yumchina.com. Yum China uses this website as a primary channel for disclosing key information to its investors, some of which may contain material and previously non-public information.Forward-Looking StatementsThis press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements under the section titled "2026 Outlook." We intend all forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the fact that they do not relate strictly to historical or current facts and by the use of forward-looking words such as "expect," "expectation," "believe," "anticipate," "may," "could," "intend," "belief," "plan," "estimate," "target," "predict," "project," "likely," "will," "continue," "should," "forecast," "outlook," "commit" or similar terminology. These statements are based on current estimates and assumptions made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate and reasonable under the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct. Forward-looking statements include, without limitation, statements regarding the future strategies, growth, business plans, investments, store openings, net new stores, franchise mix of net new stores, capital expenditures, capital returns, dividend and share repurchase plans, CAGR for system sales, operating profit and EPS, earnings, performance and returns, anticipated effects of population and macroeconomic trends, execution of the Company's RGM 3.0 strategy, the anticipated effects of our innovation, digital and delivery capabilities and investments on growth and beliefs regarding the long-term drivers of Yum China's business. Forward-looking statements are not guarantees of performance and are inherently subject to known and unknown risks and uncertainties that are difficult to predict and could cause our actual results or events to differ materially from those indicated by those statements. We cannot assure you that any of our expectations, estimates or assumptions will be achieved. The forward-looking statements included in this press release are only made as of the date of this press release, and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances, except as required by law. Numerous factors could cause our actual results or events to differ materially from those expressed or implied by forward-looking statements, including, without limitation: whether we are able to achieve development goals at the times and in the amounts currently anticipated, if at all, the success of our marketing campaigns and product innovation, our ability to maintain food safety and quality control systems, changes in public health conditions, our ability to control costs and expenses, including tax costs, as well as changes in political, economic, trade relations, regulatory conditions in China and the U.S., and those set forth under the caption "Risk Factors" in our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. Our plan of capital returns to shareholders is based on current expectations, which may change based on market conditions, capital needs or otherwise. In addition, other risks and uncertainties not presently known to us or that we currently believe to be immaterial could affect the accuracy of any such forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. You should consult our filings with the Securities and Exchange Commission (including the information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q) for additional detail about factors that could affect our financial and other results.About Yum China Holdings, Inc.Yum China is the largest restaurant company in China with a mission to make every life taste beautiful. The Company operates over 19,000 restaurants under six brands across over 2,700 cities in China. KFC and Pizza Hut are the leading brands in the quick-service and casual dining restaurant spaces in China, respectively. In addition, Yum China has partnered with Lavazza to develop the Lavazza coffee concept in China. Little Sheep and Huang Ji Huang specialize in Chinese cuisine. Taco Bell offers innovative Mexican-inspired food. Yum China has a world-class, digitalized supply chain, which includes an extensive network of logistics centers nationwide and an in-house supply chain management system. Its strong digital capabilities and loyalty program enable the Company to reach customers faster and serve them better. Yum China is a Fortune 500 company with the vision to be the world's most innovative pioneer in the restaurant industry. For more information, please visit http://ir.yumchina.com.ContactsInvestor Relations Contact:Tel: +86 21 2407 7556 IR@YumChina.com Media Contact:Tel: +86 21 2407 3824Media@YumChina.comYum China Holdings, Inc.Condensed Consolidated Statements of Income(in US$ million, except per share data)(unaudited)Quarter Ended% ChangeYear to Date Ended% Change6/30/20266/30/2025B/(W)6/30/20266/30/2025B/(W)RevenuesCompany sales$ 2,910$ 2,61311$ 5,957$ 5,41410Franchise fees and income292418595115Revenues from transactions with franchisees1551153531123632Other revenues443527826723Total revenues3,1382,787136,4095,76811Costs and Expenses, NetCompany restaurantsFood and paper918810(13)1,8811,684(12)Payroll and employee benefits804712(13)1,6171,431(13)Occupancy and other operating expenses719669(7)1,4371,357(6)Company restaurant expenses2,4412,191(11)4,9354,472(10)General and administrative expenses139131(7)276269(3)Franchise expenses1210(24)2421(18)Expenses for transactions with franchisees148110(35)298227(31)Other operating costs and expenses3830(26)6959(18)Closures and impairment expenses, net1212(7)121832Other income, net—(1) NM —(1) NM Total costs and expenses, net2,7902,483(12)5,6145,065(11)Operating Profit3483041479570313Interest income, net1225(52)2851(48)Investment loss(6)(18)65(17)(15)(6)Income Before Income Taxes and Equity in Net Earnings (Losses) from Equity Method Investments354311148067399Income tax provision(92)(80)(14)(215)(199)(8)Equity in net earnings (losses) from equity method investments222346(15)Net income – including noncontrolling interests264233145955469Net income – noncontrolling interests2018(11)4239(7)Net Income – Yum China Holdings, Inc.$ 244$ 21514$ 553$ 5079Effective tax rate26.0 %25.8 %(0.2) ppts. 26.6 %26.9 %0.3 ppts. Basic Earnings Per Common Share$ 0.70$ 0.58$ 1.58$ 1.36Weighted-average shares outstanding (in millions)348373350374Diluted Earnings Per Common Share$ 0.70$ 0.58$ 1.57$ 1.35Weighted-average shares outstanding (in millions)349374351376OP margin11.1 %10.9 %0.2ppts.12.4 %12.2 %0.2ppts.Company sales100.0 %100.0 %100.0 %100.0 %Food and paper31.531.0(0.5) ppts. 31.631.1(0.5)ppts.Payroll and employee benefits27.627.2(0.4) ppts. 27.126.4(0.7)ppts.Occupancy and other operating expenses24.825.70.9 ppts. 24.125.11.0ppts.Restaurant margin16.1 %16.1 %— ppts. 17.2 %17.4 %(0.2)ppts.Percentages may not recompute due to rounding. NM refers to not meaningful.Yum China Holdings, Inc.KFC Operating Results(in US$ million)(unaudited)Quarter Ended% ChangeYear to Date Ended% Change6/30/20266/30/2025B/(W)6/30/20266/30/2025B/(W)RevenuesCompany sales$ 2,294$ 2,05911$ 4,704$ 4,26710Franchise fees and income241923474020Revenues from transactions with franchisees191718383316Other revenues11(5)22(4)Total revenues2,3382,096124,7914,34210Costs and Expenses, NetCompany restaurantsFood and paper710631(12)1,4561,316(11)Payroll and employee benefits630556(13)1,2731,110(15)Occupancy and other operating expenses563523(8)1,1231,055(6)Company restaurant expenses1,9031,710(11)3,8523,481(11)General and administrative expenses6761(9)128120(6)Franchise expenses109(22)2119(18)Expenses for transactions with franchisees1515(3)3029(4)Other operating costs and expenses11531258Closures and impairment expenses, net108(30)101327Total costs and expenses, net2,0061,804(11)4,0423,664(10)Operating Profit$ 332$ 29214$ 749$ 67810OP margin14.2 %14.0 %0.2ppts.15.6 %15.6 %—ppts.Company sales100.0 %100.0 %100.0 %100.0 %Food and paper30.930.7(0.2)ppts.31.030.9(0.1)ppts.Payroll and employee benefits27.527.0(0.5)ppts.27.126.0(1.1)ppts.Occupancy and other operating expenses24.525.40.9ppts.23.824.70.9ppts.Restaurant margin17.1 %16.9 %0.2ppts.18.1 %18.4 %(0.3)ppts.Percentages may not recompute due to rounding.Yum China Holdings, Inc.Pizza Hut Operating Results(in US$ million)(unaudited)Quarter Ended% ChangeYear to Date Ended% Change6/30/20266/30/2025B/(W)6/30/20266/30/2025B/(W)RevenuesCompany sales$ 604$ 54511$ 1,231$ 1,1299Franchise fees and income32476441Revenues from transactions with franchisees31525344Other revenues36(41)613(51)Total revenues613554111,2481,1499Costs and Expenses, NetCompany restaurantsFood and paper204177(15)417363(15)Payroll and employee benefits171154(11)339317(7)Occupancy and other operating expenses151141(7)303292(4)Company restaurant expenses526472(11)1,059972(9)General and administrative expenses2826(11)5452(6)Franchise expenses21(43)32(37)Expenses for transactions with franchisees21(37)43(25)Other operating costs and expenses354151153Closures and impairment expenses, net13521356Total costs and expenses, net562508(10)1,1261,043(8)Operating Profit$ 51$ 4611$ 122$ 10615OP margin8.3 %8.3 %—ppts.9.8 %9.2 %0.6ppts.Company sales100.0 %100.0 %100.0 %100.0 %Food and paper33.832.5(1.3)ppts.33.932.1(1.8)ppts.Payroll and employee benefits28.328.3—ppts.27.528.10.6ppts.Occupancy and other operating expenses25.025.90.9ppts.24.625.91.3ppts.Restaurant margin12.9 %13.3 %(0.4)ppts.14.0 %13.9 %0.1ppts.Percentages may not recompute due to rounding. Yum China Holdings, Inc.Condensed Consolidated Balance Sheets(in US$ million)6/30/202612/31/2025(Unaudited)ASSETSCurrent AssetsCash and cash equivalents$ 485$ 506Short-term investments901878Accounts receivable, net11595Inventories, net459438Prepaid expenses and other current assets390440Total Current Assets2,3502,357Property, plant and equipment, net2,6232,543Operating lease right-of-use assets2,1142,189Goodwill2,0211,963Intangible assets, net151148Long-term bank deposits and notes688678Equity investments382387Deferred income tax assets168156Other assets374362Total Assets10,87110,783LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITYCurrent LiabilitiesAccounts payable and other current liabilities2,2632,127Short-term borrowings6630Income taxes payable10789Total Current Liabilities2,4362,246Non-current operating lease liabilities1,7471,823Non-current finance lease liabilities5051Deferred income tax liabilities418406Other liabilities159158Total Liabilities4,8104,684Redeemable Noncontrolling Interest——EquityCommon stock, $0.01 par value; 1,000 million shares authorized; 345 million shares and 355 million shares issued at June 30, 2026 and December 31, 2025, respectively; 345 million shares and 354 million shares outstanding at June 30, 2026 and December 31, 2025, respectively.34Treasury stock(13)(28)Additional paid-in capital3,6963,796Retained earnings1,6961,764Accumulated other comprehensive loss(25)(157)Total Yum China Holdings, Inc. Stockholders' Equity5,3575,379Noncontrolling interests704720Total Equity6,0616,099Total Liabilities, Redeemable Noncontrolling Interest and Equity$ 10,871$ 10,783Yum China Holdings, Inc.Condensed Consolidated Statements of Cash Flows(in US$ million)(unaudited)Year to Date Ended6/30/20266/30/2025Cash Flows – Operating ActivitiesNet income – including noncontrolling interests$ 595$ 546Depreciation and amortization237219Non-cash operating lease cost211199Closures and impairment expenses1218Investment loss1715Equity in net (earnings) losses from equity method investments(4)(6)Distributions of income received from equity method investments89Deferred income taxes(9)(3)Share-based compensation expense2322Changes in accounts receivable(17)(13)Changes in inventories(8)52Changes in prepaid expenses, other current assets and value-added tax assets72(8)Changes in accounts payable and other current liabilities39(53)Changes in income taxes payable1524Changes in non-current operating lease liabilities(187)(200)Other, net(28)43Net Cash Provided by Operating Activities976864Cash Flows – Investing ActivitiesCapital spending(271)(259)Purchases of short-term investments, long-term bank deposits and notes(3,777)(3,924)Maturities of short-term investments, long-term bank deposits and notes3,7813,905Acquisition of equity investment—(14)Other, net22Net Cash Used in Investing Activities(265)(290)Cash Flows – Financing ActivitiesProceeds from short-term borrowings65—Repayment of short-term borrowings(30)(129)Repurchase of shares of common stock(530)(368)Cash dividends paid on common stock(203)(180)Dividends paid to noncontrolling interests(32)(25)Other, net(9)(7)Net Cash Used in Financing Activities(739)(709)Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash74Net Decrease in Cash, Cash Equivalents and Restricted Cash(21)(131)Cash, Cash Equivalents, and Restricted Cash - Beginning of Period506723Cash, Cash Equivalents, and Restricted Cash - End of Period$ 485$ 592In this press release:Certain performance metrics and non-GAAP measures are presented excluding the impact of foreign currency translation ("F/X"). These amounts are derived by translating current year results at prior year average exchange rates. We believe the elimination of the F/X impact provides better year-to-year comparability without the distortion of foreign currency fluctuations.System sales growth reflects the results of all restaurants regardless of ownership, including Company-owned and franchise restaurants that operate our restaurant concepts, except for non-Company-owned restaurants for which we do not receive a sales-based royalty. Sales of franchise restaurants typically generate ongoing franchise fees for the Company at an average rate of approximately 6% of system sales. Franchise restaurant sales are not included in Company sales in the Condensed Consolidated Statements of Income; however, the franchise fees 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 all of our revenue drivers, Company and franchise same-store sales as well as net unit growth.Effective January 1, 2018, the Company revised its definition of same-store sales growth to represent the estimated percentage change in sales of food of all restaurants in the Company system that have been open prior to the first day of our prior fiscal year, excluding the period during which stores are temporarily closed. We refer to these as our "base" stores. Previously, same-store sales growth represented the estimated percentage change in sales of all restaurants in the Company system that have been open for one year or more, including stores temporarily closed, and the base stores changed on a rolling basis from month to month. This revision was made to align with how management measures performance internally and focuses on trends of a more stable base of stores.Unit Count by BrandKFC12/31/2025New BuildsClosuresRefranchised6/30/2026Company-owned11,032657(181)(8)11,500Franchisees1,965338(22)82,289Total12,997995(203)—13,789Pizza Hut12/31/2025New BuildsClosures6/30/2026Company-owned3,830315(109)4,036Franchisees338180(5)513Total4,168495(114)4,549Others12/31/2025New BuildsClosures6/30/2026Company-owned19861(19)240Franchisees73895(114)719Total936156(133)959Reconciliation of Reported GAAP Results to Non-GAAP Measures(in millions, except per share data)(unaudited)In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") in this press release, the Company provides the following non-GAAP measures:Measures adjusted for Special Items, which include Adjusted Operating Profit, Adjusted Net Income, Adjusted Earnings Per Common Share ("EPS"), Adjusted Effective Tax Rate and Adjusted EBITDA;Company Restaurant Profit ("Restaurant profit") and Restaurant margin;Core Operating Profit and Core OP margin, which exclude Special Items, and further adjusted for Items Affecting Comparability and the impact of F/X;These non-GAAP measures 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 measures provides additional information to investors to facilitate the comparison of past and present results, excluding those items that the Company does not believe are indicative of our core operations.With respect to non-GAAP measures adjusted for Special Items, the Company excludes impact from Special Items for the purpose of evaluating performance internally and uses them as factors in determining compensation for certain employees. Special Items are not included in any of our segment results.Adjusted EBITDA is defined as net income including noncontrolling interests adjusted for equity in net earnings (losses) from equity method investments, income tax, interest income, net, investment gain or loss, depreciation and amortization, store impairment charges, and Special Items. Store impairment charges included as an adjustment item in Adjusted EBITDA primarily resulted from our semi-annual impairment evaluation of long-lived assets of individual restaurants, and additional impairment evaluation whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. If these restaurant-level assets were not impaired, depreciation of the assets would have been recorded and included in EBITDA. Therefore, store impairment charges were a non-cash item similar to depreciation and amortization of our long-lived assets of restaurants. The Company believes that investors and analysts may find it useful in measuring operating performance without regard to such non-cash items.Restaurant Profit is defined as Company sales less expenses incurred directly by our Company-owned restaurants in generating Company sales, including cost of food and paper, restaurant-level payroll and employee benefits, rent, depreciation and amortization of restaurant-level assets, advertising expenses, and other operating expenses. Company restaurant margin percentage is defined as Restaurant profit divided by Company sales. We also use Restaurant profit and Restaurant margin for the purposes of internally evaluating the performance of our Company-owned restaurants and we believe they provide useful information to investors as to the profitability of our Company-owned restaurants.Core Operating Profit is defined as Operating Profit adjusted for Special Items, and further excluding Items Affecting Comparability and the impact of F/X. We consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends. Items such as charges, gains and accounting changes which are viewed by management as significantly impacting the current period or the comparable period, due to changes in policy or other external factors, or non-cash items pertaining to underlying activities that are different from or unrelated to our core operations, are generally considered "Items Affecting Comparability." Examples of Items Affecting Comparability include, but are not limited to: temporary relief from landlords and government agencies; VAT deductions due to tax policy changes; and amortization of reacquired franchise rights recognized upon acquisitions. We believe presenting Core Operating Profit provides additional information to further enhance comparability of our operating results and we use this measure for purposes of evaluating the performance of our core operations. Core OP margin is defined as Core Operating Profit divided by Total revenues, excluding the impact of F/X.The following tables set forth the reconciliation of the most directly comparable GAAP financial measures to the non-GAAP financial measures. The reconciliation of GAAP Operating Profit to Restaurant Profit and Core Operating Profit by segment is presented in Segment Results within this release.Quarter EndedYear to Date Ended6/30/20266/30/20256/30/20266/30/2025Reconciliation of Operating Profit to Adjusted Operating ProfitOperating Profit$ 348$ 304$ 795$ 703Special Items, Operating Profit ————Adjusted Operating Profit$ 348$ 304$ 795$ 703Reconciliation of Net Income to Adjusted Net IncomeNet Income – Yum China Holdings, Inc.$ 244$ 215$ 553$ 507Special Items, Net Income –Yum China Holdings, Inc.————Adjusted Net Income – Yum China Holdings, Inc.$ 244$ 215$ 553$ 507Reconciliation of EPS to Adjusted EPSBasic Earnings Per Common Share$ 0.70$ 0.58$ 1.58$ 1.36Special Items, Basic Earnings Per Common Share————Adjusted Basic Earnings Per Common Share$ 0.70$ 0.58$ 1.58$ 1.36Diluted Earnings Per Common Share$ 0.70$ 0.58$ 1.57$ 1.35Special Items, Diluted Earnings Per Common Share————Adjusted Diluted Earnings Per Common Share$ 0.70$ 0.58$ 1.57$ 1.35Reconciliation of Effective Tax Rate to Adjusted Effective Tax RateEffective tax rate26.0 %25.8 %26.6 %26.9 %Impact on effective tax rate as a result of Special Items————Adjusted effective tax rate26.0 %25.8 %26.6 %26.9 %Net income, along with the reconciliation to Adjusted EBITDA, is presented below:Quarter EndedYear to Date Ended6/30/20266/30/20256/30/20266/30/2025Net Income – Yum China Holdings, Inc.$ 244$ 215$ 553$ 507Net income – noncontrolling interests20184239Equity in net (earnings) losses from equity method investments(2)(2)(4)(6)Income tax provision9280215199Interest income, net(12)(25)(28)(51)Investment loss6181715Operating Profit348304795703Special Items, Operating Profit————Adjusted Operating Profit348304795703Depreciation and amortization120110237219Store impairment charges14131819Adjusted EBITDA$ 482$ 427$ 1,050$ 941Operating Profit, along with the reconciliation to Core Operating Profit, is presented below:Quarter ended% ChangeYear to Date Ended% Change6/30/20266/30/2025B/(W)6/30/20266/30/2025B/(W)Operating Profit$ 348$ 30414$ 795$ 70313Special Items, Operating Profit ————Adjusted Operating Profit$ 348$ 30414$ 795$ 70313Items Affecting Comparability————F/X impact(20)—(44)—Core Operating Profit$ 328$ 3047$ 751$ 7037Total revenues3,1382,787136,4095,76811F/X impact(183)—(342)—Total revenues, excluding the impact of F/X$ 2,955$ 2,7876$ 6,067$ 5,7685Core OP margin11.1 %10.9 %0.2ppts.12.4 %12.2 %0.2ppts.Yum China Holdings, Inc.Segment Results(in US$ million)(unaudited)Quarter Ended 6/30/2026KFCPizza HutAll Other SegmentsCorporateandUnallocated(1)EliminationTotalCompany sales$ 2,294$ 604$ 12$ —$ —$ 2,910Franchise fees and income2432——29Revenues from transactions with franchisees(2)19325108—155Other revenues1323525(220)44Total revenues$ 2,338$ 613$ 274$ 133$ (220)$ 3,138Company restaurant expenses1,90352612——2,441General and administrative expenses6728836—139Franchise expenses102———12Expenses for transactions with franchisees(2)15223108—148Other operating costs and expenses1323123(220)38Closures and impairment expenses, net1011——12Total costs and expenses, net2,006562275167(220)2,790Operating Profit (Loss)$ 332$ 51$ (1)$ (34)$ —$ 348Reconciliation of GAAP Operating Profit to Restaurant Profit is as follows:Quarter Ended 6/30/2026KFCPizza HutAll Other SegmentsCorporateandUnallocated(1)EliminationTotalGAAP Operating Profit (Loss)$ 332$ 51$ (1)$ (34)$ —$ 348Less:Franchise fees and income2432——29Revenues from transactions with franchisees(2)19325108—155Other revenues1323525(220)44Add:General and administrative expenses6728836—139Franchise expenses102———12Expenses for transactions with franchisees(2)15223108—148Other operating costs and expenses1323123(220)38Closures and impairment expenses, net1011——12Restaurant profit$ 391$ 78$ —$ —$ —$ 469Company sales2,29460412——2,910Restaurant margin17.1 %12.9 %(2.3) %N/AN/A16.1 %Reconciliation of GAAP Operating Profit to Core Operating Profit is as follows:Quarter Ended 6/30/2026KFCPizza HutAll Other SegmentsCorporateandUnallocated(1)EliminationTotalGAAP Operating Profit (Loss)$ 332$ 51$ (1)$ (34)$ —$ 348Special Items, Operating Profit ——————Adjusted Operating Profit (Loss)$ 332$ 51$ (1)$ (34)$ —$ 348Items Affecting Comparability——————F/X impact(19)(3)—2—(20)Core Operating Profit (Loss)$ 313$ 48$ (1)$ (32)$ —$ 328Quarter Ended 6/30/2025KFCPizza HutAll Other SegmentsCorporateandUnallocated(1)EliminationTotalCompany sales$ 2,059$ 545$ 9$ —$ —$ 2,613Franchise fees and income1923——24Revenues from transactions with franchisees(2)1711780—115Other revenues1617217(161)35Total revenues$ 2,096$ 554$ 201$ 97$ (161)$ 2,787Company restaurant expenses1,7104729——2,191General and administrative expenses6126836—131Franchise expenses91———10Expenses for transactions with franchisees(2)1511678—110Other operating costs and expenses1516817(161)30Closures and impairment expenses, net831——12Other income, net———(1)—(1)Total costs and expenses, net1,804508202130(161)2,483Operating Profit (Loss)$ 292$ 46$ (1)$ (33)$ —$ 304Reconciliation of GAAP Operating Profit to Restaurant Profit is as follows:Quarter Ended 6/30/2025KFCPizza HutAll Other SegmentsCorporateandUnallocated(1)EliminationTotalGAAP Operating Profit (Loss)$ 292$ 46$ (1)$ (33)$ —$ 304Less:Franchise fees and income1923——24Revenues from transactions with franchisees(2)1711780—115Other revenues1617217(161)35Add:General and administrative expenses6126836—131Franchise expenses91———10Expenses for transactions with franchisees(2)1511678—110Other operating costs and expenses1516817(161)30Closures and impairment expenses, net831——12Other income, net———(1)—(1)Restaurant profit$ 349$ 73$ —$ —$ —$ 422Company sales2,0595459——2,613Restaurant margin16.9 %13.3 %(11.5) %N/AN/A16.1 %Reconciliation of GAAP Operating Profit to Core Operating Profit is as follows:Quarter Ended 6/30/2025KFCPizza HutAll Other SegmentsCorporateandUnallocated(1)EliminationTotalGAAP Operating Profit (Loss)$ 292$ 46$ (1)$ (33)$ —$ 304Special Items, Operating Profit ——————Adjusted Operating Profit (Loss)$ 292$ 46$ (1)$ (33)$ —$ 304Items Affecting Comparability——————F/X impact——————Core Operating Profit (Loss)$ 292$ 46$ (1)$ (33)$ —$ 304Year to Date Ended 6/30/2026KFCPizza HutAll Other SegmentsCorporateandUnallocated(1)EliminationTotalCompany sales$ 4,704$ 1,231$ 22$ —$ —$ 5,957Franchise fees and income4766——59Revenues from transactions with franchisees(2)38551217—311Other revenues2648347(456)82Total revenues$ 4,791$ 1,248$ 562$ 264$ (456)$ 6,409Company restaurant expenses3,8521,05925—(1)4,935General and administrative expenses128541480—276Franchise expenses213———24Expenses for transactions with franchisees(2)30448216—298Other operating costs and expenses1547444(455)69Closures and impairment expenses, net1011——12Total costs and expenses, net4,0421,126562340(456)5,614Operating Profit (Loss)$ 749$ 122$ —$ (76)$ —$ 795Reconciliation of GAAP Operating Profit to Restaurant Profit is as follows:Year to Date Ended 6/30/2026KFCPizza HutAll Other SegmentsCorporateandUnallocated(1)EliminationTotalGAAP Operating Profit (Loss)$ 749$ 122$ —$ (76)$ —$ 795Less:Franchise fees and income4766——59Revenues from transactions with franchisees(2)38551217—311Other revenues2648347(456)82Add:General and administrative expenses128541480—276Franchise expenses213———24Expenses for transactions with franchisees(2)30448216—298Other operating costs and expenses1547444(455)69Closures and impairment expenses, net1011——12Restaurant profit (loss)$ 852$ 172$ (3)$ —$ 1$ 1,022Company sales4,7041,23122——5,957Restaurant margin18.1 %14.0 %(8.2) %N/AN/A17.2 %Reconciliation of GAAP Operating Profit to Core Operating Profit is as follows:Year to Date Ended 6/30/2026KFCPizza HutAll Other SegmentsCorporateandUnallocated(1)EliminationTotalGAAP Operating Profit (Loss)$ 749$ 122$ —$ (76)$ —$ 795Special Items, Operating Profit ——————Adjusted Operating Profit (Loss)$ 749$ 122$ —$ (76)$ —$ 795Items Affecting Comparability——————F/X impact(40)(7)—3—(44)Core Operating Profit (Loss)$ 709$ 115$ —$ (73)$ —$ 751Year to Date Ended 6/30/2025KFCPizza HutAll Other SegmentsCorporateandUnallocated(1)EliminationTotalCompany sales$ 4,267$ 1,129$ 18$ —$ —$ 5,414Franchise fees and income4047——51Revenues from transactions with franchisees(2)33336164—236Other revenues21334234(324)67Total revenues$ 4,342$ 1,149$ 403$ 198$ (324)$ 5,768Company restaurant expenses3,48197220—(1)4,472General and administrative expenses120521681—269Franchise expenses192———21Expenses for transactions with franchisees(2)29333162—227Other operating costs and expenses21133534(323)59Closures and impairment expenses, net1332——18Other income, net———(1)—(1)Total costs and expenses, net3,6641,043406276(324)5,065Operating Profit (Loss)$ 678$ 106$ (3)$ (78)$ —$ 703Reconciliation of GAAP Operating Profit to Restaurant Profit is as follows:Year to Date Ended 6/30/2025KFCPizza HutAll Other SegmentsCorporateandUnallocated(1)EliminationTotalGAAP Operating Profit (Loss)$ 678$ 106$ (3)$ (78)$ —$ 703Less:Franchise fees and income4047——51Revenues from transactions with franchisees(2)33336164—236Other revenues21334234(324)67Add:General and administrative expenses120521681—269Franchise expenses192———21Expenses for transactions with franchisees(2)29333162—227Other operating costs and expenses21133534(323)59Closures and impairment expenses, net1332——18Other income, net———(1)—(1)Restaurant profit (loss)$ 786$ 157$ (2)$ —$ 1$ 942Company sales4,2671,12918——5,414Restaurant margin18.4 %13.9 %(16.0) %N/AN/A17.4 %Reconciliation of GAAP Operating Profit to Core Operating Profit is as follows:Year to Date Ended 6/30/2025KFCPizza HutAll Other SegmentsCorporateandUnallocated(1)EliminationTotalGAAP Operating Profit (Loss)$ 678$ 106$ (3)$ (78)$ —$ 703Special Items, Operating Profit ——————Adjusted Operating Profit (Loss)$ 678$ 106$ (3)$ (78)$ —$ 703Items Affecting Comparability——————F/X impact——————Core Operating Profit (Loss)$ 678$ 106$ (3)$ (78)$ —$ 703The above tables reconcile segment information, which is based on management responsibility, with our Condensed Consolidated Statements of Income. (1) Amounts have not been allocated to any segment for purpose of making operating decision or assessing financial performance as the transactions are deemed corporate revenues and expenses in nature. (2) Primarily includes revenues and associated expenses of transactions with franchisees derived from the Company's central procurement model whereby the Company centrally purchases substantially all food and paper products from suppliers and then sells and delivers to KFC and Pizza Hut restaurants, including franchisees.