01—Abstract
Summary
Summary of the 10-Q filed November 7, 2024. Cited figures are marked; the original filing is the authoritative source.
Yum!
Brands, Inc. reported third-quarter 2024 total revenues of $1.83 billiona, up from $1.71 billion in the prior-year quarter, and net income of $382 million, or $1.35 diluted EPS, versus $416 million and $1.46 a year earlier. Year to date, net income was $1.06 billion ($3.73 diluted EPS) versus $1.13 billion ($3.97) in 2023. Diluted EPS excluding Special Items was $1.37 for the quarter and $3.87 year to date.
Same-store sales declined 2%b for both the quarter and year to date, with the KFC Division down 4% for the quarter and the Pizza Hut Division down 4%, while the Taco Bell Division grew 4%. The filing cites Middle East conflict impacts as a low single-digit headwind to same-store sales growth, with approximately 275 restaurants temporarily closed in affected markets. The company's cash position and capital allocation changed during the period.
Operating cash flow was $1.18 billionc year to date, compared with $1.16 billion in 2023. Shareholders' deficit stood at $(7.67) billion at September 30, 2024, with total debt of about $11 billion. Yum acquired 216 KFC restaurants in the U.K. and Ireland for $174 million in cash, sold its Devyani investment for $104 million, and repurchased $327 million of stock year to date under a $2 billion May 2024 authorization, leaving $1.7 billion remaining.
The company also refinanced its Term Loan A and Revolving Facility, and the net leverage ratio ended the quarter at 4.1x EBITDA. The filing also discloses an unresolved IRS proposed adjustment asserting an underpayment of $2.1 billiond plus $418 million in penalties for fiscal 2014, with interest estimated at about $1.3 billion through the third quarter of 2024.
The company disagrees, believes its position is more likely than not to be sustained, and has recorded no reserve. An Indian enforcement penalty of approximately $130 million remains under a Delhi High Court stay.
02—Key points
Key Highlights
- Total revenues rose to $1,826 million in the quarter from $1,708 million, and to $5,187 million year to date from $5,040 million.
- Net income fell to $382 million ($1.35 diluted EPS) in the quarter from $416 million ($1.46), and to $1,063 million ($3.73) year to date from $1,134 million ($3.97).
- Diluted EPS excluding Special Items was $1.37 for the quarter and $3.87 year to date, with the filing citing a higher tax rate and unfavorable after-tax investment results as drags.
- Same-store sales declined 2% for the quarter and year to date; KFC Division was down 4% in the quarter, Pizza Hut down 4%, and Taco Bell up 4%.
- Middle East conflict affected sales in KFC and Pizza Hut markets, with approximately 275 restaurants temporarily closed and one franchisee defaulted after quarter end.
- Year-to-date share repurchases totaled $327 million, and the company acquired 216 KFC restaurants in the U.K. and Ireland for $174 million in cash.
- Unresolved IRS proposed adjustment asserts a $2.1 billion underpayment plus $418 million in penalties for fiscal 2014; the company disagrees and has recorded no reserve.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Yum! Brands kept $0.21.
- Revenue$1.83B100.0%
- Cost of revenue−$523.0M28.6%
- Gross profit$1.30B71.4%
- Operating costs−$684.0M37.5%
- Operating income$619.0M33.9%
- Interest, other & tax−$237.0M13.0%
- Net income$382.0M20.9%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed November 7, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $1.83B$1.71B | +6.9% |
| Cost of Revenue | $523.00M$421.00M | +24.2% |
| Gross Profit | $1.30B$1.29B | +1.2% |
| Operating Expenses | $1.21B$1.09B | +10.2% |
| Operating Income | $619.00M$613.00M | +1.0% |
| Net Income | $382.00M$416.00M | −8.2% |
| EPS (Basic) | $1.36$1.48 | −8.1% |
| EPS (Diluted) | $1.35$1.46 | −7.5% |
| Shares Outstanding (Basic) | 282.00M281.00M | +0.4% |
| Shares Outstanding (Diluted) | 285.00M286.00M | −0.3% |
05—Questions
Frequently Asked Questions
How did Yum! Brands perform in the third quarter of 2024?
Total revenues increased to $1,826 million from $1,708 million, while net income decreased to $382 million from $416 million. Diluted EPS was $1.35 versus $1.46 a year earlier, and diluted EPS excluding Special Items was $1.37 versus $1.44.
Which divisions drove same-store sales performance?
Company same-store sales declined 2% for the quarter. The Taco Bell Division grew 4%, while the KFC Division and Pizza Hut Division each declined 4%. The filing attributes Middle East conflict impacts to KFC and Pizza Hut markets.
How is the company returning cash to shareholders and managing debt?
Year to date, Yum paid $565 million in dividends and repurchased $327 million of common stock, with $1.7 billion remaining under the May 2024 authorization. Total debt was about $11 billion, roughly 96% fixed, with a consolidated net leverage ratio of 4.1x EBITDA and BB+/Ba2 credit ratings.
What is the status of the IRS matter?
The IRS asserts an underpayment of $2.1 billion plus $418 million in penalties for fiscal 2014, with interest estimated at about $1.3 billion through the third quarter of 2024. The company is contesting the assertion, the matter is proceeding with the IRS Office of Appeals, and no reserve has been recorded. The filing says an unfavorable resolution could have a material adverse impact.
What were the main acquisition and divestiture activities in 2024?
Yum acquired two franchisee entities operating 216 KFC restaurants in the U.K. and Ireland on April 29, 2024, for $174 million in cash, net of cash acquired. It also sold its approximate 5% Devyani International investment for $104 million in pre-tax proceeds during the first quarter.
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