01—Abstract
Summary
Summary of the 10-Q filed August 7, 2025. Cited figures are marked; the original filing is the authoritative source.
Yum!
Brands, Inc. reported second-quarter 2025 Total revenues of $1.93 billiona, up from $1.76 billion a year earlier, and Net Income of $374 million versus $367 million. Diluted EPS was $1.33 versus $1.28, and EPS excluding Special Items was $1.44 versus $1.35. Year to date, Net Income fell to $628 million from $681 million, with diluted EPS of $2.23 versus $2.38, largely reflecting a $102 million reserve tied to a Mexican tax matter that raised the year-to-date effective tax rate to 32.4% from 21.8%.
Excluding Special Items, year-to-date diluted EPS rose to $2.74b from $2.50. Consolidated system sales excluding FX rose 4% for both the quarter and year to date, with same-store sales growth of 2% in each period. The company's cash generation strengthened, with operating cash flow of $850 million year to date versus $705 million a year earlier.
Management used this cash to fund $338 millionc of share repurchases and $395 million of dividends, and it reported $1.3 billion of remaining capacity under its May 2024 repurchase authorization. Total debt was $11.0 billion, with approximately 96% fixed and a consolidated net leverage ratio of 3.8x EBITDA. Management stated it expects to maintain leverage near 4.0x over the medium term and to deliver materially higher capital returns going forward.
Key risks include a $938 milliond Securitization Notes tranche with an anticipated repayment date of May 2026, which the company expects to refinance, and an unresolved IRS proposed underpayment of $2.1 billion in tax plus $418 million in penalties, for which no reserve has been recorded. The filing also discloses an Indian regulatory penalty order of approximately $130 million that is stayed and that the company does not consider probable of significant loss. Unit count declined by 74 year to date, mainly due to the January 2025 closure of 283 KFC and 254 Pizza Hut restaurants in Turkey.
02—Key points
Key Highlights
- Quarterly total revenues rose to $1.93 billion from $1.76 billion, and quarterly GAAP diluted EPS was $1.33 versus $1.28.
- Year-to-date Net Income was $628 million versus $681 million, reflecting a $102 million tax reserve related to a Mexican subsidiary; year-to-date diluted EPS excluding Special Items rose to $2.74 from $2.50.
- System sales excluding FX grew 4% for both the quarter and year to date, with same-store sales growth of 2% in each period.
- Year-to-date operating cash flow was $850 million versus $705 million, and share repurchases totaled $338 million year to date.
- Pizza Hut Division operating profit declined 15% in the quarter and 17% year to date, while Taco Bell Division operating profit rose 5% and 10%.
- Total debt was $11.0 billion, with a consolidated net leverage ratio of 3.8x EBITDA; the $938 million May 2026 Securitization Notes are expected to be refinanced.
- The IRS proposed $2.1 billion underpayment plus $418 million in penalties remains in Tax Court litigation, with no reserve recorded.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2025, Yum! Brands kept $0.19.
- Revenue$1.93B100.0%
- Cost of revenue−$560.0M29.0%
- Gross profit$1.37B71.0%
- Operating costs−$751.0M38.9%
- Operating income$622.0M32.2%
- Interest, other & tax−$248.0M12.8%
- Net income$374.0M19.3%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2025filed August 7, 2025Financial Statements
Q2 FY2025 against Q2 FY2024
| Line item | Q2 FY2025Q2 FY2024 | Change |
|---|---|---|
| Revenue | $1.93B$1.76B | +9.6% |
| Cost of Revenue | $560.00M$470.00M | +19.1% |
| Gross Profit | $1.37B$1.29B | +6.2% |
| Operating Expenses | $1.31B$1.16B | +13.4% |
| Operating Income | $622.00M$607.00M | +2.5% |
| Net Income | $374.00M$367.00M | +1.9% |
| EPS (Basic) | $1.34$1.30 | +3.1% |
| EPS (Diluted) | $1.33$1.28 | +3.9% |
| Shares Outstanding (Basic) | 279.00M282.00M | −1.1% |
| Shares Outstanding (Diluted) | 281.00M286.00M | −1.7% |
05—Questions
Frequently Asked Questions
Why did the effective tax rate increase so sharply year to date?
The year-to-date effective tax rate was 32.4% versus 21.8% a year earlier, primarily due to the unfavorable impact of a $102 million reserve tied to a Mexican court ruling that losses could not offset recapture gains from a 2009 tax deconsolidation. The company is appealing the decision and does not expect resolution within twelve months.
How much capital did Yum! Brands return to shareholders in the period?
Year to date, the company repurchased $338 million of Common Stock and paid $395 million in dividends on Common Stock. As of June 30, 2025, it had remaining capacity to repurchase up to $1.3 billion under the May 2024 authorization, which runs through December 31, 2026.
What is the status of the IRS dispute?
The IRS asserted an underpayment of $2.1 billion plus $418 million in penalties for fiscal 2014, with interest estimated at about $1.6 billion through the second quarter of 2025. The company filed a petition in U.S. Tax Court on June 4, 2025, believes its position is more likely than not to be sustained, and has recorded no reserve. An unfavorable outcome could have a material adverse impact on future financial statements.
Which divisions drove performance this quarter?
The KFC Division's GAAP operating profit rose 9% to $365 million in the quarter, and the Taco Bell Division's rose 5% to $262 million. The Pizza Hut Division's operating profit fell 15% to $80 million, reflecting higher bad debt expense, higher G&A, and a same-store sales decline of 1%.
What are the near-term debt maturities and refinancing plans?
The $938 million May 2016 Securitization Notes have an anticipated repayment date of May 2026 and are classified as short-term borrowings. The company expects to refinance them before that date, and states that if it cannot or chooses not to, operating cash and availability under its $1.5 billion Revolving Facility would be sufficient to repay them. Failure to repay or refinance would trigger rapid amortization and additional interest of at least 7%.
06—Continue