The operator introduces the Yum! Brands, Inc. 2023 Fourth Quarter Earnings Call and hands it over to host Matt Morris, head of investor relations. CEO David Gibbs, CFO Chris Turner, and Senior Vice President and Corporate Controller Dave Russell will be speaking. The call includes forward-looking statements and risk factors, and non-GAAP financial measures will be discussed. The reporting calendar for each market is also mentioned, and the call is being recorded for playback. An upcoming Yum! investor event is also mentioned.

In the second paragraph, the speaker announces the release of first quarter earnings and a conference call on May 1st, as well as an upcoming Taco Bell Consumer Day in December. They then turn the call over to David Gibbs, who expresses concern for those impacted by conflict in the Middle East. He discusses the success of Yum! Brands in 2023, with record-breaking growth in unit and system sales, as well as the opening of 10,000 new restaurants. He also highlights the role of franchise partners and the success of their digital strategy.

Yum! has been focusing on deploying proprietary technologies to enhance their back-of-house operations and give their franchise partners a competitive edge, particularly in emerging markets. The conflict in the Middle East region had a small impact on Yum!'s fourth quarter sales, but this is expected to decrease over the course of 2024. KFC International and Taco Bell U.S. are the main drivers of Yum!'s growth, with KFC International opening nearly 2,700 new restaurants in 2023 and Taco Bell crossing the $15 billion system sales milestone. Taco Bell U.S. also maintained its strong performance in the fourth quarter, outperforming the QSR industry in terms of same-store sales and margins.

The paragraph discusses the performance of Yum! Brands' KFC and Taco Bell divisions, with a focus on their growth in sales and units. It also highlights standout markets, such as KFC China, Latin America, Africa, and Thailand. The company's plans for future initiatives, such as new menu items and a loyalty program, are also mentioned. The performance of Taco Bell U.S. is also discussed, with strong same-store sales growth and outperformance of the QSR industry.

In the final quarter of the year, Taco Bell faced challenges but ended on a high note with a 5% increase in comps. Their digital sales reached a record high and their loyalty program saw a 17% growth. The brand was also recognized as the top franchisor and brand icon. Taco Bell International saw a 14% unit growth, with plans to expand into new markets and increase brand awareness. The Pizza Hut division saw a 1% growth in system sales and a 4% unit growth, but a decline in same-store sales.

During the quarter, sales trends at Pizza Hut International were flat, while Pizza Hut U.S. saw a decline of 4%. However, the team plans to launch new limited time offers and make exciting innovations to the Melts platform. At Habit Burger Grill, system sales grew 6% for the full year, thanks to improvements in operations and cost reduction efforts.

The company saw a significant increase in store level margins despite a decline in sales due to their efforts in developing their talent. They were recognized as one of the Best Companies for Future Leaders and their Taco Bell Division CEO was officially transitioned to Sean Tresvant. The previous CEO, Mark King, was praised for his leadership and setting the brand up for success. The company's Global Chief Technology Officer will be moving into the role of Chief Digital and Technology Officer, while the current officer will continue as a Senior Advisor. The company has been recognized as a leader in technology in the global QSR industry.

Joe has been a valuable leader in driving innovation and digital growth for Pizza Hut. The company remains focused on reducing greenhouse gas emissions and implementing sustainable packaging. Their efforts have been recognized by various organizations. The CEO also praises Yum! China for their impressive capabilities and digital engagement with their loyalty program members.

In this paragraph, the speaker discusses the advantages of KFC and Pizza Hut, such as consistent paybacks and clear competitive advantages in the market. They also mention the challenges faced in the past year, but highlight the success of their growth plan and their confidence in future sales opportunities. The speaker then hands over to another speaker to discuss financial results, restaurant development, and their balance sheet and capital strategy. Overall, 2023 was an exceptional year for Yum! with strong same-store sales growth and a record number of new units opened.

The China team has crossed 10,000 KFC restaurants this quarter, with 40% of them being built in the last three years. Yum!'s full year system sales grew 10%, with fourth quarter system sales up 5%. KFC International and Taco Bell U.S. were the main growth engines, with system sales growing 12% this year. The company also saw a 4% decrease in general and administrative expenses due to cost control. Core profit grew 8% for the quarter and 12% for the full year. Yum! opened almost 1,900 units in the fourth quarter, with 87% of the growth coming from international markets. The KFC Division saw the largest growth, with units up 8%. China, India, Thailand, South Africa, and Spain were among the countries that drove KFC's development this year, with 15 countries growing unit count by more than 25 restaurants.

Yum! Brands announced the acquisition of 218 KFC restaurants in the UK, which is expected to bring in $40 million of incremental EBITDA in the first 12 months. Pizza Hut opened a record-breaking 575 units in the quarter and 1,600 units for the year, with strong growth in markets like China, India, and Canada. Taco Bell also had a successful year, opening 417 units. Yum! Brands' longer-term growth engines, including Habit and Taco Bell International, opened 208 units and grew unit count by 12%. The company expects development to continue at a strong pace in 2024, with KFC reaching 30,000 units and Pizza Hut reaching 20,000 units.

The article discusses KFC's growth potential in China and their digital strategy for expanding their operations globally. They have successfully deployed their Yum! Commerce platform in the US and plan to expand it to other markets in 2024. Kiosks are also a priority for improving customer experience and streamlining operations, with a 70% increase in kiosk penetration in KFC restaurants outside of China. The company has also expanded their proprietary technology products and platforms, such as Poseidon, to more restaurants.

Yum! Brands has made significant progress in onboarding restaurants to their digital ecosystem, including the deployment of their Dragontail AI platform in 7,000 restaurants and the use of an automated inventory management system in 90% of KFC locations. They also plan to expand their SuperApp to more restaurants and develop new AI-driven capabilities for smarter decision making. The expansion of their Yum! GlobalData Hub will enable personalized upsell recommendations, intelligent menu pricing, and dynamic routines for managers. Overall, Yum! Brands is pleased with the success of their digital ecosystem in their restaurants.

By the end of 2024, Taco Bell plans to have all of its U.S. restaurants using key technologies through the Yum! ecosystem, such as the Poseidon Point of Sale system and automated inventory management software. Their net leverage ratio decreased in 2023 due to pausing new debt financing and paying off existing debt. They also plan to use their excess cash for share repurchases and investments, and recently announced an increase in dividends. Despite challenges, Taco Bell expects to meet its long-term growth goals in 2024.

The company expects core operating profit growth of at least 8% in 2024, with a strong unit development pipeline and confidence in delivering strong system sales growth. While the first quarter may be challenging, they anticipate improving trends throughout the year. They also expect flat G&A growth and a tax rate of 21-23%. The company's teams have adjusted to challenges and remain focused on delivering long-term growth. They believe their iconic brands, franchisees, and business model will drive growth and shareholder value creation for years to come. In terms of development, the company anticipates reaching milestones in the first half of 2024 and expects a steady pace of global development in 2024 and 2025.

In response to a question about the company's expected growth rate, David Gibbs, CEO of Yum! Brands, expresses confidence in the company's pipeline and development plans. He mentions the success of franchisees and the company's new asset types as potential drivers of growth. In a separate question, Chris Turner, CFO of Yum! Brands, discusses the company's confidence in meeting its growth algorithm for 2024, attributing it to unit growth and the potential for same store sales to accelerate. However, he acknowledges potential challenges in the Middle East and the US market.

The company is confident in its growth trajectory for the year, with strong pipelines in development and expected sequential improvement in same store sales. They also have levers at their disposal for at least 8% core operating profit growth, including managing G&A costs, leveraging digital and technology capabilities, and driving productivity improvements. They are confident in delivering on their algorithm.

The speaker, David Palmer, asks about the impact of digital sales growth on overall sales and other benefits such as loyalty and labor efficiency. He also asks about the expected stabilization of Pizza Hut's comps in the second quarter. Chris Turner responds by stating that digital capabilities have positively impacted the company's algorithm, supporting strong unit economics and helping franchisees invest in new stores. He also mentions that digital played a significant role in the company's 10% global system sales growth.

The speaker discusses the profitability and progress of Yum!'s digital technology teams and capabilities. They also mention the success and potential of Pizza Hut, both in the US and globally. The company is investing in digital and attracting top talent, and plans to continue accelerating growth in this area. Despite a tough first quarter for Pizza Hut in the US, the company expects positive results for the year and sees a wide potential for growth in China.

During a conference call, Jon Tower of Citi asks for clarification on the company's G&A guidance for 2024 and how the company is working with franchisees to approach pricing in the U.S. given the pressure on the lower income consumer. Chris Turner clarifies that the G&A is expected to be flat on a 52-week basis and David Gibbs shares that Taco Bell, which makes up the majority of U.S. sales and profits, has seen a slight outperformance in low income trade areas, indicating the strength of the brand in this environment.

The speaker discusses the value perception of Taco Bell among consumers and how the brand can offer both value and innovation while maintaining industry-leading margins. Despite a challenging macro environment, the brand is expected to continue connecting with consumers and growing transactions. The speaker also mentions the success of the $3 and under value menu in the U.S. and its positive impact on franchisee profitability.

The company expects some small shifts in consumer behaviors but is slowly returning to a more normal operating environment with a focus on value, convenience, and food innovation. They are optimistic about the future due to their initiatives and pipeline, such as Taco Bell's increased innovation in 2024. The Middle East creates some uncertainty, but the company has levers to pull, such as improving efficiency and holding G&A flat, to achieve their profit growth target. Despite the impact of the Middle East, the company saw positive transaction growth in Q4.

In the paragraph, the speaker discusses the company's expectations for the upcoming year, including potential growth in sales and operating profit. They mention plans to open new lines of business and highlight the success of Taco Bell in the previous quarter. The speaker also mentions the potential for Taco Bell to gain market share due to its strong performance and upcoming initiatives.

In a challenging consumer environment, Taco Bell has been able to grow and gain market share. The company is excited about the potential for further growth and has a strong team in place to lead the brand. One interesting fact is that in the last three years, 25% of all young restaurants have been built, showing the commitment of franchisees to the brand. This commitment is also evident in the company's development pipeline and the strength of its brands. The call concludes with a thank you to participants.

This summary was generated with AI and may contain some inaccuracies.