Yum China : 4Q 2020 Earnings Presentation

Fourth Quarter and Fiscal Year 2020 Results

February 2021

Cautionary Statement on Forward-Looking Statements & Non-GAAP Measures

This presentation 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. 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" 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, business plans, investment, dividend and share repurchase plans, earnings, performance and returns of Yum China, anticipated effects of population and macroeconomic trends, the expected impact of the COVID-19 outbreak, the anticipated effects of our innovation, digital and delivery capabilities 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 presentation are only made as of the date of this presentation, 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, the changes in public health conditions, including the COVID-19 outbreak, our ability to control costs and expenses, including tax costs, as well as changes in political, economic and regulatory conditions in China. 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 captions "Risk Factors" and "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. This presentation includes certain non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures are included in this presentation where indicated. You are urged to consider carefully the comparable GAAP measures and reconciliations.

2

Business Highlights

Appendix - Financial Results

Stores in Photos: KFC - Changsha Yanghushui street ;Pizza Hut - Beijing Jiuxianqiao

Proven Resilience and Strong Execution in 2020

Safety	Agility	Profitability
Ensured safety of our	300mn+ Members	$961 mn
employees and	80% Digital Order	Operating Profit
customers	50%+ Off-premise sales	$732 mn
		Adjusted OP1
Innovation	Store Growth	Portfolio Growth
~500	1,165 New stores
New or upgraded	10,506 Total stores
products

1 See the appendix for a reconciliation to the non-GAAP adjusted measures

4

Corporate Responsibility: Going the Extra Mile

Recognized

Commitment

Industry Leader for the Restaurant and Leisure Facilities industry of DJSI in 2020

Certified as Top Employer China for the third year in 2021

Bloomberg Gender Equality Index for the third year in 2021

Support our	Support our	•	Provided 170,000+ free	New Plastic	•	Target 30% reduction
	meals to 1,450+	Reduction		of non-degradable
Employees	Community
	hospitals and	Initiatives		plastic packaging
			community health
					weight by 2025
			centers during COVID-
• Launched Family Care Program for			19 outbreak		• All KFC & Pizza Hut
	•	Provided modern			restaurants stopped
restaurant management team				using plastic straws
			kitchen equipment to
• Set up fund for COVID affected			70 schools in Hubei in		•	Replaced disposable
frontline employees and their families			2020. 1,200 schools			plastic cutlery and
			and ~400,000 students			plastic bags with eco-
			benefitted since 2008			friendly options in most
						restaurants
						5

Resilience During Challenging Times

Resilient Performance in Q4	Profitable Growth	Leading Digital Capabilities
• Total revenue grew 11%1	• Gross new stores: 1,165 FY	• Q4 Sales were
• System sales grew 5%2	• Total stores: 10,506	 Digital payment: 97%
• Same-store sales: 96% of prior year2	• New store cash payback periods3:	 Digital order: ~83%
• 15.1% restaurant margin	 ~2 years	 Delivery & takeaway: 50%+
• US$180 mn Operating Profit	 ~3-4 years	 From Members: ~59%
(US$961 mn FY)
		• Members: 300+ mn
		 Privileges sold: ~38 mn FY
1 Stated in reported currency, includes the consolidation of Huang Ji Huang from April 2020 and Suzhou KFC from August 2020.
2 Both stated in constant currency basis. System sales includes the consolidation of Huang Ji Huang from April 2020.	6
3 Refers to Average Pre-tax Cash Payback Period; Includes units opened from October 2018 to September 2019, after deduction of 3% license fee.

Re-establishing Momentum

11%

Total revenue growth1 (%)

1%

-11%

-24%

Q1 Q2 Q3 Q4

Operating Profit (US$mn)

	556
	320	320
97 98	128132	180 182

System sales growth2 (%)

1%

-4%

-20%

5%

Q1	Q2	Q3	Q4
		83%	78%61%

Same-store sales growth2 (%)

Q1 Q2 Q3 Q4

		-6%	-4%
	-11%
-15%
Q1	Q2	Q3	Q4

Operating Profit growth (%)

5%

-66%-35%-33%-67%

Q1 Q2 Q3 Q4

Reported		Adjusted

1 Stated in reported currency, 2 Stated in constant currency basis.	7
Note: Include the consolidation of Huang Ji Huang from April 2020 and Suzhou KFC from August 2020. Operating Profit included special item impact of -$1mn,-$4mn, $236mn and -$2mn in Q1 to Q4 respectively.

Q4 Operating Profit Increased 90% YoY (78% ex FX)

Operating Profit (US$ mn)		2019		2020
	Q4	180	182
		94	105

ReportedAdjusted

	YoY	+90%		+72%
	YoY ex F/X	+78%		+61%
Full Year	961	912
901	732

	Reported	Adjusted
YoY	+7%	-20%
YoY ex F/X	+7%	-20%

Key Factors for Q4 Year-Over-Year Growth

• Productivity improvement and other store cost savings

• Lower commodity prices
• New unit contribution
• Relief provided by landlords and government agencies
• Foreign exchange
• Operational deleverage from the same-store sales decline
• Wage inflation and increased rider cost associated with the rise in delivery volume
• Higher promotion costs

Note: See the appendix for a reconciliation to the non-GAAP adjusted measures

8

Powerful Digital Ecosystem

• Improves engagement with customers
• Improves efficiency

Privilege		Mobile	Mobile
Super Apps	Tableside Order
Program	Pre-order

Online

MembershipQueuing

Program

K-Music

	K-Run					Delivery
					YUMC
					Pay
		V-gold &	Smile to Pay
E-Gifting	Book Kingdom				Operations	Marketing
Merchandise	Payment

9

Membership Programs and Super Apps

Drive Frequency and Spend

275+ mm
KFC Members1	Memberships
~140 mm
Downloads from
iOS and Andriod 1
~89 mm
MAU2 in Q4 2020
~60%
KFC Sales3

~2x	>2x
ARPU4of	Privilege
Active Members	Frequency5

85+ mm

Pizza Hut Members1

~30 mm

Downloads from iOS and Andriod1

~13 mm

MAU2 in Q4 2020

~53%

Pizza Hut Sales3

~9mm in Q4

~38mm in 2020

Privilege Membership

Subscriptions Sold

1	Accumulative up to December 31, 2020. 2 MAU refers to the monthly active users of the KFC Super App, Pizza Hut Super App, as well as the miniprograms embedded in third party applications. 3 Q4 2020.	10
4	Compare ARPU (annual spending per active member) in 2020 and 2016. 5 After subscription vs. before subscription for privilege members.

Delivery and Takeaway are Key Growth Drivers

Delivery	+	Takeaway	=	Off-premise
% of Company sales	% of Company sales	% of Company sales

			28%
	15%	19%
12%
2017	2018	2019	2020
			36%
20%	24%	25%

2017 2018 2019 2020

	~30%
25%+
2019	2020

	~9%
~5%
2019	2020

55%+

~40%

in Q4 2020

in Q4 2020

Note: % of Company sales include Wuxi KFC since 2018, and include Suzhou KFC since August 2020

11

New Store Growth with Attractive Paybacks

	2018	2019	2020
			1,165
		1,006
Gross		819
505
new
257 360
stores
	Q4	Full Year
			10,506
		9,200
Total	8,484
stores
	18 YE	19 YE	20 YE

Lower Tier Penetration			New Unit Payback1
2020 new stores		Tier 1-2			Tier 3-6

58% KFC

42%

51%

PH

49%

Tier 1-2

Tier 3-6

KFC

~2-3 yrs

~2 yrs

Total stores

Tier 1-2

Tier 3-6

Pizza Hut

~4-5 yrs

~3-4 yrs

56%

KFC 44%

42%

PH

58%

Note: Included Huang Ji Huang stores from April 2020	12
1 Refers to Average Pre-tax Cash Payback Period; Includes units opened from October 2018 to September 2019, after deduction of 3% license fee.

Remodels Keep Our Brands Fresh

Remodeled stores

2018		2019		2020

931 972 939

416

232 297

Q4

Full Year

2020 YTD remodel

Others

, 2

Pizza

Hut,

375

KFC,

562

Always Something New

KFC

Pizza Hut

Stores in Photos: KFC - Hangzhou EFC shopping mall; Pizza Hut - Shanghai New World shopping mall and Beijing Jiuxianqiao

13

KFC Remained Resilient

Q4 2020 Highlights

System sales +3%1	Restaurant	306
Same-store sales -4%1	margin	Gross new	Operating profit of
stores
16.8%	US$203 million2
Transactions -9%
Average ticket +5%	+2.3 ppts y/y	166 remodels

Holiday campaigns	~85% Digital orders
+15ppts y/y	Members: 275+ million
Value promotions
~27% Delivery sales	Member sales: ~60%
Menu innovation
	+7ppts y/y

1	Stated in constant currency basis.	14
2 Segment Operating Profit before unallocated shared service costs and re-measurement gain from Suzhou KFC acquisition

Attractive Campaigns and Abundant Value

National Day Celebration	Christmas / New Year	Member Campaign	Crazy Thursday

Bucket with 17 items:	Christmas Giant Bucket at ¥129	Members Only: Buy one get one free	Extended Crazy Thursday
¥65 savings	to Wednesday and Friday

15

Product Innovations Across Categories

Premium Burger	Breakfast	Drinks	Dessert

Wagyu Beef Burger	Sweet pumpkin congee with longan, lotus	New Soymilk Tea	Hokkaido Caramel Cremia
seeds and more	KFC dessert kiosks only

16

Remarkable Progress in Pizza Hut

	Q4 2020 Highlights
System sales -3%1	Restaurant margin	96 Gross	Operating profit of
	new stores
Same-store sales -5%1	10.4%	US$14 million2
Transactions -2%	+3.7 ppts y/y	130 remodels
Average ticket -3%

Menu innovation	~75% Digital orders
+40 ppts y/y	Members: 85+ million
Great value proposition	~33% Delivery sales	Member sales: ~53%
Enhanced privilege programs
	+6 ppts y/y

1	Stated in constant currency basis.	17
2 Segment Operating Profit before unallocated shared service costs.

Innovative Products for Dine-In and Off-Premise

Dine-In Campaigns	Delivery Campaigns

Thick-cut fillet pizza

4-person combo, save up to ¥300

Crayfish with mozzarella cheese

Portuguese chicken curry

18

Strong Digital and Membership Programs

Scream Wednesday	Delivery Member Acquisition	Super Privilege Plus	Online Campaign

Extended Scream Wednesday		@¥158, members enjoy discounts and free
Delivery new members only: ¥9.9 pizza	delivery at Pizza Hut for 1 year, and	Double 12: Buy one get one free
to Monday and Tuesday
	subscriptions on other platforms	19

Driving Synergies between Huang Ji Huang and Little Sheep

Huang Ji Huang	Little Sheep		East Dawning

649 stores270 stores8 stores

	Hot pot
Self-heating instant hot pot	soup base

Salty duck

Steamed bun + Soy milk

Stores in photos: Huang Ji Huang - Guangzhou New Park; Little Sheep - Lanzhou Wanda Plaza; East Dawning - Shanghai Guoquanlu

Store count as of December 31, 2020

20

Three Distinct Coffee Brands

Simply a good cup				Specialty		price
of coffee and great price		atmosphere
coffee at affordable	Premium coffee & indulgent

KFC stores

42 stores

4 stores

Osmanthus coffee

Coffee capsules

Winter hot drinks

Pasta lunch set

Christmas dessert

Christmas drinks

Stores in photos: KFC - Shanghai Jinqiao; COFFii&JOY - Ningbo Century Oriental Plaza; Lavazza - Shanghai Metro City

Store count as of December 31, 2020

21

Taco Bell Expanded to 12 Stores

Expanded to 4 new cities in 2020

Localized Products at Great Value

Beijing		Ningbo

	Chengdu		Shenzhen
				Mexican style spicy chicken	Christmas/New Year combo
				rice bowl and wrap	for 2 person at 99 yuan
Stores in photos: Beijing - Hello Mart; Ningbo - The Mixc; Chengdu - The Mixc; Shenzhen - COCO Park	22

Launched Ready Meals

KAIFENGCAI	Pizza Hut

Cheese stuffed chicken breast /	"LuoSiFen" - Spicy noodle soup - a popular dish famous for its smell
Chicken soup	Ready-to-cook steak and pasta
Low fat chicken breast
Fried rice in 3 different style

23

2021 Outlook and Strategic Priorities

2021 FINANCIAL TARGETS

STRATEGIC PRIORITIES

• ~1,000 gross new stores
• ~$600 million Capex
• Top priority is to safeguard the health and safety of our employees and customers
• Stay agile and adapt to the fluid situations
• Grow our store footprint and develop emerging brands
• Step up investment in digitization and infrastructure to support expansion
• Manage cost with vigilance and drive efficiency improvement

24

Capital Allocation Powers Business Growth

Cash

US$4.3 bn cash and short term investment

• Strong operating cash flows

Free cash flow from operations1 (US$mn)

863

750 695

469

2017 2018 2019 2020

Capital Expenditure

• To accelerate store expansion and remodeling
• To develop our emerging brands
• To step up investment in digitalization, automation and logistics infrastructure

Capital expenditures (US$mn)

	470
415	435	419

2017 2018 2019 2020

Shareholder Returns

US$1.2bn (since spin-off)

• Resumed cash dividends in 4Q'2020
• Expect steady returns to shareholders, in line with our profit growth

Cash dividends distributed and share repurchases (US$mn)

473 442

166

102

2017 2018 2019 2020

M&A and Investment

• To remain disciplined
• To explore opportunities:
• • Brands with excellent growth potential synergy
  • New capabilities and technologies
  • Build and support our ecosystem

Past transactions

Restaurant	•	Huang Ji
brands		Huang (2020)
Joint	•	Acquired 36%
Ventures		of Wuxi KFC
		(2018)
	•	Acquired 25%
		of Suzhou KFC
		(2020)

1 Refers to net cash from operating activities minus capital expenditure.

25

Business Highlights

Appendix - Financial Results

Stores in Photos: KFC - Changsha Yanghushui street ;Pizza Hut - Beijing Jiuxianqiao

Note: 2018 & 2020 OP, NI and EPS included gain from re-measurementof equity interest upon Wuxi KFC and Suzhou KFC acquisition respectively

Q4 Results Improved Sequentially

		Sales Growth1									Profit Margin
	System sales growth (%)							Restaurant Margin (%)
	6%	8%	9%
	5%
		5%												15.7%16.0%
															15.1%
																	14.9%
									11.5%12.4%
			-5%
		Q4	Full Year
									Q4		Full Year
	Same-store sales growth (%)							Operating Profit (OP) (US$ mn)
	2%	2%	3%
	1%
														941		961
																901
		-4%							84	94	180
			-9%
										Q4		Full Year
		Q4		Full Year
					2018		2019			2020

1Stated in constant currency basis.

Note: Include the consolidation of Huang Ji Huang from April 2020 and Suzhou KFC from August 2020.

Net Income & EPS

Net Income (NI) (US$ mn)

708 713 784

74 90 151

Q4

Full Year

Diluted EPS (US$)

1.79 1.84 1.95

0.19 0.23 0.35

Q4

Full Year

27

KFC Reported $801 million Operating Profit1 in 2020

	Sales Growth2 (%)		Restaurant Margin (%)		Operating Profit1 (US$ mn)
System sales growth				949
				17.9%	895
9% 10%	11%		17.8%
		801
3%	7%		16.8%
		16.3%
		-5%		14.3%14.5%
	Q4	Full Year

Same-store sales growth

3%	3%	4%
2%
		-4%

136 161

203

	-8%	Q4	Full Year
Q4	Full Year

1. Segment Operating Profit before unallocated shared service costs and re-measurement gain from Wuxi and Suzhou KFC acquisition
2. Stated in constant currency basis.

Q4		Full Year
		2018		2019		2020	28

Pizza Hut Achieved Solid Margin and Profit

Sales Growth1 (%)

System sales growth

1%3%

-2%-3% -1%

	-15%
Q4	Full Year

Same-store sales growth

	0%	1%
-4%	-5%	-5%
	Q4	-14%
	Full Year

1. Stated in constant currency basis.
2. Segment Operating Profit before unallocated shared service costs.

Restaurant Margin (%)

11.1%

10.4% 10.3% 10.5%

6.7%

4.9%

Q4

Full Year

Operating Profit2 (US$ mn)

114

98

62

14

-9	-3
	Q4	Full Year
			2018			2019		2020	29

Growing Popularity of Membership and Digital

Members (mn)

			275+
		215+
	160+
110+
17 YE	18 YE	19 YE	20 YE
			85+

		70+
	50+
35+
17 YE	18 YE	19 YE	20 YE

Member Sales1

		54%	62%
	44%
32%
17 FY	18 FY	19 FY	20 FY
		46%	52%
	44%
18%

17 FY 18 FY 19 FY 20 FY

Digital Order2

	84%
63%
19 FY	20 FY

	67%
31%
19 FY	20 FY

MAU3

89 mm

in Q4 2020

13 mm

in Q4 2020

1. Member sales as % of system sales
2. Digital order as % of Company sales
3. MAU refers to the monthly active users of the KFC Super App, Pizza Hut Super App, as well as the mini programs embedded in third party applications.

30

Reconciliation of Reported Results to Non-GAAP Measures

Quarter Ended

Year to Date Ended

12/31/2020

12/31/2019

12/31/2020

12/31/2019

Non-GAAP Reconciliations
Reconciliation of Operating Profit to Adjusted Operating Profit
Operating Profit	$	180	$	94	$	961	$	901
Special Items, Operating Profit		(2)		(11)		229		(11)
Adjusted Operating Profit	$	182	$	105	$	732	$	912
Reconciliation of Net Income to Adjusted Net Income
Net Income - Yum China Holdings, Inc.	$	151	$	90	$	784	$	713
Special Items, Net Income -Yum China Holdings, Inc.		(2)		(8)		169		(16)
Adjusted Net Income - Yum China Holdings, Inc.	$	153	$	98	$	615	$	729
Reconciliation of EPS to Adjusted EPS
Basic Earnings Per Common Share	$	0.36	$	0.24	$	2.01	$	1.89
Special Items, Basic Earnings Per Common Share		(0.01)		(0.02)		0.43		(0.04)
Adjusted Basic Earnings Per Common Share	$	0.37	$	0.26	$	1.58	$	1.93
Diluted Earnings Per Common Share	$	0.35	$	0.23	$	1.95	$	1.84
Special Items, Diluted Earnings Per Common Share		-		(0.02)		0.42		(0.04)
Adjusted Diluted Earnings Per Common Share	$	0.35	$	0.25	$	1.53	$	1.88
Reconciliation of Effective Tax Rate to Adjusted Effective Tax Rate
Effective tax rate		28.0%		26.8%		26.6%		25.9%
Impact on effective tax rate as a result of Special Items		0.3%		1.7%		(0.2)%		1.0%
Adjusted effective tax rate		27.7%		25.1%		26.8%		24.9%

Details of Special Items
		Quarter Ended		Year to Date Ended
Gain from re-measurement of equity interest upon acquisition(1)	12/31/2020	12/31/2019	12/31/2020	12/31/2019
$	-	$	-	$	239	$	-
Share-based compensation expense for Partner PSU awards(2)		(2)		-		(7)		-
Derecognition of indemnification assets related to Daojia(3)		-		-		(3)		-
Daojia impairment(4)		-		(11)		-		(11)
Special Items, Operating Profit		(2)		(11)		229		(11)
Tax effect on Special Items(5)		-		1		(60)		1
Impact from the Tax Act(6)		-		-		-		(8)
Special Items, net income - including noncontrolling interests		(2)		(10)		169		(18)
Special Items, net income - noncontrolling interests		-		(2)		-		(2)
Special Items, Net Income -Yum China Holdings, Inc.	$	(2)	$	(8)	$	169	$	(16)
Weighted-average Diluted Shares Outstanding (in millions)		433		387		402		388
Special Items, Diluted Earnings Per Common Share	$	-	$	(0.02)	$	0.42	$	(0.04)

1) As a result of the acquisition of Suzhou KFC in the third quarter of 2020, the Company recognized a gain of $239 million from the re-measurement of our previously held 47% equity interest at fair value, which was not allocated to any segment for performance reporting purposes.

1. In February 2020, the Company granted Partner PSU Awards to select employees who were deemed critical to the Company's execution of its strategic operating plan. These PSU awards will only vest if threshold performance goals are achieved over a four-year performance period, with the payout ranging from 0% to 200% of the target number of shares subject to the PSU awards. Partner PSU Awards were granted to address increased competition for executive talent, motivate transformational performance and encourage management retention. Given the unique nature of these grants, the Compensation Committee does not intend to grant similar, special grants during the performance period. The impact from these special awards is excluded from metrics that management uses to assess the Company's performance. The Company recognized share-based compensation cost of $2 million and $7 million associated with the Partner PSU Awards for the quarter and year ended December 31, 2020, respectively.

3) In the quarter ended June 30, 2020, the Company derecognized a $3 million indemnification asset previously recorded for the Daojia acquisition as the indemnification right expired pursuant to the purchase agreement. The amount was included in Other income, net, but was not allocated to

any segment for performance reporting purposes.
4)	During the year ended December 31, 2019, we recorded an impairment charge of $11 million on intangible assets and goodwill attributable to the Daojia business. It was included	in Closures and impairment expenses in our Condensed Consolidated Statement of Income, but was not
allocated to any segment for performance reporting purposes. We recorded a tax benefit of $1 million associated with the impairment, and allocated $2 million of the after-tax impairment charge to noncontrolling interests.
5)	The tax expense was determined based upon the nature, as well as the jurisdiction, of each Special Item at the applicable tax rate.
6)	We completed the evaluation of the impact on our transition tax computation based on the final regulations that were released by the U.S. Treasury Department and the U.S. Internal Revenue Service and became effective in the first quarter of 2019, and recorded an additional tax expense of
$8 million for the transition tax accordingly.	31