Yum China Reports Third Quarter 2022 Results

Total Revenues grew 5%; System Sales grew 5% in constant currency,despite temporary closures

Delivered $316 million Operating Profit,representing 77% growth,through strong execution

Opened 621 net new stores year-to-date,on track to meet full-year net new store target of 1,000 to 1,200

SHANGHAI,Nov. 2,2022 -- Yum China Holdings,Inc. (the "Company" or "Yum China") (NYSE: YUMC and HKEX: 9987) today reported unaudited results for the third quarter ended September 30,2022.

Impact of COVID Outbreak and Mitigation Efforts

The COVID pandemic continued to impact the Company's operations and results in the third quarter. COVID-related health measures remained in effect across China,impacting travel and social activities. Despite the volatile environment,the Company grew system sales in the quarter by 5% year over year and outpaced the 2% national restaurant industry average for the period.

We captured the growing demand for delivery and takeaway which offset the subdued dine-in volume. Same-store sales for the quarter recovered to the same level a year ago but remain below pre-COVID 2019 levels. From a timing perspective,same-store sales recovered sequentially in July and August,with August exceeding the prior year level. This is primarily due to lapping the Delta variant outbreak in the prior year period. However,same-store sales percentage declined year over year in September as preventive health measures were tightened. In September,on average,approximately 900 of our stores were temporarily closed or offered only takeaway and delivery services,compared to approximately 400 stores on average in July and August.

Entering the fourth quarter,new infections continued to increase in October with resurgent outbreaks across China. In October,approximately 1,400 of our stores were either temporarily closed or offered only takeaway and delivery services. Nationwide,consumers are traveling less and reducing expenditures. According to government statistics,for the seven-day National Day holiday starting October 1,the number of travelers and related travel spending was down 18% and 26%,respectively,compared to the same holiday period last year. The COVID situations remain uncertain with regional outbreaks continuing to impact our operations. Against this backdrop,we will stay nimble with our contingency planning,ready to pivot with changing market conditions.

Third Quarter Highlights

Total revenues increased 5% year over year to $2.68 billion from $2.55 billion (an 11% increase excluding foreign currency translation ("F/X")).

Total system sales increased 5% year over year,with increases of 5% at KFC and 7% at Pizza Hut,excluding F/X.

Same-store sales were flat year over year,with flat growth at KFC and an increase of 2% at Pizza Hut,excluding F/X.

Opened 239 net new stores during the quarter; total store count reached 12,409 as of September 30,2022.

Restaurant margin was 18.8%,compared with 12.2% in the prior year period.

Operating Profit increased 77% year over year to $316 million from $178 million (an 86% increase excluding F/X).

Adjusted Operating Profit increased 89% year over year to $318 million from $168 million (a 99% increase excluding F/X).

Effective tax rate was 29.9%.

Net Income increased 98% to $206 million from $104 million in the prior year period,primarily due to the increase in Operating Profit,partially offset by the net loss from our mark-to-market investment in Meituan Dianping.

Adjusted Net Income increased 117% to $208 million from $96 million in the prior year period (a 72% increase excluding the net losses of $12 million and $32 million in the third quarter of 2022 and 2021,from our mark-to-market equity investments; an 81% increase if further excluding F/X).

Diluted EPS increased 104% to $0.49 from $0.24 in the prior year period.

Adjusted Diluted EPS increased 123% to $0.49 from $0.22 in the prior year period (a 79% increase excluding the net losses from our mark-to-market equity investments in the third quarter of 2022 and 2021,a 90% increase if further excluding F/X).

Results for the current year period include the consolidation of Hangzhou KFC.

Key Financial Results

Third Quarter 2022

Year to Date Ended 9/30/2022

% Change

% Change

System

Sales

Same-

Store Sales

Net New

Units

Operating

Profit

System

Sales

Same-

Store Sales

Net New

Units

Operating

Profit

Yum China

+5

-

+9

+77

(5)

(8)

+9

(22)

KFC

+5

-

+10

+67

(5)

(8)

+10

(12)

Pizza Hut

+7

+2

+12

+159

(3)

(6)

+12

(23)

Third Quarter

Year to Date Ended 9/30

(in US$ million,except per share data and percentages)

% Change

% Change

2022

2021

Reported

ExF/X

2022

2021

Reported

ExF/X

Operating Profit

$

316

$

178

+77

+86

$

588

$

753

(22)

(20)

Adjusted Operating Profit(1)

$

318

$

168

+89

+99

$

593

$

750

(21)

(19)

Net Income

$

206

$

104

+98

+109

$

389

$

515

(25)

(22)

Adjusted Net Income(1)

$

208

$

96

+117

+128

$

394

$

514

(23)

(21)

Basic Earnings Per Common Share

$

0.49

$

0.25

+96

+108

$

0.92

$

1.23

(25)

(23)

Adjusted Basic Earnings

Per Common Share(1)

$

0.49

$

0.23

+113

+126

$

0.93

$

1.22

(24)

(21)

Diluted Earnings Per Common Share

$

0.49

$

0.24

+104

+113

$

0.92

$

1.19

(23)

(21)

Adjusted Diluted Earnings

Per Common Share(1)

$

0.49

$

0.22

+123

+136

$

0.93

$

1.18

(21)

(19)

(1) See "Reconciliation of Reported GAAP Results to non-GAAP Adjusted Measures" included in the accompanying tables of this release for further details.

Note: All comparisons are versus the same period a year ago.

Percentages may not recompute due to rounding.

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.

CEO and CFO Comments

Joey Wat,CEO of Yum China,commented,"We achieved outstanding performance in the third quarter with fantastic growth,both top-line and bottom-line. In the past two years,we have learned to navigate through uncertainties and volatilities. During tougher times,our resilient business model and agility has helped us to effectively manage the negative impact of the pandemic. As the market situation became relatively calmer in July and August,we successfully captured the upsides and delivered strong results. By adapting and innovating,we have further strengthened our business fundamentals. Our efforts to improve our cost structure make us more nimble and efficient. This allows us to offer great value to customers without sacrificing profitability. Our in-house and tailor-made supply chain management system empowers us to innovate amazing new products and launch at scale with great speed. In just two years,we established expertise in beef burgers,capturing meaningful market share. Also,our digital capabilities continue to lead the industry. Our loyalty programs now have over 400 million members with great potential to be unleashed."

Wat continued,"I am also excited about our recent Hong Kong primary listing conversion and inclusion in Southbound Stock Connect programs. We believe this new status will provide additional access to investors and broaden our shareholder base. Looking ahead,we are confident about unlocking the long-term opportunities in China. Our innovation in store formats has enabled us to further penetrate and continue to lower upfront investment. The strong performance of our new stores gives us confidence to open new and profitable stores at a robust pace. We will continue to execute our RGM (Resilience-Growth-Moat) strategic framework to capture growth opportunities and bolster our market-leading position amidst rapidly changing conditions."

Andy Yeung,CFO of Yum China,stated,"We expanded restaurant margins and delivered meaningful growth in operating profit in the quarter. This was achieved by our continuous efforts in rebasing the cost structure,improving efficiencies and securing temporary reliefs. Compared to substantial sales deleveraging headwinds in past quarters,we benefited from favorable operating leverage in the third quarter with sequential improvement in sales. Looking into the fourth quarter,we expect the COVID situation to remain uncertain. Conditions in October continued to deteriorate from September. Intermittent outbreaks along with downward pressure on the economy and cautious consumer spending are likely to negatively impact sales momentum. At the same time,we continue to face cost pressures from the inflationary environment. Fourth quarter is seasonally a low quarter in terms of sales and profit,thus profitability could be more susceptible to fluctuations in sales and operations. Despite the headwinds,we have strong capabilities to capture sales and proactively manage cost. We remain committed to growing our store portfolio and generating shareholder returns for the long term."

Share Repurchases and Dividends

During the third quarter,we repurchased approximately 0.27 million shares of Yum China common stock for $13 million at an average price of $48.05 per share. As of September 30,2022,approximately $1.2 billion remained available for future share repurchases under the current authorization.

The Board of Directors declared a cash dividend of $0.12 per share on Yum China's common stock,payable on December 20,2022 to shareholders of record as of the close of business on November 29,2022.

Year to date ended September 30,the Company has returned approximately $565 million of capital to shareholders in the form of share repurchases and cash dividends. The Company remains committed to a disciplined capital allocation strategy that balances returning capital to the shareholders and investing in the business for continued growth.

Digital and Delivery

The KFC and Pizza Hut loyalty programs exceeded 400 million members combined,as of quarter-end. Member sales accounted for approximately 62% of system sales in the third quarter of 2022.

Delivery contributed approximately 38% of KFC and Pizza Hut's Company sales in the third quarter of 2022,an increase of approximately four percentage points from the prior year period. With the volatile COVID situation,delivery continued to be a popular option while dine-in volumes remained subdued.

Digital orders,including delivery,mobile orders and kiosk orders,accounted for approximately 91% of KFC and Pizza Hut's Company sales in the third quarter of 2022.

KFC and Pizza Hut Total

Third Quarter

Year to Date Ended 9/30

2022

2021

2022

2021

Member count (as of period-end)

400 million+

350 million+

400 million+

350 million+

Member sales as % of system sales

~62%

~63%

~62%

~64%

Delivery as % of Company sales

~38%

~34%

~37%

~32%

Digital orders as % of Company sales

~91%

~87%

~89%

~86%

New-Unit Development and Asset Upgrade

The Company opened 403 gross new stores,or 239 net new stores in the third quarter of 2022,mainly driven by development of the KFC and Pizza Hut brands.

The Company remodeled 99 stores in the third quarter of 2022.

Net New Units

Restaurant Count

Third Quarter

Year to Date

As of September 30

2022

Ended 9/30/2022

2022

2021

Yum China

239

621

12,409

11,415

KFC

165

507

8,675

7,908

Pizza Hut

95

216

2,806

2,503

Others(2)

(21)

(102)

928

1,004

(2) Others include Taco Bell,Little Sheep,Huang Ji Huang,East Dawning,COFFii & JOY and Lavazza.

Restaurant Margin

Restaurant margin was 18.8% in the third quarter of 2022,compared with 12.2% in the prior year period,primarily attributable to higher productivity,temporary relief and sales leveraging,partially offset by inflation in commodity,wage and utility costs,as well as increased rider cost associated with rising delivery volumes.

Third Quarter

Year to Date Ended 9/30

2022

2021

ppts change

2022

2021

ppts change

Yum China

18.8%

12.2%

+6.6

15.1%

15.6%

(0.5)

KFC

20.6%

13.6%

+7.0

16.6%

16.8%

(0.2)

Pizza Hut

13.4%

8.2%

+5.2

11.1%

12.2%

(1.1)

2022 Outlook

Yum China remains focused on capturing long-term opportunities in China. The Company's fiscal year 2022 targets remain unchanged from those originally disclosed on February 8,2022:

To open approximately 1,200 net new stores.

To make capital expenditures in the range of approximately $800 million to $1 billion.

Other Updates

On October 24,the Company's voluntary conversion of its secondary listing status to a primary listing status on the Main Board of the Stock Exchange of Hong Kong Limited ("HKEX") became effective. Yum China is now a dual primary listed company on the HKEX and New York Stock Exchange. The Company's common stock listed on the two exchanges will continue to be fully fungible. On the same day,the Company's shares of common stock traded on the HKEX were included in the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect.

Note on Non-GAAP Adjusted Measures

Reported GAAP results include Special Items,which are excluded from non-GAAP adjusted measures. Special Items are not allocated to any segment and therefore only impact reported GAAP results of Yum China. See "Reconciliation of Reported GAAP Results to Non-GAAP Adjusted Measures" within this release.

Conference Call

Yum China's management will hold an earnings conference call at 8:00 p.m. U.S. Eastern Time on Tuesday,November 1,2022 (8:00 a.m. Beijing/Hong Kong Time on Wednesday,November 2,2022).

A live webcast of the call may be accessed at https://edge.media-server.com/mmc/p/ny6cyocx.

To join by phone,please register in advance of the conference through the link provided below. Upon registering,you will be provided with participant dial-in numbers,a passcode and a unique access PIN.

Pre-registration Link: https://s1.c-conf.com/diamondpass/10025527-ei8ios.html

A replay of the conference call will be available one hour after the call ends until Wednesday,November 9,2022 and may be accessed by phone at the following numbers:

U.S.: 1 855 883 1031

Mainland China: 400 1209 216

Hong Kong: 800 930 639

U.K.: 0800 031 4295

Replay PIN: 10025527

Additionally,this earnings release,the accompanying slides,a live webcast and an archived webcast of this conference call will be available at Yum China's Investor Relations website at 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 Statements

This 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 under "2022 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,investment,dividend and share repurchase plans,liquidity,earnings,performance and returns of Yum China,anticipated effects of population and macroeconomic trends,the expected impact of the COVID-19 pandemic,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,including the COVID-19 pandemic and regional outbreaks caused by existing or new COVID-19 variants,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.

About Yum China Holdings,Inc.

Yum China Holdings,Inc. is a licensee of Yum! Brands in mainland China. It has exclusive rights in mainland China to KFC,China's leading quick-service restaurant brand,Pizza Hut,the leading casual dining restaurant brand in China,and Taco Bell,a California-based restaurant chain serving innovative Mexican-inspired food. Yum China also owns the Little Sheep,Huang Ji Huang and COFFii & JOY concepts outright. In addition,Yum China has partnered with Lavazza to explore and develop the Lavazza coffee shop concept in China. The Company had 12,409 restaurants in over 1,700 cities at the end of September 2022.

In 2021,Yum China was selected as a member of both Dow Jones Sustainability Indices (DJSI): World Index and Emerging Market Index. In 2022,Yum China ranked 359th on the Fortune 500 list. The Company was also named to the Bloomberg Gender-Equality Index and was certified as a Top Employer 2022 in China by the Top Employers Institute,both for the fourth consecutive year. For more information,please visit http://ir.yumchina.com.

Investor Relations Contact:

Tel: +86 21 2407 7556 / +852 2267 5801

IR@YumChina.com

Media Contact:

Tel: +86 21 2407 7510

Media@YumChina.com

Yum China Holdings,Inc.

Condensed Consolidated Statements of Income

(in US$ million,except per share data)

(unaudited)

Quarter Ended

% Change

Year to Date Ended

% Change

9/30/2022

9/30/2021

B/(W)

9/30/2022

9/30/2021

B/(W)

Revenues

Company sales

$ 2,561

$ 2,310

11

$ 7,135

$ 6,874

4

Franchise fees and income

22

40

(45)

65

120

(46)

Revenues from transactions with

franchisees and unconsolidated affiliates

80

184

(57)

219

519

(58)

Other revenues

22

20

11

62

49

27

Total revenues

2,685

2,554

5

7,481

7,562

(1)

Costs and Expenses,Net

Company restaurants

Food and paper

787

743

(6)

2,206

2,133

(3)

Payroll and employee benefits

603

591

(2)

1,819

1,675

(9)

Occupancy and other operating expenses

691

694

—

2,034

1,995

(2)

Company restaurant expenses

2,081

2,028

(3)

6,059

5,803

(4)

General and administrative expenses

157

142

(10)

449

408

(10)

Franchise expenses

9

17

46

27

50

45

Expenses for transactions with

franchisees and unconsolidated affiliates

76

180

57

212

509

58

Other operating costs and expenses

18

17

(4)

53

41

(28)

Closures and impairment expenses,net

4

2

(135)

20

13

(53)

Other expenses (income),net

24

(10)

NM

73

(15)

NM

Total costs and expenses,net

2,369

2,376

—

6,893

6,809

(1)

Operating Profit

316

178

77

588

753

(22)

Interest income,net

25

16

51

51

47

8

Investment loss

(15)

(39)

61

(32)

(43)

26

Income Before Income Taxes and

Equity in Net Earnings (Losses) from

Equity Method Investments

326

155

110

607

757

(20)

Income tax provision

(97)

(44)

(121)

(183)

(210)

13

Equity in net earnings (losses) from

equity method investments

(2)

—

NM

(4)

—

NM

Net income – including noncontrolling interests

227

111

103

420

547

(23)

Net income – noncontrolling interests

21

7

(171)

31

32

5

Net Income – Yum China Holdings,Inc.

$ 206

$ 104

98

$ 389

$ 515

(25)

Effective tax rate

29.9%

28.3%

(1.6)

ppts.

30.1%

27.7%

(2.4)

ppts.

Basic Earnings Per Common Share

$ 0.49

$ 0.25

$ 0.92

$ 1.23

Weighted-average shares outstanding

(in millions)

420

422

422

421

Diluted Earnings Per Common Share

$ 0.49

$ 0.24

$ 0.92

$ 1.19

Weighted-average shares outstanding

(in millions)

424

435

426

435

Cash Dividends Declared Per Common Share

$ 0.12

$ 0.12

$ 0.36

$ 0.36

Company sales

100.0%

100.0%

100.0%

100.0%

Food and paper

30.7

32.2

1.5

ppts.

30.9

31.0

0.1

ppts.

Payroll and employee benefits

23.5

25.6

2.1

ppts.

25.5

24.4

(1.1)

ppts.

Occupancy and other operating expenses

27.0

30.0

3.0

ppts.

28.5

29.0

0.5

ppts.

Restaurant margin

18.8%

12.2%

6.6

ppts.

15.1%

15.6%

(0.5)

ppts.

Operating margin

12.3%

7.7%

4.6

ppts.

8.2%

11.0%

(2.8)

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

% Change

Year to Date Ended

% Change

9/30/2022

9/30/2021

B/(W)

9/30/2022

9/30/2021

B/(W)

Revenues

Company sales

$ 1,992

$ 1,750

14

$ 5,554

$ 5,220

6

Franchise fees and income

15

32

(52)

44

95

(53)

Revenues from transactions with

franchisees and unconsolidated affiliates

9

17

(47)

24

46

(48)

Other revenues

1

2

(33)

6

6

(1)

Total revenues

2,017

1,801

12

5,628

5,367

5

Costs and Expenses,Net

Company restaurants

Food and paper

607

567

(7)

1,712

1,629

(5)

Payroll and employee benefits

449

425

(5)

1,363

1,214

(12)

Occupancy and other operating expenses

526

520

(1)

1,557

1,500

(4)

Company restaurant expenses

1,582

1,512

(5)

4,632

4,343

(7)

General and administrative expenses

63

62

(1)

191

175

(9)

Franchise expenses

8

16

49

23

47

50

Expenses for transactions with

franchisees and unconsolidated affiliates

8

16

49

22

45

51

Other operating costs and expenses

1

2

5

4

3

(22)

Closures and impairment expenses,net

3

1

(114)

11

7

(40)

Other expenses (income),net

24

(4)

NM

75

(16)

NM

Total costs and expenses,net

1,689

1,605

(5)

4,958

4,604

(8)

Operating Profit

$ 328

$ 196

67

$ 670

$ 763

(12)

Company sales

100.0%

100.0%

100.0%

100.0%

Food and paper

30.5

32.4

1.9

ppts.

30.8

31.2

0.4

ppts.

Payroll and employee benefits

22.5

24.3

1.8

ppts.

24.5

23.3

(1.2)

ppts.

Occupancy and other operating expenses

26.4

29.7

3.3

ppts.

28.1

28.7

0.6

ppts.

Restaurant margin

20.6%

13.6%

7.0

ppts.

16.6%

16.8%

(0.2)

ppts.

Operating margin

16.5%

11.2%

5.3

ppts.

12.1%

14.6%

(2.5)

ppts.

Percentages may not recompute due to rounding. NM refers to not meaningful.

Yum China Holdings,Inc.

Pizza Hut Operating Results

(in US$ million)

(unaudited)

Quarter Ended

% Change

Year to Date Ended

% Change

9/30/2022

9/30/2021

B/(W)

9/30/2022

9/30/2021

B/(W)

Revenues

Company sales

$ 556

$ 546

2

$ 1,541

$ 1,617

(5)

Franchise fees and income

2

2

(9)

6

6

(1)

Revenues from transactions with

franchisees and unconsolidated affiliates

1

2

(33)

3

5

(35)

Other revenues

2

1

158

6

2

NM

Total revenues

561

551

2

1,556

1,630

(4)

Costs and Expenses,Net

Company restaurants

Food and paper

176

173

(2)

481

493

3

Payroll and employee benefits

149

161

7

437

450

3

Occupancy and other operating expenses

156

168

7

452

478

5

Company restaurant expenses

481

502

4

1,370

1,421

4

General and administrative expenses

27

27

1

84

80

(5)

Franchise expenses

1

1

10

3

3

6

Expenses for transactions with

franchisees and unconsolidated affiliates

1

2

30

3

5

34

Other operating costs and expenses

2

1

(199)

5

1

NM

Closures and impairment expenses,net

—

—

(36)

1

3

85

Total costs and expenses,net

512

533

4

1,466

1,513

3

Operating Profit

$ 49

$ 18

159

$ 90

$ 117

(23)

Company sales

100.0%

100.0%

100.0%

100.0%

Food and paper

31.6

31.5

(0.1)

ppts.

31.2

30.5

(0.7)

ppts.

Payroll and employee benefits

26.9

29.5

2.6

ppts.

28.4

27.8

(0.6)

ppts.

Occupancy and other operating expenses

28.1

30.8

2.7

ppts.

29.3

29.5

0.2

ppts.

Restaurant margin

13.4%

8.2%

5.2

ppts.

11.1%

12.2%

(1.1)

ppts.

Operating margin

8.8%

3.5%

5.3

ppts.

5.9%

7.2%

(1.3)

ppts.

Percentages may not recompute due to rounding. NM refers to not meaningful.

Yum China Holdings,Inc.

Condensed Consolidated Balance Sheets

(in US$ million)

9/30/2022

12/31/2021

(Unaudited)

ASSETS

Current Assets

Cash and cash equivalents

$ 1,211

$ 1,136

Short-term investments

2,826

2,860

Accounts receivable,net

66

67

Inventories,net

321

432

Prepaid expenses and other current assets

286

221

Total Current Assets

4,710

4,716

Property,plant and equipment,965

2,251

Operating lease right-of-use assets

2,154

2,612

Goodwill

1,927

2,142

Intangible assets,net

176

272

Investments in unconsolidated affiliates

256

292

Deferred income tax assets

89

106

Other assets

419

832

Total Assets

11,696

13,223

LIABILITIES,REDEEMABLE NONCONTROLLING INTEREST AND EQUITY

Current Liabilities

Accounts payable and other current liabilities

1,992

2,332

Income taxes payable

112

51

Total Current Liabilities

2,104

2,383

Non-current operating lease liabilities

1,862

2,286

Non-current finance lease liabilities

36

40

Deferred income tax liabilities

370

425

Other liabilities

156

167

Total Liabilities

4,528

5,301

Redeemable Noncontrolling Interest

13

14

Equity

Common stock,$0.01 par value; 1,000 million shares authorized; 419 million shares and

449 million shares issued at September 30,2022 and December 31,2021,respectively; 419

million shares and 428 million shares outstanding at September 30,

2021,respectively

4

4

Treasury stock

—

(803)

Additional paid-in capital

4,408

4,695

Retained earnings

2,228

2,892

Accumulated other comprehensive (loss) income

(222)

268

Total Yum China Holdings,Inc. Stockholders' Equity

6,418

7,056

Noncontrolling interests

737

852

Total Equity

7,155

7,908

Total Liabilities,Redeemable Noncontrolling Interest and Equity

$ 11,696

$ 13,223

Yum China Holdings,Inc.

Condensed Consolidated Statements of Cash Flows

(in US$ million)

(unaudited)

Year to Date Ended

9/30/2022

9/30/2021

Cash Flows – Operating Activities

Net income – including noncontrolling interests

$ 420

$ 547

Depreciation and amortization

467

380

Non-cash operating lease cost

333

310

Closures and impairment expenses

20

13

Gain from re-measurement of equity interest upon acquisition

—

(10)

Investment loss

32

43

Equity income from investments in unconsolidated affiliates

—

(38)

Distributions of income received from unconsolidated affiliates

7

21

Deferred income taxes

(7)

17

Share-based compensation expense

31

32

Changes in accounts receivable

(6)

2

Changes in inventories

71

13

Changes in prepaid expenses,other current assets and VAT assets

216

—

Changes in accounts payable and other current liabilities

(19)

82

Changes in income taxes payable

70

(5)

Changes in non-current operating lease liabilities

(299)

(309)

Other,net

(7)

(24)

Net Cash Provided by Operating Activities

1,329

1,074

Cash Flows – Investing Activities

Capital spending

(509)

(482)

Purchases of short-term investments

(4,290)

(4,524)

Purchase of long-term time deposits

—

(25)

Maturities of short-term investments

4,226

4,544

Acquisition of business,net of cash acquired

(23)

—

Acquisition of equity investment

—

(261)

Other,net

3

5

Net Cash Used in Investing Activities

(593)

(743)

Cash Flows – Financing Activities

Repurchase of shares of common stock

(411)

(32)

Cash dividends paid on common stock

(152)

(152)

Dividends paid to noncontrolling interests

(29)

(22)

Contribution from noncontrolling interests

18

—

Payment of acquisition related holdback

(7)

(8)

Other,net

(2)

(6)

Net Cash Used in Financing Activities

(583)

(220)

Effect of Exchange Rates on Cash,Cash Equivalents and Restricted Cash

(78)

9

Net Increase in Cash,Cash Equivalents and Restricted Cash

75

120

Cash,Cash Equivalents,and Restricted Cash - Beginning of Period

1,136

1,158

Cash,and Restricted Cash - End of Period

$ 1,278

In this press release:

The Company provides certain percentage changes 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,franchise and unconsolidated affiliate 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 and unconsolidated affiliate restaurants typically generate ongoing franchise fees for the Company at an average rate of approximately 6% of system sales. Franchise and unconsolidated affiliate 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,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.

Company sales represent revenues from Company-owned restaurants. Company Restaurant profit ("Restaurant profit") is defined as Company sales less expenses incurred directly by our Company-owned restaurants in generating Company sales. Company restaurant margin percentage is defined as Restaurant profit divided by Company sales.

Reconciliation of Reported GAAP Results to Non-GAAP Adjusted 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 non-GAAP 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,which we define 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,certain non-cash expenses,consisting of depreciation and amortization as well as store impairment charges,and Special Items.

The following table set forth the reconciliation of the most directly comparable GAAP financial measures to the non-GAAP adjusted financial measures.

Quarter Ended

Year to Date Ended

9/30/2022

9/30/2021

9/30/2022

9/30/2021

Non-GAAP Reconciliations

Reconciliation of Operating Profit to Adjusted Operating Profit

Operating Profit

$ 316

$ 178

$ 588

$ 753

Special Items,Operating Profit

(2)

10

(5)

3

Adjusted Operating Profit

$ 318

$ 168

$ 593

$ 750

Reconciliation of Net Income to Adjusted Net Income

Net Income – Yum China Holdings,Inc.

$ 206

$ 104

$ 389

$ 515

Special Items,Net Income –Yum China Holdings,Inc.

(2)

8

(5)

1

Adjusted Net Income – Yum China Holdings,Inc.

$ 208

$ 96

$ 394

$ 514

Reconciliation of EPS to Adjusted EPS

Basic Earnings Per Common Share

$ 0.49

$ 0.25

$ 0.92

$ 1.23

Special Items,Basic Earnings Per Common Share

—

0.02

(0.01)

0.01

Adjusted Basic Earnings Per Common Share

$ 0.49

$ 0.23

$ 0.93

$ 1.22

Diluted Earnings Per Common Share

$ 0.49

$ 0.24

$ 0.92

$ 1.19

Special Items,Diluted Earnings Per Common Share

—

0.02

(0.01)

0.01

Adjusted Diluted Earnings Per Common Share

$ 0.49

$ 0.22

$ 0.93

$ 1.18

Reconciliation of Effective Tax Rate to Adjusted Effective Tax Rate

Effective tax rate

29.9%

28.3%

30.1%

27.7%

Impact on effective tax rate as a result of Special Items

0.2%

(0.5)%

0.2%

0.1%

Adjusted effective tax rate

29.7%

28.8%

29.9%

27.6%

Net income,along with the reconciliation to Adjusted EBITDA,is presented below:

Quarter Ended

Year to Date Ended

9/30/2022

9/30/2021

9/30/2022

9/30/2021

Reconciliation of Net Income to Adjusted EBITDA

Net Income – Yum China Holdings,Inc.

$ 206

$ 104

$ 389

$ 515

Net income – noncontrolling interests

21

7

31

32

Equity in net (earnings) losses from equity method investments

2

—

4

—

Income tax provision

97

44

183

210

Interest income,net

(25)

(16)

(51)

(47)

Investment loss

15

39

32

43

Operating Profit

316

178

588

753

Special Items,Operating Profit

2

(10)

5

(3)

Adjusted Operating Profit

318

168

593

750

Depreciation and amortization

150

128

467

380

Store impairment charges

7

4

37

23

Adjusted EBITDA

$ 475

$ 300

$ 1,097

$ 1,153

Details of Special Items are presented below:

Quarter Ended

Year to Date Ended

9/30/2022

9/30/2021

9/30/2022

9/30/2021

Gain from re-measurement of equity interest upon acquisition(1)

$ —

$ 10

$ —

$ 10

Share-based compensation expense for Partner PSU awards(2)

(2)

—

(5)

(7)

Special Items,Operating Profit

(2)

10

(5)

3

Tax effect on Special Items(3)

—

(2)

—

(2)

Special Items,net income – including noncontrolling interests

(2)

8

(5)

1

Special Items,net income – noncontrolling interests

—

—

—

—

Special Items,Inc.

$ (2)

$ 8

$ (5)

$ 1

Weighted-average Diluted Shares Outstanding (in millions)

424

435

426

435

Special Items,Diluted Earnings Per Common Share

$ —

$ 0.02

$ (0.01)

$ 0.01

(1) In the quarters ended September 30,as a result of the consolidation of the Lavazza joint venture,the Company recognized a gain of $10 million from the re-measurement of our previously held equity interest at fair value,which was not allocated to any segment for performance reporting purposes.

(2) 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 to the same employees 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 expense of $2 million and $5 million associated with the Partner PSU Awards for the quarter and year to date ended September 30,and nil and $7 million for the quarter and year to date ended September 30,2021.

(3) The tax expense was determined based upon the nature,as well as the jurisdiction,of each Special Item at the applicable tax rate.

The Company excludes impact from Special Items for the purpose of evaluating performance internally. Special Items are not included in any of our segment results. In addition,the Company provides Adjusted EBITDA because we believe that investors and analysts may find it useful in measuring operating performance without regard to items such as equity in net earnings (losses) from equity method investments,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 analyst may find it useful in measuring operating performance without regard to such non-cash item.

These adjusted 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 adjusted 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 ongoing operations due to their nature.

Unit Count by Brand

KFC

12/31/2021

NewBuilds

Closures

Acquired

9/30/2022

Company-owned

7,437

661

(251)

5

7,852

Franchisees

731

115

(18)

(5)

823

Total

8,168

776

(269)

—

8,675

Pizza Hut

12/31/2021

NewBuilds

Closures

Acquired

9/30/2022

Company-owned

2,452

282

(73)

5

2,666

Franchisees

138

10

(3)

(5)

140

Total

2,590

292

(76)

—

2,806

Others

12/31/2021

NewBuilds

Closures

Acquired

9/30/2022

Company-owned

162

49

(51)

1

161

Franchisees

868

54

(154)

(1)

767

Total

1,030

103

(205)

—

928

Yum China Holdings,Inc.

Segment Results

(in US$ million)

(unaudited)

Quarter Ended 9/30/2022

KFC

Pizza Hut

All Other

Segments

Corporate

and

Unallocated(1)

Elimination

Total

Company sales

$ 1,992

$ 556

$ 13

$ —

$ —

$ 2,561

Franchise fees and income

15

2

5

—

—

22

Revenues from transactions with

franchisees and unconsolidated affiliates(2)

9

1

11

59

—

80

Other revenues

1

2

157

12

(150)

22

Total revenues

$ 2,017

$ 561

$ 186

$ 71

$ (150)

$ 2,685

Company restaurant expenses

1,582

481

18

—

—

2,081

General and administrative expenses

63

27

12

55

—

157

Franchise expenses

8

1

—

—

—

9

Expenses for transactions with

franchisees and unconsolidated affiliates(2)

8

1

9

58

—

76

Other operating costs and expenses

1

2

155

10

(150)

18

Closures and impairment expenses,net

3

—

1

—

—

4

Other expenses,net

24

—

—

—

—

24

Total costs and expenses,689

512

195

123

(150)

2,369

Operating Profit (Loss)

$ 328

$ 49

$ (9)

$ (52)

$ —

$ 316

Quarter Ended 9/30/2021

KFC

Pizza Hut

All Other

Segments

Corporate

and

Unallocated(1)

Elimination

Total

Company sales

$ 1,750

$ 546

$ 14

$ —

$ —

$ 2,310

Franchise fees and income

32

2

6

—

—

40

Revenues from transactions with

franchisees and unconsolidated affiliates(2)

17

2

26

139

—

184

Other revenues

2

1

88

7

(78)

20

Total revenues

$ 1,801

$ 551

$ 134

$ 146

$ (78)

$ 2,554

Company restaurant expenses

1,512

502

14

—

—

2,028

General and administrative expenses

62

27

11

42

—

142

Franchise expenses

16

1

—

—

—

17

Expenses for transactions with

franchisees and unconsolidated affiliates(2)

16

2

24

138

—

180

Other operating costs and expenses

2

1

87

5

(78)

17

Closures and impairment expenses,net

1

—

1

—

—

2

Other (income) expenses,net

(4)

—

3

(9)

—

(10)

Total costs and expenses,605

533

140

176

(78)

2,376

Operating Profit (Loss)

$ 196

$ 18

$ (6)

$ (30)

$ —

$ 178

Year to Date Ended 9/30/2022

KFC

Pizza Hut

All Other

Segments

Corporate

and

Unallocated(1)

Elimination

Total

Company sales

$ 5,554

$ 1,541

$ 40

$ —

$ —

$ 7,135

Franchise fees and income

44

6

15

—

—

65

Revenues from transactions with

franchisees and unconsolidated affiliates(2)

24

3

29

163

—

219

Other revenues

6

6

407

31

(388)

62

Total revenues

$ 5,628

$ 1,556

$ 491

$ 194

$ (388)

$ 7,481

Company restaurant expenses

4,632

1,370

55

—

2

6,059

General and administrative expenses

191

84

36

138

—

449

Franchise expenses

23

3

1

—

—

27

Expenses for transactions with

franchisees and unconsolidated affiliates(2)

22

3

24

163

—

212

Other operating costs and expenses

4

5

406

28

(390)

53

Closures and impairment expenses,net

11

1

8

—

—

20

Other expenses (income),net

75

—

—

(2)

—

73

Total costs and expenses,net

4,958

1,466

530

327

(388)

6,893

Operating Profit (Loss)

$ 670

$ 90

$ (39)

$ (133)

$ —

$ 588

Year to Date Ended 9/30/2021

KFC

Pizza Hut

All Other

Segments

Corporate

and

Unallocated(1)

Elimination

Total

Company sales

$ 5,220

$ 1,617

$ 37

$ —

$ —

$ 6,874

Franchise fees and income

95

6

19

—

—

120

Revenues from transactions with

franchisees and unconsolidated affiliates(2)

46

5

75

393

—

519

Other revenues

6

2

187

11

(157)

49

Total revenues

$ 5,367

$ 1,630

$ 318

$ 404

$ (157)

$ 7,562

Company restaurant expenses

4,343

1,421

40

—

(1)

5,803

General and administrative expenses

175

80

30

123

—

408

Franchise expenses

47

3

—

—

—

50

Expenses for transactions with

franchisees and unconsolidated affiliates(2)

45

5

69

390

—

509

Other operating costs and expenses

3

1

183

10

(156)

41

Closures and impairment expenses,net

7

3

3

—

—

13

Other (income) expenses,net

(16)

—

8

(7)

—

(15)

Total costs and expenses,604

1,513

333

516

(157)

6,809

Operating Profit (Loss)

$ 763

$ 117

$ (15)

$ (112)

$ —

$ 753

The 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 included revenues and associated expenses of transactions with franchisees and unconsolidated affiliates 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 and unconsolidated affiliates that

operate our concepts.