Good morning, my name is Regina and I will be your conference operator today. At this time, I would like to welcome everyone to the Yum! Brands' First Quarter 2017 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. I would now like to turn the conference over to Mr. Keith Siegner, Vice President, Investor Relations, Corporate Strategy and Treasurer. Sir, you may begin. Keith R. Siegner - Yum! Brands, Inc.: Thank you, Regina. Good morning, everyone, and thank you for joining us. On our call today are Greg Creed, our CEO; and David Gibbs, our President and CFO. Following remarks from Greg and David, we will open the call to questions. Before we get started, I'd like to remind you that this conference call includes forward-looking statements. Forward-looking statements are subject to future events and uncertainties that could cause our actual results to differ materially from those statements. All forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our filings with the SEC. In addition, please refer to the Investor section of the Yum! Brands website, www.Yum.com, to find disclosures and reconciliations of non-GAAP financial measures that may be used on today's call. Please note the following regarding our basis of presentation for today's call. System sales results exclude the impact of foreign currency. Core operating profit growth figures exclude the impact of foreign currency and special items. Our 2016 results have been restated to adjust for two items. First, as we've previously disclosed, we changed our fiscal year to better align our global reporting calendar. Second, restated results reflect the impact of new accounting standards for pension cost recognition, which…

Our first question comes from the line of John Glass with Morgan Stanley. Please go ahead. Greg Creed - Yum! Brands, Inc.: Hi, John. John Glass - Morgan Stanley & Co. LLC: Hi, can you hear me okay? Greg Creed - Yum! Brands, Inc.: Hi, John, how are you? David W. Gibbs - Yum! Brands, Inc.: Good morning. John Glass - Morgan Stanley & Co. LLC: Good. I'm fine, thank you. First, can you just comment, David and Greg, you commented about your new Development Agreements with franchisees and that's key as you refranchise and accelerate growth. If you think about your refranchising goals over the next couple of years, how much incremental development, if you were to successfully attach those agreements to all of them, how much of that would incrementally expand unit growth versus the 3% we saw this quarter? Would it get you to 5%, for example, or is that just part of the solution to getting to that 7% system goal and some component of that's unit growth? David W. Gibbs - Yum! Brands, Inc.: Yeah, I think, as you described, John, it's really a big part of the solution to getting to incremental development. As we've talked about before, we're not going to throw out new targets for development, but the Development Agreements that we're signing from refranchising this time around with our refranchising are really quite incremental versus the previous efforts of refranchising, where we didn't undertake these kinds of Development Agreements. John Glass - Morgan Stanley & Co. LLC: And then as a follow-up, just on the Pizza Hut agreement, can you, first of all, just make clear what it is going toward? For example, are you funding some asset relocations in the United States? How much of that is a component versus…

Your next question comes from the line of Matt McGinley with Evercore ISI. Please go ahead.

Thanks. I have a follow-up on Pizza Hut. At Pizza Hut in the U.S., there's a big picture issue of kind of having these restaurants in the old format, which sounds like part of this plan is to fix some of that. But what are the near-term fixes or solutions that you can address to get in place so that you can revert the comps back to a more positive state over the course of this year? I know we're kind of looking for a home run solution over time, but what are the, I guess, singles and doubles that you can hit over the course of 2017? Greg Creed - Yum! Brands, Inc.: Well, I think what we've got to do is make sure the brand has what I call a delivery digital-centric focus. Obviously, there will continue to be active upgrades. It was interesting. Dave and I were out and touring a number of markets the last couple of weeks looking at the Zinger, looking at some asset actions that we've taken at Pizza Hut, and it was very clear. We were in one place and we've shut down an old Red Roof about half a mile down the road from what is now a fast-casual Delco end cap and I think sales – I may be wrong, have gone something like $14,000 to $29,000, or something like that. So, I think the assets will change. I think making sure that when we advertise a price point, we've got that consistently on air across the country, having the franchisees align behind that. In the past, we've not had necessarily great commitment, so I think part of it is making sure that when we play a value play, that every customer across the whole country gets the benefit of that. I think those are just some of the advantages that you'll see. We don't want to get into too much of the messaging that's going to occur, because obviously, this is a very cutthroat and competitive category. And I really don't want to get into the messages we're going to put out there. I just want to say that I feel very good about the messages we've got coming. I think they will resonate with customers. They will reinforce a delivery, sort of digital-centric nature, and the customers will see it as a more consistent expression across the country.

Okay. Thank you. David W. Gibbs - Yum! Brands, Inc.: On the asset front, you asked about the assets. We have, as we've mentioned it before, we've started ramping up the pace of remodeling over a year ago as part of another agreement with our franchisees. That agreement will be modified but continue over the next several years and you'll continue to see us accelerate the pace of fixing our stores. There will be incentives for what Greg was referring to, which is the fast-casual delco model, which we're quite excited about, given the sales bump we get from that versus other asset actions. So, I think, as Greg said, there's a lot of competitive information here that we can't reveal, but there is a plan along every critical front in the battle in the pizza category, whether it be operations, technology, or assets or advertising.

Okay. Thank you very much. David W. Gibbs - Yum! Brands, Inc.: Thanks, Matt.

Your next question comes from the line of Dennis Geiger with UBS. Please go ahead.

Great. Thanks. Greg, you've talked in the past about how an increased focus on sales can have a real notable impact on results as you complete the refranchising, as you don't have to focus on costs within the four walls as much. Granted, we're not quite there yet on the refranchising, but is the organization already preparing for that greater top-line focus? And how important of a factor do you think it was in what you saw at Taco Bell and KFC this quarter and in recent quarters? Greg Creed - Yum! Brands, Inc.: Thanks, Dennis. As I said in my prepared remarks, in March, we had a Global Leadership Summit. We took the top 200 leaders from around the world. And I think to keep it simple, we discussed the sort of the what and the why. So, we were very clear about the what, which is we're going to be more focused, more franchised, more efficient, and that we were going to accelerate growth by thinking differently, acting differently, and leading differently. David also gave a great example of why we need to do that from a financial point of view. And I came away incredibly excited that the top 200 leaders in the organization are rallying around the fact that we can get more growth out of this business. And so, it was great to obviously see the Taco Bell numbers are simply stunning. I mean, 8% same-store sales growth, 5% coming from transactions. Even the U.S. KFC business, which was up 2%, but it was 2% transaction growth. And I like sales that come predominantly from transaction growth rather than from pricing. And so, I'm very encouraged by the early start. We have a long way to go, but I do believe that we can consistently grow system sales through a combination of focus around same-store sales and focus around net new units.

Great. Thanks.

Your next question comes from the line of Andrew Charles with Cowen & Company. Please go ahead. Andrew Charles - Cowen & Co. LLC: Great. Thanks, guys, had two questions on Taco Bell. The comps are, obviously, stellar this quarter, but wanted to ask about the 80 bps of restaurant margin expansion. It just didn't seem to fully reflect the strong comps. And I know you guys did some value promotions, which were more margin-dilutive, but I would have figured that would have been offset by some of the premium innovation you did around Naked Chicken and the Triple Double. Greg Creed - Yum! Brands, Inc.: Yeah, there was some cost of sales and labor inflation in the numbers, but offset by better sales. So, I think the good news is we did get margin expansion. Last year, cost of sales at Taco Bell ran negative. They'll probably run slightly positive, around 2%, this year. Now that's coming off, I think, minus about mid-single digits last year. So, there was some inflation in labor. There was some inflation in cost of sales, but the good news was more than offset by the strength in the top-line. And, as I said, continuing to bring innovation to the marketplace, continue to be strong on value, as David said, improving operations. Again, we have been out visiting restaurants and the Taco Bells we visited, I think, were all A's. I mean, we just saw great execution. These were blind visits. No one was expecting us. Mike Grams is doing a great job improving the operating performance there, as well. So, it's world-class advertising, breakthrough innovation, great value, great operations, all of that offsetting what was some underlying labor and cost of goods inflation in the quarter. Andrew Charles - Cowen & Co. LLC: And my follow-up question was just on the fluidity of the marketing calendar. Obviously, you guys have done a nice job of balancing premium, like Naked Chicken with some value offers. Should we expect that to continue or do you remain fluid, just given the operating environment that you can lean more into one factor or the other, depending on the environment and competitive actions? Greg Creed - Yum! Brands, Inc.: I mean, the great thing is Taco Bell's got a calendar for the next couple of years, so as things happen in the marketplace – I mean, let's not kid ourselves. You'll see more "naked" products. We'd be crazy not to. But you'll always see Taco Bell doing price value. You'll see them doing breakfast. We've got good transaction growth out of breakfast again. Two year comps, I think, were like 12% on transaction growth at breakfast. So, they're doing everything right. And they have a pipeline that if anything happened, they could react to flexibly, but right now, they're executing their strategy and they're doing an incredible job executing it really well. Andrew Charles - Cowen & Co. LLC: Thank you.

Your next question comes from the line of Jason West with Credit Suisse. Please go ahead. Jason West - Credit Suisse Securities (USA) LLC: Yeah, thanks. I think you guys put up 9% core EBIT growth in the quarter and you're guiding – I think the equivalent for the year is mid-single digits on that number. I know you're lapping the 53rd week in 4Q, but is there any other reason why the business will slow a bit from here? David W. Gibbs - Yum! Brands, Inc.: Yeah, one of the other headwinds that we've highlighted is just the timing mismatch between when we're cutting G&A and getting savings versus the loss of operating profit from refranchising. I think on the last call, I highlighted that that worked in our favor last year. This quarter, those two things were about neutral. So, you see us performing at about our base underlying rate, since we don't have a 53rd week this quarter and we don't have that issue. But, as the year progresses, that will be the headwind that we described entering the year. Jason West - Credit Suisse Securities (USA) LLC: Okay, got it. And then, just a follow-up on Pizza Hut, I guess looking at the comp trends there, obviously quite a bit different from the two big competitors in the U.S. As you guys dig into those comps and look at your dine-in business versus the kind of core delivery business, is that at least a lot closer to where competitors are, just on the delivery side or are you really sort of similar on both sides of the business, because I know that dine-in has been a big overhang on that story? Greg Creed - Yum! Brands, Inc.: Yeah, we don't want to get into the specifics, but our delivery performance is better than our dine-in performance, obviously, but I think the key thing is we have a long way to go. There's a lot of difference between where we are and where we need to be. And I'm really excited that this Pizza Hut Acceleration Agreement will help us get there. It was the catalyst for change at KFC. I mean, if I step back – and I think most of you, when I took over this job, thought we'd take the under on a KFC U.S. turnaround. Hopefully, we've proven that we turned that around. And I'm equally confident that with this Pizza Hut Acceleration Agreement in place, we can do the same thing for Pizza Hut as we've done for KFC. Jason West - Credit Suisse Securities (USA) LLC: Okay. Thanks.

Your next question comes from the line of John Ivankoe with JPMorgan. Please go ahead.

Hi, great. I'd like to stay on Pizza Hut, if I may. I think you ended 2016 with around 7,600 units. And that's versus Domino's at around 5,400 or so. So just in terms of looking at the number of units that you have, what should it be, I mean, if you were to kind of redraw the entire map of the United States and you wanted to have delivery and carry-out focused assets and maximize return at those assets, as part of the Pizza Hut restructuring or significant reduction in that unit count to get to kind of redraw the United States as it stands today? David W. Gibbs - Yum! Brands, Inc.: Yeah, John, this is David. Just one point on the unit count for clarity; some of the 7,600 units that we have are licensed units versus the 5,400 that Domino's owns. (39:34)

Thank you. Yes, and that's probably not totally fair of me to include that, but I don't have that number in front of me. What is that? David W. Gibbs - Yum! Brands, Inc.: Our traditional unit count is more in the 6,300 to 6,400 unit range, but your question about the future asset base of the brand is a good one. I think as we pointed out in last investor discussions, new unit development for Pizza Hut still generates good returns. It's one of our better returning programs that we have because of the small box cost. We're excited about some of the new vehicles we've developed with the fast-casual Delco. And we certainly don't think that Pizza Hut should be shrinking in the United States. We think it can get back to being a growth concept. And we've market mapped out further opportunities to grow our brand in the United States.

Okay, very interesting. And by not shrinking, could there just be the replacement of one legacy Red Roof that's closed, but just replaced by a Delco nearby? I mean, is that part of the overall strategy, if you don't want to actually lose some presentation in the market? David W. Gibbs - Yum! Brands, Inc.: Yeah, absolutely. I think that the big part of the strategy is relocating out of many of those Red Roofs, which not only are the assets not in great shape, but oftentimes, they're in the wrong part of the trade area. Greg referenced that on our trip a couple of weeks ago, we visited one of these stores where the trade area had clearly moved away from our Red Roof, where we were doing half the volume that we eventually ended up doing just by moving a half mile down the road to where more of the activity is. Now, it's not to say that there also won't, over the short-term, be a little bit of churn in the asset base. And you'll see some closures and some openings, so I can't predict the timing of the net new units, probably, over the next year or so. But I can say that the Pizza Hut team and we feel confident that there's growth opportunities for the Pizza Hut brand in the U.S., both in growing the top-line of our existing units, relocating them to more powerful assets, and penetrating new trade areas. Greg Creed - Yum! Brands, Inc.: Yeah, I think there's areas where we're not very well penetrated. The Northeast is not a highly-penetrated Pizza Hut market. I think talking to new franchisees signing development agreements in those parts of the country, I think will be a positive to the brand. And as the brand builds its top-line momentum, which we believe we will deliver, I think that will only make people even more encouraged. The good thing is we're not short of people who want to sign on to be Pizza Hut franchisees. The good news is that we've got new franchisees who believe in the story that we're selling, who know more of the details that we can't share, are signing up. And I think that's encouraging and an encouraging sign for us, as well.

And, if I may, you quantified your investment over 2017 and 2018 for the Pizza Hut brand in the U.S., the $130 million. Could you put some context around what the incremental investment is from the franchise community? Is it a similar number? Is it many multiples of that number? Just so we get a sense of how much money is being put across the entire brand, not just from your wallet in 2017 and 2018. David W. Gibbs - Yum! Brands, Inc.: Yeah, we're not going to share specifics on that, but what I can say is they'll be investing in incremental media. They'll be investing along with us in incremental technology investments. So, this is not as if it's a one-sided investment. That's why we're all, obviously, so excited about the agreement. We all know that the partnership between the brand and the franchisees has to be right to get a business to grow. That's what we have at KFC U.S. And I think this is good evidence that the Pizza Hut franchisees and the Pizza Hut brand leadership are working in concert to bring the brand forward.

Thank you. David W. Gibbs - Yum! Brands, Inc.: Thanks, John.

Your next question comes from the line of Karen Holthouse with Goldman Sachs. Please go ahead. Karen Holthouse - Goldman Sachs & Co.: Hey. Yet another Pizza Hut question for the day, just looking at the reported company store margins, are those reflective of what the system as a whole is seeing or would there be a reason that there is a mix difference between your owned units and franchisees? David W. Gibbs - Yum! Brands, Inc.: Yeah, I think given that Pizza Hut has light company ownership, the margins can be a little misleading. The margins in the U.S. are actually better than the margins shown there. So, the margins are somewhat pulled down by international markets with new equity stores and preopening expenses and things like that. And obviously, off of a very light number, I wouldn't read too much in it. Obviously, margins are down in the U.S. business because of the decline in sales, that's certain. But, yeah, I think the overall Pizza Hut business still has, for our franchise partners and for us, has solid margins, which we certainly believe we can grow. Karen Holthouse - Goldman Sachs & Co.: And then on the development side of things, when you're working with franchisees on attaching new unit development to refranchising and what not, what sort of return hurdles do you think they're looking for in the U.S. to be incentivized to build? David W. Gibbs - Yum! Brands, Inc.: I think it really varies by franchisee in concept, but certainly the development trade areas that we've identified as part of these agreements are ones that we think meet the hurdle requirements. And for our brands, that probably ranges from cash paybacks from three to eight years, something like that. Karen Holthouse - Goldman Sachs & Co.: Great. Thank you.

Your next question comes from the line of Brian Bittner with Oppenheimer. Please go ahead. Brian Bittner - Oppenheimer & Co., Inc.: Thanks, good morning, guys. Are you guys still confident in your journey to achieve the $3.75 of EPS by 2019? I didn't hear that in your prepared remarks. And if you are, do you still think you need an average of 5% system-wide sales growth to get there, or does it need to be more towards the 7% that you're targeting? David W. Gibbs - Yum! Brands, Inc.: Yeah, I think we are confident in our journey towards $3.75 that you mentioned. And I think I mentioned in my prepared remarks that all of our transformation initiatives are on track, with encouraging results. We've never actually thrown out a specific sales number that underlies the $3.75, other than saying that it's more like our historical rate of growth. So, I think we're excited by some of the things we're seeing at Taco Bell and the Transformation Agreement and the ability over the next few years for our sales to accelerate for all of the reasons we've talked about. But as I often point out, a lot of the stuff in getting to the $3.75 is completely under our control, share buybacks, refranchisings... Greg Creed - Yum! Brands, Inc.: G&A. David W. Gibbs - Yum! Brands, Inc.: G&A cuts. All of those initiatives we feel really good about. Brian Bittner - Oppenheimer & Co., Inc.: Okay. And Taco Bell doesn't seem to be getting too much attention today. I mean, 8% comps. When you look at that quarter, how much of that 5% traffic do you think was driven by kind of hot LTO's or how much do you think was more kind of sustained demand growth that the…

Your next question comes from the line of Jeff Farmer with Wells Fargo. Please go ahead.

Thank you. On your efforts to accelerate system unit growth, can you provide more color on the international markets where you've seen that early traction, as well as some of the strategies that are driving that developmental acceleration? Again, just trying to get a better understanding of some of the early successes you've had and the drivers of that early success. Greg Creed - Yum! Brands, Inc.: Jeff, was this regarding Pizza Hut? I just missed the first part of your question.

Really, across all brands, it's development in terms of just accelerating development internationally, where you've gained traction, and it doesn't have to be about Pizza Hut. I'd love it if it was Pizza Hut, but across either Pizza Hut or KFC. Greg Creed - Yum! Brands, Inc.: Yeah, I think we're seeing, across the board, good net new unit growth on both KFC and on Pizza Hut. On the Pizza Hut side, we measure 13 distinct markets. I think 6 are developing and 7 have developed. And of those, 12 of the 13 had system sales growth in the quarter, the only exception being the U.S. So, I do believe we're seeing strong net new unit growth. Internationally, we delivered 6% net new unit growth in the quarter, which was a strong number, and I think KFC also delivered 4% net new unit growth. So, it's quite strong. I think, as David said, what we love is we're keeping control of the asset-mapping process. We're not giving that to the franchisees. So we're out there, we have mapped the world. We know where there's opportunities. And I think, as David said, we know that net new units is something we can control as towards our growth targets. And because the business is much more focused, as I said earlier, we're focused on four things, distinct relevant brands, unmatched franchise operating capability, bold asset development, and culture and talent. And I think because the organization is more focused, you are seeing us make progress on a broader scale than we had probably in the past.

Let me just ask it one more way, so any new strategies or learnings coming out of that global leadership conference in terms of how to accelerate development with your partners? David W. Gibbs - Yum! Brands, Inc.: Look, yeah, I think a big part of this is changing our mindset on development and really starting to think about every market, emerging and developed, as a great opportunity for us, because we've seen even in developed markets that our brands can get to much greater penetration. I mean, I mentioned in my prepared remarks on Pizza Hut, our master franchisee down in Australia just took, I think, close to 50 Eagle Boys restaurants and converted them to Pizza Huts. That's great growth in the developed market. At the same time, the Pizza Hut team is out striking a deal in Ethiopia to expand into a new country. So, you're seeing that across the board. And the Global Leadership Summit that Greg talked about was a great opportunity to really galvanize the team on this deal-making and growth mindset. And you should continue to see things like Eagle Boys and Ethiopia and new market entry and new deals come across the wire as we start to ramp up the pace of development. Greg Creed - Yum! Brands, Inc.: I mean, we have more Development Agreements for Taco Bell internationally than we have Taco Bells on the ground internationally. We've never been in that situation. We don't have 400 Taco Bells on the ground, but we have 400 Development Agreements, 100 with China. So, I'm with David. I think it's about being focused. We are really focused on distinct relevant brands. Why? Because that drives same-store sales. Unmatched franchise operating capability. Why? That drives same-store sales. Bold asset development. Why? Because that drives net new units. Focusing on those three things will drive system sales. And I think everyone came away from the global summit – the word is focused. That's what I'm going to stick with, and I honestly believe that this focus is going to pay off for us, for our shareholders, for our franchisees, and employees.

Helpful. Thank you. Greg Creed - Yum! Brands, Inc.: Thanks, Jeff.

Your next question comes from the line of Sara Senatore with Bernstein. Please go ahead. Sara Harkavy Senatore - Sanford C. Bernstein & Co. LLC: Thanks very much. I have two questions, one on KFC and then a follow-up on Pizza Hut. So on KFC, I know you had strong transaction growth in the U.S. and ahead of the industry, but globally, if I look at your comps of 2%, they were perhaps a little lower than what maybe your large QSR competitor is doing. So just trying to understand whether that should accelerate; you mentioned delivery, if that's the real driver going forward or if there are other places where maybe you can get to something closer to like a 3% comp, which I think would be kind of at the high end of your 2% to 3% for this year expectation. And then I wanted to ask about Pizza Hut and value. And, in particular, you mentioned messaging better around price point. And I'm trying to understand if that's what you did last year so successfully. So, you're lapping the 5% comp last year with the $5 Cravings menu. Is that what drove it? And if so, isn't that a lever that you can pull pretty quickly while you're undertaking all these longer-term digital initiatives? Thanks. Greg Creed - Yum! Brands, Inc.: Sure, okay, so to take the KFC one first. I think, as I said in the call, in places like Russia, Central and Eastern Europe, Australia, New Zealand, Latin America, we had more than 6% same-store sales growth. Now, as we said, it was offset by businesses in France and the Middle East. I can assure you my discussions with Roger Eaton are all about how do we use repeatable model to drive underlying same-store sales…

Our final question will come from the line of David Tarantino with Baird. Please go ahead. David E. Tarantino - Robert W. Baird & Co., Inc.: Hi, good morning. Just a handful of clarification questions on the guidance for this year, so, David, I guess, first, what are you thinking, as you sit here today, about the FX impact on the year? Just so we can get an idea of what the reported operating income might look like, including the FX headwind. David W. Gibbs - Yum! Brands, Inc.: Yeah, going into the year, I think our expectations was around $25 million or so. First quarter came in a little bit lighter than that run rate, and forward rates would indicate something along those lines. David E. Tarantino - Robert W. Baird & Co., Inc.: Around the $25 million or lighter than the $25 million? David W. Gibbs - Yum! Brands, Inc.: Well, like I said, we were a little bit lighter in the first quarter, but I don't think we're that precise on predicting FX, but $25 million is probably a good number to use. David E. Tarantino - Robert W. Baird & Co., Inc.: Okay, great. That's helpful. And then, I don't think you confirmed your comps guidance for the year, but can you please confirm that it is still 2% to 3% is what you're thinking globally? And then, if that's the case, I guess, how are you thinking about the composition of that across the segments? Are you thinking – you obviously delivered that in the first quarter, but with a wide range of outcomes, with Taco Bell very strong and Pizza Hut weak. Is that kind of how we should expect to see it for the rest of the year or how are you thinking…

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.