Good morning. My name is Kim and I will be your conference operator today. At this time, I would like to welcome, everyone, to the Yum! Brands Second Quarter 2017 Earnings Conference Call. Thank you. Keith Siegner, Vice President, Investor Relations, Corporate Strategy and Treasurer, you may begin your conference. Keith R. Siegner - Yum! Brands, Inc.: Thank you, operator. 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'll 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 these statements. All forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included with our filings with the SEC. In addition, please refer to the Investors 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 on 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. We are broadcasting this conference call via our website. This call is also being recorded and will be available for playback. Please be advised that if you ask a question, it will be included in both our live conference and in any future use of the recording. We would like to make you aware of the following changes in upcoming Yum! Investor Events. Disclosures pertaining to outstanding debt in our Restricted Group capital structure…

Our first question comes from Dennis Geiger with UBS. Your line is open.

Great. Thanks very much. Lots of exciting developments at Pizza Hut, clearly, lots of good color there. But as far as key priorities go, maybe you could just talk a little bit more about the technology, the operations, and the asset pieces, what you kind of see as the easiest to address, where the biggest opportunities lie. And then just building on that, on the asset piece specifically, any additional color you can provide on the Pizza Hut Delco units? I think it's probably about 20 that you've got open at this point only. But anything more on the economics, the feedback, et cetera? Thank you. David W. Gibbs - Yum! Brands, Inc.: Well, I'll start with the piece on the assets. I think you're referring to the Fast Casual Delco model that we've been rolling out over the last few years... with pretty good success.

Yes. David W. Gibbs - Yum! Brands, Inc.: The good news is that we have offered an incentive for our franchisees to accelerate the Fast Casual Delco model and we've seen a number of franchisees sign up. In fact, we were hit with 100 submissions to participate in expanding the test. So I think the Fast Casual Delco initiative is off to a good start. That's not just an initiative, by the way, that we're doing in the United States, that is also a big part of our international growth strategy. Greg Creed - Yum! Brands, Inc.: Yeah. We actually shared that with the International Partners Council when we were with them in London probably three weeks ago, and I think there was true excitement about Fast Casual Delco as a global opportunity for Pizza Hut. David W. Gibbs - Yum! Brands, Inc.: Yeah. And then on the other items that you asked about, Dennis, like technology, assets, operations, obviously all very critical, all part of the overall Transformation Agreement with the U.S. franchisees. As one piece of evidence of the progress we're making on technology, you heard Greg reference the loyalty program that we just launched. You can expect to see those kinds of improvements to our technology platforms coming out but obviously we are not going to share much in advance of revealing them to the consumers. And then on the operations front, I know the team – you've also seen our messaging start to reference hot and fresh, and the way that we're going to make sure that our consumers get the absolute best product. We know we have the best product in the category when we deliver it hot and fresh. We're doubling down and making sure that we have the capability with drivers and equipment to make that happen on a consistent basis.

Thanks, Dave.

Your next question comes from the line of John Glass from Morgan Stanley. Your line is open. John Glass - Morgan Stanley & Co. LLC: Thanks very much. My first question just has to do with your system sales goal of 7%. You got close to or closer to it this quarter. And if you look at just the sum of comps and units, it's actually 5%, maybe that's rounding. But is there a new store productivity story here either in the new stores you're opening by brand around the world or market mixes that may actually help you get to the system sales goal even if the sum total of the two growth numbers that we add up typically don't add up to 7%? David W. Gibbs - Yum! Brands, Inc.: It's a good question, John. I wouldn't read too much into it. For example, the same-store sales growth for the quarter of 2% was a very strong 2%. So there is some rounding that's happening there and a little bit of mix issues, a little bit of timing of when new units open. So when you put it all together, yes, it rounded up, and we like that but there's a number of different miscellaneous factors that contributed to it. Greg Creed - Yum! Brands, Inc.: I think there's also, as we have been – David and I've been around, and I've been in Brazil, UK, Poland, Japan, Hong Kong in the last quarter. I think it's a couple of things. One is the small box concept is definitely taking – getting traction, and that small box is allowing us to penetrate places like in Africa, into places we would not have been able to traditionally penetrate with our existing sort of asset base. And then, I think,…

Your next question comes from the line of Matt McGinley from Evercore ISI. Your line is open.

Good morning. I have a question on the franchise revenue versus the franchise expense. As we would expect, as you sell off the restaurants, your franchise revenue is going up. But when we exclude the Pizza Hut transformation expense, it looks like the franchise expenses are actually dropping. Was that $9 million favorability reference in KFC in that line item there or are you just finding more favorability in franchise expense in addition to the ongoing G&A reductions? David W. Gibbs - Yum! Brands, Inc.: I think that there's mostly some timing issues that would contribute to that. The $9 million that – we called out the $9 million on the KFC line just because KFC had a very strong quarter this year and I wanted to make sure everybody understood that a small portion of it was more one-time related to U.S. fees that we collected earlier than normal that contributed to an outsized quarter when it came to U.S. fee – U.S. KFC franchisee fee income. That was close to $6 million. But I wouldn't read too much into the second part of your question.

Okay. And on the CapEx for the year, you're running well below the $300 million to $350 million that you had discussed earlier in the year and you're obviously doing more refranchising in the back half. Is this kind of the run rate we should expect for the rest of the year? Do you have a, I guess, corporate capital plan that will require you to have a step up in CapEx in the back half? David W. Gibbs - Yum! Brands, Inc.: I don't think we're going to – we're not revising our guidance on CapEx spending. Obviously, we're laser-focused on getting the overall rate down to $100 million by 2019. In terms of how the spending is going this year, it's sort of in line with the targeted number. Maybe there's a little upside there, but I wouldn't read too much into that either.

Okay. Thank you.

Your next question comes from the line of John Ivankoe from JPMorgan. Your line is open.

Hi. Greg. As part of the 7% system-wide sales growth longer term, there's meant to be a step up in unit development, which I think is 4% to 5% longer term. So could you put the current 3% into the context of that 4% to 5%? Do you see a step up by brand in 2018 or 2019 in terms of new units? Or, I guess, just as important for other size? Or do you think we're going to see a particular slowing in... (33:27 – 33:31) Greg Creed - Yum! Brands, Inc.: Sorry, your questions – you're breaking up. We cannot get the question. David W. Gibbs - Yum! Brands, Inc.: Yeah. I don't know if we lost him or not, but John, just to address the point you made on unit development, we haven't released any specific targets for unit development. So you referenced 4% to 5%. Certainly, we'd like to get to levels like that but we've been focused on the overall mission of getting to 7% in system sales growth over the long term. A big part of that will be increasing our development because we know when we plant that development pipeline over the long term we can count on it to deliver that growth every single year. Yeah, so and you should be looking for us to continue to be ramping up development in the years to come, but we haven't released any future guidance on that.

Okay. And my apologies for the transcript. I think I just assumed 2% to 3% comp and the rest from unit development. But can I ask if the connection is better right now? Do you see step-ups in 2018 or 2019 either in terms of new unit openings or in closures? And if you could just give us a little more color or confidence that even if we think about 2018, you could get better net results than 2017? David W. Gibbs - Yum! Brands, Inc.: Yeah. I think one of the features of the Pizza Hut Transformation Agreement is actually a limitation on the U.S. stores, making it harder to close stores in the U.S. So we should get a benefit from that in 2018 if you're thinking about broader issues that may be working in our favor. But beyond that, I think we've said this on many calls, we got our management team together in the spring. The mission in this company has been to hammer home this focus on development. Bold restaurant development is one of our four key growth drivers. And I think we've seen a mindset shift all around the country, all around the world, that is really contributing to much more focus on development than we've ever had. Greg mentioned different formats. There's just a lot of good stuff going on in development. Now it takes time to plant a development pipeline and get it to grow, but we do expect to see an increase in development in 2018. Greg Creed - Yum! Brands, Inc.: Yeah. I mean, if you think about it, we've been closing KFC U.S. stores for a number of years, for quite a number of years. Hopefully, with the now 12th consecutive quarter of performance at KFC, there will be some change there as well. I think, as David said, the development agreements sort of go with refranchising. So as the refranchising occurs, the development agreements kick in. And then obviously these new units, small box new formats Cantinas, the 38-square-meter we saw in Brazil, I think all of these provide us opportunities to penetrate and continue to grow our net new unit.

Thank you. Keith R. Siegner - Yum! Brands, Inc.: Next question, please?

Your next question comes from the line of Jeff Farmer from Wells Fargo. Your line is open.

Thanks. I've got one more on the Pizza Hut Transformation Agreement in the U.S. Can you guys provide at least some base level numbers for where the concept is right now in terms of things like delivery as a percent of sales mix or digital orders as a percent of sales mix? Just give us some context as to where you're beginning this journey. And it will make it easier for us to track the progress moving forward. David W. Gibbs - Yum! Brands, Inc.: We won't provide very specific numbers. But our digital mix is around 50%. Even though we have more than half of our stores in the U.S., our dine-in stores, our business is very heavily reliant on carryout and delivery. I don't know. Maybe 10% to 15% of sales are dine-in, and the rest of the sales, just in broad terms, are split between carryout and delivery.

Okay. Thank you.

Your next question comes from the line of David Palmer from RBC Capital Markets. Your line is open.

Thank you. Just to follow up on John's question on unit development, maybe just a qualitative answer on this would be helpful. You mentioned Brazil, you mentioned the stabilization of Pizza Hut U.S., but if you were to think about your global business and looking at your pipelines of franchisees and licensees, where do you anticipate the biggest wins from a development standpoint as you look out one and two years? And then also on delivery, globally you mentioned that that's going to be an important sales layer. I know you've talked about that in the past. How significant can that be? And when do you see wins from that accelerating? Thanks. Greg Creed - Yum! Brands, Inc.: Well, I think there's obvious markets like China where we'll continue to see a lot of new unit growth. I think as we said, Taco Bell focusing on four big markets, China, India, Brazil, and Canada. As we said, we've opened our first freestanding drive-thru in Canada, the second one is under construction. In that one market, we think we can open six or seven. We've got U.S. franchisees for Taco Bell now sort of doing development in Canada. They're now doing development in Korea. So I think that where we've seen growth, which will be Asia, Africa, Central and Eastern Europe, we've got a lot of these locked into long-term development agreements. As David and I said, we were with the Pizza Hut franchisees last week. Have a new franchisee for Pizza Hut in Japan. Very impressed that he has got a real growth mindset, and I think we can accelerate opportunities in Japan as well. So I see it on that side. On delivery, as we said in the prepared remarks, about 20,000 restaurants currently deliver. Obviously mostly Pizza Huts,…

All right, thanks. Keith R. Siegner - Yum! Brands, Inc.: Thank you.

Your next question comes from the line of Sara Senatore from Bernstein. Your line is open. Sara Harkavy Senatore - Sanford C. Bernstein & Co. LLC: Thank you. I have just a couple of follow-up questions, if I may. The first is on again Pizza Hut, and I think, Greg, you said it wouldn't be kind of an immediate turnaround. Results won't show up overnight. But I think in the past we've seen that Pizza Hut can do things to drive sales in the short term in a pretty meaningful way, in particular around value messaging. So maybe you could just share a little bit about what you're doing in 3Q in terms of marketing and price points. And a related question is what are you seeing in the demand environment in the U.S. and the competitive environment? I think we've heard a lot about heavy discounting by hamburger restaurants in particular. I was wondering if you're seeing that have an impact on any of your brands, KFC and Taco Bell still comping well, but maybe a little slower sequentially. Greg Creed - Yum! Brands, Inc.: Well, I don't want to get into Q3 in the pizza category, given the competitive nature of it. I think what I can say is we've said it's a slow build. The incremental media didn't happen in the first half, it will happen in the second half. Obviously, we've just rolled out loyalty. So I think you will hopefully see a slow build, and we see the results obviously paying off in 2018 and beyond on Pizza Hut. From a demand environment point of view, I think the great thing about our category is or the great thing about food is you've got to eat it and I think there will be winners and…

Your next question comes from the line of Karen Holthouse from Goldman Sachs. Your line is open. Karen Holthouse - Goldman Sachs & Co. LLC: Hi. You're seeing more Pizza Hut questions. Sort of going back to the initial reacceleration in comps in Taco Bell that has been really built for many years. That was kind of kicked off with the Doritos Locos pretty singularly iconic viral product. Do you think there's a similar opportunity at Pizza Hut to really kickstart things with the product or are you more focused on sort of fundamental building blocks around technology, digital, asset base, et cetera? Thanks. Greg Creed - Yum! Brands, Inc.: I think the answer to that it's like the answer is and. We've got to make it easier and better. We do believe we have the better pizza; we've got to continue to make sure that we deliver a better pizza in the marketplace. But better is also making sure that our piping hot pizza gets delivered to you on time and therefore obviously tastes better. So I think the answer is, just like everything in life, we have to be easy and we have to be better. So we're working on the easy components whether that's all the technology, the digital play whether that's loyalty, and at the same time, we're obviously continuing to work on making sure we have the best pizza in the marketplace. And I think a combination of both of those will see us sort of build the Pizza Hut brand back into the brand we want it to be. Karen Holthouse - Goldman Sachs & Co. LLC: Great. Thank you.

Your next question comes from the line of Brian Bittner from Oppenheimer. Your line is open. Brian Bittner - Oppenheimer & Co., Inc. (Broker): Thanks. Good morning. I want to talk about the 2019 target of at least $3.75 in EPS. I think the $3.75 is an attractive target on its own but the question I have is what's the key in your internal model to unlocking that wording of "at least" within that stated target? Is the achievement of your goal to get to 7% systemwide sales growth help you unlock that word "at least"? Or is there something else that we should be focusing on? David W. Gibbs - Yum! Brands, Inc.: No. I mean, as we've said in past calls, we built the model on reasonable assumptions. We don't have to be heroes to get to that number. So the kinds of things that would contribute to outperformance would be an acceleration of system sales growth, a turnaround in the Pizza Hut U.S. business. We're not counting on any of those things to get there. So the "at least" is only there to indicate that we certainly have room to go beyond that if we see an acceleration in development, system sales growth beyond historical rates, Pizza Hut U.S. getting back to growth. Brian Bittner - Oppenheimer & Co., Inc. (Broker): Okay. And just the follow-up question I have is on Taco Bell. It's a great comp for the quarter relative to the industry or any metric, really. The question I have is what were the biggest differences that you saw in the business and the growth of the business this quarter when analyzing the sales versus the 8% comp you achieved last quarter? Greg Creed - Yum! Brands, Inc.: I mean, the way I look at Taco Bell is, we are just really enthusiastic about the long-term fundamentals of the business, whether it's the consumer metrics, the ops metrics, the financial metrics. Obviously, the brand has delivered consistent, healthy same-store sales growth over the long-term. And I think the icing on the cake, Dave and I happened to spend two days with the FRANMAC group, which is the franchise leadership group for Taco Bell in June, and I think to say they were happy with where the brand is, happy with where the brand is going and happy with the Taco Bell leadership team would be an understatement. So I just feel good about where the brand is going. What happens then quarter by quarter, I think, you will see us continue to deliver. The long-term fundamentals for this business are in great shape. Brian Bittner - Oppenheimer & Co., Inc. (Broker): All right. Thanks, guys. Keith R. Siegner - Yum! Brands, Inc.: Operator, we'll take one more question, please?

Certainly. Your next question comes from the line of Andrew Charles from Cowen & Company. Your line is open. Andrew Charles - Cowen & Co. LLC: Great. Thank you. Going back to your Investor Day, you guys set out plans to refranchise about 2,000 stores for at least $2 billion in proceeds. So it's about $1 million per store. Obviously with the 244 franchises in 2Q, you've looked at a gain on the sale, but the implied proceeds per store of $560,000 were a little lighter than the implied targets. Is the way to think about this is that it was driven, the lower proceeds per store, driven by an outsized amount of Pizza Huts that were franchised during the quarter? David W. Gibbs - Yum! Brands, Inc.: Yes, absolutely. Pizza Huts obviously, with smaller investments in the smaller box units typically garner less proceeds, lower volumes versus, for example, our Taco Bells, which is our highest volume concept that we are selling stores of any scale on. So very much you will see that number move around from quarter to quarter, depending on the mix of the units. Andrew Charles - Cowen & Co. LLC: Thanks. Greg Creed - Yum! Brands, Inc.: Okay. Go ahead. Keith R. Siegner - Yum! Brands, Inc.: Thank you. (49:22) Greg Creed - Yum! Brands, Inc.: Okay. So thank you all for being on the call. As we said, we believe we had another successful quarter, 6% system growth, 21% EPS growth, 19% core operating profit growth, and we look forward to updating you as we work the brands as we go through the rest of the year. So thanks for being on the call. Appreciate it.

This does conclude today's conference call. You may now disconnect.