Dentsu Group Inc

Welcome to the Dentsu Q3 FY2024 earnings call. Today's presentation materials are available on the Dentsu Group website. Joining me today are President and Global CEO Dentsu, Hiroshi Igarashi.

Igarashi de gozaimasu. Yoroshiku onegai itashimasu.

Global CGO and Global CFO Dentsu, Yushin Soga.

Soga de gozaimasu. Yoroshiku onegai itashimasu.

CEO Dentsu Japan, Takeshi Sano. Sano desu. Yoroshiku onegai shimasu. CEO Dentsu Americas and Global President, Data and Technology Dentsu, Michael Komatsinski.

Good day, everyone. Happy to be with you.

The agenda for today will start with business update from Hiroshi Igarashi. Yu Shinsoga will then present the financial update, followed by strategic update from Hiroshi Igarashi. We will invite you to ask questions after the presentations. Mr. Igarashi, please go ahead.

Good evening and thank you for joining our Q3 FY2024 earnings announcement today. Organic growth was positive 0.3% in the third quarter, continuing the improvement from the fourth quarter last year and maintaining positive growth. Japan recorded the highest nine-month net revenue to date and is expected to continue its solid growth. With the ongoing severe situation in APAC and the delayed recovery of the CXM business in EMEA and the Americas, We have revised our four-year guidance and will focus on achieving it. We would like to release our next mid-term management plan in February next year, which will be carefully reviewed based on the four years' results. Next, these are the highlights of the third quarter. We won global media work for eBay and global creative work for Adobe and regional media work in the EU and China for Pernod Ricard. In Japan, we won Domino's Pizza and AGC account by offering integrated solutions across strategy, creative, and media. In the United States, Merkle became the CRM partner for Helion and the data platform partner for Amica. In terms of sustainability, our group's targets of near- and long-term science-based greenhouse gas emissions reduction is validated by SBTI. Also, we launched the House of Creators, a project to support the next generation of content creators with the partnership of Roblox. In terms of industry recognition, one of our group employees won an Emmy Award for casting. Now I will hand over to our global CFO, Yushin Soga, to update our financial results. Thank you, Igarashi-san. Hello, everyone. This is Yushin Suga. I will now give an overview of the financial results for the third quarter of FY 2024. First, I would like to explain our performance in the three months of the third quarter from July to September. Organic growth rate was positive 0.3%, with growth continuing from the second quarter. Although the results have continued to improve since bottoming out in the fourth quarter of the prior year, they stayed lower than expected mainly due to challenges in CXM. The group's consolidated operating margin for the three months of the third quarter was 12.0%, a decrease of 140 basis points from the prior year. This was due to higher staff cost of increased headcount in Japan, allowances of trade receivables in the international markets, and others. These impacts, however, are partially mitigated by cost management initiatives. As a result, the underlying basic EPS for the three months of the third quarter was 68.4 yen. I will now move on to explain the nine months' results. First, the key items in profit and loss. Organic growth rate was negative 1.1%, but net revenue increased by 6.3% year-on-year to 858.3 billion yen due to the impact of currency and M&A. Underlying operating profit decreased by 1.0% to 97.2 billion yen due to higher SG&A expenses. On a statutory basis, operating profit decreased 40.2% year-on-year to 28.9 billion yen, and net profit decreased 93.1% to 1.5 billion yen. This is mainly due to the expenses related to the completion of the transfer of all of the group's holdings of the Russian operations in July, which we announced previously. Next, I would like to talk about customer transformation and technology, or CT&T. The group has positioned CT&T as an important area of business. As of the end of FY 2016, net revenue ratio was 15%, but it has increased to 32%. approximately as of the end of fiscal year 2023. However, the ratio for the nine months of FY 2024 is approximately 29%, which is a drop of around three percentage points compared to the same period of the previous year. As explained in the second quarter, this is mainly due to the view of the net revenue realignment for CT&T in line with organizational simplification. In addition to that, reduced client spends in the international business and strong performance in the media business in Japan also influenced the CT&T ratio decline. We continue to see successful growth in areas that will be increasingly important in the future. Examples include double-digit growth in business transformation, BX in Japan, as well as 7.5% year-on-year growth in data and technology in the Americas. Next, I will move on to the regional slide. On a nine-month basis in Japan, organic growth rate was positive 2.3% and steady growth continued. In the Americas, organic growth rate stayed negative but continued to improve on a quarterly basis. EMEA returned to positive organic growth. APAC remained in organic decline. Among the key markets, the US and the UK reported a continued negative organic growth decline, but positive organic growth was achieved in Spain, Poland, India and Thailand. Japan, the largest region accounting for around 40% of group net revenue, continues to show steady growth, with nine-month net revenue reaching a record high. CT&T was largely flat, with BX maintaining double-digit growth led by robust client demand. In the advertising business, in addition to a strong performance in TV advertising, internet media also achieved double-digit growth, continuing from the first and second quarters due to the increased client spends from existing clients and new client wins. Performance in Japan is generally in line with the initial four-year forecast, and we expect continued solid growth in the three months of the fourth quarter as well. In the Americas, the region accounting for around 30% of group net revenue, the year-to-date organic growth rate has continued to show recovery after reaching a trough in Q4 of 2023. However, it remains lower than expected. This is primarily due to reduced client spends against the backdrop of challenging conditions in the CXM business. Meanwhile, media has remained relatively stable with good contribution across major clients. the organic growth rate continues to improve, with growth in the three months of both the second and third quarters. In addition, creative is beginning to show results due to synergies with TAG. Among the client wins that Igarashi-san mentioned earlier, Adobe's global pitch was won by TAG's high creativity and efficient operations. The three months of the fourth quarter are expected to continue being a negative organic growth rate given the slow recovery in 6M and the overall volatility of the market. EMEA returned to a positive organic growth rate in the nine months. However, like the last quarter, this is partly due to the low comparative due to the one-off financial impact in the DAC cluster last year. Exceeding this one-time financial impact, organic decline in the nine months in EMEA would be negative 3.4%. CXM continues to be impacted by slower recovery across the region, specifically in the UK. On the other hand, in Spain, where we acquired Omega last year, we have achieved a double-digit organic growth rate in the third quarter, the same as the last quarter. Media continues to remain stable at levels above expectations with some new competitive opportunities. Creative returned to positive organic growth in the three months of the third quarter, led by an increase in client spends. Continued positive momentum is expected across media and creative in the three months of the fourth quarter, but full year forecast has been downgraded due to the weak CXM business. In APAC, the cumulative organic growth rate for the nine months remained negative. In particular, CXM continues to face challenging conditions. including in Australia, due to factors such as a decrease in local client spends. Media performed well with major clients, although it remains soft in the business environment. On the other hand, creative continues to be affected by client budget cuts. Furthermore, improved business performance is expected in the three months of the fourth quarter in line with earlier forecasts.

Moving on to profitability, this slide shows a breakdown of the change in the group's underlying operating profit from the prior year. On a year-to-day basis, underlying operating profit decreased from 98.3 billion yen in the prior year to 97.2 billion yen. This was due to higher other operating expenses than the increase in net revenue. Staff costs remain at the same level as in the prior year. Let me explain in detail. Net revenue has increased 9.1 billion yen, but this includes a reversal of the one-time financial impact of DAC last year, as well as a net increase from TAG and other subsidiaries acquired last year. On the other hand, other operating expenses increased by 10.9 billion yen. This was due to the net increase of TAG, which started to be consolidated in July 2023, the internal investments and allowances of trade receivables in the international markets, and others in the third quarter. Staff cost was decreased by 0.7 billion yen with cost management initiatives. For the three months of the fourth quarter, cost management will continue to be implemented, ensuring our cost base is at an appropriate level. Finally, I would like to share with you our revised guidance. As I have said, the recovery in the third quarter was slower than expected, especially in CXM. We are confident in our medium-term direction of making internal investments, strengthening our integrated growth solutions, and restoring organic growth. However, considering the nine-month results and forecast for the three months of the fourth quarter, we have revised our organic growth rate guidance downward from circa 2020. 1.0% to circa 0%, and an operating margin guidance from circa 15% to circa 14%, and underlining operating profit guidance from 180 billion yen to 167.7 billion yen, as shown in the slide. As a result, underlying net profit will be revised downward to 91%. Thank you, Yuxin. Let me now explain our group's strategy. our organic growth rates are improving. However, our recovery of performance is slow due to the weak CXM business in the international markets. Under these circumstances, the integrated growth solutions we provide contribute to the high pitch win rate in Japan and the steady accumulation of net wins mainly in the media business in the international markets. We will also continue our internal investments in areas such as data and technology and A.I. By further strengthening our specialized areas and promoting cross-selling, as well as providing integrated solutions across media-created and CXM, we will achieve our revised full-year guidance. The key to the recovery of our group's performance is the strengthening of internal investments, which we have started this year. In data and technology, we officially launched Mercury for Media, as we have explained in the first quarter. In terms of investing in our people and culture, a new program has been launched. It is designed to support the development of global leaders who embody our One Dentsu concept, and we continue to strengthen our talent pipeline. In business operations, we are working to embed the One Dentsu operating model across the group. To maximize the benefits of this model, a core platform has been developed to provide business insights based on data such as the individual client's performance and the revenue generated by each service. Moreover, to further accelerate our growth momentum, we have embarked on three initiatives over the medium term. First is focusing our resources on strategic market. We will narrow down the markets on which we focus, concentrating our management resources mainly on Japan and the United States, which account for more than half of the group's revenue. Establishing and reinforcing a competitive service model as a strategic market is our priority. Next is strengthening of our structure for strategic clients. With a focus on global accelerator clients, we will continue to strengthen our organizational structure that enables to deliver integrated services for strategic clients. In particular, our approach to Japanese clients, we will actively promote our group's integrated growth solutions overseas based on the trusted relationships we have established in Japan with intensive collaboration between Japan and international markets. Finally, redefining our strategic investment areas. We will continue internal investment with a strong focus on data and technology, AI and our people. Our people are key to integrated growth solutions, the foundation for integrating capabilities across the group. So far, our group has acquired new capabilities through investments in CT&T. Going forward, we will continue to improve our initiatives that will strengthen the competitiveness of the entire group. While continuing internal investment and focusing on intensive resource allocation, we are also working to improve cost efficiency by reviewing our organizational structure and business processes. Specifically, through the introduction of the 1-2 operating model, we are focusing on readjusting the cost structure of the middle and back offices and securing investment capacity for innovation in the front office and product development. Eliminating internal duplication and redundancy will improve our cost structure, allow us to develop unique products, and strengthen our client-focused organizations. This will accelerate our growth through reinvestment. To present our journey to growth, the next midterm management plan will be announced in February next year. Under one density, we aim to achieve growth that outperforms the global market by 2027. In the next plan, we will explain our specific business strategies to achieve medium-term targets and to recover our competitiveness. To conclude, recovery is lower than what we have expected. However, we believe that the strategies we have been working on under Won Bin Tzu will continue to be effective. It is our mission to recover our competitiveness. We will continue medium-term initiatives through the internal investments while improving our cost efficiency. Our midterm management plan, including these initiatives, will be presented with the full year results in February next year. Thank you. I will now hand back to the moderator, and we welcome questions.

We will now begin the Q&A session. First question, Diver Securities. Mr. Abe, please. Diverse Securities, Abe speaking. Thank you for this opportunity. I have two questions. First, CXM, decline of performance, the background thereof, and what do you think will be the timing of recovery? I would like to confirm this point once again. And the second point is organic growth next fiscal year onwards. Would it be possible to achieve positive organic growth? I want to know the situation by region. These are the two questions I have. Mr. Abe, thank you for your questions. This is Yagarashi. I will respond to your first question, the background behind climate performance in CXM and when we expect recovery. I will explain the overview, and after that, I would like to call upon Michael Komosinski to support. And about your second question, a growth prospect next fiscal year you want to know by region, Ikarashi will respond to that second question. First, CXM, the reason for declining challenging performance in CXM. Performance is declining, but we'd like to mention that this business is on a recovery trend. Recovery is slow, but we are on a recovery trend. I would like to mention that point. And if we take a look at peer groups in the industry, as well as tech companies, the industry as a whole is in a challenging situation whereby recovery is slow. The main trend we are seeing is on the client side, client spend. is becoming very prudent. Clients are very careful in their spending, and compared with before, there's a decline in large client spend. These are the main trends that we are observing, and specific projects and deals, up until they close, it is taking more time. That's another reason for the delayed recovery. And under such circumstances, we are thoroughly revisiting our assets. Where do we have our strengths? We are revisiting. And client needs, where are they at the moment? We are trying to have an accurate understanding of these points, specifically by client. We take a look at specific and detailed needs by client. And we try to Thank you very much. These kinds of executions, we try to conduct a cross-sell amongst these strong executions, and we are starting to see specific results. This is bearing fruit. That is the current situation. Therefore, it is taking time, but towards the end of next year, we think we will be able to confirm recovery. That is our prospect. And the outcome of specific initiatives and the future outlook, I would like to call upon Michael to add some points here as well.

Thank you, Igarashi-san. Yes, as Igarashi-san mentioned, the CXM business has been down significantly. really from clients pulling back on large transformational investments and projects. We're just not seeing the same kind of deal flow for that type of work that we saw in 2021 and 2022 off the back of the pandemic. The business has been stabilizing, and we expect that progress to continue into next year. And where we're starting to see demand come back into the business, really around the areas where there's some kind of AI-related innovation taking place. So areas like data platforms or data strategy where clients need to understand what disparate data sets they have to train models on or to be able to power large knowledge networks for various use cases across the enterprise. AI driven sort of in the enterprise content supply chain using sort of products like say from one of our partners like Adobe, where there are real innovations and enhancements in how enterprise content is managed and developed. And I would say generally in our analytics area, where there's just a continued need for better understanding of attribution, incrementality, and just a more comprehensive way of measuring marketing effectiveness. So I think those are some of the areas where we see those kind of green shoots, albeit more in sort of a point solution or a siloed sort of way, as opposed to the broad transformational projects that we were seeing. So that's, You know, we'll go to where the demand is. And that's basically what we're doing is repivoting the business to where we see demand pockets and continuing to follow, you know, what our clients are asking us for. And we'd like to see that that stabilization and recovery continues in the next year.

Michael, thank you very much. About your second question, our outlook for next fiscal year. First, in May of this year, we announced our outlook report, global outspent report we announced. And according to this report, 2025 ad spend will grow by a positive 4.2%. And by main market, Japan, positive 2.5%. U.S., a positive 4.4%. And the U.K., positive 4.5%, according to this report. This is the outlook that we announced, and we want to make sure we can commit to this. And as for specific prospect and outlook, we want to bear in mind the situation in Q4. And in February of next year, we would like to explain once again about our future outlook. Thank you very much. This concludes our response.

Thank you very much, Mr. Abbott. Thank you very much for your question. We would like to take the next question from Edison Group, Ms. Fiona Orford-Williams.

Good morning from London. It's Fiona Orford-Williams of Edison Group. My two questions. First of all, on the on the pipeline and the pitch conversion on the new business front. Particularly, could you tell us a bit of background on on the wins of eBay and Adobe or on that? And whether Mercury's had any particular successes to date? And when you referred to recovering competitiveness, did. did that imply that you were missing out to some pitches on terms of price? So that's my first question. My second question is when you say increase the emphasis on the Japanese and U.S. markets, what does that actually mean in practical terms? Does it imply disinvestment elsewhere? Thank you.

Ms. Fiona, thank you very much for your question. Regarding the first question of the pipeline situation and also regarding including the new businesses, the win rate and the pitch rate situation is what you'd like to know. And also... Regarding the ones that we won, eBay and Adobe, what was the reason for winning those is what you also wanted to know. And also, did Mercury type of a new product contribute? And also, for the ones that we lost, did the pricing change? have the major factor in losing those deals, was your question. And from my side, I would like to explain about the outline. And from Michael, especially regarding the eBay and Adobe situation, I would like him to support. And also, focusing on the U.S. and Japan, does that mean that we're going to limit the investments to these two regions? Regarding the second question, Igarashi and myself would like to answer that question. First of all, Regarding the pipeline, to this point, we have an increase in the pipeline very much. And this is, for us, a very happy situation. Especially Japan and U.S. pipeline is increasing. That is the current situation. Media's pipeline. Slightly in weight-wise is larger than others, but including creative, various integrated type of pipeline is increasing. Therefore, we would like to surely realize these pipelines and acquire these accounts. Regarding the winning of the pitches or winning rate, well, Japan, we have quite of a high winning ratio Looking at each quarter of this fiscal year, this third quarter pitch winning rate is higher than the usual. And regarding the other regions, they are putting their utmost efforts, however. It's not that we are not losing, so we would like to further increase the winning rate in the other regions as well. Overall, we consider it is a good winning rate. And next, regarding eBay and Adobe, Michael will be responding.

Yeah, thank you, Rashi-san, and hello, Fiona. Yeah, it's just some specifics on those two wins. They're actually very good examples of how we're winning in the marketplace in those respective areas. So eBay is a media win. And I think a handful of the reasons that we were selected were the strength of our global operating model. I think it was clear to them that we could provide service in their key markets and that we could bring that model together globally. and keep it coordinated and tight. We definitely demonstrated a level of innovation in our approach to media and our ability to capitalize on some of the trends and new opportunities across the media landscape. A focus on business outcomes and our ability to drive their marketing KPIs and the outcomes that those support. And then lastly, to your question specifically, Fiona, Mercury definitely played a role in that win. It demonstrated our ability to take identity-driven audiences, plan against them, activate against them, and measure holistically. And although we do that with different levels of fidelity across markets, given regulatory environments, I think the ability to showcase that and codify that into a system that they can participate in via the Dentsu Connect portal, I definitely think is helpful when clients are making those decisions. On Adobe, more in the sort of creative and scaled production set of services, a couple of similar things and then a couple of unique things. I think similarly, the global operating model was part of our selection. You know, we were able to really show strength and a depth of team resource in key regions like EMEA and APAC as well as the Americas, of course. And really, I think we demonstrated that we were best in class on their stack and their set of tools. So our understanding of how to use the new Firefly solution in conjunction with more established solutions like Adobe Asset Manager, Workfront, and some of the other tools, and bring those together for clients in kind of a content supply chain concept, really, I think, resonated. And so we always think of Adobe as kind of client zero in terms of our approach to how we use their tools, how we're going to help them talk to prospective clients in the market about the efficacy of them. And I think Dentsu is just really uniquely positioned because of our expertise to to be sort of the best marketer, the best marketing partner to help them drive demand and sales for their products. So I think that's the summary I'd have for those two wins.

In the question, I think there was a question regarding the pricing in the pitches. The bold pricing strategy within the competition situation may be sick to us, but that depends. But in such a situation... We will consider a price strategy and increase our winning rate. And next, regarding the focus, a shift to Japan and the U.S. First of all, for us, our foundation or the data and tech foundation, Japan and U.S. is leading the group in those two areas. And that foundation or platform is something that we can expand to the overall group. Therefore, in U.S. and Japan, the data and technology, we would like to make a thorough investment and secure that first. And before, I mentioned about the Japanese companies, the global companies, so to speak, that have their base in the United States and their companies that go from Japan to overseas. We are also going to approach them, too. So in the U.S. and Japan perspective, how are we going to gain additional global business is also the reason why we're focusing on Japan and U.S., However, in other markets, we are considering in detail what deals are priority, and also at the same time, we are reviewing which investments are priority as well. So within that process, we will be making investments in other markets as well as make that decision from the overall perspective. That concludes my answer.

Fiona-san, thank you for your questions. Next question, SMBC Nikko Securities, Maida-san. SMBC Nikko Securities, Maida speaking. Thank you. First, I want to confirm some numbers, CXM and Media Creative for each business's Q4 of What would be the organic growth rate in Q3 for these three businesses? That's the first question. And once again, confirmation of numbers. You always comment on account net win and net loss. I want some quantitative information on this topic. And at the same time, In the next mid-term management plan, by 2027, you say you want to aim to achieve growth that performs global market. When you announced your Q2 results, the impression we have is next year, You are doing well with regards to new accounts. So in terms of growing growth, you may be able to exceed average. That was the impression I had. But compared with that time, Q2, it seems as though you're turning down. Is that the correct understanding? Or you do have a target, and next year you think you'll be able to outperform the market in terms of organic growth. These are the points I want to confirm. Mr. Maida, thank you for your questions. Your questions for CXM, media, and creative. Organic growth situation of these three businesses this fiscal year. You want numbers for each of the three businesses, and I will call upon Soga-san to respond to that question. An account net win situation. You want a quantitative response. Igarashi, I would like to respond to that question. And in 2027, by 2027, we aim to outperform the market we mentioned. What would be the situation like in 2025, bearing in mind the current situation? Maybe the company is turning down, has a lower tone. That was your next question, and I would like to, Igarashi will respond. And first, Sokha-san will respond to your first question. This is Soga. Thank you for your questions. About your first question, media, creative, and CXM, how much organic growth for these three businesses? And it depends by region as well. Unfortunately, though, CXM main market is Americas and APAC, and they have negative performance, and we did touch upon CXM briefly before, and EMEA, positive organic growth. And with regards to media, America's EMEA, relatively strong, but unfortunately, APAC overall is in a challenging situation for media as well. In APAC, growth is negative and creative. APAC, negative, and EMEA, positive. America's is slightly negative. To sum up, overall, creative media, CXM, What was the situation like in the international market overall? Unfortunately, on a year-on-year basis, compared with the previous year, media, creative, CXM, there are some slight negatives. Particularly CXM is declining more substantially than the other businesses. That is the response to your first question. And your second question, net win situation. Thank you for your cooperation and support in the group as a whole, particularly for North American media. We've been accumulating net wins. Q4 of last year, we were slightly positive, or about £300 million positive. We started from there, and in Q1 of this year, about £200 million positive. And Q2, about 400 million pounds, and Q3, a bit less than 300 million pounds, which means relatively stably we are progressing this fiscal year, particularly media net wins. We are able to accumulate quite successfully, but overall, compared with our expectations, not only for media, but for the group business as a whole, the actual performance is not catching up with our expectations. And as a result, we came up with a forecast, as we mentioned in our presentation. But our main markets of North America, particularly media, net win, is a very important KPI. And here we have been able to grow our numbers stably, which will serve as a very robust bridge towards the next fiscal year. That's how we perceive the situation. This concludes my response. In the mid-term management plan, there was a question about that. If I may respond. When it comes to recovery, recovery is moderate, but we are engaged in it. internal investment, and we are taking the right steps with the right direction of organic growth, we understand. And at 2027, as we mentioned before, we want to, in a consistent manner, continue these initiatives towards 2027, and then we think we'll be able to outperform the market. Details we will explain in February when we announce our new mid-term management plan. Our goal towards 2027, it's not that we will definitely perform in 2025. We want to continue these right steps and strive towards a goal of 2027. This concludes my response. Thank you very much.

Mr. Maida, thank you very much for your question. We're getting close to the scheduled ending time, but we have many hands up. Therefore, we would like to extend our time a little bit to respond to the questions. So we would like to take the next question from Nomura Securities. Mr. Harahata, please go ahead. This is Harahata from Nomura Securities. I have two questions. Maybe you have explained about this from July to September, other expenses seems quite high. I would like to know the breakdown of that. That's my first question. And the second question is from October to December, APAC is going to turn around, is your explanation, and is that turnaround going to continue is what I would like to know. Those are my two questions. Thank you. Mr. Harahata, thank you very much for your questions. First of all, regarding your first question, July, September, the other expenses, it seems that it is becoming larger, and the content and breakdown is what you'd like to know. And also, your second question was regarding October to December. APAC is going to turn around, is what has been explained. Therefore, specifically speaking, with what it is going to turn around, And also, next fiscal year, is that trend going to continue? So regarding the first question, myself, excuse me, Soga will answer the second part. Igarashi will answer. Harahata-san, thank you very much for your question. This is Soga speaking. Regarding other expenses, probably what you're looking at is the flash report. And sorry, I don't have that flash report with me, so I don't have the specific numbers in my mind, but probably what's included in that is the withdrawal expense from Russia. Either way, it is a one-off expense, and this is not going to recur continuously. That is all. And regarding your second question, APAC, this term is facing a very difficult situation And within the main markets in there, China and Australia, these two markets have a large portion within the APEC region. And these two markets are struggling. However, regarding the fourth quarter, including these markets, at the end-of-term media's perspective, we can seek the turnaround. And for other areas, Taiwan, India, Thailand, for now, they are performing steadily. Regarding the next term, next fiscal year, given the fourth quarter situation, I would like to share the more details in February. It is a difficult situation, but we are going to put our efforts to grasp the market situation thoroughly and improve the performance of APAC. By the way. From November, the Headquarters Chief Strategy Officer is going to thoroughly watch this region. so that we directly will see the process of improvement and be able to respond. And such structure now is established. So we would like to continue to put our efforts into this. Thank you. Thank you very much for your explanation.

Mr. Harata, thank you for your questions. Next question, Misoho Securities, Kishimoto-san, please. Misoho Securities, Kishimoto. Thank you for your explanation. I have just one question. The background behind revising your guidance, after second quarter, you mentioned that on a quarterly basis, there's going to be recovery quarter after quarter, but the actual situation seems quite challenging. And when you announced your Q2 results, You have no clear outlook of Q4, and you made an announcement based on sensitive numbers, or you did expect this kind of situation, and the actual situation is much more tough, and clients are postponing their placements more. What is the background behind the revision of your guidance? Mr. Kishimoto, thank you for your question. I would like to explain about what we expected. CXM recovery is slow. That is indeed a fact. And CXM recovery is slower than what we expected in Q2 for other domains, media and creative. And considering the very robust performance in Japan, in other parts of our businesses, they are progressing as we expected. It's above all CXM in international market that the recovery is lower than we expected. And this is the background behind revising our guidance. Thank you for explanation. Revenue was prolonged and postponed, but you are seeing much more postponement for CXM. We think this kind of situation will continue for a while. Thank you.

Mr. Kishimoto, thank you very much for your question. It is getting close to the ending time, so the next question will be the last question. From a Tokai Tokyo intelligence level, Mr. Yamada, please go ahead. I'm Yamada from the Tokai Tokyo Technologies Lab. I have one question. The TAG, with the synergy from TAG, you're able to win large-scale deals. Specifically speaking, what kind of synergy was generated? And moving forward, what kind of synergies can you expect? That's all. Thank you. Thank you very much, Mr. Yamada, for your question. I, Igarashi, would like to answer that question. Regarding TAG, Last year, we conducted M&A and acquired this asset into the group. This company mainly does the final execution output of creative. That is the content of this asset. And they, including the AI domain, They do a personalized contents creation, and they have the excellent capability as an asset for them. And in addition, the vertical knowledge, they have a high level of vertical knowledge and rich knowledge. It was an independent organization to the acquisition, therefore heightening the vertical knowledge, and that has been highly received, and that actually further heightened their knowledge of the verticals. And this time, like Adobe, the capability of proposing a creative solution, that solution can contribute a lot to Adobe and to our clients and the potential of being able to do that and the visibility that they can do that was a highly and is highly received. Therefore from this area, including the vertical knowledge and experience, we can contribute to the client. Therefore, in order for the clients to be able to understand that, we are conducting various approaches, and we believe that there will be a great progress in this area and have high expectations. This concludes my answer. Thank you.

Mr. Yamada and all other people who raised questions, thank you very much indeed. We now conclude the earnings call. Thank you very much for participating today out of your busy schedules.