Dentsu Group Inc

Welcome to Dentsu FY 2025 earnings call, and thank you for joining us this evening. My name is Morishima from the Group II office, and I'll be your conference operator today. This is a reminder that today's call is being recorded. Furthermore, this call will be held in Japanese and English with simultaneous translation for those joining online. Please choose your preferred language from the bottom of the Zoom screen. For those joining on the telephone line, you will only be able to hear the original language spoken. Today's presentation materials are available on our website. Joining me today are global CEO, Dentsu, Hiroshi Igarashi. Igarashi. Thank you. Executive Officer, Executive Vice President and Global Chief Operating Officer Dentsu and Chairman of Dentsu America's Julian Malegri.

Julian Malegri, good evening, good morning.

CEO of Dentsu Japan and Deputy Global CEO of Dentsu, Takeshi Sano. Today's agenda will begin with FI 2025 Business Update from Hiroshi Igarashi. Shigeki Endo will then present FI 2025 financial update, followed by explanation of strategic update from Hiroshi Igarashi. We will invite you to ask questions after the presentation. Mr. Igarashi, please go ahead. Good evening, everyone. Thank you for joining our fiscal 2025 earnings call tonight. The group's organic growth rate for fiscal 2025 slightly exceeded the guidance we announced in November last year, while our operating margins for both the Japan and international businesses outperformed the guidance, which was revised up in November. Japan achieved organic growth rate of 6.2%, while at the same time registering highest ever net revenue and operating profit. Despite our international business recording negative growth, we are seeing improved profitability due to the initiatives we outlined in our midterm management plan, which we announced in February last year. As for international business, we revised the assumption for impairment test. and consequently recorded an additional goodwill impairment loss of 310.1 billion yen in the fourth quarter of fiscal 2025. Following this accounting treatment, the balance sheet of goodwill on our consolidated balance sheet decreased approximately 320.1 billion yen, which is less than half of the level registered at the end of fiscal 2024. Furthermore, we reached the decision not to pay a year-end dividend for fiscal 2025, which we previously communicated as being undetermined. The reason being the significant negative distributable amount on the balance sheet of the non-consolidated financial statements for Denson Group Inc., which resulted from a loss on valuation of shares in affiliate companies, etc., which in turn resulted from the impairment of goodwill. Furthermore, we regret to announce that no dividend is forecasted for fiscal 2026 based on a similar reason. As for fiscal 2026, we are expecting the Japan business to continue its steady growth with an organic growth rate of 2% to 3%. For the international business, we are expecting CXM in the United States to return to growth, which has been recording negative growth since fiscal 2023. we'll continue to work towards restoring our competitiveness and improving profitability. Additionally, we have filed a shelf registration for the issuance of bond-type class shares today in order to secure flexibility options for strengthening our financial position in preparation for future growth investments. Now on recent highlights. Globally, our AI-driven advertising strategy was highly appreciated by Siemens, and will result in our relationship being updated and expanded in more than 150 countries. In Japan, we were selected by Samsung Electronics Japan as its partner agency based on our comprehensive capabilities that include both our abilities to make annual proposals and to form teams for strong execution. In the Americas, we were able to expand our relationship into the media domain with a major retailer, BJ's Wholesale Club, building upon the trust we have established in the CXM domain. Also in Italy, currently hosting the Winter Olympic Games, we won Essel Luger, one of the country's leading food retail brands, as well as PassWeb, following our success in the Vodafone Group in India and the UK, we announced in the third quarter. As for industry awards and recognition, Dentsu Creative New York won the Grand Prix Prize at the Drum Awards. Furthermore, Dentsu Taiwan demonstrated its overwhelming competitiveness in the region by winning some 200 awards across various areas. RCXM Division was recognized as a leader in Gartner's Magic Quadrant for digital experience services for the second consecutive year, reflecting the consistent sense of our technology and value we provide. In addition, Dentsu Sports and Entertainment launched its operations in the Indian market, making an important step towards expanding our presence across Asia. I'll now pass the microphone to our CFO Shigeki Endo to update you on our financial results.