DENTSU GROUP INC. Q4 FY2025 earnings call

• Hiroshi Igarashi mentioned group organic growth rate for fiscal 2025 slightly exceeded guidance, Japan and international operating margins outperformed. Japan had 6.2% organic growth, international had improved profitability but recorded goodwill impairment. Decided not to pay year-end dividend for fiscal 2025 and no dividend forecasted for 2026. Filed shelf registration for bond-type class shares. • Recent highlights include AI-driven advertising strategy appreciated by Siemens, selected by Samsung in Japan, expanded in Americas media domain, won clients in Italy, industry awards. • Shigeki Endo presented financial results: full year organic growth rate 0.5% slightly above guidance, consolidated net revenue increased 0.3%, underlying operating profit decreased. Explained performance by region, guidance for fiscal 2026, goodwill impairment loss, dividends. • Hiroshi Igarashi explained strategic updates: reevaluating underperforming businesses, rebuilding business foundation with cost savings, business strategy to restore competitiveness, progress in US market, media as core of international growth.

Japan business accounted for 42% of net revenue, achieving 6.2% organic growth, highest ever net revenue and operating profit. International business had negative growth in all regions. Americas accounted for 26% of net revenue, full year organic growth rate negative 3%. EMEA full year organic growth negative 1.8%. APAC full year result in line with expectations but organic growth rate negative 6.8%.

• Fiscal 2026 organic growth rate expected 0% to 1%. Japan business expected 2% to 3% growth. International business aiming broadly flat. Americas organic growth rate circa negative 2% due to creative client losses but CXM expected to return to positive growth. EMEA and APAC expected circa 1% organic growth. • Operating margin expected 13% range, slightly lower than previous year. Statutory basis expected operating profit JPY 152.6 billion and net profit JPY 69.7 billion in fiscal 2026.

• Continuously recording goodwill impairment losses. • Negative distributable amount on balance sheet leading to no dividend payment. • Uncertainty in international business performance with negative growth in consecutive years. • Potential impact of business environment changes on financial targets.

Q: Abe san from Daiwa Securities asked about equity level and business outlook outside Americas.

A: Shigeki Endo said consolidated equity not immediately needing equity finance, considering options including equity finance; Hiroshi Igarashi said outside Americas growth outlook is achievable as budget incorporated risks.

Q: Maeda from SMBC Nikko Securities asked about intent behind impairment and views on international business structural reform.

A: Takeshi Sano explained impairment recognition basis and need to reflect risk to avoid future negative surprises; Takeshi Sano said can achieve international business growth by identifying market wins.

Q: Kishimoto from Mizuho Securities asked about FY '26 pitch size and Japan business growth outlook.

A: Hiroshi Igarashi said Media pipeline JPY 4.2 billion 80% offense, Creative GBP 701 million 73% offense, CXM pipeline growing; Takeshi Sano said Japan growth outlook slightly conservative due to 2025 high growth rebound but market events provide opportunities.

Q: Nagao from BofA Securities asked about capital policy, North American business concerns, and cash flow.

A: Shigeki Endo said preparing for future investment by issuing class shares, Giulio Malegori said North American Media momentum continues but Creative faces client loss impact; Shigeki Endo said operating cash flow turned positive in FY '25.

Q: Harahata from Nomura Securities asked about Gen AI impact and new management priorities.

A: Hiroshi Igarashi said leveraging AI for growth, centralizing AI expertise with dentsu.Connect; Takeshi Sano said priorities are rebuilding business foundation with speed, removing layers for faster client issue resolution, enhancing brand power with Chief Brand Officer.