Dentsu : FY2025 Questions and Answers（129KB）

Published February 16, 2026 at 9:05 a.m. UTC

Source: MarketScreener

Dentsu Group Financial Results for FY2025 Questions and Answers

Date: February 13, 2026 (Friday)

Hosts:

Hiroshi Igarashi, President & Global CEO, dentsu

Giulio Malegori, Global Chief Operating Officer & Chairman, dentsu Americas Takeshi Sano, CEO, dentsu Japan & Deputy Global Chief Operating Officer, dentsu Shigeki Endo, Global CFO, dentsu

Questioner 1: I have two questions. One is about the equity ratio that is down as a result of the impairment, and you are filing shelf registration for the issuance of Bond-Type Class Shares. I would like to ask about how you see the equity level. Do you think that you need further capital infusion from outside, or are you simply preparing for further worsening of the financials?

My second question regards of the business outlook of the International business. Except of Americas, you are forecasting an increase in net revenue. Do you think that this is a conservative figure? How certain are you regarding the growth next fiscal year?

Endo: For your first question, first of all, the consolidated equity is circa JPY370 billion after impairment. It is not that we will immediately need equity finance. On the other hand, growth investment and structural reforms will continue. Therefore, in terms of the financing, we will consider every option, including equity finance. As part of this consideration, in order to strengthen the financial foundation for making such an investment without diluting EPS, in order for us to issue Bond-Type Class Shares in a more agile manner, we are going to ask for the approval of the Ordinary General Meetings of Shareholders for partial amendment to the Articles of Incorporation. Igarashi: For your second question, the increase in net revenue outside of North America, is this a conservative outlook? The response is yes. we have considered the budget formulation for each market and region. Of course, we look at both risk and opportunity in detail, and we have incorporated those risks in our calculation, and we have announced the guidance. We believe that this should be achievable. Questioner 2: One is about the thinking behind impairment. From our perspective, we feel that it is better to take the impairment as quickly as possible. That is the kind of position we have from spoken previously. On this occasion, you have embedded impairment loss that would lead to two consecutive years of non-dividend payment. But if you look at the recent performance, one may think that you may not have been required to take the impairment, so I thought that there could be a significant message or a significant intent behind this. You didn't want to keep any negative legacy under the new management structure, or did you want to kind of draw a line here to make significant improvement in the International business? If you had the goodwill, there would have been a potential risk of having to recognize an impairment loss in the future as you manage the structural reforms, so you actually dealt with that in advance? I think this was quite a bold recognition of a goodwill on this occasion, impairment on this occasion. I wanted to understand the intent behind this. That's the first question.

For the second question, in regard to the International business, based on your explanation thus far, it seems that you can aim towards recovery on your own and the success examples from Japan can be implemented for the International business that could potentially lead to different results. The structural reforms for the International business and towards the new management structure, what are the views? If possible, I would like to hear a comment from Mr. Sano in this regard as well.

Endo: For your first question, in regard to the impairment, please allow me to give some detailed explanation. In Q4 of FY2025, we registered the goodwill impairment of JPY310.1 billion, and this comprised JPY230.8 billion in the Americas and JPY79.3 billion in EMEA.

Last year, in FY2025, in Q2, if we put the two together, we've recognized JPY396.1 billion of the impairment loss for the full year. If we break that down, Americas accounted for JPY299.7 billion, EMEA JPY96.4 billion. As a reference, the FY2025 total impairment amount was JPY402.6 billion. Apart from these that I have described, there were some impairments of intangible assets as well, which make up that number.

The thinking behind this and our performance for FY2025, as we have explained, is we were able to achieve positive growth slightly above our expectations and our margin exceeded our expectations.

To say more, the Americas CXM, which had been triggering the impairment, is now steadily showing the recovery signs. It's not the case that we saw a rapid deterioration in the International business. But the assumption for the impairment test, we've consulted with the accounting auditor, and we have decided to revise the assumption. The business assumption for the impairment test was such that no additional impairment loss would be expected to recognize in the future, so we actually lowered the level.

For FY2026, we have our guidance, but this is completely separate from the impairment issue. I'm kind of repeating myself, but we have focused to two points. One is that we don't want to recognize any further impairment of goodwill in the future, so we revised the assumptions to those level, currently assumed to preclude further impairment losses. The other is to achieve profitability on our guidance for FY2026. Those were the basis upon which we recognized an impairment in FY2025.

Igarashi: It's exactly as Mr. Endo has explained. From our perspective, as management, we have essentially caused a negative surprise to yourselves. This is something that we regret significantly, the significant impairment loss on the goodwill on this occasion.

This came with the thinking that we no longer want to cause a negative surprise in the future, so we took that in mind, discussed it with the accounting auditor, and made assumptions at that level. It's really based on reflecting all of the risk factors . As you have indicated, together with the reforms of the International business, going forward, would there be a potential risk in the future? As you pointed out, we do not anticipate any risks arising from the structural reforms. Instead, we have factored in all possible risks. As I have explained earlier, we want to proceed in the structural reforms without negative surprise.

Sano: For your second question. Yes, as you have indicated, there is a certain likelihood that we do expect to be able to achieve that growth. The market has undergone quite significant changes. Many changes are taking place due to AI or, in the international market, we are seeing mergers of mega agencies. Many things are happening right now and in the era of many changes, as many people say, it's also an opportunity.

From FY2025, we've already started to achieve certain results in regard to rebuilding our business foundation. As we have explained, we have achieved some outcome. But we need to accelerate that even further. For that, revisiting the entities, improving transparency, and making the management structure simpler, and they would enable greater acceleration.

The other is regards to growth. As you have indicated, there are much knowledge that we can utilize from Japan. At the same time, each of the markets are not being completely uniform, the markets have various strengths. Also, there are various client structures or the client nature. We need to identify how to win in each of the markets, and we feel that we can certainly do this.

Questioner 3: I have two questions. My first question, for FY2026, I'd like to ask about the pitch size or pitch scale. What is the amount of pitch that you are seeing for this fiscal year? What is the ratio of offense and defense amongst the pitches?

My second question regards of the outlook for the Japan business. I believe that you have a good pitch win rate. On the other hand, the organic growth rate is only expected to be 2% to 3%. Perhaps you are being conservative? Or last year, there were some special market factors around TV in particular, so do you expect the growth rate in FY2026 looks softer as a rebound?

Igarashi: For your first question, FY2026 pitch size for Media pipeline, GBP 4.2 billion is the current size. Out of this pipeline, 80% is offensive, so 80% is offense. This pipeline is what we want to realize. Also, we would like to be winning new opportunities as well by approaching clients.

For Creative, there are some pitches that will be happening, but there is a lot of competitive pressure. Currently, GBP 701 million is the size and 73% is offense.

For CXM, the pipeline is different from the other domains, but the pipeline is actually growing for CXM at 14% growth YoY, about GBP 106 million in EMEA. For CXM, we have been doing very detailed analysis since last year, so the pitch win rate is very good for CXM. On the other hand, client retention is also very high. With those considered, we believe that the recovery trend will strengthen.

Sano: For your second question. To give you the conclusion first, yes, a slightly conservative outlook, I would say. One is that a high growth rate of 6.2% in FY2025, so there is some rebound. Also, last year, there were some large-scale events in FY2025 such as the World Expo and the World Athletics.

Looking at the very strong stock market and the new administration from the election, the market environment is not bad at all, and there is the WBC, FIFA World Cup, Asian Games, the current Olympics, there are many large-scale events. We have a good win rate in the Internet ad business, which is a growing business. We are growing ahead of our competitors, so we would like to outperform the guidance.

Questioner 4: I have three questions. One is about the balance sheet on a non-consolidated basis. I understand that the retained earnings are negative right now, but you have cash, and you have the capital and reserve capital, so we believe the net asset overall is still positive.

In order to secure a buffer to enhance your capital, the capital policy on this occasion is issuing a bond on this occasion. Is that the right understanding? I wanted to receive an explanation about your capital policy going forward.

My second question is in regard to the North American business. The CXM business apparently has started to improve, and the Media business has recorded two consecutive years of acting positively. I understand that you want to also add values in the Data &Technology area. It seems that the forecast is not that pessimistic. Well, going forward, when you look at the organic growth for the US going forward, what are some of the concerns, if you could elucidate on that, please?

My third question is, within the Mid-Term Management Plan, you said that the operating margin target of 16% will be maintained. You did take the impairment loss on goodwill, but the ability to generate operating cash flow I feel has not been damaged. I think the operating cash flow target was JPY140 billion. Do you have concerns about your ability to generate cash to that extent? It does relate to the first question on the balance sheet, but appreciate if you give some comment on that, please?

Endo: For your first question, due to the consolidated impairment loss that we have taken on this occasion, the balance sheet on a non-consolidated basis, the distributable profit, which is a source of dividend, ended up being a negative JPY234.3 billion. The equity ratio or the other financial indicators are impacted due to the impairment. We have filed a registration for the issuance of the Bond-Type-Class-Share subject to approval of the partial amendment to the Articles of Incorporation. This is more from the perspective of preparing for future growth investment, as well as strengthening our capital base, and secure flexible options to be able to engage in various initiatives.

The third question is the operating margin of 16% in the Mid-Term Management Plan, if this has been maintained. As for cash, based on the track record, operating cash flow of International business has been negative for several years, but this turned positive in FY2025. In that regard, it's not the case that we have concerns about the cash. That is our view right now, but over a medium- to long-term growth going forward, we need to make investments. Here, under the new structure, we wanted to revisit the situation. In regard to the financial, the indicator of 16%, we have decided to maintain.

Giulio: For your second question, on the outlook of North America and any concerns specific to that. Well, as you heard, we are looking for organic growth of minus 2% for the full year. Let me elaborate quickly and briefly on each practice, and then we'll comment specifically on the concern.

When we look at Media, solid momentum should continue. We anticipate more demand in performance-oriented and data-driven channels, so we will accelerate our investment in the Media++ strategy, and we also embed an AI-enabled workforce with stronger data integration across planning, activation and analytics.

In CXM, I think you have already heard about the progress. We intend to further accelerate the content supply chain with our CRM.

To your specific point on the concern, this is really focused on the Creative practice which we anticipate is an area that will face challenge. As Mr. Endo quoted, we've unfortunately seen significant client losses during FY2025, and they are impacting FY2026. Also, we are anticipating some clients spend reduction that we got in FY2025, so we hope to stabilize the business throughout services that combine Creative and Media, production and social, but we need to factor in the impact of the losses that we got last year. That's the outlook. It's just factoring in the impact of last year, but we have a clear plan going forward.

Questioner 5: The first question is regarding gen AI and how that will impact the competitive environment for our advertising agencies. For overseas ad agencies, there seems to be a headwind regarding the share price. How do you plan to differentiate yourselves in the new Gen-AI era?

My second question is to the next President, Mr. Sano. As a member of the new management, amongst the challenges that were discussed today, which challenge do you think is the most urgent that you need to address first? I'd like to ask about your priorities. Also, as the new management member, why do you think that the new management will be better positioned to address these challenges? What has been strengthened through the change in management?

Igarashi: In terms of the first question, as Mr. Sano also mentioned earlier, our industry, but not just our industry, AI is making waves across the different industries. We, ourselves, cannot think about our future business without the use of AI either.

In terms of rebuilding the business foundation, I mentioned that there are 750 initiatives. These are not just cost-cut measures, but standardization and automation are major themes. In order to make the operation more efficient, be less labor-dependent, using AI for higher efficiency, this is also necessary for building the business foundation.

Also, we'd like to look at the upside of our business opportunities. This year, "AI for Growth" is our major objective. By leveraging AI, we can achieve higher growth. This is a group-wide initiative. Data and technology, dentsu.Connect is the center of our data and technology, so we would like to centralize the AI-related expertise here. There are over 700 clients that have already introduced dentsu.Connect. Also, many agencies are investing in AI. Rather than locking clients into a closed agency platform, which many clients are concerned about, we focus on interoperability. This means that the platform is connected and open to other platforms

and to the clients themselves so that AI can be adapted, customized or improved to match clients' needs. I believe that the clients will understand and work with us together to resolve their challenges. This is different from other agencies and is unique to dentsu. This is something that is now being understood amongst our clients, and I believe that we can deliver results based on this policy.

Sano: For your second question, there is so much that I'd like to say, but I'd like to keep it simple. First is the rebuilding of the business foundation as we explained earlier. In order to improve the profitability, with the transparency, simplification, and visualization, we review at underperforming business to choose whether to exit or downsizing business. We need to execute with speed. That is the most important thing. As to the organization, there is going to be a Global Chief Transformation Officer, which is the first position to be in our Group. To rebuild the business foundation and reevaluate the underperforming business, this is the executive management who will be in charge.

Second, growth. Our growth is to identify the issues of the client ahead of them, and to support the client resolve those issues. This is how Japanese business grew, and we have to expand this globally. As an organization, we need to be flatter, meaning that each head of the region reports directly to me. Also, Jean Lin, practice head, was in between the reporting to the President, but each Media, CXM, Creative President will be reporting directly to me. We will remove that layer so that we can identify the issues of the client and enhance our competitiveness in a swifter manner. These two are what we would like to prioritize.

There's one more thing I'd like to mention. There is a Global Chief Brand Officer, so there was some weakening of our brand last year with some speculative articles. For the clients to understand the brand, the dentsu brand, Media brand, et cetera, in order to enhance our brand power, Jean Lin will be the Global Chief Brand Officer. So that is another initiative that I wanted to mention.