Good morning, and welcome to the Dentsu Group Inc. 2022 Q3 earnings call. My name is Yokota from Dentsu Group's IR team. Please be aware today's call is being recorded. This call is simultaneously held in Japanese and English. Please choose your language from the bottom of the Zoom screen. If you have difficulty hearing, such as audio overlapping, please mute the original audio. For those joining on the telephone line, you can listen to the original voice only. Today's presentation materials are provided on the Dentsu Group IR website. Joining me today are CEO, Dentsu Group, Hiroshi Igarashi. Igarashi. CFO, Dentsu Group, Yushin Soga. Soga. Dentsu Japan Network, Norihiro Kuretani. Kuretani. CFO, Dentsu International, Nick Priday. This is Nick Priday speaking. Hi, everyone. The agenda for today, we'll start with business update from Hiroshi Igarashi, and financial update from Yushin Soga, followed by a strategic update from Hiroshi Igarashi. After that, we will invite you to ask questions. Mr. Igarashi, please go ahead. Hi. This is Hiroshi Igarashi, CEO of Dentsu Group. I'm going to give the updates on our business from the third quarter of 2022. In the first nine months of the year, the Dentsu Group posted + 4.3% organic growth. The performance in Japan of - 0.1% was in line with our expectations. This result was affected by the very strong performance we delivered in the third quarter of 2021. Dentsu International continued strong growth of + 7.6%. Our operating margin at the nine months was 16.4% as the group remains focused on simplification and transformation to reduce operating costs. The fast-growing area of our industry, customer transformation and technology, grew over 20% and now represents 32.6% in our group revenue, the highest figure quarterly and cumulatively. Here are some of the highlights for the third quarter. For new client wins, we announced an extension of our relationship with BMW, Vodafone, and welcomed Molson Coors as a new client at Dentsu International. In Japan, we expanded the integrated account for Sekisui House, including marketing planning, creative, digital, and media. Moving to sustainability and ESG awards and recognition. Dentsu Group Inc. has been awarded a gold in Work with Pride, which supports LGBTQ. We also expressed our support for Business for Marriage Equality, which promotes the legalization of same-sex marriage. Furthermore, the Dentsu Group was awarded 4.5 stars in the Nikkei Smart Work Management Survey, receiving an S rank rating in all areas of the best use of talent, innovation, and market development. Dentsu International has won a bronze in the Global Good Awards, which recognizes companies driving social and environmental change, the only award in our industry. Finally, industry awards and recognition. Merkle was named as a leader in the Forrester Wave: Customer Data Strategy and Activation Services. Dentsu Digital has been certified as a premier partner of Google Cloud and has won Salesforce's Japan Partner of the Year award for the third consecutive year, as well as the Marketing Cloud Innovation Partner of the Year award. ISID has won the UiPath's Partner of the Year for four consecutive years, and they won Impact Partner of the Year award. Next, I will hand over to Soga-san to discuss our financials. Thank you, Igarashi-san. I would now like to take you through the financial results for the first nine months of 2022. Regarding third quarter, our three-month results, we reported organic decline of 3.7% for the Dentsu Japan reported organic decline of 15.1% impacted by the exceptional prior year one-off comparables when we reported 50% organic growth. The third quarter growth rate in Japan compared to 2019 improved versus the second quarter, demonstrating the underlying demand in the Japanese market. Dentsu International reported 5.4% organic growth led by demand for digital experience and customer focus transformation services. Margins were also lower year-on-year, also impacted by the one-off comparables from 2021. However, margins remain 300 basis points ahead of 2019 due to the simplification and transformation the group has undertaken over the past three years. These results are in line with our expectations for the quarter. Our nine-month organic growth is +3.4%, a very strong performance given our comparables last year. Our operating margin is 16.4% at the nine-month stage. The group operating margins are 380 basis points ahead versus 2020 due to the focus on business transformation and the resulting fall in operating costs. Customer transformation and technology now accounts for 32.6% of our total revenues, up 380 basis points year on year, demonstrating progress towards our stated strategy of reaching 50% of our revenues over time. In growth rate, its growth rate on constant currency basis was over 20% reaffirming our strategy of growing revenues in the fast-growing area of customer transformation and technology. Moving to our regional view, Japan, our biggest region with 40% of group's net revenue, reported flat organic growth at the nine-month stage in line with our expectations. In Americas, our second-largest region with 29% of our group net revenue, organic growth was 7.6%. In EMEA, excluding Russia, organic revenue growth was over 10% at the nine-month stage, with the growth exceeding 15% in the third quarter. Customer Transformation & Technology growth was once again over 20% in EMEA in the quarter, with momentum expected to remain into the year end. In APAC, excluding Japan, organic revenue growth was 2.7%. Customer Transformation & Technology grew double-digit with India and our Southeast Asian cluster especially performing well. Dentsu Japan Network, Dentsu Inc. was down at the nine-month stage, but in line with our expectations. ISID maintained its growth rate at over 20% at the nine-month stage, and Sapient reported double-digit growth, largely consistent with the six-month performance. Dentsu Digital reported over 7% growth at the nine-month stage, despite the tough comparables from last year. In Dentsu International, media reported a solid 4.4% growth driven by strength in the EMEA region. In creative, growth remains muted compared to other service lines, but the launch of Dentsu Creative has been well received by clients and should reinvigorate this business in the coming quarters. CXM reported 12.2% organic growth at the nine-month stage, and we see our clients continue to invest in redefining their connection to consumers through technology and digital transformation. On a constant currency basis, CXM grew over 18%, demonstrating the synergy effect of growth achieved both organically and through acquisition. This slide covers the movement of net revenues on a year-on-year basis. While currency continues to be a benefit to our reported results, both organic growth and acquisition revenues contributed to the increase year-on-year. Recent acquisition in our customer transformation and technology practice, Extentia and Pexlify continue to perform well. Integration progress is good and revenue synergies are progressing ahead of expectations. The next slide shows the group operating margin trend on a nine-month Dentsu Japan Network margin is - 270 basis points year-on-year, due to the strong Q3 margin in 2021, boosted by the operating leverage on the strong top line last Dentsu Japan Network, the margin is up 700 basis points over the past two years. We remain pleased with the group margin trajectory over the past three years. Looking at underlying operating profit to statutory operating profit, the major change in the third quarter is an increase in business transformation cost in line with our previously stated guidance. The statutory operating profit is lower year-on-year due to the major asset sales we conducted in 2021, including our headquarters building. Next slide is the reconciliation from underlying to operating, underlying to net profit. The result was JPY 58.4 billion post adjustments. Again, impacted by the exceptional asset sales last year. Moving to our full-year outlook. We see organic growth in the 4%-5% range. We remain extremely confident on our margin delivery for the full year of 18%, excluding Russia. Our underlying basic EPS forecast sees no change today. However, if the current year-to-date foreign exchange rates were to remain until the year-end, we'd see around 10% benefit to our earnings. In conclusion, our nine-month performance until the end of the third quarter remains solid, led by the growth in our customer transformation and technology division. As we look ahead, our strong balance sheet allows us to continue to invest in customer transformation and technology capabilities, and our acquisition pipeline is full. We hope to announce some more deals in the coming month. Today, we also announced the cancellation of 6% of our treasury shares following the buyback completed in September. Our repositioning as hybrid agency consultancy continues to improve our revenue mix, providing greater revenue resilience as we shift revenues towards customer transformation and technology. Thank you. I will now hand back to Igarashi-san. Thank you, Soga-san. Today, we announced the One Dentsu structure that will realize our vision, a simplified structure that will allow the business to foster agile decision-making, strategic focus, and clarity across the group, while driving operational excellence across all functions. We will manage the business across four Dentsu Japan, Dentsu Americas, Dentsu EMEA, and Dentsu APAC. We have announced one group management team that will manage the group to accelerate business transformation, further our business growth, and deliver sustainable corporate value. As President and CEO, I will lead this team consisting of 21 group executive managers with a further 15 -group management members. Under this team, we will maximize the potential of our 65,000 talented individuals across the globe, leverage their unique strengths to drive growth for our clients. This change will take effect on January 1, 2023. Under One Dentsu, the global management structure will accelerate the growth of our clients, employees, and the Dentsu Group. First, the Dentsu Group's talented individuals will be flexibly resourced to best serve our clients. We will ensure further integration of the group's diverse capabilities to deliver top-line growth for our clients. Next is the growth of our employees, our most valuable asset. We will maximize the opportunities for each individual through a global career framework, allowing increasing talent mobility across the group. We will also actively invest in talent and develop our next generation of leaders. Finally, we will grow the Dentsu Group. A more integrated management team will achieve growth by sharing the goal of increasing the corporate value of the entire group under a consistent group-wide growth strategy. We will eliminate organizational duplication to achieve a more globalized and efficient business foundation. These are the members of the group management team, the single management team that leads One Dentsu. The business executive and corporate executive meetings are the central bodies that will make critical executive decisions, and each of them will provide leadership for the implementation of the strategy. Our group of leaders is highly diverse. Female leaders account for approximately 25%, and non-Japanese leaders, 60%. The newly created roles of Chief Governance Officer, Chief Culture Officer, and Sustainability Officer will strengthen ESG management. The Chief Global Client Officer and the Chief Integrated Solutions Officer are newly established to enhance the value provided to our clients. Today, we also announced our first non-Japanese group CFO, Nick Priday, who has been with Dentsu for nine years, and the appointment of a group chief HR officer from Google Japan. Next, I would like to talk about our strategy, which remains to grow our revenue in the fastest growth area of our business. We continue to see a multiyear runway of growth as data proliferation accelerates and growth in digital channels and a digitally native population. We will continue to focus on expanding revenue in the customer transformation and technology area. This raises the value of our service offer to clients away from merely execution, but more towards high value-added solutions through consulting services. As I explained last quarter, over 8,000 talents are working in our nearshore and offshore locations to enhance our globally distributed delivery model, and more talents are joining us. The execution of this strategy enables us to deliver more value to our clients and gives us access to high quality talent at scale through CT&T. In Dentsu Japan announced a strategic alliance with TechnoPro, Inc. To strengthen the DX domain by acquiring and developing 500 DX specialists over the next five years. We will continue to invest in this high growth area. Our strong balance sheet allows us to continue to invest in acquisitions through the cycle. Our long-term vision is to shift our business and our revenue into the structural growth area of our industry, while simultaneously looking to reduce our cost to deliver services. We continue to establish a winning position at the convergence of advertising, technology, and consulting. Customer transformation and technology allows us to expand our remit with existing clients, moving beyond our traditional marketing offer as we offer new capabilities and services across technology consulting to deliver differentiated customer experiences. The growth remains strong at over 20% for the past 9 months. Customer transformation and technology enhances our existing marketing capabilities, driving synergies and collaboration opportunities across the group. In Japan, we have seen some cases in the consulting and DX areas represented by Ignition Point and ISID. They have made collaborative proposals with other Dentsu Group companies, leading to more significant business transformation projects. In addition, Dentsu Digital and Data Artist announced the collaboration to create a structure that complements each other's strengths in the data and AI domains. For the international business, Pexlify, an acquisition we announced last quarter, has seen 40% growth in the last quarter, with average existing client revenue up over 20%. At Extentia, we already have a number of cross-product pitches underway leveraging the power of One Dentsu. These collaborations will continue to drive revenue across the group. In conclusion, we expect macroeconomic uncertainties to persist. Still, we will continue our fiscal 2022 guidance. We will grow revenues in customer transformation and technology and drive the transition to a hybrid model of agency and consulting. Transitioning to One Dentsu, we will drive business growth for our clients by integrating our diverse capabilities around a group management team. We will continue to strive to achieve the goals of 4%-5% organic growth, 18% operating margin, and 35% dividend payout ratio as outlined in our medium-term business plan through 2024. Today, I have explained the renewal of our management structure and gave you an update on business performance. We will not only achieve the goals of our medium-term management plan, which concludes in fiscal 2024, but also increase the certainty of long-term sustainable growth beyond that date. At the same time, we will contribute to the realization of a better society, including for our shareholders, clients, partners, employees, and consumers. Thank you for listening. I will now hand the microphone back to the host. We will now start the Q&A session. Please use Zoom's Raise Your Hand function to ask your question, or please press star nine of your telephone. I will call out the next person to ask the question. If you're identified, please unmute yourself and ask your question. Because of the Zoom setting, we encourage Zoom participants to choose either Japanese or English channel. The first question is from SMBC Nikko Securities, Maeda-san. Please unmute yourself. Please state your name, your company, and ask your question. My name is Maeda from SMBC Nikko. I would like to ask two questions. Is that okay if I ask the two questions together? Yes, sir. Please do so. First of all is the performance for the rest of the year. You did not change your plan, but in order for you to achieve the guidance, the organic growth for the fourth quarter, what is your view for Japan and also international? Of course, the negative was large in the third quarter because of special factors, but when we consider the global advertising situation, do you feel that you can catch up or do you still have some headroom? And also Russia. I understand that there is some the upcoming impairment. Can you still achieve the guidance even with that in mind? That is the first question. The second question is regarding CT&T. Not only for yourselves, but the global agencies are performing quite well right now. They may not be using the word CT&T, but they are probably moving in the same direction. They may sometimes call it CX. The global agencies are overall the trend, or is that the kind of a structural reform trend that we are seeing overall? Other mega agencies, other DD agencies, is there any difference in regards to what you're doing versus what they're doing? Or is there any similarities? Please elucidate on that point, please. This is Igarashi speaking. Thank you very much, Mr. Maeda, for your question. We have received two questions from you. First of all, the full year guidance, including the fourth quarter performance, how we are looking at the rest of the year performance situation globally and also the situation in Japan. You wanted to hear about it. In regards to the situation overseas, with the potential impairment in Russia, can we still achieve our guidance? That was the first question, and I will respond to this question. Then after me, I will ask Nick and Mr. Kuretani to respond respectively for their business. The second question for CT&T, you have indicated the global agencies are heading in the same direction. What is the advantage that we have over them? That was essentially your question, and I will also respond to that question. In regards to the first question, now, after the third quarter, we are now heading into the fourth quarter. We feel that we will be able to achieve our targets, whether it be for the business in Japan or business overseas. We are not within the macroeconomic situation that we can be optimistic for. The objective will still be implemented steadily, and we feel that we will still be able to achieve the guided numbers. For individual projects, I would like to ask Nick to explain about the international business and then ask Mr. Kuretani to talk about the Japan business. For Nick, if you could also refer to the Russia business too. Yes, of course. Thank you, Soga-san. Thank you Maeda-san for the question. The first thing I'd say is that the full year guidance for Dentsu International remains unchanged, 5%-6%. In terms of the CT&T business, we are still very much leaders in this space. We are very much exposed more than we were during the past to revenues from CT&T, which puts us in a good position. It's a resilient position, but also one which enables us to drive growth. On a year-to-date basis, the business across Dentsu International has performed really very strongly. If you compare us then to the consultants, we also have the exposure to media that they don't. We do believe that puts us in quite a unique position to drive growth in the long term. In terms of the specific question for 2022, our guidance remains unchanged for the full year for the international business at some 5%-6%. In terms of Russia, we've announced today that we are approving the signing of the deal to transfer ownership of our Russian business to our local partners. That's positive. We have incurred some losses on the exit so far. We've recorded those losses. We expect that the full year losses will be around JPY 37 billion. There will be some further element to recognize in the fourth quarter as we follow the accounting rules. No change to the guidance in terms of full year expectation. We do think we're well-placed to drive long-term structural growth because of our exposure to CT&T. In terms of comparison to competitors, we do have that exposure to media which the consulting groups don't. Thank you. Next, allow me to explain about the Japanese business. First of all, against an exceptional performance last year, we have been able to keep a flat performance until September is something that we are quite satisfied about. Digital advertisement and DX or CT&T, this business remains to progress very steadily. What remains is what will happen in regards to mass advertisement. The recent increase in the raw material costs and the supply chain issues. If we look at Japan overall, the client's response seems to have made a lot of progress. Given the situation with COVID, we are seeing people flow recover, including inbound travelers. The restaurant, the leisure, the pharmaceutical, retail, distribution, these are areas that are starting to regain momentum. Over the last number of years, the consumption by the wealthy remains to be quite strong, whether it be fashion, luxury or luxury vehicle brands. They are becoming more prominent. In regards to F 20Y23, what we have indicated, the organic growth rate, we intend to work towards achieving those numbers. That is all from me. This is Igarashi. The second question, CT&T, how we compare against other global agencies where we have the advantage. As Mr. Maeda has pointed out, I feel that there is a great market opportunity here. Because of that, other agencies are also starting to focus their managerial resource in this area. The point is quite correct. I think everyone is starting to recognize that there is a great market opportunity here, and so people are starting to focus in that area. Now, in that regard, for our international business, Merkle in the United States is certainly an outstanding performer. The know-how they have, the historical relationship that they've built with other clients, they have a very strong business foundation. On top of that, in EMEA, we are continuing to expand our capabilities. We have quite an outstanding advantage in that regard. In EMEA and other markets included, the CT&T domain is growing in some markets in excess of 20%. This is becoming more prominent on a global basis. I think we can clearly say that this is advantage which is that, as I've explained about offshore and nearshore services, we are able to use our assets there, and we are able to operate CT&T area in a very efficient way. We're also gathering capable people and the experts not only engaged in the delivery, but also with the possibility of the client-facing areas. We are now starting to form powerful asset. In Japan too ability to develop business, and this is becoming the driver of our CT&T operations. The various approach points, we are linking the various challenges faced by our clients. CT&T in Japan is also strengthening its unique strength. That completes my response. Thank you very much, Mr. Maeda, for your questions. Next, Mr. Ishihara from Daiwa Securities, please. Please unmute your microphone, and please give us your name and your company name. This is Ishihara from Daiwa Securities. Can you hear me? Yes, we can hear you loud and clear. I also have two questions. First, regarding Japan CT&T revenue and profit ratio in Japan. In comparison to last year, in July-September quarter, I believe the ratio has grown substantially. In comparison to April-June, although very slightly, it is declining. Once again, in this last quarter, what efforts did you make in CT&T? And going forward, what will be the pace of growth of CT&T? How should we understand that pace to be? Is it going to be a gradual growth? Or despite a decelerating economy, you expect a strong growth from CT&T? Could you elaborate on this? The second question concerns the new management structure. You have announced a new management structure. Once again, to begin with, in comparison to the past structure or what were the challenges you found in the past structure and the reasons that you have decided to transition to new structure, what were the challenges? With the renewed management structure, what is the KPI that you would like to improve the most, you would like to change the most? That is my second question. This is Igarashi speaking. Mr. Ishihara, thank you for your questions. We have received two questions. First, about CT&T in Japan and efforts in the latest quarter and outlook going forward. I would like to ask Mr. Kuretani to respond to that question. The second question was on the renewal of management structure, and Igarashi would like to respond to that question. This is Kuretani speaking. Regarding CT&T in Japan and outlook going forward, as we discussed at last earnings call, in CT&T area, we do not have any missing capabilities. We have been able to complete laying of the foundation. What is necessary to achieve growth forward is to ensure we have enough quantity in rather than quality, and we would like to emphasize recruiting and training. Regarding hiring, in the last nine months in Japan, we were able to increase by 10%, which is faster than the plan. We are able to secure people. We are making good progress. In the last quarter, there was a slight decline, and that is due to reasons such as delivery timing and basic trend of CT&T coming to account for a larger percentage remains unchanged. In 2024, CT&T is expected to account for 30% of net revenue in Japan. That is the target. As premise to that is that 40% of people in Japan will be dedicated to CT&T. In both respects, we are confident that we are able to achieve or we believe that we may be able to achieve these targets ahead of schedule. This is Igarashi speaking. I would like to address the second question on new management structure. In a large sense, from the beginning of the year, I have advocated the management objective, which is to enhance our corporate value to be pursued by everyone in the organization. This includes corporate value on the market, and corporate value for our client, and corporate value for our partners and for our people. In all of these respects, to enhance value, we have renewed our determination to make greater efforts. As a basis for that, we have to increase our competitiveness, and as a result of stronger competitiveness, what we are able to achieve will lead to greater growth. Corporate competitiveness will have to be ensured, and that is the major objective behind the new management structure, including various committees. We are making sure that we will have a very efficient and speedy information exchange and decision-making in both Japan and internationally. In a large sense, in the medium-term plan, we are making efforts to achieve medium-term plan objectives, but over the longer term, what should we aim for, and what will be the roadmap? What steps should we take? That is also a very important theme as a company. In addition to short and medium-term KPIs, over the longer term, where we should be heading towards, we will be establishing targets objectives. We will be striving to achieve these targets group-wide as one, and there will be clarity in terms of managerial resource allocation. We will be even more focused on our business and management. To ensure that, we have decided to introduce this new management structure. As we indicated in our announcement, we are once again strengthening our client centricity, global clients and grow our clients in regions. We will be focusing on these clients and will enhance our competitiveness and grow together. For that, we have decided to strengthen our efforts through this new management structure of One Dentsu. Thank you for your questions. Thank you very much, Mr. Ishihara. The next question from Edison Group, Ms. Fiona Orford-Williams. Please unmute yourself, state your name, your company name, and then ask your question. Thank you. It's Fiona Orford-Williams from Edison Group. First of all, can I ask on, at the M&A front, I mean, obviously the global situation has been changing quite dramatically. Are you seeing that now reflected in the availability of opportunities or in pricing? My second question is on the near and offshoring. I mean, you've made a lot of progress there. What more can you do on that front? Thank you. Thank you, Fiona, for your question. In regards to your first question, regarding M&A. The situation in M&A continues to change in the world, and so how are we going to work on M&A? I will ask Soga-san to respond to that question first, then if there are any follow-up, I will ask Nick to also add comments. Also your second question in regards to onshore and offshore, what more can we do? I will respond to that question. This is Soga speaking. Thank you very much for your question, Fiona. First of all, in regards to M&A on a global basis. Well, the macro environment is becoming quite unclear. As I've explained in the announcement today, we are trying to expand business in the structural growth area where we are not impacted by the economic condition very much. In other words, we're trying to expand the CT&T area. Even when the economy on a global basis become unstable, we still have high expectations on this area. This is not only for us. I think our peer groups or our competitors in a new competitive landscape are probably all looking in the same area. When the macro environment is unstable, the M&A situation whether it be price or conditions or terms they don't seem to have changed very much. If anything, maybe the situation have become even more tougher. As I said before, we still have a quite strong pipeline. In the near future, we would like to be able to share with you the track record of our M&A going forward. That would be my response. If there is anything to add, Nick, please go ahead. Thank you, Soga-san, and thank you Fiona for the question. Look, I think our M&A activity remains really active. We have a number of deals in the pipeline which we're looking at closely. Obviously, the intention is to continue doing what we're doing and expanding our exposure to the CT&T practice. I would say that on pricing, the market was quite frothy a year or so ago, and it's come off a little bit. It's still very competitive, as Soga-san says, because there are a number of different parties competing for the same assets. We always think we have a good acquisition process. Our approach to M&A and how incoming vendors act on the roles they have within the organization is always seen as very positive. I do think we have a differentiated proposition in terms of M&A versus the other agency groups. We don't see them as much in the pipeline discussions with vendors as you might think. We tend to be competing with consultancies. We have a unique position there because we wanna compete with the consultancies, but we also have the media and execution capabilities that they don't have. It remains very active. Although obviously we're very aware of the macroeconomic factors and pricing's probably come off just a little bit, but it's still very competitive. Thank you. Next, I'd like to respond to your question regarding nearshore and offshore. Well, in regards to nearshore and offshore, we feel that there are still a possibility for us to expand. I'm quite confident of this. Right now, for Dentsu International operation, mainly, the CXM, offshore or nearshore, where we are currently strengthening, mostly delivery centered around India or client support work. We are enhancing both of those areas, and we are continuing to hire people in those areas. Now, similarly, in Japan, we are trying to expand nearshore, offshore operation and capabilities. In Japan, we are not just limited to CXM domain. Media operation or creative operation included, and we are trying to expand capabilities in a diverse way for both nearshore and offshore both for Japan and for international. We will continue to expand and the nearshore offshore capabilities, and we will also make them more sophisticated so that whether it be across strategy or expertise and enhancement we will look at both of those areas to further strengthen this strategy. Thank you. Thank you, Ms. Orford-Williams, for your questions. Next question comes from Mr. Kinoshita of BofA Securities. Please unmute your microphone, and please also state your name and affiliation. This is Kinoshita from BofA Securities. Can you hear me? Yes, we can. Please go ahead. I also have two questions. This time, a new structure was announced and international CEO function no longer exists, and it will be flat across the board. With this, for example, from Japan to international, you would like to provide a good influence in terms of capabilities or vice versa from international to Japan capabilities where you look towards a good influence coming from international. Do you anticipate that such cross-pollination will accelerate? Can you give some specific examples of bringing capabilities from Japan to international, or capabilities from international to Japan to strengthen your business, if you can cite any specific examples? That is my first question. The second question concerns the future, but centering around the United States. About next fiscal year onward, if organic growth is growing at around 4%. But let's say that next year if there's a recession, then if our organic growth is at zero or even in the negative territory in your international business, do you think you will be able to defend your margin? Over the long term to maintain growth and to maintain people, will you be willing to sacrifice margin? How will you respond to recession? Thank you for your questions, Mr. Kinoshita. We've received two questions. First was about new organizational structure and what benefits we can anticipate. For example, capabilities from Japan or from international business. Are there any specific examples of utilizing the capabilities? I would like to first respond to that question, and I would also like to ask Mr. Kuretani to supplement if there are follow-up comments. I would like to ask Nick to respond regarding next year U.S. business regarding revenue and margin. First question on Dentsu integrated management. In Japan, we have unique capabilities, and in international business we have outstanding management capabilities, and the major objective is to integrate these capabilities. Even before this integration from Japan and international, each respective initiatives have been advanced. For example, in Japan, we have strength in gaming, and in the United States, there is a strength in healthcare sector, and also automotive and finance sectors. In these verticals, we have each respective strength and capabilities from Japan and capabilities from international are brought together. When we approach our strategic clients, we identify strategic clients and work on these clients together. We are doing this already, and this will be accelerated under one team structure. These joint initiatives, I'm confident, will advance even faster, and I think that will lead to our competitiveness so that we are effectively able to compete and win vis-à-vis our peers. About Japan and international exchange of best practices, I would like to add to what Mr. Igarashi just commented on. First, what we call BX, business design area in Japan, is an area where we are yet to establish full capabilities in international business. In Japan, BX is bringing about a synergy with AX, CX and DX, where we are able to have very close communication with the top management of a client. We are able to acquire new business in a very stable fashion. We are feeling very confident in this respect. To enlarge our capabilities here will lead to overall group competitiveness. I'm very confident of that. We will continue to pursue possibilities in this area. For that, under the new management structure, as BX responsible person, we have a global person responsible for BX. Next, in Japan in particular, we are looking across customer journey, and with a broad range of clients, we are deepening our relations with our clients, especially in software products. Through development of software products, recurring business is increasing in Japan. In DX area, the recurring business ratio is not disclosed externally. Year by year, this ratio is increasing and we are able to grow business in very efficient fashion. In international business, Merkle is having multiple touchpoints, they are deepening with clients and based on their software products and recurring businesses are being grown. We believe that the experience from Japan can effectively be transplanted there. Second question, Nick Priday, please. Yes, thank you for the first question. I mean, looking forward to next year, we're not giving guidance on revenue or margin today, but I can give a number of sort of qualitative and quantitative points which may help. First of all, I would say that our business is much more resilient, and the question was very much focused on the U.S., but across the whole of Dentsu International, 36% of our revenues now are in CT&T. In the U.S., that's actually higher, so our ability to drive structural growth over the medium term, I think, is very strong in that marketplace. It's not just the CXM business either. I mean, performance marketing is very closely linked to our clients' top line, and we're able to really demonstrate return on investment for our clients in that space too. Generally, I would say that our business is more resilient than it has been across the sector than previous downturns. Obviously, we don't have a crystal ball in terms of what might happen next year, but we read the same headlines, and we understand the dynamics which are ongoing in the marketplace, not just in the U.S., but the rest of the world. We do think we're much more positively exposed to structural growth and the more resilient business models than we were in the past. In the U.S., our margins have been flat this year as we continue to invest in talent to make sure we're well equipped to drive our clients' businesses with them going forward. In terms of our operating margin and our profitability, I think we've done a lot of work to transform our business, to simplify the business going forward. We've seen the upshot of that with much improved margins over the last two years, which is very positive. We're obviously investing in offshoring, going back to the previous question, increased use of automation, rationalizing our property portfolio to drive margin going forward. We do need to continue to invest in our IT infrastructure and really make sure that we have a very, very integrated business living up to the vision of One Dentsu going forward. There does need to be some ongoing investment to the business going in the future. We won't give guidance today on 2023. We'll do that in February when we've got more visibility. I think across the medium term, the focus really will be on driving growth and capitalizing on the position which we've created for ourselves over the last few years. Thank you. Thank you very much, Mr. Kinoshita, for your question. We are coming close to the end of the scheduled time, but we will extend the meeting a little bit to receive your questions. Now next question is from JP Morgan Securities, Ms. Mori. Please go ahead. Please unmute yourself. State your name, state your company name before asking your question. This is Mori from JP Morgan Securities. Thank you for this opportunity to ask the question. I have two questions. The first question is regarding the current situation. Now, the third quarter, three months, if we look at the situation of Dentsu International, Dentsu Americas were more or less flat year-over-year, but EMEA, on the other hand, showed a stronger recovery. Now, in regards to the Americas, you have pointed out that the CT&T accounts for a large portion, but I thought that the quarter saw a stronger drop than others. For each of the regions, the macro environment and your structural reform, can you actually give some commentary from right now into the fourth quarter? That's the first question. The second question is regarding the structural change. I apologize for asking a similar type of question. Now, after Wendy became the CEO, it's been just two years. I think you are still going through brand integration process, and I don't think the structural reform has not been completed. I don't think the entire work has been done. From when have you started to think about this type of structural change, and what was the trigger to making this management change? If you could explain some context or background that led you to make this decision. Thank you, Ms. Mori, for your question. The first question is for each of the regions international the situation right now and the forecast into the next year we wanted some commentary on that. Particularly for Americas, what is the situation? In regard to that question, we'll ask Nick to respond. Now, in regards to the second question regarding change, in the management structure, I will respond to that. Nick. Yeah. This is Nick speaking. Thank you for the question. You're right to call out the fact that our European region had a very strong third quarter with strong performances across all of our three service lines. That's very positive. CXM in particular has grown very strongly within Europe at 20%+, which is obviously a key engine of growth for us across the business, but has been particularly the case in Europe in the third quarter. Strong performance across all the service lines. In the Americas, our growth did slow in the third quarter, as you call out. It's still pretty robust on a year-to-date basis for the first nine months. The reason for the slowdown is really a lower performance from our creative service line. The CXM business did slow in the third quarter, but is still growing in that market at close to 10% for the first nine months of the year. It's still a strong performance overall. Obviously we are very confident in the strategic imperative to continue to grow our exposure to CT&T on a go-forward basis as we've described. That would be the key difference at which I would pull out across those two regions in particular as we go into the fourth quarter. Obviously our guidance on a full year basis for Dentsu International remains unchanged. Thank you. I would like to respond to your second question. Now, in regard to this structural change with the global executives that we have been considering from the start of this year. The progress of our midterm management plan has been very strong. The outcome of our initiatives were starting to show. We wanted to accelerate that further. The executive team had worked on this study with a unified mindset. After the midterm, where we want to be over a long-term period, we felt that we need to also set some goals in that area. That was also what was discussed among the executives. On that basis, we have started to work on putting together a long-term plan. Acceleration of our midterm initiatives, we were seeing very good situations, so we wanted to accelerate that even more. Over a long-term perspective, what type of direction shall we take that to? Enhancement or strategy in that regard. From those two perspectives, we felt that we should operate as one. That was the background that led to that decision. In regards to Wendy Clark, for the last two years, from the perspective of sustainability and diversity, she has achieved a significant outcome. In terms of a structural reform, she has exerted very strong initiative. The whole group is very appreciative of her contributions. That completes my response. Thank you very much. Thank you, Ms. Mori. We have gone overboard with our time. Next will be the final question. Mr. Julien Roch from Barclays, please. Please unmute, and please give us your name and affiliation. Yes. Good morning. It's Julien Roch with Barclays. Thank you very much for going over time. Now let me ask two questions. Coming back on Q4, all the holding agencies have reported, and they said no slowdown so far. S4 Capital has reported today, and they said no slowdown so far. If I take the upper end of your full-year guidance for international, which is 6%, I calculate only 2% growth in Q4 versus 2021, and -3 versus 2019. Which is a slowdown of 3 points versus 2021 and 5 points versus 2019 when comparing Q4 over Q3 respectively. Are you conservative for Q4, or are you seeing a slowdown for international? That is my first question. The second question is the last two global recession in 2009 and in 2020, the six holding companies were down organic 8%-9%. You just told us that you thought you were more resilient because of your higher exposure to CT&T. If we go into a global recession in line with 2008 and 2020 next year, what do you think you can decline by? You know, how much better would you be versus the historical 8%-9%? Thank you. Thank you, Julien-san, for your questions. We have received two questions. The first quarter outlook. What the outlook will be. Will international business be decelerating inclusive of that? I would like to ask Mr. Soga to respond. With regards to your second question regarding next year. In comparison to strong growth achieved in the past, and in the event of a recession, what the outlook will be was the question. I would also like to ask Mr. Soga to respond. Any further or any follow-ups, I would like to ask Nick to make additional comment. This is Soga. Thank you for your question. I would like to respond. Regarding the first question on the fourth quarter, group wide, we cannot deny that there can be some concerns. As we presented earlier, international business has shown very strong performance up to the third quarter. For Japan business, coming from very exceptionally strong performance last year, this year to beat and to achieve positive growth was A rather difficult challenge, but we have been able to maintain very solid performance. Regarding the fourth quarter, we are looking at numbers in a conservative way, rather conservative way. In Japan business, we expect a upside. For international business, although we are taking conservative attitude, we consider that there can be upside. That is my response to your first question. Moving on to your second question. In the event of a recession, this is a hypothetical question which is difficult to address directly, and this is not only for our company, but investors, analysts, I'm sure are feeling that there is not a clarity yet. There is not a very good visibility yet. What is the change? How much is the change in world economy going forward? We will have to discern that. By February next year, we would like to be able to issue guidance for fiscal 2023. But as you pointed out, in comparison to other holding agencies, we are expanding CT&T business, and we are more resilient to economic cycle change. We would like to structurally be more resilient through the cycles. Please wait for our full year forecast until February. Thank you. Thank you, Mr. Roch. With that, I would like to conclude the online earnings call. Thank you very much for your participation despite your busy schedules. Please disconnect.