Yushin Soga - Non-Executive Director, Dentsu Aegis Network Ltd. Jerry Buhlmann - Director and Chief Executive Officer, Dentsu Aegis Network. Nick Priday - Executive Officer

Yoshitaka Nagao - Nomura Securities Matthew Walker - Crédit Suisse Taro Ishihara - Daiwa Securities Masaru Sugiyama - Goldman Sachs Shinsuke Iwasa - Mizuho Securities Brian Wieser - Pivotal Research Group Oliver Matthew - CLSA Limited

Thank you very much for waiting. We would now like to start the conference call to explain FY 2018 Third Quarter Results of Dentsu Inc. [Operator Instructions] The conference today will be recorded. Please be aware as well. [indiscernible], over to you.

My name is [indiscernible] of Dentsu IR department. Thank you very much for participating in the conference call to explain FY 2018 third quarter results despite your busy schedule. The explanation today will be made in accordance with prepared document titled FY 2018 Third Quarter Results that you can find on our web page. Please have them ready for the conference call. And the conference call today will be held simultaneously for our Japan and also for international participants. From Dentsu Inc., we have Mr. Yushin Soga, Director and Executive Officer; and from London, Executive Officer and the CEO of Dentsu Aegis Network, Mr. Jerry Buhlmann; and Executive Officer and CFO of Dentsu Aegis Network; and executive officers of Dentsu Inc. are participating. And today, we'd like to have Mr. Soga to first explain the overview of the 2018 third quarter results. Then we'll receive questions from the call participants. And we are expecting to finish at 8:00 p.m. Japan time. Mr. Soga, over to you.

Hello, everyone. And thank you for participating in the call despite your busy schedule. Please refer to Page 2 of the presentation material. I would like to start with the nine months result. Revenue less cost of sales grew by 8% on constant currency basis as a result of four consecutive quarters of positive organic growth and M&A contribution in the international business. And for the underlying operating profit and investment in working environment reform in Japan, improved corporate infrastructure improvement, it actually declined. As for the digital ratio, the digital revenue less cost of sales grew double-digit for both domestic and international. And digital ratio grew to 45.4% on a consolidated basis. As well as announcing our earnings today, we also announced that Jerry Buhlmann will be stepping down as CEO. The results release this morning is a testament to the outstanding leadership Jerry has shown as CEO over the past 9 years with Dentsu Aegis Network, and before that, Aegis Group plc. And we'd like to thank Jerry for his exceptional contribution to the Dentsu Group. And please now turn to Slide 3, Page 3. Revenue less cost of sales, the organic growth in Japan and the overseas contributed significantly more so than M&A, and the organic growth rate on a consolidated basis was 4.4%. As you can see there was almost no impact from the currency exchange rate. And please go to next slide. This is showing the regional results. The first, the Japanese domestic business, driven by the digital domain and pick up in the subsidiaries there. We were able to see an improvement. And the digital ratio went up to 23.4%, growing by 1.8 percentage points. And as I've explained before, the underlying operating profit of sales because of the investments in working environment performance, first to improve corporate infrastructure. And next page, Page 5. And I would like to ask Mr. Jerry Bhulmann, CEO of Dentsu Aegis Network, to explain. Jerry, over to you.

Thank you, Yushin, for your very kind words. And I'd like to say that I have had a very rewarding and enjoyable 9 years as CEO of which the last 5.5 years being with Dentsu Inc. And I'm very proud of the track record that we've achieved together. We've built a very strong competitive global network, with a track record of our performance, an exceptional management team, which I think has continued momentum. Now that's borne out in the latest results, which shows that year-to-date, Dentsu Aegis Network is delivering 4.6% organic growth. And in the quarter from July to September, 7% organic growth. If you look at that broken down by quarter - sorry, by region, EMEA delivered 8.2% organic growth; Americas, 5.3%; the same organic growth; and APAC, 8.2%. The same organic growth. The quarterly organic growth performance represents a fifth consecutive quarter of improving organic growth. And I think this enables us to guide above the midpoint of our previous guidance in organic growth 3% to 5%. So about 4% for the year in total. You will note that there is a margin decline year-on-year. This is a purposeful margin decline. We have specifically invested in global systems and platforms to increase our shared service capabilities. And we're also investing in particular elements like our growth platform, our M1 data capability, and also other elements within the organization. So that margin decline is purposeful. In terms of new business, we continue to maintain momentum of new business in the last quarter. We've had some very good new business wins. In sales globally, LVMH in the U.S., Ferrero in Europe, United Airways in the U.S., and in Spain, which is by far the largest in Spanish market, and also some additional markets from Heineken. So good momentum on the new business front. And with that, I will hand back to Yushin. Thank you.

Thank you, Jerry. [Foreign Language] Please go to the next page, on Page 6. And this is showing the changes in operating margin, and 15.1% was the January to September 2017, and it went to 20.4% for our January to September 2018. If you look at this page you will understand as explained previously in order to move forward the improvement of corporate infrastructure, Japan and international business experienced a decline in operating margin. However, for the international businesses, the compliment ratio of fourth quarter and the revenue less costs of sales is high. Therefore, in full year term, we expect the results to be in line with the forecast, including Japan also. Next page please, Page 8. This is reconsolidation from underlying operating profits captured the OP. So if you look at the share base compensation expense related to acquire companies and inventory related to working hours, seems to be a large number. However, both of them are offsetting each other. Therefore, there is no major change on a year-over-year basis. Please go to Page 9. Again, net sales this year associates, where we have a large gain that has been announced already. We bought Kakaku.com shares, and gain on sales of shares of associates was plus JPY 52.1 billion. On the other hand, regarding finance costs additionally increased. As for the finance costs, the acquisition-related liability is due to the structure that went - we acquired companies and they did forecast exceeds the original plan that consideration based on performance increases. And that amount will be recognized as a valuation loss on the P&L, which has been already explained previously. And as a result of this, net profit was JPY 62.7 billion. It is JPY 15.4 billion increase year-on-year. Please go to next page, Page 10. This is the fiscal year 2018 consolidated forecast. Regarding this forecast, it is - has no change from the August announced figures. Next page. The content by region is shown here and there are no changes made here also. Next page please, Page 12. The CEO of our Group and the announcement of the medium term direction in August 10. And we are going continue to our focus on organic. We are going to focus on pursuing the execution of this plan, specifically speaking, the organic growth and roughly 8% higher growth that we saw continued improvement in operating margins from 2018, and maintain stable dividend. Moreover, when we announced our medium-term direction in August, we also set that measures for the future sustainable growth for the Japan business will be implemented. And as part of that as explained for the Japan digital initiative, as stated in the press release, we are planning to enter our capital and business alliance with Septeni Holdings and conduct management integration with VOYAGE GROUP and Cyber Communications. It's clear the capital and business alliance with Septeni Holdings, we expand our planning to execution structure and pragmatic advertising and others. Furthermore, through management integration of VOYAGE GROUP and Cyber Communications, we will strengthen our product development capabilities, utilizing Aptech. Through initiatives synergies, on the demand side and supply side, we will accelerate growth of the digital advertising domain and promote strengthening the new business domains. With that I would like to conclude the outline explanation of Dentsu Group fiscal year 2018 third quarter results. [Foreign Language]

We now like to receive questions from the call participants. [Operator Instructions] Operator, back over to you.

[Operator Instructions] The first person to ask question is Mr. Nagao from Nomura Securities. Nagao, please go ahead.

My name is Nagao from Nomura Securities. I have 2 questions. First of all, I'd like to ask to Mr. Soga with regards to Japan. Now this fiscal year, you're expecting to spend JPY 13 billion of the working environment reform expense. Now as of the end of September, how much of this expense have you already spent? And given the current progress, my impression is that you may not be able to use the entire amount, so would that cost be carried over to the next fiscal year? That's my first question. The second question is for international business. And I understand that Nick is also participating today, so I'd like to ask my question to Nick. Now over - so you are spending money to improve IT. Now this cost ends this fiscal year? Or will the cost increase continue beyond? And could you share with us your forecast going forward? And I think also together with the expectation for the margin going forward?

Thank you very much, Mr. Nagao. I would like to respond to the first question. For the full year 2018, the working environment reform costs was JPY 13 billion and for January to September, we spent about 65% of that JPY 8 billion. So that's how much we have spent so for. The remaining JPY 5 billion, whether we are going to continue more this in the fourth quarter or not, at this point in time, for the unconsolidated and also for the domestic group companies, we are still scheduling to use up this amount by booking these costs. But there are some areas that not have been involved yet. So some portion could be carried over to the next fiscal year, and of course, is not 0. Thank you.

And in terms of the second question. This is Nick Priday speaking. So the question was around our technology spent and whether or not that cost will continue into the future. You're quite right, that we are investing in systems and platforms across our business. And as Jerry said, when he described the performance of the business on a year-to-date basis, that's very much intentional to ensure that we deliver a business well equipped for the digital economy. And we give our people the best-in-class systems from which to provide good quality services for our clients. We do expect that, that spend on systems and platforms will continue into 2019, potentially a bit beyond. But we could say that the margin in 2018 would be a full. And we do expect, over time, for margin to grow from that position. But we're not providing any specific guidance at this time in terms of what that margin number will be for 2019. We would like to do that at the year-end results and that's in February.

Your next question is from Mr. Matthew Walker from Crédit Suisse.

I've got two questions. They are both about the Dentsu Aegis Network, if that's all right. So could you tell us what percentage of Dentsu Aegis Network is actually media buying and planning? And is that growing - is that piece growing in line with the 4.6% that you've reported year-to-date? The second question is, obviously, you do have quite a lot of media buying and planning, I think, in your business, so even before you make the platform investments, why your margins so much lower than your competitors in their media buying and planning margins?

So - yes, it's Jerry. We don't disclose the breakdown of proportions of our business in which areas. But we have strong digital business. We do disclose our percentage of that, which is 60%. We also have strong credit businesses, but they tend to be more digitally empowered. And obviously, we have a competitive media planning and buying businesses within that across both performance and the digital media. I think, moving on to your second question about positioning in '20, we are very much focused on our basic capabilities and aspect and our competitive advantage at the moment. And the addressability is a key part of media reviews all our clients are looking to get deliverables, stronger deliverables out of their performance with their agencies, and we are pretty focused on that. So we're able to get involve with price discounts being specifically not a strategy or technique we use, we tend to focus on a highly competitive product, which shows that we deliver and we find that, that works best for our clients in reviews.

Next question is from Mr. Ishihara from Daiwa Securities.

My name is Ishihara. I'm from Daiwa Securities. I have 2 questions. The first question is with regard to the international business. In the 3 months, what are the size of the new wins that you had in the last 3 months - size? And these newly acquired fields, how would they start to contribute towards the earnings? So that's the first question. The second question, as you have explained before, there's a system in VOYAGE GROUP and I understand that you have maybe investments towards these companies. And then CCI, I think was not a listed company previously, but it will be part of the same group. And I see that they will be delisted. Now just change in strategy and the potential for the growth for the Internet business how will that change going forward? And what type of difference would there be vis-à-vis that you had so far? If you could explain that point, please. Those are my 2 questions. Thank you.

Okay. So this Nick Priday speaking. It terms of your first question about the deals that we've done in the last quarter. I think I'll draw your attention in the first instance to the summary of the international results whereby we - the revenues of our business or revenues less costs of sales have grown by 10.8% on a constant-currency basis, overall. And that is broadly split 50-50 between M&A, growth and organic growth. Year-to-date, organic revenue growth performance is plus 4.6%, with the balance coming from acquisitions. I'll say the size of our acquisition remains healthy. I think the activity around M&A has been slightly reduced in 2018, for Dentsu Aegis Network. But that is consistent across the broader landscape. I think we still remain close to the top of the lead tables and some of the M&A activity. It remains a goal of us to accelerate our strategy by tougher M&A. We just need to make sure that we are perfectly cautious in terms of our due diligence procedures. But we have managed to close a number of deals in the first quarter, the large of which could be based in Switzerland and Germany, which will continue to help us expand our local network internationally. So M&A does remain a key part of accelerating our strategy. But activity, it is a little bit reduced for us this year as it's across the broader sector. Thank you.

And I would like to respond to the second question. As we have pointed out, the CCI and VOYAGE will be merged. And VOYAGE will maintain being listed. So it's not the CCI that will be listed, the VOYAGE as a holding company will maintain its listing. And will that be changed to the strategy? No, not at all. Technology - or the digital advertising, so technology area is where we have been somewhat weak and we're going to enhance that more. And as a result therefore, need improving our performance-based advertisement. So it's not the case that there was a change in our strategy. So the capability that we didn't have previously through this acquisition also from the capital. We have brought them into our group that is our strategy.

The next question is from Goldman Sachs Securities Mr. Sugiyama.

Thank you very much for your explanation. I am Sugiyama from Goldman Sachs Securities. The previous - this is going to be overlapping the previous question. Again, to gain clients, I have some customer wins. I have a follow-up question. Last time, the [indiscernible] as far as the explanation of session. It was explained that the 2018, our customer wins trend is low, and in the second half there is quite of a pipeline, and that's how I understood the explanation LVMH for the recent wins and Intel is another win, too. So once again, the 2018 customer wins are progress, I would like to know and also for our next fiscal year, these customer wins will probably drive some organic growth. So I would like you to comment on that organic growth also? That's my first question. And regarding the second question is also for Dan, especially for in the EMEA region, the buying countries growth rate difference, on Page 19, you disclosed the January to September by country growth rate. And I looked at that, it's seems that the U.K. or West Europe growth is - are low in EMEA, but on the other hand southeast than Europe and Nordic countries are having a large growth. Therefore, I would like to know what's actually happening there. And not EMEA, but in India it seems like you have a large growth also, so I'd like to know the background on this. Those are the 2 questions.

Thank you. In relation to 2018 wins, I think there is sort of 3 aspects to it. Firstly, one raised important point was the retention of Microsoft at beginning of the year. So in terms of how we have played out retaining Microsoft was critical, so that was a good start. I think our new business wins have been steady this year rather than spectacular. I think last year, we had a spectacular year. We won JPY 5.2 billion. And I anticipate this year, the win rate will be significantly lower than that. But this is a more a consequence of some natural phasing of new business. You can have good years and less good years. But we don't have any bad years [indiscernible] over the last 4, 5 years, we have always won a significant amount of new business. And this year would will be, I think, more solid year. But importantly, with the retention of Microsoft behind it. And those significant client losses in our view. In terms of the impact on next year, we would anticipate that it will have a positive impact on organic growth. And clearly, there is much else we do in the business, increasingly we offer more integrated solutions, which enables us to cross-sell and up-sell services and that's going very well based on our credit platform, which is a platform which we manage our key accounts, plan on a global basis, and that's generating a significant growth too. And I think overall, our guidance is that we will continue to outperform market in organic growth. And clearly, we will give you much more detail on that when we get into - or when someone else get into next year. But that's the overall picture on that. Nick, do you have anything to say.

Yes, thank you. So in terms of the second question, which I think really was about growth by market within regions. We do include disclosure on Page 19 that sets fact the sort of range of performances across our major markets. We don't disclose specific percentages by markets. But that disclosure is intended to give you a flavor of the different levels of performance across our major markets. And there is some variability by market as you would expect. But I'll just summarize by saying that importantly, all 3 of our geographic regions are growing organically on a year-to-date basis. And in the third quarter. And I think, if you look across the agency sector, that really is quite unusual to have a consistency of performance across the world in terms of our organic revenue growth. And I think that's a testament to the strategy and execution against that strategy for Dentsu Aegis Network. But we're not going into any more detail in terms of market-by-market organic growth in the frame. Thank you.

This question is from [indiscernible] Morgan Stanley.

I have two question. First of all, the investment in group corporate infrastructure. And up until the third quarter, both in Japan and abroad. How much have you spent so far? And what this will be for the full year? And what's the level we will see this come down to in the next fiscal year? That's the first question. The second question, and as I was describing your document, and in China, you achieved organic growth - positive organic growth, and could you explain why you have achieved the positive organic growth for China? And I think the comment was that you saw growth for the Japanese clients, but what we were worried about the most is Alibaba campaigns and Baidu, and these are Chinese companies mainly for that net advertisement. And they may be dealing directly with the clients without using the agencies, in other words they are not using the agencies starting to have large impact, so I what - I have heard, so I wanted to understand the situation there? Is that only something that's occurring in China? Or was that impact partly to disappear as it has gone around a full circle? So if you could explain the situation in China in somewhat more detail, please?

[Foreign Language] And I would like to respond to the first question. And particularly with regard to the situation in Japan, then I will hand over to Nick for the latter part of the question. As for the Japanese market, as I have explained in the first question, we are working on to add investment to improve corporate infrastructure and for working environment reform for [indiscernible], and so far we've spent about JPY 8.1 billion. And by the end of the fiscal year, we will continue to spend the necessary expenses. And so we have a true aspect investment to improve corporate infrastructure and also working environment reforms. There is no overlaps, but they're not exactly the same. So if we talk about investment, improved corporate infrastructure, this JPY 13 billion, how much of that will be for the corporate infrastructure? And how much will this be in the next fiscal? We need to scrutinize that going forward. But at this point in time, how much money we will spend next year to continue with the improvement of corporate infrastructure. We don't have an exact number for that at this point in time. So I'm unable to respond to that at this point in time. And so Nick if you could provide your response please.

Sure, thank you, Yushin. So in terms of the moneys we're spending to improve to corporate infrastructure as the question was raised in the international business. As I said, we are spending money in a number of areas to ensure that we operate in a digital economy business. And a lot of that spend is around systems and platforms and facilitating the move to more shared services across our business, which means that our brands can focus on providing fantastic services to our clients, and can collaborate to the greatest extent possible. And which I think our operating model is already a great advantage in sense of facilitating that. So it's driving that greater collaboration even further by investing in systems and platforms across Dentsu Aegis Network. And in terms of the expense of that investment, we disclosed that in terms of what our anticipated operating margin will be for 2018, and we were clear about what that margin impact would be at the beginning of this year. And we are saying that we - and we're not providing any different guidance in terms of that margin delivery in 2018 at this stage. And so our margin expectations are very much as they were at the beginning of the year, and our progress around implementing common systems and platforms across the group and driving shared services is good. In terms of what that spend will continue to be in the future? What we've said is that operating margin will improve in the future, and as I said, in an answer to an earlier question, we're not giving guidance in terms of the content of that margin improvement at this point in time. But I would draw your attention to Page 12 of the presentation, which does talk about Dentsu Group's medium-term direction, which includes continued improvement in margin. And that's really about making sure that we do capture the benefits and realize the business cases surrounding the deployment of common systems and platforms. And so there will be continued spend going forward. But as we have said before, we look at this in terms of our operating margin for Dentsu Aegis Network. Obviously, the third quarter and each quarter is slightly variable in terms of margin, the fourth quarter will not be much more profitable due to the seasonality of our business to some extent. And our expectation is that we are fully - our margin in line with previously issued guidance. Thank you.

So Nick, just to pick up on the China question. We do remain, of course, we are optimistic about China. We have seen some progress in the last quarter, and is largely driven by Western and Japanese clients increasing their spent. In relation to the disruption that's taking place and your specific reference to Baidu. Clearly these businesses have taken up a reasonably larger growth in China. But at the same time, those tend to be very focused on the small and medium-sized enterprises. The challenge and the opportunity for us is as an agency business is to ensure our services are relevant. What kind still need, is they still need to what the agencies can find alternative routes to market not just through VAT, and that's a lot about providing new types of services for SME clients. But also looking at how we develop our commerce capabilities. And I think, we're beginning to see in China, a lot of new competitors coming into that market, with a smaller more innovative, more agile, and they're looking for support and help with - in that commerce. And really for any agency business, you need to be relevant across the product sectors, across the different channels and need to identify the best way to utilize all of those to build clients brands and to drive their own e-commerce. We have invested heavily in our e-commerce capabilities. We are developing new products at all time. And we're pretty confident there are combination of insurance. We have relevant investment in our products, building our systems and platforms, businesses and making sure we got an offer that specifically helps and supports local SMEs will add significant value and growth to our business overall. So we are sort of cautiously optimistic about our approach to China. We have new management in China, which is doing a very good job there. So we're pretty confident they're driving that forward and we are clear about our strategy. In terms of, if you like the copycat contagion of approaches like China. I think, it's never quite the same anywhere else. It's always different, but it is quite an interesting market to follow. And I think, if you're looking for some form of analogy then you've seen in the West, particularly in Europe dominance of Facebook and Google. I think we'll see Amazon is now very much more focused on driving advertising revenue, making inroads into that market. And in the end, these are tech platforms that are very strong, they have a very specific offer. They are another media owner. And it remains our task to advise and execute folks within the specialism of Google, Facebook, Amazon and others. But also, across the whole communication teams. And I think, we are very comfortable. We've got relevant services and a lot of what we're investing will make us much more capable to do that. And that's borne out in terms of the performance of our business overall. And we're not going to achieve with new business.

[Operator Instructions] The next question is from Mizuho Securities, Mr. Iwasa.

I am Iwasa. I have got 2 questions. The first question is Japan businesses. Internet business segment shows a 22.6% growth from July to September, it seems that the share has increased, too. So specifically, speaking, with what initiative? Why is this growth rate increasing from January, March, April to June, July to September? So from the second half to next fiscal year, when we look at the Japan business or businesses sector, the Internet business growth what are you expecting? That is the first question. And the second question is the Japan and international businesses of fourth quarter from October to December to January to March of next year and April to June, how are you looking at demand forecast for the international business? I think that the agency businesses improving and compared to the year-end situation, how is that going to differ? Is the demand going to be stronger or weaker? It could be a qualitative comments. But I would like to know?

Okay. Then I would like to answer the first part of the question. As you have asked 2018 first quarter, second quarter, third quarter on a year-on-year basis, the Internet business is increasing. Whether the share is increasing also or not, it will all depend if the market itself is increasing or not. But the competitor Hakuhodo or CyberAgent, when we compare to those companies, this is the growth rate is no less than them. The reason behind this is because last year or last - or 2 years ago, the PDM concept was implemented and we look at how people are moved. And we combined that with the digital data and used it for marketing. And that part is starting to pick up in terms of being accepted highly. And the other thing that we can think of is that the so-called Internet marketing, you can get Internet of the clients that pick them up early stage towards the market for our clients. For the national clients, we have one day we're shifting over to utilizing the Internet. They are using Dentsu, I mean, the time lag that they use to have, that gap is becoming smaller and smaller. Because their Dentsu capability is increasing. So the national client that we have a strong relationship is now catching up because they are utilizing the Internet more. And for the second question, Japan situation I will explain. And for the international, I would like to hand over the microphone Nick or Jerry. Regarding the Japan market, we think that it is going to have a strong growth for the fourth quarter and next fiscal year. I cannot give you any specific guidance to the degree of that growth. But for Japan, Rugby World Cup next year. And then in 2020, we have the Tokyo Olympics. And towards the Olympics, in 2019, it is considered to be the preparation year. Therefore, the marketing support bouncers that we have they also towards 2020. They are thinking of how they can use the event held in 2020. And they will be thinking about that in 2019. So it's a crucial year. So from the next - the fourth quarter into next fiscal year, we believe that we can have a strong growth. So Jerry or Nick, please go had.

Okay. Thanks Yushin. It's Nick speaking. So in terms of the outlook for the fourth quarter for the international business. First of all, I'll deal with the contemplative guidance, and that is that we have said on today's call, and as Jerry mentioned, as we've been going into the presentation, that the previously issued guidance of 3% to 5% organic revenue growth for the full year was being modified. And we said, we expected the full year performance now to be above the midpoint of that range, so above 4%. In terms of the more qualitative factors, I would say, the first instance that the market does remain very challenging. And we do need to make sure that we create our own momentum and tailwinds. And I think the business has got that. But all of the growth, which we are seeing remains self-generated. I think we see that our global clients are large and international client base continues to grow quite well. And above the overall rate - overall growth rate of the group. But as we go into Q4, we do start to see and it's a slightly tougher comparatives, not materially so, but from a flat performance in Q3 of 2017, we did report positive growth of 1.2% in Q4 of 2017. And so the comparators gets slightly tougher. But overall, I think we're seeing a slight pick-up in long-term planning, from clients showing a degree of confidence returning from management. But I think that does rely on a continuing momentum into Q4, which we hope very much will be the case. And we do sense some cautious optimism from our clients about 2019 and the future outlook. And backing that up, we have seen in our own business have pick up in project-based business globally. So those will be some qualitative factors, which I would add to the quantitative updated guidance we'd given today.

The next question is from Brian Wieser from Pivotal Research.

Well, I just wanted to know at least one of your recent wins maybe more data marketer who have insourced their problematic buying had essentially awarded, I'm wondering if you could just talk more generally about insourcing trend, not that I expect that in-house is all of a sudden running back to their agencies. But I'm curious if you could talk about what you're seeing in terms of that trend and through the marketers, looking to take more controls over? And on the other hand, do you actually see opportunity at the present time from marketers, who maybe were their first generation of insources to win more business from?

Yes, thank you, it's Jerry. Look, we are seeing some insourcing in some areas. And I think to some extent that reflects the evolution of marketing. It is unbelievably complicated, it's increasingly addressable, it's more real-time, it's only channel, and there's a huge amount of media being consumed across many, many channels, so it's very competitive. And I think I see this part as a trend of marketers actually sort of training themselves up a bit, if you like to understand the market better. What we often see with insourcing particularly interesting in technical areas like it is that, the day you start insourcing is the first day towards when you outsource again. Because you take them a little down over time. And really the essence of agencies is that your services and your capabilities are relevant are scaled and can add value. And whenever there is a smaller trend of insourcing tends to be followed by our global chain of outsourcing, and it's up to the agencies to make sure that they have relevant services, the right capability and they're able to add value. And in this increasingly competitive marketing value chain, there are many, many opportunities. And something may insource since they insource quite a lot for. It is a reduction of opportunities for agencies. I say it is more opportunity. And I think some of the insourcing for outsource again relatively quickly. So an interesting period is more opportunities in front of us.

The next question is CLSA, from Mr. Oliver Matthew.

I have a question on management changes. Could you give us an update on your plans for overall management structure change? That's the first question. And the second be, Jerry, just obviously, there is a surprise that you are leaving for the CEO role, could you talk about how your roles and responsibilities will be handed over? And also could you talk a little bit about what kind of challenges you think remain in the business going forward?

Okay. First of all, regarding the first question, I would like to explain. The management change regarding the overall Dentsu Group. Well, today, 2019 executive officer team was announced today. And in 2018, largely, we kind of replaced the members. And from overseas, we had Nick Priday, the CFO to join the management. And the next year, we don't have that much of a large change is our message. But - and the Internet or the digital business in order to reinforce those 2 businesses. We added 1%, for that to our executive officer team. And as mentioned that before, the Japanese business segment, we are going to continue the business transformation, especially shifting over to the additional business. We have created a necessary team to enable us to do that. And the second question regarding Jerry's question, maybe it's better that Jerry himself answers it. So I'd like to hand over the microphone to Jerry, please.

Thank you, Yushin. So in terms of hand over, the first thing to say is that there is a 15-strong executive management team, which remains unchanged, managing Dentsu Aegis Network. Also Tim Andree, who'll come in and take over as CEO, and he is - as CEO, it is additional responsibilities. I worked closely with for 5 years. He's very familiar with the business. The changeover has been planned for some time. So I've been planning to step down for some while, so it's well planned, it's being well executed. The management team is consistent, since the beginning of the business. So I think that momentum will continue. I think in relation to the challenges going into 2019, those challenges really relate to the pace of disruption in the sector, and the ability of our business to transform to ensure we remain relevant and provide pricing and services that support that transformational disruptive business. As we mentioned before, we are investing quite heavily in systems and platforms, we're making good progress there, and I think that will be critical to ensure we can leverage the scale and capability of our global geographical footprint. I think the real changes are really focused around how we manage and use data effectively at least. And very much in the context of new regulation, how we can do that to provide more addressability in terms of connecting with consumers. Also how we drive our commerce capability and commerce platforms to support principally e-commerce group, some omni-channel commerce, some omni-channel creative engagements. So there is a range of challenges. But I think we're across those challenges as a business, we're infecting the right areas. We are very focused on relevant services. And you know the reality is that the change is quite good. It ensures if we're relevant, we can drive competitive advantage. And this business it's relentless. We have to maintain that relentless focus and energy, no success is final, no final is fatal. So we just need to keep focus on that positive energy. Keep focus on relevance, investing in our systems and platforms, making sure are cost competitive. And most importantly, that we retained our very best talent, that we ensure we remain a high-quality employer, with good people wanting to stay in the business. These are momentum businesses. If you're growing, good people want to come, good people want to stay. So maintain momentum and the business will be very strong. And I think you will continue to grow highly successfully. So I'm very confident about the outlook. But of course, it is a challenging market. And we do face that disruption and we need to face that as we go forward. Thank you.

Thank you very much for the many questions asked. I think we have come at the scheduled finishing time, so we'd like to conclude the question session.

Thank you very much for participating in our conference call to explain the FY 2018 third quarter results.

So with this, we would like to conclude the conference call to explain FY 2018 third quarter results of Dentsu Inc. Thank you very much for your participation despite your busy schedule. Please hang up your phones.