• by Steve McClellan  @mp_mcclellan, November 10, 2021

Despite turning in strong revenue growth in the third quarter (announced today) S4 Capital shares fell 10% on word from the Martin Sorrell-led company that profits would grow at a slower-than-expected pace given investments in technology, new service areas like CTV and “management infrastructure” to service big clients like Mondelez and HP.

Third quarter net revenue was up 92% to GBP 144.4 million with organic net revenue growth of 42%. For the first nine months, net revenue was up 91% to GBP 381 million with organic growth (which factors out M&A and currency impact) of 47%.

“As signaled previously, EBITDA (earnings before interest, taxes, depreciation and amortization) and EBITDA margin continue to reflect increasing investment to prioritize top-line growth given success in building our “whopper” client base and structures, as well as emerging service areas and technology platforms to increase efficiency,” the company stated.

S4 describes “whopper” clients as those generating at least $20 million annually for the firm. To date, the company has six of them including Facebook and HP which were added this year, joining Google, Mondelez and BMW/MINI. The sixth is undisclosed. The firm has identified what it termed “nineteen more potentials.”

The company had nearly 7,000 employees at the end of Q3. So far this year it has disclosed 10 M&A deals, including five in the company’s Content practice led by MediaMonks, four in data and digital media, led by MightyHive and one in technology services, a new sector for the firm that will be broken out separately in future earnings reports.

By region, Europe Middle East & Africa showed the strongest organic growth in Q3 at more than 75%, while APAC growth was 54% and the Americas was 34%.

The company said it was adapting a hybrid work model where employees would spend at least 60% of their working hours in the office, which is designed to “preserve and nurture” the company’s culture, while “giving our people the flexibility we believe they now generally desire.”