S4 Capital reported today in its full-year earnings report that total revenues surpassed 1 billion GBP for the first time in 2022.
Net revenues reached 891.7 GBP for the year with net organic revenue growth of nearly 26%.
The organic growth outlook for 2023 is 8% to 12%.
The company reported some good news and bad news on the “whopper” front. That’s the term S4 uses to describe clients worth $20 million or more in annual revenue. The good news is the firm added four whoppers to reach a total of 10 last year.
The bad news: Mondelez is dropping out of the category due to a contract not being renewed. On a Wednesday call with analysts S4 chief Martin Sorrell estimated that contract was worth around 17 million GBP. But the firm is still doing business with the client on a smaller scale and has also identified another potential 14 whoppers. The firm’s goal is to obtain 20 such clients over time.
When pressed by one analyst, Sorrell insisted there was no risk of any of the other existing whoppers falling out of bed.
The company posted an operating loss of 135.3 million GBP in part related to investments in people. There was also a charge against earnings for one acquisition in 2022—4 Mile Analytics—which performed below expectations. Two other companies acquired last year performed well, including digital transformation platform TheoremOne and digital marketing agency XX Artists.
A year ago the firm delayed its full-year earnings report twice due to a lack of proper financial controls at certain units as well as to not having a number of key financial staff in place. Those problems have largely been remedied, said CFO Mary Basterfield on the Wednesday analyst call.
Last year in the second half the company put into place stronger cost management measures—including a brake on hiring. Basterfield said those cost measures remain in place. Head count at the end of Last year was around 8,900 and the firm expects only a modest increase in head count this year.
“We have momentum going into 2023,” said Sorrell, “and are cautiously optimistic, despite the slowdown of growth in our major addressable markets.”
AI is a major opportunity for the company, Sorrell said. Wesley Ter Haar, an executive director at the company and a founder of MediaMonks called AI “another Iphone moment for our industry.” He asserted that S4 has an “early mover advantage” in the space given that it has been working with AI applications for several years.
By region last year organic growth in the The Americas was 27%. That region accounts for over 75% of the company’s business.