Sorrell’s S4 Capital Reports Strong Third Quarter Powered by ‘Faster, Better, Cheaper’ Approach

With planned expansions in San Francisco, Asia Pacific, Latin America, Africa and Middle East regions

Martin Sorrell's S4 Capital reported third-quarter earnings in line with expectations. Getty Images

Martin Sorrell’s S4 Capital reported a strong third quarter this morning, in line with expectations, with revenue up nearly 45 percent to $33.1 million.

For the three-month period ending on Sept. 30, gross profit was up almost 32 percent to $23 million. Excluding acquisitions and in constant currency, year-over-year revenue was up 46 percent and gross profit rose 33 percent. Year to date, S4 reported that revenue grew more than 48 percent to $94.3 million and gross profit was up nearly 40 percent to $67.5 million.

Earnings before interest, tax, depreciation and amortization (EBITDA) operating gross profit margin at MediaMonks, the digital production company S4 acquired for $350 million in July, was steady at around 20 percent in the third quarter, compared to the same period last year, and grew to 25 percent in the first nine months of 2018 from 15 percent during that time last year.

Sorrell, executive chairman of S4, said in a statement that the company is “already planning significant expansion” of MediaMonks’ services in content and digital media planning and buying globally, particularly in the U.S. and Asia Pacific.

"A focus on digital content ... along with an emphasis on 'faster, better, cheaper' executions, clearly resonates with clients of all shapes and sizes."
—Martin Sorrell, executive chairman, S4 Capital

MediaMonks is planning to open shop in San Francisco as it bolsters its staff in New York and London. S4 confirmed in today’s report that “an office in San Francisco has been added” to those already existing in the U.S. (in Los Angeles and New York). The office will help S4 serve its “growing technology client portfolio,” according to the company.

“We are delighted that MediaMonks was able to deliver continued significant growth, even during the integration of the company into S4 Capital,” Sorrell said. “We already see both a widening and deepening of the company’s client base, resulting in a strong performance for all three pillars at MediaMonks. A focus on digital content, digital media planning and buying and first-party data, along with an emphasis on ‘faster, better, cheaper’ executions, clearly resonates with clients of all shapes and sizes.”

MediaMonks, S4’s main trading company, divides its business into three parts: creative content and innovation, assets at scale and platforms and ecommerce. The creative content and innovation division that offers VR, AR and experiential capabilities “performed solidly” in the quarter, according to S4.

S4 reported the assets at scale pillar, which focuses on asset production across programmatic, precision marketing and the localization and adaptation of global campaign rollouts, doubled its gross and net revenues both in the third quarter and year to date, compared to the same period last year. The company said platforms and ecommerce also “grew strongly” in the quarter and year to date.

Geographically, S4 reported the critical U.S. region showed “very strong growth” in the quarter and year to date, as did Europe with the U.K. described as “particularly strong.”

Asia Pacific, Latin America, Middle East and Africa regions “grew significantly” in the quarter and year to date, S4 reported, “but from a smaller base.” The company plans to expand its operations “significantly” in those regions as well in 2019.

S4 noted that it completed several sizable assignments in the third quarter for Compass, Coty, Instagram, Mondelēz, Posadas and PVH/Tommy Hilfiger, as it also works with Google, Samsung, Grupo Modelo and Amazon Prime Video.

The company, which said it is trading in line with its full-year objectives for 2018, also announced the addition of Sue Prevezer QC, a partner at London law firm Quinn Emanuel Urquhart & Sullivan, as a third non-executive director to the S4 board.

Sources recently told Adweek that S4 Capital is also currently in a bidding war with China’s data technology company BlueFocus to acquire MightyHive, a programmatic buying firm. R3 principal and co-founder Greg Paull estimated the potential deal at $150 to $200 million.

@kitten_mouse Lindsay Rittenhouse is a staff writer at Adweek, where she specializes in covering the world of agencies and their clients.