Ladies and gentlemen, good day and welcome to the S4 Capital plc results for the year ending 31st December 2019 conference call. At this time, I'd like to turn the conference over to Sir Martin Sorrell. Please go ahead, sir.
Thank you, operator. Thank you, Julia. Welcome everybody. Obviously, a difficult time to coordinate everything, but thanks everybody for joining. I think we probably have about 100 people, either online or on the call itself. I'm joined by Peter Rademaker, who's in Amsterdam, by Scott Spirit, who's joining us from Singapore, by Victor Knaap, who as you know, is the CEO of MediaMonks, and by Pete Kim, who Victor is in Amsterdam too with Peter, and Pete Kim is in New York, the CEO of MightyHive. I'm here in London. I was trying to think just before we start as to what is the key assumption or takeaway from what we're about to show you? I think, obviously, the coronavirus overshadows everything, and we're largely looking at historically what happened in 2019.
2019, as you can see, was a very good year for S4, with industry-leading stats. Having said that, I think what coronavirus, the tragedy, which is clearly a tragedy, and the health and safety of all our 2,500 people and their families in 30 countries is of paramount importance. I think the underlying thing that we're starting to see, and I think it will come out of the presentation as we go through it, is that the impact of coronavirus probably will result in an acceleration in the change in the digital change and transformation, that what we're going to see is an acceleration in the trends, that there will be no excuses anymore for delaying the changes to the digital economy and digital transformation and business transformation. With that as an observation, I'll hand over to Peter to take us through the results.
Julian, if you can move on to the contents page. We have Peter doing the results. Scott will cover the market, client momentum, people, mergers, and integration. Victor will cover the content practice, and Pete will cover the data and programmatic practice, and I'll come back with a summary and outlook, and look after the Q&A. Over to you, Peter.
Thank you, Sir Martin. If you can switch to the next page, the financial performance on page three, please, Julian. As Sir Martin just indicated, I would say an outstandingly successful first full financial year, 2019, of S4 Capital. As you may remember, last year was our first year, which started in May 2018 till December. Also for comparison purposes, these specific numbers are a little bit hard to compare. What we have done, and also furthermore in the presentation, we have compared as much as possible in like for like 2018, as if in the same performance and same timing of our acquisitions, and also on a pro forma basis, on a full financial year basis. We believe that that in itself shows the best comparison, how we have performed in 2019. Again, we consider that as outstandingly successful.
What is also good to notice is that we were above, let's say, the consensus or the market expectations. I will pinpoint a few items on our P&L, and balance sheet and cash flow, further in this presentation. I'll start with our billings, which is our gross billings, which includes a client pass-through cost. It's not our net revenue, but our total gross billings were GBP 455.8 million, and on the pro forma, full financial year basis, we were at GBP 513.2 million billings. Our revenue was GBP 215.1 million, which is up 292% compared to last year's statutory numbers, which were GBP 64.8 million. A like for like, we were 41% up, and on a pro forma basis, 37% up.
Our gross profit, which is our most important measure within S4, we also express our performance as a percentage of our gross profit, went up to GBP 171.3 million, which is 361% up compared to last year. On like for like, 44% up, on a pro forma basis, 39% up. Our operational EBITDA, which is still a very important measure for us, GBP 33.4 million, which is 612% up compared to last year. Like for like, 51% up and pro forma on 47% up. Our operational EBITDA margins was 19.5% in this year as percentage, again, of gross profits, which is 6.9 margin points up on 2018, and the like for like was 18.6% and pro forma 20.9%. A lot of percentages. I realize that.
Basically here to point that out is, if you look at in our September presentation where we presented our half year numbers, and this is in relation to EBITDA, we were, as we indicated in our half year numbers, basically investing or gearing up for our expected busy second half year. That clearly shows because in our EBITDA in the first half year was 13.7%, and in the second half it was 23.5%, resulting in this 19.5% overall for the full year after central cost. Our operating result or loss was GBP 3.8 million. Important to notice, and I will come back to that later also, is that includes adjusting items of GBP 35 million, which is acquisition related expenses, it's amortization, and share-based compensation. That's included in that GBP 35 million. Last year, it was a GBP 8.5 million operating loss in 2018.
On a pro forma basis, it would be GBP 2.5 million. The results before income tax were GBP 9.2 million loss. Again, these include the adjusting items versus a loss of GBP 9.1 million in 2018 and pro forma at a GBP 2.8 million loss. The result, basically the net result, after-tax result was GBP 10 million loss for 2019. Again, including the adjusting items versus a GBP 8.1 million loss in 2018 and a pro forma result for the period of GBP 5.7 million loss. Adjusted basic net result, that includes, again, adding back the adjusting items was GBP 0.052 versus GBP 0.010 in 2018. Our basic diluted net result per share was GBP 0.027 loss versus GBP 0.033 loss in 2018. A pro forma adjusted basic net result per share of GBP 0.013 loss.
Our year-end net cash, and again, I will come back to that when I address some of the topics in the balance sheet. We ended up in a net cash position of GBP 23.7 million, or in other words, we had GBP 66 million cash on our balance sheet. We had the GBP 42 and a half million, approximately GBP 42 and a half million loan, which we have drawn down to front the acquisition back in 2018 in the MediaMonks transaction. Important to notice, for 2020, we had a very good start in January with the top line up over 30%. Of course it was January, so we were not seeing any material impact as yet from the coronavirus. We will, of course, update, and I think Sir Martin will also come back later in the presentation on that.
If we flip to the next slide, here you see a lot of these numbers that I just mentioned. You have an overview, which clearly shows the different P&L. From left to right, the unaudited 2019 statements, which we're about to finalize and expect our financial statements to be ready at the end of April. They're still classified as unaudited compared to the audited numbers from last year, that seven-month period. The unaudited like for like, the pro forma, and the pro forma full year 2018 for comparison purposes. If I flip to the next slide, again, the unaudited condensed income statement.
What is important to notice here, next to the fact what I addressed in the first slide is that we have the EBITDA mentioned, the GBP 33.4 million in the first block on the top side of the sheet, if you see the sheets in front of you. The holding costs were GBP 5.8 million. Basically, the operation was delivering GBP 39.2 million EBITDA contribution in the year 2019, which is approximately, and that is also our guidance to the market, that is the approximately 23% performance, where we indicate ourselves in somewhere in the area between 18% and 23%, 24% EBITDA margin for our operation, so before central cost. After central cost, it is around 20%.
What we did in this sheet also for comparison purposes, we included last year and, again, the like for likes, and we have annualized some of the positions like amortization charges to make a comparison as good as possible. What I would point out is that also, if you look at our unaudited pro forma full financial year 2019, so that means that looking at the performances as if all acquisitions and all activities were included from January 1st, our pro forma would be approximately GBP 45 million in EBITDA. Before holding cost, it would be approximately GBP 51 million to show our, let's say, profit potential in the group. If we then switch to the next slide, again, a lot of numbers in here.
What I would like to point out in this sheet is basically our weighted average numbers of shares were in 2019, 368 million, delivering an adjusted basic net result per share of GBP 0.052, compared to last year, GBP 0.010. If you would look at 2019 on a full financial year basis, again, as if all acquisitions and all activities were there from January 1st for the full year, our adjusted basic net result per share was GBP 0.06. You also see in this specific slide, our adjusted non-recurring expenses and acquisition related expenses, which were GBP 12.8 million. Our share-based compensation of GBP 7.2 million, and our amortization charges, which we have to include in our P&L account, for the amortization of the intangibles that we separate from our acquisitions. That's the approximately GBP 35 million where I was referring to. This is basically the composition.
Of course, for calculating the adjusted basic net share, we also have to take the adjusted tax on this item, delivering the GBP 0.052 again. If you go further to the next slide, the unaudited consolidated balance sheet. What I would like to pinpoint here is a couple of things. We consider this, especially in the time where we're in right now, as a very strong balance sheet, as I indicated in my opening. We have a cash equivalent of GBP 66 million. We have still the long-term debt of GBP 42 million, delivering us this GBP 23 million-GBP 24 million net cash at year-end, which we consider to be very strong. This is the result of a strong cash flow. I'll come back to that in the next slide.
The group is able to deliver strong operational cash flows with an approximate GBP 9 million working capital investment, which is limited, if you would look at the total numbers and the growth percentages compared to last year on a pro forma basis or a like-for-like basis. New for this year in the unaudited balance sheet, we have included IFRS 16, the right of use assets, or in other words, we have capitalized our rental contracts against the liability, which is now included in our long-term and our short-term liability, since IFRS requires so. It's a little bit of a strange topic in our balance sheet, but still we have to comply to that. That's now included. As you will also see, there's some contingent consideration and holdbacks from our 2019 specifically, mergers or acquisitions that we have done in that year.
The biggest component of that is the Firewood acquisition, which we announced in October 2019. Those were the items I wanted to pinpoint in the consolidated balance sheet. If we move over to the cash flows. What may be good to notice on the next slide is that if you look at the cash flow from operations for the year 2019, you will see that our cash flow from operations was GBP 32 million. If you compare that to our GBP 33.4 million EBITDA, you will notice that there is a high cash conversion or a relatively low investment in working capital, as I just indicated when we were talking about the balance sheet. That's a strong performance for our whole group. What you see is the cash outflows from our investing activities, GBP 67 million. That's what we done.
As you probably all aware of, is that typically, when we do our transactions, we pay 50% in cash and 50% in kind, to the former founders, owners of the companies we acquire. That resulted in 2019, approximately GBP 57 million was investment of acquisitions of subsidiary, net of cash acquired, resulting in a cash outflow of GBP 67 million. Of course, the issuance of shares, which we did in October. In October, when we acquired Firewood, we did our share admission, which resulted in a GBP 97 net income, at that moment in time, or proceeds from this issuance of shares in order to finance our mergers. Again, we started the year with GBP 25 million cash on our balance sheet, and we ended, as I indicated, with GBP 66, delivering our net cash position of approximately GBP 24 million.
If you go to the next slide, the pro forma gross profit and operational EBITDA by practice. The content practice, the biggest part of S4 Capital Group, 73% of total, and slightly declined compared to last year, given the growth percentages of our programmatic practice. Programmatic gross profit was 27% of this year, compared to 24% in 2018. Our content practice operational EBITDA before holding cost was GBP 35.9 million, and our content practice operational EBITDA margin was 22.1%. Our programmatic practice operational EBITDA before holding cost was GBP 14.9 million, and the margin was 24.1% over the full financial year. If I go to my last slide, the pro forma gross profit by geographies. The Americas, still very strong like in last year, 71% of total, delivering GBP 160.4 million, which is 39% up compared to last year pro forma.
EMEA, 22% of total, or in other words, almost GBP 49 million, 27% up. Asia Pacific, 7% of total, started with a small base with 107% growth, delivering approximately GBP 15 million profit contributions for full financial year 2019. This was my short summary on our financial performance, I'll hand over to Scott to take us to the market next section. Scott?
Great. Thank you, Peter. If we can move to the next slide. The plan today is to share with you some of our perspectives about what's happening in the marketing and advertising industry, and why we believe S4 is so well-placed to help clients navigate this landscape, and continue to enjoy our strong organic growth, which is significantly above the market and our competitors for the future. As you know, the four core defining principles of S4 Capital are, we're purely digital, we have a holy trinity of data, digital content, and programmatic services. Our go-to-market strategy is being faster, better, cheaper, and providing speed, quality, and value, and we have a unitary structure. On the first of those, purely digital, you can see from this chart that media spend continues to migrate from traditional to digital, which is enjoying strong double-digit growth rates.
We see a total media spend landscape at $640 billion. Digital is rapidly approaching half of that. This is in the context of a larger $1.9 trillion total marketing spend. This includes just over $500 billion of trade marketing. That's actually also rapidly switching to digital as Amazon and Alibaba and others make inroads. As you can see, we have a huge and growing addressable market. If we move down to the next slide, you'll see some further charts here from Mary Meeker, primarily, which illustrate the growth of digital. You can see from the quarterly advertising revenue growth that we see at the large companies, the large platforms like Google, Facebook, Amazon, Twitter, Snap, and Pinterest, they continue to enjoy strong double-digit ad revenue growth rates.
You can see from the other charts that search, that social, that programmatic and e-commerce advertising all continue their upward trends. This is due to consumer behavior and media consumption migrating to being more and more digital. With the streaming wars taking consumers away from traditional linear TV and radio, we will continue to see this trend accelerate. On the next slide, I think it's important to understand that as S4, we very much see ourselves as the service layer for the big media platforms, the e-commerce platforms, the marketing and advertising technology and software companies. The reality is now, as a CMO, you'll probably have relationships with most of the companies on this slide. These companies provide products, and they provide technology that's very helpful for marketing, and that's what their valuations are based on. They don't provide, or they provide very limited services.
As such, they've developed and nurtured ecosystems of service partners. Our objective at S4 is clear. We want to be the most nimble, agile, creative, and strategic partner for these companies and help create success stories for our mutual clients. The partnerships we build with these companies are absolutely crucial to our success. We already have deep symbiotic relationships with most of them. Google, for example, is our largest client, accounts for almost a quarter of our revenue, and we work with them across all our practice areas of data, creative, and programmatic. That only tells half the story. MightyHive is one of the leading accredited practitioners across Google's entire product range and a key service partner for them. They operate across Google Marketing Platform, Search, Cloud, Analytics, et cetera.
A significant portion of their business, their client business, both enterprise and small and medium-sized business, is referred directly to us by Google. The idea that these tech companies are looking to disintermediate agencies is simply not true. At least in our case, they're actively helping us develop and grow. We're building similar relationships across all these companies. Adobe, Facebook, Snap, Alibaba, Salesforce, Microsoft, IBM, Spotify, Netflix, ByteDance, Amazon, and others on this slide are all clients of ours already. We're building out our service capabilities with all of them across data, content, and programmatic. On the next slide, I think it's key to note that agility and speed are at the heart of our model and our competitiveness. How we deliver services to our clients and our partners is significantly different to the traditional agency service model.
The way clients engage with agencies is evolving and changing. We view it as a spectrum. On the left-hand side, you have that traditional model of clients fully outsourcing their business to an agency, and this is the model that's been going for ages and that holding companies especially rely on. What we're seeing is that for diverse reasons, spanning a desire for transparency, data privacy, wanting direct relationships with the tech platforms, and ultimately simply wanting work to be faster, better and cheaper, clients are increasingly taking more control and moving along this spectrum. Exploring new engagement models and new operating models such as hybrid embedded models, which is not simply placing staff on site. It's an entirely different integrated way of working with the client marketing team. At the far right of this spectrum, you have the clients fully in-housing certain capabilities.
At S4, we have a flexible approach and a business model which supports clients wherever they want to be on this spectrum. We don't have the burden of incumbency, which allows us to be truly agnostic and consultative in how we engage with clients. In-housing continues to be a major topic in the industry. Several recent surveys, including the one quoted here from MediaLink and WARC, have shown that this is a trend which continues to dominate client thinking. It's also evident here in the recent comments from senior clients at Uber and Marks & Spencer. Our unitary structure at S4 really allows us to operate anywhere on this spectrum. The quote you see on the bottom right here, from a leading Fortune 500 retailer, it's typical of the feedback we get versus traditional siloed company, holding company approaches.
The next slide, I want to quickly talk about what's going on in the industry and the kind of rapidly changing environment that we're operating in, from a digital perspective. I'm sure those of you that follow the industry and understand digital marketing will have read lots of headlines recently, in the trade press, about cookies. They've had a bad rap, cookies, but here's a couple of our favorite cookies. These are Oreos from Mondelēz, one of our favorite clients. The cookies that have been talked about are digital cookies. What's actually happened? Google announced that in two years' time, it's going to phase out the use of third-party cookies following the lead of Safari and Firefox.
This is a decision that was driven by privacy concerns, and they plan to develop other technologies, called their Privacy Sandbox, which will allow some of the functionality of cookies, but in a more privacy compliant way. This is not a surprise, and it's likely a precursor to further decisions in the future. What does that actually mean for online advertising and programmatic, which we specialize in? Well, in terms of programmatic, we define that as the use of automation and technology informed by data to buy advertising in real time instead of going through human negotiations and preset prices. As you can see, that's a pretty broad definition. It encompasses search, display, social, video, mobile, increasingly connected TV, digital out-of-home, and it covers billions and billions of dollars of spend.
Our view is that digital advertising is in a constant state of disruption and change, and the industry will and is already adapting to this particular move through innovation and new solutions. Given that MightyHive is a consultancy, and this is an area of opportunity for us because we work with clients and platforms to help them find new solutions. For example, we're already seeing increased demand for first-party data strategies, for cloud-based services, and for working with data clean rooms, which Google, Amazon and Facebook all have. Third-party cookies have been the enabler to collect data and signals from online users, and that's an important data source in programmatic advertising to date. They're far from the only one.
It's likely that there will still be some form of privacy compliant third-party data functionality for targeting maybe cohorts of people rather than individuals, and that will likely come from Google or others. Many other data sources continue to exist, such as contextual data or location-based data, and it will only heighten the importance of first-party data for clients. This is an area that we've talked about in the past, and particularly for S4 and MightyHive, they're deeply involved in it. We've made several transactions in this area, and we've already seen a significant uptick in business from clients. Incidentally, one of the welcome side effects of this development is that many clients are understanding that a sort of blind reliance on tactics driven by third-party cookies is no longer possible or relevant.
A smarter strategy informed by first-party data and with the relevant platform and audience specific content is the winning one. This should sound familiar because that's our holy trinity approach at S4, and we believe this will drive wider collaboration between our practice areas. Moving on to the next slide, you'll see our client list. Obviously, we've had a stellar year of organic growth as Peter outlined, and we're very proud of the clients that have helped us achieve this. We have a first-class client list, some of the world's leading, most dynamic brands, many of them disruptors in their industries, and that's something that we admire and share and aspire to be in our own industry. Moving on to the next slide.
As you'll see from both of these slides on the logos, tech is a major sector for us, and we have large scaled relationships with most of the leading tech companies in the world. This is obviously beneficial to our organic growth rate, given that these companies are seeing strong top-line revenue growth and are thus expanding their own marketing investment way beyond typical levels. This is illustrated, there's a chart on the next slide here. This chart here is the FAANG spend on worldwide advertising, and you can see the kind of growth rates are pretty much exponential compared to the average growth rate of the market and what you see from some of the traditional categories like auto and FMCG. Ad Age recently published an article saying that Amazon was now the highest spending advertiser in the world in 2019, surpassing P&G.
Around half of our revenue comes from clients in this sector. It provides us very significant organic growth opportunities, and also, obviously, we intend to expand our share with these clients. On to the next slide. This discusses an area called torso clients. An underappreciated aspect in the rise of the Googles and Facebooks of the world is the degree to which their growth has been driven by small and medium businesses. The chart on this slide illustrates that there are literally millions of advertisers on Facebook and Instagram on a monthly basis. This is easy to overlook because the small and medium-sized businesses don't lack. They sort of lack the name recognition of their larger and more famous enterprise equivalents, which have been the focus of traditional advertising agencies for more than a century. Upon closer inspection, the importance of the SMB sector is obvious.
What changed? Well, quite simply, technology has unshackled smaller advertisers, enabling them for the first time to compete directly with their larger brethren in the global programmatic advertising industry. MightyHive have long served these new entrants into the advertising industry. In fact, it's where they first started their efforts in marketing services. In doing so, they developed from scratch the teams, tools, and processes to serve these clients well. Tackling problems such as how to build scale, how to automate the day-to-day operational challenge of serving thousands of accounts rather than dozens, and encompassing issues ranging from client management to service, support, and billing. These developments enabled not only growth of their SMB business, but also provided valuable in their enterprise efforts. As we continue to develop the business, we're committed in our belief that SMB will play an important role in our future.
These contributions will include revenue growth, client diversification, automation, and efficiency, the developing of new marketing tactics, and the ability to grow with our SMB clients, some of which will obviously become the giants of tomorrow. This is quite a differentiation from traditional ad agencies who really focus on the Fortune 500. The next slide talks about our own client momentum in 2019. Obviously, with the kind of organic growth we've been showing, we've won a lot of business. We've seen our client roster expand and grow dramatically. Our land and expand strategy has seen us grow organically at clients where we've deepened our relationships. Clients like Google, HP, Netflix, Facebook, Salesforce, Amazon, and LinkedIn in the tech sector, and the likes of Heineken, Mondelēz, and L'Oréal as well. We've also been successful in landing new clients and broadening our service client base.
We welcome new brands such as Fanta, Shiseido, Mead Johnson, Lavazza, SoFi, P&G, Merck, Marriott, and Vodafone. The mergers we've done have also boosted group growth. With the unitary structure we have, that encourages collaboration, referrals, and introduction from day one across both the content and data and programmatic practices. A couple of examples here, such as Caramel and BizTech, collaborating with MediaMonks to win a significant creative and digital transformation assignment from ExxonMobil, IMA supporting MediaMonks to pick up creative and social work from HP, and ProgMedia in Brazil, helping MightyHive expand its AB InBev relationship. We've also been pleased with the progress S4 Capital has made in winning business from what we call the full Holy Trinity pitch of data, digital content, and programmatic.
Some of this has been by our land and expand and growing existing clients into new practice areas, but also increasingly pitching our full capabilities as a service and winning new business. With wins across the likes of Sprint, Bayer, Ace Hardware, Google, L'Oréal, and AB InBev, we're entering 2020 involved in several major pitches across FMCG, pharma, tech, and automotive. Moving on to the next slide. We've clearly achieved brand awareness and brand trial in 2019, and 2020 needs to be a year of conversion at scale for us. With these levels of organic growth that we've been experiencing, obviously, and as Peter mentioned, particularly in the first half of the year, we've been investing very heavily in our talent base. Here are just a few highlights of the kind of hires we've made in 2019. These are our organic hires.
This is on top of the significant talent injections we've had from the various mergers we've completed during the year. One thing you'll notice in their backgrounds is that the majority of these hires don't come from traditional agencies. We continue to hire people from a diverse background of creative, production, consulting, tech, and analytics. Moving on to the next slide, you'll see that our presence has expanded significantly across the globe. We now have a truly global presence with 2,500 colleagues across 30 markets, and we don't feel like we need to be in 100-plus markets. We feel very comfortable with our geographic exposure as it is. Around 70% of our revenue comes from the Americas, with 20% from Europe and 10% from Asia.
Asia is growing at triple-digit organic rates, and we'd certainly like and expect it to be a more significant tranche of our business in the future. Longer term, we've talked about moving to a ratio of 40% America, 20% EMEA, and 40% Asia Pacific. Moving on to mergers. Obviously, we started S4 with a blank piece of paper and a clear vision, and 2019 was a foundational year in delivering on that vision and building out our capabilities and geographical coverage. The core mergers of MediaMonks and MightyHive took place in 2018, and in 2019, we did a further eight transactions, and then Circus joined us recently in January 2020. Whilst we continue to have a strong M&A pipeline, we do feel comfortable that we've built market-leading capabilities in the Holy Trinity practice areas of data, creative, and programmatic, and we have good geographical coverage.
Having spent much of the past few months with these companies, I should also stress the amazing talent that this has brought into S4. Not just the exceptional entrepreneurs that are shown on the slide here with their mugshots, but also the deep talent benches those entrepreneurs have assembled. It really is as good as anything I've ever seen in the industry. Moving on to the next slide, I wanted to quickly talk about integration. Obviously, with this level of transactions, getting the integration right is incredibly important for our success and is key to us delivering on our promise of having a unitary structure. That principle informs our deal structure. It lends itself to integration from day one. We buy 100% of these companies.
We don't do minorities, we don't do earn-outs, we don't build silos, and usually around half of the consideration is in S4 Capital stock, creating a common incentive for our leadership team. From a practical perspective, we focus heavily on making these integrations win-win situations. Culturally, there's a very clear alignment and buy-in across all our entrepreneurial leaders, a shared desire to disrupt the traditional holding company model, and this certainly helps with the integration. From a more practical perspective, we have common cloud-based operating systems using best-in-class solutions like NetSuite, Salesforce, G Suite, and Workday across the whole business, rather than having disparate siloed solutions in each part of it. I can certainly assure you in the past month of this coronavirus scare, that's proved invaluable to our new ways of remote working.
From a commercial perspective, there's clearly a belief that one and one equals significantly more than two. We've seen an S4 effect in the business development opportunities for each of these mergers. I've talked about some of those client wins already. From a branding perspective, it's important for us that we're not trying to build a holding company 2.0 approach with multiple siloed competing brands. We have two core practice areas, digital content, which is MediaMonks, and data and programmatic, which is MightyHive. Over time, with sensitive and non-prescriptive approach, we've been integrating those mergers that we've done already. ProgMedia, ConversionWorks, Datalicious already operating as MightyHive. Just a couple of weeks ago, BizTech rebranded as MediaMonks in Australia. This helps us fulfill our promise of a unitary structure.
On the office side, we've already integrated certain offices and continue to pursue others in the major markets of London, New York, San Francisco, and Buenos Aires. I will pass to Victor to update us on the MediaMonks side of things.
Thank you, Scott. Next slide, please. Hello, everyone. Many thanks for joining. Before looking back at great 2019, I would like to start with our big 2020 goal. We want to end the year with 2,500 Monks, 25 offices, one brand, and an unbeatable pitch and positioning. Obviously, that 2020 forecast is built on top of a strong 2019 strategy of growth. Next sheet, please. We went from 1,000 to 2,000 Monks, added core capabilities like film, Adobe, influencers, and embedded to help brands consolidate creative and content spend. Besides that, because of our additions, like BizTech, IMA, Firewood, WhiteBalance, and Circus, we strengthened our position in LATAM and APAC. Some of our key clients grew to Whopper status. Overall, we've seen a lot of organic growth with Google, IBM, Amazon, to name a few, and we had no key account losses.
We won new clients like HP, Pernod Ricard, Shiseido, Fanta in APAC, and Avon. Obviously, it's going to be challenging times for our clients as well. As MediaMonks, we are very well positioned to help our clients to keep in touch with their consumers. People are spending more time on social media as ever and our offering in digital content creation, influencers, animation, gaming, live stream solutions, studio films are perfectly suited to help brands to connect to their consumers. If we look at the awards side of things, we had a very good year in the major award shows as well.
From web accolades, like being the first company that won 250 Favorite Website Awards, to being the number one digital agency in Mexico, to being the Best Places to Work, at Ad Age, to Best Connected Home Products at CES, to Greater China Production Company of the Year, Southeast Asia Digital Agency of the Year, and many more in Cannes, Clio, Effie, Webby, and so on. Let's look at some of our work that we created. We created 4 sheets, up to the next 1, please, that shows you a little bit the type of work and the clients that we work for. I will keep this short, but we produced over 2,000 pieces of work in 2019.
Let me show you a little bit the best in class in the different regions. For HP, we do a lot of video and social campaigns. For AT&T, we created a super cool 4D experience where people can become Batman. A lot of inspirational films for Procter & Gamble, and Microsoft, a lot of installations that combine art and technology. LATAM, it's been a great year in LATAM as well. You could have seen that from our growth figures, but also in work, we've done some excellent work for Aeromexico that as well is delivering a lot of top-line results as well as in award shows. Victoria], same as for a digital transformation. Games for Pharmaton. Moving to Europe, you will see HP popping up in different regions at [MediaMonks]. It truly becomes a global client. Very nice film and integrated campaign for HP Elite.
We build a content studio for Avon, ramping out 25,000 pieces of content every single year. We build the best 1.7-second ad for L'Oréal, and we've done great work with "The Witcher" for Netflix. Last but not least, APAC, our fastest growing region at this moment. We've done installations for Puma in China to beautiful art installations for Google that helps kids to learn how to develop, to work for Johnson & Johnson, Neutrogena, and in-store activations for SK-II. That's it from my side. Please ask any questions if you like, and over to Pete.
Thank you, Victor. I will cover the data and programmatic practice. Moving on to slide 32. 2019 for MightyHive was a year of tremendous growth, and everybody on the team is extraordinarily excited by what is happening. Just a couple of factoids here. We scaled our presence and doubled global headcounts from 200 to 400, doubled the number of offices from 12 to 24 and made several acquisitions, which have already been mentioned. The merger pipeline is focused on building our enterprise consulting and data analytics capabilities, which as Scott mentioned, is very timely now during the ongoing disruptions inside of the media and advertising worlds. This has shown up with a number of very excellent client wins that we're very proud of. AB InBev, L'Oréal, ASICS, Bayer, iFood, Lavazza, SoFi, Vodafone, et cetera, are just a sampling of the exciting wins that we're seeing around the globe.
We come in with It's always nice to be recognized with awards and accolades from the trade press, and our partners especially, being recognized as the partner of the year in our Australian, New Zealand markets. One that I'm particularly proud of is being recognized as the employer most dedicated to employee growth. We saw some of our executives, like Sasha Schmitz, be recognized as one of the women to watch in the EMEA markets, and we're recognized as one of the best mid-size companies to work for in New York City. Moving on.
As Scott mentioned, the partners and the tech ecosystem is incredibly important for MightyHive. As you see, we continue to be experts across the various platforms that are all critical, yet confusing to master. We can help our clients really to cut through that confusion and move straight to getting the results that they need from this. Moving on. Just a couple of case studies that we'll highlight briefly here. I think we've gone through some of these in the past. I just really want to show that MightyHive is able to deliver game-changing results for clients that are out there really trying to figure out how to adapt themselves in the new world.
These kinds of activities really show themselves when we look at case studies like these. It's really just showing how much innovation is still left to be done and that clients that are new as well as clients that are venerable can make these changes and can compete in an ongoing world. Moving on to the next slide, we see yet another case study inside of there where we have just shown that our clients continue to increase profitability and increase business results using very innovative tactics like in-housing, which are difficult motions to execute, yet with the right help, for example, from MightyHive, can be done and done well. We can move through some of these, just like taking a look at what we're doing inside of the large financial services company here, which we can't name just for confidentiality reasons.
Transitioning a client from a 100% outsource model to an in-house hands-on keyboard model is just generating incredible results here. Just to sum it up, a 400% increase against performance goals while reducing man-hours inside of analytics by 96%. I think these numbers speak for themselves in terms of what we can do with an eight-figure marketing budget. Moving on. Just one final highlight here is, once again, with one of our favorite clients, Mondelēz International. What's interesting about this one is the work that we're doing here is not so much focused on media as it is on the other piece of the holy trinity data. We are really helping our clients here in order to transform all of their digital measurements and add first-party data assets in a way that is transformative to the business.
When you're talking about a huge marketer like Mondelēz International, when you start posting results like 10% increases in ROI, it really does gain a lot of attention. With that quick summary, I will turn it over to Sir Martin.
Thank you, Pete, thank you, Victor, thank you, Scott, and thanks, Peter. I just want to summarize, if we move on to the next slide, Julian, just summarize where we are, and the outlook. Firstly, as we look at 2019, it was a very strong gross profit, and bottom-line organic growth, very much in line with well, beyond the three-year plan that we set for 2019 to 2021. As Peter pointed out, we have a very strong cash flow and a strong balance sheet, which going into this virus-driven recession, we think is important. We have looked again at our three-year plan as we do every year. For 2022, we're targeting to double organically in three years. That implies for those of a mathematical disposition, a 24% compound organic growth rate. I stress this is without deals or mergers.
We feel comfortable over the three years, 2020- 2022, with a target of that nature, you saw in January, and the indications for February are good, too, from what we've seen, although they're limited. Obviously, the virus will have impacts going forward. It's a good start to 2020. Gross profit in January up over 30%. We've seen a limited effect from COVID-19 so far, but we think we have to be obviously realistic about the potential impact. We've shown you the ways that we're already starting to mitigate that impact with our clients. This is very client-driven in terms of the ways that they're working. I think I just want to go back to what I said at the beginning. I think the net result of all this is going to be an acceleration in digital transformation or business transformation work.
We have a very healthy merger pipeline in data and analytics, in content and programmatic media. I think one thing to say is that we haven't seen a commensurate drop in pricing. Sellers are clinging to sort of pre-virus valuation metrics. I think that will shake out. From what we hear, private equity companies or driven companies are drawing down their revolvers, focusing on liquidity. Obviously, the impact is going to be quite significant in some of the highly leveraged situations, and we think that will have an impact on pricing, which will probably help. We achieved, as Scott said, brand awareness in 2019 and brand trial. We now need to develop conversion at scale in 2020. To that point, we're involved in a number of major opportunities, presentations, or pitches.
We're not particularly enamored of the pitch process because we have a supply constraint, and it's difficult for Victor and his colleagues, Wes, and Pete and his colleagues, Chris Martin, to apportion resources when you're growing on the content side by over 35% or around 35% on the programmatic side, by 60% as they were last year. It's difficult to apportion resources. We much prefer the land and expand route, as Scott touched on. We're realistic again that we have to compete in a world where presentations are important, and as I said, there are a number of those. With that said, if I can pass it back to Julia, can we take Q&A? We've been going for about 55 minutes. Thank you for-
Thank you.
listening so far. We'll take Q&A.
Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press star one to ask a question. We'll pause for just a moment to allow everyone to signal a question. Thank you. Thank you. We'll now take our first question from Paul Richards from Dowgate. Please go ahead. Your line is open.
Thank you. Congratulations on a tremendous performance in 2019. Clearly, all the focus now is on COVID-19. Could you provide a bit more color, perhaps, of your experience of China? Recognize it's a small part of the group, but how that went into COVID-19, and now that it's sort of coming out from that, how that has affected marketing. Secondly, to what extent can you continue with business as usual? For example, the pitching process at a time when there are no face-to-face meetings. It would be good to get a bit of color on both of those, please.
Okay. Thank you, Paul. Thanks for the question. We anticipated a lot of interest, obviously, on COVID-19. Scott, together with Victor and Pete, has sort of put together a couple of slides that I think we can put up, or if we can't put them up, Scott can take us through them. I just make the observation on the second body of question, Paul, around presentations. As Victor and his colleagues know full well, we're participating in a couple of major presentations at the moment, and those presentations, they've gone virtual. The process continues, but not with physical visits or physical presentations, but with virtual presentations. It can be a little bit more clunky than we would like, but the process continues. I think what happens, Paul, is the process continues.
It's probably a little bit more delayed, and there are other rounds that come in as a result. I think probably gets a little bit elongated. The answer is, the process is continuing. Scott, do you want to just run through the results of the research that you've done? I mean, we've got a couple of slides, which I think we can get Julian to put up.
Yeah. [crosstalk]
Yeah. If you just want to run through it.
Yeah, happy to do that. It should answer your question and more, Paul. I've spent the past couple of days going around the company and really trying to get to the bottom of what the impact is and what our response is and how we see this playing out. I don't know if, Julian, you can get those slides up. This should be the next slide. Obviously, like any company, our priority initially has been the focus on the safety and health of our colleagues and families, and so far, everyone's safe and well, and putting in protocols to try and guarantee that. We started testing our home working protocols in late February and early March of this year in many of the major markets, and we've now moved to that option in most locations.
From a financial perspective, we only have visibility of our January figures at the moment. They were very strong, and we talked about gross profit up over 30% in line with budgets. Obviously, that was pre-virus. It's unlikely that February will be majorly impacted given that most of the current restrictions really only came into effect in early to mid-March. Even when we have those February numbers, we're still anticipating a decent February. I think it's important to remember that S4 Capital is a services business and not a media business. We started the year with a very strong order book, and to date, we've not seen any significant deterioration in that. Indeed, the pipeline is still stronger right now than it was this time last year. Many of our clients have moved to a virtual model in the past few weeks and a remote working model.
In all those cases, especially the larger clients, the tech clients that we service heavily, we've quickly established a new way of working. It's really helpful, I think, that many of our client engagements operated already on this sort of hybrid embedded model that I've talked about rather than an outsourced model, and where we're already seen as part of the client marketing team. We already share the same cloud-based tools, the same security access and protocols, the same processes and ways of working. That has made it as seamless as possible. It's obviously not ideal, but it's been helpful. That helps internally as well. Our unitary structure and the kind of tools that we use across the group are all common, so that's made collaboration much easier as we've moved to this kind of remote working model.
Outside of specific sectors, travel, bricks and mortar, retail, hospitality, live events, et cetera, we're not seeing any cancellations, more reallocations. Some of which are actually in our favor. We're seeing some sort of traditional media spend moving into digital because they simply can't get the traditional work done. There's some discussions of delays, but in the vast majority of cases, there's an assumption that spending will ramp up once the situation recovers. As you mentioned, China, I mean, ideally, China offers us some hope of what happens once countries control the spread of the virus, both from a kind of societal basis, but also from a business basis for us. I mean, we closed our China office for New Year, as everyone did. We extended that for a couple of weeks, as was the Chinese policy.
We got back to work very quickly, initially from home, and then opened up our office in late February. That office is up and running and providing a lot of work to clients and actually helping clients who are struggling themselves to get up and running. Fingers crossed that the rest of the world can deal with it in such a quick and efficient way. That said, I think it's super naive of us to think that this is not going to have a major effect on the world's economy and on GDP growth, and that's obviously correlated to marketing spend. There's going to be significant pressure on consumption in the short term, and in many nations, shops are literally shut now.
There's going to be a significant hit to employment in small business, in hospitality, in retail, et cetera. I guess the extent of these impacts will rely on how quickly the pandemic can be controlled. I'm certainly no expert on that, so that's speculation. Just anecdotally, there are a few factors that we look at from our perspective at S4 Capital, where we feel like we have more protection, our business model has more protection, and it defends our ability to continue delivering above-market growth. I'll go through those quickly. The first one is that we're purely digital, and our business is 100% focused on digital. Much of our work can be produced in remote and virtual working environments.
We've got a more limited exposure to offline marketing, which will be more impacted, and we're also seeing some kind of live action production being transferred to animation or VFX, which is easier to do from a remote perspective. We have a leaner structure, we've got low overheads, we've got flexible direct costs. Agility is really important on this. I mean, Victor can talk about it later, but he's already gone to market for his client base, with the whole set that he discussed it a little bit earlier, of kind of products and solutions to help clients in this, to help them move more quickly, to continue producing content, to move from an offline perspective to a digital one. We've really been already able to help multiple clients in that respect, and clients are responding well to that proposition.
We've had strong feedback from our larger tech-based clients that we're very well positioned in our ways of working, and our ability to switch to virtual engagement. The fact that we have a large California presence in the same time zone is also very helpful. We talked about China already. It's very small for us, but, is already back to work. They're trying to help brands adapt their spending, and we're working with them on the product development side of that. One example is where we've worked with a major platform to help their clients create VR and AR enabled events rather than offline ones, which have to be canceled. That's, again, switching budget from offline to online.
We have, as I said many times, a high exposure to tech clients. That's a sector which has higher growth rates and is probably less exposed than sectors like retail and travel, and more likely to continue spending. We have limited exposure to travel. That's about 2% for us, I think. That's obviously the area where there's been the most delays and cancellations. I think as Martin stressed all the way through that even in the most challenged sectors, we view this as something that's going to accelerate digital transformation. That's an agenda that will be protected and accelerated within companies. There's actually an interview you can find online with the chief digital officer of Royal Caribbean, obviously a company that's right in the eye of the hurricane, so to speak.
He says exactly that their digital agenda continues, despite the challenges to the business. We’ll keep you guys updated. We remain very confident in our ability to deliver growth, to maintain margins, and obviously, as Peter’s explained, we have the benefit of an incredibly strong balance sheet to get us through this.
Yeah, Victor, maybe Victor can just expand a bit on what Scott said. You've developed a program for clients. Do you want to say a little bit about that, Victor?
Yeah, thanks for this. The first thing that's going to happen in production of advertising materials is that all the major shoots are being canceled and all the experiential, and event-based marketing materials are being stopped. What we created is a package, how we can help brands to reconnect to their consumers that spend increasingly more time on social media. That means, we set up dedicated animation studios. We can do post-production because there are isolated offices. We can help with gaming, with filters, with influencers. IMA is very well positioned to help out because content is created by the influencers at their homes. We're sending that through in order to help brands that are facing currently the cancellations of all the video shoots, and events all over the world. It's very well received. We were very fast by offering this help.
We started sending out all that material yesterday, and we get very positive response on it. It's difficult times, but we are helping wherever we can, by using our digital knowledge.
Okay. All right. Thank you. Paul, you satisfied with that?
It's probably the most comprehensive answer I've ever had as an analyst, to be honest. Thank you very much indeed.
All right. Okay. Operator, Julia, any other questions?
Yes. We'll now take our next question from Joe Spooner from HSBC. Please go ahead. Your line is open.
Morning, guys. Just in light of these coronavirus uncertainties that you spoke about, have you changed plans around recruitment, and obviously head count being an upfront investment? Are you still running to the same plan or are those adjusted?
Well, Joe, I think early days, but we've always. We saw it last year in 2019, as you know, when we came to the end of the first half, I think our top line was up about 30%, Peter? 35%.
We had recruited at a rate of about 50%, and that had a compression effect on our operating margins. We had recruited ahead of the curve, both at Programmatic with Pete's operations, and with content with Victor's operations. We course-corrected, as we said in the first half, our margins were impacted by that. Broadly, I think it's a fair rule of thumb to say, in order to maintain margins and to maintain profitability, you recruit the same headcount numbers would rise at the same rate as you see gross profit, not revenues, not gross revenues, but net revenues. I think whilst we haven't really seen what's fully happened in February, but I think our people who are running our individual businesses, our two practices, really are tailoring headcount increase and expansion to what we see happening at the revenue level.
I think as I said, in the first half of last year, we were burnt a bit by over-hiring. It is very difficult when you're growing at these sort of rates, 40%-45%, and an implied rate of, let's say, 30% plus going forward in the three-year plan, organic growth. What you really have to do is to hire ahead of the curve, particularly being in the year. If you think about the pattern of our revenues, Q1 is the weakest quarter in terms of size. Q2 is probably the second strongest, Q3 the second weakest, and Q4 the strongest. As you go through the calendar year, you probably have to hire in anticipation, and your growth sort of strengthens as you move through the year or the absolute size strengthens.
It's a difficult balancing act, but I think what we try and do is balance, given the experience we had in the first half of last year, and we did by implication, probably the hiring rate was slowed down as we went through the second half of the year. We're trying to balance it as best we can on the best knowledge that we have. Peter, do you want to add anything to that, with what you see going on at the moment?
I think what you said is totally right. Also to coming back to Joe's question, basically one of the things we focus on is to have as much as possible flexibility in the group or to gear up, or if necessary, to gear down. Again, we don't see it yet, waiting for the numbers on February. That's at least how we try to be as flexible as possible with our total cost structure, in order to, if necessary, take the necessary steps.
If I can ask a second question while I've got the line. You spoke in the presentation about the torso clients. It seemed like those comments were focused on MightyHive. Is there a role there with that important customer base for the other side of the business, MediaMonks?
Well, I think really, Victor's business, the content practice, is almost solely around what we would call enterprise clients. On the content side, there's, in our view, much less of an opportunity. Pete, do you want to talk a little bit about torso clients and SMB and how important that is in the relationship of Google? Well, in the ad revenues of Google and Facebook and Amazon.
Absolutely. I think Scott covered it well, the high level points remain the same, which is that the incredible growth that we've seen in the digital advertising industry is apparent. What's not apparent sometimes is where the revenues have come from. Just a tremendous contribution to that overall growth has come from the so-called torso, the small and medium business. It really is important to note some of the job creation and economic activity that has been spurred by all of this, on the backs of these technology platforms that have really unleashed the SMB category into the advertising world.
We look at that as not only just revenue growth and continued traction, but also as a really wonderful place in order to do training for future hires and for future employees to work on the larger enterprise accounts as well as a source of research and development into new tactics. Oftentimes, smaller and nimbler players can be the places where new tactics are first born and tested and tried out. Finally, inside of the world of just growth, and you can see that the torso, as Scott mentioned, some of these folks will be the giants of tomorrow, and we're excited to assist them on that journey.
I think to be fair, Joe, the pressure in this event-driven cycle that we're going through at the moment, or event-driven recession. The pressure will be on those smaller companies. We reckon, Scott, what it's around about 10% of our revenues, maybe 5%-10% of our revenues.
Yeah. I agree.
The pressure is going to be on them. On the flip side of that is the relief from the fiscal bazookas that are being fired at the moment is coming in the small and medium-sized sector. I think those companies will start to move, as I say, even more to digital. I think that's the background to it.
Yeah, just to be clear, we're really talking about the medium-sized end of that. Some of the companies you saw the logos of there, they might not be super well-known companies, but they're pretty big. We're not in a position to help the local plumber as yet.
Thank you very much, Scott.
Okay. Julia, any more questions?
Yes. We'll now take our next question from Adrien de Saint Hilaire from Bank of America. Please go ahead. Your line is open.
Okay.
Good morning, everyone, and thanks for taking the questions, and I hope you're all safe. Martin, I read an interview this weekend where you were saying that maybe this crisis is in between 9/11 and the 2009 recession. Is that also your best guess in terms of where the ad market is going to go for 2020, so decline of between five and 10? Maybe as a follow-up to what you were saying, would you expect that online outperforms the broader market and offline underperforms? That's the first question. You've made the point a few times that you are a service company, not a media company. What is the typical lag that you would expect between media ad spending and services, let's say? Thirdly, you discussed about increasing talent, et cetera?
In previous downturns, this marketing industry has been very quick to adjust headcount and staffing to the downturn. Do you think there's a case that given the talent scarcity, that doesn't apply anymore and that effectively everyone will need to keep their headcount, let's say, in the face of the downturn? Thank you very much indeed.
Okay. Maybe, Scott, you can take the service media lag second question from Adrien. I'll try and deal with the recession and the nature of the recession and the talent piece. It's so difficult. 10 days ago, two weeks ago, it seemed to me that this was more like 9/11 than 2008. It's clearly deepened, maybe because of the nature of actions that various governments made or didn't make. The impact is serious. It's intriguing to look at the indices yesterday, that really, if you look at some of the S&P indices, not the U.K. indices, but the S&P indices, what's happened so far is we're back to where we were in December of 2018. That the gains of 2019, 25% or whatever, they've been wiped out.
Where we are at the moment is back to when we had that sort of panic, let's call it a mini panic, in December of 2018. I saw a good analysis yesterday on a Goldman call, which looked at sort of structural recessions, cyclical recessions, and event-driven recessions. The argument, which I think I have some sympathy for what it's worth, is that this is event-driven. I think what's going to happen is pretty much what they laid out, which is this is going to have a very big effect on GDP figures in Q2 of 2020 and Q3, that 2020 is a shot year. It's a dead year for many companies. That will accelerate the digital change and transformation.
It will make CEOs, I think, embrace what Scott pointed out in relation to Royal Caribbean, which is, as you said, in the eye of the storm, and I think what's going to happen. I think the nature of this is somewhere between what we saw after 9/11 and 2008. We did see In 2008, coming to the talent part of the question, I remember that at WPP, we had pretty much done what we needed to do by the first or second quarters of 2009. The U.S. obviously has historically had the advantage that it is a much more flexible economy. That's a harsh thing to say because it's a harsh reality. The American economy, and just to remind you, 70% of our business is in the Americas, North and South America, the preponderance of that being in North America.
We're very North America sort of driven. When the USD strengthens, that makes the point. The GBP has weakened to pre-Brexit levels at 121, 122, and it gives us sort of a 6% or so cushion, if you like, as we were talking about last night. Effectively, I think our ability to deal with the-- It comes back to Joe's question about balancing revenue growth and headcount. I think given the fact we're very American-focused gives us a sort of structural advantage. Apart from the fact, as Peter pointed out, our direct costs are much more flexible and at lower levels, and our indirects are not non-existent, but virtually non-existent because we haven't had time to develop bad habits. That's where I think it is. I think this will be V-shaped.
I think the China news, I even heard this morning that a leading military bio department in the Chinese army/state is developing a vaccine quite rapidly. I think it's going to be very painful. Let's be quite clear, for all sorts of reasons, and it's a terrible human crisis. I think it will be Q2 or Q3 oriented. I think the markets will start to respond faster than real business, and that real business in Q4 will readjust. I'm going out on a limb here, I think that's where I think we'll see in the real world some readjustment, and I think the readjustment will be quite violent, quite strong. It'll be a strong V-shaped recovery, and I think it will be heavily driven by online. I don't know about you, Adrien, I think my pattern of travel will change.
I think I will do less travel. I think I will do more technology. When we did a CNBC interview on Skype this morning, I'm told it's the first time they've done that, which I found sort of extraordinary. You're going to get more of that. There's going to be a change in the pattern of behavior. This is going to have, I think, a very significant psychological impact on people and what they do and how they go about it. I don't think it's going to be a return to the same pattern. I think, again, just reflecting on it in the last couple of days as we were preparing the results, I think really we're going to see an acceleration to online behavior of some significance. On the talent side, we will seek to retain, obviously, all that we can.
I think we will continue to grow our headcount. Victor referred to 2,500 Monks, and we already have 400- 500 people on the data programmatic and media side. That's indicating our headcount will be something like 3,000 by the end of the year, even if we don't expand programmatic and data, which we will do. We would expect to expand our headcount quite significantly as we go through the year in line with our revenue growth. Scott, do you want to try and deal with the service media lag? I think media always-
Yeah
gets hit quick. You see on ITV, I just see as we were talking that BBC had suspended the production of "EastEnders" and a number of their other programming. You're seeing that. Scott?
Sure. Thanks for the question, Adrien, hope you're well. Also, thanks for getting Martin to commit to less travel as well. It's very helpful. On the specific question, what I was trying to specify there is that obviously we're a services business, that the media owners, the decisions are kind of quicker and harsher, I think, in terms of budgets being cut, as Martin referred to, ITV seeing a bit of that, specifically in the categories like travel, retail, leisure, where the stores are shut. I think what we're seeing, it differs maybe a little between the creative and media side of our business. On the creative side, our clients still need to market, right? They might be making strategic media decisions and stopping outdoor, for example.
There's not going to be much use for outdoor in the next few weeks or stopping some of their TV budget and what we're seeing really is that switch to digital. You still want to reach consumers. As Martin said, consumer behavior is switching much more to digital. It has been anyway, but in the short term, because of this, it will be even more. How can you reach them? As Victor outlined, there's a whole host of tactics that we're putting into play with our clients about how to do that and convert some of that budget to make it still work. On the media side of our business, Pete can talk about it more. Obviously, in those specific categories, we're going to see some pain inevitably.
Again, there, what you see on retail, for example, most retailers are omnichannel now, so they might be shutting their physical stores, but that means they'll be driving more and more money to online spend and performance spend, trying to drive people to their dot-com stores or their apps. I think, again, it's balanced by the fact that we're focused entirely on digital.
Okay. Thank you very much. Yeah, stay safe. All right. Thanks, and the same to you, Adrien.
Thank you. You too.
Julia, any more?
Yes, sir. We'll now take our next question from Matthew Walker from Credit Suisse. Please go ahead.
Thanks, everyone, and good morning. Just a couple of questions. The first one is, obviously, you've got this model to drive 24% compound growth rate. Do you see that as being because of the virus? Do you see that as being a slower year this year, notwithstanding the good start in January and February, and then an acceleration from Q4 onwards? That's the first question. The second question is, you've raised money in the past. You've been pretty acquisitive. How do you think about that this year? How are you going to sort of do what you want to do on the acquisition front, but also protect the balance sheet and not raise money at a share price that you maybe don't want to? The third question is for Scott, which is on the cookies and the replacement for the third-party cookies.
You mentioned there would be some replacements. Maybe you can give a bit more color on what you ultimately think the third party might be. Thanks.
Okay. Thank you. Thanks, Matthew. Scott, do you want to deal with third-party, and maybe Pete can come in on the third-party cookies as well while I think of an answer to patent and financing?
Yeah, sure. I'll give it a quick go and then hand over to Pete, who's by far more the expert on them than me. I think there are a couple of points. One, I think that there'll be a big shift in emphasis from third-party data to first-party data. That's already been happening, and it will continue more aggressively. It's not a like-for-like replacement if you like, but it's a substitute, I think.
Specifically what I was referring to is that when Google made the announcement that they were going to get rid of third-party cookies, the reason they gave two years notice, or part of the reason, was that they said they were gonna develop an alternative technology, which would be browser-based and privacy compliant, which would still give advertisers some of the capabilities for targeting that cookies give, but in a privacy and kind of anonymized way. Probably, likelihood is you'll target cohorts of users rather than down to the individual level. Now, they announced that's kind of all in theory, right? They haven't built it yet. It's not like it's a product that's ready to go. We're working closely with them, trying to feed into that process. There are other third parties out there trying to build similar products.
A lot of the ad tech companies are pivoting away from third-party cookies to try and have a kind of a different approach. There's a lot of innovation going into this. Anyway, I'll hand it over to Pete, who can probably give you a better answer.
I don't know, Scott, that was pretty good. The only other comments that I would add is the net impact of the third-party cookie changes will take a while to really shake out. The equation that I use in my head is going to be initial impact of the third-party cookie, sort of impending expiration will be offset by the products and services, notably the Chrome Privacy Sandbox, in addition to the other efforts that are being built out there right now. We just don't know what that number is. Will that band-aid be a 99% band-aid or a 1% band-aid? It'll likely be somewhere in between, but I think that that specific will matter a lot.
Right now, those solutions are still being discussed and designed and nowhere near a place where we can really start to gauge their impacts. You can get into GitHub and take a look at all of the different specifications and the debates that are changing day by day, and we're monitoring them closely, and a lot of cases are even opining as to which direction they should take. All of that being said, I do think that the larger crosscurrents here that we're thinking about this are notable in the sense that, number one, with third-party cookies having a question mark by it, I think that we will accelerate the shift to first-party data. Let me be clear there.
I think that from a broader point of view, third-party data has always been a little bit of a challenge in the sense that it's typically temporary arbitrage in terms of the profits that you can be gaining from third-party cookies, simply because it's very difficult to have a differentiated data strategy using the same data that everybody else has too. Which already pointed towards a first-party data emphasis eventually, and I think this has just accelerated that. We indeed are seeing upticks in business as those realities now start to land and expand, if you will, in the minds of CMOs and the CXO suite in general.
When you're taking a look at the data density in terms of the ad, sorry, the media inventory that's out there, we do see a specific advantage for the quote unquote walled gardens who do have the advantage of the identity graphs and the logins that they have throughout, and the giants are well known inside of this. There will be efforts by these small publishers in order to try to compete with that. There are various things that are out there, and various theories that are out there around what that might look like. Everything from sort of a magical tech solution that is pushed out to co-ops and collaboration between small publishers in order to put something that is close to a larger identity graph, or even just roll-ups and consolidation in the industry.
We're tracking all of these things very closely, and I think we could do a two-hour call just on the analysis of these types of things, but those are my high-level comments at the moment.
Yeah. Do you want to say a little bit, Pete, about the impact on publishers, and alternatives to DoubleClick, I mean, Trade Desk and other things like that, just to give Matthew a little bit more detail on it?
Yeah, sure. In terms of publishers, I think that some of the quotes that have been out there, and they've been floating around, but Google has stated in several forums that according to their data, the clearing price in terms of media, in the presence and in the absence of cookies, differs by up to 50%. I think in one case I saw it at 52%, and another case I saw it at 53%, as quoted. Regardless of the specific number, those are really large figures in terms of what's going on, in terms of the actual revenue coming in from these channels. What's interesting about that is, I think that the small and medium publishers of the world were already sort of skating on thin ice.
We saw a lot of consolidation in some of the larger of the kind of challenger brands in publishing last year, in media last year, and I think that a 50% drop on some of these cases, if they don't have the cookies and they don't have the identity graphs, that's obviously not a good thing. I do think that that's going to lead towards some of these efforts to offset, which we just discussed in the previous stanza. As we're taking a look at some of the efforts of the independent ad tech folks, and when I say independent, those are the folks that don't have the benefit of an identity graph. I think that there is absolutely going to be a little bit of an effort in order to try and replace these types of things.
Our friends at The Trade Desk have been very vocal about the things that they're working on, and we shall see exactly how successful those are. I do think that's definitely going to be a challenge that they're going to have to meet.
Coming back, Matthew, to the other two questions you had, if you're happy with that set of responses. On the pattern, inevitably, if you go look at our pattern, we'll follow what we think, and it's very early days, the pattern that we see with the clients. I think clients will see significant pressures in Q2 and Q3. As I say, I think the real world will start to recover, and I think it'll be quite a sharp recovery in Q4. What that means for the full year in 2020 is difficult to lay out completely. I think we can say we're still comfortable with the three-year plan objectives that we set out for 2019, 2021, and 2022. On finance, Peter, do you want to add anything to that in terms of what you see?
No. Indeed, we're quite comfortable at this very moment in time, with our plan. Indeed, it's going to be a big question, of course, what's going to happen or in Q1 or maybe Q2, sorry, Q2 already. In our three-year plan horizon, we're very comfortable or confident that we would be able to achieve our goals.
On financing, I think you can expect, Matthew, a similar pattern to what we've been doing recently. We've filled out, geographically for a minute, we're in 30 countries, as Scott outlined. We see a need for Germany. We've taken some time on Germany, but there are some specific opportunities in Germany currently, and I think that we would like to add an operation in Germany fairly quickly, or it'll depend on what happens in terms of client developments, but to some extent, but I think that will be important. I think that's the one country where we'd like to add, so it would take us to 31. The financing of that would be internal cash flow, our usual half share, management taking half, cashing half of their equity, and half shares.
On the data and programmatic side, you've seen what we've done with ConversionWorks and Datalicious, which are now MightyHive in the U.K. and in Korea. You can expect, we have a pipeline, you can expect a similar approach outside the United States in data and analytics, and indeed in any programmatic opportunities that arise. I don't think there will be significant or large transactions in the short to medium term, but I think there will continue to be those areas in content, which is probably the German focus. In data and analytics, which is a fast-growing area, and because of the third-party cookie decision by Google, increasing prominence and in the programmatic media area. I think a continuation of what we've seen. Does that answer your threefold question?
It does. Thank you. You can use your extra time to brush up on your German. Perfect.
Okay.
Thank you.
Julia, any further questions?
Yes, sir. One final question from Steve Liechti from Numis. Please go ahead. Your line is open.
Morning, everybody. Sorry, I've got two quick, well, one quick one, hopefully. What did you say percentage of sales was from tech clients? I missed it.
One half, Steve. One half.
Okay. Fine.
One half.
That's sales as opposed to number of customers or anything like that. That's actual revenues?
Yes. No, that is net revenues, gross profit.
Yeah. Correct. Thank you. Perfect. Just trying to understand the way your business works between the two different verticals. I understand it is much more project-based, and you've talked about the pitches that you're involved in now that are underway and probably more virtual. Do you track a pitch pipeline on a, I don't know, a one-month, two-month, three-month basis? I understand your comments that the long-term trend is towards probably more digital and transformation. Has your pitch pipeline gone down or up in the last sort of few weeks, given what's been going on?
We said in the statement the pipeline was stronger than this time last year. I think that remains the case. Victor, do you want to talk about your pipeline and, Pete, your pipeline too? Victor.
Yeah. Thanks for your question. No, it's completely in line with last year and a little bit up. We keep on monitoring if we go from pipeline to deals. That's our major objective, but it's looking healthy so far.
Pete, do you want to respond on that?
Sure. Like most companies, we track our opportunities, whether they be upsells of existing clients or brand-new clients on a day-to-day and week-to-week basis. As of this moment, we are seeing a strong growth and a strong start to 2020, but as Sir Martin and Scott both said, with COVID-19 sort of changing things, not even day-to-day, but hour-to-hour oftentimes, we're watching it like a hawk, and we'll continue to monitor and see how things shape up.
Okay. Steve, you want any further detail?
No, that's fine. Thank you.
Okay. Julia, anything else, or are we clear?
Thank you. There are no further questions, sir.
Okay. All right. Thank you very much, Julia. Thank you, Julian, for pushing the slides. I think we're going to put up the COVID-19, the two slides at the end that we went through on the website now that we've exposed you all to it. Thank you for joining us. Again, just finally, I think our net view is that this accelerates the importance of digital and being a purely digital operation. We think we're in the right position, in the right way, but we'll join you for Q1 in a few weeks' time. Thanks for joining us today. We have a further call with U.S. analysts in an hour or so. I think at, what is it? 12:00 P.M. or at 12:00 P.M. London time, 8:00 A.M. East Coast time, if any of you want to join that too. Thank you very much. Thank you, operator.
Thank you, Julia. Thank you, Julian.