Welcome everybody to S4 Capital's Q1 2023 results presentation. We had our first call this morning with mainly European and Asian audience, and we probably have got our North and South American audience on this call now. I'm joined by Scott Spirit and Mary Basterfield here in London, then Wesley ter Haar is in Amsterdam, and Chris Martin is in Boulder, Colorado. Unfortunately, Brady Brim-DeForest is traveling down from Scotland to London by train for some extraordinary reason. Anyway, he's doing that instead of plane, so he's unavailable. Scott is gonna fill in for him on the tech services area. He's got a good range of knowledge of that too.
With the presentation today, we're gonna start off with a brief presentation on the financial results. The biggest element that inbound set of queries that we're getting and questions and observations is obviously on AI and AGI. Some of you may have seen Google's Salvo yesterday on the West Coast in response to the huge interest that AI and AGI has been generating. Wes ter Haar is going to focus in the second section of the presentation on that. We'll have a brief Q&A session for people on this call, which we'll try and answer all the questions you have. To kick off, Mary, do you want.
Thank you, Martin. Hello everybody. Thank you for joining us today. Our first quarter performance was in line with expectations with revenue of GBP 262 million, up 27% on a reported basis and 6% like-for-like. Net revenue of GBP 219 million was up 28% reported or 7% like-for-like. We maintain our full year guidance of 8%-12% net revenue growth on a like-for-like basis after adjusting for the reduction in scope of one Whopper account. On this basis, the growth in net revenue for Q1 was 8%. In Q2, we expect net revenue growth to be within the guided range. Given current economic uncertainty, we continue to manage our cost base tightly and to take selective cost actions with a focus on operational efficiency.
We also maintain our full year operational EBITDA margin target of 15%-16%. As in previous years, operational EBITDA will be significantly weighted to the second half. Net debt at the end of March was GBP 136 million or 1 times operational EBITDA. Our full year net debt guidance of GBP 180 million-GBP 220 million is unchanged as we have yet to make the final payments related to prior year combinations. With merger payments fully met in 2023, net debt is expected to decrease in 2024 given our current capital allocation strategy. Moving to the next slide, let's take a look at Q1 net revenue by practice and region. My comments here are all on a like-for-like basis.
Our net revenue growth in the quarter was led by the Technology services practice, which grew 57%, driven mainly by expansion of our revenues with existing clients. Both Content and DDM faced slower addressable markets. Net revenues were up around 1% on a strong quarter in 2022, when Content grew 33% and DDM 35%. Many of our major clients continue to grow activities strongly with us, though it is clear that 2023 has started cautiously. We have seen sales cycles lengthen, particularly for regional and local clients. From a regional perspective, the Americas grew fastest with net revenue up 11% driven by Technology services. The Americas accounted for 79% of the mix in the quarter. EMEA was down 5%, reflecting slower market conditions and strong prior year comparators.
In APAC, we saw net revenue for the quarter down 10% with slower sales cycles in Japan and Korea, and China emerging slowly from the COVID lockdown. We have again included information in the appendix on outstanding contingent consideration, expected share count and invested capital. We are happy to take any questions on these at your convenience. Thank you very much. I'll now hand over to Wes for the update on artificial intelligence.
Thank you, Mary. Hey everyone, we are back with our recurring AI updates. We did this six weeks ago, of course, when we presented our 2022 numbers. What is quite interesting is before that presentation, I don't think we had many or even any questions around AI. Of course, Scott is fielding, pretty much exclusively questions around AI now.
I think, correctly so, very interesting moment in time. We actually released our report about this early March. We shared it broadly, The Revolution Will Be Generated. Very little interest early March in this, I think we were maybe slightly ahead of the curve. We go to the next slide, the reason we are so bullish on this and so on top of this is because we have to be clear on what's happening. You look at what's happening, AI will change the economics of everything, right? Not just advertising. I think if we talk about the change of economics of advertising, that's really what we've been saying since the very first days of S4. That's what faster, better, and cheaper means.
From our perspective, we could not be more excited by this because we really believe that it makes our model inevitable. I do want to say something about our industry at large, though. I think there's quite a bit of angst about the advertising industry as a whole, and of course, there will be winners and losers. If you think about the level of disruption that's about to happen in culture, in commerce, and in technology, our industry really is the first port of call, right? Agencies and consultancies are the first port of call to help clients, industries, and businesses, and brands figure out this level of disruption. I think we'll actually see that play out over the next few years as more and more of our colleagues and frenemies start talking about this in a bit more depth.
When we talk about the winners and losers, the losers are gonna be those that don't adapt, aren't agile enough, don't understand the reality of the moment. That is not us, but there's also upside beyond this disruption if we go to the next slide. The exciting thing here, and this is really what we call day one, we're currently in day zero of AI disruption, this is day one. The original intent and promise of digital advertising is gonna be made possible because of this technology, right? That original intent and promise was always around deep personalization at scale with clear context, white glove, long tail loyalty opportunities, highly conversational interfaces. To be honest, that promise has been quite clunky, right? It hasn't quite materialized yet.
This wave of innovation actually unlocks that original promise, which is one of the reasons we're so excited about this opportunity. If we go to the next slide, what are we seeing in market? We're seeing the following: No marketer can ignore this technology. We're seeing that with all of our clients. Everybody is looking for support. They're looking for subject matter expertise because of what's happening. If we go to the next slide, the role of enterprise, and I'm paraphrasing an enterprise client that I had this conversation with earlier in the week. The role of enterprise is to mitigate and minimize risk. There's a lot of discussion around the speed of disruption. I think that's probably slightly overstated based on what we're seeing, and the speed won't be equally distributed.
We have clients that want to move very, very quickly, probably the clients that have a bit more pressure on costs, we also have clients that are very focused on figuring out what day zero looks like, and especially the clients that see marketing more as investment than cost on what day one looks like because there's lots of opportunity there to win. If we go to the next slide, let's talk a bit about day zero. Day zero is really about handling complexity, and that's something where we're digging and helping our clients solve that and really plan for what's next. The complexity sits in very sort of broad landscapes. Communications is one. How do you talk about this in a meaningful way? Corporate communications, road mapping. We're seeing a lot of blow-ups there. It pretty much happens every other day.
I think the most recent one was Wendy's talked about using this technology in a very bullish manner to the market. Of course, caused a minor revolt internally. A lot of this is playing into the writer strikes in L.A. at the moment, the use of AI. There's a lot of components and complexity to figure out from a communications perspective. Copyright is a gray area. I think a lot of clients are waiting for that to be more figured out from a legal perspective. There's real conversations to be had about your ethical take on this and how you want to turn up as a business and a brand, which sort of leads into brand safety discussions.
There is a massive wave of, let's call it Digital Transformation 2.0 about to happen, and that wave could wash away a lot of the work that has been done before. That is big discussion and decision to take, which will take a bit of time, but plays into privacy, security. It's quite difficult to pick a partner at this moment in time. It's a bit early to pick winners. Operationally, speaking from experience, the technology is quite powerful, right? In some cases very powerful. It's not perfect, so implementing that in your own workflows actually is a massive change management exercise, which we'll talk about in a bit more detail later on. That is day zero, some of the complexity. We go to the next slide, our role is really this focus on now, right?
We are in the business of helping our clients unlock value that's available right now. To do that well, we have end-to-end packaged AI offerings. We'll show a case video at the end that talks about brand experience, which is a bit more day one. It really is where this is innovation, push the opportunity of digital personalization and real-time messaging, which I think is very exciting. A few of these packages are in play with our whoppers, with new clients. It's quite a popular new client conversation. Part of it is brand advisory, which really speaks to that communication complexity and the ethics around this.
Part of this is creative fatigue, which to me is one of the more interesting offerings currently. Creative fatigue really speaks to this concept that if you have digital ad content out in the landscape, there is a moment where it starts losing its value, right? The click rates and conversion rates go down. That's called creative fatigue, and it is a really meaningful compressor of media value. We're solving that with one of our technology clients/partners. I think that's gonna be really meaningful. We hope to show that work in our next meeting. Brand experience. Talked about this a bit previously. This is really that upside of deep personalization at scale, consumer experience at a much stickier level.
In-house agency, we're seeing a lot of interest and uptick in the idea of really extending our experience in in-house agency building to do the AI version of that, really meaningful in today's macro environment because there's a promise of less headcount and equal or even more output. Virtual production, one of the intent offerings, is really an extension of the innovation we've gone through over the last few years, combines our experience in real-time, Unreal Engine and gaming engines with generative AI. I was reviewing some of the work that we did for one of our bigger clients, a big product company, and the work is indistinguishable from physical shoots. I think massive amount of disruption about to happen in that space as we're packaging it for more clients as we speak. Data and cloud.
We've talked about the importance of this for a while. Single source of truth, clear taxonomy, availability of data. That just went from important to imperative, right? Because if you do not have that data, and you do not have the cloud architecture to make that data available, you can't start training your own algorithms, which is really gonna be a key part of having a differentiator for all the businesses moving forward. Lots of stuff that we're doing right now for our clients. We'll show a video around brand experience at the end of this presentation. If we go to the next slide, I think, important to just tackle the question head-on. Lots of disruption to come in advertising and everything else. The question becomes, within that disruption, why bet on S4? Why bet on us?
There will be winners and losers. I think there are a few components to this. If we go to next slide, we're not surprised, right? This is a space that we've been very bullish on for a long time. This image is not generated by AI. This is me before I had to worry about analyst questions about generative AI. We've been talking and thinking about this space since 2017. You can see it in our interviews, in our projects, in our lab reports, in our trend presentations. That's played into us being consistently fast and first as the last six months have rolled out. What does that mean? It means we were the first top 20-t op 25 player to talk about it in this type of setting in a meaningful way.
First, with our market report that I referenced earlier, The Revolution Will Be Generated. First, with our ethical guidelines published at a much deeper level than you'll find at many other places in our industry, and so on and so on. This space moves extremely fast, and I think we've shown time and again that we have the agility to stay on top of it. If we go to the next slide, what that means is that AI is part of our existing workflows. We call these our playbooks, our AI playbooks, and we have them for all of our teams and all of our talent communities. We're implementing AI into their work and into their workflows, and we're making some amazing progress.
If I look at the efficiency that that's creating just in the last six months, which has really been a watershed moment in the generative AI space. We look forward to sharing and talking about that efficiency as we go throughout the year. This is a massive training and change management operation. It's the biggest that we have ever done. I'd wager it's one of the bigger ones in our industry currently. If we go to the next slide, the reason we can do that so quickly is because we're solving key issues that you must have seen in the news, right? Other companies are really struggling with their ability to use ChatGPT because of data and security issues. We've seen other network companies sort of block access. We've seen big enterprise clients sort of struggle and make mistakes.
We've already launched MonkGPT internally. We're empowering our whole team to use the tech in a safe and secure way. Really, on top of that, we're building and have built a really healthy ecosystem of AI tools and workflows. Honestly, if you were to ask me about winners and losers in this space, if you're not building your own technology and pipelines, you cannot win this moment in our industry. Again, I think we're ahead of the curve there. If we go to the next slide, we also have a foundational difference within our organization that allows us to move so quickly. We are a single company. We're a single brand. We're a single P&L. AI makes that an inevitability. AI works, but it only really works if you can pull it through end-to-end across a pipeline of data, media, Content, and technology.
We truly believe AI winners will be single companies, not fragmented teams on a bunch of P&L islands. It just won't work. If we go to the next slide, you know our mission. We've said it often. Changing the economics of AI is really faster, better, cheaper. To be faster, better, cheaper, we're on a mission to be the world's most AI-empowered partner in our industry, and I believe we are well on our way. One more slide just to tackle some of the questions Scott, especially, has been handling. We have a Q&A after this. I think important to share our point of view so we're all at the same level of detail and information, and maybe we can get a bit more granular in our Q&As. The questions that we're getting really revolve around three areas. They revolve around our scale, our headcount.
They revolve around the sector that we're quite heavily weighted on, which is technology. Then focuses on impact on sales. Scale first. We are at, I think, about 8,700 people. Let's say a small 9,000. That's a perfect footprint for what needs to happen, right? It means we're a truly global player. We have the diversity of team and talent to be a partner to enterprise clients. That's reflected in our portfolio, and we can help them consolidate their spend. We aren't belabored with a massive amount of legacy structure and scale and legacy commercial models. We feel much more bullish on being a disruptor at 9,000 than having to do that at 90,000. The amount of internal structures and commercial models you have to disrupt at that size is gonna be really, really tough.
We feel great about current size. There might be some headcount impacts, right, as we get more and more efficient. The reality is, we're also seeing sales come in. I think one of the great promises of AI is being able to do more with the same footprint, which we're already seeing play out. The second piece is sector. There's definitely macro worries about the technology sector. To be honest, we're not seeing that play out in our client portfolio. There's healthy growth there for us, which I think plays into the consolidation element that we offer. It also means we're extremely close to the companies that are defining what happens next in this space. We have access to the alphas and beta programs. We're working with the big technology and platform companies to figure out the use and business cases as the...
as this technology scales to the rest of the market. That's a key role for us, right? A key role for us is being a technology implementer and making sure the technologies find their place in market and become that glue between companies and consumers and the conversion that happens there. Third piece, sales. Realistically, we see this as big a conquesting opportunity as the first year and a half of COVID. You can look back at our numbers to get a sense of what that meant, but not quite now. Day zero is a bit slower. There's a lot of complexity. To be honest, we can't wait for Day one because it unblocks a lot of that sale opportunity and conquesting opportunity.
Main takeaway is that I think we're extremely poised to grab that upside when the explosion really happens at the enterprise level. That's a quick precursor to the Q&A. We're gonna watch a quick video, great piece of work from our team that really hints more at brand experience and day one opportunities. After that, we'll go to the Q&A. This is the KIKI case. Thanks, Wes. Now operator, we're open for Q&A.
Thank you. If you'd like to ask a question, please press star one on your telephone keypad. We'll pause for just a moment to allow everyone an opportunity to signal for questions.
Any Q&A?
There are no questions at this time.
Okay.
I will hand over back to our speaker for closing remarks.
Thanks very much. Obviously, Wes, the presentation was so stunning that they were all stunned into silence, a quiet bunch. Any questions, by all means, contact us. Wes, Chris, email. Thanks for joining us. We'll see you for the half year results later on in the year. Thank you once again.