Correct. An "S" character skips. This is in the Goal description:
'S' - Skip the next character and continue with the subsequent character
Test case #3 uses "S" as well, but on further inspection, it turns out that it will work just fine without implementing "S" behavior because the character that it skips is a "G", which has no functionality. So as long as your program ignores unrecognized characters, test 3 works fine without the "S".
In hindsight, I should have made test 3 require that "S" behavior works properly. I really wanted to introduce that concept at that point.