Future plc (FUTR) Earnings Call Transcript & Summary

Good afternoon, and thank you for joining us today. This is a third in a series of webinars we have on Future, following on from our update on consumer privacy and regulatory change around the PCW markets. Today's session is aimed at helping providing a little bit more insight into the value of our high intent audiences across our platform, following on from some shareholder inquiries around what we think might happen regarding our audience comps as we anniversary the COVID spikes and the relationship that audience has with yield growth across our business. One of the things that is critical about our strategy is that we operate in specialist markets with endemic audiences. We have highlighted before at our Privacy Seminar in March that not all audiences are equal, and the more qualified and targeted that audience is, the more valuable it also is. Although our long-term trends are clear, on a 5-year CAGR, as highlighted in the interim results, with average organic media revenue growth of 24% versus average organic audience growth of 19%. One of the critical things for Future is to drive podium positions in our brands, ensuring we have the most relevant audiences for all of our partners and we hold many #1 positions across most of our verticals. What we wanted to explore more today with higher endemic audiences means we're uniquely placed to find the most valuable audiences for our partners, allowing us to benefit from very high yields. Sometimes people ask me what matters most, a big audience or a valuable audience. And the critical point here is that our strategy means that we don't need to swing the pendulum. And instead, what we want to ensure we can continue to do is reach 1 and 2 people in the U.K., be the market leader in our markets and also find and service the most valuable audience for our clients and partners. Put simply, we aim for both audience reach and yield progression. It's not an either/or proposition. So truly, all audiences are not equal. And in Future, we have become experts through our platform of finding the maximum value from the audience that we have, and that's what this session is really about. In particular, we thought our recent investments in B2B newsletters will be a good way to illustrate the value of the audiences we have. Sophie, our Chief Marketing Officer, is going to kick off today talking about the relative value of the audience at Future and will explain why a growing audience in our most valuable segments drives more value overall than a mass market audience. And as we've said before, we expect to see some audience declines in pockets of our brand portfolio as we anniversary the unusual COVID comps. But we expect a large proportion of this to be low-intent audiences that generate significantly lower yields. Taking an example, whilst we could report the audience in our brand Life Science last year as more people search for COVID news, this did not deliver much revenue upside because the value of the non-endemic audience was much lower to us than growing our video or B2B base. Our deal thesis for the acquisition of SmartBrief, the e-mail newsletter business we acquired 2 years ago, was that we could use the future wheel to drive our new revenue diversifications from the SmartBrief brands by accessing our capabilities. Rick, who runs our B2B business, will talk to you a bit about SmartBrief and how his business has benefited from accessing the Future platform and center of excellence and how this is helping create increasingly valuable audiences. Sophie will then finish off by providing the other side of the deal thesis, talking about how we've leveraged the technology and operating model in SmartBrief to bring newsletters alive in the consumer portfolio. So with that, I'll hand over to Sophie.

Thank you, Zillah, and hello. I'm Sophie Wybrew-Bond. I'm Chief Marketing Officer at Future. And I've been in the business exactly 2 years. The marketing function at Future has a number of component parts. The 2 that are relevant for this webinar are our consumer subscriptions business and also our e-mail marketing business. So how does the principle of not all audiences are equal help us to expand our yield? Well, because we're specialists, we know the value of endemic audiences. Those are the audiences who are very enthusiastic and passionate about our content, delivered by our specialist brands. And we have a very well-documented track record for attracting those audiences at scale. Even at the base of the pyramid you see here, Future's audiences are already demonstrating a higher level of intent, and that differentiates them from competitors' audiences. And it's due to our expertise in search. So we're already starting from a more differentiated position. And then we're able to add yet more value for advertising clients. We do this by moving audiences from unknown data points to knowing more about them, and that allows us to better serve their needs. And that, of course, drives increased engagement. And audience engagement is highly valued by advertisers, and that's demonstrated through the increase in yield on the right-hand side of this slide. Towards the base of the pyramid, we have high-intent audiences at scale, driven by achieving podium positions in search. But we have less information about each user. Here, we can achieve $1 to $2 per thousand impressions when selling digital ads at open auction. Moving up the pyramid, we gather more data on our audiences. And you can see that the yield increases as we go, from $6 to $7 for private marketplace digital ads, $12 to $13 for directly sold digital ads, $15 to $20 for video ad impressions. And when looking at B2B newsletters to highly targeted audiences with rich data, we can achieve over $80 per thousand impressions. So by understanding that we can derive greater yields from having richer data about our audiences, which, of course, is a classic B2B technique. This was part of the thesis that led us to acquire SmartBrief, as we were thinking about how this would also benefit our B2B business. Our content is our primary asset, is what we continue to invest in and nurture, and it's the key to driving value from our audiences. It's the value exchange between Future's content and our audiences that power our model. Whether this is an unknown audience, finding our content via search, and thereby demonstrating high intent, or whether that relationship deepens as audiences browse more pages across more of our sites, or even takes the decision to actively share their data for us -- with us in exchange for more curated and valued content, such as that provided via an e-mail newsletter. So we combine our high intent, large-scale audiences, attracted by podium positions in search, with significant and growing quantities of first-party data from the recent acquisitions of the GoCo Group and now, of course, Dennis. And this provides us with valuable known audiences that we can monetize in a number of ways, including e-mail newsletters, subscriptions and personalized product recommendations. The e-mail expertise and technology that SmartBrief brought to Future has accelerated our program of curated B2C e-mails and also powers our data collection growth, which are monetized -- and our e-mails are monetized via advertising. I'll talk more about those in a while. But first, to find out more about SmartBrief, here's Rick Stamberger.

Thanks, Sophie. I'm Rick Stamberger, Senior Vice President of Future's B2B vertical. And I'm pleased to be here today to share more about SmartBrief, the company I ran for 20 years before Future acquired us in 2019. I'll also discuss our integration into the Future ecosystem and how our understanding and treatment of B2B audiences as well as our proprietary e-mail technology is helping to fuel growth across the business. But first, let's dive a bit deeper into the SmartBrief business model. SmartBrief's mission is to equip the executives, B2B marketers and trade associations with the content, data and technology they need to succeed. We achieved success by combining technology and editorial expertise. For more than 20 years, SmartBrief has been refining its proprietary e-mail technology platform to deliver curated news and valuable content to our influential readership and partners. We produce our publications in partnership with leading trade associations and professional societies. And it's that partnership along with our highly relevant content that generates the relationship of trust we have with our audience. And that relationship of trust is something that every media company desires and needs today. For our subscribers, SmartBrief delivers curated, hyper relevant digital newsletters to keep them informed and prepared. For our publishing partners, SmartBrief provides a critical communication service that helps them recruit and engage with their members and target nonmembers while generating non-news revenue. For B2B marketers, SmartBrief efficiently connects them with a valuable audience of business decision-makers, an audience that's relevant, highly engaged and typically very hard to reach. SmartBrief seamlessly creates and distributes over 250 digital newsletters, curating the most relevant content for virtually every industry and profession. And we're able to do that at scale without sacrificing quality of either the content or the product. This allows us to create an unparalleled combination of breadth and depth of B2B audience engagement. Our advertisers rely on SmartBrief to reach specific audiences through advanced targeting based on industry, profession and user demographics, such as job title, company size and purchasing power. It's an audience that includes senior leadership and others with buying authority in 15 of the largest sectors of the U.S. economy. For example, you can see that over 1/3 of our targetable readership is VP level or above, which speaks to the decision-making power of the audience. And just as important, we're delivering that advertising in the context of the most important industry and professional news that affects the reader. Working closely with our association partners who connect us with the majority of our qualified valuable audience, we acquire more than 1 million new subscribers annually through a variety of opt-in tactics. This type of audience growth is not only incredibly effective and efficient, but it also provides a deep contextual understanding of just who our audience is. For example, let's say you're one of the large food delivery companies that have emerged during the pandemic. We provide you with a scalable and effective way to reach restaurant owners and operators. And if you have a specific target in mind, say, companies that have $1 million in revenue, a large chain operating on the East Coast of the United States, we can get that granular in our targeting. Having a deeper understanding and gaining the trust of our audience means the ability to expand our relationship with them through new products, new content, new services that allow us to engage with them even more deeply and in more meaningful ways. As a part of a larger Future ecosystem, we've been able to expand our capabilities beyond our core newsletter product and are seeing early success with events, awards programs, video and podcasts. This mix of products deepens and reinforces our relationship with key advertisers as well. Being part of Future has helped grow the business, certainly, through the products we're selling, again, awards, events, video products. But we're also testing ways to gain B2B subscribers through the monthly visitors to Future's websites. Our SmartBrief SmartSummit product combines Future's virtual event expertise with SmartBrief's niche audiences and content. We produced 16 SmartSummits in FY '21, with relevant topics ranging from managing clinical burnout at the height of the pandemic to remote learning in K-12 schools. More than 7,000 of our subscribers signed up for SmartSummit in its inaugural year. We've launched a sponsored health care podcast dealing with clinician burnout, and we're able to attract leading guests for podcast because of our audience reach. It's the combination of highly qualified audiences, relationships of trust and credibility with our subscribers, an extremely effective advertising targeting capability with our proprietary technology that has made SmartBrief the leader in digital B2B media. It's reflected in our premium yield of an effective CPM of $80 to $85. We continue to diversify our revenue with content solutions, social audience extension and recurring revenue for custom newsletter production. And we'll continue our growth by launching more Future products to more of our audiences. At the same time, Future is taking advantage of the SmartBrief e-mail expertise and our proprietary technology. And for that, I'll hand it over to Sophie, who will discuss how we are utilizing the SmartBrief e-mail platform beyond B2B to the larger Future business.

Thank you, Rick. And you heard Rick demonstrate and talk about what Future has brought to SmartBrief. I'm going to talk about what SmartBrief has brought to Future and how we're applying that to our B2C business. So we all know what it's like when an e-mail lands in our inbox at exactly the right time and with content that catches our attention. E-mail newsletters at their very best are an intimate product, targeted and curated just for you. And despite being a legacy channel, e-mails are actually experiencing something of a renaissance, particularly in North America. With our rich seam of content created for our websites, Future is really well placed to curate engaging newsletters for our passionate audiences. We've always had them in our mix of products. And they bring the triple benefit of driving traffic back to our sites, generating ad revenue from in e-mail ads, and also growing first-party data as customers sign up to receive daily or weekly news letters. SmartBrief has brought us both proprietary technology, but also a depth of expertise in e-mail, with which to supercharge this program. So we've been creating new and migrating existing B2C newsletters onto the SmartBrief platform. And here are 2 examples of new e-mail products we've created. The TechRadar Week in Review is a weekly blog style e-mail designed to be highly engaging as the editor in chief of TechRadar talks about the stories that have caught his attention over the past week. There's also an e-mail from Tom's Guide, which is focused on a single category, gaming, and thereby is much more targeted for the segment of Tom's Guide audience for whom it's highly relevant. By creating better e-mail products, we're able to drive up sign-ups from consumers, which enriches our first-party data. For example, the TechRadar newsletter list has grown 50% since migrating to SmartBrief and launching the TechRadar Week in Review last year. And here are some of our existing newsletters which we've now migrated to the SmartBrief platform. And as you can see, SmartBrief's technology has improved the deliverability and engagement metrics. Open rates are largely improved. And the click-through rates on ads, plus clicks on any content, has seen significant improvements from our previous third-party platform. And as I mentioned earlier, this has the added benefit of referring even more traffic back to our own sites. The improved delivery and engagement of SmartBrief e-mails is a benefit to advertisers, whether they simply place an ad in an e-mail newsletter or take a high-impact partnership opportunity such as the sponsorship or even a dedicated send. And for these targeted and engaged audiences, they are prepared to pay a higher yield. Early yield results for our B2C newsletters are higher than the on-site video yield and 10x that of open auction digital ads. Another model for collecting rich first-party data is in exchange for services, with the newsletter then following on as part of the customer communications. An example of this is the Marie Claire Beauty Drawer, which is a beauty sampling service that collects everything from e-mail and postal addresses to skin type and skin care product preferences in order to deliver relevant samples to a highly engaged audience. And this permissioned data allows us to curate newsletters based on beauty interests, which will give advertisers access to highly-targeted segments at a high yield. And our other services, such as GoCompare, are also collecting permission data in order to provide an effective service to customers. In addition to providing a marketing channel for advertisers in e-mail, we were able to use both our services business such as GoCompare and our B2C e-mail data collection to deepen our understanding of our audiences. All of this rich data enhances Aperture, Future's intelligent platform that allows audiences to access Future's rich first-party audience data captured across our vast portfolio of brands, and it helps them to reach high-intent target audiences. Aperture gives advertisers access to engage audience segments and new targeting capabilities across more than 180 of Future's digital brands, leveraging proprietary data from more than 300 million monthly global users to inform an advanced audience segmentation. And the more first-party data we can upload to Aperture, the more we understand our audiences. And that movement from unknown to known will help us to increase our yields, as I described at the start of the webinar. Our latest acquisition, Dennis, powers this further. And I'll hand you over to Zillah now to talk about this a bit more.

Thank you, Sophie. So think what you've heard so far from both Sophie and Rick is how the combination of the Future platform, coupled with the SmartBrief capability, has resulted in the ability to create unique value on both sides of the equation. As you will have seen, we completed the Dennis acquisition earlier this week. And we see a material opportunity to accelerate our strategy with Dennis in a very similar way that we did with SmartBrief. We will enhance our first-party data through the Dennis' subscription base while also leveraging Dennis' highly efficient subscription capabilities. And as demonstrated earlier today, rich first-party data creates for us a valuable, high-yield in audience. We are accelerating the deployment of our wealth vertical, both in the U.K. and U.S., we will be able to deploy our monetization capabilities to the acquirer content. For example, Kiplinger already has a fantastic newsletter strategy. And we're really excited about the opportunity to deploy the Future wheel across this to grow yields and revenues on their website. And finally, we'll be able to utilize both Dennis' expertise and subscriptions and Future's operating model to drive further scalability in our business. To use Sophie's phraseology, we are confident that we can deliver 2 plus 2 to equal 6 with the Dennis acquisition, or ideally, even more than 6. So to summarize, all audiences are not equal. And the most valuable audiences to Future is an endemic audience with intent, as these drive higher yields and enable our clients and advertisers to reach the audience they want. We do this by enriching our first-party data and focusing on specialist media and podium positions. We aim for both reach and yield progression. It's not an either/or proposition. And we're super excited about our ability to diversify our revenue streams for Dennis, as Rick and Sophie just outlined what we did for SmartBrief. Hope you found today's session useful. And I look forward to catching up next at our presentation of our full year results on the 30th of November. In the meantime, we'd be delighted to take any questions now.

Hi there. I will just let my colleagues come off mute and join us on the video as well. I hope you find that useful. I see we've already got one question just come in from Nick. So why don't we start off with that? I think, Nick, it's about organic versus inorganic. Prior in 2020, the SmartBrief business wasn't in our organic numbers and it's actually a tiny, tiny number in the business overall. So the 19% decline was, I think, about less than GBP 100,000. It was sitting in what was creative solutions, service activations and things like packs, [ east ], et cetera, as opposed to a comparison to SmartBrief business. The SmartBrief business has consistently been delivering a double-digit growth over the last few years. But we'll give you more update on that during the full year results at the end of November. I hope that answers the question. I don't know if there's any other questions you'd like to ask us. Guys, a question went to me, which is how [ rate you ] across the product portfolio. You've been able to roll out the e-mail product functionality. You referenced Tom's Guide and TechRadar. I think I'm going to hand this over to Sophie in a moment. But before I do, I think one of the things that is -- we're really pleased with the rollout of the e-mail across consumer. I think with the impact to the pandemic, we probably lost about 6 months in kind of that process because I think we always spent the first 6 months of the pandemic trying to work at what it meant for us. And so probably a little bit behind where we would have liked to be merging with the SmartBrief business, but we are in terms of momentum exactly where we want to be. But maybe Sophie can bring a little bit more color to what that looks like.

Yes. Happy to. Thank you. So I think by Christmas, we're in a fierce program of rollout at the moment. By Christmas, about 75% of our newsletters will be on SmartBrief platform. And we've started with the ones that we think have the greatest commercial upside for us. And so you've seen some of the early results in the slides just in the webinar now. But the idea is that we just continue that rollout program and improve the products and the learning as we go. It's been a very healthy start.

I'm on mute. And then I think there's another question, thanks a lot, Sophie, from Colin around whether or not that's just promotional or commercial. Colin, you should know us better. Nothing is just promotional at Future. But I think maybe Rick or Sophie may want to pick up in terms of what our views are there in terms of the commercial opportunities.

Yes. I'd be happy to. Colin, it's been a while. So I think they are definitely a commercial proposition. There is that triple benefit where we get some referral traffic back through to our websites. But predominantly, they are -- in e-mail advertising is a big opportunity for us. And we see our revenues more than doubling in the new financial year coming from in e-mail ads. But there also an e-commerce opportunity as we get really good around surfacing e-mails that offer product recommendations. So they work in a number of ways. We think advertising is the primary commercial route this year, but we'll be exploring other options, too. And there are some brands where the referral traffic back to the home website is really high proportion. And others, it's a much smaller slice.

And then just a question from Nick there around -- but I don't know if we [ can speak about this ]. We are communicating with consumers in 5 years' time. Rick, do you want to pick that one up and then maybe I'll add something on at the end?

Yes. Sure. Nick, 5 years, of course, in technology is a lifetime or a couple of lifetimes. But we've been using e-mail for 20 years and have watched the death of e-mail probably every 2 or 3 years during that 2-decade time period. E-mail is -- remains a -- and actually is having a resurgence since. Sophie mentioned in the webcast that it is data-intensive. It is requested. It is targetable and targeted. And for those reasons, it is highly effective and highly efficient. So I think it's going to be around for quite some time.

And I think just to build on that, one of the things that we actually saw is a bit of a renaissance back into e-mail. I mean I couldn't concur with Rick more in terms of the media is constantly disrupted. But if you look at the growth on Morning Brew and Air Mail with Graydon Carter and -- I can't remember now. Is it Substack?

Air Mail. Air Mail and Substack.

Yes. And Substack. So -- well, I think over the last couple of years, what we've seen actually are people increasingly saying, what I'd really like is something that's curated to me and it's personal to me. So it's actually, in some ways, much more like a magazine format in terms of the direction of it and the creation on it. And because you opt into and you say you want to engage them, we know we're giving you something that is really meaningful. So I think we're quite bullish on it. But who knows what 5 years looks like. But right now, we see a big opportunity. And certainly, within the GoCo transaction, we see there's a real opportunity there to add value to that population, which I think we talked again at the time we did that transaction. It's one of the opportunities for us, and that's something that we're just in the process of developing right now and looking to roll out in the next couple of months. We have a question in around whether or not we should expect to see all of our ad sales above $1 to $2 CPM rate. So I think if I said this to my CRO, he'd have a heart attack. So I think the reality is -- and what we're really trying to demonstrate today is that not all audience is equal. And we're always going to have some audience which is lower value, because if you are reaching 1 in 2 people in the U.K. and 1 in 3 in the U.S., then inevitably, not all of those people are valuable at that moment in time to all of your advertising partners. And so we want to make sure that we continue to be the largest in our markets so we can be the #1 and protect our competitive positions, but at the same time, also making sure that we have the right person. And so we have the most valuable audience as well. And so today's webinar has really been about trying to demonstrate the value of having the insight about not just a large audience but actually who's in that audience, and then making sure that you don't monetize everyone at $1 to $2 CPMs, but instead, you extract the value for each proportion of that audience appropriately and that you communicate with them, e-mail being a classic example, in the right way, according to what they need, which allows us then to drive the values. We certainly expect and continue to be quite bullish about ongoing yield opportunities and the change in the mix in Future, but I do think we will continue to see $1 and $2 CPMs. I don't think we've got any more questions just now. I'll just give it a couple of seconds more. We did say we would be on for half an hour, and I don't want to keep people back on a Friday afternoon in the U.K. and on a Friday morning back on a holiday weekend. So if there isn't any more questions which -- it doesn't look like, then thank you very much for your time. We really appreciated you spending the time with us. And if you've got any more follow-up, please reach out to Marion or myself directly. Thank you.