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Edited Transcript of FUTR.L earnings conference call or presentation 17-May-19 8:30am GMT

Half Year 2019 Future PLC Earnings Presentation - London

London Jun 6, 2019 (Thomson StreetEvents) -- Edited Transcript of Future PLC earnings conference call or presentation Friday, May 17, 2019 at 8:30:00am GMT

TEXT version of Transcript


Corporate Participants


* Penny Ladkin-Brand

Future plc - CFO, Company Secretary & Executive Director

* Zillah Byng-Thorne

Future plc - CEO & Executive Director




Zillah Byng-Thorne, Future plc - CEO & Executive Director [1]


In terms of the plan for this morning, we'll give you a very brief update on the exec summary, Penny will take you through the numbers, and then I'll give you sort of a bit more detail on terms of the execution of the strategy.

In terms of the business performance, I think the kind of key takeaway for me is that the reshaping of the businesses is -- that have been undertaken in the last 12 months, it's been a very transformational year for us. And when you start to look through these numbers, it is fundamentally a different business than the business that was 12 months ago, but very much in line with the execution of the strategy we're seeking to do. So if you think about what did we say we're going to do, have we done it and has that delivered a business which is a -- different in terms of shape and, therefore, valuation. I think key things to call out are that more than half our revenues now come from outside of the U.K. That was one of the key things we wanted to do in terms of diversifying our exposure to the U.K. marketplace. 70% of our revenues are now in the Media division. Remember when that was inverted and 70% of our revenues were in Magazine division? And we still love the Magazine division. It's a huge asset to us in terms of our strategy and in terms of the valuable IP we get from it. However, very pleased to be 70% into the much higher margin part of our business.

One of the things we fundamentally think is really important is audience growth. And I feel very encouraged by the fact that the organics of the legacy portfolio audience growth is up 25%. We really do feel like we're rating the content that audiences want to read, and there's no better endorsement of that part of our strategy than the growth in the organic numbers. However, in absolute terms, we've actually nearly doubled the size of our audience overall, as a group, so we're very much reaching twice as many people as we were before.

I think one of the things we talk about from a strategic prospective is operating leverage. And I think you see really clearly today that the platform that we've created, both technically and operationally, is working and you see that come through with our -- the EBITDA margins, where they are -- some 6 percentage point improvements on our EBITDA margin. Really goes to that point about the operating leverage and the scale within the business.

And then finally, the acquisitions are on track. So again, the final part of our strategy is to grow through acquisition as well. I'm very happy with how they're progressing. And we're very happy with the latest additions, men in Lycra and BlackBerrys, which I have back at my desk, which I forgot to bring along today. I feel like I've disappointed everyone by not bringing my BlackBerry, but we think it's the -- it's a new mobile phone.

So with that, I'll hand over to Penny.


Penny Ladkin-Brand, Future plc - CFO, Company Secretary & Executive Director [2]


Hi, good morning. And so you have to excuse me a little because I've got a bit of a cold this morning, so apologies. And I'll try not to sneeze too much down the microphone.

But happily, the numbers talk a little a bit for themselves in that we got a very pleasingly, some really strong results to be able to present to you today. So to Zillah's point, I mean one of the key things that we've been focusing on is improving the operating leverage in the business, so really nice to see the revenue doubled to GBP 108 million but much more pleasing to see the EBITDA has increased by more than that to GBP 23.7 million. And that's really -- you can see that in the step change in the EBITDA margin up 6 percentage points to 22%. And then the other point that we're always very focused on is making sure that, that flows through to cash. So free cash flows which is operating cash flows after CapEx are GBP 27.5 million. And so a much higher cash conversion than, perhaps, to expect. EPS growth has been strong, up 92% to 20.5p. And the strong cash flows has helped us delever very quickly, so we're just over 1x on leverage at the end of the first half.

Just moving on to revenue in a bit more detail. And this is the first time that we've presented the results including the impact of IFRS 15, and so we've restated the prior year comparatives. It's not a significant movement for us, about GBP 3.5 million. So just -- and just a gross up of where we've messaged off some agency commission in the past.

So 2 things which are very much a reflection of the strategy around diversification, which is the significant growth into Media and now 70% of group revenue. And as Zillah mentioned, U.S. is now more than half of the revenue. So you can see the acquisitions. So we've made 3 acquisitions in the course of last year, which are having a big step change on the revenue numbers. So the B2B business, NewBay, some titles from Haymarket and then Purch we acquired at the very end of last financial year. So that's driving a good chunk of the revenue growth although underlying organic revenue growth, so with which we've included here at constant currency has been very strong. So total organic growth of 14%; and in the media division, 38%. So some really great results. And you can see on the little pie chart there, some fantastic results both from eCommerce, 79% organic growth; and also digital display advertising, a 34% organic growth, which is really the move into the U.S. I'm very much focused on the monetization of that audience is reflected there.

Mags declined 11% after the impact of IFRS 15, so 10% all without that. So very much in line with our expectation and the trend that we've been seeing but that's overall contributing to the 14% organic growth.

So we can see how that then on this next slide flows through to profit. Media growth contribution is now 3 quarters of the total growth contribution because it's so much higher margin than the Magazine division and that it is -- and a significant decline in overheads as a percentage of EBITDA is really what's flowing through to drive the step change in EBITDA and that increase in the EBITDA margin to 22%. And so the Media margin has declined a little bit, which is as we expected and guided for the impact of Purch Publisher Services, that's where we're wrapping the inventory for on behalf of other publishers. And so we take the revenue and then we give away 80% of it. One of those and the most significant partner within that division is Mobile Nations, which we then acquired in March. And so we'll see the impact of some of that reverse in the second half as we start to consolidate those results. But Magazine margins, they improved slightly up 63%. But overall, you can see that the Media margins still reigns much, much higher than the Mag divisions. So as we see the change in the revenue mix shift, that flows through to the bottom line.

So just highlighting and the point that we both made around increasing the operating leverage in the business, you can see from last year to this year, just that step change in the EBITDA margin, the PBT margin and also CapEx as a percentage of revenue. So we've stepped up the total quantum of CapEx a little bit, but as a percentage of revenue, that's quite a significant decrease as we changed the scale of the organization. So we're increasing revenue per head, and we're increasing the margin and rev CapEx as the percentage of revenue is declining. So you really see the benefits of the operating leverage flow through.

I've got -- I was listening to a podcast by Jim Collins on the way here about flywheel. So I've got flywheels in my head. And so this is very much our flywheel as we step up the scale and you see it flow through.

So moving on. We've got the -- we can see the growth in EBITDA and that margin just on a 4-year trend, so you can really see the benefits of that flywheel now I'm on the theme kind of paying off as we increase the scale, we increase the EBITDA margin. And then as we look at that in terms of cash, I mean it's slightly lumpier but we can see that flowing through to cash as well. And so this is the free cash flow, so operating cash after CapEx really stepping up as we increase the scale of the group and increase the scale of the diversification.

Just looking at the cash flow in a bit more detail. We've seen, overall, the cash has been really strong with the operating cash conversion of more than 100%. And I think the only other point just to really highlight on here is the acquisition, so GBP 42 million of acquisitions, which was the acquisition of Mobile Nations in March, largely funded out of cash and then also the cycling titles much more so. GBP 1.7 million for the cycling titles. And then, we have a deferred consideration on Mobile Nations, which is payable after the period to March next year. So we took out an FX option just to hedge against currency exposure but otherwise, cash has been strong.

On that point, we refinanced in Feb, which we announced at the time. So we now have a GBP 90 million revolving credit facility with a GBP 45 million uncommitted accordion facility. So really as we set to the scale of the business, we've been able to give us more balance sheet strength. I think one of the key points to highlight is we're at 1.1x leverage at the end of the first half. We feel comfortable at around up to 1.5x. We've got -- we potentially have the ability to go up with an acquisition spike, but that's the sort of level of leverage that we feel typically comfortable at, but we've got lots of balance sheet strength.

So in summary, a really strong first half significantly changed the scale of EBITDA and stepped up the margin. And so together with the refinancing and the return to the premium listing, we already see a significant kind of step change in the group.


Zillah Byng-Thorne, Future plc - CEO & Executive Director [3]


Thanks, Penny.

So I did promise you a sports filled set of pictures today. So my other next biggest passion is football. So I'm not sure if we're Tottenham or Liverpool at the moment, but we're definitely going to win.

So -- and then flywheels. It's as if Penny and I have rehearsed this, right? So I -- most of you are familiar with my wheel in terms of strategy. And I think almost everyone has seen this slide before. I make no apologies for being boring but also efficient in terms of how I spend my time writing decks. We're just really focused in executing on our strategy. Someone was asking me this morning about -- as the things we wouldn't think about buying. And there's lots of things we won't buy because there's lots of things that don't fit with our strategy. And I really clear -- focused on what we do and what we do successfully, which we know how to execute is, I think, what underpins these numbers. And so that's why I come back to the strategy from perspective.

If you just look at the wheel in a little bit more detail, just to recap on that point, each wheel in essence represents one of our audience verticals, be that tech, be that gaming, be that music, be that media tech and the B2B portfolio. And what we're trying to do is then, with each of these spokes in the wheel, find a monetization route. And we feel that what we want to do is buy audiences or buy into verticals or build verticals where we can pretty much fill every spoke and have a complete full set of diversified revenues, and that's pretty much what we're setting out to do. And the content and then how we use the data to help think about that content is what drives that.

Our strategy remains to be a global specialist media platform, the emphasis on specialist. We don't really like mass market. We don't like things that are highly commoditized. And we believe in our brand, we believe in marketing positions, we believe in the communities we talk to and that's a core part of that engagement. And then in growing our business, we see ourselves doing that through organic growth, which Penny's talked about ongoing partnerships and then where appropriate through acquisition. And then finally, we try very much to drive a diversified business model across all the revenue streams with being material. However, again, I was just talking to Johnathan earlier about something -- I was saying that sometimes the strategy is the easy part, and I think lots of businesses know what they should do. I think the piece that sometimes gets complicated is how you execute on that and it's very easy to get distracted by new things and kind of forget actually what it is that you're good at and how you execute against that. And so I think it's really important again to try and come back to the 4 core pillars, underpin how we execute on our strategy. I think that it's -- with the message about how much we focus on this within the organization, it's been 85% of my time if not more than that, thinking about how do we execute on our strategy rather than on how we should evolve our strategy further.

The first 2 here: diversifying the audience and scalable platforms are kind of what I describe as core pillars that drive the business. We write content. We're a media company that writes content. And therefore, if you're not engaging with your audiences and diversifying your audiences, you're going to have a problem sustaining your growths. And as Penny said, our growths -- our audience growth has been pretty terrific this last 6 months and has continued to be on the back of that. And that happens not by accident, but because we think about how do we diverse our audiences further, so adaptation of cycling brands, the Mobile Nation brand, the growth the B2B business. But also within the core, I was looking at how can we expand out, so within the music portfolio, making sure we're covering end-to-end in the music arena. Or within the gaming portfolio, we've recently double-downed editorially on tips. For all of you gamers out there, you know what that means. But otherwise, what that means is basically how to cheat at gaming but it's dressed up as tips. But that's actually driven really significant growth in our gaming vertical in the last 8 to 12 weeks, have been an area of investment for us. So really thinking about is there any part -- being humble enough to look at competitors and think, where are we not writing that they are that we could win that and then doubling down on those areas.

And in the scalable platform, you don't grow at the rate we're growing unless you've built infrastructure and scalability into your core business model. And having a scalable platform is really core to us. It's not just about the technology, it's also about the processes that underpin that. And so the -- standardizing the model through the playbook approach, whereby everything which we think is core to Future, we try and standardize and productionize, so that anyone can come in to the business new and pick it up. But it is also around continuing to invest in the platform, I'll come onto that in a moment, sufficient. So we added 3 new sites to Vanilla in the last 6 last months, and we are about go live with 3 over the next 6 weeks. So we're in peak migration season as I speak right now.

The next 2 pillars, 3 to 4, are probably more around the further growth of the strategy, so how do we continue to diversify our content monetization? How are we thinking about innovation within the core business? And so I just let -- highlighted here that we are very much investing back into the business, we're not just taking all the profit and showing it and then there's nothing for future. We very much are always thinking about how do we continue to deliver these growth rates in years 2, 3 and 4 and beyond? And so many things up here are like premium content online, so some of them are B2B sites have pay walls. How could we do that better? How do we access that more? We have a sophisticated audiences that use ad blockers. We have been looking at and been quite successful actually with the number of ways to monetize around the ad blockers. Language formats, again, we've talked about before. We've got a significant trial going on just now around Hispanic. It feels like a natural audience extension for us. eCommerce B2B services, so we write about best broadband that can lead you into well why not write about the best antivirus. It fits within the technology portfolio in terms of where we are but it has a much higher-end CPE attached to it.

And then, as Penny mentioned, podcasting. When I look at the spokes, one of the ears where I think we're missing out is around audio, and so we're thinking about what can we do in podcasting. And through the acquisition of Cyclingnews, we actually acquired a GBP 1.2 million podcasts downloaded skill set, particularly around Tour De France. There was a lot of activity around that, so we're seeing that as a really great opportunity both with the Cyclingnews and the FourFourTwo population. So we're thinking about how can we trial podcasting more. And in fact, we just hired someone for -- on a 3-month basis to help us think about how we produce all of that content and monetize that, [go for].

So lots of ongoing investment in the core business, I think, is the key thing. Which brings me nicely onto point 4 which is the ongoing investment. And so we continue to invest in tech, I'll comment to talk about that. We launched a new event during the course of this year, so we really are thinking about our cost portfolio. How can we seed what I've talked about as horizon 2 or horizon 3 revenues? One of those things is continued investment in people. And I do look at the business and you think about what's happened in the last 12 months. One of the things we -- we've done a couple of things, one is across the senior management team, we made a decision to invest in one additional head, like a layer below us, whether we had a job vacancy or not. We just decided we needed to actually bring in some bandwidth that should help us during the next phase of our growth. So everyone's been out trying to hire.

And in fact, Penny, I think your new FD is here, isn't he? That's the one who...


Penny Ladkin-Brand, Future plc - CFO, Company Secretary & Executive Director [4]




Zillah Byng-Thorne, Future plc - CEO & Executive Director [5]


Yes. He's not listening, however. Yes. You can wave your hand.

So -- and so that has been a really important part of us recognizing that increasingly we can't do it ourselves. We have to hire teams to do it. And therefore, we have to put scalability in those teams. And then within my own leadership team, I made 2 hiring appointments in the last 2 weeks. First one is Jason MacLellan, who comes in as IT and Operations Director. So that means that Kev, our CTO, can focus on engineering. That's where Kev is genius and that's where he adds his value. And quite frankly, I don't want Kev worrying about software contract renewal rates, which is what he's been spending his time on. It's a waste of his intellect and skill. So instead we've a hired a chap called Jason MacLellan. Had actually worked before at Fitness First 15 years ago, who's a seasoned IT Director, Professional. But he's also going to take on some of the day-to-day operational friction on the organization, which will help us get that sorted out as we get bigger.

And then finally, Simon Jackson, who's here. Simon's tired of me introducing him, right? So please get a chance to speak to Simon at the end, who is our Chief Commercial Officer. And Simon joins us from Sky and most recently, Gamesys, with an experience in marketing and subscriptions and monetization models. So -- and Simon's responsible for kind of growing our monetization path and putting more spokes in our wheel. So it's really great for us to have that additional capacity in the organization.

So coming back then to content and where are we in terms our audiences. Normally, we kind of flip through this slide. But I just want to draw a couple of points worth mentioning. The first one was about how much -- not only do we want to have the biggest audiences, we also believe in brand leadership. We think it's a defensive position. And at the moment, we have leadership positions in PC gaming space, photography, renovations, music and tech, i.e. all of those books. We have market leadership positions in the U.K. and many of them in the U.S., and we think that's core to our strength.

I wanted to briefly spend a little bit more time on our B2B portfolio because I think last year, we kind of didn't really spend much time on it. And to be honest, more like dwarfed by the Purch acquisition, when we were talking to many of you. And so to put a little bit more detail on here -- so just to draw again, it's exactly the same strategy as the B2B portfolio, as is with the B2C. We're looking for leadership position in the niches in which we operate. And so a little one -- we have the #1 TV conference in the U.S., which is New York TV Week in October. In our audio visual vertical, we have the #1 position in AV technology in the U.S. Music Week is the #1 music publisher in the B2B industry in the U.K. And consumer technology is the #1 B2B consumer technology type for the U.S. and includes the publication of the CES' show, Daily. CES being the biggest consumer electronic event globally. And we actually run the show daily on that. So we really definitely have leadership positions. And as you listen to me talk about those verticals, what you've heard is something very similar to the ones we have in consumer, which is back to this point around not just about diversifying into B2B but also if you think about our wheel, expanding that out and owning the entire wheel, both the audience on the consumer side also in the audience in the B2B side. So we become truly expert in the niches that we work in.

So I promised more detail on the tech stack, and I know you can't wait for it. We tried to make it a little bit easier to understand, but it's a really core part of our business and so I think it's worth making sure people understand how it functions. There are kind of key 3 things that the tech stack enable for us: the first one is revenue goals; the second is audience growth; and the third one is operating scale. I'm going left to right. The assets box is really about how we protect the content we create, how we manage the IP, how to make it discoverable. So once we've migrated magazines into the asset register or we've written some content, how does everyone globally access that easily? And how do we make sure freelancers -- we actually commission that content and own the rights to it forever as opposed to onetime only. So that's what the asset stream of our content strategy's all about.

The next one which is the website stream, it's all about how do we -- it's all about the content. And so how do we distribute it, how do we sort it and how do we present it. So things in there are around how do we create the website? How do we make sure it's content localized, i.e. if you're in the U.S., you see dollars rather than pounds for example. How do we make sure of the taggings? Or how does it bring content together? How does Google think about -- how does the advertising group think about it? All works seamlessly? And then the content management system, CMS, is where the editorial team actually post their content into. How does that work in aggregate? So that's what the website is for, which we call Vanilla and -- but it's actually much more than just one thing, it's an aggregate of lots of modules. And you'll see a little a new there, which is FLEXI, which Kev, our CTO, talked about in the Capital Markets Day, which is really about how do we build the WEBSITE BUILDER faster. And he demonstrated in the Capital Markets Day the speed of which we can create new websites, and that really helps us structurally improve the way in which we migrate going forward and make that easier to do.

And then the final piece, close to my heart, is about monetization. So having protected the asset and made sure we can distribute it, how do we then monetize it? And from that prospective, we've 2 primary monetization routes online, eCommerce and ads. No change to Hawk at the moment, but I just wanted to call out HYBRID. We really thought hard about that name, which is the new advertising tech platform, which is the base of Bordeaux and RAMP. That one came from the finance guys in there, the corporate office rather than the dev. You can tell, right? And it really is best of breed. It's -- Bordeaux is all about quality of ad unit and frequency of ad unit, and RAMP is all about quality of advertising agency partners, it's all about the demand partners and the floor pricing and how that works. Since they're doing quite different things in the advertising universe, together you have this kind of best of breeds. And that's what we've developed this RAMP -- with HYBRID.

Briefly on revenue diversification, sometimes we get asked about why do you want to buy more brands, or why are you launching more brands in verticals you already operate in. It's a really core part to our strategy in that we operate in specials vertical, but some of those verticals are 100 million-plus large in audience. It is now -- they're -- that is not a one-size-fits-all approach. And so what we're trying to do is that within that audience where we have market leadership, we really segment down into the super niches. So for example, What Hi-Fi? is all about high-end audio; Laptop, the clue's in the name, it's all about pretty geeky laptop stuff; DigitalCameraWorld talks to camera enthusiasts; whereas Tom's Guide talks to the generalist electronics consumer. And so that's very much what we're trying to do in terms of our strategy. And just using the tech portfolio as an example, you can see that only 18 months ago, TechRadar was 93% of the audience in tech websites. That used to cause me a little bit of concern, felt little bit overexposed to TechRadar. I thought it was a fantastic site, but I wanted to diversify a little bit. You look where we are as of December, and TechRadar's 32% in the group. TechRadar's growing double digit. TechRadar's not getting smaller. It's just we've added more around it, and we're growing overall in that position. So suddenly we feel like we've got lots of very niche tech. Anandtech's quite geeky tech. So T3 is mainstream lifestyle tech. Tom's Hardware is getting a bit more geeky. And then Tom's Guide and Tom's Hardware play to mass market tech but with a slightly different audience practices, which is again really helpful.

So another core part of our strategy was expanding into the U.S. We talked about that a lot in the last 12 months. And I think one could argue, job done, although, it's never done, right?

42nd Street, is actually where we have our office, so that's why we put it up there. It's not because we're planning to go to Broadway, but it's a great location and we really like it.

In terms of market position in the U.S., we now have leading positions in the U.S. in terms of #1 in tech space, PC gaming and in B2B, AV tech, consumer tech and our TV portfolio. So we're a market leader within the U.S. as well as having scale, which is really, really important.

And then just in terms of our acquisition strategy, we actually acquired 3 businesses in the last 12 months. So the first one was the B2B portfolio in NewBay. We then acquired Purch brand in the late autumn. And then back in February, we acquired Mobile Nations, so further strengthening our tech portfolio. Within that, we acquired 5 offices. We're now back down to 3. Soon I think down to 2. But the whole point is our business is about keeping our business simple. So our job is when we acquire things, to take the complexity out and then go back to our core execution model. We acquired -- I think somewhere in the slide that says about 500 colleagues, we actually -- we're -- are now -- 356 just now in terms of new employees. The actual U.S. headcount in total is 369. So you can see we've taken out a lot of the back-office functions and moved them to the U.K. in terms of where it's a lower cost of labor. It's about twice as expensive to operate staff in the U.S., so we only want to operate staff in the U.S. who generally are a value add and need to be there. Whereas if it's something which we think is -- can be done from any location, we're going to bring that back into the U.K. in that respect. And then we continue to share expertise and standardize our business model.

However, it's not about the buying stuff or having big audiences, it's about monetizing those audiences as I was saying earlier. And so how are we going about monetizing the U.S. audience, I think, is the key point. What you can see in the top box is organic U.S. revenue, so that is the legacy sides, parts of the acquisition. And what you can see there U.S. -- our organic revenues growing very healthily. I think key point to point out is our U.S. audience growth is really pretty fantastic at 34%. And I would remind everyone that a vast majority of the -- of our colleagues are actually sitting in the U.K., supporting that growth. So we don't believe you have to be in market to drive -- to talk to the right audience. We actually hired 28 new roles into the U.S., excluding the acquisitions where we felt I need to actually hire more talent, particularly around sales and editorial in terms of how we're going around that. And in eCommerce, so that's still a -- over 100%. And digital advertising, slightly disappointing. It isn't quite 50% growing organically, right? Must try harder. But you know, joking aside, we've plays back to the effort. We've been focusing on making sure monetizing that audience as hard as we were monetizing the U.K. And then our favorite statistic around ARPU, you can see on the chart, we continue to have this gap between the U.K. and U.S., however, we're quite pleased with that because everything's growing. And so as long as that -- everything's growing, that's like good for us. And actually the U.S. growth is 40%, so we're very pleased with the pace of that growth in the U.S. in terms of our ARPU.

Moving just briefly onto the acquisition strategy. I'm not going to talk about Home Interest ever again after today. I don't often make promises, but that's a promise. But I wanted to just close out on it because it's actually 20 months since we acquired this business. And I think it's really important that people feel that we kind of closed back with the investment case and what we said we'd do and did we do it. And our strategy's very much worked fine, things where we believe we can add value. And I think this is the case in point where we added value. So we bought this business from Centaur Media group 20 months ago. Since we acquired it, we fully integrated it. We've launched a new event in the home improvements. We've also got a new event scheduled and booked now for 2021. We launched a new website. And we repositioned the magazines including a relaunch of one of them.

Total revenue in the Home Interest portfolio's up 6%, which includes the Magazine portfolio, which was half of the revenue when we acquired it. So if you put that in context, we have overall growth rate of 6%. It's really pleasing year-over-year. Suffice to say, the contribution is double digit in terms of where we are year-over-year. So very pleased with how we've performed with that. Now if you think about it, 20 months ago, we did the acquisition. Since then, we have done 3 or 4 -- think 4 acquisitions subsequent. So when we're doing new stuff, we're not forgetting about implementing and demonstrating the growth of the original business models of what we have.

Which next segues me into Mobile Nations and CrackBerry. I never thought I'd own a BlackBerry again. So what did we buy? So Mobile Nations was a partner to Purch. We knew the business well. We already were selling it. As Penny mentioned, it's one of the reasons why the margin in Media is slightly diluted. They decided they wanted to sell. It's a really nice business. Two founders, incredibly well-run, really, really pleasant individuals to work with. About GBP 8 million of EBITDA was our pro forma. We acquired it. And at the end of February, there is an earnout on the business, as Penny mentioned already. And we're really pleased with how the business is performing at -- today. Because of the earnout, we are operating a little bit at arms' length in some of the commercial arrangements. But I don't want to tell them all of our good stuff and then pay them 10x for that, right? So there's a -- our turn to come in 2020, when we come out with the earnout and we can then put our best practice in place. In the meantime, what we've done is implement all the control measures we normally do. So the finance function's fully integrated, and we have all our normal monthly financial review meetings and quarterly business review meetings. But at this moment in time, the optimization in terms of how we add additional volume from a commercial perspective is sitting more like 9 months away, which gives us lots of time to think about how we can absolutely make it stellar when the time comes. Although, we are actually learning quite a lot from them, so it's really been helpful to find out how they run their business as well and so we're bringing that back into the house.

And then cycling nations, we actually acquired, I think, officially on the same day. We did both transactions. We bought 2 cycling brands. We've had stated intent to want to move in back into cycling. We actually still own these assets. They're very familiar to us. Half the staff that came across were actually original Future people, so that was nice. We -- it's about GBP 2 million kind of revenue. The margins are about 20% in terms of EBITDA, in terms of what the contribution is. What I really like about here is the ability to start to really drive into this new vertical now and build out from that. And having built this platform of specialist expertise, so we are intent -- fully intent to launch. I expect a couple of new brands around us. And I think that the guys we acquired from -- the folks were slightly surprised to be involved in a business where the first statement was how many people do you want? Which quite often in Media world, that's not what's happening in brands. And so they've been really excited about that opportunity.

We believe there is value to add in being in mainstream cycling. We also believe there's value to add in being on the Vanilla platform for the existing brand. As I said, they've got a wonderful podcasting business, we can learn a bit from and use that to leverage off of. And we are going to migrate to Vanilla after the Tour de France for no reason other than we just don't want to put the Tour de France at risk. It is the peak trading for this part of our portfolio, and there's no urgency from that prospective in terms of this is our horizon 2, horizon 3 growth opportunity, so I'd rather keep our advertising partners happy and keep our audiences happy than put anything at risk.

Which brings me then on to the Purch acquisition, which was completed in the 4th September. So coming up for 9 months now. So pro forma EBITDA, in terms of what we bought, was $10 million. It's really helped us strengthen our position in the U.S. in terms of taking that market leadership position. I've been really pleased with how this is going so far. We've added, so far, lots of value but still lots more to come. We did say at the time we did the acquisition, we were going to take the migration slowly. We didn't want to interrupt peak trading and I think the results have been true to suggest that was a good decision to make, in terms of our peak trading performance. In terms of where, we've got -- all of the control integration work is done. We're running as one business and one team. We have migrated all of the Purch forum sites. That is across to a -- Purch have a high degree of user-generated content around forums, truly highly valuable. It's one of the things we didn't -- we don't have at Future, which we are actually in the process of rolling out. However, it wasn't due to graph and climate, it wasn't scalable. So we've sorted that part of the business. We've migrated Space.com to add the Vanilla platform, and the results have been very pleasing in terms of audience and monetizations. We're very pleased with how that's gone. We have developed HYBRID, and now rolled HYBRID out to the legacy Vanilla site, which took place in April. So TechRadar, T3, et cetera, are now using the new ad stack. We will roll out the new ad stack to the Purch site and have them move onto Vanilla because it's a simultaneous piece of work.

We have 3 migrations due to take place in the next 6 weeks. So Top Ten Reviews is going live in 2 weeks' time. Tom's Guide goes live in 4 weeks' time. And then Live Science goes live in 6 weeks' time. So there's -- we've been kind of running in parallel to kind of 3 different migration paths. And what we wanted to do was make sure we knew what ad platform they were going on, so otherwise, you end up doing 2 lots of migrations. So we -- and we wanted to make sure we got the ad migration right in terms of the value attributable to that.

We also expect to have significant technology savings following the migration to Vanilla. So as we talked about before, there's some of that driving the current EBITDA margin expansion partly through some of the overhead and software cost savings, but we'd expect to have some further savings coming into next year.

Which nicely leads me on to my exec summary. I -- it is actually a record breaking set of results, which is really pleasing. Where I'm quite modest, but I'm kind of secretly high-fiving on breaking some records. That should be nice. The business is in really good shape. I think our strategy's working, and the focus on execution is really coming through in terms of the delivery of the strategy. We are very much focused on market-leading brands, relationships with our audiences and relationships with our clients. And we think that's coming through in terms of the top line and then also in how that drives operating leverage and ultimately, into the cash flow, which Penny and I care about a lot. We believe that we buy businesses where we can add value. We believe we're demonstrating that not only can we add that value and have a track record of doing that, but we do that simultaneously with continuing to grow the core business. And we do that because of the scalable processes and technology platforms. And at this stage, we see no reason to not expect the current trends to continue.