Q1 2021 j2 Global Inc Earnings Call
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Good day, ladies and gentlemen, welcome to the J two global Q1, 2021 earnings call. My name is Paul and I will be the operator assisting you today.
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On this call will be Vivek Shah CEO of J, two global and Scott <unk>, President and CFO of J T.
I will now turn the call over to Scott to recap President and CFO of J two global.
You may begin.
Thank you.
Good morning, ladies and gentlemen, and welcome to the J two global Investor Conference call for Q1 2021.
As the operator mentioned I'm, Scott <unk>, President and CFO of J, two global and I'm joined by our CEO Vivek Shah.
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Before we begin our prepared remarks allow me to read the safe Harbor language.
This call and the webcast will include forward looking statements.
The statements may involve risks and uncertainties that could cause actual results to differ materially from the anticipated results.
Some of those risks and uncertainties include but are not limited to the risk factors that we've disclosed in our various SEC filings, including our 10-K filings recent 10-Q filings various proxy statements and 8-K filings as well as the additional risk factors that we've included as part of the slideshow for this webcast.
We refer you to discussions in those documents regarding safe Harbor language as well as forward looking statements.
Now, let me turn the call over to Vivek for his opening remarks. Thank you Scott and good morning, everyone. We're obviously very pleased with our outstanding financial results from the first quarter as we continue to exceed our expectations and demonstrate the quality of our portfolio and the strong tailwind that exist in our verticals.
We're also increasing our guidance, which as far as I remember has never happened to J two without a major acquisition driving it.
The momentum only adds to the considerable excitement of J too as we work on separating the company into two pieces of compelling ACI business and of vertically focused internet platform.
Let me start by Unpacking, our pro forma Q1 results, which were adjusted to exclude the voice assets, we sold over the past three quarters.
As well as our <unk> backup business, which we expect to sell.
Total revenues from over 23% with nearly 40% growth in our digital media segment, and almost 6% growth in our cloud services segment.
Digital media growth, where the combination of low teens organic growth coupled with acquisition based revenues, mostly from retail me now.
Leading the pack, where our broadband assets hoopla and that could have which together grew over 30% year over year.
Look with speed test set yet another record in Q1.
With $1 9 billion test, which is up nearly 60% from last year.
We also launched video testing on speed tests for iOS and revamped consumer coverage maps on speed test for Android continuing to enhance user utility and network analytics.
That could help customers are seeing significant increases in Wi Fi usage with more connected devices and more activity straining networks.
This should bode well for back of house, which offers products to help businesses create great Wi Fi the.
Every day help group continues to show of strength with revenues up over 15% as consumer interest in health continues to grow and as pharma continues to shift away from traditional advertising vehicles to digital.
Also last week, we acquired a small but interesting assets called daily AUM, which sells health and wellness courses online. We believe we can leverage our significant audience reach to drive paid content or.
For our tech and gaming brands, including IGN Spice works, Mashable and PC Mag saw growth of close to 27% as the advertising market continues to strengthen.
The retail me not integration continues to exceed expectations with an improved go to market strategy increased cross promotional efforts among our brands and cost efficiencies being realized earlier than planned or deal signed or browser extension saw monthly active users increase of 129% year over year through the combination of.
Strong installed and increased merchant coverage cloud services pro forma revenue growth was close to 6% in the quarter one of its strongest growth quarters in recent memory with consensus which is our cloud fax business that we're planning to spin off later this year, having another fantastic quarter.
Census saw revenues growth by close to 7% with the corporate fax portion growing by over 14%, while the web fax business has been modeled to slightly decline.
I actually saw growth of nearly a point and web fax revenues given their respective growth rates, we anticipate that in a few quarters corporate fax revenues will exceed web fax revenues customer usage has been very strong with pages up 38% year over year.
While we don't monetize all increased page volumes. It is an important indication of the utilization of the platform.
We also launched apps and two important marketplaces, epic's, App Orchard, and Amazon Health, which has been part of our ongoing efforts at increasing our healthcare channel partnerships.
The remainder of cloud services composed of our cyber security and SMB enablement verticals grew 4% in the quarter.
As I described in our last call. We are directing investment dollars for cyber security and to our Martech businesses to drive future organic growth.
The average security, we recently launched our Viper all in one solutions, which was developed to offer businesses complete protection security awareness training.
Email and endpoint security data loss prevention, and the business cloud VPN.
And Martech, we continue to see growing volumes across our email platforms and we're focused on bringing new capabilities to our customers. For example, we recently added automated SMS marketing to campaigner to enable multichannel marketing within a single platform.
Notwithstanding those investments our adjusted EBITDA margin was 39, 3% of 410 basis point improvement over last year and adjusted EBITDA grew nearly 38%.
This was a fantastic quarter from a top and bottom line perspective.
Given the strength of Q1, we are revising our guidance upward.
As I said.
When we've increased guidance in the past, it's been because of non budgeted acquisitions.
Being in a position to increase guidance.
The guidance that I would point out was originally set at over 16% revenue growth at the midpoint.
Largely because of operating outperformance is very exciting for the company.
Our updated guidance revenue growth at the midpoint is close to 19% with adjusted EBITDA growth at over 14%. You'll also see that we set the low end of our guidance to match the high end of our original guidance.
Against this backdrop of strength and I am pleased to report that we're making terrific progress in our efforts of spinning off the consensus business as outlined in our April 20th call as we've discussed in the past we operate our businesses and our highly decentralized fashion, which is an advantage as we look at separating consensus this business.
The operations from J two a full project team has been established and is fully operational to ensure a smooth and efficient separation. The team has already made significant progress and I expect a clean execution on the timeline, we shared about 90% of the employees will be moving with the consensus business already inside of the business.
Unit with the balance representing employees from shared services functions that substantially support the consensus business. Therefore, we are of very clear delineation of human resources from a systems perspective, we've organized our deployments to help ensure the ability to create separate instances from the facility.
All of these perspective, many of the consensus employees work out of our downtown Los Angeles location and will remain there. We're also making good progress on effectuate the legal entity separation.
We're anticipating our audits will be completed in the coming weeks and expect to file a form 10 soon thereafter.
We're still working through the respective capital structures of the two companies, but remain very confident that the cash and remain COSE balance sheet spin.
Along with its ongoing free cash flow borrowing capacity and its retained stake in consensus.
Minority investments and the disposition of non core assets should give us ample dry powder to continue the level of M&A consistent with recent history at the same time consensus should have ample free cash flow of its own.
The allocate for the development of its interoperability platform and Delevering over time from a governance perspective.
We are working on ensuring that each company has the right board composition of experience skill diversity tenure and independence. Our goal is to have little if any overlap in the two boards, which will require both boards to seek new members. We view this as a valuable refreshment opera.
<unk> for the companies one of the attractive aspects of the separation is the relative absence of dis synergies on the cost side, we are estimating less than $10 million of annual incremental recurring costs to separate the companies and make consensus public company ready.
This represents less than 1% increase in total costs at J two.
On the revenue side consensus is cloud fax offerings sat quite distinctly from the other cloud services offerings Theres Little cross our upselling between cloud fax and our cyber security and SMB enablement offerings of.
Of course, we believe the value of the separation isn't allowing each business to have focused resources management and balance sheets to pursue their respective growth strategies, while giving investors two distinct investable companies, one with ACI at peers and.
And the other with Internet peers.
We expect the hold analyst days, along with deal Road shows ahead of the split.
The allow both companies an opportunity to more fully explain their standalone operations capital structures strategic priorities and the transaction in general before I hand, the call back to Scott a few words about our ESG activities and progress we thought our ESG roadshows at which we outlined the company's five pillars of purpose.
Which are dei sustainability community data and governance with very successful. We've also made great progress in enhancing our public disclosures, we delivered over 350, new disclosures and published policies and programs on our corporate website, we incorporate dei goals into my compensation.
And those of our executive team. The result of our annual employment engagement survey, we're gratified with over 80% of employees being proud to work the J, two and would recommend us as an employer and the gap between our efforts and third party ratings is beginning to close and ISS we saw.
Our governance score were lower is better.
Proved from four to two of our environment score improved from 7% to four and our social score improved from 10 to one where close to hiring a new head of sustainability and ESG, who should ensure we maintain our momentum and continue to seek ways in which we can create social value.
With that I will pass the call back to Scott.
Thank you Vivek I'll provide an overview of both our non-GAAP and pro forma results for Q1 2021.
You'll recall from our previous earnings call. We have sold certain Australia, New Zealand voice assets in August 2020, and certain UK voice assets in February 2021, and we now have our beta be backup assets classified as assets held for sale.
As a result, we will present, our non-GAAP results, which included these operations for the periods owned and our pro forma results, which exclude the contribution from these assets in all periods as Vivek as highlighted it was a stellar quarter driven by organic growth throughout J tubes businesses.
We ended the quarter with approximately $500 million of cash and investments, including $372 million of cash.
Now, let's review the summary quarterly financial results on slide four let's begin with revenues it was a record for.
First fiscal quarter for J, two we had just shy of 400 million of revenue in the quarter and 385 million of revenue on a pro forma basis, representing approximately 20% of 23% growth respectively. Adjusted EBITDA was also record for of fiscal quarter with $156 3 million as reported and 151.
$5 million on a pro forma basis the growth in EBITDA was 33, 8% of 37, 5%, respectively outpacing our revenue growth due to high margin incremental revenue and judicious cost management.
Finally growth in earnings per share was even stronger in the first quarter, we had $2 <unk> 18 of non-GAAP adjusted EPS and $2 11 of.
Pro forma EPS, a growth of 55, 8% and 60% respectively from Q1 2020, turning to slide five in Q1, we generated $152 5 million of free cash flow, an all time record for J, two which was of 61% increase from Q1 2020.
I note that our strong free cash flow was driven by the excellent digital media results in Q4 2020 with the cash collections coming primarily in Q1 2021, as well as approximately $20 million of receivables acquired as part of the retail me not acquisition that was also collected in the quarter I would also remind those that are new to J too.
Net our EBITDA to free cash flow conversion is best measured over a rolling four quarter basis, and it's typically in the mid to high 60% range.
On a trailing 12 month basis, our adjusted EBITDA of $655 million and our free cash flow is $465 million, which of our current share price represents an enterprise value to EBITDA multiple of just 10.1 times and an enterprise value to free cash flow multiple of $14 two times respectively.
Now, let's turn to the two businesses cloud of digital media for Q1 as outlined on slide six the cloud business grew revenue, 1% on a reported GAAP basis, and five 6% on a pro forma basis to $158 8 million adjusted.
Adjusted EBITDA was $83 4 million as reported and $78 6 million of pro forma basis generating growth rates of two 2% and for 9% respectively. The digital media business revenue grew 39, 5% to $226 8 million and experienced double digit revenue growth exclusive of Retailmenot.
Adjusted EBITDA was up more than 94% to $84 4 million and digital media margins expanded to 37, 2% increasing by more than 12 percentage points from Q1, 2020, finally before going to a question and answer session I would like to turn your attention to our business outlook on slide eight due to the <unk>.
Impressive organic Q1 results, we are raising our guidance. The we provided in February of this year.
To remind you at that time, we estimated on a pro forma basis, the revenues would be between $1 $63 billion and $1 676 billion adjusted EBITDA between $646 million and $666 million and non-GAAP adjusted EPS between $8 of 93 cents per <unk>.
Share and $9 27 per share the new range of guidance has the former high end as our new low end of guidance for 'twenty 'twenty. One we now estimate on a pro forma basis revenues to be between 1.676 billion and $1 7 billion adjusted EBITDA of between $666 million.
And $680 million and non-GAAP adjusted earnings per share to be between $9 27 per share and $9 51 per share I would note that these earnings do not include any potential dilution that could occur from the calling of the three in the quarter percent convertible notes later this year, we continue the study.
The appropriate timing method to effectuate the call in light of the separation of consensus from J to following our business outlook slide are various metrics and reconciliation statements for the various non-GAAP measures to the nearest GAAP equivalent I would now ask the operator to rejoin us to instruct you on how to queue for questions.
Thank you we will now be conducting a question and answer session in the interest of time, we ask that you. Please limit yourself to one question. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
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One moment, please while we poll for questions.
And the first question is.
This is coming from Cory Carpenter from J P. Morgan's career line of slides.
Great. Thanks for the questions the.
Just hoping you could talk a bit more about what's driving the outperformance in digital media I mean.
How you think about the sustainability of it I think the 40% growth. This quarter was probably the strongest perhaps in your history and then related to that now that you're about six months into the retail me not acquisition, hoping you could talk about some of your key learnings from the integration thus far thanks.
Alright, Thanks, Corey and good morning, Sean.
So I'll break it into two pieces on the digital media side, starting with the organic growth rate, which was as we said sort of mid double digits kind of 13% to 14% range and I think you had just.
We had a bunch of.
Tailwind across all of the verticals the tech vertical the health vertical of the gaming vertical all with very strong the advertising environment.
Continues to be quite favorable for.
Premium properties.
In a world where I think we are shifting from interest based advertising the contextual based advertising I think we're seeing some significant benefit in that.
I'll also say and it's a good segue to your second question that within our shopping vertical and principally retail me not the execution as being the fantastic and so you know.
The pace at which we are incorporating both revenue.
And expense synergy is ahead of schedule when we consummated the transaction, we had said and indicated that we thought that we could have a run rate.
Of $80 million of EBITDA at a run rate level within 24 months. We believe we can achieve that within calendar 2021, So that's a fairly substantial improvement.
Over what we had planned so we're excited.
Across the board for all of the assets within the digital media segment and we do believe it's sustainable we think of lot of the shifts that are taking place in the marketplace. So just acceleration of trends that would there you see the way in which you know changes in the way in which we work the way in which we consume content the way in which we shop.
All are favorable we believe long term trends for our portfolio.
Okay. Thank you and congrats on the quarter.
Thanks Corey.
Thank you.
And the next question is coming from Shyam Patil from Sig Xiaomi Your line is lives.
Hey, guys congrats on the quarter on the outlook.
Couple of questions.
I guess first of all items.
Can you guys talk a little bit about kind of what youre seeing right now.
For the environment.
Your pipeline and kind of of what Youre seeing in terms of evaluating that.
<unk>.
And then second question.
With the with.
The increase in guidance.
And any color you could offer us in terms of how to think about.
Digital media versus cloud in the second quarter as well for the year.
Sure.
So let me just start maybe on the M&A and then Scott can talk a little bit about.
The little bit more color on our guidance.
So the M&A pipeline continues to be very strong we are seeing a number of interesting opportunities across the board and what I should say because I.
I know this question exists for many is the Saar process of spinning off consensus in any way slowing down our M&A program and the answer that question is no.
Our sourcing and evaluating of deals continues at a pretty robust level. There are a few in the pipeline that are very interesting for us both of the consensus and remain co I should I should point out so I don't see anything different in the marketplace in terms of valuations and I don't see anything.
That would.
Impede our normal ordinary course of M&A as you know.
It can be episodic and what seems to have happened at least over the last couple of years is there seems to be more M&A activity that picks up in.
In the second half and so it could just be the.
As we acquire as we acquire assets like <unk> tell me not there is a integration period and so those teams of probably more focused on that and possibly sourcing in those areas.
Or it could just be the debt that's sort of.
That's the distribution is a little bit random, but we feel very good about it.
I've been asked about spec activity and you know the types of.
The types of transactions the spacs of looking at are really not the types of transactions that we're looking at so you know.
In terms of our own M&A approach, where we're looking to create value.
The the categories, we're in and the targets we are not seeing the stock pressure that I think others.
May be seeing.
And then on the guidance question from what I would say is.
For Q2 <unk>.
Remember that as of quarter of course, the we did not own retail me now so digital media should be in the high thirty's growth year over year.
Cloud should be in the mid single digit range on revenue what.
What I would note I'd remind everybody of is.
You'll recall, we talked about this in the queue for coal.
This is now beginning in Q2, our investment period as Vivek highlighted in his opening remarks, we've seen both in Q1, we even start really coming into this year.
Tremendous opportunities to invest particularly in the areas of cyber security.
<unk>.
Pregnancy and parenting indeed.
So you're going to see those investments begin we've already begun actually in Q2 such the.
While the revenue will grow sequentially from Q1 to Q2, I would expect EBITDA to be somewhat in a similar range for Q1, because Q1 was very very light by design on those investment activities. When we budgeted it really began in Q2 and the then continued through the end of the year.
Great. Thank you guys.
Thank you. Thank you.
Thank you and the next question is coming from will power from Baird. Your line of lives.
Okay, Great Yeah, I guess would echo the congratulations on the results I guess.
Maybe first question circling back to the strength in cloud services, I think close to 56% pro forma growth I Wonder if we could get any more color just on the key.
The drivers are there within the business and sustainability.
Well I'm happy.
So I'm happy to say that a large chunk of that came from consensus.
So as.
As Vivek mentioned the strength of the underlying.
Business platform usage.
Really really strong and remember we're comparing against the quarter, meaning Q1 of 2020 that really was not impacted in any material degree by COVID-19.
And I think what youre seeing in consensus and you may recall, we talked about this over the last several years.
A lot of the incremental customers coming on are very large enterprises and so it takes a while to the on ramp for them.
And with their usage.
We get up to speed and so that's what we're beginning to see this outperformance is driven by health care is driven by customers actually that we acquired as customers.
Well over a year ago.
It is getting them fully on boarded.
To our platform.
So that is one key element of it the other key element that vivek touched on in his opening remarks that I think is important.
Is that the smaller customer base, we called the web channel.
Historically, we've said that that's a low single digit decline ex.
<unk> had approximately 1% gain in Q1 of 2021 over 2020 of them. There's a lot of factors that go into that I think some of it is based on the evolving.
Work from home environment, and the hybrid model, even as people begin to return to work.
I think improvement internally in our own sales and marketing efforts in that area for those two things were key drivers for the whole cloud business and correct me you want to comment on the other two areas, which would be our SMB enablement really driven by Martech and our cyber security.
Scott's right. So the consensus business really had a very strong quarter and as you know this is several quarters running now that it's demonstrating fairly sustained levels of org.
Organic growth, particularly on the corporate side and as I said in my remarks, we're going to get to the point pretty soon with the corporate business is larger than the web business and therefore, it's larger growth rate starts to show up even more in the aggregate growth growth rate in terms of the non consensus for.
<unk> of the of the cloud.
Segment, they grew 4% in the quarter and our view of those businesses as I've said in the past is we are really shifting from a profitability mindset. These businesses will really run for profit and non growth and thats shifting and so in our own view longer term, we're making investments now.
To really get that growth rate to accelerate because we're optimistic about our opportunities in cyber security and SMB enablement and so.
It touches of little bit on I think the margin.
Question that came that just proceed of D set of questions and what I will tell you and as I've said in the many times in the past we have a total growth orientation. We look at our investment choices in terms of returns on invested capital whether that's in our acquisition program, whether that's investing in our existing businesses, whether that's repurchasing stock.
And we look at it we look at the competition for capital and we will deploy capital in the most promising areas. What I can tell you and as I've said and I think as we're showing quarter after quarter is that the organic growth opportunities inside of the existing portfolio are very strong and we're going to feed them and that is what is implied in.
In our guidance for the rest of the year, if I have only one regret.
About Q1 is is that we didn't move quickly enough inside of the quarter.
To reinvest some of that excess EBITDA.
So look I think it's a great sign that we see in our total growth package growth opportunities across every conceivable aspect of the company.
Okay. That's helpful. And then I guess, maybe just a follow up.
I think you said that the tech media or debt.
Yes.
The Tech gaming segment.
27%.
Year over year, which looked like strong growth how does the how is the gaming console cycle kind of playing into that.
Does that.
Pac results through the balance of this year.
Yes, So certainly I think Q1 benefited at IGN from from the strength of relating to the console cycle and the refresh and generally speaking that's a multi quarter type of event and so we see it continuing to sustain throughout the rest of the year, but just to be clear.
We're seeing a lot of non gaming strength in that tech and gaming.
Our basket of revenues it is far more tech than it is gaming.
Okay, great. Thank you.
Thank you.
The next question is coming from James Breen from William Blair James Your line of lives.
Thanks for taking the question just on the.
The digital media side.
The comments around some of the sectors that you saw that were most impacted by COVID-19.
We are starting to reemerge.
Thoughts just.
As you've expanded digital media business on other verticals potentially moving into.
Yes, so when we go back about a year ago and start to think about the businesses that were negatively impacted.
By the onset of the pandemic ACA, how is probably one of the first businesses that comes to mind just as a reminder, ACA how is in the business of selling tools to help businesses create great Wi Fi and when you add the shift from.
From office work the at homework.
That that business suffered a bit that business is now.
Really doing well it was of great driver in Q1 of of growth and we are very optimistic about it going forward. So that is an example, I think of of business inside of the digital media portfolio.
That had a negative impact from pandemic that now is reversing course outs.
Outside of that I would say that generally speaking the pandemic did accelerate in a positive way of bunch of trends in health and in shopping in particular.
That will benefits early in the pandemic and continued to be kind of the new normal.
And in that way, we are very excited as for the new verticals look I think we're always interested in high value verticals, where we.
We can find audiences with intent.
Of that allow us to have our multiple monetization.
Business model put into play and so there are certainly other high value verticals beyond the verticals that we're in but that's what we're looking for and generally speaking if we're going to enter into a new vertical we would do it at scale. So when we entered into the health vertical the health media vertical obviously everyday health group provided us.
That scale and while we were in the shopping vertical the retail me not acquisition certainly put us.
At a different order of magnitude. So if you were to see us move into a new vertical it would likely be with a larger acquisition.
Great. Thanks.
Thank you.
Thank you and the next question is coming from a socket calia from Barclays sort of catch your line of life. Okay.
Hey, guys. Thanks for thanks for taking my question here for fitting me in.
Maybe for you.
Can you just remind us what the split of the digital media businesses between display and performance sort of sort of.
Roughly speaking and maybe how that might trend through the rest of the year.
Yes, good morning, <unk>. So in Q1, if you look at the digital media segment in total the display business was around 30% of the revenues performance marketing was around 47% of the revenues and the subscription business is around 22% again. This is just for the digital media segment to answer your.
Question, it's interesting with respect of display advertising, we've had 10 consecutive quarters of growth in our display business and I can remember a time, where there were some market concerns about display and where display was going again I do think that the shifts in the marketplace.
From interest based advertising to contextual advertising and premium environment, absolutely does benefit us I also think that our orientation high value verticals with audiences with intent.
Really do value us and it's an important point, while we make the distinction between display and performance marketing, which is really of pricing distinction, whereas display as cost per thousand impressions served in performance marketing is cost per acquisition lead for click. The reality is that our display advertising is measured by marketers and the performance base.
So while we distinguish those in in in how we and delineating of revenues. The marketer doesn't the marketers looking for dollars that perform and Theres positive ROI, whether it's CPM dollars of CPA dollars and so I think on that basis, the aggregate of our advertising business is well positioned because it's.
Highly performing advertising in an environment, where.
There are other historically well performing advertising is likely to be challenged so I think that puts us in a very strong position.
They can just add to that but I think what you see socket in terms of the Q1 representation of how we categorize the revenues from digital media. Once again, assuming no further acquisition is reasonably representative of the distribution of revenues for the year.
Very helpful. Thanks.
Thank you.
The next question is coming from James Fish from Piper Sandler James Your line of lives.
Hey, guys congrats on the record quarter Scott.
Scott, maybe just help US bridge the guide here a little bit for the remainder of the year. Obviously you guys are extremely outperformed.
All of our expectations.
Does guide.
The impact of the.
The higher operational costs related to the spin out starting I know you talked about investments and reinvesting in the business here and second it does kind of seem to imply a guide down for the remaining few quarters given the Q1 upside just in the aggregate. So just you being conservative or what are we missing here.
So yeah. So a few things first of all as it relates to the spin.
There are no material costs flow through the guidance the guidance of the consolidated guidance of J two under the assumption that we stay together through the.
End of the year, which of course, we believe is unlikely as we expect the spend to be effectuate growth.
Just to give you a sense of how the businesses operate combined.
You may recall from the April 20th of coal.
There will be approximately up to $10 million of.
Of course, as we split the two companies and create two public companies.
<unk> will occur primarily as we get closer to the distribution date will be borne by the company is on a going forward basis. Those are independent of any actual EPS that we will incur in terms of fluctuating.
Actuated the separation of things like legal fees banking fees et cetera.
So that's.
That's one element, but we're talking about in the guide is $10 million to $15 million of incremental spend that otherwise would flow to EBITDA.
Going back to those major categories that I referenced earlier and both the cloud and digital media businesses from the cloud Youll recall in the Q for coal we had in February we talked about incremental investments primarily in marketing.
Because we've had very very good.
Two good in fact, LTV to CAC ratios, both the Mar Tech business in cyber security. So that's beginning to ramp up as we speak.
In terms of your overall question on the guidance.
It was a phenomenal Q1, I think we're always a little reticent to extrapolate that out on a going forward basis.
I would say that our guidance, particularly in the area of the revenues, maybe a little bit conservative.
On the EBITDA look it is our intention to be able to spend all of these incremental dollars I think it will be.
Somewhat of a disappointment, if we're not able to put all of that money to work because that will be very good for both consolidated J too as well as for the two companies when they split in terms of sustaining strong revenue growth going forward.
So I'm not I don't really want to see the ebitdas.
Flow through with the same degree they did in Q1.
I might just add Scott two things to that number one in terms of the.
The dis synergy costs those are annualized costs of certainly the impact in 2021 should be prorated.
So in the context of its growth.
In the context of our expense base. They are fairly small I think the the sort of the more of and the other piece on this revised guidance does not contemplate any.
The future M&A inside of J, two which would be unusual given our track record. So there's certainly opportunities if and when that were to happen, but I would most importantly reiterate that.
I think we focused on the EBIT guide I think that's one aspect of the revenue guide I think is very different and again, we are seeing opportunities to put money to work to accelerate future growth those who have been close to the company for a while we have not seen these levels of organic growth ever.
And I think that's an important recognition for the marketplace, which is you have in our total growth.
Strategy, a very healthy quotient that is coming organically, while we continue to look for inorganic opportunities I think at the very exciting combination and an important signal.
Yes, that's very helpful. If I could sneak in one other.
Are you guys still anticipating another 203 of 1000.
Subscriber churn for the divested backup business thats coming in any sense for the timing, whether it's you guys are expecting kind of Q2 or back half of the year.
Yes, So let me let me just note I know one for touching on here So first of all.
Just to explain the customer count decline and the cloud business debt is almost all related to either assets that we have divested meeting the voice assets that existed say in prior periods for ANZ voice and UK voice as well as some declines that have occurred in the BW backup I would note.
Those metrics in the back include those assets from the various periods in which they were one so to your point when we divest the beat of be backup assets, yes, there will be a decline in customer talents I would say in hopefully the lower end of that range that you referenced.
And we've made great progress.
I'm, a little reticent to give the specific timing, but I would say it certainly could occur in the second fiscal quarter.
But it could also be early Q3, so it is going to be I think right on the cusp of.
Of either late Q2 early Q3, obviously, if we maintain the assets through Q2 gross.
Of those customer counts remain of our metrics until the asset is actually the spokes.
Couple of Scott Congrats on the great organic growth guys.
Thank you.
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Thank you and the next question is coming from John Tomlin Peng from C. J S Securities John Your line of size.
Good morning, guys. Thank you for taking my questions and great quarter again.
Just the most of my questions have been answer as the top two of them I was wondering if you could breakout the growth expectations for consensus within the guidance that you provided I know the mix of shifting over to the on the festival and corporate side I'm just wondering of the numbers for the year and then how that may accelerate going forward as that becomes bigger and bigger.
Yes, so right now consensus it looks like it is in that mid single digit range and the basically be organic growth.
It does not assume any M&A.
The only M&A debt affected last year's result for the deal we did very early in the year. So it's almost irrelevant in the year over year growth.
My own expectation is and particularly once the separation of hers is given the additional investments that we made in some of the consensus products the <unk>.
That would be.
Sort of the low watermark for growth going forward on aided by M&A, but obviously, we need to get to the point of separation and refine those.
Projections as we get closer to the distribution fee.
Got it.
What's driving the growth in web fax is that something you're measuring right now of or attributable to something that you've done.
I think it's a combination of a couple of thing we do believe that the changing work environment.
AIDS in the need for having.
Individual solutions available for employees now work from home either permanently on a hybrid basis.
But we have made some changes in the way we market over the last two to three quarters I think that is also.
Aiding the improvement it's hard to tease out, which one is more important but I think the synergy of both of those is moving the web channel in the right direction my own belief is debt.
We should not accept the fact that it is of low single digit decline I think the context of a very large portfolio.
You'll obviously of pieces that maybe don't support the growth rate of strongly as other pieces, but as you start to think about separation as you start to look at the individual pieces, particularly of a standalone company going forward for you. That's just not necessarily an accepted assumption that we should live with.
I think it's a little early though to say that the web is on in the ascendancy will become a contributor to growth, but I think in the near to intermediate term the goal would be stability to slight growth.
Got it one more if I could I was just wondering if youre able to measure the impact of do not track features across the major mobile platforms, either in the past quarter or in this quarter. It does look rolled out.
Again, it's because it's not part of what we do in our monetization mixed we can't.
There's not an impact on us per se. However, I do think the pendulum that is swinging in the marketplace is saying look if I can't.
If the basis of the AD is not targeting the person in front of the screen and the basis needs to be targeting the content in the environment that they are in and that they're looking at a contextual versus an interest based approach to targeting which is historically how advertising has worked its only in the world of day.
The collection and using programmatic inventory to re target did we shift into this into this interest based approach, we're now going back to contextual and that's where we're seeing a benefit.
Got it. Thank you I appreciate it guys.
Thank you.
Thank you and there were no other questions in the queue I would now like to hand, the call back to Scott to Ricky of J, two global for any closing remarks.
Paul Thank you very much. Thank you all for participating today in our Q1 earnings call. Just a couple of housekeeping announcements before we conclude I would note and we have a press release out on a series of virtual conferences that Rebecca and I will be participating in over the coming weeks. So.
So that will give you an opportunity for.
For additional color commentary as we proceed for the quarter.
In some cases, there will be fireside chats with global presentations in other cases, only one on ones I would also note from the overall spin perspective. The next major milestone will be the filing of the form 10, which we expect to be in the month of June.
The formal filing with the SEC.
Upon which they begin their process to review that document.
Once they declared effective then we can proceed with declaring the distribution and fluctuating the actual spin off which we still anticipate to be in Q3.
So thank you once again and if you do have any further questions you could continue to E mail us at Investor day to Dot com. Thank you.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.
Okay.