Q1 2021 Mcafee Corp Earnings Call
Good day, Thank you for standing by welcome to the Mcafee first quarter 2021 earnings conference call. At this time all participants are in a listen only mode. After the speak of presentation there'll be a question and answer session.
I asked the question during the session you will need the press star one on your telephone.
Please be advised that today's conference is being recorded and if you require any further assistance. Please press star zero.
I'd now like to hand, the conference over to speak of today, Your daughter don't say like this.
As president of Investor Relations. Please go ahead.
Thank you operator, good afternoon, and thank you for joining us today to discuss Mcafee <unk> first quarter earnings results for the period ended March 27th 2021.
On today's call of Peter leave President and CEO Venkat, but he bought the executive Vice President and Chief Financial Officer, and Ashish Agarwal, Senior Vice President of strategy and corporate development.
Earlier this afternoon, the Mcafee issued a press release announcing its financial results while the.
This call will reflect items discussed within those documents for a complete information about our financial performance. We encourage you to read our 2020 annual report on form 10-K for the fiscal year ended December 26, 2020, and our quarterly reports on form 10-Q for the fiscal quarter ended March 27th two.
21, which we plan to file this week with the Securities and Exchange Commission.
Before we begin I want to remind you that the matters discussed on today's call may include forward looking statements related to our operating performance financial goals and business outlook, which are based on management's current beliefs and assumptions. These forward looking statements reflect our opinions as of the date of this call and we undertake.
No obligation to revise this information as the result of new developments that may occur.
Forward looking statements are subject to various risks uncertainties and other factors that could cause our actual results to differ materially from those expected and described today.
For a more detailed description of our risk factors. Please review our most recent annual report on form 10-K and are called the report on form 10-Q to be filed this week with the Securities and Exchange Commission, where you will see a discussion of factors that could cause the company's actual results to differ materially from those statements.
A replay of this conference call will be available on our website under the Investor Relations section I would also like to remind you that during the call. We will discuss some non-GAAP measures in talking about Mcafee is performance.
You can find the reconciliation of these measures to the nearest comparable GAAP measures in our earnings release.
Before I pass the call over to Peter I would like to remind everyone that due to the announced sale of certain assets together with certain liabilities of our enterprise business on March eight 2021, and the related assets liabilities and financial results of the enterprise business were classified as discontinued operations in our condensed consolidated financials.
Statements and are thus excluded from continuing operations for all periods presented as such we will focus on continuing operations on our consumer business on this in future calls I will now turn the call over to Peter leaf Mcafee as president and CEO.
Thank you Eduardo and good afternoon, Q1 was a very strong quarter for Mcafee as we significantly increased revenue profitability and free cash flow. We delivered robust top line consolidated results, which include both continuing operations and discontinued operations with total company.
The revenue of $773 million growing 13% year over year. We also improved profitability with total company adjusted EBITDA of $316 million of 41% margin and growth of 29% versus last year, clearly a solid quarter for both segments we had.
The strong start to the year with double digit year over year of growth for both revenue and adjusted EBITDA.
Moving to continuing operations for our consumer business, our team executed well with our Q1 net revenue profitability and free cash flow, beating expectations. We delivered net revenue of $442 million, an increase of 25% year over year adjusted.
Adjusted EBITDA closed the quarter at $199 million up 25% versus the same period last year with EBITDA margins of 45% in the quarter.
The adjusted EBITDA for the period included stranded and dis synergy costs of $22 million.
We continue to drive double digit growth along with improved profitability through our differentiated omnichannel go to market strategy.
In Q1, we added another industry, leading 885000, net new core direct to consumer subscribers or DTC to the platform.
Closing the quarter at a cumulative $18 9 million versus $15 7 million core DTC subscribers in the same period last year of.
Strong start to fiscal 2021, marking another terrific quarter of revenue growth and this marks our 14th consecutive quarter of sequential and year over year core direct to consumer subscriber ads.
In addition to the strong operating results Q1 highlights included the following a multiyear extended agreement with Fujitsu client computing to deliver best in class consumer security solutions to fit your two device users a renewal agreement with the UK electrical retailer Dixons Carphone.
And an extension and expansion agreement with the consumer division of lumen of U S. Based service provider our unique Omnichannel go to market strategy allows mcafee to outpace the competition attracting subscribers at the emanation point and throughout their digital journey. Furthermore, from a product perspective on April <unk>.
<unk> Mcafee as total protection was again awarded the highest possible ranking of three stars advance plus by the Austrian based anti malware test lab a comparative.
Our plan is to balance the need to execute and deliver results while simultaneously investing to capture the tremendous market opportunity in front of US we continue to invest in our product portfolio go to market engine and subscriber acquisition and retention motions to maintain of double digit long term revenue growth rate.
We remain confident in the sustainability of this trajectory driven by the positive market forces tied to digital transformation. The proliferation of personal devices educational and professional use adoption and the increased public awareness of the importance of privacy and security.
As we look out over the rest of 2021, we are confident that the flywheel effect of our business will continue to benefit from a larger renewal base associated with the trailing 12 month cohort increasing to $3 2 million from $2 8 million net new DTC subscribers in Q1.
We understand the mission critical role we play in securing the digital transformation wave that is sweeping the world the acceleration and Digitization that has taken place over the past year has only served to compound that urgency Mcafee has expertise in bringing differentiated security solutions to consumers has never been more timely.
New conveniences in the realm of work learn shop bank exercise stream and telemedicine have gone from nice to haves must haves.
Digitally enabled experiences have become permanently woven into consumers' daily lives as they expect every interaction to be secure Mcafee is there to provide that peace of mind. Thank.
Thank you once again to our Mcafee team members for your dedication and hard work, which has allowed us to focus on customer and partner success execute on our strategy and deliver very strong Q1 results I will now turn the call over to Venkat to discuss our financial results in further detail.
Thanks, Peter and good afternoon, everyone for today's discussion I'll be focusing on non-GAAP continuing operations, unless specifically stated otherwise.
Also you'll find the historical view of our continuing operations within the supplemental financials on the IR section of all of our web site.
We continued our strong momentum in Q1 with double digit growth in revenue profitability and cash flow year over year overall results exceeded expectations driven by strong execution and the increased demand for our holistic personal security offerings.
For the first quarter revenue for total company was 773 million of grew.
The 13% over the last year.
Adjusted EBITDA was $316 million up 29% year over year, representing a margin of 41 per cent and adjusted EPS of <unk> 44 cents.
Revenue for continuing operations was 442 million a growth of 25 per cent over the last year.
Adjusted EBITDA was 199 million up 25 per cent year over year, representing a margin of 45 per cent and adjusted EPS of <unk> 25 cents.
Excluding 22 million of stranded costs.
Justice EBITDA would be $221 million, representing a 50% margin.
Moving to expenses our cost of sales were in line with the revenue with gross margin at 80 per cent.
As a percentage of revenue operating expenses decreased in the quarter by approximately 30 basis points year over year.
Even while continuing to invest in customer acquisition of investments in the quarter.
Our pure play consumer business continues to show solid gains as we invest to address the increasing demand for a holistic portfolio of security services.
We saw strong demand and subscriber growth across all geos and channels.
Our team continues to execute well focusing on customer acquisition conversion and retention.
In Q1, we ended with an industry, leading 3.2 million net new subscribers on the trailing 12 month basis, including 885000 added in the most recent quarter.
This reflects the ongoing permanent shift towards digital transformation of consumers.
Across the online activities, which reinforces the need for online protection.
Also continued to see strong demand for our mobile and indirect channels of business.
Average revenue per customer in Q1 was $5.95 down two cents from Q4, which reflected the growth and mix of new subscribers, which are initially dilutive to the ERP see.
All geographies.
There was a stronger mix of new Where's the renewal revenue.
From a retention perspective, our dollar retention rate or the other are remained at 100% R.
Our team's excellent execution through a deliberate focus on user experience value up for offerings ease of renewal and up selling higher value added packages.
The news to contribute to our would be out of our improvement.
Now turning to balance sheet and cash flows which include results from continuing and discontinued operations. We entered the first quarter with 346 million in total company cash and cash equivalents.
We declared our second dividend post the IPO in the amount of lemon and half cents.
For class a common share in March and paid the dividend in early April from a cash flow perspective, we generated 259 million in total company cash flow from operations compared to 171 million in the prior year, an increase of 51 per cent the.
The improvement in the.
The improvement is attributable to increased profitability and well managed working capital.
Finally, total company Unlevered free cash flow was 298 million in the theater, which grew 35% year over year. This is inclusive of approximately 54 million in one time costs.
Turning to guidance, we are providing current quarter and annual guidance ranges for the revenue and adjusted EBITDA for our continuing operations pure play consumer business and the.
The second quarter, ending June 'twenty, six 2021 we expect revenue and adjusted EBITDA to be in the range of 430, and $434 million and 161 and 165 million respectively.
Our second quarter guidance includes estimated stranded cost in the range of $40 million to $45 million.
Furthermore, we anticipate cash net interest expense for the second quarter to be in the range of $50 million to $55 million.
And you should assume the fully diluted share count of approximately 470 million share.
For the full year ending December 25th 2021 we expect revenue and adjusted EBITDA to be in the range of 1.77 billion and $1, seven 9 billion and $693 million and 703 million respectively.
For fiscal 'twenty, one we estimate annualized trying to a class of $150 million and cash net interest expense to be in the range of 190 and $200 million.
For the fully diluted share count you heard of assume approximately 470 million share.
For second quarter, and FY 'twenty, one the normalized non-GAAP tax rate for continuing operations is expected to be 22%.
And the pure play consumer focused company, we have a highly attractive consumer subscription business with the industry, leading scale double digit growth and high profit a beauty and the growing personal security market.
Are we as sophisticated product platform and loyal long term relationships constitute the sustainable competitive advantages. We are committed to the success of all of our customers and positioning Mcafee for long term growth and profitability. We look forward to reporting of continued progress for you.
All the time.
Before closing I'd like to state that the plan to sell enterprise business.
<unk> is on track to close as scheduled before the end of FY 'twenty, one with that I'll turn the call back to the operator to begin Q&A.
Yeah.
Thank you.
And at this time of who like to ask the question do we need to press star one on your telephone until the drilling the question, especially of the pound key.
Please standby, we compile the Q&A roster.
Our first question on sort of from the line of Hamzah sort of Wala from Morgan Stanley you may begin.
Yeah. Thank you for saying Oh My God.
Question.
Wanted to touch on the.
Mobile and ISP side of things I know I see that you announced.
Partners of the lumen. This quarter can you give us any update on sort of how that business has been doing obviously it grew quite fast in 2020, how does that sort of sustained.
Q1.
Particularly given some of these recent partnerships of your plumbing.
Hey, I'm zone I appreciate the question, it's Peter and our overall of the mobile business continues to be of really strong performer for us as we've expanded with partners that we've had and we've also added some new partners lumen is formerly known as Centurylink. So we've had a relationship for a <unk>.
Number of years, it's been very successful.
And if you think about.
The U S market, particularly which is the bulk of what lumen does for Centurylink.
That's a market that's seeing expansion in the number of ways. One of those is related to consumer behavior and in the U S. This year the expectation is that.
The number of connected home devices will increase in the neighborhood of 60%. So when we think about things like home router security and how expansive that market is and how many devices folks have at home and how many broadband subscribers and then to be like lumen has it really.
Turns into a very very positive story for us not only now but long term and this was.
Like all of the deals we talked about this was an extension and it's multiyear so it's been a very good relationship and it continues to be and we're very happy to two of sign that for a multiyear continuation.
Got it and just maybe one follow up on.
Perhaps the.
PC OEM side. So it seems like there is still a good deal of pent up demand.
On the OEM channel.
Many of the 2021 I'm wondering how you see demand within that channel specifically trending through the rest of the year.
Actually given some of the supply chain issues any impact that we should be considering there.
Well you know all too well, we are not exclusively tied into other to P. C. Your PC shipments, but the expectation. This is an IDC statement is that the PC shipments in PC demand are expected to continue to be strong for 2021.
So we're seeing obviously a piece of shipments all of our strong again, it's not a direct correlation for our business we grow when PC shipments are down as we did in 2019 at a very very solid clip, but right now we're continuing to see that to be the case and that's certainly what the projections are and I think it's more than just <unk>.
Kind of traditional PC, we're seeing usage change whether it's gaming the broadening of utilization that we're seeing with new applications and that also expands into areas that you just asked about like mobile so yeah. It's been strong in the it seemingly continuing to be.
Thank you.
Thank you.
And our next question comes from line of Fatima <unk> from UBS you may begin.
Good afternoon, and thank you for taking my question Peter.
Peter I'll start with you.
About the model and the renewable flywheel as you characterized it.
One of the better understand.
With that positive force in play in the model.
Why have the expectation that the revenue profile what are the key quarter on quarter.
The sequential of decay as implied in the revenue guide is near the change in your expectations of direct to consumer cadence is it a change in renewal assumptions I'd love to drill in on that disparity of little bit more and then a follow up for <unk>. Please.
You bet and very kept may have opinions on this one as well so thanks for the question for Tim of so first and foremost.
The answer is no the market continues to be expansive we think it's only growing.
I had a really healthy clip that we continue to see consumer behavior also is a key element to help inform us and we absolutely continue to see that and we think we're in very early innings on that front as far as the flywheel itself as you know it can be a bit dilutive we added 600.
69000, new DTC subscribers in Q3 668000 in Q4 and 885000 this past quarter. So that is very very solid and frankly its record breaking for us non inclusive of the mobile channel as we've discussed but of course the economics.
And the betterment of those economics come in year, two year, three et cetera, and that's.
That's a key focus for us related to performance marketing and making the consumer experience, great and that Dr. Our number that that dollar based retention number of holding at 100% as we look at that cohort that's coming in.
We're tracking as expected very nicely with more and more of that base now moving towards the renewal, but it will be dilutive initially and that's something that frankly, we like and.
And we like the long term projection as far as the guide, which we hadn't guided for the year before we opted to do that Venkat can certainly talk about that a bit but we feel very good about the market very good about the flywheel as you described it and remember 80, 85% of this business really is of renewal business. So it's very.
A very solid in that sense, and we feel very good about the about that upcoming but I'll I'll leave I'll leave Venkat to answer the other question and he may have some color on that one as well.
Thanks Peter.
Uh huh.
A couple of additional comments.
You know obviously, we're very pleased with the results in Q1, you know it's been a incredible growth in the number of subscribers.
And certainly we're very pleased with the start of the fiscal year growing 20% of both in Q floor and Q1 the.
Overall, we like the momentum now just a couple of things to remind you in terms of guidance itself one.
As Peter mentioned, we did a sort of provided full year.
Guidance at midpoint, it's 14% growth overall, so we feel very positive, but full year growth.
Growth potential spin.
Specific to Q2, just a couple of things for you to consider one is you know.
It's a tough grow over from last year and the second is the Q2.
<unk> tends to be seasonally or a.
Our weakest so we're being.
Thoughtful in how we guide for Q2, and Q2 Q3 tend to be a you know sequentially all of our weakest and the Q4 and Q1.
Traditionally the strongest so we feel very good about the full year at 14% growth and you know where I think we're being pragmatic with respect to Q2.
Understood I appreciate that and just a point of clarification bank of it for you.
Is the cash flow performance in the quarter that was on a consolidated basis, if I understood and heard you correctly, but any sense you can give us in terms of the continuing operations related cash flow I E. The consumer business and consumer segment tied cash flow and.
As well as the any stranded cost impact that you think directionally point us to for the consumers.
Our free cash flow generation in the quarter and that's it for me. Thank you.
Yes sure.
So a couple of things to you.
The consider you know from a from a Q2 perspective.
From a cash.
Continuing operations are a consumer business.
You know clearly the pre standard margin.
We achieved a 50% margins.
Included you know if we in the quarter for our continuing operations, we had identified about $22 million worth of trying to of course a.
Which brings the overall post trended down.
But it was the very solid quarter and for the full year, we are projecting.
You know from the from a guidance perspective.
All of the month 47 per cent of our full year EBITDA margins.
And with the $150 million of trying to of course, we're projecting for the full year.
For the team of just one more thing I think venkat hit of beautifully the the other piece and again, we're working through all components, but it is of very very strong.
Cash conversion business related to the consumer business. So we can we can go further on that front in upcoming quarters, but its a very strong cash conversion business related to EBITDA conversion.
Okay. Thanks, operator, I think I'll take the thank you thanks for the team.
And our next question comes from the line is Rob Owens from Piper Sandler you may begin.
Well all of your line is open.
Yeah.
Yes.
Sorry about that I guess, the mute button.
Good afternoon. Thanks.
Hoping you could unpack a little bit the net dollar retention rates of the components, there just where insurance in this environment versus the up sell and what you've seen I guess throughout the pandemic with increased awareness around the security and the importance of it.
You bet Hey, Robyn.
We have all been in the mute button mode. So we've all been through the multiple times through COVID-19 every one of us.
Related to the Drs for particularly for.
First time, so the better.
The question on the person I'm, so sorry, sorry.
You did great of around two two.
So related to a to D R and retention generally so what we've continued to do in addition to.
Some of the more recent aspects as we've continued to invest we've invested in digital marketing we've invested in performance marketing we've invested in improving conversion frankly.
And we've seen subscriber retention improve we've also with this broader and broader and larger and larger base that we've continued to grow we've seen customer sat and NPS scores go up we're making it easier we still have work to do whether.
Whether that's payment processing or realization that youre getting the benefit of Mcafee lives safe as an example, so all of those things of helped US as we've talked about in the past go from FY 17 of 87% to today of 100%.
And that's been really really important importantly, as well what we're seeing with this this cohort this massive amount of new subs that we've been adding is that we're on track with what we had anticipated where the retention is in line with with that triple digit number with the higher volume.
And I think part of that has to do with more protection for more people as opposed to it's not just about me. It's now about my family.
And when we see more users and more users become part of the portfolio. We typically see retention continue to go up we're seeing more devices as we talked about earlier. The P. C story is very positive, but that's not an exclusivity what we're seeing it's mobile devices.
It's home and connected home devices.
VPN et cetera, and we're seeing a broader proliferation, where folks more often than they were in years past are brian of buying a broader portfolio and in short that all leads to stickiness. So hopefully that helps.
Thanks, guys.
I guess just from the PC versus Mcafee, given the big Spike of the Max shipments that you've been seeing are you seeing better conversion.
More of the net new customers.
The macro trends of new housing starts for ratios EBIT roughly.
It's largely in line from a ratio perspective, but volume wise, it's increasing on on all fronts. As you would anticipate and again because of the consumer behavior transitions and because of those important applications that are now digitized we continue to see that and we continue to see that globally.
Thank you.
You bet Thanks, Rob.
Our next question comes from the line of Brian Essex from Goldman Sachs You may begin.
Hi, good afternoon, and thank you for taking the question.
Peter I had a question for you just sort of investors and kind of put it in the context, if we look at.
Net new.
Business on the bathroom.
From both on the direct to consumer as well as channel led and mobile.
What percentage of that is P C focused versus alternative channels outside PC just get it.
Kind of gauge sensitivity there.
Well the thing is when we look back historically it was it was of much higher percentage than it is today and that's that's changed from Mcafee one of the areas of maybe we should talk about it more of that we've invested in significantly is mcafee direct and that's been a very very strong growth channel for us. So we.
Are very much in the direct business, a mcafee dot com and that business is growing at a very very healthy clip. In addition to the fact that as you know we have a strong E tail and retail business and the mobile business continues to perform really well. So we haven't broken it out in the delineated fashion, but as we've expanded.
<unk>, we've expanded the channels and grown.
With the opportunities in mobile like lumen and others.
It's become a much more balanced business in that sense and again the direct piece has also been really performing well.
Got it that's helpful and maybe just a follow up of May take a while the shot in the dark here on the off chance that we may get the information, but any chance you disclosed total consumer billings and the percentage or the breakout between E channel mobile and search.
We haven't broken all of that out at this point, but certainly you know where we're going to continue as we're still in the mode of.
Making sure that we have each component in line with everything we've projected which I think we've done a good job thus far of outlining exactly what we would what we'd be broadcasting in making sure where we're hitting all of those numbers and in many cases, beating them.
Alright, it was worth the shot thank you.
Net.
Our next question will come from the line of Gregg Moskowitz from Mizuho may begin.
Okay. Thank you for taking the questions. So for my first question I just wanted to follow up on for the team is a question about the guidance and for Q2 and I completely appreciate the point about the tough year over year revenue comp.
Having said that of forecasted revenue declined for a ratable model on a sequential basis. It was obviously quite a quite uncommon and so I just wanted to be clear of that that you haven't been seeing any increase in churn over the past few weeks herself.
Hey, Greg I'll touch on it first of I kept me have some some from.
We are not seeing an increase in churn no.
Okay, very very clear. Thanks, Thanks for that Peter and then just as a follow up so just in light of the enterprise divestiture. How are you thinking about M&A is that part of the strategy going forward.
Well I think we're going to continue to be very responsible and you know when you look at the use of capital I think we've done a very effective job, thus far but absolutely we're going to look at things that make sense.
The markets are arguably a bit frothy, but we will over time.
When you look at those those opportunities we've done that in the past.
As we talked earlier about VPN that was an acquisition that served us really well and we will continue to look at things that the.
That potentially broadening.
And also create an opportunity for us to bring more differentiation to the market. So it's definitely not off the table, but we will continue to be very responsible.
Alright, that's great. Thanks, Peter.
Our next question comes from the line of Matt Hedberg from RBC capital markets you may begin.
Hey, great guys. Thanks for taking my question I apologize I wanted to ask one more question. It sounds like you were really definitive in your last answer you're not seeing any increase in churn I guess the.
When you think about the full year guide.
People go back to work and the students go back to school.
Have you factored in any sort of longer term.
Deterioration in churn or is it no we expect to stay sort of at this level through this year.
Sure.
Okay.
Yes.
Yeah.
Okay.
Sure.
Yes.
Yeah.
Yeah.
Yeah.
Okay.
Yeah.
Yes.
Yes.
Yes.
Yes.
Yes.
Yeah.
Uh huh.
<unk>.
Yeah.
Yeah.
Yes.
Okay.
This is Matt.
Lots of non cat.
Good God I'm not sure if you were you.
Your phone is.
And then I just want to make sure. We can we can hear you okay.
Can you hear me okay.
I think that's better much better yes, okay sorry.
So kind of a couple of things one we had structurally.
We see increased usage.
Across.
All of the wildfire you know all of the wise this it for banking schooling shopping health care. So.
We do see.
The long term tailwind as the result of that and so we do see incremental consumers and therefore, an increase in town and the terms underlying times been sort of going you know growing nicely.
For the consumer security the second aspect I think of and Peter touched on it which is.
As the shipments.
Increased for the consumer market you know obviously the demand for say the security software has been increasing especially as the the refresh cycles continue.
The third of angle is the the growth in mobile phones and Iot across all device types. So we see an expanding and voluminous Tam and in our own results. We do see that you know our subscription churn and subscriber churn is pretty much of.
In line with our internal expectations and actually of tracking slightly better. So for the rest of the year, we do see an expanding tam our ability to execute because we happen to be at the point of emanation of across all of these different channels and that sort of obviously bodes well and you saw that.
You know, especially in the Q1 results with 25% growth in Oh for 808000, net new subscribers out of it. So we're very pleased with the momentum we have in Q1 and as the market evolves and we continue to execute we see that momentum continue.
Got it that's helpful and then Peter obviously strong results you seem to be firing on all cylinders.
When you think for the balance of this year.
And obviously strong profitability as well how do you think about allocating additional dollars.
The sales and marketing or R&D is it tilted more towards one thing or in other of Geo maybe mobile just sort of curious on how you think about that incremental investment from here is it sort of.
Maybe drive even better results.
Right.
And you're absolutely right, Matt I think you know.
As we go through it as a team we think about it with a very balanced view because each element matters a great deal.
So I think youre going to see us continue to provide that level of balance internally as we think about what areas. We can continue investing with differentiation. Obviously from a go to market standpoint. These are long term sustained relationships, but we invest together with our partners and it's really beyond <unk>.
<unk> in that sense and from an R&D perspective, the team is working on a number of things too.
To really assess not only what the market is looking like today, but over time as we see so much expansion as this market continues to broaden.
The needs that the different consumers and frankly of different demographic of consumers will have over time as well so it investment decisions being made on both fronts as we continue to operate well in and Reenergize the business and we will continue the pace and sequence as we go.
Got it I think a lot of Super helpful guys. Thanks.
You bet Thanks, Matt.
And once again, that's total of one for questions. Our next question will come from the line of Patrick Colville from Deutsche Bank you may begin.
Hi, there.
So I don't look at that horse on the guidance for <unk>, but just wanted to make sure of is correct.
Uh huh.
Greg mentioned that employs the sequential decline in revenue.
You mentioned that churn is not an issue so.
So should we consider as to why the might be a sequential decline in revenue.
Well I think venkat talked about it he can he can jump in again.
<unk> seasonally a light quarter and it is a tough compare.
And you know look we've guided in such a way that.
I think we've been very thoughtful about making sure that we have been pragmatic and in the guidance as we've gone over the last few quarters, but we absolutely are not seeing a cessation of them for the market transition that continues to grow nor as I said hopefully it was very clear or we see.
<unk> of churn increase.
And also we want to get a gauge on how this COVID-19 cohort continues to do but thus far it's performed as expected, which we're really pleased with so.
Hopefully that gives you a bit of a sense, but the absolutely no no concern at this point on that or the churn is increasing and that's not the case.
Okay, and just to add to that Patrick I mean from an annual we feel very positive.
We did give the annual guidance grown at the midpoint of little over 14%.
And and even the two Q2 guidance at.
At the midpoint are is it.
Right around 13% so.
And this compared to the tough girl or from last year, that's the 20% growth of last year.
Q2, and seasonally Q2 tends to be one of the one of the weaker quarters for us and which is being thoughtful but.
But from a fully of perspective, clearly, we're very positive with a 14%.
Revenue growth.
Yeah.
Okay.
Can I just ask.
Around the kind of non DTC revenue.
Kind of lead them.
Such a M S.
I'm on the SP the.
That revenue base.
But on the the calculations correctly I mean that seems to continue to pick up pretty nicely in the end if I'm not mistaken is roughly around the Huntington 13 million in the quarter.
So what's going on that because of that businesses being.
For coming and performing really well.
Yes, they're all performing well the cat can jump in it's it's.
We won't we won't be numerate on each piece at this point other than to say each of those areas is performing very well.
And we're also growing geographically very well every geo grew double digits as well so it's a cross channels and it's across geographies, but doesn't catch up in place.
Yeah Peter.
You said it exactly right I think of the momentum in Q1 has been across channels across the geographies.
We're particularly pleased with the growth in our mobile business, which is where we've been investing.
You know not only new partnerships.
Across the provider, but also investing across the geography.
Different geographies.
Across multiple different mobile providers.
The big opportunity, we do see a in the mobile space is going deeper in with the each other mobile providers with you know attracting new users. So overall, we're very pleased certainly with the direct.
Direct to consumer, but you know clearly the results show that.
The indirect and partner led has been growing nicely as well.
Yeah.
Thank you so much.
Thanks, Patrick.
Thank you I'm not showing any further questions in the queue I'd like to turn call back over to the speakers for any closing remarks. Thank you and thank you all for joining we look forward to updating you on our next call and I hope everyone stays healthy and safe. Thanks, very much bye bye.
Yeah.
Yeah.
This concludes today's conference call. Thank you for participating you may now disconnect.
[music].
Yes.
Yes.
Yes.
Okay.
[music].
Yeah.
[music].
Okay.
[music].
Yes.
Okay.
[music].