Good day, ladies and gentlemen, and welcome to J2 Global’s Q1, 2021 Earnings Call. My name is Paul, and I will be the operator assisting you today. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

[Operator Instructions] On this call will be Vivek Shah, CEO of J2 Global; and Scott Turicchi, President and CFO of J2. I will now turn the call over to Scott Turicchi, President and CFO of J2 Global. Thank you. You may begin..

Thank you. Good morning, ladies and gentlemen welcome to the J2 Global investor conference call for Q1 2021. As the Operator mentioned I am Scott Turicchi, President and CFO of J2 Global and I'm joined by our CEO Vivek Shah. A presentation is available for today's call, a copy of the presentation is available at our website.

When you launch the webcast there is a button on the viewer on the right hand side which will allow you to expand the slides. If you have not received a copy of the press release, you may access it through our corporate website at www.j2global.com. In addition you will be able to access the webcast from this site.

After completing the formal presentation, we will be conducting a Q&A session. The Operator will instruct you at that time regarding the procedures for asking a question. However, you may e-mail us questions at any time at investor@j2global.com. Before we begin our prepared remarks, allow me to read the Safe Harbor language.

As you know this call and the webcast will include forward-looking statements. Such statements may involve risks and uncertainties that would 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 slide show 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 in the first quarter as we continue to exceed our expectations and demonstrate the quality of our portfolio and the strong tailwinds that exist in our verticals.

We're also increasing our guidance which as far as I remember has never happened to J2 without a major acquisition driving it. This momentum only adds to the considerable excitement at J2 as we work on separating the company into two pieces, a compelling HCIT business, and a vertically focused Internet platform.

Let me start by unpacking our pro forma Q1 results which are adjusted to exclude the voice assets we've sold over the past three quarters as well as our B2B backup business which we expect to sell. Total revenues grew over 23% with nearly 40% growth in our Digital Media segment, and almost 6% percent growth in our Cloud Services segment.

Digital Media's growth was a combination of low teens organic growth coupled with acquisition-based revenues mostly from RetailMeNot. Leading the pack with our broadband assets Ookla and Ekahau which together grew over 30% year-over year.

Ookla speed test set yet another record another record in Q1, was 1.9 billion test, which is up nearly 60% from last year. We also launched video testing on Speedtest for iOS and revamped consumer coverage maps on Speedtest for Android, continuing to enhance user utility and network analytics.

Ekahau customers are seeing significant increases in WiFi usage with more connected devices and more activity straining networks. This should bode well for Ekahau which offers products to help businesses create great WiFi.

The Everyday Health Group continues to show strength with revenues up over 15% as consumer interest and 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 asset called Daily Own which sells health and wellness courses online.

We believe we can leverage our significant audience reach to drive paid content. Our tech and gaming brands including IGN, Spiceworks, Mashable and PCMag saw growth of close to 27% as the advertising market continues to strengthen.

The RetailMeNot 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.

Our deal finder browser extension saw monthly active users increased 129% year-over-year through the combination of strong installs 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. Consensus saw revenues growth by close to 7%, but the corporate fax portion growing by over 14%.

While the web fax business has been modeled to slightly decline growing by over 14%. While the web fax business has been modeled to slightly decline we actually saw a growth of nearly a point in 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 in two important marketplaces Epic's app [ph] Orchard and Amazon’s Health which has been part of our ongoing efforts at increasing our healthcare channel partnerships. The remainder of cloud services composed of our cybersecurity and SMB enablement verticals grew 4% in the quarter.

As I described in our last call we are directing investment dollars to cybersecurity and to our Martech businesses to drive future organic growth.

In cybersecurity we recently launched our Vipre all in one solutions which was developed to offer businesses complete protection with security awareness training, email and endpoint security, data loss prevention and a business cloud VPN.

In 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 multi-channel marketing within a single platform.

Notwithstanding those investments our adjusted EBITDA margin was 39.3% a 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 the guidance in the past, it’s been because of non-budgeted acquisitions. Being in a position to increase guidance and 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.

In 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.

It's against this backdrop of strength and I'm pleased to report that we’re making terrific progress in our efforts at spinning off the consensus business as outlined in our April 20 call.

As we've discussed in the past, we operate our businesses in a highly decentralized fashion which is advantage as we look at separating consensuses business operations from J2. 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 or already inside of the business unit, with the balance representing employees from shared services functions that substantially support the consensus business.

Therefore, we have a 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 a facilities 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 effectuating 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 We’re still working through the respective capital structures from the two companies but we remain very confident that the cash on our main core balance sheet spin along with its ongoing free cash flow borrowing capacity and its retained stake in consensus, its various minority investments and the disposition of non-core assets should give it ample dry powder to continue a level of M&A consistent with recent history.

At the same time consensus should have ample free cash flow of its own to allocate for the development of its interoperability platform and de-levering 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 opportunity for the companies. One of the attractive aspects of this separation is the relative absence of the 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 J2. On the revenue side, consensuses cloud facts offerings sat quite distinctly from the other cloud services offerings.

There is little cross or upselling between cloud facts and our cyber security in SMB enablement offerings.

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 a CIT peers and the other with Internet peers.

We expect to hold analyst days along with deal roadshows ahead of the split to 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 were 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 incorporated DEI goals into my compensation and those of our executive team. The results of our annual employment engagement survey were gratifying with over 80% of employees being proud to work at J2 and would recommend us as an employer. And the gap between our efforts and third-party ratings is beginning to close.

At ISS, we saw our governance score were lower as better improved from 4 to 2. Our environment score improved from 7 to 4. And our social score improved from 10 to 1. We're 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 will provide an overview of both our non-GAAP and pro forma results for Q1 2021. As you recall from our previous earnings call, we have sold certain Australia and New Zealand voice assets in August 2020 and certain UK voice assets in February 2021. And we now have our B2B 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 has highlighted, it was a stellar quarter driven by organic growth throughout J2’s businesses.

We ended the quarter with approximately $500 million of cash in investments, including $372 million of cash. Now let's review the summary quarterly financial results on slide 4. Let's begin with revenues. It was a record first fiscal quarter for J2.

We are just shy of $400 million of revenue in the quarter and $385 million in revenue on a pro forma basis, representing approximately 20% and 23% growth respectively. Adjusted EBITDA was also record for a fiscal quarter with a $156.3 million as reported and a $151.5 million on a pro forma basis.

The growth in EBITDA was 33.8% and 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 $2.18 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 5. In Q1, we generated $152.5 million of free cash flow, an all-time record for J2 which was a 60.1% 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 RetailMeNot acquisition that was also collected in the quarter.

I would also remind those that are new to J2, that our EBITDA to free cash flow conversion is best measured over a rolling four-quarter basis and is typically in the mid to high 60% range .On a trailing 12-month basis our adjusted EBITDA is $655 million and our free cash flow is $465 million which our current share price represents an enterprise value to EBITDA multiple of just 10.1 times and enterprise value to free cash flow multiple of 14.2 times respectively.

Now, let's turn to the two businesses Cloud and Digital Media for Q1 as outlined on slide 6. The cloud business grew revenue 1% on a reported GAAP basis and 5.6% on a pro forma basis, to $158.8 million adjusted EBITDA was $83.4% million as reported and $78.6 million on a pro forma basis generating growth rates of 2.2% and 4.9% 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 our question-and-answer session I would like to turn your attention to our business outlook on slide 8. Due to the impressive organic Q1 results we are raising our guidance that we provided in February of this year.

To remind you, at that time, we estimated on a pro forma basis that 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 $8.93 per share and 9.27 per share. The new range of guidance has the former high-end as our new low-end of guidance.

For 2021 we now estimate on a pro forma basis revenues to be between $1.676 six billion and $1.7 billion adjusted EBITDA to be 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 3.25% convertible notes later this year. We continue to study the appropriate timing and method to effectuate the call in light of the separation of consensus from J2.

Following our business outlook slide our various metrics and reconciliation statements for the various non-GAAP measures to their 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. [Operator Instructions] And the first question is coming from Cory Carpenter from JPMorgan. Cory, your line is live..

Hey. Thanks for the questions. Vivek, just told me you could talk a bit more about what's driving the outperformance in digital media and 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 RetailMeNot acquisition hoping you could talk about some of your key learnings from the integration thus far? Thanks..

Great. Thanks, Cory. And good morning. 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 tailwinds across all of the verticals, the tech vertical, the health vertical, the gaming vertical, all were very strong.

The advertising environment continues to be quite favorable for premium properties in a world where I think we're shifting from interest-based advertising to contextual-based advertising. I think we're seeing some significant benefit in that.

I will also say and it's a good segue to your second question that within our shopping vertical and principally RetailMeNot, the execution has been fantastic.

And so, 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 the assets within the digital media segment. And we do believe it's sustainable. We think a lot of the shifts that are taking place in the marketplace are just acceleration of trends that were there.

You see the way in which, changes in the way in which we work, the way in which we consume content, the way in which we shop, those all are favorable we believe long-term trends for our portfolio..

Great. Thank you and congrats on the quarter..

Thanks Cory..

Thank you. And the next question is coming from Shyam Patil from SIG. Shyam your line is live..

Hey, guys. Congrats on the quarter and the outlook. I had a couple of questions, I guess, first one can you guys talk a little bit about kind of what you're seeing right now in the M&A environment. Your pipeline and kind of what you're seeing since valuation expectations.

And then the second question, with the increase in guidance 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 a little bit more color on our guidance to the M&A pipeline continues to be very strong. We're seeing a number of interesting opportunities across the board.

And what I should say because I know this question exists for many is that as our process of spinning off consensus in any way slowing down our M&A program. And the answer to 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 at consensus in RemainCo 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 the second half. And so, it could just be that as we acquire, as we acquire assets like RetailMeNot, there is a integration period. And so, those teams are probably more focused on that than possibly sourcing in those areas.

Or it could just be that, that, that sort of, that's, that the distribution is something, is a little bit random. But we feel very good about it. You know I've been asked about SPAC activity and you know the types of, the types of transactions that SPACs are looking at are really not the types of transactions that we're looking at.

So, in terms of our own M&A approach where we're looking to create value, the categories we're in and the targets, we're not seeing the SPAC pressure that I think others may be seeing..

And then on the guidance question, Shyam, what I would say is, for Q2 remember that’s a quarter of course that we did [indiscernible] 00:24:37 on RetailMeNot so digital media should be in the high 30s growth year-over-year, cloud should be in the mid-single digit range on revenue.

What I would note, I'd remind everybody else is and you'll recall we talked about this in the Q4 call, this is now beginning in Q2, our investment period.

As Vivek highlighted in his opening remarks, we've seen both in Q1, we even saw it really coming into this year, tremendous opportunities to invest particularly in the areas of cybersecurity, Martech, pregnancy and parenting and gaming. So, you're going to see those investments begin.

They've already begun actually in Q2 such that while the revenue will grow sequentially from Q1 to Q2, I would expect EBITDA to be somewhat in a similar range to Q1 because Q1 was very, very light by design on those investment activities. And we budgeted, they really began in Q2 and they then continue through the end of the year..

Okay. Thank you, guys..

Thank you. And the next question is coming from Will Power from Baird. Will, your line is live..

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 5%, 6% pro forma growth. I wonder if we can get more color just on the key drivers there within the business and sustainability..

Well, I'm happy to say that a large chunk of that came from consensus. So as Vivek mentioned, the strength in the underlying business platform usage was really, really strong. Remember we're comparing against a quarter meaning Q1 of 2020 that really was not impacted in any material degree by COVID.

And I think what you're seeing is consensus and you may recall when 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 on-ramp them and for their usage to fully get up to speed. And so, that's what we're beginning to see.

This outperformance is driven by healthcare, is driven by customers actually that we acquired as customers well over a year ago. What it is getting them fully onboard is to our platform. So that is one key element of it.

The other key element that Vivek touched on in his opening remarks what I think is important is that the smaller end customer base, we call the web channel, which historically we've said you know that's a low single-digit decline actually had approximately 1% gain in Q1 to 2021 over 2020 and 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. Those two things were key drivers for the whole cloud business.

And Vivek you may 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 organic growth particularly on the corporate side.

And as I said in my remarks we're going to get to the point pretty soon where the corporate business is larger than the web business and therefore its larger growth rate starts to show up even more in the aggregate growth rate. In terms of the non- consensus portions 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 were really run for profit and not growth and not 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 a little bit on I think the margin question that came that just preceded these sets of questions and what I will tell you and as I said 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, we look at the competition for capital and we'll 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 our guidance for the rest of the year.

If I have only one regret about Q1 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 the tech gaming segment up 27% year-over-year which looks like strong growth how does the gaming console cycle kind of playing into that.

And how does that impact results through the balance of this year?.

Yeah. I know so certainly I think Q1 benefited at IGN and from the strength relating to the console cycle and the refresh and generally speaking that's a multi quarter type 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 basket of revenues. It is far more tech than it is gaming..

The next question is coming from James Breen from William Blair. James your line is live..

Thanks for taking the question. Just on the Digital Media side, any comments around some of the sectors that you saw that were most impacted by COVID starting to reemerge? And then thoughts just you know as you expanded Digital Media business on other verticals [indiscernible] Thanks..

Yeah. 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, Ekahau is probably one of the first businesses that comes to mind. Just as a reminder, Ekahau is in the business of selling tools to help businesses create great WiFi.

And when you add the shift from office work to at-home work, that business suffered a bit. That business is now really doing well. It was a great driver in Q1 of growth, and we are very optimistic about it going forward.

So that is an example I think of a business inside of the Digital Media portfolio that had a negative impact from the pandemic that now is reversing course.

You know outside of that, I would say that generally speaking, you know the pandemic did accelerate in a positive way a bunch of trends in health and in shopping in particular that will benefit early in the pandemic and continued to be kind of the new normal. And in that way, we're very excited.

As for new verticals, look I think we're always interested in high value verticals where we can find audiences within that allow us to have our multiple monetization, business models 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 that we’re in. But that’s what we are looking for. And generally speaking, if we are 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 RetailMeNot 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. And the next question is coming from Saket Kalia from Barclays. Saket, your line is live..

Oh, hey, guys, thanks for, thanks, thanks for taking my question, fitting me in.

Vivek, maybe for you, can you just remind us what the split of the digital media business is between display and performance sort of, sort of roughly speaking? And maybe how that might trend through the rest of the year?.

Yeah. Good morning, Saket. So, in Q1, if you look at the digital media segment in total, display business was around 30% of the revenues, performance marketing was around 47% of the revenues and the subscription business was around 22%. Again, this is just for the digital media segment.

To answer your question, it's interesting with respect to 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 ships in the marketplace from interest-based advertising to contextual advertising and premium environments 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 a distinction between display and performance marketing, which is really a pricing distinction whereas display is cost per thousand impressions serve and performance marketing is cost per acquisition lead or click. The reality is that our display advertising is measured by marketers on a performance basis.

So while we distinguish those in how we in delineating revenues the marketers doesn't. The marketers looking for dollars that perform and there's positive ROI whether it's CPM dollars or 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 other historically well-performing advertising is likely to be challenged. So, I think that puts us in a very strong position..

I think I’d add to that Vivek. I think what you see Saket in terms of the Q1 representation of how we categorize the revenues in digital media. Once again assuming no further acquisition is reasonably representative of the distribution of revenues for the year..

Very helpful. Thanks..

Thank you. And the next question is coming from James Fish from Piper Sandler. James, your line is live..

Hey guys, congrats on the record quarter. Scott maybe just help us [indiscernible] the guide here a little bit for the remainder of the year. Obviously you guys are extremely outperformed all of our expectations but it does guide include the impact of the higher operational cost related to the spin out starting.

I know you talked about investments, reinvesting in the business here. And second it does kind of seem to imply a guide down for the remaining two quarters given the Q1 upside just in 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 that flow through the guidance. The guidance is a consolidated guidance of J2 under the assumption that we stay together through the end of the year, which of course we believe is unlikely as we expect to spin through, be effectuated in Q3.

But just to give you a sense of how the businesses operate combined, you may recall from the April 20th call that there will be approximately up to $10 million of costs as we split the two companies and create two public companies.

Those will occur primarily as we get closer to the distribution date and will be borne by the companies on a going forward basis. Those are independent of any actual fees that we will incur in terms of effectuating the separation, things like legal fees, banking fees et cetera. So, that's one element.

What we're talking about in the guide is $10 million to $15 million of incremental spend that otherwise would flow to EBIT going back to those major categories that I referenced earlier in both the cloud and digital media businesses.

From the cloud, you recall in the Q4 call, we had in February, we talked about incremental investments primarily in marketing because we've had very, very good, too good in fact LTV to cap ratios in both the Martech business and cybersecurity. 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 revenue, this may be a little bit conservative.

On the EBITDA, look, it is our intention to be able to spend all these incremental dollars.

I think it’ll 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 J2 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 EBTIDA’s flow-through at the same degree they get in Q1..

I might just add to that, two things to that, number one in terms of the synergy cost those are annualized costs. So certainly the impact in 2021 should be pro-rated. So in the context of its growth in the context of our expense base they're fairly small.

I think the sort of the more and the other piece on this revised guidance is it does not contemplate any future M&A inside of J2 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 EBITDA guide, I think that's one aspect, 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. So, I think it's a very exciting combination and an important signal..

Yeah. That's very helpful.

If I can sneak in one other, are you guys still anticipating another 200,000, 300,000 subscriber churn for the divested backup business that's coming? And any sense to the timing whether it's – you guys are expecting kind of Q2 or back half the year?.

Yeah. So let me just know, I know what you're touching on here.

So first of all just to explain the customer count decline in the cloud business that is almost all related to either assets that we have divested, meaning 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 B2B backup plan.

I would note that those metrics in the back include those assets in the various periods in which they were home. So to your point, when we divest the B2B backup assets, yes, there will be a decline in customer counts. I would say in hopefully the lower end of that range that you reference and we've made great progress.

I'm a little reticent to give a specific timing but I would say it certainly could occur in the second fiscal quarter but it could also be early Q3. So it's going to be I think right on the cusp of either late Q2 early Q3. Obviously if we maintain the assets through Q2 those customer accounts remain in metrics and so the asset is actually disposed..

Helpful Scott. Congrats on the great organic growth guys..

Thank you. And the next question is coming from Jon Tanwanteng from CJS Securities. Jon your line is live..

Good morning, guys. Thank you for taking my questions and great quarter again. Just that most of my questions have been answered it's up to them. I was wondering if you could break out the growth expectations for consensus within the guidance that you provided. I know the mix is shifting over down [indiscernible] corporate side.

I'm just wondering you the number for the year and then how that may accelerate going forward as that becomes bigger and bigger.

Yeah. So right now consensus looks like it is in that mid-single digit range and they'll basically be organic growth, it does not assume any M&A. The only M&A that affected last year’s results was a 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 occurs is given the additional investments that we made in some of the consensus products that that would be sort of the low watermark for growth going forward unaided 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..

Got it.

And what's driving the growth in web fax? Is that something you're measuring right now or attributable to something that you've done?.

You know I think it's a combination of a couple of things. We do believe that the changing work environment aids in the need for having individual solutions available for employees who now work from home either permanently or in 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 that that we should not accept the fact that it is a low single-digit decline.

I think that you know in the context of a very large portfolio, you'll obviously have pieces that maybe don't support the growth rate as 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, to me 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 an ascendancy and 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 you were able to measure the impact of do not track features across some major mobile platforms either in the past quarter or in this quarter as it rolls out..

Again it's, because it's not part of what we do in our monetization mix 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 then the basis needs to be targeting the content and the environment that they are in.

And if they're looking at, a contextual versus an interest-based approach to targeting which is historically how advertising has worked. It's only in the world of data collection and using programmatic inventory to retarget did we shift 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. Appreciate it guys..

Thank you. And there were no other questions in the queue. I would now like to hand the call back to Scott Turicchi of J2 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 Vivek and I will be participating in over the coming weeks.

So that'll give you an opportunity for additional color commentary as we proceed through the quarter. In some cases there will be fireside chats or formal presentations. In other cases only one on ones.

I would also note from the overall spin perspective, the next major milestone would be the filing of the Form 10 which we expect to be in the filing of the Form 10 which we expect to be in the month of June. That’s the formal filing with the SEC, upon which they begin their process to review their document.

Once they declared effective, then we can proceed with clearing the distribution and effectuating 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 can continue to e-mail us at investor@j2.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..