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j2 Global Inc (JCOM) Q1 2021 Earnings Call Transcript

By Motley Fool Transcribers - May 11, 2021 at 1:30PM

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JCOM earnings call for the period ending March 31, 2021.

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j2 Global Inc (JCOM -0.46%)
Q1 2021 Earnings Call
May 11, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

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.

Scott Turicchi -- President and Chief Financial Officer

Thank you. Good morning, ladies and gentlemen, and welcome to the J2 Global investor conference call for Q1 2021. As the operator mentioned, I'm 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've 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'll be conducting a Q&A session. The operator will instruct you at that time, regarding the procedures for asking a question. However, you may email 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 have 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 have 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.

Vivek Shah -- Chief Executive Officer

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 at 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 were adjusted to exclude the Voice assets we 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% 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 were our broadband assets, Ookla and Ekahau, which together grew over 30% year-over-year.

Ookla's Speedtest set yet another record in Q1 with 1.9 billion tests, 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's customers are seeing significant increases in Wi-Fi usage, with more connected devices and more activity straining networks. This should bode well for Ekahau, which offers products to help businesses create great Wi-Fi.

The Everyday Health Group continues to show 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 asset called DailyOM, 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 increase 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. Consensus 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, we actually saw 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 increase to page volumes, it is an important indication of the utilization of the platform. We also launched Apps in 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 to Cyber Security and to our Martech businesses to drive future organic growth. In Cyber Security, 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 multichannel 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 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 will 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 are 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 an advantage, as we look at separating Consensus' 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 are 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 are anticipating our audits will be completed in the coming weeks and expect to file a Form-10 soon thereafter. We are still working through the respective capital structures of the two companies, but remain very confident that the cash on RemainCo's balance sheet is spin [Phonetic], 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 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 opportunity for the companies.

One of the attractive aspects of this separation is the relative absence of dissynergies. 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, Consensus' Cloud Fax offerings sat quite distinctly from the other Cloud Services offerings. There is little cross or upselling between Cloud Fax and our cyber security and SMB enablement offerings.

Of course, we believe the value of the separation is in 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 HCIT 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 stand-alone 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 outline 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 are 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.

Scott Turicchi -- President and Chief Financial Officer

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 U.K. 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 include 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 and 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 had just shy of $400 million of revenue in the quarter and $385 million of revenue on a pro forma basis, representing approximately 20% and 23% growth, respectively.

Adjusted EBITDA was also record for a fiscal quarter with $156.3 million as reported and $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 at 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, 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 $8.93 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 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 the 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 are 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.

Questions and Answers:

Operator

Thank you. We will now be conducting a question-and-answer session.

[Operator Instructions]

And the first question is coming from Cory Carpenter from J.P. Morgan. Cory, your line is live.

Cory Carpenter -- J.P. Morgan -- Analyst

Great, thanks for the questions.

Vivek, just hoping you could talk a bit more about what's driving the outperformance in Digital Media and how do 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.

Vivek Shah -- Chief Executive Officer

Right. 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 we 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 of 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.

Cory Carpenter -- J.P. Morgan -- Analyst

Great. Thank you and congrats on the quarter.

Vivek Shah -- Chief Executive Officer

Thanks, Cory.

Operator

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

Shyam Patil -- SIG -- Analyst

Hey, guys, congrats on the quarter and the outlook. 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 with the M&A environment, your pipeline, and kind of what you're seeing in terms of valuation expectations?

And then, 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 as for the year?

Vivek Shah -- Chief Executive Officer

Sure. So, let me just start maybe on the M&A, and then Scott can talk a little bit about--, 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 know this question exists for many is that, is 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 and 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 assets like RetailMeNot, there is a integration period. And so, those teams are probably more focused on that and possibly sourcing in those areas, or it could just be that sort of--, the distribution is a little bit random. But, we feel very good about it.

I've been asked about SPAC activity. 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 target, we're not seeing the SPAC pressure that I think others may be seeing.

Scott Turicchi -- President and Chief Financial Officer

And then, on the guidance question, Shyam. What I would say is, for Q2, remember that's a quarter, of course, that we did not own 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 and 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 and we even saw really coming into this year, tremendous opportunities to invest, particularly in the areas of cyber security, 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 the EBITDA to be somewhat in a similar range to Q1, because Q1 was very, very light by design on those investment activities. When we budgeted, they really began in Q2 and they then continue through the end of the year.

Shyam Patil -- SIG -- Analyst

Great. Thank you, guys.

Scott Turicchi -- President and Chief Financial Officer

Thank you.

Vivek Shah -- Chief Executive Officer

Thank you.

Operator

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

Will Power -- Baird -- Analyst

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 you can give any more color just on the key drivers there within the business and sustainability?

Scott Turicchi -- President and Chief Financial Officer

Well, I'm happy--, as 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. And 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 in Consensus, and you may recall, well, 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 with their usage to fully get up to speed. And so, that's what we're beginning to see.

This outperformance is driven by healthcare, it's driven by customers actually that we acquired as customers well over a year ago, while it is getting them fully onboarded 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-end customer base, we call the web channel, which historically we've said that's a low-single digit decliner; actually, had approximately 1% gain in Q1 of 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; that those two things were key drivers for the whole Cloud business.

And Vivek may want to comment on the other two areas, which would be our SMB enablement, really driven by Martech; and our cyber security.

Vivek Shah -- Chief Executive Officer

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 that's 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--. and 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've 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 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 had only one regret about Q1, it's 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.

Will Power -- Baird -- Analyst

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 looked like strong growth. How is the gaming console cycle kind of playing into that and how does that impact results through the balance of this year?

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 looked like strong growth. How is the gaming console cycle kind of playing into that and how does that impact results through the balance of this year?

Scott Turicchi -- President and Chief Financial Officer

Yeah, so, certainly, I think Q1 benefited at IGN from the strength relating to the console cycle in 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.

Will Power -- Baird -- Analyst

Okay, great. Thank you.

Operator

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

James Breen -- William Blair -- Analyst

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 as you've expanded Digital Media business and other verticals, [Indecipherable]. Thanks.

Vivek Shah -- Chief Executive Officer

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 Wi-Fi. 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.

Outside of that, I would say that generally speaking, the pandemic did accelerate in a positive way a bunch of trends in health, and in shopping, in particular, there were benefits 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 with intent 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 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.

James Breen -- William Blair -- Analyst

Great, thanks.

Vivek Shah -- Chief Executive Officer

Thank you.

Operator

Thank you. And the next question is coming from Saket Kalia from Barclays. Saket, your line is live.

Saket Kalia -- Barclays -- Analyst

Hey, guys, 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, roughly speaking? And maybe, how that might trend through the rest of the year?

Vivek Shah -- Chief Executive Officer

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 shifts in the marketplace from interest-based advertising to contextual advertising in premium environment absolutely does benefit us. I also think that our orientation in 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 served 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 of revenues, the marketer doesn't. The marketer is 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.

Scott Turicchi -- President and Chief Financial Officer

And I would add to that. 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.

Saket Kalia -- Barclays -- Analyst

Very helpful, thanks.

Operator

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

James Fish -- Piper Sandler -- Analyst

Hey guys, congrats on the record quarter.

Scott, maybe just help us bridge the guide here a little bit for the remainder of the year. Obviously, you guys extremely outperformed all of our expectations. But, does guide include the impact of the higher operational costs related to the spin-off 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 few quarters, given the Q1 upside just an aggregate. So, just you're being conservative or what are we missing here?

Scott Turicchi -- President and Chief Financial Officer

So, yeah, 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 the spin to be effectuated in Q3.

So, just to give you a sense of how the businesses operate combined. You may recall from the April 20 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 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, etc. 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 EBITDA, going back to those major categories that I referenced earlier in both the Cloud and Digital Media businesses. So, in the Cloud, you'll 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-CAC ratios in both the Martech business and the 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 is maybe a little bit conservative; on the EBITDA, look, it is our intention to be able to spend all 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 J2, as well as for the two companies when they split in terms of sustaining strong revenue growth going forward. So, I don't really want to see the EBITDAs flow through at the same degree they did in Q1.

Vivek Shah -- Chief Executive Officer

I might just add, Scott, two things to that. Number one, in terms of the dissynergy costs, those are annualized costs. So, certainly, the impact in 2021 should be prorated. So, in the context of our expense base, they are 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 is certainly opportunities, if and when that were to happen. But, I would most importantly reiterate that I think we focus 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, I think, the very exciting combination and an important signal.

James Fish -- Piper Sandler -- Analyst

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 [Phonetic]? And any sense for the timing, whether it's you guys are expecting, kind of Q2 or back half of the year?

Scott Turicchi -- President and Chief Financial Officer

Yeah, so let me just note 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 U.K. Voice, as well as some declines that have occurred in the B2B Backup. I would note that those metrics in the back include those assets in the various periods in which they were owned.

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 referenced. 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 counts will remain in our metrics until the asset is actually disposed.

James Fish -- Piper Sandler -- Analyst

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

Scott Turicchi -- President and Chief Financial Officer

Thank you.

Vivek Shah -- Chief Executive Officer

Thank you.

Operator

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

Jon Tanwanteng -- CJS Securities -- Analyst

Good morning, guys. Thank you for taking my questions and great quarter again.

Just--, and most of my questions have been answered. I just have two of 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 to faster-growing corporate side. I'm just wondering you have a number for the year? And then, how that may accelerate going forward, as that becomes bigger and bigger?

Scott Turicchi -- President and Chief Financial Officer

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

Jon Tanwanteng -- CJS Securities -- Analyst

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?

Vivek Shah -- Chief Executive Officer

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 on a hybrid basis. But, we have made some changes in the way we market over the last two to three quarters and 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 we should not accept the fact that it is a low-single-digit decline. I think--, in the context of a very large portfolio, you will 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 stand-alone 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.

Jon Tanwanteng -- CJS Securities -- Analyst

Got it. One more, if I could. I was just wondering if you're able to measure the impact of Do Not Track futures across the major mobile platforms either in the past quarter or in this quarter if that gets rolled out?

Vivek Shah -- Chief Executive Officer

Again, because it's not part of what we do in our monetization mix, we can't--, there is 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 that they are 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.

Jon Tanwanteng -- CJS Securities -- Analyst

Got it. Thank you. Appreciate it, guys.

Scott Turicchi -- President and Chief Financial Officer

Thank you.

Vivek Shah -- Chief Executive Officer

Thanks, Jon.

Operator

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.

Scott Turicchi -- President and Chief Financial Officer

Well, 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, that will 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 will be 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 that document. Once they declare it effective, then we can proceed with declaring 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 email us at investor@j2.com. Thank you.

Operator

[Operator Closing Remarks]

Duration: 48 minutes

Call participants:

Scott Turicchi -- President and Chief Financial Officer

Vivek Shah -- Chief Executive Officer

Cory Carpenter -- J.P. Morgan -- Analyst

Shyam Patil -- SIG -- Analyst

Will Power -- Baird -- Analyst

James Breen -- William Blair -- Analyst

Saket Kalia -- Barclays -- Analyst

James Fish -- Piper Sandler -- Analyst

Jon Tanwanteng -- CJS Securities -- Analyst

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