INVESTOR RELATIONS 28 January Zayo Reporting Update Call

Transcription

1 INVESTOR RELATIONS 28 January 2016 Zayo Reporting Update Call

2 ZAYO GROUP SAFE HARBOR Information contained in this presentation that is not historical by nature constitutes forward-looking statements which can be identified by the use of forward-looking terminology such as believes, expects, plans, intends, estimates, projects, could, may, will, should, or anticipates or the negatives thereof, other variations thereon or comparable terminology, or by discussions of strategy. No assurance can be given that future results expressed or implied by the forward-looking statements will be achieved and actual results may differ materially from those contemplated by the forward-looking statements. Such statements are based on management s current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, those relating to Zayo Group Holdings, Inc. s ( the Company or ZGH ) financial and operating prospects, current economic trends, future opportunities, ability to retain existing customers and attract new ones, outlook of customers, and strength of competition and pricing. In addition, there is risk and uncertainty in the Company s acquisition strategy including our ability to integrate acquired companies and assets. Specifically there is a risk associated with our recent acquisitions, and the benefits thereof, including financial and operating results and synergy benefits that may be realized from these acquisitions and the timeframe for realizing these benefits. Other factors and risks that may affect our business and future financial results are detailed in the Risk Factors section of our Annual Report or Form 10-K filed with the Securities and Exchange Commission ( SEC ) on September 18, We caution you not to place undue reliance on these forward-looking statements, which speak onlyas oftheirrespective dates. We undertake no obligationto publiclyupdate or revise forward-looking statements to reflect events or circumstances after releasing this supplemental information or to reflect the occurrence ofunanticipated events, exceptasrequired bylaw. 2

3 REPORTING UPDATE Agenda Reminder on New Segments Announcement On the November 10, 2015 Earnings Conference Call, the Company announced four new reporting segments: Zayo Dark Fiber Solutions, Zayo Network Connectivity, Zayo Colocation and Cloud, and Other 8-K Filed With Re-cast Segment Financials & Metrics On January 26, 2016, the Company filed an 8-K with the Securities and Exchange Commission that included re-cast historical financial and operating metrics under the new reporting segment structure Allstream Update and Reporting Details Zayo announced the close of the Allstream acquisition on January 15, Zayo will be reporting Allstream as a new single and separate reporting segment through the Jun-16 quarter (Fiscal Year 2016)

4 Review: Reporting Segment Changes Reorganized strategic & reporting segments announced on November 10, 2015 prior reporting segments Physical Infrastructure Cloud & Connectivity strategic product groups no change Metro & Intercity Dark Fiber Mobile Infrastructure Group zcolo Cloud Ethernet IP Waves SONET new reporting segments starting FY16Q2 Dark Fiber Solutions Dave Jones Colocation & Cloud Infrastructure Greg Friedman Network Connectivity Max Clauson co-coo Chris Morley manages the 3 reporting segments co-coo Matt Erickson manages Global Sales and Customer Success 1 1 Includes sales, solutions engineering, strategic markets and alliances, IT, tranzact, customer service and security 4

5 Zayo Dark Fiber Solutions Segment Revenue Stratification & Operational Data $200 $175 $150 Revenue Stratification 1 $127.4 $129.7 $133.5 $135.3 $135.0 $6.4 $7.0 $7.6 $6.7 $3.6 $114.4 $102.7 $105.5 $13.3 $13.4 $14.3 $14.9 $15.7 $5.0 $2.5 $ $11.6 $10.5 $ $89.6 $91.6 $97.5 $107.4 $109.0 $111.3 $113.4 $115.4 MRR and MAR $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 0 $2,565 $310 Net New Sales (Bookings) thousands Contract Value = $4,500 $434M$240M$326M$439M$101M$429M$392M6M $4,000 $1,917 $325 $2,442 $2,488 $327 $531 $1,450 $212 $2,818 $2,619 $546 $484 $1,998 $330 $2,255 $1,592 $2,115 $1,956 $1,239 $2,272 $2,136 $1,668 $200 $175 $150 Estimated Capital and Upfront Expenditures associated with Net New Sales (Bookings) less Upfront Charges $39 $35 $36 $134 $9 $157 $141 $10 MRR Usage MAR Other Revenue Net Sales - MRR Net Sales - MAR MRR and MAR thousands $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 0 Gross Installations $1,555 $1,618 $1,914 $1,907 $1,960 $1,914 $1,816 $1,672 MRR and MAR thousands (0) ($1,000) ($597) ($725) ($818) ($900) ($945) ($993) ($836) ($761) ($1,500) ($2,000) ($2,500) ($3,000) ($3,500) ($4,000) ($4,500) Churn % = 1 Zayo Dark Fiber Solutions annualized QoQ recurring revenue growth was 9% in F1Q16 Churn Processed - 0.9% - 0.6% - 0.7% - 0.8% - 0.7% - 0.8% - 0.7% - 0.6% MRR and MAR thousands $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 0 Net Installations $1,021 $1,189 $1,141 $962 $824 $837 $1,153 $655 5

6 Zayo Dark Fiber Solutions Segment Cash Flow Stratification Adjusted EBITDA 69% 69% 68% 67% 69% 69% 72% 72% Purchases of Property and Equipment 40% 45% 44% 46% 54% 55% 58% 69% Net Capital 1 19% - 14% 4% 16% 27% 24% 41% 40% $20 ($14) $4 $20 $35 $32 $56 $54 $71 $73 $77 $85 $90 $93 $97 $97 $41 $48 $58 $70 $73 $79 $94 () Unlevered Free Cash Flow (FCF) 2 29% 24% 24% 21% 15% 15% 13% 2% Adj Unlevered FCF 3 40% 72% 54% 40% 31% 35% 19% 20% $30 $27 $27 $20 $20 $18 $3 $41 $76 $61 $52 $41 $46 $26 $26 1 Net Capital is equal to Cash Outflows for Purchases of Property and Equipment less Additions to Deferred Revenue 2 Unlevered Free Cash Flow is equal to Adjusted EBITDA less Cash Outflows for Purchases of Property and Equipment 3 Adjusted Unlevered Free Cash Flow is equal to Adjusted EBITDA less Net Capital less Monthly Amortized Revenue 6

7 Zayo Colocation and Cloud Segment Revenue Stratification & Operational Data Revenue Stratification $80 $57.6 $58.3 $ $2.2 $2.2 $38.5 $40 $ $1.3 $18.2 $19.6 $21.5 $26.9 $ $ $16.8 $18.4 $ $34.9 $54.5 $55.4 (.1) MRR and MAR $1,250 $1, $406 $420 $29 $22 Net New Sales (Bookings) thousands Contract Value = $1,500 $16M $13M $17M $15M $19M $31M $23M $30M $462 $48 $489 $37 $570 $35 $932 $80 $882 $918 $51 $72 $80 $60 $40 $20 Estimated Capital and Upfront Expenditures associated with Net New Sales (Bookings) less Upfront Charges ($20) $377 $397 $415 $452 $536 $852 $831 $847 $16 $5 $7 $2 $18 $31 $13 $14 MRR Usage MAR Other Revenue Net Sales - MRR Net Sales - MAR thousands Gross Installations thousands Churn Processed thousands Net Installations $1,500 $1,500 $1,250 $1,189 $1,069 (0) ($184) ($216) ($237) ($301) ($262) $1,250 MRR and MAR $1, $468 $470 $443 $517 $489 $680 MRR and MAR (0) (0) ($1,000) ($475) ($613) ($700) MRR and MAR $1, $594 $489 0 ($1,250) ($1,500) Churn % = - 1.1% - 1.2% - 1.2% - 1.2% - 1.0% - 1.3% - 1.3% - 1.1% 0 $284 4 $205 $216 $227 $67 7

8 Zayo Colocation and Cloud Segment Cash Flow Stratification $80 Adjusted EBITDA 51% 49% 50% 50% 50% 51% 48% 49% Purchases of Property and Equipment $80 32% 48% 47% 40% 27% 26% 47% 33% $80 Net Capital 1 31% 46% 44% 44% 24% 30% 46% 30% $60 $60 $60 $40 $40 $40 $20 $20 $20 $9 $10 $11 $13 $13 $20 $28 $28 $6 $9 $10 $11 $7 $10 $27 $19 $6 $9 $10 $12 $6 $12 $26 $18 Unlevered Free Cash Flow (FCF) 2 $80 19% 1% 3% 9% 23% 24% 1% 16% Adj Unlevered FCF 3 $80 18% 1% 4% 4% 24% 19% 1% 17% $60 $60 $40 $40 $20 $20 $3 $1 $2 $6 $9 $1 $9 $3 $1 $1 $7 $7 $1 $10 1 Net Capital is equal to Cash Outflows for Purchases of Property and Equipment less Additions to Deferred Revenue 2 Unlevered Free Cash Flow is equal to Adjusted EBITDA less Cash Outflows for Purchases of Property and Equipment 3 Adjusted Unlevered Free Cash Flow is equal to Adjusted EBITDA less Net Capital less Monthly Amortized Revenue 8

9 Zayo Network Connectivity Segment Revenue Stratification & Operational Data $200 $175 $150 Revenue Stratification $1.9 $1.9 $3.2 $1.4 $2.2 $151.3 $151.7 $153.8 $160.2 $161.7 $163.0 $167.0 $163.0 $3.4 $3.4 $3.4 $3.5 $3.8 $3.5 $2.6 $3.3 $1.8 $2.4 $2.2 $1.9 $1.8 $2.3 $2.6 $2.9 $1.2 $1.7 $1.4 $144.2 $144.8 $146.1 $153.1 $154.0 $154.2 $156.3 $159.2 MRR Usage MAR Other Revenue MRR and MAR $2,000 $1,500 $1,000 0 Net New Sales (Bookings) thousands Contract Value = $4,500 $80M M$150M $90M $106M$103MM$119M $4,000 $3,423 $3,500 $3,194 $3,130 $3,220 $3,255 $164 $162 $177 $95 $107 $3,000 $2,686 $2,799 $2,792 $76 $94 $57 $2,500 $2,610 $2,705 $2,968 $2,735 $3,017 $3,125 $3,148 $3,259 Net Sales - MRR Net Sales - MAR $200 $175 $150 Estimated Capital and Upfront Expenditures associated with Net New Sales (Bookings) less Upfront Charges $27 $36 $41 $32 $41 $35 $35 $40 MRR and MAR thousands $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 0 Gross Installations $3,307 $3,381 $2,961 $2,899 $2,942 $3,017 $2,988 $2,695 MRR and MAR thousands (0) ($1,000) ($1,500) ($2,000) ($2,500) ($3,000) ($3,500) ($4,000) ($4,500) Churn Processed ($2,263) ($2,461) ($2,669) ($2,452) ($2,458) ($2,308) ($2,587)($2,595) Churn % = - 1.7% - 1.8% - 1.6% - 1.6% - 1.6% - 1.6% - 1.4% - 1.4% MRR and MAR thousands $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 0 $233 $292 Net Installations $447 $484 $430 $393 $1,044 $1,073 9

10 Zayo Network Connectivity Segment Cash Flow Stratification Adjusted EBITDA 54% 54% 53% 52% 53% 53% 52% 53% Purchases of Property and Equipment 27% 22% 23% 29% 32% 29% 30% 28% Net Capital 1 26% 20% 21% 25% 29% 29% 29% 22% $81 $82 $82 $83 $86 $86 $85 $89 $42 $34 $35 $46 $53 $47 $49 $47 $40 $31 $32 $40 $47 $47 $48 $38 Unlevered Free Cash Flow (FCF) 2 26% 32% 30% 23% 20% 24% 22% 25% Adj Unlevered FCF 3 26% 32% 30% 25% 22% 22% 21% 28% $40 $49 $47 $37 $33 $39 $36 $42 $39 $49 $46 $40 $35 $35 $34 $47 1 Net Capital is equal to Cash Outflows for Purchases of Property and Equipment less Additions to Deferred Revenue 2 Unlevered Free Cash Flow is equal to Adjusted EBITDA less Cash Outflows for Purchases of Property and Equipment 3 Adjusted Unlevered Free Cash Flow is equal to Adjusted EBITDA less Net Capital less Monthly Amortized Revenue 10

11 ALLSTREAM ACQUISITION Allstream Acquisition Closed & Reporting Update >9,000 km metro fiber network concentrated in Canada s top five metropolitan markets (Toronto, Montreal, Vancouver, Ottawa, Calgary) Connect approximately 3,300 on-net buildings ~20,000 km long-haul fiber network connecting all major Canadian markets and key U.S. network access points Operates colocation space in Toronto, Montreal & Vancouver Acquisition closed on January 15, 2016 Zayo will report Allstream as a single separate segment in the Mar-16 and Jun-16 fiscal quarters (through FY 2016) Starting in the Sep-16 quarter (FY 2017), the Company plans to separately report Zayo Canada (the Canadian Communications Infrastructure business) and consolidate financial and operating metrics into the Dark Fiber Solutions, Network Connectivity and Colo & Cloud segments The remaining Allstream business will continue to be reported under the Allstream segment 11

12 Q & A

13 Thank You

14 Appendix: Reconciliations 14

15 Zayo Dark Fiber Solutions Segment Financial Data ($ in ) Financial Data Three Months Ended September 30, December 31, March 31, June 30, September 30, Revenue $127.4 $129.7 $133.5 $135.3 $135.0 Annualized revenue growth 45% 7% 12% 6% - 1% Pro- forma annualized revenue growth 1 18% 9% Operating income/(loss) ($35.4) $35.7 $ $23.4 Adjusted EBITDA $85.2 $89.6 $92.6 $96.8 $96.6 Annualized Adjusted EBITDA growth 40% 21% 14% 18% - 1% Pro- forma annualized Adjusted EBITDA growth 1 21% 12% Adjusted EBITDA margin 67% 69% 69% 72% 72% 2 Purchases of property and equipment $58.1 $69.7 $73.0 $78.9 $93.5 Unlevered Free Cash Flow $27.0 $19.9 $19.6 $17.9 $3.1 Unlevered Free Cash Flow margin 21% 15% 15% 13% 2% Adjusted Unlevered Free Cash Flow $51.5 $40.8 $46.2 $26.0 $26.4 Adj Unlevered Free Cash Flow margin 40% 31% 35% 19% 20% 1 Pro- forma annualized growth for revenue and Adjusted EBITDA are calculated as if the acquisitions occurred on the first day of the quarter preceding the respective quarter in which the acquisitions closed 2 Zayo Dark Fiber Solutions annualized QoQ recurring revenue growth was 9% in F1Q16 15

16 Zayo Colocation and Cloud Segment Financial Data ($ in ) Financial Data Three Months Ended September 30, December 31, March 31, June 30, September 30, Revenue $26.9 $27.0 $38.5 $57.6 $58.3 Annualized revenue growth 100% 2% 171% 198% 5% Pro- forma annualized revenue growth 1 13% 7% 17% Operating income/(loss) $1.4 $6.5 $2.0 (.5) ($5.8) Adjusted EBITDA $13.3 $13.4 $19.5 $27.8 $28.4 Annualized Adjusted EBITDA growth 94% 3% 184% 169% 8% Pro- forma annualized Adjusted EBITDA growth 1 29% 19% 4% Adjusted EBITDA margin 50% 50% 51% 48% 49% Purchases of property and equipment $10.9 $7.3 $10.2 $27.0 $19.0 Unlevered Free Cash Flow $2.4 $6.1 $9.3.8 $9.4 Unlevered Free Cash Flow margin 9% 23% 24% 1% 16% Adjusted Unlevered Free Cash Flow $1.1 $6.5 $7.3.7 $10.0 Adj Unlevered Free Cash Flow margin 4% 24% 19% 1% 17% 1 Pro- forma annualized growth for revenue and Adjusted EBITDA are calculated as if the acquisitions occurred on the first day of the quarter preceding the respective quarter in which the acquisitions closed 16

17 Zayo Network Connectivity Segment Financial Data ($ in ) Financial Data Three Months Ended September 30, December 31, March 31, June 30, September 30, Revenue $160.2 $161.7 $163.0 $163.0 $167.0 Annualized revenue growth 17% 4% 3% 0% 10% Pro- forma annualized revenue growth 1 3% 2% Operating income/(loss) ($4.5) $53.8 $33.8 $28.6 $33.3 Adjusted EBITDA $83.1 $85.6 $85.7 $85.0 $88.7 Annualized Adjusted EBITDA growth 8% 11% 1% - 3% 17% Pro- forma annualized Adjusted EBITDA growth 1-1% - 1% Adjusted EBITDA margin 52% 53% 53% 52% 53% Purchases of property and equipment $46.3 $52.5 $46.9 $49.4 $46.7 Unlevered Free Cash Flow $36.8 $33.1 $38.7 $35.6 $42.0 Unlevered Free Cash Flow margin 23% 20% 24% 22% 25% Adjusted Unlevered Free Cash Flow $39.6 $35.4 $35.2 $34.0 $47.4 Adj Unlevered Free Cash Flow margin 25% 22% 22% 21% 28% 1 Pro- forma annualized growth for revenue and Adjusted EBITDA are calculated as if the acquisitions occurred on the first day of the quarter preceding the respective quarter in which the acquisitions closed 17

18 Zayo Other Segment Financial Data Financial Data ($ in ) Three Months Ended September 30, December 31, March 31, June 30, September 30, Revenue $6.1 $5.5 $5.7 $6.0 $6.5 Annualized revenue growth - 109% - 43% 20% 24% 31% Pro- forma annualized revenue growth 1-125% Operating income $1.3 $ $1.2 Adjusted EBITDA $1.4 $1.1 $1.2 $1.3 $1.7 Annualized Adjusted EBITDA growth - 175% - 78% - 22% 35% 148% Pro- forma annualized Adjusted EBITDA growth 1-172% Adjusted EBITDA margin 22% 20% 20% 21% 27% Purchases of property and equipment Unlevered Free Cash Flow $1.4 $1.1 $1.2 $1.3 $1.7 Unlevered Free Cash Flow margin 22% 20% 20% 21% 27% Adjusted Unlevered Free Cash Flow $1.3 $1.1 $1.3 $1.2 $1.7 Adj Unlevered Free Cash Flow margin 21% 20% 23% 20% 27% 1 Pro- forma annualized growth for revenue and Adjusted EBITDA are calculated as if the acquisitions occurred on the first day of the quarter preceding the respective quarter in which the acquisitions closed 18

19 Segment Financial Data Rollup Segment Data Rollup ($ in ) Three Months Ended September 30, 2015 Dark Fiber Colocation & Cloud Network Solutions Dark Fiber Zayo Infrastructure Colocation & Cloud Zayo Zayo Zayo Connectivity Network Zayo Zayo Mobile Zayo Dark Segment Solutions Cloud Segment Infrastructure Wavelength Zayo SONET Ethernet IP Segment Connectivity Professional Other Zayo Group Infrastructure Fiber Elimination Segment zcolo Services Elimination Segment Services Services Services Services Elimination Segment Services Other Segment Holdings Revenue.3 $ $135.0 $48.7 $9.6.0 $58.3 $70.9 $23.8 $41.4 $ $167.0 $4.7 $1.7 $6.5 $366.8 Adjusted EBITDA $16.9 $79.7 $96.6 $24.0 $4.4 $28.4 $34.1 $13.0 $24.3 $17.3 $88.7 $1.2.5 $1.7 $215.4 Adjusted EBITDA margin 67% 73% 72% 49% 45% 49% 48% 55% 59% 56% 53% 26% 28% 27% 59% 19

20 Invested Capital Ratio by Reporting Segment Invested Capital ($ in ) Three Months Ended September 30, 2015 Dark Fiber Solutions Colocation and Cloud Network Connnectivity Other Corporate / Intercompany Elimination Zayo Group Holdings Vested Stock- Based Compensation of Equity Awards Other Additional Paid- In Capital Total Additional paid- in capital Less net assests of discontinued operations Capital lease obligations Debt Less cash balance $309.4 $45.1 $ $7.3 $641.9 $289.3 $275.4 $ $355.7 $1,115.4 $598.7 $320.5 $ $363.0 $1, , , (0.0) 3,667.7 (10.3) (1.1) (26.0) (3.1) (305.1) (345.7) Total Invested Capital $2,448.5 $964.0 $1,622.7 $22.7 $57.9 $5,

21 Segment Data Reconciliation: Net (Loss)/Earnings to Adjusted EBITDA Segment Data Reconciliation 1 ($ in ) Zayo Dark Fiber Solutions Zayo Network Connectivity Three Months Ended September 30, 2015 Zayo Colocation and Cloud Infrastructure Zayo Other Corporate / Intercompany Elimination Zayo Group Holdings Net earnings/(loss) ($2.2) $15.9 ($15.8) $1.2 ($14.3) ($15.2) Interest expense Provision for income taxes Depreciation and amortization expense Stock- based compensation Unrealized foreign currency gain/(loss) on intercompany loans 0.0 (0.1) Non- cash loss on investments Adjusted EBITDA $96.6 $88.7 $28.4 $1.7.0 $ A reconciliation of previous quarters legacy segment information can be found in our historical earnings supplements found on our website at earnings- release 21

22 Segment Data Reconciliation: Net (Loss)/Earnings to Adjusted EBITDA Segment Data Reconciliation ($ in ) Zayo Dark Fiber Solutions Zayo Network Connectivity Three Months Ended June 30, 2015 Zayo Colocation and Cloud Infrastructure Zayo Other Corporate / Intercompany Elimination Net earnings/(loss) ($5.2) $7.2 ($9.9) $1.1 $11.9 $5.1 Interest expense Benefit/(provision) for income taxes (0.4) Depreciation and amortization expense Stock- based compensation Loss on extinguishment of debt Unrealized foreign currency gain/(loss) on intercompany loans (16.9) (16.8) Non- cash loss on investments Zayo Group Holdings Adjusted EBITDA $96.8 $85.0 $27.8 $1.3.0 $

23 Segment Data Reconciliation: Net (Loss)/Earnings to Adjusted EBITDA Segment Data Reconciliation ($ in ) Three Months Ended March 31, 2015 Zayo Dark Fiber Solutions Zayo Network Connectivity Zayo Colocation and Cloud Infrastructure Zayo Other Corporate / Intercompany Elimination Zayo Group Holdings Net earnings/(loss) ($42.7) ($9.5) ($7.3).6 $5.2 ($53.7) Interest expense Benefit for income taxes (18.4) (18.4) Depreciation and amortization expense Transaction costs Stock- based compensation Loss on extinguishment of debt Unrealized foreign currency gain/(loss) on intercompany loans Adjusted EBITDA $92.6 $85.7 $19.5 $1.2.0 $

24 Segment Data Reconciliation: Net (Loss)/Earnings to Adjusted EBITDA Segment Data Reconciliation ($ in ) Three Months Ended December 31, 2014 Zayo Dark Fiber Solutions Zayo Network Connectivity Zayo Colocation and Cloud Infrastructure Zayo Other Corporate / Intercompany Elimination Zayo Group Holdings Net earnings/(loss) ($13.2) $21.1 $3.5 $1.2 ($8.8) $3.8 Interest expense Benefit for income taxes (4.4) (4.4) Depreciation and amortization expense Transaction costs Stock- based compensation (2.4) (3.1) 0.0 (0.5) 0.0 (6.0) Loss on extinguishment of debt Foreign currency gain on intercompany loans Non- cash loss on investments Adjusted EBITDA $89.6 $85.6 $13.4 $1.1.0 $

25 Segment Data Reconciliation: Net (Loss)/Earnings to Adjusted EBITDA Segment Data Reconciliation ($ in ) Zayo Dark Fiber Solutions Three Months Ended September 30, 2014 Zayo Network Connectivity Zayo Colocation and Cloud Infrastructure Zayo Other Corporate / Intercompany Elimination Zayo Group Holdings Net loss ($62.5) ($22.0) ($1.0).9 (.9) ($110.5) Interest expense Provision for income taxes Depreciation and amortization expense Transaction costs Stock- based compensation (0.4) Foreign currency gain on intercompany loans Adjusted EBITDA $85.2 $83.1 $13.3 $1.4.0 $