EARNINGS CALL PRESENTATION Fiscal Year 2018 Q3 NYSE: ZAYO @ZayoGroup
Safe Harbor Information contained in this supplemental 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 on Form 10-K and most recent Form 10-Q filed with the Securities and Exchange Commission. We caution you not to place undue reliance on these forward-looking statements, which speak only as of their respective dates. We undertake no obligation to publicly update or revise forward-looking statements to reflect events or circumstances after releasing this supplemental information or to reflect the occurrence of unanticipated events, except as required by law. In addition to this presentation and our filings with the SEC, the Company provides a glossary of terms used throughout and a supplemental earnings presentation, both of which are available under the investor section of the Company’s website at http://www.zayo.com/investors. The supplemental earnings presentation includes definitions and tables reconciling non-GAAP measures used in this presentation, including the quantitative reconciliation of Adjusted EBITDA to net income/(loss) and quantitative reconciliations of adjusted unlevered free cash flow and levered free cash flow, each to net cash provided by operating activities. 2
DAN CARUSO Chairman & Chief Executive Officer
EXCLUDES ALLSTREAM Mar18q Highlights Record $9.5M Net Bookings and record $8.1M Gross Installs Churn declined slightly to $5.8M / 1.1% Net Installs at $2.3M imply a 5% growth rate Revenue grew 7% annualized 1 EBITDA declined $0.9M 1 QoQ due to higher Dec17q one time items and seasonal factors EBITDA margin of 55% , and aUFCF of 27% Recent high quality tuck-in M&A transactions: Spread Networks, Optic Zoo, Neutral Path Meaningful progress in evaluation of potential REIT conversion Planned Scott Rice divestiture demonstrates continued progress with Allstream separation 1 Normalized for $7.4M one-time positive revenue impact, and $5M one-time positive adjusted EBITDA impact, from Ciber settlement in Dec17q 4
EXCLUDES ALLSTREAM Nearing targeted 6-8% growth rate Net Installs Target Net Installs at $2.3M implied 5% growth rate $9.5M Net Bookings surpassed $8.5M 8% Growth = $3.4m target 6% Growth = $2.7m $8.1M Gross Installs was close to $8.5M target Churn at $5.8M (1.1%) remained elevated relative to $5.5M target 5
EXCLUDES ALLSTREAM Transition to Verticals occurred during quarter Global Mega Verticals 1 Finance & Carrier Professional Sales executive has global responsibility for 48% Services and QBHC dedicated to each Vertical 15% cluster Improved understanding of opportunities in Cloud, Media, Content each Vertical Software & & Commerce Infrastructure 14% Increased credibility and better 13% conversations with customers Public, Health & Utilities 10% 1 Percentages correspond to ending MRR & MAR by Vertical 6 6 6
EXCLUDES ALLSTREAM Sales Channel investment “baking in the oven” QBHC Sales leadership short tenure, as ~50% are recently promoted or new to Zayo ~45% of QBHC are <6 months into roles Most costs in run rate, but full productivity requires additional quarters 7 7 7
EXCLUDES ALLSTREAM Fiber Solutions momentum growing Fiber Solutions Net Installs at $1.5M imply a 9% growth rate Net Bookings of $3.8M surpassed Gross Installs of $2.6M , implying momentum to Gross Installs and Net Installs EBITDA margin of 78% , and aUFCF of $106.2M Churn was 0.5% 8
EXCLUDES ALLSTREAM Regional execution is enabling scaling of Fiber Solutions Jack Waters Each region led by business President, Fiber Solutions executive, with ownership of value Central creation Mountain Direct responsibility for product, engineering, construction, and operations Business development assists East Vertical team in exploiting opportunities in each fiber market Growing business development resources by ~40% West South Europe 9
EXCLUDES ALLSTREAM Sales investments and strong market demand driving Bookings growth Net New Sales (Bookings) Record Bookings of $9.5M aided by large wireless deal and E-Rate wins Zayo is seeing broad-based demand from all customer Verticals Early signs of success for the sales investments and Vertical strategy 10
EXCLUDES ALLSTREAM Record: Bookings <12 Month Payback Net New Sales (Bookings) Stratification $8.5m Record Positive IRR Bookings demonstrate leveraging of breadth and depth of fiber network 11 11
EXCLUDES ALLSTREAM Large project wins with attractive return profiles drove longer payback Contract Value vs. CapEx on Bookings Total Bookings contract value 2.7x the associated committed capex Average payback of 20 months 12 12
EXCLUDES ALLSTREAM Momentum in E-Rate solutions Markets of New E-Rate Wins 1 Selected by 20+ school districts for E-Rate solutions Includes both dark- and lit-fiber solutions Provides schools and libraries with dedicated, high-bandwidth connectivity Double the 2017 E-Rate wins Significant win for Zayo’s Public, Health & Utilities Vertical 1 Markets Inclusive of E-Rate wins announced 4/03/18 13
EXCLUDES ALLSTREAM Large mobile infrastructure win Markets of Large Mobile Infrastructure Win Zayo to provide dark fiber backhaul in 30+ markets across 21 states Encompasses thousands of macro towers Deal exhibits second-tenant economics, but also provides for construction of hundreds of route miles of fiber 14
EXCLUDES ALLSTREAM Pace of Gross Installs increased Gross Installations $8.5m Pipeline & Bookings are sufficient to remain on upward trend Attaining $8.5M threshold is a ~5% increase from Mar18q $8.1M Gross Installs 15 15
EXCLUDES ALLSTREAM Modest churn improvement in Mar18q Churn 1 Churn declined modestly to 1.1% , but still above target level $5.5m 1 Mar17q includes only one month of ELI CI 16 16
EXCLUDES ALLSTREAM Net Installs on cusp of 6-8% growth Net Installations Net Installs were $2.3M ---------$3.4m required for 8% implied growth Anticipate continued momentum in Jun18q ---------$2.7m required for 6% implied growth 1 Implied by the current quarter pace of net installs, calculated as Net Installs annualized ($2.3M*4 = $9.2M), divided by the beginning quarter run-rate $172.2M=5%) and excludes the impact of the Spread and Optic Zoo 17 acquisitions 17
EXCLUDES ALLSTREAM Revenue and EBITDA Revenue Revenue grew 7% QoQ annualized 1 ; 5% organic Despite revenue growth, EBITDA was aEBITDA slightly down 1 Excludes $7.4M one-time revenue impact and $5M one-time EBITDA impact from Ciber bankruptcy settlement 18 18
EXCLUDES ALLSTREAM Cash Flow Capital Expenditures Continued growth in aUFCF and LFCF margin LFCF aUFCF 19 19
EXCLUDES ALLSTREAM Is 8-10% CI growth rate viable? Net Installs As Sales Channel and Fiber Business 10% Growth = $4.4m development investments mature, Net Viable? Bookings are expected to rise 8% Growth = $3.4m As Revenue Retention initiatives take root, churn rate is expected to decline 20 20
EXCLUDES ALLSTREAM Requires continued momentum across leading indicators Net Installs Increase Bookings to $9.3M Sep17q-Mar18q averaged Decrease Churn to $5.5M $8.4M 21 21
EXCLUDES ALLSTREAM Revenue Retention suggests churn upside Net Promoter Score launched in late 2017, current score is 23 Analytical assessment intensified over past few months, revealing: 40-60% of churn is addressable ● Customers generally positive about ● products and service level (with some gaps) Systematic engagement with customers, ● covering revenue retention in addition to new opportunities, is primary opportunity to reduce churn 22 22
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