EARNINGS CALL PRESENTATION Fiscal Year 2019 Q1 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 and Chief Executive Officer
Sep18q highlights Lower Bookings and Installs resulted in lower implied growth $7.3M Net Bookings and $7.6M Gross Installs ● Churn at $6.5M / 1.2% ● Net Installs at $1.0M imply a 2% growth rate ● Revenue and EBITDA growth declined due to nonrecurring items and FX Revenue declined -7% ( 0% recurring Revenue growth, 2% in constant currency) 1 ● EBITDA declined -1% ( 1% recurring EBITDA growth) 1 ● EBITDA margin of 56% , and aUFCF of 22% LFCF positive at $55M 1 Growth rates presented are QoQ annualized growth and normalize for the adoption of the new accounting standard, Revenue from Contracts with Customers EXCLUDES ALLSTREAM 4
Zayo’s History Pioneer of communications infrastructure 45 acquisitions since 2007 totaling ~$6.7B 1 1 As of September 30, 2018 5
Zayo Today Largest, independent, international provider of communications infrastructure OUR ASSETS OUR EXPERTISE PRODUCT MIX - % OF REVENUE* 1.2k 12.2M 36k 41% Fiber Solutions ON-NET DATA CENTERS FIBER MILES BUILDINGS 31% Transport 3.7k 50 15% Enterprise Networks EMPLOYEES ZAYO DATA CENTERS 11% Colocation ~$2.6B revenue $1.1B invested equity since 2007 inception OUR TRACK RECORD NYSE: $ ~$1.3B adjusted EBITDA $8.6B equity value today; ~8x return ZAYO 45 acquisitions for ~$6.7B Oct. 2014 * Excludes Allstream 6
Organic execution across the diverse platform has been the focus of recent quarters Several initiatives taken to improve execution, including: ● Transition to post-IPO management team ○ Verticalization and growth of the sales force ○ Regionalization of the Fiber Solutions business ○ Confident these are right long-term initiatives ● Sep18q results decreased conviction that initiatives will yield ● 6-8% consolidated growth in near term Contributed to evaluation of whether execution might be ● enhanced by reducing the overall complexity of Zayo’s business 7 7 Proprietary and confidential 7
Zayo is currently four autonomous business segments with shared sales and corporate infrastructure + a separated Allstream Communications Allstream Infrastructure Fiber Enterprise Transport zColo Solutions Networks 5 Fiber Regions Waves zColo WAN / LAN Wholesale Voice SONET Cloud Unified Comm / VoIP IP Transit DIA / Security Data Services Ethernet Media Networks Sales Customer Service & IT 8 8
Separate Zayo into two public companies through a spin-off of Enterprise Co 1 Zayo Infra Co Enterprise Co Fiber Solutions Transport Enterprise Carrier 5 Fiber Regions Waves WAN / IP VPN Ethernet Tails IP Transit DIA / Security Wholesale Voice zColo Media Networks Cloud SONET Sales Sales Customer Service & IT Customer Service & IT 1 Consummation of spin is subject to regulatory and Board approval 9 9
Both businesses will benefit from focus and simplification Zayo Infra Co Enterprise Co Long-term Master Strong product portfolio and Customer Unique fiber-focused Agreement customer base centered on infrastructure provider higher bandwidth with deep, dense networks connectivity connecting and broad geographic enterprise locations, reach Zayo Infra Co might including to public cloud and maintain 9.9% ownership SaaS providers 10 10
Rationale Reduces complexity, enables more focused execution within each business ● Addresses Allows for increased innovation and management control and accountability ● Scope/Scale Further formalizes existing inter-company relationships into arms-length ● Paradox agreements Zayo Infra Co likely to trade at higher multiple, potentially lower cost of debt ● Improves cost Creates stronger currency for M&A of capital ● Zayo Infra Co consists solely of Fiber, Transport and Colo businesses ● Improves path Resulting REIT is more clear, flexible and compelling ● to REIT Strong industry precedents; Numerous REIT peers ● Investors able to value each business separately based on strength of assets, ● Unleashes performance of business, and long-term growth prospects latent value Increases degrees of freedom for further consolidation ● 11 11
Zayo Infra Co is Compelling Zayo Infra Co Leading communications infrastructure asset – ● strong competitive moat ($1.7BN Revenue 1 ) Leadership Global fiber footprint with unparalleled Dan Caruso, Chairman and CEO ● ● metro/regional depth and International reach Percent of Revenue Powerful secular trends provide multiple growth ● drivers for bandwidth Diversified, blue-chip customer base comprised of ● the largest and most sophisticated users of communications infrastructure Stable, recurring revenue model yields attractive, ● predictable cash flows 1 Post-spin revenue reflects the reclassification of transfer pricing to third party revenue 12 12
Enterprise Co unleashed to pursue high bandwidth services strategy Enterprise Co Significant scale with strong product portfolio ● ($1.0B Revenue 1 ) and geographic coverage Leadership Mike Strople - COO ● Solid, long-tenured customer base ● Tyler Coates - SVP Enterprise ● Dan Caruso, Chairman ● Long-term Zayo relationship provides certainty ● on network access and cost Percent of Revenue Well-diversified customer roster of 50,000+ ● enterprises – only 17% of revenue from Top 10 Complementary wholesale enterprise services ● through carriers Balance between growth-focused and strong ● cash flow generating businesses enables organic and inorganic investment for growth 1 Post-spin revenue reflects the reclassification of transfer pricing to third party revenue 13 13
Enterprise Co consists of two divisions Enterprise Co Enterprise Division Carrier Division ~70% of New Service Co ~30% of New Service Co Products Products SD-WAN/IP VPN Ethernet Tails DIA Wholesale Voice Unified Comm SONET Customers Customers 50,000+ small, medium, Leading wireline, wireless, large enterprises and other regional carriers 14 14 Product Groups Fiber Solutions ● Spread Networks ● Wavelengths ● IP Transit ● Media Networks ● Sonet? ● Global Reach ● zColo ●
Pro forma financial profile Zayo WholeCo Enterprise Co Zayo Infra Co ($bn) $1.0 1 $1.7 1 Revenue (LQA) $2.6 EBITDA margin (%) ~50% ~30% ~55% Adjusted UFCF % 20% ~20% ~20% Leverage 4.4x 2.0x - 4.0x 4.0x – 5.0x+ Illustrative 1 Post-spin revenue reflects the reclassification of transfer pricing to third party revenue 15 15
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