EARNINGS CALL PRESENTATION Fiscal Year 2018 Q4 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 Jun18q highlights Leading indicators below targets $8.0M Net Bookings and $7.7M Gross Installs ● Churn at $6.2M / 1.2% ● Net Installs at $1.5M imply a 3% growth rate ● Annualized Growth Revenue 11% ( 7% organic 1 ) ● EBITDA 9% ( 7% organic 2 ) ● EBITDA margin of 55% , and aUFCF of 25% LFCF Positive at $25M Substantial progress on: Allstream separation; completed most of internal workstream ● REIT; filed for PLR with IRS ● Divestiture of Scott-Rice, which closed on July 31 ● 1 Organic revenue excludes $4.9M derived from the McLean datacenter, Neutral Path and Spread Networks acquisitions. 2 Organic EBITDA excludes $1.8M derived from the McLean datacenter, Neutral Path and Spread Networks acquisitions. EBITDA and EBITDA growth rates are normalized for the recast across segments. 4
EXCLUDES ALLSTREAM Each Vertical Cluster showing steady contributions Net New Sales (Bookings) $8.0M Bookings shows modest progress ($M) without large deals Diverse demand across all customer verticals MRR and MAR Hitting $8.5M target requires 6% increase from $8.0M Expect momentum as recent go-to-market initiatives gain traction 5
EXCLUDES ALLSTREAM Payback at 13 months, reflecting absence of large deals Contract Value vs. CapEx on Bookings Payback ($M) MRR and MAR Total Bookings contract value 2.5x the associated committed capex Net New Sales (Bookings) Stratification ($M) $8.5m MRR and MAR 70% of Net Sales has <12 month payback 6 6
EXCLUDES ALLSTREAM Continue to invest in QBHC QBHC Further ramping of fiber biz dev and indirect QBHC Anticipate higher resources will lead to consistent >$8.5M Bookings performance 7 7 7
EXCLUDES ALLSTREAM Sales team continues to mature Sales Productivity - Average Sales by Tenure 1 Consistent quarterly productivity gains by cohort Most recent cohorts ramping faster as Vertical Cluster structures gain traction 1 Data set includes all sales hires since Mar17q, with measurements for their productivity in each quarter they are employed (e.g., the “3” Tenure bar shows the average sales productivity for all hires in their third quarter of 8 tenure) 8 8
EXCLUDES ALLSTREAM Slight decline to Gross Installs Gross Installations ($M) Lighter than anticipated gross installs partially driven by low Colo quarter $8.5m Record Fiber Solutions Gross Install MRR and MAR quarter at $3.0M Attaining $8.5M threshold is a ~10% increase from Jun18q $7.7M Gross Installs 9 9
EXCLUDES ALLSTREAM Modest increase in Churn Churn ($M) Jun18q Churn at 1.2% Analysis suggests ~20% of Churn is avoidable MRR and MAR $5.5m Increasing customer engagement to drive out avoidable Churn Expect Churn to remain at around 1.2% in upcoming quarters Churn % -1.2% -1.2% -1.2% -1.1% -1.2% 10 10
EXCLUDES ALLSTREAM Net Installs remain below 6-8% target growth Net Installations Implied Annual Growth from Net Installs 1 ($M) Net Installs were $1.5M , driven by: ---------$3.4m required for 8% implied growth ---------$2.7m required for 6% implied growth $7.7M Gross Installs were below target MRR and MAR Churn at $6.2M (1.2%) remained elevated 1 Implied by the current quarter pace of net installs, calculated as Net Installs annualized ($1.5M*4 = $6.0M), divided by the beginning quarter run-rate $176.9M=3%) 11 11
Commercial highlights Dark Fiber and Waves / Global Cloud Provider Largest sales quarter with customer Long-haul dark fiber deal leveraging in-place network 10G to 100G wavelength upgrades on multiple routes Supporting capacity expansion, diversity and triversity requirements 12
Commercial highlights cont. Waves / European Dark Fiber / Waves / Transportation International Carrier Competitive Mobile Carrier Services Company Initial sale with this carrier 1,100 miles of dark fiber Multiple 100G wavelength connecting several data services that connect East and Multiple wavelength routes centers West Coast data centers connecting major data centers IP/VPN, and Firewall for core throughout the U.S. Providing resilient edge cloud network infrastructure 7-year deal, Total Contract Major mobile infrastructure >12 month payback Value >$2M deal for Zayo in Europe 13
Zayo’s focus remains unchanged: Continue Bookings momentum, reduce Churn, increase Installs ✓ Reach, and ultimately exceed, target of 6-8% organic growth ✓ Achieve EBITDA growth at or above revenue growth ✓ Continue to integrate, deploy capital efficiently and create value through both ✓ organic and inorganic growth 14
MATT STEINFORT CHIEF FINANCIAL OFFICER
EXCLUDES ALLSTREAM Revenue and EBITDA Revenue QoQ Annualized Revenue Growth ($M) Revenue grew 11% QoQ annualized; 3 7% organic 1 3 Excludes CIBER EBITDA grew 9% QoQ annualized, 7% aEBITDA Margin ($M) organic 2 3 3 Excludes CIBER 1 Organic revenue excludes $4.9M derived from the McLean datacenter, Neutral Path and Spread Networks acquisitions. Reported Revenue growth was 11%. 2 Organic EBITDA excludes $1.8M derived from the McLean datacenter, Neutral Path and Spread Networks acquisitions. EBITDA and EBITDA growth rates are normalized for the recast across segments. 16 16
EXCLUDES ALLSTREAM Capital Expenditures ($M) CapEx Cash Flow Strong aUFCF 1 at 25% of revenue LFCF down QoQ due to higher capex, seasonally higher interest payments and change in net working capital LFCF aUFCF 1 % of Revenue % of Revenue ($M) ($M) 1 Normalized for recast 17 17
Ethernet and Allstream related changes Transport Enterprise Networks As highlighted last quarter, Ethernet Transport moved to the Transport Waves Wide Area Networks Segment SONET Cloud & Cloudlink IP Transit Ethernet Transport Allstream separation introduced several other intercompany allocation Ethernet Transport changes Recast financial and operating metrics are included in the quarterly materials 18
Segments 19
Jun18q financial results 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 Jun18q EPS is based on 247.2 and 248.5 million weighted average shares outstanding for basic and diluted, respectively, for the quarter 20
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