EARNINGS CALL PRESENTATION Fiscal Year 2018 Q4 NYSE: ZAYO - - PowerPoint PPT Presentation

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EARNINGS CALL PRESENTATION Fiscal Year 2018 Q4 NYSE: ZAYO - - PowerPoint PPT Presentation

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


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EARNINGS CALL PRESENTATION

Fiscal Year 2018 Q4 NYSE: ZAYO @ZayoGroup

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Safe Harbor

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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.

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DAN CARUSO

Chairman & Chief Executive Officer

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Jun18q highlights

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EXCLUDES ALLSTREAM

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.

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% organic1)
  • EBITDA 9% (7% organic2)

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
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Each Vertical Cluster showing steady contributions

EXCLUDES ALLSTREAM Net New Sales (Bookings)

$8.0M Bookings shows modest progress

without large deals Diverse demand across all customer verticals Hitting $8.5M target requires 6% increase from $8.0M Expect momentum as recent go-to-market initiatives gain traction

($M) MRR and MAR

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SLIDE 6

Payback at 13 months, reflecting absence

  • f large deals
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Total Bookings contract value 2.5x the associated committed capex

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EXCLUDES ALLSTREAM Contract Value vs. CapEx on Bookings

Payback

Net New Sales (Bookings) Stratification

$8.5m

70% of Net Sales has <12 month payback

($M) MRR and MAR ($M) MRR and MAR

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Continue to invest in QBHC

Further ramping of fiber biz dev and indirect QBHC Anticipate higher resources will lead to consistent >$8.5M Bookings performance

QBHC

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EXCLUDES ALLSTREAM

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Sales team continues to mature

Consistent quarterly productivity gains by cohort Most recent cohorts ramping faster as Vertical Cluster structures gain traction

Sales Productivity - Average Sales by Tenure1

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EXCLUDES ALLSTREAM

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 tenure)
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Slight decline to Gross Installs

Lighter than anticipated gross installs partially driven by low Colo quarter Record Fiber Solutions Gross Install quarter at $3.0M Attaining $8.5M threshold is a ~10% increase from Jun18q $7.7M Gross Installs

Gross Installations

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EXCLUDES ALLSTREAM

$8.5m

($M) MRR and MAR

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Modest increase in Churn

Jun18q Churn at 1.2% Analysis suggests ~20% of Churn is avoidable Increasing customer engagement to drive out avoidable Churn Expect Churn to remain at around 1.2% in upcoming quarters

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EXCLUDES ALLSTREAM

$5.5m

Churn

Churn %

  • 1.1%
  • 1.2%
  • 1.2%
  • 1.2%
  • 1.2%

($M) MRR and MAR

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Net Installs remain below 6-8% target growth

Net Installations

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EXCLUDES ALLSTREAM

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%)

Net Installs were $1.5M, driven by:

$7.7M Gross Installs were below target

Churn at $6.2M (1.2%) remained elevated

  • --------$3.4m required for 8% implied growth
  • --------$2.7m required for 6% implied growth

($M) MRR and MAR Implied Annual Growth from Net Installs1

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Commercial highlights

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 Dark Fiber and Waves / Global Cloud Provider

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Commercial highlights cont.

Initial sale with this carrier Multiple wavelength routes connecting major data centers throughout the U.S. 7-year deal, Total Contract Value >$2M

1,100 miles of dark fiber

connecting several data centers IP/VPN, and Firewall for core cloud network Major mobile infrastructure deal for Zayo in Europe Multiple 100G wavelength services that connect East and West Coast data centers Providing resilient edge infrastructure

>12 month payback

Waves / International Carrier European Dark Fiber / Competitive Mobile Carrier Waves / Transportation Services Company

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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

  • rganic and inorganic growth
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MATT STEINFORT

CHIEF FINANCIAL OFFICER

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Revenue and EBITDA

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EXCLUDES ALLSTREAM

Revenue grew 11% QoQ annualized;

7% organic1

EBITDA grew 9% QoQ annualized, 7%

  • rganic2

Revenue aEBITDA

($M) QoQ Annualized Revenue Growth Margin

3 Excludes CIBER 3 Excludes CIBER 3 3

($M)

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.
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Cash Flow

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Strong aUFCF1 at 25% of revenue LFCF down QoQ due to higher capex, seasonally higher interest payments and change in net working capital

Capital Expenditures aUFCF1 LFCF

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EXCLUDES ALLSTREAM

1 Normalized for recast

($M) % of Revenue ($M) CapEx ($M) % of Revenue

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Ethernet and Allstream related changes

Transport Enterprise Networks Waves SONET IP Transit Wide Area Networks Cloud & Cloudlink Ethernet Transport Ethernet Transport

As highlighted last quarter, Ethernet Transport moved to the Transport Segment Allstream separation introduced several other intercompany allocation changes Recast financial and operating metrics are included in the quarterly materials

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Segments

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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
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$442M of revolver capacity $1.9B of net operating loss

carryforwards

2.75M shares repurchased at an

average price of $34.02

Balance Sheet

1 includes $35.7M of PP&E from Scott Rice planned divestiture classified as held for sale

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Debt Schedule1

Gross leverage of 4.5x

Interest Rate

1

($M)

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Stock-Based Compensation

Performance oriented Stock-Based Compensation

1 dilution represents the actual dilution for shares vested and delivered during the quarter

Stock Based Compensation

Consistent Stock-Based Compensation expense with modest dilution

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Strategic initiatives

Progress towards Allstream separation Closed sale of Scott-Rice Telephone Operational separation complete Multiple options available to realize value from Allstream business Actively evaluating strategic options, no specific timetable for resolution Advancing evaluation of REIT conversion Believe it likely that a path to REIT conversion exists Continued conversations with IRS; filed PLR in July Executing the administrative changes required to operate as a REIT Developing implementation plans for required changes to financial systems and reporting

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Q&A

For detailed Supplement Earnings Information presentation, please visit:

investors.zayo.com