EARNINGS CALL PRESENTATION
Fiscal Year 2018 Q4 NYSE: ZAYO @ZayoGroup
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
Fiscal Year 2018 Q4 NYSE: ZAYO @ZayoGroup
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.
Chairman & Chief Executive Officer
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
Annualized Growth
EBITDA margin of 55%, and aUFCF of 25% LFCF Positive at $25M Substantial progress on:
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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
Payback at 13 months, reflecting absence
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
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
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)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
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
$5.5m
Churn
Churn %
($M) MRR and MAR
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 $6.2M (1.2%) remained elevated
($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 >$2M
1,100 miles of dark fiber
connecting several data centers IP/VPN, and Firewall for core cloud network Major mobile infrastructure deal for Zayo in Europe Multiple 100G wavelength services that connect East and West Coast data centers Providing resilient edge infrastructure
>12 month payback
Waves / International Carrier European Dark Fiber / Competitive Mobile Carrier Waves / Transportation Services Company
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Zayo’s focus remains unchanged:
✓
Continue Bookings momentum, reduce Churn, increase Installs
✓
Reach, and ultimately exceed, target of 6-8% organic growth
✓
Achieve EBITDA growth at or above revenue growth
✓
Continue to integrate, deploy capital efficiently and create value through both
CHIEF FINANCIAL OFFICER
Revenue and EBITDA
1616
EXCLUDES ALLSTREAM
Revenue grew 11% QoQ annualized;
7% organic1
EBITDA grew 9% QoQ annualized, 7%
Revenue aEBITDA
($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 $1.8M derived from the McLean datacenter, Neutral Path and Spread Networks acquisitions. EBITDA and EBITDA growth rates are normalized for the recast across segments.Cash Flow
17Strong aUFCF1 at 25% of revenue LFCF down QoQ due to higher capex, seasonally higher interest payments and change in net working capital
Capital Expenditures aUFCF1 LFCF
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EXCLUDES ALLSTREAM
1 Normalized for recast($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
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$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 $35.7M of PP&E from Scott Rice planned divestiture classified as held for sale21
Debt Schedule1
Gross leverage of 4.5x
Interest Rate
1($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 quarterStock Based Compensation
Consistent Stock-Based Compensation expense with modest dilution
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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For detailed Supplement Earnings Information presentation, please visit:
investors.zayo.com