Earnings Call Presentation Zayo Group Holdings, Inc. Fiscal Year - - PowerPoint PPT Presentation

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Oct 31, 2022 435 likes •836 views

Earnings Call Presentation Zayo Group Holdings, Inc. Fiscal Year 2017 Q2 NYSE: ZAYO @ZayoGroup Safe Harbor Information contained in this presentation that is not historical by nature constitutes forward - looking statements which can be

SLIDE 1

Earnings Call Presentation

Zayo Group Holdings, Inc.

Fiscal Year 2017 Q2

NYSE: ZAYO @ZayoGroup

SLIDE 2

Safe Harbor

Information contained in this 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 filed with the Securities and Exchange Commission (“SEC”). 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 supplemental earnings presentation and a glossary of terms used throughout. All of which can be found under the investor section of the Company’s website at http://www.zayo.com/investors.

SLIDE 3

Dan Caruso Chairman & Chief Executive Officer

SLIDE 4

FY 2Q17 Highlights

continued consecutive quarter revenue & aEBITDA growth1

4% pro forma recurring revenue growth; 6% constant currency (CC)

net bookings of $5.2M net installs of $2.0M, driven by record $6.7M in gross installs and churn of 1.2% additional one-time disclosures provide deeper analysis on operational metrics announced acquisition of Electric Lightwave, investor call to be scheduled upon closing

1 financial and operating metrics exclude Zayo Canada

SLIDE 5

Zayo at a Glance

8,991,647 fiber miles 115,695 route miles 3,095 employees 175 QBHC Customers * 6.8k customers 52% of rev from enterprise & content 48% carriers & wireless Products* 38% Dark Fiber Solutions 44% Network Connectivity 17% Colo & Cloud Infrastructure 1% Other International Network Unique Metro Fiber Datacenters Leading Fiber & Data Center Consolidator 39 acquisitions to date 7 since Jan 2015 Growth

Our assets What we do Track record

63 zColo data centers >696k billable sf People Financial1

1 quarter ended Dec-16 annualized 2 every quarter since becoming a public filer inclusive of Zayo Group, LLC operating subsidiary. Excludes Zayo Canada 3 based on average closing price for month of Dec-16

25,886 buildings 148 avg metro fiber count ~$2.0B revenue ~$1.1B adjusted EBITDA Value Creation 29 consecutive quarters of sequential revenue growth2 $1.1B invested equity since 2007 inception $8.1B equity value3 >7x return

* Excludes Zayo Canada

SLIDE 6 FY2015 Q4 Earnings Presentation

1 based on quarter ended Dec-16

Segments

Dark Fiber Solutions Network Connectivity Colocation & Cloud Infrastructure Canada and Other Segment Total Revenue $150.4 $177.6 $66.7 $112.0 $506.7 Revenue % of Total 30% 35% 13% 22% 100% Adjusted EBITDA $110.5 $91.1 $33.9 $27.9 $263.4 EBITDA Margin 73% 51% 51% 25% 52% EBITDA % of Total 42% 35% 13% 11% 100% Capital Expenditures $128.3 $48.3 $27.4 $9.6 $213.6 Capital Expenditures % of Total 60% 23% 13% 4% 100% Adjusted UFCF

$0.9

$41.4 $6.9 $17.7 $65.1 Adjusted UFCF Margin

23% 10% 16% 13% Adjusted UFCF % of Total

64% 11% 27% 100% Net Installs $1.1 $0.4 $0.5

$0.3

$1.7 Net Installs % of Total 67% 24% 28%

100% Implied Growth Rate on Net Installs 9% 3% 9%

4% Net Sales (Bookings) $1.5 $2.9 $0.7 $1.0 $6.1

Segments

SLIDE 7 7 $217 $232 $233

$2 $3 $2 $1 $3

$219 $233 $237

59% 59% 59% 59% 59%

$0 $50 $100 $150 $200 $250 $300

Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 ($M)

Revenue

Q2 Financial Highlights

($M)

Adjusted EBITDA

Associated with Other Revenue Excluding Associated with Other Revenue Adjusted EBITDA Margin

4% QoQ annualized pro forma recurring

revenue growth

 6% in CC1 2% QoQ annualized pro forma recurring

adjusted EBITDA growth

$365 $390 $393 $5 $3 $6

$370 $393 $399

$0 $50 $100 $150 $200 $250 $300 $350 $400 $450

Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Recurring Other

EXCLUDES ZAYO CANADA

1 CC: constant currency

SLIDE 8 8

($172) ($205) ($204) $146 $213 $153 ($26) $8 ($51)

($250) ($150) ($50) $50 $150 $250 $350 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Purchases of PP&E Cash Flow From Operations LFCF 1 quarter ended Dec-15 includes $54M of semi-annual interest payments and $17M of deferred interest from Jun-15 quarter senior notes offerings 2 quarter ended Jun-16 LFCF includes $23.2M outflow related to debt refinancing activities. Excluding this impact, LFCF would be $5.2M

Q2 Financial Highlights Cont.

Purchases of Property & Equipment

($M)

Net AFFO

(capturing churn replacement)

% of Revenue

Levered FCF

($M) ($M)

% of Revenue 1

net AFFO of $107M or 27% of revenue

$163 $194 $196 $6 $7 $6 $3 $5 $2

$172 $205 $204

$0 $50 $100 $150 $200 $250 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Growth Maintenance Other

$98 $110 $107

27% 18% 29% 28% 27% $0 $50 $100 $150 $200 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16

EXCLUDES ZAYO CANADA

0.0% 0.4% 4.2% 0.2% Implied revenue growth:

4.0%

SLIDE 9 9

Q2 Operational Highlights

Net Installations

($M) MRR and MAR MRR and MAR ($3.1) ($3.2) ($3.7) ($1.0) ($1.0) ($1.0)

($4.2) ($4.2) ($4.7)

1.2%
1.0%
1.1%
1.1%
1.2%

($7.0) ($6.0) ($5.0) ($4.0) ($3.0) ($2.0) ($1.0) $0.0 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Hard Disconnects Upgrades / Price Decrease / Replacement Churn % = $5.1 $5.4 $5.6 $1.3 $1.1 $1.1

$6.4 $6.5 $6.7

$0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Upgrades / Price Increase / Replacement Installations from New Services

Gross Installations Churn Processed

($M)

$2.2 $2.3 $2.0

$0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 MRR and MAR ($M)

1 implied by the current quarter pace of Net Installs, calculated as Net Installs annualized ($1.986M * 4 = $7.94M), divided by the beginning of quarter run-rate $129.4 = 6.1%

churn of 1.2% within historical and expected range net installs imply 6% annualized recurring revenue growth rate1 EXCLUDES ZAYO CANADA

SLIDE 10

Net Installs

have communicated an expectation of achieving net installs approaching $3.0M in nearer term record quarter of $6.7M gross installs consistent with expectations that were set in prior quarters. Internal expectations were >$7.0M and low bookings during the quarter led to the gap churn of 1.2% was in line with guidance of 1.1 - 1.3%, though higher than recent

quarters. Resulting churn of $4.7M was high

the combined impact resulted in net installs being lower than expectations

in line with prior quarters, but lower than expectation

SLIDE 11 11 $6.5 $6.7 $5.9 $7.9 $9.5 $8.7

$14.4 $16.2 $14.6

98 109 102 105 96

$0 $5 $10 $15 $20

Dec-15 Mar-16 Jun-16 Sep-16 Dec-16

Q2 Operational Highlights Cont.

$123.5 $129.4 $131.3

$0 $50 $100 $150

Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 ($M)

Last day of quarter run-rate

(MRR+MAR)

Delivery date after 6 months Delivery date within the next 6 months Implied Average Days to Install

Service Activation Pipeline

($M)

service activation pipeline represents 11% of revenue run-rate

50 months average remaining contract term

EXCLUDES ZAYO CANADA

SLIDE 12 12

$474 $562 $284 ($312) ($222) ($145)

42 31 16 26 22

($450) ($250) ($50) $150 $350 $550 $750

Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Contract Value Capex & Upfront Expenditures Payback Months $4.3 $4.2 $3.5 $1.6 $2.6 $1.5 $0.9 $0.4 $0.2

$6.8 $7.2 $5.2

$0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0

Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 <12 Month Payback and Positive IRR >12 Month Payback and Positive IRR Speculative Projects

Q2 Operational Highlights Cont.

Contract Value vs. Capex on Bookings

($M)

Net New Sales (Bookings) Stratification

MRR and MAR ($M)

net bookings of $5.2M were below expectations net bookings with <12 month payback were

17% lower than Sep-16 quarter whereas net

bookings with >12 month payback and speculative projects were 42% lower than Sep-16 quarter the capex associated with bookings was

$145M, the lowest in the past several

quarters the $284M of contract value includes $43M

f upfront payments; net capex associated

with bookings was $102M1 EXCLUDES ZAYO CANADA

1 includes $3.2M of Construction Costs Associated with Net New Sales

SLIDE 13 13

$3.0 $1.7

$0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 $4.5 $5.0

Avg. Dec-15 thru Sep-16

Dec-16

$3.8 $3.5

$0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 $4.5 $5.0

Avg. Dec-15 thru Sep-16

Dec-16

Net New Sales (Bookings) to Very Large Customers1

MRR and MAR

Net New Sales (Bookings) to All Other Customers

MRR and MAR ($M) ($M)

EXCLUDES ZAYO CANADA ~50 customers defined as Very Large Customers1 comprising 47% of our recurring revenue Net Bookings to Very Large Customers down

$1.3M - 43% lower than their prior 4 quarter

average Net Bookings to All Other Customers down

$0.3M - 8% lower than the prior 4 quarter

average

Customer Size

most of the bookings shortfall was attributed to largest customers

1 Very Large Customers defined as >$300K Monthly Recurring Revenue

SLIDE 14 14 $2.3 $1.5 $3.5 $2.9 $1.1 $0.7

$6.9 $5.2

$0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0

Avg. Dec-15 thru Sep-16

Dec-16 DFS ZNC ZCCI Other

Net New Sales (Bookings) Stratification

MRR and MAR ($M)

EXCLUDES ZAYO CANADA ZCCI segment down $0.3M - 32% lower than prior 4 quarter average ZNC segment down $0.5M - 16% lower than prior 4 quarter average DFS segment down $0.7M - 32% lower than prior 4 quarter average

Segments

bookings shortfall experienced across segments, though less pronounced in Network Connectivity

SLIDE 15

Reflections on Operational Execution

Have consistently faced the natural challenges associated with large expansions, complex integrations, and expanding product line; operating “on all cylinders” would require a period of time to digest without further inorganic activity In 2016, headwinds were:

Allstream and Viatel integrations; ELI acquisition
transition from pre-IPO to post-IPO exec team
ramp up in Major Network Expansions

Execution remains strong

with Salesforce.com and Tranzact as foundation, quote to bill process and integration

capability is the strongest in the industry

seen as a capable, responsive, creative, reliable, and focused supplier by nearly all our

customers

sales execution is good but not great - sales leadership is the strongest in our history

though increasing the quantity of talented sales professionals is an opportunity

faced internal headwinds in 2016; to some degree, these factors are “business as usual”

SLIDE 16

Industry Observations

Recent M&A

AT&T purchase of DirecTV, Time

Warner Media and Fibertower spectrum

Verizon purchase of XO, Yahoo, and

AOL

Centurylink purchase of Level 3; &

Level 3 purchase of TW Telecom

Charter purchase of Time Warner Cable

and Brighthouse

Suddenlink and Cablevision acquired by

Altice; New Wave acquired by Cable One

Windstream purchase of Earthlink
Crown purchase of Fibernet

consolidation and strategic ponderings are higher than normal; believe is pause in decision-making and not a reduction in demand Ponderings

What is the right path to 5G?
Google Fiber versus Webpass
Cloud & datacenter strategies being

developed by most enterprises

Possible Trump-inspired consolidations:
Sprint
T-Mobile
AT&T
Verizon
Dish/Echostar
Comcast
Charter
Altice
Web Scale Providers

SLIDE 17

Bandwidth, Fiber, and Consolidation

tailwinds remain compelling bandwidth’s growing importance

to enterprises and consumers is a multi-generational trend

fiber will remain the essential

technology that underlies bandwidth for many decades

consolidation is leaving Zayo as

the only independent operator of deep and dense fiber networks throughout the U.S. (and beyond)

cloud, 5G, and emerging webscale concepts will drive transformative

demand across most industry sectors

SLIDE 18 18

$7 $3 $17 $0 $10 $20 $30 $40 $50

Dec-15 Mar-16 Jun-16 Sep-16 Dec-16

Unlevered Free Cash Flow (UFCF)

$11 $10 $15 $0 $10 $20 $30 $40 $50

Dec-15 Mar-16 Jun-16 Sep-16 Dec-16

Purchases of PP&E

Zayo Canada – Financial Targets

Dec-16 performance update2

1 Dec-15 quarter results adjusted to exclude two non-recurring items totaling $0.3M of quarterly revenue and adjusted EBITDA 2 actual Jun-16 US$ based on 0.78 US Dollar FX rate, actual Sep-16 US$ based on 0.77 US Dollar FX rate, actual Dec-16 US$ based on 0.75 US Dollar FX rate 3 Sep-16 capital expenditures were lower (and UFCF was higher) due to timing of payments

$96 $117 $113 $112 $0 $50 $100 $150

Dec-15 Mar-16 Jun-16 Sep-16 Dec-16

Allstream Revenue

($M)

$18 $18 $27 $0 $10 $20 $30 $40 $50

Dec-15 Mar-16 Jun-16 Sep-16 Dec-16

Adjusted EBITDA

($M) ($M) ($M)

1 1 1 16% 19% 23% 1

$10

25%

$3 $28 $24

3 3 25%

$17 $108 $27 $10

2H2016 Post Synergy $42M UFCF

SLIDE 19 ($M) Geography SPG Booking Qtr2 Estimated Capital Expenditures NetNew Sales (Bookings) MRR & MAR3 Upfront Charges West Mobile Infrastructure Mar-14 $58 $0.4 $38 Midwest Dark Fiber Sep-14 $75 $0.1 $0 Southwest Dark Fiber Sep-14 $22 $0.1 $0 West Mobile Infrastructure Mar-15 $39 $0.4 $32 South Mobile Infrastructure Mar-15 $189 $0.6 $25 Southwest Dark Fiber Mar-15 $24 $0.2 $0 Midwest Mobile Infrastructure Jun-15 $88 $0.4 $21 Northwest Mobile Infrastructure Jun-15 $61 $0.6 $0 Southeast Mobile Infrastructure Dec-15 $98 $0.3 $6 South Mobile Infrastructure Dec-15 $36 $0.2 $3 South Mobile Infrastructure Mar-16 $75 $0.2 $2 South Dark Fiber Jun-16 $34 $0.3 $30 National Mobile Infrastructure Sep-16 $64 $0.9 $3 West Dark Fiber Dec-16 $27 $0.1 $14 Cumulative Changes 1 $4 $0.0 $0 Total $894 $4.8 $172 Capital Expenditures Gross Installs Upfront Received Actual Through Dec-16 $363 $1.3 $64 Percentage of Committed 41% 27% 37% 1 changes represent net cost overruns/underruns associated with the initial anchor tenant contract 2 some projects may have been booked over multiple quarters 3 MRR+MAR per site varies due to factors such as distance between site and existing network

Major Network Expansion

ne new >$20M project signed in Dec-16 quarter

west coast long haul dark fiber project signed in quarter

41% of capital commitments

spent through Dec-16 quarter… but only 27% of installs realized

SLIDE 20

Electric Lightwave Acquisition

fiber rich, complementary assets in important west coast markets adds 12,100 route miles

$1.42 billion purchase price 6.5x post-synergy purchase multiple

strengthens Zayo’s position as the only independent national infrastructure focused provider expected FY 3Q17 close will provide additional insight into post- close approach and expectations in a special investor presentation

SLIDE 21

Electric Lightwave Acquisition

expands network footprint in key metro markets

Portland, OR Sacramento, CA Seattle, WA Salt Lake City, UT San Francisco, CA Phoenix, AZ

SLIDE 22 22

Commercial Highlights

vendor and route diversity are driving increased demand from major buyers

f bandwidth

provides customer with diversity fully on-net, minimizing capex deal illustrates “second tenant” economics expected to complete FY 3Q17 total contract value ~$9M

<12 month payback

Northeast Longhaul Dark Fiber - Communications Company

SLIDE 23 23

Commercial Highlights Cont.

new network architectures are additive to demand for dark fiber backhaul

connects 81 sites using C-RAN network architecture leverages existing network

100+ route miles of new network build

includes longhaul connectivity to Denver C-RAN network topology requires an average of 43 fiber strands per cluster

Colorado Springs DFTT Deal

New Network Existing Network

SLIDE 24 24

Commercial Highlights Cont.

follow-on sales leverage organic expansions and acquired assets

Dark Fiber & Waves / Genomics Research

multi-point combination

f dark fiber & waves

3 diverse routes ~$12k MRR&MAR <12 month payback

Dark Fiber / Global Internet Provider

cross-border dark fiber network leverages Allstream acquisition

90%+ on-net ~$75k MRR&MAR >12 month payback

Note: maps are shown for illustrative purposes

Dark Fiber / Telecommunications Company

longhaul dark fiber solution requires no additional build

20 year IRU ~$27k MRR&MAR <12 month payback

SLIDE 25

Ken desGarennes Chief Financial Officer

SLIDE 26 FY2015 Q4 Earnings Presentation

($M, Except per Share Amounts) Dec-15 Mar-16 Jun-16 Sep-16 Dec-162 Zayo Group Holdings Revenue $369.6 $478.0 $507.3 $504.9 $506.7 Annualized revenue growth 3% 117% 25%

1% Pro-forma annualized revenue growth1 3% 2% 9%

0% Operating income/(loss) 58.7 57.5 72.0 87.0 90.7 Net Earnings/(loss) (10.8) (19.3) (30.9) 15.7 19.8 EPS (basic and diluted) (0.04) (0.08) (0.13) 0.06 0.08 Zayo Group Holdings Adjusted EBITDA $218.9 $242.8 $257.8 $260.6 $263.4 Annualized Adjusted EBITDA growth 7% 44% 25% 4% 4% Pro-forma annualized Adjusted EBITDA growth1 7% 13% 18% 5% 3% Adjusted EBITDA margin 59% 51% 51% 52% 52%

Q2 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 Dec-16 EPS is based on 243.1 and 245.6 million weighted average shares outstanding for basic and diluted, respectively, for the quarter; 244.1 million shares were outstanding on 12/31/2016 2

SLIDE 27 FY2015 Q4 Earnings Presentation

$0 $1,000 $2,000 $3,000

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 as of December 31, 2016 pro forma for refinancing activity

Balance Sheet

6.375% 6.000% L+275

ample liquidity including $443M of revolver capacity

$1.2B of net operating loss carry

forwards2

27 ($M) Interest Rate

Debt Schedule1

pro-forma for ELI acquisition

4.5x gross leverage3

January term loan repricing reduces weighted average cost of debt from

5.1% to 4.9%4

1 principal value; excludes capital lease obligations 2 excludes increase in NOLs from ELI acquisition 3 based on Zayo LQA EBITDA + ELI Synergized LQA EBITDA 4 based on December 31, 2016 1 month LIBOR average ($M) Dec-15 Dec-16 Consolidated Balance Sheet Data Cash and cash equivalents 176 144 Property and equipment, net 3,626 4,287 Total assets 6,274 6,868 Long-term debt and capital lease obligations, including current portion 3,702 4,176 Total Stockholders' equity 1,248 1,288

L+250 5.750% L+200

SLIDE 28 FY2015 Q4 Earnings Presentation $26 $4 $6 $17 $28 $28

$43 $32 $35

$0 $25 $50 $75 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Pre-IPO Plan Post-IPO RSU Actual Dilution1

Stock-Based Comp

performance oriented stock-based compensation

pre-IPO plan vesting accelerated and completed in Dec-16 quarter post-IPO RSU plans will continue based primarily on measured equity IRR and share price performance

($M)

Stock Based Compensation

309 421 157 1 dilution represents the actual dilution for shares vested and delivered during the quarter Share Dilution1 (000s) 0.1% 0.2% 0.1% Dilution % 470 0.2% 996 0.4%

SLIDE 29

For detailed Supplemental Earnings Information presentation, please visit:

investors.zayo.com

Q&A

SLIDE 30

Reconciliations

SLIDE 31

Presentation of Certain Consolidated Pro-forma Financial Data

Acquisitions have been, and are expected to continue to be, a component of the Company’s strategy. In this presentation, the Company sets forth its pro-forma annualized revenue growth rate and pro-forma annualized Adjusted EBITDA growth rates for the current fiscal quarter. The adjustments reflected in our pro-forma amounts have not been prepared with a view towards complying with Article 11 of Regulation S-X. These pro-forma measures are intended to provide additional information regarding such rates of growth on a more comparable basis than would be provided without such pro-forma adjustments.

Non-GAAP Financial Measures

The Company provides financial measures that are not defined under generally accepted accounting principles in the United States, or GAAP, including Adjusted EBITDA, Adjusted EBITDA Margin, unlevered free cash flow, adjusted unlevered free cash flow, levered free cash flow, adjusted funds from operations, and net adjusted funds from operations. Adjusted EBITDA, as defined below and in our Segment Reporting note to our consolidated financial statements and notes thereto, is the primary measure used by

ur Chief Operating decision maker to evaluate segment operating performance. Adjusted EBITDA is defined as earnings/(loss) from continuing operations before

interest, income taxes, depreciation, and amortization (“EBITDA”) adjusted to exclude acquisition or disposal-related transaction costs, losses on extinguishment of debt, stock-based compensation, unrealized foreign currency gains/ (losses) on intercompany loans, and non-cash income/(loss) on equity and cost method

investments. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by revenue. Unlevered free cash flow is defined as Adjusted EBITDA minus

purchases of property and equipment, net of stimulus grants. Adjusted unlevered free cash flow is defined as Adjusted EBITDA minus purchases of property and equipment, net of stimulus grants, plus additions to deferred revenue, less non-cash monthly amortized revenue. Levered free cash flow is defined as operating cash flow minus purchases of property and equipment, net of stimulus grants. Adjusted funds from operations (“AFFO”) is defined as earnings/(loss) from continuing operations before depreciation and amortization, unrealized foreign currency gains/(losses) on intercompany loans, stock-based compensation, acquisition or disposal-related transaction costs, losses on extinguishment of debt, non-cash income/(loss) on equity and cost investments, non-cash monthly amortized revenue, less cash payments related to maintenance capital expenditures. Net AFFO is defined as AFFO plus upfront customer payments from less than twelve month payback on net new sales less cash payments related to capital expenditures for (i) less than twelve month payback on net new sales and (ii) network capacity. These measures are not measurements of our financial performance under GAAP and should not be considered in isolation or as alternatives to net income, net cash flows provided by operating activities, total net cash flows or any other performance measures derived in accordance with GAAP or as alternatives to net cash flows from operating activities or total net cash flows as measures of our liquidity. We use Adjusted EBITDA to evaluate our operating performance. In addition to Adjusted EBITDA, management uses unlevered free cash flow, which measures the ability of Adjusted EBITDA to cover capital expenditures. Adjusted EBITDA is a performance rather than cash flow measure. Correlating our capital expenditures to our Adjusted EBITDA does not imply that we will be able to fund such capital expenditures solely with cash from operations. These metrics are among the primary measures used by management for planning and forecasting future periods. We believe the presentation of Adjusted EBITDA is relevant and useful for investors because it allows investors to view results in a manner similar to the method used by management and make it easier to compare our results with the results of other companies that have different financing and capital structures. We believe that the presentation of levered free cash flow is relevant and useful to investors because it provides a measure of cash available to pay the principal on our debt and pursue acquisitions of businesses or other strategic investments or uses of capital. We believe the presentation of AFFO and Net AFFO is useful to investors by providing measures presented by certain datacenter and cellular tower REITs (and some non-REITs) with which we are sometimes compared.

SLIDE 32 We also monitor Adjusted EBITDA because our subsidiaries have debt covenants that restrict their borrowing capacity that are based on a leverage ratio, which utilizes a modified EBITDA, as defined in our credit agreement and the indentures governing our notes. The modified EBITDA is consistent with our definition of Adjusted EBITDA; however, it includes the pro forma Adjusted EBITDA of and expected cost synergies from the companies acquired by us during the quarter for which the debt compliance certification is due. Adjusted EBITDA results, along with the quantitative and qualitative information, are also utilized by management and our Compensation Committee, as an input for determining incentive payments to employees. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation from, or as a substitute for, analysis of our results of operations and

perating cash flows as reported under GAAP. For example, Adjusted EBITDA:
does not reflect capital expenditures, or future requirements for capital and major maintenance expenditures or contractual commitments;
does not reflect changes in, or cash requirements for, our working capital needs;
does not reflect the interest expense, or the cash requirements necessary to service the interest payments, on our debt; and
does not reflect cash required to pay income taxes.

Unlevered free cash flow and adjusted unlevered free cash flow have limitations as analytical tools and should not be considered in isolation from, or as a substitute for, analysis of our results as reported under GAAP. For example, unlevered free cash flow:

does not reflect changes in, or cash requirements for, our working capital needs;
does not reflect the interest expense, or the cash requirements necessary to service the interest payments, on our debt; and
does not reflect cash required to pay income taxes.

Levered free cash flow, AFFO, and Net AFFO have limitations as an analytical tool and should not be considered in isolation from, or as a substitute for, analysis of

ur results as reported under GAAP. For example, levered free cash flow, AFFO, and Net AFFO:
does not reflect principal payments on debt;
does not reflect principal payments on capital lease obligations;
does not reflect dividend payments, if any; and
does not reflect the cost of acquisitions.

Our computation of Adjusted EBITDA, unlevered free cash flow, adjusted unlevered free cash flow, levered free cash flow, AFFO, and Net AFFO may not be comparable to other similarly titled measures computed by other companies because all companies do not calculate these measures in the same fashion. Because we have acquired numerous entities since our inception and incurred transaction costs in connection with each acquisition, borrowed money in order to finance our operations and acquisitions, and used capital and intangible assets in our business, and because the payment of income taxes is necessary if we generate taxable income after the utilization of our net operating loss carryforwards, any measure that excludes these items has material limitations. As a result of these limitations, these measures should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or as a measure of our liquidity. See “Reconciliation of Non-GAAP Financial Measures” for a quantitative reconciliation of Adjusted EBITDA, AFFO, and Net AFFO to net income/(loss) and for a quantitative reconciliation of unlevered free cash flow, adjusted unlevered free cash flow and levered free cash flow to net cash flows provided by operating activities. Annualized revenue and annualized Adjusted EBITDA are derived by multiplying the total revenue and Adjusted EBITDA, respectively, for the most recent quarterly period by four. Our computations of annualized revenue and annualized Adjusted EBITDA may not be representative of our actual annual results. Measures referred to as being calculated on a constant currency basis are intended to present the relevant information assuming a constant exchange rate between the two periods being compared. Such metrics are calculated by applying the currency exchange rates used in the preparation of the prior period financial results to the subsequent period results. Tables reconciling such non-GAAP measures are included in the Historical Financial Data & Reconciliations section of this presentation. A glossary of terms used throughout is available under the investor section of the Company’s website at http://www.zayo.com/investors.

SLIDE 33 FY2015 Q4 Earnings Presentation

($ in millions)

Consolidated Zayo Canada Consolidated Excluding Zayo Canada Net (loss)/income $19.8 $19.6 $0.2 Interest expense $53.7 0.2 53.5 Provision/(benefit) for income taxes $0.2 0.0 0.2 Depreciation and amortization $131.4 1.7 129.7 Transaction costs $6.2 3.7 2.5 Stock-based compensation $34.5 2.0 32.5 Loss on extinguishment of debt $0.0 0.0 0.0 Foreign currency loss/(gain) on intercompany loans $17.4 (0.3) 17.7 Non-cash loss on investments $0.2 0.0 0.2 Adjusted EBITDA $263.4 $26.9 $236.5 Purchases of property and equipment 213.6 9.6 204.0 Unlevered Free Cash Flow $49.8 $17.3 $32.5 December 31, 2016

Consolidated Historical Reconciliations – Without Zayo Canada

SLIDE 34 FY2015 Q4 Earnings Presentation ($ in millions) September 30, December 31, March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, 2014 2014 2015 2015 Total 2015 2015 2016 2016 Total 2016 2016 Net (loss)/income ($110.5) $3.8 ($53.7) $5.1 ($155.3) ($15.2) ($10.8) ($19.3) ($30.9) ($76.2) $15.7 $19.8 Interest expense 46.9 53.4 60.7 53.0 214.0 53.8 51.2 57.7 57.4 $220.1 53.3 53.7 Provision/(benefit) for income taxes 9.4 (4.4) (18.4) 4.6 (8.8) 2.7 11.1 7.8 (13.1) $8.5 6.6 0.2 Depreciation and amortization 96.0 96.9 100.1 113.2 406.2 117.1 113.7 137.2 148.3 $516.3 138.5 131.4 Transaction costs 3.4 1.3 1.5 0.0 6.2 0.0 3.3 14.2 4.0 $21.5 3.0 6.2 Stock-based compensation 123.1 (6.0) 40.7 42.9 200.7 46.1 42.9 33.5 33.4 $155.9 32.0 34.5 Loss on extinguishment of debt 0.0 30.9 54.9 8.5 94.3 0.0 0.0 0.0 33.8 $33.8 0.0 0.0 Foreign currency loss/(gain) on intercompany loans 14.7 13.3 13.2 (16.8) 24.4 10.7 7.1 11.1 24.9 $53.8 11.2 17.4 Non-cash loss on investments 0.0 0.5 0.0 0.4 0.9 0.2 0.4 0.6 0.0 $1.2 0.3 0.2 Adjusted EBITDA, from continuing operations $183.0 $189.7 $199.0 $210.9 $782.6 $215.4 $218.9 $242.8 $257.8 $934.9 $260.6 $263.4 Purchases of property and equipment 115.3 129.5 130.1 155.5 530.4 159.2 172.4 185.1 187.4 $704.1 208.3 213.6 Unlevered Free Cash Flow $67.7 $60.2 $68.9 $55.4 $252.2 $56.2 $46.5 $57.7 $70.4 $230.8 $52.3 $49.8 Fiscal Year 2017 Fiscal Year 2015 Fiscal Year 2016

Reconciliation

Net (Loss)/Income to Adjusted EBITDA

SLIDE 35 FY2015 Q4 Earnings Presentation

($ in millions)

Zayo Dark Fiber Solutions Zayo Network Connectivity Zayo Cloud and Connectivity Services Zayo Canada Zayo Other Corporate/Interco mpany Elimination Zayo Group Holdings Net (loss)/income $6.2 $20.7 ($9.7) $19.6 $0.5 ($17.5) $19.8 Interest expense 23.9 17.1 12.5 0.2 0.0 0.0 53.7 Provision/(benefit) for income taxes 0.0 0.0 0.0 0.0 0.0 0.2 0.2 Depreciation and amortization 66.0 37.3 26.1 1.7 0.3 0.0 131.4 Transaction costs 0.9 1.1 0.5 3.7 0.0 0.0 6.2 Stock-based compensation 13.2 14.6 4.5 2.0 0.2 0.0 34.5 Foreign currency loss/(gain) on intercompany loans 0.1 0.3 0.0 (0.3) 0.0 17.3 17.4 Non-cash loss on investments 0.2 0.0 0.0 0.0 0.0 0.0 0.2 Adjusted EBITDA $110.5 $91.1 $33.9 $26.9 $1.0 $0.0 $263.4 Three months ended December 31, 2016

segment Net (Loss)/Earnings to Adjusted EBITDA

Reconciliation

SLIDE 36 FY2015 Q4 Earnings Presentation ($ in millions) Consolidated Zayo Canada Consolidated Excluding Zayo Canada Net cash provided by continuing operating activities: $169.7 $17.1 $152.6 Cash paid for income taxes 4.1 0.0 4.1 Cash paid for interest, net of capitalized interest 84.1 0.0 84.1 Excess tax benefit from stock-based compensation 0.0 0.0 0.0 Transaction costs 6.2 3.7 2.5 Provision for bad debts (0.5) (0.1) (0.4) Additions to deferred revenue (43.4) (1.1) (42.3) Amortization of deferred revenue 28.1 1.6 26.5 Other changes in operating assets and liabilities 15.1 5.7 9.4 Adjusted EBITDA 263.4 26.9 236.5 Purchases of property and equipment (213.6) (9.6) (204.0) Unlevered Free Cash Flow 49.8 17.3 32.5 Additions to deferred revenue 43.4 1.1 42.3 Amortization of deferred revenue (28.1) (1.6) (26.5) Adjusted Unlevered Free Cash Flow $65.1 $16.8 $48.3 Reconciliation of levered free cash flow: Net cash provided by continuing operating activities: $169.7 $17.1 $152.6 Purchases of property and equipment ($213.6) ($9.6) ($204.0) Levered free cash flow: ($43.9) $7.5 ($51.4) December 31, 2016

cash from Operating Activities to UFCF, Adjusted UFCF & LFCF - without Zayo Canada

Reconciliation

SLIDE 37 FY2015 Q4 Earnings Presentation

($ in millions)

Consolidated Zayo Canada Consolidated Excluding Canada Earnings/(loss) from continuing operations $19.8 $19.6 $0.2 Depreciation and Amortization Expense 131.4 1.7 129.7 Foreign currency loss/(gain) on intercompany loans 17.4 (0.3) 17.7 Stock-based compensation 34.5 2.0 32.5 Transaction costs 6.2 3.7 2.5 Loss on extinguishment of debt 0.0 0.0 0.0 Non-cash loss on investments 0.2 0.0 0.2 Amortization of deferred revenue (28.1) (1.6) (26.5) Maintenance capital expenditures (7.5) (1.0) (6.5) AFFO 173.9 24.1 149.8 Upfront customer payments on <12 mo payback of new sales 24.0 0.6 23.4 Capital expenditures for <12 mo payback net new sales (23.7) (2.6) (21.1) Capital expenditures for network capacity (47.8) (2.8) (45.0) Net AFFO $126.4 $19.3 $107.1 December 31, 2016

AFFO & Net AFFO – without Zayo Canada

Reconciliation

SLIDE 38 38 38 Zayo Santa Clara Zayo Canada Purchase accounting and other adjustments Pro-Forma without Zayo Canada Revenue 504.9 $ 1.4 $ 112.2 $

394.1 $ Operating costs and expenses Operating costs, excluding depreciation and amortization 173.8 0.5 $ 59.5 $

114.8

$ Selling, general and administrative expenses 105.6 0.1 29.8

75.9

Depreciation and amortization 138.5

10.5
128.0

Operating income/(loss) 87.0 0.7 12.4

75.3

Other income/(expense) Interest expense (53.3)

(1.7)
(51.6)

Foreign currency (loss)/gain on intercompany loans (11.2)

(0.2)
(11.0)

Other (expense)/income, net (0.2)

(0.2)

Total other expense, net (64.7)

(1.9)
(62.8)

(Loss)/income before provision for income taxes 22.3 0.7 10.5

12.5

Provision/(benefit) for income taxes 6.6

6.9 Net (loss)/income $ 15.7 $ 0.7 $ 10.5 $ (0.3) $ 5.6 Add back non-EBITDA items included in net (loss)/income Depreciation and amortization 138.5

10.5
128.0

Interest expense 53.3

1.7
51.6

Provision/(benefit) for income taxes 6.6

6.9 Foreign currency loss/(gain) on intercompany loans 11.2

0.2
11.0

Transaction costs 3.0

Stock-based compensation 32.0

1.8
30.2

Non-cash loss on investments 0.3

Adjusted EBITDA $ 260.6 $ 0.7 $ 27.5 $ - $ 233.8 Three Months ended September 30, 2016 Historical (in millions)

Pro Forma Growth Reconciliations – September 2016 (Supporting FY17Q2 Pro Forma Growth excluding Zayo Canada)1,2

Reconciliation

($ in millions) 1 a reconciliation of previous quarter pro-forma growth can be found in our historical earnings supplements found on our website at http://investors.zayo.com/earnings-releases 2 includes the financial results of the acquired Allstream business during the three months ended September 30, 2016, purchase accounting adjustments and Santa Clara acquisition

SLIDE 39

Thank You

investors.zayo.com