investor relations 28 january 2016 zayo reporting update call · dec113 mar114 jun114 sep114 dec114...

Zayo Reporting Update CallINVESTOR RELATIONS 28 January 2016

ZAYO GROUP

SAFE HARBORInformation contained in this presentation that is not historical by nature constitutes “forward-looking statements” whichcan 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 orcomparable terminology, or by discussions of strategy. No assurance can be given that future results expressed or impliedby the forward-looking statements will be achieved and actual results may differ materially from those contemplated bythe forward-looking statements. Such statements are based on management’s current expectations and beliefs and aresubject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed orimplied by the forward-looking statements. These risks and uncertainties include, but are not limited to, those relating toZayo Group Holdings, Inc.’s (“the Company” or “ZGH”) financial and operating prospects, current economic trends, futureopportunities, ability to retain existing customers and attract new ones, outlook of customers, and strength ofcompetition and pricing. In addition, there is risk and uncertainty in the Company’s acquisition strategy including our abilityto integrate acquired companies and assets. Specifically there is a risk associated with our recent acquisitions, and thebenefits thereof, including financial and operating results and synergy benefits that may be realized from theseacquisitions and the timeframe for realizing these benefits. Other factors and risks that may affect our business andfuture financial results are detailed in the “Risk Factors” section of our Annual Report or Form 10-K filed with theSecurities and Exchange Commission (“SEC”) on September 18, 2015. We caution you not to place undue reliance on theseforward-looking statements, which speak only as of their respective dates. We undertake no obligation to publicly updateor revise forward-looking statements to reflect events or circumstances after releasing this supplemental information orto reflect the occurrence of unanticipated events, except as required by law.

2

REPORTING UPDATE

Agenda• Reminder on New Segments Announcement

• On the November 10, 2015 Earnings Conference Call, the Company announced four new reporting segments: Zayo Dark Fiber Solutions, Zayo Network Connectivity, Zayo Colocation and Cloud, and Other

• 8-K Filed With Re-cast Segment Financials & Metrics• On January 26, 2016, the Company filed an 8-K with the Securities and Exchange Commission that included

re-cast historical financial and operating metrics under the new reporting segment structure

• Allstream Update and Reporting Details• Zayo announced the close of the Allstream acquisition on January 15, 2016. Zayo will be reporting Allstream

as a new single and separate reporting segment through the Jun-16 quarter (Fiscal Year 2016)

4

Review: Reporting Segment Changes

4

Reorganized strategic & reporting segments announced on November 10, 2015

strategic product groups – no

change zColoMobile

Infrastructure Group

priorreporting segments

Physical Infrastructure

Metro & Intercity

Dark Fiber

Cloud & Connectivity

WavesEthernet IPCloud SONET

new reporting segments

starting FY16Q2Dark Fiber Solutions

Dave Jones

Colocation & Cloud InfrastructureGreg Friedman

Network ConnectivityMax Clauson

co-COO Chris Morley manages the 3 reporting segments

co-COO Matt Erickson manages Global Sales and Customer Success 1

1 Includes sales, solutions engineering, strategic markets and alliances, IT, tranzact, customer service and security

5

$1,555 $1,618 $1,914 $1,907 $1,960 $1,816 $1,672

$1,914

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

Dec-‐13 Mar-‐14 Jun-‐14 Sep-‐14 Dec-‐14 Mar-‐15 Jun-‐15 Sep-‐15

$89.6 $91.6 $97.5 $107.4 $109.0 $111.3 $113.4 $115.4

$0.1 $0.3 $0.4 $0.2 $0.3 $0.2 $0.3 $0.3

$10.5 $10.9 $11.6 $13.3 $13.4 $14.3 $14.9 $15.7

$2.5 $2.7 $5.0

$6.4 $7.0 $7.6 $6.7 $3.6

$102.7 $105.5 $114.4

$127.4 $129.7 $133.5 $135.3 $135.0

$0

$25

$50

$75

$100

$125

$150

$175

$200


MRR Usage MAR Other Revenue

millions

Revenue Stratification1

$39 $35 $36 $134 $9 $157 $141 $10 $0

$25

$50

$75

$100

$125

$150

$175

$200


Estimated Capital and Upfront Expenditures associated with Net New Sales (Bookings) less Upfront

Chargesmillions

Zayo Dark Fiber Solutions Segment RevenueStratification & Operational Data

thousands

($900)($597) ($725)

($945)($818)

($993) ($836)($761)

-‐0.9% -‐0.6% -‐0.7% -‐0.8% -‐0.7% -‐0.8% -‐0.7% -‐0.6%($4,500)

($4,000)

($3,500)

($3,000)

($2,500)

($2,000)

($1,500)

($1,000)

($500)

$0


Churn ProcessedGross Installations

MRR

and

MAR

MRR

and

MAR

thousands

$655 $1,021

$1,189 $962 $1,141

$824 $837 $1,153

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500


Net Installationsthousands

MRR

and

MAR

Churn % =

$2,255 $1,592 $2,115 $1,956 $1,239 $2,272 $2,136 $1,668

$310

$325

$327 $531

$212

$546 $484

$330

$2,565

$1,917

$2,442 $2,488

$1,450

$2,818 $2,619

$1,998

$434M$240M$326M$439M$101M$429M$392M$256M

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500


Net Sales - MRRNet Sales - MAR

Contract Value =

Net New Sales (Bookings)

thousands

MRR

and

MAR

1 Zayo Dark Fiber Solutions annualized QoQ recurring revenue growth was 9% in F1Q16

6

$41 $48 $50 $58 $70 $73 $79 $94

40% 45% 44% 46% 54% 55% 58% 69%

$0

$25

$50

$75

$100

$125


% of Revenue

millionsPurchases of Property and Equipment

$71 $73 $77 $85 $90 $93 $97 $97

69% 69% 68% 67% 69% 69% 72% 72%

$0

$25

$50

$75

$100

$125


% of Revenue

millionsAdjusted EBITDA

$20

($14)

$4 $20 $35 $32 $56 $54

19% -‐14% 4% 16% 27% 24% 41% 40%

($25)

$0

$25

$50

$75

$100


% of Revenue

millionsNet Capital1

$41 $76 $61 $52 $41 $46 $26 $26

40% 72% 54% 40% 31% 35% 19% 20%

$0

$25

$50

$75

$100

$125


% of Revenue

millionsAdj Unlevered FCF3

$30 $25 $27 $27 $20 $20 $18 $3

29% 24% 24% 21% 15% 15% 13% 2%

$0

$25

$50

$75

$100

$125


% of Revenue

millionsUnlevered Free Cash Flow (FCF)2

Zayo Dark Fiber Solutions SegmentCash Flow Stratification

1 Net Capital is equal to “Cash Outflows for Purchases of Property and Equipment” less “Additions to Deferred Revenue”2 Unlevered Free Cash Flow is equal to Adjusted EBITDA less “Cash Outflows for Purchases of Property and Equipment”3 Adjusted Unlevered Free Cash Flow is equal to Adjusted EBITDA less “Net Capital” less “Monthly Amortized Revenue”

7

$468 $470 $443 $517 $489

$1,069 $1,189

$680

$0

$250

$500

$750

$1,000

$1,250

$1,500


$16.8 $18.4 $20.3 $25.5 $25.8 $34.9 $54.5 $55.4$0.3 $0.4 $0.4

$0.6 $0.8

$1.3

$2.2 $2.2

$0.3 $0.3 $0.3 $0.4 $0.4

$0.6

$0.8 $0.8

$0.8 $0.5 $0.5 $0.3 $0.0

$1.9

$0.1

($0.1)

$18.2 $19.6 $21.5 $26.9 $27.0

$38.5

$57.6 $58.3

($20)

$0

$20

$40

$60

$80



millions

Revenue Stratification

$16 $5 $7 $2 $18 $31 $13 $14 $0

$20

$40

$60

$80

$100



Chargesmillions

Zayo Colocation and Cloud Segment RevenueStratification & Operational Data

thousands

($184)($216) ($237)

($301)($262)

($475)

($700)($613)

-‐1.1% -‐1.2% -‐1.2% -‐1.2% -‐1.0% -‐1.3% -‐1.3% -‐1.1%($1,500)

($1,250)

($1,000)

($750)

($500)

($250)

$0



MRR

and

MAR

MRR

and

MAR

thousands

$284 $254 $205 $216 $227

$594 $489

$67 $0

$250

$500

$750

$1,000

$1,250

$1,500



MRR

and

MAR

Churn % =

$377 $397 $415 $452 $536 $852 $831 $847

$29 $22 $48 $37

$35

$80 $51 $72

$406 $420 $462 $489 $570

$932 $882 $918

$16M $13M $17M $15M $19M $31M $23M $30M

$0

$250

$500

$750

$1,000

$1,250

$1,500



Contract Value =


thousands

MRR

and

MAR

8

$6 $9 $10 $11 $7 $10 $27 $19

32% 48% 47% 40% 27% 26% 47% 33%

$0

$20

$40

$60

$80


% of Revenue


$9 $10 $11 $13 $13 $20 $28 $28

51% 49% 50% 50% 50% 51% 48% 49%

$0

$20

$40

$60

$80


% of Revenue


$6 $9 $10 $12 $6 $12 $26 $18

31% 46% 44% 44% 24% 30% 46% 30%

$0

$20

$40

$60

$80


% of Revenue


$3 $0 $1 $1 $7 $7 $1 $10

18% 1% 4% 4% 24% 19% 1% 17%

$0

$20

$40

$60

$80


% of Revenue


$3 $0 $1 $2 $6 $9 $1 $9

19% 1% 3% 9% 23% 24% 1% 16%

$0

$20

$40

$60

$80


% of Revenue


Zayo Colocation and Cloud SegmentCash Flow Stratification


9

$2,695 $2,961 $2,899 $2,942 $3,017 $2,988

$3,307 $3,381

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500


$144.2 $144.8 $146.1 $153.1 $154.0 $154.2 $156.3 $159.2

$1.2 $1.7 $1.4 $1.8 $2.4 $2.2 $1.9 $1.8 $2.3 $2.6 $2.9 $3.4 $3.4 $3.4 $3.5 $3.8 $3.5 $2.6 $3.3 $1.9 $1.9 $3.2 $1.4 $2.2 $151.3 $151.7 $153.8

$160.2 $161.7 $163.0 $163.0

$167.0

$0

$25

$50

$75

$100

$125

$150

$175

$200



millions

Revenue Stratification

$2,610 $2,705 $2,968 $2,735 $3,017 $3,125 $3,148 $3,259

$76 $94 $162

$57 $177 $95 $107 $164

$2,686 $2,799 $3,130

$2,792

$3,194 $3,220 $3,255 $3,423

$80M $100M$150M $90M $106M$103M$100M$119M

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500



Contract Value =


thousands

MRR

and

MAR

Zayo Network Connectivity SegmentRevenue Stratification & Operational Data

thousands

($2,461)($2,669)

($2,452)($2,458)($2,587)($2,595)

($2,263)($2,308)

-‐1.7% -‐1.8% -‐1.6% -‐1.6% -‐1.6% -‐1.6% -‐1.4% -‐1.4%($4,500)

($4,000)

($3,500)

($3,000)

($2,500)

($2,000)

($1,500)

($1,000)

($500)

$0



MRR

and

MAR

MRR

and

MAR

thousands

$233 $292 $447 $484 $430 $393

$1,044 $1,073

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500



MRR

and

MAR

Churn % =

$27 $36 $41 $32 $41 $35 $35 $40 $0

$25

$50

$75

$100

$125

$150

$175

$200



Chargesmillions

10

$42 $34 $35 $46 $53 $47 $49 $47

27% 22% 23% 29% 32% 29% 30% 28%

$0

$25

$50

$75

$100

$125


% of Revenue


$81 $82 $82 $83 $86 $86 $85 $89

54% 54% 53% 52% 53% 53% 52% 53%

$0

$25

$50

$75

$100

$125


% of Revenue


$40 $31 $32 $40 $47 $47 $48 $38

26% 20% 21% 25% 29% 29% 29% 22%

$0

$25

$50

$75

$100

$125


% of Revenue


$39 $49 $46 $40 $35 $35 $34 $47

26% 32% 30% 25% 22% 22% 21% 28%

$0

$25

$50

$75

$100

$125


% of Revenue


$40 $49 $47 $37 $33 $39 $36 $42

26% 32% 30% 23% 20% 24% 22% 25%

$0

$25

$50

$75

$100

$125


% of Revenue


Zayo Network Connectivity SegmentCash Flow Stratification


ALLSTREAM ACQUISITION

Allstream Acquisition Closed & Reporting Update

11

>9,000 km metro fiber network concentrated in Canada’s top five metropolitan markets (Toronto, Montreal, Vancouver, Ottawa, Calgary)

Connect approximately 3,300 on-net buildings

~20,000 km long-haul fiber network connecting all major Canadian markets and key U.S. network access points

Operates colocation space in Toronto, Montreal & Vancouver

• Acquisition closed on January 15, 2016 • Zayo will report Allstream as a single separate segment in the Mar-16 and Jun-16 fiscal quarters

(through FY 2016) • Starting in the Sep-16 quarter (FY 2017), the Company plans to separately report Zayo Canada

(the Canadian Communications Infrastructure business) and consolidate financial and operating metrics into the Dark Fiber Solutions, Network Connectivity and Colo & Cloud segments

• The remaining Allstream business will continue to be reported under the Allstream segment

Thank You

Appendix: Reconciliations

14

15

Zayo Dark Fiber Solutions SegmentFinancial Data

Financial DataFinancial Data($ in millions)

September 30, December 31, March 31, June 30, September 30,

2014 2014 2015 2015 2015

Revenue $127.4 $129.7 $133.5 $135.3 $135.0

Annualized revenue growth 45% 7% 12% 6% -‐1%

Pro-‐forma annualized revenue growth 1 18% 9%

Operating income/(loss) ($35.4) $35.7 $20.2 $25.9 $23.4

Adjusted EBITDA $85.2 $89.6 $92.6 $96.8 $96.6

Annualized Adjusted EBITDA growth 40% 21% 14% 18% -‐1%

Pro-‐forma annualized Adjusted EBITDA growth 1 21% 12%

Adjusted EBITDA margin 67% 69% 69% 72% 72%

Purchases of property and equipment $58.1 $69.7 $73.0 $78.9 $93.5

Unlevered Free Cash Flow $27.0 $19.9 $19.6 $17.9 $3.1

Unlevered Free Cash Flow margin 21% 15% 15% 13% 2%

Adjusted Unlevered Free Cash Flow $51.5 $40.8 $46.2 $26.0 $26.4

Adj Unlevered Free Cash Flow margin 40% 31% 35% 19% 20%

Three Months Ended

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 Zayo Dark Fiber Solutions annualized QoQ recurring revenue growth was 9% in F1Q16

2

16

Zayo Colocation and Cloud SegmentFinancial Data




2014 2014 2015 2015 2015

Revenue $26.9 $27.0 $38.5 $57.6 $58.3

Annualized revenue growth 100% 2% 171% 198% 5%

Pro-‐forma annualized revenue growth 1 13% 7% 17%

Operating income/(loss) $1.4 $6.5 $2.0 ($0.5) ($5.8)

Adjusted EBITDA $13.3 $13.4 $19.5 $27.8 $28.4

Annualized Adjusted EBITDA growth 94% 3% 184% 169% 8%

Pro-‐forma annualized Adjusted EBITDA growth 1 29% 19% 4%







Three Months Ended

17

Zayo Network Connectivity SegmentFinancial Data

Financial DataFinancial Data


($ in millions)September 30, December 31, March 31, June 30, September 30,

2014 2014 2015 2015 2015

Revenue $160.2 $161.7 $163.0 $163.0 $167.0

Annualized revenue growth 17% 4% 3% 0% 10%

Pro-‐forma annualized revenue growth 1 3% 2%

Operating income/(loss) ($4.5) $53.8 $33.8 $28.6 $33.3

Adjusted EBITDA $83.1 $85.6 $85.7 $85.0 $88.7

Annualized Adjusted EBITDA growth 8% 11% 1% -‐3% 17%

Pro-‐forma annualized Adjusted EBITDA growth 1 -‐1% -‐1%







Three Months Ended

18

Zayo Other Segment Financial Data




2014 2014 2015 2015 2015

Revenue $6.1 $5.5 $5.7 $6.0 $6.5

Annualized revenue growth -‐109% -‐43% 20% 24% 31%

Pro-‐forma annualized revenue growth 1 -‐125%

Operating income $1.3 $1.1 $0.6 $0.7 $1.2

Adjusted EBITDA $1.4 $1.1 $1.2 $1.3 $1.7

Annualized Adjusted EBITDA growth -‐175% -‐78% -‐22% 35% 148%

Pro-‐forma annualized Adjusted EBITDA growth 1 -‐172%







Three Months Ended

19

Segment Financial Data Rollup

Segment Data Rollup($ in millions)

Dark Fiber Colocation & Cloud NetworkSolutions Dark Fiber Zayo Infrastructure Colocation & Cloud Zayo Zayo Zayo Connectivity Network Zayo

Zayo Mobile Zayo Dark Segment Solutions Cloud Segment Infrastructure Wavelength Zayo SONET Ethernet IP Segment Connectivity Professional Other Zayo Group Infrastructure Fiber Elimination Segment zColo Services Elimination Segment Services Services Services Services Elimination Segment Services Other Segment Holdings

Revenue $25.3 $109.7 $0.0 $135.0 $48.7 $9.6 $0.0 $58.3 $70.9 $23.8 $41.4 $30.9 $0.0 $167.0 $4.7 $1.7 $6.5 $366.8Adjusted EBITDA $16.9 $79.7 $96.6 $24.0 $4.4 $28.4 $34.1 $13.0 $24.3 $17.3 $88.7 $1.2 $0.5 $1.7 $215.4Adjusted EBITDA margin 67% 73% 72% 49% 45% 49% 48% 55% 59% 56% 53% 26% 28% 27% 59%

Three Months Ended September 30, 2015

20

Invested Capital Ratio by Reporting Segment

Invested CapitalInvested Capital

($ in millions)

Dark Fiber Solutions

Colocation and Cloud

Network Connnectivity Other

Corporate / Intercompany Elimination

Zayo Group Holdings

Vested Stock-‐Based Compensation of Equity Awards $309.4 $45.1 $279.6 $0.6 $7.3 $641.9 Other Additional Paid-‐In Capital $289.3 $275.4 $169.7 $25.3 $355.7 $1,115.4 Total Additional paid-‐in capital

$598.7 $320.5 $449.3 $25.9 $363.0 $1,757.3 Less net assests of discontinued operations

Capital lease obligations 12.0 20.1 4.4 -‐ -‐ 36.6 Debt 1,848.1 624.6 1,195.0 -‐ (0.0) 3,667.7 Less cash balance (10.3) (1.1) (26.0) (3.1) (305.1) (345.7)

Total Invested Capital $2,448.5 $964.0 $1,622.7 $22.7 $57.9 $5,115.9


21

Segment Data Reconciliation: Net (Loss)/Earnings to Adjusted EBITDA

Segment Data Reconciliation1

1 A reconciliation of previous quarters’ legacy segment information can be found in our historical earnings supplements found on our website at http://www.zayo.com/financial-‐earnings-‐release

($ in millions)

Zayo Dark Fiber Solutions

Zayo Network Connectivity

Zayo Colocation and

Cloud Infrastructure Zayo Other


Zayo Group Holdings

Net earnings/(loss) ($2.2) $15.9 ($15.8) $1.2 ($14.3) ($15.2)

Interest expense 25.5 17.5 10.0 0.0 0.8 53.8

Provision for income taxes 0.0 0.0 0.0 0.0 2.7 2.7

Depreciation and amortization expense 55.6 33.9 27.1 0.5 0.0 117.1

Stock-‐based compensation 17.5 21.5 7.1 0.0 0.0 46.1

Unrealized foreign currency gain/(loss) on intercompany loans 0.0 (0.1) 0.0 0.0 10.8 10.7

Non-‐cash loss on investments 0.2 0.0 0.0 0.0 0.0 0.2

Adjusted EBITDA $96.6 $88.7 $28.4 $1.7 $0.0 $215.4


22


Segment Data Reconciliation

($ in millions)



Zayo Colocation and



Zayo Group Holdings

Net earnings/(loss) ($5.2) $7.2 ($9.9) $1.1 $11.9 $5.1


Benefit/(provision) for income taxes 0.0 0.0 0.0 (0.4) 5.0 4.6



Loss on extinguishment of debt 4.7 3.6 0.2 0.0 0.0 8.5

Unrealized foreign currency gain/(loss) on intercompany loans 0.0 0.1 0.0 0.0 (16.9) (16.8)


Adjusted EBITDA $96.8 $85.0 $27.8 $1.3 $0.0 $210.9

Three Months Ended June 30, 2015

23



($ in millions)



Zayo Colocation and Cloud

Infrastructure Zayo Other


Zayo Group Holdings

Net earnings/(loss) ($42.7) ($9.5) ($7.3) $0.6 $5.2 ($53.7)


Benefit for income taxes 0.0 0.0 0.0 0.0 (18.4) (18.4)


Transaction costs 0.2 0.2 1.1 0.0 0.0 1.5



Unrealized foreign currency gain/(loss) on intercompany loans 0.0 0.0 0.0 0.0 13.2 13.2

Adjusted EBITDA $92.6 $85.7 $19.5 $1.2 $0.0 $199.0

Three Months Ended March 31, 2015

24



($ in millions)



Zayo Colocation and Cloud

Infrastructure Zayo Other


Zayo Group Holdings

Net earnings/(loss) ($13.2) $21.1 $3.5 $1.2 ($8.8) $3.8


Benefit for income taxes 0.0 0.0 0.0 0.0 (4.4) (4.4)



Stock-‐based compensation (2.4) (3.1) 0.0 (0.5) 0.0 (6.0)


Foreign currency gain on intercompany loans 0.0 0.1 0.0 0.0 13.2 13.3


Adjusted EBITDA $89.6 $85.6 $13.4 $1.1 $0.0 $189.7

Three Months Ended December 31, 2014

25



($ in millions)



Zayo Colocation and



Zayo Group Holdings

Net loss ($62.5) ($22.0) ($1.0) $0.9 ($25.9) ($110.5)


Provision for income taxes 0.0 0.0 0.0 0.4 9.0 9.4



Stock-‐based compensation 63.5 53.5 6.5 (0.4) 0.0 123.1

Foreign currency gain on intercompany loans 0.0 0.0 0.0 0.0 14.7 14.7

Adjusted EBITDA $85.2 $83.1 $13.3 $1.4 $0.0 $183.0


investor relations 28 january 2016 zayo reporting update call · dec113 mar114 jun114 sep114 dec114...

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