Zayo — Corporate Update (March 2017)
34 slides from Zayo's corporate update, Mar 17, 2017
Slide 1: ELI Closing Investor Call
ELI Closing Invester Call Zayo Group Holdings, Inc. NYSE: ZAYO@ZayoGroup
Slide 2: Safe Harbor
2 SafeHarbor 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,” “sho
Slide 3: Context
Context ● ● ELI Transaction closed on March 1, 2017 Unlike Allstream, ELI was immediately integrated into Zayo’s operational performance ○ ○ ○ ○ Heavy geographic overlap Rapid collaboration on customer opportunities Quick progress on data, systems, and processes Day 1 organizational re-alignment ● S
Slide 4: As ELI is integrated, we will also
As ELI is integrated, we will also: ● ● ● ● ● Advance our Communications Infrastructure strategy Finish Allstream and Viatel integrations Bolster sales resources by ~ Cement global-orientation of each Segment Retain emphasis on Measured Equity Value Creation ○ Reward pace (“Equity IRR”) of measured
Slide 5: Providing Dec17q Targets
Providing Dec17q Targets ● ● Traditionally, have not provided guidance Instead, have provided operational metrics with emphasis on leading indicators (e.g., Bookings and Net Installs) To achieve transparency in light of changes, will provide Dec17q targets, with updates in intervening quarters Post
Slide 6: Previously Communicated Guidance
Previously Communicated Guidance Pro Forma LQA aEBITDA including ELI and Canada synergies $M 6
Slide 7: Annualized aEBITDA if remaining synergies achieved by Dec17q
If most of the remaining synergies are achieved Dec17q, Annualized aEBITDA would be ~$1.3B by Pro Forma LQA aEBITDA including ELI and Canada synergies $M 7
Slide 8: Zayo Group Segments
Zayo Group Segments Crisp separation into independent Global Business Segments SMB ● Zayo Group is a holding company of multiple portfolio businesses, with a Communications Infrastructure theme Transparency to investors on performance of each business segment will be provided Management’s focus is o
Slide 9: Fiber Solutions Segment: Dec17q Annualized aEBITDA
Dec17q Annualized aEBITDA by Segment Fiber Solutions Segment $M1 and dark fiber leased to other Zayo market-based rates ○ ○ ○ +/-10% organic revenue growth ~80% EBITDA margin 25-30% Adjusted UFCF margin3 ● ● Continued focus on inorganic opportunities In private transactions, pure-play Fiber Solution
Slide 10: Fiber Solutions Segment Units
Fiber Solutions Segment Units, each treated as a by a seasoned executive Western Europe 10 Communications Infrastructure Fiber Solutions 6 Geographic Business portfolio company, run North America
Slide 11: Colo Segment: Dec17q Annualized aEBITDA
Dec17q Annualized aEBITDA by Segment Colo Segment $M1 organic revenue growth 50-55% EBITDA margin 15-20% Adjusted UFCF margin3 ○ ○ ● ● Continued focus on inorganic opportunities Similar companies valued at mid to high double digit multiples ○ ○ Public comps [e.g., Cyrus One (18x); QTS (18x)] Precede
Slide 12: Transport Segment: Dec17q Annualized aEBITDA
Dec17q Annualized aEBITDA by Segment $M1 Transport Segment consists of: Wavelengths, Wholesale IP & SONET ths and IP are growth products, whereas SONET is shrinking Operational metrics2: ● ○ Low single digit organic revenue growth, as SONET decline offsets higher growth rate ~45% EBITDA margin 20-25
Slide 13: Enterprise Networks Segment
Enterprise Networks Segment ● Broad suite of products aimed at large enterprise customers: ○ ○ ○ ○ Managed WAN Ethernet Private Lines Dedicated Internet Access and IP-VPN Cloud Infrastructure Operational metrics2: ● Dec17q Annualized aEBITDA by Segment $M1 ○ ○ ○ Low to mid single digit organic reven
Slide 14: CI Shared Services
CI Shared Services ● Segments share a Sales and Customer Service organization ● Each Segment participates directly in sales through business development ● Zayo’s Communications Infrastructure QBHC will grow from 1371 to ~2502 during CY 2017 14 Communications Infrastructure Shared Sales & Customer Se
Slide 15: Allstream Segment
Allstream Segment ● Voice and SMB businesses from both ELI and legacy Allstream Though non-core to Communications Infrastructure theme, Allstream is a valuable business By completely separating it, creates optionality to either manage it for cash flow or spin it out Operational metrics2: ● ● ● ○ Neg
Slide 16: Net Indebtedness
Net Indebtedness Indebtedness 16 Gross Indebtedness (including cap leases) Cash Balance Net Immediately Prior to ELI Close (12/31/16A) $4.2B $0.1B $4.0B Immediately After ELI Close (3/31/17E) $5.7B $0.2B $5.5B Become consistently run-rate LFCF positive during calendar 20171
Slide 17: Recap of Dec17q Targets
Recap of Dec17q Targets (excluding 17 Communications Infrastructure: ~90% of EBITDA Fiber Solutions Colo Transport Enterprise Networks Allstream Total aEBITDA % of total 47% 10% 17% 17% 9% $1.33B LQA Organic Revenue Growth Rate ~10% High Single Digits Low Single Digits Low to Mid Single Digits Negat
Slide 18: Targets will be updated during earnings calls
Targets will be updated during earning calls 18 ●Provided today Update 4 Report Sep17q Results & update Dec17q Targets Update 3 Report Jun17q Results & update Dec17q Targets Update 1 Financial Targets for Dec17q Update 2 Report Mar17q Results & update Dec17q Targets Update 5 Report Dec17q Results
Slide 19: Temporary scale back in publication of quarterly Operational Metrics
Temporary scale back in publication of quarterly Operational Metrics ● ● Unlike Allstream, ELI was immediately integrated into Zayo’s day-to-day operations Given March 1, 2017 ELI close date, it will be challenging to produce detailed and accurate operational metrics for Mar17q Expect to scale back
Slide 20: Summary
Summary ● CY 2017 will be a year of substantial change, with EBITDA and Adjusted Unlevered Free Cash Flow expected to increase, driven by: ○ ○ Organic growth Progress on ELI, Allstream, Europe integrations ● Zayo Group is a holding company of multiple portfolio businesses, with a Communications Infr
Slide 21: Bandwidth, Fiber, and Consolidation tailwinds
Bandwidth,Fiber, tailwinds are compelling and Consolidation 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
Slide 22: Supplemental Earnings Information
For detailed Supplemental Earnings Information presentation, please visit: investors.zayo.com
Slide 23: Appendix
Appendix For detailed Supplemental Earnings Information presentation, please visit: investors.zayo.com
Slide 24: Electric Lightwave Acquisition
Electric Lightwave Acquisition fiber rich, complementary assets in important west coast markets adds 12,100 route miles $1.42 billion purchase price 6.5x post-synergy purchase multiple strengthens Zayo’s position as the only independent national infrastructure focused provider expected FY 3Q17 close
Slide 25: Electric Lightwave Acquisition map
Electric Lightwave Acquisition e d e r o etr rke s Sacramento,CA
Slide 26: Electric Lightwave network map
o,CA Phoenix,AZ Boise,ID S ·· okane,WA San Franc .isc
Slide 27: Allstream Acquisition
Allstream Acquisition exa d ne r fo p i e r arkets Vanc.ouver,BC
Slide 28: Allstream Acquisition
Allstream Acquisition yetr e a ne r tp i in arke s Ottawa,ON Montreal,QC
Slide 29: Reconciliations
Reconciliations
Slide 30: Presentation of Certain Consolidated Pro-forma Financial Data
Presentation of Certain Consolidated Pro-forma Financial Data Acquisitions have been, and are expected to continue to be, a component of the Company’s strategy. In this presentation, the Company sets forth its pro-forma annualized revenue growth rate and pro-forma annualized Adjusted EBITDA growth r
Slide 31: Adjusted EBITDA definition and use
We also monitor Adjusted EBITDA because our subsidiaries have debt covenants that restrict their borrowing capacity that are based on a leverage ratio, which utilizes a modified EBITDA, as defined in our credit agreement and the indentures governing our notes. The modified EBITDA is consistent with
Slide 32: Reconciliation Net (Loss)/Income to Adjusted EBITDA
Reconciliation Net (Loss)/lncome to Adjusted EBITDA Flilsca'l Y•ea1 r Firs.cal Yea1r Fiscal Year 2017 ($in millions) 201.5. 2101.6 Se<ptellil'ber 30, OeDI!'m'beir 3.1,, M!a.rcJh3.1,, Jurte30,, 2015 Sept•em:b.er 30, 0BDI!'mbe<r3·1. M:;m:Jh3.1, 20116 u:ne30,, 20116 Se<ptembe-r 30,. 201;6 li>BDern'bter
Slide 33: Reconciliation Net (Loss)/Income to Adjusted EBITDA
Reconciliation Net (Loss)/lncome to Adjusted EBITDA ($in millions) Sept:e111i11 ber 3'0.., 2016 Deoen11 ber 3, 2016 !Exr·l u:di ng Zayo Canada 1CaMOIi.dla'lt·Bdl ZayoCarNld\a ElLI $1'91.3 $19.6 .:2 $ .:2 53.5 . 2 9.7 ($3. 13.5 .1 3:2.7 53.7 . 2 131. 6. Inte·r·e.st expee n.s.e Pr i!l.i.si n/(Deru ·fi
Slide 34: Thank You
[LOGO] Thank You investors.Zayo.com