investor presentation - investors – zayo...

Investor Presentation

Zayo Group Holdings, Inc.

Results through Fiscal Year 2016 Q2NYSE: ZAYO@ZayoGroup

2

Safe HarborInformation 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 or Form 10-K filed with

the Securities and Exchange Commission (“SEC”) on September 18, 2015. 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, pricing supplement 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.

2

Zayo at a Glance (pre-Allstream)

3

7,442,113 fiber miles

95,178 route miles

1,949 employees

135 QBHC

Customers

6.7k customers

54% of rev from enterprise & content

46% carriers & wireless

Products

37% Dark Fiber Solutions

46% Network Connectivity

16% Colo & Cloud Infrastructure

1% Other

International Network Unique Metro Fiber Datacenters

Leading Fiber &

Datacenter Consolidator

37 acquisitions to date

5 since Jan 2015

Growth

Ou

r assets

Wh

at

we d

oTra

ck

reco

rd

55 zColo datacenters

>590k billable sf

People

Financial1

$

1 Quarter ended Dec -15 annualized2 Every quarter since becoming a public filer inclusive of Zayo Group, LLC operating subsidiary3 Based on average closing price for month of Dec-15

19,341 buildings

149 avg metro fiber count

$1.5B revenue

$876M adjusted EBITDA

Value Creation

25 consecutive quarters of

sequential revenue growth2

$1.1B invested equity since

2007 inception

~$6.3B equity value3

>5x return

4

Zayo Vision & Mission

Vision: Amass fiber, data center, and structure assets and

unleash their value by providing exceptional communications

infrastructure services

Mission: Accelerate our customers’ capabilities to bring freedom

and prosperity to the world by providing enormous high-quality

bandwidth

Expansive US & Int’l Fiber Footprint

5

with Dense Regional & Metro Networks

Morristown

Newark

Yonkers

Bloomfield

Napa

Santa Cruz

Fresno

Sacramento

Columbia

Baltimore

Silver Spring

Leesburg

6

across the U.S.

CedartownAthens

Lafayette

Jasper

Boulder

Ft. Collins

Georgetown

Parker

Addison

Mount Prospect

Rosemont

Evanston

7

also Europe & Canada

Notingham

Birmingham

Bristol

Lowesoft

Bordeaux

Lyon

Marseille

Strasbourg

LondonBuffalo

8

United Kingdom - London France - Paris Canada - Toronto

9

% Revenue % EBITDA% of Adj.

UFCF

Dark Fiber Leased raw fiber

Mobile Infrastructure Tower/small cell backhaul

Subtotal

Da

rk F

ibe

r

So

luti

on

s

Wavelengths1G, 2.5G, 10G & 100G

waves

EthernetSwitched & dedicated

service

IP Services Internet access & transit

SONETLegacy carrier-grade

service

Subtotal

Ne

two

rk C

on

nec

tivit

y

1 Based on quarter ended Dec-15 Dark Fiber Solutions, Network Connectivity, & Colocation & Cloud Infrastructure segment results; revenue from “Other” segment represents 1% of total revenue

1

30% 37% 71%

7% 8% -60%

37% 45% 11%

19% 16% 4%

11% 11% 25%

9% 8% 17%

6% 6% 20%

46% 41% 66%

Interconnect-Oriented ColoSpace, power &

interconnects

Cloud ServicesInfrastructure-as-a-

Service

Subtotal

13% 12% 20%

3% 2% 2%

16% 13% 22%

Co

loc

ati

on

& C

lou

d

Infr

astr

uc

ture

Big Bandwidth & Infra Product Set

10

FY 2Q16 Highlights

25th consecutive quarter of consecutive revenue growth

6% organic recurring revenue growth; 7% constant currency

record gross installs of $6.4M and near-record net installs of $2.2M

bookings of $6.8M

closed Viatel (UK/EU fiber) and Stream (Dallas colo) acquisitions

signed Allstream acquisition

$314 $359 $365

$9

$8 $5 $324

$367 $370

$0

$50

$100

$150

$200

$250

$300

$350

$400

Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15

Recurring Other

($M)Revenue

Q2 Financial Highlights

11

>98% of revenue is recurring

3% QoQ annualized total revenue growth

4% in constant currency

6% QoQ annualized recurring revenue growth

7% in constant currency

$184 $211 $217

$6

$5 $2 $190

$215 $219

59% 58% 57% 59% 58% 58% 59% 59%

$0

$50

$100

$150

$200

$250


($M)

Adjusted EBITDA

7% QoQ annualized total EBITDA growth

12% QoQ annualized recurring EBITDA growth

Associated with Other Revenue

Excluding Associated with Other Revenue

Adjusted EBITDA Margin

($130) ($159)($172)

124

195146

($6)$36

($26)

24% 25% 1% -2% 11% 11% 10% -7%

($250)

($150)

($50)

$50

$150

$250

$350


Purchases of PP&E Cash Flow From Operations LFCF1 Includes churn replacement capex plus ~0.5% implied growth2 Quarter ended Sep-15 LFCF impacted by ~$8M non-cash charge offset in cash flow from financing activities3 Quarter ended Dec-15 includes $54M of semi-annual interest payments and $17M of deferred interest from Jun-15 quarter senior notes offerings

Q2 Financial Highlights Cont.

12

$120 $150 $163

$6

$7$6

$4

$3

$3

$130

$159 $172

$0

$50

$100

$150

$200


Growth Maintenance Other

Purchases of Property & Equipment($M)

Net AFFO(capturing churn replacement)

$85

$127

$98

30% 24% 20% 26% 32% 32% 35% 27%

$0

$50

$100

$150

$200


% of Revenue

Levered FCF($M) ($M)

>90% of capex growth-related

net AFFO1 of $98M or 27% of revenue

($26M) of quarterly levered free cash flow

% of Revenue

2 3

$1.8$2.2 $2.2

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0


Q2 Operational Highlights

13

Net Installations

($M)

MR

R a

nd M

AR

MR

R a

nd M

AR

($2.5) ($2.8) ($3.1)

($1.2)($1.0)

($1.0)

($3.7) ($3.8)($4.2)

-1.3% -1.3% -1.3% -1.2% -1.3% -1.2% -1.1% -1.2%($7.0)

($6.0)

($5.0)

($4.0)

($3.0)

($2.0)

($1.0)

$0.0


Hard Disconnects

Upgrades / Price Decrease / Replacement

Churn % =

$4.1 $4.9 $5.1

$1.4

$1.1$1.3

$5.5$6.0

$6.4

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0


Upgrades / Price Increase / Replacement

Installations from New Services

Gross Installations Churn Processed($M)

MR

R a

nd M

AR

($M)

record gross install quarter at $6.4M

near-record $2.2M net installs

net installs imply 7% annualized recurring

revenue growth rate1

also record $14.4M install pipeline

1 Implied by the current quarter pace of Net Installs, calculated as Net Installs annualized ($2.199M * 4 = $8.796M), divided by the beginning of quarter run-rate $119.8M = 7.3%

$3.8 $4.4 $4.3

$1.4

$1.7 $1.6$0.1

$0.3 $0.9$5.2

$6.4$6.8

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0


<12 Month Payback and Positive IRR >12 Month Payback and Positive IRR

Speculative Projects

Q2 Operational Highlights Cont.

14

$227

$404 $474

($96)($134) ($312)

17 16 35 15 38 33 12 42

($450)

($250)

($50)

$150

$350

$550

$750


Contract Value Capex & Upfront Expenditures Payback Months

Contract Value vs. Capex on Bookings

($M)

CY15 bookings grew >20% YOY

~2/3 of bookings have <12 month payback

13% associated with speculative projects

total bookings contract value >1.5x the

associated committed capex

average payback of 42 months includes

$0.9M of speculative project bookings

Net New Sales (Bookings) Stratification

MR

R a

nd M

AR

($M)

Q2 Commercial Highlights

15

FTT market expansion and small cell acceleration drove >90% of committed

speculative projects in quarterLarge Atlanta FTT Project

fiber network to increase by >1,000 route miles

adding ~500 towers

~$100M of committed capex

175 502 596216

6981,628

391

1,200

2,224

0

500

1,000

1,500

2,000

2,500


In Service - SC Under Construction - SC

Small Cells

committed to build >1,000 incremental small cells

~$75M in committed capex

85% QoQ growth

Q2 Commercial Highlights Cont.

16

Bookings leverage completed and in-process FTT builds

leverages fiber from in-process FTT build

customer migrating from legacy lit service to Zayo

dark fiber

$121k MRR, >12 month payback

leverages existing network from completed FTT build

multiple, diverse 100G metro waves for high-

throughput datacenter connectivity

$75k MRR, <12 month payback

Note: Maps are shown for illustrative purposes

Metro Dark Fiber /

Municipal Government Customer

Metro Waves /

Internet Services Customer

Q2 Commercial Highlights Cont.

17

Bookings also leverage long-haul assets and international scale

Ethernet Private Line /

International Law Firm

10G & 1G diverse

circuits

connecting 11 US offices

$71k MRR, >12 month

payback

IP Services /

Content Infrastructure

IP via 2x 100G ports

significant upgrade at

primary datacenter

locations

$40k MRR, <12 month

payback

Metro Dark Fiber /

Alternative Carrier

dark fiber connectivity in 9US & UK/EU metro markets

leverages international tier 1

metro footprint

$59k MRR, <12 month

payback

Note: Maps are shown for illustrative purposes

18

Recent AcquisitionsTransform Zayo into pan-North America and European infrastructure provider

closed December 31, 2015 for $17M

Dallas datacenter adds 36k billable square feet

closed December 31, 2015 for $101M

24.2x pre-synergy LQA multiple 9.0x post-synergy

expect synergies to be substantially realized within CY16

adds 4.7k intercity and 560 metro miles of fiber

Viatel

Allstream

closed January 15, 2016 for $298M

3.7x pre-synergy LQA multiple

adds 12.5k of intercity and 5.5k metro miles of fiber

Stream Dallas

Colo Facility

$326

$1,639

$1,430

$350

$0

$1,000

$2,000

$3,000

$4,000

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Balance Sheet

6.375%6.000%10.125% L+275

ample liquidity including $441M of

revolver capacity

$1.1B of net operating loss carry

forwards

19

($M)

Interest Rate

Debt Schedule1

4.3x gross leverage

>75% fixed rate incl. rate swap

>50% is unsecured

leverage neutral $400M incremental

term loan (L+350 bps / 1% floor)

closed in January to fund Allstream

1 Principal value; excludes capital lease obligations; as of 12/31/2015

($ in millions) December 31, December 31,

2014 2015

Consolidated Balance Sheet Data

Cash and cash equivalents 164 176

Property and equipment, net 2,931 3,626

Total assets 4,989 6,274

Long-term debt and capital lease

obligations,

including current portion 2,937 3,702

Total Stockholders' equity 1,075 1,248

Consolidation

20

Note: Acquisitions shown on the Calendar Year in which the transactions were closed

remain active & opportunistic

CY15 was consistent with historical

pace of acquisitions

focused on fiber and datacenter targets

targeting both North America & Europe

ample debt capacity for additional deals

37 closed acquisitions totaling >$5 billion

For detailed Supplemental Earnings Information presentation, please visit:

investors.zayo.com

thank you

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