Earnings Call Presentation€¦ · 1 Quarter ended Dec -15 annualized 2 Every quarter since...

Earnings Call Presentation

Zayo Group Holdings, Inc.

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

Dan Caruso Chairman & Chief Executive Officer

3

4

FY 2Q16 Highlights

25th consecutive quarter of consecutive revenue growth

6% organic recurring revenue growth

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

Zayo at a Glance

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

5

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

FY2015 Q4 Earnings Presentation 6

% 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

Segments & Products

7

$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

>98% of revenue is recurring

3% QoQ annualized total revenue growth

4% in constant currency

6% QoQ annualized recurring revenue growth


$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

7

8

1 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.

$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

($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 LFCF

8

% of Revenue

2 3

9

Q2 Operational Highlights

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)

$1.8$2.2 $2.2

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0


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

91 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%

10

Q2 Operational Highlights Cont.

$104.8$119.8

$123.5

$0

$50

$100

$150


($M)Last day of quarter run-rate

(MRR+MAR)

12% QoQ annualized revenue run-rate growth


6% excluding December 31, 2015 acquisitions


record service activation pipeline represents

12% of revenue run-rate

47 months average remaining contract term

$5.9 $5.7 $6.5

$5.1 $8.4 $7.9

$11.0

$14.0 $14.4

87 91 93 90 95 96 100 98

$0

$5

$10

$15

$20


Delivery date after 6 months

Delivery date within the next 6 months

Implied Average Days to Install

Service Activation Pipeline

10

($M)

11

$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.

$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)

11

12

Q2 Commercial Highlights

12

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

13

Q2 Commercial Highlights Cont.

13

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

14

Q2 Commercial Highlights Cont.

14

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

Ken desGarennes Chief Financial Officer

15

FY2015 Q4 Earnings Presentation

Q2 Financial Results

161 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 closed2 Dec-15 EPS is based on 244.8 million weighted average shares outstanding for the quarter; 244.7 million shares were outstanding on 12/31/15

($ in millions)

December 31, March 31, June 30, September 30, December 31,2014 2015 2015 2015 2015

Revenue

Zayo Dark Fiber Solutions 129.7 133.5 135.3 135.0 137.7

Zayo Network Connectivity 161.7 163.0 163.0 167.0 168.7

Zayo Colocation & Cloud Infrastructure 27.0 38.5 57.6 58.3 58.5

Other 5.5 5.7 6.0 6.5 4.7

Corporate/Intercompany Elimination 0.0 0.0 0.0 0.0 0.0

Zayo Group Holdings Revenue $323.9 $340.7 $361.9 $366.8 $369.6

Annualized revenue growth 4% 21% 25% 5% 3%

Pro-forma annualized revenue growth1 4% 6% 5% 5% 3%

Operating income/(loss) 97.1 56.7 54.7 52.1 58.7

Net Earnings/(loss) 3.8 (53.7) 5.1 (15.2) (10.8)

EPS (basic and diluted) 0.02 (0.22) 0.02 (0.06) (0.04)

EBITDA

Zayo Dark Fiber Solutions 89.6 92.6 96.8 96.6 99.1

Zayo Network Connectivity 85.6 85.7 85.0 88.7 89.9

Zayo Colocation & Cloud Infrastructure 13.4 19.5 27.8 28.4 29.0

Other 1.1 1.2 1.3 1.7 0.9

Corporate/Intercompany Elimination 0.0 0.0 0.0 0.0 0.0

Zayo Group Holdings Adjusted EBITDA $189.7 $199.0 $210.9 $215.4 $218.9

Annualized Adjusted EBITDA growth 15% 20% 24% 9% 7%

Pro-forma annualized Adjusted EBITDA

growth1 15% 10% 7% 9% 7%

Adjusted EBITDA margin 59% 58% 58% 59% 59%

Three Months Ended

2

17

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

Equity

18

size authorized $500M

term6 months

(expires May 9, 2016)

shares

repurchased in Q2356k

associated

capital used$8.4M

public floatPE &

Management

post-2009

investors &

management

pre-2009

investors

Estimated Shareholder Base Share Repurchase Program

Since November 16, 1015 waiver, estimate ~30M shares have transferred

from private equity ownership

243.9M shares outstanding1

1 Shares outstanding as of 2/12/2016


$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


($13)

$20 $26

$27 $17

-$6.0

$46.1 $42.9

($50)

($25)

$0

$25

$50

$75

$100

$125

$150


Pre-IPO Plan Post-IPO RSU Actual Dilution1

Stock-Based Comp

20

Performance oriented stock-based compensation

post-IPO RSU plans based primarily

on measured equity IRR and share

price performance

pre-IPO plan non-dilutive to current

shares outstanding

($M)

Stock Based Compensation

2,228 157N/A N/A N/A N/A N/A N/A

1 Dilution represents the actual dilution for shares vested and delivered during the quarter

Share Dilution (000s)

0.9% 0.1%N/A N/A N/A N/A N/A N/ADilution %


Consolidation

21Note: 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

Q&A

Segment-Level Results

24

$1,618

$1,914 $1,907

$1,960 $1,816

$1,672

$1,914

$2,322

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500


$91.6 $97.5 $107.4 $109.0 $111.3 $113.4 $115.4 $117.4

$0.3 $0.4

$0.2 $0.3 $0.2 $0.3 $0.3 $0.3

$10.9 $11.6

$13.3 $13.4 $14.3 $14.9 $15.7 $16.6

$2.7 $5.0

$6.4 $7.0 $7.6 $6.7 $3.6 $3.5

$105.5 $114.4

$127.4 $129.7 $133.5 $135.3 $135.0 $137.7

$0

$25

$50

$75

$100

$125

$150

$175

$200


MRR Usage MAR Other Revenue

millions

Revenue Stratification

$35 $36 $134 $9 $157 $141 $10 $181

$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 revenue stratification & operational data

thousands

($597) ($725)($945) ($818) ($993) ($836) ($761)

($1,017)

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

($4,000)

($3,500)

($3,000)

($2,500)

($2,000)

($1,500)

($1,000)

($500)

$0


Churn ProcessedGross Installations

MR

R a

nd

MA

R

MR

R a

nd

MA

R

thousands

$1,021 $1,189

$962 $1,141

$824 $837 $1,153 $1,305

12% 14% 10% 11% 8% 8% 11% 12%

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500


Implied Recurring Revenue Growth1=

Net Installationsthousands

MR

R a

nd

MA

RChurn % =

$1,592 $2,115 $1,956 $1,239 $2,272 $2,136 $1,668 $2,165

$325

$327 $531

$212

$546 $484

$330

$373 $1,917

$2,442 $2,488

$1,450

$2,818 $2,619

$1,998

$2,538

$240M $326M $439M $101M $429M $392M $256M $357M

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500


Net Sales - MRR

Net Sales - MAR

Contract Value =

Net New Sales (Bookings)

thousands

MR

R a

nd

MA

R

24

Segment Information

1 Calculated as Net Installs annualized, divided by beginning quarter MRR+MAR run-rate

25

$48 $50 $58 $70 $73 $79 $94 $109

45% 44% 46% 54% 55% 58% 69% 79%

$0

$25

$50

$75

$100

$125


% of Revenue

millions

Purchases of Property and Equipment

$73 $77 $85 $90 $93 $97 $97 $99

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

$0

$25

$50

$75

$100

$125


% of Revenue

millions

Adjusted EBITDA

($14)

$4 $20 $35 $32 $56 $54 $76

-14% 4% 16% 27% 24% 41% 40% 55%

($25)

$0

$25

$50

$75

$100


% of Revenue

millions

Net Capital1

$76 $61 $52 $41 $46 $26 $26 $7

72% 54% 40% 31% 35% 19% 20% 5%

$0

$25

$50

$75

$100

$125


% of Revenue

millionsAdj Unlevered FCF3

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

($10)

24% 24% 21% 15% 15% 13% 2% -7%

($25)

$0

$25

$50

$75

$100


% of Revenue

millionsUnlevered Free Cash Flow (FCF)2

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” 25

Segment InformationZayo Dark Fiber Solutions cash flow stratification

26

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

$3,307 $3,381 $3,230

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500


$144.8 $146.1 $153.1 $154.0 $154.2 $156.3 $159.2 $161.6

$1.7 $1.4 $1.8 $2.4 $2.2 $1.9 $1.8 $2.5

$2.6 $2.9 $3.4 $3.4 $3.4 $3.5 $3.8 $3.9

$2.6 $3.3 $1.9 $1.9 $3.2 $1.4 $2.2 $0.7

$151.7 $153.8 $160.2 $161.7 $163.0 $163.0 $167.0 $168.7

$0

$25

$50

$75

$100

$125

$150

$175

$200



millions


$2,705 $2,968 $2,735 $3,017 $3,125 $3,148 $3,259 $2,800

$94

$162

$57

$177 $95 $107 $164

$147 $2,799

$3,130

$2,792

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

$2,947

$100M $150M $90M $106M $103M $100M $119M $86M

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500


Net Sales - MRR

Net Sales - MAR

Contract Value =


thousands

MR

R a

nd

MA

R

thousands

($2,669)($2,452)($2,458)($2,587)($2,595)

($2,263) ($2,308)($2,435)

-1.8% -1.6% -1.6% -1.6% -1.6% -1.4% -1.4% -1.5%($4,500)

($4,000)

($3,500)

($3,000)

($2,500)

($2,000)

($1,500)

($1,000)

($500)

$0



MR

R a

nd

MA

R

MR

R a

nd

MA

R

thousands

$292 $447 $484 $430 $393

$1,044 $1,073

$795

2% 4% 4% 3% 3% 8% 8% 6%

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500



MR

R a

nd

MA

RChurn % =

$36 $41 $32 $41 $35 $35 $40 $39

$0

$25

$50

$75

$100

$125

$150

$175

$200





Chargesmillions

26

Segment InformationZayo Network Connectivity revenue stratification & operational data



27

$34 $35 $46 $53 $47 $49 $47 $48

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

$0

$25

$50

$75

$100

$125


% of Revenue

millions


$82 $82 $83 $86 $86 $85 $89 $90

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

$0

$25

$50

$75

$100

$125


% of Revenue

millions

Adjusted EBITDA

$31 $32 $40 $47 $47 $48 $38 $45

20% 21% 25% 29% 29% 29% 22% 27%

$0

$25

$50

$75

$100

$125


% of Revenue

millions

Net Capital1

$49 $46 $40 $35 $35 $34 $47 $41

32% 30% 25% 22% 22% 21% 28% 24%

$0

$25

$50

$75

$100

$125


% of Revenue


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

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

$0

$25

$50

$75

$100

$125


% of Revenue



Segment InformationZayo Network Connectivity cash flow stratification

28

$470 $443 $517 $489

$1,069

$1,189

$680

$783

$0

$250

$500

$750

$1,000

$1,250

$1,500


$18.4 $20.3 $25.5 $25.8 $34.9 $54.5 $55.4 $55.2

$0.4 $0.4 $0.6 $0.8

$1.3

$2.2 $2.2 $2.3

$0.3 $0.3 $0.4 $0.4

$0.6

$0.8 $0.8 $0.9

$0.5 $0.5 $0.3 $0.0

$1.9

$0.1

($0.1)

$0.1

$19.6 $21.5 $26.9 $27.0

$38.5

$57.6 $58.3 $58.5

($20)

$0

$20

$40

$60

$80



millions


$5 $7 $2 $18 $31 $13 $14 $23

$0

$20

$40

$60

$80

$100





Chargesmillions

thousands

($216)($237)

($301) ($262)

($475)

($700)($613) ($629)

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

($1,250)

($1,000)

($750)

($500)

($250)

$0



MR

R a

nd

MA

R

MR

R a

nd

MA

R

thousands

$254 $205 $216 $227

$594

$489

$67 $154

17% 12% 10% 10% 27% 11% 1% 3%

$0

$250

$500

$750

$1,000

$1,250

$1,500



MR

R a

nd

MA

RChurn % =

$397 $415 $452 $536 $852 $831 $847 $1,187

$22 $48 $37

$35

$80 $51 $72

$64

$420 $462 $489

$570

$932 $882 $918

$1,251

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

$0

$250

$500

$750

$1,000

$1,250

$1,500


Net Sales - MRR

Net Sales - MAR

Contract Value =


thousands

MR

R a

nd

MA

R

28

Segment InformationZayo Colo and Cloud Infrastructure revenue stratification & operational data



29

$9 $10 $11 $7 $10 $27 $19 $15

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

$0

$20

$40

$60

$80


% of Revenue

millions


$10 $11 $13 $13 $20 $28 $28 $29

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

$0

$20

$40

$60

$80


% of Revenue

millions

Adjusted EBITDA

$9 $10 $12 $6 $12 $26 $18 $15

46% 44% 44% 24% 30% 46% 30% 25%

$0

$20

$40

$60

$80


% of Revenue

millions

Net Capital1

$0 $1 $1 $7 $7 $1 $10 $14

1% 4% 4% 24% 19% 1% 17% 23%

$0

$20

$40

$60

$80


% of Revenue


$0 $1 $2 $6 $9 $1 $9 $14

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

$0

$20

$40

$60

$80


% of Revenue



Segment InformationZayo Colo and Cloud Infrastructure cash flow stratification

Reconciliations

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 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 and liquidity, and we use levered free cash flow as a measure to evaluate cash

generated through normal operating activities. 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. In

addition to these measures, we use levered free cash flow as a measure to evaluate cash generated through normal operating activities. 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.

31


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 operating 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 our 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.

32


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.

33


ReconciliationNet (Loss)/Income to Adjusted EBITDA

34

($ in millions)

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

2013 2013 2014 2014 Total 2014 2014 2015 2015 Total 2015 2015

Net (loss)/income ($27.4) ($36.8) ($41.6) ($73.5) ($179.3) ($110.5) $3.8 ($53.7) $5.1 ($155.3) ($15.2) ($10.8)

Earnings/(loss) from discontinued operations (1.7) (0.8) (1.1) 1.3 (2.3) 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Interest expense 51.5 50.3 49.1 52.6 203.5 46.9 53.4 60.7 53.0 214.0 53.8 51.2

Provision/(benefit) for income taxes 9.3 8.4 9.5 10.1 37.3 9.4 (4.4) (18.4) 4.6 (8.8) 2.7 11.1

Depreciation and amortization 81.0 81.7 84.2 91.3 338.2 96.0 96.9 100.1 113.2 406.2 117.1 113.7

Transaction costs 0.6 0.2 0.0 4.5 5.3 3.4 1.3 1.5 0.0 6.2 0.0 3.3

Stock-based compensation 42.9 57.0 65.2 88.6 253.7 123.1 (6.0) 40.7 42.9 200.7 46.1 42.9

Loss on extinguishment of debt 0.0 0.0 0.0 0.0 1.9 0.0 30.9 54.9 8.5 94.3 0.0 0.0

Foreign currency loss/(gain) on intercompany loans (0.6) (0.2) (0.1) (3.8) (4.7) 14.7 13.3 13.2 (16.8) 24.4 10.7 7.1

Non-cash loss on investments 0.0 1.9 0.0 0.0 0.0 0.0 0.5 0.0 0.4 0.9 0.2 0.4

Adjusted EBITDA, from continuing operations $155.6 $161.7 $165.2 $171.1 $653.6 $183.0 $189.7 $199.0 $210.9 $782.6 $215.4 $218.9

Purchases of property and equipment 86.7 88.3 90.9 94.9 360.8 115.3 129.5 130.1 155.5 530.4 159.2 172.4

Unlevered Free Cash Flow $68.9 $73.4 $74.3 $76.2 $292.8 $67.7 $60.2 $68.9 $55.4 $252.2 $56.2 $46.5

Fiscal Year

2016

Fiscal Year

2014

Fiscal Year

2015


Reconciliation

35

Segment Net (Loss)/Earnings to Adjusted EBITDA

($ in millions)

Zayo Dark Fiber

Solutions

Zayo

Network

Connectivity

Zayo

Colocation

and Cloud Zayo Other

Corporate /

Intercompany

Elimination

Zayo Group

Holdings

Net earnings/(loss) ($1.6) $18.0 ($9.1) $0.3 ($18.4) ($10.8)

Interest expense 24.6 17.3 9.2 0.0 0.1 51.2

Benefit for income taxes 0.0 0.0 0.0 0.0 11.1 11.1

Depreciation and amortization expense 57.3 33.6 22.3 0.5 0.0 113.7

Transaction costs 1.1 2.0 0.2 0.0 0.0 3.3

Stock-based compensation 17.5 19.1 6.2 0.1 0.0 42.9

Loss on extinguishment of debt 0.0 0.0 0.0 0.0 0.0 0.0

Foreign currency gain on intercompany loans 0.0 (0.1) 0.0 0.0 7.2 7.1

Non-cash loss on investments 0.2 0.0 0.2 0.0 0.0 0.4

Adjusted EBITDA $99.1 $89.9 $29.0 $0.9 $0.0 $218.9

Three Months Ended December 31, 2015


Cash from Operating Activities to UFCF, Adjusted UFCF & LFCF

36

Reconciliation

($ in millions)


2013 2013 2014 2014 2014 2014 2015 2015 2015 2015

Net cash provided by continuing operating activities: $97.1 $142.3 $159.0 $168.1 $118.2 $123.7 $168.5 $195.0 $195.2 $146.2

Cash paid for income taxes 0.5 0.6 1.6 3.0 8.7 2.1 1.9 1.8 4.7 2.0

Cash paid for interest, net of capitalized interest 75.0 16.8 68.4 15.2 73.6 71.1 32.2 14.3 29.3 83.2

Non-liquidating distribution to common unit holders 0.0 10.0 3.0 9.1 0.0 0.0 0.0 0.0 0.0 0.0

Excess tax benefit from stock-based compensation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.9 0.0

Transaction costs 0.6 0.2 0.0 4.5 3.5 1.3 1.5 0.0 0.0 3.3

Provision for bad debts (0.4) (0.4) (0.8) (0.3) (0.6) (0.3) (0.4) (0.6) (0.6) (1.9)

Additions to deferred revenue (24.0) (23.4) (65.2) (51.2) (43.2) (40.9) (39.5) (25.5) (49.7) (36.9)

Amortization of deferred revenue 12.6 13.6 14.2 15.2 17.3 17.3 18.3 19.2 20.4 21.5

Other changes in operating assets and liabilities (5.8) 2.0 (15.0) 7.5 5.5 15.4 16.5 6.7 8.2 1.5

Adjusted EBITDA 155.6 161.7 165.2 171.1 183.0 189.7 199.0 210.9 215.4 218.9

Purchases of property and equipment (86.7) (88.3) (90.9) (94.9) (115.3) (129.5) (130.1) (155.5) (159.2) (172.4)

Unlevered Free Cash Flow 68.9 73.4 74.3 76.2 67.7 60.2 68.9 55.4 56.2 46.5

Additions to deferred revenue 24.0 23.4 65.7 51.2 43.2 40.9 39.5 25.5 49.7 36.9

Amortization of deferred revenue (12.6) (13.6) (14.2) (15.2) (17.3) (17.3) (18.3) (19.2) (20.4) (21.5)

Adjusted Unlevered Free Cash Flow $80.3 $83.2 $125.8 $112.2 $93.7 $83.8 $90.1 $61.7 $85.5 $61.9

Reconciliation of levered free cash flow:

Net cash provided by continuing operating activities: $97.1 $142.3 $159.0 $168.1 $118.2 $123.7 $168.5 $195.0 $195.2 $146.2

Purchases of property and equipment ($86.7) ($88.3) ($90.9) ($94.9) ($115.3) ($129.5) ($130.1) ($155.5) ($159.2) ($172.4)

Levered free cash flow: $10.4 $54.0 $68.1 $73.2 $2.9 ($5.8) $38.4 $39.5 $36.0 ($26.2)

Fiscal Year

2014

Fiscal Year

2015

Fiscal Year

2016


AFFO & Net AFFO

37

Reconciliation

($ in millions)


2013 2013 2014 2014 Total 2014 2014 2015 2015 Total 2015 2015

Earnings/(loss) from continuing operations ($29.1) ($37.6) ($42.7) ($72.2) ($181.6) ($110.5) $3.8 ($53.7) $5.1 ($155.3) ($15.2) ($10.8)

Depreciation and Amortization Expense $81.0 $81.7 $84.2 $91.3 $338.2 $96.0 $96.9 $100.1 $113.2 $406.2 $117.1 $113.7

Foreign currency loss/(gain) on intercompany loans (0.6) (0.2) (0.1) (3.8) (4.7) 14.6 13.4 13.2 (16.8) 24.4 10.7 7.1

Stock-based compensation 42.9 57.0 65.2 88.5 253.6 123.1 (6.0) 40.7 42.9 200.7 46.1 42.9

Transaction costs 0.6 0.2 0.0 4.5 5.3 3.5 1.2 1.5 0.0 6.2 0.0 3.3

Loss on extinguishment of debt 0.0 1.9 0.0 0.0 1.9 0.0 30.9 54.9 8.5 94.3 0.0 0.0

Non-cash loss on investments 0.0 0.0 0.0 0.0 0.0 0.0 0.5 0.0 0.4 0.9 0.2 0.4

Amortization of deferred revenue (12.6) (13.6) (14.2) (15.2) (55.6) (17.3) (17.3) (18.3) (19.2) (72.1) (20.4) (21.5)

Maintenance capital expenditures (5.1) (4.9) (4.9) (5.2) (20.1) (5.7) (5.7) (5.8) (7.5) (24.7) (7.0) (6.5)

AFFO 77.2 84.5 87.5 87.9 337.0 103.7 117.7 132.6 126.6 480.6 131.5 128.6

Upfront customer payments on <12 mo payback of new sales 32.7 48.2 32.7 45.1 158.7 25.3 18.8 68.2 37.0 149.3 55.1 41.1

Capital expenditures for <12 mo payback net new sales (24.4) (44.1) (14.5) (39.4) (122.7) (45.4) (17.8) (50.6) (25.9) (139.7) (36.8) (29.8)

Capital expenditures for network capacity (15.7) (17.4) (20.0) (23.8) (76.9) (20.6) (33.7) (42.7) (21.5) (118.5) (22.8) (41.6)

Net AFFO $69.9 $71.2 $85.7 $69.8 $296.2 $63.0 $85.0 $107.5 $116.2 $371.7 $127.0 $98.3

Fiscal Year

2016

Fiscal Year

2014

Fiscal Year

2015

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