360networks and MarquisNet Boost Zayo’s Fiscal Q3

With the AboveNet deal still in the wings, Zayo Group (news, filings) passed the $100M quarterly revenue threshold in its third fiscal quarter while continuing its margin growth.  Here’s a quick tabular summary:

$ in millions	Fiscal Q3/11	Fiscal Q4/11	Fiscal Q1/12	Fiscal Q2/12	Fiscal Q3/12
– Zayo Bandwidth	54.7	55.9	56.5	64.5	74.8
– Zayo Fiber Solutions	11.9	13.5	13.2	15.3	19.6
– zColo	9.1	9.5	9.7	10.2	11.8
Total Revenue	74.2	77.8	78.4	89.0	105.0
Adjusted EBITDA	32.7	37.2	38.0	45.1	53.9
Adj. EBITDA Margin	44.1%	47.8%	48.4%	50.6%	51.3%
Capex	29.1	24.9	28.6	31.4	42.7
Buildings on-net	4228	4393	4542	5193	5431

This is the first full quarter that includes the results of 360networks and MarquisNet,  so the company’s results are harder than usual to gauge at first sight.  Actually, given the frequency of M&A by Zayo perhaps it’s just as hard as usual.  In the second quarter there will be two months or so from AriaLink and of course AboveNet is in the wings for Q3.

Revenue grew organically as well as inorganically, but seems to have been offset by relatively higher levels of churn – to be expected in the aftermath of a merger.  I look forward to more detail on the conference call.  Margins continued to rise steadily, now solidly in the low 50s.

Zayo’s network expansion accelerated during the quarter, as they added 232 buildings to their network, up from 196 in the prior quarter.  The prior quarter’s on-net building jump included 455 additional on-net buildings from 360networks of course.  Of those 232, almost three quarters were to towers, with most of the rest being enterprise locations.  And there are more where that came from, as Zayo now has fiber to another 944 sites under construction, up 247 from the prior quarter.

Zayo also said it would have to restate some of its past financials slightly after discovering a mathematical error in the calculation of the deferred tax assets acquired from Fibernet Telecom Group two years ago.  That takes a small chunk off the balance sheet, but is unrelated to the company’s operational growth profile.

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Categories: Financials · Metro fiber