Posting Q4 Results, Zayo Surges Into Small Cell Backhaul

Zayo posted its fiscal Q2/2016 earnings report this morning, a rare quarter in which M&A activity didn’t feature in the numbers, sequentially at least.  Zayo’s purchase of Viatel, Allstream, and Stream’s Dallas colo will of course contribute to the next report in a big way.  Here is a quick table of the company’s results, which is of course in far less detail than you can find in the extensive information the company puts out in its earnings supplement.

$ in millions	Fiscal Q2/15	Fiscal Q3/15	Fiscal Q4/15	Fiscal Q1/16	Fiscal Q2/16
– Dark Fiber	129.7	133.5	135.3	135.0	137.7
– Network Connectivity	161.7	163.0	163.0	167.0	168.7
– Colo & Cloud	27.0	38.5	57.6	58.3	58.5
– Other	5.5	5.7	6.0	6.5	4.7
Total Revenue	323.9	340.7	361.9	366.8	369.6
Adjusted EBITDA	189.7	199.0	210.9	215.4	218.9
Adj. EBITDA Margin	58.6%	58.4%	58.3%	58.7%	59.2%
Capex	129.5	130.1	155.5	159.2	172.4
Buildings on-net	16,712	17,479	17,973	18,528	19,341

 

Revenue growth seems to have been rather lighter than the market had been projecting, as analysts had been looking for $373M on the top line, although no particular product line seems to have been to blame more than any other.   Looking ahead a bit, new bookings during the quarter were strongest from the colo and cloud side, with dark fiber pretty much where it usually is, and network connectivity a bit lighter.   EBITDA margins edged closer to the 60% milestone, although they’ll surely fall back in the wake of the acquisitions of Allstream and Viatel, neither of which was near that sort of level.

Capex reached the highest level I have seen it to date at some 47% of revenue, with the fruits of all that hard work showing up in the 813 on-net buildings they added during the quarter.  Those were mostly on the wireless infrastructure side of course, which is clearly going to continue.  Zayo said that 90% of committed speculative projects during the quarter were fiber-to-the-tower and small cell, including more than 1,000 incremental small cells alone with $75M dedicated to the project (up 80%).  The density they have built up in their FTT markets has provided a stepping stone to small cell deployments, and thus Zayo is again off to the races toward a new opportunity to densify its networks.

On the balance sheet, Zayo added another $400M to its term loan facility, which helped pay for the Allstream deal after closing the other two with cash on hand.  Zayo spent $8.5M buying back 356K shares of its stock during the quarter.  They now estimate that 30 million shares have shifted from private equity to the public float since the November 16 waiver.

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Categories: Datacenter · Financials · Metro fiber