In its quarterly report this morning, Zayo posted its usual complex mix of steady organic and inorganic growth numbers. But the standout item by far was a big fiber-to-the-tower buildout project down in Texas. Here are their numbers in some context:
| $ in millions | Fiscal Q3/14 |
Fiscal Q4/14 |
Fiscal Q1/15 |
Fiscal Q2/15 |
Fiscal Q3/15 |
|---|---|---|---|---|---|
| – Physical Infrastructure | 125.0 | 135.9 | 149.6 | 152.7 | 164.3 |
| – Lit Services | 151.7 | 153.8 | 156.1 | 157.4 | 163.0 |
| – Other Services | 6.4 | 8.4 | 14.9 | 13.8 | 13.4 |
| Total Revenue | 278.0 | 296.7 | 320.6 | 323.9 | 340.7 |
| Adjusted EBITDA | 165.0 | 171.7 | 183.3 | 189.7 | 199.0 |
| Adj. EBITDA Margin | 59.4% | 55.9% | 57.1% | 58.6% | 58.4% |
| Capex | 90.9 | 94.9 | 115.3 | 129.5 | 130.1 |
| Buildings on-net | 14,490 | 15,027 | 16,151 | 16,712 | 17,479 |
Revenues came in ahead of analyst projections, with organic growth and the Latisys contribution more than offsetting some European currency headwinds. The company added another 767 on-net buildings and towers to their network, building another 662 route miles of fiber along the way.
Zayo has projects going on all over the place, some they have talked publicly about like their longhaul build between Dallas and Phoenix, and some that add FTT depth in places they’ve already been busy in like along the Colorado Front Range. But this new one in Dallas described in the Earnings Supplement is a really big one, with 2,000 new metro fiber miles planned hooking up more than 600 cell towers, with a capex budget of some $185M in planned over the next four years. Of all the US major regions in the US, Texas has not been one of Zayo’s favorite targets until now. I’ve always figured they’d take care of that inorganically sooner or later by acquiring FiberLight or Alpheus, yet an organic move in Dallas makes plenty of sense too.
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Categories: Datacenter · Fiber Networks · Financials
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GOOD FOR THEM. THEY ARE ON THE RIGHT TRACK
What is with the stock? It’s down 8% in the last two days. I thought their earnings report was pretty strong. What didn’t Wall Street like?
3 things I thought hurt them:
(1) bookings commentary
(2) the IPO idea that the investment was couched in further fiber M&A and now they are talking about how expensive it is and they may take an unconventional approach(plan to spend our money is now changing)
(3) How do they compete with CCI who is 4-5x the size, 7 multiple point higher ebitda – how does Zayo compete with someone with that type of cost of capital advantage?