Zayo Makes Some Progress Toward Growth Goals

Fresh off of two acquisition announcements in January, Zayo posted its fiscal Q2 numbers yesterday after the market closed.  Revenues came in a bit above expectations, while earnings per share trailed slightly.  Here are a few of their numbers in some context:

$ in millions	Fiscal Q2/17	Fiscal Q3/17	Fiscal Q4/17	Fiscal Q1/18	Fiscal Q2/18
Total Revenue	506.7	550.2	638.0	643.5	653.5
Adjusted EBITDA	263.4	282.0	310.8	316.6	329.9
Adj. EBITDA Margin	52.0%	51.2%	48.7%	49.2%	50.5%
Capex	213.6	208.3	205.3	193.4	193.4
Buildings on-net	25,886	29,402	30,555	~31,600	32,793

It’s one of those rare Zayo quarters where there wasn’t much M&A noise to deal with.  Margins rose back above the 50% mark again, reflecting the company’s ongoing integration projects.  Capex remained slightly lower than it has been, although still near 30% of revenues of course.  Earnings per share of 5 cents was below expectations of about 13 cents.

Zayo has been trying to kick start its organic growth in order to gain some more respect from investors, looking to get it up to 6-8%.  In order to do that, they want bookings of above $8.5M with churn below 1.1%.  In Fiscal Q2 they made progress toward that goal with bookings of $7.9M and churn of 1.2%.  Net installs of $1.6M were still below the $2.6-3.4M they want to achieve though.  They are continuing to scale their sales headcount and are taking a hard look at their customer focus priorities.  They’ve still got work left to do though.

Also still in the works are the planned separation of the non-infrastructure parts of Allstream, and a potential conversion to a REIT.  Both of those are stories to keep an eye on in the months ahead.

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Categories: Fiber Networks · Financials