Zayo Group Holdings, Inc. (NYSE:ZAYO) Q1 2019 Earnings Conference Call Transcript

Nov 07, 2018 • 05:00 pm ET

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Zayo Group Holdings, Inc. (NYSE:ZAYO) Q1 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Thank you for standing by, and welcome to the Zayo Group Holdings Fiscal Year 2019 First Quarter Earnings Call. My name is Ari, I will be your operator today. During the presentation, all participants will be in a listen-only mode. After today's presentation, there will be an opportunity for you to ask questions. (Operator Instructions). Please note that this event is being recorded, Wednesday, November 8, 2018.

I'd now like to turn the conference over to Brad Korch. Please go ahead.

Executive
Brad Korch

Good afternoon, and thank you for joining. Today's call will be led by Zayo's Chairman and CEO, Dan Caruso; and CFO, Matt Steinfort. This call is being webcast with a slide presentation that reviews the key financial and operating results for the three months ended September 30, 2018. For a link to the webcast, please visit the IR section of the Zayo website, www.zayo.com. The slide presentation and earnings release are directly available on the site.

(Forward-Looking Cautionary Statements)

I will now turn the presentation over to Dan Caruso, our Chairman and CEO.

Executive
Dan Caruso

Thank you, Brad. Our results for the quarter were lower-than-anticipated, both on the bookings and installs, which result in a lower applied growth. Our bookings were $7.3 million and installs $7.6 million, compared to the targets that we've been aiming toward, which is north of $8 million and with an intent of getting to $8.5 million and above. The churn was $6.5 million, 1.2% and together that produced net installs of $1 million, which implies a 2% growth, a 2% growth relative to the target that we set of 6% to 8%.

Our revenue EBITDA growth declined primarily due to nonrecurring items and FX, which, on the nonrecurring, we foreshadowed during the last earnings call and as the revenue is in line with kind of our low net installs. EBITDA margin and unlevered free cash flow stayed healthy at 56% and 22%, and our levered free cash flow was positive at $55 million. Now, these operating metrics are below targets. Later in the call, we will discuss these results in more detail. We'll explain why we believe that the December 2018 quarter results will look a lot similar to prior quarters such as the June 2018 quarter and why we remain optimistic about near-term prospects for strong bookings, gross installs and net installs.

But today, we also announced a project to separate Zayo into two publicly traded companies. One that is laser-focused on our infrastructure business, and one centered on enterprise services. I will provide the context that led to this decision and the rationale on why we believe this is a path that will unleash substantial value for our shareholders.

So let's start with a little bit of Zayo history. Zayo, from its very beginning, was a pioneer in Communication Infrastructure. And as part of that, we acquired 45 companies, nearly all of which were -- had significant fiber and/or data center assets. Along with these companies came other lines of business that were built on