Zayo has reported its fiscal Q2 earnings, turning in a profit of $1.9M on total revenues of $77.9M. While Zayo remains privately held, it has publicly traded debt as well as a general outlook on openness, and has since last Spring issued very detailed information on its progress. On October 1, they acquired American Fiber Systems, which as expected supplied most of the revenue boost over the prior quarter. Here is a quick chart of Zayo’s earnings in the context of the prior three quarters:
| $ in millions | Fiscal Q3/10 | Fiscal Q4/10 | Fiscal Q1/11 | Fiscal Q2/11 |
|---|---|---|---|---|
| –Zayo Bandwidth | 45.5 | 46.6 | 47.2 | 52.8 |
| –Zayo Enterprise | 8.8 | 9.3 | 8.2 | 8.1 |
| –ZColo | 6.9 | 7.1 | 7.2 | 7.4 |
| –Zayo Fiber Solutions |
0.0 |
0.0 |
7.5 | 11.1 |
| Total Revenue | 59.8 | 61.4 | 68.6 | 77.9 |
| COS | 19.5 | 19.8 | 19.9 | 20.7 |
| Adj.EBITDA | 21.4 | 22.8 | 28.6 | 32.2 |
| Adj.EBITDA Margin | 35.8% | 37.1% | 39.1% | 41.3% |
| Capital Expenditures | 16.9 | 21.6 | 21.4 | 37.5 |
| On-Net Buildings | 2256 | 2418 | 3100 | 4041 |
| On-Net Towers | 913 | 1045 | 1300 | 1681 |
Revenue: Most of the growth was inorganic, but not all. Of note is that ZFS, the dark fiber division that began with the AGL assets, is now the company’s second largest division with annualized revenues of around $45M. Zayo Enterprise slipped sequentially, while ZColo and the main engine of the company, Zayo Bandwidth, continued their upward trajectory.
EBITDA: As I expected, EBITDA margins rose above the 40% threshold to 41.3%. The number has been trending upward as they realize synergies from past acquisitions and grow revenue, but this quarter’s increase was even more dramatic due to the AFS purchase, as I believe AFS had at least mid-40s EBITDA margins prior to the merger.
Capex: Capex was up significantly, as the company spent $37.5M on property and equipment during the quarter. Some of that may be due to the multiple stimulus projects they are now rolling out in earnest, in addition to their ongoing wireless backhaul efforts. I’ll have to listen to the call for details.
On-Net Buildings: Boosted by AFS’s 600+ buildings and their ongoing wireless backhaul efforts, the company’s on-net building count rose by nearly a thousand, breaking the 4K mark. To my knowledge, there are only a half dozen metro fiber operators above that threshold: TW Telecom, Level 3, Fibertech, Optimum Lightpath, maybe Sunesys, and now Zayo.
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Categories: Financials · Metro fiber
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Wow! The increase in pop’s in the form of on net buildings and towers is most impressive. If Dan’s metric for tracking the success of his business model beyond acquisitions is panning out, you should begin to see the value of these “assets” showing up in step function sales sooner rather than later.
Rob- any thoughts on their balance sheet ?
Only that they’ll need to raise cash if they’re going to buy anything else. Cash levels are low, but their credit facility is largely undrawn.