Market Overview

Zayo Group Holdings, Inc. Reports Financial Results for the Fourth Fiscal Quarter Ended June 30, 2018

Share:

Fourth Fiscal Quarter 2018 Financial Highlights

  • $657.6 million of consolidated revenue, including $546.6 million from
    the Communications Infrastructure segments and $111.0 million from the
    Allstream segment.
  • Net income of $43.8 million, including $30.6 million from the
    Communications Infrastructure segments and a net income of $13.2
    million from the Allstream segment.
  • $324.9 million of adjusted EBITDA, including $300.7 million from
    Communications Infrastructure and $24.2 million from the Allstream
    segment.
  • Bookings of $8.0 million, gross installs of $7.7 million, churn of
    1.2% and net installs of $1.5 million, all on a monthly recurring
    revenue (MRR) and monthly amortized revenue (MAR) basis, excluding the
    Allstream segment.
  • Adjusted unlevered free cash flow of $155.4 million.

Zayo Group Holdings, Inc. ("Zayo" or "the Company") (NYSE:ZAYO), a
global leader in Communications Infrastructure, announced results for
the three months ended June 30, 2018.

Fourth quarter operating income increased $14.9 million and net income
increased by $20.4 million over the previous quarter. Basic and diluted
net income per share during the quarter was $0.18. During the three
months ended June 30, 2018, capital expenditures were $208.0 million.

As of June 30, 2018, the Company had $256.7 million of cash and $441.9
million available under its revolving credit facility.

Recent Developments

Scott-Rice Telephone Co

On July 31, 2018, the Company closed the sale of Scott-Rice Telephone Co
("SRT") for $42 million to Nuvera (formerly New Ulm Telecom, Inc.). The
Company acquired SRT as part of its March 2017 purchase of Electric
Lightwave and it was reported as part of the Allstream segment. The
Company concluded that SRT was not a significant disposal group and did
not represent a strategic shift, and therefore was not classified as
discontinued operations. Scott Rice had a net loss before taxes of $1.6
million for the year ended June 30, 2018.

Share Repurchases

On May 7, 2018, our Board of Directors authorized the repurchase of up
to $500 million of our common stock from time to time using a variety of
methods, including open market purchases, privately negotiated
transactions and other means in accordance with federal securities laws.
The authorization expires in November 2018, and may be suspended or
discontinued at any time. During the year ended June 30, 2018, the
Company repurchased 2.7 million of its outstanding common stock at an
average price of $34.02, or $93.5 million.

Potential REIT Conversion

On May 3, 2018, the Company announced that it completed the first phase
of its investigation on the advisability and feasibility of a conversion
to a real estate investment trust for U.S. federal income tax purposes
(a "REIT"). The Company has begun the next phase of its evaluation and
preparation for a potential conversion to a REIT. As part of these
efforts, the Company has begun a direct dialogue with the U.S. Internal
Revenue Service ("IRS") in an effort to obtain clarity and support for
its position, and is seeking a private letter ruling ("PLR") from the
IRS. The Company's ability to qualify for taxation as a REIT will depend
upon its continuing compliance following REIT conversion with various
requirements, including requirements related to the nature of its
assets, the sources of its income and the distributions to its
stockholders.

The Company is requesting that its PLR address whether its revenues from
dark and lit fiber satisfy applicable REIT income tests, and the
Company's ultimate decision to convert to a REIT may depend upon a
favorable ruling from the IRS on this topic. The Company submitted a PLR
request to the IRS in July 2018, but the IRS may not provide a response
until 2019 or later or may not respond at all.

Fourth Fiscal Quarter Financial Results

Three Months Ended June 30, 2018 and March 31, 2018

(in millions)

    Three months ended
June 30, 2018     March 31, 2018
Revenue $ 657.6 $ 649.4
Annualized revenue growth 5 %
Operating income 120.2 105.3
 

Income from operations before income taxes   

20.7 44.3
Provision/(benefit) for income taxes   (23.1 )   20.9  
Net income $ 43.8   $ 23.4  
 
Adjusted EBITDA $ 324.9 $ 319.6

Annualized Adjusted EBITDA growth  

7 %
Adjusted EBITDA margin 49 % 49 %
 
Levered free cash flow $ 43.8 $ 67.7
 

Three Months Ended June 30, 2018 and June 30, 2017

(in millions)

    Three months ended
June 30, 2018     June 30, 2017
Revenue $ 657.6 $ 638.0
Annualized revenue growth 3 %
Operating income 120.2 105.4
 
Net income from operations before income taxes 20.7 34.2
Provision/(benefit) for income taxes   (23.1 )   11.0  
Net income $ 43.8   $ 23.2  
 
Adjusted EBITDA $ 324.9 $ 310.8
Annualized Adjusted EBITDA growth 5 %
Adjusted EBITDA margin 49 % 49 %
 
Levered free cash flow $ 43.8 $ 39.6
 

Conference Call

Zayo will host a conference call to discuss fourth fiscal quarter 2018
results at 5:00 p.m. EDT on August 22, 2018. To participate on the live
call, listeners in the U.S. may dial 866-737-5498 and international
listeners may dial 412-858-4607; please request to join the Zayo Group
call. During the call, the Company will review an Earnings Presentation
that summarizes the financial, operational and commercial highlights of
the quarter. This Earnings Presentation, a live webcast of the
conference call, and a Supplemental Earnings Presentation will be made
available through the Investor Relations section of the Company's
website at investors.zayo.com.

About Zayo

Zayo Group Holdings, Inc. (NYSE:ZAYO) provides communications
infrastructure solutions, including fiber and bandwidth connectivity,
colocation and cloud infrastructure to the world's leading businesses.
Customers include wireless and wireline carriers, media and content
companies and finance, healthcare and other large enterprises. Zayo's
128,900-mile network in North America and Europe includes extensive
metro connectivity to thousands of buildings and data centers. In
addition to high-capacity dark fiber, wavelength, Ethernet and other
connectivity solutions, Zayo offers colocation and cloud infrastructure
in its carrier-neutral data centers. Zayo provides users with flexible,
customized solutions and self-service through Tranzact, an innovative
online platform for managing and purchasing bandwidth. For more
information, visit zayo.com.

Forward-Looking Statements

Information contained in this earnings release that is not historical by
nature constitutes "forward-looking statements" which can be identified
by the use of forward-looking terminology such as "believes," "expects,"
"plans," "intends," "estimates," "projects," "could," "may," "will,"
"should," or "anticipates" or the negatives thereof, other variations
thereon or comparable terminology, or by discussions of strategy. No
assurance can be given that future results expressed or implied by the
forward-looking statements will be achieved and actual results may
differ materially from those contemplated by the forward-looking
statements. Such statements are based on management's current
expectations and beliefs and are subject to a number of risks and
uncertainties that could cause actual results to differ materially from
those expressed or implied by the forward-looking statements. These
risks and uncertainties include, but are not limited to, those relating
to the Company's financial and operating prospects, current economic
trends, future opportunities, ability to retain existing customers and
attract new ones, outlook of customers, and strength of competition and
pricing. In addition, there is risk and uncertainty in the Company's
acquisition strategy including our ability to integrate acquired
companies and assets. Specifically there is a risk associated with our
recent acquisitions, and the benefits thereof, including financial and
operating results and synergy benefits that may be realized from these
acquisitions and the timeframe for realizing these benefits. Other
factors and risks that may affect our business and future financial
results are detailed in the "Risk Factors" section of our Annual Report
on Form 10-K to be filed with the Securities and Exchange Commission
(our "Annual Report"). We caution you not to place undue reliance on
these forward-looking statements, which speak only as of their
respective dates. We undertake no obligation to publicly update or
revise forward-looking statements to reflect events or circumstances
after releasing this supplemental information or to reflect the
occurrence of unanticipated events, except as required by law.

This earnings release should be read together with the Company's
consolidated financial statements and notes thereto for the year ended
June 30, 2018 included in the Company's Annual Report.

Non-GAAP Financial Measures

The Company provides financial measures that are not defined under
generally accepted accounting principles in the United States ("GAAP"),
including Adjusted EBITDA, Adjusted EBITDA Margin, adjusted unlevered
free cash flow and levered free cash flow.

Adjusted EBITDA, as defined below and in Note 16 – Segment Reporting
of our consolidated financial statements and notes thereto included in
our Annual Report on Form 10-K, is the primary measure used by our chief
operating decision maker to evaluate segment operating performance.

Adjusted EBITDA is defined as earnings/(loss) from operations before
interest, income taxes, depreciation and amortization ("EBITDA")
adjusted to exclude acquisition or disposal-related transaction costs,
losses on extinguishment of debt, stock-based compensation, unrealized
foreign currency gains/(losses) on intercompany loans, and non-cash
income/(loss) on equity and cost method investments. Adjusted EBITDA
Margin is defined as Adjusted EBITDA divided by revenue. Adjusted
unlevered free cash flow is defined as Adjusted EBITDA less purchases of
property and equipment, net of stimulus grants, plus additions to
deferred revenue, less non-cash monthly amortized revenue. Levered free
cash flow is defined as net cash provided by operating activities less
purchases of property and equipment, net of stimulus grants. Adjusted
unlevered free cash flow and levered free cash flow are not measurements
of our financial performance under GAAP and should not be considered in
isolation or as alternatives to net income, net cash flows provided by
operating activities, total net cash flows or any other performance
measures derived in accordance with GAAP or as alternatives to net cash
flows from operating activities or total net cash flows as measures of
our liquidity.

Adjusted EBITDA is a performance rather than cash flow measure. In
addition to Adjusted EBITDA, management uses adjusted unlevered free
cash flow, which measures the ability of Adjusted EBITDA to cover
capital expenditures. We use levered free cash flow as a measure to
evaluate cash generated through normal operating activities. These
metrics are among the primary measures used by management for planning
and forecasting future periods. We believe the presentation of Adjusted
EBITDA is relevant and useful for investors because it allows investors
to view results in a manner similar to the method used by management and
make it easier to compare our results with the results of other
companies that have different financing and capital structures. We
believe that the presentation of levered free cash flow is relevant and
useful to investors because it provides a measure of cash available to
pay the principal on our debt and pursue acquisitions of businesses or
other strategic investments or uses of capital.

We also monitor Adjusted EBITDA because our subsidiaries have debt
covenants that restrict their borrowing capacity that are based on a
leverage ratio, which utilizes a modified EBITDA, as defined in our
credit agreement and the indentures governing our notes. The modified
EBITDA is consistent with our definition of Adjusted EBITDA; however, it
includes the pro forma Adjusted EBITDA of and expected cost synergies
from the companies acquired by us during the quarter for which the debt
compliance certification is due. Adjusted EBITDA results, along with the
quantitative and qualitative information, are also utilized by
management and our Compensation Committee, as an input for determining
incentive payments to employees.

Adjusted EBITDA has limitations as an analytical tool and should not be
considered in isolation from, or as a substitute for, analysis of our
results of operations and operating cash flows as reported under GAAP.
For example, Adjusted EBITDA:

  • does not reflect capital expenditures, or future requirements for
    capital and major maintenance expenditures or contractual commitments;
  • does not reflect changes in, or cash requirements for, our working
    capital needs;
  • does not reflect the interest expense, or the cash requirements
    necessary to service the interest payments, on our debt; and
  • does not reflect cash required to pay income taxes.

Adjusted unlevered free cash flow has limitations as an analytical tool
and should not be considered in isolation from, or as a substitute for,
analysis of our results as reported under GAAP. For example, adjusted
unlevered free cash flow:

  • does not reflect changes in, or cash requirements for, our working
    capital needs;
  • does not reflect the interest expense, or the cash requirements
    necessary to service the interest payments, on our debt; and
  • does not reflect cash required to pay income taxes.

Levered free cash flow has limitations as an analytical tool and should
not be considered in isolation from, or as a substitute for, analysis of
our results as reported under GAAP. For example, levered free cash flow:

  • does not reflect principal payments on debt;
  • does not reflect principal payments on capital lease obligations;
  • does not reflect dividend payments, if any; and
  • does not reflect the cost of acquisitions.

Our computation of Adjusted EBITDA, and levered free cash flow may not
be comparable to other similarly titled measures computed by other
companies because all companies do not calculate these measures in the
same fashion.

Because we have acquired numerous entities since our inception and
incurred transaction costs in connection with each acquisition, borrowed
money in order to finance our operations and acquisitions, and used
capital and intangible assets in our business, and because the payment
of income taxes is necessary if we generate taxable income after the
utilization of our net operating loss carry forwards, any measure that
excludes these items has material limitations. As a result of these
limitations, these measures should not be considered as a measure of
discretionary cash available to us to invest in the growth of our
business or as a measure of our liquidity. See "Reconciliation of
Non-GAAP Financial Measures" for a quantitative reconciliation of
Adjusted EBITDA to net income/(loss) and for a quantitative
reconciliation of levered free cash flow to net cash provided by
operating activities.

Annualized revenue and annualized Adjusted EBITDA are derived by
multiplying the total revenue and Adjusted EBITDA, respectively, for the
most recent quarterly period by four. Our computations of annualized
revenue and annualized Adjusted EBITDA may not be representative of our
actual annual results.

Measures referred to as being calculated on a constant currency basis
are intended to present the relevant information assuming a constant
exchange rate between the two periods being compared. Such metrics are
calculated by applying the currency exchange rates used in the
preparation of the prior period financial results to the subsequent
period results.

Tables reconciling non-GAAP measures are included in the Reconciliation
of Non-GAAP Financial Measures section of this earnings release and in a
supplemental earnings presentation. A glossary of terms used throughout
and the supplemental earnings presentation are available under the
investor section of the Company's website at http://investors.zayo.com.

           

Consolidated Financial Information

Consolidated Statements of Operations

(in millions, except per share data)

 
Year Ended June 30,
2018 2017 2016
Revenue $ 2,604.0   $ 2,199.8   $ 1,721.7  
Operating costs and expenses
Operating costs (excluding depreciation and amortization) 941.9 782.9 578.7
Selling, general and administrative expenses 489.8 436.2 386.4
Depreciation and amortization   747.4     606.9     516.3  
Total operating costs and expenses   2,179.1     1,826.0     1,481.4  
Operating income   424.9     373.8     240.3  
Other expenses
Interest expense (299.8 ) (241.5 ) (220.1 )
Loss on extinguishment of debt (4.9 ) (18.2 ) (33.8 )
Foreign currency gain/(loss) on intercompany loans 5.4 (10.3 ) (53.8 )
Other income/(expense), net   2.4     0.3     (0.3 )
Total other expenses, net   (296.9 )   (269.7 )   (308.0 )
Income/(loss) from operations before income taxes 128.0 104.1 (67.7 )
Provision for income taxes   26.1     18.4     8.5  
Net income/(loss) $ 101.9   $ 85.7   $ (76.2 )
 
Weighted-average shares used to compute net income/(loss) per share:
Basic 247.3 243.9 243.3
Diluted 248.5 246.8 243.3
Net income/(loss) per share:
Basic and diluted $ 0.41 $ 0.35 $ (0.31 )
 
       

Consolidated Balance Sheets

(in millions, except share amounts)

 
Year Ended June 30,
2018 2017
Assets
Current assets
Cash and cash equivalents $ 256.7 $ 220.7
Trade receivables, net of allowance of $11.1 and $9.5 as of June 30,
2018 and June 30, 2017, respectively
235.6 191.6
Prepaid expenses 74.1 68.3
Other assets 22.6 34.0
Assets held for sale 41.8    
Total current assets 630.8 514.6
Property and equipment, net 5,447.2 5,016.0
Intangible assets, net 1,212.1 1,188.6
Goodwill 1,719.1 1,840.2
Deferred income taxes, net 37.6 38.3
Other assets   170.0     141.7  
Total assets $ 9,216.8   $ 8,739.4  
Liabilities and stockholders' equity
Current liabilities
Accounts payable $ 45.9 $ 72.4
Accrued liabilities 312.3 325.4
Accrued interest 72.6 63.5
Current portion of long-term debt 5.0 5.0
Capital lease obligations, current 11.9 8.0
Deferred revenue, current 164.4 146.0
Liabilities associated with assets held for sale   6.1      
Total current liabilities 618.2 620.3
Long-term debt, non-current 5,690.1 5,532.7
Capital lease obligation, non-current 121.6 93.6
Deferred revenue, non-current 1,096.8 989.7
Deferred income taxes, net 143.2 40.2
Other long-term liabilities   57.8     52.4  
Total liabilities 7,727.7 7,328.9
 
Stockholders' equity
Preferred stock, $0.001 par value - 50,000,000 shares authorized; no
shares issued and outstanding as of June 30, 2018 and June 30, 2017,
respectively
Common stock, $0.001 par value - 850,000,000 shares authorized;
246,631,241 and 246,471,551 shares issued and outstanding as of June
30, 2018 and June 30, 2017, respectively
0.2 0.2
Additional paid-in capital 1,881.6 1,884.0
Accumulated other comprehensive income (15.5 ) 5.4
Accumulated deficit   (377.2 )   (479.1 )
Total stockholders' equity   1,489.1     1,410.5  
Total liabilities and stockholders' equity $ 9,216.8   $ 8,739.4  
 
           

Consolidated Statement of Cash Flows

(in millions)

 
Year Ended June 30,
2018 2017 2016
Cash flows from operating activities
Net income/(loss) $ 101.9 $ 85.7 $ (76.2 )
Adjustments to reconcile net income/(loss) to net cash provided
by operating activities
Depreciation and amortization 747.4 606.9 516.3
Loss on extinguishment of debt 4.9 18.2 33.8
Non-cash interest expense 9.8 9.6 11.9
Stock-based compensation 96.7 114.1 155.9
Amortization of deferred revenue (137.8 ) (117.6 ) (111.5 )
Foreign currency (gain)/ loss on intercompany loans (5.4 ) 10.3 53.8
Excess tax benefit from stock-based compensation (7.9 )
Deferred income taxes 25.0 12.6 (2.8 )
Provision for bad debts 5.1 3.7 3.9
Non-cash loss on investments 1.0 1.2 1.2
Changes in operating assets and liabilities, net of acquisitions
Trade receivables (48.1 ) (7.2 ) 1.9
Accounts payable and accrued liabilities 7.3 5.2 (36.0 )
Additions to deferred revenue 212.8 200.5 184.0
Other assets and liabilities   (49.5 )   (33.4 )   (14.3 )
Net cash provided by operating activities   971.1     909.8     714.0  
Cash flows from investing activities
Purchases of property and equipment (789.9 ) (835.5 ) (704.1 )
Cash paid for acquisitions, net of cash acquired   (176.9 )   (1,434.8 )   (437.5 )
Net cash used in investing activities   (966.8 )   (2,270.3 )   (1,141.6 )
Cash flows from financing activities
Proceeds from debt 462.8 3,865.8 929.3
Principal payments on long-term debt (315.7 ) (2,408.8 ) (535.0 )
Payment of early redemption fees on debt extinguished (20.3 )
Principal payments on capital lease obligations (8.4 ) (6.6 ) (4.9 )
Payment of debt issue costs (4.3 ) (35.4 ) (4.2 )
Common stock repurchases (93.5 ) (81.1 )
Excess tax benefit from stock-based compensation 7.9
Cash paid for Santa Clara acquisition financing arrangement and other   (5.3 )   (3.7 )    
Net cash provided by financing activities   35.6     1,411.3     291.7  
Net cash flows 39.9 50.8 (135.9 )
Effect of changes in foreign exchange rates on cash   (3.9 )   (0.8 )   (2.0 )
Net increase/(decrease) in cash and cash equivalents 36.0 50.0 (137.9 )
Cash and cash equivalents, beginning of year   220.7     170.7     308.6  
Cash and cash equivalents, end of period $ 256.7   $ 220.7   $ 170.7  
Supplemental disclosure of non-cash investing and financing
activities:
Cash paid for interest, net of capitalized interest $ 280.2 $ 195.6 $ 228.5
Cash paid for income taxes 20.3 13.1 14.0
Non-cash purchases of equipment through capital leasing 22.1 12.0 7.6
Non-cash purchases of equipment through nonmonetary exchange 17.1 12.8 50.6
(Decrease)/Increase in accounts payable and accrued expenses for
purchases of property and equipment
(32.2 ) 16.9 25.7
 
                   

Reconciliation of Non-GAAP Financial Measures

(in millions)

 
Adjusted EBITDA and Cash Flow Reconciliation Three months ended Year Ended June 30,
June 30, 2018 March 31, 2018 June 30, 2017 2018 2017
Reconciliation of Adjusted EBITDA:
Net income/(loss) $ 43.8 $ 23.4 $ 23.2 $ 101.9 $ 85.7
Interest expense 77.8 75.3 71.5 299.8 241.5
Provision for income taxes (23.1 ) 20.9 11.0 26.1 18.4
Depreciation and amortization 176.2 191.2 181.3 747.4 606.9
Transaction costs 1.1 3.3 2.9 18.6 20.5
Stock-based compensation 26.2 19.2 21.1 96.7 114.1
Loss on extinguishment of debt 13.7 4.9 18.2
Foreign currency loss/(gain) on intercompany loans 22.4 (13.9 ) (14.4 ) (5.4 ) 10.3
Non-cash loss on investments   0.5     0.2     0.5     1.0     1.2  
Adjusted EBITDA $ 324.9   $ 319.6   $ 310.8   $ 1,291.0   $ 1,116.8  
 
Reconciliation of adjusted unlevered free cash flow:
Net cash provided by continuing operating activities $ 251.8 $ 262.8 $ 244.9 $ 971.1 $ 909.8
Cash paid for income taxes 3.4 13.8 3.3 20.3 13.1
Cash paid for interest, net of capitalized interest 85.1 58.8 86.4 280.2 195.6
Transaction costs 1.1 3.3 2.9 18.6 20.5
Provision for bad debts 0.7 (3.5 ) (1.6 ) (5.1 ) (3.7 )
Additions to deferred revenue (74.8 ) (76.1 ) (43.8 ) (212.8 ) (200.5 )
Amortization of deferred revenue 36.3 35.1 32.1 137.8 117.6
Other changes in operating assets and liabilities   21.3     25.4     (13.4 )   80.9     64.4  
Adjusted EBITDA   324.9     319.6     310.8     1,291.0     1,116.8  
Purchases of property and equipment (208.0 ) (195.1 ) (205.3 ) (789.9 ) (835.5 )
Additions to deferred revenue 74.8 76.1 43.8 212.8 200.5
Amortization of deferred revenue   (36.3 )   (35.1 )   (32.1 )   (137.8 )   (117.6 )
Adjusted unlevered free cash flow $ 155.4   $ 165.5   $ 117.2   $ 576.1   $ 364.2  
 
Reconciliation of levered free cash flow:
Net cash provided by operating activities $ 251.8 $ 262.8 $ 244.9 $ 971.1 $ 909.8
Purchases of property and equipment, net   (208.0 )   (195.1 )   (205.3 )   (789.9 )   (835.5 )
Levered free cash flow, as defined $ 43.8   $ 67.7   $ 39.6   $ 181.2   $ 74.3  
 
           
Adjusted EBITDA and Cash Flow Reconciliation Three months ended June 30, 2018

Zayo
Consolidated

Allstream

Consolidated
Excluding
Allstream

Reconciliation of Adjusted EBITDA:
Net income/(loss) $ 43.8 $ 13.2 $ 30.6
Interest expense 77.8 4.2 73.6
Provision for income taxes (23.1 ) (22.8 ) (0.3 )
Depreciation and amortization 176.2 29.3 146.9
Transaction costs 1.1 0.3 0.8
Stock-based compensation 26.2 26.2
Foreign currency loss on intercompany loans 22.4 22.4
Non-cash loss on investments   0.5         0.5  
Adjusted EBITDA $ 324.9   $ 24.2   $ 300.7  
 
Reconciliation of levered free cash flow:
Net cash provided by operating activities $ 251.8 $ 23.9 $ 227.9
Purchases of property and equipment, net   (208.0 )   (5.0 )   (203.0 )
Levered free cash flow, as defined $ 43.8   $ 18.9   $ 24.9  
 
                               
Net income/(loss) to Adjusted EBITDA Three months ended June 30, 2018

Fiber
Solutions(1)

Transport(1)

Enterprise
Networks(1)

zColo(1)

Allstream

Other(1)

Corp/
Eliminations(1)

Total
(in millions)
Net income/(loss) $ 60.7 $ (6.2 ) $ 12.8 $ (13.6 ) $ 13.2 $ 0.3 $ (23.4 ) $ 43.8
Interest expense 42.8 12.6 7.5 10.6 4.2 0.1 77.8
Provision for income taxes (22.8 ) (0.3 ) (23.1 )
Depreciation and amortization 58.3 43.0 11.6 32.2 29.3 0.4 1.4 176.2
Transaction costs 0.5 0.2 0.1 0.3 1.1
Stock-based compensation 10.9 7.2 4.9 3.0 0.2 26.2
Foreign currency loss on intercompany loans 22.4 22.4
Non-cash loss on investments   0.5   (0.1 )   0.1   0.5  
Adjusted EBITDA $ 173.7 $ 56.8   $ 36.9 $ 32.1   $ 24.2   $ 1.0 $ 0.2   $ 324.9  
 

Effective April 1, 2018, with the continued increase in our scope and
scale, the Company's chief operating decision maker ("CODM"), who is the
Company's Chief Executive Officer, implemented certain organizational
changes to the management and operation of the business that directly
impact how the CODM makes resource allocation decisions and manages the
Company. The changes in structure had the impact of creating two new
SPGs and re-aligning an existing SPG among the Company's reportable
segments. The changes in structure also resulted in changes in how the
Company measures the relative burden each segment bears of indirect and
corporate related costs. These changes to the existing reportable
segments have been recast for all prior period financial and operating
metrics presented in our Annual Report for comparability, and for
quarters ended September 30, 2017, December 31, 2017 and March 31, 2018
as shown below;

                               
  Three months ended March 31, 2018

Fiber
Solutions(1)

Transport(1)

Enterprise
Networks(1)

zColo(1)

Allstream

Other(1)

Corp/
Eliminations(1)

Total
Revenue $ 213.7 $ 166.5 $ 86.1 $ 59.6 $ 117.7 $ 5.8 $ $ 649.4
Adjusted EBITDA 171.4 55.1 36.2 28.6 26.4 2.0 (0.1 ) 319.6
 
Net income/(loss) to Adjusted EBITDA:
Net income/(loss) 36.8 (2.9 ) 10.7 (7.5 ) (7.7 ) 1.1 (7.1 ) 23.4
Interest expense 41.0 12.5 7.4 10.4 4.1 (0.1 ) 75.3
Provision/(benefit) for income taxes 20.9 20.9
Depreciation and amortization 84.2 39.6 14.5 23.4 29.0 0.5 191.2
Transaction costs 1.3 0.7 0.6 0.3 0.4 3.3
Stock-based compensation 8.0 5.2 3.1 2.1 0.6 0.1 0.1 19.2
-
Foreign currency loss on intercompany loans (13.9 ) (13.9 )
Non-cash loss on investments   0.1       (0.1 )   (0.1 )       0.3       0.2  
Adjusted EBITDA $ 171.4 $ 55.1   $ 36.2   $ 28.6   $ 26.4   $ 2.0 $ (0.1 ) $ 319.6  
 
                               
  Three months ended December 31, 2017

Fiber
Solutions(1)

Transport (1)

Enterprise
Networks(1)

zColo(1)

Allstream Other (1)

Corp/
Eliminations(1)

  Total
Revenue $ 203.9 $ 166.0 $ 93.8 $ 59.9 $ 123.4 $ 6.4 $ $ 653.5
Adjusted EBITDA 168.0 57.4 41.4 30.9 31.0 1.2 329.9
 
Net income/(loss) to Adjusted EBITDA:
Net income/(loss) 16.6 (3.7) 18.9 (3.0) 2.0 0.2 (19.5) 11.5
Interest expense 42.1 12.4 7.1 7.7 3.9 (0.1) 73.1
Provision/(benefit) for income taxes 22.9 22.9
Depreciation and amortization 99.9 42.3 11.0 22.8 19.5 0.4 195.9
Transaction costs 1.4 1.0 0.7 0.5 2.2 0.1 5.9
Stock-based compensation 7.7 5.5 3.7 3.0 3.4 0.3 (0.1) 23.5

Foreign currency gain on intercompany loans

(3.1) (3.1)
Non-cash loss on investments   0.3             (0.1)   0.2
Adjusted EBITDA $ 168.0 $ 57.5 $ 41.4 $ 31.0 $ 31.0 $ 0.9 $ 0.1 $ 329.9
 
                               
  Three months ended September 30, 2017

Fiber
Solutions(1)

Transport (1)

Enterprise
Networks(1)

zColo(1)

Allstream Other (1)

Corp/
Eliminations(1)

Total
Revenue $ 198.8 $ 168.0 $ 85.4 $ 58.4 $ 127.7 $ 5.2 $ $ 643.5
Adjusted EBITDA 160.1 60.8 33.6 28.6 32.4 1.2 (0.1 ) 316.6
 
Net income/(loss) to Adjusted EBITDA:
Net income/(loss) 10.6 (3.6 ) 10.1 (8.0 ) 13.3 0.6 0.2 23.2
Interest expense 40.1 12.5 7.3 9.8 3.9 73.6
Provision/(benefit) for income taxes 5.4 5.4
Depreciation and amortization 95.3 42.5 9.9 23.3 12.6 0.5 184.1
Transaction costs 2.3 1.8 1.7 0.4 2.1 8.3
Stock-based compensation 11.8 7.6 4.6 3.1 0.5 0.1 0.1 27.8
Loss on extinguishment of debt 4.9 4.9
Foreign currency gain on intercompany loans (10.8 ) (10.8 )
Non-cash loss on investments                   0.1     0.1  
 
Adjusted EBITDA $ 160.1 $ 60.8   $ 33.6 $ 28.6   $ 32.4 $ 1.2 $ (0.1 ) $ 316.6  

(1) These segments are included in Communications
Infrastructure

View Comments and Join the Discussion!