Zayo Group Announces Earnings Amid Acquisition Rumors

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Zayo Group Holdings (NYSE: ZAYO) announced results for the three months ended December 31, 2018, last week. The company maintains a 130,000-mile fiber network in North America and Europe, in addition to offering co-location and cloud infrastructure in its carrier-neutral data centers.

MoffettNathanson analyst Nick Del Deo said he thought Zayo’s fate would have been sealed by now as far as a buyer goes.

 (Industry rumors have Google as the leading candidate to purchase the company’s infrastructure assets.) “Rarely is a single quarter really critical to a company’s fate,” Del Deo said, “but this quarter clearly carries far more weight than is typical.  Zayo’s management team has long promised a sustainable improvement in bookings and growth,” he said. “That turnaround has not yet materialized despite the changes and investments it has made over the better part of two years.”

Nonetheless, second quarter net income increased by $8.1 million over the previous quarter. During the three months ended December 31, 2018, capital expenditures were $202.2 million. Zayo stock was up 2.6 percent as of Friday after it reported net income hitting $30.2M. Revenues dipped 2 percent however, on substantially lower depreciation and amortization. Operating income rose to $144.7M from $103.2M.

On November 7, 2018, Zayo announced plans to separate into two publicly traded companies – one to focus on providing communications infrastructure and another to leverage infrastructure to provide solutions for enterprise customers – with the core tenets of the plan being simplification of the business and a focus on a communications infrastructure business. The company is evaluating multiple options that will achieve the core tenets of the plan and maximize shareholder value.  

February 11, 2019

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