Zayo Group released 2Q21 earnings, disclosing a year-over-year EBITDA decline, according to two sources familiar with the situation. However, the company posted a sequential gain in bookings but a higher customer churn rate, they added.    

Net bookings for the quarter totaled USD 6.4m, compared to USD 6.1m in 1Q21 and USD 7.4m in 2Q20, they said. Churn ticked up to 1.4% in 2Q21, compared to 1.26% in 1Q21 and 1.12% in 2Q20.  

Zayo attributed the increase in churn to wireless network consolidation and losing some volumes due to customers reconfiguring the network architecture.  

Investors pointed out that while bookings grew slightly sequentially, they are looking for when bookings will return to pre-pandemic levels and for when churn is going to normalize, the sources said.  

On the call, the company also said 2021 was an investment year as it looks to grow, sources added.   

Zayo Group operates two segments: Zayo Networks and its Canadian segment Allstream. The company acquired Allstream in January 2016 for CAD 465m.   

Consolidated revenue for the quarter totaled USD 579m, compared to USD 560.7m in the same quarter the prior year, they added. Of the total, Zayo Networks revenue totaled USD 520m for 2Q21, up 3% year-over-year from 2Q20.  

Total adjusted EBITDA for the quarter decreased to USD 254m, down from USD 299.6m in 2Q20, which included its zColo data centers. In December 2020, the company offloaded a portion of the data centers to DataBank, while the remaining French contingent closed in 1Q21.  

Zayo Networks also generated the lion’s share of EBITDA. Case in point, the segment generated normalized 2Q21 adjusted EBITDA of USD 246m, compared to USD 265m in 1Q21 and USD 253m in 2Q20.  

On a consolidated basis, pro forma adjusted EBITDA for the quarter totaled USD 349m, after incorporating several adjustments, including USD 22m tied to run-rate new bookings. 

As of 30 June, liquidity totaled USD 1.0346bn through USD 288.8m of cash and USD 745.8m of revolver availability.

On an LTM basis, the company used the LQA pro forma adjusted EBITDA of USD 1.396bn. As of 30 June, leverage shook out to 5.66x through USD 7.897bn of total debt.  

Zayo’s USD 1.08bn 6.125% senior unsecured notes due 2028 traded yesterday (31 August) at 101.875 to yield 5.528%, roughly in line with trades at 101.5 prior to the earnings report, according to MarketAxess.   

The USD 1.477bn 4% senior secured notes due 2027 traded yesterday (31 August) at 99.125 to yield 4.18%, compared to trades at 98.875 prior the earnings report.  

Zayo did not respond to a request for comment.  

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