As we sit here today, Zayo is in a good position financially. We just raised $35M of debt. Our business is generating healthy EBITDA. The large capital projects such as Fiber to the Tower we are undertaking are fully funded. We believe we are on a track to get to free cash flow breakeven within our available equity and debt facilities. And we believe we will accomplish this with a decent cushion.
Nonetheless, we will need to prepare ourselves for the macro-economic environment we are facing. Please read the blog post Sequoia’s Startup Advice: Save Cash, Slash Costs, Stay Alive. It is important for all of us to read through and consider the implications. Courtesy of a reader, another blog post was identified. VentureBeat posted The Sequoia “RIP: Good Times” presentation. I haven’t listened to it yet but I will later this morning.
I know this post will alarm Zayo employees. Well, it would be a mistake if anyone isn’t taking notice of the severity of the economic downturn. I can’t speak for other industries; within Telecom, Zayo is in good shape. Nonetheless, we need to be thoughtful in our reaction to this economic environment. We will be fine tuning our execution plan with this in mind.
Hopefully this storm will pass quickly and not be nearly as bad as many are predicting. But for now, my advice to all businesses and individuals is to get as prepared as you can.
Please make sure your fellow Zayo employees read this blog and the Sequoia note.
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Full presentation deck for Sequoia meeting was posted on VentureBeat on 10/10 – instructive read.
Thanks Jon. Here is the link: http://venturebeat.com/2008/10/10/the-sequoia-rip-good-times-presentation-get-your-copy-here/
Dan:It could be a recycled message, but in today’s environment it is timely. Cash is always important for both businesses and households, however in this time of low liquidity it is critical. Today the value of cash is much more valuable or costly depending on which side of the ledger it is on. As a Zayo employee I must ask, will this expendature increase our value. If not, it should not be spent. Companies that survive these times will emerge stronger, and tight cash control habits will be valuable when cash is not so tight.
Denny
Good reading.
If asked, I would have added that downturns also present opportunities, not just challenges.
For eg, cement customer loyalty. Companies that can offer customers cost savings (while still making a profit, of course) _and_ exceed expectations for product and CS during times like these will cement loyalty. Benefits of customer loyalty right now are obvious.
Denny, thanks for leaving the comment. I agree–those who navigate through this will emerge stronger. To do so requires a vigorous, proactive, and constructive response to the environment. Take care of your embedded base of customers. Help them save money. Rethink of all our spending. Reduce projects, revisit existing expenditures, eliminate costs…renegotiate vendor contracts. We will also need to get on top of credit approvals, deposits, and collections, particularly within ZMS.
In these times, leaders from within the organization will emerge. They will show leadership immediately. They will help their co-workers through these difficult times. I already have my eyes open to see what leaders emerge.
Unlike those who intelligently get their rest at night, I read all of this information at around 3:30 a.m. Sunday evening. After the initial “oh no” feeling, I was moved quickly to a state of being grateful to be under the Zayo management team, who would so openly share the information with us. By this morning though, I had moved on to a new place that I’m not sure others would go to–because maybe they just don’t know or have forgotten where we all came from.
One of the unique elements of Zayo is working with a diversified team with experience in lots of directions. One of those directions for the Tulsa team (and my guess is for the others like PPL, NTI, etc.) was being “scrappy” in financially lean times. Our history included a year of financial bliss in 2000–quickly brought to a tumultuous end that left us operating in “Black Monday” mode for about 5 years. During that time, I watched engineers patch together network elements, solve incredibly difficult customer problems, increase our reliability, create capacity out of seemingly nowhere, and enable us win business that we never thought would be possible. These abilities and experiences will enable Zayo to capitalize or at a minimum survive on this downturn in a way that most companies wouldn’t know how to do. We never knew what it was like to be “fat and happy” at Citynet/AFN–and I know enough about NTI/PPL to know they were the same. Larger giants were brought to their knees, while we remained afloat and began to thrive.
I think the combination of the financial and general leadership from our upper management team coupled with a group of people skilled in the art of miracle working with a network will sustain Zayo through these times–regardless of which way it goes and which skill sets we need to lean on.
I’m very happy to be on this ship with this crew. I have great confidence in this team to see us through the storm. If there’s a way to survive–there’s no better group to find it.
Teresa, thanks for the note. This is a great example of leadership from within the organization. In addition to the companies that came together to form Zayo, we also have the ICG experience. We have dozens of employees who were part of our ICG turnaround. We were successful at ICG because of the combined efforts of this scrappy bunch.
I will stress the following. Zayo is in solid financial shape. We have plenty of cash in the bank. We are able to fund all projects that are underway. We believe we can get to FCF break even in 2Q09 and stay well within our current funding resources. We won’t be taking this for granted though–hence to pounce on opportunities to ensure we are poised to exploit this environment.