Segment Information | Segment Information The Company reports segment information along the same lines that its chief executive officer reviews its operating results in assessing performance and allocating resources. The Company operates two reportable segments, Business Services and Consumer Services. The Company’s Business Services segment provides a broad range of data, voice and managed services to retail and wholesale business customers. The Company’s Consumer Services segment provides nationwide Internet access and related value-added services to residential customers. The Company evaluates performance of its segments based on segment operating income. Segment operating income includes revenues from external customers, related cost of revenues and operating expenses directly attributable to the segment, which include costs over which segment managers have direct discretionary control, such as advertising and marketing programs, customer support expenses, product development expenses, certain technology and facilities expenses, billing operations and provisions for doubtful accounts. Segment operating income excludes other income and expense items and certain expenses over which segment managers do not have discretionary control. Costs excluded from segment operating income include various corporate expenses (consisting of certain costs such as corporate management, human resources, finance and legal), depreciation and amortization, impairment of goodwill and intangible assets, restructuring, acquisition and integration-related costs, and stock-based compensation expense, as they are not considered in the measurement of segment performance. Information on reportable segments and a reconciliation to consolidated loss from operations for the three and six months ended June 30, 2014 and 2015 is as follows: Three Months Ended Six Months Ended June 30, June 30, 2014 2015 2014 2015 (in thousands) Business Services Revenues $ 234,216 $ 227,558 $ 468,219 $ 453,875 Cost of revenues (excluding depreciation and amortization) 121,555 106,829 244,819 216,291 Gross margin 112,661 120,729 223,400 237,584 Direct segment operating expenses 86,834 81,538 172,445 162,786 Segment operating income $ 25,827 $ 39,191 $ 50,955 $ 74,798 Consumer Services Revenues $ 63,142 $ 56,106 $ 126,459 $ 112,236 Cost of revenues (excluding depreciation and amortization) 22,633 20,219 45,245 40,219 Gross margin 40,509 35,887 81,214 72,017 Direct segment operating expenses 11,401 7,332 22,961 15,654 Segment operating income $ 29,108 $ 28,555 $ 58,253 $ 56,363 Consolidated Revenues $ 297,358 $ 283,664 $ 594,678 $ 566,111 Cost of revenues 144,188 127,048 290,064 256,510 Gross margin 153,170 156,616 304,614 309,601 Direct segment operating expenses 98,235 88,870 195,406 178,440 Segment operating income 54,935 67,746 109,208 131,161 Depreciation and amortization 45,615 47,723 92,470 94,987 Impairment of long-lived assets 5,437 — 10,771 — Restructuring, acquisition and integration-related costs 4,908 3,978 9,885 9,350 Corporate operating expenses 6,363 5,479 15,676 11,167 Income (loss) from operations $ (7,388 ) $ 10,566 $ (19,594 ) $ 15,657 The Company manages its working capital on a consolidated basis and does not allocate long-lived assets to segments. In addition, segment assets are not reported to, or used by, the chief operating decision maker and therefore, total segment assets have not been disclosed. The Company has not provided information about geographic segments because substantially all of the Company’s revenues, results of operations and identifiable assets are in the United States. Information on revenues by groups of similar services and by segment for the three and six months ended June 30, 2014 and 2015 is as follows: Three Months Ended Six Months Ended June 30, June 30, 2014 2015 2014 2015 (in thousands) Business Services Retail services $ 191,386 $ 188,702 $ 383,906 $ 377,198 Wholesale services 37,970 34,034 74,412 67,006 Other services 4,860 4,822 9,901 9,671 Total revenues 234,216 227,558 468,219 453,875 Consumer Services Access services 52,514 44,872 105,149 89,918 Value-added services 10,628 11,234 21,310 22,318 Total revenues 63,142 56,106 126,459 112,236 Total Revenues $ 297,358 $ 283,664 $ 594,678 $ 566,111 The Company’s Business Services segment earns revenue by providing a broad range of data, voice and managed services to retail and wholesale business customers. The Company presents its Business Services revenue in the following three categories: (1) retail services, which includes data, voice and managed services provided to business customers; (2) wholesale services, which includes the sale of transmission capacity and other services to other telecommunications carriers and businesses; and (3) other services, which primarily consists of web hosting. Revenues generally consist of recurring monthly charges for such services; usage fees; installation fees; termination fees; and administrative fees. The Company’s Consumer Services segment earns revenue by providing nationwide Internet access and related value-added services to residential customers. The Company presents its Consumer Services revenue in the following two categories: (1) access services, which includes dial-up and high-speed Internet access services; and (2) value-added services, which includes revenues from ancillary services sold as add-on features to the Company's Internet access services, such as security products, premium email only, home networking and email storage; search revenues; and advertising revenues. Revenues generally consist of recurring monthly charges for such services; usage fees; installation fees; termination fees; and fees for equipment. |