Segment Information | Segment Information General The Company reports segment information along the same lines that its Chief Operating Decision Maker reviews its operating results in assessing performance and allocating resources. The Company's Chief Operating Decision Maker is its Chief Executive Officer. The Company's reportable segments are strategic business units that are aligned around distinct customer categories to optimize operations. The Company operates the following four reportable segments: • Enterprise/Mid-Market . The Company’s Enterprise/Mid-Market segment provides a broad range of data, voice and managed network services to distributed multi-site business customers. • Small Business . The Company’s Small Business segment provides a broad range of data, voice and managed network services to small, often single-site business customers. • Carrier/Transport . The Company’s Carrier/Transport segment provides transmission capacity and other data, voice and managed network services to telecommunications carriers and large enterprises. • Consumer . The Company’s Consumer segment provides nationwide Internet access and related value-added services to residential customers. Segment Results The following table presents segment results for the three and six months ended June 30, 2015 and 2016 : Three Months Ended Six Months Ended June 30, June 30, 2015 2016 2015 2016 (in thousands) Enterprise/Mid-Market Revenues $ 114,368 $ 97,586 $ 228,759 $ 202,275 Cost of revenues (excluding depreciation and amortization) 56,216 50,499 112,488 102,070 Gross margin 58,152 47,087 116,271 100,205 Small Business Revenues 79,041 57,270 $ 158,095 $ 119,403 Cost of revenues (excluding depreciation and amortization) 35,263 27,205 72,860 56,939 Gross margin 43,778 30,065 85,235 62,464 Carrier/Transport Revenues 34,149 35,123 $ 67,021 $ 71,192 Cost of revenues (excluding depreciation and amortization) 15,350 15,289 30,943 30,753 Gross margin 18,799 19,834 36,078 40,439 Consumer Revenues 56,106 50,378 $ 112,236 $ 101,749 Cost of revenues (excluding depreciation and amortization) 20,219 17,941 40,219 36,378 Gross margin 35,887 32,437 72,017 65,371 Total Segments Revenues 283,664 240,357 566,111 494,619 Cost of revenues (excluding depreciation and amortization) 127,048 110,934 256,510 226,140 Gross margin $ 156,616 $ 129,423 $ 309,601 $ 268,479 The following table presents a reconciliation of segment gross margin to consolidated income (loss) before income taxes for the three and six months ended June 30, 2015 and 2016 : Three Months Ended Six Months Ended June 30, June 30, 2015 2016 2015 2016 (in thousands) Segment gross margin $ 156,616 $ 129,423 $ 309,601 $ 268,479 Operating costs and expenses: Selling, general and administrative expenses 94,349 76,925 189,607 158,337 Depreciation and amortization 47,723 33,571 94,987 73,770 Restructuring, acquisition and integration-related costs 3,978 3,279 9,350 6,292 Total operating costs and expenses 146,050 113,775 293,944 238,399 Income from operations 10,566 15,648 15,657 30,080 Gain on sale of business — — — 5,727 Interest expense and other, net (14,112 ) (10,824 ) (28,049 ) (21,933 ) Loss on extinguishment of debt (5,966 ) (226 ) (7,252 ) (458 ) Income (loss) before income taxes $ (9,512 ) $ 4,598 $ (19,644 ) $ 13,416 The Company evaluates performance of its segments based on segment gross margin. Segment gross margin includes revenues from external customers and related cost of revenues. Costs excluded from segment gross margin include selling, general and administrative expenses, depreciation and amortization, restructuring, acquisition and integration-related costs, gain on sale of business, interest expense and other, net, and loss on extinguishment of debt, as they are not considered in the measurement of segment performance. Management periodically evaluates the segmentation of customers within the distinct customer categories, which may result in changes to segment information in the future. 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 and expenditures for additions of long-lived 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. Revenues by Type The Company generates revenues by providing a broad range of data, voice and managed network services to business and residential customers. The Company’s revenues primarily consist of the following: • Monthly recurring charges for providing data, voice and managed network services; transmission capacity; and Internet access and related value-added services; • Usage revenues; • Equipment revenues; and • Non-recurring and other revenues, such as installation fees, termination fees and administrative fees. The following table presents revenue detail for the three and six months ended June 30, 2015 and 2016 : Three Months Ended Six Months Ended June 30, June 30, 2015 2016 2015 2016 (in thousands) Monthly recurring revenues $ 251,145 $ 212,693 $ 499,120 $ 436,095 Usage revenues 25,120 21,271 52,798 43,729 Equipment revenues 3,935 3,947 7,659 8,054 Non-recurring and other revenues 3,464 2,446 6,534 6,741 Total revenues $ 283,664 $ 240,357 $ 566,111 $ 494,619 |