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Table of Contents
Segment Results of Operations
We began recording revenue and cost of revenue transactions in our new segment structure during 2015. Management determined that it is impracticable to restate
financial information prior to 2015 to conform to the new reportable segment structure due to the level of effort required to segment customers that terminated
service prior to 2015 and identify the related cost of revenue associated with those customers, as this information is not currently available. The following
discussion contains current year segment operating results under the new segment reporting structure and for comparability purposes, contains current year and
prior year segment operating results under the previous segment reporting structure. For more information regarding our segment reporting, refer to Note 16 to our
Consolidated Financial Statements.
We evaluate performance of our new segment structure 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,
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. Management continues to evaluate the segmentation of customers within the distinct customer categories,
which may result in changes to segment information in the future.
We evaluated the performance of our previous segment structure 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 expenses over which segment managers have direct
discretionary control, such as advertising and marketing programs, customer support expenses, operations 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.
New Segment Results
The following table presents segment results for our new reportable segment structure for the year ended December 31, 2015:
Year Ended
December 31, 2015
Enterprise/Mid-Market
Revenues $ 444,968
Cost of revenues (excluding depreciation and amortization) 221,347
Gross margin 223,621
Small Business
Revenues 297,039
Cost of revenues (excluding depreciation and amortization) 139,440
Gross margin 157,599
Carrier/Transport
Revenues 135,905
Cost of revenues (excluding depreciation and amortization) 61,979
Gross margin 73,926
Consumer Services
Revenues 219,340
Cost of revenues (excluding depreciation and amortization) 77,862
Gross margin 141,478
Consolidated
Revenues 1,097,252
Cost of revenues (excluding depreciation and amortization) 500,628
Gross margin $ 596,624
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