OPERATING SEGMENTS

The Company has two reportable segments: INAP US and INAP INTL. These segments are comprised of strategic businesses that are defined by the location of the service offerings. Our INAP US segment consists of US Colocation, US Cloud, and US Network services based in the United States. Our INAP INTL segment consists of these same services based in countries other than the United States, and Ubersmith.

During the three months ended March 31, 2018, we changed our organizational structure in an effort to create more effective and efficient operations and to improve customer and product focus. In that regard, we revised the information that our chief executive officer, who is also our Chief Operating Decision Maker (“CODM”), regularly reviews for purposes of allocating resources and assessing performance. As a result, we report our financial performance based on our revised segment structure. We have reclassified prior period amounts to conform to the current presentation.

The prior year reclassifications, which did not affect total revenues, total costs of sales and services, operating loss or net loss, are summarized as follows (in thousands):



	Three Months Ended June 30, 2017
	As Previously Reported		Reclassification			As Reported
Revenues:
INAP COLO	$	52,044	$	(52,044	)	$	—
INAP CLOUD	17,598		(17,598		)	—
INAP US	—		54,113			54,113
INAP INTL	—		15,529			15,529
Costs of sales and services, exclusive of depreciation and amortization:
INAP COLO	$	22,070	$	(22,070	)	$	—
INAP CLOUD	4,359		(4,359		)	—
INAP US	—		21,137			21,137
INAP INTL	—		5,292			5,292



	Six Months Ended June 30, 2017
	As Previously Reported		Reclassification			As Reported
Revenues:
INAP COLO	$	105,383	$	(105,383	)	$	—
INAP CLOUD	36,392		(36,392		)	—
INAP US	—		109,575			109,575
INAP INTL	—		32,200			32,200
Costs of sales and services, exclusive of depreciation and amortization:
INAP COLO	$	46,876	$	(46,876	)	$	—
INAP CLOUD	8,598		(8,598		)	—
INAP US	—		44,684			44,684
INAP INTL	—		10,790			10,790

Each segment is managed as an operation with well-established strategic directions and performance requirements. Each segment is led by a separate General Manager who reports directly to the Company’s CODM. The CODM evaluates segment performance using business unit contribution which is defined as business unit revenues less direct costs of sales and services, customer support, and sales and marketing, exclusive of depreciation and amortization.

Our services, which are included within both our reportable segments, are described as follows:

Colocation

Colocation involves providing conditioned power with back-up capacity and physical space within data centers along with associated services such as interconnection, remote hands, environmental controls, monitoring and security while allowing our customers to deploy and manage their servers, storage and other equipment in our secure data centers. We design the data center infrastructure, procure the capital equipment, deploy the infrastructure and are responsible for the operation and maintenance of the facility.

Cloud

Cloud services involve providing compute resources and storage services on demand via an integrated platform that includes our automated bare metal solutions. We offer our next generation cloud platforms in our high density colocation facilities and utilize the INAP performance IP for low latency connectivity.

Network

Network services includes our patented Performance IP™ service, content delivery network services, IP routing hardware and software platform. By intelligently routing traffic with redundant, high-speed connections over multiple, major Internet backbones, our IP connectivity provides high-performance and highly-reliable delivery of content, applications and communications to end users globally. We deliver our IP connectivity through 99 POPs around the world.

The following table provides segment results with prior period amounts reclassified to conform to the current presentation (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Revenues:
INAP US	$	64,067		$	54,113		$	121,142		$	109,575
INAP INTL	17,895			15,529			35,021			32,200
Net revenues	81,962			69,642			156,163			141,775

Cost of sales and services, customer support and sales and marketing:
INAP US	34,873			32,776			65,396			68,232
INAP INTL	11,872			8,463			23,005			17,465
Total costs of sales and services, customer support and sales and marketing	46,745			41,239			88,401			85,697

Segment profit:
INAP US	29,194			21,337			55,746			41,343
INAP INTL	6,023			7,066			12,016			14,735
Total segment profit	35,217			28,403			67,762			56,078

Exit activities, restructuring and impairments	826			4,628			793			5,651
Other operating expenses, including sales, general and administrative and depreciation and amortization expenses	32,264			25,828			63,963			51,988
Income (loss) from operations	2,127			(2,053		)	3,006			(1,561		)
Non-operating expenses	15,886			17,336			30,698			25,570
Loss before income taxes and equity in earnings of equity-method investment	$	(13,759	)	$	(19,389	)	$	(27,692	)	$	(27,131	)

The CODM does not manage the operating segments based on asset allocations. Therefore, assets by operating segment have not been provided.