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Segment Reporting | 9 Months Ended
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Sep. 30, 2023
Segment Reporting [Abstract] |
Segment Reporting | Segment Reporting Effective on January 1, 2023, we reorganized around a two-business unit operating model, Public Cloud and Private Cloud. This two-business unit operating model ensures increased focus, delivery, and service quality for our customers. We have changed our segment reporting to reflect this reorganization under two operating segments, which correspond directly to our reportable segments: Public Cloud, a services-centric, capital-light model providing value-added cloud solutions through managed services, Elastic Engineering and professional services offerings for customer environments hosted on the AWS, Microsoft Azure and Google Cloud public cloud platforms; and Private Cloud, a technology-forward, capital-intensive model providing managed service offerings for customer environments hosted in one of our data centers as well as in those owned by customers or by third parties such as colocation providers. Private Cloud also includes our legacy OpenStack Public Cloud business that we ceased to actively market to customers in 2017. Our prior Multicloud Services segment has been separated into its public and private cloud components and the offerings previously reported in our Apps & Cross Platform segment have been reassigned to either the Public Cloud or Private Cloud segment based on the nature of the offering. Our segments are based upon a number of factors, including, the basis for our budgets and forecasts, organizational and management structure and the financial information regularly used by our Chief Operating Decision Maker to make key decisions and to assess performance. We assess financial performance of our segments on the basis of revenue and segment operating profit. Segment operating profit includes expenses directly attributable to running the respective segments' business. This excludes any corporate overhead expenses. We have centralized corporate functions that provide services to the segments in areas such as accounting, information technology, marketing, legal and human resources. Corporate function costs that are not allocated to the segments are included in the row labeled "Corporate functions" in the table below. The table below presents a reconciliation of revenue by reportable segment to consolidated revenue and a reconciliation of consolidated segment operating profit to consolidated loss before income taxes for the three and nine months ended September 30, 2022 and 2023.
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(In millions) | 2022 |  | 2023 |  | 2022 |  | 2023
Revenue by segment: |  |  |  |  |  |  |
Public Cloud | $ | 445.0 |  |  | $ | 432.8 |  |  | $ | 1,284.1 |  |  | $ | 1,312.3 |
Private Cloud | 342.6 |  |  | 299.6 |  |  | 1,051.2 |  |  | 925.1 |
Total consolidated revenue | $ | 787.6 |  |  | $ | 732.4 |  |  | $ | 2,335.3 |  |  | $ | 2,237.4 |
Segment operating profit: |  |  |  |  |  |  |
Public Cloud | $ | 28.1 |  |  | $ | 21.6 |  |  | $ | 92.5 |  |  | $ | 63.1 |
Private Cloud | 116.2 |  |  | 84.9 |  |  | 385.7 |  |  | 264.6 |
Total consolidated segment operating profit | 144.3 |  |  | 106.5 |  |  | 478.2 |  |  | 327.7 |
Corporate functions | (64.8) |  |  | (61.0) |  |  | (188.1) |  |  | (192.7) |
Share-based compensation expense | (19.4) |  |  | (17.2) |  |  | (59.5) |  |  | (51.9) |
Special bonuses and other compensation expense (1) | (2.4) |  |  | (3.3) |  |  | (8.2) |  |  | (9.7) |
Transaction-related adjustments, net (2) | (2.4) |  |  | (1.6) |  |  | (9.6) |  |  | (4.1) |
Restructuring and transformation expenses (3) | (26.1) |  |  | (14.3) |  |  | (74.3) |  |  | (63.0) |
Hosted Exchange incident expenses, net of proceeds received or expected to be received under our insurance coverage | — |  |  | 5.3 |  |  | — |  |  | 0.4 |
Amortization of intangible assets (4) | (42.0) |  |  | (39.7) |  |  | (126.4) |  |  | (121.6) |
Impairment of goodwill | (405.2) |  |  | (165.7) |  |  | (405.2) |  |  | (708.8) |
UK office closure (5) | — |  |  | — |  |  | — |  |  | (12.1) |
Impairment of assets, net | (58.7) |  |  | (48.4) |  |  | (58.7) |  |  | (48.4) |
Interest expense | (52.3) |  |  | (56.5) |  |  | (152.9) |  |  | (170.7) |
Gain (loss) on investments, net | (0.1) |  |  | — |  |  | (0.4) |  |  | 0.2 |
Gain on debt extinguishment | — |  |  | 55.4 |  |  | — |  |  | 163.1 |
Other expense, net | (6.0) |  |  | (2.6) |  |  | (15.5) |  |  | (0.3) |
Total consolidated loss before income taxes | $ | (535.1) |  |  | $ | (243.1) |  |  | $ | (620.6) |  |  | $ | (891.9) |
(1) | Includes expense related to retention bonuses, mainly relating to restructuring and integration projects, and the related payroll tax, senior executive signing bonuses and relocation costs, and payroll taxes associated with the exercise of stock options and vesting of restricted stock. Beginning in the second quarter of 2023, includes expense related to the one-time grant of long-term incentive bonuses as a component of our annual compensation award process.
(2) | Includes legal, professional, accounting and other advisory fees related to acquisitions, certain one-time compliance costs related to being a public company, integration costs of acquired businesses, purchase accounting adjustments, payroll costs for employees that dedicate significant time to supporting these projects and exploratory acquisition and divestiture costs and expenses related to financing activities.
(3) | Includes consulting and advisory fees related to business transformation and optimization activities, payroll costs for employees that dedicate significant time to these projects, as well as associated severance, certain facility closure costs, and lease termination expenses. This amount also includes total charges of $1.0 million and $5.2 million for the three and nine months ended September 30, 2022, respectively, related to the July 2021 Restructuring Plan which are not accounted for as exit and disposal costs under ASC 420, including one-time offshore build out costs.
(4) | All of our intangible assets are attributable to acquisitions, including the Rackspace Acquisition in 2016.
(5) | Expense recognized related to the closure of a UK office that we exited in the second quarter of 2023 prior to the lease end date.
The table below presents depreciation expense included in segment operating profit above for the three and nine months ended September 30, 2022 and 2023.
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(In millions) | 2022 |  | 2023 |  | 2022 |  | 2023
Public Cloud | $ | 2.0 |  |  | $ | 2.4 |  |  | $ | 6.3 |  |  | $ | 7.0 |
Private Cloud | 42.2 |  |  | 42.2 |  |  | 130.7 |  |  | 131.0 |
Corporate functions | 10.4 |  |  | 5.8 |  |  | 33.0 |  |  | 22.9 |
Total depreciation expense | $ | 54.6 |  |  | $ | 50.4 |  |  | $ | 170.0 |  |  | $ | 160.9 |
Management does not use total assets by segment to evaluate segment performance or allocate resources. As such, total assets by segment are not disclosed.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 22 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-22 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 15 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-15 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 31 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-31 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 32 -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-32 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 42 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-42 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 32 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-32 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 40 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-40 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//280/tableOfContent Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 26 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-26 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 34 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-34 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 41 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-41 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-21 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-21 Reference 14: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 32 -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-32 + Details
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