Document and Entity Information
Document and Entity Information Document - shares | 9 Months Ended | |
Sep. 30, 2017 | Nov. 10, 2017 | |
Document Information [Line Items] | ||
Entity Registrant Name | Switch, Inc. | |
Entity Central Index Key | 1,710,583 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Common Class A [Member] | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 35,937,500 | |
Common Class B [Member] | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 173,624,316 | |
Common Class C [Member] | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 42,944,647 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Sep. 30, 2017 | Jun. 13, 2017 | Dec. 31, 2016 |
CURRENT ASSETS: | |||
TOTAL ASSETS | $ 0 | $ 0 | |
CURRENT LIABILITIES: | |||
Commitments and Contingencies | |||
STOCKHOLDER'S EQUITY | |||
Common stock, $0.001 par value per share, 1,000,000 shares authorized, one share and none issued and outstanding as of September 30, 2017 and June 13, 2017, respectively | 0 | 0 | |
Total stockholder's equity | 0 | $ 0 | |
Switch, Ltd. | |||
CURRENT ASSETS: | |||
Cash | 7,992,000 | $ 22,713,000 | |
Accounts receivable, net of allowance of $429 and $340, respectively | 13,725,000 | 9,131,000 | |
Prepaid expenses | 4,087,000 | 3,921,000 | |
Other current assets | 9,597,000 | 2,052,000 | |
Total current assets | 35,401,000 | 37,817,000 | |
Property and equipment, net | 1,072,823,000 | 874,259,000 | |
Long term deposit | 4,262,000 | 4,440,000 | |
Investments | 0 | 169,000 | |
Other assets | 11,894,000 | 4,330,000 | |
TOTAL ASSETS | 1,124,380,000 | 921,015,000 | |
CURRENT LIABILITIES: | |||
Long term debt, current portion | 5,194,000 | 14,330,000 | |
Accounts payable | 19,516,000 | 1,663,000 | |
Accrued expenses | 17,750,000 | 13,127,000 | |
Accrued construction payables | 16,669,000 | 47,528,000 | |
Accrued Michigan building and land purchase | 22,589,000 | 23,916,000 | |
Accrued impact fee expense | 0 | 27,018,000 | |
Deferred revenue, current portion | 9,890,000 | 7,157,000 | |
Customer deposits | 7,939,000 | 6,939,000 | |
Capital lease obligations, current portion | 3,500,000 | 4,000,000 | |
Total current liabilities | 103,047,000 | 145,678,000 | |
Long term debt, net | 818,865,000 | 457,737,000 | |
Capital lease obligations | 19,466,000 | 19,466,000 | |
Accrued interest, capital lease obligations | 1,981,000 | 2,070,000 | |
Deferred revenue | 19,301,000 | 17,701,000 | |
TOTAL LIABILITIES | 962,660,000 | 642,652,000 | |
Commitments and Contingencies | |||
MEMBERS' EQUITY: | |||
Members' equity, 225,000,000 units authorized; 200,750,505 and 198,866,680 units issued and outstanding, respectively | 161,627,000 | 279,056,000 | |
Accumulated other comprehensive gain (loss) | 93,000 | (693,000) | |
TOTAL MEMBERS' EQUITY | 161,720,000 | 278,363,000 | |
TOTAL LIABILITIES AND MEMBERS' EQUITY | $ 1,124,380,000 | $ 921,015,000 |
Consolidated Balance Sheets Par
Consolidated Balance Sheets Parenthetical - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Common stock, par value ($ per share) | $ 0.001 | |
Common stock, shares authorized (in shares) | 1,000,000 | |
Common stock, shares issued (in shares) | 1 | |
Common stock, shares outstanding (in shares) | 1 | |
Switch, Ltd. | ||
Accounts receivable allowance | $ 429 | $ 340 |
Units authorized (in shares) | 225,000,000 | 225,000,000 |
Units issued (in shares) | 200,750,505 | 200,750,505 |
Units outstanding (in shares) | 198,866,680 | 198,866,680 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - Switch, Ltd. - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Revenue | $ 97,689 | $ 81,666 | $ 278,947 | $ 236,464 |
Cost of revenue | 50,744 | 47,029 | 144,575 | 125,389 |
Gross profit | 46,945 | 34,637 | 134,372 | 111,075 |
Selling, general and administrative expense | 21,494 | 18,225 | 60,941 | 52,508 |
Income from operations | 25,451 | 16,412 | 73,431 | 58,567 |
Other income (expense): | ||||
Interest expense, including $403, $266, $901 and $740, respectively, in amortization of debt issuance costs | (8,856) | (2,273) | (17,789) | (6,850) |
Equity in net losses of investments | (221) | (1,260) | (955) | (3,814) |
Loss on extinguishment of debt | 0 | 0 | (3,565) | 0 |
Gain on lease termination | 0 | 2,801 | 0 | 2,801 |
Other | 112 | 246 | 644 | 436 |
Total other income (expense) | (8,965) | (486) | (21,665) | (7,427) |
Net income | $ 16,486 | $ 15,926 | $ 51,766 | $ 51,140 |
Net income per unit: | ||||
Basic | $ 0.08 | $ 0.08 | $ 0.26 | $ 0.26 |
Diluted | $ 0.08 | $ 0.08 | $ 0.25 | $ 0.25 |
Weighted-average units used in computing net income per unit: | ||||
Basic | 200,746,690 | 199,108,842 | 200,415,541 | 199,328,865 |
Diluted | 208,972,744 | 204,244,558 | 207,395,818 | 203,490,593 |
Other comprehensive income: | ||||
Foreign currency translation adjustments | $ 221 | $ 293 | $ 786 | $ 316 |
Comprehensive income | $ 16,707 | $ 16,219 | $ 52,552 | $ 51,456 |
Consolidated Statements of Com5
Consolidated Statements of Comprehensive Income Parenthetical - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Switch, Ltd. | ||||
Amortization of Debt Issuance Costs | $ 403 | $ 266 | $ 901 | $ 740 |
Consolidated Statement of Membe
Consolidated Statement of Members' Equity - Switch, Ltd. - 9 months ended Sep. 30, 2017 - USD ($) $ in Thousands | Total | Members' Equity [Member] | AOCI Attributable to Parent [Member] | Common Unit Award [Member] | Common Unit Award [Member]Members' Equity [Member] | Common Unit Award [Member]AOCI Attributable to Parent [Member] | Incentive Units | Incentive UnitsMembers' Equity [Member] | Incentive UnitsAOCI Attributable to Parent [Member] |
Balance (in shares) at Dec. 31, 2016 | 198,866,680 | 198,866,680 | |||||||
Balance at Dec. 31, 2016 | $ 278,363 | $ 279,056 | $ (693) | ||||||
Increase (Decrease) in Members' Equity | |||||||||
Net income | 51,766 | 51,766 | 0 | ||||||
Distributions | (174,235) | (174,235) | 0 | ||||||
Equity-based compensation expense | $ 3,764 | $ 3,764 | 0 | ||||||
Unit based compensation awarded or vested | 150,880 | 1,676,325 | |||||||
Unit based compensation awarded or vested | $ 1,115 | $ 1,115 | $ 0 | $ 0 | $ 0 | $ 0 | |||
Issuance of membership units upon exercise of unit options | 57,000 | 56,620 | |||||||
Issuance of membership units upon exercise of unit options | $ 161 | $ 161 | 0 | ||||||
Foreign currency translation adjustments | $ 786 | $ 0 | 786 | ||||||
Balance (in shares) at Sep. 30, 2017 | 198,866,680 | 200,750,505 | |||||||
Balance at Sep. 30, 2017 | $ 161,720 | $ 161,627 | $ 93 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION: | ||
Escrow Deposits Related to Property Sales | $ 1,235 | $ 0 |
Noncash Reimbursement of Long-term Deposit | 178 | 0 |
Switch, Ltd. | ||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | 51,766 | 51,140 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization of property and equipment | 64,676 | 47,589 |
Loss on disposal of property and equipment | 24 | 718 |
Amortization of debt issuance costs | 901 | 740 |
Bad debts | 172 | 37 |
Loss on extinguishment of debt | 2,065 | 0 |
Equity in losses on investments | 955 | 3,814 |
Equity-based compensation | 4,879 | 4,912 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (3,363) | (300) |
Prepaid expenses | (166) | (378) |
Other current assets | (124) | 664 |
Other assets | (748) | (258) |
Accounts payable | 1,904 | 779 |
Accrued interest, capital lease obligations | (89) | 74 |
Accrued expenses | 4,622 | 9,356 |
Accrued impact fee expense | (27,018) | 0 |
Deferred revenue | 4,333 | 682 |
Customer deposits | 1,000 | 843 |
Net cash provided by operating activities | 105,789 | 120,412 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Acquisition of property and equipment | (284,011) | (190,504) |
Acquisition of intangible asset | (32) | 0 |
Escrow deposit | (7,632) | 0 |
Proceeds from sale of property and equipment | 100 | 0 |
Proceeds from notes receivable | 211 | 445 |
Purchase of notes receivable | 0 | (2,500) |
Purchase of investments | 0 | (1,500) |
Purchase of Portfolio Energy Credits | (64) | 0 |
Net cash used in investing activities | (291,428) | (194,059) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from borrowings | 976,000 | 114,000 |
Repayment of borrowings, including capital lease obligations | (621,300) | (7,500) |
Debt issuance costs on new loan | (8,826) | (1,005) |
Deferred offering costs paid | (893) | 0 |
Taxes paid for net settlement of exercised options | 0 | (290) |
Cash distributions | (174,063) | (24,212) |
Repurchase of member options | 0 | (11,734) |
Net cash provided by financing activities | 170,918 | 69,259 |
NET DECREASE IN CASH | (14,721) | (4,388) |
CASH - Beginning of period | 22,713 | 14,192 |
CASH - End of period | 7,992 | 9,804 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||
Cash paid for interest, net of amounts capitalized | 16,843 | 5,816 |
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION: | ||
(Decrease) increase in liabilities incurred to acquire property and equipment | (19,412) | 17,433 |
Increase in liabilities incurred related to deferred offering costs | 3,237 | 0 |
Forgiveness of note receivable in exchange for capital lease asset | 0 | 2,100 |
Distributions declared but not paid | 6,219 | 659 |
Net settlement of outstanding vested options | 0 | 744 |
Distributions used for payment of option loans and related interest | $ 172 | $ 8 |
Organization
Organization | 9 Months Ended |
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization Organization Switch, Inc. was formed as a Nevada corporation on June 13, 2017. Switch, Inc. was formed for the purpose of completing an initial public offering ("IPO") and related transactions in order to carry on the business of Switch, Ltd. and its subsidiaries. As the manager of Switch, Ltd., Switch, Inc. is expected to operate and control all of the business and affairs of Switch, Ltd., and through Switch, Ltd. and its subsidiaries, continue to conduct the business now conducted by these subsidiaries. Initial Public Offering On October 11, 2017, Switch, Inc. completed its IPO of 35,937,500 shares of Class A common stock at a public offering price of $17.00 per share. Switch, Inc. received $577.3 million in proceeds, net of underwriting discounts and commissions, but before offering expenses of $4.1 million , which Switch, Inc. used to purchase 35,937,500 newly issued common units of Switch, Ltd. ("Common Units"), at a price per Common Unit equal to the IPO price per share of Class A common stock, less underwriting discounts and commissions. As a result of the IPO, Rob Roy, the Founder, Chief Executive Officer and Chairman of Switch, Ltd., and an affiliated entity of Mr. Roy (collectively, the "Founder Members") collectively control approximately 67.2% of the combined voting power of Switch, Inc.'s common stock as a result of their ownership of Switch, Inc.'s Class C common stock, each share of which is entitled to 10 votes on all matters submitted to a vote of Switch, Inc.'s stockholders. Subsequent to the IPO and the Transactions, as defined below, Switch, Inc.'s sole assets are Common Units of Switch, Ltd. Switch, Inc. is the sole manager of Switch, Ltd. As a result, beginning in the fourth quarter of 2017, Switch, Inc. will consolidate the financial results of Switch, Ltd. and report a non-controlling interest in its consolidated financial statements. See Note 6 — Subsequent Events below for further description of the IPO and the Transactions. |
Nature of Operations
Nature of Operations | 9 Months Ended |
Sep. 30, 2017 | |
Switch, Ltd. | |
Nature Of Operations [Line Items] | |
Nature of Operations | Nature of Operations Business Activities Switch, Ltd. ("Switch") and its subsidiaries (collectively, the "Company") are limited liability companies that provide colocation space and related services to global enterprises, financial companies, government agencies, and others that conduct critical business on the internet. The Company develops and operates data centers in Nevada, which are Tier IV Gold certified, and Michigan, and is developing data centers in Georgia, delivering redundant services with low latency and super capacity transport environments. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2017 | |
Significant Accounting Policies [Line Items] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation and Accounting The balance sheets are presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Separate statements of income, comprehensive income, changes in stockholder's equity, and cash flows have not been presented as Switch, Inc. did not engage in any business activities prior to the IPO except for the issuance of one share as described in Note 3 — Stockholder's Equity. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates. |
Switch, Ltd. | |
Significant Accounting Policies [Line Items] | |
Summary of Significant Accounting Policies | mary of Significant Accounting Policies Basis of Presentation and Accounting The accompanying consolidated financial statements are presented in accordance with generally accepted accounting principles in the United States of America ("GAAP"), and include the accounts of the Company. All significant intercompany transactions and balances have been eliminated. Unaudited Interim Financial Information The accompanying interim consolidated balance sheet as of September 30, 2017 , the interim consolidated statements of comprehensive income for the three and nine months ended September 30, 2017 and 2016 , the interim consolidated statement of members' equity and of cash flows for the nine months ended September 30, 2017 , and the consolidated financial data disclosed in these notes as of September 30, 2017 and for the three and nine months ended September 30, 2017 and 2016 are unaudited. The unaudited interim consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of these interim consolidated financial statements. The consolidated results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of the results to be expected for the year ending December 31, 2017 , or for any other future annual or interim period. These interim consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and related notes for the year ended December 31, 2016 included in the Prospectus. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. On an ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to the allowance for doubtful accounts, collectability of notes receivable, useful lives of property and equipment, equity-based compensation, deferred revenue, fair value of leased property at inception of lease term, fair value of deliverables under multiple element arrangements, probability assessments of exercising renewal options on leases and other than temporary impairments on investments. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable. Cash The Company considers all highly liquid instruments with an original maturity of three months or less to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2017 and December 31, 2016 . Investments The Company's investments in entities where it holds at least a 20% ownership interest and has the ability to exercise significant influence, but not control, over the investee are accounted for using the equity method of accounting. The Company's share of the investee's results of operations is included in equity in (losses) net earnings of investments and foreign currency translation adjustments, as applicable, are included in other comprehensive income with a corresponding adjustment to its investment. The Company discontinues applying the equity method of accounting when the investment is reduced to zero. If the investee subsequently reports net income or other comprehensive income, the Company resumes applying the equity method of accounting only after its share of unrecognized net income and other comprehensive income, respectively, equals the share of losses not recognized during the period the equity method of accounting was suspended. The Company gives precedence to other comprehensive income and losses when determining whether to resume applying the equity method of accounting. Investments in entities where the Company holds less than a 20% ownership interest are generally accounted for using the cost method of accounting. In addition, the Company reviews its relationships with other entities to identify whether they are variable interest entities and to assess whether the Company is the primary beneficiary of such entity. If the determination is made that the Company is the primary beneficiary, then the entity is consolidated. Fair Value Measurements Financial assets and liabilities are recorded at fair value. The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The accounting guidance establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels as follows: Level 1 Quoted prices in active markets for identical assets or liabilities. Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Derivative Financial Instruments A derivative is a financial instrument whose value changes in response to an underlying variable, requires little or no initial net investment and is settled at a future date. Derivatives are initially recognized at fair value on the date on which the derivatives are entered into and subsequently re-measured at fair value. Embedded derivatives included in hybrid instruments are treated and disclosed as separate derivatives when their economic characteristics and risks are not closely related to those of the host contract, the terms of the embedded derivative are the same as those of a stand-alone derivative and the combined contract is not measured at fair value through earnings. The financial host contracts are accounted for and measured using the applicable GAAP of the relevant financial instrument category. The method of recognizing fair value gains and losses depends on whether the derivatives are designated as hedging instruments, and if so, the nature of the hedge relationship. All gains and losses from changes in the fair values of derivatives that do not qualify for hedge accounting are recognized immediately in earnings. As of September 30, 2017 and December 31, 2016 , the Company's identified embedded derivative does not qualify for hedge accounting (Note 5). During the nine months ended September 30, 2017 , the Company entered into an agreement for the purchase of electricity (Note 9). The accounting guidance for derivative instruments provides a scope exception for commodity contracts that meet the normal purchase and sales criteria specified in the standard. The normal purchases and normal sales exception requires, among other things, physical delivery in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that are designated as normal purchases and normal sales are not recorded on the consolidated balance sheets at fair value. Concentration of Credit and Other Risks Although the Company operates primarily in Nevada, realization of its customer accounts receivable and its future operations and cash flows could be affected by adverse economic conditions, both regionally and elsewhere in the United States. During the three months ended September 30, 2017 and 2016 , the Company's largest customer and its affiliates comprised 12% and 13% , respectively, of the Company's revenue. During the nine months ended September 30, 2017 and 2016 , the Company's largest customer and its affiliates comprised 10% and 14% , respectively, of the Company's revenue. No single customer accounted for 10% or more of accounts receivable as of September 30, 2017 or December 31, 2016 . The Company generally carries cash on deposit with financial institutions in excess of federally insured limits. Through May 31, 2017, the Company was also exposed to a limited extent, to a risk of unfavorable price increases from its principal provider of power, Nevada Power Company dba NV Energy ("NV Energy"), whose rates are set by and services are regulated by the Public Utilities Commission of Nevada ("PUCN"). On June 1, 2017, the Company became an unbundled purchaser of energy in Nevada. Accounts Receivable Customer receivables are non-interest bearing and the Company generally does not request collateral from its customers, however, it usually obtains a lien or other security interest in certain customers' equipment placed in the Company's data center, and/or obtains a deposit. In the event collection is not reasonably assured at inception of a contract, recognition of related revenue is deferred generally until receipt of cash payment. The Company maintains an allowance for doubtful accounts for estimated losses up to the full amount of invoices based on the age of the invoices. If the financial condition of the Company's customers were to deteriorate or if they became insolvent, resulting in an impairment of their ability to make payments, greater allowances for doubtful accounts may be required. Management specifically analyzes accounts receivable and current economic news and trends, historical bad debt, customer concentrations, customer credit-worthiness and changes in customer payment terms when evaluating revenue recognition and the adequacy of the Company's reserves. Delinquent account balances are written-off after management has determined the likelihood of collection is not probable. The Company recorded bad debt expense (recovery) of $167,000 and $(223,000) for the three months ended September 30, 2017 and 2016 , respectively, and $172,000 and $37,000 for the nine months ended September 30, 2017 and 2016 , respectively. Notes Receivable Notes receivable are recorded at amortized cost using the interest method. The Company evaluates the collectability of both principal and interest based on an assessment of any significant changes in the amount and timing of the expected future cash flows. As of December 31, 2016 , the Company fully impaired the carrying value of its notes receivable (Note 5). Internal Use Software The Company capitalizes certain costs incurred in connection with developing or obtaining internal use software. Capitalized software costs placed into service are included in computer equipment, furniture and fixtures within property and equipment, net on the consolidated balance sheets and are amortized on a straight-line basis over a three -year period. Software costs that do not meet capitalization criteria are expensed immediately. The Company capitalized internal use software costs of $70,000 and $473,000 , respectively, during the three months ended September 30, 2017 and 2016 , and $1.2 million and $670,000 during the nine months ended September 30, 2017 and 2016 , respectively. Property and Equipment Property and equipment is stated at cost. Depreciation and amortization of property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets. The cost and accumulated depreciation of property and equipment retired or otherwise disposed of are eliminated from the respective accounts and any resulting gain or loss is included in operations. Costs of repairs and maintenance are expensed as incurred. For assets held under capital leases, the estimated useful lives are limited to the shorter of the useful life of the asset or the term of the lease, including renewal option periods if exercise is intended (Note 7). Amortization of assets that are recorded under capital leases is included in depreciation expense. For assets used in data center operations, the related depreciation and amortization are included in cost of revenue. The Company's estimated useful lives of its property and equipment are as follows (in years): Assets Estimated Useful Lives Land improvements, buildings and building improvements 20-40 Substation equipment 30 Data center equipment 5-10 Vehicles 7 Core network equipment 5-7 Cloud computing equipment 5 Fiber facilities 20, 40 Deferred installation charges 3-5 Computer equipment, furniture and fixtures 3-5 In addition, the Company has capitalized interest costs during the construction phase of data centers. Once a data center or expansion project becomes operational, these costs are allocated to certain property and equipment categories and are depreciated over the estimated useful life of the underlying assets. Impairment of Long‑Lived Assets The Company's long‑lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset group to estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Portfolio Energy Credits The Company recognizes portfolio energy credits ("PECs") at their cost when purchased as an intangible asset, subject to impairment testing. PECs are not considered outputs by the Company. Amortization of PECs is recorded within cost of revenue on the consolidated statements of comprehensive income when PECs are utilized in operations. Deferred Debt Issuance Costs Costs incurred in obtaining certain debt financing are deferred and amortized over the terms of the related debt instruments using the interest method for term debt and the straight-line method for revolving debt. Deferred Offering Costs The Company capitalizes certain legal, accounting, and other third-party fees that are directly associated with in-process equity financings until such financings are consummated. After consummation of the equity financing, these costs are recorded in stockholders' equity as a reduction of additional paid-in capital generated as a result of the offering. As of September 30, 2017 , the Company recorded $4.1 million of deferred offering costs within other assets in the accompanying consolidated balance sheets in contemplation of the IPO. Upon the successful consummation of the IPO in October 2017, the deferred offering costs were recorded immediately in Switch, Inc.s' stockholders' equity as a reduction of additional paid-in capital generated as a result of the IPO. The Company did not record any deferred offering costs as of December 31, 2016 . Foreign Currency Translation SUPERNAP International, S.A. ("SUPERNAP International"), an equity method investment of the Company, has investments in foreign subsidiaries. Gains or losses from translation of foreign operations where the local currency is the functional currency are included in other comprehensive income. Revenue Recognition During the nine months ended September 30, 2017, the Company derived more than 95% of its revenue from recurring revenue streams, consisting primarily of (1) colocation, which includes the licensing of cabinet space and power; and (2) connectivity services, which includes cross-connects, broadband services, and external connectivity. The remainder of the Company's revenue is from non-recurring revenue streams, which primarily include installation and contract settlements. Recurring revenue is generally billed monthly and recognized ratably over the period to which the service relates. The Company's contracts with its customers generally have terms of three to five years. Non-recurring installation fees, although generally paid in a lump sum upon installation, are deferred and recognized ratably over the expected life of the installation, which was 73 months as of September 30, 2017 and December 31, 2016 . The expected life of the installation is determined based on (i) the weighted-average term of new contracts entered into during the period with customers, plus (ii) the average term of contract renewals entered into during the period with existing customers. Revenue from connectivity services is generally recognized on a gross basis in accordance with the accounting standard related to reporting revenue gross as a principal versus net as an agent, primarily because the Company acts as the principal in the transactions, takes title to services and bears credit risk. Revenue from contract settlements, which result when a customer wishes to terminate their contract early, is generally recognized when no remaining performance obligations exist, to the extent that the revenue has not previously been recognized. The Company guarantees certain service levels, such as uptime, as outlined in individual customer contracts. If these service levels are not achieved, the Company reduces revenue for any credits given to the customer as a result. There were no service level credits issued during the three and nine months ended September 30, 2017 and 2016 . Revenue is recognized only when the service has been provided and when there is persuasive evidence of an arrangement, the fee is fixed or determinable and collection of the receivable is reasonably assured. It is the Company's customary business practice to obtain a signed colocation facility agreement and service order prior to recognizing revenue in an arrangement. The Company assesses collectability based on a number of factors, including past transaction history with the customer and the credit-worthiness of the customer. The Company generally does not request collateral from its customers except it usually obtains a lien and/or other security interest in a customer's equipment placed in the Company's data centers or obtains a deposit. If the Company determines that collection of a fee is not reasonably assured, the fee is deferred and revenue is recognized at the time collection becomes reasonably assured, which is generally upon receipt of cash. Multiple Element Arrangements The Company enters into multiple element revenue arrangements in which a customer may purchase a combination of the right to use network capacity (e.g., conduit and fiber optic cables), maintenance services, and colocation services. Terms of performance, cancellation, termination, or refunds in these arrangements are similar to those for individual stand-alone deliverables. To the extent these revenue arrangements involve the use of property and equipment, they are evaluated under lease accounting guidance to determine whether the arrangement meets the definition of a lease. None of the multiple element arrangements entered into by the Company during any of the periods presented have met the definition of a lease. The services offered under these revenue arrangements qualify as separate units of accounting. Multiple deliverables within revenue arrangements are allocated to separate units of accounting if the deliverables meet both of the following criteria: • The delivered items have value to the customer on a stand-alone basis. The items have value on a stand-alone basis if they are sold separately by any vendor or the customer could resell the delivered items on a stand-alone basis; and • If the arrangement includes a general right of return relative to the delivered items, delivery or performance of the undelivered items is considered probable and substantially in the control of the Company. At the inception of a multiple element arrangement, the Company: (1) determines whether and when each unit of accounting has been delivered or performed; (2) determines the fair value of each unit of accounting using the selling price hierarchy of vendor-specific evidence of fair value ("VSOE") if available, third-party evidence ("TPE") if VSOE is not available, and management's best estimate of the selling price ("BESP") if neither VSOE nor TPE is available; and (3) allocates the total price among the various units of accounting using the relative selling price method. Once the total price has been allocated among the various units of accounting, revenue is recognized when the relevant revenue recognition criteria are met for each element, which is upon acceptance or use of the services by the customer. VSOE generally exists when the deliverable is sold separately; however, in certain instances VSOE cannot be established if the deliverable cannot be priced within a narrow range or has a limited sales history. TPE is determined based on competitor prices for similar deliverables when sold separately. The Company determines BESP for a product or service by considering multiple factors including, but not limited to, pricing practices, market conditions, competitive landscape, type of customer, geographies, internal costs, and gross margin objectives. Revenue is allocated to rights to use network capacity and related colocation services and maintenance services under these arrangements based on TPE. Revenue allocated to other colocation services provided under these arrangements is based on VSOE. Income Taxes Since limited liability companies are "pass-through" entities under the U.S. Internal Revenue Code, the members of the Company are taxed directly on their respective ownership interests in consolidated income, and, therefore, no provision or liability for federal income tax has been included in the accompanying consolidated financial statements. Based on management's evaluations, since there are no conditions or uncertainties that present any material risk of loss of the pass-through status of the Company or other identified uncertain tax positions to be taken or taken in previously filed federal or state income tax returns that remain subject to examination by relevant tax authorities (presently consisting of those for tax years 2014 through 2016), the related provisions of GAAP relative to uncertain tax positions have had no effect on the Company's consolidated financial statements. The Company's policy is to record estimated probable penalties and interest to be assessed to the Company, if any, related to income tax matters as selling, general and administrative expense. Advertising Costs Advertising costs are expensed when incurred and are included in selling, general and administrative expense in the accompanying consolidated statements of comprehensive income. Advertising expense was $351,000 and $597,000 for the three months ended September 30, 2017 and 2016 , respectively, and $1.3 million and $1.5 million for the nine months ended September 30, 2017 and 2016 , respectively. Equity-Based Compensation Equity-based compensation cost is measured at the grant date for all equity-based awards made to employees and members based on the fair value of the awards and is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period. The Company grants equity awards to its employees and members and these equity awards generally have only a service condition. The Company's equity awards vest up to five years. The Company uses the Black-Scholes option-pricing model to determine the fair value of its equity awards. The determination of the fair value of equity awards is affected by assumptions regarding a number of complex and subjective variables including the fair value of the Company's member equity units, the expected price volatility of the member equity units over the term of the awards and actual and projected employee unit option exercise or purchase behaviors. The Company's member equity units' fair value per unit is estimated using a weighted average approach of a combination of the following three methods: (1) publicly traded data center company multiples; (2) data center precedent transaction multiples; and (3) the discounted cash flow method based on the Company's five-year forecast. The weighting of these three methods varied over time. The Company estimates the expected volatility by analyzing the volatility of companies in the same industry and selecting volatility within the range. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term of the equity awards. The expected dividend rate is determined at the grant date for each equity award. The expected term of the equity award is calculated by analyzing the historical exercise data and obtaining the weighted average of the holding period for the equity awards. Net Income per Unit Basic net income per unit is computed by dividing net income by the weighted-average number of units outstanding during the period. Diluted net income per unit is computed giving effect to all potential weighted average dilutive units including options, and incentive units. The dilutive effect of outstanding awards, if any, is reflected in diluted earnings per unit by application of the treasury stock method. Refer to Note 13 for further information on net income per unit. Recent Accounting Pronouncements ASU 2014-09 Revenue from Contracts with Customers In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). The ASU replaces much of the current guidance regarding revenue recognition including most industry-specific guidance. The core principle of the ASU is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity will be required to identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligation in the contract, and recognize revenue when (or as) the entity satisfies a performance obligation. In addition to the new revenue recognition requirements, entities will be required to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Entities may choose between two retrospective transition methods when applying the ASU. In July 2015, the FASB voted to defer the effective date by one year (ASU 2015-14) to December 15, 2018 for annual reporting periods beginning after that date, and interim periods within annual periods beginning after December 15, 2019, and permitted early adoption of the standard, but not before the original effective date of December 15, 2017. Companies may use either a full retrospective or a modified-retrospective approach to adopt the standard. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers - Principal versus Agent Considerations Reporting ("ASU 2016-08"). The core principle of the guidance in Revenue from Contracts with Customers in ASU 2014-09 is not changed by the amendments in ASU 2016-08. The amendments clarify the implementation guidance on principal versus agent considerations. Per ASU 2016-08, when another party is involved in providing goods or services to a customer, an entity is required to determine whether the nature of its promise is to provide the specified good or service itself (principal) or to arrange for that good or service to be provided by the other party (agent). When an entity that is a principal satisfies a performance obligation, the entity recognizes revenue in the gross amount of consideration to which it expects to be entitled in exchange for the specified good or service transferred to the customer. When an entity that is an agent satisfies a performance obligation, the entity recognizes revenue in the amount of any fee or commission to which it expects to be entitled. The effective date and transition requirements for ASU 2016-08 are the same as the effective date and transition requirements for ASU 2014-09. In April 2016 and May 2016, the FASB issued guidance which amends certain other aspects of ASU 2014-09. The amendments include the identification of performance obligations and the licensing implementation guidance (ASU 2016-10) and the collectability of revenue, presentation of sales tax and other similar taxes collected from customers, contracts containing noncash considerations, and contract modifications and completed contracts at transition (ASU 2016-12). In December 2016, the FASB amended ASU 2014-09 to make minor corrections and minor improvements to the guidance that are not expected to have a significant effect on current accounting practice or create a significant administrative cost. The effective date and transition provisions in these amendments are aligned with the requirements of ASU 2014-09. The Company is in the process of selecting a transition method and determining the effect of this guidance on its consolidated financial statements. ASU 2014-15 Presentation of Financial Statements - Going Concern In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern ("ASU 2014-15"), which provides guidance about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The adoption of ASU 2014-15 during the year ended December 31, 2016 did not impact the Company's consolidated financial statements. ASU 2015-02 Consolidation (Topic 810): Amendments to the Consolidation Analysis In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis ("ASU 2015-02"). This standard modifies existing consolidation guidance for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. The adoption of ASU 2015-02 in the first quarter of 2017 did not impact the Company's consolidated financial statements. ASU 2016-02 Leases (Topic 842) On February 25, 2016, the FASB issued ASU 2016-02, Leases ("ASU 2016-02"). The principle of ASU 2016-02 is that a lessee should recognize the assets and liabilities that arise from leases. Lessees will need to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability. For income statement purposes, ASU 2016-02 requires leases to be classified as either operating or finance. Operating leases will result in straight-line expense while finance leases will result in a front-loaded expense pattern. ASU 2016-02 is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted. The new standard must be adopted using a modified-retrospective transition, and provides for certain practical expedients. The Company is evaluating the potential effects of the adoption of this ASU on its consolidated financial statements. The Company has not decided if early adoption will be considered. ASU 2016-09 Stock Compensation - Improvements to Employee Share-Based Payment Accounting In March 2016, the FASB issued ASU 2016-09, Stock Compensation - Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 was issued to simplify accounting guidance by identifying, evaluating, and improving areas for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The areas affected by ASU 2016-09 include accounting for income taxes, classification of excess tax benefits on the statement of cash flows, minimum statutory tax withholding requirements, and classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-withholding purposes. In addition, under this guidance, an entity can make an accounting policy election to either estimate the number of aw |
Stockholder's Equity
Stockholder's Equity | 9 Months Ended |
Sep. 30, 2017 | |
Class of Stock [Line Items] | |
Stockholder's Equity | Stockholder's Equity As of September 30, 2017, Switch, Inc. was authorized to issue 1,000,000 shares of common stock, par value $0.001 per share. One share was issued and outstanding as of September 30, 2017. On October 5, 2017, in connection with the Transactions, Switch, Inc. amended and restated its articles of incorporation to authorize: (i) 750,000,000 shares of Class A common stock, par value $0.001 per share, (ii) 300,000,000 shares of Class B common stock, par value $0.001 per share, (iii) 75,000,000 shares of Class C common stock, par value $0.001 per share, and (iv) 10,000,000 shares of blank check preferred stock. The shares of Class B common stock and Class C common stock are held by the holders of Common Units other than Switch, Inc. (the "Continuing Members"). The shares of Class B common stock are held by the Continuing Members, other than the Founder Members (the "Non-Founder Members") and entitle the holders to one vote per share on matters submitted to a vote of Switch, Inc.'s stockholders. The shares of Class C common stock are held by the Founder Members and entitle the holders to 10 votes per share on matters submitted to a vote of Switch, Inc.'s stockholders. |
Switch, Ltd. | |
Class of Stock [Line Items] | |
Stockholder's Equity | Members' Equity Switch, Ltd. Member Distributions During the nine months ended September 30, 2017 , the Company's Board of Managers approved distributions of $180.4 million , comprised of $107.0 million to its members in accordance with their percentage interests and $73.4 million to certain members with unreturned capital contributions in accordance with the Company's operating agreement. As of September 30, 2017 , of the distributions declared during the nine months ended September 30, 2017 , the Company made distributions of $174.2 million and retained the distribution of $6.2 million , which represents the unvested portion of members' percentage interest as of September 30, 2017 that will be distributed upon vesting. |
Property and Equipment, Net
Property and Equipment, Net | 9 Months Ended |
Sep. 30, 2017 | |
Switch, Ltd. | |
Property, Plant and Equipment [Line Items] | |
Property and Equipment, Net | Property and Equipment, Net Property and equipment, net, consists of the following as of: September 30, 2017 December 31, 2016 (unaudited) (in thousands) Land and land improvements $ 133,896 $ 104,318 Data center equipment 713,858 591,085 Capitalized leased assets 35,974 36,408 Buildings and building improvements 327,110 248,680 Substation equipment 4,247 — Cloud computing equipment 5,661 5,661 Fiber facilities 8,445 6,344 Computer equipment, furniture and fixtures 28,904 21,007 Vehicles 1,601 1,241 Construction in progress 108,550 97,368 Core network equipment 30,609 23,859 Deferred installation charges 4,114 3,858 Property and equipment, gross 1,402,969 1,139,829 Less: accumulated depreciation and amortization (330,146 ) (265,570 ) Total property and equipment, net $ 1,072,823 $ 874,259 During the three months ended September 30, 2017 and 2016 , depreciation and amortization expense was $22.9 million and $16.5 million , respectively. During the nine months ended September 30, 2017 and 2016 , depreciation and amortization expense was $64.7 million and $47.6 million , respectively. Accumulated amortization for the capitalized leased assets totaled $7.9 million and $6.6 million as of September 30, 2017 and December 31, 2016 , respectively. During the nine months ended September 30, 2017 and 2016 , capitalized interest was $2.1 million and $1.9 million , respectively. |
Long-Term Deposit
Long-Term Deposit | 9 Months Ended |
Sep. 30, 2017 | |
Switch, Ltd. | |
Deposit Assets, Noncurrent [Line Items] | |
Long-Term Deposit | Long-Term Deposit On March 10, 2015, NV Energy and the Company entered into a Substation Agreement and related land purchase agreement for land owned by a wholly-owned subsidiary of Switch. Pursuant to the Substation Agreement, NV Energy will design, construct, maintain, and own a substation and related feeders in connection with service to Switch's development of three of its data center facilities in Las Vegas. The substation was placed into service in April 2016. Switch has paid the associated costs and associated tax gross-up related to the development of the substation and related feeders as defined in the Substation Agreement. These costs are subject to reimbursement based upon Switch's future power usage. Costs incurred as of December 31, 2016 totaled $6.2 million , of which $4.4 million are classified as long-term deposits and $1.8 million as property and equipment on the consolidated balance sheets. On October 30, 2017, a reimbursement of $1.4 million was received related to the substation, of which $178,000 was classified as long-term deposits and $1.2 million as property and equipment. This reimbursement was given retroactive effect in the consolidated balance sheets and costs incurred as of September 30, 2017 totaled $4.8 million , of which $4.3 million is classified as long-term deposits and $544,000 as property and equipment. |
Equity Method Investments
Equity Method Investments | 9 Months Ended |
Sep. 30, 2017 | |
Switch, Ltd. | |
Schedule of Equity Method Investments [Line Items] | |
Equity Method Investments | Equity Method Investments The Company currently holds two investments, SUPERNAP International and Planet3, Inc. ("Planet3"). As of September 30, 2017 and December 31, 2016 , the Company determined that it continued to have a variable interest in both SUPERNAP International and Planet3, as the entities do not have sufficient equity at risk. However, the Company concluded that it is not the primary beneficiary of SUPERNAP International or of Planet3 as it does not have deemed control of either entity. As a result, it does not consolidate either entity into its consolidated financial statements. As of September 30, 2017 and December 31, 2016, the investment in SUPERNAP International was accounted for under the equity method of accounting. SUPERNAP International is an investment of which the Company holds a 50% ownership interest. As of September 30, 2017 and December 31, 2016 , the Company had invested $1.3 million in SUPERNAP International. As of September 30, 2017 , the Company's carrying value of its investment in SUPERNAP International was reduced to zero as a result of recording its share of the investee's losses. Accordingly, as the Company does not have any guaranteed obligations and is not otherwise committed to provide further financial support to SUPERNAP International, the Company discontinued the equity method of accounting for its investment in SUPERNAP International as of September 30, 2017 and will not provide for additional losses until its share of future net income or comprehensive income, if any, equals the share of net losses not recognized during the period the equity method was suspended. The Company's share of net loss recorded for the three months ended September 30, 2017 and 2016 amounted to $221,000 and $390,000 , respectively. The Company's share of net loss recorded for the nine months ended September 30, 2017 and 2016 amounted to $1.0 million and $1.3 million , respectively. As of September 30, 2017 and December 31, 2016 , the Company had recorded amounts consisting of reimbursable expenses due from SUPERNAP International of $760,000 and $1.4 million , respectively, within accounts receivable on the consolidated balance sheets. Planet3 is an investment of which the Company holds a 45% ownership interest. As of September 30, 2017 and December 31, 2016 , the Company had invested $10.0 million in Planet3. The Company's share of net loss recorded for the three and nine months ended September 30, 2016 amounted to $868,000 and $2.5 million , respectively. As of December 31, 2016 , as the Company does not have any guaranteed obligations and is not otherwise committed to provide further financial support to Planet3, the Company discontinued the equity method of accounting for its investment in Planet3 and will not provide for additional losses until its share of future net income, if any, equals the share of net losses not recognized during the period the equity method was suspended. On May 13, 2016, Switch entered into an agreement with Planet3 (the "Note Purchase Agreement") pursuant to which Planet3 agreed to issue to Switch secured convertible promissory notes with an aggregate principal amount not to exceed $3.0 million . Interest accrues on the unpaid principal balance of the notes at 5% per annum. The notes, together with any then unpaid and accrued interest, matured on September 1, 2017. On the maturity date, the outstanding principal balance and accrued interest, if any, can be converted at the Company's option into ownership interests of Planet3. On September 6, 2017, the Company delivered to Planet3 a Notice of Default. As of September 30, 2017, the Company has not exercised its option. As of December 31, 2016 , the Company had purchased notes having an aggregate principal amount of $3.0 million . If a qualified financing, as defined in the notes, occurs on or prior to the maturity date, then, upon the closing of the qualified financing, the outstanding principal amount of the notes and all accrued and unpaid interest shall automatically convert into shares of the preferred stock issued by Planet3 at a discount. The Company had identified and separately accounted for an embedded derivative related to the automatic conversion feature of the secured convertible promissory notes. The estimated fair value of the embedded derivative was based on Level 3 inputs, such as the value of the preferred stock upon conversion, using a present value of future cash flow valuation technique that relies on management assumptions of the probability of occurrence, term, and the risk-free discount rate. The estimated fair value of the embedded derivative was immaterial as of September 30, 2017 and December 31, 2016 . As of December 31, 2016 , the Company determined an other than temporary loss in value of its investment in Planet3 had occurred due to Planet3's continued operating losses and the release of a beta product that did not generate the projected sales activity. The Company fully impaired the carrying values of its investment in Planet3 of $4.4 million , notes receivable of $2.4 million , net of a $629,000 discount, interest receivable of $55,000 , and related embedded derivative of $896,000 for a total write-down of $7.7 million . The estimated fair value of the Company's investment in Planet3 was based on Level 3 inputs, using a present value of future cash flow valuation technique that relies on management assumptions to derive an enterprise value. |
Switch, Inc. 2017 Incentive Awa
Switch, Inc. 2017 Incentive Award Plan | 9 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Disclosure of Compensation Related Costs, Share-based Payments [Text Block] | Switch, Inc. 2017 Incentive Award Plan On September 22, 2017, Switch, Inc.'s Board of Directors adopted the 2017 Incentive Award Plan ("2017 Plan"). The 2017 Plan provides that the initial aggregate number of shares of Class A common stock reserved and available for issuance be 25,000,000 shares of Class A common stock plus an increase each January 1, beginning on January 1, 2018 and ending on and including January 1, 2027, equal to the lesser of (A) 17,000,000 shares of Class A common stock, (B) 5% of the aggregate number of shares of Switch, Inc.'s Class A common stock, Class B common stock and Class C common stock outstanding on the final day of the immediately preceding calendar year and (C) such smaller number of shares of Class A common stock as is determined by the Board of Directors. This number is subject to adjustment in the event of a stock split, stock dividend or other defined changes in Switch, Inc.'s capitalization. The 2017 Plan was effective as of its adoption date. Switch, Inc.'s sole stockholder approved the 2017 Plan on September 22, 2017. All awards granted under the 2017 Plan are intended to be treated as (i) stock options, including incentive stock options, (ii) stock appreciation rights, (iii) non-statutory stock options under the Internal Revenue Code of 1986, as amended, (iv) restricted stock, (v) restricted stock units, or (vi) other stock or cash based awards as may be determined by the plan's administrator from time to time. The term of each option award shall be no more than 10 years from the date of grant. Options exercised under the 2017 Plan provide the purchaser with full rights equivalent to those of existing Class A common stock holders and holders as of the date of exercise. On September 22, 2017, Switch, Inc.'s Board of Directors approved a grant of stock options under the 2017 Plan effective immediately following the determination of the public offering price per share of the Class A common stock in the IPO. These options covered an aggregate of 5,724,896 shares of Class A common stock, which number was calculated based on the actual per share IPO price of Switch, Inc.'s Class A common stock. Each stock option has an exercise price per share equal to the IPO price of a Class A common stock as set forth in the final prospectus for Switch, Inc.'s IPO, dated October 5, 2017, filed with the Securities and Exchange Commission (the "SEC") on October 10, 2017 pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the "Prospectus"). Of these options granted, options covering 5,626,470 shares of Class A common stock were vested in full as of the date of the Prospectus. |
Long-Term Debt
Long-Term Debt | 9 Months Ended |
Sep. 30, 2017 | |
Switch, Ltd. | |
Debt Instrument [Line Items] | |
Long-Term Debt | Long-Term Debt 2015 Credit Agreement On May 5, 2015, the Company entered into a credit agreement ("2015 Credit Agreement") with Wells Fargo Bank, National Association, as administrative agent, and certain other lenders, which replaced the Company's previous $250.0 million credit agreement. The 2015 Credit Agreement consisted of a $200.0 million term loan facility (the "2015 Term Loan Facility") and a $400.0 million revolving credit facility (the "2015 Revolving Credit Facility," and, together with the 2015 Term Loan Facility, the "2015 Facilities"), each with a term of five years. Upon satisfying certain conditions, the 2015 Credit Agreement provided that the Company could increase the amount available for borrowing under the 2015 Facilities no more than five times (up to an additional $125.0 million in total) during the term of the 2015 Credit Agreement. On May 2, 2016, the Company amended the 2015 Credit Agreement to increase the aggregate amount available for borrowing under the 2015 Facilities by an additional $125.0 million and to modify certain other terms and conditions. On the closing date of the amendment, the Company recorded additional deferred debt issuance costs of $1.0 million , of which $860,000 related to the 2015 Revolving Credit Facility and $145,000 related to the 2015 Term Loan Facility. Total deferred debt issuance costs as of December 31, 2016 totaled $3.4 million , net of accumulated amortization of $1.4 million . Net debt issuance costs related to the 2015 Term Loan Facility are presented together with long-term debt and were $2.2 million as of December 31, 2016 . Net debt issuance costs associated with the 2015 Revolving Credit Facility are included within other assets and were $1.1 million as of December 31, 2016 . The 2015 Facilities were collateralized by substantially all of the Company's tangible and intangible personal property and guaranteed by certain of the Company's wholly-owned subsidiaries. Interest on the 2015 Facilities was calculated based on a base rate plus the applicable margin or a LIBOR rate plus the applicable margin, at the Company's election. Interest calculations were based on 365/366 days for a base rate loan and 360 days for a LIBOR loan. Base rate interest payments were due and payable in arrears on the last day of each calendar quarter, beginning December 31, 2015 . LIBOR rate interest payments were due and payable on the last day of each selected interest period (not to extend beyond three-month intervals). The 2015 Facilities had, among other things, financial and other covenants. Beginning with the fiscal quarter ended September 30, 2015 , the 2015 Credit Agreement required compliance with the consolidated total leverage and consolidated fixed charge coverage ratios (as defined in the 2015 Credit Agreement). As of December 31, 2016 , the maximum consolidated total leverage ratio was 4.25 to 1.00 and the minimum consolidated fixed charge coverage ratio was 1.50 to 1.00 . The maximum consolidated total leverage ratio was subject to change periodically for future fiscal quarters. The Company was in compliance with these covenants as of December 31, 2016 . The terms of the 2015 Facilities limited the Company's ability, among other things, to return capital to equity interest holders, grant liens on its assets, and incur additional debt. The Company's net assets were subject to restrictions, including the ability to pay distributions. As of December 31, 2016 , none of the Company's net assets were deemed restricted under the 2015 Facilities. 2017 Credit Agreement On June 27, 2017, the Company entered into an amended and restated credit agreement ("2017 Credit Agreement") with Wells Fargo Bank, National Association, as administrative agent, and certain other lenders, consisting of a $600.0 million term loan facility (the "2017 Term Loan Facility"), maturing on June 27, 2024, and a $500.0 million revolving credit facility (the "2017 Revolving Credit Facility," and, together with the 2017 Term Loan Facility, the "2017 Facilities"), maturing on June 27, 2022, which replaced the Company's 2015 Credit Agreement, as defined above. The 2017 Term Loan Facility is subject to principal amortization of $1.5 million per calendar quarter commencing on September 30, 2017. In addition, the 2017 Term Loan Facility has a prepayment premium of 1.0% of the aggregate principal outstanding in the event that, prior to the six-month anniversary of the closing date, the Company enters into a repricing transaction. Upon satisfying certain conditions, the 2017 Credit Agreement provides that the Company can increase the amount available for borrowing under the 2017 Facilities no more than five times (up to an additional $75.0 million in total, plus an additional amount subject to certain leverage restrictions) during the term of the 2017 Credit Agreement. The Company recorded debt issuance costs of $8.8 million on the closing date related to the 2017 Credit Agreement, of which $5.6 million related to the 2017 Term Loan Facility and $3.2 million related to the 2017 Revolving Credit Facility. In connection with the 2017 Credit Agreement, $811,000 of the unamortized debt issuance costs on the 2015 Revolving Credit Facility continued to be deferred as a result of modification accounting. Unamortized debt issuance costs as of September 30, 2017 totaled $9.3 million . Unamortized debt issuance costs related to the 2017 Term Loan Facility are presented together with long-term debt and were $5.4 million as of September 30, 2017 . As of September 30, 2017 , unamortized debt issuance costs are included within other assets and were comprised of $3.1 million related to the 2017 Revolving Credit Facility and $771,000 associated with the modification accounting on the 2015 Revolving Credit Facility. The 2017 Facilities are collateralized by substantially all of the Company's tangible and intangible personal property and guaranteed by certain of the Company's wholly-owned subsidiaries. Interest on the 2017 Facilities is calculated based on the base rate plus the applicable margin or a LIBOR rate plus the applicable margin, at the Company's election. Interest calculations are based on 365/366 days for a base rate loan and 360 days for a LIBOR loan. Base rate interest payments are due and payable in arrears on the last day of each calendar quarter, beginning September 30, 2017. LIBOR rate interest payments are due and payable on the last day of each selected interest period (not to extend beyond three-month intervals). In addition, the 2017 Revolving Credit Facility incurs a fee on unused lender commitments based on the applicable margin and payments are due and payable in arrears on the last day of each calendar quarter, beginning September 30, 2017. The 2017 Facilities have, among other things, financial and other covenants. Beginning with the fiscal quarter ended June 30, 2017, the 2017 Credit Agreement required compliance with the consolidated total leverage ratio (as defined in the 2017 Credit Agreement). As of September 30, 2017 , the maximum consolidated total leverage ratio was 6.00 to 1.00 . The maximum consolidated total leverage ratio is subject to change periodically for future fiscal quarters. The Company was in compliance with this covenant as of September 30, 2017 . The terms of the 2017 Facilities limit the Company's ability, among other things, to incur additional debt, incur additional liens, encumbrances or contingent liabilities, and pay distributions or make certain other restricted payments (with certain exceptions and baskets, including a restricted payment basket of $15.0 million per fiscal year). Loss on Extinguishment of Debt During the nine months ended September 30, 2017 , the Company recorded a $3.6 million loss related to the refinancing of its 2015 Credit Agreement and closing of its 2017 Credit Agreement on June 27, 2017. The loss was comprised of the write-off of previously unamortized debt issuance costs of $2.1 million and lender fees of $1.5 million . Long-term debt consists of the following as of: September 30, 2017 December 31, 2016 (unaudited) (in thousands) 2015 Term Loan Facility, interest paid at the defined LIBOR rate plus applicable interest margin (2.77% at December 31, 2016); matures May 2020 $ — $ 185,000 2017 Term Loan Facility, interest paid at the defined LIBOR rate plus applicable interest margin (3.99% at September 30, 2017); matures June 2024 598,500 — Less: unamortized debt issuance costs (5,441 ) (2,233 ) 593,059 182,767 2015 Revolving Credit Facility, interest paid at the defined LIBOR rate plus applicable interest margin (2.71% at December 31, 2016); matures May 2020 — 289,300 2017 Revolving Credit Facility, interest paid at the defined LIBOR rate plus applicable interest margin (3.74% at September 30, 2017); matures June 2022 231,000 — $ 824,059 $ 472,067 As of September 30, 2017 , long-term debt maturities are as follows (in thousands): 2017 (three months remaining) $ 1,500 2018 6,000 2019 6,000 2020 6,000 2021 6,000 Thereafter 804,000 829,500 Less: unamortized debt issuance costs (5,441 ) $ 824,059 |
Leases
Leases | 9 Months Ended |
Sep. 30, 2017 | |
Switch, Ltd. | |
Operating Leased Assets [Line Items] | |
Leases | Leases Capital Leases The Company leases the land and building for one of its data centers from an entity in which a member of Switch, Inc.'s Board of Directors has a beneficial ownership interest, under which the building portion of the lease has been capitalized. Pursuant to GAAP, the lease attributable to the land is accounted for as an operating lease. The lease expires in 2033 with two subsequent 10 -year and one five -year renewal option periods. As of September 30, 2017 , minimum payment obligations for this capital lease are as follows: Related Party Building Lease* (in thousands) 2017 (three months remaining) $ 474 2018 1,952 2019 2,064 2020 2,124 2021 2,243 Thereafter 33,636 42,493 Less: amount representing interest (23,027 ) Present value of minimum capital lease payments $ 19,466 * Until 2023, capital lease payments are applied only to accrued interest, thus, there is no current portion. In February 2016, a wholly-owned subsidiary of Switch acquired rights and interests to manage, construct and use the Nevada Broadband Telemedicine Initiative ("NBTI") fiber network. The right to use the NBTI fiber network is accounted for as a capital lease. As of September 30, 2017 and December 31, 2016 , capital lease assets related to the NBTI fiber network were $16.1 million and $15.9 million , respectively, and related future minimum payment obligations are $3.5 million during the year ending December 31, 2017 . The capital lease will expire 25 years from the date the network is accepted by the Nevada Hospital Association, the entity that holds title to the network, and has a 25 -year renewal option. Acceptance occurred in September 2017. The Company is the sole consumer of output from four feeders related to a substation owned by NV Energy (Note 4). The Company accounts for this arrangement as a capital lease. As of September 30, 2017 and December 31, 2016 , capital lease assets related to the feeders were $259,000 and $930,000 , respectively. There are no future minimum payment obligations related to this capital lease. The capital lease will expire 39 years from the date the substation was placed into service, which was April 2016. Operating Lease Commitments The Company leases land, warehouse storage space and data center buildings under operating leases (including the land portion of the capitalized building lease) that have non-cancellable terms expiring through 2066 with entities in which a member of Switch, Inc.'s Board of Directors has a beneficial ownership interest. In addition, the Company leases warehouse storage space, storage yards for fiber and construction materials and equipment under operating leases in Nevada that have non-cancellable terms expiring through 2055. As of September 30, 2017 , future minimum lease payments for all operating leases with remaining terms in excess of one year are as follows: Related Parties Other Total (in thousands) 2017 (three months remaining) $ 1,167 $ 595 $ 1,762 2018 4,706 2,359 7,065 2019 4,798 2,369 7,167 2020 4,860 2,372 7,232 2021 4,256 506 4,762 Thereafter 59,516 822 60,338 $ 79,303 $ 9,023 $ 88,326 During the three months ended September 30, 2017 and 2016 , rent expense related to operating leases was approximately $1.8 million and $2.2 million , respectively. During the nine months ended September 30, 2017 and 2016 , rent expense related to operating leases was approximately $5.4 million and $6.4 million , respectively. Related party rent included in these amounts was approximately $1.3 million and $1.1 million for the three months ended September 30, 2017 and 2016 , respectively. Related party rent included in these amounts was approximately $3.6 million and $3.1 million for the nine months ended September 30, 2017 and 2016 , respectively. |
Retirement Benefit Plans
Retirement Benefit Plans | 9 Months Ended |
Sep. 30, 2017 | |
Switch, Ltd. | |
Defined Contribution Plan Disclosure [Line Items] | |
Retirement Benefit Plans | Retirement Benefit Plans The Company has a defined contribution retirement plan that covers its eligible employees (the "Plan"). The Plan is qualified in accordance with section 401(k) of the Internal Revenue Code. Eligible employees can participate in the Company's pre-tax 401(k) plan or after-tax Roth 401(k) plan. As of February 2016, the Company makes matching contributions equal to 100% of the first 3% of compensation deferred by a participant. The Company may make a discretionary additional matching contribution. The Company recognized expense related to its contributions to the Plan of $283,000 and $232,000 for the three months ended September 30, 2017 and 2016 , respectively, and $880,000 and $589,000 for the nine months ended September 30, 2017 and 2016 , respectively. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2017 | |
Long-term Purchase Commitment [Line Items] | |
Commitments and Contingencies | Commitments and Contingencies Cobalt Litigation On September 7, 2017, Switch, Inc. and Switch, Ltd. (collectively, the "Defendants"), were named in a lawsuit filed in the U.S. District Court for the District of Nevada by V5 Technologies d/b/a Cobalt Data Centers. The Defendants were served on September 13, 2017. The lawsuit alleges, among other things, that the Defendants have monopolized the Las Vegas Metropolitan area of Southern Nevada's data center colocation market and have engaged in unfair business practices leading to the failure of Cobalt Data Centers in 2015. The Defendants have retained outside counsel and are vigorously pursuing their rights and interests. The outcome of the Defendants' legal proceedings is inherently unpredictable, subject to significant uncertainties, and could be material to Switch, Inc.'s financial condition, results of operations, and cash flows for a particular period. For the pending matter described above, it is not possible to estimate the reasonably possible loss or range of loss. |
Switch, Ltd. | |
Long-term Purchase Commitment [Line Items] | |
Commitments and Contingencies | Commitments and Contingencies Purchase Commitments In August 2017, a wholly-owned subsidiary of Switch assumed agreements from an entity in which a member of Switch, Inc.'s Board of Directors has a beneficial ownership interest for the purchase of three parcels of land in southern Nevada for an aggregate purchase price of $7.6 million , which was deposited in escrow as of September 30, 2017 and recorded within other current assets on the consolidated balance sheets. These transactions closed in October 2017. On March 8, 2017, the Company entered into a firm Power Purchase & Sale Agreement of electricity with Morgan Stanley Capital Group Inc. to purchase a minimum of 40 megawatts per energy hour for a term of 36 months, or a minimum purchase commitment of $33.4 million during the term, starting June 1, 2017. The remaining minimum purchase commitment is $32.5 million as of September 30, 2017 . In December 2016, the Company notified the landlord for its data center building and land in Michigan of its intent to exercise the purchase option pursuant to the lease agreement. The purchase price of $25.0 million , less 65% of all rent payments made to the landlord, will be payable upon closing of the sale by January 1, 2018. The Company has recorded the present value of the adjusted purchase price within accrued Michigan building and land purchase on the consolidated balance sheet as of September 30, 2017 and December 31, 2016 . In September 2016, the Company entered into a take-or-pay contract with a lit fiber transport services vendor whereby the Company will be required to purchase a minimum of $75,000 in eligible services on a monthly basis for a term equal to or greater than 24 months beginning 12 months after the eligible services are made available. The eligible services were made available in September 2017. In June 2015, the Company entered into an agreement for the purchase of three parcels of land in northern Nevada. The first closing on two of the land parcels was completed in August 2015 in accordance with the agreement. The second closing on the third land parcel with a purchase price of $5.4 million will occur on or before 36 months after the date of the first closing, or by August 1, 2018. PEC Purchase Commitments In November 2015, the Company entered into a five -year contract beginning January 1, 2016 with the Southern Nevada Water Authority ("SNWA") to purchase an estimated 82 million in PECs, or a minimum remaining purchase commitment of $574,000 during the term, from the 14 megawatt solar photovoltaic generating plant constructed at SNWA's River Mountains Water Treatment Facility to meet its anticipated requirements under the State of Nevada's Renewal Portfolio Standard Statute. In November 2015, the Company entered into a renewable energy agreement with NV Energy to purchase all PECs realized from Switch Station 2, a 79 megawatt photovoltaic solar generation facility currently under construction, for a minimum purchase commitment of $13.2 million during the term. The term of the renewable energy agreement is 20 years from the commercial operation date of Switch Station 2, which achieved commercial operation on October 11, 2017. In June 2015, the Company entered into a renewable energy agreement with NV Energy to purchase all PECs realized from Switch Station 1, a 100 megawatt photovoltaic solar generation facility currently under construction, not to exceed the Company's total electric load from its data center facilities, for a minimum purchase commitment of $21.6 million during the term. The term of the renewable energy agreement is 20 years from the commercial operation date of Switch Station 1, which was July 21, 2017. As of September 30, 2017 , future minimum PEC purchase commitments are as follows (in thousands): 2017 (three months remaining) $ 807 2018 1,902 2019 1,902 2020 1,902 2021 1,738 Thereafter 27,113 $ 35,364 Impact Fee Expense On September 30, 2016, Switch filed its application with the PUCN to become an unbundled purchaser of energy, capacity, and/or ancillary services in Nevada from a new provider of electric resources. The application was approved on December 28, 2016 and Switch elected to pay the impact fee to NV Energy, the Company's energy provider in Nevada through May 31, 2017, of $27.0 million in a lump sum by the earlier of August 1, 2017 or the date by which Switch is able to secure all necessary rights and contracts, including its Network Integration Transmission Service agreements with NV Energy and other compliance items. As there is no future economic benefit to the Company from the impact fee, it was recognized as an expense within impact fee expense during the year ended December 31, 2016 in the consolidated statements of comprehensive income. The Company paid the accrued impact fee of $27.0 million on May 31, 2017 and became an unbundled purchaser of energy in Nevada on June 1, 2017. Self-Insurance Reserves Effective January 1, 2017, the Company is self-insured for various levels of employee health coverage. Insurance reserves include accruals for estimated settlements for known claims, as well as accruals for estimates of incurred but not reported claims. As of September 30, 2017 , the estimated liabilities for unpaid and incurred but not reported claims totaled $280,000 , which is included within accrued expenses on the consolidated balance sheets. Energy Litigation In July 2016, Switch filed a lawsuit in the U.S. District Court for the District of Nevada against, among other parties, the PUCN and the former Commissioners of the PUCN, NV Energy, and the former General Counsel to the PUCN Commissioners. The lawsuit alleged, among other things, that the defendants violated state and federal law to conspire and defraud Switch so that NV Energy could unlawfully retain Switch as a customer of NV Energy and impair renewable energy development in the state of Nevada. Switch sought damages, attorneys' fees, costs and preliminary injunctive relief. On December 21, 2016, Switch and NV Energy agreed to settle the lawsuit on confidential terms which do not create any material financial liability to Switch. On January 4, 2017, Switch filed a voluntary dismissal of the energy litigation lawsuit with the U.S. District Court for the District of Nevada. Patent Litigation On August 7, 2017, Switch filed a lawsuit in the U.S. District Court for the Eastern District of Texas against Aligned Data Centers LLC ("Aligned"), and MTechnology Inc. The lawsuit alleges, among other things, that Aligned has used and promoted technology at its data centers to attract clients to its facility, directly and indirectly infringing at least three of Switch's patents and using Switch's patented technology to attempt to unlawfully compete with Switch. The complaint also alleges that Aligned hired a consultant to design their data centers; that this consultant had toured Switch under non-disclosure agreement; and that this consultant breached his confidentiality agreements with Switch by using Switch's designs to design the Aligned data centers. Switch is seeking an injunction to prevent the defendants in the lawsuit from infringing Switch's patents, as well as other remedies. On August 16, 2017, Aligned filed an answer to the complaint and a motion to dismiss the lawsuit. Among other things, Aligned alleges in its answer that Switch's patents in question should be declared invalid, and countersued for declaratory judgment of the non-infringement of certain of Switch's patents, injunctive relief, and damages for alleged anti-competition practices involving Aligned's trademarks in violation of the Lanham Act, tortious interference with Aligned's business, and disparagement of Aligned's business. Switch has retained outside counsel to represent it and is vigorously defending its rights and interests. Given certain jurisdictional issues, Switch filed a separate complaint in the Eighth Judicial District of Nevada against the consultant, Stephen Fairfax and his business MTechnology, on September 12, 2017. Among other claims, Switch has raised allegations of breach of contract and misappropriation of trade secrets. Cobalt Litigation On September 7, 2017, Switch and Switch, Inc. (collectively, the "Defendants"), were named in a lawsuit filed in the U.S. District Court for the District of Nevada by V5 Technologies d/b/a Cobalt Data Centers. The Defendants were served on September 13, 2017. The lawsuit alleges, among other things, that the Defendants have monopolized the Las Vegas Metropolitan area of Southern Nevada's data center colocation market and have engaged in unfair business practices leading to the failure of Cobalt Data Centers in 2015. The Defendants have retained outside counsel and are vigorously pursuing their rights and interests. The outcome of the Defendants' legal proceedings is inherently unpredictable, subject to significant uncertainties, and could be material to the Company's financial condition, results of operations, and cash flows for a particular period. For the pending matter described above, it is not possible to estimate the reasonably possible loss or range of loss. |
Equity-Based Compensation
Equity-Based Compensation | 9 Months Ended |
Sep. 30, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Equity-Based Compensation | Switch, Inc. 2017 Incentive Award Plan On September 22, 2017, Switch, Inc.'s Board of Directors adopted the 2017 Incentive Award Plan ("2017 Plan"). The 2017 Plan provides that the initial aggregate number of shares of Class A common stock reserved and available for issuance be 25,000,000 shares of Class A common stock plus an increase each January 1, beginning on January 1, 2018 and ending on and including January 1, 2027, equal to the lesser of (A) 17,000,000 shares of Class A common stock, (B) 5% of the aggregate number of shares of Switch, Inc.'s Class A common stock, Class B common stock and Class C common stock outstanding on the final day of the immediately preceding calendar year and (C) such smaller number of shares of Class A common stock as is determined by the Board of Directors. This number is subject to adjustment in the event of a stock split, stock dividend or other defined changes in Switch, Inc.'s capitalization. The 2017 Plan was effective as of its adoption date. Switch, Inc.'s sole stockholder approved the 2017 Plan on September 22, 2017. All awards granted under the 2017 Plan are intended to be treated as (i) stock options, including incentive stock options, (ii) stock appreciation rights, (iii) non-statutory stock options under the Internal Revenue Code of 1986, as amended, (iv) restricted stock, (v) restricted stock units, or (vi) other stock or cash based awards as may be determined by the plan's administrator from time to time. The term of each option award shall be no more than 10 years from the date of grant. Options exercised under the 2017 Plan provide the purchaser with full rights equivalent to those of existing Class A common stock holders and holders as of the date of exercise. On September 22, 2017, Switch, Inc.'s Board of Directors approved a grant of stock options under the 2017 Plan effective immediately following the determination of the public offering price per share of the Class A common stock in the IPO. These options covered an aggregate of 5,724,896 shares of Class A common stock, which number was calculated based on the actual per share IPO price of Switch, Inc.'s Class A common stock. Each stock option has an exercise price per share equal to the IPO price of a Class A common stock as set forth in the final prospectus for Switch, Inc.'s IPO, dated October 5, 2017, filed with the Securities and Exchange Commission (the "SEC") on October 10, 2017 pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the "Prospectus"). Of these options granted, options covering 5,626,470 shares of Class A common stock were vested in full as of the date of the Prospectus. |
Switch, Ltd. | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Equity-Based Compensation | Equity-Based Compensation 2005 Common Membership Unit Plan In 2005, the Company established the 2005 Common Membership Unit Plan (the "Unit Option Plan") for the purpose of attracting and retaining the best available personnel for positions of substantial responsibility, to provide additional incentive to employees and consultants of the Company and to promote the success of the Company's business. All options granted under the Unit Option Plan are intended to be treated as non-statutory unit options under the Internal Revenue Code of 1986, as amended. The term of each option shall be the term stated in the option agreement; provided, however, that the term shall be no more than 10 years from the date of grant. Options exercised under the plan provide the purchaser with full rights equivalent to those of existing members and holders as of the date of exercise. Since the inception of the Unit Option Plan through September 30, 2017 , members have exercised or exchanged 21,440,000 unit awards. The unit option activity under the Unit Option Plan is summarized as follows (number of units in thousands) as of: Number of Units Weighted Average Exercise Price per Unit Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (1) (In thousands) Unit options outstanding - December 31, 2016 167 $ 2.09 1.75 $ 939 Unit options exercised (unaudited) (57 ) $ 2.85 Unit options outstanding - September 30, 2017 (unaudited) 110 $ 2.85 1.00 $ 1,560 Unit options vested and exercisable- December 31, 2016 167 $ 2.09 1.75 $ 939 Unit options vested and exercisable- September 30, 2017 (unaudited) 110 $ 2.85 1.00 $ 1,560 (1) The intrinsic value is calculated as the difference between the fair value of the unit on September 30, 2017 and December 31, 2016 and the exercise price of the option. There were no nonvested unit options outstanding as of September 30, 2017 . 2012 Incentive Unit Awards In 2012, the Company began issuing incentive unit awards ("Incentive Units"). The Incentive Units contained a hurdle amount (similar to an exercise price) where employees benefited from any appreciation in the value of their incentive awards above the hurdle amount. The hurdle amount was $11.69 per Incentive Unit issued for the three and nine -month periods ended September 30, 2017 . In September 2017, the Company granted 7,500,000 Incentive Units to the Chief Executive Officer of the Company (the "CEO Award"). The Company also granted 1,511,572 Incentive Units to the President of the Company with a hurdle amount of $11.69 per Incentive Unit (the "President Award"). The CEO Award contained a provision that caused the Incentive Units underlying the CEO Award to convert into Common Units on a one-to-one basis in connection with the closing of the IPO. Each of the CEO Award and President Award vested as to 40% of the award on the closing of the IPO and will subsequently vest as to 2.5% of the award on each of the eight quarterly anniversaries of the closing of the IPO and 5% of the award each quarterly anniversary thereafter, subject to continued service. No compensation expense was recorded related to these awards until the performance condition became probable of occurring upon closing of the IPO. Pursuant to the terms of the CEO Award, since the total number of Common Units granted pursuant to the CEO Award equals less than 3% of all outstanding shares of Switch, Inc. following the closing of the IPO, including the exercise of the underwriters' option to purchase additional shares (the "threshold"), Switch expects to negotiate with the Chief Executive Officer to provide for an additional award, such that the CEO Award and any new awards held by the Chief Executive Officer represent a number of shares of common stock of Switch, Inc. equal to the threshold. The Incentive Unit activity is summarized below (number of units in thousands): Number of Units Weighted Average Hurdle Amount per Unit Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (1) (In thousands) Incentive Units outstanding - December 31, 2016 19,393 $ 4.20 1.98 $ 68,139 CEO Award (unaudited) 7,500 $ — President Award (unaudited) 1,512 $ 11.69 Incentive Units forfeited (unaudited) (873 ) $ 4.62 Incentive Units - September 30, 2017 (unaudited) 27,532 $ 3.45 2.10 $ 373,028 Incentive Units vested - December 31, 2016 4,558 $ 3.97 1.50 $ 17,053 Incentive Units vested - September 30, 2017 (unaudited) 6,234 4.09 0.91 $ 80,470 (1) The intrinsic value is calculated as the difference between the fair value of the unit on September 30, 2017 and December 31, 2016 and the hurdle amount of the Incentive Unit. The weighted average hurdle amounts for Incentive Units granted and vested, and the weighted average remaining time to vest for Incentive Units outstanding were as follows (number of units in thousands) as of: September 30, 2017 (unaudited) Incentive Units Outstanding Incentive Units Vested Number of Units Weighted Average Hurdle Amount Weighted Average Remaining Contractual Life (Years) Number of Units Weighted Average Hurdle Amount 6,510 $ 3.33 0.18 1,680 $ 3.33 1,560 4.33 0.31 972 4.33 150 4.67 2.11 15 4.67 7,786 4.26 1.61 3,151 4.26 200 4.62 2.71 20 4.62 757 5.02 2.53 219 5.02 500 5.53 2.29 125 5.53 260 6.46 3.07 45 6.46 130 7.26 3.90 7 7.26 667 7.39 3.55 — — 7,500 — 4.01 — — 1,512 11.69 4.01 — — 27,532 $ 3.45 2.10 6,234 $ 4.09 The number and weighted average grant date fair value for Incentive Units granted and outstanding are as follows (number of units in thousands) as of: Number of Nonvested Incentive Units Outstanding Weighted Average Grant Date Fair Value per Incentive Unit Nonvested Incentive Units outstanding - December 31, 2016 14,835 $ 1.34 CEO Award (unaudited) 7,500 11.69 President Award (unaudited) 1,512 1.98 Incentive Units forfeited (unaudited) (873 ) 0.97 Incentive Units vested (unaudited) (1,676 ) 1.10 Nonvested Incentive Units outstanding - September 30, 2017 (unaudited) 21,298 $ 5.06 The weighted average assumptions used in estimating the grant date fair value of these units, exclusive of the CEO Award, are listed in the table below: Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 (unaudited) Expected volatility 29.3 % 50.0 % 29.3 % 41.2 % Risk-free interest rate 1.4 % 1.1 % 1.4 % 1.3 % Expected term (in years) 2.0 5.0 2.0 3.9 Dividend rate 0.6 % 0.9 % 0.6 % 0.9 % As the CEO Award contained a provision that caused the Incentive Units underlying the CEO Award to convert into Common Units on a one-to-one basis in connection with the closing of the IPO, the grant date fair value of these units was $11.69 per unit. Total fair value of Incentive Units vested for the nine months ended September 30, 2017 and 2016 was $1.8 million and $2.9 million , respectively. As of September 30, 2017 , equity-based compensation cost related to all unvested equity awards, exclusive of the CEO Award and President Award, not yet recognized totaled $7.0 million . This was recognized in connection with the closing of the IPO. Total equity-based compensation cost related to the CEO Award and President Award is $90.7 million , $36.3 million of which was recognized in connection with the closing of the IPO and $54.4 million of which is expected to be recognized over a weighted-average period of 4.0 years. During the nine months ended September 30, 2017 , the Company awarded 150,880 fully vested Common Units at a fair market value of $7.39 per unit totaling $1.1 million in equity-based compensation. During the nine months ended September 30, 2016 , the Company awarded 150,895 fully vested Common Units at a fair market value of $5.53 per unit totaling $835,000 in equity-based compensation. Total equity-based compensation recognized in the consolidated statements of comprehensive income for the Unit Option Plan, Incentive Units, and fully vested Common Units is as follows for each of the periods presented: Three Months Ended Nine Months Ended 2017 2016 2017 2016 (unaudited) (in thousands) Cost of revenue $ 50 $ — $ 148 $ — Selling, general and administrative 1,265 1,224 4,731 4,912 Total equity-based compensation expense $ 1,315 $ 1,224 $ 4,879 $ 4,912 |
Fair Value of Financial Informa
Fair Value of Financial Information | 9 Months Ended |
Sep. 30, 2017 | |
Switch, Ltd. | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Fair Value of Financial Information | Fair Value of Financial Instruments The carrying amounts as of September 30, 2017 for cash, accounts receivable, and accounts payable approximate their estimated fair values due to the short maturity of these instruments. Management believes the fair value of the Company's long-term debt was $834.0 million based on Level 2 inputs using quoted market prices on or about September 30, 2017 . The carrying amounts as of December 31, 2016 for cash, accounts receivable, accounts payable, and long-term debt approximate their estimated fair values due to the short maturity of these instruments, or because the related interest rates approximate current market rates. Management has elected not to adopt the option available under GAAP to measure any of its eligible financial instruments or other items at fair value. Accordingly, the Company continues to measure all of its assets and liabilities on the historical cost basis of accounting except as otherwise required under GAAP. |
Net Income Per Unit
Net Income Per Unit | 9 Months Ended |
Sep. 30, 2017 | |
Switch, Ltd. | |
Net income per unit: | |
Net Income Per Unit | Net Income Per Unit The following table sets forth the calculation of basic and diluted net income per unit during the periods presented (in thousands, except unit and per unit data): Three Months Ended Nine Months Ended 2017 2016 2017 2016 (unaudited) (in thousands, except unit and per unit data) Net income per unit: Numerator: Net income-basic and diluted $ 16,486 $ 15,926 $ 51,766 $ 51,140 Denominator-basic: Weighted-average units outstanding-basic 200,746,690 199,108,842 200,415,541 199,328,865 Net income per unit-basic $ 0.08 $ 0.08 0.26 $ 0.26 Denominator-diluted: Weighted average units outstanding-basic 200,746,690 199,108,842 200,415,541 199,328,865 Weighted average effect of dilutive securities: Effect of dilutive options 88,326 119,240 113,797 267,129 Effect of unvested Incentive Units 8,137,728 5,016,476 6,866,480 3,894,599 Weighted average units outstanding-diluted 208,972,744 204,244,558 207,395,818 203,490,593 Net income per unit-diluted $ 0.08 $ 0.08 $ 0.25 $ 0.25 The following outstanding weighted average effect of unvested Incentive Units were excluded from the computation of the diluted net income per unit for the periods presented because their effect would have been anti-dilutive. Three Months Ended Nine Months Ended 2017 2016 2017 2016 (unaudited) Incentive Units — 313,674 163,817 1,023,581 |
Segment Reporting
Segment Reporting | 9 Months Ended |
Sep. 30, 2017 | |
Switch, Ltd. | |
Segment Reporting Information [Line Items] | |
Segment Reporting | Segment Reporting The Company's chief operating decision maker is its Chief Executive Officer. The Company manages its operations as a single operating segment for the purposes of assessing performance and making operating decisions. All of the Company's assets are maintained in the United States. The Company derives a substantial majority of its revenue from sales to customers in the United States, based upon the billing address of the customer. Revenue derived from customers outside the United States, based upon the billing address of the customer, were less than 2% of total revenues for each period presented. The Company's revenue is comprised of the following: Three Months Ended Nine Months Ended 2017 2016 2017 2016 (unaudited) (in thousands) Colocation $ 79,429 $ 66,107 $ 225,753 $ 193,020 Connectivity 17,111 14,333 49,201 39,623 Other 1,149 1,226 3,993 3,821 Revenue $ 97,689 $ 81,666 $ 278,947 $ 236,464 |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2017 | |
Subsequent Event [Line Items] | |
Subsequent Events | Subsequent Events Subsequent events through November 14, 2017, the date on which the balance sheets were available to be issued, were evaluated by Switch, Inc. to determine the need, if any, for recognition or disclosure in its balance sheets. Organizational Transactions On October 11, 2017, Switch, Inc. completed its IPO of 35,937,500 shares of its Class A common stock at a public offering price of $17.00 per share, which included 4,687,500 shares of Class A common stock pursuant to the underwriters' option to acquire additional shares of Class A common stock. Switch, Inc. received approximately $577.3 million in proceeds, net of underwriting discounts and commissions . In connection with the closing of the IPO, Switch, Inc. and Switch, Ltd. consummated the following organizational transactions (the "Transactions"): • Switch, Ltd. adopted and approved the Fifth Amended and Restated Operating Agreement of Switch, Ltd. (the "Switch Operating Agreement"), which amended and restated Switch, Ltd.'s prior operating agreement to, among other things, convert all incentive units in Switch, Ltd. into Common Units and to appoint Switch, Inc. as the sole manager of Switch, Ltd.; • Switch, Inc. amended and restated its articles of incorporation to, among other things, provide for Class A common stock, Class B common stock and Class C common stock; • Switch, Inc. issued shares of its Class B common stock to the Non-Founder Members on a one-to-one basis with the number of Common Units they owned, for nominal consideration, and shares of its Class C common stock to the Founder Members on a one-to-one basis with the number of Common Units they own, for nominal consideration; • Switch, Inc. issued and sold 35,937,500 shares of its Class A common stock in exchange for net proceeds of approximately $577.3 million , after deducting underwriting discounts and commissions but before offering expenses of $4.1 million ; • Switch, Inc. used all of the net proceeds from the IPO to acquire Common Units from Switch, Ltd. at a purchase price per Common Unit equal to the initial public offering price of Class A common stock, less underwriting discounts and commissions, collectively representing 14.2% of Switch, Ltd.'s outstanding Common Units; • the Continuing Members continued to own the Common Units they received in connection with the conversion of their existing membership interests in Switch, Ltd. into Common Units and have no economic interests in Switch, Inc. despite their ownership of Class B common stock or Class C common stock, where "economic interests" means the right to receive any distributions or dividends, whether cash or stock, in connection with common stock; and • Switch, Inc. entered into (i) a Tax Receivable Agreement with Switch, Ltd. and the Continuing Members and (ii) an Amended and Restated Registration Rights Agreement with the Continuing Members who, upon the completion of the IPO, own an aggregate of 216,568,963 shares of Switch, Inc.'s Class B common stock and Class C common stock, representing approximately 94.4% of the combined voting power of all of Switch, Inc.'s common stock. Although the actual timing and amount of any payments that Switch, Inc. makes to the Continuing Members under the Tax Receivable Agreement will vary, management expects those payments will be significant. Common Units are redeemable at the election of the Continuing Members for newly issued shares of Class A common stock on a one-to-one basis (and such Continuing Members' shares of Class B common stock or Class C common stock, as the case may be, will be canceled on a one-to-one basis upon any such issuance). Switch, Inc. has the option to instead make a cash payment equal to a volume weighted average market price of one share of Class A common stock for each Common Unit redeemed (subject to customary adjustments, including for stock splits, stock dividends and reclassifications) in accordance with the terms of the Switch Operating Agreement. Switch, Inc.'s decision to make a cash payment upon a Continuing Member's election will be made by its independent directors (within the meaning of the rules of the New York Stock Exchange ("NYSE")) who are disinterested. Switch, Inc.'s corporate structure following the IPO, as described above, is commonly referred to as an "Up-C" structure, which is often used by partnerships and limited liability companies when they undertake an initial public offering of their business. The Up-C structure allows the Continuing Members to continue to realize tax benefits associated with owning interests in an entity that is treated as a partnership, or "passthrough" entity, for income tax purposes following the offering. One of these benefits is that future taxable income of Switch, Ltd. that is allocated to the Continuing Members will be taxed on a flow-through basis and therefore will not be subject to corporate taxes at the entity level. Additionally, because the Continuing Members may redeem their Common Units for shares of Switch, Inc.'s Class A common stock or, at Switch, Inc.'s option, for cash, the Up-C structure also provides the Continuing Members with potential liquidity that holders of non-publicly traded limited liability companies are not typically afforded. Switch, Inc. receives the same benefits as the Continuing Members on account of its ownership of Common Units in an entity treated as a partnership, or "passthrough" entity, for income tax purposes. As Switch, Inc. redeems additional Common Units from the Continuing Members under the mechanism described above, Switch, Inc. will obtain a step-up in tax basis in its share of Switch, Ltd.'s assets. This step-up in tax basis will provide Switch, Inc. with certain tax benefits, such as future depreciation and amortization deductions that can reduce the taxable income allocable to Switch, Inc. Switch, Inc. entered into the Tax Receivable Agreement with Switch, Ltd. and each of the Continuing Members that provides for the payment by it to the Continuing Members of 85% of the amount of tax benefits, if any, that it actually realizes (or in some cases are deemed to realize) as a result of (i) increases in tax basis resulting from the redemption of Common Units and (ii) certain other tax benefits attributable to payments made under the Tax Receivable Agreement. As a result of the Transactions, including the IPO and the underwriters' exercise of their option to acquire additional shares of Class A common stock: • Switch, Inc. is a holding company and its principal asset is Switch, Ltd.'s Common Units; • Switch, Inc. is the sole manager of Switch, Ltd. and controls the business and affairs of Switch, Ltd. and its subsidiaries; • Switch, Inc.'s amended and restated articles of incorporation and the Switch Operating Agreement requires that (i) Switch, Inc. at all times maintain a ratio of one Common Unit owned by Switch, Inc. for each share of Class A common stock issued by Switch, Inc. (subject to certain exceptions for treasury shares and shares underlying certain convertible or exchangeable securities), and (ii) Switch, Ltd. at all times maintain (x) a one-to-one ratio between the number of shares of Class A common stock issued by Switch, Inc. and the number of Common Units owned by Switch, Inc., (y) a one-to-one ratio between the number of shares of Class B common stock owned by the Non-Founder Members and the number of Common Units owned by the Non-Founder Members, and (z) a one-to-one ratio between the number of shares of Class C common stock owned by the Founder Members and the number of Common Units owned by the Founder Members; • Switch, Inc. owns 35,937,500 Common Units representing 14.2% of the economic interest in Switch, Ltd., where "economic interests" means the right to receive any distributions, whether cash, property or securities of Switch, Ltd., in connection with Common Units; • the purchasers in the IPO (i) own 35,937,500 shares of Class A common stock, representing approximately 5.6% of the combined voting power of all of Switch, Inc.'s common stock, (ii) own 100% of the economic interest in Switch, Inc., and (iii) through Switch, Inc.'s ownership of Common Units, indirectly hold approximately 14.2% of the economic interest in Switch, Ltd.; • the Non-Founder Members own (i) 173,624,316 Common Units, representing approximately 68.8% of the economic interest in Switch, Ltd., and (ii) through their ownership of Class B common stock, approximately 27.2% of the voting power in Switch, Inc.; • the Founder Members own (i) 42,944,647 Common Units, representing 17.0% of the economic interest in Switch, Ltd. and (ii) through their ownership of Class C common stock, approximately 67.2% of the voting power in Switch, Inc.; and • the Continuing Members collectively (i) own Class B common stock and Class C common stock representing approximately 94.4% of the combined voting power of all of Switch, Inc.'s common stock, and (ii) own 85.8% of the economic interest in Switch, Ltd., representing a direct interest through the Continuing Members' ownership of Common Units. As the sole manager of Switch, Ltd., Switch, Inc. operates and controls all of the business and affairs of Switch, Ltd. and, through Switch, Ltd. and its subsidiaries, conducts Switch, Inc.'s business. Although Switch, Inc. has a minority economic interest in Switch, Ltd., it has the sole voting interest in, and controls the management of, Switch, Ltd., and has the obligation to absorb losses of, and receive benefits from, Switch, Ltd. that could be significant. As a result, Switch, Inc. has determined that Switch, Ltd. is a variable interest entity ("VIE") and that Switch, Inc. is the primary beneficiary of Switch, Ltd. Accordingly, pursuant to the VIE accounting model, beginning in the fourth quarter of 2017, Switch, Inc. will consolidate Switch, Ltd. in its consolidated financial statements and will report a non-controlling interest related to the Common Units held by the Continuing Members on its consolidated financial statements. Switch, Inc. has a board of directors and executive officers, but has no employees. The functions of all of Switch, Inc.'s employees reside at Switch, Ltd. Stock Option Grants On October 5, 2017, Switch, Inc. granted 5,724,896 stock options with an exercise price of $17.00 , the public offering price per share of the Class A common stock in the IPO. Of these options, options covering 5,626,470 shares of Class A common stock were vested in full as of the date of grant. Total stock-based compensation cost related to the stock options is $28.6 million based on the estimated grant date fair value using a Black-Scholes option-pricing model. |
Switch, Ltd. | |
Subsequent Event [Line Items] | |
Subsequent Events | Subsequent Events Subsequent events through November 14, 2017, the date on which the unaudited interim consolidated financial statements as of and for the nine months ended September 30, 2017 were available to be issued, were evaluated by the Company to determine the need, if any, for recognition or disclosure in its consolidated financial statements. Switch, Inc.'s Initial Public Offering On October 11, 2017, Switch, Inc. completed its IPO of 35,937,500 shares of Class A common stock at a public offering price of $17.00 per share. Switch, Inc. received $577.3 million in proceeds, net of underwriting discounts and commissions, which was used by Switch, Inc. to purchase 35,937,500 newly issued Common Units from the Company at a price per Common Unit equal to the price per share of Class A common stock offered in the IPO, less underwriting discounts and commissions. Subsequent to the IPO and the Transactions, Switch, Inc. became the sole manager of the Company and holds 14.2% of the economic interests in the Company, where "economic interests" means the right to receive any distributions, whether cash, property or securities of the Company, in connection with Common Units. As a result, beginning in the fourth quarter of 2017, Switch, Inc. will consolidate the financial results of the Company and report a non-controlling interest in its consolidated financial statements. In connection with the closing of the IPO, the Company recognized equity-based compensation expense of $36.3 million related to the partial vesting of Incentive Units underlying the CEO Award and the President Award and $7.0 million related to the accelerated vesting of the remaining outstanding Incentive Units. Switch, Ltd.'s 2017 Revolving Credit Facility On October 12, 2017, the Company repaid the outstanding balance of $231.3 million , which included accrued interest of $300,000 , on its 2017 Revolving Credit Facility with proceeds received as consideration from Switch, Inc. for Switch, Inc.'s purchase of Common Units in connection with the IPO. |
Summary of Significant Accoun25
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Significant Accounting Policies [Line Items] | |
Basis of Presentation and Accounting | Basis of Presentation and Accounting The balance sheets are presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Separate statements of income, comprehensive income, changes in stockholder's equity, and cash flows have not been presented as Switch, Inc. did not engage in any business activities prior to the IPO except for the issuance of one share as described in Note 3 — Stockholder's Equity. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates. |
Switch, Ltd. | |
Significant Accounting Policies [Line Items] | |
Basis of Presentation and Accounting | Basis of Presentation and Accounting The accompanying consolidated financial statements are presented in accordance with generally accepted accounting principles in the United States of America ("GAAP"), and include the accounts of the Company. All significant intercompany transactions and balances have been eliminated. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. On an ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to the allowance for doubtful accounts, collectability of notes receivable, useful lives of property and equipment, equity-based compensation, deferred revenue, fair value of leased property at inception of lease term, fair value of deliverables under multiple element arrangements, probability assessments of exercising renewal options on leases and other than temporary impairments on investments. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable. |
Cash | Cash The Company considers all highly liquid instruments with an original maturity of three months or less to be cash equivalents. |
Investments | Investments The Company's investments in entities where it holds at least a 20% ownership interest and has the ability to exercise significant influence, but not control, over the investee are accounted for using the equity method of accounting. The Company's share of the investee's results of operations is included in equity in (losses) net earnings of investments and foreign currency translation adjustments, as applicable, are included in other comprehensive income with a corresponding adjustment to its investment. The Company discontinues applying the equity method of accounting when the investment is reduced to zero. If the investee subsequently reports net income or other comprehensive income, the Company resumes applying the equity method of accounting only after its share of unrecognized net income and other comprehensive income, respectively, equals the share of losses not recognized during the period the equity method of accounting was suspended. The Company gives precedence to other comprehensive income and losses when determining whether to resume applying the equity method of accounting. Investments in entities where the Company holds less than a 20% ownership interest are generally accounted for using the cost method of accounting. In addition, the Company reviews its relationships with other entities to identify whether they are variable interest entities and to assess whether the Company is the primary beneficiary of such entity. If the determination is made that the Company is the primary beneficiary, then the entity is consolidated. |
Fair Value Measurements | Fair Value Measurements Financial assets and liabilities are recorded at fair value. The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The accounting guidance establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair value into three broad levels as follows: Level 1 Quoted prices in active markets for identical assets or liabilities. Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
Derivative Financial Instruments | Derivative Financial Instruments A derivative is a financial instrument whose value changes in response to an underlying variable, requires little or no initial net investment and is settled at a future date. Derivatives are initially recognized at fair value on the date on which the derivatives are entered into and subsequently re-measured at fair value. Embedded derivatives included in hybrid instruments are treated and disclosed as separate derivatives when their economic characteristics and risks are not closely related to those of the host contract, the terms of the embedded derivative are the same as those of a stand-alone derivative and the combined contract is not measured at fair value through earnings. The financial host contracts are accounted for and measured using the applicable GAAP of the relevant financial instrument category. The method of recognizing fair value gains and losses depends on whether the derivatives are designated as hedging instruments, and if so, the nature of the hedge relationship. All gains and losses from changes in the fair values of derivatives that do not qualify for hedge accounting are recognized immediately in earnings. As of September 30, 2017 and December 31, 2016 , the Company's identified embedded derivative does not qualify for hedge accounting (Note 5). During the nine months ended September 30, 2017 , the Company entered into an agreement for the purchase of electricity (Note 9). The accounting guidance for derivative instruments provides a scope exception for commodity contracts that meet the normal purchase and sales criteria specified in the standard. The normal purchases and normal sales exception requires, among other things, physical delivery in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that are designated as normal purchases and normal sales are not recorded on the consolidated balance sheets at fair value. |
Concentration of Credit and Other Risks | Concentration of Credit and Other Risks Although the Company operates primarily in Nevada, realization of its customer accounts receivable and its future operations and cash flows could be affected by adverse economic conditions, both regionally and elsewhere in the United States. During the three months ended September 30, 2017 and 2016 , the Company's largest customer and its affiliates comprised 12% and 13% , respectively, of the Company's revenue. During the nine months ended September 30, 2017 and 2016 , the Company's largest customer and its affiliates comprised 10% and 14% , respectively, of the Company's revenue. No single customer accounted for 10% or more of accounts receivable as of September 30, 2017 or December 31, 2016 . The Company generally carries cash on deposit with financial institutions in excess of federally insured limits. Through May 31, 2017, the Company was also exposed to a limited extent, to a risk of unfavorable price increases from its principal provider of power, Nevada Power Company dba NV Energy ("NV Energy"), whose rates are set by and services are regulated by the Public Utilities Commission of Nevada ("PUCN"). On June 1, 2017, the Company became an unbundled purchaser of energy in Nevada. |
Accounts Receivable | Accounts Receivable Customer receivables are non-interest bearing and the Company generally does not request collateral from its customers, however, it usually obtains a lien or other security interest in certain customers' equipment placed in the Company's data center, and/or obtains a deposit. In the event collection is not reasonably assured at inception of a contract, recognition of related revenue is deferred generally until receipt of cash payment. The Company maintains an allowance for doubtful accounts for estimated losses up to the full amount of invoices based on the age of the invoices. If the financial condition of the Company's customers were to deteriorate or if they became insolvent, resulting in an impairment of their ability to make payments, greater allowances for doubtful accounts may be required. Management specifically analyzes accounts receivable and current economic news and trends, historical bad debt, customer concentrations, customer credit-worthiness and changes in customer payment terms when evaluating revenue recognition and the adequacy of the Company's reserves. Delinquent account balances are written-off after management has determined the likelihood of collection is not probable. |
Notes Receivable | Notes Receivable Notes receivable are recorded at amortized cost using the interest method. The Company evaluates the collectability of both principal and interest based on an assessment of any significant changes in the amount and timing of the expected future cash flows. As of December 31, 2016 , the Company fully impaired the carrying value of its notes receivable (Note 5). |
Internal Use Software | Internal Use Software The Company capitalizes certain costs incurred in connection with developing or obtaining internal use software. Capitalized software costs placed into service are included in computer equipment, furniture and fixtures within property and equipment, net on the consolidated balance sheets and are amortized on a straight-line basis over a three -year period. Software costs that do not meet capitalization criteria are expensed immediately. |
Property and Equipment | Property and Equipment Property and equipment is stated at cost. Depreciation and amortization of property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets. The cost and accumulated depreciation of property and equipment retired or otherwise disposed of are eliminated from the respective accounts and any resulting gain or loss is included in operations. Costs of repairs and maintenance are expensed as incurred. For assets held under capital leases, the estimated useful lives are limited to the shorter of the useful life of the asset or the term of the lease, including renewal option periods if exercise is intended (Note 7). Amortization of assets that are recorded under capital leases is included in depreciation expense. For assets used in data center operations, the related depreciation and amortization are included in cost of revenue. The Company's estimated useful lives of its property and equipment are as follows (in years): Assets Estimated Useful Lives Land improvements, buildings and building improvements 20-40 Substation equipment 30 Data center equipment 5-10 Vehicles 7 Core network equipment 5-7 Cloud computing equipment 5 Fiber facilities 20, 40 Deferred installation charges 3-5 Computer equipment, furniture and fixtures 3-5 In addition, the Company has capitalized interest costs during the construction phase of data centers. Once a data center or expansion project becomes operational, these costs are allocated to certain property and equipment categories and are depreciated over the estimated useful life of the underlying assets. |
Impairment of Long-Lived Assets | Impairment of Long‑Lived Assets The Company's long‑lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset group to estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. |
Portfolio Energy Credits | Portfolio Energy Credits The Company recognizes portfolio energy credits ("PECs") at their cost when purchased as an intangible asset, subject to impairment testing. PECs are not considered outputs by the Company. Amortization of PECs is recorded within cost of revenue on the consolidated statements of comprehensive income when PECs are utilized in operations. |
Deferred Debt Issuance Costs and Deferred Offering Costs | Deferred Debt Issuance Costs Costs incurred in obtaining certain debt financing are deferred and amortized over the terms of the related debt instruments using the interest method for term debt and the straight-line method for revolving debt. Deferred Offering Costs The Company capitalizes certain legal, accounting, and other third-party fees that are directly associated with in-process equity financings until such financings are consummated. After consummation of the equity financing, these costs are recorded in stockholders' equity as a reduction of additional paid-in capital generated as a result of the offering. As of September 30, 2017 , the Company recorded $4.1 million of deferred offering costs within other assets in the accompanying consolidated balance sheets in contemplation of the IPO. Upon the successful consummation of the IPO in October 2017, the deferred offering costs were recorded immediately in Switch, Inc.s' stockholders' equity as a reduction of additional paid-in capital generated as a result of the IPO. The Company did not record any deferred offering costs as of December 31, 2016 . |
Foreign Currency Translation | Foreign Currency Translation SUPERNAP International, S.A. ("SUPERNAP International"), an equity method investment of the Company, has investments in foreign subsidiaries. Gains or losses from translation of foreign operations where the local currency is the functional currency are included in other comprehensive income. |
Revenue Recognition | Revenue Recognition During the nine months ended September 30, 2017, the Company derived more than 95% of its revenue from recurring revenue streams, consisting primarily of (1) colocation, which includes the licensing of cabinet space and power; and (2) connectivity services, which includes cross-connects, broadband services, and external connectivity. The remainder of the Company's revenue is from non-recurring revenue streams, which primarily include installation and contract settlements. Recurring revenue is generally billed monthly and recognized ratably over the period to which the service relates. The Company's contracts with its customers generally have terms of three to five years. Non-recurring installation fees, although generally paid in a lump sum upon installation, are deferred and recognized ratably over the expected life of the installation, which was 73 months as of September 30, 2017 and December 31, 2016 . The expected life of the installation is determined based on (i) the weighted-average term of new contracts entered into during the period with customers, plus (ii) the average term of contract renewals entered into during the period with existing customers. Revenue from connectivity services is generally recognized on a gross basis in accordance with the accounting standard related to reporting revenue gross as a principal versus net as an agent, primarily because the Company acts as the principal in the transactions, takes title to services and bears credit risk. Revenue from contract settlements, which result when a customer wishes to terminate their contract early, is generally recognized when no remaining performance obligations exist, to the extent that the revenue has not previously been recognized. The Company guarantees certain service levels, such as uptime, as outlined in individual customer contracts. If these service levels are not achieved, the Company reduces revenue for any credits given to the customer as a result. There were no service level credits issued during the three and nine months ended September 30, 2017 and 2016 . Revenue is recognized only when the service has been provided and when there is persuasive evidence of an arrangement, the fee is fixed or determinable and collection of the receivable is reasonably assured. It is the Company's customary business practice to obtain a signed colocation facility agreement and service order prior to recognizing revenue in an arrangement. The Company assesses collectability based on a number of factors, including past transaction history with the customer and the credit-worthiness of the customer. The Company generally does not request collateral from its customers except it usually obtains a lien and/or other security interest in a customer's equipment placed in the Company's data centers or obtains a deposit. If the Company determines that collection of a fee is not reasonably assured, the fee is deferred and revenue is recognized at the time collection becomes reasonably assured, which is generally upon receipt of cash. Multiple Element Arrangements The Company enters into multiple element revenue arrangements in which a customer may purchase a combination of the right to use network capacity (e.g., conduit and fiber optic cables), maintenance services, and colocation services. Terms of performance, cancellation, termination, or refunds in these arrangements are similar to those for individual stand-alone deliverables. To the extent these revenue arrangements involve the use of property and equipment, they are evaluated under lease accounting guidance to determine whether the arrangement meets the definition of a lease. None of the multiple element arrangements entered into by the Company during any of the periods presented have met the definition of a lease. The services offered under these revenue arrangements qualify as separate units of accounting. Multiple deliverables within revenue arrangements are allocated to separate units of accounting if the deliverables meet both of the following criteria: • The delivered items have value to the customer on a stand-alone basis. The items have value on a stand-alone basis if they are sold separately by any vendor or the customer could resell the delivered items on a stand-alone basis; and • If the arrangement includes a general right of return relative to the delivered items, delivery or performance of the undelivered items is considered probable and substantially in the control of the Company. At the inception of a multiple element arrangement, the Company: (1) determines whether and when each unit of accounting has been delivered or performed; (2) determines the fair value of each unit of accounting using the selling price hierarchy of vendor-specific evidence of fair value ("VSOE") if available, third-party evidence ("TPE") if VSOE is not available, and management's best estimate of the selling price ("BESP") if neither VSOE nor TPE is available; and (3) allocates the total price among the various units of accounting using the relative selling price method. Once the total price has been allocated among the various units of accounting, revenue is recognized when the relevant revenue recognition criteria are met for each element, which is upon acceptance or use of the services by the customer. VSOE generally exists when the deliverable is sold separately; however, in certain instances VSOE cannot be established if the deliverable cannot be priced within a narrow range or has a limited sales history. TPE is determined based on competitor prices for similar deliverables when sold separately. The Company determines BESP for a product or service by considering multiple factors including, but not limited to, pricing practices, market conditions, competitive landscape, type of customer, geographies, internal costs, and gross margin objectives. Revenue is allocated to rights to use network capacity and related colocation services and maintenance services under these arrangements based on TPE. Revenue allocated to other colocation services provided under these arrangements is based on VSOE. |
Revenue Recognition, Multiple Element Arrangements | Multiple Element Arrangements The Company enters into multiple element revenue arrangements in which a customer may purchase a combination of the right to use network capacity (e.g., conduit and fiber optic cables), maintenance services, and colocation services. Terms of performance, cancellation, termination, or refunds in these arrangements are similar to those for individual stand-alone deliverables. To the extent these revenue arrangements involve the use of property and equipment, they are evaluated under lease accounting guidance to determine whether the arrangement meets the definition of a lease. None of the multiple element arrangements entered into by the Company during any of the periods presented have met the definition of a lease. The services offered under these revenue arrangements qualify as separate units of accounting. Multiple deliverables within revenue arrangements are allocated to separate units of accounting if the deliverables meet both of the following criteria: • The delivered items have value to the customer on a stand-alone basis. The items have value on a stand-alone basis if they are sold separately by any vendor or the customer could resell the delivered items on a stand-alone basis; and • If the arrangement includes a general right of return relative to the delivered items, delivery or performance of the undelivered items is considered probable and substantially in the control of the Company. At the inception of a multiple element arrangement, the Company: (1) determines whether and when each unit of accounting has been delivered or performed; (2) determines the fair value of each unit of accounting using the selling price hierarchy of vendor-specific evidence of fair value ("VSOE") if available, third-party evidence ("TPE") if VSOE is not available, and management's best estimate of the selling price ("BESP") if neither VSOE nor TPE is available; and (3) allocates the total price among the various units of accounting using the relative selling price method. Once the total price has been allocated among the various units of accounting, revenue is recognized when the relevant revenue recognition criteria are met for each element, which is upon acceptance or use of the services by the customer. VSOE generally exists when the deliverable is sold separately; however, in certain instances VSOE cannot be established if the deliverable cannot be priced within a narrow range or has a limited sales history. TPE is determined based on competitor prices for similar deliverables when sold separately. The Company determines BESP for a product or service by considering multiple factors including, but not limited to, pricing practices, market conditions, competitive landscape, type of customer, geographies, internal costs, and gross margin objectives. Revenue is allocated to rights to use network capacity and related colocation services and maintenance services under these arrangements based on TPE. Revenue allocated to other colocation services provided under these arrangements is based on VSOE. |
Income Taxes | Income Taxes Since limited liability companies are "pass-through" entities under the U.S. Internal Revenue Code, the members of the Company are taxed directly on their respective ownership interests in consolidated income, and, therefore, no provision or liability for federal income tax has been included in the accompanying consolidated financial statements. Based on management's evaluations, since there are no conditions or uncertainties that present any material risk of loss of the pass-through status of the Company or other identified uncertain tax positions to be taken or taken in previously filed federal or state income tax returns that remain subject to examination by relevant tax authorities (presently consisting of those for tax years 2014 through 2016), the related provisions of GAAP relative to uncertain tax positions have had no effect on the Company's consolidated financial statements. The Company's policy is to record estimated probable penalties and interest to be assessed to the Company, if any, related to income tax matters as selling, general and administrative expense. |
Advertising Costs | Advertising Costs Advertising costs are expensed when incurred and are included in selling, general and administrative expense in the accompanying consolidated statements of comprehensive income. |
Equity-Based Compensation | Equity-Based Compensation Equity-based compensation cost is measured at the grant date for all equity-based awards made to employees and members based on the fair value of the awards and is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period. The Company grants equity awards to its employees and members and these equity awards generally have only a service condition. The Company's equity awards vest up to five years. The Company uses the Black-Scholes option-pricing model to determine the fair value of its equity awards. The determination of the fair value of equity awards is affected by assumptions regarding a number of complex and subjective variables including the fair value of the Company's member equity units, the expected price volatility of the member equity units over the term of the awards and actual and projected employee unit option exercise or purchase behaviors. The Company's member equity units' fair value per unit is estimated using a weighted average approach of a combination of the following three methods: (1) publicly traded data center company multiples; (2) data center precedent transaction multiples; and (3) the discounted cash flow method based on the Company's five-year forecast. The weighting of these three methods varied over time. The Company estimates the expected volatility by analyzing the volatility of companies in the same industry and selecting volatility within the range. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term of the equity awards. The expected dividend rate is determined at the grant date for each equity award. The expected term of the equity award is calculated by analyzing the historical exercise data and obtaining the weighted average of the holding period for the equity awards. |
Net Income per Unit | Net Income per Unit Basic net income per unit is computed by dividing net income by the weighted-average number of units outstanding during the period. Diluted net income per unit is computed giving effect to all potential weighted average dilutive units including options, and incentive units. The dilutive effect of outstanding awards, if any, is reflected in diluted earnings per unit by application of the treasury stock method. Refer to Note 13 for further information on net income per unit. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements ASU 2014-09 Revenue from Contracts with Customers In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). The ASU replaces much of the current guidance regarding revenue recognition including most industry-specific guidance. The core principle of the ASU is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity will be required to identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligation in the contract, and recognize revenue when (or as) the entity satisfies a performance obligation. In addition to the new revenue recognition requirements, entities will be required to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Entities may choose between two retrospective transition methods when applying the ASU. In July 2015, the FASB voted to defer the effective date by one year (ASU 2015-14) to December 15, 2018 for annual reporting periods beginning after that date, and interim periods within annual periods beginning after December 15, 2019, and permitted early adoption of the standard, but not before the original effective date of December 15, 2017. Companies may use either a full retrospective or a modified-retrospective approach to adopt the standard. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers - Principal versus Agent Considerations Reporting ("ASU 2016-08"). The core principle of the guidance in Revenue from Contracts with Customers in ASU 2014-09 is not changed by the amendments in ASU 2016-08. The amendments clarify the implementation guidance on principal versus agent considerations. Per ASU 2016-08, when another party is involved in providing goods or services to a customer, an entity is required to determine whether the nature of its promise is to provide the specified good or service itself (principal) or to arrange for that good or service to be provided by the other party (agent). When an entity that is a principal satisfies a performance obligation, the entity recognizes revenue in the gross amount of consideration to which it expects to be entitled in exchange for the specified good or service transferred to the customer. When an entity that is an agent satisfies a performance obligation, the entity recognizes revenue in the amount of any fee or commission to which it expects to be entitled. The effective date and transition requirements for ASU 2016-08 are the same as the effective date and transition requirements for ASU 2014-09. In April 2016 and May 2016, the FASB issued guidance which amends certain other aspects of ASU 2014-09. The amendments include the identification of performance obligations and the licensing implementation guidance (ASU 2016-10) and the collectability of revenue, presentation of sales tax and other similar taxes collected from customers, contracts containing noncash considerations, and contract modifications and completed contracts at transition (ASU 2016-12). In December 2016, the FASB amended ASU 2014-09 to make minor corrections and minor improvements to the guidance that are not expected to have a significant effect on current accounting practice or create a significant administrative cost. The effective date and transition provisions in these amendments are aligned with the requirements of ASU 2014-09. The Company is in the process of selecting a transition method and determining the effect of this guidance on its consolidated financial statements. ASU 2014-15 Presentation of Financial Statements - Going Concern In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern ("ASU 2014-15"), which provides guidance about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The adoption of ASU 2014-15 during the year ended December 31, 2016 did not impact the Company's consolidated financial statements. ASU 2015-02 Consolidation (Topic 810): Amendments to the Consolidation Analysis In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis ("ASU 2015-02"). This standard modifies existing consolidation guidance for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. The adoption of ASU 2015-02 in the first quarter of 2017 did not impact the Company's consolidated financial statements. ASU 2016-02 Leases (Topic 842) On February 25, 2016, the FASB issued ASU 2016-02, Leases ("ASU 2016-02"). The principle of ASU 2016-02 is that a lessee should recognize the assets and liabilities that arise from leases. Lessees will need to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability. For income statement purposes, ASU 2016-02 requires leases to be classified as either operating or finance. Operating leases will result in straight-line expense while finance leases will result in a front-loaded expense pattern. ASU 2016-02 is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted. The new standard must be adopted using a modified-retrospective transition, and provides for certain practical expedients. The Company is evaluating the potential effects of the adoption of this ASU on its consolidated financial statements. The Company has not decided if early adoption will be considered. ASU 2016-09 Stock Compensation - Improvements to Employee Share-Based Payment Accounting In March 2016, the FASB issued ASU 2016-09, Stock Compensation - Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 was issued to simplify accounting guidance by identifying, evaluating, and improving areas for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The areas affected by ASU 2016-09 include accounting for income taxes, classification of excess tax benefits on the statement of cash flows, minimum statutory tax withholding requirements, and classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-withholding purposes. In addition, under this guidance, an entity can make an accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. Upon adoption of this guidance during the first quarter of 2017, the Company changed its policy to account for forfeitures as they occur. The adoption of this guidance during the first quarter of 2017 did not materially impact the Company's consolidated financial statements. ASU 2016-13 Financial Statements - Credit Losses In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses ("ASU 2016-13"). Under this guidance, a company will be required to use a new forward-looking "expected loss" model for trade and other receivables that generally will result in the earlier recognition of allowances for losses. The amendments in ASU 2016-13 are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021, and requires a modified-retrospective approach to adoption. Early adoption is permitted in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is evaluating the potential effects the adoption of this standard will have on its consolidated financial statements. The Company has not decided if early adoption will be considered. ASU 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"). The areas affected by ASU 2016-15 are debt prepayment and debt extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies), distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. Specifically, under this guidance, cash payments for debt prepayment or debt extinguishment costs will be classified as cash outflows for financing activities. The amendments in ASU 2016-15 are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in ASU 2016-15 will be applied using a retrospective transition method to each period presented. The adoption of ASU 2016-15 is not expected to materially impact the Company's consolidated financial statements. The Company has not decided if early adoption will be considered. ASU 2017-09 Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting ("ASU 2017-09"). This update provides clarify and reduces both diversity in practice and cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. For all entities, the amendments in ASU 2017-09 are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period. The adoption of ASU 2017-09 is not expected to materially impact the Company's consolidated financial statements. The Company has not decided if early adoption will be considered. |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Switch, Ltd. | |
Property, Plant and Equipment [Line Items] | |
Schedule of property and equipment, net | Property and equipment, net, consists of the following as of: September 30, 2017 December 31, 2016 (unaudited) (in thousands) Land and land improvements $ 133,896 $ 104,318 Data center equipment 713,858 591,085 Capitalized leased assets 35,974 36,408 Buildings and building improvements 327,110 248,680 Substation equipment 4,247 — Cloud computing equipment 5,661 5,661 Fiber facilities 8,445 6,344 Computer equipment, furniture and fixtures 28,904 21,007 Vehicles 1,601 1,241 Construction in progress 108,550 97,368 Core network equipment 30,609 23,859 Deferred installation charges 4,114 3,858 Property and equipment, gross 1,402,969 1,139,829 Less: accumulated depreciation and amortization (330,146 ) (265,570 ) Total property and equipment, net $ 1,072,823 $ 874,259 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) - Switch, Ltd. | 9 Months Ended |
Sep. 30, 2017 | |
Debt Instrument [Line Items] | |
Schedule of Long-term Debt | Long-term debt consists of the following as of: September 30, 2017 December 31, 2016 (unaudited) (in thousands) 2015 Term Loan Facility, interest paid at the defined LIBOR rate plus applicable interest margin (2.77% at December 31, 2016); matures May 2020 $ — $ 185,000 2017 Term Loan Facility, interest paid at the defined LIBOR rate plus applicable interest margin (3.99% at September 30, 2017); matures June 2024 598,500 — Less: unamortized debt issuance costs (5,441 ) (2,233 ) 593,059 182,767 2015 Revolving Credit Facility, interest paid at the defined LIBOR rate plus applicable interest margin (2.71% at December 31, 2016); matures May 2020 — 289,300 2017 Revolving Credit Facility, interest paid at the defined LIBOR rate plus applicable interest margin (3.74% at September 30, 2017); matures June 2022 231,000 — $ 824,059 $ 472,067 |
Schedule of Long-term Debt Maturities | As of September 30, 2017 , long-term debt maturities are as follows (in thousands): 2017 (three months remaining) $ 1,500 2018 6,000 2019 6,000 2020 6,000 2021 6,000 Thereafter 804,000 829,500 Less: unamortized debt issuance costs (5,441 ) $ 824,059 |
Leases (Tables)
Leases (Tables) - Switch, Ltd. | 9 Months Ended |
Sep. 30, 2017 | |
Operating Leased Assets [Line Items] | |
Schedule of future minimum payment obligations for capital lease | As of September 30, 2017 , minimum payment obligations for this capital lease are as follows: Related Party Building Lease* (in thousands) 2017 (three months remaining) $ 474 2018 1,952 2019 2,064 2020 2,124 2021 2,243 Thereafter 33,636 42,493 Less: amount representing interest (23,027 ) Present value of minimum capital lease payments $ 19,466 |
Schedule of future minimum lease payments for operating leases | As of September 30, 2017 , future minimum lease payments for all operating leases with remaining terms in excess of one year are as follows: Related Parties Other Total (in thousands) 2017 (three months remaining) $ 1,167 $ 595 $ 1,762 2018 4,706 2,359 7,065 2019 4,798 2,369 7,167 2020 4,860 2,372 7,232 2021 4,256 506 4,762 Thereafter 59,516 822 60,338 $ 79,303 $ 9,023 $ 88,326 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Switch, Ltd. | |
Long-term Purchase Commitment [Line Items] | |
Future minimum purchase commitments | As of September 30, 2017 , future minimum PEC purchase commitments are as follows (in thousands): 2017 (three months remaining) $ 807 2018 1,902 2019 1,902 2020 1,902 2021 1,738 Thereafter 27,113 $ 35,364 |
Equity-Based Compensation (Tabl
Equity-Based Compensation (Tables) - Switch, Ltd. | 9 Months Ended |
Sep. 30, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Schedule of Unit Option Activity | The unit option activity under the Unit Option Plan is summarized as follows (number of units in thousands) as of: Number of Units Weighted Average Exercise Price per Unit Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (1) (In thousands) Unit options outstanding - December 31, 2016 167 $ 2.09 1.75 $ 939 Unit options exercised (unaudited) (57 ) $ 2.85 Unit options outstanding - September 30, 2017 (unaudited) 110 $ 2.85 1.00 $ 1,560 Unit options vested and exercisable- December 31, 2016 167 $ 2.09 1.75 $ 939 Unit options vested and exercisable- September 30, 2017 (unaudited) 110 $ 2.85 1.00 $ 1,560 (1) The intrinsic value is calculated as the difference between the fair value of the unit on September 30, 2017 and December 31, 2016 and the exercise price of the option. |
Schedule of Incentive Unit Activity | The Incentive Unit activity is summarized below (number of units in thousands): Number of Units Weighted Average Hurdle Amount per Unit Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (1) (In thousands) Incentive Units outstanding - December 31, 2016 19,393 $ 4.20 1.98 $ 68,139 CEO Award (unaudited) 7,500 $ — President Award (unaudited) 1,512 $ 11.69 Incentive Units forfeited (unaudited) (873 ) $ 4.62 Incentive Units - September 30, 2017 (unaudited) 27,532 $ 3.45 2.10 $ 373,028 Incentive Units vested - December 31, 2016 4,558 $ 3.97 1.50 $ 17,053 Incentive Units vested - September 30, 2017 (unaudited) 6,234 4.09 0.91 $ 80,470 (1) The intrinsic value is calculated as the difference between the fair value of the unit on September 30, 2017 and December 31, 2016 and the hurdle amount of the Incentive Unit. |
Schedule of Weighted Average Hurdle Amounts for Incentive Units | The weighted average hurdle amounts for Incentive Units granted and vested, and the weighted average remaining time to vest for Incentive Units outstanding were as follows (number of units in thousands) as of: September 30, 2017 (unaudited) Incentive Units Outstanding Incentive Units Vested Number of Units Weighted Average Hurdle Amount Weighted Average Remaining Contractual Life (Years) Number of Units Weighted Average Hurdle Amount 6,510 $ 3.33 0.18 1,680 $ 3.33 1,560 4.33 0.31 972 4.33 150 4.67 2.11 15 4.67 7,786 4.26 1.61 3,151 4.26 200 4.62 2.71 20 4.62 757 5.02 2.53 219 5.02 500 5.53 2.29 125 5.53 260 6.46 3.07 45 6.46 130 7.26 3.90 7 7.26 667 7.39 3.55 — — 7,500 — 4.01 — — 1,512 11.69 4.01 — — 27,532 $ 3.45 2.10 6,234 $ 4.09 |
Schedule of Number and Weighted Average Grant Date Fair Value for Incentive Units | The number and weighted average grant date fair value for Incentive Units granted and outstanding are as follows (number of units in thousands) as of: Number of Nonvested Incentive Units Outstanding Weighted Average Grant Date Fair Value per Incentive Unit Nonvested Incentive Units outstanding - December 31, 2016 14,835 $ 1.34 CEO Award (unaudited) 7,500 11.69 President Award (unaudited) 1,512 1.98 Incentive Units forfeited (unaudited) (873 ) 0.97 Incentive Units vested (unaudited) (1,676 ) 1.10 Nonvested Incentive Units outstanding - September 30, 2017 (unaudited) 21,298 $ 5.06 |
Schedule of Weighted Average Assumptions Used | The weighted average assumptions used in estimating the grant date fair value of these units, exclusive of the CEO Award, are listed in the table below: Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 (unaudited) Expected volatility 29.3 % 50.0 % 29.3 % 41.2 % Risk-free interest rate 1.4 % 1.1 % 1.4 % 1.3 % Expected term (in years) 2.0 5.0 2.0 3.9 Dividend rate 0.6 % 0.9 % 0.6 % 0.9 % |
Schedule of Equity-Based Compensation | Total equity-based compensation recognized in the consolidated statements of comprehensive income for the Unit Option Plan, Incentive Units, and fully vested Common Units is as follows for each of the periods presented: Three Months Ended Nine Months Ended 2017 2016 2017 2016 (unaudited) (in thousands) Cost of revenue $ 50 $ — $ 148 $ — Selling, general and administrative 1,265 1,224 4,731 4,912 Total equity-based compensation expense $ 1,315 $ 1,224 $ 4,879 $ 4,912 |
Net Income Per Unit (Tables)
Net Income Per Unit (Tables) - Switch, Ltd. | 9 Months Ended |
Sep. 30, 2017 | |
Net income per unit: | |
Schedule of Basic and Diluted Net Income Per Unit | The following table sets forth the calculation of basic and diluted net income per unit during the periods presented (in thousands, except unit and per unit data): Three Months Ended Nine Months Ended 2017 2016 2017 2016 (unaudited) (in thousands, except unit and per unit data) Net income per unit: Numerator: Net income-basic and diluted $ 16,486 $ 15,926 $ 51,766 $ 51,140 Denominator-basic: Weighted-average units outstanding-basic 200,746,690 199,108,842 200,415,541 199,328,865 Net income per unit-basic $ 0.08 $ 0.08 0.26 $ 0.26 Denominator-diluted: Weighted average units outstanding-basic 200,746,690 199,108,842 200,415,541 199,328,865 Weighted average effect of dilutive securities: Effect of dilutive options 88,326 119,240 113,797 267,129 Effect of unvested Incentive Units 8,137,728 5,016,476 6,866,480 3,894,599 Weighted average units outstanding-diluted 208,972,744 204,244,558 207,395,818 203,490,593 Net income per unit-diluted $ 0.08 $ 0.08 $ 0.25 $ 0.25 |
Schedule of Antidilutive Securities | The following outstanding weighted average effect of unvested Incentive Units were excluded from the computation of the diluted net income per unit for the periods presented because their effect would have been anti-dilutive. Three Months Ended Nine Months Ended 2017 2016 2017 2016 (unaudited) Incentive Units — 313,674 163,817 1,023,581 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Switch, Ltd. | |
Segment Reporting Information [Line Items] | |
Schedule of Composition of Revenue | The Company's revenue is comprised of the following: Three Months Ended Nine Months Ended 2017 2016 2017 2016 (unaudited) (in thousands) Colocation $ 79,429 $ 66,107 $ 225,753 $ 193,020 Connectivity 17,111 14,333 49,201 39,623 Other 1,149 1,226 3,993 3,821 Revenue $ 97,689 $ 81,666 $ 278,947 $ 236,464 |
Organization (Details)
Organization (Details) $ / shares in Units, $ in Millions | Oct. 11, 2017USD ($)$ / sharesshares | Sep. 30, 2017vote | Oct. 12, 2017 |
Subsequent Event | |||
Subsidiary, Sale of Stock [Line Items] | |||
Offering costs paid | $ 4.1 | ||
Subsequent Event | IPO | |||
Subsidiary, Sale of Stock [Line Items] | |||
Number of shares issued (in shares) | shares | 35,937,500 | ||
Price per share (in dollars per share) | $ / shares | $ 17 | ||
Consideration received | $ 577.3 | ||
Rob Roy and Affiliated Entity [Member] | Subsequent Event | |||
Subsidiary, Sale of Stock [Line Items] | |||
Percentage of voting interests | 67.20% | ||
Common Class C [Member] | |||
Subsidiary, Sale of Stock [Line Items] | |||
Common Stock, Voting Rights, Votes Per Share | vote | 10 |
Summary of Significant Accoun34
Summary of Significant Accounting Policies - Narrative (Details) - shares | Sep. 30, 2017 | Jun. 13, 2017 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Common stock, shares issued (in shares) | 1 | 0 |
Summary of Significant Accoun35
Summary of Significant Accounting Policies - Cash and Concentration of Credit and Other Risks (Details) - Switch, Ltd. - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Concentration Risk [Line Items] | |||||
Cash equivalents | $ 0 | $ 0 | $ 0 | ||
Revenue | Customer Concentration Risk | |||||
Concentration Risk [Line Items] | |||||
Concentration Risk, Percentage | 12.00% | 13.00% | 10.00% | 14.00% |
Summary of Significant Accoun36
Summary of Significant Accounting Policies - Accounts Receivable and Internal Use Software (Details) - Switch, Ltd. - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Significant Accounting Policies [Line Items] | ||||
Bad debt expense (recovery) | $ 167 | $ (223) | $ 172 | $ 37 |
Capitalized internal use software costs | $ 70 | $ 473 | $ 1,200 | $ 670 |
Software and Software Development Costs [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Estimated Useful Lives | 3 years |
Summary of Significant Accoun37
Summary of Significant Accounting Policies - Property Plant and Equipment (Details) - Switch, Ltd. | 9 Months Ended |
Sep. 30, 2017 | |
Land improvements, buildings and building improvements | Minimum | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Lives | 20 years |
Land improvements, buildings and building improvements | Maximum | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Lives | 40 years |
Substation equipment | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Lives | 30 years |
Data center equipment | Minimum | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Lives | 5 years |
Data center equipment | Maximum | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Lives | 10 years |
Vehicles | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Lives | 7 years |
Core network equipment | Minimum | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Lives | 5 years |
Core network equipment | Maximum | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Lives | 7 years |
Cloud computing equipment | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Lives | 5 years |
Fiber facilities | Minimum | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Lives | 20 years |
Fiber facilities | Maximum | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Lives | 40 years |
Deferred installation charges | Minimum | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Lives | 3 years |
Deferred installation charges | Maximum | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Lives | 5 years |
Computer equipment, furniture and fixtures | Minimum | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Lives | 3 years |
Computer equipment, furniture and fixtures | Maximum | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Lives | 5 years |
Summary of Significant Accoun38
Summary of Significant Accounting Policies - Deferred Offering Costs, Revenue Recognition, Equity-Based Compensation, and Advertising Costs (Details) - Switch, Ltd. - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Significant Accounting Policies [Line Items] | |||||
Deferred offering costs | $ 4,100,000 | $ 4,100,000 | $ 0 | ||
Advertising expense | $ 351,000 | $ 597,000 | $ 1,300,000 | $ 1,500,000 | |
Equity awards vesting period | 5 years | ||||
Minimum | |||||
Significant Accounting Policies [Line Items] | |||||
Contract terms | 3 years | ||||
Maximum | |||||
Significant Accounting Policies [Line Items] | |||||
Contract terms | 5 years |
Stockholder's Equity - Stockhol
Stockholder's Equity - Stockholder's Equity (Details) | 4 Months Ended | ||
Sep. 30, 2017vote$ / sharesshares | Oct. 05, 2017$ / sharesshares | Jun. 13, 2017$ / sharesshares | |
Class of Stock [Line Items] | |||
Common stock, shares authorized (in shares) | 1,000,000 | 1,000,000 | |
Common stock, par value ($ per share) | $ / shares | $ 0.001 | $ 0.001 | |
Common stock, shares issued (in shares) | 1 | 0 | |
Common stock, shares outstanding (in shares) | 1 | 0 | |
Common Class C [Member] | |||
Class of Stock [Line Items] | |||
Common Stock, Voting Rights, Votes Per Share | vote | 10 | ||
Subsequent Event | |||
Class of Stock [Line Items] | |||
Common stock, shares authorized (in shares) | 750,000,000 | ||
Preferred Stock, Shares Authorized | 10,000,000 | ||
Subsequent Event | Common Class A [Member] | |||
Class of Stock [Line Items] | |||
Common stock, par value ($ per share) | $ / shares | $ 0.001 | ||
Subsequent Event | Common Class B [Member] | |||
Class of Stock [Line Items] | |||
Common stock, shares authorized (in shares) | 300,000,000 | ||
Common stock, par value ($ per share) | $ / shares | $ 0.001 | ||
Subsequent Event | Common Class C [Member] | |||
Class of Stock [Line Items] | |||
Common stock, shares authorized (in shares) | 75,000,000 | ||
Common stock, par value ($ per share) | $ / shares | $ 0.001 |
Stockholder's Equity - Members'
Stockholder's Equity - Members' Equity (Details) - Switch, Ltd. $ in Millions | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Distribution Made to Limited Liability Company (LLC) Member [Line Items] | |
Distribution Made to Limited Liability Company (LLC) Member, Cash Distributions Declared | $ 180.4 |
Distribution Made to Limited Liability Company (LLC) Member, Cash Distributions Paid | 174.2 |
Distribution Made To Limited Liability Company (LLC) Member, Distribution Payable | 6.2 |
Cash Distribution [Member] | |
Distribution Made to Limited Liability Company (LLC) Member [Line Items] | |
Distribution Made to Limited Liability Company (LLC) Member, Cash Distributions Declared | 107 |
Return of Capital Distribution [Member] | |
Distribution Made to Limited Liability Company (LLC) Member [Line Items] | |
Distribution Made to Limited Liability Company (LLC) Member, Cash Distributions Declared | $ 73.4 |
Property and Equipment, Net (De
Property and Equipment, Net (Details) - Switch, Ltd. - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 1,402,969 | $ 1,139,829 |
Less: accumulated depreciation and amortization | (330,146) | (265,570) |
Total property and equipment, net | 1,072,823 | 874,259 |
Land and land improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 133,896 | 104,318 |
Data center equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 713,858 | 591,085 |
Capitalized leased assets | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 35,974 | 36,408 |
Buildings and building improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 327,110 | 248,680 |
Substation equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 4,247 | 0 |
Cloud computing equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 5,661 | 5,661 |
Fiber facilities | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 8,445 | 6,344 |
Computer equipment, furniture and fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 28,904 | 21,007 |
Vehicles | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 1,601 | 1,241 |
Construction in progress | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 108,550 | 97,368 |
Core network equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 30,609 | 23,859 |
Deferred installation charges | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 4,114 | $ 3,858 |
Property and Equipment, Net - N
Property and Equipment, Net - Narrative (Details) - Switch, Ltd. - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Property, Plant and Equipment [Line Items] | |||||
Depreciation | $ 22.9 | $ 16.5 | $ 64.7 | $ 47.6 | |
Accumulated amortization for capitalized leased assets | $ 7.9 | 7.9 | $ 6.6 | ||
Capitalized interest | $ 2.1 | $ 1.9 |
Long-Term Deposit (Details)
Long-Term Deposit (Details) - Switch, Ltd. - USD ($) | Oct. 30, 2017 | Sep. 30, 2017 | Dec. 31, 2016 |
Deposit Assets, Noncurrent [Line Items] | |||
Costs incurred | $ 4,800,000 | $ 6,200,000 | |
Costs incurred (classified as long-term deposits) | 4,262,000 | 4,440,000 | |
Costs incurred (classified as property and equipment) | $ 544,000 | $ 1,800,000 | |
Subsequent Event | |||
Deposit Assets, Noncurrent [Line Items] | |||
Proceeds from Reimbursement of Development Costs | $ 1,400,000 | ||
Proceeds from Reimbursement of Development Costs, Long Term Deposit | 178,000 | ||
Proceeds from Reimbursement of Development Costs, Property and Equipment | $ 1,200,000 |
Equity Method Investments (Deta
Equity Method Investments (Details) - Switch, Ltd. | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2017USD ($)investment | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)investment | Sep. 30, 2016USD ($) | Dec. 31, 2016USD ($) | May 13, 2016USD ($) | |
Schedule of Equity Method Investments [Line Items] | ||||||
Number of investments | investment | 2 | 2 | ||||
Share of net income (loss) from equity method investment | $ (221,000) | $ (1,260,000) | $ (955,000) | $ (3,814,000) | ||
Convertible notes payable | Note Purchase Agreement with Planet3 | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Principal face amount of debt issued | $ 3,000,000 | |||||
Interest rate on debt | 5.00% | |||||
SUPERNAP International | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Ownership interest in equity method investment | 50.00% | 50.00% | ||||
Invested amount | $ 1,300,000 | $ 1,300,000 | $ 1,300,000 | |||
Carrying value of investment | 0 | 0 | ||||
Share of net income (loss) from equity method investment | (221,000) | (390,000) | (1,000,000) | (1,300,000) | ||
SUPERNAP International | Equity Method Investee | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Accounts receivable due | $ 760,000 | $ 760,000 | 1,400,000 | |||
Planet3, Inc. | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Ownership interest in equity method investment | 45.00% | 45.00% | ||||
Invested amount | $ 10,000,000 | $ 10,000,000 | 10,000,000 | |||
Carrying value of investment | 4,400,000 | |||||
Share of net income (loss) from equity method investment | $ (868,000) | $ (2,500,000) | ||||
Equity method investment, notes receivable | 2,400,000 | |||||
Equity method investment, discount on notes receivable | 629,000 | |||||
Equity method investment, interest receivable | 55,000 | |||||
Equity method investment, embedded derivative | $ 896,000 | |||||
Other than temporary impairment loss | $ 7,700,000 |
Switch, Inc. 2017 Incentive A45
Switch, Inc. 2017 Incentive Award Plan (Details) - 2017 Plan - shares | Oct. 05, 2017 | Sep. 30, 2017 | Sep. 22, 2017 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of Shares Authorized | 25,000,000 | ||
Authorized Shares, Annual Increase, Number of Shares | 17,000,000 | ||
Authorized Shares, Annual Increase, Number of Shares | 5.00% | ||
Term of award | 10 years | ||
Subsequent Event | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Options granted (in shares) | 5,724,896 | ||
Options, Vested in Period, Number of Shares | 5,626,470 |
Long-Term Debt (Details)
Long-Term Debt (Details) | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2017USD ($) | Sep. 30, 2017USD ($) | Jun. 27, 2017USD ($)Instance | Dec. 31, 2016USD ($) | May 02, 2016USD ($) | May 05, 2015USD ($)Instance | May 04, 2015USD ($) | |
Credit Facility | Revolving Credit Facility | 2015 Revolving Credit Facility | |||||||
Debt Instrument [Line Items] | |||||||
Debt instrument term (in years) | 5 years | ||||||
Switch, Ltd. | |||||||
Debt Instrument [Line Items] | |||||||
Debt issuance costs | $ 5,441,000 | $ 5,441,000 | $ 3,400,000 | ||||
Debt Issuance Costs, Long-Term Debt and Line of Credit Arrangements, Net | 9,300,000 | 9,300,000 | |||||
Accumulated amortization of debt issuance costs | $ 1,400,000 | ||||||
Switch, Ltd. | Previous Credit Agreement | |||||||
Debt Instrument [Line Items] | |||||||
Principal face amount of debt issued | $ 250,000,000 | ||||||
Switch, Ltd. | 2015 Facilities | |||||||
Debt Instrument [Line Items] | |||||||
Number of times available borrowing limit can be increased | Instance | 5 | ||||||
Available borrowing limit | $ 125,000,000 | ||||||
Debt issuance costs | $ 1,000,000 | ||||||
Debt Issuance Costs, Line of Credit Arrangements, Net | 771,000 | 771,000 | $ 811,000 | ||||
Maximum consolidated total leverage ratio | 4.25 | ||||||
Consolidated fixed charge coverage ratio | 1.50 | ||||||
Switch, Ltd. | 2017 Facilities | |||||||
Debt Instrument [Line Items] | |||||||
Number of times available borrowing limit can be increased | Instance | 5 | ||||||
Available borrowing limit | $ 75,000,000 | ||||||
Debt issuance costs | $ 8,800,000 | $ 8,800,000 | |||||
Maximum consolidated total leverage ratio | 6 | 6 | |||||
Restricted payment basket amount | $ 15,000,000 | $ 15,000,000 | |||||
Switch, Ltd. | Term Loan | |||||||
Debt Instrument [Line Items] | |||||||
Debt issuance costs | 5,441,000 | $ 5,441,000 | $ 2,233,000 | ||||
Switch, Ltd. | Term Loan | 2015 Term Loan Facility | |||||||
Debt Instrument [Line Items] | |||||||
Principal face amount of debt issued | 200,000,000 | ||||||
Debt instrument term (in years) | 5 years | ||||||
Debt issuance costs | 2,200,000 | 145,000 | |||||
Switch, Ltd. | Term Loan | 2017 Term Loan Facility | |||||||
Debt Instrument [Line Items] | |||||||
Principal face amount of debt issued | $ 600,000,000 | ||||||
Debt issuance costs | 5,600,000 | $ 5,600,000 | |||||
Principal amortization | 1,500,000 | ||||||
Prepayment premium (percentage) | 1.00% | ||||||
Switch, Ltd. | Credit Facility | Revolving Credit Facility | 2015 Revolving Credit Facility | |||||||
Debt Instrument [Line Items] | |||||||
Revolving credit facility | $ 400,000,000 | ||||||
Debt issuance costs | $ 860,000 | ||||||
Switch, Ltd. | Credit Facility | Revolving Credit Facility | 2015 Revolving Credit Facility | Other Assets | |||||||
Debt Instrument [Line Items] | |||||||
Debt issuance costs | $ 1,100,000 | ||||||
Switch, Ltd. | Credit Facility | Revolving Credit Facility | 2017 Revolving Credit Facility | |||||||
Debt Instrument [Line Items] | |||||||
Revolving credit facility | $ 500,000,000 | ||||||
Debt Issuance Costs, Line of Credit Arrangements, Net | $ 3,200,000 | ||||||
Switch, Ltd. | Credit Facility | Revolving Credit Facility | 2017 Revolving Credit Facility | Other Assets | |||||||
Debt Instrument [Line Items] | |||||||
Debt Issuance Costs, Line of Credit Arrangements, Net | $ 3,100,000 | $ 3,100,000 |
Long-Term Debt - Extinguishment
Long-Term Debt - Extinguishment of Debt (Details) - Switch, Ltd. - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Extinguishment of Debt [Line Items] | ||||
Loss on extinguishment of debt | $ 0 | $ 0 | $ 3,565 | $ 0 |
Loss on extinguishment of debt | 2,065 | $ 0 | ||
2015 Facilities | ||||
Extinguishment of Debt [Line Items] | ||||
Loss on extinguishment of debt | 3,600 | |||
Loss on extinguishment of debt | 2,100 | |||
Write off of lender fees | $ 1,500 |
Long-Term Debt - Long-Term Debt
Long-Term Debt - Long-Term Debt (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 | May 02, 2016 |
Term Loan | 2015 Term Loan Facility | |||
Debt Instrument [Line Items] | |||
Interest rate on debt | 2.77% | ||
Term Loan | 2017 Term Loan Facility | |||
Debt Instrument [Line Items] | |||
Interest rate on debt | 3.99% | ||
Revolving Credit Facility | 2015 Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Interest rate on debt | 2.71% | ||
Revolving Credit Facility | 2017 Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Interest rate on debt | 3.74% | ||
Switch, Ltd. | |||
Debt Instrument [Line Items] | |||
Term Loan Facility | $ 829,500,000 | ||
Less: unamortized debt issuance costs | (5,441,000) | $ (3,400,000) | |
Long-term debt | 824,059,000 | 472,067,000 | |
Switch, Ltd. | Term Loan | |||
Debt Instrument [Line Items] | |||
Less: unamortized debt issuance costs | (5,441,000) | (2,233,000) | |
Long-term debt | 593,059,000 | 182,767,000 | |
Switch, Ltd. | Term Loan | 2015 Term Loan Facility | |||
Debt Instrument [Line Items] | |||
Term Loan Facility | 0 | 185,000,000 | |
Less: unamortized debt issuance costs | (2,200,000) | $ (145,000) | |
Switch, Ltd. | Term Loan | 2017 Term Loan Facility | |||
Debt Instrument [Line Items] | |||
Term Loan Facility | 598,500,000 | 0 | |
Less: unamortized debt issuance costs | (5,600,000) | ||
Switch, Ltd. | Revolving Credit Facility | 2015 Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Long-term debt | 0 | 289,300,000 | |
Switch, Ltd. | Revolving Credit Facility | 2017 Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Long-term debt | $ 231,000,000 | $ 0 |
Long-Term Debt - Long-Term De49
Long-Term Debt - Long-Term Debt Maturities (Details) - Switch, Ltd. - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Long-term Debt, Fiscal Year Maturity [Abstract] | ||
2017 (three months remaining) | $ 1,500 | |
2,018 | 6,000 | |
2,019 | 6,000 | |
2,020 | 6,000 | |
2,021 | 6,000 | |
Thereafter | 804,000 | |
Long-term debt, gross | 829,500 | |
Less: unamortized debt issuance costs | (5,441) | $ (3,400) |
Long-term debt | $ 824,059 | $ 472,067 |
Leases - Narrative (Details)
Leases - Narrative (Details) - Switch, Ltd. | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)renewal_option | Sep. 30, 2016USD ($) | Dec. 31, 2016USD ($) | |
Capital Leased Assets [Line Items] | |||||
Capital leases, number of renewal options | renewal_option | 2 | ||||
Capital leases, renewal option period one | 10 years | ||||
Capital leases, renewal option period two | 5 years | ||||
Minimum capital lease payment obligations | $ 42,493,000 | $ 42,493,000 | |||
Operating Leased Assets [Line Items] | |||||
Operating leases, rent expense | 1,800,000 | $ 2,200,000 | $ 5,400,000 | $ 6,400,000 | |
Fiber facilities | |||||
Capital Leased Assets [Line Items] | |||||
Capital leases, renewal option period one | 25 years | ||||
Capital lease assets | 16,100,000 | $ 16,100,000 | $ 15,900,000 | ||
Minimum capital lease payment obligations | 3,500,000 | $ 3,500,000 | |||
Capital leases, term of lease | 25 years | ||||
Substation equipment | |||||
Capital Leased Assets [Line Items] | |||||
Capital lease assets | 259,000 | $ 259,000 | $ 930,000 | ||
Minimum capital lease payment obligations | 0 | $ 0 | |||
Capital leases, term of lease | 39 years | ||||
Related Parties | |||||
Operating Leased Assets [Line Items] | |||||
Operating leases, rent expense | $ 1,300,000 | $ 1,100,000 | $ 3,600,000 | $ 3,100,000 |
Leases - Capital Lease Payment
Leases - Capital Lease Payment Obligations (Details) - Switch, Ltd. $ in Thousands | Sep. 30, 2017USD ($) |
Capital Leased Assets [Line Items] | |
2017 (three months remaining) | $ 474 |
2,018 | 1,952 |
2,019 | 2,064 |
2,020 | 2,124 |
2,021 | 2,243 |
Thereafter | 33,636 |
Minimum capital lease payment obligations | 42,493 |
Less: amount representing interest | (23,027) |
Present value of minimum capital lease payments | $ 19,466 |
Leases - Future Operating Lease
Leases - Future Operating Lease Payments (Details) - Switch, Ltd. $ in Thousands | Sep. 30, 2017USD ($) |
Operating Leased Assets [Line Items] | |
2017 (three months remaining) | $ 1,762 |
2,018 | 7,065 |
2,019 | 7,167 |
2,020 | 7,232 |
2,021 | 4,762 |
Thereafter | 60,338 |
Future minimum lease payments for all operating leases | 88,326 |
Related Parties | |
Operating Leased Assets [Line Items] | |
2017 (three months remaining) | 1,167 |
2,018 | 4,706 |
2,019 | 4,798 |
2,020 | 4,860 |
2,021 | 4,256 |
Thereafter | 59,516 |
Future minimum lease payments for all operating leases | 79,303 |
Other | |
Operating Leased Assets [Line Items] | |
2017 (three months remaining) | 595 |
2,018 | 2,359 |
2,019 | 2,369 |
2,020 | 2,372 |
2,021 | 506 |
Thereafter | 822 |
Future minimum lease payments for all operating leases | $ 9,023 |
Retirement Benefit Plans (Detai
Retirement Benefit Plans (Details) - Switch, Ltd. - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Feb. 29, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Defined Contribution Plan Disclosure [Line Items] | |||||
Defined contribution plan, percent of employer matching contributions | 3.00% | ||||
Defined contribution plan, expense recognized | $ 283 | $ 232 | $ 880 | $ 589 |
Commitments and Contingencies -
Commitments and Contingencies - Future minimum purchase commitments (Details) - Switch, Ltd. - Portfolio Energy Credits [Member] $ in Thousands | Sep. 30, 2017USD ($) |
Purchase Obligation, Fiscal Year Maturity [Abstract] | |
Purchase Obligation, Due in Next Twelve Months | $ 807 |
Purchase Obligation, Due in Second Year | 1,902 |
Purchase Obligation, Due in Third Year | 1,902 |
Purchase Obligation, Due in Fourth Year | 1,902 |
Purchase Obligation, Due in Fifth Year | 1,738 |
Purchase Obligation, Due after Fifth Year | 27,113 |
Purchase commitment | $ 35,364 |
Commitments and Contingencies55
Commitments and Contingencies - Narrative (Details) - Switch, Ltd. portfolio_energy_credit in Millions | May 31, 2017USD ($) | Mar. 08, 2017USD ($)MWh | Sep. 30, 2016USD ($) | Nov. 30, 2015USD ($)portfolio_energy_credit | Aug. 31, 2015USD ($)land_parcel | Jun. 30, 2015USD ($)land_parcel | Dec. 31, 2016USD ($) | Sep. 30, 2017USD ($) | Aug. 31, 2017USD ($)land_parcel |
Long-term Purchase Commitment [Line Items] | |||||||||
Regulatory Fee Expense | $ 27,000,000 | ||||||||
Payment of Regulatory Liabilities | $ 27,000,000 | ||||||||
Self Insurance Reserve | $ 280,000 | ||||||||
Energy [Member] | Morgan Stanley Capital Group [Member] | |||||||||
Long-term Purchase Commitment [Line Items] | |||||||||
Purchase commitment | $ 33,400,000 | 32,500,000 | |||||||
Land improvements, buildings and building improvements | Michigan Data Center Landlord [Member] | |||||||||
Long-term Purchase Commitment [Line Items] | |||||||||
Purchase commitment | $ 25,000,000 | ||||||||
Unrecorded Unconditional Purchase Obligation, Percentage of Previous Lease Payment to Receive as Credit in Purchase | 65.00% | ||||||||
Fiber Services [Member] | Lit Fiber Transport Services Vendor [Member] | |||||||||
Long-term Purchase Commitment [Line Items] | |||||||||
Unrecorded Unconditional Purchase Obligation, Minimum Monthly Purchase Required | $ 75,000 | ||||||||
Unrecorded Unconditional Purchase Obligation, Term | 24 months | ||||||||
Land [Member] | Land Purchase Counterparty 1 [Member] | |||||||||
Long-term Purchase Commitment [Line Items] | |||||||||
Purchase commitment, minimum quantity required | land_parcel | 3 | ||||||||
Purchase commitment | $ 7,600,000 | ||||||||
Land [Member] | Land Purchase Counterparty 2 [Member] | |||||||||
Long-term Purchase Commitment [Line Items] | |||||||||
Purchase commitment, minimum quantity required | land_parcel | 3 | ||||||||
Purchase commitment | $ 5,400,000 | ||||||||
Unrecorded Unconditional Purchase Obligation, Remaining Term | 36 months | ||||||||
Unrecorded Unconditional Purchase Obligation, Period Quantity Purchased | land_parcel | 2 | ||||||||
Portfolio Energy Credits [Member] | |||||||||
Long-term Purchase Commitment [Line Items] | |||||||||
Purchase commitment | $ 35,364,000 | ||||||||
Portfolio Energy Credits [Member] | Southern Nevada Water Authority [Member] | |||||||||
Long-term Purchase Commitment [Line Items] | |||||||||
Purchase commitment | $ 574,000 | ||||||||
Portfolio Energy Credits [Member] | NV Energy Switch Station 2 [Member] | |||||||||
Long-term Purchase Commitment [Line Items] | |||||||||
Purchase commitment | $ 13,200,000 | ||||||||
Portfolio Energy Credits [Member] | NV Energy Switch Station 1 [Member] | |||||||||
Long-term Purchase Commitment [Line Items] | |||||||||
Purchase commitment | $ 21,600,000 | ||||||||
Portfolio Energy Credits [Member] | Southern Nevada Water Authority [Member] | |||||||||
Long-term Purchase Commitment [Line Items] | |||||||||
Purchase commitment, minimum quantity required | portfolio_energy_credit | 82 | ||||||||
Unrecorded Unconditional Purchase Obligation, Term | 5 years | ||||||||
Portfolio Energy Credits [Member] | NV Energy Switch Station 2 [Member] | |||||||||
Long-term Purchase Commitment [Line Items] | |||||||||
Unrecorded Unconditional Purchase Obligation, Term | 20 years | ||||||||
Portfolio Energy Credits [Member] | NV Energy Switch Station 1 [Member] | |||||||||
Long-term Purchase Commitment [Line Items] | |||||||||
Unrecorded Unconditional Purchase Obligation, Term | 20 years | ||||||||
Energy [Member] | Morgan Stanley Capital Group [Member] | |||||||||
Long-term Purchase Commitment [Line Items] | |||||||||
Purchase commitment, minimum quantity required | MWh | 40 | ||||||||
Unrecorded Unconditional Purchase Obligation, Term | 36 months |
Equity-Based Compensation - 200
Equity-Based Compensation - 2005 Common Membership Unit Plan (Details) - Switch, Ltd. - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 9 Months Ended | 12 Months Ended | 153 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2017 | |
Number of Units | |||
Unit options outstanding, number of units - December 31, 2016 (in shares) | 167 | ||
Unit options exercised (unaudited), number of units (in shares) | (57) | (21,440) | |
Unit options outstanding, number of units - September 30, 2017 (unaudited) (in shares) | 110 | 167 | 110 |
Weighted Average Exercise Price per Unit | |||
Unit options outstanding, weighted-average exercise price per unit - December 31, 2016 (in dollars per share) | $ 2.09 | ||
Unit options exercised (unaudited), weighted-average exercise price per unit (in dollars per share) | 2.85 | ||
Unit options outstanding, weighted-average exercise price per unit - September 30, 2017 (unaudited) (in dollars per share) | $ 2.85 | $ 2.09 | $ 2.85 |
Additional Option Information | |||
Unit options vested and exercisable, number of units (in shares) | 110 | 167 | 110 |
Unit options vested and exercisable, weighted-average exercise price per unit - September 30, 2017 (unaudited) | $ 2.85 | $ 2.09 | $ 2.85 |
Unit options outstanding, weighted-average remaining contractual life (Years) | 1 year | 1 year 9 months | |
Unit options vested and exercisable, weighted-average remaining contractual life (Years) | 1 year | 1 year 9 months | |
Unit options outstanding, aggregate intrinsic value (in USD) | $ 1,560 | $ 939 | $ 1,560 |
Unit options vested and exercisable, aggregate intrinsic value (in USD) | $ 1,560 | $ 939 | $ 1,560 |
Employee Stock Option | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Term of award | 10 years |
Equity-Based Compensation - Inc
Equity-Based Compensation - Incentive Unit Activity (Details) - Switch, Ltd. - Incentive Units $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2017USD ($)$ / sharesshares | Sep. 30, 2017USD ($)$ / sharesshares | Sep. 30, 2017USD ($)Quarter$ / sharesshares | Sep. 30, 2016 | Dec. 31, 2016USD ($)$ / sharesshares | |
Number of Units | |||||
Incentive units outstanding, number of units - December 31, 2016 (in shares) | shares | 19,393,000 | ||||
Incentive units forfeited (unaudited), number of units (in shares) | shares | (873,000) | ||||
Incentive units outstanding, number of units - September 30, 2017 (unaudited) (in shares) | shares | 27,532,000 | 27,532,000 | 27,532,000 | 19,393,000 | |
Weighted Average Hurdle Amount per Unit | |||||
Incentive units outstanding, weighted average hurdle amount per unit - September 30, 2017 (unaudited) (in dollars per share) | $ 4.20 | ||||
Incentive units awarded (unaudited), weighted average hurdle amount per unit (in dollars per share) | $ 11.69 | 11.69 | |||
Incentive units forfeited (unaudited), weighted average hurdle amount per unit (in dollars per share) | 4.62 | ||||
Incentive units outstanding, weighted average hurdle amount per unit - September 30, 2017 (unaudited) (in dollars per share) | $ 3.45 | $ 3.45 | $ 3.45 | $ 4.20 | |
Incentive units vested, number of units (in shares) | shares | 6,234,000 | 6,234,000 | 6,234,000 | 4,558,000 | |
Incentive units vested, weighted average hurdle amount per unit (in dollars per share) | $ 4.09 | $ 4.09 | $ 4.09 | $ 3.97 | |
Incentive units outstanding, weighted average contractual life (years) | 2 years 1 month 7 days | 2 years 1 month 6 days | 1 year 11 months 23 days | ||
Incentive units vested, weighted average contractual life (years) | 10 months 28 days | 1 year 6 months | |||
Incentive units outstanding, aggregate intrinsic value (in USD) | $ | $ 373,028 | $ 373,028 | $ 373,028 | $ 68,139 | |
Incentive units vested, aggregate intrinsic value (in USD) | $ | $ 80,470 | $ 80,470 | $ 80,470 | $ 17,053 | |
Share-based Compensation Arrangement by Share-based Payment Award, Award Threshold Percentage | 3.00% | ||||
Tranche One | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Award vesting percentage | 40.00% | ||||
Tranche Two | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Award vesting percentage | 2.50% | ||||
Award vesting period (in quarters) | Quarter | 8 | ||||
Tranche Three | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Award vesting percentage | 5.00% | ||||
CEO | |||||
Number of Units | |||||
Incentive units awarded (unaudited), number of units (in shares) | shares | 7,500,000 | 7,500,000 | |||
Weighted Average Hurdle Amount per Unit | |||||
Incentive units awarded (unaudited), weighted average hurdle amount per unit (in dollars per share) | $ 0 | ||||
President | |||||
Number of Units | |||||
Incentive units awarded (unaudited), number of units (in shares) | shares | 1,511,572 | 1,512,000 | |||
Weighted Average Hurdle Amount per Unit | |||||
Incentive units awarded (unaudited), weighted average hurdle amount per unit (in dollars per share) | $ 11.69 |
Equity-Based Compensation - I58
Equity-Based Compensation - Incentive Units By Weighted Average Hurdle Amount (Details) - Switch, Ltd. - Incentive Units - $ / shares shares in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Incentive units outstanding, number of units (in shares) | 27,532 | 19,393 | |
Incentive units outstanding, weighted average hurdle amount per unit (in dollars per share) | $ 3.45 | $ 4.20 | |
Incentive units outstanding, weighted average contractual life (years) | 2 years 1 month 7 days | 2 years 1 month 6 days | 1 year 11 months 23 days |
Incentive units vested, number of units (in shares) | 6,234 | 4,558 | |
Incentive units vested, weighted average hurdle amount per unit (in dollars per share) | $ 4.09 | $ 3.97 | |
Weighted Average Hurdle Amount, $3.33 | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Incentive units outstanding, number of units (in shares) | 6,510 | ||
Incentive units outstanding, weighted average hurdle amount per unit (in dollars per share) | $ 3.33 | ||
Incentive units outstanding, weighted average contractual life (years) | 2 months 5 days | ||
Incentive units vested, number of units (in shares) | 1,680 | ||
Incentive units vested, weighted average hurdle amount per unit (in dollars per share) | $ 3.33 | ||
Weighted Average Hurdle Amount, $4.33 | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Incentive units outstanding, number of units (in shares) | 1,560 | ||
Incentive units outstanding, weighted average hurdle amount per unit (in dollars per share) | $ 4.33 | ||
Incentive units outstanding, weighted average contractual life (years) | 3 months 22 days | ||
Incentive units vested, number of units (in shares) | 972 | ||
Incentive units vested, weighted average hurdle amount per unit (in dollars per share) | $ 4.33 | ||
Weighted Average Hurdle Amount, $4.67 | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Incentive units outstanding, number of units (in shares) | 150 | ||
Incentive units outstanding, weighted average hurdle amount per unit (in dollars per share) | $ 4.67 | ||
Incentive units outstanding, weighted average contractual life (years) | 2 years 1 month 10 days | ||
Incentive units vested, number of units (in shares) | 15 | ||
Incentive units vested, weighted average hurdle amount per unit (in dollars per share) | $ 4.67 | ||
Weighted Average Hurdle Amount, $4.26 | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Incentive units outstanding, number of units (in shares) | 7,786 | ||
Incentive units outstanding, weighted average hurdle amount per unit (in dollars per share) | $ 4.26 | ||
Incentive units outstanding, weighted average contractual life (years) | 1 year 7 months 10 days | ||
Incentive units vested, number of units (in shares) | 3,151 | ||
Incentive units vested, weighted average hurdle amount per unit (in dollars per share) | $ 4.26 | ||
Weighted Average Hurdle Amount, $4.62 | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Incentive units outstanding, number of units (in shares) | 200 | ||
Incentive units outstanding, weighted average hurdle amount per unit (in dollars per share) | $ 4.62 | ||
Incentive units outstanding, weighted average contractual life (years) | 2 years 8 months 16 days | ||
Incentive units vested, number of units (in shares) | 20 | ||
Incentive units vested, weighted average hurdle amount per unit (in dollars per share) | $ 4.62 | ||
Weighted Average Hurdle Amount, $5.02 | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Incentive units outstanding, number of units (in shares) | 757 | ||
Incentive units outstanding, weighted average hurdle amount per unit (in dollars per share) | $ 5.02 | ||
Incentive units outstanding, weighted average contractual life (years) | 2 years 6 months 11 days | ||
Incentive units vested, number of units (in shares) | 219 | ||
Incentive units vested, weighted average hurdle amount per unit (in dollars per share) | $ 5.02 | ||
Weighted Average Hurdle Amount, $5.53 | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Incentive units outstanding, number of units (in shares) | 500 | ||
Incentive units outstanding, weighted average hurdle amount per unit (in dollars per share) | $ 5.53 | ||
Incentive units outstanding, weighted average contractual life (years) | 2 years 3 months 15 days | ||
Incentive units vested, number of units (in shares) | 125 | ||
Incentive units vested, weighted average hurdle amount per unit (in dollars per share) | $ 5.53 | ||
Weighted Average Hurdle Amount, $6.46 | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Incentive units outstanding, number of units (in shares) | 260 | ||
Incentive units outstanding, weighted average hurdle amount per unit (in dollars per share) | $ 6.46 | ||
Incentive units outstanding, weighted average contractual life (years) | 3 years 26 days | ||
Incentive units vested, number of units (in shares) | 45 | ||
Incentive units vested, weighted average hurdle amount per unit (in dollars per share) | $ 6.46 | ||
Weighted Average Hurdle Amount, $7.26 | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Incentive units outstanding, number of units (in shares) | 130 | ||
Incentive units outstanding, weighted average hurdle amount per unit (in dollars per share) | $ 7.26 | ||
Incentive units outstanding, weighted average contractual life (years) | 3 years 10 months 24 days | ||
Incentive units vested, number of units (in shares) | 7 | ||
Incentive units vested, weighted average hurdle amount per unit (in dollars per share) | $ 7.26 | ||
Weighted Average Hurdle Amount, $7.39 | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Incentive units outstanding, number of units (in shares) | 667 | ||
Incentive units outstanding, weighted average hurdle amount per unit (in dollars per share) | $ 7.39 | ||
Incentive units outstanding, weighted average contractual life (years) | 3 years 6 months 18 days | ||
Incentive units vested, number of units (in shares) | 0 | ||
Incentive units vested, weighted average hurdle amount per unit (in dollars per share) | $ 0 | ||
Weighted Average Hurdle Amount, $0.00 | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Incentive units outstanding, number of units (in shares) | 7,500 | ||
Incentive units outstanding, weighted average hurdle amount per unit (in dollars per share) | $ 0 | ||
Incentive units outstanding, weighted average contractual life (years) | 4 years 2 days | ||
Incentive units vested, number of units (in shares) | 0 | ||
Incentive units vested, weighted average hurdle amount per unit (in dollars per share) | $ 0 | ||
Weighted Average Hurdle Amount, $11.69 | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Incentive units outstanding, number of units (in shares) | 1,512 | ||
Incentive units outstanding, weighted average hurdle amount per unit (in dollars per share) | $ 11.69 | ||
Incentive units outstanding, weighted average contractual life (years) | 4 years 2 days | ||
Incentive units vested, number of units (in shares) | 0 | ||
Incentive units vested, weighted average hurdle amount per unit (in dollars per share) | $ 0 |
Equity-Based Compensation - Non
Equity-Based Compensation - Nonvested Incentive Units (Details) - Switch, Ltd. - Incentive Units shares in Thousands | 9 Months Ended |
Sep. 30, 2017$ / sharesshares | |
Number of Nonvested Incentive Units Outstanding | |
Nonvested incentive units outstanding, number of units - December 31, 2016 (in shares) | shares | 14,835 |
Incentive units forfeited (unaudited), number of units (in shares) | shares | (873) |
Incentive units vested (unaudited), number of units (in shares) | shares | (1,676) |
Nonvested incentive units outstanding, number of units - September 30, 2017 (unaudited) (in shares) | shares | 21,298 |
Weighted Average Grant Date Fair Value per Incentive Unit | |
Nonvested incentive units outstanding, weighted average grant date fair value per incentive unit - December 31, 2016 (in dollars per share) | $ / shares | $ 1.34 |
Incentive units forfeited (unaudited), weighted average grant date fair value per incentive unit (in dollars per share) | $ / shares | 0.97 |
Incentive units vested (unaudited), weighted average grant date fair value per incentive unit (in dollars per share) | $ / shares | 1.10 |
Nonvested incentive units outstanding, weighted average grant date fair value per incentive unit - September 30, 2017 (unaudited) (in dollars per share) | $ / shares | $ 5.06 |
CEO | |
Number of Nonvested Incentive Units Outstanding | |
Incentive units awarded (unaudited), number of units (in shares) | shares | 7,500 |
Weighted Average Grant Date Fair Value per Incentive Unit | |
Incentive units awarded (unaudited), weighted average grant date fair value per incentive unit (in dollars per share) | $ / shares | $ 11.69 |
President | |
Number of Nonvested Incentive Units Outstanding | |
Incentive units awarded (unaudited), number of units (in shares) | shares | 1,512 |
Weighted Average Grant Date Fair Value per Incentive Unit | |
Incentive units awarded (unaudited), weighted average grant date fair value per incentive unit (in dollars per share) | $ / shares | $ 1.98 |
Equity-Based Compensation - Wei
Equity-Based Compensation - Weighted Average Assumptions and Additional Information (Details) - Switch, Ltd. - USD ($) $ / shares in Units, $ in Thousands | Oct. 11, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 |
Weighted Average Assumptions: | |||||
Equity-based compensation expense | $ 1,315 | $ 1,224 | $ 4,879 | $ 4,912 | |
Incentive Units | |||||
Weighted Average Assumptions: | |||||
Expected volatility | 29.30% | 50.00% | 29.30% | 41.20% | |
Risk-free interest rate | 1.40% | 1.10% | 1.40% | 1.30% | |
Expected term (in years) | 2 years | 5 years | 2 years | 3 years 10 months 24 days | |
Dividend rate | 0.60% | 0.90% | 0.60% | 0.90% | |
Vested in period fair value | $ 1,800 | $ 2,900 | |||
Common Units | |||||
Weighted Average Assumptions: | |||||
Common units awarded (unaudited), number of units (in shares) | 150,880 | 150,895 | |||
Common units awarded (unaudited), weighted average grant date fair value per incentive unit (in dollars per share) | $ 7.39 | $ 5.53 | |||
Equity-based compensation expense | $ 1,100 | $ 835 | |||
All Excluding CEO | |||||
Weighted Average Assumptions: | |||||
Unit-based compensation cost not yet recognized | $ 7,000 | 7,000 | |||
CEO | |||||
Weighted Average Assumptions: | |||||
Unit-based compensation cost not yet recognized | 90,700 | 90,700 | |||
Unit-based compensation cost not yet recognized, excluding IPO | $ 54,400 | $ 54,400 | |||
Unit-based compensation cost not yet recognized, weighted average period | 4 years 2 days | ||||
CEO | Incentive Units | |||||
Weighted Average Assumptions: | |||||
Common units awarded (unaudited), number of units (in shares) | 7,500,000 | ||||
Common units awarded (unaudited), weighted average grant date fair value per incentive unit (in dollars per share) | $ 11.69 | ||||
IPO | Subsequent Event | |||||
Weighted Average Assumptions: | |||||
Equity-based compensation expense | $ 36,300 |
Equity-Based Compensation - Equ
Equity-Based Compensation - Equity-based Compensation Expense (Details) - Switch, Ltd. - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Total equity-based compensation expense | $ 1,315,000 | $ 1,224,000 | $ 4,879,000 | $ 4,912,000 |
Cost of revenue | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Total equity-based compensation expense | 50,000 | 0 | 148,000 | 0 |
Selling, general and administrative | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Total equity-based compensation expense | $ 1,265,000 | $ 1,224,000 | $ 4,731,000 | $ 4,912,000 |
Fair Value of Financial Infor62
Fair Value of Financial Information - Narrative (Details) $ in Millions | Sep. 30, 2017USD ($) |
Switch, Ltd. | Fair Value, Inputs, Level 2 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Fair value of long-term debt | $ 834 |
Net Income Per Unit - Schedule
Net Income Per Unit - Schedule of Basic and Diluted Net Income Per Unit (Details) - Switch, Ltd. - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Numerator: | ||||
Net income-basic and diluted | $ 16,486 | $ 15,926 | $ 51,766 | $ 51,140 |
Weighted-average units outstanding-basic (in shares) | 200,746,690 | 199,108,842 | 200,415,541 | 199,328,865 |
Net income per unit-basic (in dollars per share) | $ 0.08 | $ 0.08 | $ 0.26 | $ 0.26 |
Denominator-diluted: | ||||
Weighted-average units outstanding-basic (in shares) | 200,746,690 | 199,108,842 | 200,415,541 | 199,328,865 |
Weighted average effect of dilutive securities: | ||||
Weighted average units outstanding-diluted (in shares) | 208,972,744 | 204,244,558 | 207,395,818 | 203,490,593 |
Net income per unit-diluted (in dollars per share) | $ 0.08 | $ 0.08 | $ 0.25 | $ 0.25 |
Employee Stock Option | ||||
Weighted average effect of dilutive securities: | ||||
Effect of dilutive securities | 88,326 | 119,240 | 113,797 | 267,129 |
Incentive Units | ||||
Weighted average effect of dilutive securities: | ||||
Effect of dilutive securities | 8,137,728 | 5,016,476 | 6,866,480 | 3,894,599 |
Net Income Per Unit - Schedul64
Net Income Per Unit - Schedule of Antidilutive Securities (Details) - Switch, Ltd. - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Employee Stock Option | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of diluted net income per unit (in shares) | 0 | 0 | 0 | |
Incentive Units | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of diluted net income per unit (in shares) | 0 | 313,674 | 163,817 | 1,023,581 |
Segment Reporting - Narrative (
Segment Reporting - Narrative (Details) | 9 Months Ended |
Sep. 30, 2017 | |
Switch, Ltd. | Outside of the United States | Revenue | Geographic Concentration Risk | |
Revenue, Major Customer [Line Items] | |
Concentration risk, percentage | 2.00% |
Segment Reporting - Schedule of
Segment Reporting - Schedule of Composition of Revenue (Details) - Switch, Ltd. - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Revenue from External Customer [Line Items] | ||||
Revenue | $ 97,689 | $ 81,666 | $ 278,947 | $ 236,464 |
Colocation | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 79,429 | 66,107 | 225,753 | 193,020 |
Connectivity | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | 17,111 | 14,333 | 49,201 | 39,623 |
Other | ||||
Revenue from External Customer [Line Items] | ||||
Revenue | $ 1,149 | $ 1,226 | $ 3,993 | $ 3,821 |
Subsequent Events - Narrative (
Subsequent Events - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands | Oct. 12, 2017 | Oct. 11, 2017 | Oct. 05, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Jun. 13, 2017 | Dec. 31, 2016 |
Subsequent Event [Line Items] | |||||||||
Common stock, shares outstanding (in shares) | 1 | 1 | 0 | ||||||
Subsequent Event | |||||||||
Subsequent Event [Line Items] | |||||||||
Offering costs paid | $ 4,100 | ||||||||
Tax receivable agreement, percentage of tax benefits paid | 85.00% | ||||||||
IPO | Subsequent Event | |||||||||
Subsequent Event [Line Items] | |||||||||
Number of shares issued (in shares) | 35,937,500 | ||||||||
Price per share (in dollars per share) | $ 17 | ||||||||
Consideration received | $ 577,300 | ||||||||
Over-Allotment Option | Subsequent Event | |||||||||
Subsequent Event [Line Items] | |||||||||
Number of shares issued (in shares) | 4,687,500 | ||||||||
Continuing Members | Subsequent Event | |||||||||
Subsequent Event [Line Items] | |||||||||
Percentage of voting interests | 94.40% | ||||||||
Continuing Members | Common Class B and Common Class C | Subsequent Event | |||||||||
Subsequent Event [Line Items] | |||||||||
Common stock, shares outstanding (in shares) | 216,568,963 | ||||||||
Purchasers in the IPO | Subsequent Event | |||||||||
Subsequent Event [Line Items] | |||||||||
Percentage of voting interests | 5.60% | ||||||||
Percentage of economic interests of shareholder | 100.00% | ||||||||
Non-Founder Members | Subsequent Event | |||||||||
Subsequent Event [Line Items] | |||||||||
Percentage of voting interests | 27.20% | ||||||||
Founder Members | Subsequent Event | |||||||||
Subsequent Event [Line Items] | |||||||||
Percentage of voting interests | 67.20% | ||||||||
2017 Plan | Subsequent Event | |||||||||
Subsequent Event [Line Items] | |||||||||
Options granted in period, aggregated grant date fair value | $ 28,600 | ||||||||
Options granted, weighted average exercise price (in dollars per share) | $ 17 | ||||||||
Options vested (in shares) | 5,626,470 | ||||||||
Options granted (in shares) | 5,724,896 | ||||||||
Switch, Ltd. | Variable Interest Entity, Primary Beneficiary | Subsequent Event | |||||||||
Subsequent Event [Line Items] | |||||||||
Variable interest entity, ownership percentage | 14.20% | ||||||||
Variable interest entity, ownership (in shares) | 35,937,500 | ||||||||
Switch, Ltd. | |||||||||
Subsequent Event [Line Items] | |||||||||
Equity-based compensation expense | $ 1,315 | $ 1,224 | $ 4,879 | $ 4,912 | |||||
Offering costs paid | $ 893 | 0 | |||||||
Units outstanding (in shares) | 198,866,680 | 198,866,680 | 198,866,680 | ||||||
Repayment of borrowings | $ 621,300 | $ 7,500 | |||||||
Switch, Ltd. | IPO | Subsequent Event | |||||||||
Subsequent Event [Line Items] | |||||||||
Equity-based compensation expense | $ 36,300 | ||||||||
Switch, Ltd. | Continuing Members | Subsequent Event | |||||||||
Subsequent Event [Line Items] | |||||||||
Percentage of economic interests of shareholder | 85.80% | ||||||||
Switch, Ltd. | Non-Founder Members | Subsequent Event | |||||||||
Subsequent Event [Line Items] | |||||||||
Percentage of economic interests of shareholder | 68.80% | ||||||||
Units outstanding (in shares) | 173,624,316 | ||||||||
Switch, Ltd. | Founder Members | Subsequent Event | |||||||||
Subsequent Event [Line Items] | |||||||||
Percentage of economic interests of shareholder | 17.00% | ||||||||
Units outstanding (in shares) | 42,944,647 | ||||||||
2017 Revolving Credit Facility | Credit Facility | Revolving Credit Facility | Switch, Ltd. | Subsequent Event | |||||||||
Subsequent Event [Line Items] | |||||||||
Repayment of borrowings | $ 231,300 | ||||||||
Interest Paid | $ 300 |