Non-controlling Interest

12 Months Ended

Dec. 31, 2020

Noncontrolling Interest

Ownership

Switch, Inc. owns a minority economic interest in Switch, Ltd., where “economic interest” means the right to receive any distributions, whether cash, property, or securities of Switch, Ltd., in connection with Common Units. Switch, Inc. presents interest held by noncontrolling interest holders within noncontrolling interest in the consolidated financial statements. During the years ended December 31, 2020, 2019, and 2018, Switch, Inc. issued an aggregate of 28.3 million shares, 34.0 million shares, and 19.1 million shares of Class A common stock, respectively, to Members in connection with such Members’ redemptions of an equivalent number of Common Units and corresponding cancellation and retirement of an equivalent number of Switch, Inc.’s Class B common stock. Such retired shares of Class B common stock may not be reissued. The redemptions occurred pursuant to the terms of the Switch Operating Agreement.

In August 2018, Switch, Inc.’s Board of Directors authorized a program by which Switch, Ltd. may repurchase up to $150.0 million of its outstanding Common Units for cash and Switch, Inc. will cancel a corresponding amount of its shares of Class B common stock. In November 2019, Switch, Inc.’s Board of Directors increased the repurchase authority by $5.0 million, with any unused amount from this increase expiring on December 31, 2019. In February 2020, Switch, Inc.’s Board of Directors authorized the repurchase by Switch, Ltd. of up to $20.0 million of its outstanding Common Units, which authorization expired unused in March 2020. In May 2020, Switch, Inc.’s Board of Directors authorized the repurchase by Switch, Ltd. of up to $20.0 million of its outstanding Common Units held by Rob Roy, the Founder, Chief Executive Officer and Chairman of Switch, Ltd., and an affiliated entity of Mr. Roy (collectively, the “Founder Members”), with any unused amount from this authorization expiring in June 2020. During the years ended December 31, 2020, 2019, and 2018, Switch, Ltd. elected to repurchase an aggregate of 1.1 million, 6.4 million, and 6.1 million, respectively, of its outstanding Common Units for $20.0 million, all of which was from Founder Members, $91.0 million, of which $2.7 million was from Founder Members and $12.8 million was from an entity in which a member of the Company’s Board of Directors has a beneficial ownership interest, and $60.6 million, respectively, upon the exercise by certain Members of their respective redemption right. Pursuant to these repurchases, Switch, Inc. canceled and retired an equivalent amount of its shares of Class B common stock, and such shares may not be reissued. These repurchases were funded from Switch’s existing cash and cash equivalents. As of December 31, 2020, the Company had no repurchase authority remaining.

The ownership of the Common Units is summarized as follows:


	December 31, 2020			December 31, 2019
	Units (in thousands)	Ownership %		Units (in thousands)	Ownership %
Switch, Inc.’s ownership of Common Units(1)	118,934	49.8	%	89,688	37.8	%
Noncontrolling interest holders’ ownership of Common Units(2)	120,045	50.2	%	147,859	62.2	%
Total Common Units	238,979	100.0	%	237,547	100.0	%

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(1)Common Units held by Switch, Inc. exclude 75,000 and 80,000 Common Units underlying unvested restricted stock awards as of December 31, 2020 and 2019, respectively.

(2)Common Units held by noncontrolling interest holders exclude 1.6 million and 3.2 million unvested Common Unit awards as of December 31, 2020 and 2019, respectively.

The Company uses the weighted average ownership percentages during the period to calculate the income before income taxes attributable to Switch, Inc. and the noncontrolling interest holders of Switch, Ltd.

Distributions

Prior to the payment of Switch, Inc.’s Class A common stock dividends during the year ended December 31, 2020, Switch, Ltd. made cash distributions to holders of Common Units, excluding Switch, Inc., of $0.159 per Common Unit for a total distribution of $20.9 million. During the year ended December 31, 2019, Switch, Ltd. made cash distributions to holders of Common Units, excluding Switch, Inc., of $0.118 per Common Unit for a total distribution of $20.1 million. During the year ended December 31, 2018, Switch, Ltd. made cash distributions to holders of Common Units, excluding Switch, Inc., of $0.059 per Common Unit for a total distribution of $11.6 million.