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Significant Risk Concentrations
3 Months Ended
Mar. 31, 2020
Risks And Uncertainties [Abstract]  
Significant Risk Concentrations

10. Significant Risk Concentrations

Significant Customers

No customer accounted for 10% or more of total revenue for each of the three months ended March 31, 2020 and 2019.

Kodak Alaris, Inc. had accounts receivable balances of $1.6 million or approximately 16% of total accounts receivable at March 31, 2020.  Honeywell International, Inc. and affiliated entities (“Honeywell”) had accounts receivable balances of $1.2 million or approximately 12% of total accounts receivable at March 31, 2020 and $1.2 million or approximately 13% of total accounts receivable at December 31, 2019. No other customer accounted for 10% or more of total accounts receivable at March 31, 2020 or December 31, 2019.

Significant Supplier

Effective March 1, 2019, pursuant to a new Global Partnership Agreement with Microsoft Corporation (“Microsoft”), we are authorized to sell Windows Embedded operating systems in Canada, the United States, Argentina, Brazil, Chile, Mexico, Peru, Venezuela, Puerto Rico, Columbia, and several Caribbean countries. Of our total revenue, 79% in 2019 and 75% in 2018 resulted from the sale of Windows IoT operating systems. Our existing distribution agreement for sales of Windows IoT operating systems in the European Union, the European Free Trade Association, Turkey and Africa, expired on June 30, 2019 and was not renewed thereafter. We generated approximately 3% of our Partner Solutions software sales under this agreement in 2019. We have also entered into ODAs with Microsoft pursuant to which we are licensed to sell Microsoft Windows Mobile operating systems to customers in North America, South America, Central America (excluding Cuba), Japan, Taiwan, Europe, the Middle East, and Africa. The ODAs to sell Windows Mobile operating systems are effective through April 30, 2022.

Software sales under these agreements constitute a significant portion of our Partner Solutions revenue and total revenue. There is no automatic renewal provision in any of these agreements, and these agreements can be terminated unilaterally by Microsoft at any time.

Microsoft currently offers a rebate program to sell Microsoft Windows Embedded operating systems pursuant to which we earn money for achieving certain predefined objectives. In accordance with Microsoft rebate program rules:

for the three months ended March 31, 2020 and March 31, 2019, respectively, we allocated 20% of rebates to reduce cost of sales, with the remaining 80% potentially available to offset qualified marketing expenses related to Microsoft Azure products in the period that expenditures are claimed and approved.

 

Under this rebate program, we recorded rebate credits as follows (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Reductions to cost of revenue

 

$

113

 

 

$

82

 

Reductions to marketing expense

 

$

219

 

 

$

413

 

 

There was a balance of approximately $168,000 in qualified outstanding rebate credits at March 31, 2020, which will be accounted for as a reduction in marketing expense in the period in which qualified program expenditures are claimed and approved.