omcl-20200630

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________________________________

FORM 10-Q


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File No. 000-33043

OMNICELL, INC.

(Exact name of registrant as specified in its charter)


Delaware			94-3166458
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification No.)

590 East Middlefield Road

Mountain View, CA 94043

(Address of registrant’s principal executive offices, including zip code)

(650) 251-6100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.001 par value

OMCL

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transitions period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

As of July 24, 2020, there were 42,763,115 shares of the registrant’s common stock, $0.001 par value, outstanding.

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OMNICELL, INC.

TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets (Unaudited) as of June 30, 2020 and December 31, 2019	3
	Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 2020 and 2019	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the three and six months ended June 30, 2020 and 2019	5
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the three and six months ended June 30, 2020 and 2019	6
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2020 and 2019	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	39
Item 4.	Controls and Procedures	40

PART II	OTHER INFORMATION	41
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3.	Defaults Upon Senior Securities	59
Item 4.	Mine Safety Disclosures	59
Item 5.	Other Information	59
Item 6.	Exhibits	60

Signature			61

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PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

OMNICELL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


	June 30, 2020		December 31, 2019

	(In thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents	$	133,583	$	127,210
Accounts receivable and unbilled receivables, net of allowances of $3,204 and $3,227, respectively	188,918		218,362
Inventories	114,245		108,011
Prepaid expenses	13,297		14,478
Other current assets	15,122		15,177
Total current assets	465,165		483,238
Property and equipment, net	57,866		54,246
Long-term investment in sales-type leases, net	20,961		19,750
Operating lease right-of-use assets	52,537		56,130
Goodwill	335,034		336,539
Intangible assets, net	115,710		124,867
Long-term deferred tax assets	14,154		14,142
Prepaid commissions	44,822		48,862
Other long-term assets	116,197		103,036
Total assets	$	1,222,446	$	1,240,810

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	34,587	$	46,380
Accrued compensation	41,057		44,155
Accrued liabilities	52,979		55,567

Deferred revenues, net	107,940		90,894
Total current liabilities	236,563		236,996
Long-term deferred revenues	6,101		7,083
Long-term deferred tax liabilities	29,561		39,090
Long-term operating lease liabilities	46,690		50,669
Other long-term liabilities	16,070		11,718
Long-term debt	—		50,000
Total liabilities	334,985		395,556
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000 shares authorized; no shares issued	—		—
Common stock, $0.001 par value, 100,000 shares authorized; 51,902 and 51,277 shares issued; 42,757 and 42,132 shares outstanding, respectively	52		51
Treasury stock at cost, 9,145 shares outstanding, respectively	(185,074)		(185,074)
Additional paid-in capital	820,632		780,931
Retained earnings	265,540		258,792
Accumulated other comprehensive loss	(13,689)		(9,446)
Total stockholders’ equity	887,461		845,254
Total liabilities and stockholders’ equity	$	1,222,446	$	1,240,810

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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OMNICELL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

	(In thousands, except per share data)
Revenues:
Product revenues	$	138,942	$	158,379	$	309,015	$	303,989
Services and other revenues	60,679		59,034		120,292		115,941
Total revenues	199,621		217,413		429,307		419,930
Cost of revenues:
Cost of product revenues	85,779		84,583		176,051		163,394
Cost of services and other revenues	30,617		28,785		60,409		55,374
Total cost of revenues	116,396		113,368		236,460		218,768
Gross profit	83,225		104,045		192,847		201,162
Operating expenses:
Research and development	20,830		16,848		39,482		32,926
Selling, general, and administrative	69,386		68,434		148,205		136,712

Total operating expenses	90,216		85,282		187,687		169,638
Income (loss) from operations	(6,991)		18,763		5,160		31,524
Interest and other income (expense), net	174		(1,629)		(648)		(3,039)
Income (loss) before provision for income taxes	(6,817)		17,134		4,512		28,485
Provision for (benefit from) income taxes	(2,518)		1,158		(2,500)		9,225
Net income (loss)	$	(4,299)	$	15,976	$	7,012	$	19,260
Net income (loss) per share:
Basic	$	(0.10)	$	0.39	$	0.16	$	0.47

Diluted	$	(0.10)	$	0.37	$	0.16	$	0.45
Weighted-average shares outstanding:
Basic	42,659		41,371		42,509		41,033
Diluted	42,659		42,945		43,616		42,646

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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OMNICELL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

	(In thousands)
Net income (loss)	$	(4,299)	$	15,976	$	7,012	$	19,260
Other comprehensive income (loss), net of reclassification adjustments and taxes:
Unrealized losses on interest rate swap contracts	—		(103)		—		(420)
Foreign currency translation adjustments	451		(971)		(4,243)		(302)
Other comprehensive income (loss)	451		(1,074)		(4,243)		(722)
Comprehensive income (loss)	$	(3,848)	$	14,902	$	2,769	$	18,538

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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OMNICELL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)


	Common Stock				Treasury Stock						Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive Income (Loss)	Stockholders’ Equity
	Shares	Amount		Shares	Amount

	(In thousands)
Balances as of December 31, 2019	51,277	$	51	(9,145)	$	(185,074)	$	780,931	$	258,792	$	(9,446)	$	845,254
Net income	—	—		—	—		—		11,311		—		11,311
Other comprehensive loss	—	—		—	—		—		—		(4,694)		(4,694)

Share-based compensation	—	—		—	—		10,659		—		—		10,659
Issuance of common stock under employee stock plans	474	1		—	—		17,658		—		—		17,659
Tax payments related to restricted stock units	—	—		—	—		(1,425)		—		—		(1,425)
Cumulative effect of a change in accounting principle related to credit losses	—	—		—	—		—		(264)		—		(264)
Balances as of March 31, 2020	51,751	52		(9,145)	(185,074)		807,823		269,839		(14,140)		878,500
Net loss	—	—		—	—		—		(4,299)		—		(4,299)
Other comprehensive income	—	—		—	—		—		—		451		451

Share-based compensation	—	—		—	—		11,351		—		—		11,351
Issuance of common stock under employee stock plans	151	—		—	—		3,503		—		—		3,503
Tax payments related to restricted stock units	—	—		—	—		(2,045)		—		—		(2,045)
Balances as of June 30, 2020	51,902	$	52	(9,145)	$	(185,074)	$	820,632	$	265,540	$	(13,689)	$	887,461

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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OMNICELL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)


	Common Stock				Treasury Stock						Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive Income (Loss)	Stockholders’ Equity
	Shares	Amount		Shares	Amount

	(In thousands)
Balances as of December 31, 2018	49,480	$	50	(9,145)	$	(185,074)	$	678,041	$	197,454	$	(10,854)	$	679,617
Net income	—	—		—	—		—		3,284		—		3,284
Other comprehensive income	—	—		—	—		—		—		352		352
At the market equity offering, net of costs	243	—		—	—		20,216		—		—		20,216
Share-based compensation	—	—		—	—		8,410		—		—		8,410
Issuance of common stock under employee stock plans	628	—		—	—		20,526		—		—		20,526
Tax payments related to restricted stock units	—	—		—	—		(1,920)		—		—		(1,920)
Balances as of March 31, 2019	50,351	50		(9,145)	(185,074)		725,273		200,738		(10,502)		730,485
Net income	—	—		—	—		—		15,976		—		15,976
Other comprehensive loss	—	—		—	—		—		—		(1,074)		(1,074)
At the market equity offering, net of costs	217	—		—	—		17,590		—		—		17,590
Share-based compensation	—	—		—	—		8,260		—		—		8,260
Issuance of common stock under employee stock plans	216	1		—	—		4,806		—		—		4,807
Tax payments related to restricted stock units	—	—		—	—		(2,802)		—		—		(2,802)
Balances as of June 30, 2019	50,784	$	51	(9,145)	$	(185,074)	$	753,127	$	216,714	$	(11,576)	$	773,242

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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OMNICELL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Six Months Ended June 30,
	2020		2019

	(In thousands)
Operating Activities
Net income	$	7,012	$	19,260
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	28,779		25,874
Loss on disposal of property and equipment	—		399



Share-based compensation expense	22,010		16,670



Deferred income taxes	(9,409)		3,810
Amortization of operating lease right-of-use assets	5,157		5,226
Amortization of debt issuance costs	482		1,145
Changes in operating assets and liabilities:
Accounts receivable and unbilled receivables	28,236		(9,244)
Inventories	(7,271)		(4,466)
Prepaid expenses	1,181		1,021
Other current assets	219		(830)
Investment in sales-type leases	(1,375)		(4,412)
Prepaid commissions	4,040		1,536
Other long-term assets	(4,580)		3,061
Accounts payable	(11,254)		2,066
Accrued compensation	(3,098)		(8,041)
Accrued liabilities	(2,824)		1,810
Deferred revenues	16,264		253
Operating lease liabilities	(5,186)		(5,269)
Other long-term liabilities	4,352		3,891
Net cash provided by operating activities	72,735		53,760
Investing Activities

Software development for external use	(20,002)		(22,581)
Purchases of property and equipment	(13,211)		(9,369)

Net cash used in investing activities	(33,213)		(31,950)
Financing Activities

Repayment of debt and revolving credit facility	(50,000)		(60,000)
At the market equity offering, net of offering costs	—		37,806
Proceeds from issuances under stock-based compensation plans	21,162		25,333
Employees’ taxes paid related to restricted stock units	(3,470)		(4,722)


Net cash used in financing activities	(32,308)		(1,583)
Effect of exchange rate changes on cash and cash equivalents	(841)		63
Net increase in cash and cash equivalents	6,373		20,290
Cash and cash equivalents at beginning of period	127,210		67,192
Cash and cash equivalents at end of period	$	133,583	$	87,482




Supplemental disclosure of non-cash activities
Unpaid purchases of property and equipment	$	366	$	711
Transfers between inventory and property and equipment, net	$	—	$	1,428

Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,335	$	557

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

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OMNICELL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Organization and Summary of Significant Accounting Policies

Business

Omnicell, Inc. was incorporated in California in 1992 under the name Omnicell Technologies, Inc. and reincorporated in Delaware in 2001 as Omnicell, Inc. The Company’s major products are medication management automation solutions and adherence tools for healthcare systems and pharmacies, which are sold in its principal market, the healthcare industry. The Company’s market is primarily located in the United States and Europe. “Omnicell” or the “Company” collectively refer to Omnicell, Inc. and its subsidiaries.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements reflect, in the opinion of management, all adjustments, consisting of normal recurring adjustments and accruals, necessary to present fairly the financial position of the Company as of June 30, 2020 and December 31, 2019, the results of operations and comprehensive income (loss) for the three and six months ended June 30, 2020 and 2019, and cash flows for the six months ended June 30, 2020 and 2019. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and accompanying Notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 26, 2020, except as discussed in the sections entitled “Allowance for Credit Losses” and “Recently Adopted Authoritative Guidance” below. The Company’s results of operations and comprehensive income (loss) for the three and six months ended June 30, 2020 and cash flows for the six months ended June 30, 2020 are not necessarily indicative of results that may be expected for the year ending December 31, 2020, or for any future period.

Principles of Consolidation

The Condensed Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications and Adjustments

Certain prior-year amounts have been reclassified to conform with current-period presentation. This reclassification was a change in the presentation of certain items in the disaggregation of product revenues for the three and six months ended June 30, 2019 in Note 2, Revenues, of the Notes to Condensed Consolidated Financial Statements. This change was not deemed material and was included to conform with current-period classification and presentation.

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s Condensed Consolidated Financial Statements and accompanying Notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable, including any potential impacts arising from the novel coronavirus (“COVID-19”) pandemic. Although these estimates are based on management’s best knowledge of current events and actions that may impact the Company in the future, actual results may be different from the estimates.

The Company’s critical accounting policies are those that affect its financial statements materially and involve difficult, subjective or complex judgments by management. As of June 30, 2020, the Company is not aware of any events or circumstances that would require an update to its estimates, judgments, or revisions to the carrying value of its assets or liabilities. Given the ongoing uncertainty surrounding the COVID-19 pandemic, events or circumstances may arise that could result in a change in estimates, judgments, or revisions to the carrying value of the Company’s assets or liabilities.

Segment Reporting

The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company's Chief Operating Decision Maker ("CODM") is its Chief Executive Officer. The CODM allocates resources and evaluates the performance of the Company at the consolidated level using information about its revenues, gross profit, income from operations, and other key financial data. All significant operating decisions are based upon an analysis of the Company as one operating segment, which is the same as its reporting segment.

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Allowance for Credit Losses

The Company is exposed to credit losses primarily through sales of its products and services, as well as its sales-type leasing arrangements. The Company performs credit evaluations of its customers’ financial condition in order to assess each customer’s ability to pay. These evaluations require significant judgment and are based on a variety of factors including, but not limited to, current economic trends, payment history, and a financial review of the customer. The Company continues to monitor customers’ creditworthiness on an ongoing basis.

The Company maintains an allowance for credit losses for accounts receivable, unbilled receivables, and net investment in sales-type leases based on expected credit losses resulting from the inability of its customers to make required payments. The allowance for credit losses is measured using a loss rate method, considering factors such as customers’ credit risk, historical loss experience, current conditions, and forecasts. The allowance for credit losses is measured on a collective (pool) basis by aggregating customer balances with similar risk characteristics. The Company also records a specific allowance based on an analysis of individual past due balances or customer-specific information, such as a decline in creditworthiness or bankruptcy. Actual collection losses may differ from management’s estimates, and such differences could be material to the Company’s financial position and results of operations.

The allowance for credit losses is presented in the Condensed Consolidated Balance Sheets as a deduction from the respective asset balance. The following table summarizes the Company’s allowance for credit losses by asset type:


	June 30, 2020		December 31, 2019

	(In thousands)
Allowance for credit losses:
Accounts receivable and unbilled receivables	$	3,204	$	3,227
Long-term unbilled receivables ⁽¹⁾	33		—
Net investment in sales-type leases ⁽²⁾	248		225

_________________________________________________

⁽¹⁾Included in other long-term assets in the Condensed Consolidated Balance Sheets.

⁽²⁾Includes both current and long-term portions presented in other current assets and long-term investment in sales-type leases, net, respectively.

Changes in the allowances for credit losses were not significant for the three and six months ended June 30, 2020 and 2019.

Recently Adopted Authoritative Guidance

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company adopted ASU 2018-15 on January 1, 2020 on a prospective basis. The adoption of this guidance did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, that modifies or replaces existing models for trade and other receivables, debt securities, loans, and certain other financial instruments. For instruments measured at amortized cost, including trade and lease receivables, loans, and held-to-maturity debt securities, the standard replaced the current “incurred loss” approach with an “expected loss” model. Entities are required to estimate expected credit losses over the life of the instrument, considering available relevant information about the collectibility of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. The Company adopted the new standard on January 1, 2020 using the modified retrospective transition method, which resulted in the recognition of an immaterial cumulative-effect adjustment to retained earnings.

Recently Issued Authoritative Guidance

There was no recently issued and effective authoritative guidance that is expected to have a material impact on the Company’s Condensed Consolidated Financial Statements through the reporting date.

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Note 2. Revenues

Revenue Recognition

The Company earns revenues from sales of its products and related services, which are sold in the healthcare industry, its principal market. The Company’s customer arrangements typically include one or more of the following performance obligations:

Products. Software-enabled equipment that manages and regulates the storage and dispensing of pharmaceuticals, consumable blister cards and packaging equipment and other medical supplies.

Software. On premise or cloud-based subscription solutions that improve medication management and adherence outcomes or enable incremental functionality of the Company’s equipment.

Installation. Installation of equipment as integrated systems at customer sites.

Post-installation technical support. Phone support, on-site service, parts, and access to unspecified software updates and enhancements, if and when available.

Professional services. Other customer services, such as technology-enabled services, training, and consulting.

A portion of the Company’s sales are made to customers who are members of Group Purchasing Organizations (“GPOs”). GPOs are often owned fully or in part by the Company’s customers, and the Company pays fees to the GPO on completed contracts. The Company considers these fees consideration paid to customers and records them as reductions to revenue. Fees to GPOs were $1.7 million and $2.6 million for the three months ended June 30, 2020 and 2019, respectively, and $4.6 million and $4.8 million for the six months ended June 30, 2020 and 2019, respectively.

Disaggregation of Revenues

The following table summarizes the Company’s product revenues disaggregated by revenue type for the three and six months ended June 30, 2020 and 2019:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

	(In thousands)
Hardware and software	$	116,919	$	133,005	$	259,352	$	251,819
Consumables	18,063		21,795		41,333		45,502
Other	3,960		3,579		8,330		6,668
Total product revenues	$	138,942	$	158,379	$	309,015	$	303,989

The following table summarizes the Company’s revenues disaggregated by geographic region, which is determined based on customer location, for the three and six months ended June 30, 2020 and 2019:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

	(In thousands)
United States	$	178,052	$	195,811	$	385,786	$	375,831
Rest of world ⁽¹⁾	21,569		21,602		43,521		44,099
Total revenues	$	199,621	$	217,413	$	429,307	$	419,930

_________________________________________________

⁽¹⁾No individual country represented more than 10% of total revenues.

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Contract Assets and Contract Liabilities

The following table reflects the Company’s contract assets and contract liabilities:


	June 30, 2020		December 31, 2019

	(In thousands)
Short-term unbilled receivables, net ⁽¹⁾	$	9,602	$	11,707
Long-term unbilled receivables, net ⁽²⁾	16,132		12,260
Total contract assets	$	25,734	$	23,967

Short-term deferred revenues, net	$	107,940	$	90,894
Long-term deferred revenues	6,101		7,083
Total contract liabilities	$	114,041	$	97,977

_________________________________________________

⁽¹⁾Included in accounts receivable and unbilled receivables in the Condensed Consolidated Balance Sheets.

⁽²⁾Included in other long-term assets in the Condensed Consolidated Balance Sheets.

The portion of the transaction price allocated to the Company’s unsatisfied performance obligations for which invoicing has occurred is recorded as deferred revenues.

Short-term deferred revenues of $107.9 million and $90.9 million include deferred revenues from product sales and service contracts, net of deferred cost of sales of $19.6 million and $13.1 million, as of June 30, 2020 and December 31, 2019, respectively. The short-term deferred revenues from product sales relate to delivered and invoiced products, pending installation and acceptance, expected to occur within the next twelve months. During the three and six months ended June 30, 2020, the Company recognized revenues of $20.9 million and $64.3 million, respectively, that were included in the corresponding gross short-term deferred revenues balance of $104.0 million as of December 31, 2019.

Long-term deferred revenues include deferred revenues from service contracts of $6.1 million and $7.1 million as of June 30, 2020 and December 31, 2019, respectively. Remaining performance obligations primarily relate to maintenance contracts and are recognized ratably over the remaining term of the contract, generally not more than five years.

Significant Customers

There were no customers that accounted for more than 10% of the Company’s total revenues for the three and six months ended June 30, 2020 and 2019. Also, there were no customers that accounted for more than 10% of the Company’s accounts receivable balance as of June 30, 2020 and December 31, 2019.

Note 3. Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) for the period by the weighted-average number of shares outstanding during the period. In periods of net loss, all potential common shares are anti-dilutive, so diluted net loss per share equals the basic net loss per share. In periods of net income, diluted net income per share is computed by dividing net income for the period by the basic weighted-average number of shares plus any dilutive potential common stock outstanding during the period. Potential common stock includes the effect of outstanding dilutive stock options, restricted stock awards, and restricted stock units computed using the treasury stock method. Any anti-dilutive weighted-average dilutive shares related to stock award plans are excluded from the computation of the diluted net income per share.

Table of Contents

The basic and diluted net income (loss) per share calculations for the three and six months ended June 30, 2020 and 2019 were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

	(In thousands, except per share data)
Net income (loss)	$	(4,299)	$	15,976	$	7,012	$	19,260
Weighted-average shares outstanding — basic