NovoCure Ltd 10-Q

Item 1. Financial Statements NOVOCURE LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands (except share data) September 30, 2020 December 31, 2019 Unaudited Audited ASSETS CURRENT ASSETS: Cash and cash equivalents $ 234,461 $ 177,321 Short-term investments — 148,769 Restricted cash 920 2,095 Trade receivables 84,561 58,859 Receivables and prepaid expenses 37,064 29,202 Inventories 26,479 23,701 Total current assets 383,485 439,947 LONG-TERM ASSETS: Property and equipment, net 10,271 9,342 Field equipment, net 9,132 7,684 Right-of-use assets, net 17,122 17,571 Other long-term assets 11,039 4,904 Total long-term assets 47,564 39,501 TOTAL ASSETS $ 431,049 $ 479,448 The accompanying notes are an integral part of these unaudited consolidated financial statements. 2 Table of Contents NOVOCURE LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands (except share data) September 30, 2020 December 31, 2019 Unaudited Audited LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Trade payables $ 42,206 $ 36,925 Other payables, lease liabilities and accrued expenses 53,128 49,386 Total current liabilities 95,334 86,311 LONG-TERM LIABILITIES: Long-term loan, net of discount and issuance costs — 149,424 Deferred revenue 10,859 7,807 Long-term leases 13,080 14,140 Employee benefits 4,571 3,754 Other long-term liabilities 168 222 Total long-term liabilities 28,678 175,347 TOTAL LIABILITIES 124,012 261,658 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Share capital - Ordinary shares no par value, unlimited shares authorized; issued and outstanding: 101,728,327 shares and 99,528,435 shares at September 30, 2020 (unaudited) and December 31, 2019, respectively — — Additional paid-in capital 946,267 871,442 Accumulated other comprehensive income (loss) ( 3,236 ) ( 2,767 ) Retained earnings (accumulated deficit) ( 635,994 ) ( 650,885 ) TOTAL SHAREHOLDERS' EQUITY 307,037 217,790 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 431,049 $ 479,448 The accompanying notes are an integral part of these unaudited consolidated financial statements. 3 Table of Contents NOVOCURE LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS U.S. dollars in thousands (except share and per share data) Three months ended September 30, Nine months ended September 30, Year ended December 31, 2020 2019 2020 2019 2019 Unaudited Unaudited Audited Net revenues $ 132,660 $ 92,062 $ 350,413 $ 252,084 $ 351,318 Cost of revenues 28,395 22,900 78,365 63,820 88,606 Gross profit 104,265 69,162 272,048 188,264 262,712 Operating costs and expenses: Research, development and clinical trials 32,818 18,766 88,008 55,262 79,003 Sales and marketing 29,364 23,830 86,658 69,871 96,675 General and administrative 27,061 22,711 79,073 64,198 87,948 Total operating costs and expenses 89,243 65,307 253,739 189,331 263,626 Operating income (loss) 15,022 3,855 18,309 ( 1,067 ) ( 914 ) Financial expenses (income), net 3,983 2,555 9,032 6,165 7,910 Income (loss) before income tax 11,039 1,300 9,277 ( 7,232 ) ( 8,824 ) Income tax 1,755 ( 630 ) ( 5,614 ) 4,258 ( 1,594 ) Net income (loss) $ 9,284 $ 1,930 $ 14,891 $ ( 11,490 ) $ ( 7,230 ) Basic net income (loss) per ordinary share $ 0.09 $ 0.02 $ 0.15 $ ( 0.12 ) $ ( 0.07 ) Weighted average number of ordinary shares used in computing basic net income (loss) per share 101,234,306 98,485,519 100,601,427 96,551,041 97,237,549 Diluted net income (loss) per ordinary share $ 0.09 $ 0.02 $ 0.14 $ ( 0.12 ) $ ( 0.07 ) Weighted average number of ordinary shares used in computing diluted net income (loss) per share 108,643,814 107,604,578 108,113,416 96,551,041 97,237,549 The accompanying notes are an integral part of these unaudited consolidated financial statements. 4 Table of Contents CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) U.S. dollars in thousands Three months ended September 30, Nine months ended September 30, Year ended December 31, 2020 2019 2020 2019 2019 Unaudited Unaudited Audited Net income (loss) $ 9,284 $ 1,930 $ 14,891 $ ( 11,490 ) $ ( 7,230 ) Other comprehensive income (loss), net of tax: Change in foreign currency translation adjustments 143 ( 216 ) 26 ( 430 ) ( 304 ) Pension benefit plan 153 ( 68 ) ( 495 ) ( 811 ) ( 1,063 ) Total comprehensive income (loss) $ 9,580 $ 1,646 $ 14,422 $ ( 12,731 ) $ ( 8,597 ) 5 Table of Contents NOVOCURE LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY U.S. dollars in thousands (except share data) Ordinary shares Additional paid-in capital Accumulated other comprehensive loss Retained earnings (accumulated deficit) Total shareholders' equity Balance as of December 31, 2019 (audited) 99,528,435 $ 871,442 $ ( 2,767 ) $ ( 650,885 ) $ 217,790 Share-based compensation to employees — 16,557 — — 16,557 Exercise of options and vested RSUs 834,538 4,511 — — 4,511 Other comprehensive income (loss), net of tax benefit of $ 0 — — ( 862 ) — ( 862 ) Net income (loss) — — — 3,952 3,952 Balance as of March 31, 2020 (Unaudited) 100,362,973 $ 892,510 $ ( 3,629 ) $ ( 646,933 ) $ 241,948 Share-based compensation to employees — 18,770 — — 18,770 Proceeds from issuance of shares 33,075 1,667 — — 1,667 Exercise of options and vested RSUs 624,673 3,685 — — 3,685 Other comprehensive income (loss), net of tax benefit of $ 0 — — 97 — 97 Net income (loss) — — — 1,655 1,655 Balance as of June 30, 2020 (Unaudited) 101,020,721 $ 916,632 $ ( 3,532 ) $ ( 645,278 ) $ 267,822 Share-based compensation to employees — 20,121 — — 20,121 Exercise of options and vested RSUs 707,606 9,514 — — 9,514 Other comprehensive income (loss), net of tax benefit of $ 0 — — 296 — 296 Net income (loss) — — — 9,284 9,284 Balance as of September 30, 2020 (Unaudited) 101,728,327 $ 946,267 $ ( 3,236 ) $ ( 635,994 ) $ 307,037 6 Table of Contents Ordinary shares Additional paid-in capital Accumulated other comprehensive loss Retained earnings (accumulated deficit) Total shareholders' equity Balance as of December 31, 2018 (audited) 93,254,185 $ 757,314 $ ( 1,400 ) $ ( 643,655 ) $ 112,259 Share-based compensation to employees — 9,649 — — 9,649 Exercise of options and warrants and vested RSUs 2,438,612 16,978 — — 16,978 Other comprehensive income (loss), net of tax benefit of $ 11 — — ( 342 ) — ( 342 ) Net income (loss) — — — ( 12,150 ) ( 12,150 ) Balance as of March 31, 2019 (Unaudited) 95,692,797 $ 783,941 $ ( 1,742 ) $ ( 655,805 ) $ 126,394 Share-based compensation to employees — 13,732 — — 13,732 Proceeds from issuance of shares 43,421 1,208 — — 1,208 Exercise of options and warrants and vested RSUs 2,122,658 19,457 — — 19,457 Other comprehensive income (loss), net of tax benefit of $ 69 — — ( 615 ) — ( 615 ) Net income (loss) — — — ( 1,270 ) ( 1,270 ) Balance as of June 30, 2019 (Unaudited) 97,858,876 $ 818,338 $ ( 2,357 ) $ ( 657,075 ) $ 158,906 Share-based compensation to employees — 14,338 — — 14,338 Exercise of options and warrants and vested RSUs 1,090,059 15,475 — — 15,475 Other comprehensive income (loss), net of tax benefit of $ 11 — — ( 284 ) — ( 284 ) Net income (loss) — — — 1,930 1,930 Balance as of September 30, 2019 (Unaudited) 98,948,935 $ 848,151 $ ( 2,641 ) $ ( 655,145 ) $ 190,365 The accompanying notes are an integral part of these unaudited consolidated financial statements. 7 Table of Contents NOVOCURE LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. dollars in thousands Three months ended September 30, Nine months ended September 30, Year ended December 31, 2020 2019 2020 2019 2019 Unaudited Unaudited Audited Cash flows from operating activities: Net income (loss) $ 9,284 $ 1,930 $ 14,891 $ ( 11,490 ) $ ( 7,230 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 2,188 1,932 6,677 5,993 8,460 Asset write-downs and impairment of field equipment 124 78 263 239 398 Share-based compensation 20,121 14,338 55,448 37,719 52,416 Foreign currency remeasurement loss (gain) ( 79 ) — ( 549 ) — ( 917 ) Decrease (increase) in accounts receivables ( 7,678 ) ( 9,986 ) ( 33,556 ) ( 17,020 ) ( 36,496 ) Amortization of discount (premium) 424 ( 547 ) ( 654 ) ( 1,712 ) ( 2,176 ) Decrease (increase) in inventories ( 55 ) 1,067 ( 2,446 ) ( 1,832 ) ( 1,159 ) Decrease (increase) in other long-term assets ( 5,173 ) 1,069 ( 2,794 ) 1,151 3,446 Increase (decrease) in accounts payables and accrued expenses 9,908 6,433 7,974 10,902 16,883 Increase (decrease) in other long-term liabilities 1,905 ( 1,407 ) 413 ( 4,292 ) ( 7,006 ) Net cash provided by (used in) operating activities $ 30,969 $ 14,907 $ 45,667 $ 19,658 $ 26,620 Cash flows from investing activities: Purchase of property, equipment and field equipment $ ( 2,782 ) $ ( 2,708 ) $ ( 9,209 ) $ ( 7,430 ) $ ( 10,485 ) Proceeds from maturity of short-term investments 150,000 105,000 150,000 315,661 420,661 Purchase of short-term investments — ( 104,466 ) — ( 313,142 ) ( 461,843 ) Net cash provided by (used in) investing activities $ 147,218 $ ( 2,174 ) $ 140,791 $ ( 4,911 ) $ ( 51,667 ) Cash flows from financing activities: Proceeds from issuance of shares, net $ — $ — $ 1,667 $ 1,208 $ 2,467 Repayment of long-term loan ( 150,007 ) ( 7 ) ( 150,022 ) ( 23 ) ( 31 ) Exercise of options and warrants 9,514 15,475 17,710 51,910 59,245 Net cash provided by (used in) financing activities $ ( 140,493 ) $ 15,468 $ ( 130,645 ) $ 53,095 $ 61,681 Effect of exchange rate changes on cash, cash equivalents and restricted cash $ 102 $ ( 216 ) $ 152 $ ( 430 ) $ 26 Increase (decrease) in cash, cash equivalents and restricted cash 37,796 27,985 55,965 67,412 36,660 8 Table of Contents Cash, cash equivalents and restricted cash at the beginning of the period 197,585 182,183 179,416 142,756 142,756 Cash, cash equivalents and restricted cash at the end of the period $ 235,381 $ 210,168 $ 235,381 $ 210,168 $ 179,416 Three months ended September 30, Nine months ended September 30, Year ended December 31, 2020 2019 2020 2019 2019 Unaudited Unaudited Audited Supplemental cash flow activities: Cash paid during the period for: Income taxes, net of refunds $ 4,382 $ 3,040 $ 11,319 $ 10,431 $ 11,241 Interest $ 1,840 $ 3,453 $ 8,671 $ 10,247 $ 13,699 Non-cash activities in accordance with ASC-842: Right-of-use assets obtained in exchange for lease obligations $ 675 $ 1,062 $ 2,849 18,335 $ 22,943 The accompanying notes are an integral part of these unaudited consolidated financial statements. 9 Table of Contents NOVOCURE LIMITED AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data) NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION Organization . NovoCure Limited (including its consolidated subsidiaries, the “Company”) was incorporated in the Bailiwick of Jersey and is principally engaged in the development, manufacture and commercialization of Tumor Treating Fields delivery systems, including Optune and Optune Lua, for the treatment of solid tumors. The Company has received regulatory approval from the U.S. Food and Drug Administration (“FDA”) under the Premarket Approval (“PMA") pathway and regulatory approvals and clearances in certain other countries for Optune to treat adult patients with glioblastoma multiforme (“GBM”). The Company also has received FDA approval under the Humanitarian Device Exemption pathway to market Optune Lua for unresectable, locally advanced or metastatic malignant pleural mesothelioma (“MPM”) in combination with standard chemotherapies. Financial statement preparation . The accompanying unaudited consolidated financial statements include the accounts of the Company and intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation for the periods presented. The preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. These consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 10-K”) filed with the Securities and Exchange Commission on February 27, 2020. The significant accounting policies applied in the audited annual consolidated financial statements of the Company as disclosed in the 2019 10-K are applied consistently in these unaudited interim consolidated financial statements, except as noted below: Recently Adopted Accounting Pronouncements. In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses. ASU 2016-13 also applies to employee benefit plan accounting, effective date for the first quarter of fiscal year 2020. The Company adopted the standard effective as of January 1, 2020, and the adoption of this standard did not have an impact on the Company's consolidated financial statements. In August 2018, FASB issued 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. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The implementation costs incurred in a hosting arrangement that is a service contract should be presented as a prepaid asset in the balance sheet and expensed over the term of the hosting arrangement to the same line item in the statement of income as the costs related to the hosting fees. The Company adopted the standard effective as of January 1, 2020, and the adoption of this standard did not have an impact on the Company's consolidated financial statements. 10 Table of Contents NOTE 2: CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS Cash equivalents include items almost as liquid as cash, such as certificates of deposit and time deposits with maturity periods of three months or less when purchased. As of September 30, 2020 and December 31, 2019, the Company’s cash and cash equivalents were composed of: September 30, 2020 December 31, 2019 Unaudited Audited Cash $ 25,595 $ 18,377 Money market funds 208,866 158,944 Total cash and cash equivalents $ 234,461 $ 177,321 The Company also invests in marketable U.S. Treasury Bills (“T-bills”) that are classified as held-to-maturity securities. The amortized cost and recorded basis of the T-bills are presented as short-term investments. In August 2020, all outstanding short-term investments matured and were used to prepay the Company's outstanding term loan. See Note 5: Long Term Loan below. As of September 30, 2020 and December 31, 2019, the Company’s short-term investments were: September 30, 2020 December 31, 2019 Unaudited Audited Short-term investments $ — $ 148,769 Quoted market prices were applied to determine the fair value of cash equivalents and short-term investments, therefore they were categorized as Level 1 in accordance with Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures.” The estimated fair value of the Company’s short-term investments as of September 30, 2020 and December 31, 2019 was $ 0 and $ 148,738 , respectively. NOTE 3: INVENTORIES Inventories are stated at the lower of cost or net realizable value. The weighted average methodology is applied to determine cost. As of September 30, 2020 and December 31, 2019, the Company’s inventories were composed of: September 30, 2020 December 31, 2019 Unaudited Audited Raw materials $ 5,711 $ 3,912 Work in progress 6,987 6,482 Finished products 13,781 13,308 Total $ 26,479 $ 23,701 NOTE 4: COMMITMENTS AND CONTINGENT LIABILITIES Operating Leases. The facilities of the Company are leased under various operating lease agreements for periods, including options for extensions, ending no later than 2030. The Company also leases motor vehicles under various operating leases, which expire on various dates, the latest of which is in 2024. Pledged deposits and bank guarantees. As of September 30, 2020 and December 31, 2019, the Company pledged bank deposits of $ 1,420 and $ 1,390 , respectively, to cover bank guarantees in respect of its leases of operating facilities and obtained bank guarantees for the fulfillment of the Company’s lease and other contractual commitments of $ 1,652 and $ 1,557 , respectively . 11 Table of Contents NOTE 5: LONG TERM LOAN On August 18, 2020, the Company terminated its outstanding term loan, which bore interest at 9.0 % per annum. The prepayment included $ 150,000 in principal repayment and $ 3,000 in prepayment premium, plus accrued and unpaid interest and expenses payable through the payoff date. The un-amortized issuance costs in the amount of $ 478 that were fully amortized upon the repayment and the prepayment premium were included in the Company’s third quarter finance expenses. NOTE 6: EQUITY INCENTIVE PLANS AND ESPP In September 2015, the Company adopted the 2015 Omnibus Incentive Plan (the “2015 Plan”). Under the 2015 Plan, the Company can issue various types of equity compensation awards such as share options, restricted shares, performance shares, restricted share units (“RSUs”), performance-based share units (“PSUs”), long-term cash awards and other share-based awards. Options granted under the 2015 Plan generally have a four-year vesting period and expire ten years after the date of grant. Options granted under the 2015 Plan that are canceled or forfeited before expiration become available for future grants. RSUs granted under the 2015 Plan generally vest over a three year period. PSUs granted under the 2015 Plan generally vest between a three and six year period as performance targets are attained. RSUs and PSUs granted under the 2015 Plan that are canceled before expiration become available for future grants. As of September 30, 2020, 11,263,270 ordinary shares were available for grant under the 2015 Plan. A summary of the status of the Company’s option plans as of September 30, 2020 and changes during the period then ended is presented below: Nine months ended September 30, 2020 Unaudited Number of options Weighted average exercise price Outstanding at beginning of year 10,350,810 $ 20.40 Granted 861,551 70.56 Exercised ( 1,260,709 ) 14.16 Forfeited and canceled ( 183,758 ) 19.26 Outstanding as of September 30, 2020 9,767,894 $ 25.65 Exercisable options 4,858,926 $ 16.84 For the nine months ended September 30, 2020, options to purchase 1,260,709 ordinary shares were exercised, resulting in the issuance of 1,260,709 ordinary shares. A summary of the status of the Company’s RSUs and PSUs as of September 30, 2020 and changes during the period then ended is presented below. 12 Table of Contents Nine months ended September 30, 2020 Unaudited Number of RSU/PSUs Weighted average grant date fair value Unvested at beginning of year 1,474,395 $ 30.26 Granted (1) 3,923,573 55.06 Vested ( 906,108 ) 21.31 Forfeited and cancelled ( 24,394 ) 48.49 Unvested as of September 30, 2020 4,467,466 53.76 (1) Includes RSUs and PSUs granted on March 3, 2020 as follows: (a) 527,041 RSUs that are expensed based on their grant date fair value of $ 69.37 per RSU over the service period of three years ; (b) 408,539 PSUs that have a mix of service and clinical milestone vesting conditions, cliff-vest in pre-determined increments, and that have been deemed probable to vest and are therefore expensed beginning in the first quarter of 2020 based on their grant date fair value of $ 69.37 per PSU; (c) 108,113 PSUs that have a mix of service and clinical milestone vesting conditions, cliff-vest in pre-determined increments, and that will begin to be expensed at $ 69.37 per PSU when it becomes probable that the milestones will be achieved, and (d) 2,703,852 PSUs that have a mix of service, market and other milestone performance vesting conditions (including but not limited to new FDA approved indications), cliff-vest in pre-determined increments, and have a compensation cost of $ 48.16 per PSU that will not be recognized until the performance condition becomes probable. Also includes RSUs and PSUs granted on September 1, 2020 as follows: (a) 25,090 RSUs that are expensed based on their grant date fair value of $ 84.68 per RSU over the service period of three years ; (b) 17,712 PSUs that have a mix of service and clinical milestone vesting conditions, cliff-vest in pre-determined increments, and that have been deemed probable to vest and are therefore expensed beginning in the third quarter of 2020 based on their grant date fair value of $ 84.68 per PSU; and (c) 17,712 PSUs that have a mix of service and clinical milestone vesting conditions, cliff-vest in pre-determined increments, and that will begin to be expensed at $ 84.68 per PSU when it becomes probable that the milestones will be achieved. The PSUs vest no earlier than three years from the date of grant and no later than six years from the date of grant. The grant date fair value of PSUs with market vesting conditions were obtained by using Monte Carlo simulations. The Company accounts for share-based compensation in accordance with ASC 718. In September 2015, the Company adopted an employee share purchase plan (“ESPP”) to encourage and enable eligible employees to acquire ownership of the Company’s ordinary shares purchased through accumulated payroll deductions on an after-tax basis. In the United States, the ESPP is intended to be an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code and the provisions of the ESPP are construed in a manner consistent with the requirements of such section. As of September 30, 2020, 4,017,014 ordinary shares were available to be purchased by eligible employees under the ESPP and 447,634 shares had been issued under the ESPP. 13 Table of Contents The fair value of share-based awards was estimated using the Black-Scholes model for all equity grants. For market condition awards, the Company also applied the Monte-Carlo simulation model. We assessed fair value using the following underlying assumptions: Nine months ended September 30, Year ended December 31, 2019 2020 2019 Unaudited Audited Stock Option Plans Expected term (years) 5.50 - 6.25 5.50 - 6.50 5.50 - 6.5 Expected volatility 54 %- 56 % 55 %- 61 % 55 %- 61 % Risk-free interest rate 0.30 %- 0.86 % 1.90 %- 2.40 % 1.73 %- 2.40 % Dividend yield 0.00 % 0.00 % 0.00 % ESPP Expected term (years) 0.50 0.50 0.50 Expected volatility 47 %- 66 % 44 %- 62 % 44 %- 62 % Risk-free interest rate 0.17 %- 1.57 % 2.10 %- 2.51 % 2.10 %- 2.51 % Dividend yield 0.00 % 0.00 % 0.00 % The total non-cash share-based compensation expense related to all of the Company’s equity-based awards recognized for the three and nine months ended September 30, 2020 and 2019 and the year ended December 31, 2019 was: Three months ended September 30, Nine months ended September 30, Year ended December 31, 2019 2020 2019 2020 2019 Unaudited Unaudited Audited Cost of revenues $ 767 $ 605 $ 1,916 $ 1,626 $ 2,231 Research, development and clinical trials 5,101 2,202 12,275 5,203 7,570 Sales and marketing 4,677 3,368 13,061 8,585 11,897 General and administrative 9,576 8,163 28,196 22,305 30,718 Total share-based compensation expense $ 20,121 $ 14,338 $ 55,448 $ 37,719 $ 52,416 NOTE 7: EARNINGS PER SHARE Basic net income (loss) per share is computed based on the weighted average number of ordinary shares outstanding during each period. Diluted net income per share is computed based on the weighted average number of ordinary shares outstanding during the period, plus potential dilutive shares considered outstanding during the period, in accordance with ASC 260-10, as determined under the treasury stock method. Basic and diluted net income per ordinary share was the same for each period presented, except for the three months ended September 30, 2020, as the inclusion of all potential dilutive shares (deriving from options, RSUs and the ESPP) outstanding would be anti-dilutive. The calculation of diluted earnings per share includes the weighted average of potentially dilutive securities, which consists of ordinary shares underlying outstanding share options, RSUs, performance share units and the ESPP. The effect of these dilutive securities under the treasury stock method was approximately 7,409,508 and 7,511,989 shares for the three and nine months ended September 30, 2020, respectively. The Company excluded 952,823 and 717,492 share options under the treasury stock method from the computation of dilutive net income per share for the three and nine months ended September 30, 2020 because including them would have had an anti-dilutive effect. 14 Table of Contents NOTE 8: SUPPLEMENTAL INFORMATION The Company operates in a single reportable segment. The following table presents long-lived assets by location: September 30, 2020 December 31, 2019 Unaudited Audited United States $ 10,317 $ 8,896 Switzerland 2,012 3,067 Israel 3,998 2,753 Japan 1,237 999 Germany 895 729 Others 944 582 Total long-term assets $ 19,403 $ 17,026 The Company’s revenues by geographic region, based on the customer’s location, are summarized as follows: Three months ended September 30, Nine months ended September 30, Year ended December 31, 2019 2020 2019 2020 2019 Unaudited Unaudited Audited United States $ 92,635 $ 61,399 $ 243,103 $ 166,937 $ 232,805 EMEA: Germany 22,756 21,688 66,027 64,065 86,564 Other EMEA 5,468 2,794 12,069 5,442 8,782 Japan 7,523 4,779 21,153 12,334 17,912 Greater China (1) 4,278 1,402 8,061 3,306 5,255 Total net revenues $ 132,660 $ 92,062 $ 350,413 $ 252,084 $ 351,318 (1) Reflects revenue recognized in accordance with a License and Collaboration Agreement (the “Zai Agreement”) between the Company and Zai Lab (Shanghai) Co., Ltd. (“Zai”), dated September 10, 2018, pursuant to which Zai is commercializing Optune in China, Hong Kong, Macau and Taiwan (referred to in this table as “Greater China”). During the nine month period ended September 30, 2020, the Company triggered an $ 8,000 milestone related to the approval of Optune for the treatment of GBM in China and a $ 2,000 clinical trial milestone, each of which are being recognized over the remainder of the Zai performance period ending in September 2024. For additional information, see Note 12 to the Consolidated Financial Statements in the 2019 10-K. NOTE 9: INCOME TAX In accordance with the changes to the U.S. tax code enacted in response to the economic impacts of COVID-19 signed into legislation on March 27, 2020 the Company recorded a net tax benefit of $ 11,269 in the first quarter of 2020. The benefit results from net operating loss carry-backs in the U.S. 15 Table of Contents