What changed in this filing

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Item 1. Financial Statements

2020-11-02 compared with 2020-08-03 · 134 added, 119 removed, 472 unchanged (35% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

September 30,

(In thousands, except share and per share data)

4 unchanged sentences

Net investment in leases

Income taxes receivable

Prepaid expenses and other current assets

26 unchanged sentences

Preferred stock, $ 0.001 par value, 50,000,000 shares authorized;

none issued and outstanding as of June 30, 2020 and December 31, 2019

none issued and outstanding as of September 30, 2020 and December 31, 2019

Common stock, $ 0.001 par value, 300,000,000 shares authorized;

19,411,404 shares issued and outstanding as of June 30, 2020;

19,424,679 shares issued and outstanding as of September 30, 2020;

19,152,715 shares issued and outstanding as of December 31, 2019

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands, except share and per share data)

13 unchanged sentences

Total operating expenses

(Loss) income from operations

(Loss) income before income taxes

Income tax expense (benefit)

Net (loss) income

Net (loss) income per common share

Weighted-average common shares used to compute net (loss) income per common share

Income (loss) from operations

Other (expense) income

Income (loss) before income taxes

Income tax (benefit) expense

Net income (loss)

Net income (loss) per common share

Weighted-average common shares used to compute net income (loss) per common share

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Tactile Systems Technology, Inc.

Condensed Consolidated Statements of Comprehensive (Loss) Income

Condensed Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

Net (loss) income

Net income (loss)

Other comprehensive (loss) income:

2 unchanged sentences

Total other comprehensive (loss) income

Comprehensive (loss) income

Comprehensive income (loss)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4 unchanged sentences

(Loss) Income

Balances, March 31, 2020

Balances, June 30, 2020

Stock-based compensation

1 unchanged sentence

Taxes paid for net share settlement of restricted stock units

Common shares issued for employee stock purchase plan

Comprehensive loss for the period

Balances, June 30, 2020

Comprehensive income (loss) for the period

Balances, September 30, 2020

Balances, December 31, 2019

3 unchanged sentences

Common shares issued for employee stock purchase plan

Comprehensive (loss) income for the period

Comprehensive loss for the period

Balances, September 30, 2020

Balances, June 30, 2019

Balances, March 31, 2019

Stock-based compensation

1 unchanged sentence

Taxes paid for net share settlement of restricted stock units

Common shares issued for employee stock purchase plan

Comprehensive income for the period

Balances, June 30, 2019

Comprehensive income (loss) for the period

Balances, September 30, 2019

Balances, December 31, 2018

4 unchanged sentences

Comprehensive income for the period

Balances, June 30, 2019

Balances, September 30, 2019

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

6 unchanged sentences

Stock-based compensation expense

Gain on maturities of marketable securities

Gain on other investments and maturities of marketable securities

Impairment losses

14 unchanged sentences

Intangible assets costs

Net cash provided by investing activities

Other investments

Net cash provided by (used in) investing activities

Cash flows from financing activities

3 unchanged sentences

Net cash provided by financing activities

Net increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents – beginning of period

8 unchanged sentences

Tactile Systems Technology, Inc.

(“we,” “us,” and “our”) is the sole manufacturer and distributor of the Flexitouch® and Entre™ systems, medical devices that help control symptoms of lymphedema, a chronic and progressive medical condition, and the Airwear wrap, a medical device used for the management of venous insufficiency, venous hypertension, venous ulcerations and lymphedema.

Our products are purchased or rented for at-home use and are recommended by vascular, wound and lymphedema clinics throughout the United States.

17 unchanged sentences

In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included.

The results for the six months ended June 30, 2020, are not necessarily indicative of results to be expected for the year ending December 31, 2020, or for any other interim period or for any future year.

The results for the nine months ended September 30, 2020, are not necessarily indicative of results to be expected for the year ending December 31, 2020, or for any other interim period or for any future year.

The condensed consolidated interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019.

6 unchanged sentences

The United States economy in general and our business specifically have been negatively affected by the COVID-19 pandemic.

We have seen adverse impacts as it relates to the decline in the number of patients that healthcare facilities and clinics are able to treat due to enhanced safety protocols.

There are no reliable estimates of how long the pandemic will last or how many people are likely to be affected by it.

21 unchanged sentences

Actual results could differ from those estimates.

Comprehensive (Loss) Income

Comprehensive (loss) income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

Our comprehensive (loss) income represents net (loss) income adjusted for unrealized gains and losses on available-for-sale marketable securities and the related taxes.

Comprehensive Income (Loss)

Comprehensive income (loss) reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

Our comprehensive income (loss) represents net income (loss) adjusted for unrealized gains and losses on available-for-sale marketable securities and the related taxes .

Summary of Significant Accounting Policies

Significant Accounting Policies

There were no material changes in our significant accounting policies during the six months ended June 30, 2020, except as set forth below.

There were no material changes in our significant accounting policies during the nine months ended September 30, 2020, except as set forth below.

See Note 3 – “Summary of Significant Accounting Policies” to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019, for information regarding our significant accounting policies.

20 unchanged sentences

Marketable Securities

Our investments in marketable securities, all of which have original contractual maturities of less than twelve months, are classified as available-for-sale and consist of the following:

At June 30, 2020

(In thousands)

government and agency obligations

Corporate debt securities

Marketable securities

There were no investments in marketable securities at September 30, 2020.

At December 31, 2019 investments in marketable securities were classified as available-for-sale and consisted of the following:

At December 31, 2019

3 unchanged sentences

Marketable securities

Net pre-tax unrealized gains for marketable securities at June 30, 2020, were recorded as a component of accumulated other comprehensive income in stockholders' equity.

There were no sales of marketable securities during the six months ended June 30, 2020.

There were no marketable securities in an unrealized loss position at June 30, 2020.

There were no net pre-tax unrealized gains for marketable securities at September 30, 2020.

There were no sales of marketable securities during the nine months ended September 30, 2020.

There were no marketable securities in an unrealized loss position at September 30, 2020.

At December 31, 2019, unrealized losses and the fair value of marketable securities aggregated by investment category and the length of time the securities were in a continuous loss position, were as follows:

8 unchanged sentences

(In thousands)

At June 30, 2020

At September 30, 2020

At December 31, 2019

4 unchanged sentences

Our patents and other intangible assets are summarized as follows:

At June 30, 2020

At September 30, 2020

(In thousands)

11 unchanged sentences

Total intangible assets

Amortization expense was $ 0.1 million for each of the three months ended June 30, 2020 and 2019, and $ 0.3 million for each of the six months ended June 30, 2020 and 2019.

Amortization expense was $ 0.1 million for each of the three months ended September 30, 2020 and 2019, and $ 0.3 million and $ 0.4 million for the nine months ended September 30, 2020 and 2019, respectively.

Future amortization expenses are expected as follows:

(In thousands)

2020 (July 1 - December 31)

2020 (October 1 - December 31)

Accrued Expenses

1 unchanged sentence

(In thousands)

At June 30, 2020

At September 30, 2020

At December 31, 2019

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

10 unchanged sentences

Subject to satisfaction of certain conditions, we may increase the amount of the revolving loans available under the Credit Agreement and/or add one or more term loan facilities in an amount not to exceed an incremental $ 25.0 million in the aggregate, such that the total aggregate principal amount of loans available under the Credit Agreement (including under the revolving credit facility) does not exceed $ 35.0 million.

As of June 30, 2020 , and the date on which we filed this report, we did not have any outstanding borrowings under the Credit Agreement.

As of September 30, 2020, and the date on which we filed this report, we did no t have any outstanding borrowings under the Credit Agreement.

Our obligations under the Credit Agreement are secured by a security interest in substantially all of our and our subsidiaries’ assets and are also guaranteed by our subsidiaries.

The Credit Agreement contains a number of restrictions and covenants, including that we maintain compliance with a maximum leverage ratio and a minimum liquidity covenant.

As of June 30, 2020, we were in compliance with all financial covenants under the Credit Agreement.

As of September 30, 2020, we were in compliance with all financial covenants under the Credit Agreement.

Commitments and Contingencies

13 unchanged sentences

These leases are typically greater than one year with fixed, escalating rents over the noncancelable terms and, therefore, ROU operating lease assets and operating lease liabilities are recorded on the Condensed Consolidated Balance Sheet, with rent expense to be recognized on a straight-line basis over the term of the lease.

The remaining lease terms vary from approximately one to ten years as of June 30, 2020.

The remaining lease terms vary from approximately three to ten years as of September 30, 2020.

In March 2008, we entered into a noncancelable operating lease agreement for building space for our previous corporate headquarters that provided for monthly rent, real estate taxes and operating expenses that was subsequently extended to July 31, 2021.

7 unchanged sentences

The portion of the space under the initial lease was placed in service in September 2019.

This portion was recognized as an operating lease and included in the ROU operating lease assets and operating lease liabilities on the Condensed Consolidated Balance Sheets.

The portion of the space covered under the second lease is expected to be occupied and commence in the second half of 2020 and the portion of the space covered under the third lease is expected to be occupied and commence in the second half of 2021.

This portion was recognized as an operating lease and included in the ROU operating lease assets and operating lease liabilities on the Condensed Consolidated Balance Sheets beginning as of September 30, 2019.

The portion of the space covered under the second lease commenced on September 1, 2020.

This portion was recognized as an operating lease and included in the ROU operating lease assets and operating lease liabilities on the Condensed Consolidated Balance Sheets as of September 30, 2020.

The portion of the space covered under the third lease is expected to be occupied and commence in the second half of 2021.

We lease vehicles for certain members of our field sales organization under a vehicle fleet program whereby the initial, noncancelable lease is for a term of 367 days , thus more than one year.

Subsequent to the initial term, the lease becomes a month-to-month, cancelable lease.

As of June 30, 2020, we had approximately 65 vehicles with agreements within the initial, noncancelable lease term that are recorded as ROU operating lease assets and operating lease liabilities.

As of September 30, 2020, we had approximately 69 vehicles with agreements within the initial, noncancelable lease term that are recorded as ROU operating lease assets and operating lease liabilities.

In addition to monthly rental fees specific to the vehicle, there are fixed monthly nonlease components that have been included in the ROU operating lease assets and operating lease liabilities.

2 unchanged sentences

We also have operating lease agreements for certain computer and office equipment.

The remaining lease terms as of June 30, 2020, ranged from less than one year to approximately four years with fixed monthly payments that are included in the ROU operating lease assets and operating lease liabilities.

The remaining lease terms as of September 30, 2020, ranged from less than one year to approximately three years with fixed monthly payments that are included in the ROU operating lease assets and operating lease liabilities.

The leases provide an option to purchase the related equipment at fair market value at the end of the lease.

3 unchanged sentences

(In thousands)

At June 30, 2020

At September 30, 2020

At December 31, 2019

4 unchanged sentences

Weighted average discount rate

Six Months Ended June 30,

Nine Months Ended September 30,

Supplemental cash flow information for our operating leases:

3 unchanged sentences

(In thousands)

2020 (July 1 - December 31)

2020 (October 1 - December 31)

Total minimum lease payments

3 unchanged sentences

Non-current obligations under operating lease liabilities

As of June 30, 2020, we have additional lease commitments of $ 13.9 million related to amendments to existing building leases that have not yet commenced.

As of September 30, 2020, we have additional lease commitments of $ 7.1 million related to amendments to existing building leases that have not yet commenced.

As the lessee we are involved in providing guidance to the lessor for related improvements, however these improvements are managed and owned by the lessor.

Operating lease costs were $ 0.7 million and $ 0.4 million for the three months ended June 30, 2020 and 2019, respectively.

Operating lease costs were $ 1.4 million and $ 0.7 for the six months ended June 30, 2020 and 2019, respectively.

Operating lease costs were $ 0.8 million and $ 0.6 million for the three months ended September 30, 2020 and 2019, respectively.

Operating lease costs were $ 2.1 million and $ 1.3 for the nine months ended September 30, 2020 and 2019, respectively.

Major Vendors

We had purchases from two major vendors that accounted for 33 % and 32 % of our total purchases for the three and six months ended June 30, 2020, respectively.

We had purchases from two major vendors that accounted for 38 % and 33 % of our total purchases for the three and six months ended June 30, 2019, respectively.

We had purchases from two major vendors that accounted for 31 % and 33 % of our total purchases for the three and nine months ended September 30, 2020, respectively.

We had purchases from two major vendors that accounted for 42 % and 37 % of our total purchases for the three and nine months ended September 30, 2019, respectively.

Purchase Commitments

We issued purchase orders prior to June 30, 2020, totaling $ 24.4 million for goods that we expect to receive within the next year.

We issued purchase orders prior to September 30, 2020, totaling $ 20.5 million for goods that we expect to receive within the next year.

Retirement Plan

We maintain a 401(k) retirement plan for our employees in which eligible employees can contribute a percentage of their pre-tax compensation.

Discretionary contributions to the 401(k) plan totaled $ 0.1 million for each of the three and six months ended June 30, 2020 and 2019.

Discretionary contributions to the 401(k) plan totaled $ 0.1 million for each of the three ended September 30, 2020 and 2019, and $ 0.2 million for each of the nine months ended September 30, 2020 and 2019.

Stockholders' Equity

4 unchanged sentences

(a) 5 % of the number of common shares of stock outstanding as of December 31 of the immediately preceding calendar year, or (b) 2,500,000 shares;

provided, however, that our Board of Directors may determine that any annual increase be a lesser number.

provided, however, that our Board of Directors may

determine that any annual increase be a lesser number.

In addition, all awards granted under our 2007 Omnibus Stock Plan and our 2003 Stock Option Plan that were outstanding when the 2016 Plan became effective and that are forfeited, expired, cancelled, settled for cash or otherwise not issued, will become available for issuance under the 2016 Plan.

1 unchanged sentence

On January 1, 2020, 952,697 shares were added as available for issuance thereunder.

As of June 30, 2020, 4,709,363 shares were available for future grant pursuant to the 2016 Plan.

As of September 30, 2020, 4,658,176 shares were available for future grant pursuant to the 2016 Plan.

Upon adoption and approval of the 2016 Plan, all of our previous equity incentive compensation plans were terminated.

1 unchanged sentence

In the second fiscal quarter of 2020, our Board of Directors appointed a new President and Chief Executive Officer (“CEO”), effective June 8, 2020.

In conjunction with the acceptance of the written offer, our CEO will receive both restricted stock units and stock option awards under our 2016 Plan.

The awards will be granted during the third fiscal quarter of 2020, and a portion of the awards will vest on June 30, 2021, with the remaining portion of the awards vesting over a period of three years from the date of grant.

Further, all of the stock options included in these awards will require that our stock price exceed 110 % of the closing price of our common stock on the date of grant for 20 consecutive trading days during the term of the option in order to vest.

We recorded stock-based compensation expense of $ 2.4 million and $ 2.3 million for the three months ended June 30, 2020 and 2019, respectively, and $ 5.1 million for each of the six months ended June 30, 2020 and 2019.

In conjunction with the acceptance of the written offer, our CEO received both restricted stock units and stock option awards under our 2016 Plan during the third fiscal quarter of 2020 and the stock options have a seven year term.

A portion of the awards will vest on June 30, 2021, with the remaining portion of the awards vesting over a period of three years from the date of grant.

Further, all of the stock options included in these awards require that our stock price exceed $ 40.15 for 20 consecutive trading days during the term of the option in order to vest.

We recorded stock-based compensation expense of $ 3.2 million and $ 2.3 million for the three months ended September 30, 2020 and 2019, respectively, and $ 8.3 million and $ 7.4 million for the nine months ended September 30, 2020 and 2019, respectively.

This expense was allocated as follows:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

6 unchanged sentences

We have granted stock options to certain participants that vest over three or four years and typically have a contractual term of seven or ten years .

Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for stock options was $ 1.0 million and $ 0.7 million for the three months ended June 30, 2020 and 2019, respectively, and $ 1.8 million and $ 1.4 million for the six months ended June 30, 2020 and 2019, respectively.

At June 30, 2020, there was approximately $ 8.5 million of total unrecognized pre-tax stock option expense under our equity compensation plans, which is expected to be recognized on a straight-line basis over a weighted-average period of 2.3 years.

Our stock option activity for the six months ended June 30, 2020, was as follows:

Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for stock options was $ 1.1 million and $ 0.6 million for the three months ended September 30, 2020 and 2019, respectively, and $ 3.0 million and $ 2.0 million for the nine months ended September 30, 2020 and 2019, respectively.

At September 30, 2020, there was approximately $ 7.9 million of total unrecognized pre-tax stock option expense under our equity compensation plans, which is expected to be recognized on a straight-line basis over a weighted-average period of 2.1 years.

Our stock option activity for the nine months ended September 30, 2020, was as follows:

Exercise Price

3 unchanged sentences

Balance at December 31, 2019

Balance at June 30, 2020

Options exercisable at June 30, 2020

Balance at September 30, 2020

Options exercisable at September 30, 2020

(1) The exercise price of each option granted during the period shown was equal to the market price of the underlying stock on the date of grant.

1 unchanged sentence

The aggregate intrinsic value of options outstanding represents the difference between the exercise price of the option and the closing stock price of our common stock on the last trading day of the period.

Options exercisable of 561,360 as of June 30, 2019, had a weighted-average exercise price of $ 4.27 per share.

Options exercisable of 539,487 as of September 30, 2019, had a weighted-average exercise price of $ 5.15 per share.

Time-Based Restricted Stock Units

1 unchanged sentence

Time-based restricted stock units granted under the 2016 Plan vest over one to three years .

Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for time-based restricted stock units was $ 1.4 million and $ 1.0 million for the three months ended June 30, 2020 and 2019, respectively, and $ 2.6 million and $ 1.9 million for the six months ended June 30, 2020 and 2019, respectively.

As of June 30, 2020, there was approximately $ 8.6 million of total unrecognized pre-

tax compensation expense related to outstanding time-based restricted stock units that is expected to be recognized over a weighted-average period of 2.1 years.

Our time-based restricted stock unit activity for the six months ended June 30, 2020, was as follows:

Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for time-based restricted stock units was $ 1.4 million and $ 1.0 million for the three months ended September 30, 2020 and 2019, respectively, and $ 4.0 million and $ 2.9 million for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, there was approximately $ 7.5 million of total unrecognized pre-tax compensation expense related to outstanding time-based restricted stock units that is expected to be recognized over a weighted-average period of 1.9 years.

Our time-based restricted stock unit activity for the nine months ended September 30, 2020, was as follows:

Average Grant

2 unchanged sentences

Balance at December 31, 2019

Balance at June 30, 2020

Deferred and unissued at June 30, 2020 (2)

Balance at September 30, 2020

Deferred and unissued at September 30, 2020 (2)

(1) The aggregate intrinsic value of restricted stock units outstanding was based on our closing stock price on the last trading day of the period.

(2) For the six months ended June 30, 2020, there were 551 restricted stock units granted to non-employee directors in lieu of their quarterly cash retainer payments.

(2) For the nine months ended September 30, 2020, there were 858 restricted stock units granted to non-employee directors in lieu of their quarterly cash retainer payments.

These restricted stock units were fully vested upon grant and represent the right to receive one share of common stock, per unit, upon the earlier of the director’s termination of service as a director of ours or the occurrence of a change of control of us.

These restricted stock units are included in the “Granted” line in the table above and are also included in the “Vested” line in the table above due to their being fully vested upon grant.

As of June 30, 2020, there were 6,660 outstanding restricted stock units that have been previously granted to non-employee directors in lieu of their quarterly director retainer payments.

As of September 30, 2020, there were 6,967 outstanding restricted stock units that have been previously granted to non-employee directors in lieu of their quarterly director retainer payments.

Performance-Based Restricted Stock Units

7 unchanged sentences

All earned and vested PSUs will be settled in shares of common stock.

Stock-based compensation expense recognized for PSUs was a benefit of $ 0.3 million and an expense of $ 0.5 million , for the three months ended June 30, 2020 and 2019, respectively, and an expense of $ 0.1 million and $ 1.2 million for the six months ended June 30, 2020 and 2019, respectively.

The stock-based compensation expense for the three and six months ended June 30, 2020 reflects a $ 1.0 million benefit due to a change in the estimated payout associated with PSUs granted in 2019 being below the minimum performance target threshold level, as defined.

As of June 30, 2020, there was approximately $ 1.9 million of total unrecognized pre-tax compensation expense related to outstanding PSUs that is expected to be recognized over a weighted average period of 2.1 years.

Our performance-based restricted stock unit activity for the six months ended June 30, 2020, was as follows:

Stock-based compensation expense recognized for PSUs was $ 0.4 million and $ 0.5 million for the three months ended September 30, 2020 and 2019, respectively, and $ 0.5 million and $ 1.7 million for the nine months ended September 30, 2020 and 2019, respectively.

The stock-based compensation expense for the nine months ended September 30, 2020 reflects a $ 1.0 million benefit due to a change in the estimated payout associated with PSUs granted in 2019 being below the minimum performance target threshold level, as defined.

As of September 30, 2020, there was approximately $ 1.4 million of total unrecognized pre-tax compensation expense related to outstanding PSUs that is expected to be recognized over a weighted average period of 2.0 years.

Our performance-based restricted stock unit activity for the nine months ended September 30, 2020, was as follows:

Average Grant

2 unchanged sentences

Balance at December 31, 2019

Balance at June 30, 2020

Balance at September 30, 2020

(1) The aggregate intrinsic value of performance-based restricted stock units outstanding was based on our closing stock price on the last trading day of the period.

8 unchanged sentences

On January 1, 2020, 190,539 shares were added as available for issuance thereunder.

As of June 30, 2020, 1,618,335 shares were available for future issuance under the ESPP.

We recognized stock-based compensation expense associated with the ESPP of $ 0.3 million and $ 0.2 million for the three months ended June 30, 2020 and 2019, respectively, and $ 0.6 million and $ 0.5 million for the six months ended June 30, 2020 and 2019, respectively.

As of September 30, 2020, 1,618,335 shares were available for future issuance under the ESPP.

We recognized stock-based compensation expense associated with the ESPP of $ 0.3 million and $ 0.2 million for the three months ended September 30, 2020 and 2019, respectively, and $ 0.8 million and $ 0.7 million for the nine months ended September 30, 2020 and 2019, respectively.

We derive our revenue from the sale and rental of our compression products to our customers in the United States.

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

5 unchanged sentences

(1) The “other products” line primarily includes revenue from our Entre system.

The Actitouch system and the Airwear wrap contributed immaterial amounts of revenue for each of the three and six months ended June 30, 2020 and 2019.

Rental revenue for the three and six months ended June 30, 2020 and 2019, was primarily from private insurers.

Our revenue from third-party payers, inclusive of sales and rental revenue, for the three and six months ended June 30, 2020 and 2019, are summarized in the following table:

The Actitouch system and the Airwear wrap contributed immaterial amounts of revenue for each of the three and nine months ended September 30, 2020 and 2019.

Rental revenue for the three and nine months ended September 30, 2020 and 2019, was primarily from private insurers.

Our revenue from third-party payers, inclusive of sales and rental revenue, for the three and nine months ended September 30, 2020 and 2019, are summarized in the following table:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

8 unchanged sentences

These rental agreements do not have an impact on the revenue results in 2020.

Total rental revenue for the three and six months ended June 30, 2019 included both operating and sales-type lease revenue.

Operating lease revenue was $ 1.4 million and $ 4.2 million for the three and six months ended June 30, 2019.

Total rental revenue for the three and nine months ended September 30, 2019 included both operating and sales-type lease revenue.

Operating lease revenue was $ 0.6 million and $ 4.8 million for the three and nine months ended September 30, 2019.

The revenue and associated cost of revenue of sales-type leases are recognized on the lease commencement date and a net investment in leases is recorded on the Condensed Consolidated Balance Sheet.

8 unchanged sentences

Completion of these payments represents the fair market value of the equipment, and as such, interest income is not applicable.

Sales-type lease revenue and the associated cost of revenue for the three and six months ended June 30, 2020 and 2019, was:

Three Months Ended June 30,

Six Months Ended June 30,

Sales-type lease revenue and the associated cost of revenue for the three and nine months ended September 30, 2020 and 2019, was:

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

5 unchanged sentences

Our provision for income taxes included current federal and state income tax expense, as well as deferred federal and state income tax expense.

The effective tax rate for the three months ended June 30, 2020 was an expense of 75 % , compared to 14 % for the three months ended June 30, 2019.

The primary driver of the change in our effective tax rate is attributable to a change in projected taxable income, including proportionately lower benefits for stock based compensation as compared to the same period last year.

We recorded income tax expense of $ 5.9 million and an expense of $ 0.4 million for the three months ended June 30, 2020 and 2019, respectively.

The effective tax rate for the six months ended June 30, 2020 was an expense of 25 % , compared to a benefit of 172 % for the six months ended June 30, 2019.

We recorded income tax expense of $ 3.0 million and a benefit of $ 2.7 million for the six months ended June 30, 2020 and 2019, respectively.

The effective tax rate for the three months ended September 30, 2020 was a benefit of 55 % , compared to an expense of 27 % for the three months ended September 30, 2019.

The primary driver of the change in our effective tax rate is attributable to a change in projected taxable income, including proportionately higher tax benefits for stock-based compensation as compared to the same period last year.

We recorded an income tax benefit of $ 0.8 million and an expense of $ 0.9 million for the three months ended September 30, 2020 and 2019, respectively.

The effective tax rate for the nine months ended September 30, 2020 was an expense of 17 % , compared to a benefit of 36 % for the nine months ended September 30, 2019.

The primary driver of the change in our effective tax rate is attributable to a change in projected taxable income, including proportionately lower tax benefits for stock-based compensation as compared to the same period last year.

We recorded an income tax expense of $ 2.3 million and a benefit of $ 1.8 million for the nine months ended September 30, 2020 and 2019, respectively.

We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority is more-likely-than-not to sustain the position following an audit.

3 unchanged sentences

Net Income Per Share

The following table sets forth the computation of our basic and diluted net (loss) income per share:

The following table sets forth the computation of our basic and diluted net income (loss) per share:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands, except share and per share data)

Net (loss) income

Net income (loss)

Weighted-average shares outstanding

1 unchanged sentence

Weighted-average shares used to compute diluted net (loss) income per share

Net (loss) income per share - Basic

Net (loss) income per share - Diluted

Net income (loss) per share - Basic

Net income (loss) per share - Diluted

The following common stock equivalents were excluded from the computation of diluted net (loss) income per share for the periods presented because including them would have been anti-dilutive:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Restricted stock units

9 unchanged sentences

The lowest priority is given to unobservable inputs (Level 3).

The following provides information regarding fair value measurements for our cash equivalents and marketable securities as of June 30, 2020, and December 31, 2019, according to the three-level fair value hierarchy:

At June 30, 2020

The following provides information regarding fair value measurements for our cash equivalents and marketable securities as of September 30, 2020, and December 31, 2019, according to the three-level fair value hierarchy:

At September 30, 2020

Quoted Prices

10 unchanged sentences

Corporate debt securities

During the three and six months ended June 30, 2020, there were no transfers within the three-level hierarchy.

During the three and nine months ended September 30, 2020, there were no transfers within the three-level hierarchy.

A significant transfer is recognized when the inputs used to value a security have been changed, which merits a transfer between the disclosed levels of the valuation hierarchy.

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements