(4) Net Income (Loss) Per Share

The Company computes net income (loss) per share of Class A and Class B common stock using the two class method. Under the provisions of the two class method, basic net income (loss) per share is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of common and dilutive common equivalent shares outstanding during the period. The computation of the diluted net income (loss) per share of Class B common stock assumes the conversion of Class A common stock to Class B common stock, while the diluted net income (loss) per share of Class A common stock does not assume the conversion of those shares.

In accordance with the two class method, the undistributed earnings for each period are allocated based on the contractual participation rights of the Class A and Class B common shares and the restricted shares as if the earnings for the year had been distributed. Considering the terms of the Company’s charter which provides that, if and when dividends are declared on our common stock in accordance with Delaware General Corporation Law, equivalent dividends shall be paid with respect to the shares of Class A common stock and Class B common stock and that both classes of common stock have identical dividend rights and would share equally in our net assets in the event of liquidation, we have allocated undistributed losses on a proportionate basis. Additionally, the Company has paid dividends equally to both classes of common stock and the unvested restricted shares since it initiated a quarterly cash dividend in November 2006.

Instruments granted in unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities prior to vesting. As such, the Company’s restricted stock awards are considered participating securities for purposes of calculating earnings per share. Under the two class method, dividends paid on unvested restricted stock are allocated to these participating securities and therefore impacts the calculation of amounts allocated to common stock.

The following table includes net income (loss) applicable to common stockholders used to compute basic net income (loss) per share for the periods ended (in thousands, except per share amount):


	Three months ended March 31, 2012						Three months ended March 31, 2013
	Class A			Class B			Class A		Class B
Numerator:
Net income (loss)	$	(225	)	$	(490	)	$	21	$	64
Dividends paid to participating securities		—			(73	)		—		—

Net income (loss) applicable to common stockholders	$	(225	)	$	(563	)	$	21	$	64

Denominator:
Weighted average number of shares outstanding used to calculate basic net income (loss) per share		9,587			24,015			9,570		25,585

Basic net income (loss) per share applicable to common stockholders	$	(0.02	)	$	(0.02	)	$	0.00	$	0.00

	Three months ended March 31, 2012						Three months ended March 31, 2013
	Class A			Class B			Class A		Class B
Numerator:
Net income (loss)	$	(225	)	$	(490	)	$	21	$	64
Dividends paid to participating securities		—			(73	)		—		—
Reallocation of net income (loss) for Class A shares as a result of conversion of Class A to Class B shares		—			(225	)		—		21

Net income (loss) applicable to common stockholders	$	(225	)	$	(788	)	$	21	$	85

Denominator:
Weighted average number of shares outstanding used to calculate basic net income (loss) per share		9,587			24,015			9,570		25,585
Weighted average stock options and warrants and common shares subject to repurchase or cancellation		—			—			—		395
Conversion of Class A to Class B common shares outstanding		—			9,587			—		9,570

Weighted average number of shares outstanding used to calculate diluted net income (loss) per share		9,587			33,602			9,570		35,550

Diluted net income (loss) per share applicable to common stockholders	$	(0.02	)	$	(0.02	)	$	0.00	$	0.00

The weighted average number of shares used to calculate the diluted net income (loss) per share includes the weighted average number of shares from the assumed conversion of Class A common stock to Class B common stock.

The computation of diluted net income (loss) per share excludes the following because their effect would be anti-dilutive (in thousands):

•

For the three months ended March 31, 2012 and 2013, outstanding options to acquire 6,926 and 6,665 shares of Class B common stock.

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For the three months ended March 31, 2012 and 2013, 3,424 and 1,279 shares of unvested Class B restricted common shares at March 31, 2012 and 2013, respectively, issued to employees and in connection with acquisitions. These shares were for future services that vest over periods ranging from one to six years.

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For the three months ended March 31, 2012 and 2013, 249 and 131 restricted stock units with vesting based on satisfaction of certain service and market conditions.