Basic and Diluted Income per Common Share

9 Months Ended

Sep. 30, 2018

Basic and Diluted Income per Common Share

15. Basic and Diluted Income per Common Share

During the year ended December 31, 2017, the Company used the two-class method to compute net income per common share, because it had issued securities, other than common stock, that contractually entitled the holders to participate in dividends and earnings. These participating securities included the Company’s redeemable convertible preferred stock which had non-forfeitable rights to participate in any dividends declared on the Company’s common stock. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings.

Under the two-class method, for periods with net income, basic net income per common share is computed by dividing the net income attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Net income attributable to common stockholders is computed by subtracting from net income the portion of current period earnings that the participating securities would have been entitled to receive pursuant to their dividend rights had all of the period’s earnings been distributed. No such adjustment to earnings is made during periods with a net loss, as the holders of the participating securities have no obligation to fund losses.

Diluted net income per common share is computed under the two-class method by using the weighted average number of shares of common stock outstanding, plus, for periods with net income attributable to common stockholders, the potential dilutive effects of stock options and warrants. The Company analyzed the potential dilutive effect of any outstanding dilutive securities under the “if-converted” method and treasury-stock method when calculating diluted earnings per share, in which it is assumed that the outstanding participating securities convert into common stock at the beginning of the period or date of issuance, if later. The Company reports the more dilutive of the approaches (two-class or “if-converted”) as its diluted net income per share during the period.

As of January 1, 2018, the Company no longer had outstanding securities other than common stock, which required holders’ participation in dividends and earnings; therefore, the Company no longer was required to calculate EPS under the two-class method. Basic net income per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is computed by giving effect to all potential shares of common stock, including stock options, stock related to unvested restricted stock awards, and outstanding warrants to the extent dilutive.

The components of basic and diluted earnings per share, or EPS, are as follows:


	Three months ended September 30,						Nine months ended September 30,
	2017		2018		2017		2018
Earnings per share
Net income	$	1,634	$	2,510	$	6,570	$	19,213
Less: net income allocated to participating securities	213		—		858		—
Net income attributable to common stockholders	$	1,421	$	2,510	$	5,712	$	19,213
Net income per share:
Basic	$	0.12	$	0.13	$	0.48	$	1.05
Diluted	$	0.11	$	0.12	$	0.42	$	0.91














Weighted Average Number of Common Shares Outstanding
Basic	11,828,657		19,072,196		11,814,045		18,300,435
Dilutive effect of stock options, restricted stock units, and warrants	1,424,080		2,073,928		1,673,604		2,765,367
Diluted	13,252,737		21,146,124		13,487,649		21,065,802

The following common share equivalents have been excluded from the calculation of weighted-average common shares outstanding, because the effect is anti-dilutive for the periods presented:


	Three months ended September 30,			Nine months ended September 30,
	2017	2018	2017	2018
Anti-dilutive Disclosure
Series A redeemable convertible preferred stock outstanding	1,775,000	—	1,775,000	—
Stock options issued and outstanding	110,125	—	110,125	—