EARNINGS PER SHARE

12 Months Ended

Dec. 31, 2022

EARNINGS PER SHAREBasic net income per share has been computed by dividing net income attributable to class A common shareholders for the periods subsequent to the Business Combination by the weighted average number of shares of common stock outstanding for the same period. Diluted earnings per share of Class A common stock were computed by dividing net income available to CompoSecure, Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities. No earnings per share is presented for the year ended December 31, 2020 as only the Class B common shares would have been outstanding in historical periods pursuant to the reverse recapitalization and the Class B common shares do not participate in the Company's income or loss and are therefore not participating securities.

The following table sets forth the computation of net income used to compute basic net income per share of Class A common stock for the years ended December 31, 2022 and December 31, 2021, respectively. The basic and diluted earnings per share period for the year ended December 31, 2021, represents only the prorated period from December 27, 2021 to December 31, 2021, which represents the period wherein we had outstanding Class A common stock.


	Year Ended December 31,
	2022		2021
Basic and diluted:
Net income	$	131,815	$	83,414
Less: Net income attributable to non-controlling interest	113,158		80,260
Net income attributable to Class A Common shareholders	$	18,657	$	3,154
Plus: adjustment to net income due to net effect of equity awards, exchangeable notes and class B units	18,017		7,943
Net income attributable to Class A Common shareholders after adjustment	$	36,674	$	11,097
Weighted average common shares outstanding used in computing net income per share - basic	15,372,422		14,929,982
Plus: net effect of dilutive equity awards, exchangeable notes and class B units	17,182,895		79,639,876
Weighted average common shares outstanding used in computing net income per share - diluted	32,555,317		94,569,858
Net income per share—basic	$	1.21	$	0.21
Net income per share—diluted	$	1.13	$	0.12

Basic earnings per share for the year ended December 31, 2022 was calculated by dividing net income attributable to Class A Common shareholders of $18,657 divided by 15,372,422 of weighted average Class A common shares outstanding at December 31,2022. Diluted earnings per share was calculated by dividing net income adjusted for net effects of dilutive equity awards and exchangeable notes of $36,674, divided by 32,555,317 of weighted average common shares after adjusting for the net effects of dilutive equity awards and exchangeable notes outstanding at December 31, 2022.

Basic earnings per share for the year ended December 31, 2021 was calculated by dividing net income attributable to Class A Common shareholders of $3,154 divided by 14,929,982 of weighted average Class A common shares outstanding at December 31, 2021. Diluted earnings per share was calculated by dividing net income adjusted for net effects of dilutive equity award, exchangeable notes and Class B units of $11,097 divided by 94,569,858 of weighted average common shares after adjusting for the net effects of dilutive equity awards, exchangeable notes and Class B units outstanding at December 31, 2021.

Securities that could potentially be dilutive are excluded from the computation of diluted earnings per share when the exercise price exceeds the average closing price of the Company’s common stock during the period, because their inclusion would result in an antidilutive effect on per share amounts. The Company applied the if-converted method for the exchangeable notes to calculate diluted earnings per share in accordance with ASU 2020-06.

The following amounts were not included in the calculation of net earnings per diluted share because their effects were anti-dilutive:


	Year Ended December 31, 2022	Year Ended December 31, 2021
Potentially dilutive securities:
Warrants	22,415,400	22,415,400
Class B common shares	60,325,057	—

Earnout consideration shares	7,500,000	7,500,000
Equity awards	3,461,502	—

Change in Accounting Policy for net income per share:

Effective April 1, 2022, the Company had changed its methodology to apply its accounting policy to calculate the basic and diluted earnings per share as well as determined that it would push down the changes in fair value of the mark-to-market liabilities that related to the Company's warrants and earnout consideration liability to its operating subsidiary, Holdings, resulting in a change to the net income attributable to the controlling and non-controlling interest.

The Company observed diversity in practice due to lack of specific guidance in ASC 810 related to earnings per share due to the Company's Up-C structure. The method adopted effective April 1, 2022 was voluntary and more appropriately represented the economics of the net income allocation upon the conversion of the potential dilutive instruments due to the fact that the issuance of Class A Common Stock would result with a corresponding issuance of a Class A Common Unit in Holdings. Further, for similar reasons, pushing down the changes in fair value of the mark-to-market liabilities to Holdings, and therefore allocating the changes between the controlling and non-controlling interest would provide more appropriate information to the users of the financial statements. The Company determined that, accordingly, this change would more appropriately reflect the allocation of the consolidated Company’s net assets between the controlling and non-controlling interest, and the respective basic and dilutive earnings per share presented in the Company’s consolidated financial statements.

Below is a summary of the impact of the change in accounting policy for the period indicated:


	Year ended December 31, 2021				Year ended December 31, 2021
Income Statement Items:	As previously reported		Adjustment		As currently reported
Net income per share attributable to Class A common stockholders - basic (1)	$	0.91	$	(0.70)	$	0.21
Net income per share attributable to Class A common stockholders - diluted (1)	$	0.14	$	(0.02)	$	0.12
Net income attributable to CompoSecure, Inc. (2)	13,512		(10,358)		3,154
Net income attributable to redeemable non-controlling interests (2)	69,902		10,358		80,260

(1) The amounts for the year ended December 31, 2021 represent basic and diluted net income per share of Class A common stock for the prorated period from December 27, 2021 through December 31, 2021, the period following the Business Combination described in Note 1.

(2) Net income attributable to CompoSecure, Inc. for the year ended December 31, 2021 was equal to net income for the period subsequent to the Business Combination for the prorated period from December 27, 2021 through December 31, 2021. Net income attributable to non-controlling for the year ended December 31, 2021 is equal to net income for the period from January 1, 2021 through December 31, 2021.