BASIC AND DILUTED NET INCOME (LOSS) PER SHARE

We compute basic net income (loss) per share by dividing net income (loss) by the weighted average number of common shares outstanding during the relevant period. Diluted net income (loss) per common share has been computed by dividing net income (loss) by the diluted number of common shares outstanding during the period. Except where the result would be antidilutive to net income (loss), diluted net income (loss) per common share would be computed assuming the impact of the conversion of the $200.0 million of 2.5% convertible senior notes due February 15, 2019 (the “Convertible Notes”), the exercise of outstanding stock options, the vesting of restricted stock units (“RSUs”), and the exercise of warrants.

We have a choice to settle the conversion obligation under the Convertible Notes in cash, shares or any combination of the two. Pursuant to certain covenants in our six-year $350.0 million term loan facility (the “2015 Term Loan Facility”), which we entered into in 2015 to partially fund the acquisition of CBR, we may be restricted from settling the conversion obligation in whole or in part with cash unless certain conditions in the 2015 Term Loan Facility are satisfied. We utilize the if-converted method to reflect the impact of the conversion of the Convertible Notes. This method assumes the conversion of the Convertible Notes into shares of our common stock and reflects the elimination of $1.9 million of interest expense related to the Convertible Notes during the three months ended September 30, 2016.

The dilutive effect of the warrants, stock options and RSUs has been calculated using the treasury stock method.

The components of basic and diluted net income (loss) per share for the three and nine months ended September 30, 2016 and 2015, were as follows (in thousands, except per share data):



	Three Months Ended September 30,					Nine Months Ended September 30,
	2016		2015			2016		2015
Net income (loss)	$	16,196	$	(20,584	)	$	8,074	$	25,578
Weighted average common shares outstanding	34,171		33,223			34,377		30,379
Effect of dilutive securities:
Stock options and RSUs	558		—			387		1,568
Warrants	—		—			—		3,015
Convertible 2.5% notes	7,382		—			—		—
Shares used in calculating dilutive net income (loss) per share	42,111		33,223			34,764		34,962
Net income (loss) per share:
Basic	$	0.47	$	(0.62	)	$	0.23	$	0.84
Diluted	$	0.43	$	(0.62	)	$	0.23	$	0.73

The following table sets forth the potential common shares issuable upon the exercise of outstanding options, the vesting of RSUs, the exercise of warrants (prior to consideration of the treasury stock method), and the conversion of the Convertible Notes, which were excluded from our computation of diluted net income (loss) per share because their inclusion would have been anti-dilutive (in thousands):



	Three Months Ended September 30,		Nine Months Ended September 30,
	2016	2015	2016	2015
Options to purchase shares of common stock	2,218	2,989	2,778	791
Shares of common stock issuable upon the vesting of RSUs	249	712	654	157
Warrants	7,382	7,382	7,382	—
Convertible 2.5% notes	—	7,382	7,382	7,382
Total	9,849	18,465	18,196	8,330

In connection with the issuance of the Convertible Notes, in February 2014, we entered into convertible bond hedges. The convertible bond hedges are not included for purposes of calculating the number of diluted shares outstanding, as their effect would be anti-dilutive. The convertible bond hedges are generally expected, but not guaranteed, to reduce the potential dilution and/or offset the cash payments we are required to make upon conversion of the Convertible Notes.