14. Earnings per share

The Company has issued redeemable common stock which is redeemable at an amount other than fair value. Redemption of a class of common stock at other than fair value increases or decreases the carrying amount of the redeemable common stock and is reflected in basic earnings per share using the two-class method. There were no redemptions of common stock, or adjustments to the carrying value of the redeemable common stock during the three and nine months ended March 31, 2018 or 2017. Accordingly, the two-class method presented below does not include the impact of any redemption. The Company's redeemable common stock is described in Note 15 to the Company's audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2017.

Basic earnings per share include shares of restricted stock that meet the definition of a participating security because these shares are eligible to receive non-forfeitable dividend equivalents at the same rate as common stock. Basic earnings per share have been calculated using the two-class method and basic earnings per share for the three and nine months ended March 31, 2018 and 2017, reflects only undistributed earnings. The computation below of basic earnings per share excludes the net income attributable to shares of unvested restricted stock (participating non-vested restricted stock) from the numerator and excludes the dilutive impact of these unvested shares of restricted stock from the denominator.

Diluted earnings per share have been calculated to give effect to the number of shares of additional common stock that would have been outstanding if the potential dilutive instruments had been issued in each period. Stock options are included in the calculation of diluted earnings per share utilizing the treasury stock method and are not considered to be participating securities, as the stock options do not contain non-forfeitable dividend rights.

The calculation of diluted earnings per share includes the dilutive effect of a portion of the restricted stock granted to employees in August 2014, November 2014, August 2015, August 2016, August 2017, and March 2018 as these shares of restricted stock are considered contingently returnable shares for the purposes of the diluted earnings per share calculation and the vesting conditions in respect of a portion of the restricted stock had been satisfied. The vesting conditions for awards made in March 2018, August 2017, August 2016 and August 2015 are discussed in Note 13 and the vesting conditions for all other awards are discussed in Note 18 to the Company's audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2017.

The following table presents net income attributable to Net1 (income from continuing operations) and the share data used in the basic and diluted earnings per share computations using the two-class method:


		Three months ended						Nine months ended
		March 31,						March 31,
		2018			2017			2018			2017
		(in thousands except						(in thousands except
		percent and						percent and
		per share data)						per share data)
Numerator:
Net income attributable to Net1	$	3,009		$	18,392		$	32,114		$	61,665
Undistributed earnings		3,009			18,392			32,114			61,665
Percent allocated to common shareholders (Calculation 1)		98	%		98	%		98	%		98	%
Numerator for earnings per share: basic and diluted	$	2,962		$	18,064		$	31,597		$	60,609

Denominator:
Denominator for basic earnings per share: weighted-average
common shares outstanding		55,828			53,666			55,874			52,054
Effect of dilutive securities:
Stock options		61			169			54			127
Denominator for diluted earnings per share: adjusted
weighted average common shares outstanding and
assumed conversion		55,889			53,835			55,928			52,181

Earnings per share:
Basic	$	0.05		$	0.34		$	0.57		$	1.16
Diluted	$	0.05		$	0.34		$	0.56		$	1.16

(Calculation 1)
Basic weighted-average common shares outstanding (A)		55,828			53,666			55,874			52,054
Basic weighted-average common shares outstanding and
unvested restricted shares expected to vest (B)		56,716			54,639			56,788			52,961
Percent allocated to common shareholders (A) / (B)		98	%		98	%		98	%		98	%

Options to purchase 288,692 and 351,828 shares of the Company's common stock at prices ranging from $10.59 to $24.46 per share were outstanding during the three and nine months ended March 31, 2018, but were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average market price of the Company's common stock. The options, which expire at various dates through August 27, 2024, were still outstanding as of March 31, 2018.