Net Income (Loss) Per Share

9 Months Ended

Sep. 30, 2021

On January 1, 2021, the Company adopted the accounting standard update to simplify the accounting for convertible debt instruments. The Company now uses the if converted method for its Convertible notes in calculating the diluted net income (loss) per share, and includes the effect of potential share settlement for the Convertible notes, if the effect is dilutive.

Basic earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method and the if-converted method. Dilutive potential common shares include outstanding stock options, restricted stock units, performance stock units, ESPP shares and conversion shares under the Convertible notes. The diluted EPS is computed with the assumption that the Company will settle the convertible debt in shares, rather than cash.

As of September 30, 2021, the Company’s Convertible notes were potentially convertible into 4,167,232 shares of common stock. The Company used the if-converted method to calculate the potential dilutive effect of the conversion spread on diluted net income per share for the nine months ended September 30, 2021.

The denominator for diluted net income (loss) per share does not include any effect from the capped call transactions the Company entered into concurrently with the issuance of the Convertible notes, as this effect would be anti-dilutive. In the event of conversion of a Convertible note, shares delivered to the Company under the capped call will offset the dilutive effect of the shares that the Company would issue under the Convertible notes. In the three and nine months ended September 30, 2021, the “if-converted method” was not applied as the effect would have been anti-dilutive.

For the three and nine months ended September 30, 2020, and the three months ended September 30, 2021, basic loss per common share and diluted loss per common share are the same in each respective period as the inclusion of any potentially issuable shares would be anti-dilutive.

The following table sets forth the computation of basic and diluted net income (loss) and the weighted average number of shares used in computing basic and diluted net income (loss) per share (in thousands, except per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Numerator:
Net income (loss) used in calculating net income (loss) per share, basic and diluted	$	(1,390)	$	(2,257)	$	5,997	$	(26,065)
Denominator:
Weighted average shares of common stock outstanding used in computing net income (loss) per share, basic	17,945		17,603		17,860		16,368
Dilutive effect of incremental shares and share equivalents:
Options	—		—		70		—
RSUs	—		—		297		—
PSUs	—		—		81		—
ESPP	—		—		19		—
Weighted average shares of common stock outstanding used in computing net income (loss) per share, diluted	17,945		17,603		18,327		16,368
Net income (loss) per share:
Net income (loss) per share, basic	$	(0.08)	$	(0.13)	$	0.34	$	(1.59)
Net income (loss) per share, diluted	$	(0.08)	$	(0.13)	$	0.33	$	(1.59)

The following numbers of shares outstanding, prior to the application of the treasury stock method and the if-converted method, were excluded from the computation of diluted net income (loss) per common share for the periods presented because including them would have had an anti-dilutive effect (in thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
Capped call	4,167	—	4,167	—
Convertible notes	4,167	—	4,167	—
Options to purchase common stock	308	232	187	246
Restricted stock units	528	733	72	735
Performance stock units	455	24	24	83
Employee stock purchase plan shares	22	17	—	57
Total	9,647	1,006	8,617	1,121