Net (Loss) Income Per Share

9 Months Ended

Sep. 30, 2022

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, 2022, the Company’s Convertible Notes were initially convertible into 6,640,256 shares of common stock.

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 issuances of 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, 2022, the if-converted method was not applied as the effect would have been anti-dilutive.

For the three and nine months ended September 30, 2022, a basic loss per common share and diluted loss per common share are the same in each 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 (loss) income per share (in thousands, except per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Numerator:
Net (loss) income used in calculating net (loss) income per share, basic	$	(12,134)	$	(1,390)	$	(74,552)	$	5,997
Denominator:
Weighted average shares of common stock outstanding used in computing net (loss) income per share, basic	19,593		17,945		18,897		17,860
Dilutive effect of incremental shares and share equivalents:
Convertible notes	—		—		—		—
Options	—		—		—		70
RSUs	—		—		—		297
PSUs	—		—		—		81
ESPP	—		—		—		19
Weighted average shares of common stock outstanding used in computing net (loss) income per share, diluted	19,593		17,945		18,897		18,327
Net (loss) income per share:
Net (loss) income per share, basic	$	(0.62)	$	(0.08)	$	(3.95)	$	0.34
Net (loss) income per share, diluted	$	(0.62)	$	(0.08)	$	(3.95)	$	0.33

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 (loss) income 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,
	2022	2021	2022	2021
Capped call	8,724	4,167	8,724	4,167
Convertible notes	6,640	4,167	6,640	4,167
Options to purchase common stock	521	308	521	187
Restricted stock units	488	528	488	72
Performance stock units	470	455	470	24
Employee stock purchase plan shares	22	22	22	—
Total	16,865	9,647	16,865	8,617