Earnings Per Share

9 Months Ended

Sep. 30, 2012

Earnings Per Share [Abstract]

Earnings per share

7. Earnings per share

Basic net income per share allocable to holders of common stock is computed by dividing the net income allocable to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. Net income allocable to holders of common stock is calculated using the two-class method, as we have issued securities other than common stock that contractually entitle the holder to participate in dividends and earnings. Holders of our convertible preferred stock were each entitled to receive non-cumulative dividends at the annual rates payable prior and in preference to any dividends on any shares of our common stock. After payment of these preferred stock dividends, any additional dividends were required to be distributed among the holders of convertible preferred stock and common stock pro rata (on an as-converted basis). The holders of the convertible preferred stock did not have a contractual obligation to share in our losses. We considered our convertible preferred stock to be participating securities. The two-class method requires earnings for the period, after deduction of preferred stock dividends, to be allocated between the holders of common and preferred stock based on their respective rights to receive dividends. Basic net income per share is then calculated by dividing net income allocable to holders of common stock (after the reduction for any undeclared preferred stock dividends assuming the distribution of current income for the period) by the weighted average number of shares of common stock outstanding.

In computing diluted net income allocable to holders of common stock, undistributed earnings are reallocated to reflect the potential impact of dilutive securities. Diluted net income per share allocable to holders of common stock is computed by dividing the net income allocable to holders of common stock for the period by the weighted average number of common and potential common shares outstanding during the period, if the effect of each class of potential shares of common stock is dilutive. Potential shares of common stock include incremental shares of common stock issuable upon the exercise of stock options, conversion of preferred stock and exercise of warrants.

The following table sets forth the computation of basic and diluted net income per share under the two-class method attributable to common stockholders:

	Three months ended September 30,					Nine months  ended September 30,
	2012		2011			2012			2011
	(in thousands, except per share amounts)
Numerator:
Net income	$	3,664	$	2,401		$	12,158		$	13,934
Non-cumulative dividends to holders of preferred stock		—		(1,498	)		(2,248	)		(4,495	)
Undistributed earnings allocable to holders of preferred stock		—		(840	)		(3,709	)		(8,821	)
Net income—basic		3,664		63			6,201			618
Adjustment for undistributed earnings reallocated to holders of common stock		—		145			521			1,221
Net income—diluted	$	3,664	$	208		$	6,722		$	1,839
Denominator:
Weighted average shares used in computing net income per share:
Basic		20,342		982			10,956			925
Weighted average effect of potentially dilutive securities:
Options to purchase common stock		2,699		2,820			2,789			2,271
Employee stock purchase plan		117		—			70			—
Common stock warrants		1		—			1			—
Convertible preferred stock warrants		—		—			—			—
Diluted		23,159		3,802			13,816			3,196
Net income per share:
Basic	$	0.18	$	0.06		$	0.57		$	0.67
Diluted	$	0.16	$	0.05		$	0.49		$	0.58

The following potentially dilutive shares of common stock were excluded from the computation of diluted net income per share of common stock for the periods presented because including them would have had an antidilutive effect:

	Three months  ended September 30,				Nine months  ended September 30,
	2012		2011		2012		2011
	(in thousands)
Options to purchase common stock		923		—		345		—
Convertible preferred stock (if-converted basis)		—		13,205		6,506		13,205
Restricted stock units		18		—		18		—
Total		941		13,205		6,869		13,205