13. Net Income (Loss) Per Share of Common Stock

On May 2, 2018, our founder, Mark Pincus, elected to convert certain outstanding shares of Class B common stock and all outstanding shares of Class C common stock controlled by Mr. Pincus and an affiliated investment entity into an equivalent number of shares of Class A common stock. As a result of Mr. Pincus’ conversion, the remaining shares of Class B common stock represented less than 10% of the total voting power of all Zynga stockholders and, accordingly, each remaining outstanding share of Class B common stock automatically converted into one share of Class A common stock. Each Zynga stockholder now has one vote per share on all matters subject to stockholder vote. Following the conversion, no shares of Class B or Class C common stock are outstanding and the total number of authorized shares of capital stock will be reduced to account for the elimination of the Class B and Class C common stock. Accordingly, beginning in the second quarter of 2018, the Company calculated basic and dilutive net income (loss) per share under a single-class method.

Prior to the conversion noted above, we computed net income (loss) per share of common stock using the two-class method required for participating securities and multiple classes of common stock. Prior to the date of the initial public offering, we considered all series of our convertible preferred stock to be participating securities due to their non-cumulative dividend rights. Additionally, we considered shares issued upon the early exercise of options subject to repurchase and unvested restricted shares to be participating securities, because the holders of such shares have non-forfeitable dividend rights in the event we declare a dividend for common shares. In accordance with the two-class method, net income allocated to these participating securities, which include participation rights in undistributed net income, is subtracted from net income (loss) to determine total net income (loss) to be allocated to common stockholders.

Basic net income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding, including potential dilutive securities. In computing diluted net income (loss) per share, net income (loss) attributable to common shareholders is re-allocated to reflect the potential impact of dilutive securities, including stock options, unvested ZSUs, unvested performance-based ZSUs and ESPP withholdings. For periods in which we have generated a net loss or there is no income attributable to common stockholders, we do not include dilutive securities in our calculation of diluted net income (loss) per share, as the impact of these awards is anti-dilutive.

The following tables set forth the computation of basic and diluted net income (loss) per share of common stock (in thousands, except per share data):

	Three Months Ended June 30,			Six Months Ended June 30,
	2018			2018
	Class			Class
	A⁽¹⁾			A⁽¹⁾
BASIC:
Net income (loss) attributable to common stockholders – basic	$	(911	)	$	4,698
Weighted-average common shares outstanding – basic		858,666			864,117
Net income (loss) per share attributable to common stockholders – basic	$	(0.00	)	$	0.01
DILUTED:
Net income (loss) attributable to common stockholders – basic	$	(911	)	$	4,698
Weighted-average common shares outstanding – basic		858,666			864,117
Weighted-average effect of dilutive securities:
Stock options and employee stock purchase plan		—			10,803
ZSUs		—			14,093
Performance-based ZSUs		—			1,272
Weighted-average common shares outstanding – diluted		858,666			890,285
Net income (loss) per share attributable to common stockholders – diluted	$	(0.00	)	$	0.01

(1)

The net income (loss) per share calculations for the three and six months ended June 30, 2018 are presented as if the one-for-one class conversion occurred as of the beginning of the respective period.

	Three Months Ended June 30,						Six Months Ended June 30,
	2017						2017
	Class		Class		Class		Class			Class			Class
	A		B		C		A			B			C
BASIC:
Net income (loss) attributable to common stockholders – basic	$	4,565	$	407	$	121	$	(3,896	)	$	(382	)	$	(103	)
Weighted-average common shares outstanding – basic		773,704		68,904		20,517		772,679			75,289			20,517
Net income (loss) per share attributable to common stockholders – basic	$	0.01	$	0.01	$	0.01	$	(0.01	)	$	(0.01	)	$	(0.01	)
DILUTED:
Net income (loss) attributable to common stockholders – basic	$	4,565	$	407	$	121	$	(3,896	)	$	(382	)	$	(103	)
Reallocation of net income (loss) as a result of conversion of Class C shares to Class A shares		121		—		—		(103	)		—			—
Reallocation of net income (loss) as a result of conversion of Class B shares to Class A shares		407		—		—		(382	)		—			—
Reallocation of net income (loss) to Class B and Class C shares		—		—		—		—			—			—
Net income (loss) attributable to common stockholders – diluted	$	5,093	$	407	$	121	$	(4,381	)	$	(382	)	$	(103	)
Weighted-average common shares outstanding – basic		773,704		68,904		20,517		772,679			75,289			20,517
Conversion of Class C to Class A common shares outstanding		20,517		—		—		20,517			—			—
Conversion of Class B to Class A common shares outstanding		68,904		—		—		75,829			—			—
Weighted-average effect of dilutive securities:
Stock options and employee stock purchase plan		9,811		917		—		—			—			—
ZSUs		14,710		—		—		—			—			—
Performance-based ZSUs		345		—		—		—			—			—
Weighted-average common shares outstanding – diluted		887,991		69,821		20,517		869,025			75,289			20,517
Net income (loss) per share attributable to common stockholders – diluted	$	0.01	$	0.01	$	0.01	$	(0.01	)	$	(0.01	)	$	(0.01	)

The following weighted-average equity awards were excluded from the computation of diluted net income (loss) per share because their effect would have been anti-dilutive for the periods presented (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Stock options and employee stock purchase plan		38,278		16,827		9,737		35,138
Restricted shares		—		—		—		1,062
ZSUs		53,536		2,770		2,720		49,263
Total		91,814		19,597		12,457		85,463