NET INCOME PER SHARE

3 Months Ended

Mar. 31, 2020

Basic net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed in a similar manner, but it also includes the effect of potential common shares outstanding during the period, when dilutive. Potential common shares include Stock Options, RSUs, PSUs, shares to be purchased under the Company’s ESPP, the Notes due 2023, the Notes due 2024 and warrants issued in conjunction with the Notes due 2024. Until the Company’s authorized shares of common stock increases to satisfy the share reservation condition, the Notes due 2025 and warrants issued in conjunction with the Notes due 2025 must be settled in cash, and therefore excluded from shares used in diluted per share amounts.

The dilutive effect of potentially dilutive common shares is reflected in diluted earnings per share by application of the treasury stock method for stock options, RSUs, PSUs, Notes due 2024, warrants issued in conjunction with the Notes due 2024 and shares to be purchased under the ESPP, and by application of the if-converted method for the Notes due 2023. To the extent these potential common shares are antidilutive, they are excluded from the calculation of diluted net income per share.

The following table presents the computation of basic and diluted net income per share for the periods presented.



	Three Months Ended March 31,
	2020		2019
	(In thousands, except per share data)
Numerator:
Net income	$	68,936	$	2,765
Notes due 2023 interest and financing costs, net	44		—
Adjusted net income	$	68,980	$	2,765

Denominator:
Shares used in basic per share amounts:
Weighted average common shares outstanding	123,531		108,195

Shares used in diluted per share amounts:
Weighted average common shares outstanding	123,531		108,195
Effect of dilutive securities:
Employee stock-based awards	8,609		7,668
Warrants (issued in conjunction with Notes due 2024)	2,128		—
Notes due 2024	2,936		—
Notes due 2023	900		—
Weighted average common shares outstanding for diluted calculation	138,104		115,863

Basic and diluted net income per share
Net income per share, basic	$	0.56	$	0.03
Net income per share, diluted	$	0.50	$	0.02

The following outstanding shares of common stock equivalents were excluded from the calculation of the diluted net income per share attributable to common stockholders because their effect would have been antidilutive.



	Three Months Ended March 31,
	2020	2019
	(In thousands)
Employee stock options	—	112
RSUs and PSUs	—	91
Notes due 2023	—	11,701
Total	—	11,904

Diluted earnings per share for the three months ended March 31, 2020 and 2019 includes the dilutive effect of stock options, RSUs, PSUs, and shares to be purchased under the ESPP, the Notes due 2023, the Notes due 2024 and warrants issued in conjunction with the Notes due 2024. For the three months ended March 31, 2020, no shares were antidilutive and excluded from diluted earnings per share. For the three months ended March 31, 2019, certain common stock issuable under stock options, RSUs, PSUs and Notes due 2023 have been omitted from the diluted net income per share calculation because including such shares would have been antidilutive.

Since the Company has the intent and ability to settle the aggregate principal amount of the Notes due 2024 in cash and any excess in shares of the Company’s common stock, the Company uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable. In order to compute the dilutive effect, the number of shares included in the denominator of diluted net income per share is determined by dividing the conversion spread value of the “in-the-money” Notes due 2024 by the Company’s average share price during the period and including the resulting share amount in the diluted net income per share denominator. The conversion spread will have a dilutive impact on net income per share of common stock when the average market price of the Company’s common stock for a given period exceeds the conversion price of $20.5010 per share for the Notes due 2024. The Company’s weighted average common stock price since the issuance of the Notes due 2024 was above the conversion price, resulting in an impact on the diluted net income per share.