Earnings Per Share

6 Months Ended

Jun. 30, 2022

9. Earnings Per Share

The Company has two classes of common stock authorized: Class A common stock and Class B common stock. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to ten votes per share. Each share of Class B common stock is convertible into one share of Class A common stock at the option of the holder at any time or automatically upon certain events described in the Company’s amended and restated certificate of incorporation, including upon either the death or voluntary termination of the Company’s Executive Chairman. The Company allocates undistributed earnings attributable to common stock between the common stock classes on a one‑to‑one basis when computing net income per share. As a result, basic and diluted net income per share of Class A common stock and per share of Class B common stock are equivalent.

During the three months ended June 30, 2022 and 2021 and during the six months ended June 30, 2022, no shares of Class B common stock were converted to Class A common stock. During the six months ended June 30, 2021, holders of Class B common stock converted 929,597 shares of Class B common stock to Class A common stock.

Basic net income per share (“Basic EPS”) is computed by dividing consolidated net income adjusted for net loss attributable to the redeemable noncontrolling interest and changes in the redemption value of redeemable noncontrolling interest, if applicable, by the weighted-average number of common shares outstanding during the reporting period. The Company computes the weighted-average number of common shares outstanding during the reporting period using the total number of shares of Class A common stock and Class B common stock outstanding as of the last day of the previous year plus the weighted-average of any additional shares issued and outstanding during the reporting period.

Diluted net income per share (“Diluted EPS”) gives effect to all potentially dilutive securities. Diluted EPS is computed by dividing consolidated net income adjusted for net loss attributable to the redeemable noncontrolling interest and changes in the redemption value of redeemable noncontrolling interest, if applicable and dilutive, by the weighted-average number of common shares outstanding during the reporting period using (i) the number of shares of common stock used in the Basic EPS calculation as indicated above, (ii) if dilutive, the incremental weighted-average common stock that the Company would issue upon the exercise of stock options and the vesting of RSUs, (iii) if dilutive, market-based performance awards based on the number of shares that would be issuable as of the end of the reporting period assuming the end of the reporting period was also the end of the contingency period. The dilutive effect of these common stock equivalents is reflected in diluted earnings per share by application of the treasury stock method. The if-converted method is used to calculate the number of shares issuable upon exercise of the 2024 Put Right (as defined in Note 4 to the financial statements contained within the Annual Report), inclusive of CarOffer noncontrolling interest and incentive units, that would be issuable as of the end of the reporting period assuming the end of the reporting period was also the end of the contingency period.

For the three and six months ended June 30, 2022 and 2021, a reconciliation of the numerator and denominator used in the calculation of basic and diluted net income per share is as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Numerator:
Consolidated net income	$	18,061		$	27,396		$	36,899		$	46,947
Net loss attributable to redeemable noncontrolling interest		(1,223	)		(656	)		(2,295	)		(3,466	)
Accretion of redeemable noncontrolling interest to redemption value		29,620			—			111,620			—
Net (loss) income attributable to common stockholders — basic	$	(10,336	)	$	28,052		$	(72,426	)	$	50,413
Net loss attributable to redeemable noncontrolling interest		—			(656	)		—			(656	)
Net (loss) income attributable to common stockholders — diluted	$	(10,336	)	$	27,396		$	(72,426	)	$	49,757
Denominator:
Weighted-average number of shares of common stock used in computing net income per share attributable to common stockholders — basic		118,390,641			117,124,895			118,211,975			116,722,913
Dilutive effect of share equivalents resulting from stock options		—			450,512			—			481,802
Dilutive effect of share equivalents resulting from unvested restricted stock units		—			300,916			—			360,363
Dilutive effect of share equivalents resulting from CarOffer incentive units and noncontrolling interest		—			1,577,781			—			788,891
Weighted-average number of shares of common stock used in computing net income per share attributable to common stockholders — diluted		118,390,641			119,454,104			118,211,975			118,353,969
Net (loss) income per share attributable to common stockholders:
Basic	$	(0.09	)	$	0.24		$	(0.61	)	$	0.43
Diluted	$	(0.09	)	$	0.23		$	(0.61	)	$	0.42

For the three and six months ended June 30, 2022 and 2021, potentially dilutive common stock equivalents that have been excluded from the calculation of diluted weighted-average shares outstanding as their effect would have been anti-dilutive are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Stock options outstanding		885,547		588,490		914,870		457,714
Restricted stock units outstanding		4,296,625		2,849,737		4,186,653		2,671,279
CO Incentive Units, Subject Units and noncontrolling interest		15,205,940		—		11,498,025		—

For the three and six months ended June 30, 2021, shares of Class A common stock potentially issuable under market-based performance awards of approximately 282,921 were excluded from the calculation of weighted average shares used to compute Diluted EPS, as the market-based vesting conditions had not been achieved as of the reporting period end date and as such there were zero contingently issuable shares. During the three months ended March 31, 2022, the Company modified its market-based performance awards to contain only service-based vesting conditions in line with the Company's other restricted stock unit awards.

For the three and six months ended June 30, 2022, there was no effect of potentially dilutive shares as the numerator was negative.