Earnings Per Share

3 Months Ended

Mar. 31, 2022

(a)Basic

Basic earnings per share is calculated by dividing the net income attributable to Karat Packaging for the period by the weighted average number of common shares outstanding during the related period.


	Three Months Ended March 31,
	2022		2021
	(in thousands, except per share data)
Net income attributable to Karat Packaging Inc.	$	6,667	$	1,780
Weighted average number of common shares in issue	19,808		15,167
Basic earnings per share	$	0.34	$	0.12

(b)Diluted

Diluted earnings per share is calculated based upon the weighted average number of common shares and common equivalent shares outstanding during the period, calculated using the treasury stock method. Under the treasury stock method, exercise proceeds include the amount the employee must pay for exercising stock options and the amount of compensation cost related to stock awards for future services that the Company has not yet recognized. Common equivalent shares are excluded from the computation in periods in which they have an anti-dilutive effect.

The following table summarizes the calculation of diluted earnings per share:


	Three Months Ended March 31,
	2022		2021
	(in thousands, except per share data)
Net income attributable to Karat Packaging Inc.	$	6,667	$	1,780
Weighted average number of common shares in issue	19,808		15,167
Dilutive shares
Stock options and restricted stock units	93		236
Adjusted weighted average number of common shares	19,901		15,403
Diluted earnings per share	$	0.34	$	0.12

For the three months ended March 31, 2022 and 2021, a total of 474,000 and 236,000 shares of potentially dilutive shares, respectively, have been excluded in the diluted earnings per share calculation due to its anti-dilutive impact on earnings per share.