Earnings Per Share

9 Months Ended

Sep. 30, 2022

(a)Basic

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands, except per share data)
Net income attributable to Karat Packaging Inc.	$	6,096	$	3,786	$	19,107	$	15,149
Weighted average number of common shares in issue	19,809		19,710		19,809		17,945
Basic earnings per share	$	0.31	$	0.19	$	0.96	$	0.84

(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 September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands, except per share data)
Net income attributable to Karat Packaging Inc.	$	6,096	$	3,786	$	19,107	$	15,149
Weighted average number of common shares in issue	19,809		19,710		19,809		17,945
Dilutive shares
Stock options and restricted stock units	129		171		113		165
Adjusted weighted average number of common shares	19,938		19,881		19,922		18,110
Diluted earnings per share	$	0.31	$	0.19	$	0.96	$	0.84

For the three months ended September 30, 2022 and 2021, a total of 434,000 and 90,000 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. For the nine months ended September 30, 2022 and 2021, a total of 452,000 and 157,000 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.