Earnings per Share

3 Months Ended

Dec. 31, 2020

We calculate basic earnings per common share (“EPS”) pursuant to the two-class method as a result of the issuance of the Series A Preferred Stock on June 24, 2016. Our Series A Preferred Stock is considered a participating security because, in the event that we pay a dividend or make a distribution on the outstanding common stock, we shall also pay each holder of the Series A Preferred Stock a dividend on an as-converted basis. The two-class method is an earnings allocation formula that determines EPS for common stock and participating securities according to dividend and participation rights in undistributed earnings. Under this method, all earnings, distributed and undistributed, are allocated to common shares and participating securities based on their respective rights to receive dividends. The Series A Preferred Stock is not included in the computation of basic EPS in periods in which we have a net loss, as the Series A Preferred Stock is not contractually obligated to share in our net losses.

Diluted EPS is calculated using the more dilutive of the two-class method or as-converted method. The two-class method uses net income available to common shareholders and assumes conversion of all potential shares other than the participating securities. The as-converted method uses net income and assumes conversion of all potential shares including the participating securities. Dilutive potential common shares include outstanding stock options, unvested restricted share units and convertible preferred stock. The basic and diluted weighted average shares outstanding are the same for the three months ended December 31, 2020 as a result of the net loss available to common shareholders and anti-dilutive impact of the potentially dilutive securities.

Subsequent to the issuance of our December 31, 2019 interim financial statements, we identified that the diluted EPS disclosures incorrectly stated that diluted EPS for the three months ended December 31, 2019 was calculated using the as-converted method and not the two-class method, when in fact diluted EPS was correctly calculated internally using the two-class method. The table in the disclosure summarizing the computation of diluted EPS incorrectly added back “Income allocated to participating securities” to what is equivalent to “Net income available to common shareholders” shown below and incorrectly included the corresponding 21,021 weighted average diluted participating shares outstanding in diluted shares outstanding. The disclosure errors had no impact on reported net income per diluted share for the three months ended December 31, 2019. The disclosures below have been corrected to appropriately reflect diluted EPS under the two-class method for the three months ended December 31, 2019. We have concluded that these corrections were not material to the previously issued condensed consolidated financial statements for the three months ended December 31, 2019.

The following table summarizes the computation of basic and diluted EPS share under the two-class or as-converted method, as well as the anti-dilutive shares excluded:


	Three Months Ended
	December 31,
	2020		2019
Basic earnings per common share:
Net income	$	1,083	$	4,684
Less: Preferred stock dividend declared	(1,313)		(1,323)
Net (loss) income available for distribution	(230)		3,361
Income allocated to participating securities	—		(1,513)
Net (loss) income available to common shareholders	$	(230)	$	1,848


	Three Months Ended
	December 31,
	2020		2019

Weighted average basic shares outstanding	32,658		25,663

Basic (loss) income per common share	$	(0.01)	$	0.07

Diluted earnings per common share:
Method used:	Two-class		Two-class
Net (loss) income available to common shareholders	$	(230)	$	1,848

Weighted average basic shares outstanding	32,658		25,663
Dilutive effect related to employee stock plans	—		375
Weighted average diluted shares outstanding	32,658		26,038

Diluted (loss) income per common share	$	(0.01)	$	0.07

Anti-dilutive shares excluded:
Outstanding stock-based grants	436		—
Convertible preferred stock	21,021		21,021
Total anti-dilutive shares excluded	21,457		21,021

Dilutive shares under the as-converted method(1)	53,905		47,059

(1) The dilutive shares under the as-converted method assume conversion of the Series A Preferred Stock and are presented here merely for reference. In a net income position, diluted earnings per share is determined by the more dilutive of the two-class method or the as-converted method.