(4) Net Income (Loss) Per Share

The Company computes net income (loss) per share of Class A and Class B common stock using the two class method. Under the provisions of the two class method, basic net income (loss) per share is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of common and dilutive common equivalent shares outstanding during the period. The computation of the diluted net income (loss) per share of Class B common stock assumes the conversion of Class A common stock to Class B common stock, while the diluted net income (loss) per share of Class A common stock does not assume the conversion of those shares.

In accordance with the two class method, the undistributed earnings for each period are allocated based on the contractual participation rights of the Class A and Class B common shares and the restricted shares as if the earnings for the year had been distributed. Considering the terms of the Company’s charter which provides that, if and when dividends are declared on our common stock in accordance with Delaware General Corporation Law, equivalent dividends shall be paid with respect to the shares of Class A common stock and Class B common stock and that both classes of common stock have identical dividend rights and would share equally in our net assets in the event of liquidation, we have allocated undistributed losses on a proportionate basis. Additionally, the Company has paid dividends equally to both classes of common stock and the unvested restricted shares since it initiated a quarterly cash dividend in November 2006.

Instruments granted in unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities prior to vesting. As such, the Company’s restricted stock awards are considered participating securities for purposes of calculating earnings per share. Under the two class method, dividends paid on unvested restricted stock are allocated to these participating securities and therefore impacts the calculation of amounts allocated to common stock.

The following table includes net income (loss) applicable to common stockholders used to compute basic net income (loss) per share for the periods ended (in thousands, except per share amount):


	Nine months ended September 30,
	2012						2013
	Class A			Class B			Class A		Class B
Basic net income (loss) per share:
Numerator:
Net income (loss) from continuing operations	$	(292	)	$	(475	)	$	87	$	273
Dividends paid to participating securities		—			(262	)		—		—

Net income (loss) from continuing operations applicable to common stockholders	$	(292	)	$	(737	)	$	87	$	273
Discontinued operations, net of tax		(27	)		(68	)		207		645

Net income (loss) applicable to common stockholders	$	(319	)	$	(805	)	$	294	$	918

Denominator:
Weighted average number of shares outstanding used to calculate basic net income (loss) per share		9,576			24,303			9,168		26,280

Basic net income (loss) per share:
Net income (loss) from continuing operations applicable to common stockholders	$	(0.03	)	$	(0.03	)	$	0.01	$	0.01
Discontinued operations, net of tax		(0.00	)		(0.00	)		0.02		0.02

Basic net income (loss) per share applicable to common stockholders	$	(0.03	)	$	(0.03	)	$	0.03	$	0.03


	Three months ended September 30,
	2012						2013
	Class A			Class B			Class A		Class B
Numerator:
Net income (loss) from continuing operations	$	(172	)	$	(318	)	$	133	$	465
Dividends paid to participating securities		—			(123	)		—		—

Net income (loss) from continuing operations applicable to common stockholders	$	(172	)	$	(441	)	$	133	$	465
Discontinued operations, net of tax		(15	)		(38	)		196		687

Net income (loss) applicable to common stockholders	$	(187	)	$	(479	)	$	329	$	1,152

Denominator:
Weighted average number of shares outstanding used to calculate basic net income (loss) per share		9,570			24,536			8,377		27,308


Basic net income (loss) per share:
Net income (loss) from continuing operations applicable to common stockholders	$	(0.02	)	$	(0.02	)	$	0.02	$	0.02
Discontinued operations, net of tax		(0.00	)		(0.00	)		0.02		0.02

Basic net income (loss) per share applicable to common stockholders	$	(0.02	)	$	(0.02	)	$	0.04	$	0.04

The following table calculates net income (loss) to diluted net income (loss) applicable to common stockholders used to compute diluted net income (loss) per share for the periods ended (in thousands, except per share amounts):


	Nine months ended September 30,
	2012						2013
	Class A			Class B			Class A		Class B
Diluted net income (loss) per share:
Numerator:
Net income (loss) from continuing operations	$	(292	)	$	(475	)	$	87	$	273
Dividends paid to participating securities		—			(262	)		—		—
Reallocation of net loss for Class A shares as a result of conversion of Class A to Class B shares		—			(292	)		—		87

Net income (loss) from continuing operations applicable to common stockholders	$	(292	)	$	(1,029	)	$	87	$	360

Discontinued operations, net of tax		(27	)		(68	)		204		648
Reallocation of discontinued operations for Class A shares as a result of conversion of Class A to Class B shares		—			(27	)		—		204

Diluted discontinued operations, net of tax	$	(27	)	$	(95	)	$	204	$	852

Net income (loss) applicable to common stockholders	$	(319	)	$	(1,124	)	$	291	$	1,212

Denominator:
Weighted average number of shares outstanding used to calculate basic net income (loss) per share		9,576			24,303			9,168		26,280
Weighted average stock options and warrants and common shares subject to repurchase or cancellation		—			—			—		923
Conversion of Class A to Class B common shares outstanding		—			9,576			—		9,168

Weighted average number of shares outstanding used to calculate diluted net income (loss) per share		9,576			33,879			9,168		36,371

Diluted net income (loss) per share:
Net income (loss) from continuing operations applicable to common stockholders	$	(0.03	)	$	(0.03	)	$	0.01	$	0.01
Discontinued operations, net of tax		(0.00	)		(0.00	)		0.02		0.02

Net income (loss) per share applicable to common stockholders	$	(0.03	)	$	(0.03	)	$	0.03	$	0.03


	Three months ended September 30,
	2012						2013
	Class A			Class B			Class A		Class B
Numerator:
Net income (loss) from continuing operations	$	(172	)	$	(318	)	$	129	$	469
Dividends paid to participating securities		—			(123	)		—		—
Reallocation of net income (loss) for Class A shares as a result of conversion of Class A to Class B shares		—			(172	)		—		129

Net income (loss) from continuing operations applicable to common stockholders	$	(172	)	$	(613	)	$	129	$	598

Diluted discontinued operations, net of tax		(15	)		(38	)		191		692
Reallocation of diluted discontinued operations for Class A shares as a result of conversion of Class A to Class B shares		—			(15	)		—		191

Diluted discontinued operations, net of tax	$	(15	)	$	(53	)	$	191	$	883

Net income (loss) applicable to common stockholders	$	(187	)	$	(666	)	$	320	$	1,481

Denominator:
Weighted average number of shares outstanding used to calculate basic net income (loss) per share		9,570			24,536			8,377		27,308
Weighted average stock options and warrants and common shares subject to repurchase or cancellation		—			—			—		1,592
Conversion of Class A to Class B common shares outstanding		—			9,570			—		8,377

Weighted average number of shares outstanding used to calculate diluted net income (loss) per share		9,570			34,106			8,377		37,277

Diluted net income (loss) per share:
Net income (loss) from continuing operations applicable to common stockholders	$	(0.02	)	$	(0.02	)	$	0.02	$	0.02
Discontinued operations, net of tax		(0.00	)		(0.00	)		0.02		0.02

Diluted net income (loss) per share applicable to common stockholders	$	(0.02	)	$	(0.02	)	$	0.04	$	0.04

The weighted average number of shares used to calculate the diluted net income (loss) per share includes the weighted average number of shares from the assumed conversion of Class A common stock to Class B common stock.

The computation of diluted net income (loss) per share excludes the following because their effect would be anti-dilutive (in thousands):

•

For the three and nine months ended September 30, 2012, outstanding options to acquire 6,640 shares of Class B common stock. For the three and nine months ended September 30, 2013, outstanding options to acquire 3,649 and 6,025 shares of Class B common stock, respectively.

•

For the three and nine months ended September 30, 2012, 3,566 shares of unvested Class B restricted common shares, respectively, issued to employees and in connection with acquisitions. For the three and nine months ended September 30, 2013, 280 shares of unvested Class B restricted common shares issued to employees and in connection with acquisitions.

•

For the three and nine months ended September 30, 2012, 209 restricted stock units. For the three and nine months ended September 30, 2013, 181 restricted stock units.

•

For the three and nine months ended September 30, 2012, 4,907 shares of Class B common stock that may be issued in lieu of cash for the deferred payments related to the acquisition of Jingle using the “if converted” method.