Q32 Bio Inc. Earnings Per Share Disclosure
19. Net Income (Loss) per Share
Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the applicable period. In computing diluted net income (loss) per share, only potential shares of common stock that are dilutive are included. The Company considered each issue or series of issues of potential shares of common stock separately when determining whether potential shares of common stock are dilutive or antidilutive. The Company made such determination in sequence from the most dilutive to the least dilutive and concluded that its Convertible Notes are dilutive to net income per share for the year ended December 31, 2024. Pursuant to FASB ASC Topic 260, Earnings Per Share, the Company applied the if-converted method to determine the effect of its Convertible Notes on the diluted earnings per share calculations. Pursuant to such method, the Company adjusted the numerator for the gains or losses recognized during the period
in net income from the Convertible Notes and the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the Convertible Notes were converted as of the beginning the period.
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Years Ended December 31, |
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(in thousands, except per share amounts) |
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2024 |
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2023 |
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Numerator: |
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|
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Net income (loss)-basic |
|
$ |
(47,733 |
) |
|
$ |
(53,743 |
) |
Net income (loss)-diluted |
|
$ |
(63,533 |
) |
|
$ |
(53,743 |
) |
Denominator: |
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Weighted-average common shares outstanding-basic |
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|
9,320,884 |
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|
|
349,060 |
|
Dilutive securities |
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|
336,812 |
|
|
|
|
|
Weighted-average common shares outstanding-diluted |
|
|
9,657,696 |
|
|
|
349,060 |
|
|
|
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|
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||
Net income (loss) per share-basic |
|
$ |
(5.12 |
) |
|
$ |
(153.96 |
) |
Net income (loss) per share-diluted |
|
$ |
(6.58 |
) |
|
$ |
(153.96 |
) |
As of December 31, 2024, the Company’s potentially dilutive securities, which include stock options and warrants, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. As of December 31, 2023, the Company’s potentially dilutive securities, which include convertible preferred stock, convertible notes, stock options and warrants, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.
The Company excluded the following from the computation of diluted net loss per share attributable to common stockholders because including them would have had an anti-dilutive effect:
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Years Ended December 31, |
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2024 |
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2023 |
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Series A convertible preferred stock |
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— |
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2,286,874 |
|
Series A-1 convertible preferred stock |
|
|
— |
|
|
|
312,094 |
|
Series B convertible preferred stock |
|
|
— |
|
|
|
2,625,897 |
|
Options to purchase common stock |
|
|
1,942,920 |
|
|
|
1,120,014 |
|
Warrants to purchase common stock |
|
|
18,145 |
|
|
|
18,145 |
|
In addition, during the year ended December 31, 2022, Legacy Q32 issued the Convertible Notes with a principal balance of $30.0 million. As described in Note 11, the Convertible Notes contained conversion features whereby the Convertible Notes and any accrued interest may have converted into either a variable number of shares of common stock or into shares of Series B preferred stock based on a fixed exchange ratio. Any shares of Series B preferred stock issued to settle the Convertible Notes would then be convertible into shares of common stock. The Convertible Notes were excluded from the computation of diluted net loss per share attributable to common stockholders for the year ended December 31, 2023, because including them would have had an anti-dilutive effect. Per the Merger further discussed in Note 1, the Convertible Notes converted into 1,433,410 shares of common stock at the effective date of the Merger.
About Earnings Per Share Disclosures
The earnings per share disclosure breaks down the calculation from net income to both basic and diluted EPS, revealing the full impact of a company's capital structure on per-share economics. The reconciliation between basic and diluted share counts exposes how many stock options, RSUs, convertible securities, and warrants are potentially dilutive to existing shareholders.
Key signals: a widening gap between basic and diluted shares indicates growing dilution from equity compensation or convertible instruments. Anti-dilutive securities excluded from the diluted calculation deserve attention — they represent latent dilution that will materialize if the stock price rises. Watch for the effect of share buybacks on per-share metrics: EPS growth driven primarily by repurchases rather than income growth signals weakening fundamentals. Compare year-over-year changes in the diluted share count against equity compensation expense to assess whether management is effectively managing dilution.