Net (Loss) Income per Share
Basic net (loss) income per share is calculated by dividing net (loss) income by the weighted-average shares outstanding during the period, without consideration for common stock equivalents. Diluted net (loss) income per share is calculated by adjusting the weighted-average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury stock method. For purposes of the dilutive net (loss) income per share calculation, stock options, RSUs and PSUs for which the performance and market vesting conditions, respectively, have been deemed probable, and 2013 ESPP shares are considered to be common stock equivalents, while PSUs with performance and market vesting conditions, respectively, that were not deemed probable as of December 31, 2025 are not considered to be common stock equivalents.
We utilize the control number concept in the computation of diluted earnings per share to determine whether potential common stock equivalents are dilutive. The control number used is net (loss) income from continuing operations. The control number concept requires that the same number of potentially dilutive securities applied in computing diluted earnings per share from continuing operations be applied to all other categories of income or loss, regardless of their anti-dilutive effect on such categories. Since we had a net loss for the years ended December 31, 2025 and 2023, no dilutive effect was recognized in the calculation of loss per share, and basic and diluted net loss per share was the same for those periods.
The following is a reconciliation of basic weighted-average number of common shares used in computing net (loss) income per share to diluted weighted-average number of common shares used in computing net (loss) income per share for the periods indicated:
| | | | | | | | | | | | | | | | | |
| Years ended December 31, |
| 2025 | | 2024 | | 2023 |
| Basic shares | 57,972,004 | | | 56,807,415 | | | 55,651,487 | |
| Effect of dilutive securities | | | | | |
| Stock options | — | | | 336,446 | | | — | |
| Restricted stock units | — | | | 732,925 | | | — | |
| Performance-based stock units | — | | | 8,845 | | | — | |
| Employee stock purchase plan shares | — | | | 3,624 | | | — | |
| Diluted shares | 57,972,004 | | | 57,889,255 | | | 55,651,487 | |
The following common stock equivalents were excluded from the calculation of diluted net (loss) income per share applicable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect: | | | | | | | | | | | | | | | | | |
| Years ended December 31, |
| 2025 | | 2024 | | 2023 |
| Stock options | 6,113,063 | | | 3,926,330 | | | 5,263,681 | |
| Restricted stock units | 2,007,463 | | | 95,679 | | | 1,346,701 | |
| Performance-based stock units | — | | | — | | | 145,023 | |
| Employee Stock Purchase Plan shares | 51,318 | | | 3,987 | | | 48,713 | |
| Total | 8,171,844 | | | 4,025,996 | | | 6,804,118 | |
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.