Earnings Per Share
Basic earnings per share is calculated by dividing the net income or loss by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted earnings per share is computed by dividing the net income or loss by the weighted-average number of shares of common stock, plus potentially dilutive securities outstanding for the period, as determined in accordance with the treasury stock, if-converted, or contingently issuable accounting methods, depending on the nature of the security. For purposes of the diluted earnings per share calculation, stock options, restricted stock units (“RSUs”), performance share units (“PSUs”), and shares potentially issuable in connection with the employee stock purchase plan and convertible senior notes are considered potentially dilutive securities and included to the extent that their addition is not antidilutive.
The following table presents the computations of basic and dilutive earnings per common share:
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Numerator: | | | | | |
| Net income | $ | 62,870 | | | $ | 69,190 | | | $ | 48,155 | |
| Adjustment for interest expense recognized on convertible senior notes, net of tax | 6,007 | | | 5,863 | | | 5,889 | |
| Net income — diluted | $ | 68,877 | | | $ | 75,053 | | | $ | 54,044 | |
| Denominator: | | | | | |
| Weighted-average shares outstanding — basic | 31,706,429 | | 32,273,850 | | 33,741,213 |
| Effect of dilutive securities: | | | | | |
| Stock options | 243,041 | | 369,662 | | 271,540 |
| Restricted stock units | 1,017,568 | | 1,064,851 | | 714,190 |
| Performance share units | 128,350 | | 109,512 | | 267,761 |
| Convertible senior notes | 6,606,305 | | 6,606,305 | | 6,793,421 |
| Weighted average shares outstanding — diluted | 39,701,693 | | 40,424,180 | | 41,788,125 |
| | | | | |
| Earnings per share — basic | $ | 1.98 | | | $ | 2.14 | | | $ | 1.43 | |
| Earnings per share — diluted | $ | 1.73 | | | $ | 1.86 | | | $ | 1.29 | |
The Company has the option to settle the conversion obligation for its convertible senior notes in cash, shares or a combination of the two. The Company uses the if-converted method for the convertible senior notes.
The following table presents dilutive securities excluded from the calculation of diluted earnings per share:
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Stock options | 130,344 | | 130,344 | | 259,405 |
| Restricted stock units | 26,765 | | 232,269 | | 31,050 |
| Performance share units | 217,490 | | 232,572 | | 308,680 |
| Employee stock purchase plan | 37,593 | | 17,946 | | 18,591 |
For performance share units, these securities were excluded from the calculation of diluted earnings per share as the performance-based or market-based vesting conditions were not met as of the end of the reporting period. All other securities presented in the table above were excluded from the calculation of diluted earnings per share as their inclusion would have had an antidilutive effect.
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.