NET INCOME PER SHARE

Potential common shares are excluded from the diluted net income per share computation to the extent that they would be antidilutive. If the Company reported a net loss for the year, no potentially dilutive securities would be included in the computation of diluted net loss per share. As discussed in Note 11, Debt, the Company has the option to pay cash for the aggregate principal amount due upon the conversion of its 2025 Notes.

For additional information on the Company’s computation, see Note 2, Summary of Significant Accounting Policies. Prior to the Company’s adoption of ASU 2020-06, for the year ended December 31, 2021, the Company used the treasury stock method to calculate dilutive shares on its convertible debt.

The following table sets forth the computation of basic and diluted net income per common share for the years ended December 31, 2023, 2022 and 2021 (in thousands, except per share amounts):


	Year Ended December 31,
	2023		2022		2021
Numerator:
Net income—basic	$	41,955	$	15,909	$	41,980
ASU 2020-06 convertible notes if-converted method adjustment	4,114		—		—



Adjusted net income—diluted	$	46,069	$	15,909	$	41,980
Denominator:
Weighted average common shares outstanding—basic	46,222		45,521		44,262
Computation of diluted securities:
ASU 2020-06 convertible notes if-converted method adjustment	5,608		—		—
Dilutive effect of stock options	51		787		1,030
Dilutive effect of RSUs	96		226		298
Dilutive effect of conversion premium on the 2022 Notes	—		—		38
Dilutive effect of ESPP purchase options	2		4		2
Weighted average common shares outstanding—diluted	51,979		46,538		45,630
Net income per share:
Basic net income per common share	$	0.91	$	0.35	$	0.95
Diluted net income per common share	$	0.89	$	0.34	$	0.92

The following table summarizes the outstanding stock options, RSUs, ESPP purchase options and convertible senior notes that were excluded from the diluted net income per common share calculation because the effects of including these potential shares were antidilutive in the periods presented (in thousands):


	Year Ended December 31,
	2023	2022	2021
Weighted average number of stock options	6,251	2,821	2,141
Convertible senior notes (1)	—	6,206	—
Weighted average number of RSUs	1,033	417	116
Weighted average ESPP purchase options	20	7	13
Total	7,304	9,451	2,270

(1) The convertible senior notes were antidilutive for the year ended December 31, 2022, in conjunction with a $5.1 million if-converted method adjustment to the numerator that adds back the interest expense associated with the convertible debt on a post-tax basis under ASU 2020-06.

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.

Pacira BioSciences, Inc. Earnings Per Share Disclosure

About Earnings Per Share Disclosures

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