Earnings per Share
Basic earnings per share (EPS) is calculated using the weighted average number of common shares outstanding. Diluted EPS is calculated using the weighted average number of common shares outstanding, including the dilutive effect of the Company’s stock options, stock awards, and employee stock purchase plan (ESPP) awards using the treasury-stock method, and the 2023 Notes using the if-converted method.
The following table sets forth the computation of basic and diluted EPS for the years ended December 31, 2024, 2023 and 2022 (dollars in thousands, except share and per share amounts): | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| 2024 | | 2023 | | 2022 |
| Numerator: | | | | | |
| Net earnings | $ | 73,865 | | | $ | 1,316 | | | $ | 60,711 | |
| After-tax interest expense for 2023 Notes | — | | | — | | | 3,556 | |
| Numerator for dilutive earnings per share | $ | 73,865 | | | $ | 1,316 | | | $ | 64,267 | |
| Denominator: | | | | | |
| Weighted average shares outstanding, basic | 55,100,063 | | | 54,536,281 | | | 53,665,143 | |
| Effect of dilutive securities: | | | | | |
| Stock options and stock awards | 858,474 | | | 970,547 | | | 1,230,721 | |
| Convertible notes | — | | | — | | | 6,783,936 | |
| Weighted average shares outstanding, diluted | 55,958,537 | | | 55,506,828 | | | 61,679,800 | |
| | | | | |
| Earnings per share, basic | $ | 1.34 | | | $ | 0.02 | | | $ | 1.13 | |
| Earnings per share, diluted | $ | 1.32 | | | $ | 0.02 | | | $ | 1.04 | |
Effect of Convertible Notes and Related Convertible Note Hedges and Warrants
In connection with the issuance of the 2023 Notes, the Company entered into Convertible Note Hedge and Warrant Transactions as described further in Note 8, Debt. The expected collective impact of the Convertible Note Hedge and Warrant Transactions is to reduce the potential dilution that would occur if the price of the Company's common stock was between the conversion price of $59.33 per share and the strike price of the warrants of $80.91 per share.
The Convertible Note Hedge and Warrant Transactions are excluded in the calculation of diluted EPS because inclusion would be anti-dilutive. Specifically, the denominator of the diluted EPS calculation excludes the additional shares related to the warrants because the average price of the Company's common stock was less than the strike price of the warrants of $80.91 per share. Prior to actual conversion, the Convertible Note Hedge Transactions are not considered in calculating diluted EPS, as their impact would be anti-dilutive.
In addition to the above described effect of the Convertible Note Hedge and Warrant Transactions, the Company also excluded the common stock equivalents of the following outstanding stock-based awards and shares associated with the conversion of the 2023 Notes in the calculation of diluted EPS, because their inclusion would be anti-dilutive: | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2024 | | 2023 | | 2022 |
| Stock options and stock awards | 601,684 | | | 543,140 | | | 373,728 | |
| 2023 Notes | — | | | 1,691,337 | | | — | |
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.