Computation of Earnings Per Share

9 Months Ended

Sep. 30, 2019

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted-average number of common shares outstanding, including restricted stock units (“RSUs”) vested during the period. Diluted EPS is computed based on the sum of the weighted average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of shares issuable from stock options, unvested RSUs and the 3.25% Convertible Senior Notes due 2020 (“Convertible Senior Notes”). Potentially dilutive common shares from outstanding stock options and unvested RSUs are determined using the average share price for each period under the treasury stock method. Potentially dilutive shares from the Convertible Senior Notes are determined using the if-converted method. Under the provisions of the if-converted method, the Convertible Senior Notes are assumed to be converted and included in the denominator of the EPS calculation and the interest expense, net of tax, recorded in connection with the Convertible Senior Notes is added back to net income.

The Convertible Senior Notes have a dilutive impact when the average market price of the Company’s common stock exceeds the applicable conversion price of the notes. The Senior Convertible Notes became convertible on March 31, 2018 and remained convertible through September 30, 2019.

The following table reconciles net income and the weighted-average shares used in computing basic and diluted earnings per share (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Numerator:
Net income used for basic earnings per share	$	16,181	$	10,822	$	42,295	$	41,704
Interest expense on Convertible Senior Notes, net of tax	180		791		1,669		4,152
Net income used for diluted earnings per share, if-converted method	$	16,361	$	11,613	$	43,964	$	45,856

Basic weighted-average common shares outstanding	41,642		39,290		40,520		37,490
Potentially dilutive shares issuable from Convertible Senior Notes	410		1,825		1,282		3,193
Potentially dilutive shares issuable from stock options and unvested RSUs	1,154		1,774		1,249		1,784
Diluted weighted-average common shares outstanding, if-converted	43,206		42,889		43,051		42,467
Potentially dilutive shares excluded from calculation due to anti-dilutive effect	223		—		198		161

Potentially dilutive shares excluded from the calculation above represent stock options when the combined exercise price and unrecognized stock-based compensation are greater than the average market price for the Company’s common stock because their effect is anti-dilutive.