What is the significance of 'basic and diluted' in the context of Budget's earnings per share?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
Diluted EPS was computed using the treasury stock method for non-vested stock. In computing diluted loss per share for the year ended December 31, 2024, our number of diluted weighted average shares outstanding excludes the effect of non-vested stock as the effect would have been anti-dilutive. This occurs when a net loss is reported and the effect of using dilutive shares would be anti-dilutive.
| Y | 11, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2022 | ||
| Revenues | $ | 11,789 | $ 12,008 | $ 11,994 |
| Expenses | ||||
| Operating | 6,014 | 5,675 | 5,285 | |
| Vehicle depreciation and lease charges, net | 2,976 | 1,739 | 828 | |
| Selling, general and administrative | 1,352 | 1,408 | 1,348 | |
| Vehicle interest, net | 941 | 736 | 402 | |
| Non-vehicle related depreciation and amortization | 237 | 216 | 225 | |
| Interest expense related to corporate debt, net: | ||||
| Interest expense | 358 | 296 | 250 | |
| Early extinguishment of debt | 19 | 5 | _ | |
| Long-lived asset impairment and other related charges | 2,470 | _ | ||
| Restructuring and other related charges | 37 | 11 | 19 | |
| Transaction-related costs, net | 3 | 5 | 8 | |
| Other (income) expense, net | 9 | 3 | (7) | |
| Total expenses | 14,416 | 10,094 | 8,358 | |
| Income (loss) before income taxes | (2,627) | 1,914 | 3,636 | |
| Provision for (benefit from) income taxes | (810) | 279 | 880 | |
| Net income (loss) | (1,817) | 1,635 | 2,756 | |
| Less: Net income (loss) attributable to non-controlling interests | 3 | (8) | ||
| Net income (loss) attributable to Avis Budget Group, Inc. | $ | (1,821) | $ 1,632 | $ 2,764 |
| Technoome (1855) attributable to Avis Budget Group, Inc. | * | (1,021) | 1,002 | 2,104 |
| Earnings (loss) per share | ||||
| Basic | $ | (51.23) | $ 42.57 | $ 58,41 |
| Diluted | $ | (51.23) | $ 42.08 | $ 57.16 |
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, the terms 'basic' and 'diluted' refer to two different calculations of earnings per share (EPS), providing a more comprehensive view of profitability. Basic EPS is calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. This calculation gives a simple, straightforward view of earnings on a per-share basis.
Diluted EPS, on the other hand, takes into account the potential dilution that could occur if all outstanding stock options, warrants, convertible securities, and other dilutive securities were exercised or converted into common stock. This calculation reflects a company's potential future obligations. Diluted EPS is always lower than (or equal to) basic EPS, as it assumes the conversion of all securities into shares, increasing the denominator in the EPS calculation.
The difference between basic and diluted EPS can be significant for potential Budget franchisees because it provides insight into the company's capital structure and potential future obligations. A large difference between basic and diluted EPS might indicate that Budget has a significant number of dilutive securities outstanding, which could potentially impact future earnings per share. Conversely, if the basic and diluted EPS are very close, it suggests that the potential dilution from outstanding securities is minimal. In the provided financial table, for the year 2024, Budget's basic and diluted earnings per share are the same at ($51.23). For 2023, the basic EPS is $42.57, while the diluted EPS is $42.08. In 2022, the basic EPS is $58.41, while the diluted EPS is $57.16.