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Earnings per share: 5 things you need to know · PwC's accounting podcast

• 0:00
  SPEAKER_01: Thought Leadership from PWC.
• 0:08
  SPEAKER_03: Welcome to PWC's Accounting Podcast.
• 0:11
  SPEAKER_03: I'm Heather Horn.
• 0:13
  SPEAKER_03: Thanks for joining me as we continue our Tuesday series in which one of our all-star podcast guests takes over the podcasts, picks the topics for the month, and joins me on all the episodes.
• 0:26
  SPEAKER_03: My guest in August is Brett Jeole, Deputy Chief Accountant in PwC's national office, who leads our financial instruments team.
• 0:34
  SPEAKER_03: Today is his final episode in his series of key reminders on financial instrument hot topics in under 25 minutes.
• 0:41
  SPEAKER_03: Let's see if he can go four for four.
• 0:44
  SPEAKER_02: EPS, it's a very closely watched metric by the analyst community.
• 0:48
  SPEAKER_02: And we thought it was a good topic to cover because some of the complications in earnings per share actually come from some of the complex financial instruments that we're talking about.
• 0:58
  SPEAKER_00: Basic EPS isn't all that basic sometimes.
• 1:01
  SPEAKER_00: So I I think the uh the first area, and a perfect example of why it's not basic, is um dealing with participating securities in the two-class method.
• 1:11
  SPEAKER_00: I would say when you're talking about participating securities, the three main areas that you know our clients and our engagement teams are concerned about.
• 1:19
  SPEAKER_00: First is identifying the participating securities in the capital structure.
• 1:23
  SPEAKER_00: Seems like it should be easy, sometimes not that easy.
• 1:37
  SPEAKER_03: Brett and John share insights on earnings per share, a closely watched metric that gets a lot of attention in the market, but that can be complex to calculate.
• 1:55
  SPEAKER_03: And diluted EPS.
• 1:57
  SPEAKER_03: From participating securities to mezzanine equity to liability classified warrants, they break down a complex area and explain what you need to know in plain English.
• 2:08
  SPEAKER_03: Whether you're well versed in EPS accounting or not, they have a lot to share.
• 2:12
  SPEAKER_03: So listen in.
• 2:19
  SPEAKER_03: Brett, welcome back to the podcast.
• 2:21
  SPEAKER_03: Thanks again for joining me.
• 2:22
  SPEAKER_03: And Brett, this is our fourth in our series of 25 minutes or less on some of our hot financial instruments topics.
• 2:30
  SPEAKER_03: And our topic today is one that I know is a favorite of our audience, and that's earnings per share.
• 2:36
  SPEAKER_03: But why did you choose this topic for this month's series?
• 2:40
  SPEAKER_02: Thanks, Heather.
• 2:41
  SPEAKER_02: I'm excited to be here too, especially to talk about EPS.
• 2:45
  SPEAKER_02: And in earnings season, where I was talking about EPS, it's a very closely watched metric by the analyst community.
• 2:51
  SPEAKER_02: And we thought it was a good topic to cover because some of the complications in earnings per share actually come from some of the complex financial instruments that we're talking about when you have more complex capital structures.
• 3:03
  SPEAKER_02: So we're going to try to uh touch on those today.
• 3:06
  SPEAKER_02: And obviously the concept of EPS is simple, right?
• 3:09
  SPEAKER_02: It's just division, but we find in practice it can be quite complicated.
• 3:14
  SPEAKER_02: And so we thought it was a good topic to give a couple of reminders.
• 3:17
  SPEAKER_02: And remember, EPS comes in two flavors.
• 3:19
  SPEAKER_02: You've got basic, uh, which is a metric to signal performance using the ratio of earnings divided by the weighted average number of common shares outstanding during the period.
• 3:32
  SPEAKER_02: And then you've got diluted, which is a similar metric, but the denominator is effect is adjusted to reflect the exercise, conversion, or issuance of all potentially dilutive securities.
• 3:44
  SPEAKER_02: So the idea is to say if all of those potentially diluted securities in the capital structure were outstanding, what does that metric look like?
• 3:52
  SPEAKER_02: Today we're going to walk through a couple areas, both in basic and diluted computations, where we get a lot of questions from clients and engagement teams.
• 3:59
  SPEAKER_03: Yeah, and I think saying it's just division when it comes to at least diluted EPS, maybe a slight stretch, but I'm sure we'll get into that.
• 4:07
  SPEAKER_03: But maybe let's with that said, let's start with basic.
• 4:10
  SPEAKER_03: I think that's always easier to deal with, but still obviously some subtleties.
• 4:15
  SPEAKER_03: So also help happy to welcome to the podcast John Haran, who's been on before talking about some of these topics.
• 4:22
  SPEAKER_03: But John, what's sort of our first reminder when we're thinking about uh basic EPS?
• 4:28
  SPEAKER_00: Well, actually, Heather, basic EPS isn't all that basic sometimes.
• 4:32
  SPEAKER_00: So I I think the uh the first area and a perfect example of why it's not basic is um dealing with participating securities in the two-class method.
• 4:42
  SPEAKER_00: I would say when you're talking about participating securities, the three main areas that you know our clients and our engagement teams are concerned about.
• 4:50
  SPEAKER_00: First is uh identifying the pr participating securities in the capital structure.
• 4:54
  SPEAKER_00: Seems like it should be easy, sometimes not that easy.
• 4:58
  SPEAKER_00: The second thing concerns them is the two-class method requires the hypothetical allocation of all earnings uh you know to the various securities.
• 5:06
  SPEAKER_00: Well, in fact, we know that companies don't always distribute 100% of their earnings.
• 5:12
  SPEAKER_00: And uh the third thing is um that when you're dealing with certain complex capital structures, using the two-class method can be a little difficult.
• 5:20
  SPEAKER_00: So let's focus on that first one, which is identifying all the participating securities.
• 5:24
  SPEAKER_00: So I think we got to start with what's the definition of a participating security?
• 5:28
  SPEAKER_00: A participating security is a security that's going to participate in distributions along with common if and when uh those dividends are declared.
• 5:39
  SPEAKER_00: And it doesn't matter whether the company is a dividend-paying company or not.
• 5:43
  SPEAKER_00: What matters is that the participating security is contractually entitled to receive those dividends if and when the dividend is declared.
• 5:54
  SPEAKER_00: Now, uh a couple interesting things.
• 5:56
  SPEAKER_00: First is the form of uh a participating security doesn't have to be that a dividend is actually paid.
• 6:04
  SPEAKER_00: For example, let's say we have a forward sale contract on our own equity, and the investor in that forward sale contract is going to want an adjustment to the exercise price of that contract if and when the company pays a dividend.
• 6:17
  SPEAKER_00: Now, since it's a fait to complete, that that forward forward contract is going to get exercised.
• 6:23
  SPEAKER_00: There's an absolute transfer of value to the investor, and therefore that makes that forward contract a participating security.
• 6:30
  SPEAKER_00: Now contrast that, for example, with the warrant.
• 6:33
  SPEAKER_00: So in a warrant, you may have the same provision that if and when a dividend is paid, the exercise price the exercise price of the warrant is decreased.
• 6:43
  SPEAKER_00: However, it's not an absolute transfer of value to the investor.
• 6:47
  SPEAKER_00: Why?
• 6:48
  SPEAKER_00: Because the investor actually has to exercise the warrant in order to receive the benefit from the uh the exercise price adjustment.
• 6:56
  SPEAKER_03: So even though in your scenario with the forward contract, you don't look at the probability a dividend will be declared before the forward exercise, you're just saying it will be exercised, so you have to take this into account.
• 7:08
  SPEAKER_00: That's right.
• 7:08
  SPEAKER_00: That's right.
• 7:10
  SPEAKER_00: Just to you know, to give a couple more examples, uh two of the more common participating securities that we see.
• 7:16
  SPEAKER_00: One is unvested restricted shares.
• 7:18
  SPEAKER_00: So sometimes a company will take unvet, you know, uh issue restricted shares, put them in a trust, subject them to vesting restrictions to the employee.
• 7:26
  SPEAKER_00: But sometimes administratively, it's a heck of a lot easier for the company just to pay dividends currently, since those shares are legally issued and outstanding, to those unvested, restricted shareholders.
• 7:38
  SPEAKER_00: So that would be a non-forfeitable transfer of value to those security holders, and therefore that would be a participating security.
• 7:46
  SPEAKER_00: I would say the second most common that we see, or maybe it's equal, is convertible preferred stock.
• 7:53
  SPEAKER_00: These startup companies, uh developing companies, growth company, you know, growing companies all issue convertible preferred stock.
• 8:01
  SPEAKER_00: Um, 99.9% of the time, that convertible preferred stock participates on an as converted basis along with common shares.
• 8:11
  SPEAKER_00: So moving on to the second thing that I think clients are worried about, and that is, you know, it really has to do with how you apply the two-class method.
• 8:21
  SPEAKER_00: And so basically what it requires is the hypothetical allocation of all of the earnings of the company, regardless of whether they ever intend, in fact, to pay those dividends.
• 8:31
  SPEAKER_00: Obviously, you know, that gives you a result that's not really economic reality, um, which is something that really troubles our clients.
• 8:38
  SPEAKER_00: So, you know, it's it's an extremely dilutive, extremely dilutive result for basic EPS purposes.
• 8:44
  SPEAKER_03: Well, and it's funny, I'll pause you because I think as soon as you word that use that word hypothetical in the context of accounting, people's eyebrows raise, because you know, we also have uh people who do tax equity structures, no hypothetical liquidation at book value also you know, gives a result that may not be consistent with what's really expected.
• 9:03
  SPEAKER_03: So this is another case.
• 9:04
  SPEAKER_03: So if you're in this case, so that you have to do this calculation, then uh what's sort of the next step?
• 9:12
  SPEAKER_00: So you you would assume that you've distributed all of the earnings and uh you would look at the securities and say, okay, if we did distribute all these earnings, how much would go to the participating security and how much would go to the common stock?
• 9:24
  SPEAKER_00: And that reduces the numerator in basic earnings per share for the common shareholders.
• 9:30
  SPEAKER_00: A couple of other things that are unique, a little bit unique about participating securities.
• 9:35
  SPEAKER_00: One is we don't typically allocate losses to participating securities.
• 9:40
  SPEAKER_00: There's only two reasons you would allocate losses to participating securities.
• 9:43
  SPEAKER_00: And the first is if the holder of that participating security were were required to fund that loss, and second, if the liquidation preference of that security were reduced by the amount of the loss.
• 9:54
  SPEAKER_00: That's almost never the case.
• 9:56
  SPEAKER_00: So you generally do not allocate losses to participating securities.
• 10:01
  SPEAKER_00: So the last thing I mentioned is sometimes it's difficult to apply with complex capital structures.
• 10:07
  SPEAKER_00: Think of a situation, think of an LLC with preferred units.
• 10:10
  SPEAKER_00: Might have various series of preferred units.
• 10:14
  SPEAKER_00: One of those series requires that if any distribution is paid, it first needs to go to the reduction of the liquidation preference of that preferred unit.
• 10:23
  SPEAKER_00: So if you think about that and carry it out to you know, to what that means to the EPS calculation, is you may look at your earnings at the end of the period, and they may not be sufficient to pay down the liquidation preference on that uh preferred unit.
• 10:37
  SPEAKER_00: So then you move to the next period.
• 10:38
  SPEAKER_00: And since we calculate each period discreetly for purposes of participating securities, we have the same situation.
• 10:44
  SPEAKER_00: Not enough earnings to pay down the entire liquidation preference.
• 10:47
  SPEAKER_00: So if you play that out to its ultimate ending, you would never get to a situation where you're actually allocating any earnings to the common shares.
• 10:55
  SPEAKER_00: So when we think about that, it really doesn't make any sense.
• 10:59
  SPEAKER_00: So what we believe is that you should really just focus on the return on capital rather than the return of capital.
• 11:07
  SPEAKER_00: And so what that means is when we do our participating security allocation with a security like that, we basically assume that that liquidation preference has already been paid down.
• 11:18
  SPEAKER_00: And we focus on how the allocation would happen from a return on capital perspective.
• 11:23
  SPEAKER_00: And we think you get a more fairly reflective EPS computation when you when you do that.
• 11:29
  SPEAKER_03: All right.
• 11:29
  SPEAKER_03: Well, John, you uh jammed a lot of information in that first reminder, but I will say I really like that you gave a few good rules of thumb of almost always and almost never.
• 11:39
  SPEAKER_03: So at least it gives people, you know, in a few of those a place to start.
• 11:43
  SPEAKER_03: But we need to keep moving.
• 11:45
  SPEAKER_03: So, Brett, let me go to you for a second reminder.
• 11:48
  SPEAKER_03: And uh are we sticking with basic AP EPS for this one?
• 11:51
  SPEAKER_02: Yes, we're gonna stay with uh basic EPS.
• 11:54
  SPEAKER_02: And the reminder is gonna be that mezzanine equity is more than just the balance sheet classification.
• 11:59
  SPEAKER_02: So remember, whenever we talk about mezzanine equity, most of the time reminds go directly to it's you know, permanent versus in the mezzanine.
• 12:06
  SPEAKER_02: Uh, but there's another aspect of that guidance and that's subsequent measurement.
• 12:10
  SPEAKER_02: And so the accretion of these securities can impact the basic uh EPS calculation in sometimes complex ways.
• 12:17
  SPEAKER_03: So I'm gonna ask you the same thing that John started with as he explained participating in security.
• 12:22
  SPEAKER_03: So can you remind our listeners of when we're talking about mezzanine equity, what we're talking about?
• 12:27
  SPEAKER_02: Yeah.
• 12:27
  SPEAKER_02: Um and it's complicated, but we'll do it in a minute.
• 12:30
  SPEAKER_03: Um we'll see.
• 12:32
  SPEAKER_03: So the SEC uses the term.
• 12:33
  SPEAKER_02: I couldn't do that.
• 12:35
  SPEAKER_02: The SEC uses the term mandatorily redeemable security to describe an equity security that can be put back for cash or other assets by the investor.
• 12:44
  SPEAKER_02: So that right can be either conditional or unconditional.
• 12:47
  SPEAKER_02: And those securities have to be presented separate and apart from permanent equity in the financial statements.
• 12:52
  SPEAKER_02: Remember, this this SEC's definition of mandatorily redeemable is different from the FASBE's definition in ASC 480.
• 13:00
  SPEAKER_02: So these can be in the form of preferred stock, which is common or common stock, and can also be in the form of non-controlling interest.
• 13:08
  SPEAKER_02: So determining whether a security requires mezzanine classification in the first place can be tricky, but I'm not going to get into that today.
• 13:16
  SPEAKER_02: I want to focus on the second aspect, which is a subsequent measurement.
• 13:20
  SPEAKER_02: So under the SEC's rules, you're required to recreate the mezzanine security to its redemption value if it's probable of becoming redeemable.
• 13:29
  SPEAKER_02: Remember, it's it doesn't have to be probable of being redeemed, just probable of becoming redeemable.
• 13:36
  SPEAKER_02: So, you know, a security could become redeemable merely due to the passage of time, it'll become probable of being redeemable, right?
• 13:44
  SPEAKER_02: So you're gonna accrete that to its redemption value by the time the security becomes redeemable, and this accretion is considered to be a deemed dividend for accounting purposes.
• 13:54
  SPEAKER_02: So think of if I've got a preferred security, that accretion is always gonna impact the basic numerator of the EPS calculation.
• 14:02
  SPEAKER_02: For common securities, it's a little more complicated because if it's redeemable at fair value, that accretion is not going to impact the numerator.
• 14:11
  SPEAKER_02: As the SEC believes that the that common redeemable fair value, they're not really receiving value that other common shareholders are not receiving.
• 14:20
  SPEAKER_02: But if it's redeemable at other than fair value, typically a premium, then the accretion of common would impact the numerator.
• 14:28
  SPEAKER_02: But there's a policy election to be made here.
• 14:30
  SPEAKER_02: You can either charge the numerator for the entire amount of the accretion or simply charge the numerator for the amount of accretion in excess of fair value.
• 14:40
  SPEAKER_02: And that's an election you have to make.
• 14:41
  SPEAKER_02: But in all those cases, you have to be thinking about that accretion and whether you have to adjust the numerator, the numerator.
• 14:47
  SPEAKER_03: All right.
• 14:47
  SPEAKER_03: Also a lot jammed into one little reminder, but let's keep moving along.
• 14:51
  SPEAKER_00: Uh and and don't forget, Brett, that non-controlling interest can also be a redeemable security.
• 14:56
  SPEAKER_00: That can also impact uh your uh EPS.
• 14:59
  SPEAKER_03: So just one more thing for people to think about.
• 15:02
  SPEAKER_03: So uh we've used two of our reminders on basic EPS.
• 15:05
  SPEAKER_03: And I know John said it wasn't that basic, but still more basic than diluted EPS.
• 15:11
  SPEAKER_03: So if we're thinking about diluted EPS, John, what's your sort of first hot take?
• 15:16
  SPEAKER_00: So our first hot take, Heather, would be that um ASU 2020 significantly changed the way we think about EPS for contracts that can be settled in cash or shares.
• 15:28
  SPEAKER_00: Okay.
• 15:29
  SPEAKER_00: And the most significant change, I think, related to convertible debt.
• 15:35
  SPEAKER_00: In the public markets, there are basically two flavors of convertible debt that get issued.
• 15:39
  SPEAKER_00: We have sexy names, instrument C and instrument X.
• 15:42
  SPEAKER_03: Yes, I know you've talked about this before on the podcast because I remember those distinctive names.
• 15:48
  SPEAKER_00: Instrument C is a convertible debt instrument that when the investor decides to convert, the issuer has to settle the principal amount in cash and the con and is able to settle the conversion spread in either cash or shares.
• 16:01
  SPEAKER_00: Instrument X is an instrument that when the investor elects to convert, the issuer can settle that instrument in either cash or shares in any combination for the entire amount of the instrument.
• 16:13
  SPEAKER_00: So the most significant change as a result of the issuance of ASU 2020 relates to instrument X.
• 16:20
  SPEAKER_00: And what that is, is prior to 2020, an issuer could elect the um what we referred to as the net share settlement method to compute the number of shares to include in the denominator.
• 16:32
  SPEAKER_00: So what that meant is they, although there was a rebuttable presumption that they had to settle the the uh instrument and shares, and that would force the use of the if converted method for diluted EPS purposes, the issuer could overcome that presumption either by past policy and having the intent and ability to settle the principal amount in cash and the conversion spread in shares.
• 16:54
  SPEAKER_00: So that would allow them to use what we refer to as the net share settlement method for EPS purposes, which only became dilutive if the conversion option went in the money.
• 17:03
  SPEAKER_00: So really it was just a measurement of conversion spread value divided by share price.
• 17:08
  SPEAKER_00: That's the number of shares you would include in the denominator.
• 17:10
  SPEAKER_00: Much less dilutive answer.
• 17:12
  SPEAKER_00: After 2020 oh six, it basically eliminated the issuer's ability to overcome the presumption.
• 17:18
  SPEAKER_00: So they're going to have to use the full if-converted method and assume the entire instrument is converted for shares, even if they have no intention of ever settling anything in shares, and they've had past practice and history of settling the instrument in cash.
• 17:33
  SPEAKER_00: And really what the FASB was trying to get at is they wanted more comparability.
• 17:38
  SPEAKER_00: Um and so that's that's really where they were going.
• 17:41
  SPEAKER_00: 20206 also impacted the way that we handle EPS for what we refer to as instrument C, although in a much, much more subtle way than instrument X.
• 17:53
  SPEAKER_00: So instrument C was that instrument that when converted, principal amount gets settled in cash, conversion spread in cash or shares.
• 18:00
  SPEAKER_00: They always use the net net share settlement method before, right?
• 18:05
  SPEAKER_00: One of the changes that the FASI made is really all they did was change the name of the method that we use for uh diluted EPS purposes.
• 18:13
  SPEAKER_00: And they refer to it as the if converted method.
• 18:15
  SPEAKER_00: So when you first think about that, it says that sounds drastic.
• 18:18
  SPEAKER_00: That sounds like a drastic change.
• 18:20
  SPEAKER_00: But really, it's the same old net share settlement method that the issuer can use.
• 18:26
  SPEAKER_00: However, the uh new standard required the use of the average share price for the period when determining the number of shares to include in the denominator.
• 18:36
  SPEAKER_00: So, in other words, it would be conversion spread value divided by the average share price for the period.
• 18:43
  SPEAKER_00: Prior to 2020, the the guidance wasn't clear as to what method you would use.
• 18:50
  SPEAKER_00: So most believed that there was a policy choice to be made.
• 18:53
  SPEAKER_00: You could either use the average share price for the period, or could use you could use the period end price or the formula, the contractual formula that would determine settlement based on period end prices.
• 19:05
  SPEAKER_00: And so companies made a policy choice, and many companies chose to use those period end prices in determining the number of shares to include.
• 19:12
  SPEAKER_00: Well, 2020 oh six eliminated that.
• 19:15
  SPEAKER_00: The other thing is probably even more subtle.
• 19:17
  SPEAKER_00: Um, in year-to-date computations with respect to instrument C, the new standard made it clear that when doing your year-to-date calculation, you would use the weighted average of each quarter and take the average of those each of those four quarters to determine the number of shares to include in your year-to-date diluted EPS computation.
• 19:37
  SPEAKER_00: Um, whereas before it wasn't so clear that that's the way you would do it.
• 19:40
  SPEAKER_00: Some people, I think, did it um independently for the year-to-date period.
• 19:45
  SPEAKER_00: That's a sleeper.
• 19:46
  SPEAKER_03: Yes.
• 19:47
  SPEAKER_03: Sounds like this whole thing may be a sleeper that people should be paying attention to.
• 19:51
  SPEAKER_03: So if you have either uh either of those types of uh instruments, make sure you're paying attention to this.
• 19:59
  SPEAKER_03: All right.
• 20:00
  SPEAKER_03: Brett, I'm gonna go back to you hopefully for something a little more straightforward.
• 20:03
  SPEAKER_03: What's your fourth reminder?
• 20:05
  SPEAKER_02: Fourth reminder uh is an oldie but a goodie.
• 20:08
  SPEAKER_02: That's for liability classified warrants.
• 20:10
  SPEAKER_02: Think about that dilution calculation very carefully.
• 20:13
  SPEAKER_02: Um so this applies to both liability classified warrants as well as when you have convertible debt where you've bifurcated that conversion option and are going to account for it separately.
• 20:23
  SPEAKER_02: When you have a period where you're reporting a loss, we typically don't think of a lot of these dilutive instruments because if you have a loss, generally adding more instruments to that denominator is just spreading the loss over a larger base, and therefore they're anti-dilutive and you ignore them for the purpose of diluted DPS.
• 20:42
  SPEAKER_02: But one of the exceptions to this is for liability classified warrants, because uh when a warrant is liability classified, it's recorded at fair value on the balance sheet with changes going through earnings.
• 20:53
  SPEAKER_02: And so a lot of times if you have a period in a loss, you actually are also seeing decreases in the stock price.
• 21:01
  SPEAKER_02: Um, and so there may be a decrease in value of that liability classified warrant, which is a gain in the income statement.
• 21:09
  SPEAKER_02: So when I'm thinking about the effect on EPS, not only am I thinking about the denominator, but I'm also thinking about adjustments to that numerator, and I need to reverse out that gain.
• 21:20
  SPEAKER_02: And what we see sometimes is the effect of reversing out the gain actually makes that instrument dilutive and needs to be included, even though you would think generally these instruments aren't.
• 21:32
  SPEAKER_02: So when that applies not only to a liability classified warrant, but also when you've got convertible debt with this bifurcated conversion option.
• 21:39
  SPEAKER_02: Make sure you're doing the math carefully.
• 21:41
  SPEAKER_03: All right.
• 21:42
  SPEAKER_03: That's a good reminder.
• 21:43
  SPEAKER_03: Probably easier for people to get their heads around than some of these other ones.
• 21:46
  SPEAKER_03: And so let's wrap things up.
• 21:48
  SPEAKER_03: Uh, we have a few moments left.
• 21:50
  SPEAKER_03: Brett, what's our final reminder?
• 21:52
  SPEAKER_02: The last one I think is a simple one too.
• 21:54
  SPEAKER_02: And that's that repurchase convertible instruments need to be evaluated separately.
• 21:58
  SPEAKER_02: We actually get a lot of questions around this because when you're talking about the repurchase or extinguishment of a portion of the outstanding issue of convertible debt, you know, obviously when you when you transfer consideration to repurchase it, that often results in an extinguishment loss because you're you're uh extinguishing it at a value greater than the book value.
• 22:19
  SPEAKER_02: And when you're determining whether that whether the rest of the convertible debt is dilutive or not, you need to think of the outstanding instrument separate from that portion that you had just that you just redeemed.
• 22:32
  SPEAKER_02: So it's often that that redeemed convertible debt would be anti-dilutive while the remaining convertible debt is actually dilutive itself.
• 22:40
  SPEAKER_02: So make sure you're you're doing that calculation in in two separate pieces.
• 22:44
  SPEAKER_00: One interesting thing is the standard actually, it's it's an old EI uh EITFD topic.
• 22:50
  SPEAKER_00: The standard actually refers to um prof only preferred stock.
• 22:54
  SPEAKER_00: It does apply to both convertible debt and convertible preferred stock.
• 22:58
  SPEAKER_00: Some people get confused about that.
• 22:59
  SPEAKER_03: All right, good reminder.
• 23:00
  SPEAKER_03: And I'm impressed because I was starting to think we were not going to meter a 25-minute guarantee.
• 23:06
  SPEAKER_03: However, you guys really pulled it together at the end.
• 23:08
  SPEAKER_03: So thanks for that.
• 23:09
  SPEAKER_03: Now, I will say if uh for our listeners, my guess is you guys shared enough information.
• 23:14
  SPEAKER_03: So now they have more questions and maybe have identified something they need to think about a little bit more.
• 23:20
  SPEAKER_03: So if that's the case, especially given the complexity of these areas, where should they go to look for more help?
• 23:26
  SPEAKER_00: Uh I would start with our um uh EPS chapter of our financial statement presentation guide.
• 23:32
  SPEAKER_00: It's got lots of information there, covers all those topics we discussed today, plus many more.
• 23:36
  SPEAKER_03: All right, excellent.
• 23:37
  SPEAKER_03: Well, gentlemen, it's so nice to have you in.
• 23:39
  SPEAKER_03: Thanks for coming in on a very hot August uh Tuesday, and really appreciate uh your insights.
• 23:46
  SPEAKER_03: Thank you.
• 23:46
  SPEAKER_02: Thanks, Heather.
• 23:48
  SPEAKER_03: That's our show for today.
• 23:50
  SPEAKER_03: Tune in next week for more fresh episodes so that you never miss any of our audio content.
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• 24:10
  SPEAKER_03: From the thought leadership at PWC, I am Heather Horn.
• 24:14
  SPEAKER_03: Thanks for tuning in.
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