Earnings per Share

12 Months Ended

Sep. 30, 2021

The Company utilizes the two-class method to report earnings per share. Basic earnings per share is computed by dividing net income available to each class of stock by the weighted average number of outstanding common shares for each class of stock. Diluted earnings per share is computed by dividing net income available to each class of stock by the weighted average number of outstanding common shares, plus dilutive potential common shares, which is calculated using the treasury-stock method. Under the treasury-stock method, potential common shares are excluded from the computation of EPS in periods in which they have an anti-dilutive effect. For the fiscal year ended September 30, 2020, the potentially dilutive common shares were excluded from the Class A Common Stock diluted loss per share calculation since their effects would have been anti-dilutive due to the net loss attributable to Class A Common Stock for the period. The potentially dilutive common shares did not have a dilutive effect on the Company’s EPS calculation for the fiscal year ended September 30, 2021. The Company did not have any dilutive securities for the fiscal year ended September 30, 2019.

In computing earnings per share subsequent to the completion of our IPO, the Company allocates dividends declared to Class A Common Stock and Class B Common Stock based on timing and amounts actually declared for each class of stock and the undistributed earnings are allocated to Class A Common Stock and Class B Common Stock pro rata on a basic weighted average shares outstanding basis since the two classes of stock participate equally on a per share basis upon liquidation. Prior to the completion of the IPO in fiscal 2020, the Company declared dividends totaling $75 million which were allocated solely to Class B Common Stock as there was no outstanding Class A Common Stock at the time these dividends were declared. While Class A and Class B Common Stock have the same dividend rights, the allocation of all dividends declared prior to the IPO to Class B Common Stock resulted in a different loss per share for the two classes of common stock for the fiscal year ended September 30, 2020.

Subsequent to the completion of the IPO, and modification of our stock-based compensation awards as described in Note 12, the Class B Common Stock issued to Management LLC for the exercise of the vested deferred equity units is included in the basic weighted average number of outstanding shares of Class B Common Stock. Upon issuance to the participants in the Plan, the Class B Common Stock will be converted into Class A Common Stock and included in the basic weighted average number of outstanding

shares of Class A Common Stock. Since the shares expected to satisfy the vested portion of the deferred equity units are already included in the basic weighted average number of outstanding common shares, there is no potential dilutive effect associated with the vested portion of these stock-based compensation awards.

The following table sets forth the calculation of basic and diluted net income (loss) per common share under the two-class method (in millions, except share and per share data):


	Fiscal Year Ended September 30,
	2021				2020				2019
	Class A		Class B		Class A		Class B		Class A		Class B
Basic and Diluted EPS:
Numerator
Net income (loss) attributable to Warner Music Group Corp.	$	68	$	236	$	(21)	$	(454)	$	—	$	256
Less: Net income attributable to participating securities	(4)		—		(1)		—		—		—
Net income (loss) attributable to common stockholders	$	64	$	236	$	(22)	$	(454)	$	—	$	256
Denominator
Weighted average shares outstanding	110,560,517		402,911,743		26,897,115		477,624,846		0		501,991,944
Basic and Diluted EPS	$	0.58	$	0.58	$	(0.82)	$	(0.95)	$	—	$	0.51