Earnings per Share

6 Months Ended

Mar. 31, 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. The Company did not have any securities with a dilutive effect for the three and six months ended March 31, 2021 and 2020, respectively.

In computing earnings per share subsequent to the completion of our IPO, the Company has allocated 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 have been 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.

Subsequent to the completion of the IPO, and modification of our stock-based compensation awards as described in Note 2, 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. Refer to Note 2 for a description of current period activity.

The following table sets forth the calculation of basic and diluted net income per common share under the two-class method for the three and six months ended March 31, 2021 and 2020 (in millions, except share and per share data):


	Three Months Ended March 31,
	2021				2020
	Class A		Class B		Class A		Class B
Basic and Diluted EPS:
Numerator
Net income attributable to Warner Music Group Corp.	$	27	$	90	$	—	$	(74)
Less: Net income attributable to participating securities	(1)		—		—		—
Net income attributable to common stockholders	$	26	$	90	$	—	$	(74)
Denominator
Weighted average shares outstanding	113,623,893		400,705,856		0		501,991,944
Basic and Diluted EPS	$	0.23	$	0.22	$	—	$	(0.15)

	Six Months Ended March 31,
	2021				2020
	Class A		Class B		Class A		Class B
Basic and Diluted EPS:
Numerator
Net income attributable to Warner Music Group Corp.	$	46	$	169	$	—	$	46
Less: Net income attributable to participating securities	(3)		—		—		—
Net income attributable to common stockholders	$	43	$	169	$	—	$	46
Denominator
Weighted average shares outstanding	103,922,919		408,669,332		0		501,991,944
Basic and Diluted EPS	$	0.41	$	0.41	$	—	$	0.09