Net Income (Loss) Per Common Share

12 Months Ended

Sep. 30, 2022

Loss Per Common Share

Basic earnings (loss) per share is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding. Diluted earnings (loss) per share reflects the potential dilution that would occur if equity awards granted under the Company's various share-based compensation plans were vested or exercised; if the Company’s Series A Preferred Stock were converted into shares of the Company’s common stock; if the Company's Exchangeable Notes, Convertible Notes or the warrants the Company sold to purchase shares of its common stock in connection with the issuance of Convertible Notes ("Call Spread Warrants") were exercised; if the outstanding consideration advance received in connection with the Company’s strategic partnership with RingCentral were converted into shares of the Company's common stock; if the Company's Exchangeable Notes were settled in shares of the Company's common stock; and/or if the 2017 Emergence Date Warrants were exercised, resulting in the issuance of common shares that would participate in the earnings of the Company. In periods with net losses, no incremental shares are reflected as their effect would be anti-dilutive.

The Company's Series A Preferred Stock are participating securities, which requires the application of the two-class method to calculate basic and diluted earnings (loss) per share. Under the two-class method, undistributed earnings are allocated to common stock and participating securities according to their respective participating rights in undistributed earnings, as if all the earnings for the period had been distributed. Basic earnings (loss) per common share is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period. Net income (loss) attributable to common stockholders is reduced for preferred stock dividends earned and accretion recognized during the period. No allocation of undistributed earnings to participating securities was performed for periods with net losses as such securities do not have a contractual obligation to share in the losses of the Company.

As of June 30, 2022, the Company no longer had both the ability and intent to settle conversions of the Convertible Notes through combination settlement by repaying the principal portion in cash and any excess of the conversion value over the

principal amount in shares of the Company's common stock nor did it have the ability and intent to repay outstanding RingCentral consideration advance in cash prior to its conversion. As a result, the Company transitioned from the treasury stock method to the if-converted method to calculate diluted earnings (loss) per share for its Convertible Notes and the outstanding RingCentral consideration advance. The change in methodology was applied prospectively, beginning with the period ended June 30, 2022. See Note 1, "Background and Basis of Presentation," to our Consolidated Financial Statements for additional information related to the Company’s liquidity and going concern assessment.

The following table sets forth the calculation of net loss attributable to common stockholders and the computation of basic and diluted loss per share for the periods indicated:


	Fiscal years ended September 30,
(In millions, except per share amounts)	2022			2021			2020
Loss per share:
Numerator
Net loss	$	(2,096)		$	(13)		$	(680)
Dividends to preferred stockholders	(4)			(4)			(7)
Undistributed loss	(2,100)			(17)			(687)
Percentage allocated to common stockholders(1)	100.0		%	100.0		%	100.0		%
Numerator for basic and diluted loss per common share	$	(2,100)		$	(17)		$	(687)

Denominator for basic and diluted loss per common share	86.0			84.5			92.2

Loss per common share
Basic	$	(24.42)		$	(0.20)		$	(7.45)
Diluted	$	(24.42)		$	(0.20)		$	(7.45)

(1) Basic weighted average common stock outstanding	86.0			84.5			92.2
Basic weighted average common stock and common stock equivalents (preferred shares)	86.0			84.5			92.2
Percentage allocated to common stockholders	100.0		%	100.0		%	100.0		%

For fiscal 2022, the Company excluded 4.2 million RSUs, 0.3 million stock options, 5.6 million 2017 Emergence Date Warrants, 7.9 million shares underlying the Convertible Notes and Call Spread Warrants, 58.1 million shares underlying the Exchangeable Notes, 22.1 million shares underlying the outstanding consideration advance received in connection with the Company's strategic partnership with RingCentral and 0.1 million shares of Series A Preferred Stock from the diluted loss per share calculation as their effect would have been anti-dilutive. The Company also excluded 4.1 million PRSUs and 0.3 million shares authorized under the Company's Stock Bonus Program from the diluted loss per share calculation as either their performance metrics have not yet been attained or their effect would have been anti-dilutive.

For fiscal 2021, the Company excluded 2.7 million RSUs, 0.4 million stock options, 0.2 million shares issuable under the ESPP, 5.6 million 2017 Emergence Date Warrants, 12.6 million shares underlying the Convertible Notes and Call Spread Warrants and 0.1 million shares of Series A Preferred Stock from the diluted loss per share calculation as their effect would have been anti-dilutive. The Company also excluded 1.5 million PRSUs from the diluted loss per share calculation as either their performance metrics had not yet been attained or their effect would have been anti-dilutive.

For fiscal 2020, the Company excluded 2.7 million RSUs, 0.9 million stock options, 0.2 million shares issuable under the ESPP, 5.6 million 2017 Emergence Date Warrants, 12.6 million shares underlying the Convertible Notes and Call Spread Warrants and 0.1 million shares of Series A Preferred Stock from the diluted loss per share calculation as their effect would have been anti-dilutive. The Company also excluded 1.0 million PRSUs from the diluted loss per share calculation as either their performance metrics had not yet been attained or their effect would have been anti-dilutive.

Avaya Holdings Corp. 10-K