A Leaner, Stronger Emmis Kills It In Fiscal Q3


“This is actually a spectacular quarter for us,” Emmis Communications Chairman/CEO and company founder Jeff Smulyan said as he opened Thursday morning’s conference call held to discuss Emmis’ fiscal Q3 2019 financial results.

“This is the best quarter that we’ve had in over four years,” he said.

Yet, net revenue was down — due to less stations in Emmis’ stable.

Emmis was up 5% in markets that were up 2%, Smulyan noted.

Further, Emmis grew revenue in all three months of the quarter, which ended November 30, 2018.

A look at Emmis’ year-over-year financials would suggest a decline. Emmis’ total net revenues for fiscal Q3 were $30.3 million, down from $35.4 million in the prior year. But, comparisons would be unfair, as Emmis in fiscal Q3 2018 still owned KPWR-FM in Los Angeles and still had a cluster of stations in St. Louis.

In fact, Emmis outperformed in both New York and Indianapolis.

Later in the call, CFO Ryan Hornaday shared that, according to Miller Kaplan, Emmis’ radio markets were up 4.9% in Q3, pro forma. September and November were each up 2%, while October was up a strong 11% — thanks to a political bump.

These radio markets were up collectively by 2% in fiscal Q3, he added, citing Miller Kaplan.

Some $1.1 million in political revenue was recorded in fiscal Q3, thanks to strong activity in Indianapolis.

Strong ratings for both Urban WBLS-FM and Hip-Hop WQHT-FM “Hot 97” helped Emmis in the quarter.

This helped Emmis achieve radio revenue in fiscal Q3 of $28.7 million, compared to $34 million.

Healthcare advertising was a strong contributor to Emmis’ revenue, representing 10% of its client pool dollars. Automotive, cellular and services were also strong in fiscal Q3. The weakest ad categories: Restaurants, beverages and entertainment.

What’s key, however, is Emmis’ net income. Even with tough comps, Emmis excelled with net income of $712,000 (5 cents per diluted share), compared to a loss of $279,000 (-2 cents per share).

Investors were pleased with the results, with midday trading for Emmis shares pushing it to prices not seen since early November 2018. As of 12:40pm Eastern, EMMS was trading at $3.98, up 9.6% from Wednesday’s close.

On the emerging technologies side, revenues climbed to $418,000 from $236,000. Smulyan spoke highly of Digonex, Emmis’ dynamic pricing subsidiary, which has moved on “to another level.”

He said, “It continues to grow its client base and we think we’ve reached the tipping point in that business. We think that business can be a significant contributor to our company, going forward.”

The one hard part of Emmis’ fiscal Q3, Smulyan said, was that it involved the “significant downsizing” of its Nextradio and TagStation LLC operations.

As RBR+TVBR first reported in October 2018TagStation LLC and its NextRadio — developed as an App that would turn any smartphone into a data-free FM tuner by unlocking a chip inside an individual headset — are winding down their operations.

“The effort to form a consortium for NextRadio and TagStation has not been successful,” Smulyan revealed in delivering Emmis’ fiscal Q2 results three months ago. It had been rumored that several radio broadcasting companies were looking to acquire NextRadio and/or TagStation, turning it into a shared platform for all FM radio station owners to benefit from.

“We just couldn’t get enough support,” Smulyan said in October, adding that Emmis is “just not willing or really able to keep funding NextRadio and TagStation, going forward.”

On Thursday (1/10), he said, “We had a vision for the industry … it just wasn’t possible without much help from others.”

Paul Brenner will be moving on, as will other key executives tied to NextRadio and TagStation.

Emmis notes that its leverage is 2.4x EBITDA, in compliance of its covenant of 4x EBITDA.


Looking ahead, Emmis’ Term Loans mature on April 18, 2019.

What is Emmis doing to address this?

“We are evaluating several alternatives to refinance this debt prior to its maturity,” Hornaday revealed. “We expect to complete this refinancing by the end of March.”

Meanwhile, Hornaday added that Emmis’ fiscal Q4 2019 pacing is up in the low-single-digits. December was down 5%, January and February are pacing up in that low single-digit range.

In closing the call, Smulyan expressed hope that 2019 would see advertisers finally see the value of radio, driving revenue across all companies. Asked what could be done to improve the health and viability of radio stations, he noted that deregulation from the FCC is needed. “You’re obviously competing against Google and Facebook and every other form of advertising,” he said. “[Deregulation] will help attract capital to the industry, and there has just not been an inflow of capital to the industry. And, it is needed.”