Emmis finds the black, set to get aggressive

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Radio’s canary in the mine shaft, Emmis Communications, is reporting growth in its domestic radio operations – Jeff Smulyan said it’s the first time his company has had a story to tell in some time. He also said the restructuring that will come with its New York/Chicago sale/partnership with Merlin Media will allow the company to go back on offense.


In its fiscal first quarter of 2011, the company’s publications wing pulled in similar net revenues as they did in 2010 but were done in by increased expenses.

However, radio net revenue grew from $44.233M to $45.37M and operating income surged from $9.305M to $10.650M.

45% of Emmis radio income is generated in New York and Los Angeles. In LA, it beat the market by a bit, enjoying a 3% increase in revenue compared to a positive 2.7% gain for the market overall. It was a different story in New York, where Emmis dropped 7.6% while the market as a whole was edging up 0.4%. The company added three markets — St. Louis, Indianapolis and Austin – to its outperform list, and underperformed in Chicago. Stats were unavailable for its holdings in Terre Haute IN.

Smulyan said the company has battled not only the economy in the recent past, but also the misfortune to be reliant on formats that have not proven to be PPM-friendly. But he expressed his optimism for the business, noting that radio has weathered the onslaught of new media better than any other member of the traditional media.

Smulyan noted that the economy has slowed, dampening earlier thoughts that 2011 would be a major turnaround year. That said, pacings for August are up – but again, the soft economy reduces visibility and what looks good a month out has had a way of shrinking of late.

Pat Walsh said automotive has been riding a 13% wave of black ink, and said that figure would be better if troubled Japanese manufacturers were able to participate. He said business from carmakers in the US and other foreign locations has been steady.

Regarding pacings, Walsh said it seemed to be a matter of the economy in general, not market size, noting that Emmis is seeing similar results top to bottom, “from Terre Haute to New York.”

Emmis said 57.5% of its Q1 2011 income was local, 14.8% was national, 0.4% was political, 5.6% came from publication sales, 4.8% from non-traditional sources such as event ticket sales, and 16.9% from other sources including websites and barter, among other things.

Smulyan noted that most estimate of the value of the Merlin sale have been at about the $200M level (RBR-TVBR put it at $198M). He said, given the variables involved in valuation, that Emmis was hoping its ultimate value will come in to the north of that figure.

Smulyan summarized the company’s results in a note to Emmis employees. He said, “Although it remains choppy, our growth and recovery continues. Revenues were up 3 percent in radio, down 1 percent in our publishing division, and up 2 percent overall for the company. Our expenses were up slightly as we began making modest investment to help bolster growth in future quarters.”

Smulyan concluded, “While the economy is not helping us, our company is now on the right track. By restructuring our balance sheet, we will be able to once again compete more vigorously in our industries. Thanks to all of you for continuing to perform in these challenging times. I’m excited about our future.”

Analyst Marci Ryvicker of Wells Fargo noted that CBS shares a presence in New York, Los Angeles and Chicago with Emmis, and said that Emmis’s overall positive showing bode well for the upcoming analyst conference with CBS Radio.

RBR-TVBR observation: Emmis said the sale of stations, along with income and revenue potential from a Los Angeles LMA, poise it for action going forward. Just what that action might be was not discussed with any specificity, and nothing can happen until the Merlin deal closes. But it will make Emmis a company to watch for more reasons than its lead-off status to the conference call season during upcoming quarters.