Emmis outperformed markets for quarter


On a pro forma basis, excluding the three stations recently sold to Merlin Media, domestic radio revenues were up 4% for Emmis Communications, while its markets were up only 2%. So, with revenues moving up and an improved balance sheet from the station sales CEO Jeff Smulyan was a pretty upbeat guy on Thursday’s quarterly conference call.

As reported to the SEC, net revenues were down 3.1% for fiscal Q2 (June-August) to $$64.6 million, with publishing down 3.6% to $14.6 million and radio down 3% to $50 million. Excluding revenues from the Merlin stations for both years, RBR-TVBR calculates that net radio revenues were up 4% to $46.1 million (including international as well as domestic radio). Markets cited as particularly strong were Los Angeles and Indianapolis (HQ building pictured).

August was a particularly strong month, with revenues up 10%. Smulyan cautioned, however, that September was only slightly positive and October is down against last year’s tough political ad-inflated comps.

The Merlin sale closed on the first day of the new quarter, September 1st, but the stations had been LMA’d for some time before that. Emmis retained a minority equity stake in the $198 million deal, but collected $120 million in cash to clean up its balance sheet. CFO Pat Walsh reported that the company’s debt as of August 31st had been $331 million, but was reduced to $214 million after the Merlin transaction.

Smulyan and Walsh continue to evaluate options to refinance Emmis’ debt now that it has de-levered. However, the credit markets have tightened again so that refi may not come as soon as they had hoped.

RBR-TVBR observation: We enjoyed Jeff’s quip that every radio group blames “the other guy” for cutting rates, but there is some tangible evidence that Emmis is refusing cheap business. Wells Fargo analyst Marci Ryvicker, who doesn’t officially cover the penny stock but keeps an eye on Emmis anyway, notes some good indications about rate vs. sellout in the quarterly SEC filing: “For the 6 months ended August 31, EMMS’ average rate per minute was UP 7.5%, whereas rate for FQ1 was UP only 2.2% so there was sequential improvement from quarter to quarter.  For the 6 months ended August 31st, EMMS’ average rate per minute sold was DOWN 3.7% – this compares to sell out UP 2.1% in FQ1.  If we are reading this correctly, it looks like EMMS is going for rate over occupancy, which to us, is a positive sign.”

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