Emmis quarterly ad sales still soft, but less soft


Emmis Communications reported that domestic radio revenues for its fiscal Q2 (June-August) were down 22%, which was an improvement over the 27% decline in Q1. Looking ahead, CEO Jeff Smulyan is predicting that in a few months the company could post its first positive numbers since April 2008.

Total radio revenues (including international) were down 26.5% for the quarter to $53.4 million, while publishing revenues fell 30.6% to $14.5 million. So, total revenues for the company were down 27.4% to $68 million.

Cost-cutting continued. Station operating expenses declined 17.5% for radio to $39.4 million and publishing operating expenses declined 20.8% to $15.4 million. That produced negative cash flow of $890K for publishing, which radio cash flow was a positive $14.1 million.

As Emmis filed its quarterly results, it also filed amended reports with the SEC for its previous fiscal year and fiscal Q1 of this year. However, the change dealt with a tax calculation and did not impact revenues or EBITDA.

CEO Jeff Smulyan no longer conducts quarterly Wall Street conference calls, but he did have a lot to discuss in his quarterly email to employees and interested observers like RBR-TVBR. He began by trying to put to rest some employee/investor concerns.

“First, there’s the issue of NASDAQ delisting. I understand that merely being put on notice is unsettling, but I am confident that we have the time and means to avoid delisting. Because the trigger for delisting is months away, we believe improvements in our business could drive our stock price up in time to prevent delisting. However, if the market does not respond to our progress as we expect, we can address the problem through other means over which we have more direct control. Emmis will remain a NASDAQ firm,” Smulyan said. He didn’t explain how the issue would be addressed, but if Emmis’ stock doesn’t get back above $1.00 per share – which is not far away now – a reverse split would be the obvious solution.

“Second, today we’re filing SEC documents restating our earnings from our last fiscal year and from the first quarter of this fiscal year. Certainly, ‘restating our earnings’ sounds ominous, but our restatement solely relates to a noncash technical tax issue that has no impact on our operations. While there might be big numbers involved and a lot of paperwork being filed, I don’t see anything to worry about,” he assured staffers.

Smulyan then moved on to the good news, at least in relative terms, that although revenues were still down from a year earlier, there has been sequential improvement in recent months, with the shortfall percentage gap narrowing.

“What’s driving this trend? Improvements in all of our markets. Notably, our clusters in Chicago, St, Louis, Indianapolis and Austin outperformed their markets in Q2. New York is building steam, and with significant ratings improvements we expect both New York and LA to improve in the coming months. Specific bright spots include Indy’s WIBC, which earned another Marconi Award, and Chicago’s WLUP and New York’s WRXP, which both are showing major ratings and revenue improvements,” the CEO told staffers.

As that trend continues, Smulyan said Emmis could see its first positive numbers within a few months.

“One hopeful note on the horizon is that, as GM and Chrysler emerge from bankruptcy, we expect them to rely on advertising to position and push their respective brands. Other automakers, including Toyota, have already announced major marketing campaigns for later this year.  Automotive is still a major category for all our business units and we expect this category to rebound in the months to come,” Smulyan said.

RBR-TVBR observation: Still weak, to be sure, but finally a flicker of hope. Indeed, Emmis’ stock has already more than doubled this year in anticipation of a recovery.

One thing you can say for these down months and quarters – they sure make for easy comps down the road!