Revenues fall 6% for Emmis

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Emmis Communications is no longer conducting quarterly conference calls, but reported Friday that revenues for its fiscal Q3 (September-November, 2008) were down 6% to $85.1 million. Domestic radio revenues were off 8%. A statement from CEO Jeff Smulyan notes that Emmis continues to generate cash flow, had $63.6 million in cash on hand at the end of the quarter and is “well-positioned for this downturn.”


Although Emmis management did not conduct a conference call with the dwindling corps of Wall Street radio analysts, the company did provide a detailed written commentary on the quarter. You can read the whole thing in the “Investor Relations” section of the Emmis website, but we think these are the two key paragraphs:

“Net revenues for the third fiscal quarter were $85.1 million, a 6% decrease over the prior period. Our domestic radio net revenues underperformed our markets during the fiscal third quarter. Although our reported domestic radio net revenues decreased 8%, these domestic radio net revenues include (1) certain revenue performance guarantees associated with our national sales representation agreement, (2) revenues of Emmis Interactive and (3) revenues from barter arrangements. Revenues of our domestic radio stations as reported to Miller Kaplan (an independent accounting firm), which exclude these three items, were down 15.4%, whereas Miller Kaplan reported that revenues of our domestic radio markets were down 14.1%. During the third quarter, three of our clusters outperformed their markets: Los Angeles, St. Louis and Austin. Our LA cluster finished the quarter down 17% in a market off 19%. KPWR continued to outperform the market but its share gains were partially offset by continued weakness at KMVN. Our New York stations were down 21% with the NY Market down 15%. Hot 97 and Kiss outperformed the market, however, revenues at our reformatted WRXP in its third quarter of operation are still developing and considerably short of revenues recorded at the former WQCD in last year’s third quarter. The Chicago market finished off 8% and our Emmis stations were off 22%.

In the third quarter, national revenues were down 4% compared to markets off 18%. Local revenues were down 21% on markets down 15%. During the third quarter, our largest category was media (television/cable/newspapers), which represented 10% of our radio revenues and was down 21% from the prior year. Our second largest category, automotive, represented 8% of our radio revenues and decreased 34% year over year. The only top 10 categories that saw gains were cellular and beverages (both up 3%). Retail, financial services and movies were all down more than 20%. During the third quarter units sold was down 2% and average unit rate was down 15%.”

Pro forma net radio revenues were down 4% to $62.3 million, with $51 million from domestic and $11.3 million from foreign radio. Station operating expenses were $37.6 million for domestic and $8 million for foreign. Pro forma net publishing revenues were down 12% to $22.9 million. Operating expenses for the magazine division were $18.4 million.

Wachovia analyst Marci Ryvicker sent clients a summary saying that Emmis’ Q3 results had beaten her estimates due to a bigger national guarantee than anticipated, higher interactive revenues and a favorable foreign exchange impact on international revenues. So, consolidated EBITDA of $17 million was well ahead of her $11 million expectation. However, Ryvicker notes that domestic radio is pacing down 20% (excluding the rep guarantee) in fiscal Q4. She has reduced her estimates going forward. The analyst expects domestic radio (including interactive) to be down 9.5% and international down 12%.

“While the economy in the United States and abroad continues to struggle, at Emmis we are working diligently to take the necessary steps to successfully navigate through these difficult times,” said CEO Jeff Smulyan in an earnings announcement. “Despite crises at other media companies, Emmis continues to generate cash flow that is greater than two times its annual interest costs and had $63.6 million of cash on hand at the end of the third quarter. I am confident that we are well-positioned for this downturn, and will remain focused on managing our expenses and balance sheet while delivering the best product to our advertisers, listeners and readers,” he said.

Emmis also noted some interesting financial moves to keep both employees and bankers happy. “During the quarter, Emmis began a program that uses a portion of the cash from the sale of WVUE-TV in New Orleans, and possibly Emmis’ common stock, to pay quarterly bonuses to 64 employees to offset temporary salary reductions. Although the employees will be receiving the same amount of pay under the program, the structure of the program lowers operating costs under the terms of the Company’s credit agreement,” Emmis explained.