Jeff Smulyan – President, Chief Executive Officer Patrick Walsh – Chief Financial Officer, Chief Operating Officer Kate Snedeker – Investor Relations

Welcome and thank you for standing by. Currently all participants are on listen-only for the presentation. Today’s conference is being recorded. If anyone objects, they may disconnect. This conference is for the Emmis Second Quarter Earnings call. I’d like to turn the conference over to Kate from Emmis.

Thank you, Catherine. Good morning everyone. Thank you for joining us for Emmis’ second quarter earnings call. A special welcome to the Emmis employees joining us this morning. We’ll start in just a moment with opening comments from Emmis Chairman and CEO Jeff Smulyan, and CFO-COO Pat Walsh. At the end of their comments, Jeff and Pat will respond to questions that have been submitted via email to ir@emmis.com. A playback of the call will be available until Thursday, October 24 by dialing 1-402-220-4182. This conference call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please refer to Emmis’ public filings with the SEC for more information on the various risks and uncertainties. Additional disclosure related to non-GAAP financial measures has been posted under the Investors tab of our website, emmis.com. Jeff?

Kate, thanks. This has been another very good quarter for us, for several reasons. In terms of domestic radio, we’ve outperformed our markets again. Our stations were up 3.5% and our markets were up 3.3%. For the six months, our stations were up 5.3% and our markets 4.2%. I think the thing to point out is we are incredibly proud that we keep beating our markets even though we’re more of a boutique and yet we compete with the largest players in this industry and consistently seem to do well. The other important thing to note is we compete in many of America’s largest markets, and those markets are beating the industry. The industry is probably up about 1%, maybe 1.5% this year, so if our markets are up over 4%, we think that’s a good sign because we think that the largest advertisers are showing more faith in radio in the largest markets and hopefully that will have impact throughout the entire industry. Publishing also had a very good quarter – revenues up almost 6%. We’ve really seen improvement in almost all of our magazines and that, coupled with the continued affinity for our magazine product, is very encouraging to us in clearly a challenged space. Again, we seem to set the pace pretty easily in city and regional magazines by every metric. The other thing is – and I think we’ll look back on this quarter as one that was really integral in the transformation of the radio business – we launched NextRadio in August with Sprint. This is the first major carrier to focus on getting FM chips and activating them in cell phones. They were activated with our NextRadio system. We are ecstatic with the response. Consumer response has been very, very positive, both in reviews of the site, feedback about the site – we’re doing research on that now – but also in terms of how many times it’s downloaded, how many times people go back to it. We are in the very early stages of this. As we’ve said, we really would like to be in four or five years in 300 million cell phones. This is the start. No question, hardest part is getting it launched. Sprint has been incredibly pleased, and they’ve been a terrific partner. The other thing that’s been most gratifying to me is the unprecedented support we’ve had in the radio industry, not only to fund this but to become active in making this a compelling platform for consumers, and we’ve said we have 70 of the 75 largest companies on board financially supporting this, including all of the top 20 companies, and we also have the support of thousands of small market radio stations, so that is very, very encouraging. The other thing I can tell you about it is that we have seen an opportunity to, for once, transform the terrestrial signal. We’ve all been streaming for many years. We will continue to stream. We have to reach our audiences in any way possible, but we all understand that we have some unique advantages in the terrestrial signal. It’s free, it reaches everyone on a one-to-many basis, and we think based on battery life, data charges, buffering problems that there is a significant opportunity for our industry to capitalize on that, and that’s really what FM chips do. As we’ve said many times, 20 years ago we sold 40 million Walkmen in this country. We don’t do that anymore, but just with the Sprint deal, we’ll have 30 million phones in place and we think that will lead to many, many millions of phones. So our message to our people and to others in the industry is, if we get behind this and we make the interactive experience great for our listeners, then we think this will spread like wildfire, and we think that getting this done now largely through the efforts of Paul Brenner and his team, Kevin Gage and the NAB, other industry leaders, it’s just been very gratifying. So I’m excited about that, and I think we’ll look back on this quarter as a quarter where, yes, we over-performed again and I’m proud of that, but where we really launched something that changed the trajectory of the American radio industry. Pat?

Thanks Jeff. Good morning everyone. As Jeff mentioned in his opening remarks, our second quarter operating results reflect our continuing focus on operating excellence while delivering technical innovation to help lift the entire radio industry. For the second fiscal quarter ended August 31, 2013, we increased income from continuing operations compared to the prior year by $2.5 million or 179%, and for the six months ended 8/31 delivered $8.9 million in operating income from continuing operations, an $8 million lift from the prior year. As has been the case in recent quarters, we encourage those on the call to refer to the Investors section of our website, emmis.com, for additional detailed financial disclosures. During the first (sic) [second] quarter ended August 31, 2013, we reported net revenues were up 3.9%. As Jeff mentioned, revenues in our radio markets where Emmis competes grew 3.3% in the quarter. Emmis grew net radio revenues 3.5% during the quarter as the performance of our four of our five Miller Kaplan markets – Indianapolis, Los Angeles, Austin, and St. Louis – all took market share during the quarter. The New York radio market grew an impressive 6% during Q2; however, WQHT FM fell short of that performance due to ticket sales for June’s Summer Jam, the largest hip hop concert event in the world, not hitting its traditional sellout levels. In spite of record-setting sponsorship sales and a record Internet live streaming audience, a crowded summer concert calendar in New York caused us to miss our expected sellout audience. We’ve reviewed this year’s Summer Jam performance and plan performance for next year which should return us to historical sellout levels. Coupled with record sponsorship and a live stream audience that was larger than any television program the night of the concert, we remain bullish on the future of our landmark concert. Had Summer Jam performed at sellout levels and the political revenues at prior year levels, Q2 revenues would have been plus-6, growth that is similar to the first fiscal quarter. During the quarter, our national performance was plus-1, local an impressive plus-7, and digital continued its torrid pace of growth, up 19% during the quarter. Both local and digital outpaced our markets, which is consistent with our strategic emphasis on these two areas of the business. Taking a quick look at our monthly trends, we were down 1 in June. We would have been plus-3 with a Summer Jam sellout. We were plus-9% in July and plus-5% in August. During the second quarter, our number of minutes sold decreased 2% compared to the prior year, with average minute rates increasing a solid 6% during the quarter. Automotive and beverage were our largest summer categories, both representing 11% of revenues. Automotive was up 19%, and our third-largest category now, wireless, was up 30% during the quarter. Home improvement, grocery and entertainment also grew double digits while media, beverage, quick serve restaurants and financial services saw declines during the quarter. We continue to place a particular emphasis in the healthcare category which we think will play an important part in our future quarters, although the pace of revenues related to the Affordable Care Act has been slower than we anticipated. Radio revenues are currently pacing up 2% for the fiscal third quarter and we forecast the quarter will end up 1%. Excluding significant political revenues in October and November 2012, we would be pacing up 5% and forecasted to end up 4%. Revenues in our publishing division, as Jeff mentioned, were up 6% during the quarter as Atlanta, Indianapolis, Orange Coast, and our two largest titles – Texas Monthly and Los Angeles – all showed solid growth. Similar to radio, Emmis publishing revenues are pacing up 2% in the fiscal third quarter. In terms of station operating expenses, excluding depreciation and amortization, second quarter expenses were up 5%. Radio station operating expenses, excluding non-cash comp and certain costs related to NextRadio and TagStation, were up 3% in the second fiscal quarter. Publishing expenses were down 1 in the quarter. Corporate expenses were up during the quarter as a result of certain non-cash compensation related to our retention plan trust and certain employee contracts; however, cash corporate expenses were down 1% during the quarter. Excluding non-cash comp and preferred litigation expenses, corporate expenses are running about $3.6 million per quarter and we expect the full year to be around $13.5 million. At 8/31/13, the Company had $63 million outstanding under our senior credit facility with a weighted average cost of borrowing of 4.47%. Also on our balance sheet is $77 million of 98.7 FM non-recourse debt related to the WRKS transaction. I recommend investors reference the leverage calculation on our website which reflects leverage at 3.1 times EBITDA, as defined in our credit agreement, excluding both the non-recourse debt and the related LMA payment. Based on present forecasts, we expect leverage to begin to approach the 2.5 times threshold by the end of the fiscal year or early in the next fiscal year, which will further reduce our interest spread over LIBOR and enable potential restricted payments. As a reminder, we finish fiscal ’13 with approximately $66 million in accumulated NOLs which should continue to shield profits from federal taxes for the foreseeable future. We spent $950,000 on CapEx in Q2 and expect to spend just over $3 million on CapEx in fiscal ’14. Jeff will talk a little bit more about NextRadio in the investor Q&A, but suffice to say we’re thrilled with the effort of all broadcasters in working together to launch this critical portable FM smartphone application, and we’re equally excited that the men and women of Emmis continue to outpace the radio industry and take market share at the same time we launch this important app. With that, Jeff, we’ve gotten a number of questions from investors on the Q&A submission page, so I wanted to fire a few of those at you.

Sure.

Why don’t we start with NextRadio, and you talked a fair amount about it in your opening remarks. NextRadio launched about a month ago. What are you hearing from Sprint, other broadcasters and consumers about NextRadio? What can we expect in the coming months, and when will Emmis start to generate meaningful revenue from NextRadio?

Well as we said, I love—Dan Hesse, who is the Chairman of Sprint, has called this a rolling thunder launch. Last week, the first Samsung phones came out. Up until that, we’d had HTC. As we get into the Christmas season, a number of other phones will launch so it will be rolling to the point where we get to 10 million or so phones within the year—within a year of launch. We think—we know Sprint has been ecstatic. They love the take rate. The take rate is higher than other apps they’re seeing. They love what we call the stickiness. People who are listening, especially the interactive components where they can get album art, they can interact with the radio station, that has been a home run for us. Our job is to make sure that more and more broadcasters understand that the interactivity on the phone as well as the coming interactivity in the automobile are the two most important things that we can do as an industry. Sprint has been great. They love it. They were doing things in terms of launching web pages and sending consumer notices, frankly, well above and beyond our agreement with them, so they are very happy. We’ve been happy. The consumer reviews on the app have been spectacular, and feedback in the industry. I think when people see it and use it, they love it, and that’s the most important thing. Our job is to get as much consumer research now as we can, but I think the feedback has been overwhelmingly positive. Remember, it’s a daunting task. We’re starting at zero and we want to march toward 300 million phones. The advertising component won’t start for a while. We need to get enough phones in circulation that we can run some tests, but I think CATS and McGavern and some of the large national reps want to work on some tests with us, especially CATS has talked about that, to start testing when we get enough phones in circulation. But this has a chance to be a major new revenue component for the American radio industry. By having the interactivity, by having location-based coupons and other services, we could be talking about hundreds of millions – really, more than that – of brand-new advertising for the American radio industry that we’ve never had a chance to get before. So we’re very, very bullish, and I think the thing that’s most gratifying is, (a) that the industry has come together to fund this and support it, much more so than we had ever hoped; and then the second thing is that the response from people in the industry and consumers who have used it has been overwhelmingly positive.

Jeff, a number of questions related to radio pacings and growth. Without Summer Jam and political, Q2 looks like Q1; and ex-political, Q3 is still pacing up mid-single digits. But it seems like things have slowed down compared to where things were pacing on the last call. Has growth slowed in recent months? Is this an Emmis-specific or a trend for the industry, and how has the government shut-down impacted us?

Well, I think the overhang of all these things has clearly impacted consumer confidence. We’ve seen that in the data, and as consumer confidence is impacted, obviously the media business has. Our business certainly is okay. We would have liked to have seen it take off. We said at the time, we were up 7 in the first quarter – that’s unusual. We hadn’t seen a 7% quarter, so I think a lot of that was in part due to some good things that happened to us that was clearly significantly better than the rest of the industry. But it is frustrating that the industry is probably going to be up 1 maybe this year. Hopefully we’ll be up 3 or 4, but that is frustrating and clearly it’s not spectacular. Remember, we’re now getting into the period where we have political comps last year, and while radio isn’t a major political beneficiary, clearly there is enough dollars that you get in October and November that it skews your numbers backward. But like just about everybody else, I am very, very hopeful that the government shutdown ends and that we get off of this debt ceiling crisis, because clearly it impacts consumer confidence.

Jeff, another question around M&A. Lots of M&A going on in local television. Do you see more M&A in radio coming, and will Emmis participate?

I think we are clearly — every day, our debt level comes down. We have said when we get to under two times, which will be sometime in the next 12 months, that will be sort of a landmark event. We have thought about M&A and we will think about it. We’re looking at some things, but we’re going to be very prudent. I would also tell you that if we do anything dramatic, it will be with financial partners where we may contribute a little capital but it will mostly be people looking to us for our management. I think probably the thing that is most gratifying through all of this is people now look at this company, what we’ve accomplished, what we’ve done in the worst possible circumstances, and they said we’d like to hire your management, and that’s gratifying. So we’ll look at those things. There may be some very, very dramatic M&A that we might do. We may also sit tight. I would say that if we do anything dramatic, it will be largely off of our existing balance sheet. We’re very proud of low leverage, and we want to keep low leverage, whether we get to dividend payers or stock repurchase I think those are the kind of things you can most likely see in the future.

And Jeff, that kind of knocks out another question an investor had, asking as we continue to de-lever and approach the 2.5 times threshold for restricted payments, is it your intention to continue to focus on debt repayment?

Well, I think that’s the priority, but clearly as you get under 2.5 times, you can probably do a little of both. Our cost of debt comes down and our opportunity to deploy free cash flow can go in several areas. Right now, we’re focused on debt repayment. When we get to that point, we’ll decide how to allocate our capital; and as my dear late father used to say, those are nice problems to have.

A couple of industry-related questions, Jeff. An investors asks, what’s your take on Nielsen’s acquisition of Arbitron, and what role do you think Nielsen Audio will play in radio’s future fortunes?

Well, we’re hopeful. Nielsen certainly has the resources. We had a very good relationship with the Arbitron people. As a matter of fact, Arbitron was one of the first entities to step up to help fund NextRadio. We understand the challenges; we also understand the naturally adversarial relationship between an industry which pays for ratings and the company which conducts them. Nielsen has a lot of resources. I love Nielsen’s overall approach, saying that they measure the audience consumption of media; and it’s impossible to do that effectively without having an industry which reaches the average American for two hours a day. So hopefully as they figure out the framework of measuring all broadcast and entertainment consumption, radio’s position vis-à-vis all advertising will improve. And remember, we’ve always had a problem. We’ve always gotten much more daily consumption than we’ve gotten revenues based on that consumption. It’s the old story – we’ve got 28% of media consumption and 7% of the dollars. Having an integrated entity like Nielsen measure all of this should be beneficial to the industry.

Jeff, a question on the Clear Channel IHeartRadio deal with Warner Music – what do you think it will mean for Emmis and others in radio?

Well, I think the verdict is out. Listen – we applaud Clear Channel doing some groundbreaking things. We’ve sort of come to the conclusion that their focus for their company is more IHeart and streaming. Our focus is terrestrial distribution. We think that’s where 100% of the profit of this industry is, but we applaud Clear Channel for investing millions of dollars in that area and testing the waters. Clearly they are going to be big in terrestrial radio – they are the biggest – and clearly we are going to keep doing streaming. As I’ve said a thousand times, this comes down to what consumers want. We think that there is a benefit in terrestrial radio beyond what people understand now, because of it’s free distribution, because of ubiquity. But we’re all testing the waters. I applaud Clear Channel for testing those waters and making very significant investments, and we’re all going to be doing streaming and they’re all going to be doing terrestrial, and we’ll work down the path. How the royalty rates shake out, we’ll see.

Jeff, just a couple more. A couple of investors asked for updates on our two major litigation matters – Hungary and the preferred stock litigation, so a quick update there.

Yes. Our first hearing in the case for Hungary is in December. It addresses jurisdictional issues. Assuming we prevail, we expect a full hearing on the merits of that case in 2014. For those of you who haven’t followed it, we were one of the two national networks, the only two national networks in Hungary that were nationalized. When the new government came in, they basically took over media. That’s a long story we won’t get into. We won in the trial court and the appellate court in Hungary, but it was very clear then the government just said, we don’t care, so they just went to parliament and changed the law. We now are in the one forum that they cannot avoid, and that is the exit courts. We believe justice will prevail. It’s well known that we have estimated our damages at between $80 million and $90 million, plus legal costs, and we are very anxious to get our day in court. Obviously we’ve incurred very big costs because we feel very, very strongly that we have a great case. You can never predict those things, but we feel good. On the preferred, both sides filed motions for summary judgment and we’re hoping for a ruling in the next couple of months. If the motions are not granted, the case is set for trial in January. Given the court’s ruling last August, we’re very optimistic about our chances. This would then go to the federal district court. Judge Barker, who is a very esteemed federal jurist here, ruled really on our behalf in every conceivable manner. The plaintiffs, the preferred holders, get one more crack at the apple. They’ll get a chance in the 7th Circuit. If they prevail, then we’ll be back. If we prevail, this case ends. I assume the Supreme Court is not going to hear this one, but you never know. Again, we feel very good. We don’t have a long history of a lot of litigation, but we will go very, very vigorously when we go. In both of these cases, we felt very strongly. We were vindicated in the lower courts in Hungary, and we’ve been vindicated in the federal district court on the preferred case, so we’re going on. I wish we didn’t have to spend the money, but we feel like that’s money we’ll get back if we prevail. Most people don’t look at this company as the benefit of those cases, but that’s sort of a hidden benefit of Emmis if we prevail and we feel good about it.

And Jeff, when the statements came out this morning, a couple of investors asked questions about the jump in the Hungarian legal expenses, and most of that was driven by we had some major procedural briefs that needed to be filed that took a fair amount of legal work to put into that, and so there was a significant amount of legal work that was done by our counsel during the second fiscal quarter.

Right. Listen – if we prevail, we get all those monies back and many, many millions of dollars more. We’re all cognizant that you don’t win everything in life, but like I said, we feel strongly that we’ll prevail in this case, and if we do prevail in this case, all that money will come back to our shareholders and many, many more dollars.

Last question, Jeff – you mentioned when we talked about M&A potentially partnering with private equity, and you’ve mentioned that during previous calls. Do you have any update on those discussions?

Just that we’ve been fortunate. There are people who like that we seem to find issues, spot issues a little faster. Sometimes you’re a pioneer. This company has always been an innovator from the day it started, whether it was starting in hip hop or all sports, or some of the ideas that we’ve had in spectrum management and broadcast, traffic consortium, NextRadio, and I think people have liked the combination of this company of a really energized, committed workforce, people who care about the company, are loyal to the company, a company that’s loyal to its people. We don’t think there’s any other way to be in business. We think that this is a bond between the company and its people, and that bond creates great results and innovative results. I think people look at us and say, boy, we looked at your balance sheet a few years ago and we don’t know how you got out of that, but you did. I can tell you how we got out of it. We got out of it because we’ve got a lot of people that rolled up their sleeves and said, we’re going to fix this thing, and we did. And it’s no secret – we’ve lost a lot of good friends in the industry who didn’t make it, and we’ve seen a lot of good friends who still have unsustainable balance sheets. We don’t have those challenges, so maybe that’s why we’re willing to take on larger challenges for the betterment of the industry. We’ve always said that we think that the portability of radio in smartphones is the biggest single thing we could do to transform American radio. If somebody will give us another idea, we’ll be all over that too; but our goal is to fix our industry. If we fix our industry, Emmis will do very well.

Jeff, that’s all we had from investors, so if you have any closing comments, feel free.

No. Again, I—you know, I love what this company has done. I love what it stands for. I think I love how our peers view us. Doing the NextRadio thing was certainly very, very hard for five years, but having people say, boy, this is important and we really appreciate it, and having people say I cannot believe the product that Paul Brenner and the NextRadio team created, how incredibly, incredibly compelling it is. When you see hardened people in the industry who have been in a tough time look at something and say, wow, this really is something special. I urge our investors on this call to go to a Sprint store and turn on a radio and see what it does, because it really makes radio come alive. We think that more than anything else, this will change the perception of American radio, and to think that all of that came through the hard work of people in this company is incredibly gratifying. And doing it at the same time when we continue to produce better than industry average numbers is very gratifying.

Thank you everyone. Just a reminder – the replay of the call is available for the next two weeks at 402-220-4182.