Kate Snedeker - Media & IR Jeff Smulyan - Chairman and CEO Pat Walsh - CFO and COO

Welcome and thank you for standing-by. At this time, all participants are in a listen-only mode, throughout the duration of the call. This call is being recorded, if you have any objections you may disconnect at this point. I will now turn the meeting over to your host, Ms. Kate at Emmis Communications. Ma’am, you may begin.

Good morning. Thank you, Paige. Thank you for joining us for today’s Emmis Communications Conference Call regarding Fourth Quarter and Full Year Earnings. I want to extend a special welcome to all the Emmis employees who are joining us and listening in this morning. We’ll begin in just a moment with opening comments from Emmis Chairman and CEO, Jeff Smulyan and Pat Walsh, CFO and COO. After opening comments from Jeff and Pat, we will respond to the questions submitted via email to ir@emmis.com. A playback of the call will be available until Thursday, May 21st by dialing 203-369-0390. 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 Web site, emmis.com. Jeff?

Kate thanks. As you know we’re looking back at our full year -- the fiscal year which ended February 28th and for the year we had another really good year. This is the fifth year in a row that we’ve beaten our markets. Our Q4 revenues we’re up 20% and on a pro forma basis, up eight tenths of a point against markets that were down 2.5%. On a month-by-month basis we were up 5.2 in December with markets that were down seven tenths, in January down one and markets down five and in February down one eight on markets down two. February marked the 15th consecutive month where we outperformed our markets which we think is really quite exceptional. Having said that, obviously you could see the trend and it continued through the first quarter. The New York market remains very weak it was down 6% in Q4, even though we were only eight tenths of a point. And as we saw really going into January, our first quarter was very weak, we’re in it now, but March and April were down 7.5% those were very tough months and those comport with what we’ve seen other places, May is better negative. But good news is that as we get into our second quarter pacings are up in nicely and positive territory. But obviously we’re skittish because the year has been off to a tough start for all of radio. Our publishing revenue is down one in the fourth quarter, but up 2% for the year and our publishing numbers are off to a very good start this year, beating last year with significant improvement and performance. As you know, we amended our credit facility, which we completed last week that gives us flexibility but we really feel that we need, I think some people said for your conservative you did need it. But this has been a year where things have been certainly topper than anyone in our industry expected and we just thought that we needed to give ourselves flexibility because we face obvious challenges with the New York market as well as our particular competitive challenge in Los Angeles. Although let me say that we knew what competitor launched and taking Big Boy that we would be off to a rocking start, but we’re seeing some nice bounce back. It's too early to say anything, we’ve been doing this for 35 years and we’ve seen all sorts of competition. We feel very comfortable with where our team at power will end and I’ve said before, we tell you that our management team led by Val Maki, and Janet Brainin, and Jimmy Steal, we think are the very best in American radio. So we feel very comfortable that we’ll be fine in our competitive battle there. Let me then talk about NextRadio. This was really a remarkable quarter for NextRadio. As you know we’re now up to about post to 2.5 million downloads and we download them one phone at a time. We started our industry campaign at the end of February and I can say in a word it is working it proves we were at radio works. We told the listeners of the American radio stations that there was an FM chip in every smartphone and they responded remarkably. And I can tell you that the impact to that is being felt everywhere, whether it's at the carriers, whether it's in Congress, whether it's with the public at large, whether it's people at the FCC. The one word I would the one phrase I would say is, it is working dramatically. We know by all the metrics that consumers who are exposed to NextRadio love it and we can start more research by Fred Jacobs last week. We think that the idea that when people get metered data it changes their behavior is being validated every single day. We’re now up to 61% of the American public that has metered data, that is a tremendous opportunity for the American radio industry because we are the free alternative and the most remarkable thing about the NextRadio experience is that we’re now up to average time listening per session, per session per station of 18 minutes that is a remarkable statistic and as it grows throughout the ecosystem, we think that it is game changing. We all know that the average PPM session in America is nine minutes and 30 seconds, but when people use NextRadio because of the interactivity, their time spent with the station goes up to 18 minutes, if we can replicate that across 300 million smartphones and other devices, it really does reinvigorate the American radio industry. The thing I love about this is we have had to support everybody in the industry, just about everybody is running the spots and we can see from consumer response, that when they understand the issue they respond and that changes the game. As I have said, we’re up to just 2.5 million downloads and April was an all-time record with 400, and I think 39,000 downloads. We’re up to 40 enabled smartphones, three tablets and now we are on the verge of a new era and that’s the era of interactive advertising. As many of you know we’re doing the test with Allstate that’s step one, but as we grow in phones, we become available to major ad agencies and major advertisers not only nationally, but locally. We have enough mass and we’re getting enough mass that an interactive new opportunity for advertising for the American radio industry is going to be available. The thing I would say is that when you look at the numbers you know that the American radio industry needs a shot being on and in this we are incredibly proud to have led an industry effort that's really been supported, as not only by the NAV, but by all the broadcasting groups to change the game. And I think you’ll see today, but even more important what you're going to see in the near-term are some significant opportunities that are industry is going to have. I am very proud of the people at Emmis because for an industry that needs innovation and we provided it and I think that after many years of making the point about the activation with FM chips we’re now beating close to the point where the American public is going to have the ability to experience that. So with that, I thank you and I want to turn it over to Kate and to Pat.

All right thanks Jeff. Good morning everyone. As folks know this morning we released earnings for our fiscal fourth quarter and our full fiscal year-ended February 28, 2015. Before we dig into the results as we do each quarter and as Kate mentioned at the start we encourage those on the call to refer to the additional financial information disclosed under the Investors tab at our Web site emmis.com to assist with better understanding the pro forma results of our radio and publishing operations. Our results for the fourth quarter and the full fiscal year reflect our continued strong performance relative to our radio and publishing peer groups. Radio net revenues excluding 98.7 FM’s LMA payments grew 1% during the fourth quarter, compared to a down 3% mark. Our three largest markets New York, Los Angeles and Austin all took market-share during the quarter. Our performance in most revenue categories was solid, with national coming in flat against a down 2 market continued strong performance in our area of strategic focus local where we were up 2% against a down four market, and digital where we down four against a down eight market. We lagged in non-traditional revenue where we were flat with markets up a strong 12%. Several of our winter events came off a record setting year in fiscal 2014 accounting for our more modest growth in NTR. Overall, we were pleased with the quarter given the weak marketplace and the up 11 fourth quarter of fiscal ’14 we were comping against. Taking a quick look at our monthly trends, as Jeff mentioned, we were up five in December, down one in January and down two in February. February marked the 15th consecutive month that Emmis that our own performances beating our markets. During Q4 our number of minutes sold continued to trend and decreased 1% compared to the prior year with average minute rates up 1%. Automotive was once again our largest category representing 13% of our revenues, automotive was down one in the quarter. Categories with growth included healthcare, retail, financial services, media and education. Wireless our third largest category decreased 35% during the quarter and given its importance to our largest stations as a category of focus for both our national rep and local sales teams going forward. Quick service restaurants and entertainment also saw declines this winter. Revenues in our publishing division were down one and decrease revenue at Texas Monthly mostly offset by growth at Los Angeles, Atlanta and Orange Coast magazines. For the full year, net revenues in our radio division were up two and markets down four. As Jeff mentioned, this is the fifth consecutive year that our station portfolio has taken share. All five of our Miller Kaplan reporting clusters took market-share during the year and our over performance relative to our markets was at its peak during this fifth of the five years. We performed well within each revenue category. National was flat and markets down nine, local up one and markets down six. Our NTR was up double-digit up 10 and markets even stronger up 19 and our digital business grew 2% and markets down one. We beat our markets in every single months of the fiscal year. During the full year we sold 1% fewer minutes at 2% higher average minute rates revenues in our publishing division grew 2% during the fiscal year. Looking forward to Q1 of fiscal 2016 we are currently pacing down 6.5% for the quarter. We were down 7.5% in March nearly trailing our markets which was down 6.8%. We were down similar amount in April and do not yet half yet have Miller Kaplan reports through the month. May is slightly improved but still down from the prior year. As Jeff mentioned the second quarter appears stronger with patients current up mid single-digits but we cautioned investors that is still early with a lot of business not yet on the books. Our publishing division is pacing up mid single-digit through the first three issues of the year. In terms of station operating expenses excluding depreciation and amortization Q4 expenses were up 6%. The expense growth during the quarter was concentrated in the radio division and related to three principal factors, our new five year agreement with Nielsen where the expenses are straight-line over the five year term expense growth for anniversary after Q1 of fiscal '16. Legal expense related to our former KPWR FM morning show host, and expenses associated with reformat in underperforming in St. Louis. Regular expenses were up 3.5% for the full year publishing expenses were up 3% during the quarter and full year and cooperate overhead expenses were down 12% in Q4 and down 11% for the full fiscal year. During the quarter the company performed it's annual impairment test along with the intangibles and goodwill. The company recognized the series of non-cash impairment which generated the substantial net loss for the quarter in year. During the quarter the company recognized full impairment in $58.4 million in goodwill related to the WPLS and WLIP acquisition. The New York market was down 7% last year after an upsize market in fiscal '14. Our expectations from market performance and the performance of the DOS and LIB at the time of acquisition were substantially better than actual performance and expectations for future growth in the market by management and our valuation advisors are not more modest today than at the time of acquisition. These factors cause us to recognize goodwill impairment. The more modest growth expectations also caused us to recognize $9.5 million impairment of our long lived intangible value on WEPN FM in New York which is operated under LMA by ESPN and additional $100,000 on our Terre Haute station cluster. Our other New York radio stations are evaluated from impairment as cluster and given the aggregate current value of the stations were not impaired. The impact of these impairment charges including a write off of our investment cost load is non-cash in nature and has no impact on Emmis's cash flow, get compliance or ongoing operations. The impairment charges place Emmis in an three year cumulative loss position requiring us to record a full valuation allowance on our differed tax assets accounting for the remainder of the fourth quarter and full year operating loss. At February 28, 2015 the company had $193 million outstanding under our senior credit facility with a weighted average cost of borrowing of 5.97%. This rate will increase 100 basis points in the future following agreement on April 30 with our term loan under to amend our credit agreement. The amendment increases our permitted leverage to 6.75 times through February 29, 2016 it increases loan amortization and include certain pre-payment premiums. We executed the amendment to address uncertainties related to our new direct competitor in Los Angles and the continuing revenue softness in the New York market. We made an SEC filing and the detail on the amendment on April 3 also on our balance sheet is $70 million of 98.7 FM non-resource debt related to 98.7 FM New York transaction. I once again recommend industrial reference to leverage calculation at our website which reflects leverage at 5.4 times EBITDA defined in our credit agreement. We finish the year with approximately $67 million in net operating loss carry forward. Finally we invested $3.5 million in CapEx during fiscal '15 and expect to spend a comparable amount in fiscal '16. We're proud of our operating performance that’s allowing us to outperform the competitive radio business for half decade. Our performances have attracted new competition but we remain confident that we have the right strategic focus and a great team to deliver the results we need to win. In addition as Jeff is outlined the promise of the next radio application provides a straight hope of the resurgent's of radio and tremendous option value for Emmis future. I know Jeff Smulyan thanking our colleagues at Emmis for the dedication and persistent as got off to our challenges and emerge on top. With that Jeff we've got a handful of questions that’s folks submitted in advance of the call. So let me start with the first one, it's a long one. Q - Pat Walsh: The combo of a format competitor in our way a tough market in New York and challenging start to the year is put a sizeable bent in the share price being precede an update on each of these situations the competitive dynamic in L.A. the New York market in Emmis performance in New York and radios performance year-to-date and the prospects are for improvement?

Yes Pat Starting Los Angeles obviously and as I have said, who are new to the company, new to the industry and they say, oh my god, your biggest station is under attack, we’ve been doing this for 35 years. We knew that when you launch competitor and they command them, they did a good job, they ran commercial free for a month that happen, we’ve seen that before and they have Big Boy now. But I think the good news is we knew there would be shock. So we knew that the pain would occur right as people came exposed -- a station with no commercials, but now we’re starting to see the bounce back. We think the story is better told not in the first 30 days, or 60 days or 120 days, but our has been one of the best brands in United States for 30 years and we see the strength of the brand and we’ve seen the start of the bounce back and it will be fun to look at this battle. Six months from now and a year from now and I feel very comfortable about that especially during that what we’re already seeing, but also knowing the team that we have. With Rick Cummings overseeing our programming, who's been overseeing our programming since the first day this company started and Jimmy, and Val, and Janet and Diana and our whole team out there. So feel good about that. New York, I think our integration was little tougher in the purchase of WBLS and against the backdrop of tough market, but we got the market after our first six months and I think we’re beating the market now. We think we’ve overhaul something and we believe that we’ll be fine in New York and we think we see some signs of the New York market is finally coming back and then of course the back drop of all of pad is that the industry is off to a very tough start and you can see it everybody’s earnings. I think every single group announce that there actual radio segment was down in the first quarter, but we do see pacings in our second quarter coming back and we hear that from a brethren in the industry. So we’re optimistic, cautiously optimistic I should say.

So Jeff, the next question relates to the recent amendment, as number of investors ask why where that leverage at 5.4 times at the end of the year, why did we take the step to negotiate an expense of amendment with our lenders to increase our average covenant to six and three quarters time for the balance of the year?

Pat, I would say two things, 2009 and 1992, we look through all of them and we just felt that we needed and I understand, I had several institutions say, gosh, you're giving yourself an awful lot of push-up. But I think that we just -- we wanted to buy an insurance policy and I think the size of the cushion probably made a lot of people say, oh my gosh, we got to dump this stock, but that’s okay. Not happy people dump our stock, but we have seen a lot in 35 years and we want to be prepared for the worst. Do I think we’re going to come close to 6.75? No, absolutely not and if you ;pipeline at our projections by the end of the year, it will be probably much closer to 5.0. But we don’t and hopefully we’ll get into the high fours in the next 12 months. But having said that, we’ve just lift them some tough times and I think one thing you know about this company and this management team that whatever you throw at us, whether it's being nationalized Hungary where we lost our third largest asset or and then usual impact on urban stations that we saw or the knock down of the American economy, whatever they throw at us, we’re going to survive. That I can say with confidence and it's for one reason, our people, we have the most dedicated best people in the industry and whatever they throw at us we’ll be fine.

Jeff, this is a question from an investor that we get frequently it relates to scale, a lot of competitors operate significantly greater scale than us, so this investor ask, with over half your radio revenue coming from New York and Latin America, would you ever consider diversifying out of those markets to lower your concentration risk?

No, I told you that you never say never to any question, certainly we will consider it. But we feel like we know those markets and we have assets that have remarkable brands in those markets and when there is an uptick you can generate dramatically more cash flow in those markets and other places. And so overtime we feel very good and in case when you get the blips, as we’ve had it New York and Latin America which is kind of where to get them both the ones. So we feel comfortable, we play different game in the scale [guys], wavering every cost out and they do a good job and commoditizing sales and at commoditizing product. We’re in a different business, we believe that we got to touch our audiences every day and we believe that our sales people have to have deep strong relationships with our advertisers and we think there is an awful to of opportunity in that segment of the business and I hope there is an opportunity for those people who believe that commoditization is the answer. That doesn’t mean we won’t compete in those areas, but our strength is really being to use the old ABC phrase, up close and personal with our audiences and with our advertisers. We've changed gears Jeff couple of investors asked about where the preferred stock litigation is at this stage. Well as you know we would like to have a verdict by now. As most of you called at no we've won in the courts with every step to the way and we felt extremely encourage by the hearing before the seven circuit having said that was five months ago in December and we think that a verdict is imminent and we feel pretty comfortable with that verdict. And again we prevailed every step of the way and we hope we prevail again. And we just have to wait and see.

Last two questions and I'll roll on together because I think your answers were rolled in together. The question relates to the impairment charges seemingly signaling a diminished future growth expectation to radio. It's investor asking a senior radio is still have growth potential and it's already have come from where is it come from and at the same time investors ask about next radio and when do we begin seeing a financial return from Next Radio.

Well as I said on the opening calls we've said for a long time we believe that this is a catalyst to the industry. For those of who fall this know that six years ago I address it by the industry to find out about the activation of the FM chip and the more we study that we felt that it check every box. It checks the box that radio listening which is held remarkably well but it's preceding this declining and dramatically improved we're on every smartphone in the United States. And we are on a every Smartphone's in the United States we need to get the chips turned on. But if were at industry that lived on its portability we were shock to see that millennials don’t really understand radio is affordable media and when they're exposed through a next radio they go wow. So what we found is that the industry that sold 45 million walkman 20 years ago so no affordable radios now but the one device that they look at 135 times a day has a radio in it and what we've seen in the 2.5 million phones when Next radio is on and use is that people love it. They use it dramatically more than we ever imagine and if we can be in 300 million phones and let me make the statement we will be in 300 million phones. For those of who is listening in homes you can right that one down. This industry is going to be in all the smartphones and when that happens at a time when people understand are the only three alternatives. We will have a tremendous opportunity to grow our listening dramatically that’s number one. Number two, the beauty of what we’re doing is that we have a new interactive opportunity for our industry all state is the very first test but as we grow scales and we get in more and more phones and we're doing it every day. And as we reach agreements with other entities we will be able to do interactive advertising and the thing I love about this is our biggest challenge against the pure place is commercialization if we can sell interactive ads in compliment to our over the ads and they run simultaneously. We can sell by an interactive component at a much higher rate now it will take us a little time to do that but as we do that if you're selling 10 units in hour and six of them are interactive and I realized that’s in the future you may get more for your six interactive ads when you get for all 10 of their ads it gives us at least the opportunity as this eco system builds to reduce a bit of our promotional low and give our industry more revenue. So it's a brand new revenue source that we never had cope it's interactive it's over the air it's an eco-system that every book has to control. So I'm very excited about that and then the most important I think is changing the perception probably even more important than the gigantic listening or the new inner active is when people get involved with the inner activity they think radio is cool again and let's face we need to start winning that battle. We've said that billions of dollars have shifted into streaming alternatives digital audio and yet none of them approve the business model. We have the business model that works in the constrain it and change the perception that’s a game changer this industry needs.

Jeff that’s all we have from investors. So if you have any closing remarks.

Again it's sort of been the best of time or worst time I wish the radio industry revenues were better. But we've seen things in the last quarter that give us that indication the America public here is our message and it happen to be the next radio message they've respond and that’s the most important thing. Our industry makes a cash register ring and I think that the innovation that we have is going to change our landscape. We have great opportunities in industry and I think the thing I like to do now I think our people they think just about everybody in American radio industry were really behind this idea. And thank the NAB Gordon Smith release that this is your game changer and the NAB and Erica Barber at the RAB have led it. And the industry has stood united all of us and we're in industry that has a tremendous amount of impact in peoples lauds every day and I think as we stand together we can gain that and fixed in industry that needs and we're get it. So I think all of our brothers in the industry and our industry leaders and also as always we survive for 35 years for one reason and that’s great people and I think our people. So thanks Pat.

Thank you everyone for joining us. Just a reminder, that a play back of the call will be available until Thursday, May 21st by dialing 203-369-4012. Thank you.

That concludes today’s conference. Thank you for joining. You may now disconnect.