Kate Snedeker - Investor Relations Jeff Smulyan - Chairman and CEO Ryan Hornaday - EVP, CFO and Treasurer

Welcome and thank you for standing-by. At this time, all participants will be on a listen-only mode. This call is being recorded. If you have any objections, you may disconnect at this point. I would like to turn over the call to your host, Kate at Emmis. Ma’am, you may now begin.

Alphonso, thanks so much. Good morning everyone and thank you for joining us for today’s Emmis Communications conference call regarding second quarter earnings. I want to say 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 Ryan Hornaday, EVP, CFO and Treasurer. After opening comments from Jeff and Ryan, we will respond to the questions that have been submitted via email to ir@emmis.com. A digital playback of the call will be available until Thursday, October 22nd by dialing 203-369-3253. 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 on our website emmis.com. Jeff, we’re ready to get started.

Kate thanks and thanks everybody for joining us today, especially our people from Emmis who are sitting in. This is a fascinating quarter for us for a lot of reasons, kind of a landmark quarter. We beat our markets in our second quarter and for the year-to-date and for the six months. According to Miller Kaplan in the second quarter, we were down one-half of 1% while our markets were down 1.9%. The good news is that we continue to perform well on a relative basis. This company now is about I think 5.5 years in exceeding its market revenues. That’s the good news. The bad news is the industry is very challenged. We think radio has demonstrated that it has more reach than any other medium in America but there is no doubt that our industry needs a catalyst. And this quarter we think proved the tipping point for the catalysts that we think our industry needs and that’s NextRadio. As the quarter progressed, our billings got a bit softer and we see that coming into our second quarter that now comps against political make the last few months tougher and that’s continuing through October with softness. We think a lot of that is comps against political because we’re seeing in our pacings going forward from November things look much improved. Publishing revenues were up 3% in the quarter; Texas Monthly in particular had a quarter of solid growth. Couple of other things to note in the quarter, the Seventh Circuit Court of Appeals unanimously affirmed the lower court’s ruling in our preferred case. That case is now over and done final. And our company has won and we’re very, very gratified, very pleased with all the courts, the District Court and the Court of Appeals have agreed with our position. So that issue is now over and behind us, to people who are curious. And then also just most recently I have to say that our morning show in Los Angeles is opened up nicely over its competitor. And we think that’s kind of a landmark moment. Emmis has been in format battles for all of its 35 years. What we found over and over again is that building great brands always allows you to prevail. And I know a lot of people say well, in Los Angeles we’ve got a format competitor and they are going to be tough and they are. They are very good competitors and their morning show is certainly talented; we know because we created it. But the reality is the brand, the Power 106 has really demonstrated tremendous resiliency. And as we’ve seen in these battles for all of our 35 years a brand has made a great people. And we’re now seeing that in that format battle, we’re starting to see a little daylight between us and the other guys. We know that that could change month-to-month when we think for the long-haul with Power 106 brand we’ll demonstrate the superiority in the market. Now I think I want to talk just very briefly about NextRadio because this really was a breakthrough quarter. As many of you know, AT&T signed on July 27. We’re also working with T-Mobile and other carriers and handset manufacturers to finalize some deals that have not been announced. We have about 4.5 million activations to-date we’re adding about 400,000 each month. And what’s so gratifying about this is as people discover NextRadio, they like it. They’re intrigued by it. And we know that when they engage with NextRadio, they’re spending double the time that they do in a normal radio listening session, about 20 minutes. That is a remarkable statistic. And remember we have to get these phones one, one at a time because they have to be installed in each phone. It’s not like sending something out and it’s available in 300 million phones all at once. We have to do it phone by phone. But it’s clearly working. And pilot programs for advertisers have been remarkable. So, we know that we’re on to something that number one will increase radio listening dramatically; number two will open up an entirely new revenue area for our industry which we just critically needed. Number three, based on all of our research and based on all what the consumer interactions, we’ll make radio cool and visual and interactive in a way and device that every American looks at over 150 times a day. So, we could be more excited. We think that the catalyst is coming for NextRadio, for our industry. And I also would say that probably the last few months have been the most gratifying in my entire 40-year career in this industry. People have come to understand what this does for industry and have been incredibly supportive. And so I thank all of the broadcasters as well as all the people at Emmis for getting us to this day. And we’re going to keep going on because it’s an idea whose time has come. And again, I think it’s really important to our industry. So with that I’m going to turn it over to Ryan. Ryan?

Thanks, Jeff and good morning, everyone. This morning, we released earnings for our second fiscal quarter ended August 31, 2015. We encourage those on the call to refer to the additional financial information disclosed at our website www.emmis.com to assist with better understanding our financial results. Our results for the second quarter were much improved from our first quarter. While our markets remained challenged, we outperformed our markets in Q2 and are now beating our markets in the year to date period. Radio net revenues reported to Miller Kaplan during our second fiscal quarter which excludes certain barter and syndication revenues were down slightly, compared to markets which were down 1.9%. Due to first six months of our fiscal year, we’re slightly ahead of our markets which according to Miller Kaplan are down 3.4%. Our outperformance in Q2 was led by our New York cluster, which was up 4.3% while the New York radio market was down 3.4%. Our St. Louis and Indianapolis clusters also grew market share. For the quarter, we outperformed our markets in local spot business, NTR and digital while narrowly underperforming in national spot business. Within the quarter we were up 5 in the month of June buoyed by a record setting Summer Jam concert in New York, down 2% in July and down 5% from in August. During Q2, our number of minutes sold was flat compared to the prior year with average minute rates down 1%. Automotive remains our largest category, representing 13% of radio revenues and the auto category saw revenue decrease 7% during the quarter. The wireless category, representing 8% of revenues, rebounded nicely and was up 58% in the quarter. Beverages and financial services were up in the quarter while entertainment, retail, healthcare and quick served restaurants were down. Revenues on our publishing division were up 3% in the quarter driven by solid growth at our largest title Texas Monthly. Looking forward our third fiscal quarter, we’re currently pacing down 4%. Political advertising in the prior year creates difficult comps through the end of October while early November is pacing positive to the prior year. Our publishing division is forecasting revenues to be down low to mid single-digits. In terms of station operating expenses excluding depreciation and amortization, Q2 expenses were up 3%. The expense increase related to increased spending associated with scaling our emerging technology segments which consists of NextRadio and Digonex, and higher expenses related to our sponsored events. Corporate expenses were up 4% as a result of higher compensation related expenses, partially offset by reduced legal fees. As of August 31, 2015, excluding debt that is non-recourse to Emmis the company had $191.6 million outstanding under a senior credit facility with a weighted average borrowing cost of 6.97%. Our leverage was 5.82 times EBITDA as defined in our credit agreement in compliance with our covenant of 6.75 times EBITDA. Finally, we have invested $1.3 million in capital expenditures in the first half in this fiscal year and we expect to spend approximately $3.7 million for the full year. With that Jeff, we have some questions that have been submitted to us by email. A - Ryan Hornaday: The first one: It appears the momentum behind NextRadio is accelerating. When do you expect NextRadio to start generating revenue and what could it mean for Emmis?

Well, it’s difficult to tell because we’re in a new area, but we certainly think that by the end of this fiscal year and certainly in the next fiscal year. But as we have things like the Allstate test, the Universal Music test that have given us pretty remarkable interactive experience. Those campaigns will now go to advertisers at large. Again this is a year of testing. We may have a few more tests, but I’d think that revenues will start occurring at the end of this fiscal year and certainly next year as phones come in next year from T-Mobile and AT&T and we have mentioned U.S. Cellular and a few other things, those phones will really ramp up. At 4.5 million downloads, we’re in the very early stages where we could start doing things. But those download numbers have grown and as we said just with Sprint phones and a few other phones in the market at about 400,000 phones a month, that will change dramatically next year. So, I think you’ll see the first real revenues in NextRadio in our next fiscal year, possibly some at the end of this month.

Okay, there’s a detailed question around listener hours and I’ll take that one. We’re averaging about 1 million listening hours per month now with our existing user base. You said you expect all carriers and handset manufactures to support the activation of the FM chip in smartphones, two notable exceptions to-date have been Verizon Wireless and Apple. What gives you confidence they will join the effort?

Well, our original strategy was to make a deal with one carrier. The industry did that and that was a deal with Sprint. Then the idea was to get research done in consumer acceptance and then when we got 2 million downloads to take that message to our audiences. And our audiences responded pretty significantly. It led to AT&T, it led to T-Mobile. And now what we’re seeing is sort of a -- its growth, it sort of builds upon itself. And as more people realize that -- they pay $400 or $500 for a smartphone, there’s an FM radio in there and they’re carrier isn’t turning it on. As they are aware of that, they make their carriers know that they’re concerned. And I think that has and we’ve seen that with several carriers now; we’re certain we’ll see it with Verizon and ultimately Apple. We understand that we have to prove an economic chase to the carriers in the Apple because we know that they all make money either selling data or music. And this is the beauty of NextRadio as it’s a free service. But we think the case is compelling. We also know that on a public safety basis radio is the only way that the public can be alerted in times of crisis, because the phone system is either out because there’s a power grid outage or because the data networks are jammed. And so from public safety and also from consumer acceptance of not having to pay for the exact same content that you get for free over NextRadio, we think it’s compelling case and we think it’s -- we see it now with a number of carriers. Once they understand that and once they understand the economics, they sort of are compelled to make a deal. So we feel comfortable.

For two quarters in a row radio has been the number one reach medium, exceeding broadcast television. However, our revenues remain challenged. What does radio need to do to change its perception on Madison Avenue?

Well that’s one of the great frustrations of my career that by every measurable standard, our problem is one perception not the lack of consumption. If you compare us to traditional media, the newspaper business has suffered on monumental lack of consumption, it’s declined. If you look at TV and people would follow this with all sorts of issues with fragmentation, TV has its challenges. Radio has really had less fragmentation than any other medium. Its reach has held up perfectly. I think most people were astounded to know that more Americans listen to radio every week 93% than watch TV every week which is 87%. So I think that is a tremendous point in our favor, but the perception radio is yesterday’s news. My friend Pierre Bouvard [ph] did a remarkable study that showed that advertisers believe that radio’s reach is 50%, in reality it is 93%. And another bit of research that showed that advertisers believe that Pandora and Spotify are as big as terrestrial radio. In reality terrestrial radio is nine times bigger than Pandora and 17 times bigger than Spotify. So we’ve said the biggest issue we have at NextRadio is that it makes radio cool again. People see it interact with. And it comes at a time when they are paying data charges. And actually my most encouraging experience with NextRadio is that 92% of people including 93% of the millennials think that experience is cool. And we think as that becomes widespread, it will force people to change their perception of radio, which is what we need more than anything else.

Okay. And this is, New York cluster had a great quarter in Q2 despite the market being down. What do you attribute the outperformance to and can it be sustained?

I think the outperformance is due to the leadership of Deon and his team and also Pat Walsh who has laser focused on New York and they have really done a very good job. And we’ve said in the past, our integration of the BLS LIB properties was -- it took a little longer than we had hoped last year. But I think we’ve got it right. And I think as I said earlier in the call, we managed to do well. We have worthy competitors in New York, really good competitors. But I think we’re very good at building teams and brands. And I think it’s a product of our culture. Having said that Ryan, there is no question that New York market has significantly underperformed the rest of the radio. And I think this year it’s down better than last year but it’s still down about 4% which is very frustrating to us. But it’s still the largest city in United States and radio has been a vibrant part of it for the long time and we think with key catalyst it will get better.

Does the recent format attack in Los Angeles cause you to believe that Emmis needs more scale to compete effectively?

I think we’ve always been a niche player. That’s who we are. We never believe that we had it -- and listen, we love to have a full cluster in Austin and a big cluster in St. Louis and Indianapolis and that’s the hand we have. And many people remember when we had a second FM in Los Angeles really didn’t provide us with some of those synergies. I think what we are really good at and what I think is important is we’re good at building local brands, strong local brands. Radio is an industry unlike many industries where you really can’t be successful with one national brand and it’s been tried many times because what people care about is their local radio station. And I think what we found is we’re very, very good at building brands and maintaining. Power 106 has been a dominant radio station in Los Angeles since 1986. So, we’re going on 30 years with that station. And I think that brand means a lot to Southern Californians; it’s been challenged over those 30 years and it’s always emerged dominant. We have no doubt it will be now.

Our last question Jeff has to do with our leverage which has been creeping up over the last couple of quarters. Do you have any plan to sell any assets to reduce the leverage?

No, as you know, Ryan, we generate substantial free cash flow and that will allow us to de-lever it. We never say never about buying or selling or doing anything in this industry because the world changes. But our strong sense is that we have good assets and while we’ll always consider alternatives, we know that we generate enough free cash flow to de-lever. And certainly that is job one. So we feel comfortable of where we are. We took our leverage out because we knew that our markets were challenged and we had some direct competition.

Great. That’s all we have in terms of questions. Jeff, do you have any closing remarks.

Just thanks to everybody being on this call, our investors, analysts and people. It’s really a landmark quarter, the end of our preferred case, reaching the tipping point with NextRadio, being able to respond format challenges and obviously turn the corner with those. So, we feel very good. I wish that I could tell you that the overall landscape in American radio was brighter but we think brighter days are ahead. And I think the thing that is so gratifying is that those brighter days are really being read in large part by the efforts of the people at Emmis.

Thanks Jeff. Just a reminder, a playback of this call will be available for the next few weeks till Thursday October 22nd at 203-369-3253. Thanks everyone for joining us.

And that concludes today’s conference. Thank you for your participation. You may now disconnect.