Kate Snedeker - IR Jeff Smulyan - CEO Ryan Hornaday - CFO

Welcome and thank you all for standing by. All participants will be in listen-only mode all throughout the duration of today's conference call. This call is being recorded. If you have any objections you may disconnect at this point. Now I'll turn the meeting over to your host, Kate of Emmis Communications. You may now begin.

Thank you Ramon, good morning everyone. Thank you for joining us for today's Emmis Communications Conference Call regarding the 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 Ryan Hornaday, EVP, CFO and Treasurer. After opening comments from Jeff and Ryan, we will respond to the questions that have been submitted via e-mail to ir@emmis.com. A digital playback of the call will be available and until end of business on Thursday, May 19. That number is 203-369-3513. 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 the non-GAAP financial measures has been posted under the Investors tab on our Web site, www.emmis.com. Jeff, we're ready to start.

Kate thanks. And I want to thank everybody for listening today and especially people of Emmis. This is -- actually it's kind of an unusual time for us, because we're reporting on our fourth quarter and as you know, we're almost done with our first quarter. But looking back on the fourth quarter and our last fiscal year, it was certainly a tough year for us. Make no mistake about it, we are all very happy to be in our new fiscal year, which started on March 1. For last year, this is the first year in six years we did not meet our markets. Our markets were down 1.5% for the year and we were down 4.6%. So, that in itself is challenging for us, but we now see a lot of brighter times ahead. In summing up last year, there really were some very positive things. As we said, the numbers were tough, we implemented some cutbacks in January to recognize that we needed to deal with that, but last year we really had, we think, the foundation of things that have led now to what we think are much better times. Last year, was a year for NextRadio that we got an agreement with AT&T. We got an agreement with T-Mobile. We also launched a series of unlocked phones and we'll be reaping the benefits of those this year. So we think that was important. We also resolved our long-running preferred shareholder issue. So those are the things that in a tough year, we look to as we lay the groundwork for better times and we think those better times are here now. Our first quarter is pacing flat to slightly up and we see better signs in that on the horizon. So, while it's certainly too early to tell, we think that we have a very good chance this year of going back to beating our markets and we do that in the sixth year of seven years that we will beat our markets. And one of the reasons that we think this is a cause for optimism is that ratings are way up. In Los Angeles ratings were up year-over-year 5% in our last monthly Nielsen trend, we beat our competitor in the key 18 to 34 demo. In New York, both Hot 97 and BLS were in the top 5 with their demos. We've had a remarkable year in St. Louis with the performance of the Point, which has been the number one 18 to 34 and 18 to 49, and 25-54, and that it shared that application, which is either been 1 or 2, 25-54. So, it's really been a remarkable run in St. Louis and even our new station KNAU has moved out in the top four in its target demo. In Indianapolis, stations have done very well, led by B105. And in Austin, our cluster has continued to be the dominant first place cluster, really led by KROX dominant [indiscernible] and BOB, which is consistently dominant 18 to 49, 25-54, so all of that portends good things for us. In addition, remarkable turnaround in New York City, our New York cluster in March and April, finished up 12%, significantly being in the market and the de novo pacing up 20%., so we think that all that portends very good things for the Company in the coming year, bouncing back from a tough year last year. NextRadio, I want to highlight a few things. The first is that, obviously, we now have the Samsung Galaxy S7 and S7 Edge, which are the top selling Android phones, now obviously on the Sprint network, the AT&T network and as of yesterday on the T-Mobile network. So we think that is a breakthrough that indicates that we're going to start really ramping up phones for NextRadio this year. Because of the impact that NextRadio has had in the United States, we have been really contacted by a multitude of international operators, matter of fact I'm in Toronto now, speaking to Canadian Music Week about their efforts and their interest in NextRadio in Canada. We'll launch our first international network in Peru in the next two weeks. And we've had really request from a lot of places. In addition, the fastest growing area of smartphones is or let's call the unlocked phones, we've now reached agreements to be the pre-load native FM app on Blue and Alcatel phones and those of the phones that you buy at Amazon, Costco, Walmart and Best Buy and they're unlocked and it's a very fast growing part of the segment. In addition, we announced a partnership with PRSS, which is a distribution network for public radio. We're very, very proud of the partnership we have with NPR and its leadership in American Public Media and we believe this makes NextRadio in interactivity in a totally new level that nobody listing the Public Radio has ever seen and that was announced at the NAB and we couldn't be prouder. And at the same time, the Home Depot, America's largest radio advertiser is now a paying client on NextRadio, and we're excited about that because now we will start to see the era where interactive advertising with the remarkable attribution metrics that it gives our advertisers and our stations will start paying dividends for every broadcaster and we could not be more proud with the era of interactive advertising, which will benefit every broadcaster and every advertiser in America is beginning in the current year. And in addition, one more bright spots and that is that our industry is clearly rebounding. I am very proud of the financial reports that we've seen from Beasley, and Intercom and iHeart and just this morning from RadioOne. It is clear that more and more people are recognizing the incredible impact, the incredible reach, the incredible return on investment and the incredible difference that listening to local radio makes in United States. So, all those things lead us to a very upbeat outlook. One more point and that is that the Company will plan to address its issue with a reverse stock split, if necessary a 4 to 1, we will do that this summer. So we will eliminate that overhang on the Company. But with that, as I've said, a very tough year last year the toughest we've had in a long time but this year is shaping up to be a good year, I think in a many ways because of the groundwork that we laid in a tough year last year. So with that Ryan, it's all yours.

Thanks, Jeff, and good morning everyone. This morning we released earnings for our fourth fiscal quarter and year ended February 29, 2016. 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 fourth quarter were weak, despite an improvement in radio market revenues. Our radio net revenues reported to Miller Kaplan during our fourth fiscal quarter which excludes certain barter and syndication revenues were down 7.3%, compared to markets which were up 0.7%. Our St. Louis and Indianapolis clusters grew market share during the quarter. Our results continue to be negatively impacted by a recent format competitor to our station in Los Angeles. While the revenue impact will be felt into this summer, ratings have started to rebound. As Jeff stated, in March, our ratings in Los Angeles were up 5% as compared to March 2015 and we were ranked ahead of our direct competitor in the targeted 18 to 34 demographic. We are optimistic that revenue impact we have been experiencing in Los Angeles will abate in the second half of the current fiscal year. Our fourth quarter revenues were also negatively impacted by non-spot revenues as we held a concert in New York City last year during the NBA All Star Game that did not occur this year. National spot business remained our weakest line of revenue, down a 11% in the quarter. Local spot was down 7.5%. Digital posted another nice quarter of growth, up 10% in the quarter. Looking at the monthly results, December and January were down 5%, but February was down 11%, partially due to the nonrecurring concert in New York discussed earlier. During Q4, our number of minutes sold was down 3%, compared to the prior year with average minute rates down 3.3%. Automotive remains our largest category, representing 12% of radio revenues and our auto revenues were down 7% in the quarter. Cellular and financial were up in the quarter with most other categories down to varying degrees. Revenues in our publishing division were down 2% in the quarter and down slightly for the year. Radio and publishing station operating expenses, excluding depreciation and amortization were down 3% in Q4, excluding severance of 1.6 million associated with our cost reduction activities in January of this year, as well as severance of 0.8 million in Q4 of the prior year, these expenses would have been down 5% in the quarter. We continue to invest in our two emerging technologies, Next Radio and Digonex and combined, expenses for these businesses were up 900,000 in Q4. We recorded an impairment charge in Q4 of 9.5 million, 5.4 million related to our FCC licenses and was driven by declines in overall market revenues and a reduction in long-term growth rate assumptions, 4.1 million of the impairment charge related to goodwill and patents associated with Digonex. Now for some good news, fiscal 2017 is off to a strong start. While Q1 is currently pacing flat to the prior year, these results include the weakness I highlighted earlier for the Los Angeles and excluding LA, our Q1 would be pacing up 5%. We have been helped by competitive political races in New York and Indiana, resulting in about $75,000 of incremental revenue in Q1 and that represents about half of the up 5% we would be ex-LA. In April, all remaining Series A preferred stock were converted into Class A common stock at a ratio of 2.8 shares of Class A common stock for each share of preferred stock. We currently have approximately 48.5 million common shares outstanding. As of February 29, 2016, excluding debt that is non-recourse to Emmis we had 184.8 million outstanding under our senior credit facility with a weighted average borrowing cost of 7%. Our leverage was 5.4 times EBITDA, as defined in our credit agreement, in compliance with our covenant of 6.75 times EBITDA. We expect leverage to decrease into the five times range by the end of fiscal 2017 due to EBITDA growth and continued repayment of debt outstanding. Finally, we invested 3.4 million in capital expenditures into fiscal 2016 and expect a similar amount in fiscal 2017. With that, Jeff, we have a few questions investors submitted to us in advance of the call.

Okay. A - Ryan Hornaday: You touched on this in your opening comments some believe that digital dollars will find their way back to traditional media, particularly radio, because it is the number one reach medium in the United States. Do you believe this is true, and if so why?

I really do. I think there has been so much now written. We sort of like different waves. We went to the digital wave for so long, but now I think with some problems with ROI, with problems with BOTs, and also with just a recognition I think people gave up on radio in ways that just didn't make any sense. And I think we're now starting to see, we call some green shoots. So, I'm encouraged.

Next question is about programmatic, what are your thoughts on the timing and impact of programmatic buying for radio?

Well, I think it's -- we're in the very, very beginning in the first inning. I think the iHeart platform they've talked about yesterday up and running. And there a lot, the Katz Expressway is starting, Marketron is building a system and there will be others and we're learning a lot. We formed a group of our senior sales leaders to analyze it and I think we're well on the way. And I think we will be prepared as it rolls out, but I think it's very early to tell. I would not think this would be a significant portion of radio revenue, certainly for the near-term.

Emmis's hip-hop concerts in New York and Los Angeles in June are important events for Emmis, and by the way, those fall in our second fiscal quarter. How do they look with about a month to go?

Yes, we're very, very encouraged. We're encouraged as sponsorships for both events are at record levels. We've got some new very, very major sponsors that we could not be more pleased with. It looks like and again, you never know what ticket sales. But we're very encouraged and it looks like those events will be record breaking this year.

Do you expect political revenues to be meaningful for Emmis this fall?

Well, they were certainly more meaningful than we thought in both the New York and Indiana primaries. And while we never want to get our hopes up too much on political in the radio industry, it's very clear that a lot of political consultants have said, you know what, radio is a great way to target and some of work that the Katz and Nielsen had done has been very helpful. So, again, it's really hard to know where critical races are? What national dollars will be spent? What the super packs will do? But I think it bodes well that it will be a nice uptick for radio this year.

Are there any updates on NextRadio's discussions with Verizon or Apple?

Well, let me just say that we've sort of completed the strategy to really focus on all of the major carriers. And then in addition to that, the unlocked phones, we are just about done, getting every major unlocked phone manufacturer to have the NextRadio platform. We have two or three and the third is well on its way. And with the carriers, we always said, the strategy was always let's reach an agreement with one which was Sprint. We did that, we came together to support that. And then, we said, we'll use our megaphone to tell our listeners that there's a free FM Radio in every smartphone in the world and they did that. Our industry really responded remarkably, and so last year AT&T came on board and the advisors that we had told us that, once you got one of the big guys, the others would come. I'm sure after AT&T we got T-Mobile, U.S. Cellular and it's no secret that we are in discussions with Verizon and very encouraged by what we see. We've also said our major focus will shift then to Apple. And we believe there is reasons that we will be in every smartphone in the United States in a few years, and we are very, very optimistic, Ryan, we believe this is an idea whose time has come and we've certainly seen every road block along the way. But it's something that our audiences want, it's something that our advertisers want, it's something that's critical for public safety in the United States, and it's something just about every broadcast that I've seen and I've talked to all of them, have come together in way that really is most gratifying experience that I've had in 40 years in the industry, and it's an idea whose time has come and the job that Paul and his team have done, it's just been amazing. It created a product that people love and we're in the early stages. This year, we'll go from 20 million phones to 75 million and in the next year, even without any new additions, we'll go to about 125 million or more. But the gratifying thing is to see how it's come together and how people have really applauded the effort we've done, it's been a remarkable experience and one that I can't thank every broadcasters in the United States enough for pitching in and making this a reality.

Thanks, Jeff. The last question comes from an investor asking about the number of Form 4s that have been filed and asking if there has been an increase in selling by insiders and I'll go ahead and take this one.

I haven't done a lot of Form 4 work, I'll be honest.

The selling activity relates to share withholding on stock that's been issued to executives. If people recall, last year in an effort to improve covenant EBITDA, executives began receiving 10% of their base compensation in Emmis Class A common stock and shares are withheld at the time that that stock is granted to cover the tax obligation and essentially all executives are purchasing stock each quarter equal to 10% of their annualized pay and they're holding the net shares, not selling them. So the Form 4s are merely the tax withholding on the stock that's issued each quarter. And that's all we have in terms of questions. Jeff, do you have any closing remarks?

No, just again as we said, last year was a tough year, but it laid the foundation, it looks to be a very, very encouraging year this year. So I thank all of our employees and all of our investors and we look for better times ahead.

Thanks, Jeff. Just a reminder that a playback of the call will be available for the next two weeks by dialing 203-369-3513, thanks everybody have a great day.

Thank you so much speakers. And that concludes today's conference. Thank you all for participating. You may now disconnect.