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

Welcome and thank you for standing by. At this time, all participants are in listen-only mode. This call is being recorded. If you have any objections, you may disconnect at this point. Now, I will turn the meeting over to Kate at Emmis. Ma’am, you may begin.

Thank you. Good morning, everyone. Thank you for joining us for today’s Emmis conference call regarding third quarter 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 submitted via email to ir@emmis.com. A playback of the call will be available until Thursday, January 19th by dialing 203-369-3180. 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, we’re ready to begin.

Kate, thanks. This is certainly a disappointing quarter; I think a couple things that highlight it. Political did not come in the way we expected it. We’ve now seen the broadcast results and I think our results comported with that. We were down 1.8%, while our markets were up 2.5%. Given the history of this Company, we really haven’t lost to our markets that often but that can be explained by our underperformance in Los Angeles. Outside of Los Angeles, we beat our markets up 4% -- excuse me our markets were up 0.4 points and we were up I think bit better than that. On a year-to-date basis, ex-Los Angeles, we’re also beating our markets, but with Los Angeles, we are losing slightly to our markets. The good news is with advanced marketing in LA, ratings have rebounded where we had a very nice run and we think that pertains some very good things for our performance in Los Angeles. In our other markets, we’re having a spectacular year in St. Louis beating the market very nicely, beating the Austin market, and ratings have been very encouraging in the rest of our radio portfolio. So, we feel like depending on what our markets do this year, with the ratings improvement in Los Angeles and the out performance in a few other markets that it does indicate that we’re probably due for a bounce back to a year which we can beat our markets. Also in the quarter, we closed the sale of Texas Monthly, used the proceeds to pay down debt, which will be the primary focus of this Company. The sale of the Terre Haute radio stations will close at the end of this month. We are continuing to explore alternatives and are talking to a number of people about WLIB-AM in New York and/or in the latter stages of our process to sell our remaining magazines. Obviously that information will be forthcoming as soon as we have something to announce. On a much more upbeat note, Digonex is our dynamic pricing business. It is early stages but we’ve seen a dramatic improvement in bookings and in our pipeline, and we feel like that that’s a business that has a lot of upside. We’re again early stages but the last, certainly the last quarter we’ve seen a ramp up in new business and interest. We think that dynamic pricing is an idea whose time has come. And also it was a landmark quarter for NextRadio. NextRadio began the quarter by putting the Samsung S7, which has been the largest selling smartphone in the world and actually -- and I want to distinguish that between the S7 and the S7 Note but it’s on all carriers, and that really is a significant achievement. So, every major carrier in the United States, all five of them now have NextRadio enabled phones. In addition, we’ve seen significant improvement and increased involvement, negotiations with other manufacturers. Stay tuned for announcements about NextRadio being adopted by other manufacturers. We also have had a significant product enhancement, news feed which has gotten rave reviews. We also now are presenting our data reporting capabilities. I can’t stress that enough because we believe that as advertisers look at the ability of radio to provide enhanced data reporting metrics that it will be a very significant event for every American radio station. Also we just reached an agreement with Sprint which keeps NextRadio preloaded on their Android devices, that’s our first renewal and Sprint was our first partner, and we’re happy about that. And we surpassed 10 million downloads and 25 million listening hours. So, the reality is this is still early stages. We have come an awfully long way since this project started, and we couldn’t be more excited. We’ve said that we think that this is the catalyst that our industry needs. When you see quarters like this, you know that the industry needs catalysts. And we think and we hope and think we have that catalyst in NextRadio and we’re very gratified by the effort of all of our people and also all of our peers in the industry. This has really been as it started an industry effort. It was designed to be an agnostic solution for every broadcaster in America. And in my 40 years in the industry, I’ve never seen more industry unity in making this work. And I think if we all work together, this will change the game for all of us. So with that Kate, turn over to Ryan.

Thanks Jeff and good morning everyone. This morning, we released earnings for our third fiscal quarter ended November 30, 2016. During the third quarter, we closed on the sale of Texas Monthly magazine. So, current period reported results for our publishing division are not comparable with the prior year. We encourage those on the call to refer to the supplemental financial information we have posted under the Investors tab of our website, www.emmis.com. Our radio net revenues reported to Miller Kaplan during our third fiscal quarter which excludes certain barter and syndication revenues were down 1.8% compared to markets, which were up 2.5%. Our relative underperformance is due to our Los Angeles operations where a radio station is being negatively affected by a direct competitor that launched in the prior year. Excluding Los Angeles, we would have beaten our markets in Q3 with our radio division up 0.4% in markets that would have been down 0.9%. Digital remains our strongest line of business, up 24% in the quarter. National spot was down 9%, local spot was down 2% and NTR was down 3%. During the quarter, each month finished down low-single-digits. We recorded approximately 0.9 million of political advertising revenue in the quarter, which was down nearly 20% from Q3 of the last presidential election. During Q3, our number of minutes sold was down 1.7% compared to the prior year with average minute rates down 2.8%. Automotive remains our largest category, representing 11% of radio revenues in Q3. And automotive advertising was down 7% in the quarter. Restaurant, cellular and beverages were our strongest categories in the quarter; financial and media were the weakest of our top 10 categories. Pro forma for the sale of Texas Monthly revenues for our publishing division were down 6.4% in the quarter. Our local management teams are heavily involved in assisting with the announced sales of our remaining magazines excluding Indianapolis Monthly, which we hope to conclude in our Q4. Radio station operating expenses excluding depreciation and amortization were up 6% in Q3, primarily due to increased marketing and promotional spend in our largest markets. Early returns in the form of improved ratings are encouraging and should help to provide stability as we head into fiscal 2018. We continue to invest in our two emerging technologies, NextRadio and Digonex, and combined expenses for these businesses were up $660,000 in Q3. Looking ahead to Q4, December was the weakest month this fiscal year with radio revenues down 9%. January and February are typically volatile this time of year, but they are currently placed pacing flat to down low-single-digits. As of November 30, 2016, excluding debt that is non-recourse to Emmis, we had $159 million outstanding under our senior credit facility with a weighted average borrowing cost of 7%. Our leverage was 5.53 times EBITDA as defined in our credit agreement in compliance with our covenant of 6 times EBITDA. While we expect to remain in compliance with our total leverage ratio covenant under our senior credit facilities through this fiscal year-end, the covenant steps down to 4 times on May 31, 2017. Planned asset sales will help to close the gap between current leverage in this 4 times test as of 5/31/2017. We are currently exploring an amendment to this covenant step down with our senior lenders, as well as refinancing alternatives with other financial institutions. Finally, we invested $0.7 million in capital expenditures in Q3 and we expect to invest approximately $3.5 million for the full year. With that Jeff, we have some questions investors submitted to us in advance of the call.

Go ahead, Ryan. A - Ryan Hornaday: What is your expectation for radio advertising revenues in calendar 2017?

Well, again, I’d like to be hopeful. I get asked this question on panels and everything. December was a tough year; I talked to a number of -- a tough month -- talked to a number of broadcasters and it was a very tough month all around. We see it in our markets; we see it in our performance. January, February look better. We’d like to think that the radio industry could be up a bit this year; on a panel last month, I said up 1 to 2, I’ll hold to that. I hope that’s not too optimistic.

You said in the past that radio has a perception problem, not a consumption problem. Do you still believe that to be the case?

Yes. If you look yesterday, the figures released yesterday, you’ll see that time spent we’ve seen went up a couple of percent again last year. We maintain the largest reach of any medium. It is very frustrating to see that it -- we’ve seen significant fragmentation of the television business and you’ve seen the staggering decline in consumption of the newspaper business, the radio hasn’t fared better. But I think all traditional media are lumped together; the perception is that’s yesterday’s news. And we could shout from rooftops, and I think people in our industry have done it. I think the largest companies, I think Katz, I think RAB have done a great job of saying, look, we reach 93% of the population every week and our return on investment is remarkable. They’ve made some great deals of studies on that. There was this one release this morning that Pierre Bouvard of Cumulus mentioned, showing our ROI, an improvement on sales staggering numbers. But I think people look at all traditional media and they say yesterday’s news, because this is very strange dichotomy. You have a market capitalization of the entire American radio industry, which is probably a fifth of one streaming company, Spotify. And yet Spotify lost $200 million last year; I don’t know what this year’s losses will be, but I -- so, you don’t -- you have all the cache in the world and all the significant economic benefit go to the streaming industry, which none of us have been able to crack the code and make money yet. And yet traditional broadcasting where we all do streaming, but we also -- most of our revenues over the year is still very profitable, but the perception is gee, it’s yesterday’s news. How is that for a long winded answer?

Sounds good. Do you expect the outcome of the election to change of the regulatory environment for broadcasters?

Well, it’s hard to know. Conventional wisdom is that it would be much more to regulatory. And with radio, I guess that means ownership caps, maybe a loosening of foreign ownership. Although, yesterday there was a ruling that Univision could sell 49% to Televisa and that’s interesting. A lot of people noted that that was a liberalization and yet maybe that the relationship with outside countries, especially Mexico may get worse. So, it’s hard to say. My sense is that would be more to regulatory but there are a lot of questions about what that will mean for radio.

What’s your target leverage ratio for Emmis?

I’d certainly like it to be under 4. We have a plan to get it under 4 and I would certainly like it be under 4. We I think -- when you look at our leverage, I think after Terre Haute, it will get -- and after this quarter, it will probably approach 5 [ph], and as we announce additional sales, it will be in the mid 4s or so. But likely you get little bit lower than that. Certainly this was a company that to be refinanced a number of ways, it’s not based with some of the crushing leverage of peers. But I think in uncertain times, you’d like less debt, not more, and so that’s job one here.

Can you talk about efforts to get Apple onboard with NextRadio?

We have a whole game plan, but until we have something definitive, we just have a plan we’re working on. I can just say when we did the deal with Sprint, we had a number of skeptics say the industry bought its way on the Sprint, they’ll never get anybody else. Since that time, we have gotten every other carrier, we haven’t paid anybody and we got a renewal with Sprint where we didn’t have to pay for a renewal. I think that’s coming a long, long way. And the last year, since we started last year, we have added AT&T T-Mobile, Verizon, you have cellular phones and all those peers. So, you can buy phones on every carrier in the United States, and that’s just all in the last year. So, we’ve come a long way. I’d say, we won’t rest until we are in every smartphone, and we’ve got to get Apple but we are working.

Speaking of NextRadio and I guess outside of the U.S. what opportunities do you see for NextRadio in Central and South America, and how do you intend to explore them?

Well, we’ve been very gratified. Since we started this project, couple of surprising things occurred. First, automakers came to us and said, you realize that in the connected car, the future interactivity is critical, and that happened really on day one. In addition, broadcasters from all over the world said, you know this really is important. We launched in Peru few months ago, we’ve also launched in Mexico, we’ve launched in Canada, we’re getting ready to launch in Colombia. It really requires committed broadcasters to work together, but what we are seeing is with phone manufacturers that they see the need to turn this FM chip on. And I would say one thing that’s a little easier in Latin America is that people depend on their phone for radio. So, the idea of adding NextRadio and that interactivity to people who already say gee, I use my phone for radio, what we’re seeing in very, very early stages is a faster adoption rate because people are more familiar with it. We have to sort of show a whole generation of people who never knew radio was portable that radio could be in the palm of your hands.

We have a question about our New York radio cluster, kind of the positioning and performance of the cluster, what are your thoughts?

Well, we’ve been very pleased. And I say that we had a bit of a rocky start when we took over BLS, but now BLS is settled in and I think it’s a very good combination; BLS on the more adult and the urban radio, and obviously HOT 97 on lower end. And what we’re seeing and I think there is an optimism that ratings have stabilized. We do very well; BLS has been one of the top three or four stations in New York and it’s maintained that position. We have seen probably in the mornings doing very well. And HOT 97 has had a little bit of a dip a year ago but now it’s really performing very nicely, and both of those are big stations. And we felt like we need to streamline our sales effort and we brought Charlie Morgan in to refine that in the operation and we’re cautiously optimistic about pretty good year in New York this year.

The last question is around the expenses associated with the failed to go private. And we had about $650,000 of expenses that are included in corporate expenses on our income statement that we recognized in the third quarter. And I think that’s all we have for questions. Jeff, any closing remarks?

No. I think again, we see rays of light which are very encouraging, ratings improvements, significant performance in certain markets. We think that in our most challenged market in Los Angeles with new ratings and new marketing, we think that we have turned the corner. We certainly turned the corner in ratings and we hope that we turn the corner in revenues and cash flow. This is an industry that makes no mistake. It’s an industry that reaches everybody that should be more dynamic, it’s not -- we think we’re doing our part, we think other broadcasters are doing their part to return this industry to more dramatic growth. But I continue to be incredibly proud of the innovation of our people whether it is Digonex or it is NextRadio whether it’s some of the remarkable digital assets that Angie and her team have created. And we’re hopeful that 2017 will be a better year.

Thanks Jeff, and thank you for joining us. Just a reminder, a replay will be available for the next two weeks until January 19th by dialing 203-369-3180. Thank you.

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