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

Welcome and thank you all for standing by. At this time, all participants are in listen-only-mode all throughout the 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 Kate at Emmis. Ma'am, you may begin.

Good morning. Thank you for joining us for today's Emmis Communications conference call regarding first 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 that have been submitted via email to ir@emmis.com. A playback of the call will be available for the next week until Thursday, July 28, by dialing (402) 998-1256. 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 are ready to begin.

Kate, thanks. And I want to welcome everybody who is on the call today. Since our last earnings call was in May and was near the end of our first fiscal quarter, I think we had already discussed that it was a very tough quarter. The good news is that Q2 which started the 1 June as shown a dramatic improvement. June was up 5% also aided by a really record-setting ticket sales for Summer Jam in New York as well as improvement throughout the portfolio. As of today, June, the quarter two is pacing up 1% to 2%. So, we believe that the downturn that we really see ourselves in much of the industry have for the last six months may be behind us. We're encouraged. The sale of Power 106 has been approved by the FCC. We're in an LMA [Local Marketing Agreement] period and we expect that it will close by the -- certainly the end of the next few months. With that and with one other possible transaction, which is WLIB, which we're working on and some other things we're working on, our indebtedness will be reduced by 50% to hopefully 60% over 60%, a dramatic reduction and a complete change of the capital structure of the company, which we felt was the single most important thing we could do and it's the reason for the sale of Power 106, which under normal times we would not have wanted to do, but we felt it was important for the future of the company. Ratings for our New York stations are very strong. HOT 97 has been number 118, 34 in the last few months. BLS and HOT 97 are both top five 25, 54. So we think that we've really got some good tailwinds for our ratings in New York and really the ratings throughout the portfolio have generally been very good. So, developments on NextRadio in the next weeks, we'll be launching streaming comparable versions for Android and Apple devices and that would really be -- they will all be operative by the end of the month. The idea here is to make sure that even if you don't have headphones, that every smartphone owner can get the NextRadio experience, that's a lot of research and people, so that's important, so that's what we're doing. We're also busy developing our android auto and car play auto solutions to enhance FM listening experiences in the connected car. Very encouraged about some things we see in the auto space. We previously announced our partnership with Westwood One, which provides daily insights and attribution, that's really a groundbreaking network project and giving a new level of insight into Westwood One's national advertisers. Also continuing to make progress on our whole data evaluation agreement with Nielsen as well as some other pretty interesting things that we're doing in the data space and we have now announced an agreement with Alcatel. As you know we have agreements with all of the major carriers in the United States; AT&T, Verizon, T-Mobile, Sprint USA or in addition to that, we're now starting on manufactured agreements, Alcatel and Blue have been the first two and there are two others that are in the works with very large manufacturers that we'll highlight the NextRadio experience not only in the United States, but in the rest of North and South America and we see that the evolution to the FM chip is growing. Recently Mexico announced the mandate. We've never asked for a mandate but there is one in Mexico. There are discussions about that type of procedure in Canada and the ITU, which is the global governing telecommunications entity has strongly recommended that for safety the FM Chip be activated. So, we're seeing, we're certainly in the -- still the early stages of a very long process to make this a key component of radio listing experience not only here but around the world, but every quarter we see some pretty exciting things. So, with that, I'll turn it back to Kate.

Ryan, I think we're ready to go.

All right. Thanks Jeff and good morning, everyone. This morning we released earnings for our first fiscal quarter ended May 31, 2017. During the prior fiscal year, we sold all of our magazines except Indianapolis Monthly. We also sold our radio stations in Terre Haute, Indiana. These sales cause our current period reported results to not be comparable with prior year results. 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. During the quarter, on May 8, 2017, we entered into an agreement to sell our radio station in Los Angeles, Power 106 for $82.75 million. The buyer began operating the station pursuant to the local marketing agreement on July 1, 2017. The closing of the sale will occur shortly after the proceeds of the television spectrum auction are distributed by the FCC, which we expect to occur during our second fiscal quarter ending August 31, 2017. This transaction will meaningfully improves the credit profile of the company and reduce our total leverage ratio to approximately 4.4 times as defined in our existing credit facility. We have posted a pro forma leverage calculation under the Investors tab of our website. As we discussed on our last earnings call, our first quarter was very challenging. Excluding Los Angeles, our radio net revenues reported to Miller Kaplan during our first fiscal quarter, which excludes certain barter and syndication revenues were down 6.7% compared to markets which were down 1.4%. We outperformed in St. Louis and Austin, but underperformed in New York and Indianapolis. Our local, national and digital lines of business were down while NTR was up. Looking at the individual months and excluding our stations in Los Angeles and Terre Haute, March was down 2%, April was down 12% and May was down 7%. During Q1 our number of minutes sold was up 1% compared to the prior year with average minute rates down 11%. Automotive remains our largest category representing 12% of radio revenues in Q1 and automotive advertising was down 10% in the quarter. The media, financial and services categories were strong in the quarter; cellular, entertainment and restaurants were the weakest of our top 10 categories. Pro forma for the sale of our radio stations in Terre Haute and excluding our station in Los Angeles, radio station operating expenses excluding depreciation and amortization were down 3% in Q1, primarily due to lower revenue-related costs. Expenses for our emerging technologies were up $1.5 million in Q1. Approximately $1 million of this increase relates to the final settlement of amounts due to Sprint including $0.65 million of proceeds from a nonrecourse loan to NextRadio from a third-party that was remitted to Sprint and expensed on the books of NextRadio at the time of the remittance. Also, Emmis contributed approximately $0.3 million to NextRadio to cover the radio industry's remaining shortfall to Sprint and this amount was also expensed in Q1 when it was remitted to Sprint. All cash obligations to Sprint have been satisfied. The remaining growth in emerging technologies expenses in Q1 relates to ongoing investment in our NextRadio product including streaming capabilities, our automotive solutions and enhanced data reporting. As of May 31, 2017, excluding debt that is nonrecourse to Emmis we had $157.2 million outstanding under our senior credit facility with a weighted average borrowing cost of 8.2%. Given the timing of our magazine sales on February 28, 2017, our cash and working capital balances were higher than usual as of year-end. These balances returned to normal levels as of May 31, 2017. Looking ahead to Q2, our performance is much improved. We finished June up 5% buoyed by record-setting ticket sales for our largest concert Summer Jam in New York. Organizational changes to our salesforce in New York that were implemented earlier this year are beginning to bear fruit. In addition, as Jeff highlighted earlier, rating at our two largest brands HOT 97 and BLS in New York are on an upswing. As of today, both July and August are pacing down modestly. Finally, we invested $0.4 million in capital expenditures in Q1 and we expect to invest approximately $2 million for all of fiscal 2018. With that Jeff, we have some questions investors submitted to us in advance of the call.

Okay. Q - Ryan Hornaday: Once the sale of Power 106 in Los Angeles closes and this will have one of the better balance sheets in the radio industry. What happens next at Emmis?

I think, that's what we want to see. We really felt that fixing the balance sheet especially given the challenges of the industry was very, very important. That's why we made the very tough decision to sell Power 106. It will be a balance sheet that is de-levered. My sense is we'll de-lever it more. We obviously are considering the sale of WLIB. We have some land that we might sell and maybe sell some tower space. There are some other things that we might do to deleverage, although I would think that the core of the business will remain intact and we'll be given the opportunity to compete a little bit more effectively. And in addition, we're excited by some of the trends we see with DigiNext and obviously with the future for NextRadio.

Jeff, you mentioned WLIB, that was the next question because it's the last asset that we had I guess publicly disclosed is a possible candidate for sale. Is there an update on the timing or expectations for that station?

No. I think our expectations are the same and what I've learned about deals is until you have some, you don't have anything. So, when we can announce something, we certainly talk to a lot of people. We haven't gotten to the final stages, but we'll see what we come up with.

With the success of Summer Jam in New York last month, are there any plans to expand it to a series of concerts?

Well we actually did one in Tokyo. It was a full sponsored deal where we got a presenting fee and some other things. What's interesting and one thing when we really assess the company, the brand of HOT 97 is really unique. It has been recognized as a single largest Hip Hop brand in the world and we've always known that. We've always had listeners to it all over the world. When we stream, we get -- we get streaming from a lot of places. So, one of the things we want to do is figure out a way to leverage that brand and it maybe a series of concerts. It may be a whole list of other things.

In May, the FCC announced its modernization of media regulation initiative. Do you expect any major changes impacting Emmis to result from this?

No, I think and we've had discussions -- had discussions with Chairman Pie of NextRadio and Apple and things like that and we think Chairman Pie, the most important thing is he loves his business. Chairman Pie and more than other chairs and many of whom have been friends, really has a greater affinity for radio than anyone. I've seen really since Chairman Quello a long time ago. He loves radio. He understands what it means. He understands what it means in its community. He understand what it means in emergency situations and so whatever underbrush, regulatory underbrush they clear out, I think would be good, but I think the most important things is you have a Chairman of the FCC and I might also say this about the other commissioners. Commissioner Clyburn, Mr. Riley and now Commissioner [Housen] is coming back on. All have a deep and abiding respect and understanding of the [firewall] and that can only be good.

In June, NextRadio announced a partnership with Westwood One that you mentioned in your opening comments to provide consumer insights and intelligence to national advertisers about their radio campaign. What is the significance of this for advertisers?

It's significant for advertisers and it's significant for our industry. It's significant for advertisers because it really gives them insights in over the air radio, that up until now they've only been able to get in the digital world. And as you know, everything digital has been exploding and the traditional media has been pretty much leveled to slightly down. This now gives our advertisers a chance to get those insights and we keep saying, game changing, groundbreaking. We hear that advertisers and so our job is to roll this out and build it up. That's our job.

What are NextRadio's plans for the connected car?

[Expiri] 15:37: We also are seeing that a lot of Americans are choosing to connect to their car through the smartphone. So naturally that's the evolution for NextRadio. So what we're trying to do is marry that. So, if you've got an Apple phone or you've got an Android phone and you plug it into your car, that it seamlessly works in the dashboard and gives you a full interactive experience. So, we're really hitting all sides of that from the traditional embedded dashboard, radio to whatever comes. Our goal is very simple and this isn’t just our goal at Emmis and NextRadio. The radio industry must be front and center however, people get their information through dashboard. So, if they turn it, they turn their car and they see an embedded FM radio, AM/FM radio with HD that's great. But if they turn on their car and they see what looks like an Android screen or an Apple screen, we got to be there. So, our job and I think we’ve had good discussions with people in the industry and certainly with our friends at [Expiri], we got to figure out how to make sure radio is front and center in every -- in every automotive device.

Thanks Jeff. That's all we have in terms of questions. Do you have any closing remarks?

No, I think clearly this is another important quarter. This year started out tough for us. We're now seeing some sequential improvement, which is very encouraging. On the Emmis front, we're seeing nice ratings. We continue to make progress in the other areas that we're working on and I think the most important thing we could say is we love this business. We think we're good at it. We attract really wonderful people and we want to compete without one hand tied behind our back. So, our goal is let's fix the balance sheet in a way that we know that's not an issue and that what we've done and now we just move on from there.

Thanks everyone for joining us. Just a reminder, a replay of the call will be available for the next week until end of business on Thursday, July 20. The number there is (402) 998-1256. Thanks so much.

And that concludes today’s conference. Thank you all for participating. You may now disconnect.