Kate Snedeker - Media & IR Contact Jeffrey Smulyan - Founder, Executive Chairman and CEO Ryan Hornaday - CFO, EVP and Treasurer

Welcome, and thank you for standing by. [Operator Instructions]. This call is being recorded. If you have any objections, you may disconnect at this time. May I introduce your speaker for today, Kate at Emmis. Please go ahead.

Thanks, Iris. Good morning, everyone. 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 Ryan Hornaday, EVP, CFO and Treasurer. After opening comments from Jeff and Ryan, we will respond to the questions submitted via email at ir@emmis.com. A playback of the call is available for the next week by dialing 402-220-9775. 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 quarter, obviously, is a look back at the end of our fiscal year, which ended on 2/28. Just a couple of highlights. We did outperform our markets in our fourth quarter pro forma radio revenues for Miller Kaplan we're down one and markets we're down three. New York outperformed, as did St Louis, which was in the last quarter of its existence as part of the Emmis family. In that quarter, we closed on the sale of our St. Louis radio stations, actually closed on April 30. So our net credit facility debt is now below $20 million. So we really, we did come in an awfully long way in transforming this company in a company without -- now without any significant debt, a company that has the flexibility to tackle [indiscernible] into the future. In addition, our ratings in New York have been very strong, and our ratings in Indianapolis have been growing very nicely. So we're very pleased there. And our stations in Austin are holding service. As you know, we have a dominant cluster in Austin. In addition to that, NextRadio had another good quarter. I think we are seeing the realization among our industry and among advertisers, of the value of the data attribution to advertisers that we provide. NextRadio is really uniquely positioned to meet the demand and our partnership with EDID [ph] which is a part of the 4H, is another example of how we're continuing to improve our report. Stay tuned for more interesting announcements for NextRadio and our involvement with other broadcasters who seek the value of the work that we're doing, that we need to do as an industry. In Digonex, very steady progress. We're making progress with Digonex, our dynamic pricing business. A lot of new clients this year, and we remained optimistic that, that's going to be a very interesting business to own. So we're very pleased. As we've said, we really want to be in the world where we don't have a lot of debt and got almost zero. We believe that it gives us the flexibility to tackle new areas and traditional areas, and we could not be more pleased. And again I'm happy for the effort of all our people. It's always tough to part with great people, which we did in St Louis as we did in Los Angeles last year. But we think, going into the world that we're facing, that having more flexibility and nominal debt will serve us well. With that, Ryan.

Thanks, Jeff, and good morning, everyone. This morning, we released earnings for our fourth fiscal quarter and full year ended February 28, 2018. During the fiscal year ended February 28, 2017, we sold all of our magazines, except Indianapolis Monthly as well as our radio stations in Terre Haute, Indiana. In addition, during the second quarter of our current fiscal year, we closed on the sale of KPWR FM in Los Angeles. These sales caused our current period reported results to not be comparable with prior year results. So 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. Pro forma for these asset divestitures, our radio net revenues as reported to Miller Kaplan, which excludes certain barter and syndication revenues, were down 0.7% in Q4. According to Miller Kaplan, our radio markets collectively were down 3.3% in the quarter. Our New York cluster gained share in the quarter, as then our St Louis cluster in its final quarter as a part of Emmis. We thank our former employees in Saint Louis for all of their contributions to Emmis and wish them continued success with Hubbard Intercom. In our fourth quarter, we outperformed our radio markets in every line of business, national, local digital and NTR, Looking at the individual months and excluding our stations in Los Angeles and Terre Haute, December was up one, January was down two and February was down one. Our two largest categories in Q4 were health care and automotive, with each representing 9% of our Q4 revenues. Health care was up 7% in Q4, but automotive was down 9% in Q4. The cellular and home categories were strong in the quarter. Retail and media joined automotive as the weakest of our top 10 categories. Pro forma for the sale of our stations in Los Angeles and Terre Haute, radio station operating expenses excluding depreciation and amortization were down 1% in Q4. Expenses for our emerging technologies were down $3.7 million in Q4. Q4 of the prior year included $3.35 million of proceeds from a nonrecourse loan to NextRadio from a third party. The proceeds from the loan were remitted to Sprint during the quarter to help satisfy the remaining obligations due to Sprint and were expensed on the books of NextRadio at the time of the remittance. As of February 28, 2018, we had $78.5 million of secured credit facility debt outstanding. On April 30, 2018, we closed on the sale of our 4 radio stations in Saint Louis, Hubbard and Intercom. Gross proceeds were $60 million. After deducting estimated taxes payable of $15.9 million in transaction-related expenses, net proceeds totaled $40.5 million and were used to repay credit facility term loans. The taxes payable as a result of the transactions are not required to be remitted to the applicable taxing authority until May 2019. So the repaid amounts outstanding under our revolver and we plan to hold excess cash on our balance sheet to enhance our liquidity position until we remit the taxes in May of 2009. Net of cash balances are credit facility debt outstanding as of May 10, 2018, was less than 20 million. Looking ahead to Q1, we expect radio revenues pro forma for all asset divestitures to be down low to mid-single digits as compared to the prior year. Finally, we invested $0.6 million in CapEx in Q4 and $1.8 million for all of fiscal 2018. We expect capital expenditures in fiscal 2019 to be less than $1 million. With that Jeff, we have some questions that investors submitted to us in advance of the call. A - Ryan Hornaday: Okay Ryan. There is increasing chatter that is part of the quadrennial review later this year. The FCC maybe some restrictions on radio ownership, including the removal of the AM FM 7S, Sub Caps. what are your thoughts in this potential deregulation?

Yes we do. As you known, and you've heard me say many times. We think that the industry needs an infusion of capital. We have not been able to attract significant cap on this industry, and I think loosening sub caps will be helpful, there are debates on the other side. But I think generally from what I see a fairly unified industry to do this and I think more important I think [indiscernible] pie and the republican majority want to do this. So my sense is going to happen and I think on balance, it'll be good because it will attract capital for an industry that really needs it on April 25, the U.S. health representatives unanimously passed the music modernization act, which would significantly change music copyright laws. As propose with this regulation have any significant impact on Emmis? it really doesn't if you study the acted really has to deal with some of the digital space relationship between the copyright and the music industry, the labels, reporting requirements, but it if you study the exemption over the air radio.

In the past six months, two of the radio industry's largest operators, [indiscernible] have filed for bankruptcy protection. These developments impacted Emmis and wanted to say about the state of the radio industry?

Well, I think it's just been said many times that companies were caught in a downturn with too much debt. And I think that was really more function of their unique capital structures in the state of the industry. On the other hand, the industry hasn't grown. And we do that too much debt if the industry is growing. Then sometimes you can overcome that I think in those 2 cases it just wasn't possible. When companies are in a situation like that, there's always a tendency to add more inventory, to take cheap inventory. I think is that a lot of that has been written about. I happened to agree with that so I think as they come out of bankruptcy I think they will have leverage more manageable and that should be good for those companies people operate as companies and also for the industry.

Emmis has been aggressively paying down at senior dad and now has one of the lowest leverage ratios in the radio industry? What do you believe is the appropriate leverage level for radio company in today's radio industry?

Well, we've made a decision for a lot of reasons to have no death. We're down to our last $20 million of debt. And as we talked about with the sale of WLIB and the sale of our land in Indianapolis, probably will eliminate that. I think the bankruptcy situations, I think they're both of those companies are talking about being levered at about 5 .7x. So I think they believe the creditors of those companies believe that iHeart that should be a reasonable leverage ratio. Another one of my friends said he'd like to be under six times this year. So we've just decided were different stage in our life cycle and we'd like more flexibility in less debt so that those levels would not be interesting to us but I think as far as a sustainable business model I think leverage in those areas is probably okay.

Our last question touches on something you just mentioned. So as Emmis closes in on a debt-free balance sheet, excluding its nonrecourse debt, what's next for Emmis?

Emmis is going to look at a lot of different things. You know that we feel very strongly about the future for NextRadio. We've had some terrific discussions with other broadcasters about that future, and we're working on that, excited about the future for NextRadio outside the United States not only in Latin American candidate now on a ship we are excited about did you next that business is ramping up and we think that will be a nice business. We're going to be working a lot of areas we're not going to limit ourselves to terrestrial radio or even media we're looking at areas where we think our management team, our strategic focus, our ability to sort of fill in gaps of our knowledge in areas where we may not know we think it will service well. Having a debt free balance sheet will give us the opportunity to try some new things, invest in some new areas. We're only going to do things where we think we can make a difference in the operations or whatever business it is. That's all we have in terms of questions. Any closing remarks, Jeff?

No and I think we said that we wanted to transform our company. We're well on the way of doing that. It's always been since the first day of this company in 1981, always been possible because of the great people we have. Whenever we sell something, and we lose some of those people it's painful, but we got a nucleus of people who've been together for a long, long time and I continue to have faith in their ability to create a culture which will be in the things that we have. So I always thank them. And I think, all the people who have had faith in us and our stock.

With that, just a reminder, that a replay of the call is available for the next week by dialing 402-220-9775. Thank you so much for joining us.

That concludes the conference. Thank you for your participation. You may now disconnect.