Welcome, and thank you for standing by. [Operator Instructions] This call is being recorded. If you have any objections, you may disconnect at this point. Now I will turn the meeting over to your host, Kate at Emmis. You may now begin.

Thanks, Martha. Good morning, everyone. Thanks for joining us for today's Emmis conference call regarding second quarter earnings. I want to extend a special welcome to all the Emmis employees listening in. 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'll 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. The number is (402) 220-3762. 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 start.

Kate, thanks. Good morning, everybody. This is an interesting quarter obviously as we'll get into. Our quarter actually ended down a bit, largely fueled by a very, very tough June. One of the toughest months we've had, which really was because of weather and related incidents around our Summer Jam. But after a big downturn in June, July and August actually paced up, and that has continued, September and now October pacing up. And I think we'd probably pace up in November, December. So actually, a pretty significant uptick since the tough month in June. And October is actually the best month that this company has had in 4 years. So things are good. Ratings are good. HOT 97, BLS were 2 and 5, the 25-54. HOT 97 has had some remarkable runs, especially in upper demos as well as its very strong position, 18-34 and 18-49. And HOT 97 is actually up 20% adults, year-over-year. In Indianapolis, B105 has rebounded, is #1 with adults and women. Our news talk stations that -- because of all the fascinating things in Washington, our news talk stations in Indianapolis and Austin are up very sharply. And in Austin, BOB remains the #1 commercial station in the market as usual. And our new KGSR, which is Austin City Limits, has created a lot of excitement. So we've been pleased there. And on other fronts, Indianapolis Monthly had a very good start to the year. Revenue is up 9% for the first half of the year, which sort of bucks the trend in the magazine business. We're very proud of that. And in other things, we're very proud of Digonex. Our dynamic pricing business has seen a very significant uptick in business. It seems like all of a sudden that people are discovering the value of dynamic pricing, and they're hiring Digonex to do it. So we've been very pleased. We've seen that business steadily grow in the last few years. And we are excited that, that's -- we think that's going to be a nice business going forward. The tough part for me today is to announce that the effort to form a consortium for NextRadio and TagStation has not been successful. We have tried. We have worked with a number of broadcasters. And let me say this, that we've had so many people who have supported our efforts. But having said that, the major learning that we had was that we really to be -- to make this business what it needed to be, it needed to do data attribution. That was the learning of the project. And to do that, we really needed much deeper involvement. We tried. We couldn't get the industry to come together. Everybody unanimously said we have to have this. But when it came time to sort of pitching in and helping fund it, we just couldn't get enough support. And we're just not willing or really able to keep funding NextRadio and TagStation going forward. It's very heartbreaking to me. I put many years of my life into this. It's heartbreaking because I think we've assembled some of the most brilliant, hard-working, dedicated people who have put this together. But we just -- we can't do it ourselves. As one of our board members said, we just can't fund the R&D to the entire radio industry. And we sadly concluded that. So we're going to be dramatically reducing the operations of these businesses and plan to eliminate the operating losses which they have generated in the very near term. So with that, Ryan, I'll turn it over to you.

Thanks, Jeff, and good morning, everyone. This morning, we released earnings for our second fiscal quarter ended August 31, 2018. In the second quarter of the prior fiscal year, we sold Power FM in Los Angeles. In the first quarter of the current fiscal year, we sold our 4 radio stations in St. Louis. These sales caused 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. Pro forma for these asset divestitures, our radio revenues, as reported to Miller Kaplan, which exclude certain barter and other revenues, were down 6.7% in Q2. According to Miller Kaplan, our radio markets collectively were down 4% in the quarter. For the 6 months ended August 31, 2018, our radio revenues, as reported to Miller Kaplan, were down 5%, in line with our radio market. Looking at the individual months in the quarter and pro forma for asset divestitures, June was down 16%, July was up 2%, and August was up 2%. Our poor performance in June principally relates to weak ticket sales for our largest concert, Summer Jam in New York City. Rain fell for most of the day at the concert, and ticket revenues suffered. July and August radio pacings improved in-month, and that strength has extended into our Q3. Automotive was our largest category in Q2, representing 12% of our revenues. Automotive was also our strongest category as revenues were up 15% in Q2. The health care and cellular categories were also strong in the quarter. Restaurants, beverages, entertainment and media were the weakest of our top 10 categories. Pro forma for the sale of our stations in Los Angeles and St. Louis, radio station operating expenses, excluding depreciation and amortization, were up 2.5% in Q2, and up 1% through the first half of this fiscal year. During the quarter, we recorded a $0.3 million bad debt expense charge related to United States Traffic Network, which in August announced plans to liquidate. We announced this morning that we plan to dramatically reduce the operations of our NextRadio and TagStation businesses and explore other means of eliminating the operating losses from these businesses in the coming months. In the trailing 12 months ended August 31, 2018, the operating losses from these businesses totaled $7.6 million. As of August 31, 2018, we had $28 million of secured credit facility debt outstanding and approximately $7 million of unrestricted cash on hand. Our leverage was 2.8x EBITDA as defined in our credit agreement, in compliance with our covenant of 4x EBITDA. Looking ahead to Q3, we are encouraged by the strength we are seeing in advertising revenues. Radio revenues for September finished up 1% and August is pacing up double digits. Finally, we invested $0.1 million in CapEx in the first half of this fiscal year. And we expect capital expenditures for the full fiscal year to be less than $1 million. With that, Jeff, we have some questions that investors submitted to us in advance of the call.

Sure, Ryan. [ Awesome. ]

The annual ratio show took place last -- the last week of September in Orlando. Do you have any major takeaways from the show?

Well, I -- ironically, the big takeaway was the value of data. And we've said this before. The industry has been fueled for almost 100 years by our call to action and the impact that, that call to action has on people. But in spite of the remarkable power of our call to action, we've been eclipsed by people who can provide them to-the-minute information based on advertising characteristics, the attribution ascribed to customers. The foremost example of that, obviously, is Google and Facebook. It's no secret that almost 100% of all advertising growth in the United States in the last 5 years has gone to Google and Facebook. What we've learned in radio, and this is something we really learned at NextRadio, about 3 to 4 years ago, was that if our industry could provide quality attribution data, the power of broadcasting married with that really had a chance to revitalize an industry, which, as everyone knows, has been downtrodden. So that's the ironic takeaway. We laughed and we said, we've sort of been saying this for 3 or 4 years, and all of a sudden, it became the theme of the show. So I think that's correct. I think for the industry to compete, it must come -- it must provide that data to advertisers. If not, they continue to say they're going forward with people who can provide that.

I want to correct one thing I said earlier. I think I said that August was pacing up double digits, I meant to say that October was pacing up double digits, which is something you mentioned as well in your comments, Jeff.

Okay, yes. October was positive though, which is very good -- I mean August.

August and October both, but October was better. Following up on the news this morning that the industry consortium to own and operate the NextRadio and TagStation businesses appears to have been unsuccessful, any other lessons learned from the process, Jeff?

Well, I mean the lessons learned from a long time ago was when somebody wants to draft you to lead an effort, walk out of the room. But seriously, I've learned a lot. I've made some tremendous friends in this industry through this project. And the support from this industry was really remarkable. The challenge was it was 10 miles wide and about 1/10 of an inch deep. And to do what we learned we needed to do, and I think Paul and his team were brilliant in seeing it, was we really needed to use this remarkable network of all the stations that were involved to come together to provide aggregated data. Paul has been saying that for really 3 -- over 3 years. And I think people -- some people understood it. A lot of people didn't. But to do that you really need to build a very, very significant attribution capability. And we had funded millions of dollars, as I think you've mentioned. We spent -- our losses were over $7 million this year, actually a little bit more than that. And that had been going on for year after year. And to do that, you needed people to be not only invested much more in their involvement with this, but also to step up and invest money. And it was ironic. We had a number of people in Indianapolis last week from a number of companies, all of them said we absolutely must do this. And at the end of the day, there just weren't enough of those companies to say, but we'll help support it. And we said, guys, we just -- we've done this. I've had long debates with our board. And our board has said, this looks like the most significant research and development work being done in the entire American radio industry. Why is one small company doing all of it? And it was a question I couldn't answer. So we finally just said, look, guys, we can't do this anymore. And if you're not in the room and doing it and if enough of you aren't, then we wish you well, but we're not going to keep building this. So the lesson, there's 1,000 lessons learned. I think on the positive note, I've really loved getting to know so many people in the industry. But at the end of the day, it's really tough to really get people to come together, understand what their own interest is, understand what the interest of the industry is and allocate their resources to something.

Next question is around podcasting. Several broadcasters have invested in podcasting platforms. What are your thoughts, Jeff? And could this be an area of future investment for Emmis?

Well, I've done this business for 40 years now, and I've seen a lot of shiny objects. Let me say first, the positive. Podcasting is a very compelling form of audio. It is an area where you have I think -- what -- 25%, 30% of the population listening to podcasts. So from that standpoint, there's clearly upside. There are challenges with advertising in it. And I'm always somebody who looks at the numbers. And there are something like 600,000 podcasts. And of those 600,000, my guess is 599,000 probably will never generate any meaningful revenue. The people who are doing it, and I think NPR, ESPN have done a very good job of using their brands to create a successful economically viable podcast. But I would also say that you need to understand that it's a long, long slog. So yes, podcasting will grow. But the odds of economic success for any individual podcast for many of our companies are challenging.

A question around political. As we approach the midterm general elections, what is your expectation for political ad revenues [ in the Emmis' 3 ] markets?

We're somewhat encouraged. And we've said this over and over again. Radio has never been a primary medium for political. But yet, when you're in a state with good races, you can see some significant income. I happened to read a comment about my friend Paul Tinkler yesterday, and Paul's in Tennessee. And they've got a very, very hotly contested senate race down there, and he's seeing money. And we're seeing that in Indiana, and we're seeing that in some other ways in Texas and some revenue in New York. So we're seeing it more than usual. And I think, political has to be one of the reasons that August is up double digits -- excuse me, now you got me doing it, October. October is up double digits. So yes, it can help. It's not like television, where you sometimes could double your entire revenue for a year in a hot political race.

One of our investors has been doing some digging and noted that our Northwest Indianapolis real estate has been rezoned to urban business. Any updates on the sale of that land?

Well, they're right. The rezoning has been completed. We are now in the process of [ listening to ] people. A lot of people are coming over the [ transom ]. We can afford to be very patient. The nice thing about our situation, Ryan, is that we don't have much debt left. We have cash on hand. This is a situation where the economics of AM radio, especially with a station with 2 FM translators, dictate that the old 70 acre tower site in the fastest-growing part of Indiana, the use of the land for other purposes is very wise. So we're getting offers. We're listening. I would imagine, it will be a process that will unfold. But we're very encouraged. That's one of those times in your life where you find that it's almost found money.

We have one last question, Jeff. On our last earnings call you talked about transitioning the company into other areas of higher growth. Any updates on this process?

No, no. We've said that. And obviously, today's announcement indicates that we've got to make the decisions that make most sense for our future. And we will be exploring those. And when we have an announcement to make about things we're doing, obviously, we will.

That's all we have for questions. Any closing remarks, Jeff?

Yes, I want to pay a special tribute. I have done this job for 40 years for one reason, and that is that I've been surrounded by incredibly hard-working, great people. And in those 40 years, I haven't found more hard-working and more great people than the team that Paul Brenner has assembled at NextRadio. And it really was very painful to have to move in a different direction there because they've done some of the most brilliant work that I have ever seen. Their work has been groundbreaking for years and years. And I just -- I want to thank all of them. I don't know what the future holds for everybody on that team, but they have a heartfelt debt of gratitude from me for really doing remarkable work. And I thank them.

Thanks, Jeff and Ryan. Just a reminder that a playback of the call will be available for the next week. The phone number, again, is (402) 220-3762. Thanks for joining us this morning.

Thank you for participating in today's conference. You may now disconnect.