Emmis Communications Corp. posted a 4-percent increase in revenue during its second fiscal quarter, but profit was lower due to higher legal expenses and employee retention costs.
The Indianapolis-based radio and publishing firm on Thursday reported a profit of $2.6 million, or 6 cents a share, compared to $38 million, or 98 cents a share, in the same quarter of 2012.
Much of the profit in that quarter last year stemmed from the 2012 sale of KXOS-FM in Los Angeles for $85.5 million, from which the company reported a gain from discontinued operations of $32.8 million.
Total revenue for the most recent quarter, which ended Aug. 31, hit $55 million, up from $52.9 million.
Emmis shares dropped 4.6 percent in late morning trading, to $2.25 each.
The owner of 21 radio stations, including WIBC-FM 93.1, said revenue from its radio operations rose 3.2 percent, to $41.3 million. That rate outpaced domestic average radio revenues that were about 1.5 percent, the company said.
Emmis’ publishing division had strong revenue growth in the quarter, rising nearly 6 percent to $13.7 million. That unit includes Indianapolis Monthly and similar publications in several major cities.
Operating income of $5.7 million was down 25 percent.
The company cited higher expenses for the quarter, which dragged on profit. They included employee compensation through Emmis' 2012 Retention Trust, which allocates company shares to employees as bonuses. It also included more than $1 million in legal costs during the quarter to fight a decision by the government of Hungary to award to another bidder the national radio license held by its subsidiary there.
The big news for Emmis during the quarter was the launch of NextRadio, an app Emmis developed that allows certain wireless phones to receive FM broadcast signals like a transistor radio. It debuted in September on some phone models sold by the Sprint wireless network.
Emmis has led the NextRadio industry initiative, with CEO Jeff Smulyan estimating it could eventually generate hundreds of millions of dollars a year in new revenue for radio broadcasters.
Currently, most cell phones in the U.S. can receive radio only through Internet-based radio streaming, which can eat into one’s data-plan minutes. NextRadio is coupled with an Emmis-developed system that also allows Sprint phone customers to receive song and station information, along with ads and special offers pushed to the phone’s video screen that correspond to ads playing at any given moment on the radio.
The NextRadio consortium of stations has agreed to pay Sprint $15 million a year for three years and to share with Sprint some of the revenue generated by the app.
Stations are paying Sprint $3.75 million in the first three months of the service, of which Emmis will pay $800,000. Seventy of the nation’s 75 largest radio groups have gotten aboard NextRadio, plus numerous small-market stations.
During an earnings call Thursday mornng, Smulyan said he expected the app to be installed on 300 million phones within four or five years.
“We’ll look back on this quarter as one that was integral in the transformation of the radio business,” Smulyan said.
He estimated that 10 million NextRadio-enabled phones could be in use within the first year.