Indianapolis-based Emmis Communications Corp. announced Thursday that revenue in its second fiscal quarter slipped from last year and losses nearly quadrupled, but company officials said there was reason for optimism.

The company lost $8.6 million on revenue of $64.6 million for the quarter ended Aug. 31, compared to a loss of $2.3 million on revenue of $66.7 million for the same period a year ago.

For the first six months of its fiscal year, Emmis lost $13.1 million on revenue of $125.8 million, compared to a loss of $6.3 million on revenue of $126.9 million during the same period in 2010.

But Emmis Chairman Jeff Smulyan said the sale of majority interest in two Chicago radio stations and one in New York to Chicago-based Merlin Media brightens Emmis’ future.

Because the sale of WLUP and WKQX in Chicago and New York’s WRXP didn’t close until Sept. 1, it is not reflected in Emmis’ most recent earnings statement.

In a conference call with analysts Thursday, Emmis officials explained that the three stations were not profitable and that selling them would bring in $120 million to be used to pay down 38 percent of the company’s debt and eliminate $10 million in annual interest payments.

Emmis retained a 21-percent common equity interest in Merlin, which Smulyan said “has significant value.”

“We have really taken this company and solved its major structural problems,” Smulyan said. “We’re not totally done yet, … but I couldn’t be more pleased.”

Emmis officials pointed out that excluding the three sold stations, the company's radio advertising for the first six months of this year is up 4 percent over the same period last year. That compares favorably to all other stations in Emmis markets, which were up 2 percent.

“Our stations are beating their in-market competitors for advertising dollars,” Smulyan said. “Our stations have outperformed their markets in nine of the last 12 months.”

Emmis’ Indianapolis radio cluster was its strongest performer, up 21 percent in the first six months of this year compared to the same period in 2010. All other Indianapolis radio stations were up 4 percent, according to Emmis. Emmis officials also said its Los Angeles cluster is doing well.

Emmis owns 17 FM and two AM radio stations nationwide and seven city and specialty magazines. Locally, Emmis owns WFNI-AM 1070, WIBC-FM 93.1, WLHK-FM 97.1 and WYXB-FM 105.7, as well as Indianapolis Monthly magazine.

Overall, Emmis second-quarter radio advertising revenue for beverage, wireless, health care and movie sectors was up at least 10 percent, said Pat Walsh, Emmis’ chief financial officer. Automotive advertising—Emmis’ biggest revenue generator—was up 7 percent. Restaurant and media advertising on Emmis radio stations was also up single-digit percentages, while advertising in the entertainment, financial and home improvement sectors declined.

Emmis publishing revenue was down 4 percent, but Walsh projected a rebound during the third quarter, which is typically a big quarter for the type of city magazines the company publishes.

“This company is winning despite a tough economy,” Smulyan said.

There are other reasons for optimism, Smulyan said. They include a new smart phone app the company released this month with the National Association of Broadcasters, a customer relationship management system which should help improve the company’s sales processes, and the growth of Emmis’ Broadcast Traffic Consortium, which now has 25 participating radio stations.

Despite what Smulyan calls a good quarter, Wall Street has not been kind to the company. Emmis stock traded at 66 cents per share shortly after noon on Thursday, and the company has continually faced the risk this year of being delisted from NASDAQ for remaining under $1 for too long. Emmis has until February to get its stock price up before being delisted.

“I learned long ago that Wall Street doesn’t always make sense,” Smulyan said. “If we continue to execute, we believe this challenge will cure itself.”