UPDATE: Emmis stock drops after earnings report

Emmis Communications Corp. Chairman Jeff Smulyan suggested this morning that the radio industry has hit rock bottom, but that there is reason for optimism in 2008.

Today, Emmis officials announced a $2.1 million loss on revenue of $91.7 million for the quarter ended Nov. 30. Though revenue was up slightly from $91.2 million for the same quarter last year, it didn’t keep pace with expenses, which rose 7 percent.

“We are always perceived as the canary in the coal mine,” Smulyan said during a conference call with analysts this morning. “Maybe this is the view from the bottom of the shaft. … We think 2008 will be better for us.”

Investors were not swayed by Smulyan’s optimism, as Emmis’ stock slumped 8.5 percent this morning, to $2.26 a share.

Chief Financial Officer Pat Walsh said the Indianapolis-based media company was especially hurt by its radio stations in New York, Los Angeles and Chicago.

But many of the company’s markets saw double-digit declines, including a 17-percent drop in revenue in Indianapolis, where Emmis operates WLHK-FM 97.1, WYXB-FM 105.7, WIBC-FM 93.1 and WFNI-AM 1070.

In January, the FM 93.1 and AM 1070 frequencies underwent content makeovers, with Emmis moving WIBC’s popular news-talk format to the FM dial and changing 1070 to all sports.

Third-quarter revenue was down 11 percent in New York, 9 percent in Los Angeles, 13 percent in Chicago, and 10 percent in St. Louis and 1 percent in Austin, Texas.

Revenue from local advertising was down 8 percent, while revenue from national ads declined a whopping 26 percent.

Emmis saw double-digit ad revenue drops in all its major categories, including an 11-percent decline from the media sector and 10 percent from automotive. Movies, cellular and beverages segments also saw big declines.

Emmis officials emphasized that revenue from its growing list of international stations was up 30 percent from the same quarter a year ago.

Smulyan remains upbeat about the radio industry and Emmis’ outlook for 2008.

Among the reasons Smulyan cited for his optimism:

-A turnaround in sales performance at New York stations.

-Emmis’ publishing group is beating expectations, with third-quarter revenue in the division rising 4.6 percent. Growth is strong in three Los Angeles publications, especially the recently acquired Orange Coast Magazine.

-Continued growth in overseas properties.

-Growth of Emmis’ interactive division, with a major announcement coming “soon.”

-The new Arbitron listener measurement system called the Portable People Meter shows that radio draws more listeners than were counted under the traditional diary system.

Smulyan and Walsh said that without a one-time non-cash termination fee of $15.3 million to change national sales representatives, Emmis’ third-quarter balance sheet would have looked much more positive.

Also during the third quarter, Emmis acquired a 13-radio station chain in Bulgaria for $8.8 million.

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