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After pro-forma revenues declined 7% during its second fiscal quarter ending August 31, Emmis is seeing signs of a recovery for fiscal Q3, which includes the months of September, October and November. Thanks in part to political advertising, October is pacing up double digits, which would make it the company’s strongest month in four years.

Speaking to investors Thursday morning, CEO Jeff Smulyan said he was “somewhat encouraged” by midterm election spending so far and that Emmis is seeing more political dollars than usual in the three states where it operates – Texas, New York and Indiana. That’s one reason why the company is feeling upbeat after closing out a difficult fiscal Q2. “We are encouraged by the strength we are seeing in advertising revenue,” CFO Ryan Hornaday said. “September finished up 1% and October is pacing up double digits.”

Emmis endured a16% downturn in June, mainly due to weather-related issues for the “Hot 97” WQHT Summer Jam concert in what Smulyan called “one of the toughest months we’ve had.” Rain fell for most of the day for the annual concert in New York, the company’s largest outdoor event, weakening ticket sales. But July and August were each up 2% and that momentum has continued in the fall. Smulyan predicted the upward trend would continue into November and December.

Auto was a bright spot for Emmis during the quarter that ended Aug. 31. Not only was auto its largest category, accounting for 12% of revenues, it also was its strongest, climbing 15% year over year. Healthcare and cellular were also strong, Hornaday, said, while restaurants, beverage, entertainment and media were the weakest of the company’s top 10 categories. Pro forma station operating expenses rose 2.5% in the quarter. Like Entercom and Cumulus, Emmis took a revenue hit from United States Traffic Network – to the tune of $300,000.

On a reported basis, Emmis had $30.7 million in second fiscal quarter revenues, down from $41.8 million one year earlier. In the comparable quarter one year ago, the company sold CHR “Power 106” KPWR Los Angeles and in the first quarter of its current fiscal year, it spun off its four-station St. Louis cluster. These sales made reported results not comparable year-over-year.

After selling off assets to pay down debt, Emmis now operates radio stations in just three markets: New York, Austin and its home base of Indianapolis. Smulyan said ratings “remain strong” in New York where Hot 97 and urban AC WBLS were No. 2 and No. 5 in 25-54, respectively. AC “B105” WYXB Indianapolis rebounded and is No. 1 in adults and women, and it news/talk stations in Indy and Austin are “up very sharply,” Smulyan said.

Beyond its owned and operated radio stations, Smulyan said that dynamic pricing subsidiary Digonex “has seen a surge of new clients in the last couple of months and we are more excited than ever about the prospects for that business moving forward.”

Term Loan Due Date Imminent

Emmis had $28 million of debt on its books under its term loan at the end of August and $7 million in cash on hand. In a regulatory filing, the company said it has ample cash to fund its future operations but won’t be able to pay the term loan, which is due April 18, 2019. Among the options being explored are refinancing its credit agreement, something it has done “many times in the past.” Emmis has reduced its leverage ratio to 2.8 times cash flow by selling assets and repaying debt and says that’s “enhanced its ability to refinance the debt.” Other options include finding additional investors for its TagStation business or “reducing our cash burn from that business,” a process already underway with yesterday’s announcement to radically scale back operations of it and NextRadio. The company could still sell Gospel WLIB New York and other assets, according to the filing.