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Steve Andrew is an analyst for an east coast based money manager (2007-present). He focuses primarily on small cap growth companies. He is a graduate of Virginia Tech's Pamplin School of Business with a degree in finance.
  • Emmis Communication's FM Radio App Has Strong Reception 0 comments
    Aug 28, 2013 1:38 PM | about stocks: EMMS

    Emmis Communications (NASDAQ:EMMS) rolled out their NextRadio app to Sprint customers last week with fairly strong results. NextRadio allows users to listen to FM terrestrial radio through the FM receiver chip within their smartphone. Sprint, for the first time, sold HTC One phones with the FM receiver chip activated and the NextRadio app preloaded. HTC Evo users can also download the app and receive FM radio. The app gives terrestrial radio stations a new way to broadcast and interact with their local customers. According to CTO Paul Brenner, in an audio interview with Radio Ink Magazine on 8/26/13 (Audio), after one week the initial results for NextRadio usage were as follows:

    • 7,000-8,000 downloads/activations
    • 1,000 plus stations tuned into by users
    • 15-20% of user using the app 20-30 minutes a day reception

    The app, which will be on the majority of Sprint phones by the end of the year, could be a big win for listeners, terrestrial radio companies, Emmis, and Sprint (NYSE:S). Customers will be able to save significant data usage and battery life by switching to the over the air receiver. Ads and interactivity on the app will drive new revenue for local stations at a very low operation cost (pricing has not been announced but Brenner said it is significantly less than streaming solutions). Stations have access to TagStation, a cloud application that allows customization of the listener experience, cover art, promotions, etc for each station the app is tuned to. Brenner noted all CBS owned radio stations have adopted the app and are actively updating their TagStation controls.

    Sprint and Emmis partnered early on in the development of NextRadio. Sprint's unlimited data packages drive the company to find any way possible to reduce the amount of data used on their network. If Sprint can convert, even a small percent of streaming listeners, to the NextRadio it has the potential to reduce data congestion in the largest markets. Sprint also receives a percentage of the revenue generated by the app.

    NextRadio has a chance to be a major game changer for Emmis but it is still an uphill climb. The first major roadblock is Apple. iPhones do not have FM receiver chips designed in, nor is there any sign that FM could be coming. The second major roadblock comes from Verizon and ATT. As long as customers are willing to pay to stream music (through data charges) and enough data bandwidth is available it is unlikely these providers will unlock the FM receivers on their phones.

    NextRadio may just be extra upside to an already cheap company in Emmis. The company has deleveraged to a current adjusted enterprise value of under $200mil ($67mil of liabilities is a LMA on a New York radio station with Disney that will amortize to $0 over the life of the contract). Leverage stands at the lowest levels in the company's recent history at 3.2x adjusted EBITDA to debt. The company is in a strong position financially to continue to bring down debt at an increasing pace as the business generates more cash. Insiders have been buyers of the stock multiple times in the last 3 months at prices up to $3.20.

    The company expects to grow in the low single digits but if NextRadio is able to generate any additional revenue it would be hugely accretive to the business. Emmis is a inexpensive, well run company with the potential for tremendous upside if they are able to execute NextRadio successfully.

    Disclosure: I am long EMMS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Disclosure: I am long EMMS.

    Stocks: EMMS
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