TEGNA INC Q3 FY2023 Earnings Call

Good day and thank you for standing by. Welcome to TEGNA's Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentations, there'll be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Julie Heskett, Senior Vice President Financial Planning and Analysis, and Head of Investor Relations. Please go ahead.

Thank you. Good morning and welcome to our third quarter conference call and webcast. Today, our President and CEO, Dave Lougee; and our CFO, Victoria Harker will review TEGNA's financial performance and results and discuss TEGNA's quarter-ahead outlook. After that we'll open the call for questions. Hopefully, you've had the opportunity to review our third quarter earnings results. If you have not yet seen a copy of the release, it's available at tegna.com. Before we get started, I'd like to remind you that this conference call and webcast includes forward-looking statements and our actual results may differ. Factors that may cause them to differ are outlined in our SEC filings. This presentation also includes certain non-GAAP financial measures. We have provided reconciliations of those measures in the most directly comparable GAAP measures in the press release. With that, let me turn the call over to Dave.

Thank you, Julie, and good morning, everyone. TEGNA's third quarter results align with our business plan, which focuses on enhancing performance, optimizing operational efficiency, and generating long-term value for our shareholders. We reached a record in subscription revenue for the third quarter and noticed an improvement in advertising and marketing services revenue, thanks to positive trends in important sectors like automotive and services. Additionally, we completed our initial $300 million accelerated share repurchase program ahead of schedule at the end of August. Despite limited trading opportunities, we managed to buy shares opportunistically in the market, raising our total commitment this year to nearly $800 million returned to shareholders. I will provide more details on capital return actions and our strong positioning in a moment. In terms of third quarter performance, total company revenue was in line with our expectations, down 11% year-over-year primarily due to a decrease in political revenue from last year's mid-term elections. Excluding political revenue, revenue declined slightly year-over-year. As noted, subscription revenue reached a record high and increased marginally year-over-year. TEGNA's subscription revenue continues to deliver stable cash flows, aided by contractual rate increases, partly offset by subscriber losses. We anticipate repricing around 30% of our traditional subscribers by year's end, which should enhance our outlook. Despite overall economic challenges, advertising revenue trends improved sequentially compared to the first half of the year, and this positive trend is expected to carry into the fourth quarter. AMS revenue declined 3% compared to the same quarter last year; however, underlying advertising trends remained flat year-over-year when accounting for the Premion national account loss mentioned previously. Our automotive segment, the largest within AMS, continues to show robust year-over-year growth for the fifth consecutive quarter, with a 20% increase this quarter, and our second largest category, services, grew by 15%. Looking ahead, 2024 is poised to be a strong year for TEGNA, given our advantageous portfolio of stations for political advertising during the upcoming presidential election, the Summer Olympic Games in Paris, and the Super Bowl on our CBS platforms, especially compared to last year's smaller Fox portfolio. Regarding our capital allocation, we are excited about the opportunities ahead and are committed to continuing our strong history of returning capital to shareholders. Our leading balance sheet and resilient financial performance allow us to return capital through share repurchases and dividends while also pursuing organic initiatives and evaluating strategic M&A opportunities to enhance our growth outlook. We are on track to exceed our previously communicated capital return to shareholders. After completing the initial $300 million ASR program earlier than expected, we repurchased an additional $28 million in shares in the market just before entering our blackout period. This was done under our existing share repurchase program. During our last earnings call, we announced a second ASR program valued at $325 million, which is expected to begin soon. These recent transactions will collectively lead us to retire nearly $800 million in TEGNA shares. With strong operating performance and prudent use of free cash flow, we are set to continue improving our capital return strategy. Even after both ASR programs and the extra share purchases in 2023, we aim to finish the year with net leverage below three times. Our strong free cash flow generation is expected to improve next year due to the benefits from the political landscape, the Olympics, and the Super Bowl, offering us further flexibility for future capital allocation decisions across organic growth, strategic M&A, and returning capital to shareholders through repurchases and increased dividends. Now, turning to strategic updates, we reached a comprehensive multiyear agreement with ABC this quarter, renewing our affiliations in 13 markets nationwide, affecting 9% of the US and serving nearly 11 million households. Our collaboration combines ABC's beloved entertainment and news programming with our strong local stations and large audiences. This successful negotiation underscores the mutually beneficial long-term relationships we maintain with our programming partners. TEGNA's local stations provide essential news content that is among the most trusted in the country, combined with leading programming from ABC, delivering large audiences with strong viewer engagement. The extensive reach of broadcast distribution is gaining audience share over more fragmented competitors, particularly cable channels and programmers. A significant area of focus is the transition of professional sports to local broadcasts as the traditional cable RSN model falters. Sports teams and leagues are increasingly recognizing this shift and are excited about the opportunity to connect with a broader audience. In this vein, we announced that KENS, our San Antonio station, will exclusively show 11 San Antonio Spurs games this season featuring the much-anticipated number one draft pick, Victor Wembanyama. We are thrilled to partner with the Spurs this year. As the current RSN bankruptcy situation unfolds, we expect more announcements in this area. With our strong portfolio of stations in key sports markets, we are well-positioned to capitalize on this shift in local sports broadcasting. Additionally, our Locked On local sports digital network continues to thrive, achieving over 27 million listens and views per month. We launched four local Locked On channels this quarter, with more on the way in the fourth quarter. Our Daily Blast LIVE talk show is now in its seventh season, expanding its audience reach significantly with distribution in 20 additional Sinclair markets and a Hearst market, increasing our total reach to over 55% of the US. As the content landscape evolves, we believe that Daily Blast LIVE's efficient production approach will become an increasingly viable option for broadcasters while simultaneously engaging viewers. Our VERIFY brand, aimed at countering misinformation, ended the third quarter with approximately 467,000 followers across its dedicated channels, and weekly viewership increased for the fourth consecutive quarter, with over 2.8 million minutes watched via TEGNA streaming apps. Speaking of streaming, our apps amassed 677 million streaming minutes, representing a 78% year-over-year increase this quarter. These apps are available on Roku, Fire TV, and Apple TV devices; we are also rolling out apps for Samsung, LG, Chromecast, and other platforms, with plans to have them all live by year-end. Delivering important news and impactful investigations that affect lives is the core mission of our newsrooms. We are proud of our dedicated employees who enable us to serve this mission daily. A particular shout out to our WWL station in New Orleans, which recently received a national News Emmy for their investigative reporting on the living conditions for nursing home residents after Hurricane Ida, leading to crucial legislative changes in Louisiana. The work we do makes a real difference. I will now hand the call over to Victoria.

Thanks, Dave. Good morning, everyone and thanks for joining us. As you've already heard, we've achieved record third quarter subscription revenue, and we continue to deliver sequential improvement in both advertising and marketing services revenue. We also successfully achieved all of our key revenue and expense guidance provided last quarter in line with expectations. Before I drill down on the drivers of our third quarter financial results, I'd like to reiterate both the Board and the management team's focus and commitment to the continued return of capital to our shareholders, as you've seen in our ongoing execution on those plans. As Dave mentioned earlier, we are very pleased that nearly $800 million in cash accumulated during the pendency of our transaction has been committed to share repurchases over the past six months. As you've already seen, execution on that return of capital is well underway. During the third quarter, we completed the initial $300 million accelerated share repurchase program on August 31, a few weeks earlier than we previously anticipated. The initial $300 million ASR program reduced TEGNA's outstanding share count by approximately 18 million shares. In addition, in the second quarter, approximately 9 million shares were retired through Standard General's extinguishment of their termination fee obligation. As Dave mentioned, following the completion of the first ASR and before entering our third quarter blackout period on September 16, we opportunistically repurchased an additional $28 million or nearly 2 million shares in the open market. As a result, total share reduction as of the end of the third quarter was $29 million. Beyond this, as announced in August, our second ASR program targeting $325 million in repurchases will kick off this week. As a result of all of these actions, since the termination of the merger agreement in late May, TEGNA is committed to nearly $800 million in share repurchases through ASRs, the settlement of the merger termination fee and opportunistic repurchases in the open market. As a result of this commitment, we expect approximately 45 million to 50 million shares to be retired by the end of March 2024 based on current market prices, reflecting more than 20% of shares outstanding prior to us undertaking these actions. Additionally, following the termination of the merger agreement, the Board declared a 20% increase to the regular quarterly dividend, which was paid out for the first time in October. As you're also aware, we have an extremely strong balance sheet, including low leverage, and we are very well positioned to continue to return capital to shareholders through buybacks and dividends while investing in organic growth and bolt-on M&A opportunities. We also have manageable debt with no near-term bond maturities until March of 2026, and all of our debt is fixed rate at a very attractive 5.2% on a weighted average basis. We ended the quarter with total debt of $3.1 billion and cash of $553 million. As a reminder, our only financial covenant is a 4.5x leverage cap that applies to our undrawn $1.5 billion revolver. Net leverage ended the quarter at 2.61x. All of these well-planned and executed actions highlight the strength of our balance sheet, which provides optionality around capital allocation decisions and continues to differentiate us in this current macroeconomic environment. Now, let's take a look at the drivers of our third quarter financial performance. My comments today are primarily focused on TEGNA's performance on a consolidated non-GAAP basis to provide you with visibility into the financial drivers of our business trends as well as our operating results. You can find all of our reported data and prior period comps in our press release. For the third quarter, total company revenue was in line with our guidance range, down 11% year-over-year due almost exclusively to lower political revenue when compared to the midterm election cycle last year. Excluding political revenue, total revenue was down just slightly compared to the third quarter of 2022. Our record third quarter subscription revenue, which increased slightly year-over-year, was driven by subscriber rate increases from contractual rate escalators, partially offset by subscriber declines of mid-single digits. As we mentioned last quarter, we have an additional 30% of our traditional subscribers up for renewal by the end of this year. On the reverse comp side of the equation, we had previously stated we had approximately 60% of our Big Four subscribers up for renewal by year-end. We are pleased to announce we reached a comprehensive multiyear agreement renewal with ABC, representing roughly 20% of our Big Four subscribers. We also look to renew our agreement with NBC toward the end of this year. Now, I'll unpack the drivers of AMS performance in the third quarter and the drivers. AMS revenue finished the quarter down 3% compared to the third quarter of last year. Advertising trends were basically flat when adjusting for the previously disclosed loss of a single premium national account earlier this year. Despite macroeconomic challenges, advertising revenue trends improved in the third quarter and were sequentially better than the second. These gains were driven by improving trends in key verticals such as automotive, services, insurance, and packaged goods. As a reminder, the underlying advertising improvements began in the second quarter and are continuing into the fourth. Within AMS, we are thrilled to see our two largest advertising categories, automotive and services, continued to perform well. Automotive advertising generated growth for the fifth consecutive quarter with third quarter up double-digits year-over-year. The services category was also up double-digits year-over-year with the strength in home services such as HVAC, electrical, pest control, and plumbing. Categories facing headwinds in the current macroeconomic environment include media, telecom, restaurants, healthcare, and banking. Now, turning to Premion. As you've heard over the prior quarters, Premion continues to strengthen its position in the convergent TV marketplace by winning additional local advertisers that are allocating larger spending dollars to streaming. During the quarter, Premion introduced programmatic selling capabilities, enabling agencies to leverage either managed services or hands-on keyboard buying workflow. Similar to last year, Premion revenue was down year-over-year, impacted by the loss of a single large national account. However, Premion's primary focus is on the growth in local OTT revenue where it is uniquely positioned to win. Premion local revenue was strong, up double-digits year-to-date. As a reminder, the national account loss impacted AMS by two points in the first three quarters of the year. However, in the fourth quarter, the account impact will be four points on AMS due to seasonality. We cycled the loss of this account at the beginning of 2024. Looking ahead, 2024 will be a strong year at TEGNA, driven by favorable portfolio stations in key markets benefiting from a robust presidential election cycle, the Summer Olympics, and the Super Bowl. TEGNA's high-margin subscription and political revenues produce annuity-like EBITDA and free cash flow, carrying more than 50% of our total revenues on a two-year basis. Turning now to expenses for the third quarter. For the quarter, non-GAAP operating expenses of $576 million finished in line with our guidance range, up 1% compared to the third quarter last year, driven by higher programming fees. Excluding programming costs, non-GAAP operating expenses for the quarter also finished within our guidance range, down 1% when compared to last year due to expense management and ongoing operational efficiencies. Third quarter expenses coming out of the merger termination were slightly higher than previous run rate as we increase activity around employee development, recruitment, and retention, as well as our renewed strategic planning efforts. We expect fourth quarter year-over-year expenses to be lower as well. As expected, our third quarter adjusted EBITDA of $166 million was down 38% year-over-year, primarily driven by the absence of high-margin political revenue from midterm elections and higher programming costs. We continue to generate strong free cash flow of $60 million during the quarter, driven primarily by our high-margin durable subscription revenues and the thoughtful management of our balance sheet as we've historically done. Now, turning to 2023 outlook. As you saw in today's third quarter release, we remain on track to meet all of our key guidance metrics for the full year and provide forward guidance for the fourth quarter and key financial metrics. To help you model our near-term expectations, let's walk through a few fourth quarter financial guidance metrics. As a reminder, we expect to be disproportionately impacted on a comparable basis in the fourth quarter by the absence of $179 million of high-margin political revenue from the mid-term election last year. For the fourth quarter, we expect total company revenue to be down mid- to high-teens percent year-over-year, primarily driven by the absence of political revenue I just mentioned. Excluding political, fourth quarter revenue is projected to be flat. We forecast operating expenses in the fourth quarter to increase in the low single-digit percentage range compared to the fourth quarter of 2022, driven by increased programming expenses. Including programming costs, we project fourth quarter operating expenses to be down low single-digit percent year-over-year. Now turning to full-year 2023. We'd like to reiterate that our full-year 2023 guidance elements in ranges remain the same as announced last quarter, and we remain on track to meeting or exceeding them. As a reminder, you can find our 2022 actuals for all of these metrics in our investor presentation on our website. For the year, corporate expenses are expected to be in the range of $40 million to $45 million. Depreciation is projected to be in the range of $60 million to $65 million, amortization is projected to be in the range of $53 million to $54 million. Interest expense is expected to be in the range of $170 million to $175 million. We expect capital expenditures to be in the range of $55 million to $60 million. We forecast an effective tax rate in the range of 23.5% to 24.5%. Even after the impacts of both ASR programs and the incremental repurchase of shares in 2023, we continue to expect to end 2023 with net leverage below 3 times. And with that, I'll now turn to Q&A to take your questions.

Our first question comes from the line of Dan Kurnos with The Benchmark Company.

Thanks. Good morning. Victoria, I appreciate the numbers you've shared regarding the guidance, but I'm trying to reconcile a few things. I understand the differences on a sequential and year-on-year basis, especially considering the political factors. You mentioned that in Q3, ad trends remained relatively flat year-on-year, excluding the loss from Premion national. I know you've pointed out that there's a bit more of a sequential impact due to seasonality expected in Q4, which makes sense. We've also heard that the national trends for the local broadcast group are slightly improving, and you indicated that Q4 trends are looking better. Additionally, you have a more favorable comparison with crowd-out, and political advertising should increase sequentially. It's still early for next year, so I’m trying to understand if there is conservatism in your guidance. Is it simply based on the trends or bookings you're currently observing, along with a lack of visibility? Subscriber churn should also be somewhat lower sequentially in Q4 compared to Q3. I’m trying to get a clearer picture of how you are approaching the trends as we head into the next quarter.

Hi, Dan, it's Dave. I'll start with the last question regarding political advertising. We're not anticipating much in that area. We have a solid footprint for the year, but our presence during early presidential primaries hasn't been significant. Therefore, we won't see a large influx of those dollars. We'll be fine, but that isn't where our strongest enthusiasm lies regarding political advertising. I'll let Julie address the rest about underlying advertising.

Certainly. So, I will reiterate that the sequential trends are improving, continuing into the fourth quarter. And you're right, Dan, that you heard in the third quarter normalizing underlying trends would have been flat year-over-year. So that will be better in Q4 and it's included in our total revenue guide. The one impact also for your purposes is the Premion national business, which we've talked about all year long being a headwind to us. It is a bigger adjustment in fourth quarter impact what it had been about two points all year long for second and third quarter; it's going to be more four points as Victoria said in the fourth quarter. So if you just do that math alone, right, roughly flat in Q3 would put you up mid-single digits in Q4.

Okay. We can talk through a little bit more of the pieces offline, but I get it and it's good to hear sort of, I guess, the continuation of trends. On the expense side, I think this is a little bit of a surprise just out there maybe not maybe just me. But I just want to get a sense the Q4 guide is good in terms of underlying OpEx. You just did ABC, so I don't know, David. I know you won't comment specifically on how the deal played out, but just how to think about the growth there? ABC and NBC which you still have coming up, have been historically variable deals. So I don't know how we should be thinking about the growth in reverse. But underlying, is there more OpEx efficiencies to be driven both in Q4 and then into 2024, excluding those programming costs? So just maybe take those two pieces, would be super helpful. Thanks.

I'll speak to the overall situation. As Victoria mentioned, we have some expenses that others might not have, related to the strategic issues following the unsuccessful acquisition. We've been spending some funds, which won't represent a permanent rate concerning some external and advisory work, as Victoria outlined. These expenses will slightly affect our numbers, but we should have less of this in the fourth quarter, with most of it tapering off into next year. I want to emphasize that we are not providing guidance on expenses for next year. Additionally, since we still have our largest reverse compensation deal coming up, I won't comment on figures related to reverse compensation and programming expenses. However, I reiterate from our previous calls that the network deals will create a new reality for the business, and I stand by those remarks.

Okay. Got it. Thank you. Good to see you guys keep on desktop. Appreciate the color.

Our next question comes from the line of Steven Cahall with Wells Fargo.

Thanks. Dave maybe first just to follow on Dan's question a little bit. So I know you and a lot of your peers have been consistent that the growth rate of reverse comp is lower than what it used to be, that new paradigm that you talked about. I think what a lot of us are trying to figure out is what the key discussion points are when you're talking to a network partner like ABC, who you just renewed or NBC that you have coming up in relation to how their streaming plans affect your business. Disney has been pretty clear that they intend to take sports direct to consumer. That has some impact on your ABC stations, and same with NBC. So wondering, if you could just help us frame how you think about the future and how you're kind of defending against more especially sports content going on to streaming? And then Victoria, you all had some discretionary Q3 share repurchases. What's your appetite to continue down that path? Are you allowed to during the upcoming $325 million ASR or is that just something that you'll kind of wait and see after the ASR where the stock price is? Thank you.

I'll address the first question first. As you know, we are currently engaged in a significant negotiation that will extend until the end of the year. I prefer not to provide details about the discussion topics during this period. However, as I mentioned in the last call, the exclusivity issues regarding ABC and ESPN are important. The exclusivity with ABC Disney has diminished over time, but ESPN remains a valuable partner. It's all part of our value consideration. When we discuss sports moving to streaming, it's not strictly limited to that medium; they are often simulcast. Traditional sports broadcasts will continue to be significant for a long time, as evidenced by the high ratings for NFL games. The absence of exclusivity in sports, some of which has existed and new iterations that will emerge, all contribute to the overall value. I understand this might not provide concrete numbers, but from our perspective, it's about assigning value to that reality and engaging in discussions grounded in an ecosystem that has shifted away from exclusivity. When exclusivity is no longer a factor, it alters the value proposition.

To address the second part of your question, Steven, we take advantage of opportunities as they arise. We completed the first ASR program a few weeks early due to some market compression. As you know, we have a $300 million approval program that we can use opportunistically, allowing us to go into the market and execute a share buyback of $28 million. I expect that the Board will likely renew this program moving forward, and we will utilize it when the right opportunities present themselves. Additionally, the second ASR program, which is $325 million, starts this week and will be our main focus for initial buybacks this quarter. Any developments after that will be announced. I want to emphasize that we have this opportunistic program in place and will use it during favorable conditions when we can enter the market at the right prices.

Great. Thank you.

Our next question comes from the line of James Goss with Barrington Research. James, your line is now open.

You move on operator and see if James comes back on after the next.

Next question will come from the line of Craig Huber with Huber Research Partners.

Yes. Hi. Thank you. My first question on Premion. I think you guys said last quarter it was down modestly which I'll assume that means mid-single digits. Maybe just comment how it did in the quarter, obviously you had the hit with the lost national account but just sort of frame that for us please.

Yes, Craig, it's Julie. I'll take that. The commentary would be exactly the same while total premium revenues are down modestly, again the focus is on the local side of the business. So we know that national is down year-over-year but local is up year-to-date double-digits.

Okay. Great. Thanks. In the past, you guys have said your retrans subscribers are down mid-single digits year-over-year. Is that a similar trend we had in the third quarter?

Yes.

Yes.

Okay. Thank you. And then in your mind, you guys have obviously been very aggressive here repurchasing stock, as you've gone through several times today. Is there anything that you're thinking differently for next year? Obviously, you have a windfall to make you all as local ad revenue next year. You're obviously arguing that your stock price is quite low and investors would agree with that. Is there anything in your mind that you're seeing out there on the macro side of things that would maybe preclude you from buying back a ton of stock next year to continue these, I guess, rolling ASRs however you want to think about it?

Hey, Craig, it's Dave. I want to highlight what Victoria mentioned in her remarks about our focus on capital return. Given our balance sheet, we have the flexibility to pursue the best options for shareholder returns without closing off any possibilities. We remain committed to prioritizing shareholder returns in this environment and prefer to maintain a strong balance sheet, considering the uncertainties that exist.

To elaborate on that point, as mentioned earlier, we do not have any debt maturity until 2026, with our first call option available in the fall of 2024. Considering the current interest rates, it may not be financially prudent to utilize that option, but we have the flexibility to explore various avenues. Regarding future debt maturities, our robust balance sheet allows us to effectively manage those maturities while also enabling share buybacks, maintaining our dividend, and pursuing organic investments.

And then my final question, net retrans for this year, how do you sort of think about that is going to shape up and we're all said and down here down slightly modestly for the year, net retrans.

Yes. Craig, we have not guided. And again, we've got negotiations coming up here in the fourth quarter that may impact that. So we're not in a position to answer that at this time.

As you know, obviously, we had a lot of subscribers up and a large reverse comp deal. So we're not going to in the middle of negotiations comment on anything on that.

Okay. Thank you.

Our next question comes from the line of James Goss with Barrington Research.

Okay. Thank you. Sorry about that last thing. I wanted to ask about a couple of things. One about the streaming apps. Obviously, this is a great way to try to offset the risk to some of the economics with the traditional cable and satellite platform. I'm wondering in terms of the various outlets you used between Roku or YouTube, there will be different types of economic implications. I wonder if you could talk a little more about how you're viewing that and how things are developing along those lines.

It varies because much of our significant usage comes from our own apps and platforms, rather than relying on third-party services. So, it really depends on the platform; if it's our own, we have zero share to account for. The deals we have differ significantly, with some we feel positive about and others that we aren't particularly excited about for the long term. However, we pursue them for short-term distribution to ensure our content reaches audiences. We've not engaged in some due to this, and it relates to the question you've asked. Over time, I believe this will evolve into a scale opportunity, and we are already substantial in our position. We will be looking for chances to grow even larger in the future. While I am not indicating any significant moves until 2024, as you noted, this represents a solid opportunity for us. Additionally, the programming costs will mainly be incremental to our existing operations, making it beneficial for us.

Okay. A couple of other things. One with DBL. It's gaining increased traction you're at 55% of the country. Is there any consistency of the time slabs it's applying? And can you talk about the economic level that you're able to get with that particular effort?

I'm sorry, Jim you broke up; could you just say that last part again?

Yeah. With DBL gaining increased traction to 55% of the country. Can you talk about the consistency of the time slots that typically gets put into and what the economics are in terms of your value as you deal with other broadcasters and distributing that service?

We value distribution primarily because it helps us reach more audiences, which we can then monetize over time. Currently, most of our content is in the afternoon time slot, but there is variation across different markets depending on the local demographics and the strength of the station. We have success stories in a variety of time periods, although there are some periods where performance isn't as strong. Overall, our model works well for us because we can produce content in Denver at a significantly lower cost compared to Hollywood. This additional distribution is beneficial for us, especially since we operate with a relatively fixed expense run rate. Although we haven't discussed it much in recent years, this aspect has been a significant advantage that continues to benefit us.

Okay. One last thing that hasn’t been talked about, ATSC 3.0. Even though the broadcasters seem pretty enthused about it, I think a lot of the TV sellers do not seem so enthused because they might have competing products and they may not want to have incurred the additional costs. And maybe the FCC could mandate inclusion. And I'm just wondering how you are looking at what your expectations are in terms of how it might fit in with you in particular with TEGNA?

I can't comment on what others say, but from our perspective, we strongly believe in the importance of making the new standard accessible to the American public. However, we would not be true to our principles if we became too optimistic about any short-term business models. We have been closely involved in the development of Pearl, the consortium focused on this matter, and we believe we are contributing positively to the industry. Technically, we are not expecting to see immediate economic benefits. From a strategic standpoint, we view ATSC 3.0 as a platform similar to the iPhone, where third parties developed profitable applications. I remain optimistic that over time, ATSC 3.0 will lead to similar opportunities, but currently, we do not see immediate prospects that warrant significant financial investment from TEGNA.

Do you think the FCC will need to mandate it to ensure its implementation? Or do you believe the broadcasters or the TV manufacturers will eventually come to agree that it is beneficial?

I think given the FCC and TEGNA this year, I'm not going to opine on the FCC, I'll leave that be. But I would simply say that broadcasters have done a pretty good job voluntarily of getting transitions done until date. We have more stations, we're transitioning. But I think it remains to be seen how the future plays out relative to the manufacturers and public policy. I think it's a good question.

All right. Thank you very much.

Our next question comes from the line of Craig Huber with Huber Research Partners.

Yeah. Hi. It's Craig Huber. Good morning.

Craig, we miss you.

We miss you.

Hey. A couple of follow-ups guys, you mentioned 4Q ad trends improving sequentially versus what you saw in the third quarter here. I'm curious, like categories are there any categories in the current quarter that are significantly doing better this quarter than what you saw in the third quarter. But maybe you could also touch on National in particular.

Yeah, did you just mention National in particular, Craig? Let me double-check what you asked.

Yeah. Yeah. What I like to hear what categories are doing materially better than this quarter so far versus what you saw in the third quarter

Yeah. I think the trends are pretty similar, Craig. We looked at those yesterday. I don't think the bottom-line with those performers in third of the performance and fourth, I'm not certainly seeing any major variances to speak up.

Our next question comes from the line of Steven Cahall with Wells Fargo.

Thank you. And one final note as we close here. As we indicated last quarter, Victoria will be stepping down year's end as CFO and Julie will be stepping into that seat after years of preparation. While Victoria will be CFO through the end of the year and will be helping with the transition through spring of next year, this will be her last earnings call with us and I want to take this public opportunity to thank her for all she's done here at TEGNA and for our shareholders over many, many years.

Thank you, Dave. And it's been my pleasure to serve and support TEGNA for almost 12 years, 70 earnings calls later over my career. This is a momentous occasion for me, but I am very, very confident and proud of the team, Julie in particular, but the rest of the finance team. And I'll be around clapping from the stands.

Thanks, Victoria. With that, thanks everyone for taking the time to join us today and listening in. If you have additional questions please reach out to Julie at 703-873-6401. Thanks everyone.

This concludes today's conference call. Thank you for participating. You may now disconnect.