Welcome to Lee Enterprises 2023 first quarter webcast and conference call. The call is being recorded and will be available for replay at investors.lee.net. At the close of the planned remarks, there will be an opportunity for questions. Participants accessing this call by webcast may submit written questions through the website, and they will be answered during the call as time permits. Otherwise, you will receive a response later. A link to the live webcast can be found at investors.lee.net under the Events section. Now, I will turn the call over to your host, Josh Rinehults, Vice President, Finance.
Good morning. Thank you for joining us. Speaking on this morning's call are Kevin Mowbray, President and Chief Executive Officer, and Tim Millage, Vice President, Chief Financial Officer, and Treasurer. Earlier today, we issued a news release with preliminary results for our first fiscal quarter of 2023. It is available at lee.net as well as at major financial websites. Please also refer to our earnings presentation found at investors.lee.net that includes supplemental information. As a reminder, this morning's discussion will include forward-looking statements based on our current expectations. These statements are subject to certain risks, trends, and uncertainties that could cause actual results to differ materially. Such factors are described in this morning's news release and also in our SEC filings. During the call, we refer to certain non-GAAP financial measures, including adjusted EBITDA and cash costs, which are defined in our news release.
Reconciliation to the relevant GAAP measures are included in tables accompanying the release. Now to open the discussion is our President and Chief Executive Officer, Kevin Mowbray. Kevin will open the conversation on slide three of the earnings presentation for those following along.
Thank you, Josh. Good morning, everyone. I'm really encouraged at the pace by which we're transforming Lee into a vibrant, digitally-centric company. We're pleased with our strong digital subscription growth and digital subscribers now total 564,000, an increase of 25% compared to the prior year. We're also driving higher rates as revenue from digital subscriptions increased 56% compared to the prior year. Digital advertising revenue increased 12% with Amplified Digital revenue up 45%. Our first quarter results demonstrate strong digital growth with consistent execution of our three-pillar digital growth strategy. This execution is the foundation of our long-term investment thesis. Sustainable long-term digital revenue growth from our three-pillar initiatives will transform the mix of our revenue base, driving margin expansion and stronger free cash flow generation, which will fuel debt reduction, enhancing our balance sheet.
A stronger balance sheet and improved operating cash flow, combined with multiple expansion fueled by increasing digital revenue, creates a strong path to significant long-term value creation for our shareholders. Our three-pillar digital growth strategy is guiding our transformation to a vibrant, digitally-centric company. We're focused on expanding our digital audiences, growing our digital subscriber base and revenue, diversifying and expanding our offerings for local advertisers. The strategy and execution are expected to result in $435 million of recurring sustainable digital revenue by 2026. Digital subscriber growth at Lee has outpaced our industry peers for the last 13 quarters. Lee is the fastest-growing digital subscription platform in media, with more than 564,000 digital subscribers, up 25% from the first quarter.
Amplified Digital agency revenue continues to significantly outpace the industry as well, with an impressive 74% growth over the last 12 months. Total digital revenue has grown to nearly $250 million in the last 12 months. Our digital transformation is driving a rapid change in the mix of our revenue in the first quarter. Total digital revenue now represents 35% of our total operating revenue. Before we get into the first quarter operating results, we're excited to share about a new brand identity within our portfolio. TownNews will begin its next chapter as BLOX Digital, as announced last month. The name BLOX Digital celebrates a rich history and is a testament to the success of the flagship software as a service solution, BLOX CMS. With a refreshed mission and new modern look, BLOX Digital is even better positioned to deliver valuable integrated digital solutions.
Supporting the expansion and modernization of BLOX Digital is a priority for Lee as we execute our enterprise-wide digital transformation and enhance value for our customers, subscribers, and Lee shareholders. Moving to the first quarter operating results, Lee delivered strong digital growth with consistent execution of our three-pillar digital growth strategy. Total operating revenue was $185 million in the first quarter. Digital revenue growth continued at a strong pace, with total digital revenue up 17%, driven by 56% growth in digital subscription revenue. At the end of the quarter, we had 564,000 subscribers to our digital-only products. This is a 25% growth rate after many consecutive quarters of significant growth. On the advertising side, digital advertising revenue increased 12% compared to the first quarter last year, driven by 45% growth in revenue at Amplified Digital.
Amplified revenue now totals $21 million in the quarter. We have been presented with challenges in the first quarter. Total print revenue was $120 million, an 18% decline year-over-year as cyclical headwinds accelerated the pace of decline. I couldn't be more proud of this team for their smart thinking, steadfast commitment toward our three-pillar digital growth strategy, and the rapid execution of our plans to drive industry-leading digital revenue growth, and a commitment towards achieving our adjusted EBITDA goals. These efforts have importantly kept us on track to reaffirm our full year guidance for adjusted EBITDA. Now I'll turn it over to Tim with more details on our first quarter results.
Thank you, Kevin, and good morning, everyone. In wddition to driving industry-leading digital revenue growth, we are focused on maximizing the profitability of our legacy business and achieving our long-term leverage targets. Operating expenses totaled $176 million, and cash costs were down 5%. Decreases in cash costs were attributed to continued business transformation efforts, partially offset by strategic investments in digital talent and technology tied to our digital growth strategy, increased digital cost of goods sold, and general rising prices. For the quarter, we reported adjusted EBITDA of $18 million. As Kevin mentioned earlier, we faced a number of headwinds to begin fiscal 2023, largely driven by uncertain market conditions. One way we are addressing this is we are focused on managing the profitability of our print business as cyclical headwinds have accelerated the changes in demand for these products and services.
We continue to identify opportunities to further optimize our cost structure in distribution and manufacturing, as well as corporate services. To that end, we executed an additional $60 million of annualized cost reductions, early in the second quarter, $40 million of which will be realized in fiscal year 2023. Executing the various actions began early in the second quarter, we expect to achieve more than $40 million reduction to our cash cost in the remainder of the year. Over the last two years, we have identified and implemented over $130 million of annualized cost actions. While we remain focused on operational excellence and reducing the cost structure of our legacy print businss and growing profits, our main priority is to drive long-term, sustainable digital revenue growth.
We continue to invest in talent and technology in areas of our business tied to our digital future, and our commitment to high-quality local news remains steadfast. The targeted investments will drive our digital future and will impact our cash costs in fiscal year 2023. We expect the investments we are making in new talent and technology and increased digital cost of goods sold to increase our total cash costs by approximately $25 million in the fiscal year. These costs will have a short-term impact on our margin profile but are expected to drive Lee's digital transformation. We continue to strengthen our balance sheet. The principal amount of debt at the end of the first quarter was $463 million.
As a reminder, our credit agreement with Berkshire Hathaway, our sole lender, has favorable terms that are incredibly important for us as we execute our strategy, as it allows us the ability to make the necessary investments in talent and technology that fuel our recurring sustainable digital revenue growth. We made no pension contributions in the first quarter. We do not expect any material pension contributions in fiscal 23. Finally, we continue to identify opportunities to monetize our non-core assets, which facilitates accelerated debt reduction. In the first quarter, we closed $4.1 million of asset sales. The net proceeds from that sale were used to pay down debt in the second quarter. We have identified an additional $30 million of non-core assets to monetize, which are in various phases of the sale process.
As a reminder, with solid execution of our three-pillar digital growth strategy as well as our commitment to improving our balance sheet, our goal is to achieve our long-term leverage target of under 2.5x . On slide 10, we are summarizing our fiscal 23 outlook. To account for the current market conditions, we are widening the range of our total digital revenue guidance, lowering the midpoint of the range with expected growth between 13% and 19% year-over-year. At the same time, we implemented a significant cost reduction focused on costs that support our print business. With these cost actions and continued progress on our digital transformation, we're reaffirming our adjusted EBITDA fiscal year target of $94 million-$100 million. With that, I will turn it back over to Kevin to wrap up.
Thanks, Tim. Under the guidance and oversight of the board of directors, our leadership team's continued execution of our growth strategy sets the stage for significant long-term value creation. Our three-pillar digital growth strategy is the foundation of our investment thesis, the execution of that strategy is at the core of creating value for our shareholders. To wrap it up, I'd like to thank the entire Lee team for their efforts in driving our transformation. We have the right board, the right team, and the right strategy, I believe we're better positioned than ever to create long-term value for our readers, our users, our advertisers, and shareholders. This concludes our remarks. The team will remain on the line for questions you may have. Operator, please open the line for questions.
Thank you. At this time, we will be conducting a question and answer session. As a reminder, if you're accessing this call by webcast, you may submit typed questions on your screen. Those questions will be answered during the call as time permits. One moment please, while we poll for questions. Our question comes the line of Michael Kupinski from Noble Capital Markets. Your line is open.
Thank you. Good morning, and thanks for taking my questions. A quick couple of questions here. Can you kind of give us a sense of how print advertising is pacing in the current quarter, what you're hearing from advertisers, any specifics in terms of what is driving currently the decline? Obviously we're pacing now against or comping against easing comps from last year. Kind of give us a sense of what we're seeing in that in print right now.
Yeah, thanks. Thanks, Mike. Thanks for the question. You know, I think what we're seeing is some of the cyclical headwinds that we saw in the first quarter. You know, we're seeing some of that in the second quarter as well, which is what prompted us to, you know, take the quick action that we did. At the same time, you know, we feel really good about the digital guidance that we have out there. You know, we do think, you know, our digital subscription guidance is really strong and the performance there is, you know, pacing with our expectations. We've got, you know, some opportunity on the digital ad side as well for some trend improvement.
Great. On the cost actions you've taken on the print side, I was wondering if you could kind of give us some sense of the types of cost reductions you're doing there. If you can, just kind of give us a sense of... I know that you guys have been really rightsizing that business pretty aggressively. What are we actually doing at this point, in terms of those cost reductions? Can you kind of give us a sense of whether or not we're expecting restructuring charges going, you know, and if you can just kind of give us a magnitude of those?
Yeah. That's a good question. You know, again, we continue to evaluate, you know, all departments of the organization as part of our digital transformation. We still have a lot of costs that are tied to our print business. It's still, you know, 2/3 of our revenue. And we have a lot of costs that are directly related to that revenue. As the revenue trends, you know, cyclical headwinds we're facing have affected those revenue trends, you know, we've got some levers to pull because the costs that support there. A lot of it was on the comp side. We're also looking a lot of our vendor costs as well to manage those, so production, distribution, and some of our other vendor costs.
We still have some significant amount of cost tied to our print business, given it is a, you know, a sizable % of our revenue. You know, in terms of your question on, you know, the restructuring charges, you know, we are looking at restructuring charges, you know, in the mid to high single digits and millions for the fiscal year. A little bit less than what we were seeing last year.
On the print side at this point, you're not decreasing the print days or anything like that at this point, are you? Can you kind of give us a sense of what you're doing on that?
Yeah. We're looking at a lot of options on levers that we can pull on the print side. Yeah, all options.
I gotcha. In terms, can you give us a sense, I know newsprint is a smaller portion of your total expenses on that side, can you kind of give us a sense of what newsprint costs are doing? I know they have been moderating a little bit.
Yeah. After, a pretty wild ride over the last 18 months, of rapidly rising prices, we are seeing, you know, them moderate and level off at the current pace.
On the digital side, can you kind of give us a sense of how digital revenue growth is pacing in the current quarter?
It's very, very consistent with, you know, what we saw in the first quarter. You know, our total digital revenue was up 17%. We're pacing around there as well in the second quarter.
Gotcha. Then on digital subscription, were there any specific changes in marketing in the quarter, you know, changes in paywalls that might, you know, kind of account for some of the growth that we're seeing there?
No. Nothing specific. It's just all part of our, you know, all part of the strategy. The, the foundation of that is, you know, local content that, you know, our users enjoy and want. That's kind of the foundation of our digital subscription platform. At the same time, you know, we're mining data that's informing our marketing decisions. You know, that's just, you know, part of the grind that we're going through and part of the tactics that we are deploying to drive digital subscription growth. As you saw in the quarter, you know, great growth from a unit perspective. You know, 25% growth year-over-year, which is, you know, 13 consecutive quarters of industry-leading growth. At the same time, we're growing average rates.
Having revenue grow, you know, 56% year- over- year with units up 25%, we're starting to see that increase in average rates. We're really happy with what we're seeing on the digital sub site.
That's terrific. I would assume the margins are starting to show some improvement there as well on the digital side. Yeah. What was the reason why Town News was rebranded? I was just wondering if you could kind of give me a sense of what led you to rebrand it.
You know, we've been really pleased with the performance of TownNews. It's been primarily focused in the media sector in terms of its BLOX CMS services. Really believe we've got a great opportunity to go above and beyond providing those services outside of the media landscape, hence the name from TownNews to BLOX Digital.
Gotcha. Okay. All right. Thanks. That's all I have. Thank you.
Thank you.
That is all that we have from questions. I will turn it back to Kevin for closing remarks.
Great. Well, thank you. As I mentioned earlier, we remain keenly focused on transforming our business model from the long-term benefits for our shareholders, our employers, our employees, our readers, and advertisers. We appreciate your time and your interest in Lee. Thank you again for joining the call.
Thank you. Ladies and gentlemen, at this time, we have reached the end of our question and answer session. This concludes our call. Everyone, have a great day.