Q4 2023 Gannett Co Inc Earnings Call

Participants

Matthew Esposito; Head of IR; Gannett Co., Inc.

Mike Reed; Chairman, CEO & President; Gannett Co., Inc.

Kristin Roberts; Chief Content Officer; Gannett Co., Inc.

Chris Cho; President of Digital Marketing Solutions; Gannett Co., Inc.

Doug Horne; CFO & Principal Financial Officer; Gannett Co., Inc.

Giuliano Bologna; Analyst; Compass Point Research & Trading, LLC

Lee Cooperman; Analyst; Omega Family Office, Inc.

Presentation

Operator

Greetings, and welcome to Ganite 4Q earnings conference call. At this time, all participants are in a listen only mode. Brief question and answer session will follow the formal presentation. Anyone should require operator assistance during the conference, please press star zero on your telephone. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matthew Esposito, Investor Relations. Thank you, Mr. Esposito, you may begin.

Matthew Esposito

Thank you. Good morning, everyone, and thank you for joining our call today to discuss Connect Fourth Quarter 2023 financial results. Presenting on today's call will be Mike Reed, Chairman and Chief Executive Officer, Doug Horne, Chief Financial Officer, Kristin Roberts, Chief Content Officer, and Chris Jones, President of Digital Marketing Solutions. If you navigate to the Gannett website, you will find that we have posted an earnings supplement in addition or earlier press release, we will be referencing it today on the call as it provides you with additional detail on this quarter's performance.
Before we begin, please let me remind you that this call is being recorded. And in addition, certain statements made during this call are or may be deemed to be forward-looking statements, including those with respect to future results and events and are based upon current expectations. These statements involve risks and uncertainties that may cause actual results and events to differ materially from those discussed today. We encourage you to read the cautionary statement regarding forward-looking statements in the earnings supplement as well as the risk factors described in our filings made with the SEC. Except as required by law, we undertake no obligation to publicly update or correct any of the forward-looking statements made during this call. In addition, we will be discussing non-GAAP financial information during the call, including same-store revenues, free cash flow, adjusted EBITDA, adjusted EBITDA margin and adjusted net income attributable to connect, you can find reconciliations of our non-GAAP measures to the most comparable U.S. GAAP measures in the earnings supplement.
Lastly, I would like to remind you that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase any interest in Getnet. The webcast and audio cast are copyrighted material of Gannett and may not be duplicated we introduced or rebroadcasted without prior written consent.
With that, I would like to turn call over to my three connects Chairman and CEO.

Mike Reed

Thanks, Matt. Good morning, everybody, and thanks for joining our call this morning. I'm pleased to share with you details on our solid fourth quarter and very solid 2023 full year performance and how we are building on this momentum already in 2024. 2023 was a year marked by innovation, resilience and collaborative efforts. At Getnet, we rallied around new ideas, new approaches and new avenues and implemented substantial change in our organization, which drove meaningful improvement in our key metrics. As a result, we achieved four consecutive quarters of sequential improvement in same-store revenues. We grew adjusted EBITDA and free cash flow.
For the full year, we significantly increased our net income. We developed new partnership revenue streams, and we improved our capital structure in 2023 adjusted EBITDA grew 4% over the prior year. We repaid approximately $142 million of debt, which combined with the growth in adjusted EBITDA, significantly reduced our first lien net leverage from 2.7 times to 2.0 times. We also significantly improved free cash flow in 2023, and we maintained a strong liquidity position with just over $100 million of cash on the balance sheet.
We are very excited to carry this momentum into the year ahead. As you'll hear from Doug later among progress in several other areas. In 2024, we expect another year of adjusted EBITDA and free cash flow growth, another $110 million in debt repayment and further reduction to our first lien net leverage in 2023. Digital revenues were approximately $1.1 billion and represented 39% of total revenues growing over the prior year. Over the past year. The investment and successful execution of our content strategy allowed us to grow our digital audience and engagement as well as improve the overall monetization of our audience
Our expectation for 2024 is that total digital revenues will make up over 45% of total revenues by the end of the year. And we expect digital revenues to grow approximately 10% versus 2023 and importantly, begin to outpace the declines we see in our legacy revenue streams. As a result, we are expecting total revenue growth near the end of 2024. We've talked about the inflection point in the past being the end of 24. The inflection point is when revenue flips from declining to growing.
And as a result. And as I just said, we're expecting that towards the end of 24 as we enter 25, there were numerous accomplishments in 2023 and they underscore the strength of our strategy at a time when the media industry faces many challenges, I'm sure many of you have read in the press over the last couple of months, many of our peers have recently announced sizable layoffs. Nonprofits have been forced to close and some media outlets have ceased to exist. Although we faced similar headwinds, we believe our scale and our strategy are differentiators and that our results are continued proof that we were under that we are on the right path.
Remember, we grew profitability in 2023, and our outlook this morning forecast continued growth over the next three years. Later today, you'll hear from Christian Roberts and how we are reinvesting in our newsrooms, particularly in our small communities. And as we enter 2024, we are energized to have laid the necessary groundwork for sustainable growth here again, that important to our success in 2023 and the success in 2024 is the growth of total digital revenues. We have seen solid progress across several several of our digital revenue streams and in the fourth quarter total digital revenues continued to grow over the prior year.
Our digital revenue strategy and the foundation for anticipated future growth is to expand our audience and improve engagement and improve the platform monetization at each point in the customer journey with us, we believe the greatest revenue opportunity lies in a comprehensive monetization strategy that maximizes revenue across the entire spectrum of our 187 million average monthly unique visitors, which by the way, grew 4% year over year.
An important component of the monetization of our audience has been digital only subscription revenue in Q4, digital-only subscription revenue and digital only are to experience new highs, reflecting a more strategic acquisition and pricing model. We believe we have continued upside in both areas as we maintain our focus on smart customer acquisition, in-depth local content and effective pricing strategies. While digital-only subscription revenue growth remains a key element given its highly recurring nature, we are balancing it with a focus on our digital advertising business in the fourth quarter, our initiatives around audience expansion and increased engagement led to the best quarterly performance for digital advertising in all of 2023.
First-party data is crucial to unlocking further value in our digital advertising, lengthening the time on site and creating personalized smart customer journeys that allow for the full implementation of multi-point monetization. By leveraging our data science capabilities. We launched first-party data led campaigns across 50 demographic segments and 800 interest segments in 2023. The deprecation of the third-party cookie is expected to result in a substantial shift in the advertising industry. While its full impact remains to be seen, we believe we are well positioned in 2024 to capture increased premium revenue as we expand our already robust first-party data capabilities.
Another channel to increase our overall monetization is through partnerships. We made great strides with partnerships in 2023 as we align with brands that share our values and are expected to expand our audience.
Within the quarter, we announced two more partnerships with Jeff pocket and Home Solutions. Our five announced partnerships in 2023 create a new digital revenue stream with significant potential and importantly, at a very high margin than they have been that have become immediately accretive to our total revenue and to our total free cash flow for 2024, we expect to generate approximately $20 million in this very high margin partnership revenue more than doubling 2023 levels, virtually all of which is accretive to adjusted EBITDA and free cash flow over the next five years. We believe this partnership revenue can grow more meaningfully. And while we expect to launch new partnerships in 2024, the more substantial revenue growth is expected to come from scaling our existing portfolio of partnerships further embedding the content across our platform and driving increased engagement.
Now central to our strategy is our commitment to expanding our audience and their engagement through our renewed content strategy, focused on creating joyful experiences. Since joining us as our Chief Content Officer, Christian has made a remarkable impact on the domestic and net media segments. Kristin and her team are executing on our strategy to rapidly expand our audience and content, amplify our journalism and drive diversified revenue streams. Over the past two quarters, the team has driven the significant increase in audience growth page views and readership per story, while also leveraging the power of data to deliver the right outcomes for each consumer.
I'll now hand you over to Christian to recap for team's accomplishments in 2023 and here what we can expect in 2020 for Christian?

Kristin Roberts

Thank you, Mike. We are doing exactly what we said we would do when we launched our renewed content strategy six months ago. More people are reading and watching us than ever before. We are using strong journalism to serve our communities in ways that are also expected to create revenue and we're showing that content can be the engine of growth economics. All of this success is linked to the ambition and the energy that our content team brings to the challenge every day.
As I outlined last year, our strategy centers on audience growth, expansion of our audience, along with deepening insights and engagement, create the foundation expected to maximize monetization across increasingly diverse revenue streams. In 2023, we experienced significant audience expansion due to strong improvements in the efficiency of our content team. This in turn resulted in increased page views and readership per story. We also remain focused on staying attuned to our audience's preferences, particularly around college football and high school sports. In 2024, we will be entering the next phase of our plan, which is engagement initiatives such as rebooting, our small newsrooms and gearing up for the 2024 election will be at the top of our list.
So let's briefly walk through each of these. A key focus for us in 2024 is reinvesting in our small newsrooms. Last year, we launched an initiative with the conviction that putting reporters into our smallest newsrooms was critical, but not enough on its own to be sustainable. We'll try to experiment with new ways of engaging Hometown readers at a small site scale. Our reporters combined, the first person voice with a newsletter approach that invited readers to join them in experiencing their community first hand, when the results were remarkable and gave us the confidence to probably expand this strategy. We're hiring more journalists in communities that like the pilot sites have lost local news reporters, and we're converting more of our smaller newsrooms across the country to take advantage of the engagement, reader satisfaction and retention that the newsletters offer.
We're also directing our focus for the 2024 elections with our one-team unified strategy leading the charge. Our mission is to leverage the strength, power and footprint of the USA TODAY NETWORK to create the preeminent balanced source of news information tools and guides that empower voters to make informed choices on specific issues and political races that will set America's direction for the next four years. We will center our election journalism on the people we serve not by candidates courting them. The USA TODAY NETWORK is committed to making the voter the VIP. of our election strategy. We will help readers viewers and listeners become more informed and ready to make the best choices for themselves and their families at the ballot box. We're also leaning into local through a litany of data guides in more than 100 cities and towns as well as service journalism, community events and engagement opportunities that allow our readers, viewers and listeners to get accurate nuanced coverage of their specific communities, we will be launching a healthful e-mail course, that prepares readers to vote and we're creating explanatory journalism on the platforms. We know our audiences are already on. We have redesigned our results page to get audiences, the information they care about faster and more investing to make it all happen. We're creating roles and redeploying journalists throughout the network to focus on better serving the voters during this election. Ultimately, all of these initiatives are expected to have a tangible impact on our company, both in delivering on our mission of serving our audience as well as revenue generation. We drove meaningful audience growth in the second half of 2023. We're scaling the outcomes of our successes in 2024, and we're leaning hard into new initiatives expected to drive new and SaaS building up our growth. I am profoundly thankful to be leading the content team. We are proud to be a growth engine in that, and we're doing it with a commitment to our purpose. Back to you, Mike.

Mike Reed

Thanks, Kristin. We're so excited to see the significant audience growth in the closing months of 23, especially when you consider in how large our audience already is to see that large scale and then to be able to continue to grow from there is very exciting and we look forward to scaling and having that impact our 24, 25 and 26 results as we go forward. And in parallel to the digital revenue growth in our media properties as the growth of our DMS business look like to our DMS business continues to operate at a high level and it ended the full year 2023 with more than $475 million of highly recurring revenue.
Approximately 15,000 core platform customers double digit adjusted EBITDA margins, healthy RPU and customer budget retention rates of over 95%. In spite of the relatively flat performance in core platform revenues during the fourth quarter, we did manage to achieve full year growth over the prior year and importantly, we anticipate revenue growth for the fourth first quarter of 2024 as well as the full year. We are also pleased to see core platform RPU hit a new high in the fourth quarter. We are excited to have Chris Joe lead our DMS business in 2024. Chris is a proven leader in the product field and his team is laser focused on driving future growth, expanding our product portfolio and providing a best in class marketing solution for our SMB partners.
And I'll now hand it over to Chris to provide an update on the business and outline some of the exciting initiatives that are in motion. Chris?

Chris Cho

Thank you, Mike. I'm pleased with the remarkable resilience of our DMS business showcase despite a more challenging environment in the latter half of the year.
In 2023, our DMS business continued to grow. Our fundamentals remained strong, and we laid the groundwork for expected success in 2024 and beyond as we head into 2024. I am thrilled about the strategic initiatives underway as well as the ones we are poised to pursue. In the fourth quarter, DMS revenue reflected a continuation of the macro trends from Q. three. General consumer stress and weakness slowed the growth in our largest vertical home services along with other large verticals such as health care, professional and other services.
We have already begun to see this dissipate in 2024. And as a result, our DMS revenue is expected to grow 1% to 2% in Q1, and we also anticipate a higher growth trajectory for the full year 2024 than experienced in 2023 several actions are currently underway that are expected to further accelerate the business in 2024. We will strategically align ourselves to meet demand where it is most prevalent and offers the greatest potential home services will remain a high priority given its size and its growth potential. We continue to be highly optimistic about this customer segment and expect to see double-digit growth for the full year of 2024. Additionally, we will replicate the scale achieved there by doubling down in areas where we have strong domain expertise. We have seen strong demand such as health care, real estate and health and fitness scale in verticals is incredibly important in serving our clients and optimizing customer results.
And we've been building that critical scale beyond home services, and we are well positioned to meet increasing demand in these verticals. Contribution from these high-potential categories is expected to accelerate in 2024 as we leverage our extensive knowledge and expertise in both sales and service within these domains. Additionally, in 2024, we are placing a strong emphasis on product development to expand our overall portfolio and increase our total total addressable market with a high-powered solutions that we believe will make the local ECU value proposition even stronger for our clients. I am energized. I'm excited to be leading our DMS business into 2024. We have made great progress in 2023, and we believe the potential is even greater for the year ahead.
I want to thank the incredibly talented local IQ team for their relentless effort to achieve our goals and deliver innovative marketing solutions to our valued customers.
Mike?

Mike Reed

Thanks, Chris. It's very exciting to see where the DMS business is heading under your leadership, the expansion into these new categories is going to be a critical component of growth, give us great diversification in our revenue streams and frankly, it increases our addressable market for this business. That, combined with our new product development, gives us a lot of confidence that we'll return to pretty significant growth in this business over the next three years.
So really excited to see that the overall, I'm very excited by the execution in 2023 by going out and the team and the progress we've already made in 2024. We have a top-tier passionate leadership team.
One of the best I've ever worked with, frankly, and I've been CEO for a long time in this industry, and I just love this team we've assembled we have a dynamic content strategy and a growing DMS business.
We feel the momentum shifting here again that we are heading into 2024 with incredible optimism.
And with that, I'll now turn the call over to Doug to provide additional detail and color around our 2023 fourth quarter financials, as well as the details on our full year 2024 and midterm business outlook. Doug?

Doug Horne

Thank you, Mike, and good morning, everyone. As Mike mentioned, we are very excited with the progress in our digital revenue, the resulting solid financial performance in the fourth quarter as well as the significant progress against our strategic priorities.
Let's begin with our consolidated results and just to note all the comparisons are on a year-over-year basis unless otherwise noted.
For Q4, total operating revenues were $669.4 million, a decrease of 8.4% or 8% on a same-store basis. This represents a 40 basis point sequential improvement from Q3 revenue trends marking four consecutive quarters of top-line trend improvement it is encouraging to note that we are seeing positive developments in several key digital areas. As we look ahead, our execution remains focused on cultivating sustainable revenue growth, growing our digital audience and customer base, increasing our monetization of this space and continuing to stabilize our print business. As we continue to execute on these fronts, we expect the pace and the magnitude of our revenue trend to accelerate trend improvement to accelerate.
Adjusted EBITDA totaled $74.1 million in the fourth quarter, a decrease of 18% or $16.2 million. Adjusted EBITDA margin in Q4 was 11.1% compared to 12.4% in the prior year. Revenue declines were largely mitigated by strategic cost controls, although in the fourth quarter, we cycled against some of the larger temporary cost savings from the prior year, which resulted in an estimated $9 million impact in savings from the prior year quarter.
On a sequential basis, adjusted EBITDA increased $14.6 million, representing solid growth over Q three. Solid improvement in adjusted EBITDA and adjusted EBITDA margin from Q3 to Q4 reflects the seasonally stronger revenue, enhanced focus on high-margin revenue streams and our commitment to expense management. In Q4, we continue to modulate our cost base and align with our overall revenue trends operating expenses in the fourth quarter decreased approximately 9% despite the temporary actions in the prior year. And we are pleased also pleased to see that continued deflationary pressures from some of our larger raw material categories. We anticipate that these cost savings will contribute favorably to our operating expense trends moving forward.
Total digital revenues in Q4 were $277.1 million, up 2.9%, representing the third consecutive quarter of growth. Digital advertising, which is a component of total digital revenues, posted its strongest results for the year, thanks to stabilizing rates in our programmatic business and a notable increase in our platform page views. This is a very promising sign, which we believe reflects reflects the success of our expanding our audience and our renewed content strategy.
Our digital-only subscription revenue growth remained strong with increased subscriptions on a sequential basis and significant year-over-year growth in digital-only RPU in Q4 our digital-only subscription revenues reached a high of approximately $42 million, growing 18.3% on a same-store basis. Digital-only ARPU also reached a new high of $7.05, growing approximately 20% year over year.
Longer term, we see an opportunity to double our digital-only RPU due to the highly local and relevant content. Our team produces while our print advertising trends remain impacted by secular declines. We are pleased to have improved our trend by seven points compared to the Q4 in the prior year. Print advertising remains an effective tool for many national and local businesses, and we expect these trends to return to mid digit decreases in 2024.
The results in print subscription revenue continue to show promising improvements driven by the actions we have implemented to enhance the subscriber experience. We are pleased to report that our service levels and the percentage of open routes are at their best levels in two years. In Q4 alone, our open routes decreased an additional 20%. Furthermore, the conversion to mail delivery has proven to be a consistent and effective delivery model to our consumers in areas where staffing delivery routes is a more persistent challenge. In 2023, we successfully converted 46 markets to mail delivery with plans for approximately 53 more markets in the first half of 2024. Mail delivery not only provides a better consumer experience, but it is on average approximately 50% of the cost compared to carrier delivery in Q4.
Our other revenues category, which includes commercial printing and delivery, as well as other digital syndication and affiliate revenues, benefited from growth in partnership revenue, but we did experience an overall 8.5% decrease on a same-store basis due to the secular declines associated with commercial print volumes.
In the fourth quarter, we began reporting in three segments separating our Getnet media segment into two segments, domestic and at Media and Newsquest domestic. And that media is comprised of USA TODAY daily and weekly content brands and approximately 220 local U.S. markets across 43 states. Newsquest reflects the operations of more than 220 local brands and magazines across the UK. The primary operational difference between the two segments is the home delivered nature of the print product in the US and the single-copy retail outlet distribution model in the UK. This difference in distribution models creates a difference in margin for the two segments.
Looking at the domestic U.S. Media segment, we believe our strategic initiatives continue to play a crucial role in driving sequential improvements in same-store revenue trends for Q4. Our same store revenue decrease of 9.3% represents an 80 basis point improvement from Q3 revenue trends. Additionally, our digital businesses continue to operate at a high level in Q4, with total digital revenues growing 5.6% on a same-store basis. As a result, total digital revenues returned to full year growth on a same-store basis and we expect this to accelerate this momentum in 2024.
Turning to Newsquest. Despite the challenged inflationary environment in the UK, Newsquest delivered a strong quarterly performance for Q4. Adjusted EBITDA in the segment was $11.3 million, growing 23.3% compared to the same period in the prior year. For the full year, our adjusted EBITDA of $50.1 million reflects the highest figure since 2017, growing approximately 25.2% over the prior year as a result of the successful integration of the Q1 2022 Archer acquisition. For Q4, total revenues were approximately $58.2 million, down 2% on a same-store basis and represents a 390 basis point sequential improvement from Q3 revenue trends.
Equally important, we are pleased to see total digital revenues experienced their second consecutive quarter of growth in Q4, which is a trend we expect to continue and 2024 in our digital marketing solutions business. Total core platform revenue in the fourth quarter was $119.4 million, adjusted EBITDA for the segment was $12.5 million, representing a margin of 10.4% in the fourth quarter. We had approximately 15,000 core platform customers in the fourth quarter with core platform RPU reaching a new high up 2% over the prior year.
As Chris highlighted, our strategic plan for 2024 involves continuing to optimize and grow our core DMS solutions, while at the same time expanding our product portfolio with a high-powered software solutions, which we believe will increase our total addressable market and core platform revenue Let's now shift to the balance sheet. At the end of the fourth quarter, our cash balance stood at $100.2 million and our outstanding net debt was approximately $1 billion.
Our Q4 free cash flow improved by $14.4 million to $12.7 million. And for the full year, free cash flow was $56.5 million, which is up approximately $60 million from 2022. We ended Q4 with approximately $1.1 billion of total debt, reflecting $23.9 million of total debt paydown for the quarter. For the full year, we repaid $141.6 million of total debt, which exceeded our initial projections for the year debt repayment remains our primary use of capital allocation, and we will continue to focus on reducing our overall leverage. As a result, we expect to repay $110 million in 2024.
I'm also pleased to report that our first lien net leverage ended the year at two times, which reflects our current year debt reduction as well as the improved EBITDA performance in 2023. In Q4, we completed three real estate and non-strategic asset sales, bringing our full year total to $85.3 million. In 2024, we expect our real estate and non-strategic asset sales to be in the range of $45 million to $50 million, and we will continue to evaluate our full product portfolio on an ongoing basis in 2024. We are committed to making greater investments in our people and technology and reducing the amount of money spent on underutilized real estate This means that we are assessing our office space on a market by market basis to free up additional resources to reinvest in journalism and content bolster both our nationwide and local coverage, better serve our partners and accelerate our digital future. We have a significant real estate footprint in McLean, Virginia, which has been underutilized since the pandemic, which like for many companies prompted a fundamental shift in how and where Getnet employees work.
Given the success of our flexible work model and our current office space requirements, we plan to vacate our McLean office move our headquarters to our existing location in New York City and transition the USA TODAY newsroom to our DC bureau. It is important to note that as a result of these moves, we will incur an impairment charge of approximately $45 million in the first quarter of 2024. But importantly, this will not impact our cash flow.
Turning now to our guidance. As we look forward to 2024, we expect another year of adjusted EBITDA growth over the prior year, driven by improving revenue -- (technical difficulty)

Operator

This is the operator. Speakers, can you hear me?

Kristin Roberts

I'm Kristian, I can hear you. You can go.

Operator

I can Mr. Seto, can you hear me?

Kristin Roberts

I think? Yes, I think the remaining 100 went out. So I'm going to try.

Mike Reed

All right. Let me just quickly connect them. Just me one. The management line has been disconnected. Please be in whole and we quickly get them big.
Yes, ladies and gentlemen, the management line has been reconnected. Please go.

Doug Horne

Thank you. Thank you very much. Apologies for the technical difficulties. As I was mentioning, we are planning to vacate our McLean office space in Virginia. And as a result of these moves, we will incur an impairment charge of approximately $45 million in the first quarter of 2024. But importantly, this will not impact our cash flow.
Can I now turn to our guidance as we look forward to 2024, we expect another year of adjusted EBITDA growth over the prior year, driven by improving revenue trends and ongoing cost management. We expect total digital revenues to grow approximately 10% year over year, bringing total revenue trends in at low to mid single digit declines year over year. Revenue trends on a same-store basis are expected to begin growing on a overall basis as we near the end of 2024.
We expect revenue trends to continue to improve sequentially starting in Q1, we expect adjusted EBITDA in the first quarter of 2024 to perform similar to the fourth quarter of 2023 steadily improving to meaningful growth in the back half of the year. In 2024, we will continue to make further investments in our technology infrastructure and in our product portfolio driving an increase in capital expenditures year over year. This is expected to have a $15 million impact on free cash flow from 2024.
However, free cash flow is still expected to grow in 2024. The expected digital revenue growth in 2024 is the foundation for what we believe is sustainable growth in total revenues across 2025 and 2026, along with growth in adjusted EBITDA and net income. Free cash flow generation is expected to accelerate in future years with a 40% kegger from 2023 to 2026. As we grow our audience, expand our product suite and diversify our digital monetization, we believe we can establish a sustainably growing media and digital marketing solutions company that holds true to our mission to enrich the communities and businesses we serve. And I will now hand it back to Mike.

Mike Reed

Thanks, Doug. From again, as Doug said, apologies for the technical difficulties. Our line dropped. It seemed to happen, right? When we mentioned that we are moving the headquarters from McLean to New York. So maybe they we'll give that guidance. We're trying to sell something for anyways a fund.
Let me recap before we move to Q&A and then I'll be back after Q&A to wrap the call up to recap, we're entering 2024 with a great deal of optimism. As you've heard here this morning.
We have a very strong team here that we've made several key hires to our leadership team and believe we have the right structure and personnel in place to drive the speed and execution that we need to evolve this business in 2023, we saw significant improvement in our key financial metrics. We told you we would focus on profitability, digital revenue growth and improve our balance sheet. And we have done just we have done just that we grew adjusted EBITDA for the full year, which combined with our $142 million of debt repayment reduced our first lien net leverage by about 27% to 2.0 times.
We generated free cash flow of approximately $56 million, representing over $60 million of growth over the prior year. We improved our revenue trends in each quarter, consecutively throughout the year, and we expect to end 2024 with revenue near flat. And we believe this sets us up nicely for anticipated revenue growth in 2025.
Total digital revenue for the full year continued to grow with nearly 40% of total revenue coming from digital sources and more than 41% up from digital. And in the fourth quarter, we expect that percentage to move towards 45% of total revenue in 2024. We are also seeing wins in several of our key digital initiatives. Importantly, we are growing our audience and our engagement with that audience. Our paid digital subscription strategy resulted in new highs in revenue and RPU as well as increasing volumes in the back half of the year.
The five partnerships we announced in 2023 are expected to become a greater contributor to our overall performance in 24. And of course, beyond these high margin deals are anticipated to generate approximately $20 million in affiliate revenue in 2024 and grow more meaningfully over the long term.
As you can see, our commitment to our strategy and most importantly, our readers and customers is unwavering. We believe we are on the path to sustainable revenue growth while also increasing our free cash flow generation.
Now I'll turn it over to the operator for questions.
Operator?

Question and Answer Session

Operator

(Operator Instructions) Giuliano Bologna, Compass Point.

Giuliano Bologna

Please go. So I'll go more India, maybe to kick it off and the first question from more of a high-level on your suggestion of a tectonic shift in the business and kind of and the kind of revenue profile of the platform. I'm just curious why the shift and why you're so bullish about the opportunity set ahead here.

Mike Reed

Hey, thanks. Good morning. Thanks for the question to you. There are many initiatives underway that give us that both this and that confidence in the shift, we're seeing back half of 23 in early 24. But let me hit on a few of the the bigger ones in my view on number one, our new content strategy. So we we have scale Com and the new content strategy is driving further audience growth, which is really important. And we're also through through data and AI, engaging with that audience better, which is leading to more and more opportunities to engage with that consumer throughout their life cycle on our platform, leading to revenue monetization opportunities across the spectrum for us. So much better digital revenue opportunity as we grow that audience and engage better with that audience.
Second, I would say is our affiliate revenue partnerships that's bringing in the additional broader audience engaging with us in a different way or coming to us from a different way. And then through the ION data, we're able to engage better with that audience. And that's driving not only affiliate revenues, but more revenue on our platform as well.
So so the content strategy, the affiliate revenue partnerships using data and AI to gauge is really helping to give us a lot of confidence in the growth on the digital on the digital side off the platform from.
I would also say that we're we're seeing a much more a bigger TAM as we engage with a wider audience on the platform and that and we're seeing our monetization hit consumers all along their journey, which is which is helpful to our growth now and in the future on Europe, a big big part of our overall confidence in total revenue growth assume that digital revenue growth in surpassing 50% next year, 55% in 2026. And where these digital revenues come from, we have a lot more visibility, which gives us a great deal of confidence. As many of you know, our most volatile and unpredictable revenue line is print advertising and less than 20% of our total revenue now comes from print advertising, and that percentage will continue to decline significantly in 25 and 26. So a lot more visibility in where the revenues are coming from the media business on the digital side, more visibility on the DMS side with a much more recurring nature to that revenue on the DMS side.
And then I would say finally, this new management team on IS is in place as of the essentially the summer. So the things that are executing on are just starting to take hold. We've barely seen the fruits of that in 23, we'll really see the fruits of that 24, 25, 26.
So I guess to sum that up content strategy, use of data and AI, our new affiliate partnerships and this management team and their strategy are really giving us a ton of confidence as we we look out over the next three years.

Giuliano Bologna

That's very helpful. And shifting to on the deleveraging further, sorry, you paid down about $140 million in 2023, whereas we had projected about $110 million and you're projecting $110 million again for 2024. I am curious what your confidence level is around that $110 million for '24.

Doug Horne

Hi, this is Doug. I'll take that one, we feel really good about the results in 24 in terms of both our projections and our asset sales. We repaid, like you said, 100 -- over $140 million in 2023, and that was in excess of what we had planned. And I would say over the last couple of years, we've been really successful at kind of exceeding the asset sale expectations that we've put out there. And we feel very confident in our ability to kind of meet that threshold that we've put out there for next year.

Giuliano Bologna

That's very helpful. And then the catering to the digital side, I'm curious, was accelerating the revenue growth on Zillow side. I know there's obviously been a focus on higher RPU and it's material at this point. I'd be curious to know if there's anything else on the digital side, which we focus on.

Mike Reed

Yes. Yes, the RPUs, a good, good start jumping off point to answer that question because that RPU growth we're seeing, especially the back half of 23, obviously, that carries into 24 and with our renewed subscription strategy focused on bringing in the right customers, the right price points and improving retention. We expect that RPU to continue to grow so that that will be a revenue driver. We're also seeing volume growth again in the back half of the year, and we expect that to continue over that over the projection period. So we feel that will be a nice revenue driver. But the biggest things that are going to drive our digital revenue growth go back to really the confidence we have in the overall business projections we've been number one is our content strategy, which is growing our audience and growing the engagement with that audience, which just leads to more digital revenue offer opportunities off the platform. And that is furthered by our affiliate partnership strategy, which leads to more audience hitting us coming to us. And it fuels the first point of growing audience growing engagement, leading to more top average of advertising opportunities as well as subscription opportunities as well as our affiliate revenue opportunities.
And then we have the DMS business, which you heard from Chris today, we have a vertical expansion underway developing that subject matter expertise, growing our algorithm to be able to deliver similar results in other verticals. Our diversifying ourselves from the home services space gives us a much bigger addressable market and more opportunity for growth and then leveraging AI and data to acquire customers, but also to grow our product set in that business gives us a lot of confidence for growth too.
So there are several factors here that that are not really on the Tom. We're seeing those results back half of this year and early in 2024 that give us the confidence to grow 10% on the digital side and in 24 and to accelerate that growth 25 and 26.

Giuliano Bologna

That's very helpful. And then moving over to the affiliate deals, you're sounds like to talk about the existing deals and what are you working on for additional or incremental deals? And then you can kind of related to that topic, I'd be curious what the average EBITDA margin as for the existing deals, where do you think it will be for kind of current and future deals?

Mike Reed

Yes. So we're obviously, we're really excited about this potential revenue stream, and it's really new to us in 2023. We signed five deals in 2023, two of those were signed in the fourth quarter. We really we only had two that were live in 2023, and they were not live for the full year.
So we generally generated somewhere just below $10 million of revenues in 2023. And as we mentioned on the call, we expect that revenue to more than double to $20 million in 2024 as all five deals get live, which which they are now. And so last year's results were really based on two deals that were not live. The full year this year, we'll have five deals live for most of the year. However, there's a lot of maturity to come with those deals.
So what we're seeing in 24 is not where we expect these deals to end up. So as we mentioned in the call, we expect pretty significant growth from the current five deals we've signed and then of course, we expect to sign more deals than the five we have today from a from a margin to answer your margin question, these are, I would say 95% to 100% margin. We really don't incur any incremental costs that content comes from our partners. It's on our platform, users come and engage, and we generate revenue so that the margins on this revenue are almost 100%.

Giuliano Bologna

Sorry, I know you mentioned this earlier, but on the topic, I'm curious if there's anything happening on the generic front with a I have the opportunity to leverage. Yes, cannot. The data are and find our content. And it seems like every day there's new deal that's been announced out in the market. So be curious to get your opinion?

Mike Reed

Yes. So there's there's two sides of the aisle. One is how how we're leveraging AI, too, to improve our business and our business opportunities. The other side of AI is the continued shift of our content and thus preventing this after that content and eventually being paid fair value for the great content that we produce every day. So starting with the benefits of AI, those those tools, obviously, I'm stating the obvious here, but they're evolving rapidly rapidly. We're embracing them as quickly as we can. But we're being thoughtful in how we deploy them so that we're not making big mistakes, a high level. We're using the tools to reduce costs, increase efficiencies and to drive revenue. This is an important note, we're not using these tools to replace journalists or to publish content. We're using them more behind the scenes to help our generalist become more efficient, leading to more time for each journalist to be able to create more content. We're also using the tools to better engage with customers and data and business customers and the benefits will continue to accrue as we use these developing AI tools through increased productivity, intelligent monetization strategies, new product opportunities, cost savings, and then the revenue opportunities that come from increased productivity and new product opportunities.
Switching to the other side, Juliana, on the licensing side, nothing yet to report. We do believe that we will be fairly compensated for this content. We do believe this content is immensely valuable to so many of the learning machines out there around AI. And the thing about news and information is constantly refreshes. That's not stale. And so there's there's real value in that in feeding these machines. I can't I can't tell you whether it's a next month, next year or three years when we start to really see these licensing deals come to fruition, but we do believe they will because our contents copyright protected and in data and this content is really important to a lot of these are AI technology. So you know that we haven't built any licensing revenue into our projections we shared this morning. So it's real, really free optionality for our shareholders. It's all upside to the projections. We used this morning, but I would reiterate we do expect deals to come. I just can't predict the timing of them at this point.

Giuliano Bologna

That's very helpful. And then one last one Yes. I'm curious what the drivers are of cost reduction are in 24 and beyond as you put any kind of you rough numbers around some of those opportunities?

Doug Horne

-- this is Doug again. On the cost front, we're hitting it on a number of areas I mentioned on the call in terms of some of our raw materials, most notably paper, we've seen kind of deflationary pressures where prices have returned to more kind of a normalized levels, which is creating favorability for us, both kind of on the tail end of the year, but also going into 2024, the move to mail delivery in markets where it makes sense, saves us roughly roughly 50% on the home delivery costs so we're continuing to pursue that and also some chunkier opportunities. We continue to consolidate our physical printing and distribution infrastructure. And so you'll you'll see us continue to reduce the number of kind of sites that we maintain across the country as well as we talked about investing in technology and the consolidation. Our technology systems is unlocking kind of duplicate license costs and just efficiency efforts. And then we also talked about office space and where we have a program in place that will we're critically assessing all of this space outside of kind of are our biggest markets, biggest areas of content creation. And we're really going to be very aggressive in making sure that we're not investing any ex U.S. dollars and real estate moving forward.

Operator

Lee Cooperman, Omega Family Office.

Lee Cooperman

I applaud. Thank you very much. I apologize when you blacked out. I missed some numbers, but what is it that you're looking for for the year in EBITDA and where you expect to end the year in net debt? And you did that you mentioned the $40 million charge for moving out of the facilities in Virginia. What is your annual savings that you're expecting to get from that move that BDO first series of questions and I have some others.

Mike Reed

Yes. So I'll leave the we didn't give specific a specific number guidance on EBITDA. What we did guide to this morning was that we expected growth in EBITDA, '24 over '23. And so that that's continuance of the growth we saw in 2020 over 22 on with regard to McLane of the impairment charge is really to take the future operating expenses for that lease and impair that now since we're not going to use the office building, so the the operating expense reduction we would expect in the future years, while that lease is still in place are in the kind of $7 million to $8 million range. So we expect our operating expenses to go down by about $7 million to $8 million as a result of that impairment, open McLean office space.

Doug Horne

And just to clarify that part of the product going to be approximately $45 million.

Mike Reed

$45 million.

Lee Cooperman

And day your year end debt that you're projecting for this year?

Mike Reed

Yes. So right now we're on that's about $1 billion. As you know, half to half of that is second lien convertible. So the first lien on that, we expect to pay down another $110 million this year, and we would expect to have still a $100 million of cash on the balance sheet. So we're looking at first lien first lien net debt as we end next year, closer to about $300 million.

Lee Cooperman

Now the Bloomberg shows you have fully diluted shares of [150 million]. That's run rate. If you take the convert, that was the fully diluted share count the for --?

Mike Reed

The fully diluted share count, if you count the converts would add about [95 million] to that. As you know, we can buy some of those convertible notes back on. So it's 95 million at a maximum but could be less overtime if we buy back some of those convertible notes, but clearly apparently do improve.

Lee Cooperman

What was your EBITDA in 2023?

Mike Reed

About $270 million.

Lee Cooperman

So it would be not unreasonable to think in terms of $300 million this year.

Mike Reed

I know you're not giving guidance just like we just guided to growth this year, really, we just guided to growth. It's a little it's a little early for us to tell.

Lee Cooperman

Like I said, I'm going to China and go through the numbers 300 -- let's say I'm using $300 million EBITDA and let's say a net debt is less than $1 billion -- and [$245 million] which I after all that I talked to were.
Okay, very good outlook.

Doug Horne

And just to just of highlight, there is a business outlook slide in our supplement that I think provides a lot of context in terms of the outlook, I'd refer everyone to that slide for the kind of official outlook has changed, at least.

Operator

So thank you and there are no further questions at this time. I would now like to turn the floor over to Mike Reed for closing comments.

Mike Reed

Yes. Thanks, everyone, and apologies again for the hiccup on the call, but thanks.
Thanks all of you who stuck with us on overall, as you can tell, we're really enthusiastic about on the future. We're also very proud of the execution in 2023, given the circumstances and some of the tough backdrop that our industry faces. As you heard today, our strategies yielded solid results and growth, and we've built the foundation for sustainable growth in the future.
Entering 2024, we have top-tier leadership team, a dynamic content strategy. We're using data to drive improved engagement and revenue to monetization both consumer related and advertising related. And we have a resilient DMS business with growth with new growth opportunities with channel expansion in areas where we're actually seeing demand and based on our progress in 2023. We feel a palpable momentum shift in that, and we're heading into 2024, as I said, with a great deal of optimism. So thanks again for your time today, and we look forward to update you and updating you on Q1 in just two months. Thank you all.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your time.