Graham Holdings Company Reports 2024 and Fourth Quarter Earnings

Graham Holdings Company (NYSE:GHC) today reported its financial results for the fourth quarter and full year of 2024. The Company also filed its Form 10-K today for the year ended December 31, 2024 with the Securities and Exchange Commission.

Division Operating Results

Revenue for 2024 was $4,790.9 million, up 9% from $4,414.9 million in 2023. Revenues increased at education, television broadcasting, healthcare and automotive, partially offset by declines at manufacturing and other businesses. The Company reported operating income for 2024 of $215.5 million, compared to $69.4 million in 2023. Excluding goodwill and other long-lived asset impairment charges, the improvement in operating results is due to increases at education, television broadcasting and healthcare, partially offset by declines at manufacturing and automotive. The Company reported adjusted operating cash flow (non-GAAP) for 2024 of $447.0 million, compared to $338.3 million in 2023. Adjusted operating cash flow increased at education, television broadcasting, healthcare, automotive and other businesses, partially offset by a decline at manufacturing. Capital expenditures totaled $93.1 million and $107.3 million for 2024 and 2023, respectively.

For the fourth quarter of 2024, revenue was $1,245.8 million, up 7% from $1,166.8 million in 2023. Revenues increased at education, television broadcasting, healthcare and other businesses, partially offset by declines at manufacturing and automotive. The Company reported operating income of $72.5 million in the fourth quarter of 2024, compared to $40.8 million in 2023. The increase in operating results is due to increases at television broadcasting, manufacturing, healthcare and other business, partially offset by a decline at education, due to a fourth quarter long-lived asset impairment charge of $22.9 million, and a decline at automotive. The Company reported adjusted operating cash flow (non-GAAP) for the fourth quarter of 2024 of $139.6 million, compared to $83.0 million in 2023. Adjusted operating cash flow increased at education, television broadcasting, manufacturing, healthcare and other businesses, partially offset by a decline at automotive. Capital expenditures totaled $27.1 million and $35.7 million for the fourth quarter of 2024 and 2023, respectively.

Acquisitions and Dispositions of Businesses

There were no significant business acquisitions or dispositions during the fourth quarter of 2024.

Debt, Cash and Marketable Equity Securities

At December 31, 2024, the Company had $748.2 million in borrowings outstanding at an average interest rate of 6.0%, including $62.8 million outstanding on its $300 million revolving credit facility. Cash, marketable equity securities and other investments totaled $1,156.6 million at December 31, 2024.

At December 31, 2023, the Company had $811.8 million in borrowings outstanding at an average interest rate of 6.4%, including $97.9 million outstanding on its $300 million revolving credit facility. Cash, marketable equity securities and other investments totaled $898.9 million at December 31, 2023.

The Company recognized $27.0 million and $24.6 million in net gains on marketable equity securities in the fourth quarter of 2024 and 2023, respectively.

Common Stock Repurchases

During the fourth quarter of 2024, the Company purchased a total of 19,672 shares of its Class B common stock at a cost of $15.9 million. At December 31, 2024, there were 4,332,307 shares outstanding. On September 12, 2024, the Board of Directors authorized the Company to acquire up to 500,000 shares of Class B common stock; the Company has remaining authorization for 466,460 shares as of December 31, 2024.

Pension Plan

At December 31, 2024, the Company had a pension surplus of $2,510.5 million, reported in the Company's Consolidated Balance Sheet as Prepaid Pension Cost, an increase from $2,113.6 million at December 31, 2023.

In the fourth quarter of 2024, the Company purchased an irrevocable group annuity contract from an insurance company for $461.3 million to settle $457.9 million of the outstanding defined benefit obligation related to certain retirees and beneficiaries. The purchase of the group annuity contract was funded from the assets of the Company's pension plan. As a result of this transaction, the Company was relieved of all responsibility for these pension obligations and the insurance company is now required to pay and administer the retirement benefits owed to approximately 1,850 retirees and beneficiaries, with no change to the amount, timing or form of monthly retirement benefit payments. As a result, the Company recorded a one-time, pre-tax, noncash settlement gain of $653.4 million in the fourth quarter of 2024.

Mandatorily Redeemable Noncontrolling Interest and Subsequent Event

The Company recorded interest expense of $34.2 million and $119.3 million for the fourth quarter and year ended December 31, 2024, respectively, to adjust the fair value of the mandatorily redeemable noncontrolling interest at Graham Healthcare Group (GHG). The significant adjustment recorded in 2024 is largely related to a substantial increase in the estimated fair value of CSI Pharmacy Holding Company, LLC (CSI).

On February 25, 2025, the Company and a group of minority shareholders entered into an agreement to settle a significant portion of the mandatorily redeemable noncontrolling interest for a total of $205 million, which consists of approximately $186.25 million in cash and $18.75 million in Graham Holdings Company Class B common stock. Refer to Notes 2, 3, 11 and 12 in the Company's 2024 10-K filing for additional information.

Overall Company Results

The Company reported net income attributable to common shares of $724.6 million ($163.40 per share) for the year ended December 31, 2024, compared to $205.3 million ($43.82 per share) for the year ended December 31, 2023. For the fourth quarter of 2024, the Company reported net income attributable to common shares of $548.8 million ($125.55 per share), compared to $53.3 million ($11.72 per share) for the fourth quarter of 2023.

The results for 2024 and 2023 were affected by a number of items as described in the Non-GAAP Financial Information schedule attached to this release. Excluding these items, net income attributable to common shares was $282.2 million ($63.63 per share) for 2024, compared to $200.5 million ($42.78 per share) for 2023. Excluding these items, net income attributable to common shares was $98.7 million ($22.58 per share) for the fourth quarter of 2024, compared to $49.7 million ($10.94 per share) for the fourth quarter of 2023.

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Additional Commentary on Fourth Quarter 2024 Results

Division Results

Education

For the fourth quarter of 2024, education division revenue totaled $408.2 million, up 3% from $395.5 million for the same period of 2023. Kaplan reported operating income for the fourth quarter of 2024 of $0.1 million, compared to $21.5 million in the fourth quarter of 2023. Excluding a long-lived asset impairment charge recorded in the fourth quarter of 2024, operating income increased.

Kaplan International revenue increased 3% in the fourth quarter of 2024 (1% on a constant currency basis). The increase is due largely to growth at Pathways and UK Professional, partially offset by lower revenue at Australia. Kaplan International reported operating income of $19.0 million for the fourth quarter of 2024, an 18% decline from $23.3 million in 2023. The decrease is due primarily to declines at Languages and Australia. Revenue and operating results at Australia declined in the fourth quarter of 2024 due to lower new student enrollments at Kaplan Business School resulting from changes in student visa policies.

Higher Education revenue in the fourth quarter of 2024 increased 2% compared to the same period of 2023. Kaplan recorded $14.6 million and $11.3 million in fees from Purdue Global in its Higher Education operating results for each of the fourth quarters of 2024 and 2023. Higher education results improved in the fourth quarter of 2024 due to an increase in the Purdue Global fee recorded.

Supplemental Education revenue increased 6% in the fourth quarter of 2024, driven mostly by growth in Legal assessment services, publishing, CFA, pre-college test preparation and securities licensure. Operating results were flat in the fourth quarter of 2024 compared to 2023 due to revenue growth, offset by increased employee healthcare and pension expense.

Kaplan corporate and other expenses decreased in the fourth quarter of 2024 due to lower incentive compensation expense compared to the fourth quarter of 2023.

In the fourth quarter of 2024, Kaplan recorded an intangible asset impairment charge of $22.9 million related to one of the Kaplan International business units.

Television Broadcasting

For the fourth quarter of 2024, revenue increased 30% to $161.7 million, from $124.6 million in 2023, due primarily to a $49.7 million increase in political advertising revenue and an increase in digital advertising revenue, partially offset by a decline in local advertising revenue from fewer available advertising spots and lower demand, and a $1.9 million decrease in retransmission revenues. Operating income for the fourth quarter of 2024 improved 95% to $78.5 million, from $40.2 million in the same period of 2023, due to increased revenues and cost reductions from lower headcount, partially offset by increased pension expense.

Manufacturing

Manufacturing revenues decreased 9% in the fourth quarter of 2024 due to lower revenues at Hoover, partially offset by increased revenues at Dekko, Forney and Joyce. The revenue decline at Hoover is due largely to a decrease in overall product demand, particularly for multi-family housing. Revenues improved at Dekko due largely to growth in the commercial office electrical products and lighting sectors. In the fourth quarter of 2024, Hoover results included wood gains on inventory sales, compared to higher wood gains in the fourth quarter of 2023. Operating results were up in the fourth quarter of 2024 due to improved results at Dekko, Joyce and Forney, partially offset by a decline in results at Hoover.

Healthcare

Healthcare revenues increased 41% in the fourth quarter of 2024, largely due to significant growth at CSI from an expansion of infusion treatment offerings and patient service areas; revenue also grew in home health and hospice services and at the other healthcare businesses.

The increase in GHG operating results in the fourth quarter of 2024 is due to substantially higher operating results at CSI from significant revenue growth, along with improved results at home health and Surpass Behavioral Health, partially offset by increased pension expense. Adjusted operating cash flow (non-GAAP) at GHG increased to $24.6 million in the fourth quarter of 2024, from $12.7 million in the fourth quarter of 2023.

GHG recorded equity in earnings of $3.5 million and $3.1 million for the fourth quarter of 2024 and 2023, respectively, related to its interests in home health and hospice joint ventures.

Automotive

Revenues for the fourth quarter of 2024 decreased 5% due to a decline in new and used vehicle sales and a decline in sales of finance and insurance product offerings, partially offset by the addition of the Kia dealership and sales growth for services and parts. Operating results for the fourth quarter of 2024 declined due to lower sales and overall gross margins on new vehicles and a decline in finance and insurance product sales, partially offset by higher overall gross profit on services and parts, and higher overall gross profit and gross margins on used vehicles.

Other Businesses

A summary of revenue by category for other businesses:

Overall, revenue from other businesses increased 2% in the fourth quarter of 2024. Retail revenue declined largely due to significantly lower revenue at Society6, partially offset by revenue growth at Framebridge and Saatchi Art. Media revenue declined due to lower revenue at WGB, Slate, Foreign Policy and Code3, partially offset by revenue growth at City Cast. Specialty revenue increased due to revenue growth at Clyde's Restaurant Group (CRG), Decile and Supporting Cast.

Operating results improved in the fourth quarter of 2024 due to a reduction in losses at WGB and Saatchi Art and improved results at CRG and Slate, partially offset by increased losses at Society6 and City Cast, and a decline in results at Code3 and Foreign Policy. Adjusted operating cash flow losses (non-GAAP) at other businesses improved to $16.1 million in the fourth quarter of 2024, from $20.0 million in the fourth quarter of 2023.

In the fourth quarter of 2024, the Company offered Separation Incentive Programs (SIPs) to certain employees at WGB and Decile to reduce the number of employees; $0.3 million in related non-operating pension expense was recorded.

Equity in Losses of Affiliates

Overall, the Company recorded equity in earnings of affiliates of $5.2 million for the fourth quarter of 2024, compared to losses of $2.9 million for 2023. These amounts include $1.4 million in net gains and $6.4 million in net losses for 2024 and 2023, respectively, from affiliates whose operations are not managed by the Company.

Net Interest Expense

The Company incurred net interest expense of $46.2 million and $23.0 million for the fourth quarter of 2024 and 2023, respectively. The Company recorded interest expense of $34.2 million and $8.7 million in the fourth quarter of 2024 and 2023, respectively, to adjust the fair value of the mandatorily redeemable noncontrolling interest at GHG. Excluding these adjustments, the decrease in net interest expense relates primarily to lower debt balances and lower interest rates on the Company's variable debt.

Non-Operating Pension and Postretirement Benefit Income, Net

The Company recorded net non-operating pension and postretirement benefit income of $689.6 million for the fourth quarter of 2024, compared to $36.5 million for the fourth quarter of 2023.

In the fourth quarter of 2024, the Company recorded a pre-tax, noncash settlement gain of $653.4 million in connection with the purchase of an irrevocable group annuity contract from an insurance company.

In the fourth quarter of 2024, the Company recorded $0.5 million in expenses related to non-operating SIPs at Kaplan, manufacturing and other businesses. In the fourth quarter of 2023, the Company recorded $0.2 million in expenses related to a non-operating SIP at the television broadcasting division. The SIPs were funded by the assets of the Company's pension plan.

Other Non-Operating Income (Expense)

For the fourth quarter of 2024, the Company recorded other non-operating income, net, of $9.6 million, compared to non-operating expense, net, of $3.4 million for the fourth quarter of 2023. The 2024 amounts included $11.1 million in foreign currency gains and other items, partially offset by a $1.7 million decrease in the fair value of a cost method investment. The 2023 amounts included $3.0 million in foreign currency losses; a $0.5 million impairment on a cost method investment, and other items; partially offset by $1.3 million in gains related to sales of businesses and contingent consideration.

Earnings Per Share

The calculation of diluted earnings per share for the fourth quarter of 2024 was based on 4,341,412 weighted average shares outstanding compared to 4,515,022 for the fourth quarter of 2023.

Forward-Looking Statements

All public statements made by the Company and its representatives that are not statements of historical fact, including certain statements in this press release, in the Company's Annual Report on Form 10-K and in the Company's 2024 Annual Report to Stockholders, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on expectations, forecasts, and assumptions by the Company's management and involve a number of risks, uncertainties, and other factors that could cause actual results to differ from those stated, including, without limitation, comments about expectations related to acquisitions or dispositions or related business activities, the Company's business strategies and objectives, the prospects for growth in the Company's various business operations, the Company's future financial performance, and the risks and uncertainties described in Item 1A of the Company's Annual Report on Form 10-K. Accordingly, undue reliance should not be placed on any forward-looking statement made by or on behalf of the Company. Any forward-looking statements made in this press release speaks only as of the date on which it is made. The Company assumes no obligation to update any forward-looking statement after the date on which such statement is made, even if new information subsequently becomes available.

NON-GAAP FINANCIAL INFORMATION

GRAHAM HOLDINGS COMPANY

(Unaudited)

In addition to the results reported in accordance with accounting principles generally accepted in the United States (GAAP) included in this press release, the Company has provided information regarding Adjusted Operating Cash Flow and Net income excluding certain items described below, reconciled to the most directly comparable GAAP measures. Management believes that these non-GAAP measures, when read in conjunction with the Company's GAAP financials, provide useful information to investors by offering:

• the ability to make meaningful period-to-period comparisons of the Company's ongoing results;
• the ability to identify trends in the Company's underlying business; and
• a better understanding of how management plans and measures the Company's underlying business.

Adjusted Operating Cash Flow and Net income, excluding certain items, should not be considered substitutes or alternatives to computations calculated in accordance with and required by GAAP. These non-GAAP financial measures should be read only in conjunction with financial information presented on a GAAP basis.

The gains and losses on marketable equity securities relate to the change in the fair value (quoted prices) of its portfolio of equity securities. The mandatorily redeemable noncontrolling interest represents the ownership portion of a group of minority shareholders at a subsidiary of the Company's Healthcare business. The Company measures the redemption value of this minority ownership on a quarterly basis with changes in the fair value recorded as interest expense or income, which is included in net income for the period. The effect of gains and losses on marketable equity securities and net interest expense related to fair value adjustments of the mandatorily redeemable noncontrolling interest are not directly related to the core performance of the Company's business operations since these items do not directly relate to the sale of the Company's services or products. The accounting principles generally accepted in the United States ("GAAP") require that the Company include the gains and losses on marketable equity securities and net interest expense related to fair value adjustments of the mandatorily redeemable noncontrolling interest in net income on the Statements of Operations. The Company excludes the gains and losses on marketable equity securities and net interest expense related to fair value adjustments of the mandatorily redeemable noncontrolling interest from the non-GAAP adjusted net income because these items are independent of the Company's core operations and not indicative of the performance of the Company's business operations.

The following tables reconcile the non-GAAP financial measures for Net income, excluding certain items, to the most directly comparable GAAP measures: