Graham Holdings Company (NYSE: GHC) today reported its financial results for the fourth quarter and full year of 2023. The Company also filed its Form 10-K today for the year ended December 31, 2023 with the Securities and Exchange Commission.

Division Operating Results

Revenue for 2023 was $4,414.9 million, up 12% from $3,924.5 million in 2022. Revenues increased at education, healthcare and automotive, partially offset by declines at television broadcasting, manufacturing and other businesses. The Company reported operating income for 2023 of $69.4 million, compared to $83.9 million in 2022. The decrease in operating results is due to goodwill impairment charges at World of Good Brands (WGB, formerly Leaf Media) and Dekko and declines at television broadcasting and manufacturing, partially offset by increases at education, healthcare and automotive, and reduced losses at other businesses due to goodwill and other long-lived asset impairment charges in 2022 at Society6 and Saatchi Art (both formerly included in Leaf Marketplace). The Company reported adjusted operating cash flow (non-GAAP) for 2023 of $338.3 million, compared to $377.6 million in 2022. Adjusted operating cash flow declined at television broadcasting, manufacturing and other businesses, partially offset by increases at education, healthcare and automotive.

For the fourth quarter of 2023, revenue was $1,166.8 million, up 10% from $1,064.0 million in 2022. Revenues increased at education, healthcare and automotive, partially offset by declines at television broadcasting, manufacturing and other businesses. The Company reported operating income of $40.8 million in the fourth quarter of 2023, compared to an operating loss of $54.9 million in 2022. The increase in operating results is due to goodwill and other long-lived asset impairment charges at Society6 and Saatchi Art in 2022 and increases at healthcare and automotive, partially offset by declines at education, television broadcasting and manufacturing. The Company reported adjusted operating cash flow (non-GAAP) for the fourth quarter of 2023 of $83.0 million, compared to $119.2 million in 2022. Adjusted operating cash flow declined at education, television broadcasting and manufacturing, partially offset by increases at healthcare and automotive.

Acquisitions and Dispositions of Businesses

There were no significant business acquisitions or dispositions during the fourth quarter of 2023.

Debt, Cash and Marketable Equity Securities

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.

At December 31, 2022, the Company had $726.4 million in borrowings outstanding at an average interest rate of 5.7%, including $200.2 million outstanding on its $300 million revolving credit facility. Cash, marketable equity securities and other investments totaled $812.8 million at December 31, 2022.

The Company recognized $24.6 million and $33.3 million in net gains on marketable equity securities in the fourth quarter of 2023 and 2022, respectively.

Common Stock Repurchases

During the fourth quarter of 2023, the Company purchased a total of 100,263 shares of its Class B common stock at a cost of $62.1 million. At December 31, 2023, there were 4,478,810 shares outstanding. On May 4, 2023, 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 236,403 shares as of December 31, 2023.

Pension Plan

At December 31, 2023, the Company had a pension surplus of $2,113.6 million, reported in the Company’s Consolidated Balance Sheet as Prepaid Pension Cost, an increase from $1,658.0 million at December 31, 2022.

Overall Company Results

The Company reported net income attributable to common shares of $205.3 million ($43.82 per share) for the year ended December 31, 2023, compared to $67.1 million ($13.79 per share) for the year ended December 31, 2022. For the fourth quarter of 2023, the Company reported net income attributable to common shares of $53.3 million ($11.72 per share), compared to $6.2 million ($1.28 per share) for the same period of 2022.

The results for 2023 and 2022 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 $200.5 million ($42.78 per share) for 2023, compared to $287.2 million ($59.03 per share) for 2022. Excluding these items, net income attributable to common shares was $49.7 million ($10.94 per share) for the fourth quarter of 2023, compared to $90.5 million ($18.80 per share) for the fourth quarter of 2022.

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Additional Commentary on Fourth Quarter 2023 Results

Division Results

Education

For the fourth quarter of 2023, education division revenue totaled $395.5 million, up 9% from $361.8 million for the same period of 2022. Kaplan reported operating income for the fourth quarter of 2023 of $21.5 million, compared to $25.2 million in the fourth quarter of 2022.

Kaplan International revenue increased 16% in the fourth quarter of 2023 (11% on a constant currency basis). The increase is due largely to growth at Pathways and Australia. Kaplan International reported operating income of $23.3 million for the fourth quarter of 2023, a small decline from $23.9 million in 2022. The decrease is due to lower earnings at UK Professional and increased incentive compensation costs, partially offset by improved results at Australia and Singapore.

Higher Education revenue in the fourth quarter of 2023 was flat compared to the same period of 2022. Kaplan recorded $11.3 million in fees from Purdue Global in its Higher Education operating results for each of the fourth quarters of 2023 and 2022. Higher education results declined in the fourth quarter of 2023 due to increased other higher education development costs.

Supplemental Education revenue declined 3% in the fourth quarter of 2023, driven mostly by softness in Real Estate, Securities and Medical Licensure test preparation, offset in part by growth in CFP, CFA, Architecture and Engineering and MCAT test preparation and publishing activities. Operating results improved in the fourth quarter of 2023 due to savings from reduced headcount, partially offset by lower revenues.

In the fourth quarter of 2022, Kaplan implemented a Separation Incentive Program (SIP) to reduce the number of employees at Supplemental Education and Higher Education, which was funded by the assets of the Company’s pension plan. In connection with the SIP, the Company recorded $3.6 million in non-operating pension expense in the fourth quarter of 2022.

Kaplan corporate and other expenses increased in the fourth quarter of 2023 due to higher incentive compensation costs compared to the fourth quarter of 2022.

Television Broadcasting

For the fourth quarter of 2023, revenue decreased 19% to $124.6 million, from $154.7 million in 2022, due primarily to a $34.0 million decline in political advertising revenue as well as a small decline in retransmission revenues, partially offset by increased digital advertising revenues. Operating income for the fourth quarter of 2023 declined 43% to $40.2 million, from $70.0 million in the same period of 2022, due to reduced revenues and higher network fees.

Manufacturing

Manufacturing revenues decreased 14% in the fourth quarter of 2023 due to lower revenues at Hoover, Dekko and Joyce, partially offset by increased revenues at Forney. The revenue decline at Hoover is due to lower wood prices and a decrease in overall product demand, partially offset by increased rates. Revenues declined at Dekko due largely to lower product demand, particularly in the commercial office electrical products sector. In the fourth quarter of 2023, Hoover results included wood gains on inventory sales, compared to modest losses in the fourth quarter of 2022. Operating results were down in the fourth quarter of 2023 due to a decline in results at Hoover, Dekko and Joyce, partially offset by improved results at Forney.

Healthcare

Healthcare revenues increased 34% in the fourth quarter of 2023, largely due to significant growth at CSI and from businesses acquired in 2022, along with growth in home health and hospice services.

Graham Healthcare Group (GHG) recorded pension expense of $3.4 million related to the pension credit retention program in the fourth quarter of 2023. In the fourth quarter of 2022, GHG recorded pension expense of $10.5 million related to this program. Of this amount, $7.8 million related to the first three quarters of 2022; the Company concluded that this adjustment was not material to the Company’s operating results for the relevant interim periods. The improvement in GHG operating results in the fourth quarter of 2023 is due to higher pension expense in the fourth quarter of 2022 related to the GHG pension credit retention program and improved results at CSI, partially offset by increased net losses from newly acquired businesses and a decline in home health and hospice results. Adjusted operating cash flow (non-GAAP) at GHG increased to $12.7 million in the fourth quarter of 2023, from $10.5 million in the fourth quarter of 2022.

GHG recorded equity in earnings of $3.1 million and $2.9 million for the fourth quarter of 2023 and 2022, respectively, related to its interests in home health and hospice joint ventures.

Automotive

Revenues for the fourth quarter of 2023 increased due to the acquisition of the Toyota of Richmond dealership and sales growth at the other dealerships, except for the Jeep dealership, which had lower revenues due a decline in new vehicle sales, and a small revenue decline at CDJR. Operating results for the fourth quarter of 2023 improved due largely to the Toyota of Richmond acquisition, partially offset by declines at the Jeep and CDJR dealerships.

Other Businesses

A summary of revenue by category for other businesses:

Overall, revenue from other businesses declined 7% in the fourth quarter of 2023. 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 and Code3, partially offset by revenue growth at Slate, Foreign Policy and City Cast. Specialty revenue increased due to revenue growth at Clyde’s Restaurant Group (CRG). Excluding the former Leaf businesses, revenues from other businesses increased in the fourth quarter of 2023.

Operating results improved in the fourth quarter of 2023 due to the $129.0 million in impairment charges at the former Leaf businesses recorded in the fourth quarter of 2022. Excluding the impairment charges, operating results declined in the fourth quarter of 2023, due to increased losses at the former Leaf businesses and Framebridge, partially offset by improved results at Code3, Slate, Foreign Policy and CRG and a reduction in losses due to the sales of Pinna and CyberVista. In the fourth quarter of 2023, the former Leaf businesses continued to incur transition-related costs in connection with the overall restructuring of Leaf into three stand-alone businesses. Adjusted operating cash flow losses (non-GAAP) at other businesses declined slightly to $20.0 million in the fourth quarter of 2023, from $20.3 million in the fourth quarter of 2022.

In the fourth quarter of 2022, the former Leaf businesses recorded a net depreciation expense credit of $5.9 million that related to the period from June 2021 through September 30, 2022; the Company concluded that this adjustment was not material to the Company’s operating results for the relevant periods.

Equity in Losses of Affiliates

Overall, the Company recorded equity in losses of affiliates of $2.9 million for the fourth quarter of 2023, compared to $5.8 million for 2022. These amounts include $6.4 million and $9.0 million in net losses for 2023 and 2022, respectively, from affiliates whose operations are not managed by the Company.

Net Interest Expense

The Company incurred net interest expense of $23.0 million and $14.4 million for the fourth quarter of 2023 and 2022, respectively. The Company recorded interest expense of $8.7 million and $3.7 million in the fourth quarter of 2023 and 2022, respectively, to adjust the fair value of the mandatorily redeemable noncontrolling interest at GHG. Excluding these adjustments, the increase in net interest expense relates primarily to increased debt at the automotive dealerships and higher 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 $36.5 million for the fourth quarter of 2023, compared to $45.9 million for the fourth quarter of 2022.

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. In the fourth quarter of 2022, the Company recorded $3.6 million in expenses related to a non-operating SIP at the education division.

Other Non-Operating (Expense) Income

For the fourth quarter of 2023, the Company recorded other non-operating expense, net, of $3.4 million, compared to non-operating income, net, of $27.1 million for the fourth quarter of 2022. 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. The 2022 amounts included a non-cash gain of $18.4 million on the sale of CyberVista; a $6.3 million increase in the fair value of cost method investments; a $2.3 million gain on sale of a cost method investment; $1.3 million in gains related to sales of businesses and contingent consideration and other items; partially offset by a $1.3 million impairment on a cost method investment and other items.

Earnings Per Share

The calculation of diluted earnings per share for the fourth quarter of 2023 was based on 4,515,022 weighted average shares outstanding compared to 4,785,904 for the fourth quarter of 2022.

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 2023 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. 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.