On this page of StockholderLetter.com we present the 3/23/2023 shareholder letter from Graham Holdings Co — ticker symbol GHC. Reading current and past GHC letters to shareholders can bring important insights into the investment thesis.

 •  3/23/2023 Letter Continued (Full PDF)
 •  3/26/2024 GHC Stockholder Letter
 •  3/26/2025 GHC Stockholder Letter
 •  More "Education & Training Services" Category Stockholder Letters
 •  GHC Benford's Law Stock Score = 76

GHC 3/23/2023 Shareholder/Stockholder Letter Transcript:

2022 ANNUAL REPORT
GRAHAM HOLDINGS COMPANY
1300 NORTH 17TH STREET
SUITE 1700
ARLINGTON, VA 22209
703 345 6300
GHCO.COM

REVENUE BY PRINCIPAL OPERATIONS
EDUCATION
36%
19%
14%
OTHER BUSINESSES
AUTOMOTIVE
BROADCASTING
11%
8%
HEALTHCARE
12%
MANUFACTURING

FINANCIAL HIGHLIGHTS
2022
2021
CHANGE
Operating revenues
$3,924,493
$3,185,974
23%
Income from operations

83,898

Net income attributable to common shares

67,079
$ 352,075
Diluted earnings per common share

13.79

70.45
Dividends per common share

6.32

6.04
Common stockholders    equity per share

779.55

896.76
(13%)
4,965
(3%)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
4,836
Diluted average number of common shares outstanding
OPERATING REVENUES ($ in millions)
2022
77,375
8%
(81%)
(80%)
5%
INCOME FROM OPERATIONS ($ in millions)
3,924
2022
84
202 1
3,186
202 1
77
2020
2,889
2020
100
2019
2,932
2019
145
2018
2,696
2018
246
ADJUSTED OPERATING CASH FLOW (1) ($ in millions)
NET INCOME ATTRIBUTABLE TO COMMON SHARES ($ in millions)
2022
378
2022
67
202 1
263
202 1
352
2020
284
2020
300
2019
287
2019
328
2018
377
2018
271
RETURN ON AVERAGE COMMON STOCKHOLDERS    EQUITY
DILUTED EARNINGS PER COMMON SHARE ($)
2022
1.7%
2022
13.79
202 1
8.6%
202 1
70.45
2020
8.5%
2020
58. 1 3
2019
10.5%
2019
6 1.2 1
2018
9.3%
2018
50.20
Adjusted Operating Cash Flow (non-GAAP)
(1)
(IN THOUSANDS)
Operating Income
$ 83,898
2021
2020
$ 77,375 $100,407
2019
2018
$144,546 $246, 1 6 1
Add: Amortization of Intangible Assets and Impairment
of Goodwill and Other Long-Lived Assets
187,841
90,810
86,950
62,395
55,523
Add: Depreciation Expense
73,297
71,415
74,257
59,253
56,722
Add: Pension Service Cost
32,567
22,991
22,656
20,422
18,221
$262,591 $284,270
$286,616
$376,627
Adjusted Operating Cash Flow (non-GAAP)
(1)
2022
$377,603
Adjusted Operating Cash Flow (non-GAAP) is calculated as Operating Income excluding Amortization of Intangible Assets and
Impairment of Goodwill and Other Long-Lived Assets plus Depreciation Expense and Pension Service Cost.

TO OUR SHAREHOLDERS
2022 at Graham Holdings was a year of improve-
First, we were able to continue to grow two of our
ment in operating results paired with additional
platforms, Graham Healthcare and Automotive,
reduction in share count. Our primary focus was,
with bolt-on acquisitions.
and continues to be, enhancing the operating
results of our divisions. While there were no
At Graham Healthcare Group, we had several
parent-level transactions in 2022, we did work
notable transactions:
with several of our businesses to complete a few
   bolt-on    acquisitions.
1) we created a new joint venture with our Northern
Illinois Home Health and Hospice operations;
I cannot remember the beginning of a year where
the range of potential outcomes was as wide as
2) we extended our in-home capabilities through
it was at the start of 2022. The omicron variant
the acquisition of The Skin Clique, which provides
of COVID-19 threatened to upend the fragile
aesthetician services from the comfort of home;
recovery we began to see in some of our businesses impacted by the pandemic, most notably
3) we entered the applied behavioral analysis
Kaplan International and at several other units,
(ABA) therapy industry through the acquisition
such as Clyde   s Restaurant Group. Additionally,
of Surpass Behavioral Health, a clinical provider
while an election year brings expected demand
of therapy to kids with autism. We think we can
in political advertising, that spend is highly race
be an excellent owner for the business with a
specific. In light of the geographic footprint at
focus on building an environment that drives
Graham Media Group, our ability to get a share
great clinical outcomes for children.
of that advertising was not guaranteed.
Additionally, this past summer we acquired two
We are pleased to report that as we exited
dealerships at Graham-Ourisman Automotive: a
2022, the business strengthened as the year
Toyota dealership and a Chrysler/Dodge/Jeep/
progressed. By year-end, we largely considered
Ram dealership, both located in Woodbridge,
ourselves in a post-COVID operating environ-
VA. These dealerships help us continue to
ment, with the financial results beginning to
build out our Washington, D.C. area footprint,
match up with that assertion.
increase our brand portfolio, and leverage our
D.C. based operating structure.
Operating results increased from 2021 by $113
million to $304 million in adjusted operating
The second big use of capital was the repur-
free cash flow. The largest increases were at
chase of approximately 122,000 shares, which
Graham Media Group and Kaplan, although
reduced shares outstanding by approximately
several other units showed meaningful progress
2.5%. We don   t repurchase all the time and the
as well. Improvements were somewhat offset by
pace may change depending on our view of
declines at Leaf Group.
the discount to intrinsic value and corresponding margin of safety. As a reminder, we do not
We deployed shareholder capital primarily in two
have set programs to spend a certain amount
areas throughout the year.
of money on share repurchases within a defined
period, but only purchase when we believe doing
so will create real value for shareholders.
2 | GRAHAM HOLDINGS

We are pleased to report that as we exited 2022, the business
    strengthened
as the year progressed. By year-end, we largely
considered ourselves in a post-COVID operating environment,
with the financial results beginning to match up with that assertion.

I   d like to elaborate a bit about how this approach
    We do not use a share repurchase program or
is, in our belief, the only way that companies
repurchase program announcement with the
should look at share repurchases.
hopes of artificially elevating the share price
in the short term.
From the middle of 2015 through the end of
2022, the Company repurchased approximately
    We do not repurchase shares where the result
1,188,000 shares for a total price of $592 million.
would put our balance sheet at risk or limit
Now, let   s consider an alternate universe. In this
our ability to be opportunistic in creating
universe, the Company authorizes a $592 million
higher value elsewhere.
share repurchase on July 1, 2015 to be spent
ratably through December 31, 2022, assuming
the trading prices were equal to the average
OPERATING BUSINESSES
of the high and low for each day. Under these
The recovery at Kaplan has been incredibly
parameters, our theoretical program would have
gratifying for all involved. After nearly two and a
repurchased approximately 1,063,000 shares.
half years of operations constrained by the pandemic, Kaplan began to emerge from its COVID
Our program in the latter scenario would have
cocoon more fully by the second half of 2022.
resulted in approximately 125,000 additional
We   ve seen that our ability in 2020 and 2021 to
shares outstanding today, or an incremental 2.6%.
maintain operations, treat our partners well and
By not having a set repurchase program, we were
invest through a remarkably challenging period
able to acquire approximately 11.7% more shares
has led to a competitive environment where we
as compared with the alternative universe.
can play offense while many competitors are
struggling with too much leverage and the rami-
We believe that over time, continuing sharehold-
fications of short-sighted business practices.
ers will be much better off with this approach.
For clarity, we   d like to share a few guidelines
Kaplan   s adjusted operating free cash flow
that we feel are unlikely to change:
increased by $29 million from 2021 to $108 million. We expect these positive trends to continue,
    We do not have a set program that commits
led by Kaplan International.
us to buying shares regardless of price.
Kaplan Languages drove most of the improve    We do not repurchase shares with the sole
ment. The ability to travel across borders
purpose of offsetting any share issuances or
resumed in much of the world in 2022. China   s
stock-based compensation (of which we tend
policy changes around both COVID-19 and travel
to do very little to begin with). Price matters
late in the year should increase student partici-
in all circumstances.
pation in Languages (as well as in Pathways and
other Kaplan businesses) in 2023.
2022 ANNUAL REPORT | 3



 3/23/2023 Letter Continued (Full PDF)