On this page of StockholderLetter.com we present the 3/26/2024 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.
2023 ANNUAL REPORT
REVENUE BY PRINCIPAL OPERATIONS EDUCATION OTHER BUSINESSES 36% 25% AUTOMOTIVE 11% BROADCASTING 8% HEALTHCARE 10% 10% MANUFACTURING
FINANCIAL HIGHLIGHTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2023 2022 CHANGE Operating revenues $4,414,877 $3,924,493 12% Income from operations 69,393 83,898 Net income attributable to common shares $ 205,288 67,079 Diluted earnings per common share 43.82 13.79 Dividends per common share 6.60 6.32 4% Common stockholders equity per share 887.68 779.55 14% 4,836 (4%) Diluted average number of common shares outstanding OPERATING REVENUES ($ in millions) 2023 4,654 (17%) INCOME FROM OPERATIONS ($ in millions) 4,415 2023 69 84 2022 3,924 2022 2021 3,186 2021 77 2020 2,889 2020 100 2019 2,932 2019 145 ADJUSTED OPERATING CASH FLOW (1) ($ in millions) NET INCOME ATTRIBUTABLE TO COMMON SHARES ($ in millions) 2023 338 2023 205 2022 378 2022 67 2021 263 2021 352 2020 284 2020 300 2019 287 2019 328 RETURN ON AVERAGE COMMON STOCKHOLDERS EQUITY DILUTED EARNINGS PER COMMON SHARE ($) 2023 2023 5.3% 43.82 2022 1.7% 2022 13. 79 2021 8.6% 2021 70.45 2020 8.5% 2020 58. 1 3 2019 10.5% 2019 6 1.2 1 (1) Adjusted Operating Cash Flow (non-GAAP) (IN THOUSANDS) Operating Income 2022 2021 2020 2019 $ 77,375 $100,407 $144,546 $ 69,393 $ 83,898 Add: Amortization of Intangible Assets and Impairment of Goodwill and Other Long-Lived Assets 149,105 187,841 90,810 86,950 Add: Depreciation Expense 86,064 73,297 71,415 74,257 59,253 Add: Pension Service Cost 33,787 32,567 22,991 22,656 20,422 $338,349 $377,603 $262,591 $284,270 $286,616 Adjusted Operating Cash Flow (non-GAAP) (1) 2023 62,395 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 My report to you on the Company for 2023 is largely positive. Our operating results were good; our marketable securities portfolio performed well relative to our expectations, resulting in increased values; our pension plan overfunding grew; and we repurchased about 7% of outstanding shares. It is unusual that all of this occurred in the same year, but we aim for most of these things to be true in most years. Perhaps most importantly, our talented leaders have laid a foundation that generates optimism about continued growth in the years ahead. Operating results clocked in with adjusted operating cash ow(1) of $338 million. As a reminder, this represents our earnings excluding non-cash pension expense and depreciation and amortization expense. We like to look at this number because it is a key indicator of our pre-tax cash ow generation from business operations. This represents a modest decline from the 2022 results, with most of the decline attributable to two factors: the lack of political advertising, and operating results along with transition costs at the former Leaf Group businesses. The largest increases for the year took place at Kaplan, which returned closer to its normal enrollment coming out of COVID-19 restrictions, and Graham Healthcare, where solid results at our home health and hospice operations were paired with strong growth at CSI Pharmacy. The Company was minimally active in acquiring new businesses. We did not acquire any new businesses at the parent level, although we did nd several opportunities within the units: a powerhouse. We are delighted to own an additional Toyota franchise and continue to grow our regional footprint. Q At year end, Graham Healthcare acquired an additional 10% of CSI Pharmacy from our minority partners. We are pleased to have increased our ownership stake in CSI and to be able to put capital into a business we already know well. By far, our largest use of capital was to buy more of ALL of the businesses we already know very well by repurchasing our own shares. For the year, the Company repurchased approximately 325,000 shares at an average weighted price of $594 per share, at a cost of $193 million. As previously mentioned, this was roughly 7% of the beginning of year share count. Over the past four years, the Company has repurchased 18% of the total outstanding shares as of December 31, 2019. We believe in repurchasing shares opportunistically when we have high con dence we are generating meaningful value for shareholders. Notably, we do not repurchase shares under de ned programs regardless of price or when we think the stock is close to the intrinsic value of the company or above it. Why did we buy shares aggressively in 2023? Our belief is that, for much of 2023, a uniquely large discount existed. With a large margin of safety built into our analysis, we still found the share price very attractive. As a result, you now have a 7% larger claim on the future pro ts of the Company. Our operating results were led by Kaplan and Graham Media Group. Q In the fall, the Automotive group acquired a Toyota dealership in Richmond, VA from the McGeorge family. With a sterling reputation in central Virginia, this dealership is 2 | GRAHAM HOLDINGS Graham Media Group (GMG) was, once again, the biggest operating income generator for the Company. GMG reported adjusted operating cash
Graham Media Group was, once again, the biggest income generator for the Company. ow of $155 million in 2023, down $68 million from 2022, largely due to reduced political advertising, as well as the impacts of cord cutting. With a Presidential election in 2024, the year is very likely to show improved results over 2023. The trends causing fragmentation of audiences and cord cutting we have discussed in recent years continued in 2023. While in many cases we have had share gains in market creating some offset, the overall linear audiences continue to decline. Catherine Badalamente and her team continue to evolve our model from one of local broadcaster to local media operator that leverages our brand and assets to facilitate larger community connections. We have now operated large-scale events in multiple markets, ranging from the Pigskin Classic in San Antonio to events surrounding an annual Thanksgiving Parade in Detroit. We believe we can continue down this path in all markets. Additionally, our local community presence and infrastructure have given us permission to partner with schools to facilitate the greater distribution and viewership of high school sports. Our ability to professionally produce a game efficiently has created new media opportunities that are attracting local advertisers. We believe our viewership of high school sports could one day challenge our news viewership. We hope to continue to build out this programming in the years to come. As the media world continues to rapidly change, we are glad that we have created an environment where we have maximal degrees of freedom in navigating it. Graham Media Group does not need to service mountains of debt, and the cash ow generation from our non-media operations means that we can be focused on the option that maximizes value over a longer time horizon. We will continue to keep you updated on the great work the team is doing as trends evolve. (1) Adjusted Operating Cash Flow (non-GAAP) (IN THOUSANDS) Total Company Education Television Broadcasting Healthcare Higher Supplemental Total Kaplan Education Education North America $133,938 $23,845 $38,942 2023 Operating Income $ 69,393 $104,471 Add: Amortization of Intangible Assets and Impairment of Goodwill and Other Long-Lived Assets 149,105 14,553 5,450 3,675 Add: Depreciation Expense 86,064 38,187 12,224 5,475 4,416 5,165 9,581 Add: Pension Service Cost 33,787 8,907 3,331 14,083 3,737 4,147 7,884 $338,349 $166,118 $154,943 $47,078 $47,095 $31,784 $78,879 $ 83,898 $82,933 $201,879 $15,265 $24,819 $21,069 $45,888 Adjusted Operating Cash Flow (non-GAAP) $22,472 $ 61,414 2022 Operating Income Add: Amortization of Intangible Assets and Impairment of Goodwill and Other Long-Lived Assets 187,841 16,170 5,440 3,776 Add: Depreciation Expense 73,297 34,114 12,294 3,781 4,373 6,344 10,717 Add: Pension Service Cost 32,567 8,934 3,554 11,008 3,842 4,114 7,956 $377,603 $142,151 $223,167 $33,830 $33,034 $31,527 $64,561 Adjusted Operating Cash Flow (non-GAAP) (1) 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. 2023 ANNUAL REPORT | 3
 • shareholder letter icon 3/26/2024 Letter Continued (Full PDF)
 • stockholder letter icon 3/23/2023 GHC Stockholder Letter
 • stockholder letter icon 3/26/2025 GHC Stockholder Letter
 • stockholder letter icon More "Education & Training Services" Category Stockholder Letters
 • Benford's Law Stocks icon GHC Benford's Law Stock Score = 76


GHC 3/26/2024 Shareholder/Stockholder Letter Transcript:

2023 ANNUAL REPORT

REVENUE BY PRINCIPAL OPERATIONS
EDUCATION
OTHER BUSINESSES
36%
25%
AUTOMOTIVE
11%
BROADCASTING
8%
HEALTHCARE
10%
10%
MANUFACTURING

FINANCIAL HIGHLIGHTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2023
2022
CHANGE
Operating revenues
$4,414,877
$3,924,493
12%
Income from operations

69,393

83,898
Net income attributable to common shares
$ 205,288

67,079

Diluted earnings per common share

43.82

13.79

Dividends per common share

6.60

6.32
4%
Common stockholders    equity per share

887.68

779.55
14%
4,836
(4%)
Diluted average number of common shares outstanding
OPERATING REVENUES ($ in millions)
2023
4,654
(17%)
INCOME FROM OPERATIONS ($ in millions)
4,415
2023
69
84
2022
3,924
2022
2021
3,186
2021
77
2020
2,889
2020
100
2019
2,932
2019
145
ADJUSTED OPERATING CASH FLOW (1) ($ in millions)
NET INCOME ATTRIBUTABLE TO COMMON SHARES ($ in millions)
2023
338
2023
205
2022
378
2022
67
2021
263
2021
352
2020
284
2020
300
2019
287
2019
328
RETURN ON AVERAGE COMMON STOCKHOLDERS    EQUITY
DILUTED EARNINGS PER COMMON SHARE ($)
2023
2023
5.3%
43.82
2022
1.7%
2022
13. 79
2021
8.6%
2021
70.45
2020
8.5%
2020
58. 1 3
2019
10.5%
2019
6 1.2 1
(1)
Adjusted Operating Cash Flow (non-GAAP)
(IN THOUSANDS)
Operating Income
2022
2021
2020
2019
$ 77,375 $100,407
$144,546
$ 69,393
$ 83,898
Add: Amortization of Intangible Assets and Impairment
of Goodwill and Other Long-Lived Assets
149,105
187,841
90,810
86,950
Add: Depreciation Expense
86,064
73,297
71,415
74,257
59,253
Add: Pension Service Cost
33,787
32,567
22,991
22,656
20,422
$338,349
$377,603
$262,591 $284,270
$286,616
Adjusted Operating Cash Flow (non-GAAP)
(1)
2023
62,395
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
My report to you on the Company for 2023 is
largely positive. Our operating results were good;
our marketable securities portfolio performed well
relative to our expectations, resulting in increased
values; our pension plan overfunding grew; and
we repurchased about 7% of outstanding shares.
It is unusual that all of this occurred in the same
year, but we aim for most of these things to be
true in most years.
Perhaps most importantly, our talented leaders
have laid a foundation that generates optimism
about continued growth in the years ahead.
Operating results clocked in with adjusted operating cash    ow(1) of $338 million. As a reminder,
this represents our earnings excluding non-cash
pension expense and depreciation and amortization expense. We like to look at this number
because it is a key indicator of our pre-tax cash
   ow generation from business operations.
This represents a modest decline from the
2022 results, with most of the decline attributable to two factors: the lack of political
advertising, and operating results along with
transition costs at the former Leaf Group businesses. The largest increases for the year took
place at Kaplan, which returned closer to its
normal enrollment coming out of COVID-19
restrictions, and Graham Healthcare, where
solid results at our home health and hospice
operations were paired with strong growth at
CSI Pharmacy.
The Company was minimally active in acquiring
new businesses. We did not acquire any new
businesses at the parent level, although we did
   nd several opportunities within the units:
a powerhouse. We are delighted to own an
additional Toyota franchise and continue to
grow our regional footprint.
Q  At year end, Graham Healthcare acquired
an additional 10% of CSI Pharmacy from our
minority partners. We are pleased to have
increased our ownership stake in CSI and
to be able to put capital into a business we
already know well.
By far, our largest use of capital was to buy more
of ALL of the businesses we already know very
well by repurchasing our own shares. For the
year, the Company repurchased approximately
325,000 shares at an average weighted price
of $594 per share, at a cost of $193 million. As
previously mentioned, this was roughly 7% of the
beginning of year share count. Over the past four
years, the Company has repurchased 18% of the
total outstanding shares as of December 31, 2019.
We believe in repurchasing shares opportunistically when we have high con   dence we are
generating meaningful value for shareholders.
Notably, we do not repurchase shares under
de   ned programs regardless of price or when
we think the stock is close to the intrinsic value
of the company or above it.
Why did we buy shares aggressively in 2023?
Our belief is that, for much of 2023, a uniquely
large discount existed. With a large margin of
safety built into our analysis, we still found the
share price very attractive. As a result, you now
have a 7% larger claim on the future pro   ts of
the Company.
Our operating results were led by Kaplan and
Graham Media Group.
Q  In the fall, the Automotive group acquired
a Toyota dealership in Richmond, VA from
the McGeorge family. With a sterling reputation in central Virginia, this dealership is
2 | GRAHAM HOLDINGS
Graham Media Group (GMG) was, once again,
the biggest operating income generator for the
Company. GMG reported adjusted operating cash

Graham Media Group was, once again, the biggest income
    generator
for the Company.
   ow of $155 million in 2023, down $68 million
from 2022, largely due to reduced political advertising, as well as the impacts of cord cutting.
With a Presidential election in 2024, the year is
very likely to show improved results over 2023.
The trends causing fragmentation of audiences
and cord cutting we have discussed in recent years
continued in 2023. While in many cases we have
had share gains in market creating some offset,
the overall linear audiences continue to decline.
Catherine Badalamente and her team continue to
evolve our model from one of local broadcaster
to local media operator that leverages our brand
and assets to facilitate larger community connections. We have now operated large-scale events in
multiple markets, ranging from the Pigskin Classic
in San Antonio to events surrounding an annual
Thanksgiving Parade in Detroit. We believe we
can continue down this path in all markets.
Additionally, our local community presence and
infrastructure have given us permission to partner
with schools to facilitate the greater distribution
and viewership of high school sports. Our ability
to professionally produce a game efficiently has
created new media opportunities that are attracting local advertisers. We believe our viewership
of high school sports could one day challenge our
news viewership. We hope to continue to build
out this programming in the years to come.
As the media world continues to rapidly change,
we are glad that we have created an environment
where we have maximal degrees of freedom
in navigating it. Graham Media Group does not
need to service mountains of debt, and the cash
   ow generation from our non-media operations
means that we can be focused on the option that
maximizes value over a longer time horizon. We
will continue to keep you updated on the great
work the team is doing as trends evolve.
(1)
Adjusted Operating Cash Flow (non-GAAP)
(IN THOUSANDS)
Total
Company
Education
Television
Broadcasting
Healthcare
Higher
Supplemental Total Kaplan
Education
Education
North America
$133,938
$23,845
$38,942
2023
Operating Income
$ 69,393
$104,471
Add: Amortization of Intangible
Assets and Impairment of
Goodwill and Other
Long-Lived Assets
149,105
14,553
5,450
3,675



Add: Depreciation Expense
86,064
38,187
12,224
5,475
4,416
5,165
9,581
Add: Pension Service Cost
33,787
8,907
3,331
14,083
3,737
4,147
7,884
$338,349
$166,118
$154,943
$47,078
$47,095
$31,784
$78,879
$ 83,898
$82,933
$201,879
$15,265
$24,819
$21,069
$45,888
Adjusted Operating
Cash Flow (non-GAAP)
$22,472
$ 61,414
2022
Operating Income
Add: Amortization of Intangible
Assets and Impairment of
Goodwill and Other
Long-Lived Assets
187,841
16,170
5,440
3,776



Add: Depreciation Expense
73,297
34,114
12,294
3,781
4,373
6,344
10,717
Add: Pension Service Cost
32,567
8,934
3,554
11,008
3,842
4,114
7,956
$377,603
$142,151
$223,167
$33,830
$33,034
$31,527
$64,561
Adjusted Operating
Cash Flow (non-GAAP)
(1)
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.
2023 ANNUAL REPORT | 3



shareholder letter icon 3/26/2024 Letter Continued (Full PDF)
 

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