Graham Holdings(GHC) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2025, and 2024. It includes the statements of operations, comprehensive income, balance sheets, cash flows, and changes in stockholders' equity, accompanied by detailed notes that provide further explanation on accounting policies, segment performance, and other financial details Condensed Consolidated Statements of Operations The company's total operating revenues increased to $1.22 billion in Q2 2025 from $1.19 billion in Q2 2024. Net income attributable to common stockholders showed a significant turnaround, shifting from a net loss of $21.0 million in Q2 2024 to a net income of $36.7 million in Q2 2025. For the first six months, revenue grew slightly, but net income decreased from $103.3 million in 2024 to $60.6 million in 2025 Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Operating Revenues | $1,215,772 | $1,185,280 | $2,381,687 | $2,337,942 | | Income from Operations | $72,751 | $25,911 | $120,224 | $61,353 | | Net Income (Loss) Attributable to GHC | $36,749 | $(21,040) | $60,643 | $103,340 | | Diluted net income (loss) per share | $8.35 | $(4.79) | $13.81 | $23.11 | Condensed Consolidated Balance Sheets As of June 30, 2025, total assets were $7.62 billion, a slight decrease from $7.68 billion at the end of 2024. Total liabilities decreased to $3.18 billion from $3.35 billion, primarily due to a reduction in long-term debt and mandatorily redeemable noncontrolling interest. Consequently, total equity increased to $4.38 billion Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $2,009,706 | $2,098,624 | | Total Assets | $7,619,032 | $7,677,205 | | Total Current Liabilities | $1,579,468 | $1,199,799 | | Total Liabilities | $3,184,609 | $3,346,569 | | Total Equity | $4,384,554 | $4,286,815 | Condensed Consolidated Statements of Cash Flows For the first six months of 2025, net cash provided by operating activities significantly increased to $140.8 million from $53.1 million in the prior year period. Net cash used in financing activities rose sharply to $188.5 million, driven by large distributions to noncontrolling interests. This resulted in a net decrease in cash and cash equivalents of $68.5 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $140,810 | $53,108 | | Net Cash Used in Investing Activities | $(31,317) | $(41,784) | | Net Cash Used in Financing Activities | $(188,512) | $(21,261) | | Net Decrease in Cash | $(68,505) | $(14,276) | Notes to Condensed Consolidated Financial Statements The notes provide detailed explanations of the company's accounting policies and financial data. Key events include the acquisition of Arconic Architectural Products, the settlement of a $205 million mandatorily redeemable noncontrolling interest, and a goodwill impairment charge of $26.3 million in Q2 2024. The company's operations are diversified across education, broadcasting, manufacturing, healthcare, automotive, and other businesses - The company is a diversified holding company with operations in educational services (Kaplan), television broadcasting, manufacturing, healthcare, automotive dealerships, and other businesses like restaurants and media[23][24][25] - On February 25, 2025, the company settled a significant portion of its mandatorily redeemable noncontrolling interest for $205 million, consisting of $186.25 million in cash and $18.75 million in Class B common stock. This resulted in a $66.2 million increase to the obligation, recorded as interest expense[38][39] - In Q2 2024, the company recorded goodwill and amortized intangible asset impairment charges totaling $26.3 million related to its World of Good Brands (WGB) reporting unit due to digital advertising revenue declines and operating losses[58] Goodwill by Segment (Net, in thousands) | Segment | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Education | $850,709 | $815,184 | | Television Broadcasting | $190,815 | $190,815 | | Manufacturing | $152,931 | $152,931 | | Healthcare | $135,038 | $135,038 | | Automotive | $129,280 | $129,280 | | Other Businesses | $76,788 | $76,788 | | Total | $1,535,561 | $1,500,036 | Management's Discussion and Analysis of Results of Operations and Financial Condition Management discusses the financial results, highlighting a 3% revenue increase in Q2 2025 and a shift to net income of $36.7 million from a net loss of $21.0 million in Q2 2024. The improvement was driven by growth in education and healthcare, offsetting declines in broadcasting and automotive. The analysis covers divisional performance, liquidity, capital resources, and significant transactions, including a major settlement of noncontrolling interest and recent acquisitions Results of Operations In Q2 2025, the company's revenue grew 3% to $1.22 billion, and operating income surged to $72.8 million from $25.9 million in Q2 2024. The significant increase in net income was largely due to the absence of a $26.3 million impairment charge taken in 2024 and lower interest expense related to fair value adjustments. For the first six months of 2025, revenue increased 2% to $2.38 billion, and operating income nearly doubled to $120.2 million - Q2 2025 net income was $36.7 million, compared to a net loss of $21.0 million in Q2 2024. The prior year's loss included a $26.3 million goodwill impairment charge and $73.5 million in interest expense to adjust the fair value of mandatorily redeemable noncontrolling interest[146][148] - H1 2025 net income was $60.6 million, down from $103.3 million in H1 2024. The decrease is primarily attributable to significantly lower net gains on marketable equity securities ($32.3 million in 2025 vs. $123.8 million in 2024)[147][149][152] Division Results The Education division saw a 3% revenue increase and a 31% operating income increase in Q2 2025, driven by Higher Education and Supplemental Education. Television Broadcasting revenue fell 8% due to lower political advertising. Manufacturing operating income grew 77% despite a 7% revenue decline. Healthcare was a strong performer, with revenue up 37% and operating income nearly doubling. Automotive revenue and operating income both declined by 8-9% Education Division Operating Results (in thousands) | Segment | Q2 2025 Revenue | Q2 2024 Revenue | Q2 2025 Operating Income | Q2 2024 Operating Income | | :--- | :--- | :--- | :--- | :--- | | Kaplan International | $272,171 | $267,026 | $29,937 | $25,824 | | Higher Education | $84,738 | $81,041 | $17,972 | $14,354 | | Supplemental Education | $80,161 | $73,133 | $7,406 | $5,672 | | Total Education | $436,813 | $422,899 | $46,185 | $35,277 | - Television Broadcasting revenue decreased 8% in Q2 2025 due to a $4.5 million drop in political advertising and a $2.6 million decrease in retransmission revenue[159] - Healthcare revenue grew 37% in Q2 2025, with operating income up 97%, largely due to significant growth at CSI Pharmacy from an expansion of infusion treatment offerings and patient service areas[165] - Automotive revenue decreased 8% in Q2 2025, driven by declines in new and used vehicle sales and finance and insurance product offerings[168] Liquidity and Capital Resources The company's primary source of liquidity is cash from operations. As of June 30, 2025, the company held $176.2 million in cash and $898.1 million in marketable securities, against total debt of $816.4 million. Cash decreased by $84.6 million in the first half of 2025, largely due to a $186.25 million cash payment to settle a mandatorily redeemable noncontrolling interest. The company maintains a $300 million revolving credit facility with $156.4 million available Liquidity Position (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $176,223 | $260,852 | | Investments in marketable equity securities | $898,148 | $858,743 | | Total debt | $816,375 | $748,192 | - A significant use of cash in H1 2025 was the settlement of a mandatorily redeemable noncontrolling interest for a total of $205 million, which included approximately $186.25 million in cash[206][216] - The company's working capital decreased to $430.2 million from $898.8 million at year-end 2024, partly because its $400 million senior notes due June 2026 are now classified as a current liability[203] - The Board of Directors has authorized the repurchase of up to 500,000 shares of Class B common stock, with 462,482 shares remaining under this authorization as of June 30, 2025[195][219] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risks stem from equity price fluctuations in its marketable securities portfolio, interest rate changes affecting its debt and cash, and foreign exchange rate volatility from its international operations. No significant changes to these risk exposures were reported compared to the 2024 year-end Form 10-K - The company is exposed to market risk from equity price risk, interest rate risk, and foreign exchange rate risk. Disclosures have not changed significantly since the 2024 Annual Report[222] Controls and Procedures Based on an evaluation as of June 30, 2025, the company's management, including the CEO and CFO, concluded that its disclosure controls and procedures are effective. There were no material changes to the company's internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[223] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[224] PART II. OTHER INFORMATION Other Information This section states that during the quarter ended June 30, 2025, none of the company's directors or officers adopted, modified, or terminated any Rule 10b5-1 trading arrangements - During the quarter ended June 30, 2025, no directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement[226] Exhibits This section provides a list of all exhibits filed with the Form 10-Q report. These include the company's certificate of incorporation, by-laws, debt indentures, and certifications by the CEO and CFO as required by the Sarbanes-Oxley Act - The report lists exhibits filed, including corporate governance documents, debt agreements, and required CEO/CFO certifications (Rule 13a-14(a)/15d-14(a) and Section 1350)[228]