Graham Holdings(GHC) - 2025 Q2 - Quarterly Results

Overall Financial Performance and Corporate Developments The company reported revenue growth and improved operating income in Q2 and H1 2025, driven by education and healthcare, alongside strategic divestitures, acquisitions, and a strong liquidity position Second Quarter and First Half 2025 Performance Summary Graham Holdings Company reported revenue growth in both the second quarter and first half of 2025, primarily driven by the education and healthcare segments. Operating income significantly improved year-over-year, largely due to the absence of a 2024 goodwill impairment charge. Net income attributable to common shares reversed to a profit of $36.7 million in Q2 2025 from a loss in Q2 2024, though H1 2025 net income declined compared to the prior year Q2 2025 vs Q2 2024 Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $1,215.8M | $1,185.3M | +3% | | Operating Income | $72.8M | $25.9M | +181% | | Adjusted Operating Cash Flow (non-GAAP) | $111.3M | $98.5M | +13% | H1 2025 vs H1 2024 Key Financial Metrics | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $2,381.7M | $2,337.9M | +2% | | Operating Income | $120.2M | $61.4M | +96% | | Adjusted Operating Cash Flow (non-GAAP) | $199.4M | $181.3M | +10% | - The significant improvement in operating income for both Q2 and H1 2025 is largely attributed to the absence of goodwill and other long-lived asset impairment charges at World of Good Brands (WGB) that were recorded in Q2 2024[4][5] Net Income (Loss) and EPS Attributable to Common Shares | Period | Net Income (Loss) | Diluted EPS | | :--- | :--- | :--- | | Q2 2025 | $36.7M | $8.35 | | Q2 2024 | ($21.0M) | ($4.79) | | H1 2025 | $60.6M | $13.81 | | H1 2024 | $103.3M | $23.11 | Corporate Activities and Financial Position During the first half of 2025, the company divested its World of Good Brands (WGB) businesses and acquired Arconic Architectural Products. Key management changes occurred at Graham Healthcare Group (GHG). As of June 30, 2025, the company maintained a solid liquidity position with over $1.1 billion in cash and marketable securities, while continuing its Class B common stock repurchase program - The company completed the sale of various websites and businesses of World of Good Brands (WGB) in H1 2025, with remaining operations expected to shut down by the end of Q3 2025[6] - On July 15, 2025, the company's subsidiary Hoover acquired Arconic Architectural Products, assuming approximately $105 million in net pension obligations as part of the purchase price[7] - David Curtis and Justin DeWitte, co-CEOs of Graham Healthcare Group (GHG), have stepped down from their leadership roles[8] Financial Position as of June 30, 2025 | Item | Amount | | :--- | :--- | | Borrowings Outstanding | $816.4M | | Average Interest Rate | 6.0% | | Cash, marketable equity securities, etc. | $1,127.5M | - The company repurchased 3,978 shares of Class B common stock for $3.5 million in the first six months of 2025. The remaining authorization allows for the purchase of 462,482 more shares[11] Consolidated Statements of Operations The company's consolidated operations in Q2 and H1 2025 demonstrated revenue growth and improved operating income, with Q2 net income reversing to a profit and H1 net income impacted by reduced gains on marketable securities Three Months Ended June 30 For the second quarter of 2025, the company's revenue grew 3% to $1.22 billion. A significant decrease in interest expense, primarily due to fair value adjustments of mandatorily redeemable noncontrolling interest, and the absence of 2024's impairment charges, led to a net income of $36.7 million, a stark reversal from the $21.0 million net loss in the same period last year Q2 2025 vs Q2 2024 Statement of Operations Highlights (in thousands) | Line Item | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Operating Revenues | $1,215,772 | $1,185,280 | 3% | | Operating Income | $72,751 | $25,911 | 181% | | Interest Expense | ($18,106) | ($91,383) | -80% | | Impairment of Goodwill | $0 | $26,287 | N/A | | Net Income (Loss) Attributable to GHC | $36,749 | ($21,040) | N/A | | Diluted EPS | $8.35 | ($4.79) | N/A | Six Months Ended June 30 For the first six months of 2025, revenue increased by 2% to $2.38 billion, and operating income nearly doubled to $120.2 million. However, a significant decrease in gains on marketable equity securities compared to the prior year led to a 41% decline in net income attributable to common stockholders, which fell to $60.6 million H1 2025 vs H1 2024 Statement of Operations Highlights (in thousands) | Line Item | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | | Operating Revenues | $2,381,687 | $2,337,942 | 2% | | Operating Income | $120,224 | $61,353 | 96% | | Gain on marketable equity securities, net | $32,258 | $123,780 | -74% | | Net Income Attributable to GHC | $60,643 | $103,340 | -41% | | Diluted EPS | $13.81 | $23.11 | -40% | Segment Performance Analysis The company's Q2 2025 segment performance was characterized by strong revenue and operating income growth in Healthcare and Education, offsetting declines in Television Broadcasting, Manufacturing, and Automotive, with the Education division showing broad-based sub-segment improvements Business Division Overview In Q2 2025, revenue growth was driven by Healthcare (+37%) and Education (+3%), which offset declines in Television Broadcasting (-8%), Manufacturing (-7%), and Automotive (-8%). Operating income saw significant improvements in Healthcare (+97%), Manufacturing (+77%), and Education (+31%), while Television Broadcasting and Automotive segments experienced declines Q2 2025 Revenue by Business Division (in thousands) | Division | Q2 2025 Revenue | Q2 2024 Revenue | % Change | | :--- | :--- | :--- | :--- | | Education | $436,813 | $422,899 | 3% | | Healthcare | $202,219 | $147,528 | 37% | | Television broadcasting | $105,984 | $115,478 | -8% | | Manufacturing | $96,218 | $103,626 | -7% | | Automotive | $285,572 | $308,814 | -8% | Q2 2025 Operating Income (Loss) by Business Division (in thousands) | Division | Q2 2025 Op. Income | Q2 2024 Op. Income | % Change | | :--- | :--- | :--- | :--- | | Healthcare | $25,097 | $12,737 | 97% | | Manufacturing | $7,566 | $4,265 | 77% | | Education | $46,185 | $35,277 | 31% | | Automotive | $9,293 | $10,203 | -9% | | Television broadcasting | $27,940 | $31,128 | -10% | H1 2025 Adjusted Operating Cash Flow (non-GAAP) by Division (in thousands) | Division | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | | Education | $113,848 | $98,692 | 15% | | Manufacturing | $24,995 | $19,430 | 29% | | Healthcare | $52,150 | $32,948 | 58% | | Television broadcasting | $63,262 | $72,264 | -12% | | Automotive | $19,280 | $23,346 | -17% | Education Division Deep Dive The Education division's revenue increased by 3% in Q2 2025, driven by growth in Supplemental Education (+10%) and Higher Education (+5%). Operating income for the division grew by 31% to $46.2 million, with all sub-segments contributing to the improvement. Adjusted operating cash flow for the division also saw a healthy 15% increase Q2 2025 Education Division Revenue by Sub-segment (in thousands) | Sub-segment | Q2 2025 Revenue | Q2 2024 Revenue | % Change | | :--- | :--- | :--- | :--- | | Supplemental education | $80,161 | $73,133 | 10% | | Higher education | $84,738 | $81,041 | 5% | | Kaplan international | $272,171 | $267,026 | 2% | Q2 2025 Education Division Operating Income by Sub-segment (in thousands) | Sub-segment | Q2 2025 Op. Income | Q2 2024 Op. Income | % Change | | :--- | :--- | :--- | :--- | | Supplemental education | $7,406 | $5,672 | 31% | | Higher education | $17,972 | $14,354 | 25% | | Kaplan international | $29,937 | $25,824 | 16% | Non-GAAP Financial Information The company presents non-GAAP financial measures, including adjusted net income, to provide a clearer view of core operational performance by excluding certain non-recurring or non-cash items, demonstrating improved adjusted net income for both Q2 and H1 2025 Reconciliation of Net Income The company provides non-GAAP net income to offer a clearer view of its core operational performance by excluding items like gains/losses on marketable securities and fair value adjustments of mandatorily redeemable noncontrolling interest. For Q2 2025, adjusted net income was $63.1 million ($14.33 per share), up from $56.9 million ($12.70 per share) in Q2 2024. For H1 2025, adjusted net income was $114.1 million ($25.98 per share), compared to $107.3 million ($23.99 per share) in H1 2024 - Management believes non-GAAP measures provide useful information for period-to-period comparisons and identifying underlying business trends by excluding items not directly related to core performance, such as changes in fair value of marketable securities and certain interest expenses[30][31][32] GAAP vs. Non-GAAP Net Income and EPS | Period | GAAP Net Income | Adjusted Net Income (non-GAAP) | GAAP Diluted EPS | Adjusted Diluted EPS (non-GAAP) | | :--- | :--- | :--- | :--- | :--- | | Q2 2025 | $36.7M | $63.1M | $8.35 | $14.33 | | Q2 2024 | ($21.0M) | $56.9M | ($4.79) | $12.70 | | H1 2025 | $60.6M | $114.1M | $13.81 | $25.98 | | H1 2024 | $103.3M | $107.3M | $23.11 | $23.99 | - Major adjustments to reconcile GAAP to non-GAAP net income in Q2 2025 included adding back net losses on marketable securities ($8.6 million), net non-operating impairment losses ($9.5 million), and charges related to incentive programs ($4.5 million)[33]