Conglomerates can be hard to analyze, but Graham Holdings (GHC 0.83%) gets most of its revenue from the education and television broadcasting businesses. Unfortunately, those industries have faced a series of challenges lately, with for-profit education having come under fire from government regulators and the television media industry seeing plenty of competition from a host of other content providers.

Coming into Wednesday's first-quarter financial report, Graham Holdings investors wanted to see signs that the company could start emerging from the long period of uncertainty that has hung over the business for a while. Graham's results didn't fully satisfy shareholders, and it's clear that challenges still remain for the company going forward. Let's take a closer look at Graham Holdings and what its latest results mean for shareholders.

Kaplan test prep book cover.

Image source: Kaplan.

Graham deals with tough conditions

Graham's first-quarter numbers didn't give investors much of what they were looking to see. Overall revenue fell 3% to $582.7 million, continuing a longer-term trend of sagging sales. Net income fell 45% to $21.1 million, and on an adjusted basis, earnings of $2.50 per share were off by roughly half from what Graham posted in the first quarter of 2016.

Taking a closer look at the report, Graham's segments all had stories to tell. For the key Kaplan educational segment, a 7% slide in sales contributed to a 38% drop in operating income. Higher education saw the biggest drop in revenue, largely because enrollments at Kaplan University continued to slide. Although new student enrollments were up slightly, total student counts fell 13% to just over 32,500. Meanwhile, test preparation and international education saw more modest sales decreases, and the international division actually boosted its operating profits by more than half, but test prep suffered a wider loss.

Unfortunately, Graham didn't get a boost from its television broadcasting segment. Sales were down 1% from the year-ago period, and the drop would have been more extreme were it not for recently acquired stations. A drop in political advertising hurt the company, and higher network fees pushed operating income down by three-eighths. New contracts with affiliates in Houston and Detroit were primarily responsible for the fee increases.

The only bright light for Graham came from its other businesses, where revenue climbed 9%. However, an even bigger jump in expenses caused those businesses to lose even more money than they did in the previous year.

What's next for Graham Holdings?

Yet the big news for Graham came after the end of the quarter. In late April, the company made the decision to have the education division essentially donate the assets and operations of Kaplan University to a new nonprofit corporation affiliated with Purdue University. Under the deal, Kaplan will provide key non-academic operations support to the new educational nonprofit, with an initial term of 30 years. The nonprofit entity will have the right to buy out Kaplan after a six-year period. Kaplan University will retain its School of Professional and Continuing Education, and the other Kaplan businesses will remain under Graham's control. Nevertheless, the deal reflects the realization that for-profit education hasn't panned out to be the money-making enterprise that investors had hoped to see.

Graham has also made minor moves in other parts of its business. Last month, the company bought lumber and plywood specialist Hoover Treated Wood Products, which makes products that have fire-retardant or preservative attributes. In general, though, Graham appears content to concentrate on its main businesses while still leaving open the possibility of strategic moves elsewhere.

Graham Holdings investors didn't respond well to the report, and the stock fell nearly 2% in the day's trading session following the announcement. With an uncertain future facing for-profit education, Graham will need to look closely at its strategy with respect to Kaplan to ensure it's getting everything out of the business that it can going forward.