Hearst Leaders Offer Rare Glimpse at Company’s Financials

Frank Bennack Steve Swartz
Courtesy of Paley Center for Media

What’s the fastest-growing business at Hearst?

Not ESPN. Not its 30 TV stations. Not its recent investments in Vice Media or Buzzfeed. The rock star at Hearst at present is Homecare Homebase, a company that provides the software used by home health care agencies.

Hearst CEO Steve Swartz offered that tidbit during a Q&A conversation with Hearst exec vice chairman held as part of the Paley Center for Media’s International Council Summit Thursday in New York. The 40-minute session offered a rare glimpse at some specifics of the privately held Hearst’s various media, publishing and data businesses.

“Business information and business services — that’s the fastest growing part of the company,” Swartz said, to the crowd’s surprise. Hearst bought 85% of Homecare Homebase in 2013.

Bennack noted that Hearst’s expansion into medical data services specifically has delivered the best return on investment in the company’s history. It started with Hearst acquiring for $80,000 a B-to-B magazine aimed at pharmacists. We paid $80,000 for that business. Today it’s a $100 million business,” Bennack said.

Bennack was CEO of Hearst from 1979 from 2013 when he handed the reins to Swartz In that time, the company went from a newspaper and magazine publishing company with three TV stations valued at a total of $700 million to a $10 billion company today. During that time, the company did about $15 billion worth of acquisitions. And still, the company has no net debt on its balance sheet, which is a point of pride, Bennack said.

“I’ve always been a little risk-averse about having too much debt,” he said.

Hearst is owned by the Hearst Family Trust, as established by the terms of the will of founder William Randoph Hearst. The company will be formally inherited by the Hearst Family Trust beneficiaries in 2040, Bennack said. By that time, the company may have moved into the public realm, Bennack said.

At present, about 69% of the company’s revenue comes from acquisitions made during the past 35 years. About 11% of revenue comes from the legacy newspaper and magazine assets, Bennack said.

Swartz said that despite the choppy seas the company’s newspaper group, including the San Francisco Chronicle and Houston Chronicle, will record its fourth consecutive year of profit growth in 2015. The magazine group will notch its second consecutive year of profit growth.

Bennack said the key to a successful M&A strategy is to “show yourself as an aggressive buyer.” He noted that Hearst paid record prices at the time for its acquisitions of the Houston Chronicle and WCVB-TV in Boston. “That tells the world out there that if you’re a seller, you should talk to these people,” he said.

Hearst’s more recent investments include Awesomeness TV, Complex Media, Vice Media and Buzzfeed. There’s no way to know whether any one of those entities will become the new ESPN in terms of earnings growth for Hearst. But the company can’t stand still, either, Swartz said.

“The challenge is to keep pushing the rest of the organization,” Swartz said. “We continue to find businesses that are growing faster than anything we’re seeing in traditional media.” Swartz said they look for investments in companies where Hearst’s existing assets can “bring something to the table” for them.

Bennack added that the key to the future is finding something that has as much upside potential as cable television did in the 1980s and ‘90s. He doesn’t know exactly what that is, but he predicts “it’s going to be digital.”

(Pictured: Frank Bennack, Steve Swartz and moderator Mark Robichaux of NewBay Media)

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