☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
California | 68-0176227 | ||
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | ||
7250 Redwood Boulevard ,Suite 200 Novato, California | 94945 | ||
(Address of principal executive office) | (Zip code) |
Title of each class | Trading symbol | Name of each exchange on which registered | ||
Common stock, no par value | HNNA | The Nasdaq Stock Market LLC | ||
4.875% Notes due 2026 | HNNAZ | The Nasdaq Stock Market LLC |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☐ |
HENNESSY ADVISORS, INC.
TABLE OF CONTENTS
Financial Information | ||||||
Item 1 | 1 | |||||
1 | ||||||
2 | ||||||
3 | ||||||
4 | ||||||
5 | ||||||
Item 2 | ||||||
Item 4 | ||||||
26 | ||||||
Other Information | ||||||
Item 6 | ||||||
i
June 30, | September 30, | |||||||
2022 | 2021 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 57,480 | $ | 15,836 | ||||
Investments in marketable securities, at fair value | 10 | 10 | ||||||
Investment fee income receivable | 2,168 | 2,795 | ||||||
Prepaid expenses | 536 | 788 | ||||||
Other accounts receivable | 283 | 277 | ||||||
Total current assets | 60,477 | 19,706 | ||||||
Property and equipment, net of accumulated depreciation of $2,005 and $1,850, respectively | 312 | 311 | ||||||
Operating lease right-of-use | 740 | 1,010 | ||||||
Management contracts | 80,643 | 80,643 | ||||||
Other assets | 200 | 235 | ||||||
Total assets | $ | 142,372 | $ | 101,905 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities | ||||||||
Accrued liabilities and accounts payable | $ | 2,743 | $ | 4,151 | ||||
Operating lease liability | 365 | 359 | ||||||
Income taxes payable | 424 | 1,050 | ||||||
Total current liabilities | 3,532 | 5,560 | ||||||
Notes payable, net of issuance costs | 38,799 | — | ||||||
Long-term operating lease liability | 372 | 646 | ||||||
Net deferred income tax liability | 13,690 | 12,437 | ||||||
Total liabilities | 56,393 | 18,643 | ||||||
Commitments and contingencies (Note 9) | 0 | 0 | ||||||
Stockholders’ equity | ||||||||
Common stock, 0 par value, 22,500,000 shares authorized; 7,482,128 shares issued and outstanding as of June 30, 2022, and 7,469,584 as of September 30, 2021 | 20,954 | 19,964 | ||||||
Retained earnings | 65,025 | 63,298 | ||||||
Total stockholders’ equity | 85,979 | 83,262 | ||||||
Total liabilities and stockholders’ equity | $ | 142,372 | $ | 101,905 | ||||
December 31, 2022 | September 30, 2022 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 57,050 | $ | 58,487 | ||||
Investments in marketable securities, at fair value | 10 | 9 | ||||||
Investment fee income receivable | 2,075 | 2,051 | ||||||
Prepaid expenses | 762 | 853 | ||||||
Other accounts receivable | 257 | 257 | ||||||
Total current assets | 60,154 | 61,657 | ||||||
Property and equipment, net of accumulated depreciation of $2,106 and $2,057, respectively | 335 | 320 | ||||||
Operating lease right-of-use | 561 | 651 | ||||||
Management contracts | 81,012 | 80,868 | ||||||
Other assets | 157 | 156 | ||||||
Total assets | $ | 142,219 | $ | 143,652 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities | ||||||||
Accrued liabilities and accounts payable | $ | 1,331 | $ | 3,320 | ||||
Accrued management contract payment | 37 | 210 | ||||||
Operating lease liability | 369 | 367 | ||||||
Income taxes payable | 948 | 820 | ||||||
Total current liabilities | 2,685 | 4,717 | ||||||
Notes payable, net of issuance costs | 38,943 | 38,870 | ||||||
Long-term operating lease liability | 186 | 279 | ||||||
Net deferred income tax liability | 13,750 | 13,488 | ||||||
Total liabilities | 55,564 | 57,354 | ||||||
Commitments and contingencies (Note 9) | ||||||||
Stockholders’ equity | ||||||||
Common stock, no par value, 22,500,000 shares authorized; 7,573,706 shares issued and outstanding as of December 31, 2022, and 7,571,741 as of September 30, 2022 | 21,230 | 20,951 | ||||||
Retained earnings | 65,425 | 65,347 | ||||||
Total stockholders’ equity | 86,655 | 86,298 | ||||||
Total liabilities and stockholders’ equity | $ | 142,219 | $ | 143,652 | ||||
Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Revenue | ||||||||||||||||
Investment advisory fees | $ | 6,375 | $ | 7,903 | $ | 21,499 | $ | 22,458 | ||||||||
Shareholder service fees | 534 | 624 | 1,689 | 1,792 | ||||||||||||
Total revenue | 6,909 | 8,527 | 23,188 | 24,250 | ||||||||||||
Operating expenses | ||||||||||||||||
Compensation and benefits | 1,987 | 2,330 | 6,360 | 6,686 | ||||||||||||
General and administrative | 1,227 | 1,124 | 3,790 | 3,564 | ||||||||||||
Mutual fund distribution | 117 | 118 | 450 | 359 | ||||||||||||
Sub-advisory fees | 1,195 | 1,863 | 4,642 | 5,452 | ||||||||||||
Depreciation | 52 | 56 | 155 | 181 | ||||||||||||
Total operating expenses | 4,578 | 5,491 | 15,397 | 16,242 | ||||||||||||
Net operating income | 2,331 | 3,036 | 7,791 | 8,008 | ||||||||||||
Interest expense | 562 | — | 1,560 | — | ||||||||||||
Other income | (17 | ) | (1 | ) | (20 | ) | (2 | ) | ||||||||
Income before income tax expense | 1,786 | 3,037 | 6,251 | 8,010 | ||||||||||||
Income tax expense | 485 | 793 | 1,435 | 2,107 | ||||||||||||
Net income | $ | 1,301 | $ | 2,244 | $ | 4,816 | $ | 5,903 | ||||||||
Earnings per share | ||||||||||||||||
Basic | $ | 0.17 | $ | 0.30 | $ | 0.64 | $ | 0.80 | ||||||||
Diluted | $ | 0.17 | $ | 0.30 | $ | 0.63 | $ | 0.80 | ||||||||
Weighted average shares outstanding | ||||||||||||||||
Basic | 7,480,796 | 7,364,716 | 7,477,372 | 7,361,165 | ||||||||||||
Diluted | 7,577,134 | 7,431,925 | 7,548,851 | 7,387,356 | ||||||||||||
Cash dividends declared per share | $ | 0.14 | $ | 0.14 | $ | 0.41 | $ | 0.41 | ||||||||
Three Months Ended December 31, | ||||||||
2022 | 2021 | |||||||
Revenue | ||||||||
Investment advisory fees | $ | 5,654 | $ | 7,938 | ||||
Shareholder service fees | 491 | 596 | ||||||
Total revenue | 6,145 | 8,534 | ||||||
Operating expenses | ||||||||
Compensation and benefits | 1,858 | 2,262 | ||||||
General and administrative | 1,569 | 1,400 | ||||||
Fund distribution and other | 95 | 155 | ||||||
Sub-advisory fees | 969 | 1,877 | ||||||
Depreciation | 49 | 53 | ||||||
Total operating expenses | 4,540 | 5,747 | ||||||
Net operating income | 1,605 | 2,787 | ||||||
Interest expense | 563 | 508 | ||||||
Interest income | (467 | ) | (2 | ) | ||||
Income before income tax expense | 1,509 | 2,281 | ||||||
Income tax expense | 390 | 368 | ||||||
Net income | $ | 1,119 | $ | 1,913 | ||||
Earnings per share | ||||||||
Basic | $ | 0.15 | $ | 0.26 | ||||
Diluted | $ | 0.15 | $ | 0.25 | ||||
Weighted average shares outstanding | ||||||||
Basic | 7,572,454 | 7,472,680 | ||||||
Diluted | 7,581,157 | 7,522,686 | ||||||
Cash dividends declared per share | $ | 0.14 | $ | 0.14 | ||||
Three Months Ended December 31, 2022 | ||||||||||||||||
Common Stock | Retained Earnings | Total Stockholders’ Equity | ||||||||||||||
Shares | Amount | |||||||||||||||
Balance at September 30, 2022 | 7,571,741 | $ | 20,951 | $ | 65,347 | $ | 86,298 | |||||||||
Net income | — | — | 1,119 | 1,119 | ||||||||||||
Dividends paid | — | — | (1,041 | ) | (1,041 | ) | ||||||||||
Shares issued for auto-investments pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan | 215 | 2 | — | 2 | ||||||||||||
Shares issued for dividend reinvestment pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan | 1,750 | 15 | — | 15 | ||||||||||||
Stock-based compensation | — | 262 | — | 262 | ||||||||||||
Balance at December 31, 2022 | 7,573,706 | $ | 21,230 | $ | 65,425 | $ | 86,655 | |||||||||
Nine Months Ended June 30, 2022 | ||||||||||||||||
Total | ||||||||||||||||
Common Stock | Retained | Stockholders’ | ||||||||||||||
Shares | Amount | Earnings | Equity | |||||||||||||
Balance at September 30, 2021 | 7,469,584 | $ | 19,964 | $ | 63,298 | $ | 83,262 | |||||||||
Net income | — | — | 1,913 | 1,913 | ||||||||||||
Dividends paid | — | — | (1,027 | ) | (1,027 | ) | ||||||||||
Employee restricted stock vested | 10,000 | — | — | — | ||||||||||||
Repurchase of vested employee restricted stock for tax withholding | (3,458 | ) | (31 | ) | (6 | ) | (37 | ) | ||||||||
Shares issued for auto-investments pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan | 193 | 2 | — | 2 | ||||||||||||
Shares issued for dividend reinvestment pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan | 1,729 | 19 | — | 19 | ||||||||||||
Stock-based compensation | — | 388 | — | 388 | ||||||||||||
Employee restricted stock forfeiture | — | (3 | ) | — | (3 | ) | ||||||||||
Balance at December 31, 2021 | 7,478,048 | $ | 20,339 | $ | 64,178 | $ | 84,517 | |||||||||
Net income | — | — | 1,602 | 1,602 | ||||||||||||
Dividends paid | — | — | (1,028 | ) | (1,028 | ) | ||||||||||
Shares issued for auto-investments pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan | 64 | 1 | — | 1 | ||||||||||||
Shares issued for dividend reinvestment pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan | 1,952 | 19 | — | 19 | ||||||||||||
Stock-based compensation | — | 295 | — | 295 | ||||||||||||
Employee restricted stock forfeiture | — | (12 | ) | — | (12 | ) | ||||||||||
Balance at March 31, 2022 | 7,480,064 | $ | 20,642 | $ | 64,752 | $ | 85,394 | |||||||||
Net income | — | — | 1,301 | 1,301 | ||||||||||||
Dividends paid | — | — | (1,028 | ) | (1,028 | ) | ||||||||||
Shares issued for auto-investments pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan | 145 | 1 | — | 1 | ||||||||||||
Shares issued for dividend reinvestment pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan | 1,919 | 20 | — | 20 | ||||||||||||
Stock-based compensation | — | 291 | — | 291 | ||||||||||||
Balance at June 30, 2022 | 7,482,128 | $ | 20,954 | $ | 65,025 | $ | 85,979 | |||||||||
Three Months Ended December 31, 2021 | ||||||||||||||||
Common Stock | Retained Earnings | Total Stockholders’ Equity | ||||||||||||||
Shares | Amount | |||||||||||||||
Balance at September 30, 2021 | 7,469,584 | $ | 19,964 | $ | 63,298 | $ | 83,262 | |||||||||
Net income | — | — | 1,913 | 1,913 | ||||||||||||
Dividends paid | (1,027 | ) | (1,027 | ) | ||||||||||||
Employee restricted stock vested | 10,000 | — | — | — | ||||||||||||
Repurchase of vested employee restricted stock for tax withholding | (3,458 | ) | (31 | ) | (6 | ) | (37 | ) | ||||||||
Shares issued for auto-investments pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan | 193 | 2 | — | 2 | ||||||||||||
Shares issued for dividend reinvestment pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan | 1,729 | 19 | — | 19 | ||||||||||||
Stock-based compensation | — | 388 | — | 388 | ||||||||||||
Employee restricted stock forfeiture | — | (3 | ) | (3 | ) | |||||||||||
Balance at December 31, 2021 | 7,478,048 | $ | 20,339 | $ | 64,178 | $ | 84,517 | |||||||||
Nine Months Ended June 30, 2021 | ||||||||||||||||
Total | ||||||||||||||||
Common Stock | Retained | Stockholders’ | ||||||||||||||
Shares | Amount | Earnings | Equity | |||||||||||||
Balance at September 30, 2020 | 7,356,822 | $ | 18,705 | $ | 59,473 | $ | 78,178 | |||||||||
Net income | — | — | 1,773 | 1,773 | ||||||||||||
Dividends declared | — | — | (1,011 | ) | (1,011 | ) | ||||||||||
Shares issued for auto-investments pursuant to the 2018 Dividend Reinvestment and Stock Purchase Plan | 652 | 6 | — | 6 | ||||||||||||
Shares issued for dividend reinvestment pursuant to the 2018 Dividend Reinvestment and Stock Purchase Plan | 2,165 | 19 | — | 19 | ||||||||||||
Stock-based compensation | — | 352 | — | 352 | ||||||||||||
Balance at December 31, 2020 | 7,359,639 | $ | 19,082 | $ | 60,235 | $ | 79,317 | |||||||||
Net income | — | — | 1,886 | 1,886 | ||||||||||||
Dividends declared | — | — | (1,012 | ) | (1,012 | ) | ||||||||||
Shares issued for auto-investments pursuant to the 2018 Dividend Reinvestment and Stock Purchase Plan | 306 | 3 | — | 3 | ||||||||||||
Shares issued for auto-investments pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan | 838 | 7 | — | 7 | ||||||||||||
Shares issued for dividend reinvestment pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan | 2,298 | 19 | — | 19 | ||||||||||||
Stock-based compensation | — | 351 | — | 351 | ||||||||||||
Balance at March 31, 2021 | 7,363,081 | $ | 19,462 | $ | 61,109 | $ | 80,571 | |||||||||
Net income | — | — | 2,244 | 2,244 | ||||||||||||
Dividends declared | — | — | (1,013 | ) | (1,013 | ) | ||||||||||
Shares issued for auto-investments pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan | 1,424 | 13 | — | 13 | ||||||||||||
Shares issued for dividend reinvestment pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan | 2,144 | 20 | — | 20 | ||||||||||||
Stock-based compensation | — | 351 | — | 351 | ||||||||||||
Balance at June 30, 2021 | 7,366,649 | $ | 19,846 | $ | 62,340 | $ | 82,186 | |||||||||
Three Months Ended December 31, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 1,119 | $ | 1,913 | ||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation | 49 | 53 | ||||||
Unrealized gain on marketable securities | (1 | ) | — | |||||
Change in right-of-use | (1 | ) | — | |||||
Amortization of note issuance costs | 73 | 55 | ||||||
Deferred income taxes | 262 | 570 | ||||||
Employee restricted stock forfeiture | — | (3 | ) | |||||
Stock-based compensation | 262 | 388 | ||||||
Change in operating assets and liabilities | ||||||||
Investment fee income receivable | (24 | ) | (31 | ) | ||||
Prepaid expenses | 91 | 225 | ||||||
Other accounts receivable | — | (111 | ) | |||||
Other assets | (1 | ) | (11 | ) | ||||
Accrued liabilities and accounts payable | (1,989 | ) | (1,687 | ) | ||||
Income taxes payable | 128 | (202 | ) | |||||
Net cash (used in) provided by operating activities | (32 | ) | 1,159 | |||||
Cash flows from investing activities | ||||||||
Purchases of property and equipment | (64 | ) | (57 | ) | ||||
Payments related to management contracts | (317 | ) | — | |||||
Net cash used in investing activities | (381 | ) | (57 | ) | ||||
Cash flows from financing activities | ||||||||
Proceeds from issuance of notes, net of underwriting discount | — | 39,042 | ||||||
Payment of issuance costs on notes | — | (435 | ) | |||||
Repurchase of vested employee restricted stock for tax withholding | — | (37 | ) | |||||
Proceeds from shares issued pursuant to the 2021 Dividend Reinvestment and Stock Repurchase Plan | 2 | 2 | ||||||
Dividend payments | (1,026 | ) | (1,008 | ) | ||||
Net cash (used in) provided by financing activities | (1,024 | ) | 37,564 | |||||
Net (decrease) increase in cash and cash equivalents | (1,437 | ) | 38,666 | |||||
Cash and cash equivalents at the beginning of the period | 58,487 | 15,836 | ||||||
Cash and cash equivalents at the end of the period | $ | 57,050 | $ | 54,502 | ||||
Supplemental disclosures of cash flow information | ||||||||
Cash paid for interest | $ | 491 | $ | 387 | ||||
Dividend reinvestment issued in shares | $ | 15 | $ | 19 |
Nine Months Ended June 30, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 4,816 | $ | 5,903 | ||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation | 155 | 181 | ||||||
Unrealized gain on marketable securities | — | (1 | ) | |||||
Change in right-of-use | 2 | (60 | ) | |||||
Amortization of note issuance costs | 192 | — | ||||||
Deferred income taxes | 1,253 | 882 | ||||||
Deferred offering costs | — | (7 | ) | |||||
Employee restricted stock forfeiture | (15 | ) | — | |||||
Stock-based compensation | 974 | 1,054 | ||||||
Change in operating assets and liabilities | ||||||||
Investment fee income receivable | 627 | (418 | ) | |||||
Prepaid expenses | 252 | 309 | ||||||
Other accounts receivable | (6 | ) | 18 | |||||
Other assets | 35 | (10 | ) | |||||
Accrued liabilities and accounts payable | (1,408 | ) | (435 | ) | ||||
Income taxes payable | (626 | ) | (202 | ) | ||||
Net cash provided by operating activities | 6,251 | 7,214 | ||||||
Cash flows from investing activities | ||||||||
Purchases of property and equipment | (156 | ) | (182 | ) | ||||
Net cash used in investing activities | (156 | ) | (182 | ) | ||||
Cash flows from financing activities | ||||||||
Proceeds from issuance of notes, net of underwriting discount | 39,042 | — | ||||||
Payment of issuance costs on notes | (435 | ) | — | |||||
Repurchase of vested employee restricted stock for tax withholding | (37 | ) | — | |||||
Proceeds from shares issued pursuant to the 2018 Dividend Reinvestment and Stock Repurchase Plan | — | 9 | ||||||
Proceeds from shares issued pursuant to the 2021 Dividend Reinvestment and Stock Repurchase Plan | 4 | 20 | ||||||
Dividend payments | (3,025 | ) | (2,978 | ) | ||||
Net cash provided by (used in) financing activities | 35,549 | (2,949 | ) | |||||
Net increase in cash and cash equivalents | 41,644 | 4,083 | ||||||
Cash and cash equivalents at the beginning of the period | 15,836 | 9,955 | ||||||
Cash and cash equivalents at the end of the period | $ | 57,480 | $ | 14,038 | ||||
Supplemental disclosures of cash flow information | ||||||||
Cash paid for income taxes | $ | 810 | $ | 1,427 | ||||
Cash paid for interest | $ | 1,368 | $ | — | ||||
Dividend reinvestment issued in shares | $ | 58 | $ | 58 |
(1) | Basis of Financial Statement Presentation |
(2) | Management Contracts Purchased |
(3) | Investment Advisory Agreements |
(4) |
December 31, 2022 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Money market fund deposits | $ | 54,613 | $ | — | $ | — | $ | 54,613 | ||||||||
Mutual fund investments | 10 | — | — | 10 | ||||||||||||
Total | $ | 54,623 | $ | — | $ | — | $ | 54,623 | ||||||||
Amounts included in: | ||||||||||||||||
Cash and cash equivalents | $ | 54,613 | $ | — | $ | — | $ | 54,613 | ||||||||
Investments in marketable securities | 10 | — | — | 10 | ||||||||||||
Total | $ | 54,623 | $ | — | $ | — | $ | 54,623 | ||||||||
June 30, 2022 | ||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | September 30, 2022 | ||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Money market fund deposits | $ | 54,116 | $ | — | $ | — | $ | 54,116 | $ | 54,225 | $ | — | $ | — | $ | 54,225 | ||||||||||||||||
Mutual fund investments | 10 | — | — | 10 | 9 | — | — | 9 | ||||||||||||||||||||||||
Total | $ | 54,126 | $ | — | $ | — | $ | 54,126 | $ | 54,234 | $ | — | $ | — | $ | 54,234 | ||||||||||||||||
Amounts included in: | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 54,116 | $ | — | $ | — | $ | 54,116 | $ | 54,225 | $ | — | $ | — | $ | 54,225 | ||||||||||||||||
Investments in marketable securities | 10 | — | — | 10 | 9 | — | — | 9 | ||||||||||||||||||||||||
Total | $ | 54,126 | $ | — | $ | — | $ | 54,126 | $ | 54,234 | $ | — | $ | — | $ | 54,234 | ||||||||||||||||
September 30, 2021 | ||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Money market fund deposits | $ | 11,554 | $ | — | $ | — | $ | 11,554 | ||||||||||||||||||||||||
Mutual fund investments | 10 | — | — | 10 | ||||||||||||||||||||||||||||
Total | $ | 11,564 | $ | — | $ | — | $ | 11,564 | ||||||||||||||||||||||||
Amounts included in: | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 11,554 | $ | — | $ | — | $ | 11,554 | ||||||||||||||||||||||||
Investments in marketable securities | 10 | — | — | 10 | ||||||||||||||||||||||||||||
Total | $ | 11,564 | $ | — | $ | — | $ | 11,564 | ||||||||||||||||||||||||
(5) | Leases |
June 30, 2022 | ||||
(In thousands, | ||||
except years and | ||||
percentages) | ||||
Operating lease right-of-use | $ | 740 | ||
Current operating lease liability | $ | 365 | ||
Long-term operating lease liability | $ | 372 | ||
Weighted average remaining lease term | 2.1 | |||
Weighted average discount rate | 0.90 | % |
December 31, 2022 | ||||
(In thousands, except years and percentages) | ||||
Operating lease right-of-use | $ | 561 | ||
Current operating lease liability | $ | 369 | ||
Long-term operating lease liability | $ | 186 | ||
Weighted average remaining lease term | 1.6 | |||
Weighted average discount rate | 0.90 | % |
December 31, 2022 | ||||
(In thousands) | ||||
Remainder of fiscal year 2023 | $ | 281 | ||
Fiscal year 2024 | 286 | |||
Total undiscounted cash flows | 567 | |||
Present value discount | (12 | ) | ||
Total operating lease liabilities | $ | 555 | ||
June 30, 2022 | ||||
(In thousands) | ||||
Remainder of fiscal year 2022 | $ | 93 | ||
Fiscal year 2023 | 374 | |||
Fiscal year 2024 | 286 | |||
Total undiscounted cash flows | 753 | |||
Present value discount | (16 | ) | ||
Total operating lease liabilities | $ | 737 | ||
(6) | Accrued Liabilities and Accounts Payable |
December 31, 2022 | September 30, 2022 | |||||||
(In thousands) | ||||||||
Accrued bonus liabilities | $ | 515 | $ | 2,207 | ||||
Accrued sub-advisor fees | 324 | 336 | ||||||
Other accrued expenses | 492 | 777 | ||||||
Total accrued liabilities and accounts payable | $ | 1,331 | $ | 3,320 | ||||
June 30, 2022 | September 30, 2021 | |||||||
(In thousands) | ||||||||
Accrued bonus liabilities | $ | 1,760 | $ | 2,738 | ||||
Accrued sub-advisor fees | 364 | 628 | ||||||
Other accrued expenses | 619 | 785 | ||||||
Total accrued liabilities and accounts payable | $ | 2,743 | $ | 4,151 | ||||
(7) | Debt Outstanding |
(8) | Income Taxes |
(9) | Commitments and Contingencies |
(10) | Equity |
Nine Months Ended June 30, 2022 | ||||||||
Shares | Weighted Average Grant Date Fair Value per Share | |||||||
Non-vested balance at beginning of period | 323,810 | $ | 8.87 | |||||
Granted | — | — | ||||||
Vested (1) | (102,958 | ) | (9.46 | ) | ||||
Forfeited | (7,917 | ) | (8.76 | ) | ||||
Non-vested balance at end of period | 212,935 | $ | 8.58 | |||||
Three Months Ended December 31, 2022 | ||||||||
Shares | Weighted Average Grant Date Fair Value per Share | |||||||
Non-vested balance at beginning of period | 315,561 | $ | 8.15 | |||||
Granted | — | — | ||||||
Vested (1) | (31,753 | ) | (8.39 | ) | ||||
Forfeited | — | — | ||||||
Non-vested balance at end of period | 283,808 | $ | 8.14 | |||||
(1) | Represents partially vested RSUs for which the Company already has recognized the associated compensation expense but has not yet issued to employees the related shares of common stock. |
June 30, 2022 | ||||
(In thousands, | ||||
except years) | ||||
Total expected compensation expense related to RSUs | $ | 17,117 | ||
Recognized compensation expense related to RSUs | (15,289 | ) | ||
Unrecognized compensation expense related to RSUs | $ | 1,828 | ||
Weighted average remaining years to expense for RSUs | 2.5 | |||
December 31, 2022 | ||||
(In thousands, except years) | ||||
Total expected compensation expense related to RSUs | $ | 18,143 | ||
Recognized compensation expense related to RSUs | (15,833 | ) | ||
Unrecognized compensation expense related to RSUs | $ | 2,310 | ||
Weighted average remaining years to expense for RSUs | 2.8 | |||
(11) | Earnings per Share and Dividends per Share |
(12) |
(13) | Subsequent Events |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Forward-Looking
This report contains “forward-looking statements” within the meaning of the securities laws, for which we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. In some cases,
Forward-looking statements are subject to risks, uncertainties, and assumptions, including those described in the section titled “Risk Factors” and elsewhere in our Annual Report on
Our business activities are affected by many factors, including, without limitation, redemptions by mutual fund shareholders,investors in the Hennessy Funds, taxes, general economic and business conditions, interest rate movements, inflation, the personal savings rate, competitive conditions, industry regulation, and fluctuations in the stock market, many of which are beyond the control of our management. Further, the business and regulatory environments in which we operate remain complex, uncertain, and subject to change. We expect that regulatory requirements and developments will cause us to incur additional administrative and compliance costs. Notwithstanding the variability in our economic and regulatory environments, we remain focused on the investment performance of the Hennessy Funds and on providing
Our business strategy centers on (a) the identification, completion, and integration of future acquisitions and (b) organic growth, through both the retention of the mutual fund assets we currently manage and the generation of inflows into the mutual funds we manage. The success of our business strategy may be influenced by the factors discussed in the section titled “Risk Factors” and elsewhere in our Annual Report on
16
Overview
Our primary business activity is providing investment advisory services to a family of
We derive our operating revenues from investment advisory fees paid to us by the Hennessy Funds and shareholder service fees paid to us by the Hennessy Mutual Funds. These fees are calculated as a percentage of the average daily net assets of each Hennessy Fund. The percentage amount of the investment advisory fees varies by fund. The percentage amount of the shareholder service fees is consistent across all funds,of the Hennessy Mutual Funds, but shareholder service fees are charged on Investor Class shares only. The dollar amount of the fees we receive fluctuates with changes in the average net asset value of each Hennessy Fund, which is affected by each fund’s investment performance, purchases and redemptions of shares, general market conditions, and the success of our marketing, sales, and public relations efforts.
On a total return basis, the Dow Jones Industrial Average (the “Dow”) posted total returns of
Long-term U.S. bond yields increased dramaticallyslightly during the three months ended June 30,December 31, 2022, withas elevated rates of inflation have persisted and unemployment trends continue to argue for the Federal Reserve most recently increasing its benchmark federal funds rate by three quartersto remain in tightening mode. The economy continues to create jobs, job vacancies remain at high levels, and average hourly earnings growth continues to show marked strength. With all that in mind, consensus expectations for economic growth call for only modest real growth this year and the idea of a percentage point in June 2022. This was the largest Federal Reserve rate increase since 1994. The Federal Reserve continues to indicate that it will likely continue raising rates so long as inflation remains above target. Federal Funds futures, according to Bloomberg, are pricing in about seven more rate hikes by the end of 2022.
The Japanese equity market was up 13.28% in U.S. dollar terms over the three months ended December 31, 2022, as measured by the Tokyo Stock Price Index (the “TOPIX”), posted total returnsIndex. During the period, Japanese equities traded higher on news of a substantial fiscal package meant to bolster the economy. In addition, the Bank of Japan widened the band within which it has been maintaining 10-year government bond yields. The timing of this decision came as a surprise to the market and equities rallied higher.
17
In the three months ended December 31, 2022, all 17 Hennessy Funds generated positive returns, as the overall market, and in particular, value stocks, recovered from a tough first nine months ended June 30, 2022, respectively. Despite Japanese stocks trading at roughly 12x 2022 estimated earnings, investors continued to grapple with global inflationary pressures, the prospect of slowing growth, and continued lockdowns throughout parts of China.
As always, we are committed to providing superior service to investors and employing a consistent and disciplined approach to investing based on a
We provide service to over 150,000 mutualnearly 145,000 fund accounts nationwide, including accounts held by investors who employ financial advisors to assist them with investing as well as accounts held by retail investors who invest directly with us. We serve approximately 12,60012,200 financial advisors who utilize the Hennessy Funds on behalf of their clients, including over 260150 who purchased one of our Funds for the first time during the most recent quarter. Approximately 17% of such advisors own two or more Hennessy Funds, and overapproximately 400 advisors hold a position of over $500,000. TheseWhile numbers have been decliningdeclined in recent years, but we will continue to focus significant efforts on financial advisors who own two or more Hennessy Funds or hold a position of over $500,000 in an effort to build and maintain brand loyalty among theour top tier of advisors.
Total assets under management as of June 30,December 31, 2022, was $3.2$3.0 billion, a decrease of $0.96$1.1 billion, or 23.4%26.1%, compared to June 30,December 31, 2021. The decrease in total assets was attributable to market depreciation and net outflows of the Hennessy Funds and market depreciation.Funds.
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The following table illustrates the
Fiscal Quarter Ended | ||||||||||||||||||||
June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Beginning assets under management | $ | 3,804,028 | $ | 4,072,849 | $ | 4,065,922 | $ | 4,117,560 | $ | 4,023,364 | ||||||||||
Acquisition inflows | — | — | — | — | — | |||||||||||||||
Organic inflows | 183,662 | 209,842 | 147,461 | 94,871 | 301,731 | |||||||||||||||
Redemptions | (351,556 | ) | (346,572 | ) | (240,160 | ) | (222,467 | ) | (351,897 | ) | ||||||||||
Market appreciation (depreciation) | (480,568 | ) | (132,091 | ) | 99,626 | 75,958 | 144,362 | |||||||||||||
Ending assets under management | $ | 3,155,566 | $ | 3,804,028 | $ | 4,072,849 | $ | 4,065,922 | $ | 4,117,560 | ||||||||||
Fiscal Quarter Ended | ||||||||||||||||||||
December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | December 31, 2021 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Beginning assets under management | $ | 2,895,717 | $ | 3,155,566 | $ | 3,804,028 | $ | 4,072,849 | $ | 4,065,922 | ||||||||||
Acquisition inflows | 43,088 | — | — | — | — | |||||||||||||||
Organic inflows | 130,721 | 115,526 | 183,662 | 209,842 | 147,461 | |||||||||||||||
Redemptions | (314,704 | ) | (209,600 | ) | (351,556 | ) | (346,572 | ) | (240,160 | ) | ||||||||||
Market appreciation (depreciation) | 254,636 | (165,775 | ) | (480,568 | ) | (132,091 | ) | 99,626 | ||||||||||||
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Ending assets under management | $ | 3,009,458 | $ | 2,895,717 | $ | 3,155,566 | $ | 3,804,028 | $ | 4,072,849 | ||||||||||
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As stated above, the fees we receive for providing investment advisory and shareholder services are based on average assets under management. The following table shows average assets under management by share class for each quarter since June 30,December 31, 2021:
Fiscal Quarter Ended | ||||||||||||||||||||
June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Investor Class | $ | 2,141,224 | $ | 2,265,309 | $ | 2,365,152 | $ | 2,385,204 | $ | 2,505,402 | ||||||||||
Institutional Class | 1,297,907 | 1,564,037 | 1,734,121 | 1,717,046 | 1,646,013 | |||||||||||||||
Total | $ | 3,439,131 | $ | 3,829,346 | $ | 4,099,273 | $ | 4,102,250 | $ | 4,151,415 | ||||||||||
Fiscal Quarter Ended | ||||||||||||||||||||
December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | December 31, 2021 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Hennessy Mutual Funds | ||||||||||||||||||||
Investor Class | $ | 1,949,185 | $ | 2,026,122 | $ | 2,141,224 | $ | 2,265,309 | $ | 2,365,152 | ||||||||||
Institutional Class | 1,090,937 | 1,185,369 | 1,297,907 | 1,564,037 | 1,734,121 | |||||||||||||||
Hennessy Stance ESG Large Cap ETF | 4,125 | — | — | — | — | |||||||||||||||
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Average assets under management | $ | 3,044,247 | $ | 3,211,491 | $ | 3,439,131 | $ | 3,829,346 | $ | 4,099,273 | ||||||||||
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The principal asset on our balance sheet, management contracts, represents the capitalized costs incurred in connection with the purchase of the assets related to the management of mutualinvestment funds. As of June 30,December 31, 2022, this asset had a net balance of $80.6$81.0 million, unchanged sincecompared to $80.9 million as of September 30, 2021.
On October 20, 2021, we completed a public offering of the 2026 Notes in the aggregate principal amount of $40.25 million, which included the full exercise of the underwriters’ overallotment option. The 2026 Notes mature on December 31, 2026, and may be redeemed in whole or in part at any time or from time to time at our option on or after December 31, 2023. The 2026 Notes bear interest at 4.875% per annum, payable on the last day of each calendar quarter and at maturity, beginning December 31, 2021. The 2026 Notes are direct unsecured obligations, rank equally in right of payment with any of our future unsecured unsubordinated indebtedness, senior to any of our future indebtedness that expressly provides that it is subordinate to the 2026 Notes, effectively subordinate to all of our existing and future secured indebtedness, and structurally subordinated to all existing and future indebtedness and other obligations of any future subsidiaries of ours.
The 2026 Notes are the principal liability on our balance sheet at $38.8$38.9 million, net of issuance costs.
19
Results of Operations
The following tables settable sets forth items in the statements of income as dollar amounts and as percentages of total revenue:
Three Months Ended June 30, | ||||||||||||||||
2022 | 2021 | |||||||||||||||
Amounts | Percent of Total Revenue | Amounts | Percent of Total Revenue | |||||||||||||
(In thousands, except percentages) | ||||||||||||||||
Revenue | ||||||||||||||||
Investment advisory fees | $ | 6,375 | 92.3 | % | $ | 7,903 | 92.7 | % | ||||||||
Shareholder service fees | 534 | 7.7 | 624 | 7.3 | ||||||||||||
Total revenue | 6,909 | 100.0 | 8,527 | 100.0 | ||||||||||||
Operating expenses | ||||||||||||||||
Compensation and benefits | 1,987 | 28.8 | 2,330 | 27.3 | ||||||||||||
General and administrative | 1,227 | 17.7 | 1,124 | 13.2 | ||||||||||||
Mutual fund distribution | 117 | 1.7 | 118 | 1.4 | ||||||||||||
Sub-advisory fees | 1,195 | 17.3 | 1,863 | 21.8 | ||||||||||||
Depreciation | 52 | 0.8 | 56 | 0.7 | ||||||||||||
Total operating expenses | 4,578 | 66.3 | 5,491 | 64.4 | ||||||||||||
Net operating income | 2,331 | 33.7 | 3,036 | 35.6 | ||||||||||||
Interest expense | 562 | 8.1 | — | — | ||||||||||||
Other income | (17 | ) | (0.2 | ) | (1 | ) | (0.0 | ) | ||||||||
Income before income tax expense | 1,786 | 25.8 | 3,037 | 35.6 | ||||||||||||
Income tax expense | 485 | 7.0 | 793 | 9.3 | ||||||||||||
Net income | $ | 1,301 | 18.8 | % | $ | 2,244 | 26.3 | % | ||||||||
Nine Months Ended June 30, | ||||||||||||||||
2022 | 2021 | |||||||||||||||
Amounts | Percent of Total Revenue | Amounts | Percent of Total Revenue | |||||||||||||
(In thousands, except percentages) | ||||||||||||||||
Revenue | ||||||||||||||||
Investment advisory fees | $ | 21,499 | 92.7 | % | $ | 22,458 | 92.6 | % | ||||||||
Shareholder service fees | 1,689 | 7.3 | 1,792 | 7.4 | ||||||||||||
Total revenue | 23,188 | 100.0 | 24,250 | 100.0 | ||||||||||||
Operating expenses | ||||||||||||||||
Compensation and benefits | 6,360 | 27.4 | 6,686 | 27.6 | ||||||||||||
General and administrative | 3,790 | 16.4 | 3,564 | 14.7 | ||||||||||||
Mutual fund distribution | 450 | 1.9 | 359 | 1.5 | ||||||||||||
Sub-advisory fees | 4,642 | 20.0 | 5,452 | 22.5 | ||||||||||||
Depreciation | 155 | 0.7 | 181 | 0.7 | ||||||||||||
Total operating expenses | 15,397 | 66.4 | 16,242 | 67.0 | ||||||||||||
Net operating income | 7,791 | 33.6 | 8,008 | 33.0 | ||||||||||||
Interest expense | 1,560 | 6.7 | — | — | ||||||||||||
Other income | (20 | ) | (0.1 | ) | (2 | ) | (0.0 | ) | ||||||||
Income before income tax expense | 6,251 | 27.0 | 8,010 | 33.0 | ||||||||||||
Income tax expense | 1,435 | 6.2 | 2,107 | 8.7 | ||||||||||||
Net income | $ | 4,816 | 20.8 | % | $ | 5,903 | 24.3 | % | ||||||||
Three Months Ended December 31, | ||||||||||||||||
2022 | 2021 | |||||||||||||||
Amount | Percent of Total Revenue | Amount | Percent of Total Revenue | |||||||||||||
(In thousands, except percentages) | ||||||||||||||||
Revenue | ||||||||||||||||
Investment advisory fees | $ | 5,654 | 92.0 | % | $ | 7,938 | 93.0 | % | ||||||||
Shareholder service fees | 491 | 8.0 | 596 | 7.0 | ||||||||||||
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Total revenue | 6,145 | 100.0 | 8,534 | 100.0 | ||||||||||||
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Compensation and benefits | 1,858 | 30.2 | 2,262 | 26.5 | ||||||||||||
General and administrative | 1,569 | 25.5 | 1,400 | 16.4 | ||||||||||||
Fund distribution and other | 95 | 1.5 | 155 | 1.8 | ||||||||||||
Sub-advisory fees | 969 | 15.8 | 1,877 | 22.0 | ||||||||||||
Depreciation | 49 | 0.9 | 53 | 0.6 | ||||||||||||
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Total operating expenses | 4,540 | 73.9 | 5,747 | 67.3 | ||||||||||||
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Net operating income | 1,605 | 26.1 | 2,787 | 32.7 | ||||||||||||
Interest expense | 563 | 9.2 | 508 | 6.0 | ||||||||||||
Interest income | (467 | ) | (7.6 | ) | (2 | ) | (0.0 | ) | ||||||||
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Income before income tax expense | 1,509 | 24.5 | 2,281 | 26.7 | ||||||||||||
Income tax expense | 390 | 6.3 | 368 | 4.3 | ||||||||||||
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Net income | $ | 1,119 | 18.2 | % | $ | 1,913 | 22.4 | % | ||||||||
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Revenue – Investment Advisory Fees and Shareholder Service Fees
Total revenue comprises investment advisory fees and shareholder service fees. Comparing the three months ended June 30,December 31, 2021, to the three months ended June 30,December 31, 2022, total revenue decreased by 19.0%28.0%, from $8.5 million to $6.9$6.1 million, investment advisory fees decreased by 19.3%28.8%, from $7.9 million to $6.4$5.7 million, and shareholder service fees decreased by 14.4%17.6%, from $0.62$0.60 million to $0.53$0.50 million.
20
We collect investment advisory fees from each of the Hennessy Funds at differing annual rates. These annual rates range between 0.40% and 1.25% of average daily net assets. Average daily net assets of the Hennessy Funds for the three months ended June 30,December 31, 2022, was $3.4$3.0 billion, which represents a decrease of $0.7$1.1 billion, or 17.2%25.7%, compared to the three months ended June 30, 2021, and average daily net assets for the nine months ended June 30, 2022, was $3.8 billion, which represents a decrease of $0.2 billion, or 4.1%, compared to the nine months ended June 30,December 31, 2021. The Hennessy Fund with the largest average daily net assets for the three and nine months ended June 30,December 31, 2022, was the Hennessy Focus Fund, with $0.91 billion and $1.1 billion, respectively.$0.7 billion. We collect an investment advisory fee from the Hennessy Focus Fund at an annual rate of 0.90% of average daily net assets. However, we pay a
Total assets under management as of June 30,December 31, 2022, was $3.2$3.0 billion, a decrease of $0.96$1.1 billion, or 23.4%26.1%, compared to June 30,December 31, 2021. The decrease was attributable about equally to market depreciation and to net outflows of the Hennessy Funds and market depreciation.
The Hennessy Funds with the three largest amounts of net inflows were as follows:
Three Months Ended | ||||
Fund Name | Amount | |||
Hennessy | ||||
$ | 4 million |
Hennessy Cornerstone Growth Fund | ||||
$ | 3 million | |||
Hennessy Total Return Fund | $ | 1 million |
The Hennessy Funds with the three largest amounts of net outflows were as follows:
Three Months Ended | ||||
Fund Name | Amount | |||
Hennessy | $ | (109) million | ||
Hennessy | $ | (36) million | ||
Hennessy | $ | (21) million |
Redemptions as a percentage of assets under management increased from an average of 2.8%2.0% per month during the three months ended June 30,December 31, 2021, to an average of 3.2%3.4% per month during the three months ended June 30,December 31, 2022. Redemptions as a percentage of assets under management decreased from an average of 3.2% per month during the nine months ended June 30, 2021, to an average of 2.7% per month during the nine months ended June 30, 2022.
Operating Expenses
Comparing the three months ended June 30,December 31, 2021, to the three months ended June 30,December 31, 2022, total operating expenses decreased by 16.6%21.0%, from $5.5$5.7 million to $4.6$4.5 million. The decrease in operating expenses was due to decreases in all expense categories other than general and administrative expense, which moderately increased.expense. As a percentage of total revenue, total operating expenses increased 6.6 percentage points to 73.9%. Although the dollar value decreased, operating expenses increased as a percentage of total revenue increased 1.9 percentage points to 66.3% because fixed expenses have become a larger portion of total operating expenses.
Compensation and Benefits Expense
21
General and Administrative Expense
Fund Distribution and Other Expense: Fund distribution and other industry event attendance, as well as increased employee business travel expense (though still below
The distribution component of fund distribution and other expense consists of fees paid to various financial institutions that offer the Hennessy Funds as potential investments to their clients. When the Hennessy Funds are purchased through one of these financial institutions, the institution typically charges an
The distribution component of fund distribution expense remained flat at $0.12 million. As a percentage of total revenue, mutual fund distribution expense increased 0.3 percentage points to 1.7%.
average daily net assets held by financial institutions;
the split of average daily net assets held by financial institutions in Institutional Class shares of the Hennessy Mutual Funds versus Investor Class shares of the Hennessy Mutual Funds; and
fee minimums at various financial institutions.
The other component of fund distribution and other expense remained flat despite lower average daily net assets held at financial institutions due to fixed expenses, such as minimum fees. Inconsists of fees incurred by us for the nine-month period ended June 30, 2022, the increase in mutual fund distribution expenses was primarily due to recently expanding a relationship with a financial institution for which we pay a portionoperations of the fees.
Comparing the three months ended June 30,December 31, 2021, to the three months ended June 30,December 31, 2022,
22
Sub-Advisory Fees Expense: Comparing the ninethree months ended June 30,December 31, 2021, to the ninethree months ended June 30,December 31, 2022,
Depreciation Expense
Interest Expense
Comparing the three months ended June 30,December 31, 2021, to the three months ended June 30,December 31, 2022, interest expense increased by 10.8% from $0$0.5 million to $0.6 million. Comparing the nine months ended June 30, 2021, to the nine months ended June 30, 2022, interest expense increased from $0 to $1.6 million.
Interest Income
Interest income consists of interest payment madeearned on December 31, 2021.
Income Tax Expense
Comparing the three months ended December 31, 2021, to the three months ended December 31, 2022, income tax expense decreasedincreased by 38.8%6.0%, from $0.8$0.37 million to $0.5$0.39 million. Comparing the nine months ended June 30, 2021, to the nine months ended June 30, 2022, income tax expense decreased by 31.9%, from $2.1 million to $1.4 million.
Net Income
Comparing the three months ended June 30,December 31, 2021, to the three months ended June 30,December 31, 2022, net income decreased by 42.0%41.5%, from $2.2$1.9 million to $1.3$1.1 million. Comparing the nine months ended June 30, 2021, to the nine months ended June 30, 2022, net income decreased by 18.4%, from $5.9 million to $4.8 million.
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Critical Accounting Policies
Our financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States, which require the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. These accounting policies, methods, and estimates are an integral part of the financial statements prepared by management and are based upon management’s current judgments. Those judgments are normally based on knowledge and experience with regard to past and current events and assumptions about future events. Certain accounting policies, methods, and estimates are particularly sensitive because of their significance to the financial statements and because future events affecting them may differ markedly from management’s current judgment. For a discussion of the accounting policies that we believe are most critical to understanding our results of operations and financial position, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on
Liquidity and Capital Resources
We continually review our capital requirements to ensure that we have funding available to support our business model. Management anticipates that cash and other liquid assets on hand as of June 30,December 31, 2022, will be sufficient to meet our capital requirements for one year from the issuance date of this report, as well as our longer-term capital requirements for periods beyond one year from the issuance date of this report. To the extent that liquid resources and cash provided by operations are not adequate to meet long-term capital requirements, management plans to raise additional capital by either, or both, seeking to increase our borrowing capacitybank financing or accessing the capital markets, or by pursuing both of these options.markets. There can be no assurance that we will be able to raise additional capital.
Our total assets under management as of June 30,December 31, 2022, was $3.2$3.0 billion, a decrease of $0.96$1.1 billion, or 23.4%26.1%, compared to June 30,December 31, 2021. The primary sources of our revenue, liquidity, and cash flow are our investment advisory fees and shareholder service fees, which are based on and generated by our average assets under management. Our average assets under management for the ninethree months ended June 30,December 31, 2022, was $3.8$3.0 billion, a decrease of $0.2$1.1 billion, or 4.1%25.7%, compared to the ninethree months ended June 30,December 31, 2021. As of June 30,December 31, 2022, we had cash and cash equivalents of $57.5$57.1 million.
24
The following table summarizes key financial data relating to our liquidity and use of cash:
For the Nine Months Ended June 30, | ||||||||
2022 | 2021 | |||||||
(In thousands) | ||||||||
Net cash provided by operating activities | $ | 6,251 | $ | 7,214 | ||||
Net cash used in investing activities | (156 | ) | (182 | ) | ||||
Net cash provided by (used in) financing activities | 35,549 | (2,949 | ) | |||||
Net increase in cash and cash equivalents | $ | 41,644 | $ | 4,083 | ||||
For the Three Months Ended December 31, | ||||||||
2022 | 2021 | |||||||
(In thousands) | ||||||||
Net cash (used in) provided by operating activities | $ | (32 | ) | $ | 1,159 | |||
Net cash used in investing activities | (381 | ) | (57 | ) | ||||
Net cash (used in) provided by financing activities | (1,024 | ) | 37,564 | |||||
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Net (decrease) increase in cash and cash equivalents | $ | (1,437 | ) | $ | 38,666 | |||
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The decrease in cash provided by operating activities of $0.9$1.2 million was primarilymainly due to decreased operating income.
The decreaseincrease in cash used in investing activities of $0.03$0.3 million was due to decreased purchasesthe purchase of property and equipmentassets related to the management of the Stance ETF in the current period.
The increasedecrease in cash provided byfrom financing activities of $38.5$38.6 million was due to the issuance of the 2026 Notes on October 20, 2021.in the prior comparable period.
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Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Management performed an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as such term is defined in
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting as defined in
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PART II: OTHER INFORMATION
Item 6. | Exhibits |
Set forth below is a list of all exhibits to this Quarterly Report on
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101 | Financial statements from the Quarterly Report on Form 10-Q of Hennessy Advisors, Inc. for the quarter ended | |
104 | The cover page for the Company’s Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized:
HENNESSY ADVISORS, INC. | ||||||
Date: | By: | /s/ Teresa M. Nilsen | ||||
Teresa M. Nilsen | ||||||
President |
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