Hennessy Advisors(HNNA) - 2025 Q3 - Quarterly Report

PART I - Financial Information Item 1 - Unaudited Condensed Financial Statements This section presents the unaudited condensed financial statements for Hennessy Advisors, Inc., including the Balance Sheets, Statements of Income, Statements of Changes in Stockholders' Equity, and Statements of Cash Flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial items for the periods ended June 30, 2025, and September 30, 2024 Balance Sheets Balance Sheets (in thousands) | Metric | June 30, 2025 (in thousands) | September 30, 2024 (in thousands) | Change (vs. Sep 30, 2024) | | :-------------------------------- | :----------------------------- | :-------------------------------- | :-------------------------- | | Cash and cash equivalents | $70,319 | $63,922 | +$6,397 | | Total current assets | $74,187 | $68,276 | +$5,911 | | Management contracts | $82,438 | $82,252 | +$186 | | Total assets | $158,005 | $152,099 | +$5,906 | | Total current liabilities | $4,763 | $4,954 | -$191 | | Notes payable, net | $39,723 | $39,477 | +$246 | | Total liabilities | $61,455 | $60,788 | +$667 | | Total stockholders' equity | $96,550 | $91,311 | +$5,239 | Statements of Income Statements of Income (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change (3M) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | YoY Change (9M) | | :-------------------- | :------------------------------- | :------------------------------- | :-------------- | :------------------------------ | :------------------------------ | :-------------- | | Investment advisory fees | $7,508 | $7,242 | +3.7% | $25,242 | $19,343 | +30.5% | | Shareholder service fees | $546 | $542 | +0.7% | $1,796 | $1,525 | +17.8% | | Total revenue | $8,054 | $7,784 | +3.5% | $27,038 | $20,868 | +29.6% | | Total operating expenses | $5,205 | $5,199 | +0.1% | $16,908 | $14,939 | +13.2% | | Net operating income | $2,849 | $2,585 | +10.2% | $10,130 | $5,929 | +70.9% | | Net income | $2,121 | $2,029 | +4.5% | $7,538 | $4,769 | +58.1% | | Basic EPS | $0.27 | $0.26 | +3.8% | $0.97 | $0.62 | +56.5% | | Diluted EPS | $0.26 | $0.26 | 0.0% | $0.95 | $0.62 | +53.2% | | Cash dividends declared per share | $0.14 | $0.14 | 0.0% | $0.41 | $0.41 | 0.0% | Statements of Changes in Stockholders' Equity Statements of Changes in Stockholders' Equity (in thousands) | Metric (in thousands) | Balance at Sep 30, 2024 | Balance at Jun 30, 2025 | Change | | :-------------------- | :---------------------- | :---------------------- | :----- | | Common Stock Amount | $22,592 | $23,504 | +$912 | | Retained Earnings | $68,719 | $73,046 | +$4,327 | | Total Stockholders' Equity | $91,311 | $96,550 | +$5,239 | - The increase in common stock amount is primarily due to stock-based compensation and shares issued for dividend reinvestment and auto-investments under the DRSPP[16] Statements of Cash Flows Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :------------------------------ | :------------------------------ | :--------- | | Net cash provided by operating activities | $9,995 | $5,841 | +$4,154 | | Net cash used in investing activities | ($451) | ($1,203) | +$752 | | Net cash used in financing activities | ($3,147) | ($3,097) | -$50 | | Net increase in cash and cash equivalents | $6,397 | $1,541 | +$4,856 | | Cash and cash equivalents at end of period | $70,319 | $62,017 | +$8,302 | - The significant increase in net cash provided by operating activities is primarily due to increased net income in the current period[20] - The decrease in cash used in investing activities is mainly due to lower costs associated with asset purchases compared to the prior comparable period[20] Notes to Unaudited Condensed Financial Statements - Hennessy Advisors, Inc. primarily provides investment advisory services to 16 open-end mutual funds and one ETF, branded as the Hennessy Funds, and also offers shareholder services[25] - The Company's operating revenues are derived from contractual investment advisory and shareholder service fees, calculated daily as a percentage of the net asset values of the Hennessy Funds[26][29] - The Company completed asset purchases related to the CCM Small/Mid-Cap Impact Value Fund and CCM Core Impact Equity Fund in November 2023 and February 2024, respectively, adding approximately $71 million to assets under management[34] - The Company capitalized $0.2 million in costs for the pending purchase of assets related to the STF Tactical Growth & Income ETF and STF Tactical Growth ETF, expected to close in Q3 2025[35][67] - The Company's effective income tax rates for the nine months ended June 30, 2025 and 2024, were 28.1% and 27.2%, respectively[51] - The 2024 Omnibus Incentive Plan replaced the 2013 plan, granting restricted stock units (RSUs) that vest over four years. Unrecognized compensation expense related to RSUs was $2.017 million as of June 30, 2025[55][56] - The Company adopted a new Dividend Reinvestment and Stock Purchase Plan (DRSPP) in January 2024, with 1,515,102 shares remaining available for issuance as of June 30, 2025[57] - The Company's stock buyback program has 1,096,368 shares remaining available for repurchase, with no repurchases made during the nine months ended June 30, 2025[58] - The Company paid a quarterly cash dividend of $0.1375 per share on June 4, 2025[60] - The Company is evaluating the impact of new FASB ASUs on Segment Reporting (ASU 2023-07, effective FY2025), Income Tax Disclosures (ASU 2023-09, effective FY2026), and Income Statement Expense Disaggregation (ASU 2024-03, effective FY2027)[62][63][64] Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations, including an overview of its business activities, market conditions, assets under management, liquidity, and a detailed analysis of revenue and expenses for the three and nine months ended June 30, 2025, compared to the prior year Forward-Looking Statements - The report contains forward-looking statements subject to risks, uncertainties, and assumptions, as detailed in the Annual Report on Form 10-K[69][70] - Business activities are influenced by factors such as investor redemptions, economic conditions, interest rates, inflation, competition, and regulatory changes[71](