Hennessy Advisors(HNNA) - 2026 Q1 - Quarterly Report

Financial Performance - Total revenue for the three months ended December 31, 2025, was $8,320,000, a decrease of 14.3% compared to $9,708,000 for the same period in 2024[13] - Net income for the three months ended December 31, 2025, was $1,930,000, down 31.8% from $2,834,000 in the prior year[13] - Earnings per share (EPS) for the three months ended December 31, 2025, was $0.24, compared to $0.36 for the same period in 2024[13] - Investment advisory fees decreased by 14.3% to $7.8 million, while shareholder service fees decreased by 13.6% to $0.56 million[90] - Net income for the three months ended December 31, 2025, was $1.93 million, representing 23.2% of total revenue, down from $2.83 million, or 29.2%, in the prior year[89] - Net income decreased by 31.9%, from $2.8 million to $1.9 million, primarily due to decreased revenue[114] Assets and Liabilities - Total current assets decreased to $76,013,000 as of December 31, 2025, from $76,515,000 as of September 30, 2025[11] - Total liabilities decreased to $60,645,000 as of December 31, 2025, from $62,723,000 as of September 30, 2025[11] - Cash and cash equivalents at the end of the period were $71,967,000, down from $72,431,000 at the beginning of the period[19] - Total accrued liabilities and accounts payable as of December 31, 2025, amounted to $2.161 million, a decrease from $4.864 million as of September 30, 2025[48] - The principal liability on the balance sheet, the 2026 Notes, was $39.9 million as of December 31, 2025[82] Operating Expenses - Operating expenses for the three months ended December 31, 2025, were $5,716,000, a slight decrease from $5,878,000 in the same period in 2024[13] - Total operating expenses decreased by 2.8% from $5.9 million to $5.7 million, but as a percentage of total revenue, increased to 68.7%[99] - General and administrative expense increased by 15.8%, from $1.7 million to $1.9 million, representing 23.0% of total revenue, an increase of 1.9 percentage points[101] - Fund distribution and other expense decreased by 18.1%, from $0.3 million to $0.2 million, maintaining 2.7% of total revenue[107] - Sub-advisory fees expense decreased by 7.9%, from $1.1 million to $1.0 million, with an increase of 0.8 percentage points to 12.5% of total revenue[108] - Depreciation expense increased by 8.2%, from $0.06 million to $0.07 million, accounting for 0.8% of total revenue, an increase of 0.2 percentage points[109] Dividends and Shareholder Actions - The company declared cash dividends of $0.14 per share for both the three months ended December 31, 2025, and 2024[13] - The company issued 1,976 shares for dividend reinvestment during the three months ended December 31, 2025[15] - The Company issued 1,976 shares under the Dividend Reinvestment and Stock Purchase Plan during the three months ended December 31, 2025, with 1,511,452 shares remaining available for issuance[57] - The stock buyback program allows for the repurchase of up to 2,000,000 shares, with 1,096,368 shares remaining available as of December 31, 2025[58] - The Company paid a quarterly cash dividend of $0.1375 per share on November 26, 2025[60] Market and Economic Conditions - The Dow Jones Industrial Average increased by 4.03% for the three months ended December 31, 2025, driven by earnings growth and expectations of supportive monetary policy[74] - The unemployment rate was 4.6% as of November 2025, up from 4.2% a year earlier, indicating a slight increase in labor market challenges[75] Business Strategy and Management - The Company’s business strategy focuses on future acquisitions and organic growth through retention of fund assets and generation of inflows[71] - The Company recognized revenues based on contractual percentages of net asset values of Hennessy Funds, with fees affected by market appreciation or depreciation and net inflows or outflows of shareholders[29] - The Company has investment advisory agreements with Hennessy Funds Trust for 16 mutual funds and the Hennessy Sustainable ETF, with fees based on average daily net asset values[35] - The Company has completed 12 purchases of management assets related to 33 investment funds, some reorganized into existing Hennessy Funds[32] - The Company monitors compliance programs and oversees service providers, ensuring adherence to investment objectives and regulatory requirements[31] Shareholder Equity and Compensation - As of December 31, 2025, the non-vested balance of RSUs was 395,365 shares, with an unrecognized compensation expense of $3.019 million and a weighted average remaining vesting period of 1.5 years[56] - The Company adopted the 2024 Omnibus Incentive Plan, replacing the previous plan, allowing for RSUs that vest over four years at a rate of 25% per year[55] Taxation - The effective income tax rates for the three months ended December 31, 2025, and 2024, were 28.0% and 28.6%, respectively[51] - Income tax expense decreased by 33.9%, from $1.1 million to $0.7 million, due to lower net operating income and a reduced effective income tax rate[113]