Hennessy Advisors(HNNA) - 2024 Q1 - Quarterly Report

Financial Performance - Total revenue for the three months ended December 31, 2023, was $6,144,000, slightly down from $6,145,000 in the same period of 2022, representing a decrease of 0.02%[14] - Net income for the three months ended December 31, 2023, was $1,200,000, an increase of 7.25% compared to $1,119,000 for the same period in 2022[14] - Earnings per share for the three months ended December 31, 2023, were $0.16, consistent with the same period in 2022[14] - Total operating expenses for the three months ended December 31, 2023, were $4,719,000, an increase of 3.95% compared to $4,540,000 in the same period of 2022[14] - Total revenue for the three months ended December 31, 2023, remained flat at $6.1 million, with investment advisory fees also flat at $5.7 million, while shareholder service fees decreased by 2.4%[87] - Total operating expenses increased by 3.9%, from $4.5 million to $4.7 million, and as a percentage of total revenue, operating expenses increased to 76.8%[94] - Net income for the three months ended December 31, 2023, was $1.2 million, representing 19.5% of total revenue, compared to $1.1 million, or 18.2%, for the same period in 2022[86] - Net income increased by 7.2%, from $1.1 million to $1.2 million, primarily due to increased interest income[110] Assets and Liabilities - Total current assets decreased to $62,889,000 as of December 31, 2023, from $63,701,000 as of September 30, 2023, a decline of 1.28%[12] - Total liabilities decreased to $56,845,000 as of December 31, 2023, from $57,967,000 as of September 30, 2023, a reduction of 1.93%[12] - Stockholders' equity increased to $88,161,000 as of December 31, 2023, from $87,752,000 as of September 30, 2023, an increase of 0.47%[12] - Cash and cash equivalents at the end of the period were $59,605,000, a decrease from $60,476,000 at the beginning of the period, representing a decline of 1.44%[21] - Accrued liabilities and accounts payable totaled $1,616,000 as of December 31, 2023, down from $3,165,000 as of September 30, 2023[53] - Total assets under management as of December 31, 2023, was $3.3 billion, an increase of $0.3 billion, or 9.0%, compared to December 31, 2022[82] Cash Flow - The company reported a net cash provided by operating activities of $416,000 for the three months ended December 31, 2023, compared to a net cash used of $32,000 in the same period of 2022[21] - Cash provided by operating activities increased by $0.4 million, primarily due to timing of cash payments and increased net income[117] - The company anticipates that cash and liquid assets will be sufficient to meet capital requirements for at least one year[114] Expenses - General and administrative expenses increased by 9.9%, from $1.6 million to $1.7 million, primarily due to increased professional services expense[96] - Fund distribution and other expenses increased by 56.8%, from $0.10 million to $0.15 million, as a percentage of total revenue increased to 2.4%[102] - Sub-advisory fees expense decreased by 6.0%, from $1.0 million to $0.9 million, representing 14.8% of total revenue, a decrease of 1.0 percentage point[104] - Depreciation expense increased by 40.8%, from $0.05 million to $0.07 million, accounting for 1.1% of total revenue[105] Shareholder Information - Cash dividends declared per share remained stable at $0.14 for both the three months ended December 31, 2023, and 2022[14] - The Company issued 2,770 shares under the Dividend Reinvestment and Stock Purchase Plan during the three months ended December 31, 2023[61] - The Company paid a quarterly cash dividend of $0.1375 per share on November 27, 2023[65] Market and Economic Conditions - The market is pricing in six rate cuts in 2024, indicating a potential shift in monetary policy[77] - The Japanese equity market increased by 8.00% in U.S. dollar terms over the three months ended December 31, 2023[78] Investment and Management - As of December 31, 2023, the Company completed an asset purchase adding approximately $12 million to its assets under management[36] - The Company reported total assets under management reflecting a valuation of $59.417 million as of December 31, 2023[47] - The Company has 16 Hennessy Mutual Funds and the Hennessy Stance ESG ETF under its investment advisory agreements[39] - The Company performed a qualitative analysis and determined there was no impairment of management contracts as of December 31, 2023[34] - The management contract asset had a net balance of $81.5 million as of December 31, 2023, compared to $81.3 million as of September 30, 2023[83] - The average daily net assets of the Hennessy Funds for both the three months ended December 31, 2023, and 2022, remained unchanged at $3.0 billion[89] Taxation - The effective income tax rate for the three months ended December 31, 2023, was 27.0%, compared to 25.8% for the same period in 2022[56] Other Financial Information - The Company has unrecognized compensation expense related to RSUs amounting to $2,140,000 as of December 31, 2023[60] - The Company completed a public offering of 4.875% notes due 2026 with an aggregate principal amount of $40,250,000[54] - The fair value of the 2026 Notes was approximately $38.2 million as of December 31, 2023[48] - The weighted average common shares outstanding for basic earnings per share increased to 7,672,191 in Q4 2023 from 7,572,454 in Q4 2022[64] - The weighted average remaining lease term for the Company's operating lease right-of-use assets is 0.6 years[51] - The Company recognized rent expense for all offices totaling $0.1 million for the three months ended December 31, 2023[51] - The Company has no long-term operating leases as of December 31, 2023[49] - Total operating lease liabilities as of December 31, 2023, amounted to $186,000[52] - Interest income rose from $0.47 million to $0.79 million, attributed to higher interest rates and an increased cash balance[107][108] - Interest expense slightly increased from $0.56 million to $0.57 million due to accounting principles related to the 2026 Notes[106] - No changes in internal control over financial reporting were reported during the fiscal quarter ended December 31, 2023[120]