Hennessy Advisors Inc 10-Q for FY2020 Q1

Hennessy Advisors Inc 10-Q for FY2020 Q1

About this 10-Q

About this 10-Q

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Table of Contents

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Table of Contents

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Hennessy Advisors Inc (HNNA)

10-Q 2020-02-11 For: 2019-12-31

Added on April 06, 2026

Hennessy Advisors Inc filed this 10-Q on February 11, 2020, covering the quarter ended December 31, 2019 (FY2020 Q1).

Quarter ended December 31, 2019, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $10.24M; down 12.0% from $11.64M a year earlier
Net income: $2.63M; down 14.3% from net income of $3.07M a year earlier
Diluted EPS: $0.35; down 10.3% from $0.39 a year earlier

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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)



PART I	Financial Information

Item 1	Unaudited Condensed Financial Statements	1

	Balance Sheets	1

	Statements of Income	2

	Statements of Changes in Stockholders’ Equity	3

	Statements of Cash Flows	4

	Notes to Unaudited Condensed Financial Statements	5

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 4	Controls and Procedures	24

PART II	Other Information

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 6	Exhibits	25

	Signatures	26


	December 31, 2019		September 30, 2019
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	22,455	$	24,687
Investments in marketable securities, at fair value		9		9
Investment fee income receivable		3,484		3,291
Prepaid expenses		528		633
Other accounts receivable		449		392

Total current assets		26,925		29,012

Property and equipment, net of accumulated depreciation of $1,432 and $1,379, respectively		342		361
Operating lease right-of-use asset		558		—
Management contracts		80,643		80,643
Other assets		192		192

Total assets	$	108,660	$	110,208

Liabilities and Stockholders’ Equity
Current liabilities:
Accrued liabilities and accounts payable	$	2,742	$	5,538
Accrued purchase consideration payable		—		710
Current operating lease liability		439		—
Income taxes payable		1,368		672
Deferred rent		—		116
Current portion of long-term debt, net of debt issuance costs		4,327		4,327

Total current liabilities		8,876		11,363

Long-term debt, net of debt issuance costs and current portion		11,967		13,048
Long-term operating lease liability		221		—
Deferred income tax liability, net		10,672		10,269

Total liabilities		31,736		34,680

Commitments and Contingencies (Note 9)
Stockholders’ equity:
Common stock, no par value, 22,500,000 shares authorized; 7,465,551 shares issued and outstanding as of December 31, 2019, and 7,527,040 as of September 30, 2019		18,030		17,673
Retained earnings		58,894		57,855

Total stockholders’ equity		76,924		75,528

Total liabilities and stockholders’ equity	$	108,660	$	110,208


	Three Months Ended December 31,
	2019			2018
Revenue
Investment advisory fees	$	9,449		$	10,738
Shareholder service fees		795			906

Total revenue		10,244			11,644

Operating expenses
Compensation and benefits		2,513			2,900
General and administrative		1,492			1,517
Mutual fund distribution		139			123
Sub-advisory fees		2,316			2,444
Depreciation		53			55

Total operating expenses		6,513			7,039

Net operating income		3,731			4,605
Interest expense		187			310
Other income		(56	)		(78	)

Income before income tax expense		3,600			4,373
Income tax expense		972			1,306

Net income	$	2,628		$	3,067

Earnings per share
Basic	$	0.35		$	0.39

Diluted	$	0.35		$	0.39

Weighted average shares outstanding
Basic		7,501,147			7,913,894

Diluted		7,537,716			7,916,870

Cash dividends declared per share	$	0.14		$	0.11

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company


	Three Months Ended December 31, 2019
										Total
	Common Stock						Retained			Stockholders’
	Shares			Amount			Earnings			Equity
Balance at September 30, 2019		7,527,040		$	17,673		$	57,855		$	75,528
Net income		—			—			2,628			2,628
Dividends declared		—			—			(1,032	)		(1,032	)
Shares issued for auto-investments pursuant to the 2018 Dividend Reinvestment and Stock Purchase Plan		1,702			20			—			20
Shares issued for dividend reinvestment pursuant to the 2018 Dividend Reinvestment and Stock Purchase Plan		1,596			18			—			18
Shares repurchased pursuant to a stock buyback program		(64,787	)		(128	)		(557	)		(685	)
Stock-based compensation		—			447			—			447

Balance at December 31, 2019		7,465,551		$	18,030		$	58,894		$	76,924


	Three Months Ended December 31, 2018
										Total
	Common Stock						Retained			Stockholders’
	Shares			Amount			Earnings			Equity
Balance at September 30, 2018		7,897,145		$	16,783		$	54,197		$	70,980
Net income		—			—			3,067			3,067
Dividends declared		—			—			(871	)		(871	)
Employee and director restricted stock vested		21,563			—			—			—
Repurchase of vested employee restricted stock for tax withholding		(2,685	)		(31	)		(5	)		(36	)
Shares issued for auto-investments pursuant to the 2018 Dividend Reinvestment and Stock Purchase Plan		296			4			—			4
Shares issued for dividend reinvestment pursuant to the 2018 Dividend Reinvestment and Stock Purchase Plan		1,207			13			—			13
Stock-based compensation		—			568			—			568

Balance at December 31, 2018		7,917,526		$	17,337		$	56,388		$	73,725


	December 31, 2019
	(In thousands, except years)
Operating lease right-of-use assets	$	558
Current operating lease liability	$	439
Long-term operating lease liability	$	221
Weighted average remaining lease term		1.5
Weighted average discount rate		2.28	%


	(In thousands)
Remainder of fiscal year 2020	$	334
Fiscal year 2021		341

Total undiscounted cash flows		675
Present value discount		(15	)

Total operating lease liabilities	$	660


	Three Months Ended December 31, 2019
	Shares			Weighted Average Grant Date Fair Value per Share
Non-vested balance at beginning of year		313,669		$	12.22
Granted		—			—
Vested (1)		(31,437	)		(14.23	)
Forfeited		—			—

Non-vested balance at end of year		282,232		$	12.00


	For the Three Months Ended December 31, 2019
	(In thousands, except years)
Total expected compensation expense related to RSUs	$	14,975
Recognized compensation expense related to RSUs at reporting date		(11,590	)

Unrecognized compensation expense related to RSUs at reporting date	$	3,385

Weighted average remaining period to expense for RSUs		2.8


	Fair Value Measurements as of December 31, 2019
	Level 1		Level 2		Level 3		Total
	(In thousands)
Money market fund deposits	$	19,871	$	—	$	—	$	19,871
Mutual fund investments		9		—		—		9

Total	$	19,880	$	—	$	—	$	19,880

Amounts included in:
Cash and cash equivalents	$	19,871	$	—	$	—	$	19,871
Investments in marketable securities		9		—		—		9

Total	$	19,880	$	—	$	—	$	19,880


	Fair Value Measurements as of September 30, 2019
	Level 1		Level 2		Level 3		Total
	(In thousands)
Money market fund deposits	$	21,816	$	—	$	—	$	21,816
Mutual fund investments		9		—		—		9

Total	$	21,825	$	—	$	—	$	21,825

Amounts included in:
Cash and cash equivalents	$	21,816	$	—	$	—	$	21,816
Investments in marketable securities		9		—		—		9

Total	$	21,825	$	—	$	—	$	21,825


	12/31/2019			9/30/2019			6/30/2019			3/31/2019			12/31/2018
	(In thousands)
Beginning assets under management	$	4,873,839		$	5,013,075		$	5,135,937		$	4,887,547		$	6,197,617
Acquisition inflows		—			—			—			—			194,948
Organic inflows		187,057			130,352			142,155			242,566			310,468
Redemptions		(334,103	)		(351,303	)		(458,197	)		(516,592	)		(1,048,642	)
Market appreciation (depreciation)		251,709			81,715			193,180			522,416			(766,844	)

Ending assets under management	$	4,978,502		$	4,873,839		$	5,013,075		$	5,135,937		$	4,887,547


Three Months Ended December 31, 2019
Fund Name	Amount
Hennessy Japan Fund	$	17 million
Hennessy Focus Fund	$	11 million
Hennessy Technology Fund	$	0.09 million


	For the Three Months Ended December 31,
	2019			2018
	(In thousands)
Net cash provided by operating activities	$	1,285		$	1,832
Net cash used in investing activities		(744	)		(1,797	)
Net cash used in financing activities		(2,773	)		(1,984	)

Net decrease in cash and cash equivalents	$	(2,232	)	$	(1,949	)


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
October 1-31, 2019 (1)		26,907	$	10.93		26,907		840,357
November 1-30, 2019		—		—		—		840,357
December 1-31, 2019 (1)		37,880		10.32		37,880		802,477

Total		64,787	$	10.57		64,787		802,477



31.1		Rule 13a-14a Certification of the Principal Executive Officer.

31.2		Rule 13a-14a Certification of the Principal Financial Officer.

32.1		Written Statement of the Principal Executive Officer, Pursuant to 18 U.S.C. § 1350.

32.2		Written Statement of the Principal Financial Officer, Pursuant to 18 U.S.C. § 1350.

101		Financial statements from the Quarterly Report on Form 10-Q of Hennessy Advisors, Inc. for the quarter ended December 31, 2019, filed on February 11, 2020, formatted in XBRL: (i) the Condensed Balance Sheets; (ii) the Condensed Statements of Income; (iii) the Condensed Statements of Changes in Stockholders’ Equity; (iv) the Condensed Statements of Cash Flows; and (v) the Notes to Unaudited Condensed Financial Statements.