Hennessy Advisors Inc 10-Q for FY2020 Q2

Hennessy Advisors Inc 10-Q for FY2020 Q2

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Hennessy Advisors Inc (HNNA)

10-Q 2020-05-14 For: 2020-03-31

Added on April 06, 2026

Hennessy Advisors Inc filed this 10-Q on May 14, 2020, covering the quarter ended March 31, 2020 (FY2020 Q2).

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $8.88M; down 15.1% from $10.46M a year earlier
Net income: $1.97M; down 32.1% from net income of $2.9M a year earlier
Diluted EPS: $0.27; down 27.0% from $0.37 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	5

	Notes to Unaudited Condensed Financial Statements	6

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

Item 4	Controls and Procedures	27

PART II	Other Information

Item 1A	Risk Factors	28

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 6	Exhibits	29

	Signatures	30


	March 31, 2020		September 30, 2019
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	6,997	$	24,687
Investments in marketable securities, at fair value		8		9
Investment fee income receivable		2,450		3,291
Prepaid expenses		493		633
Other accounts receivable		342		392

Total current assets		10,290		29,012

Property and equipment, net of accumulated depreciation of $1,493 and $1,379, respectively		316		361
Operating lease right-of-use asset		463		—
Management contracts		80,643		80,643
Other assets		192		192

Total assets	$	91,904	$	110,208

Liabilities and Stockholders’ Equity
Current liabilities:
Accrued liabilities and accounts payable	$	3,102	$	5,538
Accrued purchase consideration payable		—		710
Current operating lease liability		439		—
Income taxes payable		711		672
Deferred rent		—		116
Current portion of long-term debt, net of debt issuance costs		—		4,327

Total current liabilities		4,252		11,363

Long-term debt, net of debt issuance costs and current portion		—		13,048
Long-term operating lease liability		113		—
Deferred income tax liability, net		11,219		10,269

Total liabilities		15,584		34,680

Commitments and Contingencies (Note 10)
Stockholders’ equity:
Common stock, no par value, 22,500,000 shares authorized; 7,261,323 shares issued and outstanding as of March 31, 2020, and 7,527,040 as of September 30, 2019		18,089		17,673
Retained earnings		58,231		57,855

Total stockholders’ equity		76,320		75,528

Total liabilities and stockholders’ equity	$	91,904	$	110,208


	Three Months Ended March 31,						Six Months Ended March 31,
	2020			2019			2020			2019
Revenue
Investment advisory fees	$	8,201		$	9,631		$	17,650		$	20,369
Shareholder service fees		678			825			1,473			1,731

Total revenue		8,879			10,456			19,123			22,100

Operating expenses
Compensation and benefits		2,414			2,752			4,927			5,652
General and administrative		1,288			1,335			2,780			2,852
Mutual fund distribution		115			106			254			229
Sub-advisory fees		2,008			2,251			4,324			4,695
Depreciation		61			54			114			109

Total operating expenses		5,886			6,498			12,399			13,537

Net operating income		2,993			3,958			6,724			8,563
Interest expense		260			299			447			609
Other income		(32	)		(84	)		(88	)		(162	)

Income before income tax expense		2,765			3,743			6,365			8,116
Income tax expense		795			843			1,767			2,149

Net income	$	1,970		$	2,900		$	4,598		$	5,967

Earnings per share
Basic	$	0.27		$	0.37		$	0.62		$	0.75

Diluted	$	0.27		$	0.37		$	0.62		$	0.75

Weighted average shares outstanding
Basic		7,363,938			7,918,281			7,432,918			7,916,059

Diluted		7,393,167			7,922,408			7,466,169			7,917,561

Cash dividends declared per share	$	0.14		$	0.11		$	0.28		$	0.22

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company


	Six Months Ended March 31, 2020
	Common Stock						Retained Earnings			Total Stockholders’ Equity
	Shares			Amount			Retained Earnings			Total Stockholders’ 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
Stock-based compensation		—			447			—			447
Shares repurchased pursuant to stock buyback program		(64,787	)		(128	)		(557	)		(685	)

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

Net income		—			—			1,970			1,970
Dividends declared		—			—			(1,011	)		(1,011	)
Shares issued for auto-investments pursuant to the 2018 Dividend Reinvestment and Stock Purchase Plan		46			—			—			—
Shares issued for dividend reinvestment pursuant to the 2018 Dividend Reinvestment and Stock Purchase Plan		1,835			18			—			18
Stock-based compensation		—			447			—			447
Shares repurchased pursuant to stock buyback program		(206,109	)		(406	)		(1,622	)		(2,028	)

Balance at March 31, 2020		7,261,323		$	18,089		$	58,231		$	76,320


	Six Months Ended March 31, 2019
	Common Stock						Retained Earnings			Total Stockholders’ Equity
	Shares			Amount			Retained Earnings			Total Stockholders’ 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

Net income		—			—			2,900			2,900
Dividends declared		—			—			(871	)		(871	)
Shares issued for auto-investments pursuant to the 2018 Dividend Reinvestment and Stock Purchase Plan		534			6			—			6
Shares issued for dividend reinvestment pursuant to the 2018 Dividend Reinvestment and Stock Purchase Plan		1,334			14			—			14
Stock-based compensation		—			557			—			557
Employee restricted stock forfeiture					(14	)					(14	)

Balance at March 31, 2019		7,919,394		$	17,900		$	58,417		$	76,317


	March 31, 2020
	(In thousands, except years)
Operating lease right-of-use assets	$	463
Current operating lease liability	$	439
Long-term operating lease liability	$	113
Weighted average remaining lease term		1.3
Weighted average discount rate		2.28	%


	(In thousands)
Remainder of fiscal year 2020	$	225
Fiscal year 2021		340

Total undiscounted cash flows		565
Present value discount		(13	)

Total operating lease liabilities	$	552


	March 31, 2020		September 30, 2019
	(In thousands)
Accrued bonus liabilities	$	1,981	$	3,888
Accrued sub-advisor fees		558		730
Other accrued expenses		563		920

Total accrued expenses	$	3,102	$	5,538


	Six Months Ended March 31, 2020
	Shares			Weighted Average Grant Date Fair Value per Share
Non-vested balance at beginning of period		313,669		$	12.22
Granted		—			—
Vested⁽¹⁾		(62,875	)		(14.23	)
Forfeited		—			—

Non-vested balance at end of period		250,794		$	11.72


	For the Six Months Ended March 31, 2020
	(In thousands, except years)
Total expected compensation expense related to RSUs	$	14,975
Recognized compensation expense related to RSUs at reporting date		(12,037	)

Unrecognized compensation expense related to RSUs at reporting date	$	2,938

Weighted average remaining years to expense for RSUs		2.6


	Fair Value Measurements as of March 31, 2020
	Level 1		Level 2		Level 3		Total
	(In thousands)
Money market fund deposits	$	4,553	$	—	$	—	$	4,553
Mutual fund investments		8		—		—		8

Total	$	4,561	$	—	$	—	$	4,561

Amounts included in:
Cash and cash equivalents	$	4,553	$	—	$	—	$	4,553
Investments in marketable securities		8		—		—		8

Total	$	4,561	$	—	$	—	$	4,561


	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


	3/31/2020			12/31/2019			9/30/2019			6/30/2019			3/31/2019
							(In thousands)
Beginning assets under management	$	4,978,502		$	4,873,839		$	5,013,075		$	5,135,937		$	4,887,547
Acquisition inflows		—			—			—			—			—
Organic inflows		161,368			187,057			130,352			142,155			242,566
Redemptions		(685,621	)		(334,103	)		(351,303	)		(458,197	)		(516,592	)
Market appreciation (depreciation)		(1,134,317	)		251,709			81,715			193,180			522,416

Ending assets under management	$	3,319,932		$	4,978,502		$	4,873,839		$	5,013,075		$	5,135,937


	Three Months Ended March 31,
	2020						2019
	Amounts			Percent of Total Revenue			Amounts			Percent of Total Revenue
	(In thousands, except percentages)
Revenue
Investment advisory fees	$	8,201			92.4	%	$	9,631			92.1	%
Shareholder service fees		678			7.6			825			7.9

Total revenue		8,879			100.0			10,456			100.0

Operating expenses
Compensation and benefits		2,414			27.2			2,752			26.3
General and administrative		1,288			14.5			1,335			12.8
Mutual fund distribution		115			1.3			106			1.0
Sub-advisory fees		2,008			22.6			2,251			21.5
Depreciation		61			0.7			54			0.5

Total operating expenses		5,886			66.3			6,498			62.1

Net operating income		2,993			33.7			3,958			37.9
Interest expense		260			2.9			299			2.9
Other income		(32	)		(0.3	)		(84	)		(0.8	)

Income before income tax expense		2,765			31.1			3,743			35.8
Income tax expense		795			8.9			843			8.1

Net income	$	1,970			22.2	%	$	2,900			27.7	%


	Six Months Ended March 31,
	2020						2019
	Amounts			Percent of Total Revenue			Amounts			Percent of Total Revenue
	(In thousands, except percentages)
Revenue
Investment advisory fees	$	17,650			92.3	%	$	20,369			92.2	%
Shareholder service fees		1,473			7.7			1,731			7.8

Total revenue		19,123			100.0			22,100			100.0

Operating expenses
Compensation and benefits		4,927			25.8			5,652			25.6
General and administrative		2,780			14.5			2,852			12.9
Mutual fund distribution		254			1.3			229			1.0
Sub-advisory fees		4,324			22.6			4,695			21.2
Depreciation		114			0.6			109			0.6

Total operating expenses		12,399			64.8			13,537			61.3

Net operating income		6,724			35.2			8,563			38.7
Interest expense		447			2.3			609			2.8
Other income		(88	)		(0.4	)		(162	)		(0.8	)

Income before income tax expense		6,365			33.3			8,116			36.7
Income tax expense		1,767			9.3			2,149			9.7

Net income	$	4,598			24.0	%	$	5,967			27.0	%


Three Months Ended March 31, 2020			Six Months Ended March 31, 2020
Fund Name	Amount		Fund Name	Amount
Hennessy BP Midstream Fund		$4 million	Hennessy Large Cap Financial Fund	$0.5 million
Hennessy Large Cap Financial Fund		$2 million


	For the Six Months Ended March 31,
	2020			2019
	(In thousands)
Net cash provided by operating activities	$	5,289		$	5,464
Net cash used in investing activities		(779	)		(1,858	)
Net cash used in financing activities		(22,200	)		(3,929	)

Net decrease in cash and cash equivalents	$	(17,690	)	$	(323	)


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
January 1-31, 2020⁽¹⁾		71,645	$	10.28		71,645		730,832
February 1-29, 2020⁽¹⁾		52,800		10.39		52,800		678,032
March 1-31, 2020⁽¹⁾		81,664		9.12		81,664		596,368

Total		206,109	$	9.85		206,109		596,368


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 March 31, 2020, filed on May 14, 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.


	HENNESSY ADVISORS, INC.

Date: May 14, 2020	By:	/s/ Teresa M. Nilsen
		Teresa M. Nilsen
		President