Hennessy Advisors Inc 10-Q for FY2020 Q3

Hennessy Advisors Inc 10-Q for FY2020 Q3

About this 10-Q

About this 10-Q

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Hennessy Advisors Inc (HNNA)

10-Q 2020-08-06 For: 2020-06-30

Added on April 06, 2026

Hennessy Advisors Inc filed this 10-Q on August 6, 2020, covering the quarter ended June 30, 2020 (FY2020 Q3).

Quarter ended June 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $6.9M; down 34.0% from $10.44M a year earlier
Net income: $1.78M; down 33.2% from net income of $2.66M a year earlier
Diluted EPS: $0.24; down 29.4% from $0.34 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	17

Item 4	Controls and Procedures	28

PART II	Other Information

Item 1A	Risk Factors	29

Item 6	Exhibits	30

	Signatures	31


	June 30, 2020		September 30, 2019
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	8,708	$	24,687
Investments in marketable securities, at fair value		9		9
Investment fee income receivable		2,394		3,291
Prepaid expenses		421		633
Other accounts receivable		286		392

Total current assets		11,818		29,012

Property and equipment, net of accumulated depreciation of $1,557 and $1,379, respectively		288		361
Operating lease right-of-use asset		369		—
Management contracts		80,643		80,643
Other assets		192		192

Total assets	$	93,310	$	110,208

Liabilities and Stockholders’ Equity
Current liabilities
Accrued liabilities and accounts payable	$	3,213	$	5,538
Accrued purchase consideration payable		—		710
Current operating lease liability		441		—
Income taxes payable		815		672
Deferred rent		—		116
Current portion of long-term debt, net of debt issuance costs		—		4,327

Total current liabilities		4,469		11,363

Long-term debt, net of debt issuance costs and current portion		—		13,048
Deferred income tax liability, net		11,276		10,269

Total liabilities		15,745		34,680

Commitments and Contingencies (Note 10)
Stockholders’ equity
Common stock, no par value, 22,500,000 shares authorized; 7,263,781 shares issued and outstanding as of June 30, 2020, and 7,527,040 as of September 30, 2019		18,557		17,673
Retained earnings		59,008		57,855

Total stockholders’ equity		77,565		75,528

Total liabilities and stockholders’ equity	$	93,310	$	110,208


	Three Months Ended June 30,						Nine Months Ended June 30,
	2020			2019			2020			2019
Revenue
Investment advisory fees	$	6,366		$	9,617		$	24,016		$	29,986
Shareholder service fees		529			825			2,002			2,556

Total revenue		6,895			10,442			26,018			32,542

Operating expenses
Compensation and benefits		1,797			2,676			6,724			8,328
General and administrative		1,074			1,360			3,854			4,212
Mutual fund distribution		109			126			363			355
Sub-advisory fees		1,569			2,285			5,893			6,980
Depreciation		63			56			177			165

Total operating expenses		4,612			6,503			17,011			20,040

Net operating income		2,283			3,939			9,007			12,502
Interest expense		—			257			447			866
Other income		(1	)		(93	)		(89	)		(255	)

Income before income tax expense		2,284			3,775			8,649			11,891
Income tax expense		509			1,118			2,276			3,267

Net income	$	1,775		$	2,657		$	6,373		$	8,624

Earnings per share
Basic	$	0.24		$	0.34		$	0.86		$	1.10

Diluted	$	0.24		$	0.34		$	0.86		$	1.10

Weighted average shares outstanding
Basic		7,262,042			7,706,654			7,376,167			7,846,257

Diluted		7,279,294			7,725,079			7,404,578			7,852,352

Cash dividends declared per share	$	0.14		$	0.11		$	0.41		$	0.33

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company


	Nine Months Ended June 30, 2020
										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
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

Net income		—			—			1,775			1,775
Dividends declared		—			—			(998	)		(998	)
Shares issued for auto-investments pursuant to the 2018 Dividend Reinvestment and Stock Purchase Plan		187			2			—			2
Shares issued for dividend reinvestment pursuant to the 2018 Dividend Reinvestment and Stock Purchase Plan		2,271			19			—			19
Stock-based compensation		—			447			—			447

Balance at June 30, 2020		7,263,781		$	18,557		$	59,008		$	77,565


	Nine Months Ended June 30, 2019
										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

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

Net income		—			—			2,657			2,657
Dividends declared		—			—			(825	)		(825	)
Shares issued for auto-investments pursuant to the 2018 Dividend Reinvestment and Stock Purchase Plan		724			7			—			7
Shares issued for dividend reinvestment pursuant to the 2018 Dividend Reinvestment and Stock Purchase Plan		1,506			14			—			14
Shares repurchased pursuant to a stock buyback program		(422,692	)		(835	)		(3,181	)		(4,016	)
Stock-based compensation		—			542			—			542
Employee restricted stock forfeiture		—			(14	)		—			(14	)

Balance at June 30, 2019		7,498,932		$	17,614		$	57,068		$	74,682


	June 30, 2020
	(In thousands, except years and percentages)
Operating lease right-of-use assets	$	369
Current operating lease liability	$	441
Long-term operating lease liability	$	—
Weighted average remaining lease term		1.0
Weighted average discount rate		2.28	%


	(In thousands)
Remainder of fiscal year 2020	$	113
Fiscal year 2021		340

Total undiscounted cash flows		453
Present value discount		(12	)

Total operating lease liabilities	$	441


	June 30, 2020		September 30, 2019
	(In thousands)
Accrued bonus liabilities	$	2,079	$	3,888
Accrued sub-advisor fees		542		730
Other accrued expenses		592		920

Total accrued expenses	$	3,213	$	5,538


	Nine Months Ended June 30, 2020
	Shares			Weighted Average Grant Date Fair Value per Share
Non-vested balance at beginning of period		313,669		$	12.22
Granted		—			—
Vested ⁽¹⁾		(94,312	)		(14.23	)
Forfeited		—			—

Non-vested balance at end of period		219,357		$	11.35


	For the Nine Months Ended June 30, 2020
	(In thousands, except years)
Total expected compensation expense related to RSUs	$	14,975
Recognized compensation expense related to RSUs at reporting date		(12,484	)

Unrecognized compensation expense related to RSUs at reporting date	$	2,491

Weighted average remaining years to expense for RSUs		2.4


	Fair Value Measurements as of June 30, 2020
	Level 1		Level 2		Level 3		Total
	(In thousands)
Money market fund deposits	$	4,553	$	—	$	—	$	4,553
Mutual fund investments		9		—		—		9

Total	$	4,562	$	—	$	—	$	4,562

Amounts included in:
Cash and cash equivalents	$	4,553	$	—	$	—	$	4,553
Investments in marketable securities		9		—		—		9

Total	$	4,562	$	—	$	—	$	4,562


	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


	Fiscal Quarters Ended
	June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019			June 30, 2019
	(In thousands)
Beginning assets under management	$	3,319,932		$	4,978,502		$	4,873,839		$	5,013,075		$	5,135,937
Acquisition inflows		—			—			—			—			—
Organic inflows		104,742			161,368			187,057			130,352			142,155
Redemptions		(471,129	)		(685,621	)		(334,103	)		(351,303	)		(458,197	)
Market appreciation (depreciation)		538,223			(1,134,317	)		251,709			81,715			193,180

Ending assets under management	$	3,491,768		$	3,319,932		$	4,978,502		$	4,873,839		$	5,013,075


Three Months Ended June 30, 2020
Fund Name	Amount
Hennessy Focus Fund	$	(158) million
Hennessy Japan Fund	$	(94) million
Hennessy Gas Utility Fund	$	(43) million


	For the Nine Months Ended June 30,
	2020			2019
	(In thousands)
Net cash provided by operating activities	$	8,012		$	10,220
Net cash used in investing activities		(814	)		(1,946	)
Net cash used in financing activities		(23,177	)		(9,921	)

Net decrease in cash and cash equivalents	$	(15,979	)	$	(1,647	)


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 June 30, 2020, filed on August 6, 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.