Hennessy Advisors Inc 10-Q for FY2024 Q1
Hennessy Advisors Inc (HNNA)
About this 10-Q
Hennessy Advisors Inc filed this 10-Q on February 8, 2024, covering the quarter ended December 31, 2023 (FY2024 Q1).
Headline figures
Quarter ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $6.14M
- unchanged from $6.15M a year earlier
- Net income
- $1.2M
- up 7.2% from net income of $1.12M a year earlier
- Diluted EPS
- $0.16
- up 6.7% from $0.15 a year earlier
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the Quarterly Period Ended
For the transition period from _____ to _____
Commission File Number
HENNESSY ADVISORS, INC.
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (IRS Employer |
| incorporation or organization) | Identification No.) |
| (Address of principal executive office) | (Zip code) |
(
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange |
| | | The |
| | | The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | |||
| Smaller reporting company | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
As of February 5, 2024, there were
HENNESSY ADVISORS, INC.
| PART I |
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| Item 1 |
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| Item 2 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 4 |
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| PART II |
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| Item 1A | Risk Factors | 24 |
| Item 5 | Other Information | 24 |
| Item 6 |
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Item 1: Unaudited Condensed Financial Statements
(In thousands, except share and per share amounts)
(Unaudited)
| December 31, | September 30, | |||||||
| 2023 | 2023 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Investments in marketable securities, at fair value | ||||||||
| Investment fee income receivable | ||||||||
| Interest income receivable | ||||||||
| Prepaid expenses | ||||||||
| Other accounts receivable | ||||||||
| Total current assets | ||||||||
| Property and equipment, net of accumulated depreciation of $ and $, respectively | ||||||||
| Operating lease right-of-use asset | ||||||||
| Management contracts | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities | ||||||||
| Accrued liabilities and accounts payable | $ | $ | ||||||
| Operating lease liability | ||||||||
| Income taxes payable | ||||||||
| Total current liabilities | ||||||||
| Notes payable, net of issuance costs | ||||||||
| Net deferred income tax liability | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 9) | ||||||||
| Stockholders' equity | ||||||||
| Common stock, par value, shares authorized; shares issued and outstanding as of December 31, 2023, and as of September 30, 2023 | ||||||||
| Retained earnings | ||||||||
| Total stockholders' equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
See Notes to Unaudited Condensed Financial Statements
(In thousands, except share and per share amounts)
(Unaudited)
| Three Months Ended December 31, | ||||||||
| 2023 |
2022 |
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| Revenue |
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| Investment advisory fees |
$ | $ | ||||||
| Shareholder service fees |
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| Total revenue |
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| Operating expenses |
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| Compensation and benefits |
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| General and administrative |
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| Fund distribution and other |
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| Sub-advisory fees |
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| Depreciation |
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| Total operating expenses |
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| Net operating income |
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| Interest expense |
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| Interest income |
( |
) | ( |
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| Income before income tax expense |
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| Income tax expense |
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| Net income |
$ | $ | ||||||
| Earnings per share |
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| Basic |
$ | $ | ||||||
| Diluted |
$ | $ | ||||||
| Weighted average shares outstanding |
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| Basic |
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| Diluted |
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| Cash dividends declared per share |
$ | $ | ||||||
See Notes to Unaudited Condensed Financial Statements
Statements of Changes in Stockholders' Equity
(In thousands, except share data)
(Unaudited)
| Three Months Ended December 31, 2023 |
||||||||||||||||
| Total |
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| Common Stock |
Retained |
Stockholders' |
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| Shares |
Amount |
Earnings |
Equity |
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| Balance at September 30, 2023 |
$ | $ | $ | |||||||||||||
| Net income |
- | |||||||||||||||
| Dividends paid |
- | ( |
) | ( |
) | |||||||||||
| Shares issued for auto-investments pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan |
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| Shares issued for dividend reinvestment pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan |
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| Stock-based compensation |
- | |||||||||||||||
| Balance at December 31, 2023 |
$ | $ | $ | |||||||||||||
Statements of Changes in Stockholders' Equity
(In thousands, except share data)
(Unaudited)
| Three Months Ended December 31, 2022 |
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| Total |
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| Common Stock |
Retained |
Stockholders' |
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| Shares |
Amount |
Earnings |
Equity |
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| Balance at September 30, 2022 |
$ | $ | $ | |||||||||||||
| Net income |
- | |||||||||||||||
| Dividends paid |
- | ( |
) | ( |
) | |||||||||||
| Shares issued for auto-investments pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan |
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| Shares issued for dividend reinvestment pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan |
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| Stock-based compensation |
- | |||||||||||||||
| Balance at December 31, 2022 |
$ | $ | $ | |||||||||||||
See Notes to Unaudited Condensed Financial Statements
(In thousands)
(Unaudited)
| Three Months Ended December 31, | ||||||||
| 2023 |
2022 |
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| Cash flows from operating activities |
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| Net income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities |
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| Depreciation |
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| Unrealized gain on marketable securities |
( |
) | ( |
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| Change in right-of-use asset and operating lease liability |
( |
) | ( |
) | ||||
| Amortization of note issuance costs |
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| Deferred income taxes |
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| Stock-based compensation |
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| Change in operating assets and liabilities |
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| Investment fee income receivable |
( |
) | ( |
) | ||||
| Interest income receivable |
( |
) | ( |
) | ||||
| Prepaid expenses |
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| Other accounts receivable |
( |
) | ||||||
| Other assets |
( |
) | ( |
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| Accrued liabilities and accounts payable |
( |
) | ( |
) | ||||
| Income taxes payable |
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| Net cash provided by (used in) operating activities |
( |
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| Cash flows from investing activities |
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| Purchases of property and equipment |
( |
) | ( |
) | ||||
| Payments related to management contracts |
( |
) | ( |
) | ||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| Cash flows from financing activities |
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| Proceeds from shares issued pursuant to the 2021 Dividend Reinvestment and Stock Repurchase Plan |
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| Dividend payments |
( |
) | ( |
) | ||||
| Net cash used in financing activities |
( |
) | ( |
) | ||||
| Net decrease in cash and cash equivalents |
( |
) | ( |
) | ||||
| Cash and cash equivalents at the beginning of the period |
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| Cash and cash equivalents at the end of the period |
$ | $ | ||||||
| Supplemental disclosures of cash flow information |
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| Cash paid for interest |
$ | $ | ||||||
| Dividend reinvestment issued in shares |
$ | $ | ||||||
See Notes to Unaudited Condensed Financial Statements
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
| (1) | Basis of Financial Statement Presentation |
The accompanying unaudited condensed balance sheet as of September 30, 2023, which has been derived from audited financial statements, and the unaudited interim condensed financial statements as of and for the three months ended December 31, 2023, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and include the accounts of Hennessy Advisors, Inc. (the “Company,” “we,” “us,” or “our”). Certain information and footnote disclosures in these unaudited interim condensed financial statements, normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States, have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission for Quarterly Reports on Form 10-Q. In the opinion of management, the unaudited interim condensed financial statements reflect all adjustments necessary for a fair statement of the Company’s financial position at December 31, 2023, the Company’s operating results for the three months ended December 31, 2023 and 2022, and the Company’s cash flows for the three months ended December 31, 2023 and 2022. These unaudited interim condensed financial statements and notes should be read in conjunction with the Company’s audited financial statements and notes thereto for fiscal year 2023, which are included in the Company’s Annual Report on Form 10‑K for the fiscal year ended September 30, 2023.
The preparation of financial statements requires management to make estimates and assumptions. Making estimates requires management to exercise significant judgment. Accordingly, the actual results could differ substantially from those estimates.
The Company’s operating activities consist primarily of providing investment advisory services to
The employee retention credit (“ERC”), as originally enacted on March 27, 2020, by the CARES Act, was a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer paid to employees and allowed claims through December 31, 2021, by eligible employers who retained employees during the COVID-19 pandemic. The Company filed Form 941-X to request an ERC from the Internal Revenue Service. In May 2023, the Company received an ERC of approximately $
The Company’s operating revenues consist of contractual investment advisory and shareholder service fees paid to it by the Hennessy Funds. The Company earns investment advisory fees from each Hennessy Fund by, among other things:
| ● | acting as portfolio manager for the fund or overseeing the sub‑advisor acting as portfolio manager for the fund, which includes managing the composition of the fund’s portfolio (including the purchase, retention, and disposition of portfolio securities in accordance with the fund’s investment objectives, policies, and restrictions), seeking best execution for the fund’s portfolio, managing the use of soft dollars for the fund, and managing proxy voting for the fund; |
| ● | performing a daily reconciliation of portfolio positions and cash for the fund; |
| ● | monitoring the liquidity of the fund; |
| ● | monitoring the fund’s compliance with its investment objectives and restrictions and federal securities laws; |
| ● | maintaining a compliance program (including a code of ethics), conducting ongoing reviews of the compliance programs of the fund’s service providers (including any sub‑advisor), including their codes of ethics, as appropriate, conducting onsite visits to the fund’s service providers (including any sub-advisor) as feasible, monitoring incidents of abusive trading practices, reviewing fund expense accruals, payments, and fixed expense ratios, evaluating insurance providers for fidelity bond, directors and officers and errors and omissions insurance, and cybersecurity insurance coverage, managing regulatory examination compliance and responses, conducting employee compliance training, reviewing reports provided by service providers, and maintaining books and records; |
| ● | if applicable, overseeing the selection and continued employment of the fund’s sub‑advisor, reviewing the fund’s investment performance, and monitoring the sub‑advisor’s adherence to the fund’s investment objectives, policies, and restrictions; |
| ● | overseeing service providers that provide accounting, administration, distribution, transfer agency, custodial, sales, marketing, public relations, audit, information technology, and legal services to the fund; |
| ● | maintaining in‑house marketing and distribution departments on behalf of the fund; |
| ● | preparing or directing the preparation of all regulatory filings for the fund, including writing and annually updating the fund’s prospectus and related documents; |
| ● | for each annual report of the fund, preparing or reviewing a written summary of the fund’s performance during the most recent 12‑month period; |
| ● | monitoring and overseeing the accessibility of the fund on financial institution platforms; |
| ● | paying the incentive compensation of the fund’s compliance officer and employing other staff such as legal, marketing, national accounts, distribution, sales, administrative, and trading oversight personnel, as well as management executives; |
| ● | providing a quarterly compliance certification to the Board of Trustees of Hennessy Funds Trust (the “Funds’ Board of Trustees”); and |
| ● | preparing or reviewing materials for the Funds’ Board of Trustees, presenting to or leading discussions with the Funds’ Board of Trustees, preparing or reviewing all meeting minutes, and arranging for training and education of the Funds’ Board of Trustees. |
The Company earns shareholder service fees from Investor Class shares of the Hennessy Mutual Funds by, among other things, maintaining a toll free number that the current investors in the Hennessy Funds may call to ask questions about their accounts and actively participating as a liaison between investors in the Hennessy Funds and U.S. Bank Global Fund Services.
Investment advisory and shareholder service fee revenues are earned and calculated daily by the Hennessy Funds’ accountants at U.S. Bank Global Fund Services and are subsequently reviewed by management.
The Company recognizes revenues when its obligations related to the investment advisory and shareholder services are satisfied, and it is probable that a significant reversal of the revenue amount would not occur in future periods. Management judgment is required in assessing the probability of significant revenue reversal and in identification of distinct services. Investment advisory and shareholder services are performed over time because investors in the Hennessy Funds are receiving and consuming the benefits as they are provided by the Company. Fees are based on contractual percentages of net asset values and recognized for services provided during the period, which are distinct from services provided in other periods. Such fees are affected by changes in net asset values, including market appreciation or depreciation, foreign exchange translation, and net inflows or outflows. Assets under management represent the broad range of financial assets the Company manages for the Hennessy Funds on a discretionary basis pursuant to investment management and shareholder servicing agreements that are expected to continue for at least 12 months. In general, reported assets under management reflect the valuation methodology that corresponds to the basis used for determining revenue. The fees are computed and billed monthly, at which time they are recognized in accordance with Accounting Standards Codification 606 — Revenue from Contracts with Customers.
The Company’s contractual agreements for investment advisory and shareholder services prove that a contract exists with fixed and determinable fees, and the services are rendered daily. The collectability is deemed probable because the fees are received from the Hennessy Funds in the month subsequent to the month in which the services are provided.
| (2) | Management Contracts Purchased |
Throughout its history, the Company has completed
Under Accounting Standards Codification 350 — Intangibles - Goodwill and Other, intangible assets that have indefinite useful lives are not amortized but are tested at least annually for impairment. The Company considered various factors, such as likelihood of continued renewal, whether there are foreseeable limits on net cash flows, and whether the Company is dependent on a limited number of investors, in determining the useful life of the management contracts. Based on analysis, the Company considers the management contract asset to be an intangible asset with an indefinite useful life and no impairment as of the end of the current period.
The Company completed its most recent asset purchase on November 10, 2023, when it purchased assets related to the management of the CCM Small/Mid-Cap Impact Value Fund. This asset purchase added approximately $
As of December 31, 2023, there was a second asset purchase pending under the CCM Transaction Agreement, which is for the purchase of assets related to the management of the CCM Core Impact Equity Fund. The purchase is subject to customary closing conditions, including the approval of the shareholders of the CCM Core Impact Equity Fund. At the Special Meeting of Shareholders of the CCM Core Impact Equity Fund on January 31, 2024, shareholders approved the purchase of assets related to the management of the CCM Core Impact Equity Fund by the Company. See Note 13, "Subsequent Events," for additional information.
In the current period, the Company capitalized $
| (3) | Investment Advisory Agreements |
The Company has investment advisory agreements with Hennessy Funds Trust under which it provides investment advisory services to all classes of the
The investment advisory agreements must be renewed annually (except in limited circumstances) by (i) the Funds’ Board of Trustees or the vote of a majority of the outstanding shares of the applicable Hennessy Fund and (ii) the vote of a majority of the trustees of Hennessy Funds Trust who are not interested persons of the Hennessy Funds. If an investment advisory agreement is not renewed, it terminates automatically. There are two additional circumstances in which an investment advisory agreement terminates. First, an investment advisory agreement automatically terminates if the Company assigns them to another advisor (assignment includes “indirect assignment,” which is the transfer of the Company’s common stock in sufficient quantities deemed to constitute a controlling block). Second, an investment advisory agreement may be terminated prior to its expiration upon
As provided in each investment advisory agreement, the Company receives investment advisory fees monthly based on a percentage of the applicable fund’s average daily net asset value.
The Company has entered into sub-advisory agreements for the Hennessy Focus Fund, the Hennessy Equity and Income Fund, the Hennessy Japan Fund, the Hennessy Japan Small Cap Fund, and the Hennessy Stance ESG ETF. Under each of these sub-advisory agreements, the sub‑advisor is responsible for the investment and reinvestments of the assets of the applicable Hennessy Fund in accordance with the terms of such agreement and the applicable Hennessy Fund’s Prospectus and Statement of Additional Information. The sub‑advisors are subject to the direction, supervision, and control of the Company and the Funds’ Board of Trustees. The sub‑advisory agreements must be renewed annually (except in limited circumstances) in the same manner as, and are subject to the same termination provisions as, the investment advisory agreements.
In exchange for sub-advisory services, the Company (not the Hennessy Funds) pays sub-advisory fees to the sub-advisors out of its own assets. Sub‑advisory fees are calculated as a percentage of the applicable fund’s average daily net asset value.
| (4) | Fair Value Measurements |
The Company applies Accounting Standards Codification 820 — Fair Value Measurement for all financial assets and liabilities, which establishes a framework for measuring fair value and expands disclosures about fair value measurements. The standard defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” It also establishes a fair value hierarchy consisting of the following three levels that prioritize the inputs to the valuation techniques used to measure fair value:
| ● | Level 1 – Unadjusted, quoted prices in active markets for identical assets or liabilities that an entity has the ability to access at the measurement date; |
| ● | Level 2 – Other significant observable inputs (including, but not limited to, quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, and model‑derived valuations in which all significant inputs and significant value drivers are observable in active markets); and |
| ● | Level 3 – Significant unobservable inputs (including the entity’s own assumptions about what market participants would use to price the asset or liability based on the best available information) when observable inputs are not available. |
Based on the definitions, the following tables represent the Company’s assets categorized in the Level 1 to Level 3 hierarchies:
| December 31, 2023 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| (In thousands) | ||||||||||||||||
| Money market fund deposits | $ | $ | $ | $ | ||||||||||||
| Mutual fund investments | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Amounts included in: | ||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| Investments in marketable securities | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| September 30, 2023 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| (In thousands) | ||||||||||||||||
| Money market fund deposits | $ | $ | $ | $ | ||||||||||||
| Mutual fund investments | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Amounts included in: | ||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| Investments in marketable securities | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
There were no transfers between levels during the three months ended December 31, 2023, or the year ended September 30, 2023.
The fair values of receivables, payables, and accrued liabilities approximate their book values given the short-term nature of those instruments.
The fair value of the 2026 Notes (see Note 7) was approximately $
| (5) | Leases |
The Company determines if an arrangement is an operating lease at inception. Operating leases are included in operating lease right‑of‑use assets and current and long‑term operating lease liabilities on the Company’s balance sheet. During the quarter ended March 31, 2021, the Company renewed the lease for its office in Novato, California for an additional years, which created a long‑term operating lease as of such date. Upon renewal of the lease, the Company recorded a right‑of‑use asset of $
Right‑of‑use assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right‑of‑use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date. The Company’s lease terms may include options to extend the lease when it is reasonably certain that it will exercise any such options. For its leases, the Company concluded that it is not reasonably certain that any renewal options would be exercised, and, therefore, the amounts are not recognized as part of operating lease right‑of‑use assets or operating lease liabilities. Leases with initial terms of 12 months or less, and certain office equipment leases that are deemed insignificant, are not recorded on the balance sheet and are expensed as incurred and included within rent expense under general and administrative expense. Lease expense related to operating leases is recognized on a straight-line basis over the expected lease terms.
The Company’s most significant leases are real estate leases of office facilities. The Company leases office space under non-cancelable operating leases. Its principal executive office is located in Novato, California, and it has additional offices in Austin, Texas, Dallas, Texas, Boston, Massachusetts, and Chapel Hill, North Carolina. Only the office lease in Novato, California has been capitalized because the other operating leases have terms of 12 months or less, including leases that are month‑to‑month in nature. The classification of the Company’s operating lease right-of-use assets and operating lease liabilities and other supplemental information related to the Company’s operating leases are as follows:
| December 31, 2023 | ||||
| (In thousands, except years and percentages) | ||||
| Operating lease right-of-use assets | $ | |||
| Current operating lease liability | $ | |||
| Long-term operating lease liability | $ | |||
| Weighted average remaining lease term | ||||
| Weighted average discount rate | % | |||
For the three months ended December 31, 2023, rent expense for all offices, which is recorded under general and administrative expense in the statements of income, totaled $
The undiscounted cash flows for future maturities of the Company’s operating lease liabilities and the reconciliation to the balance of operating lease liabilities reflected on the Company’s balance sheet are as follows:
| December 31, 2023 | ||||
| (In thousands) | ||||
| Remainder of fiscal year 2024 | $ | |||
| Total undiscounted cash flows | ||||
| Present value discount | ( | ) | ||
| Total operating lease liabilities | ||||
| (6) | Accrued Liabilities and Accounts Payable |
Details relating to accrued liabilities and accounts payable reflected on the Company’s balance sheet are as follows:
| December 31, 2023 | September 30, 2023 | |||||||
| (In thousands) | ||||||||
| Accrued bonus liabilities | $ | $ | ||||||
| Accrued sub-advisor fees | ||||||||
| Other accrued expenses | ||||||||
| Total accrued liabilities and accounts payable | $ | $ | ||||||
| (7) | Debt Outstanding |
On October 20, 2021, the Company completed a public offering of
The 2026 Notes are direct unsecured obligations, rank equally in right of payment with any of the Company’s future unsecured unsubordinated indebtedness, senior to any of the Company’s future indebtedness that expressly provides that it is subordinate to the 2026 Notes, effectively subordinate to all of the Company’s existing and future secured indebtedness, and structurally subordinated to all existing and future indebtedness and other obligations of any of the Company’s future subsidiaries.
| (8) | Income Taxes |
The Company’s effective income tax rates for the three months ended December 31, 2023 and 2022, were
The Company is subject to income tax in the U.S. federal jurisdiction and various state jurisdictions. As of December 31, 2023, the Company has identified 22 state tax jurisdictions in which it is subject to income tax.
| (9) | Commitments and Contingencies |
In addition to the operating leases discussed in Note 5, the Company has contractual expense ratio limitations in place with respect to the Hennessy Midstream Fund, the Hennessy Technology Fund, and the Hennessy Stance ESG ETF. The contractual expense ratio limitations with respect to the Hennessy Midstream Fund and the Hennessy Technology Fund will expire February 28, 2024, unless extended. The contractual expense ratio limitation with respect to the Hennessy Stance ESG ETF will expire December 31, 2024, unless extended. Total fees waived during the three months ended December 31, 2023 and December 31, 2022, were $
The Company has
| (10) | Equity |
Amended and Restated 2013 Omnibus Incentive Plan
The Company has adopted, and the Company’s shareholders have approved, the Amended and Restated 2013 Omnibus Incentive Plan (the “Omnibus Plan”). Under the Omnibus Plan, participants may be granted restricted stock units (“RSUs”), each of which represents an unfunded, unsecured right to receive a share of the Company’s common stock on the date specified in the recipient’s award. The Company issues new shares of its common stock when it is required to deliver shares to an RSU recipient. The RSUs granted under the Omnibus Plan vest over years at a rate of
A summary of RSU activity is as follows:
| Three Months Ended December 31, 2023 | ||||||||
| Shares | Weighted Average Grant Date Fair Value per Share | |||||||
| Non-vested balance at beginning of period | $ | |||||||
| Granted | ||||||||
| Vested | ||||||||
| Forfeited | ||||||||
| Non-vested balance at end of period | $ | |||||||
Additional information related to RSUs is as follows:
| December 31, 2023 | ||||
| (In thousands, except years) | ||||
| Unrecognized compensation expense related to RSUs | $ | |||
| Weighted average remaining years to expense for RSUs | ||||
Dividend Reinvestment and Stock Purchase Plan
In January 2021, the Company adopted a Dividend Reinvestment and Stock Purchase Plan (the “DRSPP”), replacing the previous Dividend Reinvestment and Stock Purchase Plan that had been in place since 2018. The DRSPP provides shareholders and new investors with a convenient and economical means of purchasing shares of the Company’s common stock and reinvesting cash dividends paid on the Company’s common stock. Under the DRSPP, the Company issued
As discussed in Note 13, the Company began offering to investors an updated Dividend Reinvestment and Stock Purchase Plan in January 2024 that replaced the DRSPP.
Stock Buyback Program
In August 2010, the Company’s Board of Directors adopted a stock buyback program pursuant to which the Company was authorized to repurchase up to
| (11) | Earnings per Share and Dividends per Share |
The weighted average common shares outstanding used in the calculation of basic earnings per share and weighted average common shares outstanding, adjusted for common stock equivalents, used in the computation of diluted earnings per share were as follows:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Weighted average common stock outstanding, basic | ||||||||
| Dilutive impact of RSUs | ||||||||
| Weighted average common stock outstanding, diluted | ||||||||
For the three months ended December 31, 2023 and 2022, the Company excluded
The Company paid a quarterly cash dividend of $
| (12) | Recently Issued and Adopted Accounting Standards |
The Company has reviewed accounting pronouncements issued between the filing date of its most recent Form 10-K, which was December 7, 2023, and the filing date of this Form 10-Q and has determined that no accounting pronouncements issued would have a material impact on the Company’s financial position, results of operations, or disclosures, except as disclosed below.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires more detailed income tax disclosures. The guidance requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is required to adopt this standard prospectively in fiscal year 2026. The Company is currently in the process of evaluating the impact of adoption on its financial statements.
| (13) | Subsequent Events |
The Company has evaluated subsequent events through the date these financial statements were issued and has concluded that no material events occurred during this period that require recognition or disclosure, other than as discussed below.
In January 2024, the Company began offering to investors an updated Dividend Reinvestment and Stock Purchase Plan. The maximum number of shares of common stock that may be issued under the updated plan is
At the Special Meeting of Shareholders of the CCM Core Impact Equity Fund on January 31, 2024, shareholders approved the purchase of assets related to the management of the CCM Core Impact Equity Fund by the Company. It is anticipated that the assets of the CCM Core Impact Equity Fund will be reorganized into the Hennessy Stance ESG ETF on February 23, 2024.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward‑Looking Statements
This report contains “forward-looking statements” within the meaning of the securities laws, for which we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. In some cases, forward‑looking statements can be identified by terminology such as “expect,” “anticipate,” “intend,” “may,” “plan,” “will,” “should,” “could,” “would,” “assume,” “believe,” “estimate,” “predict,” “potential,” “project,” “continue,” “seek,” and similar expressions, as well as statements in the future tense. We have based these forward-looking statements on our current expectations and projections about future events, based on information currently available to us. Forward‑looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at which, or means by which, such performance or results will be achieved.
Forward-looking statements are subject to risks, uncertainties, and assumptions, including those described in our Annual Report on Form 10‑K for the fiscal year ended September 30, 2023, including under the section entitled “Risk Factors” in such report. Unforeseen developments could cause actual performance or results to differ substantially from those expressed in or suggested by the forward-looking statements. Management does not assume responsibility for the accuracy or completeness of these forward-looking statements. There is no regulation requiring an update of any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations.
Our business activities are affected by many factors, including, without limitation, redemptions by investors in the Hennessy Funds, taxes, general economic and business conditions, interest rate movements, inflation, the personal savings rate, competitive conditions, industry regulation, and fluctuations in the stock market, many of which are beyond the control of our management. Further, the business and regulatory environments in which we operate remain complex, uncertain, and subject to change. We expect that regulatory requirements and developments will cause us to incur additional administrative and compliance costs. Notwithstanding the variability in our economic and regulatory environments, we remain focused on the investment performance of the Hennessy Funds and on providing high‑quality customer service to investors.
Our business strategy centers on (i) the identification, completion, and integration of future acquisitions and (ii) organic growth, through both the retention of the fund assets we currently manage and the generation of inflows into the funds we manage. The success of our business strategy may be influenced by the factors discussed in the section titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023. All statements regarding our business strategy, as well as statements regarding market trends and risks and assumptions about changes in the marketplace, are forward-looking by their nature.
Overview
Our primary business activity is providing investment advisory services to a family of 16 open-end mutual funds and one ETF branded as the Hennessy Funds. We manage 12 of the 17 Hennessy Funds internally. For the remaining five funds, we have delegated the day‐to‑day portfolio management responsibilities to sub‑advisors, subject to our oversight. We oversee the selection and continued employment of each sub‑advisor, review each fund’s investment performance, and monitor each sub‑advisor’s adherence to each applicable fund’s investment objectives, policies, and restrictions. In addition, we conduct ongoing reviews of the compliance programs of sub‑advisors and make onsite visits to sub‑advisors, as feasible. Our secondary business activity is providing shareholder services to investors in the Hennessy Mutual Funds.
We derive our operating revenues from investment advisory fees paid to us by the Hennessy Funds and shareholder service fees paid to us by the Hennessy Mutual Funds. These fees are calculated as a percentage of the average daily net assets of each Hennessy Fund. The percentage amount of the investment advisory fees varies by fund. The percentage amount of the shareholder service fees is consistent across all Hennessy Mutual Funds, but shareholder service fees are charged on Investor Class shares only. The dollar amount of the fees we receive fluctuates with changes in the average net asset value of each Hennessy Fund, which are affected by each fund’s investment performance, purchases and redemptions of shares, general market conditions, and the success of our marketing, sales, and public relations efforts.
On a total return basis, the Dow Jones Industrial Average was up 13.09% for the three months ended December 31, 2023. During the most recent quarter, equity prices advanced as investors reacted positively to encouraging signs that inflation is moderating. While the rate of inflation continues to be above the Federal Reserve’s stated 2% target, the market increasingly seems to believe that the potential for slowing economic growth could bring inflation close to the Federal Reserve's stated goal. Notwithstanding this past quarter’s anemic revenue and earnings growth for S&P 500 companies, earnings broadly came in higher than consensus estimates, which may speak to the idea that companies are reining in expenses, which may in turn bolster margins in 2024.
Long-term U.S. bond yields decreased meaningfully during the three months ended December 31, 2023, as encouraging inflation data pointed to the potential that the Federal Reserve could be done raising rates for the foreseeable future. While the Federal Reserve continues to indicate that it reserves the right to raise rates, the market believes that the Federal Reserve is more likely to cut rates in 2024 rather than raise them. According to Bloomberg, the market is pricing in six rates cuts in 2024. With the labor market continuing to show signs of strength, we expect investors to focus on any weakness as a signal that inflation could moderate further. Economic growth in 2024 is expected to be 1.3% versus an expectation of 2.4% in 2023, according to Bloomberg. Any unexpected strength in either the labor market or the economy at large could pose a risk to the market’s belief that lower rates are on the horizon.
The Japanese equity market was up 8.00% in U.S. dollar terms over the three months ended December 31, 2023, as measured by the Tokyo Stock Price Index. During the period, Japanese equities traded higher as an emphasis on increasing shareholder value has taken root in Japan. Investors have applauded an increasing focus on corporate governance, capital allocation, and shareholder returns.
For the twelve months ended December 31, 2023, all 17 Hennessy Funds generated positive returns. For the three‑year period ended December 31, 2023, 13 of the Hennessy Funds with at least three years of operating history posted positive annualized returns, with the exception of the Hennessy Japan Fund, the Hennessy Japan Small Cap Fund, and the Hennessy Large Cap Financial Fund. Over the longer term, all Hennessy Funds with at least ten years of operating history posted positive returns in each of the five-year and ten-year periods ended December 31, 2023.
As always, we are committed to providing superior service to investors and employing a consistent and disciplined approach to investing based on a buy‑and‑hold philosophy that rejects the idea of market timing. Our goal is to provide products that investors can have confidence in, knowing their money is invested as promised and with their best interests in mind. Accordingly, we continually seek new and improved ways to support investors in the Hennessy Funds, including by providing market insights, sector highlights, and other resources to help them manage their fund investments with confidence. We operate a robust and leading‑edge marketing automation and customer relationship management (CRM) system, with a database of over 100,000 financial advisors, in addition to retail investors. We utilize this technology both to help retain assets and drive new purchases into the Hennessy Funds. We employ a comprehensive marketing and sales program consisting of content, digital, social media, and traditional marketing initiatives and proactive meetings. In addition, our consistent annual public relations campaign has resulted in the Hennessy brand name appearing on TV, radio, print, or online media on average once every two to three days.
We provide service to over 147,500 fund accounts nationwide, including accounts held by investors who employ financial advisors to assist them with investing as well as accounts held by retail investors who invest directly with us. We serve approximately 11,400 financial advisors who utilize the Hennessy Funds on behalf of their clients, including approximately 300 who purchased one of our Funds for the first time during the most recent quarter. Approximately 17% of such advisors own two or more Hennessy Funds, and over 400 advisors hold a position of over $500,000. While numbers have declined in recent years, we continue to focus significant efforts on financial advisors who own two or more Hennessy Funds or hold a position of over $500,000 in an effort to build and maintain brand loyalty among our top tier of advisors.
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. The increase in total assets was attributable to market appreciation and the purchase of the assets related to the CCM Small/Mid-Cap Impact Value Fund, partly offset by net outflows of the Hennessy Funds.
The following table illustrates the quarter‑by‑quarter changes in our assets under management since December 31, 2022:
| Fiscal Quarter Ended |
||||||||||||||||||||
| December 31, |
September 30, 2023 |
June 30, 2023 |
March 31, 2023 |
December 31, 2022 |
||||||||||||||||
| (In thousands) |
||||||||||||||||||||
| Beginning assets under management |
$ | 3,032,042 | $ | 2,964,013 | $ | 2,843,963 | $ | 3,009,458 | $ | 2,895,717 | ||||||||||
| Acquisition inflows |
12,436 | - | - | - | 43,088 | |||||||||||||||
| Organic inflows |
226,617 | 247,311 | 134,137 | 85,950 | 130,721 | |||||||||||||||
| Redemptions |
(253,058 | ) | (146,614 | ) | (177,687 | ) | (276,391 | ) | (314,704 | ) | ||||||||||
| Market appreciation (depreciation) |
262,335 | (32,668 | ) | 163,600 | 24,946 | 254,636 | ||||||||||||||
| Ending assets under management |
$ | 3,280,372 | $ | 3,032,042 | $ | 2,964,013 | $ | 2,843,963 | $ | 3,009,458 | ||||||||||
As stated above, the fees we receive for providing investment advisory and shareholder services are based on average assets under management. The following table shows average assets under management for each quarter since December 31, 2022:
| Fiscal Quarter Ended |
||||||||||||||||||||
| December 31, 2023 |
September 30, 2023 |
June 30, 2023 |
March 31, 2023 |
December 31, 2022 |
||||||||||||||||
| (In thousands) |
||||||||||||||||||||
| Hennessy Mutual Funds |
||||||||||||||||||||
| Investor Class |
$ | 1,904,504 | $ | 1,957,980 | $ | 1,864,583 | $ | 1,949,124 | $ | 1,949,185 | ||||||||||
| Institutional Class |
1,082,938 | 1,081,288 | 941,683 | 993,086 | 1,090,937 | |||||||||||||||
| Hennessy Stance ESG ETF |
50,800 | 44,774 | 44,647 | 43,692 | 4,125 | |||||||||||||||
| Average assets under management |
$ | 3,038,242 | $ | 3,084,042 | $ | 2,850,913 | $ | 2,985,902 | $ | 3,044,247 | ||||||||||
The principal asset on our balance sheet, the management contract asset, represents the capitalized costs incurred in connection with the purchase of the assets related to the management of investment funds. As of December 31, 2023, this asset had a net balance of $81.5 million, compared to $81.3 million as of September 30, 2023. The increase is related to costs associated with the CCM Transaction Agreement.
On October 20, 2021, we completed a public offering of the 2026 Notes in the aggregate principal amount of $40.25 million, which included the full exercise of the underwriters’ overallotment option. The 2026 Notes mature on December 31, 2026, and may be redeemed in whole or in part at any time or from time to time at our option on or after December 31, 2023. The 2026 Notes bear interest at 4.875% per annum, payable on the last day of each calendar quarter and at maturity, beginning December 31, 2021. The 2026 Notes are direct unsecured obligations, rank equally in right of payment with any of our future unsecured unsubordinated indebtedness, senior to any of our future indebtedness that expressly provides that it is subordinate to the 2026 Notes, effectively subordinate to all of our existing and future secured indebtedness, and structurally subordinated to all existing and future indebtedness and other obligations of any future subsidiaries of ours.
The 2026 Notes are the principal liability on our balance sheet at $39.2 million, net of issuance costs.
Results of Operations
The following table sets forth items in the statements of income as dollar amounts and as percentages of total revenue:
| Three Months Ended December 31, |
||||||||||||||||
| 2023 |
2022 |
|||||||||||||||
| Amount |
Percent of Total Revenue |
Amount |
Percent of Total Revenue |
|||||||||||||
| (In thousands, except percentages) |
||||||||||||||||
| Revenue |
||||||||||||||||
| Investment advisory fees |
$ | 5,665 | 92.2 | % | $ | 5,654 | 92.0 | % | ||||||||
| Shareholder service fees |
479 | 7.8 | 491 | 8.0 | ||||||||||||
| Total revenue |
6,144 | 100.0 | 6,145 | 100.0 | ||||||||||||
| Operating expenses |
||||||||||||||||
| Compensation and benefits |
1,866 | 30.4 | 1,858 | 30.2 | ||||||||||||
| General and administrative |
1,724 | 28.1 | 1,569 | 25.5 | ||||||||||||
| Fund distribution and other |
149 | 2.4 | 95 | 1.5 | ||||||||||||
| Sub-advisory fees |
911 | 14.8 | 969 | 15.8 | ||||||||||||
| Depreciation |
69 | 1.1 | 49 | 0.9 | ||||||||||||
| Total operating expenses |
4,719 | 76.8 | 4,540 | 73.9 | ||||||||||||
| Net operating income |
1,425 | 23.2 | 1,605 | 26.1 | ||||||||||||
| Interest expense |
567 | 9.2 | 563 | 9.2 | ||||||||||||
| Interest income |
(786 | ) | (12.8 | ) | (467 | ) | (7.6 | ) | ||||||||
| Income before income tax expense |
1,644 | 26.8 | 1,509 | 24.5 | ||||||||||||
| Income tax expense |
444 | 7.3 | 390 | 6.3 | ||||||||||||
| Net income |
$ | 1,200 | 19.5 | % | $ | 1,119 | 18.2 | % | ||||||||
Revenue – Investment Advisory Fees and Shareholder Service Fees
Total revenue comprises investment advisory fees and shareholder service fees. Comparing the three months ended December 31, 2022, to the three months ended December 31, 2023, total revenue remained flat at $6.1 million, investment advisory fees remained flat at $5.7 million, and shareholder service fees decreased by 2.4%, from $0.49 million to $0.48 million.
The decrease in shareholder service fees was due to a decrease in the average daily net assets held in Investor Class shares of the Hennessy Mutual Funds. Assets held in Investor Class shares of the Hennessy Mutual Funds are subject to a shareholder service fee, whereas assets held in Institutional Class shares of the Hennessy Mutual Funds are not subject to a shareholder service fee.
We collect investment advisory fees from each of the Hennessy Funds at differing annual rates. These annual rates range between 0.40% and 1.25% of average daily net assets. Average daily net assets of the Hennessy Funds for both the three months ended December 31, 2023 and 2022, was unchanged at $3.0 billion. The Hennessy Fund with the largest average daily net assets for the three months ended December 31, 2023, was the Hennessy Cornerstone Mid Cap 30 Fund, with $0.64 billion. We collect an investment advisory fee from the Hennessy Cornerstone Mid Cap 30 Fund at an annual rate of 0.74% of average daily net assets. The Hennessy Fund with the second largest average daily assets for the three months ended December 31, 2023, was the Hennessy Focus Fund, with $0.61 billion. We collect an investment advisory fee from the Hennessy Focus Fund at an annual rate of 0.90% of average daily net assets. However, we pay a sub‑advisory fee at an annual rate of 0.29% to the fund’s sub-advisor, which reduces the net operating profit contribution of the fund to our financial operations.
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. The increase in total assets was attributable to market appreciation and the purchase of the assets related to the CCM Small/Mid Cap Impact Value Fund, partly offset by net outflows of the Hennessy Funds.
The Hennessy Funds with the three largest amounts of net inflows were as follows:
| Three Months Ended December 31, 2023 |
||
| Fund Name |
Amount |
|
| Hennessy Cornerstone Mid Cap 30 Fund |
$81 million |
|
| Hennessy Japan Fund |
$5 million |
|
| Hennessy Cornerstone Growth Fund |
$2 million |
|
The Hennessy Funds with the three largest amounts of net outflows were as follows:
| Three Months Ended December 31, 2023 |
||
| Fund Name |
Amount |
|
| Hennessy Focus Fund |
$(49) million |
|
| Hennessy Gas Utility Fund |
$(21) million |
|
| Hennessy Japan Small Cap Fund |
$(9) million |
|
Redemptions as a percentage of assets under management decreased from an average of 3.4% per month during the three months ended December 31, 2022, to an average of 2.8% per month during the three months ended December 31, 2023.
Operating Expenses
Comparing the three months ended December 31, 2022, to the three months ended December 31, 2023, total operating expenses increased by 3.9%, from $4.5 million to $4.7 million. As a percentage of total revenue, total operating expenses increased 2.9 percentage points to 76.8%.
The increase in operating expenses was due to increases in all expense categories other than sub-advisory fees, which decreased, and compensation and benefits, which remained flat.
Compensation and Benefits Expense: Comparing the three months ended December 31, 2022, to the three months ended December 31, 2023, compensation and benefits expense remained flat at $1.9 million. As a percentage of total revenue, compensation and benefits expense increased 0.2 percentage points to 30.4%.
General and Administrative Expense: Comparing the three months ended December 31, 2022, to the three months ended December 31, 2023, general and administrative expense increased by 9.9%, from $1.6 million to $1.7 million. As a percentage of total revenue, general and administrative expense increased 2.6 percentage points to 28.1%.
The increase in general and administrative expense was primarily due to increased professional services expense.
Fund Distribution and Other Expense: Fund distribution and other expense consists primarily of financial institution fees incurred by us for distribution of the Hennessy Funds and also for the operations of the Hennessy Stance ESG ETF. Fund distribution and other expense does not include sub‑advisory fees, which are shown separately.
The distribution component of fund distribution and other expense consists of fees paid to various financial institutions that offer the Hennessy Funds as potential investments to their clients. When the Hennessy Funds are purchased through one of these financial institutions, the institution typically charges an asset‑based fee, which is recorded as a fund distribution expense on our statement of operations to the extent paid by us. The Hennessy Mutual Funds, but not the Hennessy Stance ESG ETF, may be purchased directly and when purchased directly, we do not incur any such expense. These fees generally increase or decrease in line with the net assets of the Hennessy Funds held through these financial institutions, which are affected by inflows, outflows, and fund performance. In addition, some financial institutions charge a minimum fee if the average daily net assets of a Hennessy Fund held by such an institution are less than a threshold amount. In such cases, we pay the minimum fee.
The distribution component of fund distribution and other expenses is affected by many factors, including the following:
| ● |
average daily net assets held by financial institutions; |
| ● |
the split of average daily net assets held by financial institutions in Institutional Class shares of the Hennessy Mutual Funds versus Investor Class shares of the Hennessy Mutual Funds; and |
| ● |
fee minimums at various financial institutions. |
The other component of fund distribution and other expense consists of fees incurred by us for the operations of the Hennessy Stance ESG ETF. We receive a unitary investment advisory fee from the Hennessy Stance ESG ETF and then pay all of its operating expenses (with limited exceptions), including fund administration, fund accounting, transfer agency, custody, licensing, audit, and tax services.
Comparing the three months ended December 31, 2022, to the three months ended December 31, 2023, fund distribution and other expense increased by 56.8%, from $0.10 million to $0.15 million. As a percentage of total revenue, fund distribution and other expense increased 0.9 percentage points to 2.4%.
The increase in fund distribution and other expense was primarily due to a full period of fees incurred by us for the operations of the Hennessy Stance ESG ETF in the current period. We began advising the Hennessy Stance ESG ETF on December 22, 2022, and therefore only a partial period of expenses related to its operations were incurred in the prior comparable period.
Sub-Advisory Fees Expense: Comparing the three months ended December 31, 2022, to the three months ended December 31, 2023, sub-advisory fees expense decreased by 6.0%, from $1.0 million to $0.9 million. As a percentage of total revenue, sub-advisory fees expense decreased 1.0 percentage point to 14.8%. The decrease in sub-advisory fees expense was due to decreased average daily net assets of the sub‑advised Hennessy Funds, partly offset by the expense associated with new sub-advisory relationships relating to the Hennessy Stance ESG ETF that became effective on December 22, 2022.
Depreciation Expense: Comparing the three months ended December 31, 2022, to the three months ended December 31, 2023, depreciation expense increased by 40.8%, from $0.05 million to $0.07 million. As a percentage of total revenue, depreciation expense increased 0.2 percentage points to 1.1%.
The increase in depreciation expense resulted from new fixed asset purchases, partially offset by the write-off of fully depreciated assets.
Interest Expense
Comparing the three months ended December 31, 2022, to the three months ended December 31, 2023, interest expense increased from $0.56 million to $0.57 million. The increase in interest expense was due to the manner in which interest expense is calculated under accounting principles generally accepted in the United States. The issuance costs related to the 2026 Notes that have been capitalized are amortized over time and therefore increase the carrying amount of the 2026 Notes. As the carrying amount of the 2026 Notes increases, the interest expense on the 2026 Notes for financial statement purposes also increases.
Interest Income
Interest income consists of interest earned on cash and cash equivalents. Comparing the three months ended December 31, 2022, to the three months ended December 31, 2023, interest income increased from $0.47 million to $0.79 million.
The increase in interest income resulted from increased interest rates, as well as an increased cash balance.
Income Tax Expense
Comparing the three months ended December 31, 2022, to the three months ended December 31, 2023, income tax expense remained flat at $0.4 million.
Net Income
Comparing the three months ended December 31, 2022, to the three months ended December 31, 2023, net income increased by 7.2%, from $1.1 million to $1.2 million.
The increase in net income was primarily due to increased interest income in the current period.
Critical Accounting Policies and Estimates
Our financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States, which require the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. These accounting policies, methods, and estimates are an integral part of the financial statements prepared by management and are based upon management’s current judgments. Those judgments are normally based on knowledge and experience with regard to past and current events and assumptions about future events. Certain accounting policies, methods, and estimates are particularly sensitive because of their significance to the financial statements and because future events affecting them may differ markedly from management’s current judgment. For a discussion of the accounting policies and estimates that we believe are most critical to understanding our results of operations and financial position, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10‑K for the fiscal year ended September 30, 2023.
Liquidity and Capital Resources
We continually review our capital requirements to ensure that we have funding available to support our business model. Management anticipates that cash and other liquid assets on hand as of December 31, 2023, will be sufficient to meet our capital requirements for one year from the issuance date of this report, as well as our longer-term capital requirements for periods beyond one year from the issuance date of this report. To the extent that liquid resources and cash provided by operations are not adequate to meet long-term capital requirements, management plans to raise additional capital by either, or both, seeking bank financing or accessing the capital markets. There can be no assurance that we will be able to raise additional capital.
On October 20, 2021, we completed a public offering of our 2026 Notes in the aggregate principal amount of $40.25 million, which included the full exercise of the underwriters’ overallotment option. The 2026 Notes mature on December 31, 2026, and may be redeemed in whole or in part at any time or from time to time at our option on or after December 31, 2023. The 2026 Notes bear interest at 4.875% per annum, payable on the last day of each calendar quarter and at maturity, beginning December 31, 2021. The 2026 Notes are direct unsecured obligations, rank equally in right of payment with any of our future unsecured unsubordinated indebtedness, senior to any of our future indebtedness that expressly provides that it is subordinate to the 2026 Notes, effectively subordinate to all of our existing and future secured indebtedness, and structurally subordinated to all existing and future indebtedness and other obligations of any future subsidiaries of ours.
Our 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. The primary sources of our revenue, liquidity, and cash flow are our investment advisory fees and shareholder service fees, which are based on and generated by our average assets under management. Our average assets under management for both the three months ended December 31, 2023 and 2022, was unchanged at $3.0 billion. As of December 31, 2023, we had cash and cash equivalents of $59.6 million.
The following table summarizes key financial data relating to our liquidity and use of cash:
| For the Three Months |
||||||||
| Ended December 31, |
||||||||
| 2023 |
2022 |
|||||||
| (In thousands) |
||||||||
| Net cash provided by (used in) operating activities |
$ | 416 | $ | (32 | ) | |||
| Net cash used in investing activities |
(250 | ) | (381 | ) | ||||
| Net cash used in financing activities |
(1,037 | ) | (1,024 | ) | ||||
| Net decrease in cash and cash equivalents |
$ | (871 | ) | $ | (1,437 | ) | ||
The increase in cash provided by operating activities of $0.4 million was primarily due to timing of cash payments and also due to increased net income in the current period.
The decrease in cash used in investing activities of $0.1 million was due to the costs associated with the purchase of assets related to the management of an ETF that was reorganized into the Hennessy Stance ESG ETF in the prior comparable period.
The increase in cash used in financing activities of $0.01 million was due the increased dollar amount of dividends paid as a result of having more shares outstanding in the current period than in the prior comparable period.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Management performed an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on such evaluation, management, including the Company’s principal executive officer and principal financial officer, concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting as defined in Rules 13a-15(f) of the Exchange Act that occurred during the fiscal quarter ended December 31, 2023, and that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
There have been no material changes from the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended September 30, 2023.
Rule 10b5-1 Trading Plans
During the three months ended December 31, 2023, director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement,” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Set forth below is a list of all exhibits to this Quarterly Report on Form 10-Q.
Notes:
| (1) |
|
| (2) |
Management contract or compensatory plan or arrangement. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized:
| HENNESSY ADVISORS, INC. | ||
| Date: February 8, 2024 | By: | /s/ Teresa M. Nilsen |
| Teresa M. Nilsen | ||
| President | ||
Exhibit 10.2
Form of Restricted Stock Unit Award Agreement for Employees
HENNESSY ADVISORS, INC.
2024 OMNIBUS INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT
|
[Name] |
||
|
[Address] |
||
|
[Telephone]: |
(_____) ______-______ |
Dear __________________:
You have been granted an award of restricted stock units of Hennessy Advisors, Inc. (the “Company”) under the Hennessy Advisors, Inc. 2024 Omnibus Incentive Plan (the “Plan”) and this Restricted Stock Unit Award Agreement (this “Agreement”). Capitalized terms used herein and not defined have the meaning given to them in the Plan.
|
Grant Date: |
_______________, 20__ |
|
|
Number of Restricted Stock Units: |
______________ (_______) Units |
|
|
Vesting Schedule: |
|
Your Restricted Stock Units shall vest as follows:
● Twenty-five percent (25%) of your Restricted Stock Units will vest on each of the first four anniversaries of the Grant Date, provided you are employed by the Company or an Affiliate on the applicable vesting date.
● If your employment terminates as a result of death, Disability or Retirement at a time when the Company could not terminate you for Cause, any unvested Restricted Stock Units will become fully vested on such date of termination.
● Upon any other termination of employment prior to the date the Restricted Stock Units are vested, the Restricted Stock Units will be immediately forfeited. |
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Settlement: |
As soon as practicable (and in no event more than 30 days) after your Restricted Stock Units vest, the Company will deliver to you a whole number of Shares equal to the number of Restricted Stock Units that have vested. |
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Transferability of Shares: |
By accepting this Agreement, you agree not to sell any Shares acquired under this Agreement at a time when applicable laws, Company policies or an agreement between the Company and its underwriters prohibit a sale. |
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Rights as Shareholder: |
You will not be deemed for any purposes to be a shareholder of the Company with respect to any of the Restricted Stock Units unless and until Shares are issued therefor upon vesting of the units. |
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Transferability of Award: |
You may not transfer or assign this Agreement for any reason, other than under your will or as required by intestate laws. Any attempted transfer or assignment will be null and void. |
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Change of Control: |
Upon a Change of Control, all Restricted Stock Units shall become vested in full provided you are an employee of the Company or an Affiliate on the date of such Change of Control. The remaining terms of the Agreement shall remain in effect without change. |
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Tax Withholding: |
To the extent that the vesting of, or other event with respect to, the Restricted Stock Units results in income to you for Federal, state, or local income tax purposes, or the Company or an Affiliate is otherwise required to withhold taxes with respect to the Restricted Stock Units, you shall deliver to the Company at the time the Company is obligated to withhold taxes such amount as the Company requires to meet its withholding obligation, and if you fail to do so, the Company has the right and authority to deduct or withhold from other compensation payable to you an amount sufficient to satisfy its withholding obligations. You may satisfy the withholding requirement, in whole or in part, by electing to have the Company withhold for its own account that number of Shares otherwise deliverable to you upon vesting or settlement having an aggregate Fair Market Value on the date the tax is to be determined equal to the taxes to be withheld in connection with the vesting or settlement of the Restricted Stock Units; provided that the amount to be withheld may not exceed the maximum statutory Federal, state, and local tax withholding obligations associated with the transaction to the extent needed for the Company to avoid an accounting charge. Your election must be irrevocable, in writing, and submitted to the Secretary of the Company before the applicable vesting or settlement date. The Fair Market Value of any fractional Share not used to satisfy the withholding obligation (as determined on the date the tax is determined) will be paid to you in cash. |
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Recoupment; Rescission of Exercise: |
If the Company determines that recoupment of incentive compensation paid to or otherwise received by you pursuant to your Restricted Stock Units is required under any law or any recoupment policy of the Company, then your Restricted Stock Units will terminate immediately on the date of such determination to the extent required by such law or recoupment policy, any prior vesting of such Restricted Stock Units may be deemed to be rescinded and the Company may recoup any such incentive compensation in accordance with such recoupment policy or as required by law. The Company shall have the right to offset against any amounts due from the Company to you the amount owed by you hereunder and any withholding amount tendered by you with respect to any such incentive compensation.
In addition, if (i) the Company or an Affiliate terminates you for Cause, (ii) you terminate your employment or service at a time when you could be terminated for Cause, or (iii) your termination is not for Cause, but the Administrator later determines that you could have been terminated for Cause if all of the facts had been known at the time of termination of employment or service, then any Restricted Stock Units that became vested during the period beginning six months prior to such termination and ending on the date of your termination may be rescinded by the Company within two years of such termination of employment or service by written notice to you at your last address on file with the Company. In the event of any such rescission, you shall pay to the Company the amount of any gain realized or payment received as a result of the rescinded Restricted Stock Units in such manner and on such terms and conditions as may be required, and the Company shall be entitled to offset against any amounts due from the Company to you the amount owed by you hereunder and any withholding amount tendered by you with respect to such Restricted Stock Units. |
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Miscellaneous: |
● The existence of this Agreement shall not affect in any way the right or power of the Company or its shareholders to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Company’s capital structure or its business, or any merger or consolidation of the Company, or any issuance of bonds, debentures, preferred, or prior preference stock senior to or affecting the common stock of the Company or the rights thereof, or dissolution or liquidation of the Company, or any sale or transfer of all or any part of the Company’s assets or business or any other corporate act or proceeding, whether of a similar character or otherwise.
● As a condition of the granting of the Restricted Stock Units, you agree, for yourself and your legal representatives or guardians, that this Agreement shall be interpreted by the Administrator and that any interpretation by the Administrator of the terms of this Agreement and any determination made by the Administrator pursuant to this Agreement shall be final, binding and conclusive.
● This Agreement may be amended only by written consent signed by both you and the Company, unless the amendment is not to your detriment. Notwithstanding the foregoing, this Agreement may be amended without your consent in accordance with the provisions of the Plan.
● This Agreement may be executed in counterparts. |
This Agreement is granted under and governed by the terms and conditions of the Plan. Additional provisions regarding this Agreement can be found in the Plan.
[The remainder of this page is intentionally left blank.]
By signing below and accepting this Restricted Stock Unit Award Agreement, you agree to all of the terms and conditions described herein and in the Plan. You also acknowledge receipt of the Plan and the Prospectus describing the Plan.
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Authorized Officer |
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Recipient |
Exhibit 10.3
Form of Restricted Stock Unit Award Agreement for
Directors and Advisory Committee Members
HENNESSY ADVISORS, INC.
2024 OMNIBUS INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT
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[Name] |
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[Address] |
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[Telephone]: |
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(____) ______-______ |
Dear ___________________:
You have been granted an award of restricted stock units of Hennessy Advisors, Inc. (the “Company”) under the Hennessy Advisors, Inc. 2024 Omnibus Incentive Plan (the “Plan”) and this Restricted Stock Unit Award Agreement (this “Agreement”). Capitalized terms used herein and not defined have the meaning given to them in the Plan.
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Grant Date: |
_________________, 20__ |
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Number of Restricted Stock Units: |
____________________ (_________) Units |
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Vesting Schedule: |
Your Restricted Stock Units shall vest as follows:
● Twenty-five percent (25%) of your Restricted Stock Units will vest on each of the first four anniversaries of the Grant Date, provided you remain in service with the Company until the applicable vesting date.
● If your service with the Company terminates as a result of death, Disability, or Retirement, any unvested Restricted Stock Units will become fully vested on such date of termination.
● Upon any other termination of service with the Company prior to the date the Restricted Stock Units are vested, the Restricted Stock Units will be immediately forfeited. |
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Settlement: |
As soon as practicable (and in no event more than 30 days) after your Restricted Stock Units vest, the Company will deliver to you a whole number of Shares equal to the number of Restricted Stock Units that have vested. |
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Transferability of Shares: |
By accepting this Agreement, you agree not to sell any Shares acquired under this Agreement at a time when applicable laws, Company policies or an agreement between the Company and its underwriters prohibit a sale. |
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Rights as Shareholder: |
You will not be deemed for any purposes to be a shareholder of the Company with respect to any of the Restricted Stock Units unless and until Shares are issued therefor upon vesting of the units. |
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Transferability of Award: |
You may not transfer or assign this Agreement for any reason, other than under your will or as required by intestate laws. Any attempted transfer or assignment will be null and void. |
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Change of Control: |
Upon a Change of Control, all Restricted Stock Units shall become vested in full provided you remain in service with the Company until the date of such Change of Control. The remaining terms of the Agreement shall remain in effect without change. |
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Tax Withholding: |
To the extent that the Company or an Affiliate is required to withhold taxes with respect to the Restricted Stock Units, you shall deliver to the Company at the time the Company is obligated to withhold taxes such amount as the Company requires to meet its withholding obligation, and if you fail to do so, the Company has the right and authority to deduct or withhold from other compensation payable to you an amount sufficient to satisfy its withholding obligations. You may satisfy the withholding requirement, in whole or in part, by electing to have the Company withhold for its own account that number of Shares otherwise deliverable to you upon vesting or settlement having an aggregate Fair Market Value on the date the tax is to be determined equal to the taxes to be withheld in connection with the vesting or settlement of the Restricted Stock Units; provided that the amount to be withheld may not exceed the maximum statutory Federal, state, and local tax withholding obligations associated with the transaction to the extent needed for the Company to avoid an accounting charge. Your election must be irrevocable, in writing, and submitted to the Secretary of the Company before the applicable vesting or settlement date. The Fair Market Value of any fractional Share not used to satisfy the withholding obligation (as determined on the date the tax is determined) will be paid to you in cash. |
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Recoupment; Rescission of Exercise: |
If the Company determines that recoupment of incentive compensation paid to or otherwise received by you pursuant to your Restricted Stock Units is required under any law or any recoupment policy of the Company, then your Restricted Stock Units will terminate immediately on the date of such determination to the extent required by such law or recoupment policy, any prior vesting of such Restricted Stock Units may be deemed to be rescinded and the Company may recoup any such incentive compensation in accordance with such recoupment policy or as required by law. The Company shall have the right to offset against any amounts due from the Company to you the amount owed by you hereunder and any withholding amount tendered by you with respect to any such incentive compensation. |
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Miscellaneous: |
● The existence of this Agreement shall not affect in any way the right or power of the Company or its shareholders to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Company’s capital structure or its business, or any merger or consolidation of the Company, or any issuance of bonds, debentures, preferred, or prior preference stock senior to or affecting the common stock of the Company or the rights thereof, or dissolution or liquidation of the Company, or any sale or transfer of all or any part of the Company’s assets or business or any other corporate act or proceeding, whether of a similar character or otherwise.
● As a condition of the granting of the Restricted Stock Units, you agree, for yourself and your legal representatives or guardians, that this Agreement shall be interpreted by the Administrator and that any interpretation by the Administrator of the terms of this Agreement and any determination made by the Administrator pursuant to this Agreement shall be final, binding, and conclusive.
● This Agreement may be amended only by written consent signed by both you and the Company, unless the amendment is not to your detriment. Notwithstanding the foregoing, this Agreement may be amended without your consent in accordance with the provisions of the Plan.
● This Agreement may be executed in counterparts. |
This Agreement is granted under and governed by the terms and conditions of the Plan. Additional provisions regarding this Agreement can be found in the Plan.
[The remainder of this page is intentionally left blank.]
By signing below and accepting this Restricted Stock Unit Award Agreement, you agree to all of the terms and conditions described herein and in the Plan. You also acknowledge receipt of the Plan and the Prospectus describing the Plan.
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Authorized Officer |
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Recipient |
Exhibit 10.4
FIRST AMENDMENT
TO
FOURTH AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This FIRST AMENDMENT TO FOURTH AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Amendment”), effective as of February 8, 2024, is made by and between Hennessy Advisors, Inc. (the “Company”) and Neil J. Hennessy (the “Employee”).
RECITALS
WHEREAS, the Company and the Employee previously entered into a Fourth Amended and Restated Employment Agreement, dated as of February 22, 2019 (the “Agreement”); and
WHEREAS, the parties now desire to amend the Agreement as provided for herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:
1. The last sentence in Section 3(b)(i) of the Agreement is hereby replaced its entirety with the following: “The Quarterly Bonus shall be paid under, and subject to the terms and conditions of, the Hennessy Advisors, Inc. 2024 Omnibus Incentive Plan or any successor plan thereto, as long as any such plan remains in effect.”
2. Except as herein modified or amended, the terms and conditions of the Agreement shall remain unchanged and in full force and effect.
3. This Amendment may be executed by facsimile or electronic signature, and a facsimile or electronic signature shall constitute an original for all purposes.
* * * * *
IN WITNESS WHEREOF, each party has caused this Amendment to be duly executed as of the date first written above.
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COMPANY: |
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HENNESSY ADVISORS, INC. |
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By: |
/s/ Daniel B. Steadman |
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Daniel B. Steadman |
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Executive Vice President |
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| EMPLOYEE: | |||
| /s/ Neil J. Hennessy | |||
| Neil J. Hennessy | |||
Exhibit 10.5
FIRST AMENDMENT
TO
EMPLOYMENT AGREEMENT
This FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (this “Amendment”), effective as of February 8, 2024, is made by and between Hennessy Advisors, Inc. (the “Company”) and Teresa M. Nilsen (the “Employee”).
RECITALS
WHEREAS, the Company and the Employee previously entered into an Employment Agreement, dated as of January 26, 2018 (the “Agreement”); and
WHEREAS, the parties now desire to amend the Agreement as provided for herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:
1. The last sentence in Section 3(b)(i) of the Agreement is hereby replaced its entirety with the following: “The Quarterly Bonus shall be paid under, and subject to the terms and conditions of, the Hennessy Advisors, Inc. 2024 Omnibus Incentive Plan or any successor plan thereto, as long as any such plan remains in effect.”
2. Except as herein modified or amended, the terms and conditions of the Agreement shall remain unchanged and in full force and effect.
3. This Amendment may be executed by facsimile or electronic signature, and a facsimile or electronic signature shall constitute an original for all purposes.
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IN WITNESS WHEREOF, each party has caused this Amendment to be duly executed as of the date first written above.
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COMPANY: |
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| HENNESSY ADVISORS, INC. | |||
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By: |
/s/ Daniel B. Steadman |
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Daniel B. Steadman |
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Executive Vice President |
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| /s/ Teresa M. Nilsen | |||
| Teresa M. Nilsen | |||
Exhibit 31.1
Rule 13a – 14a Certification of the Principal Executive Officer
I, Teresa M. Nilsen, certify that:
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I have reviewed this Quarterly Report on Form 10-Q of Hennessy Advisors, Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a‑15(f) and 15d-15(f)) for the registrant and have: |
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ Teresa M. Nilsen | |
| Teresa M. Nilsen, President | |
| Hennessy Advisors, Inc. | |
| Date: February 8, 2024 |
Exhibit 31.2
Rule 13a – 14a Certification of the Principal Financial Officer
I, Kathryn R. Fahy, certify that:
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I have reviewed this Quarterly Report on Form 10-Q of Hennessy Advisors, Inc.; |
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a‑15(f) and 15d-15(f)) for the registrant and have: |
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ Kathryn R. Fahy | |
| Kathryn R. Fahy, Chief Financial Officer | |
| Hennessy Advisors, Inc. | |
| Date: February 8, 2024 |
Exhibit 32.1
Written Statement of the Principal Executive Officer
Pursuant to 18 U.S.C. § 1350
Solely for the purposes of complying with 18 U.S.C. § 1350, I, the undersigned President of Hennessy Advisors, Inc. (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended December 31, 2023 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Teresa M. Nilsen | |
| Teresa M. Nilsen, President | |
| Hennessy Advisors, Inc. | |
| Date: February 8, 2024 |
Exhibit 32.2
Written Statement of the Principal Financial Officer
Pursuant to 18 U.S.C. § 1350
Solely for the purposes of complying with 18 U.S.C. § 1350, I, the undersigned Chief Financial Officer of Hennessy Advisors, Inc. (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended December 31, 2023 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Kathryn R. Fahy | |
| Kathryn R. Fahy, Chief Financial Officer | |
| Hennessy Advisors, Inc. | |
| Date: February 8, 2024 |