HENNESSY ADVISORS INC
For the period ended Dec 31, 2024. Filed Feb 13, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2024 · Filed Feb 13, 2025
HNNA$10.19-3.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001437749-24-025553
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-12-31; filed 2025-02-13.
0001437749-25-003757
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 72 previous paragraphs and 59 current paragraphs.
26 unchanged; 31 reworded; 2 added; 12 removed; 3 previous and 0 current paragraphs rearranged.
Tables are not compared: 10 previous and 9 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (2)
Current report
On a total return basis, the Dow Jones Industrial Average was up 0.93% for the three months ended December 31, 2024. During the most recent quarter, equity prices increased modestly as a strong economic backdrop coupled with a solid earnings season appeared to give investors reason to continue bidding stocks higher. Following the November election, equities rallied sharply on the expectation of lower tax rates and fewer governmental business regulations. In the final weeks of 2024, though, investors seemed to turn their attention to inflation and the prospect of rate cuts. While there was once an expectation of several Federal Reserve interest rate cuts in 2025, the market is now pricing in anywhere from one to perhaps two cuts in 2025, according to Bloomberg, as the economy continues to grow above expectations and inflation remains higher than the Federal Reserve’s target rate. For 2025, aggregate revenue growth for the companies in the S&P 500® Index is forecasted to increase 6% while earnings are expected to increase nearly 15%, also according to Bloomberg. This robust implied margin expansion may provide investors with more reasons to buy equities this year provided that the economy continues to do well.
Current report
Long-term U.S. bond yields increased meaningfully during the three months ended December 31, 2024. With inflation still above the Federal Reserve’s 2% inflation goal and unemployment remaining low, yields increased. At the end of September 2024, the market was pricing in close to eight interest rate cuts by the end of 2025, according to Bloomberg. With recently released economic data continuing to point to above trend inflation, the market is now pricing in no more than two rate cuts by the end of 2025.
Removed paragraphs (12)
Previous report
On a total return basis, the Dow Jones Industrial Average was up 18.51% for the nine months ended June 30, 2024. During the most recent quarter, equity prices declined modestly as investors adjusted to an increasing likelihood that the Federal Reserve may cut the Federal Funds rate perhaps only once during 2024, according to estimates from Bloomberg. Earlier this year, the market was pricing in no fewer than three to four cuts. While the labor market remains strong, there are anecdotal reports from retailers that consumers are starting to allocate their disposable income in a more cautious manner. With the release of corporate earnings in the first quarter of 2024, we saw a landscape where earnings growth outpaced revenue growth, which speaks to marginally higher profit margins. This news, in conjunction with the strong labor market, has reinforced the idea that the economy is no longer headed toward recessionary territory. According to Bloomberg, real GDP growth in 2024 is expected to come in around 2.3%, only modestly behind last year’s real GDP growth of 2.5%.
Previous report
While long-term U.S. bond yields were essentially flat from the beginning of our fiscal year nine months ago, a strong labor market and economic resilience caused long-term yields to increase nicely since the beginning of 2024. The Federal Reserve’s 2% inflation goal continues to dominate its thinking as it ponders the course for interest rate changes. In May, the consumer price index advanced at a 3.3% rate, well above the 2% target. According to Federal Reserve Chairman Jerome Powell, inflation is not expected to reach its 2% target rate until late 2025 or even in 2026. Despite this prediction, the market continues to hold out hope that the Fed may be able to cut interest rates even with elevated levels of inflation.
Previous report
Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, total operating expenses increased by 13.3%, from $13.2 million to $14.9 million. As a percentage of total revenue, total operating expenses decreased 2.6 percentage points to 71.6%.
Previous report
Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, compensation and benefits expense increased by 11.6%, from $5.7 million to $6.4 million. As a percentage of total revenue, compensation and benefits expense decreased 1.7 percentage points to 30.6%. The dollar value increase in compensation and benefit expense was due to an increase in incentive-based compensation in the current period and also due to the ERC received in the prior comparable period, as discussed in Note 1 to Item 1, "Unaudited Condensed Financial Statements."
Previous report
Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, general and administrative expense increased by 14.4%, from $4.1 million to $4.7 million. As a percentage of total revenue, general and administrative expense decreased 0.7 percentage points to 22.7%.
Previous report
Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, fund distribution and other expense increased by 68.5%, from $0.3 million to $0.6 million. As a percentage of total revenue, fund distribution and other expense increased 0.9 percentage points to 2.8%. The increase in fund distribution and other expense was primarily due to the additional expenses relating to the Hennessy Stance ESG ETF resulting from the purchase of assets related to the management of the CCM Funds and subsequent reorganization of such assets into the Hennessy Stance ESG ETF in the current period, but was also due to increased average daily net assets across the Hennessy Funds. In addition, the increase was also partially attributable 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.
Previous report
Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, sub-advisory fees expense increased by 8.6%, from $2.8 million to $3.0 million. As a percentage of total revenue, sub-advisory fees expense decreased 1.1 percentage points to 14.6%.
Previous report
Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, depreciation expense increased by 12.8%, from $0.16 million to $0.19 million. As a percentage of total revenue, depreciation expense remained the same at 0.9%. The dollar value increase in depreciation expense resulted from new fixed asset purchases, partially offset by the write-off of fully depreciated assets.
Previous report
In both periods, the increase in interest income resulted from increased interest rates and increased principal balances.
Previous report
Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, interest expense increased from $0.565 million to $0.569 million. Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, interest expense increased from $1.69 million to $1.70 million.
Previous report
Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, income tax expense increased by 84.2%, from $0.4 million to $0.8 million. Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, income tax expense increased by 46.7%, from $1.2 million to $1.8 million.
Previous report
In both periods, the increase in net income was primarily due to increased revenue, and additionally due to increased interest income in the current period.
Reworded paragraphs (31)
Previous wording
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 applicable 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.
Current wording
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 is 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.
Previous wording
The Japanese equity market was up 13.72% in U.S. dollar terms over the nine months ended June 30, 2024, as measured by the Tokyo Stock Price Index. During the period, Japanese equities traded higher as investors cheered stronger corporate earnings, a weaker yen, and more shareholder friendly corporate governance.
Current wording
The Japanese equity market was down 4.04% in U.S. dollar terms over the three months ended December 31, 2024, as measured by the Tokyo Stock Price Index. During the period, Japanese equities traded lower despite optimism that a potential merger between Honda and Nissan could portend a new era of dealmaking in the Japanese equity market.
Previous wording
For the twelve months ended June 30, 2024, all 17 Hennessy Funds generated positive total returns. For the three‑year period ended June 30, 2024, nearly all of the 17 Hennessy Funds posted positive annualized total returns, with the exception of the Hennessy Focus Fund, the Hennessy Japan Small Cap Fund, the Hennessy Large Cap Financial Fund, and the Hennessy Small Cap Financial Fund. Over the longer term, all of the Hennessy Funds with at least five or ten years of operating history posted positive returns in each of the five- and ten-year periods ended June 30, 2024.
Current wording
For the twelve months ended December 31, 2024, all 17 Hennessy Funds generated positive total returns. In addition, for the three‑year and five-year periods ended December 31, 2024, all of the 17 Hennessy Funds posted positive annualized total returns as well. Lastly, over the longer term, all of the Hennessy Funds with over ten years of operating history posted positive returns in the ten-year period ended December 31, 2024.
Previous wording
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.
Current wording
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 to 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 campaigns have resulted in the Hennessy brand name appearing on TV, radio, print, or online media on average once every two to three days.
Previous wording
We provide service to over 180,000 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 11,500 financial advisors who utilize the Hennessy Funds on behalf of their clients, including over 450 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 500 advisors hold a position of over $500,000. While numbers have declined in recent years, we continue to focus significant efforts on building and maintaining brand loyalty among our top tier of advisors.
Current wording
We provide service to over 210,000 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 11,000 financial advisors who utilize the Hennessy Funds on behalf of their clients, including roughly 500 who purchased one of our Funds for the first time during the most recent quarter. Approximately 18% of such advisors own two or more Hennessy Funds, and over 700 advisors hold a position of over $500,000. While numbers have declined in recent years, we continue to focus significant efforts on building and maintaining brand loyalty among our top tier of advisors.
Previous wording
Total assets under management as of June 30, 2024, was $4.0 billion, an increase of $1.1 billion, or 35.9%, compared to June 30, 2023. The increase in total assets was attributable to net inflows into the Hennessy Funds, market appreciation, and the purchase of the assets related to the CCM Funds.
Current wording
Total assets under management as of December 31, 2024, was $4.8 billion, an increase of $1.5 billion, or 45.7%, compared to December 31, 2023. The increase in total assets was attributable to net inflows into the Hennessy Funds, market appreciation, and the purchase of the assets related to the management of the CCM Funds.
Previous wording
The following table illustrates the quarter‑by‑quarter changes in our assets under management since June 30, 2023:
Current wording
The following table illustrates the quarter‑by‑quarter changes in our assets under management since the quarter ended December 31, 2023:
Previous wording
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 June 30, 2023:
Current wording
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 the quarter ended December 31, 2023:
Previous wording
The principal asset on our balance sheet, the management contracts asset, represents the capitalized costs incurred in connection with the purchase of the assets related to the management of investment funds. As of June 30, 2024, this asset had a net balance of $82.3 million, compared to $81.3 million as of September 30, 2023. The increase was due to the purchase of assets related to the management of the CCM Funds.
Current wording
The principal asset on our balance sheet, the management contracts 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, 2024, this asset had a net balance of $82.3 million, unchanged since September 30, 2024.
Previous wording
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 future secured indebtedness, and structurally subordinate to all future indebtedness and other obligations of any future subsidiaries of ours.
Current wording
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 now be redeemed in whole or in part at any time or from time to time at our option. 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 future secured indebtedness, and structurally subordinate to all future indebtedness and other obligations of any future subsidiaries of ours.
Previous wording
The 2026 Notes are the principal liability on our balance sheet at $39.4 million, net of issuance costs.
Current wording
The 2026 Notes are the principal liability on our balance sheet at $39.6 million, net of issuance costs.
Previous wording
As discussed above, on October 20, 2021, we completed a public offering of our 2026 Notes in the aggregate principal amount of $40.25 million. 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.
Current wording
As discussed above, on October 20, 2021, we completed a public offering of our 2026 Notes in the aggregate principal amount of $40.25 million. The 2026 Notes mature on December 31, 2026, and may now be redeemed in whole or in part at any time or from time to time at our option.
Previous wording
Our total assets under management as of June 30, 2024, was $4.0 billion, an increase of $1.1 billion, or 35.9%, compared to June 30, 2023. 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 the nine months ended June 30, 2024, was $3.5 billion, an increase of $0.5 billion, or 16.9%, compared to the nine months ended June 30, 2023. As of June 30, 2024, we had cash and cash equivalents of $62.0 million.
Current wording
Our total assets under management as of December 31, 2024, was $4.8 billion, an increase of $1.5 billion, or 45.7%, compared to December 31, 2023. 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 the three months ended December 31, 2024, was $4.8 billion, an increase of $1.8 billion, or 58.8%, compared to the three months ended December 31, 2023. As of December 31, 2024, we had cash and cash equivalents of $65.0 million.
Previous wording
The increase in cash provided by operating activities of $1.2 million was primarily due to increased net income in the current period.
Current wording
The increase in cash provided by operating activities of $1.8 million was primarily due to increased net income in the current period.
Previous wording
The increase in cash used in investing activities of $0.5 million was primarily due to the costs associated with the purchase of assets related to the management of the CCM Funds in the current period.
Current wording
The decrease in cash used in investing activities of $0.1 million was primarily due to the costs associated with the purchase of assets related to the management of the CCM Funds in the prior comparable period.
Previous wording
The increase in cash used in financing activities of $0.03 million was due to 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.
Current wording
The increase in cash used in financing activities of $0.01 million was due to 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.
Previous wording
Total revenue comprises investment advisory fees and shareholder service fees. Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, total revenue increased by 36.5%, from $5.7 million to $7.8 million, investment advisory fees increased by 38.3%, from $5.2 million to $7.2 million, and shareholder service fees increased by 16.6%, from $0.47 million to $0.54 million. Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, total revenue increased by 17.5% from $17.8 million to $20.9 million, investment advisory fees increased by 18.5%, from $16.3 million to $19.3 million, and shareholder service fees increased by 6.1%, from $1.4 million to $1.5 million.
Current wording
Total revenue comprises investment advisory fees and shareholder service fees. Comparing the three months ended December 31, 2023, to the three months ended December 31, 2024, total revenue increased by 58.0%, from $6.1 million to $9.7 million, investment advisory fees increased by 59.9%, from $5.7 million to $9.1 million, and shareholder service fees increased by 35.1%, from $0.5 million to $0.6 million.
Previous wording
In both periods, the increase in investment advisory fees was due mainly to increased average daily net assets of the Hennessy Funds, and the increase in shareholder service fees was due to an increase 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.
Current wording
The increase in investment advisory fees was due mainly to increased average daily net assets of the Hennessy Funds, and the increase in shareholder service fees was due to an increase 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.
Previous wording
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 the three months ended June 30, 2024, was $3.9 billion, which represents an increase of $1.0 billion, or 36.6%, compared to the three months ended June 30, 2023, and average daily net assets for the nine months ended June 30, 2024, was $3.5 billion, which represents an increase of $0.5 billion, or 16.9%, compared to the nine months ended June 30, 2023. The Hennessy Fund with the largest average daily net assets for the three and nine months ended June 30, 2024, was the Hennessy Cornerstone Mid Cap 30 Fund, with $1.1 billion and $0.9 billion, respectively. 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 and nine months ended June 30, 2024, was the Hennessy Focus Fund, with $0.64 billion and $0.63 billion, respectively. 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.
Current wording
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 the three months ended December 31, 2024, was $4.8 billion, which represents an increase of $1.8 billion, or 58.8%, compared to the three months ended December 31, 2023. The Hennessy Fund with the largest average daily net assets for the three months ended December 31, 2024, was the Hennessy Cornerstone Mid Cap 30 Fund, with $1.7 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, 2024, was the Hennessy Focus Fund, with $0.7 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.
Previous wording
Total assets under management as of June 30, 2024, was $4.0 billion, an increase of $1.1 billion, or 35.9%, compared to June 30, 2023. The increase in total assets was attributable to net inflows into the Hennessy Funds, market appreciation, and the purchase of the assets related to the CCM Funds.
Current wording
Total assets under management as of December 31, 2024, was $4.8 billion, an increase of $1.5 billion, or 45.7%, compared to December 31, 2023. The increase in total assets was attributable to net inflows into the Hennessy Funds, market appreciation, and the purchase of the assets related to the management of the CCM Funds.
Previous wording
Redemptions as a percentage of assets under management increased from an average of 2.1% per month during the three months ended June 30, 2023, to an average of 2.2% per month during the three months ended June 30, 2024. Redemptions as a percentage of assets under management decreased from an average of 2.8% per month during the nine months ended June 30, 2023, to an average of 2.4% per month during the nine months ended June 30, 2024.
Current wording
Redemptions as a percentage of assets under management decreased from an average of 2.8% per month during the three months ended December 31, 2023, to an average of 2.6% per month during the three months ended December 31, 2024.
Previous wording
Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, total operating expenses increased by 20.4%, from $4.3 million to $5.2 million. As a percentage of total revenue, total operating expenses decreased 9.0 percentage points to 66.8%.
Current wording
Comparing the three months ended December 31, 2023, to the three months ended December 31, 2024, total operating expenses increased by 24.6%, from $4.7 million to $5.9 million. As a percentage of total revenue, total operating expenses decreased 16.3 percentage points to 60.5%. The dollar value increase in operating expense was due to increases in all expense categories other than general and administrative expense and depreciation expense, which moderately decreased.
Previous wording
Compensation and Benefits Expense: Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, compensation and benefits expense increased by 17.1%, from $1.9 million to $2.3 million. As a percentage of total revenue, compensation and benefits expense decreased 4.9 percentage points to 29.2%. The dollar value increase in compensation and benefit expense was due to the ERC received in the prior comparable period, as discussed in Note 1 to Item 1, "Unaudited Condensed Financial Statements."
Current wording
Compensation and Benefits Expense: Comparing the three months ended December 31, 2023, to the three months ended December 31, 2024, compensation and benefits expense increased by 48.2%, from $1.9 million to $2.8 million. As a percentage of total revenue, compensation and benefits expense decreased 1.9 percentage points to 28.5%. The dollar value increase in compensation and benefit expense was due to an increase in incentive-based compensation in the current period.
Previous wording
General and Administrative Expense: Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, general and administrative expense increased by 19.4%, from $1.3 million to $1.6 million. As a percentage of total revenue, general and administrative expense decreased 2.9 percentage points to 20.0%.
Current wording
General and Administrative Expense: Comparing the three months ended December 31, 2023, to the three months ended December 31, 2024, general and administrative expense decreased by 4.1%, from $1.72 million to $1.65 million. As a percentage of total revenue, general and administrative expense decreased 11.1 percentage points to 17.0%. The decrease in general and administrative expense was primarily due to decreased professional services expense, partially offset by increased commission expense on sales of the Hennessy Funds.
Previous wording
Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, fund distribution and other expense increased by 96.6%, from $0.1 million to $0.2 million. As a percentage of total revenue, fund distribution and other expense increased 0.9 percentage points to 2.9%. The increase in fund distribution and other expense was primarily due to increased average daily net assets across the Hennessy Funds. Additionally, there was an increase in operating expenses relating to the Hennessy Stance ESG ETF, which had greater average daily net assets in the current period resulting from the purchase of assets related to the management of the CCM Core Impact Fund and subsequent reorganization of such assets into the Hennessy Stance ESG ETF. Such reorganization, which was effective as of February 23, 2024, nearly doubled the average daily net assets of the Hennessy Stance ESG ETF.
Current wording
Comparing the three months ended December 31, 2023, to the three months ended December 31, 2024, fund distribution and other expense increased by 77.9%, from $0.1 million to $0.3 million. As a percentage of total revenue, fund distribution and other expense increased 0.3 percentage points to 2.7%. The increase in fund distribution and other expense was primarily due to increased average daily net assets across the Hennessy Funds. Additionally, there was an increase in operating expenses relating to the Hennessy Stance ESG ETF, which had greater average daily net assets in the current period resulting from the purchase of assets related to the management of the CCM Core Impact Fund and subsequent reorganization of such assets into the Hennessy Stance ESG ETF. Such reorganization, which was effective as of February 23, 2024, nearly doubled the average daily net assets of the Hennessy Stance ESG ETF.
Previous wording
In both periods, the dollar value increase in sub-advisory fees expense was due to increased average daily net assets of the sub‑advised Hennessy Funds, the expense associated with new sub-advisory relationships relating to the Hennessy Stance ESG ETF that became effective on December 22, 2022, and the increase in average daily net assets of the Hennessy Stance ESG ETF as a result of the purchase of assets related to the management of the CCM Funds and subsequent reorganization of such assets into the Hennessy Stance ESG ETF.
Current wording
Sub-Advisory Fees Expense: Comparing the three months ended December 31, 2023, to the three months ended December 31, 2024, sub-advisory fees expense increased by 24.4%, from $0.9 million to $1.1 million. As a percentage of total revenue, sub-advisory fees expense decreased 3.1 percentage points to 11.7%. The dollar value increase in sub-advisory fees expense was due to increased average daily net assets of the sub‑advised Hennessy Funds, including the increase in average daily net assets of the Hennessy Stance ESG ETF as a result of the purchase of assets related to the management of the CCM Core Impact Fund and subsequent reorganization of such assets into the Hennessy Stance ESG ETF.
Previous wording
Depreciation Expense: Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, depreciation expense remained the same at $0.06 million. As a percentage of total revenue, depreciation expense decreased 0.2 percentage points to 0.8%.
Current wording
Depreciation Expense: Comparing the three months ended December 31, 2023, to the three months ended December 31, 2024, depreciation expense decreased by 11.6% from $0.07 million to $0.06 million. As a percentage of total revenue, depreciation expense decreased 0.5 percentage points to 0.6%. The decrease in depreciation expense resulted from fewer fixed asset purchases in the current period.
Previous wording
Interest income consists of interest earned on cash and cash equivalents. Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, interest income increased from $0.7 million to $0.8 million. Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, interest income increased from $1.8 million to $2.3 million.
Current wording
Interest income consists of interest earned on cash and cash equivalents. Comparing the three months ended December 31, 2023, to the three months ended December 31, 2024, interest income decreased from $0.8 million to $0.7 million. The decrease in interest income resulted from decreased interest rates in the current period.
Previous wording
In both periods, the increase in interest expense was due to the manner in which interest expense is calculated under U.S. GAAP. 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.
Current wording
Comparing the three months ended December 31, 2023, to the three months ended December 31, 2024, interest expense increased from $0.567 million to $0.572 million. The increase in interest expense was due to the manner in which interest expense is calculated under U.S. GAAP. 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.
Previous wording
In both periods, the increase in income tax expense was due to increased net operating income, as well as a higher effective income tax rate in the current period due to a greater exposure to state income tax liability based on the location of investors in the Hennessy Funds.
Current wording
Comparing the three months ended December 31, 2023, to the three months ended December 31, 2024, income tax expense increased by 155.2%, from $0.4 million to $1.1 million. The increase in income tax expense was due to increased net operating income, as well as a higher effective income tax rate in the current period due to a greater exposure to state income tax liability based on the location of investors in the Hennessy Funds.
Previous wording
Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, net income increased by 81.8%, from $1.1 million to $2.0 million. Comparing the nine months ended June 30, 2023, to the nine months ended June 30, 2024, net income increased by 39.0%, from $3.4 million to $4.8 million.
Current wording
Comparing the three months ended December 31, 2023, to the three months ended December 31, 2024, net income increased by 136.2%, from $1.2 million to $2.8 million. The increase in net income was primarily due to increased revenue in the current period.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
In both periods, the dollar value increase in operating expense was due to increases in all expense categories.
Previous report — wording carried elsewhere
In both periods, the dollar value increase in general and administrative expense was primarily due to increased commission expense on sales of the Hennessy Funds.
Previous report — wording carried elsewhere
Sub-Advisory Fees Expense: Comparing the three months ended June 30, 2023, to the three months ended June 30, 2024, sub-advisory fees expense increased by 20.4%, from $0.9 million to $1.1 million. As a percentage of total revenue, sub-advisory fees expense decreased 1.9 percentage points to 13.9%.