Item 5. Market for Registrant’s Common Equity
ITEM 5.
MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock trades on The Nasdaq Global Market under the stock symbol “HNNA.”
We have paid regular cash dividends to our shareholders and intend to continue to do so, although the declaration of a dividend is always subject to the discretion of our Board of Directors.
As of the end of fiscal year 2025, we had 116 holders of record of our common stock. In addition, there were 48 brokerage firm accounts that represent 2,034 additional individual shareholders for a total of 2,150 shareholders.
The equity compensation plan information required by Item 201(d) of Regulation S‑K is set forth in the “Equity Compensation Plan Information” subheading under Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”
30
Table of Contents
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
During fiscal year 2025, we repurchased shares underlying vested restricted stock units (“RSUs”) from employees to satisfy tax withholding obligations arising in connection with the vesting of RSUs. The stock repurchases are presented in the following table for the three months ended September 30, 2025:
Period
Total Number of Shares Purchased
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 1-31, 2025
-
$
-
-
1,096,368
August 1-31, 2025
-
-
-
1,096,368
September 1-30, 2025 (2)
41,442
11.08
-
1,096,368
Total
41,442
$
11.08
-
1,096,368
(1)
We are authorized to purchase a maximum of 2,000,000 shares under our stock buyback program. We announced the stock buyback program in August 2010, and the program has no expiration date. In August 2022, the Board of Directors increased the number of shares that may be repurchased under the stock buyback program by 500,000 shares, to a total of 2,000,000 shares. A total of 1,096,368 shares remain available for repurchase under the stock buyback program. We did not repurchase any shares pursuant to the stock buyback program during the three months ended September 30, 2025.
(2)
The shares that we repurchased in September 2025 are not subject to a maximum per plan or program because we did not repurchase them pursuant to a plan or program.
ITEM 7.
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 the section titled “Risk Factors” and elsewhere in this Annual Report on Form 10‑K. 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 Item 1A, “Risk Factors.” 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.
31
Table of Contents
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 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.
U.S. equities had strong, positive performance for the one‑year period ended September 30, 2025, with the S&P 500 ® Index returning 17.60% and the Dow Jones Industrial Average returning 11.50% for the period (on a total return basis). Equity prices advanced in anticipation of the Federal Reserve lowering its benchmark interest rate in September. Further, the markets, according to Bloomberg, are pricing in roughly two rate cuts in 2025 and four rate cuts by the end of 2026. While inflation remains above the Federal Reserve’s 2% target, the market seems to be comfortable with underlying economic fundamentals. Based on expected third quarter earnings for companies in the S&P 500, the market is projecting, according to FactSet Earnings Insight, strong revenue growth and even stronger earnings growth for S&P 500 companies. The prospect of strong margins, driven by pricing power and expense controls, has likely provided relief to market participants that are concerned over the prospect of slowing economic growth.
Yields on long-term U.S. bonds increased during the one‑year period ended September 30, 2025, as inflation continues to hover above the Federal Reserve’s target inflation rate of 2%. Despite this, investors appear to have started to increasingly focus on softer economic and employment data to support the belief that the Federal Reserve will continue to be more accommodative over the next year. The August employment report indicated that the unemployment rate climbed to 4.3%, which is near a four-year high. ADP Research estimated a loss of 32,000 private sector jobs last month and Carlyle Group’s “shadow” labor report shows similar weakness in employment trends. While expected real GDP growth for 2025 was recently revised up to 1.8%, according to Bloomberg, it is nonetheless well off the nearly 3% year-over-year growth seen in 2023 and 2024.
The Japanese equity market increased 17.73% (in U.S. dollar terms) for the one‑year period ended September 30, 2025, as measured by the Tokyo Stock Price Index (TOPIX). Strong performance has largely been the result of a weaker yen enhancing the competitiveness of Japan’s exports abroad. Foreign capital inflows, buoyed by an increased emphasis on shareholder friendly corporate governance efforts have helped as well. Reforms aimed at improving capital efficiency among corporations have raised investor expectations of increased public company returns.
Against this positive equity performance backdrop, all 17 Hennessy Funds posted positive returns for the one‑year and three-year periods ended September 30, 2025. The longer‑term performance numbers remain strong, with all 16 Hennessy Funds with at least 10 years of operating history posting positive returns for both the 5-year and 10‑year periods ended September 30, 2025.
32
Table of Contents
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 183,000 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 11,100 financial advisors who utilize the Hennessy Funds on behalf of their clients, including nearly 1,500 who purchased one of our Funds for the first time during fiscal year 2025. Approximately 17% 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 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 the end of fiscal year 2025 was $4.2 billion, a decrease of $0.40 billion, or 8.6%, compared to the end of fiscal year 2024. The decrease in total assets was attributable to net outflows from the Hennessy Funds, and was partly offset by market appreciation.
The following table illustrates the year-by-year changes in our assets under management over the past three fiscal years:
Fiscal Years Ended September 30,
2025
2024
2023
(In thousands)
Beginning assets under management
$
4,642,363
$
3,032,042
$
2,895,717
Acquisition inflows
-
71,656
43,088
Organic inflows
1,356,091
1,554,303
598,119
Redemptions
(1,991,232
)
(1,005,191
)
(915,397
)
Market appreciation
237,546
989,553
410,515
Ending assets under management
$
4,244,768
$
4,642,363
$
3,032,042
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 by share class over the past three fiscal years:
Fiscal Years Ended September 30,
2025
2024
2023
(In thousands)
Hennessy Mutual Funds
Investor Class
$
2,364,830
$
2,121,824
$
1,930,294
Institutional Class
2,021,341
1,475,335
1,027,166
Hennessy Sustainable ETF
96,043
89,784
34,230
Average assets under management
$
4,482,214
$
3,686,943
$
2,991,690
The principal asset on our balance sheet, the management contract asset, represents the capitalized costs incurred in connection with the purchase of assets related to the management of investment funds. As of the end of fiscal year 2025, this asset had a net balance of $82.6 million, an increase of $0.3 million since the end of fiscal year 2024. This increase is related to the costs associated with the definitive agreement signed with STF Management, LP in March 2025.
33
Table of Contents
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. The 2026 Notes are the principal liability on our balance sheet at $39.8 million, net of issuance costs.
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 the end of fiscal year 2025 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.
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, 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.
Our total assets under management as of the end of fiscal year 2025 was $4.2 billion, a decrease of $0.40 billion, or 8.6%, compared to the end of fiscal year 2024. The primary sources of our revenues, 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 fiscal year 2025 was $4.5 billion. As of the end of fiscal year 2025, we had cash and cash equivalents of $72.4 million.
The following table summarizes key financial data relating to our liquidity and use of cash:
Fiscal Years Ended September 30,
2025
2024
(In thousands)
Net cash provided by operating activities
$
13,792
$
9,277
Net cash used in investing activities
(627
)
(1,303
)
Net cash used in financing activities
(4,656
)
(4,528
)
Net increase in cash and cash equivalents
$
8,509
$
3,446
The increase in cash provided by operating activities of $4.6 million was mainly due to increased net income in the current period.
The decrease in cash used in investing activities of $0.6 million was due to costs related to the purchase of the CCM Funds in the prior year being greater than costs associated with the definitive agreement signed with STF Management, LP in the current year.
The increase in cash used in financing activities of $0.1 million was due to repurchases of shares underlying RSUs from employees to satisfy tax withholding obligations arising in connection with the vesting of RSUs in the current period.
Dividend Payments . We have consistently paid dividends each year since 2005. Our quarterly dividend rate per share remained constant during fiscal years 2025 and 2024, and our dividend payments totaled $4.3 million and $4.2 million in fiscal years 2025 and 2024, respectively.
2026 Notes . 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 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 mature on December 31, 2026.
34
Table of Contents
RESULTS OF OPERATIONS
The following table sets forth items in the statements of income as dollar amounts and as percentages of total revenue:
Fiscal Years Ended September 30,
2025
2024
Amounts
Percent of Total Revenue
Amounts
Percent of Total Revenue
(In thousands, except percentages)
Revenue
Investment advisory fees
$
33,174
93.3
%
$
27,524
92.8
%
Shareholder service fees
2,364
6.7
2,122
7.2
Total revenue
35,538
100.0
29,646
100.0
Operating expenses
Compensation and benefits
10,625
29.9
9,064
30.5
General and administrative
6,301
17.7
6,484
21.9
Fund distribution and other
1,030
2.9
818
2.8
Sub-advisory fees
4,147
11.7
4,169
14.1
Depreciation
290
0.8
244
0.8
Total operating expenses
22,393
63.0
20,779
70.1
Net operating income
13,145
37.0
8,867
29.9
Interest income
(2,768
)
(7.8
)
(3,112
)
(10.5
)
Interest expense
2,293
6.5
2,275
7.7
Income before income tax expense
13,620
38.3
9,704
32.7
Income tax expense
3,660
10.3
2,607
8.8
Net income
$
9,960
28.0
%
$
7,097
23.9
%
Revenue – Investment Advisory Fees and Shareholder Service Fees
Total revenue comprises investment advisory fees and shareholder service fees. Comparing fiscal year 2025 to fiscal year 2024, total revenue increased by 19.9%, from $29.6 million to $35.5 million, investment advisory fees increased by 20.5%, from $27.5 million to $33.2 million, and shareholder service fees increased by 11.4%, from $2.1 million to $2.4 million.
The increase in investment advisory fees was due mainly to increased average daily net assets of the Hennessy Funds. 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.
We collect investment advisory fees from each Hennessy Fund 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 fiscal year 2025 was $4.5 billion, which represents an increase of $0.8 billion, or 21.6%, compared to fiscal year 2024. The Hennessy Fund with the largest average daily net assets for fiscal year 2025 was the Hennessy Cornerstone Mid Cap 30 Fund, with $1.5 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 net assets for fiscal year 2025 was the Hennessy Focus Fund, with $573 million. 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.
35
Table of Contents
Total assets under management as of the end of fiscal year 2025 was $4.2 billion, a decrease of $0.40 billion, or 8.6%, compared to the end of fiscal year 2024. The decrease in total assets was attributable to net outflows from the Hennessy Funds, partly offset by market appreciation.
The only Hennessy Fund with net inflows was as follows:
Fiscal Year Ended September 30, 2025
Fund Name
Amount
Hennessy Midstream Fund
$
3
million
The Hennessy Funds with the three largest amounts of net outflows were as follows:
Fiscal Year Ended September 30, 2025
Fund Name
Amount
Hennessy Focus Fund
$
(210
)
million
Hennessy Mid Cap 30 Fund
$
(202
)
million
Hennessy Cornerstone Growth Fund
$
(44
)
million
Redemptions as a percentage of assets under management increased from an average of 2.3% per month during fiscal year 2024 to an average of 3.6% per month during fiscal year 2025.
Operating Expenses
Comparing fiscal year 2024 to fiscal year 2025, total operating expenses increased by 7.8%, from $20.8 million to $22.4 million. As a percentage of total revenue, total operating expenses decreased 7.1 percentage points to 63.0%. The increase in dollar value of operating expenses was primarily due to increases in compensation and benefits and fund distribution and other expenses.
Compensation and Benefits Expense : Comparing fiscal year 2024 to fiscal year 2025, compensation and benefits expense increased by 17.2%, from $9.1 million to $10.6 million. As a percentage of total revenue, compensation and benefits expense decreased 0.6 percentage points to 29.9%. The increase in dollar value of compensation and benefits expense was due primarily to an increase in incentive-based compensation during fiscal year 2025.
General and Administrative Expense : Comparing fiscal year 2024 to fiscal year 2025, general and administrative expense decreased by 2.8% from $6.5 million to $6.3 million. As a percentage of total revenue, general and administrative expense decreased 4.2 percentage points to 17.7%. The decrease in general and administrative expense was primarily due to a decrease in professional services expense in the current period.
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 Sustainable 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 Sustainable 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.
36
Table of Contents
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 Sustainable ETF. We receive a unitary investment advisory fee from the Hennessy Sustainable 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 fiscal year
2024 to fiscal year
2025, fund distribution and other expense
increased by
25.9%, from
$0.8 million to
$1.0 million. As a percentage of total revenue, fund distribution and other expense
increased
0.1 percentage points to
2.9%. The increase of fund distribution and other expense was due to increased average daily net assets of the Hennessy Mutual Funds, which in turn increases the fees we pay to financial institutions.
Sub-Advisory Fees Expense : Comparing fiscal year 2024 to fiscal year 2025, sub‑advisory fees expense decreased by 0.5%, from $4.2 million to $4.1 million. As a percentage of total revenue, sub‑advisory fees expense decreased 2.4 percentage points to 11.7%. The decrease in sub‑advisory fees expense was due to a decrease in average daily net assets of the sub‑advised Hennessy Funds.
Depreciation Expense : Comparing fiscal year 2024 to fiscal year 2025, depreciation expense increased by 18.9% from $0.2 million to $0.3 million. As a percentage of total revenue, depreciation expense remained the same at 0.8% in both periods. The dollar value increase in depreciation expense was due to additional fixed asset purchases.
Interest Income
Comparing fiscal year 2024 to fiscal year 2025, interest income decreased from $3.1 million to $2.8 million. The decrease was due to decreased interest rates, partly offset by increased principal balances.
Interest Expense
Comparing fiscal year 2024 to fiscal year 2025, interest expense increased by 0.8% from $2.28 million to $2.29 million. The increase in interest expense was due to the manner in which interest expense is calculated in accordance with 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.
Income Tax Expense
Comparing fiscal year 2024 to fiscal year 2025, income tax expense increased by 40.4%, from $2.6 million to $3.7 million. The increase in income tax expense was due to higher net operating income in the current period.
Net Income
Comparing fiscal year 2024 to fiscal year 2025, net income increased by 40.3%, from $7.1 million to $10.0 million. The increase in net income was primarily due to increased average assets under management in the current period, which resulted in higher revenue and net operating income.
37
Table of Contents
CRITICAL ACCOUNTING ESTIMATES AND POLICIES
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. Described below are the accounting policies that we believe are most critical to understanding our results of operations and financial position.
Our operating revenues consist of contractual investment advisory and shareholder service fees. We earn our investment advisory fees through portfolio management of the Hennessy Funds, and we earn our shareholder service fees by assisting investors in the Hennessy Mutual Funds. These fee revenues are earned and calculated daily by the Hennessy Funds’ accountants. In accordance with Financial Accounting Standards Board (“FASB”) guidance on revenue recognition, we recognize fee revenues monthly. Our contractual agreements provide persuasive evidence that an arrangement exists with fixed and determinable fees, and the services are rendered daily. The collectability is probable as the fees are received from the Hennessy Funds in the month subsequent to the month in which the services are provided.
The management contracts we have purchased are considered intangible assets with an indefinite life and we account for them in accordance with Accounting Standards Codification 350: Intangibles – Goodwill and Other (“ASC 350”). Pursuant to ASC 350, an entity first assesses qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform a quantitative impairment test. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. If an entity determines that it is more likely than not that an indefinite‑lived intangible asset is impaired, then it must conduct an impairment analysis. We were able to forego the quantitative analysis for fiscal year 2025 as the more-likely-than-not threshold was not met as of the end of fiscal year 2025.
The costs related to our purchase of assets related to the management of investment funds are capitalized as incurred. The costs are defined as an intangible asset per the FASB standard “Intangibles – Goodwill and Other.” The acquisition costs include legal fees, fees for soliciting shareholder approval, and a percent of asset costs to purchase the management contracts. The amounts are included in the management contract asset, totaling $82.6 million as of the end of fiscal year 2025.
RECENTLY ISSUED AND ADOPTED ACCOUNTING STANDARDS
We reviewed accounting pronouncements issued between December 11, 2024, the filing date of our most recent previously filed Annual Report on Form 10-K, and December 3, 2025, the filing date of this Annual Report on Form 10-K, and are currently in the process of evaluating the impact of adoption on our financial position, results of operations, and disclosures.
See Note 1(k) of the Notes to Financial Statements for a discussion of recently issued and adopted accounting standards.
38
Table of Contents