Breaking Down Hennessy Advisors, Inc. (HNNA) Financial Health: Key Insights for Investors

You're looking at Hennessy Advisors, Inc. (HNNA) right now and wondering if the dividend yield is enough to offset the recent stock volatility, and honestly, that's the right question to ask an asset manager in this market. The good news is the balance sheet is defintely solid, with cash and equivalents net of gross debt climbing to a strong $30.07 million as of the end of the third fiscal quarter in 2025, a jump of 38.1% year-over-year. But the core business is showing some sequential softness: Q3 2025 revenue came in at $8.05 million, a dip from Q2's $9.28 million, and diluted earnings per share (EPS) compressed from $0.33 to $0.26 quarter-over-quarter, reflecting the fee-sensitive nature of their business. Still, total Assets Under Management (AUM) reached a resilient $4.28 billion, and the annualized dividend yield is compelling at around 4.4%, making this a classic value-versus-growth debate, especially with the stock trading at a low P/E ratio of 7.94.

Revenue Analysis

You want to know how Hennessy Advisors, Inc. (HNNA) makes its money and if that engine is accelerating. The direct takeaway is this: HNNA's revenue is almost entirely driven by its Assets Under Management (AUM), and while the trailing twelve months show strong growth, the quarter-to-quarter volatility is a real factor to watch.

Primary Revenue Streams and Contribution

As an asset manager, Hennessy Advisors, Inc. (HNNA)'s primary revenue streams are straightforward: they are fees charged on the assets they manage, which means market performance and net client flows are everything. The business has two main segments of revenue, both tied directly to AUM (Assets Under Management), which was approximately $4.28 billion as of June 30, 2025.

The core revenue sources are:

• Investment Advisory Fees: The largest component, charged as a percentage of the average daily net assets in their mutual funds and exchange-traded funds (ETFs).
• Shareholder Service Fees: Fees for administrative and transfer agency services to fund shareholders.

Here's the quick math on the fee breakdown from the last full fiscal year's structure, which dictates the 2025 mix. Investment Advisory Fees were the dominant driver, representing the vast majority of total revenue.

The takeaway is simple: almost all of HNNA's income is non-discretionary management fees. This means if the stock market dips, your revenue will defintely take a hit.

Near-Term Revenue Growth and Trends

Hennessy Advisors, Inc. (HNNA) has demonstrated a solid recovery in the near term, largely thanks to favorable market conditions boosting AUM. The Trailing Twelve Months (TTM) revenue ending June 30, 2025, hit approximately $35.82 million.

Year-over-year growth has been robust, but it's not a straight line. The TTM revenue growth rate ending June 30, 2025, was a strong 32.04% compared to the previous TTM period. However, looking at the last reported quarter, Q3 2025 revenue of $8.05 million was only a 3.5% increase year-over-year from Q3 2024. Also, that $8.05 million was a sequential drop from the prior quarter's revenue of $9.28 million.

This tells you two things:

• Market appreciation drove the big TTM number.
• Recent market volatility is causing fee revenue to fluctuate, as seen in the sequential decline.

Analysis of Significant Revenue Changes

The most significant change is the strategic push into new products to grow the AUM base. Management is actively working to expand their fund lineup, specifically moving forward with plans to assume management of the STF Tactical Growth & Income ETF and the STF Tactical Growth ETF. This is a clear action to diversify the AUM base beyond their traditional mutual fund offerings and capture the growing interest in the ETF space.

The increase in average AUM for the nine months ended June 30, 2025, was a substantial 31.6% to $4.6 billion, which is the real driver behind the revenue jump. Still, the sequential dip in Q3 2025 revenue shows the sensitivity of the business model to short-term market movements and a slight decline in average AUM from the prior quarter. You can dive deeper into the ownership structure and market sentiment in Exploring Hennessy Advisors, Inc. (HNNA) Investor Profile: Who's Buying and Why?

Profitability Metrics

You're looking at Hennessy Advisors, Inc. (HNNA) to see if their engine is running efficiently, and that means going straight to the margins. The good news is that, as of the trailing twelve months (TTM) ending June 30, 2025, the company demonstrates a strong level of profitability, particularly when benchmarked against the broader asset management sector.

For a firm like Hennessy Advisors, Inc., which earns revenue primarily from management fees, the concept of a 'Cost of Goods Sold' is practically non-existent. This means their Gross Profit Margin is effectively 100%, which is typical for a service-based financial company. The real test of operational efficiency is what happens after they pay for their people, technology, and distribution-the operating expenses.

Here's the quick math on their core profitability for the TTM period ending mid-2025:

• TTM Revenue: $35.81 million.
• TTM Net Income: $9.9 million.
• Net Profit Margin: 27.5%.

To be fair, the Operating Profit Margin is the most telling figure for an asset manager. Based on their TTM Net Income of $9.9 million on $35.81 million in revenue, and assuming a standard corporate tax rate and minimal non-operating items, their operating margin is estimated to be around 35.0%. This is a great starting point for any financial firm.

Margin Trends and Industry Comparison

The trend in profitability for Hennessy Advisors, Inc. (HNNA) shows some recent volatility but a strong overall performance. Looking at the quarterly results for fiscal year 2025, you see the direct impact of market fluctuations on their fee base:

• Q2 2025 Net Income was $2.6 million on $9.3 million in revenue.
• Q3 2025 Net Income dropped to approximately $2.12 million on $8.05 million in revenue.

This sequential decline in revenue and net income from Q2 to Q3 2025 highlights the fee-driven sensitivity to average assets under management (AUM). Still, the TTM Net Profit Margin of 27.5% is solid, especially when you consider the industry headwinds.

The broader US asset management industry is struggling with margin compression. The median industry operating margin was 32% in 2023, down from 42% in 2021, and this pressure is expected to continue through 2025 as costs for technology and distribution keep climbing. Hennessy Advisors, Inc.'s estimated TTM Operating Margin of 35.0% suggests they are currently outperforming the median industry peer, which is a defintely a positive signal for their cost management and operational efficiency.

Here is a snapshot of their profitability ratios compared to the industry median:

The key takeaway is that Hennessy Advisors, Inc. is running a leaner operation than many of its peers, which gives them a buffer against the ongoing fee compression that is eroding revenue yields across the sector. The real action item is to monitor their cost-to-income ratio (the inverse of operating margin) to ensure they maintain this efficiency edge as they integrate new offerings like the STF Tactical Growth & Income ETF, which could expand their ETF offerings and add complexity.

You can read more about the company's full financial picture in our detailed post: Breaking Down Hennessy Advisors, Inc. (HNNA) Financial Health: Key Insights for Investors.

Finance: Track Q4 2025 Operating Expenses closely to confirm the 35.0% operating margin estimate holds up.

Debt vs. Equity Structure

You're looking at Hennessy Advisors, Inc. (HNNA) and wondering how they fund their operations-it's a smart question, because a company's capital structure tells you a lot about its risk tolerance. The direct takeaway here is that Hennessy Advisors, Inc. runs a very conservative, low-leverage balance sheet, relying primarily on equity and internal cash flow, not debt, to finance its business.

As of the third quarter of the 2025 fiscal year, the company's debt profile is exceptionally lean, which is typical for a well-managed asset manager. Their total debt is almost entirely comprised of a single long-term obligation, with short-term debt being negligible. The total long-term debt and capital lease obligation stood at approximately $40.15 million as of June 30, 2025.

Here's the quick math on their leverage, comparing it to the industry standard for Asset Management firms:

A Debt-to-Equity (D/E) ratio of 0.42 is defintely a strong signal of financial stability. To be fair, the industry average for Asset Management is around 0.95, so Hennessy Advisors, Inc. uses less than half the debt per dollar of equity compared to its peers. This low D/E ratio means that for every dollar of shareholder equity, the company only has about 42 cents in debt, making it highly resilient to economic downturns or rising interest rates.

The company's primary debt is a set of 4.875% Notes Due 2026, which were issued back in October 2021 for $40.25 million. There has been no significant new debt issuance or refinancing activity reported in 2025, suggesting they are comfortable with their current structure as they approach the 2026 maturity. This is a very clean, simple capital structure.

Hennessy Advisors, Inc. clearly favors equity and retained earnings over debt financing for growth. This is further underscored by its substantial cash position: as of Q3 2025, their cash and equivalents, net of gross debt, stood at $30.07 million. This cash balance provides significant flexibility for strategic initiatives, like their progress toward assuming management of STF ETFs, or for continued shareholder returns via dividends, which were maintained at $0.1375 per share across Q1-Q3 2025.

• Low debt shields them from rate hikes.
• Strong cash provides capital for acquisitions.
• The 2026 debt maturity is the next financing event to watch.

The balance sheet strength gives management a lot of optionality. You can read more about the company's overall financial picture in Breaking Down Hennessy Advisors, Inc. (HNNA) Financial Health: Key Insights for Investors.

Liquidity and Solvency

You're looking at Hennessy Advisors, Inc. (HNNA) to understand its financial foundation, and the short-term liquidity picture is defintely a major strength. The company's balance sheet shows a significant buffer, meaning they have ample resources to cover immediate obligations and pursue strategic opportunities, like expanding their ETF offerings.

For a firm in the asset management space, liquidity is often tied directly to cash and receivables, and Hennessy Advisors, Inc. is sitting on a mountain of it. This isn't just a good sign; it's a clear signal of operational efficiency and financial discipline, especially when you map near-term market volatility.

Assessing Hennessy Advisors, Inc.'s Liquidity

The simplest way to gauge a company's ability to meet its short-term debts is through the Current and Quick Ratios. For Hennessy Advisors, Inc., these numbers are exceptional, reflecting a business model that generates cash without tying up capital in things like physical inventory.

As of the most recent data leading up to the end of the 2025 fiscal year, the Current Ratio stood at approximately 15.58, and the Quick Ratio was nearly identical at 15.46. Here's the quick math: a ratio of 1.0 is considered healthy, so a ratio over 15.0 means the company has over $15 in current assets for every $1 in current liabilities. That's a massive safety net.

• Current Ratio: 15.58 (Exceptional short-term coverage).
• Quick Ratio: 15.46 (Liquidity remains high even without inventory).

The near-parity of the two ratios confirms that Hennessy Advisors, Inc., as an asset manager, has virtually no inventory to liquidate, making its current assets highly liquid. They can pay their bills many times over.

Working Capital and Cash Flow Trends

The trend in working capital (current assets minus current liabilities) is overwhelmingly positive. This is best illustrated by the company's rising cash position net of gross debt, which hit $30.07 million as of the third quarter of 2025. That figure represents a substantial year-over-year increase of 38.1%, showing they are not only solvent but actively accumulating cash reserves.

Analyzing the cash flow statement reinforces this strength. Over the last twelve months (TTM) leading into Q3 2025, the firm generated significant cash from its core operations. This is the engine of the business, and it's running strong.

The high Free Cash Flow (FCF) of $13.07 million is especially important because it's the money left over after all necessary capital expenditures (CapEx) are paid. This cash can be used for dividends, share buybacks, or funding growth initiatives, like the planned assumption of management for the STF Tactical Growth & Income ETF and the STF Tactical Growth ETF.

Liquidity Strengths and Actionable Insights

The primary takeaway is that liquidity is a major strength for Hennessy Advisors, Inc. (HNNA). There are no immediate liquidity concerns; instead, the company has a significant war chest. This financial flexibility allows management to be opportunistic, Exploring Hennessy Advisors, Inc. (HNNA) Investor Profile: Who's Buying and Why?, and execute on strategic growth plans without needing to raise external capital or stress the balance sheet.

For you, as an investor, this means the quarterly dividend of $0.1375 per share, which implies an annualized yield of around 4.4%, is extremely well-covered by the company's cash flow and cash reserves. You should focus your risk assessment not on short-term solvency, but on the long-term trends in Assets Under Management (AUM) and the success of their strategic acquisitions.

Valuation Analysis

You are looking at Hennessy Advisors, Inc. (HNNA) and asking the right question: Is the market seeing something I'm missing, or is this a deep-value play? The short answer is that, based on traditional metrics, Hennessy Advisors, Inc. appears undervalued, but you must be mindful of the low liquidity and the concentration risk inherent in asset managers.

The core valuation ratios suggest the stock is cheap. Hennessy Advisors, Inc. trades at a trailing price-to-earnings (P/E) ratio of just 8.04. For context, the broader market often sees P/E ratios in the mid-to-high teens. Also, the price-to-book (P/B) ratio sits at an attractive 0.81. A P/B below 1.0 means the stock is trading for less than the book value of the company's assets, which is defintely a classic value indicator. The enterprise value-to-EBITDA (EV/EBITDA) is also low at 3.63, pointing to a very inexpensive valuation relative to its operating cash flow.

Here's the quick math on the key valuation multiples based on the latest trailing-twelve-months (TTM) data:

The stock's price action over the last 12 months, however, shows a mixed picture. The stock price has decreased by a modest 0.93% over the past year, but the year-to-date (YTD) return is a steeper loss of -20.75% as of November 20, 2025. This tells me the market has been punishing the stock this year, likely due to pressures on assets under management (AUM) or fee compression. The 52-week range of $8.43 to $13.88 shows significant volatility, with the current price of around $10.05 (as of November 19, 2025) sitting closer to the low end.

For income-focused investors, Hennessy Advisors, Inc. offers a strong dividend. The company pays an annual dividend of $0.55 per share, which translates to a high dividend yield of approximately 5.47%. The dividend payout ratio is sustainable at a healthy 44.02% of trailing earnings, meaning less than half of the company's profit is used for the dividend, leaving plenty of room for reinvestment or a safety buffer.

When we look at Wall Street's view, the consensus is a Buy rating, though this comes from a single analyst. This lack of broad coverage is common for smaller firms and adds to the uncertainty. While the formal consensus is positive, some technical forecasts are bearish, predicting a significant price drop, which highlights the risk of low-liquidity stocks where a single large trade can move the needle. You need to look past the single rating and focus on the fundamentals and the Mission Statement, Vision, & Core Values of Hennessy Advisors, Inc. (HNNA) to understand their long-term strategy.

Your action here is to treat this as a deep-value candidate. The low P/E and P/B are compelling, but the negative YTD performance is a clear risk signal. You have to believe in the firm's ability to grow AUM to justify an investment.

Risk Factors

You're looking at Hennessy Advisors, Inc. (HNNA) because their Q2 2025 results showed a strong performance, with total revenue hitting $9.3 million and net income at $2.6 million. That's a great bounce. But as a seasoned analyst, I focus on what can derail that momentum. The reality is that an asset manager's revenue is directly tied to its Assets Under Management (AUM), and that makes them highly exposed to market and competitive risks.

The biggest near-term risk for Hennessy Advisors, Inc. is the external environment, especially market volatility and intense competition. While the company's estimated AUM is still solid at approximately $4.0 billion as of November 2025, any significant market correction will immediately hit that number, and thus, their fee revenue. We saw this risk highlighted in the Q2 2025 report, which cited heightened market volatility driven by new tariffs, inflation, and interest rate policy uncertainty.

Here's the quick math: A drop in AUM means a drop in the management fees that make up most of their income. Plus, the investment management space is brutal. Hennessy Advisors, Inc. is up against behemoths like BlackRock that have far greater financial resources, distribution networks, and a broader product set, making client retention a constant battle.

The company also faces specific operational and strategic risks, especially around its growth-by-acquisition model, which is a core strategy alongside organic growth. Acquisitions are tricky, and the risks are clear:

• Difficulty finding attractive acquisition targets in a competitive market.
• Inability to accurately value potential asset purchases.
• Loss of acquired fund assets through investor redemptions post-purchase.

Losing a significant chunk of AUM right after paying for it can quickly turn a strategic win into a financial loss. That's a defintely a risk to model.

Mitigation Strategies and Clear Actions

To be fair, Hennessy Advisors, Inc. isn't just sitting still; they are taking clear actions to mitigate these risks. Their primary defense against market volatility is their commitment to a disciplined, long-term investing philosophy, which aims to provide stability in turbulent times. They're also strategically diversifying their product line to compete better.

For example, the definitive agreement with STF Management, LP to expand their Exchange-Traded Fund (ETF) offerings is a smart move. ETFs are a high-growth area and offer a different fee structure and distribution channel than their traditional mutual funds, which helps insulate them from product-specific headwinds.

Financially, the firm is well-positioned to weather some storms. Their cash position, net of debt, was reported to be strengthening, up nearly 30% in the twelve months leading up to Q1 2025, which gives them a buffer to handle market downturns or fund redemptions. That strong balance sheet is your safety net.

For a deeper dive into the firm's overarching philosophy, you should review the Mission Statement, Vision, & Core Values of Hennessy Advisors, Inc. (HNNA).

Growth Opportunities

You want to know where Hennessy Advisors, Inc. (HNNA) goes from here, and honestly, the path is clear: controlled product expansion and leaning into their core strength-consistent fund performance. The firm is a realist, mapping growth not on market hype but on strategic, accretive moves.

For the trailing twelve months (TTM) ending June 30, 2025, Hennessy Advisors, Inc. reported revenue of $35.82 million and net income of $9.87 million, translating to a diluted earnings per share (EPS) of $1.25. That's a solid operating base, but you need to see what drives the next leg up. The biggest near-term catalyst is product innovation via acquisition, specifically in the Exchange Traded Fund (ETF) space.

Here's the quick math on their immediate growth drivers:

• Strategic Acquisitions: The company is progressing toward assuming management of two STF ETFs, a move expected to expand their product lineup and add approximately $220 million in assets under management (AUM). This deal was signed in March 2025 and is a clear path to boosting the total AUM, which stood at $4.28 billion as of June 30, 2025.
• Organic Growth: Their business model relies on attracting new capital by showing superior returns. All 17 Hennessy Funds posted positive returns for the year ended December 31, 2024, and they have a long history of positive multi-period performance. Strong performance drives inflows, and inflows drive advisory fees.
• Balance Sheet Flexibility: Cash and equivalents net of gross debt stood at $30.07 million in the third quarter of 2025, a strong position that gives management optionality for future, similar acquisitions or to support the consistent dividend payout.

What this estimate hides is that asset management revenue is tied directly to market conditions; volatility can pressure fee revenue, as seen with the sequential revenue decline from $9.28 million in Q2 2025 to $8.05 million in Q3 2025. Still, the long-term strategy is defintely sound.

Competitive Moat: Experience and Discipline

In a crowded market, Hennessy Advisors, Inc.'s competitive advantage (or 'moat') is less about technological flash and more about institutional discipline and tenure. They stick to a consistent, buy-and-hold philosophy that rejects market timing, which appeals to a segment of the investor base looking for stability.

Their management team, including Founder, Chairman & CEO Neil J. Hennessy, is long-tenured, which provides continuity and a deep understanding of their fund strategies. This experience is a key differentiator in an industry where fund manager turnover is common. Their focus on providing a broad range of funds, from traditional equity to ETFs, ensures they can serve varied investor needs.

For a deeper dive into the investor base supporting this growth, you should check out Exploring Hennessy Advisors, Inc. (HNNA) Investor Profile: Who's Buying and Why?

The firm's financial health is underpinned by a strong balance sheet, which is critical for an asset manager. Here is a snapshot of the TTM financial performance as of mid-2025:

This shows a profitable, albeit smaller, player in the asset management space, positioned to use its liquidity for targeted growth. Your next step should be to monitor the integration of the new ETF assets; seamless integration is what turns a strategic initiative into real earnings growth.