Luna Innovations Incorporated Reports First Quarter 2017 Financial Results

Net loss improved to $(1.4) million for the three months ended March 31, 2017 compared to $(1.5) million for the three months ended March 31, 2016

 (ROANOKE, VA, May 11, 2017) – Luna Innovations Incorporated (NASDAQ: LUNA) today announced its financial results for the three months ended March 31, 2017.

For the three months ended March 31, 2017, Luna reported revenues of $13.1 million and a net loss of $(1.4) million compared to revenues of $14.0 million and a net loss of $(1.5) million for the three months ended March 31, 2016. Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) was $0.1 million for the three months ended March 31, 2017 and 2016.  A reconciliation of net loss to Adjusted EBITDA can be found in the schedules included in this release.

“As we described last quarter, with the transition to a new vendor managed inventory arrangement with our largest customer in Asia as of January 1, 2017, we shipped fewer of our 100G integrated coherent receivers during the first quarter of 2017 than we did in the first quarter of 2016.  As a result, our overall products and licensing revenue declined year over year,” said My Chung, president and chief executive officer of Luna. “We anticipate the market for 100G products to return to significant growth in the second half of this year, driven by the build-out of metro networks in China and the adoption of our second generation 100G integrated coherent receivers. We remain focused on the execution of our key strategic growth initiatives, and continue to be excited about the growth opportunities they provide for the full year of 2017 and beyond.”

First Quarter Financial Summary

Total revenues for the three months ended March 31, 2017 were $13.1 million compared to $14.0 million for the three months ended March 31, 2016.  Technology development revenues increased 15% to $4.3 million for the three months ended March 31, 2017, compared to $3.7 million for the three months ended March 31, 2016.   Products and licensing revenues were $8.8 million for the three months ended March 31, 2017, compared to $10.3 million for the three months ended March 31, 2016.  The decline in products and licensing revenues year over year resulted primarily from lower sales of 100G receivers in Asia compared to the first quarter of the previous year as Luna transitioned to a new vendor managed inventory arrangement with its largest customer in that region. 

Gross profit was $4.7 million, or 36% of revenues, for the three months ended March 31, 2017, compared to gross profit of $4.8 million, or 35% of revenues, for the three months ended March 31, 2016.  

Selling, general and administrative expenses were $4.5 million for the three months ended March 31, 2017, compared to $4.6 million for the three months ended March 31, 2016.

Research, development and engineering expenses decreased to $1.4 million for the three months ended March 31, 2017 compared to $1.6 million for the three months ended March 31, 2016.

Operating loss improved to $(1.3) million for the three months ended March 31, 2017, compared to an operating loss of $(1.4) million for the three months ended March 31, 2016.  Net loss attributable to common stockholders improved to $(1.4) million for the three months ended March 31, 2017, compared to a net loss attributable to common stockholders of $(1.5) million for the three months ended March 31, 2016.  Adjusted EBITDA was unchanged at $(0.1) million for the three months ended March 31, 2017 and 2016.

Non-GAAP Measures

In evaluating the operating performance of its business, Luna’s management considers Adjusted EBITDA, which excludes certain charges and credits that are required by generally accepted accounting principles (“GAAP”). Adjusted EBITDA provides useful information to both management and investors by excluding the effect of certain non-cash expenses and items that Luna believes may not be indicative of its operating performance, because either they are unusual and Luna does not expect them to recur in the ordinary course of its business or they are unrelated to the ongoing operation of the business in the ordinary course. Adjusted EBITDA should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. Adjusted EBITDA has been reconciled to the nearest GAAP measure in the table following the financial statements attached to this press release.

Conference Call Information

As previously announced, Luna will conduct an investor conference call at 5:00 p.m. (EDT) today to discuss its financial results for the three months ended March 31, 2017, and recent business developments. The call can be accessed by dialing 844.578.9643 domestically or 270.823.1522 internationally prior to the start of the call. The participant access code is 18890708. Investors are advised to dial in at least five minutes prior to the call to register. The conference call will also be webcast live over the Internet. The webcast can be accessed by logging on to the “Investor Relations” section of the Luna website, www.lunainc.com, prior to the event. The webcast will be archived under the “Webcasts and Presentations” section of the Luna website for at least 30 days following the conference call.

About Luna

Luna Innovations Incorporated (www.lunainc.com) is a leader in optical technology, providing unique capabilities in high speed optoelectronics and high performance fiber optic test products for the telecommunications industry and distributed fiber optic sensing for the aerospace and automotive industries.  Luna is organized into two business segments, which work closely together to turn ideas into products: a Technology Development segment and a Products and Licensing segment. Luna’s business model is designed to accelerate the process of bringing new and innovative technologies to market.

Forward-Looking Statements

The statements in this release that are not historical facts constitute “forward-looking statements” made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These statements include Luna’s expectations regarding Luna’s future financial performance, the significant growth of the market for Luna’s 100G products in the second half of 2017, the adoption of Luna’s second generation 100G integrated coherent receivers, and additional potential growth opportunities. Management cautions the reader that these forward-looking statements are only predictions and are subject to a number of both known and unknown risks and uncertainties, and actual results, performance, and/or achievements of Luna may differ materially from the future results, performance, and/or achievements expressed or implied by these forward-looking statements as a result of a number of factors. These factors include, without limitation, failure of demand for Luna’s products and services to meet expectations, technological challenges and those risks and uncertainties set forth in Luna’s periodic reports and other filings with the Securities and Exchange Commission (“SEC”). Such filings are available on the SEC’s website at www.sec.gov and on Luna’s website at www.lunainc.com. The statements made in this release are based on information available to Luna as of the date of this release and Luna undertakes no obligation to update any of the forward-looking statements after the date of this release.

Luna Innovations Incorporated
Consolidated Statements of Operations 

 

Three Months Ended
 March 31,

 

 

2017

 

2016

 

 

(unaudited)

 

Revenues:

 

 

 

 

Technology development

$

4,276,448

 

 

$

3,723,262

 

 

Products and licensing

8,841,936

 

 

10,263,753

 

 

Total revenues

13,118,384

 

 

13,987,015

 

 

Cost of revenues:

 

 

 

 

Technology development

3,222,354

 

 

2,846,723

 

 

Products and licensing

5,220,775

 

 

6,296,685

 

 

Total cost of revenues

8,443,129

 

 

9,143,408

 

 

Gross profit

4,675,255

 

 

4,843,607

 

 

Operating expense:

 

 

 

 

Selling, general and administrative

4,495,701

 

 

4,645,282

 

 

Research, development and engineering

1,444,828

 

 

1,550,491

 

 

Total operating expense

5,940,529

 

 

6,195,773

 

 

Operating loss

(1,265,274

)

 

(1,352,166

)

 

Other income (expense):

 

 

 

 

Other income, net

351

 

 

3,940

 

 

Interest expense

(64,374

)

 

(86,173

)

 

Total other expense

(64,023

)

 

(82,233

)

 

Loss before income taxes

(1,329,297

)

 

(1,434,399

)

 

Income tax expense

26,690

 

 

25,175

 

 

Net loss

(1,355,987

)

 

(1,459,574

)

 

Preferred stock dividend

34,096

 

 

21,210

 

 

Net loss attributable to common stockholders

$

(1,390,083

)

 

$

(1,480,784

)

 

Net loss per share attributable to common stockholders:

 

 

 

 

Basic and diluted

$

(0.05

)

 

$

(0.05

)

 

Weighted average common shares and common equivalent shares outstanding:

 

 

 

 

Basic and diluted

27,541,356

 

 

27,477,181

 

 


Luna Innovations Incorporated
Consolidated Balance Sheets

 

March 31, 2017

 

December 31, 2016

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

$

12,105,934

 

 

$

12,802,458

 

 

Accounts receivable, net

12,256,152

 

 

14,297,725

 

 

Inventory

8,722,670

 

 

8,370,235

 

 

Prepaid expenses and other current assets

1,536,003

 

 

1,627,175

 

 

Total current assets

34,620,759

 

 

37,097,593

 

 

Property and equipment, net

6,575,200

 

 

6,780,838

 

 

Intangible assets, net

8,280,903

 

 

8,681,263

 

 

Goodwill

2,348,331

 

 

2,348,331

 

 

Other assets

68,778

 

 

88,948

 

 

Total assets

$

51,893,971

 

 

$

54,996,973

 

 

Liabilities and stockholders’ equity

 

 

 

 

Liabilities:

 

 

 

 

Current Liabilities:

 

 

 

 

Current portion of long-term debt obligations

$

1,833,333

 

 

$

1,833,333

 

 

Current portion of capital lease obligations

53,043

 

 

52,128

 

 

Accounts payable

3,147,754

 

 

4,466,192

 

 

Accrued liabilities

8,672,431

 

 

8,667,100

 

 

Deferred revenue

843,345

 

 

949,603

 

 

Total current liabilities

14,549,906

 

 

15,968,356

 

 

Long-term deferred rent

1,372,356

 

 

1,403,957

 

 

Long-term debt obligations

1,965,776

 

 

2,420,032

 

 

Long-term capital lease obligations

101,328

 

 

114,940

 

 

Total liabilities

17,989,366

 

 

19,907,285

 

 

Commitments and contingencies

 

 

 

 

Stockholders’ equity:

 

 

 

 

Preferred stock, par value $0.001, 1,321,514 shares authorized, issued and outstanding at March 31, 2017 and December 31, 2016

1,322

 

 

1,322

 

 

Common stock, par value $0.001, 100,000,000 shares authorized, 27,989,104 and 27,988,104 shares issued, 27,542,277 and 27,541,277 shares outstanding at March 31, 2017 and December 31, 2016

28,621

 

 

28,600

 

 

Treasury stock at cost, 446,827 shares at March 31, 2017 and December 31, 2016

(517,987

)

 

(517,987

)

 

Additional paid-in capital

82,656,937

 

 

82,451,958

 

 

Accumulated deficit

(48,264,288

)

 

(46,874,205

)

 

Total stockholders’ equity

33,904,605

 

 

35,089,688

 

 

Total liabilities and stockholders’ equity

$

51,893,971

 

 

$

54,996,973

 

 

 

Luna Innovations Incorporated
Consolidated Statements of Cash Flows

 

Three Months Ended March 31,

 

2017

 

2016

 

(unaudited)

Cash flows provided by/(used in) operating activities

 

 

 

Net loss

$

(1,355,987

)

 

$

(1,459,574

)

Adjustments to reconcile net loss to net cash provided by/(used in) operating activities

 

 

 

Depreciation and amortization

956,687

 

 

939,799

 

Share-based compensation

170,084

 

 

258,803

 

Bad debt expense

29,671

 

 

 

Change in assets and liabilities

 

 

 

Accounts receivable

2,011,902

 

 

(298,309

)

Inventory

(352,435

)

 

20,375

 

Other current assets

55,092

 

 

(376,642

)

Accounts payable and accrued expenses

(1,313,107

)

 

(721,289

)

Deferred revenue

(137,859

)

 

92,259

 

Net cash provided by/(used in) operating activities

64,048

 

 

(1,544,578

)

Cash flows used in investing activities

 

 

 

Acquisition of property and equipment

(157,308

)

 

(138,099

)

Intangible property costs

(133,054

)

 

(101,467

)

Net cash used in investing activities

(290,362

)

 

(239,566

)

Cash flows used in financing activities

 

 

 

Payments on capital lease obligations

(12,697

)

 

(20,106

)

Payments of debt obligations

(458,333

)

 

(458,334

)

Proceeds from the exercise of options

820

 

 

 

Net cash used in financing activities

(470,210

)

 

(478,440

)

Net decrease in cash or cash equivalents

(696,524

)

 

(2,262,584

)

Cash and cash equivalents-beginning of period

12,802,458

 

 

17,464,040

 

Cash and cash equivalents-end of period

$

12,105,934

 

 

$

15,201,456

 

 

Luna Innovations Incorporated
Reconciliation of Net Loss to EBITDA and Adjusted EBITDA

 

Three Months Ended
 March 31,

 

 

2017

 

2016

 

 

(unaudited)

 

Net loss

$

(1,355,987

)

 

$

(1,459,574

)

 

Interest expense

64,374

 

 

86,173

 

 

Tax expense

26,690

 

 

25,175

 

 

Depreciation and amortization

956,687

 

 

939,799

 

 

EBITDA

(308,236

)

 

(408,427

)

 

Share-based compensation

170,084

 

 

258,803

 

 

Non-recurring merger-related charges

 

 

 

 

Adjusted EBITDA

$

(138,152

)

 

$

(149,624

)

 

###
Investor Contact:
Dale Messick, CFO
Luna Innovations Incorporated
Phone: 1.540.769.8400
Email: IR@lunainc.com