Luna Reports Third Quarter 2012 Financial Results

Products and licensing revenues increase 18% over prior year quarter; Total revenues decrease 9% from prior year quarter

 

(ROANOKE, VA, November 8, 2012) – Luna Innovations Incorporated (NASDAQ: LUNA) today announced its financial results for the third quarter and nine months ended September 30, 2012.

For the three months ended September 30, 2012, the Company reported a net loss attributable to common stockholders of $0.3 million compared to net income to common stockholders of $0.2 million for the third quarter of 2011.

Total revenues decreased by 9%, from $8.8 million in the third quarter of 2011 to $8.0 million in the third quarter of 2012. Products and licensing revenues increased by 18%, from $2.7 million in the third quarter of 2011 to $3.2 million in the third quarter of 2012, due to increased sales of the Company’s new ODiSI product line. Revenues in the Company’s technology development segment declined by 21% from $6.2 million in the third quarter of 2011 to $4.9 million in the third quarter of  2012, primarily due to lower revenues in the Company’s Secure Computing and Communications group, where several short-term projects benefitted the group’s third quarter 2011 revenues.  Gross profit decreased from $3.5 million for the third quarter of 2011 to $3.1 million for the third quarter of 2012. 

Adjusted EBITDA, a non-GAAP measure, which is earnings before interest, taxes, and non-cash expenses of share-based compensation, depreciation, amortization and warrant expense, declined to $0.7 million for the third quarter of 2012, as compared to $1.1 million for the third quarter of 2011. Cash at September 30, 2012 of $6.7 million represents an increase of $0.1 million from $6.6 million at June 30, 2012.

“I am pleased with the successes we continue to make on each of our key strategic growth initiatives,” said My Chung, president and chief executive officer.  “In addition to our continuing progress in our fiber optic shape sensing and secure computing initiatives, the introduction of our ODiSI line of products for strain measurement earlier this year drove the incremental products and licensing revenues we generated this quarter. We are encouraged that our customers are embracing our technology and remain optimistic that the growing composite test market will continue to provide diversity in our revenue sources.”

Third Quarter Financial and Business Summary

— Total revenues decreased by 9%, to $8.0 million for the third quarter of 2012, from $8.8 million for the third quarter of 2011.

— Products and licensing revenues increased by 18%, to $3.2 million in the third quarter of 2012, from $2.7 million in the third quarter of 2011.

— Technology development revenues decreased by 21%, to $4.9 million for the third quarter of 2012, from $6.2 million for the third quarter of 2011.

— Gross profit decreased to $3.1 million, or 39% of total revenues, for the third quarter of 2012, from $3.5 million, or 40% of total revenues, for the third quarter of 2011.

— Selling, general and administrative expenses increased by 16% to $2.7 million, or 33% of total revenues for the third quarter of 2012, from $2.3 million, or 26% of total revenues, for the third quarter of 2011.

— Total operating expenses increased to $3.3 million, or 41% of total revenues, for the third quarter of 2012, from $3.2 million, or 36% of total revenues for the third quarter of 2011.

— Adjusted EBITDA decreased to $0.7 million for the third quarter of 2012, from $1.1 million for the third quarter of 2011.

— Net loss attributable to common stockholders declined to $0.3 million, or a loss of $0.02 per basic and diluted common share, for the third quarter of 2012, compared to a net income attributable to common stockholders of $0.2 million, or income of $0.02 per basic common share and $0.01 per diluted common share, for the third quarter of 2011.

— Cash and cash equivalents totaled $6.7 million at September 30, 2012, as compared to $6.6 million at June 30, 2012 and $8.9 million at December 31, 2011.

–Introduced a new lower cost optical backscatter reflectometer, the OBR 5T-50, expanding our product offering in the fiber-optic testing market by directly addressing the needs of manufacturing production lines, as well as university labs and research facilities.

–Received full accreditation by the U.S. Department of Defense as a Trusted Integrated Circuit Supplier through our Secure Computing and Communications group.

Nine Months Ended September 30, 2012 Financial Summary

— Total revenues decreased $2.9 million, or 10%, to $24.6 million for the nine months ended September 30, 2012, compared to $27.5 million for the nine months ended September 30, 2011.

— Products and licensing revenues decreased by 13%, to $8.7 million for the nine months ended September 30, 2012, from $10.1 million for the nine months ended September 30, 2011. 

— Technology development revenues decreased by 9%, to $15.9 million for the nine months ended September 30, 2012, from $17.4 million for the nine months ended September 30, 2011.

— Gross profit decreased by 9%, to $9.5 million for the nine months ended September 30, 2012, from $10.5 million for the nine months ended September 30, 2011.

— Selling, general and administrative expenses decreased by 12% to $8.2 million, or 33% of total revenues, for the nine months ended September 30, 2012, from $9.3 million, or 34% of total revenues, for the nine months ended September 30, 2011.

— Total operating expenses decreased by 10% to $10.2 million, or 41% of total revenues, for the nine months ended September 30, 2012, from $11.3 million, or 41% of total revenues, for the nine months ended September 30, 2011.

— Adjusted EBITDA decreased to $1.7 million for the nine months ended September 30, 2012, from $2.1 million for the nine months ended September 30, 2011. 

— Net loss attributable to common stockholders improved to $0.9 million, or a loss of $0.06 per basic and diluted common share, for the nine months ended September 30, 2012, compared to a net loss attributable to common stockholders of $1.1 million, or a loss of $0.08 per basic and diluted common share, for the nine months ended September 30, 2011.

Non-GAAP Measures

In evaluating the operating performance of its business, Luna’s management excludes certain charges and credits that are required by generally accepted accounting principles (“GAAP”).  These non-GAAP results provide useful information to both management and investors by excluding items that the company believes may not be indicative of its operating performance, because either they are unusual and the company 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.  These non-GAAP measures should be considered in addition to results and guidance prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results.  The non-GAAP measures included in this press release have 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. (EST) today to discuss its financial results and business developments for the third quarter of 2012 and expectations for the remainder of 2012.  The call can be accessed by dialing 866.700.7101 domestically or 617.213.8837 internationally prior to the start of the call. The participant access code is 19063914Investors 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 focused on sensing and instrumentation. Luna develops and manufactures new-generation products for the healthcare, telecommunications, energy and defense markets. The company’s products are used to measure, monitor, protect and improve critical processes in the markets we serve. Through its disciplined commercialization business model, Luna has become a recognized leader in transitioning science to solutions. Luna is headquartered in Roanoke, Virginia.

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 our expectations regarding the demand for the company’s fiber optic equipment and technologies and the company’s technical capabilities. 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 the company 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 the company’s products and services to meet expectations, technological challenges and those risks and uncertainties set forth in the company’s periodic reports and other filings with the Securities and Exchange Commission. Such filings are available at the SEC’s website at www.sec.gov and at the company’s website at www.lunainc.com. The statements made in this release are based on information available to the company 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

Condensed Consolidated Statements of Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

  

2012

 

 

2011

 

 

2012

 

 

2011

 

 

  

(unaudited)

 

 

(unaudited)

 

Revenues:

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technology development revenues

  

$

4,874,826

  

 

$

6,161,826

  

 

$

15,868,642

  

 

$

17,406,515

  

Products and licensing revenues

  

 

3,155,953

  

 

 

2,681,184

  

 

 

8,715,630

  

 

 

10,058,709

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

  

 

8,030,779

  

 

 

8,843,010

  

 

 

24,584,272

  

 

 

27,465,224

  

 

 

 

 

 

Cost of revenues:

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technology development costs

  

 

3,577,476

  

 

 

3,630,163

  

 

 

11,248,453

  

 

 

11,910,771

  

Products and licensing costs

  

 

1,307,285

  

 

 

1,719,039

  

 

 

3,821,980

  

 

 

5,059,507

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total cost of revenues

  

 

4,884,761

  

 

 

5,349,202

  

 

 

15,070,433

  

 

 

16,970,278

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

  

 

3,146,018

  

 

 

3,493,808

  

 

 

9,513,839

  

 

 

10,494,946

  

Operating expense:

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

  

 

2,665,454

  

 

 

2,303,325

  

 

 

8,183,632

  

 

 

9,340,545

  

Research, development, and engineering

  

 

654,566

  

 

 

877,741

  

 

 

1,968,877

  

 

 

1,950,275

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expense

  

 

3,320,020

  

 

 

3,181,066

  

 

 

10,152,509

  

 

 

11,290,820

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (loss)/income

  

 

(174,002)

 

 

 

312,742

 

 

 

(638,670

 

 

(795,874

 

 

 

 

 

Other income/(expense):

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income, net

  

 

37,866

 

 

 

21,953

  

 

 

85,083

 

 

 

57,793

 

Interest expense

  

 

(68,455

 

 

(91,908

 

 

(222,473

 

 

(290,634

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other income/(expense)

  

 

(30,589

 

 

(69,955

 

 

(137,390

 

 

(232,841

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income/(Loss) before income taxes

  

 

(204,591)

 

 

 

242,787

 

 

 

(776,060

 

 

(1,028,715

Income tax expense

  

 

15,618

 

 

 

287

  

 

 

21,417

 

 

 

10,307

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss)/income

  

 

(220,209)

 

 

 

242,500

 

 

 

(797,477

 

 

(1,039,022

 

 

 

 

 

Preferred stock dividend

  

 

34,095

  

 

 

20,616

  

 

 

94,974

  

 

 

94,952

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss)/income attributable to common stockholders

  

$

(254,304)

 

 

$

221,884

 

 

$

(892,451

 

$

(1,133,974

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss)/income per share:

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.02)

 

 

$

0.02

 

 

$

(0.06

 

$

(0.08

Diluted

  

$

(0.02)

 

 

$

0.01

 

 

$

  (0.06)

 

 

$

      (0.08)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares:

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

13,939,938

  

 

 

13,669,724

  

 

 

13,903,809

  

 

 

13,598,249

 

Diluted

  

 

13,939,938

  

 

 

15,898,639

 

 

 

13,903,809

 

 

 

13,598,249

  

 

   Luna Innovations Incorporated

Condensed Consolidated Balance Sheets

 

 

  

September 30,
2012

 

 

December 31,
2011

 

 

  

(unaudited)

 

 

Assets

  

 

 

 

 

 

 

 

Current assets:

  

 

 

 

 

 

 

 

Cash and cash equivalents

  

$

6,722,311

  

 

$

8,939,127

  

Accounts receivable, net

  

 

7,729,108

  

 

 

5,958,086

  

Inventory, net

  

 

3,569,999

  

 

 

3,330,773

  

Prepaid expenses

  

 

962,612

  

 

 

1,071,438

  

Other current assets

  

 

36,717

  

 

 

35,717

  

 

  

 

 

 

 

 

 

 

 

 

 

Total current assets

  

 

19,020,747

  

 

 

19,335,141

  

Property and equipment, net

  

 

2,470,723

  

 

 

2,816,674

  

Intangible assets, net

  

 

449,477

  

 

 

539,563

  

Other assets

  

 

171,668

  

 

 

228,043

  

 

  

 

 

 

 

 

 

 

 

 

 

Total assets

  

$

22,112,615

  

 

$

22,919,421

  

 

  

 

 

 

 

 

 

 

Liabilities and stockholder’s equity

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Current Liabilities:

  

 

 

 

 

 

 

 

Current portion of long term-debt obligation

  

 

1,625,000

  

 

 

1,625,000

  

Current portion of capital lease obligation

 

 

53,288

 

 

 

50,949

 

Accounts payable

  

 

2,357,536

  

 

 

1,656,602

  

Accrued liabilities

  

 

2,927,932

  

 

 

3,612,193

  

Deferred credits

  

 

1,103,353

  

 

 

1,462,603

  

 

  

 

 

 

 

 

 

 

 

 

 

Total current liabilities

  

 

8,067,109

  

 

 

8,407,347

  

Long-term debt obligation

  

 

2,500,000

  

 

 

3,625,000 

  

Long-term lease obligation

 

 

142,745

 

 

 

183,008

  

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

Total liabilities

  

 

10,709,854

  

 

 

12,215,355

  

 

 

 

Commitments and contingencies

  

 

 

 

 

 

 

 

Stockholders’ equity:

  

 

 

 

 

 

 

 

Preferred stock

  

 

1,322

  

 

 

1,322

  

Common stock

  

 

14,221

  

 

 

13,969

  

Additional paid-in capital

  

 

60,880,410

  

 

 

59,289,516

  

Accumulated deficit

  

 

(49,493,192

 

 

(48,600,741

 

  

 

 

 

 

 

 

 

Total stockholders’ equity

  

 

11,402,761

  

 

 

10,704,066

 

 

  

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

  

$

22,112,615

  

 

$

22,919,421

  

 

  

 

 

 

 

 

 

 

                   

Luna Innovations Incorporated

Condensed Consolidated Statements of Cash Flows

 

 

 

 

 

 

 

 

 

 

 

  

Nine months ended
September 30,

 

 

  

2012

 

 

2011

 

 

  

(unaudited)

 

Cash flows (used in)/provided by operating activities

  

 

 

 

 

 

 

 

Net loss

  

$

(797,477

 

$

(1,039,022

Adjustments to reconcile net loss to net cash used in operating activities:

  

 

 

 

 

 

 

 

Depreciation and amortization

  

 

814,498

  

 

 

1,042,700

  

Share-based compensation

  

 

1,411,672

  

 

 

1,737,220

  

Warrant expense

  

 

52,889

  

 

 

41,752

  

Changes in assets and liabilities:

  

 

 

 

 

 

 

 

Accounts receivable

  

 

(1,771,022

 

 

(239,167

)

Inventory

  

 

(243,565

 

 

(463,666

Other current assets

  

 

107,826

 

 

 

(174,249

)

Other assets

  

 

56,375

  

 

 

56,375

 

Accounts payable and accrued expenses

  

 

(36,216

 

 

(223,648

Deferred credits

  

 

(359,250

)

 

 

(174,040

)

 

  

 

 

 

 

 

 

 

 

 

 

Net cash (used in)/provided by operating activities

  

 

(764,270)

 

 

 

564,255

 

 

  

 

 

 

 

 

 

 

 

 

 

Cash flows used in investing activities

  

 

 

 

 

 

 

 

Acquisition of property and equipment

  

 

(242,396

 

 

(289,777

Intangible property costs

  

 

(131,727

 

 

(272,741

 

  

 

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

  

 

(374,123

 

 

(562,518

 

  

 

 

 

 

 

 

 

 

 

 

Cash flows used in financing activities

  

 

 

 

 

 

 

 

 

 

 

Payments on capital lease obligations

  

 

(37,924

 

 

(30,115

Proceeds from debt obligations

  

 

  

 

 

6,000,000

 

Payment of debt obligations

  

 

(1,125,000

 

 

(6,617,393

Proceeds from the exercise of options and warrants

  

 

84,501

  

 

 

262,641

  

 

  

 

 

 

 

 

 

 

 

 

 

Net cash used in financing activities

  

 

(1,078,423

 

 

(384,867

)

 

  

 

 

 

 

 

 

 

Net change in cash

  

 

(2,216,816

)

 

 

(383,130

)

Cash and cash equivalents—beginning of period

  

 

8,939,127

  

 

 

7,216,580

  

 

  

 

 

 

 

 

 

 

Cash and cash equivalents—end of period

  

$

6,722,311

  

 

$

6,833,450

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 


Luna Innovations Incorporated

Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

  

2012

 

 

2011

 

 

2012

 

 

2011

 

 

  

(unaudited)

 

 

(unaudited)

 

Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA:

 

 

 

 

 

Net income (loss)

  

$

(220,209)

 

 

$

242,500

 

 

$

(797,477

 

$

(1,039,022

 

 

 

 

 

Interest expense

  

 

68,455

  

 

 

91,908

  

 

 

222,473

  

 

 

290,634

  

Income tax expense

  

 

15,618

  

 

 

287

  

 

 

21,417

  

 

 

10,307

  

Depreciation and amortization

  

 

286,386

  

 

 

332,432

  

 

 

814,498

  

 

 

1,042,700

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

  

 

150,250

  

 

 

667,127

 

 

 

260,911

 

 

 

304,619

 

 

 

 

 

 

Stock-based compensation and warrant expense

  

 

524,161

  

 

 

462,073

  

 

 

1,464,561

  

 

 

1,778,972

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

  

$

674,411

  

 

$

1,129,200

  

 

$

1,725,472

  

 

$

2,083,591

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

###

Investor Contact:

Dale Messick, CFO

Email: IR@lunainc.com