Luna Reports First Quarter 2013 Financial Results

 

Company posts net income of $2.8 million following sale of Secure Computing and Communications group; net loss from continuing operations increased to $1.1 million

(ROANOKE, VA, May 9, 2013) – Luna Innovations Incorporated (NASDAQ: LUNA) today announced its financial results for the first quarter ended March 31, 2013.

Luna recorded net income attributable to common stockholders of $2.8 million, or $0.17 per diluted share, for the first quarter of 2013 compared to a net loss attributable to common stockholders of $0.4 million, or ($0.03) per diluted share in the first quarter of 2012.  The net income in the first quarter of 2013 included a net after-tax gain of $4.0 million realized on the sale of the company’s Secure Computing and Communications group (“SCC”) in March. Total revenues from continuing operations decreased to $4.5 million in the first quarter of 2013 compared to $6.7 million in the first quarter of 2012, reflecting a decrease of $1.3 million in the Technology Development segment and a decrease of $0.8 million in the Products and Licensing segment.  This decrease in revenue was driven primarily by decreased contract research revenue within our optical systems group and lower sales of telecom related test and measurement equipment.  Gross profit decreased to $1.4 million for the first quarter of 2013 compared to $2.7 million for the first quarter of 2012. Luna’s operating expenses remained steady at $3.3 million in the first quarter of 2013, comparable to the first quarter of the prior year. The resulting net loss from continuing operations, which excludes the effects of SCC’s operations prior to its sale and the gain associated with the sale, was $1.1 million for the first quarter of 2013 compared to a net loss from continuing operations of $0.7 million for the first quarter of 2012.    

Adjusted EBITDA, a non-GAAP measure, which is earnings before interest, taxes, and non-cash expenses of stock based compensation, depreciation, amortization and warrant expense, and excludes the effects of discontinued operations, declined to ($1.3) million for the first quarter of 2013, as compared to $0.1 million for the first quarter of 2012.  With the proceeds from the sale of SCC, our cash and cash equivalents increased to $10.3 million at March 31, 2013 from $7.9 million at March 31, 2012.

“The sale of SCC during the first quarter added significant liquidity to our balance sheet,” said My Chung, chief executive officer of Luna. “We are now continuing to focus on our two remaining strategic initiatives for future revenue growth — shape sensing for minimally invasive medical applications and fiber optic measurement of strain and temperature for a wide variety of industries. We’re optimistic about developments in the telecommunications industry pointing to investment in upgrading networks, which provides increased opportunity for our technological solutions. At the same time, we’re making great strides with our shape-sensing technology, transitioning toward product integration.”

First Quarter Financial and Business Highlights

— Total revenues decreased by 32%, from $6.7 million in the first quarter of 2012 to $4.5 million in the first quarter of 2013.

— Technology development revenues decreased by 33%, to $2.6 million for the first quarter of 2013 from $3.9 million for the first quarter of 2012.  Products and licensing revenue decreased by 31%, from $2.7 million in the first quarter of 2012 to $1.9 million in the first quarter of 2013.

— Gross profit for the first quarter of 2013 decreased to $1.4 million, or 31% of total revenues, from $2.7 million, or 41% of total revenues, for the corresponding period of 2012.

— Selling, general and administrative expenses decreased by 5% to $2.5 million for the first quarter of 2013 from $2.6 million for the first quarter of 2012. 

— Total operating expenses remained consistent at $3.3 million for the first quarter of 2013 and 2012.

— Adjusted EBITDA decreased to ($1.3) million in the first quarter 2013 from $0.1 million in the first quarter of 2012.

— Net income attributable to common stockholders improved to $2.8 million for the first quarter of 2013 compared to a net loss attributable to common stockholders to $0.4 million for the first quarter of 2012.

— Cash and cash equivalents totaled $10.3 million at March 31, 2013 as compared to $7.9 million at March 31, 2012.

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. (EDT) today to discuss its financial results and business developments for the first quarter of 2013 and expectations for the remainder of 2013.  The call can be accessed by dialing 866.515.2907 domestically or 617.399.5121 internationally prior to the start of the call. The participant access code is 23732056.  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 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 it serves.

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 March 31,

 

 

  

2013

 

 

2012

 

 

  

(Unaudited)

 

 

(Unaudited)

 

     

Revenues:

  

     

 

     

Technology development

  

$

2,627,241

  

 

$

3,942,700

  

Products and licensing

  

 

1,869,676

  

 

 

2,713,814

  

 

  

 

 

 

 

 

 

 

Total

  

 

4,496,917

  

 

 

6,656,514

  

 

  

 

 

 

 

 

 

 

     

Cost of revenues:

  

     

 

     

Technology development costs

  

 

2,184,914

  

 

 

2,699,197

  

Products and licensing costs

  

 

919,482

  

 

 

1,247,494

  

 

  

 

 

 

 

 

 

 

Total

  

 

3,104,396

  

 

 

3,946,691

  

 

  

 

 

 

 

 

 

 

     

Gross Profit

  

 

1,392,521

  

 

 

2,709,823

  

 

  

 

 

 

 

 

 

 

     

Operating expense:

  

     

 

     

Selling, general and administrative

  

 

2,511,884

  

 

 

2,646,782

  

Research, development, and engineering

  

 

837,256

  

 

 

694,972

  

 

  

 

 

 

 

 

 

 

Total

  

 

3,349,140

  

 

 

3,341,754

  

 

  

 

 

 

 

 

 

 

     

Operating loss

  

 

(1,956,619

 

 

(631,931

 

  

 

 

 

 

 

 

 

     

Other income/(expense)

  

     

 

     

Other income, net

  

 

71,234

  

 

 

23,265

 

Interest (expense)

  

 

(58,179

 

 

(79,658

 

  

 

 

 

 

 

 

 

Total

  

 

13,055

 

 

 

(56,393

 

  

 

 

 

 

 

 

 

     

Loss before income taxes

  

 

(1,943,564

 

 

(688,324

     

Income tax expense

  

 

(795,200)

  

 

 

4,421

  

 

  

 

 

 

 

 

 

 

     

Loss from continuing operations

 

 

(1,148,364

 

 

(692,745

Income from discontinued operations, net of income taxes

 

 

3,933,961

  

 

 

357,997

 

 

 

 

 

 

 

 

 

 

Net income/(loss)

  

 

2,785,597

 

 

 

(334,748

     

Preferred stock dividend

  

 

23,629

  

 

 

34,096

  

 

  

 

 

 

 

 

 

 

     

Net income/(loss) attributable to common stockholders

  

$

2,761,968

 

 

$

(368,844

 

  

 

 

 

 

 

 

 

     

Net loss per share from continuing operations:

  

 

 

 

 

 

 

 

        Basic

  

$

(0.08

 

$

(0.05

        Diluted

  

$

(0.08

 

$

(0.05

Net income per share from discontinued operations:

  

 

 

 

 

 

 

 

        Basic

  

$

0.28

 

 

$

0.03

 

        Diluted

  

$

0.24

 

 

$

0.02

 

Net income/(loss) per share attributable to common stockholders:

  

 

 

 

 

 

 

 

        Basic

  

$

0.20

 

 

$

(0.03

        Diluted

  

$

0.17

 

 

$

(0.03

Weighted average common shares and common equivalent shares outstanding

  

 

 

 

 

 

 

 

        Basic

 

 

14,011,814

 

 

 

13,850,667

 

        Diluted

 

 

16,615,574

 

 

 

16,322,294

 

   

Luna Innovations Incorporated
Condensed Consolidated Balance Sheets

 

  

March 31,
2013

 

 

December 31,
2012

 

 

  

(Unaudited)

 

 

 

 

     

Assets

  

     

 

     

Current assets

  

     

 

     

Cash and cash equivalents

  

$

10,266,998

  

 

$

6,340,461

  

Accounts receivable, net

  

 

5,625,212

  

 

 

7,059,635

  

Inventory, net

  

 

3,521,920

  

 

 

3,336,916

  

Prepaid expenses

  

 

646,960

  

 

 

667,773

  

Other current assets

  

 

70,208

  

 

 

35,629

  

 

  

 

 

 

 

 

 

 

Total current assets

  

 

20,131,298

  

 

 

17,440,414

  

     

Property and equipment, net

  

 

2,268,109

  

 

 

2,426,638

  

Intangible assets, net

  

 

358,963

  

 

 

437,839

  

Other assets

  

 

99,085

  

 

 

152,877

  

 

  

 

 

 

 

 

 

 

     

Total assets

  

$

22,857,455

  

 

$

20,457,768

  

 

  

 

 

 

 

 

 

 

     

Liabilities and stockholders’ equity

  

     

 

     

Liabilities

 

 

 

 

 

 

 

 

Current Liabilities

  

     

 

     

Current portion of long term debt obligation

  

$

1,625,000

  

 

$

1,500,000

  

Current portion of capital lease obligation

  

 

54,906

  

 

 

54,091

  

Accounts payable

  

 

1,562,304

  

 

 

1,797,571

  

Accrued liabilities

  

 

2,803,982

  

 

 

2,747,175

  

Deferred credits

  

 

573,395

  

 

 

832,822

  

 

  

 

 

 

 

 

 

 

Total current liabilities

  

 

6,619,587

  

 

 

6,931,659

  

     

Long-term debt obligation

  

 

1,750,000

  

 

 

2,125,000

  

Long-term lease obligation

  

 

114,881

  

 

 

128,917

  

 

  

 

 

 

 

 

 

 

     

Total liabilities

  

 

8,484,468

  

 

 

9,185,576

  

 

  

 

 

 

 

 

 

 

     

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

  

     

 

     

Preferred stock

  

 

1,322

  

 

 

1,322

  

Common stock

  

 

14,269

  

 

 

14,245

  

Additional paid-in capital

  

 

61,700,308

  

 

 

61,361,505

  

Accumulated deficit

  

 

(47,342,912

 

 

(50,104,880

 

  

 

 

 

 

 

 

 

Total stockholders’ equity

  

 

14,372,987

  

 

 

11,272,192

  

 

  

 

 

 

 

 

 

 

     

Total liabilities and stockholders’ equity

  

$

22,857,455

  

 

$

20,457,768

  

 

  

 

 

 

 

 

 

 

 

Luna Innovations Incorporated
Condensed Consolidated Statements of Cash Flows       

 

 

Three Months Ended March 31, 

 

 

  

2013

 

 

2012

 

 

  

(Unaudited)

 

 

(Unaudited)

 

     

Cash flows(used in)/provided by operating activities

  

     

 

     

Net income/(loss)

  

$

2,785,597

 

 

$

(334,748

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

  

     

 

     

Depreciation and amortization

  

 

228,267

  

 

 

284,101

  

Share-based compensation

  

 

313,516

  

 

 

454,584

  

Warrant expense

  

 

  

 

 

11,886

  

Gain on sale, net of income taxes

 

 

(4,029,210

 

 

  

 

Tax benefit from utilization of net operating loss carryforward

 

 

(861,071

 

 

  

 

Change in assets and liabilities:

  

     

 

     

Accounts receivable

  

 

2,039,952

 

 

 

(866,444

)

Inventory

  

 

(185,004

 

 

57,389

 

Other current assets

  

 

(127,333

 

 

139,670

  

Other assets

  

 

53,792

  

 

 

18,791

  

Accounts payable and accrued expenses

  

 

(231,431

 

 

(60,923

Deferred credits

  

 

(259,427

 

 

(250,631

     

Net cash used in operating activities

  

 

(272,352

 

 

(546,325

 

  

 

 

 

 

 

 

 

     

Cash flows (used in)/provided by investing activities

  

     

 

     

Acquisition of property and equipment

  

 

(50,255

 

 

(104,719

Intangible property costs

  

 

(11,777

 

 

(48,246

Proceeds from sale of discontinued operations, net of fees

 

 

4,522,460

  

 

 

 

 

  

 

 

 

 

 

 

 

     

Net cash provided by/(used in) investing activities

  

 

4,460,428

  

 

 

(152,965

 

  

 

 

 

 

 

 

 

     

Cash flows used in financing activities

  

     

 

     
     

Payments on capital lease obligations

  

 

(13,221

 

 

(12,453

Payment of debt obligations

  

 

(250,000

 

 

(375,000

Proceeds from exercise of options and warrants

  

 

1,682

  

 

 

26,979

  

 

  

 

 

 

 

 

 

 

     

Net cash used in financing activities

  

 

(261,539

 

 

(360,474

 

  

 

 

 

 

 

 

 

     

Net change in cash

  

 

3,926,537

 

 

 

(1,059,764

Cash and cash equivalents, beginning of period

  

 

6,340,461

  

 

 

8,939,127

  

 

  

 

 

 

 

 

 

 

     

Cash and cash equivalents, end of period

  

$

10,266,998

  

 

$

7,879,363

  

 

  

 

 

 

 

 

 

 

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

 

 

Three Months Ended March 31, 

 

 

  

2013

 

 

2012

 

 

  

(Unaudited)

 

 

(Unaudited)

 

     

Net income/ (loss)

  

$

2,785,597

 

 

$

(334,748

Less income from discontinued operations, net of income taxes

 

 

3,933,961

  

 

 

357,997

  

Loss from continuing operations

 

 

(1,148,364

 

 

(692,745

 

Interest expense

  

 

58,179

  

 

 

79,658

  

Tax (benefit)/expense

  

 

(795,200)

  

 

 

4,421

  

Depreciation and amortization

  

 

228,267

  

 

 

284,101

  

 

  

 

 

 

 

 

 

 

     

EBITDA

  

 

(1,657,118

 

 

(324,565

     

Share-based compensation

  

 

313,516

  

 

 

454,584

  

Warrant expense

                —

              11,886

  

     

Adjusted EBITDA

  

$

(1,343,602

 

$

141,905

  

 

  

 

 

 

 

 

 

 

###

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