Luna Innovations Incorporated Reports Second Quarter 2013 Financial Results

Products and licensing revenues increase 11% over prior year quarter; Total revenues decrease 11% from prior year quarter

(ROANOKE, VA, August 6, 2013) – Luna Innovations Incorporated (NASDAQ: LUNA) today announced its financial results for the second quarter and six months ended June 30, 2013.

As compared to the same quarter last year, total revenue decreased by 11%, from $6.7 million in the second quarter of 2012 to $6.0 million in the second quarter of 2013.  Products and licensing revenues increased 11% compared to the second quarter of 2012 driven by higher sales of the company’s ODiSI product line in addition to increased revenue from the development of the company’s fiber optic shape sensing product.  Products and licensing revenues for the second quarter also increased 69% compared to the first quarter of 2013.

Technology development revenues declined by 28% compared to the second quarter of 2012 due primarily to the continued lower level of contract research projects within the company’s optical systems group. Technology development revenues grew by 7% compared to the first quarter of 2013.  Gross profit decreased from $2.7 million for the second quarter of 2012 to $2.4 million for the second quarter of 2013.  Operating expenses for the second quarter of 2013 increased $0.2 million, or 6%, over the second quarter of 2012.   

The company reported a net loss attributable to common stockholders of $1.0 million, or $0.07 per common share, for the second quarter of 2013, compared to a net loss of $0.3 million, or $0.02 per common share, in the same quarter last year.  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, decreased to $(0.3) million for the second quarter of 2013, as compared to $0.4 million for the second quarter of 2012.

“I am pleased to report growth in the Products and Licensing segment of our business,” said My Chung, chief executive officer of Luna.  “Growth in sales of our ODiSI products for measuring strain and temperature continued to offset the softness of the telecom test and measurement market for us.  The multi-year renewal of our agreement with Intuitive Surgical during the second quarter also provides a strong base for growth in the future as we work toward the commercialization of the shape sensing platform.” 

Second Quarter Financial and Business Summary
— Total revenues decreased by 11%, from $6.7 million in the second quarter of 2012 to $6.0 million in the second quarter of 2013.

–Technology development revenues decreased by 28%, to $2.8 million, for the second quarter of 2013, from $3.9 million for the second quarter of 2012.  Technology development revenues increased by 7% compared to the first quarter of 2013.

— Products and licensing revenue increased by 11%, from $2.8 million in the second quarter of 2012 to $3.2 million in the second quarter of 2013.  Products and licensing revenue increased 69% over the first quarter of 2013.

— Gross profit for the second quarter of 2013 decreased to $2.4 million, or 40% of total revenues, from $2.7 million, or 41% of total revenues, for the second quarter of 2012.

— Selling, general and administrative expenses increased by 5% to $2.7 million, or 45% of total revenues for the second quarter of 2013, from $2.5 million, or 37% of total revenues, for the second quarter of 2012. 

— Total operating expenses increased to $3.3 million, or 56% of total revenues, for the second quarter of 2013 from $3.1 million, or 47% of total revenues for the second quarter of 2012.

— Adjusted EBITDA decreased to $(0.3) million in the second quarter 2013 from $0.4 million in the second quarter of 2012.

— Net loss attributable to common stockholders for the second quarter of 2013 increased to $1.0 million from $0.3 million for the second quarter of 2012.

— Cash and cash equivalents totaled $8.7 million at June 30, 2013, as compared to $6.3 million at December 31, 2012 and $10.3 million at March 31, 2013.  Net cash used during the quarter was adversely impacted by a $1.1 million increase in accounts receivable at June 30 compared to March 31, driven primarily by the timing of sales during the second quarter.  

Six Months Ended June 30, 2013 Financial Summary
— Total revenue decreased by 22% to $10.5 million for the six months ended June 30, 2013 compared to $13.4 million for the six months ended June 30, 2012.

–Technology development revenues decreased by 31%, from $7.8 million for the six months ended June 30, 2012 to $5.4 million for the six months ended June 30, 2013.

— Products and licensing revenue decreased by 9%, from $5.6 million for the six months ended June 30, 2012 to $5.0 million for the six months ended June 30, 2013.

— Gross profit for the six months ended June 30, 2013 decreased by 30%, to $3.8 million, compared to a gross profit of $5.5 million for the six months ended June 30, 2012. Gross margin percentages decreased to 36% of revenues for the first six months of 2013 from 41% of revenues for the first six month of 2012.

— Selling, general and administrative expenses was relatively unchanged at $5.2 million, representing 49% of total revenues for the six months ended June 30, 2013 compared to 39% of total revenues for the six months ended June 30, 2013.

— Total operating expenses increased to $6.7 million, or 64% of total revenues, for the six months ended June 30, 2013, from $6.5 million or 48% of total revenues, for the six months ended June 30, 2012.

— Adjusted EBITDA decreased to $(1.7) million for the six months ended June 30, 2013 from $0.5 million for the six months ended June 30, 2012. 

— Net income attributable to common stockholders improved to $1.8 million for the six months ended June 30, 2013, compared to a net loss attributable to common stockholders of $0.6 million for the six months ended June 30, 2012 largely the result of a net after-tax gain of $3.9 million realized on the sale of the company’s Secure Computing and Communications group in the first quarter.

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 second quarter of 2013.  The call can be accessed by dialing 800.299.9630 domestically or 617.786.2904 internationally prior to the start of the call. The participant access code is 24290407.  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 company’s future growth and commercialization of the company’s shape sensing platform. 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
June 30,

 

 

Six Months Ended

June 30 ,

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

2013

 

 

2012

 

 

2013

 

 

2012

 

 

  

(unaudited)

 

 

(unaudited)

 

Revenues:

  

     

 

     

 

     

 

     

     Technology development revenues

  

$

2,807,296

  

 

$

3,894,846

  

 

$

5,434,537

  

 

$

7,837,546

  

     Products and licensing revenues

  

 

3,165,764

  

 

 

2,845,864

  

 

 

5,035,439

  

 

 

5,559,677

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

         

Total revenues

  

 

5,973,060

  

 

 

6,740,710

  

 

 

10,469,976

  

 

 

13,397,223

  

         

Cost of revenues:

  

     

 

     

 

     

 

     

     Technology development costs

  

 

2,209,158

  

 

 

2,729,108

  

 

 

4,381,135

  

 

 

5,428,304

  

     Products and license costs

  

 

1,355,643

  

 

 

1,267,201

  

 

 

2,288,062

  

 

 

2,514,696

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

         

Total cost of revenues

  

 

3,564,801

  

 

 

3,996,309

  

 

 

6,669,197

  

 

 

7,943,000

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

         

Gross Profit

  

 

2,408,259

  

 

 

2,744,401

  

 

 

3,800,779

  

 

 

5,454,223

  

         

Operating expense:

  

     

 

     

 

     

 

     

     Selling, general and administrative

  

 

2,658,605

  

 

 

2,526,638

  

 

 

5,167,251

  

 

 

5,183,614

  

     Research, development, and engineering

  

 

666,632

  

 

 

608,459

  

 

 

1,507,124

  

 

 

1,293,240

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

         

Total operating expense

  

 

3,325,237

  

 

 

3,135,097

  

 

 

6,674,375

  

 

 

6,476,854

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

         

Operating loss

  

 

(916,978

 

 

(390,696

)

 

 

(2,873,596

 

 

(1,022,631

)

         

Other income/(expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Other income, net

  

 

15,307

  

 

 

23,265

  

 

 

86,540

  

 

 

46,533

 

     Interest expense

  

 

(49,781

 

 

(74,357

 

 

(107,960

 

 

(154,015

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

         

Total other expense

  

 

(34,474

 

 

(51,092

 

 

(21,420

 

 

(107,482

         

Loss from continuing operations before income taxes

  

 

(951,452

 

 

(441,788

)

 

 

(2,895,016

 

 

(1,130,113

)

Income tax (benefit)/expense

  

 

(160,855

 

 

—  

  

 

 

(956,055

 

 

5,799

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

         

Loss from continuing operations

  

 

(790,597

 

 

(441,788

)

 

 

(1,938,961

 

 

(1,135,912

)

(Loss)/income from discontinued operations, net of  income taxes

  

 

(161,485

 

 

199,268

 

 

 

3,772,476

 

 

 

558,644

 

Net (loss)/income

  

 

(952,082

 

 

(242,520

)

 

 

1,833,515

 

 

 

(577,268

)

         

Preferred stock dividend

  

 

26,366

  

 

 

26,784

  

 

 

49,995

  

 

 

60,880

  

         

Net (loss)/income attributable to common stockholders

  

$

(978,448

 

$

(269,304

)

 

$

1,783,520

 

 

$

(638,148

)

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

         

Net loss per share from continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Basic

 

$

(0.06

 

$

(0.03

 

$

(0.14)

 

 

$

(0.08

     Diluted

 

$

(0.06

 

$

(0.03

 

$

(0.14)

 

 

$

(0.08

Net (loss)/income per share from discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Basic

 

$

(0.01

)

 

$

0.01

 

 

$

0.27

 

 

$

0.04

 

     Diluted

 

$

(0.01

)

 

$

0.01

 

 

$

0.23

 

 

$

0.03

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Basic

 

$

(0.07

)

 

$

(0.02

 

$

0.13

 

 

$

(0.05

     Diluted

 

$

(0.07

)

 

$

(0.02

 

$

0.11

 

 

$

(0.05

Weighted average common shares and common equivalent shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     Basic

 

 

14,362,494

 

 

 

13,892,816

 

 

 

14,206,598

 

 

 

13,885,684

 

     Diluted

  

 

14,362,494

 

 

 

16,314,620

 

 

 

16,558,357

 

 

 

16,325,402

 

      

Luna Innovations Incorporated
Condensed Consolidated Balance Sheets  

                 

 

  

June 30,
2013

 

 

December 31,
2012

 

 

  

(unaudited)

 

 

 

 

Assets

  

     

 

     

Current assets:

  

     

 

     

Cash and cash equivalents

  

$

8,742,869

  

 

$

6,340,461

  

Accounts receivable, net

  

 

6,702,987

  

 

 

7,059,635

  

Inventory, net

  

 

3,646,133

  

 

 

3,336,916

  

Prepaid expenses

  

 

560,275

  

 

 

667,773

  

Other current assets

  

 

70,207

  

 

 

35,629

  

 

  

 

 

 

 

 

 

 

     

Total current assets

  

 

19,722,471

  

 

 

17,440,414

  

Property and equipment, net

  

 

2,141,390

  

 

 

2,426,638

  

Intangible assets, net

  

 

377,638

  

 

 

437,839

  

Other assets

  

 

80,293

  

 

 

152,877

  

 

  

 

 

 

 

 

 

 

     

Total assets

  

$

22,321,792

  

 

$

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

  

 

55,734

  

 

 

54,091

  

Accounts payable

  

 

2,238,501

  

 

 

1,797,571

  

Accrued liabilities

  

 

2,531,515

  

 

 

2,747,175

  

Deferred credits

  

 

611,269

  

 

 

832,822

  

 

  

 

 

 

 

 

 

 

     

Total current liabilities

  

 

7,062,019

  

 

 

6,931,659

  

Long-term debt obligation

  

 

1,375,000

  

 

 

2,125,000

  

Long-term lease obligation

  

 

100,633

  

 

 

128,917

  

 

  

 

 

 

 

 

 

 

     

Total liabilities

  

 

8,537,652

  

 

 

9,185,576

  

     

Commitments and contingencies

  

     

 

     

Stockholders’ equity:

  

     

 

     

Preferred stock

  

 

1,322

  

 

 

1,322

  

Common stock

  

 

14,688

  

 

 

14,245

  

Additional paid-in capital

  

 

62,089,490

  

 

 

61,361,505

  

Accumulated deficit

  

 

(48,321,360

 

 

(50,104,880

 

  

 

 

 

 

 

 

 

     

Total stockholders’ equity

  

 

13,784,140

  

 

 

11,272,192

  

 

  

 

 

 

 

 

 

 

     

Total liabilities and stockholders’ equity

  

$

22,321,792

  

 

$

20,457,768

  

 

  

 

 

 

 

 

 

 

  

Luna Innovations Incorporated
Condensed Consolidated Statements of Cash Flows

                 

 

  

Six months ended

 

 

  

June 30,

 

 

  

 

 

 

 

 

 

 

 

  

2013

 

 

2012

 

 

  

(unaudited)

 

Cash used in operating activities

  

     

 

     

Net income (loss)

  

$

1,833,515

 

 

$

(577,268

Adjustments to reconcile net income (loss) to net cash used in operating activities

  

     

 

     

Depreciation and amortization

  

 

489,244

  

 

 

528,113

  

Share-based compensation

  

 

618,084

  

 

 

928,368

  

Warrant expense

  

 

  

 

 

12,032

  

Gain on sale of discontinued operations, net of income taxes

  

 

(3,868,114

 

 

 

Allowance for doubtful accounts or bad debt expense

  

 

124,810

 

 

 

 

Change in assets and liabilities:

  

     

 

     

Accounts receivable

  

 

834,122

 

 

 

(1,212,864

Inventory

  

 

(309,217

 

 

(69,186

Other current assets

  

 

(40,647

 

 

150,289

  

Other assets

  

 

72,584

  

 

 

37,583

  

Accounts payable and accrued expenses

  

 

174,916

  

 

 

(847,341

Deferred credits

  

 

(221,553

 

 

(328,491

 

  

 

 

 

 

 

 

 

     

Net cash used in operating activities

  

  

(1,313,794

 

 

(1,378,765

 

  

 

 

 

 

 

 

 

     

Cash flows provided by/(used in) investing activities

  

     

 

     

Acquisition of property and equipment

  

 

(69,108

 

 

(123,732

)

Intangible property costs

  

 

(145,858

 

 

(55,847

)

Proceeds from sale of discontinued operations, net of fees

  

 

4,522,460

 

 

 

 
 

  

 

 

 

 

 

 

 

     

Net cash provided by/(used in) investing activities

  

 

4,307,494

 

 

 

(179,579

)

 

  

 

 

 

 

 

 

 

     

Cash flows used in financing activities

  

     

 

     
     

Payments on capital lease obligations

  

 

(26,641

 

 

(25,094

)

Payment of debt obligations

  

 

(625,000

 

 

(750,000

)

Proceeds from the exercise of options and warrants

  

 

60,349

  

 

 

33,830

  

 

  

 

 

 

 

 

 

 

     

Net cash used in financing activities

  

 

(591,292

 

 

(741,264)

  

 

  

 

 

 

 

 

 

 

     

Net increase/(decrease) in cash or cash equivalents

  

 

2,402,408

  

 

 

(2,299,608

)

Cash and cash equivalents, beginning of period

  

 

6,340,461

  

 

 

8,939,127

  

 

  

 

 

 

 

 

 

 

     

Cash and cash equivalents, end of period

  

$

8,742,869

  

 

$

6,639,519

  

 

  

 

 

 

 

 

 

 

  

Luna Innovations Incorporated
Reconciliation of Net Income/(Loss) to EBITDA and Adjusted EBITDA

                                 

 

  

Three Months Ended

 

 

Six Months Ended

 

 

  

June 30,

 

 

June 30,

 

 

  

2013

 

 

2012

 

 

2013

 

 

2012

 

 

  

(unaudited)

 

 

(unaudited)

 

 

  

     

 

     

 

     

 

     
         

Net income/(loss)

  

$

(952,082

 

$

(242,520

 

$

1,833,515

 

 

$

(577,268

Less (loss)/income from discontinued operations, net of income taxes

 

 

(161,485

 

 

199,268

  

 

 

3,772,476

  

 

 

558,644

  

Loss from continuing operations

 

 

(790,597

 

 

(441,788

 

 

(1,938,961

 

 

(1,135,912

Interest expense

  

 

49,781

  

 

 

74,357

  

 

 

107,960

  

 

 

154,015

  

Tax (benefit) expense

  

 

(160,855)

  

 

 

—  

  

 

 

(956,055

 

 

 5,799

  

Depreciation and amortization

  

 

260,979

  

 

 

244,012

  

 

 

489,244

  

 

 

528,113

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

         

EBITDA

  

 

(640,692

 

 

(123,419

 

 

(2,297,812

 

 

(447,985

Share-based compensation

 

 

304,568

  

 

 

473,784

  

 

 

618,084

  

 

 

928,368

  

Warrant expense

  

 

  

 

 

147

  

 

 

  

 

 

12,032

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

         

Adjusted EBITDA

  

$

(336,124

)  

 

$

350,512

  

 

$

(1,679,728)

  

 

$

492,415

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

###

Investor Contact:
Dale Messick, CFO
Luna Innovations Incorporated
Phone:1.540.769.8400
Email: [email protected]