Luna Innovations Reports Strong First Quarter 2018 Results

  • Total revenues of $12.2 million for the three months ended March 31, 2018, up 21% compared to the three months ended March 31, 2017
  • Products and licensing revenues of $7.6 million for the three months ended March 31, 2018, up 29% compared to the three months ended March 31, 2017
  • Net income improved to $0.1 million for the three months ended March 31, 2018 compared to a net loss of $(1.4) million for the three months ended March 31, 2017
  • Adjusted EBITDA improved to $0.6 million for the three months ended March 31, 2018 compared to $(0.2) million for the three months ended March 31, 2017

(ROANOKE, VA, May 9, 2018) – Luna Innovations Incorporated (NASDAQ: LUNA), a global leader in advanced optical technology, today announced its financial results for the three months ended March 31, 2018.

“By continuing to focus on our strategic priorities, we delivered a profitable first quarter for the first time in our history. We drove robust organic revenue growth of over 20% compared to the three months ended March 31, 2017 in a quarter that is typically our weakest, and we delivered the corresponding improvement to our bottom line,” said Scott Graeff, President and Chief Executive Officer of Luna. “The strong revenue performance, resulting largely from a nearly 70% increase in sales of our test and measurement products, along with prudent cost management, allowed us to realize positive net income from continuing operations for the fourth consecutive quarter, also a company record. Luna is positioned to continue to leverage the trends of growth in optical connectivity in high speed networks and data centers as well as the expanding use of composite materials and the need for improved means of testing their structural integrity.  We expect those trends to drive top line growth into the future.”

For the three months ended March 31, 2018, Luna reported net income of $0.1 million compared to a net loss of $(1.4) million for the three months ended March 31, 2017.  Net income from continuing operations improved by $1.0 million, to $0.1 million, or  $0.01 per share, for the three months ended March 31, 2018, compared to a net loss from continuing operations of $(0.9) million, or $(0.03) per share, for the three months ended March 31, 2017. Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) was $0.6 million for the three months ended March 31, 2018 compared to a loss of $(0.2) million for the three months ended March 31, 2017.  A reconciliation of net income/(loss) to adjusted EBITDA can be found in the schedules included in this release.

First Quarter Financial Summary

Total revenues for the three months ended March 31, 2018 were $12.2 million compared to $10.1 million for the three months ended March 31, 2017.  Technology development revenues increased 9% to $4.6 million for the three months ended March 31, 2018, compared to $4.2 million for the three months ended March 31, 2017.  Products and licensing revenues increased 29% to $7.6 million for the three months ended March 31, 2018, compared to $5.9 million for the three months ended March 31, 2017.   The increase in the products and licensing revenues for the three months ended March 31, 2018 compared to the three months ended March 31, 2017 was realized primarily in Luna’s ODiSI, Optical Backscatter Reflectometer, and tunable laser products.

Gross profit was $5.0 million, or 41% of revenues, for the three months ended March 31, 2018, compared to gross profit of $3.9 million, or 38% of revenues, for the three months ended March 31, 2017.

Selling, general and administrative expenses were $3.8 million for the three months ended March 31, 2018, compared to $3.7 million for the three months ended March 31, 2017.

Research, development and engineering expenses were $1.1 million for the three months ended March 31, 2018, compared to $0.9 million for the three months ended March 31, 2017 due to increased development costs associated with Luna’s ODiSI and Terahertz instruments.

Net income from continuing operations improved to $0.1 million for the three months ended March 31, 2018, compared to a net loss from continuing operations of $(0.9) million for the three months ended March 31, 2017.  Net loss from discontinued operations was $(0.5) million for the three months ended March 31, 2017.

Net income attributable to common stockholders for the three months ended March 31, 2018 was $0.1 million, compared to a net loss attributable to common stockholders of $(1.4) million for the three months ended March 31, 2017.  Adjusted EBITDA was $0.6 million for the three months ended March 31, 2018, compared to $(0.2) million for the three months ended March 31, 2017.

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 pm (EDT) today to discuss its financial results for the three months ended March 31, 2018, 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 2475628. 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 top line growth and Luna continuing to leverage the trends of growth in optical connectivity in high speed networks and data centers, as well as the expanding use of composite materials and the need for improved means of testing their structural integrity.  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,

 

 

 

2018

 

2017

 

 

 

(unaudited)

 

 

Revenues:

 

 

 

 

 

Technology development

$

4,636,776

 

 

$

4,236,102

 

 

 

Products and licensing

7,556,396

 

 

5,850,795

 

 

 

Total revenues

12,193,172

 

 

10,086,897

 

 

 

Cost of revenues:

 

 

 

 

 

Technology development

3,353,501

 

 

3,109,467

 

 

 

Products and licensing

3,813,553

 

 

3,101,045

 

 

 

Total cost of revenues

7,167,054

 

 

6,210,512

 

 

 

Gross profit

5,026,118

 

 

3,876,385

 

 

 

Operating expense:

 

 

 

 

 

Selling, general and administrative

3,809,617

 

 

3,722,170

 

 

 

Research, development and engineering

1,101,488

 

 

928,772

 

 

 

Total operating expense

4,911,105

 

 

4,650,942

 

 

 

Operating income/(loss)

115,013

 

 

(774,557

)

 

 

Other income/(expense):

 

 

 

 

 

Investment income

75,912

 

 

 

 

 

Other (expense)/income

(115

)

 

351

 

 

 

Interest expense

(40,738

)

 

(64,374

)

 

 

Total other income/(expense)

35,059

 

 

(64,023

)

 

 

Income/(loss) from continuing operations before income taxes

150,072

 

 

(838,580

)

 

 

Income tax expense

1,396

 

 

26,690

 

 

 

Net income/(loss) from continuing operations

148,676

 

 

(865,270

)

 

 

Loss from discontinued operations, net of income tax of $0

 

 

(490,717

)

 

 

Net loss from discontinued operations

 

 

(490,717

)

 

 

Net income/(loss)

148,676

 

 

(1,355,987

)

 

 

Preferred stock dividend

64,425

 

 

34,096

 

 

 

Net income/(loss) attributable to common stockholders

$

84,251

 

 

$

(1,390,083

)

 

 

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

 

 

 

 

 

Basic

$

0.01

 

 

$

(0.03

)

 

 

Diluted

$

 

 

$

(0.03

)

 

 

Net loss per share from discontinued operations:

 

 

 

 

 

Basic

$

 

 

$

(0.02

)

 

 

Diluted

$

 

 

$

(0.02

)

 

 

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

 

 

 

 

 

Basic

$

 

 

$

(0.05

)

 

 

Diluted

$

 

 

$

(0.05

)

 

 

Weighted average common shares and common equivalent shares outstanding:

 

 

 

 

 

Basic

27,204,989

 

 

27,541,356

 

 

 

Diluted

31,198,833

 

 

27,541,356

 

 

 

 

Luna Innovations Incorporated
Consolidated Balance Sheets

 

 

March 31, 2018

 

December 31, 2017

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

$

33,442,674

 

 

$

36,981,533

 

 

Accounts receivable, net

8,098,703

 

 

7,869,168

 

 

Receivable from sale of HSOR business

4,001,496

 

 

4,000,976

 

 

Contract assets

2,408,930

 

 

1,778,142

 

 

Inventory

6,534,899

 

 

6,951,110

 

 

Prepaid expenses and other current assets

1,086,837

 

 

1,220,650

 

 

Total current assets

55,573,539

 

 

58,801,579

 

 

Long-term contract assets

263,722

 

 

209,699

 

 

Property and equipment, net

3,425,544

 

 

3,453,741

 

 

Intangible assets, net

3,204,843

 

 

3,237,593

 

 

Goodwill

502,000

 

 

502,000

 

 

Other assets

18,024

 

 

18,024

 

 

Total assets

$

62,987,672

 

 

$

66,222,636

 

 

Liabilities and stockholders’ equity

 

 

 

 

Liabilities:

 

 

 

 

Current liabilities:

 

 

 

 

Current portion of long-term debt obligations

$

1,750,000

 

 

$

1,833,333

 

 

Current portion of capital lease obligations

38,145

 

 

43,665

 

 

Accounts payable

2,357,649

 

 

2,962,863

 

 

Accrued liabilities

5,742,777

 

 

6,557,649

 

 

Contract liabilities

1,804,125

 

 

3,428,625

 

 

Total current liabilities

11,692,696

 

 

14,826,135

 

 

Long-term deferred rent

1,148,370

 

 

1,184,438

 

 

Long-term debt obligations

232,084

 

 

603,007

 

 

Long-term capital lease obligations

63,184

 

 

71,275

 

 

Total liabilities

13,136,334

 

 

16,684,855

 

 

Commitments and contingencies

 

 

 

 

Stockholders’ equity:

 

 

 

 

Preferred stock, par value $0.001, 1,321,514 shares authorized, issued and outstanding at March 31, 2018 and December 31, 2017

1,322

 

 

1,322

 

 

Common stock, par value $0.001, 100,000,000 shares authorized, 28,365,549 and 28,354,822 shares issued, 27,162,195 and 27,283,918 shares outstanding at March 31, 2018 and December 31, 2017

29,217

 

 

29,186

 

 

Treasury stock at cost, 1,203,354 and 1,070,904 shares at March 31, 2018 and December 31, 2017

(1,955,787

)

 

(1,649,746

)

 

Additional paid-in capital

83,744,496

 

 

83,563,208

 

 

Accumulated deficit

(31,967,910

)

 

(32,406,189

)

 

Total stockholders’ equity

49,851,338

 

 

49,537,781

 

 

Total liabilities and stockholders’ equity

$

62,987,672

 

 

$

66,222,636

 

 

 

Luna Innovations Incorporated
Consolidated Statements of Cash Flows

 

 

Three Months Ended March 31,

 

2018

 

2017

 

(unaudited)

Cash flows provided by/(used in) operating activities

 

 

 

Net income/(loss)

$

148,676

 

 

$

(1,355,987

)

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

 

 

 

Depreciation and amortization

307,852

 

 

956,687

 

Share-based compensation

94,606

 

 

170,084

 

Bad debt expense

 

 

29,671

 

Change in assets and liabilities

 

 

 

Accounts receivable

(229,535

)

 

1,824,454

 

Contract assets

221,386

 

 

187,448

 

Inventory

(110,095

)

 

(352,435

)

Other current assets

133,293

 

 

55,092

 

Accounts payable and accrued expenses

(1,456,154

)

 

(1,464,847

)

Contract liabilities

(1,650,363

)

 

13,880

 

Net cash (used in)/provided by operating activities

(2,540,334

)

 

64,047

 

Cash flows used in investing activities

 

 

 

Acquisition of property and equipment

(129,720

)

 

(157,308

)

Intangible property costs

(113,108

)

 

(133,054

)

Net cash used in investing activities

(242,828

)

 

(290,362

)

Cash flows used in financing activities

 

 

 

Payments on capital lease obligations

(13,611

)

 

(12,697

)

Payments of debt obligations

(458,333

)

 

(458,333

)

Repurchase of common stock

(306,041

)

 

 

Proceeds from the exercise of options

22,288

 

 

820

 

Net cash used in financing activities

(755,697

)

 

(470,210

)

Net decrease in cash or cash equivalents

(3,538,859

)

 

(696,525

)

Cash and cash equivalents-beginning of period

36,981,533

 

 

12,802,458

 

Cash and cash equivalents-end of period

$

33,442,674

 

 

$

12,105,933

 

 

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

 

 

Three Months Ended
 March 31,

 

 

2018

 

2017

 

 

(unaudited)

 

Net income/(loss)

$

148,676

 

 

$

(1,355,987

)

 

Less loss from discontinued operations, net of income taxes

 

 

(490,717

)

 

Net income/(loss) from continuing operations

148,676

 

 

(865,270

)

 

Interest expense

40,738

 

 

64,374

 

 

Tax expense

1,396

 

 

26,690

 

 

Depreciation and amortization

307,852

 

 

356,816

 

 

EBITDA

498,662

 

 

(417,390

)

 

Share-based compensation

94,606

 

 

170,084

 

 

Adjusted EBITDA

$

593,268

 

 

$

(247,306

)

 

###

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