Luna Reports Fourth Quarter 2012 and Full Year Financial Results

 

Revenues decreased 5% from prior year quarter and 9% for the year; Net loss flat year over year


(ROANOKE, VA, March 26,  2013) – Luna Innovations Incorporated (NASDAQ: LUNA) today announced its financial results for the fourth quarter and year ended December 31, 2012.

For the fourth quarter of 2012, Luna realized a net loss attributable to common stockholders of $0.6 million, or $0.04 per share, compared to a net loss attributable to common stockholders of $0.4 million, or $0.03 per share, for the fourth quarter of 2011.  Revenues decreased 5% to $7.8 million in the fourth quarter of 2012 from $8.1 million in the fourth quarter of the preceding year, reflecting $0.2 million growth in the Technology Development segment more than offset by a decrease of $0.6 million in revenue from the Products and Licensing segment. Gross profit remained relatively unchanged at approximately $2.7 million for the most recent quarter and for the fourth quarter of last year.   

For the year, total revenues decreased 9% to $32.3 million for 2012 compared to $35.6 million in 2011. Products and Licensing revenue was $11.3 million in 2012 compared to $13.2 million in 2011, while full year revenues in the company’s technology development segment declined to $21.1 million in 2012 compared to $22.4 million in 2011.  Gross profit decreased to $12.2 million for 2012 compared to gross profit of $13.2 million in 2011.  Net loss attributable to common stockholders remained unchanged at $1.5 million, or $0.11 per common share, for 2012 and 2011. 

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 $0.2 million for the fourth quarter of 2012 compared to $0.6 million for the fourth quarter of 2011 and to $1.9 million for full year 2012 from $2.6 million in 2011.

On March 4, 2013, the company announced that it had sold its Secure Computing and Communications (“SCC”) group effective March 1, 2013, a component of the Technology Development segment.  Revenues for 2012 included approximately $6 million associated with SCC.

“The sale of our SCC group allowed us to increase liquidity while continuing to focus on the growth potential of our core fiber-optic technologies,” said My Chung, chief executive officer of Luna.  “With the completion of this transaction, we have accelerated the monetization of our secure computing technologies and generated cash to mitigate our risk of reductions in government spending.”

Fourth Quarter Financial and Business Summary

— Total revenues decreased by 5%, to $7.8 million for the fourth quarter of 2012, from $8.1 million for the fourth quarter of 2011.

— Technology development revenues increased by 4%, to $5.2 million for the fourth quarter of 2012, from $5.0 million for the fourth quarter of 2011. 

— Products and licensing revenues decreased by 19%, to $2.5 million in the fourth quarter of 2012, from $3.1 million in the fourth quarter of 2011, including a decrease of approximately $0.3 million in sales of fiber optic test and measurement equipment and approximately $0.3 million of reductions in funded product development activities.

— Gross profit decreased to $2.6 million for the fourth quarter of 2012, from $2.7 million for the fourth quarter of 2011.

— Selling, general and administrative expenses increased by 7% to $2.6 million, or 34% of total revenues for the fourth quarter of 2012, from $2.4 million, or 30% of total revenues, for the fourth quarter of 2011.

— Total operating expenses remained relatively unchanged at $3.2 million, or 41% of total revenues, for the fourth quarter of 2012 and 39% of total revenues for the fourth quarter of 2011.

— Adjusted EBITDA decreased to $0.2 million for the fourth quarter of 2012, from $0.6 million for the fourth quarter of 2011.

— Net loss attributable to common stockholders declined to $0.6 million, or ($0.04) per basic and diluted common share, for the fourth quarter of 2012, compared to a net loss attributable to common stockholders of $0.4 million, or ($0.03) per basic and diluted common share, for the fourth quarter of 2011.

— Cash and cash equivalents totaled $6.3 million at December 31, 2012, as compared to $8.9 million at December 31, 2011.  Outstanding principal on our term loan decreased from $5.3 million at December 31, 2011, to $3.6 million at December 31, 2012.

— Introduced the OBR 5T-50 in November of 2012 to address the production line needs of the telecommunications industry.

Year Ended December 31, 2012 Financial Summary

— Total revenue decreased $3.3 million, or 9%, to $32.3 million for the year ended December 31, 2012, compared to $35.6 million for the year ended December 31, 2011.

— Products and licensing revenue decreased by 15%, to $11.3 million for the year ended December 31, 2012, from $13.2 million for the year ended December 31, 2011.   

— Technology development revenues decreased by 6%, to $21.1 million for the year ended December 31, 2012, from $22.4 million for the year ended December 31, 2011.

— Gross profit decreased by 8%, to $12.2 million for the year ended December 31, 2012, from $13.2 million for the year ended December 31, 2011.

— Selling, general and administrative expenses decreased by 8% to $10.8 million, or 33% of total revenues, for the year ended December 31, 2012, from $11.8 million, or 33% of total revenues, for the year ended December 31, 2011.

— Total operating expenses decreased by 8% to $13.4 million, or 41% of total revenues, for the year ended December 31, 2012, from $14.5 million, or 41% of total revenues, for the year ended December 31, 2011.

— Adjusted EBITDA decreased to $1.9 million for the year ended December 31, 2012 from $2.7 million for the year ended December 31, 2011. 

— Net loss attributable to common stockholders remained unchanged at $1.5 million, or $0.11 per basic and diluted common share, for the year ended December 31, 2012 and for the year ended December 31, 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 fourth quarter and full year of 2012.  The call can be accessed by dialing 866.202.0886 domestically or 617.213.8841 nternationally prior to the start of the call. The participant access code is 80732414.  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. Through its disciplined commercialization business model, Luna has become a recognized leader in transitioning science to solutions. Luna is headquartered inRoanoke,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 growth potential of fiber-optic technology 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
December 31,

 

 

Year ended
December 31,

 

 

  

2012

 

 

2011

 

 

2012

 

 

2011

 

 

  

(unaudited)

 

 

 

 

 

 

 

Revenues

  

     

 

     

 

     

 

     

Technology development

  

$

5,229,644

  

 

$

5,011,387

  

 

$

21,098,286

  

 

$

22,417,902

  

Products and licensing

  

 

2,535,087

  

 

 

3,137,113

  

 

 

11,250,717

  

 

 

13,195,822

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

  

 

7,764,731

  

 

 

8,148,500

  

 

 

32,349,003

  

 

 

35,613,724

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

  

     

 

     

 

     

 

     

Technology development

  

 

3,680,434

  

 

 

3,882,508

  

 

 

14,928,887

  

 

 

15,793,279

  

Products and licensing

  

 

1,420,063

  

 

 

1,530,436

  

 

 

5,242,043

  

 

 

6,589,943

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total cost of revenues

  

 

5,100,497

  

 

 

5,412,944

  

 

 

20,170,930

  

 

 

22,383,222

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

  

 

2,664,234

  

 

 

2,735,556

  

 

 

12,178,073

  

 

 

13,230,502

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

  

     

 

     

 

     

 

     

Selling, general and administrative

  

 

2,620,524

  

 

 

2,448,321

  

 

 

10,804,156

  

 

 

11,788,866

  

Research, development and engineering

  

 

589,540

  

 

 

724,455

  

 

 

2,558,417 

  

 

 

2,674,730

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

  

 

3,210,064

  

 

 

3,172,776

  

 

 

13,362,573

  

 

 

14,463,596

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

  

 

(545,830

 

 

(437,220

 

 

(1,184,500

 

 

(1,233,094

Other income (expense)

  

     

 

     

 

     

 

     

Interest

  

 

(64,056

 

 

(85,890

 

 

(286,529

 

 

(376,524

Other

  

 

22,978

  

 

 

169,772

  

 

 

108,061

  

 

 

227,565

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

  

 

(586,908

 

 

(353,338

 

 

(1,362,968

 

 

(376,524

Income tax expense

  

 

—  

  

 

 

—  

  

 

 

21,417

  

 

 

10,307

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

  

 

(586,908

 

 

(353,338

 

 

(1,384,385

 

 

(1,392,360

Preferred stock dividend

  

 

24,780

  

 

 

32,510

  

 

 

119,754

  

 

 

127,462

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders

  

$

(611,688

 

$

(385,848

 

$

(1,504,139

 

$

(1,519,822

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share of common stock

  

     

 

     

 

     

 

     

Basic and diluted

  

$

(0.04

 

$

(0.03

 

$

(0.11

 

$

(0.11

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares

  

     

 

     

 

     

 

     

Basic and diluted

  

 

14,008,772

  

 

 

13,794,361

  

 

 

13,930,267

  

 

 

13,647,555

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Luna Innovations Incorporated

Condensed Consolidated Balance Sheets

 

                 

 

  

December 31,

 

 

  

2012

 

 

2011

 

 

  

 

 

 

 

 

Assets

  

     

 

     

Current Assets

  

     

 

     

Cash and cash equivalents

  

$

6,340,461

  

 

$

8,939,127

  

Accounts receivable, net

  

 

7,059,635

  

 

 

5,958,086

  

Inventory, net

  

 

3,336,916

  

 

 

3,330,773

  

Prepaid expenses

 

 

667,773

 

 

 

1,071,438

 

Other current assets

  

 

35,629

  

 

 

35,717

  

 

  

 

 

 

 

 

 

 

Total current assets

  

 

17,440,414

  

 

 

19,355,141

  

 

  

 

 

 

 

 

 

 

Property and equipment, net

  

 

2,426,638

  

 

 

2,816,674

  

Intangible assets, net

  

 

437,839

  

 

 

539,563

  

Other assets

  

 

152,877

  

 

 

228,043

  

 

  

 

 

 

 

 

 

 

                                Total assets

  

$

20,457,768

  

 

$

22,919,421

  

 

  

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

  

     

 

     

Current liabilities

  

     

 

     

Current portion of long term debt obligation

  

$

1,500,000

  

 

$

1,625,000

  

Current portion of capital lease obligation

  

 

54,091

  

 

 

50,949

  

Accounts payable

  

 

1,797,571

  

 

 

1,656,602

  

Accrued liabilities

  

 

2,747,175

  

 

 

3,612,193

  

Deferred credits

  

 

832,822

  

 

 

1,462,603

  

 

  

 

 

 

 

 

 

 

                      Total current liabilities

  

 

6,931,659

 

 

 

8,407,347

 

           Long term debt obligations

  

 

2,125,000

  

 

 

3,625,000

  

           Long term capital lease obligations

  

 

128,917

  

 

 

183,008

  

 

  

 

 

 

 

 

 

 

Total liabilities

  

 

9,185,576

  

 

 

12,215,355

  

 

  

 

 

 

 

 

 

 

Commitments and contingencies

  

 

  

  

 

 

  

  

Stockholders’ equity

  

     

 

     

Preferred stock

  

 

1,322

  

 

 

1,322

  

Common stock

  

 

14,245

  

 

 

13,969

  

Additional paid-in capital

  

 

61,361,505

  

 

 

59,289,516

  

Accumulated deficit

  

 

(50,104,880

 

 

(48,600,741

 

  

 

 

 

 

 

 

 

Total stockholders’ equity

  

 

11,272,192

  

 

 

10,704,066

  

 

  

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

  

$

20,457,768

  

 

$

22,919,421

  

 

  

 

 

 

 

 

 

 

 

Luna Innovations Incorporated

Condensed Consolidated Statements of Cash Flows

                 

 

  

Year ended December 31,

 

 

  

2012

 

 

2011

 

 

  

 

 

 

 

 

Cash flows from operating activities

  

     

 

     

Net loss

  

$

(1,384,385

 

$

(1,392,360

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

  

     

 

     

Depreciation and amortization

  

 

1,092,027

  

 

 

1,462,511

  

Stock-based compensation

  

 

1,862,533

  

 

 

2,163,290

  

 

  

     

 

     

Changes in operating assets and liabilities

  

     

 

     

Accounts receivable

  

 

(1,101,549

 

 

1,711,539

  

Inventory

  

 

(10,482

 

 

(224,173

Other assets

  

 

478,919

  

 

 

(321,430

Accounts payable and accrued expenses

  

 

(724,050

 

 

(288,989

Deferred credits

  

 

(629,781

 

 

(119,999

 

  

 

 

 

 

 

 

 

Net cash used in operating activities

  

 

(416,768

 

 

2,990,389

  

 

  

 

 

 

 

 

 

 

Cash from investing activities

  

     

 

     

Acquisition of property and equipment

  

 

(371,390

 

 

(327,704

Intangible property costs

  

 

(224,537

 

 

(347,813

 

  

 

 

 

 

 

 

 

Net cash used in investing activities

  

 

(595,927

 

 

(675,517

 

  

 

 

 

 

 

 

 

Cash flows from financing activities

  

     

 

     

Proceeds from debt obligations

  

 

  

 

 

6,000,000

  

Payments on debt obligations

  

 

(1,625,000

 

 

(6,867,393

Payment on capital lease obligations

  

 

(50,949

 

 

(42,383

Proceeds from exercise of options and warrants

  

 

89,978

  

 

 

317,451

  

 

  

 

 

 

 

 

 

 

Net cash (used in)/provided by financing activities

  

 

(1,585,971

 

 

(592,325

 

  

 

 

 

 

 

 

 

Net change in cash

  

 

(2,598,666

 

 

1,722,547

  

Cash and cash equivalents—beginning of period

  

 

8,939,127

  

 

 

7,216,580

  

 

  

 

 

 

 

 

 

 

Cash and cash equivalents—end of period

  

$

6,340,461

  

 

$

8,939,127

  

 

  

 

 

 

 

 

 

 

 

Luna Innovations Incorporated

Reconciliation of Net Loss to EBITDA and Adjusted EBITDA

 

                                 

 

  

Three months ended
December 31,

 

 

Year ended
December 31,

 

 

  

2012

 

 

2011

 

 

2012

 

 

2011

 

 

  

(unaudited)

 

 

 

 

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

  

     

 

     

 

     

 

     

Net loss

  

$

(586,908

 

$

(353,338

 

$

(1,384,385

 

$

(1,392,360

Interest

  

 

64,057

  

 

 

85,891

  

 

 

286,529

  

 

 

376,524

  

Taxes

  

 

—  

  

 

 

—  

  

 

 

21,417

  

 

 

10,307  

  

Depreciation and amortization

  

 

277,529

  

 

 

419,811

  

 

 

1,092,027

  

 

 

1,462,511

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

  

 

(245,322

 

 

152,364

  

 

 

15,588

  

 

 

456,982

 

Share based compensation expense

 

 

450,861

 

 

 

426,018

  

 

 

1,862,533

  

 

 

2,163,290

 

Warrant expense

  

 

(35,696

 

 

18,586

  

 

 

17,190

  

 

 

60,338

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

  

$

169,843

  

 

$

596,968

  

 

$

1,895,311

  

 

$

2,680,610

  

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

###

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