Luna Innovations Reports Fourth-Quarter and Full-Year 2021 Results

Highlights

• Total revenues of $24.2 million for the three months ended December 31, 2021, up 26%, compared to the three months ended December 31, 2020
• Gross margin of 58% for the three months ended December 31, 2021, compared to 61% for the three months ended December 31, 2020
• Operating income of $1.0 million for the three months ended December 31, 2021, compared to operating loss of $0.6 million for the three months ended December 31, 2020
• Net income of $1.6 million for the three months ended December 31, 2021, compared to net loss of $0.1 million for the three months ended December 31, 2020
• Adjusted EBITDA of $3.1 million for the three months ended December 31, 2021, compared to $3.0 million for the three months ended December 31, 2020
• Adjusted EPS of $0.08 for the three months ended December 31, 2021, compared to $0.05 for the three months ended December 31, 2020
• Company provides 2022 outlook

(ROANOKE, VA, March 14, 2022) - Luna Innovations Incorporated (NASDAQ: LUNA), a global leader in advanced optical technology, today announced its financial results for the three months and full fiscal year ended December 31, 2021.

“In many ways, 2021 was a pivotal year for Luna Innovations, and that has continued into early 2022,” said Scott Graeff, President and Chief Executive Officer of Luna. “Through the challenges of the global pandemic, we stayed focused on our strategy and on enhancing our global leadership position in fiber optic technology. We integrated the OptaSense acquisition, and subsequent to year-end, completed the divestiture of Luna Labs and acquired LIOS Sensing. We reported record backlog and delivered double-digit revenue and gross profit growth for the fourth-quarter and full-year. Across our sensing and communications testing businesses, we realized some of the largest customer orders to date and penetrated into new geographies and markets, while implementing systems to support growth."

Graeff continued, "Luna's businesses are stronger than ever. The strategic initiatives that we undertook during the past five years, and in particular the past 18 months, have placed us in a better position to more fully capitalize on the growing 5G network communications, electric vehicle and other emerging market opportunities. The absolute focus and dedication of the Luna team is evident every day, as we serve our customers with excellence. I'm proud of the team for what they've accomplished and know that they will continue to execute against our vision: Enabling the Future with Fiber. We look forward to reporting against our 2022 goals, and updating you on initiatives, over the coming the months."

Fourth-Quarter Fiscal 2021 Financial Summary

Highlights of the financial results for the three months ended December 31, 2021 are:

			Three Months Ended December 31,				Change
(in thousands, except per share data)			2021		2020
Revenues			$24,222		$19,278		26	%
Gross profit			14,120		11,754		20	%
Gross margin			58 %		61 %
Operating expense			13,085		12,391		6	%
Operating income/(loss)			1,035		(637)
Operating margin			4.3 %		(3.3) %
Other (expense)/income and income tax benefit/(expense)			440		(308)
Net income/(loss) from continuing operations			$1,475		$(945)
Income from discontinued operations, net of income tax expense of $203 and $284			100		881
Net income/(loss)			$1,575		$(64)
Earnings per diluted share (EPS)			$0.05		$ —
Adjusted EPS			$0.08		$0.05		60	%
Diluted weighted average shares outstanding			33,666		30,896
Adjusted EBITDA			$3,123		$3,028		3	%

A reconciliation of Adjusted EPS and Adjusted EBITDA to the nearest comparable figures under generally accepted accounting principles ("GAAP") can be found in the schedules included in this release.

 

Revenues for the three months ended December 31, 2021 increased 26% compared to the prior year period, primarily due to revenue generated by the businesses the Company acquired during 2020.

Gross margin for the three months ended December 31, 2021 was 58%, compared to 61% for the three months ended December 31, 2020, driven primarily by product mix as a result of acquisitions. Operating income increased to $1.0 million for the three months ended December 31, 2021, compared to an operating loss of $0.6 million for the three months ended December 31, 2020. The increase in operating income was primarily due to higher revenue resulting in a higher gross profit, as well as lower acquisition costs in the current quarter versus the prior-year quarter.

Net income was $1.6 million, or $0.05 per fully diluted share, for the three months ended December 31, 2021, compared to a net loss of $0.1 million, or $0.00 per fully diluted share, for the three months ended December 31, 2020. Adjusted EPS was $0.08 for the three months ended December 31, 2021 compared to $0.05 for the three months ended December 31, 2020. Adjusted EBITDA was $3.1 million for the three months ended December 31, 2021, compared to $3.0 million for the three months ended December 31, 2020.

Full-Year Fiscal 2021 Financial Summary

Highlights of the financial results for the twelve months ended December 31, 2021 are:

			Full Year Ended December 31,
(in thousands, except per share data)			2021		2020		Change
Revenues			$ 87,513		$59,115		48	%
Gross profit			$ 51,556		$35,880		44	%
Gross margin			59 %		61 %
Operating expense			54,146		35,067		54	%
Operating (loss)/income			(2,590)		813
Operating margin			(3.0) %		1.4 %
Other (expense)/income and income tax benefit/(expense)			1,501		547
Net (loss)/income from continuing operations			$(1,089)		$1,360
Income from discontinued operations, net of income tax expense of $584 and $339			2,471		1,931
Net income			$ 1,382		$3,291
Earnings per diluted share (EPS)			$ 0.04		$0.10		(60)	%
Adjusted EPS			$ 0.17		$0.18		(6)	%
Diluted weighted average shares outstanding			31,658,085		32,578,757
Adjusted EBITDA			$ 7,584		$7,926		(4)	%

 

A reconciliation of Adjusted EPS and Adjusted EBITDA to the nearest comparable GAAP figures can be found in the schedules included in this release.

Revenues for the twelve months ended December 31, 2021 increased 48% compared to the prior-year period, primarily due to our acquisitions in 2020.

Gross margin of 59% for the twelve months ended December 31, 2021 was down compared to 61% for the twelve months ended December 31, 2020 due to product mix as a result of acquisitions. Operating loss of $2.6 million for the twelve months ended December 31, 2021, declined compared to operating income of $0.8 million for the twelve months ended December 31, 2020. The decrease in operating income was primarily due to incremental amortization of intangible assets and inventory step-up related to Luna's completed acquisitions.

Net income was $1.4 million, or $0.04 per fully diluted share, for the twelve months ended December 31, 2021, compared to a net income of $3.3 million, or $0.10 per fully diluted share, for the twelve months ended December 31, 2020. Adjusted EPS was $0.17 for the twelve months ended December 31, 2021, compared to $0.18 for the twelve months ended December 31, 2020. Adjusted EBITDA was $7.6 million for the twelve months ended December 31, 2021, compared to $7.9 million for the twelve months ended December 31, 2020.

 

Subsequent Events

Subsequent to the close of the fiscal year, Luna completed two important and strategic transactions:

• Divestiture of Luna Labs, which was moved to Discontinued Operations in the third quarter 2021
• Acquisition of LIOS Sensing

LIOS Sensing, based in Cologne, Germany, is a recognized market leader in fiber optic distributed monitoring solutions for power cable, pipelines, oilfield services, security, highways, railways and industrial fire detection systems. The acquisition brings to Luna important Distributed Temperature Sensing ("DTS") intellectual property, products and expertise. DTS strongly complements Luna's existing offerings and provides algorithm development expertise, critical for AI and machine learning.

2022 Full-Year and Q1 Outlook

For fiscal year and Q1 2022, including both the mid-March divestiture of Luna Labs and the acquisition of LIOS Sensing, Luna expects:

• Total revenues in the range of $109 million to $115 million for full year 2022
• Adjusted EBITDA in the range of $10 million to $12 million for full year 2022
• Total revenues in the range of $20 million to $22 million for Q1 2022

Luna is not providing an outlook for net income, which is the most directly comparable GAAP measure to Adjusted EBITDA, because changes in the items that Luna excludes from net income to calculate Adjusted EBITDA, such as share-based compensation, tax expense, and significant non-recurring charges, among other things, can be dependent on future events that are less capable of being controlled or reliably predicted by management and are not part of Luna's routine operating activities.

The outlook above does not include any future acquisitions, divestitures, or unanticipated events.

Non-GAAP Financial 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 GAAP. Adjusted EBITDA and Adjusted EPS provide 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 and Adjusted EPS 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 and Adjusted EPS 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 8:30 am (ET) today to discuss its financial results for the three months and full-year ended December 31, 2021, as well as the divestiture of Luna Labs and the acquisition of LIOS Sensing. The investor conference call will be available via live webcast on the Luna website at www.lunainc.com under the tab “Investor Relations.” To participate by telephone, the domestic dial-in number is 844.578.9643 and the international dial-in number is 270.823.1522. The participant access code is 2096088. Investors are advised to dial in at least five minutes prior to the call to register. The webcast will be archived on the company’s website under “Webcasts and Presentations” for 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-performance, fiber optic-based, test products for the telecommunications industry and distributed fiber optic-based sensing for a multitude of industries. 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 its projected 2022 financial results and outlook and growth potential, as well as the impacts of the recently completed acquisition of OptaSense and LIOS Sensing and the recently completed divestiture of Luna Labs. 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, failure of target market to grow and expand, technological and strategic challenges and those risks and uncertainties set forth in Luna’s Form 10-Q for the quarter ended September 30, 2021, and Luna's other periodic reports and 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.

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Investor Contact:
Allison Woody
Phone: 540-769-8465
Email: [email protected]