Luna Innovations Reports Second Quarter 2011 Financial Results
Total revenues increase 7% over prior year quarter; Product & license revenues increase 38% over prior year quarter; Fourth consecutive quarter of positive cash flow
ROANOKE, Va., Aug 09, 2011 -- Luna Innovations Incorporated (NASDAQ: LUNA) today announced its financial results for the second quarter and six months ended June 30, 2011.
As compared to the same quarter last year, product and license revenue increased by 38%, from $2.9 million in the second quarter of 2010 to $4.0 million in the second quarter of 2011, while total revenue increased by 7%, from $9.0 million in the second quarter of 2010 to $9.6 million in the second quarter of 2011. Gross profit increased from $3.3 million for the second quarter of 2010 to $3.7 million for the second quarter of 2011. The company reported a net loss attributable to common stockholders of $0.3 million, or $0.02 per common share for the second quarter of 2011, as compared to a net loss attributable to common stockholders of $0.7 million, or $0.05 per common share for the second quarter of 2010. Adjusted EBITDA, a non-GAAP measure, which is earnings before interest, taxes, depreciation and amortization, excluding litigation and reorganization related items and non-cash stock-based compensation and warrant expense, decreased to $0.7 million for the second quarter of 2011, as compared to $0.8 million for the second quarter of 2010. Cash increased to $8.1 million at June 30, 2011 compared to $6.3 million at June 30, 2010.
"We are pleased to see continued improvement in our bottom line and cash flow, largely being accomplished through growth in our product and license revenue, which saw a year-over-year increase of 38%," said My Chung, chief executive officer of Luna. "We remain focused on molding our corporate strategy to align product development, contract research, and services with a commercialization strategy that will facilitate long-term growth and increased shareholder value."
Second Quarter Financial and Business Summary
-- Total revenues increased by 7%, from $9.0 million in the second quarter of 2010 to $9.6 million in the second quarter of 2011.
-- Product and license revenue increased by 38%, from $2.9 million in the second quarter of 2010 to $4.0 million in the second quarter of 2011. Technology development revenues decreased by 8%, to $5.6 million, for the second quarter of 2011 from $6.1 million for the second quarter of 2010.
-- Gross profit for the second quarter of 2011 increased to $3.7 million, or 38% of total revenues, from $3.3 million, or 37% of total revenues, for the corresponding period of 2010.
-- Selling, general and administrative expenses decreased by 3% to $3.3 million, or 34% of total revenues for the second quarter of 2011, from $3.4 million, or 37% of total revenues, for the second quarter of 2010.
-- Total operating expenses increased to $3.9 million, or 40% of total revenues, for the second quarter of 2011 from $3.8 million, or 42% of total revenues for the second quarter of 2010.
-- Adjusted EBITDA decreased to $0.7 million in the second quarter 2011 from $0.8 million in the second quarter of 2010.
-- Net loss attributable to common stockholders improved to $0.3 million for the second quarter of 2011 compared to a net loss attributable to common stockholders of $0.7 million for the second quarter of 2010.
-- Achieved fourth consecutive quarter of positive cash flow. Cash and cash equivalents totaled $8.1 million at June 30, 2011, as compared to $7.5 million at March 31, 2011. The second quarter of 2011 included $0.4 million of additional indebtedness as a part of the refinancing with Silicon Valley Bank discussed below.
-- My E. Chung appointed as Luna's president, chief executive officer and a member of the board of directors.
-- Luna refinanced its credit facility with Silicon Valley Bank to establish a $6.0 million term loan and a $1.0 million revolving line of credit. With the proceeds of the term loan, Luna repaid the remaining balance on the promissory note to Hansen Medical, Inc. of $3.0 million and its prior balance on its revolving line of credit with Silicon Valley Bank of $2.5 million.
Six Months Ended June 30, 2011 Financial Summary
-- Total revenue increased $1.7 million, or 10%, to $18.6 million for the six months ended June 30, 2011 compared to $16.9 million for the six months ended June 30, 2010.
-- Product and license revenue increased by 48%, from $5.0 million for the six months ended June 30, 2010 to $7.4 million for the six months ended June 30, 2011. Technology development revenues decreased by 6%, from $11.9 million for the six months ended June 30, 2010 to $11.2 million for the six months ended June 30, 2011.
-- Gross profit for the six months ended June 30, 2011 increased by 14%, to $7.0 million, compared to a gross profit of $6.1 million for the six months ended June 30, 2010.
-- Selling, general and administrative expenses increased by 2% from $6.8 million, or 40% of total revenues, for the six months ended June 30, 2010 to $6.9 million, or 37% of total revenues, for the six months ended June 30, 2011.
-- Total operating expenses increased by 5% to $8.1 million, or 44% of total revenues, for the six months ended June 30, 2011 compared to $7.7 million, or 46% of total revenues, for the six months ended June 30, 2010.
-- Adjusted EBITDA decreased to $1.0 million for the six months ended June 30, 2011 from $1.4 million for the six months ended June 30, 2010.
-- Net loss attributable to common stockholders improved to $1.4 million for the six months ended June 30, 2011 compared to a net loss attributable to common stockholders of $2.0 million for the six months ended June 30, 2010.
Outlook 2011
Based on information as of August 9, 2011, the company expects total revenue for 2011 to be in the range of $35.0 million to $37.0 million. Also for 2011, the company anticipates a net loss to common stockholders in the range of $2.5 million to $3.0 million. For the third quarter of 2011, the company expects revenue of approximately $8.5 million to $9.0 million and a net loss attributable to common stockholders of approximately $0.5 million to $0.7 million.
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 Innovations 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 2011 and expectations for the remainder of 2011. The call can be accessed by dialing 866.356.3095 domestically or 617.597.5391 internationally prior to the start of the call. The participant access code is 73844771. 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 Innovations website, http://www.lunainnovations.com, prior to the event. The webcast will be archived under the "Webcasts and Presentations" section of the Luna Innovations website for at least 30 days following the conference call.
About Luna Innovations:
Luna Innovations Incorporated (www.lunainnovations.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 we serve. Through its disciplined commercialization business model, Luna has become a recognized leader in transitioning science to solutions. Luna is headquartered in Roanoke, 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 financial results for the third quarter and full year 2011, as well as the demand for the company's fiber optic equipment and technologies. 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 the fact that the outlook for the third quarter and full year 2011 could change, failure of demand for the company's products and services to meet expectations, 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 http://www.sec.gov and at the company's website at http://www.lunainnovations.com. The statements made in this release are based on information available to the company as of the date of this release and Luna Innovations 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 | Six Months Ended | |||||||||||||||
| June 30, |
June 30, |
|||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| Revenues: | ||||||||||||||||
| Technology development revenues | $ | 5,623,074 | $ | 6,091,503 | $ | 11,244,689 | $ | 11,902,597 | ||||||||
| Product and license revenues | 4,000,515 | 2,907,139 | 7,377,525 | 4,981,836 | ||||||||||||
| Total revenues | 9,623,589 | 8,998,642 | 18,622,214 | 16,884,433 | ||||||||||||
| Cost of revenues: | ||||||||||||||||
| Technology development costs | 4,194,442 | 4,192,920 | 8,280,608 | 8,025,260 | ||||||||||||
| Product and license costs | 1,767,778 | 1,499,861 | 3,340,469 | 2,719,102 | ||||||||||||
| Total cost of revenues | 5,962,220 | 5,692,781 | 11,621,077 | 10,744,362 | ||||||||||||
| Gross Profit | 3,661,369 | 3,305,861 | 7,001,137 | 6,140,071 | ||||||||||||
| Operating expense: | ||||||||||||||||
| Selling, general and administrative | 3,251,073 | 3,350,524 | 6,929,593 | 6,765,036 | ||||||||||||
| Research, development, and engineering | 620,470 | 430,181 | 1,180,159 | 946,809 | ||||||||||||
| Total operating expense | 3,871,543 | 3,780,705 | 8,109,752 | 7,711,845 | ||||||||||||
| Operating loss | (210,174 | ) | (474,844 | ) | (1,108,615 | ) | (1,571,774 | ) | ||||||||
| Other income/(expense) | 37,823 | -- | 35,835 | (14,872 | ) | |||||||||||
| Interest expense | (84,303 | ) | (143,485 | ) | (198,725 | ) | (227,526 | ) | ||||||||
| Total other income/(expense) | (46,480 | ) | (143,485 | ) | (162,890 | ) | (242,398 | ) | ||||||||
| Loss before income taxes | (256,654 | ) | (618,329 | ) | (1,271,505 | ) | (1,814,172 | ) | ||||||||
| Income tax expense |
-- |
-- |
10,020 | -- | ||||||||||||
| Net loss | (256,654 | ) | (618,329 | ) | (1,281,525 | ) | (1,814 ,172 | ) | ||||||||
| Preferred stock dividend | 32,708 | 93,000 | 74,336 | 174,633 | ||||||||||||
|
Net loss attributable to common stockholders |
$ | (289,362 | ) | $ | (711,329 | ) | $ | (1,355,861 | ) | $ | (1,988,805 | ) | ||||
| Net loss per share of common stock: | $ | (0.02 | ) | $ | (0.05 | ) | $ | (0.10 | ) | $ | (0.16 | ) | ||||
| Luna Innovations Incorporated | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| June 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 8,066,006 | $ | 7,216,580 | ||||
| Accounts receivable, net | 6,675,480 | 7,669,625 | ||||||
| Inventory, net | 3,772,483 | 3,106,600 | ||||||
| Prepaid expenses | 688,057 | 665,210 | ||||||
| Other current assets | 45,004 | 45,348 | ||||||
| Total current assets | 19,247,030 | 18,703,363 | ||||||
| Property and equipment, net | 3,144,099 | 3,204,670 | ||||||
| Intangible assets, net | 662,551 | 664,418 | ||||||
| Other assets | 265,627 | 303,210 | ||||||
| Total assets | $ | 23,319,307 | $ | 22,875,661 | ||||
|
Liabilities and stockholders' equity |
||||||||
|
Liabilities: |
||||||||
| Current Liabilities | ||||||||
| Line of credit | $ |
-- |
$ | 2,500,000 | ||||
| Current portion of long term debt obligation | 1,500,000 | 1,195,784 | ||||||
| Current portion of capital lease obligation | 49,446 | 2,194 | ||||||
| Accounts payable | 1,498,678 | 2,008,183 | ||||||
| Accrued liabilities | 4,209,901 | 3,549,604 | ||||||
| Deferred credits | 1,685,740 | 1,392,602 | ||||||
| Total current liabilities | 8,943,765 | 10,648,367 | ||||||
| Long-term debt obligation | 4,375,000 | 2,611,609 | ||||||
| Long-term lease obligation | 208,864 | -- | ||||||
| Total liabilities | 13,527,629 | 13,259,976 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders' equity: | ||||||||
| Preferred stock | 1,322 | 1,322 | ||||||
| Common stock | 13,763 | 13,526 | ||||||
| Additional paid-in capital | 58,213,370 | 56,681,756 | ||||||
| Accumulated deficit | (48,436,777 | ) | (47,080,919 | ) | ||||
| Total stockholders' equity | 9,791,678 | 9,615,685 | ||||||
| Total liabilities and stockholders' equity | $ | 23,319,307 | $ | 22,875,661 | ||||
| Luna Innovations Incorporated | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| Six months ended | ||||||||
| June 30, | ||||||||
| 2011 | 2010 | |||||||
| (unaudited) | ||||||||
| Cash flows used in operating activities | ||||||||
| Net loss | $ | (1,281,525 | ) | $ | (1,814,172 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation and amortization | 710,269 | 641,979 | ||||||
| Share-based compensation | 1,275,147 | 1,763,015 | ||||||
| Warrant expense | 38,893 | 122,183 | ||||||
| Change in assets and liabilities: | ||||||||
| Accounts receivable | 994,149 | (1,007,451 | ) | |||||
| Inventory | (665,883 | ) | (127,163 | ) | ||||
| Other current assets | (22,503 | ) | 668,871 | |||||
| Other assets | 37,583 | 31,024 | ||||||
| Accounts payable and accrued expenses | 111,900 | (2,386,304 | ) | |||||
| Deferred credits | 103,138 | 426,444 | ||||||
| Net cash used in operating activities | 1,301,168 | (1,681,574 | ) | |||||
| Cash flows used in investing activities | ||||||||
| Acquisition of property and equipment | (173,945 | ) | (39,146 | ) | ||||
| Intangible property costs | (199,741 | ) | (88,712 | ) | ||||
| Net cash used in investing activities | (373,686 | ) | (127,858 | ) | ||||
| Cash flows provided by (used in) financing activities | ||||||||
| Payments on capital lease obligations | (18,030 | ) | (2,684 | ) | ||||
| Proceeds from debt obligations | 6,000,000 | 2,500,000 | ||||||
| Payment of debt obligations | (6,242,394 | ) | (265,657 | ) | ||||
| Proceeds from the exercise of options and warrants | 182,368 | 616,940 | ||||||
| Net cash provided by (used in) financing activities | (78,056 | ) | 2,848,599 | |||||
| Net change in cash | 849,426 | 1,039,167 | ||||||
| Cash and cash equivalents--beginning of period | 7,216,580 | 5,228,802 | ||||||
| Cash and cash equivalents--end of period | $ | 8,066,006 | $ | 6,267,969 | ||||
| Luna Innovations Incorporated | |||||||||||||||
| Reconciliation of EBITDA and Adjusted EBITDA to Net Loss | |||||||||||||||
|
Three Months Ended |
Six Months Ended |
||||||||||||||
| June 30, | June 30, | ||||||||||||||
| 2011 | 2010 | 2011 |
2010 |
||||||||||||
| (unaudited) | (unaudited) | ||||||||||||||
| Reconciliation of EBITDA and Adjusted EBITDA | |||||||||||||||
| Net loss | $ | (256,654 | ) | $ | (618,329 | ) | $ | (1,281,525 | ) | (1,814,172 | ) | ||||
| Interest expense | 84,303 | 143,485 | 198,725 | 227,526 | |||||||||||
| Income tax expense |
-- |
-- |
10,020 | -- | |||||||||||
| Depreciation and amortization | 382,856 | 313,020 | 710,269 | 641,979 | |||||||||||
| EBITDA | 210,505 | (161,824 | ) | (362,511 | ) | (944,667 | ) | ||||||||
| Stock-based compensation and warrant expense | 472,328 | 950,814 | 1,314,040 | 1,886,198 | |||||||||||
| Fees associated with Hansen litigation and Chapter 11 reorganization |
-- |
39,863 |
-- |
422,750 | |||||||||||
| Adjusted EBITDA | $ | 682,833 | $ | 828,853 | $ | 951,529 | 1,364,281 | ||||||||
Luna Innovations Incorporated
Dale Messick, CFO
1-540-769-8400
[email protected]