Luna Innovations Reports Second-Quarter 2023 Results

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Reaffirms Full-Year 2023 Outlook

Q2 Highlights

  • Total revenues of $29.2 million, up 11% year over year

  • Gross margin of 58%, compared to 61% for the prior year

  • Net loss of $1.6 million, compared to net loss of $2.4 million for the prior year

  • Adjusted EBITDA of $2.7 million, compared to $1.2 million for the prior year

  • Adjusted EPS of $0.04, compared to $(0.02) for the prior year

ROANOKE, Va., August 10, 2023--(BUSINESS WIRE)--Luna Innovations Incorporated (NASDAQ: LUNA), a global leader in advanced optical technology, today announced its financial results for the three and six months ended June 30, 2023.

"We continue to see abundant opportunities for Luna’s capabilities and are particularly pleased this quarter with strong performance from our Sensing business," said Scott Graeff, President and Chief Executive Officer of Luna. "We did experience a distinct difference in the growth rates of our two businesses – Sensing and Communications Test. Our Sensing business, including our project-based solutions, grew strongly. Pressure in the broader Communications market did impact our Communications Test business. We continue to secure large, multi-unit, follow-on orders in our primary markets, and we are seeing significant wins with new applications."

Second-Quarter Fiscal 2023 Financial Summary

Highlights of the financial results for the three months ended June 30, 2023 are:

Three Months Ended June 30,

Change

(in thousands, except share and per share data)

2023

2022

Revenues

$

29,164

$

26,162

11

%

Gross profit

16,865

15,963

6

%

Gross margin

58

%

61

%

Operating expense

17,079

18,425

(7

)%

Operating loss

(214

)

(2,462

)

Operating margin

(1

)%

(9

)%

Other expense, net and income tax benefit

(344

)

(480

)

Net loss from continuing operations

$

(558

)

$

(2,942

)

(Loss)/income from discontinued operations, net of tax of $(346) and $(856)

(1,038

)

591

Net loss

$

(1,596

)

$

(2,351

)

Loss per diluted share (EPS)

$

(0.05

)

$

(0.07

)

Adjusted EPS

$

0.04

$

(0.02

)

Diluted weighted average shares outstanding

33,634,538

32,478,736

Adjusted EBITDA

$

2,732

$

1,184

131

%

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 June 30, 2023 increased 11% compared to the prior-year period.

Gross margin was 58% for the three months ended June 30, 2023, compared to 61% for the three months ended June 30, 2022, driven primarily by product mix. Operating loss and margin were $0.2 million and 1% of total revenues, respectively, for the three months ended June 30, 2023, compared to an operating loss of $2.5 million and 9% of total revenues, respectively, for the three months ended June 30, 2022.

Net loss was $1.6 million, or $0.05 per fully diluted share, for the three months ended June 30, 2023, compared to net loss of $2.4 million, or $0.07 per fully diluted share, for the three months ended June 30, 2022. Adjusted EPS was $0.04 for the three months ended June 30, 2023 compared to $(0.02) for the three months ended June 30, 2022.

Adjusted EBITDA was $2.7 million for three months ended June 30, 2023, compared to $1.2 million for the three months ended June 30, 2022.

Six Months Ended Fiscal 2023 Financial Summary

Highlights of the financial results for the six months ended June 30, 2023 are:

Six Months Ended June 30,

Change

(in thousands, except share and per share data)

2023

2022

Revenues

54,209

48,642

11

%

Gross profit

31,838

30,242

5

%

Gross margin

59

%

62

%

Operating expense

34,184

35,069

(3

)%

Operating loss

(2,346

)

(4,827

)

Operating margin

(4

)%

(10

)%

Other expense, net and income tax benefit

(54

)

542

Net loss from continuing operations

$

(2,400

)

$

(4,285

)

Net (loss)/income from discontinued operations, net of income taxes of $(346) and $3,283

(1,038

)

11,515

Net (loss)/income

$

(3,438

)

$

7,230

(Loss)/earnings per diluted share (EPS)

$

(0.10

)

$

0.22

Adjusted EPS

$

0.04

$

0.02

100

%

Diluted weighted average shares outstanding

33,483,978

32,361,560

Adjusted EBITDA

$

3,586

$

2,905

23

%

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 six months ended June 30, 2023 increased 11% compared to the prior-year period.

Gross profit of $31.8 million for the six months ended June 30, 2023 increased from $30.2 million for the six months ended June 30, 2022 primarily due to higher sales. Operating loss and margin improved to $2.3 million and 4% of total revenues, respectively, for the six months ended June 30, 2023, compared to $4.8 million and 10% of total revenues, respectively, for the six months ended June 30, 2022.

Net loss was $3.4 million, or $0.10 per fully diluted share, for the six months ended June 30, 2023, compared to a net income of $7.2 million, or $0.22 per fully diluted share, for the six months ended June 30, 2022. Adjusted EPS was $0.04 for the six months ended June 30, 2023, compared to $0.02 for the six months ended June 30, 2022.

Adjusted EBITDA was $3.6 million for the six months ended June 30, 2023, compared to $2.9 million for the six months ended June 30, 2022.

Q2 and Recent Business Highlights

  • Recognized significant wins for monitoring systems, including a contract for the largest power utility company in Italy

  • Secured large, follow-on, multi-unit Terahertz order for EV battery production process monitoring

  • Drove significant wins in our RIO line of lasers supported by macro trends such as LiDAR

  • Secured a seven-figure blanket order for polarization modules from a major data center hyper-scaler

  • Named industry veteran as Managing Director for Europe, Middle East and Africa region

  • Hosted Luna's first Investor Day in New York City, outlining the company's plans for future growth

2023 Full-Year Outlook

Luna is reaffirming the 2023 revenue and adjusted EBITDA outlook it originally provided on March 14, 2023:

  • Total revenue of $125 million to $130 million for the full year 2023

  • Adjusted EBITDA of $14 million to $18 million for the full year 2023

In addition, Luna expects total revenues in the range of $29 million to $32 million for the third quarter 2023.

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 and Adjusted EPS, which are non-GAAP financial measures. Adjusted EBITDA and Adjusted EPS exclude certain charges and income 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 5:00 pm (ET) today, August 10, 2023, to discuss its financial results for the three and six months ended June 30, 2023. 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 1.800.715.9871 .and the international dial-in number is 1.646.307.1963. Participants should ask to join the Luna Innovations Incorporated conference call, conference ID 6350168, and are advised to dial in at least fifteen minutes prior to the call. A replay of the conference call will be available 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 full year 2023 and third quarter of 2023 financial results and outlook, and the Company's ability to secure additional significant wins. 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, uncertainties related to the macroeconomic conditions and those risks and uncertainties set forth in Luna’s Form 10-Q for the quarter ended June 30, 2023, 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.

Luna Innovations Incorporated
Consolidated Balance Sheets (Unaudited)
(in thousands, except share data)

June 30, 2023

December 31, 2022

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

3,277

$

6,024

Accounts receivable, net

33,813

33,249

Contract assets

9,601

7,691

Inventory

42,003

36,582

Prepaid expenses and other current assets

5,159

4,328

Total current assets

93,853

87,874

Property and equipment, net

4,761

4,893

Intangible assets, net

17,371

18,750

Goodwill

27,313

26,927

Operating lease right-of-use assets

3,670

4,661

Other non-current assets

3,321

3,255

Deferred tax asset

4,842

4,647

Total assets

$

155,131

$

151,007

Liabilities and stockholders’ equity

Liabilities:

Current liabilities:

Current portion of long-term debt obligations

$

3,000

$

2,500

Accounts payable

10,306

8,109

Accrued and other current liabilities

11,375

16,694

Contract liabilities

3,463

4,089

Current portion of operating lease liabilities

1,899

2,239

Total current liabilities

30,043

33,631

Long-term debt obligations, net of current portion

27,734

20,726

Long-term portion of operating lease liabilities

2,062

2,804

Other long-term liabilities

419

444

Total liabilities

60,258

57,605

Commitments and contingencies

Stockholders’ equity:

Common stock, par value $0.001, 100,000,000 shares authorized, 35,739,827 and 34,901,954 shares issued, 33,908,336 and 33,105,080 shares outstanding at June 30, 2023 and December 31, 2022, respectively

36

35

Treasury stock at cost, 1,831,491 and 1,796,862 shares at June 30, 2023 and December 31, 2022, respectively

(5,960

)

(5,607

)

Additional paid-in capital

108,709

104,893

Accumulated deficit

(5,734

)

(2,296

)

Accumulated other comprehensive loss

(2,178

)

(3,623

)

Total stockholders’ equity

94,873

93,402

Total liabilities and stockholders’ equity

$

155,131

$

151,007

Luna Innovations Incorporated
Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share data)

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Revenues

$

29,164

$

26,162

$

54,209

$

48,642

Cost of revenues

12,299

10,199

22,371

18,400

Gross profit

16,865

15,963

31,838

30,242

Operating expense:

Selling, general and administrative

13,439

14,768

26,736

28,056

Research, development and engineering

2,722

2,665

5,538

5,207

Amortization of intangible assets

918

992

1,910

1,806

Total operating expense

17,079

18,425

34,184

35,069

Operating loss

(214

)

(2,462

)

(2,346

)

(4,827

)

Other income/(expense):

Other (expense)/income

(110

)

53

(18

)

73

Interest expense, net

(584

)

(111

)

(953

)

(224

)

Total other expense, net

(694

)

(58

)

(971

)

(151

)

Loss from continuing operations before income taxes

(908

)

(2,520

)

(3,317

)

(4,978

)

Income tax (benefit)/expense

(350

)

422

(917

)

(693

)

Net loss from continuing operations

(558

)

(2,942

)

(2,400

)

(4,285

)

(Loss)/income from discontinued operations, net of income tax expense (benefit) of $(346), $(856), $(346), and $166.

(1,038

)

591

(1,038

)

594

Gain on sale of discontinued operations, net of tax of $3,117

—

—

—

10,921

Net (loss)/income from discontinued operations

(1,038

)

591

(1,038

)

11,515

Net (loss)/income

$

(1,596

)

$

(2,351

)

$

(3,438

)

$

7,230

Net loss per share from continuing operations:

Basic

$

(0.02

)

$

(0.09

)

$

(0.07

)

$

(0.13

)

Diluted

$

(0.02

)

$

(0.09

)

$

(0.07

)

$

(0.13

)

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

Basic

$

(0.03

)

$

0.02

$

(0.03

)

$

0.36

Diluted

$

(0.03

)

$

0.02

$

(0.03

)

$

0.36

Net loss per share attributable to common stockholders:

Basic

$

(0.05

)

$

(0.07

)

$

(0.10

)

$

0.22

Diluted

$

(0.05

)

$

(0.07

)

$

(0.10

)

$

0.22

Weighted average shares:

Basic

33,634,538

32,478,736

33,483,978

32,361,560

Diluted

33,634,538

32,478,736

33,483,978

32,361,560

Luna Innovations Incorporated
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)

Six Months Ended June 30,

2023

2022

Cash flows used in by operating activities

Net (loss)/income

$

(3,438

)

$

7,230

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

Depreciation and amortization

2,740

2,694

Share-based compensation

2,172

2,177

Loss on disposal of property and equipment

278

—

Gain on sale of discontinued operations, net of tax

—

(10,921

)

Deferred taxes

(194

)

(124

)

Change in assets and liabilities

Accounts receivable

(168

)

(6,555

)

Contract assets

(1,815

)

140

Inventory

(4,798

)

(4,281

)

Other current assets

(804

)

(3,870

)

Other long-term assets

(93

)

646

Accounts payable and accrued and other current liabilities

(3,653

)

6,123

Contract liabilities

(693

)

1,196

Other long term-liabilities

—

(1,523

)

Net cash used in operating activities

(10,466

)

(7,068

)

Cash flows used in investing activities

Acquisition of property and equipment

(1,180

)

(1,657

)

Acquisition of intangible property

(63

)

—

Proceeds from sale of property and equipment

—

25

Proceeds from sale of discontinued operations

—

12,973

Acquisition of Luna Innovations Germany GmbH

—

(22,085

)

Other

—

4

Net cash used in investing activities

(1,243

)

(10,740

)

Cash flows provided by financing activities

Payments on finance lease obligations

(25

)

(24

)

Proceeds from borrowings under debt obligations

8,500

21,150

Payments of debt obligations

(1,000

)

(15,772

)

Repurchase of common stock

(353

)

(294

)

Proceeds from ESPP

546

521

Proceeds from the exercise of stock options

1,234

1,158

Net cash provided by financing activities

8,902

6,739

Effect of exchange rate changes on cash and cash equivalents

60

(1,195

)

Net decrease in cash and cash equivalents

(2,747

)

(12,264

)

Cash and cash equivalents-beginning of period

6,024

17,128

Cash and cash equivalents-end of period

$

3,277

$

4,864

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

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Net (loss)/income

$

(1,596

)

$

(2,351

)

$

(3,438

)

$

7,230

Net (loss)/income from discontinued operations

(1,038

)

591

(1,038

)

11,515

Net loss from continuing operations

(558

)

(2,942

)

(2,400

)

(4,285

)

Interest expense, net

584

111

953

224

Income tax (benefit)/expense

(350

)

422

(917

)

(693

)

Depreciation and amortization

1,323

1,538

2,740

2,694

EBITDA

999

(871

)

376

(2,060

)

Share-based compensation

1,118

934

2,172

2,000

Integration and transaction expense

160

156

249

2,000

Amortization of inventory step-up

—

257

—

257

Other non-recurring charges (1)

455

708

789

708

Adjusted EBITDA

$

2,732

$

1,184

$

3,586

$

2,905

(1) - Other non-recurring charges primarily include facility consolidation and one-time insurance deductible.

Luna Innovations Incorporated
Reconciliation of Net (Loss)/Income to Adjusted EPS
(in thousands, except per share data)

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Net (loss)/income

$

(1,596

)

$

(2,351

)

$

(3,438

)

$

7,230

Net (loss)/income from discontinued operations

(1,038

)

591

(1,038

)

11,515

Net loss from continuing operations

(558

)

(2,942

)

(2,400

)

(4,285

)

Share-based compensation

1,118

934

2,172

2,000

Integration and transaction expense

160

156

249

2,000

Amortization of intangible assets

918

992

1,910

1,813

Amortization of inventory step-up

—

257

—

257

Other non-recurring charges (1)

455

708

789

708

Income tax effect on adjustments

(663

)

(762

)

(1,280

)

(1,695

)

Adjusted income (loss) from continuing operations

$

1,430

$

(657

)

$

1,440

$

798

Adjusted EPS

$

0.04

$

(0.02

)

$

0.04

$

0.02

Adjusted weighted average shares:

Diluted

33,635

32,479

33,484

32,362

(1) - Other non-recurring charges primarily include facility consolidation and one-time insurance deductible.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230810790064/en/

Contacts

Investor Contact:
Allison Woody
Phone: 540-769-8465
Email: IR@lunainc.com

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