Luna Innovations Incorporated (NASDAQ: LUNA), a global leader in
advanced optical technology, today announced its financial results for
the three months ended March 31, 2019.
“I continue to be proud of the Luna team and how we’ve driven
performance and delivered such a strong first quarter,” said Scott
Graeff, President and Chief Executive Officer of Luna. “We continue to
build on the momentum we gained in 2018. The Luna team, through all
levels of this organization, demonstrated leadership and delivered
outstanding customer service, all while closing sales and filling the
pipeline. Integration of the Micron Optics and General Photonics
acquisitions is going smoothly. It is clear that we acquired excellent
talent, strong capabilities and assets that are both strategic and
synergistic. In addition, performance in Adjusted EBITDA is a good
demonstration of the accretion delivered by our recent acquisitions.
Overall, this is a great start to our fiscal 2019.”
First-quarter Fiscal 2019 Financial Summary
Financial results for the three months ended March 31, 2019 reflect
strong momentum entering the fiscal year. These results include a full
quarter of the business of Micron Optics, Inc. (“MOI”), acquired in
October 2018, and one month of the operations of General Photonics
(“GP”), acquired on March 1, 2019. Revenue and expenses related to the
Company’s optoelectronics business, which was divested in July 2018, are
classified as discontinued operations in the Company’s results of
operations for the three months ended March 31, 2018:
| Three Months Ended March 31, | |||||||||||
| 2019 | 2018 | Change | |||||||||
| Revenues: | |||||||||||
| Technology development | $ | 6,640,743 | $ | 4,636,776 | 43.2 | % | |||||
| Products and licensing | $ | 8,192,375 | $ | 4,131,754 | 98.3 | % | |||||
| Total revenues | $ | 14,833,118 | $ | 8,768,530 | 69.2 | % | |||||
| Gross profit | $ | 6,767,634 | $ | 3,839,626 | 76.3 | % | |||||
| Gross margin | 45.6 | % | 43.8 | % | 180 bps | ||||||
| Operating expense | $ | 7,665,211 | $ | 4,213,082 | 81.9 | % | |||||
| Operating loss | $ | (897,577 | ) | $ | (373,456 | ) | 140.3 | % | |||
| Net income | $ | 1,125,879 | $ | 148,676 | $1.0M | ||||||
| Adjusted EBITDA | $ | 958,810 | $ | (52,339 | ) | $1.0M | |||||
A reconciliation of Adjusted EBITDA to net income can be found in the
schedules included in this release.
Products and licensing revenue for the three months ended March 31,
2019, increased compared to the prior year period due partially to the
inclusion of incremental revenues from the acquisitions of both MOI in
October 2018 and GP at the beginning of March 2019. In addition,
products and licensing revenue benefited from continued growth in sales
of Luna’s fiber optic-based sensing products, including its ODiSI
products. Technology development revenues increased for the three months
ended March 31, 2019, compared to the prior-year period due to growth in
various government research programs surrounding applications of optical
sensing and advanced materials and Luna’s success in winning related
research contracts.
The increase in operating expenses was due primarily to $0.9 million in
transaction-related costs associated with the acquisition of GP and $1.8
million of expenses associated with the operations of MOI and GP.
Neither of these acquisitions were present in the first quarter of 2018.
Pre-tax loss from continuing operations increased to $(0.7) million for
the three months ended March 31, 2019, compared to $(0.3) million for
the prior year fiscal quarter due primarily to transaction-related
expenses associated with the acquisition of GP.
Income tax benefit for the three months ended March 31, 2019, was due to
a one-time non-cash benefit resulting from a reduction in the valuation
allowance associated with the company’s net deferred tax asset following
the acquisition of GP.
Net income attributable to common stockholders for the three months
ended March 31, 2019, was $1.0 million, or $0.03 per fully diluted
share, compared to net income attributable to common stockholders of
$0.1 million, or $0.00 per fully diluted share, for the three months
ended March 31, 2018. The increase in net income attributable to common
stockholders was driven by improved overall performance and included the
$1.9 million income tax benefit from the release of valuation allowance,
partially offset by $0.9 million of transaction-related costs associated
with the acquisition of GP. Net income attributable to common
stockholders for the three months ended March 31, 2019, also included
$0.5 million of non-cash expenses for share-based compensation and
amortization of intangible assets associated with the acquisitions of
MOI and GP.
Adjusted EBITDA was $1.0 million for the three months ended March 31,
2019, compared to $(0.1) million for the three months ended March 31,
2018.
2019 Full-year Outlook:
Luna reaffirms:
-
Total revenues in the range of $60 million to $65 million for full
fiscal 2019; and -
Adjusted EBITDA in the range of $6.0 million to $6.5 million for full
fiscal 2019.
Luna is not providing an outlook for net income, which is the most
directly comparable generally accepted accounting principles (“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, amortization of acquired intangible assets,
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 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 (ET) today to discuss its financial results for the three
months ended March 31, 2019. 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 5299635. 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-performance, fiber optic-based, test products for the
telecommunications industry and distributed fiber optic-based 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 the integration of its recent acquisitions of MOI and GP, its
projected 2019 financial results, and its business focus. 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-K for the year ended December 31, 2018, 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 Statements of Operations | ||||||||
| Three Months Ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| (unaudited) | ||||||||
| Revenues: | ||||||||
| Technology development | $ | 6,640,743 | $ | 4,636,776 | ||||
| Products and licensing | 8,192,375 | 4,131,754 | ||||||
| Total revenues | 14,833,118 | 8,768,530 | ||||||
| Cost of revenues: | ||||||||
| Technology development | 4,816,146 | 3,353,501 | ||||||
| Products and licensing | 3,249,338 | 1,575,403 | ||||||
| Total cost of revenues | 8,065,484 | 4,928,904 | ||||||
| Gross profit | 6,767,634 | 3,839,626 | ||||||
| Operating expense: | ||||||||
| Selling, general and administrative | 6,207,318 | 3,333,490 | ||||||
| Research, development and engineering | 1,457,893 | 879,592 | ||||||
| Total operating expense | 7,665,211 | 4,213,082 | ||||||
| Operating loss | (897,577 | ) | (373,456 | ) | ||||
| Other income/(expense): | ||||||||
| Investment income | 171,225 | 75,912 | ||||||
| Other expense | (1,729 | ) | (10,854 | ) | ||||
| Interest expense | (11,187 | ) | (40,647 | ) | ||||
| Total other income | 158,309 | 24,411 | ||||||
| Loss from continuing operations before income taxes | (739,268 | ) | (349,045 | ) | ||||
| Income tax benefit | (1,865,147 | ) | (76,967 | ) | ||||
| Net income/(loss) from continuing operations | 1,125,879 | (272,078 | ) | |||||
|
Income from discontinued operations, net of income tax of $0 and $78,363 |
— | 420,754 | ||||||
| Net income from discontinued operations | — | 420,754 | ||||||
| Net income | 1,125,879 | 148,676 | ||||||
| Preferred stock dividend | 83,058 | 64,425 | ||||||
| Net income attributable to common stockholders | $ | 1,042,821 | $ | 84,251 | ||||
| Net income/(loss) per share from continuing operations: | ||||||||
| Basic | $ | 0.04 | $ | (0.01 | ) | |||
| Diluted | $ | 0.03 | $ | (0.01 | ) | |||
| Net income per share from discontinued operations: | ||||||||
| Basic | $ | — | $ | 0.02 | ||||
| Diluted | $ | — | $ | 0.02 | ||||
| Net income per share attributable to common stockholders: | ||||||||
| Basic | $ | 0.04 | $ | — | ||||
| Diluted | $ | 0.03 | $ | — | ||||
|
Weighted average common shares and common equivalent shares outstanding: |
||||||||
| Basic | 28,039,080 | 27,204,989 | ||||||
| Diluted | 33,479,935 | 27,204,989 | ||||||
| Luna Innovations Incorporated | ||||||||
| Consolidated Balance Sheets | ||||||||
|
March 31, |
December 31, |
|||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 24,580,006 | $ | 42,460,267 | ||||
| Accounts receivable, net | 13,505,444 | 13,037,068 | ||||||
| Receivable from sale of HSOR business | 2,500,375 | 2,500,000 | ||||||
| Contract assets | 2,829,186 | 2,422,495 | ||||||
| Inventory | 9,996,054 | 6,873,742 | ||||||
| Prepaid expenses and other current assets | 1,087,416 | 935,185 | ||||||
| Total current assets | 54,498,481 | 68,228,757 | ||||||
| Long-term contract assets | 359,166 | 336,820 | ||||||
| Property and equipment, net | 3,845,748 | 3,627,886 | ||||||
| Intangible assets, net | 11,309,181 | 3,302,270 | ||||||
| Goodwill | 10,345,249 | 101,008 | ||||||
| Other assets | 3,205,983 | 1,995 | ||||||
| Total assets | $ | 83,563,808 | $ | 75,598,736 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Liabilities: | ||||||||
| Current liabilities: | ||||||||
| Current portion of long-term debt obligations | $ | 247,726 | $ | 619,315 | ||||
| Current portion of capital lease obligations | — | 40,586 | ||||||
| Accounts payable | 4,945,927 | 2,395,984 | ||||||
| Accrued liabilities | 8,599,225 | 6,597,458 | ||||||
| Contract liabilities | 2,792,119 | 2,486,111 | ||||||
| Total current liabilities | 16,584,997 | 12,139,454 | ||||||
| Long-term deferred rent | — | 1,035,974 | ||||||
| Other long-term liabilities | 2,970,879 | — | ||||||
| Long-term capital lease obligations | — | 68,978 | ||||||
| Total liabilities | 19,555,876 | 13,244,406 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
|
Preferred stock, par value $0.001, 1,321,514 shares authorized, issued and outstanding at March 31, 2019 and December 31, 2018 |
1,322 | 1,322 | ||||||
|
Common stock, par value $0.001, 100,000,000 shares authorized, 29,398,818 and 29,209,506 shares issued, 28,145,713 and 27,956,401 shares outstanding at March 31, 2019 and December 31, 2018, respectively |
30,329 | 30,120 | ||||||
|
Treasury stock at cost, 1,253,105 shares at March 31, 2019 and December 31, 2018 |
(2,116,640 | ) | (2,116,640 | ) | ||||
| Additional paid-in capital | 86,355,322 | 85,744,750 | ||||||
| Accumulated deficit | (20,262,401 | ) | (21,305,222 | ) | ||||
| Total stockholders’ equity | 64,007,932 | 62,354,330 | ||||||
| Total liabilities and stockholders’ equity | $ | 83,563,808 | $ | 75,598,736 | ||||
| Luna Innovations Incorporated | ||||||||
| Consolidated Statements of Cash Flows | ||||||||
| Three Months Ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| (unaudited) | ||||||||
| Cash flows provided by/(used in) operating activities | ||||||||
| Net income | $ | 1,125,879 | $ | 148,676 | ||||
|
Adjustments to reconcile net income to net cash provided by/(used in) operating activities |
||||||||
| Depreciation and amortization | 617,309 | 307,852 | ||||||
| Share-based compensation | 342,765 | 94,606 | ||||||
| Deferred taxes | (1,889,266 | ) | — | |||||
| Change in assets and liabilities | ||||||||
| Accounts receivable | 1,052,571 | (229,535 | ) | |||||
| Contract assets | (429,037 | ) | 221,386 | |||||
| Inventory | (527,849 | ) | (110,095 | ) | ||||
| Other current assets | (41,549 | ) | 133,293 | |||||
| Accounts payable and accrued expenses | 1,196,425 | (1,456,154 | ) | |||||
| Contract liabilities | 149,435 | (1,650,363 | ) | |||||
|
Net cash provided by/(used in) operating activities |
1,596,683 | (2,540,334 | ) | |||||
| Cash flows used in investing activities | ||||||||
| Acquisition of property and equipment | (215,251 | ) | (129,720 | ) | ||||
| Intangible property costs | (60,639 | ) | (113,108 | ) | ||||
| Acquisition of General Photonics Corporation | (19,004,250 | ) | — | |||||
| Net cash used in investing activities | (19,280,140 | ) | (242,828 | ) | ||||
| Cash flows used in financing activities | ||||||||
| Payments on finance lease obligations | (6,763 | ) | (13,611 | ) | ||||
| Payments of debt obligations | (375,000 | ) | (458,333 | ) | ||||
| Repurchase of common stock | — | (306,041 | ) | |||||
| Proceeds from the exercise of options and warrants | 184,959 | 22,288 | ||||||
| Net cash used in financing activities | (196,804 | ) | (755,697 | ) | ||||
| Net decrease in cash and cash equivalents | (17,880,261 | ) | (3,538,859 | ) | ||||
| Cash and cash equivalents-beginning of period | 42,460,267 | 36,981,533 | ||||||
| Cash and cash equivalents-end of period | $ | 24,580,006 | $ | 33,442,674 | ||||
| Luna Innovations Incorporated | ||||||||
| Reconciliation of Net Income to EBITDA and Adjusted EBITDA | ||||||||
| Three Months Ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| (unaudited) | ||||||||
| Net income | $ | 1,125,879 | $ | 148,676 | ||||
| Less income from discontinued operations, net of income tax | — | 420,754 | ||||||
| Net income/(loss) from continuing operations | 1,125,879 | (272,078 | ) | |||||
| Interest expense | 11,187 | 40,647 | ||||||
| Investment income | (171,225 | ) | (75,912 | ) | ||||
| Tax benefit | (1,865,147 | ) | (76,967 | ) | ||||
| Depreciation and amortization | 617,309 | 237,365 | ||||||
| EBITDA | (281,997 | ) | (146,945 | ) | ||||
| Share-based compensation | 342,765 | 94,606 | ||||||
| Non-recurring charges (1) | 898,042 | — | ||||||
| Adjusted EBITDA | $ | 958,810 | $ | (52,339 | ) | |||
|
(1) Non-recurring charges consist of transaction-related expenses incurred during the quarter ended March 31, 2019, related to the acquisition of General Photonics. |
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