Luna Innovations Incorporated (NASDAQ: LUNA) today announced its
financial results for the third quarter and nine months ended
September 30, 2011.
For the third quarter of 2011, Luna achieved its first quarterly
positive net income since its IPO (excluding the fourth quarter of
2009, in which net income resulted primarily from the reversal of
previous litigation accruals). Net income attributable to common
stockholders of $0.2 million for the third quarter of 2011 reflects
an improvement of $0.7 million compared to net loss attributable to
common stockholders of $0.5 million for the third quarter of 2010,
as revenues increased while operating expenses declined.
Also, as compared to the same quarter last year, total revenue
increased by 3%, from $8.6 million in the third quarter of 2010 to
$8.8 million in the third quarter of 2011. Revenue in the company’s
technology development segment improved by 23% from $5.0 million in
the third quarter of 2010 to $6.2 million in the third quarter of
2011, while product and license revenue decreased by 25%, from $3.6
million in the third quarter of 2010 to $2.7 million in the third
quarter of 2011. Gross profit increased from $3.4 million for the
third quarter of 2010 to $3.5 million for the third quarter of
2011.
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, improved to $1.1
million for the third quarter of 2011, as compared to $0.9 million
for the third quarter of 2010. Cash decreased from $8.1 million at
June 30, 2011 to $6.8 million at September 30, 2011.
“Our third quarter results reflect the achievement of a
significant milestone in our financial and operational objectives,”
said My Chung, chief executive officer of Luna. “I am extremely
pleased that during a weak economy for product sales our team was
able to deliver bottom line results that exceeded expectations.
Moving forward we will focus our efforts on accelerating growth
within the company through a principal focus on opportunities in
fiber optic sensing and secure computing.”
Third Quarter Financial and Business
Summary
-- Total revenues increased by 3%, to $8.8 million for the third
quarter of 2011, from $8.6 million for the third quarter of
2010.
-- Technology development revenues increased by 23%, to $6.2
million for the third quarter of 2011, from $5.0 million for the
third quarter of 2010. Growth in this segment of the business
included the recognition of approximately $0.8 million in revenue
from the completion of four short-term contracts in the secure
computing and communications group.
-- Product and license revenue decreased by 25%, to $2.7 million
in the third quarter of 2011, from $3.6 million in the third
quarter of 2010, reflecting lower sales of fiber optic test and
measurement equipment.
-- Gross profit increased to $3.5 million, or 40% of total
revenues, for the third quarter of 2011, from $3.4 million, or 40%
of total revenues, for the third quarter of 2010.
-- Selling, general and administrative expenses decreased by 32%
to $2.3 million, or 26% of total revenues for the third quarter of
2011, from $3.4 million, or 39% of total revenues, for the third
quarter of 2010, driven primarily by a $0.2 million reduction in
outside legal costs and a $0.4 million decrease in stock-based
compensation expense.
-- Total operating expenses decreased to $3.2 million, or 36% of
total revenues, for the third quarter of 2011, from $3.7 million,
or 44% of total revenues for the third quarter of 2010.
-- Adjusted EBITDA increased to $1.1 million for the third
quarter of 2011, from $0.9 million for the third quarter of
2010.
-- Net income attributable to common stockholders improved to
$0.2 million, or $0.02 per basic common share and $0.01 per diluted
common share, for the third quarter of 2011, compared to a net loss
attributable to common stockholders of $0.5 million or $0.04 per
basic and diluted common share, for the third quarter of 2010.
-- Cash and cash equivalents totaled $6.8 million at September
30, 2011, as compared to $7.2 million at December 31, 2010 and $8.1
million at June 30, 2011. The decrease in cash during the third
quarter of 2011 reflects a high concentration of the quarter’s
revenues being earned during the last month of the quarter and,
accordingly, not converted from accounts receivable to cash by
September 30. Although cash decreased by approximately $1.2 million
during the quarter, accounts receivable increased by approximately
$1.2 million.
Nine Months Ended September 30, 2011
Financial Summary
-- Total revenue increased $2.0 million, or 8%, to $27.5 million
for the nine months ended September 30, 2011, compared to $25.5
million for the nine months ended September 30, 2010.
-- Product and license revenue increased by 18%, to 10.1 million
for the nine months ended September 30, 2011, from $8.5 million for
the nine months ended September 30, 2010.
-- Technology development revenues increased by 3%, to $17.4
million for the nine months ended September 30, 2011, from $16.9
million for the nine months ended September 30, 2010.
-- Gross profit increased by 10%, to $10.5 million for the nine
months ended September 30, 2011, from $9.6 million for the nine
months ended September 30, 2010.
-- Selling, general and administrative expenses decreased by 7%
to $9.3 million, or 34% of total revenues, for the nine months
ended September 30, 2011, from $10.0 million, or 39% of total
revenues, for the nine months ended September 30, 2010.
-- Total operating expenses decreased by 1% to $11.3 million, or
41% of total revenues, for the nine months ended September 30,
2011, from $11.5 million, or 45% of total revenues, for the nine
months ended September 30, 2010.
-- Adjusted EBITDA remained relatively unchanged at $2.1 million
for the nine months ended September 30, 2011 and 2010.
-- Net loss attributable to common stockholders improved to $1.1
million, or $0.08 per basic and diluted common share, for the nine
months ended September 30, 2011, compared to a net loss
attributable to common stockholders of $2.5 million, or $0.19 per
basic and diluted common share, for the nine months ended September
30, 2010.
Outlook for the Remainder of
2011
Based on information as of November 14, 2011, the company
expects total revenue for 2011 to be in the range of $35.6 million
to $36.1 million. Also for 2011, the company anticipates a net loss
to common stockholders in the range of $1.8 million to $2.0
million. For the fourth quarter of 2011, the company expects
revenue of approximately $8.0 million to $8.5 million and a net
loss attributable to common stockholders of approximately $0.7
million to $1.0 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. (EST) today to discuss its
financial results and business developments for the third quarter
of 2011 and expectations for the remainder of 2011. The call can be
accessed by dialing 866.730.5763 domestically or
857.350.1587 internationally prior to the start of the call.
The participant access code is 10860626. 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,
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 fourth quarter
and full year 2011, as well as the company’s focus on opportunities
in fiber optic sensing and secure computing. 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 fourth 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 www.sec.gov and at the company’s website at
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
September 30,
Nine Months Ended
September 30,
2011 2010 2011 2010 (unaudited)
(unaudited) Revenues: Technology development revenues $
6,161,826 $ 5,027,024 $ 17,406,515 $ 16,929,621 Product and license
revenues 2,681,184 3,558,118
10,058,709 8,539,953 Total revenues
8,843,010 8,585,142 27,465,224 25,469,574 Cost of revenues:
Technology development costs 3,630,163 3,534,089 11,910,771
11,559,351 Product and license costs 1,719,039
1,613,499 5,059,507 4,332,600
Total cost of revenues 5,349,202
5,147,588 16,970,278 15,891,951
Gross Profit 3,493,808 3,437,554 10,494,946 9,577,623
Operating expense: Selling, general and administrative
2,303,325 3,383,121 9,340,545 10,044,549 Research, development, and
engineering 877,741 307,777 1,950,275 1,249,385 Reorganization
expense - 53,597 -
161,801 Total operating expense 3,181,066
3,744,495 11,290,820
11,455,735 Operating net income/(loss) 312,742
(306,941 ) (795,874 ) (1,878,112 ) Other income/(expense):
Other income/(expense) 21,953 10,000 57,793 (5,477 ) Interest
expense (91,908 ) (124,756 ) (290,634 )
(352,282 ) Total other income/(expense) (69,955 )
(114,756 ) (232,841 ) (357,759 )
Income/(loss) before income taxes 242,787 (421,697 ) (1,028,715 )
(2,235,871 ) Income tax expense 287 1,817
10,307 1,817 Net income
(loss) 242,500 (423,514 ) (1,039,022 ) (2,237,688 )
Preferred stock dividend 20,616 93,000
94,952 267,633 Net income/(loss)
attributable to common stockholders $ 221,884 $ (516,514 ) $
(1,133,974 ) $ (2,505,321 ) Net income/(loss) per share of
common stock: Basic $ 0.02 $ (0.04 ) $ (0.08 ) $ (0.19 )
Diluted $ 0.01
N/A
N/A
N/A
Weighted average shares: Basic 13,669,724 13,188,913
13,598,249 12,890,752 Diluted 15,898,639 N/A N/A N/A
Luna Innovations Incorporated Condensed
Consolidated Balance Sheets
September 30,
2011
December 31,
2010
(unaudited) Assets Current assets Cash and cash equivalents
$ 6,833,450 $ 7,216,580 Accounts receivable, net 7,908,792
7,669,625 Inventory, net 3,570,266 3,106,600 Prepaid expenses
849,090 665,210 Other current assets 35,717
45,348 Total current assets 19,197,315
18,703,363 Property and equipment, net 3,010,999 3,204,670
Intangible assets, net 652,050 664,418 Other assets 246,835
303,210 Total assets $
23,107,199 $ 22,875,661 Current Liabilities:
Revolving 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 50,192 2,194 Accounts payable 1,860,793 2,008,183
Accrued liabilities 3,515,097 3,549,604 Deferred credits
1,408,562 1,392,602 Total
current liabilities 8,334,644 10,648,367 Long-term debt obligation
4,000,000 2,611,609 Long-term lease obligation 196,033 —
Total liabilities 12,530,677 13,259,976
Commitments and contingencies Stockholders’ equity: Preferred stock
1,322 1,322 Common stock 13,835 13,526 Additional paid-in capital
58,776,258 56,681,756 Accumulated deficit (48,214,893 )
(47,080,919 ) Total stockholders’ equity
10,576,522 9,615,685 Total liabilities
and stockholders’ equity $ 23,107,199 $ 22,875,661
Luna Innovations Incorporated
Condensed Consolidated Statements of Cash Flows
Nine months ended
September 30,
2011 2010 (unaudited) Cash flows used in
operating activities Net loss $ (1,039,022 ) $ (2,237,688 )
Adjustments to reconcile net loss to net cash used in operating
activities Depreciation and amortization 1,042,700 953,630
Share-based compensation 1,737,220 2,616,024 Warrant expense 41,752
149,850 Change in assets and liabilities: Accounts receivable
(239,167 ) 625,016 Inventory (463,666 ) (140,220 ) Other current
assets (174,249 ) 736,834 Other assets 56,375 71,029 Accounts
payable and accrued expenses (223,648 ) (3,417,135, ) Deferred
credits (174,040 ) 316,332 Net
cash provided by/(used in) operating activities 564,255
(326,328 )
Cash flows used in
investing activities Acquisition of property and equipment
(289,777 ) (50,540 ) Intangible property costs (272,741 )
(152,404 ) Net cash used in investing
activities (562,518 ) (202,944 )
Cash flows provided by (used in) financing activities
Payments on capital lease obligations (30,113 ) (4,000 ) Proceeds
from debt obligations 6,000,000 2,500,000 Payment of debt
obligations (6,617,393 ) (842,699 ) Proceeds from the exercise of
options and warrants 262,639 799,397
Net cash provided by (used in) financing activities
(384,867 ) 2,452,698
Net change in
cash (383,130 ) 1,923,426 Cash and cash equivalents—beginning
of period 7,216,580 5,228,802
Cash and cash equivalents—end of period $ 6,833,450 $
7,152,228
Luna
Innovations Incorporated Reconciliation of Net Income (Loss)
to EBITDA and Adjusted EBITDA
Three Months Ended
September 30,
Nine Months Ended
September 30,
2011 2010 2011 2010 (unaudited)
(unaudited) Reconciliation of Net Income (Loss) to EBITDA
and Adjusted EBITDA: Net income (loss) $ 242,500 $ (423,514 ) $
(1,039,022 ) $ (2,237,688 ) Interest expense 91,908 124,756
290,634 352,282 Income tax expense 287 1,817 10,307 1,817
Depreciation and amortization 332,432 311,652
1,042,700 953,630 EBITDA 667,127
14,711 304,619 (929,959 ) Stock-based compensation and
warrant expense 462,073 880,676 1,778,972 2,765,874 Fees associated
with Hansen litigation and Chapter 11 reorganization —
53,597 — 284,193
Adjusted EBITDA $ 1,129,200 $ 948,984 $ 2,083,591 $
2,120,108
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