Fourth quarter products and licensing revenue
increased 60% compared to prior year quarter
Luna Innovations Incorporated (NASDAQ: LUNA) today announced its
financial results for the fourth quarter and year ended December
31, 2014.
- Total revenue for the quarter was $6.2
million, up 32% compared to prior year quarter
- Product and licensing revenue for the
quarter was $2.9 million, up 60% compared to prior year
quarter
- Gross profit for the quarter was $2.2
million, up 52% compared to prior year quarter
- Operating loss for the quarter was $0.9
million, an improvement of $1.9 million compared to prior year
quarter
- Total revenue for the year was $21.3
million, up 16% over 2013
- Product and license revenue for the
year was $9.1 million, up 31% over 2013
“The fourth quarter was a strong finish to the year for us,”
said My Chung, president and chief executive officer. “Increased
sales of our ODiSI platform for measuring strain and temperature
coupled with the continued recovery for our telecom test &
measurement products drove significant top line growth for us in
the fourth quarter and set us on a path for continuing to improve
our operating results. As we look forward to our anticipated merger
with Advanced Photonix, we are excited by the opportunity this
combination presents us to drive overall revenue growth and to
accelerate our path to profitability.”
Fourth Quarter Financial
Highlights
Total revenue for the fourth quarter of 2014 increased 32%, to
$6.2 million, compared to $4.7 million in the fourth quarter of
2013. The increase in total revenue was driven by growth in both
the product and licensing and the technology development segments.
Product and licensing revenue increased 60% to $2.9 million in the
fourth quarter of 2014, compared to $1.8 million in the fourth
quarter of 2013, reflecting continued growth in sales of ODiSI
systems for measurement of strain and temperature and OVA systems
for testing of optical components. Technology development revenue
increased 14% to $3.2 million, compared to $2.9 million for the
fourth quarter of 2013.
Gross profit improved to $2.2 million, or 36% of revenue, for
the fourth quarter of 2014, compared to gross profit of $1.5
million, or 31% of revenue, for the fourth quarter of 2013. The
improved margin resulted from the revenue mix, with product and
licensing revenue representing a higher proportion of total
revenues in 2014 and having higher margins than technology
development revenue.
Selling, general and administrative expenses decreased 24% to
$2.7 million for the fourth quarter of 2014, compared to $3.5
million for the fourth quarter of 2013, driven largely by lower
compensation costs. Research, development and engineering expenses
decreased to $0.4 million for the fourth quarter of 2014 compared
to $0.7 million for the fourth quarter of 2013, reflecting lower
operating expenses following the sale of the medical shape sensing
business in January 2014.
Growth in revenues and margins along with reduced operating
expenses resulted in a $1.9 million improvement in operating loss
to $0.9 million for the fourth quarter of 2014, compared to an
operating loss of $2.8 million in the fourth quarter of 2013.
Income from discontinued operations was $0.3 million for the
fourth quarter of 2014, compared to income from discontinued
operations of $0.4 million in the fourth quarter of 2013.
Discontinued operations for the 2013 period includes the revenues
and costs recognized with the medical shape sensing business, which
was sold in January 2014 to Intuitive Surgical. For the 2014
period, the income from discontinued operations reflected the
allocation of income taxes between continuing operations and
discontinued operations.
Net loss attributable to common stockholders for the fourth
quarter of 2014 improved $1.1 million to $0.9 million, compared to
a net loss attributable to common stockholders of $2.0 million for
the fourth quarter of 2013. Adjusted EBITDA improved to $(0.2)
million for the fourth quarter of 2014, compared to $(1.5) million
for the fourth quarter of 2013.
Full Year 2014 Financial
Highlights
Total revenue increased 16% to $21.3 million in 2014, compared
to total revenue of $18.3 million in 2013. This increase in revenue
was driven primarily by growth in product and licensing revenue,
which improved 31% to $9.1 million in 2014 compared to $6.9 million
in 2013, reflecting increased sales of ODiSI and OVA products.
Technology development revenues increased 7% to $12.2 million in
2014 compared to $11.4 million in 2013.
Gross profit for 2014 increased to $7.8 million, or 37% of
revenue, compared to gross profit of $6.0 million, or 33% of
revenue, for 2013.
Selling, general and administrative expenses decreased 11% to
$10.3 million in 2014, compared to $11.5 million in 2013. The
decrease in selling, general and administrative expenses reflects
the transaction related expenses incurred in 2013 with respect to
the sale of our medical shape sensing business as well as cost
reduction initiatives undertaken during 2014 following the
sale.
Research, development and engineering expenses decreased 18% to
$2.1 million in 2014, compared to $2.6 million in 2013. The
reduction in research, development and engineering expenses
reflects lower engineering expenses following the sale of the
medical shape sensing business in January 2014, which included the
transfer of ten employees to Intuitive Surgical.
Improved revenues, margins and operating expenses all
contributed to a $3.5 million improvement in the company’s
operating loss in 2014. For the year, the operating loss was $4.5
million, compared to an operating loss of $8.0 million for
2013.
Income from discontinued operations increased to $9.3 million in
2014, compared to $4.7 million in 2013. For 2014, income from
discontinued operations consists primarily of the gain, net of tax,
recognized on the sale of the medical shape sensing business in
January 2014. This amount does not include any amounts that may be
received in future periods upon completion of the final technical
milestone, or any potential future royalty payments, under the
agreement with Intuitive Surgical. For 2013, income from
discontinued operations includes the gain, net of tax, recognized
on the sale of the Secure Computing and Communications group in
March 2013, the operating results of the Secure Computing and
Communications group prior to the date of sale, and the operating
results associated with the medical shape sensing business for
2013.
Net income attributable to common stockholders improved to $5.9
million for 2014, compared to a net loss attributable to common
stockholders of $0.9 million for 2013. Adjusted EBITDA for 2014 was
$(2.5) million compared, to $(4.7) million for 2013.
Non-GAAP 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 generally accepted
accounting principles (“GAAP”). Adjusted EBITDA provides useful
information to both management and investors by excluding the
effect of certain non-cash expenses and 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. 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 p.m. (EDT) today to discuss its financial
results and business developments for the fourth quarter of 2014.
The call can be accessed by dialing 877.299.4454 domestically or
617.597.5447 internationally prior to the start of the call. The
participant access code is 31057565. 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 public
company composed of scientists, engineers, and business
professionals developing and manufacturing a new generation of
technologies and products. It has been successful in taking
innovative technologies from applied research to product
development and ultimately to the commercial market, driving
breakthroughs in fields such as aerospace, automotive,
telecommunications, healthcare, energy, and defense.
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 the company’s operating results and
future growth of the company’s fiber optic sensing products, as
well as the opportunity for further growth and improved
profitability from the potential merger with Advanced Photonix,
Inc. 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, failure of demand for the company’s
products and services to meet expectations, technological
challenges, other risks related to the potential merger with
Advanced Photonix, Inc. 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.lunainc.com. The statements made in this release are based on
information available to the company 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.
No Offer or Solicitation
This communication is not intended to and does not constitute an
offer to sell or the solicitation of an offer to subscribe for or
buy or an invitation to purchase or subscribe for any securities or
the solicitation of any vote or approval in any jurisdiction in
connection with the merger or otherwise, nor shall there be any
sale, issuance or transfer of securities in any jurisdiction in
contravention of applicable law. No offer of securities shall be
made except by means of a prospectus meeting the requirements of
Section 10 of the Securities Act of 1933, as amended.
Important Additional Information Has
Been and Will Be Filed with the SEC
Luna has filed with the SEC a registration statement on Form S-4
that includes a preliminary joint proxy statement of Luna and API
and also constitutes a preliminary prospectus of Luna. The
registration statement has not yet become effective. Luna and API
plan to mail the joint proxy statement/prospectus to their
respective stockholders in connection with the merger.
INVESTORS AND STOCKHOLDERS ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED OR TO BE
FILED WITH THE SEC CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT LUNA, API, THE MERGER
AND RELATED MATTERS.
Investors and stockholders will be able to obtain free copies of
the definitive joint proxy statement/prospectus and other documents
filed with the SEC by Luna and API through the website maintained
by the SEC at www.sec.gov. In addition, investors and stockholders
will be able to obtain free copies of the definitive joint proxy
statement/prospectus and other documents filed by Luna with the SEC
by contacting Luna at One Riverside Circle, Suite 400, Roanoke,
Virginia 24016, Attention: Investor Relations or by calling
540-769-8400, and will be able to obtain free copies of the
definitive joint proxy statement/prospectus and other documents
filed by API by contacting API at 2925 Boardwalk Drive, Ann Arbor,
Michigan 48104, Attention: Investor Relations or by calling
734-864-5699.
Participants In the
Solicitation
Luna and API and their respective directors and executive
officers may be deemed to be participants in the solicitation of
proxies from the respective stockholders of Luna and API in respect
of the transaction described in the joint proxy
statement/prospectus. Information regarding the persons who may,
under the rules of the SEC, be deemed participants in the
solicitation of the respective stockholders of Luna and API in
connection with the proposed transaction, including a description
of their direct or indirect interests, by security holdings or
otherwise, will be set forth in the definitive joint proxy
statement/prospectus when it is filed with the SEC. Information
regarding Luna’s directors and executive officers is contained in
Luna’s Annual Report on Form 10-K for the year ended December 31,
2013 filed with the SEC on April 10, 2014 and its proxy statement
on Schedule 14A, filed with the SEC on April 15, 2014, which are
filed with the SEC. Information regarding API’s directors and
executive officers is contained in API’s Annual Report on Form 10-K
for the year ended March 31, 2014 and its proxy statement on
Schedule 14A, filed with the SEC on July 11, 2014.
Luna Innovations Incorporated Consolidated
Statements of Operations Three months
ended Years ended December 31, December
31, 2013 2014 2013
2014 (unaudited) (unaudited) Revenues: Technology
development revenues $ 2,857,125 $ 3,243,980 $ 11,421,868 $
12,205,889 Products and licensing revenues 1,841,266
2,945,302 6,911,707 9,054,101 Total revenues
4,698,391 6,189,282 18,333,575
21,259,990 Cost of revenues: Technology development costs
2,205,938 2,583,424 8,882,071 9,376,485 Products and licensing
costs 1,033,067 1,392,580 3,402,882
4,046,885 Total cost of revenues 3,239,005
3,976,004 12,284,953 13,423,370 Gross profit
1,459,386 2,213,278 6,048,622 7,836,620
Operating expense: Selling, general & administrative
3,539,095 2,702,335 11,525,636 10,253,847 Research, development,
and engineering 672,405 380,684 2,558,332
2,087,874 Total operating expense 4,211,500
3,083,019 14,083,968 12,341,721
Operating loss (2,752,114 ) (869,741 ) (8,035,346 )
(4,505,101 ) Other income/(expense): Other income, net 75,756 21
347,062 111,452 Interest expense, net (56,924 ) (15,287 )
(207,538 ) (96,229 ) Total other income/(expense), net 18,832
(15,266 ) 139,524 15,223 Loss from
continuing operations before income taxes (2,733,282 ) (885,007 )
(7,895,822 ) (4,489,878 ) Income tax (benefit)/expense (353,729 )
282,654 (2,387,422 ) (1,137,228 ) Loss from
continuing operations (2,379,553 ) (1,167,661 ) (5,508,400 )
(3,352,650 ) Operating income/(loss) from discontinued operations,
net of $0.3 million, $0.0 million, $0.9 million and $0.0 million of
related income taxes 413,431 (6,364 ) 1,313,611 (34,491 )
(Loss)/gain on sale, net of $0.0 million,$(0.3) million, $1.5
million and $1.3 million of related income taxes (56,631 )
288,680 3,391,639 9,381,948 Income from
discontinued operations, net of income taxes 356,800
282,316 4,705,250 9,347,457 Net (loss)/income
(2,022,753 ) (885,345 ) (803,150 ) 5,994,807 Preferred stock
dividend 26,166 28,567 102,327 112,197
Net (loss)/income attributable to common stockholders $
(2,048,919 ) $ (913,912 ) $ (905,477 ) $ 5,882,610
Net loss per share from continuing operations: Basic and diluted $
(0.17 ) $ (0.08 ) $ (0.38 ) $ (0.23 ) Net income per share from
discontinued operations: Basic and diluted $ 0.03 $ 0.02 $ 0.33 $
0.63 Net (loss)/income per share attributable to common
stockholders: Basic and diluted $ (0.15 ) $ (0.06 ) $ (0.06 ) $
0.40 Weighted average shares: Basic and diluted 14,008,772
14,485,882 14,336,135 14,880,697
Luna Innovations
Incorporated Consolidated Balance Sheets
December 31, December 31, 2013 2014
(unaudited)
Assets Current assets: Cash and cash equivalents
$ 7,778,541 $ 14,116,969 Accounts receivable, net 5,408,281
5,689,615 Inventory, net 3,346,177 3,364,233 Prepaid expenses
708,974 523,553 Other current assets 70,208 191,749
Total current assets 17,312,181 23,886,119 Property and equipment,
net 2,060,709 3,497,057 Intangible assets, net 288,475 199,277
Other assets 42,710 1,995
Total assets
$ 19,704,075 $ 27,584,448
Liabilities and stockholders’ equity Current Liabilities:
Current portion of long term debt obligation 1,500,000 625,000
Current portion of capital lease obligation 66,617 70,725 Accounts
payable 1,401,764 1,447,177 Accrued liabilities 3,546,585 5,536,322
Deferred revenue 691,424 861,081 Total current
liabilities 7,206,390 8,540,305 Long-term debt obligation 625,000 —
Long-term capital lease obligation 110,307 39,582
Total liabilities 7,941,697 8,579,887
Commitments and contingencies Stockholders’ equity:
Preferred stock, par value $0.001, 1,321,514 shares authorized,
issued and outstanding at December 31, 2013 and 2014, respectively
1,322 1,322 Common stock, par value $0.001, 100,000,000 shares
authorized, 14,527,335 and 15,110,924 shares issued, 14,527,335 and
15,088,199 shares outstanding at December 31, 2013 and 2014,
respectively 14,842 15,541 Treasury stock at cost, zero shares at
December 31, 2013 and 22,725 shares at December 31, 2014 — (32,221
) Additional paid-in capital 62,756,571 64,147,666 Accumulated
deficit (51,010,357 ) (45,127,747 )
Total stockholders’
equity 11,762,378 19,004,561
Total liabilities and stockholders’ equity 19,704,075
27,584,448 Luna Innovations
Incorporated Consolidated Statements of Cash Flows
Years ended December 31, 2013
2014 (unaudited)
Cash flows used in operating
activities: Net (loss)/income $ (803,150 ) $ 5,994,807
Adjustments to reconcile net (loss)/income to net cash
provided/(used in) by operating activities: Depreciation and
amortization 935,477 607,693 Stock-based compensation 1,181,379
1,019,445 Gain on sale of discontinued operations, net of income
taxes (3,391,639 ) (9,381,948 ) Inventory obsolescence expense —
163,998 Allowance for doubtful accounts or bad debt expense 134,811
— Tax benefit from utilization of loss from current year operations
(1,507,791 ) (1,148,941 ) Changes in operating assets and
liabilities: Accounts receivable 1,533,827 (281,334 ) Inventory
(9,261 ) (220,419 ) Other assets (79,180 ) 50,696 Accounts payable
and accrued expenses 396,540 311,627 Deferred credits (178,305 )
169,657 Net cash used in operating activities (1,787,292 )
(2,714,719 )
Cash flows provided by investing activities:
Acquisition of property and equipment (186,956 ) (255,242 )
Intangible property costs (253,451 ) (252,083 ) Proceeds from sale
of discontinued operations, net 5,110,855 10,927,268
Net cash provided by investing activities 4,670,448
10,419,943
Cash flows used in financing activities:
Payments on debt obligations (1,500,000 ) (1,500,000 ) Payments on
capital lease obligation (57,033 ) (66,617 ) Purchase of treasury
stock — (32,221 ) Proceeds from the exercise of options and
warrants 111,957 232,042 Net cash used in financing
activities (1,445,076 ) (1,366,796 )
Net change in cash and cash
equivalents 1,438,080 6,338,428 Cash and cash
equivalents—beginning of period 6,340,461 7,778,541
Cash and cash equivalents—end of period $ 7,778,541 $
14,116,969
Supplemental disclosure of cash flow
information Cash paid for interest $ 178,646 $ 87,354 Dividend
on preferred stock, 79,292 shares of common stock issuable for each
of the years ended December 31, 2013 and 2014, respectively $
102,327 $ 112,177 Cash paid for income taxes $ 14,010 $ 150,000
Luna Innovations Incorporated
Reconciliation of Net (Loss)/Income to EBITDA and Adjusted
EBITDA Three Months Ended Year Ended December 31,
December 31,
2013 2014 2013
2014 (unaudited) (unaudited) Net (loss)/income
$ (2,022,753 ) $ (885,345 ) $ (803,150 ) $ 5,994,807 Less income
from discontinued operations, net of income taxes 356,800
282,316 4,705,250 9,347,457 Net loss from
continuing operations (2,379,553 ) (1,167,661 ) (5,508,400 )
(3,352,650 ) Interest expense 56,924 15,287 207,538 96,229 Tax
benefit (353,729 ) 282,654 (2,387,422 ) (1,137,228 ) Depreciation
and amortization 224,102 127,792 935,477
607,693 EBITDA (2,452,256 ) (741,928 ) (6,752,807 )
(3,785,956 ) Share-based compensation 269,825 450,861 1,181,379
1,019,445 Transaction costs 675,686 125,489 898,316 242,762
Adjusted EBITDA $ (1,506,745 ) $ (165,578 ) $ (4,673,112 ) $
(2,523,749 )
Luna Innovations IncorporatedInvestor Contact:Dale
Messick, CFO1-540-769-8400IR@lunainc.com
Luna Innovations (NASDAQ:LUNA)
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