Maintains 2020 Outlook
Highlights
- Total revenues of $17.1 million for the three months ended
March 31, 2020, up 16% compared to the three months ended March 31,
2019
- Products and licensing revenues of $10.3 million for the
three months ended March 31, 2020, up 26% compared to the three
months ended March 31, 2019
- Operating income of $0.4 million for the three months ended
March 31, 2020 versus operating loss of $(0.9) million for the
three months ended March 31, 2019
- Net income from continuing operations of $0.3 million, or
$0.01 per fully diluted share, for the three months ended March 31,
2020, compared to $1.1 million, or $0.03 per fully diluted share,
for the three months ended March 31, 2019
- Adjusted EBITDA improved to $1.6 million for the three
months ended March 31, 2020, compared to $1.0 million for the three
months ended March 31, 2019
- Company maintains 2020 outlook, anticipates lower end of
range
Luna Innovations Incorporated (NASDAQ:LUNA), a
global leader in advanced optical technology, today announced its
financial results for the three months ended March 31, 2020.
“Luna’s first-quarter was a strong start to our year,” said
Scott Graeff, President and Chief Executive Officer of Luna. “As
the effects of the COVID-19 pandemic began spreading more broadly
and as a designated essential business, we took swift and decisive
action in mid-March. We mobilized the Luna teams to enable us to
face the crisis in the most effective way, in order to ensure that
we protected our employees, while safeguarding and driving the
long-term potential of our businesses.”
Graeff continued, “Our top priority is the health and safety of
our employees and the communities in which we operate. In its
30-year lifespan, Luna has encountered many challenges. We believe
that we have the financial and operational strength to see us
through, recognizing the uncertainty around the duration of
COVID-19's impact on the economy. Based upon what we know today,
from a bottoms-up analysis across our businesses, we are currently
maintaining the 2020 outlook range we provided on March 5, although
trending towards the lower end of that range. We have experienced
management leaders, a resilient team of employees, close and
collaborative relationships with our customers and suppliers, and a
strong balance sheet. We remain laser-focused on our long-term
potential and on our foundational purpose, which is to enhance the
safety, security and connectivity of people by leveraging our
expertise in fiber optic-based technology and the information it
provides. Our core priorities have not changed, and we continue to
serve our customers with excellence, and produce outstanding and
innovative fiber optic-based products."
First-Quarter Fiscal 2020 Financial
Summary Financial results for the three months ended
March 31, 2020 marked the 10th consecutive quarter of year-on-year
revenue and Adjusted EBITDA growth. The first-quarter 2020 results
include a full quarter of the business of General Photonics
Corporation ("GP"), acquired in March 2019, compared to one month
for the three months ended March 31, 2019.
Highlights of the financial results for the first-quarter of
2020 are:
Three Months Ended March 31,
(in thousands, except share and per share
data)
2020
2019
Change
Revenues:
Products and licensing
$
10,326
$
8,192
26
%
Technology development
6,815
6,641
3
%
Total revenues
17,141
14,833
16
%
Gross profit
8,364
6,768
24
%
Gross margin
48.8
%
45.6
%
Operating expense
7,974
7,665
4
%
Operating income/(loss)
390
(897
)
143
%
Other (expense)/income and income
taxes
(70
)
2,023
Net income from continuing operations
$
320
$
1,126
(72
)
%
Loss from discontinued operations, net of
income tax of $464
(1,436
)
—
Net (loss)/income
(1,116
)
1,126
(199
)
%
Diluted weighted average shares
outstanding
32,549,487
33,479,935
Net income per share from continuing
operations (diluted)
$
0.01
$
0.03
(67
)
%
Adjusted EBITDA
$
1,580
$
959
65
%
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, 2020 increased compared to the prior year period, due to the
inclusion of the incremental revenues associated with the acquired
operations of GP, as well as increased revenues associated with
Luna’s communications test products and other legacy products.
Technology development revenues increased in Q1 2020, compared to
the prior-year period, due to growth in various government research
programs.
Operating income improved to $0.4 million in Q1 2020 from an
operating loss of $(0.9) million in Q1 2019. The increase in
operating income was due to increased revenue and gross profit as
well as improved operating expense leverage. Operating expenses
increased by $0.3 million in Q1 2020 from Q1 2019 due primarily to
additional expenses associated with the acquired operations of GP.
Income/(loss) from continuing operations before income taxes
increased to $0.5 million for the three months ended March 31,
2020, compared to $(0.7) million for the three months ended March
31, 2019, driven primarily by revenue performance and operating
expense leverage.
Net income from continuing operations was $0.3 million, or $0.01
per fully diluted share, for the three months ended March 31, 2020,
compared to $1.1 million, or $0.03 per fully diluted share, for the
three months ended March 31, 2019 which included a $1.9 million
income tax benefit related to a reduction in deferred tax asset
valuation allowances due to the GP acquisition. Net (loss)/income
attributable to common stockholders for the three months ended
March 31, 2020, was $(1.1) million, or $(0.03) per fully diluted
share, compared to $1.0 million, or $0.03 per fully diluted share,
for the three months ended March 31, 2019. The decrease in net
income attributable to common stockholders is primarily due to a
$1.9 million income tax benefit related to a reduction in deferred
tax asset valuation allowances due to the GP acquisition that was
recorded in Q1 2019, a $1.4 million loss from discontinued
operations (resulting from the resolution of a $2.5 million
indemnification claim related to the August 2017 sale of Luna's
high-speed optical receivers (HSOR) business) that was recorded in
Q1 2020 and the increase in our operating income/(loss) in Q1 2020
versus Q1 2019. The resolution of the HSOR claim resulted in Luna
receiving $0.6 million from escrow and the buyer receiving $1.9
million. The resulting loss of $1.4 million has been reflected in
loss from discontinued operations, net of tax benefit of $0.5
million.
Adjusted EBITDA was $1.6 million for the three months ended
March 31, 2020, compared to $1.0 million for the three months ended
March 31, 2019. The increase was driven by revenue growth from both
Luna’s legacy business, the GP acquisition, and operating expense
leverage.
2020 Full-Year Outlook Luna
recognizes that the COVID-19 pandemic has created evolving and
significant macroeconomic uncertainty. Discussions with business
leaders and a bottoms-up analysis have determined that our original
guidance from March 5, 2020 is still valid. Therefore, it is
maintaining the fiscal 2020 outlook originally provided on March 5,
although believes financial performance will trend towards the
lower end of the ranges:
- Total revenues of $81M to $84M
- Adjusted EBITDA of $10M to $12M
In terms of seasonality, Luna anticipates that revenues will
continue to be weighted to the second half, with the percentage
split in the first half of 2020 being slightly below historical
trends. In recent years, Luna has recorded approximately 44% to 46%
of its revenue in the first half of the year.
COVID-19 Update On April 14,
2020, Luna provided a COVID-19 related business update, including
outlining the initiatives the Company has implemented to ensure the
safety and well-being of its workforce. The elements contained in
that release remain current as of today.
Luna has a strong cash position and adequate access to capital.
Cash and cash equivalents were $26.3 million as of the
first-quarter 2020, and Luna continues to have access to its $10
million revolving credit facility. To date, Luna has not
implemented furloughs nor reduced employee hours or compensation
and does not currently anticipate doing so.
From an operational perspective, the Company provided the
following update as of May 7, 2020:
- Lightweighting and 5G trends continue to be strong, and Luna
does not anticipate those to change. The company continues to
believe it is in a strong position to take advantage of those
trends.
- Luna’s operations are essential and continue to operate at
normal capacity with necessary COVID-19 precautions.
- Luna has experienced minor effects on its supply chain across
its businesses and has been able to manage through these issues.
All major component manufacturers are operating and fulfilling
Luna’s purchase orders. In cases where there were delays, Luna has
been able to rely on its inventory of components to continue
production of its products. Luna continues to monitor its supply
chain and remediate any issues as they arise. At this time, Luna
believes it will be able to procure components necessary to meets
it sales needs.
- An important part of Luna’s sales effort has been done
historically through a series of tradeshows and conferences, none
of which are currently taking place. Luna has shifted to a robust
online presence, hosting and planning to host a total of six
webinars to educate existing and potential customers about its key
products. While tradeshows have always been successful in filling
the sales pipeline, these webinars have improved engagement between
Luna's salesforce and its customers allowing Luna to curate a
specific message over a longer and more dedicated period of
customer “face time.”
- Realizing the complexity of the pandemic and potential
long-term implications on its businesses, Luna is committed to
being as transparent as possible, to keep its various stakeholders
apprised, publicly, of significant operational and financial shifts
as necessary.
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, 2020. 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 844.578.9643 and the
international dial-in number is 270.823.1522. The participant
access code is 5876266. Investors are advised to dial in at least
five minutes prior to the call to register. The webcast will be
archived 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 the aerospace and
automotive industries. Luna is organized into two business
segments, which work closely together to turn ideas into products:
a Products and Licensing segment and a Technology Development
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 its projected 2020 financial results
and outlook, the strength and improvement in capital structure and
the solidity of its balance sheet and cash flows, the potential
impacts of the COVID-19 pandemic on its business, operations and
financial results, and growth potential. 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 ultimate impact of the COVID-19 pandemic and those
risks and uncertainties set forth in Luna’s Form 10-Q for the three
months ended March 31, 2020, 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 (Unaudited)
(in thousands, except share and
per share data)
Three Months Ended March
31,
2020
2019
Revenues:
Products and licensing
$
10,326
$
8,192
Technology development
6,815
6,641
Total revenues
17,141
14,833
Cost of revenues:
Products and licensing
3,862
3,249
Technology development
4,915
4,816
Total cost of revenues
8,777
8,065
Gross profit
8,364
6,768
Operating expense:
Selling, general and administrative
6,377
6,207
Research, development and engineering
1,597
1,458
Total operating expense
7,974
7,665
Operating income/(loss)
390
(897
)
Other income/(expense):
Investment income
59
171
Other income/(expense)
9
(2
)
Interest expense
—
(11
)
Total other income
68
158
Income/(loss) from continuing operations
before income taxes
458
(739
)
Income tax expense/(benefit)
138
(1,865
)
Net income from continuing operations
320
1,126
Loss from discontinued operations, net of
income tax of $464
(1,436
)
—
Net (loss)/income
(1,116
)
1,126
Preferred stock dividend
—
83
Net (loss)/income attributable to common
stockholders
$
(1,116
)
$
1,043
Net income per share from continuing
operations:
Basic
$
0.01
$
0.04
Diluted
$
0.01
$
0.03
Net income per share from discontinued
operations:
Basic
$
(0.05
)
$
0.00
Diluted
$
(0.04
)
$
0.00
Net (loss)/income per share attributable
to common stockholders:
Basic
$
(0.04
)
$
0.04
Diluted
$
(0.03
)
$
0.03
Weighted average shares:
Basic
30,380,345
28,039,080
Diluted
32,549,487
33,479,935
Luna Innovations
Incorporated
Consolidated Balance
Sheets
(in thousands, except share
data)
March 31, 2020
December 31, 2019
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
26,324
$
25,006
Accounts receivable, net
15,519
16,269
Receivable from sale of HSOR business
—
2,501
Contract assets
2,612
2,759
Inventory
11,191
10,294
Prepaid expenses and other current
assets
1,575
1,287
Total current assets
57,221
58,116
Long-term contract assets
486
449
Property and equipment, net
3,306
3,466
Intangible assets, net
9,853
10,194
Goodwill
10,542
10,542
Other assets
2,009
2,341
Deferred tax asset
1,542
1,416
Total assets
$
84,959
$
86,524
Liabilities and stockholders’
equity
Liabilities:
Current liabilities:
Accounts payable
2,490
2,787
Accrued liabilities
9,243
10,369
Contract liabilities
3,569
3,888
Total current liabilities
15,302
17,044
Other long-term liabilities
1,880
2,011
Total liabilities
17,182
19,055
Commitments and contingencies (Note
13)
Stockholders’ equity:
Common stock, par value $0.001,
100,000,000 shares authorized, 32,126,368 and 31,788,896 shares
issued, 30,486,577 and 30,149,105 shares outstanding at March 31,
2020 and December 31, 2019, respectively
32
32
Treasury stock at cost, 1,639,791 shares
at March 31, 2020 and December 31, 2019
(4,337
)
(4,337
)
Additional paid-in capital
89,446
88,022
Accumulated deficit
(17,364
)
(16,248
)
Total stockholders’ equity
67,777
67,469
Total liabilities and stockholders’
equity
$
84,959
$
86,524
Luna Innovations
Incorporated
Consolidated Statements of
Cash Flows (Unaudited)
(in thousands)
Three Months Ended March
31,
2020
2019
Cash flows (used in)/provided by
operating activities
Net (loss)/income
$
(1,116
)
$
1,126
Adjustments to reconcile net (loss)/income
to net cash (used in)/provided by operating activities
Depreciation and amortization
679
617
Share-based compensation
226
343
Bad debt expense
14
—
Loss from discontinued operations, net of
tax
1,436
—
Tax benefit from release of valuation
allowance
—
(1,889
)
Deferred taxes
(127
)
—
Change in assets and liabilities
Accounts receivable
737
1,053
Contract assets
111
(429
)
Inventory
(897
)
(528
)
Other current assets
(287
)
(41
)
Accounts payable and accrued expenses
(760
)
1,196
Contract liabilities
(318
)
149
Net cash (used in)/provided by operating
activities
(302
)
1,597
Cash flows provided by/(used in)
investing activities
Acquisition of property and equipment
(74
)
(215
)
Intangible property costs
(91
)
(61
)
Acquisition of General Photonics
Corporation
—
(19,004
)
Proceeds from sale of discontinued
operations
600
—
Net cash provided by/(used in) investing
activities
435
(19,280
)
Cash flows provided by/(used in)
financing activities
Payments on finance lease obligations
(13
)
(7
)
Payments of debt obligations
—
(375
)
Proceeds from the exercise of options and
warrants
1,198
185
Net cash provided by/(used in) financing
activities
1,185
(197
)
Net increase/(decrease) in cash and
cash equivalents
1,318
(17,880
)
Cash and cash equivalents-beginning of
period
25,006
42,460
Cash and cash equivalents-end of
period
$
26,324
$
24,580
Luna Innovations
Incorporated
Reconciliation of Net Income
to EBITDA and Adjusted EBITDA (Unaudited)
(in thousands)
Three Months Ended March
31,
2020
2019
Net income
$
(1,116
)
$
1,126
Loss from discontinued operations, net of
tax
1,436
—
Net income from continuing operations
320
1,126
Interest expense
—
11
Investment income
(59
)
(171
)
Tax expense/(benefit)
138
(1,865
)
Depreciation and amortization
679
513
EBITDA
1,078
(386
)
Share-based compensation
502
343
Non-recurring charges (1)
—
898
Amortization of inventory step-up
—
104
Adjusted EBITDA
$
1,580
$
959
(1) Non-recurring charges consist of transaction-related
expenses incurred during the three months ended March 31, 2019,
related to the acquisition of General Photonics.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200507005919/en/
Investors: Jane Bomba
303-829-1211 IR@lunainc.com
Sally J. Curley 614-530-3002 IR@lunainc.com
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