Reaffirms Outlook
Q3
Highlights
- Total revenues of $29.2 million, up 43%
year-over-year
- Total revenues in constant currency of $30.1 million; up 48%
year-over-year
- Gross margin of 58%, compared to 62% for the prior-year
period
- Net income of $1.2 million, compared to net income of $0.4
million for the prior-year period
- Adjusted EBITDA of $4.5 million, compared to $2.1 million
for the prior-year period
- Adjusted EPS of $0.09, compared to $0.03 for the prior-year
period
Luna Innovations Incorporated (NASDAQ: LUNA), a global leader in
advanced optical technology, today announced its financial results
for the three and nine months ended September 30, 2022.
"I'm extremely pleased with our performance in Q3, achieving
over 40% growth in revenues and more than doubling Adjusted EBITDA
versus last year," said Scott Graeff, President and Chief Executive
Officer of Luna. "The team was able to achieve these strong
financial results while still navigating a challenging supply chain
and economic environment. And I’m particularly pleased that this
quarter is more normative, positively reflecting the meaningful
strategic moves and investments we’ve made over the past two years
to refine Luna’s focus and realign our organization appropriately.
Today, Luna Innovations is uniquely positioned to offer a breadth
of solutions and capabilities in fiber technology.”
Graeff continued, “With three quarters now behind us, we feel
very comfortable that we will finish 2022 within the ranges that we
provided on our March earnings call. As always, we remain focused
on execution, both to capitalize on important growth trends and to
advance our strategy of Enabling the Future with Fiber.”
Third-Quarter Fiscal 2022 Financial
Summary
Highlights of the financial results for the three months ended
September 30, 2022 are:
Three Months Ended September
30,
Change
(in thousands, except share and per share
data)
2022
2021
Revenues
$
29,153
$
20,329
43
%
Gross profit
16,919
12,584
34
%
Gross margin
58
%
62
%
Operating expense
15,441
12,594
23
%
Operating income/(loss)
1,478
(10
)
Operating margin
5
%
—
%
Other expense, net and income tax
expense
(310
)
(334
)
Net income/(loss) from continuing
operations
$
1,168
$
(344
)
Income from discontinued operations, net
of income taxes
28
699
Net income
$
1,196
$
355
Income per diluted share (EPS)
$
0.04
$
0.01
Adjusted EPS
$
0.09
$
0.03
200
%
Diluted weighted average shares
outstanding
34,104,850
33,780,714
Adjusted EBITDA
$
4,544
$
2,110
115
%
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 September 30, 2022 increased
43% compared to the prior-year period; 48% on a constant currency
basis.
Gross margin was 58% for the three months ended September 30,
2022, compared to 62% for the three months ended September 30,
2021, driven primarily by product mix. Operating income and margin
were $1.5 million and 5% of total revenues, respectively, for the
three months ended September 30, 2022, compared to an operating
loss of $10 thousand dollars and less than 1% of total revenues,
respectively, for the three months ended September 30, 2021.
Net income was $1.2 million, or $0.04 per fully diluted share,
for the three months ended September 30, 2022, compared to net
income of $0.4 million, or $0.01 per fully diluted share, for the
three months ended September 30, 2021. Adjusted EPS was $0.09 for
the three months ended September 30, 2022 compared to $0.03 for the
three months ended September 30, 2021.
Adjusted EBITDA was $4.5 million for three months ended
September 30, 2022, compared to $2.1 million for the three months
ended September 30, 2021.
Nine Months Ended Fiscal 2022 Financial
Summary
Highlights of the financial results for the nine months ended
September 30, 2022 are:
Nine Months Ended September
30,
Change
(in thousands, except share and per share
data)
2022
2021
Revenues
77,795
63,291
23
%
Gross profit
47,162
37,436
26
%
Gross margin
61
%
59
%
Operating expense
50,510
41,061
23
%
Operating loss
(3,348
)
(3,625
)
Operating margin
(4
)%
(6
)%
Other expense, net and income tax
benefit
231
1,061
Net loss from continuing operations
$
(3,117
)
$
(2,564
)
Income from discontinued operations, net
of income taxes
11,543
2,371
Net income/(loss)
$
8,426
$
(193
)
Earnings/(loss) per diluted share
(EPS)
$
0.26
$
(0.01
)
Adjusted EPS
$
0.12
$
0.08
50
%
Diluted weighted average shares
outstanding
32,492,276
33,585,973
Adjusted EBITDA
$
7,450
$
4,461
67
%
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 nine months ended September 30, 2022 increased
23% compared to the prior-year period; 25% on a constant currency
basis.
Gross profit of $47.2 million for the nine months ended
September 30, 2022 increased from $37.4 million for the nine months
ended September 30, 2021 primarily due to higher sales. Operating
loss and margin improved to $3.3 million and 4% of total revenues,
respectively, for the nine months ended September 30, 2022,
compared to $3.6 million and 6% of total revenues, respectively,
for the nine months ended September 30, 2021.
Net income was $8.4 million, or $0.26 per fully diluted share,
for the nine months ended September 30, 2022, compared to a net
loss of $0.2 million, or $(0.01) per fully diluted share, for the
nine months ended September 30, 2021. Adjusted EPS was $0.12 for
the nine months ended September 30, 2022, compared to $0.08 for the
nine months ended September 30, 2021.
Adjusted EBITDA was $7.5 million for the nine months ended
September 30, 2022, compared to $4.5 million for the nine months
ended September 30, 2021.
2022 Full-Year Outlook
Luna is reaffirming the 2022 revenue and adjusted EBITDA outlook
it originally provided on March 14, 2022, which included the
mid-March divestiture of Luna Labs and the acquisition of Lios.
- Total revenue of $109 million to $115 million for the full year
2022
- Adjusted EBITDA of $10 million to $12 million for the full year
2022
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, Adjusted EPS and revenue
measured on a constant currency basis, 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.
The Company calculates revenue measured on a constant currency
basis by translating its foreign revenues for the relevant period
in U.S. dollars at the average exchange rate in effect for the
comparable prior year period. The Company presents revenue in this
manner because it is a global company that transacts business in
multiple currencies and reports financial information in U.S.
dollars. Foreign currency exchange rate fluctuations affect the
amounts reported by the Company in U.S. dollars with respect to its
foreign revenues. Exchange rate fluctuations can have a significant
effect on reported revenues. The Company believes presenting
constant currency revenue information provides useful information
to investors, as it provides information to assess how its
businesses performed excluding the effects of changes in foreign
currency exchange rates and assists investors in evaluating the
effectiveness of the Company’s operations and underlying business
trends in a manner that is consistent with management’s evaluation
of business performance.
Adjusted EBITDA, Adjusted EPS and revenue measured on a constant
currency basis 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, November 10, 2022, to
discuss its financial results for the three and nine months ended
September 30, 2022. 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 1.877.270.2148 and the international dial-in
number is.1.412.902.6510. Participants should ask to join the Luna
Innovations Incorporated conference call 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 2022
financial results and outlook, and the Company's ability to
capitalize on growth trends. 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
quarter ended September 30, 2022, 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)
September 30, 2022
December 31, 2021
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
7,889
$
17,128
Accounts receivable, net
29,295
20,913
Contract assets
6,196
5,166
Inventory
32,400
22,493
Prepaid expenses and other current
assets
4,744
3,793
Assets held for sale
—
12,952
Total current assets
80,524
82,445
Property and equipment, net
4,827
2,988
Intangible assets, net
18,964
17,177
Goodwill
27,215
18,984
Operating lease right-of-use assets
4,069
5,075
Other non-current assets
3,251
247
Deferred tax asset
6,397
3,321
Total assets
$
145,247
$
130,237
Liabilities and stockholders’
equity
Liabilities:
Current liabilities:
Current portion of long-term debt
obligations
$
2,250
$
4,167
Accounts payable
5,370
2,809
Accrued and other current liabilities
19,237
9,258
Contract liabilities
4,850
4,649
Current portion of operating lease
liabilities
2,115
2,101
Liabilities associated with assets held
for sale
—
9,703
Total current liabilities
33,822
32,687
Long-term debt obligations, net of current
portion
19,465
11,673
Long-term portion of operating lease
liabilities
2,374
3,509
Deferred tax liability
1,324
—
Other long-term liabilities
408
445
Total liabilities
57,393
48,314
Commitments and contingencies
Stockholders’ equity:
Common stock, par value $0.001,
100,000,000 shares authorized, 34,650,827 and 33,855,725 shares
issued, 32,865,870 and 32,116,270 shares outstanding at September
30, 2022 and December 31, 2021, respectively
35
34
Treasury stock at cost, 1,784,957 and
1,744,026 shares at September 30, 2022 and December 31, 2021,
respectively
(5,542
)
(5,248
)
Additional paid-in capital
103,264
98,745
Accumulated deficit
(3,149
)
(11,575
)
Accumulated other comprehensive loss
(6,754
)
(33
)
Total stockholders’ equity
87,854
81,923
Total liabilities and stockholders’
equity
$
145,247
$
130,237
Luna Innovations
Incorporated
Consolidated Statements of
Operations (Unaudited)
(in thousands, except share and
per share data)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Revenues
$
29,153
$
20,329
$
77,795
$
63,291
Cost of revenues
12,234
7,745
30,633
25,855
Gross profit
16,919
12,584
47,162
37,436
Operating expense:
Selling, general and administrative
12,665
9,674
42,527
33,414
Research, development and engineering
2,776
2,920
7,983
7,647
Total operating expense
15,441
12,594
50,510
41,061
Operating income/(loss)
1,478
(10
)
(3,348
)
(3,625
)
Other income/(expense):
Other income
73
—
146
—
Interest expense, net
(218
)
(110
)
(442
)
(375
)
Total other expense, net
(145
)
(110
)
(296
)
(375
)
Income/(loss) from continuing operations
before income taxes
1,333
(120
)
(3,644
)
(4,000
)
Income tax expense/(benefit)
165
224
(527
)
(1,436
)
Net income/(loss) from continuing
operations
1,168
(344
)
(3,117
)
(2,564
)
Income from discontinued operations, net
of income tax (benefit)/expense of ($78), $235, $88 and $381
28
699
622
2,371
Gain on sale of discontinued operations,
net of tax of $3,117
—
—
10,921
—
Net income from discontinued
operations
28
699
11,543
2,371
Net income/(loss)
$
1,196
$
355
$
8,426
$
(193
)
Net income/(loss) per share from
continuing operations:
Basic
$
0.04
$
(0.01
)
$
(0.10
)
$
(0.08
)
Diluted
$
0.03
$
(0.01
)
$
(0.10
)
$
(0.08
)
Net income per share from discontinued
operations:
Basic
$
—
$
0.02
$
0.36
$
0.08
Diluted
$
—
$
0.02
$
0.36
$
0.07
Net income/(loss) per share attributable
to common stockholders:
Basic
$
0.04
$
0.01
$
0.26
$
(0.01
)
Diluted
$
0.04
$
0.01
$
0.26
$
(0.01
)
Weighted average shares:
Basic
32,800,690
31,944,869
32,492,276
31,553,998
Diluted
34,104,850
33,780,714
32,492,276
33,585,973
Luna Innovations
Incorporated
Consolidated Statements of
Cash Flows (Unaudited)
(in thousands)
Nine Months Ended September
30,
2022
2021
Cash flows (used in)/provided by
operating activities
Net income/(loss)
$
8,426
$
(193
)
Adjustments to reconcile net income/(loss)
to net cash used in operating activities
Depreciation and amortization
3,993
3,523
Share-based compensation
3,204
2,230
Gain from discontinued operations, net of
tax
(10,921
)
—
Deferred taxes
(3,374
)
(23
)
Change in assets and liabilities
Accounts receivable
(6,166
)
482
Contract assets
(2,739
)
837
Inventory
(6,662
)
(1,906
)
Other current assets
2,093
(1,752
)
Other long-term assets
599
—
Accounts payable and accrued and other
current liabilities
5,824
(1,681
)
Contract liabilities
2,425
(287
)
Other long term-liabilities
13
—
Net cash (used in)/provided by operating
activities
(3,285
)
1,230
Cash flows used in investing
activities
Acquisition of property and equipment
(2,313
)
(943
)
Intangible property costs
4
(215
)
Proceeds from sale of property and
equipment
25
—
Proceeds from sale of discontinued
operations
12,973
—
Acquisition of Lios
(22,085
)
—
Net cash used in investing activities
(11,396
)
(1,158
)
Cash flows provided by/(used in)
financing activities
Payments on finance lease obligations
(36
)
(36
)
Proceeds from borrowings under debt
obligations
22,150
—
Payments of debt obligations
(16,275
)
(3,110
)
Repurchase of common stock
(294
)
(420
)
Proceeds from ESPP
521
530
Proceeds from the exercise of options
1,160
2,076
Net cash provided by/(used in) financing
activities
7,226
(960
)
Effect of exchange rate changes on cash
and cash equivalents
(1,784
)
277
Net decrease in cash and cash
equivalents
(9,239
)
(611
)
Cash and cash equivalents-beginning of
period
17,128
15,366
Cash and cash equivalents-end of
period
$
7,889
$
14,755
Luna Innovations
Incorporated
Reconciliation of Net
Income/(Loss) to EBITDA and Adjusted EBITDA
(in thousands)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Net income/(loss)
$
1,196
$
355
$
8,426
$
(193
)
Net income from discontinued
operations
28
699
11,543
2,371
Net income/(loss) from continuing
operations
1,168
(344
)
(3,117
)
(2,564
)
Interest expense, net
218
110
442
375
Income tax expense/(benefit)
165
224
(527
)
(1,436
)
Depreciation and amortization
1,299
1,131
3,993
3,440
EBITDA
2,850
1,121
791
(185
)
Share-based compensation
1,027
689
3,027
2,133
Integration and transaction expense
184
196
2,184
2,073
Amortization of inventory step-up
134
104
391
440
Other non-recurring charges (1)
349
—
1,057
—
Adjusted EBITDA
$
4,544
$
2,110
$
7,450
$
4,461
(1) - Other non-recurring charges include
severance, customer accommodation, facility consolidation and debt
refinancing costs.
Luna Innovations
Incorporated
Reconciliation of Net
Income/(Loss) to Adjusted EPS
(in thousands, except per share
data)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Net income/(loss)
$
1,196
$
355
$
8,426
$
(193
)
Net income from discontinued
operations
28
699
11,543
2,371
Net income/(loss) from continuing
operations
1,168
(344
)
(3,117
)
(2,564
)
Share-based compensation
1,027
689
3,027
2,133
Integration and transaction expense
184
196
2,184
2,073
Amortization of intangible assets
988
761
2,793
2,353
Amortization of inventory step-up
134
104
391
440
Other non-recurring charges (1)
349
—
1,057
—
Income tax effect on adjustments
(671
)
(438
)
(2,363
)
(1,750
)
Adjusted income from continuing
operations
$
3,179
$
968
$
3,972
$
2,685
Adjusted EPS
$
0.09
$
0.03
$
0.12
$
0.08
Adjusted weighted average shares (in
thousands):
Diluted
34,105
33,781
32,492
33,586
(1) - Other non-recurring charges include
severance, customer accommodation, facility consolidation and debt
refinancing costs.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221110005999/en/
Investor Contact: Allison
Woody Phone: 540-769-8465 Email: IR@lunainc.com
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