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Luna Innovations Reports Second-Quarter 2022 Results

Reaffirms 2022 Outlook

Highlights

  • Total revenues of $26.2 million for the three months ended June 30, 2022, up 19% compared to the three months ended June 30, 2021
  • Gross margin of 61% for the three months ended June 30, 2022, compared to 57% for the three months ended June 30, 2021
  • Net loss of $2.4 million for the three months ended June 30, 2022, compared to net loss of $0.2 million for the three months ended June 30, 2021; primarily due to $1.8 million benefit from tax and discontinued operations in the second quarter 2021
  • Adjusted EBITDA of $1.2 million for the three months ended June 30, 2022, compared to $1.0 million for the three months ended June 30, 2021
  • Adjusted EPS of $(0.02) for the three months ended June 30, 2022, compared to $0.03 for the three months ended June 30, 2021; impacted by discontinued operations and associated taxes

Luna Innovations Incorporated (NASDAQ: LUNA), a global leader in advanced optical technology, today announced its financial results for the three and six months ended June 30, 2022.

"As I reflect on the first half of 2022, I'm pleased with the team's top-line performance and ability to navigate ongoing macroeconomic and market factors," said Scott Graeff, President and Chief Executive Officer of Luna. "We achieved double-digit revenue growth for the second-quarter in nearly all of our product lines, and I'm proud of the Luna team for their accomplishments. The team's focus and execution will carry us through the remainder of 2022 and will allow us to achieve growth in each business. This, combined with strong bookings, gives me the confidence to reaffirm our 2022 outlook."

Graeff continued, "We've recently completed several acquisitions and one large divestiture. As with all transactions, we are reviewing expense infrastructure to ensure operational efficiency. The strategic actions that we've recently undertaken to enhance operations, expand our IP portfolio and refresh product lines are gaining momentum. As a result, today Luna is a clear leader and a company fully focused on Enabling the Future with Fiber."

Second-Quarter Fiscal 2022 Financial Summary

Highlights of the financial results for the three months ended June 30, 2022 are:

 

 

 

 

Three Months Ended June 30,

 

Change

(in thousands, except share and per share data)

 

2022

 

2021

 

 

Revenues

 

$

26,162

 

 

$

21,965

 

 

19

%

 

 

 

 

 

 

 

 

Gross profit

 

 

15,963

 

 

 

12,581

 

 

27

%

Gross margin

 

 

61

%

 

 

57

%

 

 

 

 

 

 

 

 

 

Operating expense

 

 

18,425

 

 

 

14,615

 

 

26

%

Operating loss

 

 

(2,462

)

 

 

(2,034

)

 

 

 

Operating margin

 

 

(9

) %

 

 

(9

) %

 

 

 

 

 

 

 

 

 

 

Other expense, net and income tax (expense)/benefit

 

 

(480

)

 

 

873

 

 

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operations

 

$

(2,942

)

 

$

(1,161

)

 

 

 

 

 

 

 

 

 

 

 

Income from discontinued operations, net of income taxes

 

 

591

 

 

 

931

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(2,351

)

 

$

(230

)

 

 

 

 

 

 

 

 

 

 

 

Loss per diluted share (EPS)

 

$

(0.07

)

 

$

(0.01

)

 

 

 

Adjusted EPS

 

$

(0.02

)

 

$

0.03

 

 

 

 

Diluted weighted average shares outstanding

 

 

32,478,736

 

 

 

31,494,563

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

1,184

 

 

$

1,021

 

 

16

%

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 June 30, 2022 increased 19% compared to the prior-year period, primarily due to revenue generated by the Lios acquisition.

Gross margin increased to 61% for the three months ended June 30, 2022, compared to 57% for the three months ended June 30, 2021, driven primarily by favorable product mix. Operating loss and margin were $2.5 million and 9% of total revenues, respectively, for the three months ended June 30, 2022, compared to $2.0 million and 9% of total revenues, respectively, for the three months ended June 30, 2021. The increase in operating loss was primarily due to our recent acquisitions, partially offset by lower deal and integration costs.

Net loss was $2.4 million, or $0.07 per fully diluted share, for the three months ended June 30, 2022, compared to net loss of $0.2 million, or $0.01 per fully diluted share, for the three months ended June 30, 2021. Adjusted EPS was $(0.02) for the three months ended June 30, 2022 compared to $0.03 for the three months ended June 30, 2021. The second-quarter 2022 results were impacted by discontinued operations and associated taxes.

Adjusted EBITDA was $1.2 million for three months ended June 30, 2022, compared to $1.0 million for the three months ended June 30, 2021.

Six Months Ended Fiscal 2022 Financial Summary

Highlights of the financial results for the six months ended June 30, 2022 are:

 

 

 

 

Six Months Ended June 30,

 

Change

(in thousands, except share and per share data)

 

2022

 

2021

 

 

Revenues

 

 

48,642

 

 

 

42,962

 

 

13

 

%

 

 

 

 

 

 

 

 

Gross profit

 

 

30,242

 

 

 

24,852

 

 

22

 

%

Gross margin

 

 

62

%

 

 

58

%

 

 

 

 

 

 

 

 

 

Operating expense

 

 

35,069

 

 

 

28,466

 

 

23

 

%

Operating loss

 

 

(4,827

)

 

 

(3,614

)

 

 

 

Operating margin

 

 

(10

) %

 

 

(8

) %

 

 

 

 

 

 

 

 

 

 

Other expense, net and income tax benefit

 

 

543

 

 

 

1,394

 

 

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operations

 

$

(4,284

)

 

$

(2,220

)

 

 

 

 

 

 

 

 

 

 

 

Income from discontinued operations, net of income taxes

 

 

11,515

 

 

 

1,672

 

 

 

 

 

 

 

 

 

 

 

 

Net income/(loss)

 

$

7,231

 

 

$

(548

)

 

 

 

 

 

 

 

 

 

 

 

Earnings/(loss) per diluted share (EPS)

 

$

0.22

 

 

$

(0.02

)

 

 

 

Adjusted EPS

 

$

0.02

 

 

$

0.05

 

 

(60

)

%

Diluted weighted average shares outstanding

 

 

32,361,560

 

 

 

31,413,451

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

2,906

 

 

$

2,352

 

 

24

 

%

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 six months ended June 30, 2022 increased compared to the prior-year period, primarily due to revenue generated by the Lios acquisition.

Gross margin of $30.2 million for the six months ended June 30, 2022 increased from $24.9 million for the six months ended June 30, 2021 primarily due to higher sales. Operating loss and margin declined to $4.8 million and 10% of total revenues, respectively, for the six months ended June 30, 2022, compared to $3.6 million and 8% of total revenues, respectively, for the six months ended June 30, 2021. The increase in operating loss was primarily due to our recent acquisitions.

Net income was $7.2 million, or $0.22 per fully diluted share, for the six months ended June 30, 2022, compared to a net loss of $0.5 million, or $(0.02) per fully diluted share, for the six months ended June 30, 2021. Adjusted EPS was $0.02 for the six months ended June 30, 2022, compared to $0.05 for the six months ended June 30, 2021.

Adjusted EBITDA was $2.9 million for the six months ended June 30, 2022, compared to $2.4 million for the six months ended June 30, 2021.

2022 Full-Year Outlook

Luna is confirming the 2022 outlook it originally provided on March 14, 2022, which included the mid-March divestiture of Luna Labs and the acquisition of Lios, and also is providing a third-quarter 2022 outlook:

  • 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
  • Total revenues in the range of $28 million to $30 million for the third quarter 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 and Adjusted EPS, which 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. Adjusted EBITDA and Adjusted EPS 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 8:30 am (ET) today, August 11, 2022, to discuss its financial results for the three and six months ended June 30, 2022. The investor conference call will be accessible by telephone and through the internet. Participants may register using this link to obtain dial-in details. Registration details are also available by visiting www.lunainc.com under the tab "Investor Relations." To participate in the webcast, please follow instructions via the links above at least 15 minutes before the call to download the necessary software and to avoid any delays in listening 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 and third quarter 2022 financial results and outlook, and the Company's 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 quarter ended June 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)

 

 

June 30, 2022

 

December 31, 2021

 

(unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

4,864

 

 

$

17,128

 

Accounts receivable, net

 

30,422

 

 

 

20,913

 

Contract assets

 

3,369

 

 

 

5,166

 

Inventory

 

30,754

 

 

 

22,493

 

Prepaid expenses and other current assets

 

6,535

 

 

 

3,793

 

Assets held for sale

 

 

 

 

12,952

 

Total current assets

 

75,944

 

 

 

82,445

 

Property and equipment, net

 

4,499

 

 

 

2,988

 

Intangible assets, net

 

20,399

 

 

 

17,177

 

Goodwill

 

28,441

 

 

 

18,984

 

Operating lease right-of-use assets

 

4,774

 

 

 

5,075

 

Other non-current assets

 

3,214

 

 

 

247

 

Deferred tax asset

 

4,612

 

 

 

3,321

 

Total assets

$

141,883

 

 

$

130,237

 

Liabilities and stockholders’ equity

 

 

 

Liabilities:

 

 

 

Current liabilities:

 

 

 

Current portion of long-term debt obligations

$

2,000

 

 

$

4,167

 

Accounts payable

 

3,881

 

 

 

2,809

 

Accrued and other current liabilities

 

16,413

 

 

 

9,258

 

Contract liabilities

 

4,816

 

 

 

4,649

 

Current portion of operating lease liabilities

 

2,449

 

 

 

2,101

 

Liabilities associated with assets held for sale

 

 

 

 

9,703

 

Total current liabilities

 

29,559

 

 

 

32,687

 

Long-term debt obligations, net of current portion

 

19,218

 

 

 

11,673

 

Long-term portion of operating lease liabilities

 

2,767

 

 

 

3,509

 

Deferred tax liability

 

1,357

 

 

 

 

Other long-term liabilities

 

421

 

 

 

445

 

Total liabilities

 

53,322

 

 

 

48,314

 

Commitments and contingencies

 

 

 

Stockholders’ equity:

 

 

 

Common stock, par value $0.001, 100,000,000 shares authorized, 34,528,065 and 33,855,725 shares issued, 32,752,348 and 32,116,270 shares outstanding at June 30, 2022 and December 31, 2021, respectively

 

35

 

 

 

34

 

Treasury stock at cost, 1,784,957 and 1,744,026 shares at June 30, 2022 and December 31, 2021, respectively

 

(5,542

)

 

 

(5,248

)

Additional paid-in capital

 

102,043

 

 

 

98,745

 

Accumulated deficit

 

(4,345

)

 

 

(11,575

)

Accumulated other comprehensive loss

 

(3,630

)

 

 

(33

)

Total stockholders’ equity

 

88,561

 

 

 

81,923

 

Total liabilities and stockholders’ equity

$

141,883

 

 

$

130,237

 

Luna Innovations Incorporated

Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share data)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2022

 

2021

 

2022

 

2021

 

 

 

 

Revenues

$

26,162

 

 

$

21,965

 

 

$

48,642

 

 

$

42,962

 

Cost of revenues

 

10,199

 

 

 

9,384

 

 

 

18,400

 

 

 

18,110

 

Gross profit

 

15,963

 

 

 

12,581

 

 

 

30,242

 

 

 

24,852

 

Operating expense:

 

 

 

 

 

 

 

Selling, general and administrative

 

15,760

 

 

 

12,805

 

 

 

29,862

 

 

 

23,739

 

Research, development and engineering

 

2,665

 

 

 

1,810

 

 

 

5,207

 

 

 

4,727

 

Total operating expense

 

18,425

 

 

 

14,615

 

 

 

35,069

 

 

 

28,466

 

Operating loss

 

(2,462

)

 

 

(2,034

)

 

 

(4,827

)

 

 

(3,614

)

Other income/(expense):

 

 

 

 

 

 

 

Other income

 

53

 

 

 

 

 

 

74

 

 

 

 

Interest expense, net

 

(111

)

 

 

(122

)

 

 

(224

)

 

 

(265

)

Total other expense, net

 

(58

)

 

 

(122

)

 

 

(150

)

 

 

(265

)

Loss from continuing operations before income taxes

 

(2,520

)

 

 

(2,156

)

 

 

(4,977

)

 

 

(3,879

)

Income tax expense/(benefit)

 

422

 

 

 

(995

)

 

 

(693

)

 

 

(1,659

)

Net loss from continuing operations

 

(2,942

)

 

 

(1,161

)

 

 

(4,284

)

 

 

(2,220

)

Income from discontinued operations, net of income tax expense (benefit) of ($856), $101, $166 and $146

 

591

 

 

 

931

 

 

 

594

 

 

 

1,672

 

Gain on sale of discontinued operations, net of tax of $3,117

 

 

 

 

 

 

 

10,921

 

 

 

 

Net income from discontinued operations

 

591

 

 

 

931

 

 

 

11,515

 

 

 

1,672

 

Net (loss)/income

$

(2,351

)

 

$

(230

)

 

$

7,231

 

 

$

(548

)

Net loss per share from continuing operations:

 

 

 

 

 

 

 

Basic

$

(0.09

)

 

$

(0.04

)

 

$

(0.13

)

 

$

(0.07

)

Diluted

$

(0.09

)

 

$

(0.04

)

 

$

(0.13

)

 

$

(0.07

)

Net income per share from discontinued operations:

 

 

 

 

 

 

 

Basic

$

0.02

 

 

$

0.03

 

 

$

0.36

 

 

$

0.05

 

Diluted

$

0.02

 

 

$

0.03

 

 

$

0.36

 

 

$

0.05

 

Net (loss)/income per share attributable to common stockholders:

 

 

 

 

 

 

 

Basic

$

(0.07

)

 

$

(0.01

)

 

$

0.22

 

 

$

(0.02

)

Diluted

$

(0.07

)

 

$

(0.01

)

 

$

0.22

 

 

$

(0.02

)

Weighted average shares:

 

 

 

 

 

 

 

Basic

 

32,478,736

 

 

 

31,494,563

 

 

 

32,361,560

 

 

 

31,413,451

 

Diluted

 

32,478,736

 

 

 

31,494,563

 

 

 

32,361,560

 

 

 

31,413,451

 

Luna Innovations Incorporated

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

Six Months Ended June 30,

 

2022

 

2021

 

 

Cash flows used in operating activities

 

 

 

Net income/(loss)

$

7,231

 

 

$

(548

)

Adjustments to reconcile net income/loss to net cash used in operating activities

 

 

 

Depreciation and amortization

 

2,694

 

 

 

2,360

 

Share-based compensation

 

2,177

 

 

 

1,514

 

Gain from discontinued operations, net of tax

 

(10,921

)

 

 

 

Deferred taxes

 

(124

)

 

 

 

Tax benefit from release of valuation allowance

 

 

 

 

475

 

Change in assets and liabilities

 

 

 

Accounts receivable

 

(6,555

)

 

 

(473

)

Contract assets

 

140

 

 

 

763

 

Inventory

 

(4,281

)

 

 

(1,562

)

Other current assets

 

(3,870

)

 

 

(2,399

)

Other long-term assets

 

646

 

 

 

 

Accounts payable and accrued and other current liabilities

 

6,123

 

 

 

(2,185

)

Contract liabilities

 

1,196

 

 

 

(826

)

Other long term-liabilities

 

(1,524

)

 

 

 

Net cash used in operating activities

 

(7,068

)

 

 

(2,881

)

Cash flows used in investing activities

 

 

 

Acquisition of property and equipment

 

(1,657

)

 

 

(551

)

Intangible property costs

 

4

 

 

 

(141

)

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

 

(10,740

)

 

 

(692

)

Cash flows provided by/(used in) financing activities

 

 

 

Payments on finance lease obligations

 

(24

)

 

 

(24

)

Proceeds from borrowings under debt obligations

 

21,150

 

 

 

 

Payments of debt obligations

 

(15,772

)

 

 

(2,072

)

Repurchase of common stock

 

(294

)

 

 

(420

)

Proceeds from ESPP

 

521

 

 

 

530

 

Proceeds from the exercise of options

 

1,158

 

 

 

1,490

 

Net cash provided by/(used in) financing activities

 

6,739

 

 

 

(496

)

Effect of exchange rate changes on cash and cash equivalents

 

(1,195

)

 

 

673

 

Net decrease in cash and cash equivalents

 

(12,264

)

 

 

(3,396

)

Cash and cash equivalents-beginning of period

 

17,128

 

 

 

15,366

 

Cash and cash equivalents-end of period

$

4,864

 

 

$

11,970

 

Luna Innovations Incorporated

Reconciliation of Net Income/(Loss) to EBITDA and Adjusted EBITDA

(in thousands)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2022

 

2021

 

2022

 

2021

 

 

 

 

Net (loss)/income

$

(2,351

)

 

$

(230

)

 

$

7,231

 

 

$

(548

)

Net income from discontinued operations

 

591

 

 

 

931

 

 

 

11,515

 

 

 

1,672

 

Net loss from continuing operations

 

(2,942

)

 

 

(1,161

)

 

 

(4,284

)

 

 

(2,220

)

Interest expense, net

 

111

 

 

 

122

 

 

 

224

 

 

 

265

 

Income tax expense/(benefit)

 

422

 

 

 

(995

)

 

 

(693

)

 

 

(1,659

)

Depreciation and amortization

 

1,538

 

 

 

1,109

 

 

 

2,694

 

 

 

2,309

 

EBITDA

 

(871

)

 

 

(925

)

 

 

(2,059

)

 

 

(1,305

)

Share-based compensation

 

934

 

 

 

787

 

 

 

2,000

 

 

 

1,444

 

Integration and transaction expense

 

156

 

 

 

991

 

 

 

2,000

 

 

 

1,877

 

Amortization of inventory step-up

 

257

 

 

 

168

 

 

 

257

 

 

 

336

 

Other non-recurring charges (1)

 

708

 

 

 

 

 

 

708

 

 

 

 

Adjusted EBITDA

$

1,184

 

 

$

1,021

 

 

$

2,906

 

 

$

2,352

 

(1) - Other non-recurring charges include 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 June 30,

 

Six Months Ended June 30,

 

2022

 

2021

 

2022

 

2021

 

 

 

 

Net (loss)/income

$

(2,351

)

 

$

(230

)

 

$

7,231

 

 

$

(548

)

Net income from discontinued operations

 

591

 

 

 

931

 

 

 

11,515

 

 

 

1,672

 

Net loss from continuing operations

 

(2,942

)

 

 

(1,161

)

 

 

(4,284

)

 

 

(2,220

)

Share-based compensation

 

934

 

 

 

787

 

 

 

2,000

 

 

 

1,444

 

Integration and transaction expense

 

156

 

 

 

991

 

 

 

2,000

 

 

 

1,877

 

Amortization of intangible assets

 

992

 

 

 

766

 

 

 

1,813

 

 

 

1,592

 

Amortization of inventory step-up

 

257

 

 

 

168

 

 

 

257

 

 

 

336

 

Other non-recurring charges (1)

 

708

 

 

 

 

 

 

708

 

 

 

 

Income tax effect on adjustments

 

(762

)

 

 

(678

)

 

 

(1,695

)

 

 

(1,312

)

Adjusted (loss)/income from continuing operations

$

(657

)

 

$

873

 

 

$

799

 

 

$

1,717

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EPS

$

(0.02

)

 

$

0.03

 

 

$

0.02

 

 

$

0.05

 

 

 

 

 

 

 

 

 

Adjusted weighted average shares (in thousands):

 

 

 

 

 

 

 

Diluted

 

32,479

 

 

 

31,495

 

 

 

32,362

 

 

 

31,413

 

(1) - Other non-recurring charges include customer accommodation, facility consolidation and debt refinancing costs.

 

Contacts

Investor Contact:

Allison Woody

Phone: 540-769-8465

Email: IR@lunainc.com

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