Financial News

Printer Friendly Version View printer-friendly version
<< Back
Luna Innovations Reports Strong Fourth Quarter and Full Year 2017 Financial Results
  • Revenue of $13.2 million and $46.2 million for the quarter and full fiscal year ended December 31, 2017, up 12.1% and 10.4%, respectively versus same periods prior year
  • Net income from continuing operations of $0.2 million, which includes effects of a one-time pre-tax charge of $0.7 million, and adjusted EBITDA of $1.2 million for the quarter ended December 31, 2017, compared to $0.3 million and $1.0 million, respectively, for the same period last year
  • Net loss from continuing operations of less than $0.1 million, which includes effects of a one-time pre-tax charge of $0.7 million, and Adjusted EBITDA of $2.5 million for the full year ended December 31, 2017, each up $2.6 million versus the prior full year

ROANOKE, Va.--(BUSINESS WIRE)--Mar. 20, 2018-- Luna Innovations Incorporated (NASDAQ: LUNA), a leader in advanced optical technology, today announced its financial results for the fourth quarter and year ended December 31, 2017.

“We are extremely pleased about our continued progress strategically and operationally, which resulted in our strong financial performance both for the fourth quarter and the full year ended December 31, 2017,” said Scott Graeff, President and Chief Executive Officer of Luna. “We delivered $0.7 million in income from continuing operations for the fourth quarter of 2017 when normalized for the $0.7 million one-time charge related to the departure of My Chung. We achieved double-digit growth in revenues year over year and recognized positive income from continuing operations for the fourth quarter. I'm incredibly proud of the whole Luna team, whose sharp focus allowed us to deliver these results. The demand for our test and measurement products is growing and this was reflected in our robust fourth quarter and 2017 full year results. Silicon photonics and its applications in high speed networks and data centers is driving the telecommunications test segment, and our ODiSI platform continues to gain traction with the ever-expanding use of composite materials in manufacturing. We believe the macro trends behind the growing demand in these markets leave us well positioned to continue our growth into 2018 and beyond."

Total revenues for the three months ended December 31, 2017, were $13.2 million, compared to $11.8 million for the three months ended December 31, 2016. Technology development revenues grew to $5.1 million for the three months ended December 31, 2017, from $4.5 million for the three months ended December 31, 2016. Products and licensing revenues were $8.1 million for the three months ended December 31, 2017, compared to $7.3 million for the three months ended December 31, 2016.

The company recognized income from continuing operations of $0.2 million for the three months ended December 31, 2017, compared to $0.3 million for the three months ended December 31, 2016. The 2017 results include the effects of a one-time pre-tax charge of $0.7 million in association with the retirement of the company's former chief executive officer in October 2017. Adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA") was $1.2 million for the three months ended December 31, 2017, compared to adjusted EBITDA of $1.0 million for the three months ended December 31, 2016. Adjusted EBITDA is a non-GAAP financial measure used by management to measure operating performance and is reconciled to income from continuing operations for the respective periods within the table included at the end of this release. Net income attributable to common stockholders was $0.4 million for the three months ended December 31, 2017 compared to $0.3 million for the three months ended December 31, 2016.

Fourth Quarter Financial Highlights

Gross profit increased to $5.4 million, or 41% of total revenues, for the three months ended December 31, 2017, compared to gross profit of $4.7 million, or 40% of total revenues, for the three months ended December 31, 2016.

Selling, general and administrative expenses increased to $4.4 million for the three months ended December 31, 2017, compared to $3.5 million for the three months ended December 31, 2016. Selling, general and administrative expenses for the three months ended December 31, 2017 included $0.7 million of costs incurred in association with the retirement of the company's former chief executive officer in October 2017, including both cash and share-based costs. Research, development and engineering expenses increased to $0.9 million for the three months ended December 31, 2017, compared to $0.8 million for the three months ended December 31, 2016.

Before taxes, the company achieved essentially break-even results from continuing operations for the three months ended December 31, 2017, compared to pre-tax income from continuing operations of $0.4 million for the three months ended December 31, 2016. Excluding the impact of the expenses recognized in connection with the retirement of the company's former chief executive officer, the pre-tax income from continuing operations for the three months ended December 31, 2017 would have been $0.7 million. After tax, the company recognized income from continuing operations of $0.2 million for the three months ended December 31, 2017, compared to $0.3 million for the three months ended December 31, 2016.

The company had income from discontinued operations of $0.2 million for the three months ended December 31, 2017 compared to a loss from discontinued operations of less than $0.1 million for the three months ended December 31, 2016.

Net income attributable to common stockholders was $0.4 million for the three months ended December 31, 2017, compared to $0.3 million for the three months ended December 31, 2016. Adjusted EBITDA was $1.2 million for the three months ended December 31, 2017, compared to adjusted EBITDA of $1.0 million for the three months ended December 31, 2016.

Cash and cash equivalents were $37.0 million as of December 31, 2017, and $12.8 million as of December 31, 2016. The company purchased approximately 483,000 shares of its common stock during the three months ended December 31, 2017.

Full Year 2017 Financial Highlights

Total revenues were $46.2 million for the year ended December 31, 2017, compared to $41.9 million for the year ended December 31, 2016. Technology development revenues increased to $18.6 million for the year ended December 31, 2017 compared to $16.3 million for the year ended December 31, 2016. Products and licensing revenues increased to $27.7 million for the year ended December 31, 2017, compared to $25.6 million for the year ended December 31, 2016.

Gross profit for the year ended December 31, 2017, grew to $18.1 million compared to $15.8 million for the year ended December 31, 2016. The gross margin was 39% of total revenues for the year ended December 31, 2017 and 38% for the year ended December 31, 2016.

Selling, general and administrative expenses remained flat at $14.8 million for the years ended December 31, 2017 and 2016. Selling, general and administrative expenses for 2017 included $0.7 million of costs related to the retirement of the company's former chief executive officer as described above.

Research, development and engineering expenses were $3.5 million for the years ended December 31, 2017 and 2016.

The company's resulting pre-tax loss from continuing operations improved to $0.3 million for the year ended December 31, 2017, compared to a pre-tax loss from continuing operations of $2.8 million for the year ended December 31, 2016. After tax, the company recognized a loss from continuing operations of less than $0.1 million for the year ended December 31, 2017, compared to $2.7 million for the year ended December 31, 2016.

For the year ended December 31, 2017, the company recognized income from discontinued operations of $14.7 million related to the after-tax gain associated with the sale of the company's HSOR business.

The company recognized net income attributable to common stockholders of $14.5 million for the year ended December 31, 2017, compared to a net loss attributable to common stockholders of $2.5 million for the year ended December 31, 2016. The net income for 2017 resulted from the income from discontinued operations discussed above. Adjusted EBITDA improved to $2.5 million for the year ended December 31, 2017, compared to $0.2 million for the year ended December 31, 2016.

Non-GAAP Measures

In evaluating the operating performance of its business, the company'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, the company 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 2017 and the full year ended December 31, 2017. The call can be accessed by dialing 844.578.9643 domestically or 270.823.1522 internationally prior to the start of the call. The participant access code is 3184618. 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 company's 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 leader in advanced optical technology, providing unique capabilities in high speed optoelectronics and high performance fiber optic test products for the telecommunications industry and distributed fiber optic sensing for the aerospace and automotive industries. The company is organized into two business segments, which work closely together to turn ideas into products: a Technology Development segment and a Products and Licensing segment. The company'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 the company's expectations regarding the company’s potential for continued growth in 2018 and beyond. 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 and those risks and uncertainties set forth in the company’s periodic reports and other filings with the Securities and Exchange Commission ("SEC"). Such filings are available on the SEC’s website at www.sec.gov and on 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 the company undertakes no obligation to update any of the forward-looking statements after the date of this release.

 

Luna Innovations Incorporated

Consolidated Statements of Operations

 
  Three months ended December 31,   Years ended December 31,
2017   2016 2017   2016
(unaudited) (unaudited)
Revenues:
Technology development revenues $ 5,147,954 $ 4,508,851 $ 18,576,383 $ 16,280,582
Products and licensing revenues   8,067,243     7,284,556     27,660,891     25,587,187  
Total revenues   13,215,197     11,793,407     46,237,274     41,867,769  
Cost of revenues:
Technology development costs 3,943,118 3,486,897 13,988,378 12,473,211
Products and licensing costs   3,919,842     3,634,871     14,120,071     13,589,858  
Total cost of revenues   7,862,960     7,121,768     28,108,449     26,063,069  
Gross profit   5,352,237     4,671,639     18,128,825     15,804,700  
Operating expense:
Selling, general and administrative 4,427,717 3,467,323 14,770,986 14,763,709
Research, development, and engineering   887,719     750,426     3,469,193     3,540,227  
Total operating expense   5,315,436     4,217,749     18,240,179     18,303,936  
Operating income/(loss)   36,801     453,890     (111,354 )   (2,499,236 )
Other expense:
Other income/(expense), net 175 15,002 (4,498 ) 13,071
Interest expense, net   (38,647 )   (82,253 )   (218,506 )   (319,334 )
Total other expense   (38,472 )   (67,251 )   (223,004 )   (306,263 )
(Loss)/income from continuing operations before income taxes (1,671 ) 386,639 (334,358 ) (2,805,499 )
Income tax (benefit)/expense   (235,915 )   38,233     (295,753 )   (135,567 )
Income/(loss) from continuing operations 234,244 348,406 (38,605 ) (2,669,932 )
Income/(loss) from discontinued operations, net of income taxes   201,085     (42,246 )   14,653,510     300,440  
Net income/(loss) 435,329 306,160 14,614,905 (2,369,492 )
Preferred stock dividend   49,558     30,527     146,889     105,258  
Net income/(loss) attributable to common stockholders $ 385,771   $ 275,633   $ 14,468,016   $ (2,474,750 )
Net income/(loss) per share from continuing operations:
Basic $ 0.01 $ 0.01 $ $ (0.10 )
Diluted $ 0.01 $ 0.01 $ $ (0.10 )
Net income/(loss) per share from discontinued operations:
Basic $ 0.01 $ $ 0.53 $ 0.01
Diluted $ 0.01 $ $ 0.53 $ 0.01
Net income/(loss) per share attributable to common stockholders:
Basic $ 0.01 $ 0.01 $ 0.52 $ (0.09 )
Diluted $ 0.01 $ 0.01 $ 0.52 $ (0.09 )
Weighted average shares:
Basic 27,485,278 27,543,882 27,579,988 27,547,217
Diluted 31,790,418 32,568,289 27,579,988 27,547,217
 
 

Luna Innovations Incorporated

Consolidated Balance Sheets

 
  December 31,
2017
  December 31,
2016
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 36,981,533 $ 12,802,458
Accounts receivable, net 9,857,009 10,269,012
Receivable from sale of HSOR business 4,000,976
Inventory, net 6,951,110 6,848,835
Prepaid expenses 1,220,650 1,375,659
Current assets held for sale       5,801,629  
Total current assets 59,011,278 37,097,593
Property and equipment, net 3,453,741 3,482,687
Intangible assets, net 3,237,593 3,367,217
Goodwill 502,000 502,000
Other assets 18,024 38,194
Non-current assets held for sale       10,509,282  
Total assets $ 66,222,636   $ 54,996,973  
Liabilities and stockholders’ equity
Current Liabilities:
Current portion of long term debt obligation 1,833,333 1,833,333
Current portion of capital lease obligation 43,665 52,128
Accounts payable 2,962,863 2,954,742
Accrued liabilities 8,959,935 7,913,544
Deferred revenue 1,026,339 837,906
Current liabilities held for sale       2,376,703  
Total current liabilities 14,826,135 15,968,356
Long-term deferred rent 1,184,438 1,319,402
Long-term debt obligation 603,007 2,420,032
Long-term capital lease obligation 71,275 114,940
Non-current liabilities held for sale       84,555  
Total liabilities   16,684,855     19,907,285  
Commitments and contingencies
Stockholders’ equity:
Preferred stock, par value $0.001, 1,321,514 shares authorized, issued and outstanding at December 31, 2017 and 2016 1,322 1,322
Common stock, par value $0.001, 100,000,000 shares authorized, 28,354,822 and 27,988,104 shares issued, 27,283,918 and 27,541,277 shares outstanding at December 31, 2017 and 2016, respectively 29,186 28,600
Treasury stock at cost, 1,070,904 and 446,827 shares at December 31, 2017 and 2016, respectively (1,649,746 ) (517,987 )
Additional paid-in capital 83,563,208 82,451,958
Accumulated deficit   (32,406,189 )   (46,874,205 )
Total stockholders’ equity   49,537,781     35,089,688  
Total liabilities and stockholders’ equity $ 66,222,636   $ 54,996,973  
 
 

Luna Innovations Incorporated

Consolidated Statements of Cash Flows

 
  Years ended December 31,
2017   2016
(unaudited)
Cash flows provided by/(used in) operating activities:
Net income/(loss) $ 14,614,905 $ (2,369,492 )
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
Depreciation and amortization 2,526,609 3,713,879
Stock-based compensation 715,094 860,215
Loss on disposal of fixed assets 3,640
Gain on sale of discontinued operations, net of income taxes (15,671,028 )
Bad Debt 99,888 305,593
Changes in operating assets and liabilities:
Accounts receivable 1,152,055 (3,568,761 )
Inventory (1,902,311 ) 492,932
Other assets 83,428 (238,736 )
Accounts payable and accrued expenses (896,534 ) 564,689
Deferred credits   189,296     (160,156 )
Net cash provided by/(used in) operating activities   915,042     (399,837 )
Cash flows provided by/(used in) investing activities:
Acquisition of property and equipment (1,352,531 ) (1,509,984 )
Proceeds from sale of property and equipment 3,000
Intangible property costs (495,597 ) (490,200 )
Proceeds from sale of discontinued operations, net   28,026,528      
Net cash provided by/(used in) investing activities   26,181,400     (2,000,184 )
Cash flows used in financing activities:
Payments on debt obligations (1,833,333 ) (1,871,635 )
Payments on capital lease obligation (52,128 ) (56,873 )
Purchase of treasury stock (1,131,759 ) (333,053 )
Borrowings under term loans
Proceeds from the exercise of options   99,853      
Net cash used in financing activities   (2,917,367 )   (2,261,561 )
Net change in cash and cash equivalents 24,179,075 (4,661,582 )
Cash and cash equivalents—beginning of period   12,802,458     17,464,040  
Cash and cash equivalents—end of period $ 36,981,533   $ 12,802,458  
Supplemental disclosure of cash flow information
Cash paid for interest $ 209,497 $ 308,116
Dividend on preferred stock, 79,292 shares of common stock issuable for each of the years ended December 31, 2017 and 2016 $ 146,889 $ 105,258
Cash paid for income taxes $ 377,907 $ 233,732
Cash received for income tax refunds $ $ 67,127
 
 

Luna Innovations Incorporated

Reconciliation of Income/(Loss) from Continuing Operations to EBITDA and Adjusted EBITDA

 
  Three months ended
December 31,
  Year ended
December 31,
2017   2016 2017   2016
(unaudited) (unaudited)
Income/(loss) from continuing operations $ 234,244   $ 348,406 $ (38,605 )   $ (2,669,932 )
Interest expense 38,647 82,253 218,506 319,334
Income tax (benefit)/expense (235,915 ) 38,233 (295,753 ) (135,567 )
Depreciation and amortization   375,049     376,931   1,261,768     1,466,171  
EBITDA 412,025 845,823 1,145,916 (1,019,994 )
Share-based compensation 238,667 194,861 715,094 860,215
CEO separation costs other than share-based compensation   595,992       595,992      
Adjusted EBITDA $ 1,246,684   $ 1,040,684 $ 2,457,002   $ (159,779 )
 

Source: Luna Innovations Incorporated

Investor Contact:
Luna Innovations Incorporated
Dale Messick, CFO, 1-540-769-8400
IR@lunainc.com