UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 11, 2021
(Exact name of registrant as specified in its charter)
(Address of principal executive offices, including zip code)
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth Company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b‑2 of the Securities Exchange Act of 1934 (§240.12b‑2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02. | Results of Operations and Financial Condition | ||||
On March 11, 2021, Luna Innovations Incorporated (the “Company”) issued a press release announcing its financial results for the three months and year ended December 31, 2020, as well as information regarding a conference call to discuss these financial results and the Company's recent corporate highlights and outlook. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
Also on March 11, 2021, the Company is posting an updated slide presentation on its corporate website and will be using the presentation in connection with the conference call discussed above. A copy of the presentation is furnished herewith as Exhibit 99.2 to this Current Report on Form 8-K.
The information in this Current Report on Form 8-K and Exhibits 99.1 and 99.2 attached hereto are being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.
| Item 9.01. | Financial Statements and Exhibits | ||||
(d)Exhibits.
| Exhibit | Description | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Luna Innovations Incorporated | ||||||||
| By: | /s/ Scott A. Graeff | |||||||
| Scott A. Graeff President and Chief Executive Officer | ||||||||
Date: March 11, 2021
Exhibit 99.1
Luna Innovations Reports Record Fourth-Quarter
and Full-Year 2020 Results
Company provides 2021 outlook
Fourth Quarter Highlights
•Created the world's largest fiber optic sensing company with the acquisition of OptaSense Holdings, Ltd ("OptaSense") in early December
•Total revenues of $25.9 million for the three months ended December 31, 2020, up 33%, compared to the prior-year period
◦Excluding the acquisition of OptaSense, total revenues of $24.4 million, up 25%
•Operating income of $0.5 million for the three months ended December 31, 2020, compared to $1.7 million for the prior-year period
◦Excluding the acquisition of OptaSense and acquisition-related expenses, operating income of $3.7 million for the three months ended December 31, 2020
•Net loss from continuing operations of $0.1 million for the three months ended December 31, 2020, compared to net income from continuing operations of $2.1 million for the prior-year period
◦Excluding the acquisition of OptaSense and acquisition-related expenses, net income from continuing operations of $3.0 million, or $0.09 per fully diluted share, for three months ended December 31, 2020
•Adjusted EBITDA of $4.3 million for the three months ended December 31, 2020, compared to $3.2 million for the prior-year period
◦Excluding the acquisition of OptaSense and acquisition-related expenses, adjusted EBITDA of $5.0 million for the three months ended December 31, 2020
(ROANOKE, VA, March 11, 2021) - Luna Innovations Incorporated (NASDAQ: LUNA), a global leader in advanced optical technology, today announced its financial results for the three months and full fiscal year ended December 31, 2020.
“Our outstanding operating and financial performance in 2020 in the midst of a pandemic underscores the strength of our product portfolio, our ability to innovate and the fact that we are clear about our strategy and have not wavered from our stated vision,” said Scott Graeff, President and Chief Executive Officer of Luna. “From an
operational standpoint, the absolute focus and dedication of our team was evident as we continued to execute against that strategy to support our customers, keep our employees safe and deliver the financial results that we guided to before COVID permeated our lives."
Graeff continued, "In spite of the fact that we could not travel and meet in person, we continued to work our acquisition pipeline and recently completed the acquisition of OptaSense, the largest transaction in our history. Our financial achievements were equally as impressive, achieving double-digit top-line growth and record revenue for 2020. I am inspired by the commitment and hard work of the Luna team, all of whom continued to ensure service excellence for our customers. This performance and focus gives us a very strong springboard entering 2021.”
Fourth Quarter Fiscal 2020 Financial Summary
Financial results for the three months ended December 31, 2020 continue the strong momentum throughout the fiscal year. The reported performance metrics below include OptaSense for the stub period starting from the acquisition date of December 3, 2020 through December 31, 2020. Given the timing of the close of the transaction so late in the quarter and fiscal year, the inclusion of the results of operations of OptaSense for this stub period does not reflect integration costs or cost synergies from the transaction.
Highlights of the financial results for the three months ended December 31, 2020 are:
| Three Months Ended December 31, | |||||||||||||||||||||||||||||
| (in thousands, except per share data) | 2020 | 2019 | Change | ||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||
| Lightwave | $ | 19,278 | $ | 13,988 | 38 | % | |||||||||||||||||||||||
| Luna Labs | 6,637 | 5,492 | 21 | % | |||||||||||||||||||||||||
| Total revenues | 25,915 | 19,480 | 33 | % | |||||||||||||||||||||||||
| Gross profit | 13,358 | 10,388 | 29 | % | |||||||||||||||||||||||||
| Gross margin | 51.5 | % | 53.3 | % | |||||||||||||||||||||||||
| Operating expense | 12,828 | 8,670 | 48 | % | |||||||||||||||||||||||||
| Operating income | 530 | 1,718 | (69) | % | |||||||||||||||||||||||||
| Operating margin | 2.0 | % | 8.8 | % | |||||||||||||||||||||||||
| Net income/(loss) from continuing operations | $ | (64) | $ | 2,146 | (103) | % | |||||||||||||||||||||||
| Diluted weighted average shares outstanding (in thousands) | 32,831 | 32,212 | |||||||||||||||||||||||||||
| Net income per share from continuing operations (diluted) | $ | — | $ | 0.07 | |||||||||||||||||||||||||
| Adjusted EBITDA | $ | 4,283 | $ | 3,238 | 32 | % | |||||||||||||||||||||||
A reconciliation of Adjusted EBITDA to net (loss)/income can be found in the schedules included in this release.
The reported results reflect the inclusion of the incremental revenues of $1.5 million associated with the operations of OptaSense for the stub period from December 3, 2020 through December 31, 2020. Excluding the revenue from OptaSense, Lightwave revenue increased by $3.8 million for the three months ended December 31, 2020, or 27%, compared to the prior year period, to $17.8 million. This increase in revenue was due to increased revenues associated with communications test and fiber optic sensing products. Luna Labs revenues increased for the three months ended December 31, 2020, compared to the prior-year period due in part to a large shipment of product to a US military branch to help reduce maintenance costs. Excluding the revenue from OptaSense, total revenue increased by $4.9 million, or 25%, compared to the prior year period, to $24.4 million.
Gross profit for the three months ended December 31, 2020 increased compared to the prior-year period due to increased revenues associated with legacy Luna operations as well as an incremental $0.7 million of gross profit associated with the operations of OptaSense for the stub period from December 3, 2020 through December 31, 2020. Excluding the gross profit from OptaSense, gross profit increased $2.3 million, or 22%, compared to the prior year period, to $12.7 million.
The increase in operating expenses was primarily a result of $2.2 million of acquisition related expenses incurred in connection with the acquisition of OptaSense and $1.6 million of expenses associated with OptaSense operations for the stub period from December 3, 2020 through December 31, 2020, as well continued incremental investment in sales and engineering to support Luna's growth. Excluding the acquisition-related expenses and expenses of OptaSense operations, operating income increased $2.0 million, or 114%, compared to the prior-year period, to $3.7 million, representing an operating margin on legacy Luna operations of 15%.
Net loss from continuing operations was $0.1 million, or $0.00 per fully diluted share, for the three months ended December 31, 2020, compared to net income from continuing operations of $2.1 million, or $0.07 per fully diluted share, for the prior-year period. The decrease in net income from continuing operations was driven by $2.3 million of acquisition related expenses more than offsetting increased revenue and strong operating results from Luna's legacy operations. Excluding acquisition-related expenses and a $0.9 million loss from the operations of OptaSense, net income from continuing operations increased by $0.8 million, or 39%, to $3.0 million or $0.09 per fully diluted share.
Adjusted EBITDA was $4.3 million for the three months ended December 31, 2020, compared to $3.2 million for the three months ended December 31, 2019. The increase was driven by revenue growth from both Lightwave and Luna Labs. Legacy Adjusted EBITDA, which excludes the effects of the OptaSense acquisition, was $5.0 million for the three months ended December 31, 2020.
Full-Year Fiscal 2020 Financial Summary
Highlights of the financial results for the twelve months ended December 31, 2020 are:
| Full Year Ended December 31, | |||||||||||||||||||||||||||||
| (in thousands, except per share data) | 2020 | 2019 | Change | ||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||
| Lightwave | $ | 59,115 | $ | 49,117 | 20 | % | |||||||||||||||||||||||
| Luna Labs | $ | 23,566 | $ | 21,399 | 10 | % | |||||||||||||||||||||||
| Total revenues | $ | 82,681 | $ | 70,516 | 17 | % | |||||||||||||||||||||||
| Gross profit | $ | 42,188 | $ | 35,183 | 20 | % | |||||||||||||||||||||||
| Gross margin | 51.0 | % | 49.9 | % | |||||||||||||||||||||||||
| Operating expense | 37,205 | 31,867 | 17 | % | |||||||||||||||||||||||||
| Operating income | 4,983 | 3,316 | 50 | % | |||||||||||||||||||||||||
| Operating margin | 6.0 | % | 4.7 | % | |||||||||||||||||||||||||
| Net income from continuing operations | $ | 4,727 | $ | 5,343 | (12) | % | |||||||||||||||||||||||
| Diluted weighted average shares outstanding | 32,579 | 31,841 | |||||||||||||||||||||||||||
| Net income per share from continuing operations (diluted) | $ | 0.15 | $ | 0.17 | |||||||||||||||||||||||||
| Adjusted EBITDA | $ | 13,087 | $ | 9,473 | 38 | % | |||||||||||||||||||||||
A reconciliation of Adjusted EBITDA to net income can be found in the schedules included in this release.
2021 Full-Year Outlook:
For fiscal year 2021, Luna expects:
•Total revenues in the range of $122 million to $127 million for full fiscal 2021; and
•Adjusted EBITDA in the range of $16 million to $19 million for full fiscal 2021.
Luna is not providing an outlook for net income, which is the most directly comparable generally accepted accounting principles ("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, Legacy Adjusted EBITDA and Legacy Adjusted EPS, which exclude certain charges and credits that are required by GAAP. Adjusted EBITDA, Legacy Adjusted EBITDA and Legacy 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. Legacy Adjusted EBITDA and Legacy Adjusted EPS exclude the effects of the acquisition of OptaSense in December 2020, which management believes is useful to assess the profitability of the legacy Luna business on a standalone basis. Adjusted EBITDA, Legacy Adjusted EBITDA and Legacy Adjusted EPS should be considered in addition to results prepared in accordance with GAAP, but should not be considered substitutes for, or superior to, GAAP results. Adjusted EBITDA, Legacy Adjusted EBITDA and Legacy 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 to discuss its financial results for the three months and full year ended December 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 3898157. 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 Lightwave segment and a Luna Labs 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 2021 financial results and
outlook and growth potential, as well as the impacts of the recently completed acquisition of OptaSense. 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 and those risks and uncertainties set forth in Luna’s Form 10-Q for the quarter ended September 30, 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.
Investor Contact:
Allison Woody
Phone: 540-769-8465
Email: IR@lunainc.com
Luna Innovations Incorporated
Consolidated Balance Sheets
(in thousands of U.S Dollars)
| December 31, 2020 | December 31, 2019 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 15,366 | $ | 25,006 | |||||||
| Accounts receivable, net | 24,951 | 16,269 | |||||||||
| Receivable from sale of HSOR business | — | 2,501 | |||||||||
| Contract assets | 7,046 | 2,759 | |||||||||
| Inventory | 23,597 | 10,294 | |||||||||
| Prepaid expenses and other current assets | 4,509 | 1,287 | |||||||||
| Total current assets | 75,469 | 58,116 | |||||||||
| Property and equipment, net | 3,308 | 3,466 | |||||||||
| Intangible assets, net | 20,109 | 10,194 | |||||||||
| Goodwill | 18,121 | 10,542 | |||||||||
| Long term contract assets | 471 | 449 | |||||||||
| Operating lease ROU asset | 11,281 | 2,236 | |||||||||
| Finance lease ROU asset | 244 | 70 | |||||||||
| Other assets | 39 | 35 | |||||||||
| Deferred tax asset | 1,960 | 1,416 | |||||||||
| Total assets | 131,002 | 86,524 | |||||||||
| Liabilities and stockholders’ equity | |||||||||||
| Current liabilities: | |||||||||||
| Current portion of long-term debt obligation | $ | 4,167 | $ | — | |||||||
| Accounts payable | 4,393 | 2,787 | |||||||||
| Accrued liabilities | 12,159 | 9,036 | |||||||||
| Contract liabilities | 7,095 | 3,888 | |||||||||
| Current portion of operating lease ROU liability | 2,223 | 1,283 | |||||||||
| Current portion of finance lease ROU liability | 48 | 50 | |||||||||
| Total current liabilities | 30,085 | 17,044 | |||||||||
| Long-term debt obligation | 15,817 | — | |||||||||
| Long-term portion of operating lease ROU liability | 10,248 | 1,988 | |||||||||
| Long-term portion of finance lease ROU liability | 196 | 23 | |||||||||
| Other long-term liabilities | 214 | — | |||||||||
| Total liabilities | 56,560 | 19,055 | |||||||||
| Stockholders’ equity: | |||||||||||
Common stock, par value $0.001, 100,000,000 shares authorized, 32,724,512 and 31,788,896 shares issued, 31,024,537 and 30,149,105 shares outstanding at December 31, 2020 and 2019, respectively | 33 | 32 | |||||||||
Treasury stock at cost, 1,699,975 and 1,639,791 shares at December 31, 2020 and 2019, respectively | (4,789) | (4,337) | |||||||||
| Additional paid-in capital | 92,403 | 88,022 | |||||||||
| Accumulated deficit | (12,957) | (16,248) | |||||||||
| Accumulated other comprehensive loss | (248) | — | |||||||||
| Total stockholders’ equity | 74,442 | 67,469 | |||||||||
| Total liabilities and stockholders’ equity | $ | 131,002 | $ | 86,524 | |||||||
Luna Innovations Incorporated
Consolidated Statements of Operations
(in thousands of U.S. Dollars, except per share data)
| Three months ended December 31, | Year ended December 31, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Lightwave revenues | $ | 19,278 | $ | 13,988 | $ | 59,115 | $ | 49,117 | |||||||||||||||
| Luna Labs revenues | 6,637 | 5,492 | 23,566 | 21,399 | |||||||||||||||||||
| Total revenues | 25,915 | 19,480 | 82,681 | 70,516 | |||||||||||||||||||
| Cost of revenues: | |||||||||||||||||||||||
| Lightwave costs | 7,570 | 5,070 | 23,306 | 20,157 | |||||||||||||||||||
| Luna Labs costs | 4,987 | 4,022 | 17,187 | 15,176 | |||||||||||||||||||
| Total cost of revenues | 12,557 | 9,092 | 40,493 | 35,333 | |||||||||||||||||||
| Gross profit | 13,358 | 10,388 | 42,188 | 35,183 | |||||||||||||||||||
| Operating expense: | |||||||||||||||||||||||
| Selling, general and administrative | 8,559 | 6,330 | 27,644 | 23,344 | |||||||||||||||||||
| Research, development and engineering | 1,996 | 2,255 | 6,713 | 7,496 | |||||||||||||||||||
| Acquisition related expense | 2,204 | 85 | 2,204 | 1,027 | |||||||||||||||||||
| Loss on sale and disposal of property and equipment | 69 | — | 644 | — | |||||||||||||||||||
| Total operating expense | 12,828 | 8,670 | 37,205 | 31,867 | |||||||||||||||||||
| Operating income | 530 | 1,718 | 4,983 | 3,316 | |||||||||||||||||||
| Other income/(expense): | |||||||||||||||||||||||
| Other income/(expense), net | 31 | (1) | 50 | (5) | |||||||||||||||||||
| Investment income | 2 | 69 | 67 | 394 | |||||||||||||||||||
| Interest expense, net | (23) | (1) | (25) | (16) | |||||||||||||||||||
| Total other income | 10 | 67 | 92 | 373 | |||||||||||||||||||
| Income from continuing operations before income taxes | 540 | 1,785 | 5,075 | 3,689 | |||||||||||||||||||
| Income tax (expense)/benefit | (604) | 361 | (348) | 1,654 | |||||||||||||||||||
| (Loss)/income from continuing operations | (64) | 2,146 | 4,727 | 5,343 | |||||||||||||||||||
| Income from discontinued operations, net of income taxes | — | — | (1,436) | — | |||||||||||||||||||
| Net (loss)/income | (64) | 2,146 | 3,291 | 5,343 | |||||||||||||||||||
| Preferred stock dividend | — | — | — | 286 | |||||||||||||||||||
| Net (loss)/income attributable to common stockholders | $ | (64) | $ | 2,146 | $ | 3,291 | $ | 5,057 | |||||||||||||||
| Net income per share from continuing operations: | |||||||||||||||||||||||
| Basic | $ | — | $ | 0.07 | $ | 0.15 | $ | 0.19 | |||||||||||||||
| Diluted | $ | — | $ | 0.07 | $ | 0.15 | $ | 0.17 | |||||||||||||||
| Net loss per share from discontinued operations: | |||||||||||||||||||||||
| Basic | $ | — | $ | — | $ | (0.05) | $ | — | |||||||||||||||
| Diluted | $ | — | $ | — | $ | (0.04) | $ | — | |||||||||||||||
| Net income per share attributable to common stockholders: | |||||||||||||||||||||||
| Basic | $ | — | $ | 0.07 | $ | 0.11 | $ | 0.18 | |||||||||||||||
| Diluted | $ | — | $ | 0.07 | $ | 0.10 | $ | 0.16 | |||||||||||||||
| Weighted average shares (in thousands): | |||||||||||||||||||||||
| Basic | 30,896 | 30,159 | 30,670 | 28,689 | |||||||||||||||||||
| Diluted | 32,831 | 32,212 | 32,579 | 31,841 | |||||||||||||||||||
Luna Innovations Incorporated
Consolidated Statements of Cash Flows
(in thousands of U.S. Dollars)
| Year ended December 31, | ||||||||||||||
| 2020 | 2019 | |||||||||||||
| Cash flows provided by operating activities: | ||||||||||||||
| Net income | $ | 3,291 | $ | 5,343 | ||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
| Depreciation and amortization | 2,970 | 2,503 | ||||||||||||
| Stock-based compensation | 2,134 | 1,544 | ||||||||||||
| Loss on sale and disposal of property and equipment | 644 | — | ||||||||||||
| Loss from discontinued operations, net of tax | 1,436 | — | ||||||||||||
| Deferred tax asset | (522) | — | ||||||||||||
| Tax benefit from release of valuation allowance | — | (3,349) | ||||||||||||
| Bad debt | 127 | 538 | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||
| Accounts receivable | (3,292) | (2,249) | ||||||||||||
| Contract assets | (1,504) | (449) | ||||||||||||
| Inventory | (1,550) | (723) | ||||||||||||
| Other current assets | (2,203) | (242) | ||||||||||||
| Other long-term assets | (3) | 45 | ||||||||||||
| Accounts payable and accrued expenses | 1,143 | 592 | ||||||||||||
| Contract liabilities | (29) | 1,245 | ||||||||||||
| Other long-term liabilities | 214 | — | ||||||||||||
| Net cash provided by operating activities | 2,856 | 4,798 | ||||||||||||
| Cash flows used in investing activities: | ||||||||||||||
| Acquisitions, net of cash acquired | (34,102) | (19,004) | ||||||||||||
| Acquisition of property and equipment | (681) | (541) | ||||||||||||
| Proceeds from sale of property and equipment | 403 | — | ||||||||||||
| Intangible property costs | (379) | (270) | ||||||||||||
| Proceeds from sale of discontinued operations, net | 600 | — | ||||||||||||
| Net cash used in investing activities | (34,159) | (19,815) | ||||||||||||
| Cash flows provided by/(used in) financing activities: | ||||||||||||||
| Proceeds from debt obligations | 19,984 | — | ||||||||||||
| Payments on debt obligations | — | (625) | ||||||||||||
| Payments on finance lease obligation | (53) | (40) | ||||||||||||
| Purchase of treasury stock | (452) | (2,220) | ||||||||||||
| Proceeds from ESPP | 456 | — | ||||||||||||
| Proceeds from the exercise of options | 1,714 | 448 | ||||||||||||
| Net cash provided by/(used in) financing activities | 21,649 | (2,437) | ||||||||||||
| Net change in cash and cash equivalents | (9,654) | (17,454) | ||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | 14 | — | ||||||||||||
| Cash and cash equivalents—beginning of period | 25,006 | 42,460 | ||||||||||||
| Cash and cash equivalents—end of period | $ | 15,366 | $ | 25,006 | ||||||||||
| Supplemental disclosure of cash flow information | ||||||||||||||
| Cash paid for interest | $ | 4 | $ | 18 | ||||||||||
| Cash paid for income taxes | $ | 1,244 | $ | 1,160 | ||||||||||
| Contingent liability for business combinations | $ | 225 | $ | 1,000 | ||||||||||
| Dividend on preferred stock | $ | — | $ | 286 | ||||||||||
Luna Innovations Incorporated
Reconciliation of Net Income to Adjusted EBITDA and Legacy Adjusted EBITDA
(in thousands)
| Three months ended December 31, | Year ended December 31, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Net (loss)/income | $ | (64) | $ | 2,146 | $ | 3,291 | $ | 5,343 | |||||||||||||||
| Loss from discontinued operations, net of income taxes | — | — | (1,436) | — | |||||||||||||||||||
| Net (loss)/income from continuing operations | (64) | 2,146 | 4,727 | 5,343 | |||||||||||||||||||
| Interest expense | 23 | 1 | 25 | 16 | |||||||||||||||||||
| Investment income | (2) | (69) | (67) | (394) | |||||||||||||||||||
| Income tax expense/(benefit) | 604 | (361) | 348 | (1,654) | |||||||||||||||||||
| Depreciation and amortization | 844 | 669 | 2,970 | 2,503 | |||||||||||||||||||
| EBITDA | 1,405 | 2,386 | 8,003 | 5,814 | |||||||||||||||||||
| Share-based compensation | 596 | 404 | 2,134 | 1,544 | |||||||||||||||||||
| Acquisition related expense | 2,204 | 85 | 2,204 | 1,027 | |||||||||||||||||||
| Amortization of inventory step-up | 78 | — | 78 | 725 | |||||||||||||||||||
| Non-recurring charges | — | 363 | 668 | 363 | |||||||||||||||||||
| Adjusted EBITDA | $ | 4,283 | $ | 3,238 | $ | 13,087 | $ | 9,473 | |||||||||||||||
| OptaSense operating loss | 869 | — | 869 | — | |||||||||||||||||||
| Less: depreciation and amortization | 154 | — | 154 | — | |||||||||||||||||||
| Less: amortization of inventory step-up | 35 | — | 35 | — | |||||||||||||||||||
| Legacy Adjusted EBITDA | $ | 4,963 | $ | 3,238 | $ | 13,767 | $ | 9,473 | |||||||||||||||
Luna Innovations Incorporated
Reconciliation of Net Income to Adjusted EPS and Legacy Adjusted EPS
(in thousands)
| Three months ended December 31, | Year ended December 31, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Net (loss)/income | $ | (64) | $ | 2,146 | $ | 3,291 | $ | 5,343 | |||||||||||||||
| Loss from discontinued operations, net of income taxes | — | — | (1,436) | — | |||||||||||||||||||
| Net (loss)/income from continuing operations | (64) | 2,146 | 4,727 | 5,343 | |||||||||||||||||||
| Share-based compensation | 596 | 404 | 2,134 | 1,544 | |||||||||||||||||||
| Acquisition related expense | 2,204 | 85 | 2,204 | 1,027 | |||||||||||||||||||
| Amortization of inventory step-up | 78 | — | 78 | 725 | |||||||||||||||||||
| Non-recurring charges | — | 363 | 668 | 363 | |||||||||||||||||||
| Release of valuation allowance | (568) | (907) | |||||||||||||||||||||
| Income tax adjustment | (322) | (232) | (1,198) | (811) | |||||||||||||||||||
| Adjusted income from continuing operations | $ | 2,492 | $ | 2,198 | $ | 8,613 | $ | 7,284 | |||||||||||||||
| OptaSense net loss | (863) | — | (863) | — | |||||||||||||||||||
| Legacy adjusted income from continuing operations | $ | 3,355 | $ | 2,198 | $ | 9,476 | $ | 7,284 | |||||||||||||||
| Adjusted EPS | $ | 0.08 | $ | 0.07 | $ | 0.26 | $ | 0.23 | |||||||||||||||
| Legacy Adjusted EPS | $ | 0.10 | $ | 0.07 | $ | 0.29 | $ | 0.23 | |||||||||||||||
| Adjusted weighted average shares (in thousands): | |||||||||||||||||||||||
| Diluted | 32,831 | 32,212 | 32,579 | 31,841 | |||||||||||||||||||
###
Fourth-quarter and Full-Year 2020 Earnings Investor Supplemental Materials March 11th, 2021
NASDAQ: LUNA Luna Innovations Incorporated© 2021 2 Safe Harbor Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 This presentation includes information that constitutes “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 future financial performance, including 2021 guidance, and the market and potential demand for its products, the company's growth potential, its balance sheet and capitalization and access to capital, its technological advantages and capabilities, its continuity of operations during the COVID-19 pandemic, upgrades to enterprise software, its strategic position, and corporate culture. 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, failure of target markets to grow and expand, technological, operational and strategic challenges, uncertainties related to the ultimate impact of the COVID-19 pandemic 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 presentation are based on information available to Luna as of the date of this presentation, March 11, 2021, and Luna undertakes no obligation to update any of the forward-looking statements after the date of this presentation, except as required by law. Adjusted Financial Measures In addition to U.S. GAAP financial information, this presentation includes Adjusted EBITDA, a non-GAAP financial measure. This non-GAAP financial measure is in addition to, and not a substitute for or superior to, measures of financial performance prepared in accordance with U.S. GAAP. A reconciliation of Adjusted EBITDA to Net Income is included in the appendix to this presentation.
4Q and Full-Year FY20 Results
NASDAQ: LUNA Luna Innovations Incorporated© 2021 4 Fourth-quarter 2020: Key Financial Results Q4 was Luna’s strongest-ever fourth quarter, although reported results included the OptaSense acquisition and its associated costs and stub period results. In order to help understand trends in ongoing operating performance (that will compare to 2021 guidance), we are also providing metrics without OptaSense. Total revenues of $25.9M; up 33% year-over-year; revenues of $24.4M, up 25% excluding OptaSense Lightwave revenue of $19.3M, up 38% year-over-year • Excluding OptaSense, revenue of $17.8M, up 27% Luna Labs revenue of $6.6M, up 21% year-over-year Operating income of $0.5M, compared to $1.7M for the prior-year period Excluding OptaSense and deal related costs, Operating income of $3.7M for Q4 2020, or a margin of 15% Net loss from continuing operations of $0.1M, compared to income of $2.1M for the prior-year period Excluding OptaSense and deal related costs, Net Income from continuing operations of $3.0M for Q4 2020, or $0.09 per fully diluted share Adjusted EBITDA of $4.3M, compared to $3.2M for the prior-year period Excluding OptaSense and deal related costs, Adjusted EBITDA of $5.0M for Q4 2020 1Adj EPS and EBITDA are a non-GAAP measures. Reconciliation of comparable GAAP measures to non-GAAP measures are included in the appendix to this presentation.
NASDAQ: LUNA Luna Innovations Incorporated© 2021 5 Full-Year 2020: Key Financial Results Total revenues of $82.7M; up 17% year-over-year; Revenues of $81.2M, up 15% excluding OptaSense Lightwave revenue of $59.1M, up 20% year-over-year • Excluding OptaSense, revenue of $57.6M, up 17% Luna Labs revenue of $23.6M, up 10% year-over-year Operating income of $5.0M, compared to $3.3M in FY 2019 Excluding OptaSense and deal related costs, Operating income of $8.1M for FY 2020, or a margin of 10% Net income from continuing operations of $4.7M, compared to $5.3M in FY 2019 Excluding OptaSense and deal related costs, Net Income from continuing operations of $7.8M for FY 2020, or $0.24 per fully diluted share Adjusted EBITDA of $13.1M, compared to $9.5M in FY 2019 Excluding OptaSense and deal related costs, Adjusted EBITDA of $13.8M for FY 2020 1Adj EPS and EBITDA are non-GAAP measures. Reconciliation of comparable GAAP measures to non-GAAP measures are included in the appendix to this presentation.
NASDAQ: LUNA Luna Innovations Incorporated© 2021 6 Fourth-quarter 2020 Highlights and Accomplishments Reported strong fourth-quarter 2020 financial results in challenging COVID environment Acquired OptaSense, a leader in distributed acoustic sensing Providing fully distributed measurement capabilities for long-range applications Secured new debt facility with PNC Bank, establishing important new banking relationship $12.5M term facility $15.0M revolver facility • $7.5M drawn on revolver Closed single largest instrument order in company history $6.2M deal with Lockheed Martin
NASDAQ: LUNA Luna Innovations Incorporated© 2021 7 FY 2020 Highlights and Accomplishments Maintained continuity of operations through global pandemic Health and safety of employees remained a high priority Completed the acquisitions of OptaSense and New Ridge Technologies adding significant talent, product depth, IP (over 150 patents) and a global footprint Continued focus on building sales pipeline and interacting with customers through frequent videoconferencing calls, virtual sales conference, tradeshows and Luna-hosted product education webinars Implemented organization-wide upgrades to enterprise software and other foundational items NetSuite Salesforce.com Hired into key positions, both in operations and corporate shared services Employee Stock Purchase Plan Human Capital Management providers Added to the Russell 3000® and Small-Cap Russell 2000 ® Indexes
NASDAQ: LUNA Luna Innovations Incorporated© 2021 8 ($2.0) $0.3 $9.5 FY16 FY17 FY18 FY19 FY20 Adjusted EBITDA1 (millions) $3.1 $29.6 $33.1 $42.9 $70.5 FY16 FY17 FY18 FY19 FY20 Revenue (millions) $82.7 Strong Financial Results 1 Adj EBITDA is a non-GAAP measure. Reconciliation of comparable GAAP measures to non-GAAP measures are included in the appendix to this presentation. 11/9/20 Guidance: $81.0 - $83.0 11/9/2020 Guidance: $10.0 to $12.0 $13.1
NASDAQ: LUNA Luna Innovations Incorporated© 2021 9 A Flexible Balance Sheet Strong balance sheet on December 31, 2020: $131.0M in total assets • $15.4M in cash and cash equivalents • $45.4M in working capital Total debt of $20.0M outstanding $12.5M in term debt $7.5M drawn on revolver • $7.5M available Allows us to deploy our capital to generate long-term sustainable growth by increasing organic sales, reinvesting in our business and identifying inorganic opportunities
NASDAQ: LUNA Luna Innovations Incorporated© 2021 10 2021 Financial Outlook Issuing FY 2021 outlook: Total revenues of $122M to $127M Adjusted EBITDA1 of $16M to $19M 1 Adj EBITDA is a non-GAAP measure. Reconciliation of comparable GAAP measures to non-GAAP measures are included in the appendix to this presentation. The outlook above does not include any future acquisitions, divestitures, or unanticipated events.
NASDAQ: LUNA Luna Innovations Incorporated© 2021 11 Luna – Enabling the Future with Fiber Positioned as a global fiber optic leader Proprietary measurement technology, offering unprecedented combination of resolution, accuracy and speed Customers in attractive markets: Military and Defense, Communications, Infrastructure, Energy, Automotive and Aerospace Positioned to take advantage of trends such as vehicle lightweighting, smart infrastructure, and increasing demands on data centers and broadband capacity Adequately capitalized to fund growth Long-tenured, experienced executive team / board Corporate culture of innovation and integrity Overview
Appendix
NASDAQ: LUNA Luna Innovations Incorporated© 2021 13 Reconciliation of Net Income to Adjusted EBITDA (1) Non-recurring charges consist of the following: 2020) footprint consolidation 2019) CFO transition expenses
NASDAQ: LUNA Luna Innovations Incorporated© 2021 14 Reconciliation of Net Income to Adjusted EBITDA: Full Year (1) Non-recurring charges include the following: 2017) CEO separation costs and other share-based compensation; 2018) Transaction-related expenses associated with the acquisition of Micron Optics, Inc.; 2019) CFO transition expenses; 2020) footprint consolidation
NASDAQ: LUNA Luna Innovations Incorporated© 2021 15 Reconciliation of Net Income to Adjusted and Legacy Adjusted EPS (1) Non-recurring charges consist of the following: 2020) footprint consolidation 2019) CFO transition expenses. 2020 2019 2020 2019 Reconciliation of Net Income to Adjusted EPS Net income (63)$ 2,146$ 3,291$ 5,343$ Loss from discontinued operations, net of income tax benefit of $464 - - 1,436 - GAAP (loss)/income from continuing operations (63)$ 2,146$ 4,727$ 5,343$ Adjustments: Stock Based Compensation 596 404 2,134 1,544 Acquisition related expense 2,204 85 2,204 1,027 Amortization of Inventory Step-up 78 - 78 725 Non-Recurring Items (1) - 363 668 363 Release of Valuation Allowance (568) - (907) Total adjustments: 2,878 284 5,084 2,752 Income tax adjustment - benefit (expense) (322) (232) (1,198) (811) Adjusted (loss)/income from continuing operations 2,492$ 2,198$ 8,613$ 7,284$ Optasense net loss (863) (863) Legacy adjusted income from continuing operations 3,355$ 2,198$ 9,476$ 7,284$ Adjusted EPS 0.08 0.07 0.26 0.23 Legacy Adjusted EPS 0.10 0.07 0.29 0.23 Adjusted weighted average shares (in thousands): Diluted 32,831 32,212 32,579 31,841 Three Months Ended Twelve Months Ended December 31, December 31, (Unaudited) (Unaudited)
NASDAQ: LUNA Luna Innovations Incorporated© 2021 16 Historical Quarterly Results