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): November 10, 2022
(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 November 10, 2022 , Luna Innovations Incorporated (the “Company”) issued a press release announcing its financial results for the three and nine months ended September 30, 2022, 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 November 10, 2022 , 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 | ||||||||
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: November 10, 2022
Exhibit 99.1
Luna Innovations Reports Strong Third-Quarter 2022 Results
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
(ROANOKE, VA, November 10, 2022) - 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.
Investor Contact:
Allison Woody
Phone: 540-769-8465
Email: IR@lunainc.com
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.
###
Third-Quarter 2022 Results Investor Supplemental Materials November 10, 2022
NASDAQ: LUNA Luna Innovations Incorporated© 2022 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 its technological and product capabilities and critical nature, its market position and penetration, sales bookings, sales market and revenue growth, intellectual property position, the company's future financial performance, including guidance, and market recognition of key technologies and demand for its products, the company’s overall growth potential, its balance sheet and capitalization and access to, and deployment of, capital, its strategic position, and corporate and leadership 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 to penetrate target markets or of those markets to grow and expand, technological, operational and strategic challenges, integration of acquisitions, potential performance shortfalls as a result of the diversion of management’s attention caused by transactions and integrating operations, global supply chain issues, geopolitical and economic factors 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, November 10, 2022, 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 and Adjusted EPS, which are non-GAAP financial measures. These non-GAAP financial measures are 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 Net Income to Adjusted EBITDA and Net Income to Adjusted EPS are included in the appendix to this presentation.
NASDAQ: LUNA Luna Innovations Incorporated© 2022 3 Speakers Scott Graeff President & Chief Executive Officer Brian Soller Chief Technology Officer & EVP, Corporate Development Gene Nestro Chief Financial Officer & SVP, Finance
NASDAQ: LUNA Luna Innovations Incorporated© 2022 4 Third-Quarter 2022: Key Financial Results Revenues of $29.2M, up 43% year-over-year Revenues in constant currency1 of $30.1M, up 48% year-over-year Gross margin of 58%, compared to 62% for the prior-year period Adjusted operating income of $4.2M, compared to $1.7M for the prior-year period Adjusted EBITDA2 of $4.5, compared to $2.1M for the prior-year period Adjusted EPS2 of $0.09, compared to $0.03 for the prior-year period 1We calculate constant currency revenues (a non-GAAP financial measure) by translating our foreign revenues for the current period in U.S. dollars at the average exchange rate in effect for the comparable prior year period. The translated results are then used to determine year-over-year percentage increases or decreases.. 2Adj EPS, EBITDA and Operating Income are a non-GAAP measures. Reconciliation of comparable GAAP measures to non-GAAP measures are included in the appendix to this presentation. Executing against our strategy
NASDAQ: LUNA Luna Innovations Incorporated© 2022 5 Third-Quarter 2022 and Recent Business Highlights Signed new, $14.2 million contract with Intuitive Surgical, Inc. (Nasdaq: ISRG) to supply critical photonic subsystems for its next-generation, robotic surgical systems Continued delivering OBR 6200 to Lockheed Martin to support global sustainment of F-35 Continued market share growth for Luna’s fiber optic systems displacing legacy technologies Perimeter security for an Eastern European airport Water storage tank monitoring in Middle East Leak detection for Produced Water pipeline in the U.S. Power cable monitoring for large, offshore, U.S. wind farm Continued successful penetration with THz products into industrial process monitoring markets EV battery Adhesive manufacturing Key management appointments Eva Hartmann named SVP of Human Resources Brian Soller to Chief Technology Officer & EVP of Corporate Development
NASDAQ: LUNA Luna Innovations Incorporated© 2022 6 $4.0 $7.6 $7.5 FY19 FY20 FY21 FY22 Adjusted EBITDA1,2 (millions) $49.1 $87.5 $77.8 FY19 FY20 FY21 FY22 Revenue1 (millions) $59.1 Strong Financial Results 1 Reminder: Luna Labs reclassified to Discontinued Operations and subsequent sale in late Q1 2022. 2 Adj EBITDA is a non-GAAP measure. Reconciliation of comparable GAAP measures to non-GAAP measures are included in the appendix to this presentation. FY22 Guidance: $109M - $115M FY22 Guidance: $10M to $12M $7.9
NASDAQ: LUNA Luna Innovations Incorporated© 2022 7 Balance Sheet Balance sheet on September 30, 2022: $145.2M in total assets • $7.9M in cash and cash equivalents • $46.7M in working capital Total debt of $21.7M outstanding $19.5M in term debt $2.2M drawn on revolver All investments over the past five years – in both business and in M&A – have been funded by using the balance sheet through cash and bank debt Luna will continue to deploy capital prudently to generate long-term sustainable growth Increasing organic sales Reinvesting in our business Identifying inorganic opportunities
2022 Financial Outlook
NASDAQ: LUNA Luna Innovations Incorporated© 2022 9 2022 Financial Outlook 2022 outlook reflects the sale of Luna Labs, the acquisition of Lios and the ongoing impact of the pandemic: Full-year total revenue of $109M to $115M Full-year adjusted EBITDA1 of $10M to $12M 1 Adj EBITDA is a non-GAAP measure. Reconciliation of comparable GAAP measures to non-GAAP measures are included in the appendix to this presentation.
NASDAQ: LUNA Luna Innovations Incorporated© 2022 10 Luna – Enabling the Future with Fiber Positioned as a global fiber optic leader Proprietary fiber-optic based measurement technology, offering unprecedented combination of performance and economics Customers in attractive markets: Defense, Communications, Infrastructure, Energy, Automotive and Aerospace Positioned to take advantage of trends such as vehicle lightweighting, smart infrastructure, increasing needs for global security, and increasing demands on data centers and broadband capacity Adequately capitalized to fund growth Long-tenured, experienced executive team / board Corporate culture of innovation and integrity Overview
Appendix
NASDAQ: LUNA Luna Innovations Incorporated© 2022 12 Reconciliation of Net (Loss)/Income to Adjusted EBITDA1 1 Results shown include the reclassification of Luna Labs to Discontinued Operations. 2 Other non-recurring charges include customer accommodation, facility consolidation, severance and debt refinancing costs. (in thousands) 2022 2021 2022 2021 Reconciliation of EBITDA and Adjusted EBITDA GAAP net income/(loss) 1,196$ 355$ 8,426$ (193)$ Income from discontinued operations, net of tax 28 699 11,543 2,371 GAAP net income/(loss) from continuing operations 1,168 (344) (3,117) (2,564) Interest expense, net 218 110 442 375 Income tax (benefit)/expense 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 (2) 349 1,057 - Adjusted EBITDA 4,544$ 2,110$ 7,450$ 4,461$ Three Months Ended Nine Months Ended September 30, September 30, (Unaudited) (Unaudited)
NASDAQ: LUNA Luna Innovations Incorporated© 2022 13 Reconciliation of Net (Loss)/Income to Adjusted EPS1 1 Results shown include the reclassification of Luna Labs to Discontinued Operations. 2 Other non-recurring charges include customer accommodation, facility consolidation, severance and debt refinancing costs. 2022 2021 2022 2021 Reconciliation of Net (loss)/Income to Adjusted EPS GAAP net income/(loss) 1,196$ 355$ 8,426$ (193)$ Income from discontinued operations, net of tax 28 699 11,543 2,371 GAAP net income/(loss) from continuing operations 1,168 (344) (3,117) (2,564) Adjustments: 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 (2) 349 1,057 - Total adjustments: 2,682 1,750 9,452 6,999 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 Three Months Ended September 30, (Unaudited) Nine Months Ended September 30, (Unaudited) (in thousands, except per share data)
NASDAQ: LUNA Luna Innovations Incorporated© 2022 14 Reconciliation of Operating (Loss) to Adjusted Operating Income1 1 Results shown include the reclassification of Luna Labs to Discontinued Operations. 2 Other non-recurring charges include customer accommodation, facility consolidation, severance and debt refinancing costs. 2022 2021 2022 2021 Reconciliation of Operating (Loss) to Adjusted Operating Income GAAP Operating Loss 1,478$ (10)$ (3,348)$ (3,625)$ Adjustments: 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 (2) 349 1,057 Total adjustments: 2,682 1,750 9,452 6,999 Adjusted Operating Income 4,160$ 1,740$ 6,104$ 3,374$ Three Months Ended September 30 (Unaudited) Nine Months Ended September 30, (Unaudited) (in thousands)
NASDAQ: LUNA Luna Innovations Incorporated© 2022 15 Historical Quarterly Results1 1 Results shown include the reclassification of Luna Labs to Discontinued Operations. September 30, 2021 December 31, 2021 March 31, 2022 June 30, 2022 September 30, 2022 Revenues 20,329$ 24,222$ 22,481$ 26,162$ 29,153$ Cost of revenues 7,745 10,102 8,202 10,199 12,234 Gross profit 12,584 14,120 14,279 15,963 16,919 Gross margin 62% 58% 64% 61% 58% Operating expense: Selling, general and administrative 8,717 9,533 11,437 14,612 12,065 Research, development and engineering 2,920 2,543 2,543 2,665 2,204 Amortization of intangibles 761 760 821 992 988 Integration and deal related expense 196 249 1,844 156 184 Total operating expense 12,594 13,085 16,645 18,425 15,441 Operating income/(loss) (10)$ 1,035$ (2,366)$ (2,462)$ 1,478$ (in thousands) Three Months Ended