Maintains 2020 Outlook
Highlights
- Total revenues of $21.1 million for the three months ended
September 30, 2020, up 14% compared to the three months ended
September 30, 2019
- Operating income and margin of $2.3 million and 11% of total
revenues, respectively, for the three months ended September 30,
2020 versus operating income and margin of $1.5 million and 8% of
total revenues, respectively, for the three months ended September
30, 2019
- Net income of $3.1 million, or $0.10 per fully diluted
share, for the three months ended September 30, 2020, compared to
$1.2 million, or $0.04 per fully diluted share, for the three
months ended September 30, 2019
- Adjusted EBITDA increased to $4.3 million for the three
months ended September 30, 2020, compared to $2.9 million for the
three months ended September 30, 2019
- Company maintains 2020 outlook
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, 2020.
"I'm extremely pleased with our strong third-quarter 2020
performance, which reflects the team's focus on delivering results
during these challenging times," said Scott Graeff, President and
Chief Executive Officer of Luna. "I'm particularly pleased with how
well the entire team has navigated the unusual and constantly
changing environment, with a focus on growing top-line, expanding
both gross and operating margins year-over-year, all while managing
expenses prudently. Although we continue to experience some impact
from the COVID-19 pandemic, we are performing close to our original
budget year-to-date, which under the circumstances is quite
extraordinary. We will continue to focus on supporting customers
with excellence, delivering strong results for our shareholders,
and providing a safe and supportive environment for our
employees."
Third-Quarter Fiscal 2020 Financial
Summary
Financial results for the three months ended September 30, 2020
marked the 12th consecutive quarter of year-on-year revenue and
Adjusted EBITDA growth.
Highlights of the financial results for the three months ended
September 30, 2020 are:
Three Months Ended September
30,
(in thousands, except share and per share
data)
2020
2019
Change
Revenues:
Lightwave
$
15,350
$
13,088
17
%
Luna Labs
5,700
5,301
8
%
Total revenues
21,050
18,389
14
%
Gross profit
10,949
9,275
18
%
Gross margin
52
%
50
%
Operating expense
8,697
7,793
12
%
Operating income
2,252
1,482
52
%
Operating margin
11
%
8
%
Other income and income tax
benefit/(expense)
850
(252
)
437
%
Net income
$
3,102
$
1,230
152
%
Diluted weighted average shares
outstanding
32,411,086
32,115,847
Net income per share (diluted)
$
0.10
$
0.04
150
%
Adjusted EBITDA
$
4,267
$
2,883
48
%
A reconciliation of Adjusted EBITDA to net income can be found
in the schedules included in this release.
Lightwave revenues for the three months ended September 30, 2020
increased compared to the prior-year period, due primarily to
increased revenues from our communication test and sensing
businesses. Luna Labs revenue increased for the three months ended
September 30, 2020, compared to the prior-year period, due to
growth in various government research programs.
Operating income and margin improved to $2.3 million and 11% of
total revenues, respectively, for the three months ended September
30, 2020, compared to $1.5 million and 8% of total revenues,
respectively, for the three months ended September 30, 2019. The
increase in operating income was primarily due to our revenue mix
and operating expense leverage. The Lightwave division represented
a larger portion of our total revenues and generally carries
stronger margins. Operating expenses as a percentage of revenue
decreased 1.1% for the three months ended September 30, 2020,
compared to the three months ended September 30, 2019.
Net income was $3.1 million, or $0.10 per fully diluted share,
for the three months ended September 30, 2020, compared to $1.2
million, or $0.04 per fully diluted share, for the three months
ended September 30, 2019. Net income attributable to common
stockholders for the three months ended September 30, 2020, was
$3.1 million, or $0.10 per fully diluted share, compared to $1.1
million, or $0.03 per fully diluted share, for the three months
ended September 30, 2019. The increase in both net income from
continuing operations and net income attributable to common
stockholders is primarily due to Lightwave's additional gross
profit and operating expense leverage.
Adjusted EBITDA was $4.3 million for the three months ended
September 30, 2020, compared to $2.9 million for the three months
ended September 30, 2019. The increase was driven by revenue
growth, increased gross profit, and operating expense leverage.
Nine Months Year-to-Date Fiscal 2020
Financial Summary
The results for the nine months ended September 30, 2020 include
nine months of the business of General Photonics Corporation
("GP"), acquired in March 2019, compared to seven months for the
prior-year period.
Highlights of the financial results for the nine months ended
September 30, 2020 are:
Nine Months Ended September
30,
(in thousands, except share and per share
data)
2020
2019
Change
Revenues:
Lightwave
$
39,837
$
35,129
13
%
Luna Labs
16,929
15,907
6
%
Total revenues
56,766
51,036
11
%
Gross profit
28,830
24,795
16
%
Gross margin
51
%
49
%
Operating expense
24,378
23,196
5
%
Operating income
4,452
1,599
178
%
Operating margin
8
%
3
%
Other income and income tax benefit
339
1,597
(79
)
%
Net income from continuing operations
$
4,791
$
3,196
50
%
Loss from discontinued operations, net of
income tax of $464
(1,436
)
—
Net income
$
3,355
$
3,196
5
%
Diluted weighted average shares
outstanding
32,478,625
31,768,575
Net income per share from continuing
operations (diluted)
$
0.15
$
0.10
50
%
Adjusted EBITDA
$
8,803
$
6,236
41
%
Lightwave revenues for the nine months ended September 30, 2020
increased compared to the prior-year period due to the inclusion of
the incremental revenues associated with the acquired operations of
GP, as well as increased revenues associated with our sensing
business. Luna Labs revenues increased for the nine months ended
September 30, 2020, compared to the prior period, due to growth in
Phase 2 SBIR government research programs.
Operating income and margin improved to $4.5 million and 8% of
total revenues, respectively, for the nine months ended September
30, 2020, compared to $1.6 million and 3% of total revenues,
respectively, for the nine months ended September 30, 2019. The
increase in operating income was primarily due to our revenue mix
and operating expense leverage. The Lightwave division represented
a larger portion of our total revenues and generally carries
stronger margins.
Net income from continuing operations was $4.8 million, or $0.15
per fully diluted share, for the nine months ended September 30,
2020, compared to $3.2 million, or $0.10 per fully diluted share,
for the nine months ended September 30, 2019, which included a $1.3
million income tax benefit related to a reduction in deferred tax
asset valuation allowances due to the GP acquisition. The increase
in net income from continuing operations was primarily due to
increased revenue and gross profit as well as operating expense
leverage. Net income attributable to common stockholders for the
nine months ended September 30, 2020, was $3.4 million, or $0.10
per fully diluted share, compared to $2.9 million, or $0.09 per
fully diluted share, for the nine months ended September 30, 2019.
The increase in net income attributable to common stockholders is
primarily due to increased revenue and gross profit as well as
operating expense leverage, partially offset by the loss from
discontinued operations. The loss from discontinued operations was
attributable to the resolution of a $2.5 million indemnification
claim related to the August 2017 sale of Luna's high-speed optical
receivers (HSOR) business that was recorded in the first quarter of
2020. The resolution of the HSOR claim resulted in Luna receiving
$0.6 million from escrow and the buyer receiving $1.9 million, net
of a tax benefit of $0.5 million.
2020 Full-Year Outlook
Luna is reaffirming its full-year guidance:
- Total revenues of $81M to $83M
- Adjusted EBITDA of $10M to $12M
COVID-19 Update
Luna continues to operate at its normal capacity with the
well-being and safety of its workforce a priority and, to date, has
not experienced any material impact related to COVID-19.
The company has a strong cash position and adequate access to
capital. Cash and cash equivalents were $26.4 million as of
September 30, 2020, and in addition, Luna has access to its $10
million revolving credit facility.
The company continues to believe it is in a strong position to
take advantage of trends such as 5G, lightweighting and
infrastructure monitoring and that these trends will continue
during and after the COVID-19 pandemic.
Luna’s operations are deemed essential and continue to operate
at normal capacity with necessary COVID-19 precautions. To date,
the company has been able to mitigate disruptions to its supply
chain.
An important part of Luna’s sales effort has been done
historically through a series of in-person tradeshows and
conferences, none of which are currently taking place. Luna's
successful shift to a robust online presence has, in many
instances, improved engagement between Luna's sales force and its
customers, allowing Luna to curate a specific message over a longer
and more dedicated period of customer "face time". Yet, in-person
meetings have historically been helpful in closing the sale. This
has created a slight challenge around Luna's ability to forecast
the exact timing of closing certain customer contracts and
receiving purchase orders. Due to Luna's innovative, reliable
products and its close customer relationships, the lack of
in-person discussions has not, to date, had an adverse effect on
the likelihood of obtaining the orders themselves.
Non-GAAP Financial
Measures
In evaluating the operating performance of its business, Luna’s
management considers Adjusted EBITDA, which excludes certain
charges and credits that are required by GAAP. Adjusted EBITDA
provides useful information to both management and investors by
excluding the effect of certain non-cash expenses and items that
Luna believes may not be indicative of its operating performance,
because either they are unusual and Luna does not expect them to
recur in the ordinary course of its business, or they are unrelated
to the ongoing operation of the business in the ordinary course.
Adjusted EBITDA 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, Luna will conduct an investor
conference call at 5:00 pm (ET) today to discuss its financial
results for the three and nine months ended September 30, 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 1262746. 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 2020 financial results
and outlook, the continuation of trends such as 5G, lightweighting
and infrastructure monitoring, the potential impacts of the
COVID-19 pandemic on its business, operations and financial
results, and growth potential. Management cautions the reader that
these forward-looking statements are only predictions and are
subject to a number of both known and unknown risks and
uncertainties, and actual results, performance, and/or achievements
of Luna may differ materially from the future results, performance,
and/or achievements expressed or implied by these forward-looking
statements as a result of a number of factors. These factors
include, without limitation, failure of demand for Luna's products
and services to meet expectations, failure of target market to grow
and expand, technological and strategic challenges, uncertainties
related to the ultimate impact of the COVID-19 pandemic and those
risks and uncertainties set forth in Luna’s Form 10-Q for the three
and nine months 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.
Luna Innovations Incorporated
Consolidated Balance Sheets (in thousands, except share
data)
September 30, 2020
December 31, 2019
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
26,422
$
25,006
Accounts receivable, net
18,254
16,269
Receivable from sale of HSOR business
—
2,501
Contract assets
4,219
2,759
Inventory
11,713
10,294
Prepaid expenses and other current
assets
3,268
1,287
Total current assets
63,876
58,116
Long-term contract assets
577
449
Property and equipment, net
2,111
3,466
Intangible assets, net
9,193
10,194
Goodwill
10,542
10,542
Other assets
7,855
2,341
Deferred tax asset
1,729
1,416
Total assets
$
95,883
$
86,524
Liabilities and stockholders’
equity
Liabilities:
Current liabilities:
Accounts payable
$
3,177
$
2,787
Accrued liabilities
7,716
10,369
Contract liabilities
3,721
3,888
Total current liabilities
14,614
17,044
Other long-term liabilities
7,761
2,011
Total liabilities
22,375
19,055
Commitments and contingencies
Stockholders’ equity:
Common stock, par value $0.001,
100,000,000 shares authorized, 32,510,506 and 31,788,896 shares
issued, 30,823,065 and 30,149,105 shares outstanding at September
30, 2020 and December 31, 2019, respectively
33
32
Treasury stock at cost, 1,687,441 and
1,639,791 shares at September 30, 2020 and December 31, 2019,
respectively
(4,666
)
(4,337
)
Additional paid-in capital
91,034
88,022
Accumulated deficit
(12,893
)
(16,248
)
Total stockholders’ equity
73,508
67,469
Total liabilities and stockholders’
equity
$
95,883
$
86,524
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,
2020
2019
2020
2019
Revenues:
Lightwave
$
15,350
$
13,088
$
39,837
$
35,129
Luna Labs
5,700
5,301
16,929
15,907
Total revenues
21,050
18,389
56,766
51,036
Cost of revenues:
Lightwave
5,670
5,449
15,736
15,063
Luna Labs
4,431
3,665
12,200
11,178
Total cost of revenues
10,101
9,114
27,936
26,241
Gross profit
10,949
9,275
28,830
24,795
Operating expense:
Selling, general and administrative
6,505
5,746
19,085
17,955
Research, development and engineering
1,616
2,047
4,717
5,241
Loss on sale of property and equipment
576
—
576
—
Total operating expense
8,697
7,793
24,378
23,196
Operating income
2,252
1,482
4,452
1,599
Other income/(expense):
Investment income
1
76
65
324
Other income/(expense)
14
1
19
(5
)
Interest expense
(1
)
(4
)
(2
)
(15
)
Total other income
14
73
82
304
Income from continuing operations before
income taxes
2,266
1,555
4,534
1,903
Income tax (benefit)/expense
(836
)
325
(257
)
(1,293
)
Net income from continuing operations
3,102
1,230
4,791
3,196
Loss from discontinued operations, net of
income tax of $464
—
—
(1,436
)
—
Net income
3,102
1,230
3,355
3,196
Preferred stock dividend
—
113
—
285
Net income attributable to common
stockholders
$
3,102
$
1,117
$
3,355
$
2,911
Net income per share from continuing
operations:
Basic
$
0.10
$
0.04
$
0.16
$
0.11
Diluted
$
0.10
$
0.04
$
0.15
$
0.10
Net loss per share from discontinued
operations:
Basic
$
—
$
—
$
(0.05
)
$
—
Diluted
$
—
$
—
$
(0.04
)
$
—
Net income per share attributable to
common stockholders:
Basic
$
0.10
$
0.04
$
0.11
$
0.10
Diluted
$
0.10
$
0.03
$
0.10
$
0.09
Weighted average shares:
Basic
30,809,896
28,291,297
30,593,954
28,193,330
Diluted
32,411,086
32,115,847
32,478,625
31,768,575
Luna Innovations Incorporated
Consolidated Statements of Cash Flows (Unaudited) (in
thousands)
Nine Months Ended September
30,
2020
2019
Cash flows provided by operating
activities
Net income
$
3,355
$
3,196
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization
2,126
1,835
Share-based compensation
1,538
1,140
Bad debt expense
147
—
Loss on sale of property and equipment
576
—
Loss from discontinued operations, net of
tax
1,436
—
Deferred taxes
(313
)
—
Tax benefit from release of valuation
allowance
—
(1,889
)
Change in assets and liabilities
Accounts receivable
(2,131
)
(2,238
)
Contract assets
(1,589
)
(1,106
)
Inventory
(1,419
)
(73
)
Other current assets
(1,982
)
(74
)
Other long term assets
—
(339
)
Accounts payable and accrued expenses
(1,481
)
(114
)
Contract liabilities
(166
)
747
Net cash provided by operating
activities
97
1,085
Cash flows provided by/(used in)
investing activities
Acquisition of property and equipment
(422
)
(501
)
Intangible property costs
(291
)
(192
)
Proceeds from sale of property and
equipment
403
—
Proceeds from sale of discontinued
operations
600
—
Acquisition of General Photonics
Corporation
—
(19,004
)
Net cash provided by/(used in) investing
activities
290
(19,697
)
Cash flows provided by/(used in)
financing activities
Payments on finance lease obligations
(39
)
(27
)
Payments of debt obligations
—
(625
)
Repurchase of common stock
(329
)
(2,220
)
Proceeds from the exercise of options and
warrants
1,397
438
Net cash provided by/(used in) financing
activities
1,029
(2,434
)
Net increase/(decrease) in cash and
cash equivalents
1,416
(21,046
)
Cash and cash equivalents-beginning of
period
25,006
42,460
Cash and cash equivalents-end of
period
$
26,422
$
21,414
Luna Innovations Incorporated
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(Unaudited) (in thousands)
Three Months Ended September
30,
Nine Months Ended September
30,
2020
2019
2020
2019
Net income
$
3,102
$
1,230
$
3,355
$
3,196
Loss from discontinued operations, net of
tax
—
—
(1,436
)
—
Net income from continuing operations
3,102
1,230
4,791
3,196
Interest expense
1
4
2
15
Investment income
(1
)
(76
)
(65
)
(324
)
Income tax (benefit)/expense
(836
)
325
(257
)
(1,293
)
Depreciation and amortization
762
669
2,126
1,835
EBITDA
3,028
2,152
6,597
3,429
Share-based compensation
571
420
1,538
1,140
Non-recurring charges (1)
668
—
668
942
Amortization of inventory step-up
—
311
—
725
Adjusted EBITDA
$
4,267
$
2,883
$
8,803
$
6,236
(1) Non-recurring charges consist of
transaction and moving related expenses for the sale of property
and equipment during the three and nine months ended September 30,
2020 and transaction related expenses for the acquisition of
General Photonics during the nine months ended September 30,
2019.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201109006047/en/
Allison Woody Phone: 540-769-8465 Email: IR@lunainc.com
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