Luna Innovations Reports Second-Quarter 2023 Results

Reaffirms Full-Year 2023 Outlook

Q2 Highlights

  • Total revenues of $29.2 million, up 11% year over year
  • Gross margin of 58%, compared to 61% for the prior year
  • Net loss of $1.6 million, compared to net loss of $2.4 million for the prior year
  • Adjusted EBITDA of $2.7 million, compared to $1.2 million for the prior year
  • Adjusted EPS of $0.04, compared to $(0.02) for the prior year

ROANOKE, Va.--()--Luna Innovations Incorporated (NASDAQ: LUNA), a global leader in advanced optical technology, today announced its financial results for the three and six months ended June 30, 2023.

"We continue to see abundant opportunities for Luna’s capabilities and are particularly pleased this quarter with strong performance from our Sensing business," said Scott Graeff, President and Chief Executive Officer of Luna. "We did experience a distinct difference in the growth rates of our two businesses – Sensing and Communications Test. Our Sensing business, including our project-based solutions, grew strongly. Pressure in the broader Communications market did impact our Communications Test business. We continue to secure large, multi-unit, follow-on orders in our primary markets, and we are seeing significant wins with new applications.”

Second-Quarter Fiscal 2023 Financial Summary

Highlights of the financial results for the three months ended June 30, 2023 are:

 

 

Three Months Ended June 30,

 

Change

(in thousands, except share and per share data)

 

 

2023

 

 

 

2022

 

 

 

Revenues

 

$

29,164

 

 

$

26,162

 

 

11

%

 

 

 

 

 

 

 

Gross profit

 

 

16,865

 

 

 

15,963

 

 

6

%

Gross margin

 

 

58

%

 

 

61

%

 

 

 

 

 

 

 

 

Operating expense

 

 

17,079

 

 

 

18,425

 

 

(7

)%

Operating loss

 

 

(214

)

 

 

(2,462

)

 

 

Operating margin

 

 

(1

)%

 

 

(9

)%

 

 

 

 

 

 

 

 

Other expense, net and income tax benefit

 

 

(344

)

 

 

(480

)

 

 

 

 

 

 

 

 

 

Net loss from continuing operations

 

$

(558

)

 

$

(2,942

)

 

 

 

 

 

 

 

 

 

(Loss)/income from discontinued operations, net of tax of $(346) and $(856)

 

 

(1,038

)

 

 

591

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(1,596

)

 

$

(2,351

)

 

 

 

 

 

 

 

 

 

Loss per diluted share (EPS)

 

$

(0.05

)

 

$

(0.07

)

 

 

Adjusted EPS

 

$

0.04

 

 

$

(0.02

)

 

 

Diluted weighted average shares outstanding

 

 

33,634,538

 

 

 

32,478,736

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

2,732

 

 

$

1,184

 

 

131

%

 

A reconciliation of Adjusted EPS and Adjusted EBITDA to the nearest comparable figures under generally accepted accounting principles ("GAAP") can be found in the schedules included in this release.

Revenues for the three months ended June 30, 2023 increased 11% compared to the prior-year period.

Gross margin was 58% for the three months ended June 30, 2023, compared to 61% for the three months ended June 30, 2022, driven primarily by product mix. Operating loss and margin were $0.2 million and 1% of total revenues, respectively, for the three months ended June 30, 2023, compared to an operating loss of $2.5 million and 9% of total revenues, respectively, for the three months ended June 30, 2022.

Net loss was $1.6 million, or $0.05 per fully diluted share, for the three months ended June 30, 2023, compared to net loss of $2.4 million, or $0.07 per fully diluted share, for the three months ended June 30, 2022. Adjusted EPS was $0.04 for the three months ended June 30, 2023 compared to $(0.02) for the three months ended June 30, 2022.

Adjusted EBITDA was $2.7 million for three months ended June 30, 2023, compared to $1.2 million for the three months ended June 30, 2022.

Six Months Ended Fiscal 2023 Financial Summary

Highlights of the financial results for the six months ended June 30, 2023 are:

 

 

Six Months Ended June 30,

 

Change

(in thousands, except share and per share data)

 

 

2023

 

 

 

2022

 

 

 

Revenues

 

 

54,209

 

 

 

48,642

 

 

11

%

 

 

 

 

 

 

 

Gross profit

 

 

31,838

 

 

 

30,242

 

 

5

%

Gross margin

 

 

59

%

 

 

62

%

 

 

 

 

 

 

 

 

Operating expense

 

 

34,184

 

 

 

35,069

 

 

(3

)%

Operating loss

 

 

(2,346

)

 

 

(4,827

)

 

 

Operating margin

 

 

(4

)%

 

 

(10

)%

 

 

 

 

 

 

 

 

Other expense, net and income tax benefit

 

 

(54

)

 

 

542

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operations

 

$

(2,400

)

 

$

(4,285

)

 

 

 

 

 

 

 

 

 

Net (loss)/income from discontinued operations, net of income taxes of $(346) and $3,283

 

 

(1,038

)

 

 

11,515

 

 

 

 

 

 

 

 

 

 

Net (loss)/income

 

$

(3,438

)

 

$

7,230

 

 

 

 

 

 

 

 

 

 

(Loss)/earnings per diluted share (EPS)

 

$

(0.10

)

 

$

0.22

 

 

 

Adjusted EPS

 

$

0.04

 

 

$

0.02

 

 

100

%

Diluted weighted average shares outstanding

 

 

33,483,978

 

 

 

32,361,560

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

3,586

 

 

$

2,905

 

 

23

%

 

A reconciliation of Adjusted EPS and Adjusted EBITDA to the nearest comparable GAAP figures can be found in the schedules included in this release.

Revenues for the six months ended June 30, 2023 increased 11% compared to the prior-year period.

Gross profit of $31.8 million for the six months ended June 30, 2023 increased from $30.2 million for the six months ended June 30, 2022 primarily due to higher sales. Operating loss and margin improved to $2.3 million and 4% of total revenues, respectively, for the six months ended June 30, 2023, compared to $4.8 million and 10% of total revenues, respectively, for the six months ended June 30, 2022.

Net loss was $3.4 million, or $0.10 per fully diluted share, for the six months ended June 30, 2023, compared to a net income of $7.2 million, or $0.22 per fully diluted share, for the six months ended June 30, 2022. Adjusted EPS was $0.04 for the six months ended June 30, 2023, compared to $0.02 for the six months ended June 30, 2022.

Adjusted EBITDA was $3.6 million for the six months ended June 30, 2023, compared to $2.9 million for the six months ended June 30, 2022.

Q2 and Recent Business Highlights

  • Recognized significant wins for monitoring systems, including a contract for the largest power utility company in Italy
  • Secured large, follow-on, multi-unit Terahertz order for EV battery production process monitoring
  • Drove significant wins in our RIO line of lasers supported by macro trends such as LiDAR
  • Secured a seven-figure blanket order for polarization modules from a major data center hyper-scaler
  • Named industry veteran as Managing Director for Europe, Middle East and Africa region
  • Hosted Luna's first Investor Day in New York City, outlining the company's plans for future growth

2023 Full-Year Outlook

Luna is reaffirming the 2023 revenue and adjusted EBITDA outlook it originally provided on March 14, 2023:

  • Total revenue of $125 million to $130 million for the full year 2023
  • Adjusted EBITDA of $14 million to $18 million for the full year 2023

In addition, Luna expects total revenues in the range of $29 million to $32 million for the third quarter 2023.

Luna is not providing an outlook for net income, which is the most directly comparable GAAP measure to Adjusted EBITDA, because changes in the items that Luna excludes from net income to calculate Adjusted EBITDA, such as share-based compensation, tax expense, and significant non-recurring charges, among other things, can be dependent on future events that are less capable of being controlled or reliably predicted by management and are not part of Luna's routine operating activities.

The outlook above does not include any future acquisitions, divestitures, or unanticipated events.

Non-GAAP Financial Measures

In evaluating the operating performance of its business, Luna’s management considers Adjusted EBITDA and Adjusted EPS, which 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.

Adjusted EBITDA and Adjusted EPS should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. Adjusted EBITDA and Adjusted EPS have been reconciled to the nearest GAAP measure in the table following the financial statements attached to this press release.

Conference Call Information

As previously announced, Luna will conduct an investor conference call at 5:00 pm (ET) today, August 10, 2023, to discuss its financial results for the three and six months ended June 30, 2023. 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 1.800.715.9871 .and the international dial-in number is 1.646.307.1963. Participants should ask to join the Luna Innovations Incorporated conference call, conference ID 6350168, 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 2023 and third quarter of 2023 financial results and outlook, and the Company's ability to secure additional significant wins. 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 macroeconomic conditions and those risks and uncertainties set forth in Luna’s Form 10-Q for the quarter ended June 30, 2023, and Luna's other periodic reports and filings with the Securities and Exchange Commission ("SEC"). Such filings are available on the SEC’s website at www.sec.gov and on Luna’s website at www.lunainc.com. The statements made in this release are based on information available to Luna as of the date of this release and Luna undertakes no obligation to update any of the forward-looking statements after the date of this release.

 
 
 

Luna Innovations Incorporated
Consolidated Balance Sheets (Unaudited)
(in thousands, except share data) 

 

 

June 30, 2023

 

December 31, 2022

 

(unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

3,277

 

 

$

6,024

 

Accounts receivable, net

 

33,813

 

 

 

33,249

 

Contract assets

 

9,601

 

 

 

7,691

 

Inventory

 

42,003

 

 

 

36,582

 

Prepaid expenses and other current assets

 

5,159

 

 

 

4,328

 

Total current assets

 

93,853

 

 

 

87,874

 

Property and equipment, net

 

4,761

 

 

 

4,893

 

Intangible assets, net

 

17,371

 

 

 

18,750

 

Goodwill

 

27,313

 

 

 

26,927

 

Operating lease right-of-use assets

 

3,670

 

 

 

4,661

 

Other non-current assets

 

3,321

 

 

 

3,255

 

Deferred tax asset

 

4,842

 

 

 

4,647

 

Total assets

$

155,131

 

 

$

151,007

 

Liabilities and stockholders’ equity

 

 

 

Liabilities:

 

 

 

Current liabilities:

 

 

 

Current portion of long-term debt obligations

$

3,000

 

 

$

2,500

 

Accounts payable

 

10,306

 

 

 

8,109

 

Accrued and other current liabilities

 

11,375

 

 

 

16,694

 

Contract liabilities

 

3,463

 

 

 

4,089

 

Current portion of operating lease liabilities

 

1,899

 

 

 

2,239

 

Total current liabilities

 

30,043

 

 

 

33,631

 

Long-term debt obligations, net of current portion

 

27,734

 

 

 

20,726

 

Long-term portion of operating lease liabilities

 

2,062

 

 

 

2,804

 

Other long-term liabilities

 

419

 

 

 

444

 

Total liabilities

 

60,258

 

 

 

57,605

 

Commitments and contingencies

 

 

 

Stockholders’ equity:

 

 

 

Common stock, par value $0.001, 100,000,000 shares authorized, 35,739,827 and 34,901,954 shares issued, 33,908,336 and 33,105,080 shares outstanding at June 30, 2023 and December 31, 2022, respectively

 

36

 

 

 

35

 

Treasury stock at cost, 1,831,491 and 1,796,862 shares at June 30, 2023 and December 31, 2022, respectively

 

(5,960

)

 

 

(5,607

)

Additional paid-in capital

 

108,709

 

 

 

104,893

 

Accumulated deficit

 

(5,734

)

 

 

(2,296

)

Accumulated other comprehensive loss

 

(2,178

)

 

 

(3,623

)

Total stockholders’ equity

 

94,873

 

 

 

93,402

 

Total liabilities and stockholders’ equity

$

155,131

 

 

$

151,007

 

 
 
 
 

Luna Innovations Incorporated
Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share data) 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

 

 

Revenues

$

29,164

 

 

$

26,162

 

 

$

54,209

 

 

$

48,642

 

Cost of revenues

 

12,299

 

 

 

10,199

 

 

 

22,371

 

 

 

18,400

 

Gross profit

 

16,865

 

 

 

15,963

 

 

 

31,838

 

 

 

30,242

 

Operating expense:

 

 

 

 

 

 

 

Selling, general and administrative

 

13,439

 

 

 

14,768

 

 

 

26,736

 

 

 

28,056

 

Research, development and engineering

 

2,722

 

 

 

2,665

 

 

 

5,538

 

 

 

5,207

 

Amortization of intangible assets

 

918

 

 

 

992

 

 

 

1,910

 

 

 

1,806

 

Total operating expense

 

17,079

 

 

 

18,425

 

 

 

34,184

 

 

 

35,069

 

Operating loss

 

(214

)

 

 

(2,462

)

 

 

(2,346

)

 

 

(4,827

)

Other income/(expense):

 

 

 

 

 

 

 

Other (expense)/income

 

(110

)

 

 

53

 

 

 

(18

)

 

 

73

 

Interest expense, net

 

(584

)

 

 

(111

)

 

 

(953

)

 

 

(224

)

Total other expense, net

 

(694

)

 

 

(58

)

 

 

(971

)

 

 

(151

)

Loss from continuing operations before income taxes

 

(908

)

 

 

(2,520

)

 

 

(3,317

)

 

 

(4,978

)

Income tax (benefit)/expense

 

(350

)

 

 

422

 

 

 

(917

)

 

 

(693

)

Net loss from continuing operations

 

(558

)

 

 

(2,942

)

 

 

(2,400

)

 

 

(4,285

)

(Loss)/income from discontinued operations, net of income tax expense (benefit) of $(346), $(856), $(346), and $166.

 

(1,038

)

 

 

591

 

 

 

(1,038

)

 

 

594

 

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

 

 

 

 

 

 

 

 

 

 

10,921

 

Net (loss)/income from discontinued operations

 

(1,038

)

 

 

591

 

 

 

(1,038

)

 

 

11,515

 

Net (loss)/income

$

(1,596

)

 

$

(2,351

)

 

$

(3,438

)

 

$

7,230

 

Net loss per share from continuing operations:

 

 

 

 

 

 

 

Basic

$

(0.02

)

 

$

(0.09

)

 

$

(0.07

)

 

$

(0.13

)

Diluted

$

(0.02

)

 

$

(0.09

)

 

$

(0.07

)

 

$

(0.13

)

Net (loss)/income per share from discontinued operations:

 

 

 

 

 

 

 

Basic

$

(0.03

)

 

$

0.02

 

 

$

(0.03

)

 

$

0.36

 

Diluted

$

(0.03

)

 

$

0.02

 

 

$

(0.03

)

 

$

0.36

 

Net loss per share attributable to common stockholders:

 

 

 

 

 

 

 

Basic

$

(0.05

)

 

$

(0.07

)

 

$

(0.10

)

 

$

0.22

 

Diluted

$

(0.05

)

 

$

(0.07

)

 

$

(0.10

)

 

$

0.22

 

Weighted average shares:

 

 

 

 

 

 

 

Basic

 

33,634,538

 

 

 

32,478,736

 

 

 

33,483,978

 

 

 

32,361,560

 

Diluted

 

33,634,538

 

 

 

32,478,736

 

 

 

33,483,978

 

 

 

32,361,560

 

 
 
 
 

Luna Innovations Incorporated
Consolidated Statements of Cash Flows (Unaudited)
(in thousands) 

 

Six Months Ended June 30,

 

 

2023

 

 

 

2022

 

 

 

Cash flows used in by operating activities

 

 

 

Net (loss)/income

$

(3,438

)

 

$

7,230

 

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

 

 

 

Depreciation and amortization

 

2,740

 

 

 

2,694

 

Share-based compensation

 

2,172

 

 

 

2,177

 

Loss on disposal of property and equipment

 

278

 

 

 

 

Gain on sale of discontinued operations, net of tax

 

 

 

 

(10,921

)

Deferred taxes

 

(194

)

 

 

(124

)

Change in assets and liabilities

 

 

 

Accounts receivable

 

(168

)

 

 

(6,555

)

Contract assets

 

(1,815

)

 

 

140

 

Inventory

 

(4,798

)

 

 

(4,281

)

Other current assets

 

(804

)

 

 

(3,870

)

Other long-term assets

 

(93

)

 

 

646

 

Accounts payable and accrued and other current liabilities

 

(3,653

)

 

 

6,123

 

Contract liabilities

 

(693

)

 

 

1,196

 

Other long term-liabilities

 

 

 

 

(1,523

)

Net cash used in operating activities

 

(10,466

)

 

 

(7,068

)

Cash flows used in investing activities

 

 

 

Acquisition of property and equipment

 

(1,180

)

 

 

(1,657

)

Acquisition of intangible property

 

(63

)

 

 

 

Proceeds from sale of property and equipment

 

 

 

 

25

 

Proceeds from sale of discontinued operations

 

 

 

 

12,973

 

Acquisition of Luna Innovations Germany GmbH

 

 

 

 

(22,085

)

Other

 

 

 

 

4

 

Net cash used in investing activities

 

(1,243

)

 

 

(10,740

)

Cash flows provided by financing activities

 

 

 

Payments on finance lease obligations

 

(25

)

 

 

(24

)

Proceeds from borrowings under debt obligations

 

8,500

 

 

 

21,150

 

Payments of debt obligations

 

(1,000

)

 

 

(15,772

)

Repurchase of common stock

 

(353

)

 

 

(294

)

Proceeds from ESPP

 

546

 

 

 

521

 

Proceeds from the exercise of stock options

 

1,234

 

 

 

1,158

 

Net cash provided by financing activities

 

8,902

 

 

 

6,739

 

Effect of exchange rate changes on cash and cash equivalents

 

60

 

 

 

(1,195

)

Net decrease in cash and cash equivalents

 

(2,747

)

 

 

(12,264

)

Cash and cash equivalents-beginning of period

 

6,024

 

 

 

17,128

 

Cash and cash equivalents-end of period

$

3,277

 

 

$

4,864

 

 
 
 
 

Luna Innovations Incorporated
Reconciliation of Net (Loss)/Income to EBITDA and Adjusted EBITDA
(in thousands) 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

 

 

Net (loss)/income

$

(1,596

)

 

$

(2,351

)

 

$

(3,438

)

 

$

7,230

 

Net (loss)/income from discontinued operations

 

(1,038

)

 

 

591

 

 

 

(1,038

)

 

 

11,515

 

Net loss from continuing operations

 

(558

)

 

 

(2,942

)

 

 

(2,400

)

 

 

(4,285

)

Interest expense, net

 

584

 

 

 

111

 

 

 

953

 

 

 

224

 

Income tax (benefit)/expense

 

(350

)

 

 

422

 

 

 

(917

)

 

 

(693

)

Depreciation and amortization

 

1,323

 

 

 

1,538

 

 

 

2,740

 

 

 

2,694

 

EBITDA

 

999

 

 

 

(871

)

 

 

376

 

 

 

(2,060

)

Share-based compensation

 

1,118

 

 

 

934

 

 

 

2,172

 

 

 

2,000

 

Integration and transaction expense

 

160

 

 

 

156

 

 

 

249

 

 

 

2,000

 

Amortization of inventory step-up

 

 

 

 

257

 

 

 

 

 

 

257

 

Other non-recurring charges (1)

 

455

 

 

 

708

 

 

 

789

 

 

 

708

 

Adjusted EBITDA

$

2,732

 

 

$

1,184

 

 

$

3,586

 

 

$

2,905

 

 

(1) - Other non-recurring charges primarily include facility consolidation and one-time insurance deductible. 

 
 
 
 

Luna Innovations Incorporated
Reconciliation of Net (Loss)/Income to Adjusted EPS
(in thousands, except per share data) 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

 

 

Net (loss)/income

$

(1,596

)

 

$

(2,351

)

 

$

(3,438

)

 

$

7,230

 

Net (loss)/income from discontinued operations

 

(1,038

)

 

 

591

 

 

 

(1,038

)

 

 

11,515

 

Net loss from continuing operations

 

(558

)

 

 

(2,942

)

 

 

(2,400

)

 

 

(4,285

)

Share-based compensation

 

1,118

 

 

 

934

 

 

 

2,172

 

 

 

2,000

 

Integration and transaction expense

 

160

 

 

 

156

 

 

 

249

 

 

 

2,000

 

Amortization of intangible assets

 

918

 

 

 

992

 

 

 

1,910

 

 

 

1,813

 

Amortization of inventory step-up

 

 

 

 

257

 

 

 

 

 

 

257

 

Other non-recurring charges (1)

 

455

 

 

 

708

 

 

 

789

 

 

 

708

 

Income tax effect on adjustments

 

(663

)

 

 

(762

)

 

 

(1,280

)

 

 

(1,695

)

Adjusted income (loss) from continuing operations

$

1,430

 

 

$

(657

)

 

$

1,440

 

 

$

798

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EPS

$

0.04

 

 

$

(0.02

)

 

$

0.04

 

 

$

0.02

 

 

 

 

 

 

 

 

 

Adjusted weighted average shares:

 

 

 

 

 

 

 

Diluted

 

33,635

 

 

 

32,479

 

 

 

33,484

 

 

 

32,362

 

 

(1) - Other non-recurring charges primarily include facility consolidation and one-time insurance deductible. 

 

 

Contacts

Investor Contact:
Allison Woody
Phone: 540-769-8465
Email: IR@lunainc.com

Release Summary

Luna announces its financial results for Q2 2023 and reaffirms full-year outlook.

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Contacts

Investor Contact:
Allison Woody
Phone: 540-769-8465
Email: IR@lunainc.com