Reaffirms Full-Year 2023 Outlook
Q1 Highlights
- Total revenues of $25.0 million, up 11% year over
year
- Total revenues in constant currency of $25.3 million; up 13%
year-over-year
- Gross margin of 60%, compared to 64% for the prior
year
- Net loss of $1.8 million, compared to net income of $9.6
million for the prior year, which included the gain on sale of Luna
Labs
- Adjusted EBITDA of $0.9 million, compared to $1.7 million
for the prior year
- Adjusted EPS of $0.00, compared to $0.05 for the prior
year
Luna Innovations Incorporated (NASDAQ: LUNA), a global leader in
advanced optical technology, today announced its financial results
for the three months ended March 31, 2023.
"I’m pleased that we were able to drive strong revenues in the
first quarter, which is cyclically one of our softest revenue
quarters," said Scott Graeff, President and Chief Executive Officer
of Luna. "Because of the foundational work we did in 2022, we’ve
entered 2023 with an integrated organizational structure, proven
systems, and best practices. With those pieces in place, we were
able to achieve the top end of our revenue guidance for the
quarter.
"Our charge for 2023 will be to continue to drive operating
excellence that will help to set the stage for greater expansion
into new markets where we can deliver our superior capabilities and
capture share. Given our current position, we’re pleased to be able
to reaffirm our outlook for 2023 revenue and adjusted EBITDA.”
First-Quarter Fiscal 2023 Financial
Summary
Highlights of the financial results for the three months ended
March 31, 2023 are:
Three Months Ended March 31,
Change
(in thousands, except share and per share
data)
2023
2022
Revenues
$
25,045
$
22,481
11
%
Gross profit
14,973
14,279
5
%
Gross margin
60
%
64
%
Operating expense
17,105
16,645
3
%
Operating loss
(2,132
)
(2,366
)
Operating margin
(9
)%
(11
)%
Other expense, net and income tax
benefit
290
1,023
Net loss from continuing operations
$
(1,842
)
$
(1,343
)
Income from discontinued operations, net
of tax of $4,139
—
10,924
Net (loss)/income
$
(1,842
)
$
9,581
Income per diluted share (EPS)
$
(0.06
)
$
0.30
Adjusted EPS
$
0.00
$
0.05
Diluted weighted average shares
outstanding
33,331,745
32,243,082
Adjusted EBITDA
$
854
$
1,721
(50
)
%
A reconciliation of Adjusted EPS, Adjusted EBITDA and revenues
in constant currency 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 March 31, 2023 increased 11%
compared to the prior-year period; 13% on a constant currency
basis.
Gross margin was 60% for the three months ended March 31, 2023,
compared to 64% for the three months ended March 31, 2022, driven
primarily by product mix and the Lios acquisition. Operating loss
and margin were $2.1 million and 9% of total revenues,
respectively, for the three months ended March 31, 2023, compared
to an operating loss of $2.4 million dollars and 11% of total
revenues, respectively, for the three months ended March 31,
2022.
Net loss was $1.8 million, or $0.06 per fully diluted share, for
the three months ended March 31, 2023, compared to net income of
$9.6 million, or $0.30 per fully diluted share, for the three
months ended March 31, 2022. Adjusted EPS was $0.00 for the three
months ended March 31, 2023 compared to $0.05 for the three months
ended March 31, 2022.
Adjusted EBITDA was $0.9 million for three months ended March
31, 2023, compared to $1.7 million for the three months ended March
31, 2022.
Q1 and Recent Business
Highlights
- Realized strong, double-digit revenue growth for communications
test and Terahertz product lines
- Announced a significant contract to provide temperature, depth
and acoustic monitoring for an innovative power generation project
that will deliver clean energy to a major metropolitan area in the
Northeast U.S.
- Announced large, new contract with Dominion Energy to provide
monitoring services for the largest offshore wind project in the
United States
- Won a contract for industrial battery storage monitoring for a
leading European manufacturer of electric vehicle batteries
- Experienced high levels of activity and customer engagement at
industry trade shows OFC and Photonics West
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 $31 million for the second 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, 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 8:00 am (ET) today, May 9, 2023, to discuss its
financial results for the three months ended March 31, 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
1.833.630.1956 .and the international dial-in number is
1.412.317.1837. 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 2023 and
second quarter of 2023 financial results and outlook, greater
expansion into new markets 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 March 31, 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)
March 31, 2023
December 31, 2022
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
3,559
$
6,024
Accounts receivable, net
31,924
33,249
Contract assets
9,001
7,691
Inventory
39,675
36,582
Prepaid expenses and other current
assets
5,815
4,328
Total current assets
89,974
87,874
Property and equipment, net
4,691
4,893
Intangible assets, net
18,125
18,750
Goodwill
27,208
26,927
Operating lease right-of-use assets
4,293
4,661
Other non-current assets
3,295
3,255
Deferred tax asset
4,548
4,647
Total assets
$
152,134
$
151,007
Liabilities and stockholders’
equity
Liabilities:
Current liabilities:
Current portion of long-term debt
obligations
$
2,750
$
2,500
Accounts payable
5,578
8,109
Accrued and other current liabilities
16,273
16,694
Contract liabilities
5,942
4,089
Current portion of operating lease
liabilities
2,116
2,239
Total current liabilities
32,659
33,631
Long-term debt obligations, net of current
portion
22,480
20,726
Long-term portion of operating lease
liabilities
2,495
2,804
Other long-term liabilities
432
444
Total liabilities
58,066
57,605
Commitments and contingencies
Stockholders’ equity:
Common stock, par value $0.001,
100,000,000 shares authorized, 35,227,817 and 34,901,954 shares
issued, 33,396,326 and 33,105,080 shares outstanding at March 31,
2023 and December 31, 2022, respectively
35
35
Treasury stock at cost, 1,831,491 and
1,796,862 shares at March 31, 2023 and December 31, 2022,
respectively
(5,949
)
(5,607
)
Additional paid-in capital
106,624
104,893
Accumulated deficit
(4,138
)
(2,296
)
Accumulated other comprehensive loss
(2,504
)
(3,623
)
Total stockholders’ equity
94,068
93,402
Total liabilities and stockholders’
equity
$
152,134
$
151,007
Luna Innovations
Incorporated
Consolidated Statements of
Operations (Unaudited)
(in thousands, except share and
per share data)
Three Months Ended March
31,
2023
2022
Revenues
$
25,045
$
22,481
Cost of revenues
10,072
8,202
Gross profit
14,973
14,279
Operating expense:
Selling, general and administrative
13,296
13,281
Research, development and engineering
2,817
2,543
Amortization of intangible assets
992
821
Total operating expense
17,105
16,645
Operating loss
(2,132
)
(2,366
)
Other income/(expense):
Other income
92
21
Interest expense, net
(369
)
(113
)
Total other expense, net
(277
)
(92
)
Loss from continuing operations before
income taxes
(2,409
)
(2,458
)
Income tax benefit
(567
)
(1,115
)
Net loss from continuing operations
(1,842
)
(1,343
)
Income from discontinued operations, net
of tax of $1,022
—
3
Gain on sale of discontinued operations,
net of tax of $3,117
—
10,921
Net income from discontinued
operations
—
10,924
Net (loss)/income
$
(1,842
)
$
9,581
Net loss per share from continuing
operations:
Basic
$
(0.06
)
$
(0.04
)
Diluted
$
(0.06
)
$
(0.04
)
Net income per share from discontinued
operations:
Basic
$
—
$
0.34
Diluted
$
—
$
0.34
Net (loss)/income per share attributable
to common stockholders:
Basic
$
(0.06
)
$
0.30
Diluted
$
(0.06
)
$
0.30
Weighted average shares:
Basic
33,331,745
32,243,082
Diluted
33,331,745
32,243,082
Luna Innovations
Incorporated
Consolidated Statements of
Cash Flows (Unaudited)
(in thousands)
Three Months Ended March
31,
2023
2022
Cash flows used in by operating
activities
Net (loss)/income
$
(1,842
)
$
9,581
Adjustments to reconcile net (loss)/income
to net cash used in operating activities
Depreciation and amortization
1,417
1,179
Share-based compensation
1,054
1,132
Loss on disposal of property and
equipment
51
—
Gain from discontinued operations, net of
tax
—
(10,921
)
Deferred taxes
99
220
Change in assets and liabilities
Accounts receivable
1,596
(1,795
)
Contract assets
(1,250
)
(1,144
)
Inventory
(2,619
)
(1,416
)
Other current assets
(1,573
)
(1,636
)
Other long-term assets
(54
)
2
Accounts payable and accrued and other
current liabilities
(3,173
)
2,287
Contract liabilities
1,785
171
Other long term-liabilities
—
(33
)
Net cash used in operating activities
(4,509
)
(2,373
)
Cash flows used in investing
activities
Acquisition of property and equipment
(478
)
(915
)
Intangible property costs
(32
)
—
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
—
38
Net cash used in investing activities
(510
)
(9,964
)
Cash flows provided by financing
activities
Payments on finance lease obligations
(12
)
(12
)
Proceeds from borrowings under debt
obligations
2,500
7,450
Payments of debt obligations
(496
)
(1,036
)
Repurchase of common stock
(342
)
(278
)
Proceeds from ESPP
—
85
Proceeds from the exercise of stock
options
834
220
Net cash provided by financing
activities
2,484
6,429
Effect of exchange rate changes on cash
and cash equivalents
70
(432
)
Net decrease in cash and cash
equivalents
(2,465
)
(6,340
)
Cash and cash equivalents-beginning of
period
6,024
17,128
Cash and cash equivalents-end of
period
$
3,559
$
10,788
Luna Innovations
Incorporated
Reconciliation of Net
(Loss)/Income to EBITDA and Adjusted EBITDA
(in thousands)
Three Months Ended March
31,
2023
2022
Net (loss)/income
$
(1,842
)
$
9,581
Net income from discontinued
operations
—
10,924
Net loss from continuing operations
(1,842
)
(1,343
)
Interest expense, net
369
113
Income tax benefit
(567
)
(1,115
)
Depreciation and amortization
1,417
1,156
EBITDA
(623
)
(1,189
)
Share-based compensation
1,054
1,066
Integration and transaction expense
89
1,844
Other non-recurring charges (1)
334
—
Adjusted EBITDA
$
854
$
1,721
(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 March
31,
2023
2022
Net (loss)/income
$
(1,842
)
$
9,581
Net income from discontinued
operations
—
10,924
Net loss from continuing operations
(1,842
)
(1,343
)
Share-based compensation
1,054
1,066
Integration and transaction expense
89
1,844
Amortization of intangible assets
992
821
Other non-recurring charges (1)
334
—
Income tax effect on adjustments
(617
)
(933
)
Adjusted income from continuing
operations
$
10
$
1,455
Adjusted EPS
$
0.00
$
0.05
Adjusted weighted average shares (in
thousands):
Diluted
33,332
32,243
(1) - Other non-recurring charges
primarily include facility consolidation and one-time insurance
deductible.
Luna Innovations
Incorporated
Reconciliation of Revenues to
Constant Currency Revenues
(in thousands)
Three Months Ended March 31,
2023
GAAP revenues
$
25,045
Effect of foreign exchange
256
Constant currency revenues
$
25,301
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230509005382/en/
Allison Woody Phone: 540-769-8465 Email: IR@lunainc.com
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