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 14, 2023
(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 14, 2023 , Luna Innovations Incorporated (the “Company”) issued a press release announcing its financial results for the three and nine months ended September 30, 2023, 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 14, 2023 , 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 14, 2023
Exhibit 99.1
Luna Innovations Reports Third Quarter 2023 Results
Q3 Highlights
•Total revenue of $30.7 million, up 5% year over year
•Gross margin of 57%, compared to 58% for the prior year
•Net income of $0.5 million, compared to net income of $1.2 million for the prior year
•Adjusted EBITDA of $4.2 million, compared to $4.5 million for the prior year
•Adjusted EPS of $0.07, compared to $0.09 for the prior year
(ROANOKE, VA, November 14, 2023) - 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, 2023.
"We delivered solid performance this quarter in spite of continued macroeconomic headwinds," said Scott Graeff, President and Chief Executive Officer of Luna. "We realized multiple significant wins in our Sensing business, providing further proof of the breadth of applications and abundance of opportunities for our fiber sensing solutions. We also recognized a particularly strong showing from our Communications Test business, where we saw significant increase in revenue after realizing moderate recovery from the headwinds this business faced last quarter.”
Third Quarter Fiscal 2023 Financial Summary
Highlights of the financial results for the three months ended September 30, 2023 are:
| Three Months Ended September 30, | Change | |||||||||||||||||||||||||
| (in thousands, except share and per share data) | 2023 | 2022 | ||||||||||||||||||||||||
| Revenue | $ | 30,703 | $ | 29,153 | 5 | % | ||||||||||||||||||||
| Gross profit | 17,629 | 16,919 | 4 | % | ||||||||||||||||||||||
| Gross margin | 57 | % | 58 | % | ||||||||||||||||||||||
| Operating expense | 16,477 | 15,441 | 7 | % | ||||||||||||||||||||||
| Operating income | 1,152 | 1,478 | ||||||||||||||||||||||||
| Operating margin | 4 | % | 5 | % | ||||||||||||||||||||||
| Other expense, net and income tax expense | (691) | (310) | ||||||||||||||||||||||||
| Net income from continuing operations | $ | 461 | $ | 1,168 | ||||||||||||||||||||||
Income from discontinued operations, net of tax of $— and $(78) | — | 28 | ||||||||||||||||||||||||
| Net income | $ | 461 | $ | 1,196 | ||||||||||||||||||||||
| Earnings per diluted share (EPS) | $ | 0.01 | $ | 0.04 | ||||||||||||||||||||||
| Adjusted EPS | $ | 0.07 | $ | 0.09 | ||||||||||||||||||||||
| Diluted weighted average shares outstanding | 35,218,547 | 34,104,850 | ||||||||||||||||||||||||
| Adjusted EBITDA | $ | 4,172 | $ | 4,544 | (8) | % | ||||||||||||||||||||
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.
Revenue for the three months ended September 30, 2023 increased 5% compared to the prior-year period.
Gross margin was 57% for the three months ended September 30, 2023, compared to 58% for the three months ended September 30, 2022, driven primarily by product mix. Operating income and margin were $1.2 million and 4% of total revenue, respectively, for the three months ended September 30, 2023, compared to an operating income of $1.5 million and 5% of total revenue, respectively, for the three months ended September 30, 2022.
Net income was $0.5 million, or $0.01 per fully diluted share, for the three months ended September 30, 2023, compared to net income of $1.2 million, or $0.04 per fully diluted share, for the three months ended September 30,
2022. Adjusted EPS was $0.07 for the three months ended September 30, 2023 compared to $0.09 for the three months ended September 30, 2022.
Adjusted EBITDA was $4.2 million for three months ended September 30, 2023, compared to $4.5 million for the three months ended September 30, 2022.
Nine Months Ended Fiscal 2023 Financial Summary
Highlights of the financial results for the nine months ended September 30, 2023 are:
| Nine Months Ended September 30, | Change | |||||||||||||||||||||||||
| (in thousands, except share and per share data) | 2023 | 2022 | ||||||||||||||||||||||||
| Revenue | $ | 84,912 | $ | 77,795 | 9 | % | ||||||||||||||||||||
| Gross profit | 49,467 | 47,162 | 5 | % | ||||||||||||||||||||||
| Gross margin | 58 | % | 61 | % | ||||||||||||||||||||||
| Operating expense | 50,661 | 50,510 | — | % | ||||||||||||||||||||||
| Operating loss | (1,194) | (3,348) | ||||||||||||||||||||||||
| Operating margin | (1) | % | (4) | % | ||||||||||||||||||||||
| Other expense, net and income tax benefit | (745) | 231 | ||||||||||||||||||||||||
| Net loss from continuing operations | $ | (1,939) | $ | (3,117) | ||||||||||||||||||||||
Net (loss)/income from discontinued operations, net of income taxes of $(346) and $3,205 | (1,038) | 11,543 | ||||||||||||||||||||||||
| Net (loss)/income | $ | (2,977) | $ | 8,426 | ||||||||||||||||||||||
| (Loss)/earnings per diluted share (EPS) | $ | (0.09) | $ | 0.26 | ||||||||||||||||||||||
| Adjusted EPS | $ | 0.11 | $ | 0.12 | (8) | % | ||||||||||||||||||||
| Diluted weighted average shares outstanding | 33,631,654 | 32,492,276 | ||||||||||||||||||||||||
| Adjusted EBITDA | $ | 7,759 | $ | 7,450 | 4 | % | ||||||||||||||||||||
A reconciliation of Adjusted EPS and Adjusted EBITDA to the nearest comparable GAAP figures can be found in the schedules included in this release.
Revenue for the nine months ended September 30, 2023 increased 9% compared to the prior-year period.
Gross profit of $49.5 million for the nine months ended September 30, 2023 increased from $47.2 million for the nine months ended September 30, 2022 primarily due to higher sales. Operating loss and margin improved to $1.2
million and 1% of total revenue, respectively, for the nine months ended September 30, 2023, compared to $3.3 million and 4% of total revenue, respectively, for the nine months ended September 30, 2022.
Net loss was $3.0 million, or $0.09 per fully diluted share, for the nine months ended September 30, 2023, compared to a net income of $8.4 million, or $0.26 per fully diluted share, for the nine months ended September 30, 2022, due to the gain on sale of Luna Labs. Adjusted EPS was $0.11 for the nine months ended September 30, 2023, compared to $0.12 for the nine months ended September 30, 2022.
Adjusted EBITDA was $7.8 million for the nine months ended September 30, 2023, compared to $7.5 million for the nine months ended September 30, 2022.
Q3 and Recent Business Highlights
•Named George Gomez-Quintero as Chief Financial Officer
•Awarded a multi-year service contract for system deployed on the largest fiber-optic monitoring solution ever installed
•Secured multiple sales of seismic monitoring DAS instruments to American seismic labs and the U.S. government
•Secured $1.5M+ in new orders for DAS and DTS systems for pipeline monitoring from the largest energy company in the UAE
•Renewed global supply partnership agreement for infrastructure monitoring with one of the world's largest multinational conglomerates
•Successfully deployed fiber optic-sensing based traffic monitoring for the Utah Department of Transportation
2023 Full-Year Outlook
Luna is updating the 2023 revenue outlook and maintaining the adjusted EBITDA outlook:
•Total revenue of $120 million to $125 million for the full year 2023
•Adjusted EBITDA of $14 million to $18 million for the full year 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 8:30 am (ET) today, November 14, 2023, to discuss its financial results for the three and nine months ended September 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 6862329, 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 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 September 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.
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, 2023 | December 31, 2022 | ||||||||||
| (unaudited) | |||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 6,028 | $ | 6,024 | |||||||
| Accounts receivable, net | 39,304 | 33,249 | |||||||||
| Contract assets | 7,324 | 7,691 | |||||||||
| Inventory | 43,318 | 36,582 | |||||||||
| Prepaid expenses and other current assets | 4,207 | 4,328 | |||||||||
| Total current assets | 100,181 | 87,874 | |||||||||
| Property and equipment, net | 4,892 | 4,893 | |||||||||
| Intangible assets, net | 16,143 | 18,750 | |||||||||
| Goodwill | 26,896 | 26,927 | |||||||||
| Operating lease right-of-use assets | 7,999 | 4,661 | |||||||||
| Other non-current assets | 3,338 | 3,255 | |||||||||
| Deferred tax asset | 5,645 | 4,647 | |||||||||
| Total assets | $ | 165,094 | $ | 151,007 | |||||||
| Liabilities and stockholders’ equity | |||||||||||
| Liabilities: | |||||||||||
| Current liabilities: | |||||||||||
| Current portion of long-term debt obligations | $ | 3,000 | $ | 2,500 | |||||||
| Accounts payable | 10,617 | 8,109 | |||||||||
| Accrued and other current liabilities | 14,705 | 16,694 | |||||||||
| Contract liabilities | 4,619 | 4,089 | |||||||||
| Current portion of operating lease liabilities | 2,069 | 2,239 | |||||||||
| Total current liabilities | 35,010 | 33,631 | |||||||||
| Long-term debt obligations, net of current portion | 28,887 | 20,726 | |||||||||
| Long-term portion of operating lease liabilities | 6,178 | 2,804 | |||||||||
| Other long-term liabilities | 407 | 444 | |||||||||
| Total liabilities | 70,482 | 57,605 | |||||||||
| Commitments and contingencies | |||||||||||
| Stockholders’ equity: | |||||||||||
Common stock, par value $0.001, 100,000,000 shares authorized, 35,781,127 and 34,901,954 shares issued, 33,943,453 and 33,105,080 shares outstanding at September 30, 2023 and December 31, 2022, respectively | 36 | 35 | |||||||||
Treasury stock at cost, 1,837,674 and 1,796,862 shares at September 30, 2023 and December 31, 2022, respectively | (6,043) | (5,607) | |||||||||
| Additional paid-in capital | 109,634 | 104,893 | |||||||||
| Accumulated deficit | (5,273) | (2,296) | |||||||||
| Accumulated other comprehensive loss | (3,742) | (3,623) | |||||||||
| Total stockholders’ equity | 94,612 | 93,402 | |||||||||
| Total liabilities and stockholders’ equity | $ | 165,094 | $ | 151,007 | |||||||
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, | |||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| Revenue | $ | 30,703 | $ | 29,153 | $ | 84,912 | $ | 77,795 | ||||||||||||||||||
| Cost of revenue | 13,074 | 12,234 | 35,445 | 30,633 | ||||||||||||||||||||||
| Gross profit | 17,629 | 16,919 | 49,467 | 47,162 | ||||||||||||||||||||||
| Operating expense: | ||||||||||||||||||||||||||
| Selling, general and administrative | 12,829 | 11,678 | 39,565 | 39,733 | ||||||||||||||||||||||
| Research, development and engineering | 2,719 | 2,776 | 8,257 | 7,983 | ||||||||||||||||||||||
| Amortization of intangible assets | 929 | 987 | 2,839 | 2,794 | ||||||||||||||||||||||
| Total operating expense | 16,477 | 15,441 | 50,661 | 50,510 | ||||||||||||||||||||||
| Operating income/(loss) | 1,152 | 1,478 | (1,194) | (3,348) | ||||||||||||||||||||||
| Other income/(expense): | ||||||||||||||||||||||||||
| Other income | 115 | 73 | 98 | 146 | ||||||||||||||||||||||
| Interest expense, net | (613) | (218) | (1,566) | (442) | ||||||||||||||||||||||
| Total other expense, net | (498) | (145) | (1,468) | (296) | ||||||||||||||||||||||
| Income/(loss) from continuing operations before income taxes | 654 | 1,333 | (2,662) | (3,644) | ||||||||||||||||||||||
| Income tax expense/(benefit) | 193 | 165 | (723) | (527) | ||||||||||||||||||||||
| Net income/(loss) from continuing operations | 461 | 1,168 | (1,939) | (3,117) | ||||||||||||||||||||||
| Income/(loss) from discontinued operations, net of income tax expense/(benefit) of $—, $(78), $(346), and $3,205. | — | 28 | (1,038) | 622 | ||||||||||||||||||||||
| Gain on sale of discontinued operations, net of tax of $3,117 | — | — | — | 10,921 | ||||||||||||||||||||||
| Net income/(loss) from discontinued operations | — | 28 | (1,038) | 11,543 | ||||||||||||||||||||||
| Net income/(loss) | $ | 461 | $ | 1,196 | $ | (2,977) | $ | 8,426 | ||||||||||||||||||
| Net income/(loss) per share from continuing operations: | ||||||||||||||||||||||||||
| Basic | $ | 0.01 | $ | 0.04 | $ | (0.06) | $ | (0.10) | ||||||||||||||||||
| Diluted | $ | 0.01 | $ | 0.03 | $ | (0.06) | $ | (0.10) | ||||||||||||||||||
| Net income/(loss) per share from discontinued operations: | ||||||||||||||||||||||||||
| Basic | $ | — | $ | — | $ | (0.03) | $ | 0.36 | ||||||||||||||||||
| Diluted | $ | — | $ | — | $ | (0.03) | $ | 0.36 | ||||||||||||||||||
| Net income/(loss) per share attributable to common stockholders: | ||||||||||||||||||||||||||
| Basic | $ | 0.01 | $ | 0.04 | $ | (0.09) | $ | 0.26 | ||||||||||||||||||
| Diluted | $ | 0.01 | $ | 0.04 | $ | (0.09) | $ | 0.26 | ||||||||||||||||||
| Weighted average shares: | ||||||||||||||||||||||||||
| Basic | 33,917,700 | 32,800,690 | 33,631,654 | 32,492,276 | ||||||||||||||||||||||
| Diluted | 35,218,547 | 34,104,850 | 33,631,654 | 32,492,276 | ||||||||||||||||||||||
Luna Innovations Incorporated
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
| Nine Months Ended September 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash flows used in by operating activities | |||||||||||
| Net (loss)/income | $ | (2,977) | $ | 8,426 | |||||||
| Adjustments to reconcile net (loss)/income to net cash used in operating activities | |||||||||||
| Depreciation and amortization | 4,092 | 3,993 | |||||||||
| Share-based compensation | 3,219 | 3,204 | |||||||||
| Loss on disposal of property and equipment | 281 | — | |||||||||
| Gain on sale of discontinued operations, net of tax | — | (10,921) | |||||||||
| Deferred taxes | (998) | (3,374) | |||||||||
| Change in assets and liabilities | |||||||||||
| Accounts receivable | (6,095) | (6,166) | |||||||||
| Contract assets | 1,145 | (2,739) | |||||||||
| Inventory | (6,520) | (6,662) | |||||||||
| Other current assets | 202 | 2,093 | |||||||||
| Other non-current assets | (121) | 599 | |||||||||
| Accounts payable and accrued and other current liabilities | (479) | 5,824 | |||||||||
| Contract liabilities | 111 | 2,425 | |||||||||
| Other non-current liabilities | — | 13 | |||||||||
| Net cash used in operating activities | (8,140) | (3,285) | |||||||||
| Cash flows used in investing activities | |||||||||||
| Acquisition of property and equipment | (1,750) | (2,313) | |||||||||
| Acquisition of intangible property | (95) | — | |||||||||
| Proceeds from sale of discontinued operations | — | 12,973 | |||||||||
Acquisition of Luna Innovations Germany GmbH | — | (22,085) | |||||||||
| Other | — | 29 | |||||||||
| Net cash used in investing activities | (1,845) | (11,396) | |||||||||
| Cash flows provided by financing activities | |||||||||||
| Payments on finance lease obligations | (37) | (36) | |||||||||
| Proceeds from borrowings under debt obligations | 10,400 | 22,150 | |||||||||
| Payments of debt obligations | (1,750) | (16,275) | |||||||||
| Repurchase of common stock | (436) | (294) | |||||||||
| Proceeds from ESPP | 546 | 521 | |||||||||
| Proceeds from the exercise of stock options | 1,272 | 1,160 | |||||||||
| Net cash provided by financing activities | 9,995 | 7,226 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (6) | (1,784) | |||||||||
| Net increase/(decrease) in cash and cash equivalents | 4 | (9,239) | |||||||||
| Cash and cash equivalents—beginning of period | 6,024 | 17,128 | |||||||||
| Cash and cash equivalents—end of period | $ | 6,028 | $ | 7,889 | |||||||
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, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Net income/(loss) | $ | 461 | $ | 1,196 | $ | (2,977) | $ | 8,426 | |||||||||||||||
| Net income/(loss) from discontinued operations | — | 28 | (1,038) | 11,543 | |||||||||||||||||||
| Net income/(loss) from continuing operations | 461 | 1,168 | (1,939) | (3,117) | |||||||||||||||||||
| Interest expense, net | 613 | 218 | 1,566 | 442 | |||||||||||||||||||
| Income tax expense/(benefit) | 193 | 165 | (723) | (527) | |||||||||||||||||||
| Depreciation and amortization | 1,353 | 1,299 | 4,092 | 3,993 | |||||||||||||||||||
| EBITDA | 2,620 | 2,850 | 2,996 | 791 | |||||||||||||||||||
| Share-based compensation | 1,046 | 1,027 | 3,219 | 3,027 | |||||||||||||||||||
| Integration and transaction expense | 59 | 184 | 308 | 2,184 | |||||||||||||||||||
| Amortization of inventory step-up | — | 134 | — | 391 | |||||||||||||||||||
Other non-recurring charges (1) | 447 | 349 | 1,236 | 1,057 | |||||||||||||||||||
| Adjusted EBITDA | $ | 4,172 | $ | 4,544 | $ | 7,759 | $ | 7,450 | |||||||||||||||
(1) - Other non-recurring charges primarily include facility consolidation/set-up costs and one-time insurance deductible.
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, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Net income/(loss) | $ | 461 | $ | 1,196 | $ | (2,977) | $ | 8,426 | |||||||||||||||
| Net income/(loss) from discontinued operations | — | 28 | (1,038) | 11,543 | |||||||||||||||||||
| Net income/(loss) from continuing operations | 461 | 1,168 | (1,939) | (3,117) | |||||||||||||||||||
| Share-based compensation | 1,046 | 1,027 | 3,219 | 3,027 | |||||||||||||||||||
| Integration and transaction expense | 59 | 184 | 308 | 2,184 | |||||||||||||||||||
| Amortization of intangible assets | 929 | 988 | 2,839 | 2,793 | |||||||||||||||||||
| Amortization of inventory step-up | — | 134 | — | 391 | |||||||||||||||||||
Other non-recurring charges (1) | 447 | 349 | 1,236 | 1,057 | |||||||||||||||||||
| Income tax effect on adjustments | (620) | (671) | (1,901) | (2,363) | |||||||||||||||||||
| Adjusted income from continuing operations | $ | 2,322 | $ | 3,179 | $ | 3,762 | $ | 3,972 | |||||||||||||||
| Adjusted EPS | $ | 0.07 | $ | 0.09 | $ | 0.11 | $ | 0.12 | |||||||||||||||
| Adjusted weighted average shares: | |||||||||||||||||||||||
| Diluted | 35,219 | 34,105 | 33,632 | 32,492 | |||||||||||||||||||
(1) - Other non-recurring charges primarily include facility consolidation/set-up costs and one-time insurance deductible.
Third Quarter 2023 Results Investor Supplemental Materials Luna Innovations Incorporated © 1 November 14, 2023
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, market growth and its market position, sales wins, revenue growth, customer activity, engagement and prospects, recurring sales, margin, and the company's future financial performance, including guidance. 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, customer relationships, 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, 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 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 14, 2023, 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. Luna Innovations Incorporated © 2
Speakers Luna Innovations Incorporated © 3 Scott Graeff President & Chief Executive Officer Brian Soller Chief Technology Officer & EVP, Corporate Development George Gomez-Quintero Chief Financial Officer & EVP, Finance
Why Luna? Our investment thesis Luna Innovations Incorporated © 4 Enabling the future with fiber Proprietary measurement technology, offering unparalleled combination of resolution, accuracy and speed Customers in large, growing markets: Infrastructure, Energy, Defense, Communications, Automotive & Aerospace Aligned with macro trends in Energy, Infrastructure, Transport, Communications and more Robust IP portfolio with over 700 patents owned or in-licensed Attractive capital deployment, funded all investments internally; disciplined M&A Leverage: Scalable platforms, processes and people in place
Third Quarter FY2023 Results Luna Innovations Incorporated © 5
Third Quarter 2023: Key Financial Results • Revenue of $30.7M; up 5% year over year • Gross margin of 57%, compared to 58% for the prior year • Net income of $0.5M, compared to net income of $1.2M for the prior year • Adjusted EBITDA1 of $4.2M, compared to $4.5M for the prior year • Adjusted EPS1 of $0.07, compared to $0.09 for the prior year Luna Innovations Incorporated © 6 1Adj EPS and EBITDA are a non-GAAP measures. Reconciliation of comparable GAAP measures to non-GAAP measures are included in the appendix to this presentation.
Third Quarter 2023 and Recent Highlights • Named George Gomez-Quintero as Chief Financial Officer • Awarded a multi-year service contract for system deployed on the largest fiber-optic monitoring solution ever installed • Secured multiple sales of seismic monitoring DAS instruments to American seismic labs and the U.S. government • Secured $1.5M+ in new orders for DAS and DTS systems for pipeline monitoring from the largest energy company in the UAE • Renewed global supply partnership agreement for infrastructure monitoring with one of the world's largest multinational conglomerates • Successfully deployed fiber optic-sensing based traffic monitoring for the Utah Department of Transportation Luna Innovations Incorporated © 7 1Adj EPS and EBITDA are a non-GAAP measures. Reconciliation of comparable GAAP measures to non-GAAP measures are included in the appendix to this presentation.
Revenue has been driven by strong organic growth, supplemented by efficient M&A Luna Innovations Incorporated © 8 1Results exclude Luna Labs Revenue1 (millions) 2023 guidance: $120M - $125M
We have delivered solid AEBITDA, while internally funding many initiatives Luna Innovations Incorporated © 9 1Results exclude Luna Labs 2 Adj EBITDA is a non-GAAP measure. Reconciliation of comparable GAAP measures to non-GAAP measures are included in this presentation. FY23 guidance: $14M - $18M Adjusted EBITDA1, 2 (millions)
Balance Sheet • Balance sheet on September 30, 2023: – $165.1M in total assets o $6.0M in cash and cash equivalents o $65.2M in working capital • Total debt of $31.9M outstanding Luna Innovations Incorporated © 10
2023 Guidance1 Luna Innovations Incorporated © 11 Full-year total revenue $120M - $125M Full-year adjusted EBITDA $14M - $18M 1 The outlook above does not include any future acquisitions, divestitures or unanticipated events..
Appendix Luna Innovations Incorporated © 12
Reconciliation of Net Income/(Loss) to Adjusted EBITDA Luna Innovations Incorporated © 13 AP PE N D IX 1 Other non-recurring charges primarily include facility consolidation, one-time insurance deductible, etc. (in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Reconciliation of EBITDA and Adjusted EBITDA (Unaudited) (Unaudited) Net income/(loss) $ 461 $ 1,196 $ (2,977) $ 8,426 Net income/(loss) from discontinued operations — 28 (1,038) 11,543 Net income/(loss) from continuing operations 461 1,168 (1,939) (3,117) Interest expense, net 613 218 1,566 442 Investment income — Income tax expense/(benefit) 193 165 (527) Depreciation and amortization 1,353 1,299 4,092 3,993 EBITDA 2,620 2,850 2,996 791 Share-based compensation 1,046 1,027 3,219 3,027 Integration and transaction expense 59 184 308 2,184 Amortization of inventory step-up — 134 — 391 Other non-recurring charges (1) 447 349 1,236 1,057 Adjusted EBITDA $ 4,172 $ 4,544 $ 7,759 $ 7,450
Reconciliation of Net Income/(Loss) to Adjusted EPS Luna Innovations Incorporated © 14 AP PE N D IX 1 Other non-recurring charges primarily include facility consolidation, insurance one-time deductible, etc. (in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Reconciliation of Net (Loss)/Income to Adjusted EPS (Unaudited) (Unaudited) Net income/(loss) $ 461 $ 1,196 $ (2,977) $ 8,426 Net income/(loss) from discontinued operations — 28 (1,038) 11,543 Net income/(loss) from continuing operations 461 1,168 (1,939) (3,117) Share-based compensation 1,046 1,027 3,219 3,027 Integration and transaction expense 59 184 308 2,184 Amortization of intangible assets 929 988 2,839 2,793 Amortization of inventory step-up — 134 — 391 Other non-recurring charges (1) 447 349 1,236 1,057 Income tax effect on adjustments (620) (671) (1,901) (2,363) Adjusted income from continuing operations $ 2,322 $ 3,179 $ 3,762 $ 3,972 Adjusted EPS $ 0.07 $ 0.09 $ 0.11 $ 0.12 Adjusted weighted average shares: Diluted 35,219 34,105 33,632 32,492 Luna I novations Incorporated ©
Historical Quarterly Results Luna Innovations Incorporated © 15 AP PE N D IX (in thousands) Three months ended September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 September 30, 2023 Revenue $ 29,153 $ 31,702 $ 25,045 $ 29,164 $ 30,703 Cost of revenue 12,234 12,367 10,072 12,299 13,074 Gross profit 16,919 19,335 14,973 16,865 17,629 Gross margin 58 % 61 % 60 % 58 % 57 % Operating expense: Selling, general and administrative 12,065 13,292 13,207 13,279 12,770 Research, development and engineering 2,204 2,853 2,817 2,722 2,719 Amortization of intangible assets 988 1,238 992 918 929 Integration and deal related expenses 184 488 89 160 59 Total operating expense 15,441 17,871 17,105 17,079 16,477 Operating income/(loss) $ 1,478 $ 1,464 $ (2,132) $ (214) $ 1,152