Document


 
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): May 8, 2019
 
 
 
Luna Innovations Incorporated
(Exact name of registrant as specified in its charter)
 
 
 

301 1st Street SW, Suite 200
Roanoke, VA 24011
(Address of principal executive offices, including zip code)
540-769-8400
(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))

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. ¨







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
Common Stock, $0.001 par value per share
LUNA
The Nasdaq Stock Market LLC






Item 2.02.
Results of Operations and Financial Condition

On May 8, 2019, Luna Innovations Incorporated (the “Company”) issued a press release announcing its financial results for the quarter ended March 31, 2019, as well as information regarding a conference call to discuss these financial results. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

Also on May 8, 2019, 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: May 8, 2019



Exhibit



Exhibit 99.1

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12889894&doc=4

Luna Innovations Reports Strong First-Quarter 2019 Results

Highlights
Total revenues of $14.8 million for the three months ended March 31, 2019, up 69% compared to the three months ended March 31, 2018
Products and licensing revenues of $8.2 million for the three months ended March 31, 2019, up 98% compared to the three months ended March 31, 2018
Net income was $1.1 million, or $0.03 per fully diluted share, for the three months ended March 31, 2019, compared to $0.1 million, or $0.00 per fully diluted share, for the three months ended March 31, 2018
Adjusted EBITDA improved to $1.0 million for the three months ended March 31, 2019, compared to a loss of $(0.1) million for the three months ended March 31, 2018
Reaffirms 2019 outlook

(ROANOKE, VA, May 8, 2019) - Luna Innovations Incorporated (NASDAQ: LUNA), a global leader in advanced optical technology, today announced its financial results for the three months ended March 31, 2019.

“I continue to be proud of the Luna team and how we’ve driven performance and delivered such a strong first quarter,” said Scott Graeff, President and Chief Executive Officer of Luna. “We continue to build on the momentum we gained in 2018. The Luna team, through all levels of this organization, demonstrated leadership and delivered outstanding customer service, all while closing sales and filling the pipeline. Integration of the Micron Optics and General Photonics acquisitions is going smoothly. It is clear that we acquired excellent talent, strong capabilities and assets that are both strategic and synergistic. In addition, performance in Adjusted EBITDA is a good demonstration of the accretion delivered by our recent acquisitions. Overall, this is a great start to our fiscal 2019.”


First-quarter Fiscal 2019 Financial Summary
Financial results for the three months ended March 31, 2019 reflect strong momentum entering the fiscal year. These results include a full quarter of the business of Micron Optics, Inc. ("MOI"), acquired in October 2018, and one month of the operations of General Photonics ("GP"), acquired on March 1, 2019. Revenue and expenses





related to the Company's optoelectronics business, which was divested in July 2018, are classified as discontinued operations in the Company's results of operations for the three months ended March 31, 2018:

 
 
 
Three Months Ended March 31,
 
 
 
 
 
2019
 
2018
 
Change
Revenues:
 
 
 
 
 
 
Technology development
 
$
6,640,743

 
$
4,636,776

 
43.2
%
Products and licensing
 
$
8,192,375

 
$
4,131,754

 
98.3
%
 
   Total revenues
 
$
14,833,118

 
$
8,768,530

 
69.2
%
 
 
 
 
 
 
 
 
Gross profit
 
$
6,767,634

 
$
3,839,626

 
76.3
%
Gross margin
 
45.6
%
 
43.8
%
 
180 bps

 
 
 
 
 
 
 
 
Operating expense
 
$
7,665,211

 
$
4,213,082

 
81.9
%
Operating loss
 
$
(897,577
)
 
$
(373,456
)
 
140.3
%
 
 
 
 
 
 
 
 
Net income
 
$
1,125,879

 
$
148,676

 
$1.0M

 
 
 
 
 
 
 
 
Adjusted EBITDA
 
$
958,810

 
$
(52,339
)
 
$1.0M

 
 
 
 
 
 
 
 


A reconciliation of Adjusted EBITDA to net income can be found in the schedules included in this release.

Products and licensing revenue for the three months ended March 31, 2019, increased compared to the prior year period due partially to the inclusion of incremental revenues from the acquisitions of both MOI in October 2018 and GP at the beginning of March 2019. In addition, products and licensing revenue benefited from continued growth in sales of Luna's fiber optic-based sensing products, including its ODiSI products. Technology development revenues increased for the three months ended March 31, 2019, compared to the prior-year period due to growth in various government research programs surrounding applications of optical sensing and advanced materials and Luna's success in winning related research contracts.

The increase in operating expenses was due primarily to $0.9 million in transaction-related costs associated with the acquisition of GP and $1.8 million of expenses associated with the operations of MOI and GP. Neither of these acquisitions were present in the first quarter of 2018.

Pre-tax loss from continuing operations increased to $(0.7) million for the three months ended March 31, 2019, compared to $(0.3) million for the prior year fiscal quarter due primarily to transaction-related expenses associated with the acquisition of GP.






Income tax benefit for the three months ended March 31, 2019, was due to a one-time non-cash benefit resulting from a reduction in the valuation allowance associated with the company's net deferred tax asset following the acquisition of GP.

Net income attributable to common stockholders for the three months ended March 31, 2019, was $1.0 million, or $0.03 per fully diluted share, compared to net income attributable to common stockholders of $0.1 million, or $0.00 per fully diluted share, for the three months ended March 31, 2018. The increase in net income attributable to common stockholders was driven by improved overall performance and included the $1.9 million income tax benefit from the release of valuation allowance, partially offset by $0.9 million of transaction-related costs associated with the acquisition of GP. Net income attributable to common stockholders for the three months ended March 31, 2019, also included $0.5 million of non-cash expenses for share-based compensation and amortization of intangible assets associated with the acquisitions of MOI and GP.

Adjusted EBITDA was $1.0 million for the three months ended March 31, 2019, compared to $(0.1) million for the three months ended March 31, 2018.

2019 Full-year Outlook:
Luna reaffirms:
Total revenues in the range of $60 million to $65 million for full fiscal 2019; and
Adjusted EBITDA in the range of $6.0 million to $6.5 million for full fiscal 2019.

Luna is not providing an outlook for net income, which is the most directly comparable generally accepted accounting principles ("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, amortization of acquired intangible assets, 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, 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 months ended March 31, 2019. The call can be accessed by dialing 844.578.9643 domestically or 270.823.1522 internationally prior to the start of the call. The participant access code is 5299635. Investors are advised to dial in at least five minutes prior to the call to register. The conference call will also be webcast live over the Internet. The webcast can be accessed by logging on to the “Investor Relations” section of the Luna website, www.lunainc.com, prior to the event. The webcast will be archived under the “Webcasts and Presentations” section of the Luna website for at least 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 Technology Development segment and a Products and Licensing 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 the integration of its recent acquisitions of MOI and GP, its projected 2019 financial results, and its business focus. 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 and those risks and uncertainties set forth in Luna’s Form 10-K for the year ended December 31, 2018, 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 Contacts:
Jane Bomba                        Sally J. Curley





Luna Innovations Incorporated                Luna Innovations Incorporated
Phone: 303-829-1211                    614-530-3002
Email: IR@lunainc.com                    IR@lunainc.com








Luna Innovations Incorporated
Consolidated Statements of Operations
 
Three Months Ended March 31,
 
2019
 
2018
 
(unaudited)
Revenues:
 
 
 
Technology development
$
6,640,743

 
$
4,636,776

Products and licensing
8,192,375

 
4,131,754

Total revenues
14,833,118

 
8,768,530

Cost of revenues:
 
 
 
Technology development
4,816,146

 
3,353,501

Products and licensing
3,249,338

 
1,575,403

Total cost of revenues
8,065,484

 
4,928,904

Gross profit
6,767,634

 
3,839,626

Operating expense:
 
 
 
Selling, general and administrative
6,207,318

 
3,333,490

Research, development and engineering
1,457,893

 
879,592

Total operating expense
7,665,211

 
4,213,082

Operating loss
(897,577
)
 
(373,456
)
Other income/(expense):
 
 
 
Investment income
171,225

 
75,912

Other expense
(1,729
)
 
(10,854
)
Interest expense
(11,187
)
 
(40,647
)
Total other income
158,309

 
24,411

Loss from continuing operations before income taxes
(739,268
)
 
(349,045
)
Income tax benefit
(1,865,147
)
 
(76,967
)
Net income/(loss) from continuing operations
1,125,879

 
(272,078
)
Income from discontinued operations, net of income tax of $0 and $78,363

 
420,754

Net income from discontinued operations

 
420,754

Net income
1,125,879

 
148,676

Preferred stock dividend
83,058

 
64,425

Net income attributable to common stockholders
$
1,042,821

 
$
84,251

Net income/(loss) per share from continuing operations:
 
 
 
Basic
$
0.04

 
$
(0.01
)
Diluted
$
0.03

 
$
(0.01
)
Net income per share from discontinued operations:
 
 
 
Basic
$

 
$
0.02

Diluted
$

 
$
0.02

Net income per share attributable to common stockholders:
 
 
 
Basic
$
0.04

 
$

Diluted
$
0.03

 
$

Weighted average common shares and common equivalent shares outstanding:
 
 
 
Basic
28,039,080

 
27,204,989

Diluted
33,479,935

 
27,204,989






Luna Innovations Incorporated
Consolidated Balance Sheets
 
 
March 31, 2019
 
December 31, 2018
 
 
(unaudited)
 
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
$
24,580,006

 
$
42,460,267

 
Accounts receivable, net
13,505,444

 
13,037,068

 
Receivable from sale of HSOR business
2,500,375

 
2,500,000

 
Contract assets
2,829,186

 
2,422,495

 
Inventory
9,996,054

 
6,873,742

 
Prepaid expenses and other current assets
1,087,416

 
935,185

 
Total current assets
54,498,481

 
68,228,757

 
Long-term contract assets
359,166

 
336,820

 
Property and equipment, net
3,845,748

 
3,627,886

 
Intangible assets, net
11,309,181

 
3,302,270

 
Goodwill
10,345,249

 
101,008

 
Other assets
3,205,983

 
1,995

 
Total assets
$
83,563,808

 
$
75,598,736

 
Liabilities and stockholders’ equity
 
 
 
 
Liabilities:
 
 
 
 
Current liabilities:
 
 
 
 
Current portion of long-term debt obligations
$
247,726

 
$
619,315

 
Current portion of capital lease obligations

 
40,586

 
Accounts payable
4,945,927

 
2,395,984

 
Accrued liabilities
8,599,225

 
6,597,458

 
Contract liabilities
2,792,119

 
2,486,111

 
Total current liabilities
16,584,997

 
12,139,454

 
Long-term deferred rent

 
1,035,974

 
Other long-term liabilities
2,970,879

 

 
Long-term capital lease obligations

 
68,978

 
Total liabilities
19,555,876

 
13,244,406

 
Commitments and contingencies
 
 
 
 
Stockholders’ equity:
 
 
 
 
Preferred stock, par value $0.001, 1,321,514 shares authorized, issued and outstanding at March 31, 2019 and December 31, 2018
1,322

 
1,322

 
Common stock, par value $0.001, 100,000,000 shares authorized, 29,398,818 and 29,209,506 shares issued, 28,145,713 and 27,956,401 shares outstanding at March 31, 2019 and December 31, 2018, respectively
30,329

 
30,120

 
Treasury stock at cost, 1,253,105 shares at March 31, 2019 and December 31, 2018
(2,116,640
)
 
(2,116,640
)
 
Additional paid-in capital
86,355,322

 
85,744,750

 
Accumulated deficit
(20,262,401
)
 
(21,305,222
)
 
Total stockholders’ equity
64,007,932

 
62,354,330

 
Total liabilities and stockholders’ equity
$
83,563,808

 
$
75,598,736

 






Luna Innovations Incorporated
Consolidated Statements of Cash Flows
 
 
Three Months Ended March 31,
 
2019
 
2018
 
(unaudited)
Cash flows provided by/(used in) operating activities
 
 
 
Net income
$
1,125,879

 
$
148,676

Adjustments to reconcile net income to net cash provided by/(used in) operating activities
 
 
 
Depreciation and amortization
617,309

 
307,852

Share-based compensation
342,765

 
94,606

                Deferred taxes
(1,889,266
)
 

Change in assets and liabilities
 
 
 
Accounts receivable
1,052,571

 
(229,535
)
Contract assets
(429,037
)
 
221,386

Inventory
(527,849
)
 
(110,095
)
Other current assets
(41,549
)
 
133,293

Accounts payable and accrued expenses
1,196,425

 
(1,456,154
)
Contract liabilities
149,435

 
(1,650,363
)
Net cash provided by/(used in) operating activities
1,596,683

 
(2,540,334
)
Cash flows used in investing activities
 
 
 
Acquisition of property and equipment
(215,251
)
 
(129,720
)
Intangible property costs
(60,639
)
 
(113,108
)
Acquisition of General Photonics Corporation
(19,004,250
)
 

Net cash used in investing activities
(19,280,140
)
 
(242,828
)
Cash flows used in financing activities
 
 
 
Payments on finance lease obligations
(6,763
)
 
(13,611
)
Payments of debt obligations
(375,000
)
 
(458,333
)
Repurchase of common stock

 
(306,041
)
Proceeds from the exercise of options and warrants
184,959

 
22,288

Net cash used in financing activities
(196,804
)
 
(755,697
)
Net decrease in cash and cash equivalents
(17,880,261
)
 
(3,538,859
)
Cash and cash equivalents-beginning of period
42,460,267

 
36,981,533

Cash and cash equivalents-end of period
$
24,580,006

 
$
33,442,674







Luna Innovations Incorporated
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
 
 
Three Months Ended March 31,
 
2019
 
2018
 
(unaudited)
Net income
$
1,125,879

 
$
148,676

Less income from discontinued operations, net of income tax

 
420,754

Net income/(loss) from continuing operations
1,125,879

 
(272,078
)
Interest expense
11,187

 
40,647

Investment income
(171,225
)
 
(75,912
)
Tax benefit
(1,865,147
)
 
(76,967
)
Depreciation and amortization
617,309

 
237,365

EBITDA
(281,997
)
 
(146,945
)
Share-based compensation
342,765

 
94,606

Non-recurring charges (1)
898,042

 

Adjusted EBITDA
$
958,810

 
$
(52,339
)

(1) Non-recurring charges consist of transaction-related expenses incurred during the quarter ended March 31, 2019, related to the acquisition of General Photonics.
###



q12019supplementaldeckfi
Investor Supplemental Materials May 8, 2019


 
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 the company's future financial performance and the potential demand for its products, the company's growth potential, its business focus and competitive advantages, and its expectations about the benefits of its acquisition of General Photonics. Management cautions the reader that these forward-looking statements are only predictions and are subject to a number of both known and unknown risks and uncertainties, and actual results, performance, and/or achievements of the company may differ materially from the future results, performance, and/or achievements expressed or implied by these forward-looking statements as a result of a number of factors. These factors include, without limitation, failure of demand for the company’s products and services to meet expectations, failure of target market to grow and expand, technological and strategic challenges, market valuation of the company and those risks and uncertainties set forth in the company’s periodic reports and other filings with the Securities and Exchange Commission ("SEC"). Such filings are available on the SEC’s website at www.sec.gov and on the company’s website at www.lunainc.com. The statements made in this presentation are based on information available to Luna as of the date of this presentation 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, a non-GAAP financial measure. This non-GAAP financial measure is 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 Adjusted EBITDA to Net Income is included in the appendix to this presentation. NASDAQ: LUNA Luna Innovations Incorporated© 2019


 
1Q FY19 Results


 
First-quarter 2019 Financial Results Strong financial performance: . Sixth consecutive quarter of year-over-year, double-digit revenue growth from continuing operations . $1.0M improvement in Adjusted EBITDA year-over-year Total revenues of $14.8M, up 69% year-over-year: . Products and licensing revenue of $8.2M, up 98% year-over-year . Technology development revenue of $6.6M, up 43% year-over-year Net Income was $1.0 million, or $0.03 per fully diluted share, for the three months ended March 31, 2019, compared to $0.1 million, or $0.00 per fully diluted share, for the three months ended March 31, 2018 . Change due to one-time $1.9 million income tax benefit, offset by one-time $0.9 million of transaction- related costs and recurring $0.5 million in incremental non-cash expenses associated with the acquisitions Adjusted EBITDA1 improved to $1.0 million for the three months ended March 31, 2019, compared to a loss of $(0.1) million for the three months ended March 31, 2018 Reaffirms FY19 outlook: . Total revenues of $60M to $65M . Adjusted EBITDA of $6.0M to $6.5M 1Adj EBITDA is a non-GAAP measure. Reconciliation of comparable GAAP measures to non-GAAP measures are included in the appendix to this presentation. NASDAQ: LUNA Luna Innovations Incorporated© 2019


 
Strong Start to 2019 Revenue1 Adjusted EBITDA1, 2 Q1FY19 (millions) (millions) performance continues the FY19E operational and FY19E $6.0-$6.5 financial growth $60-$65 of the prior fiscal years. $3.0 $42.9 Q1: $1.0 $33.1 $0.3 1 $29.6 Based on management’s estimates $26.6 as of May. 8, 2019 of the impact Q1: from the divestiture of $14.8 ($1.0) Optoelectronics. Includes the acquisitions of Micron Optics and ($2.0) General Photonics. 2Adj EBITDA is a non-GAAP measure. Reconciliation of comparable GAAP measures to non-GAAP measures are FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 included in the appendix to this presentation. NASDAQ: LUNA Luna Innovations Incorporated© 2019


 
Update on Acquisitions Integration . Rapid integration; moved quickly to merge complementary products into integrated customer solutions; migrated sales teams to common rewards systems . Working as a single integrated company Micron Optics . Exceptionally positive customer feedback for the combination with Luna . Sales force training complete on products from both companies General Photonics . Quick, smooth integration into Lightwave proceeding as planned • Education of sales force on all products • Complementary, additive product lines; driving integration into one overall product portfolio NASDAQ: LUNA Luna Innovations Incorporated© 2019


 
Recent Highlights Acquisition of General Photonics $6M+ purchase order for Phoenix 1000 Tunable Lasers . Received from industry-leading robotics company . Delivered over four years Recognized as 2019 Innovator of the Year . Presented by the Roanoke-Blacksburg Technology Council . Recognizes organizations that set standard for thought leadership and innovation . Represents significant technological breakthrough / addresses market opportunity / or both Introduced Luna 6415 Lightwave Analyzer . Newest product in Comms Test segment . Provides robust, easy-to-use measurements for development and manufacturing of modern high- speed optical components and networks NASDAQ: LUNA Luna Innovations Incorporated© 2019


 
A Flexible Balance Sheet and Strong Cash Position Balance sheet on March 31, 2019: . $83.6M in total assets • $24.6M in cash and cash equivalents • $37.9M in working capital Focus on working capital and reinvestment in business in order to generate long- term sustainable growth Financial Performance NASDAQ: LUNA Luna Innovations Incorporated© 2019


 
Pro-forma Luna Financials, Adjusted for the sale of Optoelectronics and the Acquisitions of Micron Optics and General Photonics (in thousands) For the three months ended1 March 31, 2018 June 30, 2018 September 30, 2018 12/31/20182 3/31/20193 Revenues: Technology development $ 4,637 $ 5,466 $ 5,316 $ 5,548 $ 6,641 Products and licensing 8,481 8,867 10,787 11,345 10,221 Total revenues 13,118 14,333 16,103 16,893 16,862 - - - - Cost of revenues: - - - - Technology development 3,353 3,945 3,919 4,268 4,816 Products and licensing 3,112 3,323 4,204 4,002 3,836 Total cost of revenues 6,465 7,268 8,123 8,270 8,652 - - - - Gross Profit 6,653 7,065 7,980 8,623 8,210 - - - - Operating expense: - - - - Selling, general and administrative 5,510 5,413 5,488 6,394 7,165 Research, development and engineering 1,422 1,360 1,535 1,894 1,708 Total operating expense 6,932 6,773 7,023 8,288 8,873 - - - - O perating income/(loss) $ (279) $ 292 $ 957 $ 335 $ (663) 1 Unaudited pro forma financials assumes the Optoelectronics business was sold and the Micron Optics and General Photonics businesses were acquired on January 1, 2018. 2 Includes $751,000 of costs associated with the acquisition of Micron Optics. 3 Includes $898,000 of costs associated with the acquisition of General Photonics. NASDAQ: LUNA Luna Innovations Incorporated© 2019


 
Why Invest in Luna? Proprietary, measurement technology, offering unprecedented combination of resolution, accuracy and speed Customers in attractive markets: Aerospace, Automotive, Communications, Energy and Defense Positioned to take advantage of trends such as vehicle light-weighting and increasing demands on data centers and broadband capacity Adequately capitalized to fund growth Long-tenured, experienced executive team / board Corporate culture of innovation and integrity Compelling value: currently trading at an attractive multiple Summary NASDAQ: LUNA Luna Innovations Incorporated© 2019


 
Appendix


 
Reconciliation of Net Income to Adjusted EBITDA: First-Quarter Three Months Ended March 31, 2019 2018 (unaudited) Net income $ 1,125,879 $ 148,676 Less income from discontinued operations, net of income tax — 420,754 Net income/(loss) from continuing operations 1,125,879 (272,078) Interest expense 11,187 40,647 Investment income (171,225) (75,912) Tax benefit (1,865,147) (76,967) Depreciation and amortization 617,309 237,365 EBITDA (281,997) (146,945) Share-based compensation 342,765 94,606 Non-recurring charges 1 898,042 — Adjusted EBITDA $ 958,810 $ (52,339) 1 Non-recurring charges consist of transaction-related expenses incurred during the quarter ended March 31, 2019, related to the acquisition of General Photonics. Additional Financial Information NASDAQ: LUNA Luna Innovations Incorporated© 2019


 
Reconciliation of Net Income to Adjusted EBITDA: Full Fiscal Year For the year ended December 31, 2015 2016 2017 2018 (Unaudited) Net income $ 2,317,026 $ (2,369,492) $ 14,614,905 $ 11,004,241 Less Income from disc ops 8,718,103 1,538,624 15,865,720 9,766,431 Net income from continuing ops (6,401,077) (3,908,116) (1,250,815) 1,237,810 Interest expense 218,233 316,975 217,352 124,344 Investment income - - - (549,580) Tax provision (470,605) (135,567) (1,148,579) 47,818 Depreciation and amortization 843,636 905,956 1,136,729 908,347 EBITDA (5,809,813) (2,820,752) (1,045,313) 1,768,739 Share based compensation 1,124,379 860,215 715,094 527,189 Non-recurring charges1 3,704,019 - 595,992 751,102 Adjusted EBITDA $ (981,415) $ (1,960,537) $ 265,773 $ 3,047,030 1 Non-recurring charges include the following: 2015: Transaction-related expenses associated with the acquisition of Advanced Photonix, Inc. 2017: CEO separation costs and other share-based compensation 2018: Transaction related expenses associated with the acquisition of Micron Optics, Inc. Additional Financial Information NASDAQ: LUNA Luna Innovations Incorporated© 2019