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 15, 2021
(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 15, 2021 , Luna Innovations Incorporated (the “Company”) issued a press release announcing its financial results for the three and nine months ended September 30, 2021, 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 15, 2021 , 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 15, 2021
Exhibit 99.1
Luna Innovations Reports Third-Quarter 2021 Results
Luna Labs moved to Discontinued Operations
Highlights
The following highlights reflect the reclassification of Luna Labs to discontinued operations:
•Total revenues of $20.3 million for the three months ended September 30, 2021, up 32% compared to the three months ended September 30, 2020
•Gross margin of 62% for the three months ended September 30, 2021, compared to 63% for the three months ended September 30, 2020
•Operating loss of $10 thousand for the three months ended September 30, 2021, compared to operating income of $1.2 million for the three months ended September 30, 2020
•Net income of $0.4 million for the three months ended September 30, 2021, compared to net income of $3.1 million for the three months ended September 30, 2020
•Adjusted EBITDA of $2.1 million for the three months ended September 30, 2021, compared to $3.1 million for the three months ended September 30, 2020
•Adjusted EPS of $0.03 for the three months ended September 30, 2021, compared to $0.11 for the three months ended September 30, 2020
(ROANOKE, VA, November 15, 2021) - 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, 2021.
"Q3 was a record quarter for customer demand of our products, as we realized the highest level of bookings we've ever had," said Scott Graeff, President and Chief Executive Officer of Luna. "The largest backlog in our history is the result of record bookings, the increased impact of COVID and industry-wide supply chain challenges which have slowed our ability to deliver products. As a result, revenue for the year will be lighter than what we could have delivered. We believe that this is a temporary situation and remain committed to Luna's strategy. We continue to see vast opportunities for Luna in fiber optic technologies and are pleased to take the pivotal step in focusing on fiber with our transition of Luna Labs to discontinued operations. We have evaluated a number of opportunities and look forward to sharing Luna's meaningful achievements over the coming months."
Third-Quarter Fiscal 2021 Financial Summary
Highlights of the financial results for the three months ended September 30, 2021 are:
| Three Months Ended September 30, | Change | |||||||||||||||||||||||||
| (in thousands, except share and per share data) | 2021 | 2020 | ||||||||||||||||||||||||
| Revenues | $ | 20,329 | $ | 15,350 | 32 | % | ||||||||||||||||||||
| Gross profit | 12,584 | 9,632 | 31 | % | ||||||||||||||||||||||
| Gross margin | 62 | % | 63 | % | ||||||||||||||||||||||
| Operating expense | 12,594 | 8,420 | 50 | % | ||||||||||||||||||||||
| Operating (loss)/income | (10) | 1,212 | ||||||||||||||||||||||||
| Operating margin | — | % | 8 | % | ||||||||||||||||||||||
| Other (expense)/income and income tax benefit/(expense) | (334) | 1,096 | ||||||||||||||||||||||||
| Net (loss)/income from continuing operations | $ | (344) | $ | 2,308 | ||||||||||||||||||||||
Income from discontinued operations, net of income tax of $235 and $247 | 699 | 794 | ||||||||||||||||||||||||
| Net income | $ | 355 | $ | 3,102 | (89) | % | ||||||||||||||||||||
| Earnings per diluted share (EPS) | $ | 0.01 | $ | 0.10 | (90) | % | ||||||||||||||||||||
| Adjusted EPS | $ | 0.03 | $ | 0.11 | (73) | % | ||||||||||||||||||||
| Diluted weighted average shares outstanding | 33,780,714 | 32,411,086 | ||||||||||||||||||||||||
| Adjusted EBITDA | $ | 2,110 | $ | 3,144 | (33) | % | ||||||||||||||||||||
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 September 30, 2021 increased compared to the prior-year period, primarily due to revenue generated by the businesses we have recently acquired over the last year.
Gross margin decreased to 62% for the three months ended September 30, 2021, compared to 63% for the three months ended September 30, 2020, driven primarily by product mix. Operating loss and margin declined to $10 thousand and less than 1% of total revenues, respectively, for the three months ended September 30, 2021, compared to $1.2 million and 8% of total revenues, respectively, for the three months ended September 30, 2020. The decrease in operating income was primarily due to an increase in operating expenses and amortization related to our recent acquisitions.
Net income was $0.4 million, or $0.01 per fully diluted share, for the three months ended September 30, 2021, compared to net income of $3.1 million, or $0.10 per fully diluted share, for the three months ended September 30, 2020. Adjusted EPS was $0.03 for the three months ended September 30, 2021 compared to $0.11 for the three months ended September 30, 2020.
Adjusted EBITDA was $2.1 million for three months ended September 30, 2021, compared to $3.1 million for the three months ended September 30, 2020. The decrease was driven by lower income from continuing operations.
Nine Months Ended Fiscal 2021 Financial Summary
Highlights of the financial results for the nine months ended September 30, 2021 are:
| Nine months ended September 30, | Change | |||||||||||||||||||||||||
| (in thousands, except share and per share data) | 2021 | 2020 | ||||||||||||||||||||||||
| Revenues | $ | 63,291 | $ | 39,837 | 59 | % | ||||||||||||||||||||
| Gross profit | 37,436 | 24,126 | 55 | % | ||||||||||||||||||||||
| Gross margin | 59 | % | 61 | % | ||||||||||||||||||||||
| Operating expense | 41,061 | 23,252 | 77 | % | ||||||||||||||||||||||
| Operating (loss)/income | (3,625) | 874 | ||||||||||||||||||||||||
| Operating margin | (6) | % | 2 | % | ||||||||||||||||||||||
| Other (expense)/income and income tax benefit/(expense) | 1,061 | 1,012 | 5 | % | ||||||||||||||||||||||
| Net (loss)/income from continuing operations | $ | (2,564) | $ | 1,886 | ||||||||||||||||||||||
Income from discontinued operations, net of income tax of $381 and $209 | 2,371 | 1,469 | ||||||||||||||||||||||||
| Net (loss)/income | $ | (193) | $ | 3,355 | ||||||||||||||||||||||
| Earnings per diluted share (EPS) | $ | (0.01) | $ | 0.10 | ||||||||||||||||||||||
| Adjusted EPS | $ | 0.08 | $ | 0.14 | (43) | % | ||||||||||||||||||||
| Diluted weighted average shares outstanding | 33,585,973 | 32,478,625 | ||||||||||||||||||||||||
| Adjusted EBITDA | $ | 4,461 | $ | 4,990 | (11) | % | ||||||||||||||||||||
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 nine months ended September 30, 2021 increased compared to the prior-year period, primarily due to our recent acquisitions.
Gross margin of 59% for the nine months ended September 30, 2021 was down compared to 61% for the nine months ended September 30, 2020 due to product mix. Operating loss and margin declined to $3.6 million and (6)% of total revenues, respectively, for the nine months ended September 30, 2021, compared to $0.9 million and 2% of total revenues, respectively, for the nine months ended September 30, 2020. The decrease in operating income was primarily due to $2.1 million of integration and transaction costs, as well as $1.6 million of amortization of
intangible assets and inventory step-up related to Luna's recently completed acquisitions and its continuing portfolio activities.
Net loss was $0.2 million, or $(0.01) per fully diluted share, for the nine months ended September 30, 2021, compared to a net income of $3.4 million, or $0.10 per fully diluted share, for the nine months ended September 30, 2020. Adjusted EPS was $0.08 for the nine months ended September 30, 2021, compared to $0.14 for the nine months ended September 30, 2020.
Adjusted EBITDA was $4.5 million for the nine months ended September 30, 2021, compared to $5.0 million for the nine months ended September 30, 2020.
2021 Full-Year Outlook
Luna is revising guidance to reflect the reclassification of Luna Labs to discontinued operations and COVID-19 pandemic related issues:
•Total revenue of $85 million to $88 million
•Adjusted EBITDA of $6 million to $8 million
Adjusted EBITDA is a non-GAAP measure. Luna is not providing an outlook for net income/(loss), 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 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 to discuss its financial results for the three and nine months ended September 30, 2021. The investor conference call will be available via live webcast on the Luna website at www.lunainc.com under the tab “Investor Relations.” To participate by telephone, the domestic dial-in number is 844.578.9643 and the international dial-in number is 270.823.1522. The participant access code is 6088397. Investors are advised to dial in at least five minutes prior to the call to register. The webcast will be archived on the company’s website under “Webcasts and Presentations” for 30 days following the conference call.
About Luna
Luna Innovations Incorporated (www.lunainc.com) is a leader in optical technology, providing unique capabilities in high-performance, fiber optic-based, test products for the telecommunications industry and distributed fiber optic-based sensing for 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 2021 financial results and outlook, the Company's growth potential, the resolution of backlog and supply chain challenges and the potential sale of Luna Labs. 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 September 30, 2021, 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
(in thousands, except share data)
| September 30, 2021 | December 31, 2020 | ||||||||||
| (unaudited) | |||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 14,755 | $ | 15,366 | |||||||
| Accounts receivable, net | 19,557 | 21,928 | |||||||||
| Contract assets | 2,883 | 4,139 | |||||||||
| Inventory | 25,350 | 23,062 | |||||||||
| Prepaid expenses and other current assets | 6,213 | 4,433 | |||||||||
| Assets held for sale | 13,855 | 6,541 | |||||||||
| Total current assets | 82,613 | 75,469 | |||||||||
| Property and equipment, net | 2,820 | 2,917 | |||||||||
| Intangible assets, net | 17,819 | 19,994 | |||||||||
| Goodwill | 18,979 | 18,121 | |||||||||
| Operating lease right-of-use asset | 5,497 | 5,984 | |||||||||
| Other non-current assets | 246 | 369 | |||||||||
| Deferred tax asset | 1,707 | 1,689 | |||||||||
| Non-current assets held for sale | — | 6,459 | |||||||||
| Total assets | $ | 129,681 | $ | 131,002 | |||||||
| Liabilities and stockholders’ equity | |||||||||||
| Liabilities: | |||||||||||
| Current liabilities: | |||||||||||
| Current portion of long-term debt obligations | $ | 4,167 | $ | 4,167 | |||||||
| Accounts payable | 2,585 | 2,852 | |||||||||
| Accrued and other current liabilities | 10,826 | 10,773 | |||||||||
| Contract liabilities | 4,967 | 6,698 | |||||||||
| Current portion of operating lease liability | 2,020 | 1,876 | |||||||||
| Liabilities associated with assets held for sale | 9,091 | 3,719 | |||||||||
| Total current liabilities | 33,656 | 30,085 | |||||||||
| Long-term debt obligations | 12,709 | 15,817 | |||||||||
| Long-term portion of operating lease liability | 4,073 | 5,034 | |||||||||
| Other long-term liabilities | 374 | 410 | |||||||||
| Non-current liabilities associated with assets held for sale | — | 5,214 | |||||||||
| Total liabilities | 50,812 | 56,560 | |||||||||
| Commitments and contingencies | |||||||||||
| Stockholders’ equity: | |||||||||||
Common stock, par value $0.001, 100,000,000 shares authorized, 33,511,899 and 32,724,512 shares issued, 31,961,907 and 31,024,537 shares outstanding at September 30, 2021 and December 31, 2020, respectively | 34 | 33 | |||||||||
Treasury stock at cost, 1,739,455 and 1,699,975 shares at September 30, 2021 and December 31, 2020, respectively | (5,209) | (4,789) | |||||||||
| Additional paid-in capital | 97,238 | 92,403 | |||||||||
| Accumulated deficit | (13,150) | (12,957) | |||||||||
| Accumulated other comprehensive loss | (44) | (248) | |||||||||
| Total stockholders’ equity | 78,869 | 74,442 | |||||||||
| Total liabilities and stockholders’ equity | $ | 129,681 | $ | 131,002 | |||||||
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, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Revenues | $ | 20,329 | $ | 15,350 | $ | 63,291 | $ | 39,837 | |||||||||||||||
| Cost of revenues | 7,745 | 5,718 | 25,855 | 15,711 | |||||||||||||||||||
| Gross profit | 12,584 | 9,632 | 37,436 | 24,126 | |||||||||||||||||||
| Operating expense: | |||||||||||||||||||||||
| Selling, general and administrative | 9,674 | 6,229 | 33,414 | 17,959 | |||||||||||||||||||
| Research, development and engineering | 2,920 | 1,615 | 7,647 | 4,717 | |||||||||||||||||||
| Loss on sale of property and equipment | — | 576 | — | 576 | |||||||||||||||||||
| Total operating expense | 12,594 | 8,420 | 41,061 | 23,252 | |||||||||||||||||||
| Operating (loss)/income | (10) | 1,212 | (3,625) | 874 | |||||||||||||||||||
| Other (expense)/income: | |||||||||||||||||||||||
| Investment income | — | 1 | — | 65 | |||||||||||||||||||
| Other income | — | 13 | — | 19 | |||||||||||||||||||
| Interest expense | (110) | (1) | (375) | (2) | |||||||||||||||||||
| Total other (expense)/income | (110) | 13 | (375) | 82 | |||||||||||||||||||
| (Loss)/income from continuing operations before income taxes | (120) | 1,225 | (4,000) | 956 | |||||||||||||||||||
| Income tax expense/(benefit) | 224 | (1,083) | (1,436) | (930) | |||||||||||||||||||
| Net (loss)/income from continuing operations | (344) | 2,308 | (2,564) | 1,886 | |||||||||||||||||||
Income from discontinued operations, net of income tax of $235, $246, $381, and $673 | 699 | 794 | 2,371 | 1,469 | |||||||||||||||||||
| Net income/(loss) | $ | 355 | $ | 3,102 | $ | (193) | $ | 3,355 | |||||||||||||||
| Net (loss)/income per share from continuing operations: | |||||||||||||||||||||||
| Basic | $ | (0.01) | $ | 0.07 | $ | (0.08) | $ | 0.06 | |||||||||||||||
| Diluted | $ | (0.01) | $ | 0.07 | $ | (0.08) | $ | 0.06 | |||||||||||||||
| Net income per share from discontinued operations: | |||||||||||||||||||||||
| Basic | $ | 0.02 | $ | 0.03 | $ | 0.08 | $ | 0.05 | |||||||||||||||
| Diluted | $ | 0.02 | $ | 0.02 | $ | 0.07 | $ | 0.05 | |||||||||||||||
| Net income/(loss) per share attributable to common stockholders: | |||||||||||||||||||||||
| Basic | $ | 0.01 | $ | 0.10 | $ | (0.01) | $ | 0.11 | |||||||||||||||
| Diluted | $ | 0.01 | $ | 0.10 | $ | (0.01) | $ | 0.10 | |||||||||||||||
| Weighted average shares: | |||||||||||||||||||||||
| Basic | 31,944,869 | 30,809,896 | 31,553,998 | 30,593,954 | |||||||||||||||||||
| Diluted | 33,780,714 | 32,411,086 | 33,585,973 | 32,478,625 | |||||||||||||||||||
Luna Innovations Incorporated
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
| Nine Months Ended September 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| Cash flows provided by operating activities | |||||||||||
| Net (loss)/income | $ | (193) | $ | 3,355 | |||||||
| Adjustments to reconcile net loss to net cash (used in)/provided by operating activities | |||||||||||
| Depreciation and amortization | 3,523 | 2,126 | |||||||||
| Share-based compensation | 2,230 | 1,538 | |||||||||
| Bad debt expense | 262 | 147 | |||||||||
| Loss on sale of property and equipment | — | 576 | |||||||||
| Loss from discontinued operations, net of tax | — | 1,436 | |||||||||
| Deferred taxes | (23) | (313) | |||||||||
| Change in assets and liabilities | |||||||||||
| Accounts receivable | 220 | (2,131) | |||||||||
| Contract assets | 837 | (1,589) | |||||||||
| Inventory | (1,906) | (1,419) | |||||||||
| Other current assets | (1,752) | (1,982) | |||||||||
| Accounts payable and accrued expenses | (1,681) | (1,481) | |||||||||
| Contract liabilities | (287) | (166) | |||||||||
| Net cash provided by operating activities | 1,230 | 97 | |||||||||
| Cash flows (used in)/provided by investing activities | |||||||||||
| Acquisition of property and equipment | (943) | (422) | |||||||||
| Intangible property costs | (215) | (291) | |||||||||
| Proceeds from sale of property and equipment | — | 403 | |||||||||
| Proceeds from sale of discontinued operations | — | 600 | |||||||||
| Net cash (used in)/provided by investing activities | (1,158) | 290 | |||||||||
| Cash flows (used in)/provided by financing activities | |||||||||||
| Payments on finance lease obligations | (36) | (39) | |||||||||
| Payments of debt obligations | (3,110) | — | |||||||||
| Repurchase of common stock | (420) | (329) | |||||||||
| Proceeds from ESPP | 530 | — | |||||||||
| Proceeds from the exercise of options and warrants | 2,076 | 1,397 | |||||||||
| Net cash (used in)/provided by financing activities | (960) | 1,029 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | 277 | — | |||||||||
| Net (decrease)/increase in cash and cash equivalents | (611) | 1,416 | |||||||||
| Cash and cash equivalents-beginning of period | 15,366 | 25,006 | |||||||||
| Cash and cash equivalents-end of period | $ | 14,755 | $ | 26,422 | |||||||
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, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Net income/(loss) | $ | 355 | $ | 3,102 | $ | (193) | $ | 3,355 | |||||||||||||||
| Income from discontinued operations, net of tax | 699 | 794 | 2,371 | 1,469 | |||||||||||||||||||
| Net (loss)/income from continuing operations | (344) | 2,308 | (2,564) | 1,886 | |||||||||||||||||||
| Interest expense | 110 | 1 | 375 | 2 | |||||||||||||||||||
| Investment income | — | (1) | — | (65) | |||||||||||||||||||
| Income tax expense/(benefit) | 224 | (1,083) | (1,436) | (930) | |||||||||||||||||||
| Depreciation and amortization | 1,131 | 709 | 3,440 | 1,979 | |||||||||||||||||||
| EBITDA | 1,121 | 1,934 | (185) | 2,872 | |||||||||||||||||||
| Share-based compensation | 689 | 542 | 2,133 | 1,450 | |||||||||||||||||||
| Integration and transaction expense | 196 | — | 2,073 | — | |||||||||||||||||||
| Loss on sale of property and moving related expenses | — | 668 | — | 668 | |||||||||||||||||||
| Amortization of inventory step-up | 104 | — | 440 | — | |||||||||||||||||||
| Adjusted EBITDA | $ | 2,110 | $ | 3,144 | $ | 4,461 | $ | 4,990 | |||||||||||||||
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, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Net income/(loss) | $ | 355 | $ | 3,102 | $ | (193) | $ | 3,355 | |||||||||||||||
| Income from discontinued operations, net of tax | 699 | 794 | 2,371 | 1,469 | |||||||||||||||||||
| Net (loss)/income from continuing operations | (344) | 2,308 | (2,564) | 1,886 | |||||||||||||||||||
| Share-based compensation | 689 | 542 | 2,133 | 1,450 | |||||||||||||||||||
| Integration and deal expense | 196 | — | 2,073 | — | |||||||||||||||||||
| Amortization of intangible assets | 761 | 424 | 2,353 | 1,236 | |||||||||||||||||||
| Amortization of inventory step-up | 104 | — | 440 | — | |||||||||||||||||||
| Loss on sale of property and moving related expenses | — | 668 | — | 668 | |||||||||||||||||||
| Income tax effect on adjustments | (438) | (409) | (1,750) | (839) | |||||||||||||||||||
| Adjusted income from continuing operations | $ | 968 | $ | 3,533 | $ | 2,685 | $ | 4,401 | |||||||||||||||
| Adjusted EPS | $ | 0.03 | $ | 0.11 | $ | 0.08 | $ | 0.14 | |||||||||||||||
| Adjusted weighted average shares (in thousands): | |||||||||||||||||||||||
| Diluted | 33,781 | 32,411 | 33,586 | 32,479 | |||||||||||||||||||
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Third-quarter 2021 Results Investor Supplemental Materials November 15, 2021
NASDAQ: LUNA Luna Innovations Incorporated© 2021 2 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, including 2021 guidance, and market recognition of key technologies and demand for its products, backlog, sales growth, the company’s overall growth potential, its balance sheet and capitalization and access to capital, its technological advantages and capabilities, its strategic position, and corporate and leadership culture. 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 markets to grow and expand, technological, operational and strategic challenges, uncertainties related to the ongoing impact of the COVID-19 pandemic 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, November 15, 2021, 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.
3Q FY21 Results
NASDAQ: LUNA Luna Innovations Incorporated© 2021 4 Third-Quarter 2021: Key Financial Results Revenues of $20.3M; up 32% year-over-year Beginning in Q3 with the classification of Luna Labs to discontinued operations, Luna now reports as one segment • Luna becomes a pure play based on its fiber optic technology; Lightwave = Luna Gross Margin of 62%, compared to 63% for the prior-year period Increase to the low/mid 60% range, compared to the low 50% range • Historically, this metric included the gross margin of Luna Labs Operating loss of $10K, compared to operating income of $1.2M for the prior-year period Decrease primarily due to increase in operating expenses and amortization related to our recent acquisitions Adjusted EBITDA1 of $2.1M, compared to $3.1M for the prior-year period Adjusted EPS1 of $0.03, compared to $0.11 for the prior-year period 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.
NASDAQ: LUNA Luna Innovations Incorporated© 2021 5 Third-quarter 2021 Highlights Continued focus on Luna’s mission to “enable the future with fiber” by moving Luna Labs to discontinued operations Returned to international travel, including onsite visits to OptaSense locations Recorded largest backlog in company history Continued successful penetration of distributed sensing solutions in key, target markets Infrastructure and security • Delivered large order for infrastructure monitoring in the mining space to South American customer — First significant order for DAS products with new, “quantitative” features for monitoring strain and temperature • Landed large deal for perimeter monitoring system in Indonesia • Won competitive bid for a monitoring system for a major bridge in the southeast U.S. using Hyperion and associated sensors Oil and Gas • Large, multi-unit order for Hyperion-based monitoring solution for off-shore oil and gas infrastructure • Oilfield business for DAS products seeing increasing uptake as confidence grows entering Q4 • Carbon sequestration market beginning to recognize value of DAS technology with several key wins in Q3 Transportation • Large win for traffic monitoring system with a western U.S. DOT — Further validation of DAS technology for real-time traffic monitoring systems
NASDAQ: LUNA Luna Innovations Incorporated© 2021 6 Third-quarter 2021 Highlights (continued) Continued sales momentum for Terahertz products for industrial process control market Record bookings with multiple, large “Blue-chip” customer wins in Q3 Continued sales momentum for communications test products Record bookings for high-speed optical analyzers (OVA/OBR) Delivered first five OBR 6200, portable test systems for field support of the F-22 aircraft • First follow-on sale generated from successful deployment of OBR 6200 units for global fleet support of F-35 Multiple large orders for laser and module products for multiple, growing applications Significant new orders for RIO lasers from multiple LiDAR manufacturers Large customer wins for polarization modules for applications in medical robotics, medical imaging, and defense-related high-power laser applications
NASDAQ: LUNA Luna Innovations Incorporated© 2021 7 $4.0 $4.5 FY19 FY20 FY21 Adjusted EBITDA1,2 (millions) $49.1 $63.3 FY19 FY20 FY21 Revenue1 (millions) $59.1 Strong Financial Results 1 Results shown include the reclassification of Luna Labs to Discontinued Operations. 2 Adj EBITDA is a non-GAAP measure. Reconciliation of comparable GAAP measures to non-GAAP measures are included in the appendix to this presentation. FY21 Guidance: $85.0 - $88.0 FY21 Guidance: $6.0 to $8.0 $8.6
NASDAQ: LUNA Luna Innovations Incorporated© 2021 8 A Flexible Balance Sheet Strong balance sheet on September 30, 2021: $129.7M in total assets • $14.8M in cash and cash equivalents • $49.0M in working capital Total debt of $16.9M outstanding $9.4M in term debt $7.5M drawn on revolver • $7.5M available Allows us to continue to deploy our capital to generate long-term sustainable growth by increasing organic sales, reinvesting in our business and identifying inorganic opportunities
NASDAQ: LUNA Luna Innovations Incorporated© 2021 9 2021 Financial Outlook Revising guidance to reflect the reclassification of Luna Labs to Discontinued Operations and pandemic related issues: Total revenue of $85M to $88M Adjusted EBITDA1 of $6M to $8M 1 Adj EBITDA is a non-GAAP measure. Reconciliation of comparable GAAP measures to non-GAAP measures are included in the appendix to this presentation. The outlook above does not include any future acquisitions, divestitures, or unanticipated events.
NASDAQ: LUNA Luna Innovations Incorporated© 2021 10 Luna – Enabling the Future with Fiber Positioned as a global fiber optic leader Proprietary measurement technology, offering unprecedented combination of resolution, accuracy and speed Customers in attractive markets: Military and Defense, Communications, Infrastructure, Energy, Automotive and Aerospace Positioned to take advantage of trends such as vehicle lightweighting, smart infrastructure, and increasing demands on data centers and broadband capacity Adequately capitalized to fund growth Long-tenured, experienced executive team / board Corporate culture of innovation and integrity Overview
Appendix
NASDAQ: LUNA Luna Innovations Incorporated© 2021 12 Reconciliation of Net (Loss)/Income to Adjusted EBITDA1 1 Results shown include the reclassification of Luna Labs to Discontinued Operations. (in thousands) 2021 2020 2021 2020 Reconciliation of EBITDA and Adjusted EBITDA GAAP net income/(loss) 355$ 3,102$ (193)$ 3,355$ Income from discontinued operations, net of tax 699 794 2,371 1,469 GAAP net income/(loss) from continuing operations (344) 2,308 (2,564) 1,886 Interest expense 110 1 375 2 Investment income - (1) - (65) Income tax (benefit)/expense 224 (1,083) (1,436) (930) Depreciation and amortization 1,131 709 3,440 1,979 EBITDA 1,121 1,934 (185) 2,872 Share-based compensation 689 542 2,133 1,450 Integration and transaction expense 196 - 2,073 - Loss on sale of property and facility moving expenses - 668 - 668 Amortization of Inventory step-up 104 - 440 - - - - - Adjusted EBITDA 2,110$ 3,144$ 4,461$ 4,990$ Three Months Ended Nine Months Ended September 30, September 30, (Unaudited) (Unaudited)
NASDAQ: LUNA Luna Innovations Incorporated© 2021 13 Reconciliation of Net (Loss)/Income to Adjusted EPS1 1 Results shown include the reclassification of Luna Labs to Discontinued Operations. 2021 2020 2021 2020 Reconciliation of Net (loss)/Income to Adjusted EPS GAAP net income/(loss) 355$ 3,102$ (193)$ 3,355$ Income from discontinued operations, net of tax 699 794 2,371 1,469 GAAP net income/(loss) from continuing operations (344) 2,308 (2,564) 1,886 Adjustments: Share-based Compensation 689 542 2,133 1,450 Integration and transaction expense 196 - 2,073 - Amortization of Intangible assets 761 424 2,353 1,236 Amortization of Inventory Step-up 104 - 440 - Loss on sale of property and facility moving expenses - 668 - 668 Total adjustments: 1,750 1,634 6,999 3,354 Income tax effect on adjustments (438) (409) (1,750) (839) Adjusted income from continuing operations 968$ 3,533$ 2,685$ 4,401$ Adjusted EPS 0.03$ 0.11$ 0.08 0.14 Adjusted weighted average shares (in thousands): Diluted 33,781 32,411 33,586 32,479 (in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, (Unaudited) (Unaudited)
NASDAQ: LUNA Luna Innovations Incorporated© 2021 14 Historical Quarterly Results1 1 Results shown include the reclassification of Luna Labs to Discontinued Operations. September 30, 2020 December 31, 2020 March 31, 2021 June 30, 2021 September 30, 2021 Revenues 15,350$ 19,278$ 20,997$ 21,965$ 20,329$ Cost of revenues 5,718 7,523 8,726 9,384 7,745 Gross Profit 9,632 11,755 12,271 12,581 12,584 Gross Margin 63% 61% 58% 57% 62% Operating expense: Selling, general and administrative 5,713 7,714 9,222 11,048 8,717 Research, development and engineering 1,615 1,996 2,917 1,810 2,920 Amortization of Intangibles 424 478 826 766 761 Integration and deal related expense - 2,204 886 991 196 Loss on sale of property and facility moving expenses 668 69 - - - Total operating expense 8,420 12,461 13,851 14,615 12,594 Operating income/(loss) 1,212$ (706)$ (1,580)$ (2,034)$ (10)$ Three Months Ended (in thousands)