Luna Innovations Reports Strong Fourth-Quarter and Fiscal-Year 2018 Results
-
Fifth consecutive quarter of year-over-year, double-digit
revenue growth -
Total revenues of $13.5 million for the three months ended
December 31, 2018, up 37% compared to the three months ended December
31, 2017; total revenues of $42.9 million for fiscal year 2018, an
increase of 30% compared to fiscal 2017 -
Pre-tax income from continuing operations improved to $0.6
million for the three months ended December 31, 2018, compared to a
loss of $(0.5) million for the prior-year fourth quarter; for fiscal
2018, pre-tax income from continuing operations increased to $1.3
million compared to a pre-tax loss from continuing operations of
$(2.4) million in fiscal 2017 -
Net income attributable to common stockholders improved to $0.9
million for the three months ended December 31, 2018, compared to $0.4
million for the prior-year fourth quarter; for fiscal 2018, income
attributable to common stockholders declined to $10.7 million from
$14.5 million in fiscal 2017, primarily due to the smaller gain
recognized on the sale of discontinued operations in 2018 compared to
2017. -
Adjusted EBITDA of $1.6 million for the three months ended
December 31, 2018 and $3.0 million for fiscal year 2018, and a gross
margin improvement of 5 basis points for the full year
ROANOKE, Va.–(BUSINESS WIRE)–lt;a href=”https://twitter.com/hashtag/Q42018?src=hash” target=”_blank”gt;#Q42018lt;/agt;–Luna Innovations Incorporated (NASDAQ: LUNA), a global leader in
advanced fiber optic-based technology, today reported strong financial
results for the three months and fiscal year ended December 31, 2018.
“This has been an extraordinary year for Luna, and I’m extremely pleased
with our performance in the fourth quarter and for this fiscal year,”
said Scott Graeff, President and Chief Executive Officer of Luna. “Our
strong financial results underscore how we have executed on our strategy
to realign Luna’s business to focus on our core, fiber optic-based test
and measurement offerings. We’ve identified and acquired new businesses
to complement our existing platforms and have been committed to
divesting those businesses that no longer fit our growth profile as an
organization. These actions, combined with the strength of our customer
base in rapid-growth industries, have driven Luna’s fiscal 2018
performance, and we are well positioned for future growth.”
Graeff continued, “As prudent stewards of capital, we believe that the
acquisition of General Photonics, a leader in characterization and
control of light for photonics applications, will only continue to drive
Luna’s growth. This acquisition, and the acquisition of Micron Optics
completed last year, spotlight Luna’s ability to acquire assets that fit
squarely within our core while delivering an excellent return on
invested capital.”
Fourth-Quarter and Full-Year Fiscal 2018
Financial Summary
Total revenues for the three months ended December 31, 2018 were $13.5
million, compared to $9.9 million for the three months ended December
31, 2017. Total products and licensing revenues increased to $8.0
million for the three months ended December 31, 2018, compared to $4.7
million for the three months ended December 31, 2017. The increase in
the products and licensing revenues for the three months ended December
31, 2018, compared to the three months ended December 31, 2017, includes
revenues realized from the acquisition of Micron Optics, Inc. (“MOI”) in
October 2018 along with continued growth in sales of Luna’s fiber
optic-based sensing products, including its ODiSI products and its
Terahertz products. Technology development revenues increased to $5.5
million for the three months ended December 31, 2018, compared to $5.1
million for the three months ended December 31, 2017. The increase in
technology development revenues for the three months ended December 31,
2018 compared to the prior-year period was due to growth in various
government research programs surrounding applications of advanced
materials and Luna’s success in winning related research contracts.
Gross profit was $6.6 million, or 49% of revenues, for the three months
ended December 31, 2018, compared to gross profit of $4.2 million, or
42% of revenues, for the three months ended December 31, 2017.
Selling, general and administrative (“SG&A”) expenses were $4.9 million
for the three months ended December 31, 2018, compared to $3.9 million
for the three months ended December 31, 2017. Research, development and
engineering (“R&D”) expenses were $1.3 million for the three months
ended December 31, 2018, compared to $0.7 million for the three months
ended December 31, 2017. The increase in SG&A expenses was due primarily
to $0.8 million in transaction-related costs associated with the
acquisition of MOI and $0.8 million of expenses associated with the
operations of MOI following the acquisition.
Pre-tax income from continuing operations improved to $0.6 million for
the three months ended December 31, 2018 compared to a pre-tax loss from
continuing operations of $(0.5) million for the three months ended
December 31, 2017. Net income from continuing operations declined
slightly to $(0.1) million for the three months ended December 31, 2018,
compared to breakeven for the prior-year fiscal quarter due to the
allocation of income taxes between continuing and discontinued
operations.
Net income attributable to common stockholders for the three months
ended December 31, 2018 was $0.9 million, compared to $0.4 million for
the three months ended December 31, 2017. The increase in net income
attributable to common stockholders includes a $0.6 million increase in
income from discontinued operations associated with finalization of the
purchase price from the sale of Luna’s optoelectronics business in July
2018.
Adjusted EBITDA was $1.6 million for the three months ended December 31,
2018, compared to $0.7 million for the three months ended December 31,
2017.
For the full year fiscal 2018, Luna reported total revenues of $42.9
million, an increase of 30% compared to total revenues of $33.1 million
for fiscal 2017. Gross profit improved to $19.4 million, or 45% of
revenues, for 2018 compared to $13.4 million, or 40% or revenues, for
2017. SG&A expenses increased to $14.8 million for 2018 compared to
$12.9 million in 2017. The increase in SG&A expenses included $0.8
million in costs associated with the acquisition of MOI. R&D expenses
were $3.8 million in 2018 compared to $2.7 million in 2017.
Pre-tax income from continuing operations improved to$1.3 million for
fiscal 2018 compared to a pre-tax loss from continuing operations of
$(2.4) million for fiscal 2017. Income from continuing operations
improved to $1.2 million compared to a loss from continuing operations
of $(1.3) million for 2017.
Net income attributable to common stockholders was $10.7 million for
fiscal 2018 compared to $14.5 million for fiscal 2017. The
year-over-year decline was due primarily to the larger gain recognized
on the sale of Luna’s high-speed optical receivers business in 2017
compared to the gain from the sale of Luna’s optoelectronic components
business in 2018. Net income from continuing operations improved to $1.2
million, or $0.04 per diluted share for fiscal 2018, compared to a net
loss from continuing operations of $(1.3) million, or $(0.05) per
diluted share for fiscal 2017. Adjusted EBITDA was $3.0 million for
fiscal 2018 compared to $0.3 million for the prior fiscal year. A
reconciliation of net income to adjusted EBITDA can be found in the
schedules included in this release.
2019 Full Year Outlook:
Luna expects:
-
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 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,
including items 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 includes the expected operating results from Luna’s
acquisition of General Photonics Corporation announced today along with
the associated acquisition costs. It 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 generally accepted accounting principles
(“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 8:30 am (EST) today to discuss its financial results for the
fourth-quarter and year-end fiscal 2018, the acquisition of General
Photonics and recent business developments. 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 8384348.
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 its growth potential and the impact of its acquisitions of MOI
and General Photonics on future growth, 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-Q for the
quarter ended September 30, 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.
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Luna Innovations Incorporated
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|
Three months ended December 31, | Year ended December 31, | ||||||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||
| Technology development revenues | $ | 5,548,639 | $ | 5,147,954 | $ | 20,967,556 | $ | 18,576,383 | ||||||||||||||||
| Products and licensing revenues | 7,989,686 | 4,714,269 | 21,949,689 | 14,505,482 | ||||||||||||||||||||
| Total revenues | 13,538,325 | 9,862,223 | 42,917,245 | 33,081,865 | ||||||||||||||||||||
| Cost of revenues: | ||||||||||||||||||||||||
| Technology development costs | 4,268,509 | 3,943,118 | 15,400,475 | 13,988,378 | ||||||||||||||||||||
| Products and licensing costs | 2,697,538 | 1,731,643 | 8,078,870 | 5,724,457 | ||||||||||||||||||||
| Total cost of revenues | 6,966,047 | 5,674,761 | 23,479,345 | 19,712,835 | ||||||||||||||||||||
| Gross profit | 6,572,278 | 4,187,462 | 19,437,900 | 13,369,030 | ||||||||||||||||||||
| Operating expense: | ||||||||||||||||||||||||
| Selling, general and administrative | 4,896,136 | 3,943,520 | 14,794,205 | 12,923,841 | ||||||||||||||||||||
| Research, development and engineering | 1,252,663 | 691,566 | 3,766,160 | 2,653,337 | ||||||||||||||||||||
| Total operating expense | 6,148,799 | 4,635,086 | 18,560,365 | 15,577,178 | ||||||||||||||||||||
| Operating income/(loss) | 423,479 | (447,624 | ) | 877,535 | (2,208,148 | ) | ||||||||||||||||||
| Other expense: | ||||||||||||||||||||||||
| Other (expense)/income, net | (1,070 | ) | 114 | (17,143 | ) | 26,106 | ||||||||||||||||||
| Investment income | 198,525 | — |
|
549,580 | — |
|
||||||||||||||||||
| Interest expense, net | (21,136 | ) | (38,474 | ) | (124,344 | ) | (217,352 | ) | ||||||||||||||||
| Total other income/(expense) | 176,319 | (38,360 | ) | 408,093 | (191,246 | ) | ||||||||||||||||||
| Income/(loss) from continuing operations before income taxes | 599,798 | (485,984 | ) | 1,285,628 | (2,399,394 | ) | ||||||||||||||||||
| Income tax expense/(benefit) | 722,148 | (486,530 | ) | 47,818 | (1,148,579 | ) | ||||||||||||||||||
| (Loss)/Income from continuing operations | (122,350 | ) | 546 | 1,237,810 | (1,250,815 | ) | ||||||||||||||||||
| Income from discontinued operations, net of income taxes | 1,062,186 | 434,783 | 9,766,431 | 15,865,720 | ||||||||||||||||||||
| Net income | 939,836 | 435,329 | 11,004,241 | 14,614,905 | ||||||||||||||||||||
| Preferred stock dividend | 66,407 | 49,558 | 257,302 | 146,889 | ||||||||||||||||||||
| Net income attributable to common stockholders | $ | 873,429 | $ | 385,771 | $ | 10,746,939 | $ | 14,468,016 | ||||||||||||||||
| Net income/(loss) per share from continuing operations: | ||||||||||||||||||||||||
| Basic | $ | — | $ | — | $ | 0.04 | $ | (0.05 | ) | |||||||||||||||
|
Diluted |
$ | — | $ | — | $ | 0.04 | $ | (0.05 | ) | |||||||||||||||
| Net income per share from discontinued operations: | ||||||||||||||||||||||||
| Basic | $ | 0.04 | $ | 0.01 | $ | 0.35 | $ | 0.58 | ||||||||||||||||
| Diluted | $ | 0.04 | $ | 0.01 | $ | 0.30 | $ | 0.58 | ||||||||||||||||
| Net income per share attributable to common stockholders: | ||||||||||||||||||||||||
| Basic | $ | 0.03 | $ | 0.01 | $ | 0.39 | $ | 0.52 | ||||||||||||||||
| Diluted | $ | 0.03 | $ | 0.01 | $ | 0.33 | $ | 0.52 | ||||||||||||||||
| Weighted average shares: | ||||||||||||||||||||||||
| Basic | 28,067,348 | 27,485,278 | 27,596,401 | 27,579,988 | ||||||||||||||||||||
| Diluted | 28,067,348 | 31,790,418 | 32,452,228 | 27,579,988 | ||||||||||||||||||||
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Luna Innovations Incorporated |
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December 31, |
December 31, |
|||||||||||
| (unaudited) | ||||||||||||
| Assets | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 42,460,267 | $ | 36,981,533 | ||||||||
| Accounts receivable, net | 13,037,068 | 5,929,042 | ||||||||||
| Receivable from sale of HSOR business | 2,500,000 | 4,000,976 | ||||||||||
| Contract assets | 2,422,495 | 1,778,142 | ||||||||||
| Inventory, net | 6,873,742 | 4,634,781 | ||||||||||
| Prepaid expenses | 935,185 | 1,140,999 | ||||||||||
| Current assets held for sale | — | 4,336,105 | ||||||||||
| Total current assets | 68,228,757 | 58,801,578 | ||||||||||
| Property and equipment, net | 3,627,886 | 2,854,641 | ||||||||||
| Intangible assets, net | 3,302,270 | 1,727,390 | ||||||||||
| Goodwill | 101,008 | — | ||||||||||
| Long term contract assets | 336,820 | 209,699 | ||||||||||
| Other assets | 1,995 | 1,995 | ||||||||||
| Non-current assets held for sale | — | 2,627,333 | ||||||||||
| Total assets | $ | 75,598,736 | $ | 66,222,636 | ||||||||
| Liabilities and stockholders’ equity | ||||||||||||
| Current liabilities: | ||||||||||||
| Current portion of long term debt obligation | $ | 619,315 | $ | 1,833,333 | ||||||||
| Current portion of capital lease obligation | 40,586 | 43,665 | ||||||||||
| Accounts payable | 2,395,984 | 2,111,077 | ||||||||||
| Accrued liabilities | 6,597,458 | 6,547,230 | ||||||||||
| Contract liabilities | 2,486,111 | 3,318,379 | ||||||||||
| Current liabilities held for sale | — | 972,451 | ||||||||||
| Total current liabilities | 12,139,454 | 14,826,135 | ||||||||||
| Long-term deferred rent | 1,035,974 | 1,184,438 | ||||||||||
| Long-term debt obligation | — | 603,007 | ||||||||||
| Long-term capital lease obligation | 68,978 | 71,275 | ||||||||||
| Total liabilities | 13,244,406 | 16,684,855 | ||||||||||
| Commitments and contingencies | ||||||||||||
| Stockholders’ equity: | ||||||||||||
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Preferred stock, par value $0.001, 1,321,514 shares authorized, issued and outstanding at December 31, 2018 and 2017 |
1,322 | 1,322 | ||||||||||
|
Common stock, par value $0.001, 100,000,000 shares authorized, 29,209,506 and 28,354,822 shares issued, 27,956,401 and 27,283,918 shares outstanding at December 31, 2018 and 2017, respectively |
30,120 | 29,186 | ||||||||||
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Treasury stock at cost, 1,253,105 and 1,070,904 shares at December 31, 2018 and 2017, respectively |
(2,116,640 | ) | (1,649,746 | ) | ||||||||
| Additional paid-in capital | 85,744,750 | 83,563,208 | ||||||||||
| Accumulated deficit | (21,305,222 | ) | (32,406,189 | ) | ||||||||
| Total stockholders’ equity | 62,354,330 | 49,537,781 | ||||||||||
| Total liabilities and stockholders’ equity | $ | 75,598,736 | $ | 66,222,636 | ||||||||
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Luna Innovations Incorporated |
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| Year ended December 31, | ||||||||||||
| 2018 | 2017 | |||||||||||
| (unaudited) | ||||||||||||
| Cash flows (used in)/provided by operating activities: | ||||||||||||
| Net income | $ | 11,004,241 | $ | 14,614,905 | ||||||||
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Adjustments to reconcile net income to net cash (used in)/provided by operating activities: |
||||||||||||
| Depreciation and amortization | 1,095,418 | 2,526,609 | ||||||||||
| Stock-based compensation | 527,189 | 715,094 | ||||||||||
| (Gain)/loss on disposal of fixed assets | (1,000 | ) | 3,640 | |||||||||
| Gain on sale of discontinued operations, net of income taxes | (8,595,798 | ) | (15,671,028 | ) | ||||||||
| Bad debt | 6,000 | 99,888 | ||||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Accounts receivable | (6,240,377 | ) | 1,152,055 | |||||||||
| Contract assets | (761,714 | ) | — | |||||||||
| Inventory | (967,797 | ) | (1,902,311 | ) | ||||||||
| Prepaid expenses | 1,849,630 | 83,428 | ||||||||||
| Accounts payable and accrued expenses | (661,928 | ) | (896,534 | ) | ||||||||
| Contract liabilities | (986,498 | ) | — | |||||||||
| Deferred credits | — | 189,296 | ||||||||||
| Net cash (used in)/provided by operating activities | (3,732,634 | ) | 915,042 | |||||||||
| Cash flows provided by investing activities: | ||||||||||||
| Acquisition of property and equipment | (329,249 | ) | (1,352,531 | ) | ||||||||
| Proceeds from sale of property and equipment | 1,000 | 3,000 | ||||||||||
| Intangible property costs | (309,266 | ) | (495,597 | ) | ||||||||
| Acquisition of Micron Optics | (5,001,750 | ) | — | |||||||||
| Proceeds from sale of discontinued operations, net | 15,799,529 | 28,026,528 | ||||||||||
| Net cash provided by investing activities | 10,160,264 | 26,181,400 | ||||||||||
| Cash flows used in financing activities: | ||||||||||||
| Payments on debt obligations | (1,833,333 | ) | (1,833,333 | ) | ||||||||
| Payments on capital lease obligation | (46,653 | ) | (52,128 | ) | ||||||||
| Purchase of treasury stock | (466,894 | ) | (1,131,759 | ) | ||||||||
| Proceeds from the exercise of options | 1,397,984 | 99,853 | ||||||||||
| Net cash used in financing activities | (948,896 | ) | (2,917,367 | ) | ||||||||
| Net change in cash and cash equivalents | 5,478,734 | 24,179,075 | ||||||||||
| Cash and cash equivalents—beginning of period | 36,981,533 | 12,802,458 | ||||||||||
| Cash and cash equivalents—end of period | $ | 42,460,267 | $ | 36,981,533 | ||||||||
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Luna Innovations Incorporated |
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Three months ended December 31, |
Year ended December 31, |
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| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||||||
| Net income | $ | 939,836 | 435,329 | $ | 11,004,241 | $ | 14,614,905 | |||||||||||||||||
| Less income from discontinued operations, net of income taxes | 1,062,186 | 434,783 | 9,766,431 | 15,865,720 | ||||||||||||||||||||
| Net (loss)/income from continuing operations | (122,350 | ) | 546 | 1,237,810 | (1,250,815 | ) | ||||||||||||||||||
| Income tax expense/(benefit) | 722,148 | (486,530 | ) | 47,818 | (1,148,579 | ) | ||||||||||||||||||
| Income/(loss) from continuing operations before income taxes | 599,798 | (485,984 | ) | 1,285,628 | (2,399,394 | ) | ||||||||||||||||||
| Investment income | (198,525 | ) | — | (549,580 | ) | — | ||||||||||||||||||
| Interest expense | 21,136 | 38,474 | 124,344 | 217,352 | ||||||||||||||||||||
| Depreciation and amortization | 197,203 | 311,565 | 908,347 | 1,136,729 | ||||||||||||||||||||
| EBITDA | 619,612 | (135,945 | ) | 1,768,739 | (1,045,313 | ) | ||||||||||||||||||
| Share-based compensation | 181,607 | 194,861 | 527,189 | 715,094 | ||||||||||||||||||||
| Non-recurring charges | 751,102 | 595,992 | 751,102 | 595,992 | ||||||||||||||||||||
| Adjusted EBITDA | $ | 1,552,321 | $ | 654,908 | $ | 3,047,030 | $ | 265,773 | ||||||||||||||||
Contacts
Investor Contacts:
Jane Bomba
Phone: 303-829-1211
Email:
[email protected]
Sally
J. Curley
Luna Innovations Incorporated
Phone: 614-530-3002
Email:
[email protected]
