EX-99.1 2 ex991pressrelease2022930.htm EX-99.1 Document

Exhibit 99.1

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Luna Innovations Reports Strong Third-Quarter 2022 Results
Reaffirms Outlook

Q3 Highlights
•Total revenues of $29.2 million, up 43% year-over-year
•Total revenues in constant currency of $30.1 million; up 48% year-over-year
•Gross margin of 58%, compared to 62% for the prior-year period
•Net income of $1.2 million, compared to net income of $0.4 million for the prior-year period
•Adjusted EBITDA of $4.5 million, compared to $2.1 million for the prior-year period
•Adjusted EPS of $0.09, compared to $0.03 for the prior-year period

(ROANOKE, VA, November 10, 2022) - 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, 2022.

"I'm extremely pleased with our performance in Q3, achieving over 40% growth in revenues and more than doubling Adjusted EBITDA versus last year," said Scott Graeff, President and Chief Executive Officer of Luna. "The team was able to achieve these strong financial results while still navigating a challenging supply chain and economic environment. And I’m particularly pleased that this quarter is more normative, positively reflecting the meaningful strategic moves and investments we’ve made over the past two years to refine Luna’s focus and realign our organization appropriately. Today, Luna Innovations is uniquely positioned to offer a breadth of solutions and capabilities in fiber technology.”

Graeff continued, “With three quarters now behind us, we feel very comfortable that we will finish 2022 within the ranges that we provided on our March earnings call. As always, we remain focused on execution, both to capitalize on important growth trends and to advance our strategy of Enabling the Future with Fiber.”



Third-Quarter Fiscal 2022 Financial Summary
Highlights of the financial results for the three months ended September 30, 2022 are:
Three Months Ended September 30,Change
(in thousands, except share and per share data)20222021
Revenues$29,153 $20,329 43 %
Gross profit16,919 12,584 34 %
Gross margin58 %62 %
Operating expense15,441 12,594 23 %
Operating income/(loss)1,478 (10)
Operating margin5 %— %
Other expense, net and income tax expense(310)(334)
Net income/(loss) from continuing operations$1,168 $(344)
Income from discontinued operations, net of income taxes28 699 
Net income$1,196 $355 
Income per diluted share (EPS)$0.04 $0.01 
Adjusted EPS$0.09 $0.03 200 %
Diluted weighted average shares outstanding34,104,850 33,780,714 
Adjusted EBITDA$4,544 $2,110 115 %

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, 2022 increased 43% compared to the prior-year period; 48% on a constant currency basis.

Gross margin was 58% for the three months ended September 30, 2022, compared to 62% for the three months ended September 30, 2021, driven primarily by product mix. Operating income and margin were $1.5 million and 5% of total revenues, respectively, for the three months ended September 30, 2022, compared to an operating loss of $10 thousand dollars and less than 1% of total revenues, respectively, for the three months ended September 30, 2021.



Net income was $1.2 million, or $0.04 per fully diluted share, for the three months ended September 30, 2022, compared to net income of $0.4 million, or $0.01 per fully diluted share, for the three months ended September 30, 2021. Adjusted EPS was $0.09 for the three months ended September 30, 2022 compared to $0.03 for the three months ended September 30, 2021.

Adjusted EBITDA was $4.5 million for three months ended September 30, 2022, compared to $2.1 million for the three months ended September 30, 2021.

Nine Months Ended Fiscal 2022 Financial Summary
Highlights of the financial results for the nine months ended September 30, 2022 are:
Nine Months Ended September 30,Change
(in thousands, except share and per share data)20222021
Revenues77,795 63,291 23 %
Gross profit47,162 37,436 26 %
Gross margin61 %59 %
Operating expense50,510 41,061 23 %
Operating loss(3,348)(3,625)
Operating margin(4)%(6)%
Other expense, net and income tax benefit231 1,061 
Net loss from continuing operations$(3,117)$(2,564)
Income from discontinued operations, net of income taxes11,543 2,371 
Net income/(loss)$8,426 $(193)
Earnings/(loss) per diluted share (EPS)$0.26 $(0.01)
Adjusted EPS$0.12 $0.08 50 %
Diluted weighted average shares outstanding32,492,276 33,585,973 
Adjusted EBITDA$7,450 $4,461 67 %

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, 2022 increased 23% compared to the prior-year period; 25% on a constant currency basis.



Gross profit of $47.2 million for the nine months ended September 30, 2022 increased from $37.4 million for the nine months ended September 30, 2021 primarily due to higher sales. Operating loss and margin improved to $3.3 million and 4% of total revenues, respectively, for the nine months ended September 30, 2022, compared to $3.6 million and 6% of total revenues, respectively, for the nine months ended September 30, 2021.

Net income was $8.4 million, or $0.26 per fully diluted share, for the nine months ended September 30, 2022, compared to a net loss of $0.2 million, or $(0.01) per fully diluted share, for the nine months ended September 30, 2021. Adjusted EPS was $0.12 for the nine months ended September 30, 2022, compared to $0.08 for the nine months ended September 30, 2021.

Adjusted EBITDA was $7.5 million for the nine months ended September 30, 2022, compared to $4.5 million for the nine months ended September 30, 2021.

2022 Full-Year Outlook
Luna is reaffirming the 2022 revenue and adjusted EBITDA outlook it originally provided on March 14, 2022, which included the mid-March divestiture of Luna Labs and the acquisition of Lios.
•Total revenue of $109 million to $115 million for the full year 2022
•Adjusted EBITDA of $10 million to $12 million for the full year 2022

Luna is not providing an outlook for net income, which is the most directly comparable GAAP measure to Adjusted EBITDA, because changes in the items that Luna excludes from net income to calculate Adjusted EBITDA, such as share-based compensation, tax expense, and significant non-recurring charges, among other things, can be dependent on future events that are less capable of being controlled or reliably predicted by management and are not part of Luna's routine operating activities.

The outlook above does not include any future acquisitions, divestitures, or unanticipated events.


Non-GAAP Financial Measures
In evaluating the operating performance of its business, Luna’s management considers Adjusted EBITDA, Adjusted EPS and revenue measured on a constant currency basis, which are non-GAAP financial measures. Adjusted EBITDA and Adjusted EPS exclude certain charges and income that are required by GAAP. Adjusted EBITDA and Adjusted EPS provide useful information to both management and investors by excluding the effect of certain non-cash expenses and items that Luna believes may not be indicative of its operating performance, because either they are unusual and Luna does not expect them to recur in the ordinary course of its business, or they are unrelated to the ongoing operation of the business in the ordinary course.


The Company calculates revenue measured on a constant currency basis by translating its foreign revenues for the relevant period in U.S. dollars at the average exchange rate in effect for the comparable prior year period. The Company presents revenue in this manner because it is a global company that transacts business in multiple currencies and reports financial information in U.S. dollars. Foreign currency exchange rate fluctuations affect the amounts reported by the Company in U.S. dollars with respect to its foreign revenues. Exchange rate fluctuations can have a significant effect on reported revenues. The Company believes presenting constant currency revenue information provides useful information to investors, as it provides information to assess how its businesses performed excluding the effects of changes in foreign currency exchange rates and assists investors in evaluating the effectiveness of the Company’s operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance.

Adjusted EBITDA, Adjusted EPS and revenue measured on a constant currency basis should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. Adjusted EBITDA and Adjusted EPS have been reconciled to the nearest GAAP measure in the table following the financial statements attached to this press release.

Conference Call Information
As previously announced, Luna will conduct an investor conference call at 5:00 pm (ET) today, November 10, 2022, to discuss its financial results for the three and nine months ended September 30, 2022. The investor conference call will be available via live webcast on the Luna website at www.lunainc.com under the tab "Investor Relations." To participate by telephone, the domestic dial-in number is 1.877.270.2148 and the international dial-in number is.1.412.902.6510. Participants should ask to join the Luna Innovations Incorporated conference call and are advised to dial in at least fifteen minutes prior to the call. A replay of the conference call will be available on the company's website under "Webcasts and Presentations" for 30 days following the conference call.

About Luna
Luna Innovations Incorporated (www.lunainc.com) is a leader in optical technology, providing unique capabilities in high-performance, fiber optic-based, test products for the telecommunications industry and distributed fiber optic-based sensing for a multitude of industries. Luna’s business model is designed to accelerate the process of bringing new and innovative technologies to market.

Forward-Looking Statements
The statements in this release that are not historical facts constitute “forward-looking statements” made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These statements include Luna's expectations regarding its projected full year 2022 financial results


and outlook, and the Company's ability to capitalize on growth trends. Management cautions the reader that these forward-looking statements are only predictions and are subject to a number of both known and unknown risks and uncertainties, and actual results, performance, and/or achievements of Luna may differ materially from the future results, performance, and/or achievements expressed or implied by these forward-looking statements as a result of a number of factors. These factors include, without limitation, failure of demand for Luna's products and services to meet expectations, failure of target market to grow and expand, technological and strategic challenges, uncertainties related to the ultimate impact of the COVID-19 pandemic and those risks and uncertainties set forth in Luna’s Form 10-Q for the quarter ended September 30, 2022, and Luna's other periodic reports and filings with the Securities and Exchange Commission ("SEC"). Such filings are available on the SEC’s website at www.sec.gov and on Luna’s website at www.lunainc.com. The statements made in this release are based on information available to Luna as of the date of this release and Luna undertakes no obligation to update any of the forward-looking statements after the date of this release.

Investor Contact:
Allison Woody
Phone: 540-769-8465
Email: IR@lunainc.com


Luna Innovations Incorporated
Consolidated Balance Sheets (Unaudited)
 (in thousands, except share data)
September 30, 2022December 31, 2021
 (unaudited)
Assets
Current assets:
Cash and cash equivalents$7,889 $17,128 
Accounts receivable, net29,295 20,913 
Contract assets6,196 5,166 
Inventory32,400 22,493 
Prepaid expenses and other current assets4,744 3,793 
Assets held for sale— 12,952 
Total current assets80,524 82,445 
Property and equipment, net4,827 2,988 
Intangible assets, net18,964 17,177 
Goodwill27,215 18,984 
Operating lease right-of-use assets4,069 5,075 
Other non-current assets3,251 247 
Deferred tax asset6,397 3,321 
Total assets$145,247 $130,237 
Liabilities and stockholders’ equity
Liabilities:
Current liabilities:
Current portion of long-term debt obligations$2,250 $4,167 
Accounts payable5,370 2,809 
Accrued and other current liabilities19,237 9,258 
Contract liabilities4,850 4,649 
Current portion of operating lease liabilities2,115 2,101 
Liabilities associated with assets held for sale— 9,703 
Total current liabilities33,822 32,687 
Long-term debt obligations, net of current portion19,465 11,673 
Long-term portion of operating lease liabilities2,374 3,509 
Deferred tax liability1,324 — 
Other long-term liabilities408 445 
Total liabilities57,393 48,314 
Commitments and contingencies
Stockholders’ equity:
Common stock, par value $0.001, 100,000,000 shares authorized, 34,650,827 and 33,855,725 shares issued, 32,865,870 and 32,116,270 shares outstanding at September 30, 2022 and December 31, 2021, respectively
35 34 
Treasury stock at cost, 1,784,957 and 1,744,026 shares at September 30, 2022 and December 31, 2021, respectively
(5,542)(5,248)
Additional paid-in capital103,264 98,745 
Accumulated deficit(3,149)(11,575)
Accumulated other comprehensive loss(6,754)(33)
Total stockholders’ equity87,854 81,923 
Total liabilities and stockholders’ equity$145,247 $130,237 


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,
 2022202120222021
Revenues$29,153 $20,329 $77,795 $63,291 
Cost of revenues12,234 7,745 30,633 25,855 
Gross profit16,919 12,584 47,162 37,436 
Operating expense:
Selling, general and administrative12,665 9,674 42,527 33,414 
Research, development and engineering2,776 2,920 7,983 7,647 
Total operating expense15,441 12,594 50,510 41,061 
Operating income/(loss)1,478 (10)(3,348)(3,625)
Other income/(expense):
Other income73 — 146 — 
Interest expense, net(218)(110)(442)(375)
Total other expense, net(145)(110)(296)(375)
Income/(loss) from continuing operations before income taxes1,333 (120)(3,644)(4,000)
Income tax expense/(benefit)165 224 (527)(1,436)
Net income/(loss) from continuing operations1,168 (344)(3,117)(2,564)
Income from discontinued operations, net of income tax (benefit)/expense of ($78), $235, $88 and $381
28 699 622 2,371 
Gain on sale of discontinued operations, net of tax of $3,117
— — 10,921 — 
Net income from discontinued operations28 699 11,543 2,371 
Net income/(loss)$1,196 $355 $8,426 $(193)
Net income/(loss) per share from continuing operations:
Basic$0.04 $(0.01)$(0.10)$(0.08)
Diluted$0.03 $(0.01)$(0.10)$(0.08)
Net income per share from discontinued operations:
Basic$— $0.02 $0.36 $0.08 
Diluted$— $0.02 $0.36 $0.07 
Net income/(loss) per share attributable to common stockholders:
Basic$0.04 $0.01 $0.26 $(0.01)
Diluted$0.04 $0.01 $0.26 $(0.01)
Weighted average shares:
Basic32,800,690 31,944,869 32,492,276 31,553,998 
Diluted34,104,850 33,780,714 32,492,276 33,585,973 


Luna Innovations Incorporated
Consolidated Statements of Cash Flows (Unaudited)
 (in thousands)
Nine Months Ended September 30,
 20222021
Cash flows (used in)/provided by operating activities
Net income/(loss)$8,426 $(193)
Adjustments to reconcile net income/(loss) to net cash used in operating activities
Depreciation and amortization3,993 3,523 
Share-based compensation3,204 2,230 
Gain from discontinued operations, net of tax(10,921)— 
                Deferred taxes(3,374)(23)
Change in assets and liabilities
Accounts receivable(6,166)482 
Contract assets(2,739)837 
Inventory(6,662)(1,906)
Other current assets2,093 (1,752)
Other long-term assets599 — 
Accounts payable and accrued and other current liabilities5,824 (1,681)
Contract liabilities2,425 (287)
Other long term-liabilities13 — 
Net cash (used in)/provided by operating activities(3,285)1,230 
Cash flows used in investing activities
Acquisition of property and equipment(2,313)(943)
Intangible property costs4 (215)
Proceeds from sale of property and equipment25 — 
Proceeds from sale of discontinued operations12,973 — 
Acquisition of Lios(22,085)— 
Net cash used in investing activities(11,396)(1,158)
Cash flows provided by/(used in) financing activities
Payments on finance lease obligations(36)(36)
Proceeds from borrowings under debt obligations22,150 — 
Payments of debt obligations(16,275)(3,110)
Repurchase of common stock(294)(420)
Proceeds from ESPP521 530 
Proceeds from the exercise of options 1,160 2,076 
Net cash provided by/(used in) financing activities7,226 (960)
Effect of exchange rate changes on cash and cash equivalents(1,784)277 
Net decrease in cash and cash equivalents(9,239)(611)
Cash and cash equivalents-beginning of period17,128 15,366 
Cash and cash equivalents-end of period$7,889 $14,755 


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,
 2022202120222021
Net income/(loss)$1,196 $355 $8,426 $(193)
Net income from discontinued operations28 699 11,543 2,371 
Net income/(loss) from continuing operations1,168 (344)(3,117)(2,564)
Interest expense, net218 110 442 375 
Income tax expense/(benefit)165 224 (527)(1,436)
Depreciation and amortization1,299 1,131 3,993 3,440 
EBITDA2,850 1,121 791 (185)
Share-based compensation1,027 689 3,027 2,133 
Integration and transaction expense184 196 2,184 2,073 
Amortization of inventory step-up134 104 391 440 
Other non-recurring charges (1)
349 — 1,057 — 
Adjusted EBITDA$4,544 $2,110 $7,450 $4,461 

(1) - Other non-recurring charges include severance, customer accommodation, facility consolidation and debt refinancing costs.

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,
 2022202120222021
 
Net income/(loss)$1,196 $355 $8,426 $(193)
Net income from discontinued operations28 699 11,543 2,371 
Net income/(loss) from continuing operations1,168 (344)(3,117)(2,564)
Share-based compensation1,027 689 3,027 2,133 
Integration and transaction expense184 196 2,184 2,073 
Amortization of intangible assets988 761 2,793 2,353 
Amortization of inventory step-up134 104 391 440 
Other non-recurring charges (1)
349 — 1,057 — 
Income tax effect on adjustments(671)(438)(2,363)(1,750)
Adjusted income from continuing operations$3,179 $968 $3,972 $2,685 
Adjusted EPS $0.09 $0.03 $0.12 $0.08 
Adjusted weighted average shares (in thousands):
Diluted34,105 33,781 32,492 33,586 
(1) - Other non-recurring charges include severance, customer accommodation, facility consolidation and debt refinancing costs.



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