EX-99.1 2 a20221231-ex9912022q4press.htm EX-99.1 Document

Exhibit 99.1
lunalogorgba08a.jpg

Luna Innovations Reports Strong Fourth-Quarter
and Full-Year 2022 Results
Provides 2023 Guidance


Q4 Financial Highlights
•Revenues of $31.7 million, up 31% year over year
◦Revenues in constant currency of $32.5 million; up 34% year over year
•Gross margin of 61%, compared to 58% for the prior year
•Net income of $0.9 million, compared to net income of $1.6 million for the prior year
•Adjusted EBITDA of $4.7 million, compared to $3.1 million for the prior year
•Adjusted EPS of $0.08, compared to $0.08 for the prior year

Full-Year Financial Highlights
•Revenues of $109.5 million, up 25% year over year
◦Revenues in constant currency of $111.9 million; up 28% year over year
•Gross margin of 61%, compared to 59% for the prior year
•Net income of $9.3 million, compared to net income of $1.4 million for the prior year
•Adjusted EBITDA of $12.1 million, compared to $7.6 million for the prior year
•Adjusted EPS of $0.21, compared to $0.17 for the prior year

(ROANOKE, VA, March 14, 2023) - Luna Innovations Incorporated (NASDAQ: LUNA), a global leader in advanced optical technology, today announced its financial results for the three months and full fiscal year ended December 31, 2022.

"2022 was a transformational year for Luna representing the culmination of execution on the five-year strategic plan we outlined in 2017, thereby creating a pure-play fiber optics company” said Scott Graeff, President and Chief Executive Officer of Luna. “We’ve moved into FY23 with keen focus and high expectations for organizational optimization, large customer wins, and market expansion.



“With the completed divestiture of Luna Labs, our acquisition of Lios Sensing, and the integration of OptaSense, we created a solid base that reflects our fiber-focused vision for our business going forward. We believe these accomplishments will help us deliver strong financial results in FY23 and will enable our success far into the future.

“We are creating a leading global organization with world-class capabilities,” Graeff continued. “With the right people in the right places in a right-sized organization, we are preparing for significant scalability and targeting meaningful growth. We are looking forward to a strong year in an expanding market with incredible potential.”


Fourth-Quarter Fiscal 2022 Financial Summary
Highlights of the financial results for the three months ended December 31, 2022 are:
Three Months Ended December 31,Change
(in thousands, except share and per share data)20222021
Revenues$31,702 $24,222 31 %
Gross profit19,335 14,120 37 %
Gross margin61 %58 %
Operating expense17,871 13,085 37 %
Operating income1,464 1,035 
Operating margin4.6 %4.3 %
Other (expense)/income and income tax (expense)/benefit(647)440 
Net income from continuing operations$817 $1,475 
Income from discontinued operations, net of income taxes of $500 and $203
36 100 
Net income$853 $1,575 
Earnings per diluted share (EPS)$0.02 $0.05 
Adjusted EPS$0.08 $0.08 — %
Diluted weighted average shares outstanding34,354,984 33,665,613 
Adjusted EBITDA$4,692 $3,123 50 %

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 December 31, 2022 increased 31% compared to the prior year period; 34% in constant currency.

Gross margin for the three months ended December 31, 2022 was 61%, compared to 58% for the three months ended December 31, 2021, driven primarily by product mix. Operating income increased to $1.5 million for the three months ended December 31, 2022, compared to $1.0 million for the three months ended December 31, 2021.

Net income was $0.9 million, or $0.02 per fully diluted share, for the three months ended December 31, 2022, compared to $1.6 million, or $0.05 per fully diluted share, for the three months ended December 31, 2021. Adjusted


EPS was $0.08 for the three months ended December 31, 2022 compared to $0.08 for the three months ended December 31, 2021.

Adjusted EBITDA was $4.7 million for the three months ended December 31, 2022, compared to $3.1 million for the three months ended December 31, 2021.

Full-Year Fiscal 2022 Financial Summary
Highlights of the financial results for the year ended December 31, 2022 are:
Full Year Ended December 31,
(in thousands, except share and per share data)20222021Change
Revenues$109,497 $87,513 25 %
Gross profit$66,497 $51,556 29 %
Gross margin61 %59 %
Operating expense68,381 54,146 26 %
Operating loss(1,884)(2,590)
Operating margin(1.7)%(3.0)%
Other (expense)/income and income tax benefit(416)1,501 
Net loss from continuing operations$(2,300)$(1,089)
Income from discontinued operations, net of income taxes $3,705 and $584
11,579 2,471 
Net income$9,279 $1,382 
Earnings per diluted share (EPS)$0.28 $0.04 600 %
Adjusted EPS$0.21 $0.17 24 %
Diluted weighted average shares outstanding32,591,973 31,658,085 
Adjusted EBITDA$12,143 $7,584 60 %

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 year ended December 31, 2022 increased 25% compared to the prior-year period; 28% on a constant currency basis.



Gross margin of 61% for the year ended December 31, 2022 was up compared to 59% for the year ended December 31, 2021. Operating loss of $1.9 million for the year ended December 31, 2022, decreased compared to operating loss of $2.6 million for the year ended December 31, 2021.

Net income was $9.3 million, or $0.28 per fully diluted share, for the year ended December 31, 2022, compared to a net income of $1.4 million, or $0.04 per fully diluted share, for the year ended December 31, 2021. Adjusted EPS was $0.21 for the year ended December 31, 2022, compared to $0.17 for the year ended December 31, 2021.

Adjusted EBITDA was $12.1 million for the year ended December 31, 2022, compared to $7.6 million for the year ended December 31, 2021.

Q4 Business Highlights
•Closed multiple, new, large and recurring OEM accounts
•Won multiple, large contracts for our fiber sensing solutions in the infrastructure and energy industries
•Achieved strong, 47% year-over-year growth for the Company's Terahertz products
•Record quarter in the Company's Communications test vertical, delivering 59% year-over-year revenue growth
•Delivered a new generation laser tester for Silicon Photonics applications

2023 Full-Year Outlook
For fiscal year and Q1 2023, Luna expects:
•Total revenues in the range of $125 million to $130 million for full year 2023
•Adjusted EBITDA in the range of $14 million to $18 million for full year 2023
•Total revenues in the range of $23 million to $25 million for Q1 2023

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

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

Non-GAAP Financial Measures
In evaluating the operating performance of its business, Luna’s management considers Adjusted EBITDA, 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 to discuss its financial results for the three months and full-year ended December 31, 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 2023 financial results and outlook and growth potential, as well as potential organizational optimization, large customer wins and market expansion. 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
(in thousands of U.S Dollars)
December 31, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$6,024 $17,128 
Accounts receivable, net33,249 20,913 
Contract assets7,691 5,166 
Inventory36,582 22,493 
Prepaid expenses and other current assets4,328 3,793 
Assets held for sale— 12,952 
Total current assets87,874 82,445 
Property and equipment, net4,893 2,988 
Intangible assets, net18,750 17,177 
Goodwill26,927 18,984 
Operating lease right-of-use assets4,661 5,075 
Other non-current assets3,255 247 
Deferred tax assets4,647 3,321 
Total assets151,007 130,237 
Liabilities and stockholders’ equity
Current liabilities:
Current portion of long-term debt obligation$2,500 $4,167 
Accounts payable8,109 2,809 
Accrued and other current liabilities16,694 9,258 
Contract liabilities4,089 4,649 
Current portion of operating lease liabilities2,239 2,101 
Liabilities associated with assets held for sale— 9,703 
Total current liabilities33,631 32,687 
Long-term debt obligation20,726 11,673 
Long-term portion of operating lease liabilities2,804 3,509 
Other long-term liabilities444 445 
Total liabilities57,605 48,314 
Stockholders’ equity:
Common stock, par value $0.001, 100,000,000 shares authorized, 34,901,954 and 33,855,725 shares issued, 33,105,080 and 32,116,270 shares outstanding at December 31, 2022 and 2021, respectively
35 34 
Treasury stock at cost, 1,796,862 and 1,744,206 shares at December 31, 2022 and 2021, respectively
(5,607)(5,248)
Additional paid-in capital104,893 98,745 
Accumulated deficit(2,296)(11,575)
Accumulated other comprehensive loss(3,623)(33)
Total stockholders’ equity93,402 81,923 
Total liabilities and stockholders’ equity$151,007 $130,237 


Luna Innovations Incorporated
Consolidated Statements of Operations
 (in thousands of U.S. Dollars, except per share data)
 Three months ended December 31, Year ended December 31,
 2022202120222021
Revenues$31,702 $24,222 $109,497 $87,513 
Cost of revenues12,367 10,102 43,000 35,957 
Gross profit19,335 14,120 66,497 51,556 
Operating expense:
Selling, general and administrative15,017 10,542 57,544 43,956 
Research, development and engineering2,854 2,543 10,837 10,190 
Total operating expense17,871 13,085 68,381 54,146 
Operating income/(loss)1,464 1,035 (1,884)(2,590)
Other (expense)/income:
Other income8 — 216 — 
Investment income— — 46 — 
Interest expense, net(348)(104)(898)(479)
Total other expense(340)(104)(636)(479)
Income/(loss) from continuing operations before income taxes1,124 931 (2,520)(3,069)
Income tax (expense)/benefit(307)544 220 1,980 
Income/(loss) from continuing operations817 1,475 (2,300)(1,089)
Income from discontinued operations, net of income tax expenses1,108 100 1,730 2,471 
(Loss)/gain on sale of discontinued operations, net of tax of income taxes(1,072)— 9,849 — 
Net income from discontinued operations36 100 11,579 2,471 
Net income$853 $1,575 $9,279 $1,382 
Net income/(loss) per share from continuing operations:
Basic$0.02 $0.05 $(0.07)$(0.03)
       Diluted$0.02 $0.04 $(0.07)$(0.03)
Net loss per share from discontinued operations:
Basic$— $— $0.36 $0.08 
       Diluted$— $— $0.36 $0.08 
Net income per share:
Basic$0.02 $0.05 $0.28 $0.04 
       Diluted$0.02 $0.05 $0.28 $0.04 
Weighted average shares (in thousands):
Basic32,977 32,014 32,592 31,658 
Diluted34,355 33,666 32,592 31,658 



Luna Innovations Incorporated
Consolidated Statements of Cash Flows
 (in thousands of U.S. Dollars)
Year ended December 31,
20222021
Cash flows (used in)/provided by operating activities:
Net income$9,279 $1,382 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization5,449 4,628 
Stock-based compensation4,232 2,955 
Loss on sale and disposal of property and equipment53 — 
Gain from discontinued operations, net of tax(9,849)— 
Deferred tax benefit(2,363)(1,501)
Changes in operating assets and liabilities:
Accounts receivable(9,151)113 
Contract assets(5,008)(1,672)
Inventory(10,028)939 
Other current assets(386)582 
Other long-term assets1,108 — 
Accounts payable and accrued expenses6,122 (3,213)
Contract liabilities1,973 186 
Other long-term liabilities2 84 
Net cash (used in)/provided by operating activities(8,567)4,483 
Cash flows used in investing activities:
Acquisitions, net of cash acquired(22,085)— 
Acquisition of property and equipment(2,888)(1,412)
Intangible property costs(50)(356)
Proceeds from sale of discontinued operations, net13,968 — 
Net cash used in investing activities(11,055)(1,768)
Cash flows provided by/(used in) financing activities:
Proceeds from debt obligations24,150 — 
Payments on debt obligations(16,763)(4,144)
Payments on finance lease obligation(48)(48)
Purchase of treasury stock(359)(459)
Proceeds from ESPP944 1,131 
Proceeds from the exercise of options1,588 2,256 
Net cash provided by/(used in) financing activities9,512 (1,264)
Net change in cash and cash equivalents(10,110)1,451 
Effect of exchange rate changes on cash and cash equivalents(994)311 
Cash and cash equivalents—beginning of period17,128 15,366 
Cash and cash equivalents—end of period$6,024 $17,128 
Supplemental disclosure of cash flow information
Cash paid for interest$805 $458 
Net cash received for income taxes$39 $113 



Luna Innovations Incorporated
Reconciliation of Net Income to Adjusted EBITDA
 (in thousands)
Three months ended 
 December 31,		Year ended 
December 31,
 2022202120222021
 
Net income$853 $1,575 $9,279 $1,382 
Income from discontinued operations, net of income taxes36 100 11,579 2,471 
Net income/(loss) from continuing operations817 1,475 (2,300)(1,089)
Interest expense293 104 735 479 
Income tax provision/(benefit)307 (544)(220)(1,980)
Depreciation and amortization (1)
1,455 1,077 5,449 4,517 
EBITDA2,872 2,112 3,664 1,927 
Share-based compensation (1)
1,067 693 4,094 2,826 
Integration and transaction expense(21)249 2,163 2,322 
Amortization of inventory step-up286 69 677 509 
Other non-recurring charges (2)
488 — 1,545 — 
Adjusted EBITDA$4,692 $3,123 $12,143 $7,584 

(1) Excludes portion classified in discontinued operations.
(2) Other non-recurring charges include severance, customer accommodation, facility consolidation and debt refinancing costs.



`Luna Innovations Incorporated
Reconciliation of Net Income to Adjusted EPS
 (in thousands, except share and per share data)
Three months ended 
 December 31,		Year ended 
December 31,
 2022202120222021
 
Net income$853 $1,575 $9,279 $1,382 
Income from discontinued operations, net of income taxes36 100 11,579 2,471 
Net income/(loss) from continuing operations817 1,475 (2,300)(1,089)
Share-based compensation (1)
1,067 693 4,094 2,826 
Integration and transaction expense(21)249 2,163 2,322 
Amortization of intangible assets (1)
952 760 3,745 3,113 
Amortization of inventory step-up286 69 677 509 
Other non-recurring charges (2)
488 — 1,545 — 
Income tax effect on adjustments(693)(443)(3,056)(2,193)
Adjusted income from continuing operations$2,896 $2,803 $6,868 $5,488 
Adjusted EPS$0.08 $0.08 $0.21 $0.17 
Adjusted weighted average shares:
Diluted34,355 33,666 32,592 31,658 

(1) Excludes portion classified in discontinued operations.
(2) Other non-recurring charges include severance, customer accommodation, facility consolidation and debt refinancing costs.