Luna Innovations Reports Strong First-Quarter 2023 Results

Q1 Highlights

• Total revenues of $25.0 million, up 11% year over year
• Total revenues in constant currency of $25.3 million; up 13% year-over-year
• Gross margin of 60%, compared to 64% for the prior year
• Net loss of $1.8 million, compared to net income of $9.6 million for the prior year, which included the gain on sale of Luna Labs
• Adjusted EBITDA of $0.9 million, compared to $1.7 million for the prior year
• Adjusted EPS of $0.00, compared to $0.05 for the prior year

(ROANOKE, VA, May 9, 2023) - Luna Innovations Incorporated (NASDAQ: LUNA), a global leader in advanced optical technology, today announced its financial results for the three months ended March 31, 2023.

"I’m pleased that we were able to drive strong revenues in the first quarter, which is cyclically one of our softest revenue quarters," said Scott Graeff, President and Chief Executive Officer of Luna. "Because of the foundational work we did in 2022, we’ve entered 2023 with an integrated organizational structure, proven systems, and best practices. With those pieces in place, we were able to achieve the top end of our revenue guidance for the quarter.

Our charge for 2023 will be to continue to drive operating excellence that will help to set the stage for greater expansion into new markets where we can deliver our superior capabilities and capture share. Given our current position, we’re pleased to be able to reaffirm our outlook for 2023 revenue and adjusted EBITDA.”

First-Quarter Fiscal 2023 Financial Summary

Highlights of the financial results for the three months ended March 31, 2023 are:

A reconciliation of Adjusted EPS,  Adjusted EBITDA and revenues in constant currency 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 March 31, 2023 increased 11% compared to the prior-year period; 13% on a constant currency basis. 

Gross margin was 60% for the three months ended March 31, 2023, compared to 64% for the three months ended March 31, 2022, driven primarily by product mix and the Lios acquisition. Operating loss and margin were $2.1 million and 9% of total revenues, respectively, for the three months ended March 31, 2023, compared to an operating loss of $2.4 million dollars and 11% of total revenues, respectively, for the three months ended March 31, 2022.   

Net loss was $1.8 million, or $0.06 per fully diluted share, for the three months ended March 31, 2023, compared to net income of $9.6 million, or $0.30 per fully diluted share, for the three months ended March 31, 2022. Adjusted EPS was $0.00 for the three months ended March 31, 2023 compared to $0.05 for the three months ended March 31, 2022.

Adjusted EBITDA was $0.9 million for three months ended March 31, 2023, compared to $1.7 million for the three months ended March 31, 2022.

Q1 and Recent Business Highlights

• Realized strong, double-digit revenue growth for communications test and Terahertz product lines
• Announced a significant contract to provide temperature, depth and acoustic monitoring for an innovative power generation project that will deliver clean energy to a major metropolitan area in the Northeast U.S.
• Announced large, new contract with Dominion Energy to provide monitoring services for the largest offshore wind project in the United States
• Won a contract for industrial battery storage monitoring for a leading European manufacturer of electric vehicle batteries
• Experienced  high levels of activity and customer engagement at industry trade shows OFC and Photonics West

2023 Full-Year Outlook

Luna is reaffirming the 2023 revenue and adjusted EBITDA outlook it originally provided on March 14, 2023: 

• Total revenue of $125 million to $130 million for the full year 2023
• Adjusted EBITDA of $14 million to $18 million for the full year 2023

In addition, Luna expects total revenues in the range of $29 million to $31 million for the second quarter 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 8:00 am (ET) today, May 9, 2023, to discuss its financial results for the three months ended March 31, 2023.  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 1.833.630.1956 .and the international dial-in number is.1.412.317.1837. 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 2023 and second quarter of 2023 financial results and outlook, greater expansion into new markets 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 March 31, 2023, 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: [email protected]