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Luna Innovations Incorporated Reports Second Quarter and First Half of 2017 Financial ResultsLuna Innovations Incorporated (NASDAQ: LUNA) today announced its financial results for the three and six months ended June 30, 2017. For the three months ended June 30, 2017, Luna reported revenues of $13.6 million and a net loss of $(0.2) million compared to revenues of $14.6 million and a net loss of $(0.8) million for the three months ended June 30, 2016. Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") was $0.8 million for the three months ended June 30, 2017 compared to $0.4 million for the three months ended June 30, 2016. A reconciliation of net loss to Adjusted EBITDA can be found in the schedules included in this release. "The second quarter saw a significant rebound in sales of our test & measurement instruments," said My Chung, president and chief executive officer of Luna. "Product sales in our Luna Technologies (News - Alert) brand in the second quarter increased 22% year over year and 62% sequentially, substantially offsetting the financial impact of continued softness in the China market for optical receivers. With the higher margins provided by growth in our test & measurement product sales and continued focus on expense control, we improved our net loss by $0.5 million year over year. The recently announced sale of our high speed optical receiver business provides the opportunity for a more dedicated focus on growing the higher margin instrument business." Second Quarter Financial Summary Total revenues for the three months ended June 30, 2017 were $13.6 million compared to $14.6 million for the three months ended June 30, 2016. Technology development revenues increased 12% to $4.6 million for the three months ended June 30, 2017, compared to $4.1 million for the three months ended June 30, 2016. Products and licensing revenues were $9.0 million for the three months ended June 30, 2017, compared to $10.5 million for the three months ended June 30, 2016. The decrease in Products and licensing revenues was primarily driven by lower sales of Luna's 100G integrated coherent receivers in China. Gross profit was $5.1 million, or 37% of revenues, for the three months ended June 30, 2017, compared to gross profit of $5.2 million, or 35% of revenues, for the three months ended June 30, 2016. The increase in gross margin in the second quarter of 2017 resulted from increased sales of test & measurement products, which typically have higher average margins than Luna's other products and services. Selling, general and administrative expenses were $3.9 million for the three months ended June 30, 2017, compared to $4.6 million for the three months ended June 30, 2016. The decrease in selling, general and administrative expense was due to a $0.2 million decrease in incentive compensation, a $0.1 million reduction in share-based compensation expense, a $0.2 million reduction in sales-related expenses, and a $0.1 million reduction in amortization expense. Research, development and engineering expenses increased slightly to $1.3 million for the three months ended June 30, 2017 compared to $1.2 million for the three months ended June 30, 2016. Operating loss improved to $(0.1) million for the three months ended June 30, 2017, compared to an operating loss of $(0.7) million for the three months ended June 30, 2016. Net loss attributable to common stockholders improved to $(0.3) million for the three months ended June 30, 2017, compared to a net loss attributable to common stockholders of $(0.8) million for the three months ended June 30, 2016. Adjusted EBITDA was $0.8 million for the three months ended June 30, 2017 compared to $0.4 million for the three months ended June 30, 2016. Year to Date Financial Summary Total revenues for the six months ended June 30, 2017, were $26.7 million, compared to $28.6 million for the six months ended June 30, 2016. Technology development revenues increased 13% to $8.9 million for the six months ended June 30, 2017, compared to $7.9 million for the six months ended June 30, 2016. Products and licensing revenues were $17.8 million for the six months ended June 30, 2017, compared to $20.8 million for the six months ended June 30, 2016. Revenues from sales of test & measurement instruments increased 16%, partially offsetting lower revenues from high speed optical receiver products in China. Gross profit decreased to $9.8 million, or 37%, of revenues for the six months ended June 30, 2017, compared to $10.0 million, or 35% of revenues, for the six months ended June 30, 2016. Selling, general and administrative expenses decreased to $8.4 million for the six months ended June 30, 2017, compared to $9.2 million for the six months ended June 30, 2016. The decrease in selling, general and administrative expenses resulted primarily from lower selling related expenses due to lower revenues in the products and licensing segment in addition to lower share based compensation expense. Research, development and engineering expenses were substantially unchanged at $2.7 million for the six months ended June 30, 2017 and $2.8 million for the six months ended June 30, 2016. Operating loss improved to $(1.4) million for the six months ended June 30, 2017, compared to $(2.0) million for the six months ended June 30, 2016. Net loss attributable to common stockholders improved to $(1.6) million for the six months ended June 30, 2017, compared to $(2.3) million for the six months ended June 30, 2016. Adjusted EBITDA increased to $0.7 million for the six months ended June 30, 2017, compared to $0.3 million for the six months ended June 30, 2016. Non-GAAP 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 11:30 a.m. (EDT) today to discuss its financial results for the three and six months ended June 30, 2017, 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 56973945. 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 speed optoelectronics and high performance fiber optic test products for the telecommunications industry and distributed fiber optic 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 the potential benefits of Luna's sale of its high speed optical receiver business. 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, technological challenges and those risks and uncertainties set forth in Luna's periodic reports and other filings with the Securities and Exchange Commission ("SEC (News - Alert)"). 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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