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Luna Innovations Reports Strong Fourth Quarter and Full Year 2017 Financial ResultsLuna Innovations Incorporated (NASDAQ: LUNA), a leader in advanced optical technology, today announced its financial results for the fourth quarter and year ended December 31, 2017. "We are extremely pleased about our continued progress strategically and operationally, which resulted in our strong financial performance both for the fourth quarter and the full year ended December 31, 2017," said Scott Graeff, President and Chief Executive Officer of Luna. "We delivered $0.7 million in income from continuing operations for the fourth quarter of 2017 when normalized for the $0.7 million one-time charge related to the departure of My Chung. We achieved double-digit growth in revenues year over year and recognized positive income from continuing operations for the fourth quarter. I'm incredibly proud of the whole Luna team, whose sharp focus allowed us to deliver these results. The demand for our test and measurement products is growing and this was reflected in our robust fourth quarter and 2017 full year results. Silicon photonics and its applications in high speed networks and data centers is driving the telecommunications test segment, and our ODiSI platform continues to gain traction with the ever-expanding use of composite materials in manufacturing. We believe the macro trends behind the growing demand in these markets leave us well positioned to continue our growth into 2018 and beyond." Total revenues for the three months ended December 31, 2017, were $13.2 million, compared to $11.8 million for the three months ended December 31, 2016. Technology development revenues grew to $5.1 million for the three months ended December 31, 2017, from $4.5 million for the three months ended December 31, 2016. Products and licensing revenues were $8.1 million for the three months ended December 31, 2017, compared to $7.3 million for the three months ended December 31, 2016. The company recognized income from continuing operations of $0.2 million for the three months ended December 31, 2017, compared to $0.3 million for the three months ended December 31, 2016. The 2017 results include the effects of a one-time pre-tax charge of $0.7 million in association with the retirement of the company's former chief executive officer in October 2017. Adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA") was $1.2 million for the three months ended December 31, 2017, compared to adjusted EBITDA of $1.0 million for the three months ended December 31, 2016. Adjusted EBITDA is a non-GAAP financial measure used by management to measure operating performance and is reconciled to income from continuing operations for the respective periods within the table included at the end of this release. Net income attributable to common stockholders was $0.4 million for the three months ended December 31, 2017 compared to $0.3 million for the three months ended December 31, 2016. Fourth Quarter Financial Highlights Gross profit increased to $5.4 million, or 41% of total revenues, for the three months ended December 31, 2017, compared to gross profit of $4.7 million, or 40% of total revenues, for the three months ended December 31, 2016. Selling, general and administrative expenses increased to $4.4 million for the three months ended December 31, 2017, compared to $3.5 million for the three months ended December 31, 2016. Selling, general and administrative expenses for the three months ended December 31, 2017 included $0.7 million of costs incurred in association with the retirement of the company's former chief executive officer in October 2017, including both cash and share-based costs. Research, development and engineering expenses increased to $0.9 million for the three months ended December 31, 2017, compared to $0.8 million for the three months ended December 31, 2016. Before taxes, the company achieved essentially break-even results from continuing operations for the three months ended December 31, 2017, compared to pre-tax income from continuing operations of $0.4 million for the three months ended December 31, 2016. Excluding the impact of the expenses recognized in connection with the retirement of the company's former chief executive officer, the pre-tax income from continuing operations for the three months ended December 31, 2017 would have been $0.7 million. After tax, the company recognized income from continuing operations of $0.2 million for the three months ended December 31, 2017, compared to $0.3 million for the three months ended December 31, 2016. The company had income from discontinued operations of $0.2 million for the three months ended December 31, 2017 compared to a loss from discontinued operations of less than $0.1 million for the three months ended December 31, 2016. Net income attributable to common stockholders was $0.4 million for the three months ended December 31, 2017, compared to $0.3 million for the three months ended December 31, 2016. Adjusted EBITDA was $1.2 million for the three months ended December 31, 2017, compared to adjusted EBITDA of $1.0 million for the three months ended December 31, 2016. Cash and cash equivalents were $37.0 million as of December 31, 2017, and $12.8 million as of December 31, 2016. The company purchased approximately 483,000 shares of its common stock during the three months ended December 31, 2017. Full Year 2017 Financial Highlights Total revenues were $46.2 million for the year ended December 31, 2017, compared to $41.9 million for the year ended December 31, 2016. Technology development revenues increased to $18.6 million for the year ended December 31, 2017 compared to $16.3 million for the year ended December 31, 2016. Products and licensing revenues increased to $27.7 million for the year ended December 31, 2017, compared to $25.6 million for the year ended December 31, 2016. Gross profit for the year ended December 31, 2017, grew to $18.1 million compared to $15.8 million for the year ended December 31, 2016. The gross margin was 39% of total revenues for the year ended December 31, 2017 and 38% for the year ended December 31, 2016. Selling, general and administrative expenses remained flat at $14.8 million for the years ended December 31, 2017 and 2016. Selling, general and administrative expenses for 2017 included $0.7 million of costs related to the retirement of the company's former chief executive officer as described above. Research, development and engineering expenses were $3.5 million for the years ended December 31, 2017 and 2016. The company's resulting pre-tax loss from continuing operations improved to $0.3 million for the year ended December 31, 2017, compared to a pre-tax loss from continuing operations of $2.8 million for the year ended December 31, 2016. After tax, the company recognized a loss from continuing operations of less than $0.1 million for the year ended December 31, 2017, compared to $2.7 million for the year ended December 31, 2016. For the year ended December 31, 2017, the company recognized income from discontinued operations of $14.7 million related to the after-tax gain associated with the sale of the company's HSOR business. The company recognized net income attributable to common stockholders of $14.5 million for the year ended December 31, 2017, compared to a net loss attributable to common stockholders of $2.5 million for the year ended December 31, 2016. The net income for 2017 resulted from the income from discontinued operations discussed above. Adjusted EBITDA improved to $2.5 million for the year ended December 31, 2017, compared to $0.2 million for the year ended December 31, 2016. Non-GAAP Measures In evaluating the operating performance of its business, the company'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 the company believes may not be indicative of its operating performance, because either they are unusual and the company 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, the company will conduct an investor conference call at 5:00 p.m. (EDT) today to discuss its financial results and business developments for the fourth quarter of 2017 and the full year ended December 31, 2017. 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 3184618. 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 company's 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 advanced 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. The company 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. The company'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 the company's expectations regarding the company's potential for continued growth in 2018 and beyond. 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 the company 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 the company's products and services to meet expectations, technological challenges and those risks and uncertainties set forth in the company's periodic reports and other filings with the Securities and Exchange Commission ("SEC"). Such filings are available on the SEC's website at www.sec.gov and on the company's website at www.lunainc.com. The statements made in this release are based on information available to the company as of the date of this release and the company undertakes no obligation to update any of the forward-looking statements after the date of this release.
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