LUNA - Earnings call transcript Q1 2018 | Luna Innovations Incorporated

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Operator

Good day ladies and gentlemen and welcome to the Q1 2018 Luna Innovations Incorporated Earnings Conference Call. At this time all participants on a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder this conference call is being recorded. I would now like to turn the conference over to Mr. Officer Innovations. Financial Chief Messick, of Luna Dale Sir, is yours. the podium

Dale Messick

the Good Thank our you for subsequently XXXX. be afternoon site. call for our this Brian. recording operations quarter of A joining results posted review thank will we and you, conference of as us and Web on first today

releases not us Scott information At Luna which Before and and more I'd we that complete today, site on except forward-looking company's as made President the differ to to results Web guarantee or to law. that disclaim this not and this in based presentation our caution of announce may statements regarding the a but variety time with There's statements a regarding factors may the as available Exchange statements events investors in in results of factors site. the of developments available filings as remind to be CEO publicly Innovations. any over ongoing are the our update and call filed like the our well Forms required sites expectations reflect on forward-looking are result results as Commission. at SEC in currently Web changes to time, company. and me result and to our that discussed We any proceed future or to of let turn made statements with statements as any the latest and management's public We facts including any Graeff, historical involve to operating taken by any information forward-looking obligation of such materially Securities a filings risk with future beliefs uncertainties or SEC or Actual subject revisions by statements any future prospects limited conference are uncertainties should our you about each Web call forward-looking the of of be and not performance. the risks

Scott Graeff

Thank you, the we the result. able have and today. us performance strategic I'm as in to and we've the all in you joining achieve execution thank been Dale extremely of initiatives progress financial with pleased our that made for a

XXXX company. the Our marks operations first consecutive QX earnings earnings and history quarter positive QX of back earnings of quarter to a positive fourth our a first a public continuing as from in going XXXX

to growth in data and as positioned you materials. advancement and Dave data use As well growing communications our advanced I'll will will more bandwidth and review other on we trends we such detail. of as for QX of demand are as capitalized financial briefly well composites to have with and results centers benefit continue follow the opportunities particularly Technologies from and see, Optical higher the

As first you quarter challenging of from calendar recall, a may typically each most perspective. the quarter the year revenue is

a if momentum approval significant customers the many it's for because but an seasonality operations year sometimes have XXXX XXXX just loss reported in of year a loss products that focus and controlling recognizing healthy contributed losses our and makes in as we operating continued able fiscal quarter the into to of were of continuing overcome we As in takes spending ago. capital we obtain the the XX% start in expenses, $XXX,XXX to of from $XX,XXX expenditures of nearly our and year last This income business $XXX,XXX million challenging, year of the the their to particularly given any now $XXX,XXX well. QX carried beginning revenues growth backlog the our first more years. With ranging obstacles particularly to net our that on for ability continuing price operations in overall represent products from over often Luna $X.X for their to of compared equipment our longer sell capital historically investment from prior than

First than million and line. our Within bottom from and license our more quarter segment grew $X XX% $X.X Revenues our division from or grew contributed to segment, million revenues year-over-year XX%. Lightwave XX%. this sales products increased

sales includes Odyssey As photonics more and a integrity. demand for reminder, and the and more measuring instruments and for building includes structural networks. components bandwidth Lightwave of the data our It testing instruments also target the silicon fueling for of growing of optical the our health These centers. development

as the mentioned but is various in previously, first and I've see provide Luna. growth like of business progress you highlight will status these more Dale As identified that we've financial at to strategic divisions I'd and materializing. can opportunities detail moment, growth key as the a

As in the the asked us Vice President General to Manager past, and Lightwave I've done Soller, of Brian call. on I've join this division

any there questions at are the gladly at if So can all levels. address end, we them

those as significant orders nearly materials. multi-channel new an additional pleased version approximately primarily a receiving the in average of in of In QX other system well and that advanced growth applications price base our temperature this related the of civil structures. aerospace division, In on with multi-channel each revenue products. for very Lightwave as in year, $XXX,XXX fourth seven first X the XX% XX% of The to For composites for Odyssey year, systems and say product and large the quarter for year-over-year we strain of sales already launched we to that mentioned growth of quarter I've new last shipped measuring I'm with

is the seen markets. We in very and progress growth the that are pleased with penetrating we've it making at the Lightwave

ODiSI, a we first LCA component which called launched the XXX. at quarter, we analyzer new have the During

throughput performance test provides in higher high polarization times allowing loss, a to has silicon the most single parameters characterizing scan, dependent devices. LCA of and critical in their insertion and measurement of its targeting for the customers loss Specifically of XXX fast return loss resolution photonic operations. The our measurement have scan

a group last whether in and across place a in organization On XX% new Terahertz to taking ago. in revenues traction recognized compared I and continues the discussed Terahertz increase The manufacturing. or side, sales, quarter, year engineering the to gain that in the leadership our QX momentum group

our the four tradeshow We already shows marketing We to are with presence. in presence much this plan year for with in XX XXXX. greater Terahertz completed participate shows increasing platform

For comparison, we only completed shows four all of in XXXX.

that hours gaining in and our lowered taking to testament by are important being for These and we instance expect XX% cost system nearly the outstanding efficiency sold work facility. our of reduced January goods done the out true measurements a have operations, overall the to critical w XX%. of Additionally, in our to build by X, growth we a of build time are the XX% engineering since

and rate. contracts, development the that Our Technology them the X about programs depth feasibility ability last efficiently. projects this from And are relates finally, grew little which of are focused higher products opportunities our research as on target Development this for growth our bit driven market. division growth test that excited team X% so our segment, part conversion I'm year-over-year. has developed on thus largely our under the was This capturing and about remain their to a synergies win we diverse segment breadth it that earnings at U.S. extremely represents solid our government call extend mentioned by funded the ability Phase IP most and innovate and strategy, the seen the the and in into measurement with and I to far larger we performance as having portfolio XXXX in quickly expanding have very in area. of pleased far and a to There

two still through towards some within Since utilize sheet the still I capture months our that calm the opportunities substantial several at and could exploring the characterize our the this continued last that have acquisition. time interesting believe has test, grow structural We Luna stage although early profile continue to to test objective. market earnings would those this opportunities call, business. on over to that our point as balance of an devoted past grow team efforts verticals, would and some we of improve we've we cash

very that potential we like the transaction. employees any will of all would in and for our employees these and on With keep results. the to remain I know stated Dale? hard we driving fronts. targeted and quarter progress detail. Dale will more on of deployment apprised financial thank over the in everyone I've our before, we therefore results disciplined strategic a As review committed XXXX very their focused make I will I deliberate any call be toward to work are turn achievement taking the capital first of this to I approach quarter. and that,

Dale Messick

you, Scott. Thank

prior X% segment the mentioned. realized was in XX% to compared XX, year-over-year million increase a division growth Our The licensing period revenues products the along as $XX.X a The comprised which XXXX of for same XX% year-over-year million and in in the representing in segment Technology quarter were the increase the increase. recognized product for March optic our with of Lightwave grew ended of a increase fiber Development products and primarily licensing XX% in the revenues of test $XX.X year-over-year revenues year Scott segment. in our revenues

in in development of adopted under quarter first the recognition technologies. approximately new of into research the than ASC generally for standards. the segment optical revenue continues ASC related more recognized resulted would January we accepted advancing we the While accounting in technology of principles. X, have $XXX,XXX The XXX, be accounting biomedical growth funded XXXX, previous to revenue adoption under to government XXX recognition and Effective XXXX standard mostly

first compared $X.X March XX% margin XXXX expenses R&D revenue compared March of in compared representing expenses or for $XXX,XXX, expenses those three on a XXXX the million ended or million revenue XX, SG&A increased of year realized XX% year-over-year. three XXXX. of to QX of profit months essentially in of million first flat gross increased to Our of the to while XX% to million year-over-year gross to XX% ended for quarter XX, than of months last QX $X for $X.X were the revenues $X.X the less Operating quarter XXXX. for increased XXXX

in and increase we reflect year-over-year operations shown loss closed of recognized to loss amount our $XXX,XXX HSOR income August XXXX gross the the profit of continuing of discontinued first revenues the quarter discontinued first of quarter to quarter we first compared continuing We recognize our release not $XXX,XXX or operations group year. operations XXXX of the the operations that a and XXXX from in XXXX. as from the for first in in any for operating of of expenses, operations of income management sold quarter for did of related With today the last

of attributable $X.X the XX, XX, diluted share ended three common fully income Our a share on months XXXX or for breakeven $XX,XXX March loss March cents million stockholders to basis and compared or ended the months to net for was $X.XX a approximately diluted per three XXXX.

outstanding to million; couple cash balance highlights with $XX.X the balance the our has debt million. We of the declined remaining approximately on sheet. to on Turning bank $X a ended quarter of

plan quarter, or more call shares XXX,XXX we with purchase to purchases X% than our used of accumulating our I'll under of the cumulative first With issued during our During million stock stock announced Scott. stock. common to to our the the turn X.X last quarter year of now of stock over $X.X back shares cash treasury that, purchase common million

Scott Graeff

this for the At to call open you, time, Dale. up I'd Thank like questions.

is optics my test I time address any Lightwave as available Soller, Brian General in our Dale our to and Manager Vice division, fiber at business of As President and is which and questions me Brian? measurement well. this is mentioned the with comments

Operator

Instructions] [Operator you. Our Northland Capital. from Thank the comes Tim of from line first question Savageaux

is now line open. Your

Tim Savageaux

on sort what basis I growth my your that Good that. we -- there. it congrats those could guess that of that of results. certain fiber particular driven photonics would have wonder you growth as be cycle growth of I sustainable optic to you of guess your by the I And also view if sort and in well. driven of guess sort stage think and like mentioned speak that afternoon. be might sequential sustainable on are kind pretty drivers. type Thanks. on whether of is growth might above was grown rates nicely And tests, do HI, continued cloud the operators, think XX%. to And I type question maybe or I strong of looks you silicon on year-over-year a comment

Scott Graeff

of XX% are silicon comp the you, we're serving let on day initiative. But, to at I'll Well, looking this on This I I'm it in range in He certainly Scott. XX% that might Tim. I those call, to day have don't there. been products think is start going and Brian test remember. the But out. photonics QX with and the I lives kind jump mentioned side, in

I we larger starting than structural the the that larger On is to XXXX contest smaller of it's continue believe a are test photonics see -- forward percentage I a before lot with and this and growth substantial rolling getting that side because on is with side, lot energy out growth traction with mentioned the we number, in but and multi-channel has a we see a silicon multi traction to of the the gaining of initiative. got look continuing

you to add want So that. I'll let to Brian, if

Brian Soller

is this can or answers that? That Tim, Brian. more on I question Yes. color you your give

Tim Savageaux

guess Well, for I'll I I mean go just that.

in segment can of kind think have wise kind I'm an growth about whether we're to about you the like may it define of revenue I order I well looking tests. test talked But be well. wondering test talking regard. terms any versus we fiber order interested on And comp about with optic when know looks and just on bookings range. have our as there metric think quarter as fiber sort may basis XX% This if at optic of acceleration, we talked I commentary an you talk the last and given am you apples-to-apples you to

Brian Soller

Yes.

Okay.

XX% year-over-year a basis, broke the that's optic on the fiber So down test.

in show new buckets by the healthy structural silicon Test those side Odyssey whole we and And growth test test driven revenues those and a down test be pretty of the forward, year-over-year the basis. of number which So revenues and going Odyssey two portfolio includes Both material of on primarily believe buckets we those types. going structural as by driven comm photonics smaller both break but them basis. product communications Odyssey a and that's larger our is into sort segments revenues got product to

same the For in healthy and numbers that the QX. saw QX, the in bit side more actually grew reflects test communication a little we thing

So a be will of our we're is think I mentioned the rates those accelerated on. sustainable, range I last don't but we that's that an bit XX% reasonable what call basing revenues. do those plan to in here XX% timeframe we've Scott and believe believe on for been

Scott Graeff

year. of on Yes. And really and we products the primary look OVA, Tim, the and worry is our script test optical in vector this test Reflectometer I inside across comp that's two it, the network. when and myself the I before, comm that said we Optical say analyzer repeating this the kind kind about But, of Backscatter test, testing component at the

measuring into -- we you if is telco So that's And Odyssey how talk But photonics the two those and in composites. the your and increased then, of of as talk test about at the when sales across thereof itself silicon we any kind where that's look get will. growth hybrid structural vehicle the call products. temperature say the versions those driving different the strain we products really being we test We about comm that. two

Tim Savageaux

I'm the right XXX about Odyssey way you shipping you're least and the correct. just was orders that the at made I at commentary and new numbers think Fair seven enough. KSP the obviously eight the given Okay. system

Scott Graeff

Specifically Odyssey XXXX, we in unit that December. released the

Tim Savageaux

of normalized looking relative heading some growth rate growth to your Is substantially kind you All growth ahead if it you've your estimate? right. part growing here at of is seem estimate. how seen is a conservatism QX off reason their of wondering looking base, sort that the of there overall does like at the of Well, business there to of even should that relatively a that performance believe comm kind baseline or test but slow the small kind are I'm forward.

Scott Graeff

seeing lot now activity. traction, what seeing more seeing annually we are -- talked giving. we the out we I if we're Right XX% that to an We XX% but were to Whether that Yes. than to. to annual lot off in on XX% aggressive a of are of gave we folks seeing change lot more what a and of don’t than mean know a got that. activity we a more about we've I are continues, ready are lot But front XX% we basis

Tim Savageaux

up whether above Great. expecting. I came a talk kind were on which XX%. than are or gross factors mixed parts better wonder And could then, in was I let there me work there there if gross you solidly at margins little were margins follow least about of moving driving at what that

Dale Messick

Yes.

look those at much highest growth margin in sales Some because of instrument business. the mixed we as was of our now by is driven are how the that

a mix a think And of bit for product little so created I that us. shift that

Tim Savageaux

much. very Thanks Okay.

Dale Messick

you. Thank

Operator

our And comes from line of [indiscernible]. next the question

open. is line Your

Unidentified Analyst

Yes. since of substantial, We've I year the first doing. you're pretty Good stock and taken afternoon. a got what the position like of but

I completely. around think turned this you've

do your of calls fund that the your a from if you back we to cash that in more acquisitions. I look because something balance seem mention one willing previous other stock and the to we pull It did market fund. one business All any previous know that, you cash have use amount market buying best put on and a shareholders by cash of over that the money can with is, wrong the You is things correct words, to that for very money I'm you of and your business sheet would learned down some want release years might some in who if and good to the your money falls returning be the some it me and horse does you But, are filings in listening those In might sell looking sense. buy what on but trade. division better. to make

work. to concentrate just on you shares certainly something of some because buy best. want the at Why these to buying the you your cash So, not don't back because prices you put I know business to want

Scott Graeff

agree Well, cash Yes. certainly in non-accretive. I bank is that the

are budget some done our and And step very the some we we this. are deliberate opportunities specifically until and only forward at we we of Terahertz what approach more through for the do in some needed we saw we division invest deliberate in engineering getting what we've set umbrella. from do deploying holes then we and very in we're we we looking calling under tell to looking Lightwave, have that that So for active some just of are marketing state, Lightwave and said and at took we a the and money need back We sat just internally things we up that. sales, to what could where -- grow add and to And very at at doing looked the test XXXX in do. more acquisition faster are those. this company at at lean a fit investments very some back look I an that way could were, organic looking that can it We standpoint to but you opportunities in at a measurement

We two story two verticals very have things the faster. grow and these those and we're really fit within make at that to verticals clean looking

Unidentified Analyst

and has encourage nice current platform. the of certainly margins understand do No. with your I a that to certainly and I and test would fully some profit you would high measurement in fit section and

back so $XX and think in of in any invest shares. you're in bit if reject have stock, don't but little I million, invest I buying own you So that you a

I think sense. that benefit. shareholders makes All

Scott Graeff

Yes.

options. everything's I -- And process I then mean to I from kind it a we've the to inorganic think now also -- do forward. value process get that. over think think of want the what this and table. six that in We're just the in I how to from an look perspective the we're continue we looking things driving shareholders. of first at grow going believe and at we right I we order organic And and we're was seeing at a are last all position an through for done shareholders how and months you're through we've of trying faster. with increase house Like looking done we'll But process on do the going

we understand where can at tell options. looking certainly all you from I So and you're I that are coming Lenny

Unidentified Analyst

the would Okay. than you the want deliberate not acquisition. Well to I'm I'm do not other to things and certainly other being telling anything do not very about

you I as any And have opposed But so a do you of things, have that so different you an lot cash. that. of can not awful know,

So…

Scott Graeff

Yes. Thank you.

Operator

Randy And Knudson, our next Private question comes from the of Investor. line

now line is open. Your

Randy Knudson

afternoon. Good

On in recognized about you composite the for or last testing talked conference standard industry the that I Odyssey or composites hopeful misunderstood and as maybe you're be coming it might call that.

industry the that. has for -- being achieve are first any standard So there been I recognized guess in are testing and you terms question, where do as you is how we composite of products. the

Scott Graeff

with to going it know that. I our I'll that we and I'm a everything it through can. that very this priority let bit is will top little path say I talk more. a important involved is in is some of you're say believe that. and bureaucratic Brian in will who is Yes. going doing list. down process Brian we I involved answer dealing and We let organizations going there are

Brian Soller

other teams entities the partnership are course -- have technology. the materials. develop that optics our that a the we over standards we would two Luna standard those composite documentation And to of corporate materials. committee level to those to we deliver And are committees to members are would for on materials the new confirmed our considered in and the over committee time Yes, most products we've working Odyssey be relevant level fiber and believe test sure. bodies thin with that now Randy. And standards body at with all year what that with of last engaged at include between Hi, and and -- the I standards bodies. the types standards bodies of measure regards standard there using essentially identified different

it to that over they have time. over we and what organizations, But we You engaged have the take right XX so this, last to mentioned or believe Scott bodies bureaucratic can with think with are be months so some real fairly in I progress. right gotten next be see the we'll folks the year some standard as careful the

Randy Knudson

Let up a could. if question follow me I ask

in only really competition of is the this there significant without of that's competition, the this are people are naming we market, doing terms you -- kind In only testing? competition

Scott Graeff

a That’s we types competition market good The question. that this other measurement of really is have technology. in

Randy Knudson

Okay.

Brian Soller

thermocouples So whether using gauges offs or these a instrument. electrical stand detection type strain flare or temperature

competition So benefits there's these other lot are of there's way a lot bring. -- other these not competition head-to-head different they to with a from certainly They'll of the technologies. make We we techniques types using direct bring have on specific benefits optics competition fiber some very There measurements and fiber the measurements market. optics. of

is of combination and that of resolution though terms Ours can accuracy achieve. the in pretty unique we

that answers hope question. I the So

Randy Knudson

of evaluate No. technologies Terahertz airplane of holes various Terahertz Ann did. in -- to that one or isn't Arbor, modalities, and parts being It they the used? in And aren’t I've in I think using various seen airplane fact

Brian Soller

Yes.

Our other Terahertz of but technologies them It's quality can exactly we're an measuring you used different of and as many for coatings of to not with measure complimentary. thickness what applications and actually. fiber apples-to-apples optics aerospace think to types layered

Scott Graeff

come Randy, there welcome it's technology. the Ann disruptive see out and Arbor meet a to out you the you folks if in it ever firsthand. and I'd were very in area,

Randy Knudson

current plans or how when outer? to the of -- I in And in thoughts to move the stay are are appreciate going long that. they facility the terms what's

Scott Graeff

Yes.

we're the like ideal the [Maycomb] with not end this well. year. -- talked I we as of is were -- [ph] our lease is Our before lease kind within through space. in facility We're mixed It of where

from is right where now far here. kind of we a So point we're looking a at mid-year going. as that evaluating go as that But where decision we're

Randy Knudson

Great. Yes.

there I any with added value In there see, resellers, press Terahertz, the Terahertz in really there are area? I selling terms paper, where Are was added various different --are impressed in whether of other it's some of added think whatever five new new aspects on value releases but resellers been value we the of new markets using resellers plastic that significant are there can horizon. in

Scott Graeff

folks in that are there guys additional we and the nice job, distributors and Margaret have Well, John in some and up and additional and some active some there out signing and done reps. VARs Earl out a Steve the and

is on specific of So I names dead saying. or don't that it’s fingertips active with approach that specific have right get not them business an market at when a you're rep that a it you a times just my them many specific and But into the VAR knows now. requires

me has contacts. Terahertz after going where we're just stroke It's technology out here. Let broad who those and

So we are I active and know in follow don't right names. that you with just I the can up with now.

Randy Knudson

done really for that and with have thank I what so Well, appreciate questions. gentlemen you impressed overall and just you answering my

Scott Graeff

Thanks Randy.

Operator

Our next question comes from the line of Investor. Charles Noll, Private

open. line now is Your

Charles Noll

on them, the added when when begin stress Odyssey's talking And with I of it cumulative Terahertz, I middle the to just of detect delamination composite. was to thickness there composites up understand they this as not I could coat. the measures assist they On an mid-term, the you. in Thank to said was applications

complimentary. seems be it would like they So

tunnels in anything Israel that's wall Strip. subterranean the a true the they something the other Terahertz for everything with somehow [indiscernible] is -- thanks it months. tunnels that all, to be pulse fiber to last several if with in -- And It's great. in the and Luna done ago the Gaza I doing up. involved you're about where talking that's of things years don't maybe laid next to understand were there Hope they Keep remember was fine. toward but our First that being six week. and I One detect they able technology. was optic this

Scott Graeff

are are we that believe don't Trump I Yes. Wall? anything doing talking you about -- the

Charles Noll

That's money going yes. the where to Yes, is be.

Scott Graeff

now. we offer Well, that that as right them Exactly. benefit contracted But certainly not benefits we yes. to could well. aware are Yes, them I'm and with

Charles Noll

that some that something be I people know we Okay. looking at, Is should on.

Scott Graeff

to Yes. on anyone we makes at Earl or have John can that about Margaret look include separate We that. to call to you should want think or call, everything sense. That include want that and Steve and and a we we if

Charles Noll

like great. right. That you Thanks. Okay, sounds answered it. All

Scott Graeff

Charles. Thanks

Operator

from next the Northland Our from comes Tim Instructions] line Savageaux [Operator of question Capital.

Your open. line is now

Tim Savageaux

trends expect follow Hi, of it to commentary I little if basis, of Thanks. you're can on relative stability I’m seeing out optical whether and any [ph] there. have you a you kind to kind been bit seasonality solutions to talk had see looks going might wanted you see side, that up year-over-year a down or of there, wondering on that if the custom if [outward] continue group? to

Scott Graeff

for what It the them we've so lot their They piece talked of and that know deliver a set but going Yes. that's overall to is backlog they business a have forward. smaller goals. a we've they internally tremendous continue about, something pie

were XX% somewhere – they XX% talk think to little about a they'll but maybe, this along year-over-year. continue didn't to it's probably chug And think but year-over-year growth bit to do that nice it -- X% the they out they in there. lot, continue down will we a I a was growth I X% very for business flat somewhere year just probably

So there. nice work piece a continuing business our of business. it's large but out a It's not do they

Tim Savageaux

Thank Great. much. very you

Scott Graeff

Thanks Tim.

Operator

Executive back questions. Chief further for Luna no the turn remarks. I'm any to would Innovations now [Operator Graeff, Officer Instructions] call of like And to further I showing Scott

Scott Graeff

you Thank Brian. us Thanks Yes. joining today. everyone for

breakfast I had year person. throughout all completes that in XX in the in and growth you've believe will starting call. an around the kicking we this like at annual we our everyone Board As our Tuesday, carry a Directors Roanoke invite the to meeting May and would momentum stockholders we'll me holding the and we X:XX. This to expanded start QX heard at you executive today's XXXX. Roanoke meeting be to team results the I call, off join remind for next with on Hotel strong X:XX

Operator

Ladies you call. in a all gentlemen, does disconnect. and your thank participation for day. the today's and you conclude may program have Everyone conference This great

Luna Innovations (LUNA) 9 May 182018 Q1 Earnings call transcript