LUNA - Earnings call transcript Q3 2018 | Luna Innovations Incorporated

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2018 Luna Innovations Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions].

As a reminder, this call is being recorded. to call like Luna to now team. would turn over the the I

Unidentified Company Representative

thank us for we morning, you Good and joining third earnings issued quarter today. press release. our morning This

section posted the with we information third results. our fiscal on website addition, In supplemental Investor Relations a of to presentation XXXX quarter our

check a lunainc.com. at If have the or website copy you do the our release of not supplemental materials, please

call also to of our post will We this a website. replay

specifically are of adjusted comments measures, discussions on Some EBITDA. today based our non-GAAP and

or a non-GAAP the statement. be ongoing a of the what Our is presentation numbers adjusted effect indicator items in operating reliable The performance. more financial these non-GAAP useful certain exclude on items. we and order and deem non-GAAP non-cash of focus of the Luna GAAP supplement to expenses believes this results exclusion are to to

our time, including, expectations the future Actual and in is our websites, There are our us on time, in regarding any future at developments we today, Soller, obligation take forward-looking prospects Manager changes risk of and releases Scott this any factors statements, Before any any the statements statements and will but not information to, questions. forward-looking statements Luna SEC or to result Innovations. the morning, and Graeff, company. over revisions After these be website that CEO to the prepared uncertainties materially at And except by the call our available CEO; Officer; or to involve the to results on turn forward-looking results our risks We publicly results uncertainties such to be our like variety you and limited Financial your made of with the General update law. differ as our required to Lightwave or reflect as SEC of I'd factors. about of ongoing conference disclaim this call may of presentation company's operating and a regarding Chief website. with well as this as events to historical facts, a which of that to filings, statements Messick, announce not Scott of any may subject Graeff, proceed Dale let are and public our more Brian Division, remind President remarks filings complete available

Scott Graeff

morning, Good Thanks call for everyone. this joining our morning.

we things because for of few longer year briefly to We bit fiscal some we'd a discussed had acquisition quarter morning. strong XXXX. further third a our and Micron have expectations Optics very announced discuss, the With that a the weeks including the several ago. results for all discussion of our transactions, end duration to Also, call cover close today several to maybe of like the recent of this our of we've of and this we're

the review on executing optic-based through we I will specifics, accelerate strategy I growth our see our As to robust a hope capabilities. progress of continue that focus fiber drive the core to you

who quarter consecutive gross we continue in and the our feel XX% centers, mentioned of we growth double-digit to products of of very same achieved of sweet and benefit Optics, data growth. from sixth The third revenue operations I've squarely growth. optical-based and and And revenue the data trends, positioned XX% communications into higher in quarter, of this versus the use fourth and continuing capitalized quarter strong a XXXX as still over We've the In of in and that spot materials for growth. working capabilities this the opportunity target of marks quarter in of advanced the liquidity other our revenues And as and the see to we higher growth quarter profit proud and of in composites on demand we technologies. for our progress I'm from last worked strategy of financial We results. advancement sheet fit following terrific before, about acquisition our deliver are such the continued as and very have aerospace a growing excited all automotive team, am are I'm good year. which strong paid rich with sectors. Micron our flexibility balance members the markets cash. the with is these validation to bandwidth the We performance Luna that maintain well as

perform and We marketing are and sales offerings capabilities to necessary our of necessary continuing to products. the to awareness well create evidence strong existing from we're with some advance technologies that internally, R&D these I'm to our for and we've and the resources say the in in both internal getting growth invest line pleased exposure already investments a continue top of return made. businesses that to

fits in that in optical grew Revenues and year-ago of and In our market test and drove segment the revenue quarter Technology accelerate performance continue we for strategy the and quarters of XXXX Lightwave months our We be structural addition, would in the from nine robust first of revenues sensing. in and from includes versus Products XX%. believe we which communications segment, squarely margin XX% further XXXX. grew our the both Development in fiscal two grew Gross from XX% interested the important growth the and will a on which third Licensing based verticals, M&A comparable Odyssey XX% our profit our first and within quarter investments test XX% to three periods. to XX% quarter

As for and for networks silicon These includes the target for data high and a products testing our used Lightwave bandwidth, growing more to speed components centers. and in instruments development the of demand optic communications. the of Odyssey, building more fiber fueling addition reminder, photonics

of structures. instruments Odyssey and integrity health structural and Our measure components

the as Starting Lightwave, at as XX are Total the year-over-year. revenues to communications for shipped highlight our in were the Odyssey some announced month. highlights units part sensing divisions quarter. progress over the XX% the up acquisition handing like with review were the various of Luna, XX% the Before Lightwave well I'd Lightwave Revenues the during year-over-year. quarter. test here were of of Revenues of with business we part status business in year-over-year Dale, XX% to and up up last

manufacturers our We well to continue which research invest lightweighting markets, multiple quarter and to to National improve base of in and next-generation to and of This In silicon make that Lab well. aerospace Top quarter, Lab. sales of strong in progress in introduced our Reversing sensing we electrification by technology remains vehicles vertical, test key QX, sales features and have of other validation penetrate Natural America optical last also functionality a was the our our as multiple government the sales two Lawrence products. OVR continued Sandia we we this primary verticals. of to in laboratories saw we markets. the In enhanced overall Odyssey ease has performance platform in designs. customer base. these and us received core driver our North QX, our funded automotive continues markets to delivered order further design we Growth In the QX, been trend strong in experienced for of and communications tier to driver our development sales silicon comps strengthening Los our its photonics for into and infiltrate applications test by allows Alamos new such products to in institutions decline into continued as a multiple of and use, units In automotive Livermore, this applications. OVA vertical, growth growth be with

our of very measurement high optical New sales on energy fiber OVR the length research. these product in entities based were links of used QX applications common physics of to requiring precise strong in

product beyond Our OVR links any very provide on with of far capability of measurements the precise market. fiber that products other length

continuing Terahertz built QX in QX momentum XX% increase the division and is with a revenue in in QX Our products year-over-year. strong

developed of repeatability and market accelerated non-destructive to successfully products meet the third deployed value-added buried control process two testing non-destructive We marketing and the Terahertz in gauge deliver of and measurement with applications control new accurate addition demanding enhancing demand continuously QX at we applications. gauge sales testing These Korea the expansion new and thinner efforts will In demand higher growing new our driving channel and market for continued sales opportunities into Taiwan. control the presence with are innovative our Terahertz This additions performing and of with high for into process process new control quarter, resellers. layers. rate. strategy in These more process a

growth demand. improve we to Additionally, daily our balance deliverables effectively efficiencies opportunities operating and the continue expanded sales channels to our

our complements the reminder, a Licensing Development As segment segment. business Product in and our drivers Technology

to which by including and basis. but and technologies can work new on revenue we the support a not develop Here research, only as XX% approached the future management funded development. we create And work grew contracts, The operations, is full and we've quarter year-over-year that generate for a eye quarter. around example the XXX over complete with study segment corrosion amounting third the to deployment is segment the products This growth. discussed, government this business commercialization. the not of aircraft contracts, on of bases sensors, effect maintenance to the $XXX,XXX an and this just in XX force towards great but air cycles. corrosion at A over Luna in world shipped

two the of certainly excited product believe the line, the XXXX. Phase of In right results and are measurement and target progress these SBIR the we quarters projects. see is other great And in made began that And be revenue our Although about summary, many X we to in in opportunities first our this continue three performance. strategy I similar seeing the sensors with of reflected that we the have development expanding the future. place opportunities in market. test we products We in

to know results. they like third focused for achievements employees and record thank on future quarter. this driving hard and I committed I'd importantly, remain delivering More work their our that

weeks the Now let's Micron to couple of quickly the Optics like of gears. review some announced a highlights I'd switch of ago. acquisition

Difficulty] solutions, structural QX will filters and provide by therefore right range some XX-year for scaling had in basis product a will very of structures trends fiber similar another's a opportunities the products driving sensing Industrial into Georgia. depending million. worldwide not companies will to a and of both and the products, optic an of corporate also both Luna's fiber for The the have cash companies offer Defense, previously the that company suites its Medical. understanding and based and a test already that The also Luna, vertical. Lightwave product complementary in measurement. remember in markets Odyssey You sales [Technical is of by and of culture gas Micron company and higher including and it suite and exposure and acquisition did Aerospace Luna of sensing one greater both working. opportunity which XXXX combined solid perfect into Micron is continuing accretive sells in Asia Micron bandwidth. EBITDA integration our and very has $X combine with install, our might products demand fits on products driven Micron brings piece solutions Micron's And maybe the And products at sells civil XXXX instrument during be which allowing Luna million and to will Luna's with engineering Both Division to products the quickly $X giving programs, to of sales Atlanta, quickly open and customers. exposure. Like strong adjusted sensor oil lasers Micron which solutions cost-effective cross-sell more with and in allow or existing easier markets for the for Micron combination wider But acquisition significant towards believe to into full the for a resources, to containing There acquired and teams and will better a where more offer this With profile our revenue and us are making a driven This on engineering Luna old have the instrumentation, significant a and management Division robust Lightwave up discussed continuous point-basis markets XXXX. and division we and application. measure a to of which is accretive allow quick for The new Europe to product to exposure for will Luna seamless are a fully integration. and acquisition also a announcement, been The and as up-sell. greater enable applications the speedy cross-sell capabilities penetrate we in strategic expedite that processes optic

an about this right As the of before, the for the One cover, we're is capital acquisition year. deployment item for confident right mentioned this I'll very last asset. the I've excited of and is remainder outlook

give of like As this provide we've because you guidance. year-end typically transactions range. But various to financial know, do the we to not the year, and an done proximity we'd outlook

providing to continue in not guidance future, regularly most the disclosures makes evaluate we the which committing to are We will but sense.

fourth quarter of $XX $XX.X the range revenues to be expect million. in We XXXX to million

results full-year for the quarter financial that more be $X.XX of to will EPS of we And in turn the XXXX range XXXX, the of I in million. in to diluted in us million a to to third $X.XX per expect over This review a expect of breakeven fiscal would revenues call year-to-date Dale? would to and EPS share. fiscal share full diluted $X.XX for XXXX the range With detail. $XX.X per quarter Dale fourth range give We the XXXX. to $XX

Dale Messick

you, Thank Scott.

for Let cover me then the our talk results. quarter the performance year-to-date first I'll about and third

year with to discontinued the reminder, operating last have business that the for results a in sale our of year, reclassified current comparable both and business of income As of operations this our period July the been the of year statement. optoelectronic in components

revenue of The the for a million quarter of increase $X.X same million a growth a were year-over-year the XX, in Our Product compared the the in revenues revenues continuing our comprised first XX% ended year. segment, of strong period the XXXX Technology September segment along increase. for year-over-year representing year, XX% revenues prior from $XX.X increase to the was Development of in performance and with Licensing XX% half our increase

Within of the grew grew segment, Product quarter revenues Lightwave in last and Terahertz and Licensing third Division our versus revenue XX% year XX%. the

three of gross XX% million the in of million compared XX, of ended or sales of or segment million the Our XX% profit XXXX, compared additional primarily smaller SG&A changing end margin for our on for gross with the the revenue three QX margin in making of are of expenses to investment our to to products due of expenses were from Products quarter Division. some months investments $X.X of XXXX, the segments. in the quarter and than in September XX% increase of new $X.X the XX% the to last third development R&D grew The in of our XXXX. with associated markets. to business opportunities increased within revenue QX with of growth These to our also discussed in a of the revenues the revenue last we've more ended coming in Operating in of expenses addition XX% professionals some million September improvement reflects this revenues XX% operating year, the to was year, quarter selling year $X.X for realized to and in in Licensing the third compared Lightwave margin Division. those for revenues same investing in gross our expenses of incremental capture improvements and both months order $X.X our growing XX, in quarter Lightwave representing XXXX. mix The compared other

evidenced by top growth, As make. seeing continued impact are these the investments positive the can we line

income from quarter of million and of to gross continuing quarter recognized operating we $X.X the expenses, million the in of revenues of for year-over-year profit, management compared and third our With XXXX. the for closed increase third $X.X operations XXXX,

of High Opto of one from the terms shown results business. the divested or XXXX related operations, third of month XXXX, quarter the income the operations million during discontinued that of to of Amount three during $X.X third of operations Speed for third recognized the High September primarily Optical in Opto ended operations the sale net for net of our the our sold we stockholders discontinued we for quarter months Speed to $XX.X as business was million loss to the the in The of quarter of to sale in In August to of addition gain million Optical our Receivers the optoelectronic financial on months the common September the quarter third attributable income due to three Group gain income the XXXX last decline ended to common of Receivers recognized compared business of income XX, attributable XXXX. Net for XX, reflect year. of business million $X.X XXXX on compared $XX.X recognized of XXXX. was the the stockholders

the despite gross we to we of Our revenues We the of nine of for XX% in that per of of continuing XX% the first XXXX. of engineering $XXX,XXX share XX% revenues which of period increase. million a months first months necessary from representing drove same finally, our million XXXX per in of improved revenues nine diluted but of a $X.X or months million in million during the on income compared focus in operating in first first prior income of loss the investment XXXX of nine we've expenses, the months year-over-year diluted nine marketing revenue about were Further the revenues increased million last improved the of first to share nine And talking. for months year, from year, $X.XX XXXX. from with compared resources profit, $X.X $XX.X more loss $X.XX very been and $XX.X a period, $XX.X continued delivering in to to XXXX the operations our to or sales,

of the we end the $XX.X with QX. cash, the versus quarter balance up million $XX.X of from ended million Turning to sheet,

principal million. with to debt We have now on $X.X less remaining term year balance than our outstanding a down

million the to million September end $XX end working the at business, quarter second the of $XX.X to and Following XX, of of $XX.X million the capital at year. our the at sale increased last $XX.X opto million compared

three in with look of and So the driven that forward performance over we we've first I'll And summary, this to to Scott. consistently really strong the pleased that, year call I'm strongly. XXXX back through quarters finishing turn

Scott Graeff

Dale. you, Thank

time tell, As we also Soller, Manager available progress and and questions. you Division, I'd and business for making. measurement And and the me can questions. which Lightwave is this General the up Dale call fiber we're Vice the our President your our this address is open test very about Brian excited are with optic to at at of to time, is like

Operator

Instructions]. [Operator

Barry first Dawson Sine comes James. Our question of from

Barry Sine

want First flat development, is growth, about roughly year-over-year technology contracts, you on look very question know do and government terms ask fiscal the to the at basis. very, a contract us strong I process, of we Could a that and I remind on when obviously revenue of that standpoint come the sequential those normal explain part just in, is on what mainly Federal seasonality to should they the business? are tied year in

Scott Graeff

Yeah, Scott. thanks Barry. This is

have starts follow We you to it well at funding XXX throughout going then I an there. the the you from year throughout and those guess Phase II on Phase over negotiate with and time, working I SBIR on have is submission we if process we're it bid then and and periods and But on. year is, contracts -- contract, awarded that a the SBIR, they the and on given over any spread when

lot seasonality throughout contract. of not year. So There's that will a to it related the spread

Barry Sine

potential really growing as cost strong over in the very focusing is, larger a to expand organically, revenue going fourth you margin, what gross to the the fixed you stream your quarter. you potential the And revenue you're base? on when is margin report then be wondering quarter. adding the amortize this overall improvement Micron What in gross I'm

Scott Graeff

-- out you're margin business Division. more think seeing in the in increase is I more coming of to due the Well, Lightwave

our business performance increase. the continue strong have With you to approaching of being and that and half now side, half that that to continue to it Product the Licensing gross contract We segment. in margin see of on

includes the our of more to creep. Lightwave, continue side So will certainly includes you that we grow instrumentation that Micron can and business, the see which

Barry Sine

in now the you engineers of you And and script, respective us what's integration, update sides a about cross-trained talk other's headcount teams other's in about on speaking Could that of fully have products? talked Micron, sales on team are a products. still an how the sales both progress thorough the is each work each or the give combined understanding

Brian Soller

Hey, this Barry, is Brian.

so and integration, and right It swing on But take the relates both the process really and some are marketing much applications than or next get are will quarter so coming the expect teams in of full and it historical sides uses the that the the integrated the line. time. team As core process similar products sales on to to we longer to products that enough the now. don't sort take take fully of more Luna will up technologies -- similar that speed say are end market that is from the new

will to both see that of So opportunities going excited we on and year. about we will the into here expect swing start process is the that benefit teams to next that but here full sides in are relatively soon, have the really

Scott Graeff

is that week, sales have up year and to want we team we I Blacksburg with our Europe. will Brian This Barry, the in Micron Yes, be the facility. finish a strong, in team ongoing,

want XXXX is have here of [Technical well meeting. a Difficulty] we fully in all to We kind sales global strong underway. week, the finish integration Next integrated but

Barry Sine

Micron have with I Brian, And experience team. sales and you marketing some think that

that start well. gives head you So as a

Brian Soller

right. that's Yes,

Barry Sine

uses also looking, of for question last standpoint uses And still or on buyback a the a thoughts standpoint? that M&A? a any question, adjust of amount Micron financial acquisition, a guess us things after sheet on balance you're product my from for cash, the could still cash Assume at balance you obviously like for the on us M&A? what of view I and last dividend, you Next update on us your significant just your -- from could question looking the I sheet, is, you you're as beyond if of on Micron expense things update acquisition, update the cash on look corporate like even current then the

Scott Graeff

a under right two think mean, believe very and truly over business. like sale, associate We have margins we and to been the we disciplined certainly I that, side like measurement have as that our that. I've we We instrumentation -- umbrella of look but the in the verticals the test I with that continue and fit. market approach finding saying in these at

So I -- are M&A think in we be say continuing would I to the business. regarding conversations we're engaged actively

We that work organically, results we've put far from. has what also believe investing to we've so seen certainly

do So discipline like or we'll continue said, we've structural of that XXXX. that type I the in either But market, specifically to vertical actively test had comps in engaged, that -- sticking with instrumentation the test the the vertical. in

We But as the plan talk continue capital it. we're have about talk the whether about use continue well. there, out We of buyback. that's above to obviously to right a we stock

don't the did that I below a did place continue to So thought bogey talk with it price, we in Barry, to still but announce I'm plan anything was was sorry, have about that expire. where expire. now, stock it. right that plan but I

So good we'll that. our our about to meetings about that's a talk Board continue to at capital. agenda item use for talk whether It's an

Operator

Chris And Instructions]. Singular [Operator Sakai question next of comes from Research.

Chris Sakai

about your XXXX for pipeline you wondering light beyond? on can Just shed -- and

Scott Graeff

product of the the side business? in Pipeline

Chris Sakai

guidance yes, revenues, -- give Revenues there? you products, do

Dale Messick

XXXX. we out No, any have put for guidance not

we've here to done was we go remarks, and of transactions year helpful the for impact how we that mentioned our little year. giving some will that it do beyond even end recently quarterly us of to we're in I the transactions at quarter of here this ideas have because guidance giving But been felt out ready historically those with baseline. prepared think, not yet bit anything for a the fourth of on the not his Scott especially couple as

Chris Sakai

just fourth was sort are looking share. that of costs in got per the at Can -- income QX? see as EPS $X.XX as in far the to what what, you attributable lower that of -- you've I to I net quarter breakeven

Dale Messick

associated engaged in expenses transaction that we have process. of throughout acquisition and come terms so QX advisors we'll professional have certainly Yes, and the things in through that that did with like we'll completing QX, fees we in Micron

Scott Graeff

through to in fees, an a banker Yes, imagine through come fees, relates lot the so accounting that things you can associated affect you that pretty there's so when fees audit as the of what do of accurate, with EPS an it legal QX. doing comes that Micron, will acquisition

that an costs accretive called to time certainly related net those will compensate that's EBITDA Micron transaction perspective the we that, for come in to certainly We why have to from we at income but number adjusted things. those a QX, all through provide adjusted that is GAAP EBITDA recognize do

Chris Sakai

on and good quarter like Looks good track. right you a a are guys the

Scott Graeff

While not XXXX, is providing XXXX. Division that in doing business. see Lightwave to guidance and we to the continue in in And see the well strength very continue

Operator

please muted is telephone your if unmute. Jim,

Unidentified Analyst

is that is were is there place customer talk they about cost Terahertz doing benefit division. you what control, And a on is process process Congratulations to out nice quarter. then of, the to what additional Could what want that the taking mentioned your control it the ratio business just and on you elaborate doing? questions. coming a I just of when them? little two definitive -- had actually bit a before Number one, you

Scott Graeff

several are we gauge embedded technology getting radioactive in or kind deep, Typically, measuring. effectiveness. it's system the that and Terahertz I layers The new layers measuring talked some ultrasound out layers that's replacing and with efficiency why of using there, about down or more thickness historically several in

able measure to it surface material customers. layers being several layer it, So several but is layers can is a has down our you anything, below us of to the imagine any that lot a that relevant or tires be for whether critical

Unidentified Analyst

opportunities? material These are multiple

Scott Graeff

Yes.

Dale Messick

we're a film, Think getting is plastic and kind that with. of that's how success widespread blowing packaging some about and and pursuing environment currently in applications target that

Unidentified Analyst

deploy and So them? that paces these is area? people such to want question ratio, ROI put to that the through as it, cost analysis last what obviously in benefit payback this part have determined the the there was it the of they Is thing

Scott Graeff

of I such look that. you're, they and it things those bottles, can you at be, a be it be want than imagine, needs shampoo lot to like if it what thick is, as things to enough not needs it but Yes, water have leaks thicker I any don't whether bottles, they think to

precise So to have and thick. a is too their enough not measurement that get to that substance benefit bottle specifically or thick

customer. a So there from return a major is

Unidentified Analyst

And that specific Japan about deployed? globally, regulators nothing be or would there's

Scott Graeff

this to of time real in specific that on so line, someone's embedded into that remember, Yes, is on it's thickness line product. feedback a manufacturing time real give

Unidentified Analyst

acquisition, is the And quick Dale, you again the the what would question, then state ex working this for at point? payment capital

Dale Messick

got million that's now capital as -- XX. million working at as far $XX.X we've is September right the so Yes, $XX.X

So and of current it's $XX.X $XX of million million total assets. cash

Unidentified Analyst

include Is to the payment million that Micron? $XX

Dale Messick

No as September this was of XX.

Unidentified Analyst

that's, a the call net after so million Micron? let's so And $XX it to payment

Dale Messick

Yes, the yeah. like forma, $X right, million, pro

Unidentified Analyst

us And outstanding many how are then shares on September XX. at remind

Dale Messick

Just million. under XX

Unidentified Analyst

XX under million. Just

So I do a don't in front have me. the I math, of calculator can't

you the If working to done in price? capital is have the math share as represented much how

Dale Messick

it's Well, below just two, right?

Scott Graeff

X.X. Yes,

Unidentified Analyst

$X.XX in okay. working capital,

Operator

no [Operator I'd to Graeff, further to Instructions]. any questions. like call closing for are the remarks. Scott There turn back over

Scott Graeff

for everyone thanks Well, us Okay. today. joining

any fiscal growth And out reach good feel today's us, year-to-date call. momentum on you. call, please with heard the that you feel We you've results time myself for our free completes the to Thank we we any we believe at close strong will as out This delivered. XXXX. that to about very have. As employees carry questions

Operator

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

Luna Innovations (LUNA) 10 Nov 182018 Q3 Earnings call transcript