Luna Innovations Reports Third Quarter 2009 Financial Results

Luna Innovations Incorporated (NASDAQ:LUNA), a company focusing on sensing & instrumentation and pharmaceutical nanomedicines, today announced its financial results for the quarter ended September 30, 2009.

As compared to the same quarter last year, third quarter 2009 revenues decreased from $10.7 million to $8.9 million, gross profit decreased from $4.3 million to $3.5 million, and loss per share increased from $0.04 to $0.18.

Kent Murphy, Chairman and Chief Executive Officer, provided this comment related to third quarter results: “In the third quarter, we recognized approximately $0.9 million of reorganization costs in addition to approximately $0.7 million of legal fees related to our litigation with Hansen Medical. Excluding these costs and fees in both periods, our operating expenses for the most recent quarter would have decreased by approximately $1.0 million compared to the same period last year, and our operating loss would have been an improvement compared to the third quarter of last year. When we normalize our results by excluding the costs associated with our reorganization and the Hansen litigation, our Adjusted EBITDA of $0.8 million represents an increase of $0.2 million over the third quarter of 2008 and our Adjusted EBITDA of $1.3 million year to date reflects an increase of $1.1 million compared to last year. I am pleased with our continued improvement in the financial results of our core operations and our progress in developing and launching new products.”

Third Quarter Financial Highlights

• Total revenues for the third quarter of 2009 decreased by $1.8 million to $8.9 compared to $10.7 million during the third quarter of 2008.
• Product and license revenues decreased $1.2 million to approximately $2.3 million in the third quarter of 2009 compared to $3.5 million in the third quarter of 2008.
• Technology Development Division revenues decreased by $0.7 million to approximately $6.5 million compared to $7.2 million in the third quarter of 2008. Backlog was approximately $25.7 million at September 30, 2009 and at September 30, 2008.
• Gross profit for the third quarter of 2009 decreased to $3.5 million from $4.3 million for the corresponding period of 2008.
• Operating expenses remained approximately flat at $5.4 million in the third quarter. Legal fees and reorganization expenses were approximately $1.6 million during the third quarter of 2009.
• Net loss per share for the third quarter of 2009 was $0.18 per share, an increase from a loss per share of $0.04 for the third quarter of 2008. Net loss in 2008 included a one-time benefit of $0.7 million in net gain recognized on a litigation settlement.
• Cash and cash equivalents decreased to $5.7 million at September 30, 2009, compared to $12.1 million at the end of last quarter. During the quarter, the company repaid the outstanding balance on its bank debt facility in the amount of $4.3 million.
• Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) excluding the costs for reorganization and the Hansen litigation are $0.8 million compared to $0.6 million in the third quarter of 2008 and $1.3 million year to date compared to $0.2 million for the first nine months of 2008.

Third Quarter Business Highlights

• Booked approximately $3.4 million in technology development contracts in the third quarter, including a award from the National Institutes of Health’s National Institute of Environmental Health Sciences to examine the effects of Luna’s fullerene derivatives on the allergic response.
• Launched new product in the Optical Vector Analyzer™ platform, the OVA 5000, an instrument providing complete, rapid, single-scan measurement of all parameters of optical networks in real-time.

Outlook for Remainder of 2009

Given the uncertainties associated with Luna’s Chapter 11 reorganization and the Hansen litigation, the company is unable to provide a reasonable projection for its expected results of operations for the remainder of 2009 at this time.

Conference Call Information

As previously announced, Luna Innovations will conduct an investor conference call at 5:00 p.m. (EST) today to discuss its financial results for the third quarter of 2009. The call can be accessed by dialing 1.866.804.6927 domestically or 1.857.350.1673 internationally prior to the start of the call. The access code is 86243063. 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 Innovations website, http://www.lunainnovations.com, prior to the event. The webcast will be archived under the “Webcasts and Presentations” section of the Luna Innovations website for at least 30 days following the conference call.

About Luna Innovations:

Luna Innovations Incorporated (www.lunainnovations.com) develops and manufactures new-generation products for the healthcare, telecommunications, energy and defense markets. Our products are used to measure, monitor, protect and improve critical processes in the markets we serve. Through its disciplined commercialization business model, Luna has become a recognized leader in transitioning science to solutions. Luna is headquartered in Roanoke, Virginia.

Forward Looking Statements:

This release includes information that constitutes “forward-looking statements” made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding, but not limited to (i) Luna’s intention to continue to serve its customers’ needs; (ii) improvements in operating efficiencies and expenses; and (iii) the company’s position if it can emerge from Chapter 11 quickly under its filed plan of reorganization. The company attempts, whenever possible, to identify forward-looking statements by words such as “intends,” “will,” “plans,” “anticipates,” “expects,” “may,” “estimates,” “believes,” “should,” “projects,” or “continue,” or the negative of those words and other comparable words. Similarly, statements that describe the company’s business strategy, goals, prospects, opportunities, outlook, objectives, plans or intentions are also forward-looking statements. Actual events or results may differ materially from the expectations expressed in such forward-looking statements as a result of various factors, including risks and uncertainties, many of which are beyond the company’s control. Factors that could cause actual results to differ materially from the expectations expressed in such forward-looking statements include, but are not limited to risks inherent in current or future litigation proceedings, particularly with respect to Hansen Medical, Inc.; the company’s inability to continue to operate its business in the normal course; whether the company can emerge from Chapter 11 reorganization in the near future; and difficulties with the application of the company’s technologies. Additional factors that may affect the future results of the company are set forth in the company’s quarterly and annual reports on Form 10-Q and Form 10-K, respectively, and other filings with the Securities and Exchange Commission (“SEC”), which are available at the SEC’s website at http://www.sec.gov , and at the company’s website at http://www.lunainnovations.com. These risk factors are updated from time to time through the filing of periodic reports with the SEC. The statements made in this press release are based on information available to the company as of the date of this release and Luna Innovations undertakes no obligation to update any of the forward-looking statements herein after the date of this press release.