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Luna Innovations Reports Record Second Quarter 2018

August 1, 2018

ROANOKE, Va.--(BUSINESS WIRE)--Aug 1, 2018--Luna Innovations Incorporated (NASDAQ: LUNA), a global leader in advanced optical technology, today reported record financial results for the three and six months ended June 30, 2018.

Fifth consecutive quarter of year-over-year revenue growth and positive net income from continuing operations Total revenues of $13.8 million for the three months ended June 30, 2018, up 22% compared to the three months ended June 30, 2017 Net income improved significantly to $1.1 million for the three months ended June 30, 2018, compared to $(0.2) million for the prior-year fiscal quarter Adjusted EBITDA improved to $1.3 million for the three months ended June 30, 2018 compared to $0.6 million for the prior-year fiscal quarter

Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) is a non-GAAP financial metric used by management to measure operating performance. This term is defined elsewhere in this release. Please see schedules appearing later in this release for reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures.

“I’m very proud of the Luna team for driving the businesses to another strong quarter of growth,” said Scott Graeff, President and Chief Executive Officer of Luna. “The double-digit revenue percentage increases we saw across our business segments led to strong revenue growth year-over-year, and we achieved positive net income from continuing operations for a record fifth consecutive quarter.”

In a separate release issued today, Luna also announced it has sold its Optoelectronic Solutions business to OSI Optoelectronics, Inc. a subsidiary of OSI Systems, Inc., a leader in the development and manufacture of optoelectronic OEM and custom solutions for leading technologies and industries.

“As we’ve mentioned previously, we are well positioned to drive growth in Luna’s core fiber optic-based test and measurement business to better serve this rapidly expanding market, which is projected to grow to more than $9 billion by 2025,” Graeff continued. “Divesting our Optoelectronics Solutions business to an industry leader such as OSI allows us to focus on our core strengths and competitive advantages, as well as underscores our overall reputation for technological excellence. Culturally, the divestiture is a great fit with OSI, and we thank all of the Optoelectronic Solutions employees for their many contributions while they were part of the Luna team.”

Second-Quarter and Six-Month Financial Summary

Total revenues for the three months ended June 30, 2018 were $13.8 million compared to $11.3 million for the three months ended June 30, 2017. Technology development revenues increased 19% to $5.5 million for the three months ended June 30, 2018, compared to $4.6 million for the three months ended June 30, 2017. Total products and licensing revenues increased 24% to $8.3 million for the three months ended June 30, 2018, compared to $6.7 million for the three months ended June 30, 2017. The increase in the products and licensing revenues for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 was partially due to a 146% increase in sensing equipment, which includes Luna’s ODiSI products. The increase in technology development revenues for the three months ended June 30, 2018 compared to the prior-year period was due to continued growth in government research in advancing optical and bio-medical technologies and Luna’s success in winning these research contracts.

Gross profit was $5.7 million, or 41% of revenues, for the three months ended June 30, 2018, compared to gross profit of $4.4 million, or 39% of revenues, for the three months ended June 30, 2017.

Selling, general and administrative (“SG&A”) expenses were $3.8 million for the three months ended June 30, 2018, compared to $3.4 million for the three months ended June 30, 2017. Research, development and engineering (“R&D”) expenses were $1.0 million for the three months ended June 30, 2018, compared to $0.8 million for the three months ended June 30, 2017. The increase in SG&A and in R&D expenses were due partially to the hiring of additional sales and marketing professionals as well as engineers in the Lightwave division, Luna’s fiber optic test and measurement business.

Net income from continuing operations improved to $1.1 million for the three months ended June 30, 2018, compared to $0.1 million for the three months ended June 30, 2017.

Net income attributable to common stockholders for the three months ended June 30, 2018 was $1.0 million, compared to a net loss attributable to common stockholders of $(0.3) million for the three months ended June 30, 2017. Adjusted EBITDA was $1.3 million for the three months ended June 30, 2018, compared to $0.6 million for the three months ended June 30, 2017.

For the first six months of fiscal 2018, Luna reported net income of $1.2 million compared to a net loss of $(1.6) million. Net income from continuing operations improved by $2.0 million, to $1.2 million, or $0.04 per share, for the six months ended June 30, 2018, compared to a net loss from continuing operations of $(0.8) million, or $(0.03) per share, for the six months ended June 30, 2017. Adjusted EBITDA was $1.9 million for the six months ended June 30, 2018 compared $0.4 million for the six months ended June 30, 2017. A reconciliation of net income/(loss) to adjusted EBITDA can be found in the schedules included in this release.

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 8:30 am (EDT) today to discuss its financial results for the three and six months ended June 30, 2018, the sale of the Optoelectronic Solutions business and other 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 9985726. 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-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 its growth potential, the growth of the fiber optic-based test and measurement market, and its business focus. 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, failure of target market to grow and expand, technological and strategic challenges and those risks and uncertainties set forth in Luna’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 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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