LUNA Innovations: Managements Focus On Shareholder Value Is Superb

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LUNA Innovations: Managements Focus On Shareholder Value Is Superb

LUNA Innovations Inc. develops and markets fiber optic sensing, and test and measurement products worldwide. The company has two operating segments. The products and licensing unit sells the company’s commercial fiber optic test and sensing equipment and the technology development segment performs contract R&D for U.S. government agencies.

 

November 19, 2021

Price (as of close on Nov 18, 2021)

$9.38

Rating

BUY

Price Target

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LUNA Innovations Inc. (LUNA)

The Company reported weak third quarter 2021 results impacted by ongoing supply chain challenges globally. The planned divestment of the slow growing, low margin LUNA Labs business is a positive. blockedblockedblockedblockedblockedblocked     

luna nov 2021

 

Q3:21 Highlights

➢ LUNA announced plans to divest their LUNA Labs business. As of the beginning of Q3, the business has been moved to discontinued operations.

➢ Q3:21 revenues were $20.3 million, up 32% versus Q3:20, largely attributable to the acquisition of OptaSense in December 2020.

➢ LUNA reported a 31% YOY increase in gross profit to $12.5 million. Gross margin decreased by ~100 bps YOY to 62%.

➢ Adjusted EBITDA decreased to $2.1 million, compared to $3.1 million for Q3:20.

➢ LUNA noted that the Company continues to be challenged by supply chain issues which is impacting revenue growth despite strong demand.

➢ For the full year, LUNA revised its 2021 revenue outlook to factor in LUNA Labs as a discontinued operation and supply chain headwinds. Revenue and adjusted EBITDA are now expected to be between $85-$88 million and $6-$8 million, respectivel

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PRIMARY RISKS

➢ The Company operates in a space which is prone to rapid technological changes. New technology or the emergence of new industry standards could render existing products obsolete.

➢ Difficulties with integrating acquisitions could adversely affect operating costs and expected benefits from those acquisitions.

 

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