Luna Innovations Inc. (LUNA)
Q1 2010 Earnings Call
May 11, 2010 5:00 pm ET
Kent Murphy - Chairman & Chief Executive Officer
Dale Messick - Chief Financial Officer
Previous Statements by LUNA
» Luna Innovations Inc. Q4 2009 Earnings Call Transcript
» Luna Innovations Incorporated Q3 2009 Earnings Call Transcript
» Luna Innovations Incorporated Q1 2009 Earnings Call Transcript
Good day ladies and gentlemen, and welcome to the Q1 2010, Luna Innovations Incorporated earnings conference call. My name is Keith, and I’ll be your operator for today. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions)
I would now like to turn the conference over to your host for today, Mr. Dale Messick, CFO. Please proceed sir.
Thank you, Keith. Now before we begin, let me remind you that statements made in this conference call, and our public filings releases and website, which are not historical facts maybe forward-looking statements that involve risks and uncertainties, and are subject to changes anytime.
Any forward-looking statements made by us are management’s beliefs based on currently available information and should not be taken as a guarantee of future results or performance, which may differ materially as a result of a variety of factors discussed in our earnings release and our latest filings on Form 10-K and 10-Q filed with the Securities and Exchange Commission.
We disclaim any obligation to update any such factors, or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments. There is more complete information regarding forward-looking statements, risks and uncertainties in the company’s filings with the SEC available on our website.
With that, I’d like to turn the call over to Kent Murphy, Chief Executive Officer of Luna Innovations.
Thank you very much Dale. Good afternoon everyone. We appreciate you taking the time to join us this afternoon as we review our progress and results for the first quarter of 2010.
As I said before, I am pleased that our business was able to weather the Chapter 11 and reorganization process, and I believe that our first quarter of 2010 results now demonstrate a strong base from which we can continue to grow this business and continue to run full of our bottom line results.
I’ve been telling you on these calls for sometime now about the progress we’ve been making on baseline operating expenses, that we’ve become more transparent as we’ve got the litigation and reorganization behind us. During the first quarter of 2010, I think you can finally see for yourself the progress that we have made. Our operating expenses for the quarter were $3.9 million, which still included some cost for wrapping up the reorganization.
If you go back two years to the first quarter of 2008, our operating expenses were $5.3 million. Now back in 2008, the litigation had just begun, but it was still very early on and our cost associated with the litigation back in Q1 of 2008 were less than $300,000. So over the past two years, we’ve taken our quarterly operating expenses from more that $5 million to less that $4 million, or more than a 20% reduction.
During the first quarter of 2010 we were adjusted EBITDA positive, including the litigation feels. In addition this is the first consecutive quarter that we were adjusted EBITDA positive, excluding litigation fees, and marks the sixth out of the last seven quarters in achieving this milestone. With the opportunities we have for growth in the company and the lower expense base that we have achieved, hope you share our enthusiasm for our future.
As we look at Q1 results, we can see some recovery in the demand of fiber optic test and measurement equipment, where we experienced 29% in our product and licensing segment. We began customer shipping of our newest Optical Vector Analyzer product, the OVA 5000 launched late last year.
During the quarter we also kicked off our new development program with Hansen Medical, and are off to an excellent start in meeting our expectations and the delivery requirements of that new relationship. We also kicked-off the new phase of our development agreement with Intuitive Surgicals during the first quarter. Its been a busy quarter for this group, and we are all very excited about the breakthroughs they’ve made in increasing speed, length and improving accuracy on our sensing system platform.
We did experience a decline in revenues of our technology development segment compared to the first quarter of last year. As you will hear from Dale in a few minutes, the majority of that decline related to some pass-though type cost on one particular contract, which didn’t have a meaningful net impact on the gross profit for the group.
Also while not dramatic, the Chapter 11 filing did slow down the timing for awards of some new projects for us, which we continue to see the impact on the revenue in this segment. With the reorganization now behind us, I expect this segment of our business will start to recover, although we may still see some year-over-year declines for a couple of quarters as the recovery takes hold, and the revenue base reveals.
Our funded backlog of development contracts for future revenues at the end of March was approximately $2 million higher, than was the backlog at the end of Q1 in 2009. So I’m optimistic we will again start to see growth in this area.
While on the topic of our future, let me touch on our announcement yesterday of additions to the leadership time at LUNA. We’ve asked Jonathan Cool; he may also be recognized as one of our new board members to join our company as acting President and COO, taking most responsibility for the daily operations of LUNA.