Luna Innovations' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Luna Innovations Incorporated (LUNA)

Q1 2012 Earnings Call

May 9, 2012 5:00 pm ET

Executives

My E. Chung – President and Chief Executive Officer

Dale E. Messick – Chief Financial Officer

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2012 Luna Innovations Incorporated Earnings Conference Call. My name is Jeff, and I’ll be your coordinator for today. At this time, all participants are in a listen-only mode. Later, we will facilitate a question-and-answer session. (Operator instructions) As a reminder, this conference is being recorded for replay purposes.

I’d now like to turn the conference over to your host for today, Mr. Dale Messick, Chief Financial Officer. And you have the floor, sir.

Dale E. Messick

Thanks, very much Jeff. Good afternoon, everyone and thank you for joining us today for a review of Luna’s results for the first quarter 2011.

Before proceeding with our presentation, let me remind each of you that statements made in this conference call, as well as in our public filings, releases, and websites, which are not historical facts, maybe forward-looking statements that involve risks and uncertainties and are subject to change at any time, including, but not limited to statements about future financial and operating performance.

We caution our investors that 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. Actual results may differ materially as a result of a variety of factors as discussed in our earnings release and our latest Forms 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 result 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.

And at this time, I’d like to turn the call over to My Chung, President and CEO of Luna Innovations.

My E. Chung

Thank you, Dale. Today, I would like to give you an update on our key business developments since our last call as they relate to the growth initiative that we previously laid out.

Following my comments, I will turn the call back over to Dale for a discussion of our operating results for the first quarter. And then I will be happy to take any questions you might have.

Just a quick recap on our three key growth initiatives, first is to become…

Dale E. Messick

Jeff, there is some lead over in our call. It’s not coming from this room.

Operator

Yeah, my apologizes. Please continue.

My E. Chung

First is to become the leading supplier of fiber optic shape sensing and localization systems and components for minimally invasive surgical systems. Number two is to be the leading provider of composite sensing systems. And number three is to be the leading supplier of cybersecurity systems and services.

Yesterday, we announced a new development partnership with Philips Medical to conduct work in advancing Luna’s fiber-optic shape sensing technology towards commercialization and non-robotic medical applications. We have been discussing the collaboration for more than a year with Philips since they acquired a sublicense to our technology for non-robotic medical applications from Hansen Medical in February 2011 for $23 million. Philips purchased several prototype systems from us at the end of 2011 for internal testing, and we are now taking the relationships to the next level with a development agreement encompassing very unique requirements.

As you can imagine, we are very exited to begin working with Philips to further expand our region to the healthcare from robotic minimally invasive surgical systems with Intuitive Surgical and Hansen Medical to now non-robotic medical applications with Philips.

Similar to our agreements with Intuitive Surgical and Hansen Medical, this relationship will have a dedicated Luna team to develop a shape sensing product to meet certain technical specifications necessary for integration into our Philips platform. We believe that this agreement further validates the market potential for our technology.

In March, we completed an amendment to our agreement with Intuitive Surgical extending our original agreement entered in 2007 to cover the development work required to achieve their objective for 2012. We are excited to be continuing this partnership towards the successful implementation and commercialization of our technology into their targeted systems.

The second key growth strategy of ours is to become the leading provider of sensing systems for testing composite materials. Our technology gives manufactures and operators the ability to know what is happening inside composite structures and see damage even if it’s not visible.

We are improving the way composite materials are tested and validated for peak performance and safety, which is significant because of the shift towards composites in several large markets.

Last August, we introduced our ODiSi platform to address this market. And while receiving orders for the product, we continue to develop the technology in response to the markets need. As I mentioned on our last call, our initial rollout of this product identified additional technical specifications required in order to adequately address the composite sensing market.

In January, we put together a high performance development team dedicated and incentivized to developing an enhanced product in record time. I’m happy to say that this team stepped up to the challenge and was able to develop a product that’s 20 times faster in measurement speed and half the price of our previous ODiSi platform.

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