Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q _____________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to COMMISSION FILE NUMBER 000-52008 LUNA INNOVATIONS INCORPORATED (Exact name of registrant as specified in its ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 _____________________________________ FORM 10-Q _____________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to COMMISSION FILE NUMBER 000-52008 LUNA INNOVATIONS INCORPORATED (Exact name ...

Luna Innovations Incorporated (NASDAQ:LUNA) Q2 2022 Earnings Conference Call August 11, 2022 8:30 AM ET Company Participants Allison Woody - Director of Administration Scott Graeff - President and Chief Executive Officer Gene Nestro - Chief Financial Officer Brian Soller - Chief Operating Officer Conference Call Participants Alex Henderson - Needham & Company Jim Marrone - Singular Research Tim Savageaux - Northland Operator Good day, and thank you for standing by. Welcome to the Q2 2022 Luna Innovations In ...

Part I: Financial Information [Financial Statements](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) Q1 2022 revenue increased 7% to $22.5 million, with a $9.6 million net income primarily from the Luna Labs sale, and assets grew due to the LIOS acquisition [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to $144.7 million by March 31, 2022, driven by the LIOS acquisition's impact on goodwill and intangible assets, while cash decreased Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $10,788 | $17,128 | | Total current assets | $77,981 | $82,445 | | Goodwill | $29,199 | $18,984 | | Intangible assets, net | $22,332 | $17,177 | | **Total assets** | **$144,665** | **$130,237** | | Total current liabilities | $30,601 | $32,687 | | Long-term debt obligations | $18,087 | $11,673 | | **Total liabilities** | **$52,648** | **$48,314** | | **Total stockholders' equity** | **$92,017** | **$81,923** | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Q1 2022 revenue grew 7% to $22.5 million with improved gross margin, while a significant gain from discontinued operations led to a $9.6 million net income Q1 2022 vs Q1 2021 Performance (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Revenue | $22,481 | $20,997 | | Gross Profit | $14,279 | $12,271 | | Operating Loss | ($2,366) | ($1,580) | | Net Loss from Continuing Operations | ($1,343) | ($1,059) | | Net Income from Discontinued Operations | $10,924 | $740 | | **Net Income/(Loss)** | **$9,581** | **($319)** | | Diluted EPS | $0.30 | ($0.01) | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was $2.4 million in Q1 2022, with investing activities reflecting the LIOS acquisition and Luna Labs sale, resulting in a $6.3 million cash decrease Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($2,373) | ($2,934) | | Net cash used in investing activities | ($9,964) | ($409) | | Net cash provided by/(used in) financing activities | $6,429 | ($405) | | **Net decrease in cash and cash equivalents** | **($6,340)** | **($3,572)** | [Notes to Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Key notes detail the Q1 2022 sale of Luna Labs for a $10.9 million gain, the $22.1 million acquisition of LIOS, and revenue disaggregation by geography, customer, and product - The company operates in advanced optical technology, providing fiber optic test, measurement, control, and distributed sensing solutions for various industries including telecommunications, aerospace, and automotive[23](index=23&type=chunk) - On March 8, 2022, the company sold its Luna Labs business for an initial price of **$20.4 million**, resulting in a gain of **$10.9 million**, net of taxes, with Luna Labs now reported as discontinued operations[34](index=34&type=chunk)[35](index=35&type=chunk) - On March 10, 2022, the company acquired LIOS for **$22.1 million** (€20.0 million) to add long-range distributed temperature and strain sensing capabilities, adding **$10.3 million** in goodwill and **$6.0 million** in intangible assets[38](index=38&type=chunk)[40](index=40&type=chunk) Revenue Disaggregation for Q1 2022 (in thousands) | Category | Amount | | :--- | :--- | | **By Geographic Location** | | | United States | $10,516 | | Asia | $4,830 | | Europe | $4,907 | | **By Major Customer Type** | | | Foreign commercial sales & other | $11,965 | | U.S. direct commercial sales and other | $8,881 | | Sales to the U.S. government | $1,635 | | **By Major Products/Services** | | | Test, measurement and sensing systems | $20,096 | | Technology development | $1,597 | [Management's Discussion and Analysis (MD&A)](index=22&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management attributes Q1 2022 revenue growth to the LIOS acquisition, improved gross margin to product mix, and increased operating expenses to acquisition and integration costs - The company now operates as a single reportable segment, Lightwave, after the sale of the Luna Labs segment was completed on March 8, 2022[89](index=89&type=chunk)[93](index=93&type=chunk) - On March 10, 2022, the company acquired LIOS for **€20.0 million** (**$22.1 million**), adding complementary temperature and strain sensing products[92](index=92&type=chunk) - Backlog increased to **$45.8 million** at March 31, 2022, compared to **$38.4 million** at December 31, 2021[91](index=91&type=chunk) - The company is experiencing supply chain disruptions and expects potential revenue delays from customers in China due to COVID-19 shutdowns[94](index=94&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Q1 2022 revenue increased 7% to $22.5 million due to the LIOS acquisition, gross margin improved to 64%, while SG&A expenses rose 29% due to acquisition and integration costs Operating Results Summary (in thousands) | Item | Q1 2022 | Q1 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $22,481 | $20,997 | 7% | | Gross Profit | $14,279 | $12,271 | 16% | | Gross Margin | 64% | 58% | +6 pts | | SG&A Expense | $14,102 | $10,934 | 29% | | RD&E Expense | $2,543 | $2,917 | (13)% | - The income from discontinued operations for Q1 2022 included a gain of **$10.9 million**, net of tax, on the sale of the Luna Labs business[112](index=112&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2022, the company had $10.8 million in cash, funding the LIOS acquisition through Luna Labs proceeds and revolving credit facility borrowings - The LIOS acquisition price of **$22.1 million** was funded by **$13.0 million** from the Luna Labs disposition, with the remainder from the revolver and operating cash[113](index=113&type=chunk) - As of March 31, 2022, outstanding borrowings were **$7.3 million** under the Term Loan and **$15.0 million** under the Revolving Line[114](index=114&type=chunk) - Cash provided by financing activities was **$6.4 million** in Q1 2022, primarily due to **$7.5 million** in new borrowings to partially fund the LIOS acquisition[121](index=121&type=chunk) [Market Risk Disclosures](index=27&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risks are interest rate fluctuations on variable-rate debt and foreign currency exchange rates, with foreign currency risk not considered material - The company is subject to interest rate risk on its **$22.3 million** of variable-rate debt (**$7.3 million** Term Loan and **$15.0 million** Revolving Line), where a **0.25%** increase in rates would have an unfavorable annual pre-tax impact of approximately **$55,000**[123](index=123&type=chunk) - Exposure to foreign currency exchange rate fluctuations was not material to the company's financial condition or results of operations as of March 31, 2022[124](index=124&type=chunk) [Controls and Procedures](index=28&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) As of March 31, 2022, the company's disclosure controls and procedures were deemed effective, with no material changes in internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that as of March 31, 2022, the company's disclosure controls and procedures were effective[128](index=128&type=chunk) - No changes occurred during Q1 2022 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[129](index=129&type=chunk) Part II: Other Information [Risk Factors](index=29&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces risks including dependence on a revocable technology license, reliance on third-party vendors, challenges in executing strategic initiatives, ongoing COVID-19 impacts, and intellectual property threats - The company's ability to market, manufacture, and sell its fiber-optic products depends on a technology license from Intuitive Surgical, which is revocable under certain circumstances[136](index=136&type=chunk) - The business is vulnerable to supply shortages and price fluctuations due to its dependence on third-party vendors for specialized components, such as special lasers[137](index=137&type=chunk) - Risks related to strategic initiatives include difficulties integrating acquired businesses (like LIOS), potential unknown liabilities, and loss of key employees or customers[170](index=170&type=chunk)[171](index=171&type=chunk) - The COVID-19 pandemic has caused, and could continue to cause, disruptions in the supply chain, delayed revenue, and adverse impacts on operations[181](index=181&type=chunk) - The company faces risks from third-party claims of intellectual property infringement, which could result in significant litigation expenses or block the ability to sell products[207](index=207&type=chunk)[208](index=208&type=chunk) [Other Information](index=47&type=section&id=ITEM%205.%20OTHER%20INFORMATION) On May 14, 2022, the Compensation Committee approved restricted stock unit grants as retention awards for certain employees, including key executives - On May 14, 2022, the Compensation Committee approved retention grants of restricted stock units for certain employees, including named executives, to incentivize retention in a competitive market[239](index=239&type=chunk)

Luna Innovations Incorporated (NASDAQ:LUNA) Q1 2022 Earnings Conference Call May 16, 2022 8:30 AM ET Company Participants Allison Woody - Director of Administration Scott Graeff - President and Chief Executive Officer Gene Nestro - Chief Financial Officer Brian Soller - Chief Operating Officer Conference Call Participants Barry Sine - Spartan Capital Securities LLC Alex Henderson - Needham & Company, LLC Christopher Sakai - Singular Research Dave Kang - B. Riley FBR Operator Good day, and thank you for stan ...

First-Quarter 2022 Results Investor Supplemental Materials May 16, 2022 Safe Harbor Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 This presentation includes information that constitutes "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 the company's expectations regarding its technological and product capabilities, the nature of its m ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARK ONE) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 000-52008 LUNA INNOVATIONS INCORPORATED (Exact name of Registrant as Specified in its Charter) (State or Other Jurisdic ...

Financial Data and Key Metrics Changes - For Q4 2021, total revenues were $24.2 million, a 26% increase from $19.3 million in Q4 2020 [20][47] - Operating income was $1 million compared to a loss of $600,000 in Q4 2020 [20][50] - Gross margin was 58% in Q4 2021, down from 61% in the same quarter last year [20][48] - Adjusted EBITDA for Q4 2021 was $3.1 million, slightly up from approximately $3 million in Q4 2020 [20][51] - Full year 2021 revenues were reported to be $109 million to $115 million, representing a 25% to 31% growth [38][55] Business Line Data and Key Metrics Changes - The sensing business achieved approximately 68% revenue growth for the full year, with OptaSense growing nearly 40% in 2021 [32][33] - The communications test business received the largest order ever for the RIO semiconductor laser in Q4 2021 [34] Market Data and Key Metrics Changes - The company noted significant opportunities in infrastructure, aerospace, 5G, and electric vehicles [17][25] - The acquisition of LIOS Sensing is expected to enhance capabilities in temperature and strain sensing, expanding into high-growth markets [22][24] Company Strategy and Development Direction - The company has focused on transforming into a global fiber optic leader through strategic divestitures and acquisitions [9][12] - The divestiture of Luna Labs marks a significant step in simplifying the portfolio and focusing on fiber optics [12][21] - The acquisition of LIOS Sensing is seen as a critical move to complete the product portfolio and enhance market offerings [22][24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from COVID-19 and supply chain issues but expressed confidence in future growth opportunities [15][37] - The outlook for 2022 includes a revenue range of $109 million to $115 million and adjusted EBITDA of $10 million to $12 million [38][55] - Management emphasized the importance of execution and maintaining focus on strategic goals [41][42] Other Important Information - The company ended Q4 2021 with $17.1 million in cash and cash equivalents, up from $15.4 million at the end of 2020 [52] - Total debt outstanding was $15.8 million as of December 31, 2021 [54] Q&A Session Summary Question: How confident is the company in its 2022 revenue guidance considering supply chain issues? - Management expressed confidence in the guidance of $109 million to $115 million, having factored in supply chain challenges based on customer feedback and historical data [66] Question: What were the 2021 revenue and EBITDA figures for the LIOS acquisition? - The full year revenue for LIOS was around $16 million, with EBITDA being flat [68][69] Question: Does the acquisition of LIOS complete the company's product portfolio? - Management indicated that the acquisition completes the basic building blocks of the product portfolio, allowing future M&A to focus on customer bases and geographies [70][73] Question: What are the company's thoughts on share buybacks? - Management stated that discussions on capital allocation, including buybacks, are ongoing, but the current focus is on growth through investments and acquisitions [75] Question: Can management provide insight into the pipeline of larger programs? - Management highlighted several significant programs in the pipeline, with potential annual revenue contributions of $30 million to $50 million from various deals [80]

Fourth-Quarter and Full-Year 2021 Results Investor Supplemental Materials March 14, 2022 Safe Harbor Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 This presentation includes information that constitutes "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 the company's expectations regarding its technological and product capabilities, th ...

Luna Innovations Incorporated (NASDAQ:LUNA) Q3 2021 Earnings Conference Call November 15, 2021 5:00 PM ET Company Participants Scott Graeff - President & CEO Gene Nestro - CFO Brian Soller - COO James Garrett - SVP, General Manager Allison Woody - Director of Administration Conference Call Participants Dave Kang - B. Riley Charles Mills - Private Investor Chris Sakai - Singular Research Operator Good day and thank you for standing by. Welcome to the Q3 2021, Luna Innovations Incorporated Earnings Conference ...