Q1 2021 Luna Innovations Inc Earnings Call
Good day and thank you for standing by welcome to the Q1 2021 Luna innovations incorporated earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation and there will be a question and.
And sorry session to ask a question during the session you will need to press star one on your telephone and if you require any further assistance. Please press star zero and please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today Alice.
And Woody.
The rector of administration. Please go ahead.
Thank you and good afternoon, and thank you everyone for joining US today. This afternoon, we issued our first quarter 2021 earnings press release. In addition, we posted to the Investor Relations section of our website a presentation with supplemental information for the quarter. If you do not have a copy of the release or the supplemental materials. Please check our.
Website at Luna, Inc. Dot Com, we will also post a replay of this call through our website.
And the other comments and discussions today are based on non-GAAP measures. These adjusted numbers exclude the effect of certain non cash expenses and other items. The adjusted results are a supplement to the GAAP financial statements Luna.
And he believes the presentation and exclusion and these items is useful in order to focus on what we deem to be and more reliable indicators and they don't go and operating performance.
Before we proceed with our presentation today, let us remind you that statements made on this conference call and that was and our public filings releases and websites, which are not historical facts may be forward looking statements that involve risks and uncertainties and are subject to changes at any time.
Including but not limited to statements about our expectations regarding future operating results or the ongoing prospects of the company.
Actual results may differ materially as a result, and a variety of factors more complete information regarding forward looking statements risks and uncertainties is available and the Companys SEC filings, which can be found on the SEC website and our website, 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, except as required by law.
After our prepared remarks, Scott Graeff, our president and Chief Executive Officer, Jean and that drove our Chief Financial Officer, Brian Solar Chief Operating Officer, and James Gurry, Senior Vice President and General manager of our Luna Labs Division will be available to take your questions and at this time I'd like to turn the call over to Scott.
Good afternoon, everyone and thanks for taking the time to join our call.
It's amazing to me that as we sat here today and the middle of May 2021 we have more than last year since the beginning of the COVID-19 pandemic.
And like many of you I'm very happy to see most of our colleagues having been fully vaccinated and seeing a return to some level of normalcy for Luna. We started the year very focused on basic blocking and tackling you may recall that throughout last year, we continue to put into place many of the processes and.
Systems that will allow us to scale well into the future.
We are continuing to roll out the use of new tools, including the January 1st go live of our new ERP system.
And we made these investments because as we look forward, we see an abundance of opportunities for strong and rapid growth.
We need to ensure that we are well positioned for that growth and can scale comfortably you should expect to see us continue to vest and our business as we progress through this year and into 2020 too.
Many of you will remember that several years ago, as we approached and important step function and our growth. We spoke frequently about the hiring of sales and engineering talent and other resources to help us drive that growth.
And we are in a similar position now.
We are incredibly exciting about all the opportunities we see.
And in addition to making appropriate ongoing investments. We also recently undertook a review of our organizational structure to ensure we're configured in such a way that we could capture future growth.
We are very clear on our strategy and.
And structure follows strategy.
So we decided time was right to create a new position in Chief operating officer.
And I'm pleased to say that we promoted Brian solar who has been running our lightwave division into that new position.
Many of you have met Brian and can likely appreciate that he is the perfect leader for this new executive appointments.
I've known and worked with Brian for nearly 20 years and as I said and the original announcement, Brian has a strong strategic mindset and vision combined with a sharp focus on operational excellence and is uniquely qualified to drive strategic prioritization and accountability within.
The company.
And I want to point out that the timing of making this kind of change was not happenstance.
Our board and I believe that this was the right time to appoint a position of this level as we're at another inflection point in our evolution as an organization and need to further position the company for robust growth.
We've worked hard to establish a strong scalable foundation for this organization, which positions us well to execute and necessary strategic moves including M&A.
And to support a focus on our fiber optic capabilities.
Brian's breath of industry knowledge decades long proven track record and unique mix of business and management expertise and making the perfect candidate to lead the Luna as operations into the future.
I am confident that Brian will continue to do great things.
And reporting to Brian we made several other important news salvia and Faruqi was promoted to senior Vice President of worldwide sales a new position.
You may remember salvia and his name.
I mentioned and in connection with the large Lockheed Martin order that we announced at the end of last year.
Joe Burke day was promoted the vice President North American sales, replacing Salve in in that role Joe It's been a top performer with Luna for nearly a decade after leading sales efforts and some of the industry's best technology companies.
We are very excited to have him leading our north American sales.
Jamie Pollard was promoted to managing director and senior Vice President of EMEA operations.
Jamie came to us through the acquisition of Optus sense, which he had run since joining the company in 2015 previously.
Previously Jamie spent 25 years in various executive roles at Schlumberger.
Eaves limit was promoted to senior Vice President North American operations. He's also joined US through the acquisition of opt a sense, where he has served as the president of the REO laser business.
Finally, as you saw from our press release. This morning, I'm, absolutely thrilled to have building and England, joining the Luna team as senior Vice President and head of human resources.
You've just heard me discuss the immense opportunities for growth that we see before us with.
Without the right human capital strategy and corporate culture in place obtaining that growth becomes much more difficult.
Bill brings years of tremendous experience and scaled complex and global organizations. He has served in leadership positions and a variety of technology companies in various stages of maturity and importantly, bill has deep experience in acquisition due diligence and integration which will be.
Critical to our future work in M&A.
Bill has extensive experience and building and nurturing the right culture for organizations as they grow.
We believe Luna has an outstanding culture, and bill will be in charge of working directly with me to make sure that we continue to be inclusive thoughtful and supportive in the right way.
Of our employees and congratulations to all these executives and I'm thrilled to be part of such a great team.
This is all about getting the right people into the right positions. So that we at Luna are poised and prepared to move quickly to solve customer problems and to innovate with speed and to be nimble in adjusting quickly to changing market conditions and customer needs.
We continue to be focus sharply on our purpose to enable the future with fiber and we will continue to make the changes necessary to capture the opportunities in front of us.
Now I'd like to move on and some of the financial highlights for the first quarter.
For the first quarter 2021 total revenues were up 53% to $26 3 million compared to the prior year's quarter.
The Lightwave segment had an increase of 82% year over year to 21 million in total revenues and Luna labs revenue was $5 3 million down 5%.
We reported an operating loss of $800000 the year over year decrease and operating income was primarily due to one 4 million of integration transaction and amortization of intangible asset cost relating to our recently completed acquisitions as well as our continuing portfolio activities.
<unk>.
We delivered adjusted EBITDA of $2 1 million in Q1 versus $1 6 million in the prior year period now.
Now, let me discuss lightwave in more detail.
As a reminder, our lightwave solutions focused on two areas sensing and communications testing.
For the first quarter 2021 total lightwave revenue was up 82% on a year over year basis, driven by both the acquisition of Optus sense and strong commercial sales in legacy Lightwave, particularly in comms testing.
Digging a little deeper into the sensing segment revenues grew over 100% driven both by organic performance and by the acquisition of the off defense product lines.
As a reminder, we added the optics sense distributed acoustics sensing or das technology to gain access to fully distributed and measurement capabilities over a long range applications to augment our already industry, leading line of fiber optic sensing products.
The addition of long range distributed capability to our offerings and establishes Luna as a new global market leader and fiber optic sensing with diversified geographies and applications and.
And example of this was demonstrated in the announcement, we made last week about our partnership with Liberty oil field services.
This strategic partner partnership is introducing Frac cents, which is a diagnostic service to help engineering professionals, and our oil and gas customers acquire more accurate diagnostic information.
We can do this by using Luna as fiber optic measurements acquired through off the sense delivering real time data and visualization.
It's important because it will allow our customers to optimize their hydrocarbon production, which in turn allows their operations to have less of an environmental impact.
Sticking with the sensing vertical for the terahertz product line, we saw new wins and process control with large corporate customers in the automotive and aerospace industries, which drove strong double digit growth in our terahertz and Odyssey product lines.
In addition, we have visibility to a strong start in terahertz for Q2 with a significant multiple unit order book with a prominent auto manufacturer.
That needs our capability for their electric vehicle battery production life.
Now switching to the communications test vertical these product lines grew 42% year over year.
And for some additional clarity it's important to know that the real laser business acquired through the acquisition of op. The sense is included in our Comms test results.
With the addition of the real laser products.
And the general Photonics products, we added in 2019. This business is now about 50% test and measurement for communications devices.
And 50% optical components and laser module for a variety of photonic applications, such as medical devices sensing systems and Lidar.
If we look at the legacy parts of the comms testing our core products. The Ov a and Ob are led Q1 was strong double digit 17% growth.
In general Comms testing drove a significant overall improvement in commercial sales over the last year with multiple system sales to large corporate customers.
You'll remember that last year, we announced the introduction of our newest product. The Ob are 6200, a field portable version of our industry, leading optical backscatter, reflectometer, which allows fast and accurate troubleshooting of fiber networks in the field.
We also announced our exciting partnership with Lockheed Martin and their order for over 100 units in Q4, 2020.
Our deliveries to Lockheed have proceeded without interruption throughout Q1, and we're happy to report that our efforts have been well received these units are ready already being deployed and the field to help troubleshoot issues and keep the fleet of the F 35 aircraft ready for service.
In terms of new customers for the Ob are 6200, and we added several important customers and the defense space in Q1, as well as multiple new customers in the datacenter space for latency testing.
In addition, we made progress in commercializing the REO laser outside of the core Das market. We successfully designed qualified and built a real semiconductor laser to be used and the NASA navigation Doppler Lidar system. The selection of Luna is re.
Real laser highlights our unique capabilities in the development and production of rugged high quality semiconductor lasers for emerging applications such as Lidar.
Let's move on to a discussion of Luna labs, where as a reminder, we leveraged third party contract research to build a portfolio of technologies.
These technologies, which are commercialized through direct sales distributors or license agreements are outside our core strategic fiber optic offerings.
In terms of the quarter Luna labs was down slightly on a year over year basis, and COVID-19 was certainly a factor several partners had to push out work that they had been planning to do in the quarter and that affected work on our end.
We saw this dynamic across several of the markets into which we sell.
We expect to return to more normal levels in Q2, and we will be delivering this month and order of our corrosion monitoring product to Lockheed Martin space for use on the Orion spacecraft. We first talked about this last September.
These have been selected for the NASA Artemis missions to bring the first woman and the next man to the lunar surface.
And we've worked with Lockheed Martin space and NASA to adapt these units to accommodate lengthy missions in deep space, helping to achieve spacecraft reusability.
Which is a key cost saver for sustainable exploration of the Moon and beyond.
In addition to the REO laser for Lidar that I mentioned previously this is the second Luna technology that has been selected by NASA for the Artemis mission.
We also wrapped up a 30 month project with a large technology company. This project was significant because it represents a great example of how the expertise we've developed in the government and defense domains transfers to commercial sectors.
Yeah.
As you know we acquired after sense and December and have been actively integrating since then you've seen a systematic we refocused our business to pursue our vision of enabling the future with fiber.
We've been aggressive about divesting assets that don't fit with our long term growth strategy strategy and acquiring other key assets that are on our sweet spot and will help to drive further growth.
And that's exactly what we did with the Optus sense transaction, we expanded the part of our business with the greatest growth potential fiber optic based test and measurement and fiber optic sensing. This is our lightwave segment.
As a reminder, in 2020. We also did a tuck in acquisition of new range technologies, New rigid solutions are a perfect complement to our communications test and measurement portfolio and although quite small it is strategically very important to Luna and helps to advance our product roadmap and.
As a reminder, the integration of new ridges products with Luna. This helps our customers to enhance connectivity by developing faster communication networks to support everything from the five G build out to the continued expansion of bandwidth inside data centers, New ridge is already fully integrated into Luna.
And we're well on our way with the integration of optics sense into Luna lightweight business, but as I mentioned last quarter certain support services will continue to be provided by the former owner under a TSA for at least a portion of this year on sales and marketing teams and our technical teams have been.
And working together for almost six months now.
Things are going well and I'm very pleased with what I've seen.
There is no question that the acquisitions from last year have already become an important part of Luna and I'm excited to say that even in the first several months, we are seeing some incremental opportunities.
We will continue to be an acquisitive company sharply focused on building our capability and expertise in fiber.
And of course, we will only do those deals that make sense from both a financial and cultural perspective, one of our key priorities will always be the prudent and thoughtful deployment of capital.
Before I turn the call over to gene I want to cover our outlook for 2021 we.
We continue to be extremely optimistic about 2021 and are reiterating the 2021 outlook range, we provided last quarter, which is total revenues of $122 million to $127 million and adjusted EBITDA of $16 million to $19 million.
I also want to remind you again about our typical seasonality, which is the recognition of approximately 44% to 46% of annual revenue and the first half of the year with a larger portion of the annual results being realized in the second half of the year and we're right on track with that seasonality for 2021.
One.
In summary, the year for Luna is off to a good start as I said and the beginning our activities for the first quarter of 'twenty 'twenty. One are best described as fundamental blocking and tackling we've been focused on integrating the large acquisition.
Changing our processes to take advantage of our new systems, and making the necessary organizational structure changes to ensure we have the right leadership and teams in place.
And I'm grateful to the Luna team for their focus and work and I am very confident that Luna has the right strategy and we will continue to make significant progress against it as we progress through this year.
I'll now hand, the call over to gene for more of the financial details on the quarter Jamie.
Thank you Scott.
Before I proceed I want to note that our reported numbers include the results of the two acquisitions, we completed towards the end of last year.
New rich technologies, and obsolescence and their related integration transaction and amortization expenses. In addition, our results also include expenses related to our continuing portfolio activities.
With that as background and I will now shift to cover our first quarter results.
And as Scott noted our revenues for Q1, 2021 were $26 3 million compared to revenues of $17 1 million for Q1, 2020, representing a 53% year over year increase.
The increase in revenues was composed of and 82% increase and our Lightwave segment, and a 5% decrease and our Luna lab segment.
Within the Lightwave segment year over year growth was driven by our acquired businesses and strong performance from both our sensing and communications test businesses, including particularly strong commercial sales and our comps test space, resulting in double digit growth.
So you can see Luna labs was down year over year as Scott mentioned COVID-19 was a factor we heard from several partners that they were unable to do certain work, which pushed out planned work on our end.
As an example, the decrease was driven partly by lower sales of our true plot line of bleeding control training products as face to face MFS and first responder training were affected by COVID-19 restrictions.
Our gross profit increased to $13 4 million for the quarter compared to $8 4 million for the same quarter last year, representing a gross margin of 51% in Q1, 2021 compared to 49% and Q1 2020.
Gross margin improved as Lightwave grew and became a larger percentage of Luna sales recall that lightwave has a higher gross margin and Luna labs.
Not material to the quarter I would like to point out that gross profit does include approximately <unk> 2 million of noncash amortization of inventory step up related to our recent acquisitions.
We expect approximately point 2 million and Q2 with slightly lower amounts in Q3 and Q4, the inventory step up will be fully amortized in Q4, 2021 with no carryover to FY 2020 two.
Operating expenses were $14 2 million and Q1, 'twenty, one which includes 1.2 million of amortization and integration and transaction costs related to our recent acquisitions and ongoing portfolio activities are.
Our Q1, 'twenty, one opex as a percentage of revenue was up slightly year over year and you may continue to see this as we aggressively invest and our business for our next stage of growth.
Just to be clear Q1, 'twenty. One opex includes this $1 2 million, which along with the point 2 million of amortization of inventory step up included and gross profit negatively impacted our Q1 2021 operating income by a total of 1.4 million as Scott previously mentioned.
Due in part to this 1.4 million, we recognized and operating loss of 800000, and Q1 2021 compared to operating income of 400000 and Q1 of last year.
I would like to take a moment to talk about our amortization expense included in our operating expenses and Q1 'twenty 'twenty. One we have approximately 840000 of total amortization expense. This includes amortization of intangibles related to our prior acquisitions and our recent opt defense and new Rich Tech.
Knowledge, he acquisitions, along with amortization of our patents.
And we expect total amortization expense and operating expense of approximately 820000 per quarter for the rest of 2021.
We do disclose annual amortization by year and our 10-Q. So you can refer to it for future amortization expenses as a reminder, if we acquire additional companies we expect to have additional amortization related to those acquisitions.
Net loss for Q1, 2021 was 300000 or a loss of one cent per share compared to a net loss of $1 1 million or <unk> <unk> per share for Q1, 2020.
Adjusted EPS was three cents per share for Q1, 2021 versus two cents for Q1 and 2020.
Income tax benefit for Q1, 2021 differs from our statutory rate primarily due to equity compensation, we estimate our 2021 effective tax rate to be 22% to 25%.
And finally, a key metric, reflecting our underlying operations is adjusted EBITDA as Scott mentioned adjusted EBITDA increased to $2 1 million for the first quarter 2021 versus $1 6 million for Q1, 2020.
Let me now move to the balance sheet, we ended the quarter with 11.8 million of cash and cash equivalents compared to $15 4 million at the end of 2020. The decrease was largely due to the cash payment of accrued deal related expenses and we're working capital was $47 3 million at March 31.
One 2021 compared to $45 4 million on December 31, and 2020.
Remember that at the time and the op. The sense acquisition, we announced a new debt facility comprised of two separate financing vehicles, a term facility and a revolving facility.
So at the end of the quarter, we had total debt outstanding of $18 9 million of that amount $11 4 million as and term debt and $7 5 million was drawn on our revolver we.
We have access to an additional $7 5 million and the revolving credit facility should we need it.
As I mentioned last quarter, we exited 2020 stronger than when the year began as a result of a series of strategic acquisitions and continued operational improvements and further investment and our core foundation of the company.
And I'm very comfortable with the reaffirmation of guidance today, and I'm very bullish on the prospects for Luna and 2021.
With that I will turn the call back over to Scott.
Thank you Jim at this time I'd like to open the call for questions, Brian Solar Chief operating Officer, and James Garrett Senior Vice President General manager of our Luna Labs Division are with gene and me at this time and also available to address questions.
As always I wanted to assure that the proper folks were on the call today to address any specific business questions you might have so laurie.
And as a reminder to ask a question you will need to press star one on your telephone and people would try a question press the pound key.
And our first question is from Barry sine.
Got it.
From Black and capital Securities. Your line is open.
Hey, Yeah, good evening, a couple of questions.
First of all on.
The labs R&D work do you expect to make that revenue up back in the next three quarters. So that the full year's on effected orders that revenue and kind of gone forever.
Know that revenue will I'll, let James I'll, let James address it because he know specifically, but what we went through when we went through this and you know anyone on the call knows as unusual that is with the Luna labs being slightly down that that just pushed that just pushed into Q2 and and some of that has already been captured.
Here in early Q2.
Do you have any James you want to share.
This is James so like Jim said.
Some of this was COVID-19 related so weird partners and subcontractors that.
Couldn't get work done and kind of over the winter.
People were working remote or just weren't didn't have the resources, but that's still work that is on the contracts that we have so that's work that we need to do and so that'll get captured later this year. So it's more of a timing event.
And then revenue that is lost so we're gonna picked up pick that up later in the year because that is still on the contracts that we have so its stuff that that still needs to get done.
And then my second question on the slide deck in the first quarter highlights the third bullet point.
About <unk>.
Puncture and all integration of opt to sense will begin after the first year. So.
It sounds a little curious so what exactly are you not integrating or you not integrating the product lines you have integrated product line or the sales force will customers now get calls by to Luna.
Luna sales rep, and optical sensor and a Luna sales rep.
And then.
We're continuing on that point, the financial impact of that.
You had some non related nonrecurring integration expenses on.
Does that mean that those will continue into 2020 two when you actually do the integration and how does that lack of integration impact the margins I'm, assuming the margins will be lower with them not integrated and Standalone and then they would be if the company was integrated thank you yes.
Yes.
Yeah quite a bit on that question, but let me let me try to.
Try to address some of it and I'll, let Brian address it and so Barry what we were talking about was you know keep in mind.
I haven't been able to Brian has been able to do to be able to the U K yet so.
And Jamie is running that operation will continue to run that operation.
We just haven't been able to integrate some of the sales teams. We have calls the guys are talking to each other but we.
We haven't fully integrated some of those those operational savings and and sales savings.
Yet.
They will.
And they will and you saw the appointment that we made.
And to solve and Faruqi running all of sales he will get to know and as travel opens up get to see some of these these price and there will be some synergies that will be shared over time, just right now we just need to continue to focus on delivering.
You know as an example here this was the largest this was the biggest bookings quarter, we've ever seen so when you see sometimes we're still having some lingering effects, especially in Q1 of some COVID-19 related items, where the order is in house, but we cannot deliver on the order because the customer and may not be.
Working and the field for us to show up so there are some delays and those are all things that are just being being pushed we've had several orders.
That debt.
And we're slated to be delivered in Q1 that that have already been delivered just like we were talking about with Luna labs are things that have been done in April that just kind of slipped due to some movement around on the COVID-19 I'll, let you talked a little bit more Brian about.
The integration of what's going on and why and why we're doing it and the stage of what we are yeah, Hey, Bruce Brian.
We're just we're taking a very.
Measured thoughtful approach to making sure the integration goes properly given some of the limitations of travel and Scott already hit on that this process would take about this long I think anyway. These locations overseas in particular, all have functional groups and engineering sales marketing.
Finance and administration et cetera, and and we will integrate all of those those groups under the different.
Levels of leadership that we've.
I already described some of on this call and that will get to be a little easier to do and we can travel a little bit here going into later in the year.
We had always said that for the after since acquisition, we were acquiring a fully functional business that would stand on its own and would operate that way for about a year and we're right on track with that and.
And I'll, let Jim talk to the financial points, but from my perspective.
And then there'll be no impact on gross margin as it relates to these to these integration elements no.
Thanks, Yeah.
So just to be clear on the I T systems, we had two and unintelligible them from from their parent company and stand them up on.
On their own and from and I T perspective, that's essentially complete I think we have another week or so to go on that and so then we'll be off of the ITT S. A so in relation to those costs.
And they were spent about 50% and Q1 and and about 50%.
Through this quarter and financial systems, they're mapped into our consolidation process and and and.
And so from that perspective, I would say, we're essentially complete with the with those.
And next year when you do do the full integration what financial impact should we expect to see when it's fully integrated.
On on the system side on the.
The financial side on the operating margin I guess, so I'm, assuming lower overhead costs.
So they don't have a lot of overhead within up to sense and so.
Both of us so they run up.
On S. A pea version that similar to net suite that are both cloud based and so really you're only costs, there are storage and and licensing and so theres not going to be a lot of a lot of savings from from that so we're all fairly lean on on the back office accounting accounting side and these integration efforts amongst.
Engineering sales and marketing will really result, more and some more internal efficiencies.
And.
And you know two teams are working more well together under some common leadership. So that's kind of the way to think about those remaining integrations that we have to do they're not there's not a lot of heavy lifting in terms of systems or or any what I'd say material costs and again I'll I'll, let Jim speak specifically to that but the.
Benefits will be more on.
More of a coherent approach for instance, and to the market with products and with customer wins and and we're already doing all of that those teams are already working together to.
To leverage those activities and and and then they'll they'll have a common reporting structure as we as we get through the end of the year and get fully integrated right.
Okay and that's my question. Thank you gentlemen.
And expert.
Our next question is from Jim morale.
Thanks, Larry stretch your line is open.
Yes, good afternoon gentlemen.
Just wanted to talk about the Lightwave revenue I think he may have mentioned it.
And the prepared statements.
Just in regards to the 82% revenue increase.
Was there any sense of how much of that was organic.
Organic revenue stripping out the acquisition and.
Impacts.
And just as a follow up question to that revenue growth.
You mentioned that.
The Lockheed Martin and.
Contract was still ongoing but you also mentioned and other corporate customers maybe.
And just shed a little bit more light on that is it.
From a military perspective or is it going to commercial customers.
And if you could just provide a little bit of color with that thank you.
Yeah, Hey, Jim.
You know typically we look to quickly roll these into the divisions and you've heard me say before we really don't get into.
Legacy or organic versus inorganic just because of how how it can be this case it was a larger transactions. So.
It is a little bit easier, we will have it part of Lightwave.
It will roll up and the Lightwave I can tell you from now you know what it made.
The impact I believe the the organic side of light waves around 12% to 13% somewhere in that range.
Organically.
And and then the big increase happens from from Rolling in.
After sense into that.
And with the other the other part.
On the commercial.
Yeah go ahead sure yeah, the the the deliveries to Lockheed Martin has gone very well here in Q1, as we mentioned, but in terms of other customers. We did have some.
Several.
On the order of half dozen or so new wins.
With other.
Other defense related customers are activities, so that would be for other utter airframe measurements war and in this case we had.
A win for measuring on.
Submarine application so new.
New product it takes time to build that customer base up but that's right on track with what we we expect us to be bringing on these new customers on a pretty consistent basis on the defense application side and and we also had as we mentioned in the script a couple of really nice wins for datacenter testing and we mentioned in the past that this product has applications and the data.
Center.
And with measuring latency in particular.
Which is the.
Delay measurement, which is critical for financial data centers, and we had several wins on that front as well, which is more on the commercial side rather than the defense side. So it was a it was a nice start to the year for the for that new product.
Okay, great. Thank you just one other question in regards to the adjusted Beta. So you guys recorded 2.1, but you're reaffirming guidance from $16 million to $19 million. So I'm assuming in that guidance is based on having a strong second circuit.
Half the 2021 based on.
Our 50, 55% weighted to the.
The business and the second half.
Correct.
Alright so.
It's still being reaffirmed theres really no other risk and regards to hitting those numbers.
Alright.
Yeah.
Well rich.
Yeah, Jim the way that we approach this it.
It doesn't do us any good to get out ahead of ourselves. So what when we give guidance. It's what we see in front of US you know all we can do all I can do it all these times be transparent with everyone and lay out what I see in front of us and I think when you look historically if you look the last five years five six years 44 to 46 per cent of our revenue.
<unk> comes in the first half of the year, and then the and and the remainder and second half and right now with what we see and the bookings that we've seen in Q1 and what we're seeing in a halfway through Q2. It has us very confidently reaffirming the guidance both on the top.
On the revenue side and on that adjusted EBITDA because of the different things that we're looking at the acquisitive things We guide on the adjusted EBITDA and the bottom.
So we feel we feel good about with what we see today and what's in front of us reaffirming that guidance that we gave back last quarter.
Alright fair enough. Thank you very much yeah. Thanks, Jim.
Hi.
Yes.
Our next question is from Robert Silveira of R E Silvera and associates Your line is Oklahoma.
Thank you.
And gentlemen, well done and difficult time frames.
I noticed that the diluted share number has climbed by just over 800000 year over year and.
And I was wondering is that share number climbing because of stock based compensation.
Or from what else.
No it's from stock based compensation.
Okay and is that.
The exercising of options.
I think theres exercising of options and I think Theres incentivizing senior management.
When we when we do the acquisition with opt a sense you know we want to make sure that everyone else simpatico with all of us and making sure that lower shy.
Yeah, tying our our performance two.
Two our performance stock units, so yeah and also because you are referring to diluted.
And when they are issued and we do the dilution calculation that they get added and areas as if they were gonna be exar as if they were issued right.
Okay.
Okay.
The other thing I have is a question on <unk>.
And the debt that you have do you have any intentions of trying to accelerate debt reduction.
Not on the terms. So we have two pieces and the term is three years with with.
Four quarterly payments each year, so we were planning to pay that off.
Roughly a million dollars a quarter.
And their revolver, what we'll do is.
We'll pay that down if we think that's the best use of our cash and so.
We do plan and if that's the case that we would pay the revolver now.
And not not terrible.
If the revolver stands out there at seven and a half available seven and a half drawn right now there's no reason to us not to use excess cash to kind of pay that down and you can and knowing that it's always there on your availability. So.
And I think anyone here is big on pay and interest just to pay interest so.
We'll probably use that as a as a fluctuation of excess cash.
I like that idea.
Okay. Thank you very much gentlemen, well done.
And all I would appreciate it.
And on my next question is from Dave.
B Riley your line is open.
Thank you and good afternoon, and my first question exactly a clarification so regarding them on Luna labs.
You talked about COVID-19 impact can you kind of quantify is that about a million dollars or so.
James I don't know, whether you've quantified I mean.
You can talk about it I mean, I know there's contracts that were that we were planning on as we sit here and do do forecasts and budgets.
That was going to happen in Q1.
Some of the labs that we were dealing with from the customers we were dealing with solid spike coming out of the holidays, it's that trickled into into Q1 and I mean, it's certainly it's certainly a number I don't know what we were flashing and the beginning of the year, but I would bet.
It's a number I mean, it's a half million and $1 million.
That was it was pushed in and out.
Out of our out of Q1 into into Q2 and further is that is that fair James somewhere in that range, Yes, I think thats and I think that's the right ballpark.
You know like like Scott said, we're down about five per say year over year from Q1 of last year.
But I don't think it's I don't think it's much bigger than that.
So I think that's kind of the order of magnitude and I were talking about.
Something we probably would have seen growth over last year and that's typical for us to be growing year over year compared to the same quarter last year.
So for us to be down this year is unusual as Scott said earlier.
And so it's something and the 500000 to a million dollars range is probably about the right about the right range.
And said earlier, it's more of a timing issue. So that revenue is not really lost its more a delay through the rest of the year, we expect to pick it up yes, I think you'll see a different story and Q2 with a with Luna labs Dave.
Got it and then Hum and.
Certainly a lot of our comm equipment company, they've been talking about supply chain constraints because of chip shortages.
Were you impacted or do you expect to be impacted during the.
Upcoming quarters.
Hey, Dave This is Brian we don't expect to be impacted on a material way. We we've been managing that very closely we've talked about it every quarter now for three or four and I really think we certainly have seen.
Lead times grow and and delays for the size of our business and from what we consume and what we need we've been able to manage through those delays and.
Garner and a more more inventory where needed and and put buffers and emergency buffers in place. So we've been able to manage through it and so we don't.
No. We don't anticipate that's going to have a big impact, but something we're keeping a very close eye on.
Got it and then.
Regarding Lightwave you said Comcast was strong any particular areas that you can point to where you saw strength.
Yeah, when we started the year with some deliveries and the.
For the 6200 platform for Lockheed Martin and we've talked a lot about that on our last couple of calls so that was a nice driver.
And this large order at the end of last year and that drove revenue this year.
But the good news was the.
No.
Scott mentioned bookings were strong book to Bill was good.
And the commercial sector.
And I think we specifically mentioned and the India comments was strong and Q1, and we had a really nice order flow for <unk>.
Communication systems providers, so for our test equipment.
Driving.
Volume on their sides and and build outs for their manufacturing using our our equipment, which is part of our growth strategy is to get our equipment more on a manufacturing type applications and we sold.
So that in Q1 start to pick up on the commercial side.
Got it and then my last question is regarding the sense I think you said.
<unk> share oil and gas verticals.
They understand because of Japan.
And the pandemic Avi have we seen and you kind of are signs.
Signs of improvement from from those vertical.
Yes, So Q1 was a very interesting quarter after sensitive.
The business unit had a good good strong performance.
It was.
Not particularly driven by oil and gas in Q1 per se.
But with the price of oil, reaching in Q1 and $65 or so what we're seeing now already in Q2 was a really strong start to that segment in April and we're seeing that carryover into may and we expect a nice so we had with good performance in Q1 with a little bit of a lag and the oil and gas side of the equation and and that's picking.
And now in Q2, so that will just that will add to what was already kind of a good start to the year.
Got it thank you.
Thanks, Dave.
And as a reminder to ask a question. Please press star one on your telephone keypad.
And I got to ask a question. Please press star one.
A question on next question is from Penn and savvy Chow of Northland Capital markets. Your line is open.
Good afternoon, I, just wanted to focus back and on the.
And the commentary on strong bookings and I and thank you gave a little bit more color there on.
Equipment manufacturers and and mentioned data center.
Earlier, as well as being drivers organically and.
My question is that commentary you know include opt to sense on a comparable basis in terms of.
And kind of record bookings for the company.
Or is there.
And is there a comparability issue there yeah.
Yeah, I'll, let Brian talk about that Tim, but yeah. It does.
Keep in mind of the of the business model that they have in many ways.
And your book of business and the and you have to go out into the field to and to do some installation and things like that you are at the mercy of the customer being available to be out in the field to be there you can't you kind of need them as part of the process and but you know and I when I mentioned, the very strong bookings in Q1.
And I was including off defense and Brian you can talk.
Thoughts about those well yeah. So the the bookings numbers do include off a sense, but even without.
And the order flow was very strong and Q1 and the book to Bill was very good and so.
Historically Q1 is our lowest quarter from a bookings and revenue perspective, but we had and we actually had a very strong Q1 from a bookings perspective, so I.
I think that's the way to look at it and as I said, the the commercial side relative to last year, where in those spaces, Tim that you mentioned and communications test and data centers, we actually had a good year.
And commercial was okay, but millet.
Military defense defense sector, and he was actually stronger this year, we had I think our our.
Q1 ever.
And on an apples to apples basis for bookings of that type of equipment and that segment by.
No.
A fair amount and it was a really good start to the year.
Okay, great and if I could just follow up on on that particular comment.
Sure.
You mentioned, you're well on and off there some easier compares here or what have you.
Is it safe to say that on the commercial communications side.
On orders, where revenues were not only up year over year, but orders and bookings came in stronger than you would've expected at the beginning of the quarter.
I think that's a fair assessment.
The order book was very good as I said.
And the commercial element was a strong driver so a lot of work and.
Silicon Photonics and semiconductor photonic applications.
A number of other really nice applications as well outside of outside of that specific area.
And then as already mentioned and to the portable handheld product. We introduced at the end of last year and have talked about for Lockheed Martin also had some nice new wins in Q1, so that all added up to us.
A good start to the year.
Great got it thanks very much.
Thanks, Tim.
And as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.
Again to ask a question please press star one.
And there are no further questions on queue I would now like to turn the call over to Scott for final comments.
Alright, well, thank you everyone for joining us today.
You've heard me say repeatedly that we believe we are on the right path with the right vision, we continue to believe and our potential and that we're on the right side of a market shift in trends towards light weighting and five G. In fact, our capabilities can help to accelerate those trends and that's why we're investing heavily and our <unk>.
Is this and are also very focused on making sure that we have the right leaders and bench strength in place.
Feel free to reach out to myself, Jim Allison James O'brien with any questions that you may have and I look forward to speaking with you guys soon and.
Thank you for your time and interest and Luna innovations and now Laurie on legal.
Turn it back to you to end the call.
And ladies and gentlemen. This concludes today's conference call. Thank you for your participation and have a wonderful day you may all disconnect.
Okay.
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