Q3 2021 Luna Innovations Inc Earnings Call
Corporation Earnings Conference call at this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
If we acquire any further assistance. Please press star Zero I would now like to hand, the conference over to Allison Woody Director of administration. Please go ahead.
Good afternoon, and thank you for joining US today. This afternoon, we issued our.
Third 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 eat Dot Com. We will also post a replay of this call through our website.
Some of our comments and discussions today are based on non-GAAP measures. These adjusted numbers exclude the effect of certain noncash expenses and other items. The adjusted results are a supplement to the GAAP financial statements Luna believes the presentation and exclusion of these items is useful in order to focus on what we deem to be a more reliable indicator of ongoing.
<unk> performance.
Before we proceed with our presentation today, let us remind you that statements made on this conference call as well as in 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 <unk>.
Operating results or the ongoing prospects of the company.
Actual results may differ materially as a result of a variety of factors more complete information regarding forward looking statements risks and uncertainties is available in the company's 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, Jim <unk>, Our Chief Financial Officer, and Brian Solar our Chief operating officer will be available to take your questions. 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 I'm happy to be with you today as we announce an extremely important step in executing on our strategy to enable the future with fiber.
Since early 2018, we've spoken about focusing our strategy and leveraging leveraging our unique capabilities to capture the vast opportunities in fiber.
Since we established that strategy and began that work the applications for our fiber optic based technologies have only grown.
For those of you with us for several years, you'll remember that there was a lot of foundational work to be done.
And since then you've seen us simplify our portfolio by divesting noncore assets and putting our capital to work in acquiring extremely complementary technologies that have allowed us to drive strong growth.
As a major pivotal step in focusing our portfolio on fiber, we have decided to divest Luna labs. So you will note that our Luna Labs segment is now classified in discontinued operations, reflecting this intent.
We are proud of what has been accomplished in the Luna labs business by a really talented and committed group of employees and we believe as the business continues to have tremendous potential.
As we've discussed through the past several years. This business, however, does not fit with our strategy of capturing the opportunities from our capabilities in fiber.
Just as a reminder, Luna labs was the business, where we leverage third party contract research to build a portfolio of technologies. These technologies, which are commercialized through direct sales distributors or licensing agreements have been outside our core strategic fiber optic offerings as we are.
Shared with you consistently over the past several years.
Two the Luna labs employees.
Proud of what you've accomplished your work is critical and I know, you'll continue to stay focused on driving innovation and value for our customers.
In terms of the timing of this divestiture.
We completed the acquisition of Optus sense and continue to consider and evaluate the pipeline of additional acquisition opportunities.
We decided that this was the right time to take this step.
We are considering a number of opportunities related to this divestiture and we'd hope to announce something in the near term.
It is important to mention that we will continue to be an acquisitive company.
<unk> focused on building our capability and expertise in fiber.
As always we will only do those deals that makes sense from both a financial and cultural perspective, as one of our key priorities will always be the prudent and thoughtful deployment of capital.
As many of you know, we have streamlined and simplified the lunar portfolio through targeted divestitures, while simultaneously, adding value creating assets through acquisitions.
In addition, we have continued a steady cadence of making important investments in our people.
The CS and platforms.
In areas like engineering, marketing and sales setting us up for incremental growth well into the future our capital deployment strategy has not changed.
To wrap up on little Labs, I, just wanted to say again, what a pivotal moment. This is and how proud I am of the work that the team has done.
We believe strongly in the potential and opportunity as part of our fiber optic based technologies and that conviction has only grown since we established our strategy several years ago.
As we move forward Lightwave is now the totality of Luna.
Any discussion of Luna will be a discussion of the assets that we formerly categorized as the Lightwave Division.
As I mentioned last quarter Luna products and capabilities have a tremendous positive impact on our customers and society.
Whether it's enabling the next generation of a global network of smart infrastructure, or making data centers faster and more reliable or securing the perimeters and borders of critical assets around the world Luna.
Luna products helped make the world a better and safer place.
We are extremely well positioned to take advantage of the growing needs across multiple industries for solutions built on the benefits of fiber sensing technology.
We are the market leader with thousands of systems already deployed and operating in the field today.
And as far as this third quarter is concerned we saw record breaking demand for our products as we recorded historic levels of bookings and backlog.
However, as I mentioned in my comment on the earnings release, we have also experienced increasing pressure from COVID-19 related delays, including supply chain challenges.
When we were together in August I had mentioned that we were beginning to see some trends from the ongoing pandemic that we had not previously seen.
But I had also shared that at that time, our ability to deliver product to customers on a timely basis had not been materially affected even though we were getting indications that some parts, which we would normally receive in a number of days, we're taking longer.
And as always I committed to share with you what I was seeing.
When I saw it.
As we got to the end of the summer is starting to become clear that timing of deliveries for some critical electronic components were not reverting back to a more typical delivery pattern recently, it has gotten worse and our capacity to manufacture on time to meet customer demand is being challenged.
In addition, our Apis sense business, often involves travelling to customer locations to install or perform services.
I had shared with you previously that we had been experiencing some slippage from one quarter to the next due to the fact that our team was experiencing restrictions on travel to customer locations.
Is the Delta very became more prevalent so did some of those trends, thereby pushing our backlog to historic levels and delaying revenue recognition.
You will notice this when I talk about our update to guidance to adjust for the reclassification of Luna labs to discontinued operations.
And to reflect the pandemic related impact to revenue.
But let me first talk about some of the high level financial results for the quarter.
Remember now that Luna labs has been moved to discontinued operations when I talk about the results for Luna Lightwave is now Luna Luna is lightwave.
For the third quarter of 2021 total revenues were up 32% to $20 3 million compared to the prior year's quarter.
For the first nine months revenues were up 59% versus the first nine months of last year.
<unk> increases were largely driven by the acquisition last year of off defense.
I do want to point out that we delivered gross margin of 62%.
Which compares to our historic gross margin performance in the low 50% range, which included Luna labs clearly the legacy Lightwave business operated at a higher gross margin than did the Luna labs business. Therefore, we would expect to maintain higher levels of gross margin as we move.
Ford.
We reported an operating loss of 10000 for Q3 2021 versus operating income of $1 2 million for Q3 2020.
The largest driver of the year over year decrease in operating income was the increase in expenses due to our recent acquisitions as well as the pressure on revenue as a result of the ongoing pandemic that I just described.
Reflecting the same dynamic for adjusted EBITDA, We delivered $2 1 million in Q3 compared to $3 1 million in the prior year period.
This resulted in adjusted earnings per share figure of three cents for Q3 2021, compared with 11 cents for Q3 in the prior year period.
Before I move on to a deeper dive on our operations I don't want to talk about guidance.
Given the reclassification of the Luna labs business to discontinued operations, we are modifying the guidance. We've given previously that included both business units in.
In addition, as I've already said, although we had some of the strongest customer demand to date the effects of COVID-19 on supply chain and on travel.
Laid recognition of revenue.
The new guidance for 2021, excluding Luna labs, and taking into account. The pandemic is total revenues of $85 million to $88 million and adjusted EBITDA of $6 million to $8 million.
We are continuing to do everything in our power to work on our supply chain looking for alternative sources for our key components and trying to order certain inputs earlier than we normally would.
As we move into the beginning of 2022, we will also be focused trying to work down our significant backlog pulling all of those orders into revenue.
Now, let me discuss what drove our results in more detail remember that our solutions focus on two areas sensing and communications testing.
For the third quarter 2021, the revenue growth I, just mentioned was driven by both the incremental revenues due to the acquisition of off the sense and also by strong commercial sales in the comms testing business.
Let's dig a little deeper into the sensing segment, which you may recall is the segment, where we use the fiber as the physical sensor to create smart materials and structures.
Revenues grew by 27% compared to Q3 last year, largely driven by the acquisition of the off defense product lines that are included in this segment.
As a reminder, we added the Apis sense distributed acoustics sensing or das technology to gain access to fully distributed measurement capabilities over long range applications to augment our already industry, leading line of fiber optic sensing products.
Staying with our sensing vertical we made important progress on several strategic growth areas.
Sure last quarter that we delivered a number of major contracts to south American customers for infrastructure monitoring, which further position Luna as a trusted supplier and recognized world leader within these markets.
In Q3, we continue to build on that momentum by delivering a large order for a mining application South America. This validates our strategy of penetrating the infrastructure monitoring space with our new quantitative opt a sense das solution.
We signed a significant deal for our perimeter monitoring system in Indonesia further expanding our geographic reach.
We validated our technology for real time traffic monitoring systems with a large win for this technology with the department of transportation in the Western United States.
Our Hyperion strained monitoring solution for offshore oil and gas showed continued order strength in the quarter, which has continued into Q4.
We won another competitive bid for the department of transportation for real time monitoring of a bridge. This win was significant because I believe that this is the first of what should be multiple similar large infrastructure installations over the coming year, utilizing our hyperion products and associated sensors.
Finally, we have driven continued successful penetration of the industrial process control market with our terahertz products recognizing record bookings in Q3.
Now switching to the communications test vertical these.
These product lines grew strongly again this quarter, 39% in Q3 this year versus the prior year period for some additional clarity we remember that the REO laser business acquired through the acquisition of offense is included in the Comms test results without opt a sense, our legacy Luna Comms test business.
<unk> grew 8% in Q3 2021 versus last year with the sales of our high speed Communications test equipment. The O V E. An ob are growing a robust 31% versus last year.
As a reminder, this business is 50% test and measurement for communication devices.
And 50% optical components and laser modules for a variety of photonic applications, such as medical devices sensing systems and Lidar.
Our core products, the Ova and it'll be our continued to grow strongly on a year over year basis, driven by a continuation of the strong commercial environment, we've been seeing as well as the continuation of deliveries of our newest product in this category. The Ob are 6200.
You'll remember that last year, we announced our partnership with Lockheed Martin and their order for over 100 units in Q4 'twenty 'twenty throughout this year, our deliveries to Lockheed proceeded without interruption, allowing us to complete the order we had expected to expand on this order in the second half of 2020, one but dude.
Covid related program delays, we won't start delivering on the expansion until 2022.
That said, we are fully approved and have very good line of sight to the growing opportunity for this product in 2022 and the years to come.
In general comps testing drove significant overall improvement in commercial sales over last year with multiple system sales to large corporate customers.
Reinforcing the point I made earlier, we have seen tremendous and growing levels of customer demand for Luna products.
Before I turn the call over to gene for a deeper dive into the Q3 results I want to build on some comments I made earlier about the continuing effect of the global pandemic. I think we are all keenly aware that earlier predictions of easy easing of the supply chain issues have not come to fruition and have actually grown.
More pronounced.
Let me give you an example to illustrate the extent of this issue beyond what you've seen in the press around electronic components.
Luna has consistently used a type of a park see in many of our products like toilet paper and the consumer segment. There is no particular reason that this product should be difficult to get yet during the quarter. We were unable to order from anywhere the supplies we needed to produce certain products.
In addition to supply challenges. We're also experiencing requested delivery delays from our customers for a variety of delay reasons on their end.
One example of this is a customer in Asia, with whom we have a firm order and will able we're able to produce the product and prepare to ship.
The customers experiencing their own supply chain challenges delaying their readiness. They have asked us to hold on shipping the finished product due to security issues at the customer location.
So we have the order and the product, but we won't recognize revenue until we ship.
I could give you a dozen more examples like this demand for our products is at historic levels, but recognizing revenue is being delayed by supply chain challenges and customer delays.
At this point in time I would have to say that we expect some of these dynamics to carry into the first part of 2022.
In summary, we are continuing to do the fundamental blocking and tackling that allows us to build our company for the long term.
When I think about some of the strategic moves we've executed over the last several years the plan to divest Luna labs, certainly ranks up there as one of the most important.
As always I'm incredibly grateful to the Luna team for their continued focus and work, especially as we have newly experienced some of the pandemic related challenges that we've been hearing about for the past 18 plus months.
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 now include our former lunar lag segment as discontinued operations.
Means our reported numbers exclude Luna labs revenue gross margin and operating expenses. In addition, like prior quarters. Our results also include the two acquisitions, we completed towards the end of last year, new rich technologies and off the fence and their related integration transaction and amortization expenses.
Our results also include expenses related to our continuing portfolio activities.
With that as background I'll now shift to cover our third quarter results.
As Scott noted our revenues for Q3, 2021 were $20 3 million compared to revenues of $15 4 million for Q3, 2020, representing a 32% year over year increase.
Year over year growth in both our sensing in our communications test businesses was driven largely by our recent acquisitions.
Our gross profit was $12 6 million for the quarter compared to $9 6 million for the same quarter last year, representing a gross margin of 62%.
Compared to 63% in Q3 2020, as Scott mentioned without Luna Labs, our gross margin has moved from the low 50% range to the low 60% range, reflecting our higher margins in our Lightwave business.
The decrease from 63% to 62% is primarily due to product mix.
In addition, gross margin in the quarter includes 104000 of noncash amortization of inventory step up related to our recent acquisitions. This is down from 168000 in quarters, one and two of this year and we expect it to decrease further to 70000 in Q4 at which point the inventory step up will be.
<unk> fully amortized.
Operating expenses were $12 6 million in Q3, 2021 versus $8 4 million in Q3 2020. This.
This increase was primarily driven by the operating expenses of our recent acquisitions 196000 of deal integration and transaction costs and 322000 of amortization related to our off defense acquisition.
We recognized an operating loss of 10000 in Q3, 2021 compared to operating income of $1 2 million in Q3 of last year.
As a reminder, this operating loss in Q3 'twenty 'twenty. One includes the amortization in both gross margin and operating expenses that I just discussed.
Acquisitions are an important part of Luna strategy and so we will continue to see impacts to gross margin and operating income from these various amortization items as well as additional amounts assuming we continue to be acquisitive.
While these amounts are not insignificant we believe we can drive substantial incremental value to Luna from our acquisitions to give you a sense of the magnitude Luna as total amortization expense for the quarter was 954000, largely driven by our acquisitions.
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 income for Q3, 2021 was <unk> 4 million or <unk> <unk> per share compared to net income of $3 1 million or 10 cents per share for Q3 2020.
Income tax expense for Q3 2021 differs from our statutory rate primarily due to the impact of valuation allowances related to our <unk> acquisition equity compensation and R&D tax credits, we estimate our 2021 effective tax rate to be approximately 21% and.
And finally, a key metric, reflecting our underlying operations is adjusted EBITDA as Scott mentioned adjusted EBITDA was $2 1 million for Q3, 2021 versus $3 1 million for Q3 'twenty 'twenty.
Adjusted EPS was <unk> <unk> per share for Q3, 2021 versus 11 cents for Q3 2020.
Let me move now to the balance sheet, we ended the quarter with $14 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 during Q1.
Our working capital was 49 million at September 31, 2021, compared to $45 4 million on December 31 2020.
Remember that at the time of the <unk> 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 third quarter, we had total debt outstanding of $16 $9 million of that amount $9 4 million is in term debt and $7 5 million was drawn on our revolver.
We have access to an additional $7 $5 million and a revolving credit facility should we need it.
As Scott mentioned, we are revising our guidance due to Luna labs, moving to discontinued operations and pandemic related issues.
To reiterate the new guidance for 2021 excluding Luna labs and taking into account. The pandemic is total revenues of $85 million to $88 million and adjusted EBITDA of $6 million to $8 million.
In summary, I'll reiterate Scott sentiments, we are very pleased to see the incredible demand for our products, which validates our strategy of focusing on fiber and demonstrates the potential of our business. We made significant progress on refining our back office systems that we recently implemented streamlining our.
Our processes and integrating our recent acquisitions importantly, we continue to further invest in the core foundation of our company as we look forward to a time when some of the current pandemic related challenges are resolved with that I will turn the call back over to Scott.
Thank you Jim before I open the call to questions I want to take a moment to underscore some key trends that we've shared today, especially as we're approaching year end rift.
Reflecting back on this year.
We would have never been able to predict that the dynamics from 2020 would continue so far into 2021.
If you only take away a few messages from this call. Please note. The following first that the need for high speed fiber optic technology has exploded and the opportunities available to us as a result, our abundance.
And second that our customers are ordering in record levels, reflecting the demand for <unk> products and capabilities and finally, Luna labs, which was the origin of the Luna business and has been a successful part of our history will be divested. This is a critical step in leuna strategic exit.
<unk> as after this transaction Luna will be a pure play in fiber.
So now Chief operating officer, Brian Solar gene and I are happy to answer any questions. So Ashley please open the call to Q&A.
As a reminder to ask a question you will need to press star one on your telephone again that is star one to withdraw your question basketball and hockey.
Your first question comes from Dave Kang with B Riley.
Thank you. Good afternoon. My first question is regarding your outlook, if I back out the first three quarters.
It looks like the revenue will be approximately $23 $24 million up three $4 million sequentially from 20 million third quarter can you just go over some of the assumptions I assume assuming.
The demand is there and what about on the supply side you know.
Will you have enough supplies to.
Support that kind of revenues and maybe provide some additional color between same thing versus Comcast for fourth quarter.
Yeah.
Dave outlet.
I'll, let I'll, let Brian talk about that we.
We talked about the bookings and <unk>.
Bookings exceeded what our what our guidance was.
When your bottoms up this thing, which we always do.
We look at obviously you start at the bottom and say, we would have to book acts to get to why and it wise in the middle we would give a range of.
ADP or whatever it may be and I can tell you bookings has exceeded what we what we modeled out early on.
What we're experiencing is what we're continuing to talk about here is the supply chain and I'll, let Brian weigh into what we're looking at in Q4 I can tell you that we spent a lot of time looking at what what we were going to give on this discontinued ops model out to you guys from a.
From a Q4 or.
Full year, but it ends up being really a quarterly guidance.
Right.
Yeah, Hey, Dave the guidance does take into into account.
The effect on the availability.
<unk> of different parts. So, yes, I think youre right in the right range, there and we are situated well with with what we have.
In that range, we won't be affected by the availability of parts.
The sensing segment as is.
Now if you compare to Q3, the SME segment.
I expect it to be a little bit stronger here as we as we exit the year.
Relative to what its been and as we said on the last previous quarters and again Tonight Communications.
And in particular the.
The test equipment.
Limit has been really strong all year and that continued in Q3.
Got it and then speaking.
Speaking of supply chain challenges I mean, just wondering if you can kind of quantify.
Both revenue and margin impact I guess, it was down about $1.6 million sequentially. So clearly.
The impact was more than $1 6 million and we.
We were looking for a few million dollars sequential growth.
Maybe get the meeting maybe four 5 million type of impact in third quarter is that about right or.
I think that's right gene.
Yes.
Sure.
Yes, that's right okay.
Well what about our margins.
I assume.
So the extra by expediting fees and and tip cause they have gone up how much of a margin impact I'll be talking about maybe 100 to 100 bips.
No not nearly as much on the margin side.
A little bit of margin pressure, but.
The numbers that we report.
As you see are pretty pretty strong relative to historical so theres, a little bit there, but in general the.
Asps have helped really strong.
And that's kind of offset the.
We have the downward pressure on our margin.
So I shouldn't we shouldn't think about gross margin going to like maybe I don't know 64, 65%. When this thing is over we should still think of low sixties.
For out quarters.
I think low to low creeping into mid sixties.
We're now at that at this at this mid to upper eighties a range.
And because we can carry that gross margin I think.
I think we will hover around that you saw last quarter, we were 63.
In Q3 of two.
<unk> 2020, Preop, a sense, which pulled us down a little bit, but I think you can plan on.
Low to mid sixties creeping into that 64 range. When you say gene, yes, I would say.
Over certainly over a four quarter period for sure.
Any quarter up to SUNS has relative to the legacy Luna business up the sense has large.
Relatively large products and.
So they can move the needle up or down depending on that project, but yes over the course of four quarters. That's right. That's right. Yeah, I mean think about it some of the product coming out of our Blacksburg office. The O V E Z O be ours some of the laser components.
I can tell you those those those carried margins that were over 70% this quarter.
So it is a product it is a product mix and were certainly $63 $62 63 blended here.
But it all depends.
When that opens up and we were able to get some of that backlog off the off the.
Off the dock you will see that that margin come back with a bite.
Got it thank you.
Thanks.
Once again, if he would like to ask a question you will need to press star one on your telephone.
Next question comes from the line of Charles Knoles.
Hey are you there, yes, we're here Charles.
Okay I missed the first three minutes you may have them.
I answered my question, but I hate to hear you divest Luna labs at the pump.
Place to be but I can understand economically it may be a good thing but are these employees.
Seemed really sharp or are they going to be hired elsewhere.
Well, what we're doing is moving into discontinued ops available kind of available for sale. There is no transaction that has been consummated yet we'll talk about that transaction.
When that happens, but we're moving it to be available for sale.
We don't know really exactly what that transaction looks like I can tell you all the interests that we have had so far.
His top shelf folks that are interested in all those all those people doing that work so.
Youre right. It is incredible work being done by incredible folks and I think everyone we've talked to.
Recognize that that the biggest asset in inside of that organization or the people you know the IP is certainly unique and special but it's the people that that brought that to fruition. So.
<unk>.
I think that I think Luna labs.
As a as a company not part of Luna innovations will be will be fine if not more than fine I think it will remove some of the restrictions that they had experienced while being attached to a public company. There are just some things that that they were unable to do trials by being part of.
Luna innovations to public company.
There's a lot of transactions that happened prior to going public in 2006 with those a lot of that IP and those technologies. Once they got the proof of concept. There was a lot of attraction out there doing different deals that we just haven't been able to do while they were part of Luna innovations. So I think it will be a a.
Very positive thing.
Once we consummate a transaction.
Okay.
Seem to be the man.
Go ahead Glen.
Glad to hear it.
Thanks Charles.
Later.
Talk to you soon.
Once again, if you would like to ask a question. Please press Star then the number one on your telephone.
Well pause for just a moment to compile the Q&A roster.
Your next question comes from Chris Sakai with singular research your line is open.
Hi, Scott.
I guess I'm on for Jim Yeah, Hey, Chris.
Good good just.
One of the I guess the good overview on.
The integration with off the fence.
<unk> eyes.
Is that pretty well over or are you guys seeing any more.
Headwinds there.
And just wanted to then ask.
With this divestiture is this opening the opportunity and.
Window for you guys to look for more acquisitions along in the Lightwave line.
Yeah.
Good questions, Chris I will say on the integration of <unk> since we have been charging forward that many many teams have been over now to the U K and really working closely engineering.
Sales all of that is being integrated into Luna.
Brian has worked tremendously hard to make sure that happened including.
His guys, David Blaker in and Todd Haver in solving Faruqi, all folks that have been there in person integrated so that integration is going really really well and we talked about early on in Q2 about the back office being integrated and we really needed to move forward on the operation and the sales side and we have done that that is.
Making tremendous strides we just can't get to stand Covid thing out of our way.
Yeah.
It's a tough one.
We've got a travel we've got to do some of the the installations in the services and that's just.
It's a tough thing to happen here and.
We are continuing to plow, Florida on this I guess.
If I had my choices of.
Higher revenue.
Pulling it all out of backlog and entering a new quarter with no backlog I think I'd take where I am where bookings is through the roof and you know as well as anyone that the true temper.
Temperature and well being of the company is how our bookings and our bookings are unbelievable big orders large large orders small orders with what Biden signed today already activity in what's going on in some of that infrastructure stuff. So.
Bookings through the roof. The only thing I wish I didn't have as backlog through the roof I would rather have bookings through the roof and be able to get the stuff off the dock, but but but we are where we are and I'll take it all day long if that's what it is and I hope people don't don't read it the wrong way because.
Every metric was hit and expanded upon in and blown away.
For that one called revenue and I think within all sitting in backlog I think you'll see some things here in the future if we can get.
Get things off the dock and that is being prepared as far as your follow up there with what does this mean.
Yeah, I mean, I think we've talked about.
The number one investment we make is in ourselves I've talked about that investing in our own people and our own infrastructure and things like that we've done a lot of that we've done the engineering and the sales.
In marketing, we have done some of that and I think we will also look at where we get.
We're technology are we gapped in where we're trying to go with the strategy. So we will continue to be acquisitive and look at some some things that we may pick up.
No.
We'll see but it certainly does open.
<unk> open up for some other other opportunity.
Okay.
Great and then I guess last for me.
Did you guys have a book to bill ratio for the quarter.
Brian you kind of know.
We haven't loosened it one two range one two yeah round round 11112, Yeah 1.1 0.2 so.
Okay.
Okay, all right well great.
Yeah glad that here.
Yeah.
It's look I think everyones experiencing this conundrum, but but it's certainly unique for us and has us really looking at it.
This this this full year, which ends up being Q4 guidance.
You know you've heard me say before I will I will lay out what I see in front of me, we will lay out what we see a promising we are constantly bottoms up on this thing and.
Yeah.
I said, what I said in August because that's what we saw in front of us and.
And that's why I was so Pat.
Passionate about making those words today about what what we saw then and what it did since then and.
But we feel like.
We have have really bottomed bottoms up this thing and given where we think we will go is certainly setting up for for some really good things in the future here I can say that.
Okay, Alright, great Scott well, thanks, Yeah. Thanks, Chris.
Once again to ask a question. Please press star one on your telephone.
Next question comes from Neil seeking.
Hey, Scott Thanks for taking my questions Yeah sure Neal.
So I had a couple here I think theyre short answer type questions.
You said you expected to have news on how youre going to divest of Europe.
Your term.
It does work.
A year or longer closely thereafter.
And am I correct in assuming Howie.
However, the divestiture occurs it's going to result in a meaningful amount of.
Capital coming into Luna.
Yeah. It's a good question near term I would say.
What you said is pretty good by year end or shortly thereafter and certainly.
You know theres a lot of value in it.
Luna labs, as we've talked about in the past.
You and I have talked about so yeah, there will be certainly this is not.
We will not divest it to a 501 C. Three this is going to be something that that is meaningful to Luna labs.
In where they ended up being and how that looks it'll be meaningful to Luna innovations.
From a from what we get from a capital perspective, and how we put that to work.
Okay, and then a second quick question here.
You've you've talked about well first of all I, obviously haven't had time to read through the Q, but you've mentioned that Q3 bookings were through the roof and at record levels and quite excited in your voice about what Q3 bookings were.
What were the Q3 bookings and how did that compare to Q2 bookings.
Yeah, I don't know if we if we disclose that Brian do you through Q3 and two are both strong. So yeah. So both strong in Q2 and Q3. It was it's the most bookings we've ever had and we've adjusted it for <unk> since it's not because we added off the sense why it was the strongest ever if you.
Looked at legacy Luna legacy Lightwave, best bookings quarter ever and opt a sense similar so.
But we're talking about by by a meaningful margin in other words, not just a half a million a million dollar kind of thing that's right. That's right, Okay, Alright, Scot and listen my third and final question.
So I've understood what you've been talking to us about.
Really all year is that 2021 was going to be the pivotal year, where all the increased spending all of the new systems. The acquisitions. It was all going to result in 2022.
Being the beginning of a very significant acceleration of our organic growth rates, which if I remember right have been upper teens.
So if we could just say were in a magical world where COVID-19 is gone.
And supply chain issues are not an issue.
Are we still looking in that scenario at 2022 and beyond being materially higher annualized growth rates for everything fiber than what we've seen in 2019 and 20.
Yeah.
We talked about before and you saw mid to upper teens was the overall Luna growth on a year over year basis that included Luna labs, and they were running in the in the mid to upper single digits from a growth perspective.
And then they would perform maybe a little bit higher than that but certainly brought down the overall growth just because of the nature of their business. So the pure lightwave fiber optic business was running in the kind of low twenties on a year over year basis, I believe what you'll see going forward now without Luna labs is that low.
To mid twenties and.
Where youll see that growth organically and.
Kind of where we've been we will certainly see that coming off a year like 2021.
I don't feel like we beat our chest in 2020, but we sure went out there and said we got through 2020 without a lot of you know.
Bruises in Covid and pointed 2021, because we just couldn't get the supplies. We order. So many months out we never in my career here 20, plus years have ever seen supply be an issue at Lightwave is that Scott I, just I just wanted to clarify because for me anyway.
It is important.
If there were no supply chain issues and you weren't dealing with the Covid delays.
You know we've been everything fibers, then growing in the low 20% annualized growth rate. So you've been implying that those growth rates were going to materially pick up in 2022 as a result of the spend the systems and the acquisition. So I mean are you.
You're saying that you're not expecting.
Everything fiber annualized growth rates to move much above that.
Low 20 range, even if we didn't have the supply chain issues and the COVID-19 related delays or would they be expected to.
Mick meaningfully increase from that if we werent facing these headwinds based on demand and bookings.
I don't change what I've said before I mean, I think your philosophical question of what if what if.
If everything was perfect.
I think if we didn't have COVID-19 and we didn't have supply chain issues with you Neil in and I believe we were low twenty's before we saw nothing but additional growth as we saw the <unk> orders turn into tens and twenties and fit these waters. So I do believe.
We're moving from the low <unk> to the mid to upper 20 in where we're going.
Fiber optic business I stand behind what I said before if we can get beyond COVID-19 and supply issues.
Okay, Scott will listen I'm glad I kept pushing it there because mid to upper 20 organic growth is.
He is very very meaningful I mean, thats, putting you up into the high growth rate camp in my book. So anyway. Thanks for taking my questions I really appreciate it yes, Neil don't forget that over 60% gross margin I think that is not something to overlook as well.
No no I get it Scott look.
It's kind of a salt and pepper quarter here, depending on what you want to focus on but.
I'll be I'll be anxious to see what kind of.
Cash we get from Luna labs, because with the balance sheet, where it is and acquisition opportunities are bounding.
That's got to be very interesting.
When we get to the point that you report what you've done there. So again, thanks for thanks for the time thanks.
Thanks Neil.
This concludes the A&D session I will now hand, it over to Scott.
Thank you Alison and thanks, everyone for joining US today, please feel free to reach out to Jim Allison or myself with any questions and we look forward to speak with some of you at the Needham Conference Tomorrow.
Actually this concludes our earnings call.
This concludes today's conference call you may now disconnect.
Okay.
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