Luna Innovations Incorporated

Q3 2023 total revenue was $30.7 million, up 5% year over year. Gross margin was 57%, down 62 basis points from the prior year. Adjusted EBITDA was $4.2 million versus $4.5 million in the prior-year quarter, and adjusted EPS was $0.07. Revenue in the sensing vertical fell 6% year over year, while Communications Test grew 26% year over year. For full-year 2023, management cut revenue guidance to $120 million-$125 million and kept adjusted EBITDA guidance at $14 million-$18 million. Management said some customer projects are shifting out, but terahertz backlog and bookings remain strong and Q4 should include a large expected F-35-related order.

Scott Graeff framed the quarter as solid despite macro headwinds, emphasizing that timing and slower sales cycles—not demand degradation—were the main issue behind the revenue revision. He highlighted leadership additions, a more scalable operating foundation, and international expansion as part of Luna’s strategy. His tone was upbeat but candid, stressing that the company is making real-time adjustments while remaining “bullish” on the long-term outlook.

George Gomez-Quintero detailed the quarter’s financials: revenue of $30.7 million, gross margin of 57% (down 62 basis points), operating expenses of $16.5 million (up 7%), operating income of $1.2 million, net income of $461,000, and adjusted EBITDA of $4.2 million. He said cash and cash equivalents ended at $6 million, sequentially up nearly $3 million, while working capital rose to $65.2 million from $54.2 million at year-end 2022, mainly due to higher accounts receivable and inventory. Total debt was $31.9 million versus $23.2 million at year-end, driven mainly by a $12 million revolver draw.

Analysts asked about 2024 growth, and management said the outlook discussed previously for 2024 has not changed, though some projects are slipping into Q4 and next year. On Communications Test, management said the rebound looks sustainable, with good visibility into the next few quarters rather than a one-off recovery. Questions on terahertz and aerospace orders brought confirmation that the backlog is strong, the capacity buildout is on track, and an expected F-35 order is factored into guidance; management also said follow-on F-22 orders are expected later this year and unit deliveries next year.