Good morning, everyone. Thanks for joining our call.
As Alison [ph] mentioned, we issued two press releases this morning one on our quarterly and full year financial results, and one announcing the acquisition of General Photonics.
We have a lot to discuss today. I'm excited to share with you the details of the significant progress we have made over the last year. We've delivered very strong, consistent, financial results from quarter-to-quarter. We've simplified our product portfolio, and we've put some of our capital to work in acquiring extremely complementary technologies that will allow us to drive its exponential growth. Simply put, if we normalize for the divestitures we've completed in the past year or so, 2018 was the best year in Luna's history. I have to start by thanking the Luna team, who stayed laser focused on delivering our goals for the year and continue to serve our customers with excellence.
As you all know, even with a robust strategy, nothing happens without the right team. 2018 saw a lot of changes at our company. But my Luna colleagues, including those whom we welcomed from Micron Optics in Q4, remain dedicated to our vision of being a leader in optical measurement technology that improves accuracy and precision, while reducing risk and cost, and to power growth and value for our global customers. And I think the results speak for themselves.
In addition, I want to extend a hearty welcome to all of our new colleagues from General Photonics.
You have built tremendous value for your customers, and together, we'll be able to deliver even more value and growth. We're thrilled to have you join the Luna team.
So switching gears let me now provide an overview of our very strong results for the fourth quarter and full year.
In addition, we will review the M&A activity over the past 12 months, including details of today's announcement, and an update on the integration progress of the Micron Optics acquisition announced last fall. The fourth quarter of 2018 marks the fifth consecutive quarter of double-digit year-over-year growth in our revenues from continuing operations and the seventh quarter of very strong revenue growth. And the performance in Q4 just builds on the enormous progress we have achieved over the course of fiscal 2018. We've spoken consistently about executing on a strong, clear and focused strategy, and in 2018 saw us do exactly that in a disciplined manner.
As a result, our existing businesses continue to perform well with strong top line growth, which I believe is clear evidence that we're getting a return from some of the internal investments we made that we discussed throughout last year.
In addition, we continue to be interested in further M&A investments that fits squarely within our strategy, and which we believe would accelerate our performance in our two important market verticals; communications testing, and structural testing based on optical sensing. Luna’s being recognized for the strength of our portfolio and the expansions of our capabilities enabled by some of the M&A work we did in 2018. I was just in Germany a couple of weeks ago, with about 20 channel partners, and the discussions about in response to our recent recent acquisition of Micron Optics were some of the most exciting I can remember. Micron channel partners were really excited about Luna's ODiSI and The Luna partners were equally pleased with the addition of Micron’s products and capabilities to our solutions.
So now digging into more details on the financial performance. We grew revenue 37% in the quarter, and 30% for fiscal 2018 versus the comparable year ago periods. Gross profit margin grew from 42.5% to 49% in the fourth quarter and 40% to 45% for the full year 2018. This is an exceptional expansion of gross margin rate when you consider the puts and takes of the divestitures and acquisitions during the year. This gross margin expansion highlights the focus of our team, they continue to execute at a high level even with the movement of assets in and out of Luna. Revenues from our Products and Licensing segment, which includes Lightwave and ODiSI grew at a very strong 69% while revenues from our technology development segment grew almost 8% in the quarter.
As a reminder, in addition to ODiSI, Lightwave includes our instruments for testing fiber optic components, and networks used for high speed communications. These products target the growing demand for bandwidth, fueling the development of silicon photonics and the building of more and more data centers.
Our ODiSI instruments measure structural health, and integrity of components and structures.
Let me share with you some of the highlights of the progress in our various business divisions, starting with Lightwave. Total revenues in the fourth quarter were up 75% year-over-year partly due to the acquisition of Micron into October of 2018. Revenues in both our sensing part of Lightwave as well as communications test were up double digits. In our sensing business our ODiSI system continues to gain traction in the market with 12 units sold in Q4, 2018. We were able to drive this strong performance as a result of investments in the addition of new direct sales hires, enhance channels, and the introduction of our new ODiSI 6100 Platform. The main drivers for ODiSI adoption continue to be the use of new materials such as composites in our main target vertical markets of aerospace and automotive. In Q4, we delivered multiple ODiSI units into both of those markets, including our first systems directly into one of the big three U.S. automotive manufacturers, certainly a positive sign for the adoption of the ODiSI technology.
In addition, the acquisition of Micron Optics last October was very important to the future of expansion of our sensing capabilities. Due to the complementary nature of Micron Optics products, we're experiencing a smooth integration with our existing product lines, with our combined portfolios, in particular their Hyperion [ph] line of optical sensing interrogators and sensors with our ODiSI product, we have the ability to provide our customers with a broader range of capabilities, including higher speeds, and sensing over longer ranges. An example of this integration of 13 of our Hyperion optical sensing integrators into a new bridge tunnel system, which connects three major cities in China's Pearl River Delta region, known as the HZM Bridge, this mega structure consists of three cable state bridges, one undersea tunnel, and two artificial islands. This bridge tunnel system spans a total length of 55 kilometers, making it the longest sea crossing link ever built.
Given the complexity of this bridge, constant and reliable measurement of structural health is critical, and our sensors allow that to happen.
Now, let's turn to the communications test business. This part of the business finished the year with over 10% growth, which was right on track with our internal estimates. Drivers here continue to be the integration of optical and Electra Electric systems in Silicon or generally known as Silicon Photonics.
Over the course of 2018, we invested our communications test segment by adding engineering staff to accelerate our new product platforms, which will result in two product new products in 2019. There are new analyzer aimed at Silicon Photonics test, and a new portable reflectometer designed for aerospace and short haul test applications.
As we think about the priorities for Lightwave in 2019, certainly we will continue the integration of the Micron Optics team into the division.
In addition, we will also be focusing on building the team, to support continued growth, by adding engineering and sales resources.
We have some exciting opportunities for growth this year.
We have several major new product releases coming in our communications test segment, increased performance and feature updates to our ODiSI platform, and new sensors, which allow even more functionality.
Our Terahertz division is continuing the strong momentum built in the first three quarters. In the fourth quarter, we posted a 72% increase in product sales year-over-year and delivered a robust 68% growth in product sales for the full year.
Importantly, in 2018, we expanded sales channels with the addition of six new distribution partners, and increased market exposure through 10 trade shows. We made robust progress on product sales with a large government defense contractor achieving a formal manufacturing readiness level 7 assessments, and purchasing 5 Terahertz systems for production of the F-35 fighter jet. And on expense side, we created cost efficiencies for the future by moving to a new facility, which is scaled appropriately to the size of our business and allows for much greater levels of collaboration.
As we move into 2019, we'll be focused on leveraging the efficiencies provided by the new facility and our expanding team.
In addition, we will promote new products and capabilities with successful applications, market presence and compelling collateral and web content. In our technology development segment, full year revenue grew 13% year-over-year.
As a reminder, revenue in this segment comes largely from third party contract research.
We are seeing more and more requirements for multidisciplinary solutions, and our diverse and experienced team is able to quickly develop those solutions for our customers.
As we use this segment to investigate future growth opportunities, we can sell early stage products to test the market and receive valuable customer feedback.
For 2019, we expect another successful year of innovation and growth. We're entering 2019 with a larger contract backlog than we had a year ago.
Now I'd like to provide some color on our recent M&A activity, starting with an update on the integration progress for the Micron Optics acquisition.
You'll remember that we acquired Micron Optics in mid-October 2018. The company has products in sensing solutions, filters and lasers, with a significant piece of revenue driven by sales of its fiber optics sensing instrumentation, which is very complementary to our ODiSI product, and additionally fits right into our structural test vertical. Luna and Micron Optic sell into some common end markets, but Micron also brought exposure to oil and gas and civil engineering, newer markets for Luna. And both companies are fueled by continuing trends, driving demand for higher bandwidth. We closed the Micron transaction in mid-October and immediately began working on the process of integration. We're right on track with our expectations. We've taken the first steps towards cross-functional integration starting with the integration sales, marketing and the engineering teams. And we've already begun the full integration of those teams. Throughout the next six months, we'll be focused on unifying our brand presence through vehicles like our website, and marketing collateral. We're developing a channel and marketing integration strategy to accelerate the penetration of core markets and maximize our channel leverage. We'll be merging sales channels to drive both revenue and energy synergies, which while early, are also proceeding to expectations. And we have -- and we have begun the process of system integration across all platforms including Sales, ERP and MRP. Overall, I am extremely pleased with the progress. When we announced, we said that Micron was a great strategic acquisition, with a profile that would allow a seamless and quick integration in which was adjusted EBITDA accretive in Q4, 2018 and we anticipate to be fully accretive in 2019. And we're right on track, which gives me confidence about the acquisition we announced today. General Photonics is another acquisition with a terrific strategic profile, just like the acquisition of Micron Optics that fits squarely within our sensing business; General Photonics is in the sweet spot of our com test business. We acquired the company for $20 million, $19 million at closing, and a $1million earn out.
Although 2018 numbers have not yet been audited, I want to give you a better sense for the size of that asset. Last year, General Photonics achieved approximately $11 million in revenue at approximately $2.5 million in adjusted EBITDA, so we expect it to be immediately accretive. The company is based in Chino California, has approximately 60 employees, approximately 80 patents, and has been in business almost 25 years.
In addition to providing strong opportunities for deeper penetration into our existing customer base, with complementary capabilities at differing price points General Photonics also brings greater exposure to certain geographies, particularly Asia and expanded exposure to various end markets. The combination will also allow Luna to continue to improve value to customers in critical applications, such as these three; first, a precise measurement in high speed communication networks and data centers that enable faster networks and higher performance devices at a lower cost.
Second, precise optical assemblies for gyroscopes used in guided weapons systems deployed in our country's security systems, and third, precise measurement and control optoelectronics that can be used to make better light our systems, which are key to autonomous vehicles.
As with the Micron transaction several months ago, we're very excited about this acquisition and are confident that this is the right deployment of capital for the right asset. We again expect a smooth integration and I'll look forward to providing updates on our progress in the months to come. In the meantime, both Luna and General Photonics will be exhibiting at the OFC event beginning tomorrow March 5th in San Diego. This is one of the biggest trade shows of the year. OFC is the premiere event in telecommunications and data center optics. We look forward to sharing our exciting announcement with industry leaders, who come from around the globe. Both Brian and I will attend and if you're in San Diego, we invite you to stop by the Luna and General Photonics booths.
Finally, I'd like to discuss our outlook for the current year.
As discussed last quarter, we had not historically given financial guidance, but indicated that we regularly evaluate disclosures made -- make the most – what disclosures make the most sense. With a close of 2018 fiscal year, and a good track record of strong and consistent performance, we feel that the time is right to provide guidance for 2019. We've bought and sold certain assets over the last 18 months, which resulted in a more focused organization better situated to scale consistently.
So for fiscal 2019, we expect full year revenues to be in the range of $60 million to $65 million with full year 2019 adjusted EBITDA to be in the range of $6 million to $6.5 million.
So to summarize, I'm incredibly proud of the progress and results delivered by the Luna team in 2018. We achieved strong organic growth across largely all of our businesses, while also executing well on strategic acquisitions and divestitures. We've capitalized on the advancement of optical based technologies. And as I've mentioned before, our production capabilities fit squarely into the sweet spot of this growth. I'm really excited about what we accomplished this past year. We see this performance as a validation that our strategy is working and that our target markets are rich with opportunity for continued growth. And with that, I'll turn the call over to Dale to review the fourth quarter and full fiscal 2018 financial results in more detail. Dale?