Luna Announces Sale of High-Speed Optical Receivers Technology

MACOM buys assets and technology for HSOR business for $33.5 million;

Luna to retain Terahertz technology

ROANOKE, Va.–(BUSINESS WIRE)–Luna
Innovations Incorporated (NASDAQ: LUNA), which develops and
manufactures new-generation products for the aerospace, automotive,
energy, defense, and telecommunications markets, today announced that MACOM
Technology Solutions Holdings, Inc. (NASDAQ: MTSI) has agreed to buy
the assets and operations related to its high-speed optical receivers
(HSOR) business.

The sale includes the operations associated with Luna’s development,
manufacturing and sales of products such as high-speed integrated
coherent receivers and photodiodes. Luna originally acquired these
operations as part of its merger with Advanced Photonix, Inc. (API), in
May 2015. The assets and employees associated with Luna’s Terahertz
operations are not transferred in this transaction.

“Since the merger with API, we have invested substantial time and
resources into the HSOR business as a significant growth area,” said My
Chung, President and Chief Executive Officer of Luna. “As a result of
that investment, we have developed leading products and technologies in
that marketplace. MACOM has recognized the value that we have created in
this space and earlier this year approached us with this transaction
opportunity. With their larger scale of operations, broader suite of
product offerings and global footprint, we believe that MACOM provides a
greater opportunity to drive long-term growth for the HSOR business, and
the completion of this sale maximizes the value we would receive from
the HSOR business.”

As part of the transaction, employees associated with the company’s HSOR
operations and administration in the company’s location in Ann Arbor,
Mich., will transfer to MACOM. The Picometrix line of high-speed optical
receivers and optical-to-electrical converters serve the global
telecommunications, data center and manufacturing testing industries.

“Similar to our High Performance Analog and 25G laser products, Luna’s
industry-leading high speed optical receiver products and technology are
well-aligned with MACOM’s previously-announced growth strategy in Cloud
Data Centers and other high-speed networking markets, and we are excited
to be able to add these products to our growing portfolio through this
tuck-in acquisition,” said John Croteau, MACOM’s President and CEO. “We
expect the transaction to be neutral to accretive in the first year of
combined operations, and to contribute meaningfully to growth in our
Fiscal Year 2018. We look forward to bringing this talented group of
individuals into the MACOM organization as we move ahead in meeting the
evolving demands of the communications markets.”

“We are delighted with the outcome of the transaction and the value we
have created for Luna’s stockholders,” Chung said. “We are especially
grateful to the dedicated employees in the HSOR business whose skills
and efforts have resulted in building this valuable business.”

The purchase price includes $29.5 million paid in cash at closing and
additional $4.0 million to be held in escrow until December 15, 2018 for
possible working capital adjustments to the purchase price and potential
satisfaction of certain post-closing indemnification obligations.

Luna currently intends to utilize a portion of the proceeds of the
transaction to invest in expanding its fiber optic sensing product
offering.

Mr. Chung and Dale Messick, Luna’s Chief Financial Officer, will host a
conference call with investors in conjunction with the company’s
earnings call on Thursday, August 10, 2017 at 11:30 a.m. (EDT) to
discuss the transaction. The conference call will be available via live
webcast on the Luna website at www.lunainc.com
under the tab “Investor Relations.” To participate by telephone, the
domestic dial-in number is 844.578.9643 and the international dial-in
number is 270.823.1522. The participant access code is 56973945.
Investors are advised to dial in at least five minutes prior to the call
to register. The webcast will be archived on the company’s website under
“Webcasts and Presentations” for 30 days following the conference call.

About Luna

Luna Innovations Incorporated (NASDAQ: LUNA) is a leader in optical
technology, providing unique capabilities in high speed optoelectronics
and high performance fiber optic test products for the
telecommunications industry and distributed fiber optic sensing for the
aerospace and automotive industries. Luna is organized into two business
segments, which work closely together to turn ideas into products: a
Technology Development segment and a Products and Licensing segment.
Luna’s business model is designed to accelerate the process of bringing
new and innovative technologies to market. To learn more, please visit www.lunainc.com.

About Macom

MACOM enables a better-connected and safer world by delivering
breakthrough semiconductor technologies for optical, wireless and
satellite networks that satisfy society’s insatiable demand for
information. Today, MACOM powers the infrastructure that millions of
lives and livelihoods depend on every minute to communicate, transact
business, travel, stay informed and be entertained. Our technology
increases the speed and coverage of the mobile Internet and enables
fiber optic networks to carry previously unimaginable volumes of traffic
to businesses, homes and datacenters. Keeping us all safe, MACOM
technology enables next-generation radars for air traffic control and
weather forecasting, as well as mission success on the modern networked
battlefield. MACOM is a pillar of the semiconductor industry, thriving
for more than 60 years of daring to change the world for the better,
through bold technological strokes that deliver true competitive
advantage to customers and superior value to investors. For more
information visit: www.macom.com.

Forward Looking Statements

This release includes information that constitutes “forward-looking
statements” made pursuant to the safe harbor provision of the Private
Securities Litigation Reform Act of 1995, including statements
regarding, but not limited to statements concerning, the final purchase
price of the HSOR business, the amount of any post-closing adjustments
to the purchase price, the potential release of the escrowed purchase
amount, MACOM’s plans and expectations for the HSOR business, any
expected contributions to MACOM’s growth, operations and future
financial results, the impact of the transaction on MACOM’s market
position and ability to meet the expectations of any market, MACOM’s
plans to transfer the HSOR employees into its business, and Luna’s
planned use of proceeds from the transaction. Actual results may differ
materially from the expectations expressed in such forward-looking
statements as a result of various factors, including the final
determination of the amount of the working capital adjustment required
by the purchase agreement, potential post-closing indemnity claims, if
any, the future development of Luna’s various remaining businesses and
investment opportunities that are available to Luna, and risks and
uncertainties set forth in Luna’s and MACOM’s periodic reports and other
filings with the Securities and Exchange Commission. Such filings are
available at the SEC’s website at http://www.sec.gov,
at MACOM’s website at http://www.macom.com,
and at Luna’s website at http://www.lunainc.com.
The statements made in this release are based on information available
to Luna and MACOM as of the date of this release and each company
undertakes no obligation to update any of the forward-looking statements
after the date of this release.

Contacts

Luna Innovations Incorporated
Dale Messick, 1-540-769-8400
[email protected]