Gemini Reports Third Quarter 2017 Results

CALGARY, Nov. 28, 2017 /CNW/ - Gemini Corporation (GKX-TSXV) ("Gemini" or the "Company") today reported its financial results for the three and nine months ended September 30, 2017. All financial figures are expressed in Canadian dollars.

"The business environment in Western Canada remains challenged which is having an ongoing impact on gross profit margin", said Chris Podolsky, Gemini's CFO.

"In order to return the Company to profitability in 2018, the decision has been made to immediately enter into a corporate restructuring process. This restructuring will include changes to the executive leadership team and significant reductions in personnel resulting in a $6.0 million annual reduction in overhead costs. The restructuring is driven by a change in strategic direction in Alberta to enhance our focus on our field operations business, comprised of fabrication, construction and maintenance. Our Fort St John, BC environmental office will continue to operate as a profitable stand-alone location. On November 28, 2017, our Lender amended the financial covenants until March 31, 2018 to reflect the new plan put forth by Gemini, and has committed to working with management to implement a new covenant package after that date that will reflect the new state of the Company."

For more information about these developments, please see today's press release entitled "Gemini Restructures Leadership and Operations".

FINANCIAL HIGHLIGHTS

$'000's	Three months ended September 30		Nine months ended September 30
	2017	2016	2017	2016
Revenue	$14,559	$22,129	$34,859	$82,192
Gross profit	(156)	6,258	(125)	11,478
Net loss	(3,248)	(1,227)	(8,358)	(5,653)
Net loss per share - basic and diluted	(0.04)	(0.02)	(0.11)	(0.07)
Adjusted EBITDA(1)	(2,397)	2,466	(6,497)	846
$'000's			September 30, 2017	December 31, 2016
Working capital(1)			$(372)	$8,334
Working capital ratio(1)			1:1	1.8:1
Total assets			27,506	23,089
Tangible net worth(1)			(1,843)	6,565
Total liabilities to equity ratio			(52):1	2.0:1

(1)	Non-IFRS financial measure

 

THIRD QUARTER 2017 HIGHLIGHTS

• $12 million in additional work was awarded to Gemini in the third quarter from new and existing clients;
• $26.4 million revenue backlog as at September 30, 2017. The majority of this backlog will be converted into revenue in the fourth quarter of 2017 and the first quarter of 2018;
• Revenue for the quarter declined 34% or $7.5 million to $14.6 million compared with the same period in 2016 due to the continued challenging market conditions;
• Administrative expenses for the quarter decreased 26% or $0.9 million to $2.6 million compared with the same period in 2016 due to savings realized through ongoing cost containment efforts begun in 2016;
• Adjusted EBITDA for the quarter was a loss of $2.4 million due to a decrease in revenue that outpaced our cost containment efforts;
• Net Loss for the quarter was $3.2 million compared with a net loss of $1.2 million for the same period in 2016;
• Cash used in operations was $6.2 million for the quarter. By comparison, Gemini's operations provided $4.7 million of cash during the same period in 2016; and
• Gemini ended the quarter with $11.7 million drawn against the revolving line of credit, compared with nil drawn as at September 30, 2016.

OUTLOOK
Economic recovery in the sectors we serve continues to be slower than anticipated due to low energy prices and a lack of new major infrastructure projects in Western Canada. As a result, the competitive environment is one where lowest cost is the primary consideration when awarding new work. Despite aggressive cost containment efforts introduced in 2016, the lower revenue levels in 2017 require the Company to further reduce overhead costs throughout the business in order to achieve profitability.

While the economic environment for Gemini remains highly competitive, the Company continues to have confidence and success in the team's ability to secure new work. Gemini is fortunate to have solid, trusted relationships with a group of active, growth oriented clients.

The Company continues to maintain project quality while competing for new business in a competitive marketplace. The restructuring of Alberta operations in the fourth quarter of 2017 will allow the Company to bid competitively and profitably on new projects in line with current market expectations.

Requests for proposals and bidding activity remain high and the Company enjoyed success in the third quarter securing new business with new and existing clients. Revenue backlog as at September 30, 2017 was $26.4 million.

The excess fabrication capacity in the Alberta market continues to put downward pressure on gross profit margins and we do not see this changing in the foreseeable future. Higher revenue volumes combined with the planned reduction in G&A costs will help Gemini counter the pressure on gross profit margin thereby restoring profitability. The Company will continue to balance the desire for work volume with a cautious risk management approach that seeks to avoid exposing the Company to financial loss by bidding unprofitable or excessively risky projects. Gemini continues to focus on business development, rigorous estimating and controls, operational excellence and execution processes to find innovative ways to bring value to clients and secure new backlog.

MD&A AND FINANCIAL STATEMENTS
The 2017 Q3 Management's Discussion and Analysis, and the Consolidated Financial Statements provide a detailed explanation of Gemini's operating results for the three and nine months ended September 30, 2017. Gemini's 2017 third quarter will be filed on SEDAR at http://www.sedar.com by November 28, 2017.

FORWARD-LOOKING STATEMENTS AND NON-IFRS FINANCIAL MEASURES
This news release may contain forward looking information that represents Gemini's expectations, estimates or beliefs concerning, among other things, the timing of any recovery in oil and gas prices, the recovery of the markets for the Company's products and services, future operating results and various components thereof, or Gemini's future economic performance. All statements other than the statements of historical fact may be forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expects" and similar expressions. The estimates and beliefs contained in such forward-looking statements are based on management's assumptions relating to Gemini's performance and competition within the sectors in which it competes, the continuation of the current regulatory and tax regimes in the jurisdictions in which Gemini operates, and necessarily involve known and unknown risks and uncertainties, including risks and assumptions relating to client service demand, field service costs, labour rates and other factors that may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted or suggested. Gemini does not undertake to update any forward-looking information in this document whether as to new information, future events or otherwise.

This news release refers to certain Non-IFRS financial measures that are not determined in accordance with International Financial Reporting Standards ("IFRS"). The measures used are "backlog", "working capital", "working capital ratio" and "adjusted EBITDA". These measures are used by our management to assist in making operating decisions and assessing performance. While we calculate these measures consistently from period to period, they likely will not be directly comparable to similar measures used by other companies because they do not have standardized meanings prescribed by IFRS. See the "Non-IFRS Measures" section of the September 30, 2017 MD&A. Investors are encouraged to evaluate each adjustment and the reasons Gemini considers it appropriate for supplemental analysis. Investors are cautioned, however, that these measures should not be construed as an alternative to net earnings determined in accordance with IFRS as an indication of Gemini's performance. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

ABOUT GEMINI
Gemini operates in Western Canada and is headquartered in Calgary with offices in Ponoka, Fort Saskatchewan and Fort St. John. The Company is celebrating its 35th anniversary in 2017.

The Company provides fabrication, construction, maintenance, environmental and regulatory support to customers involved in oil and gas, heavy oil, oil sands, midstream and pipeline facilities, hydrocarbon processing, power and other industrials.

Shares of Gemini trade on the TSX Venture Exchange under the symbol "GKX". For more information about the Company and its services, go to www.geminicorp.ca.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

SOURCE Gemini Corporation

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