Command Center Reports Third Quarter Financial Results

Command Center, Inc. (Nasdaq: CCNI), a national provider of on-demand and temporary staffing solutions, today reported financial results for the third quarter and year-to-date periods ended September 28, 2018.

Third Quarter 2018 Financial Summary

  • Revenue of $26.3 million compared to $26.7 million in the year ago period.
  • Gross margin of 24.5% compared to 26.9% in the year ago period.
  • Net income of $546,000, or $0.11 per diluted share, compared to $851,000, or $0.17 per diluted share in the year ago period.
  • Adjusted EBITDA (excluding stock-based compensation expense) of $912,000 compared to $1.8 million in the year ago period.
  • Repurchased approximately 164,000 shares of common stock at an aggregate price of approximately $949,000, at an average price of $5.80 per share.

Management Commentary

Command Center delivered another solidly profitable quarter and returned a record level of capital to shareholders in the form of repurchased and retired shares, said Rick Coleman, president and CEO of Command Center. In the third quarter we also continued our efforts to stabilize and strengthen our staffing platform. This will remain our focus into 2019 and includes comprehensive changes to our hiring, training, compensation, and benefits practices necessary to support future revenue growth and enhance profitability. While these efforts contributed to some margin compression, tight labor markets continue to present opportunities for staffing firms, and were positioning Command Center to optimize our performance across the country and across all verticals.

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In conjunction with the low unemployment rate, were also experiencing increased competition and higher wages for quality temporary workers in some markets, Mr. Coleman added. This also contributes to higher recruiting and on-boarding costs. Were addressing these challenges, and Im encouraged by our progress in revitalizing the organization. Weve raised the bar for branch-level leadership, many of whom are new to the company, and weve set clear expectations for their performance.

Given our historical trends and the present business environment, we anticipate periodic revenue and gross profit fluctuations, but our geographic and customer diversity, along with a tightly controlled operating structure, are continuing to drive relatively consistent profitability, concluded Mr. Coleman. Our solid balance sheet positions us to pursue growth opportunities and capital deployment in tandem, and during this rebuilding period, our Board of Directors is actively evaluating a range of strategic alternatives to enhance shareholder value.

Third Quarter 2018 Financial Results

Revenue in the third quarter was $26.3 million, compared to $26.7 million in the year-ago quarter. This decrease of $394,000, or 1.5%, relates in large part to higher than normal turnover in sales positions within the last year due to increased competition in the labor market.

Gross margin in the third quarter of 2018 was 24.5%, compared to 26.9% in the year-ago quarter. This decrease was the result of increases in workers compensation cost and field team member wages and related payroll taxes, which was partially offset by relative decreases in state unemployment expense.

Selling, general and administrative (SG&A) expenses in the third quarter were $5.6 million, compared to $5.5 million in the year-ago quarter. This increase was primarily due to increased recruiting costs and internal salaries and benefits, which was partially offset by decreases in bad debt expense and lower legal and professional fees.

Third quarter operating income was $751,000, compared to $1.6 million in the third quarter of 2017.

Net income in the third quarter of 2018 was $546,000, or $0.11 per diluted share, compared to $851,000, or $0.17 per diluted share, in the year-ago quarter.

Adjusted EBITDA in the third quarter was $912,000, compared to $1.8 million in the third quarter of 2017.

Year-to-date 2018 Financial Results

Revenue in the first nine months of 2018 was $73.0 million, compared to $73.6 million in the year-ago period, a decrease of $603,000, or 0.8%.

Gross margin in the first nine months was 25.1%, compared to 26.4% in the year-ago period.

Year-to-date SG&A expenses were $18.2 million, compared to $16.0 million in the year-ago period. This increase is primarily due to $2.2 million in non-recurring and non-operational items, including impairment of the companys workers compensation deposit in receivership of approximately $1.5 million, non-recurring executive severance expenses of approximately $565,000, and a one-time $100,000 expense related to the settlement of the recent proxy contest. Other increases in SG&A include higher stock-based compensation and payroll and payroll related taxes, which were partially offset by decreased bad debt expense and a $198,000 refund of a workers compensation risk pool deposit in excess of what was recorded.

Operating income in the first nine months of 2018 was $(141,000), inclusive of the approximately $2.2 million in non-recurring expenses mentioned above, compared to $3.1 million in the year-ago period.

Net loss in the first nine months of 2018 was $(108,000), or $(0.02) per diluted share, compared to net income of $1.8 million, or $0.35 per diluted share, in the year-ago period. Adjusted EBITDA in the first nine months of 2018 was $2.6 million, compared to $3.6 million in the year-ago period.

Balance Sheet and Capital Structure

Cash and cash equivalents at September 28, 2018, was $6.3 million, compared to $7.8 million at December 29, 2017.

During the third quarter of 2018, the company purchased approximately 164,000 shares of common stock through its share repurchase program at an aggregate price of approximately $949,000, resulting in an average price of $5.80 per share. These shares were subsequently retired. Approximately $3.0 million remains under the current repurchase program.

Effective December 7, 2017, the company implemented a 1-for-12 reverse stock split. Approximately 60.6 million shares of common stock were exchanged for approximately 5.1 million newly issued shares. All stock prices, per share amounts, and number of shares in the consolidated financial statements and related notes have been retroactively adjusted to reflect the reverse stock split.

Conference Call

Command Center will hold a conference call tomorrow, Wednesday, November 7, at 10 a.m. Eastern time (8 a.m. Mountain time) to discuss its third quarter 2018 results.

Date:     Wednesday, November 7, 2018
Time: 10 a.m. Eastern time (8 a.m. Mountain time)
Toll-free dial-in number: 1-877-705-6003
International dial-in number: 1-201-493-6725
Conference ID: 13683934
 

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Hayden IR at [email protected].

The conference call will be broadcast live and available for replay here and via the investor relations section of Command Centers website at www.commandonline.com.

A replay of the conference call will be available after 1 p.m. Eastern time on the same day and continuing through November 21, 2018.

Toll-free replay number:     1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 13683934
 

About Command Center

Command Center provides flexible on-demand employment solutions to businesses in the United States, primarily in the areas of light industrial, hospitality and event services. Through 67 field offices in 22 states, the company provides employment annually for approximately 33,000 field team members working for over 3,200 clients. For more information about Command Center, go to commandonline.com.

Important Cautions Regarding Forward-Looking Statements

This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks, including, but not limited to, national, regional and local economic conditions, the availability of workers compensation insurance coverage, the availability of capital and suitable financing for the companys activities, the ability to attract, develop and retain qualified store managers and other personnel, product and service demand and acceptance, changes in technology, the impact of competition and pricing, government regulation, and other risks set forth in our most recent reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission, copies of which are available on our website at www.commandonline.com and the SEC website at www.sec.gov. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by these cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

Reconciliation of Non-GAAP Financial Measures

In addition to the results prepared in accordance with generally accepted accounting principles (GAAP), the company also presents the non-GAAP terms of EBITDA and Adjusted EBITDA. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, non-cash compensation, and certain non-recurring expenses, including reserve for workers compensation deposits. The company uses EBITDA and Adjusted EBITDA as financial measures as management believes investors find them to be useful tools to perform more meaningful comparisons of past, present and future operating results, and as a means to evaluate our results of operations. The company believes these metrics are useful compliments to net income and other financial performance measures. EBITDA and Adjusted EBITDA are not intended to represent net income as defined by GAAP, and such information should not be considered as an alternative to net income or any other measure of performance prescribed by GAAP.

       

Command Center, Inc.

Consolidated Balance Sheets

 

September 28, 2018

December 29, 2017

ASSETS (unaudited)
Current assets
Cash $ 6,258,315 $ 7,768,631
Restricted cash 44,400 12,853
Accounts receivable, net of allowance for doubtful accounts 9,799,977 9,394,376
Prepaid expenses, deposits and other assets 415,535 740,280
Prepaid workers’ compensation 299,665 167,597
Current portion of workers’ compensation deposits     99,624
Total current assets 16,817,892 18,183,361
Property and equipment, net 383,375 372,145
Deferred tax asset 1,131,178 721,602
Workers’ compensation risk pool deposit, less current portion 178,084 201,563
Workers’ compensation risk pool deposit in receivership, net 260,000 1,800,000
Goodwill and other intangible assets, net   3,957,836   4,085,576
Total assets $ 22,728,365 $ 25,364,247
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable $ 490,823 $ 563,402
Account purchase agreement facility 211,570 853,562
Other current liabilities 562,309 898,809
Accrued wages and benefits 1,566,522 1,503,688
Current portion of workers’ compensation claims liability   1,013,238   1,031,500
Total current liabilities 3,844,462 4,850,961
Workers’ compensation claims liability, less current portion   1,001,208   917,497
Total liabilities   4,845,670   5,768,458
Commitments and contingencies (Note 9)
Stockholders’ equity
Preferred stock – $0.001 par value, 416,666 shares authorized; none issued
Common stock – $0.001 par value, 8,333,333 shares authorized; 4,714,924 and 4,993,672 shares issued and outstanding, respectively 4,715 4,994
Additional paid-in capital 54,610,425 56,211,837
Accumulated deficit   (36,732,445)   (36,621,042)
Total stockholders’ equity   17,882,695   19,595,789
Total liabilities and stockholders’ equity $ 22,728,365 $ 25,364,247
 
       

Command Center, Inc.

Consolidated Statements of Operations

(unaudited)

 
Thirteen weeks ended Thirty-nine weeks ended

September 28, 2018

   

September 29, 2017

September 28, 2018

   

September 29, 2017

Revenue $ 26,309,035 $ 26,703,266 $ 72,952,418 $ 73,555,175
Cost of staffing services   19,855,146   19,513,757   54,627,143   54,134,575
Gross profit 6,453,889 7,189,509 18,325,275 19,420,600
Selling, general and administrative expenses 5,630,260 5,483,857 18,212,788 15,991,976
Depreciation and amortization   72,548   96,368   253,065   288,195
Income (loss) from operations 751,081 1,609,284 (140,578) 3,140,429
Interest (income) expense and other financing expense   (553)   6,263   1,876   7,492
Net income (loss) before income taxes 751,634 1,603,021 (142,454) 3,132,937
Provision (benefit) for income taxes   205,284   752,223   (34,362)   1,364,791
Net income (loss) $ 546,350 $ 850,798 $ (108,092) $ 1,768,146
 
Earnings (loss) per share:
Basic $ 0.11 $ 0.17 $ (0.02) $ 0.35
Diluted $ 0.11 $ 0.17 $ (0.02) $ 0.35
 
Weighted average shares outstanding:
Basic 4,808,698 5,051,960 4,905,367 5,051,745
Diluted 4,812,908 5,108,104 4,905,367 5,108,539
 

The following tables present a reconciliation of net income (loss) to EBITDA and Adjusted EBITDA for the periods presented (in thousands):

    Thirteen weeks ended     Thirty-nine weeks ended

September 28, 2018

   

September 29, 2017

September 28, 2018

   

September 29, 2017

Net income (loss) $ 546 $ 851 $ (108) $ 1,768
Interest (income) expense (0) 6 1 7
Provision for income taxes 205 752 (34) 1,365
Depreciation and amortization   73   96   253   288
EBITDA 824 1,705 112 3,428
Non-cash compensation 88 104 307 122
Reserve for workers’ compensation deposit 1,540
Other non-recurring expense       665  
Adjusted EBITDA $ 912 $ 1,809 $ 2,624 $ 3,550
 

Command Center, Inc.
Company Contact:

Cory
Smith, CFO
866-464-5844
[email protected]
or
Investor
Relations Contact
:
Hayden IR
Brett Maas
646-536-7331
[email protected]

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