Command Center, Inc. (OTCQB: CCNI), a national provider of on-demand and temporary staffing solutions, reported financial results for the third quarter ended September 29, 2017.
Third Quarter 2017 Financial Highlights (vs. Year-Ago Quarter Unless Specifically Noted)
- Revenue increased to $26.7 million compared to $26.4 million.
- Gross margin up 100 basis points to 26.9%.
- Net income improved to $0.9 million or $0.01 per diluted share compared to $0.8 million or $0.01 per diluted share.
- Adjusted EBITDA increased 53% to $1.8 million.
- Cash and cash equivalents grew 101% to $6.1 million compared to $3.0 million at the end of 2016.
- Repurchased 134,100 shares at an average price of $0.41 per share.
“The third quarter marks our fifth consecutive quarter of organic revenue growth and fourth straight quarter of gross margin expansion,” said Bubba Sandford, president and CEO of Command Center. “The foundation of our overall performance as a company continues to lie with the people who are out there every day driving revenue and putting people to work. As we indicated numerous times, the training programs we implemented are designed to capture higher margin business, which results, in part, from providing superior service to our customers and our temporary workers.
“In addition to continued revenue and gross margin increases, our EBITDA and cash are strong. In fact, we doubled our cash since the end of 2016 and continue to carry minimal debt. We expect this improved liquidity to allow us to evaluate accretive uses of our capital, which includes share buybacks, acquisition opportunities, additional store openings or placing increased resources in certain verticals. Also, through the previously announced Strategic Alternatives Committee, the company’s board of directors continues its process of evaluating opportunities to create additional value for our shareholders, which includes a number of possibilities.
“Given our financial momentum and operational execution, which we expect to continue, our board agreed the time is right to implement a reverse stock split. We expect this will bring our share price to levels that may allow a larger pool of investors to invest in our company. The reverse split is also an important step in our plans to up-list to a major U.S. stock exchange. We believe these steps, along with our diligent focus on accretive capital allocation, constitute the right plan to drive maximum shareholder value.”
Third Quarter 2017 Financial Results
Revenue in the third quarter of 2017 increased to $26.7 million, compared to $26.4 million in the year-ago quarter. The increase was driven by a continued focus on selling good accounts at the branch level, but was offset by a reduction in revenue from some larger accounts.
Gross margin in the third quarter increased 100 basis points to 26.9%, compared to 25.9% in the year-ago quarter. The increase was the result of the company’s continued emphasis on coaching and training field personnel to produce increased margins based on the value of the services provided to customers.
Selling, general and administrative expenses in the third quarter declined to $5.5 million, compared to $5.6 million in the year-ago quarter. The decline was primarily due to lower professional services fees and bad debt expense. As a percentage of revenue, SG&A expenses declined 70 basis points to 20.5% compared to 21.2%.
Operating income in the third quarter increased 43% to $1.6 million, compared to $1.1 million in the third quarter of 2016. Net income increased to $0.9 million or $0.01 per diluted share, compared to $0.8 million or $0.01 per diluted share in the year-ago quarter.
Adjusted EBITDA (a non-GAAP term defined below) in the third quarter increased 53% to $1.8 million, compared to $1.2 million in the year-ago quarter.
Cash and cash equivalents at September 29, 2017, increased 101% to $6.1 million, compared to $3.0 million at December 30, 2016. The company carried a $0.6 million balance on its account purchase agreement at September 29, 2017, compared to no debt at the end of 2016.
During the third quarter, the company repurchased 134,100 shares at an average price of $0.41 per share. Approximately $4.9 million remains under the company’s new $5.0 million stock repurchase plan announced in August of this year.
Command Center ended the quarter with 66 stores operating in 22 states.
Reverse Stock Split Authorization
Command Center’s board of directors plans to undertake a reverse stock split of the company’s common stock at a ratio of 1-for-12, reducing the number of authorized shares proportionally. The reverse split is expected to be effective in early December 2017, provided that Command Center’s Articles of Amendment have been filed with the state of Washington and FINRA approval is obtained. Command Center does not anticipate issuing fractional shares as a result of the reverse stock split. Shareholders entitled to receive fractional shares because of the reverse stock split will receive cash payments in lieu of such shares.
Command Center will hold a conference call tomorrow, November 14, at 10:00 a.m. Eastern time (8:00 a.m. Mountain time) to discuss its third quarter 2017 results.
Date: Tuesday, November 14, 2017
Time: 10:00 a.m. Eastern time (8:00 a.m. Mountain time)
Toll-free dial-in number: 1-888-389-5986
International dial-in number: 1-323-701-0225
Conference ID: 8152176
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 Liolios at 1-949-574-3860.
A replay of the conference call will be available after 1:00 p.m. Eastern time on the same day through November 28, 2017.
Toll-free replay number: 1-844-512-2921
International replay number: 1-412-317-6671
Replay ID: 8152176
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 66 field offices, the company provides employment annually for approximately 34,000 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 company's 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.
The following tables present a reconciliation of EBITDA and Adjusted EBITDA to net income for the periods presented (in thousands):
Thirteen Weeks Ended
Thirteen Weeks Ended
|EBITDA (in thousands)|
|Net income (loss)||$||851||$||838|
|Interest expense and other financing expense||6||1|
|Depreciation and amortization||96||110|
|Provision for income taxes||752||282|
|Reserve for workers compensation deposit||-||-|
|Command Center, Inc.|
|Consolidated Condensed Balance Sheets|
|September 29, 2017||December 30, 2016|
|Accounts receivable, net of allowance for doubtful accounts of $332,097 and $899,395, respectively||10,966,916||10,287,456|
|Prepaid expenses, deposits, and other||479,644||631,873|
|Prepaid workers’ compensation||302,743||745,697|
|Current portion of workers’ compensation risk pool deposits||397,424||404,327|
|Total Current Assets||18,292,976||15,232,289|
|Property and equipment, net||413,358||432,857|
|Deferred tax asset||1,308,685||2,316,774|
|Workers’ compensation risk pool deposit, less current portion, net||2,001,563||2,006,813|
|Goodwill and other intangible assets, net||4,141,085||4,307,611|
|Liabilities and Stockholders’ Equity|
|Account purchase agreement facility||569,185||-|
|Other current liabilities||650,661||395,926|
|Accrued wages and benefits||1,694,791||1,567,585|
|Current portion of workers’ compensation premiums and claims liability||1,118,179||1,101,966|
|Total Current Liabilities||4,440,409||3,827,754|
|Workers’ compensation claims liability, less current portion||1,018,244||1,604,735|
|Commitments and Contingencies (See Note 10)|
|Preferred stock - $0.001 par value, 5,000,000 shares authorized, none issued and outstanding||-||-|
Common stock - $0.001 par value, 100,000,000 shares authorized;
60,605,549 and 60,634,650 shares
issued and outstanding, respectively
|Total Stockholders’ Equity||20,669,014||18,863,855|
|Total Liabilities and Stockholders’ Equity||$||26,157,667||$||24,296,344|
Command Center, Inc.
Consolidated Condensed Statements of Income
Thirteen Weeks Ended
Thirteen Weeks Ended
|Cost of staffing services||19,513,757||19,596,705|
|Selling, general, and administrative expenses||5,483,857||5,605,680|
|Depreciation and amortization||96,368||110,155|
|Income (loss) from operations||1,609,284||1,121,106|
|Interest expense and other financing expense||6,263||616|
|Net income (loss) before income taxes||1,603,021||1,120,490|
|Provision for income taxes||752,223||282,259|
|Net income (loss)||$||850,798||$||838,231|
|Earnings per share:||$||0.01||$||0.01|
|Weighted average shares outstanding:|
Cody Slach, 949-574-3860