CCNI Command Center Inc

Net Income of $563,000; Adjusted EBITDA of $1.3 Million

Command Center, Inc. (NASDAQ: CCNI), a national provider of on-demand and temporary staffing solutions, today reported financial results for the second quarter and year-to-date periods ended June 29, 2018.

Second Quarter 2018 Financial Summary

• Revenue of $24.2 million compared to $24.5 million in the year ago period.
• Gross margin of 26.0% compared to 26.5% in the year ago period.
• Net income of $563,000, or $0.11 per diluted share, compared to $735,000, or $0.14 per diluted share in the year ago period.
• Adjusted EBITDA (which excludes certain non-recurring expenses) of $1.3 million in the second quarters of both 2018 and 2017.
• Repurchased approximately 104,000 shares of common stock at an aggregate price of approximately $590,000, at an average price of $5.69 per share.

Management Commentary

“During the second quarter we began to identify and implement operational improvements to increase profitability and facilitate revenue growth,” said Rick Coleman, president and CEO of Command Center. “Our efforts, which began in late May, include strengthening our field management team, clarifying reporting structures, and adjusting bonus parameters for positions having a direct impact on both the company’s revenue and bottom line. Although our operating results will continue to fluctuate by location, industry, and period, Command Center continues to operate profitably and generate cash. We believe the steps we’ve taken, combined with other planned measures, will enhance our service delivery capability and allow us to generate even stronger long-term results.”

Coleman continued, “Our balance sheet remains strong and debt-free with more than $5.8 million in cash. Excluding non-recurring and non-operational items, over the last 12 months we generated approximately $4.6 million in Adjusted EBITDA. This consistent performance, combined with the health of our balance sheet and the minimal capital investment needed to operate our business, enables us to return capital to our shareholders through our share repurchase program. During the second quarter of 2018, we purchased and retired approximately 104,000 shares of our common stock, leaving approximately $3.9 million available under the repurchase program.”

Second Quarter 2018 Financial Results

Revenue in the second quarter of 2018 was $24.2 million, compared to $24.5 million in the year-ago quarter. This modest decrease of $328,000, or 1.3%, is due to higher than normal turnover in sales positions as a result of increased competition in the job market related to low unemployment rates.

Gross margin in the second quarter of 2018 was 26.0%, compared to 26.5% in the year-ago quarter. The slight decline was the result of increases in workers’ compensation costs and field team member wages and related payroll taxes, which were partially offset by relative decreases in state unemployment expense, per diem, and transportation costs.

Selling, general and administrative (SG&A) expenses in the second quarter of 2018 were $5.4 million, compared to $5.2 million in the year-ago quarter. The increase was primarily due to increased internal salaries and benefits and increased stock-based compensation, which were partially offset by decreased contract labor costs at the corporate office and a refund of the company’s workers’ compensation risk pool deposit with its former insurer in excess of what was recorded. Also included in SG&A in the second quarter of 2018 are one-time expenses of $100,000 related to settlement of the company’s recent proxy contest and $95,000 of severance expense.

Operating income in the second quarter of 2018, including the $100,000 proxy contest expense and $95,000 of severance expense, was $820,000, compared to $1.2 million in the second quarter of 2017.

Net income in the second quarter of 2018, including the $100,000 proxy contest expense and $95,000 severance expense, was $563,000, or $0.11 per diluted share, compared to $735,000, or $0.14 per diluted share, in the year-ago quarter.

Adjusted EBITDA in the second quarter of 2018 was $1.3 million, unchanged from the year-ago quarter.

Year-to-date 2018 Financial Results

Revenue in the first six months of 2018 was $46.6 million, compared to $46.9 million in the year-ago period, a decrease of $209,000, or 0.4%. Gross margin in the first six months of 2018 was 25.5%, compared to 26.1% in the year-ago period. SG&A expenses in the first six months of 2018 were $12.6 million, compared to $10.5 million in the year-ago period. This increase is primarily due to $2.2 million in non-recurring and non-operational items, including a write down of the company’s risk pool deposit, severance related to former employees, and costs related to settlement of the company’s recent proxy contest.

Operating loss in the first six months of 2018 was $892,000, inclusive of the approximately $2.2 million in non-recurring expenses mentioned above, compared to operating income of $1.5 million in the year-ago period. Net loss in the first six months of 2018 was $654,000, or $(0.13) per diluted share, compared to net income of $917,000, or $0.18 per diluted share, in the year-ago period. Adjusted EBITDA in the first six months of 2018 was $1.7 million, unchanged from the prior-year period.

Balance Sheet and Capital Structure

Cash and cash equivalents at June 29, 2018, was $5.8 million, compared to $7.8 million at December 29, 2017.

During the second quarter of 2018, the company purchased approximately 104,000 shares of common stock through its share repurchase program at an aggregate price of approximately $590,000, resulting in an average price of $5.69 per share. These shares were subsequently retired. There is approximately $3.9 million remaining under the 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, Tuesday, August 14, at 10 a.m. Eastern time (8 a.m. Mountain time) to discuss its second quarter 2018 results.

Date:     Tuesday, August 14, 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: 13682139

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 ccni@haydenir.com.

The conference call will be broadcast live and available for replay here and via the investor relations section of Command Center’s 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 continue through August 28, 2018.

Toll-free replay number:     1-844-512-2921 International replay number: 1-412-317-6671 Replay ID: 13682139

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 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.

  Command Center, Inc. Consolidated Balance Sheets   June 29, 2018 December 29, 2017 ASSETS (unaudited) Current assets Cash $ 5,759,456 $ 7,768,631 Restricted cash 57,868 12,853 Accounts receivable, net of allowance for doubtful accounts 9,450,198 9,394,376 Prepaid expenses, deposits and other assets 739,692 740,280 Prepaid workers' compensation 481,465 167,597 Other receivables 239,852 - Current portion of workers' compensation deposits   -     99,624   Total current assets 16,728,531 18,183,361 Property and equipment, net 363,467 372,145 Deferred tax asset 1,111,571 721,602 Workers' compensation risk pool deposit, less current portion 201,563 201,563 Workers' compensation risk pool deposit in receivership, net 260,000 1,800,000 Goodwill and other intangible assets, net   3,984,773     4,085,576   Total assets $ 22,649,905   $ 25,364,247   LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 290,396 $ 563,402 Account purchase agreement facility - 853,562 Other current liabilities 533,310 898,809 Accrued wages and benefits 1,629,525 1,503,688 Current portion of workers' compensation claims liability   998,419     1,031,500   Total current liabilities 3,451,650 4,850,961 Workers' compensation claims liability, less current portion   1,001,208     917,497   Total liabilities   4,452,858     5,768,458   Commitments and contingencies 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; 4,878,592 and 4,993,672 shares issued and outstanding, respectively 4,878 4,994 Additional paid-in capital 55,470,964 56,211,837 Accumulated deficit   (37,278,795 )   (36,621,042 ) Total stockholders' equity   18,197,047     19,595,789   Total liabilities and stockholders' equity $ 22,649,905   $ 25,364,247           Command Center, Inc. Consolidated Statements of Income (unaudited)   Thirteen weeks ended Twenty-six weeks ended June 29, 2018     June 30, 2017 June 29, 2018     June 30, 2017 Revenue $ 24,175,985 $ 24,503,660 $ 46,643,383 $ 46,851,909 Cost of staffing services   17,898,665   18,010,803   34,771,996     34,620,818 Gross profit 6,277,320 6,492,857 11,871,387 12,231,091 Selling, general and administrative expenses 5,368,908 5,164,512 12,582,528 10,508,119 Depreciation and amortization   87,926   96,277   180,517     191,827 Income (loss) from operations 820,486 1,232,068 (891,658 ) 1,531,145 Interest expense and other financing expense   267   1,225   2,430     1,229 Net income (loss) before income taxes 820,219 1,230,843 (894,088 ) 1,529,916 Provision (benefit) for income taxes   256,972   495,947   (239,646 )   612,568 Net income (loss) $ 563,247 $ 734,896 $ (654,442 ) $ 917,348   Earnings (loss) per share: Basic $ 0.11 $ 0.15 $ (0.13 ) $ 0.18 Diluted $ 0.11 $ 0.14 $ (0.13 ) $ 0.18   Weighted average shares outstanding: Basic 4,924,245 5,025,676 4,953,701 5,025,532 Diluted 4,931,201 5,079,969 4,953,701 5,083,434  

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

      Thirteen weeks ended Twenty-six weeks ended June 29, 2018     June 30, 2017 June 29, 2018     June 30, 2017 Net income (loss) $ 563 $ 735 $ (654 ) $ 917 Interest expense - 1 2 1 Provision for income taxes 257 496 (240 ) 613 Depreciation and amortization   88   96   181     192 EBITDA 908 1,328 (711 ) 1,723 Non-cash compensation 192 8 218 18 Reserve for workers' compensation deposit - - 1,540 - Proxy settlement 100 - 100 - Executive severance   95   -   565     - Adjusted EBITDA $ 1,295 $ 1,336 $ 1,712   $ 1,741  

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Company Contact:Command Center, Inc.Cory Smith, CFO866-464-5844cory.smith@commandonline.comorInvestor Relations Contact:Hayden IRBrett Maas646-536-7331brett@haydenir.com