Command Center, Inc. (Nasdaq: CCNI), a national provider of on-demand and temporary staffing solutions, today reported financial results for the fourth quarter and year ended December 28, 2018.
Fourth Quarter 2018 Financial Summary
- Revenue of $24.4 million compared to $24.5 million in the year ago period.
- Gross margin of 27.1% compared to 24.5% in the year ago period.
- The fourth quarter of 2018 included a benefit related to changes in workers’ compensation accruals of $172,000, compared to an expense of $303,000 in the fourth quarter last year.
- Net income of $1.1 million, or $0.23 per diluted share, compared to a net loss of $(89,000), or $(0.02) per diluted share in the year ago period.
- Adjusted EBITDA (excluding stock-based compensation expense) of $1.6 million compared to $687,000 in the year ago period.
Full Year 2018 Financial Summary
- Revenue of $97.4 million compared to $98.1 million in the year ago period.
- Gross margin of 25.6% compared to 25.9% in the year ago period.
- Command Center recorded an expense related to changes in workers’ compensation accruals of $555,000 in 2018, compared to an expense of $303,000 in 2017.
- Net income of $1.0 million, or $0.20 per diluted share, compared to $1.7 million, or $0.33 per diluted share in the year ago period.
- Adjusted EBITDA (excluding stock-based compensation expense) of $4.1 million compared to $4.2 million in the year ago period.
- Repurchased approximately 324,000 shares of common stock at an aggregate cost of approximately $1.8 million, resulting in an average price of $5.65 per share.
Definitive Merger Agreement
On April 8, 2019 the company announced it has entered into a definitive agreement (“Merger Agreement”) to merge with Hire Quest Holdings, LLC, operating as Trojan Labor and Acrux Staffing, a privately-held provider of blue collar, light industrial and administrative staffing, in an all-stock transaction. The transaction is expected to close in the second quarter of 2019, or shortly thereafter, subject to standard closing conditions, including shareholder approval. Upon completion of the transaction, Hire Quest will be merged with Command Center. The company expects to issue a proxy statement containing full details of the proposed transaction for shareholder consideration and approval.
Management Commentary
“In addition to favorable workers’ compensation accrual adjustments compared to previous periods, the $1.2 million improvement in net income demonstrates our progress in streamlining operations and improving operating efficiency,” said Rick Coleman, president and CEO of Command Center. “The strong end to a solid year gives us momentum as we move towards completing our pending merger with Hire Quest Holdings, LLC. As part of the integration of the two companies, we will be transitioning our existing branches to the more profitable franchise model deployed by Hire Quest. We are a solid organization with a proven ability to generate cash and effectively deploy capital. Gaining the additional scale from the pending merger and operating from a more profitable franchise model, we will have an ecosystem of franchises that incentivizes improved performance and maximizes results for all stakeholders.”
Fourth Quarter 2018 Financial Results
Revenue in the fourth quarter of 2018 was $24.4 million, compared to $24.5 million in the year-ago quarter, a decrease of $81,000, or 0.3%.
Gross margin in the fourth quarter was 27.1%, compared to 24.5% in the year-ago quarter. This increase is primarily related to fluctuations in the company’s workers’ compensation expense.
Selling, general and administrative (“SG&A”) expense in the fourth quarter was $5.2 million, compared to $5.4 million in the year-ago quarter.
As a result of increased margin and lower SG&A, income from operations increased by $766,000 to $1.3 million in the fourth quarter of 2018, compared to $556,000 in the fourth quarter of 2017.
The financial results in the fourth quarter of 2018 included a benefit related to changes in workers’ compensation accruals of $172,000, compared to an expense of $303,000 in the fourth quarter last year.
Net income in the fourth quarter of 2018 was $1.1 million, or $0.23 per diluted share, compared to a net loss of $89,000, or $(0.02) per diluted share, in the year-ago quarter.
Adjusted EBITDA in the fourth quarter was $1.6 million, compared to $687,000 in the year-ago quarter. Adjusted EBITDA in the fourth quarter of 2018 included $105,000 in non-recurring charges and $88,000 in non-cash compensation, compared to $0 in non-recurring charges and $33,000 in non-cash compensation in the year-ago quarter.
Full-Year 2018 Financial Results
Revenue for the full-year 2018 was $97.4 million, compared to $98.1 million in 2017, a decrease of $683,000, or 0.7%.
Gross margin remained strong at 25.6% in 2018, a slight decrease from 25.9% in 2017.
SG&A in 2018 was $23.4 million, which included $2.2 million in non-recurring charges, compared to $21.3 million in 2017.
Command Center recorded an expense related to changes in workers’ compensation accruals of $555,000 in 2018, compared to an expense of $303,000 in 2017.
Net income in 2018 was $1 million, or $0.20 per diluted share, compared to $1.7 million, or $0.33 per diluted share in 2017.
Adjusted EBITDA was $4.1 million, or 4.2% of revenue in 2018, compared to $4.2 million, or 4.3% of revenue, in 2017. Included in adjusted EBITDA in 2018 were $2.2 million in non-recurring charges and $395,000 in non-cash compensation, compared to $0 in non-recurring charges and $155,000 in non-cash compensation in 2017.
Balance Sheet and Capital Structure
Cash and cash equivalents at December 28, 2018, was $8.0 million, compared to $7.8 million at December 29, 2017.
During 2018, the company purchased approximately 324,000 shares of common stock through its share repurchase program at an aggregate price of approximately $1.8 million resulting in an average price of $5.65 per share. These shares were subsequently retired. As of December 28, 2018, approximately $2.8 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 on Wednesday, April 10, 2019 at 10 a.m. Eastern time (8 a.m. Mountain time) to discuss the pending merger transaction and its fourth quarter and full-year 2018 results.
| Date: | Wednesday, April 10, 2019 | ||
| 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: | 13689444 | ||
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 continuing through April 24, 2019.
| Toll-free replay number: | 1-844-512-2921 | ||
| International replay number: | 1-412-317-6671 | ||
| Replay ID: | 13689444 | ||
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 www.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 term Adjusted EBITDA. 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 Adjusted EBITDA as a financial measure as management believes investors find it to be a useful tool 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 this metric is a useful compliment to net income and other financial performance measures. Adjusted EBITDA is 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 | ||||||||||
| December 28, 2018 | December 29, 2017 | |||||||||
| ASSETS | ||||||||||
| Current assets | ||||||||||
| Cash | $ | 7,934,287 | $ | 7,768,631 | ||||||
| Restricted cash | 69,423 | 12,853 | ||||||||
| Accounts receivable, net of allowance for doubtful accounts | 9,041,361 | 9,394,376 | ||||||||
| Prepaid expenses, deposits, and other assets | 380,930 | 740,280 | ||||||||
| Prepaid workers' compensation | 212,197 | 167,597 | ||||||||
| Current portion of workers' compensation deposits | - | 99,624 | ||||||||
| Total current assets | 17,638,198 | 18,183,361 | ||||||||
| Property and equipment, net | 329,255 | 372,145 | ||||||||
| Deferred tax asset | 1,079,908 | 721,602 | ||||||||
| Workers' compensation risk pool deposit, less current portion, net | 193,984 | 201,563 | ||||||||
| Workers' compensation risk pool deposit in receivership, net | 260,000 | 1,800,000 | ||||||||
| Goodwill and other intangible assets, net | 3,930,900 | 4,085,576 | ||||||||
| Total assets | $ | 23,432,245 | $ | 25,364,247 | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
| Current liabilities | ||||||||||
| Accounts payable | $ | 219,945 | $ | 563,402 | ||||||
| Account purchase agreement facility | 398,894 | 853,562 | ||||||||
| Other current liabilities | 821,142 | 898,809 | ||||||||
| Accrued wages and benefits | 1,218,699 | 1,503,688 | ||||||||
| Current portion of workers' compensation claims liability | 1,003,643 | 1,031,500 | ||||||||
| Total current liabilities | 3,662,323 | 4,850,961 | ||||||||
| Workers' compensation claims liability, less current portion | 878,455 | 917,497 | ||||||||
| Total liabilities | 4,540,778 | 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; 4,680,871 and 4,993,672 shares issued and outstanding, respectively | 4,681 | 4,994 | ||||||||
| Additional paid-in capital | 54,536,852 | 56,211,837 | ||||||||
| Accumulated deficit | (35,650,066 | ) | (36,621,042 | ) | ||||||
| Total stockholders' equity | 18,891,467 | 19,595,789 | ||||||||
| Total liabilities and stockholders' equity | $ | 23,432,245 | $ | 25,364,247 | ||||||
Command Center, Inc. Consolidated Statements of Income | |||||||||||||||||
| Thirteen weeks ended | Fifty-two weeks ended | ||||||||||||||||
| December 28, 2018 | December 29, 2017 | December 28, 2018 | December 29, 2017 | ||||||||||||||
| Revenue | $ | 24,436,403 | $ | 24,517,022 | $ | 97,388,820 | $ | 98,072,198 | |||||||||
| Cost of staffing services | 17,823,152 | 18,507,033 | 72,450,295 | 72,641,609 | |||||||||||||
| Gross profit | 6,613,251 | 6,009,989 | 24,938,525 | 25,430,589 | |||||||||||||
| Selling, general and administrative expenses | 5,220,411 | 5,355,705 | 23,433,198 | 21,347,681 | |||||||||||||
| Depreciation and amortization | 70,787 | 98,217 | 323,852 | 386,413 | |||||||||||||
| Income from operations | 1,322,053 | 556,067 | 1,181,475 | 3,696,495 | |||||||||||||
| Interest expense and other financing expense | 239 | 4,128 | 2,116 | 11,619 | |||||||||||||
| Net income before income taxes | 1,321,814 | 551,939 | 1,179,359 | 3,684,876 | |||||||||||||
| Provision for income taxes | 239,434 | 640,737 | 205,072 | 2,005,528 | |||||||||||||
| Net income | $ | 1,082,380 | $ | (88,798 | ) | $ | 974,287 | $ | 1,679,348 | ||||||||
| Earnings per share: | |||||||||||||||||
| Basic | $ | 0.23 | $ | (0.02 | ) | $ | 0.20 | $ | 0.33 | ||||||||
| Diluted | $ | 0.23 | $ | (0.02 | ) | $ | 0.20 | $ | 0.33 | ||||||||
| Weighted average shares outstanding: | |||||||||||||||||
| Basic | 4,695,902 | 5,006,212 | 4,853,000 | 5,043,254 | |||||||||||||
| Diluted | 4,695,902 | 5,244,377 | 4,855,019 | 5,105,006 | |||||||||||||
Please note: numbers may not foot due to rounding
The following tables present a reconciliation of net income (loss) to Adjusted EBITDA for the periods presented (in thousands):
| Thirteen weeks ended | Fifty-two weeks ended | ||||||||||||||||
| December 28, 2018 | December 29, 2017 | December 28, 2018 | December 29, 2017 | ||||||||||||||
| Net income | $ | 1,082 | $ | (89 | ) | $ | 974 | $ | 1,679 | ||||||||
| Interest expense | - | 4 | 2 | 12 | |||||||||||||
| Provision for income taxes | 240 | 641 | 205 | 2,006 | |||||||||||||
| Depreciation and amortization | 71 | 98 | 324 | 386 | |||||||||||||
| Non-cash compensation | 88 | 33 | 395 | 155 | |||||||||||||
| Reserve for workers' compensation deposit | - | - | 1,540 | - | |||||||||||||
| Other non-recurring expense | 105 | - | 634 | - | |||||||||||||
| Adjusted EBITDA | $ | 1,586 | $ | 687 | $ | 4,074 | $ | 4,238 | |||||||||
Please note: numbers may not foot due to rounding
View source version on businesswire.com: https://www.businesswire.com/news/home/20190409005958/en/
Contacts:
Command
Center, Inc.
Cory Smith, CFO
(866) 464-5844
Email: cory.smith@commandonline.com
Investor
Relations Contact:
Hayden IR
Brett Maas
(646)
536-7331
Email: brett@haydenir.com
