Cody Slach - IR, Liolios Bubba Sandford - Chief Executive Officer Colette Pieper - Chief Financial Officer.

John Rolfe – Argand Capital Matt Campbell – Laridae Capital Josh Horowitz – Palm Hans van der Burg – Logos IM Joe Furst – Furst Associates David Wayne – Wayne Investment.

[Call Starts Abruptly] Mr. Slach. You may begin..

Good morning, everyone and thank you for participating in today’s call to discuss Financial Results for the Third Quarter Ended September 23, 2016. Joining us today are Command Center’s CEO, Bubba Sandford; and CFO, Colette Pieper.

Please be aware that some of the comments made during our call may include forward-looking statements within the meaning of the federal securities laws. Statements about our beliefs and expectations containing words such as may, could, would, will, should, believe, expect, anticipate and similar expressions constitute forward-looking statements.

These statements involve risks and uncertainties regarding our operations and future results that could cause Command Center’s results to differ materially from management’s current expectations.

We encourage you to review the Safe Harbor statements and risk factors contained in yesterday’s earnings release and in our filings with the SEC, including without limitation, our most recent Annual Report on Form 10-K and our other periodic reports, which identified specific risk factors that also may cause actual results or events to differ materially from those described in forward-looking statements.

We do not undertake to publicly update or revise any forward-looking statements after the date of this call. We also note that on this call we will be discussing non-GAAP financial information.

We are providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States or GAAP. You can find a reconciliation of these metrics to our reported GAAP results in the reconciliation table provided in yesterday’s earning release.

I would like to remind everyone that this call will be available for replay through November 22nd starting at 1:00 Eastern today. A link to a webcast replay of this call was also provided in the earnings release which is also available on the Company’s website at commandonline.com.

Any redistribution, retransmission or rebroadcast of this call in any way without the expressed written consent of Command Center is strictly prohibited. Now, I would like to turn the call over to the CEO of Command Center, Bubba Sandford.

Bubba?.

Thank you, Cody, and good morning everyone. I want to thank everyone for your participation in this call and your interest in Command Center. I’d like to start off briefly discussing our operations and our performance. We discussed in our past calls we were not satisfied with our results.

We communicated we’re going to dedicate our resources to fixing those results and we have committed considerate effort these past quarters addressing those. The results we feel are positive – in a positive trend as a result of significant actions which I will take you through in greater detail later in the call.

But in summary our revenue overall was up 6.35% despite a decline in North Dakota; our stores outside North Dakota were up almost 15% and our gross margin was up. So we'll continue in this progress but before going into greater detail. I’d like to turn the call over to Colette Pieper, our CFO.

I would like to welcome her, this is her first call, earnings call as a CFO and she brings with her a wealth of experience, financial reporting and public accounting along with executive men. We are very happy to have her and we look forward to growing the company and have her part of the management team.

Colette?.

Thank you, Bubba, and good morning everyone. Our revenue in the third quarter increased 6% to $26.4 million compared to the third quarter last year. The increase was driven by increased revenue from branches outside North Dakota. And the Hancock Staffing acquisition which we purchased in June of this year.

North Dakota represented about 12% of our overall revenues down considerably from approximately 25% during the peak of the oil boom in 2014 and the 19% that we represented in the third quarter last year. Our branch sales outside of North Dakota were up 15% from last year.

During the quarter we also recorded $2 million in revenue from our newly acquired branches. As you may recall we completed the Hancock acquisition on June 3. So this is essentially our first full quarter as a combined organization. Our gross margin in the third quarter was 25.9% compared to 26.1% in the same period last year.

This small 20 basis point decline was primarily due to a mix of business that did not meet our gross margin target. On a sequential basis gross margin increased 70 basis points and 120 basis points from Q2 and Q1 respectively reflecting the progress we're making to sell better business.

Selling, general and administrative expenses in the third quarter increased to $5.6 million compared to $5.1 million in the third quarter last year. The increase was comprised of slightly higher payroll tax expense, workers' compensation expense and bad debt expense.

This was partially offset by a decrease in salaries due to a reduction in sales training staff and a reduction in stock-based compensation. Net income in the third quarter was unchanged from the third quarter of last year of $0.8 million or $0.01 per diluted share.

Adjusted EBITDA in the third quarter was $1.1 million compared to $1.6 million in the year ago quarter. Moving to the balance sheet, our cash at the end of the third quarter was approximately $500,000 compared to $7.6 million at year end, primarily driven by a $3 million increase in accounts receivable.

The increase in AR is primarily due to sales growth and our national account customer base which typically have longer payment terms under contracts. However, these contracts are typically very creditworthy customers.

We expect to collect these receivables in the fourth quarter and it's also worth noting that our cash balance is lower in the third quarter because we are funding business. We have over $12 million in receivables and have more cash available to draw under our account purchase agreement.

Cash used in investing activities of $2.1 million was primarily for the acquisition of Hancock in June. We also used $1.4 million of cash to purchase 3.4 million shares of our stock during the first three quarters of this year.

Speaking of our share repurchase program during the third quarter, we repurchased 1.2 million shares of our stock for an average price of $0.40 per share. There remains approximately $2.2 million on our $5 million plan and we will remain opportunistic to continue our stock repurchase program when appropriate.

With that, I'll turn the call back over to Bubba.

Bubba?.

Thanks, Colette. I would like to go back to few of the points that I talked summarily about in the introduction. As I mentioned during the Q2 call and we mentioned in the Q1 call, we were not happy with the results we are producing, we did not feel we are giving a commensurate return to our shareholders.

We take the capital allocation of being stewards of your capital very seriously. We took responsibility for that on those calls and we committed we were going to dedicate our resources to fixing the company and getting it back on track.

Everything at that point was on the table; we evaluated everything and went through a series of steps to produce the results we have today. The steps included everything from flattening the organization to cutting salaries to cutting extraneous cost, to realigning the organization, building out parts of our better team.

And one of the main things was starting our training classes at corporate, one of the reasons we moved to Denver was to be able to facilitate the training of all our branch managers and branch staffs at the corporate office. Completed three classes so far, fourth class coming up.

We're seeing the direct results of that through that comprehensive training program; will continue on that training program throughout 2017 beyond. We’ve completed the integration and we’ll continue the integration of the Hancock acquisition.

We’ve also had a renewed focus on our keys to success and with the execution of this and the renewed focus, we’ve delivered the results for Q3 that we know if we continue this focus we’ll produce going forward.

And those keys to success just summarily are relatively simple but absolutely essential to our business, we talk about selling good accounts, selling to customers that value the business, selling to people who are willing to pay the price that give us the margins. As you can see our margins have increased. We talk about increasing the margins.

We did that this quarter that was from a renewed focus on selling the business to customers that are willing to pay for it and pricing it appropriately. And third, the customer service, service with excellence. We are in a service-oriented business that something that we have to execute on and establishes us from – and from our competition.

So with these steps that we took that while they are painful and difficult we were willing to undertake along with the renewed focus and execution on our keys to success, we are able to generate cash. Going forward with that cash we will deploy it in five ways.

We talked about these in the past and I’ll talk about it summarily and explain a little more about our process going forward. The first is same-store sales, which is always our first goal to increase each store we have, get each store to improve.

The second is new stores, we’ve opened two new stores and will continue to open these stores in the areas of concentration when we have brand recognition. We have talent we can maximize the efficiencies and economies of scale and travel there.

Third is evaluating stores and evaluating underperforming assets, we did that this past two quarters and we shut two underperforming stores. We reserved the right going forward to always evaluating the underperforming asset whose resources or the value of the store does not exceed its resources.

Keep in mind, while we open to and shut to, we grew as a company. We grew over 6% so we continue to look at value per store and allocation of not only of financial resources but our human capital.

The fourth is acquisitions, we continue to look at deploy our capital, an acquisition is cash dependent, we did that this past year, we completed the acquisition of Hancock, we think our patience was prudent and it’s paid off and we’ll continue to look for these opportunistic acquisitions.

And the fifth is stock repurchase, we’ll continue in this manner, price dependent on the stock as well as our cash balance.

So these five areas where we’ll deploy the cash we are learning as an organization where we do best, where we maximize that return on investment on our cash in terms of opening stores, closing underperforming assets, buying the stock back and looking at acquisitions.

We’ll continue in this manner with the goal always of maximizing shareholder value with that cash going forward. So in summary, we’ve committed to fixing the organization we've done that, we’ll continue in that path. We're in a good position going forward and we look forward to the upcoming quarters.

With that, I’ll turn it over to the operator for Q&A..

Thank you, sir. [Operator Instructions] And it appears our first question comes from John Rolfe with Argand Capital..

Hi, guys.

A few questions for you, first so can you confirm with two new openings and two stores shut that you ended the quarter with 61 locations, is that correct?.

Yes, that's correct, John..

Okay. And it looked like the tax rate was quite low in the quarter.

What was the driver of that and what should we expect for a consolidated rate going forward?.

We do have a net operating loss carry forward from prior years that should offset a majority of our taxable income for 2016. We will have some alternate minimum tax but we do expect favorable tax rate..

Okay, but I guess I was looking more at – looking less at cash taxes and more at the GAAP rate, I mean what you know as we look forward would be your reasonable GAAP rate to assume?.

What we're assuming the corporate tax rate of about 35%..

Okay, okay. And so using some of your disclosure I think you said that revenues up in North Dakota were 12% of total this quarter which would imply about $3.2 million looking at last quarter and some of the disclosure in last quarter's Q it looked to me like revenue up in North Dakota was under $2.5 million.

So it looked to me like on a sequential basis revenues in North Dakota actually accelerated much more than they did in the non-North Dakota locations.

Is that in fact the case and if so is that simply a function of North Dakota having higher level of seasonality than the non-North Dakota businesses or are you maybe seeing a bottoming of the demand up there?.

John, this is Bubba. I think one thing that affects that is that and there is only X amount of stores up in North Dakota that will affect the weighting of that. Those stores up there are still profitable stores, there’s still good stores for us in terms of their growth.

I think they've learned over the past year that they have to compete like our other stores. We are in the past, anyone in North Dakota was doing very well, I wouldn’t say easily but much easier than now.

So I think they're learning the landscape and growing, our other stores are spread out across the country and they vary – in terms of their size, in their growth, in their performance..

Okay. But so can I conclude from that I mean if these initiatives that you have the North Dakota managers pursuing to diversify the revenue base if they sort of continue down that path.

Are you at least cautiously optimistic that we may have found the bottom and the revenues up there?.

Cautiously optimistic is the term I use quite often for myself that’s I like that term.

I don't know about the bottom up there I mean that's a hard one for I think me or anyone to kind of like estimate, we just we focus on the variables we can control and the ones we can’t in terms of the overall economy, we can't do much about; obviously everyone’s hoping that North Dakota has reached the bottom, they do have large infrastructure bills that have been passed and are in place up there but in terms of the bottoming I don't know.

But we'll continue to evaluate all those, all our stores, North Dakota stores as well that any that - whose performance doesn't meet the value of the resources associated, we will evaluate them..

Okay, great. Thanks very much..

Thank you..

Our next question comes from Matt Campbell with Laridae Capital. Please proceed..

Good morning, and congratulations, Colette, on your job here. I was wondering if at this point you've gotten the entire move finished and you feel like you've got the team in place right now to really accelerate your growth..

From a financial team, yes, we've got some good people working together now. I came into the company after they had relocated about a year ago. So I think that that's been settled long before I arrived but I do feel I have good talent supporting me..

And Bubba, do you feel like you've got the infrastructure now to see this business start seeing some real scale here..

We do, I mean we – one thing I should have mention is we always feel we have some work to do we can always do better like Mike Sullivan took the Penguins in mid-season and he made a bunch of changes to get him to the cup. So while we're doing well we know we can continue to improve and we can continue to evaluate that..

And how should we – Colette, how should we look at SG&A as a percent of revenues, 21.2% where do you see SG&A going forward?.

Well, I think as Bubba explained we are trying to stabilize our expenses and look closely where we can eliminate waste. And so I would expect that our fourth quarter should not have significant increases over our run rate, there maybe a few items here and there but we have a good solid foundation and I think that we should continue on that path..

Matt, can I add to that..

Absolutely..

Lot of the changes we made and cuts we made will take some time to kind of blow through the system. But we're confident and know that with these changes and cuts and reductions et cetera as we focus on growing the top line and getting good business that with those reductions over time we'll continue to deliver a positive EBITDA, strong EBITDA..

Got it.

And if you could just expand a little bit about the acquisition of Hancock, has it met your objectives to this point, is there more opportunity within that organization was just interested on that?.

Sure, the acquisition has worked well for us it was something we were – we had a good team here that worked through the due diligence of that in the negotiations and acquisition.

We've had a great team in terms of the integration, acquisitions can be challenging and tricky when our side is done and their side is well and now our side has done a great job working together.

You bring two different organizations together, they can provide some challenges but financially and operationally and culturally it's worked well we're hoping that with the experience in that – in those branches we can maximize that and see some additional potential going forward..

Great. And it's nice to see the sequential improvement in your gross margins. I guess it's a little bit of that is coming from training your staff and I think you said in your remarks that you now trained.

Is that 75% of your force to your program, your school program and that's starting to see some benefit from that, is that right?.

Yes, approximately 75%. In addition back in Q1 until we put some restrictions in changes the administrative kind of logistical procedures where we were able to better coaching affect the branches on the gross margin.

So it's a combination of a number of things, the coaching, training and continued speaking with the branches and along with the restrictions and then the training of corporate..

Great. Thanks so much..

Thank you..

[Operator Instructions] Our next question comes from Josh Horowitz with Palm. Please proceed..

Hi, Bubba. Good morning..

Hi, Josh, how are you?.

Good, good. Thank you.

Can you talk about the acquisition its revenues and profitability just – itself this quarter and how that contributed to your results?.

Well, I can speak the financial numbers. So in Q3 the revenue from Hancock was a little over $2 million and our gross margin percent was 25.32%..

Thank you for that. Can you talk about the types of the work in clients that the Hancock assuming as it fits into your portfolio and what if anything.

The company can sort of capture its best practices from Hancock and vice versa and really what you see is the opportunity there?.

Sure, well the opportunity we saw was the – it was a long established business in two markets we had not always excelled at. And they had significantly see new kind of management experience in those branches, and those branches are done well when we negotiated we got it for what we believe was a very fair price.

And so those stores with our support now has been able to continue on their path to grow and produce profitability, they are in very similar lines of work, in terms of best practices we're always open to learning things. And they're obviously learning our new systems and processes.

We hope to exchange more information but in a day they're in the same type of kind of line of work we are delivering service to customers and delivering quality workers and doing out the appropriate price..

Any significant differences in terms of receivables and collection days versus your business and just on that topic how are you, you talk about uses of cash and potential additional stock buybacks I do note the company's cash balances lower than it's been in a few quarters but obviously you're not in need of any capital.

Are there any different factoring arrangements or things that you're doing is part of that acquisition to release some cash?.

Well, there were small – they were always a small business so their collection process was little probably more hands on than ours with 60 some odd stores and now it's transferred over to us but we're not doing anything different – that was one of the I guess advantages of the acquisition was that it required no additional overhead on our part.

No additional infrastructure to take them on in fact it was purely accretive..

Got it. Thank you very much..

Thank you..

Our next question comes from Hans van der Burg with Logos IM..

Hi, guys, can you hear me?.

Yes, we can.

How are you?.

Good morning, guys. Good. Thank you. And I had a couple of questions today, maybe the first one on the aging of the accounts receivable. I heard Colette say that some of the increase in the aging was due to higher percentage of business with national clients and then these are highly creditworthy.

But I also saw that you mentioned a bad debt expense this quarter and I was wondering is all of the increase from say the 30 days we saw in Q2 to 44 days in Q3 is all of that due to more national clients or are there also some customers trouble perhaps in specific industries, could you provide some color on that please..

I’ll let Colette kind of add more color at the end. But the majority of that’s national account as we wanted to grow from Q1 to Q2 going forward. We'd seen our national accounts team excelled over the past couple of quarters. So we wanted to kind of as I mentioned in my thing build out the teams and provide the supporting teams that we're doing well.

So we've continued in that process. One of the trade-offs are getting these highly creditor or customers that have great credit is the terms, the terms – the payment terms are longer than our typical local mom-and-pops and it's a trade-off in the negotiations we have with them.

So some of that is directly attributed to the longer payment terms and negotiated with them..

All right, can I ask a quick follow-up on that because also if you consider some of the margin increases that we saw this quarter is some of that’s related – I’m not sure, this is relevant but there’s some that related to the fact that perhaps you're not or providing lower discounts for early payments or is that not relevant in this business at all?.

Whether it's relevant or not I don't know but we've been very conscious and put it forward to significant effort to sell higher margin business and keep coach the branches on walking away from business but we don't think it’s paying us the appropriate amount for the service level, the risk et cetera.

And that that is – that was a lot of effort we distill it down to a few sentences here, a number of people here having discussions and coaching sessions and communications with the branches on how to negotiate, how to walk away et cetera. And we are seeing the results of that..

All right, thank you. Thank you for that. I have one other one on the share buybacks, it’s already been discussed a bit earlier in this call.

But I was wondering with this cash balance is getting low, which would be willing to utilize your account purchase agreement to continue purchasing shares and the price is right, or would you only consider it when you have sort of cash on hand?.

We obviously evaluate all opportunities, all potential actions to take maximize shareholder value and we’ll continue to evaluate all those going forward..

So it would be an option, if you think the prices are right, if you withdrawn your account purchase agreement?.

I mean, it would – may not depending upon the factors our growth strategy with those five things. I should have mentioned is largely depend upon our cash but also situation factors of what’s going on in the market, what’s going on in the economy.

Does an acquisition pop up or there numerous acquisitions that pop up, now does the stock hopefully start to recover, we’d like it to get covered to a point where it wouldn’t make sense for us to buyback..

Yes, that’s definitely make sense and I just want to ask you one last question, around the risk of asking really stupid question but I was going through the 10-K or 10-Q and I saw in the liquidity and capital resources section that at quarter end there was $8.3 million in outstanding accounts receivables sold under your account purchase agreement, is that correct?.

Yes, that is correct..

And again this is might be a really stupid question but shouldn't we see then some cash accounting your balance sheet?.

We have a reserve against our availability of $5.7 million for worker's compensation and so the amount – yes, so from there it is kind of a complicated arrangement where we can only draw down on 90% of the eligible receivables. And so there's a – there are different steps into the amount of cash available..

Okay, that's very helpful. Thank you very much, guys..

Thank you..

Our next question comes from Joe Furst with First Associates. Please proceed..

Good morning, I’m curious, could you discuss the seasonality of your businesses, there are in particular quarters that are better or worse than others or is it fairly a standard most of the year?.

There is some seasonality obviously with stores in colder climates, so you obviously Q4 and Q1 are in those areas are going to be probably less busy than Q2 and Q3 which are the summer seasons and fall seasons, spring seasons..

Okay. Thank you..

Thank you..

Our next question comes from David Wayne with Wayne Investment. Please proceed..

Good morning.

Can you hear me?.

Good morning, yes, we can..

Please address for me, Mr. Sandford, the three or so years of your leadership. I consider to be of the utmost of poor performance.

Can I ask for your immediate resignation?.

I understand, appreciate your comments as a new organization we are committed to maximizing shareholder value when I came on here in February 13, the company was on a cash spiral in significant trouble. We went through 13 and 14 and delivered significant results in returns, some of that we had a positive effect of North Dakota.

We made a transition to Denver and in the process of Denver we were also as we mentioned in earlier calls looking at two acquisitions and we are looking for some internal growth and we hired some people as I took responsibility in those previous calls.

And it was not happy about it but I took responsibility that we didn't deliver on any of those things than we wanted to. So we committed at the end of Q1 and through Q2 to fixing the company and as I mentioned anything everything was on the table. We went through some difficult decisions here and we're seeing the positive results.

We've made significant changes the organization is flatter we've instilled procedures, policies in a culture that going forward we feel very confident will continue to perform and deliver positive results for the shareholders..

It appears we have a follow-up question from Matt Campbell with Laridae Capital. Please proceed..

Laridae Capital but I just want to make a comment for the people who are actually peel the onion back, this organization was probably in a much more world of hurt than many realized. In fact I'd point out that the management team has spoken with their own pocketbooks and bought stock at a lot of higher prices.

So some times turning a business around takes time, as investors we should all realize that. So I do appreciate people's frustration here. They are doing the things that they can control. I don't think anyone saw North Dakota be such a big influence both up and down.

And yet this management team has bought back a lot of stock and has paid for stock in the open market at much higher prices too. So they're feeling the pain too. This is just a comment. Thank you very much..

Thank you. Matt..

At this time, this concludes our question-and-answer session. I would now like to turn the conference back over to Mr. Sandford for any closing remarks..

Thank you everyone for your participation again. And we look forward to speaking to you again in the future..

Ladies and gentlemen, this does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation..