Bubba Sandford - CEO Cory Smith - CFO.

Matthew Campbell - Laridae Capital Hans van der Burg - Logos Investment Management.

Good morning everyone and thank you for your participating in today's conference call to discuss Command Center's Financial Results for the Third Quarter ended September 29, 2017. Joining us today are Command Center's CEO, Bubba Sandford; and CFO, Cory Smith.

Please be aware that some of the comments made during this 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, believe, should, 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 the Company's earnings release and in its filings with the Securities and Exchange Commission, including without limitation, our Annual Report on Form 10-K and our other periodic reports, which identifies specific risk factors that also may cause actual results or events to differ materially from those described in forward-looking statements.

Copies of the Company's most recent reports on Forms 10-K, and 10-Q may be obtained at the Company's website at www.commandonline.com or at the SEC's website, at www.sec.gov. The Company does not undertake to publicly update or revise any forward-looking statements after the date of this conference call.

Also note that on this call the Company will be discussing non-GAAP financial information. We are providing this information as a supplement to information prepared in accordance with Accounting Principles Generally Accepted or GAAP.

You can find a reconciliation of these metrics to their reported GAAP results in the reconciliation table provided in the Company's earnings release. I would like to remind everyone that this call will be available for replay through November 28, starting at 1:00 PM Eastern today.

A link to the website replay of this call was also provided in the earnings release, which is also available on the Company's website at www.commandonline.com. Any redistribution, retransmission or rebroadcast of this call in any way without the expressed written consent of Command Center is strictly prohibited.

I'd now like to turn the call over to the CEO of Command Center, Bubba Sandford.

Bubba?.

Thank you Don, 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 by quickly summarizing our third quarter financial performance. The third quarter marks our fifth consecutive quarter of revenue growth and our fourth straight quarter of gross margin expansion.

The foundation of this performance continues to lie with the people who are out there every day in our branches driving revenue, putting people to work and implementing executing on our keys to success.

As we talked about numerous times, these results - the result of numerous actions we've taken and continue to take on a daily basis including our training program, our field services working and everyone in corporate to execute the key to success which capture higher margin business and results providing superior service to our customers and our temporary workers.

In addition to the string of positive revenue gross margin results that we reported, since we taken these actions mid-2016 we continue to improve our EBITDA and build our cash. Since then our cash is doubled since the end of 2016 we continue to carry minimal debt.

We expect this improved position and improved liquidity to allow us to evaluate accretive uses of our capital which I'll talk about later after Cory watches the third quarter results in more detail.

Cory?.

Thank you, Bubba, good morning everyone. Moving right on to our third quarter results. Our revenue increased to $26.7 million in the third quarter of 2017 compared to 26.4 million in the third quarter of 2016.

This increase was driven by organic growth and the 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 from 100 basis points to 26.9% compared to 25.9% in the third quarter of 2016.

This increase was a 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 our 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.

This decline was primarily due to lower professional service fees and bad debt expense. As a percentage of revenue, SG&A expenses were reduced 70 basis points to 20.5% compared to 21.2% in the third quarter of 2016.

Net income in the third quarter increased to 0.9 million or $0.01 per diluted share compared to $0.8 million or $0.01 per diluted share in the third quarter of 2016. Adjusted EBITDA in the third quarter increased 53% to $1.8 million compared to $1.2 million last year.

Another highlight of our adjusted EBITDA, year-to-date adjusted EBITDA has more than doubled to $3.6 million compared to the same period in 2016. This has help drive $2.4 million of free cash flow compared to a free cash drain of $2.8 million in the first nine months of 2016.

This has helped significantly strengthen our balance sheet cash, cash and cash equivalents at September 29, 2017 more than doubled to $6.1 million compared to $3 million at December 30, 2016. We carried a $0.6 million balance on our account purchase agreement at the end of our third quarter compared to no debt at the end of 2016.

During the third quarter, we resumed our share repurchase program and as part of that program we repurchased 134,100 shares of our common stock at an average price of $0.41 per share, approximately 4.9 million remain under the $5 million repurchase plan. And with that, I will turn the call back over to Bubba..

Thanks Corey. So summarizing our third quarter performance, our results continue to be driven by implementation execution on our keys to success which are defined by sell good accounts, increased margins and servicing with excellence.

We've been able to execute this plan by relentless focus by everyone involved in the organization from the branches to the field service to the corporate side, which means getting the right team in place and driving home that philosophy to everyone. All of our actions are designed around implementing those keys in adding value added business.

We continually evaluate our cost on a regular basis and look at our cost structure and eliminate or reduce any cost that are not directly attributable to helping us drive our key succession, drive good business.

As a result of all of this and three additional items I’m going to mention in the next section, Command Center is today in strongest position it's ever been and we are in excellent position for the future. The three additional items I would like to talk about our operational excellence, our stores and acquisition.

At first I want to talk about our operational excellence. This is the implementation and execution of keys to success. We continue to invest wisely and enhance deployments of our existing branches through local market sales, account manager recruiting, training everything designed to drive higher margin business and improved customer service.

This has allowed us to help us establish a solid infrastructure in a prudent manner that we can duplicate and expand our business both organically and through acquisition as we've done with the Hancock acquisition. We have consistently achieved gross margin levels that led our sector. We remain committed to being the best operations in the business.

Second section I want to talk is about store expansion or revenue generation. We continue to evaluate our footprint expansion through new store openings primarily in areas where we asked efficient customer concentration of brand recognition. This is something we adhere to for quite some time.

We constantly evaluate the best use of our capital and how to best allocate the capital, the higher growth opportunity within our existing branches.

These opportunities include existing customers expansion, several new industry vertical offerings, a time to make more sense to allocate capital results to new stores alternatively and be more prudent action to use of personnel and financial capital to target increases with existing line of approval.

This flexibility for everyone in the organization including management has necessary be able to capitalize on the opportunities as they identify. Third is acquisition, as many of you are aware our industry is extremely fragmented with thousands of small successful local talent management across the country similar to Hancock.

We have identified great number of these possible acquisitions and we are currently in the process of evaluating. Many of these we hope would fit within our culture and we want to pursue these aggressively which is where our cash balance lands and supports us to be able to pursue this.

We continue to look at these and looked at acquisitions that are accretive without having to add significant infrastructure. All these items previous mentioned and these put Command in a strongest position it's ever been in. They also allow us to support us to do the next few things that I want to talk about.

In addition to these initiatives, as disclosed in February the Board of Directors established strategic alternatives committee and the special committee comprised of independent directors to identify and evaluate the variety of other strategic opportunities available to the company. Since then several initiatives are underway.

Now this three I want to talk - I want to talk about all and share repurchase program, our reverse split and other strategic alternatives. First, the share repurchase program.

Our strengthening balance sheet improving cash flow enable us to simultaneously return value to shareholders through our share repurchases while continue to invest in internal, external business expansion opportunities that will further strengthen our business.

Since early 2015, we have been opportunistically acquiring our shares in the over market pursuing to a 10b-1 trading plan adopted by the company. During 2015, we purchased approximately 2.3 million shares at an average price of $0.60 per share. During 2016, we purchased an additional 3.8 million shares at an average price of $0.04 per share.

Through the end of September 2017, we have purchased an additional 134,000 shares at an average price of $0.41 per share. As previously disclosed, in early September the Board of Directors authorized a new three-year 5 million stock repurchase program. Subsequent to September 30, 2017 the company repurchased an additional 424,000 shares.

Our plan is to continue to acquire Command Center shares as part of our comprehensive capital allocation strategy as long as those shares represent an attractive investment opportunity as we believe they do now. Second is the reverse split we are listing on major stock exchange.

We believe that one of the most meaningful way we can improve the value of our stock is to move from the OTC over-the-current market to a major U.S. stock exchange. At this end we have applied for a listing on a major change and focused our efforts on meeting a number of compliance and listing compliance set forth by that exchange.

The benefits of listing Command Center on major exchange include greater visibility for our stock, the potential for future inclusion and benchmarking the stock greater trading liquidity and access to a broader set of investors including institutional investors, mutual funds and hedge funds, In addition listing on a major exchange will help finance and build additional credibility with investors leading to improved analyst coverage an increased attention from financial reports.

One of the more important gaining elements for listing on a major stock exchange and maintain stock price above a certain per share dollar value. In order to meet this requirement Command Center's Board of Directors has approved a plan to implement a 1 for 12 reverse stock split which is expect to become effective later this month.

And while the reverse stock split itself will not change the value of the company or the aggregate value of the stock we hold. We believe the listing on a major exchange may bring more demand for our stock and help shareholder achieve a fair value for their shares.

It's important to note that we believe this reverse stock whether a significant necessary component for us to obtain compliance with the listing requirements of the exchange and a move forward in up listing.

And while we cannot accurately predict the outcome and tying of this process our goal is to obtain a listing on our major exchange and begin trading there in 2018.

The last is other strategic alternatives any good company from time to time especially in three to five year time plan to step back and evaluate the business there are in the industry wherein and how best to go about maximizing shareholder value.

The strategic alternative committee has done this they're doing this very seriously and obviously a part of this is engaging and recognized investment banking firm to assist in all their efforts to evaluate other alternatives and these include and not limited to merging, selling the company, taking on significant debt to acquiring company and anything and everything that will maximize shareholder value.

We want to show our shareholders, employees and all our customers that the strategic alternatives committee has taken this very seriously in evaluating all options while at the same time creating value and preserving all the relationships we spent in built.

Before turning the turn the call over the question-and-answer and I’d like to briefly address the director nomination notes we received from Ephraim Field’s and our upcoming annual meeting with shareholders.

As you may know Ephraim Field’s the Command Center shareholders’ has indicated his intention to nominate five candidates for election to Command Center's seven person board at the 2017 annual meeting of Command Center's stockholders. The Board of Directors is evaluating the nomination notice and Mr. Field’s proposed nominees.

We’re disappointed that Mr. Field to seek control of the board in the company in this manner we believe that the current director six of whom are not members of Command Center's management team and the management team have a record of working to advance the interest of all shareholders.

In terms of the Board composition the Board has proactively signed new directors over time has added new two directors recently with extensive experience includes a well-rounded group of professionals that we believe have exercised their responsibility to care.

We anticipate comment any further on the record or the board in the future and demonstrating my turning over control of the board and the company and Mr. Field is more than to watch. The Board is working closely with management will continue to treat the building of long-term stockholder value as a top priority.

Also we continue to value the input of our shareholders on our strategy, our opportunities and our leadership. We are pleased to have a robust ongoing dialogue with many of you and welcome your further input.

Command Center will announce the date of the annual meeting after [indiscernible] currently we anticipate that the meeting will be held in early 2018. And with that to add the purpose of today's call is to discuss our earnings results so we ask that you please keep your questions focused on that topic. We’ll not further address Mr.

Field’s announced inattentions or director nomination during this call. We thank you for cooperation in that regard. With that I'll turn the call back over to our operator, Don..

[Operator Instructions] We will take our first question from [David Levine] with Vertical Research. Please go ahead..

As I sort of look at the numbers and kind of look at the direction even going here it’s pretty clear I think you’re trying to drive margins here and maybe that sort of involves a little bit of maybe coming out lower margin business I guess I’d like to hear comment just about that notion maybe at a higher level.

The other thing I’m wondering is, it's kind of interesting your sense of the industry in general maybe just kind of a macro view out there.

And how what you're seeing and what’s your perspective is of kind of the temporary services space in general and the health of that and just sort of how you feel like that just right now and obviously how you sit in the middle of that but generally just kind of - I guess kind of macro view of the industry if you have such a thing?.

I'll answer the first question your first question on the margins and it’s a great question. Margin is something that we evaluate not weekly but on a daily basis and there is always a trade-off. Do we want to get higher margin business and maybe less volume or do we want to sacrifice a little bit of margin and get more business.

And that's something our field services and actually everyone corporate works with the branches on evaluating that and it's our second key to success is always increase the margin but there several points under there that discuss, evaluate the nature of the working manager on intensity, the risk component et cetera.

So there's time it does make sense for us to take on a larger volume of work maybe at a lower margin and there is other times that makes sense based on a number of factors largely work related and the customer and customer credit et cetera that make sense to keep it at a higher margin.

So it’s something we’re evaluating on a daily basis and our branches work through that with everyone. In terms of - I guess I want to stop does that answer your question..

Yes, that’s fine..

The second - in terms of the industry we have found historically that when we execute on our fundamentals we're successful in really anywhere. It’s a very obviously like any business it’s competitive out there but when it’s competitive for us it’s competitive for everyone else.

We see a need for our services, we’re seeing that because we’re continuing to grow and we’re seeing a need for our services at the level that we’re performing meaning our margin. So, we'll continue to focus on that and we’re not seeing any negative trend so far in the staffing industry..

When you kind of made reference to just some larger customers I think at the beginning so I just kind of curious maybe here is a little more color on that?.

Sure, yes that’s a great point thank you for bringing that up. So one of the advantages our company has we can service the local mom-and-pop as well as service the large national accounts. International accounts are great I mean they have great credit rating, they’re national they’re all over we can service them in wide range of branches.

And then many times they have big projects, and those big projects are opportunities for us and our branches to capture. So it causes a spike maybe in one year for revenue for that certain time period that project may go away so we may not have that business in the following year not at any fault of our service, it’s just the project goes away.

So it’s a kind of double edge sword, we like the national account and that project work because it’s good revenue, its good business but at the same time they’ll cause a little bit of a trough in the following year because that project may not be there.

We’re always encouraging our branches to diversify their client base and find new clients to supplant any of that business that may go away..

I just want to make one more comment before I hop off. I know sometimes the reverse split thing is something that everybody consternates over and I think the reverse split thing is something that has a bad name and it has a bad name largely I think because of the reasons that companies’ historically have done reverse split.

Most of time is to maintain a list and not to up list and I just want to say I think that's a hard decision sometimes for board but I'm not really sure why it is but I think from an accounting standpoint not it’s the consequence.

But I think the fact that you've chosen to realign sort of the level of the business with the capitalization is a really good decision.

And you probably not going hear that very much because I might be the only guy in the world who think the reverse split sometimes won’t be appropriate really good idea but in this case I think it’s a good idea this pattern doing so thanks fellows..

[Operator Instructions] For our next question we'll go to Matthew Campbell with Laridae Capital..

It's nice to see you guys build the cash balance and increase margins and grow the business continuing in that progress.

But I want to follow up with Dave, I think Dave just made the comment about doing a reverse split I'm not opposed to that but I would hope you're as aggressive in your buyback at that point too because a lot of people might believe or not think the value of their stock did change.

And that you sell so I think you guys hopefully will be prepared for that. My question is Bubba to you in terms of your preference of buy versus build.

What is the M&A market look like right now in terms of acquisitions so and what evaluations looking like that and if they’re high should we think that you're going to be building out your own branches?.

What we’re seeing is there seems to be a lot of opportunity for acquisitions out there. It does seem like some of the multiples are fairly high but we will - that's one of our reasons for the margin is to continually build cash so we can be opportunistic and pursue these aggressively.

And then when one presents itself at the right price and the right integration model we can move relatively fast. In terms of buy versus build its always a hybrid and we're always balancing.

We’re looking at areas where we can grow in new areas where we can grow we build to maximize or build upon our existing relationship with customers of this new Greenfield operations, we can do that with our other verticals, as well as build some of those verticals within existing branches so it doesn’t cost additional capital to build.

So it’s a balance and we will always remain flexible and opportunistic to move on which of those options will provide the greatest return for shareholders..

Right, and I understand that you had to do a lot of training and that training program is kind of completed.

At this point can we as investors expect you guys to grow the storefront end of 2017/2018 in one of those two directions?.

I didn’t follow your questions in terms of the key direction..

I guess what I'm saying is we have - it feels to me like you've got a lot of good growth and margin expansion out of your network today. And you got a lot of training done to this point.

So this point as investors can we expect you to grow either way one of the two ways either you’re buying something or you’re building over the next 12 to 18 months?.

Just to clarify our training never ends, we’ve completed our first phase of it but the training will continue will always continue.

So in terms of the growing I mean that’s kind of one thing we mentioned, there are opportunities and sometimes for us to grow with the existing store comp but we’re able to expand our relationship with our customers within existing store.

Sometimes the opportunities present to us open Greenfield stores, it depends on what the nature of the work is and where it is and that’s what we’re looking at right now. So we'll be looking at new Greenfield operations to try and build upon those relationships, as well as looking at acquisitions that will also expand our geography..

Just one last if I may, you guys bought a lot of stock back in 2015 2.5 million, in 2016 3.8 million 134,000 and then it sounds like if I heard you correctly you bought another 424,000 since September.

So just kind of curious at this point if my math is correct you bought about 550,000 this year and you've doubled your cash balance so it seems like you guys took a little time off from a buyback program or really slowed it down and now you’re accelerating it.

Just wondering the thinking behind that?.

Yes, we slowdown at one point to rebuild our cash sometime in 2016 we felt it was prudent to rebuild our cash, we want to get it build up at war chest and then from there we could decide how we’re going to deploy that..

We’ll take our next question from Hans van der Burg with Logos Investment Management..

One quick question on the gross margin increase, I heard you say in the beginning of the call that you saw some decline which you commented further on for your larger accounts.

To what extent was this - you could say - as you could say change in mix responsible for the growth margin increase that we saw this quarter versus just selling over the whole line higher margin business?.

I can address that for you, think the mix helped improve our gross margin slightly, but most of the increase in gross margin related to decreases in Worker's Compensation expense and through the expense.

This really goes back to our continued training and education at the branches as these kinds of improvements really take a lot of time to come to fruition and reflect positively on our financial results..

Maybe one more on those larger accounts, I hate to say that, yes there was two side of that medal that sometimes it’s a bit lumpy you have higher revenue and the other years yes, they won’t come back given what you know about how these customers performed last year do you have any visibility on say coming quarters whether or not these larger customers were doing really good or really high revenue in Q4 2016 or was it just you could say normal?.

I’d say it’s pretty typical and it's something that our branches and our national council look at relentlessly constantly building out their existing relationship and finding new relationships with national account. So they continually find those areas where they'll have more national accounts work on a consistent basis as well as project work.

So that's pretty consistent in terms of pretty typical on how they work from year-to-year that they’ll have projects and then sometimes they won't..

And maybe last one from me, in Q1 you reported that you saw the – for oil revenue business or your related business sort of bottomed out being a showing a little bit of stabilization year-over-year and I know that you previously said that you won’t go into detail on that anymore.

But just from a high level point of view how would you say that that business has fared over the year?.

We’re not seeing an impact from anything in the oil industry and our stores up there are performing like the rest of our stores on a regular basis in terms of executing the keys to success finding good customers, diversifying the client base, delivering excellent service and pricing at appropriately.

So we haven't seen an impact from that no stores are performing like the rest of our stores very well..

So it's fair to assume that business or that part of the business sort of stabilized during the year as it did in Q1?.

Yes..

For our next question we will go to [indiscernible], a Private Investor..

Just a quick housekeeping question, was there any meaningful impact from the hurricanes on the business?.

Well they only hit a few areas where we’re located and we didn't find a meaningful impact or material impact our stores - it can impact us either way our stores can be impacted in terms of the flooding if the stores are not open. And then on the other side our stores can take advantage if there is actually existing work.

So it’s typically net out for us..

This does conclude our question-and-answer session. I would now like to turn the call back to Mr. Sandford for closing remarks..

Thank you, John. In closing I'd just like to emphasize that the company has never been in a stronger position than it is today with increasing revenues, consistent profitability, industry-leading margins, and strong balance sheet. We are very well positioned for the future.

I like to thank everyone for listening today and we look forward to speaking next quarter. Thank you..

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