Richard Coleman - Chief Executive Officer Cory Smith - Chief Financial Officer.

Matthew Campbell - Laridae Capital David Lavigne - Trickle Research LLC Hans van der Burg - Logos Investment Management.

Good morning, everyone, and thank you for participating in today's conference call to discuss Command Center's Financial Results for the First Quarter Ended March 30, 2018. Joining us today are Command Center's CEO, Rich Coleman; and CFO, Cory Smith.

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 the Company's earnings release and in its filings with the Securities and Exchange Commission, including without limitation that most recent Annual Reports on Form 10-K and other periodic reports, which identifies specific risk factors that also may include 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 on 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. They are providing this 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 the 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 May 24, starting at 1:00 P.M. ET today.

A link to a 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 anyway 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, Rick Coleman.

Rick?.

Thank you, Annette. Good morning, everyone. Thanks for dialing in today and for your interest in Command Center. It's an honor to be joining you as your new Chief Executive Officer. I'd like to start off by quickly summarizing our first quarter financial performance.

Our first quarter reflected strong revenue across many of our branches, which was offset by some one-time larger national accounts project work in 2017. Given these revenue dynamics, we continued to proactively manage our cost.

SG&A expenses were down slightly after excluding a non-recurring Freestone collateral reserve deposit, and also after excluding severance related expenses associated with the departure of our former CEO.

Since taking over as CEO just over a month ago, it's become clear to me that Command Center has built a powerful staffing platform well-positioned to not only serve current customers, but also capable of supporting growth through organic expansion, strategic acquisitions or both.

In the coming months as part of our continuing strategic alternatives process, we plan to carefully evaluate multiple opportunities to drive and unlock value for our shareholders. We are also keenly aware of the importance of our ability to continue generating cash and we remain focused on good margins and profitability.

We planned in part to continue our aggressive capital deployment strategy through ongoing purchases of our common stock in the open market and possibly through targeted acquisition opportunities. I'll expand upon our strategic priorities after Cory walks through our first quarter results in greater detail.

Cory?.

Thank you, Rick, and good morning, everybody. Let me jump right into our first quarter results. First quarter revenue increased slightly to $22.5 million compared to $22.3 million in the first quarter of 2017.

As Rick mentioned, while we improved revenue in many branches, we ultimately experienced modest overall revenue growth as these increases were offset by some large national account project work we undertook in 2017, that was not repeated in 2018. Gross margin in the first quarter were 24.9% compared to 25.7% last year.

This decrease was due to higher relative workers' compensation costs and field team member wages and related payroll taxes. Selling, general and administrative expenses in the first quarter were $7.2 million, compared to $5.3 in 2017.

Did the increase was driven by the $1.54 million write-down of our workers' compensation collateral deposit with our former workers compensation insurance provider Freestone.

We now believe it is more likely than not that we will ultimately be treated as a general creditor in the liquidation proceeding and accordingly, we increase the reserve on this asset resulting in a net deposit of $260,000 currently recognized on our balance sheet.

Please note, however, if the amount we may ultimately received is uncertain and could be higher or lower than this recognized amount, excluding this non-recurring items and the one-time expense related to the departure of our Former CEO, selling, general and administrative expenses were actually decreased 3% in the first quarter to 23.2% of revenue compared to 23.9% in 2017.

This was due to decreases in bad debt, internal payroll and payroll related taxes and the absence of a one-time OSHA fine occurred in 2017. Our net loss in the first quarter was $1.2 million or $0.24 per diluted share compared to net income of approximately $200,000 or $0.04 per diluted share in the first quarter of 2017.

Adjusted EBITDA remain flat at approximately $400,000 in the first quarter of both 2017 and 2018. Trailing 12-month adjusted EBITDA was $4.2 million included is approximately $350,000 of non-recurring proxy contest related expenses incurred in our most recent two quarters.

Moving onto the balance sheet, cash and cash equivalents as well as restricted cash and March 30, 2018 was $6.7 compared to $7.8 at the end of last year. Beyond the cyclical use of cash, that typically happens during each first quarter approximately 76% of this $1 million decrease in our cash balances due to four items.

Costs related to the recently settled proxy contests, purchase of treasury stock, the settlement of a note payable related to our 2016 acquisition and IT infrastructure improvements and upgrades.

We carried approximately $200,000 balance on our account purchase agreement at the end of our first quarter compared to approximately $850,000 at the end of 2017. The main reason for this decrease is due the lower eligible accounts receivable at quarter end.

During the first quarter, we repurchased 22,461 shares of our common stock at an average price of $5.74 per share. In April, we purchased an additional 36,310 shares at an average price of $5.68 per share.

From the inception of our stock repurchase plan in 2015 through April 2018, we have repurchased a total of 639,843 shares for roughly 11% of our beginning outstanding share count. Approximately $4.3 million remain under our current $5 million repurchase program.

Our plan is to continue acquiring Command Center shares as part of our comprehensive capital allocation strategy. And with that I'll turn the call back over to Rick..

Thanks Cory. Over the past 40 days I've spent time meeting with our Executive Team, our Headquarter support staff, various members of our field operations, and a number of our shareholders.

It's still early in my tenure, but it's clear to me that Command Center and has built a valuable staffing platform with the potential for significant operating leverage. As a result, we believe our existing infrastructure can support additional [both] in 2018 and beyond.

Since I've gotten a number of questions regarding our expansion plans, I'll start there. We have three primary revenue growth opportunities, revenue growth in our existing branches, expansion into new branches and acquisitions. I'll start by discussing growth opportunities in our existing branches.

One of the advantages of having a robust footprint in our case 67 branch offices in 23 states is that we can whether cyclical changes and branch performance. These are not only a function of changing market conditions, but also reflect effective account management and local staffing practices.

Put simply, our highest priority growth objective is to achieve maximum performance from each and every one of our branches. During the remainder of 2018 much of our attention will be focused on aligning our people, incentives and capital allocation to this priority.

Our opportunities include capitalizing on existing customer relationships while locating and serving new customers who appreciate the value we offer. All of this requires strong and experienced management. We can't succeed without good people who stay with us.

So we'll also focus on reducing turnover and staffing our branches with motivated and experienced leadership. What we do is not easy. We require unique people, who appreciate and can excel at the dynamics of this business day-in and day-out.

While our systems and processes can ensure we operate within acceptable limits, nothing can replace the power of the creative and motivated workforce. In addition to organic revenue growth, we will also continue to evaluate the potential for footprint expansion by opening new branches.

New Branch openings will continue to be opportunistic, either in areas where we have sufficient customer concentration and brand recognition or where we can be assured a new book of business delivered through our existing customer relationships. Finally, we will always be on the lookout for accretive acquisitions, but we will be extremely selective.

Our industry is very fragmented with thousands of small local talent management businesses across the United States. Many acquisitions regardless of industry fail due to the high risk of distraction, integration failure, or cultural misalignment. Staffing is a people business and our assets walk out the door at the end of each day.

As we examined candidate acquisitions, we will look for situations that can add density and management talent where we already have scale and brand recognition. Our goal is to add revenue and gross profit without taking on any significant infrastructure or overhead.

As I mentioned earlier, all of our growth opportunities require talented employees at the branch level. So we will continue making investments in our personnel. In particular, we will be working to fill our vacant revenue producing positions.

We have a plan in place to find quality people for these positions and expect revenue performance and operating improvements to follow. We will also be working to improve our employee retention. Our product is our people and we have some of the strongest in the staffing industry.

We will focus not only on keeping our employees personally and professionally gratified, but also motivating them to achieve our growth potential. In order to do so, we will examine our compensation structures, drive clarity and our Company's operating objectives and enhance our recruiting processes.

We believe any modest cost increases that arise from this strategic step will only drive better returns for our company and our shareholders. With a clear growth plan in place and a strong priority to invest in our personnel, I'd like to pivot to the current industry operating environment. As you know the staffing industry is highly competitive.

In good markets and bad Command Center is consistently come to work everyday with the objective of putting the best people to work for our clients. But today's an interesting time in our industry was several tailwinds. Given the economy is at or near full employment our employers are finding it more difficult to fill open positions on their own.

Many are turning to the staffing industry to solve this problem. Over the past several years, we've experienced the rapidly growing labor market distinguished by the prevalence of short-term contracts or freelance work rather than permanent jobs. This model sometimes called the gig economy creates recruiting opportunities for staffing companies.

Furthermore, today's growing wage gap is necessitated second wage earners who often look to staffing for part time supplemental work. Finally, there's been an increase in federal, state and local regulations on business owners making it tougher than ever to operate a small business.

Naturally, these owners often turned to temp labor to reduce complexity and cost. In the city of Austin, Texas for example, we recently approved the sick time ordinance that requires, employers to allow their workers to accrue and take up to 64 hours of paid sick leave per year.

The ordinance goes into effect later this year and is the first of its kind in Texas. But there were a number of other cities across the country that have similar local compliance ordinances. Command Center must be and is compliant with these rules and others in the markets where we operate, and this is one of the key benefits we provide customers.

As another example, as of July 2017, Oregon employees who sign up for a program called OregonSaves are automatically enrolled in a retirement plan which adds significant reporting obligations for employers. While we have the resources and know-how to administer this program and can certainly be complex and costly for local business owners to do so.

We see these different local employer base requirements as opportunities, not obstacles. In closing, these market drivers as well as others make it a compelling time to be in the staffing industry and as I'm learning more each day, Command Center is uniquely positioned to thrive in this market.

The platform is in place and could support additional growth. We have the balance sheet to build the business and support our customers. We have clear growth opportunities and I believe all of these will drive long-term shareholder value. With that, I'll turn the call back over to Annette..

Thank you, sir. [Operator Instructions] We’ll take our first question from Matthew Campbell of Laridae Capital. Please proceed..

Good morning, gentlemen, and welcome Rick to Command Center..

Thanks Matthew..

Yes, I'd like to congratulate you guys also on a stable Q1, especially considering that there's been a number of external issues that the Company has had to deal with over the last couple of quarters, the proxy and what have you. And as a shareholder, I'm very happy that both sides have come to a conclusion on that and now we can focus on business.

I was wondering if you could quantify the one – the national project work that didn't reoccur in this Q1 kind of better understand, how tough the comps really were?.

Sure. Obviously it’s normal. We’ll have fluctuations in our national accounts business. Some of it's seasonal work, a store closings, realignments and things of that nature, and some of that is related to larger projects that come away from time-to-time. I don't think you can take this data point as a trend.

I think it's just normal fluctuation and as you know we're going to rise and fall with our customer's business in the national accounts arena..

Right, but I mean was there a big change, I'm just curious on a year-over-year basis because you did point it out? But you want to quantify that at all or….

It's really tough to quantify the project work because we've got it. It happens over a various branches and it happens within the existing clients, so when we build a clients, for instance if we got to Walmart, we're going to build – some of that amount is going to be for recurring work and some of it’s going to be for project work.

And really what we did and we identified this as we saw a large spike and we talked about what happened there. But we didn't go through each invoice and segregate. This was project work and this was with normal reoccurring work. So it's really tough to quantify..

I’ll add, that we also have a number of different types of national accounts. We have some branches, for example, who have a revenue base, that’s over 50% national accounts base.

We've got others who have very small amounts of national accounts revenue, but we still consider those customers national accounts because either because they want to be treated as a national account and have a single point of contact for multiple branches or in the case of our largest customers, they're doing a substantial amount of revenue for us..

Got it. And if I could I just have a couple quick follow-ons.

If there was some costs, obviously associated with the proxy [pipe] that you took – that was in the 10-K, is that all behind us or should we expect a little bit more on a cost associated with that? And are there any other one-time costs that you could highlight that we should expect going forward?.

We believe all those costs are behind us now as the agreement, we've settled in the proxy contest. As far as one-time costs, we're not aware of anything on the horizon that would add to those.

That's great. And my last question, I guess, back in 2014 or 2015 that North Dakota was a big profit center for us at one point.

Clearly, those branches have stabilized and have always been net cash generators, but just curious if you guys have seen any kind of change in North Dakota now that oil is going higher, I think it's over 70 bucks a barrel, and that – those are my questions. Thanks so much..

Yes, let us circle back for just a second to your previous question. We want to make sure, we're clear..

As part of the agreement in the proxy context, we have agreed to pay an additional $100,000 of expenses for Mr. Field, so we will experience that one-time cost in the near future..

Thanks for that..

And as far as North Dakota goes, it's my understanding that a substantial part of the revenue when the oil fields were really up and running has to do with constructing the infrastructure to serve the oil field. A lot of that infrastructure is finished now and so I can't really predict the future, but I wouldn't look to that.

Those branches to have the same type of performance going forward regardless of the performance of the oil patch..

Okay. Well thanks for those answers and it's nice to have you on Board, Rick..

Thanks, Matthew..

We shall take our next question from David Lavigne of Trickle Research. Please proceed..

Hi, guys.

How you doing?.

Hello, David..

So you sort of alluded to it and then you kind of touched on a little bit in the industry section and I guess I'm trying to decide if it's sort of a net positive or maybe a negative, but what – are you experiencing kind of some wage pressures across the Board and that seems to be a little bit more topical now as we are moving forward just down a broadly.

And it sounds like maybe you’ve attributed a little bit of margin pressure to that issue, and I'm just trying to get my arms around what your sense is of that issue as we kind of move forward? Again, I suppose that you can look at that from two sides, but I think in general, is that something that you've sort of experienced in the organization?.

I guess the only indicator that I’ve observed along those lines is with hourly wages in some of our branches. California for example has instituted a new minimum wage that escalates periodically. I don't have the details handy, and frankly, as we have, some of our hourly employees who were with us a longer period of time, which is a good thing.

We began to see some wage increase in those branches, but I don't think it's a significant enough for you to notice it in the bottom line..

Okay. And I'm curious about – I know you can't speak to this a lot, but on the acquisition side. I mean, I understand kind of the three pronged growth approach, and I think the organic piece is something everybody's trying to kind of read more out of regardless of what industry you're in.

But it still seems to me that sort of the acquisition side of things might be the most, I don't know, I guess the most impactful and given the kind of fragmented nature of the industry that we talk about a lot.

So it seems to me like there might be more acquisition opportunities than ever really kind of seemed to get confident, I'm curious what the strategy is there.

I mean, even if it's just kind of a high level, I mean, is that something where the acquisition, your acquisition model, I mean is there an approach that you take to the acquisition thing that tries to identify acquisitions that maybe your geographic or certain size or obviously you noted accretive, but just trying to get my arms around that process.

It seems to me that given the cash position with the company and some of those other things, but that would be the – I don’t know if it’s the easiest task, but it seems like the most – maybe the most disappoint to me..

Yes. So I hope I didn't imply that we're not going to look at acquisition opportunities. We aren’t. It’s just not going to be our highest priority because there's a high risk associated with it. My dad used to tell me if you want it badly, you'll get it that way badly.

And we're not dead set on acquiring companies only to see the people who are the backbone of the company potentially walk out the door, and that's a high risk for the mom-and-pop operations that exist across the United States where we can find quality businesses that fit into our geographic footprint or have enough scale to establish a toehold in a new region.

Then we'll get serious in those kinds of discussions..

Those are the things that we try to identify on an ongoing basis daily or whatever?.

Yes. I wouldn't say we have a systematic plan, we haven't sent the word out and said, hey, if you want us to buy your company, let us know. But we have talked to some of our regional folks. They're on the lookout for those kinds of opportunities and we have had a couple of them referred to us just recently..

Okay. Well, I'm with Matt. I think it's great to have the consternation behind us and I'm glad that you're kind of getting situated and trying to move forward. So that I think is probably the best news of the quarters. So I appreciate. .

All right. Thanks a lot David..

[Operator Instructions] Our next question is from Hans van der Burg of Logos Investment Management. Please go ahead sir..

Good morning, guys. You talked a little bit about making the investments in personal and selling the revenue performance roles and continued focus on organic revenue expansion.

So I was wondering what sort of time lines do you see for filling these roles and implementing these changes?.

It'll be gradual over the next several months, Hans and all of those – just to perhaps comfort you a little. Those are revenue producing positions that we're talking about. .

Okay. Thanks.

Maybe another one?.

Yes, I'm sorry. Even if we wanted to, we couldn't and wouldn't immediately staff up all those position simultaneously. As you know, there's a lag time before we start seeing revenue for new hires. .

And would you say that have these roles has been vacant for a longer periods of time or as that just recently became an issue?.

A little bit of both. There's normal ebb and flow in our environment. We have positions that come open and locations that are sometimes more difficult to fill and so we have to pay greater attention to getting those build..

All right, thanks. That's good color. Maybe a follow-up – another question on the comment you just made about the acquisition.

You mentioned the high risk associated with M&A, and I was just wondering that if you look back at the Hancock expectation that the company did I think a year-ago, did any of these risks that you mentioned about personnel leaving or the negative effects of kind of occurred if any of these risks materialize with regards to that acquisition or does that go really well?.

I think I'm just looking around the room here and getting some nods and it went reasonably well. No major problems there. Every acquisition I've ever been involved with, and I think it’s probably close to 20 at this point has had come with surprises, so you just have to anticipate that going in, do effective due diligence and deal with it..

Yes, that makes sense. Thanks guys for taking my questions and good luck going forward..

Thank you, Hans. End of Q&A.

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

Thanks everyone. I really appreciate your dialing in and your involvement and the good questions that we got. We're looking forward to the next quarter and we'll talk to you soon. Thanks operator..

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