Greetings and welcome to the Command Center, Inc., First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded.

It is now my pleasure to introduce your host Louie Toma of Hayden IR. Thank you sir, you may begin..

Thank you, operator. I'd like to welcome everybody to today's call. Hosting the call today are Command Center's CEO, Rick Coleman; and CFO, Cory Smith. Please be aware that some of the comments made during our call today 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 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 the filings with the Securities and Exchange Commission, including without limitation the most recent Annual Report on Form 10-K and other periodic reports, which identifies specific risk factors that 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 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 this call, the Company - 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 the general expected accounting or GAAP.

You may 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 everybody that this call will be available for replay through May 28, starting at 1:00 P.M. Eastern today.

A link to a website replay of this call was also provided in the earnings release, which is 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.

Now, I would like to turn the call over to the CEO of Command Center, Rick Coleman. Rick..

Thanks Louie. Good morning everyone and thanks for joining us. The first of quarter of each year, usually a slow quarter for us and the first quarter 2019 was no exception. In addition to our usual weather related issues, and the expected seasonal slowdown of certain customer projects.

We also experienced a significant reduction in services from one large customer. Our project mix was also less favorable with more revenue for which we had greater administrative expenses in the form of contractually required temporary worker background checks and drug screens.

Finally, we have significant nonrecurring expenses, including more than $600,000 in costs relating to our pending merger with Hire Quest, as well as nearly $250,000 in 2018 bonus related costs. These expenses contributed significantly to our operating and net losses and absent these charges, we would have been profitable.

Just over a month ago we announced our plans to merge with Hire Quest Holdings LLC a privately held provider of blue-collar, light industrial and administrative staffing, operating as Trojan Labor and accrued staffing. We remain very excited about this planned transaction and its benefits for shareholders.

We're looking forward to positioning the combined organization as a staffing industry leader with significant scale and a proven business model that we expect will drive improved profitability. Assuming shareholders approve the items necessary to close the transaction on a combined basis we will then have about 160 branches in 31 states.

Our combined scale and expanded geographic footprint will differentiate us from competitors and is expected to help us secure new customers and the larger labor pool.

As we have previously indicated, based on our current projections and after some period of integration and normalization, we believe the combined entity will produce annually EBITDA in excess of $15 million, exclusive of growth opportunities. Since we last spoke, we have drafted and submitted the preliminary proxy statement to the SEC.

We are waiting the initial SEC review and will then respond to any questions the SEC may have. Once we have completed the review we will file a definitive proxy statement and distribute the proxy to shareholders. The next steps will be to schedule a shareholder vote announce the details of our tender offer.

While this process is underway we ask for your patience and understanding regarding the limited additional details we can provide. While these steps are ongoing, we been working hard with the Hire Quest team on post-merger planning. Our efforts are focused on ensuring a smooth and rapid integration.

As previously announced, Rick Hermans, who is currently the President and CEO of Hire Quest will be assuming the same role with the combined entity. Our coordination with the Hire Quest team has gone very well and with each passing day, we are more encouraged by this pending combination.

We believe this merger has tremendous potential to create sustainable shareholder value and a strong company moving forward. I'll now turn the call over to Cory Smith, our CFO to review the financial results..

Thank you Rick and good morning, everyone. Revenue in the first quarter of 2019 was $21.8 million compared to $22.5 million in the year ago quarter, the decreased of $713,000 or 3.2%. This decrease was largely due to reduction in services provided to a large client, cool weather in parts of the country and the loss of key salespeople.

Gross margin in the first quarter was 25.9% compared to 24.9% in the year ago quarter.

This improvement is primarily related to a decrease in workers compensation costs, as well as lower unemployment cost, which were partially offset by higher temp employee wages and related payroll taxes as unemployment rates remain low and put upward pressure on wages.

Selling general and administrative expense in the first quarter was $6.6 million amounting to a decrease of approximately $664,000 from $7.2 million in the first quarter last year.

This decrease was primarily due to the impairment of our workers compensation deposit in receivership of approximately $1.5 million, that was incurred in the first quarter of last year, excluding this expense SG&A increased by approximately $876,000 with most of this increase due to higher legal and professional fees, related to the pending merger.

We reported a loss from operations of $986,000, compared to a loss from operations of $1.7 million in the first quarter last year. Net loss in the first quarter of 2019 was $744,000 or negative $0.16 per diluted share compared to a net loss of $1.2 million or negative $0.24 per diluted share in the year ago quarter.

Adjusted EBITDA in the first quarter was a negative $118,000 compared to a positive $417,000 in the year ago quarter.

Adjusted EBITDA in the first quarter of 2019, included $712,000 in non-recurring charges and $88,000 in non-cash compensation, compared to $2 million in non-recurring charges and $27,000 in non-cash compensation in the year ago quarter.

Moving on to the balance sheet, cash and cash equivalents at March 29, 2019 was $7.5 million compared $8 million at December 28, 2018.

During the first quarter of 2019, prior to the signing of the definitive merger agreement, we purchased approximately 48,000 shares of common stock through our share repurchase program at an aggregate price of approximately $198,000, resulting in an average price of $4.15 per share, these shares have been retired.

In conjunction with the recently announced merger with Hire Quest and the related pending tender offer, we have discontinued repurchasing shares under this program.

As a reminder, in connection with the Hire Quest transaction, and contingent upon shareholder approval, and the ultimate closing of the transaction Command Center tends to commence a self-tender offer at $6 per share for up to 1.5 million shares of our common stock.

If the number of shared properly tender exceeds to 1.5 million shares, we will repurchase tendered shares on a pro rata basis. There's no minimum number of shares in this tender offer. We invite shareholders to discuss whether they tender their shares with their broker or other financial or tax advisors.

And with that, I'll turn the call back over to the operator for Q&A..

Thank you. We will now be conducting a question-and-answer session. [Operator instructions].

Gentlemen, it appears we have no questions at this time. We will now turn the floor back over to you..

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Thanks, operator. Thanks, everyone, we appreciate you joining us. We look forward to getting the proxy out here shortly. And thank you for your ongoing support..

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