Command Center (CCNI, Financial) is a $45 million microcap company selling on the over-the-counter market with little to no analyst coverage. Since 2013, when new management came in, the company has seen massive growth with high margins. The growth has produced massive cash floww for the company, allowing it to pay off its debts and build up excess cash reserves. Excess cash makes up 15% of Command Center's market capitalization. Management is determined to effectively use the cash. Command Center has authorized a $5 million share repurchase and also plans to add new store or even make small acquisitions. The market hasn't given credit for the successful turnaround by management since the company is still selling for such low valuation multiples.
Business overview
Command Center is a temporay labor provider to blue collar industries like construction, hospitality and other various trades. The company operates 57 stores in 41 states throughout the United States. A snapshot of the firm's financials are included below
First-quarter results
First Quarter 2015 Financial Highlights vs. Same Year-Ago Quarter:
- Revenue up 2.8% to $19.0 million
- Gross margins increased 190 basis points to 28.3%
- Operating income was $189,000 compared to operating incomeof $596,000
- Net income was $82,000 compared to net income of $511,000
- Adjusted EBITDA totaled $396,000 compared to $678,000
CEO Bubba Sandford said about first quarter results,"Our firstquarter financial results reflect our investment in hiring training and retaining staff to support our long term focus of increasing shareholder value.” He went on to say, “A 17% decline in revenue from offices located in the Bakken region was offset by increases in our other locations, reflecting the value of our geographic and industry segment diversification. We achieved these increases through our ongoing programs to improve same store revenue and profitability. Our plan of steady diversified growth with a focus on profitability continues to add value for the company’s shareholders, and we look forward to continuing to deliver positive results through the rest of the year.”
Command Center's revenues in the first quarter of 2015 increased by 2.8% to $19 million compared to $18.5 million in the same quarter last year. The increase in revenues came from improving revenues and profitability at existing branch locations. Revenues from the Bakken Shale region of North Dakota fell by 17% and was offset by revenues increases from branches throughout the United States. During the first quarter Command Center's Gross Margins increased 190 basis points to 28.3% from 26.4% in 2014. The company's improving gross margins were driven by lower workers' compensation costs, which came from the company's ongoing programs to improve employee safety. Command Center had operating income of $189,000 compared to $596,000 a year ago; this decline was the direct result of the company's plan to improve revenues and profitability generated at existing branches. The company hired new people and created better benefits for employees. Command Center's non-cash compensation for the first quarter increased $146,000 as the company extended its equity compensation program to included all full time employees. The company's adjusted EBITDA in the first quarter of 2015 was $396,000 or $0.01 per share compared to $678,000 or $0.01 per share last year. Command Center cash decreased from $8.6 million in December of 2014 to $7.9 million.
Management
Over the last few year Command Center has turned itself around from and unfocused and struggling company to a well-run and profitable business. Management has focused on winning high-margin business, controlling cost, and making its branches be responsible for their own profitability. The result of these actions have lead to rapid growth in operation income even with top-line revenues contracting. Command Center's CEO Bubba Sandford deserves a lot of credit for the company's turnaround. Management is clearly shareholder friendly and looking to return cash to shareholders through a share repurchase plan.
Share repurchase plan
In April, the company announced a three-year $5 million stock repurchase program. Command Center plans to repurchase share to the extent the market does not fully reflect the strength and performance of the company. The company's share repurchase plan will not prevent the company from opening new store or pursuing acquisitions.
Valuation
Command Center sells for 5 times earnings, 6.2 times operating income, 7.1 times EV/EBIT, and 6.4 times EV/EBITDA. The company's largest competitor sells for 10x EV/EBITDA and if the company sold for 9x its EV/EBITDA would sell for $1.05/share. Command Center is undervalued and unloved my the market. The company is well run, has a shareholder friendly managment and is profitable. With all of this there is no reason not to see multiple expansion for Command Center.
