Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Josh Vogel – Sidoti & Company.
Josh Vogel – Sidoti & Company
I was wondering if there were any reforms or legislation floating around California that you think is either making you nervous or making you more positive on the prospects of the business.
William Sherertz
We're not taking IOU's. Business is business and the more the government continues to jump on the backs of small business and require them whether its health insurance or others, it's going to benefit us, and I think we're seeing a direct benefit from that. There's no specific legislation going on that I know of that would have any major impact on us.
Josh Vogel – Sidoti & Company
On the last call you mentioned something about California raising the worker's comp rates on July 1, and that was going to be a big positive to you in the back half of the year.
William Sherertz
The State went up 15%. They backed it down from the 24%, and a lot of the insurers went up 5% to 10%. So all that kind of plays into our hands as long as we pick carefully. That's the real key to it.
Josh Vogel – Sidoti & Company
You also mentioned last quarter that you expect the gross margin to continue to improve throughout the year. Is that still your stance here in the back half?
William Sherertz
Yes. One of the things that we really kind of push is what we call preferred payroll and that would be a direct competitor to Pay Checks and ADP. It's a part of the company that's growing and we think it has great potential and will help our margins.
Josh Vogel – Sidoti & Company
Looking at your guidance, the decline at the mid point in the range in gross revenue for Q3, it implies a rate of decline that's greater year over year than what we saw in Q2. I was wondering if there's some seasonal stuff going on here or are you just being super conservative.
William Sherertz
You've got to give the numbers as you see them. You can't be super conservative or liberal or anything else. You just do them as you see them. Let's just say we've got a month behind us and those are good numbers. We're probably a little better than that.
Josh Vogel – Sidoti & Company
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