Overall PEO gross revenues increased 38% to $464 million over the second quarter of last year primarily due to new clients as PEO business from new customers more than tripled our lost PEO business from former customers as compared to the 2011 second quarter. Our PEO revenues from existing customers experienced approximately a 7% increase year-over-year due to increases in both headcount and hours worked.
Staffing revenues for the second quarter of 2012 were flat at $30.4 million primarily due to the addition of new business and small increase in revenue from existing customers echoing the amount of lost business from former customers.
On a percentage basis gross margin in the second quarter was 3.3 percentage compared to 3.6% in the second quarter of 2011. The key components of this quarter’s gross margin are as follows: Direct PEO cost as a percentage of gross revenues in the second quarter increased to 84.7% compared to 85.1% in the same quarter last year due to increases in the overall customer market percentages as a result of price increases which we began to see flow through during much of the 2012 second quarter.
Workers compensation expense as a percentage of gross revenues was 4% which is up 60 basis points from the same quarter a year ago primarily due to an increase in the provision for estimated workers comp claim cost and a higher safety incentive. We continue to work closely with our third-party actuary as well as monitor our own internal data to evaluate our workers comp reserves.Looking ahead to the balance of 2012, we anticipate that 4% level of gross revenues for workers compensation expense to continue. SG&A expenses increased 19% to $10.6 million versus Q2 of 2011 primarily due to increases in management payroll and profit sharing as well as to the variable expense components within the SG&A as the course of this business grow. Our tax rate is currently at 33.5% and we expect this rate to remain at similar levels for the balance of 2012.Read the rest of this transcript for free on seekingalpha.com
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