Paul V. Walsh
Thank you, Tyson, and good morning, everyone. Second quarter revenue of $135.7 million was a new company record. The 8% sequential growth was a $10 million increase over Q1, representing the largest sequential gains in nearly 3 years. This is impressive and that it comprehends the decline in our touch control in revenue from 8% in Q1 to just 5% in Q2. The strength was across all of our major product lines with several reaching all-time highs. The Ember acquisition closed on July 3, thus, our Q2 results do not reflect anything related to that deal other than transaction cost. I'll start with the GAAP results, which include charges related to the executive separation agreement, transaction costs associated with the Ember acquisition, $9.2 million noncash stock compensation charges and an $8.4 million credit from a one-time release of tax reserves. Second quarter GAAP gross margin improved to 61%. R&D investment increased to $34.2 million and SG&A expense increased to $32.2 million, resulting in GAAP operating income of 12.1%. Because of a tax reserve release, there was a tax benefit in Q2, thus, our tax rate was a negative 15.3%, resulting in diluted GAAP earnings of $0.47.
Turning to our non-GAAP results. Gross margin increased meaningfully to 61.3%, a 7% sequential increase in broad-based products and an 8% sequential increase in access products contributed to the gross margin improvement. Our Broadcast products also increased 8% sequentially in Q2, driven by our audio business, which was favorable to the margin mix within Broadcast. Mix continues to be the primary determinant in the quarter-to-quarter margin fluctuations and I expect that trend to persist in the second half of 2012. We project our Q3 gross margin will be at or near 61% depending on mix. This comprehends an expectation of the higher margin Access business will represent a smaller percentage of revenue in Q3 and the product mix within access will be less favorable than in Q2.
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