With that, I'll turn the call over to Skullcandy's President and CEO, Jeremy Andrus.Jeremy Andrus Hi, everyone, and thanks for joining our second quarter earnings call. We are pleased with our second quarter results. Net sales increased 38%. Gross margin improved sequentially and net income increased 60%. Our sales growth was broad-based, with all of our major channels of distribution increasing on both the domestic and international sides. Sales growth was driven by sell-through and SKU growth with existing accounts, a double-digit increase in ASPs and the transition to a direct selling model in Europe. Also benefiting sales was the earlier timing of back-to-school shipping, which began about a week earlier this year and shifted some sales in the second quarter compared to the third quarter last year. Second quarter gross margin increased 40 basis points sequentially from the first quarter and benefited, primarily by a more favorable mix of revenue and improved margins from 2012 model products. In the expense side, SG&A increased slightly above sales growth and were aligned with expectations. While we continue to invest in key areas of the business, the rate of investment has slowed and we are beginning to generate incremental revenue from those investments. We're extremely excited about the second half of this year. We will be launching a new redesigned line of Astro Gaming headphones, a new line of Skullcandy gaming headphones and a number of internally designed and developed headphones from both our Skullcandy and 2XL brands. We believe Astro Gaming is the best premium gaming headphone brand on the market and there are many long-term opportunities to continue to develop this brand. When we acquired Astro in April of last year, we knew there were significant number of synergies between gaming and audio headphone categories. These synergies includes product development, supply-chain, sales channels and the customer base. The gaming headphone category is growing, especially at the high-end and there are limited number of established brands in this space. Barriers to entry are high because of the sophistication in technology involved with developing and distributing such a complex product. At the time of acquisition, Astro was a small niche business with great products and a strong brand, but have limited distribution and a cost structure that did not support traditional retail channels. The company's products were targeted primarily at hard-core gamers and sold exclusively online.
After years worth of product redesign and factory resourcing, Astro's entire product line now carries retail-ready margins, giving us the ability to expand Astro's distribution into traditional retail channels. On July 20, we launched Astro's first new product since the acquisition, the $299 A50 Wireless gaming headset. A50 is Astro's most technologically advanced product in its award-winning line of headsets. It features cutting-edge KleerNet 5.8 gigahertz wireless technology, Dolby Digital 7.1 surround sound, and built in MixAmp 5.8 and multi-platform compatibility. The A50 is professional tuned for audiophile level performance when gaming, watching movies or listening to music. It functions natively across all manner of entertainment devices, including gaming consoles, PCs, Macs and home theater systems.Since the launch of the A50 less than 2 weeks ago, we have sold a significant number of units from the astrogaming.com website. And the early buzz around the product has been very positive. Just this week, it was awarded the Editors' Choice for gaming headsets in PCMag.com and a recent YouTube video featuring the unboxing of the new A50 has already received 230,000 views. Technology publication, The Verge, commented, "Astro's headset range has been praised for its sound quality, but the A50 may be the company's most versatile and best-sounding product yet." Astro's always built their products on that solid foundation and the A50 is no exception. The Astro A50 is, without question, one of the best gaming headsets on the market. Read the rest of this transcript for free on seekingalpha.com