Question-and-Answer Session
Operator
(Operator Instructions). And our first question comes from line of Steve Ferranti with Stephens Incorporated.
Steve Ferranti - Stephens Incorporated
Hi guys, good afternoon and congratulations on a tremendous quarter.
Ralph Quinsey
Thanks Steve.
Steve Ferranti - Stephens Incorporated
I want to get a sense from you, to what extent do you think that there was any effects such as channel loading or maybe certain customers accelerating particular orders in the second quarter as they try and ramp up demands and meet -- ramp up inventories to meet their own demand?
Ralph Quinsey
I would say those effects are probably not predominant trends. I think there is good healthy demand for Smartphones, where we participate. When you go through demand observation that we did, I think you going to see undershoot and overshoot. I really don't think that was the dominant thing.
Steve Ferranti - Stephens Incorporated
Okay, that's great. And then I guess just turning to the third quarter guidance, it implies a fairly meaningful uptick in operating expenses there. I guess first how do you anticipate that breaking out between R&D and SG&A suite and then sort of what if the maybe you can give us some sense for some of the investments that are driving that uptick?.
Steve Buhaly
Sure. I think the uptick is roughly split between R&D and SG&A. The R&D side it's going to be increased investment primarily in engineering materials as we bring some important products to market. And on the G&A side, we tend to see our medical expenses pick up in the back half with our self insured with that kind of a feeling above that as individuals use up their personal deductions. We end up picking up the full amount for the balance of the year. And so we just see kind of a seasonal uptick there, as a primary driver. Those are the two big items.
Steve Ferranti - Stephens Incorporated
That's fair. And then I guess Ralph, you had touched upon the longer term operating model of 40% gross margin and 15% up margin. Can you give us a sense for sort of what revenue run rate you're expecting that at these days? And then I guess related to that, how do you expect or what do you think is the most dominant drivers to getting gross margins up to that level, I mean we're obviously out of the through the OpEx spend level, what are the drivers that get itself to the 40% on the gross margin line?
- To read the full transcript on Seeking Alpha, click here »
