Good day, ladies and gentlemen, and welcome to the QuickLogic Corporation Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen only mode. As a reminder, this call may be recorded. It is now my pleasure to introduce Ms. Mariah Shilton with QuickLogic's Investor Relations firm, LHA.
Please go ahead.
Thank you, Andrew. Welcome, everyone, and thank you for joining us today for QuickLogic's second quarter fiscal 2018 results conference call. With us today are Brian Pates, President and Chief Executive Officer and Doctor. Sue Chang, Chief Financial Officer. Before we begin, I will read a short Safe Harbor statement.
Some of the comments QuickLogic makes today are forward looking statements. That involve risks and uncertainties, including, but not limited to, stated expectations relating to revenue from new immature products, statements pertaining to QuickLogic's future stock performance, design activity and its ability to convert new design opportunities into production shipments, timing and market acceptance of its customers' products, schedule changes and projected production start dates that could impact the timing of shipments, the company's future evaluation systems, broadening the company's ecosystem partners, expected results, and financial expectations for revenue, gross margins, operating expenses, profitability and cash. These statements should not should be considered in conjunction with the cautionary warnings that appear in QuickLogic's SEC filings. For additional information, please refer to the company's SEC filings posted on its website and the SEC's website. Investors are cautioned that all forward looking statements in this call involve risks and uncertainties.
That future events may differ materially from those statements made. For more details on the risks, uncertainties and assumptions, please refer to those discussed under the heading Risk Factors in the annual report on Form 10 K for the fiscal year ended December 31, 2017. The company filed with the SEC on March 9, 2018. These forward looking statements are made as of today, the day of the conference call. And management undertakes no obligation to revise or publicly release any revisions of the forward looking statements in light of any new information or future events.
Please note, QuickLogic uses its website, the company blog, QuickLogic Hotspot, its corporate Twitter account, Facebook page and LinkedIn page, a channel for distribution of information about its products, its planned financial and other announcements, its attendance at upcoming investor and industry conferences and other matters. Such information may be deemed material information. And QuickLogic may use these channels to comply with its disclosure obligations under Regulation FD. This conference call is open to all missing webcast slides. We will start today's call with the company's strategic update from QuickLogic CEO, Brian Faith.
Then CFO, Sue Chung will provide financial results and guidance. Brian will deliver closing remarks and open the call to questions. At this time, it is my pleasure to turn the call over to Brian Faith, President and CEO. Please go ahead, Brian.
Thank you, Mariah, and thank you all for joining our Q2 2018 conference call. We have made tremendous progress since our last conference call. Most notably, we won 2 significant EOS S3 designs with large OEMs that forecast 2019 production in low to mid seven figures and executed our first embedded FPGA Master Technology license agreement with a semiconductor company. We believe these and other high profile designs will enable us to grow 2019 total revenue significantly more than our 50 While production commitments from major OEMs give us confidence that we are developing the momentum and critical mass to deliver our long term growth, and profitability objectives, there are 4 factors limiting our growth in 2018. The delay of the Amazon Alexa voice service or ABS specification for hearable wearable and other battery powered devices, delays in finalizing embedded FPGA IP license agreements, The push of the wearable design win we have with a Tier 1 smartphone company.
The good news is that all of these factors are rapidly moving in the right direction And with this we are gaining visibility into production schedules that we anticipate ramping during the coming quarters. While we are enough to deliver the plant products using our EOS S3 SoC will move into production during the coming months with the first schedule for late Q3. However, we don't have enough information from the other customers yet to forecast While a number of potential IP customers have shown serious interest in our Arctic Pro embedded FPGA, our engagements were stalled in a Catch 22. To address this, we modified our go to market strategy The short story is semiconductor companies wanted to run test chip experiments with our embedded FPGA technology before committing a significant amount of money to acquire an IP license for we created a master technology license agreement or MTLA that carries only a modest support and maintenance charge. This solves 2 problems.
First, it enables semiconductor companies and OEMs to build test chips using our embedded FPGA IP, for only a modest cash a new SoC design. This also provides us with exposure to other SoC design groups within the company, which expands our opportunities for new engagements. 2nd, the MTLA defines the terms and conditions of follow on IP licenses. This means the vast majority of the negotiations and legal work accomplished within the MTLA and the follow on license agreements for targeted SoCs amounts to only a couple of pages. This is critical in some cases since an SOC Design Group that wants to use EFPGA may otherwise decide it does not have the time to go through the tedious corporate level approvals line flow for a given SoC.
In June, we announced the signing of our first MTLA with Seads Guide Microsystems. C Sky, which is in the process of being acquired by Alibaba, is the only high volume embedded CPU provider in China with its own ISA and reports over 700,000,000 embedded CPUs shipped. The company's ultra low cost CK 800 series of embedded CPUs addresses a wide range of cost sensitive applications where discrete FPGAs have historic use cases such as AI, IoT, digital audio video, networking and wireless communications, security, industrial control, and automotive. C Sky plans to incorporate our Arctic Pro embedded FPGA in a new highly flexible ultralowpower common CPU platform that will be fabricated using the SMIC 40 nanometer LL process. The platform is expected to be available in mid-twenty 19.
This morning, we announced that ETH Zurich has selected our Arctic Pro embedded FPGA for use in its parallel ultralowpowerpulp platform that targets GlobalFoundries 22 FDX fabrication process. ETH is a renowned technical universe city located in Zurich, Switzerland and a founding member of the RISC V Foundation. ETH chose QuickLogics technology for its ultralow power operation and its ability to create We are collaborating with ETH to integrate our embedded FPGA in its pulp risk 5 SoC that will enable users to offload certain functions from the processors to the EFPGA fabric. This will give OEMs the capability to evaluate the power savings and performance improvements that embedded FPGA hardware solutions deliver relative to software solutions running on processors. This is critical for assumption.
We already have revenue generating IP license opportunities tied to the pulp 22 FTX test chip. We received the 22 FDX test devices from Global Foundries last quarter and continue to expect the qualification process will be completed by the end of summer. We have ongoing 22 FTX engagements that are moving forward ahead of this qualification that are independent of the opportunities tied to the ETH program. Our initiative to port to a more advanced process note at TSMC is moving forward and is note since our May conference call. Our new go to market strategy has already resulted in an MTLA agreement with C Sky and is being evaluated by other potential customers that we feel are very good prospects for IP license agreements in 2019.
We believe East Sky, the engagements associated with our ETH initiative and other ongoing engagements will lead to multiple IP license agreements. However, since the timing of finalizing these anticipated agreements is unclear and in some cases may involve the interim step of an MTLA we are not currently forecasting material IP license revenue for second half twenty eighteen. Now on to EOS S3. Last quarter, I mentioned that we were in the final stages of negotiating an MOU with a significant Japanese smartphone OEM. The MOU is now signed and covers multiple smartphone models extending to 2020.
We were originally forecasting the first smartphone would be released this year. However, the customer's lead carrier has asked them to hold always on always listening voice capability for the model it targets for release spring 2019. We are hopeful this release schedule will result in a prominent display at Mobile World Congress 2019. As I outlined in our last conference call, We have 3 active opportunities with a Tier 1 smartphone OEM. The hardware and firmware designs for the first wearable product were locked in Q2 and list our EOS S3 as the device of record.
The audit of our package and test subcontractor is ongoing as our software regression testing and quality and reliability testing. The customer's efforts with 3rd party companies that are developing apps will likely continue even after the product released for production. While we do not have a production schedule for this design win yet, we are currently anticipating it will start during the first half of twenty nineteen. We believe this design has The customer's understanding of the industry leading power consumption delivered by our EOS S3 SoC led to the second engagement for a high volume consumer wearable. We expected to know by now if the customer selected EOS S3 for the second wearable design, but that decision is still pending.
Beyond that, all I can share is we are working closely with the customer's design team and that the EOS S3 design approach consumes less power than the alternative design approach. We believe the customer ready by end of 2018 and that volume will wrap beginning in Q1 2019. If we are successful in winning this design, I believe that it has low to mid 7 figure value in 2019. The third opportunity with this customer for a hearable design remains an evaluation as the customer has prioritized other programs that have not completed testing the new beamforming and advanced noise reduction technology available with our EOS S3 SOC. Neighbor Labs released its first consumer product the AOCI Smartwatch last May.
AOCI is a highly sophisticated smartwatch that leverages our EOS S3 to optimize low power consumption, while enabling always onalways listening voice capabilities. Aki is being primarily marketed and sold through Korea Telecom or KT, which is South Korea's largest wireless telecom company. We expect Aker will contribute to our 2nd half growth and a new hearable engagement with Neighbor Labs has the potential to build on this success in 2019. In past calls, I've discussed a wearable design win with a European Health company targeting the B2B market. Since our last call, the founder and CEO of the company was replaced.
The new CEO has reset the company's near term priorities. And with that, place the B2B wearable on hold. As a result, we no longer anticipate the wearable going into production this year. And with our limited visibility, we are not currently forecast revenue in our 2019 model. Last quarter, I mentioned that we added a second engagement with a European fitness company that we have discussed on previous calls.
The good news is the new design fully leverages the resources of our EOS S3 SOC, including its embedded FPGA. However, with this design in development, the customer decided to drop its original design that used minimal ESS3 resources. As a the new product using our EOS S3 to be released in early 2020. Our success in markets beyond smartphones, wearable and hearable devices continue to build and will be a primary driver BBK Education Electronics has introduced 2 new tablets that use our EOS S3 SoC to enable always onalways listening and trigger word recognition. With 40,000 terminal sales outlets in 600 Chinese Cities and 50 flagship stores, E BBBK is a very well recognized brand and a leading supplier of interactive educational products in China.
Its new S3 Pro flagship and H20 entry level tablets use our EOS S3 to deliver the benefits of always onalways listening and enable children in China to begin learning as soon as they can talk. We are engaged with EebDK on a new potentially high volume design that is scheduled for release in 2019. We have recently won a very significant design with a major consumer electronics company that is scheduled to move into initial production in very early 2019. The first of up to 10 products using our EOS S3 SOC is scheduled for what I anticipate will be a high profile launch at CES, in January 2019. Due to our NDA with the company, The design uses our always onalways listening voice technology and our embedded FPGA.
The OEM has high brand name recognition. The end product is a new high volume consumer category for QuickLogic and we anticipate 2019 revenue in the low to mid seven figure range. In addition to the momentum we have established with major OEM customers that are scheduled to ramp new EOS S3 designs in the coming quarters. Last quarter, we announced that Marotta selected our EOS S3 for its new voice enabled Wi Fi solution that it introduced at the IOT M2M show in Japan last May. Given the fact Marotta is the worldwide leader in the wifi module market, this was a nice win for QuickLogic.
Morata has since stated that OEMs in Japan have shown interest and that it is expanding its marketing efforts for the new module outside Japan. While I believe this effort will lead Qualcomm has officially included our EOS S3 in its extension program. The extension program provides support for designers want to extend the capabilities of Qualcomm's CSR 8670 and CSR 8675 Bluetooth audio solutions. Our inclusion in the extension program makes it easy and cost efficient for designers to use EOS S3 to add ultralow power always onalways listening and voice recognition features. Before I turn the call over to Sue for her financial presentation, let's take a moment for a brief update on QuickAI.
If you are new to QuickLogic, I encourage you to review our May 9th conference call webcast and the special webcast presentation for QuickAI that we provided in conjunction with our partners a week earlier. These webcast can be found under the Events tab on our Investor Relations webpage. Our QuickAI initiative is moving forward in line with our expectations. We demonstrated some early proof of concepts with our partner SensiML at the Design Automation Conference in Sensors Expo in June. We have also initiated a very intriguing customer engagement where QuickAI has the potential to significantly improve ROI by lowering operating costs and increasing yield.
We continue to target our first production revenue for QuickAI during the second half of twenty nineteen. I would now like to turn the call over to Sue for a discussion of the financials. Sue?
Good afternoon and thanks to everyone for joining us today. Please note, we are reporting our non GAAP results. You may refer to the press release we issued today for a detailed reconciliation of our GAAP to non GAAP results and other financial statements. We have also posted an updated financial table on our IR webpage that provides current and historical non GAAP data. For the second quarter of 2018, total revenue was $3,100,000 and within our guidance range.
Our new product revenue was $1,600,000 and the mature product revenue was 1,500,000. Due to our continued success in diversifying our customer base, we had 4 customers with a greater than 10% of total revenue in the 2nd quarter, while Samsung represented less than 10% in the quarter. Our Q2 twenty eighteen gross margin was 50.1 percent and within our forecasted range. Operating expenses for Q2 were $4,500,000 and were within our guidance range. R and D expenses were $2,200,000 and SG and A expenses were $2,300,000.
R and D expenses were lower than anticipated due to the timing of a certain expenses associated with porting our embedded FPGA IP to a more advanced node at TSMC. The net total for other income expense and taxes in Q2 2018 was a $38,000 charge, which was below our forecast due to foreign currency exchange fluctuation. This resulted in a net loss of $3,000,000 or $0.04 per share, which was within our forecasted range. In May, we raised net proceeds of $13,900,000 from our public offering. Which enabled us to end the quarter with Net cash usage during the second quarter was $3,900,000.
This was above the forecasted range. Due to a significant increase in working capital and nonrecurring costs associated with the launch of QuickAI. And other long term strategic initiatives. Turning to the third quarter 2018 Our revenue guidance for total revenue is expected to be comprised of approximately $1,800,000 of a new product revenue and $1,700,000 of a mature product revenue. The increasing new product revenue is expected to be driven On a non GAAP basis, we expect our gross margin to be approximately 50% plus or -3 percent.
We're currently forecasting non GAAP operating expenses at approximately $4,700,000 plus or minus $300,000. We expect our non GAAP R and D expenses to be approximately $2,400,000 and non GAAP SG and A expenses to be approximately $2,300,000. We expect our other income expense and the taxes will be a charge of approximately $60,000. At this point of our forecast, our non GAAP loss is expected to be approximately $3,000,000 or $0.03 per share. As was the case in prior quarters, the main difference between our GAAP to non GAAP results is our stock based compensation expense, which we expect it to be approximately $500,000 for the quarter.
In Q3. We expect it to use between $2,500,000 $3,000,000 in cash. Anticipated a sequential decrease in cash usage is mostly attributable to a large decrease in accounts receivable that will be partly offset by an increase in inventory. With that, Let me now turn the call back over to Brian for his closing remarks.
Thank you, Sue. Before opening the call for and A, I want to take a moment to highlight what I think are some important points for our investors to take away from this conference call. First, let me start by saying I appreciate your patience. It's been a longer road than I envisioned, but I believe we are very close to a positive tipping point While the growth we are forecasting for Q3 is modest, it breaks a pattern of essentially flat revenue for the 10 preceding quarters and is being driven by the ramp of I believe the major OEM designs that we have already won will drive meaningful sequential growth for many quarters to come and that engagements with other large OEMs and embedded FPGA license revenue will layer on top of that. In EFPGA, we adopted our go to market model to breakout of an endless loop that was stalling our many engagements.
We believe our MTLA strategy, which has already resulted in an agreement with what will be Alibaba's first venture into the semiconductor market, will lead us to land multiple IP license agreements in 2019. With our EOS S3 SOC We have successfully transitioned from winning designs with small companies and ODMs to winning designs with major OEMs that have brand name recognition the scope to use our solutions in multiple designs and the scale to drive volume. Last quarter, we announced OEM product launches with Neighbor Labs and EEBDK. While these are not well recognized names in the U. S, there are significant OEMs in their home countries.
We expect these designs will contribute We signed an MoU with a major Japanese smartphone company for multiple models extending to 2020. We also want a very significant design that leverages our core EFPGA differentiation with a new OEM, but I think will be one of the prominent products displayed at the upcoming CES in January 2019. We are also getting more clarity from the Tier 1 smartphone company about the release of its new wearable design and we're hopeful we will win a second design with the OEM this quarter. At the bottom line, large OEMs are scheduled to move new products using our EOS into production starting in early 2019. These designs have low to mid 7 figure potential with defined production schedules and mark just a few of the high volume designs that I believe will enable us to grow 2019 total revenue significantly more than our 50% goal.
Operator, I would now like to turn
And our first question comes from the line of Richard Shannon with Craig Hallum. Your line is now open.
Brian and Sue, thank you for taking my questions and good to see the sequential guide here in third quarter. Brian, you give us a lot of detail to go into, so I'm going to try to hit a few of the key ones here. In your prepared remarks, the most interesting comment was for me that I saw was the major design you wanted the major C company, they expect to be 1st product of which to be announced at CES and said the first of up to 10 products. I guess first question on that is, can you characterize this opportunity or something that's already been settled as kind of a platform win with you across a range of products or even company wide? Can you maybe characterize the relationship and the extent of it there?
Yes, I'd be happy to, Richard. To the extent that I can with our NDA place. So I would definitely categorize it as a platform type win. We anticipate the same design being used across these up to 10 products. It's definitely a new category for QuickLogic.
And I think it'll have a very prominent display at CES. What we're what we're doing here is we're doing voice recognition. And there's certain things that we're doing in the FPGA that will be clear once we can actually talk about this design publicly. Where it clearly shows there's value to both of these technologies being in the same chip. And that's really how we won this design against other ways that you could do this architecture with competitive devices.
So yeah, it's actually a really exciting win for us and it's a new thing that we haven't even talked about has caused this move really fast.
Okay. Fascinating. Well, we look forward to hearing more about that one. Maybe a question on embedded FPGA. You talked a little bit about your new go to market strategy with C Skyiving example that approach here.
Any other initial signs of success about moving engagements along faster? I know everything sounds like you're kind of in process. So maybe not a complete signs, but anyway you can help us understand, how engagements have changed. And while I know you're you've mentioned not expecting much to happen in the second half of the year. How fast could those things come and how broad is the pipeline looking?
For these new type of license agreements?
It's a good question. So the funnel that we were talking or referring to in Q2 is largely the same funnel in terms of direct semiconductor opportunities today. And I can say that I mean, these guys jumped all over this changed and go to market strategy very quickly. And there's a few other ones that are already in the funnel that happened in the funnel that could actually sign this year for an MTLA type agreement to move into that test chip phase, resulting in more material revenue in 2019, one they actually do a test chip. But they've it's definitely loosened up some of the friction that we had been seeing with some of these customers to commit that six figure value to us, just to do a test chip.
I think if you step back for a second, if you're a company that's not familiar with programmable logic, It's a really cool concept that you can program something to something in the future, but a lot of people have difficulty wrapping their heads around that seems ambiguous. So lowering this financial bar to try out the technology, I think, is good because they can start to see some of the use cases in real life and then go forward with that financial commitment. The other thing I'll mention with respect to the funnel is we're always looking for leverage points And I see that C Sky and ETH, the announcement we did today, fall into that category for me as leverage points. So they'll do test chips and other people will take those test chips as starting points for what could be their own SoCs. So it's a way for us to fan out supportive 1 or 2 or 3 companies into multiple companies that use them as starting points.
I think you see probably ETH does a lot of these types of SoCs where they clearly see that EFPGA could be used as a hardware accelerator and not just as a scratch pad of logic and that's where we see our value coming from. So we're really excited to see those both of those companies actually have test strips that come out that we can then fan out into multiple end customers. And by the way, just to be clear, when that happens on that fan out effect, and people do move forward with a production license in those cases. That does generate license revenue for us.
Okay. All right. Excellent. Look forward to hearing more about that. Maybe two questions for me.
It's up on the line. Brian, I think this came early in your prepared remarks. You talked about the kind of delayed, impacted to delays of some of your initial Bluetooth and hearable designs. Because of the Amazon ABS certification. Can you help us understand whether those bottlenecks have been relieved yet at Amazon, they're still left to go.
And how much of a delay do you think this is relative to your expectations to communicate on last quarter's call?
Yes, so here's where I have to be careful with what I'd say because we have NDAs with Amazon. So I don't know that anything has been publicly put out as far as spec goes, but I can say that what we're hearing from customers that we're working with directly that have our already embedded into their hardware that they're looking to start qualifications of their product between now and the end of the year, which is why we came up with timeframe for this being the earliest starting at the end of this third quarter initially with people that already are further down the pipe. All the way to subsequent months going into Q4 from a revenue timeframe. So if we go back to the last call where we talked about this, we thought that as Beck actually would be already out by now and people would basically be done with certification by now. And that's not the case.
But the fact that I'm giving these timelines now This is coming from customers that are working with them. So I think there's a little bit more certainty around that now. That's very exciting to save just because of the NDA with Amazon that we have.
Certainly. That's understandable. Last quick question, you talked about confidence in reaching that breakeven level on a quarterly basis sometime next year. If you can just remind us what that breakeven level is and whether it's changed at all?
Hi, Richard. This is Sue. We have not changed our breakeven level. $10,000,000 of revenue per quarter with 50% or higher gross margin in that quarter. To get us to breakeven point.
Thank you. And our next question comes from the line of Suji Desilva with ROTH Capital. Your line is now open.
Hi, Brian. Hi, Sue. So just a couple just a question just a question on next quarter's guidance, the $1,800,000. What's driving the increase in new revenue specifically? Amongst your wins and product opportunities?
Suji, this is locally driven by the growth in sensor business.
Any more specifics so you can give there in terms of which wins are driving it near term?
Well, from the prepared remarks, we talked about NEIGHBK contributing to that. Those would be the largest contributors by name, followed by when these hearables actually start coming out the 1st of which should be in Q3.
Okay. Great.
I appreciate the color. And then the Japan smartphone opportunity that was put off maybe. Do you give any color on why the carrier asks the smartphone vendor to hold off on you're always on voice feature near term. Was there any specific driver network bandwidth concerns or things like that? Just curious about the technical issues there, if I may.
No, I'm not in those meetings with them, but what I've heard is that they basically want to have the spring model be sort of the springboard for the new features that they would carry through the next year and the fall would kind of follow as an evolution to the spring feature. So meaning that the new big features come out in the spring model. And so that's why this is a significantly different feature for them and they wanted to uncork that in spring. There's no technical issue or network bandwidth issue that's driving that.
Okay. Good to hear that. Understood. And then lastly, the licensing side of the business, the test chip phenomenon here. What's the length of time it takes for a test chip to be spun up?
What's the cycle time on that? Just to understand when these customers do go that route, how long that takes?
So a test chip from a manufacturing point of view from the moment you tape it out and get into the shuttle, you get silicon back is generally about a quarter. It could be a little bit longer depending on queue time with the subcons. Then it's a matter of how much time does it take you to verify the test chip, which could be a couple of months, like in the case of our test chip, we've done it in about 3 months. And then the last part of that equation is how long does it take you to do the actual design? So this is actually a key.
I'm glad you brought this up. This is a key reason why I think it's good that we're getting into these test chips because what these companies can do is basically start from an SoC that they've already done and have available and bolt on the EFPGA to that. So it actually compresses the amount of time to get from that to tape out of the test chip. They don't have to really do this whole 12 to 16 month SoC design process that you would normally associate with an actual production SoC. So it's actually a sort of a side benefit of doing this test trip approach.
And in total, you can see that's why we're saying that in like the first quarter of 2019 is where we can start to see other customers that are the fan out effect from C Sky and from ETH directly?
I just want to add a little bit, Suji. So from what I see from the contract agreement was signed with those customers. The terms arranged from 6 months to 18 months. So that's why we use the amortized as a support of maintenance fee as well, from deferred revenue to revenue, minimum. So you want to see our balance sheet, but that's what it is.
Okay. So those revenues won't be recognized upfront. They'll be recognized ratably over the service period, is that right?
Yes. Yes.
Okay, great. All right. Appreciate the color. Thanks guys.
Thanks, Suji. Thank
you. And our next question comes from the line of Gary Mobley with Benchmark. Your line is now open.
Hi, Brian. Hi, Sue. I had a
couple follow-up questions relating to the FPGA line of questions as Suji hemp. So just to be clear, the, there have been, what, 2 Master Technology license agreements signed, both of which have been announced C Sky and ETH there, correct?
Correct.
Correct.
Okay. And in the nonrecurring engineering fees that you'll eventually be able to rec NIs, which are on the balance sheet now as deferred revenue, the milestone will be the test chip coming back and, and meaning pre specified, working requirements, right?
Correct.
And so the dollar amount of these NREs is roughly how much per customer engagement? You said $1,000,000 plus?
So they're going to range from several $100,000 to $1,000,000 depending on how they're intended to use it in depending on the process node. But to be, I just want to make sure we're clear on this. So C Sky and ETH for the test ships, they're not going to have a full license fee. That's what this whole MTLA strategy is about is lowering that friction level to get to the test strips so they can recognize the return that they can get from this. Once they do a production tape out, that will trigger that several $100,000,000 fee that you're referring to Gary for C Sky or their end customers that want to embed their IP.
On the ETH side, they're university. So they're not going to do a license speed of quick logic for a production tip chip. We're doing this test chip with them collaboratively. The people that use their test chip as the starting point from that Pulp platform form and there could be numerous. Each of those companies that uses that as a starting point that use our EFPJ will have to pay us a full license fee again on the order of several $100,000 to $1,000,000.
And that's the license fee. And then once those companies ship production units, they'll carry that royalty. The stuff that you're talking about we see right now on the deferred line is the support and maintenance contract, which is a very low percentage of the total license that we're talking about.
And so how many to identify the number of opportunities in your MTLA pipeline, looking out even just as near term as the balance the year?
So I'd say I'm tracking double digits on a weekly basis with our sales team as far as how many we could execute before the end of the year. I would say it's probably 5 or less we could execute before the end of the year just based on where they are with their resource planning and where we are with our process note availability. It's in that ballpark.
Okay. That's helpful. I appreciate the commentary. Thanks everyone.
Thank you. And our next question comes from the line of Rick Needen with River Shore Investment Research. Your line is now open.
Thank you. Hello, Brian and Sue. I'd like to take a look at some items on your balance sheet first. I'm looking at a $700,000 increase in inventory and a forecast in the third quarter for another inventory increase. Is that related to your early 2019 opportunities that include the Tier 1 and the other unnamed OEM?
Rick, you're correct. That that's the inventory buildup for Q1 2019 shipments.
Okay. Did you give a did you put a number on your inventory increase forecast for third quarter yet? I didn't hear one. Did you give a number?
No, usually we do not provide a specific working EPSO including even greater ARR on the guidance.
Okay. I also noticed a $2,000,000 increase in accounts receivable since the end of the year. Did you get the QFP Packaging revenue in the second quarter Or are you projecting that to be in the 3rd quarter as well?
So, that's devices that was shipped in Q2, which is earlier than we forecasted. That's why you see Q2 new product revenue increase. I mean, higher than what we guided, yes.
Okay. So your and your big increase in working capital, then you're putting into building inventory for your, first quarter 2019 shipment opportunities?
Correct.
If I hear you correctly. Okay. Thank you. I'm looking at some Brian, looking at some of the quantifications of low to mid 7 figure revenue opportunities. Put on some of these design wins in 2019.
And if I go back to the end of 2017 and I look at your original CAGR target, your growth target of greater than 50% over the 1st 2 years. And I, just do some basic cocktail napkin math here, am I out of line thinking that could have 2019 revenue in the $27,000,000 area plus or minus a couple 1,000,000 which would basically be hitting your original CAGR target. Is that really out of line?
Well, let's see. If we look at this year, firstly, as a starting point for that, if I were to model the rest of the share, of course, we gave the guidance of 3.5 for this quarter. And we talked about sequential growth. So Q4 is implied up there. For the year, this year.
In fact, as a starting point, it's not a guidance number, but if you went around 10% growth for the whole year as opposed to the 50% that we're talking about. And now you're talking about end of next year being 27% that would imply pretty good clip of growth between this year and next year. I mean, it's not out of the question because if you look at these OEMs that we're talking about with this $1,000,000 to low multimillion dollar value per design and you add that onto our base business. Mean, that math would say that it should definitely be going over 50%. So over 50% to that 27 Yes, it's probably possible.
I'm not going to go and say that's guidance, but I think the difference if you go below the surface here is We do have large OEMs that we've closed designs with now. And especially this new one that we just talked about on the call for the first time, this consumer electronics category that's new for us. I mean, that has fairly significant potential for us compared to the past. So yes, I guess your cocktail napkin is not out of the question.
I mean, you were when you said lowtomid7 figures of revenue, for the new OEM consumer wearable, you were talking about the one platform that was going to be introduced at CES. Is that right?
Yes.
And you said there are 9 other opportunities within this platform that that OEM intends to use, the EOS S3 plus FPGA in?
Yes. That's correct.
And are any of those other 9 targeted for 2019?
Absolutely. I don't have the exact number, but absolutely there.
And so each of these opportunities could be low to mid 7 figures. Is that what you're telling us?
I don't know how many of those 10 would be that level. I think by the next call, I'll probably have a little bit more clarity on that part that I can communicate to everybody. But I'm sure that some of those tend to have that same value potential.
But the one being introduced in January at CVS does have lowtomid7figurerevenue opportunity. Okay.
They absolutely do. And the follow on those other 10, I'm sure some of them do, how many of them do. I don't know yet, but I'll commit that by the next call, we'll have more clarity on that. Okay. Thank
you, Brian. If you
add all that up and these other OEMs we talk about, hopefully, you can see why we're feeling really good about next year exceeding that 50% growth. Very much different.
Well, that's why if I took Brian, if I took your $12,100,000 or $12,000,000 from 2017 and increased it by 50.1% each year, that would get you to $27,000,000 about in 2019. And so I'm just trying to ascertain if that was my model to begin with on a conservative basis, if that's still within reason to be reached in 2019, given all these new opportunities that you're disclosing now? That's all I
want. Yes. It's definitely a problem.
Okay. Thanks, Brian.
You're welcome, Brian.
Thank you.
Thank you. And that concludes our question and answer portion for today. With that, I'd like to turn the call back over to CEO, Mr. Brian Faith, for closing remarks.
Thank you, operator. We will be participating at the following investor and industry events, Jefferies' annual Semiconductor Hardware summit in Chicago on August 28, Ross, Internet of Things, corporate access day in San Francisco on September 5th, the SMIC Technology Symposium in Shanghai on September 12th. I will be presenting a keynote at Silicon Summit East in Saratoga Springs, New York on October 9th, armed Tekcon and Santa Clara on October 16 through 18. And multiple global foundries technology conferences in multiple locations worldwide in third quarter. Our next conference call is scheduled for Wednesday, November 7, 30 pm Pacific Time.
Thank you for your continued support and goodbye.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a wonderful day.