Executive Summary

Q2 revenue declined to $5.40M, down 10.0% QoQ and 10.0% YoY, with gross margin compressing to 54.3% (vs. 60.7% in Q1 and 60.5% in Q2’17) on higher hosting costs and mix; net loss widened to $(1.56)M and Adjusted EBITDA turned to a $(0.71)M loss from a $0.07M profit in Q2’17 .
Management attributed softness to a deliberate exit from non‑core customers and temporary EU volume declines tied to GDPR (estimated ~25% reduction in EU revenue), partially offset by “Journey” bookings momentum and pipeline growth .
Leadership expects margin improvement in 2H’18 as higher‑margin Journey revenue scales and hosting costs decline beginning in Q3 following infrastructure actions; no formal numerical guidance provided .
Consensus estimates: We attempted to source S&P Global consensus for Q2’18; data was unavailable for this report, so comparisons vs. estimates are omitted.

What Went Well and What Went Wrong

What Went Well
- Journey traction: “roll-out of Journey continues to gain momentum with sequential increases in revenue, sales bookings and sales pipeline growth,” including a win with a leading global financial services provider .
- International launch of Journey (initiated in Q1) contributed to growth in Journey‑related revenue and bookings in Q2; pipeline accelerating outside the U.S. .
- Compliance and trust: Completed GDPR readiness and achieved SOC 2 Type I; management believes early compliance will aid reacceleration in EU in 2H’18 .
- CEO tone: “We look forward to the continued expansion of our Journey rollout… as we work to unlock the value of our SaaS platforms” .
What Went Wrong
- Top-line and mix pressure: Revenue down 10% QoQ as the company exited non‑core customer relationships and faced GDPR‑related EU volume declines; gross margin fell to 54.3% (–620 bps YoY), with a $97K hosting cost increase cited as a driver .
- Profitability deteriorated: Operating loss widened to $(1.03)M (vs. $(0.34)M in Q2’17) and Adjusted EBITDA declined to $(0.71)M (from $0.07M in Q2’17) .
- Financing costs elevated: Interest expense rose to $(0.54)M (vs. $(0.28)M in Q2’17) contributing to a larger net loss of $(1.56)M (vs. $(0.62)M in Q2’17) .

Financial Results

Metric	Q2 2017	Q1 2018	Q2 2018
Revenue ($USD Millions)	$5.99	$5.99	$5.40
Gross Margin (%)	60.5%	60.7%	54.3%
Operating Income (Loss) ($M)	$(0.34)	$(0.65)	$(1.03)
Net Income (Loss) ($M)	$(0.62)	$(1.26)	$(1.56)
GAAP EPS ($)	$(0.01)	$(0.02)	$(0.02)
Adjusted EBITDA ($M)	$0.07	$(0.46)	$(0.71)

Revenue components (mix):

Revenue Component ($USD Millions)	Q2 2017	Q1 2018	Q2 2018
Software License	$4.90	$4.70	$4.50
Overage	$0.86	$1.10	$0.68
Other (prof. svcs/partners)	$0.24	$0.27	$0.23

Additional context and non‑GAAP:

Adjusted EBITDA excludes stock‑based compensation ($0.04M) and warrant expense ($0.07M) in Q2’18; reconciliations provided .
Interest expense elevated to $(0.54)M in Q2’18 vs. $(0.28)M in Q2’17 .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Gross Margin	2H 2018	Expected progressive improvement in 2018 as Journey scales; mitigate hosting costs	Expects improvement in 2H’18; hosting cost reductions flowing through starting Q3	Reaffirmed/Refined timeline
Revenue Drivers	2018	Journey bookings outpacing traditional; high‑margin revenue growth in 2H’18	Journey momentum with sequential increases in revenue/bookings/pipeline; international acceleration	Reaffirmed
EU Trends (GDPR)	2H 2018	N/A	Anticipates reacceleration as market adjusts; cited ~25% EU revenue reduction in Q2 from GDPR uncertainty	New qualitative color
Hosting Costs	Starting Q3 2018	Mitigate hosting capacity costs	Reductions underway post migration/expansion; benefit starting Q3	Reaffirmed with timing

No formal numerical ranges (revenue, EPS, OpEx, tax) were issued in the materials reviewed .

Earnings Call Themes & Trends

Note: No Q2’18 earnings call transcript was available in our document set; themes below draw from Q4’17 (FY), Q1’18, and Q2’18 earnings materials.

Topic	Previous Mentions (Q4’17 and Q1’18)	Current Period (Q2’18)	Trend
Journey (AI/tech, attribution)	Launched late Q3’17; strong pipeline; expected high‑margin growth in 2018 . Q1: bookings outpaced traditional CAKE; early wins incl. $1T+ bank, leading retailer .	Sequential increases in revenue, bookings, and pipeline; win with leading global financial services provider .	Improving (adoption scaling)
International expansion	43% of 2017 revenue outside U.S.; >40 countries . Q1: launched international marketing for Journey .	International Journey pipeline “accelerating,” contributing to Q2 Journey revenue/bookings growth .	Improving
GDPR/regulatory	N/A in FY context; Q1 focused on growth/margins .	Completed GDPR readiness and SOC 2; GDPR uncertainty drove ~25% EU revenue reduction in Q2 .	Near‑term headwind; improving 2H outlook
Infrastructure/hosting	3‑yr $15M hosting extension in 2017 to support growth . Q1: hosting credits flattered prior year; planned cost mitigation in 2018 .	Hosting costs rose $97K YoY; reductions to flow through from Q3 .	Transitional; expected tailwind
Profitability/margins	FY17 positive Adjusted EBITDA ($0.37M) despite investments . Q1: margin improvement expected as Journey mix rises .	GM 54.3% (–620 bps YoY); management reiterates 2H improvement on mix and hosting actions .	Pressured near‑term; recovery expected

Management Commentary

CEO (Brian Ross): “We are excited about the positive momentum we are building in the rollout of Journey… While moving away from certain customer relationships negatively impacted revenue in the short term, we believe it has enabled us to utilize those resources… to drive higher margin revenue growth… in the second half of 2018” .
CFO (Andy Mazzarella): “The steps we have taken to lower hosting costs… have already begun to flow through our system in the third quarter… we are confident that our EU compliance commitment and strong sales pipeline for Journey will add higher margin revenue leading to improvements… in the second half of the year” .
Q1 baseline context: “Journey… offers intrinsically higher gross margins… We expect this to drive progressive improvement in company‑wide margins throughout 2018 as we continue to keep SG&A costs in control” .

Q&A Highlights

No Q2’18 earnings call transcript was available; therefore, no Q&A highlights or guidance clarifications could be extracted from a call transcript.

Estimates Context

We attempted to retrieve S&P Global consensus for Q2’18 revenue and EPS; data was unavailable for this report window, so we do not present vs‑consensus comparisons.
Implication: Absent consensus, investors should focus on sequential and YoY trajectories and the credibility of H2 margin improvement drivers (Journey mix, hosting cost reductions, EU normalization) as the basis for estimate recalibration .

Key Takeaways for Investors

Mix shift is the central narrative: Journey bookings and pipeline are expanding and expected to drive higher‑margin revenue in 2H’18; watch for sequential uplift in GM beginning Q3 as a key validation point .
Near‑term headwinds are identifiable and potentially transitory: GDPR‑related EU softness (~25% EU revenue reduction) and deliberate customer pruning weighed on Q2; management expects EU volumes to normalize as compliance becomes standard .
Cost inflection ahead: Hosting cost actions post migration/expansion are set to benefit margins starting in Q3; monitor COGS trend and gross margin recovery vs. Q1’s 60.7% benchmark .
Profitability lens: Adjusted EBITDA deterioration in Q2 reflects timing of mix and cost; improvement in 2H hinges on execution and timing of Journey deployments and cost savings .
Liquidity/financing costs: Elevated interest expense is a drag on net income; operational improvements must offset financing costs to narrow losses .
Trading setup: Catalysts include tangible GM expansion in Q3/Q4, Journey customer adds/expansion, and EU stabilization; misses on these could extend margin compression and weigh on sentiment .

Appendix: Additional KPIs and Operational Metrics

KPI	Detail
EU revenue impact	GDPR uncertainty resulted in an estimated ~25% reduction in EU revenue in Q2 due to lower transaction volumes .
Hosting cost delta	Hosting costs increased by $97K YoY in Q2; reductions expected to benefit starting Q3 .
Customer concentration	No single customer represented >5% of total revenue (Q1 context) .
Customer/ARPC trend	Average number of customers +3% YoY; average revenue per customer –3% YoY (Q1) .
International exposure	43% of revenue derived outside the U.S. in 2017; >40 countries served (context for Journey expansion) .

Sources: Q2’18 8‑K and press release with financials and reconciliations ; Q1’18 8‑K and press release ; FY2017 release for baseline trends .

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