Executive Summary

Q2 2018 revenue grew 67.3% year over year to $1.70M, with gross profit improving to $0.10M as collections from new municipal locations and expansion of government services drove volumes .
Profitability deteriorated due to financing costs: net loss widened to $(2.46)M and EPS was $(0.03), pressured by losses on debt conversions, higher amortization of debt discounts, and a negative derivative liability revaluation, alongside an FX loss .
Revenue momentum continued from Q1 2018 ($1.46M) as product mix skewed to prepaid airtime; however, margin remains thin and sensitive to mix and FX .
No formal quantitative guidance or earnings call transcript was found; management highlighted new relationships expected to “bear fruit” in coming quarters—near‑term stock catalysts likely revolve around funding/deleveraging progress and kiosk/government channel traction .

What Went Well and What Went Wrong

What Went Well
- Revenue acceleration: Q2 revenue +67.3% YoY to $1.70M as government services and new locations (municipalities) contributed .
- Gross profit improvement: Q2 gross profit rose to $0.10M from $0.01M in Q2 2017, with higher service volumes at minimal incremental operating cost .
- Strategic progress: CEO emphasized validation of Mexico’s electronic payments opportunity and pipeline of new relationships expected to contribute in upcoming quarters (“should bear fruit”) .
What Went Wrong
- Earnings deterioration: Net loss widened to $(2.46)M on losses from convertible debt conversions below market, higher amortization of debt discount, and increased interest expense .
- Derivative/FX headwinds: A $(0.26)M derivative liability charge and $(0.16)M FX loss in Q2 weighed on results .
- Financing risk: Material current liabilities ($4.29M) vs. total assets ($1.50M) and going‑concern language underscore dependency on external funding and balance‑sheet overhang from convertible notes .

Financial Results

Revenue, EPS, profitability vs prior periods and prior year

Metric	Q2 2017	Q1 2018	Q2 2018
Revenue ($)	$1,017,158	$1,464,789	$1,701,763
Gross Profit ($)	$12,257	$(55,877)	$104,370
Loss from Operations ($)	$(499,303)	$(628,361)	$(492,341)
Net Loss ($)	$(373,376)	$(1,668,483)	$(2,462,126)
EPS (Basic & Diluted)	$(0.01)	$(0.03)	$(0.03)

Revenue mix

Revenue Source	Q2 2017	Q1 2018	Q2 2018
Sales of Services ($)	$995,976	$1,443,107	$1,670,208
Payment Processing Fees ($)	$7,334	$5,294	$16,450
Kiosk Sales ($)	$0	$0	$11,117
Other ($)	$13,848	$16,388	$3,988
Total Revenue ($)	$1,017,158	$1,464,789	$1,701,763

Key drivers and cost/other items

Item	Q2 2017	Q1 2018	Q2 2018
Cost of Goods Sold ($)	$1,004,901	$1,520,666	$1,597,393
Interest Expense, net ($)	$(330,107)	$(1,245,786)	$(565,717)
Derivative Liability Movement ($)	$366,242	$2,531,332	$(259,419)
FX Gain (Loss) ($)	$97,475	$152,931	$(163,293)
Other Expense ($)	$(7,683)	$(2,478,599)	$(981,356)

KPIs

KPI	Q1 2018	Q2 2018
Service Providers Integrated (approx.)	>140	>140
Kiosks/Terminals Deployed	>224	>239
Third‑party Kiosks Serviced	~440	~440

Estimates vs. actuals

We did not locate published S&P Global consensus for IPSI’s Q2 2018 EPS or revenue; no comparison to Street estimates is available.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
N/A	N/A	N/A	No formal quantitative guidance provided; management cited expectation that new relationships “should bear fruit” in upcoming quarters	N/A

Earnings Call Themes & Trends

We did not find an earnings call transcript for Q2 2018; themes below reflect MD&A and press releases for Q1 and Q2.

Topic	Previous Mentions (Q1 2018)	Current Period (Q2 2018)	Trend
Market opportunity (Mexico electronic payments)	Emphasized large prepaid market and expansion across utilities/transport/lottery (Pronósticos)	Reiterated opportunity; Q2 revenue momentum supports positioning in market	Improving
Product mix/Prepaid airtime volumes	Revenue increase driven by higher prepaid airtime; gross loss in Q1 due to mix/adjustments	Continued volume-driven growth; gross profit improved on higher volumes at minimal incremental cost	Improving
Government/municipal channels	Some municipal wins in Q1 (Querétaro)	New municipal collections cited as growth contributor	Improving
FX impact	Q1 had FX gain, aiding results	Q2 had FX loss, pressuring GAAP results	Worsening
Funding/capital structure	Heavy use of convertible notes; going‑concern language	Continued conversions/losses, amortization of debt discounts, derivative liability charge	Mixed/Concerning

Management Commentary

“We believe our second quarter revenue growth, together with growth trend shown in the first quarter, validates the potential of the Mexican electronic payments market…During the quarter several new relationships have been developed which should bear fruit in upcoming quarters.” — Gaston Pereira, President & CEO .
“We’re excited with our first quarter revenue growth as we implemented our strategy to position QPAGOS in Mexico’s expanding electronic payments sector…including…Pronosticos, the leading electronic games by the Mexico’s Lottery system.” — Gaston Pereira, President & CEO .

Q&A Highlights

No Q2 2018 earnings call transcript was found; no Q&A available in our sources.

Estimates Context

No S&P Global Wall Street consensus for Q2 2018 revenue or EPS was available; as a result, we cannot assess beat/miss versus estimates.

Key Takeaways for Investors

Revenue momentum is intact: Q2 revenue rose to $1.70M (+67% YoY) with gross profit improvement, aided by expansion into municipal collections and government services .
Profitability remains constrained by capital structure: losses tied to debt conversions below market, derivative revaluation, and high non‑cash amortization of debt discounts drove a $(2.46)M net loss .
Execution focus: sustained growth in “sales of services” and fee income, plus continued kiosk deployments (224→239 QoQ), are the operational levers to watch .
Risk profile: going‑concern language and sizable current liabilities highlight near‑term funding risk; deleveraging or refinancing of convertible notes would be a key catalyst .
FX sensitivity and mix matter: thin gross margin means earnings are sensitive to peso moves and channel/provider mix; monitor gross profit trajectory quarter‑to‑quarter .
With no formal guidance or consensus coverage, near‑term stock reaction likely hinges on capital structure progress (reduction in derivative/convertible overhang) and visible wins in government/municipal channels .

Sources: Q2 2018 Form 10‑Q (filed Aug 14, 2018) –; Q2 2018 8‑K/press release (Aug 14–15, 2018) –; Q1 2018 Form 10‑Q (filed May 21, 2018) –; Q1 2018 8‑K/press release (May 23, 2018) –.

Innovative Payment Solutions, Inc. (IPSI)·Q2 2018 Earnings Summary