The Nuances of Revenue Timing

With Q2 earnings season substantially in the books, we wanted to touch on the nuances around revenue timing impacting both relative as well as absolute profitability. We’ve got a bunch of companies where revenue timing can have a more profound impact on the numbers in any given quarter.

Delayed deliveries, recognizing a portion of the revenue upfront, overseeing the local accounting for companies that sit under a serial acquirer’s umbrella… It requires a longer-term lens to understand the business and the moving pieces affecting either too low or too high profitability. The critical thing to remember is that these nuances should be one-offs, in the sense that they’d better not reveal any structural weakness in the business such as not delivering on time continuously because of operational flaws. It’s gotta be pure accounting driven where revenue and expenses aren’t perfectly aligned - for businesses where there’s no percent of completion accounting.

Back in the old days, we remember analyzing private M&A targets where we had to make our own adjustments - related to revenue recognition, the accrual accounting for employee costs, delayed payables invoicing, et cetera. Simply because the accounting module was too standardized and could yield some volatile monthly and quarterly outcomes. When keeping track of underlying performance and doing some post-mortem project analysis, it’s crucial to make apples-to-apples comparisons.

Let’s mention a couple of examples where it’s necessary to keep some of the puts and takes in mind:

• Lifco’s Q1 2024, when the timing of Easter impacted Q1 profitability negatively (especially in the Dental area). So, you’ve got Q1 EBITA margin being a little subdued and then corrected in Q2. It also made the comparison for Q1 2025 easier.

• Constellation Software’s Altera had a couple of new name sales in Q2 2025, and under IFRS, they recognized some of the revenue upfront. The same’s true for some of CSI’s incoming acquisitions that have some organic growth variability throughout the year, or because of getting in or losing a larger customer.

• Lumine’s Q1 2026 - with project timing impacting EBITA and relative margins, also affecting cash flow trends.

• Harvia’s Q1 2024 - political strikes at the harbors affecting overseas deliveries, mainly North American sales. Given that Harvia only records the sale of goods when the control is transferred to the buyer, the drag from all expenses not allocated to COGS increases. Then in Q2 2024, the revenue shift from Q1 increased total profitability. It becomes increasingly noisy when factoring in the sort of air pocket demand situation in Q2 2025 following the US tariff uncertainty. And now, in Q2, we had the planned shutdown of the Muurame factory for the successful IT upgrade (three weeks of no production and/or shipping), with 4 million EUR in revenue shifting to Q3 (mostly) while direct labor costs were still running. It led to lower profit growth in Q2 2026, with a strong catch-up (likely 35-40% YoY EBIT growth) in Q3. Focusing on each quarter’s headline figure isn’t helpful.

The reason why we’re bringing this up is because it’s also going to impact performance for one of our small cap serial acquirers we bought two months ago (up >32% since), and thus we’d like to comment on it briefly before it reports Q2 results.