@Slideup - I agree.

It is a good case study where judging on revenue isn't valuable! If an input cost is passed through both up and down, then PBT is better, and who can complain with +15%?

I think the primary culprit was capital sales. And when you have a reasonably long sales cycle, you can always use the excuse of "deferred purchases" to explain underperformance. I was looking for another reason, and my hypothesis is industry sentiment in the quarter, driving some clients to be more cautious on spending. So that's cyclical,

Regarding your point on trend: here's what the line looks, taking out Q1 22 and Q2 22.

You are right - PBT is a little closer to trend, but still on the low side. But well within 1 sd of variability to trend.

So, ... nothing to see here. Lot's of noise, no signal.

Not a particularly severe reaction from the market on Day 1, so it appears investors are taking the miss in their stride on aggregate too (which is too bad for accumulators like me looking to add on meaningful weakness!).

Don't know but that quarter drop in revenue is a bit of a worry so maybe it is fairly priced at that PE.

Tempted to do some "pruning" but still need to do my own research on the long term picture first.

I welcome the reduction and hope it falls a bit more as I'd like to start a position in XRF.

@SebastianG As an investor I find this can be a difficult predicament to be in. Is this just noise and a buying opportunity for a high quality company or does this signifiy a significant change in the company either cyclically or structurally that should give caution?

Those who know the company well will be closer to the truth but not all can be known!

I suppose the truth lies in the future.

@Shapeshifter I don't think anyone can really tell one way or the other.

Quarterly results, particularly for small companies, are rather noisey. The result is not statistically signficant at any meaningful level from the underlying recent growth trend.

I have a hypothesis that sector sentiment over the last quarter in several segements, e.g., lithium and even some others, may have driven some customer caution on capex, consistent with reported delays in purchases of $0.8m.

But in truth, unless you are in the minds of the customers and potential customers, it's probably impossible to discern company/product specfic from macro-market.

Therefore, I don't have any basis to question my thesis. From my perspective, the pullback isn't enough to justify topping up.

So that's my logic to hold and await the next report.

@Shapeshifter I thought the result was fine and in line with the steady execution we have seen for many years. I suppose the headline revenue number going backwards raises an eyebrow, but the commentary suggests $800k of capital equipment was finished and ready to ship at the end of the quarter. It's just part of the "noise" with a business like XRF that revenue can bounce around a bit particularly in the Capital Equipment segment depending on whether the units leave the factory before the end of quarter date.

The other aspect to weaker revenue they talk about but perhaps don't explain very well is they are scaling the pricing of their Consumables products up and down with their realised lithium price. It's not a direct correlation to the spot price because XRF purchase on offtake and have to cycle 6-9 months of backlog inventory, but they are pricing their units on what appears to be roughly a 30-35% PBT margin.

I think it is a good long term strategy to lock in goodwill with their customers. Many businesses who have benefited from a ~80% fall in the spot price of their key input commodity would be very slow to cut prices and maximise margins and profitability. I don't think XRF investors will complain with a segment maintaining 30-35% PBT margins, and it gives XRF a much better foot to stand on to pass through price increases when the next inevitable leg up in lithium prices returns.

@Wini unfortunately XRF is one of those companies I have watched march ever upwards from the safe comfort of my watchlist (d'oh!).

Your understanding of the mechanics of this business is inspirational and I can see if you do the work it can become an edge. In fact it becomes an edge in exactly this type of situation where there is uncertainty over perceived negative company news. You improve your probablilty of making the right decision when it is more difficult for others to decide if the market is being irrational.

When there is a broad irrational market downturn then it is like shooting fish in a barrel and even I can do well!