Hi, and good morning, and welcome to the third quarter earnings call for Cyviz. My name is Espen Gylvik. I am the CEO of the company, and with me, I have Lars Hjarrand, who is the company's CFO, and we will take you through today's presentation. We go through the third quarter highlights, some business review data, financial review, outlook, and of course, as we always do, open for questions at the end of today's presentation. Let's kick it off. Q3 was still quite of a challenged quarter, but the deliveries picked up compared to the second quarter, and our cost efforts and measures that we have put in place since early this year is starting to pay off.
We are getting better and better traction on the OpEx side of the company, and the underlying OpEx is starting now to get to the level where we build predictability also heading into 2027. I think Lars will talk more about that later. Revenue grew 9% versus previous quarter, and EBITDA improved by NOK 4 million. The order intake slowed down, largely because of two large customers, as we have talked about before, moved into Q4, and I will talk more about that specifically a bit later. Late-stage pipeline for Q4 indicates significantly higher order intake than in Q3, and we can talk more about that. Let's dive into it. Order intake ended at NOK 74.2 million. Again, I can explain the rationale behind that. One large U.S. energy deal that we already have flagged parts of in Q4, slide from Q3 to Q4.
We have already booked $7 million so far in Q4 on that customer, and we do expect anywhere between $2 million and $5 million additional on that customers to come in during Q4. The three dedicated large deals within defense in Europe is also now confirmed to come in Q4. We actually anticipated that one of those would have been in Q3, but now when all the practical agreements with all the layers of decision makers inside that part of the European defense is in place, we now know and anticipate that these deals are coming in Q4. Revenue is a reflection on what we deliver and also a conversion of the order backlog. NOK 91 million, slightly below what we expected, but still a positive development compared to the Q2 revenue numbers.
I want to spend a little bit more time on ARR, because if people paid attention last quarter, we had a very good growth from Q1 to Q2. I do want to underline that the underlying growth in ARR for the third quarter is still growing significantly and very positively. There are two factors why the number is down from previous quarter. The currency impact is around NOK 2.7 million, but the larger scheme of things on the ARR side is again related to a large U.S. energy company that canceled their previous SLA agreement in the third quarter. We have now indications and signed a revised SLA agreement that will run for five years. The rationale why they canceled was that they wanted to incorporate also the new projects that is coming in.
One of those are the $7 million that we already signed, and then of course the remaining coming into Q4, which would indicate that the total uplift of the credit will be 40% higher when we start pulling that in again. So, that number will be adjusted back to where the ARR number should be, either in Q4 as we anticipate, or at latest in Q1 next year. So, the underlying number of ARR adjusted just for that and not the currency side would be anywhere between NOK 82 million and NOK 85 million in Q3 if they had maintained that SLA and not rewrite it to a new one.
Gross margin still continues to be significantly better than previous years, quite high. This, of course, has an impact also that we haven't done a lot of large turnkey deals since they slide into Q4, so that impacts the gross margin.
It shows that we are capable of keeping solid margin on Cyviz products and Cyviz delivery if it's CCT through a partner or if it's our own component incorporated into delivery out in the market. OpEx at NOK 65.1 million. I would say, you might talk about it later, but the underlying run rate on OpEx adjusted for one-offs in Q3 will probably be in the range of NOK 62.5 million-NOK 63 million. We are aiming to get that slightly down through Q4 and into 2027 to have a predictable OpEx that is in line with what we aim to do from a revenue side. EBITDA reflection on revenue, -NOK 10.7 million, up from Q2, but still not in the range where we want it to be and anticipate to be.
We do expect to see a completely different number when we finish off Q4 with the volume we have on order intake and also the conversion into signed delivered deals in Q4. Few business highlights, $11 million from a US Army Corps of Engineers control room, a new client, which is good. One of the two key customers in Saudi, despite bombs and war in that market, still signed two contracts to add to their existing Cyviz equipment. Very happy to see three new Cyviz CoreTech partners. We are now at 28. Not at least, 93 active Cyviz Software Management Platform partners, which is up from 70 at the end of Q2. So the interest around our new software platform is increasing significantly and quite fast. We do expect to see a lot more ARR revenue driven through that platform sale when we enter 2027.
Not going to spend too much time on that. It's just a repeat on some of the things I said. I think one important thing to mention, I think the work we do together with IBM providing Cyber Campus solutions in U.S. is a super interesting concept. This is the fifth or sixth deal we do together with IBM at the university level. We are planning together with IBM to start expanding that also into Europe and Middle East when we enter 2027. So far, it has been a very U.S. centric project, but both IBM and Cyviz is motivated to take that into other markets as we enter 2027. We talked about order intake development. Not the best quarter in Q3. I think there are very plausible reasons. I'm not going to provide any excuses. As I said, a large energy company was planned in Q3.
$7 million of that is signed and in the books for Q4, should have been in Q3. We do expect also $2 million-$5 million more on that, plus some Microsoft, Accenture, and other deals coming into Q4, as well as those three larger European defense deals. Q4, we anticipate a very, very strong finish of the year. ARR, talked about it. It was NOK 76.8 million. Underlying ARR adjusted for the SLA cancellation and the new one would be in the range of NOK 82 million-NOK 85 milion at the end of Q3. That will be reflected when we look at ARR after Q4.
We still have that 20%+ growth on ARR quarter-by-quarter as an underlying performance, which is an important parameter for us as a company, because this is like one of the key elements of the pivoting we are trying to do as a company, moving slightly away from just selling hardware with less and less margin and more into those type of predictable three and five-year agreements that runs ARR business for us. Then let's move into the financials.
Thank you, Espen. Starting with the revenues, and as Espen has been gone through, the revenues for Q3 was NOK 91 million. Still an uptick from Q2, but at the same time, it's not as strong as we had hoped and wanted to. We do see that the backlog has converted quite a bit of revenues in Q3, which was positive, but also that some deals, important ones, were delayed into Q4. North America had an increase over Q2, and the other regions had a mediocre quarter per se. Looking at the gross margin of 60% in Q3 was above the 12-month average, and it was mostly due to the mix of the products that we sold. We had a higher degree of software and services and a larger share of turnkey projects and third-party hardware, which resulted in a higher gross margin than our average.
As we do close larger projects, we will see the gross margin will vary quite a bit between quarters also going forward. Looking at the operating expenses in Q3 was NOK 65.1 million, down 5% from Q2. As Espen said, the cost initiatives and cost optimization projects that we have started are showing results. It is expected also that we will reduce also through Q4 and also into 2027. We did have some one-time expenses this quarter. As Espen said, the run rate expenses for Q3 is around NOK 63 million. Looking at the EBITDA is obviously a factor or a result of the other items on the P&L, but -NOK 10.7 million in a quarter is not where we had hoped it would be. Still an uptick from Q2, but EBITDA will also fluctuate a little bit due to the timing.
Since we had a fairly weak revenue quarter, the EBITDA is then affected by that. Over to the balance sheet. Total assets of NOK 281 million is fairly unchanged since Q2. The reduction was from Q1 to Q2, so there is no real change there in this quarter. The current liabilities is up from Q2 due to increased draw on our overdraft facility. The equity is at NOK 26.8 million, which is mostly due to the weak results we have had in the first three quarters of this year. The equity ratio is 9.5%, and we are obviously monitoring the development in the equity. So far, what we see with Q4, we do not see a need for immediate action, but we are obviously monitoring this closely and the development of it going forward.
I can also add that the loan covenant waiver that we have had has been extended through Q4, and we have a good relationship and dialogue with the bank per se. Over to the cash flow. The cash flow from operating activities is -NOK 5.7 million, is mostly affected by the negative results, but also some positive impact on timing of accruals, and we have some negative changes in net working capital due to mostly increase in accounts receivable that gives the result for the operating activities. Net cash flow from investing activities, -NOK 12.6 million. This is mostly the investments we have in R&D, and also the ERP project that has continued, and we are aiming at launching in beginning of 2027, so that portion will be reduced drastically from that point on.
Net cash from financing activities is due to the drawing on the overdraft facility, which means that we ended the period with NOK 4.3 million of cash.
Okay, let's take a look at outlook. The backlog development is a reflection on, I mean, a slightly higher revenue than we had order intake in the quarter, so we eat a little bit on the order backlog, but it is still quite significant at NOK 365 million at the end of the quarter. A portion of course, the backlog numbers is also impacted by the change in currencies, since a huge part of what we do are either in US dollar or dollar-denominated currencies. When that changes and the Norwegian currency is enhancing and strengthen, we will have an impact on that. I would say the difference between the currency impact and the others is solely driven by the difference of NOK 91 million versus NOK 74 million between the order intake and the revenue side.
If you take a quick look at short-term outlook, there is definitely an increased activity level in Europe and U.S. I will have to say U.S. is starting to pick up significantly. We do actually expect U.S., when it comes to order intake, to be not very far from their full year internal budget. A lot of positive movement, especially then driven by the energy customers and also some of the corporate customers that is picking up in the second half of the year is, of course, impacting that positively. I think the two regions where the challenges have been by far the most challenging this year has been Europe and Middle East. Middle East with a lot more plausible explanations.
75% of our business out of Middle East have historically been in Saudi, and Saudi has been largely at a standstill over most of the quarters in the year, unfortunately, due to the geopolitical situation inside that region, and heavily impacted in particular in Q3 with another rounds of attacks, in particular in Saudi and Riyadh in particular. Europe, probably the weakest region for us this year. We have done a lot of adjustments in the European setup. We have done leadership changes.
We have agreed to align the backend of the company to add more sales capacity to enhance our footprint in the European market and sharpen our focus along defense and what we call critical infrastructure customers, which seems to be a lot more stable verticals to work with rather than the corporate sector that swings a lot and have had a lot of hits this year due to stock price impacts, especially in the second quarter of the year due to the AI type of wave that is hitting the market. We do expect the order intake in Q4 to be significantly better than all other three quarters. We have set a range of NOK 180 million-NOK 220 million. We are very comfortable with that.
I think as of today, halfway into Q4, knowing that the majority of things normally comes in the latter end of the quarter, I think we already have signed contracts for more than NOK 100 million, so we are quite comfortable with those numbers and have no problem indicating that probably ending more in the higher range of that band than the lower range of that band. Like I said, defense, energy, critical infrastructure, the most stable growth areas will also mean that we are gradually moving some of our focus, especially in the European market, towards those customers and less on some others that is less stable. When it comes to Middle East, we take it by day. We are focusing on interesting projects.
We are also turning some of our efforts from traditional companies that we work with, which is corporate, energy, and federal, and start looking at where can we add value, especially within defense inside that region that is under pressure and attack quarter by quarter. There's a couple of interesting opportunities with even new potential logos in that region. With some more stability in that region, we expect 2027 to be back to a more normality view in that region than 2026 has been. The short-term priorities, very simple. Sign contracts, bring in as much as possible, continue to develop and work with partners so that we can continue to reduce our own OpEx and utilize the partner ecosystem more. Push and sell the software platform and drive the ARR business fast forward.
Of course, not at least, continue to monitor and drive the cost discipline activities we have. We are continuing to do some adjustments, and I think going into 2027, we will be at a level that is sustainable and predictable when it comes to OpEx. As Lars said, one of those key additional cost elements this year has been the final leg of investments to finalize the ERP system. That will be launched in January, and you will see that a large chunk of cost we have taken this year would not be present related to ERP projects going into 2027. Medium-term outlook. If you look at some structural drivers, defense and security continues to be the type of key driver. We have a lot of requests from defense customers, especially around Europe.
A lot of processes take a lot of time, but I think as we move into 2027 and the spending and the activity level picks up, we also anticipate that the process time it takes from first initial meetings till delivering would also significantly go down in time. We have all the type of agreements needed. Last week, we were present in a huge defense conference in Paris as well as in Poland. Cyviz, as a provider of mission-critical secure solution, is on the agenda. So, we do anticipate a much larger pickup from the defense and the critical infrastructure in 2027. We are continuing to drive that shift to recurring software-driven revenue. The Cyviz Software Management Platform is key, and we know we are also now extending that into facility management and IoT.
We will, early 2027, also launch that software platform as an on-premise, as this becomes more evident that federal defense, banks, and others do require to have more control than having this run through an open software platform. I think that will add a lot of market opportunities, especially in the federal sector. Of course, the partner-led market expansion with Cyviz Core Technology, which is our software user interface. It's a software platform and a video processor. So, that part is key and crucial going into 2027 to continue to scale that. With that, I think we are at Q&As. So, thank you. If there is any questions, we are more than happy to reply on that.
No. No questions out there. I think we have addressed the issues that we wanted to. If there are any other questions in the aftermath, obviously, please feel free to reach out to us.
We do look forward to come back and have a completely different story when we talk about Q4 and entering into 2027. Thank you for participating, and have a really, really good day. Bye-bye.