Hello everyone, and welcome to the Napatech A/S 2022 half-yearly report. My name is Seb, and I'll be the operator for your call today. There will be an opportunity to ask a question via the telephone lines, and you can do so by pressing star one on your telephone keypad, or press star two to withdraw your question. I will now hand the floor over to Raymond Smets, CEO, to begin.
Good morning. I'm Ray Smets, CEO of Napatech. I'm pleased to welcome you all to Napatech's first half 2022 half year report presentation webcast. I'm joined by Heine Thorsgaard, our Chief Financial Officer here in Copenhagen this morning. Today's first half 2022 half year report was released earlier this morning on the OSE and is available on the investor relations page of our website at napatech.com. For your information, a recording of this webcast will be available on the Napatech website as soon as possible later today. We will answer your questions at the end of our presentation via text, which you can submit on our webcast page using the button below the presentation. We can take your questions on the phone if you prefer. If you'd like to ask a question, follow the instructions on this slide.
Please note that this presentation contains forward-looking statements that are subject to a number of risks and uncertainties. Our actual results may differ from those discussed in forward-looking statements. We have some extremely important topics to cover today, especially given the current global market climate, but also some super positive news that indicates the tremendous opportunity that lies before us. My objective today, with full transparency that you have come to expect from me and Heine, is to review where we are with the business, provide an update of where we stand within our market, deliver some very important indicators that point to a strong 2023 and strong strategic interests in Napatech, and of course, details about our financial results and our perspective and outlook for 2022.
Clearly, when we set our sights on 2022, we did not have the ability to predict the impact that the now-known market climate conditions could have on customer order activity, nor the impact of the then unknown geopolitical issues we're faced with today in Europe with Russia's invasion of Ukraine. We couldn't predict all of that, but what we did do in preparation for the unknown was to build a resilient and leverageable business that could weather the storms we couldn't predict. Napatech remains strong and ready to win despite these temporary challenges. We are poised for significant growth in 2023, which we believe will be the best year in the history of Napatech. I firmly believe we are in a good place to deliver a success in our business expectations.
Let's start with a quick refresh of Napatech's business underscoring why we will grow and thrive in our market. Napatech is a leading developer of FPGA-based software solutions on SmartNICs or IPUs, and Napatech is the largest independent FPGA software provider for the SmartNIC market with 7% market share in the global NIC market, vendor market. I will underscore why this is an important set of conditions for investors to understand a bit more in a few minutes, but this puts Napatech in a very positive spot to grow within this rapidly expanding market that we are focused on.
We promise to focus on our core competencies building software that powers the SmartNIC, and we have invested over 350 man years of engineering in software and SmartNIC technology over the last 20 years since we've been starting this business, and we've emerged as a leader in this fast-growing SmartNIC market. We also promise to manage the business to be leverageable. Napatech is well-positioned to capture market share in a new high-growth segment of the market around programmable NICs. A major underpinning to Napatech's opportunity for growth in our SmartNIC market actually starts in an adjacent market for servers. The good news is that the server market is hot. As data centers are designed to be the center of the networking universe for every application deployed now and into the future, server deployments are absolutely pervasive and growing fast.
Telco, tier two cloud operators, and hyperscale cloud operators have all jumped on the same bandwagon, architecting almost everything they do to run in a data center on a standard and open server. The apps being deployed in many of these cases are CPU-hungry and demanding of greater processing capacity. Why is this important to Napatech? Well, each and every server deployed in a data center needs anywhere from two to eight NICs to operate and perform, increasing the performance of those apps that run in the data center. Our FPGA-based SmartNIC is designed to fit within these servers to accelerate specialized CPU-intensive workloads, increasing the overall performance of the server while improving the financial performance and ROI of the data center.
The server market is expected to grow from $80 billion in 2020 to $138 billion in 2026, and data centers are now the center of the universe for running applications or services that we consume on a massively growing number of IP-connected devices. These data centers use massively deployed servers as the CPU platform to run these applications and services. More SmartNICs means less servers, which is a significant financial benefit to data center operations. We at Napatech are working hard to keep our technology relevant in these massively dynamic and growing parts of the market, and we see no limit to the potential here. This is why we focused on a major part of our partnering strategy to get us closer to top-tier server makers.
Our Lenovo partnership is key here, and we are working hard and getting very close to an important milestone with a semiconductor company partnership that we believe will help us grow new pipeline into 2023. More to come on this a little later in the presentation. As a leader in the SmartNIC solutions provider space, we will ride the coattails of the server and semiconductor players to get access to this adjacent market area. A good, hard challenge exists, and we have the right solution to fix it. Even though most all application deployments are on servers and data centers, these server CPUs just can't keep up. The solution is the SmartNIC to solve the performance gap. But these SmartNICs won't work unless they have software to make them optimize the specific applications that need to be accelerated. That is exactly what Napatech does.
The FPGA-based SmartNIC is in the right place at the right time, and Napatech's expertise to make the FPGA work to accelerate applications puts our technology into a very interesting market opportunity. The major server makers are looking for ways to distribute FPGA SmartNICs to their server customers, making their offerings to those customers more competitive to solve the needs of their app-hungry market. The service providers who are utilizing and virtualizing their entire mobile and landline network infrastructure have publicly stated that the FPGA is the technology of choice that they will leverage to provide high performance and service assurance. SmartNICs, also known as DPUs or IPUs, are needed now more than ever to solve the application performance gap on the standard server platforms.
These SmartNICs can offload functions like physical and virtual switching or packet processing using its built-in network operating system, and in some cases, its onboard accelerating engine. Leveraging the FPGA chip with our market-leading software to drive the application performance improvement, enterprise data center infrastructure, cloud, and edge networks now have the power to improve the performance of the applications and gain significant TCO advantages in their data center designs. The potential is huge. We are designing our solution with all of the advantages you see on the slide, from performance and agility and efficiency to improve the economics and scalability of the data centers while reducing the overall footprint and energy consumption of these deployments. To sum this up, Napatech accelerates server-based applications using the most advanced programmable IPU, DPU, SmartNIC technology, and we have deep expertise to make this happen successfully.
The key strategic advantage to our success in Napatech is the software that runs on these SmartNICs that delivers the real value to our customers. The software is our key strategic advantage. The software provides the features that make our customers' software solutions work better, smarter, and more securely. When it is married to our hardware, we add the benefit of FPGA hardware performance to accelerate these applications further. Over the recent past, we have strived to drive our business further, earning a path to the next level of growth. We created momentum, building the best-in-class FPGA-based SmartNICs and software, solving real-world problems, accelerating applications in growing market segments like networking and security, 5G mobile, cloud, edge, and financial services. We help make networks faster and are making servers more powerful while reducing the customer's data center costs.
All of this is real value for customers solving problems today. We believe we have moved into a key position in the market to benefit from the growing data center investment area. With this momentum , the future does look bright. Over the next year, we will stay focused on expanding to higher growth market opportunities, driving our software as a key competitive advantage within 5G, tier two cloud, and enterprise networks. We will keep developing sales channels to the big buyers in this market through partnerships that we have deep relationships with, and they have the kinds of customers who need our solutions. I'd like to say that we've earned a path to the next level, but we still have work to do. We remain committed to keep up the good efforts and bring Napatech into the center of the spotlight where we can make a big impact.
Now let's take a look at the important market data from our domain. In this section, I want to reveal some new important efforts to capitalize on the strategic options that lie ahead for Napatech. Firstly, where do we fit amongst the key vendors in the NIC market? Well, we use an FPGA as a foundation to our technology design because it gives us the highest performance with the greatest programmability. When both of these factors are combined, top performance with super programmability, compared to other competitive technologies, FPGAs rise to the top of potential in this market. FPGAs win on performance because we are hardware-accelerated performance, whereas SoCs are software-accelerated. FPGAs win on programmability too because we're hardware and software programmable, where SoCs are only software programmable.
We are an optimal mix of price, performance, and functionality, cost, and power, and Napatech's solution is built to allow our customers to reap those benefits. Our firm placement in the upper right-hand corner of this chart is evidenced by the increased sales activity and the strengthening relationships that we have with top semiconductor companies like AMD, Xilinx, and Intel. Without a doubt, customers select Napatech because of our software, which is production-grade, feature-rich, and of course, high performance. Our software squeezes every bit of performance we can get out of the FPGA hardware design, and we do this with a cost-conscious mindset, selling this value at the right price with a mix of features and performance. It is worth noting here that we exist in a dynamic marketplace. We have seen consolidation and M&A here as companies align their strategies to go after this growing market.
To top off a few years of M&A at Intel, Xilinx, and NVIDIA, we have seen Xilinx acquired by AMD and then suddenly move to acquire Pensando. We're gonna see more of this. With this in mind, this market is ripe for consolidation. There are more than 40 companies in this market competing for their share of this rapidly growing market. Napatech has developed a leadership position building software on FPGA-based SmartNIC IPUs and DPUs focused on the fastest-growing segments of this market, including 5G mobile, Tier 2 cloud, and enterprise. Napatech's pole position has caught some interest from customers and partners, and yes, we have been approached by several large companies on how to capitalize on this enormous business opportunity together.
Thus, the board and the management have initiated a strategic review to consider all strategic options due to the large opportunities in front of us. We remain confident as the largest pure-play FPGA vendor in our space. We bring a unique value of a complete solution to the SmartNIC industry. A feature-rich, high-performance plug-and-play solution leveraging the best in class underlying FPGA technology to solve some of the biggest problems evolving in networks today. I firmly believe if we stay on track, Napatech will bubble to the top of the heap. With this new strategic review, it is perfectly timed to take advantage of our increased value and visibility in this important growing market. In the most recent industry reports published in June, the market we serve is expected to continue to grow over the next five years, despite some of the near-term temporary market climate conditions.
The programmable NIC market, also known as the SmartNIC market, are the pink bars on the market report, and that market is expected to grow to a sizable $4.8 billion by 2026, and that's up from $1 billion in 2021. In addition to Omdia's view of the world, Gartner also predicts that by 2023, 1/3 NICs shipped will be a SmartNIC. Gartner says that this means data center customers will have the capability of having a high-performance networking solution driven by the power of the SmartNIC that can be installed on every server. It doesn't stop there. Dell'Oro also says SmartNICs will make up 38% of the market by 2026.
They say that the SmartNICs will displace traditional NICs for most of the hyperscale cloud infrastructure for general purpose and high-end workloads, and this accelerated computing trend will also happen in the tier two cloud enterprise data centers and telecoms markets. This is Napatech's market. A few additional points to note. We remain in the top 10 of the largest overall NIC makers. There are 40 other NIC companies that make up this other category, so being in the top 10 list is a significant part of this market. More importantly, the SmartNIC market, which is the fastest-growing part of the overall NIC market, which is where we're listed as a top vendor in this market with 7% share, is also notable.
Our solution is relevant and growing in this market, and we gain traction with new design wins in this area, and Napatech will see significant growth coming from these opportunities. We published an important milestone that we have now shipped 350,000 SmartNIC ports to customers around the world. This is an indication that Napatech is getting more widely deployed. Guess what. It's very possible that even your very own bit streams are being touched, secured, and accelerated by a Napatech SmartNIC solution somewhere in that data center. In Q2, despite some delayed orders in the OEM part of the business, we had solid customer activity. This is a sampling of some of our Q2 customers from all over the world and from different market domains who ordered Napatech SmartNIC solutions and software.
What you will see as you scan this list of active customers is a mix of both OEM and end user customers. Some of these customers are recurring, and some of these are new design wins and placed orders for revenue for the first time in Q2. Some of those new customers as examples are Soroc, a 40-year-old IT infrastructure services company, Jabil, a large U.S.-based global manufacturing company with over 250,000 employees, BHEL, which is Bharat Heavy Electricals Limited, is one of the largest manufacturing companies in India. Echodyne is a U.S.-based high-performance radar maker. MNDprofi is a firm specializing in an IT infrastructure. PlanetHoster is a Canadian-based web hosting services provider with over 150,000 customers in their hybrid cloud facilities in France, Switzerland, and Canada.
All of these new customers are great new customers to have, and they're all using our SmartNIC solution for a variety of use cases to accelerate applications, improve security and network performance, and their overall data center TCO and performance. What we saw in Q2 order activity is that our larger OEM forecasting from our customers and visibility was less clear due to their own reactions to the overall global market climate. This has had a temporary impact on order visibility and timing. We're working with our customers to get a better view of order timing and volume for the second half of the year. I'll talk about our expectations for the second half in just a few moments.
First, before I get there, I'd like to share some really exciting news about several key growth developments that will shape up in 2023 in a very, very positive way. With that, I have two exciting key growth developments that I'd like to share with you today, and we do have others brewing for second half 2022. We received word in the last month that we've been selected for a significant new design-in. Napatech has been working closely with a new customer requiring best-in-class SmartNIC solutions, and we are pleased to announce that we have been selected for this significant new design-in with this customer. Until a later point in time, this customer has not allowed Napatech to disclose who they are until we have all the contracts signed.
This customer is a multi-billion-dollar global leader in network and security solutions, selling its solutions to the world's largest enterprises, financial institutions, service providers, and governments. Napatech is gonna deliver its newest Intel-based FPGA SmartNIC solution with production starting on that brand-new product in the first half of 2023. The potential full year revenues in this engagement could grow to be in the range between $10 million and $15 million per year. With this new revenue beginning to ramp in mid-2023, we can estimate that 2023 revenues will be positively impacted. We will estimate that into our 2023 business plan and report on that when we publish our goals for next year. This is a key new development in revenue for Napatech, and we are excited to make this a big success for Napatech.
We are also excited to announce progress that we're making with several of our key strategic partners in the semiconductor and server domains, and we are on the verge of a new breakthrough phase of collaboration within this partner area. Our goal with any new partnership with a large strategic player like Intel or AMD and Xilinx is to gain greater access to the market that they have access to. In this new phase of partnering, we'll enable our partner to leverage their direct and sales channel organizations to seamlessly offer Napatech's industry-leading SmartNIC hardware and software solutions to their customers and prospects. We'll do this by identifying a joint pipeline of opportunities to expand our reach and dramatically enable a broader quoted sales team to position the benefits of the Napatech solution, creating leads and closing deals.
We expect this new partnership arrangement to increase our visibility in the pipeline and to grow new revenues in 2023 and beyond. This isn't just planning, this is turning into execution in 2022, and we will drive these new partnerships to grow revenues significantly. We'll make further announcements publicly, so watch this space. I think you'll be very impressed with what we will be able to achieve in this new area. Let's get into the financials. I'll start with a brief highlight of Q2 results and spend a few minutes to reflect on why we saw these results, given the current market conditions. Then I'll hand it off to Heine Thorsgaard for a more detailed overview of our results. As you already know, Q2 didn't come in where we expected earlier in the quarter.
We are dealing with unprecedented global market conditions of a variety of types that were even more acute in Q2 than we expected, and our business is certainly not immune to this complex shifting market environment or geopolitical challenges. The results are that the growth in first half 2022 year to date was down 6% in DKK, and it was down 15% in USD. This is primarily due to several reactions in our customer and our market area. Larger OEM order timing and shifts were caused due to their reaction to the global market conditions affecting their parts of the market. This breaks a record of 13 quarters in a row of growth for Napatech, so we don't take this lightly.
We expect and we hear that these conditions are only temporary, and we are increasingly optimistic about how 2023 is beginning to shape up compared to 2022. More on that in just a bit. Gross margins in Q2 were greater than 70%. That's a major rebound from Q1, which was mostly impacted by an important larger hardware order from a large OEM. This gross margin result is a sign that we have a good handle on hardware costs and overall product pricing in this market environment. Overall, our revenue growth has been impacted and has been delayed out of the first half of 2022 due to the overall market conditions, and our ability to accurately predict the timing of the OEM orders has been reduced given their response to their own market situation continues to evolve.
As we have all heard from other IT networking companies in the IT networking sector, what we have seen is historically high inflation, which has had an impact on component costs, component shortages which have delayed server shipments or caused vendors to stockpile hardware and delay software orders. Unexpected geopolitical issues with the Russian invasion of Ukraine, which has had an impact on more cautious spending globally, but especially in the EMEA and APAC theaters. Although the Americas saw a revenue increase in the first half of 5.7% year-over-year in DKK, we saw the rest of world year-over-year revenues decline by 44% due to the overall market condition, and even more so impacted by the rapid market repercussions, especially in Europe, due to the Russian invasion in Ukraine.
We are seeing all of these conditions creating a climate of inconsistency and inconsistent order activity, which reduced our visibility to timing of orders. As we discussed in the overall market share data and what we can see and touch through our access to our customers, despite all this, we remain very optimistic and positive about the trends and directions for our business over the next year. The near-term visibility over the next couple quarters will be less clear than normal, and certainly at this point in time of the quarter. Yes, we are navigating a variety of different market conditions.
Let me talk about them just a bit more, but also let me underscore the areas of our confidence. The world we live in has to be focused on the future because we know the headwinds we're feeling today are temporary, so we cannot take our eye off that prize. Look at it this way. We have had very strong customer retention. It has been unheard of over the last three to four years since I joined Napatech to lose a customer. We are gaining new customers, we are gaining new design wins, and this is a sign of strength. Napatech is executing well, keeping our customers strong and healthy. We have seen market, key market-making partnerships resonating with Napatech solution, and we have developed ways to access the growing markets through good work, nailing down partnerships that will drive growth.
We have been growing and in a very good fashion, proof points in the marketplace with customer wins with our inline and OVS software and our IPU development product direction, and we believe it will pay off. The significant new design win I just talked about a few moments earlier is a huge win for Napatech, and our ability to generate new pipeline as we enter 2023 is extremely positive. Although we cannot perfectly predict how the market may impact us over the next couple quarters, we are super confident about 2023, and we believe it'll be a huge growth year for Napatech with new customers and revenue. Despite the market headwinds, we still believe in the tailwinds.
We expect the situation we are in to be temporary, and we aren't the only ones who feel that way if you talk to industry analysts and leaders. Fortunately, we've built a business that can weather the storm. We are resilient, and we are leverageable, and we have a very lucrative opportunity ahead of us. To win in the long run, we need to keep executing. With that, let's first get into the financial details. I'll hand it off to Heine Thorsgaard for a more detailed overview of our results. Afterwards, I will share our expectations for 2022. Heine.
Thank you. Revenue in DKK in Q2 was down 24% compared to Q2 last year. In USD, revenue was down 33% compared to 2021. For the half year, revenue in DKK was down 6% compared to last year and amounted to DKK 35.5 million. In USD, revenue in first half amounted to $12.9 million compared to $15.1 million in 2021. Gross margins in Q2 ended at 70.3%, down 1.5 basis points compared to Q2 last year. Gross margins in the first half of 2022 were 58.8%. As Ray mentioned, the lower margins are due to the hardware-only order in Q1 that we also commented on in the Q1 presentation. Our staff costs and other external costs in Q2 amounted to DKK 37.9 million compared to DKK 29.9 million in Q2 last year.
For the first half of 2022, staff costs and other external costs amounted to DKK 73.9 million compared to DKK 60.3 million last year. EBITDA in Q2 amounted to a DKK -12.9 million compared to a DKK +3.4 million in Q2 last year. EBITDA for the first half of 2022 amounted to a DKK- 22 million compared to a DKK +5.8 million in the first half of 2021. Staff costs transferred to capitalized development costs in Q2 amounted to DKK 6 million compared to DKK 5.2 million in Q2 last year, and DKK 13 million for the first half compared to DKK 11.6 million in the first half last year. The results for the period in first half of 2022 amounted to a negative DKK 11.4 million compared to a positive DKK 11 million in first half of 2021.
Net cash flows from operating activities in Q2 amounted to a DKK +2.5 million compared to a DKK -0.9 million last year. For the first half of 2022, net cash flows from operating activities amounted to a DKK +2.2 million compared to a DKK -13 million last year. Net cash used in investing activities in Q2 amounted to DKK 8.6 million compared to DKK 3.5 million in Q2 of 2021. For the half year, net cash used in investing activities amounted to DKK 11.5 million compared to DKK 10.5 million last year. Free cash flows in the first half of 2022 amounted to a DKK -17.3 million compared to a DKK -23.4 million first half of 2021.
Cash and cash equivalents end of Q2 2022 amounted to DKK 37.5 million compared to DKK 38.1 million at the end of Q2 2021. Back to you, Ray.
Thanks, Heine. Thanks for doing a great job managing the financials for Napatech. Great work. Let's first talk about 2022 in general. Given the temporary market conditions, we'll work hard to put our investments to work to optimize the outcome and go long. Our goal is to go long. Time to revenue will dictate our investment priority with a focus on maximizing revenues with software and feature development. Trust that we're paying attention to the top priorities and executing as well as ever to maximize revenue in the near term. We're also going long. Let's talk about the outlook for 2022 first. The way we see the rest of the year shaping up is as follows. The pipeline development in the second half of 2022 is promising, with improved order volume expected in Q4 due to breakthroughs with our new products.
We expect Q3 revenue will be an improvement over Q2 revenue, and we expect in Q4 to be the strongest quarter of 2022, much stronger than what we saw in Q4 of 2021. We expect that the second half 2022 revenues will be higher than in the second half of 2021, and we expect cash flow to improve in the second half of 2022 compared to the first half of 2022 for sure. I also want to give you a perspective about the coming year. We are increasingly optimistic about 2023, and you've heard me say that a few times in this presentation. Revenue potential from new design wins and go-to-market partnerships were discussed today, and other revenue opportunities that we're also actively working will influence the outcome for 2023.
We believe that we will significantly increase 2023 revenue potential and make 2023 the best year in the history of Napatech. With this expectation, cash flow will improve and will increase over the next year, too. We are realizing the benefits of our leverageable business model and the strength of our business that we have built over the last four years. We can weather this storm, and we are more and more confident than ever that we're going in the right direction. In conclusion, we're focused on executing the business in a very lucrative market that we can exploit for growth in the data center expansion area. Our core business has been solid, even in the most volatile market environments around the last 3-4 years.
Despite the inconsistencies that we felt and observed with customer order timing and near-term visibility, we are executing long term on our way to a bigger and very compelling market opportunity of accelerating apps, offloading functions and virtual networks, and catching the wave with IPUs through partnerships and other ways to get to the market. Overall, we remain optimistic about a solid growth path into 2023. We need to get the job done. I'd like to invite Heine Thorsgaard to join me and take your questions. If you'd like to ask a question, you could submit it now on the live webcast page using the button below, or you may dial into one of our phone numbers on the screen, where an operator will answer the call and put you into a queue.
Please keep your questions to one or two per caller, and we'll do our best to respond to as many text questions we receive. Operator, do we have any calls in the queue?
Thank you. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. We currently have no questions in the audio queue, so I'll hand back for any text questions.
All right. Thank you, operator. We do have a couple of questions in queue, and I'll just take the first one that came in. I'm here with Heine, so Heine and I will both answer these questions. Can you speak to the new win that we announced and provide us more information and color about the timing of revenue? Well, I hope you guys noticed the excitement in my voice as I announced that because this new design win truly is a landmark design for Napatech. We did receive it over the last month, so we're very happy to announce it. You noticed the numbers associated with what we believe is the full-year revenue potential of this design win, and we're very confident about that.
We can't provide the name of the customer. We've communicated to market that it is a multi-billion dollar customer, so it's a very, very large customer focused in networking and security solutions. That is a target customer and has been a target customer of Napatech for quite some time, and it's a new customer that has not purchased from us before. We're super happy about that. They have selected us and will be using one of our newest SmartNIC designs that is an Intel-based FPGA SmartNIC, and we're super excited to be working with Intel to be bringing that solution to this particular customer next year. Production will ramp next year. We expect first units to ship sometime in the middle of next year.
Full-year production based on the number of units this customer will be purchasing, we expect the revenue range to be somewhere between $10 million and $15 million per year. Yes, you heard me right. It's a very significant design win for us. That's about all we can provide at the moment. What we will be doing is putting that into our guidance for 2023, and we will be adding that information. We did get a follow-on question. Given the new win, what should we expect in terms of additional operating costs? Heine, would you like to take that portion of the question?
Yeah, I'd be glad to. Basically this win and the products related to this is something we can handle within the current setup. That also clearly demonstrates the leverageability of our business model as we've been talking about for some time. Shipping a lot of extra SmartNICs is something we can handle with the current setup with the contract manufacturer and this is a product that has been covered by the current product roadmaps within our organization. Basically we don't need additional staff in any material way to cover this order.
It's good questions. That was two questions off the top. Operator, I'll check back with you. Are there any questions in the audio queue?
Currently no questions in the audio queue.
All right. We do have one additional message, question here on the tech side, and it's a good question. Can you comment more about your second half outlook? What does visibility look like in your pipeline? It's a very good question. Obviously, you know, we're setting the expectation for the second half of the year very clearly based on what we currently see in the pipeline. You know that our OEM order take is a little bit less visible than we've had in the recent past at this time of the year. That's okay. Under the current circumstances in the marketplace, we somewhat expect that. We are setting expectations in the following way.
Q2 clearly wasn't one of our best quarters, but Q3 will be better than Q2. Historically, Q3s and Q2s are either equal, or Q3s tend to be down. We will see an upside, a little up in the Q3 period. From a second half pipeline development activity, we see order volume improving in the Q4 timeframe, Q4 will be better and will be the best quarter of the year, we fully expect that to occur, and that's very typical history for Napatech. We expect that the second half revenues will be better than the second half revenues last year, based on our current expectations and we're feeling pretty good about that direction right now. With the improving revenue, we will also see some improvements in cash flow.
Visibility in the pipeline, covering the second half of that question, is a little less than we'd like to see at this point in time. Typically, we have pretty good visibility beginning to form in the last part of Q3 for Q4. This market condition is giving us some inconsistencies and kind of the way I see it is, you know, the most consistent thing about this marketplace is the inconsistencies that we've seen. But what we're beginning to develop in the pipeline is giving us a sense of what the second half is beginning to shape up as. Good question. I do have another question in the queue, but Operator, I'll check with you if we have any audio questions.
We have no audio questions at this time.
All right. We do have another question in the queue, and I think this is one for Heine. Is your current cash position sufficient to cover your growth strategy?
Yes. As you noticed in the report, we have been investing significantly as we communicated last summer, around a year ago. We believe we have cash, and we are confident that we have cash enough to fund this growth strategy. We also have some unused credit facilities that we could draw upon if order volumes are postponed a bit. We are confident that we have the cash in place to fund our growth strategy.
Okay. Thanks, Heine. That's the last question we have on the text side. Operator, I'll just check with you on the audio side, and if there are no questions, I think that is all the questions we have.
Yep. We have no questions on the audio side.
Okay. Well, then I guess we'll bring this webcast to close. I hope everybody has enjoyed listening to it. You know, it's a pity under the circumstances how the numbers looked for Q2, but we are super confident about the direction of this business and this company is executing well. Despite the recent kind of rough conditions of the marketplace that we're not the only ones observing, that our peers and customers have encountered too, we have navigated this company in the right direction towards what we believe will be a very bright future. We're gonna strive to get that bigger growth. The new win that we have is an example of what that growth will look like.
You know, we don't wanna say transformational yet, but we're feelng very confident about the upside that we're beginning to observe for the upcoming year. I'd like to thank you all for your attention today. I'd like to also thank the employees of Napatech for the efforts to drive our business faster, and I hope you all have a good day.