Financially, we secured a EUR 40 million revolving credit facility to refinance our existing bond loan. This move will reduce annual interest expense and enhance our financial flexibility going forward. Finally, we renewed our strategic partnership with SAP, ensuring that PeopleHub continues to evolve on SAP S/4HANA Cloud, with platform support guaranteed through 2040. This positions us at the forefront of cloud and AI-driven HR innovation for the years ahead. In short, Q3 delivered record results, operational strength, and long-term strategic alignment that ensure Zalaris remains a leader in cloud-based HR and payroll solutions globally. As already touched upon, Q3 once again proved our strong financial momentum with continued growth, increased profitability, and solid cash flow. Last 12 months, that is, LTM revenue grew 37% compared to two years ago, reaching EUR 1.47 billion. During the same period, LTM EBIT increased by 146%, now standing at EUR 191 million.
Naturally, our next milestone is within sight, reaching EUR 200 million in LTM EBIT. Our adjusted LTM EBIT margin has strengthened by 5.8 percentage points, moving from 7.2% to 13%, reflecting the scalability of our operations and continuous improvement in efficiency. LTM operating cash flow has also seen impressive progress, rising from EUR 27 million in Q3 2023 to EUR 152 million this quarter, a little down from last quarter, primarily because of some timing effects from payments received just after quarter end. At the same time, net interest-bearing debt has come down from EUR 337 million to EUR 245 million, a significant improvement. Finally, our debt-to-EBITDA ratio has strengthened from already acceptable 2.5x to a conservative 0.9x, underscoring the company's financial resilience and flexibility. In short, Zalaris today is stronger, more profitable, and more cash-generative than ever, positioning us well for the next phase of growth.
Q3 was not just a strong financial quarter, it was also a quarter of wins that strengthened our growth foundation going forward. We signed a new agreement with Eurowings, which is partially a renewal but also includes a significant upsell, expanding both the solution scope and geographical coverage. This reinforces our position as a trusted multi-country payroll partner in Europe's aviation sector. We also welcomed a new client, Hipp, one of Europe's leading baby food producers, where we'll deliver payroll services with the potential for further expansion across additional markets. Our relationship with long-term clients also remains strong. We secured a five-year renewal with Storebrand, covering full Nordic payroll and HR services, and another five-year renewal with Elkjøp for Nordic payroll and transactional HR.
In the U.K., we achieved a significant consulting win with Nottingham City Council, delivering payroll and time solutions, a strong testament to our growing consulting capabilities in the public sector. Finally, we have several ongoing discussions with both existing and new clients, many of which are expected to materialize in the upcoming quarters, further supporting our growth trajectory. In summary, these wins underline the strength of our offering, customer trust, and our ability to grow both organically and through deeper client relationships across Europe and beyond. Our Managed Services division continues to be the cornerstone of Zalaris' success, representing 77% of total revenue this quarter. Revenue grew 14% year- over- year, reaching NOK 289 million, or 13.7% in reported terms, and 12.1% when adjusted for currency effects. This reflects both new customer implementations and expanded service volumes with existing clients.
We maintained a strong net revenue retention rate of 103% in constant currency, showing that we are not only retaining our customers but also expanding with our organizations through upselling and added services. We maintained the growth was broad-based across all regions, highlighting the scalability of our business model. DACH grew 4%, continuing its solid improvement trends. Northern Europe delivered 14% growth, driven by strong Managed Services performance and operational efficiency. The U.K. and Ireland region achieved exceptional 63% growth, supported by customers that went live in Q2 and expanded project deliveries. Altogether, these results reinforce that Managed Services is performing strongly across geographies, continuing to drive both recurring revenue and long-term profitability for Zalaris. Turning to Zalaris Consulting, revenue grew 1% year- over- year, or 2.5% adjusted for currency effects. This is lower than our target of 5%.
Growth this quarter was driven primarily by increased sales in APAC, where we continue to see strong momentum following the region's expansion and new client wins. This was partially offset by lower activity levels in DACH and Poland, where we completed several large projects in the previous periods. A key point to note is that a significant portion of our consulting capacity is currently being used to support managed services, especially in transformation projects and change order deliveries as we onboard new customers. This is particularly true in Germany, where the teams are heavily engaged in implementation, supporting our strong managed services pipeline. In summary, consulting continues to play a strategic role, not just as a revenue generator on its own, but as a critical enabler of managed services growth and customer success. With this, I hand over to CFO Gunnar Manum, who will take you through the financial part of the presentation.
Thank you, Hans-Petter. This slide highlights our 10.3% year-on-year revenue increase for the quarter, marking our strongest quarter yet with revenue of NOK 375 million. When measured in constant currency, the increase year-on-year was 9.5%. Revenue in managed services grew by 14%, while Zalaris Consulting grew by 1%. The increase in managed services was mainly driven by revenue from new customers that had gone live since the second quarter last year and the third quarter last year, and additional services and increased change orders from existing customers in the Nordic region. In Zalaris Consulting, revenue compared to last year was higher in APAC, partly offset by a reduction in Germany and Poland. Net retention in managed services was approximately 103% for the quarter.
Looking ahead, we continue to have strong revenue visibility through the rest of 2025 and 2026, with a projected revenue increase of more than 16% compared to the full year 2024. The charts illustrate our anticipated growth based on signed contracts that are yet to go live. The total net annual recurring revenue from these contracts is NOK 72 million. The top graph illustrates the annual run rate for recurring revenue for managed services as of Q3 of NOK 1,015 million. Additionally, NOK 72 million net new annual revenue from signed contracts and expansions is expected to have a full effect from the end of Q4 2026. The bottom graph shows the estimated timing of this additional revenue.
In addition to the established recurring revenue for managed services, we have change orders totaling approximately 12% of recurring revenue and the revenue from Zalaris Consulting for the last 12 months of NOK 347 million. This resulted in an estimated future annual revenue of a minimum of NOK 1.564 billion, based on the average currency rates in the third quarter. Now, this slide presents our adjusted EBIT for the third quarter. The adjusted EBIT was NOK 47 million, an increase of 27% year-on-year, with an adjusted EBIT margin of 12.6%, up from 10.9% last year. The increases are a result of higher revenue, especially in the Nordic region, along with certain operational improvements. The adjusted EBIT for managed services was NOK 59.3 million, which was NOK 13.9 million more than last year, mainly due to the increased revenue and some improvements in customer margins.
The adjusted EBIT for Zalaris Consulting was minus NOK 1.1 million, NOK 5.9 million lower than last year. The main reason for the decrease in EBIT was higher costs in APAC, which we had to invest to support the strong revenue growth in that region. These costs are of a one-off nature. The condensed profit and loss slide provides a detailed overview of our financial performance, highlighting our key cost components. The increase in license costs is attributed to higher revenue from my payroll and HR solutions and was marginally higher than last year as a percentage of revenue, but in line with last year, year- to -date. Revenue per FTE in constant currency grew by approximately 11% year-on-year, and personnel costs decreased marginally as a percentage of revenue.
The increased personnel costs year-on-year was mainly due to less costs capitalized to customer projects and development projects, and higher share-based payment costs. Other operating expenses decreased by 2.8 percentage points as a share of revenue year-on-year, and these costs were marginally lower than last year. The EBIT was NOK 39.6 million for the quarter compared to NOK 31.1 million last year. Net financial expenses were NOK 9.3 million, which included an unrealized currency gain of NOK 2.5 million related to the euro-denominated bond loan. Net financial expenses last year were NOK 21.1 million, which included an unrealized currency loss of NOK 8 million. Net profit for the period was NOK 18.9 million compared to NOK 8.3 million last year. Our net operating cash flow was NOK 10.9 million for the third quarter compared to NOK 48.4 million last year.
The reduction was caused by increased net working capital, prompting the timing of significant cash inflows and outflows. Notably, the cash balance recorded two days after quarter end was NOK 18 million higher than on September 30th . The chart details the movement in our cash position since the previous quarter, reflecting a decrease of NOK 28 million following the settlement of expiring employee share options. The net interest-bearing debt as of September 30th increased by NOK 28 million during the quarter to NOK 245 million, which converts to a leverage ratio measured by the interest-bearing debt divided by the adjusted EBITDA of 0.9x. Net interest-bearing debt rose primarily because cash decreased after settling the employee share options. Yesterday, we signed an agreement with Nordea for a EUR 40 million revolving credit facility to replace our current EUR 40 million senior bank loan.
The facility has a margin of 185 basis points on top of the Euro interbank rate, based on the leverage ratio as of 30 September, compared to 525 basis points for the bond loan. Switching to the new facility will reduce annual interest expenses by EUR 16 million- EUR 18 million. The closing is expected by mid-November, and bondholders will receive a redemption notice in due course. That leaves the financial section, and I'll hand over to Hans-Petter for the outlook.
Thank you again, Gunnar. During the quarter, we've firmed our long-term strategic partnership with SAP by entering into a new agreement to migrate our PeopleHub platform to SAP S/4HANA Cloud. This marks an important milestone in our technology roadmap, ensuring that PeopleHub continues to evolve through 2040, fully aligned with SAP's innovation strategy. The migration will leverage SAP's advancements in AI, cloud, and connectivity, positioning Zalaris at the forefront of HR and payroll innovation and ensuring we continue to meet the evolving needs of our customers and markets. This investment strengthens the stability, scalability, and future readiness of our core infrastructure, enabling continued global growth and digital transformation. The agreement secures three key benefits: one, continued access to a platform supported by SAP until 2040, closer alignment with SAP's global sales organization, and expanded access to SAP's AI innovations and integration capabilities.
Implementation will be carried out in close collaboration with both SAP and Microsoft, with our new and upgraded release targeted for go live in Q2 2026. While the transition will bring a modest increase in operating costs, this will be more than offset by efficiency gains from accelerated digitization and by revenue growth through stronger collaboration with SAP's global sales teams. In short, this partnership ensures that Zalaris remains a global leader in cloud-based HR and payroll solutions, well-positioned for the future. In Q3, we achieved a major milestone, reaching our NOK 1.5 billion annualized revenue target, more than a year ahead of plan. Importantly, nearly all of this above-target growth has come from managed services, highlighting the strength of our recurring revenue model and scalability. Over the past two years, our average annual growth has been around 18% or 14% when adjusted for currency.
This growth has been driven by expansions with existing customers and the addition of new managed services contracts. As we shared in our last quarterly presentation, we have now raised the bar. Our new ambition is to reach NOK 2 billion in annualized revenue by Q4 2028, with an EBIT margin of between 13% - 15%. Managed services has grown from 71% to 77% of total revenue over the last eight quarters, and we expect to reach at least 80% as we deliver on the NOK 2 billion goal, meaning that the share of high-quality recurring revenue continues to rise. Our growth strategy remains clear and focused, built on multi-country payroll for mid-market and enterprise customers, evolving HR services, and expanding our global capability center offering and a full suite of consulting services now operated as a global business unit.
We are sharpening our land and expand approach, growing within existing clients and entering new geographies, aiming for presence in all G20 countries with full Western European coverage as the next step. With customer churn at historically low levels, our growth trajectory is solid. Further improvements will come from AI and automation, continued extras for cost efficiency, and scale-driven productivity gains. When we achieve our NOK 2 billion target, an EBIT margin of 13% - 15% will translate into NOK 260 million-NOK 300 million in EBIT. With ongoing automation and digitization, we see clear potential to exceed that margin over time. To sum up, Q3 2025 marked another record milestone for Zalaris. We delivered all-time high quarterly revenue of NOK 375 million, up 10.3% year- over- year, showing strong organic growth across regions and proving the scalability of our business model.
Adjusted EBIT reached NOK 47 million, a 27% increase from last year, resulting in our strongest Q3 margin to date at 12.6%. Our LTM EBIT now stands at NOK 191 million, putting the NOK 200 million target clearly within reach, effectively doubling the ambition we communicated back in 2023 to become a NOK 100 million EBIT company. In Germany, momentum continues to build, with new long-term contracts and expanded agreements covering over 8,000 employees, strengthening our position in one of Europe's largest HR and payroll markets. Financially, we secured a EUR 40 million revolving credit facility, replacing our previous bond loan. This move will lower annual interest expenses and enhance financial flexibility to support continued growth. We also renewed our long-term partnership with SAP, ensuring that PeopleHub evolves on SAP S/4HANA Cloud, supported through 2040. This keeps Zalaris at the forefront of cloud and AI-driven HR innovation for the years ahead.
In short, Q3 delivered record results, operational excellence, and strategic progress that solidify Zalaris' position as a global leader in cloud-based HR and payroll solutions. As we look ahead, our plans are clear to achieve our 2028 ambition of NOK 2 billion in revenue and 13% - 15% EBIT, powered by net promoting customers and an engaged team Zalaris driving our success together. Thank you for listening. If you have questions, we are ready to take them now.
Yeah, I have a question. The first one is, "Hans-Petter, should we expect Zalaris to deliver an adjusted EBIT margin in the 2028 target range in 2026-2027?" As well, given that you are already there, or are there any short-term obstacles that you have to overcome that we should be aware of?
I think as we currently see it, we do not see any obstacles. As you alluded to, we believe we can continue on the journey that we are currently at and have put the 13% - 15% squarely in sight.
Next question. "Could you provide more color on the higher cost in APAC? Will there be further ramp-up in Q4, or will growth start to scale these operating expenses again soon?
Yeah, I think, as also Gunnar Manum mentioned during his presentation, that some of the costs in APAC are more of a one-off nature, so we do not expect to see that level of, say, negative performance in the next quarters.
Next question. "Will you reduce gross debt as much as possible upon refinancing, or are there any reasons to keep to maintain a cash position above NOK 200 million?" I can answer that, and that is, no, we will not keep a cash position of NOK 200 million, and we will reduce the debt as much as possible. The plan is that we will not draw on the full NOK 40 million on the facility, which again will obviously then reduce debt and the cash balance.
Yeah, just to comment also from my end, I think that's one of the benefits of also the revolving credit facility versus the bond, that we will also pay interest only for the amount that we draw down at all times. Any other?
We have some more questions.
Okay.
Do you still consider future M&A? In that case, in what country or region, and why would you see that as a superior capital allocation to dividends or buybacks?
Yeah, we constantly evaluate, say, M&A when opportunities come and also look at it as a way to expand, particularly in the geographic to cover more geographies, covering the white space that we have communicated that we are looking at establishing ourselves in, particularly then covering Western Europe. In terms of a capital case that has capital allocation versus paying the money out, I think clearly we are still in this business to grow. We think it's a huge upside, and one of the key reasons for also wanting to close European white space is we see that we have lost some deals where we haven't had presence in large countries as Benelux and France. If we are present there, our growth will also increase further and we'll get access to larger deals. We believe that is in the best interest for shareholders, of course, subject to that the price you pay is accretive to our EBIT.
Could you elaborate on the current dynamics in the consulting segment? We've seen some slowdown. Is that a leading indicator for managed services, or just a temporary dip before consulting re-accelerates once recent contract wins start to ramp up?
Yeah, I think I wouldn't mix, say, the speed of growth in consulting with the managed services because rather the reflection that we've seen in the past, if you see slowdowns in consulting because customers take longer time to decide on launching new projects, which I think is somewhat the case. I think everybody sees at the moment that customers all over the world are in general more cautious on adding new costly projects. The contrary is somewhat on the managed services. That is where typically triggers for outsourcing decisions is looking at cost, wanting to save costs, and implement more efficient delivery models. In general, we have seen in the past that also tough markets drive growth in outsourcing decisions.
One final question. "On PeopleHub and the SAP S/4HANA Cloud transformation, could you explain what this migration actually entails for Zalaris? Should we expect any related cost? How does this impact customer lifetime value and potential migration risk?
Yeah, that's a big question. I think first of all, I think the key value that it gives customers as a step one is that we are then moving to an infrastructure that SAP warrants is going to be updated and maintained and further developed over the next 15 years. I normally, as I said, say to everyone, what supplier is able to actually warrant that you will have a solution that you don't need to do any major upgrades on for 15 years ahead? To my knowledge, basically no one. That gives us a lot of predictability moving forward, which also will allow us to also invest, continue investing in PeopleHub building services and solutions around the current infrastructure. In terms of what customers will see, I think short- term, they won't see much of a difference.
Over time, I think it will help us, or we hope it will help us roll out AI and automation initiatives faster because it will be easier to access those also from SAP than on our current infrastructure. In terms of cost, yes, as we mentioned, it will be somewhat higher costs, but we expect to then recover those costs through then further automation and cost reduction initiatives. Of course, believe that the overall value of this way overstates what the extra costs will be for us.
I think that concludes the Q&A session.
Okay, thank you for listening, and have a great day and a fantastic weekend.