Thank you very much. Good morning and welcome to the INVISIO Q3. We have a quarter which is characterized by a couple of things. First of all, we have seen an example of what we have said many times, that in our business, both the revenue and order intake can fluctuate between the quarters. In Q3, we saw certain delays in expected orders, and therefore our order intake was a little less than what we had expected. On the other side, we also saw an increase in our inventory levels as we are expecting certain orders to come in, and therefore are preparing for that. Apart from the order intake, we still see a continued high interest in our types of products all over the world and in different segments, military and police.
We expect to see a continued strengthening of our position as the leading supplier of our types of products. If we turn to Page 3 with the results for Q3, our revenue was up by 7%, and happily to see that our gross profit increased by 11%. We continue to strengthen our gross profit. Gross margin came in at 58.1% compared to 56.2% last year. For the first nine months, we also saw an increase in revenue with 5%, and also here, a good strengthening of the gross margin from 53% to 58.9%. This is stemming from long-term contracts in primarily the U.S. and in Europe. The revenue, if we look at a rolling 12 months period, our revenue has grown with 15%. Our EBIT decreased a little bit, both in the quarter and also for the first nine months.
This is, as earlier communicated, back to or related to some of the long-term strategic growth initiatives that we have initiated, both within our product development but also in the market in terms of more people, more resources. This will impact our result in the short run but is definitely building a larger company in a broader perspective. Turning to Page 5, as I just said, our rolling 12-month sales grew by 15%, but we do have irregular sales and order flows as repeated many times. The gross order intake during the quarter was SEK 40 million, and at the end of the quarter, our order book was SEK 82.3 million, which is quite low compared to previous quarters. But as we stated, we do expect certain orders to come in, and therefore, we have prepared inventory to be able to deliver with a relatively short notice.
So nothing out of the ordinary as far as we're concerned. This is the trend and the pattern that we see in our industry. Turning to Page 6. We still, as I said, continue to see very good investments in communication and safety, both in Europe but also in the U.S. We do hear from many sides that the radio communication part is important. Investments are still increasing into radio communication, but also the need and understanding for the importance of hearing protection is being adopted. So we can see that products with our types of features are getting into more and more military units and groups all around the world. One example during the quarter was the U.S. Marine Corps that publicly announced an RFI, request for information, regarding a number of hearing protection solutions for between 7,000 and 65,000 users.
Now, we normally don't comment on ongoing projects or programs, but this time, as the U.S. Marine Corps publicly announced the procurement intentions, we also decided to comment on it. Of course, we have responded to this RFI during the quarter. Apart from defense forces, we also see police forces around the globe in an increasing speed, showing interest in our types of communication and hearing protection solutions. Also in other parts of the world, turning to Page 7, our long-term initiatives on new geographical markets is starting to pay off. We follow a little bit the same pattern that we have seen in Western Europe and U.S. that initially we sell to special forces and smaller units, and then after a certain period of time, we have an opportunity to get into larger volume orders.
We have received a number of smaller orders from economies in both the Middle East and Southeast Asia, and we now also do expect to see certain larger orders within the next few quarters. With larger orders, we mean orders that will be publicly announced, which will mean at least above SEK 20 million. Turning to Page 8, as we said, our cost base has continually increased due to many of the development projects we have. We can clearly see when we talk to customers also that the system approach that we have and the broad product portfolio that we will soon also be increasing further with our intercom solution is really, really well perceived by the customers and is giving us a strong competitive advantage. Regarding the [named] intercom system, Page 9, it is still in development and in close contact with certain customers.
We, as communicated earlier, do not see significant revenue from this category until we get into the later part of 2019, but we do expect to see first pilot orders, hopefully before the close of 2018. This product category is definitely something that we are very, very positive about and do expect this to be a significant growth driver for INVISIO over the coming years. Finally, just to confirm our position, we were at the last trade show, AUSA, in Washington, early October, and through many talks with customers and also other partners in the industry, we definitely see that INVISIO has a very strong position in the market and capacity. We do believe that our leadership in the hearing protection and communications category is very strong and we have definitely reason to believe that we can continue to strengthen our position.
All in all, we are pleased with our Q3 results, even though the order intake is weaker than expected. Again, this is down to the lumpiness of order intakes that we have always informed about in earlier reports. That concludes the short presentation of the interim report, and we are now open for questions. Moderator?
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that's star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We will now take our first question from Stefan Knutsson from ABG. Please go ahead.
Hi, Lars. Thank you for the presentation. I just have a question regarding the inventory buildup, and that you say that you have expected orders coming in. What is your visibility when it comes to those orders?
Pretty good. I would say that we would not build this kind of inventory level if we did not have a high level of confidence that the orders. Of course, part of the inventory is our standard level of inventory, which is in the SEK 30 million-SEK 40 million range, but the rest is definitely targeted at certain specific orders where we have, again, high confidence that these orders will arrive. But certain processes and paperwork at the customer end needs to be finalized, and sometimes that takes a little time.
Okay. And coming back to the orders, we have seen only one big order is communicated throughout 2018. Can you say anything about if you have lost any procurement or—
Not to my knowledge, no. We have not. This is more due to the volatility and the lumpiness of the different programs. No, I think we have actually seen quite a good order intake of smaller orders throughout the year. Considering that no large programs have been announced, I think the order intake has been fair. But we are, of course, expecting also to see larger orders in the not too distant future.
Okay. Thank you very much.
Welcome.
If you find your question has been answered, you may remove yourself from the queue by pressing star two. We will now take our next question from Viktor Westman from Redeye. Please go ahead.
Thank you for taking my question. First, I wonder about how do you calculate the return on investment when you do your new investments? Do you have a specific hurdle rate, for instance, or can you at least talk a little bit about how you evaluate the possibilities and how you navigate between them?
Do you mean, for instance, the intercom category?
Yeah, mostly that one, but I assume you do other stuff as well.
Yeah. We do standard. First of all, of course, it is very important that we have customers that are indicating to us that they have a need. Once we have identified that need with several customers, we always build a business case where we, of course, look at the opportunity, the expected market size, what competitors are in the market, how we can differentiate and innovate in that market, and then also trying to look at what product solutions do we think we can do, and what are the investments, and so on. Then we build a full business case with all these types of information, and then we sign off on it when we believe that we have all the information we need to move ahead.
Yes. A follow-up was on the intercom that you mentioned. I think you wrote in the report, volume orders in H2 2019 or something like that. This sounds actually quite specific. Is this just a careful guesstimate, or is there some certainty here? Coming back to the visibility question asked earlier.
I would say in a new category like the intercom, the visibility when it comes to actual order is, of course, lower because we are still in development phase. Even though we have contacts with certain customers, before we have a fully-fledged product ready, we cannot start actually receiving larger orders. As you know, if we talk larger order, even for this type of product, there will need to be some kind of tender process, most likely. As with our present category, we will start selling to certain smaller groups, special forces and similar that has a faster route to market. I think we have a very good indication of where this can go. As usual, there is uncertainty about the timing and how long it will take to get into certain customer groups.
Okay. The last question from me on the U.S. Marines. Happy to see that you mentioned it in the report, but can you talk about the probability that you have to share this customer with other players? The other players that have not won anything for 10 years, they are probably very eager to win this one. In terms of the risk of them undershooting you in terms of price, et cetera, is that an issue?
Not at this point. I think the only thing we have seen so far is a request for information. A request for information is very broad. That is only trying to find out what is available in the market. Once they have gathered all this information, they have compiled all the information, then they will come back with a different document, which is most likely a request for quotation. That is actually when their specification starts, when they know more exactly what it is that they want. Right now, it is not clear what they want. It is more a request for what is available. It will take a while. Unfortunately, we have not been given any information about the next steps or timing for the next steps. Quite honestly, at this point, we do not know much more than you do.
Okay. Thank you. That is helpful. Thank you.
Thank you.
Okay, just as a reminder, if you would like to ask a question, please press star one. It appears there are no further questions at this time. Mr. Hansen, I'd like to turn the conference back to you for any additional or closing. Oh, one moment. We just appear to have another question. We will now take our question from Yiwei Zhou from SEB. Please go ahead.
Hi, it is Yiwei from SEB. Thank you for taking my question. Lars, just regarding the upcoming orders, it sounds very confident to get these orders. But you also mentioned there are certain orders have been delayed. Is there any correlation between the delay?
I am not sure I understood the correlation between the delay and the order.
Is there a political issue or is the—
No. It's just these are very large organizations. There is a lot of paperwork and processes, and very often there are not so many people working on getting all the details sorted out. No, there's no political. It is more a process thing that it just takes time, and very often we don't have the full insight into exactly what takes place. We have seen this many, many times. There's nothing unusual about this.
Okay, thanks.
Okay, it appears there are no further questions at this time. Mr. Hansen, I'd like to turn the conference back to you for any additional or closing remarks.
Thank you very much for listening in, and talk to you again after our full year report. Thank you.