Thank you very much, and welcome to our Q1 updates. INVISIO is continuing our long-term ambition and work in order to increase our market presence, have even stronger relationships with our customers, and develop new innovative products in close cooperation with our customers. In our first quarter of 2018, we have not seen any large orders, but it is very good to see that the underlying business has been strong. We have seen a number of small orders from both existing and new customers. Turning to the next slide. We have, during the quarter, strengthened our already strong relationship with certain armies. In Denmark, we signed a new five-year framework agreement with the Danish Army.
Denmark was the first army customer we made agreement with about five years ago in 2012, and it is very pleasing to see that we now have a new agreement with them for another five years, with option of additional two years. So we continue to have a very strong position in our home market. It is also very pleasing to see that the U.S. Army's TCAPS program was awarded a prestigious Safe-in-Sound Award during the quarter for their work to prevent hearing loss within the army in the U.S. As you know, I am sure, our INVISIO solutions are the core of the TCAPS program, so we are very proud to be part of that and be part of making sure that the U.S. soldiers are gradually reducing the issues they have with hearing loss.
This is part of our ongoing and long-term commitment to the U.S. market and to growing our business in the U.S. and our relationship with government customers and others. As a natural consequence of that, we have also, during the first quarter, initiated activities for manufacturing in the U.S., which will be up and running shortly for key products. We believe this is going to be an advantage for us to have manufacturing closer to the customer and on location in the U.S. with one of our existing manufacturing partners. On the next slide, one of the very large activities that are ongoing in our company is the development of the new product category for intercom systems, which we are very excited about, and which is also one of the largest development projects we have had in the history of the company.
It is a totally new product category and meant to be either mounted or carried in a backpack for soldiers that already have radio communications, so they are able to communicate in vehicles and boats and helicopters, et cetera. The development work is ongoing. It is a process where we also involve some customers. We have stated earlier that the product will be commercially available in the later part of 2018, but we do not foresee any business of relevance from this product category before 2019 and 2020. It does take time. Even though we already, at this point, are willing to and able to talk to customers about this product category, it will take time until we get to a level of substantial orders. On the next page, the summary of our financial performance in Q1.
Our revenue was more or less in line with last year, which was a very strong quarter last year. What is very good to see is that our gross margin has increased quite a lot compared to last year, now at 59.6%. This is, of course, very good to see, and it is the effect of a higher amount of direct sales from our sales offices in the U.S. and in France. We continue to see a good development in both countries. Traditionally, we have said that our gross margin should be between 50% and 55%, and we are now well above that. We also know that things vary in quarters depending on the amount of direct sales and the product mix and so on. A very strong start to the year with our gross margin.
As we have seen through 2017, we have increased our operating expenses in the form of investments for developing new products, more personnel, both in R&D and in sales and marketing, and therefore our costs are higher than they were last year. That impacts our operating profit, which is SEK 18.5 million compared to SEK 22.7 million last year. Our operating margin is 22%, well above our financial target of 15%. Looking on the next page, just the usual overview of the sales development and on the operating profit. The difference between 2016 and 2017 on the operating profit was because of the increased level of operating expenses for the large organization. We will continue to see some investments also in 2018, but we are not going to increase at the same level we did in 2017.
We now have a much larger organization that are able to fulfill our ambitions in the new product categories, and we would like to stabilize the organization during 2018 and see the effects of that. On the next page, you see the rolling sales for 12 months back to 2014 and the order backlog. The order backlog is stable or has been for a number of quarters now, plus or minus. The order backlog was SEK 127 million at the end of Q1. As said again, we did not have any large orders in the quarter. In 2017, first quarter, we had an order of about SEK 90 million from the U.K. This year it has primarily been smaller orders from a large variety of customers. It has been from primarily customers in the U.S. and in Europe that we have seen good orders during Q1. Next slide.
Looking into 2018, as I said, our continued focus is on business expansion. We are in a long process of building a strong company with more markets and further strengthening our role as a leading supplier to the important customer groups that we have in defense and security markets around the globe. Next page. You have seen this before. It is our strategy document or our strategy pillars, the four areas that we work within. Number one, increasing our market shares in Europe, North America and Oceania. Number two, geographical expansion with a focus on Asia and the Middle East. Number three is extremely important for us, continued development of our current products, but also the new product category for intercom systems.
And then number four, with the addition now of the U.S., that we work with our external partners for manufacturing to make sure we get cost efficiency out of our manufacturing and business model. On the next slide. We, for 2018, continue to see growth drivers that are important for us, of course. The continuation of soldier modernization programs around the globe, and that we see more and more individual communication devices, radios being deployed. Unfortunately, we cannot influence the number of radios being sold or the number of modernization programs being rolled out, and they are very important for our ability to sell our systems and our products. We do believe there is a trend globally for more and more radio communication, personal communication, as well as soldier modernization programs in general. In addition to that, it's the cost to society for hearing impairment that is a driver.
We can see, and also with the award that the TCAPS program was given, that the focus on hearing impairment, hearing damage, is very high in many countries, and that will be driving the need for our type of products over the coming years. We ourselves are a very strong part of driving the development with our innovative solutions that make sure our customers get state-of-the-art product solutions for their needs. As a repetition, we still believe there's a large growth potential in our industry. The current market is still in its infancy. We've only penetrated a small amount, and we also continue to believe that we have a very strong position in the market and with barriers to entry.
Like I said, as an example, in Denmark, we now have a new contract that will make us the sole supplier to the Danish Army for the next many years. In addition to our current markets, the new intercom systems will provide new business opportunities of large sizes, we hope, over the coming years. As usual, we are aware that our industry is characterized by an uneven order flow and sales over the year, and we will continue to see that. There will be large orders from certain quarters and smaller orders in the following quarters. That is the nature of the industry that we are in. With that concluding our presentation, we are open for questions. Operator, please.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press star one to ask a question. We have an opening question from Victor Forsell of Remium. Please go ahead.
Thank you for having me. Good morning, everyone.
Hiya.
Hi. Regarding the order backlog and the small orders you received during the quarter, it seems like they have increased sequentially to new higher amounts. Can you tell us more about the level and if it is a level we can expect further on?
We hope so, but we will not promise anything because again, they do arrive a little bit in waves, but we do believe that the smaller orders is a consequence of many things. It is a consequence of existing customers coming back with repeat orders. It is a consequence of many new activities that we do, both in existing geographies and some of the new geographies. It is also a consequence of the large amount of salespeople that we have, both in the U.S. as well as France and Italy and other places. So it is a combination of several factors that all in all should help us over time to increase the number of smaller orders. We hope it will continue. We are pretty sure it will, but it will vary between quarters as well.
Okay, thank you. Regarding the new customers as well, regarding the small orders, can you tell us more about them?
They are spread out over geographies. There are some in Europe, there are some in U.S., but we are also seeing some in the new geographies in Asia and Middle East. So it is a good mix of new customers.
Okay, thank you. And yet another quarter with a strong gross margin. Can you tell us more about that? And can we expect these levels above 55% going forward?
Again, at this point in time, we will only commit to being somewhere between 50% and 55%, probably in the higher part of that. But there is no doubt that the increasing amount of direct sales will help us achieve higher gross margins over time. But again, in some areas, we are also acting a little bit like a technical integrator, where we sometimes supply products as part of our systems that comes from other suppliers with a lower gross margin. So there is also an element of product mix in it. But I think we can say that we are in the high range of 50%- 55% now, and then we would like to see a few more quarters before we comment in general on another level of gross margin.
Okay. Thank you for the answers.
Welcome.
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Thank you very much. Then that concludes our session today. Thank you for calling in.