Okay. Hello. Good morning, everybody. Welcome to the Batson presentation of the Q3 2019. And today, I'm happy to announce that I will share this presentation together with Martin Oerman, our CFO, who will be presenting the financial part of the report.
So for the Q3, in brief, the gaming industry is undergoing significant changes and more markets are getting regulated or they are on the way to become regulated. This means some challenging challenges in some markets and some regulated markets are under pressure, and we are operating under new circumstances. Nevertheless, we have a strong operating income in this challenging quarter with revenues of NOK 1.275 1,000,000,000 and an EBIT of NOK 213,000,000, which is a pretty good margin at close to 17%. For Betson, some challenges in a few markets is mitigated at some part by other markets. And it's a good situation for us to be working in several markets so that we have a big geographical diversity.
During the quarter and for the future, we have continued our investments in our own technology, and we see pretty good development on the sports book and the offering that we have in the sports book. We have also prolonged our multiyear sponsorship of Swedish ice hockey, which we are really proud of. We have issued a bond in order to be able to take care of the growing market and invest in our own development and possibly in M and A activities. So some recent product and technology initiatives. We have launched multi game window in casino, which allows customers to enjoy multiple games at the same time on the desktop.
We have done, as I mentioned, several enhancements in the sportsbook. So we have a very competitive offering, especially in the ice hockey. And the Sportbook is now turning into become an attractive third party product where we get quite a lot of interest from the market on that product. We have done ISO 27,001 certification, which I will go deeper into on the next slide. We are accredited with ISO 27,001, which is a framework for to keep our assets secure.
We have gone through 116 controls within 14 different categories. And this has happened we received the certification in September during the quarter. And why did we do this? This is a way for us to make sure that we have the best data protection available and to make our customers comfortable with our systems and the way we treat their data. So I usually say that Batson is more or less a technology company, and that's a really important part of what we do.
And Batson, we have a lot of proprietary technology. We control our technology in house. And this means that we can differentiate the customer experience to the gaming market and the customer behavior, which is constantly changing. We can control the changes and adapt to certain market changes and market conditions. So our platform allows scalability and we are in full control of the product development.
This makes it easy for us to migrate acquired companies onto our platform. This will also contribute to, of course, scalability and cost efficiency. And when we have these things in house, we are in control of the customer experience, and that is the most important part
for us.
So speaking on ESG, better work with ESG within several areas. Maybe most important one and the central one being responsible gaming, which I will look deeper into, but also to conduct responsible business in many ways, in all possible ways. And we are trying to be an attractive employer and treat our employees in a good way. And we also take a great environmental responsibility with certain activities. So regarding pay protection, we were actually the 1st company to hire a person within responsible gaming more than 10 years ago within the Internet gaming industry.
So this has been an important part of our efforts ever since. And today we are in the forefront of this area in this industry. We have a duty to care principle in the operations and we do continuously investments in the responsible gaming area every quarter. So our business is pretty much dependent on regulatory situations in different jurisdictions. And I want to report a little bit on a few markets.
Sweden is, as you know, regulated from 1st January, and it's a very important market for us long term. We believe that it's important to reach a high channelization on this market in order to have a successful market implementation of the new regulation and for the customer protection, of course. We received a fine earlier this year and we have appealed that one during the quarter. In the Netherlands, we expect the market to open in the Q1 2021. We have made adjustments to our product offering there.
So we are now fully compliant to receive a license at the earliest possible time. We have filed an interest for license in June 2019. In Italy, there has been a marketing ban with effective from 1st July this year. So that's quite a big change on that market. Still we see very strong growth on the Italian market marketing ban.
Okay. So now we head into the financial summary, and I'm going to leave the floor to Martin Hermann. Welcome. Thanks.
Figures and comments on the following slides relate to the 3rd quarter and are compared to the same period last year. All figures, all numbers are in Swedish kronor. Revenue for the Q3 was SEK1.275 billion compared to SEK1.427 1,000,000,000 the same quarter last year. The Wetsen Group is geographically well diversified and has partly been able to mitigate the decrease in revenue from the Nordic and the Western Europe regions by growth in several other markets. Sportbook revenue is down by 7% in the 3rd quarter, but if we exclude the World Cup effect, it is in line with last year.
Casino revenue is down 12%. Part of total revenue is made up by license revenue amounting to SEK138 1,000,000, which is an increase of SEK76 1,000,000 compared to the same period last year. And decrease in is mainly due to Sorry. Yes, the license revenue amounted to SEK 38,000,000, which is an increase of SEK76 1,000,000 compared to the same period last year. The increase is mainly due to enhanced performance in the sports book delivered by Betsson to our B2B partner, Yal.
Mobile revenue as share of total revenue increased from 67% to 72% in the 3rd quarter. Gross profit amounted to SEK 831,000,000 compared SEK 10,000,000,000 same quarter last year corresponding to a gross margin of 65.2%. Cost of services provided has increased in the 3rd quarter by SEK 27,000,000 Increased cost is mainly related to increased bedding duties in Sweden and Italy as well as increased payment costs. Negative exchange rate fluctuation also impacted the gross profit by some SEK 4,000,000 in the quarter. Thanks to continuous work on operational efficiency.
Operating expenses have decreased by SEK51 1,000,000 corresponding to an 8% decrease. This is mainly explained by lower marketing costs and personnel costs. Other external expenses have also decreased but is offset by increased amortization and depreciations due to implementation of the IFRS 16, the leasing standard, with the impact that rental cost for properties is now reported as depreciation and financial expenses instead of other external expenses. EBIT amounts to SEK 213,000,000 and EBIT margin is 16.7%. The decrease in both EBIT and EBIT margin is mainly explained by lower revenue and increase of cost of service provided, but partly mitigated by operating expenses.
Looking at the breakdown by region. We can see a decrease in both the Nordics and the Western Europe compared to the same period last year. The Sika region and the rest of the world show growth in revenue but cannot fully offset the decrease in the 2 larger regions. In the Nordic region, we see continued weak market developments due to regulatory changes. According to governmental figures, the channelization in Sweden is over 90%.
However, other industrial sources question this figure. The combination of the channelization and increased competition from new players has affected Betson's revenue in Sweden. The Norwegian market is still suffering from payment blockings imposed by the Norwegian government in the beginning of 2019. However, Betson's own platform gives Betson the flexibility to take quick actions to offer customers alternative payment solutions, resulting in Betson being able to maintain customer trust, although to a higher cost for payment providers, also affecting the gross margin in Norway. We have in previous presentations described the actions that we have taken in the Netherlands to be able to be in the best possible position for license when the market opens up
for regulation.
This has had an impact on the revenue since we are no longer allowed to approach new customers, and we saw a steep drop in the Q1 this year. It is still hard to predict the market conditions until regulation, but we hope that the regulator will focus on customer protection and channelization starting already now, although the market is not yet open. Although Wetsen have been facing challenges also in the Sika region, such as increased gaming tax and market ban in Italy, we see a positive trend with an overall growth in the Sika region and also in the rest of the world, a lot thanks to the strong sportsbook offering developed by Betson. In Q3, Betsson offered some 44,000 live betting events, reflecting a competitive offer. Minor intra year variations in the number of event are explained by seasonality in the game seasons.
Sportbook gross turnover in all bets and gaming solutions amounted to SEK 6,179,000,000 and is comparable to the same period last year and also comparable to the second quarter this year. Sport book revenue in the 3rd quarter amounted to SEK 350,000,000, which is a decrease of 7%, and the decline is mainly explained by the Nordics, where we see the Swedish regulation and the payment blocking in Norway as the two main explanations to the decrease. Sportbook revenue in Western Europe is flat, and we see an increase from the Sika region and the rest of the world. Excluding the revenue from the Football World Cup last year, sportsbook revenue is in line with last year. Sportbook margin was 7.8%, which is slightly higher than the 8 quarter rolling average of 7.2%.
Mobile sportsbook accounted for 81% of sportsbook revenue. And the total sportsbook revenue presented 25% of group's total revenue. Casino revenue added up to 74%. Vetsland's current casino offers includes 2,700 casino games, of which 2,000 is offered on mobile devices. Casino revenue amounted to SEK 942,000,000, which is a decrease of 12% compared to the same period last year and is mainly explained by the impact from Swedish regulation and adjustment in the offering in Netherlands.
Comparing Q3 revenues to Q2 revenues, we see casino revenue growth coming mainly from Western Europe, Sika region and the rest of the world, offsetting the decline in the Nordic regions. Mobile casino revenues. Share as part of total casino revenue increased from 64% to 71% this year. Wetzel has a high cash conversion ratio and show operating cash flow of SEK307,000,000 out of an EBIT of SEK230,000,000, which is mainly driven by operating income and, to some extent, positively affected by changes in working capital. The majority of Betson's cash flow from investing activities relates be explained by increased focus on product development and primarily on sports book related development.
Cash flow from financing activities amounted to SEK 235,000,000 comprised 2 major events. Firstly, we have taken up a new bond of SEK 1,000,000,000, as Pontus said earlier, under the total framework of SEK 2,500,000,000 Secondly, we have redeemed the majority of the old bond except the SEK 235,000,000, which has been redeemed in October. The new bond is an unsecured bond with the majority of in the 26th September in 2022. The coupon rate is stable, 3 months plus 400 basis points and other conditions are in line the same as the old bond. Wetson has low leverage and as end of September, a net debt amounting to SEK 278,000,000, implying a net debt to EBITDA ratio of 0.4% and an equity to asset ratio of 59%.
I hand over to Pontus for a summary.
Okay. Thank you, Martin. So to summarize the Q3, the revenue was impacted by regulatory challenges. Still, we managed to show another strong quarter in terms of cost control, which gives us good results and good cash conversion anyway. We are confident about the long term opportunities.
We see strong developments in the sports book, and we have commercial opportunities for that product. We're going to increase focus on geographical spread and look for new markets to establish on. We're going to keep continue working on our cost efficiencies throughout the organization to secure the strong EBIT that we have. So I believe that Betson's strong financial position and our technology provide a very strong foundation to manage market changes and to offer competitive product solutions. Yes, that's it.
And I think we leave it there for questions. We start here in this room. We have any questions from the audience? It doesn't seem so. Okay.
Then we go to questions from the telephone. Do we have any?
Thank So we have a question from Erik Molberg from ABG. Please go ahead. Your line is now
open. Hi, guys. Good morning. So overall, you are showing negative growth rates and your trading update was rather underwhelming. At the same time, you're cutting down in marketing.
How sort of will you be able to get back to growth? What is your strategy?
Of course, we show it's easy for anyone to understand that we show a decline compared to last year. But if you look what we write in the report of the Q4 has started with growth compared to the Q3. So we are in a phase of growth already now. And of course, we have to adjust marketing spendings according to different situations on different markets.
All right. But if we exclude for Turkey, could you perhaps give us some flavor on the underlying margin? Because to me, it looks like the only thing that is currently holding up EBIT is Turkey and that the fact that you continue to cut down on marketing because if you compare it to Q2, marketing expenses were down roughly SEK 20,000,000.
Yes. And that's normal to allocate marketing between different quarters. And as we write in the report, we have chosen to bring down marketing in Sweden during this quarter, but it doesn't mean that we will bring it down forever.
But could you perhaps elaborate a bit on the underlying performance of Vestan if we exclude for Turkey?
Yes. I think the underlying performance is great. We are growing in the majority of our markets. So it's a very strong development.
All right. But looking into 2020, how sort of how will you be able to get back to growth? Do you expect to get back to growth in Sweden? Or what sort of your game plan for 2020? Because if you I assume that you will be able to that you will have to sort of start investing quite a lot in marketing if that's your plan.
And if we look for current expectations there, everyone assumes that you're going to be able to grow EBIT into 2020. Do you think that's a feasible goal?
We're not going to go into the strategy of how we're going to grow next year. But we are a growth company and we're going to continue to grow. There are challenges from time to time on certain markets, but the underlying ambition to grow faster than the market remains. But we're not going to go into details on how to achieve that next year.
Could you perhaps give us some flavor on how you plan on increased marketing spending into 2020?
No, I cannot go into that. I can't even comment if it's a plan to increase or not. So that's nothing that we state to the market at this point of time.
All right. And in regards of gross margins, it's a drop and a lot of that stemmed from the increase in cost to payment provider, which was roughly SEK 25,000,000 or so. I have asked about this previously, and you mentioned that you change payment providers all the time. Could you perhaps elaborate a bit on the amount of payment providers in terms they have in Norway and how it differs versus 1 year ago? And also, has there been any sort of increases or changes Q on Q?
I can't comment on the number of payment providers that we have, but I can assure that we have a very strong technology in order to support several different payment providers. So we are in a really good position in that regard.
How many during the past 12 months, how many of your payment service providers in Norway have been shut down?
I can't answer that question, but it's we change payment providers. It's a normal course of business. So but it's nothing it's not a figure that we report in the report.
All right. But the ratio, things like cost to suppliers to sales, is this ratio the same we should assume for into Q4? Or how should we perceive that?
We don't give any forecast on the payment cost ratio. And you have to keep in mind that payment cost in the report is not only from one market, it's from many different markets. So it's a mixture.
Could you perhaps give us some flavor on how much the increase stemmed from Norway?
No, I can't.
All right. Looking into Q4, could you give us a flavor on how Turkey has started? It is facing tough comps on a year over year basis. But I mean, it has been one of the most crucial drivers for the past quarters, both on EBITDA and for top line. Could you perhaps give us some do you expect to grow Q on Q in Turkey?
Or how should we perceive the competitive landscape there?
I don't comment on Turkey per se, but Turkey is, of course, market. And together with other sportsbook strong markets, we expect to see a strong we expect to see an uptake because the sportsbook is performing really well. So that goes more or less automatically.
All right. And in terms of Georgia, could you give any sort of flavor how that developed if we compare Q2 to Q3?
I cannot I don't comment on that specific market.
And no comments on how it has developed sequentially into Q4? No. But looking into 2020, again, would it be fair to assume that it's sort of like Turkey, Georgia and also the rest of the world that you're assuming to grow those regions that you're assuming to grow in? Or how should we perceive that? Because all right, within Europe, you have Netherlands.
I assume Netherlands will be relatively similar to 2019 because you cannot really use idealistic payment service providers and you can't really do any affiliate marketing until the market regulates. Then we have Sweden, which will I assume will continue to be somewhat challenging. Obviously, will have a positive effect from the Euro championship in soccer. But would it be fair to assume it's Turkey, Georgia and sort of Peru and rest of the world that you're assuming to grow it?
We expect to see growth across a lot of markets. But you are right in the fact that Netherlands, of course, will be hard to grow given the fact that we cannot market and we do not market. And we are a little bit limited in our activities there until we receive the license. Sweden remains to be seen, still an open playing field. It's going to be very, I would say, exciting to see next year for Sweden.
But apart from that, we expect to grow on a lot of markets, which we have done also this year.
All right. Thank you very much. That's all for me for now. Thank you, guys.
Okay. Thank you. So do we have any more questions on the phone?
No questions registered at the moment.
But I can just do a reminder.
Okay. So no more phone questions. Then we're going to see if we have nothing on the web. And then we go back to the audience again with this new information. Any questions from you?
I guess not. Everybody is up for coffee. Okay. Thanks for this. See you next time.
Bye.