Hello, everyone. Thanks for dialing in. We're going to start on our Q3 report highlights. We continued strong year-over-year growth in revenue and audience metrics, and the portfolio of our licensed and wholly owned games grew at about the same pace. We had growth in both parts of our portfolio, about the same rate of growth. We have released the first ever game based entirely on match-three mechanics, and also developed completely by G5 and wholly owned. Revenues went about 112% up year-over-year, and we saw continued growth in Asia, as in the previous quarters. We had strong positive cash flow of about SEK 32 million, and cash on the account increased to about SEK 100 million. Monetization metrics, the monthly average gross revenue per paying user was healthy at about $40.1, one of the highest we've had.
With that, we can move on to slide three. What I can say about the growth, if we look at year-over-year figures, we see that the growth has continued in Asia, Most of that actually in Japan. There was a continued trend for the increase of revenue coming through smartphones, That is just the trend that we are riding in the industry as the screens of the device continue to increase on average with the release of new larger models. We see more revenue come from those devices with larger screens. Our games are more enjoyable and better to play on larger screens, There is a correlation between the size of the screen and the revenue per user. That is a very clear correlation for us that we are seeing.
As screens become larger and larger on mobile phones, just over time, we naturally see more revenue come from users using those devices. Last year, we were able to cross the threshold where we started actively acquiring users on smartphones, and we could do that profitably, thanks to the increase in the average screen size on smartphones. Operating profit was at SEK 32.6 million, That is EBIT margin of 12.2%, and this is actually after the write-down of SEK 1.8 million. Adjusted for that write-down, profit margin in the quarter was actually higher, That just, again, demonstrates that we have expanding profit margins as the company continues to grow Because of the leverage in the business model that we have. We had some positive effect on earnings margin from other operating income expense items connected to warrant program and currency exchange rates.
The write-down was connected to the licensed free-to-play game that is not performing according to expectations. Compared to the scale of our operations, these adjustments may happen in the future, but they're not that large at this point. Cash flow was at SEK 31.5 million, The company is generating significant positive cash flow, Cash and equivalents amounted to SEK 90.7 million at the end of the quarter. Let's move on to slide four. We can see that there is a continuing trend for expansion of Asia in the breakdown of our revenue by geography. The region is now responsible for more than a quarter of our total revenues, 26%, compared to just 11% last year. This is again happening as we continue to actively acquire customers, users in Asia, specifically Japan, but also in China and South Korea.
We see very good traction there with our games, it's working out real well, we continue to see a lot of potential in the region for future growth. The growth was actually across all regions. North America went up 61% year-over-year. Asia was the largest growth, 400%. Europe grew 112%, rest of the world, about 150% year-over-year. Let's move on to slide five. You can see on this chart on the left that the quarterly revenue was a sequential decline from second quarter when expressed in SEK, but our internal reports actually show sequential growth in USD terms, about 6% Q2 to Q3. The exchange rates affected the result and almost 70% of our revenue, we actually receive in USD and JPY, because U.S., North America, and Japan are our largest regions by revenue.
SEK has actually strengthened against both of these currencies quite considerably since the beginning of the year, but also there was another jump during Q3, which interestingly reversed at the beginning of Q4. This currency exchange situation has affected the result in the third quarter, but fundamentally, we internally saw the result of Q3 just continuing the trend of sequential growth in the company. free-to-play games went up by 121% year-over-year. As you can see, unlockable games now account for less than 1% of total revenue. They're becoming absolutely insignificant. Last year, they were about 6%, now down to 1%. The growth in the licensed games was driven by Hidden City, our number one by revenue, as in the previous quarters. We had very good pace of growth in our own portfolio as well.
We entered Q3 with a really good momentum in the first month. Then, probably because of seasonality and of some balance and monetization experiments we have made that didn't work out that well, we had a slower second half of the quarter, which affected the result for the quarter in whole. As we go into the beginning of Q4, and we now have a whole month that has already passed October, we have seen that our top grossing positions for most of our games went up considerably compared to Q3. We had really good momentum there. Another positive factor that we have seen in the beginning of Q4 is the reversal in exchange rate trends that are helping us right now in terms of the revenue. It's a great start of the fourth quarter. People reacted really well to the Halloween event.
Once again, the chart positions for our main games were very often at all-time high positions. We're excited about the Q4, and we will see how that plays out. Let's move on to slide six and look at our costs. Our admin costs increased in line with the growth of the organization and the platform, just to maintain our operations and maintain the number of teams that we need. We have seen increase in research and development, both in parts that are responsible for developing games and increasing the capacity there, creating new teams to be able to work actively on more games. We needed to be able to support the games that we have in the market and also to make new games. As long as the game is actively developed and being updated, we have to keep a team assigned to it.
To start a new game, we have to create new ones. The only time where we can reuse the capacity that we already have is when we move some of our games to the harvest mode, when we officially give up on them, and then we can use resources that were dedicated to that game to create something new. This creates certain demand for new resources and new teams as long as we want to continue expanding our actively maintained portfolio of games. The capitalization ratio was lower year-over-year, and it has to do with the fact that we also strengthened our platform team. The platform team is the one that's responsible for the cross-selling systems, the G5 Friends network, and all the other subsystems, and all the code that helps us maintain the publishing platform and is game independent.
That part of development is not capitalized, and we see some increase there as the portfolio grows and the demands for that platform also grow. Sales and marketing, the user acquisition expenses stood at about 24% of revenues compared to 17% in 2016. This is a higher level, not the highest we've had, but it's a higher level, and we continue to go on with user acquisition expenses, even when we saw the slower second half of Q3 because we anticipated that we can fix the issues that we've had and the users that we would acquire in Q3 will benefit us and the company's results in the fourth quarter. That's pretty much how it played out for October. Despite a slower growth in Q3 sequentially, we decided not to drop user acquisition expenses too much and stay at the high enough spending level.
This is paying off in Q4. Let's move on to slide seven and look at our EBIT and EBIT margin. EBIT went up sequentially quarter-to-quarter and also year-over-year, of course, and we had some positive effects from currency exchange and intercompany loans. EBIT margin was at 12.2% compared to 10.4% a year ago, and we continue to see our profit margins expand as we said many times because the business model has this leverage in it, and the higher revenue we'll report, the higher should our profit margins go. Let's move on to slide eight, and look at the situation with the capitalization. For a couple of quarters, we had this balance between capitalized expenses and amortization in a quarter.
Since then, we've decided that we need more capacity in our R&D, and we need to develop more games and focus more on improving our existing games, but also on starting new games. We have been adding quite a bit of development staff throughout the year, and you can see the result of that. We are actually capitalizing more than we are amortizing. Capitalization net of amortization actually went up to 5.1 million SEK. Amortization went up a little compared to last year, but that wasn't enough to balance the increase in capitalization. The total value of games on the balance sheet was up a little bit compared to last year. You can see that because we released a couple of games, certain amounts have moved from the not-released games free-to-play to the released games free-to-play.
We have zero value assigned to not-released unlockable games. We are done with that. There are no more unlockable games in our pipeline, and we have a small amount still tied to released unlockable games, but that is a minor amount. The amount of free-to-play games that are not released yet reflect the amounts put on the balance sheet when it comes to the games that we are developing now and that have not yet been released. As I was saying in previous calls, the absolute amount on the balance sheet is not a good indication of how many games we are developing. We have said before we plan to launch two to four games a year. We also try to be smarter about how much we spend on a game before we bring it to the market. We want to do it faster.
We want to spend less money in the period before we release the game. It does not necessarily mean that we're making less games than before or these games are of different level of quality. We can quite often reuse a lot of what we have developed before, and that really helps us keep costs under control when it comes to the development of new games in the stage before they are brought to the market. Free-to-play games now represent 99% of the total game portfolio value. Once again, unlockable games are very insignificant at this point. The number of actively maintained free-to-play games is now up to 18 with the two recent launches. Let's move on to slide number nine and look at our cash flow. Cash flow from operating activities was SEK 47.5 million.
We had a slight positive impact from changes in working capital. The company is generating significant positive cash flow as we are supposed to. We paid taxes in the amount of SEK 2.2 million. The cash flow was at SEK 31.5 million. The investing activities went up year-over-year. That is mostly game development, as we discussed. Some financing activities that you can see in the cash flow statement are related to the warrant program. During the quarter, we granted warrants in accordance with the general meeting decision which expanded our warrant program to almost 100 employees, which I think is great for alignment of interests of the key employees and the shareholders. With that, let's move on to the questions and answers, if we have any.
Thank you. Ladies and gentlemen, if you have a question for the speakers, please press zero one on your telephone keypad now. I remind you that if you want to ask a question, you will have to press zero one on your telephone keypad. There are no questions registered, so I'll return the conference back to the speakers.
Yes, we got a question over email from Marcus, that there was a goal communicated by G5 for Q3 to have month-by-month sales growth. It seems this did not happen, why? Also, how come UA was reduced with this goal in mind?
All right. Thank you for the question. I think I tried answering it a little bit, let me explain again. The situation was that initially in Q3, we had very good growth momentum in the beginning of the quarter. The work on our games is ongoing at all times, and we try things. We try to improve things, and quite often it works out, but sometimes things don't really go our way, and that's what happened in Q3. There was a little bit of seasonality as well. We found it more difficult to acquire new users towards the end of the quarter. Our main theory is that we also have made certain negative changes to the games.
This did not affect our active user audience, however, it affected the revenue they were generating, and because we still have to provide a reasonable profit margin in a quarter, we always try to do that. Because of that, we had to reduce the user acquisition expenses slightly to provide that profit margin. At the same time, we worked on updates that were supposed to fix things that went wrong, and those updates came out in the beginning of the fourth quarter. The situation has changed dramatically since then, and we had really nice momentum in Q4 in the beginning, in the month of October. We can see this continue into early days of November from what we can see.
We were able to identify new sources of user acquisition, and the revenue's working better for us, and the audience seems to be more responsive to the holiday content. We see seasonality play here as well, because the audience gets much more engaged with the popular holiday content like Halloween content, for example. Halloween is usually big for us, and we've seen it happen in the fourth quarter again. I think Q3 is a little bit slower and a little bit less engaging in terms of content that you can have in Q3, which is more generic and less tied to specific holiday events. Like I said, there were some changes that affected the game's monetization negatively, which were fixed towards the end of the quarter, and then these obstacles were removed for the fourth quarter. I hope it answers the question.
We also got a question on any comments on potential for Pirates & Pearls.
We are quite happy with the launch of the game, and we don't see any red flags. We are seeing some positive signs. Obviously, the first thing we have to do is to bring up the number of levels that the game has, because right now it is at about maybe 10%, 15% of the amount of content compared to its largest competitors in the market. That's what the team is focused on right now, and we hope to have news for you very soon in this regard.
Yes. We also got a question on the user acquisition cost per user, if we see some inflation in that number, so if that is getting more and more expensive.
I wouldn't say so. I think our UA team is doing an amazing job of scaling user acquisition efforts while keeping costs under control. I think overall, when you're increasing the amount of traffic you're buying, you're certainly seeing some increase, but it hasn't been a trend that would affect anything for us, at least not yet. I think that just speaks about the quality of the games that we have in our lineup and the ability to support marketing teams