Thank you very much. Welcome, everyone, to this earnings conference for Karnov Group. I hope you all are well and are staying safe. Today, we are going to present the outcome of our third quarter of 2020. Next slide, please. I'm Flemming Breinholt, President and CEO of the company. With me, I have our CFO, Dora Brink Clausen, and also our IR specialist, Erik Berggren. Dora and I will present the outcome of the third quarter using a few slides, and then we'll open up for questions. Those of you who have called in can ask questions verbally, while those of you who are participating via webcast can send questions in written form via the webcast. With that said, let's get started with the presentation of Q3. Let's turn the page to go to the next slide. Financial highlight.
We have made a solid third quarter, where we grow on top line and improve our adjusted EBITDA margin. The organic growth in the third quarter was 3%, and the adjusted EBITDA margin improved by 1 percentage point. The leverage is well in line with our targets of not more than three times. However, the COVID-19 pandemic still has an impact on our business. Apart from the offline sales, mainly print and legal training, we can see a delay in new businesses due to longer or postponed decision processes, and we also see a decrease in demand from the SME market, the small corporates, because of the pandemic. In the third quarter, we don't see the full impact on this, as the legal training normally is very low in this quarter.
We still see that our renewals rate on our core customers are the same high level as normally, and only SME and new businesses are suffering from the pandemic. Next slide, please. Some operational highlights. Karnov Group's ambition is to be a thought leader in the legal field, raising awareness and bringing inspiration to legal professionals and law firms. Last year, we established and published the report, The Future Lawyer Survey. The report is published to drive the legal sector in Sweden and Denmark forward. This year in August, we published the second edition, which focused on transformation, innovation, and motivation in the legal world of public law firms and corporates. This year's report was again well-received, both in the media and with our customers and partners, where the objective approach and invitation to debate important issues has been very welcomed.
The report has sparked interest in dialogues and debate, and also allowed us to have different conversation with some of our customers with regards to their own HR strategy preparing for the future law firm. In total, over 3,500 lawyers from Sweden and Denmark has answered the survey. The Future Lawyer Survey shows that a clear majority of the respondents perceive the industry as conservative, and that several factors make it necessary to adapt to a new reality. I want to encourage all interested to read the report, which is available on both Norstedts Juridik and Karnov Group Denmark's respective websites. Turning the page. The Danish business has performed well in the third quarter, with growth according to expectation and a high adjusted EBITDA margin. In the third quarter, we have launched new features and new initiatives in Denmark.
Our preparatory work has been improved with direct links to remarks to propositions. This makes the lawyer more efficient in the daily work. We have also upgraded our online library, and we have gotten very good feedback from customers and users on this. We have launched a new initiative for law students in Denmark with our platform KAILA. Our ambition with KAILA is to motivate and help law students in becoming successful and insightful lawyers during their studies. We market the platform via social media and have gotten a good number of followers already now. The progress with our updated Danish platform is going according to plan. We will soft launch this platform with a selected number of customers. The new platform is part of our strategy of embracing the future in support of future growth in Denmark. Turning the page.
Our Swedish business has had solid performance in the third quarter. The growth drivers were good online sales, upselling to existing customers, and sales to new customers. Our environmental health and safety solution has performed well also in the third quarter. During the quarter, we have continued adding more value and worked with improving the user experience of the platform. Customer centricity is a cornerstone in Karnov's operations. We are focusing on operational excellence without compromising the customer value. We will now strengthen the full customer experience and thereby strengthen the total perception of our offering. We have continued running our legal training courses in Sweden virtually in the third quarter. This has been appreciated by our customers, who have given us good feedback. We will continue with virtual legal training until further notice. Next slide, please.
Unfortunately, the COVID-19 pandemic continues to impact the global societies and therefore also our businesses. We continue to take several precautionary measures for our employees, and we are, of course, still strictly adhering to the regulations and recommendations from the authorities. Our special sections on our platforms in Denmark and Sweden, where we have collected all legal and regulatory information about the COVID-19 pandemic, still has high activity and easy access to relevant content. This service has been very well received and there have been many searches on our platform related to the COVID-19 pandemic. Our non-subscription part of the offline business, mainly public trainings and sales of legal training courses, have been less impacted in the third quarter due to seasonality in our offline products. Public trade and legal training have been on lower levels in the third quarter, and we expect a different product mix in the fourth quarter.
The COVID-19 pandemic is expected to have a negative impact for the full year on top line growth of approximately two percentage points. Next slide, please. I will now hand over to Dora, who will tell us more about our financial performance in the third quarter.
Next slide, please. Thank you, Flemming. I will now present and discuss the financial outcome, so let's start with an overview on slide nine. The third quarter has had good overall performance in line with expectations. The top line growth was 2% compared to the same quarter last year. Net sales were SEK 193 million. Adjusted EBITA was improved by 4% to SEK 77 million, with an improved adjusted EBITA margin of 39.9%. Next slide, please. The sales growth was due to good online performance. Organic growth was 3%, currency effect impacted negatively with -1.6%, and acquired growth from LEXNordics added 0.3%. The offline market continues its predicted decline, which was further accelerated by the COVID-19 pandemic.
The COVID-19 pandemic is estimated to have reduced overall sales growth by a little less than 1% due to seasonality, as we in the third quarter have a lower number of legal training courses. For the full year, we still expect the pandemic to negatively impact top line growth with approximately two percentage points. Next slide, please. In the third quarter, adjusted EBITA increased by 4%, and the adjusted EBITA margin was 39.9%, which is an improvement from last year. The improved margin is due to higher net sales and due to our continuous work with process optimization. As a consequence of the COVID-19 pandemic, we have adjusted our cost base to offset the effect on top line growth. We have, for instance, lower traveling and marketing costs due to the pandemic, and therefore, also lower overall costs.
Next slide, please, where you'll see our net sales development in two different views. As you can see, the long-term trend in our sales continued also in the third quarter of 2020. First, to the left, you see that the online business increased its shares of our group sales by 2 percentage points to 80%. This follows the expected market trend. The higher share subscription in our sales that you can see from the graph to the right here, the increase was 2 percentage points from 84% in Q3 2019 to 86% in Q3 2020. Move on to the next slide, please. Here we have the presentation of the third quarter in the Danish segment. In Denmark, adjusted EBITA was on a high level, and the adjusted EBITA margin was 44%, even with slightly lower net sales.
The driver for the margin improvement was process optimization and a higher level of capitalized development compared to the previous year. Organic growth was 1% in the third quarter. Due to the currency effects having a negative impact of -3%, the net sales declined by 2%. The COVID-19 pandemic has enhanced the long-term declining trend in the offline market. COVID-19 impacts sales of printed material in Denmark and also the demand in the small and medium enterprise market, where companies delay their decision process as their business are more uncertain. Next slide, please, which is the Swedish segment, where we have had good performance. Net sales in Sweden increased by 6%, which was in line with expectation. Most of the net sales increases are organic growth since our reporting currency is in SEK. We also have a little acquired growth due to our majority stake in LEXNordics.
Adjusted EBITA increased to SEK 30 million. The adjusted EBITA margin improved by 0.4 percentage points compared to the third quarter of 2019. This is due to increase in net sales, where the growth has come from upselling to existing customers and sales to new customers. Our EHS solution has performed well during the third quarter. In Sweden, our capitalization level were lower than last year during the quarter because we now have the most focus on development of the Danish segment, while we in Sweden have been more involved in maintenance. Next slide, please, where we have our cash flow slide. As expected, our adjusted operating cash flow and our cash conversion are on low levels. This is due to our invoicing seasonality. As you can see from the graph, cash flow should recover already in Q4.
The leverage of 2.4 x is well in line with our target of not more than 3x . As for our balance sheet, we have a strong bank and credit line, which makes us prepared to have the possibility to act fast if in these turbulent times a good opportunity arises for an acquisition. I will now hand over the word to Flemming again, who will make a summary of the third quarter.
Thank you, Dora. Next slide. I just want to conclude the presentation with the highlights of the third quarter. We have had a stable quarter with a solid margin. The organic growth was in line with our financial target. However, the COVID-19 impact on top-line performance has been lower than previous quarters due to seasonality in our non-subscription offline products. We have had several launches in Denmark to make the daily lives of lawyers more efficient. We have also launched KAILA, our platform aiming to motivate and inspire law students on their way to become insightful and successful lawyers. We will continue adhering to the recommendation and regulation from the authorities on the COVID-19 pandemic, with our employees' health as a top priority. The COVID-19 pandemic is expected to have a negative impact for the full year on top line growth of approximately two percentage points. Next slide, please.
By this, we handle all four questions.
Thank you. If you do wish to ask a question via the audio teleconference, please press zero one on your telephone keypad now. If you wish to withdraw your question, you may do so by pressing zero two to cancel . Once again, if you have a question via the audio teleconference, please press zero one on your telephone keypad now. Our first question comes from the line of Predrag Savinovic of Carnegie. Please go ahead. Your line is now open.
Thank you very much, operator. Good morning to you guys. A couple of questions here from my side. Firstly, on the EO cost that you flagged for that you're going to do in Q4, can you elaborate a bit on why this is taken, what it's going to be used for, and then also the timing factor of it. Is it internal driven and outside factors, COVID-19 competitive reasons, et cetera?
Was that I AC?
Yes, for Q4.
The range of the SEK 5 million-SEK 10 million is, we will spend in the Q4 to optimize our processes, and that will be a combination of the termination cost, and it will also be spent on consultancy cost. That is how to be prepared for future investment and the future demand in our operation.
All right. On the margin for the quarter, the EBITDA margin, it's quite impressive. Of this year view improvement, you spoke a little bit about it during the conference, but could you give us maybe like a bridge, what is driving it upwards? Is it mostly efficiency improvements? Is it cost reductions from traveling? I guess there could be some negative effects impacting the mix as well, but it's quite an uptick of 1.2 percentage points year-over-year.
Yes. We have had a really good quarter, and I think it's fair to say that it is a mix of both the top line growth, the seasonality, and how we are hit in the offline. Then, of course, as I also mentioned earlier, that we are also prudent and have cost savings also as a consequence of the COVID-19, which in traveling, sales promotion, et cetera. It is a mixture of all three.
Okay. Finally, I have one under for M&A question as well. I like to ask this almost every quarter. Again, a bit on your thinking on M&A. I think you have earlier alluded to being ready to acquire new business given the recent successes of the integration of JUNO , et cetera. Can you elaborate a bit now on this also going forward?
Our M&A strategy is actually valid and the same as we also have spoken about earlier, which means that we, of course, look into geographical expansion. We look into where we have products which is not dependent on one jurisdiction, where it's possible to grow the business also by looking to M&A. Then also in our, you could say, two core markets, Denmark and Sweden, looking into adjacencies, verticals, more services, and the like. All in all, it's actually still the same viewpoints we have, and where it is still also that we, of course, are looking into what we are working with in our pipeline should be supportive, not only at the day of signing, but also at the mid and long term, thereby also being a good trigger for Karnov Group's overall performance.
Okay. Thank you very much for taking my questions.
Thank you.
Thank you. Our next question comes from the line of Daniel Ovin of Nordea. Please go ahead.
Yes. Dora. One question here on Denmark. I've seen that there have been quite a good improvement versus the last few quarters, both on growth and margin. You mentioned new products here. Are there any other efforts that you put in place here? Do you expect a continued improvement from here on the Danish segment? That's the first question.
If I start a little bit with, you could say, what is it we want to achieve in the Danish market on an ongoing basis, that is, of course, to protect, develop, and thereby continuously focusing on how we can be the leader in the market and also be the one taking care of serving our customers with the most certainty and efficiency available product. Thereby we have made launches to our existing platform. As I also said, we will be aiming at doing a soft launch, where we will actually be having some testing on the products going on, the new one. This is actually because we in Denmark have an extremely high Net Promoter Score satisfaction grade, and we are actually taking the time of putting in what we believe is the right to embrace the future ahead of us also.
That means actually to continuously working with authors content to have that this is the place where you actually will be able to get most results of both the primary and the secondary sources in the legal field, and thereby giving the efficiency for the users of our product. Of course, this is very important also overall market condition-wise taking into account. When it comes to the improvement on the results.
Yes. I think that you are correct, that we have a very strong result on the Danish market and segment, and we also are mentioning that we have a higher degree of capitalization. That is, of course, due to the fact that last year we had most of our focus on developing JUNO for the Swedish market as a development project. This year, we are very focused on the Danish upgrade of the Danish platform. That is the small changes between the two segments. That, of course, helps extraordinarily good for the Q3 compared to last year Q3 in the Danish market and vice versa on the Swedish market. Overall, it doesn't affect the results.
Okay. Then on the Swedish side then, as you mentioned here, strong organic growth there. It's actually on top of an 11% organic growth in Q3 last year. If I remember correctly, there was some kind of one-off offline trade that shifted quarter, et cetera. Can you remind us again, how much was the one-off kind of tough comp in Q3 last year?
That was more than the positive gap this year, actually. We had a positive leftovers from Q2, Q3 last year on the offline, which you also can see when you see full year. Last year, we had an organic growth of 5.7%, this year, 5.1%. You can see that we are having a high pace in the Swedish market, and it's only a small seasonality in Q3.
Okay. Final question here. When you talked about what's behind your 100 basis point of EBITDA margin expansion here, I noticed that you didn't mention any synergies any longer. I'm just wondering if the results still not benefiting from that? When you look into 2021, do you expect any synergies rolling over into that year, or is that now completely out of the book, you would say?
The synergies coming from Norstedts that was finalized end of 2019. As we have said a couple of times, the synergies we were looking for the push for the full group, and we have harvested the SEK 30 million that we were set to do back in 2017 in the full group. There's not more synergies coming from that one, if that's what you're referring to. We are continuously working on optimizing the processes in Karnov, and that is also what we have been describing a little bit around here, and that is continuously to be fit for fight and fit for the future for our business.
Yes, okay. I think I thought about because you realized the synergies throughout the last year, and if I remember correctly, it was a big chunk coming by the end of the year. I thought that if you looked on a year-over-year basis for Q3, there should still be some impact, but maybe there's no impact here in this quarter, if I understand it correctly then.
Yes, last year we had a lot of capitalization as well in Q3. It is changed from Sweden to Denmark this year. When you compare the two segments, you have to take that into consideration as well. We have more focus on maintenance and more focus on development on the Danish segment compared to last year where we were developing on the Swedish market and therefore had a higher degree of capitalization on the Swedish segment.
Okay, great. Perfect. That is all my questions. Thank you very much.
Thank you. Once again, I remind you, if you do wish to ask a question via the audio teleconference, you may do so by pressing zero one on your telephone keypad now. We currently have no further questions. I will now hand back to the speakers for any further remarks.
Thank you everyone for listening and also for your questions. We will report our Q4 report on February 25th. I hope to hear from you then, if not earlier. Thank you very much.