We will present the Q3 results. First, I want to give you a brief intro to the SmartCraft group. After that, we'll look at the quarter highlights and the future outlook before we open up for Q&A. SmartCraft is a leading Nordic provider of software to the construction industry. Our mission is to simplify business for these companies. Our customers are typically SME contractors with between 10 to 100 employees. Some are smaller, and some are larger. The construction industry is one of the oldest, largest, and least digitalized industries in the world, and it has a lot to gain from digitalization. There are tremendous opportunities in this space, and this is where we operate. Our vision is to be the leading provider of digital solutions to SME construction companies in Northwestern Europe. Typically, we can group software used by construction companies into three categories.
We have software for the planning phase, software for the building phase, and we have supporting software, like accounting software. SmartCraft delivers software in the building phase, and we integrate with the planning and accounting solutions. In the building phase, you also find the U.S. vendor Procore in the enterprise segment, focusing on Fortune 1000 companies. Procore has a revenue per customer of $40,000, while SmartCraft has a revenue per customer of $3,000, so it's less than a tenth. You can clearly see that we operate in two different segments of the market. SmartCraft focuses on the construction industry and the construction phase only. This is our sweet spot and where we want to grow. Customers need to digitalize to increase productivity, reduce material costs, and increase their profit margins.
In the Nordics, this is a NOK 10 billion market, and only 11% of the market is penetrated, which means that nine out of ten companies do not have proper digital tools to be more efficient. This market is growing by double digits every year. We are a leader in the Nordics and in the best position to take a leading role in northwestern Europe. We have great solutions with proven success. Our SaaS solutions are easy to buy, easy to use, and we aim to be easy to do business with. Unlike many other software companies, we have strong and profitable revenue growth. As a Nordic leader, we have a big customer base and a big user base for cross-sales and up-sales. We are leading the consolidation in the industry with seven add-ons the last years.
Like I mentioned earlier on, we are unique, having high growth and high EBITDA. We have 16% organic growth year-to-date September, which is actually quite in line with what we've been doing the last 10 years. We have an ARR growth in Q3 that is 50%, including M&A. 96% of our revenue in Q3 was recurring. Over the last years, we have invested in a professional leadership team and organization, and together, we have more than 1,000 years of experience building software for the construction industry, and this industry only. We have a strong balance sheet, which enables growth, and we have a very good mix of Nordic and reputable international investors. We have invested in very good SaaS construction software companies. I'll give you some examples of our solutions.
Cordel covers all the project management for plumbers and electricians, and these have large complexity in their jobs and face a lot of regulation, so it's a really good solution for their needs. Bygglet is an intuitive and easy-to-use solution for SME contractors. The solution follows the flow of the projects, is easy to use, but not simple in functionality. Congrid covers the required quality and health and safety requirements for construction companies. This is required by law, and Congrid has got 17 out of the 20 largest construction companies on their customer list in Finland that use their solution every day. Today, we have started to cooperate, integrate, and synergize where it makes sense. Cordel and Kvalitetskontroll, the company we bought in July, announced in Q3 that they will create an integration between the two solutions to the benefit of our customers.
EL-VIS and Bygglet further strengthens the integration they already have and also do common sales activities. HomeRun and Congrid moved into the same office in Helsinki this summer, and they have decided to co-locate in Stockholm with the Bygglet branch to increase the presence and visibility in Sweden. They also extend integrations and cross sales, and do sales, joint sales and marketing activities. As you can see, these are some examples of activities that open up for cross sales. We are early on our journey, and going forward, we will continue to integrate and synergize, but still keep the flow and the functionality of our solutions.
90% of our users are out on site, and when they're on site, they typically use a mobile phone to look at the work order, to register the time they use, and the material they use, or they fill in the checklist or take a picture of the job so they can capture the necessary documentation. In the office, you'll have the administration and management, and they typically have a rich web client where they can follow the different projects on site from the office. In SmartCraft, we collect product descriptions, prices, technical data from the supplier, and also connect to public offices and trade organizations. This way, we really help our customers to save time and money. SmartCraft ensures that the information and documentation flows seamlessly between the parties involved. We have several ways to grow the business.
We want to capitalize on our leading position in an under-penetrated market. Historically, we know that 55% of our meetings get converted to sales, so we want to continue to work with marketing and sales in order to increase the number of meetings. We also see an opportunity to expand into adjacent construction verticals that we have so far left more or less untouched. We want to upsell by introducing new SaaS modules and move customers to higher price brackets with more functionality. Like I mentioned earlier on, we want to continue the integration work between the solutions to enable cross-sales. Ideally, all solutions should be sold in all geographies. On the M&A side, we have a good and structured M&A process, and so far we have completed seven transactions.
Three out of those were completed in the last 10 months. We have several or multiple dialogues going on in the Nordics, but also in other geographies. Anyway, we will only buy if it's a strategic good fit for the company and for the SmartCraft group. This was a short introduction to SmartCraft. Let's look at some of the highlights for Q2. We experience great demand for our solutions, and that we have solutions that fit the market well. Let's mention some other highlights. One of Sweden's largest private house builders, JSB Construction, has introduced new digital workflow using Congrid's mobile app for safety and quality inspections. This is an example of how we can scale with our solutions, as Congrid originates from the Swedish market.
The electrical vertical is of strategic importance to us, and we continue to introduce new features to increase market fit and to obtain strategic customer wins. EL-VIS, our solution for Swedish electricians, is now ready for international scale, and we have started the sales in Finland. We launched Cordel Quality Assurance this spring, and the solution replaces the need for third-party solution and creates stickiness to the customers. We are pleased to see that we have now reached more than 1,000 active users. As the corona restrictions are lifted, people can return to the office, and we can once again visit customers and participate at trade events. We believe this will boost morale. It will also boost cross sales, and we think it will bring more revenue in the future. With this, I want to give the word to Kjartan Bø, who is CFO.
Oh, sorry. I'll talk briefly about also a great another thing is that we also bought Kvalitetskontroll in July. Our strategy is to buy great SaaS companies in the construction industry. We bought Kvalitetskontroll in July. It's a great company. It's based in Bergen, great solution, great team. With Kvalitetskontroll, we see great synergies with several of the solutions in the group, and we have already started the work with Cordel, like I talked about earlier on. Now let me give the word to Kjartan.
Thank you, Gustav. For those who haven't seen me before, my name is Kjartan Bø, and I'm the CFO of SmartCraft, and I'm here to present our financial highlights for Q3. We are pleased with our strong growth in Q3. We have an ARR growth of 50% in the quarter, whereof 16% is organic growth. We have a 22% growth in average revenue per customer. There are three factors contributing to this growth. It is acquisitions, it is new sales, and it is upsells. In addition, we have in Q3 a 96% recurring revenue share. Of this, 91% is subscription on fixed base and 9% is subscriptions that are transaction-based pricing. Note that we include only the fixed price subscriptions in our ARR. We have a solid growth in revenue, which is 49% year-on-year.
The three acquisitions we closed the last 12 months is, of course, contributing to much of that growth. Our strategy is to grow the recurring revenue, and we're happy to see that organic growth is 17% in Q3. Our organic growth of total revenue was 14%. The non-recurring revenue we have has decreased in Q3. This is a result of our focus to migrate our services to a SaaS environment, and it's also an effect of the easing of COVID restrictions in the sense that our customers were less available for onboarding new systems and participating on training courses. In Q3, we have an increasing EBITDA, and as expected, the acquisitions are diluting the margin, which is now 37% for the quarter. The dilution is six percentage points, which is giving an adjusted EBITDA margin, excluding M&A, of 43%.
The 1% difference compared to Q3 2020 is due to more cost in sales and marketing and more cost in relation to SmartCraft being a listed company. We regard the Q3 margin to be strong, and as for previous acquisitions, we expect to increase the margin in the recently acquired companies over time. It is also worth noting that if we exclude the M&A, the adjusted EBITDA margin year to date is 46% in 2021 against 43% in 2020. In Q3, we capitalize 5% of revenue as R&D capitalizations. This is lower than last year, but it's because the recent acquisitions have not capitalized anything in Q3. In these companies, we are evaluating our projects for who is eligible for capitalization, and we expect to capitalize in Q4. There are two main events in Q3 that is affecting the balance sheet.
The first one is the equity increase in relation to the greenshoe option. The greenshoe was partially exercised in Q3, and this has an effect on both equity and cash. The other event is, of course, the acquisition of Kvalitetskontroll. We have an effect here on goodwill and intangible assets, and of course, it's reducing cash. It also has an effect on equity as the acquisition was partially paid in shares. These two events are also affecting the cash flow. We have payment of investments at nearly NOK 50 million, and we have received payments from financing activities in the greenshoe of NOK 47 million. In addition, we have a strong cash flow from operations, which contributes to more than NOK 10 million in cash.
If we look at the financial table, we can see that we are maintaining a high growth margin, which is up almost 2% year-over-year. We have increased payroll and operating expenses. A lot of this is relating to the acquisitions and the cost base these contribute, but it also consists of acquisition costs, restructuring, and IPO costs. These costs are later adjusted in the adjusted EBITDA margin. Net financial items are also increasing. This is because in Q2, we repaid all our loan facilities. In Q3, we have no interest expense. To sum it up, we have a solid growth, solid profitability. We have a healthy balance sheet, and we are in an excellent position to execute on our strategy. Gustav, then back to you.
Thank you, Kjartan. Let me summarize. Our IPO targets stay firm. We guide at 15%-20% organic growth in the medium term. In the medium term, the adjusted EBITDA is expected to increase due to scalability and synergies. With the great market opportunities, our solid financial platform, scalable solutions, and our competent team, we are well positioned to play a vital role in the construction industry in the years to come. That was the presentation. Now let's open up for Q&A.
Thank you. We have a few questions from viewers on the webcast, and you can submit further questions in the webcast player. The first question is, can you comment on the improved gross margin?
Yeah.
Yeah.
Kjartan, that's a good question for you.
The improved gross margin is partially by the acquisitions and partially organic from the existing companies in the group. Especially the acquisitions have had an increase in the gross margin. We see that all our solutions, as we focus on migrating from on-premise solutions and likewise to SaaS, we see an improvement in the gross margin.
Thank you. I think you touched a little bit on it, but could you please elaborate a bit on the effects of the reopening after the pandemic? How is that affecting the business and the sales activities, customers, et cetera?
Yeah. I think first of all, it is really good that the restrictions have been lifted in the Nordic market, which means that people can come back to the office. It really is a difference being able to sit down and have physical meetings, which I think everyone's been desperate to do. It also means that we can go out and meet our customers, and also be present at different events, which is very important in this industry as well. Yes, we have become a lot more digital, but still there are really important physical events that we want to participate at. That's a really good thing.
In the short term, we see that there's a little bit of a shift because as our customers are able to suddenly be a lot more physical as well, they have been a bit difficult to reach them in Q3. We expect that to be temporarily, and we think that it gonna be really good for business when hopefully market goes back to normal.
Thank you, Gustav. There's one more question on the effect of the acquisitions. Can you shed any light on how long it will take before the margin picture normalizes in that respect? And in what areas do you think you can improve cost and drive synergies in the acquired companies?
Yeah. I think it, in general, is a bit difficult to say exactly when the costs are gonna improve. We are definitely looking at how we can synergize between the different solutions. And that's how we can improve both cost and revenue. It's gonna take some time. It's not gonna happen overnight. The second part of the question was,
Yeah. Across what areas do you think there is room for improvement in these companies, and in terms of synergies?
Yeah. Definitely, an improvement. I mean, today we have 60 developers in the group, so there's definitely areas where we can do more together. We have areas in administration where we have some best practices that can be used. We also have some great best practices when it comes to sales and marketing, and also being able to do co-sales and benefit from being part of the group. It's actually in sort of several areas we can benefit from being. The acquired companies can benefit from being part of a group.
Thanks. Do you expect non-recurring revenues to pick up again in the coming months?
It's a partial question. As COVID restrictions have eased and the access to our customers were limited in Q3, we do expect the non-recurring revenue to pick up some bit. At the same time, we are looking at including services in our SaaS environment. As we are including more services into our SaaS and ARR, we are of course decreasing non-recurring revenue over time as well. It's a bit of both.
Thanks. A couple of questions on M&A. Could you comment on the M&A capacity that you have? I.e., do you have the organizational capacity to do more M&As in 2021, for example? How do you see the pipeline for M&As at the moment?
Well, the pipeline is good. We are in continuous dialogue with several companies in the Nordics and outside the Nordics. That's good. Our capacity, we have done three acquisitions over the last 10 months. We have some sort of a setup and framework to do acquisitions. We think we can continue doing acquisitions at the same pace going forward, as we have done historically, sort of one-three a year. Yeah.
Okay, thanks. There's a couple of questions on, I mean, the outlook for 2022. For 2022, where do you see the largest organic growth opportunity for SmartCraft geographically? To elaborate, can you briefly describe the opportunities you see in Western and Central Europe? Are there a lot of M&A opportunities there?
I think talking about the markets are more or less the same in the Nordic countries, and that's where we focus. That's where we have our organization. That's where we have our customers. That's where we see the biggest potential as we are today. Again, the markets we're in are pretty similar, so that's not easy to say that one country or one area is more opportunity, there's more opportunities in one than the other. When it comes to growing into northwestern Europe, that is important for us. When we find the right targets, we will do so.
We are positive that we will do so going forward, but I don't want to put a time limit or a size on that.
Thanks. Do you have any? Do you see any changes in the competitive environment? Any new or existing competitors that are grabbing market share, for example?
No, we touched upon this at the IPO. We also talked about it at the Q2 presentation. As far as we're concerned, the competitive landscape is more or less the same. We have competitors, but they are mostly smaller competitors that have parts of a solution where we deliver more like the whole solution, and some of them focus on, for example, accounting and have some functionality for construction. We want to focus only on construction and be best at doing that exactly for those customers.
Perfect. You have previously said that you want to cross-sell the Bygglet solution to EL-VIS customers. Have you seen any effects of this initiative yet, or is that too early?
We have seen some results of it. It's a little bit too early to say that. It's too early, and we don't really give the numbers out on per solution. We have seen some results, but we're also tweaking and tuning to be able to increase the pace because we know that there are some things that will make us more successful as well.
Thank you. There are no more questions from the webcast at the moment.
Thank you very much for good questions, and thank you very much for listening in. I hope you all have a great day.