Ladies and gentlemen, thank you for standing by. My name is Emma, your Chorus Call operator. Welcome, and thank you for joining the Artificial Solutions invitation to the presentation of Q3 report 2021. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session, and if you'd like to ask a question, you may press star followed by one on your touch-tone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Per Ottosson, CEO. Please go ahead, sir.
Good morning. I am Per Ottosson. Gonna go through today the third quarterly results from Artificial Solutions. I just wanna remind you that you can find the presentation under Artificial Solutions. You click the Investors, and then you go to the Financial Information, and then there's the Financial Reports, and there you will find the quarterly report. The presentation is uploaded to our website. I'm gonna go ahead and start. I think maybe there will be some people joining a bit late, but well, let's go ahead in the interest of the people that are in time here. The first slide I wanna talk about is the one with the two presenters, just to make sure we know who's presenting today since we're obviously on the phone. It is me, Per Ottosson.
I'm gonna go through a bit more about the experience of the management team, so I won't really dwell into that now. Fredrik Törgren, who is our CFO. That was the slide on presenters. Next thing I want to talk about today is what is it that Artificial Solutions does? What's the market that we are addressing? This is an explanatory graphic that we created to educate customers on the financial markets about this particular space that's called conversational AI, which also recently has received its own market sizing of the software component of that market. That's also quite an interesting development that's happened in the last few quarters, last quarter.
If you look on the left of this slide called Artificial Solutions Market, you can see that there's a user that could be a citizen. That could be a customer, that could be an internal user, so an employee, or anybody else who requests information from the system and is a human or potentially also a bot. That request could be a service request, it can be an information request, it could be a request to get something done, an action request, which is increasingly becoming something customers are doing today, and then a session request or a notification request.
Some of the types of requests that would come into our system, which is the brainy thing in the middle here, and then our system needs to decide what is it that this person wants, what language are they using? Did they mention, for example, a date? Did they mention a name? What's their place? Were there other details that are important to extract from this conversation? And what kind of request is it? Also, you wanna have an emotional feeling. Is this an happy or an upset customer? You may wanna have some human take care of an upset customer. You may wanna give them a special offer, so you wanna know that from the interaction.
You also wanna know if we've interacted before, so you wanna be connected to some kind of a CRM system or similar, source of truth where you would find information about this customer from before. The conversational AI takes all this request and then somehow fulfills that request. That's what we would typically call a session, and then a session consists of several API calls, which is our revenue model. Session is the metric to see the volume of inbound requests. API call, which is roughly five times on average the session, is the charging metric that we use because some sessions are very intensive, and therefore you would pay for more API calls. To the bottom right in this, you see that the market is now $14 billion according to MarketsandMarkets.
Remember, for some of you that we've spoken about a market of $50 billion before, and that's the difference between the value created and the software market in this market. The value we create is larger than, obviously, what we get for our software since our software is one part of the component, and then there's implementation and other things that need to happen in this to enable a conversational AI solution. The CAGR in this market is 22%. It's a large market, growing well, and we're gonna see also that this market is really taking off as we speak and that we have the right model in this market. That's what we address.
Next slide is called Artificial Solutions at a Glance, and it's quite busy, but it's really split into four different parts. I'm gonna go through it in that way so it makes more sense. The first portion of this, to the right, to the left, top left, is that we are a company that was founded in 2001. We came to the stock exchange in 2019. It's quite important that we are from 2001 because this is not the type of technological innovation where you can start from scratch and build something in your basement and then all of a sudden have world dominance. This is a technical field which requires a lot of data and experience. We have 86 languages, for example, because we have a long experience in this industry.
Typically, newer companies which are maybe four or five years old in our industry, will maybe cover two or three different languages. It's a very big benefit to be an older company with a history in this market. What we allow humans to do is communicate verbally by texting or speaking into an application. It could be through WhatsApp, through Facebook Messenger, or any other such interface, or it could just be a common voice call. I will today dive into a bit the presentation that Swisscom gave at the London AI Summit, a couple of weeks ago to show you how this is being deployed in the customer today. We're currently shifting, and we started this shift in the beginning of the year.
We're shifting from a traditional professional service model where we charge for PS license and usage into a pure software as a service model where we no longer have professional services. This means that all the one-time type revenues we are no longer selling and therefore mostly this is our partners today taking that revenue, but we're focused only on the recurring revenue and the growth in that recurring revenue in our customer base. In the last 12 months, the trailing 12 months that ended in September 2021, so this quarter, the recurring revenues accounted for 35.3%, and that's the measure that we are most focused on. If you look to the right, you see the graph, you can see that the total revenue, that's SEK 48.5 in Q4 2019 to SEK 45 in Q3 2021, is declining.
That is primarily due to the fact that we no longer sell things like professional services. There's many reasons for that, not the least of it being that it's difficult to make money on professional services, but also because if we have partners provide that component, we get many more people committed to our platform and a larger ecosystem to work with. We are now focused on the blue, the dark blue part, which you can see is growing steadily, and it's an 18% CAGR on that. A very good growth from Q4 2019 to Q3 2021. At the bottom left, we have a few customers and partners. I will dive in a bit more into Swisscom. I do wanna mention just and do a shout-out on the few of these.
Scania have just renewed and expanded the agreement with us. It's interesting in that our technology also finds its way into manufacturing where there's not a whole lot of end customers. As you may or may not know, Scania primarily sells through agents, so it's not a large end user type company, but there's still many nice use cases internally. Volkswagen have continued, and Škoda is still selling cars with our solution, essentially having a banner, and you start to interact with the solution in natural language, and you talk about the need and have probing questions about the need you have for the car rather than having to choose in a traditional way, first the engine and then if you want leather and then which color.
Here you can instead talk about what you're gonna use the car for. It has become quite popular with certain demographics and also, we're both selling cars that way, but also, Škoda has managed to create a lot of what they call sales qualified leads, and that's somebody that either has a quote, a finance quote, or comes into the showroom to drive the car. Circle K also expanded during this quarter and are also moving internationally. They were also with us in the London AI Summit to talk about their experience with us and how they love working with Teneo. To the right, you have the strategic partners, the most important one here being Microsoft, and we are what's called IP Co-Sell Incentivized with Microsoft. This means that Microsoft and we collaborate on opportunities.
The Microsoft salespeople get paid by Microsoft when we sell to their customer. That is of course because we also leverage their technologies and therefore bring their technologies into customers. A1, which is a Q3 deal that we've done, was very much done that way, where Microsoft and we collaborated together. We also have Ernst & Young, where we're working with wavespace, as it's called. This is their innovation centers, the prime global one being in Barcelona, and have several deals that we're working together with them. CGI, where we have a very committed partner building great solutions for customers that are gonna come into signature customers soon.
As you probably or may or may not be aware, maybe I should say, our model is that you can start working with our software without actually contracting, and then you can contract as you start when you need to go live. I'd like to highlight the middle square, which says AP. In our industry, which is the industry of serving requests from the outside or inside the organization, typically the NPS, the net promoter score, so the measure of how happy you are with this transaction, has steadily been going down over the last 10 years.
The reason for that is, of course, that we've been on many, or almost all customers or organizations have been focused on reducing the cost because it's very costly to provide phone-based service, which is what people really want. They wanna be able to call, get answered quickly, and not have to go in and download an app or some other click-through interface. Swisscom has, they presented this in London, they've had an 18-point NPS increase after deploying the solution in their IVR, meaning that the solution, Teneo, now picks up the phone, answers the phone when customers call in natural language, with voice, of course. We also brought in SEK 120 million equity funding in May 2021.
Also, if you're following us, you see the press release that at the end of after Q3, we also secured the financing on the debt side. The last thing I'm gonna highlight in this slide is the bottom right, the forward citations per patent per year. We've updated the patent reporting in terms of looking at who is referring to our patent. So who says that their patent or their innovation is building on our patents. The average for software patents would be that you have a citation 2.5, 2.05, and we have 5.84. What that means is that our patents are relevant.
These are the patents that come from this history from 2001, and we've been patenting these primarily in the 2010s. It's always 14, 15, 16. 2014, 15, and 16. The interesting thing with that is that these are the foundational patterns in this industry that's growing, in this market that's growing, and cited by Apple, Google, Amazon, et cetera, so part of Siri, Alexa, et cetera. A very strong portfolio of technology. Next slide I wanna talk about is the one with all the pictures on it. I wanna talk about this because we've also changed the entire management team.
Since we're moving from a model which is a licensed PS maintenance model, traditional software sales model, and we're moving into SaaS, we've also replaced the management team with a management team with that background. From the left, I've done that several times in different companies, built SaaS companies, and actually as long as 25 years, I see here, so I must be quite old. The next one is Fredrik, our CFO, also with experience from this and also from M&A, and of course, been instrumental in getting our balance sheet to where we are today, where we no longer have the financing risk that the company has seen in the last three quarters. Andreas Wieweg is, however, with us almost from the beginning.
He joined the company in 2007, and so he's got great experience in these AI solutions. He is the father, at least from an orchestration perspective, since he's been the manager all the time behind all this patented technology, and in our industry, this conversational AI industry, one of the absolute experts. Very happy that Andreas is running our development team, and is our CTO. Next one is Daniel Eriksson, also new. He has a, what we call in Swedish language. He's both, from a financial business side and also from technology. That's very relevant for what he does.
He's the Chief Innovation Officer and he's working quite hard on our product offering, but also on our customer success and making sure that customers that do start with us, that there's a stickiness in that they deploy and use things that make them stay and grow with us. As you'll see, customers are growing their usage together with us. Marie comes from a similar position at Amelia, which is an IPsoft company, which is the largest company in this industry and has been doing PR impact marketing for the last 20 years. We're very happy that she's now come in at the tail end of Q2 and started building out on marketing programs, which is coming now. Fredrik Blomberg experience in sales operations.
This is quite important to us now as we're building out on the sales side. Paloma also has worked quite hard in human resources in SaaS companies, so more than 15 years of experience and has joined us as the Chief People Officer to be able to drive our HR agenda, both culture and recruiting and retaining new staff. Nicolas Köllerstedt is the latest addition. He actually started at the beginning of this quarter, so it's not really Q3, but for this report's sake, he is the one. He comes from Snowflake, where he built up the Nordic and Baltic companies from scratch into where that stands today, which is quite a large operation. Obviously quite experienced in SaaS and also been around for quite a while in our industry.
The next slide I wanna talk about is the one that has conversational IVR, our journey at the top. This one, this slide is copied from Roger Dill, who works at Swisscom. It's copied from the deck that he presented at the London AI Summit. The interesting thing with this is I'm gonna try to highlight first a journey that a customer does, but then also the end result and how that impacts the customer. They started out with a few pilots and POCs, and started by deciding to replace the DTMF being the tone-controlled typical tone-controlled IVR.
You dial in and you say, "Press one for billing, press two for buying a new phone." They wanted to replace this because this was cumbersome, error-prone, and also not a good customer experience. You all know, sitting in the car nowadays or anywhere, it's quite difficult to hit those numbers right. Presently, this took from going from deciding to start the project to actually going live with the first part, which is called Presenter, that took 14 months. We believe on average, it will take the customers that we've signed up 12 months to ramp up to start using the product in a meaningful sense, and thereby also generating meaningful API call revenue to our company, which we will come to later as well. Roughly 12 months on average. Swisscom took a bit longer.
We didn't have the fast offering at the time. I also wanna mention that Swisscom is on the old revenue model, so their API calls are not built the way that we build API calls for our new customers. What they then started doing is voice-enabled routing. This enables the hands-free routing and also enables to ask this disambiguation question. If you say, "I want to talk about my bill," then, you may have the question, do you want to talk about your subscription or have you not got your bill? Some other clarifying questions to ensure that you get to the right person. Still, at this point, we're mostly talking about getting to the right person.
What that meant is that they improved by having less transfers, so the person picking up and having to send you to a next person, that was reduced by 21%. That actually means from a volume perspective, that's roughly 13% of the total call center volume. Give you a perspective here, thousands of people, 13%, that of course is a great ROI from a cost perspective. Swisscom is not running this from a cost perspective. They're running this project from a customer experience perspective, and you see there the transaction NPS increase by 18 points with its current implementation. It's served 1.8 million calls. That's where they are right now, and actually, as we speak now, they've started with some of the automations.
For example, if you call in and you wanna buy an iPhone 13, or you wanna get the new iPhone 13, it will know who you are since you're dialing it with your Swisscom number, and you then get the choice to maybe extend your contract, sign a new contract, get more data or whatever that might be in the discussion. Then the next portion would be to get a link on an SMS, and you sign that through Scribe. I tried this three weeks ago, very handy. We tried it in Swiss German, which is a language which is quite difficult for all computers because it's not a written language, it's only a spoken language, but it worked very, very well.
This particular customer had they been, and again, I need to emphasize they are not on our new revenue model, they are on our old revenue model. This customer generated lots of revenue in the first instance, which was end of 2018. But they're not generating now from what we call the API call revenue. In the new model, they would have started generating most of the revenue at this point at present, so that would have been then on average 12 months after starting. This is important because the new customers we bring in now will then also have the same type of trajectory. It will take around 12 months before the API calls start coming in.
Swisscom would be. Our large customers, it's an average of where we believe large customers would be, and they will be one of the largest of the large customers in that group. And they would, at this point, have 10 million API calls. If you know our price list, that translates to EUR 80,000 per month. That's what this type of customer would generate in the new model. In the old model, this generates less than 40% of that, as this is only maintenance essentially, since the lion's share of that revenue was taken in 2018. That's to explain a bit what a customer looks like. The most important part here, I think, is that the transactional NPS increases by 18 points and that they're replacing the IVR.
This is a very important use case, and we're having more and more conversations about this type of use case, implementing a similar one at Telefónica in Germany, which is a deal we announced in the Q2 report. Next slide is the Q3 operational highlights. We started early on in the quarter by joining the Azure IP Co-sell Incentivized partnership with Microsoft. It's quite a mouthful to say, but it means that the Microsoft salespeople get commission when we sell to their customer, which also of course means that they're willing to work together with us. This is quite strong also for customers, since customers with this type of partnership, they feel more secure working with a smaller Swedish company than they would maybe with just us. We then signed a LUIS to the power of Teneo.
This is our new product name SaaS deal together with our partner Microsoft to A1 Bulgaria. That was also early on in the quarter. A1 Bulgaria is an important customer to us for many reasons. Obviously, so Bulgaria has less legacy than many other operators, so it's a very modern operator, and it's also like the poster child for the A1 Group. The A1 Group is the poster child for América Móvil, which is one of the largest telco groups in the world. This one is very important to us and Microsoft to really make this a great success. Microsoft joined us in Amsterdam at the AI Summit there to talk about this in particular, and how we are now taking this solution to other telcos across the world.
We have a large system integrator that we work with as a partner, and they signed up to deploy LUIS to the power to me for its own business. They're gonna be using the solution on their own website, in their own IVR. That's also quite interesting that they're building that out. They have a fairly large inbound volume of calls, so it fits very well for them. Also, the same partner also is the one that's implementing at a large multinational U.S. tech company, where we are not allowed to use the name. They ordered the project from this partner to continue the expansion in U.S. and Japan. After this, in this quarter, this is continued, and they're expanding even more.
This, they're building the use cases now, and we will start seeing some API volumes. This is of course on the new model. We will start seeing some API volumes come probably in the middle of Q1. That's when they should be going live with these projects that they're building out. We also signed the renewal agreements with the U.S. Government Agency, Circle K and Scania. Very happy with that. Also, they're expanding into more areas and increasing the usage, which we're very, very happy for. We typically also these customers are quite referenceable. They speak to other customers and also then speak at events together with us, and they really love working in the product.
To me, all the development platform is something that almost all of them are saying is absolutely fantastic, even on the business side, so it's quite interesting. We also pointed, and this is important, we built the baseline here, and we want to now expand on the sales and marketing side. Our sales organization has been quite small while we start to understand how we're selling and who we're selling to, and how this is gonna work in the new sales platform. We brought in Nicolas now, who comes from Snowflake as a Chief Revenue Officer to start building sales organization on top of that knowledge. We've also formed an advisory board. The Chairman of the Advisory Board is Gavriella Schuster.
She's the former Corporate Vice President, and she left in last of June. That's the highest level responsible for partners within Microsoft. What's called the One Commercial Partner organization. This is important for many reasons, partly because it ties into our very strong culture, where we wanna hire multinational and also have a gender focus on our recruitment, because we believe that in the AI space, you need to be very diverse. Gavriella will help us a lot with that, and obviously also help us with... Sorry, somebody's... I don't know. Emma, can you help me mute? There's somebody that's making noise on the line.
Gavriella is also of course helping us with Microsoft and the Microsoft partners, to find the right partners across the globe, but also in recruitment and on the diversity side. Key financial highlights. I'm gonna leave this over now to Fredrik. Fredrik, if you-
Thank you. Thank you, Per. Key financial highlights in the quarter. I think the starting point is very much we are back to growth. I will dive into a number of the highlighted bullets in the presentation. Before doing that, I will also highlight that we have a star, as you can see in the presentation, on some of the numbers, and that's basically the adjusted numbers that we are reporting. As of January 1st, 2021, we report adjusted revenues to basically more accurately portray actual income over long-term contracts. And that's basically to have figures that better can be compared with new contracts under the new source model. This is quite thoroughly described in the quarterly reports on pages four to five for more details.
I think, for those of you that are not really clear on the difference between adjusted and reported numbers, I suggest to take a deep dive into those pages. This is more to basically align with the new SaaS model. I'll end that with that. Our adjusted net sales is growing and now mainly consists of recurring revenues, as we are also focusing on product sales to create long-term value for shareholders, as Per also mentioned. We're not any longer focusing on professional services, and that is very important to make note of. We experienced growth on all our revenue metrics, Q3 2021 versus Q2 2021, and the quarter-over-quarter adjusted net sales grew with 11%.
Also with our focus on increasing the recurring revenues, this is super positive, I would say. Then, just briefly on the quarterly numbers. Net sales adjusted amounted to SEK 11.9 million in Q3 versus SEK 11.5 million in Q3 2020, so up 4%. The adjusted recurring revenues amounted to SEK 9.5 million in Q3 2021 versus SEK 9 million in Q3 2020, so up 5%. As Per earlier said, I mean, the impact from our new SaaS customers on the SaaS model is still not significant as they are in a ramp-up stage. In the third quarter, recurring revenues derived from our SaaS customers, however, still constituting 14% of total adjusted recurring revenues.
This is a number, which we expect to grow as we add more customers to the SaaS model and as they are ramping up on API call volumes. We foresee this number to increase over the quarters as we go. On a rolling twelve-month basis, the adjusted recurring revenues increased with 8% versus Q3 2020 and amounted to SEK 35 million, and this is very positive, I think. We also continue to keep cost control and had an annual run rate of SEK 106 million in Q3 2021. This all in all, I think, so despite actually a lower reported sales, our cost control managed us to improve our EBITDA. The EBITDA in Q3 2021 improved to SEK -13.9 million.
We had a strong liquidity position with SEK 111 million in available funds, so SEK 96 million in cash and also SEK 15 million in credit line. Overall, I think we are on a positive revenue trajectory despite little revenue impact from the new customers that we have had during 2021. With that, I would go to the next slide, please. This is also just to emphasize what we are focusing on and the having growth in recurring revenues is a very kind of positive sign. I'll just start with the fact that our recurring revenues, which then is license and support and usage revenues in the old model and subscription fees and API call revenues under the new SaaS model.
As for all software companies, and in particular for a SaaS company like ours, this is super essential to drive this growth. It's very positive then that our recurring revenues are continuing to grow. This is a key metric for us in building a SaaS company and our focus on actually creating long-term shareholder value. It's extremely satisfying to see that the rolling 12 months recurring revenues are growing from SEK 33 million in Q3 2020 to SEK 35.3 million in Q3 2021, a growth of 8%. Even more positive, I would say, is also the fact that our recurring revenue on a quarter-over-quarter basis, i.e., Q3 2021 versus Q2 2021, is actually also growing with 8%.
We can really see a positive growth trajectory on these valuable kind of revenue streams. As we also mentioned on the previous slide, in Q3, the SaaS customers accounted for 14% of the recurring revenues in Q3. As I said on the previous slide, we expect this to continue to grow as we add more customers to the SaaS model and also as they are ramping up on API call volumes. Another positive note is also that we see continued strong commitment and high interest on our SaaS offering from our existing customers, and we expect many of them to join the SaaS model in 2022.
Another strong point is also the fact that we have key customers evidenced by our high renewal rates presented on an earlier slide, while we are also adding new and interesting clients on the SaaS model as Per has presented earlier. Next slide, please. Continued cost control. We are continuing our lower cost trajectory. As many of you on the call are aware, I mean, we did a cost reduction program in Q4 2020, which we then had full effect in Q1 2021. This cost reduction was done basically to align to the new product line SaaS strategy. Moving away from a hybrid model with professional services and a license model to a SaaS model. We continue to keep a low OpEx level.
Current annual run rate was SEK 106 million in Q3 2021. With that also you can see that our monthly OpEx cost base was below SEK 10 million per month. Going forward, we expect to increase OpEx somewhat from Q3 level in Q3 and onwards, primarily as we're adding key commercial positions to enable us to execute on our new source strategy and grow sales even more. Still, I would say we keep careful control of costs. Next slide, please. We have a solid and strong cash position when we are leaving Q3 2021, and our liquidity has continuously been strengthened during the year. As many of you are also aware, we successfully closed a direct share issuance in Q2 2021, providing us with SEK 112 million after deduction of transaction costs.
I think this is very much to emphasize that we are in a very much different position now versus prior year and also beginning of this year with the financing that we have secured. In May, we secured the equity issuance. Also as we would go into the next slide, we also successfully closed a kind of new credit facility over five years. All in all, this basically provide us with a strong cash position to enable us to drive and execute on our strategy to 100% and not having to focus on financing and refinancing. Next slide, please. On October 5, the company announced the signature of a term sheet for a five-year credit.
That is a SEK 250 million credit line carrying an interest margin of 9.5% and with a PIK interest. A PIK interest basically means that the interest cost is being capitalized over the tenure of the loan, so basically five years. That will result in that we don't have any cash interest payment during the tenure. This is very positive for us in a position where we are still in a cash flow negative position that we don't need to pay any interest costs that will flow out from the company.
As can be seen in the left staple graphs, we have SEK 250 million in proceeds, and the proceeds from the new financing will be used to refinance the company's existing debt of approximately SEK 200 million. That also includes the convertible debt that we still have on the balance sheet. Following repayment of the debt, we will have approximately SEK 50 million excluding transactional costs available for continued growth of the company and execution on our strategy. All in all, this means that our cash position, as we saw on the previous slide of SEK 96 million, will be added with additional SEK 50 million, as can be seen to the right in the staple graph.
I would also like to emphasize that with this financing, our interest cost is significantly reduced. We reduce the financing cost with approximately 7 percentage points versus the previous debt financing. The new financing terms are therefore much more favorable. I also want to emphasize that the key for us also with this financing is the fact that we don't have to pay any cash interest until after five years. Our financing cost of 9.5% is much lower than the cost of financing the company with equity. Yeah, truly favorable, I would say. The financing is provided by Capital Four, a highly reputable credit investor with EUR 15 billion in assets under management.
This is a highly professional investor who had looked into the company for a long period of time. It is also a credit investor that truly understands our industry, our competitive position, our revenue model, and what we are actually looking to accomplish with our new unique technology as the foundation. In the company, I think we view Capital Four's finances as a sign of trust in our staff, our technology, and also our ability to successfully execute on our strategy. A quality stamp in short, I would say. Just to summarize, I think the company is very pleased with the new financing, especially as it provides us with an even stronger cash position to carry out our core strategy. We are truly pleased with the financing. Next slide, please.
This is a slide that we have shown in previous presentations as well. I think a bit of repetition here. It basically entails our revenue model under the new kind of SaaS model. It's a highly scalable revenue model. To the right, you can see in the table the key revenue streams for the model. I like to focus on two of them. The two key ones are subscription revenues and then API call revenues. Both of these kind of revenue streams are recurring. That's also, as you saw on the previous slide, this is something that we are really focusing on to increase these types of revenues that are highly valuable also from a company valuation perspective. Subscription revenues is based on the number of seats used.
Basically, the number of users using our kind of development environment, and the pricing of that is between EUR 7,500 and EUR 10,000 per customer a month. That is also kind of highlighted in the red color in the graph to the left. We have API call revenues, and these revenues are fully volume-linked revenues. This means that the revenue is built on the number of API calls generated in our engine, times the cost for the customer of EUR 0.008. This is the dark blue color in the graph.
As we say in the table to the right, as an illustrative customer, this means approximately EUR 2,000-EUR 24,000 for a small and a large customer. Of course, a larger customer can of course also generate much higher API call volumes than what is shown there as well. Of course, also than a smaller customer. This is an illustrative example that we have to the left. Just to also give a bit of flavor on the customer wins that we have done on the SaaS model in 2021, we can just say that we categorize those six wins as reference customers, and we also perceive them as being large customers with the potential to reach the level that we illustrate here.
The illustration is done, of course, a bit different. If you are a small customer versus a large customer, you see the ARR fully ramped up. The big difference is of course, on the revenues generated, through API call volumes, and therefore also higher volumes bring up the revenue as well. In summary, I would just say that our SaaS model is highly scalable, and, yeah, super interesting, I would say. Over to you, Per.
Thank you, Fredrik. I wanna use the next slide to give so two slides left. I just wanna give a bit of summary of what the company has gone through and also a last one with some of the key numbers. Let's start with the transition to a SaaS model. We are done. Our software is running since mid-July. We're running a full load on the software as a service platform. This of course means that there's one version of software. During the quarter, we've been upgrading and adding features 16 times to this platform, meaning that customers get new value all the time. That is, of course, the way the SaaS model should work. We're done with this, and now it's sales and marketing focus. What we've been doing for this year is basically building a foundation.
It started with re-engineering Teneo in February. We launched the new product and pricing also in February. We signed the first co-sale partnership with Microsoft, the one that is the predecessor to the one we have now, where we first needed to do some deals together to get to the highest level where we are now. That was already in March. We also signed up the first customers in March, and also deployed the first customers. We had both ISG and Gartner recognizing that this strategy was the right strategy for customers. In April, we did the strategic SaaS deal with this large multinational U.S. tech company, the one that I said then was gonna likely start generating real API revenue mid Q1 next year.
You can see that's almost 12 months as well. We also signed the conversational AI deal with Telefónica Deutschland O2, and also a very interesting customer that are deploying a similar type of solution to the one Swisscom uses. In May, we did our first share issue, SEK 120 million . We also added support for 86 languages, which is an important part because that means that Microsoft that support six languages now have another 80 markets where we can work together. In July, we won this deal with A1 Bulgaria, a part of América Móvil, and then the renewal deals with Circle K, renewal deals with Scania, renewal deals with the U.S. state agency, and the financing that Fredrik just mentioned. We built the balance sheet.
We totally changed the technology into what's now called the Kubernetes-based SaaS platform. That's actually a very complex project. Great work by our development team. We've secured the reference customers. Now the focus will be to build pipeline on top of this. Now the focus is to first get these customers, of course, to start generating API. Their success is tied to our success, but also now to start generating new customers. That's why Nicolas just started at the beginning of this quarter and is recruiting a new sales organization, so to speak, since our sales organization shrank quite a lot. As we were doing this change, we're now starting to rebuild that, and then also we put some marketing programs into place at the tail end of this quarter, Q3.
Starting to build a pipeline now on top of this base platform that we have. Next one is a summary of all the things we've been talking about. Patents and IP valued at roughly $150 million. It is a very valuable technology that we work with. I come from this industry. I've seen it from the outside. It's an excellent technology, and also the patents, the way the patents are cited show that. Our customers are growing. The 3x is the growth in our customer base of the usage of the platform. Granted, most of our existing customers are not paying for that because of the old model, but that means that at least customers like to use the platform and continue to grow their usage of that platform.
We reduced the cost by 40%, which was the key to be able to rebuild the company from this base where we are today with sales and marketing that fit for the sales platform. We grow primarily in the Microsoft Azure space, so there's 1,700+ customers that work with Azure and Azure services. Of course, that fits us very well since that's the ecosystem that we're playing in. It's important to us to be part of an ecosystem that adds credibility, makes it easier for the customer, and provides better value to the customer since many things are pre-integrated that way. The team that is here now has been part of building a sales company valued at SEK 13 billion. The team is in place now. We're all executing.
In the beginning of this quarter, we had a complete new management team, so beginning of Q4 that is. At the end of Q3, we ended up there. That's very important to us as we are now starting to execute on the growth. Market is growing. Market is big. It's a $40 billion market, 22% CAGR. We have the largest implementations in this market, and now we also need to find the most amount of customers during the next few quarters. When we move our customers into the cloud, a key reason for them to do this is that they can reduce their carbon footprint with 84% for the same compute.
That's a very important message internally and externally for many of our customers, but of course also for us as we move it from what's called on-prem implementation into the cloud. According to the Gartner calculator, this reduces the carbon footprint to 84%. This was what I wanted to present this morning. The next slide says Q&A, and we welcome any questions on this. We have another nine minutes. Sorry if I took a bit longer than usual.
Ladies and gentlemen, if you'd like to ask a question, you may press star followed by one on your telephone keypad. If you wish to remove yourself from the question queue, you may press star followed by two. Anyone who has a question may press star followed by one at this time. The first question is from the line of Forbes Goldman with Rede ye. Please go ahead.
Yes, good morning. Thank you for the presentation. Well, I noticed that, well, this year there has really been quite a large focus on gaining and announcing quite large customers. But you also present like the unit economics for the smaller customers, and I assume that you have a strategy to going after these as well in the coming quarters. How do you expect to attract these smaller customers, and will you be using a similar go-to-market as with the large customers?
That's a great question, Forbes. The answer is no, not the same marketing. The three routes we have to market today is direct enterprise sales. That's what we've been using to gain traction with these that I call the base customers. We have a traditional channel sales. Where a partner of ours identifies and maybe we help them in the process, but they actually make the sale. That's something that we will start building out now, and that's also of course key where our Chairman of our Advisory Board, Gavriella, is key, and she's helping us pick and attract and spin up the right partners here in the Microsoft ecosystem. The third one is the one that's most relevant to smaller customers.
You see customers come in here into our development platform, so they go to what's called Teneo.ai, and there they have all the resources to start developing, and they develop for free. This is what we would call a product-led growth, a PLG strategy. We see now that we are attracting customers in there. When we do webinars and other things there, we attract customers to come in there. We're therefore hiring what's called a developer's advocate, and that's a person that will be active in forums and also in live forums, but also in the forums on the web to talk about how you can use our software when your management has told you to build a conversational AI solution, or you find that your smaller company needs one. The smaller customers will come in through the PLG track primarily.
Great. Clearly there is a lot of traffic and usage on your platform. As you showed today, a lot of it remains in the legacy model. Do you expect to transition all of these customers within a given period of time? Will you be ending the support for the legacy model at some time as well? How are your thoughts on this?
Yes, during next year we will be transitioning all customers over to the new model. There are some hindrances for doing that in the U.S., and also in Switzerland because of data legislation, which we're working through by implementing a new security framework for ourselves, and it has to do with who touches data and where that person resides and what nationality that person has. It is something we're doing during next year. We're gonna move customers over to the SaaS platform. Absolutely, that's a great question because it will have impact on our long-term revenue potentially as well, of course.
We're still very focused on getting the customers to use the platform more regardless of whether or not that gives us more revenue, because obviously that also provides a lot of value back to the platform development and to the customer. Yes, we do wanna convert them during next year.
Yeah. Understood. Great. I have some question for Fredrik. What are your thoughts on the gross profit margin? It has increased quite solidly the last couple of months and quarters. It stands at around 70%, now, but at the same time, it's a lot lower than other SaaS companies that are perhaps 90% and above. Is this feasible in the long term, do you think?
A very valid question, Forbes. I think just to put a context into our current gross margin. I think there are two factors that perhaps keep the gross margin on a relatively low level. One reason is that even though we are increasing recurring revenues and that is our primary focus and that kind of consists of more than 80%, you can say. We still have some revenues from professional services and that's also something that we are also buying some external professional services to basically be compliant with our commitments towards customers in the past. That basically means that our gross margin is somewhat eroded by the fact that we are buying those services externally.
That will of course over time increase our gross margin. I think we should expect a higher gross margin ahead as we're also kind of going away from professional services. I think the key component in really getting big impact is from when we are also kind of scaling the API call volumes. Because with increased volumes on API calls, we have more or less no extra cost. That basically means that or very limited costs. That also means that the gross margin on API call revenues is probably plus 95%. All in all, I think, as we presented also, the scalability in the model also can be driving to the gross margin long term. A long answer, sorry for that, but I think the summary is basically we expect to get to the levels that you see for other companies as well.
Yeah.
It will take some time, but we will get there.
Great. I appreciate that. I'll ask one or two questions more. Do you see any hurdles that require special requirements for new customers to join the Teneo platform, such as specific IT structures or skilled staff at the customer site that perhaps would make the onboarding process more lengthy?
Forbes, this is Per again. No, we don't. From a technical perspective, there aren't any such hurdles, but yes, some of customers may have resource constraints and maybe are not getting a partner to build out for them either. We recommend customers to not do that then, because this is a project that requires real work. It's not what's called a no-code type project. This is a project where you really need to put experts to work if it's gonna work out well. When it works out well, the ROI is fantastic. The large tech company has gone out with that their first year ROI is $39 million on the project. That is of course because the cost savings and the revenue increase is so large that you need to commit resource.
We recommend customers not to start with two people or three people from a partner site. They really need to build out a real project organization. Typically, that means 10-15 people in a large customer. In a small, more agile IT type company, maybe like a startup, one person is obviously enough, but once it comes to larger companies with large processes, you need a large commitment. There's no technical hurdles. We haven't found anybody who says, "I cannot do this because it's in Azure or so forth." It's the other way around. They all appreciate that.
Great. Well, I think I will end the Q&A session here. Thank you.
Thank you, Forbes. Emma, do we have any more questions?
There are no further questions registered at this time. If you do have a question, you may press star followed by one.
We are on top of the hour as well. Wait, half minute maybe. I think then I'll thank you all for participating this morning. I hope that we can speak also in other forums over the quarters. We're quite excited with our development, and we're very happy that you shared this with us today. Thank you very much. Emma, I suggest we close this out now then.
Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining, and have a lovely day. Goodbye.