Good morning, ladies and gentlemen, and welcome to the presentation of the achievements for Omda in the third quarter of 2024. The report and a copy of the presentation can be downloaded and found on our website, omda.com, and of course also on Newsweb. This presentation will consist of approximately a 30-minute presentation followed by a live Q and A session. You can type in your questions at any time, and we will attend to them later. A recording of this webcast will also be made available on our website, and soon after a transcript will follow. As always, I'm sitting here together with my longtime partner Sverre Flatby. Before we dive into the details and the presentations, Sverre, could I have what is your high-level main takeaways from the third quarter?
Good question. A few very important aspects we should talk about there. One is the fact that specialized solutions they dominate, and if you look at our quarter now and the quarters before, several so-called one-size-fits-all type of solution providers have tried and attempted to outcompete our solutions, but our solutions remain dominant, and I think that is a very important fact. Going forward, the recurring revenue stays on because and grows. And this quarter it continued to grow, and it has done so for 30 consecutive quarters. That's one thing. And secondly, also large customers are expanding their solution portfolio of specialized systems. As demonstrated this quarter, a large region purchases new systems, and the systems proven by the fact that we won a tender, a software for oncology tender in the third quarter.
And this type of solution that actually handles three million inhabitants is a highly mission critical software. So if you combine those two facts you see that long term recurring revenue from 27 countries, diversified business with increased recurring revenue over time, coupled with ongoing deployment of new solutions in current big customer sites and those two put together, that is actually a trend. So my friend, that trend is probably my main takeaway from the third quarter 2024. And what is your take on the numbers, Einar?
My take on the numbers from a high level perspective, three things really. First and most importantly decentralization works. Remember that the report and the P&L and what we see is really the weighted average over the performance in all business areas. And at first glance it looks decent, maybe a bit uninspiring. But dive in and look behind the obvious and you'll see that except for one business area, Emergency, all the other business areas they perform well or dare I say very well. That's one thing. Another thing is that the recent initiatives on FTEs on cost and decentralization of Emergency yet to show the impact and this effect will be gradually visible over time. Remember that the closing of the divestment in Cebu was at the very end of the quarter. And then, yes, we see the same thing as you have.
We still have some work to do on cash and cash management and especially again in the Emergency business area. But that said, yes, we are running thin on cash, but no, we are not running out of cash. Okay, these were my main takeaways, Sverre. So now maybe you could go through the presentation and give us some more insight on the details.
Sure. And let's start with our fundamentals. As I mentioned, the trend is very good. And it's due to the fact that we have been having a strategy and a vision and a mission that is crystal clear of what we're going to achieve and what we are for our customers, for society. And this mission is not going to change, running a business. We are going to do changes as we go, but this is not going to change. And what we have done over the years is to develop very good business areas. And the common thing with these areas is that they have a long term relation with their customers, long term recurring revenues and they have a critical position among the customers. So that is why we have these trends going on with the increased recurring revenue over time.
Then when we look at all these, without diving into the specifics, I would like to focus on the third quarter and what has actually happened here. If you look at this and we're going to dive further into this and Einar will go through numbers more in detail. Just to explain what Einar mentioned about what is performing well and what is not performing well. As you will see, most of these, I would say actually all are performing as expected or better, except for Emergency.
And I think that is a very important conclusion when you dive into the numbers and look at them, because that is also reflecting what are the measures that we have announced previously in the previous quarters and how are we following those up to secure that the red circle here becomes green and LIMS is the one that is yellow here. And that is why we have over the past quarters explained the roadmap for LIMS, that it will take some time before they get back into complete green situation. However, it is as expected and it follows the plan. So all in all, I would say we are quite happy with the trends and the performance this quarter. And I'm now going to explain further about Emergency and the actions taken to secure better performance.
Before that I was talking about our recurring revenues and I think it is important to understand the value creation of what's going on. Also, in the third quarter, 81% of our sales being recurring, and as you see, we have four in prioritized sequence here, four income types, and the first two are our most precious ones, and of course recurring revenue the most important, and the combo there, 83% is very good, and as you all know, number three here, the professional services are also some kind of semi recurring because it's always something with our customers, so this combination makes it very visible over time, so all in all, I think we have to see that the quality of income is very, very good this quarter.
And don't forget when I talk about these trends and the increased recurring revenues independent of oil prices, financial crisis or presidential elections for that matter, our income is coming. We don't lose money because these customers are there and they are paying their bills. And more than 90% of our recurring revenue stems from very important public or publicly owned businesses. And they are diversified, 600 contracts, 27 countries. So there is no binary threat to our recurring revenue streams. And in the bottom here you see the high stickiness over decades and the low churn is continued. And all of this makes us very happy when we exit the third quarter, see what's going on with the trends in the market. So all in all a very strong position to be in.
This is just a snapshot from the report, the PDF that was published at 7:00 A.M. this morning, and just to shortly comment on this, NOK 103 million in sales, this income, total income this quarter and an EBITDA of 21%. It's decent, could have been better, but decent. And the simplicity of our numbers is also important to remind everyone about because if you see the three income types that matters and the three cost types that matters, you will analyze the business clearly and as we did the previous quarters, just to look at the income side, the software part is really good, high quality and growing. The professional services still slightly weaker than we expected, and we want it to be. And on the cost side, cost of goods sold is actually developing very well, and also other cost is where we want it to be.
Then again, the salary in personnel—that cost is too high. We explained during our previous quarterly presentations that we have seen some actions and measures, and I'm going to explain thoroughly what the status of those and what the outcome will be. We're not going to do anything new. We are just going to follow up what we have announced previously in the previous quarters. Let me go through those. We announced the previous quarter and see the status there. First of all, professional services, degree of invoicing and price increases. That is something we've been working on. And as Einar mentioned initially, Emergency is the area where this is actually not performing well.
All in all, we can see that the trend is okay. The professional services will get back in the right level on the right level, and the measures taken on the emergency side will be the rest of the measures I'm going to explain today. First of all, we said in the previous quarter and the first quarter we're going to review the underperforming basically. And since we have now concluded it is the one business area, let's also focus on what we're going to do, and we're not going to do something new. We're going to do what has been our successful approach earlier just to continue what we are doing and make sure that we decentralize this business area. And why should we decentralize this business area? Well, when we IPO'd we were about the same size Omda in total as this business area.
It's no doubt that the decentralization of our original IPO situation, the decentralization has been a success. We're going to continue that success and make sure that we decentralize this area. That is one thing. We're going to go deeper into that and what it means. Then we also mentioned outsourcing and remote development phase out. What is that? It is a more modernized approach and also it has to do with customers, what they want as well, that a local approach to development is a better model. That is one thing. The good news for the third quarter is that we actually closed the divestment of our Filipino operation, the CSAM Philippines. That is done.
That will also reduce the number of FTEs in the company in the short term, but also more in the next quarters as well. That is the combo of that. The third one I mentioned previously is this collection of activities all together is the action plan we are following systematically each quarter to secure that we get where we want to be. Nothing is going very fast, so you won't see it directly in the numbers in the third quarter. I will explain properly what the actions here mean when it comes to for instance, cost of salary and personnel. All in all, these activities are the most important takeaways from the third quarter when it comes to margin improvement from 21% and better.
So, let me explain this graph for all of you. On the left-hand side, you have the number of FTEs, and in the bottom here, you see our quarter. Now, in a broader perspective, you see here from 2022 until 2025, and what is the graph showing? Well, the graph is actually showing the number of FTEs each quarter since the first quarter 2022 and until the third quarter this year, and I have deliberately taken these circles, added those in the third quarter in 2022, 2023, 2024 to explain to you the numbers of the third quarter, because if you look at it, you see the trend of the number of FTEs versus the cost, because in the circle here you see the cost in millions of NOK for the specific quarter.
The reason, the main reason why this number is higher than it should be is that the end of the quarter a lot of reductions were taken and not on the average of the quarter. So that is the main reason. So, and I explained the actions we've taken previously to do this and to put everything into a planned perspective. What did we do in mid-2022? We started the decentralization and then we had the so-called Project Triginta to secure that we have the trend of reducing the number of FTEs in the company compared to income. And what we now do is to carry through those actions I presented on the previous slide. And then there are a couple of things that will change completely the number of FTEs in the company in a short term.
That is one, the divestment, which immediately, as you see from the number of FTEs also had an impact in the third quarter, in the late third quarter. But then again we have a remote sourcing ramp down project, meaning that we also reduced further the same level once more during the first half year in 2025. And this is very important to understand, to analyze our numbers. And then I will say as important as the other actions we mentioned, decentralization of emergency. What is that? Well, we have identified when we looked at our budgeting for 2025, what are these natural businesses inside the emergency business area? So there are four business units that will be created based on that decentralization process. And when we analyze it, we find also there a lot of possibilities to reduce FTEs compared to income.
So, all in all, and this is not guidance, but I think it's very important for everyone that looks at our numbers is this last trend showing on that slide. You see that what is happening now is the combo of the divestment ramp down and decentralization will reduce our number of FTEs very much. And that is actually the most important thing when you see exiting the third quarter, 2024, that will help us make sure that margin improvements are coming. So that means, since we have this under control, that we will continue using our business model. And many of you that have followed us, you have seen this slide hundreds of times. But I think it's important we're not going to change any of that.
We have this strong position in healthcare, focus on this trend I mentioned with specialized healthcare, which is very strong, that creates this long-term recurring revenue and then to focus on the profitable growth there. At the same time we will continue to acquire companies with strong recurring revenue that have the same characteristics that are current business areas, so that's what we're going to do, and also I would like to say we are not going to change or reduce our ambitions when it comes to growth. You might say we are maybe a bit behind when it comes to the ambitions in time, but we're still going to do exactly the same with the same ambition, and we will focus on those four. Organic growth, profitability, cash discipline and acquisitions, so going to be strong in Europe and also worldwide.
As you see from our numbers, we are getting stronger outside the Nordics. This is not only an ambition, we are actually showing that we're doing it. By that Einar, I think it's fair to say we should now dive into the details of the numbers. Here you are.
Okay, thank you, Sverre. Now comes the fun part. Let's have a look at the numbers. The performance in the Q3, I'd like to remind us all that what we see really again, the weighted average performance of all the business areas. All right, NOK 103 million in total income, decent uptick from same period last year. The organic growth seems a little slow, 3%, but again it's a combination of all the business areas. 3% in constant currency, around 5% in NOK. That said, keep in mind that the license and recurring software recurring revenue, they comprise 83% of total sales. They grew 6%. So the most precious part of our income grows a little faster. The margin, 21%. Right. That was down from last year, but again it's decent.
But again, we'll see that it's really a combination of the growth and the performance in all the business areas. COGS, gross margin, quarter by quarter we improve 6.5% approaching our target of 5% down from 7.3% in the same quarter last year. And then salary, personnel. Yes, it's still too high. It's down from the second quarter and first quarter, partly mostly because of seasonality, holiday pay in the Nordics. And you see a stark reduction in the number of personnel. But again, the 271 employees, that's the end of the quarter and not the average. And then under cost is actually where it's supposed to be. We guided to around 15% and that is where it is. But, as we said, you know, decent, decent results, but maybe a bit uninspiring. But again, this is the weighted average. And statistics, statistics is like a bikini.
What it reveals is interesting, but what it hides is vital. So let's go into the details. The performance, as you can see, is in its entirety impacted by the performance in the emergency business area. Now to be decentralized, let us go through this and spend a little time on this graph. This is really a graphical representation of the table found in the quarterly report. You see on the bars there, the light green is the organic growth in that business area of the last four quarters. So trend growth if you like. The dark green is the growth in the third quarter. Then the purple bar is the EBITDA in that business area in the third quarter. And finally the purple line is our EBITDA target of 30%.
You see there between the gray area between 5%-10% is really where we have guided our organic growth should be, alright. If you look at this, you see that all business areas, except for Emergency, they perform well or very well. Take Connected Imaging. The growth in the third quarter is higher than the trend. Same thing with Health Analytics. The growth in the third quarter, higher than the trend. Same thing in LIMS growing very fast. Same thing with Medication Management. Last quarter some people were asked, as you know, the growth was a bit slow in Medication Management. What happened? They're working on a new contract. That's where I just described and we see the results now. I think it was time well spent. Woman & Child also grows as it should.
So the growth in all business areas, except for the one that isn't decentralized, is within our guided range between 5%-10%. Then have a look at the profitability measured in EBITDA terms. Connected Imaging is around there. Health Analytics seems to be a little below. But hey, keep in mind there's no CapEx in Health Analytics. So if you added 10% normalized CapEx, you would actually be at 35%. Then we have LIMS. We have said that that is an area; it's growing fast, received a ton of contracts. But the performance, it will take some years. For instance, the Danish contract, it would take some years until it reaches and becomes on plateau. But from then on it will perform very well. This is an investment that we are doing in this business area we think is absolutely brilliant.
Then, Medication Management: one new contract far outperforming our targets on profitability. And the same thing with Women & Child: decent growth. Absolutely. And decent profitability. That leaves us with one culprit, and that is Emergency. And what we are going to do now is to say that, okay, hey, the recipe that we gave to all the other business areas that work so well. We're going to prescribe exactly the same recipe for Emergency. Do exactly the same thing. One more thing. On Health Analytics, we have done two acquisitions within that business area. It was. And the last one was completed in the first quarter 2021. Coming back to what we have said about, you know, how long does it take? We said it takes two years for buy-and-build model. So we said that. Okay, sorry I said 21, I meant 22.
First quarter 2022. Two years after the first quarter 2024. What did we see in the second quarter this year? We saw performance was improving, and now in the third quarter we see that performance is improving even a little more. Right. And again we say what we do and we do what we say. Okay, and of course Emergency, I said that was a culprit. And of course it has a huge impact on the total results. When you see that this represents such a big part of our total business, 43%. We see that the other business areas, we are a well diversified company. And also geographically interesting to note that the rest of the world approaching 20% of total sales. Speaking of sales, the most important part of revenue is the recurring revenue, and we see that it is steadily increasing.
Has been so for almost a decade. It now grew 6% year over year. And annual recurring revenue now represents NOK 334 million. So this is very comfortable. And again the counterparties within the public sector and minimal churn. The revenue mix is a favorable one. We saw that again, software and new licenses and recurring revenue represents a large part 84% of total sales. And also please note that year to date, if you look at the year to date numbers, you see that the increase in sales year to date on licenses is notable. Notable indeed. And hardware sales, they were a bit low this quarter. Nothing special, seasonality, they come in, they come and go. We wouldn't be surprised if they pick up in the fourth quarter again, professional services, they were a bit lower than expected and on par with last year.
But again, if we break it down and see who performs and who do not perform, it's not like nothing has happened. I mean, Sverre mentioned that we were promoting them. Invoice your hours and do some work. Most business areas, they perform on par or above last year or well above last year. There's again one culprit, and that is within Emergency. So it's all linked to that business area. Cost is developing favorably. There's still more to do on OPEX. Yes, but of course we will continue to focus on the gross margin. Of course, targeting 5%. We are on track. Slowly but surely we're getting there. When it comes to the number of employees, again, the reduction in FTEs implemented, they were implemented at the end of the quarter. This is entirely explained by the divestment of the Filipino operations.
We agreed the terms at the end of June, at the end of the second quarter. We said during the second quarter presentation that we would close the transaction during the second half of this year. We closed it during the third quarter, at the very last day, and then also the 20 people were released from their duties, but that happened on the very last day of the quarter, so obviously it had no impact on numbers, so the 271 FTEs that we present as at the end of the last day of the quarter, it's not the average. Right, so that will have effect from the fourth quarter and onwards, and the same thing with the decentralization of emergency, that will take place in the fourth quarter this year, so that will have a full effect from the first quarter next year.
That is what you should put into your model. Okay. Other costs, half of it. Office lease, software for internal use. It's where it should be. Okay. The EBITDA margin, yes, it's below target, for reasons that I have explained. Again, is a weighted average. Most business areas, except for Emergency and also LIMS, they are on at or above the target. That said, it is a significant improvement compared to the first quarter of this year. And also, please note, year to date, it's not only this quarter. Year to date, EBITDA margin has improved. And also the nominal number, the NOK and the. And the cash EBITDA. So year to date is also, we see an improvement there. And the current ongoing initiatives, both like the divestment of Cebu, the effect that it has, you know, had already, and then the gradual effect it will have during the.
Over the next, you know, half year will have a positive effect. The same thing with the decentralization of Emergency and the right sizing of the cost structure. There it will have an effect, but it's yet to come. We have started but we are not there again. During the fourth quarter we will complete the decentralization of Emergency. You will see the effect, full effect from the first quarter. So that is that the CapEx. It is just what we have always guided on. Our guidance is around 10%. It was less than 10% during the third quarter last year. It is less than 10% this year. What you may notice that the CapEx not related to software, the PP&E was reduced. It's normally around 1%. It was 1/10 of that this quarter. We didn't have to invest that much.
We are managing it efficiently and we didn't really have to invest, so if you don't have to spend the money, we don't. Okay. The net working capital and cash. Let me spend some time on this. I would say a bit disappointing we must admit compared to our targets, so there's absolutely no doubt there's still more to be done in this field, but again, why is it as it is? First remember there is seasonality in the net working capital and cash numbers. Typically approximately 50% of our recurring revenues. They are invoiced and paid upfront on annual fees, and right now remember 334, so say 3, 340, so more than NOK 150-200 million are to be invoiced and paid, you know, annually upfront. All right. That will be invoiced in the fourth quarter.
This quarter and it will be paid in at the end of this quarter and early next quarter. That is the seasonality of the business. That said, our target is to have a net working capital - 10% or better. It was - 5% at the same time last year. It is - 5% now. A few things that should be adjusted for like the sale of the Filipino operations as a seller credit and also Norwegian tax refund arrangement that usually is paid in the third quarter. Now paid in the fourth quarter. No drama there, but it represents approximately 2 percentage points. So in all fairness it should be - 7% versus - 5% but still not good enough. You should expect to see a stark improvement in Q4 and especially Q1. That is. And again we are not.
We are a bit thinner on cash than we would have liked, but we know where to find it and we are not running out of cash. Okay. That said, again, our target and goals, they remain the same and we will continue to grow organically, precisely. But hard. And we will try. And we will continue to do smart acquisitions like the one we just announced with Predicare. And we will probably continue to work on those small smart acquisitions that will take us there. Okay. To conclude, our priorities: we will continue to focus on organic growth and, as you have seen, it is very good in all business areas except one. We will continue to improve the margin and we have told you how. And it's about maintaining growth and reducing the salary personnel. As simple as that. Cash discipline.
Yes, cash conversion, net working capital. Everything that has to do with the accounts receivable. Everything that has to do with that. It's a focus, a top priority area. We will continue to further decentralize. Again, the medicine that worked so well for all the other business areas. We will prescribe the same for emergency and we have full confidence it will work there too. Was it that Mark Leonard says we are anti-economies of scale corporation. Last but not least, we will continue to focus on M & A. If we can do smart moves, we make smart acquisitions, we will of course do them. Okay, before we go into the Q and A session, room, remember to subscribe to our newsletter. Just scan this code with your mobile phone and you can sign up for the newsletter.
Okay, time to move into Q and A, and we have some questions here. We have currently 13 questions. We will attend to them, and as we address them, you can continue to type in your questions as we speak. One of the first questions here, Sverre, relates to the performance in emergency. And that question is: Can you expand on the slower growth in emergency? It seems like it was driven by tough competition given the strong growth last year. What drove the strong growth last year in 2023? And what has changed? Did we lose any customers or any churn, or what happened?
No, not at all. Not lost customers. That's not what's going on. It's actually a large implementation project. So much of professional services, for instance, in one of the areas that becomes a separate business area. So we see also inside the Emergency the same that we see when we transparently look at all the different other business areas we have. So no, there's no trouble there. It is the simplicity of the combo of the continued projects going on versus the number of heads you have in the company. So when we dived into the decentralization, we see that there are a couple of things on the income side, efficiency and invoice hours, as we have talked about, and there's a couple of things on the number of FTEs. So the actions I presented a few minutes ago, they will solve this problem, this challenge in Emergency.
Okay, there's another question on Emergency. You may have answered it partly already, but the question is, what is the problem with Emergency and what are you doing to address it?
Yeah, I think a more general answer to what is the problem is actually in my head that it isn't decentralized because it's complex software. It's also a lot of different types of software, and to get between them and to have all these business areas to perform well, the clarity and responsibility is actually more important than people think, so we are now working on appointing the four leaders and will from the 1st of January solve the problem by being decentralized, so that is actually in my head, the fundamental challenge that it hasn't been, so all in all, we're quite happy with the development there.
Okay, let's continue with Emergency. And there's a question here from John. What will the effect from reduction in FTEs be on personnel expenses in Q4 and what are expected cost effects from reductions in Emergency?
We haven't published these numbers in the quarter, but as I showed you in the graph, when it comes to the number of personnel trend, and you can download the presentation and you will see the trend there, so you can make your own calculations. But obviously there are a number of people. When we decentralize, we see that there are a number of people there as well, so all in all, the summary of the ramp down, of the remote sorting process and together with the emergency process decentralization, we see that the summary of that brings us back to where we want to be and that's the most important thing, and you can do your own calculation using that slide.
Okay, and another one on the FTE side. Let's take a look at that. I believe we touched upon it. It came in before I went through, but did the headcount reduction have any impact on OpEx in Q3? And what was the timing of the reduction in Q3? And when do you expect the additional 30 FTEs to begin planned for 2025? And can you say something about the timing for these cuts? I combined two of your questions, Emilio. So as we said, the employees, the 30 FTEs that left us in the third quarter, sorry, 20. They left us on the last day of the quarter. So we had no impact on Q3 whatsoever. It will have impact on Q4 and the remaining 30 that are still there. What can we say about those?
What we can say is that each business area that uses is primarily three business areas using these people. They have the plans to secure that we ramp down everything within the first six months of next year. So that is the plan, and before that the decentralization will add reduction in Emergency.
Okay, that's a question about the income side. A few questions from John here and one is related to professional services and the question is what's the status of professional services, what has been done and what are the effects so far?
All the business areas have gone through in detail the effect on how each individual is performing, and the good thing is that every employee in the company, including Einar and myself, we are logging our hours to secure that we have a complete company wide statistics. And based on that all the business area managers have done a thorough walkthrough of how this is working, and as Einar mentioned when you went through the slide per business area, I think all of them are performing well and has had the effect entering the third quarter compared to last year. So all in all that has went really well except for Emergency where we see it's relatively slower than it should be, but then again to fix that the decentralization and the transparency and focus and responsibility will fix that as well.
Okay, there are some more questions on FTEs and the Philippines and also the timing of the effects, and the question is what will the effect be from the Philippines divestment be in total and what the effect will we see in the results in Q4, Q1 and Q2 next year, so I guess this relates to the timing. When will it kick in? You have touched upon it, but maybe can it be more precise or how should we think about this?
Again, we haven't published specifically what this part and the other part is doing. But the simple calculation is this: that the summary of the number of heads reduced in the fourth quarter based on emergency decentralization is one thing, and the first two quarters next year we will finalize the ramp down of the Philippines, and the summary of that is bringing us back to where we want to be. That is actually the calculation that I've done.
Okay, thank you. Another question on the Philippines. I'm trying to group them here. How similar are the OPEX FTE levels of the Philippines FTEs versus on a group level? That is a very good question. And the thing is, you know, way back in 2008 or actually before when the Cebu operations was first acquired, the cost difference was substantial. But over time it's fair to say that one, the salary increases in the Philippines has been higher than it has been in the Nordic. Inflation has been higher. New pension schemes, etc., have been introduced. And also the Norwegian krone has weakened very much against the Filipino peso. So the huge cost advantage is really, you know, disappearing. It's still there, but it's not, as you know, of the same magnitude it was 10, 15 years ago. It varies a bit, the cost level.
So the lowest paid are definitely, you know, on the salary base alone, more competitive. The highest paid are approaching Nordic salaries. So that's where we are. I think I'll leave it at that. And then there's a question still on salaries, and I completely understand, because that's what we have to attack. I mean, COGS and other costs. Yes, but those are the coins in the pot of money. We need to focus on FTEs, because that is where the bills are. That's the bulk of. And can you explain what the difference between personnel expenses in Q3 last year to this year consists of? You're probably asking about, you know, why the jump. And the reason is there are several things. One is the annual salary increase that comes. That is one part. There are actually more people. That is another part. And some consultancy.
That is. And guess where most of the consultants are in Emergency, so I don't have to. That is a cocktail of those, really. Okay, and then let's move on to M&A. Sverre, there are some questions here on M&A, and that is about the M&A funnel. How many targets do you have that are a good fit with your existing business areas? And are you in DD with any? And what are the size of these targets? So you have to tread carefully here.
Yeah, I agree. It's of course difficult for me to talk about things going on that are not published. What I can say in general is that we have, as you've seen, it had been a slow action on the M&A side the last couple of years. Although we started with one that we published now that will be closed in the fourth quarter, but that doesn't mean that we don't have high activity on the area. So we have a lot of discussions both with smaller targets, the size of the one we published, and we also have discussions with bigger ones. So we do that and have that for years. And also the one we published, just as an example, we have talked to them for many years, since more than five years.
So all in all, I'm confident that we have a funnel that is good enough to reach the target that we published when we IPO'd. I know that we are slightly behind when it comes to the year we hoped to be there, but all in all the funnel is good and we handle it properly, so you just have to wait to see, and we will publish the new projects when they arrive.
Okay, we have six minutes left and five questions, so let's try to attend to them. Another question related to M&A and funding it. How many newly issued shares will be bought back and how much dilution should be expected in the long run? And what are your competitive advantages when it comes to acquisitions compared to other serial acquirers? Let me take the first one and you can take the second one, Sverre. We have bought back shares amounting to approximately NOK 30 million. And you can see in the table in the report, you'll find an overview of what's bought back. And there's no dilution in buying back shares and use them. There will be a dilution if we issue new shares as a compensation for an acquisition. And the competitive advantage. What are they, Sverre?
Well, if you take an example, like the acquisition we announced a few weeks ago, that is a typical thing where the owners see that the best home for their solution is Omda and such a triage solution, a highly valuable methodology and software that has been working for 20 years. And then we add that to contracts and processes that we have. Then you see the synergy. So that is why we get more out of it. And also it's good for their customers and for their employees.
Okay, two more questions here that relates back to the salary, personal expenses, EBITDA margins and the timing. Let's take those. One is about the seasonality effect on the salaries. The seasonality effect, typically you see it in the third quarter, is related to holiday pay arrangements. The accounting for these under GAAP, SGAAP and NGAAP, it amounts to, say, roughly NOK 10 million. If you compare Q2 to Q3, Q3 around there. Then one question from DEFA, and that relates to the margin you say your current ongoing initiatives are expected to take you to your EBITDA margin of 30%. Can you give us a detailed bridge from where we are today to your 30% goal with what each step will bring and the certain timing of it, how precise can we be? Maybe we get a chance to go more into the detail later.
Yeah, this is at least one thing that the graph that I went through today, which is in the presentation you can download. If you use that to calculate, I think you'll find the answer. I think it's as simple as that, as you see the strong growth on the recurring revenue that will stay there and you see the reduction of FTEs, you will get the answer.
But maybe one way to think about this year is that we said that, you know, we have launched initiative of the ramping in Cebu. We have sold and we closed acquisition that divestment. Approximately half of them, they left us at the last third quarter. They are not there in the fourth quarter. The rest will gradually be phased out until the second quarter next year.
That is correct.
And so that's one way of thinking about it. And also I think you said that the decentralization of Emergency will take place and be completed in the fourth quarter. So we're heading into the first quarter next year with a completely decentralized organization.
That's correct, and if you put that into your calculation, you will get the answer.
Okay, two more questions. One really relates to M&A, I assume, and that is what is the size of the seller's credit? Right now there is no seller credit, so no off balance sheet seller credit. In the bond agreement we have a carve-out for up to 100 million NOK in seller credit. But right now there is zero. Okay, there's one more question and one and a half minutes. So I think this aligns well, the last question is a little different. Good morning. Thank you. Good morning to you too. What would you consider to sell the company if there is an offer at four to five times sales? And what is your agenda for succession and deepening the bench? There's really two questions bundled as one.
First, when it comes to selling the company, if someone makes a bid for the company, that will be handled according to laws and regulation and good corporate governance. So that would be handled by the board and decided by all shareholders and recommendation would come from the board of any offer. So that is really a board and general assembly question. And the last, what is your agenda for succession and deepening the bench? I mean we will not live forever, Sverre, even if we. We can try, but we'll probably die trying. So what about succession?
We're going to stay there forever. I think that's the initial plan and of course what's going on now is very interesting. We're going to stay there to reach our goals and we'll see what happens.
So you're not getting rid of us that easy. We actually enjoy what we're doing and we are on the right track. Okay, there seems to be no more questions and time is up. We hope you have enjoyed this presentation and hopefully you have come to the same conclusion as we have. The glass is not empty. It is half full. And we will promise to keep filling it over the coming quarters. Tune in again late February, when we will present the results from the fourth and final quarter of this year. And until we meet again, thanks for watching. Enjoy your weekend. Take care and stay safe.