Ework Group AB (publ) (EWRK) Earnings Call Transcript & Summary

Good morning, everyone, and a warm welcome to the presentation of Ework Group's results for the third quarter. My name is Johan Lindbladh, and I'm the Chief Communications Officer at Ework Group, and I will be moderating today's webcast. And with me here today to present our Q3 results, I have Karin Schreil, our CEO; and CFO, Johanna Estra. And in just a moment, we'll begin to go through the highlights and insights from the third quarter. And like always, after the presentation, we will open up for questions, starting with the calls, followed by the written ones. And with that, I think I'll be handing over to you, Karin and Johanna.

Thank you so much, Johan. And as usual, I would like to start with a short summary of Ework Group. We are a leading European partner in talent and workforce solutions, primarily within IT, tech and engineering. This year, we proudly celebrate 25 years as an independent talent provider. We support around 500 clients in driving growth, transformation and large-scale projects across both public and private sectors, including automotive, banking, telecom and life science. We continuously adapt to shifting client needs through our comprehensive service portfolio and our global operating model. Through our vast global talent network, we have access to over 225,000 consultants and 30,000 partner companies globally. Today, around 10,400 consultants are on assignment onshore, nearshore and offshore across more than 50 countries. Ework currently operates in 12 sites across 7 European countries. During the third quarter, we announced our expansion into Germany with planned opening next year, a key step in our strategic growth plan towards a strong position as a leading talent solutions partner in Europe. Whether it's about individual talent, teams or advisory, we focus on business needs and real value. We are powered by people and driven by impact. Ework offers a complete total talent solutions portfolio centered around workforce management from strategic planning and talent acquisition to ongoing talent optimization. This makes us a full-service trusted partner to our clients. At the core is our fine and select offering, supported by modular services that can be combined just like lego pieces to meet each client's unique needs while ensuring efficiency, quality and security in every activity. In addition to our core services, we provide a set of value-adding services for both clients and consultants such as Ework Services, Pay Express, Protected Security Services, including background checks, permanent recruitment and near-shoring. In 2025, we are elevating our proposition in talent advisory and expanding our near-shoring capabilities to help clients optimize their cost and get access to the best talent globally. Looking into the third quarter, it was marked by a mix of continued caution and glimmers of light. A number of our enterprise clients paused to reduce consultant engagements while price pressure increased, particularly for our core services in the Swedish public sector. Despite the challenging environment, we successfully won and we extended several key frame agreements. This strengthened our position ahead of a broader market recovery. The Swedish talent market is mature and it remains highly competitive. However, with large demand for talent. Following the uncertainty related to new labor legislation and recession in recent years, Norway is now stabilizing. And in the quarter, we won new public contracts at Ullensaker and Skatteetaten as well as renewals of several existing agreements. In Denmark, the market remains mixed with high demand on one hand and reductions on the other. Finland experienced a certain decline in consulting services in the quarter while securing a major public sector contract. Meanwhile, Poland continues to perform well despite tougher competition, much driven by the continued strong near-shoring trends. Slovakia shows promising growth in consulting and recruitment services. And in Belgium, local operations have now been established with Ghent as a base. Preparations for a market entry in Germany are also underway with a planned start in 2026. AI is playing an increasingly important role in our client assignments with a number of AI-related projects tripling in our platform compared to those without AI elements. This clearly illustrates how rapidly the demand for skills is changing. We are beginning to see the effects among large enterprises where broader transformation efforts are now underway, highlighting the importance of strategic workforce planning to ensure the right skills for development and competitiveness. Here, Ework's new workforce future readiness program supports clients in aligning their business strategies with long-term workforce planning. Our talent network continued to develop positively in the third quarter, reaching 227,000 registered consultants with a majority in IT. Our talent specialists are working systematically to strengthen the network with the right skills and to build long-term relationships with consultant, suppliers and partners. All of this is done in line with the market demand, which in the third quarter was particularly high for skills in AI, software development, technical testing and verification. The demand for our add-on services, particularly Pay Express continues to rise, and we see a growing interest in insights, guidance and advisory related to the volatile global environment. This is also driving growth in our Protective Security Services, including background checks and related security offerings, which are now being rolled out across all of our markets. The growth in add-on services contributed to the continued positive trend in our gross margin, which increased to 4.2% in the third quarter, in line with our strategic focus on value creation and more profitable business. The EBIT of SEK 28 million was impacted negatively by costs related to our strategic initiatives in digitalization and automation as well as restructuring and a group conference. Current operating costs are developing according to plan. Finally, our new digital platform is now operational across the Nordics, enabling automation, AI-driven matching and greater efficiency, improving quality of the activity and lead times for our clients. And more on that to come in the third slides. Our rollout to Poland and Slovakia will follow in the fourth quarter. In Sweden, order intake and consultants on assignment decreased during the third quarter compared to the same period last year. The uncertainty regarding tariffs, challenges in supply chains and continued cost focus in our clients' businesses are some of the main drivers behind the weaker demand and declining volumes. Poland continues to show strength while not growing with the same speed as in previous periods. The growth comes from a continued capability to capitalize on the European trend for near-shoring as well as developing local clients to further boost our volumes with profitable growth. In Norway, the trend is now more positive following the new labor legislation and overall recession in the recent years. We have strengthened our position in the public segment, which provides a stable revenue with a growth in profitability, underpinned by a more favorable client mix. In Denmark, earnings increased based on positive development in a more diversified client portfolio. Lower internal costs is impacting the result positively in the period. However, we also saw a slowdown during the quarter after a long period of strong performance. And this was mainly due to cost and workforce optimization activities at key clients and led to a decrease in order intake for the quarter. Finland showed strength with increased revenue and stable profitability in the third quarter despite a declining market. We do, however, see signs of a slowdown with a decrease in order intake for the third quarter. Finally, we are, as said, establishing new operations in Belgium with Ghent as a base and have hired a local sales representative who is now leading our business development activities locally. We see good opportunities for growth at new and existing clients, and we leverage our global operating model and platform to support further expansion and scaling. Looking at our industry segments in the third quarter, we saw an increasing strength and demand from our public sector clients, where we added new frame agreements in Sweden, Norway and Denmark. The ramp-up of consultants on assignment at Swedish clients Svenska kraftnät is also contributing to overall volume growth. All of this means that the public sector is once again our largest segment in the third quarter. The uncertainties in the automotive segment stemming from macroeconomic policy changes led to various cost reduction programs in our clients' businesses, which in turn affected Ework's consultant volumes in the quarter. Following this, the Automotive segment decreased its share of Ework's industry coverage to just about 20%. Within the private sector, we see a continued increasing demand from clients within banking, finance and insurance as well as higher activity in telecom, which leads to a growing number of consultant requests and a favorable growth in the segment. The remaining segments generally reflect the market sentiment for the quarter. And one segment that stands out from the rest is Life Science, where we expect a temporary slowdown in the Danish market related to workforce restructuring and transformation activities. As I mentioned earlier, with our new digital platform now operational across the Nordics, we've taken the next big step, integrating AI into the very core of how we operate and deliver value, both for our clients and internally. Over the past quarter, our focus has been on enabling automation and efficiency within our own core processes. And the key milestone is that we've now gone live with AI-driven candidate matching. This allows us to connect the right talent with client requests faster and more accurately, improving both speed and quality in our delivery. And this is not just a technical upgrade. It's a real enabler for our teams to focus more on relationships and value creation for our clients. At the same time, we're working on automating the entire request to contract process for consultants. And this initiative will create smoother workflows that will reduce manual efforts and provide a more efficient experience, both for suppliers, consultants and clients. It's an important step towards making our business more scalable, predictable and resilient. In the near future, feedback and responses both to suppliers, consultants and clients will be powered by AI, which will create a faster, more efficient and transparent process for everyone. This ensures the communication keeps pace with our growing scale and enhances the overall experience for all stakeholders. Looking ahead, we will bring AI even closer to our clients and consultants. With the upcoming digital client portal now under development, we will empower clients to manage their engagements more independently with full transparency and data-driven insights. This represents a major step forward, positioning Ework not just a services company, but a true platform provider. In short, AI is not a side initiative for Ework. It's embedded in how we create value for our clients, consultants and suppliers. Developing our business, shaping the future and continuously strengthening our position in a rapidly evolving market. And with that, Johanna, I'm glad to hand over to you.

Thank you, Karin. Yes. Let's move over to some numbers then. And looking at the financial overview of the third quarter, we reported a net sales of approximately SEK 3 billion, which is about 7% lower than last quarter, where we reported a net sales of SEK 3.2 billion. And this drop is related to the slower market and mainly to the Swedish market that is also our largest with the biggest volume and therefore, a bigger impact. From this quarter, we do not have effects from the previously reported phaseout of not profitable client contracts and no calendar effects, meaning we are comparing apples-to-apples. We unfortunately do not see any clear signs of recovery in the market short term. Some of our bigger clients have enforced consultancy freezes or reductions in their workforce as mentioned, and we expect this to continue throughout the year, impacting our top line. We continue to be proactive in sales, and we are also winning new frame agreements also in this market setting, which gives a better starting position for a market recovery. Continuing down in the P&L, our gross margin continues to have a positive development, 4.2% versus last year 4%. This is still partly driven by our add-on services, where we are now ramping up sales activities further. We have seen a high demand for security services as a result of the uncertainties in our environment currently, and we are now rolling out the services in all of the Nordics. We see a potential to increase the volume of add-on [indiscernible]. EBIT in the third quarter amounted to SEK 28 million compared to SEK 39 million last year. EBIT was negatively impacted by restructuring costs and by cost for group conference in relation to the celebration of Ework 25 years. And in total, that amounts to approximately SEK 6.3 million. Other than that, we are, as mentioned, doing investments in our new digital platform that is increasing IT costs somewhat. And the financial net decreased somewhat relating to currency effects. As mentioned before, we have taken actions to reduce exposure, and that has already given effect. We continue to have a steady focus on our long-term strategic goals to increase our profitability by higher business margins and scalability. Looking at the order intake for the second quarter, it was approximately SEK 3 billion, which is lower than in last year, SEK 3.2 billion. The order intake decreased, especially in Denmark and Finland, impacted amongst other by reductions in workforce at one larger client. We have, as mentioned, seen consultancy freezes and cost reductions at some of our largest clients at the last quarters and expect it to continue throughout the year, impacting requests and order intake. We do also see that automotive industry is a bit more uncertain given the toll situation and expect some negative impact from this during the year. Energy has gladly picked up, where we are ramping up based on our new frame agreement with Svenska kraftnät. We also see some positive signs from the telecom industry. And we also see that the public sector in Sweden and Norway has stabilized somewhat, and the drop is mainly related to private sector. From the third quarter, as mentioned, we do not have any impact from the previously reported phaseout of less profitable client contracts. The decrease in sales, as you can see in this slide, in the quarter is due to the lower business volumes and less consultants in assignments. We can see that hourly rates remain stable still. And the explanation for the drop is mainly Sweden, where the market remains challenging. Our focus is still on profitable growth, as mentioned, meaning that we will not sign frame agreements that does not meet our profitability requirements going forward. EBIT is negatively impacted from the lower business volume as well, but also by the higher costs relating to the implementation of the digital platform and also by the restructuring cost and also the cost relating to the group conference. On the opposite side, we have a positive impact from the increased contract margins and add-ons that are driving profitability, which is really positive. And given the situation in the market, we are looking into actions on the cost side that can give effect both short and mid long term in order to adapt to the current settings. And then I will hand over to Karin to sum up.

Thank you so much, Johanna. So to summarize this quarterly presentation, we do see a mixed momentum in our different markets and geographies with stronger demand in Denmark and Poland, but continued restrained markets in Sweden and Norway, where, as said, Norway is now stabilizing. We're, at the same time, continuing to generate more profitable growth, and we're seeing a positive trend in our gross margin as a result. At the same time, to further increase profitability, we need higher volumes and a broader client base. We also see a growing demand for flexible workforce management, which plays to our strengths. Internally, the implementation of our new digital platform is nearly done. It's a key step in improving efficiency and creating a foundation for further automation and AI over time. In short, Ework continues to execute on our long-term strategy and work towards our long-term goals. And now we will be opening up the floor for questions from the viewers, and we will start with the questions coming in over the phone if we have any.

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Okay. Thank you for that. Karin and Johanna, we have a few written questions here for you. And the first one says, it seems the market was particularly difficult in Sweden. Why is that?

Well, it's mainly because we have a recession still going on and affecting several of our clients, especially in the enterprise segment. We are exposed to many clients with different types of challenges, but also strategies to further optimize the cost and workforce. And this, of course, impacts also the demand for consultants and contingent workforce. Now having said that, we still see a big underlying demand for skills and for talent who can help with the transformation, as an example, into AI and automation, where new skills and capabilities are needed. So it's a mixed picture. That's why we like to talk about the mixed momentum because on one hand, we see a reduction or a cautious demand. On the other hand, we see major needs. And we are doing our very best at all times to navigate through these mixed momentum.

Thank you. Another question. There was a dramatic drop in order intake in Denmark. What happened there?

So Denmark has been developing very well over the last couple of years if we compare to Sweden as an example. Now we also see some of our clients in Denmark doing similar activities as our clients in Sweden, meaning they optimize workforce, they optimize cost, and this is natural development. But as I said, we also see bigger impact from the Life Science segment and particular clients with big activities going on that is affecting contingent workforce. So again, quite a mixed picture, but somewhat different from the previous quarter.

And do you then see challenges in any industry in particular?

Well, as I said, on a positive note, we see a certain stabilization in public sector across Sweden, Norway, Denmark. And this is a good sign. We do see big needs for talent and skills in public sector in general to drive transformation and development. But in addition to that, we see the Automotive segment, of course, being challenged with global uncertainty and volatile momentum. And of course, that also spills over on our business. And as I said, on the other hand, again, we do see a positive trend in telecom which we are also glad to see, and we have a number of important companies and clients in this segment as well as in the Financial Services segment. So quite a mixed picture where some segments stand out more than others.

Mixed picture again. Okay, thank you for that. And do you see any price pressure in the market?

Yes. We do see price pressure for our core services and in particular, the services in managing spend for clients. That's what we call managed provider solutions. Here, we see quite a heavy price pressure. We see a very competitive market and a mature market in Sweden. That is, of course, driving things in that direction. Now we have a very comprehensive portfolio at hand, ready to offer not just the core services, but a lot of add-on services and additional services that we know clients value and where we can be of great help. So we're doing, again, what we can to navigate through this very competitive landscape, also impacted by price pressure. Looking at consultants, it's a slightly different picture as we reported. So here, we do not see a big impact on consultant hourly rates driving rates down as you could maybe imagine. But this has to do with also the demographics of the consultants we h ave on assignment. And we know that many of our clients are really keen to keep their senior consultants and the experts they need to drive business-critical activities.

Okay. We have one more question here, and it says, considering the continued drop in order intake, do you see a need for further cost measures?

As said in Johanna's part of the presentation, this is something we are always looking into, to see that we are matching our cost base with the volume and our top line. And automation and AI will certainly be an important component in all of this because it will enable us to deliver services at a lower cost over time, and it will provide a very, very good platform for scalability when time turns and the market turns the other direction. So the answer is yes. That's something we're always doing. And maybe you want to comment further on that, Johanna?

I totally agree. And Ework has done a lot of work with the cost base, and we expect it to continue in these levels. And we are doing a lot of investments. So of course, that will impact the cost side. But hopefully, that will increase our scalability and profitability over time.

Okay. I think that was it. Thank you so much.

Thank you so much, Johan. And this concludes also my final and last quarterly presentation at Ework Group. And I'm happy to hand over to my successor, Daniel Almgren, to do the next presentation of quarterly results for the fourth quarter.

And that will be on the 19th of February 2026.

Good. Look forward to that. So thank you.

Thank you.

And thank you.

Thank you.