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

Good morning, and welcome to today's broadcast where we focus our eyes on Ework Group who has published a report for the second quarter of 2026 this morning. And standing beside me here in the studio is CEO, Daniel Almgren as well as CFO, Johanna Estra. Welcome.

Thank you.

Thank you.

We'll give a short presentation in a moment. But before we do, could you summarize the quarter quickly?

Yes, very quickly. In accordance to plan, I would say. This is what we expected to come out of Q2.

And Johanna, any initial thoughts from your side?

Some positives and some trends that we have seen in the last quarters.

Then let's hear more. Go ahead.

All right. Having joined Ework in November of last year, I am now a little over 8 months into this journey, and this is my third quarterly report. In my first presentation, roughly 6 months ago, Johanna and I outlined the plan for the full year 2026. For the first 2 quarters, we have followed this plan with business development fully in line with our expectations. The new and leaner organization that was announced and implemented in Q1 is now fully operational. Our focus has been and still is to build commercial capabilities to allow us to thrive even in softer markets. Although we are not fully there yet, we have taken clear steps in this direction through a renewed customer focus and as a result, have secured important business wins in the past quarter. Perhaps not surprising, but still important, we are seeing an increased demand for AI-related competencies. In order to clarify our offering and our abilities within this field and to better serve our clients, we have launched several AI-related services during the quarter, most prominently, our Skillshift Lens and our expert provider function within AI, but more about these later on. As said, financial development in the quarter has been fully in line with our expectations. We are seeing a continued decline in EBIT versus last year. Naturally, my ambition and the ambition of the whole organization is to reverse that trend as soon as possible. To that end, the fact that order intake was higher in Q2 compared to last year is encouraging. It is the first time since Q3 2024 that we have seen a year-over-year increase in order intake, and before then, since Q1 2023. Still, I would like to see this trend continue also in Q3 before concluding that we have turned a corner. Looking at development by industry and market, a couple of trends are clear. Firstly, public sector is outperforming private sector. Secondly, within the private sector, telecom and energy are the only 2 sectors that are seeing increases, where all other sectors have negative development year-over-year. Third, Norway is the individual market, which is seeing the most positive development with other markets, including Sweden, still having negative developments. Fourth, the negative development in -- developments in Denmark and Poland are driven primarily by a small number of large clients scaling back on their consulting demand. Fifth and lastly, although not visible in these aggregated numbers, we are starting to see a positive development for a few of the Swedish regions or market units as they're called in our terminology. Let's then spend some time on AI, which likely is the most important trend shaping the labor market right now. The discussion is no longer about whether AI will impact organizations and jobs, but when the shift will happen and what capabilities are needed to succeed in this transition. We see growing demand for AI-related competence across virtually all industries. New specialist roles are emerging rapidly while AI capabilities are increasingly becoming a baseline requirement across an increasing number of existing roles. At the same time, many organizations are struggling to turn AI ambitions into practical execution. A recent survey by Statistics Sweden found that for 3 out of 4 Swedish companies, the biggest barrier to AI adoption is not the technology itself, but access to the right skills. We see the same challenge across all our markets. This is where Ework can create real value. During the quarter, we launched a comprehensive AI offering built around 3 complementary components. First, we provide access to one of the largest networks of AI specialists in the Nordics, covering everything from AI development and architecture transformation and strategy. Second, we have introduced dedicated expert provider AI capabilities. These experts help clients understand market, identify the capabilities they need, and secure the right expertise for both immediate needs and long-term transformation. Third, we launched Skillshift Lens, a free platform that helps organizations understand how AI is changing roles, ways of working and future skill requirements, giving them a foundation for workforce planning, transformation and a starting point for more informed strategic discussions. Together, these capabilities help clients move from insight to execution. We help organizations understand the shift, secure the right talent and turn AI investments into tangible business value. For us, this is a natural extension of our role as an independent talent partner. We don't just connect organizations and expertise, we help them navigate one of the most significant workforce transformations of our time. And with that, I leave the word to Johanna.

Great. Thank you, Daniel. We will start with an overview of our financial performance in the second quarter. Revenue amounted to approximately SEK 3.1 billion, representing a 13% decline compared with SEK 3.6 billion in the corresponding quarter last year. We continue to operate in an uncertain market, where the client remains cautious, postponing investments decisions and maintaining a strong focus on cost control. At the same time, as Daniel mentioned, the ongoing AI transformation is reshaping the market landscape and contributing to a more complex business environment. The decrease in revenue was broad-based across most of our markets, with Norway being the exception, where we have seen a gradual recovery over the past few quarters. Norway has faced challenges since the implementation of the new labor legislation a few years ago, and it's very encouraging to see that this market is now showing signs of improvement. Denmark has remained challenging in the recent quarters, primarily to workforce reductions by one of our larger clients. Across Denmark and our other markets, we continue to invest in our sales organization to strengthen our market position, gain market share and win new business. Going forward, our focus is on stabilizing and growing our gross profit. Gross profit declined in line with revenue during the second quarter. However, I am pleased that we have maintained our gross margin despite the weaker market conditions. We continue to experience pricing pressure in certain procurement and tender processes and that is due to the higher competition across most of our markets in the current economic environment. EBIT amounted to SEK 28 million in the quarter compared to SEK 44.8 million in the corresponding period last year. The decrease was primarily driven by lower revenue that was partly offset by a reduction in OpEx. And during the first quarter, we announced a reorganization expected to generate annual cost savings of approximately SEK 80 million. And in addition, we have implemented further efficiency measures related to our facilities, which are expected to reduce annual cost by approximately SEK 5 million. Looking ahead, we do not foresee any need for significant investments in the near term. Our geographic expansion strategy can be executed in a low-cost efficient manner with limited upfront investment required to enter new markets. We have also completed the upgrade of our digital platform, which further strengthens our operational foundation. In addition, our business model is relatively scalable, providing flexibility and resilience in weaker economic conditions while limiting risk. Order intake for the second quarter amounted to approximately SEK 4.4 billion compared with SEK 4.1 billion in the corresponding period last year. We saw positive developments both in Norway and Sweden, as Daniel mentioned, also, while Denmark declined due to the previously mentioned workforce reduction. Order intake from the public sector increased during the quarter, driven primarily by growth in Sweden and Norway. The private sector was somewhat weaker with lower activities in consulting, life science, banking, finance and technology. We have seen some small signs of stabilization in a number of requests during the quarter, but no clear signs of recovery in the market. Average contract lengths continue to increase, which we believe reflects the ongoing uncertainty in the market and the customers' preference for securing key competence over a longer period. Market conditions remain mixed across geographies and industry. The automotive sector continues to be characterized by caution and uncertainty while we are seeing improvement demands in sectors such as telecom and energy. While the market environment remains challenging, the increased order intake and signs of stabilizing demand are encouraging developments. However, it's still too early to interpret these trends as evidence of a broader market recovery. Revenue remained below last year's level in the second quarter, continuing the trend we have seen in the last quarters. And as mentioned, the decline was broad-based across most markets, with Norway being the main exception. And this is, of course, reflecting the continued impact of the prolonged economic downturn that we have seen. Increasing business volumes remains our highest priority. To support this objective, we continue to strengthen our commercial focus and enhance our sales performance across the organization. EBIT was, as mentioned, primarily impacted by the lower revenue levels. At the same time, we're currently not planning any significant investments that would increase the cost base. And with that, I will hand over back to Daniel to summarize.

Thank you. And to do that, to summarize, our second quarter was fully in line with our plan and our expectations. The new organization is now fully implemented. Cost efficiency measures are executed with full impact from 2027. Our focus is primarily on 3 things: one, increase customer focus; two, grow and enhance our sales capabilities; three, be a leader in the AI transition. Longer term, our aim is to become less dependent on just one geographical market, Sweden. To achieve this, international expansion has been and will remain an important component in our strategy. This is progressing according to plan with most recently, placement of the first 2 consultants in Belgium on assignment, being a symbolic highlight of the quarter. Thank you for your interest and time so far and handing back to you, Mikael.

Thank you very much, Daniel. I think I'll begin where you left off before we let the analysts ask their questions.

You mentioned that you don't want to be geographically dependent on Sweden. And Johanna, you also mentioned that you will be able to do this expansion relatively capital light. Can you elaborate on what allows you to do geographical expansion while not doing so much investment.

Yes. So we have an organic approach to our expansion, meaning we don't acquire like a target company to enter into a new market. Rather, we try to build on the existing client base, which often consists of companies that have activities in many more countries than the Nordics and Sweden specifically. So if we have a shared and joint interest in entering into a market, if we find a couple of those relationships, then we know we have sort of the right conditions for entering into a new market.

We will now let analysts in and Dafina Shehu from ABG Sundal Collier.

Dafina here from ABG. My first question is on order intake. So this was the first increase in several quarters. How much of this is public sector driven versus driven by other segments? And do you see this increase as early signs of stabilization?

I'll start with the second part, and then I'll let Johanna answer the first part, I think. It's not a bad sign. It's the sort of short answer. But as I said during the presentation, I would like to see the trend continue for another quarter to be able to sort of more definitively say that we've turned the quarter. We have seen an example as said before. In Q3 of 2024, we also had an increase in order intake, and that didn't result in a material sort of trend shift in the financial results in coming quarters. So once -- 1 quarter is not enough. But again, rather an increase than a decrease.

And on the public sector, I would say that we have seen a shift in the trend in the last quarters. Public sector has been weak during this economic downturn. But now we see a trend with increased volumes. So a lot of it is driven by public sector, and we also have a larger client that we won some months ago that we are now ramping up volumes. So that is basically one of the key drivers.

And just on the margin as well. So the gross margin has held at 4.1% for 6 or 8 quarters despite volume declines. What is driving that resilience more specifically? Is it pricing or something else?

I would say it's a combination. We have talked a lot about our add-on services that are a margin booster that continues to be that. But also a factor that we have long framework agreements. So a shift in the margins would take some time to both increase and decrease and that's one of the factors that we continue to see this strong margin.

And just my last question. So Norway sales continues to increase, while the other markets decline. Would you say Norway is a leading indicator for the other Nordic market? Or is it running on Norway-specific dynamics such as telecom and energy?

More of the latter, I would say. In our terminology, we sort of seen Norway as one market unit, whereas, for example, a region in Sweden will also be a market unit. And again, the way we present results in these types of forums, we look at Sweden as an aggregate. But we are sort of seeing the same type of development that we've been seeing in Norway in a couple of the Swedish market units in the regions as well. Is that a harbinger of sort of more positive times to come? Too early to say. I would say there's nothing that says that Norway ought to be the first region to sort of increase, but it's -- there's nothing saying that they should be last either. So similar to an increase in order intake. It's a positive sign. It's too soon to say that that's sort of the leading indicator of a results uplift.

If you have any more questions, you only raise your hand. And moving on then from analysts to viewer. Someone writes, hi, you described Ework as a partner that helps clients move from AI ambition to actual change. What sets you apart from a traditional consulting firm or an HR tech platform in that offering?

Since we are an independent party in this sort of if you look at the consulting house, they have their sort of fixed resources that they need to transition into new skills. Since we operate across a breadth of these consulting houses and freelancers and all that, we will encourage the market, try to inform the market about what demands and what skills are in demand. But we don't, ourselves, need to sort of transition an entire workforce into a new skill set. Instead, we can source that talent from whoever does it best for the time being, meaning our access to the talent is quicker than any sort of generic or average consulting house.

And moving on then to the order intake because it is a highlight in this quarter. It increased and Dafina asked about that. And you've mentioned in the presentation as well as in the beginning of the Q&A here, that it's too early to tell, but how many quarters do we need until you're certain?

Two.

So Q4.