Ework Group (Stockholm:EWRK) Q3 2026 Earnings Call

0:00 Good morning. E-Work Group has published a report for the third quarter of the fiscal year 2026. And joining us here in the studio is the company's CEO, Daniel Ahlengren, joined by CFO Johanna Estra. Welcome. Thank you very much. You will give a presentation and afterwards we'll come back to ask a few questions from both the chat, but also joining analysts. So go ahead. Thank you very much.

0:27 Before we get into the financials, let me briefly highlight a few key developments from the quarter. First and foremost, we finalized our strategy for 2027 to 2029. I will come back to that later in this presentation. We also took an important step in Germany through the acquisition that provides access to an AUG license, a prerequisite for us to get access to attractive agreements and continue to see encouraging signs from our commercial activities with more business opportunities, tenders and a growing sales pipeline. Also, and importantly, AI continues to reshape the labour market and represents a significant opportunity for e-work in more ways than one. AI-related demand increased by 134% over the rolling 12-month period, making it our fastest-growing competence area.

1:21 We see more organisations are moving from exploration to implementation, increasing demand for specialised expertise and workforce transformation. Finally, while the market remains cautious overall, we are seeing signs of stabilization. Norway delivered growth, the decline in Sweden slowed, and we continued to strengthen customer relationships, including the important agreement with Tetra Pak. At the same time, our gross margin reached 4.3%, the highest level in five years. With that overview, let's look at the quarter in more detail. The most significant development during the quarter was, as mentioned, the expansion of our long-standing partnership with Tetra Pak.

2:08 Building on more than a decade of collaboration, E-Work has been appointed the exclusive MSP partner for interim consultants across all competency areas in Sweden. The agreement significantly broadens our role and positions E-Work as a strategic partner in managing external talent for one of the world's leading industrial companies. We are also pleased to have renewed and expanded our relationships with several important customers, including Husqvarna, SKF, Elevio, Malmöstad, Öresundskraft and Telemark Fylkeskommune. These agreements reflect continued trust in eWorks' ability to deliver specialized competence through efficient supplier management. At the same time, we secured new business Nobia, further broadening our customer base and creating opportunities for future growth.

2:57 Taken together, these wins demonstrate the strength of our customer relationships, the relevance of our offering and our ability to create value for organizations. We look forward to building on these partnerships in the quarters ahead, all the while further strengthening our sales efforts. Regional development was mixed, but with several positive signals. Norway delivered growth, while the decline in Sweden slowed and was largely concentrated in the private sector. Denmark saw a stronger pipeline, while Finland, Poland and Slovakia continued to be affected by the previously ended consulting contract. Manufacturing, public sector and energy increased their share of business during the quarter, while automotive and consulting remained weaker.

3:43 Meanwhile, our expansion in Belgium, Germany and the Netherlands continues according to plan. Let's also spend some time on the omnipresent topic of AI, which is becoming a significant growth opportunity for e-work. Demand for AI-related skills is increasing at a fast pace. This growth accelerated during the Q3 as more organizations moved from experimentation to implementation. We also continue to see a rapid expansion of AI talent in our network. The number of newly registered consultant profiles with AI competence increased by 11% compared with Q2. And today, more than one in six new profiles joining eWork have AI-related skills. This development is also accelerating.

4:31 Through our tools SkillShift Lens and SkillShift Temp, both accessible via our website, as well as expert provider AI and our specialist network, we support customers in securing critical AI capabilities and navigating the fast-changing talent landscape. E-work is especially well positioned to capture the growth, the growing demand for AI competence. Connecting clients with specialists is what we have always done. Cutting-edge knowledge within the field of AI increasingly sits with specialists who are freelancers who work in niche consultancies. Our access to these specialists via our vast network and our ability to match demands of a large client clients with a dispersed supply is and will remain a real competitive advantage for us.

5:22 During the quarter, as I said earlier, we finalized our strategy for 2027 through 2029. The strategy builds on the long-term shift shaping our market and provides a clear direction for the next phase of e-works development. The forces shown here reflect some of the most important changes affecting e-work. Firstly, it's clear that in the last few years we have lost business volumes, whereas margin levels have held or even improved. With expected effects of AI and automation, however, we do expect to see margin pressure going forward. This means recapturing volumes will be key to our resurgence, as will lowering our cost to serve. AI will change how we deliver faster than it will change what we deliver.

6:09 We expect that automation will be a key theme for us in the near term. That said though, the impact of AI does not stop there. We see very intriguing opportunities to launch new AI-related and enabled services in the near to medium term. And no, I will not tell you what they are. Finally, a key shift that we see is accelerating across our markets is the move into outcome based delivery and payment models, which in itself is a natural extension effect from the AI tools becoming an increasingly important component in how consultants deliver their services. We see an opportunity to further develop our services to accommodate this development. Our strategic priorities are set to both adapt e-work to these new circumstances, but also to utilize these forces to realize new business opportunities.

7:01 We will develop our offering to allow for multiple service levels, allowing us to serve more varied client preferences and also smaller organizations. Similarly, we will strengthen our offering within project or so-called statement of work. This will be done in combination with strengthening our network selectively. Prioritize skill areas or engineering, cybersecurity and multiple AI related fields. Geographically, we specifically aim to grow our network in Poland, Germany and Benelux. AI will allow us to both automate core repetitive processes to a greater degree and to build new revenue opportunities. Automating the boring and administrative tasks will allow us to invest in value building activities such as proactively advising our clients on what talent to source, how and from where.

7:52 In short, being a true strategic advisor within the field of talent management. Combined with the commercial and operational improvements already implemented during 2026, this provides a strong foundation for long-term profitable growth. With that, I will hand over to Johanna to take us through the financial performance for the quarter.

8:13 Thank you, Daniel. Then we will move over to Q3 financials and start with the financial overview. And for the third quarter, we reported a revenue of 2.8 billion versus three last year. And that represents a decline of about 8%. And this is due to lower consultant volumes in all our markets except for Norway. And as Daniel mentioned, Norway grew during the third quarter and that is driven by telecom and the public sector. Denmark continues to decline and is working hard on building a new sales pipeline. Poland and Finland were impacted by an end in client contract that we have reported about earlier. and this is the trend that we've seen the last quarters however it's really positive to see the stabilization in Sweden Sweden which is our largest market with the highest impact it is too early still to talk about a broad market recovery but we see some positive signs Gross profit decreased by 7% but gross margin increased to 4.3%. We have reported before and mentioned today that volume is our top priority and that that might impact the gross margins going forward. However, long client contracts create resilience

9:45 in gross margins and this effect will take time. EBIT was roughly in line with last year and this is due to lower cost and depreciation that partly mitigates the volume drop. We have maintained cost discipline throughout the year and we have also reported of cost initiatives that will have full year impact from 2027. Net financial items improved, minus 4 versus last year's 6.9, and this is due to lower interest and favorable currency effects. EPS grew by 14% during the quarter, and this is due to the higher net profit. Order intake decreased by some 9%. We saw some increased volumes in Finland and the largest decline was in Denmark and Poland.

10:39 Public and private sector was both down. Automotive grew, tech consulting and life science were weaker. We could see a pickup in demand in September and requesting Q3 was up 12%, which is really positive. We also see a trend in the market that clients tend to sign longer contracts to secure expertise. Looking at the key drivers for net sales and EBITs. In terms of net sales, the lower consultant volumes are the key drivers. But this is partly offset by higher average rates in the market. It is, as mentioned, our top priority to grow the business volumes.

11:27 We are doing sales investments, but it will take some time to see that effect.

11:32 And also we've seen more opportunities after December and a larger sales pipeline, which is really positive.

11:40 EBIT key drivers is also volume which has the highest negative effect and that is partly offset by the lower cost and depreciation. And with that I will hand over back to Daniel to sum up.

11:57 As we conclude, the third quarter developed in line with our expectations. Activity levels increased after the summer, and we are seeing encouraging signs across several markets. At the same time, and somewhat frustratingly, it is still too early to talk about a broader market recovery, and lean times remain During the year, we have strengthened our commercial capacity, increased customer engagement and built a larger pipeline of opportunities. Our focus is now on converting that activity into new businesses and sustainable growth. We are also positioned to capture growing demand in areas such as AI, data and cybersecurity, where we continue to see strong momentum. Finally, during the quarter, we established our strategic direction for the coming three years. With the strategy in place and an increasingly effective organization, our focus is now on execution.

12:51 While their market remains difficult to predict, we continue to focus on what we can influence and on building a stronger, more competitive and scalable e-work. With that, we are happy to take your questions. Yes, and I am happy to ask them as well. We are joined by analyst Daphina Chihou from ABG Sundahl Collier, and she will ask her questions momentarily. But while she prepares, I thought I could ask a question in between. So looking to your revenues as you presented, they decreased by 8%, but looking at your EBIT, the decrease wasn't as dramatic. You're maintaining your margins, but what allows you to maintain profitability despite a slower market?

13:40 one part is that we have had a long focus on gross margins and we do have long client contracts so that work has paid off so we see an increase and have for some time in the gross margin and on top of that we have had a cost focus and also had some initiatives to decrease our cost base so that are the two main drivers I would say And will this continue into Q4 next year?

14:10 Yes, of course. But as mentioned, we are focusing more on building volumes again and that might lead to lower gross margins going forward. But the cost discipline will remain and we will be very careful with investments and the right ones. We turn then to Daphina Chehu from ABG Sundal Collier who will ask her questions.

14:37 Yes, good morning. Thank you for the presentation. So just a question on the market position. As a dominant player in the weaker market, does your scale help you win share? Or does it make you more exposed when clients cut back on the consultants?

14:55 I think what we've seen historically and this time around for the past few years is no exception. The broker role that eWork has is more subjected to macro trends than pure consultancies. At least that's my take on it. On the flip side, that should also work in our favor on the way up in a more favorable macro environment.

15:26 Yes, thank you for that. And how do price and pricing discussions with clients look right now? Is that driven by actual price increases mix or better margins and new contracts, just that the sales per consultant rose in q3?

15:42 Do you want to take that one?

15:46 I would say it's a mix of everything we have seen surprisingly increasing average rates and I assume that is partly based on our mix with more senior competence and expertise and those prices tend to be more resilient than like the general consultant so a mix of all the things you mentioned

16:16 Yes, thank you for that. And just curious on the AI demand you mentioned, what kind of roles and skills are clients asking for? And is it mainly new AI initiatives or existing roles being adapted?

16:29 Yeah, you can actually have a real time view of how the demand develops on our newly relaunched website in our tool skill shift temp. The latest report is from Q2, but the Q3 one should be quite shortly forthcoming. we can see that the highest demand right now or in Q2 was for LLM application development. And while demand is increasing for AI agent development and really specific roles or skills such as retrieval, augmented generation and vector search, which please don't ask me to explain what that is. But we have a real time view of how that sort of demand is developing and also how the network is developing. That is, I think, one of the most exciting things about e-work is that we're one of the few players who can actually do that. We can see both sides at once and thus act to inform the network and also grow the network where it matters most.

17:37 Thank you. And just lastly on cost savings, could you clarify the annual cost savings from the restructuring and just how much of that is visible now in Q3 and how much remains to come through?

17:50 We have seen gradual effect of the cost initiatives during this year. The full effect, however, will be seen in 2027, the full year effect, and that is 18 million from the reorganization and additional five from reduction in facilities. Those are the main items.

18:14 Okay, great. Thank you so much. Thank you very much, Dafina. As Dafina mentioned, you talked a little bit about the sales per consultant, because looking at the net sales, it decreases, but the decrease in average number of consultants is a little bit sharper. And I'm curious, since you're growing in AI and you're focusing in AI, AI specialists, what's the kind of pricing there compared to your other consultants?

18:46 I can start with the first one and leave to Daniel on the AI. If we compare to last year, we had some shorter assignments and part-time assignments in the consultant assignments. and the reported number of consultants is headcount. So that's part of the explanation why it deviates from year to year. So that can be kind of tricky to follow, of course. And then also we had an increase in prices that is also explaining the deviation. But since it's headcount, it could depend on how much the consultant is working.

19:31 and in general we're seeing a trend towards higher average hourly rates and I think specifically to AI if you have sort of bleeding edge specialist knowledge within AI you can charge a lot per hour or per project for sharing that knowledge But the main effect I would say is a shift from sort of a mix of junior and the media and senior resources that is skewing more towards the media and senior resources and less towards the junior. And as an effect of that, hourly rates on average rise. And what sort of skills do you currently possess in your talent pool towards AI?

20:13 Well, as Daphina asked as well, you can have a look for yourself if you go into the website and look at the skillshift temp. But what we see is a move on top of what I said to Daphina away from the more sort of generic and early AI skills like chatbot development and LLM training to more specific roles and sort of next gen AI skills. And looking to your market then, you describe a positive momentum but the lead times are longer from first contact to first contract. What is primarily driving that effect?

20:52 I think that's sort of generic to what we do and it's one thing coming from the consumer industry that's frustrated me a little bit that in the consumer industry you can get really quick results out of commercial changes and a new strategy. Here the lead times are longer. You need to sort of identify and cultivate a potential new client. Oftentimes that takes years. And when you get into sort of an agreement situation, that's often a competitive bid situation in the public sector, all times. In the private sector, they tend to sort of go that route even though they don't have to. So it's sort of a formal process.

21:39 and that can span a couple of months and then eventually when you're awarded the agreement that usually takes a few months before it comes into effect and maybe there's a migration of resources maybe there's not if you're starting from zero then you need to start talking with all the sort of responsible managers and the client and make them aware of how we work and make them use us as their broker for talent. And all of that can take some time. I've learned. And does the market condition play a role in this as well?

22:12 No, I wouldn't say so. Not specifically. I don't know if you agree, but that's sort of generic to our industry. It's just that if you've been on a downward trajectory, it takes a while to get onto an upward trajectory, but hopefully once you're on that upward trajectory, it's equally difficult, if you put it that way, to break the positive momentum. And is that true to all services you offer? I interpret at least that there's a high demand for the AI specialist offers. Is the lead time shorter there?

22:47 Yes and no. Within existing framework agreements, yes. the lead times don't really exist in that way because if we're in an agreement and they can start hiring from us if they need the skill and we can offer it then that's really quick outside yes I would say that's accelerating some of the dialogues that we're having sort of a right to play so to speak that we can offer those types of competencies Order intake declined by 9% this quarter, but you described an increased activity after the summer period. When do you expect this improved activity to actually fall into new orders?

23:30 Oh, this is delicate territory. I'll let Johanna answer that one. No comments. No comments.

23:37 No, but of course, if this activity continues, which is really positive, of course, it will have a gradual effect. But it's hard to say. And also back to the lead times, how fast that will go. You want to develop your offer. You want to strengthen your specialist network, increase scalability and deepen customer relationships. It's quite the wish list. Could you elaborate on how you want to do this and what you'll measure as a result?

24:07 Yeah. So first off, I wouldn't describe it as a wish list. It's the result of quite a robust process stretching over the majority of the lion's share this year, involving everyone from our back office staff to our board of directors. That said, I would say that the sort of different activities that's included in our strategy, they're all connected one way or the other. So AI, for example, is a double edged sword in a positive sense that we will see a lot of benefits from the possibilities with automation. And at the same time, it opens up possibilities on the commercial side. When we utilize the automation potential that will allow us to serve clients in different ways than we do today and be more open to varying client demands of how we deliver the services and also reach new types of clients, smaller clients than we have been able to profitably serve in the past. So that in turn allows us to deepen client relationships and so on. I could spend the rest of the day talking about this, but I think I'll stop there. And on what you should be looking for, I'd say our primary focus is on absolute JP going forward. And so that is a measurement to keep your eye on. And also the ratio between EBIT or with IFRS

25:38 18. I've understood that that might not be the... the KPI anymore, but net results, the ratio between GP and net result. I'll be moving on to my last question. So if there's any questions from the viewers, then now is the opportune moment to ask them. So overlooking your geographical market is quite the mixed bag. Norway increased revenues by 21% and Denmark decreased by 25%. What sets these markets apart to allow this contrast?

26:08 I think what they share in characteristics, both Denmark and Norway, is that they have a high degree of client concentration. So a lot of the revenue sits with a very limited number of accounts. So we are sort of dependent on the performance and the strategy of the clients. and it is very clear to me at least that in Norway we've been in a situation with a client that has a strategy that benefits us and that is generally speaking booming in their own right and the situation has been the reverse in Denmark. So we will only sort of get out of that dependency on a few select accounts when we establish a broader client base in both countries I would say.

26:59 And what do you look forward to now in the coming six to twelve months? Moving from sort of we spent the majority of this year again in sort of restructuring and getting to sort of the results of a cost savings effort and in getting a few quick tactical initiatives in place and then formulating a longer term strategy. So now we're done with the thinking, I hope, and we will start moving into execution. And that I'm looking forward to. Johanna, do you share that view?

27:33 Yes, very much. Short answer. All right. Or were you finished there? Yes. Johanna Estra, CFO and Daniel Almgren, CEO. Thank you very much for being here presenting. Our pleasure.

27:45 Thank you. Thank you very much.