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eWork Group’s earnings call for the first quarter of 2025 revealed a mixed financial performance, with a notable decline in net sales and earnings before interest and taxes (EBIT), despite a slight improvement in gross margin. According to InvestingPro analysis, the stock appears undervalued at current levels, suggesting potential upside opportunity. The company’s stock saw a modest increase of 0.81% following the release, reflecting cautious investor optimism amid challenging market conditions.
Key Takeaways
- Net sales dropped by 17% to SEK 3.5 billion.
- Gross margin slightly improved from 3.8% to 4.1%.
- EBIT decreased from SEK 44.7 million to SEK 34.3 million.
- Stock price increased by 0.81% post-earnings release.
- Uncertainty remains due to geopolitical factors and market conditions.
Company Performance
eWork Group reported a decline in net sales, falling from SEK 4.2 billion to SEK 3.5 billion, a 17% decrease. The decline was attributed to the phasing out of unprofitable contracts and challenging market conditions in Sweden and Norway. InvestingPro data reveals the company’s gross profit margin stands at 2.16%, reflecting ongoing profitability challenges. Despite this, the company managed to increase its gross margin slightly, indicating improved cost management and efficiency. The EBIT also saw a reduction, dropping to SEK 34.3 million from SEK 44.7 million, reflecting the impact of lower sales volumes. InvestingPro subscribers have access to 12 additional key insights about eWork Group’s financial health and market position.
Financial Highlights
- Revenue: SEK 3.5 billion, down 17% year-over-year.
- Gross margin: 4.1%, up from 3.8% in the previous year.
- EBIT: SEK 34.3 million, down from SEK 44.7 million.
- Order intake: Slightly lower due to contract phase-outs.
Market Reaction
Following the earnings announcement, eWork Group’s stock price experienced a slight increase of 0.81%, reaching SEK 125 from the previous close of SEK 124. InvestingPro analysis shows the stock offers a significant dividend yield of 5.65%, with consistent dividend growth of 7.69% over the last year. The stock is currently trading near its 52-week low, suggesting potential value opportunity. The market’s reaction indicates cautious optimism, likely driven by the company’s strategic initiatives and focus on improving margins.
Outlook & Guidance
Looking forward, eWork Group remains focused on enhancing its gross margins and continuing its strategic initiatives aimed at improving operational efficiency. However, the company acknowledged the difficulty in providing precise market predictions due to ongoing geopolitical uncertainties. The company has revised its growth expectations, indicating that it is unlikely to meet its 30% EPS growth target.
Executive Commentary
Karin Skrill, CEO, emphasized the company’s commitment to driving business growth, stating, "We are doing everything we can to continue and to drive a good business for eWork." CFO Johanne Griksson highlighted the challenges faced, noting, "The market is very uncertain, and we do need the volumes as well."
Risks and Challenges
- Geopolitical uncertainties affecting market predictions.
- Continued pressure on sales from contract phase-outs.
- Challenging conditions in key markets like Sweden and Norway.
- Public sector consulting remains restrained.
- Potential cost measures and operational adjustments needed.
Q&A
During the earnings call, analysts inquired about the company’s strategy for phasing out unprofitable contracts and its exploration of AI for operational efficiency. Executives confirmed these strategic moves and discussed potential cost measures to navigate the challenging market environment. The public sector growth was also addressed, with executives noting its uncertainty.
Overall, eWork Group’s first-quarter results reflect a company navigating a complex market landscape, balancing strategic initiatives with the realities of declining sales and geopolitical uncertainties. InvestingPro’s comprehensive analysis indicates an overall "GOOD" financial health score, suggesting resilience despite current challenges. For detailed insights and expert analysis, investors can access the full Pro Research Report, available exclusively to InvestingPro subscribers.
Full transcript - eWork Group AB (EWRK) Q1 2025:
Andrea Romander, PR and Communications Manager, eWork Group: Good afternoon, everyone, and a warm welcome to the presentation of eWork Group’s q one results. My name is Andrea Romander, and I’m the PR and communications manager at eWork, and I will be moderating today’s session. It’s my first time standing here in this setting, and I’m really excited to be a part of to this presentation. Luckily, I’m not doing this alone. I feel both confident and comfortable knowing that I have two experienced colleagues with me, Karin Skrill, CEO, and Johanne Griksson, CFO at The Workgroup.
Really happy that you’re here. In just a moment, I will hand over to you two to guide us through the highlights and the insights from this first quarter. And after the presentation, we will open up the floor for the viewers’ questions. So let’s dive in and I’m handing over the clicker to you, Karin,
Karin Skrill, CEO, eWork Group: start you so much, Andrea. So happy to be here and present the results for eWork Group in the first quarter. To begin with, as you may have seen, we issued a press release about our preliminary Q1 results already last week. The decision to publish it was primarily related to the high market expectations on our volume and revenue development. And due to an extremely uncertain and volatile market, still in a post recession recovery phase in our biggest market Sweden and also in Norway, the actual volumes have not met those levels, which is impacting our results.
EWork Group today is a leading European Talent and Workforce Solutions partner. We connect our clients’ skills and the needs they have for certain skills with temporary talent in the labor market, primarily in the areas of IT and engineering. All this is built on a strong foundation as an independent talent provider. And this year, we proudly celebrate our twenty fifth anniversary. Today, we serve around 500 clients across public and private sector businesses, such as automotive, manufacturing, banking, telecom, life science, retail and energy.
We have a vast talent network of more than 200,000 consultants and 29,000 partner companies, around 300 own employees. We operate with our own presence across seven countries in Europe, and we are serving clients from more than 50 geographies, supporting by supported, I want to say, by our consulting partners and partnerships in the employer industry. Through what we do, we enable local and global companies and organizations to navigate through rapid growth, transformation and strategic large scale projects. We have a complete offering for Total Talent Solutions that is centered around workforce management from strategic advisory and planning through talent acquisition and talent management to continuous improvement and optimization. Our offering is a powerhouse built around our base services, where find and select consultants is our core.
And all services can be delivered individually or in combination like Lego pieces. In addition to our base services, we have a range of add on services aimed at partners and consultants as well as our clients. Examples of these are eWorks services and Pay Express as well as permanent recruitment, protective security and nearshoring. In 2025 so far, we have continued and refined our offering, while paying particular attention to talent advisory as a way to provide our clients with insights, best practices and knowledge. We will also take further steps going forward in supporting our clients’ cost optimization agenda through an updated and comprehensive suite of near shoring services.
During the first quarter of twenty twenty five, we saw a mixed and highly volatile momentum across our various markets. In Sweden and Norway, many of our clients are still in a recovery phase following the recession, which impacts their workforce strategies and the demand for contingent talent. Together with the phasing out of unprofitable client contracts, this led to lower volumes for eWork in the first quarter than in the previous year. On the other hand, eWork had continued good growth in both Denmark and Poland during the quarter. And this is partly due to the increased interest in near shoring, driven by cost focus and geopolitical decisions and movements affecting our clients.
In the Polish market, approximately 30% of eWORKS business can be derived from nearshoring. And the total revenue for eWORKS in The Nordics in the quarter was overall approximately 18% lower than the previous year, while Poland and Slovakia increased their revenue by approximately 5%. Another positive trend that continued in the quarter was the increase of our gross margin, which ended at 4.1% compared with 3.8% last year. This was largely driven by good growth of our add on services. And this together with our growth momentum in Denmark and Poland was together not enough to compensate for the decreased volumes in Sweden and Norway.
This resulted in an operating profit, which is down from previous year. We continue execute on our established strategy and we are still experiencing the effects of the previously mentioned phasing out of unprofitable contracts. Given the current market situation, we have further strengthened our sales focus and we are working even more proactively with new client sales based on our updated service portfolio. Our sales activities have led to several new frame agreements in the quarter with new clients, but also with existing clients. We are gaining increased and renewed confidence among our existing clients, which is really good and satisfactory.
And we have a good spread of clients across industries as well as public and private sectors. However, with big differences between our different markets. By being close to our clients’ business and needs, we are moving towards a stronger position for eWork as the talent solutions partner. During the quarter, we also launched our new internal digital platform, a key step towards increased scalability and long term efficiency where AI and automation will play an important role. Our talent network also continued to grow and develop well, with a notable rise in client demand for AI expertise.
Additionally, we initiated our operations in Belgium and we are exploring further opportunities for expansion across Europe. Taking a closer look at our industry segments, we saw good development in automotive life science and banking, finance and insurance over the quarter. I do want to mention one thing about the automotive industry, which we all have seen in experiencing uncertainties due to the development in tariffs and geopolitics. EWork is prepared for these type of market fluctuations with our updated and refined service portfolio, with our mix across different markets, but also a broad range of clients within the automotive segment. And this gives us a good spread and the conditions to mitigate uncertainties.
We also saw positive indications from the retail industry compared to the previous year. However, public sector consulting and telecom remained restrained as the three of them declined this quarter compared to last year. Looking into our markets, Ebrok strengthened our position in Denmark, where the order intake increased by 6% compared to the same quarter last year. The increase was driven by the strong demand in the manufacturing industry as well as the banking and finance sector. In Poland, we had a strong start to the year and we saw a positive trend with volumes increasing.
And as said before, this was largely driven by the demand from near shoring alternatives. Slovakia continued to develop according to plan and shows a strong result. Order intake increased sharply in Finland during the quarter, especially from banking and finance, but also from manufacturing. And the net turnover was basically the same from the comparison quarter last year. Both Sweden and Norway experienced challenges due to the fluctuations in the market.
In Sweden, the one of the strongest segment is retail, and the development within banking, finance and insurance was also positive. Both manufacturing and automation was among the weaker industries due to the geopolitical situation and uncertainties around tariffs. Norway continued to be affected by the legislation to some extent, and that is the legislation that regulates the way freelancers and professionals are hired. During the quarter, the establishment in Belgium also continued as said, and this was according to our plan. And from the second quarter this year, it will be reported as a separate market unit.
We have during the quarter started to see positive network effects following the new framework agreement with Svenske KraftNet, which was announced at the end of last year. Here we will have and we have already started handling requests during the month of May. This has notably contributed to expanding our network within engineering. In total, during the first quarter, our overall network grew significantly across all skill domains, engineering, business management, business solutions and system development, demonstrating both the breadth and the depth of our capabilities. The network expansion aligns well with the ongoing client trend, digitalization, globalization, cost control and evolving regulatory landscapes that continue to influence our clients’ priorities.
We continue to see, however, a strong underlying demand for IT and engineering talent, particularly to support innovation and operational resilience. Nearshoring remains a growing interest among our clients. It’s driven, as said before, very much by geopolitical uncertainty and a continued focus on cost control and efficiency. And the demand for AI expertise continues to be on the rise across more or less all industries, further shaping the skill sets we prioritize in our network developments. Recently, we also released our talent trend towards thirty two thousand and thirty report, diving deeper into the long term megatrends towards 02/1930.
And by 02/1930, we believe that the very definition of talent will have expanded, no longer limiting it to humans, but also including AI and new technology. And this pace of change is going to be high. It is expected to continue and accelerate, making adaptability and agility a core requirement for all organizations. And here, of course, eWork aims to be a good and a strong partner. So with this, I’m handing over to you, Johanna, to talk more about our financial results.
Johanne Griksson, CFO, eWork Group: Thank you, Karin. Yes, moving on to financials. We will start with the financial overview. And starting at the top, we reported net sales of 3,500,000,000.0 compared to last quarter SEK 4,200,000,000.0. That is a decline of 17% and that is due to the planned phase out of the non profitable client contracts and that is about eight percentage points of the decline.
And also that we have one less workday during the quarter, that is about two percentage points. And the rest is due to the lower number of consultants in assignment that we see in the first quarter. And as Karin mentioned, this is mainly related to the weak performance in Sweden and Norway. Moving on to our gross profit, of course, that is hit by the lower volumes. I’m happy to report the gross margin that is increasing of 4.1% in Q1 compared to 3.8 last year.
And this is this margin development is mainly driven by our add on services where we see a great potential. But we can also see that we are improving our margins in new framework agreements, which is really positive. And as we have reported before, of course, we are in a transition and it will take time, but the effects will be seen gradually. Moving on to our EBIT. We reported an EBIT of 34,300,000.0 versus SEK 44,700,000.0 last year.
And that is also an effect of the lower volumes in Q1. That is the main explanation. We have a slight increase in cost during Q1, and that is related to IT cost and our go live of our new internal digital platform. But as reported before, eWork has done a lot on the cost side, and we expect the cost base to remain in these levels. And we do not see a big increase going forward or larger investments.
We have also reported a financial net of minus 12,900,000.0 compared to last year SEK 1,000,000 positive. And our financial net is heavily impacted by currency effects this quarter, And that is related to an intercompany loan to the Polish business where the group is financing the Polish business and also our bank funds. So we have a bit of exposure to foreign currencies that we are currently looking into how to minimize. And we have also reported before that we are establishing a treasury function that is to look into this going forward. We have reported as well an EPS growth target of 30%.
This will be challenging given the market situation this year. So we do not expect to be able to reach those levels, but we are also looking into, of course, increasing our profitability over time. Moving on to our order intake. In the quarter, we had an order intake of SEK 4,200,000,000.0 compared to last year. That’s a bit lower.
And this is also impacted by the phase out of certain client contracts. What we do see is a steady trend in better margins in new agreement, as mentioned, which is very positive. But order intake is also impacted by the slow market in mainly Sweden. And it is a very volatile demand between clients and industries, as Karin mentioned before. And we also see that the public sector is slow compared to what is normal in a recession and the private sector is more strong.
Banking and finance is still what’s bringing in the most requests. So we see a positive trend in that industry. And we have reported also on freeze at some of our clients that has had an additional governance during the first quarter in our report. I’m happy to see that our contract length is increasing and that is driven both by clients and consultants that wants to sign longer contracts for various reasons. And we have also started to look into our order intake to see how to analyze this better and also to how to define it.
So we will come back with more information on our order intake going forward. Looking at our net sales development. Of course, we are impacted again by the phase out of the more or the less profitable client contracts. This will continue during the first half of twenty twenty five. Also, can see that volume is the biggest explanation for the drop in this picture and also that Sweden and Norway is the main explanation.
We do see that there is more potential for the add on services. That is a positive contributor, of course, both to our EBIT and also to our sales. Looking at then the EBIT development, of course, again, it’s a negative impact by the lower business volumes and of course, the less workdays in the first quarter. And here you can also see the somewhat higher costs relating to IT given the go live of the internal platform. But as mentioned also, we do not expect a big increase in our cost base going forward.
And we are still working on our long term strategic initiatives that will increase our efficiency and our scalability and enabling a more profitable growth going forward. And we have our KPI that we have reported in the last quarters. And this is because eWork has a different business model and we cannot fully use some of the traditional KPIs that are used in the consultancy business. And therefore, we are reporting this additional KPI that better clarifies our financial performance. And we believe that this is the best way to look at our profitability development over time.
And in this presentation, you can see the trend in our gross profit development per quarter, and we will continue to present this to the market going forward. And in the first quarter, we had gross profit EBIT over gross profit of 24% compared to last year, 28%. And of course, we cannot see the effect of the new more profitable agreements fully in our P and L yet. But as mentioned, transition takes time, and we hope to see this going forward.
Karin Skrill, CEO, eWork Group: Yes. So to summarize this quarterly presentation, first of all, we do see a very mixed momentum in our different geographies, strong growth in Denmark and Poland and a more challenging situation in Sweden and Norway. We continue to improve our gross margins and provide more add on services that will contribute sorry, also going forward to our profit. We continued in the first quarter our geographical expansion as we began to establish operations in Ghent in Belgium. And we also see that there is further potential for our European expansion.
Our network of talent continued to broaden throughout the period and we do see further interest in the field of AI particularly. We also see that there is a broader interest for this across all industries than we have seen before. In February, we launched our new digital platform that will support our scalable and profitable growth going forward. And looking ahead, the geopolitical uncertainties in the world will make it difficult to make meaningful statements about the market and the development thereof. However, as I work, we will continue to execute on our established and laid out strategy and we will continue to work towards our long term goals.
Andrea Romander, PR and Communications Manager, eWork Group: So thank you very much, Colleen and Johannes for that comprehensive presentation of the Q1 results. As said, we’re going to open up the floor for some viewer questions. And we are starting with the phone questions.
Karin Skrill, CEO, eWork Group: The next question comes from Simon Granath from ABG. Please go ahead.
Simon Granath, Analyst, ABG: Afternoon to all the three of you, and thank you for the presentation. Initially, I had a question on the phase out of the unprofitable contracts. Have you extended the scope of such phase outs? Or did the headwinds seen in Q1 mainly reflect the contracts that were announced in the beginning of twenty twenty four?
Karin Skrill, CEO, eWork Group: Yes. So we have, as you said, talked about this before in 2024. It’s mainly related to one big contract that we have phased out. And we do see in the comparison to last year still some effects from that phase out. But this is, of course, a continuous effort to try and turn around, of course, in the first place, contracts where profitability is not meeting our targeted levels.
But the big volume drop is related to what we have already communicated in 2024.
Simon Granath, Analyst, ABG: Perfect. That’s very clear. And from my point of view, it’s good to see gross margins continuing to progress. And I do note your comment of improved margins in the order intake. Although the market remains very uncertain, is it fair to expect gradually improved growth in gross profit going forward on the back of this and the phasing headwind from the customer phase out gradually disappearing?
Thank you.
Karin Skrill, CEO, eWork Group: Yes. No, go ahead. I can start off and you can continue, of course, Johanna. So yes, we remain focused on continuing to improve our gross margins through various measures. One, as said, is about turning around or discontinuing non profitable agreements.
But we have other activities as we try to mention as well, such as adding more services add on services with higher gross margins to our business. And also to be selective in choosing where we can make a difference, where we can make an impact that benefits both the client and ourselves.
Johanne Griksson, CFO, eWork Group: And to answer that question as well, I mean, the market is very uncertain, and we do need the volumes as well.
Simon Granath, Analyst, ABG: That makes a lot of sense. And I rarely do ask about the development after quarter has ended. But given this significant uncertainty due to macro turmoil and the development in Q1, could you say anything about how April or May for that matter has progressed?
Karin Skrill, CEO, eWork Group: So really hard to comment on. It’s a challenging landscape, that’s for sure. And I know we are not the only ones experiencing a challenging market and complex landscape. We believe that that’s going to be the situation for some time. How long that time will be, we do not know.
It’s very difficult to predict. So we are doing whatever we can do with our clients. We’re trying to stay close to their needs, to their businesses, to be the best support and partner for them in whatever area they need support. So that’s where our updated service portfolio and offering also comes well into play with, for instance, as we mentioned, nearshoring services where we see a great interest. So given where we are, we are going to do everything we can to continue and to drive a good business for eWork.
But it’s really hard to predict the outer circumstances.
Simon Granath, Analyst, ABG: Very much so indeed. And the delayed recovery here, as you point out, has also been witnessed by several of your peers. So you are not alone in this. Still, are you taking any cost measures on the back of the recent development? Or is the current OpEx level relatively fixed?
Karin Skrill, CEO, eWork Group: So yes, we are. And I think I hand over to you to talk more about that. But the answer is yes, of course. We continue to adjust our business and our operations to the current circumstances.
Johanne Griksson, CFO, eWork Group: Yes. Of course, we will, as any business would, if we see a weak market in 2025. And it is a mix of, of course, short term initiatives, things that we can do. But also it’s important for us to continue our strategic journey that is to increase efficiency and also cost efficiency over time. So we’re kind of working on two different initiatives at this point.
Simon Granath, Analyst, ABG: Perfect. And on the topic of AI and around efficiency, and thanks for the interesting comments during the presentation. Would it be possible for you to expand a little bit about how you expect, if so, to see any tailwinds from AI from an operational efficiency point of view? Is it mainly on the demand side?
Karin Skrill, CEO, eWork Group: No, it’s both basically. We do see increasing and growing demand from clients. And I think that’s natural given the impact that AI will have to any business going forward, but also to our own business clearly. So thanks to the new digital platform and the new data model that we now have in place, we will be able to implement various AI use cases to automate different activities and tasks that we are doing in our delivery mainly. And we are already working on this.
So I see this being a great help to drive efficiency, quality, but also our own focus towards clients in the right direction.
Simon Granath, Analyst, ABG: Thank you. And I do have one final question that is around the public sector that have been lukewarm for quite some quarters now. And you do mention that the development remains lukewarm also in Q1. But what is the latest and greatest perhaps on the outlook for the public sector? Are you seeing any positive signs going into H2 or into ’20 ’20 ’6
Karin Skrill, CEO, eWork Group: Yes, that’s a really, really good and interesting question because a big part of our business is in public sector, primarily in Sweden and in Norway. Yes, we see that the public sector continues to be restrained and mainly due to limited budgets and cost restraints of various kinds. But we also see a very strong underlying demand. There is a demand to automate and also to use AI as an example to drive efficiency in public sector. So I expect at some point that clearly there will be more growth in public sector.
But the question is when that will happen, of course. What interesting on our end is, of course, also a new framework agreement with Svenska KraftNet in that matter, in that regard. That is now ramping up gradually as of May. And we hope, of course, to see a really good development there given the plans of Svenske KraftNet and the important mission that they have in their business.
Simon Granath, Analyst, ABG: Thanks for having my question. Thanks.
Karin Skrill, CEO, eWork Group: Thank you
Andrea Romander, PR and Communications Manager, eWork Group: so Thank you. Thank do believe that we have time for one more question from the iPad. I’m going to direct this one to you, Karim. And the asker is saying we’ve seen a decline in sales in Q1 twenty twenty five. Are we?
And in that case, what are we doing to adjust our strategy to mitigate this?
Karin Skrill, CEO, eWork Group: That’s a really good question, of course. And the short answer is that we are doing a lot of different things. One is, of course, focusing on the clients where we see demand, really high demand for consultants to drive development, for instance, or to drive growth. So we try to be close to clients where there is a high demand. And as said, we do have clients with high demands and we have clients with less demand.
But trying to focus and prioritize clients based on their needs is, of course, one. Another one is to see how we can use nearshoring, as we mentioned, to support clients who need to grow, who have strong underlying needs for talent, but still need to be cost conscious. And their unassuring offering comes well into play. So that’s another one. We’re also looking into our add on services in general, where we know that several of them are very, very well fit for the current circumstances, both for consultants with our Pay Express offering, for instance, and for clients where we can help them with, again, cost savings, advisory compliance matters, anything that is needed during these times.
So we do everything we can, and of course, being really, really close to our clients, being out there and understanding what’s going on and not going on is the key to everything.
Andrea Romander, PR and Communications Manager, eWork Group: Thank you very much.
Karin Skrill, CEO, eWork Group: And
Andrea Romander, PR and Communications Manager, eWork Group: that was everything we had time for today. Thank you very much, Karin. Thank you very much, Johanna. And of course, thank you very much everyone who tuned in to this session. Have a lovely Wednesday and I hope to see you soon again.
Johanne Griksson, CFO, eWork Group: Thank you. Thank you.
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