SThree (STEM) Investor Update summary

Strategic positioning and market opportunity

• Focus on the employed contractor model (ECM) as a key growth driver, leveraging global STEM talent trends, regulatory complexity, and megatrends like digitalization, decarbonization, healthcare innovation, and flexible work.

• ECM, independent contracting, and permanent placements form a comprehensive suite of staffing solutions, with contract work making up over 80% of net fees.

• Market investment model enables targeted decision-making, prioritizing high-growth opportunities and client segmentation in STEM skill verticals.

• Investments in advanced technology and data-driven market selection support disciplined execution and value creation.

ECM model, complexity, and compliance

• ECM involves directly employing contractors, providing salaries and benefits, seconding them to clients, and managing all compliance, tax, and regulatory obligations.

• Regulatory changes globally, such as IR35 in the UK, are increasing demand for compliant contractor models and driving clients to seek expert partners.

• SThree's expertise in navigating complex regulations across multiple jurisdictions creates high barriers to entry and deepens client relationships.

• Clients can transfer complexity and risk to SThree, enabling continued contractor engagement despite regulatory challenges.

• Less than 1% of ECM contractors are typically on the bench, reflecting effective risk management and high demand for skilled talent.

Financial performance and growth drivers

• ECM now accounts for 38% of group net fees, up from 23% in 2019, with a 22% CAGR since 2018 and continued growth even in challenging markets.

• ECM generates net fee margins 30%-40% higher than independent contracting due to the value of compliance and risk management.

• ECM and TIP together create strong barriers to entry and unlock M&A value by providing acquired teams with advanced tools.

• High complexity and required investment create significant barriers to entry, supporting sustained margin outperformance.