Core Insights - zSpace is launching the zSpace Career Explorer™ application, an AR/VR tool aimed at preparing students for high-demand careers starting in the 2025–2026 school year [1][2] - The application is designed for grades 5–8 and focuses on career exploration in skilled trades and other high-demand fields [2][3] - zSpace Career Coach™, an AI-powered assistant, provides personalized career guidance within the Career Explorer application [4][6] Features and Functionality - The Career Explorer application includes interactive simulations for various careers such as welding, vehicle maintenance, robotic programming, and basic medical procedures [3][8] - Each simulation is set in realistic environments and includes dynamic career profiles detailing skills, responsibilities, salary ranges, and educational pathways [3][8] - The AI-powered Career Coach allows students to ask questions, explore related careers, and export transcripts for review, offering tailored guidance based on user interactions [4][8] Company Background - zSpace, Inc. is a leader in AR/VR experiences, focusing on STEM, CTE, and career readiness programs, and is trusted by over 3,500 educational institutions [7][8] - The company holds over 70 patents and emphasizes hands-on learning experiences that enhance student engagement and knowledge retention [7][9]

Core Insights - zSpace is participating in the ISTE Live 25 Conference from June 30 to July 2, 2025, showcasing its latest educational solutions [1] - The company is debuting the Career Explorer app, designed to help students explore high-demand careers through immersive experiences [3] - Nicole Heaver has been recognized as the 2025 zSpace Educator of the Year for her innovative use of zSpace technology in her classroom [6] Product Highlights - The Career Explorer app will be available for the 2025-2026 school year, providing interactive career exploration tools [3] - zSpace is expanding its AR/VR content library with new lessons in STEM, CTE, and career exploration, along with success stories from educators [4] - The zSpace Imagine solution is designed for elementary education, offering an AR/VR experience without the need for headsets, featuring interactive 3D content and a precision stylus [5] Educational Impact - The featured session at the conference will discuss integrating design thinking and extended reality for sustainable educational models, particularly in rural areas [4] - zSpace's solutions are trusted by over 3,500 educational institutions, enhancing learning experiences that may be dangerous or impractical with traditional methods [8] - A study published in the Journal of Computer Assisted Learning indicates that zSpace's hands-on learning solutions can lead to higher student test scores [9]

Core Insights - zSpace has been recognized for its innovative AR/VR solutions in education, particularly at Upper Bucks County Technical School (UBCTS), which has been named a zSpace School of Distinction [1][7] - The initiative began in 2020 to address learning loss during the pandemic and has successfully integrated immersive technology into career and technical education (CTE) [2][3] Group 1: Implementation and Impact - UBCTS's Executive Director, Dr. Michael Herrera, introduced zSpace's platform to enhance student engagement and workforce readiness during the pandemic [2][3] - Instructor Patrick Chrinko transformed the automotive lab into an interactive environment, allowing students to engage with complex systems before working on physical vehicles [3][4] - The AR/VR teaching model has proven to be more efficient and engaging compared to traditional methods, enabling students to simulate tool use and diagnose virtual system malfunctions [4] Group 2: Recognition and Advocacy - UBCTS has become a model for integrating immersive technology in CTE, enhancing curriculum, improving safety, and supporting recruitment efforts [5][6] - The school showcases its technology to prospective students and policymakers, demonstrating the value of immersive learning in preparing future workforces [6] - The recognition of UBCTS and Mr. Chrinko serves as a blueprint for other educational institutions to embrace innovation in teaching [7] Group 3: Company Overview - zSpace, Inc. provides AR/VR experiences that enhance STEM and CTE programs, trusted by over 3,500 educational institutions [9] - The company holds over 70 patents and focuses on hands-on learning solutions that improve student outcomes, as evidenced by research published in 2021 [9]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $6.8 million, down 14% year-over-year, primarily due to hardware revenues declining by 26% [5][11] - Software and services revenue increased by 11% year-over-year, contributing to improved gross profit and margins [5][11] - Gross profit for the quarter was $3.2 million, up 19% year-over-year, with gross margins improving to 47.4%, up 13 percentage points from 34.5% in the prior year [12][13] Business Line Data and Key Metrics Changes - Hardware revenues decreased significantly, while software and services revenues showed growth, indicating a strategic shift towards higher-margin offerings [11][12] - Bookings for the quarter were $8.3 million, down 6% year-over-year, with a notable 78% decline in international bookings excluding China [12] Market Data and Key Metrics Changes - The U.S. market saw a 4% growth in bookings, contrasting with a significant decline in international markets [12] - The company ended the quarter with $9.7 million in unfulfilled orders, reflecting challenges in funding sources for end users [12] Company Strategy and Development Direction - The company is focusing on enhancing its digital platform through strategic acquisitions, including BlocksCAD and Second Avenue Learning, to improve content capabilities and software offerings [6][8][9] - The transition to the Inspire II laptop is aimed at driving cost efficiencies and protecting gross margins [6] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding future opportunities despite ongoing volatility in the education market and uncertainty around funding sources [10][19] - The company refrained from providing formal financial guidance for the year due to the unpredictable operating environment [20] Other Important Information - Operating expenses for the quarter were $7.6 million, an increase of 11% year-over-year, with stock-based compensation recorded at $1 million [17] - A $20 million convertible financing facility was closed, with $13 million funded, providing liquidity for acquisitions and corporate purposes [18] Q&A Session Summary Question: Update on sales cycle and funding uncertainty - Management confirmed that the sales cycle for K-12 has extended to 75-90 days, with ongoing high uncertainty in funding sources [24][26] Question: Impact of tariffs on BOM costs - Current tariffs are at 20%, with plans to pass these costs to customers, while the new Inspire II model has a lower BOM cost, improving hardware profitability [37][40] Question: Integration of recent acquisitions - The integration of BlocksCAD is complete, while Second Avenue Learning is in progress, with positive feedback on both [44][46] Question: Feedback on the Imagine product and CTE adoption - Initial feedback on the Imagine product has been positive, with strong adoption in advanced application areas within CTE [47][49] Question: Bookings pattern and backlog health - The company noted a non-linear bookings pattern, with strong performance in the U.S. market, and confirmed that the software backlog remains healthy [55][61]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $6.8 million, down 14% year-over-year, primarily due to a 26% decline in hardware revenues as K-12 customers faced funding challenges [4][10] - Software and services revenue increased by 11% year-over-year, contributing to improved gross profit and margins [4][10] - Gross profit for the quarter was $3.2 million, up 19% year-over-year, with gross margins improving to 47.4%, up 13 percentage points from the prior year [11][12] Business Line Data and Key Metrics Changes - Hardware revenues decreased significantly, while software and services revenues showed growth, indicating a strategic shift towards higher-margin offerings [10][12] - Bookings for the quarter were $8.3 million, down 6% year-over-year, with a notable 78% decline in international bookings excluding China [11] Market Data and Key Metrics Changes - The U.S. market saw a 4% growth in bookings, while international markets (excluding China) experienced a significant decline [11] - The company ended the quarter with $9.7 million in unfulfilled orders, reflecting the impact of funding source changes on customer behavior [11] Company Strategy and Development Direction - The company is focusing on enhancing its digital platform through strategic acquisitions, including BlocksCAD and Second Avenue Learning, to expand software capabilities and content offerings [5][6][7] - The transition to the Inspire II laptop is aimed at driving cost efficiencies and protecting gross margins [5] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about future opportunities despite ongoing volatility in the education market and uncertainty around funding sources [8][19] - The company refrained from providing formal financial guidance for the year due to the unpredictable operating environment [19] Other Important Information - The company closed a $20 million convertible financing facility, with $13 million funded, to support acquisitions and general corporate purposes [17] - Operating expenses for the quarter were $7.6 million, an increase of 11% year-over-year, reflecting ongoing investments in growth [15] Q&A Session Summary Question: Update on sales cycle and funding uncertainty - Management confirmed that the sales cycle for K-12 has increased to 75-90 days, with ongoing high uncertainty in funding sources [22][24][28] Question: Impact of tariffs on BOM costs - The company expects a 20% tariff impact in Q2, with no significant impact felt in Q1, and plans to pass these costs onto customers [33][35][38] Question: Integration of recent acquisitions - The integration of BlocksCAD is complete, while Second Avenue Learning is in progress, with positive feedback on both [41][44] Question: Feedback on the Imagine product and CTE adoption - Initial feedback on the Imagine product has been positive, with strong adoption in advanced application areas within CTE [45][47] Question: Bookings patterns and backlog - Management noted a non-linear bookings pattern, with strong demand in the U.S. market, and confirmed that the software backlog remains healthy [49][58]

Financial Performance - For the three months ended March 31, 2025, zSpace, Inc. reported revenue of $6.759 million, a decrease of 13.8% compared to $7.841 million in the same period of 2024[13]. - The cost of goods sold for the same period was $3.553 million, resulting in a gross profit of $3.206 million, which is an increase of 18.6% from $2.702 million in 2024[13]. - Total operating expenses decreased to $8.590 million in Q1 2025 from $14.091 million in Q1 2024, reflecting a reduction of 38.8%[13]. - The net loss for Q1 2025 was $5.832 million, significantly improved from a net loss of $12.247 million in Q1 2024, representing a reduction of 52.4%[13]. - Total revenues for the three months ended March 31, 2025, were $6,759 million, a decrease of 13.8% from $7,841 million in the same period of 2024[138]. - Gross profit increased to $3,206 million in Q1 2025, compared to $2,702 million in Q1 2024, reflecting a gross margin improvement[138]. - Total operating expenses decreased to $8,590 million in Q1 2025, down 38.8% from $14,091 million in Q1 2024[138]. - The segment net loss for Q1 2025 was $5,832 million, significantly improved from a net loss of $12,247 million in Q1 2024[138]. Cash Flow and Financial Position - Cash, cash equivalents, and restricted cash decreased to $1.129 million as of March 31, 2025, down from $4.864 million at the end of 2024[19]. - The company incurred negative cash flows from operations of $4.641 million in Q1 2025, compared to $5.414 million in Q1 2024, indicating a slight improvement[19]. - zSpace's accumulated deficit increased to $296.232 million as of March 31, 2025, from $290.400 million at the end of 2024[16]. - The Company completed its IPO on December 6, 2024, selling 2.2 million shares at $5.00 per share, resulting in net proceeds of $7.5 million after expenses[31]. - As of March 31, 2025, the Company reported total cash, cash equivalents, and restricted cash of $1.129 million, a decrease from $4.864 million as of December 31, 2024[35]. - The company is exploring additional financing options to address ongoing working capital shortfalls and improve its financial position[26]. Revenue Breakdown - Hardware revenue decreased to $3.829 million in Q1 2025 from $5.195 million in Q1 2024, reflecting a decline of 26.3%[55]. - Product revenue accounted for 57% of total revenue for the three months ended March 31, 2025, down from 66% in the same period of 2024[176]. - Software applications revenue increased to 29% of total revenue for the three months ended March 31, 2025, compared to 25% in the same period of 2024[178]. - Services revenue accounted for 14% of total revenue for the three months ended March 31, 2025, up from 9% in the same period of 2024[180]. - International sales accounted for $960,000 in Q1 2025, down from $1.172 million in Q1 2024, with China contributing $1.0 million in Q1 2025[55]. Debt and Financing - The Company entered into a senior secured convertible note financing agreement for $13,978,495, which closed on April 11, 2025[140]. - The gross proceeds from the convertible note financing were $13,000,000, intended for debt repayment and working capital[141]. - The note issued has an interest rate of 6.0% per annum and matures on April 11, 2027[143]. - The company fully repaid all outstanding loans totaling approximately $10.18 million using proceeds from the convertible note financing[154]. - The outstanding balance of other term loans as of March 31, 2025, was $5.8 million, with effective interest rates ranging from 14.2% to 25.0%[89]. Stock and Equity - The Company completed an IPO on December 6, 2024, issuing 2.2 million shares at $5.00 per share, resulting in net proceeds of $7.5 million after expenses[92]. - The IPO led to the conversion of 4.0 million shares of preferred stock into 18.7 million shares of common stock[92]. - As of March 31, 2025, the Company had 77,150,622 shares reserved for future issuance of common stock[91]. - The Company granted 724,646 Restricted Stock Units (RSUs) valued at $12.9 million to executives and directors in February 2025, with vesting periods of one to three years[110]. - The Company has authorized 5,000,000 shares of preferred stock, with no shares designated or outstanding as of March 31, 2025[93]. Operational Highlights - The company shipped approximately 19,400 units of its proprietary laptop product, Inspire, under a partnership with a major PC OEM as of March 31, 2025[199]. - The average term length of renewable software license agreements is increasing, indicating long-term adoption of products by customers[193]. - The company plans to focus on acquiring key software companies and intellectual property to drive future growth in the education market[201]. Market and Industry Outlook - The total addressable market (TAM) for the K-12 market is estimated at approximately $21.4 billion in the United States, $29.0 billion in EMEA, and $5.6 billion in APAC, with a global TAM exceeding $68 billion[165][166]. - Management's discussion indicates that historical results may not be indicative of future performance, highlighting the importance of assessing industry outlook and risk factors[160]. - The company is facing uncertainties due to new U.S. tariffs on imports, which could adversely impact its supply chain and financial condition[202]. Employee and Customer Metrics - The company emphasizes the importance of retaining key employees, as their departure could negatively affect operations and business performance[198]. - The net dollar revenue retention rate (NDRR) for customers with at least $50,000 of ACV was 97% for the trailing twelve-month period ended March 31, 2025, down from 112% in the previous year[192].

Financial Performance - Revenue for Q1 2025 was $6.8 million, down from $7.8 million in Q1 2024, reflecting a decline of approximately 12.8%[5] - Gross margin improved to 47.4% in Q1 2025, up from 34.5% in Q1 2024, an increase of about 13 percentage points[7] - Net loss narrowed to ($5.8) million in Q1 2025 compared to ($12.2) million in Q1 2024, representing a reduction of approximately 52.4%[10] - Bookings in Q1 2025 were $8.3 million, down 6% year-over-year, with a 78% decline in international geographies excluding China[9] - Operating expenses in Q1 2025 were $7.6 million, compared to $7.0 million in Q1 2024, reflecting a year-over-year increase[9] Contract Value and Acquisitions - Annualized Contract Value (ACV) of renewable software increased by 10% to $11.6 million as of March 31, 2025, compared to $10.6 million a year ago[8] - The company completed the acquisition of Second Avenue Learning on April 15, 2025, enhancing its educational technology offerings[5] Strategic Initiatives - zSpace transitioned fully to the Inspire 2 laptop, which aims to improve cost efficiencies while maintaining the immersive experience[5] - The company closed a $20 million convertible debt financing facility post-quarter, with $13 million funded at closing[3] - zSpace was included in the Russell 2000® and Russell 3000® Indexes effective March 24, 2025, marking a significant milestone[5]

Core Viewpoint - zSpace reported a revenue decline in Q1 2025 but highlighted growth in its higher-margin software and services business, which increased by 11% year-over-year. The company is optimistic about its strategic initiatives and long-term growth potential despite a challenging macro environment [2][3]. Financial Performance - Revenue for Q1 2025 was $6.8 million, down from $7.8 million in Q1 2024, primarily due to funding uncertainty and order delivery delays [5]. - Gross margin improved to 47.4% from 34.5% in the same period last year, attributed to a shift in revenue from hardware to software and services, and better hardware profitability from the Inspire 2 platform [6]. - Net loss for Q1 2025 was ($5.8) million, an improvement from a net loss of ($12.2) million in Q1 2024 [10]. Business Highlights - The company successfully transitioned to the next-generation Inspire 2 laptop and expanded its software capabilities through acquisitions of BlocksCAD and Second Avenue Learning [2]. - zSpace was included in the Russell 2000 and Russell 3000 Indexes, marking a significant milestone [8]. - The Annualized Contract Value (ACV) of renewable software increased to $11.6 million, a 10% rise from $10.6 million a year ago [7]. Operational Metrics - Bookings in Q1 2025 were $8.3 million, down 6% year-over-year, with a notable 78% decline in international bookings excluding China [9]. - Operating expenses, excluding stock-based compensation, were $7.6 million compared to $7.0 million in Q1 2024 [9]. Capital Structure - zSpace closed a $20 million convertible debt financing facility, with $13 million funded at closing, which will enhance its capital structure [3][8].

Core Viewpoint - zSpace plans to release its financial results for the first quarter ended March 31, 2025, on May 14, 2025, after market close [1] Group 1: Financial Results Announcement - zSpace will host a conference call on the same day at 5:00 p.m. ET / 2:00 p.m. PT, featuring the CEO and CFO [2] - A live webcast of the call will be available on the investor relations website, and a replay will be accessible for a limited time [2] Group 2: Company Overview - zSpace, Inc. provides AR/VR solutions aimed at enhancing STEM, CTE, and career readiness programs, serving over 3,500 educational institutions [3] - The company is headquartered in San Jose, California, holds over 70 patents, and its solutions have been shown to improve learning outcomes [3]

Core Insights - zSpace, Inc. has acquired Second Avenue Learning, enhancing its position in the EdTech sector by combining AR/VR technology with interactive learning solutions [1][3][4] Company Overview - zSpace, founded in 2007, specializes in AR/VR solutions for education, focusing on immersive learning experiences without the need for head-mounted displays [2][9] - Second Avenue Learning, based in Rochester, NY, is known for its custom educational software and interactive learning experiences, founded by Tory Van Voorhis [2][7] Strategic Benefits of Acquisition - The acquisition is expected to enhance zSpace's content offerings by integrating Second Avenue Learning's expertise in creating interactive, standards-aligned learning modules [4] - The collaboration aims to accelerate innovation in AR/VR and blended learning applications, providing comprehensive experiential learning solutions [4][5] - The combined strengths of both companies will create tools that inspire student engagement and improve academic success [4][5] Leadership Perspectives - Paul Kellenberger, CEO of zSpace, emphasized the transformative potential of the acquisition for education, aiming to inspire a lifelong passion for discovery among students [5] - Tory Van Voorhis, Founder & CEO of Second Avenue Learning, expressed excitement about the partnership, highlighting the opportunity to blend technology with education for enhanced learning experiences [5] Market Position and Future Outlook - This acquisition marks a significant milestone for zSpace following its public listing on Nasdaq in December 2024, indicating a strong growth trajectory [6] - Financial terms of the deal were not disclosed, but both companies are committed to a smooth integration focused on innovation and customer success [6]