Financial Data and Key Metrics Changes - For the full year 2024, revenues were $38 million, down 13% year-on-year due to capital constraints prior to the IPO, which limited the ability to fulfill orders from backlog [28] - Gross margins for the year improved to 40.9% from 38.5% in the prior year, an increase of 240 basis points, primarily due to a shift in revenue mix from hardware to software and services [31] - Fourth quarter revenues were $8.5 million, down 29% year-on-year, attributed to similar capital constraints and backlog fulfillment issues [33] Business Line Data and Key Metrics Changes - The annualized contract value (ACV) of renewable software revenue was $11.3 million, up 6% compared to the previous year [29] - Bookings for the year were $41.5 million, up 1% year-on-year, with U.S. and rest of world bookings (excluding China) at $39.9 million, up 7% year-on-year [30] - In the fourth quarter, bookings were $5.3 million, down 3% year-on-year, but U.S. bookings were up 21% while international bookings (excluding China) saw a decline of 92% [34][30] Market Data and Key Metrics Changes - The K-12 education and career and technical education (CTE) markets exceed $69 billion globally, with the global ed tech market valued at over $142 billion in 2023, projected to grow at a CAGR of 13.6% through 2030 [11] - The AR VR education segment is expected to reach $14.2 billion by 2028, growing at a 30% CAGR [12] - The company is currently implemented in over 3,500 of the approximately 13,000 public school districts in the U.S., including over 80% of the largest 100 school districts [12] Company Strategy and Development Direction - The company aims to increase penetration within existing K-12 STEM and CTE markets, expand international presence through a network of over 25 resellers, and invest in R&D to enhance its platform [17][19] - The recent acquisition of BlocksCAD is intended to strengthen immersive learning solutions with a 3D design platform for STEM education [21] - The company plans to focus on acquiring complementary software solutions to accelerate software revenue growth [20] Management's Comments on Operating Environment and Future Outlook - Management noted uncertainty in the education market affecting decision-making among customers, leading to potential lengthening of sales cycles [38] - Despite the uncertainty, there is confidence in capturing demand for CTE solutions due to significant state-level funding announcements [39] - The company anticipates Q1 2025 revenues slightly above $5 million, with expectations of continued growth in the full year [39][40] Other Important Information - The company has over 80 issued patents, reinforcing its position in the education technology space [17] - Operating expenses for the year were $33.2 million, an increase of 30% year-on-year, but flat when normalized for stock-based compensation [32] Q&A Session Summary Question: Impact of IPO timing on bookings - Management explained that the timing of the IPO affected the availability of new products for sales launches, which in turn impacted bookings [44][46] Question: Inventory availability for sales demos - Inventory for the Inspire 2 product became available late in Q4, while the Imagine product inventory is available in Q1 [48] Question: Lengthening of sales cycles in K-12 - Management indicated that the average sales cycle has increased from 60-75 days to 75-90 days due to uncertainty in funding sources [82][83] Question: Gross margin trends - Management highlighted that gross margin improvements are expected from the new hardware mix and increased software content [66][70] Question: Recent debt instrument - The company took on a $2 million debt line to maintain liquidity amid market turbulence [118]
zSpace Inc(ZSPC) - 2024 Q4 - Earnings Call Transcript