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]
zSpace Inc(ZSPC) - 2025 Q1 - Earnings Call Transcript