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