Financial Data and Key Metrics Changes - First half revenues were $14.2 million, down 7% year on year, with software and services up 2% and hardware revenues down 13% [14][15] - Q2 revenues were $7.5 million, flat year on year, with hardware performance growing 3% and software and services declining 5% [19][20] - Gross profit for the first half was $6.4 million, up 11% year on year, with gross margins at 44.9%, up 7.5 percentage points [17][18] - Q2 gross profit was $3.2 million, up 5% year on year, with gross margins at 42.6%, up 2.1 percentage points [20][21] Business Line Data and Key Metrics Changes - Software and services revenues were up 2% year on year, while hardware revenues were down 13% for the first half [14][15] - K-12 customers accounted for 68% of bookings value, down from 70% in the prior year, while DTE customers drove 32% of value, up from 30% [16] - CTE content of bookings for the three months ended June 30 was 35%, up seven percentage points over the prior year quarter [50] Market Data and Key Metrics Changes - Bookings for the six-month period ending June 30 were $15.5 million, down 34% year on year, with a 21% decline in the U.S. and rest of the world markets outside of China, and an 88% increase in bookings from China [15][16] - Q2 bookings were $7.1 million, down 54% year on year, reflecting a 31% decline in the U.S. and rest of the world markets outside China, and a 100% decrease in bookings from China [19][20] Company Strategy and Development Direction - The company is focused on four key policy trends impacting its business, including decentralization of federal funding and expansion of school choice [5][6] - The integration of the Second Avenue acquisition and the launch of the Career Explorer application are expected to drive growth in the software business [8] - The company is investing in AI assistance to improve student outcomes through personalized learning [8] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the unfreezing of federal funding, which may positively impact customer decision-making [27][28] - The company is facing challenges due to delays and constraints around funding, but customer demand remains strong [11][12] - Management refrained from providing formal financial guidance due to ongoing uncertainty in the K-12 segment [23] Other Important Information - The annualized contract value of renewable software was $10.9 million, up 11% compared to twelve months ago [15] - The net dollar revenue retention rate was 131%, significantly up from 97% in the previous quarter [61] Q&A Session Summary Question: Any 3Q trends that you can highlight? - Management is cautiously optimistic about the unfreezing of federal funding and its potential impact on customer behavior [27][28] Question: How is AI incorporated in new offerings? - The company is using machine learning in its next-generation stylus and has launched the zSpace AI assistant within the Career Explorer application [29][30] Question: What is the impact of tariffs in the second half? - Tariff costs are being passed through on a dollar basis, but there is some percentage-based compression of margins [41][42] Question: What is the current backlog? - The backlog at the end of Q2 was $7.3 million for confirmed orders but not yet fulfilled [46] Question: Can you provide more details on CTE? - CTE sales are predominantly in K-12 high schools, with a focus on career exploration starting as early as grades five and six [52][55] Question: What is the driver of the significant improvement in net dollar revenue retention? - The improvement is attributed to significant orders from existing customers who expanded their footprint [62][64] Question: Can you recap the capital raises since the March close? - The company closed on a $20 million convertible offering and an equity line of credit with a maximum capacity of $30 million [71][72]
zSpace Inc(ZSPC) - 2025 Q2 - Earnings Call Transcript