zSpace, Inc. Q4 FY2025 earnings call

• Fourth quarter results reflect continued focus on advancing strategy and controlling costs. Software and services revenue comprised over 50% of total revenue, driving gross margin expansion. - Structural changes were made in late Q4 2025 to align with macro headwinds. - Continued to advance strategy by expanding platform capabilities and customer engagements across K-12, PTE, and workforce pathways. - Launched Z Stylus One, a next-generation AI-enabled stylus. - Achieved meaningful customer wins such as Greater Altoona Career and Technology Center, Mayfair High School, and Atlanta Public Schools. - Leveraging AI to eliminate language barriers across the platform. - Career Explorer powered by Career Coach AI was recognized with Tech and Learning's Best of 2025 Award of Excellence.

Full-year 2025 revenues were $27.9 million, down 27%. Software and services revenues were down 15% and made up 49% of the revenue portfolio (up from 42% in 2024). Q4 2025 revenues were $4.8 million, down 43%. Software and services represented 57% of total revenues. Full-year gross profit was $13.3 million, down 15%. Q4 gross profit was $2.4 million, with gross margins of 49.1%, up 8.4 percentage points versus Q4-2024. Annualized contract value of renewable software as of December 31, 2025 was $9.9 million, down 12% year-over-year. Net dollar revenue retention of customers with at least $50,000 of ACV was 71% (71% for those customers present as of December 31, 2024), but normalizing for two large customers, ACV would have been $11.1 million (down 2%) and MDRR would have been 88%. Bookings for the 12-month period ending December 31, 2025 were $26.1 million, down 34% year-over-year. Bookings for the three-month period ending December 31, 2025 were $3.4 million, down 21% year-over-year, with CTE customers driving 56% of booking value (down from 58% in Q4-2024).

• If 2026 presents a second year of top-line volumes similar to 2025, cost reductions made in December could allow adjusted EBITDA performance at or close to breakeven. - Company retains sufficient resources to scale back up to historical revenue highs. - Will continue to manage quality and mix of revenues for gross margin expansion and tight control of operating expenses until K-12 markets in the US stabilize. - Do not yet feel strongly enough about ability to restore sustained guidance and avoid offering guidance that may be rescinded.

• Ongoing macroeconomic and funding uncertainty. - Tariff policy, freezes in education funding, and federal government shutdowns as external headwinds. - War in Iran causing delays in opportunities in the Middle East. - Trade and tariff policies remain unresolved, and macroeconomic picture remains volatile.

Q: About 2025 K-12 funding and 2026 funding outlook, and Q1 performance.

A: 10% of K-12 STEM revenue comes from federal side. 2025 had funding disruptions. Cautious optimism for 2026. Q1 is back-end loaded. Earlier in January and February there was encouraging year-on-year strength, but March was mixed due to Middle East conflict.

Q: Frame size, scale, scope of recent announcements and CTE mix.

A: Recent announcements are significant, in six figures. CTE is more than 50%, continues to grow, with Perkins federal funding contributing.

Q: Run rate OPEX and EBITDA outlook.

A: Current OPEX run rate is closer to $19 million excluding stock-based compensation. With continued margin gains and top line like last year, break-even adjusted EBITDA possible in 2026.