zSpace (ZSPC) Q4 2024 earnings summary

Executive summary

• Completed IPO in December 2024, raising over $10 million and listing on NASDAQ, enabling accelerated growth, product investment, and sales expansion, though late-quarter order fulfillment was limited.

• Focused on K-12 and CTE markets, with a strong U.S. presence, international reach in over 50 countries, and over 3,500 school districts and institutions using solutions.

• Launched Inspire 2 and Imagine products, expanded content with a career readiness solution featuring an AI Career Coach, and won Best of Show at ISTE Live 24.

• Secured a $5 million deal with St. Louis Public Schools, marking the largest customer win to date.

• Acquired BlocksCAD in Q1 2025 to strengthen 3D design offerings for STEM education.

Financial highlights

• 2024 revenues were $38.1 million, down 13% year-over-year due to capital constraints delaying order fulfillment.

• Ended 2024 with $9.2 million in unfulfilled backlog, indicating strong demand for 2025.

• Annualized contract value (ACV) of renewable software revenue was $11.3 million as of year-end, up 6% year-over-year.

• Net dollar revenue retention (NDRR) for large customers was 92% as of December 2024.

• Gross margin for 2024 was 40.9%, up from 38.5% in 2023, driven by a shift toward software and services.

• Q4 2024 revenues were $8.5 million, down 29% year-over-year; gross margin was 40.7%, up 597 basis points due to prior year inventory write-downs.

• Q4 net loss was $(3.6) million, improved from $(4.1) million; full year net loss widened to $(20.8) million from $(13.0) million.

• Cash and cash equivalents at year-end were $4.9 million, up from $3.1 million a year ago.

Outlook and guidance

• Q1 2025 revenues expected slightly above $5 million, reflecting ongoing market uncertainty and timing of deal closings.

• Management expects strong demand in 2025, driven by backlog and market opportunities in K-12 STEM and CTE.

• Anticipates continued growth in CTE solutions, supported by large state funding initiatives.

• Expects to constrain operating expense growth to less than half the rate of revenue growth for 2025, excluding RSU grants.

• Focus remains on international expansion, R&D, and software acquisitions to drive growth.

• Confident in capturing and renewing business across K-12 and CTE segments, though performance may not be linear.