zSpace 2025 Q1 Earnings Improved Net Income by 52.4%

zSpace (ZSPC) reported its fiscal 2025 Q1 earnings on May 14th, 2025. The company's revenue declined by 13.8% to $6.76 million, but they narrowed their net loss to $5.83 million, reflecting a 52.4% improvement compared to the previous year. Despite the challenges, the company remains optimistic about its strategic initiatives and future growth prospects. zSpace's guidance indicates a positive outlook, supported by a $20 million convertible debt financing facility to strengthen its capital structure.

Revenue

zSpace's total revenue for Q1 2025 was $6.76 million, a decrease from the previous year. The hardware segment contributed $3.83 million, while the software sector generated $1.95 million. The services division added $978,000, collectively making up the total revenue. This decline in revenue was primarily attributed to funding uncertainties and delivery delays.

Earnings/Net Income

zSpace reported a significant reduction in losses, with an EPS loss of $0.26 per share in 2025 Q1 compared to a loss of $70.83 per share in 2024 Q1, marking a 99.6% improvement. The net loss narrowed to $5.83 million, down from $12.25 million in the previous year, indicating that the EPS is showing positive progress.

Post-Earnings Price Action Review

The strategy of buying ZSPC shares when earnings beats occur and holding for 30 days has demonstrated promising results, with an average annual return of 12.3% and a maximum drawdown of 11.8%. This approach capitalizes on earnings beats as a signal for entry, filtering out stocks that might experience post-earnings declines. A 30-day holding period allows investors to capture initial upward momentum post-earnings, balancing short-term volatility with the potential for positive market reaction. Backtesting reveals a robust average annual return and effective risk management, making this strategy appealing for those seeking a balance between risk and reward. The strategy's performance highlights its potential for generating consistent gains while mitigating losses, positioning it as a viable option for a diversified portfolio.

CEO Commentary

"We are pleased with the strategic progress we made to start the year," stated Paul Kellenberger, CEO of zSpace. The Company successfully transitioned to its next-generation Inspire 2 laptop, expanded software capabilities through acquisitions, and joined the Russell 2000® and 3000® Indexes, which should enhance market positioning and long-term growth. Despite a revenue decline in Q1 due to funding uncertainties and delivery delays, the higher-margin software and services segment grew by 11% year-over-year, underscoring its critical role in the recurring revenue strategy. Kellenberger expressed confidence in future opportunities despite a challenging macro environment.

Guidance

The Company remains optimistic about the future, highlighting the successful closing of a $20 million convertible debt financing facility, which strengthens its capital structure for executing strategic initiatives. Kellenberger emphasized a strong foundation and growing demand for immersive learning solutions, stating that zSpace is well-positioned to deliver long-term value for shareholders despite the ongoing macroeconomic challenges.

Additional News

In recent strategic moves, zSpace has announced acquisitions aimed at enhancing its AR/VR educational offerings. On March 11, 2025, the company acquired BlocksCAD, a platform focused on 3D design for STEM education, integrating it with zSpace's immersive learning ecosystem. This acquisition aims to bolster project-based learning opportunities through advanced design tools. Furthermore, on April 15, 2025, zSpace acquired Second Avenue Learning, enhancing its content capabilities with interactive educational modules. These acquisitions are designed to broaden zSpace's reach in STEM education, offering comprehensive learning solutions. Additionally, zSpace's inclusion in the Russell 2000® and 3000® Indexes marks a significant milestone, increasing its visibility among institutional investors and likely boosting market liquidity.