zSpace Reports $38.1 Million Revenue for Fiscal Year 2024, Faces Challenges in Profitability

zSpace, Inc. reported a total revenue of $38.1 million for the fiscal year ending December 31, 2024, a decrease of 13% from $43.9 million in 2023. The decline in revenue was primarily attributed to constraints in working capital that limited the company’s ability to fulfill hardware orders, resulting in a backlog of unfilled orders totaling $11.3 million. Hardware revenue specifically fell by 20% to $22.0 million, while software revenue decreased by 3% to $12.9 million. In contrast, service revenue saw a slight increase of 1% to $3.3 million. The company continues to face challenges in achieving profitability, reporting a net loss of $20.8 million for 2024, compared to a net loss of $13.0 million in the previous year.

In terms of operational metrics, zSpace's annualized contract value (ACV) increased to $11.3 million in 2024 from $10.6 million in 2023, indicating growth in recurring revenue potential. However, the net dollar retention rate (NDRR) dropped significantly to 92% from 112% year-over-year, reflecting challenges in customer retention and expansion. The company has a customer base of over 3,500 U.S. public school districts, with its products deployed in more than 80% of the largest 100 districts. Despite the decrease in revenue, zSpace has maintained a focus on expanding its market presence, particularly in the career and technical education (CTE) sector.

Strategically, zSpace completed its initial public offering (IPO) on December 6, 2024, raising approximately $7.5 million in net proceeds. This capital is intended to support the company’s growth initiatives, including investments in research and development and potential acquisitions to enhance its software offerings. The IPO also facilitated the conversion of 4 million shares of preferred stock into 18.7 million shares of common stock, significantly altering the company’s capital structure. However, the company has acknowledged substantial doubt about its ability to continue as a going concern due to ongoing losses and negative cash flows.

The company’s operational expenses increased by 30% to $33.2 million in 2024, driven largely by stock-based compensation expenses related to new equity awards. Research and development expenses rose by 16% to $4.9 million, while selling and marketing expenses increased by 23% to $15.9 million. General and administrative expenses saw a significant rise of 85% to $12.4 million, reflecting costs associated with preparing for the IPO and increased personnel expenses. As of December 31, 2024, zSpace had cash and cash equivalents of $4.9 million, up from $3.1 million in 2023, but still insufficient to cover its operational needs without additional financing.

Looking ahead, zSpace aims to address its working capital constraints and improve its financial performance through strategic initiatives, including enhancing its product offerings and expanding its customer base. The company plans to focus on increasing its software revenue, which is expected to grow faster than hardware revenue. However, the ongoing economic environment, including potential reductions in government funding for education, poses risks to its growth trajectory. The management is actively working on a remediation plan to secure additional financing and improve its internal controls, which have been identified as material weaknesses in the company's financial reporting processes.