zSpace (ZSPC) swings to Q2 2026 profit as margins rise and debt falls
Rhea-AI Filing Summary
zSpace, Inc. reported second quarter 2026 revenue of $5.4 million, down from $7.5 million a year earlier, primarily due to delayed and returned EMEA orders related to the Iran war. Despite lower sales, gross margin improved sharply to 56.4% from 42.6%, reflecting a richer software and services mix, more Company-owned content, and lower hardware costs.
Net income was $0.3 million compared with a net loss of $6.1 million in the prior-year quarter, aided by a $4.1 million gain from converting debt to equity. Annualized Contract Value of renewable software declined to $9.4 million, bookings fell 14% to $6.0 million, and Net Dollar Revenue Retention for large customers was 66% (83% excluding two prior customer losses). Cash stood at $0.9 million against total liabilities of $21.5 million, and the Board’s formal review of strategic alternatives remains ongoing.
Positive
- Net income of $0.3 million in Q2 2026 versus a $6.1 million loss a year ago, supported by margin expansion and a gain on extinguishment of debt.
- Gross margin increased to 56.4% from 42.6%, driven by higher-margin software and services, more Company-owned content, and a leaner hardware cost profile.
- Operating expenses (ex-stock-based compensation) fell to $4.0 million from $7.7 million, showing substantial cost reductions.
- Adjusted EBITDA loss narrowed to $0.9 million from $4.5 million, indicating improved underlying operating performance.
- Total liabilities declined to $21.5 million from $34.4 million a year earlier, aided by converting a portion of outstanding debt to equity.
Negative
- Revenue declined to $5.4 million from $7.5 million, with EMEA orders delayed and returned due to the Iran war impact.
- Annualized Contract Value of renewable software fell to $9.4 million, a 13% decrease year-over-year, signaling pressure on recurring software revenue.
- Bookings were $6.0 million, down 14% year-over-year, suggesting softer demand and sales activity.
- Net Dollar Revenue Retention for larger customers was 66%, implying notable contraction and attrition, even though normalized NDRR was higher at 83%.
- Cash, cash equivalents and restricted cash were $0.9 million versus $21.5 million in total liabilities, and stockholders’ deficit remained large at $(13.2) million.
Filing Explained
Although the release says “Margin Expansion Drives Profitability,” zSpace reported a loss from operations of
8-K Event Classification
2 items: 2.02, 9.01
2 items
Item 2.02
Results of Operations and Financial Condition
Financial
Disclosure of earnings results, typically an earnings press release or preliminary financials.
Item 9.01
Financial Statements and Exhibits
Exhibits
Financial statements, pro forma financial information, and exhibit attachments filed with this report.
Key Figures
Q2 2026 Revenue: $ 5,396
Q2 2025 Revenue: $ 7,459
Q2 2026 Gross Margin: 56.4%
+5 more
8 metrics
Q2 2026 Revenue
$ 5,396
Revenue for the three months ended June 30, 2026
Q2 2025 Revenue
$ 7,459
Revenue for the three months ended June 30, 2025
Q2 2026 Gross Margin
56.4%
Gross profit percentage for the three months ended June 30, 2026
Q2 2026 Net Income
$ 288
Net income for the three months ended June 30, 2026
Annualized Contract Value
$ 9.4 million
ACV of renewable software at June 30, 2026, down 13% year-over-year
Q2 2026 Bookings
$ 6.0 million
Bookings for the second quarter of 2026, down 14% year-over-year
Backlog
$ 3.8 million
Backlog of unfulfilled orders as of June 30, 2026
Cash and Cash Equivalents
$ 856
Cash, cash equivalents and restricted cash as of June 30, 2026
Key Terms
Annualized Contract Value, Net Dollar Revenue Retention, Adjusted EBITDA, stockholders' deficit, +1 more
5 terms
Annualized Contract Value financial
"Annualized Contract Value (“ACV”) of renewable software at June 30, 2026, was $9.4 million"
Annualized contract value (ACV) is the amount of revenue a company expects to earn from a contract in one year, expressed as a yearly figure even when the deal spans multiple years or starts partway through a year. It matters to investors because it converts varied contracts into a common annual measure—like turning different-length subscriptions into a single yearly price—so revenue trends, sales performance, and valuation comparisons are easier to see.
Net Dollar Revenue Retention financial
"Net Dollar Revenue Retention (NDRR) at June 30, 2026, was 66% for customers with over $50,000 of ACV"
Net dollar revenue retention measures how much revenue a company keeps from its existing customer base over a set period after accounting for expansions, downgrades and cancellations. Expressed as a percentage, it compares current revenue from the same customers to their prior-period revenue; a number above 100% means existing customers are, on net, spending more than before. Investors use it like a health check—higher retention signals durable, growing revenue from customers and less reliance on constantly finding new buyers.
Adjusted EBITDA financial
"Adjusted EBITDA loss was ($0.9) million compared to ($4.5) million in the second quarter of 2025"
Adjusted EBITDA is a way companies measure how much money they make from their core operations, like running a business, by removing certain costs or income that aren’t part of regular business activities. It helps investors see how well a company is doing without distractions from unusual expenses or gains, making it easier to compare companies or track performance over time.
stockholders' deficit financial
"Stockholders' deficit | | $ | (13,185)"
When a company's total liabilities exceed its total assets, the owner's equity becomes negative and is reported as a stockholders' deficit. It shows that, on paper, the business owes more than it owns — like a homeowner whose mortgage balance is larger than the home's market value. Investors watch this because it signals financial strain, higher risk of dilution or default, and can limit a company's ability to pay dividends, borrow, or grow.
gain on extinguishment of convertible and other debt financial
"Gain on extinguishment of convertible and other debt | | | 4,052"
Earnings Snapshot
Revenue (Q2 2026): $ 5,396
quarter and six months ended June 30, 2026
Revenue (Q2 2026)
$ 5,396
Lower than $7,459 in Q2 2025 due to delayed and returned EMEA orders.
Gross Margin (Q2 2026)
56.4%
Expanded from 42.6% in Q2 2025, driven by mix shift to software and lower hardware costs.
Net Income (Q2 2026)
$ 288
Improved from a net loss of $6,102 in Q2 2025, including a gain on extinguishment of debt.
Adjusted EBITDA (Q2 2026)
$ (879)
Smaller loss than $(4,458) in Q2 2025, reflecting better operating performance.
Annualized Contract Value
$ 9.4 million
Decreased 13% year-over-year for renewable software as of June 30, 2026.
Bookings (Q2 2026)
$ 6.0 million
Down 14% year-over-year for the second quarter of 2026.
AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
How did zSpace (ZSPC) perform financially in Q2 2026?
zSpace reported Q2 2026 revenue of $5.4 million and net income of $0.3 million, compared with $7.5 million revenue and a $6.1 million net loss a year earlier, as margin expansion and a debt-conversion gain offset lower sales.
What drove the profitability improvement for zSpace (ZSPC) in Q2 2026?
Profitability improved mainly because gross margin rose to 56.4% from 42.6% and operating expenses declined. A $4.1 million gain from extinguishing convertible and other debt also contributed, together turning a prior-year loss into modest net income.
How are zSpace’s (ZSPC) recurring software metrics trending?
At June 30, 2026, Annualized Contract Value of renewable software was $9.4 million, down 13% year-over-year. Net Dollar Revenue Retention for customers with over $50,000 of ACV was 66%, or 83% excluding two major customer losses in 2025.
What was zSpace’s (ZSPC) bookings and backlog in Q2 2026?
zSpace’s bookings in Q2 2026 were $6.0 million, a 14% decline from the prior-year quarter. The company reported an unfulfilled order backlog of $3.8 million as of June 30, 2026, representing contracted business not yet recognized as revenue.
What does the balance sheet look like for zSpace (ZSPC) as of June 30, 2026?
As of June 30, 2026, zSpace had $0.9 million in cash, cash equivalents and restricted cash, $21.5 million in total liabilities, and a stockholders’ deficit of $(13.2) million, reflecting a highly leveraged capital structure despite liability reductions.
Is zSpace (ZSPC) conducting a strategic alternatives review?
Yes. zSpace’s Board continues an ongoing formal review of strategic alternatives aimed at maximizing long-term shareholder value. The company notes that current valuation does not fully reflect its platform strength, but no specific outcome or timeline is disclosed.
How did zSpace’s (ZSPC) adjusted EBITDA change in Q2 2026?
Adjusted EBITDA improved, with a Q2 2026 loss of $0.9 million versus a $4.5 million loss in Q2 2025. The measure excludes interest, taxes, depreciation, stock-based compensation, and fair-value and extinguishment-related items to highlight underlying operating performance.