Hello, and thank you for participating in today's conference call to discuss C-SPACE's financial results for the first quarter ended March 31, 2026. Joining us today are C-SPACE Chief Executive Officer Paul Kellenberger, Chief Financial Officer Eric DeOlivera, and Greg Robles from Investor Relations. Before we go further, I would like to turn the call over to Mr. Robles as he reads the company's safe harbor statement. Greg, please go ahead.

Thank you, Carmen. Before we begin, I'd like to remind everyone that certain statements made on this call may be considered forward-looking statements. These statements are based on our current expectations and beliefs and are subject to risks and uncertainties that could cause actual results. Additionally, we may discuss certain key business metrics which are non-GAAP financial measures. A description of these non-GAAP measures and any comparison to the most directly comparable GAAP measures can be found in our earnings release on the Investor Relations section of our website. Now, I would like to turn the call over to the CEO of ZSpace, Paul Kellenberger. Paul?

Thank you, Greg, and good afternoon, everyone. Thank you for joining us for our first quarter 2026 earnings call. I am Paul Kellenber, CEO of ZSpace, and with me here is Eric DeLavera, our Chief Financial Officer. Q1-2026 showed early signs of stabilization for ZSpace following a very challenging 2025. As we've discussed on prior calls, last year was largely shaped by uncertainty in the federal education policy and its downstream impact on school district purchasing. While that environment has not fully resolved, we are beginning to see green shoots in the education sector, evidenced by our pipeline rebuild and stronger customer engagement. New customer additions and software renewal rates in the quarter suggest that, despite budget pressures, our customers continue to view ZSpace as an important part of their instructional technology strategy. We believe many of the most significant external headwinds have moderated, though the broader funding environment for K-12 and workforce education remains uneven and visibility into the district purchasing cycles is still limited. On the product side, with the launch of Z-Stylus One and our continued investment in our AI roadmap and a sales team that is executing with discipline, we believe we are positioned to return to growth as market conditions continue to improve. So the pace and timing of that recovery will depend on factors largely outside our control. Before turning to operational highlights, I want to address one additional item. The Board of Directors believes that the company's current market valuation does not fully reflect the value of our business or the progress we have made. Accordingly, the Board has initiated a formal review of strategic alternatives, which may include strategic partnerships, business combinations, or other transactions to ensure our shareholders realize the full value of what we have built. There can be no assurance that this review will result in any specific transaction. The company does not intend to comment further on this process until the board approves a definitive course of action or determines that further disclosure is warranted. With that, let me turn to the operational progress in the quarter. Again, on the product side, we began shipping Z Stylus 1, our next generation stylus featuring embedded sensors and machine learning algorithms that replace the external tracking modules and display markers required by prior generations. Z Stylus 1 ships as the required stylus for inspire v2 and inspire v2 pro and is also supported on inspire and inspire pro platforms the product has been granted a u.s patent with additional patents pending and we have customer deployments well underway through zspace and our authorized partners we also released a new version of the zspace studio our 3d modeling and creation application available exclusively for INSPIRE devices. The update introduces expanded curriculum-aligned model libraries supporting science and career and technical education pathways, enhanced modeling capabilities for student-driven design and iteration, and streamlined workflows for educators and students. The release was made available to to all inspire customers immediately upon launch. Turning to our customer activity, a few deployments from earlier this year illustrate how districts and workforce partners are continuing to scale with ZSpace, even in a constrained spending environment. Firstly, Danbury Public Schools announced an expansion of its immersive learning deployment, Scaling from a pilot to a full classroom set of 30 devices per school and extending access into alternative programs with a focus on equitable STEM and career connected learning and the integration of AI driven career insights. In Kansas, our partnership with Kansas Workforce One is expanding immersive career exploration and workforce development across nearly all 96 counties in the state, deploying mobile vSpace Inspire laptops for K-12 students and adult learners to support hands-on career awareness, reskilling, and job transition. And lastly, in Colorado, we launched a mobile learning lab in partnership with Colorado River BOCES and Briggs and Stratton, a branded CTE trailer powered by immersive AR VR technology that brings industry aligned career exploration in mechanics, power equipment, agriculture, and industrial technologies to students all across western Colorado. random. In closing, 2025 tested the resilience of our business. And while Q1 results are encouraging, we are mindful that one quarter does not establish a trend. The early indicators we're seeing, modest improvement in customer additions, steady software renewals, expanded deployments with partners like Danbury and Kansas Workforce One, and the successful launch of Z Stylus One and the latest ZSpace studio release give us reasonable confidence that the underlying business is on firmer footing. That said, the funding environment for K-12 and workforce education continues to evolve, and we are managing the business accordingly. disciplined on expense, focused on the product roadmap, and selective on where we invest for growth. The board is focused on ensuring the long-term value we are building is appropriately reflected for our shareholders, and we will share updates when and as appropriate. We are grateful to our customers, partners, employees, and shareholders for their continued support and we look forward to updating you on our progress in the quarters ahead with that i'll turn the call over to eric to walk you through the financial results in more details thank you paul

as you consider our results a reminder that our revenues are substantially recognized upon shipment of laptop units or fulfillment of software license keys this includes recognizing the full value of multi-year software licenses in the period in which they are fulfilled. Only a small portion of our revenue is rapidly recognized. As a result of this revenue recognition treatment, our financial results can exhibit quarter-to-quarter and year-over-year variability that exaggerates the underlying seasonality of the business. In the first quarter of 2026, we executed against familiar global volatility with a much leaner team following our restructuring this past December. While the year is still young, our early results validate the difficult decisions we've made with clear sequential improvements in demand, gross margin, and spend management. And now diving into our first quarter performance. First quarter revenues were $5.3 million, down 22%. In a theme common throughout last year, software and services revenues outperformed hardware, down only 15% in comparison. As a result, software and services made up 47% of total revenue, up from 43% in Q1 2025. Revenues grew 8% sequentially, coming off Q4's prolonged federal government shutdown, which weighed on bookings and shipments of previously placed orders. The pacing of orders throughout Q1 informs our tempered confidence in the stabilization of our market. Zspace enjoyed meaningful growth through January and February before experiencing significant deceleration in March, as orders from Qatar and Dubai were delayed amid the Iran war, and one order was returned to us from the Bahrain airport because of the impracticalities of the customer-taking delivery. However, what we've seen thus far through Q2 tentatively suggests that the balance of the year may more closely track performance from the opening two months of the year. As previously discussed, our P&L reflects multi-year software license revenue in period. To help better characterize the run rate health of the business, we offer two non-GAAP software operating metrics. as of march 31st 2026 the annualized contract value of renewable software was 10.1 million dollars down 13 compared with 12 months ago also as of december as of march 31st 2026 the net dollar revenue retention of customers with at least fifty thousand dollars of acd was 65% for those customers present as of March 31st, 2025. Unfavorable performance on these two metrics is attributable to the same two large customers who collectively expanded their Z-Space footprint in 2024, but for whom macro factors prevented full renewal of their expanded commitment, which is a feature in this metric that we will lap in Q3 of this year. Normalizing for these two customers, ACV would have been $11.2 million, or down 4%, and NDRR would have been 82%. Once again, sequentially, ACV at $10.1 million is up 2% from last quarter, suggesting recovery of our recurring high-margin AR-VR software ecosystem. Bookings for the three-month period ending March 31st, were $6.1 million, down 8% year-on-year. Importantly, this performance was up 81% on a sequential basis. Gross profit was $2.8 million, down 13% against the same period last year. First quarter gross margins were 53%, up 5.6 percentage points versus Q1 2025. Revenue mix delivered one percentage point of improvement, and the remaining 4.6 percentage points of rate-based improvement came from both software and hardware, the latter including both rollout of the new Z-Stylus-1 interaction device, which eliminates the need for an additional tracking peripheral, as well as reduced tariff factors that were in play in the comparable quarter last year. Profitability improved sequentially as well, with gross profit up 17% compared with Q425, and 53% margins, improving 3.9 percentage points over last quarter's 49%. First quarter operating expenses of $4.9 million, excluding stock-based compensation, were down 35%. People-related costs, which make up 54% of Q1 OPEX, were down 43% year-on-year, again excluding stock-based compensation. This level of spend is consistent with our previous discussion of operating expense following Q4's cost reduction and indicative of an annual run rate of approximately $19 million, still excluding stock-based compensation. As of March 31st, 2026, ZSpace had approximately $2.9 million in cash, cash equivalents, and restricted cash, compared to $1.1 million in cash, cash equivalents, and restricted cash as of March 31st, 2025. Guidance for the rest of the year. events year-to-date continue to be unpredictable, and our customers' supply chains and order fulfillment processes can be vulnerable in unexpected ways, as we saw in multiple ways last year. The cost reduction measures we implemented at the end of last year were designed to position us for success since we faced similar demand shocks in 2026 to those we experienced in 2025. While we will not be providing formal guidance, we would like to share our thinking around the 2026 scenario in which we imagine we could deliver a performance close to EBITDA breakeven. In the years immediately prior to our IPO in Q4 2024, demand for the company's augmented reality experiences in schools, other academic settings, and CTE training environments grew from $35 million to $44 million. If we were to experience a repeat of last year's approximately $30 million top line, then typical quarterly seasonality would deliver 20% of our demand in Q1, 30% in each of Q2 and Q3, and 20% in Q4, another shoulder period in our customers' business cycles. As we've often discussed, our business can experience significant quarter-to-quarter volatility. So these quarterly splits are illustrative, but far from ironclad. Coupled with additional modest sequential expansion of gross margins in upcoming quarters, building on what we've delivered over the past quarters and through Q1, we believe our path is consistent with break-even through year-end on current levels of operating expenses. Our business is not linear, but our success in bringing effective new learning solutions to K-12 and CTE markets, expanding margins, and ability to increase software as a percent of revenue, and deliver greater than $10 million in recurring ACV gives us tentative optimism. While we cannot predict what the macro landscape will offer next, by way of events, we hope that this provides some measure of insight to management's approach to navigating our waters for the rest of 2026. View-on demand of $6.1 million in bookings, gross margin expansion to greater than 53%, and the effectiveness of our recent cost reductions this quarter are consistent with this outlook. Now I will turn the call back over to Paul for closing remarks.

Thank you, Eric. We'd like to thank everyone for listening to today's call, and we look forward to speaking with you when we report our second quarter 2026 results. Thanks again for joining us.

And ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.