zSpace, Inc. (NASDAQ:ZSPC) Q3 2025 Earnings Call Transcript

zSpace, Inc. (NASDAQ:ZSPC) Q3 2025 Earnings Call Transcript November 13, 2025

zSpace, Inc. misses on earnings expectations. Reported EPS is $-0.26 EPS, expectations were $-0.2.

Operator: Hello, and thank you for participating in today’s conference call to discuss zSpace’s financial results for the third quarter ended September 30, 2025. Joining us today are zSpace’s CEO, Paul Kellenberger; and CFO, Erick DeOliveira; and Greg Robles from Investor Relations. Following their remarks, we’ll open the call for analyst questions. 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.

Greg Robles: Thanks, Operator. Good afternoon, and thank you for joining our conference call to discuss our third quarter 2025 financial results. 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 to differ materially. 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?

Paul Kellenberger: Thank you, and good afternoon, everyone. Thank you for joining us for our third quarter earnings call. I am Paul Kellenberger, CEO of zSpace, and with me is Erick DeOliveira, our Chief Financial Officer. We’re excited to share zSpace’s Q3 performance and the progress we’ve made advancing our strategic priorities. Our third quarter results reflect our focus on advancing our strategy and controlling what we can control. During the quarter, our software and services revenue comprised over 50% of total revenue, contributing to gross margin expansion of over 640 basis points. This performance was driven by strong customer renewals and the continued adoption of our software offerings, which is a key part of our strategy.

In addition, we grew revenue 18% sequentially, which is a testament to our execution and disciplined focus on delivering value to our customers despite ongoing macroeconomic and funding uncertainties. We’ve made meaningful internal progress across our products and innovation. As announced last quarter, we completed the integration of Second Avenue Learning, leading to the launch and delivery of our career exploration application. We’re pleased with our team’s dedication to excellence and their ability to deliver innovative AI-powered education products with speed and impact. In addition, to support our global expansion and ensure accessibility across various educational geographies, we’re strategically leveraging artificial intelligence to eliminate language barriers.

AI is enabling quick and efficient translation across our platform, including website content and application interfaces and providing tools that can understand and interact in over 50 languages. This initiative not only expands our global reach, but ensures students and educators regardless of their native language, can fully utilize zSpace’s award-winning educational experiences, significantly broadening our global reach. Building on this, we began deploying our solutions with GEMS Education at their flagship School of Research and Innovation in Dubai. This partnership represents a regional first in AR/VR learning integration across K-12 education in the UAE and allows students to explore complex STEM concepts through interactive 3-dimensional simulations.

Beyond Dubai, we’ve secured deployments in Italy, Bulgaria, Poland and additional locations across the Middle East, continuing to build momentum in international markets. While funding uncertainty persists in the U.S., we’ve also achieved meaningful customer wins. Union Interactive, a key partner in Bulgaria, expanded its use of zSpace as part of the National STEM project for K-12, which was funded by the European Union. In Florida, Dixie County Schools made a significant investment in robotics and health applications for high school students, which was funded by the workforce development incentive grant. Lastly, in Alabama, the Challenger Learning Center deployed zSpace to enhance elementary STEM education to foster STEAM and STEM interest and learning.

In closing, we remain confident in the long-term growth potential of zSpace and our ability to deliver on our vision. That said, we approach the fourth quarter with cautious optimism given the ongoing uncertainty related to tariff impacts and the education funding environment in the U.S. Importantly, this caution is not a reflection of customer demand. Recent wins and ongoing engagement demonstrate that both existing customers and prospects continue to express interest in our solutions and a desire to expand usage. We believe that as federal education policy continues to take shape and funding mechanisms become more predictable, the longer-term outlook for our business will strengthen. With that, I will turn the call over to Erick to walk through our financial results in more detail.

Erick?

Erick DeOliveira: 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 multiyear software licenses in the period in which they are fulfilled. Only a small portion of our revenue is ratably 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. Throughout this year, we have seen the dual themes of internal execution success, driving product innovation, quality of revenues and spend management, opposed by external headwinds from tariff policy and uncertainty around education funding.

Both themes continue to be in evidence as we review financial performance through the period ending September 30. And now diving into our year-to-date performance. Year-to-date revenues were $23 million, down 22% year-over-year. As noted in our Q1 and Q2 results, we have been enjoying outperformance in software and services revenues, which make up 48% of the revenue portfolio versus 42% for the first 9 months last year or up 6 percentage points. This dynamic continues to be an important driver of gross margin expansion. As previously discussed, our P&L reflects multiyear software license revenue in period. To help better characterize the run rate health of the business, we offer 2 non-GAAP software operating metrics. As of September 30, 2025, the annualized contract value of renewable software was $10.2 million, down 10% compared with 12 months ago.

Also as of September 30, 2025, the net dollar revenue retention of customers with at least $50,000 of ACV was 77% for those customers present as of September 30, 2024. Unfavorable performance on these 2 metrics is attributable to 2 large customers who collectively expanded their zSpace footprint a year ago, but who were not able to fully renew their expanded commitment at this time due to macro factors. Normalizing for these 2 customers, ACV would have been flat year-over-year and NDRR would have been 94%, pointing to stability across the broader customer base. Bookings for the 9-month period ending September 30 were $22.7 million, down 35% year-over-year versus the comparable prior year period. Gross profit was $10.9 million, down 10% against the same period last year.

This includes a onetime charge in the second quarter for discontinued software license inventory, which is at once related to our exit of China and also our continued efforts to bring previously resold third-party titles in-house through both acquisition of applications and internal development. Gross profit was also affected by applicable tariffs and duties. Although we have largely treated these as pass-through on a dollar basis, we incurred some margin compression from doing so. Gross margins for the 9-month period were 47.3%, up 6.4 percentage points versus the prior year period. Improvements in profitability continue to be driven by the same 3 factors identified earlier in the year, a favorable mix of hardware versus software and services revenues, which contributed 2.4 percentage points to the margin expansion over the year-to-date period and rate-based factors, including new hardware products with better price performance profiles and an increased amount of zSpace-owned software content.

These rate-based factors delivered an additional 4 percentage points of margin expansion over the year-to-date period. Operating expenses, excluding stock-based compensation, were up 9% for the first 9 months of the year. People-related costs, which make up most of our operating expenses were up 3% year-on-year for the same comparable period, again, excluding stock-based compensation. And now for the third quarter. Q3 revenues of $8.8 million were down 38% year-on-year against the prior year quarter, which included an unusually large customer order that did not fully repeat this year. Notably, this represents an 18% sequential improvement over Q2. As previously mentioned, strength in high-margin revenues continued into the third quarter with software and services representing 57% of total revenues, an 11 percentage point mix shift with significant gross margin implications.

Previously discussed turbulence in the U.S. K-12 market has persisted, resulting in unpredictable purchasing patterns and delays in school districts across the country. Bookings for the 3-month period ending September 30 were $7.4 million, down 37% year-over-year. CTE customers drove 49% of bookings value, up from 41% in the prior year comparable period. Gross profit was $4.5 million and gross margins were 51.2%, up 6.4 percentage points versus Q3 last year. This laps the 6 percentage point margin expansion in that quarter and continues the improvements in profitability we have been delivering for 5 consecutive quarters now. Within the quarter, the 11 percentage point mix shift in revenues was responsible for 4.3 percentage points of margin gain and the rate base factors drove 2.1 percentage points of improvement.

Normalizing for a $0.1 million adverse impact of tariffs, Q3 margins would have been 52.3%. Operating expenses of $6.6 million for the quarter, excluding stock-based compensation, were up 4% year-over-year. People-related costs, excluding stock-based compensation, which make up the bulk of costs, were up 5% year-over-year against the comparable prior year quarter. Our reported results include $2.7 million in stock-based compensation expense attributable to grants made as part of our employee equity incentive program. Relative to the 22.8 million shares issued and outstanding at the start of the year, we continue to manage the issuance of RSUs as part of the employee equity incentive program to a target burn rate of less than 7% for the full year.

Turning to the balance sheet. As of September 30, 2025, zSpace had approximately $4.3 million in cash, cash equivalents and restricted cash compared to approximately $3.0 million in cash, cash equivalents and restricted cash as of September 30, 2024. Our path to profitability continues to run through revenue growth via operating leverage through our ongoing expansion of gross margins and tight stewardship of operating expenses. While overall revenues are challenged by the headwinds in the U.S. K-12 market, our success in driving more of the revenue portfolio from software is bearing fruit. The gross margin expansions from revenue mix shift into software from additional first-party software and from new hardware product releases are now part of our track record in delivering results.

Additional and yet unannounced hardware innovations will further improve on this performance. Cautious and measured OpEx investments have also been a tool for driving performance and innovation while staying on the path to profitability. As a result, our adjusted EBITDA losses have narrowed to below $2 million for the third quarter, in sharp sequential contrast to earlier quarters this year. Now moving on to our outlook for the final quarter of the year. 2025 is concluding with familiar obstacles still before us and the challenges of the government shutdown over the first 6 weeks of the quarter. Clearly, many of our customers continue to value the contributions which zSpace makes in their classrooms and training environments as demonstrated by the proportion software and services revenues make up in our Q3 results.

However, the overall outlook remains difficult to project at this time. As demonstrated throughout the year, we remain confident in our ability to improve the quality of both hardware and software revenues and move the company forward to profitability but cannot credibly project business volume under current circumstances in the U.S. education sector. Given this, we will continue to refrain from issuing formal financial guidance. Now I will turn the time back to the operator for Q&A.

Q&A Session

Operator: [Operator Instructions] Our first question coming from the line of Alex Paris with Barrington Research.

Alexander Paris: Nice job on revenue in the quarter, better than our expectations, better than the consensus in this still uncertain environment. Diving into the uncertainty of the environment, and you mentioned that I want to talk a little bit about the funding environment. But before I talk about that, you referenced the government shutdown first 6 weeks of the quarter. How does that impact zSpace directly? Or is it just another point of uncertainty influencing decision-making?

Paul Kellenberger: Erick, do you want to take that?

Erick DeOliveira: Yes, I can take that. And Paul, you can add in. Thanks for the question, Alex. I think the way to think about the shutdown is, in many ways, it feels like the kind of headwind we felt throughout the year where our end users have obstacles to overcome in making purchasing and funding decisions and additional challenges in accessing those funds. Through the first 6 weeks of this quarter, their biggest obstacle has been just an inability to access funds that would have cascaded down from various federal departments, whether it’s Department of Labor or Education. And that imposes a delay in many cases in accepting shipments of products as well as upfront determination to conclude purchase orders with us. So in many ways, it feels like more of the same from the first half of the year. In other ways, it’s a slightly different wrinkle that doesn’t necessarily influence their decision-making, but the timing of their decisions.

Alexander Paris: Yes, that’s what I was thinking because if — what buckets of federal money do schools access to purchase your product given that most — the vast majority of K through 12 funding is state and local derived. But things like Title I and so on come through the federal government, but it’s my understanding that, that money continued to flow.

Erick DeOliveira: To take that from the perspective of…

Paul Kellenberger: Yes. Let me take that one. As you well know, and 2 different pieces to the business, Alex, the CTE business, which a lot of the funding is Perkins, and that has flown. I think the speed at which the funding has flown is different, depending on which color the state is, and I can make that comment. But that funding on the CTE side is flowing. On the K-12 STEM side of it, 10% of the funding is from the DoE, which is federal. And there are a number of different title programs that we participate in. Some of them are even things like Title I. But as you noted, the vast majority of the funding is state and local. And I just think it’s the overall macro environment. And to give you a little bit of a little more detail, I was at a conference about 3 weeks ago with a group of superintendents.

I won’t name any of them, but there was about 60 of them, and I probably spoke to about 15 of them. They were all, I’ll say, believing things have kind of gone back to the way they were previously with significant nuance that federal funding is now flowing directly to the states unencumbered. And when I say unencumbered, if you recall, as a part of the administration’s revisions in education, the funding is no longer tied to specific title acts. And again, Title I and some of the other titles have a lot of things like special education learning, English learning programs, supplemental type things, they no longer have those connections. So I think the term we’re continuing to use is cautiously optimistic. We actually — in the big scheme of things, and thank you for your comments on our results.

We’re — again, we’re just cautiously optimistic, and that’s probably the best way to leave it.

Alexander Paris: Okay. That works. I appreciate that color. The — in talking about your recent wins, Paul, both in the press release and your prepared comments, I don’t know that you mentioned Danbury. The Danbury school press release looked quite interesting. It’s the largest school — largest high school, school district in the state of Connecticut and the seventh largest overall. What is the deployment there? Is it 1 high school and 3 middle schools? Or is it going to be ultimately more than that?

Paul Kellenberger: Ultimately, we are — right now, I’ll say it’s the beginning. There’s still more opportunity. We’re hoping it goes entirely across the district. And I think it’s got a lot even more opportunity that goes beyond it. We announced it pretty recently. It’s been deployed. We know there — and as evidenced by our continued focus on the software side of the business and the renewals. We know they’re quite happy with it, which we hope to keep them there. It is — they are using Career Explorer, which, as we’ve discussed previously, the acquisition of Second Avenue Learning has been instrumental in us helping move that one forward. But it is right now really focused on the middle and high schools. And I think there’s 12,000 students, something like that in the district.

The other one that I will mention that you didn’t ask about it, but it was in — I happen to be in the Middle East as we speak and met with GEMS Education this week. GEMS Education is the largest private school network in the world, and they put in a zSpace classroom lab into a brand-new facility. I was meeting with the senior leaders this week. And we’re working hard, nothing is concluded on really making this broader within GEMS. And when I say broader across the entire UAE, Saudi markets within the Middle East. They’re also in the U.K., they’re also in India with schools. So that one is very much at the beginning.

Alexander Paris: That sounds exciting. But essentially, you put it in this classroom lab, do a great job, they use it. And in time, there’s opportunities to roll out to other schools. That’s the idea, right?

Paul Kellenberger: Correct. And also the opportunity to roll out additional software applications within the existing — in Danbury’s case, there’s other applications that we would like them and quite frankly, more devices as well to make it even broader.

Alexander Paris: Okay. And then while I’m kind of on the same topic, you talked about — Erick talked about the net dollar revenue retention 77% and said that, that is due — it looks like in large part to 2 large customers who collectively expanded their footprint last year, but could not renew at the same rate. Maybe just a little bit more color there.

Erick DeOliveira: Yes, I’ll take that one, Paul. That’s correct, Alex. And in particular, what stands out as encouraging for us is this was one — the largest of the 2 had a deployment of several hundred, not quite 1,000 units across 6 schools in their district and faced with the same budgetary constraints that many schools, many of our K-12 customers are dealing with, they made a decision to not fully renew. They’ve gone from being a 7-figure software renewal account to being a mid-6-figure account. And just taken by itself, if you were to normalize for that one customer, both of those metrics would have been essentially flat year-on-year. Now by way of color, what’s encouraging is how they made the decision to shoehorn themselves into their next year budget.

They didn’t go dark on all of the devices. So they had, I think, about 700 devices, 800 devices across the school district in 6 schools or so. And they have preserved all of those. So they thinned out some of the software titles on those devices, but they’ve kept a presence on all of the 700, 800 student desks that feature zSpace. So to put it in other terms, we’re still farming the same acreage. There are fewer crops growing there, but it’s the same footprint that they have preserved going into their next year of experience with zSpace.

Alexander Paris: Encouraging. So the idea there would be hopefully, when the budget constraints are not so prevalent, maybe they’ll take additional software titles onto that farm.

Erick DeOliveira: No, exactly. As Paul said, cautiously optimistic.

Paul Kellenberger: By the way, if I can add a little more color, Alex, and this is allowed in the public domain. So I’m not saying anything confidential here, but there have been massive changes at the superintendent level in St. Louis over the course of the last 1.5 years. And I’ll just call it upheaval. They’ve been through 2 superintendents and a lot of, I’ll just say, disruption at the board level between that and the funding challenges and having to make some decisions about closing schools, that’s — it’s been a really difficult situation when you look at it from the school district side of things. But as Erick said, we’re happy they’re with us and they continue to use the product, and we have an upsell opportunity down the road here.

Alexander Paris: Great. And then let me just ask one last quick one, and I’ll pass the — pass it along. The guidance, I appreciate the fact that you can’t credibly project volumes here at this point. But seasonally, there tends to be an increase in revenues from Q3 to Q4. Do you think that, that pattern will persist this year without getting into the numbers or the magnitude? Or is there a risk that it could be lower sequentially?

Erick DeOliveira: I’ll take that one, Paul. I think that this is really where the government shutdown looms as a huge wildcard. And because our revenue recognition is tied to actual shipment and fulfillment of product and very little of our revenue is ratably recognized, it is, at least as of today, an unanswerable question. You’re correct that typically, we see a sequential increase in revenues into Q4 or at least relatively strong revenues that come from fulfillment of orders that came in late in Q3. The government shutdown just means that the timing of those shipments continues to be up in the air.

Operator: And our next question coming from the line of Rohit Kulkarni with ROTH Capital Partners.

Jared Osteen: This is Jared Osteen on for Rohit. And going a little bit deeper into the several recent developments within the Workforce and CTE segment, could you walk us through some of the ones you’re most excited about and generally how CTE traction has been trending?

Paul Kellenberger: Let me take that one, Erick, to start. And if you want to add in numbers by all means, do so. Jared, as I was saying earlier, the — I’ll say the vibe in the CTE segment and a lot of the CTE market, again, the way that we go to market, there’s really 2 segments. One is the K-12 CTE market and the other one is in the community colleges and other type groups and workforce development. The K-12 CTE business, right now, and there are a number of deals that we have that were pending, I’ll say, funding confirmations. And I think what’s changed in the business — and by the way, again, the CTE funding, it’s the one that’s supported — got bipartisan support, and we feel good about that side of the business. On the K-12 CTE side of it, that side also, I’d say, has been somewhat slowed down than the normal pace, mostly because CPE directors still report to a superintendent and the superintendent is the one leading the K-12 district.

But again, we feel bullish on it. So it might have slowed down a little bit. The biggest piece that continues to resonate with our customers, and we’ve been talking to many of them is this Career Explorer application that we announced. I know we discussed it and we’ve been shipping and it’s in the market now. And it is really the launch point for us, for careers. And it could be careers and skilled trades. And as we previously have released and announced, we’ve got — we’re using AI. We’re working with OpenAI and using AI within Career Explorer. Our plan is — and again, this is in the public domain, to release all of our applications and embed AI into the applications, and that’s something that we’re working on now. So I think the Career Explorer piece within CTE is extremely well, strong reception.

There’s the largest annual conference coming up in December, ACTE. And I think, come the next quarter, we’ll even have some more detailed answers to your questions once we get through that. Erick, I don’t know whether you want to talk about any other numbers. I know we — you talked about the CTE business quarter-to-quarter.

Erick DeOliveira: Yes. Since you brought up Career Explorer, I think the one thing that I’d note there that’s encouraging is you’ll recall back in Q2, we announced that at the very beginning of Q2, we closed on an acquisition for Second Avenue Learning. And we’d indicated that part of the purpose of that team was to drive road map acceleration and bring new products forward soonest. Our career exploration product was delivered by that team and put into the market in Q3. So very rapid go-to-market from the conception of that idea to actually fielding it through our sales team. And the bookings, I believe — or bookings, we’ve actually delivered low 6 figures in value for that product alone. I think that part of that is encouraging just internally from us that we got a product to market that quickly.

But I think also it highlights how well positioned that is that the CTE market is hungry for the kinds of tools that will not only accelerate students through training to the qualifications they’re seeking, but also the kinds of institutions that are looking to help guide students into the right programs that are most suitable for them. So part of that is us being very pleased that having done a good job at bringing that product to market. The fact that we’re finding a very receptive market and that we’ve actually concluded sales within 6 months of closing on Second Avenue, I think highlights that we’re well positioned for growth in that segment going forward.

Paul Kellenberger: By the way, Jared, one other detail, really tactical, but you probably noticed within the last 6 weeks or so, we announced, I’ll say, a broadening of our suite in the robotics applications area. Next week, we’ll drop another press release on another important area within the CTE that is going to broaden our offering as well.

Jared Osteen: Great. And then you recently announced the global availability of the Inspired laptop. Could you discuss how the international segment is contributing to the business? And separately, whether you’re seeing any remaining tariff or supply chain challenges?

Paul Kellenberger: So let me take the first one about the international piece of it. And then Erick, I’ll let you take the tariff piece. Internationally, I would say we’ve always had very strong demand. It’s not an area where we, quite frankly, have really focused or invested. And obviously, given the disruptive year we’ve had this year, so far in the U.S., we have given it a little bit more focus. And in one of the recent press releases, we talked about our partners in Italy, Bulgaria and Poland. Part of the GEMS focus; and again, GEMS is headquartered in Dubai, and it’s very much a premium-oriented private school system; is, for us, to expand internationally. And so I think you’re going to see more and more of that coming, and we’ve got more and we’re building more and more of a pipeline in that area.

On the tariffs, I’ll hand that over to Erick to cover the second part. And if you didn’t cover it, Jared, to your satisfaction, you can follow up with some of the questions. Go ahead, Erick.

Erick DeOliveira: Yes. I think the tariffs were most disruptive to the sales motion in Q1 and early Q2 when they were moving around so much and remained unsettled. Where we are now in Q3, and you’ll see this in our filings, they have an impact of about 1 percentage point of gross margin. We’ve been treating the tariffs for the most part as a pass-through on a dollar basis, but that still creates a small amount of gross margin compression just because we’re not marking up the tariff impact to us. You’d asked about impacts on supply chain as well. We haven’t really noticed so much of a dislocation in terms of supply chain as a result of tariffs. The bigger impact is coming right now from just uncertainty in how education funding ultimately flows from federal level funding vehicles down to individual schools where a superintendent can make those decisions.

And at that level, tariffs less of a factor, funding more of a factor. On the P&L, tariffs do show up as a factor, but relatively modest impact to gross margins given the other tailwinds that we’ve picked up on a profitability basis. Is that helpful?

Jared Osteen: Yes. And then I think last quarter, you had spoken about shifting some of the manufacturing of core components from China to Thailand. Can you talk to whether that started to become a benefit or where we’re at on that? And then also with the hinting of new hardware coming out, can you talk to anything new about where we should expect margins to trend from here with that?

Paul Kellenberger: Erick, how about I take that first, and you can add to it. I’ll let you talk about.

Erick DeOliveira: Yes, I’ll come back to the margins.

Paul Kellenberger: You will see a press release coming out next week, Jared. And this is — when we talk about hardware, it’s not the laptop, but it’s the interaction component. And it is somewhat in the public domain, but it hasn’t formally been press released. And this is the new stylus. So you will read more about it next week. I’ve been actually showing it to a number of people, and people are calling it game changing. So we think it’s going to be — it’s going to simplify everything with the way people use zSpace. And so I think it’s super, super impactful. Erick can talk about the margin piece of it. Erick, do you want to take that part?

Erick DeOliveira: Yes, I’d be delighted to. So the key drivers of our margin expansion, we’ve talked about this before. One is the mix between software and hardware. You saw that very much in evidence this quarter. Every year going back, that’s been responsible for 200 to 300 basis points of margin expansion. Structural factors within our software and our hardware revenues. On the software side, as we bring more first-party content to market, you’ll see that be a driver of software and software COGS as we break them out in our Q. On the hardware side, the way to think about this is not an ongoing upward slope, but a sequence of step changes as new hardware is introduced at the laptop level with improved price performance characteristics.

With the new tracking device, the new interaction device, you should expect, again, a small, modest but measurable and structural improvement that will show up as a step change improvement in hardware-related costs going forward. And the big appeal as we see here is, firstly, in the user experience, Paul alluded to that. It’s exciting. It’s a much better user experience. Secondly, in terms of logistics, there are fewer — there will be fewer peripherals to manage, which if you’re an IT director in a school district, that’s going to be attractive. And obviously, that creates opportunities for us where less hardware in the ecosystem is less costly. And as there are fewer boxes to ship as part of providing a solution, delivering a solution to a school, we expect to see shipping and handling improve as well.

So again, modest changes, but structural, and you’ll see a onetime step-up improvement that should be sustained in future reporting periods.

Operator: I’m showing there are no further questions at this time. I will now turn the call back over to Mr. Paul Kellenberger, for any closing remarks.

Paul Kellenberger: Thank you. So this concludes our earnings call, and I just want to thank everybody for participating. And we’re looking forward to the next one and getting through the fourth quarter here and through 2025. Thanks to everyone.

Operator: This concludes today’s conference call. Thank you for your participation, and you may now disconnect.