Perfect Corp. Q1 FY2024 earnings call

• The first quarter revenue grew by 17.7% year-over-year to $14.3 million, and net revenue was positive $0.6 million, driven by strong growth of AI, AR, cloud solutions and substitution services for mobile and enterprise business.
• Invested in Beauty AI strategy including Beauty AI, Skin AI, Fashion AI and Gen AI across consumer and enterprise business. For consumer app business, launched innovative features in YouCam mobile app. For enterprise business, renewed contracts with big clients, boarded new brands for virtual try-on services, and saw strong momentum in new AI diagnosis product.
• Mobile beauty app active subscribers had a 30% year-over-year increase to over 902,000. Enterprise business saw recovery in sales cycle and pipeline expansion, with renewed contracts, new brand additions for VTO services, strong momentum in skin diagnostic products, and accelerated market adoption of fashion and jewelry VTO solutions. Hair AI added new hair type analysis technology.

In the first quarter of 2024, Perfect Corp.'s total revenue increased to USD 14.3 million from $12.1 million in the same period of 2023, representing a 17.7% year-over-year growth. AI and AR Cloud solutions revenue was $12.4 million in the first quarter, an increase of 19.6% compared to the same period in 2023. Licensing revenue, mostly from traditional off-line services, increased by 7.1% to $1.6 million in the first quarter of 2024. Mobile active subscribers surged by 30% year-over-year to an all-time high of 902,000 by the end of the first quarter. Gross profit for the first quarter of 2024 grew by 16.9% to $11.2 million with a gross margin of 78.3%. Operating cash flow had a net inflow of $3.5 million.

• Reiterated the outlook for the full year 2024, projecting total revenue growth recognized under IFRS to range from 12% to 16% compared to the full year 2023 results.

• Macro selling has impacted some smaller customers, with many not renewing agreements due to financial pressure. Some medium-sized customers dropped out due to financial difficulties.

Q: How is the SKU growth spread across segments?

A: Expansion is spread among jewelry, skin analysis and makeup, with makeup being the biggest segment.

Q: How are you thinking about expanding sales capacity in the enterprise business?

A: Keep sales talent in business units, specifically increase sales capability in business units focusing on skin care and fashion channels, and will keep increasing but not drastically.

Q: About the decline in key customer count, is it bottomed out?

A: Macro selling impacted some smaller customers, majority of enterprise clients are on annual base contracts, and management is vigilant, with most decrease from medium-sized customers due to financial difficulties.

Q: About the G&A expense, is the current level sustainable?

A: The company runs an agile and slim G&A team, D&O insurance premium has been reduced, and focuses investment into R&D and sales marketing outreach while being efficient in G&A