Perfect Corp. Q2 FY2024 earnings call

• Leveraged advanced AI capabilities to achieve strong growth in H1 2024, with revenue up 13.5% YOY to $28.2 million, net income up 185% YOY to $1.4 million, and adjusted net income up 26.2%.
• B2C mobile beauty apps saw 18.3% YOY growth in active subscribers, with YouCam apps utilizing Gen AI for enhancements like AI avatar, fashion, hairstyle, etc.
• B2B operations focused on enhancing market penetration, securing new contracts, renewing major licenses, and expanding into verticals such as jewelry try-on and AI-powered screen diagnostics.
• Launched PerfectGPT, a generative AI framework for beauty, along with new AI solutions like BeautyGPT and Skincare GPT.
• Achieved positive net income in Q2 2024, with adjusted net income up 43.8% YOY compared to Q2 2023.

In the second quarter of 2024, total revenue increased to $13.9 million from $12.7 million in the same period of 2023, representing a 9.6% year-over-year growth. The AI and AR cloud solutions and subscription revenue saw a stronger increase, reaching $12.9 million in Q2 2024, a 17.4% rise compared to Q2 2023, with subscription revenue contributing 92.8% of the total revenue. Licensing revenue, mostly from traditional offline services, decreased to $0.7 million in Q2 2024, down 49.8% from $1.4 million in Q2 2023. The mobile beauty app active subscribers surged 18.3% year-over-year to over 919,000 by the end of Q2 2024.

• Reiterated the 2024 total revenue year-over-year growth guidance to range from 12% to 16% based on current market and operational conditions.

• Forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from those expressed.
• Licensing revenue continuing to wane as the company shifts to a subscription revenue model.
• Macro economic conditions and election impacts potentially affecting demand.

Q: Brian Schwartz with Oppenheimer asked about the outlook for the second half, pipeline shape, and trends in different geographies.

A: Pin-Jen Chen mentioned Q2 was slightly slower due to seasonality, but renewal in B2B is strong, and new AI announcements have high brand interest. Alice Chang noted expansion into new regions in Q2 and that beauty groups are interested in AI/GPT for operations and consumer engagement.

Q: Lisa Thompson with Zacks asked about AI spending trends, licensing revenues, and the future of licensing.

A: Pin-Jen Chen said beauty enterprises have AI committees and budgets for pilots, licensing revenue is expected to be flat and wane to less than 10% of revenue. Alice Chang mentioned in-store demand is shifting to online subscription models.

Q: Christopher Recouso with Partner Group asked about converting brand clients to key customers and key customer profiles.

A: Pin-Jen Chen said key customers are typically multinational, operating in multiple countries, and brand groups. The process involves starting with pilots under $50,000 and upselling to more geographies and products.

Q: Unidentified Analyst with Sidoti asked about monthly active subscribers and new categories for growth.

A: Pin-Jen Chen said subscribers are on annual subscriptions, and growth categories include skincare, B2C consumer apps, and jewelry/watches, with skincare showing strong momentum due to med spa and clinic focus.

Q: Mike Kupinski with Noble asked about margins, vertical expansions, and M&A prospects.

A: Pin-Jen Chen discussed margin dynamics between B2B (higher margins) and B2C (affected by Apple/Google fees). Vertical expansions are for B2B, and M&A is part of growth strategy with active look for opportunities.