Perfect Corp. Q4 FY2024 earnings call

• Financials: Completed 2024 with double-digit revenue growth, total revenue $60.2M, net income $5M, adjusted net income up 18.6% to $8.3M. Operating cash flow $13M, cash & equivalents $165.9M.
• B2C: Mobile app subscription business strong, active paying subscribers over 1M, GenAI features like hair transformation, face swap, etc., popular. YouCam Online Editor web-based solution expanding.
• B2B: Deepened market penetration in skincare/makeup, over 732 brand clients, 822,000 SKUs. AI skin diagnostics and makeup virtual try-on solutions in demand. Secured key licenses renewal with top beauty conglomerates.
• Acquisition: Acquired Wanna from Farfetch in early January 2025, expanding into luxury fashion VTO for shoes, handbags, etc., to boost B2B growth.

In the fourth quarter of 2024, total revenue increased to $15.9 million from $14.1 million in the same period of 2023, a year-over-year increase of 12.4%. Full year revenue grew 12.5% to $60.2 million in 2024 from $53.5 million in 2023. The AI/AR cloud solutions and subscription revenue grew 25.4% to $15.1 million in Q4 2024, representing 95% of total revenue in that quarter. Licensing revenue decreased by 72.2% in Q4 2024 to $0.5 million. Full year gross profit was $46.9 million in 2024 with a gross margin of 78%, down from $43.1 million and 80.6% in 2023 due to increased third-party payment processing fees from mobile app subscription growth. Operating expenses in Q4 2024 decreased by 3.6% to $12.2 million, while full year operating expenses increased 2.7% to $50.1 million. Mobile app active subscribers increased 14.3% year-over-year to over 1 million by end of 2024. Enterprise customer base had a net increase of 24 brand clients, reaching 732 brand clients with over 822,000 SKUs onboarded.

• Total revenue growth for 2025 is projected to range from 13% to 14.5% compared to 2024 results. This forecast is based on current market and operational conditions, with management monitoring progress for transparency.
• Anticipates B2C revenue growing faster than B2B, with B2B expected to be 30%-40% of total revenue in 2025.

• Market uncertainties and economic conditions affecting B2B client spending plans. Potential tariffs and their impact on B2B clients' financials. Competition in the fashion space, though Wanna acquisition strengthens position but market dynamics still a risk.

Q: Pat McCann asked about B2B clients' spending and growth in 2025.

A: Louis Chen responded that B2B market is challenging due to client caution on spending plans, pipeline is solid, renewal rate is healthy, but accelerated growth remains to be seen. Guidance for 2025 is based on current visibility, with B2C growing faster than B2B.

Q: Lisa Thompson asked about Wanna competition.

A: Louis Chen stated Wanna was a leader in fashion with big brand clients like Valentino, Balenciaga, etc., and after acquisition, Perfect Corp. becomes AI/AR powerhouse in fashion and beauty VTO with few competitors in scale.

Q: Aashi Shah asked about gross margin decline in Q4.

A: Louis Chen explained that higher B2C revenue growth than expected and lower B2B revenue contribution in Q4 contributed to the gross margin dip, expecting it to gradually improve in 2025 but not returning to 2023 levels.

Q: Aashi Shah asked about Wanna integration timeline and revenue split.

A: Louis Chen said integration is ongoing, expected to continue in first half of 2025, with contribution from Wanna gradually increasing as integration progresses, but it won't have immediate significant impact.

Q: Lisa Thompson asked about AI assistant.

A: Alice Chang mentioned AI assistant for B2C will be launched in the app before second quarter of 2025, and for B2B, PerfectGPT POCs are being tested with brands, with B2C rollout faster.