Summary of Perfect Corp Conference Call Company Overview - **Company Name**: Perfect Corp - **Ticker Symbol**: PERF - **Market Capitalization**: $175 million with 101 million shares outstanding at $1.75 per share [3] - **Cash Position**: $170 million with no debt [3] - **Founded**: 2015, based in Taipei, Taiwan [3] - **Employee Count**: Approximately 410, with about half in R&D [3] - **Revenue Distribution**: 50% from the US, 25% from the EU, and 20% from Japan [3] Business Model - **B2B and B2C Segments**: - B2B: Provides beauty and fashion software solutions to major brands (e.g., Estée Lauder, Shiseido) [3][5] - B2C: Offers apps available on iOS and Android, focusing on virtual try-on and photo/video editing [3][5] - **Revenue Shift**: - B2B revenue was approximately 75%-80% at the end of 2022, projected to drop to about 30% by the end of 2025 due to faster growth in B2C [5][29] Financial Performance - **Revenue Growth Guidance**: Expected growth of 13%-14.5% for the year, with a positive outlook for surpassing this guidance [26] - **Operating Income**: First positive operating income of $500,000 reported in the third quarter [27] - **Net Income**: Approximately $5 million with margins around 10% [28] - **Subscriber Count**: 940,000 paying subscribers, primarily from developed countries [11] - **Average Selling Price (ASP)**: Increased by $20 due to the introduction of a premium model [9] Technology and Innovation - **Focus on GenAI**: GenAI technology for photo and video editing is a key growth driver [4][20] - **Patents**: Over 55 patents related to their technology [13] - **AI Integration**: Plans to embed AI agents in all apps by 2026, focusing on personalized beauty and fashion advice [18] Market Dynamics - **B2B Challenges**: Financial pressures on brand clients due to macroeconomic factors have slowed B2B growth [5][6] - **B2C Growth**: Rapid growth in B2C driven by changing consumer habits, especially during the pandemic [5] - **Competitive Landscape**: Limited large competitors in the B2B space, with many smaller players in the B2C segment [34] Strategic Initiatives - **M&A Activity**: Recent acquisition of Wannabe, enhancing virtual try-on capabilities for luxury brands [21] - **API Business Growth**: Increased interest from non-beauty companies integrating Perfect Corp's API for virtual try-on solutions [26] Customer Engagement - **User Demographics**: 75%-80% of users are female, primarily in their teens to 20s [34] - **Retention Rate**: High retention rate of over 90% for B2B clients [12][25] Future Outlook - **Growth Avenues**: Continued focus on GenAI technology, skincare analysis, and virtual try-on for accessories [30] - **Potential for Dividends or Buybacks**: Management is considering options based on cash availability [30] Key Risks - **B2B Revenue Dependency**: Slower growth in B2B could impact overall revenue if not offset by B2C growth [6][29] - **Market Competition**: Potential for larger players to enter the market or acquire the company [34] This summary encapsulates the key points discussed during the conference call, highlighting the company's current status, market dynamics, financial performance, and future strategies.

Financial Data and Key Metrics Changes - Total revenue for 2024 grew by 12.5% year-over-year to $60.2 million, with net income at $5 million and adjusted net income increasing by 18.6% to $8.3 million compared to 2023 [8][10][32] - Operating cash flow generated a net inflow of $13 million for the full year 2024, with cash and cash equivalents exceeding $165.9 million [10][34] - Gross profit for Q4 2024 increased by 2.5% to $11.8 million, with a gross margin of 74.1%, down from 81.3% in Q4 2023 [27] Business Line Data and Key Metrics Changes - The B2C mobile app business saw a 14.3% increase in active paying subscribers, reaching over 1 million by the end of 2024 [10][35] - AI/AR cloud solutions and subscription revenue grew by 25.4% to $15.1 million, representing 95% of total revenue in Q4 2024 [25] - Licensing revenue decreased by 72.2% in Q4 2024 to $0.5 million, indicating a shift towards a recurring subscription revenue model [26] Market Data and Key Metrics Changes - Positive momentum was noted in North America, Western Europe, and developing markets like Brazil, with strong demand for AI-powered features [11] - The enterprise customer base increased by 24 brand clients, totaling 732 brand clients with over 822,000 SKUs onboarded [36] Company Strategy and Development Direction - The company aims to deepen its presence in the beauty, fashion, and skin segments while exploring cross-sell opportunities and broadening product offerings [22] - The acquisition of Wanna from Farfetch is expected to enhance market reach and expand the total addressable market, particularly in luxury brands [15][39] - The focus remains on continuous R&D in generative AI to drive user engagement and loyalty [14][76] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the B2B market, noting challenges from inflation and potential tariffs affecting client spending [44][46] - The guidance for 2025 projects total revenue growth of 13% to 14.5%, with B2C revenue expected to grow faster than B2B [23][49] Other Important Information - The company reported a decrease in operating expenses by 3.6% in Q4 2024, attributed to lower R&D and G&A expenses [28] - The adjusted net margin for the full year 2024 was 13.8%, reflecting effective cost control alongside revenue growth [33][37] Q&A Session Summary Question: What is the situation with enterprise clients regarding spending on services? - Management noted that while the B2B market remains challenging, there is still interest from brands to invest in digital solutions, although they are cautious about spending [44][46] Question: What was the B2B revenue contribution last year? - The B2B revenue contribution was approximately 40% last year, with expectations for it to drop to 30% to 40% in 2025 [52][53] Question: How will operating expenses be managed in light of reduced gross margins? - Management indicated that they will continue to invest in growth while maintaining financial discipline, ensuring that expenses do not create financial pressures [55][56] Question: What is the competitive landscape for the fashion segment post-acquisition of Wanna? - Management stated that Wanna is a leader in the fashion space with significant brand partnerships, and the acquisition strengthens their position in the market [58][60] Question: What is the timeline for the full integration of Wanna? - Integration is expected to continue through the first half of the year, with a go-to-market strategy planned for later in the year [72] Question: Where will the company focus its investments in the coming year? - The primary focus will be on R&D for generative AI, alongside digital marketing efforts to attract app users [76]

Financial Data and Key Metrics Changes - Total revenue for full year 2024 grew by 12.5% year-over-year to $60.2 million, with net income of $5 million and adjusted net income increasing by 18.6% to $8.3 million compared to 2023 [8][32] - Operating cash flow generated a net inflow of $13 million for the full year 2024, with cash and cash equivalents totaling over $165.9 million [9][34] - Gross profit for Q4 2024 increased by 2.5% to $11.8 million, but gross margin decreased to 74.1% from 81.3% in Q4 2023 [27] Business Line Data and Key Metrics Changes - The AI/AR cloud solutions and mobile app subscription revenue grew by 25.4% to $15.1 million in Q4 2024, representing 95% of total revenue for the quarter [25] - The B2C mobile app business saw active paying subscribers increase by 14.3% year-over-year, reaching over 1 million by the end of 2024 [9][35] - Licensing revenue decreased by 72.2% in Q4 2024 to $0.5 million, indicating a shift towards a recurring subscription revenue model [26] Market Data and Key Metrics Changes - Positive momentum was noted in North America, Western Europe, and developing markets like Brazil, with strong demand for AI-powered features [10] - The enterprise customer base increased by 24 brand clients, totaling 732 brand clients with over 822,000 SKUs onboarded [36] Company Strategy and Development Direction - The company aims to deepen its presence in the beauty, fashion, and skin segments while exploring cross-sell opportunities and broadening product offerings [22] - The acquisition of Wanna from Farfetch is expected to enhance market reach and strengthen competitive positioning in the beauty and fashion space [14][39] - The focus on R&D, particularly in Generative AI, is a key priority for the company moving forward [76] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the B2B market, noting challenges but also a solid pipeline and interest from brands [44][48] - The guidance for total revenue growth in 2025 is projected to range from 13% to 14.5% compared to 2024 [23][40] Other Important Information - The company is integrating Wanna into its operations, with expectations for a full integration timeline within the first half of the year [72] - The company is committed to maintaining financial discipline while continuing to invest in AI development and R&D [56][76] Q&A Session Summary Question: What is the situation with your enterprise clients regarding spending? - Management noted that while the B2B market remains challenging, there is still interest from brands to invest in digital solutions, although they are cautious about spending [44][46] Question: What was the B2B revenue contribution last year? - Last year, B2B revenue was approximately 40% of total revenue, but it is expected to decrease as B2C continues to grow [52][53] Question: How do you plan to manage operating expenses in light of reduced gross margins? - Management indicated that they will continue to invest in growth while maintaining financial discipline, ensuring that expenses do not create financial pressures [54][56] Question: Can you discuss the competitive landscape after acquiring Wanna? - Management stated that Wanna is a leader in the fashion space with significant brand partnerships, and the acquisition strengthens their position in the market [58][60] Question: What is the timeline for the full integration of Wanna? - Integration is expected to continue through the first half of the year, with a focus on aligning sales, marketing, and product development efforts [72] Question: Where will the company focus its investments in the coming year? - The primary focus will be on R&D for Generative AI, alongside digital marketing efforts to attract app users [76]