Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to Perfect Corp's fourth quarter 2024 and full year 2024 earnings conference call. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. And please limit yourself to one question and one follow-up. You can rejoin the queue again if you have more questions. We will be hosting a question and answer session after the management's prepared remarks. Please note that today's event is being recorded. I will now turn the conference over to first speaker today, Mr. Jimmy Shah, IR Director of the company. Please go ahead.

Thank you. Hello, everyone. Welcome to Perfect Corps' fourth quarter 2024 and full year 2024 earnings call. With us today are Ms. Alice Chang, our Founder, Chairwoman, and Chief Executive Officer, Mr. Louis Chen, our Executive Vice President and Chief Strategy Officer, and Ms. Iris Chen, Vice President of Finance and Accounting. You can refer to our fourth quarter 2024 and full year 2024 financial results on our IAHA website or in the link or in the form 6K we filed with SEC earlier. A replay of this call will also be available on our website shortly after its conclusion. For today's call, management will provide our prepared remarks followed by a question and answer session. Before we continue, I would like to refer you to our safe Harper statement in our earnings press release. This call may contain forward-looking statements regarding performance, anticipated plans, our original results, and our objectives. Forward-looking statements are based on management's expectations and are subject to numerous risks and uncertainties that could cause actual results to differ materially from those expressed or implied in our call today. Perfect Corp. undertakes no obligation to update any forward-looking statements except as required by law after the date of this call. Please note that all members stated in management's prepared remarks are in U.S. dollars, and we will also discuss non-IFRS measures today. I will now turn the call over to our CEO, Ms. Alice Chen.

Thank you, Jimmy, and welcome to PerfectCorp 2024 fourth quarter earnings call. Let me start by giving you some updates on our financials and our progress in product business development around the world in 2024 then share our view for the year of 2025. First of all, we completed the full year 2024 with a double-digit growth in revenue as anticipated by our guidance. The total revenue grew by 12.5% year-over-year to $60.2 million. The bottom line net income for the same period was $5 million and the adjusted net income increased 18.6% to $8.3 million compared to 2023. This continuous increase in revenue and the positive net income is mainly due to strong growth within our mobile app subscription business under AIR cloud solution business. Full year 2024, our operating cash flow generated a net inflow of $13 million and our balance sheet remains very strong with over $165.9 million in cash in the cash equivalent. Our B2C mobile app business has maintained very strong growth with the number of active paying subscribers, continuing to breach old-time records with over 1 million to end 2024. It is a 14.3% increase compared to 8,879,000 subscribers at the end of 2023. This sustained growth in paying subscribers, highlighting the ongoing global demand of AI power photo and video editing creation enhancing and visualization features appealing to all age groups and the region as we mentioned we have seen positive momentum from our north american and the western europe markets as well as developing markets in brazil our uk mobile app suite continues to evolve with frequent updates and the feature enhancement powered by cutting edge generative AI for image and video creation. Among the most popular innovations, our Gen AI hair experiences have become a major hit within our user community. These features, including AI hairstyle, hair lengthening, hair wavy, hair volume, hair color, and more, provide ultra-realistic stimulus previews, transforming how consumers and the retailers make style decisions. Beyond hair transformation, our AI technology extends to other exciting innovations such as the AI face swap, AI face expression, AI photo enhance, video enhance, and more, delivering next-level creativity and personalization to our growing user community. Beyond our mobile apps, we are also expanding our web-based generative AI solution with UCAM Online Editor. Consumers now can enjoy the latest AI innovation not only through their mobile app but also via a web browser on their laptops and PCs, ensuring a stimulus and accessible experience across the platform. We are focused on harnessing the power of Gen AI to deliver engaging new features from text, image, audio, and video. That is becoming an integral part of the premium subscription for our B2C users on app and on web. By integrating state-of-the-art models and algorithms, we aim to create immersive, personalized experience that go beyond traditional functionality, driving deeper user engagement and loyalty. Our strategy in B2C app and the web involves a continuous R&D to refine generative AI content model and enabling features such as AI enhancement in photo and video, as well as AI creation, personalized image and the video. Through this relentless innovation, coupled with the robot user feedback and the deep data analytics, we try to deliver subscription-based services that offer clear, tangible value positioning us as a leading provider for cutting-edge image and video JNAI solutions in consumer market. Before I go to our B2B performance, I want to go over the recent acquisition of WANA from Farfetch and its impact on PerfectCore. The transaction was completed in early January, and we anticipate spending the next 6 to 12 months, similarly integrating WANA into our team. One of core competence gives us access to new markets in the customers within luxury brands, where it offers virtual try-on services for shoes, handbags, scarves, and clothes. This acquisition perfectly aligns with our AI service offerings to brand partners, and will expand our total addressable market beyond our career reach. Together with PerfectCorp, we will strengthen our competitive position in the beauty and the fashion space, leveraging our synergistic solution, enhanced capabilities, and experience our team members. In our B2B business in 2024, we have prioritized deepening market penetration in skincare and makeup segment. We reached over 732 brand clients with over 822,000 SKUs onboarded in our platform. We continue to make significant steps in expanding our portfolio with AI-powered skin diagnostics. Beyond core beauty and the skin care brand, we have actively expanded into new markets and the region of aesthetic clinics, dermatology clinics, skin care centers, meds-bots, and awareness centers, broadening our reach that impact to the industry. We continue to see strong demands in the skin diagnosis sector from brands, retailers, clinics, and meds-bots. Our AI-powered skin analysis detects up to 15 major concerns in HD, providing personalized treatment and product recommendations tailored to each user's unique skin profile. The technology has enabled precise treatment measures tracking progress with a before and after comparison to showcase improvements. By combining advanced diagnostics with data-driven insights, our solution enhances client engagement, trust, and the long-term loyalty in the evolving world of AI-driven skincare. Our make-up virtual try-on solution remains as a global leader, delivering strong results for brand customers. We have secure key licenses renewal with top beauty conglomerates and retailers, proving our impact on boosting online engagement in in-commerce conversion rate. While the B2B sales cycle has its challenges, our pipeline remains strong, and we remain focused on helping enterprise clients adopt AI-driven solutions to elevate consumer engagement and the digital experience. On the fashion tech side of our business, we continue to make strong progress in luxury fashion tech with luxury brands, particularly in watches and jewelries VTO. In January 2025, we acquired Walna from Farfetch to accelerate our B2B growth with fashion brands and retailers. This strategic move expands our 3D VTO solution to shoes, baths, clothes, and scarves, enhancing digital shopping experience and reshaping how brands engage with customers in the era of AI-powered fashion retail. Additionally, our new web-based AI service, UQAM Online Editor, SaaS API, integrates Gen AI technology for advanced image and video editing. While initially we designed for beauty and fashion professionals, it has gained traction across diverse industries, significantly expanding our total addressable market. The SaaS API is simplified web and mobile app development, handling complex processing without requiring server maintenance from the clients. Its flexibility makes this suitable for business of all sizes, with new clients spanning like a convenience store chain, telecom carrier, and a mobile phone company. In conclusion, we achieved a solid business growth throughout 2024, highlighted by increased revenue, enhanced operational efficiency, and strong financial performance. We are confident that Perfect Corp. is a position strategically to capitalize on expanding market opportunities and sustain long-term growth by continuously developing new technologies and leveraging our leadership position in beauty and fashion space for our consumer from our app, web, as well as our B2D enterprise brand clients. Our strategy for long-term growth in 2025 and beyond focuses on deepening our presence in the beauty fashion and the skin segment and expanding into new segments, exploring cross-sale opportunities, broadening our product service offerings, strengthening of leadership, accelerating revenue growth, and maximizing long-term shareholder value. Driven by the positive demand for both our mobile beauty app subscriptions and the enterprise SaaS solutions, our outlook for the full year 2025 project's total revenue growth recognized under IFRS to range from 13% to 14.5% compared to the full year's 2024 results. With that, I have concluded my remarks and will now pass the call over to Luis, who will discuss our financial details with you. Thank you.

Thank you, Alice. Please note that all financial comparisons are on a year-over-year basis, and the reporting period is the fourth quarter of 2024 versus the comparable period in 2023, and that on top of the International Financial Reporting Standard measures, we will also discuss non-IFRS measures to provide greater clarity on the trends in our operations. In the fourth quarter of 2024, our total revenue increased to $15.9 million from $14.1 million for the same period in 2023, representing a year-over-year increase of 12.4%. Full-year revenue increased 12.5% to $60.2 million in 2024 from $53.5 million in 2023. The growth came from the continuous growth of our AI and AR cloud solutions and mobile app subscription business. The AI, AR cloud solutions and subscription revenue grew 25.4% to $15.1 million, compared to $12 million from the year-ago period, which represents 95% of total revenue in this quarter. The growth is attributed to the continued expansion of our mobile app subscription and positive momentum from our online skin diagnosis solutions as well as our virtual trial business licensing revenue decreased by 72.2 percent in the fourth quarter of 2024 to 0.5 million compared to 1.8 million during the same period of 2023 the licensing revenue will gradually become immaterial as it continues to be phased out and replaced by the better business model of recurring subscription revenue models. The gross profit for the fourth quarter of 2024 grew by 2.5% to $11.8 million, with gross margin of 74.1%, compared to $11.5 million and gross margin of 81.3% for the same period in 2023. Full-year gross profit was $46.9 million in 2024 and gross margin of 78% compared to $43.1 million in 2023, with gross margin of 80.6%. The decrease in gross margin was primarily due to the increase in third-party payment processing fees paid to digital distribution partners such as Google and Apple due to the increase in the mobile app subscription revenue. The total operating expense for the fourth quarter of 2024 decreased by 3.6% to $12.2 million dollars compared to twelve point seven million for the same period last year the decrease were seemingly due to the lower r d expenses and gna expenses in the fourth quarter of 24 two-year operating expense increased 2.7 percent to 50.1 million in 24 compared to 48.8 million in 2023 this increase was mainly due to the increase in sales and marketing expenses r d expenses and also offset by a decrease of gna expenses going into more detail from operating expenses the sales marketing expense for the fall quarter of 24 were 6.9 million compared to 6.7 million during the same period of 2023 an increase of 3.6 percent the full year sales and marketing expense increased 9.7 percent to 28.2 million in 24 compared to 25.7 million in 2023 this increase were largely due to increase in marketing events advertising costs related to mobile apps and cloud computing costs research and development expenses were 2.8 million dollars for the fourth quarter of 2024 compared to three million dollars during the same period of 2023 a decrease of 8.3 percent the decrease were from the streamlining certain r d process and benefiting from expense savings. Full-year R&D expense increased 4.7% to $12 million for 2024, compared to $11.5 million in 2023. This increase resulted for an increase in R&D headcount and related personnel costs. General and administrative expenses decreased by 41% to $1.8 million for the fourth quarter of 2024, compared to $3 million during the same period of 2023. Full-year G&A expenses decreased by 26.6 percent to 8.5 million dollars compared to 11.6 percent in 2023. The decrease were mainly due to the increased operational efficiency as we march into the third year mark of the listing on NYSE. Net income was 1.1 million dollars for the fourth quarter of 2024 compared to the net income of 1.4 million during the same period of 2023. Full year net income was 5 million dollars for 2024 compared to 5.4 million in 2023 the positive net income was supported by continued revenue growth and effective cost control this result represents a net margin net income margin of 8.3 percent for the full year 2024 excluding non-cash share-based compensation non-cash valuation gain and loss of financial liabilities the adjusted net income was 2.3 million dollars for the fourth quarter of 2024 compared to the net adjusted net income of 2.1 million in the same period in 2023 an increase of 8.2 percent full year adjusted net income was 8.3 million in 2024 compared to 7 million in 2023 an increase of 18.6 percent these represent an adjusted net margin of 13.8 percent for the full year 2024. As of December 31st of 2024, the company held 165.9 million in cash and cash equivalent in six months deposits, compared to 163.2 million as of December 30, 2024. We had a positive operating cash flow of 3.3 million in the fourth quarter of 2024, compared to 3.1 million during the same period of 2023. For the full year operating cash flow was 13 million in 2024 compared to 13.6 million in 2023 the positive cash flow demonstrate the company's continuing ability to generate continuous cash flow to support its business operation and growth strategy on the mobile app side in business metrics the mobile app subscription business was growing and the active subscriber increased to 14.3 percent year over year reaching an all-time high of over 1 million by end of 2024. Our UCAM suite of beauty apps has demonstrated its ability to provide both enjoyment and value to users, successfully converting them into paying subscribers. Our enterprise customer base had a net increase of 24 brand clients since the end of last quarter, achieving a total of 732 brand clients with over 822,000 SKUs for makeup, skincare, eyewear, watches, and jewelry products as of end of last year the further expansion of these metrics highlights the ongoing growth in the customer penetration and skew expansion in the fourth quarter perfect core stay at the 151 key customers the same at the end of the previous quarters demonstrating the stability of our enterprise business in this quarter in summary in the fourth quarter of 2024 for AI and AI cloud solution and mobile app subscription business continue to drive our growth. Throughout the year, we remain focused on operational efficiencies and financial disciplines, resulting in 18.6% year over year in full year adjusting net income and adjusting net margin rate of 13.8%. As mentioned by Alice, we will continue to invest in the growth of our business through the development of AI technologies, both organically and through MMA opportunities. to strengthen our core competencies. Our commitment to advancing GN-AI position as an industry leader, empowering our consumers and enterprise clients with tools that outperform current solutions and redefine what's possible in user engagement and personalized services. Our purchase of Warnup from Farfetch significantly enhanced perfect core market reach, allowing us to tap into new customer segments and geographies that were previously out of scope. By integrating Warnup's established customer base, product offerings, and distribution channels, we can rapidly expand our footprint and drive growth across untapped markets. Additionally, these transactions strengthen our competitive positioning by broadening our product portfolio, increase brand visibility, and position us to better serve a wider range of industries. We are excited about the opportunity that are ahead of our B2C and B2B business line, but continue to invest in AI innovation, expanding our market presence, and building on our strong foundation. are confident that we will sustain growth well into the future. Finally, our 2025 guidance for total revenue year-over-year growth will range from 13 to 14.5 percent. This forecast is based on company current assessment of the market and operational conditions and management will closely monitor business progress and product updates in order to better offer transparency to the market. With that concludes my prepared remarks. Operator, please open up the call for questions.

Thank you. We will now begin the question and answer session. If you'd like to ask a question during this time, see the press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. And again, please limit yourself to one question and one follow-up. And your first question comes from the line of Pat Nakat with Noble. Please go ahead.

Hey, thanks for taking my question. I was wondering, I noticed certainly you highlighted the growth in the brand clients, and my question had to do with the B2B side of the house. I'm wondering what the situation is with your enterprise clients as far as their ability to potentially start to spend more money on services such as yours. What's the situation with the B2B, especially given that it has the higher margins, And will that, you know, would you anticipate a return to growth there in 2025? What should we look for there? And then I guess sort of the follow-up to that would be, how does the B2B revenue play into your 13.5% growth guidance for 2025?

Thank you, Pat. so the b2b market i would say it still remains challenging right uh you know last year certainly on the previous year we have you know challenges from inflation and and cost uh you know most recently you know we start hearing clients uh you know certainly worry about potential tariff that may come uh you know later in the year so they are certainly cautious to understand what exactly will be the impact to their financial that may turn uh you know um their spending uh plans So the pipeline remains very solid. The interest from the B2B brands are still there. They are investing, they want to be more digital. This is where we play the role. However, we understand that they are not yet ready to write a big check. So we see that the renewal rate for the business continues to be healthy. So they will continue to use what they are already using. But the expansion to have more accelerated growth, I think it still remains to be improved. and we will be very vigilant about the market and how the world economy will play. And this certainly may affect the cost structure from that perspective. But the good news is we are spending our time right into newer markets. So our total addressable whether it's client groups or it's market geographies are spending, again, partially because of the one acquisition as we are spending into newer categories that we were not previously present or only started to you know get into the market and that potentially can contribute in the growth. The guidance that we have provided certainly is based on current visibility. We didn't want to you know just have a big talk and have overly optimistic without seeing the markets moving. So we are cautiously optimistic about that since there is no really real competition in the segment that we are we remain a solid leader in this space so i believe that once the market open and probably bounce with a stronger consumption it might drive more revenue in there the total guidance for 2025 we expect that you know the b2c revenue is growing faster than the b2b continuously for the last you know year or two so we expect that you know the b2b revenue may be somewhere between 30% to 40% of the total revenue in this year pursuant to our guidance model. Great. Thank you.

And your next question comes from the line of Lisa Thompson with Zacks Investment Research. Lisa, please go ahead.

Oh, hi. Let me just follow up on your last answer. If you're thinking that next year B2B is going to be 30% to 40%, what was it last year?

So last year, I think it was 40%-ish, you know, plus a minor. We are finishing our auditing with the audit service. So the B2C part has become the bigger part of the total business in 2024.

And in looking at what your kind of earnings plan is for the year, do you think that you're going to be able to reduce operating expenses to keep in line with the reduction in gross margin because of that and then come out kind of the same as you did last year?

I think we are, you know, still investing, and I think we're still, you know, relatively smaller scale to stop investing, right? So I think the opportunity is quite big there. The expenses in the net income is positive. You know, the operating income is virtually almost break-even. So that's not really our key concerns, especially with the capital that we have to invest in the growth. I think now with expansion into newer categories, coming up with new product, especially in AI innovation, we will continue to invest. Nothing that will increase any significant differences between what our expense model has been in the previous few years. So in a nutshell, I think we will try to run the model with financial discipline to make sure that it's not creating financial pressures, but at the same time, continue to invest in AI development research and growing the R&D team.

Candice, I just have one question on Juana. Can you talk about that landscape as far as competition? I know you dominate beauty, but what does it look like in the fashion landscape?

Yeah, so WANA has clearly been the leader in the fashion space. They have more than two dozen big logos, big names, such as Valentino, Valenciaga, Louis Vuitton, Gucci, and more. So I think there's not really much competition after we acquire WANA. So after the integration, we really become the AI, AR powerhouse for fashion and beauty virtual trial market. There may be a few other smaller startups that are in the shoes market or only doing certain watches market, but not in the scale and reach that can compete with us. So I think the strategic merger really created opportunity to become the one shop for the luxury brands, especially for the top luxury brands. They rely on global teams. They rely on bigger, a more established organization to provide services to them and i think uh wanna was part of the farfetch which is again it's a great company a great group and now part of perfect core a more established global leader in technology we are confident that we can give you know extra runway for this business to grow and really become a dominant player across both beauty and fashion great thank you for those answers again if you'd like to ask a question simply press star followed by the number one on your telephone keypad can your next question come from the line of ashisha with sidoti ashie

please go ahead great thank you so much for taking my question and congrats on a very solid fourth quarter results uh i have one of the questions regarding gross margin uh gross margin declined six percentage quarter over quarter i understand the year over year decline because the b2c part is higher but like the b2c business is more but why did we see a six percent decline quarter over quarter and like if you can just give us what the key drivers behind this compression were so um so i think the the fourth quarter uh you know the the good news is the b2c was growing

at faster pace than we expected so the overall revenue contribution from b2c versus b2b in the the fourth quarter was much higher than we expected. And that's how the overall growth margin has a bigger dip. I think it's not expected, it was not expected, but I think it's really more maybe a one-time thing because the fourth quarter, the shopping season was driving in a good sale, where the people getting new smartphones or they are downloading new apps or they are subscribing new apps. And we have seen this pattern typically, in our seasonality patterns. The quarter four will have that impact because the B2C is bigger. Just this year, it was a lot more bigger and growing faster than we expected. On the other hand, B2B continues to be challenging in quarter four. So the revenue contribution from B2B was slightly lower than we expected. That also contributed to the drop in the gross margin. For the 2025 full year, I think we expect that that may gradually come up slightly. okay but it does not go back to 2023 levels uh correct correct yeah i think in 2003 we our b2b business was about uh half of the total business i think for this year as i i said earlier um you know we expect the b2b business to be more challenging and if the b2c continues to grow really quick uh fast and the b2b contribution may drop to let's say 30 percent or maybe over 30 right okay and uh just another question relating to the acquisition like if you can give us the

timeline for the full integration and also regarding the revenue split like uh you said that revenue growth like the revenue guidance for is 13 to 14.5 percent if you can just break down how much of that growth is expected to come from the acquisition and how much is the organic growth So the deal just closed like 40-45 days ago.

So the team is going through extensive integration work across all different departments. So we expect that will continue to happen in the first half of the year, meaning that the go to market together as one team, as one platform, will happen later in the year. And with that, again, we try to do as soon as we can from a sales marketing perspective from product development from customer service customer success so if we are able to move very quickly on this the revenue may be the contribution of that new acquisition might come in earlier or in more meaningful way in this year the guidance that we are given then we started with a quite conservative look into what the business are as is and you know how that contribute again one is a smaller startup right they are about 30 employees they have good grain clients like 20 20 plus in contrast we haven't we have like 700 right so that gives you a perspective about the size of the acquisition so it's not going to have a tremendous change overnight but it's much more the new value that we can unlock after the integration is done and then gradually as this process march toward and we may adjust our guidance depending on on the market Great.

And just one more, if we have the time. Strategically, where do you see increasing your investments going into the new year to take advantage of the adoption of AI? Where are your top investment priorities from an incremental dollar perspective?

AI, especially generative AI, is all our focus right now from R&D side. So you can see the evolving of a new AI model every month. It's excited. And recently, the open model to the world. So I think this is a great opportunity for or the application services on top of this big models. So by saying that R&D, no matter is a headcount or some of the server training, GPU, all these things are the main focus. Of course, digital marketing is still important, especially for B2C. If not buying apps, then all the effort we put is in digital marketing. to attract all the worldwide app users to come to us. So AI is the whole focus of R&D this year, and I think it's for the next five to 10 years. But the speed of investment I can see is fast and because the whole ecosystem evolved so fast, we'll pay very high attention to the market. and recent development of the market, I think it's very, very pro to service providers like us.

Thank you.

And our next question, again, from Lisa Thompson with Sachs Investment Research. Lisa, please go ahead.

Hi, I just wanted to ask again about whatever happened to AI Assistant and if you think that's going to be a big driver for your mobile apps. Talk about where you are with that.

Thank you. Yeah, AI Assistant is the one we are developing since the second half of last year. We try to branch them into B2B for the brand to use and the B2C. For B2C, there's AI Assistant, agent, copilot. But we will launch that in our app before second quarter of this year to try the market. I think that's the future. Everybody needs it. And it's a pay-by-service kind of a business model. And for B2B brands, we have a perfect GPT and now ready for POC. We did have brands doing POC, trying to do POC with us. And again, brands, their movement to this new AI, especially generative AI, the speed is not as fast. So we saw POC may start before end of this year. when testing, doing validation. B2C part will be faster. We will make the same agents, beauty agents, editing agents to our apps before second half of this year.

Great. I look forward to that. Thank you so much.

Thank you.

As there are no further questions at this time, I'd like to hand the conference back over to Mr. Jimmy Shea. Jimmy?

Thank you once again for joining the call today. If you have any further questions, please feel free to contact us directly or through our IR website. We look forward to speaking to everyone again in our next call. Goodbye.

This concludes today's conference call. Thank you all for joining. You may now disconnect.