• Total Revenue: $16.1 million in Q3 2024, up 10.8% from $14.5 million in Q3 2023.
• AI/AR Cloud Solution and Subscription Revenue: $13.4 million, a 17.9% increase from $11.4 million in the previous year.
• Licensing Revenue: Decreased by 14.5% to $2.4 million from $2.8 million in Q3 2023.
• Gross Profit: $13 million with a gross margin of 80.3%, compared to $11.8 million and 81.2% in Q3 2023.
• Operating Expenses: Increased by 3% to $13 million from $12.7 million in Q3 2023.
• Net Income: $2.5 million, compared to $3.5 million in Q3 2023.
• Adjusted Net Income: $3.2 million, a 20.6% increase from $2.7 million in Q3 2023.
• Operating Cash Flow: $4.2 million, compared to $4 million in Q3 2023.
• Cash and Cash Equivalents: $163.2 million as of September 30, 2024.
• Mobile App Subscribers: Increased by 17% year over year to 977,000.
• Enterprise Customer Base: Net increase of 22 brand clients, totaling 708 brand clients.
• 2024 Revenue Growth Guidance: Projected to range from 12% to 14% year over year.

• Warning! GuruFocus has detected 4 Warning Signs with PERF.

Release Date: October 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Perfect Corp (NYSE:PERF) reported a 12.5% year-over-year revenue growth for the first nine months of 2024, reaching $44.3 million.
• The company's net income for the same period was $3.9 million, with an adjusted net income increase of 23.2% to $6 million.
• The B2C mobile business saw a 17% year-over-year increase in active paying subscribers, reaching an all-time high of over 977,000.
• Expansion efforts in new markets such as Brazil and Italy have shown positive results, indicating a broadening geographic footprint.
• The introduction of B2C web-based services has expanded the total addressable market and offers higher margins by avoiding app store fees.

Negative Points

• Licensing revenue decreased by 14.5% in the third quarter of 2024, as the company transitions from traditional offline services to subscription models.
• Gross margin slightly decreased to 80.3% from 81.2% due to increased third-party payment processing fees.
• The B2B sales cycle continues to face post-recovery challenges, impacting growth in this segment.
• Net income for the third quarter of 2024 was $2.5 million, down from $3.5 million in the same period of 2023.
• The company has not yet provided specific growth rate guidance for 2025, indicating uncertainty in future projections.

Q & A Highlights

Q: Can you provide the growth rate for each segment within the AI solution, specifically B2B versus B2C? Also, any thoughts on the growth rate for next year? A: The B2C business is growing at a faster rate compared to B2B. The key clients remain the same at 151, indicating slower growth in B2B. We are still working on the guidance for next year and expect to share more details towards the end of the year.

Q: Could you elaborate on the desktop version of the mobile app and how it differs from the mobile version? Is it included with the mobile app purchase? A: The desktop version is a web-based solution that allows users to access features via a PC browser, offering flexibility beyond mobile apps. It is not bundled with the mobile app; they are separate offerings. The desktop version targets a different user base, often more professional or amateur-professional users.

Q: How does the pricing differ between the mobile app and the desktop version? A: The desktop version uses a credit-based model, where users subscribe monthly and purchase credits to access features. This model allows for higher gross margins and caters to a broader audience, including a higher percentage of male users compared to the mobile app.

Q: Can you discuss the market opportunity for Perfect GPT and how it fits with your current B2B offerings? A: Perfect GPT addresses the need for personalized beauty consultations, which are traditionally labor-intensive. It integrates AI solutions for virtual try-ons and skin analysis, providing personalized recommendations. This service aims to increase user engagement and conversion rates on brand websites.

Q: What are the implications of Perfect GPT for pricing contracts with B2B clients? A: We are in the early stages of understanding the full impact of AI services. We are working with key brands to test the service's effectiveness in cost savings and sales improvement. The data gathered will inform future pricing strategies, but brands are likely to invest in such solutions due to the challenges of retaining and training staff.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.