Jimmy Shu; IR Director; Perfect Corp
Alice Chang; Chairman of the Board, Chief Executive Officer; Perfect Corp
Pin-Jen (Louis) Chen; Executive Vice President, Chief Strategy Officer; Perfect Corp
Lisa Thompson; Analyst; Zacks Small Cap Research
Patrick McCann; Analyst; Noble Capital Markets
Aashi Shah; Analyst; Sidoti & Company, LLC
Operator
Ladies and gentlemen, please stand by. The call will begin shortly. Until that time, your lines will again be placed on music hold. Thank you for your patience.
Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to the Perfect Corp.'s first-quarter 2025 earnings conference call. Please note that all lines have been placed on mute to prevent any background noise. We will be hosting a question-and-answer session after management's prepared remarks.
(Operator Instructions) Please note that today's event is being recorded. I will now turn the conference over to the first speaker today, Mr. Jimmy Shu, IR Director of the company. Please go ahead.
Jimmy Shu
Thank you and hello, everyone. Welcome to Perfect Corp.'s first-quarter 2025 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 first-quarter 2025 financial results on our IR website or in the Form 6-K we filed with the SEC. 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 sessions. Before we continue, I would like to refer to our Safe Harbor statement in our earnings press release.
This call may contain forward-looking statements regarding performance, anticipated plans, our original results, and objectives. Forward-looking statements are based on management's expectations and are subject to numerous risk 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. So please note that all numbers stated in management's prepared remarks are in US dollar, and we will also discuss non-IFRS measures today.
I will now turn the call to our second speaker, Ms. Alice Chang, our CEO.
Alice Chang
Thank you, Jimmy, and welcome to Perfect Corp.'s 2025 first-quarter earnings conference call. Let me start by providing some financial highlights, then share some exciting developments.
After a strong end to 2024, we started the first quarter of 2025 with a double-digit growth, which was in line with our revenue guidance for 2025. Total revenue grew by 12.1% year-over-year to $16 million. The net income for the same period was $2.3 million an increase of 264% year-over-year. And the adjusted net income increased 33.3% to $2 million compared to the first quarter of 2024. The continuous growth in revenue and the positive net income is primarily driven by the strong performance of our mobile app subscription business within the AI-, AR-cloud solution sector even under the current microeconomic uncertainty.
The first quarter of 2025, we saw our operating cash flow generate a net inflow of $4.3 million and our balance sheet remains very strong, with over $164.6 million in cash and the cash equivalent. All these results are testimony to the company robust business model as well as our agility to navigate under the fast changing world and its global economic uncertainty. Our B2C mobile app business has maintained a strong growth with a number of active paying subscribers of 973,000 to end of the first quarter of 2025. An increase of 7.9% compared to 902,000 subscribers for the first quarter of 2024.
All right, YouCam mobile app suite continue to evolve with the plans update and the AI features enhancement powered by cutting edge generative AI features for image in the video creation. We recently unveiled a new mobile app called YouCam AI Chat which features personal AI assistant to assist users with a wide range of topics including fashion, dating, zodiac signs, travel, writing, financial advices and more. Beyond this specialized AI assistance, the app also delivers powerful AI tools capable of generating images, as well as summarizing photos, websites, and YouTube videos just to name a few of its popular features. By merging convenience and the personalization, YouCam AI Chat app fulfills the growing demand for seamless digital interaction. This app leverages some multiple world renowned AI LLM models such as ChatGPT- 4o and the 4o mini.
Before diving into our B2B performance, I would like to provide additional updates on the post-acquisition of Wanna. The integration of both teams is progressing smoothly with our operations, cultures, and the strategic goals aligning seamlessly. This process will position us well into the new growth opportunities and further enhance our market position as we work to expand our addressable market. At this first phase of integration, our global sales team has started to engage with the new clients and the prospects to explore additional contract opportunities with emphasis on geographic expansion and the product expansion, particularly within the shoes vertical.
In our B2B operations, we continue to deepen market penetration in beauty and the fashion segments. Our platform now hosts over 801 brand clients with over 891,000 SKUs. These increases are contributed by organic growth and consolidating the newly acquired Wanna client base and the shoe back related SKUs for BTO. We are making very good progress in expanding our unique offering with AI-powered skin diagnostics which extend across aesthetic clinics, dermatology center, skincare facilities, [mesh] spa and wellness centers.
During the first quarter, we launched our AI skin analysis solution with one of the largest beauty retailer in US. Now, users can scan their face with a smartphone, allowing the app to deliver skin analysis in seconds and then receive a personalized four-step skin routine and product tailored to their specific needs. Offering our AI skin solutions to a wider global audience has been our priority, and this partnership will open the use case to millions of North American users.
Additionally, our YouCam online editor SaaS API enables stimulus integration of perfect AI features into client software. Brain developers can now embed advanced photo portrait and video editing, generative AI, and more, offering a user a rich, full-featured, image editing experience within our product. During the first quarter of the year, we added AI hairstyle and the skin analysis API and made refinement to subscription plan and the subscription credit model.
In conclusion, despite the global economic uncertainties, we continue to experience growth in the first quarter of 2025, driven by increased revenue, improved operational efficiency, and strong financial performance. Our growth strategy for 2025 remains on track, focusing on expanding our B2C revenue with the introduction of a newer, generative AI functions and to drive higher premium subscription plans to increase the value of our subscription. On the enterprise business side, we are focusing on fully integrating the Wanna team and the product -- and their product into our business, expanding our presence in beauty, skincare, shoes, and the fashion market, exploring cross-selling opportunities, diversifying our product and service offers, strengthening leadership, accelerating revenue growth, and the maximizing long term shareholder value.
Lastly, with the rise of a more efficient and cost effective AI model, specializing in specific functionality, Perfect Corp. is well-positioned to benefit from evolving needs of clients and prospects, thanks to our strong track record, expertise, and the deep integration in the beauty and the fashion industry. With that, I have concluded my remarks and will now pass the call over to Louis, who will discuss our financial details with you.
Pin-Jen (Louis) Chen
Thank you, Alice. Please note that all financial comparisons are on a year-over-year basis and the reporting period is the first quarter of 2025 versus the comparable period in 2024. And that, on top of the international financial reporting standard IFRS measures, we will also discuss non-IFRS measures to provide greater clarity on the trends in our operations.
In the first quarter of '25, our total revenue increased to $16 million from $14.3 million for the same period in 2024, representing a year-over-year increase of 12.1%. The growth came from the continuous growth of our AI-, AR-cloud solutions, and mobile app subscription business. AI- and AI-cloud solution and subscription revenue grew 13.3% to $14.1 million compared to 12.4 million from the year ago period, which represented 88% of total revenue in the quarter. This growth is attributed to the continuing expansion of our mobile beauty app subscription and the positive momentum for our online skin diagnosis solutions as well as our virtual trial on business.
Licensing revenue increased by 1.5% in the first quarter of 2025 to $1.6 million compared to $1.6 million during the same period of 2024. The licensing revenue will gradually become immaterial as it continues to be phased out and replaced by the new AI, AR subscription revenue model. Gross profit for the first quarter of 2025 grew by 11.4% to $12.5 million with growth margin of 77.9% compared to $11.2 million and growth margin of 78.3% for the same period in 2024. The small decrease in gross margin was primarily due to the increase in third-party payment processing fee paid to the digital distribution partners such as Google and Apple due to the increase in our mobile app subscription revenue.
The total operating expenses for the first quarter of 2025 increased by 2% to $12.6 million compared to $12.4 million for the same period in last year. The increase was mainly due to the increase in R&D expenses, but was mostly offset by the decrease in G&A expenses. Going into detail for operating expenses, sales and marketing expense for the first quarter of 2025 was $7.4 million compared to $7.2 million during the same period of 2024, an increase of 2.6%. This increased were largely due to the increase in marketing events and advertising costs related to our mobile apps and cloud computing, as well as one-off sales and marketing expenses.
Research and development in Spain were $3.6 million for the first quarter of 2025 compared to $3 million during the same period of 2024, an increase of 17.5%. The increase resulted from additional R&D headcounts for new product development and one related personnel costs. General and administrative expenses decreased by 21.6% to $1.7 million for the first quarter of 2025 compared to $2.2 million during the same period of 2024. The decrease were mainly due to the decrease of corporate insurance premiums as well as saving from external professional services.
Net income was $2.3 million for the first quarter of 2025 compared to a net income of $0.6 million during the same period of 2024, an increase of 264%. The positive net income was supported by continued revenue growth and effective cost control. These results represent a net income margin of 14.3% for the first quarter of 2025. The company continues to deliver good profitability to invest in developing a complete line of audio, video creativity, and enhancement solutions for both consumers and enterprises.
Excluding non-cash, share-based compensation, non-cash valuation gain, and loss of financial liability, the adjusted net income was $2 million for the first quarter of '25 compared to adjusted net income of $1.5 million in the same period of '24, an increase of 33.3%. This also represents an adjusted net income -- net margin of 12.6% for the first quarter of 2025. As of March 31, 2025, the company held $164.6 million in cash and cash equivalent in six month deposit compared to $165.9 million as of December 31, 2024. We had a positive of varying cash flow of $4.3 million in the first quarter of 2025 compared to $3.5 million during the same period in 2024. The positive cash flow demonstrated the company's continued ability to generate continuous cash flow to support its business operations and growth strategy.
On the mobile app business front, our YouCam mobile app active subscribers was 973,000 by the end of the first quarter of 2025 compared to 1 million by the end of 2024 year. Although the number of subscribers had some expected decrease, the revenue from the app subscription continued to grow strongly. This decrease in active subscriber was expected as we continue to perform pricing optimization initiatives, as well as introducing higher price for new subscription plan, representing a significant increase in revenue per active users.
Our enterprise customer base has a net increase of 59 brand clients since the end of last quarter, achieving a total of 801 brand clients. With over 891,000 SKUs for makeup, skincare, eyewear, watches, jewelry, scarves, shoes, apparel, and fashion products as of March 31, 2025. The further expansion in these metrics highlight the inclusion of Wanna client base, as well as ongoing growth in customer penetration and SKUs expansion.
In the first quarter, perfect quarter number of key customers was 148, down from 151 at the end of December 2024. This reduction was due to a few unexpected US clients' contract churns due to the rising financial challenges in the macroeconomic environment. In the first quarter of 2025, AI- and AR-cloud solutions and mobile app subscription business continue to drive our growth. As previously mentioned, Wanna integration process will help us grow our business, and the additional development of AI technology will strengthen our core competences and expand our total addressable market.
Even with the uncertainties in today's macroeconomic environment, we are still excited about the opportunities that are ahead of our B2C and B2B business lines. Our offering can help bring clients increase customer engagement, increase basket size, as well as create savings by decreasing return rates. Our suite of YouCam apps continue to deliver value through fun, interactive features, with a focus on GenAI powers, photo and video functionality, as well as other innovative new AI capabilities.
Our 2025 guidance remains intact. Total revenue year-over-year growth is expected to range from 13% to 14.5%. This forecast is based on the company's current assessment of the market and operational conditions, and management will monitor business progress and provide updates to offer better clarity to the market. That concludes my prepared remarks. Operator, please open up the call for questions.
Operator
(Operator Instructions) Lisa Thompson from Zacks.
Lisa Thompson
Hi. Great to see another great quarter coming out. Can you talk first off about your launch of the new chat -- the AI chat app? Where did you launch it and how is it being received?
Alice Chang
The app just launched last month and this is the app on the Apple Store -- App Store. Apple's App Store and Google Play. User can just download it from the App Store. And as I said, this is integrating of all the AI assistants into one and also adding some of our strengths, like image editing by AI and photo summarize, and all kinds of different AI tools into one app.
Lisa Thompson
When it was launched in all countries in all languages?
Alice Chang
Yeah. Just released to the app stores with the languages support. It can be downloaded over the world.
Lisa Thompson
Okay. All right. That's ahead of schedule because I thought you're only going to do a couple of countries.
Alice Chang
We move fast. (laughter)
Lisa Thompson
Okay. So let me ask you a question about the Wanna acquisition. Now I thought that you had said that they were going to add about 20 key customers. But if they did, then you must have lost a lot of customers in Q1? Or did they not add 20?
Pin-Jen (Louis) Chen
Hi, this is Louis. So the Wanna acquisition did add a little bit over a dozen of the key customers after the integration. And you are right, we also have suffered some loss for our beauty business, as I mentioned in my remarks, for the other beauty clients from the key customer account.
Lisa Thompson
Okay. All right. I was wondering about that. And just -- the last question is, when you talk -- look at future acquisitions, are you going to have to be trying to find new verticals that you're not in?
Or is there any opportunity out there to say, scoop up some of the competitors that maybe do like try-ons for eyeglass because -- is there a shakeout out there in any categories? What are you thinking about acquisitions going forward?
Pin-Jen (Louis) Chen
I think our priority has been expanding our team for acquisition, accelerating our market penetration. In the core business that we are, there isn't too much other competitors that are -- we think it's worth for doing acquisition. We very much have a better product and more complete services. So I think we are winning that from just organic growth, but for newer categories, newer vertical, acquisition could help accelerate our penetration, especially in enterprise clients that are typically take long time to penetrate.
So again, options are available, but our key priority has been spending the [team], rather than just taking our competitors.
Lisa Thompson
So what verticals are left out there?
Pin-Jen (Louis) Chen
I think on the shopping, certainly in the fashion space, there are still a lot of other things. Of course, we have technology to grow internally, but I think most importantly is the luxury business, the luxury retailers. A lot of them are still not fully digitized or using BTO technology. So I think spending clients potentially will be a bigger priority rather than just acquiring them because it's a part of the market education and getting more key clients.
Lisa Thompson
Okay, great. Thank you so much. That's all my questions.
Operator
(Operator Instructions) Pat McCann, Noble Capital Markets.
Patrick McCann
Hey, thanks for taking my questions. First I want to ask about the Wanna acquisition and how that relates to or impacts the sales process when you go to a potential B2B client. I'm wondering, the -- having a more full lineup of services for a more complete list of categories now that you've acquired Wanna, how does that -- are you seeing any notable positive impacts as far as being able to provide more fully for a potential client's needs? Just wondering, early results kind of what you're seeing there and how it makes the sales process easier for your sales people.
Pin-Jen (Louis) Chen
Hi, Pat. It's very positive feedback we heard from the client because, again, they're having a full complete solution. It saves a lot of their integration efforts. So I think this is one of the strengths and synergy we try to build that it's not just one product company, but it's a whole platform or solution, especially with our global sales team, and global customer service team.
So we're able to support those clients across the different geography. That is something that standalone Wanna wouldn't be able to do it, and now as part of the Perfect group, we are able to bring the total value to the clients. Suddenly more and more clients are looking at offering multi-category integration services, and they want to work with one company, with one platform, so they will get more familiar, either from suite creation process to analytic process so that will come as an addition of synergy.
But I think the most important one is the capability that we are able to upgrade the existing technology to even better because of our decade long of research and more engineering resources. So we'll be able to take the Wanna solution at it, but also to [in view] and ship new technology in there to upgrade with the generative AI or other new algorithm under development. So in general, I think the strategy, as we map out, has been executed well, and so far the market feedback has been also strong and positive.
Patrick McCann
Thanks. And I was also wondering with regard to the B2C monetization strategies where you are maybe toying a little bit with different ways to monetize the apps and cost structures for subscribers. I was just wondering if there's -- if you could give any more color there as far as the types of things you're trying and what the feedback you're getting from the consumer is.
Pin-Jen (Louis) Chen
Our market -- retail market research and looking at other competitor alternative product here, we noticed that there's a room to optimize our price point. Originally, we're charging around $39 a year for the subscription, and now we're introducing a much higher premium subscription with new feature at $79 per year. So it's a significant increase in ASP. Of course, that is driven by adding new generated AI features. Some of those are very advanced and very fun and cool.
So the early results show that the consumers are willing to upgrade from their original plan into this newer plan, and that's also part of the contribution and revenue and increasing the AP. We will continue to do such type of optimizations and depending on the market needs to segment different product lines or different subscription plans and keep optimizing on that.
Patrick McCann
Great. Thanks so much for all of the color. That's all I had and congrats again on the quarter.
Operator
Aashi Shah, Sidoti.
Aashi Shah
Hi, congratulations on another great quarter. I just wanted to ask about the Wanna acquisition. And if you can just talk a little bit about the competitive landscape that is there in the industry, in the shoe market, and the handbags, please.
Pin-Jen (Louis) Chen
I think from our view, there isn't too much competitor in the bag space. I think Wanna has probably the best solution that is there. There's still room to improve.
The shoes market, Wanna is clearly leading in that industry with a number of brands, especially in the top luxury segments. So covering more than a dozen of top shoes brands in there. So there are a few competitors but in a much smaller scale that are there. And again, Perfect Corp., we are not shy of competition. We think we have great technology to make the solution evenly better.
I think, of course, the worldwide, macroeconomic challenges is slowing down some of these new adoption by key clients. They are waiting to see what is going to be their new cost structure, how they're going to invest in digital, and we certainly will be ready to support our clients when that decision is coming. But again, we are not waiting. We are doing a lot of integration and improvement of the technology as well in-house development teams. And I think when the market offer better clarity and open up, I will be ready to take it.
Aashi Shah
Right. And switching sides and asking a little bit about the B2B clients, following up on another question, like you've lost a lot of key brand customers. Can you tell us what the -- any color on what the conversation with clients are looking with respect to the macroeconomic conditions in the US right now?
Pin-Jen (Louis) Chen
Certainly. Yes, we lost a little bit more than what we expected. None of them were big tier one clients, but they were this medium size clients. I think most of those feedback I gave us is not the churn because of the competition. But mostly the churn because the financial pressures that they have from management to cut on the cost, because whether it's a tariff or other concerns, they want to be prepared and be ready to you know save some costs and navigate through these difficult economic times.
So that is something that we may try to regain those customers once the situation gets better. But so far, I don't think there's anything that the management is to worry about. Of course, we are sad to see those clients go, but so far it hasn't not been the VIP, the big clients, they had been just more of the small, regional brands.
Aashi Shah
Right. And my last question is about the capital allocation strategy and what -- is there any change in that? And there's about $160 million in cash on hand right now. So what the plan for the cash is going to be like?
Pin-Jen (Louis) Chen
I think the current -- under the current environment, holding on the cash is actually not a bad thing. I think there are a lot of deals, activities in the market has been very much on hold and the same as I and we. So we'll remain to see -- I mean, the capital is there to support the growth. I think growing organically is a key priority especially with the B2C business growing very strongly, that's why we launched a new app.
We are launching a lot of updates and upgrades to our existing app subscriptions, and this is part of the use of the capital to invest in R&D, to invest in market. M&A is still in our radar, but I think for the time being I will be a little bit more selective into looking what are the options in the market under the current environment.
Aashi Shah
Thank you so much, and congratulations on a great quarter again.
Operator
Thank you. As there are no further questions at this time, I'd like to hand the conference back to the management for closing remarks.
Jimmy Shu
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 next time. Thank you and goodbye.
Operator
That concludes our conference call for today. Thank you for joining and you may now disconnect.
免責聲明:投資有風險,本文並非投資建議,以上內容不應被視為任何金融產品的購買或出售要約、建議或邀請,作者或其他用戶的任何相關討論、評論或帖子也不應被視為此類內容。本文僅供一般參考,不考慮您的個人投資目標、財務狀況或需求。TTM對信息的準確性和完整性不承擔任何責任或保證,投資者應自行研究並在投資前尋求專業建議。