By Lisa Thompson

NYSE:PERF

READ THE FULL PERF RESEARCH REPORT

Perfect Corp. (NYSE:PERF) reported another solid quarter for Q1 2025 and completed its acquisition of Wannaby. Revenue grew 12.1%, led by mobile app revenue, and operating margins neared breakeven. While WANNA added less than $500,000 to revenues, its losses reduced operating income by more than $500,000. This is expected to improve going forward. Cash stayed at $165 million or $1.62 per share. On a non-IFRS basis, earnings grew 33%. With the new WANNA capabilities, we look forward to greater growth as the company starts sales in earnest to the apparel and fashion markets this quarter. Q1 was dedicated primarily to integration with the Perfect platform.

During the quarter, the company released a new standalone mobile app, YouCam AIChat. Originally, AI was going to be first implemented in B2B capabilities, but hesitation from customers led Perfect Corp. to put out AI integration in its B2C product first. Rather than add it to existing apps, it was launched as its own product. It is available worldwide and in multiple languages on the Apple and Google stores. It is very early days, and management has yet to evaluate how it is used and what features appeal to consumers the most. It has a heavy emphasis on generative AI, so it is expected that that will be a key differentiator from plain ChatGPT.

Mobile subscriber numbers increased 8% year over year, but declined sequentially from Q4 2024. Despite the decline in subscribers, revenues increased as the company optimized pricing. Premium pricing had been $39 a year with small price increases each year, but the company has now started to offer a higher pricing tier at $79 annually for those wanting more usage and even higher features. So far, this has led to higher revenues.

The company had a higher-than-usual churn of key customers in Q1, losing a net of three customers sequentially. The loss of perhaps 15 customers was masked by the addition of a dozen or so key customers added by the acquisition of WANNA. None of these customers defected to another provider, but were lost due to belt-tightening as the luxury market weakened primarily due to China spending, combined with the uncertainty of sales levels resulting from current and future US/China tariffs.

The company maintained its guidance of a year-over-year total revenue growth rate of 13% to 14.5% for 2025 compared to 2024. As a profitable AI-based SaaS company, we believe it deserves an EV-to-sales multiple of at least 2.3 times 2025 sales and a stock price of $3.00.

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