Perfect Corp. Reports Unaudited Financial Results for the Three Months Ended June 30, 2023

Perfect Corp. (NYSE: PERF) ("Perfect" or the "Company"), a global leader in providing augmented reality (“AR”) and artificial intelligence (“AI”) Software-as-a-Service (“SaaS”) solutions to beauty and fashion industries, today announced its unaudited financial results for the three months ended June 30, 2023.

Highlights for the Three Months Ended June 30, 2023

• Total revenues grew to $12.7 million, up 11.9% year over year, primarily due to strong growth momentum in AR/AI cloud solutions and subscription revenues.
• Gross profit was $10.2 million, compared to $9.7 million in the same period of 2022.
• Net Loss was $0.2 million, compared to a net income of $27.4 million in the same period of 2022.
• Adjusted net income (non-IFRS)¹ was $1.1 million, compared to adjusted net income (non-IFRS) of $0.6 million in the same period of 2022.
• The Company had 163 Key Customers² as of June 30, 2023, compared with 158 Key Customers as of March 31, 2023.
• As of June 30, 2023, the Company's customer base included 601 brand clients, with over 655,000 digital stock keeping units (“SKUs”) for makeup, haircare, skincare, eyewear, and jewelry products, compared with 525 brand clients and over 590,000 digital SKUs as of March 31, 2023.

Ms. Alice H. Chang, the Founder, Chairwoman, and Chief Executive Officer of Perfect, commented, “Throughout the previous quarter, we persistently utilized the latest AI & AR technologies, including generative AI, to consistently support our three primary areas of growth, BeautyTech, FashionTech, and SkinTech, to brands and to end users. Our objective is to enhance and expand our capabilities in these fields. As a result, we observed encouraging indications of increased product demand, indicating positive progress. Our mobile apps also continued to experience significant growth, maintaining their strong momentum in part thanks to new generative AI features. Furthermore, our AI skincare turnkey solution grew in popularity as we expanded our customer base. Our investments in generative AI, combined with our industry-leading experience and robust customer base, have positioned us for future success in the beauty and fashion tech space. We remain committed to delivering long-term, sustainable growth to our shareholders and providing our customers with the highest-quality services on the market.”

Mr. Pin-Jen (Louis) Chen, Executive Vice President and Chief Strategy Officer of Perfect, added, “In the second quarter, we saw sound momentum in our top-line growth, which was driven by continued demand for our online AR/AI cloud solutions and subscriptions, along with the rapid growth in our mobile beauty app subscribers. While we grew our revenue, we also managed to control our spending to ensure profitability. With the stable renewal rate for existing subscriptions, dedicated cost control, and healthy cash position, we affirm our unwavering confidence in generating long-term revenue growth.”

Financial Results for the Three Months Ended June 30, 2023

Revenue

Total revenue was $12.7 million for the three months ended June 30, 2023, up by 11.9% from $$11.3 million in the same period of 2022.

• AR/AI cloud solutions and subscription revenue increased by 16.3% from $9.5 million in the same period of 2022 to $11.0 million, representing 86.7% of total revenue, mainly due to solid demand for the Company’s online virtual product try-on solutions from brand customers and robust growth in its mobile beauty app subscriptions. The Company’s mobile beauty app active subscribers grew by 63.3% year over year, reaching a historical high of over 777,000 active subscribers at the end of the second quarter of 2023. This increase demonstrates the strong demand for the Company’s mobile beauty app services.
• Licensing revenue, which is mostly generated from traditional offline services, increased by 6.2% from $1.3 million in the same period of 2022 to $1.4 million, representing 10.9% of our total revenue, compared with 11.5% of total revenue in the second quarter of 2022. This reflects relatively low demand for in-store services compared to online services from brands.
• Advertisement revenue was $0.3 million, compared to $0.5 million in the same period of 2022. This change is consistent with the Company's strategic focus on delivering AR- and AI-SaaS solutions to customers while allocating fewer resources to advertisement services.

Gross Profit

Gross profit increased by 5.2% year-over-year from 9.7 million in the second quarter of 2022 to $10.2 million in the same period of 2023, representing a change of gross margins from 85.8% in the second quarter of 2022 to 80.6% in the same period of 2023. The change in gross margin was due to an increase in the cost of goods sold, which was driven by the growth in the Company’s mobile beauty app subscriptions. This surge in subscriptions led to higher platform fees paid to third-party digital distribution platforms, namely Apple and Google.

Total Operating Expenses

Total operating expenses increased by 12.5% to $12.3 million for the three months ended June 30,2023, from $11.0 million in the same period of 2022.

• Sales and marketing (“S&M”) expenses were $6.6 million, representing 51.7% of our total revenue, compared to $6.1 million and 53.6% of total revenue during the same period last year. The 7.9% year-over-year change was primarily due to increase in promotion and user acquisition expenses.
• Research and development (“R&D”) expenses were $2.8 million, representing 21.8% of total revenue, compared to $2.6 million and 23.3% of total revenue during the same period last year. The 4.6% year-over-year change was resulted from an increase in R&D people cost.
• General and administrative (“G&A”) expenses were $3.0 million, representing 23.8% of total revenue, compared to $2.2 million and 19.8% of total revenue during the same period last year. The 34.3% year-over-year change was primarily due to an increase in public company-related costs.

Net Loss

Net Loss was $0.2 million for the three months ended June 30, 2023, compared to a net income of $27.4 million during the same period of 2022, mainly due to a $28.4 million adjustment in non-cash valuation gain on financial liabilities at fair value through profit or loss in the second quarter of 2022.

Adjusted Net Income (Non-IFRS)

Adjusted net income was $1.1 million for the three months ended June 30, 2023, compared to adjusted net income of $0.6 million in the same period of 2022.

Liquidity

As of June 30, 2023, the Company held $37.2 million in cash and cash equivalents (or $198.0 million when including 6-month and longer time deposits of $160.8 million, which are classified as current financial assets at amortized cost under IFRS), compared to $95.1 million as of March 31, 2023 (or $196.1 million when including time deposits).

Recent Development

Share Repurchase Plan Update

On May 4, 2023, the Company’s board of directors authorized a share repurchase plan under which the Company may repurchase up to US$20 million of its Class A ordinary shares over the next 12-month period.

Business Outlook

Based on the recent progress of the overall business status in the industry, the stable demand for the Company’s enterprise SaaS solutions, strong growth in the Company’s mobile beauty app subscriptions, and ongoing investment in R&D with generative AI, Perfect Corp. anticipates that for 2023 full year:

• The Company's total revenue year-over-year growth rate is expected to range from 11.5% to 14.5% compared to 2022.

Note that this forecast is based on the Company's current assessment of the market and operational conditions, and that these factors are subject to change.

Conference Call Information

The Company's management will hold an earnings conference call at 7 a.m. Eastern Time on July 26, 2023 (7 p.m. Taipei Time on July 26, 2023) to discuss the financial results. For participants who wish to join the call, please complete online registration using the link provided below in advance of the conference call. Upon registering, each participant will receive a participant dial-in number and a unique access PIN, which can be used to join the conference call.

Registration Link: https://registrations.events/direct/Q4E60334

A live and archived webcast of the conference call will also be available at the Company's investor relations website at https://ir.perfectcorp.com.

About Perfect Corp.

Founded in 2015, Perfect is a global leader in providing AR and AI SaaS solutions to beauty and fashion industries. Utilizing facial 3D modeling, and AI deep learning technologies, Perfect empowers beauty brands with product try-on, facial diagnostics, and digital consultation solutions to provide consumers with an enjoyable, personalized, and convenient omnichannel shopping experience. Today, Perfect has the leading market share in helping the world’s top beauty brands execute digital transformation, improve customer engagement, increase purchase conversion, and drive sales growth while maintaining environmental sustainability and fulfilling social responsibilities. For more information, visit https://ir.perfectcorp.com/.

Forward-Looking Statements

This communication contains forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, that are based on beliefs and assumptions and on information currently available to Perfect. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” “target,” “seek” or the negative or plural of these words, or other similar expressions that are predictions or indicate future events or prospects, although not all forward-looking statements contain these words. Any statements that refer to expectations, projections or other characterizations of future events or circumstances, including strategies or plans, are also forward-looking statements. These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by these forward-looking statements. These statements are based on Perfect’s reasonable expectations and beliefs concerning future events and involve risks and uncertainties that may cause actual results to differ materially from current expectations. These factors are difficult to predict accurately and may be beyond Perfect’s control. Forward-looking statements in this communication or elsewhere speak only as of the date made. New uncertainties and risks arise from time to time, and it is impossible for Perfect to predict these events or how they may affect Perfect. In addition, risks and uncertainties are described in Perfect’s filings with the Securities and Exchange Commission. These filings may identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Perfect cannot assure you that the forward-looking statements in this communication will prove to be accurate. There may be additional risks that Perfect presently does not know or that Perfect currently does not believe are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by Perfect, its directors, officers or employees or any other person that Perfect will achieve its objectives and plans in any specified time frame, or at all. Except as required by applicable law, Perfect does not have any duty to, and does not intend to, update or revise the forward-looking statements in this communication or elsewhere after the date of this communication. You should, therefore, not rely on these forward-looking statements as representing the views of Perfect as of any date subsequent to the date of this communication.

Use of Non-IFRS Financial Measures

This press release and accompanying tables contain certain non-IFRS financial measures, including adjusted net income, as supplemental metrics in reviewing and assessing Perfect’s operating performance and formulating its business plan. Perfect defined these non-IFRS financial measures as follows:

Adjusted net income (loss) is defined as net income (loss) excluding one-off transaction costs³, non-cash equity-based compensation, non-cash evaluation (gain)/loss of preferred shares, and foreign exchange (gain)/loss. For a reconciliation of adjusted net income (loss) to net income (loss), see the reconciliation table included elsewhere in this press release.

Non-IFRS financial measures are not defined under IFRS and are not presented in accordance with IFRS. Non-IFRS financial measures have limitations as analytical tools, which possibly do not reflect all items of expense that affect our operations. Share-based compensation expenses have been and may continue to be incurred in our business and are not reflected in the presentation of the non-IFRS financial measures. In addition, the non-IFRS financial measures Perfect uses may differ from the non-IFRS measures used by other companies, including peer companies, and therefore their comparability may be limited. The presentation of these non-IFRS financial measures is not intended to be considered in isolation from or as a substitute for the financial information prepared and presented in accordance with IFRS. The items excluded from our adjusted net income are not driven by core results of operations and render comparison of IFRS financial measures with prior periods less meaningful. We believe adjusted net income provides useful information to investors and others in understanding and evaluating our results of operations, as well as providing a useful measure for period-to-period comparisons of our business performance. Moreover, such non-IFRS measures are used by our management internally to make operating decisions, including those related to operating expenses, evaluate performance, and perform strategic planning and annual budgeting.

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1</sup> Adjusted net income (loss) is a non-IFRS financial measure. See the “Use of Non-IFRS Financial Measures” section of this communication for the definition of such non-IFRS measure.

² Key Customers refers to the Company's brand customers who contributed revenue of more than $50,000 in the trailing 12 months ended on the measurement date.

³ The one-off transaction cost in the second quarter of 2022 included professional services expenditures that the Company incurred in connection with the de-SPAC transaction. No such cost incurred in the same period of 2023.

Category: Investor Relations

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