Q4 2023 Perfect Corp Earnings Call
Good morning, and good evening, ladies and gentlemen.
Unknown Executive: Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to the Perfect Corps Earnings Conference Call. At this time, all participants are in a listen-only mode.
Thank you for standing by and welcome to the Perfect Corp's earnings Conference call.
At this time all participants are in a listen only mode. We.
Unknown Executive: We will be hosting a question and answer session after management's prepared remarks. Please note that today's event is being recorded. I will now turn the conference over to the first speaker today, Ms. Jennifer Wu, the IR manager of the company.
We will be hosting a question answer session. After management's prepared remarks. Please note that today's event is being recorded.
I will now turn the conference over to the first speaker today, Ms. Jennifer Woo IR manager of the company. Please go ahead.
Thank you Hello, everyone and welcome to prevent close earnings call with US today are Ms. Alice Chen co founder.
Jennifer Wu: Thank you, and hello, everyone, and welcome to Perfect Growth Earnings Calls. With us today are Ms. Alice Chang, our Founder, Chairperson, and Chief Executive Officer; and Mr. Louis Chen, our Executive Vice President and Chief Strategy Officer.
Oh <expletive> Executive officer.
Louise Chen Executive Vice President and Chief Strategy Officer, and MS, Chen Vice President of Finance and accounting.
Jennifer Wu: And Ms. Iris Chen, Vice President of Finance and Accounting. You can refer to our fourth quarter and four-year 2023 financial results on our IR website or in the Form 6K we filed with ACC earlier. You can later access a replay of this call on our IR website shortly after the conclusion of this call. During today's call, management will provide their prepared remarks first, and then we will host a question and answer session. Before we continue, I would like to refer you to our Safe Harbor Statement in our earnings press release, which also applies to this call, as this call may contain forward-looking statements regarding PreventCode's performance, anticipated plans, operational results, and objectives. Such forward-looking statements are based on management expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied on our call today. Rebecca undertakes no obligation to update any forward-looking statement unless it is set as required by law after the date of this call.
You can refer to our fourth quarter and full year 2023 financial result of our IR website.
<unk> K, we filed with SEC earlier today.
The letter as a replay of this call.
Shortly after the conclusion of this call.
Today's call management will provide their prepared remarks first and then we will host a question and answer session.
Before we continue I would like to refer you to our safe Harbor statement in our earnings press release, which also applies to this call and this call may contain forward looking statements regarding program called performance anticipated plans operational results and objectives.
Forward looking statements are based on management's expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied on our call today.
Rebecca undertakes no obligation to update any forward looking statements.
As required by law after the date of this call.
Alice H. Chang: Please note that all numbers stated in the following management prepared remarks are in U.S. dollar terms, and we will discuss non-IBERS measures today. Without further ado, I will now turn the call over to our first speaker today, our CEO, Ms. Alice Chang. Hi, thank you very much.
Please note that all numbers stated in the following management prepared remarks are in U S dollar term.
We will discuss non <unk> measures today.
I will now turn the call to our first speaker today CEO Mrs.
Hi, Thank you very much.
Alice H. Chang: And welcome to Perfect Course's 2023 fourth quarter earnings call. We have some very good news to share with you today. Let's get started.
Welcome to target <unk>, three fourth quarter earnings call.
We have some very good news to share with you today.
Let's get started.
Alice H. Chang: We ended 2023 with a strong fourth quarter. Our fourth quarter revenue grew by 27.6% year over year to $14.1 million, and our net income was positive at $1.4 million. Our full year results were promising too. For the full year 2023, revenue increased by 13.1% year over year to $53.5 million. In our full year 2023, net income was positive at $5.4 million, and the company operating cash flow had a net inflow of $13.6 million as a result of our robust business model.
And then 2023 with a strong fourth quarter, our fourth quarter <unk> grew by 27, 6% year over year to $14 $1 million.
And our net income was positive at one $4 million.
Our full year results was promising too.
Our full year 2023 revenue increased by 13, 1% year over year.
<unk> $3.5 million.
Full year 2023, net income was positive at five 4 billion.
The company operating cash flow.
Net inflow positive of $13.6 million.
Resolve it all.
Our robust business model.
Alice H. Chang: The increases were driven by the strong momentum in our AIAR cloud solutions and the subscription services for enterprise business and our mobile beauty app, powered by our advanced AI capability. Both segments have contributed to our top line essential profitability improvements and positive operating cash. In this quarter, we captured good demand for our AI-themed bionautics product, as well as accelerated adoptions of jewelry and the fashion virtual tryout. This new deployment and the use cases further extend our coverage into a larger market. Plus, more innovative features powered by generative AI have been rolled out in our Ucam suite of mobile apps in this past quarter. This new AI feature has not only attracted new mobile app installations but also effectively converted more users into premium subscribers. All of these achievements were centered on our beautiful AI strategy, which consists of four major pillars: beauty AI, skin AI, fashion AI, and gene AI.
Increases were driven by the strong momentum in our E. I E. Our cloud solutions and a substitution for.
Our enterprise split today.
Our mobile beauty up business.
By our advanced AI capability, both segments have contributed to our top line expansion.
Profitability improvements and a positive operating cash flow.
In this quarter, we captured a good demand in our AI scheme on office products.
As well as accelerated adoption silver jewelry in the fashion virtual trial.
This new deployment and they use cases further extend our coverage into a larger market.
Plus more innovative features power about generative AI, helping our rollout in argue can suite of mobile apps in this past quarter.
This new AI features of not only attractive Neil.
Mobile app installations, but it also effectively converted more users into premium subscribers.
All of this above a two month towards centers, all our beautiful AI strategy.
Would you call. This all four major pillars to the AI.
Hi, Sachin AI engine AI.
Alice H. Chang: Hello, our core key pillars will play a pivotal part of our core business moving forward, and we are committed to keep investing in AI to strengthen our leading position in AI. Now, let's shift our focus to the operational outcomes of the fourth quarter and discuss our most recent events.
Laura <unk> will play a pivotal part of our core business moving forward.
We're committed to keep investing in AI to strengthen our leading position.
AI.
Now, let's shift our focus to operation operational outcomes, our fourth quarter and discuss our most recent advancement.
Alice H. Chang: On the B2B side, we secure all major license renewals with beauty, skincare, and jewelry brands. This renewal not only reaffirms the growth and reliance of these brands on our solutions to meet their evolving needs but also shows our leadership in the field of virtual tryouts. We also see opportunities to cross-sell to sister brands and upsell more services, such as enlarging their skill offering and expanding to additional countries for our brand clients. Our strong revenue growth in the fourth quarter of 2023 signals a recovery in enterprise new business acquisition from the second half of 2023 compared to the slow and prolonged sales cycle we saw in the first half of 2023. We entered this quarter focused on improving penetration in different verticals.
On the <unk> side with the cure all major license renewal with beauty <unk> jewelry brands.
The renewals are not only reaffirm the growth of reliance self this trend.
Friend, all our solution to meet their evolving needs.
Also show our leadership in the field of virtual trial, we also see opportunities to cross sell to sister, Brian and upsell more services.
Just in religion, the SKU offer offering and expand to additional countries to our brand clients.
Our strong revenue growth in the fourth quarter of 2023 technology a recovery the enterprise deal done since the acquisition from the second half of <unk> compared to the slow in parallel the sales cycle. We saw in the first half of <unk> III.
We entered this quarter focused on deepening the penetration in different verticals.
Alice H. Chang: To provide AI-powered skin care diagnosis products, as well as an increase in adoption of virtual trial solutions for jewelry and the fashion industry. The highlight of the fourth quarter was the growing demand for skin care and skin down office products. The demand not only comes from skin care brands but also comes from new channels such as MedSpa, Sanity Clinic, and a dermatologist. We utilize our AI-powered technology to provide users with real-time and trusted, accurate AI skin diagnosis results, which are verified by dermatologists, key benefits of our AI screen solution. Our clients leverage our AI skin diagnosis technology to provide patients with a thorough assessment of the skin concerns, including redness, wrinkles, moisture, pores, all skin types, and more than 14 skin concerns in the skin type. GoToRecommend tailored treatment plans targeting their unique demands.
To provide AI powered skincare diagnosis product as well as an increase in adoption of virtual trial solution for for jewelry and the fashion industry.
The highlights in our fourth quarter was the growing demand for skiing in the ski skincare is in diagnostic product <unk>.
The demand not only comes from skincare brand, but also comes from new channels, such as Bob said, the cleaning and the dermatologists.
We utilized our AI powered technology.
<unk> users with real time, and the trusted accurate AI skin diagnosis resolved.
Is verified by dermatologists.
A key benefit of our AI screening solution.
Our clients leverage on our AI diagnostic technology to provide patients with a thorough assessment of the skin concern, including wellness bring coal moisture poor.
All skin types more than 14 skin cultures and the skin type.
To recommend tailored treatment plans targeting their unique demand.
Alice H. Chang: With the help of AI technology, clinics can not only do consultations for patients but also give customized recommendations, just creating a personalized and assigned space. [inaudible] Furthermore, we have also seen good demand for our new product Intair Pro, which was launched in the last quarter. This self-service product on iPad attracted a mid-size skincare brand, Clinique, and MedSpa for its high-quality skin analysis and diagnosis results.
With the help of AI technology, <unk> cannot only do consultation for patients.
It also gave a customized recommendations, thus, creating a personalized and assign space.
Through year end, two booths patient engagement.
Furthermore, we have also seen good demand for our new products <unk> <unk>.
Which was launched in the last quarter.
This is self service product to our iPad subtracted.
Let me cite skincare Bryan clay need.
Med spa for its high quality analysis and diagnosis of results.
Alice H. Chang: With the Skincare Pro, we are able to expand into a larger customer base. We also see potential for this product to penetrate the market of a larger brand, clinics, and mass boxes. The expanded adoption of our skincare and skin diagnosis solutions enables us to engage with a larger potential customer base in the skin-related industry and further diversify our revenue stream. As the need for more advanced skin diagnosis continues to grow, we keep on advancing our AI technology and help brands and clinicians to streamline their customer engagement process through digital transformation.
With the skincare apparel, we are able to expand into larger customer base. We also see potential of this product to penetrate into the market of a larger brain kleenex in the med spa.
Expanded adoption of our skincare in the skin diagnosis solution enables us to engage with a larger potential customer base in the scheme related industry and the <unk>.
Further diversify our revenue stream.
As the need for more advanced skin diagnosis continue to grow we keep on advancing our AI technology to help brands and the cleaning to streamline the customer engagement profits through digital transformation.
Alice H. Chang: Another highlight was the accelerated market adoption of our watch and jewelry virtual trial solutions. Marked by several new launches with prestigious and luxury brands, we started to expand into jewelry and watches with Virtual Triumph at the beginning of 2023, and we are excited to see our efforts starting to pay off as more jewelry and watch use cases are launched in the market. Specifically, we have partnered with a luxury European jewelry brand to launch Virtual Triumph for its bracelets and earrings. Through our advanced technology, the textures in the reflection of the jewelry can be shown vividly through the screen and provide users with a true-to-life shopping experience.
Another highlight was the accelerated market adoption of our watch and jewelry virtual trial solutions.
<unk> by several new launch with purchase procedures in the luxury brands, we started to expand into jewelry and watches virtual trials and the beginning of 2023 and we are excited to see our efforts starting to pay it out as more jewelry and the watch use cases.
Launched in the market.
Please equally we have partnered with a luxury European jewelry brand to launch virtual trials widespread flooding in the yearly.
Through our advanced technology.
Texture, and a reflection of the jewelry.
Can be shown vigor delays through the screen and the provide user with true to life shopping experiences.
Alice H. Chang: The increased adoption of our virtual try-on services reflects that the demand for jewelry, watch, and accessory virtual try-on is huge, and that our technology is trusted by these high-end brands. Moreover, we have worked with some of our existing luxury brand clients to launch jewelry virtual try-on with our very unique stacking option, meaning that users can try on multiple pieces of earrings and bracelets at the same time.
The increased adoption of our virtual trial services reflects the demand for jewelry watch and accessory VT and virtual trial is huge.
Our technology is trusted by this high end Brian.
Moreover, we have worked with some of our existing luxury brand client to launch jewelry, where to try all with our very unique packing options, meaning that user can try our multiple pieces <unk> and the breadth of <unk> at the same time this unique leading functionality.
Alice H. Chang: This unique and related functionality allows users to mix and match different pieces of online content and experience the Total Loop in just a few, Helping brands to increase the time users spend on brand websites and the deeper engagement with users. Another good progress to share here is our AI peer solution, which continues to drive new innovation and compliment our industry leading 10 AI based AI hairstyle generation. We have now created the industry-first AI wig virtual try-on for users to try on different types of hair wigs with true-to-real simulation results before they buy. Additionally, we have newly developed AI hair extension, and hair band. Combined with our AI hair color, we have a complete hair solution.
<unk> allows users to mix and match different pieces Alpha online and <unk>. The total Luke Inc. Just a few clicks.
Helping brands to increase the time users brands, our brand website and the deepening engagement with the users.
Another good progress to share here.
Our AI tier solution.
Continue to drive new innovation.
Couple of them on our industry, leading Gen AI based AI here third generation, we now created the industry first AI.
Week virtual trial for usage of try all different types of out here a week with two two real simulation resolved before they buy.
Additionally, we also newly developed AI here extinction peer here Ben.
Combined with our C I hear color.
We have a complete <unk> solutions now.
Alice H. Chang: I leverage the latest diffusion generative AI model. Our technology enables users to try various styles before choosing a new style as a salon. This total solution for hairstyle, hair wig, hair extension, hairband, and hair color is unique in the market.
By leveraging the latest diffusion generative AI model.
Technology enable users to try various styles before choosing a new style as a fellow.
This total solution for his style.
We hear extension here Ben in the hair color is unique in the market with our comprehensive offering front end users can virtually try all different styles before they do if dialing or by week.
Alice H. Chang: With our comprehensive offering, friends and users can virtually try on different styles before they do hairstyling or buy wigs. Now, let's shift focus to our B2C mobile beauty app. We saw another robust quarter for our mobile beauty business, evidenced by the 45.7% year-over-year increase in our mobile 3D app active subscribers to a historically high of over 879,000. This continuous momentum in subscriber growth reflected the increasing demand for editing, enhancing, and beautifying photos and videos using mobile apps. With our suite of UPM apps, we continue to diversify our product offerings to meet needs from users in a fully capitalized on The consumer and market represents a big, very big growth opportunity with rising global demand for subscription-based premium mobile features.
Now, let's shift focus to our <unk> mobile beauty business.
We saw another robust quarters of our mobile beauty our business.
To buy the <unk>.
45, 7% year over year increase our mobile through the App.
Subscribers, who are historically high of over 879000.
And this continuous.
Momentum in subscriber growth reflected the increasing demand for editing enhancing and beautifying totals the videos to the mobile app.
With our suite of <unk>, we continue to diversify our product offering to meet a need from users in a fully <unk>.
To light on the AD market expansion train.
The consumer end market represent a big very big growth opportunity with rising global demand for subscription based premium mobile features we are well positioned to increase the market share in a consumer space.
Alice H. Chang: We are well-positioned to increase the market share in the consumer. Leveraging proprietary AI technology from GenAI, our team developed a robust roadmap of premium features for app subscribers. We have already implemented multiple GenAI-driven enhancements for our app, including AI Avatar, AI Fashion, AI Hairstyle, AI Selfie, AI Headshot, and AI Studio, etc. Which provide users with sophisticated beautification with a single click and enhancement tools for photo and video. Moreover, we launched our online AI editing tools on our website to enable users to edit and enhance their photos efficiently on the web with the help of AI. For example, users can change or remove backgrounds within sections or replace objects in just a few clips.
Leveraging powered Terry.
The technology from.
Our team developed a robust roadmap of premium features tour apps of flavor, we have already implemented multiple gene AIG when enhancements for our App.
Including AI Avatar.
<unk> AI hairstyle, AI Delphi has shot.
<unk> AI studio and etcetera, which provides users with.
<unk> the beauty vacation with a single click.
Enhancement tour for photo and video.
Moreover, we launched our online.
<unk> tools on our website to enable users to edit enhance their totals efficiently on the web with the help of AI.
For example, users can change.
Remove background within seconds or replaced object in just a few clean music users can also colorized led to imply photos, we send pictures easily.
Alice H. Chang: Users can also colorize black and white photos or expand pictures. We have also offered a series of smart AI. Photo Video Enhancement product that can instantly explore photos, upscale and enhance image resolution, eliminate noises, and brighten loaded images without compromising quality and detail. Our product strategy centers on integrating AI across our entire suite of offerings to transform user experience and solve problems for everyone. Most importantly, our unique strength is to use the same AI engine to support both the enterprise business and our mobile app business. By doing so, we can make the most use of our R&D capability to monetize in both sectors.
We have also offer the still resolve a smart AI.
Total video enhancement product that can instantly lottery.
<unk> upskill and enhance image resolution eliminates noises and Brighton loaded images, so without compromising quality and the details.
Our product strategy centered on integrating AI across our entire suite of offering to transform user experience in the salt problems for App users.
Most importantly, our unique strength is to use the same AI engine to support those enterprises.
It is.
And our mobile app visits by doing so we can make the most use of our R&D capability to monetize in both sectors.
Alice H. Chang: With this special strength in our commitment to ongoing innovation, we are poised to defend our market penetration in the industry by unlocking the transformative power of AI. In summary, our business performance for both the fourth quarter and the full year 2023 were strong. Featuring Double-Digit Revenue Growth and the Positive Button Line. We not only saw recovery in the enterprise but also gained success in expanding into new markets. The momentum in our mobile app business was very robust, too. These factors suggest that we are well-positioned to seize market opportunities.
With this special strength and our commitment to.
Two ongoing innovation, we are posed to expand our market penetration of the industry by locking the transformative power of AI.
In summary.
Our business the performance of both the fourth quarter and for full year 2023 were strong featuring double digit revenue growth and the positive bottom line.
We not only saw recovery in the enterprise business.
But also again success in expanding into new verticals.
The momentum in our mobile App business was very robust too.
This factors suggested that we are well positioned to seize market opportunity continue to grow our AI business.
Alice H. Chang: They continue to grow our AI. Based on the strong momentum in both the enterprise thought solution demands and our mobile beauty app subscription business, we observed a very healthy recovery in 2024, with an increase of over 20% in our business pipeline. And we expect the growth of our total revenue recognized under IFRS for the full year of 2024 to range from 12% to 16% year over year in comparison to a full year of 2023. With that, I've now concluded my remarks, and I will be handing the call over to Louis, who will discuss our financial details with you. Thank you. Thank you, Alice. And good morning. Good evening, everybody.
Based on the strong momentum in both the enterprise Das solution demands and our mobile beauty App subscription business.
We observed a very healthy recovery in 2024 with an increase of over 20% in.
<unk> pipeline.
And we expect the growth of our total revenue recognized by under Ifr, Ed for full year of 2024 range from 12% to 16% year over year in comparison to a full year of 2023.
With that I will now.
I'll conclude my remarks, and then we'll be ending the call over to Luis.
I'll discuss our financial details with you. Thank you.
Thank you Ali and good morning, good evening everybody.
Louis Chen: Please note that all financial comparisons are on a year-over-year basis, and the reporting period is the fourth quarter of 2023 versus a comparable period in 2022. And on top of the International Financial Reporting Standard measures, we will also discuss some non-IFRS measures to provide greater clarity on the trends in our actual operation. As Alice mentioned, in the fourth quarter of 2023, our total revenue increased to $14.1 million, or $11.1 million for the same period in 2022, representing a very robust year-over-year growth of 27.6%. And it was also the best quarter of 2023.
Please note that all financial comparisons on a year over year basis, and the reporting periods is the fourth quarter of 2023.
<unk> in 2022.
But the international financial reporting standard measures.
<unk> also discussed.
If measures to provide greater clarity on the trends in our actual operation.
That's at least mention in the fourth quarter of 2023, while total revenue increased to $14 1 million or $11 1 million for the same periods in 2022, representing a very robust year over year growth of 27.
Dan you.
He was also the best quarter Alto <unk> III.
Louis Chen: Meanwhile, our full-year revenue was $53.5 million in 2023, compared to $47.3 million in 2022, representing a year-over-year increase of 13.1%, which met the guidance we provided to investor analysts. We are very pleased to have achieved this result even under the challenge of macroeconomics in 2023, and a strong encouragement to our entire team for the year-long efforts in growing our business in both enterprises and consumer apps. Among our revenue sources, our AI cloud solution and subscription revenue was $12.0 million in the fourth quarter of 2023, an increase of 25% compared to the same period of 2022. A full year AI cloud solution and subscription revenue was $44.8 million in 2023, compared to $36.9 million in 2022, representing an increase of 21.2%. In a continuous fashion, it can be attributed to the strong demand for our online virtual try-on products among brand customers and the robust growth in our mobile beauty app subscription, especially with the addition of new categories that we now serve in skin diagnosis, beauty reads, and fashion markets.
Meanwhile, our full year revenue was $53 5 million for 2023 compared to $47 3 million in 2022, representing a year over year increase of 13, 1%, which we met the guidance, we provided to investors and analysts.
We are very pleased to have achieved these results with you bill under the challenging microeconomic introduced industry necessarily encourage them into our entire team for the year long effort in growing our business in both enterprise and consumer apps.
Among all revenue source.
Our AI cloud solution and subscription revenue was 12.0 million dollar in the fourth quarter of 2023, an increase of 25% compared to the same periods of 2022.
Full year cloud solution that subscription revenue was $44 8 million U S. Dollar in 2023 compared to $36 9 million in 2022.
An increase of 21, 2%.
The continuous station can be attributed to the strong demand online virtual try on product.
<unk> customers and the robust growth in our mobile beauty app subscription.
With the addition of new category now, we serve in diagnoses jewelry and fashion market.
Louis Chen: Notably, our mobile app active subscriber has surged by 45.7% year over year, reaching an all time high of over 879,000 by the end of the fourth quarter of 2023, a strong momentum that underlines the growing interest in our suite of new apps and our generative AI effort has started to pay off. Licensing revenue, which is mostly generated from our traditional offline services, increased by 77.6% in the fourth quarter of 2023 to For the full year 2023, I think revenue decreased by 10.5% to $7.5 million compared to $8.4 million in 2022. This decrease reflects the shift from our traditional offline services and the demand for our growing online virtual trial offerings.
Separately, our mobile active transcriber has surged by 45 seven.
7% year over year, reaching an all time high of over 879000.
By the end of the fourth quarter of 2023.
Our momentum underscored the growing interest in do we don't know what apps generative effort has started to pay off.
I think the revenue, which is mostly generated equal now traditional offline services increased by 77, 6% in the fourth quarter.
<unk> Street to $1 $80 million.
Third to $1 million during the same period of 2022.
Full year 2023, I think the revenue decreased by 10, 5% to seven 5 million compared to $8 4 million in 2022.
Kris you reflect the shift from traditional offline services and the demand of growing online virtual try on offerings.
Louis Chen: Gross profit wise, for the fourth quarter of 2023, it grew by 26% to $11.5 million, with a gross margin of 81.3%. Compare gross profit of $9.1 million and a gross margin of 82.3% for the same period in 2022. For the full year 2023, we saw gross profit increase by 7.3% to $43.1 million with a gross margin of 80.6% compared to $40.2 million in 2022, a margin of 84.9%. The decrease in gross margin was primarily a result of the increase in third-party payment processing fees paid to digital distribution partners such as Google and Apple due to the increase in mobile app subscription revenue.
Gross profit for the fourth quarter of 2023 grew by 26% to 11 5 million with gross margin of 81, 3%.
Gross profit of $9 1 million and gross margin of 82, three <unk> for the same period in 2022.
Before year 2023, we saw gross profit increased by seven 3% from $43 1 million with gross margin of 86% compared to $40 2 million in 2022 and margin of 84, 9%.
Kris and gross margin was primarily a result of the increase in third party payment processing fee.
Two digital distribution partners, such as Google and Apple due to the increase in our mobile apps are sufficient revenue.
Louis Chen: We expect the margins should be stabilized around this figure as the scale of each business segment becomes more mature and robust. The company has very good control over operating expenses. The total operating expense for the fourth quarter of 2023 decreased by 83.7% to $12.7 million, compared to $77.9 million for the same period last year. For the whole year of 2023, the total operating expenses decreased by 56.2% to $48.8 million, compared to $111.2 million in 2022. The decrease was primarily due to the high base of non-cash leasing expenses that occurred in the fourth quarter of 2022.
We expect the margin should be stabilized around these figures at the scale of each business segment become more mature and robust.
The company has a very good controlling the operating expenses.
The total operating expense for the fourth quarter of 'twenty three decreased by 83, 7% to $12 7 million compared to $77 9 million for the same period last year.
Full year 2023 loss total operating expenses decreased by 56, 2% from $48 8 million compared to $411 2 million in 2022.
Kris were primarily due to the high base of noncash leasing expenses occurred in the fourth quarter of 2022.
Louis Chen: To break down operating expenses, sales and marketing expenses for the fourth quarter of 2023 were $6.7 million compared to $6.3 million during the same period of 2022, an increase of 6%. This was due to an increase in marketing and user acquisition costs. The full-year sales and marketing expense was $25.7 million for 2023, compared to $24.5 million in 2022, representing an increase of 4.8%. This was primarily due to the increase in marketing and user acquisition costs, which was partially offset by the decrease in sales and marketing people-related expenses.
The breakdown of operating expenses sales marketing expense on the four quarter of 'twenty three.
$6 7 million compared to $6 3 million during the same period of 2022, an increase of 6%.
Due to an increase in marketing and user acquisition costs.
Our full year marketing expense was $25 7 million for 2023 compared to $24 $5 million in 2022, representing an increase of four 8%.
This was primarily due to the increase in the marketing and user acquisition costs, which was partially offset by the decrease in sales and marketing people related expenses overall.
Louis Chen: Overall, we were able to grow our business without an unnecessarily increase in our marketing expenses. This shows the benefits of our strong recurring business model and effective customer acquisition strategy. From the research and development expense side, it was $3 million for the fourth quarter of 2023, compared to $2.6 million during the same period of 2022, an increase of 17.7%. The full-year R&D expenses were $11.6 million for 2023, compared to $10.5 million for 2022.
Overall, we were able to grow our business, we bought and then conceptually increase of our marketing expenses to show the benefit of a strong recurring business model and effective customer acquisition strategy.
On the research and development that's been site.
Millions of dollars for the fourth quarter of 23% compared to $2 6 million during the same period of 2022.
An increase of 17, 7% full year R&D expense were $11 6 million for 2023 compared to $10 5 million for 2022, an increase of nine 3%. The increase were from the additional R&D headcount and related personnel costs and it is relatively mild.
Louis Chen: An increase of 9.3%. The increase came from additional R&D headcount and related personnel costs, and it is a relatively mild increase when compared to our top-line revenue growth in the same period. General and administrative expenses were $3 million for the fourth quarter of 2023, compared to $69 million during the same period of 2022, a decrease of 95.7%.
Greece, when compared to our topline revenue growth in the same period.
The general and administrative expenses were $3 million for the fourth quarter of 2023 compared to $69 million. During the same period 2022, a decrease of 95, 7% full.
Louis Chen: Full-year G&A expenses were $11.6 million in 2023, compared to $76.2 million in 2022, a decrease of 84.8 percent, a decrease due to a significant decrease in listing-related expenses after the completion of the D-SPAC transaction and listing process in 2022. The net income was $1.4 million for the fourth quarter of 2023, compared to a net loss of $190.3 million during the same period in 2022. The full-year 2023 net income was $4.4 million, compared to a net loss of $161.7 million in 2022. The increase in our bottom line was due to a significant decrease in listing expenses after the completion of the D-SPAC transaction and the listing process in 2022 and an increase in the fair value of convertible, redeemable preferred shares in 2022, which were then converted to perfect ordinary shares upon recapitalization.
Full year G&A expenses were $11 6 million in 2003 compared to $76 2 million in 2002, a decrease of $84 $8 10.
The decrease were due to the significant decrease in leasing expenses. After the completion of the deep spectrum session and leasing process in 2022.
The net income was $1 4 million for the fourth quarter of 23 compared to a net loss of $190 3 million. During the same period of 2022. The full year 23, net income was <unk> 4 million compared to a net loss of $161 7 million in 2020.
Two.
The increase in our bottom line were due to a significant decrease in leasing expenses. After the completion of the <unk> transaction and the lithium process in 2022.
The increase in the fair value of convertible redeemable preferred shares in 2022, which you were then converted to perfect ordinary shares up on recapitalization.
Excluding noncash share based compensation foreign exchange impact in one time nonrecurring cost associated to these type deal. Yes. Adjusted net income was $1 8 million for the fourth quarter of 'twenty three.
Louis Chen: Excluding non-cash share-based compensation, foreign exchange impact, and one-time non-recurring costs associated with these tech deals, the adjusted net income was $1.8 million for the fourth quarter of 2023, compared to an adjusted net loss of $0.01 million in the same period of 2022. The full-year adjusted net income was $7 million for 2023, compared to $4.1 million for 2022, an increase of 72.1%. These represent a good net margin of around 13% in 2020. Looking at our balance sheet, as of December 31, 2023, our company held $154.2 million in cash and cash equivalents in six months' time deposit, compared to $201.3 million as of September 30, 2023. The decrease in cash and cash equivalents was a result of the compression completion of the tender offer to purchase up to approximately 16 million shares for an aggregated purchase price of approximately $50 million.
<unk> to adjusted net loss of your point of view a $1 million in the same period of 2022. The full year. Adjusted net income was $7 million for 2023 compared to $4 1 million for 2022, an increase of 72, 1%.
We presume that wouldn't end margin of around 13% in 2023.
Looking at our balance sheet as of December 31, 2023 company Hail $154 2 million in cash and cash equivalents in six months time deposits compared to $201 3 million as of September 32023.
Decrease in cash and cash equivalent was a result of the compression completion of the tender offer to purchase up to approximately 16 million shares.
Aggregate purchase price of approximately $50 million.
Another important note is our capability to generate positive cash flow from the business. We had a positive operating cash flow of $13 6 million.
In the full year 2023, compared with a negative $3 3 million in full year 2022.
This improvement demonstrated the value of our business model and creating strong capital structure to support the growth of our business operation.
In total our customer base had a net increase of 18, Brian clients.
The end of last quarter, achieving a total of 645 clients. We have over 700700, 4000, skus or makeup skincare eyewear jewelry and others as well.
Louis Chen: Another important note is our capability to generate positive cash flow from our business. We had a positive operating cash flow of $13.6 million in the full year 2023, compared to a negative $3.3 million in the full year 2022. This improvement demonstrated the value of a business model in creating a strong capital structure to support the growth of a business operation. In total, our customer base had a net increase of 18 brands' clients since the end of last quarter, achieving a total of 645 brands' clients with over 704,000 SKUs for makeup, skincare, eyewear, jewelry, and others as of December 31, 2023. This is yet another record quarter for these metrics, showing a continuous increase in customer penetration and SKU expansion. Furthermore, more brands and products are leveraging Perfect Console to operate the various different subs modules. Please subscribe from Perfect.
December 31, 2023. This is yet another record quarter for these metrics joined the continuous increase in customer penetration and SKU expansion or brands and products are leveraging on perfect console to operate the values different sub modules that you subscribe from perfect.
In the fourth quarter of 2023, while total revenue has consistently exhibited strong growth.
Primarily driven by the continued momentum in our cloud solutions and in the mobile application.
The premium feature and the AI powered app, including the newly launched you can the IPO and that you can be enhanced.
Had a very mild rise in expenses on net income remains strong robust delivering double digit in margin.
Continue our investment in talent acquisition and technology innovation within our core competencies and acting as a transformative tool.
Reinvest haul product showcase and consume.
Firmly believes that our positioning within this rating industry equates to remain at the fraud or from <unk>, and rising <unk> beauty and fashion brands engage with audiences.
Louis Chen: In the fourth quarter of 2023, our total revenue consistently exhibited strong growth, primarily driven by the continued momentum in our AR and AI cloud solutions and in the mobile app subscription. Thus, the premium feature and the AI-powered app, including the newly launched Ucam AI Pro and Ucam Enhance. Despite a very mild rise in expenses, our net income remains strong, robust, delivering double-digits and margins. We continue our investment in talent acquisition and technology innovation to expand our core competencies in acting as a transformative tool as we reinvent how our products are showcased and consumed. We firmly believe that our positioning within the thriving AI industry equips us to remain at the forefront of revolutionizing how beauty and fashion brands engage with audiences.
Finally for attendees and before the company expects total revenue recognized by Ifr adds to grow year over year ROE range between 12% to 16%.
This forecast is based on the company's current assessment of the market and operational conditions and management will closely monitored the business progress each quarter and update our guidance idiotically to offer better transparency to the market that concludes my prepared remarks.
Now operator, please open up the call for questions.
We will now begin the question answer session to ask a question at this time simply press the star followed by the number one on your telephone keypad.
We will now take a moment to compile a roster.
Our first question today comes from the line of Timothy Zhao.
From Goldman Sachs. Please go ahead.
Great. Thank you management for taking my question.
After a very solid fourth quarter results.
Two questions here one is about your revenue guidance to transforming for this wondering I can share some color into the revenue growth for example revenue compensation breakdown between your <unk> and <unk> business with shipments maybe grows faster.
Louis Chen: Finally, for 2024, the company expects total revenue recognized by IFRS to grow year-over-year to range between 12 to 16 percent. This forecast is based on the company's current assessment of the market and operational conditions, and management will closely monitor business progress each quarter and update our guidance periodically to offer better transparency to the market. That concludes my prepared remarks.
Q4, and also a related question on this topic is I think you mentioned AI.
Peters.
The bad news.
Just wondering thoughts on phase III.
Unknown Executive: Now, operator, please open up the call for questions. We will now begin the question and answer session. To ask a question at this time, simply press the star followed by the number one on your telephone keypad.
The rough breakdown between cosmetics skincare fashion jewelry different customer base.
What is your outlook for.
And the second question is on the margins.
I think for Q3 full year, you had a pretty strong top line and also a solid.
Unknown Executive: We'll now take a moment to compile our roster. Our first question today comes from the line of Timothy Zhao, from Goldman Sachs. Please go ahead.
Extension in terms of gross profit.
Yes.
But I think.
In terms of margin next fee there was like.
Timothy Zhao: Great, thank you for taking my question and congratulations on the very solid fourth quarter results. I have two questions here. One is about your revenue guidance for all. I was wondering, can I just share some color on the revenue growth breakdown or revenue breakdown between your VGB and your business, which segment maybe grows faster into full, and also related questions on this topic. I think you mentioned AI pillars. I was just wondering for 2030, what is the rough breakdown between the base and what is your And the second question is on the margins. I saw I think for 2020, three full years, you had a pretty strong top line and also solid in terms of gross profit and net profit. But I think in terms of margin, actually, there was a slight decline in terms of both gross margin and net margin on a year-to-year basis.
A decline in terms of both gross margin and net margin on a year on year basis in Q3, just wondering.
What is your outlook for the cost savings and the profit margin.
Thank you.
Hi.
Good morning, very nice to talk to you again.
So our guidance again, we operate in a recurring business.
Our business a very contractual rights we have.
Recognizing it's based on IRR as measured the period's go.
So well remarks, there we have seen a good recovery momentum in the last quarter of 23.
So if we compare that to the earlier first half of 'twenty, three which was very challenging. So I think that's a good sign of a recovery issue, giving us a stronger.
In the 2020 for business.
Those contract you would take time to materialize into our ifr, yet so I think as we said we've seen the business pipeline to become a lot more solid.
Louis Chen: Just wondering, what is your outlook for the profit and the stock market? Hi Timothy, good morning. Very nice to talk to you again. So our guidance, again, as we operate in a recurring business, and our business is very contractual, right? So we are recognizing it based on IFRS measure at the period. Thus, our remarks that we have seen a good recovery momentum in the last quarter of 23. That We compared that to the earlier first half of 23, which was very challenging.
Certainly we see over 20% in our business pipeline.
Going forward.
I'll start with the breakdown.
<unk> continued to be very strong as we have reported in our last quarter I think we expect that trend to be continuing but the <unk> part as I said the recovering is also coming to help.
We see the BTC, probably you will be still growing a little bit softer than the b to b space, but <unk> certainly recovering from the early challenge in 2023.
Louis Chen: So I think that is a good sign that the recovery is giving us a stronger faith in the 2024 business. But those contracts, you know, take time to materialize into our IFRS. So I think, as we said, we've seen the business pipeline become a lot more solid. You know, certainly, we see over 20% in our business pipeline going forward. A start of the breakdown, you know, B2C continues to be very strong, as we reported in our last quarter. I think we expect that trend to be continuing. But the B2B part, as I said, the recovering is also coming to help.
In terms of the AIP alert.
Beauty AI you certainly are still a dominant part of it is all part of our core business.
Many years, but the skin AI part is growing very very fast skinnier part if we look at the organic demand that comes in is actually outpacing. The other categories. I think guys are mainly due to the AI.
Skin diagnosis product is becoming more robust covering more skin concerns and also be able to penetrate into newer channels. So it's not just the traditional brand website is now going into.
Ms Spas and Clinique and other channel. So I think all of the four pillar <unk>.
One internal the enterprise business is already leased.
Louis Chen: We see B2C probably will be still growing a little bit faster than the B2B space, but B2B will certainly recover from the early challenge in 2023. In terms of the AI pillars, beauty AI is certainly still a dominant part of it. It's been a part of our core business for many years. But the skin AI part is growing very, very fast.
Hey.
Generating a 130, if no more of that demand.
Turn off the Genuity AI is very very promising dc's very young Egypt launch about a year ago, and so from internal growth and from the roadmap perspective, we see a lot of innovation will happen.
In this pillar and so we have a strong faith and Doug Im not to forget about deficient AI, which is more to the luxury and prestige jewelry and watch it and this is the area that we invested so much in last year.
Louis Chen: The skin AI part, if we look at the organic demand that comes in, is actually outpacing the other categories. I think that's mainly due to the AI skin diagnosis product is becoming more robust, covering more skin concerns, and also being able to penetrate into newer channels. So it's not just a traditional brand website; it's now going into, you know, med spas and clinics and other channels. So I think out of the four pillars, the skin one, in terms of the enterprise business, is already, you know, let's say, generating a good one-third, if not more, of that demand. In terms of generative AI, it's very, very promising. This is very, very young.
<unk> already to see result, more than a dozen brand has already launched.
Initially launched in the market for our jewelry, including the newest edition for stacking.
All of these for a very important pillar to sustain our growth in 2024.
In terms of margin as I mentioned.
The <unk> business increased due to the fee paid to Apple and Google It is.
Eating up some of our cross broke profit.
Around three 4% company wide.
We have observed this trend in the last four quarters, we seem to be quite stabilizing to 80%, 81% gross profit margin. We don't expect a big change of down margin based on our current visibility.
Louis Chen: It just launched about a year ago. And so, from the 10 of growth and from the roadmap perspective, we see a lot of innovation happening in this pillar. And so we have a strong faith in that. But not to forget about fashion AI, which is more about luxury and prestige jewelries and watches. And this is the area that we invested so much in last year, and we're already seeing results. More than a dozen brands have already been launched, and commercially launched in the market for our jewelry, including the new ones. [inaudible] So that will be my answer to your question. [inaudible] Our next question comes from the line of Clark Jeffries, from PSC. Please go ahead.
So without a doubt there'll be.
My answer to your question.
Great. That's very helpful. Thank you guys.
Our next question comes from the line of Clarke Jeffries from PFC. Please go ahead.
Luiz Thank you for taking the question.
Lewis interesting to hear about.
The skin AI segment.
Having maybe a wider aperture of <unk>, new business interest comparative Udi, if I understood that correctly.
Also interesting to hear about the recovery in enterprise sales cycles.
The good growth in new business pipelines to start the year.
Clarke Jeffries: Lou, thank you for taking the question. You know, Louis, it's interesting to hear about the skin AI segment, maybe having maybe a wider range of new business interest compared to beauty AI, if I understood that correctly. It was also interesting to hear about the recovery in the enterprise sales cycles and the good growth and new business pipelines to start the year. I was just wanting to ask strategically, are we at the position where you might be increasing your investment going into the new year to take advantage of some of those improvements in the enterprise sales cycles? Where are your top investment priorities from an incremental dollar perspective in terms of investing behind the enterprise sales capacity? And then, as a follow-up, I wanted to ask if there was any way to level set expectations on cash flow, a 17 million improvement year over year and operating cash flow is fairly substantial. Any way to think about whether that is the right number for the business on an annual basis at this point or if there were certain working capital items that may have benefited free cash flow and we might see an ebb and flow in 2024. Thank you. Thank you, Clarke. Good evening.
I was just wanted to ask strategically are we at the position where you might be increasing your investment going into the new year to take advantage of some of those improvements in the enterprise sales cycles.
Where are your top investment priorities from an incremental.
<unk> perspective in terms of investing behind the enterprise sales.
Capacity and then as a follow up I wanted to ask if there was any way to level set expectations on cash flow.
$17 million.
The improvement year over year and operating cash flow is fairly substantial.
Any way to think about whether that is the right number for the business on an annual basis at this point or if there were certain working capital items that may have benefited free cash flow and if we might see an ebb and flow in 2024. Thank you.
Thank you Clark good evening, yes.
I think.
As an area that we have been investing for more than three years now.
Took time to develop into a more mature data and I think now.
Final closing the K then.
More and more brands and Clinique.
I'd like to see the benefits of these solutions.
I think unlike the consumer beauty cycle color cosmetic where are more dominated by big brands I think 16th.
Louis Chen: Yes, skin AI, I think, is an area that we have been investing in for more than three years now. It certainly took time to develop to a more mature status. And I think now that this is kind of crossing the chasm. You know, more and more brands and clinics are starting to see the benefits of these solutions. So and I think I like the consumer beauty cycle cosmetic wear is more dominated by big brands, I think, but the market is very much more of a long tail as well.
Market is very much more long tail as well so there's a lot more.
<unk> client.
To address and I think this is where the opportunities are and where we are investing also our sales effort both online digital marketing why.
Some advertising.
<unk> joined the different trade three sure.
Our comprehensive or targeted to in market.
Doug did remain a priority for 2024, and we have seen this globally happening not only regionally in one specific countries or regions. We've seen the demand equally growing in Japan in the U S.
Louis Chen: So there are a lot more potential clients to address, and I think this is where the opportunities are. And when we are investing also in our sales effort, both online, digital marketing, why, you know, some advertising, or joining different trade fairs, trade shows, conferences, or targeted at the skin market, I think that should remain a priority for 2024. And we have seen this globally happening, not only regionally in specific countries or regions; we've seen that demand equally growing in Japan, in the US, and in Europe as well. So skin AI, among other things, is one that has been developed for a few years; it has been well tested in the market. And I think it's now time to gain more scale. From the B2B pipeline cycle perspective, yes, we have seen that enterprise demand is certainly accelerated compared to the first half of 2023, where people were a little bit more skeptical about the future of the economy. I think now at the end of the interest hike, the terminal rate, I think enterprise spending seems to be coming back more into the pre-interest hike period.
And the new robust whale, so skinny AI.
Among other thing is they want that.
<unk> is being developed for a few years it has been well tested in the market and I think it's now time to gain more scale.
From the B to B pipeline cycle perspective, yes, we have seen that the enterprise.
Demand is certainly accelerated compared to the first half of 2023, where people were a little bit more skeptical about the future of the economics I think now at the towards the end of the interest hike at the terminal rate.
Price spending seems to be coming back wanting to.
Interest hike periods. So you have seen that the entire sales cycle has been shortened significantly so.
So customer enterprise budget seems to be a little bit.
More relaxed in terms of investing in new innovation, and we want to capitalize on that.
So our top priority is again to a higher power solutions ready for web for online subscriptions and be able to help all this new demand to integrate and deploy in the market as fast as we can.
Louis Chen: We have seen that the entire sales cycle has been shortened significantly, so customer enterprise budget seems to be a little bit more relaxed in terms of investing in new innovations, and we want to capitalize on that. So our top priority is again to have our solutions ready for the web, for online subscriptions, and be able to help all these new demands integrate and deploy in the market as fast as we can. In terms of the cash flow, the result that you see now, it is not from a one-off cash flow, or free cash flow.
In terms of the cash flow.
We felt that you saw now earning it is not on a one off.
Cash flow free cash flow I think the continued.
Our result, and we've seen quarter after quarter that are we able to bring in around this figure and I think that is what our expectations are for the operating cash flow to remain positive. So we are managing our financials as I always say, we do have strong discipline and now we are seeing that because of the nature of this outcome.
<unk>, we get pay advance and then we have delivered a service across the year, we able to generate these good operating cash flow.
Louis Chen: I think it is a continuous result, and we've seen it quarter after quarter that we are able to bring in around this figure, and I think that is what our expectations are for the operating cash flow to remain positive. So we are managing our financials, as I always say, we have strong discipline. We have seen that because of the nature of this contract, we get paid in advance, and then we deliver the service across the year, we are able to generate this good operating cash flow. Clark
Claude I can.
Some comments for the investment part we're committed to keep on investing.
AI development, and the R&D side and Thats, because this especially after <unk>.
Yes.
The market is there.
Very large to grow and this is a very early stage. So you can hear not only beauty AI beauty virtual trial, we also expense into the beauty side for the here.
<unk> here.
It's very unique in the market here style virtual try.
Alice H. Chang: I can add some comments on the investment part. We're committed to keep on investing in AI development on the R&D side. And that's because this, especially after generative AI, is the market itself, very large and growing, and this is at a very early stage. So you can hear that not only beauty AI, beauty virtual trial, we also expanded into the beauty side for hair. So hair is, it's very unique in the markets; hair style, virtual trial, hair, hair week, hair week, virtual trial, all this is developed by our generative AI. We deployed it to B2B Enterprise for brands' adoption and also to our B2C app.
Week to week.
There's a trial all of this our agenda.
They are generally the AI team.
We deployed to <unk> enterprise for Brian So adoption and also to RFP to be up.
So the coming months for R&D development will keep on increasing.
Sales channel I think you will not have a big.
The increase.
For the new markets like scheme.
Clinique that one is very new to us and the organic demand is coming very strong and we also like to.
Developed in different countries.
Major countries like U S Japan.
Yes.
For the retailer partners and affiliate partners to get us more <unk> to the market. The report prefer more blind to two rsi.
Alice H. Chang: So the commitment to R&D development will keep on increasing. For the sales channel, I think it will not have a big increase. For the new market, like skin, med spa, clinic, that one is very new to us. And the organic demand is coming in very strong. And we also like to develop in different countries. Besides major countries like the US, Japan, and the Middle East, for retailers, partners, and affiliate partners to get us more acquainted with the market and to refer more brands to our site.
And the good thing as well.
<unk>.
And it has AI in all kinds of AI solutions, we can use it in RMB to the enterprise solution.
So two RFP to see beauty app.
Through the App users.
Our energy.
Compliment to each other.
And of course or.
We are targeting.
Regarding our steel, they're hitting the market for anything AG MMA to call.
Alice H. Chang: So, and the good thing is all this AI, alternative AI, and all kinds of AI solutions, we can use them in our B2B enterprise solutions and also for our B2C apps, beauty apps, beauty app users, quite in synergy complementing each other. And, of course, for we are opening and still searching in the market for any synergy M&A to come. Very selective.
There is selective that's always our target to go.
Really appreciate it yes, it makes sense to invest behind the.
The weight than innovation in <unk>. Thank you very much both.
Thank you.
As there are no further questions at this time I'd like to hand, the conference back to management for closing remarks.
Thank you again for joining our call today and have a good one and look forward to seeing you online next time.
Clarke Jeffries: That's always our target to go. I really appreciate it. Yeah, it makes a lot of sense to invest behind the wave in innovation and generation AI.
This conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Please wait the conference will begin shortly.
Unknown Executive: Thank you very much for both of you. [inaudible] Thank you again for joining our call today and have a good one, and I look forward to seeing you all. This conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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