Hello and welcome to Noble's virtual conference. My name is Pat McCann. I'm an analyst here at Noble Capital Markets. Today, I have the pleasure of introducing the Perfect Corp. We have Louis Chen with us today. Before we get started, let me just let you know that you can submit your questions down at the bottom of your screen in the Q&A box, and we will get to as many of those at the end of the presentation as we can. Without further ado, I will hand it over to Louis.
Thank you, Pat. Good morning, everybody. Thank you for joining this session. I'm Louis Chen, the Chief Strategy Officer at Perfect Corp. Perfect Corp is an AI beauty AI company. We serve in the vertical for beauty and fashion, helping beauty brands and beauty lovers, consumers in discovering, purchasing products, and finding personalized recommendations. Our company is listed in NYSE under the symbol of PERF. So today, I'd like to share with you a little bit more about the company, our business model, and to also show you some of the typical use cases, how our clients are using our solutions. So let's get started. The company was founded in 2015. This is our ninth year. We have been public since late 2022. The company very much is a SaaS company focusing on the vertical for beauty and fashion, aiming at transforming the world with our AI innovations.
The company has grown to over 300 professionals around the world. The development headquarters is situated in Taipei, Taiwan, where I sit. We have the U.S. as our biggest market. We have about 30 professionals here in the U.S., between the West Coast and the East Coast. The U.S. market represents about 50% of our revenue. The second biggest market is Europe. It's around 20% of our revenue from the United States, and then followed by Japan and Tokyo, which represent another 10%. The remaining 20% are the rest of the world. If you look at this map, we are geographically located very close to all the beauty capitals of the world because this is where a majority of our clients sit, so our beauty or fashion companies. So to start, we really want to solve and help consumers and brands about their pain points.
There are several very typical demands and desires of our modern consumer needs in terms of beauty, especially teenagers or young people trying to understand which is the best beauty style for them, or just even broader audience about understanding the health of my skin, what is my skin type, what are the skincare products that I need, or even applying makeup tutorials. I think it's very challenging, especially for women, to learn about what's the technique, what's the right product, what's the process to put on the best makeup. We are using technology to help resolve all these issues for the consumers. The company has evolved quite a lot in the last 9 years. Now we have more than 20 different products in our offering. Sometimes it becomes a little bit more difficult to memorize each of them.
So recently, we have put it again in a simplified strategy around these four pillars. Skin AI is an overall solution about skin diagnosis, how we're using selfie cameras and AI models to help diagnose, provide up to 14 different concerns, skin detections. Our Beauty AI is our virtual try-on, anything from makeup to foundation finder to makeup tutorials. In the recent 20 months, we have expanded into the fashion and jewelry market, covering watches, rings, and bracelets, and more. And I will show you a few examples in a moment. From the business model perspective, we operate in two ways. Last year, our company did about $54 million in top-line revenue, and 50% of that came from B2B, while the other 50% from the B2C.
B2B is a very typical enterprise SaaS model where we are licensing API or SDK as a subscription product for beauty or retailers in the beauty and fashion categories. The solution covers anything from online as part of the shopping cart experience or offline in the boutique retail store. On the B2C product line, it's more of the freemium model where we have more than five mobile apps that consumers can download directly from the App Store or Google Play. They get a seven-day free trial for all the enhanced premium features. And at the end of the trial period, they have a choice to continue the premium feature by paying a subscription of around $39 per year or $5 per month, or they can continue to use it for free with a limited light version of the apps. So these two represent the biggest revenue sources for us.
What is unique in this business model, and I think you probably see a number of companies that can monetize the same technology in both ways and actually create synergy both ways. They are all beauty lovers, whether it's B2B2C or B2C. So it's the same engine, same development team, one P&L cost to develop, but we are able to monetize it to two different audiences. To give you more color on the B2B side, the logo you see here on the wall are the typical companies, brands that are using our solutions for many, many, many years already. So we have accumulated over 10 billion trials per year now. What is most impressive, our solution, our platform now serves more than 665 brands, mostly multinational brands, through their e-commerce and helping them on conversions, increasing basket size, and also reducing returns.
Another thing worth noticing in here is the platform we created. As you may be aware, these beauty brands, they have new collections of products every season, whether it's this winter collection, spring collections. So every time they bring a new product into the market, they use our toolkit, they use our platform to digitize this and offer that in the AR format. So over there, we have now accumulated over 745,000 virtual products that people can try. This makes us the biggest AR platform for beauty in the world. The chart here you see gives you a little bit more perspective about the growth pattern that we have seen over the years in our platforms. So as of last reporting quarter, we have 666 brands on our platform.
As you can see here, on every quarter, we get about 10-20 increase in new brands that are adopting the solution. So I think it's a very healthy growth pattern, and I think there's still a very long, long way to go as there are more than 2,000 brands in the world for beauty and fashions. On the right-hand side, you also see the historical pattern about the number of SKUs that we carry on our platforms. This has to do with the way that we license the monetization and how we charge our customers. So also, the metrics are excellent. A glimpse about our B2C offering is the franchise under the name YouCam. So there's various apps for different use cases surrounding photo, video, and camera use case for makeover, for selfie editors, or video apps.
So one of the things that we are very proud of is we are able to monetize these beauty apps. Here in the trend, you see the metrics that we report every quarter is the number of active subscribers. As of last reporting quarter, we have over 900,000 paying active subscribers. The vast majority, 90% of them are on an annual plan, which I said is about $39 per year. It continues to grow quite nicely. The recent pattern we have seen about 30% growth year-over-year in terms of number of subscribers. Then going back a little bit to share with you the evolution of our beauty industry and how we are helping them.
Traditionally, the beauty industry relies very heavily on physical sampling because this is one of the most effective ways for converting consumers to try to buy a new lipstick color, a new eyeshadow palette. However, physical trials are very time-consuming. Of course, sanitary concerns, so nobody's really touching those samples on the shelf anymore. And many times, there's no availability for those testers. So those are all obstacles preventing consumers from buying beauty products. So when we started in 2015, we had this vision to use AI and AR technology to bring virtual try-ons so consumers can actually see themselves already wearing makeup virtually on the iPad or on their smartphone. It's really unlocked a lot of potential for try-before-you-buy. There's never going to be a lack of samples or lack of colors that you can try.
This is a new experience, very much table stakes for all the beauty companies doing e-commerce. Just a little bit of a glimpse of that. AI is certainly the buzzword in this season. But we've been infused with AI and beauty tech since day one. When we started in 2015, we were the first ones to use machine learning technology into beauty. That was the year, if you remember, where AlphaGo and deep learning, machine learning had started. So we challenged ourselves, can we use this technology to help improve the commerce, improve the beauty experience? And we did. So with that, the mission will be some of the recent client success. So you have a better idea of how this works. Here on the screen, you see the Walmart app.
This is a typical experience where a consumer comes to the Walmart app and tries to buy a beauty product. For example, here, you'll see on the video, you're scrolling through several products. You tap onto, let's say, a lipstick, and there's a try-on option on the screen. When you use a try-on, instantaneously, the camera turns on, the selfie camera, and consumers can see their faces already there, and they can swipe left and right, have a before and after. So she's now trying, and she can see herself, the look and feel of that lipstick on her face. This is a much better and much more personalized experience compared to just looking at a celebrity photo or a video ad. So that's really the secret why consumers and brands really love that because it offers users a much more engaging and personalized experience.
Another thing worth noticing is because of our coverage of over 600 brands, and it will continue to grow. When we work with the retailers such as Walmart, we also help them bring more brands and more products without the need to redo their digitization of the SKUs because everything is already being approved and sitting on our console. We can publish that into different channels just overnight. In the Walmart example, at the launch, we enabled more than 20 brands, over 1,400 products out of the door. And every quarter, we increment by a dozen more brands depending on what the retailers carry on. Another example here to help you illustrate technology, this is, for example, MAC Cosmetics under Estée Lauder. So it is an artistic brand. They have a lot of looks.
So here, for example, in the video in the middle, you can see that with just one tap, the user can try on not only the lipstick, but the eyeshadow, the palette, the eyebrow, the foundation, the contour, the highlights, everything very easily. And not only that, we have this start tutorial. So it actually allows the technology to help consumers break this step into a step-by-step process so they can learn about putting on the makeup, which is the right product you can add to the basket right directly there. There's audio narration behind, which kind of tool and the techniques. So this is really helping a lot of the young users, young consumers to learn about beauty. And these two are just examples on how we are doing that for the beauty industry.
The next example here is how we are doing that with Amazon using our AgileHand technology. So here, if you go to the Amazon app and you see for a virtual manicure, you're thinking about buying the nail polish product and the nail clip products. Here you go. Technology is automatically real-time to detect your fingers, your nails, and it tracks the movement very precisely. And it allows you to see if that matches your style, actually matches your outfit, it doesn't match your skin tone. So it's super cool. And here, a few more examples of how we are doing that across makeup and across more categories such as watch. So typically, in the advertising format, this is a video ad, nothing new in there. But now there's the option for try-on. So when the consumer taps on the try-on on the video, it doesn't leave their site.
You turn on the camera. For example, here, you have the lady trying on the Gucci lipstick. She's swiping left and right between the different colors. If she likes this shade, she can always tap on the Shop Now. Then in this example, she goes to Sephora to make her purchase. In the middle one, for example, this is our partnership with Cartier for watch technology. Consumers can actually see the fit, the sizing of the watch on your fingers. This is for Sally Hansen, very similarly, to try on different colors. It looks super real, right? It feels almost as real as you were wearing the real product. These are four key examples. There are many, many hundreds of them suggesting you to come to our website where they're on the success story session or the other demo session.
You can try it for yourself. Another thing I would like to also mention in here is our partnership with all these tech giants, whether it's Google, it's Meta, it's Snap, it's Alibaba. These are all our partners. They're using our technology in Google Search, in Instagram, in Snapchat for brands to offer virtual try-ons for makeup products. Alibaba and Snap are also on our cap table. They are our investors since we were private. Alibaba was our lead investor in the Series B and remained to be in our cap table after the IPO. And Snap as well, it was a lead investor in the Series C and also remained in the cap table since then. So I think this is a very unique position.
Nobody else in this industry that we are has this type of partnership because this is very important for the brand to ensure that it's a consistent and cohesive experience across the Perfect 360 approach. So whether consumers are shopping online or they're on YouTube or on your social media or in the store, they'll always get the same experience when they try the same SKU because the rendering engines are coming from the same technology. It's the same engine so that we can guarantee the results are consistent. Another thing that is new that we have been working on recently is generative AI. I don't have the time to show you all of that today, but I want to show you a few glimpses of how we are able to take AI and then offer consumers a new experience.
For example, how many times women may have seen a look from a celebrity on TV, on Instagram, or on a magazine. If you want to try and you want to understand if that look fits your style, we just need one image. You can take a photo of that image. The AI will analyze the color, the shade, the texture, the patterns that she's wearing, and then transfer that into your own face. Very, very simple. With that, you can find the right product. For example, another example of how we're using generative AI, diffusion, to create hairstyles. So you just need one image from the user, and we're able to recreate her with different looks and different cuts. For example, pixie or even Afro long wavy hair looks super natural. Hair extension is another example of that. Clothing is the next big thing.
So we are working on really surrounding the female shoppers. What do they buy? Anything besides makeup, certainly apparel, is a big category. So using generative AI, so the similar way that we're doing for makeup, you just need one image. We need one image, and the AI will recreate yourself wearing that piece. So these are just a few examples of what we are able to do on our app now. Or I personally, this is one of my personal favorites, is the AI headshots. Most of the time, I don't have much more time to go to the studio anymore to take my photo, whether I'm using that as my speaker bio, or my LinkedIn. I can do that just with a regular selfie. And the AI will create myself wearing different suits, different colors, with jackets, without jackets, different scenes in the office, in the studio.
So it's super helpful. And this is one of the key features in the app as well. Or for women, if you want something a little bit more artistic, we have this, what we call the AI Studio. We only need a few images of the consumer. This is my colleague. The AI will learn about your facial identity and be able to recreate yourself, for example, in this marvelous image, like going on safari. I don't think that would be ever possible taking a photo with wildebeest or cheetah, but the AI allows you to create that already with the makeup on, with the hairstyle. So it's really just a great way of social expression and social sharing. Lastly, a few pages on the financial highlights. So as I mentioned in the beginning, we did about $54 million top line last year.
In the quarter one this year, we did about $14 million, about 18% year-over-year growth. Gross margin, last year, was about 81%. And this last quarter was about 78%, $11 million in margin. As for the bottom line, last year, we had an adjusted net income of about $7 million. So it was 10% in margin compared to previous year, $5.4 million. And in this recent quarter, it was about 10.6% in margin, $1.5 million in adjusted net income. One thing worth noticing is the capability to generate cash flow. So last year, we had a positive operating cash flow of about $13 million. And in this last reported quarter, it was about $2.5 million. The company also has a very strong balance sheet. As of last reported quarter, we have about $157 million in cash and cash equivalents.
So something that we wait to be deployed to help accelerate the growth, whether organically or through other strategic acquisitions. So with that, I will conclude my prepared presentation, and I'll open the floor for questions.
Thank you, Louis. Yeah, we do have some questions here. The first one has to do with the competitive advantages, the competitive landscape. Could you describe the company's competitive advantage, especially as it relates to the B2B brand cust omers such as Walmart, Estée Lauder, and Clinique?
Yeah. So when we started in 2015, I think there were maybe six or seven different companies that tried to do similar things we call the beauty tech. After all these years, I think most of them have been eliminated in many ways. So we have become the clear leader in this space right now. So we cover more than 600 brands.
I think our closest competitor probably has less than 10 customers, and if not less. So they are much smaller in scale, probably really a startup, 10, 20 people team, maybe less than $1 million kind of revenue. So there's no really scale that can compare to what we do. Especially after makeup, we expanded into skincare, which I didn't have much time to address today. But as we grow into a new category, we are the only one in this market who has both makeup, skincare, fashion all together in one platform. And most importantly, have access to more than 600 beauty brands across the world in different geographies. So from the B2B, I would say we are so unique that you probably, if you have done the research in the market, all the beauty brands, they are very much using our solution.
On the B2C, it's very different. B2C is a much crowded market. There's a lot of beauty apps. There are a lot of selfie camera apps. But the market overall is still growing at a very rapid rate. So we might not be the biggest one in the B2C. We are maybe probably number 5 to number 10 in that market. But as my numbers show, it was still growing very fast because the overall market, the number of consumers willing to pay for subscriptions has increased so much in the recent years. So I think it's going to be still a long way to go. And we are gaining more market share. We are launching new mobile apps to gain that market share.
Great. And then I wanted to double back to the Amazon partnership. It seems like that's, I think, what you mentioned and what you illustrated in the presentation had to do with nails and nail beauty. I'm wondering, are there opportunities to expand a partnership with the likes of Amazon? It seems like that's a large opportunity. I was just wondering if you could flesh that out a little bit.
Our strategy has been always expanding one adjacent category, one after another, right? So beauty into nail, nail into hair coloring, for example, hairstyle. One of the forte is we are able to take these and make it into a plug-in where Amazon or Walmart or other retailers, they can take this technology and embed it into their experience very seamlessly.
So the opportunity there for the brands who are selling either direct to consumer on the website or they are selling through reseller distributor, our technology helps them to offer the same experience where the consumer is coming to their own dot-com or they are going to their retail partners. And once the consumer is there, there's a way to expand this technology to more categories. So beauty is certainly a very big category. But as a female shopper-centric company, I think there's a lot of opportunity to expand that.
Great. And then the other question had to do with your numbers. So given the full year 2023 numbers, the company appears to be in a strong financial position. How does the management team view the profitability of the business and its plan to utilize that strong cash position of $157 million that you mentioned? How do you plan to utilize that in the near term?
Right. So the business model generates cash flow, as I said. So even before the IPO, we were already really sitting on a good amount of cash and certainly raised a lot of cash from the Series B and C, mostly for strategic investors. And the IPO raised another over $100 million there. So we're sitting on a quite sizable number of capital waiting to deploy. And again, we're still a strong believer in this business. So I think there's a lot of opportunity to conquer. There are more categories that we are not servicing today. So I think this capital is to use on research, on hiring talents to create more AI models, more tracking models, not only the face or the hand, but the body parts, shoulders, neck, for example, for necklace, for shoes, for the feet.
So that's one organic investment, of course. The other part is strategic M&A opportunities. They are a potential market that we want to go after, that we can accelerate the growth and be able to consolidate and create synergy from taking on this with the technology or different group of clients and new markets. It's something always on our radar. The management team spends certainly a good amount of time looking at all those opportunities. So there's no urgency per se to go ahead and do the acquisition for the sake of doing that. But we always are certainly looking at opportunities in the market. And I think it's a good thing to have sitting on this capital because then we can move very fast.
Great. I think we have a couple more minutes. We can go over a couple more things. I was wondering about the fashion vertical. You illustrated that at the end with trying on different outfits and whatnot. Could you maybe be repeated, but can you talk about how far along that is and how close that is to being a vertical that you really are expanding on?
I think many companies over the last decade no longer have tried to solve that problem. And in my view, the reason that it is not taking off is because the traditional approach that other companies are taking is just fundamentally doesn't go into work. Because if a brand and retailer has to get the apparel into a mannequin and send it to a scanning facility for 3D photogrammetry scan, it's taking too much time and cost, and it's unscalable. So when the consumer is coming to an online retailer, let's say SHEIN or other, there are 3 million pieces of clothes.
It's not just 3 or 30. So how can you create a technology that is scalable, that is affordable for the retailer so consumers can actually try any pieces that she wants online? That is really where the potential is going to be fully unlocked. So our approach is very different. We approach it using generative AI. So instead of taking the photo and creating a 3D model of that that is not going to really work, how about if we can use the AI to learn about what is actually wearing, the fabrics, the colors, the pieces, and recreate herself in a whole new way using diffusion technology, for example? The technology today, it is able to do that for photo. So you can see yourself, picture yourself wearing that in a static photo. It still takes maybe 7 or 8 seconds.
So it still takes a bit of processing time. But CPU, GPU is coming more powered. So this is going to be quickly resolved very soon. And we are certainly working on generative video technology. So imagine yourself not only wearing that piece, but maybe it's me wearing that Gucci or that Armani and walking down in the city of Paris. If you can see that as a 10-second video clip while you're doing the online shopping, I think it can really change the way for us to picture ourselves and understand the style, the fitting issues.
Great. And then I wanted to squeeze in another one about the various verticals, be it makeup on your face or nails, or in this case, fashion or accessories. You illustrated the watch example earlier. Could you give investors a sense of which of those verticals is the most exciting as far as from a growth perspective? Which one long-term should investors be most excited about?
So we started in beauty, and we were very much focused in beauty, and we dominated it. So it's still growing. It's a business that we know really well. I think it's still a huge market to go and explore that. The brands are typically not very tech-savvy. So it takes time for them to understand how technology works, how to integrate that, and to offer that. So one pillar after another, we were expanding to skincare and more recently into watches. I think watches and jewelry, certainly the luxury business, is certainly also very big. We have great clients on that field.
It takes a little bit more time because, again, watches and jewelry, just because they are more high-end. So it takes time for them to do the quality checking on that. So I would say that it's really about the time of interception of this. Beauty, we are already serving that for 8-9 years. So it is more mature. It is scaling very stable. The other market is much more newer. So they are just starting to experience technology, as the beauty company did 7-8 years ago. I think it still takes them a couple of years to be fully mature and fully scalable. But overall, in the mid-long term, I think apparel, of course, that is a much, much larger market than beauty. But beauty is a good place to be. It is maybe a niche market to some, but to us, it is still a huge potential.
Great. Thank you, Louis. Thank you for presenting today. We really enjoyed having you. It was very interesting. I also want to thank all of the participants for being here today.
Thank you. Thank you, Pat.
Yep. Thank you.