Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to Perfect Corp.'s Earnings Conference Call. At this time, all participants are in a listen-only mode. 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, Mr. Rick Lee, VP of IR of the company. Please go ahead, sir.
Thank you. Hello, everyone, welcome to Perfect Corp.'s Earnings Call. With us today are Miss Alice Chang, our Founder, Chairwoman, and Chief Executive Officer. Mr. Louis Chen, our Executive Vice President and Chief Strategy Officer, and Miss Iris Chen, Vice President of Finance and Accounting. You can refer to our full year 2022 financial results on our IR website at ir.perfectcorp.com or in the Form 6-K we furnished to the SEC yesterday afternoon. You can also access a replay of this call on our IR website when it become available a few hours after its conclusion. For today's call, management will provide their prepared remarks first. We will be hosting 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 apply to this call.
This call may contain forward-looking statements regarding Perfect Corp.'s performance, anticipated plans, operation results, and objectives. 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. Perfect Corp. undertakes no obligation to update any forward-looking statements, except as required by law after the date of this call. Please note that all numbers stated in the following management prepared remarks are in U.S. dollar terms, and we will discuss non-IFRS measures today, which are more thoroughly compared and reconciled to the most comparable measures reported in our earnings release and Form 6-K furnished to the SEC. I will now turn the call to our first speaker today, Founder, Chairwoman, and Chief Executive Officer of Perfect Corp., Ms. Chang.
Thank you, Rick. Hello, everyone. Welcome to Perfect Corp.'s full year 2022 earnings conference call. Despite all the challenging events happening around the world in 2022, through discipline and agility, we achieved revenue growth, positive cash flow, and customer base expansion for the full year. During 2022, we grew our total revenue by 16% year-over-year to $47.3 million. Thanks to our brand customers, increased demand for our AI and AR cloud solutions and driven by the increase of our subscription revenue. We ended the year with over 500 brand customers on our platform, applied our technologies to over 550,000 digital SKUs for makeup, skincare, hair dye, eyewear, and jewelry products, and facilitated over 10 billion virtual product trial annually. Such an accomplishment is not a small feat considering the sea change in the market conditions throughout 2022.
At the beginning of 2022, when we embarked upon our journey to go IPO, interest rates were at its all-time low, consumer confidence was high, the labor market was high, and corporate buyers are rushing into to buy the latest technology to surcharge their digital initiatives. Once the Federal Reserve started raising interest rates in the middle of the year, we started noticing a change of mood in the marketplace. The risk of a potential global synchronized recession started to surface. Coupled with Russia, Ukraine war, economic uncertainty started to weigh on corporate buyers' nerves. During the third quarter, we experienced the beginning stage of a prolonged sales cycle. Such a prolonged sales cycle inevitably impacted our operation.
Even though we attained $113 million of those proceeds in the fourth quarter through the PIPE transaction concurrently with our de-SPAC closing, we did not allow such success to go to our heads. Instead, we enacted stringent expense controls and adopted a more prudent approach towards our costs during the fourth quarter. As a result, although we incurred net loss in 2022, we were able to achieve revenue growth of 16% year-over-year and a positive adjusted EBITDA on a full year basis in 2022. At the same time, we have made strategic adjustments to enlarge our sales pipeline counter the impact of a prolonged sales cycle and maintain our revenue growth in the face of changing market conditions. These adjustments have manifested in three aspects.
First, we are building stronger relationships with existing customers to help them facilitate their online and offline offers. To help accelerate brands adoption and deployment of our digital solutions, we are allocating more resources, such as the customer success managers to help our global brand partners activate and deploy more virtual try-on and AI skin diagnosis experience across omnichannel. To facilitate online user engagement and sales, we help beauty and jewelry brands engage consumers through our best-in-class AR by deploying our AR/AI platform as an integral part of their website and mobile app. Second, we are focusing more resources on reaching broader beauty categories.
For example, we are expanding into new segment of skincare coverage, such as creating variants, tailor-made skin diagnosis, AI solution for mass spa, for hair salon, aesthetic beauty clinic, and expanding our advanced AI skincare SaaS solution with newer skin concerns detection, live camera skincare mode diagnosis, and skin simulation effects for before/after video comparison. We are also targeting new growth beyond beauty industry. Our SaaS services now also cover fashion use cases. Our near-term eyewear, nail design, and accessories. We have already partnered with about 10 luxury brands around the world for our industry-leading AR virtual try-on for earrings, rings, necklaces, and watches. Third, to keep leading geography. In 2023, besides continuing our long-term investment in North American and the European markets, we aim to accelerate growth by investing more on emerging markets such as Southeast Asia and the Middle East.
Our business in Indonesia, as examples, has been growing organically very well. We aim to gain further local presence in this emerging market. Our long-term competitive advantage is secured by heavily investing into R&D. To innovate new beauty tech and fashion tech solutions via continuous development in AI and AR technology. Our years of experience in deploying AI deep learning models into our product features are now further elevated with the addition of new AI training techniques, such as AI Generative Content, AIGC. With such a technological enhancement, Perfect is well-positioned to continue in helping brands and customers on digital beauty transformation and to open new doors and address a wider market of opportunities, especially for our skin diagnosis online that can tap into new group of clients such as aesthetic clinic and med spa.
Our confidence in achieving our goal is grounded in our primary research and assessment of the long-term market trend. Despite the near-term softness in corporate demand, we have learned through close dialogues with our customers and prospects that the long-term trend for beauty remains intact. Moreover, the current economic challenge has helped solidified consumer brands' determination to transform their own business through technology. We see three trends that can spur the long-term growth for our revenue. The first mega-trend is the exponential growth and acceleration in digitalization of beauty and fashion industry across all available platforms. As beauty and fashion brands expand beyond their traditional core customer base of affluent middle-aged customers to tech-savvy millennials or Gen Z, it became very imperative for them to implement an omnichannel digitization strategy.
That means brands can no longer rely solely on corporate websites, SEO, social network, or the traditional brick-and-mortar experience to retain their customers or grow their sales. Rather, they need to fully engage consumers with personalized virtual try-on experience through a universal platform like ours. Because our platform has the capability to be deployed across all sales channels in the social network, we are able to provide brands with the peace of mind that same set of SKUs only needs to be configured once, and then they can be easily and flexibly deployed at scale across sales channel for consistent consumer experience.
Also, our solution can be implemented across multiple platforms, including brand-owned channels such as brand's official mobile apps, official websites, or in-store kiosk, as well as the leading third-party platforms, including Alphabet, Google and YouTube, Snap, and in China, like platform like Taobao, Tmall, and WeChat. Such a fully seamless integration across all platforms lead to not only a very high consumer loyalty, but also a compelling return on investment. The second trend is the increase of online services for all touch points. New consumer behavior has embraced digital, physical plus digital more than ever. The shoppers are using digital online services whether they are doing offline or online shopping journey. This trend helps increase the need for more online services for both offline retailers or online e-commerce, all in a positive way to spur growing demand for our AR/AI cloud solutions even in post-pandemic.
The third trend is the increasing diversification of AR/AI technology use cases, upholding our mission to transform the world with digital technology innovation. We started to invest resources into developing our proprietary AR/AI technology five years ago. Since the end of last year, we expanded our horizon further by encompassing AIGC into our development roadmap. By incorporating various new AI techniques, such as AI-powered generative diffusion model into our product development process, we can generate an abundance of realistic images for virtually anything in combination with our AR virtual try-on. This will open an even wider window of opportunities for consumers and for brands. In addition to those three trends, we are continuously uncovering new emerging opportunities as we broaden and deepen our technology application to expand our market reach.
We are committed to accelerating innovation in AI and AR SaaS solutions, and expanding our business beyond the beauty and fashion industry with our technological advantage and omni-channel reach. With our rapid advancement into med spa, clinic, and fashion tech, we plan to replicate our success from the beauty market and dominate the fashion vertical as well. We strive to be a full 360-degree beauty tech and fashion tech company for our customers and clients. To conclude, we remain committed to driving top-line growth while focusing on profitability in the face of an increasingly challenging environment. This combination of growth and targeting profitability differentiates us from many other growth-oriented software companies that have struggled with a clear path to profitability.
We have operated with a discipline, efficiency, and a focus with a view to generate profitable growth and will continue to do so. Regardless of market conditions, we firmly uphold our mission to transform the world with AI technology innovation, and we aim to achieve this by helping brand customers utilizing our leading technologies to improve their customer shopping experience in omnichannel. We have the team, the product, the technology, and the action plan to win the market. Tremendous opportunities unfolding in front of us. We are well-positioned to capitalize such AI/AR opportunities. As more and more brands look to improve self-service efficiency, reduce product waste, and drive growth along with the emerging digital trends, we remain steadfast in our effort to expand profitability, drive organic growth, and lead with efficiency over the long term.
With that, I will now turn the call over to Louis to go over the financial details. Thank you.
Thank you, Alice. Before I go into the details of our financial results, please note that all comparison are on a year-over-year basis, that the reporting period is the full year of 2022 versus the comparable periods of 2021. That on top of the IFRS measures, we'll be also discussing non-IFRS measures to provide greater clarity on the trend in our actual operations. For the full year of 2022, we grew our total revenue by 16% to $47.3 million from $40.8 million, mainly driven by growth within our AR/AI cloud solutions and subscription revenue.
Among our revenue, the AR/AI cloud solutions subscription revenue grew by 25.3% to $36.9 million or 78% of total revenues, mainly due to the continued strong demand of our online virtual try-on solutions from the brand customers and an increase in monthly active subscribers for our consumer app. Licensing revenue decreased by 4.8% to $8.4 million or 17.8% of total revenues, primarily caused by our brand customer lower demand for the in-store offline solution, while the brand customer shift investing into the online virtual try-on. Gross profit for the full year of 2022 was $40.2 million, while gross margin decreased slightly to 84.9% from 85.9%.
Total operating expenses increased to $111.2 million from $40.1 million, mainly due to the one-time professional service fee, and de-SPAC merger related costs incurred during our public listing process. To break down, sales and marketing expenses decreased by 2.9% to $24.5 million, as we reduced spending on paid advertising campaigns in connection with our mobile app subscription, while increased our focus on organic user acquisition and trial to paid conversion. As a percentage of total revenue, sales and marketing decreased to 51.9% from 62%. Demonstrating the improved efficiency in our sales and marketing activities. Research and development expenses increased by 6.5% to $10.5 million as a result of our strategic investing in product development and expanding our engineering talent pool.
General and administrative expenses increased to $76.2 million, mainly due to the professional service fee incurred during the course of our de-SPAC transaction and public listing. Excluding those transactions that they were one time in nature, recurring G&A expenses were $5 million in the full year of 2022, relatively flat compared to $4.9 million in 2021. All expense category showed a very good control played by the management team to increase our team productivity under such a challenging macroeconomic environment and to stay competitive in the market. Net loss in the full year of 2022 increased to $161.7 million from $156.9 million.
Excluding non-cash share-based compensation, foreign exchange impact and one-time non-recurring costs associated with our de-SPAC deal, adjusted net income was $4.1 million, comparatively to our adjusted net loss of $1.8 million a year ago. Adjusted EBITDA was positive $3.1 million for the full year of 2022 compared to a loss of $0.9 million one year ago, mainly due to the strong subscription revenue growth, more efficient expense control across all functions, especially in sales and marketing pay advertising expenses. Turning to our balance sheet. As of December 31, 2022, our company held $192.6 million in cash and cash equivalents and six months time deposits, compared to $80.5 million as of December 31st, 2021.
Our public listing via the de-SPAC transaction, which was completed on October 31, 2022, served as a significant source of capital. In total, our customer base has a net increase of 75 brand clients, achieving a total of 509 brand clients with over 550,000 SKUs across makeup, skincare, eyewear, and jewelry products as of December 31, 2022. The company has a positive net increase of 28 key customers in 2022, now servicing a total of 152 key customers as of December 31, 2022. While there are signs that the macro situation may improve in the quarters to come, the present situation is one of uncertainty. Despite these difficulties, we believe our health cash position, effective cost management strategies, and expansion into new categories and geographies leave us well positioned to take advantage of future growth opportunities.
That concludes my prepared remarks. Operator, let's open up for calls for questions.
We will now begin the question and answer session. If you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. That is star one if you wish to ask a question. Your first question comes to the line of Timothy Zhao of Goldman Sachs. Your line is open... Your next question comes to the line of Brian Schwartz of Oppenheimer Group.
Yeah. Hi! Thanks for taking my questions here this morning. Alice, can you share what you're hearing or at least an update from the brand and the key customers, how they're thinking about prioritizing virtual try-on solutions in their 2023 IT budgets? Does the prioritization for these type of solutions, does it vary between beauty and some of the newer categories that you've entered? Thanks.
For beauty, big beauty groups, from what we discussed with them, the virtual try on seems, is a must-have, very essential. Big groups also looking forward to more beauty innovations, beauty tech innovations, which we are working in the POC. If you're talking about beyond beauty, then we are getting to besides the makeup and skin diagnostic, personalized recommendation is the next line for beauty brands and for skincare brands and also for those, as I said, the new markets, aesthetic clinics or med spa. It also has this strong demand, but it's a different market than the brand. For jewelry, you know, we worked very hard for the past one year, and finally we successfully win 10 luxury brands with all the POC completed.
We are looking forward to their digital enablement for the virtual try-on for jewelry. This is very new. You know, those luxury brands, they are, you know, still conservative about to see our technology for the past year. Since we passed all the POC, they tested us, so I do looking forward to see a full deployment for those luxury brands this year. That's how we discuss with the beauty and fashion groups.
Thank you.
Thank you.
Your next question comes the line of Clarke Jeffries of Piper Sandler. Your line is open.
Thank you for taking the question. First question is, you know, profitability came up multiple times in the prepared remarks. I was just wondering if I could ask maybe, looking into 2023-
... How should we think about EBITDA margins? I mean, is it fair to say that profitability on an EBITDA basis, would be something to expect for the full year of 2023 or how should we think about that?
Hi, Jeffries. This is Louis. As we presented the remark, I think, you know, we certainly focused above on the growth of the company, but also to look at profitability. I think this is very important for the end of 2022, that we're showing a positive EBITDA margin, and certainly that's our target for 2023. I say, you know, to at the same time investing in this new opportunity, you know, to address that new segment. Certainly, I think there's a synergy based on, you know, what we have already built in the beauty space continues to contribute into some margin there while we continue to invest in growing new categories.
Perfect. Then just maybe a follow-up. You know, you mentioned over $190 million in cash, pretty small use of cash flow here on a yearly basis. What kind of opportunities are you contemplating to maybe accelerate the expansion beyond beauty or any other potential uses of that cash, if sales cycles are slowing, you know, what kind of opportunities are there to kind of accelerate the business by using that cash?
I think one of the key strategy to try to fight the prolonged sales cycle was to widen the pipeline, right? Addressing, we know that enterprise buyer, they're going to take more time to go through evaluations and go through, you know, their process. The one thing that we're doing is to expand our funnel by addressing a wider market, both in geography, but also in product categories. Investing organically, I think Alice mentioned about investment, heavily investment in AI development. I think that will create opportunity, and that's where I think organic growth comes, both on the R&D side, but also to expand, you know, our business development function, our customer success function to grow the business overall. Of course, we have always been paying attention to, you know, synergetic M&A or strategic investment.
Again, we don't want to do that for the sake of doing it. We will look into opportunities that, you know, we can combine into a global distribution and bring the value. We remain very flexible in our M&A effort going forward, but also looking for opportunities. I think at where we can control and drive, I think it's going to see and grasp the demand, that we see the demand for virtual try-on or beauty tech and fashion tech in general growing even stronger because the mega trend in digital transformation.
It makes a lot of sense to have a stronger business kind of exiting the cycle with a lot more capabilities in customer success and geographic scope. Thank you for taking the question.
As a reminder, if you wish to ask a question, please press star one and wait for your name to be announced. Your next question comes to the line of Timothy Zhao of Goldman Sachs. Your line is open.
Hi, management. Thank you for taking my question. Sorry about the technical issue just occurred. I have two questions. One is about the revenue growth in 2022 by different regions. Just wondering if you could share any color if we see or compare North America versus Europe versus emerging markets, like you mentioned in Southeast Asia or Middle East? What kind of growth rate that we were seeing in last year, and what is your outlook for the revenue growth in 2023 and any color on the growth rate across different regions? That would be my first question. Second one, I think you mentioned, you have experienced lower sales cycle in this macro environment. Just wondering, if you can provide any color on the customer retention rate or the dollar retention rate among key customers, in 2022?
Thank you.
Thank you, Timothy. In 2022, U.S. region remain our number one region, and internal USD basis is also the fastest growing region in last year. Year- over- year, it contributed a little bit over 20% of the growth coming from U.S.A. You know, our number two, number three country remain the same, being Japan and France. Both of them suffer from a foreign exchange impact because of JPY and EUR. Their growth are a little bit less. In USD basis, France growth was 7% and Japan growth was 4.3%. Again, you know, we look at USD appreciation against JPY for the whole year was 15.5%. Against EUR was 5.8%, against, you know, TWD was 11%.
These all have impacted in general, I think we look at about 2.6% in our total revenue impact on the USD basis. I know hopefully this year that, you know, the foreign exchange impact goes away, and we will return to see that. I think the moral of the story is, U.S. remain to be very strong demand across all categories and with additional, you know, strong currency, certainly that shows. For 2023, I think, you know, we were very cautious. I mean, the environment is a lot of uncertainty as we, we said in our remarks. The company isn't putting a clear forecast, you know, to the investor at this point.
I think we want to remain working closely with our customers, you know, try to get all those deals in the pipeline closed. I think fundamentally, the demand is very clear. The customer, you know, renewal rate has been, you know, pretty much the same as we have seen it. You know, the service becoming pretty much the essential part of the e-commerce journey. From the service renewal adoption perspective, we haven't seen much difference in terms of retention and renewal. For the other metrics, we are still preparing for that. Please pay attention to our Form 20-F to be filed, you know, later. That will have a full year on the year basis, metric.
Thank you. Thank you, Louis.
You're welcome.
As a reminder, if you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. That is star one if you wish to ask a question. As there are no further questions at this time, I'd like to hand the conference back to management for closing remarks.
All right, thank you again for joining our call today. If you have any further questions, please feel free to contact us or request through our website. We look forward to speaking with anyone in our next call. Have a good day.
That does conclude our conference for today. Thank Thank you for participating. You may now all disconnect.