Perfect Corporation
03/13/2026 | Press release | Distributed by Public on 03/13/2026 04:27
Annual Report for Fiscal Year Ending December 31, 2025 (Form 20-F)
Operating and Financial Review and Prospects
The following discussion and analysis provides information which our management believes is relevant to an assessment and understanding of our results of operations and financial condition. This discussion and analysis should be read together with the audited historical consolidated financial statements and related notes that are included elsewhere in this annual report. In addition to historical financial information, this discussion and analysis contains forward-looking statements based upon current expectations that involve risks, uncertainties and assumptions. For more information about forward-looking statements, see "Forward-Looking Statements". Actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Item 3. Key Information - D. Risk Factors" and elsewhere in this annual report.
A.Operating Results
Company Overview
Founded in 2015, we are a leading AI technology company focused on delivering self-developed AI- and AR- powered solutions to make your virtual world beautiful. Operating with a hybrid model that spans both B2C and B2B segments, we leverage our cutting-edge expertise to transform how users and brands interact with digital experiences.
Our B2C offerings revolve around advanced AI-driven technologies, delivering a seamless user experience for photo and video editing and creation. We offer seven mobile apps under the "YouCam" suite, YouCam Makeup, YouCam Perfect, YouCam AI Pro, YouCam Video, YouCam Enhance, YouCam Nails and YouCam AI Chat, along with one web-based editing tool, YouCam Online Editor. Harnessing AI- and AR- technologies, our products enable real-time virtual try-ons, beauty camera or portrait retouching, photo or video enhancement, editing and creation, as well as state-of-the-art Generative AI capabilities such as image-to-image, image-to-video, text-to-video, text-to-photo, avatar creation, and intelligent editing. These innovative features empower users to transform selfies images and text prompts into striking personal contents. Our active subscriber base demonstrated strong growth momentum, increasing from approximately 604,000 as of December 31, 2022 to 879,000 as of December 31, 2023, and surpassing one million as of December 31, 2024. While the number of active subscribers declined modestly year over year to 908,239 as of December 31, 2025, this reflected a deliberate strategic shift toward higher-value generative AI features and premium creative tools, which drove a meaningful increase in average selling price and fueled our sustained revenue growth. Our B2C segment also functions as a dynamic platform for new AI- and AR- functionalities, enabling us to fine-tune cutting-edge solutions that can later be integrated into our B2B offerings.
Capitalizing on our success in B2C business, we deliver hyper-realistic AI-driven virtual try-on solutions for enterprise clients, transforming both online and in-store shopping experiences from product discovery to personalized recommendations. Our subscription-based modules empower beauty, skincare clinics, med spas, jewelers, watchmakers, and fashion retailers to integrate virtual try-on technology across their mobile apps, websites, in-store kiosks, and third-party e-commerce platforms. Our current offerings cover makeup, nail art, hairstyling, eyewear, watch, jewelry try-ons, advanced skin diagnostics and simulation, and foundation shade matching, all powered by a robust AI recommendation engine for ultra-personalized results. As of December 31, 2025, our cumulative customer base included 859 brand clients, offering over 982 thousand digital SKUs for makeup, haircare, skincare, shoes, bags, eyewear, watches and jewelry products, compared to 732 brand clients and over 822 thousand digital SKUs as of December 31, 2024.
In January 2025, we have completed our first strategic acquisition of Wannaby, a pioneer in AR and computer vision technologies, specializing in virtual try-on solutions for the fashion industry. The acquisition enables Perfect to
expand its offering to include real-time virtual try-on for products such as shoes and bags and high quality 3D viewer for online shopping. This strategic transaction further solidifies Perfect Corp's position as a leading beauty and fashion AI company and expands the Company's capabilities, product offerings and customer reach.
We have achieved significant scale and steady growth since our inception in 2015. We have achieved a double-digit revenue growth of 14.9% in total revenue, reaching $69.2 million in 2025, up from $60.2 million in 2024. This increase is primarily driven by the robust momentum in the revenue growth of YouCam mobile app and web service subscriptions, increasing consumer interest in Generative AI technologies and AI editing features for photos and videos, and the stable demand for the Company's online virtual product try-on solutions from brand customers.
We recorded a net income of $5.0 million in 2024 and $4.6 million in 2025. Our sustained reduction of operating loss from 2023 through 2025 demonstrated the steady growth of our business and the improvement of our overall financial and business situation. In addition, our total operating expenses as a percentage of our revenue decreased from 83.2% in 2024 to 79.9% in 2025, highlighting the continued improvement of our operational efficiency, as the scale of our business grows.
Completion of Business Combination
On October 28, 2022, we completed the Business Combination. On October 31, 2022, our Class A Ordinary Shares and Warrants commenced trading on the NYSE under the symbols "PERF" and "PERF WS", respectively.
Key Factors Affecting Our Results of Operations
Our results of operations are affected by the following factors:
Our ability to effectively monetize our premium features and expand our B2C business
Our results of operations are significantly driven by our ability to sustain a steady growth in our B2C business, which in turn, depends on our success in expanding and retaining subscriptions to the premium features offered through our YouCam suite of mobile applications and web-based services.
In managing our B2C business, we continuously monitor key performance indicators, such as the number of active subscribers. We also benchmark product ratings and functionalities against primary competitors to identify and prioritize features that serve as core drivers in converting free users to paying subscribers. As of December 31, 2025, our mobile apps had surpassed 1.1 billion cumulative downloads worldwide, underscoring our extensive market footprint and broad subscriber base. While the number of our active subscribers declined modestly from 1,000,612 as of December 31, 2024 to 908,239 as of December 31, 2025, this was as a result of our deliberate strategic shift toward cultivating a more concentrated, higher-quality subscriber base through the introduction of higher-value generative AI features and premium creative tools, which drove a meaningful increase in average selling price and supported sustained revenue growth. Revenue from mobile app and web service subscriptions increased to $44.3 million in 2025, compared to $36.6 million in 2024, representing 64.0% and 60.8% of total revenue in 2025 and 2024, respectively. We attribute this growth primarily to continued revenue generation from our YouCam suite of applications and web-based editing platforms, highlighting our effectiveness in driving the conversion of free users into paying subscribers and the monetization of our core digital offerings.
As consumers increasingly rely on mobile technology for digital content creation and personal expression, we have observed growing demand for advanced, feature-rich mobile apps and web services. In response to this trend, we have introduced and remain committed to continuously introducing a range of innovative mobile apps and web services embedded with newly developed and enhanced premium features powered by cutting-edge Generative AI technologies. These innovative offerings elevate the user experience by supporting a broad spectrum of functionality, including skin and body retouching, hairstyle modifications, makeup simulations, and AI-assisted content creation, as well as improving the efficiency of content editing. The robust functionality fuels increased consumer engagement and sustained demand for paid offerings, seamlessly embedded into everyday use, ranging from casual touch-ups to professional-level production workflows. The increased consumer engagement supports our monetization efforts, driving conversion of free users to paying subscribers, leading to an increase in overall customer lifetime value and resulting in strong recurring revenue growth.
We believe the continued integration of advanced Generative AI capabilities will unlock new possibilities in visual content creation. In line with this vision, we see ongoing opportunities to expand our footprint across mobile and
web-based platforms by delivering updated apps and web services powered by next-generation Generative AI features. To support this strategy, we remain committed to advancing our AI- and AR- technologies with the goal of launching market-differentiating products and premium offerings powered that align with evolving consumer preferences.
Our ability to continuously introduce market competitive offerings that drive user interest
Our results of operations rely heavily on our ability to consistently develop and periodically launch new premium features and product offerings that resonate with our app and web service users and adapt to evolving market dynamics. Our continued investment in research and development underpins our ability to drive innovation and maintain product relevance. Expanding our total addressable market by identifying and engaging new target user groups also plays a significant role in maintaining our steady growth in B2C business and enhancing our market competitiveness. Technological shifts, changes in platform policies, and intensifying market competition may impact the adoption of our new product offerings. By proactively monitoring these factors and aligning our development strategies with user needs, we seek to preserve the quality and appeal of our products while effectively navigating an increasingly dynamic industry environment.
Adoption of AI- and AR-technologies and expansion into new verticals
Our operating performance is closely linked to the overall adoption of AI and AR technologies in the beauty and fashion industries, which depends on brand demand and the pace of digital transformation. Although industry-wide digitization has accelerated in recent years, penetration of AI- and AR-powered solutions remains relatively limited, presenting a meaningful growth opportunity. Leveraging our deep domain expertise, proprietary technology, and established customer network, we aim not only to drive broader adoption within beauty and fashion, but also to expand into adjacent and complementary verticals. We have already extended our presence into luxury categories such as jewelry, eyewear, watches, and accessories, and are exploring new segments including hair salons, med-spa, skin clinics, and aesthetic non-surgical treatments. Our ability to integrate industry-leading facial and hand AR capabilities across these categories-such as enabling simultaneous virtual jewelry try-on and virtual makeup-positions us to deliver differentiated, cross-category solutions that are difficult to replicate.
Our ability to create sustainable growth of our B2B business and retain our customer base
Revenue from brand customers remained stable at $22.2 million in 2025, compared to $22.4 million in 2024, representing 32.1% and 37.2% of total revenue in 2025 and 2024, respectively. Our ability to achieve sustained B2B growth depends on retaining existing brand customers, increasing recurring revenue per brand, and acquiring new customers across geographies and verticals. We provide a comprehensive suite of AI- and AR-powered solutions deployable across brand-owned channels and major third-party platforms, enabling scalable and multi-channel monetization. Revenue concentration among Key Customers remains a core performance indicator, although the number of Key Customers declined from 151 in 2024 to 135 in 2025 due to customer downgrades and macroeconomic-driven churn in the beauty and luxury sectors. Despite this, total brand customer revenue remained relatively stable year-over-year. Going forward, we intend to drive sustainable growth through cross-selling across sister brands and regions, upselling additional SKUs and modules, and expanding solution adoption within large beauty and luxury groups, supported by strong customer engagement and the scalability of our platform.
In managing our B2B business, our management vigilantly monitors the revenue contribution from our Key Customers, as these metric provide reliable insights into the growth of our B2B business, for the reasons that: (i) revenue from Key Customers accounted for approximately 32.5% and 27.6% of our total revenue in 2024 and 2025, respectively; and (ii) revenue from Key Customers represented 87.2% and 86.2% of our total revenue from our total B2B business in 2024 and 2025, respectively. In addition to the Key Customers, which are major brand customers, we also generate revenue from other long-tail brand customers which is the non-Key Customer brands. The total non-Key Customer brands revenue represented 12.8% and 13.8% of our total brand business for the years ended December 31, 2024 and 2025, respectively.
Our ability to manage and improve operating efficiency
Our results of operations partially depend on our ability to effectively manage our costs and expenses. We recognized operating expenses of $55.3 million in 2025, up from $50.1 million in 2024. The increase was primarily driven by higher research and development spending, as well as elevated sales and marketing expenses associated with the growth in subscriptions to our mobile applications and web-based services, which was partially offset by a reduction in general and administrative expenses.
As we scale our business and advance our technology, we expect our customer acquisition efforts to benefit from our strong brand recognition and word-of-mouth referrals. Our continued investment in technology is also expected to drive operational efficiency, enabling the same number of employees to deliver higher productivity over time. In addition, we believe that we will continue to benefit from economies of scale as we continue to actively manage the level of our general and administrative expenses.
Our people and technology
We are committed to investing in our people and technology, as these are essential for delivering innovative solutions and services that meet the evolving needs of users and brands, expanding our active subscriber and brand customer base, and maintaining our market leadership in the consumer beauty and AI mobile apps as well as in the beauty and fashion AI- and AR- industry.
We have invested significant resources in our people, recruiting talents from renowned universities and academic institutions across various regions. We have developed a comprehensive talent development program that includes diverse training programs featuring lectures, senior experience sharing, study groups, and participation in conferences and external forums. We also foster a working environment that motivates employees to raise questions and adopts a problem-solving mindset. Our ultimate goal is to retain these talents in the long term and turn them into valuable asset for our business success.
We have also invested a substantial portion of our resources in technology development, recognizing it as the cornerstone of our business success. By collaborating with prestigious universities and research labs, we bring emerging talents and cutting-edge technologies from academic institutions to our Company, bridging the gap between academic research and commercial application. This collaboration offers us unique opportunities to access innovative ideas and the latest technology developments at an early stage, allowing us for proactive planning. Additionally, we are committed to continually improving and upgrading our technologies to ensure the highest quality to our users and brand customers. We believe these efforts are crucial to our business, as the success of our AI- and AR-powered solutions relies on technology that provides exceptional accuracy, scalability, and performance.
Basis of Presentation
Our consolidated financial statements have been prepared in accordance with IFRS. All intercompany accounts and transactions have been eliminated on consolidation. For the purposes of presenting consolidated financial statements, our assets and liabilities and our foreign operations (including subsidiaries in other countries that use currencies which are different from our functional currency) are translated into U.S. dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in equity.
Components of Results of Operations
Revenue
Our revenue sources include two major components: AI- and AR- cloud solutions and subscription and licensing. We would anticipate the revenue contribution from licensing becoming increasingly insignificant, as we progressively allocate fewer resources to this area and instead focus on strengthening our market leadership in the consumer beauty and AI mobile apps as well as in the beauty and fashion AI- and AR- industry.
(1)AI- and AR- cloud solutions and subscription
For AI- and AR- cloud solutions and subscription, we provide online cloud-based solutions to our customers, primarily including premium feature subscriptions for our app and web service users and virtual try-on solutions for our brand customers.
In terms of the premium features on our mobile apps and web services to which users subscribe through Apple App Store and Google Play and our website, we currently offer monthly and annual subscription plans, with subscription price varying by countries and regions. We recognize revenue from such services based on the fulfilled contract obligations for each month.
Our typical contract terms with brand customers range from three months to multiple years, with one-year term being the most common. Our contract consideration is fixed and determined by the following factors: (i) the functionality of the modules (e.g., makeup, skincare, shade finder, jewelry); (ii) the duration of the contract period; (iii) the geographical coverage, such as the number of countries or regions for module deployment or the number of website domains for integration into our modules; (iv) the maximum number of SKUs that a brand can utilize at the same time; and (v) any additional manpower hours required for customization, if any.
Furthermore, depending on the nature of the products and services provided, the charges of brand customers can be further divided to one-time fees, recurring fees, or a combination of both. One-time fees are made up of service setup fee, customization fee, and console base fee, which allow brands to create a brand console account on our platform for uploading and managing SKUs. Recurring fees are related to granting brand customers access to the modules throughout the contract period. These fees are recurring as the service is time-limited and scope-limited, requiring renewal upon the expiration of the service term.
(2)Licensing
We collect licensing fees from (i) licensing self-developed technologies, which include offline SDK and AI- and AR- offline solutions to brand customers, and (ii) licensing customized mobile apps designed and created based on customers' specifications that do not require continuous support from our backend cloud computing infrastructure. In this scenario, the mobile apps are operated by customers on their own infrastructure, with no additional supporting services required from us after delivery to customers.
Furthermore, depending on the type of the licensing services provided, brand customers may elect to renew licensing agreements with us, as the right to use our intellectual property is only granted to them for a specific period. We collect recurring revenue from the renewal of licensing agreements by customers. We generate recurring revenue from renewals of these licensing agreements by customers.
In addition of above two revenue sources, we also generate revenue from the sale of virtual points, a pay-as-you-go consumption model that allows users to purchase credits which are stored in their accounts and redeemed for access to selected generative AI features within our mobile apps and web services. Unlike subscription plans that provide time-based access to premium features, virtual points are usage-based and are deducted upon each utilization of designated AI functionalities, such as advanced image or video generation services. Virtual points are typically purchased through in-app payment channels or our website in predefined packages, with pricing varying by region and platform. Revenue is recognized upon the consumption of the virtual points, as the performance obligation is satisfied when the corresponding AI service is rendered to the user. Unused virtual points are recorded as contract liabilities until redeemed or expired in accordance with the applicable terms and conditions.
For further details on our revenue recognition, see Note 4 "Summary of Significant Accounting Policies" to our consolidated financial statements included in this annual report.
Cost of Sales and Services
Our cost of sales and services primarily consists of kiosk hardware cost, certain research and development personnel-related expenses allocated to cost of sales and services which are directly related to revenue and services activities, warranty provision as well as third-party payment processing fees for distribution partners such as Google Play and Apple App Store. We expect that our cost of sales and services will increase in absolute dollars in tandem with the growth of our businesses in the foreseeable future, as we continue to invest and broaden our product offerings and scale up our business operations.
Sales and Marketing Expenses
Our sales and marketing expenses consist of personnel-related expenses for salaries, employee benefits, and stock-based compensation for employees engaged in sales and marketing, advertising and promotional fees, cloud-hosting fees as well as allocated facilities and information technology costs. We plan to continue to invest in sales and marketing to grow our user and brand customer base and increase our brand awareness. As such, we expect sales and marketing expenses to increase in absolute dollars. In the near term, we anticipate fluctuations in sales and marketing expenses as a percentage of revenue due to our investments in accelerating market adoption of our AI- and AR-technologies.
General and Administrative Expenses
Our general and administrative expenses primarily consist of personnel-related expenses for employees involved in general corporate operations, including administration, legal, human resources, accounting and finance. Personnel-related expenses primarily include salaries, benefits, and share-based compensation. In addition, general and administrative expenses also include allocated facilities costs, such as rent, depreciation expenses, professional service fees and other general corporate expenses.
Furthermore, we have incurred and expect to continue incurring expenses as a result of becoming a public company since October 2022, including costs for complying with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations, and increased expenses for insurance, investor relations, and professional services. In 2025, our general and administrative expenses have decreased primarily due to reduction in corporate insurance premium and reduced external professional service fee.
Research and Development Expenses
Our research and development expenses primarily consist of salaries and benefits, including share-based compensation, for our technology and product development personnel, and depreciation and other associated corporate costs.
We expect our research and development expenses to increase in the future as we expand our team of technology and product development professionals and continue to invest in technology infrastructure and innovative AI- and AR-solutions to enhance and broaden our product offerings.
Interest Income
Our interest income primarily consists of interests earned on bank deposits and financial assets at amortized costs.
Other Income
Our other income primarily consists of subsidies from local government and VAT adjustments. We do not expect material subsidies from local government in the foreseeable future.
Other Gains and Losses
Our other gains and losses primarily consist of losses on financial liabilities at fair value through profit or loss ("FVTPL") and foreign exchange gains and losses. The FVTPL is primarily associated with our outstanding Warrants.
Finance Costs
Our finance costs primarily consist of interest expenses on our lease liabilities.
Income Tax Expense
Our income tax expense primarily consists of current income tax expenses. As a global company, we are subject to income taxes in the jurisdictions where we do business. These foreign jurisdictions have different statutory tax rates. Accordingly, our effective tax rate will vary depending on the relative proportion of income derived in each jurisdiction, use of tax credits, changes in the valuation of our deferred tax assets and liabilities as well as changes in tax laws. Currently, the applicable tax rate in our headquarters in Taiwan is 20% while the tax rate for unappropriated earnings is 5%.
Results of Operations
Our results of operations for the years ended December 31, 2023, 2024 and 2025 are presented below:
| Years ended December 31, | ||||||||||||||||||||||||||||||||
| ($ in thousands, unless otherwise stated) | 2023 | 2024 | 2025 |
2024 % Change |
2025 % Change |
|||||||||||||||||||||||||||
| Revenue | $ | 53,505 | $ | 60,202 | $ | 69,154 | 12.5 | % | 14.9 | % | ||||||||||||||||||||||
| Cost of sales and services | (10,400) | (13,258) | (15,630) | 27.5 | % | 17.9 | % | |||||||||||||||||||||||||
| Gross profit | 43,105 | 46,944 | 53,524 | 8.9 | % | 14.0 | % | |||||||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||||||||||
| Sales and marketing expenses | (25,725) | (28,213) | (30,811) | 9.7 | % | 9.2 | % | |||||||||||||||||||||||||
| General and administrative expenses | (11,582) | (8,501) | (6,996) | (26.6) | % | (17.7) | % | |||||||||||||||||||||||||
| Research and development expenses | (11,458) | (12,000) | (15,405) | 4.7 | % | 28.4 | % | |||||||||||||||||||||||||
| Expected credit losses | - | (1,373) | (75) | (100.0) | % | (94.5) | % | |||||||||||||||||||||||||
| Impairment loss on goodwill | - | - | (1,965) | - | % | (100.0) | % | |||||||||||||||||||||||||
| Total operating expenses | (48,765) | (50,087) | (55,252) | 2.7 | % | 10.3 | % | |||||||||||||||||||||||||
| Operating loss | (5,660) | (3,143) | (1,728) | (44.5) | % | (45.0) | % | |||||||||||||||||||||||||
| Non-operating income and expenses | ||||||||||||||||||||||||||||||||
| Interest income | 9,498 | 7,708 | 6,134 | (18.8) | % | (20.4) | % | |||||||||||||||||||||||||
| Other income | 33 | 55 | 28 | 66.7 | % | (49.1) | % | |||||||||||||||||||||||||
| Other gains and losses | 1,675 | (316) | 1,319 | (118.9) | % | 517.4 | % | |||||||||||||||||||||||||
| Finance costs | (15) | (18) | (16) | 20.0 | % | (11.1) | % | |||||||||||||||||||||||||
| Total non-operating income and expenses | 11,191 | 7,429 | 7,465 | (33.6) | % | 0.5 | % | |||||||||||||||||||||||||
| Income before income tax | 5,531 | 4,286 | 5,737 | (22.5) | % | 33.9 | % | |||||||||||||||||||||||||
| Income tax benefit (expense) | (115) | 735 | (1,094) | (739.1) | % | 248.8 | % | |||||||||||||||||||||||||
| Net income | $ | 5,416 | $ | 5,021 | $ | 4,643 | (7.3) | % | (7.5) | % | ||||||||||||||||||||||
Comparison of December 31, 2024 to December 31, 2025
Revenue
Total revenue increased by $9.0 million, or 14.9%, from $60.2 million for the year ended December 31, 2024 to $69.2 million for the year ended December 31, 2025. The steady increase was primarily driven by a 13.5% rise in revenue from our AI and AR cloud solutions and subscriptions, which grew from $53.8 million for the year ended December 31, 2024, to $61.1 million for the same period in 2025. This growth was fueled by continued revenue growth in YouCam mobile app and web services subscriptions, increasing consumer interest in Generative AI technologies and AI-powered photo and video editing features, and sustained demand from brand customers for the Company's online virtual product try-on solutions. We expect the licensing revenue will become increasingly insignificant, as we continue to focus on strengthening our market leadership in the consumer beauty and AI mobile apps as well as in the beauty and fashion AI- and AR- industry.
With respect to geographical contribution, revenue from the Americas has increased by 7.7% from $31.8 million for the year ended December 31, 2024 to $34.3 million for the same period in 2025, revenue from Europe has increased by 22.3% from $16.6 million for the year ended December 31, 2024 to $20.3 million for the same period in 2025, and revenue from Asia-Pacific has increased by 18.9% from $10.1 million for the year ended December 31, 2024 to $12.0 million for the same period in 2025. Revenue outside of these three major regions has grown by 52.5% from $1.7 million for the year ended December 31, 2024 to $2.6 million for the same period in 2025.
Cost of Sales and Services
Cost of sales and services increased by $2.4 million, or 17.9%, from $13.3 million for the year ended December 31, 2024, to $15.6 million for the same period in 2025. The increase was primarily attributable to higher third-party
payment processing fees paid to digital distribution partners-such as the Apple App Store and Google Play-driven by the continued growth in mobile app and web service subscription revenue. In addition, rising AI server computing costs, spurred by the increased demand for premium features powered by Generative AI technologies, also contributed to the overall increase.
Gross Profit
Gross profit increased by $6.6 million, or 14.0%, from $46.9 million for the year ended December 31, 2024 to $53.5 million for the same period in 2025. Despite the continuous increase in gross profit, our gross margin slightly decreased by 0.6% from 78.0% for the year ended December 31, 2024 to 77.4% for the year ended December 31, 2025. The slight decrease in gross margin was primarily due to the increase in third-party payment processing fees paid to digital distribution partners, such as Google and Apple, driven by the steady growth in our YouCam mobile app subscription revenue. In addition, the increases in AI server computing cost, resulting from the growing demand for premium features powered by generative AI services, also contributed to the decrease in gross margin.
Total Operating Expenses
Total operating expenses increased by $5.2 million, or 10.3%, from $50.1 million for the year ended December 31, 2024 to $55.3 million for the same period in 2025. The increase was primarily associated with higher research and development expenses and sales and marketing expenses, which were partially offset by a decline in general and administrative expenses. In addition, we recognized a non-cash impairment loss on goodwill of $2.0 million arising from the acquisition of Wannaby into our operating expense in 2025.
Sales and Marketing Expenses
Sales and marketing expenses increased by $2.6 million, or 9.2%, from $28.2 million for the year ended December 31, 2024 to $30.8 million for the same period in 2025. The increase was primarily due to the increase in marketing events and advertising costs related to our mobile apps and web service subscriptions.
General and Administrative Expenses
General and administrative expenses decreased by $1.5 million, or 17.7%, from $8.5 million for the year ended December 31, 2024 to $7.0 million for the same period in 2025. The decrease was primarily due to reduced corporate insurance premium and external professional service fees.
Research and Development Expenses
Research and development expenses increased by $3.4 million, or 28.4%, from $12.0 million for the year ended December 31, 2024 to $15.4 million for the same period in 2025. The increase was primarily driven by higher compensation expenses due to an increase in research and development headcount following the acquisition of Wannaby.
Impairment Loss on Goodwill
An impairment loss of US$2.0 million was recognized for the year ended December 31, 2025 in relation to the Wannaby cash-generating unit. No impairment was recorded for the same period in 2024. Following the acquisition, the unit's operating performance was affected by a challenging macroeconomic environment, including more cautious customer spending and extended decision-making cycles, resulting in revenue growth below initial expectations.
Total Non-operating income and expenses
Total non-operating income and expenses increased by $0.04 million, or 0.5%, from $7.4 million for the year ended December 31, 2024 to $7.5 million for the same period in 2025. The increase was primarily attributable to a decrease in the fair value of warrant liabilities, which resulted in gains recognized on financial liabilities, which was partially offset by a decline in interest income.
Interest Income
Interest income decreased by $1.6 million, or 20.4%, from $7.7 million for the year ended December 31, 2024 to $6.1 million for the same period in 2025. The decrease was primarily driven by a decline in interest rates.
Other Gains and Losses
We record other gains of $1.3 million for the year ended December 31, 2025 and other losses of $0.3 million for the same period in 2024. The change was primarily attributable to a decrease in the fair value of warrant liabilities, which resulted in gains recognized on financial liabilities.
Net Income
As a result of the foregoing, our net income for the year ended December 31, 2025 was $4.6 million, compared to $5.0 million for the same period in 2024. The 2025 net income reflects the recognition of a $2.0 million non-cash impairment loss on goodwill.
Comparison of Year Ended December 31, 2023 to Year Ended December 31, 2024
For the discussion covering items for the fiscal year ended December 31, 2024 and a comparison between the fiscal year ended December 31, 2024 and 2023, please refer to "Item 5. - Operating and Financial Review and Prospects - A. Operating Results - Results of Operations" of our annual report on Form 20-F for the fiscal year ended December 31, 2024 filed with SEC on March 28, 2025.
B.Liquidity and Capital Resources
Since our inception, we have financed our operations primarily through equity contributions from our shareholders and revenue generated from our business operations. As of December 31, 2025, we had cash and cash equivalents of $126.0 million, which primarily consisted of checking accounts, demand deposits and time deposits. Our cash and cash equivalents are primarily denominated in U.S. dollars, and we do not currently enter into any hedging arrangements. In addition, we have 6-month time deposits of $36.3 million classified as current financial assets at amortized cost according to IFRS as of December 31, 2025. Furthermore, we had U.S. Treasuries of $10.2 million, classified as non-current financial assets at amortized cost under IFRS and we do not have any loan and bank borrowings as of the same date. Our net income decreased from $5.0 million for the year ended December 31, 2024 to $4.6 million for the year ended December 31, 2025.
We believe that our cash and cash equivalents will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months from the date of this annual report and sufficient to fund our operations. As of the date of this annual report, there has been no material change to our liquidity position since December 31, 2025. To the extent that our current resources are insufficient to satisfy our cash requirements in the future, we may need to seek additional equity or debt financing. If the financing is not available, or if the terms of financing are less desirable than we expect, we may be forced to decrease our level of investment in product development or we may delay, scale back or abandon all or part of our growth strategy, which could have an adverse impact on our business and financial prospects.
Our cash requirements as of December 31, 2025 and any subsequent interim period primarily include our capital expenditure, lease obligations, contractual obligations and other commitments. Our capital expenditures are primarily related to purchase of certain servers in our ordinary course of business and ERP system upgrade, which are immaterial from a dollar amount perspective. From January 1, 2025 through December 31, 2025, we incurred capital expenditure of less than $0.5 million. Our lease obligations consist of the commitments under the rental agreements for our office premises. Our contractual obligations primarily consist of minimum commitments for marketing activities. From a dollar amount perspective, both lease obligations and contractual obligations are immaterial. In addition, we will consume cash for additional expenses as a public company for, among other things, directors' and officers' liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit and legal fees. We expect these items to be the primary part of our short-term cash requirements, and we currently do not expect any material capital expenditures in the foreseeable future. Furthermore, as part of our growth strategy, we plan to increase investment in research and development, upgrade AI- and AR- technologies, expand the suite of product offerings and premium features, broaden our user and brand customer base, and expand into synergistic segments such as the luxury sector. These new developments and expansions may generate long-term cash requirements. We intend to continue to fund
our future material cash requirements with net proceeds in connection with equity contributions from our shareholders and revenue generated from our business operations. We will continue to make cash commitments, including capital expenditures, to support the growth of our business.
We would receive the proceeds from any exercise of any outstanding Warrants that are exercised in cash pursuant to their terms. Assuming the exercise for cash of all of the 20,849,975 Warrants, consisting of 11,499,975 Perfect Public Warrants, 6,600,000 Perfect Private Placement Warrants and 2,750,000 Perfect Forward Purchase Warrants, we would receive an aggregate of approximately $239.8 million, but would not receive any proceeds from the resale of Class A Ordinary Shares issuable upon such exercise. We will have broad discretion over the use of proceeds from the exercise of these Warrants. To the extent that any of these Warrants are exercised on a "cashless basis," the amount of cash we would receive from the exercise of these Warrants will decrease. Any proceeds from the exercise of the Warrants would increase our liquidity, but our ability to fund our operations is not dependent upon receipt of cash proceeds from the exercise of the Warrants.
There is no assurance that our Warrants will be in the money prior to their expiration or that the holders of the Warrants will elect to exercise any or all of such Warrants. The likelihood that Warrant holders will exercise their Warrants, and therefore any cash proceeds that we may receive in relation to the exercise of the issued and outstanding Warrants, will be dependent on the trading price of our Class A Ordinary Shares. If the market price for our Class A Ordinary Shares is less than the exercise price of our Warrants, which is $11.50 per share, we believe Warrant holders will be unlikely to exercise their Warrants. As the closing price of our Class A Ordinary Shares was $1.39 as of March 12, 2026, we believe that holders of the Warrants are currently unlikely to exercise their Warrants. Accordingly, we do not expect to rely on the cash exercise of Warrants to fund our operations.
On October 18, 2023, the SEC declared effective a registration statement on Form F-3, under which the selling securityholders identified therein or their permitted transferees may offer and sell, from time to time, up to 38,542,254 Class A Ordinary Shares, 9,350,000 Warrants and 9,350,000 Class A Ordinary Shares underlying such Warrants. Given the substantial number of Class A Ordinary Shares registered for potential resale by the selling securityholders, the sale of shares by the selling securityholders, or the perception in the market that the selling securityholders holding a large number of shares intend to sell their shares, could increase the volatility of the market price of our Class A Ordinary Shares or result in a significant decline in the public trading price of our Class A Ordinary Shares. These sales, or the possibility that these sales may occur, and any related volatility or decrease in market price of our Class A Ordinary Shares and Warrants, might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
Cash Flows Summary
Presented below is a summary of our operating, investing, and financing cash flows:
| Year ended December 31, | ||||||||||||||||||||
| ($ in thousands, unless otherwise stated) | 2023 | 2024 | 2025 | |||||||||||||||||
| Cash flows from (used in) operating activities | $ | 13,578 | $ | 13,003 | $ | 13,305 | ||||||||||||||
| Cash flows from (used in) investing activities | (637) | (8,879) | (14,063) | |||||||||||||||||
| Cash flows from (used in) financing activities | (51,499) | (525) | (562) | |||||||||||||||||
| Effects of exchange rates changes on cash and cash equivalents | (187) | (349) | 175 | |||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | $ | (38,745) | $ | 3,250 | $ | (1,145) | ||||||||||||||
Cash Flows Generated from (Used in) Operating Activities
Cash flows generated from or used in operating activities primarily relate to the collection of accounts receivables, payment of provision and payables, net interest received and income tax paid. Our business primarily operates in a prepaid service subscription model, enabling us to collect cash in advance upon the subscription of product plans or signing of contract and then deliver services pursuant to terms and conditions of subscriptions or relevant contracts.
Net cash generated from operating activities increased by $0.3 million, or 2.3%, from $13.0 million for the year ended December 31, 2024 to $13.3 million for the year ended December 31, 2025. The Company continues to invest in growth while maintaining a healthy cash flow to support business operations underscoring the Company's operational health and sustainability.
Cash Flows Generated from (Used in) Investing Activities
Cash flows generated from or used in investing activities primarily relates to acquisition of financial assets, proceeds from disposal of financial assets, acquisition of businesses, acquisition of property, plant and equipment, acquisition of intangible assets, and changes in guarantee deposits paid.
Net cash used in investing activities was $14.1 million for the year ended December 31, 2025 and net cash used in investing activities was $8.9 million for the year ended December 31, 2024. The increase in net cash used in investing activities was primarily attributable to the Company's acquisition of Wannaby.
Cash Flows Generated from (Used in) Financing Activities
Net cash used in financing activities was $0.6 million for the year ended December 31, 2025, consisting of $0.6 million in the repayment of the principal portion of lease liabilities.
Net cash used in financing activities was $0.5 million for the year ended December 31, 2024, consisting of $0.5 million in the repayment of the principal portion of lease liabilities.
Net cash used in financing activities was $51.5 million in 2023, primarily consisting of $51.1 million representing the payments to repurchase Class A Ordinary Shares through our share repurchase program and tender offer, both launched by us in 2023, and $0.4 million in the repayment of the principal portion of lease liabilities.
Material Contractual Obligations and Commitments
During the periods presented, we did not have any material contractual obligations and commitments other than two office leases entered into by and between Perfect Taiwan and CyberLink for two years starting from June 1, 2025 and December 1, 2025, respectively.
Off-Balance Sheet Arrangements
During the periods presented, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements.
Recent Accounting Pronouncements
For a discussion of our new or recently adopted accounting pronouncements, see Note 3 "Application of New Standards, Amendments and Interpretations" to our consolidated financial statements included in this annual report.
C.Research and Development
See "Item 4. Information on the Company - B. Business Overview - Research and Development" and "Item 4. Information on the Company - B. Business Overview - Intellectual Property."
D.Trend Information
In our B2C app business, we have observed evolving user consumption patterns driven by the rapid advancement and mainstream adoption of generative AI technologies. User engagement remains closely tied to the pace of innovation in AI-powered features, competitive dynamics within mobile app marketplaces and user acquisition costs across digital advertising channels. While demand for AI-driven creative tools and beauty-related applications continues to demonstrate structural growth potential, monetization performance is influenced by subscription conversion rates, retention levels, in-app purchase behavior (including Virtual Point consumption), and the overall mobile app ecosystem environment. We continue to invest in product innovation, user experience optimization, and diversified monetization models to enhance recurring revenue stability and expand our global user base.
Enterprise spending conditions remained challenging in 2025, reflecting ongoing macroeconomic uncertainty, persistent inflationary pressures, foreign exchange volatility, and geopolitical instability. These factors have contributed to continued budget scrutiny and decision-making caution among enterprise customers, resulting in a prolonged elongation of
B2B sales cycles that began in the second half of 2022 and continued through 2023 and 2024. While we have experienced periods of increased B2B opportunity activity, such activity has not resulted in a meaningful or sustained improvement in conversion timelines, and visibility into the timing or extent of a recovery in enterprise demand remains limited. Accordingly, we believe that constrained enterprise spending and extended sales cycles may persist for an extended period.
In response to these combined B2B and B2C market conditions, we remain focused on disciplined cost management, continued product development, targeted customer acquisition, revenue diversification, and further operational efficiency initiatives, while maintaining a cautious outlook regarding the pace, timing, and sustainability of future growth. Other than as disclosed above and elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments, or events for the period from January 1, 2025 to December 31, 2025, that are reasonably likely to have a material effect on our net sales or revenue, income from continuing operations, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
E.Critical Accounting Estimates
Our consolidated financial statements have been prepared in accordance with IFRS. The preparation of our consolidated financial statements requires us to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenue, expenses and related disclosures. See Note 5 "Critical Accounting Judgments, Estimates and Key Sources of Assumption Uncertainty" to our consolidated financial statements elsewhere in this annual report for additional information on our critical accounting estimates.
Perfect Corporation published this content on March 13, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 13, 2026 at 10:27 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]