Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to the Perfect Corp.'s Earnings Conference Call. [Operator Instructions] Please note that today's event is being recorded. I will now turn the conference over to the first speaker today, Ms. Jennifer Wu, IR Manager of the company. Please go ahead.

Thank you, and hello, everyone, and welcome to Perfect Corp.'s earnings call. With us today are Ms. Alice Chang, our Founder and Chairwoman and Chief Executive Officer; Mr. Louis Chen, Executive Vice President and Chief Strategy Officer; and Ms. Iris Chen, Vice President of Finance and Accounting. You can refer to our fourth quarter and full year 2023 financial results on our IR website or in the Form 6-K we filed with SEC earlier. You can later access a replay of this call on our IR website shortly after the conclusion of this call. For today's call, management will provide their prepared remarks first, and then we will host a question-and-answer session. Before we continue, I would like to refer you to our safe harbor statement in our earnings press release, which also applies to this call, as this call may contain forward-looking statements regarding Perfect Corp.'s performance, anticipated plans, operational results and objectives. Forward-looking statements are based on management's expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied on our call today. 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's prepared remarks are in U.S. dollar terms, and we will discuss non-IFRS measures today. Without further ado, I will now turn the call to our first speaker today, our CEO, Ms. Alice Chang.

Hi. Thank you very much, and welcome to Perfect Corp.'s 2023 fourth quarter earnings call. We have some very good news to share with you today. Let's get started. We ended 2023 with a strong fourth quarter. Our fourth quarter revenue grew by 27.6% year-over-year to $14.1 million, and our net income was positive at $1.4 million. Our full year results was promising too, as our full year 2023 revenue increased by 13.1% year-over-year to $53.5 million, and our full year 2023 net income was positive at $5.4 million. The company operating cash flow had a net inflow positive of $13.6 million, as a result of our robust business model. The increases were driven by the strong momentum in our AI/AR cloud solutions and subscription services. For enterprise business and our mobile beauty app business powered by our advanced AI capabilities, both segments have contributed to our top line expansion, profitability improvement and positive operating cash flow. In this quarter, we captured a good demand in our AI [skincare] diagnosis product, as well as accelerated adoption of jewelry and fashion virtual try-on. This new deployment and use cases further expand our coverage into a larger market. For us, more innovative features, powered by generative AI helping our rollout in our YouCam suite of mobile app in this past quarter. This new AI features have not only attractive new mobile app installation, but also effectively converted more users into premium subscribers. All of this above achievement was centered on our beautiful AI strategy, which consists of 4 major pillars, beauty AI, skin AI, fashion AI, and gen AI. Those 4 key pillars will play a pivotal part of our core business moving forward, and we are committed to keep investing in AI to strengthen our leading position in AI. Now let's…

Thank you, Alice and good morning, good evening, everybody. Please note that all financial comparisons are on a year-over-year basis, and the reporting period is the fourth quarter of 2023 versus the comparable period in 2022. And now, on the top of the international financial reporting standard measures, we will also discuss some non-IFRS measures to provide greater clarity on the trends in our actual operations. As Alice mentioned, in the fourth quarter of 2023, our total revenue increased to $14.1 million from $11.1 million for the same period in 2022, representing a very robust year-over-year growth of 27.6% and it was also the best quarter of 2023. Meanwhile, our full year revenue was $53.5 million for 2023 compared to $47.3 million in 2022, representing a year-over-year increase of 13.1%, which we met the guidance we provided to investor analysts. We are very pleased to have achieved these results even under the challenge of macroeconomics in 2023 and a strong encouragement to our entire team for the year-long effort in growing our business in both enterprises and consumer apps. Among our revenue sources, AR/AI cloud solution and subscription revenue was $12.0 million in the fourth quarter of 2023, an increase of 25% compared to the same period of 2022. The full year AR/AI cloud solutions and subscription revenue was USD 44.8 million in 2023 compared to [$36.9 million] in 2022, representing an increase of 21.2%. The continued expansion can be attributed to the strong demand of our online virtual try-on products, among brand customers and the robust growth in the mobile beauty app subscriptions, especially with the addition of new categories that now we serve on skin diagnosis, jewelry and fashion markets. Notably, our mobile app active subscribers has surged by 45.7% year-over-year, reaching an all-time high of over 879,000…

[Operator Instructions] Our first question today comes from the line of Timothy Zhao from Goldman Sachs.

Great. Congrats on the very solid fourth quarter results. I have 2 questions here. One is about your revenue guidance to 2024. Just wondering can you share some color into the revenue growth breakdown or revenue compensation breakdown between your B2B and the B2C business, which segment maybe grows faster in 2024? And also, a related question on this topic is, I think you mentioned AI pillars within the business. I was just wondering for '23, what is the rough breakdown between the cosmetics, skincare, fashion, jewelry, different customer base? And what is your outlook for '24? And the second question is on the margins. I saw -- I think for 2023 full year, you had a pretty strong top line and also solid expansion in terms of gross profit and net profit. But I think in terms of margin, actually, there was slight decline in terms of both gross margin and net margins on a year-on-year basis in terms of Q3. Just wondering what is your outlook for the profit and the profit margin for '24?

Timothy, very nice to talk to you again. Yes. So our guidance, again, as we operate in a recurring business and our business are very contractual, right? So we are recognizing it based on IFRS measure, as the period. So -- so our remarks there, we have seen a good recovery momentum in the last quarter of '23. We compare that to the earlier first half of '23, which was very challenging. So I think that's a good sign of the recovery is giving us a stronger face in the 2024 business. But those contracts, it will take time to materialize into IFRS. So I think, as we said, we've seen the business pipeline to become a lot more solid. Certainly, we see over 20% in our business pipeline going forward. As far as the breakdown, B2C continues to be very strong, as we have reported in our last quarter. I think we expect that trend to be continuing. But the B2B part, as I said, the recovery is also coming to help. We see the B2C probably will be still growing a little bit faster than the B2B space, but the B2B certainly recovering from the early challenge in 2023. In terms of the AI pillars, the beauty AI is certainly still a dominant part of it, is our part of our core business since many years. But the skin AI part is growing very, very fast. The skin AI part, if we look at the organic demand that comes in is actually outpacing the other categories. I think that's mainly due to the AI skin diagnosis product is becoming more robust, covering more skin concerns and also be able to penetrate into newer channels. So it's not just a traditional brand. The website is now going into medspas,…

Our next question comes from the line of Clarke Jeffries from PSC.

Louis, thanks for taking the question. Louis, interesting to hear about the Skin AI segment, having maybe a wider aperture of new business interest compared to beauty AI, if I understood that correctly. Also interesting to hear about the recovery in the enterprise sales cycles and the good growth in new business pipeline to start the year. I was just wanting to ask strategically, are we at the position, where you might be increasing your investment going into the new year to take advantage of some of those improvements in the enterprise sales cycles, where are your top investment priorities from an incremental dollar perspective in terms of investing behind the enterprise sales capacity? And then as a follow-up, I wanted to ask if there was any way to level set expectations on cash flow, a $17 million improvement year-over-year and operating cash flow is fairly substantial. Any way to think about whether that is the right number for the business on an annual basis at this point? Or if there were certain working capital items that may have benefited free cash flow, and we might see an ebb and flow in 2024?

Thank you, Clarke. Yes, the skin AI, I think, is an area that we have been investing for more than 3 years now. It certainly took time to develop to a more mature status. And I think now you're kind of closing the case and more and more brands and clinics are started to see the benefit of these solutions. So I -- and I think unlike the consumer beauty cycle [Technical Difficulty] are more dominated by big brand. I think the skin market is very much more, long tail as well. So there's a lot more potential clients to address. And I think this is where the opportunities are and where we are investing also our sales efforts, both online digital marketing wide, some advertising or joining different trade -- tradeshows, conferences more targeted to skin market. I think that remains a priority for 2024. And we have seen this globally happening not only regionally in more specific countries or regions, we've seen that demand equally growing in Japan, in the U.S. and in Europe as well. So Skin AI, among other things, is the one that is being developed for a few years. It has been well tested in the market, and I think it's now time to gain more scale. From the B2B pipeline cycle perspective, yes, we have seen that the enterprise demand is certainly accelerated compared to the first half of 2023, where people were a little bit more skeptical about the future of the economic. I think now at the -- for the end of the interest hike, the terminal rate in enterprise spending seems to be coming back more into a pre-interest hike period. So we have seen that the entire sales cycle has been shortened significantly. So customer enterprise budget seems to be a little bit more relaxed in terms of investing in new innovation, and we want to capitalize on that. So our top priority is again to have our solutions ready for web, for online subscriptions and be able to help all these new demand to integrate and deploy in the market as fast as we can. In terms of the cash flow, the results that you saw in our earnings, it is not from a one-off cash flow -- free cash flow. I think it is a continuous result, and we've seen quarter-after-quarter that we're able to bring in around this figure. And I think that is what our expectations are for the operating cash flow to remain positive. So we are managing our financials. As I always say, we have strong discipline, and we are seeing that because of the nature of these are contractual, we can pay advance and then we have delivered the service across the year, we're able to generate these good operating cash flow.

Clarke, I can add some comments for the investment part. We're committed to keep on investing on AI development and the R&D side and that's because this -- especially after generative AI, this -- the market is very large to grow, and this is very early stage. So you can hear not only beauty AI, beauty virtual try-on, we also expensing to the beauty side for the hair. So hair is very unique in the market, hairstyle virtual try-on, hair wig virtual try-on, all this are developed by our generative AI team. So we deploy that to B2B enterprise for brand adoption and also to our B2C app. So the commitment for R&D development will keep on increasing. For sales channel, I think it will not have a big increase. For the new markets like skin, medspas, clinics, that one is very new to us, and the organic demand is coming in very strong. And we also like to develop in different countries besides major countries like U.S., Japan, [indiscernible], for the resellers partners and affiliate partners to get us more acquainted to the market and therefore prefer more brands to our site. So -- and the good thing is both these AI, generative AI and all kinds of AI solutions, we can use it in our B2B enterprise solutions and also to our B2C app, beauty app smart -- beauty app users, quite synergy complement to each other. And of course, for -- we are hovering, still searching in the market for any synergy M&A to come, very selective. That's always our target to go.

Really appreciate it. Yes, it makes lot of sense to invest behind the [indiscernible] innovation in Gen AI.

As there are no further questions at this time, I'd like to hand the conference back to management for closing remarks.

Thank you, again, for joining our call today, and have a good one and look forward to seeing you online next time.

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.