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At its event last week, Perfect Corp. (NYSE:PERF) showed off its technology to its B2B customers, highlighting its new try-on technology, which is new since last year. Since it came through the acquisition of WANNA in January, this is the first time it has been shown to its B2B customers. In addition to a fashion show featuring live models, the most impactful demonstration was allowing attendees to have their picture taken and then try on a variety of outfits. This showed how easy it was for shoppers to see how an outfit would look on them, specifically using their body, by just the click of a button.
In a presentation, the company also showed how the still image could be converted to a video—for example, showing a shopper in the outfit turning and walking down the sidewalk. These products are currently being developed and piloted. For retailers, this solves the biggest pain point, which is “What will it look like on me?” In addition to clothing, the company showed its app for shoes. Just by pointing your phone at your feet, it can show what the shoes look like on you. While at the moment it only shows a top view, it will soon be able to show all angles and, most importantly, how it looks with what you want to wear with the shoes.
Brands and retailers have an extra burden in marketing as Amazon has taken over the replenishment market, and everyone else has to push discovery. Shockingly, Amazon is not only the largest beauty retailer, but it is also the fastest-growing. TikTok is the largest retailer for discovery through its influencers and is now number six. Since customers are still experimenting with much of its technology, Perfect Corp. has a low barrier to entry. Its pricing model is pay-per-use, so B2B customers are not committing to a high fixed cost. If it turns out end-user customers don’t use the try-on or analysis, there is no cost and no risk to bring on capabilities.
Surprisingly, the company notes its most popular application is hair AI, which includes both generative AI for hair styles and colors, as well as hair analysis, all of which are being adopted by salons. Agentic AI is (scarily?) the future. These agents will collect information from your past as well as current information, like location and travel plans, to recommend products. An example is agentic AI, noting that you plan to go to Florida next month, and via skin analysis recommends that you purchase a specific sunscreen, or one you have bought in the past, before you go. Based on information it has gathered on what you typically wear, where you like to go, and what you like to eat it can recommend outfits as well as restaurants for the trip.
The company’s facial analysis continued to draw much interest, and panelists described how it aided sales by pinpointing customer problems as well as being able to show before and potential after results to the customer after getting a procedure or using a facial product. An executive from a cruise line explained how they placed a screen front and center in its boutiques on the ship and were able to drive sales through the personalized recommendations and the ability to point the customer to other products they need or that go with the one they are buying.
One thing that was evident from the panel discussions is that AI is top-of-mind for all the brands and retailers in attendance, beyond just generative AI. They have started to integrate it into their operations. One highly productive use is for appointment scheduling, particularly because people calling in typically ask the same basic questions that the AI receptionist can easily answer. The AI receptionist also excelled at upselling, as it never forgot or chose not to ask if the customer might want to upgrade to a pricier option or additional service. Generative AI is being used for marketing materials—video and print ads. Even fashion models are being created through generative AI. They are not only less expensive, but they are also easier to work with!
While we believe the B2B business has not picked up this year due to worldwide economic doldrums, we believe that the B2C segment of Perfect Corp. continues to grow faster than expected. ChatGPT is priming the pump, but it only allows limited usage before charging high prices. This is ideal for Perfect Corp. as its apps are far less expensive for consumers who use generative AI and all the other features found in YouCam apps.
We believe the gating factor to increased revenues is just awareness that these apps exist, and marketing can drive accelerated revenues. Due to the strength of the B2C business, we would not be surprised if the company increased guidance for the year above 13% to 14.5% revenue growth for 2025, yielding $68-69 million in revenues, during its Q3 earnings report. As a profitable AI-based SaaS company, we believe it deserves an EV-to-sales multiple of at least 2.9 times 2025 sales and a stock price of $3.17.
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