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For Q2 2025, Perfect Corp. (NYSE:PERF) reported an even better quarter than in Q1, growing 17.5% compared to just 12.1% in Q1 2025. Again, this was led by mobile app revenue, which we believe may be growing faster than last year’s 30%, offset by challenges in the B2B segment. Competition is our biggest concern, as there are 10-20 other mobile app providers, as well as generic AI products like ChatGPT. So far Perfect Corp. is ideally positioned in price and capabilities. Spending increased this quarter from the acquisition of WANNA and is expected to remain at these levels this year. A surprise was the increase in taxes paid. The company has used up its tax loss carryforwards in Japan and will be paying taxes there going forward. It still has carryforwards in the US and Europe. We have adjusted our model accordingly. Despite increased spending, cash and equivalents increased $3 million to $168 million or $1.65 per share. On a non-IFRS basis, earnings declined year over year 68%, perhaps disappointing investors who value the stock on a PE basis. The Perfect Corp. solutions are now being sold to WANNA customers, with the easiest sell being eyewear, as many of the fashion brands also sell eyewear. Few of the beauty customers sell fashion.
Mobile subscriber numbers increased 4% year over year, but declined sequentially from Q1 2025. Despite the decline in subscribers, revenues increased as the company optimized pricing. Premium pricing had been $39 a year with small price increases each year, but the company now offers a higher pricing tier at $79 annually for those wanting more usage and even higher features. This has led to higher revenues.
The company lost a net of nine key customers sequentially. The number of key customers peaked in Q3 2023. None of these customers defected to another provider. Half of the net decrease in key customers was due to customers being downgraded as a result of lower spending during the period, while the other half was driven by customer churn amid ongoing macroeconomic challenges in the beauty and luxury sectors.
The company maintained its guidance of a year-over-year total revenue growth rate of 13% to 14.5% for 2025 compared to 2024, yielding $69 million in revenues. There is a good chance the company can beat that number given current trends. 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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