LG Display Co., Ltd.

Hello, I'm Team Leader Heo Seok of LG Display IR. I would like to thank everyone who participated in the conference call for the 4th quarter of 2024. Today's conference call includes Team Leader Kim Seong-hyeon of CFO, Team Leader Lee Ki-young of Business Intelligence, Team Leader Kim Jong-deok of Big Project Management, Team Leader Eum Seung-chul of Middle Business Strategy, Team Leader Baek Seung-yong of Small Project Management, Good afternoon.

I am Brian Hall, in charge of LG Display's IR team. On behalf of the company, thank you to all the participants for joining us today in our Q4 2024 earnings call. Today, I have with me our CFO, Kim Sung Hyun, Lee Ki Young, who's in charge of business intelligence, Kim Jong Deok, Vice President of Large Display Planning and Management,

Um Seung-chul, Team Head of Medium Display Business Strategy, Baek Seung-yong, in charge of Small Display Planning and Management, and Son Ki-hwan, VP of Auto Marketing.

Today's conference call will be conducted in both Korean and English, and for more details, please refer to the provisional earnings which we disclosed today or the IR events section on the company's website. Also, before we begin, please take a moment to read the disclaimer.

As a reminder, today's results are based on consolidated IFRS standards prepared for your benefit and has yet to receive an audit by an outside auditor. 2024년 4분기 경영 실적을 말씀드리겠습니다. OLED 중심의 사업 구조 고도화를 지속해 나가는 가운데, 4분기는 스마트폰용 패널 출하가 크게 확대되었습니다. 이에 따라 매출은 전 분기 대비 15% 증가, 전년 동기 대비로는 6% 증가한 7조 8,329억 원을 기록하였습니다.

Now allow me to begin with our fourth quarter earnings for 2024. With continuing OLED-centric business structure upgrades, smartphone panel shipment in Q4 showed a sizable expansion, resulting in revenue increase of 15% Q over Q and 6% year over year, reporting 7,832,000,000,000,000 won.

In the case of 영업소닉, in addition to the expansion of the smartphone panel, the performance improvement flow continues through high-frequency cost reduction activities and operational efficiency, coupled with smartphone panel shipment expansion rigorous cost savings and operational efficiency supported continuous earnings improvement

driving a turnaround in operating profit of 83.1 billion won. Absent any notable changes in the end-user demand and in the relevant downstream market, we were able to drive year-over-year profit improvement of around 2 trillion won on a 2024 full-year basis.

4.5 trillion won is similar to the previous quarter.

In Q4, we had around mid-$100 billion one-off expense, including ERP-related severance pay for clerical workers, which is similar to the levels of previous quarter.

The annual EBITDA margin is 17%.

EBITDA in Q4 recorded 1 trillion, 306.5 billion won, and on a yearly basis, 4 trillion and 565 billion. EBITDA margin rate in 2024 was 17%.

Next is the fall area and the fall rate per area. The fall area in the 4th quarter increased by 5% compared to the previous year due to the fall in the TV center, and the fall in the TV panel compared to the previous year 면적 성장을 견인하며 19% 증가했습니다. 면적당 판가의 경우 스마트폰용 패널 물량 확대로 전풍기 대비 6% 증가한 873부를 기록하였습니다.

Next is area shipment and ASP per square meter. Q4 area shipment was up 5% Q over Q on shipment expansion driven mostly by TV panels. And also, on a year-over-year basis, there was a 19% increase as TV panel shipment expansion drove overall area shipment growth. ASP per square meter also increased 6% QonQ, reaching $873 following volume growth for smartphone panels.

Next, I would like to talk about product sales. Next is product revenue mix.

In Q4, mobile and others accounted for the biggest portion of the revenue mix at 42%. It's quite positive to see sustained uptrend in panel shipment every year, supported by stable supply capacity.

IT segment revenue was down 28% Q1Q, on prolonged sluggishness in the downstream demand, and we are seeing varying volatilities in shipment across different quarters by product segments and customers.

Following OLED TV panel shipment expansion, TV segment revenue posted Q&Q and YOY growth accounting for 22% of revenue mix, which is mostly flat due to overall increase in total revenue.

OTOBOOM's sales also increased by 10% compared to the previous year and the previous year, and the share recorded 8%, the same as the previous year.

Auto segment revenue also increased mid-10%, Q1Q and YOY, while its share of the mix staying at 8%, same as last quarter.

The share of OLED products in the overall sales was recorded as the highest in the past quarter, with a 60% increase of 2% compared to the previous year and the same as the previous year. The performance of the business portfolio change centered on OLED, which the company is promoting,

OLED share out of total revenue was up to percentage points Q&Q and year-over-year, reaching 60%, which is record high, further solidifying the outcome from the company's OLED-centric business portfolio transformation. Next is on the financial position and key metrics. Q4 cash and cash equivalent was 2 trillion 21.6 billion, while inventory asset declined to 2 trillion 671.2 billion won on the back of shipment expansion in time for the peak season during Q4.

부채 비율과 순차입금 비율은 각각 307%, 155%입니다. 다음은 1분기 가이던스입니다. 출하 면적은 계절적 요인에 따른 TV용 패널 출하 감소로 전분기 대비 한자릿수 중반 이상 하락을 예상합니다. In terms of Q1 guidance, we project area shipment to see a decline in TV panel shipment impacted by seasonality

reporting a decline of more than a mid-single-digit fall, Q over Q. ASP per square meter is expected to fall by around mid-10% range, Q on Q, due to it being a slow season for smartphone panels. However, with loading rate increase based on volume growth and diversification in smartphone models, we expect performance to be quite strong compared to a typical first quarter season.

Next, I will invite our CFO, Kim Sung-hyun, to run through the highlights.

Good afternoon.

I'm Kim Sung-hyun, the CFO. Thank you for joining our earnings call today.

In the midst of a non-sustainable economic environment that is delayed by the decline in demand, there has recently been a change in the global market environment, and we are facing a business environment that is more variable than ever before. Therefore, the company is committed to continuously expanding its business performance through the optimization of the business structure at the center of OLED and to improve the profit line by focusing on high-power,

Against the macro headwind of delayed demand recovery in the downstream market, we are seeing signs of changing global trade environment leading to ever heightened business volatilities. We therefore continue to drive OLED-centric business structural upgrades in order to sustain the business performance uptrend and are focusing on rigorous cost innovation and operational efficiency activities to improve profitability of our business, which is the company's priority as we push ahead with stronger execution capacity.

As a result, in the past 24 years, the annual sales have shown 25% increased performance compared to the previous year in the uncertain market environment. In the third and fourth quarter of last year, one-to-one costs were reflected in the medium-sized amount of 10 billion won, but in the annual sales,

As a result, despite uncertain market backdrop, 2024 annual revenue was up 25% year-on-year, and despite mid-$100 billion level of one-off expense in Q3 and Q4 respectively last year, we drove meaningful outcome of reporting around $2 trillion of profit improvement on an annual basis.

Excluding the impact of one-off factors, earnings results since Q3 of last year have been very much stable.

And we expect such trend will continue into the first half of this year, which is typically an off-season, allowing us to constrain the fluctuations and ensure a more steady trend without the dramatic changes that were seen in the past. This year, we will endeavor to not only achieve a turnaround in annual results, but also meet market expectations underpinned by OLED panel shipment expansion across different product segments. Next, I will run through the business plan and strategies.

Mobile OLED business will be able to achieve a turnaround OLED for mobile will secure competitive edge by preparing for future technologies required by the market and the customer.

Also, we will drive utilization in the first half supported by shipment expansion and diversification of product offerings based on stronger production capabilities to grow top-line and to strengthen profitability.

In the case of the medium-sized IT area, we will respond effectively to the competitive environment based on differentiated technologies such as global customer base, IPS Black, and Neo-LED. Although the global IT market has been in a bad situation for a long time, For medium IT segments, underpinned by global customer base and differentiated technologies, including IPS Black and NeoLED,

we will respond effectively to the competitive landscape. Although global IT market has been sluggish for an extended term, we are carrying out various internal activities that can drive profitability, including innovating our cost base. As such, we believe in the second half, if we start to see signals for demand recovery and many other opportunities, we can sufficiently have an upside compared to the target set at the start of the year.

In the IT OLED sector, it is a market situation where expensive high-end products are difficult to sell, but it is expected that the user value of Tandem OLED, such as low power, will clearly exist, and it is expected to grow for the previous year in 2025. In addition, we are considering a multidirectional system to increase the efficiency of operation, such as how to use the production infrastructure as best as possible in a changing market environment.

For IT OLED, although the market situation does not favor the sale of high-end products, we expect to see year-over-year growth in 2025 since there clearly exists unique value offering of tandem OLED, such as the lower power profile. Also, in step with market changes, we are looking at various ways to scale up operational efficiency, such as maximizing the use of production infrastructure.

The large OLED business is planning to expand product sales through the expansion of the high-end product line-up through the differentiation of gaming OLED monitors that reflect the needs of consumers as well as the enhancement of the portfolio and the needs of consumers. At the same time, we plan to continue to provide quality growth by innovating the operating structure such as efficient production strategy and cost reduction, which are linked to actual consumption.

In large OLED business, through diversification of product lineup, including ultra-large TV panels and a more solid portfolio, as well as expansion into differentiated and high-end lineup, such as gaming OLED monitors that better caters to consumer needs, we plan to drive shipment expansion. At the same time, we plan to sustain quality-driven growth and bring profitability enhancements as well through efficient production strategy underpinned by the end-user demand and cost savings and other operational innovations.

Next is the auto business sector. Recently, the entire car market is slowly recovering, but in the case of electric vehicles, there are some uncertainties, such as a reduction in electric vehicle subsidies per country. The asset is a stable and close customer relationship, premium to mass market. In addition, we have a customized product technology portfolio such as plastic OLED, ATO, high-end LTPS LCD, etc. based on tandem technology, so we will continue to expand the supply and sales of vehicles, not only electric vehicles, but also domestic vehicles, and run the business stably based on this.

Next is auto business. Recently, automobile market is starting to recover gradually, but there are uncertainties lingering around EVs as countries are scaling down on subsidies. LG Display has close and stable relationship with our customer base, and we have a portfolio of customers spanning from premium to the mass market. And because we have portfolio of distinct product and technology offerings, which are tandem-based plastic OLED, ATO, advanced OLED, and high-end LTPS LCD. We will continue to endeavor to win orders and grow the top line from not only EVs, but also internal combustion engine vehicles as we operate our business under a solid footing.

Finally, I would like to talk about investment activities. The uncertainty of the international environment has been prolonged, 수요 변동성 또한 높아진 상황이기에 투자는 보수적인 관점에서 검토하고 운용해 나가는 기준을 유지하고자 합니다.

Last point is on CapEx. Since uncertainties persist and with higher demand volatility, we wish to keep to a conservative stance when it comes to making investments.

사업체질과 재무건전성을 강화하고 안정적 수익성을 확보하는 것이 우선순위이기에 현재 보유한 인프라를 최대한 활용하며, 신규 확장 투자는 신중히 집행할 계획입니다.

지난해 투자는 2조 2천억 원을 집행하였으며,

Last year, CapEx spend amounted to 2.2 trillion won, and for this year, we estimate low to mid 2 trillion won of CapEx.

Investment will be focused on what's needed for the business structure upgrade, and spending will be from cash flow generated based on profitable operations as we plan on enhancing investment efficiency.

Thank you.

That brings us to the end of the earnings presentation for Q4 of 24. We will now take your questions.

Operator, please commence with the Q&A session. Now Q&A session will begin. Please press star 1, that is star N1, if you have any questions. Questions will be taken according to the order you have pressed the number star 1. For cancellation, please press star 2, that is star N2, on your phone. In order to allow as many Q&A chances as possible within the restricted time, we would appreciate only two questions per each participant. The first person to ask a question is Kim Dongwon of KB Securities. The first question will be provided by Kim Dong Won from KB Securities. Please go ahead with your question.

Yes, thank you for the question. I have two questions related to small-sized P-OLEDs. First of all, as the share price competition between North American strategic customers and smartphone panel supply companies intensifies, the price and pressure seems to be increasing. In the limited P-OLED KEPA of LG Display, I'd like to ask you how much the launch of the supply model of the strategic customer this year will affect the improvement of profitability in the first half of the season. The second question is about the supply of competitive society. Please tell us about your strategy. That's all.

Thank you for taking my question. I would like to ask you two questions. First one is with respect to your mid- to small-sized PEO-led business. With regards to your North America-based CG customer, I understand that there is heightened competition across different suppliers to gain a share of wallet of that specific customer. I would like to understand as to what your strategies are in order to further improve on your profitability and for you to maintain your share of wallet and market share in the smartphone panel business against that specific customer. And related to that, I also understand that for that company, there is going to be the introduction of the most mass market entry-level model that is going to be introduced into the market. I would like to understand whether that will help you mitigate the impact from seasonality and also what impact would that have on your bottom line. Second question is, with respect to the exclusive supply of foldable panels to your strategic customer, we'd like to understand what LG Display's position and strategies are to cater to that need.

Hello, I'm Baek Soon-yong, CEO of Soyoung Project. Although competition between public and private companies is intensifying, we are strengthening our own discriminatory capabilities through the preparation of future technologies and the early acquisition of improved competitiveness that customers need.

It is correct that against the backdrop of more heightened competition across different suppliers, we are very much focused on making preparations for future proof technologies and also to gain our mass production competitiveness so that we can further reinforce our company's competitive edge And at the same time, we have plans to further improve on continuous productivity, as well as more strengthened at a high level of quality, and also engage in innovation, cost innovation activities, which will help with strengthening and reinforcing the business competitiveness of the company.

The smart home business is currently continuously increasing the number of panels, and the product mix centered on new models is also improving.

Now, looking at the smartphone business, as of today, we continuously see growth in terms of the panel shipment, and we are strengthening the product mix, centering around the new models, And also through diversification of the models, we are able to increase the volume, which helps us to minimize the gap between the loading rate for our production lines between the first half and the second half of the year. As a result, we are looking forward to around 20% on a year-over-year basis growth in terms of shipment.

In terms of the small panel business, the revenue mix has moved from 26% in 2021 to 33% in 2024.

So you can see that continuously we've seen an uptrend. Going forward, we would actively utilize the existing infrastructure in terms of that is production infrastructure that we have. We will fully utilize them so that we can push for a more expanded shipment and further facilitate diversification of models as well as improve our revenue mix and product mix focusing on the new models so that we may ensure a top-line growth and secure bottom-line profitability.

Compactor changes and other market reasons for differentiated products exist within the entire demand. However, as the uncertainty in the market environment continues, the volatility of actual demand is expected to appear significantly, and we are looking forward to the possibility of differentiated products in the smartphone field,

Within the market, there is a certain level of demand for different type of form factors. However, we are working under a continuous backdrop of macro uncertainty, and we expect there to be quite a bit of volatility when it comes to end-user demand. But LG Display has a firm foundation of offering foldable products on the notebook segment, which we are at this point mass producing and supplying to a global customer. Based upon that know-how in the smartphone business as well, we will be fully mindful of the acceptance level in the market with regards to such unique and differentiated product, and also be mindful of the pace at which the market is growing and in line with which we will come up with a basic structure in terms of supplying of those differentiated products and accordingly expand on the business opportunity.

다음 질문을 받도록 하겠습니다.

We'll take the next question.

다음으로 질문해 주실 분은 UBS의 윤종현님입니다. The following question will be presented by 윤종현 from UBS. Please go ahead with your question.

Thank you. I just have a single question relating to your IT OLED business.

We see that compared to what was originally projected, the demand for your tablet OLED panels really underperformed the expectation. Compared to the actual shipment number that you've seen on a quarterly basis for 2024, what is your outlook for 2025?

Global IT market has not been able to meet the market expectations. You are correct.

Because of the sluggishness in the global IT market compared to what we had planned and expected, the actual sales of tablet OLED was not up to par. So the current macro environment does not favor sales of high-end products, but because we have a distinct differentiation in terms of low power and the tandem technology, which is best fit for IT devices, we expect that in 2025, we will be able to drive year-over-year growth.

However, I would like to understand that it is difficult to comment on the specific content of the main information related to customer service, such as model supply goals and full-time sales.

Now, having said that, with regards to a specific target in terms of supply as well as market share, these are some detailed information that we will not be able to share with you because they are closely related to our customers, so I ask for your understanding. Now, for your information, basically under this, Backdropware, there is limited panel shipment for tablet OLED. The company is looking at various different ways that will help us further increase and maximize on the operational efficiency of the FAB.

Next question, please. The following question will be presented by Nam Goong-hyun from Sinan Investment and Securities. Please go ahead with your question.

Hello, I'm Nam Goong-hyun from Sinan Investment and Securities. Thank you for your question. I have a question about large OLEDs. I know that the price of large OLED TVs in the second half of this year is quite low. Compared to the revenue of 2014 and 2015,

I would like to understand as to what the company's strategies are in terms of your bottom line if you were to compare 24 versus 25.

Hello, I'm Kim Jong-deuk, the head of the large-scale planning and management department. The situation of GDP has continued to be uncertain for 24 to 25 years. In relation to this, even in situations where demand recovery is limited, we have been focusing on the internal part to improve profitability. Hello, I am Kim Jong-Duk.

I'm Vice President of Large Display Planning and Management. The TV market in general, we expect the uncertainties to persist in 2025, as was the case in 2024. The company, under such a constraint in terms of demand recovery, had focused its internal efforts on improving and enhancing the profitability. In 2024, we had rigorous innovations against the cost base, and we've put in a lot of efforts to improve on the operational side, and such effort will continue on in 2025. Deep.

In the second half of this year, some of the Chinese Guangzhou lines will end, which is expected to have a positive effect. So we will continue to operate the best PAP based on our cost competitiveness and based on this cost improvement, we will strengthen our strategic customers and cooperation, and we will continue to develop our gaming monitors,

As you've also correctly mentioned, yes, in the second half of the year, the Guangzhou FAB is going to see its depreciation come to an end, which obviously works as a positive for us. So going forward, we are going to continuously strengthen the cost competitiveness that we have, based on which we will make sure that we operate our FAB in the most optimal way possible. And also going forward, we will further strengthen our cooperation with our strategic customers, also expand on the sales by increasing focusing on our differentiated products, such as the gaming monitors, and at the same time continue to work on our call space, all of which will help us bring about meaningful results in terms of the profitability.

Yes, we will receive additional questions.

Any other questions?

The next question is from Jung Won-sung of IAM. The following question will be presented by Jung Won-suk from IAM Securities. Please go ahead with your question.

Hello, I am Jung Won-suk from IAM Securities. Thank you for the opportunity to ask a question. I have two simple questions for you. Recently, there has been a big change in the investment of the global market, so the market is looking at the conservative basis of our 8th generation IT OLED investment in a positive way. However, in order to grow in the future, Thank you for taking my question.

I am from IAM Securities. I have two very simple questions. is a lot of changes and uncertainties in the downstream markets. So the market considers your conservative stance on investment as something being positive, especially with regards to the eighth generation IT OLED business. I'd like to understand as to what are some of your technologies and product segments that you would focus on to drive future growth? Second question is, you've mentioned depreciation. I would like to understand as to

Aside from last year and this year, I would like to understand what the mid- to longer-term depreciation trend would look like. But what I'm curious about is what you just said. I understand it as a new investment centered on the 8th generation IT OLED. Currently, our company's cross-border task is to improve the business structure, strengthen financial stability, and achieve stable profitability. We need a signal for the market. This is the CFO responding to your question.

Our basic take of the macro environment is that there still persists external uncertainties and there is high level of demand volatility. which have been ongoing for a prolonged period. And I take your question to talk about possible new investment, especially since you've mentioned the eight-generation IT OLED. So under this backdrop, we've repeatedly communicated that the top priority for our company for the time being is to focus on improving the business fundamentals as well as enhancing the financials of the company, and also securing a stable bottom-line profitability. It is under that stance that we had kept to a quite conservative CapEx or investment approach. Now, when it comes to the eight-generation IT OLED, our belief is, our take of the market is, that still there is high level of uncertainties. LG Display, once we are able to identify clear market signals, of an improvement on that backdrop. And once we are able, and once we gain a conviction that that is where the market is going, and once we have that visibility, we are fully prepared in terms of the resources and the timing to be able to cater to and respond to that change.

Yes, you asked about the price triangle. First of all, according to the 24-year standard, This year, the P.O. OLED for smartphones, which is used for smartphones, has been discontinued. And you asked me a question earlier. In the second half of this year, Regarding depreciation, if you look back to 2024, we've kept that figure at around 5.1 or 5.2 trillion won.

And if you look at this year, well, actually end of last year, some of the fab line for smartphones, P-OLED, had ended in terms of its depreciation period. And in the second half of this year, for large OLED fab in Guangzhou, there will also be some depreciation that will come to a termination there as well. So as such, we're looking towards to around 4.3 trillion won. So I declined to 4.3 trillion won, that is, in depreciation.

Yes, we will take the final question.

The last question will be presented by Kim So Won from Kium Securities.

Please go ahead with your question. As the CFO mentioned earlier, the recent growth of the car market and the regular car market has been stagnating. In this situation, please share with us the situation of the car market that we are looking at and the outlook of the auto display market. In addition, please share with us the business strategy to achieve the medium-term goals and goals of the auto display business. Thank you.

Thank you for taking my question. My question relates to your auto business. As the CFO has mentioned during the presentation, the auto market as well as the EV segment has experienced quite a bit of slump. We'd like to understand what LG Display's assessment is of the overall auto market, also particularly regarding the auto display market and what your projections are in terms of the

market going forward and what your objectives and strategies are for this business.

In terms of the auto market, there are both negatives and some positives. Negatives being a global economic slump, as well as sluggishness that we see in the EV market. But there are also positives, which are interest rate cuts and more stronger CO2 emissions regulation that is adopted in Europe for 2025. So the mix of factors co-exists, and in 2025, we think that the auto market in general will be about flat on a year-over-year basis at around 90 million cars.

The auto display market is not just about providing driving information, but information, entertainment, safety.

On the other hand, if you look at the auto display market, it continuously is showing a growth It is providing not just a driving or mileage-related information, but the display works to provide information, entertainment, and plays a key function in terms of safety as well. As such, we are seeing the adoption rate per vehicle increase, and we think that number will surpass 200 million units of cars. As a result, OLED is expected to grow by more than 70% year-over-year, while LTPS LCD growing on a YOY basis more than 20%. Growth.

We have a wide range of product portfolios, including Tandem OLED-based Pure OLED, ATO, LTPS LCD, and Oxide LCD, and major customers from mainstream to premium finished cars. It's just to note that above $200 million is sales in the number of auto display units.

Now, so based upon the tandem OLED technology, we have a variety of product portfolio offerings. including tandem OLED-based POLED, ATO, LTPS LCD, and oxide LCD. So we are able to cover the mainstream as well as the premium OEM customers. We have the customer base of major companies, and also we operate our auto display business that is well-balanced between growth and profitability.

The key. Our key competitiveness is the strong and close relationship that we have with our customer base.

who include the European premium companies, as well as Korea and Japanese incumbent auto powerhouses, as well as a global EV maker based in the U.S. Based upon that, vis-à-vis the OEM customers, we are looking to a growth rate of about 100%.

In the long term, we will continue to develop We will continue to strengthen market leadership by maintaining the market share ratio based on solid customer structure.

Supported by such differentiated technology offerings, mid to longer term, and variety of product portfolios and cost savings, and very solid customer base, we will make sure that we maintain a market share number one position that is based up of the revenue, and will continue to further strengthen our market leadership going forward.

This brings us to the end of the 4th Quarter 2024 Earnings Conference Call of LG Display.

Thank you all for joining us this afternoon, and if you have any unanswered questions, please feel free to contact us at the IR team. Thank you very much.