Lg Elec S/Gdr 144A

Good morning and good afternoon. Thank you for joining LG Electronics Earnings Release Conference Call for the first quarter of 2022. This conference call will start with a presentation on the earnings results, followed by a Q&A session, at which time, if you wish to ask a question, you will need to press star N1 on your telephone. I would now like to hand the conference over to the first speaker. Good afternoon. My name is Sang-bo Shim from Investor Relations Thank you for joining LD Electronics Earnings Release Conference Call for the first quarter of 2022. With me are representatives of each Business Management Division, Mr. Lee Kwon Kim from Home Appliance and Air Solutions, Mr. Jung Hee Lee from Home Entertainment, Mr. Joo Hyun Kim from Vehicle Component Solutions, Mr. Chung Hyun Park from Business Solutions. We are also joined by Mr. Sang-ho Park from Global Business Management Group, Mr. Hyun Kyu Lee from Finance Division, and Mr. Hong Soo Lee from Accounting Division. Please note that all statements we'll be making today regarding the financial results of the first quarter are subject to change in accordance with the results of the external review. I would also like to remind you that uncertainties in the market and changes in strategies may cause our results to be different from the outlooks and forward-looking statements made today. Today, I will outline the overall performance results of the first quarter of 2022 and the outlook for the second quarter. After that, each division will take turns to deliver its business results and outlook. Now let me start with the consolidated financial results of the first quarter of 2022 and the outlook for the second quarter. Consolidated sales of the first quarter was $21.1 trillion won and operating profit was $1.9 trillion won. Sales grew 18.5% year-on-year attributable to robust sales in premium appliances revenue growth in VS and recovering B2B demand on the back of easing of COVID-related restrictions across nations and subsequent step up in government and corporate investments. Though affected by non-recurring costs associated with workforce restructuring, operating profit grew year on year with a one-off increase in royalty income in others. Regarding non-recurring income and expense, first on the cost related to workforce restructuring, To secure a future-oriented organization structure and enhance dynamism in the organization, we implemented workforce restructuring activities including early retirement program this quarter. Though I cannot share specifics on the scale, package amount, or impact by business, early retirement package levels were set based on reasonable standards. And like we explained in the preliminary earnings announcement, the gap between the first quarter operating profit of each business and market expectations mostly stem from the impact of this cost. Though such activities entail cost burdens in the short term, we expect it to contribute significantly in strengthening business competitiveness in the mid to long term. Next, to comment on the royalty income that showed a one-off increase this quarter, Though it's not the first time we've recorded royalty income, this quarter we reflected a significant amount of licensing revenue in others as efforts to leverage and monetize our patents since last year bore fruit. I ask for your understanding that we cannot provide details on the counterparty, contract structure, patent type, or income amount due to the confidentiality clause in the agreement. We plan to continue efforts to monetize our patents going forward. I will now briefly review the first quarter performance of each business. H&A recorded $8 trillion won in sales, $447.6 billion won in operating profit, and 5.6% in profitability. H&G recorded $4.1 trillion won in sales, $188.4 billion won in operating profit, and 4.6% in profitability. GS recorded $1.9 trillion won in sales and $6.3 billion won in operating loss. DS recorded 2 trillion won in sales, 37 billion won in operating profit, and 1.8% in profitability. Each business will later share its respective business results and outlook in detail. Let's move on to the profit and loss and cash flow of the first quarter. In terms of profit and loss, Reflecting financial income and expense, equity method gain and loss, other non-operating income and expense, corporate income tax, and income and loss from discontinued operations, we posted 1.4 trillion won in net income. Next, on cash flow. Cash flow from operating activities of the first quarter was negative 137.7 billion won, and cash flow from investment activities was negative 446.1 billion won. As a result, net cash flow stood at negative 536.4 billion won and when reflecting cash flow from financial activities of 45.9 billion won, net change in cash decreased by 490.5 billion won. After reflecting changes in cash held for sale of 58.4 billion won, cash balance at the end of the first quarter came to stand at 5.6 trillion won. Next is the key financial position and indicators for the first quarter of 2022. As of the end of the first quarter, Assets did at 55.1 trillion won, liability at 33.2 trillion won, and equity at 21.9 trillion won. In terms of leverage ratios, though there was a slight increase in net debt to equity, liability to equity and debt to equity all decreased quarter on quarter and year on year, and we continue to maintain a healthy financial condition. Next is the outlook for the second quarter. In terms of the business environment, Uncertainties are expected to persist with the raw material price hikes due to the prolonged Russia-Ukraine conflict, global inflationary pressures, and delay in easing of global supply chain issues. Amidst this environment, we will maintain growth momentum and leading position in the global market by strengthening regional and product portfolio. We will drive business performance through continuous improvement in cost structure and preemptive risk management. We predict second quarter revenue to grow year on year, on the back of new product launches and robust sales of premium products. In terms of profitability, we expect the upward cost pressure to continue, but we seek to maintain sound profitability through product mix improvement and enhanced efficiency in operations. We will move on to the first quarter results and second quarter outlook by business. But before that, I would like to state that because of the business transfer to LG Chem, The GM battery pack business and CEM business originally under VS and BS respectively were incorporated into others. We have reflected these changes in performance results from the first quarter of 2022 and past results have also been restated in line with these changes. Now the business results and outlook starting with H&A. Let me share the first quarter results of H&A. sales stood at $8.1 trillion, with a 19% increase year-on-year, driven by growth across overseas markets, including North America. Despite the upside of revenue growth and marketing cost savings, operating profit decreased year-on-year due to rising raw material and logistics costs. Next is the outlook for the second quarter. Raw material and logistics cost burdens are expected to persist, and the Russia-Ukraine conflict, lockdown in major cities of China, and global oil price hikes are projected to pose further risk to business operations. Amidst this environment, armed with our product competitiveness, we will continue efforts to expand sales of premium, large-capacity, and high-efficiency products. We will focus capabilities to secure sound profitability through new product launches, aggressive selling price increases, and spending optimization. I will share the first quarter results of HE. Sales recorded a slight growth year on year, thanks to strong revenue from premium products, despite the overall demand decrease in major regions such as North America and Europe. Though revenue grew and the panel price situation improved, operating profit decreased year-on-year due to increased spending including marketing expenses. Now let me share the outlook for the second quarter. In the market, demand is projected to decrease year-on-year in Russia and advanced markets such as North America and Europe, but we expect demand for premium products to be maintained. Accordingly, We will improve product mix to focus on premium TVs like OLED, QNED, and large size TVs to maintain revenue levels similar to that of the previous year and previous quarter. We will exert efforts to secure profitability with efficient spending including marketing cost. Let me share the first quarter results of CF. Sales grew year on year and quarter on quarter thanks to close cooperation with OEMs on timely production and supply amidst the prolonged supply shortage of automotive semiconductors. Operating loss was reduced quarter-on-quarter on the back of revenue growth. Next, the outlook for the second quarter. Uncertainties in the external market are expected to persist with disruption in auto semiconductor supply, the Russia-Ukraine conflict, and lockdown in major cities of China. We will strengthen business risk management through flexible response to customers and continuous improvement in cost structure. I will share the first quarter results of BS. Though uncertainties remain due to deteriorating macroeconomic factors, sales recorded an increase quarter on quarter and year on year on the back of sustained growth in gaming monitors and grand PCs in information technology business and recovering market demand and expanded sales of digital signage and hotel TV products in information display. Operating income turned around to record profit with significant improvement quarter-on-quarter thanks to growth in revenue but decreased year-on-year due to rising component and logistics costs. Now let me share the outlook for the second quarter. In general, uncertainties still remain in the market and the B2C market with regard to IT products is expected to be stagnant or decline. The B2B market demand is expected to expand and demand for signage and hotel TVs in information display is projected to show continuous growth. In IT, we will actively meet demand for high-end products and the B2B market. And in information display, we will identify new projects in diverse verticals and secure more project wins to maintain growth momentum in sales and secure stable profitability. That brings us to the end of the first quarter earnings release and outlook for the second quarter. We will now take questions. Operator, please commence with the Q&A session.

Now, Q&A session will begin. Please press star and 1 if you have any questions. Questions will be taken according to the order you have pressed the star and 1. For cancellation, please press star and 2 on your phone. The first question will be provided by Dongwon Kim from KB Securities. Please go ahead with your question.

Yes, thank you for the question. I have a question for H&A and V.S. The actual income from inflation is decreasing, and there seems to be a concern about the deterioration of demand for endowments. How do you see the global household demand in LG Electronics this year? Please give us your opinion on demand trends and prospects for each region, including major markets such as Korea, North America, Europe, and the Middle East. I have two questions. My first question regards to home appliance and air solution business.

Due to the spread of inflation, there are growing concerns on disposable income decrease and overall demand slowdown. What are your projections on this year's overall home appliances demand? I also would like to ask about your demand forecast and the current trend that you see in major regions such as Korea, North America, Europe, and Latin America. My second question regards to vehicle solutions. There are growing expectations in the market that the vehicle component business may make a turnaround earlier than expected. If your profits do improve, which customer or product would have mainly contributed to such improvement? Do you think there are chances of meaningful turnaround in the second half of this year?

HNA Thanks to the pent-up effects of COVID-19, we have seen positive sales demand in the advanced market last year. However, in this year,

We are expecting the growth rate of home appliances demand to go down compared to the previous year as many countries' governmental spending that were used to tackle the COVID-19 outbreak has been reduced.

First of all, I would like to talk about the domestic home appliances market. We can see that it is now in the same period as before. Unlike the early days of COVID-19, the size of the home appliances market has decreased.

If I may tell you about the Korean market, it seems to enter the period of stagnation. Unlike when COVID-19 pandemic just broke out, recently we witnessed signs of demand going down. Thus, we are keeping a close eye on the home appliance demand circumstances.

In the North American market,

we have seen the pent-up demand and also the slowing down of growth momentum. However, under these circumstances, LG Electronics have paved the way to create continuous revenue by expanding floorings with cooperation with our distributors. And also, we are pouring out such efforts so even though the supply becomes back to normal, we believe that we will keep the market share as it was.

Elec S & Gdr 144A Elec S & Gdr 144A

In case of Europe, as you may already know, we are seeing geopolitical risks stemming from the conflict between Russia and Ukraine, and also inflation level and exchange rate depreciation has gone up more than expected. As additional sanctions are posed on Russia, the possibility of Eurozone nations to enter stagflation has increased. As a result, We expect a short-term demand slowdown until the end of the first half and slight recovery is expected after the second half of the year.

In Latin America,

There are concerns on unstable exchange rate due to political uncertainty witnessed in the region. LG Electronics will consider all the circumstances and plan and establish market strategies. Thank you.

Yes, I will answer the question from the V.S. Department. The 22-year electric parts business is expected to improve sales growth and income growth compared to the previous year, and as you saw in the performance announcement on Friday, the first quarter performance is close to the BEP level.

I will answer your question on VS. We expect the vehicle components business this year to see revenue growth and improved profitability versus last year. And as you saw from today's earnings report, our Q1 performance indicates that we are close to breaking even.

However, in addition to the increasing supply of semiconductors and the rise in raw materials that continues in the automotive parts industry,

That said, uncertainties over sales and cost fluctuations abound due to an ongoing shortage of semiconductor chips in the vehicle component industry and rising raw material prices, along with the Russia-Ukraine conflict and COVID lockdowns in China. Therefore, please understand that we are unable to comment on the specific timing of a turnaround.

Next question, please.

The following question will be presented by Kangho Park from Daesin Securities. Please go ahead with your question.

I'd like to ask each of you a question. First, it's about H&A. In the first quarter, there has been an increase in the supply of raw materials and inflation, and the impracticality of the market economy has increased. I think it will continue in the second quarter as well. According to that, will the reason for the rise in the supply of raw materials, which was burdened by the improvement of profitability in the first quarter, continue in the second quarter or the second half? How do you see LG Electronics' future? Also, please comment on how we can improve the performance of LG Electronics in terms of evaluation for margin acquisition. The second is about VS. After the launch of LG Magna JV, I am curious about the synergy effect in the market. I have two questions. My first question regards to H&A business.

I believe that increase in raw material costs, logistic costs, and higher inflation are adding uncertainty to the demand, and this will continue in the second quarter as well. At a time when we are expecting continuous growth in logistic costs and raw material costs in the next quarter, I would like to ask your projections on the second quarter and the second half of this year. I would like to ask about your strategies to improve profitability, including pricing strategies to secure a margin. My second question regards to vehicle solutions. The market is taking a good look at JV Magna project. Has it generated any synergies? And I would like what is your outlook for the revenue and P&L for 2022? HNA 먼저 답변 드리겠습니다.

In terms of raw materials, the price of iron ore market is rising. Resin prices are rising due to the rise in basic raw materials, along with the rise in the price of raw materials. Also, there are many conflicts due to the environmental issues in Peru and Chile. The price is rising due to the increase in supply concerns due to the reduction in production.

We expect the material cost increase and logistic disruption would continue for a while. Market price of steel is on the rise, and there are also uproar pressures on resin cost due to soaring oil prices and increase of raw material prices.

The company is purchasing at a low price compared to the market price through the partnership building and recovery of long-term strategic relationship.

As a result of establishing partnership and keeping cooperative relations with strategic partners, our purchasing price remains lower than the market price. In addition, LG Electronics is also working hard to offset raw material cost increase by changing our existing materials to those that can lead to cost reduction.

In the case of logistics, the number of container operations is decreasing due to long-term contract production activities and the reduction in national selection volume. And compared to the contract operation price of the party, it is a trend that is not being paid additionally, but it is a trend that is not being paid additionally, but it is a trend that is not being paid additionally, but it is a trend that

In regards to logistic cost, thanks to long-term contract with shipping companies and less shipping volume from China, the containerized freight index went down. Also, we're seeing less additional freight payments that are paid on top of our shipping contract prices. However, the possibility of short-term recovery seems to remain low considering the current situation regarding port strike on U.S. West Coast and China's lockdown in major cities.

We are seeing a burden in cost, however,

We are conducting improvement activities on all fronts to secure profitability through additionally increasing sales price and implementing optimized spending activities.

Yes, I will answer the VS department. LG MAGNA JV is going smoothly. For JV Synergy, we are benchmarking the know-how related to MAGNA's automobile parts business, and we are continuously promoting business capacity enhancement in each field, and we are also continuing to discuss the discovery of various business instruments.

Let me answer your question on VS. LG MAGNA JV is on track. To create synergies, we're continuously working on enhancing our capabilities by benchmarking MAGNA's vehicle component business related know-how. And we've also been having a discussion about exploring various business opportunities.

In terms of hydrogen, there was a new trade line, and the establishment of the original LG MAGNA Mexico factory is a result of this collaborative cooperation.

Also, we have secured a new channel, and the establishment of LG Magna's new plant in Mexico is a testament to our collaboration.

Despite issues such as a shortage of semiconductors and rising raw material prices,

Our revenue in 2022 is expected to remain solid, driven by the fast-growing EV market, and profitability is also expected to grow as a result of revenue growth.

Next question, please. The following question will be presented by Jisan Kim from Kium Securities. Please go ahead with your question.

Thank you for the question. There are two questions. The first one is related to the new business strategy. The main goal of this year is to add blockchain medical devices to the business. Can you share the new business strategy for the future? The second one is about the VS business. The issue of semiconductor for vehicles is getting longer. Please tell us about the company's response strategy and when do you expect the supply shortage to be resolved?

I have two questions. My first question is on your strategy about new business. At the general meeting of shareholders, you have added blockchain and medical devices as new areas of business. In light of this, can you share your new business strategy going forward? And my second question is on VS. The shortage of automotive semiconductors seems to be continuing with no end in sight. When do you expect the supply constraints to ease?

Let me explain the amendments made to the corporate charter related to added objectives.

Since blockchain technology is the core technology in the electronics industry, we believe that various business opportunities can be created utilizing this.

Elec S & Gdr 144A

We have amended our corporate charter in order to install NFT platforms that will enable NFT art gallery services and the trading and brokerage of crypto assets on our high-quality smart TVs. And we have high expectations for potential business opportunities in this area.

And we have high expectations for potential business opportunities in this area.

As for the medical device business, we have amended the corporate charter in order to sell Pryell products which have been certified as medical devices through our online platform. So far, the purchase of Pryol MediHair was available through a retailer like Hyplaza, which is allowed to sell medical devices. And now, with the amendments made to the corporate charter, we have filed a notification of sale of medical devices so that consumers can purchase them through our online channel as well.

And the health care sector is a sector that is constantly opening up opportunities and possibilities for companies. In addition, we will continue to use the IP assets

Health care is a business area where we are constantly looking for opportunities and open to possibilities. Also, we are going to actively make an effort to increase licensing revenue utilizing our IP assets.

V.S. I will answer your question. The supply issues of some semiconductor companies are gradually being resolved,

Let me answer your second question on VS. While supply constraints for some semiconductor suppliers are gradually easing, the overall supply demand imbalance of semiconductors remains largely unresolved. Although the situation is expected to gradually ease after the second half of the year, It will take quite some time for it to be fully resolved.

In response to this, the VS Division will closely cooperate with OEMs, semiconductor suppliers, and wafer suppliers

while exercising flexibility in PSI management by looking for alternative components and multi-sourcing.

Next question please. The following question will be presented by Sungryul Kwon from DB Financial and Investment. Please go ahead with your question.

I have two questions about HNA and BS. First of all, regarding HNA, I don't think LG Electronics' new home appliances have been seen much recently. So, I wonder if the new product release cycle is over. It was very popular at one time when home appliances with steam function were included, but I wonder what is the next step other than steam function home appliances. I have two questions. My first question regards to H&A.

Currently, I'm not seeing any new big things from LG Electronics as the new product launch cycle has come to an end. It will be appreciated if you can share your plans of what will come next after you release the steaming product lineup. My second question regards to business solution. I'm wondering about the estimated cost associated with the closure of the solar panel business and the timing of its recognition. Thank you.

I would like to answer your question with regards to H&A.

In early this year, LG Electronics announced that we will move on to upgradeable home appliances. We are providing new value through upgrading services not only on new products but also on those already in the market. We are also planning to continuously bring new products equipped with upgradeable features to the market.

It is difficult to mention the new products that will be released in the future, Please understand that I cannot describe all new products that will launch in the near future. However, we are planning to launch products that our customers can customize the usage according to their personal taste.

and those that we can provide additional upgradable appliances-related contents and additional features through ThinQ.

And in addition to the existing system, we are increasing the number of applications for sanitary health appliances with technology such as UV nano anti-bacterial disinfectant and other technologies, and we are promoting global expansion. Due to the increase in the number of un-tact needs due to the pandemic, the air conditioner can be disassembled frontally,

In addition, we are planning to apply sanitation and health-related features such as steaming and UV nano sterilization technology to more products and expand into the global market. Also, as more customers are asking for contact-free services after the pandemic outbreak, We have made enhancements on products so that our customers can disassemble air conditioners and replace filters of water purifiers and sterilize by themselves. We also have plans to expand the application of steaming features that are optimized for sanitation and health appliances to new products and existing products. Thank you.

Yes, I will answer the question. In February, after the approval and approval of the board of directors regarding the completion of the solar panel project, we are conducting a compensation agreement with the trading company and the cooperative with the preparation of the production line.

Let me answer your question on BS. Since the closure of the solar panel business was approved by the Board of Directors and announced in February, we have been working on closing the cell production lines. Also, discussions with channels and suppliers about compensation are underway. We are going to finalize the process involved within the scheduled closure of the business.

In accordance with accounting standards related to discontinued operations, the costs associated with the closure of the business will be accounted for as discontinued operations in June when production and sales will cease. Please understand that at this point, we are unable to provide details of such costs. Next question, please. The next question will be presented by Sunggyu Kim from Daiwa Capital Market.

Please go ahead with your question.

What is the key business strategy that the new executive director is pursuing? I would appreciate it if you could give us some information about the mid-term sales growth rate and some kind of profitability guidance. In relation to VS, I know that our VS business is made up of three business sectors. IBI, MAGNA Joint Venture, and GKW. I have two questions. My first question is on corporate-wide operations.

After the change of leadership at the end of last year, with CSO being appointed CEO, it looks like the company's undergoing large-scale business restructuring. Can you share the new management's key business strategies along with mid- to long-term revenue and profitability guidance? And my second question is on VS. Can you give us an update on the revenue from each business, including IVI, LG, Magna, JV, and ZKW? Can you also talk about the production disruptions experienced by each business caused by supply constraints?

First of all, I would like to talk about the previous four questions. I will explain the business strategy, business portfolio, and new growth motivation from the perspective of new growth motivation. First of all, from the perspective of business strategy, through selection and focus, the efficiency of business management is ensured, and through this,

Let me answer from business strategy, business portfolio, and new growth engine perspective. From a business strategy point of view, we aim to build momentum for change and growth across all of our business areas by enhancing operational efficiency with a select and focus approach and utilizing the resources gained from it.

Our recent decision to close the solar panel business and restructure the workforce was also part of this effort. And with our core business areas such as home appliances and TVs,

We are enhancing our capabilities to reach full potential by improving competitiveness for premium products and regional portfolios. And from a business portfolio point of view, once the vehicle component business makes turnaround, all of our business divisions will be able to secure a stable profit structure. And we expect the revenue and profit contribution of the vehicle component business, which is the future growth engine, to grow further.

To ensure the continuous growth momentum of Outlook, we will integrate future technologies such as Big Data, AI, and IoT,

Also, in order to gain momentum for continuous growth, we are going to apply future technologies such as big data, AI, and IoT to our existing business. And by adopting new business models such as software platforms and rental services, we are going to lay the groundwork for leadership in the era of convergence.

Lastly, from a new growth engine perspective, we're going to actively explore new business opportunities across various areas

and execute swiftly for timely commercialization, including inorganic growth. As for the new business items that we're already working on commercializing, we will improve the business models through intensive development, thereby accelerating growth. Based on these business strategies, we aim to achieve solid, over-mid single-digit revenue growth in the medium to long term and secure stable profitability.

I will answer the question from the V.S. department. Due to the recent market situation, there has been some production and supply differences, but the sales of each business sector have all grown compared to the previous year, and the sales of each sector, including the smart sector including IVR, LG Magna and JKW, are in the 70-10-20 ratio.

Let me answer your question on VS. In line with recent market situations, we did experience some production disruptions, but sales of each business grew year-over-year. The revenue contribution of Smart, including IVI, LG Magna, and ZKW is in the ratio of 70 to 10 to 20, respectively.

In the case of LG Magna, it grew by 40% from the previous year, and Smart and ZKW LG Magna in particular saw year-over-year growth in the mid-40% range, and despite the shortage of semiconductors,

Smart and ZKW saw year-over-year revenue growth by closely cooperating with channels and semiconductor suppliers to minimize disruptions to production and also driven by new projects.

Next question, please. The following question will be presented by JJ Park from J.P. Morgan. Please go ahead with your question.

Thank you for your question. There are two questions. In the first question, you said that there was a lot of cost in the first quarter due to the new human structure. I'm wondering if it's been recurring or only in the first quarter. I can't tell you the exact amount, but I'd appreciate it if you could tell me which business had the biggest impact. I have two questions. My first question is on corporate-wide operations.

Will the workforce restructuring be a one-time event, or will it recur throughout the remainder of the year? And although you may not be able to mention specific figures, but can you at least tell us which business was most impacted by this? And my second question is on HE. Due to the slowdown in consumer demand, Can you share your outlook for LCD and OLED panel supply prices for the second quarter and over the year?

First of all, I would like to explain about the human resources tax for the second quarter and over the year. First of all, I would like to explain about the human resources tax for the second quarter and over the year. First of all, I would like to explain about the human resources tax for the second quarter and over the year.

Let me answer your first question on workforce restructuring. All the costs associated with the workforce restructuring activities, including compensation for early retirees, have been reflected in this quarter's results. And at the moment, no additional plan related to this is under review.

In the short term, there will be a bit of a cost burden, but I expect there will be a big impact on the medium-term business competitiveness. And the biggest problem for any business group

Although this workforce restructuring has resulted in the cost burden in the short term, we expected to contribute greatly to the enhancement of our business competitiveness in the medium to long term. And as to which business unit was most impacted by this, Considering the size of revenue and the number of personnel, I assume that H&A was impacted most by this.

Yes, I will answer H&A's question. China's temporary lockdown during the pre-war period, the Russian-Ukrainian war, and the global inflation are all macro risks, so global TV demand seems to be decreasing. I would like to answer your question regarding home entertainment. It is true that due to various macro events such as temporary lockdown in Shenzhen, China,

The conflict between Russia and Ukraine, global inflation and others, the global TV demand had slowed down. These factors will lead to the LCD panel price drop until the second quarter, and afterwards, we expect the price to show a recovery from the third quarter as the panel demand will hike in the second half of the year and during the strong season of TVs.

However, I expect that the OLED panel price drop would be limited due to higher sales in premium line and LGD's quality-centric growth strategy. Next question, please.

The next question will be presented by Simon Wu from Bank of America Securities. Please go ahead with your question.

Yes, thank you for the question. First of all, you said that there was a unique patent profit related to the previous company. Of course, it would be a bit limited to talk about the details, Which field is this connected to? For example, is it related to communication? Or is it related to new electric vehicles? I would appreciate it if you could explain the background to some extent. Of course, you said it's one-off, but is there an additional phenomenon that can occur? Of course, it's upside, but is there an additional phenomenon that can occur? This is the first question. Elec S & Gdr 144A LG displays can make additional OLED panels. In the past, there were about 20,000 to 30,000 panels, but this year, the increase is limited, so LG Electronics has to compete with competitors in terms of quantitative growth and discrimination in OLED TVs. And as you know, the price of LCDs has dropped a lot. Thank you for taking my questions. My first question is on corporate wide operations. I see what's unique about this quarter is that you have royalty income.

I understand that it may be difficult to comment on specific figures and specific information. Can you at least tell us what the royalty income is related to? For example, is it from mobile-related patents or is it related to EV? Please explain the background. It would be very much appreciated. And although you say that it's a one-time royalty income, do you think it's possible to make it a steady source of income? And my second question is on HE. For a long time, LG has been differentiating itself through OLED TV. And as you know, the competitor has started mass producing QD OLED panels. And we are seeing many new competitors entering the market. And LGD has a limit as to additional panels they can produce. So in this context, in terms of differentiating quantitatively, and considering the fierce competition, you are facing a lot of challenges. So please comment on this. Thank you.

First of all, I would like to talk about the increase in patent revenue that has temporarily increased this quarter. We have had some non-regular patent revenues before, but as a result of our efforts to make a profit by using our own patent assets, which were promoted in earnest since last year,

Let me answer your first question. Regarding the one-off increase in royalty income this quarter, we have had non-recurring royalty income in the past, but since last year, we have been making efforts to monetize the IP assets that we own. And as a result, a fairly large amount of licensing revenue has been reflected as other income this quarter.

And regarding your second part of the question, please understand that due to confidentiality clauses, we are unable to provide detailed information such as specific names, agreement structure, or patent type. As to whether it could be a steady source of income, we have been developing core technologies related to future business across various areas, and as a result, we own numerous core IP assets

including mobile-related standard essential patents.

And with recent amendments made to the corporate charter this March at the General Meeting of Shareholders to which patent licensing business has been added,

We will actively and continuously engage in the monetization of IP assets.

Yes, I will answer from the IT department. Although it has been mentioned in the newspaper many times, the entry of the competitive OLED TV market is a positive influence on the party as the market itself will be greatly expanded due to the OLED market ecosystem led by LG.

Let me answer your question on home entertainment. As reported in media many times, we believe that our competitor jumping into the OLED TV business will bring positive effect as it may scale up the OLED TV market where currently we are taking the lead.

OLED TV has been recognized as one of the top market shares in the market since its launch.

LG OLED TV has been recognized by our customers and the market ever since from its launch, and the outstanding market share proves that we are leading the market for sure. Our market share may have some impact in case our competitor enters into the OLED TV market. However, we believe that this can rather lead to growth in the overall OLED TV market, eventually allowing us to find more opportunities to expand sales.

We are continuously communicating with the market by sending our key message that OLED TV equals LG Electronics. With such message being the key of our TV marketing,

We are planning to implement the next-generation OLED EVO marketing that allows a brighter and clearer viewing experience based on our 10-year experience in this year as well.

OLED TV will continue to improve product leadership, explore the customer value that only the company can provide, and continue to strengthen competition and discrimination factors.

Our plan is to make continuous enhancements on our products so that our OLED TVs can continue to take the leadership in the market. Additionally, we will discover the customer value that can only be delivered by LG in order to strengthen the differentiation points compared to our competitors.

And regarding the OLED panel supply you asked about, so far, we have not had any issues with the medium-term supply.

And to answer your question about OLED panel supply issue, so far we are seeing no impact on the mid- to long-term supply matters. Thank you. Next question, please.

The following question will be presented by Jonguk Lee from Samsung Securities. Please go ahead with your question.

Thank you for the question. There are two questions. The first is from the H department. I think it will take a lot of time to raise raw material prices and solve inflation supply network. Elec S, I have two questions. My first question is on home entertainment.

Many are concerned, saying that it will be difficult to secure mid- to single-digit in TV profitability in the long term because it may take considerable time until rising raw material prices, inflation, and supply chain issues get resolved. What are your projections on LG's mid-long-term TV profitability? My second question regards to H&A business. I know that smart appliances and subscription economy is on the trend nowadays, and your competitor also launched a big data appliance as well. What kind of preparations are you making for the smart home appliances lineup, including the subscription services based on ThinQ? And what are the factors that differentiate your products from others? I would like to listen to your strategies. Thank you.

I would like to answer your question in regards of home entertainment.

As you just mentioned, we are witnessing various macro risks, including rise in material cost, logistic cost, and supply chain disruption because of the conflict between Russia and Ukraine. And it is true that TV business is facing difficulties in securing profitability in the short term because of this.

However, if we look at TV demand, the demand in more than $1,000 market tends to grow continuously. is growing. Because the demand for this market and the premium market is growing, companies like OLED and QNED are expanding their premium product sales, and I think it will be possible to maintain the strong profitability of mid- and single-digit through efficient resource management.

However, taking a look at the demand in the TV perspective, those demand over $1,000 is growing continuously. So at a time when we are seeing growth in premium lineup demand, we are planning to expand the lineup in premium models such as OLED and QNED. And together with this, We are planning to do our best to maintain sound level of profitability in the SMIT to single-digit through developing and launching differentiated products. Thank you.

Yes, I will answer H&A regarding smart home. The company is providing a differentiated solution to lead the evolution of smart home. In particular, in addition to the existing SyncWave, through the recently released Up Home function, I would like to answer your question on H&A business. We have differentiated solutions to lead the evolution to smart appliances.

Especially, throughout the features of our newly-launched upgradeable appliances together with the ThinQ application, we are introducing various services that can improve diverse customer experience based on AI and big data. Throughout this process, we are continuously strengthening our competitive edge in the market.

MyHomeReport service in ThinQ app analyzes customer home use data Elec S & Gdr 144A

Through ThinQ's MyHome report service, we analyze customers' appliances' usage data and provide usage status for each appliance and information on their energy consumption. Our ThinQ Care service, via AI technology, checks whether the product is working in the right way and proactively lets the users know how to take actions according to what happens so that they can use their appliances without having any concerns.

Other services such as Smart Life Labs and Smart Tips proactively provides and recommends appropriate information and contents that users would like to know

based on the appliances they have and their usage patterns. This allows customers to enjoy a smart appliance experience. Moreover, based on the usage history and status, our services alerts our customers on what they need, linking in with a rental solution or replacement of a consumable part, and let them move on to the next step. In this sense, we are providing customized services throughout the customer experience journey. Thank you.

That brings us to the end of LG Electronics earnings release conference call for the first quarter of 2022. For further questions, please contact the IR team. Thank you.