Samsung Elect Ltd

Hello everyone, and welcome to the Samsung Electronics 2025 First Quarter Financial Results Conference Call. I will be your coordinator. All participants will be in a listen-only mode until we open the question and answer session following the presentation. As a reminder, this call is being recorded. I would now like to turn the conference over to the Investor Relations team. Please go ahead.

Welcome to all the participants worldwide and thank you for joining Samsung Electronics Earnings Call for the first quarter of 2025. I am Daniel Oh, Head of Investor Relations. Before we proceed, I have some legal house matters to take care of. First, I want to remind you that quarterly results and supplementary materials to our earnings call are on the Samsung Electronics Investor Relations website at www.samsung.com backslash global A webcast of today's call will also be uploaded to the website. Secondly, we must state that today's call may contain forward-looking statements. These statements represent our predictions and expectations of future events, but numerous risks and uncertainties could cause actual results to differ from those projected. Furthermore, The information provided herein reflects the company's views as the date of today's call, and the company undertakes no obligation to update the information subsequently. With that, now let me briefly outline today's agenda. I will first start the discussion with the first quarter financial performance, capital expenditures, and sustainability management. and our Chief Financial Officer will follow with summary of our business outlook going forward and any updates on shareholder value. We will then turn the call over to executives for details on their respective business areas before opening the call for analyst questions. The executives joining us on today's call are EVP Central Park, Head of Corporate Management Office and Chief Financial Officer, EVP Jaejun Kim representing memory. VP Hyukman Kwon for system LSI. VP Mi Jung No for Foundry. EVP Charles Hur for Samsung Display Corporation. VP Daniel Araujo for the mobile experience. And finally, EVP KL Roh for visual display. Let's begin with our consolidated financial performance for the first quarter of 2025. The company's revenue increased by 4% quarter-on-quarter to $79.14 trillion, a new all-time high for any quarter. Revenue in the DX division was up 28% driven by increased sales of flagship smartphones and high-value home appliances. However, Revenue in the DS division decreased by 17%, impacted by a decline in HBM sales due to default customer demand, which will be addressed further in detail by EVP Choi Jung Kim from the memory business later. SG&A expenses decreased by 0.6 trillion won quarter on quarter to 21.4 trillion won, thanks to efficient execution. And SG&A expenses, as a percentage of sales declined two percentage points to 27.1%. Operating profit increased 0.2 trillion won sequentially to 6.7 trillion won led by strong sales of the Galaxy S25 series and high value added products in the visual display and digital appliances businesses despite headwinds from the DS division. operating margin was 8.4% comparable to the previous quarter. Regarding currency effects, the appreciation of major currencies, including the U.S. dollar, had a positive impact of approximately $0.5 trillion won on operating profit compared to the previous quarter, felt mainly in the component business, which has a high proportion of U.S.-based transactions. Next, I will cover capital expenditures. CapEx in the first quarter of 2025 decreased by 5.8 trillion won quarter-on-quarter to 12 trillion won, of which 10.9 trillion won was invested in the S division and 0.5 trillion won was invested in display. In memory, investments also declined sequentially, reflecting our more flexible approach to better align with supply and demand. However, We remain committed to investing in R&D and advanced technology. Foundry investments decreased as we prioritized tech migration, considering market conditions and investment efficiency. In display, capex declined sequentially following the completion of major investments in 8.6 generation IT OLED panels. I will now comment on one of our key achievements in sustainability management. Our company recently ranked first in a supply chain human rights assessment of 45 leading global ICT companies conducted by non-profit organization, Know the Chain. This recognition reflects our strengthened efforts to improve supply chain due diligence and grievance mechanism with particular attention to managing forced labor risk by expanding protections for migrant workers. Our enhanced transparency through broader public disclosure of supply chain information was also positively received. The company remains committed to advancing its sustainability management practices to drive long-term value for all stakeholders. At this point, I will pass the conference over to our CFO, Sun Chul Park.

Thank you, Daniel, and good morning, everyone. It's a pleasure to join you once again on our earnings call. I will now present our outlook and review shareholder value initiatives. Recently, global trade tensions have led to a slowdown in global growth and increased fluctuations in financial markets. raising concerns over the performance of tech companies, especially in the semiconductor industry. We expect to encounter elevated uncertainties throughout the year. In this situation, we will continue our efforts to launch top-tier innovative products and services to overcome the challenges and maintain our position as a leading tech company. First of all, in an environment that is changing faster than ever, we are pursuing new growth opportunities by developing diverse new businesses, including robotics and AI. For robotics in particular, we are sparing no effort to outpace peers by advancing both hardware and software through internal development, and external partnerships. Through these efforts, we are committed to positioning ourselves as an industry leader. To this end, we have emphasized our R&D investments, which reached their highest-ever annual total in 2024. Moreover, our R&D spending in the first quarter increased by 16% year-on-year, setting a new record high for the first quarter. For our full-year outlook, we cautiously expect the overall performance to gradually improve as we move into the second half, assuming an easing of current uncertainties. In the DS division, we expect AI server demand to continue growing while mobile and PC demand should benefit from the on-device AI trend. We'll proactively address demand for high-density products such as HBM and improve our market position by focusing high-value added products. Also, in Foundry, we plan to focus on improving profitability by securing more customer orders in both advanced and mature modes. In the DS division, despite concerns over global trade and an economic slowdown, we will strive to increase sales of foldable devices and other flagship products. The second half launch of these products will provide unique tailored AI experiences for wearables will capitalize on rising demand across the entire lineup and prospects for broader adoption in emerging markets. Our plan is to reinforce our AI leadership by enhancing and expanding the integration of innovative AI features, including in our TVs and home appliances. However, it is widely understood that the current unpredictable environment is a product of major shift in the global politics and international trade, resulting in heightened market uncertainty. Drawing on our experience from our coming numerous crises since our founding, we have managed risks by preparing tailored countermeasures for multiple scenarios aiming to turn this crisis into an opportunity for us to leap forward. As a global company, we are truly leaving whole options to flexibly utilize our global production facilities and self-infrastructure in response to the changing environment. Through these efforts, every member of Samsung Electronics will work together to minimize business impact and enhance corporate value. Lastly, amid rapid shift to paradigms, we are committed to setting direction with speed and executing without hesitation. Additionally, we are applying AI and robotics technologies to our businesses and continuously expanding their use to improve operational efficiency. On top of these efforts, we are harnessing diverse cutting-edge technologies, including AI, to develop smarter products and services. We aim to advance technology innovation in new growth opportunities through cross-cooperations that combine the structures of each business unit. Moving on to enhancements to share the value the Board of Directors today approved a quarterly per share dividend of $365.01 for both common stock and preferred stock. Following our three-year shareholder return policy covering 2024 to 2026, the total annual dividend is $9.83 billion. Thus, the payout for the first quarter is 2.45 trillion won scheduled for payout in late May. In November 2024, we announced our plan to repurchase 10 trillion won worth of shares to enhance shareholder value. Of this amount, we purchased and canceled 2.7 trillion won in common shares and 0.3 trillion won in preferred shares by mid-February. For the remaining 7 trillion won, the repurchase of 3 trillion won worth of shares is in progress. Turning to stock-based compensation, after two discussions, we decided to increase the scope of stock-based compensation for all objectives to encourage and lengthen long-term value creation. Linking our objective compensation to stock performance and business research better aligned with our shareholders' interest, encouraging a strong focus on corporate shareholder value as well as sustainable research. In addition, we hope to further enhance the shareholder value through clear incentive structures that promote value creation in the mid to long term. Thank you very much, Daniel. Thank you.