"Everything" would include the microphone, both in the remote and the TV. They're claiming to split off the audio, with one path going to the speakers (and there to your ears), and the other path being hashed (and from there to LG).
They still claim to get your media's audio, but deny using the microphones.
If they don’t use the microphones why do they have a statement in their Terms of Service to not say sensitive things in front of your TV? It says the TV owner is "solely responsible" for obtaining all necessary consents from third parties whose voices may be recorded by the device, and must warn household members and guests that their voices may be recorded, and if someone does not agree, the TV's microphone and voice functions need to be turned off. [0]
[0] https://www.lg.com/us/terms