NetApp, Inc. (NTAP) Earnings Call Transcript & Summary

Good afternoon. It is 3:30 p.m. and the 2020 Annual Meeting of the Stockholders of NetApp will now come to order. I am George Kurian, Chief Executive Officer. It is my pleasure to welcome you to NetApp's annual meeting. At this point, I would like to turn the meeting over to Matt Fawcett, our Senior Vice President, General Counsel and Corporate Secretary. Matt?

Thank you, George, and welcome to our annual meeting. Let me start with a few introductions. First, our Board of Directors are here today, Mike Nevens, our Chairman; George, of course , Deepak Ahuja, Dr. Jerry Held, Kathy Hill, Deborah Kerr, Scott Schenkel. All of NetApp's directors are attending the annual meeting. And I'd also like to introduce Mike Berry, our Chief Financial Officer; Beth O'Callahan, our Deputy General Council; Vania Santella and Anthony Bedotto of Deloitte & Touche, NetApp's independent registered public accounting firm; and [ Jan Castillo ] of Broadridge, who is acting as the inspector of elections for this meeting. She has signed an oath of office, which will be filed with the minutes of this meeting. NetApp's annual meeting of stockholders is being held in accordance with NetApp's Bylaws and Delaware law. George is serving as the presiding officer of the meeting, and I am serving as the secretary of the meeting and will record the minutes. This meeting will address the matters described in NetApp's proxy statement, which was made available to all stockholders and is available on our website and the SEC's website. After votes are taken on the matters before this meeting, I will announce the preliminary voting results and the meeting will be adjourned. [ Jan Castillo ] has presented proof by affidavit that notice of this meeting has been duly given to NetApp's stockholders as of the close of business on July 17, 2020, which is the record date for this meeting. As of the record date, there were 221,933,797 shares of common stock outstanding and entitled to vote at this meeting. A list of stockholders of record as of the record date is available upon request. [ Jan Castillo ] has also presented proof by affidavit of the number of shares present by proxy at this meeting. She has advised me that a majority of the shares of common stock issued and outstanding and entitled to vote at this meeting are present in person, by proxy or virtually via the Internet, which constitutes a quorum. Because a quorum is present, this meeting is declared open to proceed with business. To expedite the flow of business, each of the matters will be proposed in the order set forth in the proxy statement, while the actual vote on the matters will be deferred until all of the matters to be acted upon have been presented. It is now 3:33, and the polls are open. If you have already voted your shares, then you do not need to vote today. If you wish to vote or to change your vote, please follow the instructions on the virtual meeting website. And now with our proposals. The first proposal is to elect 8 directors, each to serve until the next annual meeting. The nominees for election designated by the Board of Directors are identified on the slide being displayed here and listed in our proxy. The second proposal is to conduct an advisory vote to approve the compensation of NetApp's named executive officers. The third proposal is to ratify the appointment of Deloitte & Touche as NetApp's independent registered public accounting firm for the fiscal year ending April 30, 2021. And the fourth proposal is to vote on a stockholder proposal for action by written consent, which will be presented by stockholder, John Chevedden. Maybe please open the line for Mr. Chevedden to present his proposal.

This is John Chevedden. Can you hear me okay?

Yes, sir.

This is proposal 4, adopt a mainstream shareholders' right, written consent. Shareholders request that our Board of Directors take the steps necessary to permit written consent by the shareholders entitled to cast the minimum number of votes that would be necessary to authorize an action at a meeting at which all shareholders entitled to vote thereon were present and voting. Hundreds of major companies enable shareholder action by written consent. This proposal topic won majority shareholder support at 13 large companies in a single year. This included 67% support of both Allstate and Sprint. This proposal topic also won 63% support at Cigna in 2019. This proposal topic would have received higher votes than the 63% to 67% votes have more shareholders had access to independent proxy voting advice. The right for shareholders to act by written consent is gaining acceptance as a more important right than the right to call a special meeting. This seems to be the conclusion of the Intel shareholder vote at the 2019 Intel annual meeting. The directors at Intel apparently thought they could divert shareholder attention away from written consent by making it less difficult for shareholders to call a special meeting. However, Intel shareholders responded with a greater support for written consent in 2019 compared to 2018. After a 45% vote, which is clearly less than a majority vote, for a written consent shareholder proposal, the Bank of New York Mellon Corporation said it's adopted written consent in 2019. The management statement next to this proposal failed to mention that all shares held for less than 1 year at our company are disqualified in regard to shareholders calling for a special meeting. Due to the 1-year disqualification clause, the current stock ownership threshold of 25%, to call a special meeting can mean that more than 40% of shareholders must be contacted during a short window of time to simply call a special meeting. The shareholders who own 25% of stock held for 1 continuous year could discover that they actually own 40% of the company's stock when their shares held for more than -- for less than 1 year are accounted. The management statement next to this proposal 4 also fails to mention whether shareholders giving feedback to management were aware of this 1 year exclusion. Thus this shareholder feedback cited by management could be tainted. To make matters worse, management did a special solicitation at the shareholder's expense against this proposal 4. This is like management putting its hand on the scale. It is all the more important to gain the right for shareholders to act by written consent due to the demise of the in-person annual meeting. Shareholders have lost the ability to see if our CEO can think on his feet and answer questions that are not pre-screened. Plus there is no way to see if the directors are listening to the whole meeting or just the first 3 minutes. Please vote, yes, adopt the mainstream shareholders' right, written consent, proposal 4.

Thank you, Mr. Chevedden. The polls will close shortly. So if there's any shareholders who wish to vote, please do so within the next minute. And we'll pause for that. [Voting] Thank you for your patience. It is now 3:39, and I declare the polls closed. I will now report on the preliminary results of voting. According to the preliminary report of the inspector of elections, each of the persons nominated as a director has been elected; the compensation of NetApp's named executive officers has been approved; the selection of Deloitte & Touche as NetApp's independent registered public accounting firm has been ratified; and the stockholder proposal for stockholder action by written consent has been approved. The final results of the voting will be set forth in the report of the inspector of elections and will be included in these minutes of this meeting. The final results will also be reported in a current report on Form 8-K to be filed with the Securities and Exchange Commission. The matters to consider for which this meeting was called have been completed. As there is no other business to come before the meeting, the meeting is hereby adjourned. Thank you for attending NetApp's annual meeting. Be safe and be well.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.