NETGEAR, Inc. (NTGR) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the NETGEAR, Inc. Annual Meeting. At this time, I would like to turn the conference over to the Chairman and CEO of NETGEAR, Mr. Patrick Lo. Sir, please begin.

Thank you. Good morning. My name is Patrick Lo, and I'm the Chairman and CEO of NETGEAR. I'm very happy to welcome you to the NETGEAR 2020 Annual Meeting of Stockholders. This year, due to various restrictions and the precautions we're taking to promote everyone's safety and to help combat the COVID-19 pandemic, we are holding our annual meeting of stockholders virtually for the first time. With that in mind, please note that all individuals participating in this meeting on behalf of NETGEAR are doing so from the various locations. So bear with us should there be any delays as we transition between speakers and agenda items. The business of today's meeting is described in the agenda presented on our meeting website. I would like to note that only stockholders who have logged into this virtual meeting with a control number have the opportunity to vote online and to ask questions during the meeting. [Operator Instructions] I want to thank the members of our Board and executive team who are virtually attending this meeting today. As a reminder of our stockholders, in addition to me, the following individuals currently sit on NETGEAR's Board and are standing for reelection. Ms. Laura Durr; Mr. Jef Graham; Mr. Brad Maiorino; Ms. Janice Roberts; Mr. Greg Rossmann; Ms. Barbara Scherer and Mr. Thomas Waechter. In addition, I would like to thank representatives of Pricewaterhouse, NETGEAR's independent auditor, for virtually attending this meeting. This meeting will now officially come to order, and we will proceed with the formal business of the meeting described in the agenda and in the notice, annual meeting and proxy statement. The polls are currently open and you may vote online until I announce the closing of the polls, which will occur after all 5 proposals have been presented. We will not accept the ballots, proxies, revocations or changes after the closing of the polls. If you have already submitted your vote by proxy and do not wish to change a vote, you do not need to vote now, and your shares will be voted as previously instructed. If you intend to vote and have not already done so, you must submit your vote online now and in order for it to be counted. We first will present the 4 proposals submitted for approval by our Board, and then I will ask the stockholder participating today to present his proposal. We will take any questions related to the proposal after all of the proposals have been presented, after which, we will announce the preliminary results of the voting. In order to conduct an orderly meeting, we ask that you follow the rules of conduct available for your review by clicking on the attachment under meeting materials on our meeting website. Before we move on, I would like to let you know that Andrew Kim, our Senior Vice President of Corporate Development, General Counsel and Secretary, will be serving as the inspector of election. He has signed the oath of inspector of election, which will be filed with the minutes of this meeting. Andrew also will assist me with additional procedural formalities in the conduct of this meeting. Andrew, would you please report at this time with respect to the stockholders list, the mailing of the notice of the meeting and the presence of a quorum.

Thank you, Patrick. I have a complete list of the holders of record of NETGEAR's common stock as of March 30, 2020, the record date for this meeting. This list is available for inspection by stockholders of record during this meeting for any appropriate reason related to this meeting. Please see the link on our meeting website to view this list. I also have an affidavit certifying that a notice of annual meeting of stockholders of NETGEAR was timely mailed to all stockholders as of the record date. Furthermore, I can confirm that we have present virtually and by proxy a sufficient number of shares to constitute a quorum. So the meeting is duly constituted.

We will now proceed with the formal business of this meeting. After all the proposals have been described, we will answer any questions submitted online related to the proposals. As a reminder, we ask that any comments or questions during this portion of the meeting pertain only to these proposals. Please submit any questions as soon as possible for our review. There are 5 proposals to be considered by the stockholders at this meeting. The first item of business is the election of 8 nominees for directors to reserve -- to serve until the next annual meeting and until their successors are elected. The nominees for these directors are: Laura Durr, Jef Graham, Patrick Lo, Brad Maiorino, Janice Roberts, Greg Rossmann, Barbara Scherer and Thomas Waechter. The second item of business today is the ratification of the selection by the Audit Committee of the Board of Directors of PricewaterhouseCoopers as NETGEAR's independent registered public accounting firm for the fiscal year ending December 31, 2020. The third item of business today is the advisory vote on the executive compensation of NETGEAR's named executive officers as described in the proxy statement. The vote on this proposal is a nonbinding stockholder advisory vote. The fourth item of business today is the approval of an amendment to NETGEAR's 2016 equity incentive plan to increase the number of shares of common stock available to be issued thereunder by 2 million shares in addition to certain other changes described in the proxy statement. The fifth and final item of business today is a stockholder proposal requesting that NETGEAR's Board of Directors undertake steps to permit stockholders to have the right to act by written consent. This proposal was submitted by our stockholder, James McRitchie, Mr. McRitchie has informed us that he intends to submit his proposal at this meeting. At this time, I would like to invite him to present his proposal, and I ask that he keep his comments to no more than 3 minutes in the interest of time. Operator, please unmute Mr. McRitchie's phone line.

Good morning. Thanks for your attention and for allowing us to practice social distancing during the COVID-19 pandemic. I hope all of you and your loved ones are making it through these trying times, perhaps with the help of NETGEAR connectivity products. I know I'm spending a lot of time on the Internet. My name is James McRitchie of CorpGov.Net. I'm here to introduce an exciting good governance proposal to help increase the credibility and shareholder value of NETGEAR. Many Boards and investors assume a false equivalency between the rights of written consent and special meetings. However, with the right of written consent, any shareholder can seek to solicit written consent on a proposal. You don't need to own more than 7 million shares of company stock. The 2-step process required by a special meeting can take more time and expense than the 1-step process of soliciting written consents. This is especially true at NETGEAR, which allows only investors with 25%, that's more than 7 million shares, to call a special meeting. Now our 2 largest shareholders, BlackRock and Vanguard combine their shares, they do own more than 7 million shares, but they are largely passive owners, so are very unlikely to initiate a special meeting. They have never even filed a shareholder proposal, neither one of them. At many other companies, shareholders holding 10% are allowed to call special meetings. That requirement would be met with a little less than 3 million shares in the case of NETGEAR, but because NETGEAR requires 25%, not 10%, having the right to decide issues by written consent could be even more crucial in an emergency. And of course, the COVID-19 pandemic is helping us all realize that emergencies can and do happen. So let's be prepared. Similar proposals won more than 50% of the vote recently at Stanley Black & Decker, Berry Global Group, Flowserve, JetBlue, United Rentals, Capital One, Cigna, Applied Materials and Nuance. Help NETGEAR prepare for an uncertain future. Please vote for proposal number four, written consent. Thank you for your attention, and please stay safe.

Thank you. We appreciate your ongoing engagement with NETGEAR. More information on this proposal, including our Board of Directors' recommendation against the proposal, can be found in the proxy statement. That was the final proposal for today's meeting. We will now review if there are any questions submitted about the proposal before we close the polls. As a reminder, we will only review and answer questions at this time that pertain to the proposals. Please note that any discussion today may include forward-looking statements and actual results or events may differ materially from those discussed here. Additional information containing factors that could cause such a difference can be found in our most recently filed quarterly report on Form 10-Q. Andrew, please advise if there are any -- are there any questions?

Thank you, Patrick. There are no questions related to the proposals.

As there are no questions, the polls are now closed for voting. Andrew?

Okay, Patrick. Yes?

Andrew, may we have the preliminary results of the voting?

Thank you, Patrick. The preliminary report of the inspector of election covering the proposals presented at this meeting is as follows: One, the proposal to elect each of the 8 aforementioned nominees for directors on the NETGEAR's Board of Directors is carried. Two, the selection of PricewaterhouseCoopers as NETGEAR's independent registered public accounting firm for the fiscal year ending December 31, 2020, is ratified. Three, the resolution concerning the advisory vote on executive compensation of NETGEAR's named executive officers is approved. Four, the amendment to NETGEAR's 2016 equity incentive plan to provide for an increase to the number of shares of common stock available to be issued thereunder by 2 million shares in addition to certain other changes described in the proxy statement is approved. Five, the stockholder proposal requesting that NETGEAR's Board of Directors undertake steps to permit stockholders to have the right to act by written consent is not approved. We expect to report our final voting results on our current report on Form 8-K to be filed with the SEC within 4 business days after the end of this meeting.

This concludes today's meeting, and the annual meeting is now adjourned. We thank each of you for joining us today and for your continued support of NETGEAR. And everyone, save and stay healthy. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.