NightFood Holdings’ (NGTF) CEO Sean Folkson Hosts Investor Conference (Transcript)

NightFood Holdings, Inc. (OTCQB:NGTF) Investor Conference Call June 3, 2020 4:30 PM ET

Company Participants

Stuart Smith – Investor Relations

Sean Folkson – Chief Executive Officer

Conference Call Participants

Stuart Smith

Welcome everyone, and thank you for taking the time to join us here on the Quarterly Investor Call for NightFood Holdings, Inc., ticker symbol NGTF. Before we welcome the CEO to the show, Sean Folkson, I am going to read you the forward-looking statements. But I do want to point out these forward-looking statements are available to you at the bottom of every press release and every filing that the company makes. So you do not need to hear them just here, you can find them anywhere, the company makes its information available.

This current interview may contain forward-looking statements, as that term is defined in Section 27A of the United States Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Statements in this investor call, which are not purely historical are forward-looking statements and include any statements regarding beliefs, plans, expectations or intentions regarding the future, including, but not limited to any products sold or cash flow from operations.

Actual results could differ from those projected in any forward-looking statements due to numerous factors. Such factors include, among others, the inherent uncertainties associated with distribution and associated difficulties with obtaining financing on acceptable terms. These forward-looking statements are made as of the date of the of this call, which is June 3, 2020, and the company assumes no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Once again, just using that ticker symbol, listeners, NGTF, you can find at the bottom of any press release the entire forward-looking statement.

All right, with that said, let’s welcome, CEO, Sean Folkson, to the call. Sean, thank you for taking time to call in. The call is yours for your opening remarks.

Sean Folkson

Well, thanks Stuart. I’m happy to be here as always. The last few months and the last few days really unlike anything anybody could have predicted. But from a business standpoint, I want to let everybody know that things have become to return to the way they were before the virus. I hesitate to call anything normal. But – and so things have been returning to that state, closer to normal.

So with our supermarket partners, we did experience some virus-related delays and getting product on the shelf in some of the supermarkets that we were rolling into. And also I think we made mention of this in our recent quarterly filing, but our first major in-store promotion, those in-store coupon machines, those were delayed about eight weeks, but that campaign has now started and it’s running or up in, I think all of the Shaw’s, all of the Lowes Foods and all of the Harris Teeters, and we’re going to be going up in the Jewel stores in a couple of weeks. And those will be running into mid-July in most of the stores and some of the stores running into mid-August.

And I think we’re going to find a lot of new customers in the coming weeks and months with the – this in-store coupon machines, other initiatives, the pregnancy initiative in particular. We’ll be hearing a little bit about it. I know what everybody wants to hear probably at this point is our newest supermarket that we mentioned in a news release that the supermarket category managers have been more responsive than ever really since we’ve announced that we are the official ice cream of the American Pregnancy Association. And I think that was a big factor in lending, where I know it’s exactly landing, some of them changed, we announced the other day are expected to come on board in the next few weeks.

So two of those groups have given us verbal commitments and we started paperwork. The other, we received our first order last month and product started getting shelves this week. And I’m very proud to announce that our newest supermarket chain is the upscale Rouses market with 64 stores in Louisiana, Alabama and Mississippi. You can go online and look so many of their stores, beautiful stores, newly remodeled, actually those that are not just flat out brand new, loaded with the latest and greatest products, and we’re happy to be there. Rouses was named the 2018 Southeast Retailer of the Year by the Shelby report and was named by Epicurious as the Best Grocery Store in America in 2016.

So it’s a great chain. They have a major presence throughout the Gulf Coast and also they’re official supermarket up in New Orleans, starting with four flavors; Cold-Brew Decaf, After-Dinner Mint Chip, Midnight Chocolate, and of course, our top seller Cookies n’ Dreams. And this was the first account that’s been secured by the broker that we hired a few months back. They’re handling much of the Western half of the country, I guess. This is the Eastern most that they would be doing for us. And they also have a steep inter paperwork with another fantastic capital we’re super excited about.

If not for the virus, I think these two chains would have come on much faster. And I do expect that our broker in New York City will have similar success to our broker New York City being at Omni Foods, our broker at West is independent natural food brokers. I expect our broker in New York customer success, hopefully faster again, now that the business cycle is a little bit than normal. So velocities are up; a word that map is up. I can’t wait to get things kicked off with Rouses and the other new markets that we’re entering. So I’m excited.

Stuart, let’s get to the questions.

Stuart Smith

Well, yes, it sounds like a great time to be talking to you and I want to thank your shareholders once again for sending in the question. So let’s get right to that first question. It comes from I Gomez, that’s just the first initial, I, who’s asking, why is the company marketing towards pregnant women only and not the general snacking population?

Sean Folkson

Yes, thanks, Stuart. So we get versions of this questions, a lot of different versions lately. So I do want to point out first before I answer the real question. We are still marketing to the mainstream snacker as well as to the expected moms. Because obviously our long-term goal and our brand destiny, what I’d call a brand destiny is to be the leader in this projected multibillion dollar NightFood category. That is the stuff that people snack on between dinner and bed. So we see NightFood ice cream, NightFood popcorn, NightFood chips, NightFood cookies, candy, everything NightFood.

And there’s no debate over the fact that Americans spend a fortune on snacks consumed at night, right? It’s a billion dollar a week or more depending on the data source that you’re looking at. And then there’s also no debate that most people would prefer better sleep. And there’s also no debate that the most popular choices at night that people are eating tend to be unhealthy and sleep disruptive. So we don’t have to make things here for multi-billion dollar category. And when you’re launching something new, especially in such a huge, huge market, over 200 million Americans snacking regularly between dinner and bed, you can’t just target everybody because then you’re actually not targeting anybody. And most importantly as a small emerging brand, that’s not how you can win, you can’t gain traction. But the number of people snacking is so big and it’s made up of all these different groups. You can’t just try to shotgun and market everybody.

So, fortunately for us, NightFood is a better choice for this massive group of highly motivated, high consumption, highly connected consumers, those of course being the pregnant moms. So our endorsement by the American Pregnancy Association, marketing partnerships with Lamaze International, with Ovia Health with Dr. Berlin and the informed pregnancy podcast, these are all testaments to the fact that we’ve got a great product that really fits in the pregnancy lifestyle.

And so, like RXBAR did, when they launched and targeted only CrossFit gyms and CrossFit consumers, and a few years later, they sold to Kellogg’s for $650 million. We’re following that game plan, starting with a subgroup, a subgroup that is motivated, that is connected and that is high consumption. You start with them, you become an indispensable part of that subculture and you go from there.

So the pregnancy market is way bigger than I ever really would have thought when I started to do the research and think about the scope of the number. So on any given day, on any given time in the U.S. you’ve got 3 million pregnant women. Again, there’s as many pregnant women as they’re keto women and many pregnant women as they’re vegan women, and of course, many of them are avid ice cream consumers.

And NightFood is a brand and ice cream is restricted to pregnant women. Pregnancy is simply the window of their lives during which we’re going to enter their awareness, enter their lives of these consumers and their growing households because, again, every year at any given point in 3 million women, but it’s a nine-month process. So there’s 4 million women going through this every year, and it’s not just 4 million consumers it’s 4 million households, right? I can tell you personally, when my wife was pregnant and having ice cream, I was also having ice cream. There were plenty of nights where we were eating NightFood bars, but to be honest, there were also plenty of nights where were eating till empty.

So we know ice creams are now pregnancy craving 4 million households a year, pregnant mom in the household driving most of the grocery decisions. So if you’re a pregnant mom and you’re already eating ice cream, and you learned that there’s one ice cream that’s now approved by the American Pregnancy Association because it’s got a healthier profile for you and your baby, and it’s available in your town, maybe it’s available in your store. What are the odds that you’re going to try it? Are we going to be able to drive trial with those people? And what we’re seeing is that our ability to drive trial is really good in that market, a lot easier than the average consumer.

And again, as a pregnant mom, if you liked the ice cream, what are the odds that you will continue to purchase it, right? That’s what we’re seeing. What are the odds that you’ll communicate to maybe your one or two or three pregnant friends? What are the odds that you’ll go on to the discussion board that you participate and in your Facebook group and mentioned it there.

So we know that this is what’s happening. And the keys to building a brand is officially driving trial, driving repeat purchases and driving word of mouth. And there’s simply no more efficient way for us to do that than for the pregnancy market right now. And if we see these pregnant women through their pregnancy, and this is their brand of choice, there’s no reason for them to switch back once the baby comes home from the hospital and like to starting to get back to new level, there’s no reason for them to go back to Halo Top or Ben & Jerry’s, we were with them.

So there’s pregnant moms discovering NightFood today, that’ll still be NightFood consumers hopefully years from now when their kids walking or talking or going into kindergarten. So the endorsement from the American Pregnancy Association, it tells these women that are passing through this, I don’t know if you’d call it a phase or stage, I guess, pass this stage in their life that this is the ice cream they should be eating, this is the ice cream that is great for them, for their husbands, their partners, their kids. And so that’s the long answer is that this is a stage where we will be introduced to millions of new consumers. It’s not a pregnancy ice cream per se. It’s the stage that we’re being introduced. So that’s the long answer.

The short answer is simply that this is the shortest and quickest path to national distribution. And to our ability to start entering those additional snack formats, I mentioned as we pioneer, again, this multibillion dollar NightFood category that we see.

Stuart Smith

All right. Well, next question comes from Kalev T who says there’s been a lot of great news from your end, but nothing moves the stock. Please explain what the potential catalyst could or would be for moving the stock.

Sean Folkson

Well, this sounds like somebody that has not been shareholder for a very long time. I mean, we’ve certainly had some things move to stock in the past. But obviously, look, we’re looking to build a brand of tremendous value. That’s what we’re working on, and that will be reflected in the valuation of the company, assuming we’re able to successfully do that. And I know that’s not what’s being asked, but it is important to remember the massive upside of what we’re doing here with regard to this $50 billion that consumers are spending each year on nighttime snack.

So obviously, I guess I should make the disclaimer that I’m not going to speculate on what the market is going to do in the short-term as it relates to our share price. And the other thing to point out though, at the same time, as when we announced the American Pregnancy Association endorsement back in February, I think there are many people out there that immediately understood what that would mean for us as an ice cream brand to be officialized in the pregnancy. But that news was followed almost immediately by the virus-related shut down and the overall market crash because the announcement came the last week in February. And I think for a couple of days we saw the stock at a very different level. So looking forward, we’ve got more supermarket and more distribution announcements to come. I believe we’ll be seeing something in New York fairly soon, plus other major cities that are already like I said, we’re moving forward with.

Remember, we are in almost four times as many stores as we worked this time last year, and there’s more coming, more markets, more consumers. Why the stock goes up or down on any given day, it’s not something I’m going to speculate about. But if we keep growing the business from the customer base, growing the awareness, to me, those are the catalysts that I’m focused on. And there are several things in the works behind the scenes, things that are – it’s even too early to speculate on publicly that might qualify I think it was what the shareholder asking about as a catalyst. But it’s too early to speculate on those. And then we’re just grinding away here and growing and working on our national distribution. We think it’s going to be a success.

Stuart Smith

All right, very good, Sean. Chris M asked about doing NightFood vending machines in businesses and hotels. Also Nicole C asked about the hotel and college campus initiatives.

Sean Folkson

Yes. So obviously the virus has all of those plans at pause. We have looked at vending machines in college campuses in particular, obviously we’re in some hotels and college campuses before everything pretty much shut down. We’re not pursuing those things at this time. It requires a lot of time and a lot of man power. And in order to devote those resources, we need to believe that that the payoff is big enough in the short-term because we’ve got to pick our path here.

So travel’s way down, schools are shut, who knows what’s going to be in September. Rhino, Benny who’s working with us on those initiatives is no longer actively working with us with the virus. Where are you going to see how things play out in those areas while we build the core supermarket business? Obviously I still believe there’s a fantastic future there in hotels in particular that has not changed. My vision of what’s possible that has not changed it’s just we need to see what and how long it will be full things get back to, again, I hate to use the word level, but that’s the right word.

Stuart Smith

Very good. In response to recent – to the recent announcement that NightFood has over 5,000 shareholders. Matthew Z wanted to know how many shareholders there were when he first invested back in 2018.

Sean Folkson

So, yes, I thought that was a really interesting question that was passed up to me, but, unfortunately, we don’t have any way to know that. The 5,000 number, we got that report, it’s what’s called the NOBO list from a company called Broadridge. I think they do all this kind of reporting for public companies. And we got that back in February. NOBO, what that means is non-objecting beneficial owners, meaning these are shareholders that one way or another indicated that they were okay with us knowing who they were, knowing their name and their address.

And so in addition to the 5,000 plus people on the NOBO list, there might’ve been some what’s called an objecting beneficial owner, they would not appear on the list, we would not know who they are. So it’s pretty reasonable to think that we’re well over 5,000 by now, first of all adding in any objecting beneficial owners, but more importantly four months has passed and it’s been a period of time where we’ve had tremendous amount of media and distribution advancement.

So pretty safe, still probably well 5,000 by now when you factor those things in, but we don’t have a way, those reports have done basically as of that moment in time. So that was what we got was early February. It was at that moment. We don’t have a way to see who or how many people were invested a year or two ago. And we don’t even know what the number is now. We just know that it was over 5,000 on that NOBO list back in early February.

Stuart Smith

All right. Well, let’s go on to another one from Matt. He says, Sean, I’d like to know about the sales of the ice cream and what should be expected to increase in the summer months. So he wants to know, is it getting hotter outside? Yes. Should ice cream sales go up along with that, Sean, what’s your take?

Sean Folkson

Well, yes, I mean, so there is some seasonality, obviously, I think the majority of ice cream season probably comes with people at the beach or out at the park or whatever. So in terms of pint sells in the supermarkets, there’s still some seasonality there, but that’s not a factor for mature brands. This question Stuart, by the way, was asked in our Telegram chat group, which I encourage anybody listening to this call. If they want to have this kind of access to us, I’m in there probably two or three times a week, answering whatever questions I can. And other shareholders and people, they can be in there discussing the company. So it’s a great way for people to connect and that’s where this question came from. So I already answered it to Matt, but it’s probably a question on some of the people’s minds because he’s not the only person that I ever received that question from.

So there is some seasonality, but again, when you’re growing at the pace that we are, I mean, we’ve basically almost quadrupled our store count in 12 months. The sales growth that we’re expecting is not necessarily coming from individual consumers that are eating a little bit more ice cream because its summertime, the growth that we’re expecting to see is coming from adding more stores, new customers finding out about us, word of mouth and things growing.

When our gross sales increased from Q4 2019 of $176,000 to $281,000 in the next quarter and quarter-over-quarter growth of 60%, it didn’t happen because the weather got one what happened because we got some stores, more people were trying the ice cream, more people were repeat purchasing of the ice cream we believe. So that is where the growth comes from. And when you’re this new and this small, that’s what’s going to happen.

So I think with regard to the type of seasonality that Matt is asking about, I don’t think we’re going to see any of that. And so we have a full and true national footprint where we’re kind of available to just about everybody. So two to three years down the road when we’re hopefully every supermarket in the country, then you might see a little bit of what I think he’s asking about, which is a spike where you’d see more consumption in the summer, followed by a dip in the fall because that increasing consumption came from just the same customers eating a little bit ice cream.

And I do want to point that out that keep in mind that in the winter time people are home more, the nights are longer. We’re basically an ice cream that people are eating a lot at their home, kind of watching TV or whatever. So I don’t know, me personally, I don’t consume any more or less than the summertime, so I don’t know what to expect in terms of that. But if we are to see it, it’ll be further down the list.

Stuart Smith

All right, very good. Let’s move on to the next question, Sean. Actually, that is our last question. Do you have any closing remarks for us today?

Sean Folkson

Yes. I mean, one thing I forgot to mention, we were talking about the question about the shareholders. That’s a huge asset. I mean, having that many shareholders when you are a company, that’s got a product available in supermarkets and rolling into many more supermarkets, it’s hopefully those people out there, and I know many of them do or acting as owners in terms of straightening out the pints in the store. They happened to be shopping there, telling friends and family recommending the ice cream. And I do expect that as we get into more stores and as we – our sales grow, I think that our customer base will grow and our investor base will grow. And those two things will feed each other in a virtuous upward cycle.

And so that being said, I’m really excited about where we’re at. The response we’re getting from the pregnancy community is amazing. I think when we launch the new pickle flavor in July, which I know some people weren’t sure if that was a real thing, we are actually launching that flavor. And we expect a tremendous amount of buzz from the media, from consumers, which is going to create massive new opportunities for us. Those kinds of things definitely moved the needle with these supermarkets decision makers. But I think we’re in a really great place right now. And I just, I can’t wait to share more updates as we go and as we grow.

Stuart Smith

Well, that’s going to conclude our June 3, 2020 quarterly investor call for NightFood Holdings Incorporated, ticker symbol NGTF. Sean, thanks so much for your time and also your responses to all of your shareholders questions.

Sean Folkson

I bet, Stuart. Thank you as always.

Stuart Smith

All right. For Sean, folks, and this is Stuart Smith saying thank you so much for joining in on this call today.

Question-and-Answer Session

Q –

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