Notes from IR Conversation
I had a long conversation with Yvonne Zappulla. I will go over my notes later in the week to see what else would be interesting, but mainly, first, I wanted to post info about the Indian gaming conversation.
I know that many of you probably already know most of this, but it is new to me.
INDIAN GAMING
The main point of the Shinnecock PR is that this is a foot in the door for EGMI in Indian gaming. Apparently the Native American communities are very insular (not surprising considering the history) and it is very difficult for outsiders to be accepted as business partners. EGMI has been trying very hard to get accepted. Apparently getting EUMBC (the distributor mentioned in the PR) was the necessary final step. It has people on its payroll that are well-regarded by the tribes and was able to get this first order very quickly after EGMI hired them. So this sounds like a very good relationship for EGMI. This foot in the door is particularly important because “Indian gaming dwarfs Las Vegas and Macao combined” and, as we know, none of this potential revenue is included in the 2008 guidance.
As for this specific order, the owner of Electronic Gaming Zone supplies goods to stores in the Shinnecock territory and this first order for 25,000 cards will be sold in those stores.
Regarding this change from the first PR to the second:
First PR: “Jonathan Smith, Head of Economic Development of the Shinnecock Indian Nation”
Second PR: “Jonathan Smith, President of Electronic Gaming Zone”
This was not a misrepresentation in the first PR. It is just an example of the fact that tribes prefer to keep their internal affairs internal.
MANUFACTURER
The manufacturer is excellent. Makes the calculators for Wal-Mart, which is (one of?) the biggest seller of calculators in the world. They are very efficient and the fact that EGMI has them as their manufacturer is a big plus and part of the reason that margins are so good.
SGMS CONTRACT
I asked about this because I felt that 5% of gross was not such a great contract when EGMI’s gross margins are 70%. She said that state and local government lotteries are low margin business and are not a prime market for EGMI. That that would be the lowest margin business that EGMI would participate in. Also the $500,000 was important to EGMI at the time the contract was signed. In addition, having SGMS as a reference initially validated the product and was very useful as EGMI tried to establish itself and as it continues to try to establish itself with overseas lotteries.
AI
