Summary of EZCORP INC - Yahoo! Finance

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The discussion in this section contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed in this section and throughout this report.
First Quarter Ended December 31, 2008 vs. First Quarter Ended December 31, 2007 The following table presents selected, unaudited, consolidated financial data for our three-month periods ended December 31, 2008 and 2007 (the "current quarter" and "prior year quarter"):

                                  Three Months Ended December 31,          Percentage
                                    2008                   2007              Change

                                          (in thousands)
   Net revenues:
   Sales                      $         64,580       $         55,507             16.3 %
   Pawn service charges                 26,381                 22,908             15.2 %
   Signature loan fees                  36,000                 33,528              7.4 %
   Auto title loan fees                    221                      -              N/A
   Other                                 1,433                    363            294.8 %

   Total revenues                      128,615                112,306             14.5 %
   Cost of goods sold                   40,425                 33,541             20.5 %
   Signature loan bad debt               9,484                  9,670             (1.9 )%
   Auto title loan bad debt                  7                      -              N/A

   Net revenues               $         78,699       $         69,095             13.9 %

   Net income                 $         14,828       $         12,555             18.1 %

Consolidated signature loan data (combined payday loan and credit service activities) are as follows:

                                                                      Three Months Ended December 31,
                                                                             2008                    2007
                                                                          (Dollars in thousands)
Fee revenue                                                       $        36,000         $        33,528
Bad debt:
Net defaults, including interest on brokered loans                          9,385                   9,035
Insufficient funds fees, net of collections                                   293                     360
Change in valuation allowance                                                (254 )                   137
Other related costs                                                            60                     138

Net bad debt                                                                9,484                   9,670

Fee revenue less bad debt                                         $        26,516         $        23,858


Average signature loan balance outstanding during period (a)      $        30,785         $        29,654
Signature loan balance at end of period (a)                       $        33,584         $        33,724
Participating stores at end of period                                         554                     522
Signature loan bad debt, as a percent of fee revenue                         26.3 %                  28.8 %
Net default rate (a) (b)                                                      5.2 %                   5.3 %

(a) Signature loan balances include payday loans (net of valuation allowance) recorded on our balance sheet and the principal portion of active brokered loans outstanding from unaffiliated lenders, the balance of which is not included on our balance sheet.

(b) Principal defaults net of collections, as a percentage of signature loans made and renewed.

Table of Contents

Overview
We lend or provide credit services to individuals who do not have cash resources or access to credit to meet their short-term cash needs. We offer pawn loans in 371 domestic pawn stores (including 11 acquired November 13, 2008 and 66 acquired December 31, 2008) and 41 Empeño Fácil Mexico pawn stores open at December 31, 2008 (including one acquired December 31, 2008). Pawn loans are non-recourse loans collateralized by tangible personal property. At these stores, we also sell merchandise, primarily collateral forfeited from our pawn lending operations, to customers looking for good value. In 477 EZMONEY stores, six of which are managed by our U.S. Pawn operations, and 77 of our domestic pawn stores open December 31, 2008, we offer short-term non-collateralized loans, often called payday loans, or fee-based credit services to customers seeking loans (collectively, "signature loans"). In 30 EZMONEY stores and 11 of our domestic pawn stores open December 31, 2008, we offer short-term loans collateralized by the titles to borrower's automobiles, often called auto title loans.
We manage our business as three segments. The U.S. Pawn Operations segment offers pawn related activities in all 371 domestic pawn stores, and offers signature loans in 77 pawn stores and six EZMONEY stores. The Empeño Fácil segment offers pawn related activities in all 41 Mexico pawn stores. The EZMONEY Operations segment offers signature loans in 471 EZMONEY stores in the United States, and accounts for approximately 98% of our consolidated signature loan revenues. The following tables present store data by operating segment: