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 are based on our current expectations. Actual results could differ materially from those expressed or implied by the forward-looking statements due to a number of risks, uncertainties and other factors identified in Part II, Item 1A, "Risk Factors" of this report.
Three Months Ended June 30, 2009 vs. Three Months Ended June 30, 2008 The following table presents selected, unaudited, consolidated financial data for our three-month periods ended June 30, 2009 and 2008 (the current and prior year quarters):

                                    Three Months Ended June 30,          Percentage
                                     2009                 2008             Change
                                          (in thousands)
     Net revenues:
     Sales                      $       81,309       $       53,635             51.6 %
     Pawn service charges               32,880               22,691             44.9 %
     Signature loan fees                30,815               31,223             (1.3 )%
     Auto title loan fees                1,030                    -              N/A
     Other                               1,740                  521            234.0 %

     Total revenues                    147,774              108,070             36.7 %

     Cost of goods sold                 50,965               31,460             62.0 %
     Signature loan bad debt             8,618                8,545              0.9 %
     Auto title loan bad debt              104                    -              N/A

     Net revenues               $       88,087       $       68,065             29.4 %

     Net income                 $       14,385       $       10,827             32.9 %

Nine Months Ended June 30, 2009 vs. Nine Months Ended June 30, 2008 The following table presents selected, unaudited, consolidated financial data for our nine-month periods ended June 30, 2009 and 2008 (the current and prior year-to-date periods):

                                    Nine Months Ended June 30,         Percentage
                                       2009               2008           Change
                                          (in thousands)
       Net revenues:
       Sales                      $      234,902       $  170,472             37.8 %
       Pawn service charges               92,777           67,384             37.7 %
       Signature loan fees                98,409           94,917              3.7 %
       Auto title loan fees                1,666                -              N/A
       Other                               4,901            1,228            299.1 %

       Total revenues                    432,655          334,001             29.5 %

       Cost of goods sold                147,816          101,732             45.3 %
       Signature loan bad debt            23,174           24,847             (6.7 )%
       Auto title loan bad debt              153                -              N/A

       Net revenues               $      261,512       $  207,422             26.1 %

       Net income                 $       47,533       $   36,398             30.6 %

Table of Contents

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

                                          Three Months Ended              Nine Months Ended
                                               June 30,                       June 30,
                                          2009           2008            2009           2008
                                                        (Dollars in thousands)

Fee revenue                            $   30,815      $  31,223      $   98,409      $  94,917
Bad debt:
Net defaults, including interest on
brokered loans                              8,020          8,054          23,169         23,578
Insufficient funds fees, net of
collections                                   248            267             723            862
Change in valuation allowance                 313            177            (880 )          191
Other related costs                            37             47             162            216

Net bad debt                                8,618          8,545          23,174         24,847

Fee revenue less bad debt              $   22,197      $  22,678      $   75,235      $  70,070


Average signature loan balance
outstanding during period (a)          $   26,396      $  27,514      $   28,350      $  28,311
Signature loan balance at end of
period (a)                             $   28,582      $  28,997      $   28,582      $  28,997
Participating stores at end of
period                                        557            532             557            532
Signature loan bad debt, as a
percent of fee revenue                       28.0 %         27.4 %          23.5 %         26.2 %
Net default rate (a) (b)                      5.2 %          5.0 %           4.8 %          4.8 %

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

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

Table of Contents

Overview
At 897 locations open on June 30, 2009, 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 our 370 domestic pawn stores (operating as EZPAWN or Value Pawn) and 47 Mexico pawn stores (operating as Empeño Fácil). 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 our 480 EZMONEY stores (six of which are managed by our U.S. Pawn Operations segment) and 77 of our domestic pawn stores open June 30, 2009, we offer short-term non-collateralized loans, often called payday loans, or fee-based credit services to customers seeking loans (collectively, "signature loans"). In 246 of our EZMONEY stores and 35 of our domestic pawn stores, we offer 30-day auto title loans collateralized by the titles to borrowers' automobiles, or fee-based credit services to customers seeking auto title loans (collectively, "auto title loans").
We manage our business as three segments. The U.S. Pawn Operations segment offers pawn related activities in all 370 U.S. pawn stores, signature loans in 77 U.S. pawn stores and six EZMONEY stores, and auto title loans in 35 U.S. pawn stores. The Empeño Fácil segment offers pawn related activities in all 47 Mexico pawn stores. The EZMONEY Operations segment offers signature loans in 474 EZMONEY stores and offers auto title loans in 246 of these stores. This segment accounts for approximately 98% of our consolidated signature loan revenues and 58% of our auto title loan revenues in the current quarter. The following tables present store data by operating segment: