The Sezzle Inc (ASX: SZL) share price is under pressure on Tuesday following the release of its 10-Q report.
In afternoon trade, the buy now pay later (BNPL) provider's shares are down 7% to $7.63.
What did Sezzle announce?
In June, Sezzle became a reporting company for U.S. Securities and Exchange Commission (SEC) purposes. As a result, the company now files 10-Q reports with the SEC each quarter.
This has seen Sezzle release a 10-Q report this morning, complementing the quarterly update it released at the end of July.
What is causing the weakness in the Sezzle share price?
While a lot of information was provided in its previous update, today's release includes some extra information which appears to be weighing on the Sezzle share price.
According to the release, for the three months ended 30 June, Sezzle reported a net loss of US$19.1 million. This was up from a net loss of US$3.8 million in the prior corresponding period. This brought its half year net loss to US$30.4 million, which was more than triple FY 2020's first half loss.
One of the key drivers of this widening loss was a first half provision for uncollectible accounts of US$22.4 million. This compares to a provision of US$5.1 million in the prior corresponding period.
These provisions are an allowance for uncollectible accounts that management feels necessary to absorb estimated probable customer losses.
This means that as a percentage of Sezzle income, the provision for uncollectible accounts was 48.3% during the first half. This is up sharply from 28.7% during the first half of FY 2020.
What did management say about the provisions?
Management has tried to ease concerns about the jump in provisions. However, judging by the Sezzle share price performance today, not everyone is convinced.
It explained: "In the first half of 2020, we had a relatively low provision for uncollectible accounts as a result of: (a) our tightening of credit to consumers as an initial response to COVID-19, and (b) overall improved collections driven in part by the U.S. government stimulus offered to many of our consumers through the CARES Act."
"Beginning in the second half of 2020 and continuing into the first half of 2021, we've continued to perform universe expansion testing with our new enterprise merchants, which allowed us to test various credit underwriting strategies on larger merchants—resulting in higher provisions."
"Additionally, our non-integrated product offerings have resulted in higher loss rates in the first half of 2021. Such increases in loss rates during the first quarter of 2021 were offset with the stimulus checks offered through the American Rescue Plan Act of 2021. These factors are the primary reasons for the increase in our provision for uncollectible accounts, along with increases in UMS and Active Consumers," it added.
Despite today's sizeable decline, the Sezzle share price is still up 22% year to date.
