The Sezzle Inc (ASX: SZL) share price has been having a tough time of late.
Since this time last week, the buy now pay later (BNPL) provider's shares have lost 21% of their value.
What's going on with the Sezzle share price?
Investors have been selling down the Sezzle share price this week following the release of its half year report.
Although Sezzle had already released its second quarter update last month, this report contained a few new items that caught the eye of investors.
Those items were its loss for the period and the provisions it has made for uncollectible accounts.
As you might have guessed by the Sezzle share price performance since the release, the numbers did not make great reading.
According to the release, for the three months ended 30 June, Sezzle recorded a net loss of US$19.1 million. This compares to a loss of US$3.8 million in the prior corresponding period.
This brought Sezzle's half year net loss to US$30.4 million, which was more than triple FY 2020's first half loss.
Uncollectible accounts provisions
The key driver of its widening loss was news that the company has made a provision for uncollectible accounts of US$22.4 million for the half. This compares to a provision of US$5.1 million in the prior corresponding period.
This has eaten significantly into its margins. For example, as a percentage of Sezzle income, the provision for uncollectible accounts was 48.3% during the first half. This is up materially from 28.7% during the first half of FY 2020.
Management explained that the increase in provisions was due partly to the prior corresponding period having a "relatively low provision for uncollectible accounts." This was the "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."
It also blamed universe expansion testing and non-integrated product offerings for some of the provisions.
"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," it added.
Based on how the Sezzle share price is performing, investors appear to be wanting to see a notable improvement in its loss rates before buying shares again.
