| Notes Receivable | Notes Receivable Sezzle’s notes receivable comprise outstanding consumer principal and reschedule fees that Sezzle reasonably expects to collect from its consumers. As of June 30, 2022 and December 31, 2021, Sezzle’s notes receivable, related allowance for uncollectible accounts, and deferred net origination fees are recorded within the consolidated balance sheets as follows: As of June 30, 2022 December 31, 2021 Notes receivable, gross $ 108,620,169 $ 162,341,675 Less allowance for uncollectible accounts: Balance at beginning of year (23,114,173) (11,133,146) Provision (18,356,404) (52,621,682) Charge-offs, net of recoveries totaling $2,845,750 and $6,153,728, respectively 26,345,676 40,640,655 Total allowance for uncollectible accounts (15,124,901) (23,114,173) Notes receivable, net of allowance 93,495,268 139,227,502 Deferred Sezzle income (4,059,100) (5,240,919) Notes receivable, net $ 89,436,168 $ 133,986,583 Sezzle maintains an allowance for uncollectible accounts at a level necessary to absorb estimated probable losses on principal and reschedule fee receivables from consumers. Any amounts delinquent after 90 days are charged-off with an offsetting reversal of the allowance for doubtful accounts through the provision for uncollectible accounts. Additionally, amounts identified as no longer collectible—such as when a consumer becomes deceased or bankrupt—are charged off immediately. Principal payments recovered after the 90 day charge-off period are recognized as a reduction to the allowance for uncollectible accounts in the period the receivable is recovered. Sezzle has not changed the methodology for estimating its allowance for uncollectible accounts during the six months ended June 30, 2022. Sezzle uses its judgment to evaluate the allowance for uncollectible accounts based on current economic conditions and historical performance of consumer payments. The historical vintages are grouped into semi-monthly populations for purposes of the allowance assessment. The balances of historical cumulative charge-offs by vintage support the calculation for estimating the allowance for uncollectible accounts for vintages outstanding less than 90 days. Sezzle estimates the allowance for uncollectible accounts by segmenting consumer accounts receivable by the number of days balances are delinquent. Balances that are at least one day past the initial due date are considered delinquent. Balances that are not delinquent are considered current. Consumer notes receivable are charged-off following the passage of 90 days without receiving a qualifying payment, upon notice of bankruptcy, or death. Consumers are allowed to reschedule a payment one time without incurring a reschedule fee and the principal of a rescheduled payment is not considered to be delinquent. If consumers reschedule a payment more than once in the same order cycle they are subject to a reschedule fee. Deferred Sezzle income is comprised of unrecognized merchant fees and consumer reschedule fees net of direct note origination costs, which are recognized over the duration of the note with the consumer and are recorded as an offset to Sezzle income on the consolidated statements of operations and comprehensive loss. Sezzle’s notes receivable had a weighted average days outstanding of 34 days, consistent with the prior year’s duration. The following table summarizes Sezzle’s gross notes receivable and related allowance for uncollectible accounts as of June 30, 2022 and December 31, 2021: As of June 30, 2022 December 31, 2021 Gross Receivables Less Allowance Net Receivables Gross Receivables Less Allowance Net Receivables Current $ 92,234,955 $ (3,592,064) $ 88,642,891 $ 139,024,393 $ (7,989,217) $ 131,035,176 Days past due: 1–28 7,171,333 (3,209,986) 3,961,347 12,263,154 (5,126,611) 7,136,543 29–56 4,334,585 (3,575,422) 759,163 5,266,164 (4,267,236) 998,928 57–90 4,879,296 (4,747,429) 131,867 5,787,964 (5,731,109) 56,855 Total $ 108,620,169 $ (15,124,901) $ 93,495,268 $ 162,341,675 $ (23,114,173) $ 139,227,502 |
