Analysis of Bad Debts
Allowance for doubtful accounts receivable (bad debts) is a contra account which reduce the balance of the company gross accounts receivable. The relationship between the allowance and the balance in receivables should be relatively constant unless there is a change in the economy overall or a change in customer base.
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 2025 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for credit losses ÷ Accounts receivable, gross
= 100 × ÷ =
The allowance for credit losses has demonstrated a consistent upward trajectory over the observed period. Simultaneously, accounts receivable, gross, have also increased, though the rate of increase differs. The relationship between these two figures, as expressed by the allowance as a percentage of accounts receivable, gross, reveals evolving credit risk management practices or changing customer creditworthiness.
- Allowance for Credit Losses
- The allowance for credit losses increased significantly from US$2,997 thousand in 2021 to US$19,292 thousand in 2025. The most substantial increase occurred between 2022 and 2023, growing from US$5,626 thousand to US$12,096 thousand. While growth continued in subsequent years, the rate of increase moderated. This suggests a potential initial response to changing economic conditions or a shift in credit policies, followed by a more measured approach to provisioning for potential bad debts.
- Accounts Receivable, Gross
- Accounts receivable, gross, exhibited consistent growth throughout the period, rising from US$271,821 thousand in 2021 to US$760,554 thousand in 2025. The growth rate appears relatively stable, with a slight acceleration between 2023 and 2024. This indicates a corresponding increase in sales or outstanding invoices.
- Allowance as a Percentage of Accounts Receivable, Gross
- This ratio began at 1.10% in 2021 and increased to 2.65% in 2024. This indicates that the company was reserving a larger proportion of its outstanding receivables for potential uncollectibility as receivables grew. The ratio decreased slightly to 2.54% in 2025, potentially suggesting a stabilization of credit risk or a reassessment of the adequacy of the allowance. The overall upward trend, however, suggests a heightened awareness of credit risk or a more conservative approach to recognizing revenue.
In summary, the company has been proactively increasing its allowance for credit losses in line with the growth of its accounts receivable. The increasing percentage suggests a more cautious approach to managing credit risk, although the slight decrease in the most recent year warrants continued monitoring.