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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- Balance Sheet: Assets
- Common-Size Income Statement
- Analysis of Profitability Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Price to FCFE (P/FCFE)
- Operating Profit Margin since 2015
- Return on Equity (ROE) since 2015
- Debt to Equity since 2015
- Total Asset Turnover since 2015
- Aggregate Accruals
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Allowance for Doubtful Accounts Receivable
Based on: 10-K (reporting date: 2026-06-27), 10-K (reporting date: 2025-06-28), 10-K (reporting date: 2024-06-29), 10-K (reporting date: 2023-07-01), 10-K (reporting date: 2022-07-02), 10-K (reporting date: 2021-07-03).
1 2026 Calculation
Allowance as a percentage of accounts receivable, gross = 100 × Allowance for credit losses on trade receivables ÷ Accounts receivable, gross
= 100 × ÷ =
The analysis of credit loss provisions reveals a significant shift in the risk profile and valuation of trade receivables starting in 2025. While the allowance for credit losses remained nominal from 2021 through 2024, there is a substantial increase in the reserve established for potential bad debts in the subsequent periods.
- Allowance for Credit Losses Trends
- The allowance for credit losses exhibited stability at low levels between 2021 and 2024, reaching a minimum of US$ 200 thousand in June 2024. A sharp escalation occurred in June 2025, where the allowance rose to US$ 3.5 million, a level that was maintained through June 2026. This represents a significant increase in the estimated risk of non-payment compared to the 2021-2024 period.
- Gross Accounts Receivable Dynamics
- Gross trade receivables showed moderate volatility between 2021 and 2025, fluctuating within a range of approximately US$ 194.9 million to US$ 262 million. A substantial expansion is observed by June 2026, with gross receivables increasing to US$ 523.8 million, reflecting a growth of approximately 106.7% over the previous year.
- Credit Loss Ratio Interpretation
- The allowance as a percentage of gross accounts receivable reached its lowest point in 2024 at 0.10%. A peak of 1.38% was recorded in 2025, coinciding with the surge in the absolute allowance amount. By June 2026, although the absolute allowance remained constant at US$ 3.5 million, the ratio declined to 0.67%. This decrease is a direct result of the rapid expansion of the gross receivables balance, suggesting that the relative coverage of credit risk diminished as the asset base grew.