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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

Schedule of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 are as follows (in thousands):

						Carrying Value						Fair Value Measurements
						September 30, 2021						Level 1						Level 2						Level 3
Financial assets:
Finance receivables at fair value (1)						$	334,114					$	—					$	—					$	334,114
Financial liabilities:
Warrant liability - Public Warrants (3)						18,307						18,307						—						—
Warrant liability - Private Placement Warrants (4)						6,199						—						—						6,199
						Carrying Value						Fair Value Measurements
						December 31, 2020						Level 1						Level 2						Level 3
Financial liabilities:
Warrant units (2)						$	1,309					$	—					$	—					$	1,309
During the three and nine months ended September 30, 2021, there were no transfers of assets or liabilities in or out of Level 1, Level 2 or Level 3 fair value measurements.

(1) The Company primarily estimates the fair value of its installment finance receivables portfolio using discounted cash flow models that have been internally developed. The models use inputs that are unobservable but reflect the Company’s best estimates of the assumptions a market participant would use to calculate fair value.

The following table presents quantitative information about the significant unobservable inputs used for the Company’s installment finance receivables fair value measurements as of September 30, 2021:

						September 30, 2021
Interest rate on finance receivables						151.10		%
Discount rate						21.70		%
Servicing fee*						5.02		%
Remaining life						0.58 years
Default rate*						19.09		%
Accrued interest*						3.20		%
Prepayment rate*						21.40		%
*Stated as a percentage of finance receivables

(2) The estimated fair value of the warrant units is calculated using an option pricing model. The resulting fair value measurement is categorized as a Level 3 measurement. Upon closing of the Business Combination, the lender exercised the warrant units and the liability was reclassified to additional paid in capital. As such, there is no warrant unit liability at September 30, 2021. For the three and nine months ended September 30, 2021, warrant expense was $888 thousand and $4,208 thousand, respectively. For the three and nine months ended September 30, 2020, there was no warrant expense. Warrant expense is included in general, administrative, and other in the consolidated statements of operations.

The following table presents the change in the fair value of the warrant units (in thousands):
Fair value as of December 31, 2020						$	1,309
Change in fair value						4,208
Warrant units exercised						(5,517)
Fair value as of September 30, 2021						$	—

(3) The fair value measurement for the Public Warrants is categorized as Level 1 due to the use of an observable market quote in an active market under the ticker OPFI WS.

(4) The fair value of the Private Placement Warrants is measured using as Monte Carlo simulation. As such, the Private Placement Warrants are categorized as Level 3.

Schedule of Fair Value Measurement Input and Valuation Techniques

The fair value of the warrant units was estimated using an option pricing model that used the following assumptions:

												December 31, 2020
Expected term												3 years
Volatility												52.0		%
Discount for lack of marketability												45.0		%
Risk free rate												0.2		%

						September 30, 2021
Interest rate on finance receivables						151.10		%
Discount rate						21.70		%
Servicing fee*						5.02		%
Remaining life						0.58 years
Default rate*						19.09		%
Accrued interest*						3.20		%
Prepayment rate*						21.40		%
*Stated as a percentage of finance receivables

The following table presents the significant assumptions used in the simulation at September 30, 2021 and July 20, 2021, the Closing Date:
						September 30, 2021												July 20, 2021
Input						$11.50 Exercise Price Warrants						$15 Exercise Price Warrants						$11.50 Exercise Price Warrants						$15 Exercise Price Warrants
Risk-free interest rate						0.93		%				1.51		%				0.69		%				1.23		%
Expected term (years)						4.8						9.8						5.0						10.0
Expected volatility						37.00		%				35.50		%				36.50		%				36.00		%
Exercise price						$	11.50					$	15.00					$	11.50					$	15.00
Fair value of warrants						$	1.64					$	2.23					$	2.80					$	3.50

Schedule of Changes in Fair Value of Liabilities

The following table presents the change in the fair value of the warrant units (in thousands):
Fair value as of December 31, 2020						$	1,309
Change in fair value						4,208
Warrant units exercised						(5,517)
Fair value as of September 30, 2021						$	—

The following table presents the changes in the fair value of the warrant liability - Private Placement Warrants (in thousands):
						$11.50 Exercise Price Warrants						$15 Exercise Price Warrants						Total
Fair value as of Closing Date, July 20, 2021						$	7,110					$	3,194					$	10,304
Change in fair value						(2,946)						(1,159)						(4,105)
Fair value as of September 30, 2021						$	4,164					$	2,035					$	6,199

Schedule of Carrying Value and Estimated Fair Values of Financial Assets and Liabilities

The following table presents the carrying value and estimated fair values of financial assets and liabilities disclosed but not carried at fair value and the level within the fair value hierarchy as of September 30, 2021 (in thousands):

						Carrying Value						Fair Value Measurements
						September 30, 2021						Level 1						Level 2						Level 3
Assets:
Cash and cash equivalents						$	27,627					$	27,627					$	—					$	—
Restricted cash						29,175						29,175						—						—
Finance receivables at amortized cost, net						1,269						—						—						1,269
Liabilities:
Secured borrowing payable						19,791						—						—						19,791
Senior debt, net						205,968						—						—						205,968

The following table presents the carrying value and estimated fair values of financial assets and liabilities disclosed but not carried at fair value and the level within the fair value hierarchy as of December 31, 2020 (in thousands):

						Carrying Value						Fair Value Measurements
						December 31, 2020						Level 1						Level 2						Level 3
Assets:
Cash and cash equivalents						$	25,601					$	25,601					$	—					$	—
Restricted cash						20,056						20,056						—						—
Finance receivables at amortized cost, net						222,243						—						—						287,437
Liabilities:
Reserve for repurchase liability						4,241						—						—						4,241
Secured borrowing payable						16,025						—						—						16,025
Senior debt, net						131,726						—						—						131,726
Subordinated debt - related party						4,000						—						—						4,000
Other debt						6,354						—						—						6,354

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- Definition

Tabular disclosure of input and valuation technique used to measure fair value and change in valuation approach and technique for each separate class of asset and liability measured on recurring and nonrecurring basis.

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-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 2
-Subparagraph (bbb)
-URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258

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Tabular disclosure of information about fair value of asset and liability not measured at fair value.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 2E
-URI http://asc.fasb.org/extlink&oid=123874694&loc=SL7498357-110258

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Tabular disclosure of the fair value measurement of liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and gains or losses recognized in other comprehensive income (loss) and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs) by class of liability.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 2
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-URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258

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Tabular disclosure of assets and liabilities, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, that are measured at fair value on a recurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3).

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 2
-Subparagraph (b)
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-Name Accounting Standards Codification
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-URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258

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