Fair Value Measurements |
Fair Value Measurements Fair value on a nonrecurring basis: The Company has no assets or liabilities measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances.
Fair value measurement on a recurring basis: The Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022 are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value Measurements | | | June 30, 2023 | | Level 1 | | Level 2 | | Level 3 | Financial assets: | | | | | | | | | Finance receivables at fair value, excluding accrued interest and fees receivable (1) | | $ | 432,866 | | | $ | — | | | $ | — | | | $ | 432,866 | | | | | | | | | | | Financial liabilities: | | | | | | | | | Warrant liability - Public Warrants (2) | | 832 | | | 832 | | | — | | | — | | Warrant liability - Private Placement Warrants (3) | | 552 | | | — | | | — | | | 552 | | | | | | | | | | | | | | | Fair Value Measurements | | | December 31, 2022 | | Level 1 | | Level 2 | | Level 3 | Financial assets: | | | | | | | | | Finance receivables at fair value, excluding accrued interest and fees receivable (1) | | $ | 441,496 | | | $ | — | | | $ | — | | | $ | 441,496 | | | | | | | | | | | Financial liabilities: | | | | | | | | | Warrant liability - Public Warrants (2) | | 1,189 | | | 1,189 | | | — | | | — | | Warrant liability - Private Placement Warrants (3) | | 699 | | | — | | | — | | | 699 | | | | | | | | | | | During the three and six months ended June 30, 2023 and 2022, there were no transfers of assets or liabilities in or out of 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 June 30, 2023 and December 31, 2022: | | | | | | | | | | | | | | | | | June 30, 2023 | | December 31, 2022 | Interest rate on finance receivables | | 154.53 | % | | 152.39 | % | Discount rate | | 26.78 | % | | 25.89 | % | Servicing cost* | | 3.21 | % | | 5.01 | % | Remaining life | | 0.61 years | | 0.59 years | Default rate* | | 23.61 | % | | 20.27 | % | Accrued interest* | | 3.53 | % | | 3.93 | % | Prepayment rate* | | 21.41 | % | | 21.33 | % | | | | | | *Stated as a percentage of finance receivables | | |
(2) 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. (3) The fair value of the Private Placement Warrants is measured using a Black-Scholes-Merton model; accordingly, the fair value measurement for the Private Placement Warrants is categorized as Level 3. | | | | | | | | | | | | | | | | | | | | | | | | | | | The following table presents the significant assumptions used in the simulation at June 30, 2023 and December 31, 2022: | | | | | | | | | | | | June 30, 2023 | | December 31, 2022 | Input | | $11.50 Exercise Price Warrants | | $15 Exercise Price Warrants | | $11.50 Exercise Price Warrants | | $15 Exercise Price Warrants | Risk-free interest rate | | 4.43 | % | | 3.88 | % | | 4.11 | % | | 3.88 | % | Expected term (years) | | 3.1 years | | 8.1 years | | 3.5 years | | 8.5 years | Expected volatility | | 54.00 | % | | 54.00 | % | | 53.90 | % | | 53.90 | % | Exercise price | | $ | 11.50 | | | $ | 15.00 | | | $ | 11.50 | | | $ | 15.00 | | Fair value of warrants | | $ | 0.07 | | | $ | 0.41 | | | $ | 0.11 | | | $ | 0.46 | |
| | | | | | | | | | | | | | | | | | | | | 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 December 31, 2022 | | $ | 279 | | | $ | 420 | | | $ | 699 | | Change in fair value | | (25) | | | (9) | | | (34) | | Fair value as of March 31, 2023 | | 254 | | | 411 | | | 665 | | Change in fair value | | (76) | | | (37) | | | (113) | | Fair value as of June 30, 2023 | | $ | 178 | | | $ | 374 | | | $ | 552 | |
Financial assets and liabilities not measured at fair value: 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 June 30, 2023 and December 31, 2022 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value Measurements | | | June 30, 2023 | | Level 1 | | Level 2 | | Level 3 | Assets: | | | | | | | | | Cash | | $ | 26,798 | | | $ | 26,798 | | | $ | — | | | $ | — | | Restricted cash | | 35,310 | | | 35,310 | | | — | | | — | | Accrued interest and fees receivable | | 14,090 | | | 14,090 | | | — | | | — | | Finance receivables at amortized cost, net | | 325 | | | — | | | — | | | 325 | | Settlement receivable | | 2,511 | | | 2,511 | | | — | | | — | | | | | | | | | | | Liabilities: | | | | | | | | | Senior debt, net | | 331,884 | | | — | | | — | | | 331,884 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value Measurements | | | December 31, 2022 | | Level 1 | | Level 2 | | Level 3 | Assets: | | | | | | | | | Cash | | $ | 16,239 | | | $ | 16,239 | | | $ | — | | | $ | — | | Restricted cash | | 33,431 | | | 33,431 | | | — | | | — | | Accrued interest and fees receivable | | 15,800 | | | 15,800 | | | — | | | — | | Finance receivables at amortized cost, net | | 643 | | | — | | | — | | | 643 | | Settlement receivable | | 2,000 | | 2,000 | | — | | — | | | | | | | | | | Liabilities: | | | | | | | | | Secured borrowing payable | | 756 | | | — | | | — | | | 756 | | Senior debt, net | | 344,688 | | | — | | | — | | | 344,688 | | Note payable | | 1,616 | | | — | | | — | | | 1,616 | |
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