Stock-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

13. Stock-Based Compensation

2012 Stock Incentive Plan

In October 2012, the Company adopted the 2012 Stock Incentive

Plan

(as amended, the “2012 Plan”). Under the 2012 Plan, employees

and non-employees can

be granted options on common stock, RSUs and other stock-based awards, including awards earned in connection with the Agent Equity Program. Generally, these awards are based on stock agreements

with

ten-year

contractional

terms for stock options and up to a

ten-year

contractual terms for RSUs, subject to board approval

2021 Equity Incentive Plan

In February 2021, the Company’s board of directors and stockholders adopted and approved the 2021 Equity Incentive Plan (the “2021 Plan”), with an initial pool of

29,666,480

shares of common stock available for granting stock-based awards plus any reserved shares of common stock not issued or subject to outstanding awards granted under the Company’s 2012 Plan. In addition, on January 1

of each year beginning in 2022 and continuing through 2031, the aggregate number of shares of common stock authorized for issuance under the 2021 Plan shall be increased automatically by the number of shares equal to five percent

(5%)

of the total number of outstanding shares of common stock and shares of preferred stock of the Company’s outstanding (on an as converted to common stock basis) on the immediately preceding December 31

, although the Company’s board of directors or one of its committees may reduce the amount of such increase in any particular year. The 2021 Plan became effective on March 30, 2021 and as of that date, the Company ceased granting new awards under the 2012 Plan and all remaining shares available under the 2012 Plan were transferred to the 2021 Plan. As of December 31, 2021, there were

26,196,697

shares available for future grants under the 2021 Plan, inclusive of those shares transferred from the 2012 Plan. Effective January 1, 2022 the shares available for future grants were increased by an additional 20,457,795 shares as a result of the annual increase provision described above.

2021 Employee Stock Purchase Plan

In February 2021, the Company’s board of directors and stockholders adopted and approved the 2021 Employee Stock Purchase Plan (the “ESPP”). The ESPP authorizes the issuance of

7,416,620

shares of common stock to purchase rights granted to the Company’s employees or to employees of its designated affiliates. In addition, on January 1st of each year beginning in 2022 and continuing through 2031, the aggregate number of shares of common stock authorized for issuance under the ESPP shall be increased automatically by the number of shares equal to one percent

(1%)

of the total number of outstanding shares of common stock on the immediately preceding December 31st, although the Company’s board of directors or one of its committees may reduce the amount of the increase in any particular year. No more than

150,000,000

shares of common stock may be issued over the term of the ESPP, subject to certain exceptions set forth in the ESPP. Effective January 1, 2022 the shares available for issuance under the ESPP were increased by an additional

3,918,007

shares as a

result of the annual provision described

above. As

of the date of this filing, no shares have been

issued

under the ESPP.

Stock Options

Stock options vest over a prescribed service period generally lasting

four years

. Upon the exercise of any stock options, the Company issues shares to the award holder from the pool of authorized but unissued common stock.

The fair value of each stock option award is estimated on the grant date using the Black-Scholes option pricing model with the exception of certain stock options that have market-based vesting conditions which are valued using a Monte Carlo simulation. The inputs used below are subjective and require significant judgement to determine.


	Year Ended December 31,
	2021			2020			2019
Expected term (in years)		6.3			7.0			5.9
Risk-free interest rate		0.9	%		0.8	%		2.3	%
Expected volatility		49.3	%		45.1	%		45.0	%
Dividend rate		—	%		—	%		—	%
Fair value of common stock (range for the period)	$	8.80 - $18.00		$	6.65 - $23.44		$	5.16 - $6.44
Weighted average grant date fair value of options granted	$	8.68		$	5.67		$	2.62

Each of these inputs is subjective and generally requires significant judgment.

Expected Term

— The expected term represents the period that the stock-based awards are expected to be outstanding. The Company uses the simplified method to calculate the expected term due to insufficient historical experience, which assumes a ratable rate of exercise over the contractual term.

Risk-Free Interest Rate

— The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant

for zero-coupon U.S.

Treasury constant maturity notes with terms approximately equal to the stock-based awards’ expected term.

Expected Volatility

— As a result of the lack of historical and implied volatility data of the Company’s common stock prior to the IPO, the expected stock price volatility has been estimated based on the historical volatilities of a specified group of companies in its industry for a period equal to the expected life of the option. The Company selected companies with comparable characteristics to it, including enterprise value, risk profiles, and position within the industry and with historical share price information sufficient to meet the expected term of the stock options. The historical volatility data has been computed using the daily closing prices for the selected companies.

Dividend Rate

— The expected dividend rate is zero as the Company has not declared or paid any cash dividends and does not anticipate to do so in the foreseeable future.

Fair Value of Common Stock

— Prior to the IPO, the fair value of the shares of common stock underlying stock options and RSUs were historically determined by the board of directors as there was no public market for the common stock. The board of directors determined the fair value of the Company’s common stock by considering a number of objective and subjective factors including: the valuation of comparable companies, sales of convertible preferred stock to unrelated third parties, the Company’s operating and financial performance, secondary transactions involving the Company’s common stock, the lack of liquidity of common stock and general and industry specific economic outlook, amongst other factors.

A summary of stock option activity under the

Plan, including 1,061,250 stock options that were granted outside of the

Plan in 2019, is

presented below (in millions, except share and per share amounts):


	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contract Term (in years)		Aggregate Intrinsic Value
Balance as of December 31, 2020		62,827,150		$	4.55		7.8	$	1,208.0
Granted		3,375,940			13.89
Exercised		(9,318,462	)		2.89
Forfeited		(2,359,089	)		6.87

Balance as of December 31, 2021		54,525,539		$	5.30		7.1	$	221.3

Excercisable and vested at December 31, 2021		34,618,347		$	4.02		6.3	$	176.6

During the years ended December 31, 2021, 2020 and 2019, the intrinsic value of options exercised was $124.1 million, $9.8 million and $19.1 million, respectively.

Stock-based compensation recognized during the years ended December 31, 2021, 2020 and 2019 associated with stock options was $46.5 million, $31.9 million and $35.4 million, respectively. As of December 31, 2021, unrecognized compensation costs totaled $113.1 million and are expected to be recognized over a weighted-average period of 3.3 years.

In June 2020

, the Company granted 1,620,540 stock options with service, performance and market-based vesting conditions to an executive employee. These conditions include stock price targets to be met after the listing of the Company’s stock on a public exchange.

For the year ended December 31, 2021, total compensation costs of $1.5 million related to these options was recognized.

As of December 31

, 2021

, total compensation costs of $3.5

million related to these options has not yet been recognized.

The remaining

expense

expected to be satisfied over a period of 3.9 years.

Early Exercise of Stock Options

A majority of the stock options granted under the 2012 Plan provide option holders the right to elect to exercise unvested options in exchange for restricted common stock. Shares received from such early exercises are subject to repurchase in the event of the optionee’s termination of service until the stock options are fully vested at the lesser of the original issuance price or the fair value the Company’s common stock.

During the year ended December 31, 2021, 918,590 stock options were early exercised for total proceeds of $5.6 million. As of December 31, 2021, 1,068,300 shares of common stock received by holders from an early exercise were subject to repurchase. The cash proceeds received for unvested shares of common stock recorded within Accrued expenses and other current liabilities and Other

non-current

liabilities in the consolidated balance sheet was $3.2 million and $3.0 million, respectively, as of December 31, 2021. Amounts recorded are transferred into Common stock and Additional

paid-in

capital within the consolidated balance sheets as the shares vest.

Restricted Stock Units

A summary of RSU activity under the 2012 Plan and the 2021 Plan is presented below:


	Number of Shares			Weighted Average Grant Date Fair Value
Balance as of December 31, 2020		32,556,160		$	6.75
Granted		41,969,138			13.30
Vested and converted to common stock		(15,779,232	)		10.21
Forfeited		(4,228,136	)		13.20

Balance as of December 31, 2021		54,517,930		$	10.29

During the year ended December 31, 2021

the fair value of restricted stock units that vested and converted to common stock was $203.5 million

There were no units vested and converted to common stock during the years ended December 31, 2020 and 2019. During 2021, the Company net settled all RSUs through which it issued an aggregate of

10,871,486

shares of Class A common stock and withheld an aggregate of

4,907,746

shares of Class A common stock to satisfy $62.4 million of tax withholding obligations on behalf of the Company’s employees.

As of December 31, 2021,

all

unvested RSUs had total compensation costs of $479.4 million not yet recognized and is expected to be recognized over a weighted-average period of 3.2 years.

For the year ended December 31, 2021, the Company recognized stock-based compensation expense and an associated liability of $84.8 million in connection with RSUs earned as a part of the 2021 Agent Equity Program. The associated liability is recorded within Accrued expenses and other current liabilities in the consolidated balance sheet. In February 2022, the Company issued 13,624,457 RSUs to affiliated agents in connection with the 2021 Agent Equity Program.

During the

years

ended December 31, 2021 and 2020, the Company granted 8,611,810 and 8,611,810 RSUs, respectively, to an executive employee. These

awards

include service, performance and market-based vesting conditions. These conditions include stock price targets to be met after the listing of the Company’s stock on a public exchange.

For the year ended December 31, 2021, total compensation costs of $25.0 million related to these awards was recognized.

As of December 31, 2021,

total

compensation costs related to these RSUs of $75.2 million

has

not yet been recognized.

The remaining

expense

is expected to be

satisfied

over a period of 3.3 years. These awards were valued using a Monte Carlo simulation.

Other Stock-Based Awards

In July 2018, the Company issued 1,680,340 shares of Class A common stock with a grant date fair value of $2.66 per share to an executive employee. These shares are subject to a four-year vesting period in which the employee must continue to provide services to the Company. The fair value of these shares was measured based on the fair value of the Company’s common stock on the grant date and will be recognized as expense over the service period of the award. For the years ended December 31, 2021, 2020 and 2019, the Company recognized stock-based compensation expense of $1.2 million, $1.1 million and $1.1 million, respectively, related to this award.

For the years ended December 31, 2021, 2020 and 2019, the Company recorded approximately $2.2 million, $8.0 million and $0.6 million, respectively, in compensation expense for stock-based awards outside the

Plan. For the year ended December 31, 2020, $8.0 million of these expenses related to compensation expenses incurred in connection with the sale of shares to investors by certain Company employees

and non-employee service

providers in excess of the fair value of the shares sold. There were no expenses incurred in connection with the sale of shares to investors by certain Company employees and

non-employee

service providers in excess of the fair value of shares for the

years

ended December 31,

2021 and

2019.

Stock-Based Compensation

Expense

Total stock-based compensation expense included in the consolidated statement of operations is as follows (in millions):


	Year Ended December 31,
	2021		2020		2019
Commissions and other related expense	$	128.7	$	5.7	$	16.1
Sales and marketing		38.4		16.0		11.1
Operations and support		16.9		3.5		2.4
Research and development		92.7		1.4		2.8
General and administrative		109.6		16.6		5.0

Total stock-based compensation expense	$	386.3	$	43.2	$	37.4

The increase in stock-based compensation expense in 2021 as compared to 2020 and 2019 was almost entirely the result of the required accounting treatment for RSUs which differed before and after the March 31, 2021 effective date of the Company’s IPO. The RSUs outstanding prior to the IPO contained a liquidity-event based vesting condition, in addition to a time-based vesting condition. The liquidity-event based vesting condition did not allow for the recognition of stock based-compensation expense until this condition was satisfied at the time of the IPO. The Company recognized

a one-time

acceleration of stock-based compensation expense of $148.5 million in connection with the IPO when this liquidity-event based vesting condition was satisfied on March 31, 2021 and recognized additional stock-based compensation expense subsequent to the IPO over the periods that the time-based vesting conditions are satisfied.

Stock-based compensation expense for the year ended December 31, 2021 includes the following amounts

related to a

one-time

acceleration of stock-based compensation expense in connection with the IPO (in millions):


	IPO Related Expense

Commissions and other related expense	$	41.7
Sales and marketing		1.8
Operations and support		3.1
Research and development		46.9
General and administrative		55.0

Total stock-based compensation expense	$	148.5

The Company has not recognized any tax benefits from stock-based compensation as a result of the full valuation allowance maintained on its deferred tax assets.