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Stock-based Compensation | 9 Months Ended
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Sep. 30, 2023
Share-Based Payment Arrangement [Abstract] |
Stock-based Compensation | Stock-based Compensation Share option plans 2020 Incentive Compensation Plan On July 2, 2020, the Company’s board of directors adopted and the Company’s stockholders approved the 2020 Incentive Compensation Plan (the “2020 Plan”), which became effective immediately prior to the effectiveness of the registration statement for the Company’s IPO on July 2, 2020. The 2020 Plan provides for the issuance of incentive stock options, non-qualified stock options, stock awards, stock units, stock appreciation rights and other stock-based awards. The number of shares initially reserved for issuance under the 2020 Plan is 5,503,678 shares, inclusive of available shares previously reserved for issuance under the 2015 Incentive Share Option Plan, as amended and restated on September 4, 2019 (the “2015 Plan”). In addition, the number of shares reserved for issuance under the 2020 Plan is subject to increase for awards previously issued under the 2015 Plan which are forfeited or lapse unexercised. Annually, on the first day of each calendar year beginning on January 1, 2021 and ending on and including January 1, 2030, the reserve will be increased by an amount equal to the lesser of (A) 5% of the shares outstanding (on an as-converted basis) on the last day of the immediately preceding fiscal year and (B) such smaller number of shares as determined by the Company’s board of directors, provided that no more than 3,650,000 shares may be issued upon the exercise of incentive stock options. On January 1, 2023, the 2020 Plan share pool was increased by 3,463,751 shares, equal to 5% of the aggregate number of outstanding common stock as of December 31, 2022. As of September 30, 2023, there were 4,393,900 shares of common stock available for future grants. 2020 Employee Stock Purchase Plan On July 2, 2020, the Company's board of directors adopted and the Company's stockholders approved the 2020 Employee Stock Purchase Plan (the "2020 ESPP"), which became effective immediately prior to the effectiveness of the registration statement for the Company's IPO on July 2, 2020. The total shares of common stock initially reserved for issuance under the 2020 ESPP is limited to 1,000,000 shares. In addition, the number of shares available for issuance under the 2020 ESPP will be increased on January 1 of each calendar year beginning in 2021 and ending in and including 2030, by an amount equal to the lesser of (A) 1,000,000 shares, (B) 1% of the shares outstanding on the final day of the immediately preceding calendar year and (C) such smaller number of shares as is determined by the board of directors. The board of directors or a committee of the board of directors will administer and will have authority to interpret the terms of the 2020 ESPP and determine eligibility of participants. On January 1, 2023, there was no increase in the 2020 ESPP share pool. As of September 30, 2023, there were no shares of common stock issued under the 2020 ESPP. 2015 Incentive Share Option Plan In July 2015, the Company adopted the 2015 Incentive Share Option Plan ("2015 Plan"). The 2015 Plan has been amended and restated from time to time to increase the number of shares reserved for grant and to enable the grant of options to employees of the Company’s subsidiaries. Under the 2015 Plan, options to purchase common stock of the Company may be granted to employees, officers, directors and consultants of the Company. Each option granted can be exercised for one share of common stock of the Company. Options granted to employees generally vest over a period of no more than four years. The options expire ten years from the date of grant. Pursuant to the 2015 Plan, the Company had reserved 7,312,590 shares of common stock for issuance. Effective immediately upon the approval of the 2020 plan, the remaining shares of common stock available for future grant under the 2015 Plan were transferred to the 2020 Plan. As of September 30, 2023, there wer e no shares of common stock available for future grant under the 2015 Plan. Subsequent to the approval of the 2020 Plan, no additional grants will be made under the 2015 Plan and any outstanding awards under the 2015 Plan will continue with their original terms. Assumed Share Option Plans As part of the Metromile Acquisition, the Company assumed the Metromile 2011 Incentive Stock Plan ("2011 Plan") and Metromile 2021 Incentive Stock Plan ("2021 Plan") (collectively referred to as "Assumed Plans"). The equity awards assumed of 404,207 were granted from the respective Assumed Plans but will be settled in the Company's common stock (see Note 5). The remaining unallocated shares reserved under both 2011 Plan and 2021 Plan were cancelled and no new awards will be granted under these Assumed Plans. Options granted to employees and non-employees The fair value of each option granted for the nine months ended September 30, 2023 and 2022 is estimated on the date of grant using the Black-Scholes model based on the following assumptions:
|  | Nine Months Ended September 30,
|  | 2023 |  | 2022
Weighted average expected term (years) |  | 6.0 |  | 6.1
Risk-free interest rate |  | 4.2% |  | 2.7%
Volatility |  | 74% |  | 47%
Expected dividend yield |  | 0% |  | 0%
Expected volatility is calculated based on implied volatility from market comparisons of certain publicly traded companies and other factors. The expected term of options granted is based on the simplified method, which uses the midpoint between the vesting date and the contractual term in accordance with ASC Topic 718, “Compensation — Stock Compensation.” The risk-free interest rate is based on observed interest rates appropriate for the term of the Company’s stock options. The dividend yield assumption is based on the Company’s historical and expected future dividend payouts and may be subject to substantial change in the future. The following tables summarize activity of stock options and restricted stock units ("RSUs") ($ in millions, except for number of options and weighted average amounts): Stock options
|  | Number of Options |  | Weighted- Average Exercise Price |  | Weighted-Average Remaining Contractual Term (Years) |  | Aggregate Intrinsic Value
Outstanding as of December 31, 2022 (1) |  | 9,760,657 |  | $ | 39.43 |  |  | 8.17 |  | $ | 8.05 |
Granted |  | 1,016,218 |  |  | 15.67 |  |  |  |  |
Exercised |  | (92,954) |  |  | 5.13 |  |  |  |  |
Cancelled/Forfeited |  | (961,442) |  |  | 38.87 |  |  |  |  |
Outstanding as of September 30, 2023 |  | 9,722,479 |  | $ | 37.28 |  |  | 7.47 |  | $ | 5.30 |
Options exercisable as of September 30, 2023 |  | 4,386,472 |  | $ | 29.79 |  |  | 6.22 |  | $ | 5.30 |
Options unvested as of September 30, 2023 |  | 5,336,007 |  | $ | 43.44 |  |  | 8.49 |  | $ | — |
(1) Includes assumed options of 72,410 from the Metromile Acquisition (see Note 5). Restricted Stock Units
|  | Number of Shares |  | Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2022 (1) |  | 1,651,243 |  |  | $ | 27.92 |
Granted |  | 2,753,356 |  |  | 15.84 |
Vested |  | (541,372) |  |  | 25.28 |
Cancelled/Forfeited |  | (523,455) |  |  | 22.38 |
Outstanding as of September 30, 2023 |  | 3,339,772 |  |  | $ | 19.22 |
(1) Includes assumed restricted stock units of 331,797 from the Metromile Acquisition (see Note 5). Stock-based compensation expense Stock-based compensation expense from stock options and RSUs granted are included and classified in the condensed consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022, including assumed awards from the Metromile Acquisition and warrant shares for the three and nine months ended September 30, 2023 and 2022, as follows ($ in millions):
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2023 |  | 2022 |  | 2023 |  | 2022
Loss and loss adjustment expense, net |  | $ | 0.8 |  |  | $ | 0.7 |  |  | $ | 2.2 |  |  | $ | 1.9 |
Other insurance expense |  | 0.6 |  |  | 0.4 |  |  | 1.6 |  |  | 1.2 |
Sales and marketing (1) |  | 1.9 |  |  | 1.8 |  |  | 4.6 |  |  | 5.0 |
Technology development |  | 6.4 |  |  | 6.4 |  |  | 19.4 |  |  | 17.6 |
General and administrative |  | 5.7 |  |  | 6.3 |  |  | 17.8 |  |  | 17.9 |
Total stock-based compensation expense |  | $ | 15.4 |  |  | $ | 15.6 |  |  | $ | 45.6 |  |  | $ | 43.6 |
(1) Includes compensation expense related to warrant shares of $0.9 million and $1.5 million for the three and nine months ended September 30, 2023. Stock-based compensation expense classified by award type as included in the condensed consolidated statements of operations is as follows ($ in millions):
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2023 |  | 2022 |  | 2023 |  | 2022
Stock options |  | $ | 9.1 |  |  | $ | 11.9 |  |  | $ | 29.4 |  |  | $ | 35.9 |
RSUs |  | 5.4 |  |  | 3.7 |  |  | 14.7 |  |  | 7.7 |
Warrant shares |  | 0.9 |  |  | — |  |  | 1.5 |  |  | — |
Total stock-based compensation expense |  | $ | 15.4 |  |  | $ | 15.6 |  |  | $ | 45.6 |  |  | $ | 43.6 |
The total unrecognized expense granted to employees and non-employees outstanding at September 30, 2023 was $64.3 million for the stock options and $59.7 million for the RSUs, with a remaining weighted-average vesting period of 1.2 years for the stock options and 1.6 years for the RSUs. Warrants In connection with the Warrant Agreement as discussed in Note 11, the Company is authorized to issue 3,352,025 warrant shares with a grant date fair value of $20.37 that will vest in installments on a yearly basis in increasing amounts for a period of five years. The Company recognized $0.9 million and $1.5 million in compensation expense related to these equity-classified warrants for the three and nine months ended September 30, 2023, respectively. Compensation expense is presented under “Sales and marketing expense” in the consolidated statements of operations and comprehensive income. Total unrecognized compensation expense related to these warrants amounted to $66.8 million as of September 30, 2023, and will be recognized over the vesting period, for each of the installments, in increasing amounts over five years. There are no vested warrant shares as of September 30, 2023.

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