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Stockholders' Equity
 12 Months Ended
Dec. 31, 2022
Stockholders' Equity  
Stockholders' Equity

12. Stockholders’ Equity

As of December 31, 2022 and December 31, 2021, the Company has 5,000,000 preferred shares authorized with a par value of $0.0001 and no preferred shares issued and outstanding. As of December 31, 2022 and December 31, 2021, the Company has 500,000,000 common shares authorized and 25,027,467 and 25,428,929 common shares issued and outstanding, respectively, with a par value of $0.0001. Additional paid in capital is $333.6 million as of December 31, 2022 and $318.9 million as of December 31, 2021.

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Common stock reserved for future issuance consists of the following as of December 31, 2022:

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​

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Stock options outstanding under 2019 Equity Incentive Plan

882,892

Restricted stock units outstanding under 2019 Equity Incentive Plan

271,951

Performance stock units outstanding under 2019 Equity Incentive Plan

383,103

Shares authorized for future issuance under 2019 Equity Incentive Plan

2,594,587

Shares authorized for future issuance under 2019 Employee Stock Purchase Plan

907,850

Total

5,040,383

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The below table summarizes the Company’s stock-based compensation expense for each period presented:

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​

​

​

​

​

​

​

​

​

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Year ended December 31, 

​

2022

    

2021

    

2020

​

(in thousands)

Stock-Based Compensation Expense

$

11,624

​

$

5,584

​

$

2,167

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Stock-based compensation expense is recognized on a straight-line basis over the vesting period of awards. The Company does not apply a forfeiture rate to unvested awards and accounts for forfeitures as they occur. All stock-based compensation is included in other underwriting expenses in the Company’s consolidated statements of income and comprehensive income.

2019 Equity Incentive Plan

On April 16, 2019, the Company’s 2019 Equity Incentive Plan (the “2019 Plan”) became effective. The 2019 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance shares and units, and other cash-based or share-based awards. In addition, the 2019 Plan contains a mechanism through which the Company may adopt a deferred compensation arrangement in the future.

A total of 2,400,000 shares of common stock were initially authorized and reserved for issuance under the 2019 Plan. This reserve increases on January 1 of each year through 2029, by an amount equal to the smaller of: 3% of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or an amount determined by the board of directors.

Stock Options

Recipients of stock options can purchase shares of the Company’s common stock at a price equal to the stock’s fair market value on the grant date, determined by the closing price of the Company's common stock on the grant date. Stock options vest over a period between two and four years with between 25% and 50% vesting on the first anniversary of the grant date and the remainder vesting monthly over the remaining period, subject to continued service to the Company. Stock options expire ten years after the grant date.

The following table summarizes stock option transactions for the year ended December 31, 2022:

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​

​

​

​

​

​

​

​

​

​

​

​

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Weighted average

​

​

​

​

​

​

​

​

​

remaining

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Aggregate

​

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Number of

​

Weighted-average

​

contractual term

​

intrinsic value

​

    

shares

    

exercise price

    

(in years)

    

(in thousands)

Outstanding at January 1, 2022

​

933,051

​

$

29.41

​

7.59

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$

36,679

Options granted

​

122,539

​

​

51.99

​

​

​

​

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Options exercised

​

(148,427)

​

​

15.31

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​

​

​

​

Options canceled

​

(24,271)

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​

68.13

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​

​

​

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Outstanding at December 31, 2022

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882,892

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$

33.85

​

6.92

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$

16,990

Vested and Exercisable at December 31, 2022

​

658,858

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$

26.33

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6.48

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$

16,001

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The total intrinsic value of stock options exercised during the years ended December 31, 2022 and December 31, 2021 was $7.1 million and $8.5 million, respectively. No options were exercised prior to 2020. As of December 31, 2022, the Company had approximately $3.6 million of total unrecognized stock-based compensation expense related to stock options expected to be recognized over a weighted-average period of 1.58 years.

The fair value of each option granted was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions in each year presented:

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Year ended December 31, 

​

2022

    

2021

    

2020

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(in thousands)

Risk free rate of return (1)

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1.69% - 4.23%

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​

0.57% - 1.35%

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​

0.32% - 1.52%

Expected share price volatility (2)

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39.73% - 43.03%

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​

26.06% - 39.41%

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​

18.13% - 25.67%

Expected life in years (3)

​

5.89

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​

5.89

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​

5.63 - 6.08

Dividend yield (4)

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0%

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​

0%

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​

0%

(1)Determined based on the U.S. Treasury yield in effect at the time of the grant for zero-coupon U.S. Treasury notes with remaining terms similar to the expected term of the options.
(2)Determined based on a blend of the Company’s historic stock price volatility and the historic volatility of a peer group of publicly traded companies.
(3)Determined using the “simplified method” for estimating the expected option life, which is the average of the weighted-average vesting period and contractual term of the option as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its common stock has been publicly traded.
(4)Determined to be zero as the Company does not currently plan to issue dividends.

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Restricted Stock Units

Restricted stock units are valued on their grant date and generally vest either on the first anniversary of the grant date or over a three-year period with one third vesting on each anniversary date, subject to continued service with the Company. The fair value of RSUs is determined using the closing price of the Company's common stock on the grant date.

The following table summarizes RSU transactions for the year ended December 31, 2022:

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​

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Weighted-average

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​

Number of

​

grant date

​

    

shares

    

fair value

Non vested outstanding at January 1, 2022

​

235,696

​

$

79.33

Granted

​

100,106

​

​

51.53

Vested

​

(57,536)

​

​

80.60

Forfeited

​

(6,315)

​

​

76.30

Non vested outstanding at December 31, 2022

​

271,951

​

$

68.90

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As of December 31, 2022, the Company had approximately $15.4 million of total unrecognized stock-based compensation expense related to RSUs expected to be recognized over a weighted-average period of 2.87 years.

Performance Stock Units (“PSUs”)

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The Company issues PSUs to employees with a combination of service, performance, and market conditions.

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The majority of PSUs were issued pursuant to the 2021 Executive Stock Grants, as described below. For other PSU grants, vesting of PSUs requires a period of future service and the number of shares that vest depends on performance relative to predetermined targets of the Company’s Gross Written Premiums and Adjusted Return on Equity as set by the Compensation Committee. The PSU’s performance period is the fiscal year of the grant. At the end of the performance period, the actual results will be measured against the predetermined targets to determine the number of PSUs to be earned as compensation. The earned PSUs are then subject to a required service period of approximately three years from the grant date before vesting and being issued as common stock.

The following table summarizes PSU transactions for the year ended December 31, 2022:

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Weighted-average

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Number of

​

grant date

​

    

shares

    

fair value

Non vested outstanding at January 1, 2022

​

358,401

​

$

36.87

Granted

​

26,165

​

​

50.36

Vested

​

—

​

​

—

Forfeited

​

(1,463)

​

​

80.69

Non vested outstanding at December 31, 2022

​

383,103

​

$

37.62

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The PSU grants above represent the number of shares that would vest based on achievement of all stock price milestones in the executive stock grants and the 100% achievement of the predetermined company performance conditions for the other PSU grants. The actual number of PSUs which will vest is subject to adjustment based on the Company’s actual stock price performance and financial performance relative to the predetermined targets and subject to recipient service requirements. As of December 31, 2022, the Company had approximately $10.5 million of total unrecognized stock-based compensation expense related to PSUs expected to be recognized over a weighted-average period of 3.54 years.

2021 Executive Stock Grants

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During the year ended December 31, 2021, the Company granted 192,307 RSUs and 350,000 PSUs to various executives, including the Company’s CEO. The RSUs vest over a period of five years with one fifth vesting upon the first, second and third anniversary of the grants and the remainder vesting monthly thereafter.

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The PSUs are earned based on the achievement of stock price milestones. If the Company’s stock price reaches and remains at certain milestones for 30 days, the PSUs shall become earned units and will vest upon completion of a requisite service period. The Company’s CEO must remain as an employee through December 31, 2025, or as an

employee and/or director through the fifth anniversary of the grant date the PSUs to vest. Other executives must remain as employees through December 31, 2026 for the PSUs to vest. As of December 31, 2022, none of the stock price milestones have been achieved.

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The RSUs were valued based on the closing price of the Company’s stock on the grant date. The PSUs were valued using a Monte Carlo simulation to account for the market condition within the award. The Company expects to recognize $14.6 million of expense relating to the RSUs and $12.4 million relating to the PSUs. The expense shall be recognized straight-line over the requisite service period of approximately five years. Should these executives leave prior to the requisite service period, any recognized compensation expense related to unvested RSUs and PSUs will be reversed.

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2019 Employee Stock Purchase Plan

On April 16, 2019, the Company's 2019 Employee Stock Purchase Plan (“the 2019 ESPP”) became effective. A total of 240,000 shares of common stock are initially authorized and reserved for issuance under the 2019 ESPP. In addition, the 2019 ESPP provides for annual increases in the number of shares available for issuance on January 1 of each year through 2029, equal to the smaller of 240,000 shares of the Company’s common stock or such other amount as may be determined by the board of directors.

Under the 2019 ESPP, employees can purchase Company stock at a discount via payroll withholdings. The 2019 ESPP is administered through employee participation in discrete offering periods. During each discrete offering period employee funds are withheld, and the stock purchase occurs upon the conclusion of the offering period. The Company issued 13,990 and 9,793 shares pursuant to the ESPP during the years ended December 31, 2022 and December 31, 2021, respectively.

Share repurchases

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During the year ended December 31, 2021, the Company’s Board of Directors authorized a $40 million share repurchase program and the Company repurchased $15.9 million of shares under this program in 2021. On January 24, 2022, the Board of Directors approved a new share repurchase program, replacing the existing program and authorizing the repurchase by the Company of up to $100 million of its outstanding shares of common stock over the period ending on March 31, 2024.

The Company purchased 621,415 shares for $34.4 million under this program during the year ended December 31, 2022. The Company accounts for share repurchases by charging the excess of repurchase price over the common stock’s par value entirely to retained earnings. All repurchased shares are retired and become authorized but unissued shares.