Stock-based Compensation

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

Share option plan

In July 2015, the Company adopted the 2015 incentive share option plan and amended and restated the plan on September 4, 2019 (the “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 10 years from the date of grant.

Pursuant to the 2015 Plan, the Company had reserved 7,312,590 shares of Common stock for issuance. As of June 30, 2020, there were 1,750,178 shares of Common stock available for future grant.

Options granted to employees and non-employees

The fair value of each option granted during the six months ended June 30, 2020 and 2019 is estimated on the date of grant using the Black-Scholes model with the following assumptions:


	Six Months Ended June 30,
	2020	2019
Weighted average expected term (years)	6.1	6.1
Risk-free interest rate	1.0%	2.5%
Volatility	40%	50%
Expected dividend yield	0%	0%

Expected volatility is based on companies at a comparable stage, as well as companies in the same or a similar industry. The expected term of options granted is based on the “Simplified” method, in accordance with ASC 718, “Compensation — Stock Compensation”. The risk-free interest rate is based on observed interest rates appropriate for the term of the Company’s employee 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 table summarizes activity of stock options ($ in millions, except for option and average amounts):


	Number of Options	Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2019	4,048,802	$	13.27	8.8	$	42.2
Granted	707,030	24.41
Exercised	(84,936)	2.08
Cancelled	(92,376)	20.28
Outstanding as of June 30, 2020	4,578,520	$	15.06	8.6	$	43.1

Options exercisable as of June 30, 2020	1,222,898	$	4.79	7.3	$	24.1
Options vested and expected to vest as of June 30, 2020	4,578,520	$	15.06	8.6	$	43.1

Total stock-based compensation expense resulting from stock options granted to employees and non-employees for the three and six months ended June 30, 2020 were $2.4 million and $4.5 million, respectively and for the three and six months ended June 30, 2019 were $0.4 million and $0.7 million, respectively.

In December 2019, the board of directors approved the repricing of the stock options to purchase 1,708,300 shares of common stock held by 198 employees with exercise prices of $26.04 and $28.53 per share to the then current fair value of $23.69 per share. In connection with the repricing of these options, the Company recorded incremental expense of $0.1 million and $0.2 million for the three and six months ended June 30, 2020. The incremental unrecognized expense on these repriced option grants at June 30, 2020 was $1.4 million, with a remaining weighted-average period vesting period of 1.4 years.

The total unrecognized expense on options granted to employees and non-employees outstanding at June 30, 2020 was $30.3 million, with a remaining weighted-average vesting period of 1.4 years.

Stock-based compensation expense

Stock-based compensation expense was classified in the condensed consolidated statements of operations as follows ($ in millions):


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Loss and loss adjustment expense, net	$	0.1	$	—	$	0.1	$	—
Other insurance expense	0.2		0.1		0.4		0.2
Sales and marketing	0.6		0.1		1.3		0.2
Technology development	0.7		0.1		1.3		0.1
General and administrative	0.8		0.1		1.5		0.3
Total stock-based compensation expense	$	2.4	$	0.4	$	4.6	$	0.8

In 2016 and 2017, the Company entered into stock purchase agreements with two executive employees where in lieu of cash payment for the stock, promissory notes were issued totaling $1.5 million and bearing a weighted average interest of 1.9% per annum, payable to the Company. These notes are secured by the underlying stock purchased and such unvested stock can be repurchased by the Company upon termination of each executive’s employment at the original issuance price.

Because the Company only has partial recourse under the promissory notes, the Company deemed the purchase of the stock to be non-substantive. As such, the note receivable is not reflected in the condensed consolidated financial statements and the related stock transaction will be recorded at the time the note receivable is settled in cash. In accordance with ASC 718, the purchases were treated as exercises of stock options with the fair value recognized over the requisite service period through a charge to compensation cost. The maturity date of the promissory notes reflects the legal term of the stock option for purposes of valuing the award. Total stock-based compensation expense resulting from stock options granted to the executives for the three and six months ended June 30, 2020 and 2019 was less than $0.1 million and $0.1 million, respectively.

The unrecognized expense on options granted to these executives outstanding at June 30, 2020 was $0.1 million, with a remaining weighted average vesting period of 1.0 year.

On June 8, 2020, the Company received $1.3 million in cash from the two executives in full settlement of the outstanding promissory notes, including principal and accrued and unpaid interest.