Root, Inc.ROOT
Root, Inc. Stock Compensation Disclosure
SHARE-BASED COMPENSATION
Warrants
As part of the Investment Agreement discussed in Note 11, “Capital Stock,” we issued Carvana eight tranches of warrants, comprised of three tranches of “short-term warrants” and five tranches of “long-term warrants,” with the opportunity to purchase a maximum of 7.2 million shares of Class A common stock. The short-term warrants had an expiration date of September 1, 2025 and the long-term warrants have an expiration date of September 1, 2027.
On September 1, 2025, all of the short-term warrants expired unexercised and therefore, no short-term warrants remain outstanding. All compensation cost associated with the short-term warrants was previously recognized. For the years ended December 31, 2024 and 2023, we recognized compensation expense of $3.8 million and $17.4 million, respectively. There is no expense reversal because the performance obligations had been previously met.
As of December 31, 2025, certain long-term warrant tranches were probable of vesting. We recognized compensation expense considering the probability of and progress toward achieving the long-term warrant policy origination milestones. For the year ended December 31, 2025, we recognized compensation expense of $19.2 million. Warrant compensation expense is recorded in other insurance expense in the consolidated statements of operations and comprehensive income (loss). All of these warrants are out-of-the-money and, therefore, have no intrinsic value as of December 31, 2025.
Based on the probability of achieving certain policy origination milestones, unrecognized compensation cost is approximately $7.8 million as of December 31, 2025. The weighted-average remaining compensation costs are expected to be recognized over a period of 1.75 years.
The following table provides the maximum remaining unrecognized compensation costs as of December 31, 2025, and other key terms of the warrants:
| Warrants | Exercise Price | Shares Issued (in millions) | Grant Date Fair Value per Share | Unrecognized Compensation Costs (in millions) | Vesting Condition | ||||||||||||||||||||||||
| Long-Term | |||||||||||||||||||||||||||||
| Tranche 1 | $ | 180.00 | 1.4 | $ | 7.64 | $ | — | 100,000 policy originations | |||||||||||||||||||||
| Tranche 2 | $ | 225.00 | 1.5 | $ | 6.32 | 1.2 | 200,000 policy originations | ||||||||||||||||||||||
| Tranche 3 | $ | 270.00 | 1.5 | $ | 4.39 | 6.6 | 300,000 policy originations | ||||||||||||||||||||||
| Tranche 4 | $ | 405.00 | 1.5 | $ | 1.70 | 2.4 | 400,000 policy originations | ||||||||||||||||||||||
| Tranche 5 | $ | 540.00 | 1.3 | $ | 0.75 | 1.0 | 500,000 policy originations | ||||||||||||||||||||||
| Total Long-Term | 7.2 | $ | 11.2 | ||||||||||||||||||||||||||
2020 Equity Incentive Plan
We maintain an equity incentive plan, the 2020 Equity Incentive Plan, or the 2020 Plan, for the issuance and grant of equity awards (restricted stock, RSUs, PRSUs, MRSUs and incentive and nonqualified stock options) to our officers, directors, employees and certain advisors. As of December 31, 2025, the number of shares authorized under the 2020 Plan was 4.9 million shares of Class A common stock, inclusive of available shares previously reserved for issuance under the 2015 Equity Incentive Plan, or the 2015 Plan, and subject to increase for awards previously issued under the 2015 Plan which are forfeited or lapse unexercised. In addition, this reserve will automatically increase on January 1 of each year, which commenced on January 1, 2021 and will end on (and including) January 1, 2030, in an amount equal to 4% of the total number of shares of capital stock outstanding on December 31 of the preceding year. However, the board of directors may act prior to January 1 of a given year to provide that the increase for such year will be a lesser number of shares of Class A common stock. The aggregate maximum number of shares of Class A common stock that may be issued pursuant to the exercise of incentive stock options is 6.7 million shares. As of December 31, 2025, the number of shares available for issuance under the 2020 Plan was 1.8 million.
In August 2022, our board of directors approved the First Amendment to our 2020 Employee Stock Purchase Plan, or ESPP. As of December 31, 2025, the number of shares authorized and available for issuance under the ESPP was 1.0 million shares. In addition, the number of shares reserved for issuance under the ESPP is subject to an annual increase on the first day of each calendar year beginning on January 1, 2021 and ending on and including January 1, 2030, in an amount equal to the lesser of (i) 1% of the total number of shares of capital stock outstanding on December 31 of the preceding year and (ii) 0.4 million shares of Class A common stock. Our board of directors may act prior to January 1 of a given year to provide that the increase for such year will be a lesser number of shares of Class A common stock.
2015 Equity Incentive Plan
In 2015, the board of directors of the Company adopted the 2015 Plan under which the Company could grant equity awards (restricted stock, and incentive and nonqualified stock options) to its officers, directors, employees and certain advisors. In October 2020, the 2015 Plan was superseded by the 2020 Plan and all reserved shares under the 2015 Plan were transferred to the 2020 Plan.
The following table displays share-based compensation expense recorded in the consolidated statements of operations and comprehensive income (loss):
For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (dollars in millions) | |||||||||||||||||
| Share-based compensation expense: | |||||||||||||||||
| Net investment income | $ | 0.2 | $ | — | $ | — | |||||||||||
| Loss and loss adjustment expenses | 3.7 | 1.9 | 0.7 | ||||||||||||||
| Sales and marketing | 1.0 | 0.7 | 0.3 | ||||||||||||||
| Other insurance expense | 1.3 | 0.8 | 0.6 | ||||||||||||||
| Technology and development | 6.6 | 3.4 | 3.4 | ||||||||||||||
| General and administrative | 27.3 | 11.7 | 12.3 | ||||||||||||||
| Total share-based compensation expense | $ | 40.1 | $ | 18.5 | $ | 17.3 | |||||||||||
The unrecognized compensation cost and the remaining weighted-average period over which these costs are expected to be recognized for restricted stock units and unvested stock options as of December 31, 2025 is as follows:
| Service-based Restricted Stock Units | Performance-based Restricted Stock Units | Market-based Restricted Stock Units | Unvested Stock Options | ||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||
| Unrecognized compensation costs | $ | 18.9 | $ | 25.7 | $ | 0.4 | $ | 0.1 | |||||||||||||||
| Remaining weighted-average period cost is expected to be recognized (in years) | 1.32 | 2.50 | 1.23 | 0.50 | |||||||||||||||||||
Restricted Stock Units
A summary of restricted stock units activity for the years ended December 31, 2025, 2024 and 2023 is as follows:
| For the Years Ended December 31, | ||||||||||||||||||||||||||||||||||||||
| Service-based Restricted Stock Units | Performance-based Restricted Stock Units | Market-based Restricted Stock Units | ||||||||||||||||||||||||||||||||||||
| Restricted Stock Units | Number of Shares | Weighted-Average Grant Date Fair Value per Share | Number of Shares | Weighted-Average Grant Date Fair Value per Share | Number of Shares | Weighted-Average Grant Date Fair Value per Share | ||||||||||||||||||||||||||||||||
| (in millions, except per share amounts) | ||||||||||||||||||||||||||||||||||||||
| Unvested at December 31, 2022 | 1.1 | $ | 51.81 | — | $ | — | — | $ | — | |||||||||||||||||||||||||||||
| Granted | 1.2 | 6.91 | — | — | 0.4 | 5.91 | ||||||||||||||||||||||||||||||||
| Vested | (0.6) | 49.11 | — | — | — | — | ||||||||||||||||||||||||||||||||
| Forfeited, expired or canceled | (0.2) | 51.90 | — | — | — | — | ||||||||||||||||||||||||||||||||
| Unvested at December 31 2023 | 1.5 | $ | 16.74 | — | $ | — | 0.4 | $ | 5.91 | |||||||||||||||||||||||||||||
| Granted | 0.3 | 50.55 | 0.2 | 75.55 | — | — | ||||||||||||||||||||||||||||||||
| Vested | (0.8) | 18.34 | — | — | — | 7.69 | ||||||||||||||||||||||||||||||||
| Forfeited, expired or canceled | — | 22.21 | — | — | — | — | ||||||||||||||||||||||||||||||||
| Unvested at December 31, 2024 | 1.0 | $ | 25.89 | 0.2 | $ | 75.55 | 0.4 | $ | 5.71 | |||||||||||||||||||||||||||||
| Granted | 0.2 | 116.62 | 0.2 | 125.91 | — | — | ||||||||||||||||||||||||||||||||
| Vested | (0.5) | 28.33 | — | — | (0.1) | 6.70 | ||||||||||||||||||||||||||||||||
| Forfeited, expired or canceled | (0.1) | 57.16 | — | — | — | — | ||||||||||||||||||||||||||||||||
| Unvested at December 31, 2025 | 0.6 | $ | 47.81 | 0.4 | $ | 93.78 | 0.3 | $ | 5.43 | |||||||||||||||||||||||||||||
Additional information pertaining to restricted stock units for the years ended December 31, 2025, 2024 and 2023 is as follows:
| For the Years Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| (dollars in millions) | ||||||||||||||||||||
| Service-based restricted stock units: | ||||||||||||||||||||
| Total grant date fair value of awards granted | $ | 20.6 | $ | 16.9 | $ | 8.5 | ||||||||||||||
| Total grant date fair value of awards vested | 15.5 | 14.2 | 27.3 | |||||||||||||||||
| Total intrinsic value of awards vested | 59.3 | 40.4 | 3.4 | |||||||||||||||||
| Performance-based restricted stock units: | ||||||||||||||||||||
| Total grant date fair value of awards granted | $ | 17.3 | $ | 18.3 | $ | — | ||||||||||||||
| Market-based restricted stock units: | ||||||||||||||||||||
| Total grant date fair value of awards granted | $ | — | $ | — | $ | 2.3 | ||||||||||||||
| Total grant date fair value of awards vested | 0.5 | 0.3 | — | |||||||||||||||||
| Total intrinsic value of awards vested | 10.1 | 2.4 | — | |||||||||||||||||
Stock Options
A summary of option activity for the years ended December 31, 2025, 2024 and 2023 is as follows:
| Options | Number of Shares | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term (in Years) | Aggregate Intrinsic Value | ||||||||||||||||||||||
| (in millions, except exercise price and term amounts) | ||||||||||||||||||||||||||
| Outstanding at December 31, 2022 | 0.2 | $ | 38.15 | 5.63 | $ | 0.2 | ||||||||||||||||||||
| Granted | — | 8.94 | ||||||||||||||||||||||||
| Exercised | — | — | — | |||||||||||||||||||||||
| Forfeited, expired or canceled | (0.1) | 44.88 | ||||||||||||||||||||||||
| Outstanding at December 31, 2023 | 0.1 | $ | 33.68 | 4.29 | $ | 0.5 | ||||||||||||||||||||
| Granted | — | — | ||||||||||||||||||||||||
| Exercised | — | 16.77 | 0.3 | |||||||||||||||||||||||
| Forfeited, expired or canceled | — | 90.82 | ||||||||||||||||||||||||
| Outstanding at December 31, 2024 | 0.1 | $ | 34.13 | 3.15 | $ | 6.7 | ||||||||||||||||||||
| Granted | — | — | ||||||||||||||||||||||||
| Exercised | — | 13.09 | 3.2 | |||||||||||||||||||||||
| Forfeited, expired or canceled | — | 139.87 | ||||||||||||||||||||||||
| Outstanding at December 31, 2025 | 0.1 | $ | 34.80 | 2.28 | $ | 5.1 | ||||||||||||||||||||
A summary of total options outstanding and exercisable at December 31, 2025:
| Options Outstanding and Exercisable | ||||||||||||||||||||
| Options | Number of Shares | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term (in Years) | |||||||||||||||||
| (in millions, except exercise price and term amounts) | ||||||||||||||||||||
| Range of Exercise Prices: | ||||||||||||||||||||
$0.65 - $5.15 | 0.1 | $ | 2.56 | 1.35 | ||||||||||||||||
$5.15 - $43.20 | — | $ | 37.26 | 2.97 | ||||||||||||||||
$43.20 - $231.66 | — | $ | 137.01 | 4.17 | ||||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 21, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Mar 4, 2021 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.