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Share-based Payments
 9 Months Ended
Sep. 30, 2023
Share-Based Payment Arrangement [Abstract]  
Share-based Payments
18. Share-based Payments
Share-based payments consist of the following compensation costs:
Three months ended
September 30,		Nine months ended
September 30,
2023202220232022
Selling, general and administrative:
Stock option compensation expense$1.1 $3.2 $5.4 $8.9 
Equity-classified share units10.9 4.8 23.8 16.4 
Liability-classified share units0.1 0.1 0.6 0.4 
Employee share purchase plan1.3 0.7 2.6 2.1 
13.4 8.8 32.4 27.8 
Acquisition-related and integration costs:   
Acceleration of share-based payments expense0.6 — 6.5 — 
Share-based continuing employment costs0.9 1.9 2.9 6.1 
1.5 1.9 9.4 6.1 
$14.9 $10.7 $41.8 $33.9 
Conversion of IAA Share Based Awards
In connection with the acquisition of IAA, IAA’s stock options, RSU’s and performance restrictive stock unit (“PRSU”) awards were cancelled and exchanged into 187,727 Company stock options and 366,379 Company RSU awards. At the closing of the acquisition of IAA, the converted share-based awards had an estimated aggregate fair value of $24.9 million, of which $4.8 million was attributable to post-combination services and will be recognized as share-based payment expense over the remaining service periods. The Company awards are subject to the same terms and conditions as applicable to the corresponding IAA equity awards held prior to the acquisition of IAA, including vesting terms, with the exception of any Company RSU awards that replace IAA’s PRSU awards, where vesting will no longer be subject to the achievement of performance goals and will be solely based on providing continued services to the Company through the end of the applicable service period.
IAA restricted stock awards and IAA phantom stock awards which were granted to non-employee directors of IAA, vested at closing of the acquisition of IAA and therefore do not have a future service requirement. Accordingly, the entire post-combination portion of such awards of $0.3 million has been recognized as share-based payment expense concurrent with the closing of the acquisition of IAA.
In addition, certain former executives of IAA were terminated in connection with the acquisition of IAA and their outstanding share-based awards were fully accelerated as of the closing date. Accordingly, $4.3 million has been recognized as share-based payment expense concurrent with the closing of the acquisition of IAA. .
Stock Option Plans
On May 8, 2023, the Company’s shareholders approved the 2023 Share Incentive Plan (“2023 Plan”) under which 9,355,000 common shares of the Company were reserved for issuance. The 2023 Plan allows the Company to grant to employees, officers, non-employee directors and other key persons various types of equity-based awards, including stock options, performance-based restricted share units and time-based restricted share units. Beginning in the second quarter of 2023, all share-based awards granted are governed by the 2023 Plan. Equity awards granted under previous plans remain outstanding until expiration or settlement.
Stock option activity for the nine months ended September 30, 2023 is presented below:
Stock optionsPremium-priced stock options
Common
shares under
option		WA
exercise
price		WA
remaining
contractual
life (in years)		Aggregate
intrinsic
value		Common
shares under
option		WA
exercise
price		WA
remaining
contractual
life (in years)		Aggregate
intrinsic
value
Outstanding, December 31, 20222,730,295$46.88 7.3$31.2 1,118,432$91.26 4.7$— 
Granted262,72558.09 —— —— —— 
Assumed in IAA acquisition (Note 5)187,72750.96 —— —— —— 
Exercised(351,349)44.19 —5.6 —— —— 
Forfeited/Expired(135,497)54.44 —— (171,065)91.25 —— 
Outstanding, September 30, 20232,693,901$48.23 6.9$39.0 947,367$91.26 3.9$— 
Exercisable, September 30, 20231,808,780$43.55 6.1$34.5 45,757$91.37 3.9$— 
Stock Options
The Company uses the Black Scholes option pricing model to fair value stock options. Significant assumptions used to estimate the fair value of stock options granted during the nine months ended September 30, 2023 and 2022 are presented in the following table on a weighted average basis:
Nine months ended September 30,20232022
Risk free interest rate4.2 %2.2 %
Expected dividend yield1.84 %1.74 %
Expected lives of the stock options4 years4 years
Expected volatility35.8 %31.8 %
At September 30, 2023, the unrecognized stock-based compensation cost related to the non-vested stock options was $5.8 million, which is expected to be recognized over a weighted average period of 2.2 years.
The fair value of the assumed stock options is estimated on the IAA acquisition date using the Black-Scholes option pricing model. The weighted average fair value of the assumed options was $15.52. The significant assumptions used to estimate the fair value of these assumed stock options are presented in the following table on a weighted average basis:
Nine months ended September 30,2023
Risk free interest rate3.9 %
Expected dividend yield2.05 %
Expected lives of the stock options2 years
Expected volatility33.3 %
Premium-priced Stock Options
The Company has granted premium-priced stock options to the senior executives with exercise prices above the fair market value of the Company’s common shares on grant dates. The premium-priced stock options vest and become exercisable upon the third anniversary of their grant date. The fair values of the premium-priced stock options were calculated on the grant date using a Monte Carlo simulation model. The weighted average estimated grant date fair value of premium-priced options during the nine-month period ended September 30, 2022 was $8.00 per option.
The significant assumptions used to estimate the fair value are presented in the following table:
Nine months ended September 30,2022
Risk free interest rate3.0 %
Expected dividend yield1.63 %
Expected lives of the stock options4 years
Expected volatility30.2 %
There were no premium-priced stock options granted during the nine-month period ended September 30, 2023.
At September 30, 2023, the unrecognized stock-based compensation cost related to the premium-priced stock options was $1.7 million, which is expected to be recognized over a weighted average period of 1.1 years.
Share Unit Plans
Share unit activity for the nine months ended September 30, 2023 is presented below:
Equity-classified awardsLiability-classified awards
PSUsPSUs with Market ConditionsRSUsDSUs
NumberWA grant
date fair
value		NumberWA grant
date fair
value		NumberWA grant
date fair
value		NumberWA grant
date fair
value
Outstanding, December 31, 2022662,634$51.71 102,879$66.08 68,024$58.32 108,365$39.35 
Granted93,55757.96 80,07085.33 424,59953.37 18,87754.01 
Assumed in IAA acquisition (Note 5)—— —— 366,37952.79 —— 
Vested and settled(283,086)42.23 —— (257,610)52.85 —— 
Forfeited(57,492)60.58 (9,017)68.59 (9,064)57.16 —— 
Outstanding at September 30, 2023415,613$58.35 173,932$74.81 592,328$53.75 127,242$41.53 
______________________________________________________________
The total market value of liability-classified share units vested and released during the first nine months of 2023 was nil (2022: nil).
Senior Executive and Employee PSU Plans
The Company has granted PSUs under a senior executive PSU plan and an employee PSU plan (the “PSU Plans”). Under the PSU Plans, the number of PSUs that vest is conditional upon specified market, service, and/or performance vesting conditions being met. The PSU Plans allow the Company to choose whether to settle the awards in cash or in shares. The Company intends to settle by issuance of shares. With respect to settling in shares, the Company has the option to either (i) arrange for the purchase of shares on the open market on the employee’s behalf based on the cash value that otherwise would be delivered, or (ii) issue a number of shares equal to the number of units that vest.
Fair values of equity-classified PSUs are estimated on the grant date using the market close price of the Company's common shares listed on the NYSE, as these are not subject to market vesting conditions.
In August 2023, the Company granted 159,475 PSU's to senior executives, half of which vest based on performance vesting conditions and half of which vest based on market performance vesting conditions, specifically conditional upon the Company's total shareholder return relative to the performance of a peer group. The PSU's granted have a three year performance period beginning on January 1, 2023.
At September 30, 2023, the unrecognized share unit expense related to equity-classified PSUs without market conditions was $9.5 million, which is expected to be recognized over a weighted average period of 1.9 years.
PSUs with Market Conditions
The Company has granted PSUs to senior executives with a market condition where vesting is conditional upon the total stockholder return performance of the Company’s stock relative to the performance of a peer group over a three year performance period from the date of grant. The PSU's with market conditions granted in June 2022 have approximately a two year performance period to coincide with the remaining performance period of the August 2021 PSU grant.
The fair value per PSU granted in August 2023, during the three-month period ended September 30, 2023, was $85.33 and the fair value was calculated on the grant date using a Monte Carlo simulation model.
The fair value per PSU granted in June 2022, recorded in the three-month period ended September 30, 2022 was $69.92, and was calculated on the grant date using the Monte Carlo simulation model which also takes into consideration a required post-vesting holding period of one year with a discount value of $5.34 per PSU. The discount was calculated using the Chaffe Protective Put Method and an effective tax rate of 35%.
The significant assumptions used to estimate the fair value are presented in the following table:
Nine months ended September 30,20232022
Risk free interest rate4.5 %2.7 %
Expected dividend yield— %1.63 %
Expected lives of the PSUs2 years2 years
Expected volatility32.7 %33.4 %
Average expected volatility of comparable companies48.6 %34.4 %
At September 30, 2023, the unrecognized share unit expense related to equity-classified PSUs with market conditions was $6.1 million, which is expected to be recognized over a weighted average period of 2.3 years.
RSUs
During the three months ended September 30, 2023, the Company granted 88,889 restricted share units under the 2023 Plan that are equity-settled and not subject to market vesting conditions.
Fair values of RSUs are estimated on grant date using the market close price of the Company's common shares listed on the NYSE.
At September 30, 2023, the unrecognized share unit expense related to equity-classified RSUs was $20.1 million, which is expected to be recognized over a weighted average period of 1.5 years.
DSUs
The Company has deferred share unit plans (DSU plans) that are cash-settled and not subject to market vesting conditions.
Fair values of deferred share units (“DSUs”) are estimated on grant date and at each reporting date using the market close price of the Company’s common shares listed on the NYSE. DSUs are granted under the DSU plan to members of the Board of Directors. There is no unrecognized share unit expense related to liability-classified DSUs as they vest immediately and are expensed upon grant.
At September 30, 2023, the Company had a total share unit liability of $8.3 million (at December 31, 2022: $6.3 million) in respect of share units under the DSU plans.
Employee Stock Purchase Plan
In February 2023, the Board approved the suspension of the Company’s 1999 Employee Stock Purchase Plan.
On April 3, 2023, the Board approved a new Employee Stock Purchase Plan, which was subsequently approved by the Company's shareholders on May 8, 2023. Effective June 15, 2023, the Company implemented the 2023 ESPP which allows eligible employees to contribute up to 15% of their base compensation, up to twenty-five thousand dollars, towards the purchase of the Company’s stock, at 85% of the lower of the fair market value on the first day of the applicable offering period or on the last day of the applicable purchase
period within the offering period. The first offering period began on July 3, 2023, ends on the last trading day on or prior to November 15, 2023 and includes one purchase period. Subsequent offering periods are for twelve month periods, beginning on the first trading day on or after May 15 and November 15 of each calendar year and include two consecutive purchase periods of six months each. At the end of each purchase period, employee contributions are used to purchase the Company's common stock. On May 9, 2023, the Company registered 3,000,000 shares of common stock for future issuance under the 2023 ESPP, all of which remain available to be issued. During the nine months ended September 30, 2023, no shares were issued under the 2023 ESPP.