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Stock-Based Compensation | 3 Months Ended
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Mar. 31, 2023
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | Stock-Based Compensation Our equity compensation plans provide for the grant of incentive and nonqualified stock options, as well as other stock-based awards including performance share units (“PSUs”), restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and deferred stock units (“DSUs”), to employees, non-employee directors and other consultants who provide services to us. We also provide an employee stock purchase plan (“ESPP”) and 401(k) match to eligible participants. We recognize stock-based compensation expense based on grant date award fair value. This cost is recognized over the period for which the employee is required to provide service in exchange for the award or the award performance period, except for expenses relating to retirement-eligible employees that have not given their required notice, which is recognized on a pro-rata basis over the notice period prior to retirement. At March 31, 2023, there were 12.8 million shares available for grant under approved equity compensation plans. Stock-based compensation expense was allocated in the condensed consolidated statements of comprehensive income as follows:
| Three Months Ended March 31, |  |
(in thousands) | 2023 |  | 2022 |  |  |  |
Cost of revenues | $ | 2,503 |  |  | $ | 2,179 |  |  |  |  |
Operating expenses |  |  |  |  |  |  |
Sales and marketing | 2,423 |  |  | 2,032 |  |  |  |  |
Research and development | 1,777 |  |  | 1,474 |  |  |  |  |
General and administrative | 5,077 |  |  | 3,330 |  |  |  |  |
| $ | 11,780 |  |  | $ | 9,015 |  |  |  |  |
Stock-based compensation expense by grant type or plan was as follows:
| Three Months Ended March 31, |  |
(in thousands) | 2023 |  | 2022 |  |  |  |
Stock options | $ | 490 |  |  | $ | 477 |  |  |  |  |
PSUs | 3,926 |  |  | 2,699 |  |  |  |  |
RSUs | 6,062 |  |  | 4,638 |  |  |  |  |
RSAs & DSUs | 108 |  |  | 108 |  |  |  |  |
ESPP | 589 |  |  | 574 |  |  |  |  |
401(k) stock match | 605 |  |  | 519 |  |  |  |  |
| $ | 11,780 |  |  | $ | 9,015 |  |  |  |  |
As of March 31, 2023, there was $63.8 million of unrecognized stock-based compensation expense under our equity compensation plans, which is expected to be recognized on a primarily straight-line basis over a weighted average period of 2.6 years. Stock Options Our stock option activity was as follows:
| Three Months Ended March 31, 2023
| Options (#) |  | Weighted Average Exercise Price ($/share)
Outstanding, beginning of period | 562,697 |  |  | $ | 56.24 |
Granted | 30,148 |  |  | 150.76 |
Exercised | (68,088) |  |  | 32.06 |
Forfeited | (1,916) |  |  | 123.49 |
Outstanding, end of period | 522,841 |  |  | $ | 64.60 |
Of the total outstanding options at March 31, 2023, 0.4 million were exercisable. The outstanding and exercisable options had a weighted average exercise price of $53.22 per share and a weighted average remaining contractual life of 3.0 years. The weighted average grant date fair value of options granted during the three months ended March 31, 2023 was $54.53 per share. This was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:
Life (in years) | 3.9
Volatility | 39.7 | %
Dividend yield | — |
Risk-free interest rate | 4.2 | %
Performance Share Units, Restricted Stock Units and Awards, and Deferred Stock Units In each of the quarters ended March 31, 2023, 2022, 2021, and 2020 we granted PSU awards with a target performance level. These awards are earned based upon our Company’s total shareholder return as compared to an indexed total shareholder return over the course of a fiscal based three-year performance period, starting in the year of grant. Earned awards vest in the quarter following the conclusion of the performance period. In the three months ended March 31, 2023, PSU awards granted in 2019 vested at the maximum performance level and 0.1 million shares of common stock were issued. Activity for our PSUs, RSUs, RSAs, and DSUs in aggregate was as follows:
| Three Months Ended March 31, 2023
| # |  | Weighted Average Grant Date Fair Value ($/share)
Outstanding, beginning of period | 712,158 |  |  | $ | 103.93 |
Granted | 304,635 |  |  | 163.06 |
Vested and common stock issued | (305,123) |  |  | 74.70 |
Forfeited | (3,798) |  |  | 112.93 |
Outstanding, end of period | 707,872 |  |  | $ | 141.92 |
The number of PSUs, RSUs, RSAs, and DSUs outstanding at March 31, 2023 included less than 0.1 million units that have vested, but the shares of common stock have not yet been issued, pursuant to the terms of the underlying agreements. Employee Stock Purchase Plan Our ESPP activity was as follows:
| Three Months Ended March 31, |  |
(in thousands, except shares) | 2023 |  | 2022 |  |  |  |
Amounts for shares purchased | $ | 241 |  |  | $ | 147 |  |  |  |  |
Shares purchased | 2,549 |  |  | 1,698 |  |  |  |  |
A total of 1.7 million shares of common stock are reserved for issuance under the ESPP as of March 31, 2023. The fair value was estimated based on the market price of our common stock at the beginning of the offering period using the following assumptions:
Life (in years) | 0.5
Volatility | 46.4 | %
Dividend yield | — |
Risk-free interest rate | 2.5 | %

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