Share-Based Compensation

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

During the three months ended March 31, 2023, we granted 22.4 million restricted stock units ("RSUs") under the 2020 Incentive Plan with a weighted-average grant date fair value of $2.36. The majority of the RSUs were granted as part of our annual compensation award process and vest ratably over a three-year period, subject to continued service.

In addition, during the three months ended March 31, 2023, 2.5 million performance stock units ("PSUs") were granted under the 2020 Incentive Plan with a weighted-average grant date fair value of $2.08, and 4.9 million long-term incentive cash units ("LTIC units") were granted under the 2020 Incentive Plan with a weighted-average fair value as of March 31, 2023 of $0.73. Both the PSUs and LTIC units represent the target amount of grants, and the actual number of shares or units awarded upon vesting may vary depending upon the achievement of the relevant market condition which is based on Rackspace’s Total Shareholder Return (“TSR”) relative to the TSR of a comparator group of IT and Cloud Services Companies. The awards are eligible to vest in equal annual installments over three years based on the attainment of the market condition and the employee’s continued service through the end of the applicable measurement period and were valued using a Monte Carlo simulation. The LTIC units are classified as a liability within "Other current liabilities" and "Other non-current liabilities" in the Consolidated Balance Sheets.

Total share-based compensation expense is comprised of the following equity and liability classified award amounts:


	Three Months Ended March 31,
(In millions)	2022		2023
Equity classified awards	$	17.0	$	14.7
Liability classified awards	—		0.5
Total share-based compensation expense	$	17.0	$	15.2

Total share-based compensation expense recognized was as follows:


	Three Months Ended March 31,
(In millions)	2022		2023
Cost of revenue	$	2.8	$	2.8
Selling, general and administrative expenses	14.2		12.4
Pre-tax share-based compensation expense	17.0		15.2
Less: Income tax benefit	(3.6)		(3.2)
Total share-based compensation expense, net of tax	$	13.4	$	12.0

As of March 31, 2023, there was $133.3 million of total unrecognized compensation cost related to stock options, RSUs, PSUs, and the ESPP, which will be recognized using the service period or over our best estimate of the period over which the performance condition will be met, as applicable.