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Share-Based Compensation | 9 Months Ended
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Sep. 30, 2023
Share-Based Payment Arrangement [Abstract] |
Share-Based Compensation | Share-Based Compensation On April 21, 2023, the Board of Directors approved an amendment to the Rackspace Technology, Inc. 2020 Equity Incentive Plan (the "2020 Incentive Plan") to increase the maximum number of shares of our common stock available for issuance under the 2020 Incentive Plan from 50.0 million shares to 57.9 million shares, subject to stockholder approval. The amendment was subsequently approved by our stockholders as part of the 2023 Annual Meeting of Stockholders held on June 16, 2023. During the nine months ended September 30, 2023, we granted 27.0 million restricted stock units ("RSUs") under the 2020 Incentive Plan with a weighted-average grant date fair value of $2.21. 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 nine months ended September 30, 2023, 2.8 million performance stock units ("PSUs") were granted under the 2020 Incentive Plan with a weighted-average grant date fair value of $1.90, and 5.5 million long-term incentive cash units ("LTIC units") were granted under the 2020 Incentive Plan with a weighted-average fair value as of September 30, 2023 of $0.80. 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. As the company intends to settle the LTIC units in cash, they are classified as a liability within "Other current liabilities" and "Other non-current liabilities" in the Condensed Consolidated Balance Sheets. Total share-based compensation expense is comprised of the following equity and liability classified award amounts:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(In millions) | 2022 |  | 2023 |  | 2022 |  | 2023
Equity classified awards | $ | 19.4 |  |  | $ | 17.0 |  |  | $ | 59.5 |  |  | $ | 50.3 |
Liability classified awards | — |  |  | 0.2 |  |  | — |  |  | 1.6 |
Total share-based compensation expense | $ | 19.4 |  |  | $ | 17.2 |  |  | $ | 59.5 |  |  | $ | 51.9 |
Total share-based compensation expense recogniz ed was as follows:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(In millions) | 2022 |  | 2023 |  | 2022 |  | 2023
Cost of revenue | $ | 2.8 |  |  | $ | 2.0 |  |  | $ | 9.0 |  |  | $ | 7.4 |
Selling, general and administrative expenses | 16.6 |  |  | 15.2 |  |  | 50.5 |  |  | 44.5 |
Pre-tax share-based compensation expense | 19.4 |  |  | 17.2 |  |  | 59.5 |  |  | 51.9 |
Less: Income tax benefit | (4.1) |  |  | (3.6) |  |  | (12.5) |  |  | (10.9) |
Total share-based compensation expense, net of tax | $ | 15.3 |  |  | $ | 13.6 |  |  | $ | 47.0 |  |  | $ | 41.0 |
As of September 30, 2023, there was $94.9 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.

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