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Share-Based Compensation | 9 Months Ended
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Sep. 30, 2024
Share-Based Payment Arrangement [Abstract] |
Share-Based Compensation | Share-Based Compensation On April 22, 2024, 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 57.9 million shares to 87.9 million shares, subject to stockholder approval. The amendment was subsequently approved by our stockholders as part of the 2024 Annual Meeting of Stockholders held on June 14, 2024. During the nine months ended September 30, 2024, we granted 9.6 million restricted stock units ("RSUs") under the 2020 Incentive Plan with a weighted-average grant date fair value of $1.85. 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, 2024, 0.6 million performance stock units ("PSUs") were granted under the 2020 Incentive Plan with a weighted-average grant date fair value of $2.78. The PSUs represent the target amount of grants, and the actual number of shares 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. Lastly, during the nine months ended September 30, 2024, we granted 31.8 million long-term incentive cash units (“LTIC units”) under the 2020 Incentive Plan. The awards were valued using a Monte Carlo simulation and as of September 30, 2024 the LTIC units had a weighted average fair value of $0.99. The LTIC units represent the target amount of grants, and the actual number of units awarded upon vesting may vary depending upon the achievement of the relevant market condition which is based on the performance of our common stock. The awards are eligible to vest in equal installments over three years based on the attainment of the market condition and the employee’s continued service through the vesting date. As the company intends to settle the LTIC units in cash, they were classified as liabilities 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) | 2023 |  | 2024 |  | 2023 |  | 2024
Equity classified awards | $ | 17.0 |  |  | $ | 11.8 |  |  | $ | 50.3 |  |  | $ | 37.8 |
Liability classified awards | 0.2 |  |  | 3.7 |  |  | 1.6 |  |  | 10.0 |
Total share-based compensation expense | $ | 17.2 |  |  | $ | 15.5 |  |  | $ | 51.9 |  |  | $ | 47.8 |
Total share-based compensation expense recognized was as follows:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(In millions) | 2023 |  | 2024 |  | 2023 |  | 2024
Cost of revenue | $ | 2.0 |  |  | $ | 2.0 |  |  | $ | 7.4 |  |  | $ | 5.9 |
Selling, general and administrative expenses | 15.2 |  |  | 13.5 |  |  | 44.5 |  |  | 41.9 |
Pre-tax share-based compensation expense | 17.2 |  |  | 15.5 |  |  | 51.9 |  |  | 47.8 |
Less: Income tax benefit | (3.6) |  |  | (3.2) |  |  | (10.9) |  |  | (10.0) |
Total share-based compensation expense, net of tax | $ | 13.6 |  |  | $ | 12.3 |  |  | $ | 41.0 |  |  | $ | 37.8 |
As of September 30, 2024, there was $47.2 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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