
(in thousands)	2023		2022		2021
Cost of revenue	$	28,994	$	26,400	$	21,822
Selling and marketing	57,675		46,769		54,182
Research and development	31,039		29,266		25,413
General and administrative	25,644		19,775		14,530
	$	143,352	$	122,210	$	115,947
Income tax benefit	$	(2,187)	$	(1,881)	$	(23,410)

In 2021 and 2022, most of the Company’s stock based compensation arrangements vest over five years, with 20% vesting after one year and the remaining 80% vesting quarterly over the remaining four years. Beginning in 2023, most of the Company’s stock based compensation arrangements vest over four years, with 25% vesting after one year and the remaining 75% vesting quarterly over the remaining three years. The Company’s stock options have a term of ten years. In 2023, the Company also granted 0.9 million performance stock options with a total grant date fair value of $18.3 million, which vest over 2 years based on the Company’s achievement of certain financial performance targets.

The Company recognizes stock-based compensation using the accelerated attribution method, treating each vesting tranche as an individual grant. The stock-based compensation expense recognized during a period is based on the value of the awards that are expected to vest. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Ultimately, the Company recognizes the actual expense over the vesting period only for the shares that vest.

Employees may elect to receive 50% of the employee’s target incentive compensation under the Company’s Corporate Incentive Compensation Plan (the “CICP”) in the form of RSUs instead of cash. If elected by an employee, the equity amount is equal in value on the grant date to 50% of the employee’s target incentive opportunity, based on the employee’s base salary. The number of RSUs granted is determined by dividing 50% of the employee’s target incentive opportunity by 85% of the closing price of the Company’s common stock on the grant date, less the present value of expected dividends during the vesting period. If elected, the award vests 100% on the following year’s CICP payout date. Vesting is conditioned upon the performance conditions of the CICP and on continued employment; if threshold funding does not occur, the RSUs will not vest. The Company considers vesting probable on the grant date and recognizes the associated stock-based compensation expense over the requisite service period beginning on the grant date and ending on the vesting date.

Historically, the Company has granted awards that allow for the settlement of vested stock options and RSUs on a net share basis (“net settled awards”). With net settled awards, the Company withholds shares to cover the exercise price (for stock options) and the minimum statutory tax withholding obligations (for stock options and RSUs) from the shares that would otherwise be issued upon exercise or settlement. In 2023, the Company moved to cashless settlement for most of its awards. Under cashless settlement, shares are automatically sold in the market at exercise (for stock options) or vest (for RSUs) to cover the exercise price (for stock options) and the minimum statutory tax withholding obligations (for stock options and RSUs).

In 2004, the Company adopted the 2004 Long-Term Incentive Plan (as amended and restated, the “2004 Plan”) to provide employees, non-employee Directors, and consultants with opportunities to purchase stock through incentive and non-qualified stock options. Subsequent amendments to the plan increased the number of shares authorized for issuance under the plan to 42 million, extended the term of the plan to 2030, and limited annual compensation to any non-employee Director to $0.5 million.

In 2006, the Company adopted the 2006 Employee Stock Purchase Plan (the “2006 ESPP”) under which employees may purchase common stock, at a price equal to at least 85% of the fair market value of the Company’s common stock on the lesser of the commencement date or completion date for offerings under the plan, or such higher price as the Company’s Board of Directors may establish from time to time. In October 2012, the Company’s Board of Directors amended the 2006 ESPP to continue until no shares remain. In 2023, the number of shares authorized for purchase under the 2006 ESPP was increased to 2 million. For 2023, 2022, and 2021, the Company’s Board of Directors set the purchase price at 85% of the fair market value on the completion date of the offering period.

As of December 31, 2023, there were 6.9 million shares available for issuance for future equity grants under the Company’s stock plans, consisting of 5.9 million shares under the 2004 Plan and 1.0 million shares under the 2006 ESPP.

The Company estimates the fair value of stock options using a Black-Scholes option-pricing model. Key inputs used to estimate the fair value of stock options include the exercise price of the award, expected term of the option, expected volatility of the Company’s common stock over the option’s expected term, risk-free interest rate over the option’s expected term, and the Company’s expected annual dividend yield. The exercise price for stock options is greater than or equal to the shares’ fair market value at the grant date.

The following table summarizes the Company’s fair value assumptions for stock options:


	2023			2022			2021
Weighted-average grant-date fair value	$	20.55		$	17.49		$	37.74
Assumptions used in the Black-Scholes option-pricing model:
Expected annual volatility (1)	48		%	42		%	35		%
Expected term in years (2)	3.5			3.9			4.4
Risk-free interest rate (3)	4.2		%	3.4		%	0.6		%
Expected annual dividend yield (4)	0.1		%	0.1		%	0.2		%

The following table summarizes the combined stock option activity under the Company’s stock option plans for 2023:


	Shares (in thousands)	Weighted-average Exercise Price		Weighted-average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands) (1)
Options outstanding as of January 1, 2023	14,911	$	59.67
Granted	1,847	46.97
Exercised	(380)	31.56
Forfeited	(1,289)	55.90
Expired	(350)	81.62
Options outstanding as of December 31, 2023	14,739	$	58.60
Vested and expected to vest as of December 31, 2023	12,786	$	58.58	7.3	$	73,407
Exercisable as of December 31, 2023	6,761	$	63.54	6.1	$	32,594

(1) The aggregate intrinsic value of stock options as of December 31, 2023 is based on the difference between the closing price of the Company’s stock of $48.86 and the exercise price of the applicable stock options.

The aggregate intrinsic value of stock options exercised (i.e., the difference between the market price at exercise and the price paid by the employee at exercise) in 2023, 2022, and 2021 was $6.2 million, $15.6 million, and $94.3 million, respectively. As of December 31, 2023, the Company had unrecognized stock-based compensation expense related to the unvested portion of stock options of $57.8 million that is expected to be recognized as expense over a weighted-average period of 1.6 years.

RSUs provide the recipient a right to receive a specified number of shares of the Company’s common stock upon vesting. The Company values its RSUs at the fair value of its common stock on the grant date, which is the closing price of its common stock on the grant date less the present value of expected dividends during the vesting period, as the recipient is not entitled to dividends during the requisite service period.

The following table summarizes the combined RSU activity for all grants, including the CICP, under the 2004 Plan for 2023:


	Shares (in thousands)	Weighted- Average Grant-Date Fair Value		Aggregate Intrinsic Value (in thousands)
Nonvested as of January 1, 2023	2,351	$	85.52
Granted	1,545	46.57
Vested	(890)	84.74
Forfeited	(390)	71.56
Nonvested as of December 31, 2023	2,616	$	64.85	$	127,805
Expected to vest as of December 31, 2023	1,968	$	62.86	$	96,168

The fair value of RSUs vested in 2023, 2022, and 2021 was $42.8 million, $50.3 million, and $122.5 million, respectively. The aggregate intrinsic value of RSUs outstanding and expected to vest as of December 31, 2023 is based on the closing price of the Company’s stock of $48.86 as of December 31, 2023.

As of December 31, 2023, the Company had $48.6 million of unrecognized stock-based compensation expense related to all unvested RSUs that is expected to be recognized as expense over a weighted-average period of 1.7 years.