Cadence’s Omnibus Plan provides for the issuance of both incentive and non-qualified options, restricted stock awards, restricted stock units, stock bonuses and the rights to acquire restricted stock to both executive and non-executive employees. During fiscal 2023, Cadence’s stockholders approved an amendment to the Omnibus Plan to increase the number of shares of common stock authorized for issuance by 6.5 million. As of December 31, 2023, the total number of shares available for future issuance under the Omnibus Plan was 15.5 million. Options granted under the Omnibus Plan have an exercise price not less than the fair market value of the stock on the date of grant. Options and restricted stock generally vest over a period of three years to four years. Options granted under the Omnibus Plan expire seven years from the date of grant. Vesting of restricted stock awards granted under the Omnibus Plan may require the attainment of specified performance criteria.

Cadence’s 1995 Directors Stock Incentive Plan (the “Directors Plan”) provides for the issuance of non-qualified options, restricted stock awards and restricted stock units to its non-employee directors. Options granted under the Directors Plan have an exercise price not less than the fair market value of the stock on the date of grant. As of December 31, 2023, the total number of shares available for future issuance under the Directors Plan was 0.4 million. Options granted under the Directors Plan expire after ten years, and options, restricted stock awards and restricted stock units vest one year from the date of grant.

Cadence has assumed certain options granted to employees of acquired companies (“Acquired Options”). The Acquired Options were assumed by Cadence outside of its stock option plans, and each option is administered under the terms of the respective original plans of the acquired companies. All of the Acquired Options have been adjusted for the price conversion under the terms of the acquisition agreement between Cadence and the relevant acquired company. If the Acquired Options are canceled, forfeited or expire, they do not become available for future grant.


	2023		2022		2021
	(In thousands)
Stock options	$	15,939	$	14,597	$	9,051
Restricted stock	278,567		224,887		181,946
ESPP	31,105		30,955		19,093
Total stock-based compensation expense	$	325,611	$	270,439	$	210,090

Income tax benefit	$	50,994	$	40,612	$	33,958


	2023		2022		2021
	(In thousands)
Cost of product and maintenance	$	4,500	$	3,818	$	3,375
Cost of services	5,728		4,851		4,161
Marketing and sales	66,304		54,771		43,264
Research and development	194,709		158,937		131,247
General and administrative	54,370		48,062		28,043
Total stock-based compensation expense	$	325,611	$	270,439	$	210,090

The exercise price of each stock option granted under Cadence’s employee equity incentive plans is equal to or greater than the closing price of Cadence’s common stock on the date of grant. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. The weighted average grant date fair value of options granted, and the weighted average assumptions used in the model for fiscal 2023, 2022 and 2021 were as follows:


	2023			2022			2021
Dividend yield	None			None			None
Expected volatility	32.6		%	36.0		%	31.7		%
Risk-free interest rate	3.62		%	2.14		%	1.02		%
Expected term (in years)	5.0			4.8			4.8
Weighted average fair value of options granted	$	71.83		$	49.16		$	46.10


		Weighted Average		Weighted Average Remaining Contractual Terms	Aggregate Intrinsic
	Shares	Exercise Price		(Years)	Value
	(In thousands)				(In thousands)
Options outstanding as of December 31, 2022	2,915	$	80.35
Granted	262	205.87
Exercised	(797)	38.82
Forfeited	(13)	131.94
Options outstanding as of December 31, 2023	2,367	$	107.93	3.5	$	389,178
Options vested as of December 31, 2023	1,763	$	85.79	2.8	$	328,927

Cadence had total unrecognized compensation expense related to stock option grants of $32.9 million as of December 31, 2023, which will be recognized over the remaining vesting period. The remaining weighted average vesting period of unvested awards is 2.3 years.

Generally, restricted stock, which includes restricted stock awards and restricted stock units, vests over three years to four years and is subject to the employee’s continuing service to Cadence. Stock-based compensation expense is recognized ratably over the vesting term. The vesting of certain restricted stock grants is subject to attainment of specified performance criteria. Each fiscal quarter, Cadence estimates the probability of the achievement of these performance goals and recognizes any related stock-based compensation expense using the graded-vesting method. The amount of stock-based compensation expense recognized in any one period can vary based on the attainment or expected attainment of the various performance goals. If such performance goals are not ultimately met, no compensation expense is recognized and any previously recognized compensation expense is reversed.

Certain long-term, market-based stock awards granted to executives vest over three to five years and are subject to certain market conditions and the executive’s continuing service to Cadence. Vesting of the market-based awards is contingent upon achieving market conditions of total shareholder return relative to a peer index. Stock-based compensation expense is recognized using the graded-vesting method over the vesting term. If the market-based conditions are not ultimately met, compensation expense previously recognized is not reversed. As of December 31, 2023, Cadence had 2.4 million shares of unvested long-term, market-based stock awards outstanding.

Cadence granted market-based awards in fiscal 2023 and fiscal 2022. No market-based awards were granted in fiscal 2021. Compensation expense is calculated using the fair value of the market-based stock awards under Monte Carlo simulation model. The weighted average assumptions used in the model for fiscal 2023 and fiscal 2022 were as follows:


	2023			2022
Dividend yield	None			None
Expected volatility	33.6		%	29.1		%
Risk-free interest rate	3.64		%	1.98		%
Expected term (in years)	3.8			5.1
Weighted average fair value of market-based awards granted	$	132.20		$	51.34


	2023		2022		2021
	(In thousands)
Stock-based compensation expense related to performance-based restricted stock	$	22,922	$	17,753	$	16,225
Stock-based compensation expense related to market-based stock awards	30,095		25,259		6,453


		Weighted Average Grant Date		Aggregate Intrinsic
	Shares	Fair Value		Value
	(In thousands)			(In thousands)
Unvested shares as of December 31, 2022	6,371	$	99.03
Granted	1,546	233.78
Vested	(2,052)	115.26
Forfeited	(268)	118.97
Unvested shares as of December 31, 2023	5,597	$	129.35	$	1,138,797

As of December 31, 2023, Cadence had total unrecognized compensation expense related to restricted stock grants of $547.2 million, which will be recognized over a weighted average vesting period of 1.8 years.

Cadence provides an ESPP that enables eligible employees to purchase shares of its common stock. Offering periods under the plan last a duration of six months beginning on either February 1 or August 1, with the purchase dates falling on the last day of the six-month offering period. For the offering periods commencing after February 1, 2022, eligible employees may purchase Cadence’s common stock at a price equal to 85% of the lower of the fair market value at the beginning or the end of the applicable offering period, in an amount not to exceed 15% of their annual base earnings plus bonuses and commissions, and subject to a limit in any calendar year of $25,000. The ESPP may be amended from time to time. As of December 31, 2023, the total number of shares available for future issuance under the ESPP was 3.3 million.

Compensation expense is calculated using the fair value of the employees’ purchase rights under the Black-Scholes option pricing model. The weighted average grant date fair value of purchase rights granted under the ESPP and the weighted average assumptions used in the model for fiscal 2023, 2022 and 2021 were as follows:


	2023			2022			2021
Dividend yield	None			None			None
Expected volatility	29.9		%	37.2		%	31.5		%
Risk-free interest rate	4.50		%	1.71		%	0.07		%
Expected term (in years)	0.5			0.5			0.5
Weighted average fair value of options granted	$	50.95		$	43.41		$	33.77


	2023		2022		2021
	(In thousands, except per share amounts)
Cadence shares purchased under the ESPP	647		703		624
Cash received for the purchase of shares under the ESPP	$	102,017	$	89,314	$	63,932
Weighted average purchase price per share	$	157.70	$	127.12	$	102.41

*Includes shares reserved for: (i) issuance upon exercise of future option grants, (ii) issuance upon vesting of future restricted stock grants, (iii) outstanding but unexercised options to purchase common stock, or (iv) unvested restricted stock units.