We have two equity incentive plans, our 2000 Equity Incentive Plan and our 2016 Employee Stock Purchase Plan (ESPP).

Our 2000 Equity Incentive Plan provides for grants of nonqualified and incentive stock options, common stock, restricted stock, restricted stock units and stock appreciation rights to employees, directors, officers and consultants. We award restricted stock units (RSUs) as the principal equity incentive awards, including certain performance-based awards that are earned based on achieving performance criteria established by the Compensation Committee of our Board of Directors on or prior to the grant date. Each RSU represents the contingent right to receive one share of our common stock.

Our ESPP allows eligible employees to contribute up to 10% of their base salary, up to a maximum of $25,000 per year and subject to any other plan limitations, toward the purchase of our common stock at a discounted price. The purchase price of the shares on each purchase date is equal to 85% of the lower of the fair market value of our common stock on the first and last trading days of each offering period. The ESPP is qualified under Section 423 of the Internal Revenue Code. We estimate the fair value of each purchase right under the ESPP on the date of grant using the Black-Scholes option valuation model and use the straight-line attribution approach to record the expense over the six-month offering period.

The following table shows total stock-based compensation expense recorded in our Consolidated Statements of Operations:


(in thousands)	Year ended September 30,
	2023		2022		2021
Cost of license revenue	$	145	$	272	$	100
Cost of support and cloud services revenue		12,801		11,022		9,900
Cost of professional services revenue		7,928		11,481		9,263
Sales and marketing		56,394		49,467		53,712
Research and development		58,931		41,944		34,272
General and administrative		70,260		60,677		70,042
Total stock-based compensation expense	$	206,459	$	174,863	$	177,289

Stock-based compensation expense in 2023, 2022 and 2021 includes $6.8 million, $6.4 million, and $7.3 million respectively, related to our ESPP.

The fair value of RSUs granted in 2023, 2022 and 2021 was based on the fair market value of our stock on the date of grant for service- and certain performance- based RSUs and based on a Monte Carlo simulation model for relative total shareholder return (rTSR) performance RSUs. The weighted average fair value per share of RSUs granted in 2023, 2022 and 2021 was $130.64, $114.31 and $111.48, respectively.

We account for forfeitures as they occur, rather than estimate expected forfeitures.

As of September 30, 2023, total unrecognized compensation cost related to unvested RSUs expected to vest was approximately $204.4 million and the weighted average remaining recognition period for unvested RSUs was 17 months. As of September 30, 2023, the weighted average remaining vesting term for outstanding awards is 1.0 years.

As of September 30, 2023, 7.3 million shares of common stock were available for grant under the equity incentive plan and 2.6 million shares of common stock were reserved for issuance upon vesting of RSUs granted and outstanding.

The following table sets forth the restricted stock unit activity for the year ended September 30, 2023.


(in thousands, except grant date fair value data)	Shares			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Balance of outstanding RSUs at October 1, 2022		2,754		$	105.07
Granted(1)		1,767		$	130.64
Vested		(1,800	)	$	104.00
Forfeited or not earned		(140	)	$	114.67
Balance of outstanding RSUs at September 30, 2023		2,581		$	122.82	$	365,619

(1)

RSUs granted includes 38 shares from prior period rTSR awards that were earned upon achievement of the performance criteria and vested in November 2022 and 61 shares from prior period performance-based awards that were earned upon achievement of the performance criteria and vested in November 2022.

The following table presents the number of RSU awards granted by award type:


(in thousands)	Year ended September 30, 2023
Performance-based RSUs(1)		69
Service-based RSUs(2)		1,530
Relative Total Shareholder Return RSUs(3)		69

(1)

The performance-based RSUs are primarily made up of RSUs granted to our executives and are eligible to vest based upon annual performance measures over a three-year period. To the extent earned, those performance-based RSUs will vest in three substantially equal installments on November 15, 2023, November 15, 2024, and November 15, 2025, or the date the Compensation Committee determines the extent to which the applicable performance criteria have been achieved for each performance period. Up to a maximum of two times the number of RSUs can be earned.

(2)

The service-based RSUs were granted to employees, including our executive officers. Substantially all service-based RSUs will vest in three substantially equal annual installments on or about the anniversary of the date of grant.

(3)

The rTSR RSUs were granted to our executives and are eligible to vest based on the performance of PTC stock relative to the stock performance of an index of PTC peer companies established as of the grant date, as determined at the end of the measurement period ending on September 30, 2025. The RSUs earned will vest on November 15, 2025. Up to a maximum of two times the number of rTSR RSUs eligible to be earned for the period may vest. If the stock price as of the beginning of the period is below the stock price at the end of the period, a maximum of 100% of the rTSR RSUs may vest.

The weighted-average fair value of the rTSR RSUs was $179.60 per target RSU on the grant date. The fair value of the rTSR RSUs was determined using a Monte Carlo simulation model, a generally accepted statistical technique used to simulate a range of possible future stock prices for PTC and the peer group. The method uses a risk-neutral framework to model future stock price movements based upon the risk-free rate of return, the historical volatility of each entity, and the pairwise correlations of each entity being modeled. The fair value for each simulation is the product of the payout percentage determined by PTC’s rTSR rank against the peer group, the projected price of PTC stock, and a discount factor based on the risk-free rate.

The significant assumptions used in the Monte Carlo simulation model were as follows:


	2023			2022			2021
Average volatility of peer group		41.54	%		34.67	%		41.52	%
Risk-free interest rate		4.12	%		0.81	%		0.21	%
Dividend yield		—	%		—	%		—	%
Expected term (in years)		2.87			2.87			2.87

Total value on vest date of RSUs vested are as follows:


(in thousands)	Year ended September 30,
	2023		2022		2021
Total value of restricted stock unit awards at vest	$	240,066	$	199,738	$	171,316

In 2023, shares issued upon vesting of restricted stock units were net of 0.6 million shares retained by us to cover employee tax withholdings of $82.8 million. In 2022, shares issued upon vesting of restricted stock units were net of 0.6 million shares retained by us to cover employee tax withholdings of $69.0 million. In 2021, shares issued upon vesting of restricted stock and restricted stock units were net of 0.5 million shares retained by us to cover employee tax withholdings of $53.1 million.

As of September 30, 2023, we had liability-classified awards related to stock-based compensation based on a fixed monetary amount of $44.9 million.