Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. The following discussion about these market risks includes forward-looking statements. Actual results could differ materially from those projected in these forward-looking statements.

Interest Rate Sensitivity. We maintain an investment portfolio of various holdings, types, and maturities. See Notes 6 and 7 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report for information relating to investments and fair value. These investments are sensitive to interest rate movements, and their fair value will decline as interest rates rise and increase as interest rates decline. The estimated impact on these investments of a 100 basis point (1.0%) increase in interest rates across the yield curve from rates in effect as of the balance sheet date would be a $2.7 million decline in value.

Our earnings and cash flows from operations would be exposed to changes in interest rates because of the floating rate of interest on our 2030 New Term Loan, if such loan were not hedged using floating-to-fixed rate interest rate swaps. See Note 15 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report. We have entered into interest rate swaps that fix the floating rate for $350.0 million of our floating rate debt at 2.968% from September 2023 through September 2025, and another $350.0 million of our floating rate debt at 3.47% from January 2023 through January 2028. As such, a 100 basis point (1.0%) increase in the Secured Overnight Financing Rate (“SOFR”) rate as of our most recent SOFR rate setting would increase our annualized interest expense by approximately $4.6 million on the unhedged portion of our 2030 New Term Loan as recognized in our Consolidated Financial Statements. See Notes 15 and 18 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report for information relating to our 2030 New Term Loan.

Foreign Currency Exchange Risk. As a global concern, our business and results of operations are exposed to and can be impacted by movements in foreign currency exchange rates. Because we sell globally, some of our sales transactions and revenue are non-U.S. Dollar denominated, with the Euro, Indian Rupee, and Canadian Dollar being our most significant foreign currency revenue exposures. If the U.S. Dollar strengthens against these currencies, our revenue for these transactions reported in U.S. Dollars would decline. For our U.S. Dollar denominated sales, an increase in the value of the U.S. Dollar would increase the real costs of our products to customers in markets outside the United States, which could impact our competitive position. During fiscal 2024, approximately 14.3% of revenue was non-U.S. Dollar denominated. During fiscal 2024 as compared to fiscal 2023, the U.S. Dollar fluctuated against a number of foreign currencies with minimal impact as compared to fiscal 2023.

With regard to operating expense, our primary exposure to foreign currency exchange risk relates to the Canadian Dollar, Indian Rupee and Euro. If these foreign currencies strengthen against the U.S. Dollar, costs reported in U.S. Dollars will increase. During fiscal 2024, approximately 48.7% of our operating expense was non-U.S. Dollar denominated. During fiscal 2024 as compared to fiscal 2023, the U.S. Dollar primarily strengthened against a number of foreign currencies with minimal impact as compared to fiscal 2023.

From time to time, we use foreign currency forward contracts to reduce variability in certain forecasted non-U.S. Dollar denominated cash flows. Generally, these derivatives have maturities of 24 months or less and are designated as cash flow hedges. At the inception of the cash flow hedge, and on an ongoing basis, we assess whether the forward contract has been effective in offsetting changes in cash flows attributable to the hedged risk during the hedging period. The derivative’s net gain or loss is initially reported as a component of accumulated other comprehensive loss and, upon the occurrence of the forecasted transaction, it is subsequently reclassified to the line item in the Consolidated Statements of Operations to which the hedged transaction relates.

During fiscal 2024, we recorded $11.7 million in foreign currency exchange losses, as a result of monetary assets and liabilities that were transacted in a currency other than the entity’s functional currency, and the re-measurement adjustments were recorded in interest and other income, net on our Consolidated Statements of Operations. From time to time, we use foreign currency forwards to hedge these balance sheet exposures. These forwards are not designated as hedges for accounting purposes, and any net gain or loss associated with these derivatives is reported in interest and other income, net. During fiscal 2024, we recorded gains on non-hedge designated foreign currency forward contracts of $1.4 million. See Notes 1, 5 and 15 to our Consolidated Financial Statements included in Item 8 of Part II of this annual report.

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