Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Except for the cash flow hedging program initiated during the three months ended March 31, 2024 discussed below, there have been no other changes to our quantitative and qualitative disclosures set forth in Part II, Item 7A in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on January 25, 2024.

Foreign Currency Exchange Risk

To mitigate our risks associated with fluctuations in foreign currency exchange rates, we enter into foreign currency forward contracts to hedge a portion of our net outstanding monetary assets, liabilities and forecasted foreign currency denominated revenues. These foreign currency forward contracts are intended to offset gains or losses related to remeasuring monetary assets and liabilities and to reduce foreign exchange impact on our forecasted revenues. Derivative contracts related to hedging of forecasted revenues are designated as cash flow hedges for accounting purposes. For contracts qualifying as cash flow hedges, the derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income (loss) and subsequently reclassified into earnings in the same period the forecasted transaction affects earnings. For contracts not designated as cash flow hedges for accounting purposes, the derivative’s gain or loss is recognized immediately in earnings within our condensed consolidated statements of comprehensive income.

These foreign currency forward contracts expose us to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. We mitigate this credit risk by transacting with major financial institutions with high credit ratings. While the contract or notional amount is often used to express the volume of foreign currency forward contracts, the amounts potentially subject to credit risk are generally limited to the amounts, if any, by which the counterparties’ obligations under the agreements exceed our obligations to the counterparties. We are not required to pledge, and are not entitled to receive, cash collateral related to these derivative instruments. We do not enter into foreign currency forward contracts for trading or speculative purposes. Refer to Note 8 in the notes to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.