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Derivative Instruments and Hedging | 6 Months Ended
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Jun. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments and Hedging | 5. Derivative Instruments and Hedging The Company enters into foreign currency forward contracts with certain financial institutions to mitigate the impact of foreign currency fluctuations on future cash flows and earnings. Derivative instruments that hedge the exposure to variability in expected future cash flows are designated as cash flow hedges. The Company records changes in the fair value of these derivatives as a component of accumulated other comprehensive income (loss) (“AOCI”) and subsequently reclassifies the related gains or losses into cost of revenue or operating expense in the same period, or periods, during which the hedged transaction affects earnings. The Company classifies cash flows related to its cash flow hedges as operating activities in its condensed consolidated statements of cash flows. Derivative instruments that hedge the exposure to variability in the fair value of assets or liabilities or hedge monetary assets and liabilities denominated in certain non-USD currencies are not designated as hedges for financial reporting purposes. The Company records changes in the fair value of these derivatives in other income (expense), net in the condensed consolidated statements of operations. The Company classifies cash flows related to these derivatives as operating activities in its condensed consolidated statements of cash flows. The following table summarizes the notional amounts of the Company’s derivative instruments (in thousands):
|  | June 30, 2024 |  |  | December 31, 2023 |
Foreign currency forward contracts designated as hedging instruments |  | $ | 112,867 |  |  | $ | 125,617 |
Foreign currency forward contracts not designated as hedging instruments |  |  | 84,359 |  |  |  | 99,918 |
Total derivative instruments |  | $ | 197,226 |  |  | $ | 225,535 |
The Company has master netting agreements with each of its counterparties, which permit net settlement of multiple, separate derivative contracts with a single payment. The Company does not have collateral requirements with any of its counterparties. Although the Company is allowed to present the fair value of derivative instruments on a net basis according to master netting arrangements, the Company has elected to present its derivative instruments on a gross basis in its condensed consolidated financial statements. The Company’s derivative instruments generally have maturities of 18 months or less. The Company does not use derivative instruments for trading or speculative purposes. The following table summarizes the fair value of the Company’s derivative instruments on the condensed consolidated balance sheets (in thousands):
|  | Balance Sheet Location |  | June 30, 2024 |  |  | December 31, 2023 |
Derivative Assets: |  |  |  |  |  |  |  |
Foreign currency forward contracts designated as hedging instruments |  | Prepaid expenses and other current assets |  | $ | 1,109 |  |  | $ | 1,789 |
Foreign currency forward contracts not designated as hedging instruments |  | Prepaid expenses and other current assets |  |  | 385 |  |  |  | 906 |
Foreign currency forward contracts designated as hedging instruments |  | Other assets, non-current |  |  | 165 |  |  |  | 524 |
Total derivative assets |  |  |  | $ | 1,659 |  |  | $ | 3,219 |
Derivative Liabilities: |  |  |  |  |  |  |  |
Foreign currency forward contracts designated as hedging instruments |  | Accrued expenses and other liabilities |  | $ | 225 |  |  | $ | 18 |
Foreign currency forward contracts not designated as hedging instruments |  | Accrued expenses and other liabilities |  |  | 617 |  |  |  | 1,239 |
Foreign currency forward contracts designated as hedging instruments |  | Other liabilities, non-current |  |  | - |  |  |  | 15 |
Total derivative liabilities |  |  |  | $ | 842 |  |  | $ | 1,272 |
The following table presents the activity of foreign currency forward contracts designated as hedging instruments and the impact of these derivatives on AOCI (in thousands):
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Beginning balance |  | $ | 543 |  |  | $ | 1,024 |  |  | $ | 2,280 |  |  | $ | 653 |
Net gain (loss) recognized in other comprehensive income (loss) |  |  | 675 |  |  |  | 222 |  |  |  | (937 | ) |  |  | 1,065 |
Net gain reclassified from AOCI to earnings |  |  | (169 | ) |  |  | (706 | ) |  |  | (294 | ) |  |  | (1,178 | )
Ending balance |  | $ | 1,049 |  |  | $ | 540 |  |  | $ | 1,049 |  |  | $ | 540 |
As of June 30, 2024, net unrealized gains included in the balance of accumulated other comprehensive (loss) income related to foreign currency forward contracts designated as hedging instruments was $1.0 million, $0.9 million of which the Company expects to reclassify from accumulated other comprehensive (loss) income into earnings over the next 12 months. The following table summarizes the effect of foreign currency forward contracts on the condensed consolidated statements of operations (in thousands):
|  | Derivatives Designated as Hedging Instruments |  |  | Derivatives Not Designated as Hedging Instruments |
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |  |  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Cost of revenue - subscription |  | $ | 30 |  |  | $ | 89 |  |  | $ | 54 |  |  | $ | 133 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Cost of revenue - services |  |  | 11 |  |  |  | 60 |  |  |  | 19 |  |  |  | 108 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Research and development |  |  | 33 |  |  |  | 140 |  |  |  | 64 |  |  |  | 199 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Sales and marketing |  |  | 66 |  |  |  | 318 |  |  |  | 99 |  |  |  | 581 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
General and administrative |  |  | 29 |  |  |  | 99 |  |  |  | 58 |  |  |  | 157 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Other (expense) income, net |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (242 | ) |  |  | 11 |  |  |  | (1,049 | ) |  |  | 87 |
Total gains (losses) recognized in earnings |  | $ | 169 |  |  | $ | 706 |  |  | $ | 294 |  |  | $ | 1,178 |  |  | $ | (242 | ) |  | $ | 11 |  |  | $ | (1,049 | ) |  | $ | 87 |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
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