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Note 4 - Derivative Instruments and Hedging Activities
 3 Months Ended
Mar. 31, 2026
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]

4. Derivative Instruments and Hedging Activities

 

The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed by using derivative instruments are foreign exchange rate risk and interest rate risk.

 

Since October 2012, the Company has employed a hedging program with a Canadian chartered bank to limit the potential foreign exchange fluctuations incurred on its future cash flows related to a portion of payroll, taxes, rent and payments to Canadian domain name registry suppliers that are denominated in Canadian dollars and are expected to be paid by its Canadian operating subsidiary.

 

The Company does not use hedging forward contracts for trading or speculative purposes. The foreign exchange contracts typically mature between one and twelve months.

 

The Company designates its foreign exchange contracts as hedging instruments in cash flow hedges for forecasted transactions. Where the critical terms of the hedging instrument and the entire hedged forecasted transaction are the same, in accordance with ASC 815 Derivatives and Hedging ("ASC 815"), the Company concludes that changes in fair value and cash flows attributable to the risk being hedged are expected to completely offset at inception and on an ongoing basis. The Company designated the foreign exchange hedge as a cash flow hedge of expected future payments at the inception of the contract. Accordingly, for the foreign exchange contracts, unrealized gains or losses on the effective portion of these contracts were included within other comprehensive income (loss) and reclassified to earnings when the hedged transaction is settled. Cash flows from hedging activities were classified under the same category as the cash flows from the hedged items in the Consolidated Statements of Cash Flows. The fair value of the foreign exchange contract, as of  March 31, 2026 and December 31, 2025, is recorded as derivative instrument assets or liabilities. For certain contracts where the hedged transactions are no longer probable to occur, the loss on the associated forward contract is recognized in earnings.

 

As of March 31, 2026, the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was $12.9 million, all of which met the requirements of ASC 815 and were designated as hedges.

 

As of December 31, 2025, the notional amount of forward contracts that the Company held to sell U.S. dollars in exchange for Canadian dollars was $27.2 million, all of which met the requirements of ASC 815

and were designated as hedges.

 

As of March 31, 2026, we had the following outstanding forward contracts to trade U.S. dollars in exchange for Canadian dollars:

 

Maturity date (Dollar amounts in thousands of U.S. dollars)

 

Notional amount of U.S. dollars

  

Weighted average exchange rate of U.S. dollars

  

Fair value Asset (Liability)

 
             

April - June 2026

  12,933   1.3609   (251)
  $12,933   1.3609  $(251)

 

Fair value of derivative instruments and effect of derivative instruments on financial performance

 

The effect of these derivative instruments on our Condensed Consolidated Financial Statements were as follows (amounts presented do not include any income tax effects).

 

Fair value of derivative instruments in the Condensed Consolidated Balance Sheets 

 

Derivatives (Dollar amounts in thousands of U.S. dollars)

 

Balance Sheet Location

 As of March 31, 2026 Fair Value Asset (Liability)  As of December 31, 2025 Fair Value Asset (Liability) 

Foreign Currency forward contracts designated as cash flow hedges (net)

 

Derivative instruments

 $(251) $(75)

Total foreign currency forward contracts (net)

 

Derivative instruments

 $(251) $(75)

 

Movement in Accumulated other comprehensive income (AOCI) balance for the three months ended March 31, 2026 (Dollar amounts in thousands of U.S. dollars)

 

  

Gains and losses on cash flow hedges

  

Tax impact

  

Total AOCI

 

Opening AOCI Balance - December 31, 2025

 $(79) $22  $(57)

Other comprehensive income (loss) before reclassifications

  (281)  68   (213)

Amount reclassified from AOCI

  109   (29)  80 

Other comprehensive income (loss) for the three months ended March 31, 2026

  (172)  39   (133)
             

Ending AOCI Balance - March 31, 2026

 $(251) $61  $(190)
 
Effects of derivative instruments on income and AOCI for the three months ended March 31, 2026 and 2025 are as follows (Dollar amounts in thousands of U.S. dollars) 
 

Derivatives in Cash Flow Hedging Relationship

 Amount of Gain or (Loss) Recognized in OCI, net of tax, on Derivative 

Location of Gain or (Loss) Reclassified from AOCI into Income

 Amount of Gain or (Loss) Reclassified from AOCI into Income 
     

Operating expenses

 $(87)

Foreign currency forward contracts for the three months ended March 31, 2026

 $(213)

Cost of revenues

 $(22)
          
     

Operating expenses

 $(593)

Foreign currency forward contracts for the three months ended March 31, 2025

 $42 

Cost of revenues

 $(143)