Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures about Market Risks
Our primary exposure to market risk is interest rate sensitivity in connection with our investment portfolio and the 2022 Term Loan. None of these market risk sensitive instruments are held for trading purposes.
Investment Portfolio
Our investment portfolio includes financial instruments that are sensitive to interest rate risks. Our investment portfolio is used to preserve capital, maintain liquidity sufficient to meet cash flow requirements, and maximize returns commensurate with our risk appetite. We invest in instruments that meet the credit quality, diversification, liquidity, and maturity standards outlined in our investment policy.
As of December 31, 2023, our investment portfolio includes $82.0 million of cash equivalents and $71.6 million of marketable securities, which are primarily comprised of money market funds, U.S. Treasury securities, corporate debt, and government-sponsored securities. Our money market funds are short-term highly liquid investments, and our marketable securities have active secondary or resale markets to help ensure liquidity. We account for marketable securities as available-for-sale, thus, no gains or losses are realized due to changes in the fair value of our marketable securities unless we sell our investments prior to maturity or incur a credit loss. Furthermore, our investment policy includes guidelines limiting the term-to-maturity of our investments. Due to the nature of our investments, we do not believe that the fair value of our investments has a material exposure to interest rate risk.
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2022 Term Loan
The 2022 Term Loan bears interest at a rate based upon the Secured Overnight Financing Rate (“SOFR”) plus a spread adjustment of 0.26% (subject to a floor of 1.20%), plus a margin of 7.5% per annum. Based on the outstanding principal amount of the 2022 Term Loan as of December 31, 2023 of $412.5 million and the applicable interest rate, a hypothetical 1% increase or decrease in interest rates would increase or decrease future interest expense by approximately $4.1 million.
Item 8. Consolidated Financial Statements and Supplementary Data
Our Consolidated Financial Statements, together with the reports of our independent registered public accounting firms, begin on page F - 1 of this Form 10 - K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
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