Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to certain market risks, including those relating to changes in interest rates and foreign currency exchange rates. We do not enter into instruments for trading or speculative purposes.
Interest Rate Risk
We are subject to interest rate risk relating to our cash equivalents and borrowings under our Credit Agreement, which bear interest at a per annum rate equal to (i) at our option, (x) the base rate or (y) the adjusted term SOFR rate, plus (ii) the applicable margin. The applicable margin for an adjusted term SOFR loan is 2.00% and the applicable margin for a base rate loan is 1.00%. The applicable interest rate is set for a specific term when amounts are drawn down under the terms of the Revolving Facility, and future draws, if any, under the Credit Agreement may be subject to a higher or lower interest rate, depending upon, among other things, the then-prevailing SOFR rate. To date, the Company has not utilized interest rate hedging or other strategies in an attempt to mitigate our interest rate risk. A hypothetical 10% change in interest rates during the three and six months ended June 30, 2026 would have had a neutral net impact on our unaudited Condensed Consolidated Financial Statements, as changes in amounts paid for interest expense would have offset changes in interest income earned on cash balances.
Foreign Exchange Risk
We operate our business primarily within the U.S. and currently execute a majority of our transactions in U.S. dollars. However, we are exposed to limited foreign exchange risk as a result of our U.K. operations. The foreign exchange (loss) gain for the three months ended June 30, 2026 and 2025 were $(23,730) and $927,462, respectively, and $(91,246) and $1,423,000 for the six months ended June 30, 2026 and 2025, respectively. We have not utilized hedging or other strategies with respect to such foreign exchange exposure. This limited foreign currency translation risk is not expected to have a material impact on our unaudited Condensed Consolidated Financial Statements. A hypothetical 10% change in the applicable foreign exchange rate during the six months ended June 30, 2026 would have resulted in a change in total revenues of approximately 1.9% and a change in total assets of approximately 0.3%.
Concentrations of Risk
Our financial instruments that are exposed to concentrations of credit risks primarily consist of cash, cash equivalents, restricted cash, restricted cash equivalents, restricted investments, and accounts receivable. We attempt to minimize
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concentration of credit risk by maintaining our cash and restricted cash with institutions of sound financial quality. At times, cash balances may exceed limits federally insured by the Federal Deposit Insurance Corporation. We believe that we are not exposed to significant credit risk due to the financial strength of the depository institutions in which the funds are held. Most of our cash equivalents, restricted cash equivalents, and restricted investments are invested in U.S. treasury securities and corporate bonds, all of which have credit ratings of “A” or above.
We had two customers which accounted for approximately 13% and 11%, respectively, of revenues for the three months ended June 30, 2026, and one customer that accounted for approximately 34% of revenues for the three months ended June 30, 2025. We had two customers that accounted for approximately 11% and 10%, respectively, of revenues for the six months ended June 30, 2026, one of which is the same customer that accounted for approximately 42% of revenues for the six months ended June 30, 2025.
As of June 30, 2026,we had two customers that accounted for approximately 16% and 14%, respectively, of net accounts receivable. As of December 31, 2025, we had two customers that accounted for approximately 23% and 12%, respectively, of net accounts receivable.
We perform ongoing evaluations of customers’ financial condition, creditworthiness and payment performance. Based on these evaluations, we consider whether or not the accounts receivable exposure to any specific customer is within an acceptable range for that customer.
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