DHI GROUP, INC. 10-Q

Item 3. Quantitative and Qualitative Disclosures about Market Risk We have exposure to financial market risks, including changes in foreign currency exchange rates, interest rates, and other relevant market prices. 38 Table of Contents Foreign Exchange Risk Prior to June 30, 2021, we conducted business in multiple markets, in four languages, mainly across Europe, Asia, Australia, and North America. On June 30, 2021, the Company transferred majority ownership of its eFC business to eFC's management and retained a 40% common share interest. As a result, subsequent to June 30, 2021 the Company's operations are conducted within the United States. Accordingly, the Company's foreign exchange risk is limited to the value of its investments in entities with foreign operations, which are recorded as investments on the Condensed Consolidated Balance sheets at $3.6 million as of September 30, 2021. The exchange rate risk is primarily related to exchange rate fluctuations between the British Pound Sterling and the United States dollar and the translation of these. We currently do not hedge currency risk. Prior to June 30, 2021, the financial statements of our non-United States subsidiaries were translated into United States dollars using then-current exchange rates, with gains or losses included in the cumulative translation adjustment account, which is a component of stockholders’ equity. As of September 30, 2021 our cumulative translation adjustment was zero. Certain of our investments have significant operations in the United Kingdom and may be negatively impacted by the effects of Brexit. The global markets and currencies have been adversely impacted by Brexit, including fluctuations in the value of the British Pound Sterling as compared to the United States dollar, which may experience declines in the future. Volatility in exchange rates may occur as the UK negotiates its exit from the EU. In the longer term, any impact from Brexit on the Company, including its impact on the Company's equity investments, will depend, in part, on the outcome of tariff, trade, regulatory and other negotiations. Although it is unknown what the result of those negotiations will be, it is possible that new terms may adversely affect our operations and financial results. In addition, trade talks or pacts between the United States and other nations could adversely affect our operations and financial results. Interest Rate Risk We have interest rate risk primarily related to borrowings under our Credit Agreement. Borrowings under our Credit Agreement bear interest, at our option, at a LIBOR rate or base rate plus a margin. The margin ranges from 1.75% to 2.50% on the LIBOR loans and 0.75% to 1.50% on the base rate, as determined by our most recent consolidated leverage ratio. As of September 30, 2021, we had outstanding borrowings of $18.0 million under our Credit Agreement. If interest rates increased 1.0%, interest expense in 2021 on our current borrowings would increase by approximately $0.1 million. LIBOR is the subject of recent national, international and other regulatory guidance and reform. These reforms and other pressure may cause LIBOR to disappear entirely or to perform differently than in the past. It is expected that certain banks will stop reporting information used to set LIBOR at the end of 2021 when their reporting obligations cease. This would effectively end the usefulness of LIBOR and may end its publication. The consequences of these developments cannot be entirely predicted but, as noted above, could impact the interest rates of LIBOR loans. If LIBOR is no longer widely available, the Company will pursue alternative interest rate calculations under the Credit Agreement. The Company is evaluating the expected impact of this change on its consolidated financial statements.