Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Interest rate risk
As of December 31, 2025 , our total debt outstanding, excluding unamortized debt issuance costs, was $ 2,047.3 million. Of this amount, $1,033.2 million, or 50 % of our total debt obligations, relates to our Convertible Notes that have a fixed coupon rate. Our $ 33.2 million outstanding principal amount of 2049 Convertible Notes accrues cash interest at a rate of 0.75 % of the principal amount per annum. Based on quoted market prices, as of December 31, 2025 , the fair value of our fixed rate Convertible Notes was $ 31.1 million, compared to a carrying value of $ 33.2 million. Our $1,000.0 million outstanding principal amount of 2030 Convertible Notes accrues cash interest at a rate of 0.625% of the principal amount per annum. Based on quoted market prices, as of December 31, 2025, the fair value of our fixed rate 2030 Convertible Notes was $932.2 million, compared to a carrying value of $1,000.0 million. Further, as of December 31, 2025 , we had $ 24.6 million outstanding under our Credit Facility, or 1 % of our total debt obligations. If we were to maintain these borrowings for one year and maximize the potential borrowings available under the revolving credit facility for one year, a 1% (100 basis points) increase in the applicable interest rate would result in additional interest expense to the Company of approximately $19 million. The carrying value of the Credit Facility approximates fair value because interest as of December 31, 2025 , was based on Secured Overnight Financing Rate (SOFR) that reset at various intervals of less than one year. Additionally, $ 704.6 million, or 34 % of our total debt obligations, relates to Senior Notes having a fixed coupon rate. Our € 600.0 million outstanding principal amount of Senior Notes accrues cash interest at a rate of 1.375% of the principal per annum. Based on quoted market prices, as of December 31, 2025 , the fair value of our fixed rate Senior Notes was $ 700.9 million, compared to a carrying value of $ 704.6 million. Also, $ 250.0 million, or 12 % of our total debt obligations, relates to an Uncommitted Loan Agreement, fully drawn and outstanding at December 31, 2025 , for the sole purpose of providing vault cash for ATMs, that expires no later than June 19, 2026. The loan is a Prime Rate Loan, a Daily Term SOFR Rate Loan plus 1.00% or shall bear interest at the rate agreed to by the Bank and the Company at the time such loan is made. The remaining $ 34.9 million, or less than 2 % of our total debt obligations, is related to borrowings by certain subsidiaries to fund, from time to time, working capital requirements.
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Our excess cash is invested in instruments with original maturities of three months or less or in certificates of deposit that may be withdrawn at any time without penalty; therefore, as investments mature and are reinvested, the amount we earn will increase or decrease with changes in the underlying short-term interest rates.
Foreign currency exchange rate risk
For the years ended December 31, 2025 and 2024 , 76.6 % of our revenues were generated in non-U.S. dollar countries. We expect to continue generating a significant portion of our revenues in countries with currencies other than the U.S. dollar.
We are particularly vulnerable to fluctuations in exchange rates of the U.S. dollar to the currencies of countries in which we have significant operations, primarily the euro, British pound, Australian dollar, Polish zloty, Indian rupee, New Zealand dollar, Malaysian ringgit and Philippine peso. As of December 31, 2025 , we estimate that a 10% fluctuation in these foreign currency exchange rates would have the combined annualized effect on reported net income and working capital of approximately $110 million to $120 million. This effect is estimated by applying a 10% adjustment factor to our non-U.S. dollar results from operations, intercompany loans that generate foreign currency gains or losses and working capital balances that require translation from the respective functional currency to the U.S. dollar reporting currency.
Additionally, we have other non-current, non-U.S. dollar assets and liabilities on our balance sheet that are translated to the U.S. dollar during consolidation. These items primarily represent goodwill and intangible assets recorded in connection with acquisitions in countries other than the U.S. We estimate that a 10% fluctuation in foreign currency exchange rates would have a non-cash impact on total comprehensive (loss) income of approximately $25 million to $35 million as a result of the change in value of these items during translation to the U.S. dollar. For the fluctuations described above, a strengthening U.S. dollar produces a financial loss, while a weakening U.S. dollar produces a financial gain.
We believe this quantitative measure has inherent limitations and does not take into account any governmental actions or changes in either customer purchasing patterns or our financing or operating strategies. Because a majority of our revenues and expenses are incurred in the functional currencies of our international operating entities, the profits we earn in foreign currencies are positively impacted by a weakening of the U.S. dollar and negatively impacted by a strengthening of the U.S. dollar. Additionally, our debt obligations are primarily in U.S. dollars; therefore, as foreign currency exchange rates fluctuate, the amount available for repayment of debt will also increase or decrease.
We use derivatives to minimize our exposures related to changes in foreign currency exchange rates and to facilitate foreign currency risk management services by writing derivatives to customers. Derivatives are used to manage the overall market risk associated with foreign currency exchange rates; however, we do not perform the extensive record-keeping required to account for the derivative transactions as hedges. Due to the relatively short duration of the derivative contracts, we use the derivatives primarily as economic hedges. Since we do not designate foreign currency derivatives as hedging instruments pursuant to the accounting standards, we record gains and losses on foreign exchange derivatives in earnings in the period of change.
A majority of our consumer-to-consumer money transfer operations involve receiving and disbursing different currencies, in which we earn a foreign currency spread based on the difference between buying currency at wholesale exchange rates and selling the currency to consumers at retail exchange rates. We enter into foreign currency forward and cross-currency swap contracts to minimize exposure related to fluctuations in foreign currency exchange rates. The changes in fair value related to these contracts are recorded in Foreign currency exchange (loss) gain, net on the Consolidated Statements of Operations. As of December 31, 2025 , we had foreign currency derivative contracts outstanding with a notional value of $ 532.2 million, primarily in Australian dollars, British pounds, Canadian dollars, euros and Mexican pesos, that were not designated as hedges and mature within a few days.
For derivative instruments our Xe operations write to customers, we aggregate the foreign currency exposure arising from customer contracts and hedge the resulting net currency risks by entering into offsetting contracts with established financial institution counterparties as part of a broader foreign currency portfolio. The changes in fair value related to the total portfolio of positions are recorded in Revenues on the Consolidated Statements of Operations. As of December 31, 2025 , we held foreign currency derivative contracts outstanding with a notional value of $ 0.7 billion, primarily in U.S. dollars, euros, British pounds, Australian dollars, and New Zealand dollars, that were not designated as hedges and for which the majority mature within the next twelve months.
We use longer-term foreign currency forward contracts to mitigate risks associated with changes in foreign currency exchange rates on certain foreign currency denominated other asset and liability positions. As of December 31, 2025 , the Company had foreign currency forward contracts outstanding with a notional value of $ 852.7 million, primarily in euros.
See Note 13, Derivative Instruments and Hedging Activities to our Consolidated Financial Statements for additional information.
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