Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
2029 Senior Secured Notes, 2025 Convertible Notes and Embedded Derivative
Our total fixed-rate borrowings under the 2029 Senior Secured Notes and 2025 Convertible Notes as of December 31, 2024 were $40.9 million and $14.9 million, respectively. We record all of our fixed-rate borrowings at amortized cost and therefore, any changes in interest rates do not impact the values that we report for these liabilities on our consolidated financial statements. As of December 31, 2024 and 2023, we had no variable-rate borrowings related to the 2029 Senior Secured Notes or 2025 Convertible Notes.
The 2025 Convertible Notes include an embedded derivative which was marked to a fair value of zero at both December 31, 2024 and 2023. The fair value inputs to the derivative valuation include dividend yield, term, volatility, stock price, and risk-free rate. Consequently we may incur gains and losses on the derivative as changes occur in the stock price, volatility, and risk-free rate at each reporting period. Additional details regarding our 2025 Convertible Notes and the embedded derivative are included in Item IV Part 15 Note 5 – Fair Value Measurements and Note 6 – Debt in this Annual Report on Form 10-K.
Inflation Risk
Inflationary factors, such as increases in the cost of our materials, supplies, and overhead costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience an effect if inflation rates continue to rise. Significant adverse changes in inflation and prices in the future could result in material losses.
Currency Risk
Foreign Currency Exchange Risk
Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. A majority of our revenue is denominated in U.S. Dollars. However, as we have operations in foreign countries, a stronger U.S. Dollar could make our products and services more expensive in foreign countries and therefore reduce demand. A weaker U.S. Dollar could have the opposite effect. Such economic exposure to currency fluctuations is difficult to measure or predict because our sales are also influenced by many other factors.
For the fiscal year ended December 31, 2024, sales denominated in foreign currencies were approximately 9.8% of total revenue. Our results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. These foreign currencies primarily consist of the Canadian Dollar, South African Rand, British Pound, Euro, and Australian Dollar. For the twelve months ended December 31, 2024, a hypothetical 10% change in these foreign currencies would have increased or decreased our revenue by approximately $1.9 million. Actual gains and losses in the future may differ materially from the hypothetical gains and losses discussed above based on changes in the timing and amount of foreign currency exchange rate movements.
Item 8. Financial Statements and Supplementary Data
Our consolidated financial statements and the Reports of Independent Registered Public Accounting Firms appear in Part IV of this report.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.