Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We had an outstanding aggregate balance of $ 1,774.7 million under the Term Loan as of December 31, 2025. Under our Term Loan, we pay interest at an annual rate equal to SOFR plus 2.25%, with a 0.75% SOFR floor. Accordingly, we have been and continue to be subject to interest rate fluctuations. Our Cap began in December 2021, which manages our exposure to interest rate movements on a notional amount of $1.0 billion of our Term Loan. In 2025, the Cap provided the right for us to receive payment from the counterparty if one-month SOFR exceeded 1.436%. (See Note 7 to the financial statements included in this report for further details on the changes to the Cap.) The interest rate was above the level of the Cap for the full year 2025. For every SOFR increase of 25 basis points above the level of the Cap, we expect our annual interest expense to increase by an additional $2.0 million related to the unhedged portion of the Term Loan.
As of December 31, 2025, our Revolving Facility was undrawn. Accordingly, although the Revolving Facility bears interest at SOFR plus 2.5%, without a SOFR floor, if and as drawn, we are currently not exposed to fluctuations in interest rates with respect to our Revolving Facility.
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, as well as accounts receivable. We maintain our cash and cash equivalents with financial institutions with high credit ratings and at times maintain the balance of our deposits in excess of federally insured limits. The majority of our cash is swept nightly into a money market fund invested in U.S. treasuries, agency mortgage-backed securities and/or U.S. government guaranteed debt. Accounts receivable are due from both domestic and international customers. We perform credit evaluations of our customers’ financial condition and record reserves to provide for estimated credit losses. Accounts payable are owed to both domestic and international vendors.
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