UiPath, Inc. 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk. We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is principally the result of fluctuations in interest rates and foreign currency exchange rates. Interest Rate Risk As of April 30, 2021, we had $1,796.3 million of cash and cash equivalents. Cash and cash equivalents consist of cash in banks, bank deposits, money market funds, commercial paper and corporate bonds with maturity dates of less than 3 months at the purchase date. We also had $13.5 million of restricted cash as of April 30, 2021, representing cash on deposit for forward agreements and cash collateral for credit cards. In addition, as of April 30, 2021, we had $83.3 million of marketable securities. Marketable securities consist of corporate bonds and commercial paper. Such interest-earning instruments carry a degree of interest rate risk. The primary objectives of our investment activities are the preservation of capital, the fulfillment of liquidity needs, and the fiduciary control of cash. We do not enter into investments for trading or speculative purposes. The Credit Facility allowed us to borrow up to $200.0 million as of April 30, 2021. The effect of a hypothetical 10% change in interest rates on our unaudited condensed consolidated financial statements for the three months ended April 30, 2021 would have been immaterial. Foreign Currency Exchange Risk The functional currency of our non-U.S. subsidiaries is the local currency. Asset and liability balances denominated in non-U.S. dollar currencies are translated into U.S. dollars using period-end exchange rates, while translation of revenue and expenses is based upon average monthly rates. Translation adjustments are recorded as a component of accumulated other comprehensive income (loss), and transaction gains and losses are recorded in other income (expense), net on our condensed consolidated financial statements. We have engaged in hedging activity to reduce our potential exposure to currency fluctuations since the fourth quarter in fiscal year 2021. If we are not able to successfully hedge against the risks associated with currency fluctuations, our results of operations could be adversely affected. The estimated translation impact to our condensed consolidated financial statements of a hypothetical 10% change in foreign currency exchange rates would amount to $24.3 million for the three months ended April 30, 2021. During the three months ended April 30, 2021, 56% percent of our revenues and 20% percent of our expenses were denominated in non-U.S. dollar currencies, and we recognized net foreign currency transaction losses of $2.3 million after the impact of foreign currency forward contracts. 40