System1, Inc. 10-K

Item 7A. Quantitative and Qualitative Disclosure about Market Risk Figures are presented in thousands, except percentages, rates and unless otherwise noted. We have operations within the United States and internationally, and we are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate and foreign currency exchange risk. Interest Rate Risk We are exposed to market risk from changes in interest rates on our Term Loan and our Revolving Facility, which accrues interest at a variable rate. The interest rate on our Term Loan is the adjusted Term Secured Overnight Financing Rate (“Term SOFR”) plus 4.75%. The interest rate on our Revolving Facility is the Term SOFR plus 2.5%. As of December 31, 2022 (Successor), $415,000 aggregate face value was outstanding on our Term Loan and $50,000 was outstanding on our Revolving Facility. We have not used any derivative financial instruments to manage our interest rate risk exposure from our Term Loan and Revolving Facility. Based upon the short-term investment amount as of December 31, 2022, a hypothetical one percentage point increase or decrease in the interest rate of our Term Loan and our Revolving Facility would result in a corresponding increase or decrease in interest expense of approximately $4,150 annually. Foreign Currency Exchange Rate Risk We have foreign currency exchange risk related to transactions denominated in currencies other than the U.S. Dollar, principally the Canadian Dollar. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. As of December 31, 2022, an immediate 10% adverse change in foreign exchange rates on foreign-denominated accounts would result in a foreign currency loss of approximately $13,065. In the event our non-U.S. Dollar denominated sales and expenses increase, our operating results may be more greatly affected by exchange rate fluctuations. 76