Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our activities expose us to a variety of financial risks: market risk (includes foreign currency), interest rate risk and credit risk.
Foreign Currency Risk
Our exposure to market risk arises principally from exchange rate risk. Although substantially all of our revenues are denominated in U.S. dollars, a substantial portion of our expenses were incurred and paid in the Philippine peso, Indian rupee, Mexican peso, Colombian peso and euro in the year ended December 31, 2025. We also incur expenses in U.S. dollars, and currencies of the other countries in which we have operations. The exchange rates among the Philippine peso, Indian rupee, Mexican peso, Colombian peso, euro and the U.S. dollar have changed substantially in recent years and may fluctuate substantially in the future.
59
Table of Contents
The following table presents a summary of foreign currency exchange rates and changes for the periods indicated:
Philippine Peso Indian Rupee Mexican Peso Colombian Peso Euro
Average exchange rate against the U.S. dollar
Year ended December 31, 2025
57.49 87.15 19.22 4,051.14 0.89
Year ended December 31, 2024
57.28 83.67 18.31 4,072.86 0.92
Depreciation (appreciation) 0.4 % 4.2 % 5.0 % (0.5) % (3.3) %
Based on our level of operations during the year ended December 31, 2025 , and excluding any forward contract arrangements that we had in place during that period, a 10% appreciation (depreciation) of each foreign currency against the U.S. dollar would have increased (decreased) our expenses incurred and paid in that foreign currency as follows:
(in thousands) Philippine Peso Indian Rupee Mexican Peso Colombian Peso Euro
10% appreciation $ 47,586 $ 13,934 $ 4,353 $ 10,745 $ 8,252
10% depreciation $ (38,934) $ (11,401) $ (3,562) $ (8,792) $ (6,752)
In order to mitigate our exposure to foreign currency fluctuation risks and minimize the earnings and cash flow volatility associated with forecasted transactions denominated in certain foreign currencies, and economically hedge our intercompany balances and other monetary assets and liabilities denominated in currencies other than functional currencies, we enter into foreign currency forward contracts.
These contracts must be settled on the day of maturity or may be canceled subject to the receipts or payments of any gains or losses, respectively, equal to the difference between the contract exchange rate and the market exchange rate on the date of cancellation. We do not enter into foreign currency forward contracts for speculative or trading purposes. These derivative instruments do not subject us to material balance sheet risk due to exchange rate movements because gains and losses on the settlement of these derivatives are intended to offset revaluation losses and gains on the assets and liabilities being hedged.
See Note 5, “Forward Contracts” in the Notes to Consolidated Financial Statements included in this Annual Report for additional information regarding our forward contracts.
Interest Rate Risk
Our exposure to market risk is influenced by the changes in interest rates paid on any outstanding balance on our borrowings, mainly under our 2022 Credit Facilities. All of our borrowings outstanding under the 2022 Credit Facilities as of December 31, 2025 accrue interest at SOFR pl us 2.25%. Our total principal balance outstanding as of December 31, 2025 was $242.0 million. Based on the outstanding balances and interest rates under the 2022 Credit Facilities as of December 31, 2025, a hypothetical 10% increase or decrease in SOFR would cause an increase or decrease in interest expense of $0.9 million over the next 12 months.
Credit Risk
As of December 31, 2025, we had accounts receivable, net of allowance for credit losses, of $254.1 million, of which $47.2 million was owed by one of our clients. Collectively, this client represented 19% of our gross accounts receivable as of December 31, 2025.
60
Table of Contents