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Table of Contents
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk in the ordinary course of 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 primarily a result of fluctuations in foreign currency exchange rates and variable interest
rates.
Foreign Currency Risk
A portion of our bookings, revenue and operating expenses are denominated in foreign currencies, which are subject to exchange rate fluctuations. Our most
significant foreign currency exposures are the Euro, the British pound, the Indian rupee and the Canadian dollar. Our reported bookings, revenues and operating
results may be impacted by fluctuations in foreign currency exchange rates. Fluctuations in foreign currency exchange rates may also cause us to recognize
transaction gains and losses in our consolidated statement of operations; however, to date, such amounts have not been material. As our international operations
grow, our exposure to fluctuations in currency rates may increase, which may increase the costs associated with our international expansion. During 2015 , our
total bookings and total revenue growth in constant currency would have been approximately 320 basis points and 140 basis points higher, respectively. Constant
currency is calculated by translating bookings and revenue for each month in the current period using the foreign currency exchange rate for the corresponding
month in the prior period, excluding any hedging gains realized during the period.
In the third quarter of 2015 , we started to utilize foreign exchange forward contracts to manage the volatility of our bookings and revenue related to foreign
currency transactions. These forward contracts reduce, but do not eliminate, the impact of adverse currency exchange rate fluctuations. We designate these forward
contracts as cash flow hedges for accounting purposes. Changes in the intrinsic value of these hedges are recorded as a component of accumulated other
comprehensive income. Gains and losses, once realized, are recorded as a component of accumulated other comprehensive income and are amortized to revenue
over the same period in which the underlying hedged amounts are recognized. At December 31, 2015 , the total notional amount of such contracts was
$104.6 million and the realized and unrealized gain included in accumulated other comprehensive income totaled $3.4 million .
Interest Rate Sensitivity
Interest rate risk reflects our exposure to movements in interest rates associated with our borrowings. Borrowings under the Credit Facility bear interest at a
rate equal to, at our option, either (a) LIBOR (not less than 1.0% for the Term Loan only) plus 3.25% per annum or (b) 2.25% per annum plus the highest of (i) the
Federal Funds Rate plus 0.5% , (ii) the Prime Rate or (iii) one-month LIBOR plus 1.0% . Borrowings under the Term Loan were $1,083.5 million as of
December 31, 2015 . The effect of a hypothetical 10% change in interest rates would not have had a material impact on our interest expense.
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