v3.26.1
Note 5 - Derivative Financial Instruments
 12 Months Ended
Jun. 30, 2026
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 5. Derivative Financial Instruments

 

The Company measures all derivatives at fair value on the consolidated balance sheets. The accounting for gains and losses resulting from changes in the fair value of those derivatives depends upon the use of the derivative and whether it qualifies for hedge accounting are as follows (in thousands):

 

   

June 30, 2026

  

June 30, 2025

 
 

Balance sheet location

 

Fair Value

 

Derivative Assets Designated as Hedges

         

Foreign currency exchange contracts

Other current and prepaid assets

 $1,652  $— 

Foreign currency exchange contracts

Other assets

  22   — 

Total asset derivatives

 $1,674  $— 

Derivative Liabilities Designated as Hedges

         

Foreign currency exchange contracts

Accrued liabilities

 $16  $— 

Foreign currency exchange contracts

Long-term other liabilities

  55   — 

Total liability derivatives

 $71  $— 

 

As of  June 30, 2026 and  June 30, 2025 the fair value of the Company’s derivatives not designated as hedging instruments were not material. The Company records its derivative financial instruments on a gross basis within the consolidated balance sheets.

 

Cash Flow Hedging Arrangements

 

The Company uses foreign currency forward contracts designated as cash flow hedges to manage its exposure to the variability of future cash flows that are denominated in a foreign currency. For derivative instruments designated as cash flow hedges, the derivative’s gain or loss is initially reported as a component of accumulated other comprehensive loss and subsequently reclassified into income in the same period or periods in which the hedged item affects earnings. In order for the Company to receive hedge accounting treatment, the cash flow hedge must be highly effective in offsetting changes in the fair value of the hedged item and the relationship between the hedging instrument and the associated hedged item must be formally documented at the inception of the hedge relationship. Hedge effectiveness is formally assessed, both at hedge inception and on an ongoing basis, to determine whether the derivatives used in hedging transactions are highly effective in offsetting changes in the value of the hedged items and whether they are expected to continue to be highly effective in future periods.

 

The Company formally documents relationships between hedging instruments and associated hedged items. This documentation includes: identification of the specific foreign currency asset, liability or forecasted transaction being hedged; the nature of the risk being hedged; the hedge objective; and the method of assessing hedge effectiveness. If an anticipated transaction is deemed no longer likely to occur, the corresponding derivative instrument is de-designated as a hedge and any associated unrealized gains and losses in accumulated other comprehensive loss are recognized in income or expense at that time. Any future changes in the fair value of the instrument are recognized in current income or expense. The Company is required to maintain a minimum cash collateral balance of $2.0 million for its outstanding cash flow hedge derivatives to fund the anticipated settlement of its open positions. As of June 30, 2026, the Company has $2.0 million in cash collateral for its cash flow hedge derivatives recorded in long-term restricted cash on the consolidated balance sheets.

 

The notional amount of the Company’s foreign currency forward contracts that were entered into to hedge forecasted revenues and designated as cash flow hedges (in thousands):

 

  

June 30, 2026

  

June 30, 2025

 

Euro

 $30,718  $— 

Japanese Yen

  24,650   — 

Total

 $55,368  $— 

 

The amount of the gains and losses on derivative instruments designated as cash flow hedges and the classification of those gains and losses within the consolidated financial statements were as follows (in thousands):

 

  

Foreign currency exchange contracts

 
  

Years Ended

 
  

June 30,

 
  

2026

  

2025

 

Gain recognized in accumulated other comprehensive loss

 $3,010  $— 

Amount of (gain) reclassed from accumulated other comprehensive loss to net loss

  (1,407)  — 

Total

 $1,603  $— 

 

Gains and losses reclassified from accumulated other comprehensive loss are recorded in other income and expense on the Company’s statement of operations and comprehensive loss. During the year ended June 30, 2026, the gains and losses recognized due to the de-designation of cash flow hedge contracts were not significant. As of June 30, 2026 the amount that will be reclassified from accumulated other comprehensive loss to earnings within the next twelve months is $1.6 million. As of June 30, 2026 outstanding cash flow hedges will mature within the next eighteen months.

 

Balance Sheet Hedging Arrangements

 

The Company utilizes foreign currency forward contracts with reputable financial institutions to manage its exposure of fluctuations in foreign currency exchange rates on certain intercompany balances and foreign currency denominated cash, customer receivables and liabilities. The Company does not use derivative financial instruments for speculative or trading purposes. These forward contracts are not designated as hedging instruments for accounting purposes. The periods of these forward contracts range up to approximately three months and the notional amounts are intended to be consistent with changes in the underlying exposures. The Company intends to exchange foreign currencies for U.S. Dollars at maturity. The Company enters into forward currency exchange contracts to hedge its overseas operating expenses and other liabilities when deemed appropriate.

 

The notional amount of the Company’s outstanding forward currency exchange contracts consisted of the following (in thousands):

 

  

As of June 30,

 
  

2026

  

2025

 

Swiss Franc

 $32,485  $7,438 

Japanese Yen

  2,182   8,700 

Euro

 $12,279  $11,431 

Indian Rupee

  1,488   7,485 

Chinese Yuan

 $5,925  $5,491 

Korean Won

  1,470   1,306 

Canadian Dollar

 $1,059  $— 

British Pound

  —   1,617 

Total outstanding forward currency exchange contracts

 $56,888  $43,468 

 

The Company entered into the foreign currency forward contracts on June 30, 2026 and June 30, 2025. There is no significant change in the Company’s mark-to-market analysis, and therefore, there was no amount recorded on the balance sheets.

 

Gains and losses on the Company’s foreign currency forward contracts are recorded in Other expense, net, on the Company’s consolidated statements of operations and comprehensive income (loss). The following table provides information about the gain or loss associated with the Company’s derivative financial instruments not designated as hedging instruments (in thousands):

 

  

Years Ended June 30,

 
  

2026

  

2025

 

Foreign currency exchange gain on forward contracts

 $130  $655 

Foreign currency exchange gain on cash flow hedges

  2,052   — 

Total

 $2,182  $655