Derivatives

12 Months Ended

Jun. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Cash flow hedges

Interest rate swap

In March 2020, the Company entered into a $15 million notional floating to fixed interest-rate swap to hedge the interest rate risk on the first $15 million of the balance outstanding under our three-year $35.0 million revolving credit facility (as amended, the “PNC Credit Facility”) with PNC Bank, N.A. (“PNC”). At the time the hedge was executed, all critical terms matched between the hedge and the hedged item. Hedge effectiveness was assessed prospectively at inception, and on an ongoing basis by confirming that the critical terms continue to match. For the year ended June 30, 2023 there was no hedge ineffectiveness. For the year ended June 30, 2022, due to a decline in the line of credit balance, the Company recorded $0.05 million of hedge ineffectiveness, which is included in interest expense, net. For the year ended June 30, 2021 there was no hedge ineffectiveness. The hedge expired by its terms in March 2023 and was not replaced.

The Company has elected the optional expedients under ASC 848, which allows companies to continue applying hedge accounting, without de-designation, when one or more critical terms of the hedging relationship change, or is expected to change, due to reference rate reform. Effective June 1, 2022, the hedged debt index was changed from LIBOR to SOFR and the hedge documentation was updated to reflect this change on the effective date. The swap was not amended and the Company continued to apply hedge accounting.

The fair value of the interest rate swap is recorded in other current assets in the consolidated balance sheets as of June 30, 2023 and 2022:


Maturity Date	USD Notional		Floating rate receivable	Fixed rate payable		Fair value (liability) / asset
Interest rate swap
March 26, 2023	$	15,000	1M USD-SOFR	1.43	%
Fair value as of June 30, 2022						$	170
Fair value as of June 30, 2023						$	—

Foreign exchange contracts

During the two years ended June 30, 2023 and 2022, the Company entered into foreign currency exchange contracts, consisting of offsetting foreign exchange option contracts (“collars”), to mitigate foreign exchange fluctuations on the Philippine Peso (“PHP”) within a certain range and on a certain percentage of its PHP operating costs. The collars were designated as cash flow hedges upon inception, in accordance with ASC 815, in order to match the financial results of the hedges with the forecasted transactions. These contracts cover periods commensurate with the expected exposure, generally three to twelve months. We execute our contracts with our primary banking partner, PNC. The Company has not experienced and does not anticipate experiencing any issues related to derivative counterparty defaults.

The following table shows the notional amount and fair value of our foreign exchange cash flow hedging instruments as of June 30, 2023 and 2022:

Settlement date

Hedged
currency

Foreign
currency rate

Notional
amount

Fair Value

Foreign currency option contracts - liabilities

July 6, 2023 through June 21, 2024

PHP

52.50 - 57.90

27,303

Fair value as of June 30, 2022

981

Fair value as of June 30, 2023

100

The fair value of the collars are included in accounts payable and accrued liabilities in the consolidated balance sheets.

Changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognized in AOCI. Amounts previously recognized in AOCI are reclassified to expense in the periods in which the hedged expenses occur. During the years ended June 30, 2023 and 2022, the Company reclassified a loss of $1.2 million and $0.3 million, respectively, related to its collars in cost of services.

The table below summarizes the aggregate unrealized net gain or loss in AOCI for the three years ended June 30:


	June 30, 2023		June 30, 2022		June 30, 2021
Aggregate unrealized net loss at beginning of period	$	857	$	316	$	518
Add: Net loss / (gain) from change in fair value of cash flow hedges	524		860		(202)
Less: Net loss reclassified to earnings from effective hedges	(1,201)		(319)		—
Aggregate unrealized net loss at end of period	$	180	$	857	$	316