Derivatives

3 Months Ended

Sep. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives

DERIVATIVES

Cash flow hedges

Interest rate swap

In March 2020, the Company entered into a three-year $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 $80 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. Any hedge ineffectiveness is recorded in interest expense in the consolidated statements of comprehensive income. The hedge ineffectiveness for the three months ended September 30, 2022 was $0.1 million. The hedge expired in March 2023 and was not replaced.

Foreign exchange contracts

During the three months ended September 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 September 30, 2023 and June 30, 2023:

Settlement date	Hedged currency	Foreign currency rate	Notional amount ($000s)		Fair Value ($000s)
Foreign currency option contracts - liabilities
October 5, 2023 through September 23, 2024	PHP	52.50 - 57.90	$	34,251
Fair value as of June 30, 2023					$	100
Fair value as of September 30, 2023					$	316

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 accumulated other comprehensive income ("AOCI"). Amounts previously recognized in AOCI are reclassified to cost of services in the periods in which the hedged expenses occur. The net losses reclassified for the three months ended September 30, 2023 were not material. During the three months ended September 30, 2022, the Company reclassified net losses of $0.6 million.

The table below summarizes the aggregate unrealized net loss in AOCI:

	Three months ended September 30,
($000s)	2023		2022
Aggregate unrealized net loss, beginning of the period	$	180	$	857
Add: Net loss / (gain) from change in fair value of cash flow hedges	235		(168)
Less: Net loss reclassified to earnings from effective hedges	(41)		(554)
Aggregate unrealized net loss, end of the period	$	374	$	135