Derivative Instruments

3 Months Ended

Mar. 31, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Foreign Currency Forward Contracts - Hedging Instruments

Due to the global nature of our operations, portions of our revenue and operating expense are recorded in currencies other than the U.S. dollar. The value of revenue and operating expense measured in U.S. dollars is therefore subject to changes in foreign currency exchange rates. We enter into foreign currency forward contracts and foreign currency options with financial institutions with the primary objective to mitigate the impact of foreign currency exchange rate fluctuations on our international revenue and operating expense.

Foreign currency forward contracts and foreign currency options in effect as of March 31, 2024 and December 31, 2023, had durations of 1 to 9 months and 1 to 12 months, respectively. These contracts have been designated as cash flow hedges and unrealized gains and losses on the portion of these foreign currency forward contracts and foreign currency options that are included in the effectiveness test are reported in AOCI. Realized gains and losses of such contracts and options are recognized in revenue when the sale of product in the currency being hedged is recognized and in operating expense when the expense in the currency being hedged is recorded. We recognize all cash flow hedge reclassifications from AOCI and fair value changes of excluded portions in the same line item in our condensed consolidated statements of income that have been impacted by the hedged item.

The notional amount of foreign currency forward contracts and foreign currency options that were entered into to hedge forecasted revenue and operating expense is summarized as follows:


	Notional Amount
(In millions)	As of March 31, 2024		As of December 31, 2023
Euro	$	1,274.6	$	1,169.0
British pound	45.9		—
Swiss franc	215.6		—

Canadian dollar	39.7		—
Total foreign currency forward contracts and options	$	1,575.8	$	1,169.0

The pre-tax portion of the fair value of these foreign currency forward contracts and foreign currency options that were included in AOCI in total equity is summarized as follows:



(In millions)	As of March 31, 2024		As of December 31, 2023
Unrealized gains	$	4.6	$	—
Unrealized (losses)	(23.3)		(34.8)
Net unrealized gains (losses)	$	(18.7)	$	(34.8)

We expect the net unrealized losses of approximately $18.7 million to be settled over the next 9 months, with any amounts in AOCI to be reported as an adjustment to revenue or operating expense. We consider the impact of our and our counterparties’ credit risk on the fair value of the contracts as well as the ability of each party to execute its contractual obligations. As of March 31, 2024 and December 31, 2023, credit risk did not materially change the fair value of our foreign currency forward contracts and forward currency options.

The following table summarizes the effect of foreign currency forward contracts and forward currency options designated as hedging instruments in our condensed consolidated statements of income:


For the Three Months Ended March 31,
Net Gains/(Losses) Reclassified from AOCI into Operating Income					Net Gains/(Losses) Recognized in Operating Income
Location	2024		2023		Location	2024		2023
Revenue	$	2.9	$	17.6	Revenue	$	0.2	$	1.6
Operating expense	(2.1)		(0.5)		Operating expense	(1.2)		(2.1)

Foreign Currency Forward Contracts - Other Derivative Instruments

We also enter into other foreign currency forward contracts, usually with durations of one month or less, to mitigate the foreign currency risk related to certain balance sheet positions. We have not elected hedge accounting for these transactions.

The aggregate notional amount of these outstanding foreign currency forward contracts was $1,308.3 million and $1,301.5 million as of March 31, 2024 and December 31, 2023, respectively. Net losses of $24.3 million and net gains of $1.8 million related to these contracts were recorded as a component of other (income) expense, net for the three months ended March 31, 2024 and 2023, respectively.

Summary of Derivative Instruments

While certain of our derivative instruments are subject to netting arrangements with our counterparties, we do not offset derivative assets and liabilities in our condensed consolidated balance sheets. The amounts in the table below would not be substantially different if the derivative assets and liabilities were offset.

The following table summarizes the fair value and presentation in our condensed consolidated balance sheets of our outstanding derivative instruments, including those designated as hedging instruments:


(In millions)	Balance Sheet Location	As of March 31, 2024		As of December 31, 2023
Cash Flow Hedging Instruments:
Asset derivative instruments	Other current assets	$	8.6	$	0.3

Liability derivative instruments	Accrued expense and other	19.8		26.5







Other Derivative Instruments:
Asset derivative instruments	Other current assets	1.3		11.6
Liability derivative instruments	Accrued expense and other	7.5		5.1