4. Derivative Financial Instruments

From time to time, we enter into derivative instruments such as foreign currency forward contracts, to minimize the short-term impact of foreign currency exchange rate fluctuations on certain foreign currency denominated assets and liabilities. The derivative instruments are recorded at fair value in prepaid expenses and other current assets or other liabilities and accrued expenses on the condensed consolidated balance sheets. We do not designate such instruments as hedges for accounting purposes; accordingly, changes in the value of these contracts are recognized in each reporting period in other (expense) income, net in the condensed consolidated statements of operations. We do not enter into derivative instruments for trading purposes.

The foreign currency forward contracts generally mature within two to four months. The notional principal amount of outstanding foreign exchange forward contracts was $19.5 million and $44.3 million as of September 30, 2024 and December 31,

2023, respectively. The net fair value gains (losses) recognized in other expense, net in relation to these derivative instruments was $(1.3) million and $0.8 million for the three months ended September 30, 2024 and 2023, respectively, and was $(0.7) million and $0.2 million for the nine months ended September 30, 2024 and 2023, respectively.