15. Derivatives

The Company enters into foreign currency forward contracts to reduce the risk of variability in future cash flow due to foreign currency exchange rate fluctuation from certain forecasted revenue transactions billed in currencies other than the U.S. Dollar. These transactions are designated as cash flow hedges. The foreign currency forward contracts have maturities of 12 months or less. Hedge effectiveness is assessed at inception and at each reporting period utilizing statistical regression analysis. The derivatives are subject to master netting arrangements and are disclosed on a gross basis on the consolidated balance sheets. Unrealized foreign exchange gains or losses related to those designated cash flow hedge contracts are recorded in accumulated other comprehensive income ("AOCI") and are reclassified into revenues in the same periods when the hedged transactions are recognized in earnings. Cash flows from the settlement of these forward contracts are classified as operating activities on the consolidated statements of cash flows. As of December 31, 2024, the Company had designated cash flow hedge forward contracts with notional amounts equivalent to $26.0 million.

Refer to Note 13 for the activity of foreign currency forward contracts designated as hedging instruments and the impact of these derivatives on AOCI. As of December 31, 2024, the Company estimates the net amount of unrealized losses before tax on the foreign currency contracts expected to be reclassified into revenue over the next 12 months is approximately $1.1 million.