Fair Value Measurements

3 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

6. Fair Value Measurements

A three-tier fair value hierarchy is utilized to prioritize the inputs used in measuring fair value. The hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels are defined as follows:

• Level 1 Inputs - unadjusted quoted prices in active markets for identical assets or liabilities;

• Level 2 Inputs - quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; and

• Level 3 Inputs - unobservable inputs reflecting the Company’s own assumptions in measuring the asset or liability at fair value.

The following table presents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis at September 30, 2022 and June 30, 2022 (in thousands).

September 30, 2022	Level 1		Level 2		Level 3		Total
Assets
Foreign currency derivatives	$	—	$	21	$	—	$	21
Interest rate swaps	$	—	$	1,338	$	—	$	1,338
Total assets measured at fair value	$	—	$	1,359	$	—	$	1,359

June 30, 2022	Level 1		Level 2		Level 3		Total
Assets
Interest rate swaps	$	—	$	1,314	$	—	$	1,314
Total assets measured at fair value	$	—	$	1,314	$	—	$	1,314
Liabilities
Foreign currency derivatives	$	—	$	31	$	—	$	31
Total liabilities measured at fair value	$	—	$	31	$	—	$	31

Level 1 Assets and Liabilities:  

The Company’s financial instruments consist of cash, accounts receivable, accounts payable, and accrued liabilities. The Company states accounts receivable, accounts payable and accrued liabilities at their carrying value, which approximates fair value due to the short time to the expected receipt or payment.

Level 2 Assets and Liabilities:  

The fair value of derivative instruments under the Company’s foreign exchange forward contracts and interest rate swaps are estimated based on valuations provided by alternative pricing sources supported by observable inputs which is considered Level 2.

As of September 30, 2022 and June 30, 2022, the Company had foreign exchange forward contracts that were not designated as hedging instruments with notional principal amount of $4.2 million and $9.6 million, respectively. These contracts have maturities of 40 days or less. Changes in the fair value of these foreign exchange forward contracts not designated as hedging instruments are included in other income or expense in the condensed consolidated statement of operations. For the three months ended September 30, 2022, and 2021, there were net losses of $0.5 million and  $0.2 million, respectively. As of September 30, 2022 and June 30, 2022 there were no outstanding foreign exchange forward contract that were designated as hedging instruments.

The fair values of the interest rate swaps are based upon inputs corroborated by observable market data which is considered Level 2. As of September 30, 2022 and as of June 30, 2022, the Company had interest rate swap contracts, designated as cash flow hedges, with the total notional amount of $75.0 million, respectively. Changes in fair value of these contracts are recorded as a component of accumulated other comprehensive income. As of September 30, 2022 and as of June 30, 2022, these contracts had an unrealized gain of $1.3 million, respectively. See Note 13, Derivatives and Hedging, for additional information.

The fair value of the borrowings under the 2019 Credit Agreement (as defined in Note 8) is estimated based on valuations provided by alternative pricing sources supported by observable inputs which is considered Level 2. Since the interest rate is variable for the 2019 Credit Agreement, the fair value approximates the face amount of the Company’s indebtedness of $271.5 million and $308.6 million as of September 30, 2022, and June 30, 2022, respectively.

Level 3 Assets and Liabilities: 

Certain of the Company’s assets, including intangible assets and goodwill are measured at fair value on a non-recurring basis if impairment is indicated.

As of September 30, 2022, and June 30, 2022, the Company did not have any asset or liability that were considered level 3. 

There were no transfers of assets or liabilities between Level 1, Level 2 and Level 3 during the three months ended September 30, 2022 and 2021. There were no impairments recorded for the three months ended September 30, 2022 and 2021.