We enter into foreign currency forward contracts to manage our exposure to foreign currency exchange risk to reduce earnings volatility. We do not enter into derivative transactions for trading or speculative purposes.

The following table shows our derivative instruments measured at gross fair value as reflected in the Consolidated Balance Sheets:


(in thousands)	Fair Value of Derivatives Designated As Hedging Instruments				Fair Value of Derivatives Not Designated As Hedging Instruments
	March 31, 2024		September 30, 2023		March 31, 2024		September 30, 2023
Derivative assets(1):
Forward contracts	$	1,457	$	3,770	$	1,083	$	3,570
Derivative liabilities(2):
Forward contracts	$	—	$	—	$	1,672	$	3,158

(1)

As of March 31, 2024 and September 30, 2023, current derivative assets are recorded in Other current assets in the Consolidated Balance Sheets.

(2)

As of March 31, 2024 and September 30, 2023, current derivative liabilities are recorded in Accrued expenses and other current liabilities in the Consolidated Balance Sheets.

We hedge our net foreign currency monetary assets and liabilities primarily resulting from foreign currency denominated receivables and payables with foreign exchange forward contracts to reduce the risk that our earnings and cash flows will be adversely affected by changes in foreign currency exchange rates. These contracts have maturities of up to approximately three months. Generally, we do not designate these foreign currency forward contracts as hedges for accounting purposes and changes in the fair value of these instruments are recognized immediately in earnings. Because we enter into forward contracts only as an economic hedge, gains or losses on the underlying foreign-denominated balance are generally offset by the losses or gains on the forward contract. Gains and losses on forward contracts and foreign denominated receivables and payables are included in Other income (expense), net.

As of March 31, 2024 and September 30, 2023, we had outstanding forward contracts not designated as hedging instruments with notional amounts equivalent to the following:


Currency Hedged (in thousands)	March 31, 2024		September 30, 2023
Canadian Dollar / U.S. Dollar	$	1,985	$	5,135
Euro / U.S. Dollar		391,383		383,227
British Pound / U.S. Dollar		9,511		6,058
Israeli Shekel / U.S. Dollar		13,732		11,852
Japanese Yen / U.S. Dollar		12,413		4,770
Swiss Franc / U.S. Dollar		22,749		32,766
Swedish Krona / U.S. Dollar		15,165		35,085
Chinese Renminbi / U.S. Dollar		4,711		16,660
New Taiwan Dollar / U.S. Dollar		10,843		11,855
Korean Won / U.S. Dollar		—		6,157
Danish Krone / U.S. Dollar		5,468		6,731
Australian Dollar / U.S. Dollar		3,588		452
Hong Kong Dollar / U.S. Dollar		3,604		449
All other		2,918		2,439
Total	$	498,070	$	523,636

The following table shows the effect of our non-designated hedges on the Consolidated Statements of Operations for the three and six months ended March 31, 2024 and March 31, 2023:


(in thousands)		Three months ended						Six months ended
	Location of Gain (Loss)	March 31, 2024			March 31, 2023			March 31, 2024			March 31, 2023
Net realized and unrealized loss, excluding the underlying foreign currency exposure being hedged	Other income (expense), net	$	(1,286	)	$	(1,422	)	$	(5,022	)	$	(12,431	)

In the three months ended March 31, 2024 and March 31, 2023, foreign currency losses, net were $1.1 million and $0.8 million, respectively. In the six months ended March 31, 2024 and March 31, 2023, foreign currency losses, net were $0.1 million and $3.9 million, respectively.

We translate balance sheet accounts of subsidiaries with foreign functional currencies into the U.S. Dollar using the exchange rate at each balance sheet date. Resulting translation adjustments are reported as a component of Accumulated other comprehensive loss on the Consolidated Balance Sheets. We designate certain foreign exchange forward contracts as net investment hedges against exposure on translation of balance sheet accounts of Euro and Japanese Yen functional subsidiaries. Net investment hedges partially offset the impact of Foreign currency translation adjustment recorded in Accumulated other comprehensive loss on the Consolidated Balance Sheets. All foreign exchange forward contracts are carried at fair value on the Consolidated Balance Sheets and the maximum duration of net investment hedge foreign exchange forward contracts is approximately three months.

Net investment hedge relationships are designated at inception, and effectiveness is assessed retrospectively on a quarterly basis using the net equity position of Euro and Japanese Yen functional subsidiaries. As the forward contracts are highly effective in offsetting exchange rate exposure, we record changes in these net investment hedges in Accumulated other comprehensive loss and subsequently reclassify them to Foreign currency translation adjustment in Accumulated other comprehensive loss at the time of forward contract maturity. Changes in the fair value of foreign exchange forward contracts due to changes in time value are excluded from the assessment of effectiveness. Our derivatives are not subject to any credit contingent features. We manage credit risk with counterparties by trading among several counterparties and we review our counterparties’ credit at least quarterly.

As of March 31, 2024 and September 30, 2023, we had outstanding forward contracts designated as net investment hedges with notional amounts equivalent to the following:


Currency Hedged (in thousands)	March 31, 2024		September 30, 2023
Euro / U.S. Dollar	$	369,697	$	337,923
Japanese Yen / U.S. Dollar		10,089		10,285
Total	$	379,786	$	348,208

The following table shows the effect of our derivative instruments designated as net investment hedges in the Consolidated Statements of Operations for the three and six months ended March 31, 2024 and March 31, 2023:


(in thousands)		Three months ended					Six months ended
	Location of Gain (Loss)	March 31, 2024		March 31, 2023			March 31, 2024			March 31, 2023
Gain (loss) recognized in OCI	OCI	$	8,552	$	(2,664	)	$	(6,752	)	$	(17,969	)
Gain (loss) reclassified from OCI to earnings	n/a	$	—	$	—		$	—		$	—
Gain recognized, excluded portion	Other income (expense), net	$	1,079	$	1,179		$	2,215		$	2,148

As of March 31, 2024, we estimate that all amounts reported in Accumulated other comprehensive loss will be applied against exposed balance sheet accounts upon translation within the next three months.

We have entered into master netting arrangements for our forward contracts that allow net settlements under certain conditions. Although netting is permitted, it is currently our policy and practice to record all derivative assets and liabilities on a gross basis in the Consolidated Balance Sheets.

The following table sets forth the offsetting of derivative assets as of March 31, 2024:


(in thousands)	Gross Amounts Offset in the Consolidated Balance Sheets						Gross Amounts Not Offset in the Consolidated Balance Sheets
As of March 31, 2024	Gross Amount of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheets		Net Amounts of Assets Presented in the Consolidated Balance Sheets		Financial Instruments			Cash Collateral Received		Net Amount
Forward contracts	$	2,540	$	—	$	2,540	$	(1,672	)	$	—	$	868

The following table sets forth the offsetting of derivative liabilities as of March 31, 2024:


(in thousands)	Gross Amounts Offset in the Consolidated Balance Sheets						Gross Amounts Not Offset in the Consolidated Balance Sheets
As of March 31, 2024	Gross Amount of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheets		Net Amounts of Liabilities Presented in the Consolidated Balance Sheets		Financial Instruments			Cash Collateral Pledged		Net Amount
Forward contracts	$	1,672	$	—	$	1,672	$	(1,672	)	$	—	$	—