COVID-19 Impact<\/strong><\/p>\nWhile the broader implications of the COVID-19 pandemic on our employees and overall financial performance remain uncertain, we have seen certain impacts on our business and operations, results of operations, financial condition, cash flows, liquidity and capital and financial resources. Going forward, the situation is uncertain, rapidly changing and hard to predict, and the COVID-19 pandemic may have a material negative impact on our future periods, including our results for the three months ending December 31, 2021, our annual results for 2021, and beyond. To highlight the uncertainty remaining for the three-month period ending December 31, 2021, it should be noted that, due to customer buying patterns and the efforts of our sales force and channel partners to meet or exceed quarterly quotas, we have historically received a substantial portion of each quarter\u2019s sales orders and generated a substantial portion of each quarter\u2019s billings and revenue during the last two weeks of the quarter. Additionally, supply chain challenges are impacting businesses around the world. If we experience significant changes in our billings growth rates or if we are unable to supply product to meet demand, it will impact product revenue in the current quarter and FortiGuard and FortiCare service revenues in subsequent quarters, as we sell annual and multi-year service contracts that are recognized ratably over the contractual service term. In addition, the broader implications of the pandemic on our business and operations and our financial results, including the extent to which the effects of the pandemic will impact future results and growth in the cybersecurity industry, remain uncertain. The duration and severity of the economic downturn from the pandemic may negatively impact our business and operations, results of operations, financial condition, cash flows, liquidity and capital and financial resources in a material way. As a result, the effects of the pandemic may not be fully reflected in our results of operations until future periods.<\/p>\n
Non-GAAP Financial Measures<\/strong><\/p>\nWe have provided in this release financial information that has not been prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). These non-GAAP financial and liquidity measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies. We use these non-GAAP financial measures internally in analyzing our financial results and believe they are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial results with peer companies, many of which present similar non-GAAP financial measures to investors.<\/p>\n
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures provided in the financial statement tables below.<\/p>\n
Billings (non-GAAP).<\/em> We define billings as revenue recognized in accordance with GAAP plus the change in deferred revenue from the beginning to the end of the period, less any deferred revenue balances acquired from business combination(s) during the period. We consider billings to be a useful metric for management and investors because billings drive current and future revenue, which is an important indicator of the health and viability of our business. There are a number of limitations related to the use of billings instead of GAAP revenue. First, billings include amounts that have not yet been recognized as revenue and are impacted by the term of security and support agreements. Second, we may calculate billings in a manner that is different from peer companies that report similar financial measures. Management accounts for these limitations by providing specific information regarding GAAP revenue and evaluating billings together with GAAP revenue.<\/p>\nFree cash flow (non-GAAP).<\/em> We define free cash flow as net cash provided by operating activities minus purchases of property and equipment and excluding any significant non-recurring items, such as proceeds from intellectual property matter. We believe free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after capital expenditures and net of proceeds from intellectual property matter, can be used for strategic opportunities, including repurchasing outstanding common stock, investing in our business, making strategic acquisitions and strengthening the balance sheet. A limitation of using free cash flow rather than the GAAP measures of cash provided by or used in operating activities, investing activities, and financing activities is that free cash flow does not represent the total increase or decrease in the cash and cash equivalents balance for the period because it excludes cash flows from significant non-recurring items, such as proceeds from intellectual property matter, investing activities other than capital expenditures and cash flows from financing activities. Management accounts for this limitation by providing information about our capital expenditures and other investing and financing activities on the face of the cash flow statement and under the caption \u201cManagement\u2019s Discussion and Analysis of Financial Condition and Results of Operations\u2014Liquidity and Capital Resources\u201d in our most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K and by presenting cash flows from investing and financing activities in our reconciliation of free cash flow. In addition, it is important to note that other companies, including companies in our industry, may not use free cash flow, may calculate free cash flow in a different manner than we do or may use other financial measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a comparative measure.<\/p>\nNon-GAAP operating income and operating margin. <\/em>We define non-GAAP operating income as operating income plus stock-based compensation, impairment and amortization of acquired intangible assets, less gain on intellectual property matter and, when applicable, other significant non-recurring items in a given quarter, such as non-recurring gains or losses on litigation-related matters. Non-GAAP operating margin is defined as non-GAAP operating income divided by GAAP revenue. We consider these non-GAAP financial measures to be useful metrics for management and investors because they exclude the items noted above so that our management and investors can compare our recurring core business operating results over multiple periods. There are a number of limitations related to the use of non-GAAP operating income instead of operating income calculated in accordance with GAAP. First, non-GAAP operating income excludes the items noted above. Second, the components of the costs that we exclude from our calculation of non-GAAP operating income may differ from the components that peer companies exclude when they report their non-GAAP results of operations. Management accounts for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP operating income and evaluating non-GAAP operating income together with operating income calculated in accordance with GAAP.<\/p>\nNon-GAAP net income and diluted net income per share attributable to Fortinet, Inc. common stockholders. <\/em>We define non-GAAP net income as net income or loss plus the items noted above under non-GAAP operating income and operating margin. In addition, we adjust non-GAAP net income and diluted net income per share for gains or losses on investments in privately held companies, a tax adjustment required for an effective tax rate on a non-GAAP basis and adjustments attributable to non-controlling interests, which differs from the GAAP effective tax rate. We define non-GAAP diluted net income per share as non-GAAP net income divided by the non-GAAP diluted weighted-average shares outstanding. We consider these non-GAAP financial measures to be useful metrics for management and investors for the same reasons that we use non-GAAP operating income and non-GAAP operating margin. However, in order to provide a more complete picture of our recurring core business operating results, we include in non-GAAP net income and non-GAAP diluted net income per share, the tax adjustment required resulting in an effective tax rate on a non-GAAP basis, which often differs from the GAAP tax rate. We believe the non-GAAP effective tax rates we use are reasonable estimates of normalized tax rates for our current and prior fiscal years under\u00a0our global\u00a0operating structure. The same limitations described above regarding our use of non-GAAP operating income and non-GAAP operating margin apply to our use of non-GAAP net income and non-GAAP diluted net income per share. We account for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP net income and non-GAAP diluted net income per share and evaluating non-GAAP net income and non-GAAP diluted net income per share together with net income or loss and diluted net income per share calculated in accordance with GAAP.<\/p>\nFORTINET, INC.<\/strong><\/p>\nCONDENSED CONSOLIDATED BALANCE SHEETS<\/strong><\/p>\n(Unaudited, in millions)<\/strong><\/p>\n\n
\n\n\n<\/td>\n | September 30,<\/strong> \n2021<\/strong><\/td>\n<\/td>\n | December 31,<\/strong> \n2020<\/strong><\/td>\n<\/tr>\n\nASSETS<\/strong><\/td>\n<\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | \nCURRENT ASSETS:<\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | \nCash and cash equivalents<\/td>\n | $<\/td>\n | 1,852.1<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 1,061.8<\/td>\n | <\/td>\n<\/tr>\n | \nShort-term investments<\/td>\n | 1,228.1<\/td>\n | <\/td>\n | <\/td>\n | 775.5<\/td>\n | <\/td>\n<\/tr>\n | \nMarketable equity securities<\/td>\n | 40.8<\/td>\n | <\/td>\n | <\/td>\n | \u2014<\/td>\n | <\/td>\n<\/tr>\n | \nAccounts receivable\u2014net<\/td>\n | 604.9<\/td>\n | <\/td>\n | <\/td>\n | 720.0<\/td>\n | <\/td>\n<\/tr>\n | \nInventory<\/td>\n | 177.9<\/td>\n | <\/td>\n | <\/td>\n | 139.8<\/td>\n | <\/td>\n<\/tr>\n | \nPrepaid expenses and other current assets<\/td>\n | 59.7<\/td>\n | <\/td>\n | <\/td>\n | 43.3<\/td>\n | <\/td>\n<\/tr>\n | \nTotal current assets<\/td>\n | 3,963.5<\/td>\n | <\/td>\n | <\/td>\n | 2,740.4<\/td>\n | <\/td>\n<\/tr>\n | \nLONG-TERM INVESTMENTS<\/td>\n | 298.2<\/td>\n | <\/td>\n | <\/td>\n | 118.3<\/td>\n | <\/td>\n<\/tr>\n | \nPROPERTY AND EQUIPMENT\u2014NET<\/td>\n | 556.6<\/td>\n | <\/td>\n | <\/td>\n | 448.0<\/td>\n | <\/td>\n<\/tr>\n | \nDEFERRED CONTRACT COSTS<\/td>\n | 378.8<\/td>\n | <\/td>\n | <\/td>\n | 304.8<\/td>\n | <\/td>\n<\/tr>\n | \nDEFERRED TAX ASSETS<\/td>\n | 337.3<\/td>\n | <\/td>\n | <\/td>\n | 245.2<\/td>\n | <\/td>\n<\/tr>\n | \nGOODWILL AND OTHER INTANGIBLE ASSETS\u2014NET<\/td>\n | 198.6<\/td>\n | <\/td>\n | <\/td>\n | 124.6<\/td>\n | <\/td>\n<\/tr>\n | \nOTHER ASSETS<\/td>\n | 237.6<\/td>\n | <\/td>\n | <\/td>\n | 63.2<\/td>\n | <\/td>\n<\/tr>\n | \nTOTAL ASSETS<\/td>\n | $<\/td>\n | 5,970.6<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 4,044.5<\/td>\n | <\/td>\n<\/tr>\n | \nLIABILITIES AND EQUITY<\/strong><\/td>\n<\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | \nCURRENT LIABILITIES:<\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | \nAccounts payable<\/td>\n | $<\/td>\n | 142.3<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 141.6<\/td>\n | <\/td>\n<\/tr>\n | \nAccrued liabilities<\/td>\n | 247.8<\/td>\n | <\/td>\n | <\/td>\n | 149.2<\/td>\n | <\/td>\n<\/tr>\n | \nAccrued payroll and compensation<\/td>\n | 174.2<\/td>\n | <\/td>\n | <\/td>\n | 145.9<\/td>\n | <\/td>\n<\/tr>\n | \nCurrent portion of long-term debt<\/td>\n | 17.6<\/td>\n | <\/td>\n | <\/td>\n | \u2014<\/td>\n | <\/td>\n<\/tr>\n | \nDeferred revenue<\/td>\n | 1,616.1<\/td>\n | <\/td>\n | <\/td>\n | 1,392.8<\/td>\n | <\/td>\n<\/tr>\n | \nTotal current liabilities<\/td>\n | 2,198.0<\/td>\n | <\/td>\n | <\/td>\n | 1,829.5<\/td>\n | <\/td>\n<\/tr>\n | \nDEFERRED REVENUE<\/td>\n | 1,490.3<\/td>\n | <\/td>\n | <\/td>\n | 1,212.5<\/td>\n | <\/td>\n<\/tr>\n | \nINCOME TAX LIABILITIES<\/td>\n | 96.5<\/td>\n | <\/td>\n | <\/td>\n | 90.3<\/td>\n | <\/td>\n<\/tr>\n | \nLONG-TERM DEBT<\/td>\n | 988.0<\/td>\n | <\/td>\n | <\/td>\n | \u2014<\/td>\n | <\/td>\n<\/tr>\n | \nOTHER LIABILITIES<\/td>\n | 62.2<\/td>\n | <\/td>\n | <\/td>\n | 56.2<\/td>\n | <\/td>\n<\/tr>\n | \nTotal liabilities<\/td>\n | 4,835.0<\/td>\n | <\/td>\n | <\/td>\n | 3,188.5<\/td>\n | <\/td>\n<\/tr>\n | \nCOMMITMENTS AND CONTINGENCIES<\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | \nEQUITY:<\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | \nCommon stock<\/td>\n | 0.2<\/td>\n | <\/td>\n | <\/td>\n | 0.2<\/td>\n | <\/td>\n<\/tr>\n | \nAdditional paid-in capital<\/td>\n | 1,257.7<\/td>\n | <\/td>\n | <\/td>\n | 1,207.2<\/td>\n | <\/td>\n<\/tr>\n | \nAccumulated other comprehensive income (loss)<\/td>\n | (1.2<\/td>\n | )<\/td>\n | <\/td>\n | 0.7<\/td>\n | <\/td>\n<\/tr>\n | \nAccumulated deficit<\/td>\n | (138.6<\/td>\n | )<\/td>\n | <\/td>\n | (352.1<\/td>\n | )<\/td>\n<\/tr>\n | \nTotal Fortinet, Inc. stockholders\u2019 equity<\/td>\n | 1,118.1<\/td>\n | <\/td>\n | <\/td>\n | 856.0<\/td>\n | <\/td>\n<\/tr>\n | \nNon-controlling interests<\/td>\n | 17.5<\/td>\n | <\/td>\n | <\/td>\n | \u2014<\/td>\n | <\/td>\n<\/tr>\n | \nTotal equity<\/td>\n | 1,135.6<\/td>\n | <\/td>\n | <\/td>\n | 856.0<\/td>\n | <\/td>\n<\/tr>\n | \nTOTAL LIABILITIES AND EQUITY<\/td>\n | $<\/td>\n | 5,970.6<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 4,044.5<\/td>\n | <\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n FORTINET, INC.<\/strong><\/p>\nCONDENSED CONSOLIDATED STATEMENTS OF INCOME<\/strong> \n(Unaudited, in millions, except per share amounts)<\/strong><\/p>\n\n\n\n<\/td>\n | Three Months Ended<\/strong><\/td>\n<\/td>\n | Nine Months Ended<\/strong><\/td>\n<\/tr>\n\n\u00a0<\/strong><\/td>\nSeptember 30,<\/strong> \n2021<\/strong><\/td>\n<\/td>\n | September 30,<\/strong> \n2020<\/strong><\/td>\n<\/td>\n | September 30,<\/strong> \n2021<\/strong><\/td>\n<\/td>\n | September 30,<\/strong> \n2020<\/strong><\/td>\n<\/tr>\n\nREVENUE:<\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | \nProduct<\/td>\n | $<\/td>\n | 337.1<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 223.8<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 876.1<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 628.0<\/td>\n | <\/td>\n<\/tr>\n | \nService<\/td>\n | 530.1<\/td>\n | <\/td>\n | <\/td>\n | 427.3<\/td>\n | <\/td>\n | <\/td>\n | 1,502.5<\/td>\n | <\/td>\n | <\/td>\n | 1,218.4<\/td>\n | <\/td>\n<\/tr>\n | \nTotal revenue<\/td>\n | 867.2<\/td>\n | <\/td>\n | <\/td>\n | 651.1<\/td>\n | <\/td>\n | <\/td>\n | 2,378.6<\/td>\n | <\/td>\n | <\/td>\n | 1,846.4<\/td>\n | <\/td>\n<\/tr>\n | \nCOST OF REVENUE:<\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | \nProduct<\/td>\n | 134.3<\/td>\n | <\/td>\n | <\/td>\n | 84.3<\/td>\n | <\/td>\n | <\/td>\n | 341.2<\/td>\n | <\/td>\n | <\/td>\n | 245.0<\/td>\n | <\/td>\n<\/tr>\n | \nService<\/td>\n | 76.9<\/td>\n | <\/td>\n | <\/td>\n | 54.9<\/td>\n | <\/td>\n | <\/td>\n | 213.5<\/td>\n | <\/td>\n | <\/td>\n | 158.0<\/td>\n | <\/td>\n<\/tr>\n | \nTotal cost of revenue<\/td>\n | 211.2<\/td>\n | <\/td>\n | <\/td>\n | 139.2<\/td>\n | <\/td>\n | <\/td>\n | 554.7<\/td>\n | <\/td>\n | <\/td>\n | 403.0<\/td>\n | <\/td>\n<\/tr>\n | \nGROSS PROFIT:<\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | \nProduct<\/td>\n | 202.8<\/td>\n | <\/td>\n | <\/td>\n | 139.5<\/td>\n | <\/td>\n | <\/td>\n | 534.9<\/td>\n | <\/td>\n | <\/td>\n | 383.0<\/td>\n | <\/td>\n<\/tr>\n | \nService<\/td>\n | 453.2<\/td>\n | <\/td>\n | <\/td>\n | 372.4<\/td>\n | <\/td>\n | <\/td>\n | 1,289.0<\/td>\n | <\/td>\n | <\/td>\n | 1,060.4<\/td>\n | <\/td>\n<\/tr>\n | \nTotal gross profit<\/td>\n | 656.0<\/td>\n | <\/td>\n | <\/td>\n | 511.9<\/td>\n | <\/td>\n | <\/td>\n | 1,823.9<\/td>\n | <\/td>\n | <\/td>\n | 1,443.4<\/td>\n | <\/td>\n<\/tr>\n | \nOPERATING EXPENSES:<\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | \nResearch and development<\/td>\n | 107.8<\/td>\n | <\/td>\n | <\/td>\n | 90.0<\/td>\n | <\/td>\n | <\/td>\n | 311.6<\/td>\n | <\/td>\n | <\/td>\n | 252.4<\/td>\n | <\/td>\n<\/tr>\n | \nSales and marketing<\/td>\n | 347.1<\/td>\n | <\/td>\n | <\/td>\n | 266.7<\/td>\n | <\/td>\n | <\/td>\n | 978.0<\/td>\n | <\/td>\n | <\/td>\n | 780.5<\/td>\n | <\/td>\n<\/tr>\n | \nGeneral and administrative<\/td>\n | 35.8<\/td>\n | <\/td>\n | <\/td>\n | 29.4<\/td>\n | <\/td>\n | <\/td>\n | 102.2<\/td>\n | <\/td>\n | <\/td>\n | 87.1<\/td>\n | <\/td>\n<\/tr>\n | \nGain on intellectual property matter<\/td>\n | (1.1<\/td>\n | )<\/td>\n | <\/td>\n | (1.1<\/td>\n | )<\/td>\n | <\/td>\n | (3.4<\/td>\n | )<\/td>\n | <\/td>\n | (39.0<\/td>\n | )<\/td>\n<\/tr>\n | \nTotal operating expenses<\/td>\n | 489.6<\/td>\n | <\/td>\n | <\/td>\n | 385.0<\/td>\n | <\/td>\n | <\/td>\n | 1,388.4<\/td>\n | <\/td>\n | <\/td>\n | 1,081.0<\/td>\n | <\/td>\n<\/tr>\n | \nOPERATING INCOME<\/td>\n | 166.4<\/td>\n | <\/td>\n | <\/td>\n | 126.9<\/td>\n | <\/td>\n | <\/td>\n | 435.5<\/td>\n | <\/td>\n | <\/td>\n | 362.4<\/td>\n | <\/td>\n<\/tr>\n | \nINTEREST INCOME<\/td>\n | 1.2<\/td>\n | <\/td>\n | <\/td>\n | 2.5<\/td>\n | <\/td>\n | <\/td>\n | 3.5<\/td>\n | <\/td>\n | <\/td>\n | 15.7<\/td>\n | <\/td>\n<\/tr>\n | \nINTEREST EXPENSE<\/td>\n | (4.6<\/td>\n | )<\/td>\n | <\/td>\n | \u2014<\/td>\n | <\/td>\n | <\/td>\n | (10.4<\/td>\n | )<\/td>\n | <\/td>\n | \u2014<\/td>\n | <\/td>\n<\/tr>\n | \nOTHER EXPENSE\u2014NET<\/td>\n | (6.3<\/td>\n | )<\/td>\n | <\/td>\n | (1.0<\/td>\n | )<\/td>\n | <\/td>\n | (7.5<\/td>\n | )<\/td>\n | <\/td>\n | (8.1<\/td>\n | )<\/td>\n<\/tr>\n | \nINCOME BEFORE INCOME TAXES AND LOSS FROM EQUITY METHOD INVESTMENT<\/td>\n | 156.7<\/td>\n | <\/td>\n | <\/td>\n | 128.4<\/td>\n | <\/td>\n | <\/td>\n | 421.1<\/td>\n | <\/td>\n | <\/td>\n | 370.0<\/td>\n | <\/td>\n<\/tr>\n | \nPROVISION FOR (BENEFIT FROM) INCOME TAXES<\/td>\n | (9.3<\/td>\n | )<\/td>\n | <\/td>\n | 5.0<\/td>\n | <\/td>\n | <\/td>\n | 10.4<\/td>\n | <\/td>\n | <\/td>\n | 28.2<\/td>\n | <\/td>\n<\/tr>\n | \nLOSS FROM EQUITY METHOD INVESTMENT<\/td>\n | (2.8<\/td>\n | )<\/td>\n | <\/td>\n | \u2014<\/td>\n | <\/td>\n | <\/td>\n | (2.8<\/td>\n | )<\/td>\n | <\/td>\n | \u2014<\/td>\n | <\/td>\n<\/tr>\n | \nNET INCOME INCLUDING NON-CONTROLLING INTERESTS<\/td>\n | 163.2<\/td>\n | <\/td>\n | <\/td>\n | 123.4<\/td>\n | <\/td>\n | <\/td>\n | 407.9<\/td>\n | <\/td>\n | <\/td>\n | 341.8<\/td>\n | <\/td>\n<\/tr>\n | \nLess: NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS, NET OF TAX<\/td>\n | 0.1<\/td>\n | <\/td>\n | <\/td>\n | \u2014<\/td>\n | <\/td>\n | <\/td>\n | 0.1<\/td>\n | <\/td>\n | <\/td>\n | \u2014<\/td>\n | <\/td>\n<\/tr>\n | \nNET INCOME ATTRIBUTABLE TO FORTINET, INC.<\/td>\n | $<\/td>\n | 163.1<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 123.4<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 407.8<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 341.8<\/td>\n | <\/td>\n<\/tr>\n | \nNet income per share attributable to Fortinet, Inc. common stockholders:<\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | \nBasic<\/td>\n | $<\/td>\n | 1.00<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 0.76<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 2.50<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 2.07<\/td>\n | <\/td>\n<\/tr>\n | \nDiluted<\/td>\n | $<\/td>\n | 0.97<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 0.75<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 2.44<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 2.03<\/td>\n | <\/td>\n<\/tr>\n | \nWeighted-average shares outstanding:<\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | \nBasic<\/td>\n | 163.5<\/td>\n | <\/td>\n | <\/td>\n | 162.1<\/td>\n | <\/td>\n | <\/td>\n | 163.3<\/td>\n | <\/td>\n | <\/td>\n | 164.8<\/td>\n | <\/td>\n<\/tr>\n | \nDiluted<\/td>\n | 167.7<\/td>\n | <\/td>\n | <\/td>\n | 165.6<\/td>\n | <\/td>\n | <\/td>\n | 167.1<\/td>\n | <\/td>\n | <\/td>\n | 168.4<\/td>\n | <\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n FORTINET, INC.<\/strong><\/p>\nCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS<\/strong> \n(Unaudited, in millions)<\/strong><\/p>\n\n\n\n<\/td>\n | Nine Months Ended<\/strong><\/td>\n<\/tr>\n\n\u00a0<\/strong><\/td>\nSeptember 30,<\/strong> \n2021<\/strong><\/td>\n<\/td>\n | September 30,<\/strong> \n2020<\/strong><\/td>\n<\/tr>\n\nCASH FLOWS FROM OPERATING ACTIVITIES:<\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | \nNet income including non-controlling interests<\/td>\n | $<\/td>\n | 407.9<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 341.8<\/td>\n | <\/td>\n<\/tr>\n | \nAdjustments to reconcile net income to net cash provided by operating activities:<\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | \nStock-based compensation<\/td>\n | 154.8<\/td>\n | <\/td>\n | <\/td>\n | 143.0<\/td>\n | <\/td>\n<\/tr>\n | \nAmortization of deferred contract costs<\/td>\n | 126.9<\/td>\n | <\/td>\n | <\/td>\n | 99.8<\/td>\n | <\/td>\n<\/tr>\n | \nDepreciation and amortization<\/td>\n | 59.1<\/td>\n | <\/td>\n | <\/td>\n | 52.1<\/td>\n | <\/td>\n<\/tr>\n | \nAmortization of investment premium<\/td>\n | 4.8<\/td>\n | <\/td>\n | <\/td>\n | 0.2<\/td>\n | <\/td>\n<\/tr>\n | \nLoss from equity method investment<\/td>\n | 2.8<\/td>\n | <\/td>\n | <\/td>\n | \u2014<\/td>\n | <\/td>\n<\/tr>\n | \nOther<\/td>\n | 4.4<\/td>\n | <\/td>\n | <\/td>\n | 5.8<\/td>\n | <\/td>\n<\/tr>\n | \nChanges in operating assets and liabilities, net of impact of business combinations:<\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | \nAccounts receivable\u2014net<\/td>\n | 130.6<\/td>\n | <\/td>\n | <\/td>\n | (3.1<\/td>\n | )<\/td>\n<\/tr>\n | \nInventory<\/td>\n | (19.5<\/td>\n | )<\/td>\n | <\/td>\n | (31.0<\/td>\n | )<\/td>\n<\/tr>\n | \nPrepaid expenses and other current assets<\/td>\n | (12.5<\/td>\n | )<\/td>\n | <\/td>\n | (4.6<\/td>\n | )<\/td>\n<\/tr>\n | \nDeferred contract costs<\/td>\n | (201.0<\/td>\n | )<\/td>\n | <\/td>\n | (143.9<\/td>\n | )<\/td>\n<\/tr>\n | \nDeferred tax assets<\/td>\n | (91.9<\/td>\n | )<\/td>\n | <\/td>\n | 4.4<\/td>\n | <\/td>\n<\/tr>\n | \nOther assets<\/td>\n | (15.7<\/td>\n | )<\/td>\n | <\/td>\n | (2.0<\/td>\n | )<\/td>\n<\/tr>\n | \nAccounts payable<\/td>\n | (11.8<\/td>\n | )<\/td>\n | <\/td>\n | (4.2<\/td>\n | )<\/td>\n<\/tr>\n | \nAccrued liabilities<\/td>\n | 77.0<\/td>\n | <\/td>\n | <\/td>\n | 16.5<\/td>\n | <\/td>\n<\/tr>\n | \nAccrued payroll and compensation<\/td>\n | 23.1<\/td>\n | <\/td>\n | <\/td>\n | 19.5<\/td>\n | <\/td>\n<\/tr>\n | \nOther liabilities<\/td>\n | (3.2<\/td>\n | )<\/td>\n | <\/td>\n | 10.3<\/td>\n | <\/td>\n<\/tr>\n | \nDeferred revenue<\/td>\n | 497.1<\/td>\n | <\/td>\n | <\/td>\n | 282.6<\/td>\n | <\/td>\n<\/tr>\n | \nNet cash provided by operating activities<\/td>\n | 1,132.9<\/td>\n | <\/td>\n | <\/td>\n | 787.2<\/td>\n | <\/td>\n<\/tr>\n | \nCASH FLOWS FROM INVESTING ACTIVITIES:<\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | \nPurchases of investments<\/td>\n | (1,749.9<\/td>\n | )<\/td>\n | <\/td>\n | (776.3<\/td>\n | )<\/td>\n<\/tr>\n | \nSales of investments<\/td>\n | 82.2<\/td>\n | <\/td>\n | <\/td>\n | 141.4<\/td>\n | <\/td>\n<\/tr>\n | \nMaturities of investments<\/td>\n | 1,029.0<\/td>\n | <\/td>\n | <\/td>\n | 730.3<\/td>\n | <\/td>\n<\/tr>\n | \nPurchases of property and equipment<\/td>\n | (144.6<\/td>\n | )<\/td>\n | <\/td>\n | (93.6<\/td>\n | )<\/td>\n<\/tr>\n | \nPurchase of investment in privately held company<\/td>\n | (160.0<\/td>\n | )<\/td>\n | <\/td>\n | \u2014<\/td>\n | <\/td>\n<\/tr>\n | \nPayments made in connection with business combinations, net of cash acquired<\/td>\n | (73.4<\/td>\n | )<\/td>\n | <\/td>\n | (9.2<\/td>\n | )<\/td>\n<\/tr>\n | \nPurchases of marketable equity securities<\/td>\n | (42.5<\/td>\n | )<\/td>\n | <\/td>\n | (0.4<\/td>\n | )<\/td>\n<\/tr>\n | \nNet cash used in investing activities<\/td>\n | (1,059.2<\/td>\n | )<\/td>\n | <\/td>\n | (7.8<\/td>\n | )<\/td>\n<\/tr>\n | \nCASH FLOWS FROM FINANCING ACTIVITIES:<\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | \nProceeds from long-term borrowings, net of discount and underwriting fees<\/td>\n | 989.4<\/td>\n | <\/td>\n | <\/td>\n | \u2014<\/td>\n | <\/td>\n<\/tr>\n | \nPayments for debt issuance costs<\/td>\n | (2.4<\/td>\n | )<\/td>\n | <\/td>\n | \u2014<\/td>\n | <\/td>\n<\/tr>\n | \nPayments of debt assumed in connection with business combination<\/td>\n | (2.2<\/td>\n | )<\/td>\n | <\/td>\n | (4.1<\/td>\n | )<\/td>\n<\/tr>\n | \nRepurchase and retirement of common stock<\/td>\n | (170.0<\/td>\n | )<\/td>\n | <\/td>\n | (1,046.0<\/td>\n | )<\/td>\n<\/tr>\n | \nProceeds from issuance of common stock<\/td>\n | 20.7<\/td>\n | <\/td>\n | <\/td>\n | 18.2<\/td>\n | <\/td>\n<\/tr>\n | \nTaxes paid related to net share settlement of equity awards<\/td>\n | (118.9<\/td>\n | )<\/td>\n | <\/td>\n | (86.5<\/td>\n | )<\/td>\n<\/tr>\n | \nOther<\/td>\n | (0.2<\/td>\n | )<\/td>\n | <\/td>\n | (1.2<\/td>\n | )<\/td>\n<\/tr>\n | \nNet cash provided by (used in) financing activities<\/td>\n | 716.4<\/td>\n | <\/td>\n | <\/td>\n | (1,119.6<\/td>\n | )<\/td>\n<\/tr>\n | \nEFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS<\/td>\n | 0.2<\/td>\n | <\/td>\n | <\/td>\n | \u2014<\/td>\n | <\/td>\n<\/tr>\n | \nNET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS<\/td>\n | 790.3<\/td>\n | <\/td>\n | <\/td>\n | (340.2<\/td>\n | )<\/td>\n<\/tr>\n | \nCASH AND CASH EQUIVALENTS\u2014Beginning of period<\/td>\n | 1,061.8<\/td>\n | <\/td>\n | <\/td>\n | 1,222.5<\/td>\n | <\/td>\n<\/tr>\n | \nCASH AND CASH EQUIVALENTS\u2014End of period<\/td>\n | $<\/td>\n | 1,852.1<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 882.3<\/td>\n | <\/td>\n<\/tr>\n | \nSUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:<\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | \nCash paid for income taxes\u2014net<\/td>\n | $<\/td>\n | 69.9<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 27.6<\/td>\n | <\/td>\n<\/tr>\n | \nOperating lease liabilities arising from obtaining right-of-use assets<\/td>\n | $<\/td>\n | 31.0<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 14.7<\/td>\n | <\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures<\/strong> \n(Unaudited, in millions, except per share amounts)<\/strong><\/p>\nReconciliation of net cash provided by operating activities to free cash flow<\/strong><\/p>\n\n\n\n<\/td>\n | Three Months Ended<\/strong><\/td>\n<\/tr>\n\n<\/td>\n | September 30,<\/strong> \n2021<\/strong><\/td>\n<\/td>\n | September 30,<\/strong> \n2020<\/strong><\/td>\n<\/tr>\n\nNet cash provided by operating activities<\/td>\n | $<\/td>\n | 398.8<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 220.8<\/td>\n | <\/td>\n<\/tr>\n | \nLess: Purchases of property and equipment<\/td>\n | (69.0<\/td>\n | )<\/td>\n | <\/td>\n | (35.1<\/td>\n | )<\/td>\n<\/tr>\n | \nFree cash flow<\/td>\n | $<\/td>\n | 329.8<\/td>\n | <\/td>\n | <\/td>\n | $<\/td>\n | 185.7<\/td>\n | <\/td>\n<\/tr>\n | \nNet cash used in investing activities<\/td>\n | $<\/td>\n | (307.5<\/td>\n | )<\/td>\n | <\/td>\n | $<\/td>\n | (224.6<\/td>\n | )<\/td>\n<\/tr>\n | \nNet cash used in financing activities<\/td>\n | $<\/td>\n | (118.7<\/td>\n | )<\/td>\n | <\/td>\n | $<\/td>\n | (30.3<\/td>\n | )<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Reconciliation of GAAP operating income to non-GAAP operating income, operating margin, net income and diluted net income per share attributable to Fortinet, Inc. common stockholders<\/strong><\/p>\n\n\n\n<\/td>\n | Three Months Ended September 30, 2021<\/strong><\/td>\n<\/td>\n | Three Months Ended September 30, 2020<\/strong><\/td>\n<\/tr>\n\n<\/td>\n | GAAP \nResults<\/strong><\/td>\n<\/td>\n | Adjustments<\/strong><\/td>\n<\/td>\n | Non-GAAP \nResults<\/strong><\/td>\n<\/td>\n | | | | | | | | | | | | | | | | | | | | | | | | | | | | |