Fortinet, Inc. 10-K form for the fiscal year ended 2023-12-31, page 71: FORTINET, INC. 

CONSOLIDATED BALANCE SHEETS

(in millions, except per share amounts)

|    |                                                                                                                                                            |                  |         |                  |           |    |         |
|---:|:-----------------------------------------------------------------------------------------------------------------------------------------------------------|:-----------------|:--------|:-----------------|:----------|:---|:--------|
|  1 |                                                                                                                                                            | December 31,2023 |         | December 31,2022 |           |    |         |
|  2 | ASSETS                                                                                                                                                     |                  |         |                  |           |    |         |
|  3 | CURRENT ASSETS:                                                                                                                                            |                  |         |                  |           |    |         |
|  4 | Cash and cash equivalents                                                                                                                                  | $                | 1,397.9 |                  |           | $  | 1,682.9 |
|  5 | Short-term investments                                                                                                                                     | 1,021.5          |         |                  | 502.6     |    |         |
|  6 | Marketable equity securities                                                                                                                               | 21.0             |         |                  | 25.5      |    |         |
|  7 | Accounts receivable-Net of allowance for credit losses of $8.2 million and $3.6 million at December 31, 2023 and 2022, respectively                        | 1,402.0          |         |                  | 1,261.7   |    |         |
|  8 | Inventory                                                                                                                                                  | 484.8            |         |                  | 264.6     |    |         |
|  9 | Prepaid expenses and other current assets                                                                                                                  | 101.1            |         |                  | 73.1      |    |         |
| 10 | Total current assets                                                                                                                                       | 4,428.3          |         |                  | 3,810.4   |    |         |
| 11 | LONG-TERM INVESTMENTS                                                                                                                                      | -                |         |                  | 45.5      |    |         |
| 12 | PROPERTY AND EQUIPMENT-NET                                                                                                                                 | 1,044.4          |         |                  | 898.5     |    |         |
| 13 | DEFERRED CONTRACT COSTS                                                                                                                                    | 605.6            |         |                  | 518.2     |    |         |
| 14 | DEFERRED TAX ASSETS                                                                                                                                        | 868.8            |         |                  | 569.4     |    |         |
| 15 | GOODWILL                                                                                                                                                   | 126.5            |         |                  | 128.0     |    |         |
| 16 | OTHER INTANGIBLE ASSETS-NET                                                                                                                                | 35.3             |         |                  | 56.0      |    |         |
| 17 | OTHER ASSETS                                                                                                                                               | 150.0            |         |                  | 202.0     |    |         |
| 18 | TOTAL ASSETS                                                                                                                                               | $                | 7,258.9 |                  |           | $  | 6,228.0 |
| 20 | LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                                      |                  |         |                  |           |    |         |
| 21 | CURRENT LIABILITIES:                                                                                                                                       |                  |         |                  |           |    |         |
| 22 | Accounts payable                                                                                                                                           | $                | 204.3   |                  |           | $  | 243.4   |
| 23 | Accrued liabilities                                                                                                                                        | 423.7            |         |                  | 266.3     |    |         |
| 24 | Accrued payroll and compensation                                                                                                                           | 242.3            |         |                  | 219.4     |    |         |
| 25 | Deferred revenue                                                                                                                                           | 2,848.7          |         |                  | 2,349.3   |    |         |
| 26 | Total current liabilities                                                                                                                                  | 3,719.0          |         |                  | 3,078.4   |    |         |
| 27 | DEFERRED REVENUE                                                                                                                                           | 2,886.3          |         |                  | 2,291.0   |    |         |
| 28 | LONG-TERM DEBT                                                                                                                                             | 992.3            |         |                  | 990.4     |    |         |
| 29 | OTHER LIABILITIES                                                                                                                                          | 124.7            |         |                  | 149.8     |    |         |
| 30 | Total liabilities                                                                                                                                          | 7,722.3          |         |                  | 6,509.6   |    |         |
| 31 | COMMITMENTS AND CONTINGENCIES (Note 12)                                                                                                                    |                  |         |                  |           |    |         |
| 32 | STOCKHOLDERS' DEFICIT:                                                                                                                                     |                  |         |                  |           |    |         |
| 33 | Common stock, $0.001 par value-1,500.0 shares authorized; 761.0 shares and 781.5 shares issued and outstanding at December 31, 2023 and 2022, respectively | 0.8              |         |                  | 0.8       |    |         |
| 34 | Additional paid-in capital                                                                                                                                 | 1,416.4          |         |                  | 1,284.2   |    |         |
| 35 | Accumulated other comprehensive loss                                                                                                                       | (18.9)           |         |                  | (20.2)    |    |         |
| 36 | Accumulated deficit                                                                                                                                        | (1,861.7)        |         |                  | (1,546.4) |    |         |
| 37 | Total stockholders' deficit                                                                                                                                | (463.4)          |         |                  | (281.6)   |    |         |
| 40 | TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                                | $                | 7,258.9 |                  |           | $  | 6,228.0 |
See notes to consolidated financial statements.
71




, Fortinet, Inc. 10-K form for the fiscal year ended 2023-12-31, page 72: FORTINET, INC. 

CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share amounts)

|    |                                                                                              |                         |         |         |    |         |         |    |         |
|---:|:---------------------------------------------------------------------------------------------|:------------------------|:--------|:--------|:---|:--------|:--------|:---|:--------|
|  1 |                                                                                              | Year Ended December 31, |         |         |    |         |         |    |         |
|  2 | 2023                                                                                         |                         | 2022    | 2021    |    |         |         |    |         |
|  3 | REVENUE:                                                                                     |                         |         |         |    |         |         |    |         |
|  4 | Product                                                                                      | $                       | 1,927.3 |         | $  | 1,780.5 |         | $  | 1,255.0 |
|  5 | Service                                                                                      | 3,377.5                 |         | 2,636.9 |    |         | 2,087.2 |    |         |
|  6 | Total revenue                                                                                | 5,304.8                 |         | 4,417.4 |    |         | 3,342.2 |    |         |
|  7 | COST OF REVENUE:                                                                             |                         |         |         |    |         |         |    |         |
|  8 | Product                                                                                      | 763.6                   |         | 691.3   |    |         | 487.7   |    |         |
|  9 | Service                                                                                      | 473.6                   |         | 393.6   |    |         | 295.3   |    |         |
| 10 | Total cost of revenue                                                                        | 1,237.2                 |         | 1,084.9 |    |         | 783.0   |    |         |
| 11 | GROSS PROFIT:                                                                                |                         |         |         |    |         |         |    |         |
| 12 | Product                                                                                      | 1,163.7                 |         | 1,089.2 |    |         | 767.3   |    |         |
| 13 | Service                                                                                      | 2,903.9                 |         | 2,243.3 |    |         | 1,791.9 |    |         |
| 14 | Total gross profit                                                                           | 4,067.6                 |         | 3,332.5 |    |         | 2,559.2 |    |         |
| 15 | OPERATING EXPENSES:                                                                          |                         |         |         |    |         |         |    |         |
| 16 | Research and development                                                                     | 613.8                   |         | 512.4   |    |         | 424.2   |    |         |
| 17 | Sales and marketing                                                                          | 2,006.0                 |         | 1,686.1 |    |         | 1,345.7 |    |         |
| 18 | General and administrative                                                                   | 211.3                   |         | 169.0   |    |         | 143.5   |    |         |
| 19 | Gain on intellectual property matter                                                         | (4.6)                   |         | (4.6)   |    |         | (4.6)   |    |         |
| 20 | Total operating expenses                                                                     | 2,826.5                 |         | 2,362.9 |    |         | 1,908.8 |    |         |
| 21 | OPERATING INCOME                                                                             | 1,241.1                 |         | 969.6   |    |         | 650.4   |    |         |
| 22 | INTEREST INCOME                                                                              | 119.7                   |         | 17.4    |    |         | 4.5     |    |         |
| 23 | INTEREST EXPENSE                                                                             | (21.0)                  |         | (18.0)  |    |         | (14.9)  |    |         |
| 24 | OTHER EXPENSE-NET                                                                            | (6.1)                   |         | (13.5)  |    |         | (11.6)  |    |         |
| 25 | INCOME BEFORE INCOME TAXES AND LOSS FROM EQUITY METHOD INVESTMENTS                           | 1,333.7                 |         | 955.5   |    |         | 628.4   |    |         |
| 26 | PROVISION FOR INCOME TAXES                                                                   | 143.8                   |         | 30.8    |    |         | 14.1    |    |         |
| 27 | LOSS FROM EQUITY METHOD INVESTMENTS                                                          | (42.1)                  |         | (68.1)  |    |         | (7.6)   |    |         |
| 28 | NET INCOME INCLUDING NON-CONTROLLING INTERESTS                                               | 1,147.8                 |         | 856.6   |    |         | 606.7   |    |         |
| 29 | LESS: NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS, NET OF TAX                         | -                       |         | (0.7)   |    |         | (0.1)   |    |         |
| 30 | NET INCOME ATTRIBUTABLE TO FORTINET, INC.                                                    | $                       | 1,147.8 |         | $  | 857.3   |         | $  | 606.8   |
| 31 | Net income per share attributable to Fortinet, Inc. (Note 9):                                |                         |         |         |    |         |         |    |         |
| 32 | Basic                                                                                        | $                       | 1.47    |         | $  | 1.08    |         | $  | 0.74    |
| 33 | Diluted                                                                                      | $                       | 1.46    |         | $  | 1.06    |         | $  | 0.73    |
| 34 | Weighted-average shares used to compute net income per share attributable to Fortinet, Inc.: |                         |         |         |    |         |         |    |         |
| 35 | Basic                                                                                        | 778.6                   |         | 791.4   |    |         | 816.1   |    |         |
| 36 | Diluted                                                                                      | 788.2                   |         | 805.3   |    |         | 835.3   |    |         |
See notes to consolidated financial statements.
72




, Fortinet, Inc. 10-K form for the fiscal year ended 2023-12-31, page 73: FORTINET, INC. 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)
|    |                                                                                     |                         |         |      |        |      |       |       |    |       |
|---:|:------------------------------------------------------------------------------------|:------------------------|:--------|:-----|:-------|:-----|:------|:------|:---|:------|
|  1 |                                                                                     | Year Ended December 31, |         |      |        |      |       |       |    |       |
|  2 |                                                                                     | 2023                    |         | 2022 |        | 2021 |       |       |    |       |
|  3 | Net income including non-controlling interests                                      | $                       | 1,147.8 |      |        | $    | 856.6 |       | $  | 606.7 |
|  4 | Other comprehensive income (loss):                                                  |                         |         |      |        |      |       |       |    |       |
|  5 | Change in foreign currency translation                                              | (5.5)                   |         |      | (9.7)  |      |       | (3.8) |    |       |
|  6 | Change in unrealized gains (losses) on investments                                  | 8.8                     |         |      | (6.2)  |      |       | (3.5) |    |       |
|  7 | Less: tax provision (benefit) related to items of other comprehensive income (loss) | 2.0                     |         |      | (1.4)  |      |       | (0.8) |    |       |
|  8 | Other comprehensive income (loss)                                                   | 1.3                     |         |      | (14.5) |      |       | (6.5) |    |       |
|  9 | Comprehensive income including non-controlling interests                            | 1,149.1                 |         |      | 842.1  |      |       | 600.2 |    |       |
| 10 | Less: comprehensive income (loss) attributable to non-controlling interests         | -                       |         |      | 0.2    |      |       | (1.1) |    |       |
| 11 | Comprehensive income attributable to Fortinet, Inc.                                 | $                       | 1,149.1 |      |        | $    | 841.9 |       | $  | 601.3 |
See notes to consolidated financial statements.
73




, Fortinet, Inc. 10-K form for the fiscal year ended 2023-12-31, page 74: FORTINET, INC. 

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

(in millions)
|    |                                                                                             |              |        |                          |     |                                             |                     |    |                           |        |                        |    |           |        |           |           |    |    |    |         |
|---:|:--------------------------------------------------------------------------------------------|:-------------|:-------|:-------------------------|:----|:--------------------------------------------|:--------------------|:---|:--------------------------|:-------|:-----------------------|:---|:----------|:-------|:----------|:----------|:---|:---|:---|:--------|
|  1 |                                                                                             | Common Stock |        | AdditionalPaid-InCapital |     | AccumulatedOtherComprehensive Income (Loss) | Accumulated Deficit |    | Non-Controlling Interests |        | Total Equity (Deficit) |    |           |        |           |           |    |    |    |         |
|  2 | Shares                                                                                      |              | Amount |                          |     |                                             |                     |    |                           |        |                        |    |           |        |           |           |    |    |    |         |
|  3 | BALANCE-December 31, 2020                                                                   | 812.7        |        |                          | $   | 0.8                                         |                     | $  | 1,206.6                   |        |                        | $  | 0.7       | $      | (352.1)   |           | $  | -  | $  | 856.0   |
|  4 | Issuance of common stock in connection with equity incentive plans - net of tax withholding | 10.2         |        |                          | -   |                                             | (141.7)             |    |                           | -      |                        |    | -         | -      |           | (141.7)   |    |    |    |         |
|  5 | Repurchase and retirement of common stock                                                   | (12.9)       |        |                          | -   |                                             | (19.2)              |    |                           | -      |                        |    | (722.6)   | -      |           | (741.8)   |    |    |    |         |
|  6 | Stock-based compensation expense                                                            | -            |        |                          | -   |                                             | 207.9               |    |                           | -      |                        |    | -         | -      |           | 207.9     |    |    |    |         |
|  7 | Recognition of non-controlling interests upon business combination                          | -            |        |                          | -   |                                             | -                   |    |                           | -      |                        |    | -         | 17.8   |           | 17.8      |    |    |    |         |
|  8 | Net unrealized loss on investments - net of tax                                             | -            |        |                          | -   |                                             | -                   |    |                           | (2.7)  |                        |    | -         | -      |           | (2.7)     |    |    |    |         |
|  9 | Foreign currency translation adjustment                                                     | -            |        |                          | -   |                                             | -                   |    |                           | (2.8)  |                        |    | -         | (1.0)  |           | (3.8)     |    |    |    |         |
| 10 | Net income                                                                                  | -            |        |                          | -   |                                             | -                   |    |                           | -      |                        |    | 606.8     | (0.1)  |           | 606.7     |    |    |    |         |
| 11 | BALANCE-December 31, 2021                                                                   | 810.0        |        |                          | 0.8 |                                             | 1,253.6             |    |                           | (4.8)  |                        |    | (467.9)   | 16.7   |           | 798.4     |    |    |    |         |
| 12 | Issuance of common stock in connection with equity incentive plans - net of tax withholding | 7.5          |        |                          | -   |                                             | (134.7)             |    |                           | -      |                        |    | -         | -      |           | (134.7)   |    |    |    |         |
| 13 | Repurchase and retirement of common stock                                                   | (36.0)       |        |                          | -   |                                             | (55.4)              |    |                           | -      |                        |    | (1,935.8) | -      |           | (1,991.2) |    |    |    |         |
| 14 | Stock-based compensation expense                                                            | -            |        |                          | -   |                                             | 217.3               |    |                           | -      |                        |    | -         | -      |           | 217.3     |    |    |    |         |
| 15 | Acquisition of the non-controlling interests                                                | -            |        |                          | -   |                                             | 3.4                 |    |                           | -      |                        |    | -         | (16.9) |           | (13.5)    |    |    |    |         |
| 16 | Net unrealized loss on investments - net of tax                                             | -            |        |                          | -   |                                             | -                   |    |                           | (4.8)  |                        |    | -         | -      |           | (4.8)     |    |    |    |         |
| 17 | Foreign currency translation adjustment                                                     | -            |        |                          | -   |                                             | -                   |    |                           | (10.6) |                        |    | -         | 0.9    |           | (9.7)     |    |    |    |         |
| 18 | Net income                                                                                  | -            |        |                          | -   |                                             | -                   |    |                           | -      |                        |    | 857.3     | (0.7)  |           | 856.6     |    |    |    |         |
| 19 | BALANCE-December 31, 2022                                                                   | 781.5        |        |                          | 0.8 |                                             | 1,284.2             |    |                           | (20.2) |                        |    | (1,546.4) | -      |           | (281.6)   |    |    |    |         |
| 20 | Issuance of common stock in connection with equity incentive plans - net of tax withholding | 6.7          |        |                          | -   |                                             | (68.5)              |    |                           | -      |                        |    | -         | -      |           | (68.5)    |    |    |    |         |
| 21 | Repurchase and retirement of common stock                                                   | (27.2)       |        |                          | -   |                                             | (37.4)              |    |                           | -      |                        |    | (1,463.1) | -      |           | (1,500.5) |    |    |    |         |
| 22 | Excise tax on net stock repurchases                                                         | -            |        |                          | -   |                                             | (10.9)              |    |                           | -      |                        |    | -         | -      |           | (10.9)    |    |    |    |         |
| 23 | Stock-based compensation expense                                                            | -            |        |                          | -   |                                             | 249.0               |    |                           | -      |                        |    | -         | -      |           | 249.0     |    |    |    |         |
| 24 | Net unrealized gain on investments - net of tax                                             | -            |        |                          | -   |                                             | -                   |    |                           | 6.8    |                        |    | -         | -      |           | 6.8       |    |    |    |         |
| 25 | Foreign currency translation adjustment                                                     | -            |        |                          | -   |                                             | -                   |    |                           | (5.5)  |                        |    | -         | -      |           | (5.5)     |    |    |    |         |
| 26 | Net income                                                                                  | -            |        |                          | -   |                                             | -                   |    |                           | -      |                        |    | 1,147.8   | -      |           | 1,147.8   |    |    |    |         |
| 27 | BALANCE-December 31, 2023                                                                   | 761.0        |        |                          | $   | 0.8                                         |                     | $  | 1,416.4                   |        |                        | $  | (18.9)    | $      | (1,861.7) |           | $  | -  | $  | (463.4) |
See notes to consolidated financial statements.
74




, Fortinet, Inc. 10-K form for the fiscal year ended 2023-12-31, page 75: FORTINET, INC. 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)
|    |                                                                                      |                         |         |      |           |      |         |           |    |         |
|---:|:-------------------------------------------------------------------------------------|:------------------------|:--------|:-----|:----------|:-----|:--------|:----------|:---|:--------|
|  1 |                                                                                      | Year Ended December 31, |         |      |           |      |         |           |    |         |
|  2 |                                                                                      | 2023                    |         | 2022 |           | 2021 |         |           |    |         |
|  3 | CASH FLOWS FROM OPERATING ACTIVITIES:                                                |                         |         |      |           |      |         |           |    |         |
|  4 | Net income including non-controlling interests                                       | $                       | 1,147.8 |      |           | $    | 856.6   |           | $  | 606.7   |
|  5 | Adjustments to reconcile net income to net cash provided by operating activities:    |                         |         |      |           |      |         |           |    |         |
|  6 | Stock-based compensation                                                             | 249.0                   |         |      | 217.3     |      |         | 207.9     |    |         |
|  7 | Amortization of deferred contract costs                                              | 266.3                   |         |      | 223.3     |      |         | 175.9     |    |         |
|  8 | Depreciation and amortization                                                        | 113.4                   |         |      | 104.3     |      |         | 84.4      |    |         |
|  9 | Amortization of investment premiums (discounts)                                      | (27.7)                  |         |      | 4.4       |      |         | 6.9       |    |         |
| 10 | Loss from equity method investments                                                  | 42.1                    |         |      | 68.1      |      |         | 7.6       |    |         |
| 11 | Other                                                                                | 18.5                    |         |      | 23.6      |      |         | 7.9       |    |         |
| 12 | Changes in operating assets and liabilities, net of impact of business combinations: |                         |         |      |           |      |         |           |    |         |
| 13 | Accounts receivable-net                                                              | (146.4)                 |         |      | (456.7)   |      |         | (72.5)    |    |         |
| 14 | Inventory                                                                            | (253.5)                 |         |      | (109.1)   |      |         | (19.4)    |    |         |
| 15 | Prepaid expenses and other current assets                                            | (27.6)                  |         |      | (7.7)     |      |         | (17.7)    |    |         |
| 16 | Deferred contract costs                                                              | (353.5)                 |         |      | (318.2)   |      |         | (294.5)   |    |         |
| 17 | Deferred tax assets                                                                  | (301.9)                 |         |      | (226.4)   |      |         | (94.0)    |    |         |
| 18 | Other assets                                                                         | 17.7                    |         |      | (35.3)    |      |         | (19.0)    |    |         |
| 19 | Accounts payable                                                                     | (43.1)                  |         |      | 105.2     |      |         | (13.1)    |    |         |
| 20 | Accrued liabilities                                                                  | 137.4                   |         |      | 55.2      |      |         | 49.9      |    |         |
| 21 | Accrued payroll and compensation                                                     | 23.4                    |         |      | 25.0      |      |         | 44.0      |    |         |
| 22 | Other liabilities                                                                    | (21.7)                  |         |      | 23.5      |      |         | (0.7)     |    |         |
| 23 | Deferred revenue                                                                     | 1,095.3                 |         |      | 1,177.5   |      |         | 839.4     |    |         |
| 24 | Net cash provided by operating activities                                            | 1,935.5                 |         |      | 1,730.6   |      |         | 1,499.7   |    |         |
| 25 | CASH FLOWS FROM INVESTING ACTIVITIES:                                                |                         |         |      |           |      |         |           |    |         |
| 26 | Purchases of investments                                                             | (1,855.8)               |         |      | (389.1)   |      |         | (2,308.0) |    |         |
| 27 | Sales of investments                                                                 | 4.0                     |         |      | 3.0       |      |         | 85.5      |    |         |
| 28 | Maturities of investments                                                            | 1,414.8                 |         |      | 1,462.0   |      |         | 1,470.3   |    |         |
| 29 | Purchases of property and equipment                                                  | (204.1)                 |         |      | (281.2)   |      |         | (295.9)   |    |         |
| 30 | Purchases of Investments in privately held companies                                 | (8.5)                   |         |      | -         |      |         | (160.0)   |    |         |
| 31 | Payments made in connection with business combinations, net of cash acquired         | -                       |         |      | (30.8)    |      |         | (74.9)    |    |         |
| 32 | Purchases of marketable equity securities                                            | -                       |         |      | -         |      |         | (42.5)    |    |         |
| 33 | Other                                                                                | 0.3                     |         |      | -         |      |         | 0.4       |    |         |
| 34 | Net cash provided by (used in) investing activities                                  | (649.3)                 |         |      | 763.9     |      |         | (1,325.1) |    |         |
| 35 | CASH FLOWS FROM FINANCING ACTIVITIES:                                                |                         |         |      |           |      |         |           |    |         |
| 36 | Proceeds from long-term borrowings, net of discount and underwriting fees            | -                       |         |      | -         |      |         | 989.4     |    |         |
| 37 | Payments for debt issuance costs                                                     | -                       |         |      | -         |      |         | (2.4)     |    |         |
| 38 | Payments of debt assumed in connection with business combination                     | -                       |         |      | -         |      |         | (19.5)    |    |         |
| 39 | Repurchase and retirement of common stock                                            | (1,500.5)               |         |      | (1,991.2) |      |         | (741.8)   |    |         |
| 40 | Proceeds from issuance of common stock                                               | 43.8                    |         |      | 26.1      |      |         | 26.0      |    |         |
| 41 | Taxes paid related to net share settlement of equity awards                          | (112.5)                 |         |      | (160.4)   |      |         | (167.9)   |    |         |
| 42 | Other                                                                                | (1.2)                   |         |      | (4.8)     |      |         | (1.0)     |    |         |
| 43 | Net cash provided by (used in) financing activities                                  | (1,570.4)               |         |      | (2,130.3) |      |         | 82.8      |    |         |
| 44 | EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                         | (0.8)                   |         |      | (0.4)     |      |         | (0.1)     |    |         |
| 45 | NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                 | (285.0)                 |         |      | 363.8     |      |         | 257.3     |    |         |
| 46 | CASH AND CASH EQUIVALENTS-Beginning of year                                          | 1,682.9                 |         |      | 1,319.1   |      |         | 1,061.8   |    |         |
| 47 | CASH AND CASH EQUIVALENTS-End of year                                                | $                       | 1,397.9 |      |           | $    | 1,682.9 |           | $  | 1,319.1 |
| 48 | SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                   |                         |         |      |           |      |         |           |    |         |
| 49 | Cash paid for income taxes-net                                                       | $                       | 426.3   |      |           | $    | 260.2   |           | $  | 127.4   |
| 50 | Operating lease liabilities arising from obtaining right-of-use assets               | $                       | 19.2    |      |           | $    | 65.8    |           | $  | 39.6    |
| 52 | NON-CASH INVESTING AND FINANCING ACTIVITIES:                                         |                         |         |      |           |      |         |           |    |         |
| 53 | Transfers of evaluation units from inventory to property and equipment               | $                       | 31.8    |      |           | $    | 17.1    |           | $  | 15.9    |
| 54 | Liability for purchase of property and equipment                                     | $                       | 23.6    |      |           | $    | 21.2    |           | $  | 21.9    |
| 55 | Excise tax payable on net stock repurchases                                          | $                       | 10.9    |      |           | $    | -       |           | $  | -       |
| 56 | Liability incurred in connection with business combinations                          | $                       | -       |      |           | $    | 0.8     |           | $  | 0.9     |
See notes to consolidated financial statements.
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RAPID7, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)|    |                                                                                                                                                                                                                                                                                     |                   |           |                   |           |    |           |
|---:|:------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|:------------------|:----------|:------------------|:----------|:---|:----------|
|  1 |                                                                                                                                                                                                                                                                                     | December 31, 2023 |           | December 31, 2022 |           |    |           |
|  2 | Assets                                                                                                                                                                                                                                                                              |                   |           |                   |           |    |           |
|  3 | Current assets:                                                                                                                                                                                                                                                                     |                   |           |                   |           |    |           |
|  4 | Cash and cash equivalents                                                                                                                                                                                                                                                           | $                 | 213,629   |                   |           | $  | 207,287   |
|  5 | Short-term investments                                                                                                                                                                                                                                                              | 169,544           |           |                   | 84,162    |    |           |
|  6 | Accounts receivable, net of allowance for credit losses of $951 and $2,299 at December 31, 2023 and December 31, 2022, respectively                                                                                                                                                 | 164,862           |           |                   | 152,045   |    |           |
|  7 | Deferred contract acquisition and fulfillment costs, current portion                                                                                                                                                                                                                | 45,008            |           |                   | 34,906    |    |           |
|  8 | Prepaid expenses and other current assets                                                                                                                                                                                                                                           | 41,407            |           |                   | 31,907    |    |           |
|  9 | Total current assets                                                                                                                                                                                                                                                                | 634,450           |           |                   | 510,307   |    |           |
| 10 | Long-term investments                                                                                                                                                                                                                                                               | 56,171            |           |                   | 9,756     |    |           |
| 11 | Property and equipment, net                                                                                                                                                                                                                                                         | 39,642            |           |                   | 57,891    |    |           |
| 12 | Operating lease right-of-use assets                                                                                                                                                                                                                                                 | 54,693            |           |                   | 79,342    |    |           |
| 13 | Deferred contract acquisition and fulfillment costs, non-current portion                                                                                                                                                                                                            | 76,601            |           |                   | 68,169    |    |           |
| 14 | Goodwill                                                                                                                                                                                                                                                                            | 536,351           |           |                   | 515,631   |    |           |
| 15 | Intangible assets, net                                                                                                                                                                                                                                                              | 94,546            |           |                   | 101,269   |    |           |
| 16 | Other assets                                                                                                                                                                                                                                                                        | 12,894            |           |                   | 16,626    |    |           |
| 17 | Total assets                                                                                                                                                                                                                                                                        | $                 | 1,505,348 |                   |           | $  | 1,358,991 |
| 18 | Liabilities and Stockholders' Equity (Deficit)                                                                                                                                                                                                                                      |                   |           |                   |           |    |           |
| 19 | Current liabilities:                                                                                                                                                                                                                                                                |                   |           |                   |           |    |           |
| 20 | Accounts payable                                                                                                                                                                                                                                                                    | $                 | 15,812    |                   |           | $  | 10,255    |
| 21 | Accrued expenses                                                                                                                                                                                                                                                                    | 84,489            |           |                   | 80,306    |    |           |
| 22 | Operating lease liabilities, current portion                                                                                                                                                                                                                                        | 13,452            |           |                   | 12,444    |    |           |
| 23 | Deferred revenue, current portion                                                                                                                                                                                                                                                   | 455,503           |           |                   | 426,599   |    |           |
| 24 | Other current liabilities                                                                                                                                                                                                                                                           | 536               |           |                   | 1,663     |    |           |
| 25 | Total current liabilities                                                                                                                                                                                                                                                           | 569,792           |           |                   | 531,267   |    |           |
| 26 | Convertible senior notes, net                                                                                                                                                                                                                                                       | 929,996           |           |                   | 815,948   |    |           |
| 27 | Operating lease liabilities, non-current portion                                                                                                                                                                                                                                    | 81,130            |           |                   | 85,946    |    |           |
| 28 | Deferred revenue, non-current portion                                                                                                                                                                                                                                               | 32,577            |           |                   | 31,040    |    |           |
| 29 | Other long-term liabilities                                                                                                                                                                                                                                                         | 10,032            |           |                   | 14,864    |    |           |
| 30 | Total liabilities                                                                                                                                                                                                                                                                   | $                 | 1,623,527 |                   |           | $  | 1,479,065 |
| 31 | Stockholders' deficit:                                                                                                                                                                                                                                                              |                   |           |                   |           |    |           |
| 32 | Preferred stock, $0.01 par value per share; 10,000,000 shares authorized at December 31, 2023 and 2022; 0 shares issued and outstanding at December 31, 2023 and 2022                                                                                                               | $                 | -         |                   |           | $  | -         |
| 33 | Common stock, $0.01 par value per share; 100,000,000 shares authorized at December 31, 2023 and 2022; 62,283,630 and 60,206,277 shares issued at December 31, 2023 and 2022, respectively; 61,714,051 and 59,719,469 shares outstanding at December 31, 2023 and 2022, respectively | 617               |           |                   | 597       |    |           |
| 34 | Treasury stock, at cost, 569,579 and 486,808 shares at December 31, 2023 and December 31, 2022, respectively                                                                                                                                                                        | (4,765)           |           |                   | (4,764)   |    |           |
| 35 | Additional paid-in-capital                                                                                                                                                                                                                                                          | 894,630           |           |                   | 746,249   |    |           |
| 36 | Accumulated other comprehensive (loss) income                                                                                                                                                                                                                                       | 1,344             |           |                   | (1,411)   |    |           |
| 37 | Accumulated deficit                                                                                                                                                                                                                                                                 | (1,010,005)       |           |                   | (860,745) |    |           |
| 38 | Total stockholders' deficit                                                                                                                                                                                                                                                         | (118,179)         |           |                   | (120,074) |    |           |
| 39 | Total liabilities and stockholders' deficit                                                                                                                                                                                                                                         | $                 | 1,505,348 |                   |           | $  | 1,358,991 |
See accompanying notes to consolidated financial statements.
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RAPID7, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)|    |                                                               |                         |            |           |      |            |      |           |            |    |           |
|---:|:--------------------------------------------------------------|:------------------------|:-----------|:----------|:-----|:-----------|:-----|:----------|:-----------|:---|:----------|
|  1 |                                                               | Year Ended December 31, |            |           |      |            |      |           |            |    |           |
|  2 |                                                               |                         | 2023       |           | 2022 |            | 2021 |           |            |    |           |
|  3 | Revenue:                                                      |                         |            |           |      |            |      |           |            |    |           |
|  4 | Products                                                      |                         | $          | 740,168   |      |            | $    | 647,535   |            | $  | 500,843   |
|  5 | Professional services                                         |                         | 37,539     |           |      | 37,548     |      |           | 34,561     |    |           |
|  6 | Total revenue                                                 |                         | 777,707    |           |      | 685,083    |      |           | 535,404    |    |           |
|  7 | Cost of revenue:                                              |                         |            |           |      |            |      |           |            |    |           |
|  8 | Products                                                      |                         | 202,904    |           |      | 182,212    |      |           | 140,773    |    |           |
|  9 | Professional services                                         |                         | 28,837     |           |      | 32,137     |      |           | 28,175     |    |           |
| 10 | Total cost of revenue                                         |                         | 231,741    |           |      | 214,349    |      |           | 168,948    |    |           |
| 11 | Total gross profit                                            |                         | 545,966    |           |      | 470,734    |      |           | 366,456    |    |           |
| 12 | Operating expenses:                                           |                         |            |           |      |            |      |           |            |    |           |
| 13 | Research and development                                      |                         | 176,776    |           |      | 189,970    |      |           | 160,779    |    |           |
| 14 | Sales and marketing                                           |                         | 312,636    |           |      | 307,409    |      |           | 247,453    |    |           |
| 15 | General and administrative                                    |                         | 84,276     |           |      | 84,969     |      |           | 78,289     |    |           |
| 16 | Impairment of long-lived assets                               |                         | 30,784     |           |      | -          |      |           | -          |    |           |
| 17 | Restructuring                                                 |                         | 22,227     |           |      | -          |      |           | -          |    |           |
| 18 | Total operating expenses                                      |                         | 626,699    |           |      | 582,348    |      |           | 486,521    |    |           |
| 19 | Loss from operations                                          |                         | (80,733)   |           |      | (111,614)  |      |           | (120,065)  |    |           |
| 20 | Other income (expense), net:                                  |                         |            |           |      |            |      |           |            |    |           |
| 21 | Interest income                                               |                         | 10,177     |           |      | 1,813      |      |           | 365        |    |           |
| 22 | Interest expense                                              |                         | (64,700)   |           |      | (10,982)   |      |           | (14,292)   |    |           |
| 23 | Other income (expense), net                                   |                         | (14,522)   |           |      | (1,522)    |      |           | (1,921)    |    |           |
| 24 | Loss before income taxes                                      |                         | (149,778)  |           |      | (122,305)  |      |           | (135,913)  |    |           |
| 25 | (Benefit from) provision for income taxes                     |                         | (518)      |           |      | 2,412      |      |           | 10,421     |    |           |
| 26 | Net loss                                                      |                         | $          | (149,260) |      |            | $    | (124,717) |            | $  | (146,334) |
| 27 | Net loss per share, basic and diluted                         |                         | $          | (2.46)    |      |            | $    | (2.13)    |            | $  | (2.65)    |
| 28 | Weighted-average common shares outstanding, basic and diluted |                         | 60,756,087 |           |      | 58,552,065 |      |           | 55,270,998 |    |           |
See accompanying notes to consolidated financial statements.
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RAPID7, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)|    |                                                                                               |                         |       |           |      |         |      |           |         |    |           |
|---:|:----------------------------------------------------------------------------------------------|:------------------------|:------|:----------|:-----|:--------|:-----|:----------|:--------|:---|:----------|
|  1 |                                                                                               | Year Ended December 31, |       |           |      |         |      |           |         |    |           |
|  2 |                                                                                               |                         | 2023  |           | 2022 |         | 2021 |           |         |    |           |
|  3 | Net loss                                                                                      |                         | $     | (149,260) |      |         | $    | (124,717) |         | $  | (146,334) |
|  4 | Other comprehensive income (loss):                                                            |                         |       |           |      |         |      |           |         |    |           |
|  5 | Change in fair value of cash flow hedges                                                      |                         | 797   |           |      | (3,874) |      |           | (86)    |    |           |
|  6 | Adjustment for net losses realized on cash flow hedges and included in net loss, net of taxes |                         | 724   |           |      | 4,053   |      |           | -       |    |           |
|  7 | Total change in unrealized gains (losses) on cash flow hedges                                 |                         | 1,521 |           |      | 179     |      |           | (86)    |    |           |
|  8 | Change unrealized gains (losses) on investments                                               |                         | 1,234 |           |      | (778)   |      |           | (1,043) |    |           |
|  9 | Adjustment for net gains realized and included in net loss                                    |                         | -     |           |      | -       |      |           | (137)   |    |           |
| 10 | Total change in unrealized gains (losses) on investments                                      |                         | 1,234 |           |      | (778)   |      |           | (1,180) |    |           |
| 11 | Total other comprehensive income (loss)                                                       |                         | 2,755 |           |      | (599)   |      |           | (1,266) |    |           |
| 12 | Comprehensive loss                                                                            |                         | $     | (146,505) |      |         | $    | (125,316) |         | $  | (147,600) |
See accompanying notes to consolidated financial statements.
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RAPID7, INC.CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

(in thousands)   |    |                                                                                                               |              |                |     |                           |                                            |     |                    |     |                                    |         |          |    |         |    |           |         |           |    |             |    |           |
|---:|:--------------------------------------------------------------------------------------------------------------|:-------------|:---------------|:----|:--------------------------|:-------------------------------------------|:----|:-------------------|:----|:-----------------------------------|:--------|:---------|:---|:--------|:---|:----------|:--------|:----------|:---|:------------|:---|:----------|
|  1 |                                                                                                               | Common stock | Treasury stock |     | Additionalpaid-in-capital | Accumulatedothercomprehensiveincome (loss) |     | Accumulateddeficit |     | Totalstockholders'equity (deficit) |         |          |    |         |    |           |         |           |    |             |    |           |
|  2 |                                                                                                               | Shares       | Amount         |     | Shares                    | Amount                                     |     |                    |     |                                    |         |          |    |         |    |           |         |           |    |             |    |           |
|  3 | Balance, December 31, 2020                                                                                    | 52,225       |                | $   | 522                       |                                            | 487 |                    |     | $                                  | (4,764) |          | $  | 692,603 |    | $         | 454     |           | $  | (617,279)   | $  | 71,536    |
|  4 | Stock-based compensation expense                                                                              | -            |                | -   |                           | -                                          |     |                    | -   |                                    |         | 100,317  |    | -       |    | -         |         | 100,317   |    |             |    |           |
|  5 | Issuance of common stock under employee stock purchase plan                                                   | 222          |                | 2   |                           | -                                          |     |                    | -   |                                    |         | 9,274    |    | -       |    | -         |         | 9,276     |    |             |    |           |
|  6 | Vesting of restricted stock units                                                                             | 1,611        |                | 16  |                           | -                                          |     |                    | -   |                                    |         | (16)     |    | -       |    | -         |         | -         |    |             |    |           |
|  7 | Shares withheld for employee taxes                                                                            | (157)        |                | (2) |                           | -                                          |     |                    | -   |                                    |         | (16,042) |    | -       |    | -         |         | (16,044)  |    |             |    |           |
|  8 | Issuance of common stock upon exercise of stock options                                                       | 521          |                | 6   |                           | -                                          |     |                    | -   |                                    |         | 4,300    |    | -       |    | -         |         | 4,306     |    |             |    |           |
|  9 | Purchase of capped calls related to convertible senior notes                                                  | -            |                | -   |                           | -                                          |     |                    | -   |                                    |         | (76,020) |    | -       |    | -         |         | (76,020)  |    |             |    |           |
| 10 | Issuance of common stock in connection with redemption, repurchase and conversion of convertible senior notes | 2,897        |                | 29  |                           | -                                          |     |                    | -   |                                    |         | (3,094)  |    | -       |    | -         |         | (3,065)   |    |             |    |           |
| 11 | Issuance of common stock in connection with inducement of convertible senior notes                            | 35           |                | -   |                           | -                                          |     |                    | -   |                                    |         | 2,740    |    | -       |    | -         |         | 2,740     |    |             |    |           |
| 12 | Issuance of common stock related to acquisition                                                               | 341          |                | 4   |                           | -                                          |     |                    | -   |                                    |         | (4)      |    | -       |    | -         |         | -         |    |             |    |           |
| 13 | Cumulative-effect adjustment for the adoption of ASU 2020-06                                                  | -            |                | -   |                           | -                                          |     |                    | -   |                                    |         | (99,026) |    | -       |    | 27,585    |         | (71,441)  |    |             |    |           |
| 14 | Other comprehensive income                                                                                    | -            |                | -   |                           | -                                          |     |                    | -   |                                    |         | -        |    | (1,266) |    | -         |         | (1,266)   |    |             |    |           |
| 15 | Net loss                                                                                                      | -            |                | -   |                           | -                                          |     |                    | -   |                                    |         | -        |    | -       |    | (146,334) |         | (146,334) |    |             |    |           |
| 16 | Balance, December 31, 2021                                                                                    | 57,695       |                | $   | 577                       |                                            | 487 |                    |     | $                                  | (4,764) |          | $  | 615,032 |    | $         | (812)   |           | $  | (736,028)   | $  | (125,995) |
| 17 | Stock-based compensation expense                                                                              | -            |                | -   |                           | -                                          |     |                    | -   |                                    |         | 123,441  |    | -       |    | -         |         | 123,441   |    |             |    |           |
| 18 | Issuance of common stock under employee stock purchase plan                                                   | 218          |                | 2   |                           | -                                          |     |                    | -   |                                    |         | 11,941   |    | -       |    | -         |         | 11,943    |    |             |    |           |
| 19 | Vesting of restricted stock units                                                                             | 1,482        |                | 15  |                           | -                                          |     |                    | -   |                                    |         | (15)     |    | -       |    | -         |         | -         |    |             |    |           |
| 20 | Shares withheld for employee taxes                                                                            | (105)        |                | (1) |                           | -                                          |     |                    | -   |                                    |         | (7,461)  |    | -       |    | -         |         | (7,462)   |    |             |    |           |
| 21 | Issuance of common stock upon exercise of stock options                                                       | 480          |                | 5   |                           | -                                          |     |                    | -   |                                    |         | 3,313    |    | -       |    | -         |         | 3,318     |    |             |    |           |
| 22 | Issuance of common stock in connection with conversion of convertible senior notes                            | -            |                | -   |                           | -                                          |     |                    | -   |                                    |         | (3)      |    | -       |    | -         |         | (3)       |    |             |    |           |
| 23 | Issuance of common stock related to acquisition                                                               | 33           |                | -   |                           | -                                          |     |                    | -   |                                    |         | -        |    | -       |    | -         |         | -         |    |             |    |           |
| 24 | Repurchase of common stock issued in relation to acquisition                                                  | (83)         |                | (1) |                           |                                            |     |                    |     | 1                                  |         |          |    |         | -  |           |         |           |    |             |    |           |
| 25 | Other comprehensive income                                                                                    | -            |                | -   |                           | -                                          |     |                    | -   |                                    |         | -        |    | (599)   |    | -         |         | (599)     |    |             |    |           |
| 26 | Net loss                                                                                                      | -            |                | -   |                           | -                                          |     |                    | -   |                                    |         | -        |    | -       |    | (124,717) |         | (124,717) |    |             |    |           |
| 27 | Balance, December 31, 2022                                                                                    | 59,720       |                | $   | 597                       |                                            | 487 |                    |     | $                                  | (4,764) |          | $  | 746,249 |    | $         | (1,411) |           | $  | (860,745)   | $  | (120,074) |
| 28 | Stock-based compensation expense                                                                              | -            |                | -   |                           | -                                          |     |                    | -   |                                    |         | 107,254  |    | -       |    | -         |         | 107,254   |    |             |    |           |
| 29 | Issuance of common stock under employee stock purchase plan                                                   | 330          |                | 3   |                           | -                                          |     |                    | -   |                                    |         | 11,320   |    | -       |    | -         |         | 11,323    |    |             |    |           |
| 30 | Vesting of restricted stock units                                                                             | 1,454        |                | 15  |                           | -                                          |     |                    | -   |                                    |         | (15)     |    | -       |    | -         |         | -         |    |             |    |           |
| 31 | Shares withheld for employee taxes                                                                            | (113)        |                | (1) |                           | -                                          |     |                    | -   |                                    |         | (5,569)  |    | -       |    | -         |         | (5,570)   |    |             |    |           |
| 32 | Issuance of common stock upon exercise of stock options                                                       | 216          |                | 2   |                           | -                                          |     |                    | -   |                                    |         | 3,051    |    | -       |    | -         |         | 3,053     |    |             |    |           |
| 33 | Issuance of common stock related to acquisition                                                               | 107          |                | 1   |                           | -                                          |     |                    | -   |                                    |         | (1)      |    | -       |    | -         |         | -         |    |             |    |           |
| 34 | Repurchase of common stock issued in related to acquisition                                                   | -            |                | -   |                           | 83                                         |     |                    | (1) |                                    |         | 1        |    | -       |    | -         |         | -         |    |             |    |           |
| 35 | Purchase of capped called related to convertible senior notes                                                 | -            |                | -   |                           | -                                          |     |                    | -   |                                    |         | (36,570) |    | -       |    | -         |         | (36,570)  |    |             |    |           |
| 36 | Reclassification of equity to derivative assets related to capped calls                                       | -            |                | -   |                           | -                                          |     |                    | -   |                                    |         | 33,029   |    | -       |    | -         |         | 33,029    |    |             |    |           |
| 37 | Repurchase and inducement of convertible senior notes                                                         | -            |                | -   |                           | -                                          |     |                    | -   |                                    |         | 35,881   |    | -       |    | -         |         | 35,881    |    |             |    |           |
| 38 | Other comprehensive loss                                                                                      | -            |                | -   |                           | -                                          |     |                    | -   |                                    |         | -        |    | 2,755   |    | -         |         | 2,755     |    |             |    |           |
| 39 | Net loss                                                                                                      | -            |                | -   |                           | -                                          |     |                    | -   |                                    |         | -        |    | -       |    | (149,260) |         | (149,260) |    |             |    |           |
| 40 | Balance, December 31, 2023                                                                                    | 61,714       |                | $   | 617                       |                                            | 570 |                    |     | $                                  | (4,765) |          | $  | 894,630 |    | $         | 1,344   |           | $  | (1,010,005) | $  | (118,179) |
See accompanying notes to consolidated financial statements.
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RAPID7, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)|    |                                                                                                                                                              |                         |           |      |           |      |           |           |    |           |
|---:|:-------------------------------------------------------------------------------------------------------------------------------------------------------------|:------------------------|:----------|:-----|:----------|:-----|:----------|:----------|:---|:----------|
|  1 |                                                                                                                                                              | Year Ended December 31, |           |      |           |      |           |           |    |           |
|  2 |                                                                                                                                                              | 2023                    |           | 2022 |           | 2021 |           |           |    |           |
|  3 | Cash flows from operating activities:                                                                                                                        |                         |           |      |           |      |           |           |    |           |
|  4 | Net loss                                                                                                                                                     | $                       | (149,260) |      |           | $    | (124,717) |           | $  | (146,334) |
|  5 | Adjustments to reconcile net loss to net cash provided by operating activities:                                                                              |                         |           |      |           |      |           |           |    |           |
|  6 | Depreciation and amortization                                                                                                                                | 45,939                  |           |      | 41,038    |      |           | 33,501    |    |           |
|  7 | Amortization of debt discount and issuance costs                                                                                                             | 4,138                   |           |      | 4,085     |      |           | 3,982     |    |           |
|  8 | Stock-based compensation expense                                                                                                                             | 108,081                 |           |      | 119,902   |      |           | 102,579   |    |           |
|  9 | Impairment of long-lived assets                                                                                                                              | 30,784                  |           |      | -         |      |           | -         |    |           |
| 10 | Change in fair value of derivative assets                                                                                                                    | 15,511                  |           |      | -         |      |           | -         |    |           |
| 11 | Deferred income taxes                                                                                                                                        | (5,624)                 |           |      | (1,440)   |      |           | 466       |    |           |
| 12 | Induced conversion expense                                                                                                                                   | 53,889                  |           |      | -         |      |           | 2,740     |    |           |
| 13 | Other                                                                                                                                                        | 469                     |           |      | (200)     |      |           | 1,920     |    |           |
| 14 | Changes in assets and liabilities:                                                                                                                           |                         |           |      |           |      |           |           |    |           |
| 15 | Accounts receivable                                                                                                                                          | (14,021)                |           |      | (9,050)   |      |           | (25,475)  |    |           |
| 16 | Deferred contract acquisition and fulfillment costs                                                                                                          | (18,534)                |           |      | (15,910)  |      |           | (22,526)  |    |           |
| 17 | Prepaid expenses and other assets                                                                                                                            | (4,125)                 |           |      | (2,231)   |      |           | (3,355)   |    |           |
| 18 | Accounts payable                                                                                                                                             | 5,449                   |           |      | 7,977     |      |           | (2,077)   |    |           |
| 19 | Accrued expenses                                                                                                                                             | 2,422                   |           |      | 3,741     |      |           | 19,205    |    |           |
| 20 | Deferred revenue                                                                                                                                             | 30,472                  |           |      | 52,516    |      |           | 85,562    |    |           |
| 21 | Other liabilities                                                                                                                                            | (1,312)                 |           |      | 2,493     |      |           | 3,729     |    |           |
| 22 | Net cash provided by operating activities                                                                                                                    | 104,278                 |           |      | 78,204    |      |           | 53,917    |    |           |
| 23 | Cash flows from investing activities:                                                                                                                        |                         |           |      |           |      |           |           |    |           |
| 24 | Business acquisitions, net of cash acquired                                                                                                                  | (34,841)                |           |      | -         |      |           | (358,420) |    |           |
| 25 | Purchases of property and equipment                                                                                                                          | (4,366)                 |           |      | (20,382)  |      |           | (9,010)   |    |           |
| 26 | Capitalization of internal-use software                                                                                                                      | (15,878)                |           |      | (17,145)  |      |           | (9,854)   |    |           |
| 27 | Purchases of investments                                                                                                                                     | (276,829)               |           |      | (122,765) |      |           | (93,092)  |    |           |
| 28 | Sales and maturities of investments                                                                                                                          | 150,450                 |           |      | 121,304   |      |           | 147,998   |    |           |
| 29 | Other investments                                                                                                                                            | 2,710                   |           |      | (1,000)   |      |           | (3,000)   |    |           |
| 30 | Net cash used in investing activities                                                                                                                        | (178,754)               |           |      | (39,988)  |      |           | (325,378) |    |           |
| 31 | Cash flows from financing activities:                                                                                                                        |                         |           |      |           |      |           |           |    |           |
| 32 | Proceeds from issuance of convertible senior notes, net of issuance costs of $7,909 and $14,976 for the years ended December 31, 2023 and 2021, respectively | 292,091                 |           |      | -         |      |           | 585,024   |    |           |
| 33 | Purchase of capped calls related to convertible senior notes                                                                                                 | (36,570)                |           |      | -         |      |           | (76,020)  |    |           |
| 34 | Payment of debt issuance costs                                                                                                                               | -                       |           |      | (71)      |      |           | (300)     |    |           |
| 35 | Payments for redemption, repurchase and conversion of convertible senior notes                                                                               | (199,998)               |           |      | (12)      |      |           | (230,000) |    |           |
| 36 | Payments related to business acquisitions                                                                                                                    | (2,250)                 |           |      | (300)     |      |           | (12,118)  |    |           |
| 37 | Proceeds from capped calls settlement                                                                                                                        | 17,518                  |           |      | -         |      |           | -         |    |           |
| 38 | Taxes paid related to net share settlement of equity awards                                                                                                  | (5,570)                 |           |      | (7,462)   |      |           | (16,044)  |    |           |
| 39 | Proceeds from employee stock purchase plan                                                                                                                   | 11,323                  |           |      | 11,943    |      |           | 9,276     |    |           |
| 40 | Proceeds from stock option exercises                                                                                                                         | 3,053                   |           |      | 3,318     |      |           | 4,315     |    |           |
| 41 | Net cash provided by financing activities                                                                                                                    | 79,597                  |           |      | 7,416     |      |           | 264,133   |    |           |
| 42 | Effect of exchange rate changes on cash ,cash equivalents and restricted cash                                                                                | 1,202                   |           |      | (2,845)   |      |           | (1,272)   |    |           |
| 43 | Net increase (decrease) in cash, cash equivalents and restricted cash                                                                                        | 6,323                   |           |      | 42,787    |      |           | (8,600)   |    |           |
| 44 | Cash, cash equivalents and restricted cash, beginning of period                                                                                              | 207,804                 |           |      | 165,017   |      |           | 173,617   |    |           |
| 45 | Cash, cash equivalents and restricted cash, end of period                                                                                                    | $                       | 214,127   |      |           | $    | 207,804   |           | $  | 165,017   |
| 46 | Supplemental cash flow information:                                                                                                                          |                         |           |      |           |      |           |           |    |           |
| 47 | Cash paid for interest on convertible senior notes                                                                                                           | $                       | 4,605     |      |           | $    | 6,675     |           | $  | 7,345     |
| 48 | Cash paid for income taxes, net of refunds                                                                                                                   | $                       | 1,624     |      |           | $    | 1,571     |           | $  | 3,305     |
| 49 | Reconciliation of cash, cash equivalents and restricted cash:                                                                                                |                         |           |      |           |      |           |           |    |           |
| 50 | Cash and cash equivalents                                                                                                                                    | $                       | 213,629   |      |           | $    | 207,287   |           | $  | 164,582   |
| 51 | Restricted cash included in prepaid expenses and other assets                                                                                                | 498                     |           |      | 517       |      |           | 435       |    |           |
| 52 | Total cash, cash equivalents and restricted cash                                                                                                             | $                       | 214,127   |      |           | $    | 207,804   |           | $  | 165,017   |
See accompanying notes to consolidated financial statements.
65






Question: Compare the provision for income taxes of Fortinet Inc. and Rapid7 Inc. in 2023.
Answer: In 2023, Fortinet Inc. reported a provision for income taxes of $143.8 million, reflecting an effective tax rate of 11%. In contrast, Rapid7 Inc. reported a benefit from income taxes of $0.5 million in 2023. This comparison shows that Fortinet Inc. has a substantial tax expense, while Rapid7 Inc. recorded a tax benefit, likely due to its net loss position.