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 potential risks to future profitability for Fortinet Inc. and Rapid7 Inc. based on their 2023 financial metrics.
Answer: Potential risks to future profitability can be assessed by examining liquidity, solvency, and efficiency ratios, as well as overall financial performance.For Fortinet Inc.:- Current Ratio (2023): 1.19,- Debt-to-Equity Ratio (2023): -16.66, - Asset Turnover Ratio (2023): 0.73, - Net Income (2023): $1,147.8 million. Risks - 1. High Leverage: Despite an improvement, Fortinet Inc. still has a high negative debt-to-equity ratio, indicating significant leverage. This could pose a risk if the company faces economic downturns or increased interest rates. 2. Stockholders' Deficit: The company has a stockholders' deficit, which could limit its ability to raise additional equity financing. 3. Inventory Management: A significant increase in inventory from $264.6 million in 2022 to $484.8 million in 2023 could indicate potential issues with inventory management or demand forecasting.
For Rapid7 Inc.:
- Current Ratio (2023): 1.11, - Debt-to-Equity Ratio (2023): -13.74, - Asset Turnover Ratio (2023): 0.52, - Net Loss (2023): -$149,260 thousand
Risks - 1. Continued Losses: Rapid7 Inc. has reported net losses for multiple years, indicating ongoing challenges in achieving profitability. 2. High Leverage: The company has a high negative debt-to-equity ratio, indicating significant leverage and potential solvency risks. 3. Operating Expenses: High operating expenses, including research and development and sales and marketing, continue to impact profitability.
In summary, both companies face risks related to high leverage and stockholders' deficits. Fortinet Inc. has a stronger profitability position but faces risks related to inventory management and leverage. Rapid7 Inc. faces significant challenges in achieving profitability and managing high operating expenses and leverage.