Fortinet, Inc. - Annual Report: 2023 (Form 10-K)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT

$ $ See notes to consolidated financial statements.

FORTINET, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share amounts)


	Year Ended December 31,
	2023	2022	2021
REVENUE:
Product	$	$	$
Service
Total revenue
COST OF REVENUE:
Product
Service
Total cost of revenue
GROSS PROFIT:
Product
Service
Total gross profit
OPERATING EXPENSES:
Research and development
Sales and marketing
General and administrative
Gain on intellectual property matter	()	()	()
Total operating expenses
OPERATING INCOME
INTEREST INCOME
INTEREST EXPENSE	()	()	()
OTHER EXPENSE—NET	()	()	()
INCOME BEFORE INCOME TAXES AND LOSS FROM EQUITY METHOD INVESTMENTS
PROVISION FOR INCOME TAXES
LOSS FROM EQUITY METHOD INVESTMENTS	()	()	()
NET INCOME INCLUDING NON-CONTROLLING INTERESTS
LESS: NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS, NET OF TAX		()	()
NET INCOME ATTRIBUTABLE TO FORTINET, INC.	$	$	$
Net income per share attributable to Fortinet, Inc. (Note 9):
Basic	$	$	$
Diluted	$	$	$
Weighted-average shares used to compute net income per share attributable to Fortinet, Inc.:
Basic
Diluted

See notes to consolidated financial statements.

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FORTINET, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)


	Year Ended December 31,
	2023	2022	2021
Net income including non-controlling interests	$	$	$
Other comprehensive income (loss):
Change in foreign currency translation	()	()	()
Change in unrealized gains (losses) on investments		()	()
Less: tax provision (benefit) related to items of other comprehensive income (loss)		()	()
Other comprehensive income (loss)		()	()
Comprehensive income including non-controlling interests
Less: comprehensive income (loss) attributable to non-controlling interests			()
Comprehensive income attributable to Fortinet, Inc.	$	$	$

See notes to consolidated financial statements.

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FORTINET, INC.

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

(in millions)

Common Stock

Additional
Paid-In
Capital

Accumulated
Other
Comprehensive Income (Loss)

Accumulated Deficit

Non-Controlling Interests

Total Equity (Deficit)

Amount

BALANCE—December 31, 2020

()

Issuance of common stock in connection with equity incentive plans - net of tax withholding

—

()

—

()

Repurchase and retirement of common stock

()

—

()

—

()

—

()

Stock-based compensation expense

—

Recognition of non-controlling interests upon business combination

—

Net unrealized loss on investments - net of tax

—

()

—

()

Foreign currency translation adjustment

—

()

—

()

Net income

—

()

BALANCE—December 31, 2021

()

Issuance of common stock in connection with equity incentive plans - net of tax withholding

—

()

—

()

Repurchase and retirement of common stock

()

—

()

—

()

—

()

Stock-based compensation expense

—

Acquisition of the non-controlling interests

—

()

Net unrealized loss on investments - net of tax

—

()

—

()

Foreign currency translation adjustment

—

()

—

()

Net income

—

()

BALANCE—December 31, 2022

()

Issuance of common stock in connection with equity incentive plans - net of tax withholding

—

()

—

()

Repurchase and retirement of common stock

()

—

()

—

()

—

()

Excise tax on net stock repurchases

—

()

—

()

Stock-based compensation expense

—

Net unrealized gain on investments - net of tax

—

Foreign currency translation adjustment

—

()

—

()

Net income

—

BALANCE—December 31, 2023

()

See notes to consolidated financial statements.

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FORTINET, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)


	Year Ended December 31,
	2023	2022	2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income including non-controlling interests	$	$	$
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation
Amortization of deferred contract costs
Depreciation and amortization
Amortization of investment premiums (discounts)	()
Loss from equity method investments
Other
Changes in operating assets and liabilities, net of impact of business combinations:
Accounts receivable—net	()	()	()
Inventory	()	()	()
Prepaid expenses and other current assets	()	()	()
Deferred contract costs	()	()	()
Deferred tax assets	()	()	()
Other assets		()	()
Accounts payable	()		()
Accrued liabilities
Accrued payroll and compensation
Other liabilities	()		()
Deferred revenue
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments	()	()	()
Sales of investments
Maturities of investments
Purchases of property and equipment	()	()	()
Purchases of Investments in privately held companies	()		()
Payments made in connection with business combinations, net of cash acquired		()	()
Purchases of marketable equity securities			()
Other
Net cash provided by (used in) investing activities	()		()
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings, net of discount and underwriting fees
Payments for debt issuance costs			()
Payments of debt assumed in connection with business combination			()
Repurchase and retirement of common stock	()	()	()
Proceeds from issuance of common stock
Taxes paid related to net share settlement of equity awards	()	()	()
Other	()	()	()
Net cash provided by (used in) financing activities	()	()
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	()	()	()
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	()
CASH AND CASH EQUIVALENTS—Beginning of year
CASH AND CASH EQUIVALENTS—End of year	$	$	$
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes—net	$	$	$
Operating lease liabilities arising from obtaining right-of-use assets	$	$	$

Deferred Revenue

During 2023 and 2022, we recognized $ billion and $ billion in revenue that was included in the deferred revenue balance as of December 31, 2022 and 2021, respectively.

Transaction Price Allocated to the Remaining Performance Obligations

As of December 31, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $ billion, which was substantially comprised of deferred security subscription and technical support services revenue as well as unbilled contract revenue from non-cancellable contracts that will be recognized in future periods. We expect to recognize approximately $ billion as revenue over the next months and the remainder thereafter.

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ $()$ Commercial paper () Certificates of deposit and term deposits Corporate debt securities ()

Total available-for-sale investments

$ $ $()$ December 31, 2022 Amortized
CostUnrealized
GainsUnrealized
LossesFair
ValueU.S. government and agency securities$ $ $()$ Commercial paper () Certificates of deposit and term deposits Corporate debt securities () Municipal Bonds ()

Total available-for-sale investments

$ $ $()$

$ $ $()$ $()Commercial paper () ()Corporate debt securities () ()

Total available-for-sale investments

$ $()$ $()$ $()

December 31, 2022

Less Than 12 Months

12 Months or Greater

Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

U.S. government and agency securities

()

Commercial paper

()

Corporate debt securities

()

Municipal Bonds

()

Total available-for-sale investments

()

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ Due within one to three years Total$ $

Available-for-sale investments are reported at fair value, with unrealized gains and losses and the related tax impact included as a separate component of equity (deficit) and in comprehensive income. We do not intend to sell any of the securities in an unrealized loss position and it is not more likely than not that we would be required to sell these securities before recovery of their amortized cost basis, which may be at maturity.

Realized gains and losses on available-for-sale investments were insignificant in the periods presented.

Marketable Equity Securities

Our marketable equity securities were $ million and $ million as of December 31, 2023 and December 31, 2022, respectively. The changes in fair value of our marketable equity securities are recorded in other expense—net on the consolidated statements of income. We recognized $ million and $ million of losses in 2023 and 2022, respectively.

Fair Value of Financial Instruments

Fair Value Accounting—We apply the following fair value hierarchy for disclosure of the inputs used to measure fair value. This hierarchy prioritizes the inputs into three broad levels:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.

Level 3—Unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. The inputs require significant management judgment or estimation.

We measure the fair value of money market funds, certain U.S. government and agency securities and marketable equity securities using quoted prices in active markets for identical assets. The fair value of all other financial instruments was based on quoted prices for similar assets in active markets, or model-driven valuations using significant inputs derived from or corroborated by observable market data.

We classify investments within Level 1 if quoted prices are available in active markets for identical securities.

We classify items within Level 2 if the investments are valued using model-driven valuations using observable inputs such as quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. Investments are held by custodians who obtain investment prices from a third-party pricing provider that incorporates standard inputs in various asset price models.

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ $ $ $ $ $ $ Commercial paper Certificates of deposit and term deposits Corporate debt securities Money market funds Municipal bonds Marketable equity securities Total$ $ $ $ $ $ $ $ Reported as:Cash equivalents$ $ Marketable equity securities Short-term investments Long-term investments Total$ $

There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the years ended December 31, 2023 and December 31, 2022.

Work in process

Finished goods Inventory$ $

The excess and obsolete inventory reserve was $ million and $ million as of December 31, 2023 and 2022, respectively. Inventory write-downs related to excess and obsolete inventory were $ million for the year ended December 31, 2023, and material for the years ended December 31, 2022 and 2021. They were recorded in cost of product revenue on the consolidated statements of income.

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ Buildings and improvements Computer equipment and software Leasehold improvements Evaluation units Furniture and fixtures Construction-in-progress Total property and equipment Less: accumulated depreciation()()Property and equipment—net$ $

During 2023, we purchased certain real estate in the United States, Spain, and Australia totaling $ million. The purchases were accounted for under the asset acquisition method. The costs of the assets allocated to land, buildings and improvements and construction-in-progress were $ million, $ million and $ million, respectively, based on their relative fair values.

Depreciation expense was $ million, $ million and $ million in 2023, 2022 and 2021, respectively.

million in cash for shares of the Series A Preferred Stock of Linksys for a % ownership interest in this privately held company. As of December 31, 2023 and 2022, our ownership interest remained the same. Linksys provides router connectivity solutions to the consumer and small business markets.

We have concluded that our investment in Linksys is an in-substance common stock investment and that we do not hold an absolute controlling financial interest in Linksys, but that we have the ability to exercise significant influence over the operating and financial policies of Linksys. Determining that we have significant influence but not control over the operating and financial policies of Linksys required significant judgement of many factors, including but not limited to the ownership interest in Linksys, board representation, participation in policy-making processes and participation rights in certain significant financial and operating decisions of Linksys in the ordinary course of business. Therefore, we determined to account for this investment using the equity method of accounting. We record our share of Linksys’ financial results on a three-month lag basis, with the exception of material transactions or events that occur during the intervening period that materially affect the financial position or results of operations. We determined that there was a basis difference between the cost of our investment in Linksys and the amount of underlying equity in net assets of Linksys.

Our share of loss of Linksys’ financial results, as well as our share of the amortization of the basis differences, totaled $ million in 2023. Our loss related to Linksys in 2022 totaled $ million, which comprised of our proportionate share of Linksys’ financial results as well as the amortization of the basis differences of $ million, which included a $ million charge in connection with a valuation allowance established on deferred tax assets at Linksys, and the other-than-temporary impairment (“OTTI”) charge of $ million recorded during the three months ended December 31, 2022. Our share of loss of Linksys’ financial results as well as our share of the amortization of the basis differences in total was $ million in 2021. The loss related to Linksys is recorded in loss from equity method investments on the consolidated statements of income.

Due to the presence of impairment indicators, such as a series of operating losses, current expected performance relative to expected performance when we initially invested, performance relative to peers, changes in net working capital and cash available for business operations, and the results of a discounted cash flows analysis, we evaluated our equity method investment for an OTTI during 2023 and 2022. We considered various factors in determining whether an OTTI has occurred, including Linksys financial results and operating history, our ability and intent to hold the investment until its fair value recovers, the implied revenue valuation multiples compared to guideline public companies, Linksys’ ability to achieve

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

million on our equity method investment in Linksys. In connection with our evaluation as of December 31, 2023, we determined that an additional OTTI has not occurred. However, we may be required to recognize an impairment loss in future reporting periods if and when our evaluation of the aforementioned factors indicates that the investment in Linksys is determined to be other than temporarily impaired. Such determination will be based on the prevailing facts and circumstances at that time.

The carrying amount of our Linksys investment was $ million and $ million as of December 31, 2023 and 2022, respectively, and the investment was included in other assets on our consolidated balance sheets.

Other investment

On August 1, 2023, we invested $ million in cash for a % ownership interest in the outstanding common stock of a privately held company that provides rugged ethernet switches, 4G/5G industrial routers and media converters for critical infrastructure customers. We accounted for this investment as an equity method investment since we have the ability to exercise significant influence, but not control, over the operating and financial policies of the privately held company. Determining that we have significant influence but not control over the operating and financial policies of the privately held company required significant judgement of many factors, including but not limited to the ownership interest, board representation, participation in policy-making processes and participation rights in certain significant financial and operating decisions in the ordinary course of business. Therefore, we determined to account for this investment using the equity method of accounting.

We recorded our proportionate share of the privately held company’s financial results on a three-month lag basis and presented it in loss from equity method investments on the consolidated statements of income. Our share of income of the privately held company’s financial results, as well as our share of the amortization of the basis differences, were immaterial during 2023. The carrying amount of the investment was $ million as of December 31, 2023, and the investment was included in other assets on our consolidated balance sheets.

million in cash. This acquisition was accounted for as a business combination using the acquisition method of accounting. Of the purchase price, $ million was allocated to goodwill, $ million was allocated to developed technology intangible asset, $ million was allocated to customer relationships intangible asset and $ million was allocated to other net liabilities assumed, which predominantly include deferred revenue. Goodwill recorded in connection with this acquisition is primarily attributable to the assembled workforce acquired and the anticipated operational synergies. All acquired goodwill is expected to be deductible for tax purposes. Acquisition-related costs related to this acquisition were not material and were recorded as general and administrative expense.

Alaxala Networks Corporation

On October 3, 2022, we acquired the remaining % of equity interests in Alaxala for $ million in cash, and Alaxala became a wholly owned subsidiary.

2021 Acquisition

Alaxala Networks Corporation

On August 31, 2021, we closed an acquisition of % of equity interests as controlling interests in Alaxala Networks Corporation (“Alaxala”), a privately held network hardware equipment company in Japan, for $ million in cash. We

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Accounts receivable—net Inventory Prepaid expenses and other current assets Property and equipment Goodwill Other intangible assets Other long-term assets TOTAL ASSETS$ LIABILITIES Accounts payable$ Current portion of long-term debt Accrued and other current liabilities Other long-term liabilities TOTAL LIABILITIES$ NON-CONTROLLING INTERESTS$ Net purchase consideration$

The excess of the purchase consideration and the fair value of non-controlling interests over the fair value of net tangible and identified intangible assets acquired was recorded as goodwill, which is not deductible for tax purposes. Goodwill is primarily attributable to the assembled workforce of Alaxala and the anticipated operational synergies.

The fair value of the non-controlling interests of $ million was estimated based on the non-controlling interests’ respective share of the fair value of Alaxala.

Customer relationships Trade name Backlog Total identified intangible assets:$

Developed technology relates to Alaxala’s network equipment. We valued the developed technology using the relief-from-royalty method under the income approach. This method reflects the present value of the projected cost savings that are expected to be realized by avoiding the royalty that otherwise would be granted in exchange for the use of the asset. The

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

million as of August 31, 2021. We concluded that the fair value of this debt approximated its book value as of the acquisition date. We repaid this debt in full in September and October 2021. During the post-acquisition period from September 1, 2021 through the repayment dates, interest expense related to Alaxala debt was not material.

The following unaudited pro forma financial information presents the combined results of operations of Fortinet, Inc. and Alaxala, as if Alaxala had been acquired as of the beginning of business on January 1, 2020. The unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of our consolidated results of operations of the combined business that would have been achieved if the acquisition had taken place at the beginning of business on January 1, 2020, or of the results of our future operations of the combined business.

Pro forma net income attributable to Fortinet, Inc.

$ $

Additional acquisition-related information

The operating results of the acquired companies are included in our consolidated statements of income from the respective dates of acquisition. Acquisition-related costs related to each acquisition were not material. Pro forma information has not been presented, except for Alaxala as disclosed above, as the impact of these acquisitions, individually and in the aggregate, in each year were not material to our consolidated financial statements.

Foreign currency translation adjustments()

Balance—December 31, 2023

There were impairments to goodwill during 2023, 2022 and 2021 or any previous periods.

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ $ $ Customer relationships Trade name Backlog Total other intangible assets—net$ $ $

December 31, 2022

Weighted-Average Useful Life (in Years)

Gross

Accumulated Amortization

Net

Other intangible assets—net:

Finite-lived intangible assets:

Developed technologies

Customer relationships

Trade name

Backlog

Total other intangible assets—net

Amortization expense of finite-lived intangible assets was $ million, $ million and $ million in 2023, 2022, and 2021, respectively.

2025 2026 2027

2028

Thereafter Total$

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ $ Net loss attributable to non-controlling interests ()()Net income attributable to Fortinet, Inc.$ $ $ Denominator:Basic shares:Weighted-average common stock outstanding-basic Diluted shares:Weighted-average common stock outstanding-basic Effect of potentially dilutive securities:RSUs Stock options

PSUs

Weighted-average shares used to compute diluted net income per share attributable to Fortinet, Inc. Net income per share attributable to Fortinet, Inc.:Basic$ $ $ Diluted$ $ $

Stock options

PSUs

Total

10.

to approximately , some of which include one or more options to renew, with renewal terms of up to . Unless and until we are reasonably certain we will exercise these renewal options, we do not include renewal options in our lease terms for calculating our lease liability, as the renewal options allow us to maintain operational flexibility. Our finance leases were not material to our consolidated financial statements.

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ $

Variable lease expense (1)

Short-term lease expense Total lease expense$ $ $

(1) Variable lease expense for the years ended December 31, 2023, 2022 and 2021 predominantly included common area maintenance charges, real estate taxes, certain parking expense, utilities based on actual usage and insurance costs.

$ Operating lease liabilities – currentAccrued liabilities$ $ Operating lease liabilities – non-currentOther liabilities Total operating lease liabilities$ $ Weighted average remaining lease term in years – operating leasesWeighted average discount rate – operating leases % %

$ $

2025

2026

2027

2028

Thereafter Total lease payments$ Less imputed interest()Total$

As of December 31, 2023, our operating leases that had been signed but had not yet commenced were not material.

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11.

billion aggregate principal amount of senior notes (collectively, the “Senior Notes”), consisting of $ million aggregate principal amount of % notes due March 15, 2026 (the “2026 Senior Notes”) and $ million aggregate principal amount of % notes due March 15, 2031 (the “2031 Senior Notes”), in an underwritten registered public offering. The Senior Notes are senior unsecured obligations and rank equally with each other in right of payment and with our other outstanding obligations. We may redeem the Senior Notes at any time in whole or in part for cash, at specified redemption prices that include accrued and unpaid interest, if any, and a make-whole premium. However, no make-whole premium will be paid for redemptions of the 2026 Senior Notes on or after February 15, 2026, or the 2031 Senior Notes on or after December 15, 2030. Interest on the Senior Notes is payable on March 15 and September 15 of each year, beginning on September 15, 2021. As of December 31, 2023, the Senior Notes were recorded as long-term debt, net of discount and issuance costs, which are amortized to interest expense over the respective contractual terms of these notes using the effective interest method.

% %$ 2031 Senior NotesMarch 2031 % % Total debt Less: Unamortized discount and debt issuance costs Total long-term debt$

As of December 31, 2023 and 2022, we accrued interest payable of $ million, and there are no financial covenants with which we must comply. In 2023, 2022 and 2021 we recorded $ million, $ million and $ million of total interest expense in relation to these Senior Notes and repaid $ million, $ million and $ million of interest in cash, respectively. interest costs were capitalized in 2023, 2022 and 2021, as the costs that qualified for capitalization were not material.

The total estimated fair value of the outstanding Senior Notes was approximately $ million, including accrued and unpaid interest, as of December 31, 2023. The fair value was determined based on observable market prices of identical instruments in less active markets. The estimated fair values are based on Level 2 inputs.

12.

$ $

Inventory Purchase Commitments—Our independent contract manufacturers and certain component suppliers procure components and build our products based on our forecasts, the availability of various components and their capacity. These forecasts are based on estimates of future demand for our products, which are in turn based on historical trends and an analysis from our sales and marketing organizations, adjusted for lead times, changes in supplier delivery commitments and other supply chain matters and market conditions. In order to manage manufacturing lead times, plan for adequate component supply and incentivize suppliers to deliver, we may issue purchase orders to some of our independent contract manufacturers which are non-cancelable. As of December 31, 2023, we had $ million of open purchase orders with our independent contract manufacturers that consist of non-cancelable commitments. In certain instances, these agreements allow us the option to reschedule and adjust our requirements based on our business needs prior to firm orders being placed. We record a liability for non-cancelable inventory purchase commitments for quantities in excess of our future estimated demand forecasts, consistent with the valuation of our excess and obsolete inventory. As of December 31, 2023, the liability for these inventory purchase commitments was $ million and was included in accrued liabilities. The expense related to such accrued liability

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

million for the year ended December 31, 2023, and material for the years ended December 31, 2022 and 2021, and was recorded in cost of product revenue on the consolidated statements of income.

Other Contractual Commitments and Open Purchase Orders—In addition to commitments with contract manufacturers and certain component suppliers, we have open purchase orders and contractual obligations in the ordinary course of business for which we have not received goods or services. A significant portion of our reported purchase commitments consist of firm and non-cancelable commitments. In certain instances, contractual commitments allow us the option to cancel, reschedule, and adjust our requirements based on our business needs prior to firm orders being placed. As of December 31, 2023, we had $ million in other contractual commitments having a remaining term in excess of that are non-cancelable.

Litigation—We are involved in disputes, litigation, and other legal actions. For lawsuits where we are the defendant, we are in the process of defending these litigation matters, and while there can be no assurances and the outcome of certain of these matters is currently not determinable and not predictable, we currently are unaware of any existing claims or proceedings that we believe are likely to have a material adverse effect on our financial position. There are many uncertainties associated with any litigation and these actions or other third-party claims against us may cause us to incur costly litigation fees, costs and substantial settlement charges, and possibly subject us to damages and other penalties. In addition, the resolution of any intellectual property (“IP”) litigation may require us to make royalty payments, which could adversely affect our gross margins in future periods. If any of those events were to occur, our business, financial condition, results of operations, and cash flows could be adversely affected. Litigation is unpredictable and the actual liability in any such matters may be materially different from our current estimates, which could result in the need to adjust any accrued liability and record additional expenses. We accrue for contingencies when we believe that a loss is probable and that we can reasonably estimate the amount of any such loss. These accruals are generally based on a range of possible outcomes that require significant management judgement. If no amount within a range is a better estimate than any other, we accrue the minimum amount. Litigation loss contingency accruals associated with outstanding cases were not material as of December 31, 2023 and 2022.

On March 21, 2019, we were sued by Alorica Inc. (“Alorica”) in Santa Clara County Superior Court in California. Alorica has alleged breach of warranty and misrepresentation claims, which we deny. Fact discovery closed during the quarter ended June 30, 2023. Trial is set for May 2024. Although we believe that the ultimate outcome of this matter will not materially impact our financial position, results of operations or cash flows, legal proceedings are subject to inherent uncertainties, and an unfavorable ruling could occur, which may result in a material adverse impact on our business, financial position, results of operations and cash flows. No loss accrual had been recorded as of December 31, 2023 related to this litigation.

Indemnification and Other Matters—Under the indemnification provisions of our standard sales contracts, we agree to defend our customers against third-party claims asserting various allegations such as product defects and infringement of certain IP rights, which may include patents, copyrights, trademarks or trade secrets, and to pay judgments entered on such claims. In some contracts, our exposure under these indemnification provisions is limited by the terms of the contracts to certain defined limits, such as the total amount paid by our customer under the agreement. However, certain agreements include covenants, penalties and indemnification provisions including and beyond indemnification for third-party claims of IP infringement that could potentially expose us to losses in excess of the amount received under the agreement, and in some instances to potential liability that is not contractually limited. Although from time to time there are indemnification claims asserted against us and currently there are pending indemnification claims, to date there have been no material awards under such indemnification provisions.

Similar to other security companies and companies in other industries, we have experienced and may experience in the future, cybersecurity threats, malicious activity directed against our information technology infrastructure or unauthorized attempts to gain access to our and our customers’ sensitive information and systems. We currently are unaware of any existing claims or proceedings related to these types of matters, including any that we believe are likely to have a material adverse effect on our financial position.

13.

primary stock incentive plan, the 2009 EIP, under which we have granted RSUs, stock options and PSUs.

Our board of directors approved the 2009 EIP in 2009 and amended the plan in 2019. The maximum aggregate number of shares that may be issued under the 2009 EIP is shares; provided, however, that only shares may be

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

% of the voting power of all classes of stock, the exercise price shall be no less than % of the fair market value per share on the date of grant and expire no more than from the date of grant, and options granted to any other employee, the per share exercise price shall be no less than % of the closing stock price on the date of grant. In the case of a non-statutory stock option and options granted to other service providers, the per share exercise price shall be no less than % of the fair market value per share on the date of grant. Options granted to individuals owning less than % of the total combined voting power of all classes of stock generally have a contractual term of no more than and options generally vest over .

As of December 31, 2023, there were a total of million shares of common stock available for grant under the 2009 EIP.

Restricted Stock Units

$ Granted Forfeited() Vested()

Balance—December 31, 2021

Granted Forfeited() Vested()

Balance—December 31, 2022

Granted Forfeited() Vested()

Balance—December 31, 2023

Stock compensation expense is recognized on a straight-line basis over the vesting period of each RSU. As of December 31, 2023, total compensation expense related to unvested RSUs granted to employees and non-employees under the 2009 EIP, but not yet recognized, was $ million, with a weighted-average remaining vesting period of years.

RSUs settle into shares of common stock upon vesting. Upon the vesting of the RSUs, we net-settle the RSUs and withhold a portion of the shares to satisfy employee withholding tax requirements. The payment of the withheld taxes to the tax authorities is reflected as a financing activity within the consolidated statements of cash flows.

Amount withheld for taxes$ $ $

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Volatility % % %Risk-free interest rate % % %Dividend rate % % %

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ Granted Forfeited() Exercised()

Balance—December 31, 2021

Granted Forfeited() Exercised()

Balance—December 31, 2022

Granted Forfeited() Exercised()

Balance—December 31, 2023

Options vested and expected to vest—December 31, 2023

$ $

Options exercisable—December 31, 2023

$ $

The aggregate intrinsic value represents the difference between the exercise price of stock options and the quoted market price of our common stock at the date of balance sheet for all in-the-money stock options. Stock compensation expense is recognized on a straight-line basis over the vesting period of each stock option. As of December 31, 2023, total compensation expense related to unvested stock options granted to employees but not yet recognized was $ million, with a weighted-average remaining vesting period of years.

$ $ Intrinsic value of options exercised $ $ $ Fair value of options vested$ $ $

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

-$ $ $

$-$

Market/Performance-Based PSUs

In 2023, we granted market/performance-based PSUs under the 2009 EIP to certain of our executives. Based on the achievement of the market/performance-based vesting conditions during the performance period, the final settlement of the PSUs will range between % and % of the target shares underlying the PSUs based on the percentile ranking of our total stockholder return over one-, two-, three- and periods among companies included in the S&P 500 Index. %, %, % and % of the PSUs vest over one-, two-, three- and service periods, respectively.

We granted approximately million shares of PSU awards with a grant date fair value of $ per share to certain of our executives during the first quarter of 2023. The grant date fair value of these awards was determined using a Monte Carlo simulation pricing model.

Volatility %Risk-free interest rate %Dividend rate %

of these PSU awards were vested and PSU awards forfeited were during the year ended December 31, 2023.

As of December 31, 2023, total compensation expense related to unvested PSUs that were granted to certain of our executives, but not yet recognized, was $ million. This expense is expected to be amortized on a graded vesting method over a weighted-average vesting period of years.

Shares Reserved for Future Issuances

Outstanding stock options, RSUs and PSUs

Total common stock reserved for future issuances

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ $ Cost of service revenue Research and development Sales and marketing General and administrative Total stock-based compensation expense$ $ $

$ $ Stock options

PSUs

$ $ $ Total stock-based compensation expense$ $ $

$ $

Share Repurchase Program

In January 2016, our board of directors approved the Repurchase Program, which authorized the repurchase of up to $ million of our outstanding common stock through December 31, 2017. From 2016 through 2022, our board of directors approved increases to our Repurchase Program by various amounts and extended the term to February 28, 2023, bringing the aggregated amount authorized to $ billion. In February 2023, our board of directors approved an extension of the Repurchase Program to February 29, 2024. In April 2023 and July 2023, our board of directors approved $ billion and $ million increases in the authorized stock repurchase amount under the Repurchase Program, bringing the aggregate amount authorized to be repurchased to $ billion. Under the Repurchase Program, share repurchases may be made by us from time to time in privately negotiated transactions or in open market transactions. The Repurchase Program does not require us to purchase a minimum number of shares, and may be suspended, modified or discontinued at any time without prior notice. In 2023, we repurchased million shares of common stock under the Repurchase Program in open market transactions for an aggregate purchase price of $ billion, which excludes a $ million accrual related to the 1% excise tax imposed by the Inflation Reduction Act of 2022. As of December 31, 2023, $ million remained available for future share repurchases under the Repurchase Program. Refer to Note 17, Subsequent Events, for information regarding the approved $ million increase in the authorized stock repurchase amount under the Repurchase Program in January 2024 and the extension of the Repurchase Program to February 28, 2025 in February 2024.

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

14.

$ $ Foreign

Total income before income taxes and loss from equity method investments

$ $ $

$ $ State Foreign Total current$ $ $ Deferred:Federal$()$()$()State()()()Foreign()()()Total deferred()()()Provision for income taxes$ $ $

The foreign tax provision included the tax impacts from U.S. GAAP to local tax return book to tax differences that create a permanent addback including but not limited to stock compensation, meals and entertainment, and settlement of prior year tax audits with foreign jurisdiction adjustments.

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ $ Foreign income taxed at different rates Foreign withholding taxes Stock-based compensation expense()()()Foreign tax credit()()()State taxes—net of federal benefit ()()Research and development credit()()()Valuation allowance() Impact of the 2017 Tax Cuts and Jobs Act:One-time transition tax

Tax effect of a law change

()

Foreign-Derived Intangible Income ("FDII")

()()()

Adjustment to prior year’s FDII

Other ()()Total provision for income taxes$ $ $

Effective January 1, 2022, research and development expenses are required to be capitalized and amortized for U.S. tax purposes, which delays the deductibility of these expenses, and increases our current provision.

During 2023, we changed our position regarding the allocation and apportionment of expenses for income tax purposes. This change in approach affected the amount of our FDII benefit and our ability to utilize certain foreign tax credits. As a result, our FDII benefits recorded in prior years decreased by $ million, partially offset by an increased benefit for the utilization of foreign tax credits of $ million. These foreign tax credit carryforwards were previously expected to have expired unutilized resulting in the recording of a full valuation allowance thereon. Accordingly, the benefit recognized as a result of their utilization is included in the benefit from the release of a valuation allowance of $ million.

On January 4, 2022, the U.S. Treasury published another tranche of final regulations regarding the foreign tax credit. These final regulations impose new requirements that a foreign tax must meet in order to be creditable against U.S. income taxes, and generally apply to tax years beginning on or after December 28, 2021. On July 26, 2022, the U.S. Treasury released corrections to the final regulations. On July 21, 2023, the IRS released a notice that suspended the application of significant portions of the final regulations regarding the foreign tax credit for tax years 2022 and 2023. The notice released in July 2023 favorably impacted our ability to claim foreign tax credits in the United States for certain taxes imposed by certain foreign jurisdictions. On December 11, 2023, the IRS released a notice that extended the suspension of significant portions of the final regulations beyond December 31, 2023, until further guidance is issued.

On August 16, 2022, the United States enacted the Inflation Reduction Act of 2022 that provides for certain changes to the U.S. corporate income tax system, including a 15% minimum tax based on financial statement income for companies with three-year average annual adjusted financial statement income exceeding $1 billion, and a 1% excise tax on net repurchases of stock after December 31, 2022, if any. The applicable tax law changes have had no impact to our tax provision for the year ended December 31, 2023. We will continue to evaluate the impact of these tax law changes on future periods.

In December 2021, the Organisation for Economic Co-operation and Development (the “OECD”) enacted model rules for a new global minimum tax framework (“BEPS Pillar Two”), and various governments around the world have enacted, or are in the process of enacting, legislation on this. We are in the process of assessing the tax impact of Pillar Two legislation becoming applicable to us beginning January 1, 2024, and believe these rules will not have a material impact on our provision for income taxes.

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ Deferred revenue Reserves and accruals Net operating loss carryforward Stock-based compensation expense Depreciation and amortization Capitalized research expenditures Operating lease liabilities Total deferred tax assets Less: Valuation allowance()()Deferred tax assets, net of valuation allowance Deferred tax liabilities:Deferred contract costs()()Operating lease ROU assets()()Acquired intangibles()()Total deferred tax liabilities()()Net deferred tax assets$ $

In assessing the realizability of deferred tax assets, we considered whether it is more likely than not that some portion or all of our deferred tax assets will be realized. This realization is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We concluded that it is more likely than not that we will be able to realize the benefits of our deferred tax assets in the future except for our California research and development credits carryforward, certain impairment losses in business investments and certain tax attributes from business acquisitions. As of December 31, 2023, we had a valuation allowance of $ million against those items.

As of December 31, 2023, our federal and California net operating loss carryforwards for income tax purposes were $ million and $ million, respectively. All the net operating loss carryforwards were from acquisitions which were limited by Section 382 of the Internal Revenue Code. If not utilized, the federal net operating loss carryforwards will begin to expire in 2024, and California net operating loss carryforwards will begin to expire in 2034.

As of December 31, 2023, we had state tax credit carryforwards of $ million. The state credits can be carried forward indefinitely.

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

$ $ Gross increases for tax positions related to the current year Gross decreases for tax positions related to the current year Gross increases for tax positions related to the prior year Gross decreases for tax positions related to prior year()()()Gross decreases for tax positions related to prior year audit settlements Gross decreases for tax positions related to expiration of statute of limitations()()()Unrecognized tax benefits, end of year$ $ $

As of December 31, 2023, we had $ million of unrecognized tax benefits, of which, if recognized, $ million would favorably affect our effective tax rate. Our gross unrecognized tax benefits decreased approximately $ million during the year ended December 31, 2023. The net decrease was primarily due to the reversal of gross unrecognized tax benefits in connection with the lapse of statutes of limitations. Our policy is to include accrued interest and penalties related to uncertain tax benefits in income tax expense. As of December 31, 2023, 2022 and 2021, accrued interest and penalties were $ million, $ million and $ million, respectively.

It is reasonably possible that our gross unrecognized tax benefits will decrease up to $ million in the next 12 months, primarily due to the lapse of the statute of limitations. These adjustments, if recognized, would favorably impact our effective tax rate, and would be recognized as additional tax benefits.

We file income tax returns in the U.S. federal jurisdiction and in various U.S. state and foreign jurisdictions. Generally, we are no longer subject to examination by U.S. federal income tax authorities for tax years prior to 2015. We are no longer subject to U.S. state and foreign income tax examinations by tax authorities for tax years prior to 2010. We currently have ongoing tax audits in the United Kingdom, Canada, Germany and several other foreign jurisdictions. The focus of these audits is the inter-company profit allocation.

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

15.

% matching contributions on employee contributions up to % of each employee’s eligible earnings. Our matching contributions to our 401(k) Plan and the RRSP for 2023, 2022 and 2021 were $ million, $ million and $ million, respectively.

16.

business activity, and there are segment managers who are held accountable for operations, operating results and plans for levels or components below the consolidated unit level. Accordingly, we have determined that we have operating segment, and therefore, reportable segment.

$ $ Other Americas Total Americas Europe, Middle East and Africa (“EMEA”) Asia Pacific (“APAC”) Total revenue$ $ $

$ Canada Latin America Total Americas EMEA APAC Total property and equipment—net$ $

% % %Distributor B % % %Distributor C % %*

* Represents less than 10%

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FORTINET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

% %Distributor B % %Distributor C % %

17.

square feet and square feet, respectively, for $ million and $ million in cash, respectively.

Share Repurchase Program

million increase in the authorized stock repurchase amount under the Repurchase Program, bringing the aggregate amount authorized to be repurchased to $ billion of our outstanding common stock. In February 2024, our board of directors approved an extension of the Repurchase Program to February 28, 2025. As of February 23, 2024, approximately $ billion remained available for future share repurchases.

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ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

ITEM 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this Annual Report on Form 10-K. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2023 to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) set forth by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2023. Management reviewed the results of its assessment with our Audit Committee. The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in its report, which appears in this Item under the heading “Report of Independent Registered Public Accounting Firm.”

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during 2023 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Fortinet, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Fortinet, Inc. and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated February 23, 2024 expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

San Jose, California

February 23, 2024

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ITEM 9B. Other Information

On , , our , (the “Perche Plan”) under the Exchange Act for the sale of shares of our common stock. The Perche Plan was entered into during an open trading window in accordance with our insider trading policy and is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act. The Perche Plan provides for the potential sale by Patrice Perche of up to (a) shares of our common stock, including upon the vesting and settlement of RSUs and PSUs for shares of our common stock, and (b) the net shares (which are not yet determinable) after shares are withheld to satisfy tax obligations upon such vesting and settlement, in each case, at the market price, all between March 4, 2024 and June 1, 2025.

On , , one of s, (the “Sim Plan”) under the Exchange Act for the sale of shares of our common stock. The Sim Plan was entered into during an open trading window in accordance with our insider trading policy and is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act. The Sim Plan provides for the potential sale by Judith Sim of up to shares of our common stock between March 6, 2024 and March 8, 2025.

Each of the Perche Plan and the Sim Plan (together, the “10b5-1 Plans”) includes a representation from Patrice Perche and Judith Sim (as applicable) to the broker administering the plan that none of them were in possession of any material nonpublic information regarding us or the securities subject to the 10b5-1 Plans at the time the 10b5-1 Plans were entered into. A similar representation was made to us in connection with the adoption of the 10b5-1 Plans under our insider trading policy. Those representations for each 10b5-1 Plan were made as of the respective date of adoption of the applicable 10b5-1 Plan, and speak only as of that date. In making those representations, there is no assurance with respect to any material nonpublic information of which Patrice Perche and Judith Sim were unaware, or with respect to any material nonpublic information acquired by Patrice Perche and Judith Sim or us after the date of each such representation.

Once executed, transactions under the Sim Plan will be disclosed publicly through Form 4 and/or Form 144 filings with the SEC in accordance with applicable securities laws, rules and regulations. Except as may be required by law, we do not undertake any obligation to update or report any modification, termination, or other activity under current or future Rule 10b5-1 plans that may be adopted by Patrice Perche or Judith Sim or our other officers or directors, or their affiliated entities.

ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevents Inspections

Not applicable.

Part III

ITEM 10. Directors, Executive Officers and Corporate Governance

Information responsive to this item is incorporated herein by reference to our definitive proxy statement with respect to our 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

As part of our system of corporate governance, our board of directors has adopted a code of business conduct and ethics. The code applies to all of our employees, officers (including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions), agents and representatives, including our independent directors and consultants, who are not our employees, with regard to their Fortinet-related activities. Our code of business conduct and ethics is available on our website at www.fortinet.com under “Corporate—Investor Relations—Corporate Governance.” We will post on this section of our website any amendment to our code of business conduct and ethics, as well as any waivers of our code of business conduct and ethics, which are required to be disclosed by the rules of the SEC or the Nasdaq Stock Market.

ITEM 11. Executive Compensation

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

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ITEM 13. Certain Relationships and Related Transactions, and Director Independence

ITEM 14. Principal Accounting Fees and Services

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Part IV

ITEM 15. Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this Annual Report on Form 10-K:

1.Financial Statements: The information concerning Fortinet’s financial statements and the Report of Independent Registered Public Accounting Firm required by this Item 15(a)(1) is incorporated by reference herein to the section of this Annual Report on Form 10-K in Part II, Item 8, titled “Financial Statements and Supplementary Data.”

2.Financial Statement Schedule: Financial statement schedules have been omitted because they are not applicable or are not required or the information required to be set forth therein is included in the consolidated financial statements or notes thereto.

3. Exhibits: See Item 15(b) below. We have filed, or incorporated into this Annual Report on Form 10-K by reference, the exhibits listed on the accompanying Exhibit Index immediately preceding the signature page of this Annual Report on Form 10-K.

(b) Exhibits:

The exhibits listed on the Exhibit Index immediately preceding the signature page of this Annual Report on Form 10-K is incorporated herein by reference as the list of exhibits required by this Item 15(b).

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EXHIBIT INDEX

Exhibit
Number

Description

Form Incorporated by reference herein

Date Filed

Exhibit
Number

3.1

Restated Certificate of Incorporation

Quarterly Report on Form 10-Q (File No. 001-34511)

August 7, 2023

3.3

3.2

Amended and Restated Bylaws

Current Report on Form 8-K (File No. 001-34511)

June 23, 2023

3.3

4.1

Specimen common stock certificate of the Company

Registration Statement on Form S-l, as amended (File No. 333-161190)

November 2, 2009

4.1

4.2*

Description of Securities Registered Pursuant to Section 12 of the Exchange Act

10.1†

Forms of Indemnification Agreement between the Company and its directors and officers

Registration Statement on Form S-l (File No. 333-161190)

August 10, 2009

10.1

10.2†

Amended and Restated 2009 Equity Incentive Plan

Quarterly Report on Form 10-Q (File No. 001-34511)

August 1, 2019

10.1

10.3†

Forms of stock option agreement under Amended and Restated 2009 Equity Incentive Plan

Annual Report on Form 10-K (File No. 001-34511)

February 28, 2012

10.5

10.4†

Form of performance stock unit award agreement under Amended and Restated 2009 Equity Incentive Plan

Quarterly Report on Form 10-Q (File No. 001-34511)

August 6, 2013

99.1

10.5†

Forms of restricted stock unit award and performance stock unit award agreement under Amended and Restated 2009 Equity Incentive Plan (Additional Forms)

Annual Report on Form 10-K (File No. 001-34511)

March 2, 2015

10.7

10.6†

Form of restricted stock unit award agreement under Amended and Restated 2009 Equity Incentive Plan (Additional Form)

Annual Report on Form 10-K (File No. 001-34511)

February 26, 2020

10.6

10.7†

Form of stock option award agreement under Amended and Restated 2009 Equity Incentive Plan (Additional Form)

Annual Report on Form 10-K (File No. 001-34511)

February 26, 2020

10.7

10.8†

Fortinet, Inc. Amended Bonus Plan

Annual Report on Form 10-K (File No. 001-34511)

February 19, 2021

10.8

10.9†

Fortinet, Inc. Cash and Equity Incentive Plan

Quarterly Report on Form 10-Q (File No. 001-34511)

November 5, 2013

10.1

10.10†

Form of Change of Control Agreement between the Company and its directors

Quarterly Report on Form 10-Q (File No. 001-34511)

August 4, 2015

10.1

10.11†

Amended and Restated Change of Control Severance Agreement, effective as of August 7, 2019, between the Company and Ken Xie

Quarterly Report on Form 10-Q (File No. 001-34511)

August 1, 2019

10.2

10.12†

Amended and Restated Change of Control Severance Agreement, effective as of August 7, 2019, between the Company and Michael Xie

Quarterly Report on Form 10-Q (File No. 001-34511)

August 1, 2019

10.3

10.13†

Amended and Restated Change of Control Severance Agreement, effective as of August 7, 2019, between the Company and John Whittle

Quarterly Report on Form 10-Q (File No. 001-34511)

August 1, 2019

10.4

10.14†

Offer Letter, dated as of October 23, 2006, by and between the Company and John Whittle

Registration Statement on Form S-l, as amended (File No. 333-161190)

August 10, 2009

10.10

10.15†

Offer Letter, dated as of April 3, 2014, by and between the Company and Keith Jensen

Annual Report on Form 10-K (File No. 001-34511)

February 26, 2018

10.22

10.16†

Amended and Restated Change of Control Severance Agreement, effective as of August 7, 2019, between the Company and Keith Jensen

Quarterly Report on Form 10-Q (File No. 001-34511)

August 1, 2019

10.5

10.17†

Employment Agreement, dated as of January 24, 2018, between Fortinet UK Limited and Patrice Perche

Annual Report on Form 10-K (File No. 001-34511)

February 24, 2023

10.17

10.18†

Change of Control Severance Agreement, effective as of February 21, 2023, between the Company and Patrice Perche

Annual Report on Form 10-K (File No. 001-34511)

February 24, 2023

10.18

10.19†

Form of performance stock unit award agreement under Amended and Restated 2009 Equity Incentive Plan

Quarterly Report on Form 10-Q (File No. 001-34511)

May 8, 2023

10.1

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10.20†

Form of restricted stock unit award agreement under Amended and Restated 2009 Equity Incentive Plan (Additional Form)

Quarterly Report on Form 10-Q (File No. 001-34511)

May 8, 2023

10.2

21.1*

List of subsidiaries

23.1*

Consent of Independent Registered Public Accounting Firm

24.1*

Power of Attorney (incorporated by reference to the signature page of this Annual Report on Form 10-K)

31.1*

Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*

Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**

Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

97.1*

Compensation Recovery Policy

101.INS*

Inline XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH*

Inline XBRL Taxonomy Extension Schema Document

101.CAL*

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*

Cover Page Interactive Data File - the cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 is formatted in inline XBRL.

________________________________

† Indicates management compensatory plan, contract or arrangement.

* Filed herewith.

** Furnished herewith. This certification is deemed not filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

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ITEM 16. Form 10-K summary

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Date: February 23, 2024
FORTINET, INC.

	By:	/s/ Ken Xie
		Ken Xie, Chief Executive Officer and Chairman
		(Duly Authorized Officer and Principal Executive Officer)


Date: February 23, 2024
FORTINET, INC.

	By:	/s/ Keith Jensen
		Keith Jensen, Chief Financial Officer
		(Duly Authorized Officer and Principal Financial Officer and Principal Accounting Officer)

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POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Ken Xie and Keith Jensen, jointly and severally, his or her attorney-in-fact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Ken Xie

Chief Executive Officer and Chairman

February 23, 2024

Ken Xie

(Principal Executive Officer)

/s/ Keith Jensen

Chief Financial Officer

February 23, 2024

Keith Jensen

(Principal Financial Officer and Principal Accounting Officer)

/s/ Michael Xie

President, Chief Technology Officer and Director

February 23, 2024

Michael Xie

/s/ Kenneth A. Goldman

Director

February 23, 2024

Kenneth A. Goldman

/s/ Ming Hsieh

Director

February 23, 2024

Ming Hsieh

/s/ Jean Hu

Director

February 23, 2024

Jean Hu

/s/ William H. Neukom

Director

February 23, 2024

William H. Neukom

/s/ Judith Sim

Director

February 23, 2024

Judith Sim

/s/ Admiral James Stavridis

Director

February 23, 2024

Admiral James Stavridis

116

Fortinet, Inc. - Annual Report: 2023 (Form 10-K)

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