SEC Filing | Fortinet, Inc.

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ftnt-20210930

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-34511

______________________________________

FORTINET, INC.

(Exact name of registrant as specified in its charter)

______________________________________


Delaware									77-0560389
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

899 Kifer Road

Sunnyvale, California 94086

(Address of principal executive offices, including zip code)

(408) 235-7700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Common Stock, $0.001 Par Value

FTNT

The Nasdaq Stock Market LLC

(Title of each class)

(Trading Symbol)

(Name of exchange on which registered)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of November 5, 2021, there were 163,499,790 shares of the registrant’s common stock outstanding.

FORTINET, INC.

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended September 30, 2021

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		Page

	PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	1
	Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2021 and 2020	2
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2021 and 2020	3
	Condensed Consolidated Statements of Equity for the Three and Nine Months Ended September 30, 2021 and 2020	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	44
Item 4.	Controls and Procedures	44

	PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	79
Item 6.	Exhibits	80
	Exhibit Index	80
	Signatures	81

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PART I—FINANCIAL INFORMATION

ITEM 1. Financial Statements

FORTINET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in millions, except per share amounts)


	September 30, 2021		December 31, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,852.1	$	1,061.8
Short-term investments	1,228.1		775.5
Marketable equity securities	40.8		—
Accounts receivable—net	604.9		720.0
Inventory	177.9		139.8
Prepaid expenses and other current assets	59.7		43.3
Total current assets	3,963.5		2,740.4
LONG-TERM INVESTMENTS	298.2		118.3
PROPERTY AND EQUIPMENT—NET	556.6		448.0
DEFERRED CONTRACT COSTS	378.8		304.8
DEFERRED TAX ASSETS	337.3		245.2
GOODWILL	127.6		93.0
OTHER INTANGIBLE ASSETS—NET	71.0		31.6
OTHER ASSETS	237.6		63.2
TOTAL ASSETS	$	5,970.6	$	4,044.5
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable	$	142.3	$	141.6
Accrued liabilities	247.8		149.2
Accrued payroll and compensation	174.2		145.9
Current portion of long-term debt	17.6		—
Deferred revenue	1,616.1		1,392.8
Total current liabilities	2,198.0		1,829.5
DEFERRED REVENUE	1,490.3		1,212.5
INCOME TAX LIABILITIES	96.5		90.3
LONG-TERM DEBT	988.0		—
OTHER LIABILITIES	62.2		56.2
Total liabilities	4,835.0		3,188.5
COMMITMENTS AND CONTINGENCIES (Note 13)
EQUITY:
Common stock, $0.001 par value—300.0 shares authorized; 163.4 and 162.5 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	0.2		0.2
Additional paid-in capital	1,257.7		1,207.2
Accumulated other comprehensive income (loss)	(1.2)		0.7
Accumulated deficit	(138.6)		(352.1)

Total Fortinet, Inc. stockholders’ equity	1,118.1		856.0
Non-controlling interests	17.5		—
Total equity	1,135.6		856.0
TOTAL LIABILITIES AND EQUITY	$	5,970.6	$	4,044.5

See notes to condensed consolidated financial statements.

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FORTINET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited, in millions, except per share amounts)


	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
REVENUE:
Product	$	337.1	$	223.8	$	876.1	$	628.0
Service	530.1		427.3		1,502.5		1,218.4
Total revenue	867.2		651.1		2,378.6		1,846.4
COST OF REVENUE:
Product	134.3		84.3		341.2		245.0
Service	76.9		54.9		213.5		158.0
Total cost of revenue	211.2		139.2		554.7		403.0
GROSS PROFIT:
Product	202.8		139.5		534.9		383.0
Service	453.2		372.4		1,289.0		1,060.4
Total gross profit	656.0		511.9		1,823.9		1,443.4
OPERATING EXPENSES:
Research and development	107.8		90.0		311.6		252.4
Sales and marketing	347.1		266.7		978.0		780.5
General and administrative	35.8		29.4		102.2		87.1
Gain on intellectual property matter	(1.1)		(1.1)		(3.4)		(39.0)
Total operating expenses	489.6		385.0		1,388.4		1,081.0
OPERATING INCOME	166.4		126.9		435.5		362.4
INTEREST INCOME	1.2		2.5		3.5		15.7
INTEREST EXPENSE	(4.6)		—		(10.4)		—
OTHER EXPENSE—NET	(6.3)		(1.0)		(7.5)		(8.1)
INCOME BEFORE INCOME TAXES AND LOSS FROM EQUITY METHOD INVESTMENT	156.7		128.4		421.1		370.0
PROVISION FOR (BENEFIT FROM) INCOME TAXES	(9.3)		5.0		10.4		28.2
LOSS FROM EQUITY METHOD INVESTMENT	(2.8)		—		(2.8)		—
NET INCOME INCLUDING NON-CONTROLLING INTERESTS	163.2		123.4		407.9		341.8
LESS: NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS, NET OF TAX	0.1		—		0.1		—
NET INCOME ATTRIBUTABLE TO FORTINET, INC.	$	163.1	$	123.4	$	407.8	$	341.8
Net income per share attributable to Fortinet, Inc. common stockholders (Note 9):
Basic	$	1.00	$	0.76	$	2.50	$	2.07
Diluted	$	0.97	$	0.75	$	2.44	$	2.03
Weighted-average shares used to compute net income per share attributable to Fortinet, Inc. common stockholders
Basic	163.5		162.1		163.3		164.8
Diluted	167.7		165.6		167.1		168.4

See notes to condensed consolidated financial statements.

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FORTINET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, in millions)


	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Net income including non-controlling interests	$	163.2	$	123.4	$	407.9	$	341.8
Other comprehensive income (loss):
Change in foreign currency translation	(1.6)		—		(1.6)		—
Change in unrealized gains (losses) on investments	—		(1.4)		(1.0)		0.7
Less: tax provision (benefit) related to items of other comprehensive income or loss	(0.1)		(0.3)		(0.3)		0.4
Other comprehensive income (loss)	(1.5)		(1.1)		(2.3)		0.3
Comprehensive income including non-controlling interests	161.7		122.3		405.6		342.1
Less: comprehensive loss attributable to non-controlling interests	(0.3)		—		(0.3)		—
Comprehensive income attributable to Fortinet, Inc.	$	162.0	$	122.3	$	405.9	$	342.1

See notes to condensed consolidated financial statements.

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FORTINET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(unaudited, in millions)


	Three Months Ended September 30, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Non-Controlling Interests		Total Equity
	Shares	Amount
BALANCE—June 30, 2021	163.3	$	0.2	$	1,245.8	$	(0.1)	$	(195.7)	$	—	$	1,050.2
Issuance of common stock in connection with equity incentive plans - net of tax withholding	0.4	—		(38.0)		—		—		—		(38.0)
Repurchase and retirement of common stock	(0.3)	—		(2.8)		—		(106.0)		—		(108.8)
Stock-based compensation expense	—	—		52.7		—		—		—		52.7
Recognition of non-controlling interests upon business combination	—	—		—		—		—		17.8		17.8
Net unrealized gain on investments - net of tax	—	—		—		0.1		—		—		0.1
Foreign currency translation adjustment	—	—		—		(1.2)		—		(0.4)		(1.6)
Net income	—	—		—		—		163.1		0.1		163.2
BALANCE—September 30, 2021	163.4	$	0.2	$	1,257.7	$	(1.2)	$	(138.6)	$	17.5	$	1,135.6



	Three Months Ended September 30, 2020
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Non-Controlling Interests		Total Equity
	Shares	Amount
BALANCE—June 30, 2020	161.8	$	0.2	$	1,154.3	$	2.5	$	(590.3)	$	—	$	566.7
Issuance of common stock in connection with equity incentive plans - net of tax withholding	0.5	—		(25.1)		—		—		—		(25.1)
Stock-based compensation expense	—	—		49.3		—		—		—		49.3
Net unrealized loss on investments - net of tax	—	—		—		(1.1)		—		—		(1.1)
Net income	—	—		—		—		123.4		—		123.4
BALANCE—September 30, 2020	162.3	$	0.2	$	1,178.5	$	1.4	$	(466.9)	$	—	$	713.2

See notes to condensed consolidated financial statements.

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	Nine Months Ended September 30, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Non-Controlling Interests		Total Equity
	Shares	Amount
BALANCE—December 31, 2020	162.5	$	0.2	$	1,207.2	$	0.7	$	(352.1)	$	—	$	856.0
Issuance of common stock in connection with equity incentive plans - net of tax withholding	1.7	—		(98.2)		—		—		—		(98.2)
Repurchase and retirement of common stock	(0.8)	—		(6.1)		—		(194.3)		—		(200.4)
Stock-based compensation expense	—	—		154.8		—		—		—		154.8
Recognition of non-controlling interests upon business combination	—	—		—		—		—		17.8		17.8
Net unrealized loss on investments - net of tax	—	—		—		(0.7)		—		—		(0.7)
Foreign currency translation adjustment	—	—		—		(1.2)		—		(0.4)		(1.6)
Net income	—	—		—		—		407.8		0.1		407.9
BALANCE—September 30, 2021	163.4	$	0.2	$	1,257.7	$	(1.2)	$	(138.6)	$	17.5	$	1,135.6

	Nine Months Ended September 30, 2020
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings (Accumulated Deficit)		Non-Controlling Interests		Total Equity
	Shares	Amount
BALANCE—December 31, 2019	171.7	$	0.2	$	1,180.3	$	1.1	$	160.8	$	—	$	1,342.4
Issuance of common stock in connection with equity incentive plans - net of tax withholding	2.0	—		(68.3)		—		—		—		(68.3)
Repurchase and retirement of common stock	(11.4)	—		(76.5)		—		(969.5)		—		(1,046.0)
Stock-based compensation expense	—	—		143.0		—		—		—		143.0
Net unrealized gain on investments - net of tax	—	—		—		0.3		—		—		0.3
Net income	—	—		—		—		341.8		—		341.8
BALANCE—September 30, 2020	162.3	$	0.2	$	1,178.5	$	1.4	$	(466.9)	$	—	$	713.2

See notes to condensed consolidated financial statements.

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FORTINET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions)


	Nine Months Ended
	September 30, 2021		September 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income including non-controlling interests	$	407.9	$	341.8
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	154.8		143.0
Amortization of deferred contract costs	126.9		99.8
Depreciation and amortization	59.1		52.1
Amortization of investment premiums	4.8		0.2
Loss from equity method investment	2.8		—
Other	4.4		5.8
Changes in operating assets and liabilities, net of impact of business combinations:
Accounts receivable—net	130.6		(3.1)
Inventory	(19.5)		(31.0)
Prepaid expenses and other current assets	(12.5)		(4.6)
Deferred contract costs	(201.0)		(143.9)
Deferred tax assets	(91.9)		4.4
Other assets	(15.7)		(2.0)
Accounts payable	(11.8)		(4.2)
Accrued liabilities	77.0		16.5
Accrued payroll and compensation	23.1		19.5
Other liabilities	(3.2)		10.3
Deferred revenue	497.1		282.6
Net cash provided by operating activities	1,132.9		787.2
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments	(1,749.9)		(776.3)
Sales of investments	82.2		141.4
Maturities of investments	1,029.0		730.3
Purchases of property and equipment	(144.6)		(93.6)
Purchase of investment in privately held company	(160.0)		—
Payments made in connection with business combinations, net of cash acquired	(73.4)		(9.2)
Purchases of marketable equity securities	(42.5)		(0.4)
Net cash used in investing activities	(1,059.2)		(7.8)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings, net of discount and underwriting fees	989.4		—
Payments for debt issuance costs	(2.4)		—
Payments of debt assumed in connection with business combination	(2.2)		(4.1)
Repurchase and retirement of common stock	(170.0)		(1,046.0)
Proceeds from issuance of common stock	20.7		18.2
Taxes paid related to net share settlement of equity awards	(118.9)		(86.5)
Other	(0.2)		(1.2)
Net cash provided by (used in) financing activities	716.4		(1,119.6)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	0.2		—
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	790.3		(340.2)
CASH AND CASH EQUIVALENTS—Beginning of period	1,061.8		1,222.5
CASH AND CASH EQUIVALENTS—End of period	$	1,852.1	$	882.3
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes—net	$	69.9	$	27.6
Operating lease liabilities arising from obtaining right-of-use assets	$	31.0	$	14.7
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Transfers of evaluation units from inventory to property and equipment	$	14.6	$	14.8
Liability for purchase of property and equipment	$	23.8	$	26.1
Liability incurred for repurchase of common stock	$	30.4	$	—

See notes to condensed consolidated financial statements.

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FORTINET, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Preparation—The unaudited condensed consolidated financial statements of Fortinet, Inc. and its subsidiaries (collectively, “we,” “us” or “our”) have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information, as well as the instructions to Form 10-Q pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements, and should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2020, contained in our Annual Report on Form 10-K filed with the SEC on February 19, 2021. In the opinion of management, all adjustments, which includes normal recurring adjustments, considered necessary for a fair presentation have been included. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the full year or for any future periods. The condensed consolidated balance sheet as of December 31, 2020 is derived from the audited consolidated financial statements for the year ended December 31, 2020.

The condensed consolidated financial statements include the accounts of Fortinet, Inc. and its subsidiaries. We consolidate all legal entities in which we have an absolute controlling financial interest. All intercompany balances and transactions have been eliminated in consolidation.

Investments in common stock or in-substance common stock of entities that provide us with the ability to exercise significant influence, but not an absolute controlling financial interest, over the investee are accounted for under the equity method of accounting. Investments accounted for under the equity method are initially recorded at cost. Subsequently, we recognize our proportionate share of the entities’ net income or loss and the amortization of any basis differences through the condensed consolidated statements of income and as an adjustment to the investment balance. We record our share of the results of equity method investments on a three-month lag basis as income or loss from equity method investments, net of tax in the condensed consolidated statements of income. We evaluate our equity method investments at the end of each reporting period to determine whether events or changes in business circumstances indicate that the carrying value of the investment may not be recoverable. As of September 30, 2021, our investment in Linksys Holdings, Inc. (“Linksys”) was our only equity method investment.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

There have been no other material changes to our significant accounting policies as of and for the three and nine months ended September 30, 2021.

Recently Adopted Accounting Standards

Income Taxes

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2019-12—Income Taxes (“Topic 740”): Simplifying the Accounting for Income Taxes. The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application and simplification of GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 was effective for us beginning on January 1, 2021. The adoption of this guidance did not have any impact on our condensed consolidated financial statements and accompanying disclosures.

Recent Accounting Standards Not Yet Effective

Business Combinations

In October 2021, the FASB issued ASU 2021-08—Business Combinations (“Topic 805”): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in ASU 2021-08 require that an entity

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FORTINET, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

recognizes and measures contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers (“Topic 606”). At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. The amendments improve comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination. ASU 2021-08 will be effective for us beginning on January 1, 2023. We are currently evaluating the impact of ASU 2021-08 on our condensed consolidated financial statements.

2. REVENUE RECOGNITION

We sell cybersecurity solutions to a variety of organizations, such as enterprises, communication service providers, government organizations and small to medium-sized enterprises. Our revenue consists of product and service revenue. Product revenue is generated by our FortiGate network security products, our Fortinet Security Fabric platform products and other products. Service revenue relates to sales of our security subscription services, which mainly consists of our FortiGuard security solutions, as well as our FortiCare technical support services and other services.

Disaggregation of Revenue

The following table presents our revenue disaggregated by major product and service lines (in millions):


	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Product	$	337.1	$	223.8	$	876.1	$	628.0
Service:
Security subscription	287.4		235.4		815.6		669.4
Technical support and other	242.7		191.9		686.9		549.0
Total service revenue	530.1		427.3		1,502.5		1,218.4
Total revenue	$	867.2	$	651.1	$	2,378.6	$	1,846.4

Deferred Revenue

During the three months ended September 30, 2021 and September 30, 2020, we recognized $309.2 million and $263.1 million in service revenue that was included in the deferred revenue balance as of December 31, 2020 and December 31, 2019, respectively. During the nine months ended September 30, 2021 and September 30, 2020, we recognized $1.10 billion and $921.7 million in service revenue that was included in the deferred revenue balance as of December 31, 2020 and December 31, 2019, respectively.

Transaction Price Allocated to the Remaining Performance Obligations

As of September 30, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was $3.11 billion, which was substantially comprised of deferred security subscription and technical support services revenue. We expect to recognize approximately $1.62 billion as revenue over the next 12 months and the remainder thereafter.

Accounts receivable

Trade accounts receivable are recorded at the invoiced amount. Our accounts receivable balance is reduced by an allowance for expected credit losses. We measure expected credit losses of accounts receivable on a collective (pooled) basis, aggregating accounts receivable that are either current or no more than 60 days past due, and aggregating accounts receivable that are more than 60 days past due. We apply a credit-loss percentage to each of the pools that is based on our historical credit losses. We review whether each of our significant accounts receivable that is more than 60 days past due continues to exhibit similar risk characteristics with the other accounts receivable in the pool. If we determine that it does not, we evaluate it for expected credit losses on an individual basis. Expected credit losses are recorded as general and administrative expenses on our consolidated statements of income.

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FORTINET, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The allowance for credit losses was $2.6 million and $2.5 million as of September 30, 2021 and December 31, 2020, respectively. Provisions, write-offs and recoveries were not material during the nine months ended September 30, 2021 and 2020.

Deferred Contract Costs

Amortization of deferred contract costs during the three months ended September 30, 2021 and 2020 were $45.1 million and $35.3 million, respectively. Amortization of deferred contract costs during the nine months ended September 30, 2021 and 2020 were $126.9 million and $99.8 million, respectively.

3. FINANCIAL INSTRUMENTS AND FAIR VALUE

The following tables summarize our available-for-sale securities (in millions):


	September 30, 2021
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Commercial paper	$	647.0	$	0.1	$	—	$	647.1
Corporate debt securities	484.6		0.2		(0.2)		484.6
Certificates of deposit and term deposits (1)	214.5		—		—		214.5
U.S. government securities	174.7		—		(0.1)		174.6
Municipal Bonds	5.5		—		—		5.5
Total available-for-sale securities	$	1,526.3	$	0.3	$	(0.3)	$	1,526.3


	December 31, 2020
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Commercial paper	$	185.4	$	—	$	—	$	185.4
Corporate debt securities	410.5		1.0		—		411.5
Certificates of deposit and term deposits (1)	112.0		—		—		112.0
U.S. government securities	184.9		—		—		184.9
Total available-for-sale securities	$	892.8	$	1.0	$	—	$	893.8

(1) The majority of our certificates of deposit and term deposits are foreign deposits.

Table of Contents

FORTINET, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following tables show the gross unrealized losses and the related fair values of our available-for-sale securities that have been in a continuous unrealized loss position (in millions):


	September 30, 2021
	Less Than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Commercial paper	$	116.3	$	—	$	—	$	—	$	116.3	$	—
Corporate debt securities	281.0		(0.2)		—		—		281.0		(0.2)
Certificates of deposit and term deposits	15.8		—		—		—		15.8		—
U.S. government securities	80.6		(0.1)		—		—		80.6		(0.1)
Municipal Bonds	5.4		—		—		—		5.4		—
Total available-for-sale securities	$	499.1	$	(0.3)	$	—	$	—	$	499.1	$	(0.3)


	December 31, 2020
	Less Than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Commercial paper	$	61.5	$	—	$	—	$	—	$	61.5	$	—
Corporate debt securities	111.3		—		—		—		111.3		—
Certificates of deposit and term deposits	29.5		—		—		—		29.5		—
U.S. government securities	38.1		—		—		—		38.1		—
Total available-for-sale securities	$	240.4	$	—	$	—	$	—	$	240.4	$	—

The contractual maturities of our investments were as follows (in millions):


	September 30, 2021		December 31, 2020
Due within one year	$	1,228.1	$	775.5
Due within one to three years	298.2		118.3
Total	$	1,526.3	$	893.8

Available-for-sale securities are reported at fair value, with unrealized gains and losses and the related tax impact included as a separate component of equity and in comprehensive income. Accrued interest receivable of $2.4 million as of September 30, 2021 was excluded from the fair value of our available-for-sale securities and was recorded in prepaid expenses and other current assets in our condensed consolidated balance sheet.

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

Our marketable equity securities were $40.8 million as of September 30, 2021. The changes in fair value of our marketable equity securities are recorded in other expense, net on the condensed consolidated statements of income. We recognized $3.7 million loss and $0.1 million loss during the three months ended September 30, 2021 and 2020, respectively, and $2.9 million loss and $