Fair Value Measurements

12 Months Ended

Dec. 31, 2023

Fair Value Measurements

Fair Value Measurements

5. Fair Value Measurements

The Company records the fair value of assets and liabilities in accordance with ASC 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value as the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity.

In addition to defining fair value, ASC 820 expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels, which is determined by the lowest level input that is significant to the fair value measurement in its entirety.

These levels are:

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Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities.

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

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Level 3 — unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability at fair value.

Securities reported at fair value utilizing Level 1 inputs represent assets whose fair value is determined based upon observable unadjusted quoted market prices for identical assets in active markets. Level 2 securities represent assets whose fair value is determined using observable market information such as previous day trade prices, quotes from less active markets or quoted prices of securities with similar characteristics. Available-for-sale securities are characterized as Level 1 assets, such as U.S. Treasuries, and Level 2 assets, as value of the corporate bonds are determined using observable market inputs. Equity securities are characterized as Level 1 assets, as their fair values are determined using active markets for identical assets. There were no transfers between Level 1, Level 2, or Level 3 for the year ended December 31, 2023.

Financial instruments not recorded at fair value on a recurring basis include equity method investments that have not been remeasured or impaired in the current period, such as our investments in HyVia, AccionaPlug S.L., SK Plug Hyverse and Clean H2 Infra Fund.

The following table summarizes the carrying amount and estimated fair value of the Company’s financial instruments at December 31, 2023 and 2022 (in thousands):


		As of December 31, 2023
		Carrying		Fair		Fair Value Measurements
		Amount		Value		Level 1		Level 2		Level 3
Liabilities
Contingent consideration	$	126,216	$	126,216	$	—	$	—	$	126,216


		As of December 31, 2022
		Carrying		Fair		Fair Value Measurements
		Amount		Value		Level 1		Level 2		Level 3
Assets
Cash equivalents	$	212,577	$	212,577	$	212,577	$	—	$	—
Corporate bonds		193,633		193,633		—		193,633		—
U.S. Treasuries		1,139,310		1,139,310		1,139,310		—		—
Equity securities		134,836		134,836		134,836		—		—

Liabilities
Contingent consideration		116,165		116,165		—		—		116,165

The liabilities measured at fair value on a recurring basis that have unobservable inputs and are therefore categorized as Level 3 are related to contingent consideration. The fair value as of December 31, 2023 is comprised of

contingent consideration related to the Joule acquisition in 2022, the Frames acquisition in 2021 and the Giner ELX, Inc. and United Hydrogen Group Inc. acquisitions in 2020.

In connection with the Frames acquisition, the Company recorded on its consolidated balance sheet a liability of $29.1 million representing the fair value of contingent consideration payable. The fair value of this contingent consideration was $31.8 million and $31.0 million as of December 31, 2023 and 2022, respectively. The fair value of the liability increased by $1.1 million due to foreign currency translation losses. Partially offsetting this increase was a decrease of $0.3 million recorded in change in fair value of contingent consideration in the consolidated statement of operations for the year ended December 31, 2023.

In connection with the Giner ELX, Inc. acquisition, the Company recorded on its consolidated balance sheet a liability of $16.0 million representing the fair value of contingent consideration payable. The fair value of this contingent consideration was $18.0 million and $14.5 million as of December 31, 2023 and 2022, respectively. An increase of $5.5 million was recorded in change in fair value of contingent consideration in the consolidated statement of operations during the year ended December 31, 2023. Partially offsetting this increase were payments that reduced the fair value of the liability by $2.0 million for year ended December 31, 2023.

In connection with the United Hydrogen Group Inc. acquisition, the Company recorded on its consolidated balance sheet a liability of $1.1 million representing the fair value of contingent consideration payable. The fair value of this contingent consideration was $0.9 million and $1.5 million as of December 31, 2023 and 2022, respectively. A decrease of $0.6 million was recorded in change in fair value of contingent consideration in the consolidated statement of operations for the year ended December 31, 2023.

In connection with the Applied Cryo Technologies, Inc. acquisition, the Company recorded on its consolidated balance sheet an initial liability of $14.0 million representing the fair value of contingent consideration payable. The fair value of this contingent consideration was $0 million and $15.9 million as of December 31, 2023 and 2022, respectively. The decrease of $15.9 million was due to payments that reduced the fair value of the liability by $19.0 million during the year ended December 31, 2023. Partially offsetting this decrease was an increase of $3.1 million recorded in change in fair value of contingent consideration in the consolidated statement of operations during the year ended December 31, 2023. The $19.0 million payment made during the second quarter of 2023 settled the remaining obligation of the earn-out.

Finally, as described in Note 3, “Acquisitions”, an increase of $22.3 million to the fair value of contingent consideration related to the acquisition of Joule was recorded in the consolidated statement of operations for the year ended December 31, 2023.

In the audited consolidated balance sheets, contingent consideration is recorded in the contingent consideration, loss accrual for service contracts, and other liabilities financial statement line item, and is comprised of the following unobservable inputs for the year ended December 31, 2023:


Financial Instrument		Fair Value		Valuation Technique	Unobservable Input	Range (weighted average)
Contingent Consideration		$	126,216	Scenario based method	Credit spread	13.61%
					Discount rate	17.71% - 19.06%
			126,216

In the audited consolidated balance sheets, contingent consideration is recorded in the contingent consideration, loss accrual for service contracts, and other liabilities financial statement line item, and is comprised of the following unobservable inputs for the year ended December 31, 2022:


Financial Instrument		Fair Value		Valuation Technique	Unobservable Input	Range (weighted average)
Contingent Consideration		$	85,269	Scenario based method	Credit spread	15.73% - 15.74%
					Discount rate	19.85% - 20.68%
			11,310	Monte carlo simulation	Credit spread	15.74%
					Discount rate	20.00% - 20.30%
					Revenue volatility	45.29%
			19,586	Monte carlo simulation	Credit spread	15.73%
					Revenue volatility	35.7% - 23.1% (35.0%)
					Gross profit volatility	106.7% - 23.2% (60.0%)
			116,165

The change in the carrying amount of Level 3 liabilities for the year ended December 31, 2023 was as follows (in thousands):


		Year Ended
		December 31, 2023
Beginning balance at December 31, 2022		$	116,165
Cash payments			(13,000)
Payment settled in stock			(8,000)
Fair value adjustments			30,024
Foreign currency translation adjustment			1,027
Ending balance at December 31, 2023		$	126,216

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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