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Fair Value Measurements

12 Months Ended

Dec. 31, 2022

Fair Value Measurements

Fair Value Measurements

5. Fair value measurements

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, 2022.

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., and SK Plug Hyverse. During the year ended December 31, 2022, the Company contributed approximately $25.0 million, $0.8 million and $8.3 million, respectively, to HyVia, AccionaPlug S.L. and SK Plug Hyverse.

The following table summarizes the carrying amount and estimated fair value of the Company’s financial instruments at December 31, 2022 and 2021 (in thousands):


		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


		As of December 31, 2021
		Carrying		Fair		Fair Value Measurements
		Amount		Value		Level 1		Level 2		Level 3
Assets
Cash equivalents	$	115,241	$	115,241	$	115,241	$	—	$	—
Corporate bonds		226,382		226,382		—		226,382		—
U.S. Treasuries		1,013,883		1,013,883		1,013,883		—		—
Equity securities		147,995		147,995		147,995		—		—
Swaps and forward contracts		70		70		70		—		—

Liabilities
Contingent consideration		62,297		62,297		—		—		62,297
Swaps and forward contracts		981		981		981		—		—

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, 2022 is comprised of $100.1 million related to the acquisitions of Frames, Applied Cryo, and Joule, as well as $16.1 million from two acquisitions in 2020. Giner ELX, Inc. was acquired in June 2020, the remaining contingent consideration of $14.5 million as of December 31, 2022 is related to the achievement of the dry build electrolyzer stack earnout and the achievement of certain revenue targets for years 2022 through 2023. United Hydrogen Group Inc. was acquired in June 2020, and included in the purchase price was contingent consideration based on the future performance related to the expansion of the liquefication capacity of the Charleston, Tennessee liquid hydrogen plant. The Company’s liability for this contingent consideration was measured at fair value based on the Company’s expectations of achieving the expansion milestone. 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 ending 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

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 ending December 31, 2021:


Financial Instrument		Fair Value		Valuation Technique	Unobservable Input	Range (weighted average)
Contingent Consideration		$	49,927	Scenario based method	Credit spread	12.31% - 12.57%
					Discount rate	12.45% - 13.13%
			12,370	Monte carlo simulation	Credit spread	12.40%
					Discount rate	12.46%-13.18%
					Revenue volatility	48.60%
			62,297

The change in the carrying amount of Level 3 liabilities for the year ended December 31, 2022 was as follows (in thousands):


	Year ended
	December 31, 2022
Beginning Balance at December 31, 2021		62,297
Payments		(2,667)
Additions due to acquisitions		41,732
Fair value adjustments		16,468
Foreign currency translation adjustment		(1,665)
Ending balance at December 31, 2022		116,165

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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