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Fair Value Measurements

3 Months Ended

Mar. 31, 2024

Fair Value Measurements

Fair Value Measurements

14. 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.

There were no transfers between Level 1, Level 2, or Level 3 for the three months ended March 31, 2024. 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, SK Plug Hyverse and Clean H2 Infra Fund.

Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):


		As of March 31, 2024
		Carrying		Fair		Fair Value Measurements
		Amount		Value		Level 1		Level 2		Level 3
Liabilities
Contingent consideration	$	106,326	$	106,326	$	—	$	—	$	106,326


		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

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 March 31, 2024 of $106.3 million is comprised of contingent consideration related to the Joule Processing LLC (“Joule”) acquisition in 2022, the Frames Holding B.V. (“Frames”) acquisition in 2021 and the Giner ELX, Inc. (“Giner”) and United Hydrogen Group Inc. (“UHG”) acquisitions in 2020.

In connection with the Joule acquisition, the Company initially recorded on its unaudited interim condensed consolidated balance sheet a liability of $41.7 million representing the fair value of contingent consideration payable. The

fair value of this contingent consideration was $58.0 million and $75.5 million as of March 31, 2024 and December 31, 2023, respectively. The decrease compared to the year ended December 31, 2023 was partially due to payments that reduced the fair value of the liability by $10.0 million during the three months ended March 31, 2024. A further decrease of $7.5 million was recorded in change in fair value of contingent consideration in the unaudited interim condensed consolidated statement of operations for the three months ended March 31, 2024.

In connection with the Frames acquisition, the Company initially recorded on its unaudited interim condensed 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 $28.6 million and $31.8 million as of March 31, 2024 and December 31, 2023, respectively. The decrease compared to the year ended December 31, 2023 was primarily due to a decrease of $2.5 million recorded in change in fair value of contingent consideration in the unaudited interim condensed consolidated statement of operations for the three months ended March 31, 2024. A further decrease of $0.7 million was due to foreign currency translation gains.

In connection with the Giner acquisition, the Company initially recorded on its unaudited interim condensed 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 $18.7 million and $18.0 million as of March 31, 2024 and December 31, 2023, respectively. The increase compared to December 31, 2023 was recorded in change in fair value of contingent consideration in the unaudited interim condensed consolidated statement of operations for the three months ended March 31, 2024.

In connection with the UHG acquisition, the Company initially recorded on its unaudited interim condensed 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 $1.0 million and $0.9 million as of March 31, 2024 and December 31, 2023, respectively. The increase compared to December 31, 2023 was recorded in change in fair value of contingent consideration in the unaudited interim condensed consolidated statement of operations for the three months ended March 31, 2024, respectively.

In the unaudited interim condensed consolidated balance sheets, contingent consideration is recorded in the contingent consideration, loss accrual for service contracts, and other current liabilities financial statement line item, and was comprised of the following unobservable inputs as of March 31, 2024:


Financial Instrument		Fair Value		Valuation Technique	Unobservable Input	Range (weighted average)
Contingent consideration		$	106,326	Scenario based method	Credit spread	13.61% - 14.04%
					Discount rate	17.98% - 19.06%
			106,326

In the unaudited interim condensed consolidated balance sheets, contingent consideration is recorded in the contingent consideration, loss accrual for service contracts, and other current liabilities financial statement line item, and was comprised of the following unobservable inputs as of 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

The change in the carrying amount of Level 3 liabilities during the three months ended March 31, 2024 was as follows (in thousands):


		Three months ended
		March 31, 2024
Beginning balance as of December 31, 2023		$	126,216
Cash payments			(10,000)
Fair value adjustments			(9,200)
Foreign currency translation adjustment			(690)
Ending balance as of March 31, 2024		$	106,326

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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