Fair Value Measurements

9 Months Ended

Sep. 30, 2024

Fair Value Measurements

Fair Value Measurements

15. 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:

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

● 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.

● 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 during the nine months ended September 30, 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 September 30, 2024
		Carrying		Fair		Fair Value Measurements
		Amount		Value		Level 1		Level 2		Level 3
Liabilities
Contingent consideration	$	91,987	$	91,987	$	—	$	—	$	91,987

	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 September 30, 2024 of $92.0 million is comprised of contingent consideration related to the Joule Processing LLC (“Joule”) acquisition in 2022 and the Frames Holding B.V. (“Frames”) acquisition in 2021.

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 $60.0 million and $75.5 million as of September 30, 2024 and December 31, 2023, respectively. The decrease compared to the year ended December 31, 2023 was primarily due to payments that reduced the fair value of the liability by $10.0 million during the first quarter of 2024 and by $57 thousand during the third quarter of 2024. A decrease of $1.4 million and $5.5 million was recorded in change in fair value of contingent consideration in the unaudited interim condensed consolidated statement of operations for the three and nine months ended September 30, 2024, respectively.

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 $32.0 million and $31.8 million as of September 30, 2024 and December 31, 2023, respectively. The increase compared to the year ended December 31, 2023 was primarily due to an increase in foreign currency translation losses of $1.3 million and $0.3 million for the three and nine months ended September 30, 2024, respectively. The increase was partially offset by a decrease of $0.1 million recorded in change in fair value of contingent consideration in the unaudited interim condensed consolidated statement of operations for the nine months ended September 30, 2024, partially offset by an increase of $1.5 million recorded in change in fair value of contingent consideration in the unaudited interim condensed consolidated statement of operations for the three months ended September 30, 2024.

In connection with the United Hydrogen Group Inc. (“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 contingent consideration was fully settled during the second quarter of 2024 and the fair value of this contingent consideration was $0.9 million as of December 31, 2023. The decrease of $0.9 million was due to payments that reduced the fair value of the liability by $1.0 million during the second quarter of 2024. Partially offsetting this decrease was an increase of $0.1 million recorded in change in fair value of contingent consideration in the unaudited interim condensed consolidated statement of operations during the nine months ended September 30, 2024. The $1.0 million payment made during the second quarter of 2024 settled the remaining earn-out obligation.

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 contingent consideration was fully settled during the second quarter of 2024 and the fair value of this contingent consideration was $18.0 million as of December 31, 2023. The decrease of $18.0 million was due to payments that reduced the fair value of the liability by $18.2 million during the second quarter of 2024. Partially offsetting this decrease was an increase of $0.2 million recorded in change in fair value of contingent consideration in the unaudited interim condensed consolidated statement of operations during the nine months ended September 30, 2024. The $18.2 million payment during the second quarter of 2024 was paid in common stock and warrants and settled the remaining obligation of the earn-out. As part of the $18.2 million settlement of Giner’s earn-out obligation on May 24, 2024, the Company issued warrants to the sellers of Giner and the Company registered for resale up to 3,461,371 shares of the Company’s common stock issuable upon exercise of the warrants. The warrants had not been exercised as of September 30, 2024.

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 September 30, 2024:

Financial Instrument	Fair Value		Valuation Technique	Unobservable Input	Range (weighted average)
Contingent consideration	$	91,987	Scenario based method	Credit spread	12.21% - 13.51%
				Discount rate	15.73% - 18.38%
		91,987

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 nine months ended September 30, 2024 was as follows (in thousands):

	Nine months ended
	September 30, 2024
Beginning balance as of December 31, 2023	$	126,216
Cash payments		(10,000)
Change in fair value of contingent consideration		(9,200)
Foreign currency translation adjustment		(690)
Ending balance as of March 31, 2024	$	106,326
Cash payments		(1,000)
Payment settled in common stock and warrants		(18,241)
Change in fair value of contingent consideration		3,768
Foreign currency translation adjustment		(233)
Ending balance as of June 30, 2024	$	90,620
Cash payments		(57)
Change in fair value of contingent consideration		146
Foreign currency translation adjustment		1,278
Ending balance as of September 30, 2024	$	91,987