Fair Value Measurements

12 Months Ended

Dec. 31, 2024

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. 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 for the year ended December 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 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, 2024 and 2023 (in thousands):

	As of December 31, 2024
	Carrying		Fair		Fair Value Measurements
	Amount		Value		Level 1		Level 2		Level 3
Liabilities
6.00% Convertible Debenture		173,150	$	173,150	$	—	$	—	$	173,150
Contingent consideration	$	60,746	$	60,746	$	—	$	—	$	60,746

	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 the 6.00% Convertible Debenture, as described in Note 17, “Convertible Senior Notes”, and contingent consideration.

6.00% Convertible Debenture

The fair value of the 6.00% Convertible Debenture as of December 31, 2024 is comprised of a single financial liability in which the Company elected the fair value option under ASC 825, Financial Instruments (“ASC 825”), with changes in fair value recorded in gain/loss from changes in fair value of 6.00% Convertible Debenture in the consolidated statements of operations. The Company elected the fair value option due its multiple conversions features required to be presented at fair value. The Company has also elected to present interest expense separately from the changes in fair value of the 6.00% Convertible Debenture measured at fair value through earnings. Total changes in the fair value of the liability that resulted from a change in the instrument-specific credit risk will be separately recorded in other comprehensive income. There was no change in the instrument-specific credit risk during the year ended December 31, 2024.

The company estimated and recorded the fair value of the 6.00% Convertible Debenture upon its issuance date of November 12, 2024 at its cash value because it was negotiated at arm’s length. The fair value of the 6.00% Convertible Debenture as of December 31, 2024 was based on a Monte Carlo Simulation of stock price of the company on a daily basis and a discounted cash flow model that incorporates the amortization schedule, contingent on the daily simulated stock price. The valuation utilized significant Level 3 unobservable inputs, including implied yield, volatility, and risky discount rate. Other significant assumptions include risk-free rate, principal value, the Company’s common stock price, maturity date and the various conversion features and prices per the agreement. Significant judgment is required in selecting the significant inputs and assumptions. Actual assumptions may differ from our current estimates and such differences could materially impact fair value of the convertible note.

Refer to Note 17, “Convertible Senior Notes”, for the change in the carrying amount of the 6.00% Convertible Debenture for the year ended December 31, 2024.

Contingent consideration

The fair value of contingent consideration as of December 31, 2024 is related to the Joule Processing LLC (“Joule”) acquisition in 2022 and the Frames Holding B.V. (“Frames”) acquisition in 2021. The fair value of contingent consideration as of December 31, 2023 is related to the Joule acquisition in 2022, the 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 consolidated balance sheets a liability of $41.7 million representing the fair value of contingent consideration payable. The fair value of this contingent consideration was $48.2 million and $75.5 million as of December 31, 2024 and 2023, respectively. The decrease compared to the year ended December 31, 2023 was primarily due to a decrease of $14.3 million recorded in change in fair value of contingent consideration in the consolidated statements of operations during the year ended December 31, 2024. In addition, payments were made that reduced the fair value of the liability by $13.0 million during the year ended December 31, 2024.

In connection with the Frames acquisition, the Company recorded on its consolidated balance sheets a liability of $29.1 million representing the fair value of contingent consideration payable. The fair value of this contingent consideration was $12.5 million and $31.8 million as of December 31, 2024 and 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 $15.8 million. In addition, a decrease of $1.9 million was recorded in change in fair value of contingent consideration in the consolidated statements of operations for the year ended December 31, 2024. Finally, the fair value of the liability decreased by $1.6 million due to foreign currency translation gains.

In connection with the UHG acquisition, the Company initially recorded on its consolidated balance sheets 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 consolidated statements of operations during the year ended December 31, 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 consolidated balance sheets 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 consolidated statements of operations during the year ended December 31, 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 (the “Giner Warrant Shares”) of the Company’s common stock issuable upon exercise of the warrants. The exercise price of the Giner Warrant Shares was $3.3008 per share. The warrants had not been exercised as of December 31, 2024.

In the consolidated balance sheets, contingent consideration is recorded in the contingent consideration, loss accrual for service contracts, and other liabilities financial statement line item, and was comprised of the following unobservable inputs for the year ended December 31, 2024:

Financial Instrument	Fair Value		Valuation Technique	Unobservable Input	Range (weighted average)
Contingent consideration	$	60,746	Scenario-based method	Credit spread	11.83%
				Discount rate	15.91% - 16.00%
		60,746

In the consolidated balance sheets, contingent consideration is recorded in the contingent consideration, loss accrual for service contracts, and other liabilities financial statement line item, and was 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

The change in the carrying amount of contingent consideration for the year ended December 31, 2024 was as follows (in thousands):

	Year ended
	December 31, 2024
Beginning balance as of December 31, 2023	$	126,216
Cash payments		(29,825)
Payment settled in common stock and warrants		(18,241)
Change in fair value of contingent consideration		(15,847)
Foreign currency translation adjustment		(1,557)
Ending balance as of December 31, 2024	$	60,746

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

In addition to assets and liabilities that are recorded at fair value on a recurring basis, impairment indicators may subject long-lived assets and finite-lived intangible assets to non-recurring fair value measurements. During the fourth quarter of 2024, property, plant and equipment, net, intangible assets, net and right of use assets related to operating leases, net were written down to their estimated fair values. A decrease in demand of the global hydrogen market deteriorated cash flow projections which indicated that the carrying values of the long-lived assets may not be recoverable. The inputs to these models are considered to be Level 3 significant unobservable inputs.

The Level 3 significant unobservable inputs that were used in the valuation of the long-lived assets as of October 1, 2024 were:

Financial Instrument	Valuation Technique	Unobservable Input	Range (weighted average)
Property, plant and equipment, net	Cost approach	Residual value	0.0% - 12.0%
Intangibles assets, net	Relief from royalty method	Royalty rate	0.1% - 2.0%
		Discount rate	15.0% - 20.5%
		Obsolescence factor	6.7% - 20.0%
	Multi-period excess earnings method	Discount rate	15.0% - 16.0%
Right of use assets related to operating leases, net	Income approach (DCF method)	Discount rate	5.4% - 11.1%

Refer to Note 8, “Impairment”, for further information.