GOODWILL, INTANGIBLE ASSETS, NET, AND DIGITAL ASSETS HELD

9 Months Ended

Sep. 30, 2022

GOODWILL, INTANGIBLE ASSETS, NET, AND DIGITAL ASSETS HELD

GOODWILL, INTANGIBLE ASSETS, NET, AND DIGITAL ASSETS HELD

8.   GOODWILL, INTANGIBLE ASSETS, NET, AND DIGITAL ASSETS HELD

The following table presents the details of goodwill by segment (in millions):

			North American		Europe and
	Options		Equities		Asia Pacific		Global FX		Digital		Total
Balance as of December 31, 2021	$	305.8	$	1,876.9	$	575.5	$	267.2	$	—	$	3,025.4
Adjustments		—		14.5		3.4		—		0.8		18.7
Additions		—		132.4		—		—		460.1		592.5
Impairment		—		—		—		—		(460.9)		(460.9)
Changes in foreign currency exchange rates		—		(11.8)		(50.0)		—		—		(61.8)
Balance as of September 30, 2022	$	305.8	$	2,012.0	$	528.9	$	267.2	$	—	$	3,113.9

Goodwill has been allocated to specific reporting units for purposes of impairment testing - Options, North American Equities, Europe and Asia Pacific, Global FX, and Digital. No goodwill has been allocated to Futures. Goodwill impairment testing is performed annually in the fiscal fourth quarter or more frequently if conditions exist that indicate that the asset may be impaired.

Following the acquisition of ErisX, which was subsequently rebranded to Cboe Digital, which closed on May 2, 2022, in the quarter ended June 30, 2022, negative events and trends in the broader digital asset environment emerged, such as deleveraging and bankruptcies, and certain negative trends in the broader digital asset environment which emerged in late 2021 intensified, such as the decline in digital asset prices, overall market activity, and market capitalization. Additionally, following the acquisition of Cboe Digital (formerly ErisX), the efforts to syndicate minority ownership interests in Cboe Digital to potential investors during the quarter ended June 30, 2022 became more challenging, and the outlook for the Digital segment’s future market growth was negatively impacted. The Company considered these developments, in particular the syndication efforts during the quarter ended June 30, 2022, to be potential indications of impairment and performed an interim impairment test for the goodwill recognized in the Digital reporting unit during the quarter ended June 30, 2022. The Company concluded that the carrying value of the reporting unit exceeded its estimated fair value, which considered both market and income approaches, and recorded a goodwill impairment charge of $460.1 million in the condensed consolidated statements of income during the quarter ended June 30, 2022, and also recognized a deferred tax asset of $116.2 million. This deferred tax asset, resulting from the excess of tax-deductible goodwill over book goodwill, relates to future tax deductions the Company expects to realize to reduce potential tax payments on future income. As a result, the carrying value of Cboe Digital decreased by $343.9 million, to $220.0 million as of June 30, 2022. The Company also performed testing over the intangible assets recognized as a result of the Cboe Digital acquisition during the quarter ended June 30, 2022, and based on the results of the assessments, determined there was no impairment required as the fair value approximated the carrying value. No other long lived assets were recognized as a result of the acquisition and subject to further assessment.

As a result of the finalization of the net working capital calculation associated with the acquisition of Cboe Digital (formerly ErisX) during the quarter ended September 30, 2022, the Company recorded additional goodwill of $0.8 million. Subsequently, the Company concluded that the indicators of impairment outlined in the previous paragraph continued to be relevant and recorded an additional goodwill impairment charge of $0.8 million in the condensed consolidated statements of income for the three months ended September 30, 2022.

The following table presents the details of the intangible assets by segment (in millions):

			North American		Europe and
	Options		Equities		Asia Pacific		Global FX		Digital		Total
Balance as of December 31, 2021	$	159.1	$	991.4	$	426.4	$	91.7	$	—	$	1,668.6
Adjustments		—		(61.0)		—		—		—		(61.0)
Additions		—		130.1		—		—		95.9		226.0
Amortization		(9.8)		(44.6)		(19.3)		(14.3)		(3.0)		(91.0)
Changes in foreign currency exchange rates		—		(6.9)		(69.6)		—		—		(76.5)
Balance as of September 30, 2022	$	149.3	$	1,009.0	$	337.5	$	77.4	$	92.9	$	1,666.1

For the three months ended September 30, 2022 and 2021, amortization expense was $30.6 million and $31.8 million, respectively. For the nine months ended September 30, 2022 and 2021, amortization expense was $91.0 million

and $95.3 million, respectively. The estimated future amortization expense is $30.2 million for the remainder of 2022, $110.2 million for 2023, $87.5 million for 2024, $77.2 million for 2025, and $70.1 million for 2026.

The following tables present the categories of intangible assets by segment as of September 30, 2022 and December 31, 2021 (in millions, except as stated):

	September 30, 2022										Weighted
			North		Europe						Average
			American		and Asia						Amortization
	Options		Equities		Pacific		Global FX		Digital		Period (in years)
Trading registrations and licenses	$	95.5	$	604.8	$	183.4	$	—	$	25.0	Indefinite
Customer relationships		46.6		412.0		192.7		140.0		—	16
Market data customer relationships		53.6		322.0		53.7		64.4		—	10
Technology		28.1		56.2		30.8		22.5		70.0	8
Trademarks and tradenames		12.9		8.2		2.1		1.2		—	7
Digital assets held		—		—		—		—		0.9	Indefinite
Accumulated amortization		(87.4)		(394.2)		(125.2)		(150.7)		(3.0)
	$	149.3	$	1,009.0	$	337.5	$	77.4	$	92.9

	December 31, 2021										Weighted
			North		Europe						Average
			American		and Asia						Amortization
	Options		Equities		Pacific		Global FX		Digital		Period (in years)
Trading registrations and licenses	$	95.5	$	592.0	$	221.1	$	—	$	—	Indefinite
Customer relationships		46.6		378.3		232.3		140.0		—	17
Market data customer relationships		53.6		322.0		65.2		64.4		—	10
Technology		28.1		41.1		35.6		22.5		—	5
Trademarks and tradenames		12.9		7.8		2.5		1.2		—	8
Accumulated amortization		(77.6)		(349.8)		(130.3)		(136.4)		—
	$	159.1	$	991.4	$	426.4	$	91.7	$	—

Cboe Digital holds customer digital assets in customer accounts, referred to as wallets, either through a third-party custodian, a licensed trust company, or in separate and distinct wallets managed by Cboe Digital. Cboe Digital, together with its third-party custodian, is directly responsible for securing customers’ crypto assets and protecting them from loss or theft. Customer digital assets are held in omnibus wallets for the benefit of customers of Cboe Digital and Cboe Digital maintains the records of the amount and type of digital asset owned by each of its customers in omnibus wallets. The amount of customer digital assets held by Cboe Digital is reflected within digital assets – safeguarded assets and digital assets – safeguarded liabilities in the condensed consolidated balance sheets.