CBOE’s operating expenses skyrocket by 312% due to the underperformance of the acquired crypto company

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The decline in goodwill from ErisX significantly affected the company’s GAAP earnings, but on the other hand, the business results improved compared to last year.

On Friday, the Chicago Board Options Exchange (CBOE), the largest options exchange in the United States, released its second-quarter earnings results. Of particular interest are its total operating expenses, which increased 685% year-on-year from $160.6 million. CBOE explains:

“This was primarily due to a $460 million decline in goodwill recorded in the Digital reporting unit, due to negative events and trends in the broader digital asset environment. . The aforementioned environment has changed significantly since we closed ErisX trading on May 2nd, which resulted in accounting adjustments. “

ErisX allows self-directed individual retirement accounts, or IRAs, for US residents to invest in crypto assets. This is CBOE’s first project into the field of digital assets; The company expects ErisX to be a long-term leader in the industry. Terms of the deal were not disclosed in the original purchase.

Even so, it seems that ErisX’s fortunes are worsened by the crypto market. CBOE says that ErisX currently has a book value of $220 million. However, in Q2, CBOE charged goodwill loss of $460.1 million directly related to ErisX. Goodwill represents the difference between a company’s acquisition value and its net asset value. Companies can be forced to write off significant goodwill if they pay too much for acquisitions.

However, the difficulties in CBOE’s digital business have been balanced by core operations. On an overall basis, the derivatives exchange’s sales grew 21% year-over-year to $424 million. At the same time, after eliminating the cashless, one-time impairment of goodwill, the company’s adjusted earnings increased 21% year-over-year to $1.67 per share.

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