EDGAR Online: XBRL's Only Pure Play

EDGAR Online, Inc. [(EDGR) $0.88 Nasdaq, $24 mil. cap.) 52-week range: 2.83 - 0.60

EDGAR Online, Inc. estimates that the following number of companies will be impacted by the SEC's recent phased-in mandate requiring companies to file their financial reports in XBRL format:

• 2009: 500 domestic and foreign large accelerated filers with public equity float of more than $5 billion
• 2010: 1,800 other domestic and foreign large accelerated filers
• 2011: 10,300 remaining public companies filing in GAAP or IFRS

The potential opportunity for EDGAR Online from the XBRL conversion market could be significant---if they can achieve high market penetration. EDGAR Online and R. R. Donnelley (RRD) have a partnership to provide XBRL filing services to SEC-reporting companies (See their joint TryXBRL website).

In 2008 the partnership garnered 48% of XBRL filers to the SEC (followed by 15% Merrill Corp. and 14% Bowne (BNE). In the next couple of years, as more competitors enter the field and as companies become more familiar with XBRL filing requirements, I am expecting that EDGR's market share position will decline. However, they do have a unique potential in that they have already converted U. S. companies to XBRL and have the dedicated TryXBRL website for those potential filing companies to access and study their own XBRL filings.

Using $15,000 per year per company for the above new filers at market shares of 40% for 2009, 30% for 2010, and 25% for 2011, the revenue potential would be:

• 2009 $ 3.0 mil.
• 2010 8.1 mil.
• 2011 38.6 mil.

(These compare with EDGR's $19.5 million in annual revenue for 2008 with gross margin of 83% and a net loss of $2.7 million. The company has around $35 mil. of NOLs vs. current market cap of $24 million.)

Since EDGAR Online has the only known XBRL as-reported financial database on over 12,000 companies with 10 years of XBRL data (and over 6,000 data points tagged for each company), the opportunities for providing financial information and analytics are extremely large, given the scope of the new XBRL standard. EDGAR Online's website has detailed information on its XBRL products and services.

EDGAR Online licenses XBRL as-reported fundamental data as well as XBRL analytic tools. The company's high-end I-Metrix Analytic Tool is an add-in to Excel and is also part of Thomson-Reuters' leading Checkpoint solution for tax and accounting professionals.

Although EDGAR Online finds itself in a market dominated by financial information giants (TRI, FDS, MHP, Bloomberg, MCO, and IDC), EDGR is the only company which offers full XBRL as-reported corporate data. It has taken over five years to convert corporate filings into XBRL format, develop XBRL-based analytic tools, and XBRL conversion products. Now, as the XBRL standard spreads, there are international opportunities as well (For example, EDGR has full XBRL Japanese, Korean, and Chinese data-sets available). Basic patents related to XBRL data propagation and viewing, as well as the Excel add-in tool, were filed starting in 2005.

In the U. S. there are other initiatives beyond just SEC filing including EMMA (municipals) and more recently a move to tag mortgage-backed securities.

Besides EDGAR Online's proprietary analytic products and XBRL database, the company's deep and proprietary understanding of data-mining techniques regarding the SEC's EDGAR data repository and XBRL taxonomies should present the company with many opportunities regarding strategic alliances for new products and services. Recently, they have announced new partnerships with OPEXEngine and Accelerize New Media.

Note in particular pages 8, 10, and 11 of a recent investor presentation.

Shares of EDGR have traded down sharply over the last decade, a period when the company was investing heavily and building its proprietary XBRL products and resources. EDGR's decade-long commitment to XBRL has been a truly extraordinary corporate effort. Now the SEC has finally validated and mandated the standard.

As far as I know, EDGAR Online, Inc. is the only publicly traded "pure play" on XBRL due to its having the only XBRL database, combined with leading XBRL conversion, data, and analytic tools.

If you are not familiar with XBRL filings, check out EDGR's recent 10-K filing in XBRL. To date, there have been only 141 XBRL filings with the SEC. See SEC's Interactive Financial Report Viewer.

Disclosure: I am LONG EDGR stock, and I use their XBRL data sets in my company's OV Metrics products.

Comments

[contact user:]

Interesting take ... While I agree with your assessment of the firm's upside, they do not have the balance sheet to take full advantage of their market opportunity and first-mover advantage. My guess is that IF xbrl is fully implemented under current timelines (a BIG if right now given all that SEC has on its plate), EDGR gets acquired at a good premium over where the stock is trading today. If xbrl is slowrolled, they are going to have to sell parts or all of the company at a distressed valuation.

Apr 16 03:42 PM

[Miles P. Je...:]

The SEC's XBRL phased-in conversion schedule is now law. Moreover, with the government now calling for greater transparency in financial reporting, further applications of XBRL will be introduced---e.g., EMMA and Mortgage-Backeds.

EDGAR Online has recurring revenue of around 90% with 80%+ gross margin. Companies like Google, Yahoo, MSN, MarketWatch, S&P, Factset, Nasdaq, etc. purchase EDGR's XBRL data-sets to support their services. EDGR is the "Intel Inside" for the web-based financial analytics markets.

The XBRL conversion business is new incremental sales potential for EDGR. However, their XBRL database on over 12,000 companies for over 10 years is unique, proprietary and their major asset. The database allows users to reach into over 6,000 data points of companies' financial reports---which all can be delivered electronically to support in-house or web-based programs. You might like to check their 10-K for data-licensing business description.

Beyond their leading database services, EDGR now has their own I-Metrix advanced analytics programs. And, Thomson-Reuters offers their I-Metrix (in its "Checkpoint" product) to reach the CPA and legal market.

I hope you're wrong about any companies' making a pass at EDGR. The XBRL markets are just now only opening up, and they have the "only hardware store in a gold rush."












On Apr 16 03:42 PM contact user wrote:

> Interesting take ... While I agree with your assessment of the firm's
> upside, they do not have the balance sheet to take full advantage
> of their market opportunity and first-mover advantage. My guess
> is that IF xbrl is fully implemented under current timelines (a BIG
> if right now given all that SEC has on its plate), EDGR gets acquired
> at a good premium over where the stock is trading today. If xbrl
> is slowrolled, they are going to have to sell parts or all of the
> company at a distressed valuation.

Apr 17 12:07 PM

[secdataguy:]

With respect to the phase-in period now being law these things are often adjusted by the SEC following initial implementation based on experience and the issuing community's feedback (see accelerated filing). The wiggle room can be found on page 44 of the ruling (sec.gov/rules/final/20...):

"The additional phase-in time for all but the largest accelerated filers is intended to permit companies to plan and implement their data tagging with the benefit of the experience of year one filers. It also is intended to enable us [the SEC] to monitor implementation and, if necessary, make appropriate adjustments during the phase-in period."

Jun 04 02:10 PM