It's Neck-n-Neck at the Turn: Donnelley and Bowne in the XBRL Filing Lead

by: Miles P. Jennings

Yesterday was the first time I'd seen complete XBRL filing results for Bowne (BNE) and Merrill. Aliya Sternstein's article helps to clarify the early leaders in the race to provide XBRL filing services. The article notes that Bowne & Co. had "filed XBRL documents on 120 public companies," and "Merrill processed documents for about 70 companies."

By combining these new results with the XBRL Cloud Report, it is possible to estimate the leading filers' market shares. There were a total of 427 XBRL filings made to the SEC pursuant to the SEC mandate as of Sept. 14, 2009. There may be some additional quarterly reports made for companies filing late or with non-calendar quarterly reporting dates.

RR Donnelley/EDGAR Online
149 XBRL filings
34.9% market share
RR Donnelley (RRD 21.71, 52-week range 5.54 - 25.52 ) is a leading print and communications company with global revenue of $11.6 billion in 2008. EDGAR Online (EDGR 1.89, 52-week range 0.60 - 2.49) is a financial information company providing XBRL data and solutions to financial markets with 2008 revenue of $19.5 million. See their joint website for XBRL filings business. As an example of the partnership's commitment, note RRD's upcoming 33-city tour scheduled with Ernst & Young.

Bowne & Co. (BNE 6.99, 52-week range: 0.85 - 12.10)
120 filings
28.1% market share
Bowne, with $767 million in 2008 revenues, provides shareholder reporting and communication services. The company has a strategic partnership with Rivet Software, a leader in XBRL software tools.

Merrill Corporation
70 filings
16.4% market share
Merrill is a private company providing XBRL and other advanced solutions for business. Fujitsu notes Merrill as one of its partners in the XBRL field.

EDGARfilings (Thomson Reuters)
55 filings
Thomson Reuters (TRI 34.30, 52-week range 19.30 - 35.38) is a global information provider of $11.7 billion revenue for 2008. The company has strategic partnership with Rivet Software for XBRL data and with EDGAR Online for the I-Metrix financial analytic tool. In the last couple of years Thomson Reuters has expanded its XBRL activities including the purchase of EDGARfilings.

Other Filers
33 filings

Based on the current filing cost for XBRL reports to the SEC of roughly $20,000-$40,000 per year per company, that rate of XBRL filings would translate into $240 - $480 million per year after all companies were required to file in 2011.

XBRL is an emerging market. For instance, the XBRL US consortium recently launched XBRL US Labs to consider new applications of this advanced interactive financial reporting standard. In November, XBRL US will sponsor a national convention in New York. See scheduled speakers here. Current SEC filings in XBRL are a small vs. the analytics, auditing, business intelligence, and government agency data requirements to be spawned by the SEC XBRL mandate.

In past reports regarding EDGAR Online, the company's market share of XBRL filings was estimated based on early voluntary XBRL filers. Now, with the actual first-quarter data available for the first-phase filers, it has been confirmed that the Donnelley/EDGAR Online partnership is the leading provider of XBRL-formatted filings to the SEC. Using the mid-point of the above revenue range and adjusting for its assumed 50% interest in the Donnelley/EDGR partnership, annual revenue to EDGR is estimated to be as follows:

@34.8% market share
Year 1 with 149 filers:

@continuation of above plus 30% of 1,800 new filers
Year 2 with 689 filers:

@continuation of above plus 25% of 9,700 new filers
Year 3 with 3,114 filers:

Total of EDGR revenue in first 3 years of SEC mandate:

Since the new XBRL filing revenue is incremental to EDGAR Online's regular data solutions and analytics business, the potential $59,280,000 of incremental revenue could have a positive impact on the company's bottom line, especially since EDGR has over $35 million of NOLs and a gross margin of around 75%.

In considering the likelihood of the above assumptions, it is worthwhile to note that the company has already converted all the U.S. companies' financial results into XBRL data for about 10 years! EDGAR Online did that over the last 5 years or so to build their giant XBRL interactive database of U.S. companies. Since they now daily tag and store daily SEC reports---and have for many years---they have developed highly automated and proprietary data capture and handling techniques for using the SEC's EDGAR System. I understand that they have around 1.5 million rules that "sit atop" their XBRL database just for converting financial data to XBRL format.

Even if one assumes that prices for XBRL conversion will decline after the initial filing stage for companies, it is widely expected that there will be many new applications for XBRL such as for proxy statements, mortgage-backed securities, and other SEC reporting data. EDGAR Online also has a partnership with Canadian News Wire for the Canadian XBRL conversion market.

This is a fairly dramatic opportunity, and it appears not to be lost on the company's management. They announced in the second-quarter conference call that they have engaged Jordan, Edmiston Group to consider strategic equity partners.

Long-term, EDGAR Online controls the only XBRL-formatted database for U.S. reporting companies, with a deep reach into more than 6,000 data-points on each company. Trying to evaluate 10 years of usable and as-reported data on the 10-Q and 10-K filings of U.S. companies plus the associated proprietary data-mining techniques of retrieving and handling that data, is tricky. Now, with the new XBRL standard now in force, the value of EDGAR Online's database has no doubt become significantly more relevant to major financial information companies. And, the SEC mandate will probably give I-Metrix analytic tool a boost in the Thomson-Reuters channel to CPAs and attorneys---who are especially interested in accessing as-reported company financial data.

EDGAR Online's common stock (Nasdaq: EDGR) currently trading at 1.89 (52-week range 0.60 - 2.49). Its current $50.6 million market cap is less than its expected 3-year revenue from just the XBRL filings business. Even in the current downturn in the financial service area, EDGR generated $553,000 in Adjusted EBITDA for the quarter ended June 30, 2009.

Disclosure: I am long EDGR stock and purchase EDGAR Online electronic data feeds for my company's portfolio analytic tool.