EDGAR Online: Poised For Q3 Whoosh In XBRL Conversion Demand

| About: EDGAR Online, (EDGR)

Starting with SEC Form 10-Q reports for the June quarter, all U.S. SEC-reporting companies are required to detail-tag their financial footnotes in XBRL, rather than using a block-style format. This obscure technical requirement may more than double the quarterly XBRL data filed by thousands of Phase 3 filers.

As part of the SEC's XBRL mandate, large accelerated companies (Phase 1) started detail-tagging their footnotes in 2010, other accelerated companies (Phase 2) in 2011, and now the rest of SEC-reporting companies (Phase 3) must comply for the June reporting period.

EDGAR Online, Inc. (EDGR) already converts hundreds of smaller companies' financial reports into XBRL; and now they will start detail-tagging those companies' footnotes into XBRL for the June reporting period. EDGAR Online's own operating results may be dramatically impacted by this major new source of recurring revenue.

It's no wonder that EDGAR Online recently announced a 35%+ targeted annual growth in revenue for 2012. For 2011, the company had total revenue of $27.8 million of which 45% was from XBRL filings.

The company recently indicated that it is building a GRC suite of SaaS-based products as well as potentially introducing mobile-based products that draw on its deep XBRL information database and proprietary data-mining methods.

EDGAR Online pioneered in developing XBRL as a SEC-reporting format and holds U.S. patents on advanced XBRL methods. Costs of building their proprietary XBRL database of financial information on all SEC-reporting companies is the main reason why the company had $45.8 million of net operating loss carryforwards as of Dec. 31, 2010 (compared with its current market cap of $23 million).

With substantially higher revenue and potentially major new XBRL-based products serving the governance, regulatory, and compliance marketplace, EDGAR Online's shares might be revalued in a major way. It's been a decade of building and waiting. Now world demand for advanced XBRL-formatted software systems is expected to positively impact EDGAR Online's operating results.

Big Data and XBRL Background

Two recent articles caught my eye. In eWEEK Darryl K. Taft stated, "According to IBM, everyday business and consumer life creates 2.5 quintillion bytes of data per day-so much that 90 percent of the data in the world today has been created in the last two years alone." And in COMPUTERWORLD, Mikael Ricknas quoted Amazon CTO Werner Vogels as saying, "Big Data is not only about the analytics, it's about the whole pipeline. So when you think about big data solutions you have to think about all the different steps: collect, store, organize, analyze and share."

Under the SEC's XBRL reporting standard, both structured and unstructured data are organized and standardized so that data can be collected, machine-read, stored, analyzed and shared. Very soon, as required for Form 10-Q reports for the June 30, 2012 period, all U.S. reporting companies will be filing full XBRL reports-including the XBRL detail-tagging of footnotes.

The Securities and Exchange Commission was early to recognize that burgeoning growth in the amount of financial data filed with the agency required them to find ways to make that filed data machine-readable and usable. It further had to involve standards-setting bodies to establish the right technical reporting standards to use. These issues were studied and addressed in the 2004-2009 period. The final SEC rule mandating XBRL was issued in January 2009.

The SEC met the challenge of big [financial] data swamping the agency by mandating that reporting companies use the XBRL standard. How the rest of the world will handle those "2.5 quintillion bytes of data per day" remains to be seen. [quintillion=10^18]

Upcoming Doubling in XBRL Data Filed by Phase 3 Companies

Under agreements with R.R. Donnelley (NASDAQ:RRD), PR Newswire (UBM.L), Business Wire, and others, EDGAR Online provides XBRL conversion services for over 600 large and small reporting companies. This upcoming whoosh of data to be filed is not insignificant; the question is, will it really impact EDGAR Online's results. It seems clear to me that there will be a big jump in third-quarter revenue, thereby establishing a new level for regular quarterly filing of financial data with the SEC.

Basis for High Expectations

Let's face it, just because the amount of data filed by Phase 3 companies doubles or triples in the third quarter, that does not mean EDGAR Online's XBRL filings revenue and profits will rise to the same degree. But, there is a good chance the impact of this new filing requirement will significantly boost the ongoing level of XBRL filings revenue.

To estimate the magnitude of the increase in XBRL data to be filed by Phase 3 reporting companies, I have presented below the experience of 32 large accelerated companies. These companies were first required to detail-tag their financial footnotes in 2010, the second year of their XBRL filing. So, by comparing these 2010/2009 10-K data file sizes, we can get a rough estimate of how much smaller companies might increase the amount of data filed with the SEC.

The results are dramatic. The sample below includes 32 companies with a combined market capitalization of $3.9 trillion:

  1. The amount of data filed in the June 2010 10-Qs by these companies averaged 2.48x that of the 2009 levels.
  2. The amount of data filed in the Dec. 2010 10-Ks filed by these companies averaged 2.68x that of the 2009 levels.
  3. These 32 companies filed 148Mb of XBRL data in their 2011 10-K filings alone.
  4. The growth in average 10-K file size increased 9% for the 2011 vs. the 2010, suggesting a continuing general growth in filing data.

Reflecting the expected high level of filing for the June 10-Q, EDGAR Online recently announced it has added more than 60 full-time employees to handle the XBRL filing work.


Impact of Detail-Tagging of Footnotes on File Size of XBRL Instance Document

2009

2010

10-K

2011

10-K

10-Q

2012

Market

10-K

10-K

2010/

10-K

2011/

2010/

XBRL

Company

Cap

(Mb)

(Mb)

2009

(Mb)

2010

2009

Tool

3M Co. (NYSE:MMM)

60

3.16

9.00

2.85

9.26

1.03

1.98

Fujitsu

Abbott Laboratories (NYSE:ABT)

91

0.85

2.13

2.51

2.21

1.04

2.05

Fujitsu

Alcoa (NYSE:AA)

10

1.67

4.28

2.57

4.73

1.10

2.23

Rivet

Amazon.com (NASDAQ:AMZN)

83

0.66

1.44

2.18

1.68

1.17

1.57

Edgar Online

Apple (NASDAQ:AAPL)

508

0.76

2.10

2.76

1.71

0.81

2.82

Edgar Online

AT&T (NYSE:T)

185

1.87

6.27

3.35

4.11

0.66

2.80

IBM Cognos

Boeing (NYSE:BA)

55

1.33

3.72

2.80

3.86

1.04

2.23

Rivet

Bristol-Myers Squibb (NYSE:BMY)

56

2.30

5.48

2.38

4.36

0.79

2.51

IBM Cognos

Caterpillar (NYSE:CAT)

71

4.80

11.89

2.48

12.71

1.07

2.62

Fujitsu

Chevron (NYSE:CVX)

216

1.10

2.66

2.41

2.82

1.06

3.08

RR Donnelley

Coca-Cola (NYSE:KO)

157

1.28

3.71

2.91

6.98

1.88

3.01

WebFilings

Colgate-Palmolive (NYSE:CL)

45

1.76

3.94

2.24

4.49

1.14

3.12

WebFilings

Dow Chemical (NYSE:DOW)

40

3.56

6.17

1.73

9.37

1.52

1.32

WebFilings

eBay (NASDAQ:EBAY)

47

0.83

3.11

3.76

3.45

1.11

2.56

WebFilings

EMC (EMC)

60

1.39

3.76

2.70

3.71

0.99

1.73

IBM Cognos

Exxon Mobil (NYSE:XOM)

397

1.92

5.31

2.77

5.37

1.01

3.22

Rivet

General Electric (NYSE:GE)

201

3.34

9.18

2.75

3.26

0.35

2.62

IBM Cognos

Google (NASDAQ:GOOG)

195

0.71

1.95

2.77

1.96

1.00

2.65

Edgar Online

Honeywell (NYSE:HON)

46

4.64

5.29

1.14

5.11

0.97

1.49

IBM Cognos

Intel (NASDAQ:INTC)

135

1.76

4.02

2.29

4.77

1.19

2.13

IBM Cognos

International Business Machines (NYSE:IBM)

232

3.80

9.54

2.51

10.16

1.07

2.89

Fujitsu

Johnson & Johnson (NYSE:JNJ)

177

0.83

2.90

3.48

3.25

1.12

2.34

RR Donnelley

Kraft Foods (KFT)

67

1.77

4.20

2.37

3.91

0.93

3.02

Rivet

Ely Lilly (NYSE:LLY)

44

0.99

2.46

2.49

3.66

1.49

0.46

Rivet

McDonald's (NYSE:MCD)

99

0.73

1.87

2.57

1.78

0.95

2.45

Edgar Online

Pepsico (NYSE:PEP)

99

1.40

4.11

2.93

4.10

1.00

3.39

Rivet

Pfizer (NYSE:PFE)

161

2.06

11.50

5.59

5.70

0.50

1.95

Edgar Online

Texas Instruments (NYSE:TXN)

37

1.82

4.00

2.19

4.97

1.24

1.95

WebFilings

Union Pacific (NYSE:UNP)

52

0.50

1.06

2.10

2.33

2.20

4.30

IBM Cognos

United Parcel Service (NYSE:UPS)

74

1.40

3.90

2.78

4.85

1.24

2.58

Edgar Online

United Technologies (NYSE:UTX)

76

1.46

3.63

2.48

3.81

1.05

3.96

IBM Cognos

Verizon (NYSE:VZ)

111

1.15

3.37

2.92

3.54

1.05

2.29

Rivet

3,887

57.60

147.96

2.68

147.97

1.09

2.48

Source:

XBRL Cloud for XBRL data

Yahoo for Market Cap

Click to enlarge

Since large reporting companies appear to have averaged an increase of about 148% in XBRL file size from adding detailed footnotes, 2010 over 2009, I expect EDGAR Online will show an excellent increase in filing revenue for the third quarter report.

For your general reference, here is the XBRL Instance Document for Amazon.com. If that file doesn't open, here are various files for Amazon.com's recently filed 10-K.

Other XBRL Resources

Providing XBRL software conversion services is just one part of EDGAR Online's operations. In the recent conference call for the Dec. quarter, management stated that mobile-based analytic products will be introduced in the future; and they are currently building a GRC suite of XBRL-based products. They currently offer established financial analytic tools to investors and enterprise clients as well as to over 300 data solution clients such as Yahoo, Nasdaq, Google, and MSN.

Disclosure: I am long EDGR.