Miles P. Jennings, Jr.'s  Instablog

Thanks to a 219% increase in XBRL filings, EDGAR Online (EDGR 1.50, 12-month range: .60 - 2.20) just reported higher revenue and income for the 2009 third quarter.  Importantly, XBRL filing revenue represented 28.2% of total revenue, a major accomplishment.  Company management has focused on delivering the company's highly automated filing solution.  These results were achieved in an environment where only 500 of the approximate 12,000 SEC-reporting companies have been mandated to file in XBRL.

Operating income swung more than $1.0 million from $(629,000) to $451,000. Shareholders of EDGAR Online have been investing and building their massive company financial database (now formatted in XBRL) for about ten years; and red ink has painted their results quarter after quarter. Their incredibly bold corporate bet on XBRL's becoming the worldwide financial reporting standard was an extraordinary one for a nano-cap company with limited resources.

The big issue now is how their market share will evolve in the next 1-2 years. Although they now have an exclusive partnership with RR Donnelley (RRD), the market for XBRL conversion and filing services is huge---far broader than Donnelley's existing customer base.  Donnelley works with a lot of large and well established US companies, yet EDGAR Online probably receives the same fee for converting and filing a large company's financials to XBRL as for a small company. So, how EDGAR Online will build partnerships to address the potential total XBRL market is still unclear.  The company is now in negotiations with RR Donnelley regarding their annual pricing for services.  

There are lots of ways to evaluate a company's market share position. Since filing in XBRL requires the use of advanced software programs based on the complex U.S. SEC XBRL taxonomy, I thought it might be interesting to see if some of the leading high-tech firms are now using EDGAR Online's XBRL solution.  Here is list of only 16 high-tech filing clients out of about 155 EDGR/RRD filing clients---along with those companies' respective market caps:

Microsoft 250B
Apple 174B
Google 172B
Amazon 51B
EMC 34B
eBay 29B
Lockheed 27B
Yahoo 22B
Raytheon 18B
Salesforce 7B
Fiserv 7B
Citrix Systems 7B
BMC Software 7B
Electronic Arts 6B
Verisign 5B
Akamai 4B

These companies no doubt are well aware of competing XBRL services yet the EDGR/RRD partnership was their choice.  In their conference call, management stated that EDGAR Online's proprietary I-Metrix Xcelerate solution created twice the XBRL filings as its next competitor.

EDGR's report was their first report that included a quarterly period subject to the SEC mandate.  The business potential of providing this service is significant since it is recurring revenue---so long as the XBRL standard is in place. Worldwide, there are many markets in various stages of implementing XBRL as the required standard for corporate financial reporting.

In addition to the SEC-reporting business potential, other areas like mortgage-backed securities, municipals, corporate actions, and derivatives offer potential for XBRL service providers.

I am long EDGR and my company uses EDGAR-Online XBRL data-sets.