Edgar Online: Can It Convert XBRL Business Into Profits, At Last?
June 1, 2009
The countdown has started. After June 15, a new marketplace in financial data opens up as the 500 largest publicly held companies begin delivering their results in an interactive format mandated by the Securities and Exchange Commission.
The company with the largest market share in the early going of prepping data using the eXtensible Business Reporting Language is Edgar Online, a distributor of financial information about public companies, mutual funds and other traded assets. Its chief executive believes this wave of filings represents the start of a three-year surge in the company's business that will remake its top and bottom lines.
If it can just get through the present.
"We can double the size of the company,'' by the end of 2012, chief executive Phil Moyer told Securities Industry News after the company released its own financial report for the first quarter of 2009. And, he says, show a profit, which has eluded the company since its founding in 1995.
But, first, the company is signaling it may have to yet again raise money, to safely get to that rosy future.
In the first quarter, the company lost $1.1 million on revenue of $4.2 million. That compared to a loss of $705,000 on revenue of $5.0 million a year ago. Cost-cutting by customers and terminations of many subscribers in the wake of a faltering economy led to the worsening results, the company said. For all of 2008, the company had cut its loss to $2.7 million, from $7.4 million the previous year and boosted revenue to $19.5 million, from $17.9 million.
But, the company's cumulative deficit now is $68.9 million. Its stockholders' equity in the firm is $3.1 million. And the expansion of the XBRL business looms. As a result, the financial data vendor said it will talk with "strategic partners and investors" to shore up its balance sheet.
Edgar Online may have to raise $5 million to fund the growth of its XBRL business, estimates Steven Hart, a portfolio manager with Heller Capital Partners in Englewood Cliffs. "They've built for this opportunity for five years now,'' he said.
In the meantime, its stock was down to $1.22 a share on May 13, the day that one research firm, New Constructs LLC of Franklin, Tenn., rated investing in the company's stock as "dangerous" because of "disconnects between the market's expectations for future cash flows and current cash flows."
"The company has the best technology,'' said Francisco Penafiel, research analyst for Noble Financial Group in Boca Raton, Fla. "But this is a question of surviving right now, because they're burning cash'' and revenue is lagging behind expectations.
Expectations are large. Moyer, who once managed Microsoft's professional services industry business, wants Edgar Online to become the "Red Hat or Netscape of the data business" for financial services firms.
Red Hat is company in Raleigh, N.C., that has built its business around the largely free distribution of a version of the computer operating system known as Linux. Red Hat makes its money from selling support, training and other services that help companies use the "open source" software.
So it is with "open source" data. By the end of 2011, all public companies will have to report their results in XBRL fashion. Meaning: Anyone with an Internet connection can download and use it, from a reporting company's Web site. Getting the data will be close to "friction free,'' in Moyer's term, as the data winds up "leapfrogging the publishing supply chain."
