We live in a world of instant gratification and immediate expectations. So why can’t we meet our customers’ expectations that when companies file their public financial statements, Stratascope will have them in our database immediately? For most of the year, we can. For two months, May and June, we struggle. Sales people see the press release announcing the earnings, yet none of the online databases are updated? Even worse, some are updated and some are not, it depends on whose database and which company you are interested in. Switching data providers only means that different reps will be asking why their prospects are not up-to-date. Let’s take a look at what causes this situation and what we are doing about it.
What is the situation? Most people think that when companies report their financials to a governing body like the SEC, that the reporting is electronic and in a consistent format (known as XBRL). Nothing could be further from the truth. In the US alone, more than 10,000 public companies report to the SEC. Only 300 of those companies are XBRL compliant (I found this stat on EDGARonline last week).
So what does that mean? It means that the other 97% of filed reports must be handled manually. Someone has to read the financial statement and code it into a data entry program, check it for errors, and then make it available to customers like Stratascope for redistribution. It is a labor intensive process. We have worked with several different companies including Compustat, D&B (Hoovers), and Worldvest over the years. They all have the same problem.
Why are May and June the months where we experience the biggest delays? Companies normally can take up to 45 days to report their quarterly financial numbers. Most companies try to report in 25 days. The exception is the annual (Q4) filing. They take up to 75 days to submit that with the possibility of an extension. This means that companies themselves typically are reporting Q1 results just 4-5 weeks after they report Q4. 70% of all companies have either a December or January Year-End. That means that from March 15th – May 15th which is just 60 days, there are over 70,000 reports to process (approx. 50,000 public companies globally report 4 times per year for a total of 200,000 reports annually). That is more than one third of the workload for the entire year loaded up into 8 weeks, not including the March year-ends that start coming in early May as well. It is impossible for the data suppliers to keep up. Our customers will see a reporting delay from May 1st – July 1st every year because of this phenomenon.
What are we doing about it? We cannot wait for XBRL since there has only been a 3% adoption rate over the last 5 years. Unlike most companies in our space, any Stratascope customer that is experiencing a delay on a specific company, should contact us immediately. We will manually update that company within 24 hours, often sooner.
-Bruce A. Brien, CEO, Stratascope Inc.
