Regan Partners Discloses 7.8% Stake in EDGAR Online (EDGR)
In a 13D filing on EDGAR Online, Inc. (NASDAQ: EDGR) Regan Partners/Basil P. Regan disclosed a 7.8% stake (2 million shares) in the company.
Regan said it intends to enter into discussions with the Issuer's management. In addition, the firm may engage in communications with one or more shareholders, officers or directors of the Issuer, including discussions regarding the Issuer's operations and strategic direction.
A Copy of the Letter:
Members of the Board,
Regan Partners, L.P. currently beneficially owns approximately 6.37% of the common shares outstanding of Edgar Online and we have become significantly concerned by the Company's continued losses, and senior management's consistently inaccurate guidance and what we believe to be the resulting complete loss of credibility in the eyes of its shareholders and the investor community. The management of Susan Strausberg (CEO and President) has been ineffective at best. The company has lost money for the last twelve years. Revenues in the year 2006 were lower than those reported 2001, during which time it has lost over $31.5 million in net income and the number of shares outstanding has gone from fifteen million to twenty-six million, a seventy-five percent increase. Despite this continued issuance of shares, the company is left with a marginal balance sheet. This abysmal record speaks for itself. It is our view that Mrs. Strausberg does not have the managerial skill set required to increase shareholder value, particularly at this critical time. It appears to us that Edgar Online, Inc. is a rudderless company which has left shareholders significantly at risk.
Management has repeatedly given guidance forecasting a return to positive EBITDA and revenue growth. As illustrated below, the gap between Edgar Online management forecasts and actual results is extraordinary. This set of inaccurate guidance and failure to perform has caused the investment community to lose confidence in Mrs. Strausberg.
4th Quarter 2003 Earnings Conference call- February 3, 2004
Company guidance: Focus on long-term profitable growth and return to cash flow positive.
Actual results: The Company lost money in 2004, 2005 and 2006.
1st Quarter 2004 Earnings conference Call-April 27, 2004
Company guidance: Management did equity financing to support expected increase in business activity and 2004 revenue forecast of $13.7 million to$14.7 million.
Actual results: 2004 revenue were $12.9 million down from $14.3 million in2003.
2nd Quarter 2004 Earning Conference call- July 27, 2004
Company guidance: Expect third quarter revenue of $3.3 million to $3.5million and EBITDA of $(150,000) to breakeven.
Actual results: Revenue of $3.2 million and EBITDA of $(181,000).
3rd Quarter 2004 Conference call- November 1, 2004
Company guidance: Expect fourth quarter EBITDA of $(150,000) to breakeven.
Actual result: EBITDA of $(338,000).
Company guidance: For 2005 guidance was positive EBITDA in the first half of the year and positive earning per share in the second half.
Actual results: Lost more money in 2005 than in 2004.
4th Quarter 2004 Conference call- February 1, 2005
Company guidance: "2005 will be a banner year".
Actual results: Continued losses.
1st Quarter 2005 Conference call- May 3, 2005
Company guidance: 2005 revenues $14.5 to $16 million ("with the potential to exceed this"), 2005 EPS of $(0.08) to $(0.11).
Actual results: 2005 revenues of $14.2 million and EPS of $(0.23).
2nd Quarter 2005 Conference call- August 2, 2005
Company guidance: "Success will start to be recognized in late 2005 and will accelerate in 2006 and onward".
Actual result: Losses in 2005 and 2006.
4th Quarter 2005 Conference call- February 7, 2006
Company guidance: "We expect to be cash flow positive in the second half of 2006".
Actual results: Cash flow negative for all of 2006.
1st Quarter 2006 Conference call- May 2, 2006
Company guidance: Return to cash positive in the fourth quarter of 2006."We anticipate revenues will ramp up and accelerate as the year progresses".
Actual results: Cash flow loss in the fourth quarter, revenues down in fourth quarter compared to first quarter.
2nd Quarter 2006 Conference call- August 1, 2006
Company guidance: "We are still very optimistic we will be cash flow positive in the fourth quarter of 2006, but it may not be for the entire quarter."
Actual results: It does not appear the company was cash flow positive at any time in the fourth quarter of 2006.
3rd Quarter 2006 Conference call- November 1, 2006
Company guidance: Revenues of $4.2 to $4.4 million, EPS of ($0.04) to$(0.05).
Actual results: Revenue of $4.1 million and EPS of $(0.06).
4th Quarter 2006 Conference call- February 6, 2007 Company guidance:
Revenues of $4.2 to $4.4 million, EPS of $(0.05).
Actual results: Revenue of $4.1 million and EPS of $(0.06). Continued operating loss forecasted for the 2nd quarter of 2006.
Why is this record of losses and demonstrated inability to profitably run this business acceptable? The Board's inaction raises questions about its effectiveness and independence. To begin with, we believe it is poor governance for the Chairman of the Board and CEO to be a married couple. This relationship eliminates any sense of independence and allows these two people to control the Board's agenda. Further, excluding stock options, the outside Directors own only 83,000 shares of Edgar Online, Inc. stock (to say nothing of Mr. Strausberg's sales of personal shares). In addition to senior management, we believe that a significant portion of the company's shareholder base has lost confidence in this Board of Directors. I would like to remind the Board of Directors of their ultimate fiduciary duty to the shareholders, not management. In today's corporate environment where the spotlight is on Board oversight, independence and accountability, the deafening silence from the Edgar Online Board over the last several years would surely be construed by some experts as neglectful.
The poor operating results, loss of investor confidence in management, and governance concerns collectively demand that significant changes in management and the Board of Directors be made immediately. We therefore demand that:
1. Senior management be replaced immediately.
2. The Board appoint three (3) independent Directors of our choosing. Based on the board's current size constraint, this would require two (2) or more current directors to resign.
3. The Company provide us with a complete list of shareholders.
4. You hold an immediate meeting with us and the Independent Directors of the Board to discuss how it plans to effect these changes.
We believe these requests will improve shareholder value and if the Board fails to honor these requests, we reserve the right to take any and all further action.
Regan Partners, L.P.
Basil P. Regan, General Partner