“There’s money in them thar complex invoices”

Reconciliation, approval, and payment of “complex” invoices is expensive, error-prone, and, for most big companies a chance to reduce over-billing.  Complex invoices can be defined as those that have any, or all, of these characteristics:

• Indefinite quantity and/or rate on the PO
• No PO, a blanket contract, or no contract at all
• Volume or time-based rebates
• High volume, small dollar invoices with complex receipt procedures
• Hard to verify services
• Complex rate structures or regulations

Examples include telecom bills, utility bills, freight bills, consumer packaged goods bills or, legal bills.  Wherever these invoices exist, there is usually a company making money by helping buyers approve, audit, and pay them.  (Some of these providers may also help cash-strapped suppliers get paid early and these providers do especially well by taking a portion of this value.)  Examples of companies in this space include:

• Cass (CASS) a public company which handles a variety of complex invoices, but started in freight billing
• PowerTrack (Part of USBank) and Data2Logistics also in freight billing
• Too many companies to name in legal billing (Serengeti, Datacert, Mitratech…)
• Tangoe (TNGO) in telecom expense management
• PRGX Global (PRGX) in auditing and recovery

I’m writing about this business, because there is a substantial company in this space that is part of a public company and partly owned by a VC firm.  The company, Ecova,  is majority-owned by a utility named Avista (AVA).  Ecova provides energy and telecom management as well as energy management services.  It has grown quite nicely through acquisition and now has about $155 million in revenue.  Depending on how the market values Ecova, it could be worth quite a bit, but its value may be partially obscured by being owned by a utility in the Northwest US.

I don’t know jack about utilities, but Avista pays a dividend yield of 4.7%, which seems reasonable. As a result, if I buy AVA, it seems I have an opportunity to get paid a utility yield while I wait and see what Ecova is worth.  Is Ecova valued like PRGX an auditing firm or like TNGO a software firm?  If its the former, I’m still okay and if it is the latter I’m very happy.    Based on my blissful ignorance of what can go wrong with utilities (except TEPCO), I’m in.

This stock reminds me of ICGC.   ICGC is the parent company of Procurian which was just bought by Accenture.  Two years ago, ICGC’s stock sold for a little more than Procurian alone was worth.   By buying ICGC, you got essentially an option on the other SaaS companies in their portfolio for free.  AVA is not nearly as clear a buy as ICGC, but then again, ICGC, did not pay a 4.7% dividend.

BTW, I know I promised to stop writing about the stock market, but I cannot help myself right now.