Advantage IQ Inc., the quickly growing Spokane-based subsidiary of Avista Corp., in recent years has repositioned itself as a technology-based energy-management company, rather than simply a bill manager for big companies.

During the repositioning, Avista has taken a new position on its future plans for Advantage IQ.

In simplest terms, as Advantage IQ continues to grow and bolster Avista's bottom line, the parent company is in less of a hurry to cash out the well-performing unit.

In late 2008, Avista Executive Vice President Malyn Malquist said the company was exploring avenues through which it could capitalize on the Advantage IQ's success and was positioning the subsidiary for an initial public offering—the first stock offering a company makes to the public. He said the company hoped to reach $100 million in sales and could move ahead with an IPO in two or three years.

Advantage IQ has crested the $100 million in revenue mark—it reported $102 million in sales last year—but now, Avista Chairman, CEO, and President Scott L. Morris says the company doesn't have a set timeline for an IPO.

"We're not as hung up on the timing," Morris says. "The marketplace is changing. There's an opportunity to create shareholder value."

Advantage IQ provides energy-management and expense-management services to large, multiple-site companies—typically companies with 100 or more locations. Ed Schlect, executive vice president at Advantage IQ, says the Avista subsidiary has 534 customers that collectively operate about 361,000 sites—stores, offices, et al. Altogether, its clients use 25,000 average megawatts of power at any given time, more than 5 percent of the nation's commercial and industrial load—and the equivalent to the annual residential energy consumption in California and Texas combined.

Advantage IQ's headquarters are located in about 75,000 square feet of office space in the Rock Pointe Corporate Center's Rock Pointe East building, at 1313 N. Atlantic. The company has more than 900 employees in 23 U.S. states, including more than 500 people in Spokane. As of mid-June, the company had 40 open positions, about a quarter of which were jobs at the Spokane office, Schlect says.

In the next two years, Advantage IQ's profits are expected to grow faster than the utility side of the business, says Jim Bellessa, senior vice president of research at Great Falls, Mont.-based D.A. Davidson & Co. and an analyst who follows Avista.

Advantage IQ reported net income of $7.4 million, or 13 cents a share, in 2010, and Bellessa is projecting the subsidiary's net will rise to $8.1 million, or 14 cents a share, this year. The prediction falls in line with an earnings estimate Avista released in May, which stated Avista expects Advantage IQ to contribute between 13 cents a share and 16 cents a share to the company's bottom line.

In 2012, Bellessa projects, Advantage IQ will have net income of $10 million, or 17 cents a share.

At that trajectory, Advantage IQ would account for an estimated 8 percent of Avista's earnings this year and 9 percent of the corporation's earnings in 2012. The subsidiary contributed 8 percent and 6 percent of its parent company's profits in 2010 and 2009, respectively.

Put another way, Morris says Avista tells its shareholders to expect the company's net income to grow 5 percent to 7 percent a year. The utility provides between 2 percent and 3 percent of that growth, and Advantage IQ is expected to provide the rest.

"Advantage is an important part of our growth story," Morris says.

Avista's position of holding onto Advantage IQ is especially relevant now because effective July 1, a group of minority shareholders has the right to sell its stock back to the company.

In 2008, Advantage IQ acquired Cadence Network Inc., a Cincinnati-based company that at the time was its biggest rival in the expense-management arena. The company funded that transaction with common stock in Advantage IQ. One stipulation of the transaction stated that the former Cadence owners could sell their stock back to the company if Advantage IQ wasn't liquidated either through an initial public offering or a sale of the business by July 1, 2011. As of March 31, the shares owned by Cadence Network's previous owners were valued at about $33.6 million, Avista said in a filing with the U.S. Securities and Exchange Commission.

Advantage IQ entered into a $40 million line of credit in April that replaced a $15 million line that was due to expire. Avista has said that if the minority shareholders exercise their right to sell, the company will use its credit line, accept an infusion from new investors, make a capital request of current owners—Avista owns 79 percent of Advantage IQ—or a combination of those options.

Advantage IQ spokeswoman Angela Moffatt says that as of June 27, the company hadn't received any indication from the former Cadence shareholders as to whether they want to sell. Bellessa says, however, "If Cadence wants to sell, they (Advantage IQ) would be glad to buy them."

Last January, Avista Capital, another arm of Avista, bought Advantage IQ shares from one former Cadence owner for $5.6 million. Those shares represented a 4 percent interest in Advantage IQ, which suggests the company was valued at about $140 million at that time.

In addition to the Cadence acquisition, the company bought Portland-based Ecos Consulting Inc. in September of 2009; Hastings, Minn.-based Loyalton Group in December 2010; and Seattle-based Building Knowledge Networks Inc. last January. Ecos continues to use its original name, but the rest now operate as Advantage IQ.

Schlect says Advantage IQ has been growing largely through acquisition in recent years, but its operations have continued to grow organically as well. He says the company has had double-digit revenue growth annually in recent years, even if the acquisition activity is taken out of the equation.

Moving forward, Schlect says the company expects to increase its revenues by introducing new services to its established clients.

For example, with its acquisition of Building Knowledge Networks, Advantage IQ now has a real-time building energy management system, which allows it to review remotely how customers' buildings systems are performing at any given time. Such data, he says, can be analyzed to determine how to make a building operate more efficiently, both from an energy standpoint and an operational standpoint.

Also, Schlect says, thanks to its Ecos acquisition, the company is adding a growing number of utility companies to its customer base. For those utilities, it develops energy- and water-efficiency awareness campaigns and incentive programs.

"We're making that transformation into a broader end-to-end, integrated energy-management company," Schlect says.

Founded in 1995 as WWP Energy Solutions, the company entered a young utility-expense management industry in which it landed Fortune 100 clients by reviewing their utility bills—power, telecommunications, leases, and waste management—for errors and inefficiencies and finding ways to save them money.

The company also pays the utility bills on behalf of many of its clients. In fact, one source of revenue for Advantage IQ is the interest it earns on its clients' money during the short period of time between receiving funds and paying bills with those funds, a revenue stream that has been tempered by a low interest-rate environment in recent years.

Morris says he still expects Avista to spin off Advantage IQ at some point. Whenever it happens and regardless of whether it's an IPO or a business sale, Morris envisions the company being like Itron Inc., in that it would remain a strong employer based in the Inland Northwest.

"What I don't want to have happen is what happened to Itronix, where you sell it, and it's moved somewhere else," Morris says. "Whatever we do, it will be a strong, stand-alone business here in Spokane."