Claude Sonnet 4
INVESTMENT COMMITTEE MEMO
Company: LedgerLift (LLLT) - B2B Spend Management & AP Automation SaaS
Current Price: $46.00
Date: [Current]
1. RECOMMENDATION
LONG | 12-Month PT Range: $52-68 | Base Case: $59
LedgerLift demonstrates best-in-class SaaS metrics with 123% NRR and expanding margins in a large, underpenetrated mid-market opportunity. Strong competitive moats through workflow integration and data network effects justify premium valuation despite near-term growth deceleration risks.
2. BUSINESS OVERVIEW & COMPETITIVE POSITION
LedgerLift operates in the fragmented spend management/AP automation market, targeting mid-market enterprises ($132k ARPA suggests $50M-1B+ revenue customers). The company has achieved scale with 6,200 customers and $820M ARR, positioning it as a category leader.
Why it wins: Three key moats: (1) High switching costs once integrated into finance workflows, (2) Network effects from supplier onboarding and payment rails, (3) Data advantages enabling better spend analytics. The 92% subscription mix and 82% subscription gross margins indicate strong recurring revenue quality.
Why now: Digital transformation acceleration post-COVID, CFO focus on cash management in higher rate environment, and regulatory compliance requirements (SOX, etc.) driving mid-market adoption of automated controls.
3. KPI QUALITY ASSESSMENT
Strong indicators:
- NRR 123%: Excellent expansion, above SaaS median of ~110%
- Gross retention 94%: Solid stickiness, though room for improvement vs. best-in-class 97%+
- CAC payback 18 months: Healthy vs. 12-24 month benchmark
- Low concentration: Top customer 3%, top 10 at 16% reduces key account risk
Potential concerns:
- Logo churn 6%: Slightly elevated vs. enterprise SaaS norm of 3-5%, suggests some mid-market volatility
- 34% S&M spend: High but justified by growth rate; needs monitoring for efficiency
- Services mix 8%: Low-margin drag, though acceptable level
4. FINANCIAL MODEL & VALUATION
DCF Model Summary ($ millions except per share)
| Scenario | 2026E | 2027E | 2028E | 2029E | 2030E | DCF Assumptions |
|---|---|---|---|---|---|---|
| BASE CASE | WACC 10%, TG 3% | |||||
| Revenue | $992 | $1,171 | $1,346 | $1,521 | $1,704 | Growth: 21%→12% |
| EBIT | $198 | $258 | $323 | $380 | $443 | Margins: 20%→26% |
| Unlevered FCF | $179 | $235 | $295 | $349 | $407 | |
| BULL CASE | WACC 9%, TG 4% | |||||
| Revenue | $1,025 | $1,240 | $1,463 | $1,683 | $1,901 | Growth: 25%→13% |
| EBIT | $215 | $298 | $380 | $471 | $551 | Margins: 21%→29% |
| Unlevered FCF | $195 | $272 | $349 | $433 | $508 | |
| BEAR CASE | WACC 12%, TG 2% | |||||
| Revenue | $951 | $1,075 | $1,193 | $1,312 | $1,430 | Growth: 16%→9% |
| EBIT | $162 | $194 | $227 | $262 | $300 | Margins: 17%→21% |
| Unlevered FCF | $146 | $176 | $207 | $240 | $276 |
DCF Valuation Results
- Base: PV of FCF $1,736M + Terminal $6,764M = EV $8,500M → Equity Value $9,900M → $52/share
- Bull: PV of FCF $2,257M + Terminal $11,743M = EV $14,000M → Equity Value $15,400M → $81/share
- Bear: PV of FCF $1,047M + Terminal $4,653M = EV $5,700M → Equity Value $7,100M → $37/share
Note: Equity value = EV + $1.4B net cash
5. COMPARABLE COMPANY VALUATION
Median Multiples: EV/NTM Revenue 9.0x, EV/NTM EBIT 35x
2026 Estimates (Base Case): Revenue $992M, EBIT $198M
Implied Valuations:
- Revenue multiple: 9.0x × $992M = $8,928M EV → $10,328M equity → $54/share
- EBIT multiple: 35x × $198M = $6,930M EV → $8,330M equity → $44/share
Range: $44-54 (comps suggest fair value near DCF base case)
LedgerLift deserves premium to median given superior NRR and margin expansion trajectory, supporting upper end of range.
6. CATALYSTS, RISKS & CHANGE OF MIND
Catalysts (12 months):
- International expansion announcement - significant TAM expansion opportunity
- Large enterprise wins - ARPA expansion above $150k demonstrates upmarket success
- Margin beat - operating leverage demonstration ahead of model
Key Risks:
- Economic downturn - mid-market budget cuts, elongated sales cycles
- Competitive pressure - large players (SAP, Oracle) or new entrants compress pricing
- Churn deterioration - logo churn above 8% signals product-market fit issues
- Growth deceleration - revenue growth below 15% without margin expansion
- Integration complexity - customer implementations fail, damaging reputation
What Would Change My Mind (Sell Triggers):
- NRR drops below 115% for two consecutive quarters (expansion engine breaking)
- Logo churn exceeds 8% sustainably (mid-market volatility accelerating)
- Revenue growth below 15% without 300+ bps operating margin expansion (growth-profitability trade-off unfavorable)
7. KEY DILIGENCE QUESTIONS
- What's driving the 6% logo churn and how does it vary by customer size/vintage?
- How much runway exists for ARPA expansion within existing customer base?
- What's the competitive win rate vs. legacy solutions and newer entrants?
- How defensible is the 82% subscription gross margin against pricing pressure?
- What's the international expansion strategy and timeline?
- How does product roadmap address enterprise requirements for upmarket expansion?
- What are the unit economics differences between inbound vs. outbound customer acquisition?
- How sticky are customers after full workflow integration (18+ months)?
- What's the total addressable market sizing and penetration assumptions?
- How does the platform handle economic stress-testing (payment delays, supplier issues)?
Position Sizing: Recommend 2-3% portfolio weight given strong fundamentals but sector volatility.