Advanced Investment Memo (IC Memo)

LedgerLift (LLLT) – Investment Committee Memorandum
Date: 9 Feb 2026

---

1. Recommendation

Position	12‑month Target Price	Thesis (2 sentences)
Short	$28 – $42 (base‑case $28, bull‑case $42)	LedgerLift trades at $46, implying a 30‑60 % discount to its own cash‑flow generation. The market is pricing a growth premium that is not supported by the firm’s modest NRR, 6 % logo churn and a concentrated customer base.

If the share price falls into the DCF range the short will be fully realized; a sustained price above $45 would require a material upgrade in operating margins or a step‑up in growth.

---

2. Business Overview – Why LedgerLift Wins (and Why Now)

Element	Assessment
Core product	End‑to‑end spend‑management & AP‑automation SaaS for mid‑market enterprises (>$5 M ARR). The platform is highly sticky because it embeds into core finance processes and is difficult to replace without disruption.
Market tail	The B2B SaaS spend‑management market is projected to grow 12‑15 % CAGR through 2030, driven by digital‑finance transformation and regulatory pressure on expense visibility. LedgerLift is positioned in the “mid‑market” sweet‑spot where larger incumbents (e.g., SAP Ariba) have limited coverage.
Competitive moat	• 92 % of revenue is subscription‑based, with an NRR of 123 % – indicating successful upsell/cross‑sell. <br>• High gross margin on subscription (≈ 82 %) and a low‑touch implementation model that keeps service‑margin at 25 %.
Timing	• FY2025 saw a 22 % YoY revenue jump to $820 M, confirming demand for automated AP solutions post‑COVID‑19. <br>• The firm’s 18‑month CAC payback is improving as brand awareness rises, allowing a 34 % S&M spend to be leveraged for faster growth.

---

3. KPI Quality Check

KPI	Current Level	Interpretation	Potential Red Flags
NRR (Net Revenue Retention)	123 %	Strong upsell capability; revenue expands faster than churn.	If upsell slows (e.g., product‑feature saturation) NRR could fall below 115 % and erode growth.
Logo churn	6 % / yr	Acceptable for mid‑market SaaS, but combined with a 16 % revenue concentration in the top 10 customers, churn of a few large logos would materially impact revenue.	Concentration risk: loss of the top 1 customer (3 % of revenue) would shave $24 M off FY2025 revenue.
CAC payback	18 months	Reasonable for enterprise SaaS; aligns with a 34 % S&M spend.	If S&M efficiency declines (e.g., higher sales‑compensation or longer sales cycles) payback could stretch >24 months, pressuring cash flow.
Revenue mix	92 % subscription, 8 % services	High‑margin, recurring base.	Services margin (25 %) is low; any shift toward services (e.g., custom implementations) would drag gross margin.

What could be wrong? The NRR figure may be inflated by one‑off contract expansions that are not repeatable. The churn metric does not capture “revenue churn” at the contract level, which could be higher than the logo churn suggests. Finally, the concentration in the top 10 customers creates a “big‑client” tail risk that is not reflected in the churn numbers.

---

4. Valuation Models

All cash‑flow calculations use FY2025 as the base year, a cash tax rate of 23 %, D&A = 2.5 % of revenue, Capex = 3 % of revenue, and net‑working‑capital investment = 1 % of incremental revenue. Net cash is $1.4 bn (i.e., net‑debt = ‑$1.4 bn).

4.1 Forecast Summary (Revenue, EBIT, Unlevered FCF)

Year	Base	Bull	Bear
2026	Rev $992.2 M, EBIT $198.4 M, UFCF $146.1 M	Rev $1,025 M, EBIT $215.3 M, UFCF $158.6 M	Rev $951.2 M, EBIT $161.7 M, UFCF $118.4 M
2027	Rev $1,171.8 M, EBIT $257.8 M, UFCF $190.9 M	Rev $1,240.3 M, EBIT $297.7 M, UFCF $221.9 M	Rev $1,075.9 M, EBIT $193.7 M, UFCF $142.5 M
2028	Rev $1,348.6 M, EBIT $323.7 M, UFCF $240.7 M	Rev $1,463.5 M, EBIT $380.5 M, UFCF $283.5 M	Rev $1,193.2 M, EBIT $226.7 M, UFCF $167.4 M
2029	Rev $1,523.9 M, EBIT $381.0 M, UFCF $284.0 M	Rev $1,683.0 M, EBIT $471.2 M, UFCF $352.2 M	Rev $1,312.5 M, EBIT $262.5 M, UFCF $194.4 M
2030	Rev $1,708.8 M, EBIT $444.3 M, UFCF $331.7 M	Rev $1,902.8 M, EBIT $551.8 M, UFCF $413.2 M	Rev $1,430.7 M, EBIT $300.4 M, UFCF $223.0 M

4.2 DCF Results

Scenario	WACC	Terminal Growth	EV (incl. terminal)	Equity Value (EV + net cash)	Implied Share Price
Base	10 %	3 %	$4.00 bn	$5.40 bn	$28.4
Bull	9 %	4 %	$6.55 bn	$7.95 bn	$41.9
Bear	12 %	2 %	$1.98 bn	$3.38 bn	$17.8

Key steps: 1) Project revenue per scenario; 2) Apply operating margin to obtain EBIT; 3) Subtract tax, add D&A, subtract capex and incremental NWC to derive UFCF; 4) Discount UFCF and terminal value at the scenario‑specific WACC; 5) Add net cash to arrive at equity value; 6) Divide by 190 m shares.

---

5. Comps Cross‑Check

• Median EV/NTM Revenue multiple = 9.0× (Peers A = 9.0, B = 7.0, C = 11.0).
• Using FY2025 revenue ($820 M) as a proxy for NTM revenue: EV = 9.0 × $820 M = $7.38 bn.
• Equity value = EV + net cash = $7.38 bn + $1.40 bn = $8.78 bn → $46.2 per share.

Adjustments: LedgerLift’s subscription gross margin (≈ 82 %) is slightly higher than the peer set average (≈ 78 %), supporting a modest premium. However, its concentration risk and slower CAC payback justify a downward adjustment of ~10 % to the comps‑derived price, bringing the implied range to $41 – $44 – still above the DCF base but below the current market price.

---

6. Catalysts, Risks & “What‑If” Triggers

Catalysts (3)	Description
1️⃣ Expansion into Large‑Enterprise Tier – Closing the first $10 M ARR enterprise would lift the ARPA and improve gross margin (enterprise contracts have higher subscription ratios).
2️⃣ Product‑Led Upsell Engine – Launch of a self‑service analytics add‑on that could boost NRR from 123 % to > 130 % without proportional S&M spend.
3️⃣ International Roll‑out – Entry into Europe (EU‑compliant AP automation) could add ~ 15 % FY‑2026 revenue growth, narrowing the gap to bull‑case assumptions.

Risks (5)	Description
A. Customer Concentration – Loss of a top‑10 client (~3 % of revenue) would shave > $24 M from FY2025 revenue and could trigger higher churn.
B. Margin Compression – Rising cloud‑infrastructure costs or a shift toward lower‑margin services could erode gross margin by > 2 pp.
C. CAC Escalation – Competitive pressure may push S&M spend above 40 % of revenue, extending CAC payback > 24 months.
D. Macro‑Economic Slowdown – A recession could reduce mid‑market capex budgets, slowing revenue growth below 15 % YoY.
E. Regulatory Changes – New data‑privacy rules could increase compliance costs, affecting both capex and working‑capital needs.

“What Would Change My Mind?” (3 falsifiable triggers)	Trigger
1️⃣ NRR falls below 115 % for two consecutive quarters	Indicates upsell slowdown; would merit a deeper review of growth assumptions.
2️⃣ Top‑10 customer revenue share rises > 20 %	Heightened concentration risk; would increase downside potential.
3️⃣ S&M expense exceeds 38 % of revenue for FY 2026	Suggests deteriorating CAC efficiency; would push valuation toward the bear case.

---

7. Diligence Questions for Management

1. Revenue Recognition – How is ARR booked for multi‑year contracts, and what is the timing of revenue recognition for the services component?
2. NRR Drivers – What proportion of the 123 % NRR is attributable to price increases vs. genuine usage expansion?
3. Customer Concentration – What is the renewal rate for the top‑10 accounts, and are there any upcoming contract expirations that could affect revenue stability?
4. CAC Breakdown – What is the split between sales‑person salary, commissions, marketing spend, and channel partner fees?
5. Product Roadmap – When will the self‑service analytics add‑on be GA‑ready, and what is the expected incremental NRR?
6. International Expansion – What is the go‑to‑market strategy for Europe and APAC, and what are the projected timeline and cost structure?
7. Margin Sensitivity – How sensitive are gross margins to cloud‑hosting price changes and to the proportion of services vs. subscription revenue?
8. Capital Structure – Are there any off‑balance‑sheet obligations or debt covenants that could affect net cash or future financing flexibility?
9. Working‑Capital Management – What is the average days payable outstanding (DPO) and days sales outstanding (DSO) for customers, and how are they trending?
10. Competitive Landscape – How does LedgerLift differentiate its AP‑automation engine from the major incumbents (e.g., SAP Ariba, Coupa) on pricing, integration depth, and AI‑driven spend insights?

---

Conclusion – The DCF analysis shows a substantial discount to the current market price, even under the optimistic bull scenario. While comps suggest a fair‑value range near $42‑$44, the firm’s concentration risk, modest churn, and the need for sustained margin expansion create upside‑limited upside. Accordingly, we recommend a short position with a 12‑month target range of $28–$42, reflecting the base‑case DCF price and the upper bound of a plausible upside scenario. The short thesis will be reinforced if any of the three “what‑if” triggers materialize.