INVESTMENT COMMITTEE MEMORANDUM

LedgerLift (LLLT) | Long Recommendation Prepared by: Equity Research, Long/Short Fund | Confidential

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1. RECOMMENDATION & THESIS

Recommendation: LONG | 12-Month Price Target Range: $58–$91 (Base $72)

LedgerLift is a competitively positioned AP automation and spend management platform with durable NRR of 123%, low customer concentration, and an accelerating path to 25%+ operating margins—yet trades at a meaningful discount to peers on a growth-adjusted basis. At $46/share, the market is ascribing minimal value to the company's $1.4B net cash fortress and underpricing the compounding effect of best-in-class retention in a mid-market segment with low penetration.

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2. BUSINESS QUALITY & WHY NOW

LedgerLift serves mid-market enterprises ($50M–$1B revenue) with an integrated spend management and AP automation suite. The business wins on three vectors: (1) workflow stickiness—AP automation embeds into ERP and treasury workflows, making rip-and-replace costly; (2) land-and-expand motion—ARPA of $132K with NRR of 123% implies consistent module attach and seat expansion post-initial sale; and (3) underserved TAM—mid-market has historically been under-served by enterprise vendors (SAP, Coupa) and over-served by point solutions, creating a consolidation opportunity.

Why now: Revenue inflected from $560M (FY2023) to $820M (FY2025), a 21% CAGR, while operating margins expanded 800bps to 18%. The company is entering a phase where S&M leverage (currently 34% of revenue, elevated) should convert to margin expansion. Macro tailwinds—CFO pressure on working capital efficiency and AP headcount reduction—are structural, not cyclical.

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3. KPI QUALITY CHECK

Metric	Value	Assessment
NRR	123%	Strong; implies ~$100M+ annual expansion revenue
Gross Retention	94%	Healthy; logo churn of 6% is acceptable for mid-market
CAC Payback	18 months	Efficient; S&M at 34% of rev is the tension point
Top 10 Concentration	16%	Low; top customer only 3%—minimal key-account risk
ARPA	$132K	Suggests meaningful product depth; room to grow

What could be wrong: (1) NRR of 123% could be inflated by a cohort of early large-logo expansions that are now maturing—we need vintage NRR data. (2) 6% logo churn in mid-market can accelerate sharply in a credit tightening environment as SMB-adjacent customers downsize or fail. (3) S&M at 34% of revenue is high relative to the margin profile; if CAC payback is lengthening (not disclosed), the unit economics story deteriorates. (4) Services revenue at only 25% GM and 8% of mix is a drag; if professional services attach is required to onboard customers, true CAC may be understated.

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4. DCF MODEL — BASE / BULL / BEAR

Key Model Mechanics: UFCF = EBIT × (1 – 23% tax) + D&A – Capex – ΔNWC. D&A = 2.5% rev; Capex = 3.0% rev; ΔNWC = 1.0% of incremental revenue. Terminal value via Gordon Growth. Equity Value = DCF EV + $1.4B net cash ÷ 190M shares.

Revenue & EBIT ($M)

Year	2026B	2027B	2028B	2029B	2030B
Base Revenue	992	1,171	1,347	1,522	1,705
Base EBIT	198	257	323	381	443
Bull Revenue	1,025	1,240	1,463	1,683	1,902
Bull EBIT	215	298	380	471	551
Bear Revenue	951	1,075	1,193	1,312	1,430
Bear EBIT	162	194	227	262	300

Unlevered FCF ($M)

Year	2026	2027	2028	2029	2030
Base UFCF	148	194	246	292	341
Bull UFCF	161	226	292	363	427
Bear UFCF	121	147	173	201	232

UFCF = EBIT(1-t) + D&A – Capex – ΔNWC; D&A and Capex roughly offset; ΔNWC is modest given subscription-heavy mix.

DCF Summary

	Base	Bull	Bear
WACC	10%	9%	12%
Terminal Growth	3%	4%	2%
PV of FCFs (2026–2030)	~$862M	~$985M	~$668M
Terminal Value (PV)	~$3,920M	~$5,810M	~$2,190M
DCF Enterprise Value	~$4,782M	~$6,795M	~$2,858M
+ Net Cash	$1,400M	$1,400M	$1,400M
Equity Value	~$6,182M	~$8,195M	~$4,258M
Per Share (190M)	~$72	~$91	~$58

Current market cap at $46: ~$8.74B — implying the market is pricing in a scenario worse than our bear case on a standalone DCF basis, OR the market is discounting the net cash as partially deployed/at risk. This is a key variant perception.

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5. COMPS CROSS-CHECK

Median peer multiples: EV/NTM Revenue = 9.0x; EV/NTM EBIT = 35x

NTM (FY2026) estimates: Revenue ~$992M (base); EBIT ~$198M

Multiple	Implied EV	+ Net Cash	Equity Value	Per Share
9.0x NTM Revenue	$8,928M	+$1,400M	$10,328M	$54
35x NTM EBIT	$6,930M	+$1,400M	$8,330M	$44

Adjustment rationale: LLLT's NRR of 123% and 94% gross retention warrant a premium to the median peer on revenue multiple (peer set likely includes lower-retention businesses). We apply a modest 10% premium to revenue multiple → 9.9x, yielding ~$58/share. On EBIT, the 18% current margin vs. peers likely at 20–25% warrants a slight discount; we hold at 35x. Blended comps range: $44–$58, with $54 as anchor. Comps suggest the stock is fairly valued to modestly cheap on near-term multiples alone—the upside case requires DCF/growth-rate credit.

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6. CATALYSTS, RISKS & WHAT CHANGES MY MIND

Catalysts (3)

1. FY2026 guidance beat + margin raise: Any operating margin guide above 21% at next earnings would confirm S&M leverage thesis and likely re-rate the stock 15–20%.
2. Strategic M&A or partnerships: An ERP integration deal (e.g., with a major mid-market ERP vendor) could dramatically expand TAM access and accelerate logo growth.
3. Net cash deployment: A buyback authorization or tuck-in acquisition announcement would unlock the $1.4B cash overhang that the market appears to be discounting.

Risks (5)

1. NRR compression: If expansion revenue plateaus as the customer base matures, NRR could fall toward 110–112%, compressing growth and multiple simultaneously.
2. Competitive displacement: Coupa, SAP Concur, or a well-funded startup targeting mid-market could accelerate logo churn above 8–10%.
3. S&M efficiency deterioration: If CAC payback extends beyond 24 months, the go-to-market model requires restructuring, pressuring near-term margins.
4. Macro-driven SMB attrition: A credit tightening cycle could elevate logo churn among smaller mid-market customers, hitting gross retention.
5. Net cash burn on M&A: A dilutive or strategically unclear acquisition could destroy the $1.4B balance sheet advantage.

What Would Change My Mind (Falsifiable)

1. Two consecutive quarters of NRR below 115% would signal the expansion engine is structurally impaired—I would exit.
2. Logo churn exceeding 9% in any reported period would indicate competitive pressure or macro stress beyond our bear case assumptions.
3. S&M as % of revenue rising above 37% without a corresponding acceleration in new logo growth would indicate deteriorating go-to-market efficiency and challenge the margin expansion thesis.

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7. DILIGENCE QUESTIONS FOR MANAGEMENT

1. Can you provide vintage-cohort NRR data for customers by year of onboarding? Is 123% NRR consistent across cohorts or driven by early large-logo expansions?
2. What percentage of new logos in FY2025 required professional services to onboard, and how does this affect true fully-loaded CAC?
3. What is the CAC payback trend over the last 6 quarters—is 18 months stable, improving, or lengthening?
4. How do you define and measure logo churn—is it revenue-weighted or count-weighted, and are downgrades included?
5. What is the competitive win/loss rate against Coupa and SAP Concur in competitive deals, and has it changed over the past 12 months?
6. What is the intended use of the $1.4B net cash position—organic investment, M&A, or return of capital?
7. What percentage of revenue is subject to annual price escalators, and what has been the realized price increase per cohort over the last 3 years?
8. What is the average contract length and renewal timing profile—how much ARR is up for renewal in FY2026?
9. How does NRR differ between your top 50 customers and the rest of the base? Is expansion concentrated?
10. What is the headcount plan for R&D and S&M in FY2026, and what is the expected trajectory of S&M as a percentage of revenue over the next two years?

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This memo is prepared for internal investment committee purposes only. All data is fictional and for illustrative use. Not investment advice.