Advanced Investment Memo (IC Memo)

LedgerLift (LLLT) — Internal IC Memo (Long/Short Equity)

1) Recommendation, PT, thesis

Recommendation: SHORT
12-month PT range: $28–$40 (midpoint $34)

Thesis (2 sentences): LLLT is a high-quality B2B spend/AP automation SaaS business (92% subscription, 123% NRR, 78% FY25 GM) but the stock prices in a longer runway of growth and margin expansion than our cash-flow-based underwriting supports. On our DCF, even the bull case struggles to justify today’s $46 share price, leaving the equity vulnerable to growth deceleration / NRR normalization and multiple compression.

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2) Business overview + why it wins / why now

What it is: LedgerLift sells B2B spend management + AP automation software to mid-market enterprises. Revenue is primarily subscription (92%) with a small services component (8%, ~25% GM), consistent with a scalable SaaS model (FY25 subscription GM ~82%).

Why it wins (as evidenced by KPIs/mix):

• Sticky unit economics & expansion: 94% gross retention and 123% NRR imply meaningful product embedment and expansion within existing customers.
• Scale + repeatability: 6,200 customers at ~$132k ARPA suggests breadth, and concentration is manageable (top 10 = 16%, top 1 = 3%).
• Improving profitability: FY25 18% operating margin at 78% gross margin, with operating leverage implied by forward margin assumptions.

Why now (setup for a short):

• Growth is already moderating (FY23–FY25 revenue: $560m → $820m) and our forecast set explicitly steps down to low-teens growth by 2029–2030 in all scenarios.
• The stock’s valuation implies durability and/or a lower cost of capital than we are willing to underwrite on a mid-market software name, particularly when unlevered FCF remains meaningfully below what the current EV implies.

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3) KPI quality check (and what could be wrong)

NRR (123%) / retention (94% gross): Very strong—supports a “land and expand” motion and suggests product value realization over time.
What could be wrong: NRR can be temporarily elevated by pricing, seat/module rollouts, or cohort mix; if new cohorts expand less than mature cohorts, NRR can mean-revert without obvious churn spikes.

Logo churn (6%/yr): Reasonable for mid-market; not “best-in-class” but consistent with the 94% gross retention (revenue basis).
What could be wrong: Churn can rise in tighter budget cycles; churn for smaller customers could be masked by expansions in larger accounts.

CAC payback (18 months) & S&M (34% of FY25 revenue): Payback is healthy and suggests efficient growth, while S&M ratio implies some operating leverage already captured.
What could be wrong: “Payback” definitions vary (fully-loaded vs. direct); if sales efficiency is flattered by expansion revenue attribution or services-led deployments, true CAC could be higher.

Customer concentration (top 10 = 16%, top 1 = 3%): Not alarming.
What could be wrong: Mid-market budgets can be lumpy; a handful of large customers can still drive sentiment if expansions slow.

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4) Base/Bull/Bear model (2026–2030) + DCF outputs

FCF framework (all scenarios):
Unlevered FCF = EBIT·(1–tax) + D&A – capex – ΔNWC
Assumptions: tax 23%, D&A 2.5% of revenue, capex 3.0% of revenue, NWC investment = 1.0% of incremental revenue.