LedgerLift (LLLT) – IC Memo (Fictional)

Recommendation: PASS (bias: valuation-risk skew to downside on intrinsic basis)
Current Price: $46
12-mo PT range (fair value): $30–$48 (midpoint ~$38)

2-sentence thesis:
LedgerLift screens as a high-quality vertical SaaS asset (92% subscription mix, 123% NRR, 6% logo churn, expanding margins), but intrinsic value under reasonable DCF assumptions lands materially below today’s price. Public comps support current levels, yet that support appears to require sustained premium multiples despite moderating growth and only mid-20s long-run operating margins; risk/reward is not clean enough for a high-conviction long or short today.

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1) Business overview, why it wins, why now

LedgerLift provides spend management and AP automation software to mid-market enterprises. The model is predominantly recurring subscription revenue (92%), with a smaller services component (8%) that likely supports implementation and adoption but dilutes blended gross margin (services GM ~25% vs subscription GM ~82%).

Why it wins

• Strong product stickiness and expansion: gross retention 94%, NRR 123%.
• Unit economics are healthy enough for compounding: 18-month CAC payback with S&M at 34% of revenue.
• Scalable margin profile: operating margin already 18% in FY2025, with modeled expansion in all scenarios.

Why now (what is timely)

• Company is crossing from “growth + investment” into “growth + profitability,” which can support re-rating if execution persists.
• But shares at $46 imply meaningful confidence in duration of growth and margin lift; valuation debate is now central.

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2) KPI quality check and what could be wrong

NRR 123%: Strong. Indicates meaningful expansion (seats, modules, pricing, payment volume-linked monetization).
Risk: Expansion can soften quickly in macro pressure if spend volumes or seat growth decelerate; NRR may be cyclically flattered.

Logo churn 6% / gross retention 94%: Good for mid-market cohort; suggests product relevance and workflow embedding.
Risk: Could mask bifurcation (high churn in smaller accounts offset by large-customer stability).

CAC payback 18 months: Solid for a business with this retention and GM profile.
Risk: Payback can be understated if services-heavy onboarding is subsidizing adoption or if payback excludes full overhead.

Concentration (top 10 = 16%, top 1 = 3%): Manageable; not extreme key-customer risk.
Risk: In downturn, top accounts can still drive abrupt net retention compression through downsell, even absent churn.

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3) Base/Bull/Bear operating model and DCF

Key mechanics used for all scenarios

• EBIT = Revenue × operating margin
• UFCF = EBIT×(1–23% tax) + D&A (2.5% rev) – Capex (3.0% rev) – NWC investment (1.0% of incremental rev)
• DCF period: FY2026–FY2030; terminal value via Gordon growth

Forecasts ($m)

Base Case

	2026	2027	2028	2029	2030
Revenue	992.2	1,170.6	1,346.2	1,521.2	1,703.7
EBIT	198.4	257.5	323.1	380.3	443.0
Unlevered FCF	146.1	190.7	240.3	283.5	330.7

Bull Case

	2026	2027	2028	2029	2030
Revenue	1,025.0	1,240.3	1,463.5	1,683.0	1,901.8
EBIT	215.3	297.7	380.5	471.2	551.5
Unlevered FCF	158.6	220.8	283.4	352.2	413.0

Bear Case

	2026	2027	2028	2029	2030
Revenue	951.2	1,074.9	1,193.1	1,312.4	1,430.5
EBIT	161.7	193.5	226.7	262.5	300.4
Unlevered FCF	118.4	142.4	167.4	194.4	223.0

DCF outputs

Scenario	WACC	g	PV of explicit FCF	PV of TV	DCF EV	+ Net Cash	Equity Value	Implied /share
Base	10%	3%	870	3,022	3,892	1,400	5,292	$27.9
Bull	9%	4%	1,068	5,582	6,650	1,400	8,050	$42.4
Bear	12%	2%	588	1,291	1,879	1,400	3,279	$17.3

Read-through: Intrinsic value range is wide, but even bull DCF is below current price; current valuation embeds either better-than-bull operating outcomes, richer terminal economics, or persistent multiple support from peer sentiment.

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4) Comps cross-check (median anchor)

Peer medians: EV/NTM Revenue = 9.0x, EV/NTM EBIT = 35x.

Using FY2026 as NTM anchor:

• Revenue multiple approach:

  • Bear/base/bull EV = 9×Rev = 8.56 / 8.93 / 9.23 bn
  • Equity/share (add $1.4bn net cash, divide 190m): $52.4 / $54.4 / $55.9

• EBIT multiple approach:

  • Bear/base/bull EV = 35×EBIT = 5.66 / 6.95 / 7.53 bn
  • Equity/share: $37.2 / $43.9 / $47.0

• Simple 50/50 blend: roughly $44.8–$51.5/share

Adjustment discussion:
A modest discount to peer median is defensible due to (i) services mix drag vs purer software peers, (ii) moderate customer concentration, and (iii) growth expected to step down into low teens by period end. A premium could be argued from retention quality and margin expansion, but current price already captures much of that optimism.

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5) Catalysts (3)

1. FY2026 guide and quarterly beats on OM expansion (toward 20%+) without NRR degradation.
2. Large-enterprise wins / module attach disclosures that sustain NRR >120% despite macro normalization.
3. Capital allocation (buyback/M&A) using $1.4bn net cash to accelerate EPS/FCF accretion.

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6) Key risks (5)

1. Short risk: durable NRR >120% plus faster OM expansion could sustain premium multiples.
2. Macro/volume sensitivity: AP/spend-related workflows may be exposed to customer spending slowdown.
3. Competitive pressure: pricing compression or bundled offerings can hit both growth and GM.
4. Execution risk in upsell: expansion may rely on successful cross-sell into existing base.
5. Multiple regime risk: valuation could remain comps-driven longer than fundamentals imply.

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7) What would change my mind (3 falsifiable triggers)

1. Upgrade to Long: two consecutive quarters with NRR ≥125% and operating margin ≥22% while revenue growth stays >20%.
2. Upgrade to Short: NRR <115% and logo churn >8% with no corresponding S&M efficiency gain.
3. Upgrade to Long: credible path to FY2028 UFCF margin ≥20% (with disclosure support on D&A/capex/NWC discipline).

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8) Diligence questions for management (10)

1. What components drove FY2025 NRR (price vs seats vs module attach vs payments/usage)?
2. How does NRR trend by cohort size and industry vertical?
3. What percent of ARR is multi-product today vs 2 years ago?
4. How much services revenue is implementation pass-through vs strategic onboarding investment?
5. CAC payback definition: fully loaded or sales/marketing direct only?
6. What are gross retention and churn for customers <$100k ARR vs >$250k ARR?
7. Pipeline quality: net-new logo growth vs expansion contribution over next 12 months?
8. Any single-partner/channel dependency in lead generation or product integrations?
9. Margin expansion levers: hosting efficiency, support automation, G&A scale—quantify each.
10. Capital allocation priorities for the $1.4bn net cash (M&A hurdle rates, buyback thresholds)?

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Bottom line

LedgerLift is fundamentally strong, but at $46 the stock appears fully valued-to-overvalued on intrinsic cash flow assumptions and only reasonable on relative comps. With DCF/comps dispersion unusually wide, the prudent call is Pass pending clearer evidence on durability of >120% NRR and pace of free-cash-flow scaling.