INVESTMENT COMMITTEE MEMO

TO: Investment Committee FROM: [Analyst Name], Senior Analyst DATE: [Current Date] SUBJECT: Investment Recommendation: LedgerLift (LLL)

RECOMMENDATION

RECOMMENDATION: Long
12-MONTH PRICE TARGET: $62-$68 per share
THESIS: LedgerLift represents a high-quality SaaS business with best-in-class retention metrics and strong product tailwinds in the AP automation space, but investor sentiment has overly punished the stock due to short-term concerns about enterprise spending.

BUSINESS OVERVIEW

LedgerLift provides B2B spend management and accounts payable (AP) automation software for mid-market enterprises. The company has established itself as an innovator in automating manual financial processes, helping clients reduce processing costs by an average of 40% while accelerating payment cycles.

Why It Wins:

• Positioned in the growing $30B AP automation market (15-20% annual growth)
• AI-driven invoice processing and three-way matching provides technological differentiation
• Average implementation time of under 30 days with clear ROI for customers
• Strong referral rates (40% of new business) indicating customer satisfaction

Why Now:

• After a period of deceleration in tech spending, the stock has corrected to $46 (-30% from highs)
• Management has provided reassuring guidance for 2025
• Competitors are struggling with funding, creating more favorable competitive landscape

KPI QUALITY CHECK

Strengths:

• NRR of 123% (well above the 110% threshold considered healthy)
• CAC payback of 18 months (within the desired 12-24 month range)
• Gross retention of 94% (industry-leading, indicating strong stickiness)

Concerns:

• Customer concentration: Top 10 customers constitute 16% of revenue (moderate concentration risk)
• Logo churn of 6% annually (slightly elevated compared to 3-4% at market leaders)
• Revenue mix includes 8% services (lower-margin implementation work)

What Could Go Wrong:

• Economic weakness could delay new implementations in the mid-market
• Loss of a major enterprise client could meaningfully impact growth
• Margin expansion may stall if competitive dynamics intensify

VALUATION ANALYSIS

Financial Forecast Summary (in millions, except per share data)

Case	Year	Revenue	EBIT	Unlevered FCF	DCF EV	Equity Value	Implied Share Price
Base	2026	$992	$173	$105	$5,632	$2,532	$53
	2027	$1,170	$224	$135
	2028	$1,347	$281	$169
	2029	$1,521	$347	$207
	2030	$1,684	$414	$246
Bull	2026	$1,026	$184	$112	$7,198	$3,532	$74
	2027	$1,247	$249	$152
	2028	$1,467	$335	$206
	2029	$1,687	$436	$271
	2030	$1,907	$544	$343
Bear	2026	$918	$137	$81	$3,982	$1,467	$31
	2027	$1,037	$161	$95
	2028	$1,150	$188	$110
	2029	$1,265	$220	$128
	2030	$1,375	$253	$146

Valuation Methodology:

• Calculated unlevered free cash flow (EBIT × (1 - tax rate) + D&A - Capex - ΔNWC)
• Applied WACC (10% base, 9% bull, 12% bear) to discount 5-year cash flows
• Added terminal value (FCF Year 6 ÷ (WACC - terminal growth))
• Subtracted net debt ($1,400m cash less debt) to arrive at equity value

COMPS CROSS-CHECK

Peer Valuation:

• Median EV/NTM Revenue: 9.0x (Peer range: 7.0x-11.0x)
• Median EV/NTM EBIT: 35x (Peer range: 28x-42x)

Implied Valuation:

• Base case NTM Revenue: $680m (FY2024) growing to ~$760m in coming year
• Base case NTM EBIT: $123m (FY2024) growing to ~$145m
• Implied EV range using revenue multiple: $4,212m - $5,128m
• Implied EV range using EBIT multiple: $4,270m - $5,110m
• Implied per-share range: $44-$54 (using weighted average of methodologies)

Comps Adjustment Note: Adjusted downward from Peer C's high multiple due to LedgerLift's slightly lower growth profile and higher customer concentration risk.

CATALYSTS

1. Strong Q3 Results: Potential for upside to guidance driven by enterprise demand re-acceleration
2. Acquisition Announcement: Management has hinted at strategic acquisition to broaden product suite
3. Industry Tailwinds: Expected acceleration in AP automation adoption following Fed rate cuts

RISKS

1. Customer concentration (top 10 customers = 16% of revenue)
2. High services revenue mix (8%) with lower margins than pure subscription models
3. Integration challenges after recent acquisitions may distract management
4. Competitive pressure from larger players with broader suites
5. Potential macro weakness affecting mid-market budgets

WHAT WOULD CHANGE MY MIND

1. NRR drops below 115% for two consecutive quarters (indicating weakening customer relationships)
2. Gross margins fall below 75% for two consecutive quarters (indicating pricing pressure)
3. CAC payback extends beyond 24 months (indicating deteriorating customer acquisition efficiency)

DUE DILIGENCE QUESTIONS FOR MANAGEMENT

1. Can you elaborate on the specific growth drivers for 2026 and beyond?
2. How should we think about the risk of churn among the top 10 customers?
3. Recent acquisitions seem to be product-focused; how will you integrate these?
4. How is the competitive response from [Large Competitor] impacting new customer acquisition?
5. The 8% services revenue seems high relative to pure-play peers; what is your target?
6. What's driving the expansion revenue from existing customers?
7. How do you see product development evolving with the increased focus on AI features?
8. Working capital investment at 1% of incremental revenue seems conservative; is this accurate?
9. How are you managing the impact of inflation on implementation labor costs?
10. Your cash tax rate of 23% seems high;