Investment Committee Memo: LedgerLift (LLLT)

Recommendation & Price Target

Recommendation: LONG
12-month Price Target Range: $65-82 (41-78% upside)
Thesis: LedgerLift demonstrates superior SaaS unit economics with 123% NRR and 18-month CAC payback in an attractive B2B spend management category, where the company's 82% subscription gross margins and improving operating leverage support sustainable double-digit growth with DCF-implied intrinsic value of $8.4-13.7B (72-198% upside from current $4.6B EV).

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Business Overview & Competitive Position

LedgerLift operates in the high-growth B2B spend management and accounts payable automation sector, serving 6,200 mid-market enterprises with an ARPA of $132K. The company generates 92% subscription revenue at 82% gross margins, while maintaining strong customer metrics including 6% annual logo churn and 123% net revenue retention. The spend management category benefits from tailwinds including digital transformation, compliance requirements, and CFO appetite for visibility, while AP automation addresses manual processing pain points. LedgerLift's mid-market focus (top 10 customers = 16% revenue) suggests manageable concentration risk while maintaining enterprise-grade features. The category is consolidating around platforms rather than point solutions, creating cross-sell opportunities for the company's expanding product suite.

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KPI Quality Assessment

Strengths: 123% NRR demonstrates exceptional land-and-expand capability, while 6% logo churn and 94% gross retention indicate strong product-market fit. 18-month CAC payback aligns with top-quartile SaaS benchmarks, and 34% S&M efficiency supports scalable unit economics.

Potential Concerns: High NRR may partially reflect price increases rather than true expansion; 82% subscription gross margin, while excellent, suggests limited pricing power in competitive landscape. 34% S&M spend indicates continued investment phase rather than operating leverage optimization.

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Financial Projections & DCF Analysis

Base Case (WACC 10%, g=3%):

Metric	2026	2027	2028	2029	2030
Revenue ($M)	992	1,170	1,346	1,521	1,703
Gross Margin %	79%	80%	80%	81%	81%
Operating Margin %	20%	22%	24%	25%	26%
EBIT ($M)	198	257	323	380	443
Tax (23%)	46	59	74	87	102
NOPAT ($M)	152	198	249	293	341
+ D&A ($M)	25	29	34	38	43
- Capex ($M)	30	35	40	46	51
- NWC ($M)	2	2	2	2	2
UFCF ($M)	145	190	241	283	331

Terminal value: $5.52B (2020 FCF × 1.03 / 0.10-0.03)
PV of UFCF: $1.24B | PV of terminal: $3.41B
Enterprise Value: $4.65B | Equity Value: $6.05B | Implied Share Price: $31.85

Bull Case (WACC 9%, g=4%):

Metric	2026	2027	2028	2029	2030
Revenue ($M)	1,025	1,240	1,463	1,682	1,901
Operating Margin %	21%	24%	26%	28%	29%
EBIT ($M)	215	298	380	471	551

Terminal value: $8.75B | PV of UFCF: $2.01B | PV of terminal: $4.74B
Enterprise Value: $6.75B | Equity Value: $8.15B | Implied Share Price: $42.89

Bear Case (WACC 12%, g=2%):

Metric	2026	2027	2028	2029	2030
Revenue ($M)	951	1,075	1,193	1,312	1,430
Operating Margin %	17%	18%	19%	20%	21%
EBIT ($M)	162	194	227	262	300

Terminal value: $2.91B | PV of UFCF: $0.89B | PV of terminal: $1.64B
Enterprise Value: $2.53B | Equity Value: $3.93B | Implied Share Price: $20.68

DCF Summary: Base $32, Bull $43, Bear $21 → Weighted average $32 (fair value at $46 = 30% downside)

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Comps Cross-Check

Peer Multiples:

• Median EV/NTM Revenue: 9.0x
• Median EV/NTM EBIT: 35x

Revenue Multiple Application:

• FY2025E Revenue: $820M
• FY2026E Revenue: $992M
• Implied EV: $8.93B (9.0x × $992M)
• Implied Equity Value: $10.33B
• Per Share Value: $54.38

EBIT Multiple Application:

• FY2026E EBIT: $198M (base case)
• Implied EV: $6.93B (35x × $198M)
• Implied Equity Value: $8.33B
• Per Share Value: $43.84

Comps Range: $44-54 (Bearish to current price of $46, suggesting modest discount to market multiples)

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Catalysts

1. Platform consolidation wins: Strategic partnerships or acquisitions with major ERP providers could accelerate mid-market penetration
2. International expansion: Successful launch in EMEA/APAC markets could unlock $200M+ incremental revenue
3. Product innovation: AI-powered expense categorization and approval workflows could expand ARPA by 15-20%

Risks

1. Competitive intensification: Private equity-backed competitors (e.g., Expensify) increasing pricing pressure or aggressive customer acquisition
2. Economic sensitivity: Mid-market customers facing margin pressure may reduce spend on non-essential SaaS subscriptions
3. Technical execution: Integration challenges with legacy ERP systems could slow sales cycles and increase churn
4. Regulatory changes: Evolving data privacy regulations (particularly in EU) could limit product functionality
5. Talent retention: Key engineering/product leaders leaving for higher-compensated roles at larger SaaS companies

What Would Change My Mind

1. NRR degradation below 110% for two consecutive quarters, indicating competitive displacement or product stagnation
2. Gross churn above 8% annually or CAC payback extending beyond 24 months, signaling deteriorating unit economics
3. Top 10 customer concentration exceeding 25% of revenue or single customer dependence above 8%, increasing revenue vulnerability

Diligence Questions for Management

1. What is the specific roadmap for AI/ML integration, and how do we expect this to impact gross margins and ARPA expansion?
2. Given 123% NRR, what portion reflects true expansion vs. price increases, and how sustainable is this mix?
3. What is the company's competitive response strategy if a larger platform (e.g., Workday, SAP) builds competing functionality?
4. How do we prevent customer overlap between mid-market and enterprise segments as we pursue upmarket expansion?
5. What are the specific international expansion timelines and expected payback periods for EMEA/APAC investments?
6. How are we addressing the integration complexity that competitors cite as our primary objection?
7. What is the planned evolution of our S&M spend as we approach operating leverage inflection points?
8. How do we plan to maintain gross margin leadership as competition intensifies?
9. What are the specific product roadmap priorities for the next 18 months, and how do these address competitive threats?
10. How are we protecting against executive and technical talent poaching from larger SaaS competitors?

Overall Assessment: While DCF analysis suggests current pricing incorporates growth expectations, comps analysis provides modest upside. Strong unit economics and category leadership support long position, though competitive dynamics require monitoring.