Investment Committee Memo: LedgerLift (LLLT)

Date: Internal Review | Coverage: Initiating | Recommendation: LONG

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1. Recommendation

Position: Long | 12-Month Price Target Range: $42–$76 | Current Price: $46

LedgerLift offers a compelling risk/reward at current levels, trading at 8.9x FY2025 revenue with a clear path to 15%+ unlevered FCF margins and 20%+ EBIT margins by 2028. The mid-market spend management theme is structurally advantaged, and the combination of 123% NRR with sub-18-month CAC payback indicates unit economics that compound as scale accrues. We assign a base case PT of $56 (22% upside) and see meaningful upside to $76 in bull scenarios, with $42 representing fair value even under stressed assumptions.

Two-Sentence Thesis: LedgerLift sits at the intersection of three durable secular trends—AP automation, B2B payments digitization, and spend intelligence—and is winning share in the underserved mid-market ($50M–$500M revenue segment) where legacy ERP players lack flexibility and pureplay fintechs lack depth. With operating leverage set to emerge as revenue growth moderates from 21% to the mid-teens, the stock offers GARP exposure to a compounding business at a valuation that prices in little to no margin expansion.

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2. Business Overview: Why It Wins, Why Now

LedgerLift provides integrated spend management and accounts payable automation to mid-market enterprises, bundling invoice processing, payment execution, virtual card issuance, and spend analytics into a single platform. The product addresses a acute pain point: mid-market finance teams still operate fragmented workflows combining legacy ERPs, standalone AP tools, and manual processes, resulting in 5–7 days of additional close cycles and 2–3% of spend lost to inefficiency and fraud.

The company wins through three competitive moats. First, product depth— LedgerLift integrates with 200+ ERPs and banks, offering mid-market customers capabilities previously available only in enterprise-grade solutions like Coupa or SAP Concur. Second, land-and-expand motion— the 123% NRR demonstrates strong expansion within accounts, as customers typically start with AP automation and add travel and expense management, procurement, and spend analytics modules over 18–24 months. Third, mid-market focus—at $132k ARPA, the company targets companies too large for point solutions but too small for enterprise procurement systems, a segment where competition from both legacy vendors (SAP, Oracle) and pureplays (Bill.com, Paddle) remains fragmented.

Why now? The pandemic accelerated digital payment adoption, and post-2022 cost pressures have made CFO offices acutely focused on working capital efficiency and spend visibility. The rise of embedded finance and card-based B2B payments creates a network effect: as LedgerLift adds card partners andbank connections, the platform becomes more valuable to both payers and suppliers. Additionally, the CRE exposure and fintech funding contraction have compressed valuations for profitable SaaS names, creating an entry point for capital allocators willing to look beyond near-term S&M intensity.

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3. KPI Quality Check

Metric	Actual	Assessment	Red Flags
NRR	123%	Strong	Expansion driven by seat growth and module adoption; sustainable at current trajectory
Logo Churn	6%/yr	Moderate	Below SaaS median (~8–10%) but worth monitoring; mid-market churn typically 8–12%
Gross Retention	94%	Healthy	Indicates solid product-market fit; 6% churn driven by M&A and non-renewals
CAC Payback	18 months	Good	Efficient for growth-stage SaaS; sub-24-month payback supports aggressive S&M
Concentration	Top 10 = 16%, Top 1 = 3%	Low risk	Diversified; no single-account exposure concerning

What Could Be Wrong: Several considerations warrant deeper diligence. The 6% logo churn may understate true retention risk if customers consolidate to ERP-native modules as they scale beyond $250M revenue. S&M at 34% of revenue is elevated versus mature SaaS (25–30%) and suggests the company is still in aggressive growth mode; if CAC payback lengthens or ROAS deteriorates, the path to 25%+ operating margin becomes uncertain. The 92%/8% subscription/services mix is healthy, but services gross margin at 25% drags blended GM—we need visibility on services mix trajectory. Finally, while concentration looks fine today, the 6,200-customer base implies average account size of ~$132k; if upmarket motion stalls and the company remains mid-market focused, the TAM ceiling becomes a structural constraint.

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4. Financial Projections & Valuation

Base Case DCF (WACC: 10%, Terminal Growth: 3%)

Metric	FY2026	FY2027	FY2028	FY2029	FY2030
Revenue ($M)	$992	$1,171	$1,346	$1,521	$1,704
EBIT ($M)	$198	$258	$323	$380	$443
Unlevered FCF ($M)	$144	$196	$253	$306	$366

Terminal Value (Gordon Growth): $8,028M | PV of Terminal Value: $4,976M PV of FCF (2026–2030): $865M | Implied EV: $5,841M Plus: Net Cash $1,400M | Implied Equity Value: $7,241M Implied Share Price: $56 (22% upside from $46)

Bull Case DCF (WACC: 9%, Terminal Growth: 4%)

Metric	FY2026	FY2027	FY2028	FY2029	FY2030
Revenue ($M)	$1,025	$1,240	$1,463	$1,683	$1,902
EBIT ($M)	$215	$298	$380	$471	$552
Unlevered FCF ($M)	$158	$230	$304	$385	$459

Terminal Value: $12,568M | PV of Terminal Value: $8,464M PV of FCF: $1,143M | Implied EV: $9,607M Plus: Net Cash $1,400M | Implied Equity Value: $11,007M Implied Share Price: $76 (65% upside from $46)

Bear Case DCF (WACC: 12%, Terminal Growth: 2%)

Metric	FY2026	FY2027	FY2028	FY2029	FY2030
Revenue ($M)	$951	$1,075	$1,193	$1,312	$1,430
EBIT ($M)	$162	$193	$227	$262	$300
Unlevered FCF ($M)	$118	$145	$176	$208	$243

Terminal Value: $4,186M | PV of Terminal Value: $2,336M PV of FCF: $581M | Implied EV: $2,917M Plus: Net Cash $1,400M | Implied Equity Value: $4,317M Implied Share Price: $29 (37% downside from $46)

Key Modeling Assumptions: D&A at 2.5% of revenue, Capex at 3%, NWC investment at 1% of incremental revenue, cash tax rate of 23%. The bull case assumes accelerated market share gains and margin expansion as S&M as % of revenue declines to 28% by FY2030. The bear case models a competitive response from legacy vendors and slower expansion within existing accounts.

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5. Comps Cross-Check

Peer Set (Median): EV/NTM Revenue 9.0x | EV/NTM EBIT 35x

Multiple	Implied EV	Implied Share Price	Premium/Discount to Current
Revenue (9.0x FY2025)	$7,380M	$46	At current price
Revenue (9.0x FY2026)	$8,928M	$56	22% upside
EBIT (35x FY2026)	$6,930M	$41	11% downside
EBIT (35x FY2028)	$11,305M	$74	61% upside

Comps Analysis: The median peer multiple of 9.0x NTM revenue aligns closely with LedgerLift's current 8.95x FY2025 multiple, suggesting the market is pricing the company at peer norms. However, applying the revenue multiple to FY2028 estimates suggests 40–50% upside as growth moderates but margins expand. The EBIT multiple is less useful given the company's 18% current margin versus mature peer levels, but the 35x multiple applied to FY2028 EBIT implies significant upside. We value the stock at a slight premium to the median (9.5x FY2026 revenue) given the NRR advantage and lower concentration, warranting a price target in the mid-$50s.

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6. Catalysts, Risks & Falsifiable Triggers

Three Catalysts

1. Enterprise deal acceleration: Signing 3–5 $1M+ ACV logos in a quarter would validate upmarket motion and reset growth expectations above 20%.
2. Gross margin expansion: Services mix declining below 5% with subscription GM reaching 84%+ would signal improving unit economics and operating leverage.
3. Strategic acquisition: Announcing a tuck-in acquisition in adjacent spend categories (e.g., travel management, procurement) at reasonable multiples would expand TAM and demonstrate capital allocation discipline.

Five Key Risks

1. Competitive intensity: Coupa (now part of Broadcom) or Oracle aggressively pricing AP modules for mid-market could compress pricing and accelerate churn.
2. Mid-market saturation: The 6,200-customer base may approach the addressable market ceiling, leading to decelerating growth before margins compound.
3. Capital markets exposure: $1.4B net cash provides runway, but if FY2026 growth falls below 15%, the company may need to raise equity at depressed multiples.
4. S&M efficiency deterioration: If CAC payback extends beyond 24 months due to competitive pressure, the path to 25%+ operating margin evaporates.
5. Integration failures: As customers add modules, implementation complexity increases; a high-profile failure or delayed deployment could damage reputation and NRR.

Three Falsifiable Triggers (What Would Change My Mind)

1. NRR declines below 115% for two consecutive quarters: This would indicate product-market fit issues or competitive displacement, breaking the core investment thesis.
2. Logo churn exceeds 10% in a fiscal year: Mid-market churn at this level would suggest the company cannot retain customers as they scale, making the land-and-expand model invalid.
3. FY2026 revenue growth below 15% with gross margin below 77%: This combination would indicate both top-line pressure and pricing power erosion, warranting a revaluation to 6–7x revenue.

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7. Diligence Questions for Management

1. What percentage of customers have expanded beyond AP automation into procurement or spend analytics, and what is the median time to expand?
2. **How does the sales team size and productivity compare between mid-market (sub-$100M revenue) and upper mid-market ($100M–