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· SaaS micro-acquisition — B2B vertical SaaS
Tideline Software, AI Diligence Brief delivered
Target: Tideline Software, Inc., a B2B vertical-SaaS platform for field-service operators (subscription + implementation services). Stated “ARR” $3.60M, FY recognized revenue $3.42M, adjusted EBITDA $1.05M, 81% gross margin. Verdict: A real product with healthy margins, but the headline ARR is padded with one-time services, a single customer is 17% of true ARR against a “no customer over 10%” claim, and the EBITDA is inflated by capitalized R&D. Proceed with the items below confirmed before LOI.
Generated from a 4-document data room, 28 pages in total
Every claim below is traced to one of these source documents, and figures are reconciled across them, exactly as a real run reads a full data room.
Confidential Information Memorandum: Tideline_Software_CIM.pdf · 16p
Financial statements: Tideline_Financial_Statements.pdf · 6p
ARR & customer schedule: Tideline_ARR_and_Customer_Schedule.pdf · 4p
Management-call notes: Tideline_Management_Call_Notes.pdf · 2p
2Verified claims
2Contradictions
4Risks & flags
3Discarded by verifier
No findings match this filter, .
Verified claims
The economics are genuinely SaaS-like: FY recognized revenue of $3.42M at an 81% gross margin. That margin is the reason to look, but read it against the ARR-quality and capitalized-R&D findings below, which lower the true cash earnings.
high confidence
Source: Tideline_Financial_Statements.pdf · page 5 ✓ verified against source
“FY recognized revenue was $3.42M at a gross margin of 81%.”
There is a real installed base on the platform, not a services shop in disguise: the subscription component is the majority of revenue. Confirm the exact subscription-vs-services split (the schedule shows $520K is services) and the contracted vs month-to-month mix.
high confidence
Source: Tideline_Software_CIM.pdf · page 4 ✓ verified against source
“Subscription revenue represents the majority of total revenue, with the balance from implementation and professional services.”
Contradictions flagged
Two passages in the same document that cannot both be true. The brief shows you both, verbatim, and leaves the judgment to you.
critical
contradiction
The headline “ARR” is padded: $520K of the $3.60M is one-time services
Page 4 presents annual recurring revenue (ARR) of $3.60M. The revenue schedule shows $520,000 of that figure is one-time implementation and professional-services revenue, which is not recurring. True ARR is $3.08M, the headline overstates the recurring base by $520,000, or 14.4%. A SaaS multiple applied to $3.60M instead of $3.08M overpays. Reprice on the $3.08M recurring figure and confirm services are not double-counted in the growth rate.
Tideline_Software_CIM.pdf · page 4
✓ verified
“Annual recurring revenue (ARR) was $3.60M as of period end.”
vs
Tideline_ARR_and_Customer_Schedule.pdf · page 3
✓ verified
“Of the $3.60M, $520,000 represents one-time implementation and professional-services revenue recognized during the period.”
high
contradiction
The “no customer over 10%” claim is contradicted: the largest is 17% of true ARR
Page 7 states no customer exceeds 10% of ARR. The customer schedule lists the largest account at $524,000, which against true recurring ARR of $3.08M is 17.0% (and still 14.6% even of the inflated $3.60M figure). Losing this one account would remove a meaningful slice of recurring revenue. Verify the account's contract term, renewal date, and any concentration in a single end-market.
Tideline_Software_CIM.pdf · page 7
✓ verified
“Revenue is well-distributed; no single customer represents more than 10% of ARR.”
vs
Tideline_ARR_and_Customer_Schedule.pdf · page 5
✓ verified
“Customer A: $524,000; Customer B: $311,000; Customer C: $268,000 (annualized recurring).”
Financial tie-out
A quality-of-earnings first pass: the same figures tied out across the CIM, the financials, and the tax return, and every EBITDA add-back judged on whether it survives a sale. The deltas and the defensible EBITDA are computed, never asserted.
The $1.05M adjusted EBITDA is inflated by $340K of capitalized R&D, on a cash basis it is closer to $710K, and the headline ARR overstates the recurring base by $520K.
mismatch Recurring revenue (ARR): $520K gap, 14.4%
CIM, p.4 (stated ARR) ✓ verified
$3.60M“Annual recurring revenue (ARR) was $3.60M.”
vs
Schedule, true recurring ✓ verified
$3.08M“$520,000 of the $3.60M is one-time services; recurring base is $3.08M.”
The headline ARR includes $520,000 of non-recurring services. Apply any SaaS multiple to the $3.08M recurring base, not the $3.60M figure.
EBITDA add-back scrutiny
| $340,000 |
Capitalized software development (R&D) unlikely
Capitalizing R&D moves a recurring cash cost off EBITDA; the product needs continuous engineering, so a cash buyer expenses it.
|
| $180,000 |
Founder compensation above market likely
A genuine above-market founder salary normalizes to a hired engineering lead's compensation.
|
| $40,000 |
One-time legal settlement questionable
Survives only if documented as genuinely non-recurring.
|
| Seller's adjusted EBITDA (as presented) | $1.05M |
| Less: add-backs that may not survive a sale | ($340,000) |
| Defensible adjusted EBITDA | $710,000 |
| Implied EBITDA before any add-backs | $490,000 |
The seller presents $1.05M. After haircutting the add-backs that are not clearly defensible, $710,000 is what holds up, a gap that moves the price at any multiple.
Management-call cross-check
What management said on the call, checked against what the documents actually support. Both the spoken statement and the documentary basis are verified to source, so neither side of the comparison can be fabricated.
Two of management's statements are contradicted by the documents, and one is unsupported.
contradicted Our ARR is three-point-six million.
On the call
“we're at three-six ARR”
vs
Documents · page 3 ✓ verified
“$520,000 ... is one-time implementation and professional-services revenue.”
$520,000 of the $3.60M is one-time services; true recurring ARR is $3.08M.
contradicted No customer is more than ten percent of revenue.
On the call
“nobody's over ten percent, it's well spread”
vs
Documents · page 5 ✓ verified
“Customer A: $524,000 (annualized recurring).”
The largest customer is $524,000, 17.0% of true ARR ($3.08M).
unsupported We're SOC 2 compliant.
On the call
“yeah, we're SOC 2”
vs
Documents
No SOC 2 report or attestation is in the data room; nothing supports the claim.
supported We did about three-and-a-half million in revenue.
On the call
“we did about three-and-a-half last year”
vs
Documents · page 5 ✓ verified
“FY recognized revenue was $3.42M.”
Matches recognized revenue ($3.42M). Note this differs from the $3.60M ARR headline.
Risks & items needing documentary support
critical
risk
Bus-factor of one: the founder-CTO wrote and solely maintains the platform
A single founder-CTO authored and maintains the core platform, with no architecture documentation and no second engineer who knows the codebase. That is concentration risk on the asset itself, the product, not just the customers. Require a technical due diligence pass, an architecture handover, a retention package, and a documented bus-factor mitigation before close.
Source: Tideline_Software_CIM.pdf · page 8 ✓ verified against source
“The platform was developed and is maintained primarily by the founder, who serves as chief technology officer.”
high
missing info
Net retention is shown, but gross churn is not, NRR can hide it
The CIM gives net revenue retention of 112% but discloses no gross logo or gross dollar churn. A high NRR can be carried by a few expanding accounts while the base churns underneath. Request cohort retention curves, gross logo churn, and gross dollar churn before trusting the durability of the recurring base.
Source: Tideline_Software_CIM.pdf · page 6 ✓ verified against source
“Net revenue retention was 112% for the period.”
high
risk
Capitalized R&D inflates EBITDA: $340K of engineering sits on the balance sheet
$340,000 of R&D was capitalized rather than expensed, which moves a recurring cash cost off the income statement and lifts the reported $1.05M EBITDA. The product needs continuous engineering, so on a cash basis the earnings are lower. Treat the capitalized R&D as opex in the model, true cash EBITDA is closer to $710K.
Source: Tideline_Financial_Statements.pdf · page 9 ✓ verified against source
“Software development costs of $340,000 were capitalized during the period.”
medium
missing info
A portion of customers are month-to-month, weakening ARR durability
Some customers are on month-to-month rather than annual contracts, which lowers switching cost and makes the recurring base easier to leave. Request the share of ARR on annual vs monthly terms and the weighted-average remaining contract length.
Source: Tideline_Software_CIM.pdf · page 10 ✓ verified against source
“A portion of customers are billed on month-to-month terms.”
What to confirm before LOI
- Reprice on true recurring ARR of $3.08M, not the $3.60M headline (services stripped).
- Largest-customer contract term, renewal date, and end-market concentration (17% of ARR).
- Technical due diligence: architecture handover, codebase docs, founder-CTO retention.
- Cohort retention, gross logo churn, and gross dollar churn (behind the 112% NRR).
- Re-state EBITDA with capitalized R&D expensed (cash EBITDA ≈ $710K).
- Share of ARR on annual vs month-to-month terms and weighted-average contract length.
- SOC 2 report / security posture and any open customer security obligations.
- Reconcile the $3.60M ARR with the $3.42M recognized revenue and the growth rate.
Verification log, discarded before delivery
The model generated these while drafting. Each was checked against the source, could not be tied to a verbatim passage, and was removed before you saw the brief. This is the part most AI diligence tools never show you.
No SOC 2 report or audit attestation is in the data room; nothing supports the compliance claim.
Surfaced instead: request the SOC 2 report (or remediation status) and the security questionnaire history.
No gross churn figure appears anywhere; only net revenue retention (112%) is given, which is not the same thing.
Surfaced instead: request gross logo and gross dollar churn by cohort.
Contradicted by the CIM's own note that a portion of customers are month-to-month; no source supports 'all annual'.
Investment-committee memo
The decision capstone, drafted from the verified findings and the tie-out above. Every figure traces to a cited number in this brief, and it is candid that the first pass still wants a formal quality-of-earnings review.
pursue with conditions
Pursue with conditions: a real vertical-SaaS platform at healthy margins, contingent on repricing to true ARR, resolving the customer and key-person concentration, and re-stating EBITDA for capitalized R&D before LOI.
Recommendation
Proceed to a conditional LOI, but reprice. The product and 81% margin are real, yet three findings change the number: the headline ARR is $3.08M not $3.60M once services are stripped, one customer is 17% of ARR (contradicting 'no customer over 10%'), and the $1.05M EBITDA falls to ~$710K on a cash basis after the capitalized R&D. Anchor valuation to $3.08M recurring and ~$710K cash EBITDA.
Investment thesis
A vertical-SaaS platform for field-service operators with an 81% gross margin and 112% net revenue retention. The recurring base and margin support a SaaS multiple, subject to verifying ARR quality, churn, and the founder-CTO key-person risk.
Financial summary
Stated ARR $3.60M but true recurring $3.08M after removing $520K of services; recognized revenue $3.42M. Adjusted EBITDA $1.05M, but $340K of capitalized R&D inflates it, cash EBITDA is closer to $710K; implied EBITDA before add-backs $490K.
Key risks
ARR quality (services padding). Customer concentration (largest 17% of true ARR). Product/key-person concentration on a single founder-CTO with no documentation. Undisclosed gross churn behind the 112% NRR. Capitalized R&D and a month-to-month contract tail.
Conditions to close
Reprice on $3.08M recurring; complete technical due diligence and an architecture handover; obtain cohort and gross-churn data; re-state EBITDA with R&D expensed; secure the largest customer's renewal terms; and obtain the SOC 2 posture. This brief is a first pass, not a formal QoE or technical opinion.
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