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    LGN
    Earnings call· Mar 2026(Q1 FY26)

    Legence Q1 FY26 earnings call LGN

    May 14, 2026 Source

    Executive summary

    Legence Corp. Q1 FY26 — Record Backlog and Strong Revenue Growth Drive Raised Full-Year Guidance

    Legence delivered a strong first quarter, exceeding guidance with robust organic growth and significant contributions from the Bowers acquisition, particularly in the data center market. The company achieved record backlog and improved free cash flow, leading to a substantial increase in full-year revenue and EBITDA guidance. Management highlighted successful project execution and strategic M&A integration, positioning Legence for continued growth and future M&A flexibility.

    Highlights

    5

    • Total revenues more than doubled year-over-year to just over $1 billion, with 57% organic growth excluding Bowers.

    • Adjusted EBITDA grew by 132% year-over-year to $118 million, with margins expanding over 130 basis points to 11.4%.

    • Total backlog and awards reached a record $5.4 billion, up 104% year-over-year, with a book-to-bill ratio of 1.2x for the quarter.

    • Free cash flow exceeded $100 million, translating to a conversion rate of over 85% of adjusted EBITDA, significantly up from 50% prior year.

    • Full-year 2026 revenue guidance raised to $4.1 billion-$4.3 billion and adjusted EBITDA guidance raised to $470 million-$490 million.

    Concerns

    3

    • Engineering & Design revenues declined by 8% due to a tough comparable prior year quarter and softer demand for sustainability consulting.

    • Consolidated adjusted gross margin decreased to 18.7% from 21.9% YoY, primarily due to revenue mix shift towards lower-margin Installation & Maintenance segment.

    • E&C adjusted gross margin declined to 33.2% from 40.7% YoY, driven by a revenue mix shift towards lower-margin Program & Project Management services.

    Guidance & targets

    13
    CategoryTargetConfidence
    Consolidated Revenue
    $1.05 billion to $1.1 billion
    high materiality
    High
    Adjusted EBITDA
    $115 million and $125 million
    high materiality
    High
    Full Year Consolidated Revenue
    $4.1 billion to $4.3 billion
    high materiality
    High
    Full Year Adjusted EBITDA
    $470 million to $490 million
    high materiality
    High
    Interest Expense (net)
    $15 million range
    low materiality
    Medium
    Full Year Interest Expense (net)
    high $50 million range
    low materiality
    Medium
    Full Year Depreciation and Amortization
    mid-$170 million range
    low materiality
    Medium
    Full Year Capital Expenditures
    $65 million range
    medium materiality
    Medium
    Effective Tax Rate (ETR)
    mid-20% to low 30% range
    low materiality
    Medium
    Effective Tax Rate (ETR)
    low 30% range
    low materiality
    Medium
    Cash Taxes
    high $20 million to mid-$30 million range
    low materiality
    Medium
    TRA Payment (2025 operating activity)
    around $8 million to $9 million
    low materiality
    Medium
    TRA Payment (2026 operating activity)
    high $20 million to low $30 million range
    low materiality
    Low

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Engineering & Consulting
    Most of the revenue growth was organic. Program & Project Management service revenues grew robustly, particularly in K-12 schools, and saw additional activity in data centers and technology. Engineering & Design revenues declined due to a tough comparable prior year quarter and softer demand for sustainability consulting. Lower adjusted gross margin compared to prior year was due to tough comparable and mix shift towards lower-margin Program & Project Management services.
    Program & Project Management service revenue growth: 75%Program & Project Management service revenue % of segment: 41% (vs 27% YoY)Engineering & Design revenues: -8% YoY
    		$166 million14%—33.2%
    Installation & Maintenance
    Roughly half of the growth was from the addition of Bowers, with the remaining largely organic. Installation & Fabrication services accounted for the majority of segment growth, driven by Bowers and robust organic growth with data center and technology clients. Experienced attractive organic growth in life science and healthcare. Adjusted gross margin improvement was driven by strong project execution within Installation & Fabrication and economies of scale.
    Installation & Fabrication services growth: 162% YoYMaintenance & Service revenue growth: 60% YoY (over 20% excluding Bowers)
    		$872 million142%—15.9%

    Operational metrics

    30
    Total Revenues
    $1.038 billion+105% YoY
    Q1 FY26

    Exceeded quarterly guidance.

    Revenue Increase
    $506 millionYoY
    Q1 FY26

    Increase from prior year quarter.

    Bowers Group Acquisition Revenue Contribution
    over $240 million
    Q1 FY26

    Accounted for just under half of the year-over-year revenue gains.

    Organic Revenue Growth (excluding Bowers)
    57%YoY
    Q1 FY26

    Strong organic growth.

    Adjusted EBITDA
    $118 million+132% YoY
    Q1 FY26

    Reflecting contribution from Bowers and overall growth.

    Adjusted EBITDA Margin
    11.4%+133 bps YoY
    Q1 FY26

    Benefited from strong project execution and better SG&A leverage.

    Consolidated Gross Profit
    $186 million+67% YoY
    Q1 FY26

    Includes stock-based and other compensation expense related to legacy profit interest units.

    Adjusted Gross Profit (consolidated)
    $194 million
    Q1 FY26

    Excluding profit interest expense.

    Adjusted Gross Margin (consolidated)
    18.7%vs 21.9% YoY
    Q1 FY26

    Lower due to revenue mix shift to I&M and lower E&C margins, partially offset by I&M improvement.

    Adjusted Gross Profit (prior year)
    $111 million
    Q1 FY25

    Adjusted gross profit in the comparable prior year quarter.

    Adjusted SG&A
    $83 millionup from $64 million YoY
    Q1 FY26

    Excluding stock-based/noncash compensation and acquisition/strategic initiative expenses. Increase due to Bowers, headcount, and lease expenses.

    Adjusted SG&A as % of revenue
    8%down from 12.6% YoY
    Q1 FY26

    Improved significantly due to greater economies of scale.

    Depreciation and Amortization
    $42 millionup from $29 million YoY
    Q1 FY26

    Increase largely due to Bowers acquisition.

    Interest Expense (net)
    $16 milliondeclined by $13 million YoY
    Q1 FY26

    Primarily due to lower average debt balance.

    Income Tax Benefit
    $13 million
    Q1 FY26

    Largely due to release of valuation allowance on deferred tax assets.

    Valuation Allowance Release on Deferred Tax Assets
    $20 million
    Q1 FY26

    Flipped income tax from an expense to a benefit.

    Free Cash Flow Conversion Rate
    over 85%vs 50% YoY
    Q1 FY26

    Conversion rate of adjusted EBITDA, reflecting operating performance, lower interest burden, and improved working capital management.

    Cash Balance
    $245 millionup from $230 million at year-end 2025
    as of March 2026

    Cash on hand at quarter end.

    Total Liquidity
    $414 millionnearly flat when compared to $424 million at year-end 2025
    as of March 2026

    Despite use of cash for Bowers and Metrics acquisitions.

    Total Debt
    slightly over $1 billionup approximately $200 million from year-end
    as of March 2026

    Reflects upsizing of term loan to fund Bowers acquisition.

    Pro Forma Net Leverage Ratio
    1.8xcompared to 2.9x just 9 months ago
    as of March 2026

    Based on pro forma last 12 months EBITDA, including Bowers EBITDA prior to ownership. Expects to gravitate lower barring acquisitions.

    Total Full-Time Employees
    over 10,000
    as of April 2026

    Crossed this milestone in April.

    Skilled Technicians and Crafts People
    approximately 7,400over 1,000 more than what we began the year with
    as of April 2026

    Part of the growing labor force to meet demand.

    Engineers and Consultants
    over 1,200
    Q1 FY26

    Work alongside skilled technicians.

    Fabrication Capacity
    1.3 million
    Q1 FY26

    Largely up and running, with operational flexibility to execute on current book of business and meet additional demand.

    Fabrication as % of I&M Segment Revenue
    low 20s%increased from near 20% in Q4
    Q1 FY26

    Expected to continue to gravitate higher in the near term.

    Data Center Organic Growth
    about 30%YoY
    Q1 FY26

    Organic growth rate in the data center and technology end market.

    Equipment Costs
    $283 millionup a bit QoQ
    Q1 FY26

    Equipment costs as a percentage of revenue.

    Analyst Estimate E&C Revenue (annualized)
    $660 million
    FY26

    Analyst's calculation based on Q1 run rate, discussed by management.

    Analyst Estimate I&M Revenue (annualized)
    $3.5 billion
    FY26

    Analyst's calculation based on Q1 run rate, discussed by management.

    Industry KPIs

    7
    MetricValueDetails
    Total backlog$5.4BUSD
    Book to bill ratio1.2x
    End market pipelinedata center and technology
    Acquisition contributionBowers Group
    Self perform activity mixInstallation & Fabrication services
    Same store organic revenue growth57%%
    Craft skilled labor headcount capacity>10,000 total employees; ~7,400 skilled technicians and crafts peopleemployees

    Orderbook & backlog

    5
    Total Backlog and Awards$5.4 billionMarch 2026

    +104% YoY

    Reflects inclusion of Bowers. Provides additional visibility into a portion of 2027.

    Total Backlog and Awards (excluding Bowers)grew by 36%March 2026

    YoY

    Net New Backlog (sequential)approximately $200 millionQ1 FY26

    Added on top of $1 billion in revenue recorded during the first quarter.

    Book-to-Bill Ratio1.2xQ1 FY26

    lower than Q4 FY25

    Q4 FY25 had several very large awards. A book-to-bill ratio measured over a 3-month period is quite sensitive to award timing. Average of Q1 and Q4 is 1.5x.

    Fabrication Orders VisibilityEnd Q4 2028Q1 FY26

    Visibility for some fabrication orders.

    Deals & partnerships

    2
    Bowers GroupExpanded mechanical presence in D.C., Virginia region; diversified client base with hyperscalers and colocators.funded by upsizing term loan by ~$200M

    First quarter with Bowers, integration progressing well.

    MetricsNot detailed, mentioned as an acquisition using cash.

    Use of cash for both the Bowers and Metrics acquisitions.

    Risks & headwinds

    2
    Sustainability consulting demandQ1 FY26

    8% decline in Engineering & Design revenues

    Mitigation: Hopeful that sustainability consulting will pick up in future periods as backlog has increased since year-end 2025.

    Commercial real estate market softnessCurrent

    soft market right now

    Mitigation: Not a key market that we're pursuing day in and day out.

    What to watch in Q2 FY26

    5

    E&C Segment Margin Trajectory

    Next quarter
    Current33.2% adjusted gross margin in Q1 FY26
    TargetReturn to mid-30s range

    Why it matters

    E&C margins have been lower than historical mid-30s due to mix shift; recovery indicates improved profitability.

    I would expect going forward⏳ it to remain more in that historic range of low to mid-30s.

    Q&A highlights

    7

    With leverage below 2x, does Legence see scope for larger M&A like Bowers, and what are the considerations for M&A in E&C vs. I&M?

    The improved leverage provides flexibility for larger acquisitions in the medium term, though not immediately after Bowers. Legence is open to bolt-on acquisitions in E&C for customer/capacity/expertise, and is now in a better position to act quickly on larger opportunities, while remaining selective.

    “Optionality is a huge word for us and having the option to be able to pursue some larger or some might even call transformative acquisitions, now that we've proven that we can delever in a rather quick fashion really helps us as we look at the market and look at our pipeline of opportunities.”

    asked by Adam Bubes · answered by Jeffrey Sprau

    2 min read7 chapters

    Detailed Narrative

    01

    Strong Q1 Performance and Guidance Raise

    Legence exceeded Q1 guidance with total revenues over $1 billion, more than double year-over-year, and adjusted EBITDA up 132%. This outperformance, driven by strong project execution and efficiency gains, led to a significant raise in full-year 2026 revenue guidance to $4.1 billion-$4.3 billion and adjusted EBITDA guidance to $470 million-$490 million.

    02

    Strategic Impact of Bowers Acquisition

    The Bowers Group acquisition contributed over $240 million in revenue, accounting for nearly half of the year-over-year revenue gains, and significantly expanded Legence's mechanical presence in the D.C., Virginia region, diversifying its hyperscaler and colocator client base. The integration is exceeding expectations, contributing to financial impact and improved leverage.

    03

    Record Backlog and Robust Demand

    Total backlog and awards reached a record $5.4 billion, a 104% increase year-over-year (36% excluding Bowers), providing visibility into 2027. The book-to-bill ratio for Q1 was 1.2x, with the data center and technology end market being the predominant driver, alongside growth in state & local government and education.

    04

    Labor Force and Fabrication Capacity

    Legence's labor force crossed 10,000 full-time employees, including 7,400 skilled technicians, an increase of over 1,000 since the beginning of the year. The company is largely up and running on 1.3 million square feet of fabrication capacity, feeling confident in its ability to execute on current and pipeline demand, with growing interest from pharmaceutical and semiconductor clients.

    05

    M&A Strategy and Deleveraging

    The company's net leverage ratio improved to 1.8x from 2.9x nine months prior, providing flexibility for future M&A. Management expressed openness to bolt-on acquisitions for customer, capacity, and expertise additions, and the ability to pursue larger, potentially transformative acquisitions given their proven deleveraging capability.

    06

    E&C Segment Traction with Data Centers

    The Engineering & Consulting segment is gaining traction with data center and technology clients, leveraging existing relationships from the Installation & Maintenance segment to offer integrated service offerings. This expansion into high-tech customers is a key focus for cross-selling and overall thesis of Legence.

    07

    Free Cash Flow Generation

    Free cash flow exceeded $100 million in Q1 FY26, representing an over 85% conversion rate of adjusted EBITDA, significantly higher than the 50% conversion rate in the prior year. This improvement is attributed to operating performance, lower interest burden, and improved working capital management, with custom fabrication work often benefiting from higher prepayments.

    AI-generated summary of the company’s earnings call. Not investment advice.