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    LGN
    Earnings call· Jun 2026(Q2 FY26)

    Legence Q2 FY26 earnings call LGN

    Aug 13, 2026 Source

    Executive summary

    Legence Q2 FY26 — Record Revenue and Backlog Driven by Data Centers, Strong Balance Sheet

    Legence delivered a robust second quarter, marked by record revenue and backlog, largely fueled by strong demand in the data center and technology end markets. The company is strategically expanding its fabrication capacity and workforce to meet accelerating project timelines, while also significantly strengthening its balance sheet through debt reduction. Management's revised full-year guidance reflects confidence in continued momentum and execution across its diverse mission-critical service lines.

    Highlights

    5

    • Total revenue increased by 111% year-over-year to $1.3 billion, with over half organic growth.

    • Adjusted EBITDA grew by 114% year-over-year to $155 million, with margins expanding by almost 90 basis points sequentially to 12.2%.

    • Total backlog and awards reached a record $5.7 billion, up 105% year-over-year and 5% sequentially.

    • Pro forma net leverage ratio reduced to 1.5x, half the level post-IPO, despite a major acquisition.

    • Full-year 2026 revenue guidance raised by 13% to $4.7B-$4.8B, and adjusted EBITDA guidance raised by 20% to $565M-$585M.

    Concerns

    3

    • Adjusted gross margin decreased to 18.5% from 21.8% year-over-year, primarily due to revenue mix shift to lower-margin Installation and Maintenance segment.

    • Engineering & Consulting adjusted gross margin declined to 31.1% from 33.2% due to mix shift towards lower-margin program and project management services.

    • Goodwill and other intangibles for sustainability consulting business impaired due to softer market conditions and downward trend in backlog for those services.

    Guidance & targets

    10
    CategoryTargetConfidence
    Q3 FY26 Consolidated Revenue
    $1.225 billion to $1.275 billion
    high materiality
    High
    Q3 FY26 Adjusted EBITDA
    $150 million to $160 million
    high materiality
    High
    Full-year FY26 Revenue
    $4.7 billion to $4.8 billion
    high materiality
    High
    Full-year FY26 Adjusted EBITDA
    $565 million to $585 million
    high materiality
    High
    Interest expense net of income
    approximately $15 million per quarter
    medium materiality
    High
    Depreciation and amortization
    similar to second quarter levels of $44 million
    medium materiality
    High
    Capital spending
    $40 million and $45 million
    medium materiality
    High
    Full-year 2026 Cash taxes
    mid-$50 million range
    medium materiality
    High
    TRA payment related to 2025 operating activity
    around $8 million to $9 million
    medium materiality
    High
    TRA payment related to estimated 2026 activity
    between $25 million and the low $30 million range
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Engineering & Consulting
    Revenue growth was mostly organic. Strong growth in state and local government and data centers/technology for program and project management. Decline in Engineering and Design mainly due to soft demand from sustainability consulting services for mixed-use clients. Adjusted gross margin decreased from 33.2% in Q2 FY25 due to mix shift towards lower-margin program and project management.
    Program and project management service revenue growth: 17%Program and project management service revenue as % of segment revenue: 51%Engineering and Design revenue decline: 4%
    		$207 million6%—31.1%
    Installation and Maintenance
    Over half of the segment's revenue growth was organic, with the remainder from the Bowers acquisition. Installation and Fabrication Services drove most growth, led by data centers and technology, but also strong organic growth in life science/healthcare and education. Maintenance and Service saw high growth across most end markets except mixed-use. Adjusted gross margin was essentially in line with 16.2% in Q2 FY25, despite a mix shift toward installation/fabrication and away from higher-margin maintenance/service, offset by increased fabrication-only work.
    Organic revenue growth (excluding Bowers): >50%Installation and Fabrication Services growth: 189%Maintenance and Service revenue growth: 58%Organic Maintenance and Service revenue growth (excluding Bowers): ~20%
    		$1.055 billion162%—16.1%

    Operational metrics

    22
    Organic revenue growth
    nearly 60%YoY
    Q2 FY26

    Excluding the impact of acquisitions.

    Adjusted EBITDA
    $155 million114% YoY increase
    Q2 FY26

    Excluding profit interest and related expense.

    Adjusted EBITDA margin
    12.2%almost 90 bps sequential improvement
    Q2 FY26

    Compared to Q1 FY26, including Bowers.

    Adjusted gross profit
    $234 million
    Q2 FY26

    Excluding profit interest and related expense.

    Adjusted gross margin
    18.5%down from 21.8% YoY
    Q2 FY26

    Compared to Q2 FY25.

    Adjusted SG&A expense
    $87 millionup from $62 million YoY
    Q2 FY26

    Excluding stock-based compensation and acquisition/strategic initiative expenses.

    Adjusted SG&A as percentage of revenue
    6.9%down from 10.3% YoY
    Q2 FY26

    Compared to Q2 FY25.

    Pro forma net leverage ratio
    1.5xhalf the level post-IPO
    Q2 FY26

    Based on pro forma last 12-month EBITDA, including Bowers during H2 FY25.

    Cash balance
    $292 millionup from $245 million QoQ
    Q2 FY26

    As of quarter end.

    Total liquidity
    $461 millionup from $414 million QoQ
    Q2 FY26

    As of quarter end.

    Total debt
    slightly over $1 billionapproximately flat QoQ
    Q2 FY26

    As of quarter end.

    Interest expense net of income
    $15 milliondeclined by almost $15 million YoY
    Q2 FY26

    Compared to Q2 FY25.

    Term loan interest cost reduction
    25 bps
    Q2 FY26

    At the outset of the repricing.

    Term loan interest cost step-down
    additional 25 bps
    Q2 FY26

    Following credit rating upgrades in early June.

    Total employee headcount
    close to 11,000
    end of July

    Includes approximately 8,000 skilled technicians and craftspeople.

    Fabrication capacity
    1.5 millionup 200,000 sq ft in Q2
    Q2 FY26

    Current capacity.

    Fabrication capacity expansion
    100,000
    next couple of weeks

    Expected additional capacity.

    Total fabrication capacity growth
    over 1 million
    past year

    Across key geographies.

    Cash tax payments
    mid-$50 million rangeincrease from prior estimate
    FY26

    Based on revised profit outlook.

    TRA payment (2025 activity)
    $8 million to $9 million
    early 2027

    Related to 2025 operating activity.

    TRA payment (2026 activity)
    $25 million to low $30 million range
    early 2028

    Related to estimated 2026 activity.

    Net cash outflow reduction from share exchanges
    15%
    ongoing

    Additional share exchanges could slightly reduce cash tax payments while increasing TRA payments by 85% of the reduction in cash tax.

    Industry KPIs

    7
    MetricValueDetails
    Total backlog$5.7 billionUSD
    Book to bill ratio1.2xratio
    End market pipeline—
    Acquisition contribution$300 millionUSD
    Self perform activity mix—
    Same store organic revenue growthnearly 60%%
    Craft skilled labor headcount capacity8,000people

    Orderbook & backlog

    2
    Total backlog and awards$5.7 billionJune 2026

    105% YoY increase, 5% sequential increase

    Strong quarterly revenue realization, book-to-bill for Q2 FY26 was 1.2x, LTM book-to-bill was 1.4x. Data center and technology remains primary organic driver, with healthy growth in state and local government, education, and manufacturing.

    Engineering segment backlog27% YoY increaseJune 2026

    11% sequential increase

    Mostly on an organic basis.

    Deals & partnerships

    1
    Bowers GroupLargest acquisition in company history, in the DMV region.

    The acquisition contributed significantly to revenue and growth, particularly in the Installation and Maintenance segment.

    Capital programs

    1
    Fabrication capacity expansionunderway
    Period spend: $15 million to $20 million increase to prior full year guidance

    Benefit: additional 100,000 square feet within weeks, total over 1 million sq ft added over past year

    Additional spending for H2 FY26 to outfit new space with cranes and advanced tooling, and for existing facilities. Capacity expansion is based on existing demand in backlog.

    Risks & headwinds

    3
    Softer market conditions for sustainability consulting servicesPast several quarters

    Led to goodwill and other intangibles impairment in Q2 FY26

    Mitigation: Long-term conviction in value, particularly with rising energy costs.

    Volatility in quarterly net bookings and book-to-bill ratioQuarterly

    Not uncommon for larger bookings to exceed $100 million, which can come in waves and burn quickly.

    Mitigation: Company also looks at 12-month book-to-bill ratio (1.4x) to smooth out volatility; confident in ability to grow total backlog.

    Labor constraintsOngoing

    Tight labor around the country

    Mitigation: Successful recruiting, building capacity with latest technologies/automation, unionized workforce allowing national travel and trained employees, ability to run multiple shifts in fabrication facilities.

    What to watch in Q3 FY26

    5

    Bookings trajectory

    Balance of FY26
    CurrentQ2 FY26 book-to-bill 1.2x, LTM 1.4x
    TargetContinued strong pipeline and bookings growth

    Why it matters

    Indicates sustained demand and future revenue visibility, especially given project acceleration and larger award sizes.

    Overall, we feel confident in our ability to continue to grow total backlog as the year progresses based on what we see in our opportunity pipeline.

    Q&A highlights

    7

    What is the size of the largest projects being added to backlog, the makeup of data center customers, and the outlook for bookings for the rest of the year?

    The company is seeing strong bookings in data centers, with some TFO projects ranging from $175M to $200M, and solid bookings in off-site manufacturing. The pipeline remains strong, and this positive trend is expected to continue.

    “We've had some really strong bookings in the data centers, specifically in some TFO projects, which follow after base builds. They're ranging anywhere from the $175 million range to between $200 million range there as well as in our off-site manufacturing, third-party manufacturing, we've had some solid bookings there as well.”

    asked by Adam Bubes · answered by Steve Hansen

    2 min read6 chapters

    Detailed Narrative

    01

    Robust Demand and Market Diversification

    Legence continues to experience robust demand for mission-critical building systems, particularly in the data center and technology end markets, which drove nearly 60% organic revenue growth and over 35% organic backlog growth. The company also noted solid high single to double-digit organic revenue growth in life science and healthcare, education, and state and local government. Manufacturing, while small at less than 3% of revenue, is experiencing very strong growth, with expectations for continued favorable impact from reshoring in coming years.

    02

    Workforce and Fabrication Capacity Expansion

    To support growing backlog, Legence's total employee headcount reached nearly 11,000, including approximately 8,000 skilled technicians and craftspeople. The company expanded its fabrication capacity by 200,000 square feet in Q2, reaching 1.5 million square feet, with plans to add another 100,000 square feet soon. This expansion is driven by existing demand, particularly from data center, pharmaceutical, semiconductor, and memory chip clients, and aims to enhance operational efficiencies and reduce reliance on field labor.

    03

    Balance Sheet Strength and M&A Strategy

    Legence significantly improved its financial leverage, reducing its pro forma net leverage ratio to 1.5x, half the level post-IPO, within just three quarters. This was achieved despite completing the largest acquisition in company history (Bowers). The strong balance sheet positions the company to pursue attractive M&A opportunities, with an active pipeline, while maintaining disciplined evaluation.

    04

    Segment Performance and Margin Dynamics

    The Installation and Maintenance segment saw revenue increase by 162% year-over-year to $1.055 billion, with over half organic growth, driven by data centers, life science, healthcare, and education. Its adjusted gross margin remained stable at 16.1%. The Engineering & Consulting segment revenue grew 6% to $207 million, but its adjusted gross margin declined to 31.1% due to a mix shift towards lower-margin program and project management services and soft demand in sustainability consulting, which led to a goodwill impairment.

    05

    Working Capital and Project Acceleration

    After significant improvements in working capital management post-IPO, the company is now closer to normalized levels, with Q2 showing a modest use of cash. Management noted that customized fabrication modules tend to generate higher prepayments, which could be a positive mix shift. Project timelines are accelerating across all end markets, especially data centers and semiconductors, with clients increasingly seeking to lock in services further into the future due to the need for resources to complete builds.

    06

    Semiconductor and Reshoring Opportunities

    The semiconductor end market is ramping up, showing over 50% revenue growth, with increasing demand for off-site manufactured products. Management views this as a significant opportunity, aligning with the company's expertise in complex, high-volume systems. Reshoring in manufacturing is also seen as an early-stage but growing trend, with clients like Tesla and SpaceX contributing to growth, benefiting both engineering and installation services.

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