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    LGN
    Earnings call· Dec 2025(Q4 FY25)

    Legence Q4 FY25 earnings call LGN

    Mar 27, 2026 Source

    Executive summary

    Legence Q4 FY25 — Record Revenue and Strong Backlog Growth Driven by Data Centers

    Legence delivered a record-breaking fourth quarter, fueled by robust organic growth in revenue and adjusted EBITDA, primarily driven by strong demand in data center and technology end markets. The company's strategic acquisitions of Bowers Group and Metrix, alongside significant expansion of its skilled craft labor force, position it for continued growth and backlog conversion, with an optimistic outlook for 2026 despite some segment-level margin shifts.

    Highlights

    5

    • Total revenues grew by 35% to a quarterly record of $738 million, with most growth organic.

    • Adjusted EBITDA grew 53% to $87 million, with margins expanding by 140 basis points to 11.8%.

    • Total backlog and awards grew by 49% year-over-year to $3.7 billion and 20% sequentially, almost entirely organic.

    • Book-to-bill ratio for Q4 FY25 was 1.9x, accelerating from Q3 FY25's 1.5x.

    • Craft labor force increased to approximately 6,600 skilled crafts people, up from 3,400 at the end of Q2 FY25, with no significant labor constraints.

    Concerns

    2

    • Goodwill impairment charge of $27.4 million related to a smaller business unit in the Engineering segment due to uncertainty in forecasting cash flow.

    • Engineering & Consulting adjusted gross margin declined to 30.9% from 32.6% YoY, driven by revenue mix shift towards lower-margin program and project management services.

    Guidance & targets

    13
    CategoryTargetConfidence
    Consolidated Revenue
    $925 million and $950 million
    high materiality
    High
    Adjusted EBITDA
    $90 million and $100 million
    high materiality
    High
    Consolidated Revenue
    $3.7 billion to $3.9 billion
    high materiality
    High
    Adjusted EBITDA
    $400 million to $430 million
    high materiality
    High
    Interest Expense (net of interest income)
    $15 million range
    medium materiality
    High
    Interest Expense (net of interest income)
    high $50 million range
    medium materiality
    High
    Depreciation and Amortization
    $45 million range
    medium materiality
    High
    Depreciation and Amortization
    $170 million to $180 million range
    medium materiality
    High
    Capital Spending
    $65 million
    medium materiality
    High
    Effective Tax Rate (ETR)
    mid-30% to 40% range
    medium materiality
    High
    Cash Taxes
    low $30 million range
    medium materiality
    High
    Effective Tax Rate (ETR)
    gradually gravitate toward 30%
    low materiality
    Medium
    TRA Payment
    mid-single million dollar range
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Engineering & Consulting
    Revenue growth was mostly organic, driven by program and project management services, particularly with hospitality, entertainment, and education clients. Engineering & Design revenues were essentially flat. Adjusted gross margin declined from 32.6% in Q4 FY24 due to a revenue mix shift towards lower-margin program and project management services and project mix.
    		$173 million10%—30.9%
    Installation & Maintenance
    Almost all organic growth. Installation & Fabrication Services increased by 53%, driven by demand across high-growth industries, including data centers, technology, life sciences, and healthcare, particularly for direct liquid-to-chip technical cooling systems. Maintenance & Service revenue increased at a low double-digit pace of 11%, rebounding from slower growth in H1 FY25. Adjusted gross margin improved from 15.6% in Q4 FY24 due to strong project execution.
    		$565 million44%—18.3%

    Operational metrics

    30
    Adjusted Gross Profit
    $157 millionup from $112 million
    Q4 FY25

    Excludes noncash stock-based compensation expense related to legacy profit interest units.

    Adjusted Gross Margin
    21.2%up from 20.5%
    Q4 FY25

    Improvement primarily due to higher gross margins in the Installation & Maintenance segment despite lower Engineering & Consulting margins and a revenue mix shift toward I&M.

    Adjusted Gross Profit
    $550 millionup from $432 million
    FY25

    Excludes noncash stock-based compensation expense from legacy profit interest.

    Adjusted Gross Margin
    21.6%up from 20.6%
    FY25

    Higher adjusted gross margin primarily due to stronger margins at the Installation & Maintenance segment.

    Adjusted SG&A
    $75 millionup from $59 million
    Q4 FY25

    Excludes stock-based compensation and other adjusted EBITDA add-back items. Increase driven by headcount, compensation, IT, and professional fees.

    Adjusted SG&A as % of Revenue
    10.1%down from 10.8%
    Q4 FY25

    Improved efficiency despite increased absolute spend.

    Adjusted SG&A
    $267 millionessentially the same percentages of revenue as in 2024
    FY25

    As a percentage of revenue, remained stable despite becoming publicly traded in 2025.

    Adjusted SG&A as % of Revenue
    10.5%essentially the same percentages of revenue as in 2024
    FY25

    As a percentage of revenue, remained stable despite becoming publicly traded in 2025.

    Adjusted EBITDA
    $87 millionup 53%
    Q4 FY25

    Strong growth driven by robust revenue and margin expansion.

    Adjusted EBITDA Margin
    11.8%up 140 bps
    Q4 FY25

    Margin improvement reflects operational efficiencies and favorable project execution.

    Adjusted EBITDA
    $299 millionup 30%
    FY25

    Full year growth.

    Adjusted EBITDA Margin
    11.7%up 80 bps
    FY25

    Full year margin improvement compared to 2024 levels.

    Depreciation and Amortization
    $28.7 milliondown slightly from $29.9 million
    Q4 FY25

    Reported for the quarter.

    Goodwill Impairment Charge
    $27.4 million
    Q4 FY25

    Noncash charge related to a smaller business unit focused on commercial renewables, reflecting uncertainty in forecasting cash flow.

    Interest Expense
    $13.6 milliondecreased by $12.7 million
    Q4 FY25

    Primarily due to lower average debt balance than the year-ago period.

    Other Expenses (Tax Indemnity)
    $3.8 million
    Q4 FY25

    Noncash pretax expense related to a tax indemnity receivable asset that expired, with an offsetting tax liability reduction resulting in no net income statement impact.

    Other Expenses (TRA Adjustment)
    $2.9 million
    Q4 FY25

    Related to an adjustment of the Tax Receivable Agreement (TRA) liability for a change in pretax earnings mix by state.

    Income Tax Expense
    $22.2 million
    FY25

    Incurred despite a book loss, due to non-deductible items like certain amortization, goodwill impairment, and interest expense.

    Cash Taxes
    $16.4 million
    FY25

    Total cash taxes for the year.

    Cash Balance
    $230 millionup from $176 million at the end of September
    end of FY25

    Benefited from strong operating performance and working capital management.

    Total Liquidity
    $424 millionup $164 million from September
    end of FY25

    Reflecting higher cash balance and revolver upsize completed in October.

    Total Debt
    $825 millionlargely unchanged from September 30, 2025
    end of FY25

    Prior to impacts from Bowers acquisition.

    Net Leverage Ratio
    2.0xdown from 2.4x at the end of September
    end of FY25

    Based on last 12 months adjusted EBITDA, prior to impacts from Bowers acquisition.

    Net Leverage Ratio (Pro Forma Bowers)
    2.4xflat with third quarter levels
    end of FY25

    Pro forma net debt balance of a little over $1 billion.

    Capital Expenditures (Growth)
    approximately 2/3 of $65 million
    FY26

    Portion of FY26 CapEx forecast for growth, including fabrication capacity expansion.

    Fabrication Capacity
    1.3 million square feet
    once completed

    Includes 372,000 square feet of capacity that came with the Bowers acquisition.

    Fabrication-only Revenue as % of I&M
    mid-single-digit percentage
    FY24

    Proportion of Installation & Maintenance segment revenue from fabrication-only work.

    Fabrication-only Revenue as % of I&M
    mid-teens percentage
    FY25

    Proportion of Installation & Maintenance segment revenue from fabrication-only work, growing at a higher rate.

    Craftsmen and Women (Unionized)
    4,500up from 3,800 at end of September and 3,400 at end of June
    end of FY25

    Reflects general availability of union labor and Legence's ability to attract and retain talent.

    Craftsmen and Women (Unionized)
    6,600
    current

    Includes 1,700 union crafts people from Bowers at the beginning of the year and growth in existing workforce.

    Industry KPIs

    7
    MetricValueDetails
    Total backlog$3.7 billionUSD
    Book to bill ratio1.9xratio
    End market pipelinediscussions for deliveries that extend into 2029
    Acquisition contributionThe Bowers Group, Metrix
    Self perform activity mixmid-teens percentage%
    Same store organic revenue growth35%%
    Craft skilled labor headcount capacity6,600people

    Orderbook & backlog

    7
    Consolidated Backlog and Awards$3.7 billionend of FY25

    up nearly 50% from year ago levels and 20% sequentially

    Almost all organic growth; $20 million from two tuck-in acquisitions completed last quarter.

    Consolidated Book-to-bill ratio1.9xQ4 FY25

    acceleration from 1.5x in Q3 FY25

    Consolidated Book-to-bill ratio1.6xFY25
    Installation & Maintenance Backlog66%end of FY25

    YoY growth and 24% sequentially

    Much of this growth was with data center and technology clients.

    Engineering & Consulting Backlog16%end of FY25

    YoY growth and 11% sequentially

    Growth occurred across state and local government, life science and healthcare, and data centers and technology end markets.

    Bowers Backlog and Awards (Pro Forma)$1.5 billionend of FY25

    up from $1.3 billion at the end of September 2025

    Not included in Legence's year-end 2025 consolidated backlog.

    Backlog Burn (Next 12 months)a little bit over halfFY26

    Expected to burn in 2026; majority of remainder in 2027, with some extending into 2028 and beyond, driven by longer lead times and larger data center projects.

    Deals & partnerships

    2
    The Bowers GroupPremier mechanical contractor in the Northern Virginia, D.C. metro area, specializing in data center build-out.

    Acquisition announced last November, regulatory approval cleared sooner than expected, closed on January 2, 2026. Adds approximately 2,000 union crafts people and 372,000 square feet of fabrication capacity.

    MetrixEngineering firm based near Seattle, Washington, with a solid client base skewed towards the education market.a little over $30 million

    Closed on March 1, 2026. Approximately 25% of the total purchase price was paid in equity. The acquisition multiple was broadly in line with past transactions for engineering firms of this size.

    Capital programs

    1
    Fabrication Capacity Expansionunderway
    Period spend: approximately 2/3 of $65 million

    Benefit: 1.3 million square feet of fabrication capacity

    A portion of the FY26 CapEx forecast is for growth, specifically for fabrication capacity expansion in Colorado and to finish out previously announced capacity expansion at other facilities. Once completed, total fabrication capacity will be 1.3 million square feet, including 372,000 square feet from the Bowers acquisition.

    Risks & headwinds

    3
    Goodwill ImpairmentQ4 FY25

    $27.4 million noncash charge to impaired goodwill and related intangible and long-life assets.

    Mitigation: Elected to write off the goodwill to reflect the uncertainty around current ability to forecast cash flow for the business unit.

    Tax Indemnity Receivable Expirationtowards the end of FY25

    $3.8 million noncash pretax expense.

    Mitigation: An offsetting tax liability against that receivable also expired, which reduced income tax expense provision by an identical amount, resulting in no net income statement impact.

    Engineering & Consulting Margin Mix ShiftQ4 FY25

    E&C adjusted gross margin was 30.9%, down from 32.6% in the year ago quarter.

    Mitigation: Mainly driven by a revenue mix shift towards program and project management services, which generate a lower margin profile than Engineering & Design, as well as slightly lower margins within the program and project management service line on project mix.

    What to watch in Q1 FY26

    5

    Data Center Fabrication Revenue Mix

    FY26
    Currentmid-teens percentage of I&M revenue in FY25
    Targettick up a bit in 2026

    Why it matters

    Indicates the company's ability to capitalize on high-margin fabrication-only work in the booming data center market, especially with Bowers' integration.

    We expect that to probably tick up a bit in 2026, but maybe not quite as much as you'd expect because as we bring in Bowers, they historically, almost all of their fab capacity is going for their installation jobs and not serving other markets.

    Q&A highlights

    7

    Are there any challenges in the data center market related to customers' material availability or other factors, or are projects proceeding timely?

    The company has not seen supply chain issues pushing schedules out, as data center clients plan far into the future and secure necessary materials, working proactively with Legence.

    “To date, we haven't seen a supply chain issue that is pushing schedules out. Data center clients and our blue-chip clients, they're looking far into the future and securing the materials they need and working with us upfront to make sure that the material chain that we are working within is also available.”

    asked by Joseph Osha · answered by Steve Hansen

    2 min read6 chapters

    Detailed Narrative

    01

    Record Q4 Performance and Organic Growth

    Legence reported record Q4 FY25 revenues of $738 million, a 35% increase year-over-year, with the majority being organic growth across both segments. Adjusted EBITDA surged by 53% to $87 million, and adjusted EBITDA margins expanded by 140 basis points to 11.8%. This strong performance was underpinned by robust demand, particularly from data center and technology clients, and effective project execution.

    02

    Backlog Expansion and Data Center Demand

    Total backlog and awards reached $3.7 billion, marking a 49% year-over-year increase and 20% sequential growth, almost entirely organic. The book-to-bill ratio for Q4 FY25 was a strong 1.9x, indicating significant new order intake. The Installation & Maintenance segment saw 66% year-over-year backlog growth, largely driven by data center demand for direct liquid-to-chip technical cooling systems, with discussions extending into 2029 for deliveries.

    03

    Strategic Acquisitions and Integration

    The company successfully integrated The Bowers Group, a mechanical contractor in the Northern Virginia/D.C. metro area, which closed on January 2, 2026, adding approximately 2,000 union crafts people and expanding fabrication footprint by 50%. Additionally, Legence completed a tuck-in acquisition of Metrix, an engineering firm near Seattle, on March 1, 2026, enhancing its engineering capabilities and client base in the education market.

    04

    Skilled Labor Force Growth

    Legence significantly expanded its unionized craft labor force, growing from 3,400 at the end of Q2 FY25 to almost 4,500 by the end of FY25. With the addition of Bowers' 1,700 crafts people, the total force now stands at approximately 6,600. Management emphasized that despite general market tightness, Legence has not experienced significant labor constraints due to its preferred employer status and strong union relationships.

    05

    Financial Health and Deleveraging

    The company ended FY25 with a cash balance of $230 million and total liquidity of $424 million. The net leverage ratio improved to 2.0x at year-end, down from 2.4x in Q3 FY25. Pro forma for the Bowers acquisition, net leverage remained stable at approximately 2.4x. The company utilized IPO proceeds to pay down debt and focused on working capital management, contributing to a stronger balance sheet.

    06

    Goodwill Impairment and Tax Indemnity

    A non-cash charge of $27.4 million was recorded for goodwill impairment related to a smaller Engineering segment business unit focused on energy-related initiatives, reflecting uncertainty in forecasting cash flow due to market transitions. Additionally, a non-cash pretax expense of $3.8 million related to a tax indemnity receivable expiration was noted, with an offsetting tax liability reduction, resulting in no net income statement impact.

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