How much of the 80% YoY data center technology revenue growth was from fabrication versus installation, and what are the expectations for fabrication growth in 2026?

Fabrication-only work grew from a mid-single-digit percentage of I&M revenue in FY24 to mid-teens in FY25, growing at an even higher rate than installation. It's expected to tick up in FY26, but Bowers' capacity is primarily for its own installation jobs. “Just to give you a sense, even though we don't break out the fabrication-only revenue, but it is a proportion of our I&M segment revenue, in 2024 would have been a mid-single-digit percentage of our revenue was fab-only work, where it was a mid-teens percentage in 2025 with fab-only.”

Are there any changes in the duration of backlog, and how much is expected to burn over the next 12 months?

The backlog duration is elongating due to larger data center projects and longer lead times. The company expects to burn 'a little bit over half' of its backlog in 2026, with the remainder extending into 2027, 2028, and beyond. “We expect to burn a little bit over half of our backlog in 2026. And so -- and then, of course, the majority of the remainder would be in 2027, but we also have backlog extending into 2028 and not an insignificant portion.”

What drove the strength in I&M gross margins, was any of it a one-time benefit, and how sustainable is it into 2026?

Strong project execution and an increased proportion of higher-margin fabrication-only work drove the improvement. While optimistic, the company won't forecast the same level of beat every quarter, but benefits from experience in large data center jobs. “We have had 2 exceptional quarters in a row from a project execution perspective. And so we're not going to forecast that level of beat every quarter. But there -- again, I think I mentioned the increased proportion of fab only, which tend to get a little bit higher margins on the fabrication-only business as opposed to the full installed jobs.”

LGN

Legence (LGN) Q4 FY25 earnings call: guidance and Q&A

Earnings call· Dec 2025 (Q4 FY25)· Industrials· Mar 27, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
Consolidated Revenue	$925 million and $950 million high materiality	Q1 · FY26	High
Adjusted EBITDA	$90 million and $100 million high materiality	Q1 · FY26	High
Consolidated Revenue	$3.7 billion to $3.9 billion high materiality	FY26	High
Adjusted EBITDA	$400 million to $430 million high materiality	FY26	High
Interest Expense (net of interest income)	$15 million range medium materiality	Q1 · FY26	High
Interest Expense (net of interest income)	high $50 million range medium materiality	FY26	High
Depreciation and Amortization	$45 million range medium materiality	Q1 · FY26	High
Depreciation and Amortization	$170 million to $180 million range medium materiality	FY26	High
Capital Spending	$65 million medium materiality	FY26	High
Effective Tax Rate (ETR)	mid-30% to 40% range medium materiality	FY26	High
Cash Taxes	low $30 million range medium materiality	FY26	High
Effective Tax Rate (ETR)	gradually gravitate toward 30% low materiality	Beyond 2026	Medium
TRA Payment	mid-single million dollar range medium materiality	Early 2027	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
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 million	10%	—	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 million	44%	—	18.3%

LGN operating KPIs by quarter

LGN operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Dec 2025 Q4 FY25	Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Book-to-bill ratio	1.9 ratio This translated to a book-to-bill ratio for the 3 months ended December 2025 of 1.9x, an acceleration from what was already a robust third quarter book-to-bill of 1.5. Source: earnings call transcript	1.2 ratio The resulting book-to-bill ratio for the 3 months ended March 2026 was 1.2x. Source: earnings call transcript	1.2 ratio Our consolidated book-to-bill ratio for the 3 months ended June 2026 was 1.2x. Source: earnings call transcript	0%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Consolidated Backlog and Awards $3.7 billion end 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 ratio 1.9x Q4 FY25

acceleration from 1.5x in Q3 FY25

Consolidated Book-to-bill ratio 1.6x FY25

Installation & Maintenance Backlog 66% end of FY25

YoY growth and 24% sequentially

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

Engineering & Consulting Backlog 16% 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 billion end 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 half FY26

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

The Bowers Group Premier 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.

Metrix Engineering 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

Fabrication Capacity Expansion underway

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

Goodwill Impairment Q4 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 Expiration towards 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 Shift Q4 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

Data Center Fabrication Revenue Mix

FY26

Current mid-teens percentage of I&M revenue in FY25

Target tick 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.

Find out whether LGN delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.