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Image source: The Motley Fool. Thursday, Aug. 13, 2026 at 10 a.m. ET Vice President of Investor Relations - Son Vann Chief Executive Officer - Jeffrey Sprau Chief Financial Officer - Stephen Butz Chief Operating Officer - Steve Hansen Operator: Good day, and thank you for standing by. Welcome to the Q2 2026 Legence Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Son Vann, Vice President of Investor Relations. Please go ahead. Son Vann: Thanks, Daniel, and good morning, everyone. Welcome to Legence's Second Quarter 2026 Earnings Call. With me today are Jeff Sprau, Chief Executive Officer; Stephen Butz, Chief Financial Officer; and Steve Hansen, Chief Operating Officer. This morning, we issued a press release that covers our second quarter 2026 financial results and posted a presentation that accompanies the earnings release. All materials can be found on the Investor Relations section of the company's website, wearelegence.com. Before we begin, I want to remind you that comments made during this call contain certain forward-looking statements and are subject to risks and uncertainties, including those identified in our risk factors contained in our SEC filings. Our actual results could differ materially, and we undertake no obligations to update any such forward-looking statements. During this call, we will refer to certain non-GAAP financial measures, which should not be considered in isolation from or as a substitute for measures prepared in accordance with generally accepted accounting principles. Please refer to our quarterly earnings presentation for reconciliations of these non-GAAP measures to the most directly comparable GAAP measures. With that, let me turn the call over to Jeff. Jeffrey Sprau: Thank you, Son, and thanks, everyone, for joining today to discuss our second quarter performance and current outlook for Legence. As we have talked about on our past earnings calls, the demand environment for mission-critical building systems continues to be robust. This strength is evident in the exceptional growth in both our record revenue and backlog. Excluding the impact of acquisitions, organic revenue growth was nearly 60%, while backlog and awards grew organically by over 35% year-over-year. And when we include acquisitions, revenue more than doubled with similar growth in total backlog. As you would expect, the data center and technology end market led this growth. Recent discussions with our data center clients suggest continued brisk demand over the next several years. These discussions suggest no change in the pace of activity from what was discussed at the beginning of the year and in some cases, speed to market has actually accelerated. Within the data centers and technology end market, it's worth noting that this sector also includes semiconductors, an area where we're also experiencing solid revenue growth. Our growth extends to other core markets as well, including life science and health care, education and state and local government, all of which are experiencing solid high single to double-digit organic revenue growth year-to-date. Also worth noting is our activity level in manufacturing, which is embedded in our other end market category. While this end market represents less than 3% of our overall revenue base, it is experiencing very strong revenue growth and is now about equal to the size of our mixed-use market. We expect reshoring to favorably impact our manufacturing end market in the coming years. As I mentioned before, I really like our exposure to diverse end markets, understanding that growth rates between markets can ebb and flow. By intentionally focusing on attractive higher growth target-rich sectors that align well with our mission-critical services, this diversity can offset, to a degree, some of the volatility of each market. We, of course, value every client relationship and strive to deliver exceptional outcomes on every project. This customer-first philosophy has served us well for decades and in some cases, over a century and is the foundation of the reputation, trust and long-standing partnerships that we built across our broad client base. On our quarterly results, Stephen will go into greater detail. But at a high level, total revenue of $1.3 billion increased by 111% year-over-year and over half of this growth was organic. In a similar fashion, adjusted EBITDA grew by 114% year-over-year. Adjusted EBITDA margins expanded by almost 90 basis points sequentially. Total backlog and awards ended the quarter at a record $5.7 billion, up 105% year-over-year and 5% sequentially. We saw strong growth in backlog in both segments. Notably, our Engineering segment backlog grew by 27% year-over-year and 11% sequentially, mostly on an organic basis. Our consolidated book-to-bill ratio for the 3 months ended June 2026 was 1.2x. Book-to-bill over the last 12 months was 1.4x. As our markets evolve, particularly the data centers and technology market, the award sizes have grown quite significantly. In fact, it's not uncommon these days for some of the larger bookings to exceed $100 million. These bookings can come in waves with some of the large projects burning pretty quickly. All these factors can create some volatility in our quarterly net bookings and book-to-bill ratio, which is why we like to also look at the book-to-bill ratio over a 12-month period. 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. Our confidence in the future is also reflected in our revised guidance for full year 2026, which Stephen will walk you through shortly. To support the execution of our growing backlog, we continue to grow and invest in our workforce. Total employee headcount is now close to 11,000 at the end of July, including approximately 8,000 skilled technicians and crafts people. As demand for our services continues to grow, we expect to further expand our labor force. Combined with our continuous efforts to drive operational efficiencies, optimize workforce scheduling and stay selective on our project pursuit, these efforts position us to better serve our customers going forward. Our fabrication footprint is a big part of our efficiency efforts. During the second quarter, we grew our fabrication capacity by about 200,000 square feet, putting our current capacity at 1.5 million square feet. And we expect to add another 100,000 within the next couple of weeks and are looking at opportunities to expand even further. There are a lot of efficiencies that we can implement in our square footage through the use of advanced tooling, automation, optimization of floor spacing and flexibility with labor shifts, among other levers. I should also note that the capacity expansion is based on existing demand that we see in our backlog. When adding this incremental capacity with the organic expansion that we have completed over the past year and the capacity that came with Bowers, we will have grown our fabrication capacity by over 1 million square feet across our key geographies. Our third-party fabrication demand continues to be concentrated on data center and, to a lesser extent, pharmaceutical clients. More recently, we've seen increased demand from semiconductors and memory chip clients. Before handing the call to Stephen, I want to point out the continued improvement to our net leverage. During our IPO process, we heard from the investment community about the importance of having a strong balance sheet and as a result, prioritized the entire IPO proceeds toward debt reduction. This allowed us to exit the IPO at 3x net leverage last September. In just 3 quarters, we've essentially cut our financial leverage in half with pro forma net leverage now standing at 1.5x. This reduction was achieved during a period when Legence completed our largest acquisition in company history, namely Bowers in the DMV. And at 1.5x net leverage, we're in a great financial position to pursue other attractive impactful acquisition opportunities that meet our strategic and financial objectives. Our M&A pipeline has never been as active as it is today. And of course, we'll be disciplined with our evaluation of these opportunities. With that, let me turn the call over to Stephen. Stephen Butz: Thank you, Jeff, and good morning, everyone. I'll begin with a review of second quarter 2026 results in comparison to second quarter of 2025. Following my review of our historical results, I'll provide a brief update on our current guidance and discuss our balance sheet and liquidity position before turning the call back to Jeff. Starting with the second quarter 2026, we generated revenue of $1.262 billion, an increase of $663 million or 111% from the year ago quarter. The Bowers Group acquisition contributed approximately $300 million of revenue. Excluding Bowers, our revenues grew by nearly 60% year-over-year. Looking at our latest quarterly revenue growth at the segment level, starting with Engineering & Consulting. Segment revenue increased by 6% to $207 million, which was mostly organic. Program and project management service revenues grew by 17%, with particularly strong growth in state and local government as we're working on several large projects in Washington, D.C., South Carolina, Colorado and Minnesota. We also saw strength in data centers and technology. Engineering and Design revenues declined by 4%, with the decrease mainly attributable to soft demand from our sustainability consulting services for mixed-use clients, primarily large owners of commercial real estate. Our sustainability consulting business has experienced softer market conditions over the past several quarters, reflecting both broader challenges across the commercial real estate sector and evolving client demand for these services. Because impairment testing reflects our longer-term forecast, but the near term is often underpinned by customer contracts, the downward trend we've seen in backlog for those services was a key consideration and led to our decision to impair goodwill and other intangibles for this business during the second quarter. We still have conviction in the long-term value that our sustainability consulting services can deliver to clients, particularly in an environment with rising energy costs. Turning now to our larger Installation and Maintenance segment. Segment revenue of $1.055 billion increased by 162% versus the year ago quarter. Over half of the segment's revenue growth was organic, while the remainder was largely attributable to the addition of Bowers. Installation and Fabrication Services drove the majority of the segment growth, increasing by 189% year-over-year due to both strong organic growth and again, a meaningful contribution from Bowers. With respect to the organic growth, data center and technology was a key driver, but our other core markets such as life science and health care and education also saw solid organic growth in the low to mid-teens and state and local government growth was also very strong, though from a lower base. Maintenance and Service revenue increased by 58% year-over-year. Excluding the impact of Bowers, this service line delivered organic growth of nearly 20%. The high growth rate was spread across essentially all of our end markets with the exception of mixed-use. Turning to reported gross profit. Consolidated gross profit for the second quarter 2026 increased by 71% to approximately $220 million. Similar to our prior quarterly results, reported gross profit includes stock-based and other compensation expense related to legacy profit interest units, where the payment of which is entirely borne by entities outside of Legence Corp., essentially the legacy pre-IPO shareholders. As a reminder, the settlement of legacy profit interest expense does not impact Legence Corp., either in the form of cash outlay or the issuance of additional common shares. Because these profit interest units are marked to market, any significant change to our share price will have a material impact on this expense as it did in the second quarter. Excluding the impact of profit interest and related expense, adjusted gross profit on a consolidated basis totaled approximately $234 million, and adjusted gross margin was 18.5% for the second quarter of 2026 compared to approximately $130 million and 21.8% in the second quarter of 2025. The decrease in adjusted gross margin was primarily driven by the combined impact of a shift in revenue mix to our Installation and Maintenance segment, reflecting the addition of Bowers and the segment's higher growth rate as well as somewhat lower adjusted gross margin within the Engineering & Consulting segment. Looking into margins at the segment level. Second quarter 2026 Engineering & Consulting adjusted gross margin was 31.1%, down from 33.2% in the second quarter of 2025. The adjusted gross margin decline largely reflects a revenue mix shift toward the program and project management service line, which accounted for 51% of segment revenue compared to 46% in the year ago quarter. The Installation and Maintenance segment generated an adjusted gross profit margin of 16.1%, essentially in line with 16.2% reported in the year ago quarter. As you would expect, there are a lot of moving parts that take us to that flat level year-over-year in the I&M segment. But to name a few, we saw a mix shift toward the installation and fabrication service line at the expense of the higher-margin maintenance and service line, but our overall mix of fabrication-only work within the installation and fabrication service line increased year-over-year. Turning to SG&A. This expense includes approximately $59 million of stock-based and noncash compensation expense, the vast majority of which, almost $54 million was related to the legacy profit interest that is paid for by entities outside of Legence Corp. Excluding the impact of stock-based compensation expense as well as approximately $2 million of acquisition and strategic initiative expenses, our adjusted SG&A expense was $87 million, up from $62 million in the year ago quarter. This increase was primarily driven by the addition of Bowers and higher general headcount to support our strong growth. More importantly, though, adjusted SG&A as a percentage of revenue improved significantly to 6.9%, down from 10.3% in the year ago quarter as we benefit from greater economies of scale. All in all, we generated adjusted EBITDA of $155 million in the second quarter 2026, an increase of 114% from second quarter 2025 levels. Adjusted EBITDA margin for the second quarter 2026 improved by almost 20 basis points to 12.2% when compared to the year ago quarter. However, given the sequential comparison to first quarter 2026 adjusted EBITDA margins includes Bowers, we believe this is probably a more relevant comparison and yields an almost 90 basis point improvement. Depreciation and amortization totaled $44 million in the second quarter of 2026, up from $29 million in the year ago quarter, with the increase largely due to the incremental depreciation and amortization that stemmed from the Bowers acquisition. Interest expense net of income was $15 million for the second quarter 2026 and declined by almost $15 million from a year ago, primarily due to lower average debt balance and average interest rate than the year ago period. Turning to income tax. Though we reported a pretax loss for the second quarter 2026, we recorded income tax expense of $11 million due to the nondeductible nature of various items, primarily the legacy profit interest expense. As a result, on a reported basis, the effective tax rate for the quarter isn't all that meaningful. This dynamic is expected to continue through 2026 and into 2027 to some degree. Excluding the impact of these material nonrecurring and noncash items, the normalized effective tax rate would be closer to the high 20% to low 30% range, which we would expect to gravitate towards over time. Regarding cash taxes, our current estimate for 2026 is in the mid-$50 million range. This is an increase from our prior estimate based on our revised profit outlook and states where our revised profit outlook originates from. Aside from our cash tax payments, we continue to expect to make a TRA payment of around $8 million to $9 million related to our 2025 operating activity, likely in early 2027. Our TRA payment related to estimated 2026 activity is expected to total between $25 million and the low $30 million range, and this payment is likely to occur in early 2028. To the extent we have additional share exchanges, this could slightly reduce our cash tax payments while increasing our TRA payments by 85% of the reduction in cash tax. So the net difference for Legence is a 15% reduction in cash outflow. Now switching gears to backlog. We ended June with consolidated backlog and awards of $5.7 billion, up 105% from year ago levels. Compared to the first quarter of 2026, backlog and awards grew by approximately $289 million, translating to a book-to-bill for the second quarter of 1.2x. Considering that our bookings tend to fluctuate due to the growing size of our project awards, viewing book-to-bill over a longer time horizon is also important. To that end, our last 12-month book-to-bill ratio was 1.4x. In either case, these are fairly solid ratios, especially when taking into account our particularly strong quarterly revenue realization. In terms of our organic growth in backlog and awards, the data center and technology end market remains the primary driver. However, we are seeing healthy growth in state and local government, education and manufacturing clients. Now turning to our guidance. We are establishing third quarter 2026 guidance for consolidated revenue of between $1.225 billion and $1.275 billion and adjusted EBITDA of between $150 million and $160 million. For full year 2026, we're increasing our revenue guidance to a range of $4.7 billion to $4.8 billion. At the midpoint, this has increased by 13% from our previous guidance range of $4.1 billion to $4.3 billion that we presented during our first quarter report in mid-May. We're also raising our full year 2026 EBITDA guidance range by about 20% from prior guidance to $565 million to $585 million, up from $470 million to $490 million, again, just 3 months ago. While part of our full year guidance increases to account for our second quarter outperformance relative to guidance, it's more of a reflection on our growing backlog, current expectations on project timing and a continuation of the strong execution that we've experienced in recent quarters. Now just a few additional housekeeping items to support your modeling efforts. Interest expense net of interest income for the second half of the year is expected to average approximately $15 million per quarter. Depreciation and amortization for the third quarter is expected to be similar to second quarter levels of $44 million. In terms of capital spending for the second half of 2026, we currently expect to spend between $40 million and $45 million. This represents an increase to our prior full year guidance by $15 million to $20 million, largely reflecting additional spending related to incremental fabrication capacity expansion that Jeff discussed earlier to outfit the new space, including cranes and advanced tooling as well as additional spend on existing facilities. Our current capital spending forecast remains within 2% of expected revenue for the year, consistent with our historical spending levels for growth and maintenance CapEx. Now turning to our balance sheet, liquidity and leverage. We ended the second quarter with $292 million of cash, up from $245 million at the end of the first quarter. Total liquidity was $461 million at quarter end compared to $414 million at the end of the first quarter. Total debt at the end of June was slightly over $1 billion, approximately flat from the end of the first quarter. Based on pro forma last 12-month EBITDA, which would include pro forma EBITDA from Bowers during the second half of 2025, our pro forma net leverage ratio is now 1.5x, which is about half the level that we were after our IPO last September. During the quarter, we further lowered our debt costs with the repricing of our term loan. That repricing lowered our interest cost by 25 basis points at the outset. In early June, we received a credit rating upgrade from Standard & Poor's from B+ to BB- as well as from Moody's from B1 to Ba3. With our credit rating upgrade, the loan pricing will step down by an additional 25 basis points to SOFR plus 1.75%. That concludes my remarks, and now I'll turn the call back to Jeff. Jeffrey Sprau: Thanks, Stephen. In closing, and before we get to the Q&A, I want to thank our entire team at Legence. Your commitment to safely serving our customers every single day makes it possible to deliver the incredible results that we are reporting today. Operationally, we continue to experience very robust organic growth across our diverse end markets and service lines. Backlog continues to grow to record levels, and we are leveraging our growing scale and national footprint to deliver higher EBITDA margins. We expect these trends to continue, and I'm really excited for what's next. With that, we'll now open the call up to your questions. Operator? Operator: [Operator Instructions] Our first question comes from Adam Bubes with Goldman Sachs. Adam Bubes: Nice to see the sequential bookings acceleration in the quarter, I think, to about $1.5 billion of bookings. Can you just give us a sense of the size of the largest projects you're putting in backlog this quarter and makeup of data center customers, whether hyperscalers or colocators? And how are you thinking about the bookings trajectory in the balance of the year? Steve Hansen: Yes. 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. And the trend, our pipeline that we don't report on is strong now, and we feel like that trend will continue to be positive going forward. Adam Bubes: And then can you just update us on a high-level breakdown on your key data center regions today? And to what extent are your crews traveling? And do you expect travel to increase as data center developments shift towards more rural markets? Steve Hansen: Yes. Today, our boots on the ground, California, Phoenix and the DMV are 3 major locations that we are performing installation work. Our fabrication is shipping all around the country from Salt Lake City to Georgia to Charlotte, North Carolina. So we are covering a large part of the country where we aren't located and have resources to do installation. Jeffrey Sprau: Yes. And Adam, this is Jeff. We've also, over the last several quarters, begun to travel into Texas via our adjacent business in New Mexico and are serving a handful of customers in that region as well. Operator: Our next question comes from Julien Dumoulin-Smith with Jefferies. Julien Dumoulin-Smith: Yes. Kudos, I got to echo that last comment, nice acceleration all around here. Jeff and team, look, if I could ask just to lead off with this, bookings trend, how do you think about '27? You've obviously started -- continued this year fabulously, put up even better results. It looks like the order book is accelerating here quarter-over-quarter. I just want to get a little bit of your commentary. You said it even at the end in your concluding comments that you're seeing an acceleration here. How does this portend into the next year? I just want to make sure I'm hearing you very quickly because obviously, the near-term results are translating very squarely. I just want to hear how it extends here and sort of the duration, maybe if I were to like zero in on one aspect of this. Can you compound off these elevated levels in the same confidence? Jeffrey Sprau: Yes. It's really -- I use the word momentum. The momentum continues to increase, Julien, and it's remarkable. And I think it's a function of, of course, amazing demand drivers. It's also a function of the fact that these projects are getting bigger. And as you are well aware, only certain companies are positioned to accommodate those larger projects. You need to have lots of employees, you need to have lots of square footage. And most importantly, you have to have the technical expertise and the relationships to be able to capitalize. And so we're just seeing it continuing to go up and to the right. And I think the fact that we're not a one-trick pony in terms of just doing one service line. We do all service lines, and we do it for many, many customers. And so when you have that sort of, I guess, diversity of capability and diversity of customer and you have an amazing market backdrop, that turns into momentum. And that's what we're seeing. I don't know, Steve, if you have anything to add? Steve Hansen: Well said, I think the diversity in our end markets helps to continue that growth as well. And we're seeing -- we're just starting to see -- Jeff mentioned it, the manufacturing end market and the reshoring that's happening gives a sense of a positive outlook. Julien Dumoulin-Smith: Excellent. If I can zero in a little bit more on this. I mean, if you can speak a little bit more specifically to the working capital needs as you think about like that as maybe an offset here just as the business accelerates. And then related, modular capacity expansion, how large does your capacity need to be to adequately serve, right? Just if you can kind of speak into like how you accommodate this accelerating outlook as well in terms of the different pieces? Stephen Butz: Yes, Julien, good question. On working capital, as you'll probably recall, at the time we went public, we said that we could drive some improvements in working capital management. And I think you saw that the first few quarters out of the box where we even generated cash from working capital despite really strong revenue growth. We're probably now much closer to what I'd call normalized levels. This quarter, it was a modest use of cash. I'd expect with revenue growth that to continue to be the case generally. It's always hard to call quarter-to-quarter because of the lumpiness of a balance sheet type metric like that. But I think that most of the improvements have already been driven through. That said, where we're working on customized fabrication modules, we tend to generate higher levels of prepayment than we do for our other services. So to the extent that continues to increase in our mix, that could be a positive. Steve Hansen: And then from a fabrication square footage, Julien, we're sitting at 1.5 million square feet today. We have capacity for growth with that number now. And we can pull several levers within that footprint, right? We can add multiple shifts, more days on manpower load. But we will continue to grow. We look to add about another 100,000 square feet here in the coming weeks to that number. And we'll monitor our incoming requests and backlog and size appropriately for work to come. Operator: Our next question comes from Chad Dillard with Bernstein. Charles Albert Dillard: I was hoping you could talk about your gross margins in backlog. What are they today? And can you bridge it to the gross margins that you have in your current P&L? Stephen Butz: Yes. Our gross margins and backlog are generally similar to what our current or recent realizations are. We haven't seen a dramatic change in pricing across the service lines versus, say, what we would have reported this quarter or even last, if that answers your question. Of course, there's always changes in mix, like what's in the backlog. But for the underlying services and service lines, similar levels of margin. Charles Albert Dillard: Okay. Yes, that's helpful. And so as you look forward over the next couple of years, what share of your revenues do you think will be on the modular and prefab side? And how do you put that in the context of your margin potential for just the broader business? Stephen Butz: Yes. Great question. We did see, as you recall, really a ramp in our mix of fab-only type work, particularly in the second and third, fourth quarter of 2025. It's been at a relatively similar percentage the last 3 quarters. When we think about our overall I&M revenue, it's been in the low 20% range the last 3 quarters now. And while we're experiencing really nice growth in that fab-only work, we're also winning large installation jobs. And so both have been growing at a pretty similar rate. I'll hand it to Jeff or Steve in terms of the outlook for both of those. But... Steve Hansen: Yes. From a manufacturing, third-party manufacturing, solid outlook, lots of inbound stuff. And as we continue to see large projects built in more rural areas where there's just not a lot of resources there, we expect to see that continue. And to Stephen's point, the large installation projects that are inbound and continuing to get booked and run into our pipeline, we just see a solid outlook there. Operator: Our next question comes from Brian Brophy with Stifel. Brian Brophy: Just continuing the conversation on some of the regional areas where you have data center exposure. Are you experiencing any notable difference in demand trends by region and particularly curious on DMV relative to other areas? Jeffrey Sprau: Yes. I'll start, Brian, and I'll hand it over to Steve. I think any changes that we've seen probably happened a couple of quarters ago when we started to see data centers get placed in more rural parts of the country, call it, middle America, which really changed the ship to address on our fabrication work. And so now we are shipping to the Iowa of the world and the North Carolinas of the world and the Ohio of the world. That we obviously didn't see a couple of years ago. And so I think that's a notable difference. Now within the sort of primary markets, they are still the primary markets. The DMV is still data center alley. Arizona and I would say the broader Southwest is still humongous. And obviously, over the last probably 12-plus months, Texas is sort of broken into the top 3. Steve Hansen: Yes. Well said. And to Jeff's point, DMV continues to be strong. The Phoenix market and that Texas market that we have moved into and are shipping our manufactured product into Texas has been a strong growth pattern for us. Brian Brophy: Appreciate it. That's very helpful. And then just maybe touching on the demand environment you're seeing on the semi fab side. Did you book anything notable in the quarter? And just general thoughts on the outlook there? Steve Hansen: Yes. Semiconductor still is ramping and getting stronger. We're seeing some incoming demand for OSM manufactured product for our semiconductor clients. We did grow our revenue in that end market as well in the quarter, and we are booking projects to continue that growth. Operator: Our next question comes from Joseph Osha with Guggenheim Partners. Joseph Osha: I was going to ask about semiconductors as well. I want to drill down on that a bit. If you look at Intel and TSMC down in Arizona and Micron up in New York, I mean, the numbers are pretty substantial with perhaps the floor space is not quite the same. So I guess I'm curious, looking a few years out, can we imagine this segment maybe becoming as large you as data centers? Or am I being overly optimistic there? And then I have a follow-up. Stephen Butz: Yes. And Steve alluded to the fact that we did have nice revenue growth in semiconductors, the contribution this quarter. I mean it was stellar, over 50% growth. That said, that, of course, even pales to what we're seeing in the data center space. Over time, though, I mean, the outlook is certainly good for semiconductors, but tough to. Steve Hansen: Yes. I would say -- and you hit on some of the key players that are growing and building out right now, and we will target them as Intel is one of our main clients in the Bay Area and other places. The TSMC Phoenix market is super competitive in that region right there for the semiconductor stuff, but we are seeing inbounds from all others that are in memory and chip production. Jeffrey Sprau: Yes. And just to pile on here, the characteristics required for success in the semiconductor and the memory space are the same characteristics you need for success in data centers. They're complex systems. They're really, really big. They're custom, but they're high volume. And you have to be in that space. And we grew up in the semiconductor space. We grew up in the biotech space, and we grew up in the data center space. So we love to see those announcements because it's going to fit right into our wheelhouse. Joseph Osha: Excellent. And then just as a follow-up, we're starting to see some conversation following the 232 ruling on larger scale investments in cell wafer and ingot capacity onshore in the U.S., I mean, notably that Tesla announcement the other day. I'm curious, is that a market that is of interest to you all? Jeffrey Sprau: I'd say, Joe, that's -- certainly, we're interested in our large clients and what drives their demand. But I would say there's an outsized reliance upon or attractiveness to that sort of, I guess, evolution or volatility for lack of a better term. Operator: Our next question comes from Sabahat Khan with RBC Capital Markets. Sabahat Khan: I just wanted to talk a little bit about the sort of the sort of non-semis, non-data center manufacturing side that you called out more on the industrial side. Can you maybe just talk about some of the silos where you are seeing some of that reshoring activity? There's some folks out there saying they're not really seeing it in their business lines. Maybe if you can talk about which end markets you're seeing that in, kind of the opportunity set, are you doing some of the same type of work? You're providing some of the technology customers? Just a little bit more color on that opportunity. Steve Hansen: Yes. So I mean we're -- reshoring, I think, is still kind of in early stages, and we expect to see that grow over coming years. Currently, places like Tesla, SpaceX for us are great clients and we're seeing growth with them. They're going to continue to build an inbound. We've got a great engineering relationship with them as well as installations. So from both sides of our business, we'll benefit from that. Jeffrey Sprau: Yes. And it's interesting from a terminology perspective. Obviously, GLP-1 drugs on the pharma side are huge. We have some great clients that we're helping them out in that regard. Now is that reshoring or onshoring or just starting from scratch? I'm not sure. But again, those same characteristics, highly complex. You need engineering chops to be able to pull it off. You need the relationships. You need to have a resume. You got to prove that you can do it. And so as Steve mentioned, in the baseball season, it feels early innings on the reshoring perspective from our view. Sabahat Khan: Great. And then just in terms of my follow-up, it looks like the sort of the $5.67 billion number here is about 60% in the data center technology space, round numbers, almost double the mix of last year. Do you have sort of a threshold in mind for the right mix of this business or lot of opportunities there, you'll capitalize on it and go from there? Just trying to think about how you think about your go-to-market strategy? Are you still actively pursuing these customers? And if the mix gets larger, that's fine. Just how do you think about the mix of end markets across your business? Jeffrey Sprau: Yes. I'll start, and then I'll hand it over to Stephen. We've always wanted this growth to be an and versus an or. And I mean by that, we want to be able to satisfy demand from our customers, but not at the exclusion of our amazing customers in these other markets. And so we want it to be additive. Now in a perfect world, I think it'd be nice and balanced. But so long as we are keeping our customers happy, and we're not missing out or turning down opportunities in other markets that maybe are just sort of clicking along in high single digits, we really want it to be both. And to me, if data centers are 60% or 65% or 55% or 70%, doesn't matter so long as that we feel good about handling all of the opportunities. Now if we have to start making decisions, then that's a different story. But I hope we never get to that position. I don't know, Stephen, if you. Stephen Butz: Yes. Great point, Jeff. We don't want to turn away business from any of our good clients no matter the end market. And so that's going to change our mix over time. The other area where we can change our mix over time is through M&A. Now as you know, we're focused on high-end contractors and of course, on the engineering side as well, but those that focus on mission-critical facilities. So many of those are also going to have some data center exposure. But there certainly may be opportunities to add to our mix with other high-quality businesses that maybe are a little bit more skewed towards some of our other mission-critical end markets. That's something that we'll continue to evaluate over time. Operator: Our next question comes from Michael Dudas with Vertical Research Partners. Michael Dudas: Jeff, I get your sense of your customer -- obviously, your customers across the board seem to be quite active. How are you looking at allocating capacity time, your current labor force how does that look relative to what you have to execute out of your backlog in the next 3 to 5 quarters? And are your clients looking to secure your services a much greater time into the future, trying to secure opportunities where maybe even a couple of years away before they're going to need what you guys do? Jeffrey Sprau: Yes. Great question, Michael. And I'll start and then I'll hand it over to Steve. And you called it. The 2 levers that we look at after we get inbound demand, which thankfully has continued to be up and to the right is do we have the labor to accommodate it both on the engineering side and the implementation of the boots on the ground side. And number two, do we have the right square footage on the fab side. And those obviously work together. The more that we can do in the factory, all things being equal, you can do factory work with fewer people. And so it reduces the, I guess, pressure from a labor perspective. That said, and Steve, correct me if I'm wrong, we are not seeing labor constraints to the extent that we would have to either push out a project or anything like that. And the fabrication square footage is an interesting capacity challenge, and I'll hand it to Steve to walk through how we think through that. Steve Hansen: Yes, you're right, Jeff. Though there is tight labor around the country, we've been very successful at recruiting and bringing in people. As we build out that capacity and improve our fabrication floor prints, we're doing it with the latest in technologies and automation and skilled labor wants to come work on that stuff, right? So we've been able to attract the labor we need. We haven't run into labor shortages. We're always mindful of it and looking and planning ahead. And then from a capacity standpoint on our manufacturing, and we talk a lot about our OSM third-party manufacturing, even our installation and everything, we have a high priority on prefabrication, right? Take as much as we can out of the field, put it into our shops where we're much more efficient. You need less headcount. It's safer. There's a ton of positives to it. And we can adjust by running multiple shifts. Today, we run 2 shifts in a lot of our facilities and our second shifts are just light shifts to keep things moving for the next day. We can ramp those up and create capacity within our existing footprint to equal demand. Jeffrey Sprau: And the thing probably is underappreciated, we really benefit from being a unionized workforce. It's a national labor force for us that we can pull from and people can travel on a moment's notice. And what's beautiful about that, there are several great things about that, one of which is you know exactly you're getting a trained, safe, certified employee and you're pulling from all parts of the country. And so if there's a soft part in one area of the country, we get travelers that come and they go to where the work is. And certainly, one of the ways that you can become a sort of preferred employer is when you have a huge backlog and when you have amazing customers and when you have challenging technologies and cutting-edge technologies and you're safe. Those are the criteria that folks think about when they decide if they want to go work on a job in, say, Texas or say, Idaho, for instance. Michael Dudas: And just a follow-up, what about on the client side, do they -- are they looking to lock you in longer into the future? Or how are those discussions and how are you allocating those resources to some of your -- trying to keep it balance, as you mentioned in the response to a prior question through all your customers and end markets? Steve Hansen: No, it's a great question, and we are having those conversations every day with our clients. And we are seeing our backlog stretch into further out periods than we had historically because they're aware, too, right, that they need the resources to get their builds completed. So yes, we are seeing an incoming demand for what does it look like '27 and beyond. So it continues to be a positive. Jeffrey Sprau: Yes. And I don't have data to support it. But generally speaking, it's driving ideally earlier decision-making. And we're a humble company, and we basically tell our clients that we need to know because we need to lock in on whether it's designs or headcount or fabrication square footage. And I think they realize that. And so the earlier that we get engaged and start having those discussions, the better. That's, I think, one of the benefits of the fact that we have engineering as well as installation. It's earlier client involvement and in mostly any industry, the earlier you're talking to a customer, the better. And the more you understand the customer, you understand the decision-making process, you understand the competition, you understand the pain points, all that stuff. Earlier, the better for us. And I think people are realizing and again, I don't know that I have anything other than anecdote that since this is such a huge ramp, the earlier we talk, the better. Operator: Our next question comes from Oliver Davies with Rothschild & Co. Redburn. Oliver Davies: Just 2 for me. I mean, firstly, could you just provide a bit of color on the margin difference between installation and third-party fabrication sales? And then secondly, I guess you mentioned larger awards, but speed to market is key. So just any comments on the sort of conversion of the backlog, whether that's materially changed over the past 6 months or so? Stephen Butz: Yes. On the first one, of course, we don't disclose the differences of the sublevels of services versus how we disaggregate revenue. But I think what we can -- happy to say is that when we're completing a full installation job, those margins -- the revenue opportunity is much, much bigger than just a fab only. There's flow-through equipment, sometimes subcontractor costs. And so our margins are lower than when we're essentially manufacturing customized products, we do get a nicely higher margin on those. And so that should be a positive to our margins over time as we continue to do more fab-only work. But then I'll hand it to Steve for the second half. Steve Hansen: Yes. On the acceleration of schedules and on these projects, we are seeing acceleration in every end market we're in. There is a race to the finish line, especially in the data center world and the semiconductor world that we're in. They want to ramp their projects and get them done. They're all competing with their peers just like we are. And so we are seeing those pull in. We're seeing shorter time frames. And again, our ability to leverage the 1.5 million square feet of fabrication capacity allows us to work with our clients and pull those projects in on a timely manner for them. Operator: Our next question comes from Chris Senyek with Wolfe Research. Christopher Senyek: Just one question for me. Stephen, you mentioned project timing, continued strong execution as drivers of the raise. And I think, Steve, you just talked about the acceleration of projects ramping faster. Can you just separate how much of the increase in guidance this year is revenue being pulled forward versus incremental work that wasn't necessarily contemplated last quarter? Stephen Butz: Yes. It's hard to provide a split on that. I think it's a combination. I think the pull forward, we certainly benefited from that in a sense in the second quarter versus our guidance. When I say pull forward, we're just executing on some of the -- particularly the fab projects quicker than originally anticipated. So there's some of that in our guidance, but also just -- we've got a strong backlog coverage on our second half results. And so that was part of our overall guidance rise as well. Operator: And our final question comes from Derek Soderberg with Cantor Fitzgerald. Derek Soderberg: Just wanted to dig into the Engineering & Consulting segment. I think gross margins there were down a little bit. I was wondering if that was more labor costs or project mix. And then just as a follow-up on that, I'm curious if the E&C margins are different for work that's sort of attached to larger projects versus smaller projects. Stephen Butz: Yes, I'll take the first part of that. Our margins, again, the difference in the year-over-year margin was driven by a mix. We had a larger contribution from our program and project management, which includes performance contracting than our higher-margin engineering and design service line. And that's really what accounted for the difference year-over-year. And then just more broadly, as I look at the -- think about the margins in that segment, we had one quarter that was an outlier quarter where we had really high margins over the past 2 years. But otherwise, over the last 8 quarters, we've generally been in the 31% to 33% range and the difference is driven by mix, mix shifts. The one area, again, that we talked about, sustainability consulting, where we've seen a little bit of degradation, as we discussed, that's sort of plus or minus 10% of that overall engineering and design service line. So a very small piece. Overall, though, the margins for the underlying services have been consistent essentially within that period other than that, and the changes have been driven by mix shifts. Jeffrey Sprau: Yes. And I would just piggyback on that. We haven't seen, I don't think, a material difference in engineering fees by vertical market, whether the engineering fee for a data center versus a hospital versus a university versus a K-12. I think they're similar. I'm sure they're not identical, but nothing that would sort of move the needle from our perspective. Operator: This concludes the question-and-answer session. I would now like to turn it back to Son Vann for closing remarks. Son Vann: Thank you, Daniel, and thank you, everyone, for attending our second quarter '26 earnings call. A recording of this call will be available on our website in a few hours, and we look forward to updating you again in our next earnings call. Until then, have a great week. Talk to you soon. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Before you buy stock in Legence, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Legence wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $400,209!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,375,393!* That performance is why people listen. With a track record of beating the S&P 500 by 4x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks » *Stock Advisor returns as of August 13, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Legence (LGN) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Interested in LGN? Here are five stocks we like better. Record Q2 performance: Legence reported revenue of $1.262 billion, up 111% year over year, and adjusted EBITDA of $155 million, up 114%. The Bowers Group acquisition contributed about $300 million, while revenue excluding Bowers increased nearly 60%. Strong demand and backlog: Backlog and awards reached a record $5.7 billion, with data center and technology projects driving growth. Management cited steady or accelerating project timelines and bookings exceeding $100 million, including technology fit-out projects of roughly $175 million to $200 million. Full-year outlook raised: Legence increased its 2026 revenue guidance to $4.7 billion–$4.8 billion and adjusted EBITDA guidance to $565 million–$585 million, while planning $40 million–$45 million in second-half capital spending to expand fabrication capacity. 3 Overlooked Stocks Positioned for the Next Market Rotation Legence LGN (NASDAQ:LGN) reported record second-quarter results as demand for mission-critical building systems remained strong, led by data centers and technology projects, while the company raised its full-year revenue and adjusted EBITDA outlook. Revenue for the second quarter of 2026 totaled $1.262 billion, up 111% from the prior-year period. The Bowers Group acquisition contributed about $300 million of revenue, while revenue excluding Bowers rose nearly 60% year over year, according to Chief Financial Officer Stephen Butz. → AST SpaceMobile Earnings Just Reminded Investors How Risky Space Can Be Legence Stock Up 185% Since IPO—Could 50% Upside Lie Ahead? Adjusted EBITDA increased 114% from a year earlier to $155 million, with an adjusted EBITDA margin of 12.2%. The margin improved by nearly 90 basis points from the first quarter when including the impact of Bowers, Butz said. Backlog and awards ended June at a record $5.7 billion, an increase of 105% from a year earlier and about 5% sequentially. The company reported a second-quarter book-to-bill ratio of 1.2 times and a trailing 12-month book-to-bill ratio of 1.4 times. → Nebius’ Q2 Beat Shows the AI Bottleneck Is Capacity, Not Demand Chief Executive Officer Jeff Sprau said growth was concentrated in the data center and technology market, where client discussions indicated that demand has remained steady from the start of the year and, in some cases, project timelines have accelerated. “The momentum continues to increase,” Sprau said during the company’s earnings call, attributing the trend to demand conditions, larger project sizes and Legence’s ability to provide multiple service lines. He said some larger project bookings now exceed $100 million. → On Holding's Price Stumble May Be an Opening for a Company Built to Run Chief Operating Officer Steve Hansen said recent data center bookings included technology fit-out projects ranging from roughly $175 million to $200 million, along with bookings for off-site manufacturing work. Legence’s installation work is concentrated in California, Phoenix and the Washington, D.C., Maryland and Virginia region, while its fabrication operations ship products to projects around the country. The company also cited solid organic revenue growth in life sciences and health care, education, and state and local government. Manufacturing represents less than 3% of Legence’s revenue base but has been growing strongly and is now roughly equal in size to its mixed-use market, Sprau said. Management expects reshoring activity to support manufacturing demand over coming years. Engineering and consulting revenue rose 6% to $207 million, driven primarily by 17% growth in program and project management services. The company cited major state and local government projects in Washington, D.C., South Carolina, Colorado and Minnesota. Engineering and design revenue declined 4%, largely due to softer demand for sustainability consulting services among large commercial real estate owners. Butz said the decline in sustainability consulting backlog contributed to Legence’s decision to impair goodwill and other intangible assets tied to that business during the quarter. He said the company still sees long-term value in those services, particularly as energy costs rise. The installation and maintenance segment generated revenue of $1.055 billion, up 162% from the prior year. More than half of the segment’s growth was organic, with the balance largely related to Bowers. Installation and fabrication revenue rose 189%, while maintenance and service revenue increased 58%; excluding Bowers, maintenance and service revenue grew nearly 20% organically. Consolidated adjusted gross margin was 18.5%, down from 21.8% a year earlier, reflecting a revenue mix shift toward the installation and maintenance segment and lower margins in engineering and consulting. Engineering and consulting adjusted gross margin was 31.1%, down from 33.2%, largely because program and project management represented a greater share of segment revenue. Installation and maintenance adjusted gross margin was 16.1%, essentially unchanged from the prior year. Butz said margins embedded in backlog are generally similar to the company’s recent realized margins. He added that fabrication-only work carries higher margins than full installation jobs, though installation projects represent a substantially larger revenue opportunity. Legence continued to expand its fabrication footprint to support its growing backlog. During the second quarter, the company added about 200,000 square feet of fabrication capacity, bringing its total footprint to 1.5 million square feet. Management expects to add another 100,000 square feet in the coming weeks. The company had close to 11,000 employees at the end of July, including approximately 8,000 skilled technicians and craftspeople. Management said it has not faced labor constraints requiring it to delay projects, citing its ability to recruit workers and draw on a unionized national workforce. Legence ended the quarter with $292 million in cash and total liquidity of $461 million. Total debt was slightly above $1 billion, roughly flat with the first quarter. Pro forma net leverage declined to 1.5 times, about half the level reported following the company’s IPO last September. During the quarter, Legence repriced its term loan, initially reducing interest costs by 25 basis points. Following credit rating upgrades from S&P Global Ratings and Moody’s in June, loan pricing is expected to decline by an additional 25 basis points to SOFR plus 175 basis points. Legence established third-quarter guidance for revenue of $1.225 billion to $1.275 billion and adjusted EBITDA of $150 million to $160 million. For the full year, the company raised its revenue outlook to $4.7 billion to $4.8 billion from a prior range of $4.1 billion to $4.3 billion. It also increased adjusted EBITDA guidance to $565 million to $585 million, compared with previous guidance of $470 million to $490 million. Butz said the higher outlook reflects second-quarter performance, expanding backlog, expectations for project timing and continued execution. The company also increased expected capital spending, projecting $40 million to $45 million during the second half for fabrication capacity expansions, tooling and investments in existing facilities. Legence Corp. is a provider of engineering, consulting, installation and maintenance services for mission-critical systems in buildings. The company specializes in designing, fabricating and installing complex HVAC, process piping and other mechanical, electrical and plumbing systems. Legence Corp. is based in SAN JOSE, Calif. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "LGN Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

This article first appeared on GuruFocus. Revenue: $1.262 billion in Q2 2026, up 111% year over year, with organic growth of nearly 60%. Adjusted EBITDA: $155 million, up 114% year over year; adjusted EBITDA margin of 12.2%, up almost 20 basis points year over year and 90 basis points sequentially. Adjusted Gross Profit: Approximately $234 million, with an adjusted gross margin of 18.5%. Backlog and Awards: Record $5.7 billion, up 105% year over year and 5% sequentially. Book-to-Bill Ratio: 1.2 times for Q2 2026; 1.4 times over the last 12 months. Engineering & Consulting Segment Revenue: $207 million, up 6% year over year, mostly organic. Installation & Maintenance Segment Revenue: $1.055 billion, up 162% year over year, with over half of growth organic. Installation & Fabrication Services Revenue: Increased 189% year over year. Maintenance & Service Revenue: Increased 58% year over year; organic growth of nearly 20% excluding Bowers. Adjusted SG&A: $87 million, up from $62 million; as a percentage of revenue, improved to 6.9% from 10.3%. Net Leverage: Pro forma net leverage at 1.5 times, down from 3 times at IPO. Full Year 2026 Revenue Guidance: Raised to $4.7 billion to $4.8 billion. Full Year 2026 Adjusted EBITDA Guidance: Raised to $565 million to $585 million. Warning! GuruFocus has detected 7 Warning Signs with NPIFF. Is LGN fairly valued? Test your thesis with our free DCF calculator. Release Date: August 13, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Record revenue and backlog, with organic revenue growth of nearly 60% and total revenue up 111% year-over-year. Strong demand across diverse end markets, including data centers, life sciences, healthcare, education, and state/local government. Adjusted EBITDA grew 114% year-over-year, with sequential margin expansion of 90 basis points. Pro forma net leverage reduced to 1.5 times, down from 3 times at IPO, strengthening the balance sheet for future M&A. Increased full-year 2026 revenue and EBITDA guidance by 13% and 20%, respectively, reflecting strong execution and backlog. Adjusted gross margin declined to 18.5% from 21.8% due to revenue mix shift and lower margins in Engineering & Consulting. Engineering & Design revenue declined 4% due to soft demand in sustainability consulting for mixed-use clients. Goodwill and intangible impairment taken in the sustainability consulting business due to prolonged market softness. Reported net loss due to non-cash legacy profit interest expense, which is marked to market and impacted by share price. Higher cash tax estimate for 2026, increased to mid-$50 million range, due to revised profit outlook. Q: Can you provide a sense of the size of the largest projects booked in the quarter, the makeup of data center customers (hyperscalers vs. co-locators), and the bookings trajectory for the balance of the year? A: Jeff Sprau (CEO) noted strong bookings in data centers, specifically in "TFO" projects (follow-on work after base builds), ranging from $175 million to $200 million, as well as solid bookings in off-site third-party manufacturing. He stated the pipeline is strong and the trend should continue to be positive going forward. Q: How should we think about the 2027 outlook given the accelerating bookings trend and the momentum you are seeing? A: Jeff Sprau (CEO) said the "momentum continues to increase," driven by strong demand and larger project sizes that favor companies with the scale, technical expertise, and relationships to execute. He emphasized that Legence's diversity in service lines and end markets, combined with a robust market backdrop, is fueling this momentum. Stephen Butz (CFO) added that the diversity in end markets and the early stages of reshoring in manufacturing provide a positive outlook. Q: What are the working capital needs as the business accelerates, and how large does your fabrication capacity need to be to adequately serve this accelerating outlook? A: Stephen Butz (CFO) stated that working capital is now at "normalized levels" after improvements made post-IPO, with a modest use of cash in Q2. He noted that customized fabrication modules generate higher prepayments, which could be a positive if that mix increases. On capacity, Jeff Sprau (CEO) said the company is at 1.5 million square feet, with plans to add another 100,000 square feet shortly. They can also pull levers like adding shifts and increasing manpower to expand capacity within the existing footprint. Q: What are the gross margins in your current backlog, and how do they compare to the margins in your current P&L? A: Stephen Butz (CFO) stated that gross margins in backlog are "generally similar" to recent realizations, with no dramatic change in pricing across service lines. He noted that while there are always changes in mix, the underlying margins for services are at similar levels. Q: What share of revenues will come from modular and prefab work over the next couple of years, and how does that factor into the margin potential for the broader business? A: Stephen Butz (CFO) said that fab-only work has been in the "low 20% range" of I&M revenue for the last three quarters. Both fab-only work and large installation jobs are growing at similar rates. Jeff Sprau (CEO) added that the outlook for third-party manufacturing is solid, with lots of inbound demand, particularly as large projects are built in more rural areas with limited local resources. Q: Are you experiencing any notable differences in demand trends by region, particularly in the DMV area? A: Jeff Sprau (CEO) noted that the main change occurred a couple of quarters ago with data centers being placed in more rural parts of the country, changing the "ship-to address" for fabrication work to states like Iowa, North Carolina, and Ohio. He confirmed that primary markets like DMV, Arizona, and the broader Southwest remain strong, with Texas breaking into the top three over the last 12 months. Q: Did you book anything notable in the semiconductor space in the quarter, and what is the general outlook there? A: Stephen Butz (COO) said the semiconductor market is "ramping and getting stronger," with incoming demand for OSM manufactured product. Revenue in that end market grew over 50% in the quarter, and they are booking projects to continue that growth. Jeff Sprau (CEO) added that the characteristics for success in semiconductors are the same as for data centers, and Legence "grew up" in that space, making it a natural fit. Q: Can you provide more color on the reshoring activity you are seeing in the manufacturing end market? A: Stephen Butz (COO) said reshoring is still in "early stages" but expected to grow. He cited clients like Tesla and SpaceX as great examples where they are seeing growth and have strong engineering and installation relationships. Jeff Sprau (CEO) added that the same complex characteristics apply, and it feels like "early innings" for reshoring. Q: With data center and technology now representing about 60% of backlog, do you have a threshold in mind for the right mix of end markets? A: Jeff Sprau (CEO) stated they want growth to be "an and versus an or," meaning they want to satisfy demand without excluding customers in other markets. He said the mix percentage doesn't matter as long as they can handle all opportunities. Stephen Butz (CFO) added that M&A could also help change the mix over time, potentially adding businesses skewed toward other mission-critical end markets. Q: How are you allocating capacity and labor to execute the growing backlog, and are clients looking to secure your services further into the future? A: Jeff Sprau (CEO) said the two key levers are labor and fabrication square footage, and they are not seeing labor constraints that would push out projects. Stephen Butz (COO) noted they have been successful in recruiting, aided by investments in automation and technology. On client behavior, Jeff Sprau (CEO) confirmed they are having daily conversations with clients about 2027 and beyond, with backlog stretching into further-out periods as clients seek to secure resources. Q: Can you provide color on the margin difference between installation and third-party fabrication sales, and has the conversion of backlog changed materially? A: Jeff Sprau (CEO) said full installation jobs have much larger revenue opportunities but lower margins, while fab-only work yields "nicely higher margins," which should be a positive over time. Stephen Butz (COO) added that they are seeing acceleration in schedules across all end markets, with clients racing to complete projects. The company's fabrication capacity allows them to work with clients to pull projects in on a timely basis. Q: Can you separate how much of the guidance increase is due to revenue being pulled forward versus incremental work not contemplated last quarter? A: Stephen Butz (CFO) said For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Organic revenue growth of nearly 60% was primarily driven by the data center and technology end market, where speed-to-market requirements from clients are accelerating. Management attributes the record $5.7 billion backlog to a 'momentum' effect, where increasing project complexity and size favor firms with large-scale technical expertise and fabrication capacity. Strategic diversification into life sciences, healthcare, and education provided a stable growth foundation, while the manufacturing sector is emerging as a high-growth area due to reshoring trends. Operational efficiency is being realized through a 200,000 square foot expansion of fabrication capacity, allowing for more work to be shifted from the field to controlled factory environments. The company successfully reduced pro forma net leverage from 3.0x to 1.5x in three quarters, despite completing the Bowers acquisition, which management views as a validation of their capital allocation strategy. A shift toward larger project awards, some exceeding $100 million, is creating higher quarterly booking volatility but reinforcing the company's competitive moat in mission-critical systems. Full-year 2026 revenue guidance was raised to $4.7-$4.8 billion, reflecting strong backlog coverage and faster-than-anticipated execution on fabrication projects. Management expects the manufacturing end market to benefit significantly from reshoring and domestic semiconductor investments over the coming years. Capital expenditure guidance was increased by $15-$20 million to support incremental fabrication capacity expansion, including advanced tooling and automation to offset labor constraints. The M&A pipeline is described as being at its most active level ever, with a focus on high-end contractors that align with mission-critical service objectives. Guidance assumes a continuation of current project timelines, though management noted that clients are increasingly seeking to lock in capacity for 2027 and beyond. A second-quarter impairment of goodwill and intangibles was recorded for the sustainability consulting business due to soft demand from commercial real estate clients. Reported gross margins were impacted by a mix shift toward the Installation and Maintenance segment following the Bowers acquisition, which carries lower margins than Engineering. The company noted that large project bookings can come in 'waves,' which may lead to fluctuations in the quarterly book-to-bill ratio despite a strong 12-month trend of 1.4x. Legacy profit interest expenses continue to create volatility in reported GAAP results and effective tax rates, though these are non-cash items borne by pre-IPO shareholders. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management noted that large data center bookings are now ranging between $175 million and $200 million, particularly for 'Total Facility Optimization' (TFO) projects following base builds. Demand remains strong across the data center and technology end market, as well as semiconductor, manufacturing, and government clients., with fabrication work now shipping to rural markets like Iowa and Ohio as developments shift away from traditional hubs. Legence is leveraging its unionized workforce to pull skilled labor from across the country to high-demand regions like Texas and Arizona. Management stated that their investment in advanced fabrication technology acts as a recruitment tool, attracting skilled technicians who prefer working with modern automation. Fabrication-only work typically yields higher margins than full installation projects because it avoids the lower-margin pass-through costs of equipment and subcontractors. While fabrication margins are attractive, management emphasized that large installation jobs provide significantly larger total revenue opportunities. The semiconductor sector saw over 50% growth this quarter, with management noting that the technical requirements for these facilities are identical to their core data center expertise. Reshoring is still considered to be in the 'early innings,' with significant future potential expected from memory chip production and domestic manufacturing facilities.

Record Quarterly Revenues of $1.26 Billion, a 111% Increase from a Year Ago Excluding Bowers Acquisition, Revenues (non-GAAP) Grew by 60% from a Year Ago1 Quarterly Adjusted EBITDA (non-GAAP) Increased 114% from Prior Year2 Record Total Backlog and Awarded Contracts of $5.67 Billion, a 105% Increase from a Year Ago Establish Third Quarter 2026 Guidance for Revenue of $1.225 Billion - $1.275 Billion and Non-GAAP Adjusted EBITDA of $150 Million - $160 Million Raise Full Year 2026 Guidance for Revenue to $4.7 Billion - $4.8 Billion and Non-GAAP Adjusted EBITDA of $565 Million - $585 Million SAN JOSE, Calif., Aug. 13, 2026 (GLOBE NEWSWIRE) -- Legence Corp. (Nasdaq: LGN) (“Legence” or the “Company”) today reported financial results for the second quarter ended June 30, 2026. “Strong customer demand led to another record quarter for Legence, with new highs in revenue, Adjusted EBITDA and backlog and awarded contracts,” said Jeff Sprau, Chief Executive Officer of Legence. “Total revenue more than doubled year over year, with revenue growth, excluding the impact of The Bowers Group ("Bowers") acquisition, of approximately 60%. While the data centers & technology end market continues to be a significant driver of our performance, we are also benefitting from healthy activity across our other diverse end markets, including life sciences & healthcare, state & local government, and education. Our dedicated craftspeople, technicians, and engineering professionals are executing at the highest standards, and we are leveraging the scalability of our growth platform to drive sequential Adjusted EBITDA Margin expansion. As we enter the second half of 2026, healthy industry conditions, combined with our backlog-supported visibility, gives us confidence to raise our revenue and profit outlook for the year.” Second Quarter 2026 Consolidated Results: Revenues for the second quarter 2026 totaled $1.26 billion, an increase of 110.7% from $598.9 million for the second quarter 2025. Excluding the impact of the Bowers acquisition, non-GAAP revenue growth was 60.0%. Gross profit for the second quarter 2026 was $220.2 million with gross margin of 17.4%, compared to gross profit of $128.7 million and gross margin of 21.5% for the second quarter 2025. Excluding the impact of compensation related to legacy Series A Interests and Restricted Series C Interests paid for by entities outside of Legence, we generated non-GAAP Adjusted Gross Profit of $234.0 million and non-GAAP Adjusted Gross Margin of 18.5% for the second quarter 2026, compared to non-GAAP Adjusted Gross Profit of $130.3 million and non-GAAP Adjusted Gross Margin of 21.8% for the second quarter 2025. The decrease in non-GAAP Adjusted Gross Profit and non-GAAP Adjusted Gross Margin was primarily due to a revenue mix shift towards Installation & Maintenance and a slight decline in Engineering & Consulting Adjusted Gross Margin. Net loss attributable to Legence for the second quarter 2026 was $27.8 million, or $(0.37) per diluted share, compared to a net loss attributable to Legence of $5.3 million for the second quarter 2025. Net loss for the second quarter 2026 was $34.6 million, compared to a net loss of $3.9 million for the second quarter 2025. Non-GAAP Adjusted EBITDA for the second quarter 2026 was $154.6 million, an increase of 114.1% from $72.2 million for the second quarter 2025. Refer to “Non-GAAP Financial Measures” for definitions of revenue growth (excluding Bowers), Adjusted Gross Profit, Adjusted Gross Margin, Adjusted EBITDA and Adjusted EBITDA Margin and a reconciliation of each to the most directly comparable GAAP measure. Engineering & Consulting Segment Results: Engineering & Consulting segment revenue for the second quarter 2026 totaled $206.9 million, an increase of 5.5% from $196.1 million for the second quarter 2025, driven by higher demand for Program & Project Management services primarily from state & local government and data centers & technology clients, partially offset by lower revenue from Engineering & Design services primarily from mixed-use clients. Engineering & Consulting segment gross profit for the second quarter 2026 totaled $56.1 million, a decrease of 12.4% from $64.1 million for the second quarter 2025. Excluding the impact of compensation related to legacy Series A Interests and Restricted Series C Interests paid for by entities outside of Legence, we generated non-GAAP Adjusted Gross Profit of $64.3 million and non-GAAP Adjusted Gross Margin of 31.1% for the second quarter 2026, compared to non-GAAP Adjusted Gross Profit of $65.1 million and non-GAAP Adjusted Gross Margin of 33.2% for the second quarter 2025. Refer to “Non-GAAP Financial Measures” for definitions of Adjusted Gross Profit and Adjusted Gross Margin and a reconciliation of each to the most directly comparable GAAP measure. The decrease in non-GAAP Adjusted Gross Profit was primarily driven by lower non-GAAP Adjusted Gross Margin, partially offset by higher revenue. The decrease in non-GAAP Adjusted Gross Margin was primarily driven by a revenue mix shift towards the Program & Project Management service line and rising indirect customer fulfillment costs. Installation & Maintenance Segment Results: Installation & Maintenance segment revenue for the second quarter 2026 totaled $1.06 billion, an increase of 162.0% from $402.8 million for the second quarter 2025. Excluding the impact of the Bowers acquisition, non-GAAP Installation & Maintenance segment revenues grew by 86.6% over the comparable periods.3 The increase was driven by strong demand for our Installation & Fabrication services, primarily from data centers & technology clients. The increase in Maintenance & Service revenue was primarily from data centers & technology, education, state & local government and life sciences & healthcare clients. See the section titled “Non-GAAP Financial Measures” for more information about non-GAAP revenue growth (excluding Bowers). Installation & Maintenance segment gross profit for the second quarter 2026 totaled $164.1 million, an increase of 154.1% from $64.6 million for the second quarter 2025. Excluding the impact of compensation related to legacy Series A Interests and Restricted Series C Interests paid for by entities outside of Legence, we generated non-GAAP Adjusted Gross Profit of $169.6 million and non-GAAP Adjusted Gross Margin of 16.1% for the second quarter 2026, compared to non-GAAP Adjusted Gross Profit of $65.2 million and non-GAAP Adjusted Gross Margin of 16.2% for the second quarter 2025. Refer to “Non-GAAP Financial Measures” for definitions of Adjusted Gross Profit and Adjusted Gross Margin and a reconciliation of each to the most directly comparable GAAP measure. The increase in non-GAAP Adjusted Gross Profit was primarily driven by revenue growth, partially offset by a slight decline in non-GAAP Adjusted Gross Margin. The slight decline in non-GAAP Adjusted Gross Margin was primarily due to an increase in Installation & Fabrication revenue mix, and lower service line margins, largely offset by greater economies of scale in customer fulfillment support costs. Backlog and Awarded Contracts and Book-to-Bill Ratio Backlog and awarded contracts totaled $5.67 billion at June 30, 2026, an increase of 104.6% from $2.77 billion at June 30, 2025. The consolidated book-to-bill ratio for the three-month period ended June 30, 2026 was 1.2x. Engineering & Consulting segment backlog and awarded contracts increased by 26.6% year over year, primarily from growth in the state & local government, education, and life sciences & healthcare end markets. Installation & Maintenance segment backlog and awarded contracts increased by 141.2% year over year, primarily from the acquisition of Bowers and strong growth in the data centers & technology and education end markets. Balance Sheet At June 30, 2026, the Company had cash and equivalents of approximately $292.0 million and total debt4 of approximately $1.03 billion. As a result, net leverage was 1.6 times, based on non-GAAP Adjusted EBITDA of the Company for the last 12 months ended June 30, 2026 (“Legence LTM adjusted EBITDA”). When including non-GAAP EBITDA of Bowers for the six months ended December 31, 2025 together with Legence LTM adjusted EBITDA, adjusted net leverage was 1.5 times. Refer to “Non-GAAP Financial Measures” for definitions of net leverage and adjusted net leverage and related reconciliations. Guidance Legence announces the following guidance for the third quarter of 2026: Total revenues of $1.225 billion to $1.275 billion; and Non-GAAP Adjusted EBITDA of $150 million to $160 million. Legence revises guidance for full year 2026 as follows: Total revenues of $4.7 billion to $4.8 billion, up from $4.1 billion to $4.3 billion; and Non-GAAP Adjusted EBITDA of $565 million to $585 million, up from $470 million to $490 million. Conference Call Legence will host a webcast and conference call to discuss its financial results on August 13, 2026 at 10:00 a.m. (Eastern Time). The webcast link to the call and the slide presentation to accompany the call remarks can be accessed on the Company’s website at https://investors.wearelegence.com/. A replay of the webcast can be accessed through the same webcast link on the Company’s website shortly after the call and will be available through September 13, 2026. About Legence Legence is a leading provider of engineering, consulting, installation, and maintenance services for mission-critical systems in buildings. The Company specializes in designing, fabricating, and installing complex HVAC, process piping, and other mechanical, electrical and plumbing (MEP) systems—enhancing energy efficiency, reliability, and sustainability in new and existing facilities. Legence also delivers long-term performance through strategic upgrades and holistic solutions. Serving some of the world’s most technically demanding sectors, Legence counts over 60% of the Nasdaq-100 Index among its clients. Forward-Looking Statements Some of the information in this press release may contain “forward-looking statements.” All statements, other than statements of historical fact, included in this press release including, without limitation, those relating to our strategy, future operations, financial position and guidance, estimated revenues and losses, projected costs, prospects, plans and objectives of management, are forward-looking statements. When used in this press release, words such as “anticipate,” “assume,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “could,” “should,” “plan,” “potential,” “predict,” “forecast,” “budget,” “project,” “future,” “will,” “seek,” “foreseeable,” the negative versions of these words and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are not historical facts but rather are based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events, and it is possible that the results described in this press release will not be achieved. Such statements are subject to a number of assumptions, risks, uncertainties and other factors, many of which are outside of the Company’s control, that could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to: changes to economic and regulatory conditions and other trends in the markets in which we operate; our ability to compete effectively in our target markets; the business plans or financial condition of our customers; the impact of acquired companies, including Bowers, on our organization and the ability to recognize the anticipated benefits of such acquisitions; the regulations related to environmental, health and safety matters; the ability to receive necessary government permits and approvals; the future availability and price of materials and equipment necessary for the performance of our business; the risks associated with inflation, interest rates, recessionary economic conditions and commodity prices; the fact that we outsource various elements of the services we sell and use materials and equipment produced by third parties; our clients’ reliance on third party financing; the recognition of all revenues from our backlog and awarded contracts; our receipt of all payments anticipated under awarded projects and customer contracts; the maintenance of safe work sites and equipment; restrictions imposed by our existing and any future indebtedness; our exposure to costs and liabilities under environmental, health and safety laws; misconduct and errors by employees, subcontractors, partners or third party service providers; and the other risks described under the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2026 (the “Annual Report”), and in other documents subsequently filed by the Company from time to time with the SEC. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified in their entirety by the statements in this section, to reflect events or circumstances after the date of this press release. New factors emerge from time to time, and it is not possible for the Company to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in the Annual Report and in the Company’s subsequent filings with the SEC. You are cautioned not to place undue reliance on these forward-looking statements. Contact Media: [email protected] Relations: [email protected] Non-GAAP Financial Measures In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (“GAAP”), this press release contains non-GAAP financial measures as described below. Our non-GAAP financial measures may not be comparable to similarly titled measures used by other companies, have limitations as analytical tools and should not be considered in isolation, or as substitutes for analysis of our operating results as reported under GAAP. Additionally, we do not consider our non-GAAP financial measures superior to, or a substitute for, the equivalent measures calculated and presented in accordance with GAAP. In addition, this press release includes certain projections of the non-GAAP financial measure Adjusted EBITDA. Due to the high variability and difficulty in making accurate forecasts and projections of some of the information excluded from these projected measures, together with some of the excluded information not being ascertainable or accessible, the Company is unable to quantify certain amounts that would be required to be included in the most directly comparable GAAP financial measures without unreasonable effort. Consequently, no disclosure of estimated comparable GAAP measures is included and no reconciliations of the forward-looking non-GAAP financial measures are included. Revenue Growth (excluding Bowers) This press release discloses consolidated revenue growth of Legence of 60.0%, and revenue growth of Legence’s Installation & Maintenance segment of 86.6%, for the quarter ended June 30, 2026, compared to the quarter ended June 30, 2025, the calculation of which, in each case, excludes the impact of approximately $303.8 million of second quarter 2026 revenues from Bowers. Such metrics are not calculated in accordance with GAAP. Management believes such metrics provide investors with useful supplemental information regarding the Company’s organic revenue performance by presenting revenue growth without giving effect to the impact of the Bowers acquisition. As calculated in accordance with GAAP, revenue growth of Legence was 110.7% (based on second quarter 2026 and 2025 consolidated revenues of $1.26 billion and $598.9 million, respectively), and revenue growth of Legence’s Installation & Maintenance segment was 162.0% (based on second quarter 2026 and 2025 I&M segment revenues of $1.06 billion and $402.8 million, respectively), for the quarter ended June 30, 2026 compared to the quarter ended June 30, 2025. Adjusted EBITDA and Adjusted EBITDA Margin; Net Leverage and Adjusted Net Leverage Adjusted EBITDA and Adjusted EBITDA Margin are financial measures not presented in accordance with GAAP but are intended to provide useful and supplemental information to investors and analysts as they evaluate our performance. Adjusted EBITDA is defined as net loss adjusted to exclude, or otherwise reflect, interest expense, interest income, income tax expense (benefit), depreciation and amortization, credit agreement amendment fees, goodwill impairment, long-lived asset impairment, net gain on sale and disposition of property and equipment, loss on debt extinguishment, acquisition and integration costs, system deployment costs, strategic initiative costs, indemnification asset adjustments, Tax Receivable Agreement liability remeasurements and stock-based and other non-cash compensation expense (benefit). Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by revenue. Adjusted EBITDA and Adjusted EBITDA Margin should not be considered alternatives to net loss or net loss margin, respectively, as determined in accordance with GAAP. Management believes that the exclusion of the above-described items from net loss in the presentation of the non-GAAP measures identified above enables us and our investors to more effectively evaluate our operations period over period and to identify operating trends that might not be apparent due to, among other reasons, the variable nature of these items, both in value and frequency, period over period. In addition, management believes these measures may be useful for investors in comparing our operating results with those of other companies. Net leverage is defined as net debt of Legence divided by Adjusted EBITDA of Legence, and adjusted net leverage is defined as net debt of Legence divided by LTM combined adjusted EBITDA. Net debt includes total balance sheet debt, excluding finance lease liabilities, less cash and cash equivalents. LTM combined adjusted EBITDA is the sum of (1) adjusted EBITDA of Legence for the 12-month period ended June 30, 2026 (or “Legence LTM adjusted EBITDA”) and (2) EBITDA of Bowers for the six month period ended December 31, 2025 (“Bowers EBITDA”), which is based, in part, on certain unaudited financial information of Bowers for the three months ended December 31, 2025 and audited financial information of Bowers for the year ended September 30, 2025. Bowers EBITDA is defined as net income, plus depreciation and amortization, interest income and income tax expense. The Company believes these non-GAAP measures are useful to investors as they provide alternative information that management believes to be useful in assessing (including, in the case of adjusted net leverage, on a combined basis giving effect to the Bowers acquisition) our ability to meet our payment obligations in addition to considering the absolute amount of our debt. The following table provides a reconciliation (the “Legence adjusted EBITDA Reconciliation”) of our net loss, the most directly comparable financial measure presented in accordance with GAAP, to Adjusted EBITDA, and a calculation of Adjusted EBITDA Margin for the periods indicated (in thousands): The following table provides a reconciliation (the “Bowers EBITDA Reconciliation”) of net income of Bowers, the most directly comparable financial measure presented in accordance with GAAP, to Bowers EBITDA for the six months ended December 31, 2025: The following table, taken together with the Legence adjusted EBITDA Reconciliation and the Bowers EBITDA Reconciliation, presents the calculation of LTM combined adjusted EBITDA: The following table presents the calculation of net leverage and adjusted net leverage: Adjusted Gross Profit and Adjusted Gross Margin Adjusted Gross Profit is a financial measure not presented in accordance with GAAP but is intended to provide useful and supplemental information to investors and analysts as they evaluate our performance. Gross profit is defined as revenue less cost of revenue services. Adjusted Gross Profit is defined as gross profit adjusted to exclude compensation related to legacy Series A Interests and Restricted Series C Interests, where the payment of this expense is borne by entities outside of Legence Adjusted Gross Profit should not be considered an alternative to gross profit that is derived in accordance with GAAP. Adjusted Gross Margin is defined as Adjusted Gross Profit divided by revenue. Management believes that the exclusion of the above-described items from gross profit in the presentation of the non-GAAP measure identified above enables us and our investors to supplement the evaluation of our operations period over period and to identify operating trends that might not otherwise be apparent due to, among other reasons, the variable nature of these items, both in value and frequency, period over period. In addition, management believes this measure may be useful for investors in comparing our operating results with those of other companies. The following table provides a reconciliation of our gross profit, the most directly comparable financial measure presented in accordance with GAAP, to Adjusted Gross Profit for the periods presented herein (in thousands) and our Adjusted Gross Margin for the same periods: Backlog and Awarded Contracts and Book-to-Bill Ratio We believe that backlog and awarded contracts and book-to-bill ratio enable us to more effectively forecast our future results and working capital needs, as well as better identify future operating trends that may not otherwise be apparent. Backlog represents, as of any date of determination, the expected revenue values of the remaining performance obligations under our contracted fixed-price projects. Awarded contracts represents, as of any date of determination, the expected revenue values of projects awarded to us following a request for proposals but for which a formal contract has not yet been signed. We calculate our book-to-bill ratio by taking our additions to backlog and awarded contracts, excluding additions that were attained through acquisition, for the period, and dividing it by revenue from fixed-price contracts for the same period. Given that backlog and awarded contracts and book-to-bill ratio are operational measures and that our methodology for calculating each such measure does not meet the definition of a non-GAAP financial measure, as that term is defined by the SEC, a quantitative reconciliation for each is not required or provided. ______________________________________________1 Excludes impact of approximately $303.8 million of second quarter 2026 revenues from Bowers. Revenue growth (excluding Bowers) is a non-GAAP financial measure. See the section titled “Non-GAAP Financial Measures” for more information.2 Adjusted EBITDA is a non-GAAP financial measure. Definitions of non-GAAP financial measures and reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure are included in the section titled “Non-GAAP Financial Measures.”3 Excludes impact of approximately $303.8 million of second quarter 2026 revenues from Bowers. Revenue growth (excluding Bowers) is a non-GAAP financial measure. See the section titled “Non-GAAP Financial Measures” for more information.4 Total debt defined as Term Loan balance of $992.8 million and Notes Payable balance of $33.6 million.

Investors were underwhelmed by the solid earnings posted by Legence Corp. (NASDAQ:LGN) recently. We have done some analysis and have found some comforting factors beneath the profit numbers. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. In high finance, the key ratio used to measure how well a company converts reported profits into free cash flow (FCF) is the accrual ratio (from cashflow). To get the accrual ratio we first subtract FCF from profit for a period, and then divide that number by the average operating assets for the period. The ratio shows us how much a company's profit exceeds its FCF. Therefore, it's actually considered a good thing when a company has a negative accrual ratio, but a bad thing if its accrual ratio is positive. While having an accrual ratio above zero is of little concern, we do think it's worth noting when a company has a relatively high accrual ratio. Notably, there is some academic evidence that suggests that a high accrual ratio is a bad sign for near-term profits, generally speaking. Legence has an accrual ratio of -0.17 for the year to March 2026. That implies it has very good cash conversion, and that its earnings in the last year actually significantly understate its free cash flow. To wit, it produced free cash flow of US$297m during the period, dwarfing its reported profit of US$3.51m. Legence's free cash flow improved over the last year, which is generally good to see. However, that's not all there is to consider. We can see that unusual items have impacted its statutory profit, and therefore the accrual ratio. Check out our latest analysis for Legence That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates. Legence's profit was reduced by unusual items worth US$53m in the last twelve months, and this helped it produce high cash conversion, as reflected by its unusual items. This is what you'd expect to see where a company has a non-cash charge reducing paper profits. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. In the twelve months to March 2026, Legence had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be. In conclusion, both Legence's accrual ratio and its unusual items suggest that its statutory earnings are probably reasonably conservative. After considering all this, we reckon Legence's statutory profit probably understates its earnings potential! With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. When we did our research, we found 2 warning signs for Legence (1 makes us a bit uncomfortable!) that we believe deserve your full attention. After our examination into the nature of Legence's profit, we've come away optimistic for the company. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Interested in LGN? Here are five stocks we like better. Legence delivered a strong Q1 2026 beat, with revenue more than doubling to $1.038 billion and adjusted EBITDA rising 132% to $118 million. Management said the results were driven by strong demand in mission-critical building systems, especially data centers and technology projects, plus the Bowers acquisition. Backlog reached a record $5.4 billion, up 104% year over year, while the book-to-bill ratio was 1.2x. The company said demand remains robust, with data center clients a key growth engine and fabrication orders now stretching into late 2028. Legence raised full-year 2026 guidance after the quarter’s outperformance, lifting revenue expectations to $4.1 billion-$4.3 billion and adjusted EBITDA to $470 million-$490 million. The company also highlighted strong free cash flow, lower leverage and greater flexibility for selective bolt-on acquisitions. Legence Stock Up 185% Since IPO—Could 50% Upside Lie Ahead? Legence LGN (NASDAQ:LGN) reported sharply higher first-quarter 2026 revenue and adjusted EBITDA, driven by strong demand for mission-critical building systems, growth in data center and technology projects, and the contribution from its Bowers Group acquisition. Chief Executive Officer Jeff Sprau said the company’s first-quarter results exceeded quarterly guidance and supported an increase to full-year 2026 guidance. He cited “a very healthy demand environment” for mission-critical building systems, strong project execution, the company’s ability to add skilled labor and the role of acquisitions in accelerating growth. → Rocket Lab Just Hit a New All-Time High—Time to Buy or Let It Breathe? Total revenue more than doubled from a year earlier to $1.038 billion, up 105%. Chief Financial Officer Stephen Butz said Bowers contributed a little over $240 million of revenue in the quarter. Excluding Bowers, revenue rose approximately 57% year over year. Adjusted EBITDA increased 132% to $118 million, while adjusted EBITDA margin improved by about 133 basis points to 11.4%. Butz said the quarter benefited from outperformance in the installation and maintenance segment, particularly from project execution and fabrication work. → MP Materials Is Quietly Building a Rare Earth Powerhouse Sprau said data center and technology clients were the primary drivers of the company’s growth, though Legence also saw gains in life science, healthcare, education, and state and local government markets. He said the engineering and consulting segment is also gaining more traction with data center and technology clients. Total backlog and awards reached a record $5.4 billion at the end of the quarter, up 104% from a year earlier. Excluding Bowers, backlog and awards increased 36%. On a sequential basis and pro forma for the inclusion of Bowers, Legence added about $200 million of net new backlog on top of the $1 billion of revenue recorded during the quarter. → Micron Investors Face a High-Stakes Moment After the Latest Rally The company reported a book-to-bill ratio of 1.2 times for the three months ended March 2026. Management said the ratio was lower than in the fourth quarter because several large awards were booked late in 2025, but added that the underlying pipeline remains strong. In response to an analyst question, Chief Operating Officer Steve Hansen said Legence continues to have frequent conversations with data center clients and has fabrication orders extending to the fourth quarter of 2028. Engineering and consulting revenue rose 14% to $166 million. Butz said program and project management revenue grew 75%, supported by large K-12 school projects in Pennsylvania, Virginia and West Virginia, as well as increased activity with data center and technology clients. Engineering and design revenue declined 8%, which Butz attributed to a difficult year-earlier comparison and softer demand for sustainability consulting from mixed-use clients. Installation and maintenance revenue increased 142% to $872 million. Roughly half of the growth came from Bowers, with the remaining increase largely organic. Installation and fabrication services rose 162%, driven by Bowers and data center and technology demand. Maintenance and service revenue increased 60%, and grew more than 20% excluding Bowers. Adjusted gross margin in engineering and consulting declined to 33.2% from 40.7% a year earlier, reflecting a tougher comparison and a mix shift toward program and project management, which carries lower margins. Installation and maintenance adjusted gross margin improved to 15.9% from 14.3%, driven by execution in installation and fabrication and greater scale in support costs. Legence established second-quarter 2026 guidance for revenue of $1.05 billion to $1.1 billion and adjusted EBITDA of $115 million to $125 million. For the full year, the company raised revenue guidance to $4.1 billion to $4.3 billion, up from its prior range of $3.7 billion to $3.9 billion. Legence also increased its full-year adjusted EBITDA guidance to $470 million to $490 million, compared with its prior outlook of $400 million to $430 million. Butz said the revised outlook reflects project timing and execution, first-quarter outperformance and slightly improved margin expectations. He added that the company expects full-year 2026 capital spending of about $65 million, with roughly two-thirds classified as growth-related. Free cash flow exceeded $100 million in the quarter, representing a conversion rate of more than 85% of adjusted EBITDA. That compared with roughly $25 million of free cash flow and a 50% conversion rate in the prior-year quarter. Butz attributed the improvement to operating performance, a lower interest burden and better working capital management. Legence ended the quarter with $245 million of cash and total liquidity of $414 million. Total debt was slightly above $1 billion, up about $200 million from year-end due to the upsized term loan used to fund the Bowers acquisition. The company’s pro forma net leverage ratio was 1.8 times, compared with 2.9 times nine months earlier on a pro forma basis after applying IPO proceeds to debt repayment. Asked about mergers and acquisitions, Butz said the improved leverage profile gives Legence more flexibility, though he said investors should not expect another acquisition the size of Bowers in the very near term. Sprau said the company remains interested in bolt-on and tuck-in acquisitions, particularly those that add customers, capacity or expertise, while emphasizing that Legence remains selective. Sprau said Legence is largely operating with 1.3 million square feet of fabrication capacity. He said the current capacity and operational flexibility are sufficient to execute the current book of business while leaving some room for additional demand in the pipeline. Management said fabrication demand remains heavily tied to technical cooling systems for data centers, but Sprau noted growing interest from pharmaceutical and semiconductor clients. Hansen also said the life sciences market is showing signs of improvement after a post-COVID overbuild period, with increasing requests for quotations and several large project bookings. Legence also continued expanding its workforce. Sprau said the company crossed 10,000 full-time employees in April, including approximately 7,400 skilled technicians and craftspeople, more than 1,000 above the level at the start of the year. He said labor is not expected to be a material constraint on growth. Legence Corp. is a provider of engineering, consulting, installation and maintenance services for mission-critical systems in buildings. The company specializes in designing, fabricating and installing complex HVAC, process piping and other mechanical, electrical and plumbing systems. Legence Corp. is based in SAN JOSE, Calif. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "LGN Q1 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for May 2026.

This article first appeared on GuruFocus. Revenue: $1.038 billion, an increase of 105% year over year. Adjusted EBITDA: $118 million, up 132% from the previous year. Adjusted EBITDA Margin: Improved by approximately 133 basis points to 11.4%. Gross Profit: Increased by 67% to approximately $186 million. Adjusted Gross Margin: 18.7%, compared to 21.9% in the previous year. Installation & Maintenance Revenue: $872 million, increased by 142% year over year. Engineering & Consulting Revenue: Grew by 14% to $166 million. Backlog and Awards: $5.4 billion, up 104% year over year. Free Cash Flow: Exceeded $100 million, with a conversion rate of over 85% of adjusted EBITDA. Net Leverage Ratio: 1.8 times, down from 2.9 times nine months ago. Full-Year 2026 Revenue Guidance: Increased to $4.1 billion to $4.3 billion. Full-Year 2026 EBITDA Guidance: Raised to $470 million to $490 million. Warning! GuruFocus has detected 6 Warning Sign with TNK. Is LGN fairly valued? Test your thesis with our free DCF calculator. Release Date: May 14, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Legence Corp (NASDAQ:LGN) reported a significant revenue increase of 105% year over year, reaching over $1 billion in the first quarter of 2026. The acquisition of Bowers contributed significantly to revenue growth, accounting for over $240 million, and has been successfully integrated. Adjusted EBITDA grew by 132% year over year, with margins expanding by over 130 basis points due to strong project execution. The company's backlog and awards reached a record $5.4 billion, up 104% year over year, providing strong visibility into future revenue. Legence Corp (NASDAQ:LGN) raised its full-year 2026 revenue guidance to $4.1 billion to $4.3 billion, reflecting confidence in continued growth and execution. The Engineering & Consulting segment experienced a decline in gross margins, dropping from 40.7% to 33.2% year over year. There was a notable revenue mix shift towards lower-margin Program & Project Management services within the Engineering & Consulting segment. Despite strong revenue growth, the company faces challenges in maintaining high gross margins due to the mix shift and increased subcontractor costs. Interest expense, although reduced, remains a significant cost at $16 million for the first quarter of 2026. The company anticipates potential variability in its effective tax rate due to non-deductible expenses and the mark-to-market nature of profit interest expenses. Q: With leverage now back below 2 times, do you see scope for larger scale M&A in the medium term, similar to something that looks like a Bowers? Any updated thoughts on pursuing M&A in Engineering & Design versus Installation & Maintenance? A: Stephen Butz, CFO: The improved leverage profile gives us flexibility for acquisitions, but we don't expect another acquisition the size of Bowers in the near term. We're focused on integrating Bowers successfully. Over the medium term, we have more flexibility for larger scale M&A. Jeffrey Sprau, CEO: We like bolt-on acquisitions that add customers, capacity, and expertise. We're picky about the right marketplace, geographies, profitability, and services. Q: Just wanted to ask on the data center growth backlog. What's your visibility on duration and magnitude of data center-driven growth beyond 12 months out? A: Stephen Butz, CFO: We have ongoing conversations with data center clients and visibility into backlog extending to Q4 of 2028. We help clients plan and spend their CapEx, providing further visibility. Q: Can you walk us through your view on the adequacy of your current modular capacity with Bowers integrated and considerations for further investment to increase capacity? A: Steve Hansen, COO: Our capacity ebbs and flows with client demand. We have capacity to grow and take on more opportunities. If demand increases, we'll consider further expansion. Jeffrey Sprau, CEO: We're leveraging new square footage, automation, and learning curves to increase throughput and evaluate capacity. Q: There was a notable sequential jump in the life sciences and healthcare backlog. Can you provide more color on what's driving that? A: Steve Hansen, COO: Post-COVID, the life sciences market is opening up. We've booked large projects with long-term clients and see more activity in this market, including in our fabrication line. Q: How are you thinking about free cash flow for this year, and what does the trend of less working capital intensity mean for your longer-term free cash flow profile? A: Stephen Butz, CFO: We don't specifically guide free cash flow, but we have good momentum. Debt paydown and better working capital management have improved conversion rates. While custom fab work tends to get higher prepayments, we expect working capital to be a use of cash when growing revenue at a high rate. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Image source: The Motley Fool. Thursday, May 14, 2026 at 10:00 a.m. ET Chief Executive Officer — Jeffrey Sprau Chief Financial Officer — Stephen Butz Chief Operating Officer — Stephen Hansen Head of Investor Relations — Son Vann Need a quote from a Motley Fool analyst? Email [email protected] Son Vann: Thank you, Daniel, and good morning, everyone. Welcome to Allegion's first quarter 2026 earnings call. With me today are Jeffrey Sprau, our Chief Executive Officer; Stephen Butz, Chief Financial Officer; and Steve Hansen, Chief Operating Officer. This morning, we issued a press release that covers our first quarter 2026 financial results and posted a slide presentation that accompanies the earnings release. All materials can be found on the Investor Relations section of the company's website, wearelegence.com. Before we begin, I want to remind you that comments made during this call contain certain forward looking statements and are subject to risks and uncertainties including those identified in our Risk Factors contained in our SEC filings. Our actual results could differ materially and we undertake no obligations to update any such forward looking statements. During this call, we will refer to certain non-GAAP financial measures which should not be considered in isolation from or as a substitute for measures prepared in accordance with generally accepted accounting principles. Please refer to our quarterly earnings presentation for reconciliations of these non GAAP measures. To the most directly comparable GAAP measures. With that, let me turn the call over to Jeffrey. Jeffrey Sprau: Thank you, Son, and thanks, everyone, for joining today to discuss our first quarter performance and current outlook for Legence. it is only been 1.5 months since our last earnings call, and the themes that we spoke about then are still applicable today. These themes include a very healthy demand environment for mission critical building systems particularly in the data center and technology end market. Our strong project execution, our ability to attract talented labor, and the impact that M&A can bring to accelerate our growth. All of these factors contributed to our strong first quarter results that exceeded quarterly guidance. as well as provide the underpinning to raise our full-year 2026 guidance. Our first quarter results, Steve will go into greater detail. But at a high level, total revenues more than doubled year over year to just over $1 billion. Now to put that into perspective, Legence's generated 1.2 billion of revenue for all of 2022. So we have grown revenue at an incredible pace over the past 3 years. Our historic growth was roughly split evenly between organic growth and through acquisitions. This was the case in our latest quarterly results where our acquisition of Bowers accounted for just under half of the year over year revenue gains with organic growth essentially making up the other half. Excluding the impact from Bowers, revenues increased by a robust 57% year over year. With the majority of this growth coming from the installation and maintenance segment. While data centers and technology clients drove our growth, other key end markets such as life science, health care, education, and state and local government, also posted solid gains. Engineering and consulting segment revenue growth was a bit more broad based, across our end markets and that segment is seeing more traction with our data center and technology clients. Adjusted EBITDA grew by 132% year over year. Reflecting the contribution from Bowers as well as overall growth in our existing businesses. EBITDA margins expanded by over 130 basis points as we benefited from strong project execution particularly with our installation and fabrication projects and better leverage of our SG&A costs. Total backlog and awards ended the quarter at a record $5.4 billion up 104% year over year. Which reflects the inclusion of ours. Excluding Bowers, backlog and awards grew by 36% from a year ago. Now on a sequential basis and pro forma for the inclusion of Bauer's backlog, we added approximately $200 million of net new backlog on top of the $1 billion in revenue recorded during the first quarter. Most of the increase in backlog and awards came in the installation and maintenance segment, driven by the data center and technology market. While the addition of Bowers not only expanded our mechanical presence in the DC Virginia region, we also diversified our client base. In this end market increasing our presence with certain hyperscalers, and colocators. Engineering and consulting backlog rose by 13% on a year over year basis driven by state and local government, and education clients. The resulting book to bill ratio for the 3 months ended March 2026 was 1.2x. While this is lower than the book to bill experience in the fourth quarter, realize that we had several very large awards that from a timing standpoint were booked at the end of last year. This added to backlog growth and elevated book to bill in the fourth quarter but also impacted what we would have otherwise booked in the first quarter. Now setting aside the timing aspect of when awards are booked, the underlying growth that we expect in our end markets particularly in data centers and technology, remains very robust. And we feel confident in our ability to continue to grow total backlog as the year progresses based on what we see in our pipeline. We continue to grow our labor force to meet the strong demand that we see in the end markets that we serve. In April, we crossed over 10 thousand full-time employees at Legence. This includes approximately 7.4 thousand skilled technicians and craftspeople which is over 1 thousand more than what we began the year with. They work alongside our 1.2 thousand plus engineers and consultants to deliver projects at the highest standards for our clients across both segments. While we are always mindful of having the right people necessary to on our projects, we do not expect labor to be a material constraint on our ability to grow. Finally, on our fabrication capacity and expansion plans, While there are some advanced tooling installations and other operational items, that we need to complete to get where we wanna be from a functionality and efficiency standpoint, we are largely up and running on 1.3 million square feet of fab capacity today. At this level of capacity and the operational flexibility that we have with this capacity, feel good about our ability to execute on our current book of business. With some room to meet the additional demand that we see in our pipeline. Our fabrication business continues to be driven by our technical cooling systems for data centers. And will likely continue to be the case for some time. With that said, we are seeing additional indications of interest for fabrication services with our pharmaceutical and semiconductor clients. As the benefits of fabrication and modular construction are recognized by more mission critical markets, And given our relationships with many of the most technologically innovative companies in the world, we are in a great position. To capitalize on this trend. With that, let me turn the call over to Steve. Stephen Butz: Thank you, Jeffrey, and good morning, everyone. For the remainder of our call, I will begin with a review of first quarter 26 results in comparison to 2025. Following my review of our historical results, I will make some brief remarks about our current guidance discuss our balance sheet and liquidity position before handing the call back to Jess. Starting with the 2026, we generated revenue of $1.038 billion an increase of $5.00 6 million or a 105% from the year ago quarter. The Bowers Group acquisition contributed a little over $240 million of revenue. Excluding Bowers, our revenues grew by approximately 57% year over year. Our first quarter 26 revenues surpassed our guidance, primarily due to outperformance in the installation and maintenance segment. With very strong project execution, and fabrication as a key driver. The larger scale of data center projects in particular given us a chance to apply best practices and continuously improve our delivery model and efficiencies. As we gain inefficiency, 1 of the outcomes is that we are able to complete and ship product ahead of schedule, all while maintaining our high quality standards. As a result, our clients are able to install and commission our system sooner allowing us to release contingencies earlier than expected, effectively pulling forward some revenue that was originally expected in later periods, and also lift our margin profile. Increased confidence around this dynamic is also behind why we are raising our full-year 2026 guidance. Which I will cover later in my remarks. Breaking down our latest quarterly revenue growth at the segment level, starting with engineering and consulting, segment revenue grew by 14% most of which was organic. To $166 million Program and project management service revenues grew at a robust 75%. Particularly strong growth in K-12 schools. As we are working on several large projects in Pennsylvania, Virginia, and West Virginia. We also saw additional activity in data centers and technology. However, engineering and design revenues declined by 8% largely due to a very tough comparable prior year quarter that included some strong revenues from commercial solar advisory services coupled with softer demand in the current period for sustainability consulting from mixed use clients. We are hopeful that sustainability consulting will pick up in future periods. As backlog for this service has increased. Since year-end 2025. Moving to installation and maintenance. Segment revenue of $872 million increased by 142% versus the year ago quarter. Roughly half of this growth was from the addition of Bowers, with the remaining growth largely organic. Installation and fabrication services accounted for the majority of segment growth increasing by 162%. Driven by the inclusion of Bowers and robust organic growth with data center and technology clients. The segment also experienced attractive organic growth in life science and health care, in part reflecting our work on some larger hospital projects. Maintenance and service revenue increased by 60% year over year. When excluding the impact of Bowers, this service line still grew at a robust rate in excess of 20%. This high growth rate was due in part to a somewhat softer 2025 comparison. But also reflected healthy increases in education, hospitals, and semiconductor clients, the latter of which are included in our data center and technology end market. Classification. Turning to gross profit. Consolidated gross profit for the first quarter 2026 increased by 67%. To approximately $186 million Similar to our fourth quarter results, gross profit includes stock based and other compensation expense related to legacy profit interest units. Where the payment of this expense is born by entities outside of Legence Corp. Essentially, the legacy pre IPO shareholders. As a reminder, the settlement of legacy profit interest does not impact Legence Corp either in the form of cash outlay or the issuance of additional common shares. Because these profit interest units are mark to market, any significant changes to our share price will have a material impact on this expense. As it did in 2026. Excluding the impact of profit interest expense, adjusted gross profit on a consolidated basis totaled approximately $194 million and adjusted gross margin was 18.7% for the first quarter 2026, compared to approximately $111 million and 21 point 9 percent in 2025. The lower adjusted gross margin was primarily due to a revenue mix shift to the installation and maintenance segment as a result of the addition of Bowers and the high growth rate in this segment as well as lower gross margins in Engineering and Consulting segment, This was somewhat offset by the strong margin improvement in the I&M segment. Delving into margins at the segment level, first quarter 2026 engineering and consulting adjusted gross margin was 33.2%. Down from 40.7% in 2025. As mentioned, the year ago quarter was a tough comparison. In E&C as we had a few projects which generated very high margins. That were not replicated in the latest quarter. Furthermore, the segment gross margin reflected a significant revenue mix shift toward the program and project management service line, accounted for 41% of segment revenue, compared to only 27% in the year ago quarter. Program and project management services typically generate a lower margin profile than the engineering and design, due to the bigger ticket nature of these expenses and high subcontractor pass through costs of this service line. The installation and maintenance segment generated an adjusted gross margin of 15.9%. Up from 14.3% in the year ago quarter. Adjusted gross margin improvement was driven by strong project execution within the installation and fabrication service line. We also benefited from economies of scale with our support costs within this segment. Turning to SG&A. This expense includes approximately $32 million of stock based and non compensation expense, the vast majority of which almost $29 million was related to the legacy profit interest that is paid for by entities outside of Legence Corp. Excluding the impact of stock based and noncash compensation expense, as well as a little over $1 million of acquisition and strategic initiative expenses that are part of SG&A. The adjusted SG&A expense was $83 million up from $64 million in the year ago quarter. This increase was primarily due to the inclusion of Bowers, higher general headcount to support our growth and operate as a public company. As well as higher lease expenses. More importantly, though, adjusted SG&A as a percentage of revenue improved significantly. To 8% down from 12.6% in the year ago quarter we benefit from greater economies of scale with these costs, relative to our strong revenue growth. All in all, we generated adjusted EBITDA of $118 million in the first quarter 2026, an increase of 132% from the first quarter 2025 level. Adjusted EBITDA margin for the first quarter 2026 improved by approximately 133 basis points to 11.4% compared to the year ago quarter. Depreciation and amortization totaled $42 million in 2026, up from $29 million in the year ago quarter. With the increase largely due to incremental amortization and depreciation that stem from the Bowers acquisition. Interest expense net of interest income was $16 million for the first quarter 2026 and declined by $13 million from a year ago primarily due to our lower average debt balance than the year ago period. Turning to income tax. Even though we had pretax income during the first quarter 2026, we reported an income tax benefit of $13 million. This is largely due to the release of a valuation allowance on our deferred tax assets of approximately $20 million. Which flipped income tax from an expense to a benefit. Partially offsetting the release is that a number of expense items are not tax deductible, such as the profit interest expense, and certain amortization within our corporate tax paying subsidiary group. We currently estimate our effective tax rate or ETR for the full year 2026 to be in the mid-20 to low-30% range. Though this will be substantially affected by any future profit interest expense, is difficult to forecast due to the mark to market nature of this expense. Beyond 2026, we expect our ETR to gradually gravitate toward the low-30% range. Though in any given year, our ETR could be impacted by discrete items that may not be deductible for tax purposes. Regarding cash taxes, our current estimate for 2026 is in the high-20 to mid-$30 million range. Addition to our cash tax payments to federal and state jurisdictions, we currently expect to make a TRA payment of around $8 million to $9 million related to our 2025 operating activity sometime in late 2026 or early 2027. Our TRA payment related to estimated 2026 activity is under evaluation. But preliminary estimates put this range anywhere from the high-20 to low-$30 million range. With this payment likely to occur in early 2028. To the extent we have additional share exchanges, this should reduce our cash tax payment. While increasing TRA payments by 85% of the reduction in cash tax. The net difference for Allegiance is a 15% reduction in the cash outflow. Speaking of cash flow, our free cash flow, defined as net income, adding back depreciation and amortization, stock based comp, and other noncash items, changes in working capital, and capital spending, exceeded $100 million in 2026, which translates to a conversion rate of over 85% of adjusted EBITDA. This is well above the roughly $25 million of free cash flow and 50% conversion rate in the year ago quarter. Reflecting our operating performance lower interest burden and improved working capital management. Switching gears now to backlog. We ended March with consolidated backlog and awards of $5.4 billion up 104% from year ago levels. Excluding Bowers, backlog and awards grew by almost $1 billion. Or 36%. Now when compared to pro forma year-end 2025, backlog and awards grew by approximately $200 million, translating to a book to bill for the first quarter of 1.2x. As Jeff mentioned, we closed out 2025 with some very large awards, which elevated the 3 month book to bill figure in the fourth quarter. I would also note that a book to bill ratio measured over a 3 month period is quite sensitive to award timing. Especially as our business is experiencing more elevated awards in the $100 million-plus range than we have seen in the past. In terms of our organic growth and backlog and awards, the data center and technology end market is the predominant driver. Though we are also seeing growth in state and local government and education markets. Turning to our guidance. We are establishing second quarter 2026 guidance for consolidated revenue of between $1.05 billion and $1.1 billion and adjusted EBITDA between $115 million and $125 million For full year 2026, we are increasing our revenue guidance to a range of $4.1 billion to $4.3 billion up roughly 10% from our previous guidance range of $3.7 billion to $3.9 billion that we presented during our fourth quarter report on March 27, just 7 weeks ago. As previously discussed, this increase in part reflects our current expectations on project timing and execution, as well as our outperformance in the first quarter. We are also raising our full year 2026 EBITDA guidance range to $470 million to $490 million up from $400 million to $430 million. Our EBITDA guidance revision reflects the changes to our revenue guidance as well as a slight improvement in margin expectations. In large part based on our recent track record of outperformance and improved execution expectations. Now just a few other housekeeping items to help with your modeling efforts. Interest expense, net of interest income for the second quarter is expected to be in the $15 million range. With full year 2026 in the high-$50 million range. Depreciation and amortization for the second quarter is expected to be slightly higher than the first quarter, with full-year 2026 D&A in the mid-$170 million range. In terms of CapEx, we still expect full year 2026 spending to be in the $65 million range, 2-thirds of which we would classify as for growth. Now moving to our balance sheet, liquidity and leverage. We ended the first quarter with $245 million of cash, up from $230 million at 2025. Total liquidity was $414 million at quarter end, nearly flat when compared to $424 million at year-end 2025, despite our use of cash for both the Bowers and Metrix acquisitions. Total debt at the March was slightly over $1 billion, up approximately $200 million from year-end to reflect the upsizing of our term loan used to fund the Bowers acquisition. Based on pro forma last 12 months EBITDA, which would include EBITDA from Bowers between April through December 2025, prior to our ownership, our pro forma net leverage ratio is now 1.8x. Compared to 2.9x just 9 months ago, pro forma for the application of IPO proceeds which were used to repay debt. Borrowing acquisitions, we expect our net leverage ratio to continue to gravitate lower on the overall growth in the business and resulting cash generation. Based on this current leverage profile, we believe this gives us flexibility for M&A as always will take a disciplined approach to our evaluation of any opportunities. This concludes my remarks, and now I will now turn the call back to Jeffrey. Jeffrey Sprau: Thanks, Steve. In closing and before we get to the Q&A, our first quarter performance was a great start to the year. We continue to execute extremely well on our projects, particularly with the larger installation and fabrication projects that allow us greater opportunities to leverage our skilled workforce and technical capabilities. This was our first quarter with Bowers, and I am really pleased with the integration progress and the financial impact that Bowers has already delivered. And we aim to improve further from here. Backlog and awards continue to grow to record levels which further derisks our 2026 guidance and provides additional visibility into a portion of 2027. Our leverage position shows how quickly we can delever and puts us in a good financial position to be flexible with future M&A opportunities. I would like to close out our prepared remarks by acknowledging the outstanding contributions of our truly amazing employees. Your dedication and commitment to serving our customers is greatly appreciated. With that, we will now open the call up to questions. Operator? Operator: As a reminder, to ask a question, please press 1-1 on your telephone. And wait for your name to be announced. To withdraw your question, please press 1-1 again. Please stand by while we compile. Our first question comes from Adam Bubes with Goldman Sachs. Your line is open. Analyst (Adam Bubes): Hi, good morning. Good morning, Adam. Yeah. With leverage now back below 2x, do you see scope for larger-scale M&A in the medium term similar to something that looks like a Bowers? And any updated thoughts on puts and takes on pursuing M&A in engineering and design versus installation and maintenance? Stephen Butz: Yeah. I will take the first part of that, and Jeffrey will probably jump in on the second. But, I mean, certainly, the improved leverage profile does give us and improve our flexibility to do acquisitions sooner. That said, I would not expect another acquisition the size of ours in the very near term. As we as we discussed at the time, we announced the Bowers acquisition. You know, we are gonna be very focused on executing on a, you know, successful integration which were well along the way there. Made a lot of great progress. Bowers is exceeding expectations. So we are gonna continue to keep our eye on the ball. With Bowers, but, you know, I think over the medium term, it certainly does give us more flexibility to do some larger-scale M&A. Yeah. Jeffrey Sprau: that is exactly right, Steve. And certainly on the E&C front, Adam, we love bolt on or tuck in acquisitions that add customers, add capacity, add expertise in a given market and systems. And so I would expect we will continue to do that as we have historically. And Steven is exactly right. You know, optionality is a huge work for us. And having the option to be able to pursue some larger or some might even call transformative acquisitions Now that we have 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. We are super picky in terms of the requirements that fit in our in our family in terms of the right marketplace and the right geographies and the right profitability and the right services and the right outlook, So there are a lot of boxes to tick, so to speak, but having the capability to be able to act quickly now is really a great position to be in. Analyst (Adam Bubes): Great. And then second question, just wanted to ask on the data center growth. Backlog, obviously, provides really nice visibility over the next 12 months, but based on your discussions with clients and visibility into bid pipe pipeline, what is your visibility on duration and magnitude of data center driven growth beyond 12 months out. Jeffrey Sprau: Yeah. it is a great question. We continue to have conversations daily, weekly with our data center clients. And we are getting further and further visibility into that backlog. We have got orders in some of our fabrication stuff that go out to the end. You know, 2028. And we continue to help them in plan and spend their CapEx as they move forward. So Great. Analyst (Adam Bubes): Thanks so much. Jeffrey Sprau: Thank you. Operator: Thank you. Our next question comes from Julien Dumoulin-Smith with Jefferies. Your line is open. Analyst (Julien Dumoulin-Smith): Hi, team. This is Tanner on for Julien. Good morning. Good morning. Good So the order activity continues to be robust. in I&M. You have got the visibility extending Can you maybe walk us through your view on the adequacy of your current modular capacity with Bowers Integrated and maybe what considerations, could go into either further organic or inorganic investment to increase capacity? Stephen Hansen: Yeah. You know, our capacity ebbs and flows, you know, with the demand and schedules from our clients. We have capacity to continue to grow and take on more opportunities, you know, and we see we see a lot of strength in that market, the OSM market, and, you know, our clients moving to very rural areas and the size and complexity of these projects is really driving that business. And so we feel really strongly about it, and we have the capacity to continue to grow it. Obviously, if demand continues to get larger, we would have to look at further expansion, but that is always on our forefront of our minds. Yeah. Jeffrey Sprau: And we continue to leverage certainly new square footage, but also automation, adding shifts, expanding, extending hours. And we are benefiting from learning curve. These are custom projects, but they are also in the data center space high volume. And so we are seeing, I guess, for lack of a better term, higher throughput on these jobs as we get better at them. And that certainly plays into the capacity evaluation. Analyst (Julien Dumoulin-Smith): Great. Thanks for that color. And, you know, I, too, will follow up on the M&A angle, given the nice delevering position here. And as you wait platforms for inorganic growth, maybe this is an offshoot of Adam's question, but I wanted to ask this in the context of growth versus margin. With Bowers, you saw an opportunity to target growth, primarily with a longer term margin expansion opportunity. But even within I&M, how do you expect to consider margin accretion or margin improvement in organic growth and opportunities that you are seeing in the market? Thanks. Stephen Butz: Yeah. You know, we like all 4 service lines. We participate in today, and, you know, they each have a differing margin profile. But we are certainly open to expansion within any of those. And as Jeffrey mentioned, we are picky. We look for companies that have strong margins within those service lines or if we see an opportunity to improve the their margins in those service lines, that would also be a factor that we would consider. But I would not say that we would shy away from for example, another business that has a large installation and fabrication component, which would be our lowest margin profile of all our core service lines as you can see from Bowers. You know, that can add significant shareholder value. With the overall accretion it can bring. And we have been able to increase our margins, kind of, despite what could have been seen as a headwind there. Analyst (Julien Dumoulin-Smith): Alright. Great. Thank you very much. Operator: Thank you. Our next question comes from Brian Brophy with Stifel. Your line is open. Analyst (Brian Brophy): Yes, thanks. Good morning, everybody. Nice quarter. There was a notable sequential jump in the life sciences and health care backlog, it looks like, based on some of the disclosures in the deck, and it appears only some of that was related to Bowers. So just any color any other color you can provide on what is driving that? Jeffrey Sprau: Thanks. Yeah. We have noted in the past that coming out of COVID, there was some hangover in that life science, end market. With the overbuild through that period, and we are seeing that open back up. RFQs have been increasing. Been able to book a couple really nice large projects with our clients that we have been with for decades. So we expect that to continue. We are seeing more and more activity in that market. And some of that is also in our fabrication service line. We are doing both installation and fabrication in that market. And so really positive right now. Analyst (Brian Brophy): Yeah. that is great. that is helpful. And then do you mind touching on the fab only growth that you saw in the quarter? Stephen Butz: Any update on how much that accounts for as a percentage of revenue at this point? And just how you are thinking about the outlook there for the rest of the year? Thanks. Sure. it is continued to grow as expected as a percentage of the installation and maintenance segment. I think it is in the in the fourth quarter, we were in near the 20% area. And, you know, it is increased into the low twenties. We would expect that to probably continue to gravitate higher in the near term. Analyst (Brian Brophy): Appreciate it. I will pass it on. Operator: Thank you. Our next question comes from Derek Soderberg with Cantor Fitzgerald. Your line is open. Analyst (Derek Soderberg): Yes. Hey, guys. Thanks for taking the questions. Wanted to start with the E&C segment margins at 33% or so this quarter. It looks like the E&C margin over the past few quarters has been kind of in the low 30s or so and maybe behind the historical kind of mid-30s margin. I was wondering if you can maybe comment on what you think margin will be for E&C this year and maybe what is the timeline to get back to more of that normal margin. Thanks. Stephen Butz: Yes. No, great question. And as we pointed out, first quarter of last year was really an outlier when we look back over the last 4 or 5 years. And, you know, our more typical margin range has been from the low-30s to, say, 37% or so. And we are kind of falling squarely right in the middle of that now. And, you know, the gravitation's a bit lower, the last few quarters than say, from the 35, 36, 37% range is has been a higher growth rate in program and project management. And we certainly provide a lot of engineering services in that, and, you know, we lead with the engineering. But because of the overall size of the project management activities, in there, you know, it is just a lower margin service line. But I would expect going forward it to remain more in that historic range of low- to mid-30s. Analyst (Derek Soderberg): Got it. that is helpful. And then as my Quarter to quarter. Stephen Butz: Got it. Analyst (Derek Soderberg): Got it. And then as my follow-up, just a clarification and maybe for some more detail on the equipment cost. Just looking at it from a percentage of revenue, looks like it was up a bit. Stephen Butz: At $283 million I was wondering how much of that is sort of low margin pass through on some of the equipment and if you sort of exclude that, how would the underlying gross margins trend sort of look like? I was wondering if you could maybe provide some more detail on that. Analyst (Derek Soderberg): Thanks. Stephen Butz: Yeah. You know, and that is why we have broken that out, because historically that and the subcontractor cost because you know, we typically would not expect to get the same margin as we do on our labor on both of those activities. And but it but it really varies. You know? Sometimes something might be a pure pass through. Other times, you know, someone might be able to get 10% or 5%. You know? So there is not 1 specific, you know, margin number we can give you. On that pass through, but it is typically much lower than our overall margin that we would expect to generate on our labor. Analyst (Derek Soderberg): Got it. Super helpful. Thanks, guys. Jeffrey Sprau: Sure. Thank you. Operator: Thank you. Our next question comes from Michael Dudas with Vertical Research Partners. Your line is open. Analyst (Michael Dudas): Good morning, gentlemen. Jeffrey Sprau: Good morning, Michael. Jeffrey and your remarks, you talked about in the engineering and consulting business. Some gaining traction with some of your data or technology customers. Analyst (Michael Dudas): Maybe you can elaborate a little bit about what that means and how that impacts maybe the mix of business or the tempo of bookings over the next few quarters? Jeffrey Sprau: Yeah, no, it is really a function of leveraging our experience and relationships with a lot of these customers that we have had for decades. And our ability to take an I&M relationship in the semiconductor space, and introduce them to our E&C capabilities as they look to either expand their facilities or actually greenfield facilities. We have been able to leverage those relationships and now offer this integrated service offering to them. And so I would expect that to continue. that is part of the thesis of Legence's in general is to be more relevant and more sticky and provide more end to end to our clients. And so that was a really great example for us. Now, historically, E&C's markets have been other markets such as health care and state and local government and k 12. And higher education schools, And so to be able to really expand their market set is really exciting for us. And, you know, it is in these high-tech customers, you know, their credibility is a big deal. For you to gain new business and to be able to leverage credibility that is been well earned, hard earned, for decades and introduce a complimentary services is really been great to see, and it is a big focus internally as we look at opportunities and share cross-selling tactics and training and that sort of thing. So I do not have a number I could quote you. In terms of predictions, but it is absolutely the trend that we are supportive of. And we will be pushing hard going forward. Analyst (Michael Dudas): That sounds good. And to follow-up, you mentioned or Steve mentioned on your bookings. You had accelerated bookings in Q4 that took a little bit from, say, Q1. Maybe if you look at the pipeline and your conversion cadence and how that may flow through the next few quarters. Are--given what we are seeing in the marketplace, customers want things done yesterday as opposed to tomorrow. Stephen Butz: Well, that is true. You know, the timing of the bookings, though, again, a quarter is a short period. So we certainly look at it over a little bit longer period. You know, if you average the first quarter and the fourth quarter, very robust at 1.5 times. You know, we do not typically forecast a book to bill, but not really seeing a slowing in the data market. No. Jeffrey Sprau: I agree, Steve. And from a pipeline standpoint, as if we put some real chunky bookings into our backlog, and then we do not report on pipeline. We have been able to replenish it and keep it strong. So we feel positive that trend will continue. Stephen Butz: Yeah. Jeffrey Sprau: And just to pile on there, certainly, in the case of data centers, and modular construction, by the time we get called in, that project is well underway. And so you are right, Michael, in terms of when they say, hey, we need your help here. it is go time. Right? it is a quick turnaround, and that is actually to our benefit. Our ability to be quick to scale quick design, and quick to manufacture as a differentiator. And that is the reality. If you wanna participate in that business, you have to have that skill set. Analyst (Michael Dudas): Excellent. Excellent. Thank you, Jeff. Thank you. Operator: Thank you. Our next question comes from Miguel Marques with Bernstein. Your line is open. Analyst (Miguel Marques): Morning, guys, and thanks for taking the question. Just a 2-parter for me. On the modular business first, what sort of margin profile does that business have, even in context to the rest of I&M, if you could, just to get a sense of, the mix impact there? That could either be accretive or not to margin going forward? Jeffrey Sprau: Yeah. We do not disclose the margin separately on that. I would say though that it is accretive. You know, our margin profile is higher when we are doing custom fab work than a large in installed job. So it is, you know, a benefit to us that percentage of fab is increasing. Analyst (Miguel Marques): Understood. And more just a high level question on free cash flow. So I guess, first, how are you guys thinking about free cash flow for this year? And second, you know, obviously, there is been a trend of your business just being less working capital intense over the last several quarters. So in that vein, you know, if this were to be structural, I guess, what do you think it could mean in terms of your longer term free cash flow profile? And if there is a way to think about that or not, be it free cash flow margin or conversion. I know you guys talked about more than 85% adjusted EBITDA conversion this quarter, but is that something that we could anchor to going forward? Or what should that look like? Stephen Butz: Yeah. Good question. You know, it is not something we specifically guide to, but the thinking about some of the puts and takes, we do certainly have good momentum in the business, and even at the time of IPO, we talked about the fact that we saw our conversion rate increase from historic levels going forward, and it has. And, certainly, the debt pay down helps. Better working capital management was something that we talked about that we focused on. We are seeing the benefits of that. All that said, the first quarter you know, we grew revenues tremendously and still had a benefit from working capital. I do not know that I would guide to that every quarter. Though with our custom fab work, we do tend to typically get higher level of prepayments than we do on other work. And so that is a trend that we would still expect to continue. But, again, I think when you are growing revenue at such a high rate, probably typically, you know, quarter in, quarter out, maybe expect working capital to be a bit of a use of cash. Operator: Thank you. As a reminder, to ask a question, please press 1-1 on your telephone. Again, that is 1-1 to ask a question. Our next question comes from Oliver Davies with Rothschild and Co. Redburn. Your line is open. Analyst (Oliver Davies): Guys. Good morning. Just 2 for me. I am just wondering if you can provide, any color on end market growth organically, particularly data centers and anything else that you would call out? And then secondly, you know, how should we think about adjusted SG&A as a percent of sales going forward, particularly in the context of the relative growth rates of E&C and I&M? Thanks. Stephen Butz: Yeah. You want to start with--I will start with the second question. And then hand it to Steve. But you know, on adjusted SG&A as a percent of revenue, I think we would expect it to probably gravitate down if we are continuing to grow revenue at double digit pace. You know, that is obviously a key factor. We are gonna need to grow our G&A, but we would expect when we are growing at a double digit pace on the on the top line that it would it would not grow at quite the same pace until we should continue to see some economies of scale over time. Stephen Hansen: And end market growth in the data center technology, right? We are seeing that we are about 30% organic growth in there. And I would point out that we are continuing to grow all of our other end markets as well as percentage of revenue, you know, they take a hit because data center technology is large. But on a true dollar basis, we are seeing growth in all of our end markets, you know, maybe except for what we would call commercial real estate that is a soft market right now and not a key market that we are pursuing day in and day out. Analyst (Oliver Davies): Okay. Thanks. Operator: Thank you. And our next question comes from Chris Sung with Wolfe Research. Your line is open. Analyst (Chris Sung): Hey, good morning, gentlemen. Congrats on the nice quarter. Just going back to M and A, given all the hype and interest around MEPs for data centers, are you seeing valuations for M&A targets rise? Like, is price becoming a larger factor? Jeffrey Sprau: Yeah. that is a good question. You know, maybe a little bit. You know, we do not have, obviously, visibility in every single deal and every single process. I think people realize that the systems that are going into these data centers are really, really critical, and the good providers are delivering a ton of value. And so, you know, as a really vague but general statement, I think they are probably going up a little bit. I do not however, think they are going up so much they would not be attractive to pursue. Of course, like any, whether it is MEP or E&C or any consultancy, we are always gonna look at sort of the value that they would bring from a pricing perspective. But we do not see anything that is prohibitive for us from a pursuit perspective. Analyst (Chris Sung): Okay. Thanks. And just on my follow-up, on your revised guide, I mean, can we use Q1 as a run rate to, like, thinking of E&C revenue annualizing to, let's say, $660 million and then I&M to, like, $3.5 billion to get to that, you know, $4.3 billion revenue range. Is that a fair split for, like, your 2 segments? Stephen Butz: I think for E&C, we do still have a bit of seasonality. So I probably would not take the first quarter as a kind of a an annualized type figure to date. I&M is probably, you know, quite a bit less cyclical or seasonal, I should say, So, you know, that is probably gonna be driven more so by our by our backlog and awards scheduling. Analyst (Chris Sung): Alright. Thank you, guys. Alright. Thank you, guys. This concludes the question and answer session. Operator: I would now like to turn it back to Son Vann for closing remarks. Son Vann: Thank you, everyone, for attending our first quarter 26 earnings call. A recording of this call will be available on our website in a few hours. I look forward to updating you again on our next earnings call. And with that, this concludes our call. Jeffrey Sprau: Thank you very much. Operator: This concludes today's conference call. Thanks for participating. You may now disconnect. 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