Miguel Marquez

Miguel Marquez asked for additional color on the drivers behind the 16.3% Installation & Maintenance (I&M) margins in Q3, specifically what levers were pulled for better project execution and the impact of favorable end market mix or project size. He also inquired about the role of modular capacity in the Bowers acquisition, the current size and growth rate of Legence's modular business, and what Bowers adds to it.

Answer

CFO Stephen Butts attributed the I&M margin improvement to a combination of exceptional project execution, late-stage projects generating higher margins, favorable closeouts, and some equipment purchases shifting from Q4 to Q3. CEO Jeff Sprouw clarified that Bowers' history, culture, and end markets were the initial drivers of interest, with its 370,000 sq ft+ fabrication footprint being a pleasant discovery during diligence. CFO Stephen Butts added that the modular business, while not separately disclosed, represents a low to mid-teens percentage of the installation and fabrication service line revenue, up from single digits a year ago, indicating nice growth.

Miguel Marquez asked for additional color on the levers pulled for better project execution that led to the 16.3% I&M margins in Q3, and the impact of favorable end market mix or project size. He also inquired about the role of modular capacity in the Bowers acquisition, the current size and growth of Legence's modular business, and Bowers' contribution.

Answer

Jeff Sprouw, CEO, attributed the improved I&M margins to exceptional project execution, late-stage projects generating higher margins, favorable closeouts, and some equipment purchases shifting from Q4 to Q3. Jeff Sprouw clarified that Bowers' fabrication footprint was a discovery during diligence, not the initial driver. Stephen Butts, CFO, stated that fabrication-only services are in the low to mid-teens percentage of the installation and fabrication service line revenue, up from single digits a year ago, indicating nice growth.