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LC

Legence Corp. (LGN)·Q3 2025 Earnings Summary

Executive Summary

  • Record revenue of $708.0M (+26.2% YoY) and non-GAAP Adjusted EBITDA of $88.8M (+38.9% YoY); consolidated backlog and awards reached $3.065B (+29.4% YoY) with book-to-bill of 1.5x .
  • Reported GAAP net loss attributable to Legence of $(0.6)M or $(0.02) diluted EPS for the period since IPO; consolidated gross margin modestly compressed to 20.9% (-20 bps YoY) .
  • Established Q4 2025 guidance: revenue $600–$630M and non-GAAP Adjusted EBITDA $60–$65M; FY 2026 guidance (standalone, excludes Bowers): revenue $2.65–$2.85B and non-GAAP Adjusted EBITDA $295–$315M .
  • Announced definitive agreement to acquire Bowers Group for ~$475M to bolster mechanical capacity in “Data Center Alley”; expected 2026 contribution (assuming Feb 1 close): revenue $725–$775M and EBITDA $67–$75M, supported by ~$1.3B backlog .
  • Balance sheet de-risked post-IPO: total debt cut ~50% to $836M, cash $176M, net debt ~$650M, net leverage 2.4x; term loan extended to 2031 and revolver upsized to $200M .

What Went Well and What Went Wrong

What Went Well

  • Robust organic growth across segments; CEO: “exceptional results, highlighted by robust organic revenue, Adjusted EBITDA and backlog growth” .
  • I&M margin expansion: gross margin improved +140 bps YoY to 16.3% on “exceptional project execution, particularly with our fabrication work” .
  • Strong demand and visibility: consolidated book-to-bill 1.5x and backlog +29.4% YoY, led by data center & technology and life sciences & healthcare .

What Went Wrong

  • Consolidated gross margin slipped to 20.9% (-20 bps YoY) given mix shift toward lower-margin I&M; E&C margin declined to 31.7% from 33.0% .
  • GAAP profitability still near break-even: net loss attributable to Legence $(0.6)M; CFO noted quarterly effective tax rate “isn’t overly meaningful” given pre-tax income near break-even .
  • Elevated SG&A, including $18.6M stock-based comp and IPO-related professional fees; adjusted SG&A grew 11% YoY but remained a headwind .

Financial Results

Quarterly Trend (oldest → newest)

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($USD)$560.8M $505.953M*$598.890M*$708.006M
Gross Profit ($USD)$118.546M $111.704M*$128.674M*$148.059M
Gross Margin (%)21.1% 22.08%*21.49%*20.9%
Adjusted EBITDA (non-GAAP) ($USD)$63.956M ——$88.821M
EBITDA (GAAP) ($USD)—$46.815M*$59.932M*$65.479M*
Net Income - (IS) ($USD)$(1.083)M $(21.213)M*$(5.270)M*$(0.576)M
Diluted EPS (GAAP)———$(0.02)

Values marked with * were retrieved from S&P Global.

Actual vs S&P Global Consensus (Q3 2025)

MetricActualConsensusSurprise
Revenue ($USD)$708.006M $638.648M*+$69.358M; +10.9% — bold beat
Primary EPS ($USD)$0.164*$0.0837*+$0.080 — bold beat
EBITDA (GAAP) ($USD)$65.479M*$68.464M*-$2.985M — miss vs EBITDA consensus
Adjusted EBITDA (non-GAAP) ($USD)$88.821M n/aCompany-reported non-GAAP significantly above GAAP consensus

Values marked with * were retrieved from S&P Global.

Segment Breakdown (Q3 2024 vs Q3 2025)

SegmentQ3 2024 RevenueQ3 2025 RevenueYoY %Q3 2024 GP / MarginQ3 2025 GP / MarginYoY GP %
Engineering & Consulting$193.797M $212.172M +9.5% $63.945M / 33.0% $67.326M / 31.7% +5.3%
Installation & Maintenance$367.007M $495.834M +35.1% $54.601M / 14.9% $80.733M / 16.3% +47.9%
Consolidated$560.804M $708.006M +26.2% $118.546M / 21.1% $148.059M / 20.9% +24.9%

KPIs

KPIQ3 2024Q3 2025
Total Backlog & Awards ($USD)$2,369.571M $3,065.448M
Book-to-Bill (quarter)1.3x 1.5x
E&C Backlog ($USD)$881.469M $894.734M
I&M Backlog ($USD)$1,488.102M $2,170.714M
Cash ($USD)—$176.034M
Total Debt ($USD)—$836.0M
Net Debt ($USD)—~$650.0M
Net Leverage (LTM Adj. EBITDA)—2.4x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ4 2025n/a$600–$630M Established
Adjusted EBITDA (non-GAAP)Q4 2025n/a$60–$65M Established
RevenueFY 2026 (Standalone, excl. Bowers)n/a$2.65–$2.85B Established
Adjusted EBITDA (non-GAAP)FY 2026 (Standalone, excl. Bowers)n/a$295–$315M Established
Interest ExpenseQ4 2025n/a~$15M Established
Interest ExpenseFY 2026n/aLow–mid $50M Established
Depreciation & AmortizationQ4 2025n/aMid–high $20M Established
Depreciation & AmortizationFY 2026n/aLow ~$100M Established
CapExQ4 2025n/a~$20M Established
CapExFY 2026n/aLow–mid $50M; ~2/3 expansion Established
Effective Tax RateFY 2026n/a~30%; cash taxes mid-$20M (ex-TRA timing) Established
Bowers Contribution (if Feb 1 close)FY 2026n/aRevenue $725–$775M; EBITDA $67–$75M Established

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2, Q-1)Current Period (Q3 2025)Trend
Data center & technology demandNo public transcripts availableGrowth accelerated; 30% CAGR outlook; multi-geo projects; fabrication-led margin lift Strengthening
Backlog visibilityNo public transcripts available~$3.1B backlog; ~$1.8–$1.9B expected to burn in 2026 Improving visibility
Leverage & capital structureNo public transcripts availableTarget leverage “below 3x,” long-term “low 2x”; term loan extended; revolver upsized De-risking
Pricing & customer relationshipsNo public transcripts availableSelect pricing opportunities balanced by long-term client relationships Stable, disciplined
Working capital & termsNo public transcripts availableTailwinds from contract liabilities and upfront payments in custom fabrication Improving
M&A strategyNo public transcripts availableActive pipeline, focus on tuck-ins in E&C; Bowers integration priority Ongoing, measured
Fabrication capacityNo public transcripts availableCapEx delays to 2026 tooling; Bowers adds 370k sq ft East Coast capacity Expanding footprint

Management Commentary

  • CEO overview: “We are pleased to deliver exceptional results, highlighted by robust organic revenue, Adjusted EBITDA and backlog growth... We remain optimistic about our future...” .
  • Strategic rationale for Bowers: “Adding at scale high-quality mechanical capabilities in the Northern Virginia region... tremendous cross-selling potential... fabrication resources create an opportunity to serve a broader range of customers” .
  • CFO on margin drivers: “Installation and fabrication service line margins benefited from exceptional project execution, particularly with our fabrication work for data center and technology clients” .
  • Balance sheet and leverage: “Net leverage ratio declined... to 2.4x... extended maturities and reduced interest rate by 25 bps” .

Q&A Highlights

  • Leverage and M&A cadence: Comfort “below 3x,” long-term “low 2x”; near-term focus on integrating Bowers; active tuck-in pipeline, especially in E&C .
  • Demand drivers: Data center growth across geographies; life sciences & healthcare strength; increasing proportion of larger jobs; retrofit opportunity medium term .
  • Working capital tailwinds: Improved contract terms and upfront payments in custom fabrication; faster collections and payables timing .
  • Margin sustainability: I&M margin uplift from execution, favorable closeouts, and higher-mix fabrication modules; some Q3 timing pulled forward from Q4 .
  • Fabrication expansion: 2026 tooling spend shifted due to permitting; Bowers adds substantial East Coast capacity enabling reduced shipping costs and broader regional service .

Estimates Context

  • Q3 2025: Revenue beat vs consensus ($708.0M vs $638.6M*), Primary EPS beat ($0.164* vs $0.0837*); GAAP EBITDA slightly below consensus ($65.5M* vs $68.5M*) while company-reported non-GAAP Adjusted EBITDA was $88.8M . Values marked with * were retrieved from S&P Global.
  • Q4 2025: Company guides revenue $600–$630M and Adjusted EBITDA $60–$65M ; S&P Global consensus revenue at $617.0M* and EBITDA at $62.3M*—guidance brackets consensus. Values marked with * were retrieved from S&P Global.
  • FY 2026: Standalone guidance revenue $2.65–$2.85B ; adding Bowers (Feb 1 base case) implies ~$3.375–$3.625B; S&P Global consensus is ~$3.492B*—midpoint aligns when including Bowers. Values marked with * were retrieved from S&P Global.

Selected S&P Global Consensus Detail

MetricQ3 2025Q4 2025FY 2026
Revenue Consensus Mean ($USD)$638.648M*$616.997M*$3,492.229M*
Primary EPS Consensus Mean ($USD)$0.0837*$0.1038*$1.0861*
EBITDA Consensus Mean ($USD)$68.464M*$62.326M*$372.182M*
Primary EPS – # of Estimates9*8*5*
Revenue – # of Estimates11*10*7*

Values marked with * were retrieved from S&P Global.

Key Takeaways for Investors

  • Strong organic growth and backlog/book-to-bill underpin revenue visibility into 2026, particularly in data centers and healthcare .
  • Mix shift toward higher-margin fabrication within I&M is expanding margins; management sees continued opportunities for modular solutions .
  • Balance sheet materially de-risked post-IPO with net leverage at 2.4x and extended maturities; financial flexibility supports tuck-in M&A and Bowers integration .
  • Q4 guidance brackets Street on revenue/EBITDA; FY 2026 consensus aligns when including Bowers’ base-case contribution—watch for timing of close and backlog conversion .
  • Non-GAAP adjustments are significant; Adjusted EBITDA ($88.8M) far exceeds GAAP EBITDA—modeling should reflect company’s reported non-GAAP framework and disclosed add-backs .
  • Working capital improvements (contract liabilities, upfront payments) are a tailwind to cash generation; expect continued focus on terms in custom fabrication .
  • Near-term catalysts: Bowers close and integration milestones; fabrication capacity expansion; execution on high-growth end markets; potential additional tuck-ins in E&C .

Notes:

  • Values marked with * were retrieved from S&P Global.
  • Adjusted EBITDA is non-GAAP; see company definitions and reconciliation disclosures in the press release .