LGN Q2 Earnings Call Highlights

Key Points

• 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.

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.

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 Reaches Record Level

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.

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.

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.

Segment Performance and Margins

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.

Capacity, Labor and Balance Sheet

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.

Full-Year Outlook Raised

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.

About LGN (NASDAQ:LGN)

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.

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