What LGN (LGN) Said on Its Q3 Earnings Call

Key Points

• Q3 revenue rose 85% to $1.31 billion, while adjusted EBITDA nearly doubled to $177 million. Data center demand and the Bowers acquisition drove growth; revenue excluding Bowers increased 40%.
• Legence ended September with $5.9 billion in backlog and awards, up 92% year over year, and forecast 2027 revenue of $5.3 billion to $5.6 billion and adjusted EBITDA of $690 million to $730 million.
• Executives reported no change in data center customers’ plans despite questions about potential moratoriums. The company also acquired Central Texas Industrial for about $100 million and authorized a share repurchase program, whose size was not disclosed.

Legence, or LGN NASDAQ: LGN, reported an 85% increase in third-quarter revenue and nearly doubled adjusted earnings before interest, taxes, depreciation and amortization, as data center demand and the acquisition of Bowers Group fueled growth.

The company also issued its initial 2027 outlook, announced a share repurchase authorization and disclosed the acquisition of an Austin, Texas, mechanical contractor. Executives said they had not seen changes in data center customers’ building plans following the midterm elections, despite questions about potential state-level restrictions.

Third-quarter revenue rose to $1.31 billion, up $603 million from a year earlier. Bowers contributed approximately $323 million, and revenue excluding Bowers increased 40%, Chief Financial Officer Stephen Butz said. Adjusted EBITDA rose to $177 million, with the margin expanding to 13.5% from approximately 12.5% a year earlier.

Installation demand drives growth

Installation and maintenance revenue climbed 124% to $1.11 billion. Excluding Bowers, organic revenue in the segment grew 59%, with data centers and technology the primary drivers, Butz said. Installation and fabrication revenue increased 143%, while maintenance and service revenue rose nearly 36%.

Engineering and consulting revenue fell 6% to $200 million, partly because several large NBC Studios projects that contributed approximately $15 million in the year-earlier quarter were largely completed early in 2026. Butz said the company expects program and project management revenue to grow in 2027, supported by education projects scheduled to begin early in the year.

Consolidated adjusted gross margin declined to 20.3% from 21.5%, primarily because a larger share of revenue came from installation and maintenance. Butz said margins improved within both segments. Installation and maintenance adjusted gross margin rose to 18% from 16.6%, helped by project execution, prefabrication and economies of scale.

Backlog and 2027 outlook

Legence ended September with $5.9 billion in backlog and awards, up 92% from a year earlier and approximately 4% from the second quarter. Its third-quarter book-to-bill ratio was 1.2 times.

For the fourth quarter, the company forecast revenue of $1.26 billion to $1.3 billion and adjusted EBITDA of $160 million to $170 million. For 2027, it projected revenue of $5.3 billion to $5.6 billion and EBITDA of $690 million to $730 million.

Butz said larger projects and longer lead times have extended the duration of the backlog, with some work expected to generate revenue in 2028 and 2029. He also said the forecast does not assume a repeat of the third quarter’s exceptional level of project execution.

Data center demand and fabrication

Asked about potential data center moratoriums, Chief Executive Officer Jeff Sprau said the company had seen no change in demand signals, requests for proposals or deployment schedules. Chief Operating Officer Steve Hansen said recent customer conversations indicated no change to their forecasts.

Hansen said Legence had a substantial amount of data center work in the Northern Virginia area, at about 40%, and had not seen its projects there paused or delayed. Executives said the company could also serve demand in nearby markets, including Richmond.

Sprau said the company currently has approximately 1.6 million square feet of fabrication capacity. Hansen said Legence plans to expand its footprint and would provide more detail in coming months. Executives described prefabrication as a way to improve productivity and said its facilities and workforce can serve markets beyond data centers, including semiconductors, life sciences and health care.

Acquisition and capital allocation

Legence acquired Central Texas Industrial, or CTI, for approximately $100 million, including about $90 million in cash and roughly 260,000 shares. Sprau said CTI gives the company a physical labor presence in Central Texas and adds process-piping expertise and semiconductor-sector relationships.

The company ended the quarter with $341 million in cash and slightly more than $1 billion in debt. Butz said pro forma net leverage had declined to 1.2 times, approximately half its level a year earlier.

Legence did not disclose the size of the newly authorized share repurchase program on the call. Butz said it gives the company another capital allocation option alongside acquisitions, investment and debt reduction. He said acquisitions and internal expansion remain significant priorities, while debt repayment is not necessarily a priority in the current market.

About LGN (NASDAQ:LGN)

Legence Corp. provides engineering, installation and maintenance services for building systems. Its work includes heating, ventilation and air conditioning, plumbing, electrical systems, process piping, building automation and energy solutions. The company serves customers with complex building needs, including in the data center, healthcare, life sciences, commercial and industrial sectors. Its services span the building lifecycle, from design and construction to ongoing operations and maintenance.

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