Legence (NASDAQ:LGN) reported first-quarter financial results on Thursday. The transcript from the company’s first-quarter earnings call has been provided below.
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Summary
Legence reported first-quarter 2026 revenues of over $1 billion, more than doubling year-over-year, driven by both organic growth and the acquisition of Bowers.
The company raised its full-year 2026 revenue guidance to a range of $4.1 to $4.3 billion, and EBITDA guidance to $470 to $490 million, reflecting strong project execution and increased market demand.
Adjusted EBITDA grew by 132% year-over-year, with margins expanding due to strong project execution and cost leverage.
The total backlog reached a record $5.4 billion, up 104% from the previous year, indicating strong future demand, particularly in the data center and technology sectors.
Legence continues to focus on strategic growth through acquisitions, particularly in mission-critical building systems, and maintains a disciplined approach to M&A.
Full Transcript
OPERATOR
Good day and thank you for standing by. Welcome to the first quarter 2026 Legence earnings conference call. At this time, all participants are in a listen only mode. After the speaker’s presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised to withdraw your question. Please press star 11 again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today. Son Van, Vice President, Investor Relations. Please go ahead.
Son Van (Vice President, Investor Relations)
Thank you Daniel and good morning everyone. Welcome to Legion’s first quarter 2026 earnings call. With me today are Jeff Sprow, our Chief Executive Officer, Steven Butts, Chief Financial Officer and Steve Hanson, 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 from 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.
Jeff Sprow
Thank you son. And thanks everyone for joining today to discuss our first quarter performance and current outlook for Legence. It’s only been a month and a half 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 and 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 on our first quarter results. Stephen will go into greater detail, but at a high level. Total revenues more than doubled year over year to just over a billion dollars. Now to put that into perspective, Legion’s generated $1.2 billion of revenue for all of 2022, so we’ve grown revenue at an incredible pace over the past three 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, healthcare, 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 Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) grew by 132% year over year, reflecting the contribution from Bowers as well as overall growth in our existing businesses. Earnings Before Interest, Taxes, Depreciation, and Amortization (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 SGA costs. Total backlog and awards ended the quarter at a record 5.4 billion, up 104% year over year, which reflects the inclusion of Bowers. Excluding Bowers, backlog and awards grew by 36% from a year ago. Now, on a sequential basis and pro forma for the inclusion of Bowers backlog, we added approximately 200 million of net new backlog on top of the billion dollars 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 D.C. virginia region, we also diversified our client base in this end market, increasing our presence with certain hyperscalers and co locators. 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 three months ended March 2026 was 1.2 times. 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 10,000 full time employees at Legence. This includes approximately 7,400 skilled technicians and craftspeople, which is over 1,000 more than what we began the year with. They work alongside our 1,200 plus engineers and consultants to deliver projects at the highest standards for our clients across both segments. While we’re always mindful of having the right people necessary to execute 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 want to 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, we 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’re 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’re in a great position to capitalize on this trend. With that, let me turn the call over to Steven.
Stephen Butts
Thank you Jeff and good morning everyone. For the remainder of our call, I’ll begin with A review of first quarter 2026 results in comparison to first quarter of 2025. Following my review of our historical results, I’ll make some brief remarks about our current guidance, discuss our balance sheet and liquidity position before handing the call back to Jeff. Starting with the first quarter of 2026, we generated revenue of $1,038,000,000, an increase of $506,000,000, or 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 2026 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 has given us a chance to apply best practices and continuously improve our delivery model and efficiencies as we gain in efficiency. One of the outcomes is that we’re 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’ll cover later in my remarks breaking down our latest quarterly revenue growth at the segment level. Starting with engineering and consulting, the segment revenue grew by 14%, most of which was organic, to 166 million. Program and project management service revenues grew at a robust 75% with particularly strong growth in K12 schools. As we’re 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 healthcare, 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 first quarter of 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 borne by entities outside of Legions Corp. Essentially the legacy pre IPO shareholders. As a reminder, the settlement of legacy profit interest does not impact Legions 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 changes to our share price will have a material impact on this expense expense as it did in the first quarter of 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 21.9% in the first quarter 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 IM 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 the first quarter 2025. As mentioned, the year ago quarter was a tough comparison in ENC as we had a few projects which generated very high margins that were not replicated in the latest quarter. Furthermore, the segment gross margin …
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