LGN Q1 Earnings Call Highlights
Legence LGN (NASDAQ:LGN) reported sharply higher first-quarter 2026 revenue and adjusted EBITDA, driven by strong demand for mission-critical building systems, growth in data center and technology projects, and the contribution from its Bowers Group acquisition.
Chief Executive Officer Jeff Sprau said the company’s first-quarter results exceeded quarterly guidance and supported an increase to full-year 2026 guidance. He cited “a very healthy demand environment” for mission-critical building systems, strong project execution, the company’s ability to add skilled labor and the role of acquisitions in accelerating growth.
Total revenue more than doubled from a year earlier to $1.038 billion, up 105%. Chief Financial Officer Stephen Butz said Bowers contributed a little over $240 million of revenue in the quarter. Excluding Bowers, revenue rose approximately 57% year over year.
Adjusted EBITDA increased 132% to $118 million, while adjusted EBITDA margin improved by about 133 basis points to 11.4%. Butz said the quarter benefited from outperformance in the installation and maintenance segment, particularly from project execution and fabrication work.
Data Centers and Technology Remain Key Growth Drivers
Sprau said data center and technology clients were the primary drivers of the company’s growth, though Legence also saw gains in life science, healthcare, education, and state and local government markets. He said the engineering and consulting segment is also gaining more traction with data center and technology clients.
Total backlog and awards reached a record $5.4 billion at the end of the quarter, up 104% from a year earlier. Excluding Bowers, backlog and awards increased 36%. On a sequential basis and pro forma for the inclusion of Bowers, Legence added about $200 million of net new backlog on top of the $1 billion of revenue recorded during the quarter.
The company reported a book-to-bill ratio of 1.2 times for the three months ended March 2026. Management said the ratio was lower than in the fourth quarter because several large awards were booked late in 2025, but added that the underlying pipeline remains strong.
In response to an analyst question, Chief Operating Officer Steve Hansen said Legence continues to have frequent conversations with data center clients and has fabrication orders extending to the fourth quarter of 2028.
Segment Results Show Installation and Maintenance Strength
Engineering and consulting revenue rose 14% to $166 million. Butz said program and project management revenue grew 75%, supported by large K-12 school projects in Pennsylvania, Virginia and West Virginia, as well as increased activity with data center and technology clients. Engineering and design revenue declined 8%, which Butz attributed to a difficult year-earlier comparison and softer demand for sustainability consulting from mixed-use clients.
Installation and maintenance revenue increased 142% to $872 million. Roughly half of the growth came from Bowers, with the remaining increase largely organic. Installation and fabrication services rose 162%, driven by Bowers and data center and technology demand. Maintenance and service revenue increased 60%, and grew more than 20% excluding Bowers.
Adjusted gross margin in engineering and consulting declined to 33.2% from 40.7% a year earlier, reflecting a tougher comparison and a mix shift toward program and project management, which carries lower margins. Installation and maintenance adjusted gross margin improved to 15.9% from 14.3%, driven by execution in installation and fabrication and greater scale in support costs.
Guidance Raised After First-Quarter Outperformance
Legence established second-quarter 2026 guidance for revenue of $1.05 billion to $1.1 billion and adjusted EBITDA of $115 million to $125 million.
For the full year, the company raised revenue guidance to $4.1 billion to $4.3 billion, up from its prior range of $3.7 billion to $3.9 billion. Legence also increased its full-year adjusted EBITDA guidance to $470 million to $490 million, compared with its prior outlook of $400 million to $430 million.
Butz said the revised outlook reflects project timing and execution, first-quarter outperformance and slightly improved margin expectations. He added that the company expects full-year 2026 capital spending of about $65 million, with roughly two-thirds classified as growth-related.
Cash Flow, Leverage and M Flexibility
Free cash flow exceeded $100 million in the quarter, representing a conversion rate of more than 85% of adjusted EBITDA. That compared with roughly $25 million of free cash flow and a 50% conversion rate in the prior-year quarter. Butz attributed the improvement to operating performance, a lower interest burden and better working capital management.
Legence ended the quarter with $245 million of cash and total liquidity of $414 million. total debt was slightly above $1 billion, up about $200 million from year-end due to the upsized term loan used to fund the Bowers acquisition. The company’s pro forma net leverage ratio was 1.8 times, compared with 2.9 times nine months earlier on a pro forma basis after applying IPO proceeds to debt repayment.
Asked about mergers and acquisitions, Butz said the improved leverage profile gives Legence more flexibility, though he said investors should not expect another acquisition the size of Bowers in the very near term. Sprau said the company remains interested in bolt-on and tuck-in acquisitions, particularly those that add customers, capacity or expertise, while emphasizing that Legence remains selective.
Capacity and End-Market Trends
Sprau said Legence is largely operating with 1.3 million square feet of fabrication capacity. He said the current capacity and operational flexibility are sufficient to execute the current book of business while leaving some room for additional demand in the pipeline.
Management said fabrication demand remains heavily tied to technical cooling systems for data centers, but Sprau noted growing interest from pharmaceutical and semiconductor clients. Hansen also said the life sciences market is showing signs of improvement after a post-COVID overbuild period, with increasing requests for quotations and several large project bookings.
Legence also continued expanding its workforce. Sprau said the company crossed 10,000 full-time employees in April, including approximately 7,400 skilled technicians and craftspeople, more than 1,000 above the level at the start of the year. He said labor is not expected to be a material constraint on growth.
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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