Legence Corp. Class A Common stock (LGN) Earnings

Management highlights

### Overall Financial Performance - Total Q1 2026 revenue reached $1.038 billion, up 105% YoY. The Bowers acquisition contributed ~$240 million of revenue, and organic revenue grew 57% YoY. Historic revenue growth has been split evenly between organic growth and M&A. - Adjusted EBITDA grew 132% YoY to $118 million, with adjusted EBITDA margin expanding 133 basis points to 11.4%, driven by strong project execution, better SG&A leverage, and early revenue recognition from ahead-of-schedule project completion. - Adjusted SG&A as a percentage of revenue improved to 8% from 12.6% YoY, driven by strong economies of scale from rapid revenue growth. - Free cash flow exceeded $100 million in Q1 2026, with an 85% conversion rate of adjusted EBITDA, up from 50% YoY, driven by improved working capital management and lower interest burden. ### Backlog and Demand - Total backlog and awards hit a record $5.4 billion, up 104% YoY (36% YoY growth ex-Bowers). Sequential net new backlog was ~$200 million, with a Q1 book-to-bill ratio of 1.2x (the lower ratio vs Q4 2025 reflects timing of large awards booked at the end of 2025). The Q4/Q1 average book-to-bill is a robust 1.5x. - Underlying demand remains particularly strong for mission critical building systems in the data center and technology end market, with solid growth also seen in life science, healthcare, education, and state/local government. Life science end market demand is rebounding after post-COVID hangover, with increasing RFQs and large new project wins. ### Operational Capacity and Labor - The company grew its workforce to over 10,000 full-time employees as of April 2026, including 7,400 skilled technicians and 1,200+ engineers/consultants, adding over 1,000 skilled workers since the start of the year. Management does not expect labor to be a material constraint on growth. - 1.3 million square feet of fabrication capacity is largely operational, with enough excess capacity to meet current backlog and additional pipeline demand. The company is leveraging automation, additional shifts, and process learning to improve throughput, and is seeing growing interest in fabrication services from pharmaceutical and semiconductor clients beyond core data center demand.

Guidance

- Q2 2026 guidance is set for consolidated revenue of $1.05 billion to $1.1 billion, and adjusted EBITDA of $115 million to $125 million. - Full year 2026 revenue guidance was raised 10% to a range of $4.1 billion to $4.3 billion, up from the prior range of $3.7 billion to $3.9 billion. The upward revision reflects Q1 outperformance and updated project timing expectations. - Full year 2026 adjusted EBITDA guidance was raised to $470 million to $490 million, up from the prior range of $400 million to $430 million. The revision reflects higher expected revenue and modest margin improvement from stronger execution track record. - Full year 2026 interest expense (net of income) is expected to be ~$58 million, depreciation and amortization is expected to be ~$175 million, and capital expenditures are expected to remain ~$65 million (two-thirds for growth). - The 2026 full year effective tax rate is expected to be in the mid-20% to low-30% range, with 2026 cash taxes expected to be between $28 million and $35 million.

Segment performance

1. Engineering and Consulting (E&C): Revenue grew 14% year-over-year (mostly organic) to $166 million, accounting for 16.1% of total consolidated revenue. Program and project management revenue grew 75% (driven by large K-12 school projects in multiple US states and increased data center activity), while engineering and design revenue declined 8% due to a tough year-ago comparison and softer mixed-use client sustainability consulting demand. Adjusted gross margin was 33.2%, down from 40.7% YoY, driven by mix shift to lower-margin program and project management (which now makes up 41% of segment revenue vs 27% YoY) and an outlier high-margin quarter in the prior year. Backlog rose 13% YoY, driven by state/local government and education clients. 2. Installation and Maintenance (I&M): Revenue grew 142% YoY to $872 million, accounting for 83.9% of total consolidated revenue. Roughly half of growth came from the Bowers acquisition, with the remainder organic. Installation and fabrication services (the main growth driver) grew 162%, driven by Bowers and strong organic growth from data center/technology clients, plus solid gains in life science and healthcare. Maintenance and service revenue grew 60% YoY (over 20% organic ex-Bowers), driven by education, hospitals, and semiconductor clients. Adjusted gross margin improved to 15.9% from 14.3% YoY, driven by strong project execution and economies of scale.

Risks & headwinds

- Quarterly book-to-bill ratios are sensitive to the timing of large $100 million+ awards, which can create quarter-over-quarter volatility. - The mark-to-market nature of legacy profit interest units creates uncertainty for full year effective tax rate forecasting, as share price movements materially impact non-deductible expense. - Commercial real estate end market demand remains soft, and is not a core focus of the company's current growth strategy. - Any large capacity expansion would only be pursued if sustained demand growth justifies the investment, and current capacity may be insufficient if demand grows faster than expected.

Analyst Q&A

• Q: With net leverage now below 2x, do you have flexibility for large M&A like Bowers in the medium term, and what is your approach to M&A across segments? /

  A: Management said the improved leverage profile gives greater flexibility for larger M&A over the medium term, but they are currently focused on integrating Bowers (which is already exceeding expectations) so another Bowers-sized acquisition is not expected in the very near term. For the E&C segment, the company prefers bolt-on/tuck-in acquisitions that add customers, capacity, and expertise in target markets, and will remain highly disciplined about only pursuing opportunities that meet strict criteria for geography, profitability, and market fit.

• Q: What visibility do you have into the duration and magnitude of data center-driven growth beyond the next 12 months? /

  A: Management noted that they have daily conversations with data center clients, and visibility into long-term demand is growing increasingly clear. The company already has fabrication orders extending out to Q4 2028, and clients are continuing to plan and allocate capital for long-term expansion, giving the company confidence in sustained medium-term growth.

• Q: With modular fabrication capacity growing as a share of revenue, what is the margin profile of this business and what is the outlook for long-term free cash flow conversion? /

  A: Management did not disclose separate modular margins, but confirmed that custom fabrication has a higher margin profile than large installation jobs, so the increasing share of fabrication is accretive to overall I&M margins. While Q1 2026 had an 85+% adjusted EBITDA conversion rate driven by improved working capital management and prepayments on fabrication projects (a structural trend), management expects that working capital will typically be a modest use of cash during periods of very rapid revenue growth, so the 85% conversion rate should not be expected every quarter.

• Q: How is E&C leveraging existing I&M client relationships to gain traction with data center and technology clients? /

  A: Management explained that the company is cross-selling E&C services to existing long-term I&M clients in the semiconductor and data space, as clients expand or build new greenfield facilities. This leverages the company's existing hard-earned credibility with these clients to expand into new service lines, supporting the company's end-to-end integrated service thesis. Cross-selling is a key internal focus, and this trend is expected to continue growing over coming quarters.