Legence LGN (NASDAQ:LGN) reported fourth-quarter and full-year 2025 results that management said came in “well ahead” of prior guidance, driven largely by organic growth in both operating segments and sharp increases in backlog and awards.
Quarterly results topped guidance as revenue reached a record
Chief Executive Officer Jeff Sprau said fourth-quarter revenue rose 35% year over year to a quarterly record of $738 million, while adjusted EBITDA increased 53% as margins expanded by about 140 basis points. For the full year, revenue grew 22% and adjusted EBITDA rose 30%.
Installation and Maintenance revenue increased 44% to $565 million, which Butz said was almost all organic. Installation and fabrication services rose 53%, driven largely by demand from data centers and technology as well as life sciences and healthcare. Butz highlighted demand for Legence’s direct-to-chip liquid cooling systems fabricated in its shops and shipped to data centers across the U.S., citing locations including Iowa, Ohio, Utah, Georgia, Texas, and Arizona (where Legence also performs installation). Maintenance and service revenue increased 11%, rebounding from slower growth in the first half of 2025.
Margins improved as installation and fabrication execution strengthened
Butz reported fourth-quarter adjusted gross profit of about $157 million, with an adjusted gross margin of 21.2%, up from 20.5% in the year-ago period. He noted that the company’s reported gross profit includes non-cash stock-based compensation expense tied to legacy profits interest units, which Legence excludes from adjusted gross profit because the company said it does not bear the cash or share-issuance burden of that expense and it can be volatile due to mark-to-market accounting.
By segment, Engineering and Consulting adjusted gross margin declined to 30.9% from 32.6%, reflecting a mix shift toward program and project management, which carries a lower margin profile than engineering and design, and “slightly lower margins” within program and project management due to project mix. Installation and Maintenance adjusted gross margin improved to 18.3% from 15.6%, which management attributed to strong project execution in installation and fabrication, partially offset by a higher mix from service work, which has a lower margin profile than maintenance and service activities.
On the outlook for Installation and Maintenance gross margins, management said it was optimistic but cautioned against assuming recent outperformance would persist at the same level every quarter. Leadership also pointed to a rising mix of fabrication-only work, which they said tends to carry higher margins than full installation jobs, and noted benefits from experience as the company completes more large data center projects.
Backlog and awards surged; data center demand extended planning horizon
Management emphasized accelerating order activity. Sprau said backlog and awards grew 49% year over year and 20% sequentially, translating to a book-to-bill ratio of 1.9x for the quarter, up from 1.5x in the third quarter. Butz put year-end consolidated backlog and awards at $3.7 billion, up nearly 50% year over year and 20% sequentially, and said almost all the growth was organic. He added that tuck-in acquisitions completed in the prior quarter contributed about $20 million of the $609 million sequential increase in backlog and awards.
Segment backlog growth was also strong. Engineering and Consulting backlog rose 16% year over year and 11% sequentially, driven by state and local government, life science and healthcare, and data centers and technology. Installation and Maintenance backlog and awards increased 66% year over year and 24% sequentially, driven largely by data center and technology clients, including demand for direct-to-chip liquid cooling systems and fabrication capacity.
Executives said the duration of backlog is elongating. Management attributed the shift to larger projects and longer lead times, particularly in data centers, and said the company expects to burn “a little bit over half” of backlog in 2026, with most of the remainder in 2027. The company also said it has backlog extending into 2028 and is in discussions with certain data center customers on deliveries extending into 2029.
In response to analyst questions about potential constraints, Chief Operating Officer Steve Hanson said the company has not seen supply chain issues pushing schedules out, adding that data center customers are “looking far into the future and securing the materials they need” and working with Legence early to align material availability.
Acquisitions and labor force expansion featured in 2026 setup
Legence provided updates on recent acquisitions. Sprau said the company closed its acquisition of The Bowers Group on January 2, earlier than initially expected due to faster regulatory approval. He described Bowers as a premier mechanical contractor in Northern Virginia and the Washington, D.C. metro area, noting it expands Legence’s mechanical capabilities in a region with a large installed base of data center capacity and adds roughly 50% to the company’s fabrication footprint. Management said integration priorities have included establishing standardized safety and operating processes, controls, communications, and financial rigor, as well as building trust with Bowers’ roughly 2,000 employees.
The company also closed a tuck-in acquisition of Metrix, an engineering firm near Seattle, Washington, on March 1. Sprau said Metrix is complementary to Legence’s existing engineering presence in the area, has a client base that “skew[s] towards the education market,” and operates with a “strong margin profile.” Butz said the purchase price was a little over $30 million, with about 25% paid in equity, and the multiple was broadly in line with prior engineering-firm transactions.
Management also highlighted labor availability as a competitive advantage. Sprau said Legence ended 2025 with nearly 4,500 union craft workers, up from 3,800 at the end of September and 3,400 at the end of June. With the addition of 1,700 union craftspeople from Bowers and continued hiring, the company currently has about 6,600 skilled craftspeople. Sprau said Legence has not experienced significant labor constraints affecting execution or its ability to pursue attractive work.
Guidance raised; liquidity increased and leverage declined
Legence issued first-quarter 2026 guidance calling for revenue of $925 million to $950 million and adjusted EBITDA of $90 million to $100 million, including a full quarter contribution from Bowers. For full-year 2026, the company raised revenue guidance to $3.7 billion to $3.9 billion and increased adjusted EBITDA guidance to $400 million to $430 million, citing the strong fourth-quarter backlog and awards growth as a key driver of the revision.
Butz said the company ended 2025 with $230 million in cash and total liquidity of $424 million, reflecting higher cash balances and an October revolver upsize. Total debt at year-end was $825 million, and net leverage declined to 2.0x based on last-12-month adjusted EBITDA, down from 2.4x at the end of September. On a pro forma basis including Bowers, net debt would have been “a little over” $1 billion, implying pro forma net leverage of about 2.4x.
Additional modeling items provided by management included expectations for net interest expense of about $15 million in the first quarter and in the “high $50 million range” for full-year 2026; first-quarter depreciation and amortization around $45 million and full-year D&A of $170 million to $180 million; and 2026 capital spending estimated at $65 million, with roughly two-thirds allocated to growth, including fabrication capacity expansion in Colorado and completion of prior expansions. Management said that, once completed, Legence will have just under 1.3 million square feet of fabrication capacity, including 372,000 square feet added through the Bowers acquisition.
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.
