Legence Corp. Class A ((LGN)) has held its Q3 earnings call. Read on for the main highlights of the call.
TipRanks Cyber Monday Sale
- Claim 60% off TipRanks Premium for data-backed insights and research tools you need to invest with confidence.
- Subscribe to TipRanks' Smart Investor Picks and see our data in action through our high-performing model portfolio - now also 60% off
Legence Corp. Reports Strong Earnings with Record Revenue and Strategic Growth
Legence Corp. Class A’s recent earnings call painted a picture of robust financial health and strategic growth. The company reported record revenue and EBITDA growth, alongside a successful debt reduction following its IPO. Despite facing challenges in gross margins and increased expenses, Legence is experiencing strong momentum in the data center market and maintains a positive outlook.
Record Third Quarter Performance
Legence reported a record-setting third quarter, showcasing impressive year-over-year revenue growth of 26%, EBITDA growth of 39%, and backlog growth of 29%. These achievements were entirely organic, highlighting the company’s strong operational performance.
Strong Book-to-Bill Ratio
The company boasted a book-to-bill ratio of 1.5x, underscoring a positive outlook and a healthy pipeline of future projects. This ratio indicates that Legence is securing more orders than it is fulfilling, which is a promising sign for future growth.
Successful IPO and Debt Reduction
Following a successful IPO, Legence used $780 million in proceeds to significantly reduce its debt by nearly 50% to $836 million. This move improved the company’s net leverage ratio from 6.2x to 2.4x, strengthening its financial position.
Data Center and Technology Market Growth
The data center and technology market saw over 60% growth, driven by multiple projects and the modular construction of technical cooling systems. This sector’s expansion is a key driver of Legence’s overall growth strategy.
Acquisition of Bowers Group
Legence announced the acquisition of Bowers Group, a leading mechanical contractor in the Northern Virginia, D.C. metro area. This acquisition is expected to bolster Legence’s mechanical capabilities and expand its fabrication capacity, particularly in the data center market.
Decline in Gross Margin for Engineering and Consulting
The Engineering and Consulting segment experienced a decline in gross margins from 33% to 31.7%, attributed to a higher percentage of subcontractor expenses and lower margins in the engineering and design service line.
Increased SG&A Expenses
SG&A expenses rose to $85.9 million from $67.2 million in the prior year quarter, primarily due to stock-based compensation and professional fees related to the IPO. This increase reflects the costs associated with the company’s growth and public offering.
Challenges in Biotech and Life Sciences Market
The biotech and life sciences market remained soft, although there are signs of improvement with an uptick in proposal requests from clients. This sector’s recovery could present future growth opportunities for Legence.
Forward-Looking Guidance
Legence provided robust forward-looking guidance, reflecting their strong performance and future outlook. The company anticipates continued revenue and adjusted EBITDA growth through 2026, with the Bowers Group acquisition expected to significantly contribute. Legence aims to maintain a net leverage below 3x, emphasizing their commitment to a strong balance sheet and strategic focus on high-growth industries.
In summary, Legence Corp.’s earnings call highlighted a period of significant growth and strategic positioning. The company is navigating challenges while capitalizing on opportunities in high-growth markets such as data centers. With a successful IPO, strategic acquisitions, and a strong financial outlook, Legence is well-positioned for future success.