S-1/A: Legence Corp. Files S-1/A for IPO, Targets Nasdaq Listing

Sentiment:

Initial Public Offering Registration Statement 2 September 2025 6:52 AM

Legence Corp., a leading provider of engineering, installation, and maintenance services for mission-critical building systems, has filed an S-1/A registration statement for its initial public offering of 26 million Class A Common Stock shares.

Delay expectedGoodwill impairment in 2024 was primarily driven by a decline in projected cash flows due to lower revenue projections, reflecting the impact of delayed contract awards and uncertainty that revenue will be realized for point-in-time revenue recognition contracts.

Capital raiseInitial public offering of 26,000,000 shares of Class A Common Stock.Estimated initial public offering price between $25.00 and $29.00 per share.Expected net proceeds of approximately $636.9 million (or $717.5 million if underwriters' over-allotment option is fully exercised).Proceeds will be contributed to Legence Holdings to repay outstanding borrowings under the Term Loan Credit Facility and for general corporate purposes.Underwriters have a 30-day option to purchase up to 3,157,808 additional shares from the company and 742,192 additional shares from the selling stockholder.

Worse than expectedNet loss increased to $23.0 million for the six months ended June 30, 2025, from $8.8 million for the same period in 2024.Net Loss Margin worsened to (2.1)% for the six months ended June 30, 2025, from (0.9)% for the same period in 2024.Income before income tax for the six months ended June 30, 2025, was a loss of $13.4 million, compared to a loss of $3.8 million for the same period in 2024.

Summary

Legence Corp. is offering 26,000,000 shares of Class A Common Stock in its initial public offering, with an estimated price range of $25.00 to $29.00 per share.
The company's revenues grew at a compound annual growth rate of approximately 39% from 2021 to 2024, and 16% after giving pro forma effect to acquisitions.
As of June 30, 2025, Legence had $2.8 billion in backlog and awarded contracts, a 29% increase over the prior year.
In 2024, over 63% of new building project revenues came from data centers & technology, and the majority of existing building project revenues from energy efficiency upgrades, sustainability consulting, and MEP refurbishments.
The company reported a net loss of $27.6 million for the year ended December 31, 2024, and $23.0 million for the six months ended June 30, 2025.
Adjusted EBITDA was $229.6 million for 2024 (10.9% margin) and $123.0 million for the six months ended June 30, 2025 (11.1% margin).
Legence will operate under an UP-C structure, with its principal asset being membership interests in Legence Holdings, and will be the managing member of Legence Holdings.
Blackstone Inc. will beneficially own approximately 74% of the combined voting power after the offering, making Legence a controlled company under Nasdaq rules.
Net proceeds from the offering, estimated at $636.9 million, will be used primarily to repay outstanding borrowings under the Term Loan Credit Facility and for general corporate purposes.

Sentiment

Score: 5

Explanation: The company demonstrates strong market positioning, significant growth in high-demand sectors, and a robust acquisition strategy. However, consistent net losses, substantial debt, and the complexities of the UP-C structure and Tax Receivable Agreement introduce considerable financial risks and uncertainties for investors.

Positives

Strong revenue growth with a 39% CAGR from 2021-2024 (16% pro forma for acquisitions).
Significant backlog and awarded contracts of $2.8 billion as of June 30, 2025, indicating future revenue potential.
Focus on high-growth sectors like data centers, life sciences, healthcare, and education, which are experiencing rapid investment.
Deep technical expertise in mission-critical systems, serving over 60% of Nasdaq-100 Index companies.
National footprint with 70 offices across 45 U.S. states, allowing broad client service.
Integrated in-house engineering, consulting, fabrication, and modular construction capabilities, leading to higher quality, lower costs, and faster project completion.
Significant client diversity (over 9,500 clients in 2024) and small average job sizes mitigate client and project risk, with 80% of jobs meeting or exceeding initial margin estimates.
Longstanding relationships with blue-chip, repeat clients, with an average relationship length of 26 years for top 10 clients and a net revenue retention of 121% from 2021-2024.
Proven acquirer with 20 acquisitions since December 2020, demonstrating successful integration and growth acceleration.
Safety record significantly better than industry averages, with TRIR 84% lower and LTIR 93% lower than U.S. Bureau of Labor Statistics rates for the industry in 2024.

Negatives

Reported net losses of $27.6 million in 2024 and $23.0 million for the six months ended June 30, 2025, with Net Loss Margin increasing to (2.1)% in H1 2025 from (0.9)% in H1 2024.
Significant amount of existing indebtedness, with a Term Loan outstanding balance of $1,582.1 million as of June 30, 2025, leading to substantial interest expense.
Goodwill impairment charges recognized in 2022 ($23.4 million), 2023 ($5.1 million), and 2024 ($17.8 million) due to declines in projected cash flows and lower revenue projections for certain reporting units.
Increased selling, general and administrative expenses, rising by $29.3 million for the six months ended June 30, 2025, primarily due to compensation costs and professional fees.
Interest expense increased by $18.4 million for the six months ended June 30, 2025, compared to the same period in 2024, primarily due to additional borrowings.
The company's effective tax rate was negative 19.6% in 2024 and negative 71.4% for the six months ended June 30, 2025, indicating tax inefficiencies due to pass-through entities and non-deductible items.

Risks

Economic downturns in target markets may materially and adversely affect business due to dependence on construction activity.
Failure to compete and evolve effectively in highly competitive target markets could harm operating results.
Misconduct and errors by employees, subcontractors, partners, or third-party service providers could lead to fines, contract cancellations, or reputational damage.
Cost overruns, inflation, and delays, particularly with fixed-price contracts, could significantly impact results and profitability.
Failure to secure new contracts may adversely affect cash flows and financial results, as projects are generally one-time in nature.
Inability to complete projects in a timely manner or meet performance standards could result in losses, liquidated damages, and reputational harm.
Reliance on subcontractors and suppliers exposes the company to their business risks, including delays, material shortages, and increased costs.
Clients often rely on third-party financing, and its unavailability could delay projects or reduce demand for services.
Not all revenues from backlog and awarded contracts may be recognized, or payments anticipated under awarded projects may not be received.
Failure to remediate material weaknesses or maintain effective internal control over financial reporting could adversely affect accurate and timely financial reporting.
Challenges in managing growth and scaling the platform, including developing information systems and attracting/retaining employees.
Inability to achieve expected returns from the growth strategy, including capital investments and new business lines.
Difficulty in maintaining corporate culture as the company grows, potentially leading to loss of innovation and collaboration.
Acquisitions may require significant management attention, disrupt business, and adversely affect financial results, with no guarantee of anticipated benefits or successful integration.
Significant existing indebtedness and restrictions from Credit Facilities may limit ability to finance future needs or adapt business plans.
Variable rate indebtedness subjects the company to interest rate risk, potentially increasing debt service obligations significantly.
Incurrence of additional indebtedness could further exacerbate leverage risks and restrict operating flexibility.
Environmental, health, and safety laws could impose significant additional costs and liabilities.
Exposure to occupational, health, and safety matters at project sites, with potential for accidents, fines, and reputational damage.
Increasing scrutiny and regulatory requirements regarding sustainability and ESG matters may impose additional costs or reputational risks.
Dependence on distributions from Legence Holdings to pay taxes, Tax Receivable Agreement payments, and corporate expenses.
No intention to pay dividends, which may affect the market value of Class A Common Stock.
Future sales or issuance of additional Common Stock or equity-related securities could dilute ownership or adversely affect market price.
Payments under the Tax Receivable Agreement could be significant and may be accelerated, potentially exceeding actual tax benefits.
Risk of Legence Holdings becoming a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes.
Tax distributions from Legence Holdings may be substantial and exceed the overall effective tax rate applicable to a corporate taxpayer.
No existing public market for Class A Common Stock, and a liquid trading market may not develop.
Blackstone's control of a significant percentage of voting power may limit other stockholders' influence and create conflicts of interest.
Blackstone is not limited in its ability to compete with the company, and corporate opportunity provisions may enable Blackstone to benefit from opportunities otherwise available to the company.
As a controlled company, Legence may qualify for exemptions from certain Nasdaq corporate governance requirements, potentially reducing stockholder protections.
Future sales of Class A Common Stock by existing stockholders could reduce market price.
Terms of subsequent financings may adversely impact stockholder equity.
Lack of research reports or unfavorable research could cause price and trading volume to decline.
Requirements of being a public company may strain resources, increase costs, and distract management.
Purchasers in the IPO will experience immediate and substantial dilution.
Increases and uncertainty in health insurance costs could adversely impact results.
International expansion could subject the company to new challenges and risks.
Changes in U.S. trade policy, including tariffs, may have a material adverse impact.
As a government contractor, the company is subject to specific rules, regulations, audits, and potential debarment.
Climate change and related environmental issues, including natural disasters, could adversely impact business operations.

Future Outlook

Legence intends to continue growing revenues by focusing on high-growth end markets (data centers, life sciences, advanced manufacturing, healthcare, energy efficiency), increasing wallet share with existing clients, expanding its maintenance and service business, and making bolt-on acquisitions. The company anticipates incurring incremental general and administrative expenses as a publicly traded company.

Management Comments

Jeffrey Sprau, CEO, has served as CEO of Legence Parent since October 2020 and Therma Holdings LLC since April 2019, bringing extensive technical and commercial acumen and experience leading large service operations.
Stephen Butz, CFO, entered into a retention bonus agreement in August 2025, providing opportunities to earn $250,000 and $750,000 bonuses if he remains employed through specific dates in 2026.
Management believes that providing a one-stop solution for engineering, installing, and maintaining MEP systems results in lower total cost, fewer change orders, and faster turnaround times for clients, and higher win rates, better customer retention, incremental margin, and more recurring revenue for the company.
Management believes the company's focus on data centers, manufacturing facilities, and energy efficiency upgrades positions it to benefit from increasing investment in these areas, rising power prices, and accelerating load growth.

Industry Context

The demand for Legence's services is primarily driven by investment in new and existing industrial, commercial, and public sector buildings in the United States. Investments in nonresidential buildings grew at a 16% CAGR from 2021-2024, while Legence's focus segments (data centers, technology, semiconductors, life sciences, healthcare, education) grew 40% faster at a 22% CAGR over the same period. Key drivers include increasing investment in data centers (tripled from $7B in 2021 to $23B in 2024), continued reshoring of U.S. manufacturing (49% CAGR from 2021-2024), growing demand for energy efficiency solutions due to rising electricity prices (23% increase from 2020-2024), and the increasing need for outside expertise to meet corporate sustainability goals (Sustainability Services spending expected to grow 11% CAGR from $23B in 2024 to $35B in 2028 in the Americas).

Comparison to Industry Standards

MEP engineering and installation costs represent an average of 26% of the total construction budget for new industrial and commercial buildings, and as much as 35% and 39% for laboratories and hospitals, respectively, according to 2024 RSMeans Data.
The company's total recordable incident rate (TRIR) per one hundred employees per year was 0.47 during 2024, which is 84% lower than the most recently published U.S. Bureau of Labor Statistics overall rates for its industry.
The company's lost-time incident rate (LTIR) per one hundred employees per year was 0.09 during 2024, which is 93% lower than the most recently published U.S. Bureau of Labor Statistics overall rates for its industry.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Chief Executive Officer and Director	N/A (served as CEO of Legence Parent since Oct 2020, Therma Holdings LLC since Apr 2019)	Jeffrey Sprau	January 2025 (CEO), August 2025 (Director)	Transition to public company structure
Chief Financial Officer	N/A (served as CFO of Legence Parent since Nov 2021)	Stephen Butz	January 2025	Transition to public company structure
Chief Human Resources Officer	N/A (served as CHRO of Legence Parent since July 2021)	Gregory Barnes	N/A (already in role)	N/A
General Counsel and Secretary	N/A (served as General Counsel of Legence Parent since Oct 2021)	Bryce Seki	January 2025	Transition to public company structure
Director Nominee	N/A	Terrence Keenen	Prior to or upon closing of this offering	New appointment for public company board
Director Nominee	N/A	Christie Kelly	Prior to or upon closing of this offering	New appointment for public company board

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment

Legal Proceedings

Involved in various claims and legal proceedings incidental to normal business activities.
Reached a $3.1 million settlement agreement in 2023 for a class action suit related to certain employee matters, with payment made in March 2024.

Related Party Transactions

Transactions with entities associated with Legence Holdings and Blackstone Fund, including $3.0 million and $6.0 million in revenue in 2023 and 2022, respectively.
A portion of the company's term loan is held by entities associated with the company and Blackstone Fund.
Related party promissory notes were issued in connection with certain acquisitions.
Lease agreements exist with entities owned by members of management and/or Parent interests holders.
Contingent consideration payments from acquisitions were made to sellers who became members of management, totaling $33.2 million in 2024.

Stakeholder Impact

Shareholders: Potential for dilution from the IPO and future equity issuances, limited influence on corporate matters due to Blackstone's control, and no current intention to pay dividends.
Employees: Stock-based compensation plans (Series A Profits Interests, Restricted Series C Common Interests, 2025 Omnibus Incentive Plan), retention bonuses for key executives, and participation in union-sponsored pension plans and other benefits.
Customers: Benefits from integrated service offerings, but potential risks from project delays, cost overruns, and reliance on third-party financing.
Creditors: Repayment of Term Loan Credit Facility with IPO proceeds, but continued exposure to significant indebtedness and restrictive covenants.
Regulatory Authorities: Compliance with federal, state, and local laws, including environmental, health, safety, and government contracting regulations, with potential for penalties or debarment for non-compliance.

Next Steps

Completion of the initial public offering and listing of Class A Common Stock on the Nasdaq Stock Market LLC under the symbol LGN.
Implementation of the Company 2025 Omnibus Incentive Plan for eligible employees, consultants, and directors.
Adoption of a clawback policy compliant with listing rules of the applicable exchange.
Adoption of corporate governance guidelines in accordance with Nasdaq rules.
Evaluation of the impact of the One Big Beautiful Bill Act on condensed consolidated financial statements, to be reflected in Q3 2025 financial statements.

Key Dates

Date	Description
December 16, 2020	Legence Intermediate and Legence Holdings entered into the Credit Agreement; Legence Parent LLC Series A Incentive Plan adopted.
January 8, 2021	Vesting commencement date for Jeffrey Sprau's Series A Profits Interest grant.
January 19, 2021	Effective date for an interest rate swap agreement.
August 5, 2021	Amendment No. 1 to Credit Agreement, increasing Revolving Credit Facility commitment to $90.0 million.
August 27, 2021	Vesting commencement date for Gregory Barnes' August 2021 Series A Profits Interest grant.
October 28, 2021	Amendment No. 2 to Credit Agreement, securing $370.0 million incremental term loan and $71.7 million delayed draw term loan.
November 22, 2021	Vesting commencement date for Bryce Seki's November 2021 Series A Profits Interest grant.
November 30, 2021	Effective date for two interest rate swap agreements.
December 3, 2021	Vesting commencement date for Stephen Butz's Series A Profits Interest grant.
July 1, 2022	Acquisition of Black Bear Energy, Inc. completed.
November 1, 2022	Acquisition of Shadpour Consulting Engineers, LP (SC Engineers) and Lord Green Real Estate Strategies, LLC completed.
November 9, 2022	Amendment No. 3 to Credit Agreement.
December 31, 2022	Fiscal year end; Goodwill impairment of $23.4 million recognized.
February 27, 2023	Amendment No. 4 to Credit Agreement, transitioning benchmark interest from LIBOR to SOFR; Effective date for several interest rate swap agreements.
March 31, 2023	Vesting commencement dates for Gregory Barnes' and Bryce Seki's March 2023 Series A Profits Interest grants.
July 31, 2023	Amendment No. 5 to Credit Agreement, securing $155.0 million incremental term loan; Acquisition of San Jose Boiler Works, Inc. completed.
August 1, 2023	Acquisition of San Jose Boiler Works, Inc. completed.
September 1, 2023	Acquisition of A.O. Reed & Co. completed.
October 2023	California enacted various climate legislation; Rabin Roberts Research conducted a survey on behalf of BDO.
November 1, 2023	Acquisition of OCI Associates, LLC completed.
December 31, 2023	Fiscal year end; Goodwill impairment of $5.1 million recognized; Black Bear acquisition earnout maximum achieved.
January 1, 2024	Effective date for adoption of ASU 2023-07 (Segment Reporting).
January 19, 2024	Amendment No. 6 to Credit Agreement, securing $125.0 million incremental term loan; Effective date for an interest rate swap agreement.
February 12, 2024	Vesting commencement dates for Gregory Barnes' and Bryce Seki's February 2024 Series A Profits Interest grants.
March 1, 2024	Acquisition of P2S LP completed.
March 2024	Settlement payment of $3.1 million for a class action suit related to employee matters made.
June 18, 2024	Amendment No. 7 to Credit Agreement, securing $125.0 million incremental term loan.
July 1, 2024	Acquisition of AMA Consulting Engineers Holdings LLC completed.
July 1, 2024	Effective date for base salary increases for Jeffrey Sprau, Stephen Butz, Gregory Barnes, and Bryce Seki.
November 21, 2024	Amendment No. 8 to Credit Agreement, securing $315.0 million incremental term loan and extending Revolving Credit Facility maturity to December 16, 2026.
December 31, 2024	Fiscal year end; Goodwill impairment of $17.8 million recognized; All contingent consideration liabilities paid in cash.
January 1, 2025	Jeffrey Sprau became Chief Executive Officer and Director; Stephen Butz became Chief Financial Officer; Bryce Seki became General Counsel and Secretary; Bilal Khan and Robert Mitchell Nimocks became directors; Effective date for adoption of ASU 2024-01 (Compensation Stock Compensation).
January 9, 2025	Legence Corp. incorporated in Delaware.
February 6, 2025	Amendment No. 9 to Credit Agreement, reducing interest rate and extending Term Loan Credit Facility maturity to December 16, 2028.
February 2025	Real annualized private construction spending on data centers and manufacturing facilities reached highest level ever recorded at $269 billion.
March 27, 2025	Balance Sheet date for Legence Corp. (audited).
April 29, 2025	Date of Independent Registered Public Accounting Firm's report for Legence Corp. and Legence Holdings LLC.
May 2025	FASB issued ASU 2025-03 (Business Combinations and Consolidation).
June 2025	Company increased Stephen Butz's base salary from $510,048 to $600,000 and target annual bonus opportunity from 60% to 75% of base salary.
June 30, 2025	Condensed Consolidated Balance Sheet date; End of six-month interim period.
July 4, 2025	The One Big Beautiful Bill Act (the Act) was enacted into law.
July 2025	Two interest rate swap agreements added, effective December 31, 2026, maturing December 31, 2027.
August 11, 2025	Stephen Butz entered into a retention bonus agreement.
August 15, 2025	Date Condensed Consolidated Financial Statements (Unaudited) were available for issuance.
August 22, 2025	Christie Kelly's consent to be listed as a Director Nominee.
September 1, 2025	Deloitte & Touche LLP consent dates for Legence Corp. and Legence Holdings LLC.
September 2, 2025	As filed date with SEC for S-1/A; Approximate date of commencement of proposed sale to the public; Date of Kirkland & Ellis LLP opinion.
December 16, 2028	Maturity date for Term Loan Credit Facility and Delayed Draw Term Loan Credit Facility.
December 16, 2026	Maturity date for Revolving Credit Facility.
June 30, 2026	Deductions under Code Section 179D for energy-efficient commercial buildings removed for properties where construction begins after this date.
January 1, 2026	Annual increase in shares reserved for issuance under the 2025 Plan begins.
May 1, 2026	Stephen Butz's retention bonus employment through date.
December 15, 2026	Effective date for ASU 2024-03 (Income Statement Expense Disaggregation) for fiscal years beginning after this date; Effective date for ASU 2025-03 (Business Combinations and Consolidation) for fiscal years beginning after this date.
December 15, 2027	Effective date for ASU 2024-03 (Income Statement Expense Disaggregation) for interim periods beginning after this date.
January 1, 2035	End date for annual increase in shares reserved for issuance under the 2025 Plan.

Keywords

Engineering Services, Installation Services, Maintenance Services, HVAC, MEP Systems, Data Centers, Life Sciences, Healthcare, Education, Energy Efficiency, Sustainability, Construction, Infrastructure, IPO, Blackstone, SEC Filing, S-1/A, Public Offering

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