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LGN, Legence Corp.

Construction & Engineering capital-intensive UnprofitableDistress / turnaround

We are a leading provider of engineering, installation and maintenance services for mission-critical systems in buildings.

We focus on high-growth sectors that have technically demanding buildings, including technology, life sciences, healthcare and education.

Legence Corp. is growing rapidly as data centers, manufacturers, pharmaceutical companies, hospitals, schools and universities make investments in both new and existing facilities to support growing demand for their products and services, reduce energy costs and increase resiliency.

Latest annual: FY2025 10-K

LGN · Legence Corp.

The business

What it sells, where the money comes from, the kind of company it is.

Revenue · FY2025

$2.6B

+21.5% YoY

Vital signs · TTM, with 3-yr average

Revenue $3.1B 3-yr avg $2.1B

Gross margin 20% 3-yr avg 20%

Operating margin 2.2% 3-yr avg 2.1%

Owner-earnings margin 10% 3-yr avg 3%

Free cash flow margin 10% 3-yr avg 3%

The business in brief

read the 10-K →

What this business is and what moves its needle, from its own SEC filings.

Situation: Unprofitable. No sustained operating profit across the record; an earnings multiple has nothing to rest on. What the record does show is revenue, the gross-margin trajectory, and the burn against the cash on hand. Distress / turnaround. Thin interest coverage, or operating cash burned against real debt, across the record. The balance sheet carries this situation; the debt schedule sets the clock.
What moves the needle: Gross margin has run about 21% and operating margin about 2.4% through the cycle, a thin spread that turns the result on volume and the cost of what it sells far more than on the price it sets. On a spread this thin the operating result swings hard on small moves in cost or volume — it has ranged from 0.6% to 3.4% over the years, so the cost line is where the needle moves. On its own account, the filing leans hardest on pricing power & competition, set against the numbers in what the filing emphasizes, below.

Every line is arithmetic on the company's filings, shown in full in the sections below.

The record

Ten years of arithmetic, read across the cycle.

The record, 2023–2025

realized figures from each filing · older years to the left

2023’23	2024’24	2025’25	TTMTTMMar 2026
				Income statement
$1.6B	$2.1B	$2.6B	$3.1B	RevenueRevenue
20%	21%	21%	20%	Gross marginGross mgn
12%	12%	13%	13%	SG&A / revenueSG&A/rev
$10M	$70M	$62M	$67M	Operating incomeOp. inc.
0.6%	3.4%	2.4%	2.2%	Operating marginOp. mgn
($46M)	($29M)	($60M)	($22M)	Net incomeNet inc.
				Cash flow & returns
$34M	$29M	$257M	$348M	Operating cash flowOp. cash
$80M	$97M	$100M	$111M	DepreciationDeprec.
($10M)	($45M)	$149M	$150M	Working capital & otherWC & other
$17M	$19M	$38M	$50M	CapexCapex
1.1%	0.9%	1.5%	1.6%	Capex / revenueCapex/rev
$17M	$10M	$219M	$297M	Owner earningsOwner earn.
1.0%	0.5%	8.6%	9.6%	Owner earnings marginOE mgn
$17M	$10M	$219M	$297M	Free cash flowFCF
1.0%	0.5%	8.6%	9.6%	Free cash flow marginFCF mgn
$120M	$225M	$16M	$297M	AcquisitionsAcquis.
—	—	-15%	-4%	Return on equityROE
—	—	−15%	−4%	Retained to equityRetained/eq
				Balance sheet
—	$81M	$230M	$245M	Cash & investmentsCash+inv
—	$449M	$584M	$827M	ReceivablesReceiv.
—	$10M	$11M	$14M	InventoryInvent.
—	$127M	$246M	$350M	Accounts payablePayables
—	$332M	$349M	$491M	Operating working capitalOper. WC
—	$756M	$1.1B	$1.5B	Current assetsCur. assets
—	$411M	$708M	$1.1B	Current liabilitiesCur. liab.
—	1.8×	1.6×	1.3×	Current ratioCurr. ratio
$676M	$781M	$764M	$842M	GoodwillGoodwill
—	$2.4B	$2.7B	$3.5B	Total assetsAssets
—	$1.6B	$836M	$1.0B	Total debtDebt
—	$1.5B	$606M	$790M	Net debt / (cash)Net debt
0.2×	0.8×	0.6×	0.8×	Interest coverageInt. cov.
—	—	$392M	$505M	Shareholders’ equityEquity
0.6%	0.3%	2.6%	3.5%	Stock comp / revenueSBC/rev
$5M	$18M	$25M	$25M	Goodwill written downGW imp.

The record, charted

FY2023–2025

Each measure over its full record; the current point and the worst year marked.

Gross margin

21%low FY2023

Owner earnings vs. net income

Owner earningsNet income

The accountant's number, and the cash an owner can take; the gap is the tell.

$219Mowner earningsvs.($60M)net incomelow FY2024

Where the cash went

ReinvestBuybacksDividendsAcquisitionsRetainedBeyond op. cash

Each year's outlays against its operating cash: the mix, and how it drifts. The hatched cap is spending beyond that year's operating cash — financed from the balance sheet or borrowing, not operations.

FY2023FY2025

Owner-earnings bridge

FY2023–FY2025cash-flow statement, SEC EDGAR →

Net income is the accountant's number; owner earnings is the cash an owner could take out. The walk between them, off the cash-flow statement, and whether the gap is widening or holding.

In fiscal 2025 the business turned a $60M loss into $219M of owner earnings: more cash than the profit line showed, after the non-cash charges and the capital it put back in.

	FY2025	FY2024	FY2023
Reported net income	($60M)	($29M)	($46M)
Depreciation & amortizationnon-cash charge added back	+$100M	+$97M	+$80M
Stock-based compensationreal costnon-cash, but a real cost	+$68M	+$5M	+$10M
Working capital & othertiming of cash in and out, other non-cash items	+$149M	−$45M	−$10M
Cash from operations	$257M	$29M	$34M
Capital expenditurecash put back in to keep running and to grow	−$38M	−$19M	−$17M
Owner earnings	$219M	$10M	$17M
Owner-earnings marginowner earnings ÷ revenue	9%	0%	1%

Owner earnings is the cash an owner could pull out without starving the business: operating cash less the capital it must spend to hold its position . The cash-flow statement also adds stock comp back as non-cash, but it is a real cost paid in shares; counted as the expense it is (less $68M), owner earnings is nearer $151M.

Maintenance capex is estimated as depreciation where a growing business invests above it; free cash flow is the figure the scorecard's free-cash margin reads.

III

Quality & stewardship

Returns, the balance sheet, capital allocation, and pay.

Owner’s Scorecard

FY2025 10-K · source on SEC EDGAR →

Material weakness in financial controls

“As discussed in more detail in Part II, Item 9A, "Controls and Procedures" below, we and our independent registered public accounting firm have identified material weaknesses in our internal control over financial reporting.”

The figures below are only as sound as the controls that produced them. read the note →

Will it survive?

Can it pay its interest? 0.6×

Does not cover its interest

Operating income $62M ÷ interest expense $102M

What this means
A full year of operating profit didn't cover the interest bill. This is the zombie zone: the business depends on refinancing, asset sales, or forbearance to service its debt.
How heavy is the debt, net of cash? $606M · 9.8× operating profit

Heavy net debt

Cash $230M − debt $836M

What this means
Netting $230M of cash and short-term investments against $836M of debt leaves $606M owed, about 9.8× a year's operating profit (13.6× on the gross debt, before the cash). Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.
How long is cash tied up? 41d

Tight

DSO 84 + DIO 2 − DPO 45 days

What this means
Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.

Is it a good business?

Return on invested capital —

Not enough data

Industry peers: median 10%

What this means
The filing data didn't include the inputs for this check.
Owner-earnings margin 1%

Thin through the cycle

3-yr median margin, range 0%–9%; latest $219M = operating cash $257M − maintenance capex $38M

Industry peers: median 6%

What this means
What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's 9% of revenue this year, a 1% median across 3 years. Treating stock comp as the real expense it is (less $68M of SBC) leaves $151M.
Are earnings backed by cash? $257M

Loss, but cash-generative

Net income ($60M) · cash from operations $257M

In the filing’s words The filing discloses a material weakness in its financial controls — the reported numbers here, and the record built on them, are only as reliable as the controls that produced them.

What this means
The company reported a net loss, so a conversion ratio isn't meaningful. What matters then is whether operations still threw off cash, here, they did.

How is the cash used?

Where do the earnings go? —

Not enough data

What this means
The filing data didn't include the inputs for this check.
Investing or harvesting? 0.38×

Harvesting

Capex $38M ÷ depreciation $100M

What this means
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Graham’s defensive tests · 1 of 3 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

Adequate size Pass

Revenue ≥ $2B · $2.6B

What this means
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
Strong liquidity Near

Current ratio ≥ 2× · 1.57×

What this means
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
Conservative debt Miss

Debt ≤ working capital · $836M vs $402M WC

What this means
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
Moderate price —

P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price

What this means
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $-0.67/share (latest year $-0.89), the averaged base the calculator's gate runs on, and book value is $5.84/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Does AI threaten the moat?

Low contestability

The moat is physical, regulated or balance-sheet-funded, the kind AI cuts costs within but does not contest.

In its own filing Framed as a capability

The filing positions AI as something the company uses, not something it fears.

“Includes facilities housing servers, networking equipment, systems critical for storing and managing data, operational facilities for internet service providers, software companies, information technologies ("IT") development hubs, AI (as defined below) development facilities and…”

AI is unlikely to contest a moat that is physical, regulated or balance-sheet-funded; here it reads more as a cost tool than a threat, and the company is using it that way.

Read from the filing's own risk factors, paired with the industry's structure under its SIC code; the durability is read above, the price below.

All figures as filed; the source filing is linked above.

Current Position

as of the latest quarter, Mar 31, 2026

Can the business pay what it owes this year, off the freshest balance sheet: the quality of the assets, the debt actually coming due, and what a low ratio means here.

Current assets$1.5B

Cash & short-term investments$245M
Receivables$827M
Inventory$14M
Other current assets$384M

Current liabilities$1.1B

Accounts payable$350M
Other current liabilities$783M

Current ratio1.30×all current assets ÷ what's due · Graham looked for 2×

Quick ratio1.28×stricter: inventory excluded

Cash ratio0.22×strictest: cash alone against what's due

Working capital$337Mthe cushion left after near-term bills

Revenue, latest quarter vs. a year ago+105.1%the freshest read on whether the business is still growing

Current ratio, recent quarters1.8× → 1.3×

Deeper floors

Tangible book value($1.2B)equity stripped of goodwill & intangibles

Net current asset value($1.1B)Graham's net-net: current assets less all liabilities

Debt incl. operating leases$151M$151M of it operating leases

Deferred revenue$543Mcustomer cash collected before delivery; operating float

From the company's latest filing.

Acquisitions & goodwill

from the balance sheet & the 3-year cash-flow record

Goodwill grows only when a company acquires and falls only when it concedes it overpaid. The size of that bet, the cash put into buying rather than building, and how much has already been written off.

Goodwill & intangibles$1.3B49% of all assets; the premium carried on the balance sheet for businesses acquired

Against book equityexceeds itgoodwill alone is larger than the company’s entire book equity; stripped of the acquisition premium, there is no net book worth

Cash spent acquiring$362Mover 3 years buying other businesses, against $74M of capital spent building

$48M written down across 3 years (2023, 2024, 2025): goodwill the company has already conceded it overpaid for, charged against earnings. A write-down costs no cash (the cash went out when the deal was signed), but it is management marking its own past judgment to market.

Goodwill, acquired intangibles and equity from the latest balance sheet; acquisition spend and write-downs summed across the 3-year record, from the company's own filings.

Management, ownership & pay

read the proxy →

From the proxy: how much of the business the people running it own, and how they are paid.

Insider ownership<1%
The stake all directors and executive officers hold together, per the 2026 proxy: skin in the game, the first thing Munger reads.
Stock-based compensation$68M
The slice of the business handed to employees in shares this year, 3% of revenue, equal to 110% of operating profit. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. One trap: the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.

Peers, Construction & Engineering

The same industry, side by side on owner economics. Each figure is a through-cycle median, so a peak or trough year can’t distort it; the group median at the foot is the line to read each against.

Company	Revenue	Gross margin	Op. margin	ROIC	Owner earn. margin
BLDTopBuild	$5.4B	28%	13.4%	12%	9%
IESCIES Holdings Inc.	$3.4B	19%	4.0%	17%	3%
LGNLegence Corp.	$2.6B	21%	2.4%	—	1%
AMRCAmeresco Inc.	$1.8B	19%	6.1%	8%	-10%
AGXArgan Inc.	$945M	17%	8.9%	29%	19%
MTRXMatrix Service Company	$769M	6%	-3.7%	-14%	2%
LMBLimbach Holdings Inc.	$647M	18%	2.9%	10%	6%
BBCPConcrete Pumping Holdings Inc.	$356M	37%	12.6%	6%	11%
Group median	—	19%	5.1%	—	4%

The price

What a price has to assume.

What the price implies

reverse-DCF

Type today's close and see the owner-earnings growth you'd have to believe to justify it, beside what Legence Corp. has delivered.

Today’s price $

Base Normalize · through-cycle ($82M) Net of stock comp (−$109M) Steady-state · maintenance capex ($310M)

—

The assumptions Required return 9% Years of high growth 10 Terminal growth 2.5%

9.0% = the 4.55% 10-year Treasury (Jul 15, 2026) + 4.45 points of equity premium. The rate you require is yours to set.

Enter a price above to run it.

Implied by the price—

Owner-earnings growth · since FY2023+261%/yr

Owner-earnings yield—

P/E (3-yr earnings ’23–’25)—

P/B—

Graham’s price gate—

Graham capped the multiple at 15×; Buffett and Munger let that rule go: a wonderful business can deserve 50× if the thesis holds. The gate marks the bargain-hunter's floor.

Against a high-grade bond: Graham’s yardstick bond yield%

Prefilled with the 10-year Treasury (4.55%, as of Jul 15, 2026). Edit it for today’s exact figure, or a AAA corporate yield.

Graham measured a stock against the bond you could own instead, the heart of his margin of safety. Enter a price above to weigh the owner-earnings yield against this bond.

Free cash flow $297M on 67M shares outstanding (a weighted basic average, the only count this filer tags); net debt $790M. The if-converted diluted count is 108M, 61% above the shares outstanding: the dilution overhang (convertibles, options) a buyer inherits. The base is the latest year by default; Normalize values it on the through-cycle median owner-earnings margin (to avoid paying on a peak year). Net of stock comp treats option pay as the expense it is. Capex ($50M) runs well above depreciation ($111M), so this is a build-out; Steady-state swaps total capex for maintenance (≈ depreciation), lifting the base to about $310M, the cash it would throw off if it stopped expanding. The dials set the multiple a growth belief justifies; the price, and every dollar on this page, is yours.

Weigh LGN against another business →

The owners of LGN: the meeting and the votes →

Cite: Owner Scorecard, "Legence Corp. (LGN), the owner's record," https://ownerscorecard.com/c/LGN, data as of 2026-07-09.

Manual order: ← LGIH its page in the Manual LGND →

Industry order: ← KBR the Construction & Engineering chapter LMB →