Company: LGN
Filing Date: 2025-12-09
Form Type: S-1
Source: 0001193125-25-312729
Chunk: 268

Company: Legence Corp.
Filing Date: 2025-12-09
Form: S-1
Chunk 268
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 its direction. The Company earns a margin related to these costs under either fixed-margin or fixed-price arrangements with its customers. The Company determined that it is the principal in these arrangements as the Company
controls the goods and services procured from third parties.

For some transactions, customers may withhold a portion of the contract price as a contract
retention until the project is substantially complete or completed to ensure performance; however, these arrangements typically do not constitute a significant financing component.

Contract Estimates and Changes in Estimates

After
contract inception, the transaction price may change for various reasons, including executed or unresolved change orders, executed or unresolved contract modifications, claims to or from the customer or owner, and back-charge recoveries. The
customers may partially or fully agree with such modifications or affirmative claims. Most changes are considered variable consideration until approved by both parties.

Contracts with customers are often modified through change orders. Many change orders are for goods or services that are not distinct within the context of
the original contract, and, therefore, are not treated as separate performance obligations.

For contracts where the Company applies the Cost-to-Cost Input Method, the accuracy of the Company’s revenue and profit recognition in each year depends on the accuracy of management’s estimates of the cost
to complete each project. Contract costs include labor, material, subcontractors and various overhead costs such as maintenance, depreciation, consumables, or equipment rentals, which are either directly related to the fulfillment of specific
contract performance obligations or indirectly contribute to the overall customer service delivery fulfillment of multiple contracts and obligations. Costs associated with change orders, unresolved contract modifications, claims to or from owners
and back-charge recoveries are recorded as incurred. Revisions to estimated total costs are reflected in the Company’s measure of progress.

F-20

Legence Corp. Notes to Condensed Consolidated Financial Statements - (Continued) (Unaudited) These revisions, as well as the stage of completion of contracts in process and the mix of contracts at different margins, may cause fluctuations in gross profit from period to period, which may have a significant impact on the Condensed Consolidated Financial Statements. At the time a loss on a contract becomes probable, the entire amount of the estimated loss is accrued. Management monitors for circumstances that may affect the accuracy of its estimates. Disaggregation of Revenue The Company’s revenue was derived from contracts to provide goods or services in the Engineering & Consulting and Installation & Maintenance segments. Refer to “Note 16—Segment Information” for additional information on reportable segments