Company: LGN
Filing Date: 2025-09-02
Form Type: S-1/A
Source: 0001193125-25-193346
Chunk: 137

Company: Legence Corp.
Filing Date: 2025-09-02
Form: S-1/A
Chunk 137
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 profit in 2023. The increase in gross profit margin was primarily attributable to a higher mix of Engineering & Design revenue, which earns a higher margin than our Program & Project Management service line. 98

Installation& Maintenance: The increase in gross profit was
primarily attributable to higher revenue. Gross profit margin was relatively flat year over year.

Selling, General & Administrative

The increase in selling, general and administrative is primarily attributable to a $21.4 million increase in compensation
costs during the period resulting from more headcount. Additionally, there was an increase in professional fees of $10.4 million as compared to the prior year related primarily to IT costs and acquisition- related fees.

Changes in the Fair Value of Contingent Consideration Liabilities

The increase in changes in the fair value of contingent consideration liabilities is primarily attributable to the contingent earnout
obligation associated with the Black Bear acquisition, which we closed in 2022. The Black Bear acquisition included a maximum potential earnout of $50.0 million based upon the business’s results for the year ended December 31, 2023.
As of December 31, 2022, the estimated fair value of the contingent earnout obligation was $23.0 million. Based upon actual fiscal year 2023 results, the maximum earnout was achieved, resulting in a $27.0 million increase to the
contingent earnout obligation. We paid the earnout amount in 2024 and have no further obligations to Black Bear shareholders under the earnout agreement.

Goodwill Impairment

During the
year ended December 31, 2023, it was determined the carrying amount of goodwill for one reporting unit in the Engineering & Consulting segment exceeded its fair value, resulting in goodwill impairment charges of $5.1 million. The
impairment was primarily driven by a decline in projected cash flows due to lower revenue projections and investments in support functions. During the year ended December 31, 2022, it was determined the carrying amount of goodwill for two
reporting units in the Installation & Maintenance segment exceeded fair value, resulting in goodwill impairment charges of $23.4 million. The impairment was primarily driven by a decline in projected cash flows due to lower revenue
projections, investments in support functions and increased cost of capital due to rising interest rates.

Interest Expense, Net of Capitalized Interest

The increase in interest expense, net of capitalized interest is primarily attributable to additional borrowings. This
includes $155