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Stock-Based Compensation and Long-term Incentive Awards
 12 Months Ended
Dec. 31, 2025
Share-Based Payment Arrangement [Abstract]  
Stock-Based Compensation and Long-term Incentive Awards Stock-Based Compensation and Long-term Incentive Awards
Series A Interests and Restricted Series C Interests
Modifications of Series A Time Interests and Restricted Series C Common Interests
In connection with the IPO, the Company underwent a Corporate Reorganization in which the Series A Time Interests originally issued by Legence Parent were exchanged for equivalent interests in newly created entities above the consolidated structure of the Company (refer to “Note 1—Nature of Operations”). The Company determined the exchanges were contemporaneous and effectuated as part of the UP-C structure. The key terms and vesting conditions of the Rollover Series A Profits Interests and Rollover Restricted Series C Interests remain consistent with those of the original Series A Profits Interests and Restricted Series C Common Interests, respectively. The Corporate Reorganization resulted in a modification of the Series A Time Interests and Restricted Series C Common Interests, the impact of which is described as follows:
•Series A Time Interests: The Time Interests will continue to be remeasured at fair value at each reporting date with an offset to equity based on capital contributions from the issuers (refer to “Note 2—Summary of Significant Accounting Policies”). As the modification did not result in a change to the fair-value based measurement approach, no incremental compensation cost was recognized during the period.
•Restricted Series C Common Interests: The Rollover Restricted Series C Interests will continue to be remeasured at fair value at each reporting date. As the modification did not result in a change to the fair-value based measurement approach, no incremental compensation cost was recognized during the period.
Additionally, on September 16, 2025, the Series A Interests were modified such that for purposes of distributions, Time Interests are treated as fully vested while the holder remains employed by the Company. The Time Interests will continue to be remeasured at fair value at each reporting date. As the modification did not result in a change to the fair-value based measurement approach, no incremental compensation cost was recognized during the period.
Series A Interests
Time Interests were liability classified as of December 31, 2024 and equity classified as of December 31, 2025 (refer to “Note 2—Summary of Significant Accounting Policies”). The stock-based compensation liability for Time Interests as of December 31, 2024 is $19.9 million and is included in Other long-term liabilities on the Consolidated Balance Sheets. The activity of the Time Interests issued to employees of the Company was as follows:
Time Interests
Weighted-
average Grant
Date or Modification Date Fair Value
Per Interest (1)
Outstanding as of December 31, 202339,498 $346 
Granted3,682 580 
Forfeited(394)441 
Vested(121)344 
Outstanding as of December 31, 202442,665 365 
Granted6,178 897 
Forfeited(857)977 
Vested(577)395 
Outstanding at December 31, 202547,409 $1,176 
(1)As discussed above, grants were modified during the year ended December 31, 2025.
The fair value of Time Interests was estimated using the OPM as of December 31, 2025 and 2023 and the hybrid method as of December 31, 2024 with the following assumptions:
December 31,
202520242023
Expected dividend yield—%—%—%
Risk-free interest rate3.5%4.3%3.8%
Expected volatility55%75%55%
Expected life (years)2.52.75.0
The hybrid method assumptions above for December 31, 2024 were based on the weighted average assumptions of potential future scenarios as follows:
Net Settle at
IPO (1)
Remain as
Profits Interests
post IPO (2)
Delayed
Exit (3)
Expected dividend yield—%—%—%
Risk-free interest rate4.2%4.3%4.3%
Expected volatility80%70%70%
Expected life (years)0.53.55.0
(1)The Company completes an IPO, and Series A Profits Interests are settled.
(2)The Company completes an IPO, and Series A Profits Interests remain outstanding.
(3)The Company does not undergo a Change of Control in the foreseeable future.
The compensation expense and corresponding income tax benefit for Time Interests was as follows (in thousands):
Year Ended December 31,
202520242023
Selling, general and administrative$49,547 $3,786 $8,095 
Cost of revenue12,286 1,026 1,923 
Compensation expense$61,833 $4,812 $10,018 
Income tax benefit$— $— $403 
For the year ended December 31, 2025, Parent Entities distributed $26.2 million related to Time Interests, which the Company recorded as compensation expense. There were no distributions for Time Interests for the years ended December 31, 2024 or 2023. As of December 31, 2025, the unrecognized compensation expense related to Time Interests is approximately $21.1 million to be recognized over a remaining weighted-average term of 1.4 years.
The compensation expense and corresponding income tax benefit for Performance Interests was as follows (in thousands):
Year Ended December 31,
202520242023
Selling, general and administrative$370 $— $— 
Cost of revenue83 — — 
Compensation expense$453 $— $— 
Income tax benefit$— $— $— 
Payments related to the Performance Interests and Exit Interests are contingent upon the achievement of specified market thresholds and require the recipient’s continued employment through distribution dates. Once the applicable thresholds are achieved, holders are entitled to receive payments upon each qualifying distribution from the Parent Entities. For the year ended December 31, 2025, Parent Entities distributed $0.5 million to holders of Performance Interests after the threshold for the Performance Interests was met, which the Company recorded as compensation expense. There were no distributions for Performance Interests and no compensation expense recorded for Performance Interests for the years ended December 31, 2024 or 2023. There were no distributions for Exit Interests and no compensation expense recorded for Exit Interests for the years ended December 31, 2025, 2024 or 2023. Because additional distributions are dependent on future liquidity events that are not considered probable as of the financial statement dates, no compensation was accrued for these awards as of December 31, 2025 or 2024.
Restricted Series C Interests
Restricted Series C Interests were liability classified as of December 31, 2024 and equity classified as of December 31, 2025 (refer to “Note 2—Summary of Significant Accounting Policies”). The stock-based compensation liability for Restricted Series C Interests as of December 31, 2024 is $0.5 million and is included in Other long-term liabilities on the Consolidated Balance Sheets. The activity of the Restricted Series C Common Interests issued to employees of the Company was as follows:
Restricted
Series C
Interests
Weighted-
average Grant
Date or Modification Date Fair Value
Per Interest (1)
Outstanding as of December 31, 20231,278 $1,571 
Granted— — 
Outstanding as of December 31, 20241,278 1,571 
Granted— — 
Outstanding as of December 31, 20251,278 $2,611 
(1)As discussed above, grants were modified during the year ended December 31, 2025.
The fair value was estimated using the OPM as of December 31, 2025 and 2023 and the hybrid method as of December 31, 2024 with the following assumptions:
December 31,
202520242023
Expected dividend yield—%—%—%
Risk-free interest rate3.5%4.3%3.8%
Expected volatility55%75%55%
Expected life (years)2.52.75.0
The hybrid method assumptions above for December 31, 2024 were based on the weighted average assumptions of potential future scenarios as follows:
Net Settle at
IPO (1)
Remain as
Restricted
Series C
Interests post
IPO (2)
Delayed
Exit (3)
Expected dividend yield—%—%—%
Risk-free interest rate4.2%4.3%4.3%
Expected volatility80%70%70%
Expected life (years)0.53.55.0
(1)The Company completes an IPO, and Restricted Series C Interests are settled.
(2)The Company completes an IPO, and Restricted Series C Interests remain outstanding.
(3)The Company does not undergo a Change of Control in the foreseeable future.
The compensation expense for Restricted Series C Interests was as follows (in thousands):
Year Ended December 31,
202520242023
Selling, general and administrative$1,151 $273 $15 
Cost of revenue1,375 326 18 
Compensation expense$2,526 $599 $33 
For the year ended December 31, 2025, Parent Entities distributed $1.7 million related to Restricted Series C Interests, which the Company recorded as compensation expense. For the year ended December 31, 2024 the Company made a capital distribution of $0.4 million related to Restricted Series C Interests. There were no distributions for Restricted Series C Interests for the year ended December 31, 2023. As of December 31, 2025, the unrecognized compensation expense related to Restricted Series C Interests is approximately $1.6 million to be recognized over a remaining weighted-average term of 2.9 years.
2025 Omnibus Incentive Plan
The Omnibus Incentive Plan allows the Company to issue stock options, stock appreciation rights, RSUs, performance awards and other stock-based awards or cash awards to eligible employees, non-employee directors and consultants.
RSUs
RSUs represent the right to receive shares of the Company's Class A Common Stock upon vesting. RSUs are subject to a graded service-based vesting condition, vesting in three equal installments over three years subject generally to continued employment. RSUs granted to non-employee directors are subject to a service-based vesting condition, vesting at the earlier of one-year or the annual stockholders' meeting following the grant date, subject generally to continued service.
The following table summarizes the RSUs activity during the year ended December 31, 2025 (in thousands, except per share data):
RSUsWeighted-Average Grant Date Fair Value per Share
Outstanding as of December 31, 2024
— $— 
Granted688,880 28.00 
Vested— — 
Forfeited(2,678)— 
Outstanding as of December 31, 2025
686,202 $28.00 
As of December 31, 2025, unrecognized stock-based compensation expense related to the RSUs was $17.4 million, which is expected to be recognized over a weighted-average period of 2.7 years. For the year ended December 31, 2025, the Company recognized $0.8 million and $1.3 million of stock-based compensation expense related to RSUs in Cost of revenue and Selling, general and administrative, respectively, on the Consolidated Statements of Operations.
Stock Options
Stock options are an option to purchase the Company's Class A Common Stock upon vesting at an exercise price generally equal to the stock price on the date of grant. Unexercised stock options expire ten years after the grant date and, if vested, can be exercised prior to expiration, generally subject to continued employment. Stock options granted to employees are subject to a graded service-based vesting condition, vesting in three equal installments over three years subject generally to continued employment.
The following table summarizes stock option activity during the year ended December 31, 2025:
Stock OptionsWeighted-Average Grant Date Fair Value per ShareWeighted-Average Exercise Price per Share
Outstanding as of December 31, 2024
—$— $— 
Granted668,57016.46 28.00 
Vested—— — 
Forfeited—— — 
Outstanding as of December 31, 2025
668,57016.46 28.00 
Vested and exercisable as of December 31, 2025
—$— $— 
As of December 31, 2025, unrecognized stock-based compensation expense related to stock options was $9.9 million, which is expected to be recognized over a weighted-average period of 2.7 years. For the year ended December 31, 2025, the Company recognized $1.1 million of stock-based compensation expense related to stock options in Selling, general and administrative on the Consolidated Statements of Operations.
Weighted-average inputs used in the Black-Scholes option pricing model for options granted under the 2025 Omnibus Incentive Plan were as follows:
Stock price$28.00 
Expected term (in years)6.0
Expected volatility60.0%
Risk-free interest rate3.7%
Dividend yield—%