Good day and thank you for standing by. Welcome to the Q3 2026 Legions Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Son Vann, VP of Investor Relations. Please go ahead.

Thank you, Daniel, and good morning, everyone. Welcome to Legion's third quarter 2026 earnings call. With me today are Jeff Sprau, our Chief Executive Officer, Stephen Butz, Chief Financial Officer, and Steve Hansen, Chief Operating Officer. This morning, we issued a press release that covers our third quarter 2026 financial results and posted a slide presentation that accompanies the earnings release. All materials can be found on our investor relations section of the company's website, wearelegions.com. Before we begin, I want to remind you that comments made during this call contain certain forward-looking statements and are subject to the risks and uncertainties, including those identified in our risk factors contained in our SEC filings. Our actual results could differ materially and we undertake no obligations to update any such forward-looking statements. During this call, we will refer to certain non-GAAP financial measures which should not be considered in isolation from or as substitutes for measures prepared in accordance with generally accepted accounting principles. Please refer to our quarterly earnings presentation for reconciliations of these non-GAAP measures to the most comparable GAAP measures. With that, let me turn the call over to Jeff.

Thank you, Son, and thanks everyone for joining today to discuss our third quarter results and current outlook for Legions. Let me start by thanking our amazing employees for staying focused, working safely, and providing high quality service to our customers on a daily basis. Your commitment is the reason for our overall success and the driver of our strong financial performance in the latest quarter. This includes record quarterly revenues that grew 85% year-over-year, record backlog in awards that grew by over 90%, and record quarterly adjusted EBITDA that nearly doubled. And just under half of our growth was organic. Strong project execution and continued improvement in fixed cost leverage also contributed to record adjusted EBITDA margins which rose by 100 basis points from the prior year, all the more impressive as this result was delivered despite a mix shift toward I&M. To our external stakeholders and the investment community, let me start by saying that operating conditions and demand signals remain very strong, and we expect that strength to continue in the years ahead. We also expect solid growth in data center activity including in regions such as Northern Virginia where certain tighter regulatory conditions have actually been in place starting in early 2026. In fact, since acquiring Bowers at the beginning of the year, its backlog growth has been among the fastest across all of our businesses. Opportunities in the region extend several years out and that pipeline remains significant. While the DMV is a substantial region for us, We also serve data center clients nationwide, shipping fabricated products across multiple regions and supporting clients wherever they choose to build. Conversations with our data center customers post-election indicate a continuation of their plans to build. Now, beyond data centers, we expect the semiconductor and memory chip market to be quite robust going forward. Our other end markets, such as life science, Education and state and local government provides diversification and exposure to other target rich clients that have historically delivered solid growth. As a leading provider of services for mission critical building systems, we have both the expertise and customer relationships to serve a wide range of end markets and of course can shift resources to wherever the growth in the economy exists. All in all, we continue to have a positive outlook on the fundamentals of our business, underpinned by our backlog, pipeline of opportunities, and discussions with customers. This outlook is reflected in our guidance, which now extends through 2027 and plays a key role in our decision to authorize a stock buyback program that we announced earlier this morning. The buyback program provides the company with another tool to thoughtfully allocate capital in addition to acquisitions and internal capital investment options. On the topic of acquisitions, we recently completed a really nice tuck-in of a mechanical contractor in Austin, Texas. Several of our clients have asked us to work with them in this region, but to date, our capabilities have been largely limited to professional engineering services and a bit of fabrication. The company we acquired, Central Texas Industrial or CTI, provides a great launch pad for us to expand our physical labor presence in Central Texas. CTI adds highly skilled unionized craftspeople with particular expertise in process piping and has established itself as a key contractor for the semiconductor sector in the area. The pipeline of opportunity in the region from both our existing client base and CTI is really exciting. I want to welcome CTI to the Legion's team and look forward to growing in this market together. Turning to our internal capital investment plans, we continue to invest in our fabrication capabilities to support customer demand and improve productivity across our nationwide operations network. through advanced tooling and automation. We currently have approximately 1.6 million square feet of fabrication capacity and will continue to thoughtfully evaluate additional expansion opportunities. Any future expansions would continue to be driven by demand we see in our backlog and pipeline and through ongoing customer conversations. Fabrication is where the market is heading. whether customers are building data centers, semiconductor fabs, or large-scale manufacturing facilities. So with that, let me turn the call over to Stephen.

Thank you, Jeff, and good morning, everyone. I'll begin with a review of our third quarter 2026 results in comparison to the third quarter of 2025. Following my review of our historical results, I'll provide an update on our current guidance, discuss our balance sheet and liquidity position, and provide a bit more detail on the share buyback authorization and CTI acquisition before turning the call back to Jeff. In the third quarter of 2026, we generated revenue of $1 billion and $310 million, an increase of $603 million, or 85% from the year-ago quarter. The Bowers Group acquisition contributed approximately $323 million of revenue. Excluding Bowers, our revenue grew by 40% year-over-year. Looking at our latest quarterly revenue at the segment level, starting with installation and maintenance, segment revenue increased by 124% year-over-year to $1,110,000,000. Excluding the contribution from Bowers, organic revenue growth totaled 59%. The majority of the segment's growth was driven by strong demand for our installation and fabrication services, up 143% year-over-year, reflecting healthy organic growth and a meaningful contribution from Bowers. Data center and technology remained the primary driver of organic growth. Maintenance and service revenue increased by nearly 36% year-over-year, primarily driven by the contribution from Bowers. as well as growth in the education and market and manufacturing clients within other. Excluding Bowers, the service line delivered organic growth of approximately 11%. Turning to engineering and consulting, segment revenue decreased by 6% to $200 million. Most of the decrease came from our program and project management service line, which declined by approximately $10 million year over year. Last year included work on several large projects for NBC Studios that generated revenue of approximately $15 million during the third quarter of 2025. Those projects were largely completed early this year and nothing similar was replicated. We're optimistic about program and project management revenue growth in 2027 based on our backlog and awards for the service line, which have grown by 19% since the beginning of the year. This includes several large projects in the education market, and work schedules for these projects are expected to commence in early 2027. The fourth quarter is also typically a seasonally lower quarter for this service line. Engineering and design service line revenue saw a modest decline of 1.6% to $109 million, primarily due to softer demand from education clients. largely offset by increased activity in data centers and technology and manufacturing. We expect technology and manufacturing to provide greater contributions to growth in engineering and design services going forward. Turning to gross profit, consolidated gross profit for the third quarter of 2026 increased by 86% year-over-year to approximately $275 million. Similar to prior quarters, reported gross profit includes stock base and other compensation expense related to legacy profit interest units. However, unlike prior quarters, the legacy profit interest that flows through gross profit was a net benefit of $8.9 million in the third quarter of 2026 compared to an expense of $3.8 million in the year-ago quarter. The benefit was due to the decline in Legion's stock price during the third quarter of this year, which reduced the mark-to-market liability of the settlement of these units. As a reminder, though, the settlement of legacy profit interest units is entirely borne by entities outside of Legion's Corp., namely our legacy pre-IPO shareholders, and therefore does not result in the issuance of additional common shares or a cash outlay by Legion's Corp. Excluding the impact of the profit interest, adjusted gross profit on a consolidated basis was approximately $267 million, with adjusted gross margin of 20.3% for the third quarter of 2026 compared with approximately $152 million and 21.5% in the prior year quarter. The decrease in adjusted gross margin was primarily driven by a shift in revenue mix to our installation and maintenance segment, reflecting the addition of bowers and the segment's higher rate of growth. More importantly, looking at margins at the segment level, the installation and maintenance segment delivered an adjusted gross margin of 18%, up from 16.6% in the prior year quarter. The improvement was driven by higher project margins in our installation and fabrication service line, driven in part by a continued mix shift towards fabrication, strong project execution, and greater economies of scale and segment support costs. This was partially offset by a revenue mix shift toward the installation and fabrication service line and lower project margins in maintenance and services. Engineering and Consulting adjusted gross margin was 33.3% in the third quarter of 2026, up modestly from 32.8% in the prior year quarter. The improvement primarily reflected higher project margins in our program and project management service line, as well as a favorable revenue mix shift toward engineering and design, which represented approximately 55% of segment revenue compared to 52% in the prior year quarter. Now turning to SG&A. Reported SG&A expense in the third quarter of 2026 of $71 million includes a net benefit from stock-based compensation of approximately $28 million. Stock-based compensation was a benefit rather than an expense because it included legacy profit interest which provided a gain of approximately $33 million. In comparison, reported SG&A expense for the year-ago quarter of $86 million included $15 million of stock-based compensation expense, almost entirely related to the legacy profit interest. Excluding the impact of stock-based compensation expense, as well as acquisition-related expenses and other strategic initiatives, Our adjusted SG&A expense was $98 million compared with $66 million in the prior year quarter. The increase was largely driven by the addition of Bowers, higher headcount to support continued growth across the business, and public company related costs. Importantly though, adjusted SG&A as a percent of revenue improved to 7.5% down from 9.3% in the prior year quarter. reflecting greater economies of scale as we continued to grow. All in all, we generated adjusted EBITDA of $177 million in the third quarter of 2026, an increase of just under 100% year-over-year. Adjusted EBITDA margin for the third quarter of 2026 improved to 13.5% or by approximately 100 basis points when compared to the year-ago quarter. We also believe this sequential comparison is particularly relevant given that our second quarter of 2026 results included Bowers. On that basis, adjusted EBITDA margin improved by approximately 130 basis points sequentially. Depreciation and amortization totaled $44 million in the third quarter of 2026, up from $27 million in the prior year quarter. with the increase largely due to incremental depreciation and amortization associated with the Bowers acquisition. Interest expense net of income was 14 million for the third quarter of 2026, a decrease of nearly 13 million from a year ago, primarily due to a lower average debt balance and lower average interest rates. Turning to income tax, we recorded income tax expense of 20 million in the third quarter of 2026. On a reported basis, The effective tax rate for the quarter was approximately 13%, which is below the U.S. federal statutory and state rates, primarily due to non-taxable income related to the gain from legacy profit interests, as well as income from pass-through businesses not subject to income tax at the corporate level. Excluding the impact of these items to Allegiance Corp., the normalized ETR would be closer to the high 20 to low 30% range, which we would expect to gravitate towards over time. Regarding cash taxes, our current estimate is around 50 million of total cash tax for 2026, of which we expect to pay 16 to 18 million during the fourth quarter. Aside from our cash tax payments, we expect to make a TRA payment of approximately 8 to 9 million in the first quarter of 2027. related to our 2025 operating activity. Our TRA payment related to estimated 2026 activity is expected to total $25 million to the low $30 million range with the payment expected to occur in early 2028. This TRA payment estimates are essentially unchanged from our prior guidance. As a reminder, To the extent we have additional share exchanges, our cash tax payments would be reduced, while our TRA payments would increase by 85% of those cash tax savings. As a result, Legions would retain 15% of the cash tax savings, reducing our net cash outflow. Now switching gears to backlogs. We ended September with consolidated backlog and awards of $5.9 billion, up 92% from year-ago levels. compared with the second quarter of 2026, backlog and awards increased by approximately 4% or $229 million, translating to a third quarter book-to-bill ratio of 1.2 times. On an LTM basis, our book-to-bill ratio was 1.3 times. In either case, solid ratios, particularly when viewed against our strong 2026 quarterly revenue realizations. In terms of our recent organic growth in backlog and awards, the data center and technology end market has been the primary driver for the installation and maintenance segment, along with education. Our engineering and consulting segment experienced solid backlog and awards growth, which to reiterate an earlier comment, is the reason why we expect revenue growth to improve for this segment in 2027. We have experienced engineering backlog and award growth from almost all our reported end markets, except for mixed use. Now to our guidance. We are establishing fourth quarter 2026 guidance for consolidated revenue of between $1.26 and $1.3 billion and adjusted EBITDA of between $160 and $170 million. For full year 2027, we are establishing our revenue guidance range of 5.3 to 5.6 billion. We are also introducing our full year 2027 EBITDA guidance range of 690 to 730 million. Our guidance for the fourth quarter and 2027 reflects our growing backlog in awards, current expectation on project timing, and our ability to maintain a certain level of strong execution that we've been able to achieve in recent quarters. Now, just a few additional housekeeping items to support your forecasting efforts. Interest expense net of interest income for the fourth quarter of the year is expected to approximate $15 million. Depreciation and amortization for the fourth quarter is expected to come in at similar to third quarter levels of $44 million. In terms of CapEx for the fourth quarter of 2026, we expect to spend in the low $30 million range. Fourth quarter CapEx will largely be for advanced tooling and other growth-related investments. At this stage for 2027, we currently expect capital spending to be in the low $90 million range, or less than 2% of revenue. Outside of CapEx, We expect to make our $50 million deferred payment related to the Bowers acquisition in the form of cash at the end of this year. Payment for the CTI acquisition also resulted in a cash payment of approximately $90 million and the issuance of approximately 260,000 shares for a total purchase price of approximately $100 million. Now to our balance sheet liquidity and leverage. We ended the third quarter with $341 million of cash, up from $292 million at the end of the second quarter. Total liquidity was $510 million at quarter end, compared with $461 million at the end of the second quarter. Total debt at the end of September was slightly over $1 billion, relatively unchanged from the end of the second quarter. Based on pro forma last 12 months EBITDA, which would include pro forma EBITDA for Bowers during the fourth quarter of 2025. Our pro forma net leverage ratio is now down to 1.2 times, approximately half the level we were at this time last year. Finally, I'd like to spend a moment on capital allocation. Our priorities have remained consistent since going public, maintaining a strong balance sheet, reinvesting in the business, in pursuing strategic acquisitions that strengthen our capabilities and expand our addressable markets and wallet share with our clients. Over the past year, we've made meaningful progress against these priorities. This includes a significant reduction in leverage that I just mentioned, which helped to drive our three notches of credit rating upgrades over the past year, all while completing our largest acquisition ever in Bowers, along with three tuck-in acquisitions, and continuing to reinvest in our business, including expanding our fabrication capacity that's been a major contributor to our growth. As legions has grown and our cash flow has increased, our board determined that it was appropriate to add another tool to our capital allocation toolkit by authorizing a share repurchase program. The program provides us with greater flexibility in how we allocate capital, enabling us to opportunistically repurchase shares when we believe doing so represents an attractive use of capital relative to other opportunities. This doesn't change our commitment to a strong balance sheet, nor does it signal a shift in our intention to continue to acquire attractive businesses. In fact, the Board's decision to authorize the buyback program coincides with our acquisition of CTI. Moving forward, we will remain disciplined in our capital deployment approach weighing our options between acquisitions, organic capex, debt reduction, and share repurchases with the objective of deploying capital where we believe it will generate the most long-term value for our shareholders. And with that, I'll turn the call back to Jeff.

Thanks, Stephen. Before we open the call for questions, I just want to reiterate our positive outlook for the business and recognize our amazing people across Legion's for their contribution. Our strong operational performance is made possible only through your commitment to delivering exceptional services for our customers. And with that, we'll now open the call up to questions. Operator?

As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. In the interest of time, we ask that you please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. Our first question comes from Adam Bubes with Goldman Sachs. Your line is open.

Hi, good morning.

Good morning, Adam. Hey, Adam.

Hey. Following the midterm results and potential for increased state-level moratoriums, can you just talk about what you're hearing from data center customers, whether you're seeing any change in behavior across the pipeline, and do you expect any impact on near-term bookings or timing of revenue burn?

Yeah, thanks Adam. I'll start and then I'll hand it over to Steve. The short answer is no. We're seeing no change in terms of demand signals or conversations. or request for proposals or shipment schedules or deployments or anything like that. And so we've continued, in fact, it's probably grown since the last several months. And Steve, you're closer to the recent dialogue.

Yeah, you're absolutely right, Jeff. Excuse me. You know, we've had conversations with our customer and client base over the last few days, and their indications are that they see no change to their forecast. some regulations put in place isn't always a bad thing, keeps the competition levels the same, and it will allow them to continue to build and push forward. So right now our outlook is still positive in that market.

And then in Virginia specifically, even prior to the midterms, there was a pause in Loudoun County. Is there a way to frame what percent of your data center revenue comes from Virginia and your view of the trajectory of backlog in that and can you just discuss your ability to pivot craft labor to other geographies?

Yeah, you know, we've got a substantial amount of work there, about 40% in that area, and we have not seen any of the projects that we're doing there pause or delay in any way. And outlook is still strong in that market. And we do, we can very easily shift to, you know, adjacent regions, markets around that county if it does start to shift, but we still are very positive on Loudoun County.

Yeah, I think that's a good example of it's really a local decision.

And, you know, we see demand growth in the Richmond area.

And so our ability to serve that demand is very easy given our adjacency in Northern Virginia.

Yeah, and I'd just add on, piling on here, you know, while we do have quite a bit of activity in Loudoun County, Prince William County, Fairfax County, Culpeper County. Those also represent nice size markets for us in the data center market as well.

I appreciate all the detail. Thanks so much.

Thank you. Our next question comes from Sabahat Khan with RBC Capital Markets. Your line is open.

Great, thanks and good morning. I guess one of the sort of the things that's evolved in the business is a mix between the engineering side and the installation and maintenance and the more hands-on stuff. Maybe just take into account sort of the margin considerations across the two silos. Do you have sort of an ideal mix? Is it sort of like there's more demand in the sort of the construction installation side you're pursuing? Maybe just walk us through, you know, with Bowers now in the mix, how you view that mix and how that could evolve over time. Thanks.

Yeah, I wouldn't say we have an ideal mix. I mean, certainly the activity, as you've seen over the past year, has been extremely strong on the I&M side, where traditionally our business units have had really strong position in mission-critical facilities, data centers, technology, life science, where our E&C side has been a little bit more levered toward mush markets. municipalities, healthcare. Now, that said, while data center and technology has been a much smaller portion of our ENC segment, it is growing nicely. It's just off of a much smaller base. So it is an increasing focus for us as we're also getting more

Business on the education side and the I&M business just with the cross-pollination across across the company for sure and I really love the early customer engagement that comes with the ENC business and I also really love the design build capabilities that we can deliver to clients and most recently we were awarded a very large contract with the University of California system to do a campus-wide electrification and and the only way we won that is because we had the upfront plan and the upfront design and the ability to implement the changes. And that is unique in our capabilities as compared to other companies that could only provide part of the solution. And so in sort of piggybacking on Stephen's comment, I'm less concerned about what the size of the pie is, I'm more concerned about are we serving our customers in a most comprehensive way.

Great, and then just for my follow-up, the guidance for 27, when we look at sort of where the margins are expected to shake out this year, can you walk through the margins? Is this based on the margin that's embedded in the guide, some underlying margin improvement issues? Just walk us through the bigger buckets on the margin improvement puts and takes for the 27 guide, thank you.

Sure, yeah, I think in this quarter, again, we had exceptional project execution. which we don't model that level of execution in going forward. But we do model in the mix shifts that we've seen, and again, the really strong performance that we've had all year. And so you see that reflected in the higher overall year-over-year margins. So that would reflect the mix shifts we've seen toward a higher level of fabrication, as well as the overall I&M taking a bigger piece of the pie.

Yeah, and we continue to drive performance in the field to make sure everywhere we can we're affecting margin and driving performance. And to Stephen's point, that mix of fabrication helps keep that segment strong.

Thank you. Our next question comes from Julian DeMoulin-Smith with Jefferies. Your line is open.

Hey, good morning team. Thank you guys very much for the opportunity and time. Nicely done.

Thank you.

Hey, good morning. Look, maybe just to kick it off here, can you talk a little bit about the 27 guidance in light of where you stand on backlog and awarded orders and as much as obviously one seems to trend better than the other, just maybe some of the discrepancies, the duration of the backlog, any dynamics. I mean, clearly you guys have a track record here vis-a-vis guidance, but just wanted to ask explicitly as to a little bit of the bifurcation between the two.

Yeah, thanks, Julian. That's a great question. You know, as our project sizes, our average project sizes have increased over the last year. There is a bit of elongation, you know, on that backlog. Also a little bit longer lead time on some of our E&C backlog as well in terms of when those jobs are starting. So we, you know, we forecast out these larger individual projects and that's what goes into for a little bit lower revenue growth than we've seen in the backlog and awards. But we'll, of course, have some of that backlog burning well into 2028 and even some into 2029.

Yeah, absolutely. Excellent. And then maybe just a quick follow-up here. In as much as you delineated here on the call a tuck-in in Texas and then talk about really using that as a platform to grow in the state, You talk about fabrication, and then now at the end of the transcript, you talk about buyback. Can you talk a little bit about prioritization between those? Obviously, we've seen gyrations in the shares, and I'm cognizant of perhaps the decision to introduce the buyback opportunistically here, but just how should we read that? Because certainly, it seems like you've got three very clear potential avenues that you're articulating on the call.

Yeah, look, I think we've got a lot of good options in front of us. Of course, acquisitions by their nature are a bit opportunistic, right? We can't force anyone to sell, and we can't force the multiple that they want to sell at. And so it gives us another avenue if the right acquisitions aren't there. Certainly, we like the benefits of adding scale to the business and the operational leverage that that can provide, so all else equal. you know, we'd expect to continue to allocate capital toward acquisitions, but if the math doesn't work, it gives us another tool where we can look at our own stock.

Yeah, and specifically, Julian, with respect to CTI, you know, we've wanted to expand our presence in Texas for quite some time. And certainly data centers get all the press, but there's a tremendous market in terms of semiconductor. There's a tremendous healthcare market and education market due to the fact that that's a population growth area. So we've always wanted to have a bigger footprint. And to date, we've been serving it through fabrication and through our adjacent business in New Mexico. and so we always sort of had our eyes out to to find a company that you know checks the boxes for us and those boxes would be obviously has to be a culture fit and they have to be a safe company but they have to have design build capabilities and skew towards those higher-end projects and capabilities such as process piping and CTI certainly check those boxes and it gives us a great labor force and Steve can

Yeah, Jeff, you're 100% right. We're really excited about entering into that market, continuing to diversify our end market and customer base and the process piping capabilities that come there and just the overall capacity for growth in that market. We're excited to be there and it's a great addition.

Awesome, guys. Nicely done. Talk soon.

Thanks, Julian.

Thank you. Our next question comes from Sharif El Sabahi with Bank of America. Your line is open.

Hi, good morning. Good morning. I just wanted to speak to maybe some of the out years. As you said, you have coverage on backlog for 27 and some burning off in 2028 and 2029. What conversations are you having with customers or what visibility do you have into that 2028 or 2029 timeframe?

yeah we're constantly in communication with our clients and planning for you know not only just capital allocation for our growth but what they're doing helping them with capital planning looking at estimates for projects outwards and you know Jeff mentioned earlier our pipeline is still really strong in our ears and we're not seeing a slowdown for on any of those inbound requests so we feel really good about continuing our growth in not only the data center market, precision manufacturing, a lot of the onshoring work that's being planned right now that will take place during that time.

And there's obviously been this huge cycle for new build, particularly in data center. But as we think about mechanical and some of these other components, that has a shorter useful life than high voltage components, for example. So with all this new build work, how do you see that transforming into a refurbishment or replacement cycle in the coming years, maybe as that new build cycle rolls off?

Yeah, existing facility mix has changed for us from new build or from existing to new with the data center boom. But you hit it right on the head. These buildings, they run 24-7. Mechanical equipment breaks down, gets old. and we have a big focus on staying in contact with our clients long going and looking at those refurbishment opportunities and we're doing them today. You know, data centers for example. We've been building data centers since the late 90s and we are refurbishing them today in many of our markets.

Yeah, and that cycle of helping with the design, getting the installation, then getting a preventative maintenance contract, then getting the The break-fix work and being a constant presence, you are in the best position. The incumbency advantage is huge. You're in the best position to get that next piece of work when it's a new wing of a hospital or a new expansion of a school district because you have the relationship and, more importantly, you have the technical capabilities and the knowledge of those facilities. You're in the best position to win. and then it sort of starts over. So we see that the recipe for success, so to speak, continuing.

Thank you. Thank you. Our next question comes from Michael Dudas with Vertical Research Partners. Your line is open.

Good morning, gentlemen. Good morning. Jeff, maybe you can elaborate. You highlighted very positively the fabrication mix in your business. Refresh Hassan, you mentioned your square footage. Are the increasing amount of the new work for third party and for your own clients leaning fabrication? What's your capacity there? And when you think about expanding, is it around the margins? Are you looking for opportunities to serve maybe that 29, 28, 29, 30 opportunity in business given that seems to be a very strong trend within the construction industry.

No, you nailed it. And I'll start, and Steve can talk a little bit about our planning, which is now becoming real-time. It used to be a once-a-year activity. You decide how much fab you need, and now it's a real-time activity. Certainly, like I said in my prepared remarks, prefabrication is here to stay. Modular construction is here to stay given labor shortages and just the fact that it's a better solution. It's safer. It's more economical, it's more predictable, more sustainable. And what we've seen when we look at square footage, we need it for two reasons. One of which, our business just in general is growing. And so the more prefab work you can do for your existing business, the better. Secondarily, the third party sales, which you referenced, continues to grow. And as facilities get bigger, especially if they're semiconductor fabs or data centers or advanced manufacturing, Those modules, so to speak, are repeatable. And so you might be shipping 100, 200 of a given assembly, which again just calls out for doing it A, in the shop, and B, having automation, such as as fancy laser cutting devices and robotic welders and that sort of thing. And buildings, like Stephen said, are getting bigger. Our jobs are getting bigger. So all those sort of factors are sort of converging on more and more of our mix, our deliverables, rather, being done in a factory versus on-site or stick-built, which is what the industry calls it. 1.6 million is where we are today. It's not where we're going to be, my guess, in the future. And Steve can talk to sort of our planning process.

Yeah, so we're currently actively looking at, you know, inbounds conversations with our clients, backlog that, you know, to Stephen's point, that goes out into 28 and 29 for some of this off-site manufacturing. And we are and will be expanding our footprint. We'll have more details in and months to follow on what that square footage looks like. But along with the square footage and Jeff hit on it, automation and technology staying ahead of that curve in order to get the most we can out of all of our facilities is a big focus for us as well. So latest in automation and whether it's robotic welding, co-robotic welding, laser cutters, all the things that we're investing in today will just help us continue to grow and be able to say yes to our clients when they have large projects.

Excellent.

Thank you, guys. Thank you.

Thank you. Our next question comes from Chad Dillard with Bernstein. Your line is open.

Hey, good morning, guys. Good morning. So a question for you on the order book.

Maybe if you can narrow it down into the data center portion.

So can you talk about just your mix of customers between Hyperscaler versus Colo versus Neocloud Developer? And if you can, how much of the business is in Texas?

Yeah, I'll start. In terms of our mix between Hyperscaler and Neocloud, Colo Developer. That's a little hard to suss out because many of the developers are building for the hyperscalers. The one thing I could definitively say is we don't have a lot of neocloud. We have a little bit. I'm sure probably single digit percent of our data center demand is neocloud. The rest would be primarily a little bit of enterprise, but primarily hyperscalers slash developers. And I don't know, Steve or Steven, if you can

Yeah, I mean, I think if you look across the world of data centers, we touch pretty much every name that you could put in that box. And Jeff hit it, right? The developers build for the hyperscalers, and we do both direct for each. So narrowing it down to percentages is a little tough for us. On the Texas market, less than 10% of our data center work is currently in Texas. and again, it's why we are excited to be able to plant that flag in Austin and to continue to grow from our Albuquerque location over into West Texas as well and take advantage of that market.

Great, that's super helpful. Maybe just sticking with orders, during SPREQ, can you just talk about the order momentum or trends by end market? and just any thoughts on just, you know, forward order expectations as we think about, you know, third quarter, fourth quarter and beyond.

Yeah, in terms of the orders by end market, as we mentioned, you know, our revenue for the education end market has been one of the softer ones, but we did have some nice wins, particularly in the program and project management side, as well as I&M. Of course, data center and technology, we've been talking about most of this call, but that's extremely robust. Life Science and Healthcare. Our revenue realization was up versus where we were a year ago, but I think the backlog build's not as strong. We've got some large projects, hospital projects that we've been working through and haven't replaced those yet. Those are some of the big things that come to mind.

Yeah, no, Steve, you nailed it. On Healthcare and Life Science, those Large hospital jobs come in. They take some time to roll through. We have some healthy backlog in out years on some hospital work that we're working through now in design and development. And we continue to see inbounds in the life science arena that has been soft since COVID still, but we are seeing more and more pipeline inbound for looking at build outs and whatnot, which is a great signal for us in quarters to come.

Thanks, guys.

Thank you.

Thank you. Our next question comes from Craig Irwin with Roth Capital Partners. Your line is open.

Good morning, guys. First, congratulations on another beat and raise quarter here. Jeff, you seem particularly excited about the semiconductor market. You're usually pretty tempered in the way you phrase things, and you've been clear this is a priority for you. So when I look at the acquisition of CTI, I see this as particularly interesting timing. I know they do have experience in the semiconductor market, but can you maybe flesh out for everybody on the call the diligence you've done, how long you've worked with them, what their experience is in the semiconductor market. And many of us are assuming that you have substantial work in Grimes, Texas, This past week, they were very clear, or at least the suppliers from Japan were clear. A million wafers a month means it is a $300 billion CapEx by 2032. Just interesting timing here, and I know this is not the only mega fab you're working in. So any color here.

Thanks. Yeah, thanks, Craig. And I'll start and again hand it over to Steve on some specifics. You know, it's interesting. We grew up in the semiconductor space. If I go to our very initial business in San Jose, grew up in semiconductors. And so I've always had a soft spot in my heart for semiconductors. And as that trend of reshoring and just the need for chips, be it memory or otherwise, really flows exactly into our our wheelhouse and our relationships that really started in Silicon Valley now have traveled across the country whether it's in Idaho or upstate New York or this great state of Texas. And so whenever we come across somebody that has those technical chops and the relationships, you got to have both, that sort of jumps right to the top of the list and I think we see that in CCI.

yeah absolutely and and that team down there will help us build that that base of work and Jeff hit it you know our original business in the Bay Area grew up in the heart of Silicon Valley we've had some really strong recent wins there in in that market where we're seeing our existing client base that we're you know we're in their facilities and Jeff hit on earlier we we live in these facilities doing maintenance and and project work for them day in and day out and have been able to negotiate some new fab work that'll be happening there and in other markets that we're excited to be moving into including Texas and CTI will be a big part of that.

Understood, thank you.

The second question I want... Hey Craig, I think your line is coming out.

Hi, yes. Sometimes it's best to talk about the elephant in the room, right? One way to move it off to the side. And your stock is trading at a multiple where there's clearly some skepticism about the backlog. You've had several quarters of beat and raise, nothing but impressive performance. At least a few hundred million dollars in free cash to use next year for deleverage or buybacks or are acquisitions, and questions that none of us really have crystal clear answers to around data center and what actually gets completed in the long run. So you have diligence. Your customers, you will know them far better than we ever will. But my question really is, if we take the skeptical view and we step back, you have tremendous capacity that you've developed to serve this customer base that is entirely applicable to other markets. Can you really talk about the fungibility of your fabrication capacity in other markets? So one of your primary competitors, their business in fab around HVAC for rooftop units, right? So you've built it from coming in from the very high end, from clean rooms, this seems like it would be more applicable into some of the life sciences opportunities and the new pharma opportunities. If you could maybe unpack for us that if you had to move 10 or 20% of your business in the next two years, how applicable is this resource base to actually serve that?

Yeah, that's a great multifaceted question. I think for starters, if I look at our business mix, We've always wanted to be flexible and opportunistic, and we didn't want to focus on one market at the exclusion of the other. We always wanted this to be an and, not or. We didn't want to have to decide between markets. We wanted to say yes to everything and just respond to those markets that were hot. Data centers is a perfect example. We didn't say no to healthcare. We didn't say no to education. We didn't say no to aviation. In fact, all of those markets have been growing as well. It's just overshadowed. And so I think fungibility is a great word because it certainly applies to our fabrication. It also applies to our people. It applies to our technicians and our tradesmen and women and our engineers and our planners. And the reason it's fungible is we're starting at the high end of the market. And so we're in these very complicated, to your point, clean rooms and surgical suites and R&D facilities where you have to know what you're doing. And if you need to go to downmarket opportunities, so to speak, you can do that versus the other way around. Certainly our ability to have a variable workforce and sort of right-size our field labor force based on our backlog, the fact that we're a union-based field labor force gives us tremendous flexibility. And we can have somebody that works on a semiconductor facility today be in a surgical suite tomorrow because it's the same sort of technical chops you need to be able to deliver. And I think, and you hit on it, and Steve has mentioned it, I think people are realizing that prefabrication is the way to go. And it's the way to go. It's better, and it's a better use of scarce labor. And we, in fact, if you would go to our facilities, you would see... a life science skid, industrial skid being built, and then you'd see a hospital skid being built right alongside it.

Yeah, Jeff's hit it, and just I'll pile on there a little bit. We talk a lot about data center, off-site manufacturing, everything, but we are way more diverse than that in what we do, and from semiconductor to You know, pharma to quantum computing. We've got clients that we do a little bit of everything for from that prefabrication lens. And your question was right on. We can lift and shift those resources to what is where the market is going. It's historically what we've always done. When there's a rise or a fall in any given end market, we can easily shift resources.

Yeah, and just to final, we sort of can control the controllables, right? And we can't control the narrative or sentiment or stock price for that matter. What we can control is taking care of our customers. We can control being safe and delivering and developing our employees and making sure we're doing a nice job and play the long game. And so that's what we do every single day, and that's what we'll continue to do.

Great. Well, congrats again on another really strong quarter.

Thanks, Craig.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone. Again, please press star 11 to ask a question. Our next question comes from Derek Soderberg with Cantor Fitzgerald. Your line is open.

Yeah, hey guys, just one quick one for me. Wondering if you can touch on how your capital allocation priorities are sort of evolving across in new capacity expansion opportunities, M&A, reducing debt, and then now with the buyback. I just want to get your high-level view on sort of the order of priorities as we head into 2027 here. Thanks.

Sure. Just to reiterate, like, we do intend to continue to maintain a strong balance sheet. That said, I think we've been able to grow into the debt and not have to use the cash to pay down debt. Our balance sheet has strengthened just because of the cash flow we're generating, growth in the EBITDA. So I don't necessarily see us repayment of debt being a priority. in this market, but we intend to still maintain attractive levels of debt to EBITDA. Then you shift to the other categories, as I mentioned. We certainly see significant benefits of scale, right? And that also accrues to better credit quality as well. Scale is an important credit metric. And you can accomplish that through acquisitions if you find the the right opportunities that will be accretive to shareholder value, as well as internal expansion. And so those are just going to depend on a case-by-case basis. We've done some meaningful expansion of FAB capacity this year. We're continuing to look at opportunities to expand FAB further, likely look for some of that to continue to be underwritten by orders, so that'll be a balance. But those are going to remain significant priorities. And then, of course, we have the opportunity now to also retire shares at attractive valuation as well. So that's sort of how we're thinking about these priorities.

Thank you. Our next question comes from Chris Sung with Wolf Research. Your line is open.

Hey, good morning, guys. I just wanted to ask, when you look at your initial 27 guidebook, what assumptions do you have least visibility into today, and where do you think is the greatest room for us in this exchange? I guess more particularly, how does it compare to the visibility you guys had entering 26?

Visibility in 27 as compared to visibility in prior years?

Oh, yeah. It's actually quite similar to where we were last year at this time. Now, that said, this year and last year are a bit higher than we were historically. So a little bit better visibility, a little bit more of the revenue covered by backlog going into next year than we had historically, though pretty similar levels to where we were last year.

Okay, thanks. And for my follow-up, with CTI, how does that labor model compare to the rest of the legions? And as you expand in Texas, do you expect to leverage more of your existing union workforce or build out a more localized one?

Yeah, that's a good question. We'll continue to build out a local labor force there. We want to be boots on the ground in the markets we're in. We do have capacity and capability to pick up labor and move it around the country where we need to. But our goal is always to build a labor force in that geo where we acquire a business. So we will work closely with CTI, the local unions and teams down there to help grow that business much like we've done all the others that we've acquired.

Thank you. This concludes the question and answer session. I would now like to turn it back to Son Vann for closing remarks.

Thank you everyone for attending our third quarter 26 earnings call. A recording of this call will be available on our website in a few hours and we'll look forward to talking to you again next quarter. Good afternoon.

This concludes today's conference call. Thank you for participating. You may now disconnect.