Commitments and Contingencies
Legal Proceedings
The Company is involved in various claims and legal proceedings incidental to its normal business activities. When a potential loss from a proceeding or claim is considered probable and the amount can be reasonably estimated or a range of loss can be determined, a loss contingency is recorded. The Company also provides disclosure when it is reasonably possible that a material loss will be incurred. Although the outcome of such claims and proceedings cannot be predicted with certainty, the Company vigorously defends its position in all such matters. During the year ended December 31, 2023, the Company reached a $3.1 million settlement agreement, inclusive of administrative, legal and other fees, for a class action suit related to certain employee matters. Upon court approval and other required administration activities, the settlement payment was made in March 2024. The Company is not aware of any known contingencies, claims or lawsuits that will have a material effect on its financial position, results of operations or cash flows other than those described herein.
Insurance
The Company carries various insurance policies to address identified risks of loss including cyber, general liability, worker’s compensation, automobile liability and professional liability risks. A liability for known and expected but not yet reported claims of $2.6 million, as of both December 31, 2025 and 2024, is reflected in Accrued and other current liabilities in the Consolidated Balance Sheets. The determination of such claims and expenses and the appropriateness of the related liability is continually reviewed and updated by management.
The Company is self-insured for its medical coverage. The Company is responsible for the first $0.3 million of claims for each participant enrolled in the medical coverage plan. Any claims exceeding $0.3 million are covered through a stop-loss insurance plan. A liability for expected but not yet reported claims in the amount of $3.2 million and $1.3 million is reflected in Accrued compensation and benefits in the Consolidated Balance Sheets as of December 31, 2025 and 2024, respectively.
Surety
As a requirement under certain contracts, various Legence subsidiaries procure performance and payment bonds through surety underwriters. As a condition for having surety companies write bonds on Legence subsidiary’s behalf, Legence enters into indemnification agreements with the surety companies. Total outstanding bonds were approximately $561.5 million and $384.2 million as of December 31, 2025 and 2024, respectively.
Customer Guarantees
As part of its normal course of business, the Company offers guaranteed energy savings to customers under certain contracts. As of December 31, 2025 and 2024, total guarantees were $307.4 million and $308.2 million, respectively.
Historically, the Company has not incurred material losses in connection with these guarantees. Further, management is not aware of any changes in the ability of the Company to meet these guarantees and does not expect to incur significant losses related to these guarantees in the foreseeable future.
Letters of Credit
As discussed in “Note 9—Debt,” the standby letters of credit are secured through the revolving line of credit. As of December 31, 2025 and 2024, Legence Holdings had $5.7 million and $5.2 million, respectively, in standby letters of credit primarily related to the deductibles of insurance policies.