Legence Corp. 10-Q

Item 4. Controls and Procedures Evaluation of Disclosure Control and Procedures In accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") , management has evaluated, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2025. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Commission. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of September 30, 2025 at the reasonable assurance level due to the material weakness in our internal control over financial reporting described below. However, after giving full consideration to such material weakness, and the additional analyses and other procedures that we performed to ensure that our condensed consolidated financial statements included in this Quarterly Report were prepared in accordance with U.S. GAAP, our management has concluded that our consolidated financial statements present fairly, in all material respects, our financial position, results of operations and cash flows for the periods disclosed in conformity with U.S. GAAP. In connection with the audit of our financial statements for the year ended December 31, 2024, we and our independent registered public accounting firm, identified certain control deficiencies in the design and implementation of our internal control over financial reporting that in aggregate constituted a material weakness. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. We did not design and implement effective general information technology controls (“GITCs”), for multiple business units’ information systems that are relevant to the preparation of the consolidated financial statements. Specifically, we did not design and implement sufficient user access controls to ensure appropriate segregation of duties and adequately restrict user and privileged access to financial information systems to appropriate Company personnel. As a result, it is possible that the Company’s business process controls that are dependent on the ineffective GITCs, or that rely on data produced from systems, could be adversely affected. Further, we identified inappropriate segregation of duties within multiple systems to address the risk of management override over the preparation and review of manual journals, without sufficient detective controls designed to fully mitigate these risks. Our management is in the process of developing and implementing a remediation plan. The material weakness will be considered remediated when our management designs and implements effective controls that operate for a sufficient period of time and management has concluded, through testing, that these controls are effective. Our management will monitor the effectiveness of its remediation plans and will make changes management determines to be appropriate. We have not incurred any material costs to date and do not expect to incur any material costs in connection with the remediation of the material weakness in the future. We cannot assure you that the measures that we have taken, and that will be taken, to remediate this material weakness will remedy the material weakness or will be sufficient to prevent future material weaknesses from occurring. We also cannot assure you that we have identified all of our existing material weaknesses. 60 If we are unable to remediate our existing material weakness or identify additional material weaknesses and are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner or attest, starting with the filing of our annual report for the year ended December 31, 2026, that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, starting with the filing our annual report for the year ended December 31, 2026, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A Common Stock could be negatively affected, and we could become subject to investigations by the Nasdaq, the Commission or other regulatory authorities, which could require additional financial and management resources. Changes in Internal Control over Financial Reporting Except for the remediation efforts related to the identification of the material weakness described above, there was no change in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) during the three months ended September 30, 2025 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. PART II. OTHER INFORMATION