Cardinal Infrastructure (CDNL) reported 65% year-over-year revenue growth in the third quarter, but adjusted EBITDA fell to $8.5 million from roughly $27 million to $28 million in each of the first two quarters. With margins under pressure, the company withdrew its full-year guidance and paused work on its planned $357 million acquisition of Hughes Brothers Construction. Investors are now focused on cash reserves, execution at troubled projects and the company's ability to restore profitability.
Revenue grows, but margins contract sharply
Third-quarter sales were nearly $202 million, up 65% from a year earlier but down slightly from $227 million in the second quarter. Growth also slowed from earlier in the year: revenue increased 105% year over year to $167 million in the first quarter and 114% in the second.
Adjusted EBITDA was $8.5 million, or 4.2% of revenue, compared with about $28 million in the second quarter and $27 million in the first. Cardinal attributed the margin pressure to project estimate adjustments, pricing pressure in residential markets, low margins on initial bids, and higher fuel and transportation costs. Project adjustments reduced margins by about 6.5 percentage points, residential pricing pressure by 3.6 points, and fuel and transportation costs by 3.5 points.
The company posted a GAAP net loss of $11 million for the quarter. Management has brought in a third-party adviser to support operational changes. The controller is leaving, while an experienced chief operating officer will take a more active role. Cardinal said the work will focus on project selection, execution and accountability. Problem projects are about 75% complete, with many expected to finish by year-end or in the first quarter of 2027.
Full-year outlook withdrawn as backlog shrinks
During the summer, Cardinal raised the midpoint of its full-year revenue guidance to $890 million. After the second quarter, it also expected an EBITDA margin of about 17%. Following the third-quarter results, the company withdrew all full-year guidance. Management said only that fourth-quarter EBITDA should improve from the third quarter, without providing a target or estimate of the expected increase.
Backlog stood at $815 million at the end of the third quarter, down from $866 million at the end of the second. Cardinal said a more cautious approach to bidding was one reason for the decline. The combination of a smaller backlog and withdrawn profit guidance puts the focus on whether revenue growth can translate into earnings.
Cash provides some near-term flexibility. In the summer, Cardinal raised nearly $300 million, before any overallotment option, by issuing 4 million shares at $73 each. Net cash was $136 million at the end of the third quarter. After Cardinal used $46 million to acquire Allied Pave on October 1, net cash fell to about $90 million. The acquisition closed the day after the quarter ended.
Hughes Brothers deal pushed to June 2027
Cardinal had agreed to acquire Florida-based Hughes Brothers Construction for $357 million. The heavy civil construction and development company was expected to add about $220 million in revenue and $40 million in EBITDA.
Cardinal's 10-Q filing says the deal has been delayed and must close by June 30, 2027, at the latest. The agreement now includes a termination right; the available disclosure does not specify whether ending the deal would trigger a fee. Management said on the earnings call that it still intends to pursue the transaction. The delay postpones the immediate addition of debt and equity dilution, while leaving investors to weigh the acquisition against the need to improve existing operations amid falling earnings.
Cash, valuation and a $50 million buyback
After the third-quarter results, Cardinal shares traded at about $5.50. With roughly 20.6 million shares outstanding, that implied a market capitalization of about $113 million, slightly above pro forma net cash of approximately $90 million. The company went public at $21 a share late last year, and its stock briefly approached $100 this summer before retreating as operating challenges emerged.
Cardinal provides water, wastewater and stormwater infrastructure services to residential, commercial and industrial customers, with a presence in areas including Charlotte, Raleigh and Greensboro. Third-quarter assets totaled about $1.02 billion, including roughly $230 million in intangible assets and goodwill. Book equity was $589 million. Based on current operating performance, the business is generating about $800 million in annual sales, while EBITDA margins are estimated at just 2% to 3%—well below the company's previous levels.
Cardinal also announced a $50 million share repurchase program, a sizable amount relative to its current market capitalization. Any buybacks will depend on the company's cash position and operating performance. Key near-term measures include the completion of problem projects, whether fourth-quarter EBITDA improves sequentially, and whether management shifts its focus from acquisitions toward project execution and margin recovery.