Cardinal Delays $357.5 Million Hughes Brothers Deal After Quarterly Loss
Key Facts
Cardinal Infrastructure reported third-quarter results on November 12, 2026, and said it had agreed with Hughes Brothers to delay the proposed acquisition, while making improved execution in its existing operations an immediate priority. The decision coincided with the company posting a net loss of $11.0 million, compared with net income of $10.1 million in the same period a year earlier. Adjusted EBITDA also fell to $8.5 million, with a margin of 4.2%, compared with $21.4 million and a margin of 17.5% a year earlier. In its statement, management said "our strategy remains intact" and that the immediate priority is "strengthening execution." The move reflects a focus on controlling performance in existing projects before proceeding with the deal, as the company withdrew its full-year revenue and adjusted EBITDA margin guidance for 2026.
The base purchase price under the amended agreement was $357.5 million, with potential additional consideration of up to $162.5 million tied to Hughes Brothers' adjusted EBITDA performance for the twelve months ended June 30, 2027. The parties amended the merger agreement on November 11, with closing not to occur before June 30, 2027, unless they agree otherwise. Either party may terminate the agreement before that date by written notice. The Federal Trade Commission had informed Cardinal on November 10 that it had granted early termination of the statutory waiting period related to the deal. Still, the companies decided to postpone its completion, as Cardinal said improving operational execution in its current business takes precedence over completing the acquisition for now.
Third-quarter revenue rose 65.1% to $201.9 million, from $122.3 million in the corresponding period of 2025. The company said the increase included $23.9 million in organic growth, while $55.7 million came from acquired companies. But revenue growth did not translate into improved profitability: gross profit margin fell to 5.4% from 15.9% a year earlier. Cardinal attributed the $13.2 million decline in gross profit to adjustments to project cost estimates. Revenue for the first nine months of 2026 also rose 92.2% to $596.4 million, from $310.2 million in the same period of 2025, with organic growth of $144.1 million and acquisition-related growth of $142.0 million.
Management detailed the sources of the 13.3-percentage-point decline in adjusted EBITDA margin compared with the third quarter of 2025. It attributed 6.5 percentage points to project estimate adjustments, and 3.6 points to pricing pressure in residential projects and lower margins on initial bids for some industrial and commercial work. It added that higher fuel and transportation costs reduced the margin by 3.5 percentage points, while other factors offset about 0.3 point. According to the company, project cost estimate adjustments alone reduced gross profit by $13.2 million during the quarter. The figures show that revenue growth, to which acquisitions contributed, coincided with pressure on pricing, estimates and execution costs.
Backlog stood at $815.5 million on September 30, 2026, up 26.2% year over year, and the company said its acquisition of ALGC was the main driver of the increase. Cardinal also reported $335.0 million in cash and cash equivalents on that date, against total debt of $198.5 million, for net cash of $136.5 million. The company acquired Allied Paving in October for total consideration of about $115.0 million, including about $88.9 million in cash and $26.1 million in stock. The delay to the Hughes Brothers deal follows that transaction, as Cardinal focuses on integrating acquired companies and improving consistency of execution. The board also authorized a program to repurchase up to $50 million of Class A shares over 12 months, while retaining the right to suspend, modify or terminate the program, with no obligation to purchase a specific amount.
Management said it expects adjusted EBITDA to improve in the fourth quarter compared with the third quarter, but provided no revenue or margin target after withdrawing 2026 guidance. It said Chief Operating Officer Benji Wood will take a more direct role in standardizing operations, with a focus on project selection, cost estimation, review and accountability. It also said it would engage an independent consultant to support the changes and assess its estimation and review processes. The company said Chief Financial Officer Mike Rowe informed it on November 9 of his decision to resign once a successor is appointed, and will continue in his role until the replacement joins; Cardinal has retained Spencer Stuart to conduct the search. Cardinal is scheduled to report fourth-quarter 2026 results before the market opens on February 25, 2027.
CDNL shares closed at $5.64 on November 12, with 20,082,206 shares traded, according to the company's historical price record. The stock had closed at $14.99 on November 11, then its closing price rose to $6.46 on November 13. These closes place the stock's movement during the sessions around the earnings announcement and deal delay in chronological context, without the company or the price record attributing a particular change to either news item. Company data confirm that the $6.46 close was on November 13, the latest price in the record provided for this period. Management's next announced operational step is to implement standardization measures and review project estimates before the next quarterly results.