Cardinal Infrastructure Group (NASDAQ:CDNL) reported record second-quarter revenue and backlog while raising its full-year revenue outlook, though profitability fell below management’s expectations as the company absorbed higher labor, equipment and weather-related costs.
Second-quarter revenue totaled $227 million, up $115 million, or 114%, from the prior-year period. Chief Financial Officer Mike Rowe said the result included approximately 56% organic growth, with growth accelerating in May and June. Adjusted EBITDA increased 43% year over year to $28.1 million, while adjusted EBITDA margin declined to 12.4% from 18.6% a year earlier.
Revenue outlook rises as backlog reaches $866 million
Cardinal raised its 2026 revenue guidance to $880 million to $900 million, representing 95% year-over-year growth at the midpoint. The company had previously guided for $680 million to $890 million. Management said its $866 million backlog at the end of the second quarter was up 35% from a year earlier, with growth across commercial and industrial as well as residential projects.
Rowe said Raleigh generated 40% organic growth on sustained commercial and industrial demand and market-share gains. Charlotte also posted more than 40% growth, while Greensboro recorded strong share gains across a diversified end-market mix. Atlanta-based A. L. Grading Contractors continued to win larger and more complex projects, he said.
Management said commercial and industrial activity remained strong across its markets, including increased retail activity. Spivey said residential demand has remained steady, although some national homebuilders have sought pricing concessions amid broader margin pressure. Cardinal is reviewing those requests selectively rather than accepting work below its return requirements, he said.
Spivey also pointed to increased budgetary activity in the Triangle residential market, which he said had risen nearly threefold from six months earlier. Based on the typical entitlement cycle, he said that activity could support a significant rebound in residential projects over the next 18 to 24 months.
Margins pressured by growth costs, project timing and Georgia weather
Gross profit rose 67% to $24.5 million, while adjusted gross profit increased 60% to $36 million. Adjusted gross margin was 15.9%, down 540 basis points from the prior-year quarter.
Rowe attributed the margin decline to higher subcontracted labor and equipment-rental costs, particularly in newer markets that do not yet have full turnkey capabilities. The company also experienced underutilized crew capacity as it adjusted deployment models for a more diversified mix of larger commercial and industrial projects, which have different schedules than residential projects.
Intense weather in Georgia delayed deployment of higher-margin work at A. L. Grading Contractors, management said. In Charlotte, project-start delays forced Cardinal to retain workforce capacity and use former trade partners to help meet customer schedules as several projects began at the same time.
General and administrative expense totaled $9 million, or 4% of revenue, as Cardinal continued to build systems, processes and compliance capabilities as a public company. The company is rolling out a new customer relationship management system intended to provide better real-time operational and financial visibility and support Sarbanes-Oxley compliance.
Cardinal updated its full-year adjusted EBITDA margin expectation to 16% to 18%, reflecting second-quarter costs and anticipated additional G&A spending in the second half. Rowe said the revenue increase would still lift implied full-year adjusted EBITDA to more than $150 million at the midpoint, compared with roughly $136 million under the company’s original outlook.
Management said the second-half margin outlook is supported by expected stronger results at A. L. Grading Contractors, the contribution from Allied Paving in the fourth quarter, recovery of an estimated $1 million to $2 million of one-time costs, startup benefits from the asphalt plant and improved crew deployment. Spivey said subcontractor costs and utilization had improved in July.
Allied Paving acquisition expands Atlanta capabilities
Cardinal announced the acquisition of Atlanta-based Allied Paving, its ninth acquisition since 2021. The transaction was sourced and executed by the leadership team at A. L. Grading Contractors, which Cardinal acquired about five months earlier.
Chief Operating Officer Benji Wood said Allied adds paving crews and equipment that complement A. L. Grading Contractors’ grading and site-work operations. The combination will allow the company to sequence paving behind its own grading teams, reduce reliance on subcontractors and retain more project margin in-house.
Rowe said Allied contributes $108 million of annual revenue and has a 20.3% adjusted EBITDA margin. Cardinal acquired the business at roughly 5.5 times EBITDA. The company included $28 million of Allied revenue in its full-year guidance, with the contribution expected in the fourth quarter.
Cardinal completed a follow-on equity offering in June and ended the quarter with $339 million in cash, $195 million outstanding on its term loan and no borrowings under its $75 million revolving credit facility. The company said it was in a net-cash position and had capacity to fund organic investments and acquisitions.
Turnkey expansion and asphalt investments continue
Cardinal is pursuing a strategy centered on vertical integration, end-market diversification and acquisitions that increase local density. The company acquired Piedmont Pipe Construction in May to add wet-utility capacity in Charlotte, where management said the business is now nearly turnkey. Spivey characterized Charlotte as being in the sixth or seventh inning of its buildout, Atlanta in the fifth or sixth inning and Greensboro in the second or third inning.
The company also completed its first asphalt manufacturing facility near Raleigh under the Aviator Paving brand. Management said the plant is ramping as expected and is expected to reduce reliance on third-party asphalt suppliers, improve scheduling and eventually enable outside sales. Cardinal has secured land and certain permits for a second facility but plans to operate the first plant for one to two quarters before determining the size and model for the next project.
Capital expenditures were $24.7 million in the second quarter, reflecting the asphalt facility and fleet investments. Cardinal reiterated full-year capital-expenditure guidance of $58 million, excluding acquisitions.
During the quarter, field teams completed more than 9,000 documented safety activities, up more than 60% from a year earlier. Of 57,800 individually inspected safety items in weekly site inspections, more than 99% met company standards, Wood said.
About Cardinal Infrastructure Group (NASDAQ:CDNL)
We provide a comprehensive suite of infrastructure services to the residential, commercial, industrial, municipal, and state infrastructure markets. Our operations leverage a large highly skilled workforce and a fleet of specialized equipment to deliver wet utility installations (water, sewer, and stormwater systems), as well as grading, site clearing, erosion control, drilling and blasting, paving, and other related site services. We are becoming the platform of choice for a diverse array of infrastructure construction projects in our target geographies that require high-level technical expertise and sophistication.
