Cardinal Infrastructure Group Inc. Class A Common Stock M&A announcement

Please go ahead. Thank you, and good morning, everyone.

Joining me today is Cardinal's Chief Executive Officer, Jeremy Spivey. This morning, we issued a press release announcing our entry into a definitive agreement to acquire Hughes Brothers, a leading heavy civil and site development contractor. Today's remarks will include forward-looking statements that are based on our current expectations. Actual results may differ materially due to varying risk and uncertainty. With that, I'd like to turn the call over to our Chairman and Chief Executive Officer, Jeremy Spivey.

Thank you, Mike. Good morning, everyone, and thank you for joining us. We're really excited to announce the acquisition of Hughes Brothers and our entry into Central Florida. When we look at a new platform, there are a few things that really matter to us. It starts with the people. Then we look at the customer relationships, the services they provide, how much work they self-perform, the equipment they own, and ultimately, whether this is a business we can build around for a long time. When we looked at Hughes Brothers, we saw a lot of Cardinal. They have an experienced team of more than 500 employees, an owned equipment fleet, strong wet utility and site development capabilities, and long-standing relationships with customers across residential, commercial, industrial, and municipal markets. Importantly, we're entering Central Florida with scale on day one.

We have the people, equipment, customer relationships, and backlog already in place. Their average project is more than 80 acres, so this is a team accustomed to executing the type of large and complex site work that fits very well with how Cardinal operates. We've talked since the IPO about building Cardinal across the Southeast. We started in Raleigh, expanded across the Carolinas, and entered Atlanta through A.L. Grading Contractors. Florida is a natural next step, but the important thing for us was finding the right business and the right team to enter the market with. We believe Hughes gives us both. Just as importantly, Chad and Justin Hughes will continue leading the business. Our job isn't to come in on day one and change what has made Hughes successful.

It's to support the team, bring Cardinal's resources to the table, and identify opportunities over time to add capabilities, build density, and help the business grow faster. We've seen that playbook work with A.L. Grading Contractors. We acquired an already strong grading and site development business, then began adding services, increasing density, and bringing work in-house that had previously been subcontracted. We see similar opportunities over time with Hughes, whether that's adding complementary capabilities, doing more with existing customers, expanding across end markets, or pursuing tuck-in acquisitions around the platform. This will be our fourth acquisition this year following A.L. Grading Contractors, Piedmont Pipe Construction, and Allied Paving Contractors. Hughes fits the platform framework we've laid out for investors. Strong local leadership, meaningful scale, wet utility capabilities, significant self-performance, and a financial profile that fits Cardinal very well. I'll turn it back to Mike to walk through the transaction details.

Thanks, Jeremy. We are acquiring Hughes Brothers for initial consideration of $357.5 million, funded through a combination of Cardinal Class A stock, $156 million in new debt, and cash on hand. At least 40% of the closing consideration will be funded with Cardinal equity, and shares issued to the selling shareholders will be subject to 180-day lock-up. The initial purchase price is consistent with the valuation framework we communicated for new market platform acquisitions. The structure also preserves balance sheet flexibility and keeps Hughes' ownership team aligned with Cardinal shareholders. From a leverage perspective, we expect pro forma net leverage of approximately 1.4 times, well below our stated maximum target of 2.5 times. This leaves us with meaningful flexibility to continue our disciplined organic and inorganic investment approach.

Turning to Hughes' financial profile, the business generated more than $220 million of revenue from the trailing 12 months ended June 30th, and its adjusted EBITDA margin profile is immediately accretive to Cardinal's current guided margin range. Hughes also has $350 million of backlog, providing strong visibility into future activity. As we discussed, for Cardinal's own backlog, project timing can move, so investors shouldn't view that backlog as a precise quarter-by-quarter revenue schedule. But it gives us confidence in both the activity level and the customer relationships we're acquiring. The selling shareholders are also eligible to receive up to $97.5 million of additional consideration based on Hughes Brothers' 2026 adjusted EBITDA performance, payable in cash and Cardinal stock. Put simply, the additional consideration is tied directly to the financial performance of the business.

The point I want to emphasize is that we like the economics of this transaction based on the business as it operates today. We're not underwriting the deal to a large synergy target or assuming we have to materially change Hughes for the transaction to work. We certainly see opportunities to create additional value over time, but we view those as upside to an already attractive platform. I'll turn it back to Jeremy.

Thanks, Mike. I'll leave you with this. We're entering Central Florida with a strong business, an experienced local team, and the scale to compete from day one. Chad, Justin, and their team have already built a great company, and our job is to help them build on it. We've seen the Cardinal playbook work across our existing markets, and we're excited to now bring that same approach to Central Florida. Operator, let's open the line for questions.

Thanks. Yeah. Good morning, Brian.

Hughes has a longstanding customer relationship across residential, commercial, industrial, a little bit of municipal, geared mostly towards residential, given their location in Central Florida and the buyer profile that is moving to that area. We spent a meaningful amount of time on customer concentration during the diligence period, and we're very comfortable with that profile. The backlog as it has trended, has been substantially moving higher. It appears, and I'll speak more to this later, but it appears that the Florida market's cycle is timed differently than the rest of the Southeast. Given the end market user and the buyer profile that's moving to Central Florida, they appear to be on the upper side of the trough. One of the other things that attracted to us is the breadth of customer relationships and end markets.