Cardinal Infrastructure Group (CDNL) risk factors, FY2025 10-K

Risks Related to Our Business and Industry

1. 01Demand for our services may decrease during economic recessions or volatile economic cycles, and a reduction in demand in end markets may adversely affect our business
2. 02Our geographic concentration could materially and adversely affect us if the construction industry in our current markets should decline
3. 03Our dependence on suppliers of materials and subcontractors could increase our costs and impair our ability to complete contracts on a timely basis or at all
4. 04Utility shortages or price increases could have an adverse impact on operations
5. 05If we do not accurately estimate the overall risks, requirements or costs related to a project when we bid for a contract that is ultimately awarded to us, we may achieve a lower than anticipated profit or incur a loss on the contract
6. 06uninsured claims or demands from third parties for alleged damages arising from the design, construction or use and operation of a project of which our work is a part
7. 07The infrastructure services industry is highly schedule-driven, and our failure to meet the schedule requirements of our contracts could adversely affect our reputation and/or expose us to financial liability
8. 08We may incur higher costs to lease, acquire and maintain equipment necessary for our operations, and the market value of our owned equipment may decline
9. 09Because our industry is capital-intensive and we have significant fixed and semi-fixed costs, our profitability is sensitive to changes in volume
10. 10Interest rate changes, and the failure to hedge against them, may adversely affect us
11. 11We may not accurately assess and/or estimate the quality, quantity, availability and cost of aggregates we need to complete a project, particularly for projects in rural areas
12. 12Timing of the award and performance of new contracts may fluctuate
13. 13Natural and man-made disasters, severe weather, and adverse geologic conditions may increase costs, cause project delays and reduce consumer demand, all of which could materially and adversely affect us
14. 14Changes to population growth rates in certain of the markets in which we operate or plan to operate could affect the demand for homes in these regions
15. 15Our business is seasonal and subject to adverse weather and climate conditions, which can adversely impact our business and cause our quarterly operating results to fluctuate
16. 16We rely on information technology systems to conduct our business, which are subject to disruption, failure or security breaches
17. 17Major public health crises could disrupt our operations and adversely affect its business, results of operations and financial condition
18. 18The public infrastructure construction industry is highly competitive, with a variety of companies competing against us, and our failure to compete effectively could reduce the number of new contracts awarded to us or adversely affect our margins on contracts awarded
19. 19Our public infrastructure business relies on highly competitive and highly regulated state or local government contracts
20. 20Our public infrastructure business depends on our ability to qualify as an eligible bidder under state or local government contract criteria and to compete successfully against other qualified bidders in order to obtain state or local government contracts
21. 21Our public infrastructure business depends on federal, state and local government spending for public infrastructure construction, and reductions in government funding could adversely affect our results of operations
22. 22if publicly funded construction decreases due to reduced federal, state or local funding or otherwise, our financial condition, results of operations and liquidity could be materially adversely affected
23. 23An inability to obtain bonding could limit the aggregate dollar amount of contracts that we are able to pursue for our public infrastructure business
24. 24A prolonged government shutdown may adversely affect our public infrastructure business
25. 25We may not be able to recover on claims or change orders against clients for payment or on claims against subcontractors for performance
26. 26Most of our contracts can be canceled on short notice

Risks Related to Our Management and Workforce

1. 27We depend on key management personnel
2. 28We depend on our ability to hire, train and retain qualified personnel in a competitive industry
3. 29Our results of operations can be adversely affected by labor shortages, turnover and labor cost increases
4. 30Federal, state and local employment-related laws and regulations could increase our cost of doing business and subject us to fines and lawsuits
5. 31We may be subject to unionization, work stoppages, slowdowns or increased labor costs
6. 32If we are unable to comply with applicable immigration laws, our ability to successfully complete contracts may be negatively impacted
7. 33Our operations are subject to hazards that may cause personal injury or property damage, thereby subjecting us to liabilities and possible losses, which may not be covered by insurance as well as negative reputational impacts relating to health and safety matters

Risks Related to Regulatory Matters

1. 34We are required to obtain, maintain and comply with government permits, licenses and approvals, and failure to obtain, maintain, and comply with such permits, licenses and approvals could adversely affect our or our customers’ operations
2. 35Recent and potential changes in U.S. trade policies and retaliatory responses from other countries may significantly increase the costs or limit supplies of materials and products used in our construction projects involving concrete
3. 36Tax matters, including changes in corporate tax laws and disagreements with taxing authorities, could impact our results of operations and financial condition
4. 37Our business is subject to complex and evolving laws and regulations regarding data privacy and cybersecurity

Risks Related to Our Acquisition Strategy

1. 38Our strategy, which includes expanding into adjacent markets, may not be successful
2. 39insufficient management attention to our ongoing business
3. 40We cannot make any assurances that our growth or expansion strategies will be successful, and we may incur a variety of costs to engage in such strategies, including through targeted acquisitions, and the anticipated benefits may never be realized

Risks Related to Our Financial Results, Financing and Liquidity

1. 41Our use of over time revenue recognition (specifically, recognition of revenue based on the cost-to-cost input method) accounting related to our projects could result in a reduction or elimination of previously reported revenue and profits
2. 42Our backlog may not be realized or may not result in profits and may not accurately represent future revenue
3. 43We may need to raise additional capital in the future for working capital, capital expenditures and/or acquisitions, and we may not be able to do so on favorable terms or at all, which would impair our ability to operate our business or achieve our growth objectives
4. 44If adequate funds are not available, or are not available on acceptable terms, we may not be able to make future investments, take advantage of acquisitions or other opportunities, or respond to competitive challenges
5. 45We must manage our liquidity carefully to fund our working capital
6. 46the amounts owed to suppliers and subcontractors
7. 47Failure to maintain adequate financial and management processes and internal controls could lead to errors in reporting our financial results
8. 48Changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our results of operations and financial condition
9. 49limitations or adverse findings regarding our ability to do business in some jurisdictions
10. 50Our current financing arrangements contain, and our future financing arrangements likely will contain, restrictive covenants
11. 51We expect to use leverage in executing our business strategy, which may adversely affect the return on our assets
12. 52placing us at a competitive disadvantage to less leveraged competitors

Risks Related to Our Organizational Structure

1. 53Our principal asset is our interest in Cardinal, and, as a result, we depend on distributions from Cardinal to pay our taxes and expenses, including payments under the Tax Receivable Agreement. Cardinal’s ability to make such distributions may be subject to various limitations and restrictions
2. 54The Tax Receivable Agreement with the Continuing Equity Holders requires us to make cash payments to them in respect of certain tax benefits to which we may become entitled, and we expect that such payments will be substantial
3. 55Our organizational structure, including the Tax Receivable Agreement, confers certain benefits upon the Continuing Equity Holders that do not benefit holders of our Class A Common Stock to the same extent that they benefit the Continuing Equity Holders
4. 56In certain cases, payments under the Tax Receivable Agreement to the Continuing Equity Holders may be accelerated or significantly exceed any actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement
5. 57that we will have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivable Agreement
6. 58We will not be reimbursed for any payments made to the Continuing Equity Holders under the Tax Receivable Agreement in the event that any tax benefits are disallowed

Risks Related to the Ownership of our Class A Common Stock

1. 59The Continuing Equity Holders continue to have significant influence over us after our initial public offering, including control over decisions that require the approval of stockholders
2. 60Our stock price may change significantly, and you may not be able to resell shares of our Class A Common Stock at or above the price you paid or at all, and you could lose all or part of your investment as a result
3. 61other events or factors, including those resulting from system failures and disruptions, natural or man-made disasters, extreme weather events, war, acts of terrorism, an outbreak of highly infectious or contagious diseases, such as COVID-19, or responses to these events
4. 62Certain provisions of Delaware law and antitakeover provisions in our organizational documents could delay or prevent a change of control
5. 63These antitakeover provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares
6. 64We are subject to financial reporting and other requirements as a newly public company for which our accounting and other management systems and resources may not be adequately prepared
7. 65the date on which it has, during the previous three-year period, issued more than $1 billion in nonconvertible debt; and
8. 66be subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements
9. 67Because we have no current plans to pay regular cash dividends on our Class A Common Stock, you may not receive any return on investment unless you sell your Class A Common Stock for a price greater than that which you paid for it
10. 68If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, or if there is any fluctuation in our credit rating, our stock price and trading volume could decline
11. 69If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected
12. 70Future sales, or the perception of future sales, by us or our existing stockholders in the public market could cause the market price for our Class A Common Stock to decline
13. 71We are subject to litigation, arbitration, or other claims which could materially and adversely affect us
14. 72We may suffer uninsured losses or material losses in excess of insurance limits
15. 73Acts of war or terrorism may seriously harm our business
16. 74Negative publicity could adversely affect our reputation as well as our business, financial results, and stock price
17. 75Changes in accounting rules, assumptions, and/or judgments could materially and adversely affect us
18. 76Access to financing sources may not be available on favorable terms, or at all, especially in light of current market conditions, which could adversely affect our ability to maximize our returns
19. 77the market price per share of our Class A Common Stock
20. 78We may change our operational policies, investment guidelines and our business and growth strategies without stockholder consent, which may subject us to different and more significant risks in the future