Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and accompanying notes included elsewhere in this Quarterly Report on Form 10-Q for the three months ended September 30, 2026. In addition, this Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the U.S. Securities and Exchange Commission ("SEC") on March 23, 2026 ("2025 Form 10-K").

Unless the context otherwise requires, all references to "Cardinal Group," the "Company," "we," "us" and "our" in this Quarterly Report on Form 10-Q (this "Report") refer to Cardinal Infrastructure Group Inc., and unless otherwise stated, its consolidated subsidiaries. All references in this Report to "Cardinal" refer to Cardinal Civil Contracting Holdings LLC.

Cautionary Statement Regarding Forward-Looking Statements

The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences are discussed elsewhere in this Report and in "Part I. Item 1A. Risk Factors" in our 2025 Form 10-K, all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed may not occur.

This Report contains forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include the words "may," "could," "plan," "project," "budget," "predict," "pursue," "target," "seek," "objective," "believe," "expect," "anticipate," "intend," "estimate," "will," and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. Our forward-looking statements include statements about our business strategy, our industry, our future profitability, our expected capital expenditures and the impact of such expenditures on our performance, the costs of being a publicly traded corporation and our capital programs.

A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable. You are cautioned not to place undue reliance on any forward-looking statements. You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:

Although forward-looking statements reflect our good faith beliefs at the time they are made, forward-looking statements involve known and unknown risks, uncertainties and other factors, including the factors described under "Risk Factors," which

may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

Cardinal Group is a holding company that conducts no operations and our principal asset is the limited liability company units of Cardinal acquired in connection with the completion of our Initial Public Offering ("IPO") on December 11, 2025, and the reorganization transactions made prior to the IPO (the "Reorganization"), including with respect to our operating entities Cardinal and Cardinal NC. Prior to the IPO, all of our business was conducted through Cardinal NC.

Cardinal Group is the sole managing member of Cardinal. Although Cardinal Group has a minority economic interest in Cardinal, we have the sole voting interest in, operate, and control all of the business and affairs of Cardinal and its subsidiaries, and through Cardinal conduct our business. As a result, Cardinal Group consolidates Cardinal and has recorded a significant noncontrolling interest in a consolidated entity in our condensed consolidated financial statements for the economic interest in Cardinal held by the Continuing Equity Holders.

Because the IPO and the Reorganization resulted in a change to our organizational structure, the historical financial statements, which do not reflect certain items that affect our results of operations and financial position since the IPO and the Reorganization, may not give you an accurate indication of what our actual results would have been if the transactions had been completed at the beginning of the periods presented or of what our future results of operations are likely to be. This section of this Report generally discusses year-to-year comparisons between the three months ended September 30, 2026 and 2025 and the nine months ended September 30, 2026 and 2025. The comparison of the consolidated financial results for the three and nine months ended September 30, 2025 refers only to Cardinal and its subsidiaries.

Business Overview

The Company is a full-service, turnkey infrastructure services company operating in the Southeastern United States, specifically North Carolina, South Carolina, and Georgia. We provide a comprehensive suite of infrastructure services to the residential, commercial, industrial, municipal, and state infrastructure markets, including site clearing, grading, erosion control, drilling and blasting, wet utility installations, and related site services. We deliver these services primarily through in-house crews and a fleet of specialized equipment, which enables us to maintain quality control, schedule certainty, and cost efficiency across our project portfolio.

Our recent growth has been driven by a three-part strategy: (i) vertical integration within our core markets, which allows us to self-perform a broader scope of work, compress project schedules and retain margin; (ii) expansion and diversification across the end markets we serve, including residential, commercial, industrial, municipal and state infrastructure; and (iii) selective acquisitions that broaden our geographic footprint, expand our employee base and add complementary service capabilities.

Our strategy is grounded in operational discipline, market expansion, and a commitment to integrity from the ground up. Our workforce is the foundation of the Company, and we invest in our crews through structured training, field-based development, and disciplined jobsite safety practices. Our strong culture of safety is also core to the schedule certainty and quality that differentiate us in the market.

Our customers include national homebuilders, residential developers, commercial and industrial property owners, general contractors, municipalities, and state agencies. The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and notes included in Part I, Item 1 of this Quarterly Report, and with our Annual Report on Form 10-K for the year ended December 31, 2025.

Recent Transactions

In February 2026, we acquired Sugar Hill, Georgia-based A.L. Grading Contractors ("ALGC"). A fourth-generation, high-growth market leader, ALGC provides comprehensive site development solutions, including residential construction in Georgia and South Carolina, grading, wet utilities, erosion control, and clearing, supporting large-scale commercial and industrial projects. In May 2026, we acquired substantially all of the operating assets of Piedmont Pipe Construction, Inc., a North Carolina corporation ("Piedmont"). Piedmont provides wet utilities services for residential, commercial, and industrial projects across North Carolina and South Carolina. In October 2026, we acquired Allied Paving Contractors, Inc. ("Allied"), an Atlanta-based paving and heavy site construction contractor. In October 2026, we entered into an agreement to acquire Hughes Brothers Construction, Inc. ("Hughes Brothers"), a central Florida-based heavy civil wet utilities and site development contractor. In November 2026, we and Hughes Brothers agreed to postpone the proposed acquisition. Under an amendment to the merger agreement, the transaction will not close before June 30, 2027, unless otherwise agreed by the parties.

These transactions reflect our strategy of expanding capabilities and geographic reach through vertical integration, organic investment and disciplined acquisitions. Following the third-quarter results, our near-term priority is strengthening execution across our existing operations and realizing the benefits of businesses already acquired. See "Note 5. Acquisitions" and "Note 19. Subsequent Events" to the "Notes to the Condensed Consolidated Financial Statements" included under "Item 1. Financial Statements" of this Report for further information.

Key Factors Affecting Our Performance

We believe our future performance will depend on many factors, including those described in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our 2025 Form 10-K.

Executive Summary

For the three and nine months ended September 30, 2026, the Company continued to experience significant growth driven by a combination of organic expansion and acquisitions. Revenues increased 65.1% for the three-month period and 92.2% for the nine-month period compared to the corresponding prior-year periods. Organic growth reflected higher residential project volumes and, for the nine-month period, continued efforts to diversify the Company's customer base in the commercial and industrial end markets, while acquisitions contributed meaningfully to revenue growth in both periods.

The Company's growth was accompanied by increased cost of revenues and lower gross margins. During the third quarter, as additional project information became available, the Company revised estimates of costs to complete on certain projects, resulting in a cumulative catch-up adjustment that reduced gross profit by $13.2 million. Gross margin was also negatively impacted by residential pricing pressure, lower initial bid margins on certain commercial and industrial projects, and higher fuel and transportation costs.

General and administrative expenses also increased as the Company continued to grow and integrate acquired businesses, primarily reflecting expenses from acquired businesses, acquisition-related costs, non-cash stock-based compensation, and increased personnel, systems and other corporate infrastructure costs associated with the Company's increased operational complexity and transition to being a public company. Amortization expense increased primarily as a result of acquired intangible assets, while interest expense increased for the nine-month period due to higher outstanding borrowings used to finance acquisitions.

In response to the third-quarter results, the Company is implementing actions intended to strengthen project selection, estimating, project reviews and operating accountability across the organization. The Company's Chief Operating Officer is taking a more direct role in establishing and implementing consistent operating standards across the Cardinal platform, and the Company intends to engage an independent third-party advisor to support implementation of these operational changes and assess its estimating and project review processes. The Company also agreed to postpone the proposed acquisition of Hughes Brothers as it prioritizes strengthening execution across its existing operations and realizing the benefits of businesses already acquired.

Results of Operations

Quarter Ended September 30, 2026, Compared to Quarter Ended September 30, 2025

Revenues increased $79.6 million, or 65.1%, to $201.9 million for the three months ended September 30, 2026 from $122.3 million for the three months ended September 30, 2025, primarily driven by approximately $55.7 million of acquisition-related revenue growth and $23.9 million of organic growth, reflecting higher volume of residential projects and continued expansion across the Company's geographic footprint.

Cost of revenues increased $88.2 million, or 85.8%, to $191.1 million for the three months ended September 30, 2026 from $102.9 million for the three months ended September 30, 2025, primarily due to organic and acquisition-related growth and higher fuel and transportation costs.

Gross margin decreased 10.5 percentage points to 5.4% for the three months ended September 30, 2026 from 15.9% for the three months ended September 30, 2025. During the third quarter, as additional project information became available, the Company revised estimates of costs to complete on certain projects, resulting in a cumulative catch-up adjustment that reduced gross profit by $13.2 million. Gross margin was also negatively impacted by residential pricing pressure, lower initial bid margins on certain commercial and industrial projects, and higher fuel and transportation costs.

General and administrative expenses increased $9.6 million, or 187.0%, to $14.7 million for the three months ended September 30, 2026 from $5.1 million for the three months ended September 30, 2025, primarily due to $3.2 million of non-cash stock-based compensation, $2.3 million of expenses from acquired businesses, $1.8 million of acquisition-related costs, and investments in personnel, systems, and infrastructure to support the growth and increased complexity of the organization.

Amortization increased $2.6 million, or 113.3%, to $4.9 million for the three months ended September 30, 2026 from $2.3 million for the three months ended September 30, 2025 and was primarily attributable to the amortization of acquired intangible assets.

Total net income attributable to noncontrolling interest for the three months ended September 30, 2026 decreased $9.6 million compared to the three months ended September 30, 2025, which primarily reflects the share of net loss allocated to Continuing Equity Holders of LLC Units following the IPO.

Nine Months Ended September 30, 2026, Compared to Nine Months Ended September 30, 2025

Revenues increased $286.1 million, or 92.2%, to $596.4 million for the nine months ended September 30, 2026 from $310.2 million for the nine months ended September 30, 2025, primarily driven by approximately $144.1 million of organic growth, reflecting higher volume of residential projects and efforts to diversify the Company's customer base in the commercial and industrial end markets, and $142.0 million of acquisition-related revenue growth.

Cost of revenues increased $264.9 million, or 100.9%, to $527.5 million for the nine months ended September 30, 2026 from $262.6 million for the nine months ended September 30, 2025 and was primarily due to organic and acquisition-related growth and higher fuel and transportation costs.

Gross margin decreased 3.9 percentage points to 11.5% for the nine months ended September 30, 2026 from 15.4% for the nine months ended September 30, 2025, primarily reflecting higher fuel and transportation costs, the project estimate revisions recorded during the third quarter, residential pricing pressure, and lower initial bid margins on certain commercial and industrial projects.

General and administrative expenses increased $23.7 million to $34.1 million for the nine months ended September 30, 2026 from $10.4 million for the nine months ended September 30, 2025, primarily due to $5.3 million of expenses from acquired businesses, $4.9 million of acquisition-related costs, $3.7 million of non-cash stock-based compensation, and investments in personnel, systems, and infrastructure to support the growth and increased complexity of the organization.

Amortization increased $7.7 million, or 137.1%, to $13.3 million for the nine months ended September 30, 2026 from $5.6 million for the nine months ended September 30, 2025 and was primarily attributable to the amortization of acquired intangible assets.

Interest expense, net increased $3.6 million, or 92.3%, to $7.4 million for the nine months ended September 30, 2026 from $3.9 million for the nine months ended September 30, 2025 and was related to higher outstanding borrowings to finance acquisitions.

Other expenses, net increased $3.0 million to $2.9 million for the nine months ended September 30, 2026 from other income, net of $0.1 million for the nine months ended September 30, 2025, driven by a loss from partial extinguishments of debt in September 2026 and the remeasurement of the Tax Receivable Agreement liability.

Liquidity and Capital Resources

Overview

We believe our sources of liquidity will be sufficient to support our anticipated operating needs for the next 12 months. We have historically generated cash and funded our operations primarily from cash flows from operating activities as well as availability under our credit facilities and other borrowings. In the coming 12 months, our primary funding needs will revolve around the completion of projects and operating expenses, including interest on our credit facility. Additionally, we may seek to use our capital to enter new markets or expand in current markets through acquisitions or greenfield startups if we believe such markets fit our business model. To address these short-term liquidity requirements, we anticipate relying on our existing cash and cash equivalents, net cash flows generated by our operations, and availability under our credit facility.

We will continue to evaluate growth and capital alternatives to strengthen our financial position and maintain appropriate leverage to take advantage of trends in the civil infrastructure markets. We expect to pursue strategic uses of cash, such as investing in capital projects or businesses which meet our profitability targets, managing debt balances and, pursuant to our recently authorized share repurchase program, potentially repurchasing shares of our Class A Common Stock.

To the extent our current liquidity is insufficient to fund future activities, we may need to raise additional funds, such as refinancing or securing new secured or unsecured debt, issuing common and preferred equity, disposing of certain assets to fund our operations, and/or other public or private sources of capital. If we raise additional funds by issuing equity securities, the ownership of our existing stockholders will be diluted. The incurrence of additional debt financing would result in debt service obligations, and any future instruments governing such debt could provide for operating and financing covenants that could restrict our operations. We cannot assure you that we could obtain refinancing or additional financing on favorable terms or at all. See "Part I. Item 1A. Risk Factors - Access 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." in our 2025 Form 10-K.

Working Capital

As of September 30, 2026, working capital was $393.8 million. We use working capital to support seasonal and other variations in our business, primarily related to the effects of weather conditions on outdoor construction services and the spending patterns of our customers. Working capital needs are generally higher during the summer and fall months due to

increased demand for our services when favorable weather conditions exist in the states in which we operate. Seasonal trends, however, can be offset by changes in the timing of projects, which can be affected by project delays or accelerations and/or other factors that may affect customer spending.

Working capital requirements also tend to increase when we commence multiple projects or particularly large projects because labor, transportation costs, and materials requirements that typically become payable before the receivables resulting from work performed are collected. The timing of billings and project close-outs can also contribute to changes in billed and unbilled revenue. As of September 30, 2026, we expect that substantially all of our unbilled receivables will be billed to customers in the ordinary course of business within the next twelve months. Total receivables, which consists of contract billings, unbilled receivables, and retainage, net of allowance, was approximately $209.6 million as of September 30, 2026.

Our payment billing terms are generally net 30 days, and some of our contracts allow our customers to retain a portion of the contract amount, generally from 5% to 10% of billings, until the job is completed, which amounts are referred to as "retainage." As part of our ongoing working capital management practices, we evaluate opportunities to improve our working capital cycle through contractual provisions and certain financing arrangements. Occasionally, certain of our customers pay us in advance for a portion of the materials we purchase for their projects or allow us to pre-bill them for the mobilization of assets and/or crew to project sites and/or for materials purchases up to specified amounts. Vendor terms are generally 30 to 60 days.

Sources and Uses of Cash

Total cash at September 30, 2026 and December 31, 2025 were $335.0 million and $97.1 million, respectively. The following summarizes the sources and uses of our cash flows (in thousands):

The net change in cash was driven by the Company's follow-on offering of Class A Common Stock in the second quarter and proceeds from notes payable primarily used to fund the acquisition of ALGC and was partially offset by the acquisitions of ALGC and Piedmont.

Debt Financing

We continue to finance our business with a combination of existing cash and cash equivalents, net cash flows generated by our operations, and availability under our October 2025 Credit Facility. At September 30, 2026, the Company had $100.0 million available under the revolving facility and $250.0 million available under the delayed draw term loan. Subsequent to September 30, 2026, we borrowed $46.0 million under the delayed draw term loan facility to fund a portion of the cash consideration for the Allied acquisition. See "Note 10. Debt Arrangements" to the "Notes to the Condensed Consolidated Financial Statements" for a summary of our short-term and long-term debt.

Interest Rate Swap

We are exposed to interest rate risk from variable-rate borrowings. To manage this exposure, we entered into pay-fixed, receive-floating interest rate swaps that are designated as a cash flow hedge under the October 2025 Credit Facility. See "Note 11. Derivatives" and "Note 19. Subsequent Events" to the "Notes to the Condensed Consolidated Financial Statements" for further information.

Leases

As of September 30, 2026, Cardinal has $28.6 million of operating leases and $6.9 million of finance leases, including interest, primarily related to construction and transportation equipment. Of these obligations, $11.0 million of lease payments, including interest, are due in the next 12 months.

Issuance of Common Stock

On June 24, 2026, we completed an underwritten public offering of 4,600,000 shares of our Class A Common Stock at a price of $73.00 per share resulting in net proceeds to the Company of approximately $318.4 million, after underwriting discount and commission and expenses. We used $33.0 million of such net proceeds to repay borrowings outstanding under our October 2025 Credit Facility and intend to use the remaining net proceeds for general corporate purposes, which may

include funding for acquisitions, working capital requirements, capital expenditures and the repayment, refinancing, redemption or repurchase of indebtedness or other securities.

Bonding

Surety bonds are required in substantially all publicly funded construction projects. We procure surety bonds to secure our performance and pledge all proceeds and other rights under the related construction contracts to the bond surety company. For the quarter ended September 30, 2026, we generated approximately $4.2 million of our revenue from publicly funded construction projects. Our ability to obtain surety bonds primarily depends upon our capitalization, working capital, past performance, management expertise and reputation and certain external factors, including the overall capacity of the surety market. Surety companies consider such factors in relationship to the amount of our backlog and their underwriting standards, which may change from time to time. Events that affect the insurance and bonding markets may result in bonding becoming more difficult to obtain in the future or being available only at a significantly greater cost. To date, we have not encountered difficulties or material cost increases in obtaining new surety bonds.

Future Contractual Obligations and Commitments

The following summarizes our material contractual obligations and commercial commitments at September 30, 2026 (in thousands):

In October 2026, we acquired Allied, which was financed in part with cash of $88.9 million, and we entered into an agreement to acquire Hughes Brothers. In November 2026, we and Hughes Brothers agreed to postpone the proposed acquisition. Under an amendment to the merger agreement, the transaction will not close before June 30, 2027, unless otherwise agreed by the parties. If consummated, the transaction is expected to be financed in part with cash of $10.5 million and borrowings of $204.0 million under the October 2025 Credit Facility.

Additional Liquidity Requirements

As a holding company, we have no material assets other than our ownership of LLC Units. We have no independent means of generating revenue. Cardinal's operating agreement provides for the payment of certain distributions to the Continuing Equity Holders and to us in amounts sufficient to cover the income taxes imposed on such members with respect to the allocation of taxable income from Cardinal as well as to cover our obligations under the Tax Receivable Agreement and other administrative expenses.

Regarding the ability of Cardinal to make distributions to us, the terms of its financing arrangements (including the October 2025 Credit Facility) contain covenants that may restrict Cardinal from paying such distributions, subject to certain exceptions. Further, Cardinal will generally be prohibited under Delaware law from making a distribution to a member to the extent that, at the time of the distribution, after giving effect to the distribution, liabilities of Cardinal (with certain exceptions), as applicable, exceed the fair value of its assets.

In addition, under the Tax Receivable Agreement, we will be required to make cash payments to the Continuing Equity Holders equal to 85.0% of the tax benefits, if any, that we actually realize (or in certain circumstances are deemed to realize), as a result of (i) Basis Adjustments (as defined in the Tax Receivable Agreement) and (ii) certain tax benefits (such as interest deductions) arising from payments made under the Tax Receivable Agreement. We expect the amount of cash payments that we will be required to make under the Tax Receivable Agreement will be significant. The actual amount and timing of any payments under the Tax Receivable Agreement will vary depending upon a number of factors, including the timing of redemptions or exchanges by the Continuing Equity Holders, the amount of gain recognized by the Continuing Equity Holders, the amount and timing of the taxable income we generate in the future, and the federal tax rates then applicable. Any payments made by us to the Continuing Equity Holders under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to us.

Additionally, in the event we declare any cash dividends, we intend to cause Cardinal to make distributions to us in amounts sufficient to fund such cash dividends declared by us to our stockholders. Deterioration in the financial condition, earnings, or cash flow of Cardinal for any reason could limit or impair their ability to pay such distributions.

If we do not have sufficient funds to pay taxes or other liabilities or to fund our operations, we may have to borrow funds, which could adversely affect our liquidity and financial condition and subject us to various restrictions imposed by any such lenders. To the extent we are unable to make payments under the Tax Receivable Agreement for any reason, such payments

generally will be deferred and will accrue interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable Agreement and therefore accelerate payments due under the Tax Receivable Agreement. In addition, if Cardinal does not have sufficient funds to make distributions, our ability to declare and pay cash dividends will also be restricted or impaired.

See "Part I. Item 1A. Risk Factors - Risks Related to Our Organizational Structure" in our 2025 Form 10-K and "Certain Relationships and Related Party Transactions" in our Registration Statement on Form S-1 (File No. 333-290850) filed with the SEC on December 1, 2025.

Capital Expenditures

Capital expenditures, net of disposals, incurred during the nine months ended September 30, 2026 were $41.6 million and included $11.2 million for the development of an asphalt processing plant in North Carolina. We estimate that we will spend approximately $55.4 million on capital expenditures, net of disposals, during the 2026 fiscal year. Actual capital expenditures may increase or decrease in the future depending upon business activity levels, as well as ongoing assessments of equipment lease and other financing arrangements versus purchase decisions based on management's evaluation of short and long-term equipment requirements. Management expects capital expenditures will be materially higher than the prior year because we built our own asphalt manufacturing plant and are upgrading our fleet to support growth. Capital expenditures, net of disposals, incurred during the nine months ended September 30, 2025 were $31.7 million.

Other Factors Impacting Results of Operations

Backlog

Backlog at period end represents our estimate of future revenue from our construction contracts. Timing of revenue for construction contracts included in our backlog can be subject to change as a result of customer, regulatory or other delays or cancellations. These effects, among others, could cause estimated revenue to be realized in periods later than originally expected, or not at all. We occasionally experience postponements, cancellations, and reductions in expected future work due to these and/or other factors. There can be no assurance as to our customers' requirements or that actual results will be consistent with the estimates included in our forecasts. As a result, our backlog as of any particular date is an uncertain indicator of future revenue and earnings. See "Part I. Item 1A. Risk Factors - Risks Related to Our Business and Industry" in our 2025 Form 10-K.

Backlog is not defined under U.S. GAAP and differs from the remaining performance obligations disclosed in our financial statements. The primary difference is that backlog includes project commitments and signed contracts that have not yet commenced, whereas remaining performance obligations disclosed in our financial statements include only contracts for which performance has begun.

Backlog is a common measurement used in our industry. Our methodology for determining backlog may not, however, be comparable to the methodologies used by others. We add the revenue value of new contracts to backlog when secured through negotiated private transactions or when we are the low bidder on a public sector contract and management determines there are no apparent impediments to award. As work progresses, backlog is adjusted to reflect changes in estimated quantities under fixed unit price contracts, as well as to reflect changed conditions, change orders and other variations from initially anticipated contract revenues and costs, including completion penalties and bonuses. Revenue recognized on contracts and contracts cancellations are deducted from backlog.

The following summarizes backlog activity during the periods indicated (in thousands).

The increase in backlog was primarily due to the ALGC acquisition in February 2026. Based on current project schedules and other assumptions, we expect to recognize from $721.0 million to $797.0 million of our backlog within the twelve months following September 30, 2026. Actual timing and amounts may differ materially due to factors such as changes in project scope or schedules, weather-related or customer-driven delays, and contract terminations. We also anticipate generating additional revenues during the same period from new project awards, renewals, and the conversion of verbal or other preliminary commitments into executed contracts.

The following summarizes backlog at the dates indicated, categorized by stage of commitment (in thousands):

Our signed contracts comprise executed agreements covering both active projects in which performance has begun and projects for which performance has not yet commenced. Our letters of intent and issued contracts represent arrangements in which the parties have reached agreement on principal terms, evidenced either by a signed letter of intent or by issuance of a written contract pending execution. Substantially all of the contracts in our backlog may be canceled at the election of the customer. See "Business - Contracts - Contract Management Process" in our 2025 Form 10-K.

Impact of Inflation

The primary inflationary factors affecting our operations are labor, subcontractor costs, fuel/transportation costs, and material costs. In times of low unemployment, our labor costs may increase due to shortages in the supply of skilled labor and increases in compensation rates generally. Immigration actions may also affect the availability of labor. Increases in the cost of materials could negatively affect the economic viability of customer projects, and accordingly, demand for our services. Material and commodity prices are subject to volatility due to events outside of our control, such as tariff and trade actions and geopolitical events, which have contributed to recent market fluctuations. Inflation rates in the United States increased significantly over the past several years and, while inflationary pressures have shown signs of moderating, they remain elevated. We expect this high-cost and dynamic environment to continue for the remainder of 2026. Elevated levels of labor, fuel and material costs have in the past and could in the future negatively affect our project margins to the extent that we are unable to pass such cost increases along to our customers. There is uncertainty of what effect, if any, trade tariffs and recent geopolitical events will have on inflation in future periods. Such market and economic volatility and/or uncertainty can also affect our customers' investment decisions and subject us to project cancellations, deferrals, or unexpected changes in the timing, type and scope of project work.

Critical Accounting Policies and Estimates

The discussion and analysis of the financial condition and results of operations are based on the Company's condensed consolidated financial statements, which have been prepared in accordance with accounting policies generally accepted in the U.S. ("GAAP"). The preparation of these condensed consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. We continually evaluate our estimates based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. As of the date of this report, there are no material changes or updates to the critical accounting policies and estimates in the Management's Discussion and Analysis of Financial Condition and Results of Operations previously disclosed on 2025 Form 10-K, except for the following:

Effective as of January 1, 2026, the Company changed its accounting method for property and equipment from the accelerated method of depreciation to the straight-line method of depreciation.

During the three months ended September 30, 2026, as additional project information became available, the Company revised its estimate of costs to complete on certain projects, resulting in a cumulative catch-up adjustment that reduced gross profit.

See "Note 3. Changes in Accounting Estimates" to the "Notes to the Condensed Consolidated Financial Statements" for further information.

New Accounting Standards

See "Note 4. New Accounting Standards" to the "Notes to the Condensed Consolidated Financial Statements" for further information.