Financial Data and Key Metrics Changes - Net sales for Q1 2025 were $103.6 million, an increase of 8.4% from $95.6 million in the prior year quarter [10] - Sales volume grew by 10.9% year over year [10] - Gross profit increased by 8.4% to $40.8 million from $37.6 million in the prior year quarter, with a consistent gross margin of 39.3% [12][13] - Net income for Q1 2025 increased by 5.2% to $6.8 million from $6.5 million in the prior year quarter, with a net income margin of 6.6% [14] - Adjusted EBITDA for Q1 2025 was $11.9 million compared to $13.5 million for the prior year quarter, with an adjusted EBITDA margin of 11.5% [14][15] Business Line Data and Key Metrics Changes - Sales to chain accounts and distributors were up by 7.1% [11] - Online sales increased by 19.6% over the prior year quarter, reflecting a focus on expanding this high-margin category [11] - Sales to the retail channel decreased by 3.2% [11] Market Data and Key Metrics Changes - Strongest growth for the quarter came from Texas and the Midwest, with California, the largest market, also showing improvement [8] - The company is strategically managing inventory to address anticipated supply chain disruptions [6][7] Company Strategy and Development Direction - The company aims to reduce imports from China to under 10% by the end of Q2 2025, with a shift towards sourcing from Malaysia, Indonesia, Vietnam, and Thailand [5][20] - Price increases were implemented on April 1 and are expected to continue in mid-May, ranging from 5% to 20% depending on the product [8][23] - A new distribution center is expected to enhance capacity and support anticipated growth [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating supply chain challenges and an uncertain trade environment [7] - The company expects net sales for Q2 2025 to increase by high single digits to low double digits over the prior year quarter [16] - Gross margin for Q2 2025 is expected to be in line with Q1, but a potential compression in the second half of the year is anticipated due to tariffs [38] Other Important Information - The company generated operating cash flow of $7.7 million in Q1 2025 and ended the quarter with $111.9 million in working capital [15] - A quarterly dividend of $0.45 per share was approved, payable on May 23, 2025 [16] Q&A Session Summary Question: What countries are being considered for sourcing as China exposure is reduced? - Management indicated that sourcing is shifting to Malaysia, Indonesia, Vietnam, and Thailand, with plans to diversify sourcing beyond Asia [20][21][22] Question: How will the company manage the impact of tariffs on pricing? - Price increases have been implemented, and while not all costs will be passed to customers, the company is seeing high demand for its products [23][24] Question: What is the outlook on reciprocal tariffs? - Management stated that the situation is fluid and difficult to predict, making it challenging to prepare for potential reciprocal tariffs [25][26] Question: Is the company in a position to benefit from tariffs due to quicker sourcing? - Management believes they are well-prepared and have been able to capture market share due to their proactive sourcing strategy [27] Question: What is the current status of freight costs? - Freight costs were lower in Q1 compared to Q4, but are expected to rise in Q2, with fluctuations anticipated [28][29] Question: What cost-saving initiatives are being implemented? - The company is negotiating with third-party carriers to reduce shipping and transportation costs, with initial savings already observed [31][32] Question: What is the expected gross margin trend for the year? - Management expects Q2 gross margins to be consistent with Q1, but anticipates potential compression in the second half due to tariffs [36][38] Question: What factors are driving market share growth? - The company's credibility and reliability during the COVID period have strengthened customer relationships, contributing to increased market share [42]

Financial Data and Key Metrics Changes - Net sales for Q1 2025 were $103.6 million, an increase of 8.4% from $95.6 million in the prior year quarter [10] - Sales volume grew by 10.9% year over year, while pricing was unfavorable by $3.9 million [10] - Gross profit increased by 8.4% to $40.8 million, with a consistent gross margin of 39.3% [12][13] - Operating income for Q1 2025 was $7.8 million, down from $8.1 million in the prior year quarter [14] - Net income rose by 5.2% to $6.8 million, with a net income margin of 6.6% [14] - Adjusted EBITDA for Q1 2025 was $11.9 million, compared to $13.5 million in the prior year quarter, with an adjusted EBITDA margin of 11.5% [14][15] Business Line Data and Key Metrics Changes - Sales to chain accounts and distributors increased by 7.1%, while online sales rose by 19.6% [11] - Retail channel sales decreased by 3.2% [12] - The company is combining net sales to chain accounts and distributors into a single category for reporting purposes [11] Market Data and Key Metrics Changes - Strongest growth came from Texas and the Midwest, with California, the largest market, also showing improvement [7] - Online business experienced nearly a 20% sales increase during the first quarter [7] Company Strategy and Development Direction - The company is focused on reducing imports from China, aiming to lower it to under 10% by the end of Q2 2025 [6] - Price increases were implemented on April 1, with additional increases expected in mid-May [7][24] - A new distribution center is expected to enhance capacity and support anticipated growth [9] - The company is committed to balancing shareholder returns with long-term growth investments [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating supply chain challenges and an uncertain trade environment [6] - The company anticipates net sales for Q2 2025 to increase by high single digits to low double digits compared to the prior year quarter [17] - Gross margin for Q2 2025 is expected to be in line with Q1, with adjusted EBITDA margin projected in the mid-teens [17] Other Important Information - The Board of Directors approved a quarterly dividend of $0.45 per share, payable on May 23, 2025 [16] - As of March 31, 2025, the company had financial liquidity of $46.7 million and $23.8 million in short-term investments [16] Q&A Session Summary Question: What countries are being considered for sourcing to reduce China exposure? - The company plans to move sourcing to Malaysia, Indonesia, Vietnam, and Thailand, aiming for less than 10% exposure to China by August [21][22] Question: How will the company manage the impact of tariffs on pricing? - Price increases have been implemented, ranging from 5% to 20%, depending on the product, with the company absorbing some costs due to high demand [24][25] Question: How are reciprocal tariffs factored into guidance? - The company is currently operating on a day-to-day basis due to the unpredictable nature of tariff changes [26] Question: Is the company in a position to benefit from tariffs compared to competitors? - The company has been proactive in sourcing outside of China, positioning itself to gain market share [28] Question: What is the current status of freight costs? - Freight costs were lower in Q1 compared to Q4, but are expected to rise in Q2 due to ongoing shipping delays [29] Question: What cost-saving initiatives are being implemented? - The company is negotiating with third-party carriers to reduce shipping costs, with initial savings already observed [33][34] Question: What is the expected gross margin trend for the second half of the year? - The company anticipates some compression in gross margins in the second half due to tariffs and duties [40] Question: What is the mix of revenue from domestic manufacturing? - Domestic manufacturing was stable in Q1, but the company is ramping up production due to increased demand [42] Question: What factors are contributing to market share growth? - The company's credibility and reliability during the COVID period have strengthened customer relationships, leading to increased market share [45]

Financial Performance - Net sales for Q1 2025 increased by 8.4% to $103.6 million, compared to $95.6 million in Q1 2024[6] - Gross profit for Q1 2025 rose by 8.4% to $40.8 million, maintaining a gross margin of 39.3%[9] - Net income for Q1 2025 was $6.8 million, up 5.2% from $6.5 million in the prior-year quarter, with a net income margin of 6.6%[11] - Adjusted EBITDA for Q1 2025 was $11.9 million, with an adjusted EBITDA margin of 11.5%, down from 14.2% in Q1 2024[12] - Free Cash Flow for Q1 2025 increased to $6,630,000, compared to $5,635,000 in Q1 2024, reflecting a 17.7% growth[24] - Diluted earnings per common share for Q1 2025 was $0.32, slightly up from $0.31 in Q1 2024[24] - Adjusted diluted earnings per common share decreased to $0.33 in Q1 2025 from $0.40 in Q1 2024[24] Operating Expenses - Operating expenses for Q1 2025 increased by 11.6% to $32.9 million, primarily due to higher shipping and transportation costs[10] - Total depreciation and amortization for Q1 2025 was $2,688,000, compared to $2,629,000 in Q1 2024[24] - Interest expense for Q1 2025 was $509,000, a slight decrease from $524,000 in Q1 2024[24] - The company reported a provision for income taxes of $2,121,000 in Q1 2025, up from $1,975,000 in Q1 2024[24] Cash and Liquidity - Cash and cash equivalents as of March 31, 2025, were $32.5 million, compared to $31.6 million at the end of 2024[22] - Cash from operating activities for Q1 2025 was $7,726,000, compared to $6,559,000 in Q1 2024[24] Future Outlook - The company expects net sales for Q2 2025 to increase by high single-digit to low double-digit percentages compared to the prior-year quarter[4] Dividend - The board approved a quarterly dividend of $0.45 per share, payable on or about May 23, 2025[14] Sourcing Strategy - The company reduced reliance on China for sourcing from approximately 20% at the end of 2024 to 15% in March 2025[3] Online Sales Growth - Online business sales increased nearly 20% during Q1 2025, contributing to overall growth[4] Non-GAAP Measures - The company utilized non-GAAP financial measures to provide additional clarity on its operating results, including Adjusted EBITDA and Free Cash Flow[26]

Core Viewpoint - Karat Packaging Inc. reported strong revenue growth in Q1 2025, with net sales increasing by 8.4% year-over-year, positioning the company well amid global trade uncertainties and supply chain challenges [1][3][5]. Financial Performance - Net sales for Q1 2025 reached $103.6 million, up from $95.6 million in Q1 2024, driven by a $11.7 million volume growth and a favorable product mix [5][7]. - Gross profit increased by 8.4% to $40.8 million, maintaining a gross margin of 39.3%, consistent with the prior year [7][9]. - Net income rose by 5.2% to $6.8 million, with a net income margin of 6.6% compared to 6.8% in the previous year [11][12]. - Adjusted EBITDA for Q1 2025 was $11.9 million, down from $13.5 million in Q1 2024, with an adjusted EBITDA margin of 11.5% [12][24]. Operational Highlights - The company reduced its reliance on China for sourcing from approximately 20% at the end of 2024 to 15% by March 2025, securing inventory from alternative sources [3][4]. - Online sales experienced a nearly 20% increase during the first quarter, reflecting the company's focus on expanding its market share [4][22]. - Operating expenses increased by 11.6% to $32.9 million, primarily due to higher shipping and transportation costs [10][19]. Guidance and Future Outlook - The company expects net sales for Q2 2025 to increase by high single-digit to low double-digit percentages compared to the prior year [7][12]. - Additional price increases are anticipated in mid-May 2025 due to rising costs from global tariff developments [3][4]. Dividend Announcement - On May 6, 2025, the board of directors approved a quarterly dividend of $0.45 per share, payable on or about May 23, 2025 [13].

Company Overview - Karat Packaging Inc. is a specialty distributor and manufacturer of disposable foodservice products and related items, primarily serving national and regional restaurants and foodservice settings across the United States [2] - The product range includes food and take-out containers, bags, tableware, cups, lids, cutlery, straws, specialty beverage ingredients, equipment, gloves, and other items [2] - The company offers an eco-friendly product line called Karat Earth®, which focuses on quality and sustainability using renewable resources [2] - Customized solutions are also provided, including new product development, design, printing, and logistics services [2] Recent Financial Announcement - The board of directors of Karat Packaging Inc. approved a regular quarterly dividend of $0.45 per share on the company's common stock [1] - This dividend is scheduled to be payable on or about May 23, 2025, to stockholders of record as of May 16, 2025 [1]

Core Viewpoint - Karat Packaging Inc. is set to release its first quarter financial results for 2025 on May 8, 2025, and will host an investor conference call on the same day [1]. Company Overview - Karat Packaging Inc. is a specialty distributor and manufacturer of environmentally friendly disposable foodservice products, primarily serving national and regional restaurants in the United States [3]. - The product range includes food and take-out containers, bags, tableware, cups, lids, cutlery, straws, specialty beverage ingredients, equipment, gloves, and more [3]. - The company offers an eco-friendly product line called Karat Earth®, which focuses on sustainability and is made from renewable resources [3]. - Customized solutions are also provided, including new product development, design, printing, and logistics services [3]. Investor Relations - The investor conference call is scheduled for May 8, 2025, at 2:00 p.m. PT/5:00 p.m. ET, with specific phone numbers provided for domestic and international participants [2]. - The conference can be accessed via a webcast, which will be archived for approximately one year [2].

Core Viewpoint - Karat Packaging, Inc. reported lower-than-expected fourth-quarter 2024 earnings, leading to a 5% decline in share price, despite a year-over-year earnings improvement of 21% [1][9]. Financial Performance - The adjusted EPS for Q4 2024 was 29 cents, missing the Zacks Consensus Estimate of 37 cents by 21.6% [1]. - Total revenues for the quarter were $101.6 million, slightly below the Zacks Consensus Estimate of $102.3 million, with a year-over-year revenue increase of 6% [3][4]. - The year-ago quarter benefited from a $4.8 million adjustment of online sales platform fees [3]. - Gross profit rose 17% year over year to $39.8 million, with a gross margin of 39.2%, reflecting a 350-basis point expansion from the previous year [6]. - Operating expenses increased by 10% year over year to $32.5 million, while adjusted EBITDA rose 32% to $11.3 million, resulting in an adjusted EBITDA margin of 11.1% [7]. Cash Flow and Position - As of December 31, 2024, cash and cash equivalents were reported at $21.6 million, down from $23.1 million a year earlier, with cash flow from operations at $48 million compared to $53 million in the prior year [8]. Guidance and Projections - For Q1 2025, the company anticipates year-over-year sales growth of 6-8%, with a projected gross margin between 37% and 39% [12]. - For the full year 2025, sales growth is expected to be in the range of 9-11%, with targeted gross margins between 36% and 48% [12]. Market Performance - Over the past year, Karat Packaging's shares have gained 3.3%, outperforming the industry growth of 2.6% [13].

FORM 10-K (Mark One) UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Washington, D.C. 20549 ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For transition period from to Commission File Number 001-40336 For the fiscal year ended December 31, 2024 Karat Packaging Inc. (Address of registrant's principal executive offices) (Zip code) (626) 965-8882 (Registrant's telephone number ...

Financial Data and Key Metrics Changes - The company reported net sales of $101.6 million for Q4 2024, a 6.3% increase from $95.6 million in the prior year quarter [16] - Gross profit increased 16.8% to $39.8 million, with gross margin expanding by 350 basis points to 39.2% [20] - Net income for Q4 2024 rose 40.3% to $5.9 million, with a net income margin of 5.8% compared to 4.4% in the prior year [22] - Adjusted EBITDA increased to $11.3 million for Q4 2024 from $8.6 million in the prior year quarter, with an adjusted EBITDA margin of 11.1% [23] Business Line Data and Key Metrics Changes - Sales to the distributor channel increased by 13.8%, while sales to national and regional chains rose by 1.7%. Retail channel sales decreased by 1.4% [18] - Eco-Friendly product sales grew 11% year over year, representing 34.5% of total sales [10] Market Data and Key Metrics Changes - The strongest growth was observed in the Midwest, with California stabilizing and showing modest growth in December [8][9] - The company reduced reliance on China for imports to approximately 20%, with over 50% of global purchases coming from Taiwan in 2024 [7] Company Strategy and Development Direction - The strategic focus for 2025 includes driving sales growth and improving operational efficiencies, with plans to expand into the supermarket sector [11][13] - A new 187,000 square foot distribution center is set to be operational by May 2025, nearly doubling distribution capacity in California [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued positive momentum into 2025, with robust sales growth observed in January and February [11] - The company anticipates minimal long-term impact from recently imposed tariffs due to a strong U.S. dollar and stable ocean freight rates [8] Other Important Information - The Board of Directors approved an increase in the quarterly cash dividend payment to $0.45 per share [14] - The company expects net sales for Q1 2025 to increase by 6% to 8% over the prior year quarter, with a full-year revenue growth expectation of 9% to 11% [25][26] Q&A Session Summary Question: What is the expectation for revenue growth acceleration in Q1 2025? - Management noted that California's market has stabilized and is growing modestly, with significant growth in Texas and the Midwest [29] Question: How will adjusted EBITDA margins differ between Q1 and the full year? - Management indicated that operational savings from shipping and reduced lease rates will contribute positively to margins [36] Question: What are the drivers of revenue growth in 2025? - Volume growth is expected to be in the double digits, while pricing will see some increases due to tariffs [41] Question: How will the company handle freight costs in 2025? - Management expects freight costs to decrease, benefiting margins, with operational expenses anticipated to come down in Q2 [52][54] Question: What is the outlook for cash flow and capital spending in 2025? - The company plans to invest around $5 million in capital expenditures, primarily for new trucks, while maintaining a strong free cash flow conversion ratio [74][75]

Karat Packaging, Inc. (NASDAQ:KRT) Q4 2024 Earnings Conference Call March 13, 2025 5:00 PM ET Company Participants Roger Pondel - PondelWilkinson Inc., Investor Relations Alan Yu - Chairman and Chief Executive Officer Jian Guo - Chief Financial Officer Conference Call Participants Ryan Meyers - Lake Street Capital Markets Jake Bartlett - Truist Securities Brian Butler - Stifel Michael Francis - William Blair Roger Pondell Good afternoon, everyone. Welcome to Karat Packaging's 2024 fourth quarter conference ...