Core Viewpoint - Karat Packaging Inc. has announced the pricing of a secondary offering of 1,500,000 shares at $27.00 per share, with an additional option for underwriters to purchase 225,000 shares [1][2]. Company Overview - Karat Packaging Inc. is a specialty distributor and manufacturer of disposable foodservice products, including food containers, bags, tableware, cups, and eco-friendly products under the Karat Earthline brand [5]. - The company primarily serves national and regional restaurants and foodservice settings across the United States, offering customized solutions such as product development and logistics services [5]. Offering Details - The secondary offering is set to close on June 12, 2025, pending customary closing conditions, and the company will not receive any proceeds from the sale of shares by the Selling Stockholders [1]. - The offering is conducted under a shelf registration statement filed with the SEC, which was declared effective on March 28, 2025 [3]. - BofA Securities and William Blair & Company are acting as joint lead book-runners for the offering [2].

Core Viewpoint - Karat Packaging Inc. has announced a proposed underwritten public offering of 1,500,000 shares of its common stock by certain members of the management team, with an additional option for the underwriter to purchase up to 225,000 shares [1][2]. Company Overview - Karat Packaging Inc. is a specialty distributor and manufacturer of disposable foodservice products, including food containers, bags, tableware, cups, lids, cutlery, straws, and eco-friendly products under the Karat Earthline brand [5]. - The company primarily serves national and regional restaurants and foodservice settings across the United States, offering customized solutions such as product development, design, printing, and logistics services [5]. Offering Details - The offering is being made under a shelf registration statement filed with the U.S. Securities and Exchange Commission (SEC) on March 21, 2025, and declared effective on March 28, 2025 [3]. - The company will not receive any proceeds from the sale of shares by the Selling Stockholders [2]. - BofA Securities and William Blair & Company are acting as the joint lead book-runners for the offering [2]. Legal and Compliance - The press release clarifies that it does not constitute an offer to sell or a solicitation of an offer to buy these securities in any jurisdiction where such offer would be unlawful [4].

Financial Performance - Net sales for the three months ended March 31, 2025, were $103.6 million, an increase of 8.4% compared to $95.6 million for the same period in 2024[109]. - Cost of goods sold increased to $62.9 million for the three months ended March 31, 2025, reflecting an 8.4% rise from $58.0 million in the prior year[110]. - Gross margin remained consistent at 39.3% for the three months ended March 31, 2025, compared to the same period in 2024[103]. - Net income for the three months ended March 31, 2025, was $6.8 million, a 5.2% increase from $6.5 million in the same period in 2024[103]. - Gross profit for Q1 2025 was $40.8 million, an increase of $3.2 million or 8.4% from Q1 2024's $37.6 million, with a consistent gross margin of 39.3%[113]. - Operating income decreased to $7.8 million in Q1 2025, down $0.3 million or 3.2% from $8.1 million in Q1 2024, attributed to higher operating expenses[115]. - Other income, net increased significantly to $1.1 million in Q1 2025, up $0.7 million or 197.6% from $0.4 million in Q1 2024, mainly due to increased rental income[116]. - Adjusted EBITDA for Q1 2025 was $11.9 million, representing 11.5% of net sales, compared to $13.5 million or 14.2% of net sales in Q1 2024[125]. - Free Cash Flow for Q1 2025 was $6.6 million, an increase from $5.6 million in Q1 2024, reflecting improved cash generation from operations[129]. Cash Flow and Liquidity - The company generated $7.7 million in net cash from operating activities, marking a 17.8% increase compared to the prior year[103]. - Net cash provided by operating activities for the three months ended March 31, 2025, was $7.726 million, an increase from $6.559 million in the same period of 2024[140]. - The company experienced a net cash inflow of $3.533 million from investing activities in Q1 2025, compared to a net outflow of $7.947 million in Q1 2024[142]. - Net cash used in financing activities increased to $10.370 million in Q1 2025 from $8.544 million in Q1 2024, primarily due to higher cash dividends paid to shareholders[144]. - The company adjusted net income of $6.8 million for Q1 2025 for non-cash items totaling $5.5 million, including depreciation and stock-based compensation[140]. - The company is exploring options to expand liquidity to support business growth and enhance shareholder value amid uncertain macroeconomic conditions[136]. Operational Highlights - Operating expenses rose to $32.9 million in Q1 2025, up $3.4 million or 11.6% from $29.5 million in Q1 2024, primarily due to increased shipping costs and new facility expenses[114]. - Import from China as a percentage of total sourcing decreased to 18.4% for the three months ended March 31, 2025[103]. - The company is focusing on enhancing supply chain resilience by diversifying sourcing and ramping up domestic production to mitigate cost pressures from imports[100]. - The company operates approximately 500,000 square feet of distribution center in Rockwall, Texas, and has expanded its distribution capabilities with a new lease of 187,000 square feet in Chino, California[101]. - The company plans to continue focusing on inventory management and optimizing accounts payable to improve cash flow in future quarters[138]. Shareholder Returns - The company declared a quarterly cash dividend of $0.45 per share, payable on or about May 23, 2025[104]. - The company declared a quarterly cash dividend of $0.45 per share, to be paid on May 23, 2025, totaling $9.0 million in dividends for the current fiscal year[136]. Balance Sheet Overview - As of March 31, 2025, the company had an outstanding balance of $27.5 million under the 2027 Term Loan and $20.8 million under the 2026 Term Loan[134]. - As of March 31, 2025, the company's working capital decreased to $111.9 million from $114.6 million as of December 31, 2024, representing a decrease of $2.7 million, or 2.3%[138]. - Current assets increased by $11.0 million to $171.979 million, while current liabilities rose by $13.6 million to $60.083 million, primarily due to increases in accounts payable and income tax payable[138]. - The increase in current assets was mainly driven by a $9.2 million increase in inventories and a $5.7 million increase in accounts receivable due to stronger sales[138]. - Cash and cash equivalents saw a net change of $889,000 in Q1 2025, recovering from a decrease of $9.932 million in Q1 2024[140]. - The increase in current liabilities was partially offset by a reduction in other current liabilities of $0.8 million due to tax withholding payments[138].

Core Viewpoint - Karat Packing (KRT) reported quarterly earnings of $0.33 per share, exceeding the Zacks Consensus Estimate of $0.31 per share, but down from $0.40 per share a year ago, indicating a 17.5% year-over-year decline in earnings [1][2] Financial Performance - The company achieved revenues of $103.62 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 1.26% and showing a year-over-year increase from $95.61 million [2] - Over the last four quarters, Karat Packing has only surpassed consensus EPS estimates once and has topped revenue estimates just once [2] Stock Performance - Karat Packing shares have declined approximately 11.2% since the beginning of the year, compared to a decline of 4.3% for the S&P 500 [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating expectations of underperformance in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.51 on revenues of $121.97 million, and for the current fiscal year, it is $1.60 on revenues of $461.89 million [7] - The trend of estimate revisions for Karat Packing has been unfavorable leading up to the earnings release [6] Industry Context - The Containers - Paper and Packaging industry, to which Karat Packing belongs, is currently ranked in the bottom 41% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact investor sentiment [5]

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].