In the current state of the equity market, it has become increasingly difficult to find growth stocks trading at a reasonable price. The S&P 500 ( SPY ) index, for example, now trades atTQP Research is run by a Certified Public Accountant (CPA) with several years of experience in structured finance and banking.TQP Research follows a value-oriented investment approach by identifying businesses that meet the criteria for long-term success taught by Warren Buffett, Charlie Munger, and Walter Schloss, to name a ...

Group 1 - The current equity market presents challenges in finding growth stocks at reasonable prices, with the S&P 500 index trading at elevated levels [1] - TQP Research employs a value-oriented investment approach, focusing on long-term success criteria established by renowned investors like Warren Buffett and Charlie Munger [1] - Investment topics covered by TQP Research include market analysis, macroeconomic trends, large-cap blue chip companies, and undervalued micro-cap and small-cap stocks [1] Group 2 - TQP Research actively engages with the community, encouraging questions and ideas from members [1]

Core Insights - During market turbulence, investors often seek dividend-yielding stocks, which typically have high free cash flows and offer substantial dividends [1] Group 1: High-Yielding Stocks in the Industrials Sector - Karat Packaging Inc. (KRT) has a dividend yield of 7.46%. Analyst Jake Bartlett from Truist Securities maintained a Hold rating and raised the price target from $28 to $31, with an accuracy rate of 68%. Analyst Ryan Merkel from William Blair downgraded the stock from Outperform to Market Perform, with an accuracy rate of 66%. Recent news indicates that Karat Packaging posted better-than-expected quarterly earnings [7] - United Parcel Service, Inc. (UPS) has a dividend yield of 7.70%. Analyst Ken Hoexter from B of A Securities downgraded the stock from Neutral to Underperform, cutting the price target from $91 to $83, with an accuracy rate of 61%. Analyst Ariel Rosa from Citigroup maintained a Buy rating but lowered the price target from $127 to $114, with an accuracy rate of 67%. Recent news includes an expanded agreement between UPS and American Express to support small businesses [7] - Copa Holdings, S.A. (CPA) has a dividend yield of 5.54%. Analyst Savanthi Syth from Raymond James maintained a Strong Buy rating and increased the price target from $147 to $150, with an accuracy rate of 67%. Analyst Stephen Trent from Citigroup maintained a Buy rating with a price target of $159, with an accuracy rate of 64%. Recent news shows that Copa Holdings posted mixed quarterly results [7]

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 [3] - The product range includes food and take-out containers, bags, tableware, cups, lids, cutlery, straws, specialty beverage ingredients, equipment, gloves, and other items [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] Recent Developments - Alan Yu, the CEO of Karat Packaging Inc., will participate in Lake Street Capital Market's 9th Annual Best Ideas Growth (BIG9) Conference in New York on September 11, 2025 [1] - Management will conduct one-on-one meetings with investors during the conference [1]

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Presents Karat Packaging Inc.'s unaudited condensed consolidated financial statements and notes for interim periods [Condensed Consolidated Balance Sheets (Unaudited)](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS%20(UNAUDITED)) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :-------------- | :------------------ | | Total Assets | $320,963 | $294,522 | | Total Liabilities | $158,257 | $132,323 | | Total Stockholders' Equity | $162,706 | $162,199 | | Current Assets | $186,251 | $160,997 | | Current Liabilities | $69,498 | $46,447 | | Inventories | $88,779 | $70,722 | | Accounts Receivable, net | $36,385 | $26,736 | | Accounts Payable | $33,160 | $17,831 | | Related Party Payable | $7,974 | $3,130 | [Condensed Consolidated Statements of Income (Unaudited)](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME%20(UNAUDITED)) | Metric (in thousands, except per share data) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net sales | $123,986 | $112,600 | $227,610 | $208,213 | | Cost of goods sold | $74,879 | $69,193 | $137,741 | $127,204 | | Gross profit | $49,107 | $43,407 | $89,869 | $81,009 | | Operating income | $16,550 | $11,115 | $24,370 | $19,191 | | Net income | $11,052 | $9,227 | $17,867 | $15,703 | | Basic earnings per share | $0.55 | $0.46 | $0.87 | $0.76 | | Diluted earnings per share | $0.54 | $0.45 | $0.86 | $0.76 | [Condensed Consolidated Statements of Stockholders' Equity (Unaudited)](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY%20(UNAUDITED)) | Metric (in thousands) | January 1, 2025 | June 30, 2025 | | :-------------------- | :-------------- | :------------ | | Total Stockholders' Equity | $162,199 | $162,706 | **Key Changes (Six Months Ended June 30, 2025):** * Cash dividends declared: ($18,048) (sum of $9,017 and $9,031) * Net income attributable to Karat Packaging Inc.: $17,343 (sum of $6,409 and $10,934) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=10&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS%20(UNAUDITED)) | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $17,476 | $20,254 | | Net cash provided by (used in) investing activities | $1,164 | ($8,467) | | Net cash used in financing activities | ($19,675) | ($15,552) | | Net decrease in cash and cash equivalents | ($1,035) | ($3,765) | | Cash paid for income taxes | $5,491 | $3,315 | | Cash paid for interest | $948 | $1,040 | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) [1. Nature of Operations](index=12&type=section&id=1.%20Nature%20of%20Operations) - Karat Packaging Inc. (KRT) is a manufacturer and distributor of single-use disposable products for the restaurant and foodservice industries, including plastic, paper, biopolymer-based, and compostable forms[20](index=20&type=chunk) - The company offers customized solutions such as new product design, custom printing, distribution of specialty food and beverage products, and logistics services[20](index=20&type=chunk) - Products are supplied to national and regional distributors, restaurant chains, supermarkets, and small businesses, with manufacturing and distribution centers across the U.S.[21](index=21&type=chunk)[22](index=22&type=chunk) [2. Summary of Significant Accounting Policies](index=12&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) - The unaudited condensed consolidated financial statements are prepared in accordance with US GAAP for interim financial information[23](index=23&type=chunk) - The company consolidates its wholly-owned subsidiaries and Global Wells Investment Group, a variable interest entity where Karat Packaging is the primary beneficiary[25](index=25&type=chunk)[34](index=34&type=chunk) - Revenue is primarily generated from product sales to chains, distributors, online, and retail customers, recognized upon transfer of control; logistics services revenue is recognized over time[37](index=37&type=chunk)[41](index=41&type=chunk)[43](index=43&type=chunk) Fair Value Measurements (in thousands) | Category | Level 1 (June 30, 2025) | Level 2 (June 30, 2025) | Level 1 (Dec 31, 2024) | Level 2 (Dec 31, 2024) | | :------- | :---------------------- | :---------------------- | :--------------------- | :--------------------- | | Cash equivalents | $3,479 | $16,346 | $725 | $22,525 | | Short-term investments | — | $26,443 | — | $28,343 | | Publicly-traded equity securities | — | — | $31 | — | - The company adopted ASU 2023-07 (Segment Reporting) for its annual period beginning January 1, 2024, and interim period beginning January 1, 2025, requiring enhanced disclosure of significant expenses[53](index=53&type=chunk) [3. Inventories](index=17&type=section&id=3.%20Inventories) | Inventory Category (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------ | :-------------- | :---------------- | | Raw materials | $4,325 | $6,640 | | Semi-finished goods | $1,733 | $1,885 | | Finished goods | $83,421 | $62,837 | | Subtotal | $89,479 | $71,362 | | Less: inventory reserve | ($700) | ($640) | | **Total inventories** | **$88,779** | **$70,722** | [4. Property and Equipment](index=18&type=section&id=4.%20Property%20and%20Equipment) | Property and Equipment (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :-------------- | :------------------ | | Machinery and equipment | $66,203 | $66,928 | | Leasehold improvements | $19,212 | $19,193 | | Vehicles | $8,860 | $8,395 | | Furniture and fixtures | $1,015 | $1,015 | | Building | $38,779 | $38,779 | | Land | $11,907 | $11,907 | | Computer hardware and software | $113 | $94 | | Construction in progress | $256 | $431 | | Less: accumulated depreciation and amortization | ($62,850) | ($58,760) | | **Total property and equipment, net** | **$83,495** | **$87,982** | - Total depreciation and amortization expense for the six months ended June 30, 2025, was **$5,353,000** (**$2,270,000** in G&A and **$3,083,000** in COGS)[59](index=59&type=chunk) [5. Goodwill](index=18&type=section&id=5.%20Goodwill) | Goodwill (in thousands) | December 31, 2024 | June 30, 2025 | | :---------------------- | :---------------- | :------------ | | Balance | $3,510 | $3,510 | | Goodwill acquired | — | — | [6. Line of Credit](index=18&type=section&id=6.%20Line%20of%20Credit

Company Performance - Karat Packing (KRT) reported quarterly earnings of $0.57 per share, missing the Zacks Consensus Estimate of $0.60 per share, but showing an increase from $0.49 per share a year ago, resulting in an earnings surprise of -5.00% [1] - The company posted revenues of $123.99 million for the quarter ended June 2025, slightly missing the Zacks Consensus Estimate by 0.01%, and an increase from $112.6 million year-over-year [2] - Over the last four quarters, Karat Packing has surpassed consensus EPS estimates only once [2] Stock Outlook - The stock has underperformed the market, losing about 10.9% since the beginning of the year, while the S&P 500 gained 7.9% [3] - The current consensus EPS estimate for the coming quarter is $0.45 on revenues of $125 million, and for the current fiscal year, it is $1.59 on revenues of $462 million [7] Industry Context - The Containers - Paper and Packaging industry, to which Karat Packing belongs, is currently ranked in the bottom 21% of over 250 Zacks industries, indicating a challenging environment [8] - Empirical research suggests that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [8]

Financial Data and Key Metrics Changes - The company achieved a record second quarter performance with a 13% increase in sales volume, 10% growth in net sales, and 20% growth in net income year over year [4][10] - Net sales for the second quarter were $124 million, up 10.1% from $112.6 million in the prior year quarter, driven by a 13% volume growth [10] - Net income increased by 19.8% to $11.1 million from $9.2 million in the prior year quarter, with a net income margin of 8.9% compared to 8.2% a year ago [14] Business Line Data and Key Metrics Changes - Sales to chain accounts and distributors increased by 11.4%, while online sales rose by 6.8% [10] - Retail channel sales turned positive with a 1.9% increase [10] - The company improved operating cost leverage, saving $1 million in online shipping and marketing costs [9] Market Data and Key Metrics Changes - The company is diversifying its sourcing, reducing reliance on China to just 10% in the second quarter, and expanding sourcing across other Asian countries and Latin America [5] - Strong business trends are expected to continue, particularly in California, with new business wins from large national chains scheduled to begin shipping in the third and fourth quarters [6] Company Strategy and Development Direction - The company is focused on accelerating top-line growth and profitability through product innovation and strategic expansion [8] - A new distribution center near the Chino headquarters is now fully operational, enhancing logistic capabilities and enabling faster delivery times [6] - The company is maintaining its full-year 2025 guidance for net sales, gross margin, and adjusted EBITDA margin, pending potential impacts from additional tariff changes [16] Management's Comments on Operating Environment and Future Outlook - Management noted that currency pressure is starting to ease and that the company is well-positioned for continued profitable growth [5][9] - The company expects net sales for the third quarter to increase by approximately 9% to 10% over the prior year quarter [16] - Management anticipates a sequential decline in gross margin for the third quarter due to tariffs, with recovery expected in the fourth quarter [22][25] Other Important Information - The company generated operating cash flow of $9.8 million in the second quarter and ended with $116.8 million in working capital [15] - A quarterly dividend of $0.45 per share was approved, payable on August 27, 2025 [16] Q&A Session Summary Question: Why was pricing negative in the quarter, and what should be expected for the second half? - Management indicated that they are currently holding on to pricing with minor increases in certain categories, and they expect pricing to be close to breakeven in the second half [20][21] Question: What are the factors contributing to the sequential decline in gross margin? - Management explained that the impact of new sourcing will be felt in the fourth quarter, while the third quarter will still reflect higher tariff costs from the second quarter [22][24] Question: What trends are being observed in July, particularly regarding customer buying behavior ahead of August tariffs? - Management reported strong sales trends in July, especially from national chain accounts, with double-digit sales increases in California [27] Question: What is the outlook for online sales growth in the second half of the year? - Management believes online sales will continue to grow, with expectations of returning to double-digit growth in the fourth quarter due to new platforms being added [35][37] Question: What is the company's stance on M&A activity? - Management stated they are still looking at M&A opportunities, focusing on strategic acquisitions that enhance product lines or market share [38][40]

[Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) [Second Quarter 2025 Performance](index=1&type=section&id=Second%20Quarter%202025%20Performance) Karat Packaging achieved record Q2 2025 net sales of **$124.0 million** and net income of **$11.1 million**, driven by volume growth and improved gross margin despite foreign currency losses [Key Highlights and Guidance](index=1&type=section&id=Key%20Highlights%20and%20Guidance) Q2 2025 Financial Highlights (vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $124.0M | $112.6M | +10.1% | | Gross Profit | $49.1M | $43.4M | +13.1% | | Gross Margin | 39.6% | 38.5% | +110 bps | | Net Income | $11.1M | $9.2M | +19.8% | | Adjusted EBITDA | $17.7M | $15.7M | +12.8% | - The company successfully navigated trade uncertainty by diversifying its supply chain, reducing sourcing from China to just **10%** in the second quarter, with plans to expand into other Asian countries and Latin America[3](index=3&type=chunk) Q3 2025 Guidance | Metric | Expected Range | | :--- | :--- | | Net Sales Growth (YoY) | High single-digit to low double-digits | | Gross Margin | Low to mid 30s | | Adjusted EBITDA Margin | 10% to 12% | [Detailed Financial Results (Q2 2025)](index=2&type=section&id=Detailed%20Financial%20Results%20(Q2%202025)) - Net sales growth was driven by a **$14.2 million** increase from volume and product mix changes, partially offset by a **$3.3 million** unfavorable impact from year-over-year pricing[6](index=6&type=chunk) - Gross margin improved to **39.6%** from **38.5%**, benefiting from lower product costs due to favorable vendor pricing and product mix, partially offset by higher ocean freight and duty costs[8](index=8&type=chunk) - Operating expenses saw a minimal increase of **0.8%**, as higher shipping and rent costs were largely offset by reductions in online platform fees, marketing expenses, and stock-based compensation[9](index=9&type=chunk) - A significant unfavorable variance in other income/expenses was primarily caused by a **$2.9 million** loss on foreign currency transactions due to the weakening of the U.S. Dollar against the New Taiwan Dollar[10](index=10&type=chunk) [Six-Month 2025 Performance](index=3&type=section&id=Six-Month%202025%20Performance) For H1 2025, net sales increased **9.3%** to **$227.6 million** and net income grew **13.8%** to **$17.9 million**, primarily due to volume and product mix changes [Detailed Financial Results (H1 2025)](index=3&type=section&id=Detailed%20Financial%20Results%20(H1%202025)) H1 2025 Financial Summary (vs. H1 2024) | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $227.6M | $208.2M | +9.3% | | Gross Profit | $89.9M | $81.0M | +10.9% | | Gross Margin | 39.5% | 38.9% | +60 bps | | Net Income | $17.9M | $15.7M | +13.8% | | Diluted EPS | $0.86 | $0.76 | +13.2% | - The increase in net sales for the first half was primarily driven by a **$26.1 million** contribution from higher volume and changes in product mix, partially offset by a **$7.4 million** unfavorable pricing comparison[13](index=13&type=chunk) - Operating expenses increased by **6.0%** to **$65.5 million**, mainly due to higher shipping costs (**$4.6 million**), increased rent expense (**$2.1 million**), and higher professional fees (**$0.5 million**) related to a secondary offering[16](index=16&type=chunk) [Shareholder Information](index=4&type=section&id=Shareholder%20Information) The board approved a regular quarterly dividend of **$0.45 per share**, with an investor conference call scheduled to discuss Q2 results - On August 5, 2025, Karat's board of directors approved a regular quarterly dividend of **$0.45 per share**, payable around August 27, 2025, to stockholders of record as of August 20, 2025[21](index=21&type=chunk) - An investor conference call was scheduled for August 7, 2025, at 2:00 p.m. Pacific Time to discuss the second quarter results[22](index=22&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) Unaudited financial statements detail Q2 and H1 performance, showing growth in net sales and income, with "Chains and distributors" as the primary sales channel [Condensed Consolidated Statements of Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Income Statement Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $123,986 | $112,600 | $227,610 | $208,213 | | Gross profit | $49,107 | $43,407 | $89,869 | $81,009 | | Operating income | $16,550 | $11,115 | $24,370 | $19,191 | | Net income | $11,052 | $9,227 | $17,867 | $15,703 | [Net Sales by Category](index=7&type=section&id=Net%20Sales%20by%20Category) Net Sales by Channel (in thousands) | Channel | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Chains and distributors | $97,165 | $87,228 | $177,835 | $162,596 | | Online | $20,884 | $19,546 | $38,675 | $34,425 | | Retail | $5,937 | $5,826 | $11,100 | $11,192 | [Selected Balance Sheet and Cash Flow Information](index=7&type=section&id=Selected%20Balance%20Sheet%20and%20Cash%20Flow%20Information) Selected Balance Sheet Data (in thousands) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $30,549 | $31,584 | | Inventories | $88,779 | $70,722 | | Total assets | $320,963 | $294,522 | | Total liabilities | $158,257 | $132,323 | Selected Cash Flow Data (in thousands) | Account | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $17,476 | $20,254 | | Net cash provided by (used in) investing activities | $1,164 | $(8,467) | | Net cash used in financing activities | $(19,675) | $(15,552) | [Non-GAAP Financial Measures](index=9&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures like Adjusted EBITDA and Adjusted Diluted EPS to provide additional insight into core operating performance, with reconciliations provided [Reconciliation of GAAP to Non-GAAP Measures](index=9&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) Adjusted EBITDA Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $11,052 | $9,227 | $17,867 | $15,703 | | Adjustments | $6,641 | $6,456 | $11,739 | $13,521 | | Adjusted EBITDA | $17,693 | $15,683 | $29,606 | $29,224 | Adjusted Diluted EPS Reconciliation | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Diluted EPS (GAAP) | $0.54 | $0.45 | $0.86 | $0.76 | | Adjustments (per share) | $0.03 | $0.04 | $0.04 | $0.12 | | Adjusted Diluted EPS | $0.57 | $0.49 | $0.90 | $0.88 | Free Cash Flow Reconciliation (in thousands) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Cash from operating activities | $17,476 | $20,254 | | Purchase of property and equipment | $(1,263) | $(2,456) | | Free Cash Flow | $16,213 | $17,798 | [Use and Definition of Non-GAAP Measures](index=11&type=section&id=Use%20and%20Definition%20of%20Non-GAAP%20Measures) - Management uses non-GAAP measures to assess the core performance of the business and believes they provide useful information to investors for evaluating performance and comparing results across periods[42](index=42&type=chunk) - Key non-GAAP measures are defined as follows: - **Adjusted EBITDA:** Net income excluding interest, taxes, D&A, stock-based compensation, and certain other non-recurring items - **Adjusted Diluted EPS:** Diluted EPS adjusted for items like stock-based compensation and their tax effects - **Free Cash Flow:** Cash from operations less purchases of property and equipment[40](index=40&type=chunk)[44](index=44&type=chunk) [Corporate Information and Forward-Looking Statements](index=4&type=section&id=Corporate%20Information%20and%20Forward-Looking%20Statements) [About Karat Packaging Inc.](index=4&type=section&id=About%20Karat%20Packaging%20Inc.) Karat Packaging is a specialty distributor and manufacturer of disposable foodservice products, offering a wide range of items including an eco-friendly line and customized solutions - Karat Packaging is a specialty distributor and manufacturer of disposable foodservice products for restaurants and foodservice settings in the U.S[23](index=23&type=chunk) - The company's product portfolio includes food containers, bags, tableware, cups, and specialty beverage ingredients, also featuring the eco-friendly Karat Earth® line made from renewable resources[23](index=23&type=chunk) - In addition to its product offerings, Karat provides customized solutions, including new product development, design, printing, and logistics services[24](index=24&type=chunk) [Caution Concerning Forward-Looking Statements](index=5&type=section&id=Caution%20Concerning%20Forward-Looking%20Statements) This section warns that forward-looking statements, including financial guidance, are subject to risks and uncertainties that could cause actual results to differ materially - Forward-looking statements, including financial guidance, are predictions based on current expectations and are not guarantees of future performance[25](index=25&type=chunk) - Actual results could differ materially from those expressed in forward-looking statements due to various risks and uncertainties, as detailed in the company's SEC filings[25](index=25&type=chunk)

Core Insights - Karat Packaging Inc. reported record quarterly net sales and net income for the second quarter of 2025, demonstrating resilience amid supply chain disruptions and trade uncertainties [5][8][13] - The company successfully reduced its sourcing from China to 10% and is diversifying its supply chain by expanding operations in other Asian countries and Latin America [5][6] - Despite facing foreign currency headwinds, the company achieved a gross profit increase and maintained strong business trends heading into the third quarter [5][8][12] Financial Performance - Net sales for Q2 2025 increased by 10.1% to $124.0 million, up from $112.6 million in the prior-year quarter, driven by a $14.2 million increase in volume and product mix [6][8] - Gross profit rose by 13.1% to $49.1 million, with a gross margin improvement to 39.6% from 38.5% in the prior-year quarter [8][10] - Net income for Q2 2025 increased by 19.8% to $11.1 million, with a net income margin of 8.9% compared to 8.2% in the prior-year quarter [8][13] Operational Highlights - The new Chino warehouse is fully operational, enhancing logistics capabilities and enabling faster delivery times [5] - The company is experiencing sustained double-digit sales growth across all major markets, including California, with new business wins from large national chains expected to contribute in the latter half of 2025 [5][8] - Operating expenses for Q2 2025 were $32.6 million, a slight increase from $32.3 million in the prior-year quarter, primarily due to higher shipping costs and rent expenses [11][18] Guidance and Future Outlook - The company maintains its full-year guidance for 2025 on net sales, gross margin, and adjusted EBITDA margin, despite potential impacts from additional tariff changes [8][12] - For Q3 2025, net sales are expected to increase by high single-digit to low double-digit percentages compared to the prior-year quarter [8][12] - Adjusted EBITDA for Q2 2025 was $17.7 million, up 12.8% from the prior-year quarter, with an adjusted EBITDA margin of 14.3% [8][14]

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] Financial Results Announcement - Karat Packaging Inc. will release its 2025 second quarter financial results after market close on August 7, 2025 [1] - An investor conference call will be held on the same day at 2:00 p.m. PT / 5:00 p.m. ET [2] - The conference call can be accessed via phone or webcast, with an archive available for approximately one year [2]