Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission file number 001-40336 Karat Packaging Inc. (Exact name of registrant as specified in its charter ...

Risks and Challenges - The company faces significant risks related to changes in laws and regulations affecting food and beverage products, which could negatively impact customer demand [75]. - Supply chain disruptions have already affected the company, with increased freight costs and delays leading to diminished margins in 2021, and expectations of continued impacts in 2022 [78]. - Raw material inflation and shortages, particularly of polyethylene terephthalate (PET) plastic resin, could adversely affect the company's financial condition and results of operations [79]. - The competitive landscape is challenging, with larger companies potentially offering superior products or lower prices, which could hinder the company's ability to maintain or grow net sales [80]. - Economic conditions, including consumer spending trends and discretionary income, significantly influence the company's sales, with potential declines in demand due to economic uncertainty [84]. - Changes in freight carrier costs could materially impact the company's results of operations, affecting timely delivery and cost-effectiveness [83]. - The ongoing effects of COVID-19 remain unpredictable, potentially leading to increased operating costs and supply chain disruptions [90]. - The company relies on a non-exclusive supplier network, which poses risks related to timely delivery and compliance with quality standards, potentially harming margins [86]. - Labor cost inflation and the unavailability of skilled workers could disrupt the company's operations, leading to significant losses [103]. - The company may face significant risks due to potential delays or disruptions in the shipment of goods through operational ports, which could harm its business and financial condition [99]. - Inaccurate demand forecasting could lead to excess inventory or shortages, negatively impacting sales and financial performance [95]. - The company may face legal and regulatory proceedings that could harm its financial condition and results of operations, including compliance with various laws and regulations [119]. - Credit risk is a concern for the company, particularly regarding accounts receivable, which could be impacted by customers' ability to meet payment obligations during economic downturns [121]. - The company is subject to payment-related risks, including evolving regulations and potential increases in processing fees, which could affect its operations [120]. - The company may experience difficulties in managing growth, which could lead to operational challenges and impact its profitability if sales do not increase sufficiently [116]. - The company faces risks related to international operations, including potential tariffs and trade restrictions that could materially harm its business and results of operations [125]. - Tariffs could significantly raise product costs, leading to margin erosion or the need to increase prices, which may result in customer loss [126]. - The company relies on overseas manufacturers for product shipments, making it vulnerable to delays and increased costs associated with international logistics [127]. - Foreign exchange rate fluctuations, particularly with the New Taiwan Dollar, could adversely impact the company's financial condition and results of operations [130]. Financial Condition and Capital Structure - The company plans to incur significant capital expenditures for leasing additional warehouse space and investing in its E-commerce platform, which may affect its ability to service existing debt obligations [102]. - The company has identified material weaknesses in its internal control over financial reporting, which could harm its business and lead to a decline in stock price if not remediated effectively [122]. - As of December 31, 2021, the company's disclosure controls and procedures were deemed ineffective due to these material weaknesses [123]. - The company is undertaking steps to improve its internal controls, but there is no assurance that these improvements will be successful or timely [124]. - The company may pursue acquisitions, which could result in operating difficulties and adversely affect its financial condition and growth prospects [133]. - The company does not intend to pay dividends in the foreseeable future, relying on stock price appreciation for investor returns [144]. - Karat Packaging Inc. has approximately $36.7 million in outstanding indebtedness as of December 31, 2021, secured by the company's property and equipment [147]. - The company relies on cash generated from its wholly-owned subsidiary, Lollicup, for funding operations and future dividend payments [145]. - The ability of subsidiaries to distribute cash is subject to restrictions in subsidiary agreements and applicable laws, which could impact the company's operations [145]. - The company may face significant operating and financial restrictions due to its debt agreements, potentially limiting its ability to incur additional debt or transfer assets [148]. - If the company fails to comply with debt covenants, it could trigger defaults, leading to acceleration of debt repayment [148]. Corporate Governance and Compliance - As of March 1, 2022, directors and significant stockholders own 73.1% of the company's common stock, which could limit changes in corporate control [131]. - The company is classified as an "emerging growth company," allowing it to delay adopting new financial accounting standards, which may affect investor attractiveness [153]. - The company intends to take advantage of exemptions from certain reporting requirements, which could result in a less active trading market for its common stock [154]. - The company must comply with various laws and regulations as a public entity, increasing legal and financial compliance costs [157]. - Effective internal controls over financial reporting are crucial; any failure could adversely affect the company's financial position and results [159]. - The success of new product designs and developments is critical for maintaining and increasing sales, with potential costs and risks associated with product quality and market acceptance [107].

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission file number 001-40336 Karat Packaging Inc. (Exact name of registrant as specified in its cha ...

Karat Packaging Inc. (NASDAQ:KRT) Q3 2021 Results Conference Call November 11, 2021 5:00 PM ET Company Participants Roger Pondel - PondelWilkinson IR Alan Yu - CEO Peter Lee - Interim CFO Conference Call Participants Jake Bartlett - Truist Ryan Merkel - William Blair Michael Hoffman - Stifel Operator Good afternoon, and welcome to the Karat Packaging Third Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I ...

Financial Performance - Net sales for the three months ended June 30, 2021, were $94.5 million, an increase of $9.8 million or 12% compared to $84.7 million for the same period in 2020[158]. - Gross profit decreased by $0.8 million or 3% to $28.1 million, with a gross profit margin of 29.7%, down from 34.1% in the prior year[162]. - Operating income for the three months ended June 30, 2021, was $6.9 million, a decrease of $7.6 million or 53% compared to $14.5 million in the same period in 2020[164]. - Net income for the three months ended June 30, 2021, was $9.3 million, a decrease of $0.6 million or 6% from $9.9 million in the prior year[166]. - Adjusted EBITDA for the three months ended June 30, 2021, was $10.1 million, a decrease of $6.4 million or 39% compared to $16.5 million in the same period in 2020[168]. - Net sales increased by $21.4 million, or 14%, to $170.2 million for the six months ended June 30, 2021, compared to $148.8 million for the same period in 2020[171]. - Adjusted EBITDA decreased by $5.5 million, or 25%, to $16.9 million for the six months ended June 30, 2021, compared to $22.4 million for the same period in 2020[180]. - Gross profit increased by $2.9 million, or 6%, to $49.7 million for the six months ended June 30, 2021, with a gross profit margin of 29.2%, down from 31.4% in the prior year[175]. - Net income increased by $1.9 million, or 18%, to $12.4 million for the six months ended June 30, 2021, compared to $10.5 million for the same period in 2020[179]. Expenses and Costs - Cost of goods sold increased by $10.6 million or 19% to $66.4 million for the three months ended June 30, 2021, primarily due to an increase in product costs and freight expenses[159]. - Operating expenses rose by $6.8 million or 47% to $21.2 million, driven by increased shipping costs, payroll-related costs, and rent expenses[163]. - Operating expenses rose by $10.9 million, or 39%, to $39.1 million for the six months ended June 30, 2021, primarily due to increased shipping and payroll-related costs[176]. Customer Acquisition and Market Trends - The company acquired more than 9,000 new customers in the three months ended June 30, 2021, contributing to increased product sales[158]. - The company anticipates a positive impact on operations from the growing trend towards eco-friendly and compostable single-use products due to environmental concerns[184]. - Personal protective equipment sales have declined to under 1% of net sales for the first two fiscal quarters of 2021, indicating a shift in product focus[186]. Capital Expenditures and Investments - Cash and cash equivalents were approximately $7.7 million as of June 30, 2021, with expected capital expenditures of $6.3 million for the next twelve months[189]. - The company has commitments for capital expenditures not expected to exceed $6.3 million, primarily for manufacturing equipment in Texas[193]. - The Company acquired a warehouse building in Summerville, SC for $1.1 million, adding an additional distribution facility expected to be operational by September 2021[232]. - The company anticipates future capital expenditures of up to $3.2 million for manufacturing equipment in Texas[205]. Debt and Financing - Total enforceable and legally binding obligations as of June 30, 2021 amounted to $122.3 million, with long-term debt accounting for $37.2 million[206][209]. - The line of credit had approximately $3.2 million outstanding as of June 30, 2021, down from $33.2 million at December 31, 2020[199]. - Net cash provided by financing activities for the six months ended June 30, 2021 was $14.8 million, compared to $24.0 million in the same period of 2020[194]. - The company received $5.0 million under the Paycheck Protection Program, which was fully forgiven on June 10, 2021[202][203]. - The company maintains a minimum debt service coverage ratio of 1.20 to 1.00 as per its loan agreements[195][200]. - The company recorded a gain of $5.0 million from the forgiveness of the PPP loan in its income statement for the six months ended June 30, 2021[203]. Compliance and Accounting - As of June 30, 2021, the company was in compliance with all covenants included in its business loan agreements[198][201]. - The Company is an emerging growth company and has elected to take advantage of reduced public company reporting requirements under the JOBS Act[224]. - The Company plans to adopt new accounting standards in the annual reporting period beginning after December 15, 2021, and is currently assessing the impact on its consolidated financial statements[230]. - The FASB issued ASU 2016-02, requiring lessees to recognize operating leases on their balance sheet as a right-of-use asset and corresponding lease liability[225]. - The Company is currently considered a smaller reporting company, which affects its market risk disclosures[233]. - The Company periodically reviews the recoverability of deferred tax assets and provides valuation allowances as deemed necessary by management[219]. - Adequate provisions for income taxes have been made for all years, with management making judgments on tax law interpretations that may be challenged upon audit[220]. - The Company adopted ASU 2018-07 as of January 1, 2020, which did not have a material impact on its financial position or results of operations[228].

Karat Packaging, Inc. (NASDAQ:KRT) Q2 2021 Earnings Conference Call August 12, 2021 5:00 PM ET Company Participants Roger Pondel - PondelWilkinson Alan Yu - Chairman & CEO Ann Sabahat - CFO Conference Call Participants Jake Bartlett - Truist Securities Michael Hoffman - Stifel, Nicolaus & Company Ryan Merkel - William Blair & Company Operator Good afternoon, and welcome to the Karat Packaging Second Quarter 2021 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over ...

Financial Data and Key Metrics Changes - Net sales for Q1 2021 increased by 18% to $76 million compared to the same period last year [13] - Gross profit rose by 21% to $22 million, with a gross margin increase of 70 basis points despite higher freight costs [14] - Operating income declined by 8% due to increased operating expenses, with operating margin decreasing by 140 basis points [14][15] - Net income amounted to $3 million, up from less than $1 million in Q1 2020, with net income attributable to Karat Packaging at $1.8 million or $0.12 per diluted share [16] - Adjusted EBITDA increased slightly to $6.8 million, with a consolidated adjusted EBITDA margin declining by 30 basis points to 9% [17] Business Line Data and Key Metrics Changes - Sales to distributors, the largest channel, grew by 18%, while online sales surged by 82% [13] - Sales to national chains also increased by 18%, but retail channel sales fell by 29% due to a shift towards online ordering [13][14] - The take-out container segment grew to $11 million, representing 15% of revenue, while cup-related products accounted for approximately $20 million or 25% of total revenue [51] Market Data and Key Metrics Changes - The online channel's growth was attributed to a shift in consumer preference towards food delivery, with significant investments made in this area [13][14] - The company experienced a significant increase in freight costs, with ocean freight rates more than doubling compared to the previous year [11][14] - The demand for environmentally friendly products increased as restaurants reopened, contributing to the growth in online sales [10][20] Company Strategy and Development Direction - The company aims to be a leading single-source provider for a broad set of customers in disposable foodservice products, focusing on expanding its customer base and increasing online sales [9][10] - The acquisition of Pacific Cup expanded the company's manufacturing and distribution footprint, with plans to manufacture paper straws among other products [12] - The company is evaluating other acquisition targets to further enhance its market position [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to protect near-term margins despite cost pressures from freight and raw materials [11][20] - The company anticipates strong demand to continue in the upcoming months as the economy reopens [21] - Management noted that the competitive landscape is challenging, but the company's nimble operations provide a significant advantage [20] Other Important Information - The company completed its IPO on April 15, 2021, raising approximately $73 million in gross proceeds [18] - Capital expenditures declined year-over-year due to prior investments in manufacturing equipment and facility construction [18] Q&A Session Summary Question: Demand and Fulfillment Capabilities - Management indicated that they anticipated increased demand as the economy reopened and had proactively ordered more products to meet this demand [26][28] Question: Cost Increases and Pricing Strategy - Management confirmed that they are passing through cost increases to customers while also increasing margins through online sales [30] Question: PPE Revenue Comparison - PPE revenue in Q1 2021 was $800,000 compared to $2.5 million in Q1 2020, with expectations of minimal impact moving forward [33] Question: Revenue and EBITDA Expectations for Q2 - Management expects growth to exceed 18% in Q2 2021, excluding PPE, with organic growth projected above 30% [36] Question: Freight Costs and Online Sales Drivers - Freight costs increased significantly, but management is implementing price increases to offset these costs while also benefiting from a shift to online sales [40][44] Question: Retail Channel Weakness - Management expects the retail channel to improve as more stores reopen, despite current labor shortages affecting operations [45] Question: Product Mix and Manufacturing Capabilities - The company continues to manufacture approximately 15% of its products, with plans to increase domestic manufacturing to reduce reliance on imports [53][55] Question: Eco-Friendly Product Sales - Eco-friendly products comprised roughly 20% of total revenue in Q1 2021, showing an increase from previous quarters [62]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission file number 001-40336 Karat Packaging Inc. (Exact name of registrant as specified in its charter) Delaware 83-2237 ...