Karat(KRT)2025-05-09 20:04Financial 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].