Karat(KRT) - 2025 Q4 - Annual Results

Financial Performance - Fourth quarter net sales reached $115.6 million, a 13.7% increase from $101.6 million in the prior-year quarter[7] - Net income for the fourth quarter increased 22.8% to $7.2 million, resulting in a net income margin of 6.2%, up from 5.8% in the prior-year quarter[12] - Full-year net sales for 2025 increased 10.7% to $467.7 million, driven by a $39.7 million increase in volume[15] - Net income for the full year increased 6.0% to $32.7 million, with a net income margin of 7.0%[20] - Net sales for Q4 2025 reached $115.617 million, a 13.8% increase from $101.649 million in Q4 2024[28] - Operating income for Q4 2025 was $8.471 million, compared to $7.300 million in Q4 2024, representing a 16% increase[28] - Net income attributable to Karat Packaging Inc. for the year ended December 31, 2025, was $31.478 million, an increase from $29.975 million in 2024[28] - For the year ended December 31, 2025, consolidated net income was $32.664 million, with Karat Packaging contributing $31.464 million[36] Profitability Metrics - Gross profit for the fourth quarter was $39.3 million, with a gross margin of 34.0%, down from 39.2% in the prior-year quarter due to elevated tariffs[10] - Gross margin for the full year was 36.8%, down from 38.9% the previous year, impacted by rising freight and duty costs[17] - Gross profit for the year ended December 31, 2025, was $172.136 million, up from $164.329 million in 2024, reflecting a gross margin of 36.7%[28] - Adjusted EBITDA for the fourth quarter was $12.5 million, with an adjusted EBITDA margin of 10.8%, compared to 11.1% in the prior-year quarter[13] - Adjusted EBITDA for Q4 2025 was $12.498 million, with an EBITDA margin of 10.8%[34] - Adjusted EBITDA for the year ended December 31, 2025, was $55.154 million, with Karat Packaging accounting for $51.361 million[36] - The adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by net sales, providing insight into operational efficiency[41] Expenses and Costs - Operating expenses for the full year were $130.7 million, an increase from $126.6 million the previous year, primarily due to higher shipping and transportation costs[18] - The company incurred secondary offering transaction costs of $214,000 in 2025, impacting the adjusted EBITDA calculation[36] - The impairment of operating right-of-use asset was $1.993 million for the year ended December 31, 2024, affecting the adjusted EBITDA[37] Cash Flow and Assets - Cash and cash equivalents increased to $37.880 million as of December 31, 2025, compared to $31.584 million in 2024[32] - Total assets decreased to $287.686 million in 2025 from $294.522 million in 2024[32] - The company reported net cash provided by operating activities of $33.815 million for the year ended December 31, 2025[32] - Free Cash Flow for the year ended December 31, 2025, was $29.310 million, compared to $43.914 million for the previous year[38] Future Outlook - The company expects first quarter 2026 net sales to increase by 8% to 10% compared to the prior-year quarter[7] - A quarterly dividend of $0.45 per share was approved, payable on or about February 27, 2026[22] Reclassifications and Adjustments - The company reclassified approximately $1.064 million in net sales from retail to chains and distributors for Q4 2024, with no effect on previously reported sales[30] Non-GAAP Measures - The company emphasizes the use of non-GAAP financial measures to provide clarity on financial performance and liquidity[39]