Karat(US:KRT)2022-08-11 20:13Financial Performance - The company achieved record quarterly revenues of $114.9 million for the three months ended June 30, 2022, representing a 21.5% increase compared to $94.5 million for the same period in 2021[147]. - Net income for the three months ended June 30, 2022, was $7.2 million, despite challenges from commodity input cost inflation and supply chain disruptions[147]. - The company generated consolidated Adjusted EBITDA of $11.8 million for the three months ended June 30, 2022, an increase of 14.6% compared to the same period in 2021[147]. - Gross profit was $34.0 million for the three months ended June 30, 2022, reflecting a 20.9% increase from $28.1 million in the same period in 2021[155]. - Operating income for the three months ended June 30, 2022, was $7.8 million, a 13.6% increase from $6.9 million in the same period in 2021[157]. - Net income for the three months ended June 30, 2022 was $7.2 million, a decrease of $2.1 million, or 22.9%, compared to $9.3 million for the same period in 2021[160]. - Net sales for the six months ended June 30, 2022 were $220.3 million, an increase of $50.1 million, or 29.4%, compared to $170.2 million for the same period in 2021[161]. - Gross profit for the six months ended June 30, 2022 was $68.3 million, an increase of $18.5 million, or 37.3%, with a gross profit margin of 31.0%[165]. - Operating income for the six months ended June 30, 2022 was $17.3 million, an increase of $6.7 million, or 62.5%, compared to $10.6 million for the same period in 2021[167]. - Adjusted EBITDA for the six months ended June 30, 2022 was $24.8 million, with an Adjusted EBITDA margin of 11.3%, compared to $17.2 million and 10.1% for the same period in 2021[178]. Expenses and Costs - Freight and duty costs totaled $20.7 million during the three months ended June 30, 2022, an increase of $10.9 million from the same period in 2021, primarily due to elevated ocean freight rates[149]. - Operating expenses increased by 23.2% to $26.2 million for the three months ended June 30, 2022, compared to $21.2 million for the same period in 2021[156]. - Operating expenses for the six months ended June 30, 2022 were $51.0 million, an increase of $11.9 million, or 30.4%, compared to $39.1 million for the same period in 2021[166]. - Other income for the six months ended June 30, 2022 was $2.3 million, a decrease of $2.2 million, or 49.3%, compared to $4.5 million for the same period in 2021[168]. - Provision for income taxes for the six months ended June 30, 2022 was $4.4 million, with an effective tax rate of 22.6%, compared to $2.7 million and 18.1% for the same period in 2021[169]. Investments and Growth - The company invested $4.0 million to establish a joint venture in Taiwan for manufacturing compostable foodservice products, with production expected to start in the second half of 2022[147]. - The company added 140,000 square feet of warehouse space in May 2022 to enhance operational efficiency and support future growth[147]. - The company made payments totaling $4.0 million towards a joint venture investment in Taiwan during the three months ended June 30, 2022[185]. - The company anticipates making the remaining investment in the joint venture within the next 12 months[185]. - The increase in net sales was driven by $15.4 million from existing customers and $5.0 million from over 4,000 new customers acquired during the three months ended June 30, 2022[153]. - The increase in net sales was primarily driven by an increase of $41.6 million in product sales to existing customers and $8.5 million from over 9,000 new customers[161]. - The company continues to explore options for strategic acquisitions and investments to support business growth[186]. Cash Flow and Liquidity - For the six months ended June 30, 2022, net cash used in operating activities was $7.7 million, compared to net cash provided of $2.7 million for the same period in 2021[190]. - Net cash used in investing activities for the six months ended June 30, 2022 was $12.4 million, which included $1.6 million for manufacturing equipment and $7.6 million in deposits for additional equipment[192]. - Net cash provided by financing activities for the six months ended June 30, 2022 was $17.1 million, primarily from net borrowings of $11.6 million under the Line of Credit[193]. - The company had $11.6 million outstanding on the Line of Credit, $20.7 million under the 2027 Term Loan, and $22.5 million under the 2026 Term Loan as of June 30, 2022[184]. - As of June 30, 2022, the company reported working capital of $96.7 million, an increase of $24.6 million or 34.1% from $72.1 million at December 31, 2021[188]. - Current assets increased by $31.3 million, driven by a $5.7 million increase in accounts receivable and a $27.0 million increase in inventory due to higher sales volume[188]. - The company expects to meet its long-term liquidity needs with cash flows from operations and financing arrangements[187]. Market Conditions - The COVID-19 pandemic and macroeconomic dynamics have created significant uncertainty in the global economy, potentially affecting operations beyond 2022[186].