Karat Packaging Reports 2025 Second Quarter Financial Results

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]