KRT

Image source: The Motley Fool. Thursday, Aug. 6, 2026 at 5:00 p.m. ET Chief Executive Officer - Alan Yu Chief Financial Officer - Jian Guo Operator: Good day, and welcome to the Karat Packaging Second Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Roger Pondel. Roger Pondel: Good afternoon, everyone, and welcome to Karat Packaging's 2026 second quarter conference call. I'm Roger Pondel with PondelWilkinson, Karat Packaging's investor relations firm. It will be my pleasure momentarily to introduce the company's Chief Executive Officer, Alan Yu; and its Chief Financial Officer, Jian Guo. Before I turn the call over to Alan, I want to remind our listeners that today's call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous conditions, many of which are beyond the company's control, including those set forth in the risk factor section of the company's most recent Form 10-K, as filed with the Securities and Exchange Commission, and copies of which are available on the SEC's website at www.sec.gov, along with other company filings made with the SEC from time to time. Actual results could differ materially from these forward-looking statements, and Karat Packaging undertakes no obligation to update any forward-looking statements except as required by law. Please also note that during this call, we will be discussing adjusted EBITDA, adjusted EBITDA margin, adjusted diluted earnings per share, and free cash flow, which are non-GAAP financial measures as defined by SEC Regulation G. A reconciliation of the most directly comparable GAAP measures to the non-GAAP financial measures is included in today's press release, which is now posted on the company's website. And with that, I will turn the call over to CEO Alan Yu. Alan? Alan Yu: Thank you, Roger. Good afternoon, everyone. We delivered record quarterly net sales of more than $136 million, reflecting the strength of our customers' demand and accelerated momentum in our online business growth. During the quarter, our sales pipeline expanded, adding four new chain accounts, which further broadened our market reach and created additional opportunities for future revenue growth. We continue to experience encouraging momentum across our business, highlighted by the strong performance of our online channel, where net sales increased 23.6% year over year. Our eco-friendly product portfolio also continued to gain traction, benefiting from the continued expansion of SKUs and growth in the paper bag categories. As a result, eco-friendly products represented 33.8% of total sales during the quarter, compared with 31.8% in the prior-year period. Our results also benefited from IEEPA tariff refunds, which reverses higher tariff costs absorbed in the prior periods, and further contributed to the strong reported profitability. While we were pleased to capture this benefit in the quarter, our focus remains on the fundamental drivers of the business and sustaining strong long-term financial performances. To support our long-term growth strategy, we are currently finalizing a lease for a 47,000-square-foot warehouse for a new distribution center in Orlando, Florida, which we expect to be operational by the third quarter of this year. The new facility is expected to enhance Karat's ability to better service customers throughout the Southeast, improve fulfillment capability for our growing e-commerce business, reduce delivery time, and provide additional infrastructure to support future growth. At the same time, we remain focused on driving operational excellence. We are continuing to execute initiatives designed to enhance efficiency across the organization, while carefully managing costs, aiming to support sustainable profitability, and position the company for continued success. During this quarter, we achieved gross margin of 56.6%, including the benefit from the IEEPA tariff refund of 1,890 basis points. Despite higher product costs and ocean freight rates, the performance underscores the strength of our sourcing capabilities. Our sourcing diversification initiative continues to deliver tangible benefits, strengthening Karat's competitive advantage through reliable product availability and cost competitiveness. In the second quarter, domestic purchase increased to nearly 20% of total sourcing, while importing from Taiwan represented 46%, China represented 11%, and sourcing from Indonesia, Singapore, and South America represented an aggregate of 12%. Overall, we are pleased with the progress we are making with the expanding sales pipeline, new customer wins, strong e-commerce growth, and a continued focus on the operational discipline. We believe Karat is well positioned to advance profitability and long-term growth. I will now turn the call over to Jian Guo, our Chief Financial Officer, to discuss the company financial results in greater detail. Jian? Jian Guo: Thank you, Alan. I'll begin with a summary of our second quarter performance, followed by an update on our guidance. Net sales for the 2026 second quarter increased to $136.3 million, up 9.9% from $124.0 million in the prior-year quarter. The increase primarily reflected $13.1 million in volume growth and product mix, and a $0.4 million favorable impact from pricing, partially offset by a decrease of $1.1 million in shipping and logistics revenue. Sales to chain accounts and distributors, our biggest sales channel, were up by 9.0% in the 2026 second quarter. Online sales, as Alan discussed earlier, rose 23.6% over the prior-year quarter, and sales to the retail channel declined 23.4% from the 2025 second quarter, primarily from the decrease in shipping and logistics revenue. Costs of goods sold for the 2026 second quarter, including the benefit of $25.8 million from IEEPA tariff refunds, decreased 21.0% to $59.1 million from $74.9 million in the prior-year quarter. This benefit was partially offset by higher product costs of $6.9 million and increased import costs of $3.5 million, including an 8.9% increase in average container rates and a 4.3% increase in the number of containers imported versus the prior-year quarter. Gross profit for the 2026 second quarter increased to $77.2 million from $49.1 million in the prior-year quarter. Gross margin increased to 56.6% in the second quarter of 2026 from 39.6% a year ago, reflecting that 1,890 basis point contribution from IEEPA tariff refunds. Product costs represented 49.2% of net sales, up from 48.5% in the prior-year quarter, while import costs increased to 11.1% of net sales from 9.5%, primarily due to higher freight and import-related expenses. Operating expenses in the 2026 second quarter increased to $39.6 million from $32.6 million last year. The increase was primarily driven by higher shipping and transportation costs of $3.1 million, along with increases in online platform of $0.6 million and marketing expenses of $0.5 million. We also incurred higher costs of $1.1 million in salaries and benefits, while bad debt expense and warehouse expenses increased by $0.6 million and $0.4 million, respectively. Additionally, the second quarter included a $0.1 million loss on the disposal of machinery compared with a $0.3 million gain recognized in the prior-year quarter from routine asset disposals. Operating income in the 2026 second quarter increased 127.2% to $37.6 million from $16.6 million in the prior-year quarter. Other income net for the 2026 second quarter was $1.4 million compared to other expenses net of $2.0 million in the prior-year quarter. The year-over-year improvement was primarily driven by significantly lower foreign currency transaction losses, which were $0.1 million in the current quarter compared with $2.9 million in the same period last year. In addition, interest income increased by $0.5 million, reflecting $0.9 million of interest income associated with IEEPA tariff refund, partially offset by a $0.4 million decline in interest income earned on investments in certificates of deposit. Net income for the 2026 second quarter increased 168.3% to $29.6 million from $11.1 million for the prior-year quarter. Net income margin was 21.8% in the 2026 second quarter, reflecting the benefit from IEEPA tariff refunds of 1,480 basis points versus 8.9% last year. Net income attributable to Karat for the 2026 second quarter was $29.3 million, or $1.46 per diluted share, reflecting the benefit from IEEPA tariff refunds of $1 per diluted share compared with $10.9 million, or $0.54 per diluted share in the prior-year quarter. Adjusted EBITDA for the 2026 second quarter rose to $41.6 million, reflecting the benefit from IEEPA tariff refunds of $25.8 million from $17.7 million for the prior-year quarter. Adjusted EBITDA margin was 30.5%, reflecting the benefit from IEEPA tariff refunds of 1,890 basis points compared with 14.3% for the 2025 second quarter. Adjusted diluted earnings per common share increased to $1.48 for the 2026 second quarter, reflecting the benefit from IEEPA tariff refunds of $1 per diluted share from $0.57 per share in a comparable prior-year period. As of June 30, 2026, we had working capital of $110.8 million and $42 million in financial liquidity, with another $15.7 million in short-term investments. During the second quarter, we generated operating cash flow of $33.2 million and free cash flow of $31.8 million, both of which reflected the benefit from IEEPA tariff refunds received of $25.2 million during the second quarter of 2026. We paid out a regular quarterly dividend of $0.45 per share to shareholders on May 28, 2026. During the second quarter, we repurchased 73,510 shares of our common stock for a total of $2 million under our share repurchase program. As of June 30, approximately $10 million remained available under the program. On August 4, 2026, our board of directors approved an increase of regular quarterly dividend to $0.47 per share, payable on August 28, 2026, to stockholders of record as of August 21, 2026. Now, let me provide an update to our guidance. For the 2026 third quarter, we expect net sales to grow in the low double-digit range from the prior-year quarter. We expect gross margin for the 2026 third quarter to be within 35% to 37% and adjusted EBITDA margin to be within 9% to 11%, both including insignificant IEEPA tariff refunds anticipated during the quarter. For full year 2026, we expect net sales to grow in the low double-digit range over the prior year. With more clarity around the IEEPA tariff refund process, we now expect gross margin for the full year 2026 to be in the low 40% and adjusted EBITDA margin to be approximately mid-teens, both including IEEPA tariff refunds recorded during the first half of 2026. As Alan mentioned earlier, we are experiencing what we believe is accelerated growth in our sales pipeline, reflecting current strong market position and ongoing initiatives to gain market share. Looking ahead, we expect to continue driving top-line growth, sustaining healthy growth momentum through our diverse [ sourcing ] strategy and reduced tariffs. We're also confident that the actions we're taking to manage operating costs will further improve operating leverage and drive sustainable profitability. Alan and I will now be happy to answer your questions, and I'll turn the call back to the operator. Operator: [Operator Instructions] The first question today comes from Michael Francis with William Blair. Michael Francis: I want to start on the SG&A. That seemed to be the big surprise for us in the quarter to the downside. You mentioned you have some actions that you're taking to improve that. Can you talk a bit more about, A, what surprised you there, and then, B, what you're doing to offset some of the higher costs? Jian Guo: Yes, sure. Let me start and then Alan, please feel free to add some additional colors there. So in terms of the SG&A, I know you mentioned some surprises. I think really the way that we think about it is just consistent with the trend that we are observing with the macro environment, right? Just the biggest item that we are focusing on for the third quarter as far as the cost management is really the shipping cost. So shipping costs, a lot of the orders that we ship out to the customers, we utilize the third-party carriers. We partner with our third-party carriers. That's an area that we're focusing on in the third quarter to try to manage the cost. Just to give you a high-level idea, so the second quarter in terms of the offline shipping cost. In total, we incurred about $6.1 million on the year-over-year basis. That's a sequential $1.4 million increase right there. So that's one area that in the third quarter really we're focusing on utilizing our internal fleet to try to minimize, to get more efficiency out of the offline shipping cost to the customers by, as I mentioned, utilizing the internal fleet. We're delivering orders -- local orders to our local customers with our own employees. And we're also performing the inter-warehouse inventory transfers with some of our internal fleet as well. So that's the biggest area. Another area is we're continuing to try to get savings on the online order as well, online order delivery cost. The shipping cost is one area that we talked about previously on the call is we have a service agreement with one of the carriers, so that's one area that we're continuing to focus on in terms of realizing cost savings there. So that's the biggest kind of in terms of the offline and online shipping costs, really. I think it's probably fairly consistent with some of the other companies just as we approach, as we're thinking about the overall higher oil, the gas price there. One other area that we're focusing on in the third quarter is our salary and benefit expenses. That's really to utilize our labor force more efficiently. So those are the two biggest areas I would call out. Alan Yu: I want to add a little bit of color to that, what Jian just mentioned. The second quarter was the highest fuel cost that we ever seen in the past year due to the crisis in the Middle East. And in the third quarter, we are actually seeing the cost coming down in the third quarter already. Like for instance, we were paying $5.40 per gallon diesel gas. In the third quarter, we're looking at ship around $4-something, 25% discount on the diesel gas alone. On the carrier fuel surcharge also we're seeing a declining rate from the second quarter to third quarter. So this is where we're seeing that more of a decline in not only on the ocean freight declines and also as well as the shipping, all because oil prices. Everyone knows that the second quarter oil price was the highest ever but it started to drop in July, so we'll see if it's a continued drop or even at this point it is still lower than the second quarter. Michael Francis: Yes, that's not surprising. I figured that was the case. And then to the pause of your online sales are continuing to trend quite well. What drove the strength there and then across the category? Should we expect the similar growth trajectory to the -- in the second half that we saw in the first? Alan Yu: Well, let me add to this online growth. During our last quarter earning call, I mentioned that we are -- our target for this year's online revenue is $100 million. As we see July's number, we were looking at the second quarter, we're looking at 20%, 24%, 25%. I think the online growth year-over-year just in July we're seeing Amazon growth around 49% year-over-year growth just in Amazon. Our overall online sales growth in July -- in the month of July we just finished a number, we're at 37% plus just the online sales growth. So right now I can confidently say that $100 million is on track for this year's revenue goal just for online. Definitely it may be higher but I'm not sure how much higher, so we're still pushing even more online sales right now, that's where we are. Michael Francis: That's good to hear. One last one for me. Florida D.C. coming online, you continue to sort of add capacity there. Do you still think you have any sort of gaps in your current coverage where you could add more DCs and sellers, and if so, where? Alan Yu: Well, Orlando, Florida, it's on the, basically we're finalizing the agreement and that's going to help because that is our fourth largest online customer base. And we have been shipping from South Carolina and Houston into Orlando. Once we have the Orlando D.C. ready, our customer can receive their product the next day, if not the following day, instead of waiting three or five days. So that would definitely improve our sales number online in just the Southeast area, which is our fourth largest. Now the other area that we're seeing that we might need some support, definitely it would be in the Colorado area, which can support the Utah area. But we're still looking at that because Colorado is, the shipping, anything shipping to Colorado is actually more into Texas. That's what we see. So currently we're shipping to Colorado from Texas into Colorado, which is two to three days for online. And, of course, we have been looking to the North America area, the Vancouver, Toronto. These are the areas we have been trying to figure how we can get the logistic part of the issues resolved because we do see a very wide open market in that part of the segment, which is North America. Michael Francis: Okay, that's all understood. I'll pass it on. Operator: The next question comes from Ryan Meyers with Lake Street. Ryan Meyers: If we exclude the tariff refund during the quarter, I'm just curious, how would you characterize just the underlying gross margin and performance of the business? Was it relatively as you expected? Jian Guo: Let me start and then, Alan, please feel free to add colors on there as well. Hi Ryan, that's a great question. So as we reported our gross margin is 56.6% for the quarter. If you do the math, if you exclude the contribution, our gross margin without the refund -- tariff refund would have been 37.7%, which I think is still really strong. We're talking about high, close to 40% gross margin. And I think we talked about the underlying drivers, right? Our sourcing diversification, our sourcing capabilities. And I think we do expect to continue to navigate this environment really well with the pricing dynamics, with the sourcing, the changing kind of the trade landscape. We did provide the guidance for the third quarter gross margin to continue to be in the high 30s, so 35% to 37%. Does that answer your question? Alan Yu: Yes, Ryan, I want to add something to this. During the second quarter, we did see our, like Jian mentioned, a 37.7%. And in the third quarter, we're seeing a stronger U.S. dollar versus other currency in Asia, especially against Taiwan dollars. Last year, if you saw the second quarter, we had a $2.9 million currency loss due to the currency devaluation of U.S. dollars against Taiwan dollars. Now we're seeing a strong tailwind, which is the currency gain. We're seeing one of the highest gains in the third quarter that we're looking at as we stay at the same current level right now. So there's going to be some pretty positive things in the third quarter, like the ocean freight. There might be some reduction in ocean freight, because we're about to ending the peak season. Might not be a lot but it's definitely going to help. I think everything helps in terms of helping the gross margin and also we're looking at not only on that part, we're looking at into the savings in terms of operating expense as well. Ryan Meyers: Got it. Now, that's great to hear. That's awesome. And then, you know, lastly, you mentioned in the press release that you guys added four new chain accounts during the quarter. You know, how should we think about the timing and potential contribution from those wins? Alan Yu: We're thinking about the fourth quarter. So we start to ship the product. Yes, it takes us two to three months to ramp up the inventory and then start the -- so we promise the customers fourth quarter we'll start shipping the product. Ryan Meyers: Okay, got it. No, that's helpful. Thanks for taking my questions. Operator: This concludes our question and answer session. I would like to turn the conference back over to Alan Yu for any closing remarks. Alan Yu: Thank you, Operator, and thank you to everyone for joining us today. Karat is built on a strong business foundation, and we are encouraged by the positive momentum across our business. We remain focused on executing our growth strategy and look forward to keeping you updated on our continued progress. Have a nice day, everyone. Thank you. Bye-bye. Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Before you buy stock in Karat Packaging, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Karat Packaging wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $400,209!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,375,393!* That performance is why people listen. With a track record of beating the S&P 500 by 4x, Stock Advisor offers a distinct advantage. 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Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Achieved record net sales driven by robust customer demand and a 23.6% surge in the online sales channel. Expanded the sales pipeline with four new chain accounts, which are expected to begin contributing to revenue in the fourth quarter of 2026. Eco-friendly products reached 33.8% of total sales, supported by an expanded SKU portfolio and growth in the paper bag category. Sourcing diversification remains a core competitive advantage, with domestic purchases increasing to nearly 20% and reduced reliance on China (11%). Profitability was significantly bolstered by $25.8 million in IEEPA tariff refunds, which reversed higher costs absorbed in prior periods. Management is addressing logistical efficiency by finalizing a new 47,000-square-foot distribution center in Orlando to better serve the Southeast market. Projecting low double-digit net sales growth for both the third quarter and the full year of 2026. Full-year gross margin is expected in the low 40% range, with adjusted EBITDA margin targeted at approximately mid-teens. Online revenue is on track to reach or exceed the $100 million annual goal, supported by 37% growth observed in July. The Orlando distribution center is expected to be operational by Q3 2026, aiming to reduce delivery times to one or two days for a major customer base. Management anticipates improved operating leverage through internal fleet utilization and more efficient labor force management. Gross margin of 56.6% included an 1,890 basis point benefit from one-time IEEPA tariff refunds; excluding this, margin was 37.7%. Higher product costs ($6.9 million) and increased import costs ($3.5 million) acted as headwinds during the quarter. Foreign currency transaction losses improved significantly to $0.1 million from $2.9 million in the prior year due to a stronger U.S. dollar. Operating expenses rose due to a $3.1 million increase in shipping and transportation costs, largely driven by peak fuel prices in Q2. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management is shifting toward using an internal fleet for local deliveries and inter-warehouse transfers to reduce reliance on expensive third-party carriers. Fuel costs are trending downward in Q3, with diesel prices dropping from $5.40 to approximately $4.00 per gallon. A new service agreement with a major carrier is expected to yield additional savings on online order delivery costs. July data showed Amazon-specific growth of 49% and overall online growth of 37%, giving management high confidence in the $100 million annual target. The new Florida facility is strategically located to support the company's fourth-largest online customer base. Beyond Florida, management is evaluating Colorado to support the Utah market, though Texas currently services that region within 2-3 days. The company is exploring logistics solutions for Vancouver and Toronto to tap into the broader North American market.

Interested in Karat Packaging Inc.? Here are five stocks we like better. Record sales: Karat Packaging’s second-quarter net sales rose 9.9% year over year to $136.3 million, driven by 23.6% online-sales growth and stronger channel-account demand. The company added four chain accounts and expects to begin shipments in the fourth quarter. Tariff refunds boosted results: A $25.8 million IEEPA tariff refund lifted gross margin to 56.6% and contributed roughly $1.00 to diluted earnings per share. Net income rose 168.3% to $29.6 million, but gross margin excluding the refund was 37.7%. Positive outlook and expansion: Karat expects low-double-digit sales growth in the third quarter and for the full year, while opening a 47,000-square-foot Orlando distribution center to improve Southeast delivery times. The company also raised its quarterly dividend to $0.47 per share and has about $10 million remaining under its share-repurchase authorization. Wrapping Up Profits: Karat Packaging's Earnings Reward Karat Packaging (NASDAQ:KRT) reported record second-quarter net sales of $136.3 million, up 9.9% from $124.0 million a year earlier, as growth in its online business and customer demand helped offset higher product and import costs. Chief Executive Officer Alan Yu said the company added four new chain accounts during the quarter, expanding its sales pipeline and creating potential revenue opportunities. He said Karat expects to begin shipping products to those accounts in the fourth quarter after building inventory over the next two to three months. → Meta’s Earnings Drop Shows Wall Street Wants More Than Ad Growth Bristol Myers Squibb’s big buys: $18.1 billion in 2 biotech deals Online sales increased 23.6% year over year in the second quarter. Yu said the company remains on track toward its $100 million online-revenue target for 2026, adding that July online sales grew more than 37% from the prior-year month and Amazon sales rose about 49%. Second-quarter profitability was significantly affected by $25.8 million in refunds related to IEEPA tariffs, which reflected higher tariff costs the company had absorbed in prior periods. → Visa’s BioCatch Deal Could Make Fraud Prevention a Bigger Business Gross profit increased to $77.2 million from $49.1 million a year earlier, while gross margin rose to 56.6% from 39.6%. The tariff refunds contributed 1,890 basis points to gross margin, according to Chief Financial Officer Jian Guo. Excluding the refund contribution, Guo said gross margin would have been 37.7%. Cost of goods sold declined 21% to $59.1 million despite higher product costs and import expenses. Product costs increased by $6.9 million, while import costs rose $3.5 million, including an 8.9% increase in average container rates and a 4.3% increase in imported containers. → Ulta's Growth Is Real, But So Are the Risks Operating income climbed 127.2% to $37.6 million. Net income increased 168.3% to $29.6 million, and net income attributable to Karat was $29.3 million, or $1.46 per diluted share, compared with $10.9 million, or $0.54 per diluted share, in the prior-year quarter. The company said tariff refunds accounted for approximately $1 per diluted share. Adjusted EBITDA rose to $41.6 million from $17.7 million, while adjusted EBITDA margin reached 30.5%, including the tariff-refund benefit. Adjusted diluted earnings per share were $1.48, compared with $0.57 a year earlier. Sales growth was driven primarily by $13.1 million in volume growth and product mix, plus a $0.4 million favorable pricing impact. Those gains were partly offset by a $1.1 million decrease in shipping and logistics revenue. Sales to channel accounts and distributors increased 9.0%. Online sales increased 23.6%. Retail-channel sales declined 23.4%, primarily because of lower shipping and logistics revenue. Eco-friendly products represented 33.8% of total sales, up from 31.8% in the prior-year quarter, supported by additional stock-keeping units and growth in paper-based categories. Yu said Karat’s sourcing diversification continued to support product availability and cost competitiveness. Domestic purchases accounted for nearly 20% of total sourcing during the quarter, while Taiwan represented 46%, China represented 11%, and Indonesia, Singapore and South America collectively represented 12%. Operating expenses increased to $39.6 million from $32.6 million. The increase included $3.1 million in higher shipping and transportation costs, as well as increases in online-platform, marketing, salaries and benefits, bad-debt and warehouse expenses. Guo said the company is focused on reducing shipping costs by using its internal fleet more efficiently for local deliveries and inter-warehouse inventory transfers. Karat also is pursuing savings on e-commerce delivery costs through its carrier arrangements. Yu said fuel costs were elevated during the second quarter amid the Middle East crisis but had declined in the third quarter. He cited diesel prices that had fallen from about $5.40 per gallon in the second quarter to “four something” in the third quarter, alongside lower carrier fuel surcharges. Karat is finalizing a lease for a 47,000-square-foot distribution center in Orlando, Florida, expected to be operational in the third quarter. Yu said the facility is intended to improve service in the Southeast, where Orlando is the company’s fourth-largest online customer base. The facility is expected to shorten delivery times for customers currently served from South Carolina and Houston. The company is also evaluating potential logistics support in Colorado to serve Utah and is considering opportunities in Vancouver and Toronto, Yu said. For the third quarter, Karat expects net sales to grow in the low double-digit range from the prior-year period. It forecast gross margin of 35% to 37% and adjusted EBITDA margin of 9% to 11%, with insignificant IEEPA tariff refunds anticipated during the quarter. For the full year, the company expects low-double-digit net-sales growth, gross margin in the low 40% range and adjusted EBITDA margin at approximately the mid-teens. Full-year margin expectations include IEEPA tariff refunds recorded in the first half of 2026. As of June 30, Karat had $110.8 million in working capital, $42 million in financial liquidity and $15.7 million in short-term investments. Operating cash flow totaled $33.2 million and free cash flow was $31.8 million during the quarter, both aided by $25.2 million in tariff refunds received. The company repurchased 73,510 shares for $2 million during the quarter, leaving approximately $10 million authorized under its repurchase program. Karat also increased its regular quarterly dividend to $0.47 per share, payable Aug. 28 to shareholders of record as of Aug. 21. Karat Packaging Technologies, Inc (NASDAQ: KRT) is a U.S.-based provider of premium packaging solutions for consumer goods and industrial products. The company specializes in the design, manufacture and delivery of high-quality litho-laminated folding cartons, tubes and flexible packaging. Karat Packaging operates an integrated production model that combines prepress, printing, converting and finishing capabilities to support the branding and shelf-appeal needs of its customers. The company serves a diverse range of end markets, including food and beverage, confectionery, health and beauty, pharmaceuticals, specialty chemicals and promotional packaging. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Karat Packaging Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

— Online Growth Fuels Record Sales and Solid Profitability — CHINO, Calif., Aug. 06, 2026 (GLOBE NEWSWIRE) -- Karat Packaging Inc. (Nasdaq: KRT) ("Karat Packaging" or the "Company"), a specialty distributor and manufacturer of environmentally friendly, disposable foodservice products and related items, today announced financial results for its second quarter ended June 30, 2026. Second Quarter 2026 Highlights Record quarterly net sales of $136.3 million, up 9.9 percent, from $124.0 million in the prior-year quarter. International Emergency Economic Powers Act ("IEEPA") tariff refunds reduced costs of goods sold by $25.8 million, reversing IEEPA tariff costs absorbed in prior periods, and increased other income, net by $0.9 million, from interest received related to the refunds. Gross profit of $77.2 million, including contribution of $25.8 million from the IEEPA tariff refunds, up 57.1 percent, from $49.1 million in the prior-year quarter. Gross margin of 56.6 percent, including contribution of 1,890 basis points from the IEEPA tariff refunds, compared with 39.6 percent in the prior-year quarter. Net income of $29.6 million, including contribution of $20.2 million from the IEEPA tariff refunds, up 168.3 percent, from $11.1 million in the prior-year quarter. Net income margin of 21.8 percent, including contribution of 1,480 basis points from the IEEPA tariff refunds, versus 8.9 percent in the prior-year quarter. Adjusted EBITDA of $41.6 million, including contribution of $25.8 million from the IEEPA tariff refunds, versus $17.7 million in the prior-year quarter. Adjusted EBITDA margin of 30.5 percent, including contribution of 1,890 basis points from the IEEPA tariff refunds, versus 14.3 percent in the prior-year quarter. Guidance Net sales for the 2026 third quarter expected to increase by low double-digits from the prior-year quarter. Gross margin for the 2026 third quarter expected to be within 35 to 37 percent, including insignificant IEEPA tariff refunds anticipated during the quarter. Adjusted EBITDA margin for the 2026 third quarter expected to be within 9 to 11 percent, including insignificant IEEPA tariff refunds anticipated during the quarter. Net sales for full-year 2026 expected to increase by low double-digits from the prior year. Gross margin for full-year 2026 expected to be in the low 40 percents, including IEEPA tariff refunds recorded during the first half of 2026. Adjusted EBITDA margin for full-year 2026 expected to be approximately mid-teens, including IEEPA tariff refunds recorded during the first half of 2026. “We delivered record quarterly net sales of $136.3 million, driven by solid customer demand and accelerated momentum in our online business growth,” said Alan Yu, Chief Executive Officer. “Our financial performance included a benefit from the IEEPA tariff refunds, which further contributed to strong reported profitability. “We continue to experience encouraging momentum across the business and our sales pipeline is expanding. During the quarter we added four new chain accounts and our online business grew 23.6 percent over the prior-year quarter, further strengthening our growth prospects. At the same time, we continue to execute plans to enhance operational efficiency and manage costs to support sustainable profitability. “To support our long-term growth strategy, we are currently finalizing a lease for a 47,000-square-foot warehouse for a new distribution center in Orlando, Florida, which we expect to be operational by the third quarter of this year. The new facility is expected to enhance Karat’s ability to better serve customers throughout the Southeast, improve fulfillment capabilities for our growing e-commerce business, reduce delivery times, and provide additional infrastructure to support future growth,” Yu added. Second Quarter 2026 Financial Results Net sales for the 2026 second quarter increased 9.9 percent to $136.3 million, from $124.0 million in the prior-year quarter. The increase was primarily driven by $13.1 million in volume growth and product mix, as well as a $0.4 million favorable year-over-year pricing comparison, partially offset by a decrease of $1.1 million in shipping and logistics revenue. Cost of goods sold for the 2026 second quarter decreased 21.0 percent to $59.1 million, from $74.9 million in the prior-year quarter. The decrease was primarily driven by IEEPA tariff refunds of $25.8 million, partially offset by higher product costs of $6.9 million, primarily due to increased sales volume and resin price, coupled with higher import costs, including duty and tariffs and ocean freight of $3.5 million, mainly due to a 4.3 percent increase in number of containers imported and an 8.9 percent increase in average container rate compared to the prior-year quarter. Gross profit for the 2026 second quarter increased to $77.2 million, including contribution of $25.8 million from the IEEPA tariff refunds, from $49.1 million in the prior-year quarter. Gross margin was 56.6 percent in the 2026 second quarter, including contribution of 1,890 basis points from the IEEPA tariff refunds, compared with 39.6 percent in the prior-year quarter. Partially offsetting this benefit, product costs as a percentage of net sales increased to 49.2 percent from 48.5 percent, and import costs as a percentage of net sales increased to 11.1 percent from 9.5 percent compared to the prior-year quarter. Operating expenses for the 2026 second quarter increased to $39.6 million, from $32.6 million in the prior-year quarter. The increase was primarily driven by $3.1 million in higher shipping and transportation costs due to increased shipping volume and shipping rate, $0.6 million higher online platform fees, and $0.5 million higher marketing expense due to a 23.6 percent online sales growth. Other increases included a $1.1 million increase in salaries and benefits, a $0.6 million increase in bad debt expense, and a $0.4 million increase in warehouse expense. Further, 2026 second quarter included a $0.1 million loss compared with a $0.3 million gain on disposal of machinery in the normal course of business in the prior-year quarter. Other income, net for the 2026 second quarter was $1.4 million, compared with other expenses, net, of $2.0 million in the prior-year quarter. The increase in other income, net was mainly driven from a loss on foreign currency transactions of $0.1 million, compared to a loss of $2.9 million during the same period last year. In addition, interest income increased $0.5 million due to $0.9 million interest income related to IEEPA tariff refunds recognized in the 2026 second quarter, partially offset by a decrease of $0.4 million in interest income from investment in certificates of deposit compared to the prior-year quarter. Net income for the 2026 second quarter increased 168.3 percent to $29.6 million, including contribution of $20.2 million from the IEEPA tariff refunds, from $11.1 million in the prior-year quarter. Net income margin was 21.8 percent in the 2026 second quarter, including contribution of 1,480 basis points from the IEEPA tariff refunds, compared with 8.9 percent in the prior-year quarter. Net income attributable to Karat Packaging for the 2026 second quarter was $29.3 million, or $1.46 per diluted share, including contribution of 1.00 per share from the IEEPA tariff refunds, compared with $10.9 million in the prior-year quarter, or $0.54 per diluted share. Adjusted EBITDA, a non-GAAP measure defined below, was $41.6 million for the 2026 second quarter, including contribution of $25.8 million from the IEEPA tariff refunds, compared with $17.7 million for the prior-year quarter. Adjusted EBITDA margin, a non-GAAP measure defined below, was 30.5 percent of net sales for the 2026 second quarter, including contribution of 1,890 basis points from the IEEPA tariff refunds, compared with 14.3 percent for the prior-year quarter. Adjusted diluted earnings per common share, a non-GAAP measure defined below, was $1.48 per share for the 2026 second quarter, including contribution of $1.00 per share from the IEEPA tariff refunds, compared with $0.57 per share for the prior-year quarter. Six-Month 2026 Financial Results Net sales for the first half of 2026 increased 11.3 percent to $253.2 million, from $227.6 million in the same period last year. The increase was primarily due to an increase of $25.4 million in volume and change in product mix, as well as a $2.3 million favorable year-over-year pricing comparison, partially offset by a decrease of $2.0 million in shipping and logistics revenue. Cost of goods sold for the first half of 2026 decreased 2.3 percent to $134.6 million, from $137.7 million in the same period last year, primarily due to IEEPA tariff refunds of $25.8 million in the first half of 2026. This decrease is partially offset by an increase of $12.1 million in product costs primarily driven by higher sales volume and resin price, and an increase of $10.7 million in import costs, including duty and tariffs and ocean freight, primarily as a result of higher import duty and tariffs. Gross profit for the first half of 2026 increased 32.1 percent to $118.7 million, including contribution of $25.8 million from the IEEPA tariff refunds, from $89.9 million in the same period last year. Gross margin was 46.9 percent for the first half of 2026, including contribution of 1,020 basis points from the IEEPA tariff refunds, compared with 39.5 percent in the same period last year. Product costs as a percentage of net sales decreased to 48.8 percent from 48.9 percent, while import costs increased to 12.4 percent from 9.1 percent, compared to the same period of 2025. Operating expenses for the first half of 2026 were $72.6 million, compared with $65.5 million in the same period last year. The increase was primarily driven by a $2.7 million increase in shipping and transportation costs due to higher shipping volume and increased shipping rate, as well as higher salaries and benefits, bad debt expense, warehouse expense, and marketing expenses. Further, the first half of 2026 included a $0.1 million loss compared to a $0.3 million gain on disposal of machinery in the normal course of business in the same period of 2025. Other income, net for the first half of 2026 was $2.3 million, compared with other expenses, net, of $0.9 million in the same period last year. The increase in other income, net was mainly driven by a gain on foreign currency transactions of $0.2 million, compared to a loss of $2.6 million during the same period last year. In addition, interest income increased $0.2 million due to $0.9 million interest income related to IEEPA tariff refunds recognized in the first half of 2026, partially offset by a decrease of $0.7 million in interest income from investment in certificates of deposit compared to the same period of 2025. Net income increased 105.9 percent to $36.8 million for the first half of 2026, including contribution of $20.2 million from the IEEPA tariff refunds, from $17.9 million in the same period last year. Net income margin was 14.5 percent in the first half of 2026, including a contribution of 800 basis points from the IEEPA tariff refunds, compared with 7.8 percent in the same period of 2025. Net income attributable to Karat Packaging was $36.1 million, or $1.80 per diluted share, including contribution of 1.00 per share from the IEEPA tariff refunds, for the first half of 2026, compared with $17.3 million, or $0.86 per diluted share, in the same period of 2025. Adjusted EBITDA, a non-GAAP measure defined below, was $54.1 million in the first half of 2026, including contribution of $25.8 million from the IEEPA tariff refunds, compared with $29.6 million in the same period last year. Adjusted EBITDA margin, a non-GAAP measure defined below, was 21.4 percent in the first half of 2026, including contribution of 1,020 basis points from the IEEPA tariff refunds, compared with 13.0 percent in the same period of 2025. Adjusted diluted earnings per common share, a non-GAAP measure defined below, was $1.83 per share in the first half of 2026, including contribution of $1.00 per share from the IEEPA tariff refunds, compared with $0.90 per share in the same period of 2025. Dividend On August 4, 2026, Karat Packaging’s Board of Directors approved an increase in its regular quarterly dividend to $0.47 per share on the Company’s common stock, payable on or about August 28, 2026, to stockholders of record as of August 21, 2026. Share Repurchase Program During the second quarter of 2026, the Company repurchased 73,510 shares of its common stock at an average price of $27.11 per share, for a total investment of approximately $2.0 million, under its previously announced Share Repurchase Program. As of June 30, 2026, approximately $10.0 million remained available for future repurchases under the program. No shares were repurchased during the first quarter of 2026 or the six months ended June 30, 2025. Investor Conference Call The Company will host an investor conference call today, August 6, 2026, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to discuss its 2026 second quarter results. About Karat Packaging Inc. Karat Packaging Inc. is a specialty distributor and manufacturer of a wide range of disposable foodservice products and related items, primarily used by national and regional restaurants and in foodservice settings throughout the United States. Its products include food and take-out containers, bags, tableware, cups, lids, cutlery, straws, specialty beverage ingredients, equipment, gloves and other products. The Company’s eco-friendly Karat Earth® line offers quality, sustainably focused products that are made from renewable resources. Karat Packaging also offers customized solutions, including new product development and design, printing, and logistics services. To learn more about Karat Packaging, please visit the Company’s website at www.karatpackaging.com. Caution Concerning Forward-Looking Statements Statements made in this release that are not statements of historical or current facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We caution readers that forward-looking statements are predictions based on our current expectations about future events. These forward-looking statements, including, but not limited to, achieving our financial guidance, are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Our actual results, performance, or achievements could differ materially from those expressed or implied by the forward-looking statements as a result of a number of factors, including the risks discussed under the caption “Item 1A. Risk Factors” in Part I of our most recent Annual Report on Form 10-K and any updates discussed under the caption “Item 1A. Risk Factors” in Part II of our Quarterly Reports on Form 10-Q and in our other filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise that occur after the date of this release, except as required by law. Investor Relations and Media Contacts: PondelWilkinson Inc. Judy Lin or Roger Pondel [email protected] (1) Net cash provided by operating activities included cash receipts related to the IEEPA tariff refunds of $25.2 million during the six months ended June 30, 2026. (1) Secondary offering transaction costs represent legal and professional fees incurred in connection with the completion of the secondary offering by certain executive officers and stockholders of the Company, which were directly related to the offering and were incremental to our normal operating expenses. (1) Net cash provided by operating activities included cash receipts related to the IEEPA tariff refunds of $25.2 million during the six months ended June 30, 2026. Use of Non-GAAP Financial Measures Karat Packaging utilizes certain financial measures and key performance indicators that are not defined by, or calculated in accordance with, GAAP to assess our financial and operating performance. A non-GAAP financial measure is defined as a numerical measure of a company’s financial performance that (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the comparable measure calculated and presented in accordance with GAAP in the statement of operations; or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the comparable GAAP measure so calculated and presented. The following non-GAAP measures are presented in this press release: Adjusted EBITDA is a financial measure calculated as net income excluding (i) interest income, (ii) interest expense, (iii) provision for income taxes, (iv) depreciation and amortization, (v) stock-based compensation expense, and (vi) secondary offering transaction costs. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by net sales. Adjusted diluted earnings per common share is calculated as diluted earnings per common share, plus the per share impact of stock-based compensation and secondary offering transaction costs, and adjusted for the related tax effects of these adjustments. Free Cash Flow is calculated as cash from operating activities less cash used in (i) purchases of property and equipment, and (ii) deposits paid for property and equipment. We believe the above-mentioned non-GAAP measures, which are used by management to assess the core performance of Karat Packaging, provide useful information and additional clarity of our operating results to our investors in their own evaluation of the core performance of Karat Packaging and facilitate a comparison of such performance from period to period. These are not measurements of financial performance or liquidity under GAAP and should not be considered in isolation or construed as substitutes for net income or other cash flow data prepared in accordance with GAAP for purposes of analyzing our financial performance or liquidity. These measures should be considered in addition to, and not as a substitute for, revenue, net income, earnings per share, cash flows or other measures of financial performance prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies, as other companies may calculate such financial results differently. With respect to our financial targets for the 2026 third quarter and 2026 full year adjusted EBITDA margin, a reconciliation of these non-GAAP measures to the corresponding GAAP measures is not available without unreasonable effort due to the variability and complexity of the reconciling items described above that we exclude from these non-GAAP target measures. The variability of these items may have a significant impact on our future GAAP financial results and, as a result, we are unable to prepare the forward-looking statements of income and cash flows prepared in accordance with GAAP, that would be required to produce such a reconciliation.

Karat Packaging’s first quarter was shaped by broad-based sales growth, particularly in online channels and national account expansion. Management pointed to improving demand, with CEO Alan Yu noting that sales momentum accelerated throughout the quarter, culminating in a significant surge in March due to order pull-forwards. The company’s diversified sourcing strategy helped maintain gross margin stability, even as higher tariffs and import costs weighed on profitability. Yu emphasized that the shift to fulfilling more online orders directly led to stronger margin contribution and operational efficiency. Is now the time to buy KRT? Find out in our full research report (it’s free). Revenue: $116.9 million vs analyst estimates of $113 million (12.9% year-on-year growth, 3.5% beat) Adjusted EPS: $0.34 vs analyst estimates of $0.32 (6.3% beat) Adjusted EBITDA: $12.49 million vs analyst estimates of $11.17 million (10.7% margin, 11.8% beat) Revenue Guidance for Q2 CY2026 is $135.1 million at the midpoint, below analyst estimates of $139.3 million Operating Margin: 7.2%, in line with the same quarter last year Market Capitalization: $543.6 million While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Kyle Benvenuto (Bank of America): Asked about oil price assumptions embedded in margin guidance and the extent to which planned price increases would protect margins. CEO Alan Yu responded that most vendors are absorbing the bulk of cost increases, and recent stabilization in resin prices reduces the risk of further margin pressure. Kyle Benvenuto (Bank of America): Inquired about the drivers of Q2 sales growth, specifically the mix between new national accounts and organic volume. Yu explained that ongoing online sales acceleration is the primary contributor, with additional growth expected from national chains during the summer. Ryan Meyers (Lake Street Capital Markets): Sought clarity on the March order pull-forward and whether it signaled business slowing. Yu clarified that the pull-forward was about $2 million, and April softened as a result, but May sales trends were positive, supporting full-year guidance. Ryan Meyers (Lake Street Capital Markets): Asked about relative price increases versus competitors and the impact on gross margins. Yu indicated that Karat’s price increases were at the low end of the peer range, supported by tariff reductions and a desire to remain competitive for partner customers. Ben Schmidt (William Blair): Requested updates on the pipeline for new national account wins and incremental product placements. Yu stated that additional conversions among large chains and expanded eco-friendly SKUs were progressing, with potential wins expected later in the year. In upcoming quarters, the StockStory team will watch (1) the pace of online sales and whether year-to-date momentum continues, (2) execution on pricing strategies and their effectiveness in preserving gross margin amid fluctuating input costs, and (3) progress converting pipeline opportunities with national chain accounts. Continued sourcing diversification and successful tariff management will also be key markers for sustainable growth. Karat Packaging currently trades at $27.24, down from $30.41 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members). WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses. But our AI platform says the party isn't over. Find out which 9 stocks made the cut this week - FREE. Get Our Top 9 Market-Beating Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.

— Strong Top-Line Growth and Solid Profitability — CHINO, Calif., May 07, 2026 (GLOBE NEWSWIRE) -- Karat Packaging Inc. (Nasdaq: KRT) ("Karat Packaging" or the "Company"), a specialty distributor and manufacturer of environmentally friendly, disposable foodservice products and related items, today announced financial results for its first quarter ended March 31, 2026. First Quarter 2026 Highlights Net sales of $116.9 million, up 12.9 percent, from $103.6 million in the prior-year quarter. Gross profit of $41.5 million, up 1.9 percent, from $40.8 million in the prior-year quarter. Gross margin of 35.5 percent, reflecting an expected decrease from 39.3 percent in the prior-year quarter due to elevated tariffs. Net income of $7.1 million, up 4.8 percent, from $6.8 million in the prior-year quarter. Net income margin of 6.1 percent versus 6.6 percent in the prior-year quarter. Adjusted EBITDA of $12.5 million versus $11.9 million in the prior-year quarter. Adjusted EBITDA margin of 10.7 percent versus 11.5 percent in the prior-year quarter. Guidance Net sales for the 2026 second quarter expected to increase by 8 to 10 percent from the prior-year quarter. Gross margin for the 2026 second quarter expected to be within 35 to 37 percent, excluding potential tariff refund impact under the current trade policy. Adjusted EBITDA margin for the 2026 second quarter expected to be within 11 to 13 percent, excluding potential tariff refund impact under the current trade policy. Net sales for full-year 2026 expected to increase by low double-digits from the prior year. Gross margin for full-year 2026 expected to be within 34 to 36 percent, excluding potential tariff refund impact under the current trade policy. Adjusted EBITDA margin for full-year 2026 expected to be within 11 to 13 percent, excluding potential tariff refund impact under the current trade policy. “We started 2026 with a robust quarter, with year‑over‑year sales increasing almost 13 percent as momentum built throughout the quarter, accelerating from weather-impacted modest progress in January to growth exceeding 20 percent in March,” said Alan Yu, Chief Executive Officer. “Gross margin remained resilient at 35.5 percent despite the continued impact of higher tariffs, demonstrating the effectiveness of our diversified sourcing strategy and benefiting from favorable product mix and pricing. “Given the sharp increase in oil prices and its impact on our product costs, we will implement price increases on select plastic items beginning in mid‑May. While certain sourced product costs are rising, we expect tariff savings under current trade policy to start reducing our cost of goods sold in May 2026, partially offsetting these pressures, and we expect price increases to support gross margin stability. Importantly, we believe we are well positioned to continue gaining market share amid ongoing resin supply challenges, supported by our strong inventory position and disciplined supply chain execution. “Our new paper bag product category continues to expand steadily, driving a year-over-year increase in eco‑friendly product sales of 16.9 percent in the first quarter. We have also successfully closed another national chain account to supply paper bags, further strengthening our leadership in sustainable packaging solutions,” Yu added. First Quarter 2026 Financial Results Net sales for the 2026 first quarter increased 12.9 percent to $116.9 million, from $103.6 million in the prior-year quarter. The increase was primarily driven by $12.1 million in volume growth and product mix, as well as a $2.0 million favorable year-over-year pricing comparison, partially offset by a decrease of $0.8 million in shipping and logistics revenue. Cost of goods sold for the 2026 first quarter increased 20.0 percent to $75.4 million, from $62.9 million in the prior-year quarter. The increase was primarily driven by higher sales, as well as an increase of $7.3 million in import costs, consisting of import duty and tariffs and ocean freight. Specifically, import duty and tariffs costs increased from $3.4 million for the three months ended March 31, 2025 to $10.5 million for the three months ended March 31, 2026. Gross profit for the 2026 first quarter increased to $41.5 million, from $40.8 million in the prior-year quarter. Gross margin was 35.5 percent in the 2026 first quarter, compared with 39.3 percent in the prior-year quarter. Gross margin was negatively impacted by higher import costs, which increased to 13.8 percent of net sales, compared with 8.6 percent in the prior-year quarter, as well as higher inventory adjustments as a percentage of net sales. These impacts were partially offset by lower product costs as a percentage of net sales. Operating expenses for the 2026 first quarter increased to $33.1 million, from $32.9 million in the prior-year quarter. The increase was primarily driven by higher rent expense of $0.6 million related to the opening of the Company’s new Chino distribution center in March 2025 and a $0.6 million increase in salaries and benefits, partially offset by a $0.7 million decrease in online platform fees due to a shift away from third-party fulfillment of online orders, as well as a $0.4 million reduction in shipping and transportation costs resulting from lower online shipping rates. Net income for the 2026 first quarter increased 4.8 percent to $7.1 million, from $6.8 million in the prior-year quarter. Net income margin was 6.1 percent in the 2026 first quarter, compared with 6.6 percent in the prior-year quarter. Net income attributable to Karat Packaging for the 2026 first quarter was $6.7 million, or $0.34 per diluted share, compared with $6.4 million in the prior-year quarter, or $0.32 per diluted share. Adjusted EBITDA, a non-GAAP measure defined below, was $12.5 million for the 2026 first quarter, compared with $11.9 million for the prior-year quarter. Adjusted EBITDA margin, a non-GAAP measure defined below, was 10.7 percent of net sales for the 2026 first quarter, compared with 11.5 percent for the prior-year quarter. Adjusted diluted earnings per common share, a non-GAAP measure defined below, was $0.34 per share for the 2026 first quarter, compared with $0.33 per share for the same quarter last year. Dividend On May 5, 2026, Karat Packaging’s Board of Directors approved a regular quarterly dividend of $0.45 per share on the Company’s common stock, payable on or about May 28, 2026, to stockholders of record as of May 21, 2026. Investor Conference Call The Company will host an investor conference call today, May 7, 2026, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to discuss its 2026 first quarter results. Phone: (800) 715-9871 (domestic); (646) 307-1963 (international) Conference ID: Karat Packaging Inc. Webcast: Accessible at https://irkarat.com/events-presentations/; archive available for approximately one year About Karat Packaging Inc. Karat Packaging Inc. is a specialty distributor and manufacturer of a wide range of disposable foodservice products and related items, primarily used by national and regional restaurants and in foodservice settings throughout the United States. Its products include food and take-out containers, bags, tableware, cups, lids, cutlery, straws, specialty beverage ingredients, equipment, gloves and other products. The Company’s eco-friendly Karat Earth® line offers quality, sustainably focused products that are made from renewable resources. Karat Packaging also offers customized solutions, including new product development and design, printing, and logistics services. To learn more about Karat Packaging, please visit the Company’s website. Caution Concerning Forward-Looking Statements Statements made in this release that are not statements of historical or current facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We caution readers that forward-looking statements are predictions based on our current expectations about future events. These forward-looking statements, including, but not limited to, achieving our financial guidance, are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Our actual results, performance, or achievements could differ materially from those expressed or implied by the forward-looking statements as a result of a number of factors, including the risks discussed under the caption “Item 1A. Risk Factors” in Part I of our most recent Annual Report on Form 10-K and any updates discussed under the caption “Item 1A. Risk Factors” in Part II of our Quarterly Reports on Form 10-Q and in our other filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise that occur after the date of this release, except as required by law. Investor Relations and Media Contacts: PondelWilkinson Inc. Judy Lin or Roger Pondel 310-279-5980 KARAT PACKAGING INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands, except share and per share data) KARAT PACKAGING INC. AND SUBSIDIARIES NET SALES BY CATEGORY (UNAUDITED) (In thousands) * The Company reclassified one customer from the retail to the chains and distributors channel, and recast the corresponding net sales amounts of $1,071,000 for the three months ended March 31, 2025 to conform to the current period presentation. The recast had no effect on previously reported consolidated net sales for the three months ended March 31, 2025. KARAT PACKAGING INC. AND SUBSIDIARIES SELECTED BALANCE SHEET AND CASH FLOW INFORMATION (In thousands) KARAT PACKAGING INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (UNAUDITED) (In thousands, except percentages and per share amounts) Use of Non-GAAP Financial Measures Karat Packaging utilizes certain financial measures and key performance indicators that are not defined by, or calculated in accordance with, GAAP to assess our financial and operating performance. A non-GAAP financial measure is defined as a numerical measure of a company’s financial performance that (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the comparable measure calculated and presented in accordance with GAAP in the statement of operations; or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the comparable GAAP measure so calculated and presented. The following non-GAAP measures are presented in this press release: Adjusted EBITDA is a financial measure calculated as net income excluding (i) interest income, (ii) interest expense, (iii) provision for income taxes, (iv) depreciation and amortization, and (v) stock-based compensation expense. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by net sales. Adjusted diluted earnings per common share is calculated as diluted earnings per common share, plus the per share impact of stock-based compensation and adjusted for the related tax effects of these adjustments. Free Cash Flow is calculated as cash from operating activities less cash used in (i) purchases of property and equipment, and (ii) deposits paid for property and equipment. We believe the above-mentioned non-GAAP measures, which are used by management to assess the core performance of Karat Packaging, provide useful information and additional clarity of our operating results to our investors in their own evaluation of the core performance of Karat Packaging and facilitate a comparison of such performance from period to period. These are not measurements of financial performance or liquidity under GAAP and should not be considered in isolation or construed as substitutes for net income or other cash flow data prepared in accordance with GAAP for purposes of analyzing our financial performance or liquidity. These measures should be considered in addition to, and not as a substitute for, revenue, net income, earnings per share, cash flows or other measures of financial performance prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies, as other companies may calculate such financial results differently. With respect to our financial targets for the 2026 second quarter and 2026 full year adjusted EBITDA margin, a reconciliation of these non-GAAP measures to the corresponding GAAP measures is not available without unreasonable effort due to the variability and complexity of the reconciling items described above that we exclude from these non-GAAP target measures. The variability of these items may have a significant impact on our future GAAP financial results and, as a result, we are unable to prepare the forward-looking statements of income and cash flows prepared in accordance with GAAP, that would be required to produce such a reconciliation.

Performance acceleration in Q1 was driven by improving demand and market share gains, culminating in 20% growth in March, though this included some order pull-forward. Management successfully pivoted the online sales strategy to fulfill orders via company storefronts and third-party platforms, resulting in a return to robust growth at higher contribution margins. Gross margin resilience was maintained through a diversified sourcing strategy and favorable product mix, despite significant headwinds from higher import duties and tariffs. The company is proactively rebalancing its supply chain, increasing domestic and Southeast Asian sourcing while reducing reliance on Taiwan and China to mitigate geographic risk and tariff impacts. Operational leverage improved as the company reduced online platform fees by shifting away from third-party fulfillment and optimized shipping and transportation costs. Eco-friendly product sales grew 16.9% year-over-year, supported by the expansion of the paper bag category and the acquisition of new national chain accounts. Full-year 2026 net sales are expected to grow in the low double-digit range, supported by a strong pipeline of national chain accounts and record online sales projections. Management anticipates gross margin stability between 34% and 36% for the full year, aided by expected tariff savings under current trade policy and selective price increases. Price increases of 5% to 15% on plastic items are being implemented in mid-May to offset rising oil and product costs, positioned at the lower end of the peer group range to support partners. The Q2 sales growth target of 8% to 10% incorporates a conservative outlook following a softer April caused by the March order pull-forward. Strategic focus remains on converting large national chain pipelines and expanding SKU penetration within existing accounts, particularly in sustainable product lines. Import duty and tariff costs increased significantly to $10.5 million in Q1 2026 from $3.4 million in the prior-year period, while total import costs rose to 13.8% of net sales. The company added a new supplier in the Americas to further diversify the sourcing footprint and enhance supply chain flexibility against global trade volatility. Higher rent expenses of $0.6 million were incurred following the opening of the new Chino distribution center, impacting year-over-year operating expense comparisons. Management noted a $2.0 million pull-forward of orders from April into March, which influenced the monthly growth trajectory and Q2 guidance setting. Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Management noted that while oil prices rose, overseas partner vendors absorbed the majority of the increase, allowing Karat to implement minimal price hikes. Resin prices in Asia have recently stabilized or decreased, leading management to believe raw material costs will not escalate further from current levels. Online revenue is on track to exceed $100 million this year, up from approximately $72 million to $73 million last year, serving as a primary growth engine. Organic growth is also expected from national chains increasing orders for beverage-related items during the summer season. Karat implemented price increases on select plastic items to offset rising oil costs, with a range that starts lower than its peer group averages. to remain competitive while customers face high beef prices and other inflationary pressures. A reduction in effective tariff rates from 20% to 10% over the last several months is expected to significantly support gross margins in the coming quarter. Management is in discussions with several very large chains that may convert in the current or subsequent quarter. Current growth is being bolstered by adding eco-friendly and paper bag SKUs to existing customer accounts. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here.

Image source: The Motley Fool. Thursday, May 7, 2026 at 5 p.m. ET Chief Executive Officer — Alan Yu Chief Financial Officer — Jian Guo Operator: Thank you for standing by. My name is Pryla, and I will be your conference operator today. At this time, I would like to welcome everyone to the Karat Packaging Inc. First Quarter 2026 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. I would now like to hand the conference over to Roger Pondel. Please go ahead. Roger Pondel: Thank you, operator. Good afternoon, everyone, and welcome to Karat Packaging Inc.’s 2026 First Quarter Conference Call. I am Roger Pondel with Pondel Wilkinson, Karat Packaging Inc.’s investor relations firm. It will be my pleasure momentarily to introduce the company’s Chief Executive Officer, Alan Yu, and its Chief Financial Officer, Jian Guo. Before I turn the call over to Alan, I want to remind our listeners that today’s call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous conditions, many of which are beyond the company’s control, including those set forth in the Risk Factors section of the company’s most recent Form 10-K as filed with the Securities and Exchange Commission and copies of which are available on the SEC’s website at sec.gov, along with other company filings made with the SEC from time to time. Actual results could differ materially from these forward-looking statements, and Karat Packaging Inc. undertakes no obligation to update any forward-looking statements, except as required by law. Please also note that during today’s call, we will be discussing adjusted EBITDA, adjusted EBITDA margin, adjusted diluted earnings per share, and free cash flow, all of which are non-GAAP financial measures as defined by SEC Regulation G. A reconciliation of the most directly comparable GAAP measures to the non-GAAP financial measures is included in today’s press release, which is now posted on the company’s website. And with that, I will turn the call over to CEO, Alan Yu. Alan? Alan Yu: Thank you, Roger. Good afternoon, everyone. We began 2026 with a robust first quarter. Year-over-year sales increased almost 13%, with momentum building throughout the quarter. Our performance during the quarter accelerated significantly, starting with modestly impacted growth in January to growth exceeding 20% in March, which included some pull-forward of orders. The acceleration reflected improving demand, strong execution across the organization, and continued gains in market share. Notably, our online sales, which are typically at a higher contribution margin, returned to robust growth this quarter after we pivoted to grow and fulfill our own online sales on our company storefront and third-party platforms. Compared to the prior-year quarter, online sales increased almost 10% to $19.5 million in 2026 from $17.8 million in the prior-year quarter, with momentum building steadily throughout the first quarter, achieving 19% year-over-year growth in March 2026. Gross margin remained resilient at 35.5% despite the continued impact of higher tariffs. This performance demonstrates the effectiveness of our diversified sourcing strategy and was further supported by a favorable product mix and pricing. As we look ahead, we are closely managing a dynamic cost environment. Given the sharp increase in oil prices and the resulting impact on product costs, we are implementing price increases on select plastic items beginning in the middle of this month. While certain sourced product costs are rising, we expect tariff savings under current trade policy to begin reducing cost of goods sold this month. These savings should partially offset inflationary pressure and, together with our pricing action, we expect to support gross margin stability. Importantly, we are well positioned to continue gaining market share amid ongoing resin supply challenges. Our strong inventory position and disciplined supply chain execution give us confidence in our ability to consistently serve customers and meet demand. Turning to innovation and sustainability, our paperback product category continues to expand steadily, driving a year-over-year increase in eco-friendly product sales of 16.9% in the first quarter. We also successfully closed another national chain account for paperback during this quarter, further strengthening our leadership position and reinforcing our long-term strategy in sustainable packaging solutions. Our sourcing diversification initiative continues to deliver tangible benefits. We have proactively rebalanced import volumes across geographies in response to evolving tariff structures, strengthening our cost competitiveness and consistent product availability. In this quarter, we increased domestic purchases to 18% compared to 14% in the prior-year quarter, and increased sourcing from Malaysia and Vietnam to an aggregate of 17% from 12% in the prior-year quarter. At the same time, we reduced purchases from Taiwan in the current quarter to 46% compared to 54% in the prior-year quarter, and reduced sourcing from China to 11% compared to 18% in the prior-year quarter. Additionally, we expanded our sourcing footprint by adding a new supplier in the Americas, which further reduces geographic risk and enhances supply chain flexibility. We remain focused on providing responsive customer service and disciplined execution, which are a hallmark of Karat Packaging Inc., while advancing operational efficiencies. These efforts are reflected in better operating cost leverage, which decreased to 28.3% in 2026 from 31.8% in the prior-year quarter. In summary, we delivered a strong start to the year, maintained margin resilience in a challenging environment, and continue to invest in growth areas that align with our customer demand and long-term industry trends. I will now turn the call over to Jian Guo, our Chief Financial Officer, to discuss the company’s financial results in greater detail. Jian? Jian Guo: Thank you, Alan. I will begin with a summary of our Q1 performance, followed by an update on our guidance. Net sales for the 2026 first quarter increased to $116.9 million, up 12.9% from $103.6 million in the prior-year quarter. The increase primarily reflected $12.1 million in volume and mix and a $2.0 million favorable impact from pricing. Sales to chain accounts and distributors, our biggest sales channel, were up by 15.1% in the 2026 first quarter. Online sales, as Alan discussed earlier, rose almost 10% over the prior-year quarter, and sales to the retail channel declined 12% from the 2025 first quarter. Cost of goods sold for the 2026 first quarter increased 20% to $75.4 million from $62.9 million in the prior-year quarter. The increase was driven primarily by sales growth and higher import costs of $7.3 million, primarily as a result of higher import duty and tariffs, which increased from $3.4 million for the three months ended March 31, 2025 to $10.5 million for the three months ended March 31, 2026. Gross profit for the 2026 first quarter increased to $41.5 million from $40.8 million in the prior-year quarter. Gross margin for the 2026 first quarter was 35.5% compared with 39.3% a year ago. The year-over-year decline in gross margin reflects the expected impact from higher import costs, which increased to 13.8% of net sales from 8.6% in the prior-year quarter, as well as elevated inventory adjustments as a percentage of net sales. These impacts were partially offset by lower product costs as a percentage of net sales. Operating expenses in the 2026 first quarter increased to $33.1 million from $32.9 million last year. The increase was primarily driven by higher rent expense of $0.6 million associated with the opening of the company’s new Chino distribution center in March 2025, along with a $0.6 million increase in salaries and benefits. These increases were partially offset by a $0.7 million reduction in online platform fees resulting from a shift away from third-party fulfillment of online orders, as well as a $0.4 million decrease in shipping and transportation costs due to lower online shipping rates. Operating income in the 2026 first quarter increased 8.2% to $8.5 million from $7.8 million in the prior-year quarter. Total other income (net) decreased $2.9 million for the 2026 first quarter from $1.1 million in the prior-year quarter. Net income for the 2026 first quarter increased 4.8% to $7.1 million from $6.8 million for the prior-year quarter. Net income margin was 6.1% in the 2026 first quarter compared with 6.6% last year. Net income attributable to Karat Packaging Inc. for the 2026 first quarter increased 5.2% to $6.7 million, or $0.34 per diluted share, from $6.4 million, or $0.32 per diluted share, in the prior-year quarter. Adjusted EBITDA for the 2026 first quarter rose to $12.5 million from $11.9 million for the prior-year quarter. Adjusted EBITDA margin was 10.7% compared with 11.5% for the 2025 first quarter. Adjusted diluted earnings per common share increased to $0.34 for the 2026 first quarter from $0.33 per share in the comparable prior-year period. We executed strong working capital management during the first quarter, generating operating cash flow of $7.2 million and free cash flow of $6.3 million, despite continued heavy duty and tariff payments discussed earlier. We paid out a regular quarterly dividend of $0.45 per share to shareholders on February 27, 2026. As of March 31, 2026, we had $90.7 million in working capital and $36.4 million in financial liquidity, with another $45.7 million in short-term investments. On May 5, 2026, our Board of Directors approved a regular quarterly dividend of $0.45 per share, payable May 28, 2026 to shareholders of record as of May 21, 2026. Looking ahead to the 2026 second quarter, we expect net sales to increase by approximately 8% to 10% from the prior-year quarter. As Alan noted earlier, some timing shift of orders in March contributed to a softer start in April. Since then, we have replenished inventory, and we are confident in our ability to achieve our sales target. We expect gross margin for the 2026 second quarter to be within 35% to 37% and adjusted EBITDA margin to be within 11% to 13%, excluding potential tariff refund impact under the current trade policy. For the full year 2026, we expect net sales to grow in the low double-digit range over the prior year. We expect gross margin for the full year 2026 to be within 34% to 36% and adjusted EBITDA margin to be within 11% to 13%, excluding potential tariff refund impact under the current trade policy. As Alan mentioned earlier, we are seeing accelerated growth in our pipeline, reflecting our strong market positioning and initiatives to continue gaining market share in a dynamic trade and supply chain environment. We expect to continue to drive top-line growth, sustain our gross margin, and continue to deliver strong profitability with enhanced operational efficiency and disciplined cost management. Alan and I will now be happy to answer your questions, and I will turn the call back to the operator. Operator: Thank you. We will now open the call for questions. If you have dialed in and would like to ask a question, please press star then 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, please press star then 1 again. Your first question comes from the line of George Staphos with Bank of America. Please go ahead. Kyle Benvenuto: Hi. This is Kyle Benvenuto on for George. Thank you for taking my question. You noted the sharp increase in oil prices is pressuring costs across sourced products and plastics. Within both your Q2 2026 margin guidance ranges, what oil price assumptions are embedded, and at what point would the mid-May plastic price increases no longer be sufficient to protect the 34% margin floor for the year? Alan Yu: Well, here is what we see on the oil prices. Yes, you are correct. Oil prices have gone up, and raw materials have gone up sharply. But we were able to negotiate with our vendors to support less increase versus the full increase impact of the oil prices, so the majority of our partner vendors overseas have absorbed the majority of the increases. That is where we are seeing that we are giving minimal increases in the May 15 to June area. Is this going to escalate more? Right now, we see that the resin price has stabilized in Asia. It has come down a little bit also. So we do not see, at this point, that the raw material price will go up even higher from this point. Kyle Benvenuto: Thank you, Alan. And then one more question for you, and I will turn it over. Your guidance points to 8% to 10% sales growth for Q2. How much of this is driven by the expansion of new national accounts versus organic volume growth from your existing customer base? Thank you. Alan Yu: We are seeing a sharp increase in our online sales portion of our business. For example, last month, April, we topped our record with double-digit online sales growth, and we do foresee that this quarter we will have record online sales as well. Last year, we did about $72 million to $73 million in online revenue, and this year we are on track for $100-plus million in online revenues. So a big chunk of the growth is from online sales revenue. From our national chain accounts, yes, we do see some of the national chain pipeline converting to revenues. That is also a segment where we see growth, especially in the summer season. Most of these chains are going to increase their orders for their drink cups and carriers, as well as the to-go part of our foodservice segment of our business. These are all organic growth. Unknown Speaker: Right away. Kyle Benvenuto: Thank you, and congrats on the quarter. Alan Yu: Thank you. Operator: The next question comes from the line of Ryan Meyers with Lake Street Capital Markets. Please go ahead. Ryan Meyers: Hey, guys. Thanks for taking my questions. First one for me, and I just want to make sure I understand this dynamic correctly. Alan, you had called out the 20% growth that you saw in the month of March, and then, obviously, the second-quarter guidance is only 8% to 10% revenue growth. So it sounds like you guys saw some pull-forward in order demand that drove the strength in March, and then things kind of stabilized a little bit in the second quarter. That is where that delta is between that 20% and that 8% to 10% growth. It is not necessarily that the business is slowing? Alan Yu: No, it is not. And we want to be conservative in terms of our growth numbers. We do expect our full-year guidance to be in range with what we have guided earlier this year. For the second quarter, we saw some softening in April because of the pull-forward from March, and so far this month we are seeing very positive revenue growth in May. But we want to be conservative and cautious to make sure that we meet or exceed the guidance. Ryan Meyers: Yep. Fair enough. That makes sense. And then thinking in terms of pricing, you called that out in the prepared remarks. How much price do you feel needs to be taken for you to preserve your gross margins? And then, industry-wide, what do your price increases look like compared to competitors? Are you still feeling like you are priced below where the market is, allowing for some of those share gains? Alan Yu: Yes. Our price announcement was 5% to 15%, depending on category. Our peer group seems to have price increases of 8% to 12%, so we are in the lower range among our peer group. We understand this is a difficult environment, with foodservice having a challenging year and beef prices going up, so we want to support our partners. We are announcing a lower price increase, and because of some help with tariffs—over the past six to nine months we were paying a 20% tariff, and now we are down to a 10% tariff—this reduction is helping our gross margin a lot. So that is where we see it. We do see a stronger gross margin for this quarter versus the prior quarter. That is why we are seeing that our net sales should be intact and on track with our guidance. Ryan Meyers: Okay. Got it. Thank you for taking my questions. Alan Yu: Thank you, Ryan. Operator: The next question comes from the line of Ryan Merkel with William Blair. Please go ahead. Analyst: Hey. Good afternoon. Thanks for the questions. This is Ben Schmidt on for Ryan. First question here, just to put a finer point on March and April, is there any way to size the pull-forward impact in March? It sounds like April might have been down, so just a finer point there would be great. Alan Yu: I would think that about $2.0 million was pulled forward from April into March. Analyst: Okay. Got it. Thank you. Analyst: And then last one for me. I know you mentioned a win this quarter, but any other updates on the pipeline of potential wins you discussed last quarter? Alan Yu: We are working with a few very large chains that might convert this quarter or at least next quarter. This quarter, we are converting some existing customers by adding additional SKUs to those customers, such as items in the eco-friendly product line and paper bags. That is what we are seeing right now. Analyst: Alright. Got it. That is all for me. Thanks, guys. Alan Yu: Thank you. Operator: We have no further questions at this time. I would like to turn it back to Alan Yu for closing remarks. Alan Yu: Thank you, everybody, for joining our first quarter Karat Packaging Inc. earnings conference call. We look forward to speaking with you next time. Thank you very much, and have a wonderful day. Bye-bye. Operator: Thank you. Ladies and gentlemen, this concludes today’s conference call. You may now disconnect. Before you buy stock in Karat Packaging, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Karat Packaging wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $476,034!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,274,109!* Now, it’s worth noting Stock Advisor’s total average return is 974% — a market-crushing outperformance compared to 206% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of May 7, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Karat Packaging. The Motley Fool has a disclosure policy. Karat Packaging KRT Q1 2026 Earnings Transcript was originally published by The Motley Fool

Interested in Karat Packaging Inc.? Here are five stocks we like better. Karat reported a “robust” Q1 with net sales of $116.9 million, up 12.9% year‑over‑year, accelerating to >20% growth in March and a rebound in online sales to $19.5 million; management says online revenue is on track for $100M+ this year. Gross margin fell to 35.5% from 39.3% as import costs and tariffs surged (import duties rose to $10.5M from $3.4M), prompting price increases of roughly 5%–15% and sourcing shifts; management expects tariff‑related savings to begin lowering COGS this month. Profitability and cash flow remained solid—operating income rose 8.2% to $8.5M, net income was $7.1M ($0.34/share), adjusted EBITDA was $12.5M, free cash flow was $6.3M, and the board approved another quarterly dividend of $0.45; Q2 sales are guided to grow ~8%–10% with full‑year sales expected in the low double‑digit range and adjusted EBITDA margin of 11%–13%. Wrapping Up Profits: Karat Packaging's Earnings Reward Karat Packaging (NASDAQ:KRT) reported a “robust” start to fiscal 2026, with first-quarter sales up nearly 13% year over year amid improving demand, market share gains, and a return to growth in its higher-margin online channel, executives said on the company’s quarterly earnings call. Management also addressed a dynamic cost environment that includes higher oil-related input costs and elevated tariff-related import expenses, while outlining pricing actions and sourcing shifts intended to support margins going forward. → Insider Sales: Top AST SpaceMobile Insider Cuts Postion Over 30% Bristol Myers Squibb’s big buys: $18.1 billion in 2 biotech deals Chief Executive Officer Alan Yu said the company’s performance “accelerated significantly” as the quarter progressed, moving from “modest weather-impacted growth in January” to growth “exceeding 20% in March,” which included some pull-forward of orders. He said the acceleration reflected “improving demand, strong execution across the organization, and continued gain in the market share.” Chief Financial Officer Jian Guo reported net sales of $116.9 million for the first quarter, up 12.9% from $103.6 million in the prior-year period. Guo attributed the increase primarily to $12.1 million from volume and mix and a $2.0 million favorable impact from pricing. → Years in the Making, AMD’s Upside Movement Has Just Begun By channel, Guo said: Sales to channel accounts and distributors, the company’s largest channel, rose 15.1% year over year. Online sales increased nearly 10% year over year. Retail channel sales declined 12% compared with the prior-year quarter. Yu highlighted the online business as a key contributor, saying online sales “returned to robust growth” after the company “pivoted to grow and fulfill our own online sales on our company storefront and third-party platforms.” Online sales rose to $19.5 million from $17.8 million a year earlier, he said. → Light Speed Returns: Corning Cashes In on NVIDIA Growth While management characterized gross margin as “resilient,” Guo detailed the impact of higher import costs in the quarter. Cost of goods sold increased 20% to $75.4 million, and Guo said the increase was driven by sales growth as well as higher import costs of $7.3 million. Import duties and tariffs climbed to $10.5 million for the three months ended March 31, 2026, from $3.4 million in the comparable prior-year period, Guo said. Gross margin was 35.5% versus 39.3% a year ago, reflecting import costs that rose to 13.8% of net sales from 8.6% in the prior-year quarter, along with “elevated inventory adjustments” as a percentage of net sales. Guo said those pressures were partially offset by lower product costs as a percentage of net sales. Yu said the company expects tariff-related savings under current trade policy to begin reducing cost of goods sold “this month,” which he said should “partially offset inflationary pressure” alongside pricing actions. Yu said the company is implementing price increases on select plastic items beginning “in the middle of this month,” citing the “sharp increase in oil prices and the resulting impact on product costs.” In response to a question from Bank of America’s Kyle Benvenuto about oil price assumptions embedded in guidance, Yu said the company had been able to negotiate with vendors, with “majority of our partner vendors overseas” absorbing much of the increases. Yu added that resin prices in Asia had stabilized and “come down a little bit,” and he said the company did not see raw material prices rising further “from this point.” Later, addressing how Karat’s pricing compares to competitors, Yu said the company’s price announcement was “5%–15%” depending on category, while peers “seem to have a price increase of 8%–12%.” Yu said Karat’s increase was on the lower end because the company views the environment as challenging for foodservice operators. Yu also noted a tariff change that has aided the company’s pricing posture, stating that “in the past 6 or 9 months we were paying 20% tariff, now we're down to 10% tariff,” while cautioning there “may be changes in July and August.” Yu said operating cost leverage improved, with operating costs decreasing to 28.3% of net sales from 31.8% a year ago, reflecting a focus on operational efficiency and execution. Guo reported operating expenses of $33.1 million, up slightly from $32.9 million. He attributed the increase mainly to higher rent expense tied to the opening of the company’s Chino distribution center in March 2025 and higher salaries and benefits, partially offset by a reduction in online platform fees and lower shipping and transportation costs due to lower online shipping rates. Operating income increased 8.2% to $8.5 million, and net income rose 4.8% to $7.1 million, Guo said. Net income attributable to Karat increased to $6.7 million, or $0.34 per diluted share, from $6.4 million, or $0.32 per diluted share, in the prior-year quarter. Adjusted EBITDA increased to $12.5 million from $11.9 million, with adjusted EBITDA margin of 10.7% compared with 11.5% a year ago, according to Guo. Guo said the company generated operating cash flow of $7.2 million and free cash flow of $6.3 million “despite continued heavy duty and tariff payments.” He added that as of March 31, 2026, Karat had $90.7 million in working capital and $36.4 million in financial liquidity, plus $5.7 million in short-term investments. On shareholder returns, Guo said Karat paid a regular quarterly dividend of $0.45 per share on Feb. 27, 2026. He also said the board approved another $0.45 per share dividend on May 5, 2026, payable May 28, 2026, to shareholders of record as of May 21, 2026. For the second quarter, Guo said Karat expects net sales to increase approximately 8% to 10% from the prior-year quarter, with gross margin expected to be within 35% to 37% and adjusted EBITDA margin within 11% to 13%, “excluding potential tariff refund impact under the current trade policy.” For the full year, he said the company expects net sales growth in the “low double-digit range,” with gross margin of 34% to 36% and adjusted EBITDA margin of 11% to 13%, again excluding potential tariff refund impact. Management attributed the implied deceleration in near-term growth partly to timing. Yu said April saw some softening because of pull-forward from March, but he described May trends as positive. When asked to quantify the pull-forward, Yu estimated “about $2 million were pulled forward from April to March.” Yu also pointed to online growth as a major driver, telling Bank of America that April set an online sales record and that the company expects record online sales again in the second quarter. He said the company did about $72 million to $73 million in online revenue last year and is “on track for $100+ million” this year, adding that “a big chunk of the growth is from online sales revenue.” On customer wins and pipeline, Yu said the company closed “another national chain account for paper bag” during the quarter and is working with “a very large chains,” with “a few large chains” that might convert this quarter or next. He also said the company is expanding SKUs with existing customers, including eco-friendly products and paper bags. Yu added that Karat continues to reposition sourcing to manage tariffs and availability, including higher domestic purchasing and increased sourcing from Malaysia and Vietnam, alongside reduced purchases from Taiwan and China, as well as adding a new supplier in South America. Karat Packaging Technologies, Inc (NASDAQ: KRT) is a U.S.-based provider of premium packaging solutions for consumer goods and industrial products. The company specializes in the design, manufacture and delivery of high-quality litho-laminated folding cartons, tubes and flexible packaging. Karat Packaging operates an integrated production model that combines prepress, printing, converting and finishing capabilities to support the branding and shelf-appeal needs of its customers. The company serves a diverse range of end markets, including food and beverage, confectionery, health and beauty, pharmaceuticals, specialty chemicals and promotional packaging. The article "Karat Packaging Q1 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for May 2026.