Karat Packaging Reports 2022 Second Quarter Financial Results

Rhea-AI Summary

Karat Packaging Inc. (Nasdaq: KRT) reported a record quarterly revenue of $114.9 million for Q2 2022, marking a 21.5% increase year-over-year. Gross profit rose by 20.9% to $34.0 million, with a gross margin of 29.6%. Net income was $7.2 million, down from $9.3 million in Q2 2021. Adjusted EBITDA grew 14.6% to $11.8 million. For Q3 2022, net sales are projected between $117 million and $120 million, with a full-year guidance of $445 million to $449 million. The company emphasizes strong demand for eco-friendly products amid regulatory changes.

Positive

• Record quarterly revenue of $114.9 million, up 21.5% year-over-year.
• Gross profit increased 20.9% to $34.0 million.
• Adjusted EBITDA rose 14.6% to $11.8 million.
• Continued growth in eco-friendly product demand with 30% growth in distributor channel.

Negative

• Net income decreased to $7.2 million from $9.3 million, affected by $5 million gain from prior year's loan forgiveness.
• Shipping delays caused approximately $2 million in unmet orders.

– Record Quarterly Revenue of $114.9 Million with Continued Strengthening in Profitability –

– Reiterates Revenue and Gross Margin Outlook for 2022 –

CHINO, Calif., Aug. 11, 2022 (GLOBE NEWSWIRE) -- Karat Packaging Inc. (Nasdaq: KRT) (“Karat”), a specialty distributor and manufacturer of environmentally friendly, disposable foodservice products and related items, today announced financial results for its quarter ended June 30, 2022.

Second Quarter 2022 Highlights

• Record quarterly net sales of $114.9 million, up 21.5 percent from the prior-year quarter.
• Gross profit of $34.0 million, up 20.9 percent from the prior-year quarter.
• Gross margin of 29.6 percent, including expected impact from freight and duty capitalization, versus 29.7 percent in the prior-year quarter.
• Net income of $7.2 million (net income margin of 6.3 percent), versus $9.3 million (net income margin of 9.9 percent), including a gain on forgiveness of debt of $5 million, in the prior-year quarter.
• Adjusted EBITDA of $11.8 million, up 14.6 percent from the prior-year quarter.
• Adjusted EBITDA margin of 10.3 percent versus 10.9 percent in the prior-year quarter.

2022 Outlook

• Net sales for the 2022 third quarter: $117 million to $120 million, up from $102.7 million for the 2021 third quarter.
• Net sales for the 2022 full year: $445 million to $449 million, versus $364.2 million in 2021.
• Gross margin goal for the 2022 full year: 31 percent to 32 percent on average, including expected impact from freight and duty capitalization for the remainder of 2022.
  

“Results for our second quarter continued to reflect strong demand, including our ability to grow wallet share from existing and new customers,” said Alan Yu, chief executive officer. “The positive sales performance was across all categories, paced by 30 percent growth in the distributors channel and 50 percentage growth in our eco-friendly products.”

“Sales were negatively impacted by fewer order fulfillments of approximately $2 million, caused by shipping delays between our Chino manufacturing plant and other Karat warehouses, including two facilities that we recently leased in May 2022. The quarter’s shipping delay issues were transitional due to inventory overflow received in May and June and I thank the entire Karat team for working diligently to resolve the issues.”

“Our joint venture announced in April, Green Earth Technology in Taiwan, is progressing well. The 180,000-square-foot, state-of-the art automated bagasse factory in Taiwan to produce 100% compostable foodservice products is expected to be completed ahead of schedule, with production and initial shipments to begin before the end of this year.”

“As more cities and states in the U.S. and around the world enact new regulations to ban Styrofoam and single use plastic, we are experiencing increased inquiries from national chain and grocery accounts for compostable products. Karat is committed to its leadership position in the eco-friendly disposable foodservice products arena. We are in discussions with our partner to expand the manufacturing capacity in our Taiwan joint venture, and we plan to accelerate our initiative to build a bagasse factory in the U.S. in 2023, using the proprietary manufacturing processes of the new Taiwan facility,” Mr. Yu added.

Second Quarter 2022 Financial Results

Net sales for the 2022 second quarter increased 21.5 percent to $114.9 million, from $94.5 million in the prior-year quarter.

Gross profit for the 2022 second quarter increased 20.9 percent to $34.0 million, from $28.1 million in the prior-year quarter.

Despite the higher freight and duty costs in the 2022 second quarter, gross margin was 29.6 percent, consistent with 29.7 percent in the prior-year quarter. Gross margin was favorably impacted by a shift to higher margin products, such as environmentally friendly products, price increases implemented to partially offset increased product, ocean freight and labor costs, favorable foreign currency exchange rate impact, along with improved operating efficiencies and leverage.

Operating expenses in the 2022 second quarter were $26.2 million, or 22.8% of net sales, compared with $21.2 million, or 22.5% of net sales, in the prior-year quarter. The increase included higher rent and stock-compensation expense, incremental warehouse transfer costs to manage inventory overflow, higher demurrage fees, and additional temporary labor costs, including COVID-19 related illness.

Operating income in the second quarter of 2022 was $7.8 million, or 6.8 percent of net sales, compared with $6.9 million, or 7.3 percent of net sales, in the prior-year quarter.

Other income totaled $1.1 million in the 2022 second quarter, compared with $4.0 million in the prior-year quarter. The $1.1 million other income for the three months ended June 30, 2022 consisted primarily of a gain on foreign currency transactions of $0.9 million and net interest income of $0.2 million. The decrease primarily reflects a gain of $5.0 million from forgiveness of the Paycheck Protection Program (PPP) loan, partially offset by an interest expense of $1.1 million in the prior-year quarter.

The effective tax rate for the 2022 second quarter was 19.5 percent, compared with 14.2 percent for the prior-year quarter. The lower tax rate last year was primarily attributable to the gain of $5.0 million from forgiveness of the PPP loan.

Net income and net income margin for the 2022 second quarter were $7.2 million and 6.3 percent, respectively, compared with $9.3 million and 9.9 percent, respectively, in the prior-year quarter. 2021 second quarter results included the $5.0 million gain from forgiveness of the PPP loan. Net income attributable to Karat in the 2022 second quarter was $6.3 million, or $0.32 per diluted share, compared with $9.6 million, or $0.50 per diluted share, in the prior-year quarter.

Adjusted EBITDA totaled $11.8 million in the 2022 second quarter, compared with $10.3 million in the prior-year quarter. Adjusted EBITDA margin, a non-GAAP measure defined below, was 10.3 percent of net sales, compared with 10.9 percent in the prior-year quarter.

Adjusted diluted earnings per common share, a non-GAAP measure defined below, rose to $0.34 per share, from $0.29 per share in the prior-year quarter.

Six-Month 2022 Financial Results

Net sales for the first six months of 2022 increased 29.4 percent to $220.3 million, from $170.2 million in the same period last year.

Gross profit for the first six months of 2022 increased 37.3 percent to $68.3 million, from $49.7 million in the same period last year.

Despite the higher freight and duty costs in the first six months of 2022, gross margin was 31.0 percent, an increase from 29.2 percent in the same period last year. Gross margin was favorably impacted by a shift to higher margin products, such as environmentally friendly products, price increases implemented to partially offset increased product, ocean freight and labor costs, favorable foreign currency exchange rate impact, along with improved operating efficiencies and leverage.

Operating expenses were $51.0 million in the 2022 year-to-date period, compared with $39.1 million in the same period last year. The increase included higher rent, production and stock-compensation expense, incremental warehouse transfer costs to manage inventory overflow, higher demurrage fees, and additional temporary labor costs, including COVID-19 related illness.

Operating income increased to $17.3 million in the first six months of 2022, or 7.8 percent of net sales, compared with $10.6 million, or 6.3 percent of net sales, in the same period last year.

Other income totaled $2.3 million in the first half of 2022, compared with $4.5 million in the same period last year. Other income in the 2021 year-to-date period primarily reflects the $5.0 million gain on forgiveness of the PPP loan recorded in the second quarter.

Net income increased to $15.1 million for the first six months of 2022, from $12.4 million in the same period last year, including the $5.0 million gain on forgiveness of the PPP loan. Net income margin was 6.9 percent in the first six months of 2022, versus 7.3 percent in the same period last year. Net income attributable to Karat was $13.0 million, or $0.65 per diluted share, in the first six months of 2022, compared with $11.4 million, or $0.66 per diluted share, in the same period last year.

Adjusted EBITDA increased to $24.8 million in the first six months of 2022, compared with $17.2 million in the same period last year. Adjusted EBITDA margin was 11.3 percent in the 2022 year-to-date period, compared with 10.1 percent in the same period last year.

Investor Conference Call

The Company will host an investor conference call today, August 11, 2022, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to discuss its 2022 second quarter results.

Phone:                 800-715-9871 (domestic); 646-307-1963 (international)
Conference ID:    6108821
Webcast:             Accessible at http://investor.karatpackaging.com/; archive available for approximately one year

About Karat Packaging Inc.
Karat Packaging Inc. is a specialty distributor and manufacturer of a wide range of environmentally friendly, 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 continued increases in customer demand, along with achieving third quarter and full year 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 heading “Risk Factors” discussed under the caption “Item 1A. Risk Factors” in Part I of our most recent Annual Report on Form 10-K or 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 SEC. 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 that date, except as required by law.

Investor Relations and Media Contacts:

PondelWilkinson Inc.  
Judy Lin Sfetcu/Roger Pondel
310-279-5980
ir@karatpackaging.com 

KARAT PACKAGING INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except share and per share data)

	Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
Net sales	$	114,881			$	94,526			$	220,294			$	170,199
Cost of goods sold		80,917				66,428				152,041				120,475
Gross profit		33,964				28,098				68,253				49,724
Operating expenses
Selling expense		9,468				7,771				18,805				14,171
General and administrative expense (including $671 and $681 associated with variable interest entity for the three months ended June 30, 2022 and 2021, respectively; $1,234 and $1,300 associated with variable interest entity for the six months ended June 30, 2022 and 2021, respectively)		16,694				13,457				32,155				24,912
Total operating expenses		26,162				21,228				50,960				39,083
Operating income		7,802				6,870				17,293				10,641
Other income (expense)
Rental income (including $238 and $246 associated with variable interest entity for the three months ended June 30, 2022 and 2021, respectively; and $476 and $492 associated with variable interest entity for the six months ended June 30, 2022 and 2021, respectively)		238				246				476				492
Other (expense) income		(181	)			16				(263	)			122
Gain (Loss) on foreign currency transactions		850				(119	)			983				(284	)
Interest income (expense) (including $386 interest income and $821 interest expense associated with variable interest entity for the three months ended June 30, 2022 and 2021, respectively; and $1,251 interest income and $10 interest expense associated with variable interest entity for the six months ended June 30, 2022 and 2021, respectively)		237				(1,128	)			1,077				(850	)
Gain on forgiveness of debt		—				5,000				—				5,000
Total other income		1,144				4,015				2,273				4,480
Income before provision for income taxes		8,946				10,885				19,566				15,121
Provision for income taxes		1,746				1,547				4,423				2,733
Net income		7,200				9,338				15,143				12,388
Net income (loss) attributable to noncontrolling interest		856				(245	)			2,132				1,025
Net income attributable to Karat Packaging Inc.	$	6,344			$	9,583			$	13,011			$	11,363
Basic and diluted earnings per share:
Basic	$	0.32			$	0.51			$	0.66			$	0.67
Diluted	$	0.32			$	0.50			$	0.65			$	0.66
Weighted average common shares outstanding, basic		19,809,417				18,908,648				19,808,505				17,048,160
Weighted average common shares outstanding, diluted		19,926,695				19,025,871				19,914,044				17,165,383

KARAT PACKAGING INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share and per share data)

	June 30, 2022				December 31, 2021
Assets
Current assets
Cash and cash equivalents (including $932 and $1,163 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively)	$	3,501			$	6,483
Accounts receivable, net of allowances of $1,734 and $583 at June 30, 2022 and December 31, 2021, respectively (including $6 and $24 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively)		38,473				32,776
Inventories		85,475				58,472
Prepaid expenses and other current assets (including $200 and $63 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively)		6,691				5,141
Total current assets		134,140				102,872
Property and equipment, net (including $46,006 and $46,612 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively)		95,044				93,475
Deposits		13,287				6,885
Goodwill		3,510				3,510
Intangible assets, net		367				380
Other assets (including $60 and $65 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively)		840				477
Total assets	$	247,188			$	207,599
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable (including $4 and $136 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively)	$	23,325			$	18,470
Accrued expenses (including $281 and $68 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively)		7,873				7,813
Related party payable		3,204				2,003
Income taxes payable (including $0 and $9 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively)		—				85
Customer deposits (including $81 and $88 associated with variable interest entity as of June 30, 2022 and December 31, 2021, respectively)		1,619				1,215
Debt, current portion (including $910 and $1,178 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively)		910				1,178
Other payables		482				—
Total current liabilities		37,413				30,764
Deferred tax liability		5,634				5,634
Line of credit		11,600				—
Long-term debt, net of current portion and debt discount of $239 and $200 as of June 30, 2022 and December 31, 2021, respectively (including $42,016 and $35,339 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively, and debt discount of $239 and $200 associated with variable interest entity as of June 30, 2022 and December 31, 2021, respectively)		42,016				35,339
Other liabilities (including $1,324 and $2,637 associated with variable interest entity at June 30, 2022 and December 31, 2021, respectively)		3,004				3,837
Total liabilities		99,667				75,574
Karat Packaging Inc. stockholders’ equity
Common stock, $0.001 par value, 100,000,000 shares authorized, 19,832,417 and 19,809,417 shares issued and outstanding, respectively, at June 30, 2022; 19,827,417 and 19,804,417 shares issued and outstanding, respectively, at December 31, 2021		20				20
Additional paid in capital		84,921				83,694
Treasury stock, $0.001 par value, 23,000 shares at both June 30, 2022 and December 31, 2021		(248	)			(248	)
Retained earnings		52,445				39,434
Total Karat Packaging Inc. stockholders’ equity		137,138				122,900
Noncontrolling interest		10,383				9,125
Total stockholders’ equity		147,521				132,025
Total liabilities and stockholders’ equity	$	247,188			$	207,599

KARAT PACKAGING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)

	Six Months Ended June 30,
		2022				2021
Cash flows from operating activities
Net income	$	15,143			$	12,388
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		5,148				4,943
Adjustments to accounts receivable reserves		1,151				—
Adjustments to inventory reserves		513				—
Gain on sale of asset		(17	)			—
Change in fair value of interest rate swap		(2,159	)			(1,143	)
Amortization of loan fees		18				6
Stock-based compensation		1,176				240
Gain on forgiveness of debt		—				(5,000	)
(Increase) decrease in operating assets
Accounts receivable		(6,848	)			(8,760	)
Inventories		(27,516	)			(13,134	)
Prepaid expenses and other current assets		(1,697	)			3,099
Deposits		(163	)			(144	)
Other assets		87				91
Increase (decrease) in operating liabilities
Accounts payable		4,855				4,285
Accrued expenses		552				1,625
Related party payable		1,201				(1,430	)
Income taxes payable		(85	)			(41	)
Customer deposits		404				658
Other liabilities		9				—
Other payable		482				(370	)
Net cash used in operating activities	$	(7,746	)		$	(2,687	)
Cash flows from investing activities
Purchases of property and equipment		(1,615	)			(957	)
Proceeds from disposal of property and equipment		35				—
Deposits paid for joint venture investment		(4,000	)			—
Deposits paid for property and equipment		(7,596	)			(2,989	)
Proceeds from settlement of interest rate swap		825				—
Acquisition of Pacific Cup, Inc., net of cash acquired		—				(893	)
Net cash used in investing activities	$	(12,351	)		$	(4,839	)
Cash flows from financing activities
Proceeds from line of credit		20,100				1,470
Payments on line of credit		(8,500	)			(31,400	)
Proceeds from long-term debt		27,477				—
Payments on long-term debt		(21,139	)			(22,726	)
Proceeds from exercise of stock options		51				67,592
Payments on capital lease obligations		—				(176	)
Payments of noncontrolling interest tax withholding		(874	)			—
Net cash provided by financing activities	$	17,115			$	14,760
Net (decrease) increase in cash and cash equivalents		(2,982	)			7,234
Cash and cash equivalents
Beginning of year	$	6,483				448
End of year	$	3,501			$	7,682
Supplemental disclosures of non-cash investing and  financing activities:
Transfers from deposit to property and equipment	$	5,107			$	1,338
Acquisition price of Pacific Cup, Inc. included within deposits	$	—			$	100
Gain on forgiveness of debt	$	—			$	5,000
Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	5,830			$	1,574
Cash paid for interest	$	1,074			$	1,975

KARAT PACKAGING INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (UNAUDITED)

(In thousands, except per share amounts)

Reconciliation of Adjusted EBITDA and Adjusted EBITDA margin:	Three Months Ended June 30,											Six Months Ended June 30,
		2022					2021						2022					2021
	Amounts			% of revenue		Amounts			% of revenue			Amounts			% of revenue		Amounts			% of revenue
Net income:	$	7,200		6.3	%	$	9,338		9.9	%		$	15,143		6.9	%	$	12,388		7.3	%
Add (deduct):
Interest income (expense), net		(237	)	(0.2	)		1,128		1.2				(1,077	)	(0.5	)		850		0.5
Provision for income taxes		1,746		1.5			1,547		1.6				4,423		2.0			2,733		1.6
Depreciation and amortization		2,564		2.2			2,479		2.6				5,148		2.4			4,943		2.9
Stock-based compensation expense		565		0.5			240		0.3				1,176		0.5			240		0.1
IPO related expenses		—		—			601		0.6				—		—			997		0.6
Gain on forgiveness of debt		—		—			(5,000	)	(5.3	)			—		—			(5,000	)	(2.9	)
Adjusted EBITDA	$	11,838		10.3	%	$	10,333		10.9	%		$	24,813		11.3	%	$	17,151		10.1	%

Reconciliation of Adjusted Diluted Earnings Per Common Share	Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
Diluted earnings per common share:	$	0.32			$	0.50			$	0.65			$	0.66
Add (deduct):
Stock-based compensation expense		0.03				0.01				0.06				0.01
IPO related expenses		—				0.03				—				0.06
Gain on forgiveness of debt		—				(0.26	)			—				(0.29	)
Income tax impact of adjustments		(0.01	)			0.01				(0.01	)			0.01
Adjusted diluted earnings per common shares	$	0.34			$	0.29			$	0.70			$	0.45

Reconciliation of Adjusted EBITDA by Entity:	Three Months Ended June 30, 2022												Six Months Ended June 30, 2022
	Karat Packaging		Global Wells			Eliminations			Consolidated				Karat Packaging		Global Wells			Eliminations			Consolidated
Net income (loss):	$	6,255	$	990		$	(45	)	$	7,200			$	13,036	$	2,465		$	(358	)	$	15,143
Add:
Interest expense (income), net		149		(386	)		—			(237	)			174		(1,251	)		—			(1,077	)
Provision for income taxes		1,746		—			—			1,746				4,423		—			—			4,423
Depreciation and amortization		2,261		303			—			2,564				4,541		607			—			5,148
Stock-based compensation expense		565		—			—			565				1,176		—			—			1,176
Adjusted EBITDA	$	10,976	$	907		$	(45	)	$	11,838			$	23,350	$	1,821		$	(358	)	$	24,813

Reconciliation of Adjusted EBITDA by Entity:	Three Months Ended June 30, 2021												Six Months Ended June 30, 2021
	Karat Packaging			Global Wells			Eliminations		Consolidated				Karat Packaging			Global Wells		Eliminations			Consolidated
Net income (loss):	$	9,583		$	(284	)	$	39	$	9,338			$	11,363		$	1,185	$	(160	)	$	12,388
Add (deduct)
Interest expense (income), net		287			841			—		1,128				840			10		—			850
Provision for income taxes		1,547			—			—		1,547				2,733			—		—			2,733
Depreciation and amortization		2,175			304			—		2,479				4,336			607		—			4,943
Stock-based compensation expense		240			—			—		240				240			—		—			240
IPO related expenses		601			—			—		601				997			—		—			997
Gain on forgiveness of debt		(5,000	)		—			—		(5,000	)			(5,000	)		—		—			(5,000	)
Adjusted EBITDA	$	9,433		$	861		$	39	$	10,333			$	15,509		$	1,802	$	(160	)	$	17,151

Use of Non-GAAP Financial Measures

Karat 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:

• Beginning in the fourth quarter of fiscal 2021, Adjusted EBITDA is calculated as net income before interest and income taxes, depreciation and amortization, stock-based compensation expense, IPO related expenses and gain on forgiveness of debt. The prior period Adjusted EBITDA has been revised to conform to this definition.
• 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, IPO related expense and gain on forgiveness of debt, and adjusted for the related tax effects of these adjustments.
  

We believe the above-mentioned non-GAAP measures, which are used by management to assess the core performance of Karat, provide useful information and additional clarity of our operating results to our investors in their own evaluation of the core performance of Karat 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 profitability 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.

KARAT PACKAGING INC. AND SUBSIDIARIES
NET SALES BY CATEGORY (UNAUDITED)
(In Thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
		2022			2021			2022			2021
	(in thousands)
National and regional chains	$	25,081		$	22,310		$	49,987		$	40,599
Distributors		66,399			50,967			125,523			90,977
Online		15,491			13,703			29,040			25,146
Retail		7,910			7,546			15,744			13,477
	$	114,881		$	94,526		$	220,294		$	170,199

FAQ

What were Karat Packaging's financial results for Q2 2022?

In Q2 2022, Karat Packaging reported revenue of $114.9 million, a 21.5% increase, with a net income of $7.2 million.

What is the revenue outlook for Karat Packaging for full-year 2022?

Karat Packaging projects full-year revenue between $445 million and $449 million for 2022.

How did Karat Packaging's gross margin perform in Q2 2022?

Karat Packaging's gross margin was 29.6% in Q2 2022, slightly down from 29.7% in the prior year.

What challenges did Karat Packaging face in Q2 2022?

Karat Packaging faced shipping delays that impacted approximately $2 million in order fulfillments.

What growth did Karat Packaging see in eco-friendly products?

Karat Packaging experienced a 50% growth in its eco-friendly product category.