Karat Packaging Reports Fourth Quarter and Full Year 2024 Financial Results
Karat Packaging (Nasdaq: KRT) reported strong Q4 2024 results with net sales increasing 6.3% to $101.6 million. The company achieved notable improvements with gross profit up 16.8% to $39.8 million and net income rising 40.3% to $5.9 million compared to Q4 2023.
Key Q4 metrics include gross margin expansion to 39.2% and Adjusted EBITDA of $11.3 million. Eco-friendly products grew 11% year-over-year, representing 35% of total sales. The company has reduced China dependency to 20% of imports, with Taiwan now accounting for over 50% of global sourcing.
For 2025 guidance, KRT expects Q1 sales growth of 6-8% and full-year sales growth of 9-11%. The company announced a quarterly dividend of $0.45 per share, payable February 28, 2025.
Karat Packaging (Nasdaq: KRT) ha riportato risultati solidi per il quarto trimestre del 2024, con vendite nette in aumento del 6,3% a 101,6 milioni di dollari. L'azienda ha ottenuto miglioramenti significativi, con un utile lordo aumentato del 16,8% a 39,8 milioni di dollari e un reddito netto in crescita del 40,3% a 5,9 milioni di dollari rispetto al quarto trimestre del 2023.
I principali indicatori del quarto trimestre includono un'espansione del margine lordo al 39,2% e un EBITDA rettificato di 11,3 milioni di dollari. I prodotti ecologici sono cresciuti dell'11% rispetto all'anno precedente, rappresentando il 35% delle vendite totali. L'azienda ha ridotto la dipendenza dalla Cina al 20% delle importazioni, con Taiwan che ora rappresenta oltre il 50% dell'approvvigionamento globale.
Per le previsioni del 2025, KRT si aspetta una crescita delle vendite del primo trimestre del 6-8% e una crescita delle vendite per l'intero anno del 9-11%. L'azienda ha annunciato un dividendo trimestrale di 0,45 dollari per azione, pagabile il 28 febbraio 2025.
Karat Packaging (Nasdaq: KRT) reportó resultados sólidos para el cuarto trimestre de 2024, con ventas netas aumentando un 6.3% a 101.6 millones de dólares. La compañía logró mejoras notables, con una utilidad bruta que subió un 16.8% a 39.8 millones de dólares y un ingreso neto que aumentó un 40.3% a 5.9 millones de dólares en comparación con el cuarto trimestre de 2023.
Los principales indicadores del cuarto trimestre incluyen una expansión del margen bruto al 39.2% y un EBITDA ajustado de 11.3 millones de dólares. Los productos ecológicos crecieron un 11% interanual, representando el 35% de las ventas totales. La compañía ha reducido su dependencia de China al 20% de las importaciones, con Taiwán ahora representando más del 50% de la obtención global.
Para las proyecciones de 2025, KRT espera un crecimiento de ventas del primer trimestre del 6-8% y un crecimiento de ventas anual del 9-11%. La compañía anunció un dividendo trimestral de 0.45 dólares por acción, pagadero el 28 de febrero de 2025.
카라트 포장 (Nasdaq: KRT)는 2024년 4분기 강력한 실적을 보고하며, 순매출이 6.3% 증가하여 1억 160만 달러에 달했습니다. 회사는 총 이익이 16.8% 증가하여 3천980만 달러에 도달하고, 순이익이 40.3% 증가하여 590만 달러에 달하는 주목할 만한 개선을 달성했습니다. 이는 2023년 4분기와 비교한 수치입니다.
4분기의 주요 지표로는 총 이익률이 39.2%로 확대되었고, 조정된 EBITDA는 1천130만 달러입니다. 친환경 제품은 전년 대비 11% 성장하여 전체 매출의 35%를 차지하고 있습니다. 회사는 중국 의존도를 20%로 줄였으며, 대만이 이제 전 세계 조달의 50% 이상을 차지하고 있습니다.
2025년 가이던스에 따르면, KRT는 1분기 매출 성장률을 6-8%로, 연간 매출 성장률을 9-11%로 예상하고 있습니다. 회사는 주당 0.45달러의 분기 배당금을 발표했으며, 이는 2025년 2월 28일에 지급될 예정입니다.
Karat Packaging (Nasdaq: KRT) a annoncé de solides résultats pour le quatrième trimestre 2024, avec des ventes nettes en hausse de 6,3% à 101,6 millions de dollars. L'entreprise a réalisé des améliorations notables, avec un bénéfice brut en hausse de 16,8% à 39,8 millions de dollars et un revenu net en augmentation de 40,3% à 5,9 millions de dollars par rapport au quatrième trimestre 2023.
Les principaux indicateurs du quatrième trimestre incluent une expansion de la marge brute à 39,2% et un EBITDA ajusté de 11,3 millions de dollars. Les produits écologiques ont augmenté de 11% d'une année sur l'autre, représentant 35% des ventes totales. L'entreprise a réduit sa dépendance à la Chine à 20% des importations, Taiwan représentant désormais plus de 50% de l'approvisionnement mondial.
Pour les prévisions 2025, KRT s'attend à une croissance des ventes de 6 à 8% pour le premier trimestre et de 9 à 11% pour l'année entière. L'entreprise a annoncé un dividende trimestriel de 0,45 dollar par action, payable le 28 février 2025.
Karat Packaging (Nasdaq: KRT) hat starke Ergebnisse für das vierte Quartal 2024 gemeldet, mit einem Anstieg des Nettoumsatzes um 6,3% auf 101,6 Millionen Dollar. Das Unternehmen erzielte bemerkenswerte Verbesserungen, wobei der Bruttogewinn um 16,8% auf 39,8 Millionen Dollar stieg und der Nettogewinn um 40,3% auf 5,9 Millionen Dollar im Vergleich zum vierten Quartal 2023 zunahm.
Wichtige Kennzahlen für das vierte Quartal umfassen eine Erweiterung der Bruttomarge auf 39,2% und ein bereinigtes EBITDA von 11,3 Millionen Dollar. Umweltfreundliche Produkte wuchsen im Jahresvergleich um 11% und machten 35% des Gesamtumsatzes aus. Das Unternehmen hat die Abhängigkeit von China auf 20% der Importe reduziert, wobei Taiwan nun über 50% der globalen Beschaffung ausmacht.
Für die Prognose 2025 erwartet KRT ein Umsatzwachstum im ersten Quartal von 6-8% und ein Umsatzwachstum für das gesamte Jahr von 9-11%. Das Unternehmen gab eine vierteljährliche Dividende von 0,45 Dollar pro Aktie bekannt, die am 28. Februar 2025 zahlbar ist.
- Q4 net sales increased 6.3% to $101.6 million
- Q4 gross profit up 16.8% to $39.8 million
- Q4 net income grew 40.3% to $5.9 million
- Eco-friendly product sales increased 11% YoY
- Gross margin expanded 350 basis points to 39.2%
- Strong 2025 guidance with 9-11% expected sales growth
- Reduced China dependency to 20% of imports
- Operating expenses increased 10.4% to $32.5 million in Q4
- Full year 2024 net income decreased to $30.8M from $33.2M in 2023
- Full year Adjusted EBITDA margin declined to 13.1% from 14.6%
Insights
Karat Packaging delivered impressive Q4 2024 results with substantial growth across key metrics. Q4 net sales increased
The company's strategic diversification of its supply chain away from China (now just
Full-year results showed steady progress with net sales increasing
Management's 2025 guidance is particularly encouraging, projecting net sales growth of 9-11% and maintaining strong gross margins between
The continued
Karat's Q4 results reveal a textbook example of effective supply chain diversification. Their strategic pivot to reduce Chinese imports to just
The company's implementation of their "asset-light strategy" is yielding measurable benefits, with increased imports as a percentage of total product mix driving down product costs. This approach allows Karat to maintain flexibility while benefiting from the stronger USD against the New Taiwan Dollar, further enhancing margins.
Their planned 187,000 square-foot distribution center expansion represents a critical infrastructure investment timed perfectly to address capacity constraints before their peak summer season. This proactive capacity management should prevent potential fulfillment bottlenecks that could otherwise limit their projected
Particularly notable is their ability to maintain margin strength despite higher ocean freight container rates, demonstrating effective cost management elsewhere in the supply chain. The
The
— Robust Growth, Including Record Full Year Gross Margin, as Business Continues to Expand —
CHINO, Calif., March 13, 2025 (GLOBE NEWSWIRE) -- Karat Packaging Inc. (Nasdaq: KRT) (“Karat” or the “Company”), a specialty distributor and manufacturer of environmentally friendly, disposable foodservice products and related items, today announced financial results for its fourth quarter and full year ended December 31, 2024.
Fourth Quarter 2024 Highlights
- Net sales of
$101.6 million , up 6.3 percent, from$95.6 million in the prior-year quarter. - Gross profit of
$39.8 million , up 16.8 percent, from$34.1 million in prior-year quarter. - Gross margin of 39.2 percent versus 35.7 percent in the prior-year quarter.
- Net income of
$5.9 million , up 40.3 percent, from$4.2 million in the prior-year quarter. - Net income margin of 5.8 percent versus 4.4 percent in the prior-year quarter.
- Adjusted EBITDA of
$11.3 million versus$8.6 million in the prior-year quarter. - Adjusted EBITDA margin of 11.1 percent versus 9.0 percent in the prior-year quarter.
Guidance
- Net sales for the 2025 first quarter expected to increase by 6 to 8 percent from the prior-year quarter.
- Gross margin for the 2025 first quarter expected to be between 37 to 39 percent.
- Adjusted EBITDA margin for the 2025 first quarter expected to be between 9 to 11 percent.
- Net sales for full year 2025 expected to increase by 9 to 11 percent from the prior year.
- Gross margin for full year 2025 expected to be between 36 to 38 percent.
- Adjusted EBITDA margin for full year 2025 expected to be in the low to mid double-digits.
“We finished 2024 with a strong fourth quarter, as sales volume grew 14 percent and net sales increased 6 percent, despite the out-of-period benefit of
“As positive momentum continues in 2025, we are making it a priority to strengthen our supply chain resilience ahead of the tariff uncertainty. We have reduced our dependence on China for imported goods to approximately 20 percent and diversified our sourcing to countries with more favorable trade conditions and minimal tariffs, such as Taiwan, which accounted for more than 50 percent of our global sourcing for the year ended December 31, 2024. We are actively working on further reducing dependence on China and negotiating additional vendor discounts to mitigate potential negative pricing and margin impact. While we try to protect pricing, we are evaluating product pricing holistically, and have implemented pricing increases in certain categories to be effective in March and April. Combined with a strong U.S. dollar and stable ocean freight rates this year, we anticipate the recently imposed tariff should have a minimal long-term effect on margin.
“Sales of our eco-friendly products in the fourth quarter increased 11 percent year-over-year and represented 35 percent of total sales. In view of more state and local government legislation requiring recyclable or compostable foodservice products, we expect demand for eco-friendly product lines will continue to accelerate. We are further developing new and innovative products to enhance our competitive position.
“As previously announced, our newly-signed 187,000 square-foot second distribution center in Chino, California will provide the capacity needed, ahead of our summer peak season, to continue to grow our top-line,” Yu said.
Fourth Quarter 2024 Financial Results
Net sales for the 2024 fourth quarter increased 6.3 percent to
Cost of goods sold for the 2024 fourth quarter increased to
Gross profit for the 2024 fourth quarter increased 16.8 percent to
Operating expenses for the 2024 fourth quarter increased 10.4 percent to
Net income for the 2024 fourth quarter increased 40.3 percent to
Net income attributable to Karat for the 2024 fourth quarter increased 44.0 percent to
Adjusted EBITDA, a non-GAAP measure defined below, increased to
Adjusted diluted earnings per common share, a non-GAAP measure defined below, rose to
2024 Full Year Results
Net sales for the year ended December 31, 2024 increased 4.2 percent to
Cost of goods sold for the year ended December 31, 2024 increased 2.3 percent to
Gross profit for the year ended December 31, 2024 increased 7.4 percent to
Operating expenses for the year ended December 31, 2024 were
Net income for the year ended December 31, 2024 was
Net income attributable to Karat was
Adjusted EBITDA, a non-GAAP measure defined below, was
Adjusted diluted earnings per common share, a non-GAAP measure defined below, was
Dividend
On February 13, 2025, Karat’s board of directors approved a regular quarterly dividend of
Investor Conference Call
The Company will host an investor conference call today, March 13, 2025, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to discuss its 2024 fourth quarter and full year results.
Phone: (646) 307-1963 (domestic); (800) 715-9871 (international)
Conference ID: 4630795
Webcast: Accessible at http://irkarat.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 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 heading “Risk Factors” 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 that date, except as required by law.
Investor Relations and Media Contacts:
PondelWilkinson Inc.
Judy Lin or Roger Pondel
310-279-5980
ir@karatpackaging.com
KARAT PACKAGING INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share and per share data) | |||||||||||||||
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Net sales | $ | 101,649 | $ | 95,582 | $ | 422,633 | $ | 405,651 | |||||||
Cost of goods sold | 61,826 | 61,488 | 258,304 | 252,608 | |||||||||||
Gross profit | 39,823 | 34,094 | 164,329 | 153,043 | |||||||||||
Operating expenses | |||||||||||||||
Selling expenses | 13,909 | $ | 15,990 | 52,286 | $ | 41,490 | |||||||||
General and administrative expenses (including | 18,360 | $ | 13,185 | 71,530 | $ | 66,952 | |||||||||
Impairment expense and loss, net, on disposal of machinery | 254 | 294 | 2,752 | 2,525 | |||||||||||
Total operating expenses | 32,523 | 29,469 | 126,568 | 110,967 | |||||||||||
Operating income | 7,300 | 4,625 | 37,761 | 42,076 | |||||||||||
Other income (expenses) | |||||||||||||||
Rental income (including | 592 | 309 | 2,076 | 1,090 | |||||||||||
Other income (expenses), net | 8 | 13 | 162 | (45 | ) | ||||||||||
Gain (loss) on foreign currency transactions | 368 | (247 | ) | 520 | 103 | ||||||||||
Interest income (including | 565 | 763 | 2,299 | 1,803 | |||||||||||
Interest expense (including | (516 | ) | (527 | ) | (2,123 | ) | (2,043 | ) | |||||||
Total other income, net | 1,017 | 311 | 2,934 | 908 | |||||||||||
Income before provision for income taxes | 8,317 | 4,936 | 40,695 | 42,984 | |||||||||||
Provision for income taxes | 2,458 | 759 | 9,871 | 9,804 | |||||||||||
Net income | 5,859 | 4,177 | 30,824 | 33,180 | |||||||||||
Net income attributable to noncontrolling interest | 244 | 279 | 849 | 710 | |||||||||||
Net income attributable to Karat Packaging Inc. | $ | 5,615 | $ | 3,898 | $ | 29,975 | $ | 32,470 | |||||||
Basic and diluted earnings per share: | |||||||||||||||
Basic | $ | 0.28 | $ | 0.20 | $ | 1.50 | $ | 1.63 | |||||||
Diluted | $ | 0.28 | $ | 0.19 | $ | 1.49 | $ | 1.63 | |||||||
Weighted average common shares outstanding, basic | 20,026,773 | 19,953,525 | 20,002,211 | 19,904,698 | |||||||||||
Weighted average common shares outstanding, diluted | 20,173,554 | 20,021,314 | 20,124,284 | 19,977,712 | |||||||||||
KARAT PACKAGING INC. AND SUBSIDIARIES NET SALES BY CATEGORY (UNAUDITED) (In thousands) | |||||||||||
Three Months Ended December 31, | Year Ended December 31, | ||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||
National and regional chains | $ | 21,410 | $ | 21,053 | $ | 90,244 | $ | 89,655 | |||
Distributors | $ | 56,937 | $ | 50,041 | $ | 234,932 | $ | 228,316 | |||
Online | $ | 16,755 | $ | 17,846 | $ | 70,130 | $ | 61,265 | |||
Retail | $ | 6,547 | $ | 6,642 | $ | 27,327 | $ | 26,415 | |||
$ | 101,649 | $ | 95,582 | $ | 422,633 | $ | 405,651 | ||||
KARAT PACKAGING INC. AND SUBSIDIARIES SELECTED BALANCE SHEET AND CASH FLOW INFORMATION (In thousands) | |||||
Selected Balance Sheet Information: | December 31, 2024 | December 31, 2023 | |||
(Unaudited) | |||||
Cash and cash equivalents | $ | 31,584 | $ | 23,076 | |
Short-term investments | $ | 28,343 | $ | 26,343 | |
Accounts receivable, net of allowance for bad debt | $ | 26,736 | $ | 27,763 | |
Inventories | $ | 70,722 | $ | 71,528 | |
Total assets | $ | 294,522 | $ | 276,397 | |
Accounts payable | $ | 17,831 | $ | 18,446 | |
Total current liabilities | $ | 46,447 | $ | 44,401 | |
Total liabilities | $ | 132,323 | $ | 113,707 | |
Total stockholders’ equity | $ | 162,199 | $ | 162,690 | |
Selected Cash Flow Information: | Year Ended December 31, | ||||||
2024 | 2023 | ||||||
(Unaudited) | |||||||
Net cash provided by operating activities | $ | 47,982 | $ | 53,379 | |||
Net cash used in investing activities | $ | (5,855 | ) | $ | (30,174 | ) | |
Dividends paid to shareholders | $ | (31,016 | ) | $ | (20,909 | ) | |
Net cash used in financing activities | $ | (33,619 | ) | $ | (16,170 | ) | |
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 December 31, | Year Ended December 31, | |||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||
Amounts | % of Net Sales | Amounts | % of Net Sales | Amounts | % of Net Sales | Amounts | % of Net Sales | ||||||||||||||
Net income | $ | 5,859 | 5.8 | % | $ | 4,177 | 4.4 | % | $ | 30,824 | 7.3 | % | $ | 33,180 | 8.2 | % | |||||
Add (deduct): | |||||||||||||||||||||
Interest income | (565 | ) | (0.6 | ) | (763 | ) | (0.8 | ) | (2,299 | ) | (0.5 | ) | (1,803 | ) | (0.4 | ) | |||||
Interest expense | 516 | 0.5 | 527 | 0.5 | 2,123 | 0.5 | 2,043 | 0.5 | |||||||||||||
Provision for income taxes | 2,458 | 2.4 | 759 | 0.8 | 9,871 | 2.3 | 9,804 | 2.4 | |||||||||||||
Depreciation and amortization | 2,695 | 2.7 | 2,725 | 2.9 | 10,675 | 2.5 | 10,783 | 2.7 | |||||||||||||
Stock-based compensation expense | 350 | 0.3 | 27 | — | 2,065 | 0.5 | 770 | 0.2 | |||||||||||||
Out-of-period adjustment (1) | — | — | 1,124 | 1.2 | — | — | — | — | |||||||||||||
Secondary offering transaction costs (2) | — | — | — | — | — | — | 453 | 0.1 | |||||||||||||
Write-off of inventory (3) | — | — | — | — | — | — | 1,710 | 0.4 | |||||||||||||
Impairment expense and (gain) loss, net, on disposal of machinery (3) | — | — | (3 | ) | — | — | — | 2,132 | 0.5 | ||||||||||||
Operating right-of-use asset impairment | — | — | — | — | 1,993 | 0.5 | — | — | |||||||||||||
Adjusted EBITDA | $ | 11,313 | 11.1 | % | $ | 8,573 | 9.0 | % | $ | 55,252 | 13.1 | % | $ | 59,072 | 14.6 | % | |||||
(1) The out-of-period adjustment for the three months ended December 31, 2023 represented a write-off of a vendor prepayment due to the resolution of a legal contingency, which management believes was not representative of our underlying operating performance. The adjustment was to correct an immaterial error in its previously issued quarterly financial statements for the quarter ended September 30, 2023. Although the full year financial statements for the year ended December 31, 2023 are not affected, the impact of the adjustment for the quarter ended December 31, 2023 was a decrease to other assets and an increase in general and administrative expenses of
(2) Secondary offering transaction costs represent legal and professional fees incurred in connection with the completion of the secondary offering, which were directly related to the offering and were incremental to our normal operating expenses.
(3) The write-off of inventory and impairment expense and loss, net, on disposal of machinery represent amounts recognized in connection with the scaling back of production in certain locations. As part of the execution of this strategy, certain machinery and equipment were disposed of or impaired, and raw materials associated with those machinery and equipment were written-off.
Reconciliation of Free Cash Flow | Three Months Ended December 31, | Year Ended December 31, | |||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||
Cash from operating activities | $ | 8,250 | $ | 10,291 | $ | 47,982 | $ | 53,379 | |||||||
Add (deduct): | |||||||||||||||
Purchase of property and equipment | (216 | ) | — | (934 | ) | (2,835 | ) | ||||||||
Deposits paid for property and equipment | (544 | ) | (919 | ) | (3,134 | ) | (6,309 | ) | |||||||
Deposits refunded from cancelled machinery orders | — | — | — | 503 | |||||||||||
Free Cash Flow | $ | 7,490 | $ | 9,372 | $ | 43,914 | $ | 44,738 | |||||||
Reconciliation of Adjusted Diluted Earnings Per Common Share | Three Months Ended December 31, | Year Ended December 31, | ||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||
Diluted earnings per common share | $ | 0.28 | $ | 0.19 | $ | 1.49 | $ | 1.63 | ||||||
Add (deduct): | ||||||||||||||
Stock-based compensation expense | 0.01 | — | 0.10 | 0.04 | ||||||||||
Out-of-period adjustment | — | 0.06 | — | — | ||||||||||
Secondary offering transaction costs | — | — | — | 0.02 | ||||||||||
Write-off of inventory | — | — | — | 0.09 | ||||||||||
Impairment expense and loss, net, on disposal of machinery | — | — | — | 0.11 | ||||||||||
Operating right-of-use asset impairment | — | — | 0.10 | — | ||||||||||
Tax impact | — | (0.01 | ) | (0.05 | ) | (0.06 | ) | |||||||
Adjusted diluted earnings per common shares | $ | 0.29 | $ | 0.24 | $ | 1.64 | $ | 1.83 | ||||||
Reconciliation of Adjusted EBITDA by Entity | Three Months Ended December 31, 2024 | |||||||||||
Karat Packaging | Global Wells | Eliminations | Consolidated | |||||||||
Net income (loss) | $ | 5,634 | $ | 287 | $ | (62 | ) | $ | 5,859 | |||
Add (deduct): | ||||||||||||
Interest income | (564 | ) | (1 | ) | — | (565 | ) | |||||
Interest expense | 7 | 509 | — | 516 | ||||||||
Provision for income taxes | 2,458 | — | — | 2,458 | ||||||||
Depreciation and amortization | 2,391 | 304 | — | 2,695 | ||||||||
Stock-based compensation expense | 350 | — | — | 350 | ||||||||
Adjusted EBITDA | $ | 10,276 | $ | 1,099 | $ | (62 | ) | $ | 11,313 | |||
Reconciliation of Adjusted EBITDA by Entity | Year Ended December 31, 2024 | ||||||||||
Karat Packaging | Global Wells | Eliminations | Consolidated | ||||||||
Net income | $ | 29,678 | $ | 994 | $ | 152 | $ | 30,824 | |||
Add (deduct): | |||||||||||
Interest income | (1,829 | ) | (470 | ) | — | (2,299 | ) | ||||
Interest expense | 61 | 2,062 | — | 2,123 | |||||||
Provision for income taxes | 9,871 | — | — | 9,871 | |||||||
Depreciation and amortization | 9,461 | 1,214 | — | 10,675 | |||||||
Stock-based compensation expense | 2,065 | — | — | 2,065 | |||||||
Operating right-of-use asset impairment | 1,993 | — | — | 1,993 | |||||||
Adjusted EBITDA | $ | 51,300 | $ | 3,800 | $ | 152 | $ | 55,252 | |||
Reconciliation of Adjusted EBITDA by Entity | Three Months Ended December 31, 2023 | |||||||||||
Karat Packaging | Global Wells | Eliminations | Consolidated | |||||||||
Net income (loss) | $ | 3,972 | $ | 321 | $ | (116 | ) | $ | 4,177 | |||
Add (deduct): | ||||||||||||
Interest income | (435 | ) | (328 | ) | — | (763 | ) | |||||
Interest expense | 7 | 520 | — | 527 | ||||||||
Provision for income taxes | 759 | — | — | 759 | ||||||||
Depreciation and amortization | 2,421 | 304 | — | 2,725 | ||||||||
Stock-based compensation expense | 27 | — | — | 27 | ||||||||
Out-of-period adjustment (1) | 1,124 | — | — | 1,124 | ||||||||
Gain, net, on disposal of machinery (3) | (3 | ) | — | — | (3 | ) | ||||||
Adjusted EBITDA | $ | 7,872 | $ | 817 | $ | (116 | ) | $ | 8,573 | |||
Reconciliation of Adjusted EBITDA by Entity | Year Ended December 31, 2023 | |||||||||||
Karat Packaging | Global Wells | Eliminations | Consolidated | |||||||||
Net income (loss) | $ | 32,544 | $ | 820 | $ | (184 | ) | $ | 33,180 | |||
Add (deduct): | ||||||||||||
Interest income | (1,197 | ) | (623 | ) | 17 | (1,803 | ) | |||||
Interest expense | 41 | 2,019 | (17 | ) | 2,043 | |||||||
Provision for income taxes | 9,804 | — | — | 9,804 | ||||||||
Depreciation and amortization | 9,569 | 1,214 | — | 10,783 | ||||||||
Stock-based compensation expense | 770 | — | — | 770 | ||||||||
Secondary offering transaction costs (2) | 453 | — | — | 453 | ||||||||
Write-off of inventory (3) | 1,710 | — | — | 1,710 | ||||||||
Impairment expense and loss, net, on disposal of machinery (3) | 2,132 | — | — | 2,132 | ||||||||
Adjusted EBITDA | $ | 55,826 | $ | 3,430 | $ | (184 | ) | $ | 59,072 | |||
(1) The out-of-period adjustment for the three months ended December 31, 2023 represented a write-off of a vendor prepayment due to the resolution of a legal contingency, which management believes was not representative of our underlying operating performance. The adjustment was to correct an immaterial error in its previously issued quarterly financial statements for the quarter ended September 30, 2023. Although the full year financial statements for the year ended December 31, 2023 are not affected, the impact of the adjustment for the quarter ended December 31, 2023 was a decrease to other assets and an increase in general and administrative expenses of
(2) Secondary offering transaction costs represent legal and professional fees incurred in connection with the completion of the secondary offering, which were directly related to the offering and were incremental to our normal operating expenses.
(3) The write-off of inventory and impairment expense and (gain) loss, net, on disposal of machinery represent costs incurred in connection with the scaling back of production in the U.S. As part of the execution of this strategy, certain machinery and equipment was disposed of or impaired, and raw materials associated with those machinery and equipment were written-off.
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:
- Adjusted EBITDA is calculated as net income before interest income and interest expense, provision for income taxes, depreciation and amortization, stock-based compensation expense, secondary offering transaction costs, write-off of certain inventory items outside the normal course of business, impairment expense and (gain) loss, net, on disposal of machinery outside the normal course of business, impairment on operating right-of-use asset, and out-of-period adjustment.
- Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by net sales.
- 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, offset by (iii) deposits refunded from cancelled machinery orders.
- Adjusted diluted earnings per common share is calculated as diluted earnings per common share, plus the per share impact of stock-based compensation, secondary offering transaction costs, write-off of certain inventory items outside the normal course of business, impairment expense and (gain) loss, net, on disposal of machinery outside the normal course of business, impairment on operating right-of-use asset, out-of-period adjustment, 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 financial performance and liquidity 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 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 and liquidity 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.
