Karat Packaging Reports Fourth Quarter and Full Year 2025 Financial Results

— Continued Profitable Growth and Business Expansion —

CHINO, Calif., March 12, 2026 (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, 2025.

Fourth Quarter 2025 Highlights

• Record fourth quarter net sales of $115.6 million, up 13.7 percent, from $101.6 million in the prior-year quarter.

• Gross profit of $39.3 million, versus $39.8 million in the prior-year quarter.

• Gross margin of 34.0 percent, reflecting an expected decrease from 39.2 percent in the prior-year quarter due to elevated tariffs.

• Net income of $7.2 million, up 22.8 percent, from $5.9 million in the prior-year quarter.

• Net income margin of 6.2 percent, from 5.8 percent in the prior-year quarter.

• Adjusted EBITDA of $12.5 million, versus $11.3 million in the prior-year quarter.

• Adjusted EBITDA margin of 10.8 percent, versus 11.1 percent in the prior-year quarter.
  
  

Guidance

• Net sales for the 2026 first quarter expected to increase by 8 to 10 percent from the prior-year quarter.

• Gross margin for the 2026 first quarter expected to be between 34 and 36 percent.

• Adjusted EBITDA margin for the 2026 first quarter expected to be between 9 and 11 percent.

• Net sales for full-year 2026 expected to increase by low double-digits from the prior year.

• Gross margin and adjusted EBITDA margin for full year 2026 expected to continue to improve compared with the prior year, under current global tariff policy.
  
  

“We finished 2025 with a strong fourth quarter, demonstrating the strength and resilience of our business model and our ability to continue to drive profitable growth against an uncertain macroeconomic backdrop. We again achieved double-digit volume growth and our pricing turned positive for the first time since the first quarter of 2023,” said Alan Yu, Chief Executive Officer. “Our strategy to diversify sourcing is proving successful, enabling us to continue to strengthen our global supply chain and maintain a 34 percent gross margin, despite significantly higher tariffs and duty costs.

“We continue to closely monitor tariff and foreign currency developments and adjust our global supply chain as appropriate. During the fourth quarter of 2025, 46 percent of our goods were sourced from Taiwan, 14 percent from China, 13 percent from the United States, and 11 percent each from Vietnam and Malaysia. Following the recent U.S. Supreme Court ruling on tariffs and the stabilization of the U.S. Dollar and New Taiwan Dollar exchange rates, we expect tailwinds on the margin to be realized beginning in the second quarter of 2026.

“Our new paper bags product category continues to perform strongly, expanding steadily and generating meaningful revenue growth. In 2025, we won a significant paper bag contract with one of our largest national chain accounts, and we are actively pursuing further opportunities, some of which are at the final confirmation stage. We are also strengthening this category by supplying generic paper bags to smaller customer accounts, and we expect to continue gaining market share in this category in the coming years.

“In today’s dynamic trade environment, we are confident that Karat’s proven global sourcing flexibility and efficient logistics capabilities will support a solid growth trajectory,” Yu added.

Fourth Quarter 2025 Financial Results

Net sales for the 2025 fourth quarter increased 13.7 percent to $115.6 million, from $101.6 million in the prior-year quarter. The increase primarily reflected $8.2 million in volume and a $6.3 million favorable impact from pricing and product mix.

Cost of goods sold for the 2025 fourth quarter increased 23.4 percent to $76.3 million, from $61.8 million in the prior-year quarter. Product costs increased $6.1 million due to sales growth, partially offset by more favorable vendor pricing and product mix. Within import costs, duty and tariff costs increased $8.4 million, reflecting the overall higher tariff rates and a $0.4 million adjustment to the duty reserve previously recorded on certain imports.

Gross profit for the 2025 fourth quarter was $39.3 million, compared with $39.8 million in the prior-year quarter. Gross margin for the 2025 fourth quarter was 34.0 percent, compared with 39.2 percent in the prior-year quarter, reflecting the expected impact from higher import costs, as discussed above, which, as a percentage of net sales, increased to 14.5 percent from 8.3 percent in the prior-year quarter. The decrease in margin was partially offset by a decrease in product costs as a percentage of net sales, due to more favorable vendor pricing and product mix, as well as lower logistics expense as a percentage of net sales.

Operating expenses in the 2025 fourth quarter decreased to $30.9 million, from $32.5 million in the prior-year quarter. The decrease was mainly driven by reduced online platform fees of $1.6 million, lower marketing expense of $0.5 million, reduced professional services expense of $0.4 million, partially offset by higher rent expense of $0.5 million primarily due to the opening of a new Chino distribution center in 2025.

Other income, net, increased 17.7 percent to $1.2 million for the 2025 fourth quarter, from $1.0 million in the prior-year quarter.

Net income for the 2025 fourth quarter increased 22.8 percent to $7.2 million, from $5.9 million for the prior-year quarter. Net income margin rose to 6.2 percent in the 2025 fourth quarter, from 5.8 percent in the prior-year quarter.

Net income attributable to Karat for the 2025 fourth quarter increased 21.3 percent to $6.8 million, or $0.34 per diluted share, from $5.6 million, or $0.28 per diluted share, in the prior-year quarter.

Adjusted EBITDA, a non-GAAP measure defined below, totaled $12.5 million for the 2025 fourth quarter, compared with $11.3 million for the prior-year quarter. Adjusted EBITDA margin, a non-GAAP measure defined below, was 10.8 percent, compared with 11.1 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 2025 fourth quarter, compared with $0.29 per share in the prior-year quarter.

2025 Full Year Results

Net sales for the year ended December 31, 2025 increased 10.7 percent to $467.7 million, from $422.6 million last year. The increase in net sales was primarily driven by an increase of $39.7 million in volume and an increase of $11.9 million in product mix, partially offset by a $6.5 million unfavorable year-over-year pricing comparison.

Cost of goods sold for the year ended December 31, 2025 was $295.6 million, compared with $258.3 million last year. The increase primarily reflected $20.6 million in ocean freight and duty costs, from higher duties and tariffs of $14.6 million, as well as a 22.0 percent increase in import volume, partially offset by a 5.4 percent decrease in average freight container rates. In addition, product costs increased by $18.1 million due to higher sales volume and better product mix, partially offset by more favorable vendor pricing.

Gross profit for the year ended December 31, 2025 increased 4.8 percent to $172.1 million, from $164.3 million last year. Gross margin was 36.8 percent for the year ended December 31, 2025, compared with 38.9 percent last year. Gross margin was negatively impacted by rising freight and duty costs, as discussed above, which as a percentage of net sales increased to 11.8 percent during the year ended December 31, 2025, compared with 8.2 percent in the same period last year. The decrease was partially offset by a decrease in product costs and depreciation expense on production equipment as a percentage of net sales.

Operating expenses for the year ended December 31, 2025 were $130.7 million, compared with $126.6 million last year. The increase was mainly driven by $7.0 million of higher shipping and transportation costs primarily due to increases in both offline sales shipping volume and shipping rates, $3.3 million of higher rent expense due to a higher rate on the Chino, California facility lease extension, as well as the opening of a new Chino distribution center, and $1.4 million of higher salaries and benefit expenses. These increases were partially offset by a reduction in online platform fees and marketing expenses. Additionally, the year ended December 31, 2025 included a gain on disposal of machinery in the normal course of business, while the prior year included a $2.0 million non-cash impairment charge of a right-of-use asset from the sublease of the Company’s City of Industry warehouse in California and a loss on disposal of machinery in the normal course of business.

Other income, net, was $1.6 million for the year ended December 31, 2025, compared with $2.9 million last year. The decrease was primarily attributable to a loss on foreign currency transactions of $1.5 million, due to the weakening of the U.S. Dollar against the New Taiwan Dollar, partially offset by an increase in rental income from the sublet of the City of Industry warehouse in California in 2024.

Net income for the year ended December 31, 2025 increased 6.0 percent to $32.7 million, from $30.8 million last year. Net income margin was 7.0 percent for the year ended December 31, 2025, compared with 7.3 percent last year.

Net income attributable to Karat Packaging increased 5.0 percent to $31.5 million, or $1.56 per diluted share, for the year ended December 31, 2025, from $30.0 million, or $1.49 per diluted share, last year.

Adjusted EBITDA, a non-GAAP measure defined below, was $55.2 million for the year ended December 31, 2025, compared with $55.3 million last year. Adjusted EBITDA margin, a non-GAAP measure defined below, was 11.8 percent for the year ended December 31, 2025, compared with 13.1 percent last year.

Adjusted diluted earnings per common share, a non-GAAP measure defined below, was $1.61 per share for the year ended December 31, 2025, compared with $1.64 per share last year.

Dividend

On February 5, 2026, Karat’s board of directors approved a regular quarterly dividend of $0.45 per share on the Company’s common stock, payable on or about February 27, 2026, to stockholders of record as of February 20, 2026.

Share Repurchase Program

During the 2025 fourth quarter, the Company purchased 137,374 shares of its common stock at an average purchase price of $21.74 per share, for a total amount of $3.0 million. As of March 11, 2026, approximately $12.0 million remained available for repurchase under the authorized repurchase program.

Investor Conference Call

The Company will host an investor conference call today, March 12, 2026, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to discuss its 2025 fourth quarter and full year 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
310-279-5980
[email protected]

* During the three months ended June 30, 2025, the Company reclassified one customer from the retail to the chains and distributors channel, and reclassified the corresponding net sales amounts of approximately $1,064,000 for the three months ended December 31, 2024 and $4,272,000 for the year ended December 31, 2024, respectively, to conform to the current period presentation. The reclassification had no effect on previously reported condensed consolidated net sales for the three months and year ended December 31, 2024.

(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) 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.

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, and impairment of operating right-of-use asset.

• 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.

• 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, impairment of operating right-of-use asset, 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.