KRT · Karat Packaging Inc.

Karat Packaging Inc. delivered strong Q1 2026 results with net sales surging 12.9% to $116.9 million, fueled by $12.1 million in volume and product mix gains plus $2.0 million from pricing, though partially offset by lower shipping revenue. Gross profit edged up 1.9% to $41.5 million, but margin compressed to 35.5% from 39.3% primarily due to soaring import costs—import duties and tariffs jumped from $3.4 million to $10.5 million, reaching 13.8% of sales versus 8.6% last year—along with higher inventory adjustments. These pressures were mitigated by lower product costs as a percentage of sales, favorable mix, and pricing discipline. Operating expenses rose slightly to $33.1 million, driven by new Chino distribution center rent and higher salaries, offset by reduced online platform fees and shipping costs. Net income grew 4.8% to $7.1 million, with diluted EPS at $0.34. Adjusted EBITDA increased to $12.5 million, maintaining a 10.7% margin. CEO Alan Yu highlighted accelerating momentum, with March growth over 20%, resilient margins via diversified sourcing, and eco-friendly sales up 16.9% led by paper bags, including a new national chain win. Looking ahead, Q2 guidance projects 8-10% sales growth, 35-37% gross margin, and 11-13% Adjusted EBITDA margin, excluding tariff refunds; full-year anticipates low double-digit sales growth, 34-36% gross margin, and 11-13% Adjusted EBITDA margin. Price hikes on select plastics from mid-May aim to counter oil-driven cost rises, with expected tariff savings starting in May to stabilize margins amid resin challenges. A $0.45 quarterly dividend underscores capital return commitment.