May 12, 2022 16:05 ET | Source: Karat Packaging Inc. Karat Packaging Inc.
Los Angeles, California, UNITED STATES
CHINO, Calif., May 12, 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 2022 first quarter ended March 31, 2022.
“Results for our first quarter reflected excellent operational execution and sustained strong demand from existing and new customers, particularly in our environmentally friendly product lines and Karat’s Tea Zone branded products, which carry higher margins,” said Alan Yu, chief executive officer. “The positive sales performance was broad-based across all categories, including national and regional chains, distributors, online and retail channels, along with our newly expanded logistics services.”
“Subsequent to the close of the first quarter, we entered into a joint venture agreement to build a 180,000-square-foot, state-of-the art automated factory in Taiwan to manufacture 100% compostable foodservice products from bagasse, a derivative of sugarcane pulp. Manufacturing is anticipated to start in the second half of 2022. The plant further demonstrates Karat’s industry leadership position manufacturing environmentally sensitive products and the Company’s responsiveness to the changing regulatory landscape, banning single-use plastics and Styrofoam.
“Also, in May 2022, we added a total of 140,000 square-feet of warehouse space in California, Hawaii and South Carolina to meet continuing increases in consumer demand. Moreover, the success we have achieved in diversifying our global supply network is allowing us to increase the number of Karat product offerings, minimize dependence on imported goods from China and support our superior margin profile,” Mr. Yu added.
Net sales for the 2022 first quarter increased 39.3 percent to $105.4 million, from $75.7 million for the same quarter last year, reflecting new products, greater product penetration with existing and newer customers, along with the favorable impact from strong pricing.
Gross profit for the 2022 first quarter increased 58.6 percent to $34.3 million, from $21.6 million for the same quarter last year.
Gross margin expanded 390 basis points to 32.5 percent in the 2022 first quarter, from 28.6 percent for the same quarter last year. The margin expansion primarily reflected improved operating efficiencies and fixed-cost leverage, favorable foreign currency impact, sales shift to higher margin products and price increases implemented throughout the second half of 2021 and the first quarter of 2022 to offset increased product, ocean freight and labor costs.
Operating expenses in the 2022 first quarter rose to $24.8 million, or 23.5% of net sales, compared with $17.9 million, or 23.6% of net sales, reflecting higher shipping and transportation costs, workforce expansion, production expenses and stock-based compensation.
The effective tax rate for the 2022 first quarter was 25.2 percent, compared with 28.0 percent for the prior-year quarter. The higher tax rate in the prior year quarter was attributable, in part, to inclusion of certain non-deductible costs related to Karat’s initial public offering, which was completed in April 2021.
Net income for the 2022 first quarter advanced to $7.9 million, from $3.1 million for the same quarter last year. Net income margin was 7.5 percent for the 2022 first quarter, compared with 4.0 percent a year ago.
Net income attributable to Karat for the 2022 first quarter was $6.7 million, or $0.34 per diluted share, compared with $1.8 million, or $0.12 per diluted share, in the prior-year quarter.
Adjusted EBITDA, a non-GAAP measure defined below, totaled $13.0 million for the 2022 first quarter, compared with $6.8 million for the same quarter last year. Adjusted EBITDA margin, a non-GAAP measure defined below, expanded to 12.3 percent of net sales, compared with 9.0 percent for the 2021 first quarter.
Adjusted diluted earnings per common share, a non-GAAP measure defined below, rose to $0.36 per share, from $0.15 per share in the prior-year quarter.
Investor Conference Call The Company will host an investor conference call today, May 12, 2022, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time).
Phone: 877-418-4045 (domestic); 412-317-6745 (international) Replay: Accessible through May 19, 2022; 877-344-7529 (domestic); 412-317-0088 (international); replay access code 8174077 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 second 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; karat@pondel.com
KARAT PACKAGING INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands, except share and per share data)
KARAT PACKAGING INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands, except share and per share data)
KARAT PACKAGING, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)
KARAT PACKAGING INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (UNAUDITED) (In thousands, except per share amounts)
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:
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)