Karat Packaging (KRT) investor relations material

Executive summary

• Achieved record Q3 2025 net sales of $124.5 million, up 10.4% year-over-year, driven by volume growth, favorable product mix, and pricing initiatives, with double-digit growth in major markets like Texas and California.

• Net income for Q3 2025 was $7.6 million, down from $9.3 million year-over-year, with net income margin dropping to 6.1% from 8.2%.

• Gross margin declined to 34.5% for Q3 2025 (down from 38.6%), reflecting higher import costs and tariffs.

• Launched a new paper bag product line, securing a major national chain contract expected to add $20 million annually and scale to $100 million over 2-3 years.

• Board approved a $15 million share repurchase program and declared a $0.45/share quarterly dividend.

Financial highlights

• Q3 2025 net sales: $124.5 million (+10.4% YoY); nine months: $352.1 million (+9.7% YoY).

• Q3 2025 gross profit: $42.9 million (down from $43.5 million); gross margin: 34.5% (down from 38.6%).

• Q3 2025 net income: $7.6 million (down from $9.3 million); net income margin: 6.1% (down from 8.2%).

• Adjusted EBITDA for Q3: $13.1 million (10.5% margin), down from $14.7 million (13.0% margin); nine months: $42.7 million (12.1% margin).

• Operating cash flow for Q3: $1.0 million (down from $19.5 million); nine months: $18.5 million (down 53.5% YoY).

Outlook and guidance

• Q4 2025 net sales expected to increase 10%-14% year-over-year.

• Gross margin projected at 33%-35%; adjusted EBITDA margin at 8%-10%.

• Full-year 2025 guidance maintained for net sales, gross margin, and adjusted EBITDA margin, pending tariff impacts.

• 2026 pipeline robust, supported by new product categories and key customer accounts.

• Management expects continued demand growth for food delivery and take-out packaging, with focus on supply chain resilience and price adjustments.