Karat Packaging (KRT) Q1 2025 earnings summary

Executive summary

• Net sales for Q1 2025 were $103.6M, up 8.4% year-over-year, driven by 10.9% sales volume growth and product mix changes, partially offset by lower pricing.

• Gross profit increased 8.4% to $40.8M, with gross margin steady at 39.3%.

• Net income grew 5.2% to $6.8M, with net income margin at 6.6%.

• Adjusted EBITDA was $11.9M (11.5% margin), down from $13.5M (14.2% margin) year-over-year.

• Online sales surged nearly 20% year-over-year, while domestic manufacturing and a new 187,000 sq ft distribution center supported growth.

Financial highlights

• Cost of goods sold rose 8.4% to $62.9M; operating expenses increased 11.6% to $32.9M.

• Operating income was $7.8M, down 3.2% year-over-year.

• Adjusted diluted EPS was $0.33, down from $0.40 year-over-year.

• Free cash flow improved to $6.6M; working capital was $111.9M.

• Cash and equivalents at quarter-end were $32.5M; short-term investments $23.8M.

Outlook and guidance

• Q2 2025 net sales expected to grow high single- to low double-digits year-over-year.

• Q2 gross margin expected in line with Q1; adjusted EBITDA margin projected in mid-teens.

• Full-year 2025 guidance for net sales, gross margin, and adjusted EBITDA margin reiterated.

• Some margin compression anticipated in the second half due to tariffs and duties.

• Management expects continued positive impact from food delivery/take-out trends and demand for eco-friendly products.