Karat Packaging (KRT) Q4 2024 earnings summary

Executive summary

• Q4 2024 net sales rose 6.3% year-over-year to $101.6M, with sales volume up 14% and net income up 40.3% to $5.9M; full year net sales reached $422.6M.

• Gross margin expanded to 39.2% from 35.7% year-over-year, driven by lower vendor pricing, favorable currency, and product mix; record full year gross margin achieved.

• Eco-friendly product sales grew 11% in Q4, now representing 34.5%-35% of total sales.

• Supply chain diversified away from China to mitigate tariff risks, with a new 187,000 sq ft distribution center in California supporting growth.

• Strategic focus for 2025 includes driving sales growth, operational efficiency, and supply chain diversification.

Financial highlights

• Q4 2024 net sales were $101.6M, up 6.3% year-over-year; gross profit increased 16.8% to $39.8M, with gross margin up 350 bps to 39.2%.

• Q4 operating income rose 57.8% to $7.3M; adjusted EBITDA increased to $11.3M (11.1% margin); net income margin improved to 5.8% from 4.4%.

• Full year gross profit was $164.3M (up 7.4%), with gross margin at 38.9%; full year adjusted EBITDA was $55.3M (13.1% margin).

• Adjusted diluted EPS for Q4 was $0.29 (up from $0.24); full year adjusted diluted EPS was $1.64 (down from $1.83).

• Free cash flow was $7.5M in Q4 and $43.9M for 2024; working capital at $114.6M; cash and equivalents at year-end: $31.6M.

Outlook and guidance

• Q1 2025 net sales expected to grow 6%-8% year-over-year; gross margin targeted at 37%-39%.

• Full-year 2025 revenue growth projected at 9%-11%, with gross margin of 36%-38% and adjusted EBITDA margin in low to mid double digits.

• Robust sales growth and strong pipeline observed in early 2025, with new business expected to convert to revenue in H2.