Karat Packaging (KRT) Q4 2025 earnings summary

Executive summary

• Achieved record Q4 2025 net sales of $115.6 million, up 13.7% year-over-year, driven by strong double-digit volume growth across all major markets.

• Q4 net income rose 22.8% to $7.2 million; full-year net income increased 6.0% to $32.7 million.

• Maintained profitability despite higher tariffs and logistics costs, supported by diversified sourcing and strong product category growth.

• Continued expansion in eco-friendly and paper bag product categories, with eco-friendly sales rising to 37.3% of total revenue in Q4 2025 and a major contract win in paper bags.

• Maintained focus on operating efficiency, reducing operating costs leverage to 26.7% from 32% year-over-year.

Financial highlights

• Q4 2025 net sales reached $115.6 million, up 13.7% year-over-year; full-year net sales were $467.7 million, up 10.7%.

• Q4 gross profit was $39.3 million, with gross margin at 34.0% versus 39.2% in Q4 2024, impacted by higher import costs and tariffs.

• Q4 adjusted EBITDA was $12.5 million (10.8% margin); full-year adjusted EBITDA was $55.2 million (11.8% margin).

• Q4 adjusted diluted EPS was $0.34; full-year adjusted diluted EPS was $1.61.

• Generated $15.4 million in operating cash flow and $14.6 million in free cash flow in Q4 2025; full-year free cash flow was $29.3 million.

Outlook and guidance

• Q1 2026 net sales expected to increase 8%-10% year-over-year, with gross margin guidance of 34%-36% and adjusted EBITDA margin of 9%-11%.

• Full year 2026 net sales projected to grow in the low double-digit range, with anticipated improvements in gross and adjusted EBITDA margins if current tariff policy holds.

• Growth outlook driven mainly by market share gains, especially in new paper bag categories.

• Guidance includes some pipeline opportunities but remains conservative due to potential delays in customer onboarding.