Karat Packaging Reports First Quarter 2026 Financial Results
Rhea-AI Summary
Karat Packaging (Nasdaq: KRT) reported Q1 2026 results: net sales $116.9M (+12.9% YoY), gross profit $41.5M, and net income $7.1M. Gross margin was 35.5% versus 39.3% prior-year, pressured by higher import duties and tariffs that rose to $10.5M in the quarter.
Management issued Q2 and full-year 2026 guidance with adjusted EBITDA margin target 11–13% and confirmed a quarterly dividend of $0.45 per share.
AI-generated analysis. Not financial advice.
Positive
- Net sales +12.9% to $116.9M in Q1 2026
- Adjusted EBITDA $12.5M, up from $11.9M
- Quarterly dividend of $0.45 per share approved
- Eco-friendly product sales +16.9% year-over-year
Negative
- Gross margin declined to 35.5% from 39.3% YoY
- Import duty and tariff costs increased to $10.5M
- Cost of goods sold rose 20.0% to $75.4M
Key Figures
Market Reality Check
Peers on Argus
KRT gained 1.06% while peers were mixed: PACK up 2.55%, MYE roughly flat at 0.05%, and TRS/AMBP down -1.33% and -1.0%. Moves do not indicate a unified sector trend.
Previous Earnings Reports
| Date | Event | Sentiment | Move | Catalyst |
|---|---|---|---|---|
| Mar 12 | Q4 & 2025 earnings | Positive | +20.7% | Record Q4 and full-year 2025 sales with solid net income growth and guidance. |
| Nov 06 | Q3 2025 earnings | Negative | -6.3% | Record sales but lower gross margin and net income amid rising tariffs and costs. |
| Aug 07 | Q2 2025 earnings | Positive | -6.3% | Record net income and improved gross margin with strong adjusted EBITDA and dividend. |
| May 08 | Q1 2025 earnings | Positive | +10.7% | Strong sales and net income growth with stable gross margin and dividend declaration. |
| Mar 13 | Q4 2024 earnings | Positive | -2.1% | Higher sales, margins, and net income plus dividend, yet shares declined afterward. |
Earnings releases often produced sizable moves for KRT, with several strong positive reactions to upbeat reports but also occasional selloffs despite solid growth, especially when margins compressed from tariff and import-cost pressures.
Over the past year, KRT’s earnings reports have featured consistent double‑digit net sales growth and recurring dividends of $0.45 per share. Prior quarters showed record sales (Q2 and Q3 2025) and robust margins, later pressured as import duties and tariffs rose. Price reactions varied: some strong rallies followed positive quarters, while others sold off on margin compression. Today’s Q1 2026 results continue the theme of solid top‑line growth with gross margin impacted by elevated tariffs, aligning with earlier commentary and 2026 guidance shared on Mar 12, 2026.
Historical Comparison
Past earnings releases for KRT led to average moves of 3.34%, with a mix of strong rallies and selloffs tied largely to margin trends and tariff impacts.
Earnings history shows steady net sales growth with recurring $0.45 dividends, but gross margins fluctuated as tariffs and import costs increased; recent quarters, including Q1 2026, emphasize managing these pressures while sustaining double‑digit growth.
Market Pulse Summary
This announcement delivered solid Q1 2026 growth, with net sales of $116.9M up 12.9 percent and net income of $7.1M, while gross margin slipped to 35.5% under elevated tariffs. Management reiterated an outlook for 8–10 percent Q2 growth and low double‑digit full‑year gains, alongside a $0.45 dividend. Investors may watch tariff refunds, import-cost trends, and eco‑friendly sales growth of 16.9% as key drivers of future margins.
Key Terms
adjusted EBITDA financial
non-GAAP financial
import duty regulatory
tariffs regulatory
AI-generated analysis. Not financial advice.
— Strong Top-Line Growth and Solid Profitability —
CHINO, Calif., May 07, 2026 (GLOBE NEWSWIRE) -- Karat Packaging Inc. (Nasdaq: KRT) ("Karat Packaging" or the "Company"), a specialty distributor and manufacturer of environmentally friendly, disposable foodservice products and related items, today announced financial results for its first quarter ended March 31, 2026.
First Quarter 2026 Highlights
- Net sales of
$116.9 million , up 12.9 percent, from$103.6 million in the prior-year quarter. - Gross profit of
$41.5 million , up 1.9 percent, from$40.8 million in the prior-year quarter. - Gross margin of 35.5 percent, reflecting an expected decrease from 39.3 percent in the prior-year quarter due to elevated tariffs.
- Net income of
$7.1 million , up 4.8 percent, from$6.8 million in the prior-year quarter. - Net income margin of 6.1 percent versus 6.6 percent in the prior-year quarter.
- Adjusted EBITDA of
$12.5 million versus$11.9 million in the prior-year quarter. - Adjusted EBITDA margin of 10.7 percent versus 11.5 percent in the prior-year quarter.
Guidance
- Net sales for the 2026 second quarter expected to increase by 8 to 10 percent from the prior-year quarter.
- Gross margin for the 2026 second quarter expected to be within 35 to 37 percent, excluding potential tariff refund impact under the current trade policy.
- Adjusted EBITDA margin for the 2026 second quarter expected to be within 11 to 13 percent, excluding potential tariff refund impact under the current trade policy.
- Net sales for full-year 2026 expected to increase by low double-digits from the prior year.
- Gross margin for full-year 2026 expected to be within 34 to 36 percent, excluding potential tariff refund impact under the current trade policy.
- Adjusted EBITDA margin for full-year 2026 expected to be within 11 to 13 percent, excluding potential tariff refund impact under the current trade policy.
“We started 2026 with a robust quarter, with year‑over‑year sales increasing almost 13 percent as momentum built throughout the quarter, accelerating from weather-impacted modest progress in January to growth exceeding 20 percent in March,” said Alan Yu, Chief Executive Officer. “Gross margin remained resilient at 35.5 percent despite the continued impact of higher tariffs, demonstrating the effectiveness of our diversified sourcing strategy and benefiting from favorable product mix and pricing.
“Given the sharp increase in oil prices and its impact on our product costs, we will implement price increases on select plastic items beginning in mid‑May. While certain sourced product costs are rising, we expect tariff savings under current trade policy to start reducing our cost of goods sold in May 2026, partially offsetting these pressures, and we expect price increases to support gross margin stability. Importantly, we believe we are well positioned to continue gaining market share amid ongoing resin supply challenges, supported by our strong inventory position and disciplined supply chain execution.
“Our new paper bag product category continues to expand steadily, driving a year-over-year increase in eco‑friendly product sales of 16.9 percent in the first quarter. We have also successfully closed another national chain account to supply paper bags, further strengthening our leadership in sustainable packaging solutions,” Yu added.
First Quarter 2026 Financial Results
Net sales for the 2026 first quarter increased 12.9 percent to
Cost of goods sold for the 2026 first quarter increased 20.0 percent to
Gross profit for the 2026 first quarter increased to
Operating expenses for the 2026 first quarter increased to
Net income for the 2026 first quarter increased 4.8 percent to
Net income attributable to Karat Packaging for the 2026 first quarter was
Adjusted EBITDA, a non-GAAP measure defined below, was
Adjusted diluted earnings per common share, a non-GAAP measure defined below, was
Dividend
On May 5, 2026, Karat Packaging’s Board of Directors approved a regular quarterly dividend of
Investor Conference Call
The Company will host an investor conference call today, May 7, 2026, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to discuss its 2026 first quarter results.
Phone: (800) 715-9871 (domestic); (646) 307-1963 (international)
Conference ID: Karat Packaging Inc.
Webcast: Accessible at https://irkarat.com/events-presentations/; archive available for approximately one year
About Karat Packaging Inc.
Karat Packaging Inc. is a specialty distributor and manufacturer of a wide range of 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.
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 our 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 caption “Item 1A. Risk Factors” in Part I of our most recent Annual Report on Form 10-K and 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 Securities and Exchange Commission. 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 the date of this release, except as required by law.
Investor Relations and Media Contacts:
PondelWilkinson Inc.
Judy Lin or Roger Pondel
310-279-5980
KARAT PACKAGING INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except share and per share data)
| Three Months Ended March 31, | |||||||
| 2026 | 2025 | ||||||
| Net sales | $ | 116,947 | $ | 103,624 | |||
| Cost of goods sold | 75,421 | 62,862 | |||||
| Gross profit | 41,526 | 40,762 | |||||
| Operating expenses | |||||||
| Selling expenses | 12,936 | 14,411 | |||||
| General and administrative expenses (including | 20,126 | 18,548 | |||||
| Gain, net, on disposal of property | — | (17 | ) | ||||
| Total operating expenses | 33,062 | 32,942 | |||||
| Operating income | 8,464 | 7,820 | |||||
| Other income (expenses) | |||||||
| Rental income (including | 698 | 776 | |||||
| Other income, net (including | 91 | 44 | |||||
| Gain on foreign currency transactions | 252 | 239 | |||||
| Interest income (including | 286 | 566 | |||||
| Interest expense (including ( | (409 | ) | (509 | ) | |||
| Total other income, net | 918 | 1,116 | |||||
| Income before provision for income taxes | 9,382 | 8,936 | |||||
| Provision for income taxes | 2,241 | 2,121 | |||||
| Net income | 7,141 | 6,815 | |||||
| Net income attributable to noncontrolling interest | 400 | 406 | |||||
| Net income attributable to Karat Packaging Inc. | $ | 6,741 | $ | 6,409 | |||
| Basic and diluted earnings per share: | |||||||
| Basic | $ | 0.34 | $ | 0.32 | |||
| Diluted | $ | 0.34 | $ | 0.32 | |||
| Weighted average common shares outstanding, basic | 19,963,224 | 20,036,505 | |||||
| Weighted average common shares outstanding, diluted | 20,073,479 | 20,198,654 | |||||
KARAT PACKAGING INC. AND SUBSIDIARIES
NET SALES BY CATEGORY (UNAUDITED)
(In thousands)
| Three Months Ended March 31, | |||||
| 2026 | 2025 | ||||
| Chains and distributors * | $ | 92,879 | $ | 80,670 | |
| Online | 19,525 | 17,791 | |||
| Retail * | 4,543 | 5,163 | |||
| $ | 116,947 | $ | 103,624 | ||
* The Company reclassified one customer from the retail to the chains and distributors channel, and recast the corresponding net sales amounts of
KARAT PACKAGING INC. AND SUBSIDIARIES
SELECTED BALANCE SHEET AND CASH FLOW INFORMATION
(In thousands)
| Selected Balance Sheet Information: | March 31, 2026 | December 31, 2025 | |||
| (Unaudited) | |||||
| Cash and cash equivalents | $ | 28,680 | $ | 37,880 | |
| Short-term investments | $ | 5,744 | $ | — | |
| Accounts receivable, net of allowance for bad debt | $ | 42,270 | $ | 36,402 | |
| Inventories | $ | 80,009 | $ | 81,682 | |
| Total assets | $ | 282,682 | $ | 287,686 | |
| Accounts payable | $ | 24,282 | $ | 26,323 | |
| Total current liabilities | $ | 70,351 | $ | 70,220 | |
| Total liabilities | $ | 127,509 | $ | 130,816 | |
| Total stockholders’ equity | $ | 155,173 | $ | 156,870 | |
| Selected Cash Flow Information: | Three Months Ended March 31, | ||||||
| 2026 | 2025 | ||||||
| (Unaudited) | (Unaudited) | ||||||
| Net cash provided by operating activities | $ | 7,191 | $ | 7,726 | |||
| Net cash (used in) provided by investing activities | $ | (6,884 | ) | $ | 3,533 | ||
| Dividends paid to shareholders | $ | (8,983 | ) | $ | (9,017 | ) | |
| Net cash used in financing activities | $ | (9,507 | ) | $ | (10,370 | ) | |
KARAT PACKAGING INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (UNAUDITED)
(In thousands, except percentages and per share amounts)
| Reconciliation of Adjusted EBITDA and Adjusted EBITDA margin: | Three Months Ended March 31, | ||||||||||||
| 2026 | 2025 | ||||||||||||
| Amounts | % of Net Sales | Amounts | % of Net Sales | ||||||||||
| Net income: | $ | 7,141 | 6.1 | % | $ | 6,815 | 6.6 | % | |||||
| Add (deduct): | |||||||||||||
| Interest income | (286 | ) | (0.2 | ) | (566 | ) | (0.5 | ) | |||||
| Interest expense | 409 | 0.3 | 509 | 0.5 | |||||||||
| Provision for income taxes | 2,241 | 1.9 | 2,121 | 2.0 | |||||||||
| Depreciation and amortization | 2,741 | 2.4 | 2,688 | 2.6 | |||||||||
| Stock-based compensation expense | 242 | 0.2 | 346 | 0.3 | |||||||||
| Adjusted EBITDA | $ | 12,488 | 10.7 | % | $ | 11,913 | 11.5 | % | |||||
| Reconciliation of Adjusted EBITDA by Entity: | Three Months Ended March 31, 2026 | ||||||||||||||
| Karat Packaging | Global Wells | Eliminations | Consolidated | ||||||||||||
| Net income (loss) | $ | 6,741 | $ | 471 | $ | (71 | ) | $ | 7,141 | ||||||
| Add (deduct): | |||||||||||||||
| Interest income | (284 | ) | (2 | ) | — | (286 | ) | ||||||||
| Interest expense | 29 | 380 | — | 409 | |||||||||||
| Provision for income taxes | 2,241 | — | — | 2,241 | |||||||||||
| Depreciation and amortization | 2,438 | 303 | — | 2,741 | |||||||||||
| Stock-based compensation expense | 242 | — | — | 242 | |||||||||||
| Adjusted EBITDA | $ | 11,407 | $ | 1,152 | $ | (71 | ) | $ | 12,488 | ||||||
| Reconciliation of Adjusted EBITDA by Entity: | Three Months Ended March 31, 2025 | ||||||||||||||
| Karat Packaging | Global Wells | Eliminations | Consolidated | ||||||||||||
| Net income (loss) | $ | 6,409 | $ | 478 | $ | (72 | ) | $ | 6,815 | ||||||
| Add (deduct): | |||||||||||||||
| Interest income | (339 | ) | (227 | ) | — | (566 | ) | ||||||||
| Interest expense | 9 | 500 | — | 509 | |||||||||||
| Provision for income taxes | 2,121 | — | — | 2,121 | |||||||||||
| Depreciation and amortization | 2,385 | 303 | — | 2,688 | |||||||||||
| Stock-based compensation expense | 346 | — | — | 346 | |||||||||||
| Adjusted EBITDA | $ | 10,931 | $ | 1,054 | $ | (72 | ) | $ | 11,913 | ||||||
| Reconciliation of Adjusted Diluted Earnings Per Common Share: | Three Months Ended March 31, | |||||
| 2026 | 2025 | |||||
| Diluted earnings per common share: | $ | 0.34 | $ | 0.32 | ||
| Add (deduct): | ||||||
| Stock-based compensation expense | 0.01 | 0.01 | ||||
| Tax impact | (0.01 | ) | — | |||
| Adjusted diluted earnings per common share | $ | 0.34 | $ | 0.33 | ||
| Reconciliation of Free Cash Flow: | Three Months Ended March 31, | ||||||
| 2026 | 2025 | ||||||
| Cash from operating activities | $ | 7,191 | $ | 7,726 | |||
| Deduct: | |||||||
| Purchase of property and equipment | (565 | ) | (107 | ) | |||
| Deposits paid for property and equipment | (333 | ) | (989 | ) | |||
| Free Cash Flow | $ | 6,293 | $ | 6,630 | |||
Use of Non-GAAP Financial Measures
Karat Packaging 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:
- Adjusted EBITDA is a financial measure calculated as net income excluding (i) interest income, (ii) interest expense, (iii) provision for income taxes, (iv) depreciation and amortization, and (v) stock-based compensation expense.
- Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by net sales.
- Adjusted diluted earnings per common share is calculated as diluted earnings per common share, plus the per share impact of stock-based compensation and adjusted for the related tax effects of these adjustments.
- Free Cash Flow is calculated as cash from operating activities less cash used in (i) purchases of property and equipment, and (ii) deposits paid for property and equipment.
We believe the above-mentioned non-GAAP measures, which are used by management to assess the core performance of Karat Packaging, provide useful information and additional clarity of our operating results to our investors in their own evaluation of the core performance of Karat Packaging 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 financial performance 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.
With respect to our financial targets for the 2026 second quarter and 2026 full year adjusted EBITDA margin, a reconciliation of these non-GAAP measures to the corresponding GAAP measures is not available without unreasonable effort due to the variability and complexity of the reconciling items described above that we exclude from these non-GAAP target measures. The variability of these items may have a significant impact on our future GAAP financial results and, as a result, we are unable to prepare the forward-looking statements of income and cash flows prepared in accordance with GAAP, that would be required to produce such a reconciliation.
