Karat Packaging Reports Third Quarter 2026 Financial Results
Higher shipping and resin costs pressured quarterly profitability despite sales growth and nearly 38 percent growth in online sales.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Rhea-AI Summary
Karat Packaging (Nasdaq: KRT) reported third-quarter 2026 sales of $134.7 million, with revenue growth accompanied by lower earnings and margins. Sales rose 8.2% year over year, while net income fell to $4.7 million from $7.6 million. Diluted earnings attributable to Karat declined to $0.22 from $0.36. Gross margin narrowed to 33.5% from 34.5%, and adjusted EBITDA, a non-GAAP earnings measure, fell to $8.9 million from $13.1 million.
Nine-month sales rose 10.2% to $388.0 million; net income reached $41.5 million, including $20.2 million from tariff refunds. Karat expects fourth-quarter and full-year sales growth of 9 to 11 percent. Full-year gross margin guidance of 39 to 41 percent includes first-half tariff refunds. Shipments to four previously secured chain accounts began in October; additional business and four further chain accounts have shipments expected in 2027.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Hollow bars mark forward-looking points. How the balance works
Positive
- Moderate pointThird-quarter net sales rose 8.2 percent to $134.7 million year over year.
- Moderate pointThird-quarter gross profit increased 5.2 percent to $45.1 million from $42.9 million a year earlier.
- Moderate pointNine-month net sales increased 10.2 percent to $388.0 million from $352.1 million in 2025.
- Moderate pointNine-month gross profit rose 23.4 percent to $163.8 million; margin reached 42.2%, including a 660-basis-point tariff-refund benefit.
- Moderate pointNine-month net income rose to $41.5 million from $25.5 million, including $20.2 million from tariff refunds.
- Moderate pointNine-month adjusted EBITDA reached $63.0 million versus $42.7 million, including $25.8 million from tariff refunds.
- Moderate point. Forward-looking: it has not happened yet and may not happen.Fourth-quarter 2026 net sales are expected to increase 9 to 11 percent year over year.
- Moderate point. Forward-looking: it has not happened yet and may not happen.Fourth-quarter gross margin is expected at 33 to 35 percent, with adjusted EBITDA margin in the high-single digits.
- Moderate point. Forward-looking: it has not happened yet and may not happen.Full-year 2026 net sales are expected to increase 9 to 11 percent from 2025.
- Moderate point. Forward-looking: it has not happened yet and may not happen.Full-year gross margin is expected at 39 to 41 percent, including first-half IEEPA tariff refunds.
- Moderate point. Forward-looking: it has not happened yet and may not happen.Full-year adjusted EBITDA margin is expected at approximately mid-teens, including first-half IEEPA tariff refunds.
12 minor points
- Minor pointThird-quarter online sales grew nearly 38 percent over the prior-year quarter.
- Minor pointFour previously secured chain accounts began receiving select product shipments in October.
- Minor point. Forward-looking: it has not happened yet and may not happen.Additional business across multiple product lines with those customers has shipments expected in early 2027.
- Minor point. Forward-looking: it has not happened yet and may not happen.Four additional chain accounts won in the third quarter have shipments expected in the first half of 2027.
- Minor point. Forward-looking: it has not happened yet and may not happen.Florida distribution center opening is expected in November 2026.
- Minor point. Forward-looking: it has not happened yet and may not happen.Selected-item price increases are planned for November 2026 and January 2027 to help offset higher costs.
- Minor pointKarat is diversifying sourcing toward Indonesia, Malaysia and South America to address trade and freight costs.
- Minor pointNine-month net income margin increased to 10.7 percent from 7.2 percent in 2025.
- Minor pointNine-month income attributable to Karat rose to $40.5 million, or $2.01 per diluted share, from $24.7 million, or $1.22.
- Minor pointNine-month adjusted EBITDA margin reached 16.2 percent versus 12.1 percent, including 660 basis points from tariff refunds.
- Minor pointNine-month adjusted diluted EPS reached $2.07 versus $1.27, including $1.00 per share from tariff refunds.
- Minor pointNine-month other income increased to $3.3 million from $0.4 million in 2025.
Negative
- Moderate pointThird-quarter net income fell to $4.7 million from $7.6 million a year earlier.
- Moderate pointThird-quarter adjusted EBITDA declined to $8.9 million from $13.1 million a year earlier.
- Minor pointThird-quarter income attributable to Karat fell to $4.4 million, or $0.22 per diluted share, from $7.3 million, or $0.36.
- Minor pointThird-quarter gross margin narrowed to 33.5 percent from 34.5 percent a year earlier.
- Minor pointThird-quarter net income margin declined to 3.5 percent from 6.1 percent a year earlier.
8 minor points
- Minor pointThird-quarter adjusted EBITDA margin declined to 6.6 percent from 10.5 percent a year earlier.
- Minor pointThird-quarter adjusted diluted EPS fell to $0.24 from $0.37 a year earlier.
- Minor pointThird-quarter operating income declined to $4.872 million from $8.573 million a year earlier.
- Minor pointThird-quarter cost of goods sold increased 9.8 percent to $89.6 million from $81.6 million.
- Minor pointThird-quarter operating expenses increased 17.2 percent to $40.3 million from $34.3 million.
- Minor pointThird-quarter other income declined to $1.0 million from $1.3 million a year earlier.
- Minor pointNine-month cost of goods sold increased to $224.2 million from $219.3 million in 2025.
- Minor pointNine-month operating expenses increased 13.1 percent to $112.9 million from $99.8 million.
News Explained
The dividend is approved for payment; roughly ten million dollars remained available for repurchases at September 30, rather than representing completed purchases.
Karat Packaging’s board approved a regular quarterly dividend of
The company made no repurchases under its program in the third quarter; it repurchased
Details
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Key Figures
- Quarterly net sales
- $134.7 million, up 8.2%
- Third quarter 2026 versus prior-year quarter
- Gross margin
- 33.5%, compared with 34.5%
- Third quarter 2026 versus prior-year quarter
- Net income
- $4.7 million, compared with $7.6 million
- Third quarter 2026 versus prior-year quarter
- Adjusted EBITDA
- $8.9 million, compared with $13.1 million
- Third quarter 2026 versus prior-year quarter
- Fourth-quarter net sales outlook
- Increase of 9% to 11%
- Fourth quarter 2026 versus prior-year quarter
- Full-year net sales outlook
- Increase of 9% to 11%
- Full-year 2026 versus prior year
- Full-year gross margin outlook
- 39% to 41%
- Full-year 2026; includes first-half IEEPA tariff refunds
- IEEPA tariff refunds
- $25.8 million
- Recognized during the nine months ended September 30, 2026
Previous Earnings Reports
-
IEEPA tariff refunds materially boosted quarterly gross margin, net income, and adjusted EBITDA.
-
Prior-year Q3 reported higher sales but lower net income and gross margin.
24h Move is the share-price change in the day after each event; other market factors may also have contributed.
Key Terms
non-gaap financial
ieepa regulatory
AI-generated analysis. How Rhea-AI works. Not financial advice.
— Continued Strengthening of Pipeline and Solid Topline Growth —
CHINO, Calif., Nov. 05, 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 third quarter ended September 30, 2026.
Third Quarter 2026 Highlights
- Quarterly net sales of
$134.7 million , up 8.2 percent, from$124.5 million in the prior-year quarter. - Gross profit of
$45.1 million , up 5.2 percent, from$42.9 million in the prior-year quarter. - Gross margin of 33.5 percent, compared with 34.5 percent in the prior-year quarter.
- Net income of
$4.7 million , compared with$7.6 million in the prior-year quarter. - Net income margin of 3.5 percent versus 6.1 percent in the prior-year quarter.
- Adjusted EBITDA of
$8.9 million versus$13.1 million in the prior-year quarter. - Adjusted EBITDA margin of 6.6 percent versus 10.5 percent in the prior-year quarter.
Guidance
- Net sales for the 2026 fourth quarter expected to increase by 9 to 11 percent from the prior-year quarter.
- Gross margin for the 2026 fourth quarter expected to be between 33 to 35 percent.
- Adjusted EBITDA margin for the 2026 fourth quarter expected to be in the high-single digits.
- Net sales for full-year 2026 expected to increase by 9 to 11 percent from the prior year.
- Gross margin for full-year 2026 expected to be between 39 and 41 percent, including IEEPA tariff refunds recorded during the first half of 2026.
- Adjusted EBITDA margin for full-year 2026 expected to be approximately mid-teens, including IEEPA tariff refunds recorded during the first half of 2026.
“We delivered solid top-line growth in the third quarter, with sales increasing 8.2 percent, and we saw continued strong momentum in our e-commerce business, where online sales grew nearly 38 percent over the prior-year quarter,” said Alan Yu, Chief Executive Officer. “While increased import as well as domestic shipping costs and elevated resin prices pressured margin and contributed to results below our expectations, we remain encouraged by the strength of our sales performance, especially the continued momentum in our e-commerce business expansion.”
“With continued success in new account wins and the strength in our pipeline, we remain confident in our long-term growth prospects. In October, we began shipping select products to the four new chain accounts secured in the second quarter. More notably, we successfully built on the relationships we started with these customers and won additional new business with them across multiple product lines in the third quarter, with shipments expected to commence in early 2027. In addition, we gained four additional chain accounts in the third quarter, with shipments expected to commence in the first half of 2027. These wins further broaden our distribution footprint and strengthen confidence in our expansion strategy.
“Against a backdrop of elevated oil prices and ocean freight costs, we continue to realign Karat’s global supply chain and diversify sourcing toward markets with more favorable trade conditions and freight costs, including Indonesia, Malaysia and South America. We are also implementing price increases on select items this month and in January 2027 to help offset higher costs. We believe these efforts, combined with the continued strength of our online channel, new chain account wins, and the opening of our new Florida distribution center expected in November 2026, position us well to accelerate revenue growth and improve operating performance in the quarters ahead,” Yu added.
Third Quarter 2026 Financial Results
Net sales for the 2026 third quarter increased 8.2 percent to
Cost of goods sold for the 2026 third quarter increased 9.8 percent to
Gross profit for the 2026 third quarter increased 5.2 percent to
Operating expenses for the 2026 third quarter increased 17.2 percent to
Other income, net, for the 2026 third quarter was
Net income for the 2026 third quarter was
Net income attributable to Karat Packaging for the 2026 third quarter was
Adjusted EBITDA, a non-GAAP measure defined below, was
Adjusted diluted earnings per common share, a non-GAAP measure defined below, was
Nine-Month 2026 Financial Results
Net sales for the first nine months of 2026 increased 10.2 percent to
Cost of goods sold for the first nine months of 2026 was
Gross profit for the first nine months of 2026 increased 23.4 percent to
Operating expenses for the first nine months of 2026 increased 13.1 percent to
Other income, net, for the first nine months of 2026 was
Net income increased to
Net income attributable to Karat Packaging 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 November 3, 2026, Karat Packaging’s Board of Directors approved a regular quarterly dividend of
Share Repurchase Program
During the third quarter of 2026, the Company did not repurchase any of its common stock under its previously announced Share Repurchase Program. During the first nine months of 2026, the Company repurchased
Investor Conference Call
The Company will host an investor conference call today, November 5, 2026, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to discuss its 2026 third 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 at www.karatpackaging.com.
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
ir@karatpackaging.com
| KARAT PACKAGING INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands, except share and per share data) | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ende September 30, | ||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||
| Net sales | $ | 134,742 | $ | 124,516 | $ | 387,991 | $ | 352,126 | |||||||
| Cost of goods sold | 89,611 | 81,598 | 224,174 | 219,339 | |||||||||||
| Gross profit | 45,131 | 42,918 | 163,817 | 132,787 | |||||||||||
| Operating expenses | |||||||||||||||
| Selling expenses | 18,001 | 13,798 | 48,481 | 41,925 | |||||||||||
| General and administrative expenses (including | 22,310 | 20,950 | 64,390 | 58,622 | |||||||||||
| (Gain) loss, net, on disposal of property and equipment | (52 | ) | (403 | ) | 8 | (703 | ) | ||||||||
| Total operating expenses | 40,259 | 34,345 | 112,879 | 99,844 | |||||||||||
| Operating income | 4,872 | 8,573 | 50,938 | 32,943 | |||||||||||
| Other income (expenses) | |||||||||||||||
| Rental income (including | 718 | 710 | 2,132 | 2,241 | |||||||||||
| Other income, net (including | 7 | 67 | 151 | 29 | |||||||||||
| Gain (loss) on foreign currency transactions | 156 | 681 | 327 | (1,947 | ) | ||||||||||
| Interest income (including | 518 | 415 | 1,965 | 1,657 | |||||||||||
| Interest expense (including ( | (420 | ) | (539 | ) | (1,254 | ) | (1,569 | ) | |||||||
| Total other income, net | 979 | 1,334 | 3,321 | 411 | |||||||||||
| Income before provision for income taxes | 5,851 | 9,907 | 54,259 | 33,354 | |||||||||||
| Provision for income taxes | 1,125 | 2,304 | 12,743 | 7,884 | |||||||||||
| Net income | 4,726 | 7,603 | 41,516 | 25,470 | |||||||||||
| Net income attributable to noncontrolling interest | 331 | 278 | 1,049 | 802 | |||||||||||
| Net income attributable to Karat Packaging Inc. | $ | 4,395 | $ | 7,325 | $ | 40,467 | $ | 24,668 | |||||||
| Basic and diluted earnings per share: | |||||||||||||||
| Basic | $ | 0.22 | $ | 0.36 | $ | 2.03 | $ | 1.23 | |||||||
| Diluted | $ | 0.22 | $ | 0.36 | $ | 2.01 | $ | 1.22 | |||||||
| Weighted average common shares outstanding, basic | 19,958,578 | 20,091,476 | 19,956,814 | 20,062,277 | |||||||||||
| Weighted average common shares outstanding, diluted | 20,198,857 | 20,201,285 | 20,126,446 | 20,197,218 | |||||||||||
| KARAT PACKAGING INC. AND SUBSIDIARIES NET SALES BY CATEGORY (UNAUDITED) (In thousands) | |||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||
| Chains and distributors | $ | 103,289 | $ | 99,394 | $ | 302,107 | $ | 277,229 | |||
| Online | 26,898 | 19,540 | 72,240 | 58,215 | |||||||
| Retail | 4,555 | 5,582 | 13,644 | 16,682 | |||||||
| $ | 134,742 | $ | 124,516 | $ | 387,991 | $ | 352,126 | ||||
| KARAT PACKAGING INC. AND SUBSIDIARIES SELECTED BALANCE SHEET AND CASH FLOW INFORMATION (In thousands) | |||||
| Selected Balance Sheet Information: | September 30, 2026 | December 31, 2025 | |||
| (Unaudited) | |||||
| Cash and cash equivalents | $ | 33,444 | $ | 37,880 | |
| Short-term investments | $ | 10,000 | $ | — | |
| Accounts receivable, net of allowance for bad debt | $ | 44,910 | $ | 36,402 | |
| Inventories | $ | 96,792 | $ | 81,682 | |
| Total assets | $ | 306,431 | $ | 287,686 | |
| Accounts payable | $ | 45,012 | $ | 26,323 | |
| Total current liabilities | $ | 104,894 | $ | 70,220 | |
| Total liabilities | $ | 135,038 | $ | 130,816 | |
| Total stockholders’ equity | $ | 171,393 | $ | 156,870 | |
| Selected Cash Flow Information: | Nine Months Ended September 30, | ||||||
| 2026 | 2025 | ||||||
| (Unaudited) | (Unaudited) | ||||||
| Net cash provided by operating activities(1) | $ | 50,025 | $ | 18,458 | |||
| Net cash (used in) provided by investing activities | $ | (13,045 | ) | $ | 5,447 | ||
| Dividends paid to shareholders | $ | (27,348 | ) | $ | (27,091 | ) | |
| Net cash used in financing activities | $ | (41,416 | ) | $ | (31,467 | ) | |
(1) Net cash provided by operating activities included cash receipts related to the IEEPA tariff refunds of
| 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 September 30, | ||||||||||||
| 2026 | 2025 | ||||||||||||
| Amounts | % of Net Sales | Amounts | % of Net Sales | ||||||||||
| Net income | $ | 4,726 | 3.5 | % | $ | 7,603 | 6.1 | % | |||||
| Add (deduct): | |||||||||||||
| Interest income | (518 | ) | (0.4 | ) | (415 | ) | (0.3 | ) | |||||
| Interest expense | 420 | 0.3 | 539 | 0.4 | |||||||||
| Provision for income taxes | 1,125 | 0.8 | 2,304 | 1.9 | |||||||||
| Depreciation and amortization | 2,535 | 1.9 | 2,766 | 2.2 | |||||||||
| Stock-based compensation expense | 655 | 0.5 | 253 | 0.2 | |||||||||
| Adjusted EBITDA | $ | 8,943 | 6.6 | % | $ | 13,050 | 10.5 | % | |||||
| Reconciliation of Adjusted EBITDA and Adjusted EBITDA margin: | Nine Months Ended September 30, | ||||||||||||
| 2026 | 2025 | ||||||||||||
| Amounts | % of Net Sales | Amounts | % of Net Sales | ||||||||||
| Net income | $ | 41,516 | 10.7 | % | $ | 25,470 | 7.2 | % | |||||
| Add (deduct): | |||||||||||||
| Interest income | (1,965 | ) | (0.5 | ) | (1,657 | ) | (0.5 | ) | |||||
| Interest expense | 1,254 | 0.3 | 1,569 | 0.4 | |||||||||
| Provision for income taxes | 12,743 | 3.3 | 7,884 | 2.2 | |||||||||
| Depreciation and amortization | 8,003 | 2.1 | 8,132 | 2.4 | |||||||||
| Stock-based compensation expense | 1,493 | 0.3 | 1,044 | 0.3 | |||||||||
| Secondary offering transaction costs(2) | — | — | 214 | 0.1 | |||||||||
| Adjusted EBITDA | $ | 63,044 | 16.2 | % | $ | 42,656 | 12.1 | % | |||||
(2) Secondary offering transaction costs represent legal and professional fees incurred in connection with the completion of the secondary offering by certain executive officers and stockholders of the Company, which were directly related to the offering and were incremental to our normal operating expenses.
| Reconciliation of Adjusted EBITDA by Entity: | Three Months Ended September 30, 2026 | ||||||||||||||
| Karat Packaging | Global Wells | Eliminations | Consolidated | ||||||||||||
| Net income | $ | 4,310 | $ | 389 | $ | 27 | $ | 4,726 | |||||||
| Add (deduct): | |||||||||||||||
| Interest income | (515 | ) | (3 | ) | — | (518 | ) | ||||||||
| Interest expense | 46 | 374 | — | 420 | |||||||||||
| Provision for income taxes | 1,125 | — | — | 1,125 | |||||||||||
| Depreciation and amortization | 2,232 | 303 | — | 2,535 | |||||||||||
| Stock-based compensation expense | 655 | — | — | 655 | |||||||||||
| Adjusted EBITDA | $ | 7,853 | $ | 1,063 | $ | 27 | $ | 8,943 | |||||||
| Reconciliation of Adjusted EBITDA by Entity: | Three Months Ended September 30, 2025 | ||||||||||||||
| Karat Packaging | Global Wells | Eliminations | Consolidated | ||||||||||||
| Net income (loss) | $ | 7,320 | $ | 327 | $ | (44 | ) | $ | 7,603 | ||||||
| Add (deduct): | |||||||||||||||
| Interest income | (295 | ) | (120 | ) | — | (415 | ) | ||||||||
| Interest expense | 33 | 506 | — | 539 | |||||||||||
| Provision for income taxes | 2,304 | — | — | 2,304 | |||||||||||
| Depreciation and amortization | 2,463 | 303 | — | 2,766 | |||||||||||
| Stock-based compensation expense | 253 | — | — | 253 | |||||||||||
| Adjusted EBITDA | $ | 12,078 | $ | 1,016 | $ | (44 | ) | $ | 13,050 | ||||||
| Reconciliation of Adjusted EBITDA by Entity: | Nine Months Ended September 30, 2026 | ||||||||||||||
| Karat Packaging | Global Wells | Eliminations | Consolidated | ||||||||||||
| Net income (loss) | $ | 40,453 | $ | 1,235 | $ | (172 | ) | $ | 41,516 | ||||||
| Add (deduct): | |||||||||||||||
| Interest income | (1,957 | ) | (8 | ) | — | (1,965 | ) | ||||||||
| Interest expense | 119 | 1,135 | — | 1,254 | |||||||||||
| Provision for income taxes | 12,743 | — | — | 12,743 | |||||||||||
| Depreciation and amortization | 7,094 | 909 | — | 8,003 | |||||||||||
| Stock-based compensation expense | 1,493 | — | — | 1,493 | |||||||||||
| Adjusted EBITDA | $ | 59,945 | $ | 3,271 | $ | (172 | ) | $ | 63,044 | ||||||
| Reconciliation of Adjusted EBITDA by Entity: | Nine Months Ended September 30, 2025 | ||||||||||||||
| Karat Packaging | Global Wells | Eliminations | Consolidated | ||||||||||||
| Net income (loss) | $ | 24,661 | $ | 944 | $ | (135 | ) | $ | 25,470 | ||||||
| Add (deduct): | |||||||||||||||
| Interest income | (1,226 | ) | (431 | ) | — | (1,657 | ) | ||||||||
| Interest expense | 55 | 1,514 | — | 1,569 | |||||||||||
| Provision for income taxes | 7,884 | — | — | 7,884 | |||||||||||
| Depreciation and amortization | 7,222 | 910 | — | 8,132 | |||||||||||
| Stock-based compensation expense | 1,044 | — | — | 1,044 | |||||||||||
| Secondary offering transaction costs (2) | 214 | — | — | 214 | |||||||||||
| Adjusted EBITDA | $ | 39,854 | $ | 2,937 | $ | (135 | ) | $ | 42,656 | ||||||
| Reconciliation of Adjusted Diluted Earnings Per Common Share: | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||
| Diluted earnings per common share | $ | 0.22 | $ | 0.36 | $ | 2.01 | $ | 1.22 | |||||||
| Add (deduct): | |||||||||||||||
| Stock-based compensation expense | 0.03 | 0.01 | 0.07 | 0.05 | |||||||||||
| Secondary offering transaction costs(2) | — | — | — | 0.01 | |||||||||||
| Tax impact | (0.01 | ) | — | (0.01 | ) | (0.01 | ) | ||||||||
| Adjusted diluted earnings per common share | $ | 0.24 | $ | 0.37 | $ | 2.07 | $ | 1.27 | |||||||
(2) Secondary offering transaction costs represent legal and professional fees incurred in connection with the completion of the secondary offering by certain executive officers and stockholders of the Company, which were directly related to the offering and were incremental to our normal operating expenses.
| Reconciliation of Free Cash Flow: | Nine Months Ended September 30, | ||||||
| 2026 | 2025 | ||||||
| Net cash provided by operating activities(3) | $ | 50,025 | $ | 18,458 | |||
| Deduct: | |||||||
| Purchases of property and equipment | (678 | ) | (520 | ) | |||
| Deposits paid for property and equipment | (2,129 | ) | (3,244 | ) | |||
| Free Cash Flow | $ | 47,218 | $ | 14,694 | |||
(3) Net cash provided by operating activities included cash receipts related to the IEEPA tariff refunds of
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, (v) stock-based compensation expense, and (vi) secondary offering transaction costs.
- 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 secondary offering transaction costs, 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 fourth 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.
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How did Karat Packaging perform in the third quarter of 2026?
Karat Packaging reported $134.7 million in net sales, up 8.2 percent year over year, while net income fell to $4.7 million from $7.6 million. Diluted earnings attributable to Karat were $0.22, compared with $0.36 in the prior-year quarter.
What is Karat Packaging's fourth-quarter 2026 outlook?
Karat expects fourth-quarter net sales to increase 9 to 11 percent from the prior-year quarter. Its outlook calls for gross margin of 33 to 35 percent and adjusted EBITDA margin in the high-single digits.
When will Karat Packaging pay its quarterly dividend?
Karat Packaging's regular quarterly dividend of $0.47 per share is payable on or about November 27, 2026, to stockholders of record as of November 19, 2026. The board approved the dividend on November 3, 2026.