Karat Packaging (NASDAQ: KRT) delivers record 2025 Q4 sales and guidance

Rhea-AI Filing Summary

Karat Packaging Inc. reported fourth quarter and full-year 2025 results showing continued profitable growth despite higher tariffs and logistics costs. Fourth quarter net sales reached a record $115.6 million, up 13.7% from $101.6 million, while net income rose 22.8% to $7.2 million.

Gross margin in the quarter declined to 34.0% from 39.2% as duty and tariff costs increased to 14.5% of net sales, partly offset by better vendor pricing and lower logistics expense. Full-year 2025 net sales grew 10.7% to $467.7 million and net income increased 6.0% to $32.7 million.

Adjusted EBITDA for 2025 was stable at $55.2 million with an 11.8% margin, versus 13.1% last year. The company raised a regular quarterly dividend to $0.45 per share and repurchased 137,374 shares for $3.0 million, ending 2025 with $37.9 million in cash and cash equivalents.

Insights

Equity analyst

Solid revenue growth with margin pressure from tariffs and higher costs.

Karat Packaging delivered healthy top-line expansion in 2025, with net sales up 10.7% to $467.7 million and record Q4 revenue of $115.6 million. Growth was driven mainly by higher volumes and favorable product mix, including strong performance in newer categories like paper bags.

Profitability remained positive but compressed. Full-year gross margin declined to 36.8% from 38.9% as freight, duty and tariff costs increased to 11.8% of net sales. Adjusted EBITDA was essentially flat at $55.2 million, with margin down to 11.8% from 13.1%, reflecting higher shipping, rent and salary expenses.

The company returned significant capital through a $0.45 per share quarterly dividend and $3.0 million of share repurchases, while ending December 31, 2025 with $37.9 million in cash and no increase in total liabilities. Guidance calls for 2026 net sales to grow by low double digits and for gross and adjusted EBITDA margins to improve under current tariff policy, but actual outcomes will depend on trade conditions and execution.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 12, 2026

Karat Packaging Inc.

(Exact name of registrant as specified in its charter)

Delaware			001-40336			83-2237832
(State or other jurisdiction of incorporation			(Commission File Number			(IRS Employer Identification No.)

6185 Kimball Avenue, Chino, CA 91708

(Address of principal executive offices) (Zip Code)

(626) 965-8882

Registrant’s telephone number, including area code:

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o			Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o			Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12)
o			Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o			Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbol			Name of each exchange on which registered
Common Stock, $0.001 par value per share			KRT			The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b -2 of this chapter).

Emerging growth company ☒

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o

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Item 2.02. Results of Operations and Financial Condition.

    On March 12, 2026, Karat Packaging Inc. (the "Company”) issued a press release reporting its financial results for the fourth quarter and year ended December 31, 2025. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

    The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed "filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act”), or otherwise subject to the liabilities under that section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit Number						Description
99.1						Press release, dated March 12, 2026
104						Cover Page Interactive Data File (embedded within the Inline XBRL document)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: March 12, 2026			KARAT PACKAGING INC.
			By:			/s/ Jian Guo
						Jian Guo
						Chief Financial Officer

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Karat Packaging Reports Fourth Quarter and Full Year 2025 Financial Results

— Continued Profitable Growth and Business Expansion —

CHINO, Calif., March 12, 2026 – Karat Packaging Inc. (Nasdaq: KRT) (“Karat” or the “Company”), a specialty distributor and manufacturer of environmentally friendly, disposable foodservice products and related items, today announced financial results for its fourth quarter and full year ended December 31, 2025.

Fourth Quarter 2025 Highlights

•Record fourth quarter net sales of $115.6 million, up 13.7 percent, from $101.6 million in the prior-year quarter.

•Gross profit of $39.3 million, versus $39.8 million in the prior-year quarter.

•Gross margin of 34.0 percent, reflecting an expected decrease from 39.2 percent in the prior-year quarter due to elevated tariffs.

•Net income of $7.2 million, up 22.8 percent, from $5.9 million in the prior-year quarter.

•Net income margin of 6.2 percent, from 5.8 percent in the prior-year quarter.

•Adjusted EBITDA of $12.5 million, versus $11.3 million in the prior-year quarter.

•Adjusted EBITDA margin of 10.8 percent, versus 11.1 percent in the prior-year quarter.

Guidance

•Net sales for the 2026 first quarter expected to increase by 8 to 10 percent from the prior-year quarter.

•Gross margin for the 2026 first quarter expected to be between 34 and 36 percent.

•Adjusted EBITDA margin for the 2026 first quarter expected to be between 9 and 11 percent.

•Net sales for full-year 2026 expected to increase by low double-digits from the prior year.

•Gross margin and adjusted EBITDA margin for full year 2026 expected to continue to improve compared with the prior year, under current global tariff policy.

“We finished 2025 with a strong fourth quarter, demonstrating the strength and resilience of our business model and our ability to continue to drive profitable growth against an uncertain macroeconomic backdrop. We again achieved double-digit volume growth and our pricing turned positive for the first time since the first quarter of 2023,” said Alan Yu, Chief Executive Officer. “Our strategy to diversify sourcing is proving successful, enabling us to continue to strengthen our global supply chain and maintain a 34 percent gross margin, despite significantly higher tariffs and duty costs.

“We continue to closely monitor tariff and foreign currency developments and adjust our global supply chain as appropriate. During the fourth quarter of 2025, 46 percent of our goods were sourced from Taiwan, 14 percent from China, 13 percent from the United States, and 11 percent each from Vietnam and Malaysia. Following the recent U.S. Supreme Court ruling on tariffs and the stabilization of the U.S. Dollar and New Taiwan Dollar exchange rates, we expect tailwinds on the margin to be realized beginning in the second quarter of 2026.

“Our new paper bags product category continues to perform strongly, expanding steadily and generating meaningful revenue growth. In 2025, we won a significant paper bag contract with one of our largest national chain accounts, and we are actively pursuing further opportunities, some of which are at the final confirmation stage. We are also strengthening this category by supplying generic paper bags to smaller customer accounts, and we expect to continue gaining market share in this category in the coming years.

“In today’s dynamic trade environment, we are confident that Karat’s proven global sourcing flexibility and efficient logistics capabilities will support a solid growth trajectory,” Yu added.

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Fourth Quarter 2025 Financial Results

Net sales for the 2025 fourth quarter increased 13.7 percent to $115.6 million, from $101.6 million in the prior-year quarter. The increase primarily reflected $8.2 million in volume and a $6.3 million favorable impact from pricing and product mix.

Cost of goods sold for the 2025 fourth quarter increased 23.4 percent to $76.3 million, from $61.8 million in the prior-year quarter. Product costs increased $6.1 million due to sales growth, partially offset by more favorable vendor pricing and product mix. Within import costs, duty and tariff costs increased $8.4 million, reflecting the overall higher tariff rates and a $0.4 million adjustment to the duty reserve previously recorded on certain imports.

Gross profit for the 2025 fourth quarter was $39.3 million, compared with $39.8 million in the prior-year quarter. Gross margin for the 2025 fourth quarter was 34.0 percent, compared with 39.2 percent in the prior-year quarter, reflecting the expected impact from higher import costs, as discussed above, which, as a percentage of net sales, increased to 14.5 percent from 8.3 percent in the prior-year quarter. The decrease in margin was partially offset by a decrease in product costs as a percentage of net sales, due to more favorable vendor pricing and product mix, as well as lower logistics expense as a percentage of net sales.

Operating expenses in the 2025 fourth quarter decreased to $30.9 million, from $32.5 million in the prior-year quarter. The decrease was mainly driven by reduced online platform fees of $1.6 million, lower marketing expense of $0.5 million, reduced professional services expense of $0.4 million, partially offset by higher rent expense of $0.5 million primarily due to the opening of a new Chino distribution center in 2025.

Other income, net, increased 17.7 percent to $1.2 million for the 2025 fourth quarter, from $1.0 million in the prior-year quarter.

Net income for the 2025 fourth quarter increased 22.8 percent to $7.2 million, from $5.9 million for the prior-year quarter. Net income margin rose to 6.2 percent in the 2025 fourth quarter, from 5.8 percent in the prior-year quarter.

Net income attributable to Karat for the 2025 fourth quarter increased 21.3 percent to $6.8 million, or $0.34 per diluted share, from $5.6 million, or $0.28 per diluted share, in the prior-year quarter.

Adjusted EBITDA, a non-GAAP measure defined below, totaled $12.5 million for the 2025 fourth quarter, compared with $11.3 million for the prior-year quarter. Adjusted EBITDA margin, a non-GAAP measure defined below, was 10.8 percent, compared with 11.1 percent for the prior-year quarter.

Adjusted diluted earnings per common share, a non-GAAP measure defined below, was $0.34 per share for the 2025 fourth quarter, compared with $0.29 per share in the prior-year quarter.

2025 Full Year Results

Net sales for the year ended December 31, 2025 increased 10.7 percent to $467.7 million, from $422.6 million last year. The increase in net sales was primarily driven by an increase of $39.7 million in volume and an increase of $11.9 million in product mix, partially offset by a $6.5 million unfavorable year-over-year pricing comparison.

Cost of goods sold for the year ended December 31, 2025 was $295.6 million, compared with $258.3 million last year. The increase primarily reflected $20.6 million in ocean freight and duty costs, from higher duties and tariffs of $14.6 million, as well as a 22.0 percent increase in import volume, partially offset by a 5.4 percent decrease in average freight container rates. In addition, product costs increased by $18.1 million due to higher sales volume and better product mix, partially offset by more favorable vendor pricing.

Gross profit for the year ended December 31, 2025 increased 4.8 percent to $172.1 million, from $164.3 million last year. Gross margin was 36.8 percent for the year ended December 31, 2025, compared with 38.9 percent last year. Gross margin was negatively impacted by rising freight and duty costs, as discussed above, which as a percentage of net sales increased to 11.8 percent during the year ended December 31, 2025, compared with 8.2 percent in the same period last year. The decrease was partially offset by a decrease in product costs and depreciation expense on production equipment as a percentage of net sales.

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Operating expenses for the year ended December 31, 2025 were $130.7 million, compared with $126.6 million last year. The increase was mainly driven by $7.0 million of higher shipping and transportation costs primarily due to increases in both offline sales shipping volume and shipping rates, $3.3 million of higher rent expense due to a higher rate on the Chino, California facility lease extension, as well as the opening of a new Chino distribution center, and $1.4 million of higher salaries and benefit expenses. These increases were partially offset by a reduction in online platform fees and marketing expenses. Additionally, the year ended December 31, 2025 included a gain on disposal of machinery in the normal course of business, while the prior year included a $2.0 million non-cash impairment charge of a right-of-use asset from the sublease of the Company’s City of Industry warehouse in California and a loss on disposal of machinery in the normal course of business.

Other income, net, was $1.6 million for the year ended December 31, 2025, compared with $2.9 million last year. The decrease was primarily attributable to a loss on foreign currency transactions of $1.5 million, due to the weakening of the U.S. Dollar against the New Taiwan Dollar, partially offset by an increase in rental income from the sublet of the City of Industry warehouse in California in 2024.

Net income for the year ended December 31, 2025 increased 6.0 percent to $32.7 million, from $30.8 million last year. Net income margin was 7.0 percent for the year ended December 31, 2025, compared with 7.3 percent last year.

Net income attributable to Karat Packaging increased 5.0 percent to $31.5 million, or $1.56 per diluted share, for the year ended December 31, 2025, from $30.0 million, or $1.49 per diluted share, last year.

Adjusted EBITDA, a non-GAAP measure defined below, was $55.2 million for the year ended December 31, 2025, compared with $55.3 million last year. Adjusted EBITDA margin, a non-GAAP measure defined below, was 11.8 percent for the year ended December 31, 2025, compared with 13.1 percent last year.

Adjusted diluted earnings per common share, a non-GAAP measure defined below, was $1.61 per share for the year ended December 31, 2025, compared with $1.64 per share last year.

Dividend

On February 5, 2026, Karat’s board of directors approved a regular quarterly dividend of $0.45 per share on the Company’s common stock, payable on or about February 27, 2026, to stockholders of record as of February 20, 2026.

Share Repurchase Program

During the 2025 fourth quarter, the Company purchased 137,374 shares of its common stock at an average purchase price of $21.74 per share, for a total amount of $3.0 million. As of March 11, 2026, approximately $12.0 million remained available for repurchase under the authorized repurchase program.

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Investor Conference Call

The Company will host an investor conference call today, March 12, 2026, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to discuss its 2025 fourth quarter and full year results.

Phone: (877) 418-4045 (domestic); (412) 317-6745 (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

4

KARAT PACKAGING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share and per share data)

			Three Months Ended December 31,												Year Ended December 31,
			2025						2024						2025						2024
			(Unaudited)						(Unaudited)						(Unaudited)
Net sales			$	115,617					$	101,649					$	467,743					$	422,633
Cost of goods sold			76,268						61,826						295,607						258,304
Gross profit			39,349						39,823						172,136						164,329
Operating expenses
Selling expenses			11,919						13,909						53,844						52,286
General and administrative expenses (including $669 and $470 associated with variable interest entity for the three months ended December 31, 2025 and 2024, respectively, and $2,855 and $2,358 associated with variable interest entity for the years ended December 31, 2025 and 2024, respectively)			18,749						18,360						77,371						71,530
Loss (gain), net, on disposal of machinery and impairment expense			210						254						(493)						2,752
Total operating expenses			30,878						32,523						130,722						126,568
Operating income			8,471						7,300						41,414						37,761
Other income (expenses)
Rental income (including $339 and $262 associated with variable interest entity for the three months ended December 31, 2025 and 2024, respectively, and $1,516 and $1,038 associated with variable interest entity for the years ended December 31, 2025 and 2024, respectively)			682						592						2,923						2,076
Other income, net			44						8						73						162
Gain (loss) on foreign currency transactions			404						368						(1,543)						520
Interest income (including $155 and $1 associated with variable interest entity for the three months ended December 31, 2025 and 2024, respectively, and $586 and $470 associated with variable interest entity for the years ended December 31, 2025 and 2024, respectively)			553						565						2,210						2,299
Interest expense (including $452 and $509 associated with variable interest entity for the three months ended December 31, 2025 and 2024, respectively, and $1,966 and $2,062 associated with variable interest entity for the years ended December 31, 2025 and 2024, respectively)			(486)						(516)						(2,055)						(2,123)
Total other income, net			1,197						1,017						1,608						2,934
Income before provision for income taxes			9,668						8,317						43,022						40,695
Provision for income taxes			2,474						2,458						10,358						9,871
Net income			7,194						5,859						32,664						30,824
Net income attributable to noncontrolling interest			384						244						1,186						849
Net income attributable to Karat Packaging Inc.			$	6,810					$	5,615					$	31,478					$	29,975
Basic and diluted earnings per share:
Basic			$	0.34					$	0.28					$	1.57					$	1.50
Diluted			$	0.34					$	0.28					$	1.56					$	1.49
Weighted average common shares outstanding, basic			20,037,669						20,026,773						20,057,549						20,002,211
Weighted average common shares outstanding, diluted			20,122,932						20,173,554						20,180,070						20,124,284

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KARAT PACKAGING INC. AND SUBSIDIARIES

NET SALES BY CATEGORY (UNAUDITED)

(In thousands)

			Three Months Ended December 31,												Year Ended December 31,
			2025						2024						2025						2024
Chains and Distributors *			$	93,327					$	79,411					$	370,556					$	329,448
Online			17,071						16,755						75,286						70,130
Retail *			5,219						5,483						21,901						23,055
			$	115,617					$	101,649					$	467,743					$	422,633

* During the three months ended June 30, 2025, the Company reclassified one customer from the retail to the chains and distributors channel, and reclassified the corresponding net sales amounts of approximately $1,064,000 for the three months ended December 31, 2024 and $4,272,000 for the year ended December 31, 2024, respectively, to conform to the current period presentation. The reclassification had no effect on previously reported condensed consolidated net sales for the three months and year ended December 31, 2024.

KARAT PACKAGING INC. AND SUBSIDIARIES

SELECTED BALANCE SHEET AND CASH FLOW INFORMATION

(In thousands)

Selected Balance Sheet Information:			December 31, 2025						December 31, 2024
			(Unaudited)
Cash and cash equivalents			$	37,880					$	31,584
Short-term investments			$	—					$	28,343
Accounts receivable, net of allowance for bad debt			$	36,402					$	26,736
Inventories			$	81,682					$	70,722
Total assets			$	287,686					$	294,522
Accounts payable			$	26,323					$	17,831
Total current liabilities			$	70,220					$	46,447
Total liabilities			$	130,816					$	132,323
Total stockholders’ equity			$	156,870					$	162,199

Selected Cash Flow Information:			Year Ended December 31,
			2025						2024
			(Unaudited)
Net cash provided by operating activities			$	33,815					$	47,982
Net cash provided by (used in) investing activities			$	25,399					$	(5,855)
Dividends paid to shareholders			$	(36,100)					$	(31,016)
Repurchases of common stock			$	(2,998)					$	—
Net cash used in financing activities			$	(52,918)					$	(33,619)

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KARAT PACKAGING INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (UNAUDITED)

(In thousands, except per share amounts)

Reconciliation of Adjusted EBITDA and Adjusted EBITDA margin:			Three Months Ended December 31,															Year Ended December 31,
			2025						2024									2025						2024
			Amounts			% of Net Sales			Amounts			% of Net Sales						Amounts			% of Net Sales			Amounts			% of Net Sales
Net income			$	7,194		6.2		%	$	5,859		5.8		%				$	32,664		7.0		%	$	30,824		7.3		%
Add (deduct):
Interest income			(553)			(0.5)			(565)			(0.6)						(2,210)			(0.5)			(2,299)			(0.5)
Interest expense			486			0.4			516			0.5						2,055			0.4			2,123			0.5
Provision for income taxes			2,474			2.2			2,458			2.4						10,358			2.3			9,871			2.3
Depreciation and amortization			2,759			2.4			2,695			2.7						10,891			2.3			10,675			2.5
Stock-based compensation expense			138			0.1			350			0.3						1,182			0.3			2,065			0.5
Secondary offering transaction costs (1)			—			—			—			—						214			—			—			—
Impairment of operating right-of-use asset			—			—			—			—						—			—			1,993			0.5
Adjusted EBITDA			$	12,498		10.8		%	$	11,313		11.1		%				$	55,154		11.8		%	$	55,252		13.1		%

Reconciliation of Adjusted Diluted Earnings Per Common Share			Three Months Ended December 31,												Year Ended December 31,
			2025						2024						2025						2024
Diluted earnings per common share			$	0.34					$	0.28					$	1.56					$	1.49
Add (deduct):
Stock-based compensation expense			0.01						0.01						0.06						0.10
Impairment of operating right-of-use asset			—						—						—						0.10
Secondary offering transaction costs (1)			—						—						0.01						—
Tax impact			(0.01)						—						(0.02)						(0.05)
Adjusted diluted earnings per common share			$	0.34					$	0.29					$	1.61					$	1.64

(1) 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 December 31, 2025
			Karat Packaging			Global Wells			Eliminations			Consolidated
Net income (loss)			$	6,803		$	452		$	(61)		$	7,194
Add (deduct):
Interest income			(398)			(155)			—			(553)
Interest expense			34			452			—			486
Provision for income taxes			2,474			—			—			2,474
Depreciation and amortization			2,456			303			—			2,759
Stock-based compensation expense			138			—			—			138
Adjusted EBITDA			$	11,507		$	1,052		$	(61)		$	12,498

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Reconciliation of Adjusted EBITDA by Entity			Year Ended December 31, 2025
			Karat Packaging			Global Wells			Eliminations			Consolidated
Net income (loss)			$	31,464		$	1,396		$	(196)		$	32,664
Add (deduct):
Interest income			(1,624)			(586)			—			(2,210)
Interest expense			89			1,966			—			2,055
Provision for income taxes			10,358			—			—			10,358
Depreciation and amortization			9,678			1,213			—			10,891
Stock-based compensation expense			1,182			—			—			1,182
Secondary offering transaction costs (1)			214			—			—			214
Adjusted EBITDA			$	51,361		$	3,989		$	(196)		$	55,154

(1) 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 December 31, 2024
			Karat Packaging			Global Wells			Eliminations			Consolidated
Net income (loss)			$	5,634		$	287		$	(62)		$	5,859
Add (deduct):
Interest income			(564)			(1)			—			(565)
Interest expense			7			509			—			516
Provision for income taxes			2,458			—			—			2,458
Depreciation and amortization			2,391			304			—			2,695
Stock-based compensation expense			350			—			—			350
Adjusted EBITDA			$	10,276		$	1,099		$	(62)		$	11,313

Reconciliation of Adjusted EBITDA by Entity			Year Ended December 31, 2024
			Karat Packaging			Global Wells			Eliminations			Consolidated
Net income			$	29,678		$	994		$	152		$	30,824
Add (deduct):
Interest income			(1,829)			(470)			—			(2,299)
Interest expense			61			2,062			—			2,123
Provision for income taxes			9,871			—			—			9,871
Depreciation and amortization			9,461			1,214			—			10,675
Stock-based compensation expense			2,065			—			—			2,065
Impairment of operating right-of-use asset			1,993			—			—			1,993
Adjusted EBITDA			$	51,300		$	3,800		$	152		$	55,252

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Reconciliation of Free Cash Flow			Three Months Ended December 31,												Year Ended December 31,
			2025						2024						2025						2024
Net cash provided by operating activities			$	15,357					$	8,250					$	33,815					$	47,982
Add (deduct):
Purchase of property and equipment			(236)						(216)						(756)						(934)
Deposits paid for property and equipment			(505)						(544)						(3,749)						(3,134)
Free Cash Flow			$	14,616					$	7,490					$	29,310					$	43,914

Use of Non-GAAP Financial Measures

Karat 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 calculated as net income before interest income and interest expense, provision for income taxes, depreciation and amortization, stock-based compensation expense, secondary offering transaction costs, and impairment of operating right-of-use asset.

•Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by net sales.

•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.

•Adjusted diluted earnings per common share is calculated as diluted earnings per common share, plus the per share impact of stock-based compensation, secondary offering transaction costs, impairment of operating right-of-use asset, and adjusted for the related tax effects of these adjustments.

We believe the above-mentioned non-GAAP measures, which are used by management to assess the core performance of Karat, provide useful information and additional clarity of our operating results to our investors in their own evaluation of the financial performance and liquidity of Karat 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 and liquidity 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.

9

FAQ

How did Karat Packaging (KRT) perform in Q4 2025?

Karat Packaging posted record Q4 2025 net sales of $115.6 million, up 13.7% from $101.6 million a year earlier. Net income rose to $7.2 million from $5.9 million, with net margin improving to 6.2% despite lower gross margin from higher tariffs.

What were Karat Packaging’s full-year 2025 financial results?

For 2025, Karat Packaging generated $467.7 million in net sales, up 10.7% from $422.6 million. Net income increased to $32.7 million from $30.8 million, while gross margin eased to 36.8% from 38.9% due mainly to higher freight, duty and tariff costs.

How did tariffs and import costs affect Karat Packaging (KRT) margins?

Higher duties and tariffs significantly pressured margins in 2025. Freight, duty and tariff costs rose to 11.8% of net sales from 8.2% the prior year. In Q4 2025, import costs reached 14.5% of net sales, contributing to gross margin declining to 34.0% from 39.2%.

What guidance did Karat Packaging give for 2026 growth and margins?

Karat Packaging expects 2026 first-quarter net sales to rise 8–10% year over year, with gross margin between 34–36% and adjusted EBITDA margin between 9–11%. For full-year 2026, it anticipates low double-digit net sales growth and improving gross and adjusted EBITDA margins.

What capital returns did Karat Packaging (KRT) provide to shareholders?

On February 5, 2026, the board approved a regular quarterly dividend of $0.45 per share, paid in late February. During Q4 2025, the company also repurchased 137,374 shares at an average price of $21.74, totaling $3.0 million.

How strong is Karat Packaging’s balance sheet at year-end 2025?

As of December 31, 2025, Karat Packaging held $37.9 million in cash and cash equivalents and $81.7 million of inventories. Total assets were $287.7 million, total liabilities $130.8 million, and stockholders’ equity $156.9 million, indicating a solid equity base.

What was Karat Packaging’s 2025 adjusted EBITDA and margin?

In 2025, Karat Packaging reported adjusted EBITDA of $55.2 million, essentially flat versus 2024’s $55.3 million. Adjusted EBITDA margin was 11.8%, down from 13.1%, as higher shipping, rent, and compensation costs offset the double-digit sales growth.

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