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 2024 second quarter ended June 30,
2024.
Second Quarter 2024 Highlights
- Net sales of $112.6 million, versus $108.7 million in
the prior-year quarter.
- Gross profit of $43.4 million, versus $41.9 million
in the prior-year quarter.
- Gross margin of 38.5 percent, equal to that of the prior-year
quarter.
- Net income of $9.2 million, versus $10.7 million in
the prior-year quarter.
- Net income margin of 8.2 percent, versus 9.8 percent in the
prior-year quarter.
- Adjusted EBITDA of $15.7 million, versus
$21.1 million in the prior-year quarter.
- Adjusted EBITDA margin of 13.9 percent, versus 19.4 percent in
the prior-year quarter.
2024 Guidance
- Net sales for the 2024 third quarter expected to increase by
mid to high single digits from the prior-year quarter.
- Gross margin for the 2024 third quarter expected to be 38 to 39
percent versus 36.9 percent for the prior-year quarter.
- Net sales for the 2024 full year expected to increase by
mid-single digits from the prior year.
- Gross margin goal for the 2024 full year expected to be 38 to
40 percent versus 37.7 percent from the prior year.
“Our business pipeline continues to expand, with the signing of
new national and regional chain accounts. During the second
quarter, however, initiation of certain new orders took longer than
anticipated, due, in part, to administrative set-up procedures at a
number of the larger chain accounts and softer demand in certain
categories, which we do not expect either to recur in the
second-half of the year,” said Alan Yu, Chief Executive Officer.
“Net sales for the second quarter rose by 3.5 percent, even with
approximately 6.4 percent lower prices, compared with last
year.
“We were pleased that gross margin remained steady, despite
pressure from significantly higher ocean freight costs, which
spiked in mid-May and remained high through July. Freight costs
have since started to moderate.
“Our strategic initiative established last year to expand
Karat’s warehouse footprint in new geographic markets and enlarge
existing warehouses is paying off and contributing to business
growth across most of our sales channels, including online sales,
which typically carries the highest margin and now represents 17.4
percent of total sales,” Yu said.
Second Quarter 2024 Financial Results
Net sales for the 2024 second quarter increased 3.5 percent to
$112.6 million, from $108.7 million in the prior-year
quarter. The increase was primarily driven by growth in volume and
a change in product mix, as well as the inclusion of online sales
platform fees, partially offset by unfavorable year-over-year
pricing comparison, as the pricing environment remained
competitive, especially in the distributor channel.
Gross profit for the 2024 second quarter increased 3.7 percent
to $43.4 million, from $41.9 million in the prior-year
quarter. Gross margin for both the 2024 and 2023 second quarters
was 38.5 percent. Gross margin for the 2024 second quarter included
a net favorable impact of 90 basis points from the inclusion of
online platform fees in net sales and production expenses in cost
of goods sold. Gross margin also improved from lower vendor
pricing and increased imports as a percentage of total product mix,
partially offset by an increase in freight and duty costs and
inventory reserve adjustment. Gross margin for the 2023 second
quarter included a negative impact of 160 basis points from the
write-off of certain raw materials, as the Company disposed of
certain machinery and equipment in executing the plan to scale back
production in certain locations.
Operating expenses in the 2024 second quarter were
$32.3 million, compared with $28.5 million in the
prior-year quarter. The increase was primarily due to the inclusion
of online sales platform fees, higher rent and warehouse expense,
including a higher rate on our Chino, California facility lease
extension, an increase in online marketing expense and higher stock
compensation expense, partially offset by the inclusion of
production expense in cost of goods sold, and a decrease in
impairment expense and loss on disposal of machinery.
Operating income in the 2024 second quarter decreased to
$11.1 million, from $13.3 million in the prior-year
quarter, primarily due to an increase in operating expenses of
$3.8 million, partially offset by an increase in gross profit
of $1.5 million.
Total other income, net, was $1.0 million for the 2024
second quarter, compared with $0.7 million in the prior-year
quarter. The increase was primarily due to higher rental income
from the sublease of the City of Industry warehouse.
Net income for the 2024 second quarter decreased to
$9.2 million, from $10.7 million for the prior-year
quarter. Net income margin was 8.2 percent in the 2024 second
quarter, compared with 9.8 percent a year ago.
Net income attributable to Karat for the 2024 second quarter was
$9.1 million, or $0.45 per diluted share, compared with
$10.5 million, or $0.53 per diluted share in the prior-year
quarter.
Adjusted EBITDA, a non-GAAP measure defined below, totaled
$15.7 million for the 2024 second quarter, compared with
$21.1 million for the prior-year quarter. Adjusted EBITDA
margin, a non-GAAP measure defined below, was 13.9 percent of net
sales, compared with 19.4 percent for the same quarter last
year.
Adjusted diluted earnings per common share, a non-GAAP measure
defined below, was $0.49 per share for the 2024 second quarter,
compared with $0.69 per share in the prior-year quarter.
Six-Month 2024 Financial Results
Net sales for the first half of 2024 increased 1.8 percent to
$208.2 million, from $204.5 million in the same period
last year. Net sales for the first half of 2024 were understated by
$0.7 million from products shipped and recognized as revenue
in 2023 and not delivered until 2024. The increase in net sales in
the first half of 2024 primarily resulted from volume growth and
product mix change and the inclusion of online sales platform fees,
partially offset by unfavorable year-over-year pricing
comparison.
Gross profit for the first half of 2024 increased 1.3 percent to
$81.0 million, from $80.0 million in the same period last
year. Gross margin was 38.9 percent for the first half of 2024,
compared with 39.1 percent in the same period last year. Gross
profit for the first half of 2024 was understated by
$0.3 million related to the timing of revenue recognition.
Gross margin for the first half of 2024 included a net favorable
impact from the inclusion of online platform fees in net sales and
production expenses in cost of goods sold totaling 80 basis points.
Gross margin for the first half of 2024 benefited from the
strengthening of the United States Dollar against Taiwan New
Dollar, more favorable vendor pricing, and increased import as a
percentage of total product mix. These improvements were partially
offset by an increase in freight and duty costs and inventory
reserve adjustment. Gross margin for the first half of 2023
included the negative impact of 80 basis points from the write-off
of certain raw materials, as the Company disposed of certain
machinery and equipment in executing the plan to scale back
production in certain locations.
Operating expenses were $61.8 million for the first half of
2024, compared with $53.9 million in the same period last
year. Operating expenses for the six months ended June 30,
2024 included a $2.0 million non-cash impairment of a ROU
asset and $0.5 million from loss of disposal of machinery in
the normal course of business. In comparison, operating expenses
for the six months ended June 30, 2023 included non-routine
impairment expense and loss on disposal of machinery of
$2.5 million as the Company executed its plan to scale back
production in certain locations. The increase in operating expenses
for the current year period was primarily due to the inclusion of
online sales platform fees in operating expenses, higher rent and
warehouse expense, including a higher rate on our Chino, California
facility lease extension, an increase in online marketing expense,
higher stock compensation expense and an increase in bad debt
expense. These increases were partially offset by inclusion of
production expense in cost of goods sold and a reduction in
shipping and transportation costs.
Operating income decreased to $19.2 million for the first
half of 2024, from $26.1 million in the same period last year.
The decrease was primarily due to an increase in operating expenses
of $7.9 million, partially offset by an increase in gross
profit of $1.0 million.
Total other income, net, was $1.3 million in the first half
of 2024, compared with total other expenses, net of
$0.1 million in the same period last year. The year-over-year
increase was primarily driven by the foreign currency transactions
gain/loss and an increase in interest income and rental income.
Net income decreased to $15.7 million for the first half of
2024, from $19.9 million in the same period last year. Net
income margin was 7.5 percent in the first half of 2024, compared
with 9.7 percent in the same period last year.
Net income attributable to Karat was $15.3 million, or
$0.76 per diluted share, for the first half of 2024, compared with
$19.5 million, or $0.98 per diluted share, in the same period
last year.
Adjusted EBITDA, a non-GAAP measure defined below, decreased to
$29.2 million in the first six months of 2024, compared with
$36.4 million in the same period last year. Adjusted EBITDA
margin, a non-GAAP measure defined below, was 14.0 percent in the
2024 year-to-date period, compared with 17.8 percent in the same
period last year.
Adjusted diluted earnings per common share, a non-GAAP measure
defined below, was $0.88 per share, compared with $1.15 per share
in the same period last year.
DividendsOn August 6, 2024, Karat’s board of
directors approved a quarterly regular cash dividend of $0.35 per
share and declared a special cash dividend of $0.15 per share, both
payable on August 30, 2024, to stockholders of record as of August
21, 2024.
Investor Conference CallThe Company will host
an investor conference call today, August 8, 2024, at 2:00 p.m.
Pacific Time (5:00 p.m. Eastern Time).
Phone: 646-307-1963 (domestic); (800) 715-9871
(international)Conference ID:
4261013Webcast: Accessible at http://irkarat.com/;
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
StatementsStatements 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 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
heading “Risk Factors” discussed under the caption “Item 1A. Risk
Factors” in Part I of our most recent Annual Report on Form 10-K or
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 SEC. 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 that date, except as required by law.
Investor Relations and Media
Contacts:PondelWilkinson Inc.Judy Lin /Roger
Pondel310-279-5980; ir@karatpackaging.com
|
KARAT PACKAGING INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
INCOME (UNAUDITED)(In thousands, except share and
per share data) |
| |
| |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
| Net sales |
$ |
112,600 |
|
|
$ |
108,740 |
|
|
$ |
208,213 |
|
|
$ |
204,541 |
|
| Cost of goods sold |
|
69,193 |
|
|
|
66,879 |
|
|
|
127,204 |
|
|
|
124,536 |
|
|
Gross profit |
|
43,407 |
|
|
|
41,861 |
|
|
|
81,009 |
|
|
|
80,005 |
|
| Operating
expenses: |
|
|
|
|
|
|
|
| Selling expenses |
|
13,868 |
|
|
|
8,871 |
|
|
|
24,631 |
|
|
|
17,572 |
|
| General and administrative
expenses (including $689 and $647 associated with variable interest
entity for the three months ended June 30, 2024 and 2023;
respectively, $1,245 and $1,318 associated with variable interest
entity for the six months ended June 30, 2024 and 2023,
respectively) |
|
17,893 |
|
|
|
17,192 |
|
|
|
34,662 |
|
|
|
33,821 |
|
| Impairment expense and loss,
net, on disposal of machinery |
|
531 |
|
|
|
2,459 |
|
|
|
2,525 |
|
|
|
2,541 |
|
|
Total operating expenses |
|
32,292 |
|
|
|
28,522 |
|
|
|
61,818 |
|
|
|
53,934 |
|
|
Operating income |
|
11,115 |
|
|
|
13,339 |
|
|
|
19,191 |
|
|
|
26,071 |
|
| Other income
(expenses) |
|
|
|
|
|
|
|
| Rental income (including $258
and $239 associated with variable interest entity for the three
months ended June 30, 2024 and 2023; respectively, $513 and $486
associated with variable interest entity for the six months ended
June 30, 2024 and 2023, respectively) |
|
600 |
|
|
|
275 |
|
|
|
891 |
|
|
|
522 |
|
| Other income (expenses),
net |
|
51 |
|
|
|
118 |
|
|
|
106 |
|
|
|
(90 |
) |
| Gain (loss) on foreign
currency transactions |
|
317 |
|
|
|
322 |
|
|
|
439 |
|
|
|
(105 |
) |
| Interest income (including
$133 and $182 associated with variable interest entity for the
three months ended June 30, 2024 and 2023; respectively, $346 and
$198 associated with variable interest entity for the six months
ended June 30, 2024 and 2023, respectively) |
|
533 |
|
|
|
519 |
|
|
|
964 |
|
|
|
586 |
|
| Interest expense (including
$519 and $565 associated with variable interest entity for the
three months ended June 30, 2024 and 2023; respectively, $1,036 and
$971 associated with variable interest entity for the six months
ended June 30, 2024 and 2023, respectively) |
|
(548 |
) |
|
|
(573 |
) |
|
|
(1,072 |
) |
|
|
(980 |
) |
|
Total other income (expenses), net |
|
953 |
|
|
|
661 |
|
|
|
1,328 |
|
|
|
(67 |
) |
|
Income before provision for income taxes |
|
12,068 |
|
|
|
14,000 |
|
|
|
20,519 |
|
|
|
26,004 |
|
| Provision for income
taxes |
|
2,841 |
|
|
|
3,323 |
|
|
|
4,816 |
|
|
|
6,141 |
|
| Net
income |
|
9,227 |
|
|
|
10,677 |
|
|
|
15,703 |
|
|
|
19,863 |
|
| Net income
attributable to noncontrolling interest |
|
127 |
|
|
|
175 |
|
|
|
437 |
|
|
|
356 |
|
| Net income
attributable to Karat Packaging Inc. |
$ |
9,100 |
|
|
$ |
10,502 |
|
|
$ |
15,266 |
|
|
$ |
19,507 |
|
| Basic and diluted
earnings per share: |
|
|
|
|
|
|
|
|
Basic |
$ |
0.46 |
|
|
$ |
0.53 |
|
|
$ |
0.76 |
|
|
$ |
0.98 |
|
|
Diluted |
$ |
0.45 |
|
|
$ |
0.53 |
|
|
$ |
0.76 |
|
|
$ |
0.98 |
|
| Weighted average common shares
outstanding, basic |
|
19,994,250 |
|
|
|
19,886,585 |
|
|
|
19,981,928 |
|
|
|
19,887,023 |
|
| Weighted average common shares
outstanding, diluted |
|
20,113,842 |
|
|
|
19,953,510 |
|
|
|
20,094,664 |
|
|
|
19,947,155 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KARAT PACKAGING INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)(In thousands, except share and per
share data) |
| |
| |
June 30, 2024 |
|
December 31,2023 |
| Assets |
|
|
|
| Current
assets |
|
|
|
|
Cash and cash equivalents (including $4,705 and $13,566 associated
with variable interest entity at June 30, 2024 and
December 31, 2023, respectively) |
$ |
19,311 |
|
|
$ |
23,076 |
|
| Short-term investments
(including $7,132 and $0 associated with variable interest entity
at June 30, 2024 and December 31, 2023,
respectively) |
|
32,743 |
|
|
|
26,343 |
|
| Accounts receivable, net of
allowance for bad debt of $491 and $392 at June 30, 2024 and
December 31, 2023, respectively |
|
33,683 |
|
|
|
27,763 |
|
| Inventories |
|
79,841 |
|
|
|
71,528 |
|
| Prepaid expenses and other
current assets (including $72 and $82 associated with variable
interest entity at June 30, 2024 and December 31, 2023,
respectively) |
|
4,265 |
|
|
|
6,219 |
|
|
Total current assets |
|
169,843 |
|
|
|
154,929 |
|
| Property and equipment, net
(including $43,578 and $44,185 associated with variable interest
entity at June 30, 2024 and December 31, 2023,
respectively) |
|
92,281 |
|
|
|
95,226 |
|
| Deposits |
|
159 |
|
|
|
1,047 |
|
| Goodwill |
|
3,510 |
|
|
|
3,510 |
|
| Intangible assets, net |
|
313 |
|
|
|
327 |
|
| Operating right-of-use
assets |
|
43,403 |
|
|
|
20,739 |
|
| Other non-current assets
(including $44 and $53 associated with variable interest entity at
June 30, 2024 and December 31, 2023, respectively) |
|
1,184 |
|
|
|
619 |
|
|
Total assets |
$ |
310,693 |
|
|
$ |
276,397 |
|
| |
|
|
|
| Liabilities and
Stockholders’ Equity |
|
|
|
| Current
liabilities |
|
|
|
| Accounts payable (including
$68 and $63 associated with variable interest entity at
June 30, 2024 and December 31, 2023, respectively) |
$ |
24,316 |
|
|
$ |
18,446 |
|
| Accrued expenses (including
$268 and $591 associated with variable interest entity at
June 30, 2024 and December 31, 2023, respectively) |
|
13,947 |
|
|
|
10,576 |
|
| Related party payable |
|
3,873 |
|
|
|
5,306 |
|
| Customer deposits (including
$0 and $116 associated with variable interest entity at
June 30, 2024 and December 31, 2023) |
|
877 |
|
|
|
951 |
|
| Long-term debt, current
portion (including $1,150 and $1,122 associated with variable
interest entity at June 30, 2024 and December 31, 2023,
respectively) |
|
1,150 |
|
|
|
1,122 |
|
| Operating lease liabilities,
current portion |
|
7,758 |
|
|
|
4,800 |
|
| Other current liabilities
(including $2,186 and $1,302 associated with variable interest
entity at June 30, 2024 and December 31, 2023,
respectively) |
|
3,686 |
|
|
|
3,200 |
|
|
Total current liabilities |
|
55,607 |
|
|
|
44,401 |
|
| Deferred tax liability |
|
4,197 |
|
|
|
4,197 |
|
| Long-term debt, net of current
portion and debt discount of $172 and $203 at June 30, 2024
and December 31, 2023, respectively (including $47,844 and
$48,396 associated with variable interest entity at June 30,
2024 and December 31, 2023, respectively, and debt discount of
$172 and $203 associated with variable interest entity at
June 30, 2024 and December 31, 2023, respectively) |
|
47,844 |
|
|
|
48,396 |
|
| Operating lease liabilities,
net of current portion |
|
38,854 |
|
|
|
16,687 |
|
| Other non-current liabilities
(including $116 and $0 associated with variable interest entity at
June 30, 2024 and December 31, 2023 respectively) |
|
363 |
|
|
|
26 |
|
|
Total liabilities |
|
146,865 |
|
|
|
113,707 |
|
| |
|
|
|
| Karat Packaging Inc.
stockholders’ equity |
|
|
|
| Preferred stock, $0.001 par
value, 10,000,000 shares authorized, no shares issued and
outstanding, as of June 30, 2024 and December 31,
2023 |
|
— |
|
|
|
— |
|
| Common stock, $0.001 par
value, 100,000,000 shares authorized, 20,037,665 and 20,014,665
shares issued and outstanding, respectively, as of June 30,
2024 and 19,988,482 and 19,965,482 shares issued and outstanding,
respectively, as of December 31, 2023 |
|
20 |
|
|
|
20 |
|
| Additional paid in
capital |
|
88,307 |
|
|
|
86,667 |
|
| Treasury stock, $0.001 par
value, 23,000 shares as of both June 30, 2024 and
December 31, 2023 |
|
(248 |
) |
|
|
(248 |
) |
| Retained earnings |
|
69,633 |
|
|
|
67,679 |
|
|
Total Karat Packaging Inc. stockholders’ equity |
|
157,712 |
|
|
|
154,118 |
|
| Noncontrolling interest |
|
6,116 |
|
|
|
8,572 |
|
|
Total stockholders’ equity |
|
163,828 |
|
|
|
162,690 |
|
|
Total liabilities and stockholders’ equity |
$ |
310,693 |
|
|
$ |
276,397 |
|
|
|
|
|
|
|
|
|
|
|
KARAT PACKAGING, INC. AND SUBSIDIARIESCONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(In
thousands) |
| |
Six Months Ended June 30, |
|
|
|
2024 |
|
|
|
2023 |
|
| Cash flows from
operating activities |
|
|
|
| Net income |
$ |
15,703 |
|
|
$ |
19,863 |
|
| Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
|
Depreciation and amortization (including $607 associated with
variable interest entity for both the six months ended June 30,
2024 and 2023, respectively) |
|
5,289 |
|
|
|
5,350 |
|
|
Adjustments to allowance for bad debt |
|
140 |
|
|
|
(843 |
) |
|
Adjustments to inventory reserve |
|
375 |
|
|
|
(408 |
) |
|
Write-off of inventory |
|
451 |
|
|
|
2,944 |
|
|
Impairment of deposits |
|
— |
|
|
|
523 |
|
|
Impairment of operating right-of-use asset |
|
1,993 |
|
|
|
— |
|
|
Loss, net, on disposal of machinery and equipment |
|
532 |
|
|
|
2,018 |
|
|
Amortization of loan fees (including $31 associated with variable
interest entity for both the six months ended June 30, 2024 and
2023, respectively) |
|
46 |
|
|
|
40 |
|
|
Accrued interest on certificates of deposit (including $132 and $0
associated with variable interest entity for the six months ended
June 30, 2024 and 2023, respectively) |
|
(299 |
) |
|
|
— |
|
|
Stock-based compensation |
|
1,315 |
|
|
|
493 |
|
|
Amortization of operating right-of-use assets |
|
3,461 |
|
|
|
2,281 |
|
|
(Increase) decrease in operating assets |
|
|
|
|
Accounts receivable (including $0 and $3 associated with variable
interest entity for the six months ended June 30, 2024 and 2023,
respectively) |
|
(6,060 |
) |
|
|
(2,061 |
) |
|
Inventories |
|
(9,139 |
) |
|
|
(7,625 |
) |
|
Prepaid expenses and other current assets (including $12 and $9
associated with variable interest entity for the six months ended
June 30, 2024 and 2023, respectively) |
|
1,976 |
|
|
|
478 |
|
|
Other non-current assets (including $10 and $21 associated with
variable interest entity for the six months ended June 30, 2024 and
2023, respectively) |
|
(165 |
) |
|
|
(36 |
) |
|
Increase (decrease) in operating liabilities |
|
|
|
|
Accounts payable (including $5 and $1 associated with variable
interest entity for the six months ended June 30, 2024 and 2023,
respectively) |
|
6,300 |
|
|
|
4,006 |
|
|
Accrued expenses (including $323 and $336 associated with variable
interest entity for the six months ended June 30, 2024 and 2023,
respectively) |
|
3,371 |
|
|
|
(1,059 |
) |
|
Related party payable |
|
(1,433 |
) |
|
|
2,187 |
|
|
Income taxes payable |
|
— |
|
|
|
5,105 |
|
|
Customer deposits (including $0 and $49 associated with variable
interest entity for the six months ended June 30, 2024 and 2023,
respectively) |
|
(449 |
) |
|
|
(302 |
) |
|
Operating lease liabilities |
|
(3,093 |
) |
|
|
(2,205 |
) |
|
Other liabilities |
|
(60 |
) |
|
|
304 |
|
|
Net cash provided by operating activities |
$ |
20,254 |
|
|
$ |
31,053 |
|
| Cash flows from
investing activities |
|
|
|
|
Purchases of property and equipment |
|
(415 |
) |
|
|
(1,816 |
) |
|
Proceeds on disposal of property and equipment |
|
90 |
|
|
|
28 |
|
|
Payments for costs incurred from sale of machinery and
equipment |
|
— |
|
|
|
(209 |
) |
|
Deposits paid for joint venture investment |
|
— |
|
|
|
(2,900 |
) |
|
Deposits refunded from joint venture investment |
|
— |
|
|
|
6,900 |
|
|
Deposit refund from cancelled property and equipment purchase |
|
— |
|
|
|
503 |
|
|
Deposits paid for property and equipment |
|
(2,041 |
) |
|
|
(3,823 |
) |
|
Purchases of short-term investments (including $7,000 and $8,000
associated with variable interest entity for the six months ended
June 30, 2024 and 2023, respectively) |
|
(22,513 |
) |
|
|
(28,000 |
) |
|
Redemption of short-term investments |
|
16,412 |
|
|
|
— |
|
|
Net cash used in investing activities |
$ |
(8,467 |
) |
|
$ |
(29,317 |
) |
| Cash flows from
financing activities |
|
|
|
|
Proceeds from long-term debt (including $0 and $8,000 associated
with variable interest entity for the six months ended June 30,
2024 and 2023, respectively) |
|
— |
|
|
|
8,000 |
|
|
Payments for lender fees |
|
— |
|
|
|
(61 |
) |
|
Payments on long-term debt (including $555 and $476 associated with
variable interest entity for the six months ended June 30, 2024 and
2023, respectively) |
|
(555 |
) |
|
|
(476 |
) |
|
Tax withholding on vesting of restricted stock units |
|
— |
|
|
|
(18 |
) |
|
Proceeds from exercise of common stock options |
|
325 |
|
|
|
— |
|
|
Dividends paid to shareholders |
|
(12,996 |
) |
|
|
(6,965 |
) |
|
Payment for Global Wells noncontrolling membership interest
redemption (including $2,010 and $0 associated with variable
interest entity for the six months ended June 30, 2024 and 2023,
respectively) |
|
(2,326 |
) |
|
|
— |
|
|
Net cash (used in) provided by financing activities |
$ |
(15,552 |
) |
|
$ |
480 |
|
|
Net (decrease) increase in cash and cash equivalents |
$ |
(3,765 |
) |
|
$ |
2,216 |
|
| Cash and cash
equivalents |
|
|
|
| Beginning of period |
$ |
23,076 |
|
|
$ |
16,041 |
|
| End of period |
$ |
19,311 |
|
|
$ |
18,257 |
|
| Supplemental
disclosures of non-cash investing and financing
activities: |
|
|
|
| Transfers from deposit to
property and equipment |
$ |
2,492 |
|
|
$ |
5,273 |
|
| Non-cash purchases of property
and equipment |
$ |
118 |
|
|
$ |
819 |
|
| Supplemental
disclosures of cash flow information: |
|
|
|
| Income tax refund |
$ |
3,315 |
|
|
$ |
200 |
|
| Cash paid for interest |
$ |
1,040 |
|
|
$ |
1,026 |
|
| |
|
|
|
|
|
|
|
|
KARAT PACKAGING INC. AND
SUBSIDIARIESRECONCILIATION 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 June 30, |
|
Six Months Ended June 30, |
| |
|
2024 |
|
|
2023 |
|
|
|
2024 |
|
|
2023 |
|
| |
Amounts |
% of net sale |
Amounts |
% of net sale |
|
Amounts |
% of net sale |
Amounts |
% of net sale |
|
Net income: |
$ |
9,227 |
|
8.2 |
% |
$ |
10,677 |
|
9.8 |
% |
|
$ |
15,703 |
|
7.5 |
% |
$ |
19,863 |
|
9.7 |
% |
| Add (deduct): |
|
|
|
|
|
|
|
|
|
|
Interest income |
|
(533 |
) |
(0.5 |
) |
|
(519 |
) |
(0.5 |
) |
|
|
(964 |
) |
(0.5 |
) |
|
(586 |
) |
(0.3 |
) |
|
Interest expense |
|
548 |
|
0.5 |
|
|
573 |
|
0.5 |
|
|
|
1,072 |
|
0.5 |
|
|
980 |
|
0.5 |
|
|
Provision for income taxes |
|
2,841 |
|
2.5 |
|
|
3,323 |
|
3.1 |
|
|
|
4,816 |
|
2.3 |
|
|
6,141 |
|
3.0 |
|
|
Depreciation and amortization |
|
2,660 |
|
2.4 |
|
|
2,717 |
|
2.5 |
|
|
|
5,289 |
|
2.6 |
|
|
5,350 |
|
2.7 |
|
|
Stock-based compensation expense |
|
940 |
|
0.8 |
|
|
216 |
|
0.2 |
|
|
|
1,315 |
|
0.6 |
|
|
493 |
|
0.2 |
|
|
Write-off of inventory (1) |
|
— |
|
— |
|
|
1,710 |
|
1.6 |
|
|
|
— |
|
— |
|
|
1,710 |
|
0.8 |
|
|
Impairment expense and loss on disposal of machinery (1) |
|
— |
|
— |
|
|
2,445 |
|
2.2 |
|
|
|
— |
|
— |
|
|
2,445 |
|
1.3 |
|
|
Operating right-of-use asset impairment |
|
— |
|
— |
|
|
— |
|
— |
|
|
|
1,993 |
|
1.0 |
|
|
— |
|
— |
|
| Adjusted
EBITDA |
$ |
15,683 |
|
13.9 |
% |
$ |
21,142 |
|
19.4 |
% |
|
$ |
29,224 |
|
14.0 |
% |
$ |
36,396 |
|
17.8 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The write-off of inventory and impairment
expense and loss on disposal of machinery represent costs incurred
in connection with the scaling back of production in certain
locations. As part of the execution of this strategy, certain
machinery and equipment was disposed of or impaired, and raw
materials associated with those machinery and equipment were
written-off.
| Reconciliation of
Adjusted Diluted Earnings Per Common Share |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
| Diluted earnings per common
share: |
$ |
0.45 |
|
|
$ |
0.53 |
|
|
$ |
0.76 |
|
|
$ |
0.98 |
|
| Add (deduct): |
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
0.05 |
|
|
|
0.01 |
|
|
|
0.06 |
|
|
|
0.02 |
|
|
Write-off of inventory (1) |
|
— |
|
|
|
0.09 |
|
|
|
— |
|
|
|
0.09 |
|
|
Impairment expense and loss on disposal of machinery (1) |
|
— |
|
|
|
0.12 |
|
|
|
— |
|
|
|
0.12 |
|
|
Operating right-of-use asset impairment |
|
— |
|
|
|
— |
|
|
|
0.10 |
|
|
|
— |
|
|
Income tax impact of adjustments |
|
(0.01 |
) |
|
|
(0.06 |
) |
|
|
(0.04 |
) |
|
|
(0.06 |
) |
| Adjusted diluted
earnings per common shares |
$ |
0.49 |
|
|
$ |
0.69 |
|
|
$ |
0.88 |
|
|
$ |
1.15 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The write-off of inventory and impairment
expense and loss on disposal of machinery represent costs incurred
in connection with the scaling back of production in certain
locations. As part of the execution of this strategy, certain
machinery and equipment was disposed of or impaired, and raw
materials associated with those machinery and equipment were
written-off.
| Reconciliation of
Adjusted EBITDA by Entity: |
Three Months Ended June 30, 2024 |
|
Six Months Ended June 30, 2024 |
| |
Karat Packaging |
Global Wells |
Eliminations |
Consolidated |
|
Karat Packaging |
Global Wells |
Eliminations |
Consolidated |
|
Net income (loss): |
$ |
9,100 |
|
$ |
150 |
|
$ |
(23 |
) |
$ |
9,227 |
|
|
$ |
14,950 |
|
$ |
510 |
|
$ |
243 |
|
$ |
15,703 |
|
| Add (deduct): |
|
|
|
|
|
|
|
|
|
|
Interest income |
|
(400 |
) |
|
(133 |
) |
|
— |
|
|
(533 |
) |
|
|
(618 |
) |
|
(346 |
) |
|
— |
|
|
(964 |
) |
|
Interest expense |
|
29 |
|
|
519 |
|
|
— |
|
|
548 |
|
|
|
36 |
|
|
1,036 |
|
|
— |
|
|
1,072 |
|
|
Provision for income taxes |
|
2,841 |
|
|
— |
|
|
— |
|
|
2,841 |
|
|
|
4,816 |
|
|
— |
|
|
— |
|
|
4,816 |
|
|
Depreciation and amortization |
|
2,356 |
|
|
304 |
|
|
— |
|
|
2,660 |
|
|
|
4,682 |
|
|
607 |
|
|
— |
|
|
5,289 |
|
|
Stock-based compensation expense |
|
940 |
|
|
— |
|
|
— |
|
|
940 |
|
|
|
1,315 |
|
|
— |
|
|
— |
|
|
1,315 |
|
|
Operating right-of-use asset impairment |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
1,993 |
|
|
— |
|
|
— |
|
|
1,993 |
|
| Adjusted
EBITDA |
$ |
14,866 |
|
$ |
840 |
|
$ |
(23 |
) |
$ |
15,683 |
|
|
$ |
27,174 |
|
$ |
1,807 |
|
$ |
243 |
|
$ |
29,224 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Reconciliation of
Adjusted EBITDA by Entity: |
Three Months Ended June 30, 2023 |
|
Six Months Ended June 30, 2023 |
| |
Karat Packaging |
Global Wells |
Eliminations |
Consolidated |
|
Karat Packaging |
Global Wells |
Eliminations |
Consolidated |
|
Net income (loss): |
$ |
10,493 |
|
$ |
203 |
|
$ |
(19 |
) |
$ |
10,677 |
|
|
$ |
19,533 |
|
$ |
412 |
|
$ |
(82 |
) |
$ |
19,863 |
|
| Add (deduct) |
|
|
|
|
|
|
|
|
|
|
Interest income |
|
(336 |
) |
|
(183 |
) |
|
— |
|
|
(519 |
) |
|
|
(387 |
) |
|
(216 |
) |
|
17 |
|
|
(586 |
) |
|
Interest expense |
|
8 |
|
|
565 |
|
|
— |
|
|
573 |
|
|
|
26 |
|
|
971 |
|
|
(17 |
) |
|
980 |
|
|
Provision for income taxes |
|
3,323 |
|
|
— |
|
|
— |
|
|
3,323 |
|
|
|
6,141 |
|
|
— |
|
|
— |
|
|
6,141 |
|
|
Depreciation and amortization |
|
2,413 |
|
|
304 |
|
|
— |
|
|
2,717 |
|
|
|
4,743 |
|
|
607 |
|
|
— |
|
|
5,350 |
|
|
Stock-based compensation expense |
|
216 |
|
|
— |
|
|
— |
|
|
216 |
|
|
|
493 |
|
|
— |
|
|
— |
|
|
493 |
|
|
Write-off of inventory (1) |
|
1,710 |
|
|
— |
|
|
— |
|
|
1,710 |
|
|
|
1,710 |
|
|
— |
|
|
— |
|
|
1,710 |
|
|
Impairment expense and loss on disposal of machinery (1) |
|
2,445 |
|
|
— |
|
|
— |
|
|
2,445 |
|
|
|
2,445 |
|
|
— |
|
|
— |
|
|
2,445 |
|
| Adjusted
EBITDA |
$ |
20,272 |
|
$ |
889 |
|
$ |
(19 |
) |
$ |
21,142 |
|
|
$ |
34,704 |
|
$ |
1,774 |
|
$ |
(82 |
) |
$ |
36,396 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The write-off of inventory and impairment
expense and loss on disposal of machinery represent costs incurred
in connection with the scaling back of production in certain
locations. As part of the execution of this strategy, certain
machinery and equipment was disposed of or impaired, and raw
materials associated with those machinery and equipment were
written-off.
Use of Non-GAAP Financial MeasuresKarat
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, (vi) write-off of certain
inventory items outside the normal course of business, (vii)
impairment expense and loss on disposal of machinery outside the
normal course of business, and (viii) operating right-of-use asset
impairment.
- 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, operating right-of-use asset impairment,
write-off of certain inventory items outside the normal course of
business, impairment expense and loss on disposal of machinery
outside the normal course of business, 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 core performance 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
profitability 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.
|
KARAT PACKAGING INC. AND SUBSIDIARIESNET
SALES BY CATEGORY (UNAUDITED) (In
thousands) |
| |
| |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
| |
(in thousands) |
| National and regional
chains |
$ |
24,052 |
|
|
$ |
23,827 |
|
|
$ |
45,522 |
|
|
$ |
45,195 |
|
| Distributors |
|
62,097 |
|
|
|
62,590 |
|
|
|
114,924 |
|
|
|
117,237 |
|
| Online |
|
19,546 |
|
|
|
15,493 |
|
|
|
34,425 |
|
|
|
29,148 |
|
| Retail |
|
6,905 |
|
|
|
6,830 |
|
|
|
13,342 |
|
|
|
12,961 |
|
| |
$ |
112,600 |
|
|
$ |
108,740 |
|
|
$ |
208,213 |
|
|
$ |
204,541 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karat Packaging (NASDAQ:KRT)
Historical Stock Chart
From Oct 2024 to Nov 2024
Karat Packaging (NASDAQ:KRT)
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From Nov 2023 to Nov 2024
