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Karat Packaging
🇺🇸 NASDAQ:KRT
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Sep 30, 2023

Karat Packaging Q3 2023 Earnings Report

Net income increased significantly due to margin growth, driven by scaling back US manufacturing and lower freight costs, despite a slight decrease in net sales.

Key Takeaways

Karat Packaging reported a 4.1% decrease in net sales to $105.5 million, but net income increased by 48.5% to $9.1 million. The increase in net income was driven by a 14.0% increase in gross profit to $38.9 million and margin expansion.

Net sales decreased by 4.1% year-over-year to $105.5 million.

Gross profit increased by 14.0% year-over-year to $38.9 million.

Net income increased by 48.5% year-over-year to $9.1 million.

Eco-friendly product sales represented approximately 33% of total sales.

Total Revenue
$106M
Previous year: $110M
-4.1%
EPS
$0.47
Previous year: $0.33
+42.4%
Adjusted EBITDA Margin
14.4%
Previous year: 10.7%
+34.6%
Gross Profit
$38.9M
Previous year: $34.2M
+13.7%
Cash and Equivalents
$28.2M
Previous year: $7.53M
+273.9%
Free Cash Flow
$9.43M
Previous year: $19.9M
-52.5%
Total Assets
$280M
Previous year: $239M
+16.9%

Karat Packaging

Karat Packaging

Karat Packaging Revenue by Segment

Forward Guidance

Karat Packaging anticipates net sales for the fourth quarter of 2023 to increase by 2-5% compared to the prior year. Gross margin is expected to be between 36.0% and 38.0%. For the full year 2023, net sales are expected to decrease by mid-single digit and gross margin is expected to be between 37.5% and 38.5%. Eco-friendly product sales are projected to be 33-34% of total sales.

Positive Outlook

  • Net sales for Q4 2023 expected to increase 2 to 5 percent from the prior year quarter.
  • Gross margin goal for Q4 2023: 36.0 to 38.0 percent versus 32.0 percent for 2022 fourth quarter.
  • Gross margin goal for the 2023 full year: 37.5 to 38.5 percent versus 31.2 percent for 2022.
  • Eco-friendly product sales objective for the 2023 full year: 33 to 34 percent of total sales, compared with 27 percent in 2022.
  • Board of directors authorized an increase in the quarterly cash dividend payment to $0.20 per share from $0.10 per share.

Challenges Ahead

  • Net sales for the 2023 full year expected to decrease by mid-single digit.
  • Total revenue was impacted by unfavorable year-over-year pricing comparison.
  • Operating expenses increased primarily due to workforce expansion.
  • Increase in operating expenses due to higher marketing expense to support online sales growth.
  • Increase in operating expenses due to higher professional expenses in connection with the secondary offering completed during the quarter.

Revenue & Expenses

Visualization of income flow from segment revenue to net income

Company Overview

Full financial data and analysis

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